United States v. Kelly

• Decision Date: 29 July 1965
• Docket Number: Docket 28018.,No. 99,99
• Parties: UNITED STATES of America, Appellee, v. Roy B. KELLY, Cecil V. Hagen and Milton J. Shuck, Defendants-Appellants.
• Court: U.S. Court of Appeals — Second Circuit

349 F.2d 720 (1965)

UNITED STATES of America, Appellee, v. Roy B. KELLY, Cecil V. Hagen and Milton J. Shuck, Defendants-Appellants.

No. 99, Docket 28018.

United States Court of Appeals Second Circuit.

Argued November 19, 1964.

Decided July 29, 1965.

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Charles A. Stillman, Asst. U. S. Atty., New York City (Robert M. Morgenthau, U. S. Atty. for Southern District of New York, Robert G. Morvillo, Lawrence W. Newman and John S. Martin, Jr., Asst. U. S. Attys., and Robert M. Cipes, Sp. Asst. to U. S. Atty., New York City, on the brief), for appellee.

Albert J. Ahern, Jr., Washington, D. C. (Marvin B. Segal, New York City, on the brief), for defendant-appellant Roy B. Kelly.

Marvin B. Segal, New York City (Albert J. Ahern, Jr., Washington, D. C., on the brief), for defendant-appellant Cecil V. Hagen.

Stuart Robinowitz, New York City (Robert L. Ellis, Renee J. Roberts, Joseph Zuckerman and Rosenman, Colin, Kaye, Petschek & Freund, New York City, on the brief), for defendant-appellant Milton J. Shuck.

Before MEDINA, MOORE and MARSHALL, Circuit Judges.

MEDINA, Circuit Judge:

This is another one of those seemingly interminable stock fraud conspiracy cases which have bedevilled this Court and judges and juries in the Southern District of New York during recent years. See also, e. g., United States v. Re, 2 Cir., 1964, 336 F.2d 306, cert. denied, 379 U.S. 904, 85 S.Ct. 188, 13 L. Ed.2d 177; United States v. Dardi, 2 Cir., 1964, 330 F.2d 316, cert. denied, 379 U.S. 845, 85 S.Ct. 50, 13 L.Ed.2d 50; United States v. Crosby, 2 Cir., 1961, 294 F.2d 928, cert. denied sub nom. Mittelman v. United States, 1962, 368 U.S. 984, 82 S.Ct. 599, 7 L.Ed.2d 523. It is a sad commentary upon the morals of our stock market places in general, and the over-the-counter market in particular, that at this late date in the history of federal securities regulation we are called upon once again to "memorialize the rapacity of the perpetrators and the gullibility, and perhaps also the cupidity, of the victims." United States v. Benjamin, 2 Cir., 1964, 328 F.2d 854, 856, cert. denied sub nom. Howard v. United States, 377 U.S. 953, 84 S.Ct. 1631, 12 L.Ed.2d 497.

The indictment is a formidable document containing 160 counts, naming 20 defendants and 28 alleged co-conspirators. The following individual and corporate defendants pleaded guilty before trial: John Van Allen, Irving H. Hertzberg, F. W. MacDonald & Co., Pierre A. DuVal, DuVal's Consensus, Inc., Martin Teller and Michael Ackman. Cases against the following defendants were severed prior to trial: Paul Hagenbach, Brandel Trust, Charles R. Stahl, DePontet & Co., Adam Miles, and Stahl, Miles & Co., Ltd. The trial commenced on November 14, 1962 and the jury returned its verdict some nine months later on August 7, 1963. In the meantime, on February 7, 1963 defendant Jules Bean pleaded guilty and the case against the corporate defendant Singer, Bean & Mackie was severed. Van Allen, Hertzberg, Teller, Hagenbach and Stahl were Government witnesses at the trial.

For one reason or another most of the 160 counts of the indictment were eliminated and only seven were submitted to the jury with respect to the four remaining defendants. The jury found Roy B. Kelly, Cecil V. Hagen, Milton J. Shuck and Gulf Coast Leaseholds, Inc. guilty of conspiracy as charged in Count 1. Kelly, Hagen and Gulf Coast Leaseholds, Inc. were found guilty as charged in substantive registration counts 57, 60 and 61 and they were all acquitted on the substantive fraud count 107. Shuck was not only found guilty of conspiracy as above stated. The jury also found him guilty as charged in the substantive fraud counts 93, 105 and 107. Gulf Coast Leaseholds, Inc. was fined and has not appealed. Kelly and Hagen were sentenced on each of Counts 1, 57, 60 and 61 to three years imprisonment, to be served concurrently. Hagen was also fined $25,000. Shuck was sentenced on each of Counts 1, 93, 105 and 107 to eighteen months imprisonment, to be served concurrently, and his fine of $25,000 was remitted, as was also the fine in the same amount originally imposed on Kelly. The three convicted individuals, Kelly, Hagen and Shuck have appealed to this Court and each is now on bail pending the disposition of the appeal.

While the eleven months trial in United States v. Dardi, supra, 2 Cir., 1964, 330 F.2d 316, cert. denied, 379 U.S. 845, 85 S.Ct. 50, 13 L.Ed.2d 50, probably is something of a record for a criminal conspiracy case tried to court and jury, this case would seem to be a close second. The elapsed time of the trial was just short of nine months. The trial transcript covers 18,000 pages and we have before us an additional 4,000 pages of various preliminary hearings, motions, affidavits and other papers. The prosecutor informed the trial judge, just before the summations, that over 1,000 exhibits had been offered by the Government and over 500 exhibits offered by the various defendants, that 44 witnesses had been called by the Government and 18 called by appellant Shuck.

We affirm in all respects the judgment of conviction against Kelly and Hagen on Counts 1, 57, 60 and 61. We reverse the judgment of conviction against Shuck on Counts 1, 93, 105 and 107 and remand the case against him for retrial on all said Counts, if the prosecutor is so advised.

Synopsis of Opinion

I

Summary of Appellants' Law Points for Reversal

II

Comprehensive and Chronological Review of the Evidence

III

The Conspiracy Count

IV

The Claims of Misconduct by the Trial Judge are Wholly Unjustified

V

The So-Called "Slanted" Instructions

VI

The Reading of the Indictment to the Jury

VII

Accomplices and Co-conspirators Who Pleaded Guilty

VIII

Miscellaneous Claims of Violation of Constitutional Rights of Kelly and Hagen

IX

Objections to Various Documents Offered by the Prosecutor Were Properly Overruled

X

The Cross-examination of the Government Witness Shreve

XI

It Was Not Error to Send GX990 to the Jury During Its Deliberations

XII

The Refusal to Excuse Juror No. 3 Was Proper

XIII

Omnibus Discussion of Miscellaneous Other Claims of Error

XIV

The Substantive Counts

XV

The Challenge to the Method of Selecting Jurors Was Properly Overruled

XVI Conclusion

I Summary of Appellants' Law Points for Reversal

The principal legal question in the case is the familiar one concerning the Government claim of a single over-all conspiracy vis-a-vis the contention of Shuck that the case should have been severed as to him, and that, in any event, the evidence was not sufficient to connect him with any single over-all conspiracy, but rather at most with a separate and distinct conspiracy.

Other contentions include:

Alleged prejudicial error in reading the indictment to the jury as part of the instructions at the close of the evidence.

Fifty-two other separate claims by Kelly and Hagen of prejudicial error in the instructions to the jury and in refusing requests for instructions.

The challenged admissibility into evidence of Government Exhibits: 104, 434(a), 442, 446(a), 446(c), 446(d), 446(e), 446(i), 446(uu), 447(a), 447(e), 447(o), 447(s), 556, 617, 773, 862, 865, 921, 933, 937, 991.

Claims of improper restrictions on the cross-examination of the Government witnesses Shreve and Teller.

The claim by Kelly and Hagen that Juror No. 3 should have been excused.

A miscellany of points by Kelly and Hagen relating to the refusal to direct the taking of certain depositions before trial, the fixing of bail, the receipt of papers served by the Government in opposition to certain pre-trial motions, the refusal to sentence those co-defendants who had pleaded guilty before or during the trial until after the jury had rendered its verdict, the refusal of the trial court to give reasons for his rulings on the admissibility of evidence, and many other allegedly prejudicial rulings too numerous to describe in detail including, in the colorful language of counsel for Kelly, the "tenacious" refusal of the Court to furnish counsel with a copy of his charge.

A further miscellany of points relating to the conduct of the trial judge and a variety of rulings, each of which is claimed to constitute a violation of the constitutional rights of Kelly and Hagen under the Fifth and Sixth Amendments, including claims that on several occasions the trial judge lost jurisdiction by ex parte continuation of the trial in the absence of Kelly and Hagen and their counsel, that he refused to hear argument and thus deprived these appellants of procedural due process, that Kelly and Hagen were deprived of their right to a speedy trial, that a Government witness was permitted to make unresponsive answers that violated the rights of Kelly and Hagen not to incriminate themselves by testifying, and that in general the rulings of the trial judge were so uniformly favorable to the prosecutor as to place him in the role of an advocate.

It is also claimed by appellants Kelly and Hagen that the procedures by which the Grand Jury was selected in the Southern District of New York were so inadequate, biased and generally unlawful as to require the dismissal of the indictment as to them.

In addition to the arguments addressed by counsel for Shuck to the severance and conspiracy phases of the case, above referred to, this appellant claims the admission of the post-conspiracy testimony of Kelly and Hagen before the SEC and the Attorney General of the State of New York was prejudicial error as to him and not cured by adequate cautionary instructions to the jury. It is also asserted on behalf of Shuck that the failure of the trial judge effectively to curb the "campaign" of counsel for Kelly and Hagen, throughout the trial, "to vilify and besmirch Shuck by inflammatory statements, improper questions and mis-statements of fact," deprived him of a fair trial....