United States v. Amick

• Citation: 439 F.2d 351
• Decision Date: 29 March 1971
• Docket Number: 17089-17095.,No. 17084-17087,17084-17087
• Parties: UNITED STATES of America, Plaintiff-Appellee, v. Fred G. AMICK et al., Defendants-Appellants.
• Court: U.S. Court of Appeals — Seventh Circuit

439 F.2d 351 (1971)

UNITED STATES of America, Plaintiff-Appellee, v. Fred G. AMICK et al., Defendants-Appellants.

Nos. 17084-17087, 17089-17095.

United States Court of Appeals, Seventh Circuit.

January 22, 1971.

As Amended on Denial of Rehearing March 29, 1971.

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Stanley B. Miller, U. S. Atty., Indianapolis, Ind., William Hegan, Chicago, Ill., K. Edwin Applegate, U. S. Atty., for plaintiff-appellee; Burton H. Finkelstein, E. George Perdix, Joan H. Saxer, James J. Sexton, III, Attys., S.E.C., Washington, D. C., of counsel.

Vance M. Waggoner, Rushville, Ind., Duge Butler, Jr., Earl N. Davis, Howard J. DeTrude, Jr., Erle A. Kightlinger, Robert A. Garelick, Sidney Mishkin, Alan I. Klineman, James W. Bradford, John D. Raikos, Thomas W. McKean, Indianapolis, Ind., Jerome B. Van Orman, Fort Wayne, Ind., for defendants-appellants; Kightlinger, Young, Gray & Hudson, Raikos, Rockford, Melangton & Dougherty, Indianapolis, Ind., of counsel.

Before FAIRCHILD, CUMMINGS and KERNER, Circuit Judges.

As Amended on Denial of Rehearing in No. 17091 March 29, 1971.

FAIRCHILD, Circuit Judge.

These are appeals by eleven individuals and two corporations from judgments of conviction of violations of 15 U.S.C. § 77q (Section 17 of the Securities Act of 1933, Fraudulent interstate transactions). Eight of the individual appellants and the corporations were convicted by a jury.¹ The other three individual appellants were convicted upon pleas of nolo contendere. Others were named in the indictment, but entered pleas or had separate trials, and are not involved on these appeals.

The charges arose out of sales of the common stock of Air & Space Underwriters, Inc. (ASU). ASU was newly formed and contemplated a business (through a subsidiary) of manufacturing and selling gyroplanes. A gyroplane is similar to a helicopter in that each has a rotor wing. The gyroplane's rotor, when in flight, is free wheeling and not powered. Forward motion is generated by a propeller. A helicopter's rotor, on the other hand, is powered in flight and has forward motion as a result. ASU took over the development of the gyroplane from Umbaugh Aircraft Corporation pursuant to a plan of reorganization of that company, approved in a Chapter X proceeding by a federal district court in Florida. There is evidence that the gyroplane to be produced could land and take off without a runway, and could carry a passenger in addition to the pilot. It was hoped that it could be produced at a price which would make it feasible for various types of business and personal transportation uses.

ASU stock was sold to investors in Indiana from August 14, 1963 until July, 1965 when the SEC obtained an injunction. The prices paid by investors during this period aggregated $2.1 million. 15 gyroplanes were produced and sold.

It appears, virtually beyond dispute, that during this period the effort to promote sales of ASU stock included general releases and individual communications which contained untrue statements of material facts, omitted material facts necessary to make the statements made not misleading, and included devices to defraud and practices which would operate as a fraud upon the purchaser. The areas of misrepresentation included the price at which the plane could be sold, progress toward production, orders on hand, and the financial history and condition of ASU. The details will not be stated except as required in discussion of particular counts. There was abundant evidence of pattern of conduct, plan, and design from which a jury could find that the false and misleading assertions, to the investing public by way of the media, including the Indiana Investor in particular, and to prospective purchasers by sales literature and individual sales efforts, constituted a scheme to defraud, changing in content from time to time. The ultimate question is whether the appellants were properly found criminally responsible for wilfully having employed such scheme or wilfully having obtained money by means of such misrepresentations.

Appellants challenge the indictment on several grounds, and make other attacks on procedure. Those who stood trial argue that the evidence was insufficient to support the respective guilty verdicts.

1. The challenge to the array of the grand jury. All appellants contend that the grand jury which indicted them was unlawfully selected. Appellants who stood trial assert the same defect with respect to the petit jury. The challenge is made to an early step in the system by which most names were selected for the jury list from which the names of veniremen were drawn. Documents were placed before the district court in support of and opposition to the challenge. Most of them were the same as those described and considered by Chief Judge Steckler of the same court in overruling a similar challenge at about the same time.²

Appellants rely principally on statements appearing in Rabinowitz v. United States³ although there was no showing in the instant case suggesting the virtual exclusion or gross under-representation on the jury list of any group or class of residents of the district or division.

The names of prospective grand jurors were drawn from among 1,200 names, at least 300 being on the jury list in each of four divisions. The names of prospective petit jurors were drawn from the 300 on the list in the Indianapolis division. The division lists were maintained at 300 by addition from time to time of names of persons who had answered questionnaires and been found qualified and not exempt. Most of the names of the larger number to whom the questionnaires had been sent were supplied by so-called key men who were asked by the clerk and jury commissioner to supply them.

As needed, the clerk and jury commissioner sent a form letter to key men in the counties in the district. According to an affidavit by the clerk, the key men were persons "who were thought to be widely acquainted with persons of diverse backgrounds within their own communities, and were most likely to suggest jurors representing a fair cross section of such communities."

The form letter soliciting suggestions was before the court. It stated in part that jurors must be "capable and impartial and * * * selected without regard to race, color, creed, politics or station of life." The recipient was asked "to suggest the names of men and women in your community who, in your judgment, would make qualified jurors." A sheet setting forth 28 U.S.C. §§ 1861 and 1862, listing qualifications and exemptions, was enclosed and it was said, "In making your suggestions please refer to the statutory requirements set forth on the attached sheet." Apparently about 140 key men had responded to such letters in the course of three years.

In November, 1966 several individuals interviewed 79 key men concerning the type of persons whose names each had suggested and prepared affidavits summarizing the interviews. These affidavits were before Judge Dillin as they had been before Judge Steckler. It seems fair to say in summary that most or all the key men said they had some standard in mind as to who would make a "responsible" juror. Indeed, any form of key man system of suggestion would almost necessarily involve the application of some subjective standard of that type. We do not consider, however, that either constitutional concepts or any statutes applicable in 1966 or 1967 compelled a purely random selection from the whole body of qualified persons in the community.⁴

It appears from the affidavits that several key men acknowledged that they had not suggested names of persons belonging to particular groups or classes. Some of the reasons, e. g., that jury duty would be a hardship on poorly paid workers, that men make better jurors than women, and that young adults are too immature, would tend to establish invalidity if such reason were found to have guided most or a substantial group of key men, but we deem the degree to which these reasons operated among the total number interviewed was clearly insubstantial.

The district court, in overruling the challenge, concluded that the key man system was not invalid per se, and that the affidavits neither established exclusion of classes of qualified persons nor made a showing sufficient to require further inquiry. We agree.

2. Challenges to form and sufficiency of indictment. The first 38 counts of the indictment charged varying groups of defendants with violations of 15 U.S. C. § 77q(a). The outline is similar to the one discussed in United States v. Birrell.⁵ Count 39 charged appellants Vollmer and Indiana Investor and Business News, Inc. (Indiana Investor) and others with violation of 15 U.S.C. § 77q (b) in publicizing ASU stock. Count 40 charged several defendants with violation of 15 U.S.C. 77e(a) (2) by mailing ASU stock without a registration statement being in effect. Count 41 charged all defendants with conspiring to commit the offenses charged in the other counts.

A number of the first 38 counts and count 40 were dismissed on motion of the government or for failure of proof. The jury acquitted various defendants on several counts among the first 38, and acquitted all defendants on count 41. The jury convicted Vollmer and Indiana Investor on count 39 and convicted one or more appellants on each of the remaining first 38 counts.

Each of the first 38 counts charged that several defendants, by the use of the mails in the offer and sale of ASU stock to a particular purchaser, wilfully (1) employed devices, schemes and artifices to defraud, (2) obtained money and property by means of untrue statements of material facts and omissions to state material facts necessary in order to make the statements made, in the light of the circumstances under which they were made, not misleading, and (3) engaged in transactions, practices, and courses of business which would and did operate as a...