US v. Victor Teicher & Co., LP

• Decision Date: 25 February 1992
• Docket Number: No. 88 Cr. 796 (CSH).,88 Cr. 796 (CSH).
• Citation: 785 F. Supp. 1137
• Parties: UNITED STATES of America v. VICTOR TEICHER & CO., L.P., Victor Teicher and Ross S. Frankel, Defendants.
• Court: U.S. District Court — Southern District of New York

785 F. Supp. 1137

UNITED STATES of America v. VICTOR TEICHER & CO., L.P., Victor Teicher and Ross S. Frankel, Defendants.

No. 88 Cr. 796 (CSH).

United States District Court, S.D. New York.

February 25, 1992.

Roger S. Hayes, Acting U.S. Atty., S.D.N.Y. (John W. Auchincloss II, Asst. U.S. Atty., of counsel), New York City, for U.S.

Morvillo, Abramowitz & Grand, P.C. (Robert G. Morvillo, Robert J. Anello, Catherine M. Foti, of counsel), New York City, for defendants Victor Teicher & Co., L.P. and Victor Teicher.

Bernstein & Milner (Michael M. Milner, Roger J. Bernstein, of counsel), New York City, for defendant Ross S. Frankel.

MEMORANDUM OPINION AND ORDER

HAIGHT, District Judge:

This case is before the Court on defendants' post-trial motions for judgments of acquittal pursuant to Fed.R.Crim.P. 29(c), or, alternatively, for a new trial pursuant to Fed.R.Crim.P. 33.

On November 11, 1988 the defendants, as well as D. Ronald Yagoda and Marcus Schloss & Co. Inc., were charged in a 31— count indictment charging, inter alia, conspiracy, securities fraud, mail fraud and perjury. Yagoda and Marcus Schloss were severed out and tried separately in May 1989. See United States v. Marcus Schloss & Co., Inc., 710 F.Supp. 944, 945 (S.D.N.Y.1989). The indictment was redacted to eliminate these defendants.

Defendants were tried before this Court and a jury from January 19, 1990 through April 6, 1990.

Defendants first made Rule 29 motions for dismissal of all counts at the close of the government's case and Counts 13, 14, 15, 16 and 19 were dismissed, although the other counts were allowed to stand. See United States v. Victor Teicher & Co., L.P., et al., 88 Crim. 796 (CSH), Memorandum Opinion and Order, 1990 WL 29697 (S.D.N.Y. March 9, 1990) ("3/9/90 slip op."). The indictment given to the jury in this case was further redacted to reflect the dismissals of these counts.

Count 1 of the indictment charged that from July 1, 1985 to on or about April 30, 1986 defendants Victor Teicher & Co., L.P., Victor Teicher ("the Teicher defendants") and Ross S. Frankel conspired, in violation of 18 U.S.C. § 371, to commit securities fraud in violation of 15 U.S.C. §§ 78j(b) and 78ff and 17 C.F.R. § 240.10b-5; fraud in connection with a tender offer in violation of 15 U.S.C. §§ 78n(e) and 78ff and 17 C.F.R. § 240.14e-3(a); and mail fraud in violation of 18 U.S.C. § 1341. Counts 2 through 10 charged the Teicher defendants with securities fraud with respect to certain securities in violation of 15 U.S.C. §§ 78j(b) and 78ff, 17 C.F.R. § 240.10b-5 and 18 U.S.C. § 2. Count 8 charged defendant Frankel with securities fraud with respect to one of those securities, American Brands, Inc. Counts 11 and 12 charged the Teicher defendants with fraud with respect to the tender offer by Dominion Textile Company, Ltd. for Avondale Mills in violation of 15 U.S.C. §§ 78n(e) and 78ff, 17 C.F.R. § 240.14e-3(a) and 18 U.S.C. § 2. Counts 13 and 14 charged Victor Teicher with mail fraud in violation of 18 U.S.C. §§ 1341 and 2. Count 15 charged Frankel with mail fraud in violation of 18 U.S.C. § 1341. Count 16 charged Frankel with four specifications of perjury before the Securities and Exchange Commission ("S.E.C.") in violation of 18 U.S.C. § 1621. Counts 17 and 18 charged Frankel with obstruction of justice in violation of 18 U.S.C. §§ 1505 and 2.

On March 23, 1990, at the conclusion of all the evidence in the case, defendants again moved for judgments of acquittal under Rule 29. The Court reserved decision on the defendants' motions. Transcript of Trial January 19, 1990—April 6, 1990 ("Tr.") at 6730.

On April 6, 1990 the jury returned verdicts of guilty against Victor Teicher & Co., L.P. and Victor Teicher on Counts 1-12, against Victor Teicher on Counts 13 and 14 and verdicts of guilty against Frankel on Counts 1, 8 and 15-18.

On May 2, 1990 the United States Court of Appeals for the Second Circuit issued its decision in United States v. Chestman, 903 F.2d 75 (1990), rev'd in part and aff'd in part, 947 F.2d 551 (2d Cir.1991), petitions for cert. filed (U.S. Jan. 1 and 2, 1992) ("Chestman I"), reversing Rule 10b-5, Rule 14e-3, mail fraud and perjury convictions obtained after a jury charge substantially similar to the charge in the case at bar. On May 14 and 21, 1990 the Teicher defendants and Frankel, respectively, filed post-trial motions for judgments of acquittal under Rule 29 or, in the alternative, for a new trial under Rule 33.

On August 24, 1990 the Second Circuit granted rehearing en banc of Chestman I and this Court deferred decision on the pending post-trial motions until the Second Circuit's en banc ruling.

On October 7, 1991 the Second Circuit issued its en banc decision. United States v. Chestman, 947 F.2d 551 (2d Cir.1991), petitions for cert. filed (U.S. Jan. 1 and 2, 1992) ("Chestman II"). Chestman II reversed in part and affirmed in part the panel's decision. Based on the en banc decision in Chestman II the defendants have filed briefs and letter-briefs supplementing the post-trial motions. Defendants' motions are now fully briefed and ripe for decision.

For the reasons set forth below, defendants' motions are denied.

BACKGROUND

To the extent that defendants challenge the sufficiency of the evidence against them, the standard of review is clear.

The evidence at trial, viewed in the light most favorable to the government, see United States v. Simmons, 923 F.2d 934, 953 (2d Cir.), cert. denied, ___ U.S. ___, 112 S.Ct. 383, 116 L.Ed.2d 334 (1991), established the facts as follows.

Defendant Teicher was the principal of defendant Victor Teicher & Co., L.P., a securities firm. The evidence showed that Teicher received confidential information concerning the securities of publicly traded companies from co-conspirators Michael David of the law firm of Paul Weiss Rifkind Wharton & Garrison and Robert Salsbury of the investment firm Drexel Burnham Lambert.

The evidence showed that Teicher received confidential information about the names of companies on the Drexel "phantom list." This list contained the names of companies that Drexel was not to trade in because the firm was working on transactions involving them. Tr. 4728-29. Salsbury testified that Teicher repeatedly asked him for the identity of companies on the list. Salsbury initially resisted giving Teicher the names on the list, and when he did reveal the names he told Teicher that he should not disclose the information to any other person. Tr. 2253, 3018, 3031-33.

The evidence showed that while working at Salomon Brothers in the late 1970s, Teicher became familiar with what Salomon Brothers called a "restricted list." This list contained a list of stocks in which Salomon Brothers was not permitted to trade.¹ Tr. 6287-6293.

In late February and March 1986, Teicher purchased stocks in companies within a day or on the day that the company was placed on the Drexel phantom list. On March 14, 1986 Teicher purchased $710,000 worth of Warnaco stock on the day after Warnaco was added to the Drexel phantom list. The government also proved that Teicher had traded in other Drexel phantom list stocks, namely Republic Airlines (Count 2) and Westchester Financial Services Corporation (Count 3). GX 81 B.

The evidence also showed that Teicher received material nonpublic information that Michael David had misappropriated from Paul Weiss and its client Triangle Industries. During his direct testimony David stated:

I said to Teicher that I had learned within Paul Weiss that American Can at sometime in the future may become a takeover target by a Paul Weiss client, Triangle Industries, but that was uncertain at that time.... I said, if it would happen at all it would happen within six months.

Tr. 287-88.

On redirect examination David testified that:

While I conveyed to him that it came from Paul Weiss, I did not mention the actual source of my information. That's Mr. Lee Pershan, the actual lawyer I talked to or I learned it from.... I not only told him that Triangle Industries would take over American Can at sometime in the future, depending on certain antitrust barriers, but I also conveyed to him in words which I don't recollect that that information came from Paul Weiss. Tr. 767-68.

The evidence showed that on March 11, 1986 Michael David told Teicher, in a conversation which took place in Teicher's office, that Paul Weiss was working on a deal involving Revco. Up to this point David had tipped Teicher on four previous Paul Weiss deals, with a tip on American Brands having been given the day before.

David testified that on the morning of March 11, 1986 he "told Teicher that the price of the buyout was supposed to go to thirty-five and only thirty-five and that the stock was trading a little bit too close to $35 a share." David testified that he told Teicher that he had gotten that information either from Andrew Solomon, another co-conspirator, or from Marcus Schloss & Co. Tr. 419, 778. The evidence showed that Teicher acted on the tip that same morning. On March 11, 1986 the opening of Revco trading was delayed because of the announcement of the pending buy-out offer that appeared on the broad tape at 9:57 a.m. Solomon testified that when Solomon's boss Yagoda saw that announcement he told Solomon to tell David to sell Revco stock short because the market price was too high relative to what Yagoda knew about the actual price of the buy-out. Solomon relayed that information to David, who in turn tipped Teicher, who sold 5,000 shares short by 10:21 a.m. Tr. 414, 421, 778, 1214-16.²

The evidence showed that Ross S. Frankel was a corporate vice president at Drexel Burnham Lambert doing research analysis in the domestic arbitrage department. In August 1985 Salsbury was hired to do financial analysis in the department. Ronald Geffen was also part of the research analysis team in the domestic arbitrage department. Tr. 4720-4752.

The evidence showed that Salsbury tipped Frankel about...