U.S. v. Ford

• Decision Date: 06 July 1979
• Docket Number: 873,No. 872,D,872
• Citation: 603 F.2d 1043
• Parties: UNITED STATES of America, Appellee, v. Sam FORD and Barbara Belle, Defendants-Appellants. ockets 78-1355, 78-1416.
• Court: U.S. Court of Appeals — Second Circuit

Page 1043

603 F.2d 1043

UNITED STATES of America, Appellee, v. Sam FORD and Barbara Belle, Defendants-Appellants.

No. 872, 873, Dockets 78-1355, 78-1416.

United States Court of Appeals, Second Circuit.

Argued April 30, 1979.

Decided July 6, 1979.

Milton S. Gould, New York City (Shea, Gould, Climenko & Casey, Dean G. Yuzek, New York City, of counsel), for defendant-appellant Sam Ford.

Arthur A. Munisteri, New York City (Benton L. Becker, Coral Gables, Fla., of counsel), for defendant-appellant Barbara Belle.

Mary Jo White, Asst. U. S. Atty., New York City (Robert B. Fiske, Jr., U. S. Atty., S. D. N. Y., David C. Patterson, Asst. U. S. Atty., New York City, of counsel), for appellee.

Before LUMBARD, FRIENDLY and MULLIGAN, Circuit Judges.

LUMBARD, Circuit Judge:

Ford and Belle appeal their convictions for wire fraud, and in Ford's case, wire fraud and perjury, entered after a two-week jury trial before Judge MacMahon of the Southern District. Finding no error in the appellants' trial and conviction, we affirm.

Ford, Belle and three others were charged in a twenty-two count indictment, filed on March 2, 1978, with various offenses in connection with the sale of stock in Dimensional Entertainment Corporation (hereinafter Dimensional). Ford and Belle were charged in count one with securities fraud, in counts three through eleven with mail fraud, in counts twelve through fourteen with wire fraud and in count fifteen with conspiracy to obstruct justice. Counts sixteen and seventeen charged Ford alone with perjury before the Securities and Exchange Commission and count eighteen charged Ford and Belle with perjury before the Grand Jury. The remaining counts named only Ford and Belle's three co-defendants, each of whom pleaded guilty before trial.

The trial of Ford and Belle commenced on September 11, 1978. At the close of its case, the government consented to the dismissal of counts five, six, nine, ten and eleven of the indictment. Subsequently, the jury found Ford and Belle guilty of wire fraud, as alleged in counts twelve through fourteen, convicted Ford on the perjury charge in count seventeen, and acquitted both defendants on the remaining counts. Ford received a sentence of five years' imprisonment and a $1,000 fine on each of counts twelve and fourteen, with the prison sentences to run concurrently and the fines to be cumulative. On count seventeen, Ford was sentenced to three years' additional imprisonment and an additional $2,000 fine. Belle was sentenced to two years' imprisonment on each of counts twelve through fourteen, to be served concurrently.

Viewed in the light most favorable to the government, the evidence at trial revealed an elaborate scheme to create a rigged market for trading in Dimensional stock. In the summer of 1975, Ford began to look for a publicly held "shell" corporation with the ostensible purpose of promoting investment in three-dimensional video entertainment programs. His search eventually turned up Wicker World, Inc., a semi-dormant furniture business which in form met the requirement of being publicly traded, though nearly all its stock was in fact under control of the company's founders.

Ford purchased Wicker World in September of 1975 and promptly installed Barbara Belle as President. The contract of sale required the company's original owners to return the bulk of their shares to the corporate treasury but allowed them to retain control over the company's business assets. Simultaneously with the sale, a forty-one to one stock dividend was declared which increased the number of outstanding shares to 996,000, almost all of which remained under Ford's control.

Ford's efforts to promote and sell the stock of Wicker World began shortly after he agreed to its purchase. A key figure in the sales campaign was Robert Maietta, a broker with the Minneapolis brokerage firm of Margolis & Co. Maietta, who testified for the government at trial, had assisted Ford in his initial search for a "shell" corporation. After Ford settled upon Wicker World, Maietta arranged a September, 1975 meeting in Minneapolis between Ford and Maietta's superiors at Margolis which led to the firm's purchase of 55,000 shares of Wicker World stock for $1.48 per share. At about the same time, Ford asked Maietta if he would attempt to sell some Wicker World stock privately to help Ford raise money for the company's as yet unpaid purchase price. Maietta agreed and promptly began to solicit purchases at $1.50 per share from various of his friends and clients in Minneapolis.

Ford visited Maietta again in Minneapolis in September of 1975. He explained that additional shares of Wicker World were available and urged Maietta to continue his private sales, offering to give him one share of stock for every two shares that he was able to sell. Maietta responded enthusiastically, selling substantial quantities of stock and also making purchases for his own account. Proceeds from these sales were in most instances deposited in either of two bank accounts that Ford had opened in Minneapolis, though on occasions when Ford was in Minneapolis Maietta turned over the sale proceeds directly. Maietta identified nearly $200,000 in deposits to Ford's Minneapolis accounts as a result of these stock sales.

In conjunction with his sales efforts through Margolis and Maietta, Ford undertook a promotional campaign to stimulate interest in Wicker World, a first step in which was to rename the company Dimensional Entertainment Corporation. Within a week after his sale of 55,000 shares of stock to Margolis, Ford organized a series of nominee purchases to create the impression of nationwide interest in the company. Individuals from Florida, California and Texas purchased significant quantities of Wicker World or Dimensional stock, purportedly on their own behalf but actually with money supplied either directly or indirectly by Ford.

During the period that Wicker World/Dimensional stock was being traded, Ford also issued three press releases to herald alleged successes in the company's business and investment activities. One of these "successes" was the company's acquisition of production rights to an off-Broadway show that was characterized in a July 1976 release as "playing to good grosses." The release also mentioned the director who had allegedly been signed to direct the show on Broadway. In fact, however, the named individual never signed a contract with Dimensional, and the play itself was a consistent money-loser, kept in production largely because Ford subsidized part of its costs.

There were other misrepresentations as well. The releases referred to Dimensional's continuing progress with three-dimensional video entertainment programs when in fact the company's projects had been effectively ended by Ford's failure to provide the financing required under two development contracts. The July, 1976 release also noted Dimensional's acquisition of Vaughn Travel Company, which it termed a profitable business with prestigious clients. Vaughn Travel was nearly bankrupt at the time, however, and the purchase was actually designed to bolster Dimensional's balance sheet. A side agreement with one of Vaughn's co-owners required virtually all of the purchase price to be returned to Dimensional in exchange for two entertainment properties and thus enabled Dimensional to list additional income on its financial statement.

In the spring of 1976 Ford sought to escalate his sales campaign by making Dimensional stock available for public sale in Minneapolis. Since he wished at the same time to avoid the detailed registration requirements of Minnesota's blue sky laws, Ford attempted to list the company in Moody's Industrial Over the Counter Manual which would exempt the company from state registration. Listing in Moody's required an audited financial statement reflecting at least $100,000 in assets, and to meet that condition Ford enlisted the aid of his nephew Stephen Yordon, a Florida certified accountant. Yordon was able to prepare a financial statement showing Dimensional with $115,000 in assets, but to do so treated as income payments owed Dimensional under a dubious contract for the sale of a theatrical script. The supposed purchaser of the script was an entertainer named Lou Wills, and although the contract set a sale price of $75,000, Wills had not even read the script when he signed the agreement and was assured at the time by Belle that he would not have to make any payments unless he actually produced a show.

The contingent form of Wills' agreement with Dimensional caused one of Yordon's accounting partners to object to the financial statement's characterization of the contractual payments as income. To meet this objection, Ford and Belle arranged for two bogus telegrams to be sent from California under the name of Lew Wills Productions. The first was addressed to Belle in New York and purported to amend the contract for sale of the script by unconditionally obligating Wills to pay $40,000 of the $75,000 purchase price within the first year. The second...