U.S. v. Tallant

• Decision Date: 07 March 1977
• Docket Number: No. 75-4244,75-4244
• Citation: 547 F.2d 1291
• Parties: Fed. Sec. L. Rep. P 95,903 UNITED STATES of America, Plaintiff-Appellee, v. Fred C. TALLANT, Sr., and William M. Womack, Jr., Defendants-Appellants.
• Court: U.S. Court of Appeals — Fifth Circuit

Page 1291

547 F.2d 1291

Fed. Sec. L. Rep. P 95,903

UNITED STATES of America, Plaintiff-Appellee, v. Fred C. TALLANT, Sr., and William M. Womack, Jr.,

Defendants-Appellants.

No. 75-4244.

United States Court of Appeals, Fifth Circuit.

March 7, 1977.

E. Lewis Hansen, Atlanta, Ga., Carl L. Shipley, Washington, D. C., for defendants-appellants.

John W. Stokes, U. S. Atty., Dorothy T. Beasley, Asst. U. S. Atty., Atlanta, Ga., for plaintiff-appellee.

Appeal from the United States District Court for the Northern District of Georgia.

Before BROWN, Chief Judge, and HILL and FAY, Circuit Judges.

JOHN R. BROWN, Chief Judge:

In connection with the intrastate offering and sale of securities of the Preferred Land Corporation, Fred C. Tallant, Sr. and William Womack, Jr., as officers, directors, and control persons, were indicted for violation of the general antifraud section of the Securities Act of 1933, 15 U.S.C.A. § 77q(a), the federal mail fraud statute, 18 U.S.C.A. § 1341, and of the federal conspiracy statute, 18 U.S.C. § 371. Because of falsification and presentation of such records to the Securities and Exchange Commission (S.E.C.) for examination in violation of 18 U.S.C.A. § 1505, ¹ appellant Womack was After repeated pre-trial attacks, ² both Tallant and Womack pleaded, just prior to trial, nolo contendere to all counts of the indictment. ³ On appeal from the conviction on a plea of nolo, eleven errors are set forth. ⁴ Of those items of error properly before this Court, we find them to be without merit and affirm the convictions. Many of the errors are not reachable from a nolo conviction.

indicted individually for obstruction of the proper administration of the Securities Act of 1933.

Non-Jurisdictional, Non-Appealable

The initial consideration before this Court on any appeal from a conviction founded on a nolo contendere plea is what form of error is appealable. Prior decisions clearly indicate that only jurisdictional defects in the proceedings below may be considered by this Court on appeal. United Of the eleven defects alleged on appeal, those numbered 1, 2, 3, 4, 5, 6, 8, 10, ⁶ and 11 are nonjurisdictional. Consequently, these contentions may not be considered by this Court on appeal.

States v. Winter, 5 Cir., 1975, 509 F.2d 975, 978 n. 8; United States v. Chaiken, 5 Cir., 1973, 489 F.2d 1052; United States v. Mizell, 5 Cir., 1973, 488 F.2d 97; United States v. Drummond, 5 Cir., 1974,488 F.2d 972; United States v. Sepe, 5 Cir., 1973, 486 F.2d 1044, aff'g,474 F.2d 784. ⁵

Jurisdictional Appealable

In one of their jurisdictional attacks, Tallant and Womack contend that § 17(a) of the Securities Act of 1933 (1933 Act), 15 U.S.C. § 77q(a), ⁷ is unconstitutional because it makes "unlawful future acts that 'would operate as a fraud' as distinguished from present or past acts that do not operate as a fraud." Essentially, because these purchasers received the same class of stock at the same price, the appellants' argument is that no purchaser sustained a loss by receipt of stock owned or controlled by Tallant or Womack rather than the original issue stock they believed they were purchasing. ⁸ Section 77q(a) speaks in terms of that ". . . operates or would operate as a fraud or deceit upon the purchaser." Additionally, the 1933 Act makes unlawful the making of untrue statements of material fact or the omissions of such a fact. 15 U.S.C.A. § 77q(a). It is not the occurrence of a dollar loss as a result of the actions, statements, or omissions which is unlawful under the 1933 Act. Among the purposes of this Act, one was to insure purchasers of securities full, truthful, and accurate information on which to base their security transactions decisions and to protect them from fraud and misrepresentation. I L. Loss, Securities Regulation, 178 (2d ed. 1961). As a result, an unlawful act may ⁹ arise when the failure to convey information in accordance with this goal occurs. The nutshell essence of the violation in this case is that § 77q was violated when Preferred Land stock was offered for sale as ostensibly original issue stock and not for that it was, already issued shares in the hands of controlling interests.

In this case, when the purpose of unlawful acts under the 1933 Act are recognized, it is evident that the "unlawful future act" unconstitutional argument is invalid. The actions already committed by Mr. Tallant and Mr. Womack were and are unlawful under § 17q(a) of the 1933 Act. ¹⁰

The remaining jurisdictional issues are raised under No. 7, in note 4 above, which questions whether (a) the acts alleged in the indictment are within the criminal jurisdiction ¹¹ of the federal courts, (b) an independent mail fraud offense is presented, (c) the indictment charges acts which constitute obstruction of justice, and (d) the indictment charges acts which constitute conspiracy. None of these items presents a valid jurisdictional error.

Under 15 U.S.C.A. § 77v ¹² jurisdiction of offenses and violations of the 1933 It is the contention of Tallant and Womack that although they may have violated § 77q for injunctive actions or administrative action by the SEC, or possibly an implied liability action by a private shareholder, they have not committed acts and the indictment does not charge acts which allow imposition of criminal penalties under § 77x. We do not agree. By the sections of the 1933 Act directly relevant to this securities fraud case, § 77q sets forth "fraudulent interstate transactions", § 77c specifies "exempted securities" those to which the 1933 Act does not apply, and § 77x spells out penalties for violation of the 1933 Act. Under § 77c(a)(11), ¹³ securities sold wholly within one state, intrastate securities, are exempted from the registration and other aspects of the 1933 Act. However, the exemptions of § 77c(a)(11) are specifically made inapplicable to § 77q, the fraudulent interstate transaction section, by subsection c which states "the exemptions provided in section 77c of this title shall not apply to the provisions of this section." 15 U.S.C.A. § 77q(c).

Act is granted to the ". . . district courts of the United States, and the United States courts of any Territory . . . ." Thus if a violation of or offense under this Act exists, the District Court possessed subject matter jurisdiction.

Thus far, one facet of this statutory structure is evident. The fraudulent intrastate offer or sale of a security is made unlawful under § 77q if it utilizes ". . . any means or instruments of transportation or communication in interstate commerce or by use of the mails, . . . directly or indirectly." (Emphasis added). For Tallant and Womack, such unlawful acts were admitted by their respective nolo contendere pleas. See Lott v. United States, 1961, 367 U.S. 421, 426, 81 S.Ct. 1563, 6 L.Ed.2d 940. ¹⁴ More simply, they admitted violation of a provision of the 1933 Act, the general antifraud provision.

Tallant and Womack argue that although intrastate securities are not exempt from the general antifraud provision, the penalties imposed by § 77x still remain inapplicable to a wholly intrastate security because, unlike § 77q, § 77x does not explicitly state that the intrastate security exemption of § 77c(a)(11) is inapplicable to § 77x. Contrary to this argument, the very wording of § 77x includes within the perimeters to which it applies a violation of ". . . any of the provisions of (the 1933 Act) . . .." (Emphasis added). One of those provisions is § 77q(a) governing fraudulent interstate transactions. Consequently, Tallant and Womack violated a provision of the 1933 Act and were subject to imposition of the penalties under § 77x for that violation. III L. Loss, Securities Regulation, 1442 n. 45, 1984 (2d ed. 1961). ¹⁵ From this it follows that if the acts charged in the indictment are sufficient to constitute an offense under the 1933 Act, a District Court possesses jurisdiction to impose criminal penalties under § 77x. Even a cursory examination of the first five counts of the indictment reveals, and we so hold, that the counts sufficiently allege acts which are offenses under the 1933 Act.

Defendants proffer as an additional deficiency in the indictment that it does not charge an offense which constitutes a violation of the mail fraud statute, 18 U.S.C.A. § 1341, standing alone. Counts 6 through 10 on their face state acts which violate § 1341.

On examination of the acts alleged in the indictment and application of the applicable law, any doubt about the sufficiency of the mail fraud counts is dispelled. Section 1341 requires (a) a scheme to defraud, and (b) a mailing for the purpose of executing the scheme. Pereira v. United States, 1954, 347 U.S. 1, 8, 74 S.Ct. 358, 98 L.Ed. 435; United States v. Brewer, 4 Cir., 1975, 528 F.2d 492, 494. The mail fraud counts reallege the scheme to defraud charged under counts 1 through 5 of the indictment which set forth the 1933 Act violations.

Each of the mail fraud counts, 6 through 10, specifically alleges a mailing of stock certificates of Preferred Land Corporation to purchasers under the scheme. This is sufficient for showing acts which constitute the second element of mail fraud. The mailing allegation comes within the definition of mailing given in Pereira, supra at 8, 74 S.Ct. 358, that

"To constitute a violation of these provisions, it is not necessary to show that petitioners actually mailed or transported anything themselves; it is sufficient if they cause it to be done.

. . . There remains only one question whether Pereira 'caused' the mailing. That question is easily answered. Where one does an act with knowledge that the use of the mails will follow in the ordinary course of business, or where such use can reasonably be foreseen, even though not actually intended, then he 'causes' the mails to be used." Id., at 8-9, 74 S.Ct. at 363.

Each day in the general course of securities sales, certificates are mailed by brokers to purchasers and...