United States v. Projansky
| Citation | 465 F.2d 123 |
| Decision Date | 22 June 1972 |
| Docket Number | Dockets 71-2006,71-2081,No. 691-694,71-2082 and 71-2124.,691-694 |
| Parties | UNITED STATES of America, Appellee, v. Irving PROJANSKY et al., Defendants-Appellants. |
| Court | United States Courts of Appeals. United States Court of Appeals (2nd Circuit) |
George B. Collins, Chicago, Ill. (Collins & Amos, Chicago, Ill.,) for defendant-appellant Harry Brainin.
Patrick A. Tuite, Chicago, Ill., for defendant-appellant Irving Projansky.
Morton J. Schlossberg, New York City (Joseph J. Marcheso, Philip M. Kazin, New York City, of counsel), for defendant-appellant Gerald Leavitt.
Stanley M. Meyer, Brooklyn, N. Y. (Preminger & Meyer, Brooklyn, N. Y.), for defendant-appellant Michael Geier.
John J. Tigue, Jr., Asst. U. S. Atty., New York City (Whitney North Seymour, Jr., U. S. Atty. S. D. N. Y., Jeffrey Harris, Carter LaPrade, Peter F. Rient, Asst. U. S. Attys., of counsel), for appellee.
Before MOORE, SMITH and HAYS, Circuit Judges.
Certiorari Denied November 13, 1972. See 93 S.Ct. 432, 433, 443, 444.
Irving Projansky, Harry Brainin, Gerald Leavitt, and Michael Geier appeal from judgments of conviction entered against them in the United States District Court for the Southern District of New York on September 17th and 23rd, 1971, after a three and one-half month trial before Judge Lasker and a jury. The four appellants, with twelve others, were indicted on August 23rd, 1967, for their alleged participation in a concerted effort to raise by manipulation the price of the stock of Hercules Galion Corporation (Hercules), a company listed on the American Stock Exchange (AMEX).1 We affirm all four judgments of conviction.
In September of 1963 Projansky, Brainin, and Irving Taub, the sole officers and directors of Argus Capital Corporation (Argus), an investment and finance company located outside Chicago, embarked on a program to gain control of Hercules, a manufacturer of heavy trucks. Pursuant to this program, during 1963 and 1964, approximately 275,000 of the 927,000 shares of Hercules stock then outstanding were purchased by Projansky, Brainin, Taub, and their associates. These shares, representing working control of Hercules, were deposited at Argus. Thereafter Brainin, as sole voting trustee of the shares, exercised the control they represented to elect himself, Projansky, Taub, and Charles Meyers to Hercules' nine-man board of directors and to install Meyers as president of Hercules.
Despite the general upward trend of the stock market from 1963 to 1965, the price of Hercules fluctuated moderately on low volume until the promotion here under focus took hold. This relatively poor performance of Hercules disgruntled the shareholders. They believed that Hercules was a sound investment. Moreover, the firm was developing a garbage truck expected to become dominant in the garbage truck market and building a new plant expected to increase productivity. Finally, Brainin and Projansky were interested in mergers and acquisitions, and if the price of Hercules stock were higher then the firm's bargaining power in any such negotiations would be enhanced.
During the spring of 1965 Projansky discussed the prospects of Hercules with Arthur Keller, president of the First National Bank of Lincolnwood, Illinois (FNBL). Projansky was chairman of the board of the FNBL. Keller, in turn, discussed Hercules with Gerald Leavitt, an acquaintance and a customer of the bank. A graduate of the University of Illinois with a Bachelor of Science Degree in Economics, Leavitt had recently left a firm in the ladies' garment wholesaling business with which he had been for sixteen years and was studying to become an investment advisor.
Thereafter in June of 1965 Leavitt brought his brother-in-law, Mark Rolland, to the FNBL for a meeting with Keller and Projansky. Rolland was a 50% partner in Investment Associates, a Chicago stock factoring firm (a firm that lent money for the purchase of stock, the loans collateralized by the stock bought). Projansky expressed his and the shareholders' interest in seeing the price of Hercules stock increase. Leavitt and Rolland responded by assuring Projansky and Keller that they could be of considerable assistance.
Shortly thereafter the parties met again at the FNBL. Rolland and Leavitt brought with them Spero Furla, a registered representative and a close friend of Rolland's. Furla was the companion of Rolland that had assisted in raising the price of Pentron.3 At this second meeting Projansky again explained the reasons for his desire to see the price of Hercules increase, and stated that he would like to see it rise from its then level of around 6 to 12 or 13. Speaking for Leavitt and Furla, Rolland foresaw no difficulty in meeting this objective. In consideration for their services, the "Rolland group" asked for options to buy Hercules stock at bargain prices. They preferred this form of payment over cash because they wanted their expected income to be taxed at capital gains rather than ordinary income rates. The meeting concluded with Projansky's admonition that any deal depended on the approval of his fellow directors Brainin and Taub.
The agreement between Projansky's group and Rolland's group was finalized in a series of three meetings in August and early September of 1965. On the one hand were Projansky, Brainin, Keller, and Taub, representing the Hercules interests, and on the other were Rolland, Furla, and Leavitt, representing the promoters. During the first meeting Brainin repeated what Projansky had said in the earlier meetings about the soundness of Hercules and the desire to see its stock price increase to enhance Hercules' merger position. Brainin stated that there were approximately one million shares outstanding, but that 30 to 35% of these shares were held dormant at Argus and voted as a block by him. After Rolland and Furla repeated their experience in stock promotion, they eventually proposed these specific terms of agreement: the right to buy 36,000 shares of Hercules stock for themselves and the brokers who would be working with them; financing for the purchase of these shares to be provided by loans from Argus (secured by the shares purchased, the borrower incurring no personal liability);5 five thousand dollars in expense money; the right to inspect Hercules' stock transfer records; and assurance that insiders would not sell while the promoters were leading Hercules up in price.
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