United States v. Guterma

• Decision Date: 18 July 1960
• Docket Number: No. 362,Docket 26198.,362
• Citation: 281 F.2d 742
• Parties: UNITED STATES of America, Appellee, v. Alexander L. GUTERMA and Robert J. Eveleigh, Defendants-Appellants, and F. L. Jacobs Co., Comficor, Inc., and Chatham Corporation, Defendants.
• Court: U.S. Court of Appeals — Second Circuit

281 F.2d 742 (1960)

UNITED STATES of America, Appellee, v. Alexander L. GUTERMA and Robert J. Eveleigh, Defendants-Appellants, and F. L. Jacobs Co., Comficor, Inc., and Chatham Corporation, Defendants.

No. 362, Docket 26198.

United States Court of Appeals Second Circuit.

Argued June 7, 1960.

Decided July 18, 1960.

COPYRIGHT MATERIAL OMITTED

Emanuel Eschwege, New York City, for defendant-appellant Eveleigh.

Jerome J. Londin, Exec. Asst. U. S. Atty., David P. Bicks, Asst. U. S. Atty., New York City (Morton S. Robson, Chief Asst. U. S. Atty., and George I. Gordon, Asst. U. S. Atty., New York City, on the brief), for appellee.

Richard H. Wels, New York City (James L. Adler, Jr., Gabriel Galef and Moss, Wels & Marcus, New York City, on the brief), for defendant-appellant Guterma.

Before LUMBARD, Chief Judge, and CLARK and FRIENDLY, Circuit Judges.

FRIENDLY, Circuit Judge.

Alexander L. Guterma and Robert J. Eveleigh appeal from a judgment of the District Court for the Southern District of New York which convicted them, after a jury trial, of various offenses under § 32 of the Securities Exchange Act of 1934 and of conspiracy, under 18 U.S.C. § 371, to violate the Securities Exchange Act and to defraud the United States by impeding and attempting to defeat the lawful functions of the Securities and Exchange Commission, all with reference to F. L. Jacobs Co., a company whose common stock was registered with the SEC under the Securities Exchange Act and listed on the New York Stock Exchange. Appellants were indicted along with Jacobs, which first pleaded guilty and later nolo contendere, and Comficor, Inc. and Chatham Corporation, alleged to be personal holding companies of Guterma, which were convicted on certain counts but have not appealed. The trial took all or part of 34 days. We have concluded that the judgment convicting Guterma and Eveleigh should be affirmed with two exceptions: Guterma's conviction on Count 2 relating to his failure to file an "insider's report" (Form 4) for January, 1959, and the conviction of both appellants on Count 9 relating to their alleged willful hindering of the filing of a current report (Form 8-K) of Jacobs for January, 1959.

The indictment, which was in 21 counts, related to various matters concerning Jacobs, whose business had been that of a subcontractor for automotive parts. In March, 1956, Guterma acquired 20,000 Jacobs shares of a total of 875,622 and became chairman of the board of directors; in the following years he acquired large additional amounts of stock and received stock options. Eveleigh became vice president, treasurer and a director of Jacobs; he also owned stock and held stock options in Jacobs and assisted Guterma in the operation of Comficor and Chatham Corporation. During 1958, under Guterma's direction, Jacobs acquired all or a controlling interest in a number of other companies. On December 4, 1958, the New York Stock Exchange suspended trading in the stock of Jacobs because of the company's failure to file its annual report for the fiscal year ended July 31, 1958, on October 31, 1958 as required.

The indictment, found on March 16, 1959, contained 21 counts. These can be divided into three categories:

(a) Counts 1-4 and 10-20 charged willful violations of the requirements of § 16(a) of the Securities Exchange Act, 15 U.S.C.A. § 78p(a), for the filing of so-called insider reports (Form 4) by officers, directors or beneficial owners of more than 10% of any class of an equity security registered on a national securities exchange within 10 days after the close of any month in which any change in such ownership occurs. Counts 1 and 2 charged failures by Guterma to file reports allegedly required of him as an officer and director of Jacobs for December, 1958, and January, 1959; Counts 3 and 4 charged similar failures by Eveleigh for the same months. Counts 10-20 charged the failure of Comficor, Guterma and Eveleigh to file reports allegedly required from Comficor as a 10% beneficial owner of Jacobs' stock for each month from December, 1957, through July, 1958, and from November, 1958, through January, 1959. Count 4 against Eveleigh was dismissed during the trial with the government's consent.

(b) Counts 5-9 charged violation of the corporate reporting requirements of § 13(a) of the Securities Exchange Act, 15 U.S.C.A. § 78m(a). Count 5 charged that Guterma and Eveleigh willfully, knowingly and without just cause hindered, delayed and obstructed the making and filing of Jacobs' annual report (Form 10-K) for the fiscal year ending July 31, 1958, which § 13(a) of the Act and SEC Rule X-13A-1 required to be filed with the SEC within 120 days after the close of the fiscal year. Counts 6, 7, 8 and 9 charged that Guterma and Eveleigh willfully, knowingly and without just cause hindered, delayed and obstructed the making and filing of current reports (Form 8-K) which § 13(a) (1) of the Act and SEC Rule X-13A-11 allegedly required of Jacobs for September, November and December, 1958 and January, 1959, because of its disposition of a significant amount of assets in each such month. The Court dismissed Counts 6, 7 and 8 for lack of proof of dispositions during the respective months of assets sufficient to require an 8-K report, rejecting the government's contention that transactions in various months could be cumulated to meet the quantitative test in the SEC instructions which we shall discuss below in connection with Count 9.

(c) Count 21 charged all five defendants with conspiring with each other and four other individuals to violate §§ 16, 20 and 32 of the Securities Exchange Act and to "defraud the United States by impeding, impairing, obstructing and attempting to defeat the lawful functions of an agency of the United States of America, namely, the Securities and Exchange Commission, in the protection of the investing public," by failing to file or obstructing and delaying the filing of the reports previously referred to and by filing reports of Jacobs "which were false and misleading with respect to material facts and which contained omissions of material facts."

The jury found all defendants guilty on all the counts that had been submitted to it. The judge sentenced Guterma to two years on each of Counts 1, 2, 5 and 9, to one year on each of Counts 10 through 20, and to four years and eleven months on the conspiracy count, the sentences to be served concurrently, and imposed fines of $10,000 on each of the 16 counts. He sentenced Eveleigh to one year on each of Counts 3, 5, 9 and 10 through 20, and to two years and eleven months on the conspiracy count, the sentences to be served concurrently, and imposed a $10,000 fine on the conspiracy count.

(1) A major contention of appellants relates to the denial of their motion to strike paragraph 7 of the conspiracy count which we set forth in the margin,¹ to the admission of evidence under that paragraph, and to the judge's charge concerning it. The motion to strike was correctly denied. The government had charged a conspiracy not to file required reports and to defraud the government of the lawful functioning of the SEC for the protection of investors by such failure and by the filing of false and misleading reports, see Hammerschmidt v. United States, 1924, 265 U.S. 182, 44 S. Ct. 511, 68 L.Ed. 968; it was relevant for the government to show that the conspiracy was motivated by a scheme to appropriate assets of Jacobs for defendants' benefit and to demonstrate what the facts were that defendants allegedly wished to conceal from the SEC and the public. There is somewhat more in appellants' contention that so much of the trial was devoted to these transactions as to have created a hazard that the jury might be led into thinking that the looting of Jacobs was the substantive offense of which defendants were indicted; although the judge's charge analyzed the evidence on each substantive count, appellants contend that what might otherwise have been the helpful effect of this was nullified by a passage, near the end of the charge, in which the judge dwelt at length on the transactions as to which the government had offered proof under paragraph 7 of the conspiracy count. Indeed, appellants claim this passage enhanced the risk that the jury would convict on all counts for the acts proved under paragraph 7. However, the judge made the bearing of this evidence clear by adding, immediately after the criticized passage, "Considering these matters and others, which you no doubt have in your minds, you must determine if the conspiracy charged existed"; and the only criticism of this portion of the charge made at the time was met in a manner stated to be satisfactory by counsel for Comficor who was the only one to take exception. Moreover, whatever the situation might be in a trial presenting a close issue of fact, the government's case on the conspiracy count and on Count 5, relating to obstructing the filing of the 10-K report, was overwhelmingly established; we are reversing the conviction on Count 9 relating to the failure to file the Form 8-K report for January, 1959; and we see no basis for belief that the jury did not decide the entirely different issues with respect to the failure to file insider reports on the evidence pertinent to those counts alone.

(2) Another general claim of appellants is that the statutory and regulatory scheme on which the substantive counts are based is so vague and indefinite as to contravene the Fifth and Sixth Amendments when invoked in a criminal prosecution. There is nothing vague or indefinite in the requirement for filing an annual report, and we do not reach the constitutional question with respect to the requirement for filing current reports in view of our reversal of the conviction of this count on another ground. Thus there remain only the attacks on § 16(a) relating to insider reports. These seem to reduce themselves to two. One relates to the phrase requiring a...