United States v. Stein

• Citation: 456 F.2d 844
• Decision Date: 25 February 1972
• Docket Number: Dockets 71-1960,No. 490,491,71-2004.,490
• Parties: UNITED STATES of America, Appellee, v. Sidney STEIN and Security Underwriting Consultants, Inc., Defendants-Appellants.
• Court: U.S. Court of Appeals — Second Circuit

456 F.2d 844 (1972)

UNITED STATES of America, Appellee, v. Sidney STEIN and Security Underwriting Consultants, Inc., Defendants-Appellants.

Nos. 490, 491, Dockets 71-1960, 71-2004.

United States Court of Appeals, Second Circuit.

Argued February 3, 1972.

Decided February 25, 1972.

Frank G. Raichle, Buffalo, N. Y. (Raichle, Banning, Weiss & Halpern, Buffalo, N. Y., on the brief), for defendants-appellants.

Daniel J. Sullivan, Asst. U. S. Atty., New York City (Whitney North Seymour, Jr., U. S. Atty., S. D. N. Y., Peter F. Rient, Asst. U. S. Atty., on the brief), for appellee.

Before ANDERSON and OAKES, Circuit Judges, and CLARIE,^* District Judge.

OAKES, Circuit Judge:

This case raises a serious speedy trial question under the sixth amendment, in addition to questions regarding the statute of limitations and sufficiency of the evidence. Appellants Sidney Stein and Security Underwriting Consultants, Inc. (Security), of which Stein was half owner, were convicted of conspiracy in violation of 18 U.S.C. § 371; Stein was also convicted of manipulating the price of Buckeye Corporation stock, a security registered on the American Stock Exchange (Amex), contrary to 15 U.S.C. §§ 78ff(a), 78i(a) (2). Stein was fined $10,000 and sentenced to two years' imprisonment on the conspiracy count and was fined $10,000 and put on five years' unsupervised probation on the substantive count. Security, now a defunct corporation, was fined $1,000 on the conspiracy count.

The indictment originally contained 72 counts against 15 defendants, but as submitted to the jury it charged only four defendants in eight counts, on six of which (charging fraudulent sales of Buckeye stock to the public) Stein was acquitted. Two co-defendants were acquitted on all counts.

Trial commenced on May 5, 1971, under an indictment filed September 22, 1966, covering alleged criminal conduct engaged in from the spring of 1960 to the autumn of 1961. On October 31, 1961, trading in Buckeye stock was suspended.

Through the testimony of five co-defendants, twelve brokers and other witnesses and almost 2,000 documentary exhibits the government's proof was that Stein and his partner in Security, Leo Davis, who died three days after the trial commenced, through Security brought about a sale of some 603,000 shares of Buckeye stock while Buckeye was sustaining a $4 million operating loss. This was accomplished by artificially shoring up the price of the stock through purchases of small amounts on the exchange through different brokers and in different names, and by offering to brokers secret compensation to induce them to promote sales of Buckeye. A recital of the facts is necessary for an understanding of the arguments regarding delay and prejudice.

In the spring of 1960, Buckeye was controlled by one George Horvath and his family through Massachusetts Mohair Plush Corporation ("Massmo") and two of its wholly-owned subsidiaries. Buckeye was what might be called a baby conglomerate, involved in the manufacture and sale of camping equipment and chicken incubators, the operation of a series of canals and locks, and an acquisition program although heavily in debt to Massmo and others. Stein and Davis helped Buckeye acquire a leasehold interest in the Montmarte Hotel in Miami Beach, and Horvath agreed to treat Stein and Davis as preferred finders in connection with Buckeye's acquisitions if they would promote the sale of Buckeye stock. As a part of the scheme, according to Horvath, he was to furnish Stein with expense money to entertain and buy presents for brokers, and to provide vacation trips and throw parties for them, with attractive girls and liquor, as part of his operating expense.

In the summer and fall of 1960, Stein and Davis sold to the public 154,500 shares of Buckeye on behalf of two Massmo subsidiaries and Horvath's brother-in-law and 64,710 shares newly issued by Buckeye. During this same period they bought small amounts — usually 100 share lots — in the names of various nominees, 90 per cent of which were made at a slight increase in price — that is on the "plus tick" — from the previous trade of the day. This small lot buying raised the price quoted in the newspapers the following day. Orders were placed with different brokers to avoid suspicion. Stein also used his expense money to throw parties for brokers and to offer them secret compensation to induce their customers to buy Buckeye. Through these efforts the price of Buckeye was maintained at between 3 and 4 while the 219,000-plus shares were unloaded to the general public. For Stein's and Davis' efforts they received 15,000 shares of Buckeye stock as finder's fees on two acquisitions and other consideration, including the loan of $160,000 from Buckeye.

In the winter and spring of 1961, while Stein and Davis concentrated their promotional activity on the west coast, entertaining and compensating brokers through one James Cravitz, a Los Angeles lawyer who died two years later, Stein also offered Frank Ebner of Banner Securities, a New York brokerage firm, 25 cents a share to sell Buckeye stock to his customers. During that spring the partners were successful in selling 330,400 Buckeye shares for Massmo as well as 27,584 shares on Security Underwriting's account and 3,800 shares previously bought by a nominee. The efforts were too successful, however, for at about the same time Massmo agreed to exchange $3.37 million owed to it by Buckeye for 1,392,552 shares of Buckeye stock at $2.25 per share; the artificial market price created by Stein and Davis embarrassed the Buckeye management since the market price was 35/8;, and stockholder approval of the issue was needed. Stein, obligingly, promptly dumped enough stock on the market to drop the price to 3¼, at which point the Buckeye stockholders approved the exchange.

Buckeye, however, sustained a $3.8 million loss for the fiscal year ended April 30, 1961. Stein then asked Ebner of Banner Securities for help in selling Buckeye stock over-the-counter at prices determined by the Amex price, for which Ebner received a commission seven per cent higher than that disclosed in the prospectus (which also failed to disclose Buckeye's extensive operating losses). Banner was also paid 25 cents per share for each share it bought for Stein and Davis on the Amex and then resold. Meanwhile, on trades often made at the end of the day Stein and Davis were buying Buckeye on the exchange, still in nominees' names, in 100 or 200 share lots. From July through October 1961, purchases in accounts controlled by Stein, Davis and Horvath amounted to 72,600 shares, or 28.8 per cent of the daily exchange volume of Buckeye purchases. When trading was suspended by Amex authorities on October 31, 1961, the Buckeye price fell precipitously to 50 cents per share. By then Massmo had advanced to Stein, Davis and Security $293,000 in unsecured loans. After suspension, the SEC began an investigation. One Hadfield, a customer's man in a brokerage house named as a co-defendant, testified at trial that Stein told him to conceal from the SEC Stein's orders in a nominee's name and, shortly after the indictment, told Hadfield and another broker that the case was a "witch hunt" and "would probably never go to trial," and that they should stick to their stories.

Appellants' principal claims of prejudice are based upon: (1) the deaths of Cravitz and Davis; (2) the loss of certain books and records; (3) the inability of a government witness to testify as to Amex rules and regulations in effect in 1960 and 1961; and (4) the fading memories of Horvath, who pleaded guilty and testified for the government, a government witness (Eugene Ross), who the defense contended took Stein's place before the statute of limitations began to run, and others (Lowenthal, a Miami broker, Ebner, the Banner chief), including Stein himself.

At the outset we note that appellants made no demand for trial until October 29, 1970, after a May 1971 date had been set, although they had been ready for trial in January 1969 before Judge MacMahon, who subsequently excused himself from the case.

At first blush, the lapse of time here involved — almost ten years from the last transactions complained of to the trial — might seem enough to constitute a denial of the sixth amendment guaranty of the right to a speedy and public trial.¹ The right to a speedy trial ". . . is as fundamental as any of the rights secured by the Sixth Amendment" and ". . . has its roots at the very foundation of our English law heritage." Klopfer v. North Carolina, 386 U.S. 213, 223, 87 S.Ct. 988, 993, 18 L.Ed. 2d 1 (1967) (speedy trial right violated by indeterminate threat of prosecution after nolle prosequi). See also Dickey v. Florida, 398 U.S. 30, 37-38, 90 S.Ct. 1564, 26 L.Ed.2d 26 (1970) (right violated by almost eight-year delay, with repeated demands by defendant for trial, death of two witnesses, unavailability of a third, loss of police records and "no valid reason" for delay); Smith v. Hooey, 393 U.S. 374, 89 S.Ct. 575, 21 L. Ed.2d 607 (1969) (right applicable after demand by person already in jail on another charge).

At the same time the right is "necessarily relative," and we must look to the circumstances of each case, Beavers v. Haubert, 198 U.S. 77, 87, 25 S. Ct. 573, 49 L.Ed. 950 (1905), at least where the delay is not ". . . purposeful or oppressive." Pollard v. United States, 352 U.S. 354, 361, 77 S.Ct. 471, 1 L.Ed.2d 393 (1957). The ". . . essential ingredient in the administration of justice is orderly expedition and not mere speed." Smith v. United States, 360 U.S. 1, 10, 79 S.Ct. 991, 997, 3 L.Ed.2d 1041 (1959). See generally United States v. Ewell, 383 U.S. 116, 120-121, 86 S.Ct. 773, 15 L.Ed.2d 627 (1966).

This court² is not alone in concluding that the right is a relative one. Compare United States v. Borman, 437 F.2d 44, 46 (2d Cir.), cert. denied, 402 U.S. 913, 91 S.Ct. 1394, 28 L.Ed.2d 655 (1971), with Evans v....