United States v. Hopps

• Court: U.S. District Court — District of Maryland
• Writing for the Court: Edward P. Morgan, Washington, D. C., and Thomas J. Kenney, Baltimore, Md., for defendants
• Citation: United States v. Hopps, 215 F.Supp. 734 (D. Md. 1962)
• Decision Date: 20 December 1962
• Docket Number: Criminal No. 25360.
• Parties: UNITED STATES of America v. Stewart B. HOPPS and Robert Hopps.

215 F. Supp. 734

UNITED STATES of America v. Stewart B. HOPPS and Robert Hopps.

Criminal No. 25360.

United States District Court D. Maryland.

December 20, 1962.

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Joseph D. Tydings, U. S. Atty., and J. Hardin Marion, III, Asst. U. S. Atty., Baltimore, Md., for plaintiff.

Edward P. Morgan, Washington, D. C., and Thomas J. Kenney, Baltimore, Md., for defendants.

THOMSEN, Chief Judge.

The indictment in this case charges that Stewart B. Hopps (Hopps) and his son Robert, as part of a scheme to defraud,¹ knowingly caused to be delivered by mail to addressees in Maryland in February 1958, a brochure which falsely represented the financial condition of International Guaranty and Insurance Company (International), a corporation of Tangier, Morocco, which Hopps dominated, supervised, managed and controlled.

Hopps has now moved, pursuant to Rule 41(e), F.R.Crim.P., to suppress as evidence against him in this proceeding: (I) all documents, papers and other property belonging to him "taken or obtained from the office of U. S. Marine and Foreign Securities, Ltd. (a Delaware corporation) and Stewart B. Hopps, personally, at 417 Montgomery St., San Francisco, California," in April 1958 "by representatives of the Insurance Department of the State of California, and subsequently obtained by the United States Attorney at Baltimore, Maryland, by subpoena duces tecum or otherwise"; and (II) all his property taken from a similar office at 44 Wall Street, New York City, in February 1960 by representatives of the Attorney General of New York and subsequently obtained by the United States Attorney.²

I. The California papers were taken by representatives of the California Insurance Commissioner, pursuant to the order of a California State Court which appointed him conservator of International and directed him to take possession of all the books, records, etc. of that company. The ultimate question here is whether the use of those papers in the instant case would violate any right of Hopps under the Fourth, Fifth or Fourteenth Amendments. To answer that question we must consider: Whether there was a search and/or seizure within the meaning of Rule 41(e) and the Fourth Amendment, and if so, whether the search and seizure were unreasonable and unlawful; whether Hopps has standing to contest the alleged search and seizure; and whether Hopps has waived any right he might otherwise have had to complain of the alleged search and seizure. These questions in turn depend largely upon the answer to still other questions, namely: the nature of the California proceeding; whether the papers belonged in whole or in part to Hopps, to International, or to some other corporation; whether the office where they were found was the office of International; whether they were delivered by or taken with the consent of an attorney for International; whether that attorney also represented Hopps at the time; and whether Hopps should be considered to have acquiesced in the taking of some or all of the papers.

II. The New York papers were delivered to representatives of the Attorney General of that State pursuant to a subpoena issued by him under sec. 352 of the General Business Law of New York, McKinney's Consol.Laws, c. 20 (Blue Sky Law) to Loretto C. Lindhauer, who was or had been Hopps's private secretary and was at that time the manager and sole occupant of the New York office used by Hopps and various corporations in which he was interested. The questions presented are generally similar to those raised in connection with the California papers.

At the hearing on the motions Hopps and other witnesses testified and many exhibits were offered, including a transcript of the California proceeding through August 1960, a transcript of the New York proceeding, correspondence and other papers covered by the motions. The findings below are based upon the evidence presented and the inferences drawn from that evidence after considering the credibility of the several witnesses, some of whom, including Hopps, did not tell the whole truth.

BACKGROUND FACTS

Stewart B. Hopps (Hopps) has had wide experience in the insurance business. For many years he has specialized in reinsurance and so-called surplus lines, which may be placed with non-admitted carriers subject to varying regulations in the several States.

A number of alien insurance companies, in addition to the Underwriters at Lloyds of London, write American risks, usually through holders of master binding contracts, and many of them have established trust funds of one kind or another in the United States to secure payment of American losses and to comply with the requirements of certain States. Some of these alien companies are substantial organizations, owned in whole or in principal part by aliens; others are less substantial, owned and operated by Americans and used by them to avoid the admission requirements of the several States, as well as for tax reasons.

Many years ago Hopps was United States Manager for a well-known British company, but for some time before the summer of 1957, he had been acting as broker and agent for various insurers, using a number of corporations which he owned directly or indirectly and which he operated with the assistance of a corps of employees, nominees, puppets and associates, who were shifted from the payroll of one company to another as business and tax considerations dictated. Among the corporations so controlled and operated by Hopps were: U. S. Marine & Foreign Securities, Ltd. (U. S. Marine); Anglo-Canadian Underwriters (Anglocan), incorporated in Newfoundland, but doing business out of offices in California, New York, Alabama and Rhode Island; American Armed Services Underwriters (AASU); Oreana Corporation (Oreana); and Sierra Underwriters, Inc. (Sierra).

Hopps also "advised" various insurance companies for a fee. His testimony sought to emphasize that phase of his activities, but the desired emphasis can be accepted only if the word "advise" is given a meaning to include "manage" and "operate".

U. S. Marine also dealt in the stock of small insurance companies which Hopps bought for himself (always or usually in the name of nominees) or for associates. Hopps did not expect to make money through dividends, but through brokerage commissions, agency commissions, and fees for "advice" to and operation of the companies in which he was interested, a number of which developed financial and other difficulties. See e. g. Rhode Island Insurance Company v. Downey, 95 Cal. App.2d 220, 212 P.2d 965.

It is hard to tell from the present record the nature of the relationship of Hopps to Atlas Insurance Company of Alabama, which went into receivership in July 1957. Some of the Hopps corps had been active in its management, and in December 1956 Atlas had entered into a spread loss treaty of reinsurance with International, which then had as its corporate name West Indische Herverzekering Maatschappij. After the receivership of Atlas, Hopps arranged that West Indische should take over the two Atlas lines in which he was particularly interested, namely, the business which had been placed with Atlas by Anglo-can and the business placed by Nationwide Underwriters, Inc., a brokerage concern operated by one Herbert Oppenheim.

It is also hard to tell when Hopps first became connected with West Indische and what his relationship thereto was before the latter part of 1957. West Indische's legal home office was in the banking house of Mars et Cie, in Tangier, but little if any business appears to have been transacted there except formal meetings and the keeping of certain corporate records. The ownership of its stock in early 1957 is not clear. Hopps testified that the principal equitable owner was a Spaniard named Ferrar, who lived in Cuba but is now dead. Hopps denied any stock ownership, but the papers which are the subject of the motion and are in evidence include one which shows that Hopps owned some founders' shares, and one of the administrateurs (directors) of West Indische was E. S. Van Galder, clearly an alias and equally clearly one of the Hopps corps. In October 1957, when Hopps needed assets for himself or Ehrlich to contribute to the Nevada trust hereinafter referred to, West Indische purchased $85,000 preferred stock of U. S. Marine (the common stock of which was owned by Hopps), giving in payment a mortgage for $85,000 which was held by West Indische. The assignment was executed by Van Galder. The name of West Indische was changed to International Guaranty and Insurance Company in the fall of 1957, and it will be convenient to refer to that corporation as "International" throughout this opinion. In 1957 Anglo-can, one of the corporations owned or controlled by Hopps, had a master binding contract with International covering the whole of North America.

THE CALIFORNIA PAPERS — FACTS

Hopps had operated out of New York City until about 1950, when he moved to San Francisco and opened an office there. In 1957-58 his chief office was at 417 Montgomery Street, San Francisco, which was rented in the name of U. S. Marine. Hopps testified that he contributed to the rent in such proportions as his tax advisers suggested. He retained his New York office, at 44 Wall Street, and from both of the offices he operated or directed the operation of various corporations, including U. S. Marine, Anglo-can, AASU and Sierra. International paid the rent of both offices for two months (February and March) in 1958, under the circumstances discussed below.

In the early summer of 1957 two well-known Californians suggested to Hopps that he find a company that would insure small mortgages. After studying the problem and conferring with Henry North, a vice president of Metropolitan Life Insurance Co., Hopps arranged that International should write the business. He caused to be incorporated in Nevada, Mortgage...