Petition — Aloi v. United States

Supreme Court brief1975

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MICHAEL RODAK, JR., CLERK |

IN THE

Supreme Court of the United States

October Term, 1975

N. @57306

VINCENT ALOI,

Petitioner,

Vv.

UNITED STATES OF AMERICA,

Respondent.

PETITION FOR A WRIT OF CERTIORARI TO

THE UNITED STATES COURT OF APPEALS

FOR THE SECOND CIRCUIT

KRISTIN BOOTH GLEN

Attorney for Petitioner Vincent Aloi

36 West 44th Street

New York, New York 10036

212-869-1940

TABLE OF CONTENTS

Opinions Below

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Reasons For GRANTING THE Warr:

Porrst I—The Court below drastically extended the

doctrine of Pinkerton v. U.S. to permit the imposi-

tion of derivative liability without first requiring

the jury to determine that a substantive offense

RS CE I Fon 6c ccccccatenccsccececss

A. The substantive crime which formed the

predicate for Petitioner’s derivative liabil-

ity had, as an essential element, that it be

wilfully committed by someone, and the jury

was never so charged .............ssse00.

B. The Court below incorrectly and unconsti-

tutionally extended Pinkerton to fill this

Se SUED ac ctnbd ccede ses éncescesses

Porxt Il—The ‘‘use”’ of a false offering circular in

Count 18 was not charged by the Trial Court and

was statutorily and constitutionally misconstrued

by the Court of Appeals ...............eeeeeees

i Se ee CEE 6 ave dvb ne cdWksccccesees

Bi Dip Gauss of AMMO oc cccccccccvccccece

Porrt I]J—Rule 30 does not bar review .........---

ND Cogn cc ccdcenceceseecessectease

B. Under Rule 30, waiver cannot be found

where an appropriate request to charge was

SEE onc cccdcensespevetecxeusace ene

Pornt IV—Petitioner was deprived of minimum re-

quirements of due process when he was sentenced

for ‘‘other crimes’’ unsupported by reliable evi-

dence, and when the Trial Court refused his re-

quest for confrontation and cross-examination ...

A. The sentence imposed was arbitrary, capri-

cious, and based on ‘‘ misinformation of con-

stitutional magnitude’”’ ..............+45:

B. Due process was violated by the imposition

of a sentence for crimes for which Petitioner

was not tried, and by denial of the right to

confrontation and cross-examination .....

Ce sks kLikdk 0 6.0 684660600 b06H) od ENE RUTH

Appenpix A—Opinion of the Court of Appeals Dur-

ing Petition for Rehearing and Rehearing—En

RES 0 HER ret robe i rey Pree

Appenpix B—Opinion of Court of Appeals Affirming

SE ng 0. 50:04.60680665665b0000000600696696%

Appenpix C—Relevant Statutory Provisions:

15 UBC ST7(G)(O) 2... cccccvccvccccccescvess

SB Ts SD nck odcateavcocccssccssesceseces

Rule 256(c) [17 CFR 230-256(c)] ..............

iii

Table of Authorities

CasEs

PAGE

Baker v. United States, 388 F.2d 931 (4th Cir. 1965) 26

Chatman v. U.S., 411 F.2d 1139 (9th Cir., 1969) .... 20

Findley v. United States, 362 F.2d 92 (10th Cir.

ER Cored cat on tiamestnae "48

Gagnon v. Scarpelli, 411 U.S. 778 (1973) .......... 22, 29

ey BE lg ee eee re 21, 28

Gideon v. Wainwright, 372 U.S. 335 (1963) ........ 27, 28

Goldberg v. Kelly, 397 U.S. 254 (1970) ............ 21

Greene v. McElroy, 360 U.S. 474 (1959) ........... 21, 29

Kent v. United States, 383 U.S. 541 (1966) ........ 28

Haller v. Robbins, 409 F.2d 857 (1st Cir. 1969) ..... 23

Levine v. U.S., 383 U.S. 265 (1966) ............... 15

Mempa v. Rhay, 389 U.S. 128 (1967) ............ 22, 27, 28

Morrissey v. Brewer, 408 U.S. 471 (1972) ......... 21, 29

Nickens v. State, 34 Md. App. 284; 301 A.2d 49

GE RN oie cpt, a Se ee 26

Nye and Nissen v. U.S., 336 U.S. 613 (1949) ....... 13, 17

Pinkerton v. U.S., 328 U.S. 640 (1946) ........ 2, 5, 8, 9, 12

13, 14, 15

Schaeffer v. United States, 362 U.S. 511 (1960) .... 14

Specht v. Patterson, 386 U.S. 605 (1967) .......... 28

Spies v. United States, 317 U.S. 492 (1943) ........ 10

Stirone v. U.S., 361 U.S. 212 (1960) ...............

Townsend v. Burke, 334 U.S. 736 (1948) ..........

U.S. v. Allsenberrie, 424 F.2d 1209 (7th Cir. 1970) ..

U.S. v. Ausmeier, 182 F.2d 349 (2d Cir. 1945) ......

U.S. v. Bollenbach, 326 U.S. 607 (1946) ............

U.S. v. Bynum, 485 F.2d 490 (2d Cir., 1973) ........

U.S. v. Byrd, 352 F.2d 570 (2d Cir., 1965) ..........

United States v. Bishop, 412 U.S. 346 (1973) ......

U.S. v. Cantone, 426 F.2d 902 (2d Cir. 1970) ........

U.S. v. Doyle, 348 F.2d 715, 721 (2d Cir. 1965) ....

U.S. v. Gillian, 288 F.2d 796 (1961) ...............

U.S. v. Howard, 506 F.2d 1131 (2d Cir., 1974) ....

U.S. v. Houle, 490 F.2d 167 (2d Cir., 1973) ........

U.S. v. Janiec, 464 F.2d 126 (3rd Cir. 1972) ........

U.S. v. Johnson, 507 F.2d 826 (7th Cir. 1974) cert.

Gen. 66 GB. GE, SERB CRUG <0 osccepeceumecunerens

U.S. v. Knippenberg, 502 F.2d 1056 (7th Cir., 1974) 15, 20

U.S. v. Looney, 501 F.2d 1039 (5th Cir. 1974) ......

U.S. v. Kronsby, 418 F.2d 65 (6th Cir., 1969) ......

United States v. Murdoch, 290 U.S. 389 (1933) .....

U.S. v. Picard, 464 F.2d 215 (1st Cir. 1972) ........

U.S. v. Roberts, 416 F.2d 1215 (5th Cir., 1965) ....

vase States v. Robertson, 298 F.2d 739 (2d Cir.,

| re ee

U.S. v. Rosner, 485 F.2d 1213 (2d Cir. 1973), cert.

den, 417 UD. GBD (100E) .. .cccccciotcccedebeces

U.S. v. Sperling, 506 F.2d 1323 (2d Cir., 1974) cert.

den. 450 U.S. OER (BBTB) «cic Kite ncunwedecintbas

U.S. v. Trigg, 39% ¥.2d 860 (7th Cir.), cert. den, 391

UM. O88 (IOGB) ....cscvcccccuscnneeneen

U.S. v. Tucker, 404 U.S. 443 (1972) ............4.. 28

U.S. v. Weston, 448 F.2d 626, 631 (9th Cir. 1971) ... 26

United States v. Williams, 499 F.2d 52 (1st Cir. 1974) 26

Williams v. New York, 337 U.S. 241 (1949) ...... 22, 25, 27

Wolff v. McDonnell, 418 U.S. 539 (1974) ........... 29

Oruer AUTHORITIES

A.B.A., Project on Minimum Standards for Criminal

Justice, Probation, p. 37 (Approved Draft, 1970).. 21, 27

A.B.A.,Project on Minimum Standards for Uriminal

Justice, Sentencing Seciion 5.4 (Approved Draft,

ERR eGEATES octtebagedbeadedddcbacees 21, 29

A.B.A., Project on Minimum Standards for Criminal

Justice, Appellate Review of Sentences (Tent.

Ms 6 chin dds 04.4009 0 00¢0n pees gee 21

Berkowitz, The Constitutional Requirements for a

Written Statement of Reasons and Facts in Sup-

ot of the Sentencing Decision: A Due Process

roposal, 60 Iowa L. Rev. 205 (1974) ............ 21

Developments in the Law: Criminal Conspiracy, 72

Harv. L. Rev. 920, 998-1000 (1959) .............. 13, 15

Federal Rules of Criminal Procedure:

es ca G cue ck sees ceecccces 3, 17, 18, 19, 20

EN LE EE 3, 18

Frankel, Criminal Sentences: Law Without Order,

TAs Cecekdeeéccceebeseedtovceccce 21

G Key Mafia Figure Tells of ‘Wars’ and Gallo-

olumbo Peace Talks, N. Y. Times, July 7, 1975,

EG EE 23

Hearings on Reform of Federal Criminal Law Be-

fore the Subcommittee on Criminal Law and Pro-

cedures of the Senate Committee on the Judiciary,

92nd Cong., 1st Sess., pt. 1 (1974) .............. 13

PAGE

Lehrich, The Use and Disclosure of Presentence

Reports in the United States, 47 F.R.D. 225, 247

GHEY 9b cchbcdtcweus heey dete ceric o6ssesssess 27

Loss, 1 Securities Regulations (1961) ............. 10

Mathews, Criminal Prosecutions Under the Federal

Securities Law, 39 Geo. Wash. L. Rev. 901, 950

DEY 005460060 66000000ukraseeteaiasoass ened 10

Note: Criminal Procedure: Probable Cause and

Due Process at Sentencing, 50 N. Car. L. Rev. 925

GCE . cede wk bi ae tttled Bac nks ide Matis wees 26

Note: Due Process in Felony Sentencing, 81 Harv.

SS FS FO ars eae e 27, 29

Note: Toward a Probable Cause Standard in Sen-

tencing, 34 Md. L. Rev. 133 (1974) .............. 26

8a Moore, Federal Practice, { 32.04 (Cipes ed. 1973) 22, 23

Packer, The Limits of the Criminal Sanction, (1970) 21

Perkins, The Act of One Conspirator, 26 Hastings

2 BR ARs RE. Gk 14

Remarks of Professor Herbert Wechsler, Second

Circuit Judicial Conference on Appellate Review

of Sentence, 32 F.R.D. 249 (1962) .............. 22

Rule 256(a)-(e); 17 C.F.R. 230.256(a)-(e) ......... 4, 9,16

Whitney North Seymour Jr., 1972 Sentenci tud

ad the Southern District of New York, v. Y. ¢.

ar Journal, 163 (April, 1973) ................ 22

15 U.S.C.:

ee ee, 4,9

Se Ge cbe seus bubba chs cdeccdokas Sudeeel 4,9, 10, 14

Se Get tds cechutenhtcddbcbsdtuaastiieee 16

Supreme Court of the United States

October Term, 1975

No.

Vixcent A101,

Petitioner,

Unrrep States or AmeEnica,

Respondent.

PETITION FOR A WRIT OF CERTIORARI TO

THE UNITED STATES COURT OF APPEALS

FOR THE SECOND CIRCUIT

Vincent Aloi, through his attorney, hereby petitions for

a writ of certiorari to review the judgment of the United

States Court of Appeals for the Second Circuit in this case.

Opinions Below

The opinion of the Court of Appeals (App. B, infra pp.

3a-34a) is reported at 511 F.2d 585 (2d Cir., 1975). The

opinion of the Court denying Aloi’s Petition for Rehearing

and Rehearing En Banc (App. A, infra at pp. 1a-2a) is not

yet reported.

Jurisdiction

The judgment of the Court of Appeals was entered on

January 31, 1975. On July 7, 1975 the Court of Appeals

denied a Petition for Rehearing and Rehearing En Banc.

Mr. Justice Marshall extended the time for filing a petition

for a writ of certiorari to and including September 5, 1975.

The jurisdiction of this Court is invoked under 28 U.S.C.

§ 1254(1).

Questions Presented

1. Can Petitioner’s conviction for the substantive crime

of ‘‘wilful use of a false and misleading offering circular’’

be sustained where

a) Petitioner’s guilt was premised entirely upon

the derivative liability theory of Pinkerton v. U.S.,

328 U.S. 640 (1946); and

b) an essential statutory element of the substan-

tive offense was that it be committed ‘‘wilfully’’;

and

c) the jury was never instructed, nor did it find,

that some member of the conspiracy must have

‘*wilfully’’ committed the substantive offense before

derivative liability could be imposed?

2. Can Petitioner’s conviction of ‘‘wilful use of a false

and misleading offering circular’’ based entirely on Pinker-

ton liability be sustained either

a) where the trial judge charged ‘‘use’’ as

‘*issuance’’ and Petitioner was not a member of the

conspiracy when the offering circular was ‘‘issued,’’

b) where the Court of Appeals sua sponte sub-

stituted the entirely novel and statutorily unauthor-

ized definition of ‘‘filing’’ and ‘‘existence,’’ creating

a fatal variance both from the crime charged in the

indictment and the bases upon which it was sub-

mitted to the jury?

3. Does Rule 30 of the Federal Rules of Criminal Pro-

cedure bar review of these errors of constitutional magni-

tude where

a) a request for an appropriate charge was made

by the government and relied upon by the defendants

and,

b) the trial judge, in violation of Rule 30, did not

instruct the parties that he would not give such a

charge, but the defendants thereafter failed to ob-

ject; or

c) does the ‘‘plain error’’ standard of Rule 52

permit review where an essential element of the

crime is not charged?

4. As a matter of constitutional law, must the criminal

sentencing procedure include ‘‘minimal requirements of

due process’’ so that

a) the sentencing court may not consider totally

unsupported allegations of other ‘‘criminal activity’’

in imposing a greater sentence, and/or

b) the procedural safeguards of confrontation

and cross examination are available to a defendant

who attempts to contest that misinformation?

Statutes Involved

The statutes involved are 15 U.S.C. 77(s)(a) and

77(x) and Rule 256(e), 17 CFR 230.256(e) printed as

Appendix C, pp. 35-39a hereto.

Statement

1. Procepvurat History

Petitioner was convicted of one count of conspiracy, one

count of wire fraud, and one count of ‘‘wilful use of a false

offering circular’’* (‘‘Count 18’’) after a three month trial

on a \ vulti-count, multi-defendant securities fraud indict-

ment in the United States District Court for the Southern

District of New York (Knapp, D.J. and a jury).

On appeal Petitioner and three co-defendants separately

raised extensive points which they argued required re-

versal; in a lengthy, and rather rambling opinion containing

virtually no citations? the Court of Appeals affirmed the

convictions of three appellants, including Petitioner, and

reversed the conviction of the fourth.°

Aloi then petitioned for rehearing and rehearing en

banc and the court called for a response from the govern-

1 He was sentenced to five years on the conspiracy count and four

years on the false offering circular count, those sentences run con-

secutively to each other, and consecutively to a seven year state sen-

tence for one count of perjury. A five year sentence on the wire

fraud count was suspended. Petitioner was also fined $16,000, the

maximum amount permissible under the three federal counts.

2 The opinion is reprinted here at pp3a-34a. In thirty pages,

apparently addressing over twenty claims of reversible error, the court

cites but six cases, none of these on the points to which it devotes the

majority of its discussion.

* The conviction of Appellant John Savino was reversed for in-

sufficiency of the evidence. A similar argument was made by Peti-

tioner but was rejected.

ment on whether the trial court’s failure to charge ‘‘wilful-

ness,’’ an essential element of the crime charged on Count

18, required reversal. Subsequent to both this response

and an additional ‘‘answer’’ which it permitted Aloi to

file, une court denied the petition with an opinion which,

while brief, served to substantially clarify the basis of its

previous decision.‘

The second opinion, when read with the first, suggests

strongly that

a) under Pinkerton v. U.S., supra, the govern-

ment need not prove, nor the court charge, that some

member of the conspiracy ‘‘wilfully’’ committed the

substantive crime of use of a false offering circular

before finding a co-conspirator like Aloi guilty on a

derivative liability theory so long as*Aloi ‘‘wilfully”’

entered the conspiracy, or

b) failure to charge an essential element of a

crime, notwithstanding previous settled law in the

Circuit® was not ‘‘plain error’’ because of the

‘*Pinkerton’’ charge and/or because of the ‘‘broad’’

(and, we argue, unjustified) definition of the term

*“‘use’’ employed for the first time by the Circuit in

its first opinion.

Facts

The basic facts of the case, most favorable to the gov-

ernment, are set forth in the court’s opinion at pp. 5a-9a.

To avoid unnecessary repetition we would simply sum-

marize the alleged conspiracy and add some additional

* As to the issues of wilfulness and “use”. With the addition of

the due process sentencing issue, which the Court of Appeals simply

did not address, these are the only issues raised here.

5 See p. 18, fn. 56 infra.

material relevant to Count 18 which is directly at issue

here.

In late 1969 several co-conspirators* decided on a pub-

lic offering of stock in At Your Service Leasing Co.

(AYSL) a company in serious financial difficulty. Two

defendants, Nelson and Miller,’ who ran a financial consult-

ing business, undertook to actually arrange the offering,

including (with Graifer) the preparation of an offering cir-

cular, dated April 8, 1970 which was filed with the SEC.

The offering circular clearly warned potential buyers

that the stock was essentially worthless,* and in fact, no

legitimate purchasers ever appeared.

The owners and Graifer then enlisted Ralph Lombardo

and Sebastian ‘‘Buster’’ Aloi® (not the petitioner Vincent

Aloi) who referred them to a well known stock manipula-

lator, Michael Hellerman, allegedly controlled by the de-

fendant Dioguardi”™.

6 Including the owners, Price, Fredinand, Handler and Garek, all

of whom were severed and never tried, and the manager Ed Graifer,

who turned government witness.

7 Each of whom pleaded and testified.

8 As the Court of Appeals itself recognized. It wrote:

“The offering circular was most explicit. In bold type on the

first page it stated: ‘THESE SHARES INVOLVE A HIGH

DEGREE OF RISK’. Under ‘Risk Factors to be Considered’,

were listed seventeen factors, any one of which should have de-

terred a prospective purchaser from buying the stock. And

until the conspiracy began, no one did”. Op. at p. 6a.

Once the conspiracy began, however, the circulars were never again

“used”. See p. 7 infra.

® Lombardo was tried, convicted and has not petitioned for cer-

tiorari. Sebastian “Buster” Aloi is the father Petitioner whose

acts both the trial court and the Court of Appeals often mistakenly

ascribe to Petitioner.

10 Hellerman also pleaded, served a very short sentence and testi-

fied for the government. Dioguardi was tried, convicted and has not

petitioned for certiorari.

Hellerman took a look at the offering circular (T 906)"

copies of which were, in turn,’? delivered to his office

(T 2780). There they sat on his couch (T 2782) until the

stock was long since illegally sold and the SEC moved in.

These offering circulars were never seen or mentioned again

and it is conceded that Petitioner'* never saw them or even

knew of their existence.

No stock was actually sold prior to the expiration of the

SEC-proscribed offering period on July 9, and the by-then

unregistered stock which was ultimately unloaded was

done so by a sophisticated rigging of buy-sell confirmations

and after market ‘‘ring-around-the rosy’’ mainpulation™

conducted by Hellerman and other associates.

The stock was in no way sold through the ‘‘use’’ of

the offering circulars which were never seen by prospective

atte and which never moved from Hellerman’s

office.

Petitioner’s ‘‘role’’ in the conspiracy was, as the Court

of Appeals put it, ‘‘collateral’’ (7a). In attempting to re-

cover a legitimate debt owed by Hellerman to two of his

friends*® he was told of the swindle Hellerman was under-

*! References to the trial transcript are desi

“T” followed by the appropriate page. + ged eal

*? As the beginning of his illegal attempts to sell the stock, -

man gave Nelson a bogus list of - rted “buyers”. poy

pany, Tech-Ec, then typed _up ations which it placed with

subscription forms and offering circulars (T 3189-90) and delivered

realy so coch purchasers Ge erakuntiens, fees tas tecae

urchasers i

were, of course, —— mailed. ns =

18 Who had not yet,

the pi yet, even under the government’s theory, entered

** In which the price of the stock is artificially inflated hony

hese ceders aad it ie Saal rece I one

egitimate broker. ee

*® One of whom was John Savino, whose conviction was reversed.

taking. He allegedly put a halt to it until, sometime in

June, his father convinced him’** to let the deal’? go through

on the condition that the prior debt would be repaid out of

the proceeds.’* Thereafter, his only role in the conspiracy

was to collect part of Hellerman’s alleged share and dis-

tribute the amount of the money debt to his friends.

As a result of this participation he was convicted not

only of conspiracy to commit securities fraud, but of Count

18, the wilful use of a false and misleading offering circu-

lar, for which he received an additional four year sentence.

REASONS FOR GRANTING THE WRIT

POINT I

The Court below drastically extended the doctrine of

Pinkerton v. U.S. to permit the imposition of derivative

liability without first requiring the jury to determine

that a substantive offense had been committed.

A. The substantive crime which formed the predicate

for Petitioner’s derivative liability had, as an essen-

tial element, that it be wilfully committed by some

one, and the jury was never so charged.

Petitioner was convicted of Count 18 of the indictment

which charged the

16 This allegedly occurred in a telephone conversation in Italian,

reported by Graifer who spoke no Italian. The entirely unproven

conversation resulted in the wire fraud conviction.

1? There was also no evidence that Petitioner, unlike his father,

knew anything at all about the stock swindle except that it existed

and was being run by Hellerman.

18 It was this alleged “power to stop and start the deal” which

both the government and the court found made Petitioner a member

of the securities fraud conspiracy. It is also conceded that he ob-

tained no financial or other gain from the “deal”.

‘ ‘wilf . . .

wd use of a false and misleading offering cir-

and sentenced to four years therefor.

‘ As discussed in the statement of facts, supra, and in the

pe Court opinion, Petitioner not only never ‘‘used’’?°

2 offering circular, he did not know of its existence. His

oy ee npr: offense, as the court charged, was predi-

cated on the derivative liability th }

=~ ty theory of Pinkerton v. U.S.,

Pinkerton, of course, holds that a conspirator may be

convicted of a substantive crime actually committed by an-

other, sg that the latter is a member of the con-

spiracy, and the crime is committed in f

Pinkerton, supra at p. 647. as

In this instance the crime allegedly committed by a

member of the conspiracy was the wilful use of a misleading

offering circular." Under settled case law, e g. United

States v. Robertson, 298 F.2d 739 (2d. Cir., 1962) 23 wilfull-

ness 1s an essential element of the offense which the govern

ment must prove beyond a reasonable doubt.?*

** Iu violation of 15 USC section 77(x)

t , 77(S

( a section 230, 256[e]) and Form 1A, Aah ey ane

g ereof. The statutory sections and Rules are reprinted i the

ppendix hereto at pp. 35a-38a. The “unlawful use” on. che

as an object of the conspiracy under Count 1 of the indict-

standing affirmance on other counts where the

rently so as not to approve, “oven by indiredion” 20 Kn

of mind, the failure to instruct the ;

jury as to the requisite wilfullness,

Kronsbe 48 Lacie ite Scio requires. reversal, e.g U.S. Vv.

2d Cir, 1965); U.S. v. Gillan 288 Fok be or

U.S. v. Ausmeier, 152 F.2d 349, 356-57 (2d Cir., 1945)” _—

The absolute necessity of proving wilfullness is appar-

ent not only from the case law, but from the statutory

scheme itself. The Securities Exchange Act of 1933, 15

U.S.C., sections 77(a) et seq., is legislation aimed at inform-

ing the public; in pursuit of this goal, the Act permits vari-

ous civil remedies, including injunctions and damages. See

generally Loss, 1 Securities Regulations (1961). It is only

Section 77(x) which makes violation of the Act a criminal

offense,” and that section specifically requires wilfulness as

opposed to carelessness, mistake or the like.*®

For the jury to find that the crime charged in Count 18

of the indictment was committed, it thus had to find that it

was committed wilfully,2® yet the court never once men-

tioned this in its charge.

24 For a general discussion of the wilfullness requirement in 77(x)

cases see Mathews, Criminal Prosecutions Under the Federal Securi-

ties ae. 39 Geo. Wash. L. Rev. 901, 950 (1971) and Loss, supra

p.1309.

25 In this respect, the Securities Act is remarkably similar to the

civil/criminal distinctions under the Internal Revenue Code (which

provides for criminal penalties beginning at section 7201 et seq).

There too, what might otherwise be mi or negligent by the tax-

payer becomes criminal only when it is wilfully done. In that con-

text, this Court has re i that wilfulness involves “bad faith

or evil intent,” United States v. Murdoch, 290 U.S. 389, 398

(1933), or “evil motive and want of justification in view of all of

the financial circumstances of the taxpayer.” Spies v. United States,

317 U.S. 492, 298 (1943).

As this Court has recently reiterated, this is so because: “The

Court’s ceasistent interpretation of the word ‘wilfully’ to require

an elemeni of mens rea implements the pervasive intent of

to construct penalties that separate the purposeful tax violator

the well-meaning, but easily confused, mass of taxpayers.” United

States v. Bishop, 412 U.S. 346, 361 (1973). This same rationale

applies to the Securities Act.

26 There was substantial evidence in the record from which the

jury could have found that the misrepresentations or omissions in

the offering circular constituting the “falseness” charged in the in-

dictment were not wilfull, but were rather the result of

or mistake. The co-conspirator most i connected the

issuance of the prospectus, Ed Graifer, i that he was not

even aware it was false or fraudulent until he was indicted! (T 880).

Instead, it charged:

I advise you as a matter of law, if you find that

this circular did fail to make the disclosures men-

tioned in the indictment and that if such disclosures

would in your judgment have been of material in-

terest to a purchaser of the securities, the issuance of

that prospectus would have violated the securities

laws of the United States.?" (TR. 5495 )2*

The jury was thus able to find Petitioner guilty of the

‘wilful use of a false and misleading offering circular’’

which he never saw, and of whose existence he did not know

solely by finding that some co-conspirator” ‘‘issued’’*° a

offering circular with material non-disclosures* whether

27 : . e

Pi Lang course, is true. It simply would not have violated the

- —_

oer” Court went on to charge derivative Pinkerton liability as

I further advise you, if you find the issuance i

was in furtherance of the conspiracy and in the A othe K nym

templation of the contemplation (sic) of the conspirators, you

may find any defendant whom you may have found guilty of

conspiracy, to be also guilty of the crime of issuing the false

(Tseae) statement alleged in count 18 of the indictment.

7° The Court of Appeals opinion suggests this may have been

> Norman, Miller or Hellerman, ding on one’s view of

*° Petitioner argded extensively below that the non-disclosures

alleged were not “material” in that they involved no additional dil

. n 4

tion of the proceeds of the offering which would be of pe ine

— aan, nor would the existence of any undisclosed

a a oan because they did so believing in a guaran-

of material interest to any of those ultimately

*' The evidence was at best conflicting as to whether the alleged

non-disclosures were “material” since no purchasers

or prospectiv

Pigasers were ever shown the offering circular. See pp. 16-17,

that ‘‘issuance’? was mistaken, negligent or, conversely,

wilful.

The charge was thus constitutionally defective in that it

permitted a finding of guilt without a finding as to an

essential element of the crime, and in fatal variance with

the indictment, Stirone v. U.S., 361 U.S. 212 (1960).

B. The Court below incorrectly and unconstitutionally

extended Pinkerton to fill this fatal variance.

In the court below, Petitioner and his co-defendants

repeatedly *? argued that the clear failure to charge wilful-

ness required reversal on Count 18. The Government, with

equal perserverance, argued that the absence of a finding of

wilfulness as to the particular crime charged, no matter

by whom committed, was irrelevant so long as it was shown

that Petitioner or his co-defendants had wilfully joined

the conspiracy. In its main opinion the court below never

dealt with either of these arguments,** but its second

opinion, denying rehearing, appears to adopt the govern-

ment’s theory.** Indeed this is the only theory, if accepted,

upon which the conviction may be sustained.

This ‘‘theory,’’ however, not only violates the rationale

of Pinkerton itself, it extends that case far beyond the nar-

82 In their briefs, reply briefs and in Petitioner’s Petition for

Rehearing.

38 [t apparently disposed of the whole wilfulness question on

some theory of waiver, although the failure to wilfulness is

mentioned only once, in conjunction with other, itional, omis-

sions in the charge which were not essential elements of the crime,

and which the Appellants did not claim rose to the dimensions of

constitutional error.

34 As stated previously, after the Petition for Rehearing was

filed, the Court called for a response by the government on the issue

of wilfulness alone. The subsequent opinion, upholding the failure

to charge wilfulness, states that it was not error, “in light of the

trial court’s charge on Pinkerton v. U.S.” a2, infra.

row construction placed on it by this Court, Nye é Nissen

v. U.S., 336 U.S. 613, 620 (1949) to permit separate, addi-

tional criminal punishment for any overt act, not neces-

sarily itself criminal, committed in furtherance of a con-

spiracy.*®

Pinkerton and all of its progeny** clearly hold that be-

fore derivative criminal liability can be imposed, a ‘‘crime’’

or ‘‘substantive offense’’ must first have been committed,

e.g. Pinkerton, supra at pp. 647-48, Nye & Nissen, supra.*"

The Court’s decision below would turn this holding on

its head and allow, in true Alice-in- Wonderland fashion, the

determination of one aspect of derivative liability** to itself

*° The fear of additional punishment even for criminal acts which

ure also charged as overt acts of the iracy is reflected in Con-

gress’s decision in the proposed Federal Criminal Code to reverse

“a judicially developed doctrine which imposes complicity liability

based solely upon membership in the conspiracy.” Hearings on Re-

form of Federal Criminal Law Before the Subcommittee on Criminal

Law and Procedures of the Senate Committee on the Judiciary, 92nd

Cong., Ist Sess., pt. 1 at p. 225 (1974). This aspect of Pinkerton

has also been criticized in, inter alia, Developments in the Law:

Criminal Conspiracy 72 Harv. L. Rev. 920, 998-1000 (1959).

**In shepardizing all citations of Pinkerton, counsel has not

found a single case where this fundamental proposition was not un-

derstood and honored. As one recent but typical exegisis of Pinker-

ton states:

_In the Pinkerton case there was so evidence that Daniel

Pinkerton had committed the substantive offense for which he

had been convicted, but it was clear that the offense had been

commitied and that it had been committed in furtherance of

an unlawful conspiracy of which he was a member. U.S. v.

Sperling, S06 F.2d 1323, 1342 (2d. Cir., 1974) cert. den. 420

U.S. 962 (1975).

aimee al , in rg & Nissen, Fe in Pinkerton, derivative li-

was t to im where the irators who

committed the substantive aise vane | canton victed of them .

see Nye & Nissen at p. 628 (dissenting op. of Justice Murphy).

Here, of course, none of those co-conspirators who might have been

directly guilty of Count 18 were ever tried or convicted of it.

3 i.e. participation in a conspiracy.

| i’

independently establish an essential element of the crime

for which another member of the conspiracy is held deriva-

tively liable.

There are dangers enough in strict application of Pink-

erton®® and in conspiracy in general*® that this new, un-

precedented approach should be immediately disavowed.

This Court should grant certiorari to do so unqualifiedly.

POINT II

The “use” of a false offering circular in Count 18 was

not charged by the Trial Court and was statutorily and

constitutionally misconstrued by the Court of Appeals.

A. The Trial Court.

Although the indictment charged that the defendants

‘‘wilfully used and caused to be used’’** a false offering cir-

cular, the trial judge never instructed the jury as to ‘‘use’’

3® Commentators have that the iety of Pinkerton

is itself in question, see ns, The Act of ne Conspirator 26

Hastings L.J. 337 (1974) and this Court’s | Silence on the issue

similarly suggests a possible lack of present ;

*° As Justice Douglas, dissenting in another case, and on other

grounds prophetically stated: Se

Conspiracy presents lexing problems that con-

cerned son Ng See Keulewitch . U.S. 336 U.S. 440, Delli

Paoli v. U.S., 352 U.S. 232. While it is proper at times to join a

conspiracy count with substantive counts even where the latter

are the same as the overt acts charged in the counts,

Pinkerton v. U.S., there is danger of multiplication. loose

practice of trying to bring together into one conspiracy those

Chose tee ore ot bent cusemely tnneus Ses ee See oe

ticized. We allow conspiracy to be put to new uses

when we sanction the practice roved why 4 Vv.

United States, 362 U.S. 511, 524 (1960) (dissenting opinion

of Justice Douglas) (footnotes omitted).

‘1 Tracking the language of the SEC Rule, pp. 36a-38a infra

whose violation was made criminal under 15 U.S.C. 77(x).

at all. Instead, he charged only that if the jury found that

the circular had been ‘‘issued’’*? it could find the defend-

ants, including petitioner, guilty under Pinkerton.

This rather peculiar substitution** requires reversal

either because it constitutes a fatal variance from the in-

dictment, Stirone v. U.S. supra,“ or, if ‘‘use’’ properly in-

cludes ‘‘issuance’’, because Petitioner was not a member of

the conspiracy at the time the circulars were issued,** and

accordingly could not be convicted under the derivative lia-

bility of Pinkerton. U.S. v. Cantone, 426 F.2d 902, 904 (2d

Cir., 1970).** See Levine v. U.S. 383 U.S. 265, 266-67 (1966)

(per curiam).**

B. The Court of Appeals.

In an apparent attempt to avoid both the argument

above and Aloi’s argument that the offering circulars were

*? The entire charge, at p. 11, fn. 28, supra, employs the term

“issued” or issuance four times; “use” or “using” never appear.

** Petitioner believes that the trial judge charged the narrower

“jssauance” rather than “use” because the record could support no

prin filed, es containing them sat, apparently forever,

on the couch in Hellerman’s office, never to be seen again (T 2780,

2782) and see infra.

not

** Stirone, of course, holds that a jury may

find guilt on a theory which the grand jury did not

*® The offering circular was filed on i 8, 1

ernment’s own theory, Petitioner did not enter the until

some time in June of 1970.

** Accord: U.S. v. Knipperbeng, 502 F.2d 1056, 1059-60 (7th

Cir., 1974); U.S. v. Roberts, 416 F.2d 1215 (Sth Cir., 1965). See

Developments in the Law: Criminal Conspiracy, supra at p. 924.

**In Levine this Court reversed Pinkerton convictions based

upon the concession of the Solicitor General that “an individual can-

not be held criminally liable for substantive offenses committed by

he had withdrawn the conspiracy.” To the extent that this

reversal based on concession falls short of a clear holding, this

Court should take this opportunity to unequivocably so hold.

in fact never ‘‘used.’* the Court of Appeals was forced

to stretch for an entirely novel ** and unjustified construc-

tion of the term ‘‘use’’.

The Court wrote:

To be sure, the offering circular was not used in

the manner normally to be expected, namely, mailed

to the prospective purchasers before sale (sic) were

consummated. But having been filed with the SEC,

it was the genesis of the subsequent plan to defraud,

and facially at least, the existence of the filed circu-

lar lent an aura of legitimacy to the scheme.® Op.

at p. 28a (emphasis added).

Use is thus defined for the first time as either ‘‘filed’’

or ‘‘existing.’’ The former construction is completely er-

roneous under the very regulation sought to be construed ©

*® The purpose of an offering circular is, of course, to fully in-

form prospective purchasers of all relevant facts concerning the com-

pany whose stock they may buy. Accordingly, an offering circular

must be filed with the SEC as a condition precedent to the granting

of a “Reg. A exemption” and must be delivered prior to or at the

time of sale of all exempt stock to which it pertains. 15 U.S.C. sec-

tion 77(s) [17 C.F.R. section 230.256]. Petitioner argued that the

offering circulars were never “used” because they were never shown

or sent to prospective customers or buyers. See fn. 43 supra. The

government based its argument solely on supposed inferences that

the circulars were in fact mailed, but the Court of A f

agreed with Petitioner that no such inferences could be drawn from

the record. Op. p. 28a fn. 9.

*® The Court’s opinion in the Petition for Rehearing tacitly rec-

ognizes this, referring to “the broad definition of ‘use’ we have pre-

viously approved” p. 2a.

°° This statement represents a rather fanciful leap. To whom

was the “aura of legitimacy” lent by the offering circulars? Since

no one but a few of the conspirators ever saw , it is hard to

imagine who the Court of Appeals had in mind.

5! The regulation whose violation is specifically em-

ploys the terms “prepared,” “filed” and “used” separately; clearly

the latter may not, in an immediately succeeding sentence, subsume

and the latter definition not only offends all notions of

common sense and usage, but, if seriously adopted, would

cause the crime to be invalidated either as unconstitution-

ally vague or as a prohibited ex post facto offense.

Finally, the conviction for ‘‘use’’ so construed is in-

valid under the well settled principle that a jury may only

constitutionally find ‘‘guilt where the proof adduced ana

the basis on which it was submitted were sufficient to sup-

port the verdict’? Nye & Nissen, supra.®?

This Court should grant certiori to clearly disavow ™ a

statutory construction so dangerous and unprecedented.

POINT III

Rule 30 does not bar review.

The Court of Appeals attempted to sidestep reversal

on the issue of failure to charge an essential element of the

all the former. The regulation reads as follows: “(e) If the offer-

ing is not completed withi nine months from the date of the offering

circular, a revised offering circular shall be prepared, filed and used

in accordance with these rules as for an original offering circular,

ex t that in the case of offering under stock purchase, savings,

stock option or other similar plans for the benefit of loyees, if

the offering is not completed within 12 months from the of the

offering circular, a revised offering circular shall be prepared, filed

and used in accordance with these rules as for an original circular.

*? See also U.S. v. Bollenbach, 326 U.S. 607, 613-615 (1946

where this Court chastised the Court of Appeals because it “.. . evi-

stan tie ke yes — ao in charge’ only on its as-

sump e t convicted on another theory

Id. p. 610 a .

5* Obviously this is required to give guidance not

lower courts, but to law enforcement. ond poccseution offictals ~~

may otherwise act on supposition that crime

legislatively come into existence. — —

crime and, to some extent the ‘‘use’’ issue by apparent **

r“ance on Rule 30 of the Federal Rules of Criminal Pro-

cedure.

There are at least two reasons why this is not the case;

a decision by this Court on either would constitute an ex-

tremely important and useful exegesis of the otherwise

generally ignored provisions of Rule 30.

A. Plain error.

Rule 52 requires reversal of a conviction based on ‘‘ plain

error’’ even in the absence of objection.

At least two Circuits ** have held that the failure to

charge an essential element of the crime constitutes such

5* The Court's discussion and disposition of all issues raised as

to the charge is rather confused, see op. at p. 18a, but the reference

to plain error in the opinion on petition for rehearing supports this

understanding.

55 Rule 30, in its entirety, reads as follows:

At the close of the evidence or at such earlier time during

the trial as the court reasonably directs, any party may file

ten requests that the court instruct the jury on the as

ao 2 oe. At the same time copies of such

shall be furnished to adverse parties. The court shall inf

counsel of its proposed action upon the requests prior to

arguments to the jury, but the court shall instruct the

the arguments are completed. No party may assign as

portion of the charge or omission therefrom he

thereto before the jury retires to consider its verdict,

distinctly the matter to which he objects and the grou

objection. Opportunity shall be given to make the objecti

of the hearing of the jury and, on request of any

the presence of the jury.

°° With the rather aberrant exception of the instant case, this is

clearly the rule in the Second Circuit, e.g. U.S. v. Howard, 506 F.2d

F.2d

1131 (2d Cir., 1974). Accord Findley v. United States, 362

92 (10th Cir., 1966). In the Second Circuit, in fact, the fai

charge an essential element is deemed so serious that it requires

reversal even where the parties have not raised the issue on ‘

U.S. v. Houle, 490 F.2d 167, 171-72 fn. 10 (2d Cir., 1973).

£5

eh38

‘plain error’. As wilfulness was such an essential ele-

ment, see I, supra, this Court should grant certiorari and

so hold.

B. Under Rule 30, waiver cannot be found where an

appropriate request to charge was made.

Eleven days prior to conclusion of the trial, the judge

passed around a charge in another securities case to give

counsel ‘‘the gist of how [he] handled it.’’*”

Subsequent to this, both sides submitted requests to

charge on various issues. The government, tracking the

statutory language, specifically requested a charge on wil-

fulness for Count 18,°* and the defendants, who opposed a

number of the government’s requests, did not object.

After these requests were made, in fact, the judge indi-

cated that he basically agreed with the government on the

law, but when the charge was finally given, no mention of

wilfulness was made.

*? This occurred rather casually at a morning conference in

chambers at which a number of other matters were being discussed.

Counsel were not given copies to take and read at leisure, nor as

the judge stated, was the same charge to be given—. “It is just my

approach I am showing you.” T3657

5® The government’s request was as follows:

REQUEST NO. 24

Elements of Count 18

Count 18 charges as follows:

Please read Count 18

The relevant statute is violated if the government has proven the

following elements beyond a reasonable doubt.

First: That a defendant, tor or other i -

nection with the offer or sale of a security, used an offering circular

which was false and misleading in light of the circumstances then

Second: That the defendant under consideration the jury,

did so wilfully and knowingly or caused others to do s0 wilfully on,

knowingly.

Petitioner has argued that once an appropriate request

to charge is made, a defendant may rely on that request

regardless of who submitted it®* and that subsequent failure

to object should not constitute a waiver.

This is particularly true where, as here, the judge did

not inform counsel, as required by Rule 30, that the request

on Count 18 would not be honored.”

In our reading of Rule 30, this fact is most significant.

The purpose of the rule is to give counsel an opportunity

to tell a trial judge what they want, and for him to inform

them, prior to giving his charge, what they will get. At the

completion of the charge, having been alerted to what has

been omitted,®? counsel must determine whether to object.

Where the judge does not inform the parties that he refuses

to charge as they have requested, they should not, pursuant

to the statutory scheme, be deemed to have waived the ‘‘ob-

jection’’ presented in their proposed charges.

This Court should grant certiorari to decide this previ-

ously undetermined issue.

5° The obvious purpose of the Rule, see fn. 62 infra, would seem

to make any such distinction irrelevant.

60 While this is apparently an issue of first impression, a number

of such cases suggest this position since, in referring to preservation

of the objection they speak in the disjunctive—i.e. the defendant

waived because he neither requested nor objected. See e.g. U.S. v.

Knippenberg, 502 F.2d 1056, 1061 (7th Cir., 1974). US. Vv.

Bynum, 485 F.2d 490, 503 (2d Cir., 1973); Chatman v. U5S.,

411 F.2d 1139 (9th Cir., 1969).

, 61 The rule specifically provides that after requests have been

led:

“The Court shall inform counsel of its proposed action

upon their requests prior to their arguments to the jury.”

°2 The clear intent of the Rule’s requirement of prior judicial

notification is precisely to avoid what happened here—i.e. counsel

not previously alerted to omissions from the request to charge missing

those omissions in the heat of trial.

POINT IV

Petitioner was deprived of minimum requiremen

due process when he was sentenced for “other poet

unsupported by reliable evidence, and when the Trial

: ourt gy his request for confrontation and cross-

In recent years judges,®* academics* and practicing law-

yers® have increasingly pointed out that

Nowhere is the incomprehensibility and inconsist-

ency of our system of criminal justice more clearly

revealed than in the sentencing process.

Berkowitz, The Constitutional Requirements for

a Written Statement of Reasons and Facts in Sup-

port of the Sentencing Decision: A Due Process Pro-

posal, 60 Iowa L. Rev. 205 (1974).

While this Court has expanded the concept of the avail-

ability of ‘‘minimum requirements of due process,”’ includ-

ing confrontation and cross-examination to, inter alia wel-

fare recipients, Goldberg v. Kelly, 397 U.S. 254, 269 ( 1970)

holders of government connected jobs, Greene v. McElroy,

360 U. S. 474, 496 (1959), juveniles, In re Gault, 387 U.S 1

(1967), and, most recently, to parolees, M orrissey Vv. Brewer,

- :

(1973) e.g., Frankel, Criminal Sentences: Law Without Order,

a See, e.g., Packer, The Limits of the Criminal Sanction, (1970).

See, e.g., Berkowitz, infra; A.B.A. Project on Minimum Stand-

ards of Criminal Justice, Sentencing (Approval Draft 1968).

As another ABA report began,

“Among the ironics of the law—{are] of the most striki

involves a comparison of the methods nini a

the methods for determining oe Oe ty 9 1

For, at sentence,

“. . . the whole intricate network tection whi

ent "ye = .- trial vanishes = ose way Ay raat

judici iscretion. ABA Project :

Standards of Criminal Justi e Rein ee

p. 1 (Text Draft 1967)" PPenate Review of Sentences,

408 U.S. 471 (1972), and probationers, Gagnon v. Scarpelli,

411 U.S. 778 (1973) in the critical®* area of sentencing, this

Court has not spoken since Williams v. New York, 337 U.S.

241 (1949). Its failure to do so has resulted in an anachron-

istic island of arbitrariness and lawlessness in the midst of

a system otherwise controlled by the mandates of the con-

stitution.

It is time for the Court to address the problem of mini-

mal due process safeguards in sentencing, and this case pro-

vides the perfect opportunity.

A. The sentence imposed was arbitrary, capricious,

and based on “misinformation of constitutional

magnitude”.

The necessity for the imposition of certain due process

requirements is nowhere better displayed than in a situation

where their absence is dispositive.

In this case the Petitioner was sentenced to the un-

usually®’ long term of nine years (five and four year

sentences running consecutively) and, equally unusually,

this sentence was to run consecutively to a state sentence

of seven years.

In determining the sentence, the trial judge relied not

only on the traditional presentence report, but also on a

** Mempa Vv. Rhay, 389 U.S. 128, 134 (1967).

*7? The likelihood of a prison sentence for securities fraud is onl

21.5% in all federal courts; in the Southern District of New Yo

when a prison sentence is imposed, its average duration is one year

and seven months; Whitney North Seymour Jr., 1972 Sentencing

Study for the Southern District of New York, N.Y.S. Bar Journal,

163, 164-65 (April, 1973).

** Federal sentences, particularly for multiple counts based on a

single criminal act or transaction, are almost invariably concurrent.

See, e.g., Remarks of Professor Herbert Wechsler, Second Circuit

Judicial Conference on Appellate Review of Sentence, 32 F.R.D. 249,

289 (1962) 8a Moore, Federal Practice 4 32.04 (6) at pp. 32-71,

32-73 (Cipes. ed. 1973).

specially prepared report and set of recommendations sub-

mitted by the prosecutor at the judge’s request.** Both

reports, and the prosecutor’s oral presentation, relied far

less on the securities fraud of which Petitioner was con-

victed than on a Godfather-like scenario in which Peti-

tioner was accused of being, inter alia, ‘‘The head of the

organized crime family in New York,’’ A 137, 1387 and of

having

authorized an open contract to murder Joey Gallo

(with] the murder actually carried out by his asso-

ciates. A 139-140".

In surveying this mass of inflammatory and unsup-

ported charges the trial judge himself stated

This case in a sense poses a dilema. These are

various facts about other things except what is in-

volved in this case, the probation report and the

sentence, in that the writer, the probation officer said

if was beyond his power to separate fact from fiction

*° The use of such a — itself is unusual and raises serious

questions, see, e.g., U.S. v. Rosner, 485 F.2d 1213 (2d Cir. 1973),

cert. den. 417 U.S. 950 (1974), U.S. v. Allsenberrie, 424 F.2d

1209 (7th Cir. 1970). Haller v. Robbins, 409 F.2d 857 (1st Cir.

1969), Moore, supra, | 32.04[3]. In any event, the submission of

- Prosecutor’s recommendations—which were, not isingly,

or maximum, consecutive te hicall -

versary nature of the sentencin ig procedure ond Peer mens

sity for protection which classically accompany such adversary pro-

"® References are to the Appendix on Appeal to the Second -

cuit, where the relevant sentencing minutes were reproduced. -

v8 a oe, a notorious New York mobster, was murdered in

1972. one has ever been charged with, or convicted of his

death. Significantly, a recent and extensive New York Times feature

article, to be an inside, eyewitness account of the murder,

entirely to mention Petitioner while naming many other

land res in connection with the murder. Gage, Key Mafia Figure

Tells of “Wars” and Gallo-Columbo Peace T. , N.Y. Times, July

and 1 am afraid it is beyond my power, too. A 153-

54 (emphasis added)

Petitioner’s lawyer, confronted by all the admitted innu-

endos, character assasinations and unsupported en

specifically requested a right of confrontation an cont

examination (A 147-148) to demonstrate the falsity >

information which was being considered against his client.

The trial judge denied these requests and, clearly rely-

ing in part on the F.B.1. and Prosecutor’s untested and un-

supported charges,”* imposed the extraordinary sentence

discussed above.

B. Due process was violated by the imposition of a

sentence for crimes for which Petitioner was not

tried, and by denial of the right to confrontation

and cross-examination.

The outregeous miscarriage of justice and the misuse

of the judicial process in this case could have been 4

vented in two ways, both of which, we believe, are consti-

tutionally mandated.

First, as a matter of due process, the information _

sidered by the trial judge could have been limited to actua

crimes resulting in conviction, or, at the very least, in erimi-

nal charges, rather than unsupported allegations of gen-

eralized ‘criminal activity.”’ The Circuits are clearly in

conflict on this issue and certiorari should be granted to

resolve it.

72 The material in the presentence report and ey

recommendations was almost entirely double and =. beng

passed through the F.B.I. by the usual ‘unidentified .

: —~ mae Gham

78 The judge clearly believed that Aloi “knew something

the Galle fase pore he was “in some way involved in a

killing.” A 169, 170, 171. He also apparently believed epee wy wal tA

accusations about alleged death threats to witnesses => =

142), although those witnesses had earlier testified made

mention whatsoever of such “threats.

Second, a requirement of confrontation and cross-ex-

amination, when crucial and probably dispositive facts are

clearly in issue, should clearly have been imposed in line

with this Court’s general exegesis of minimum require-

ments of due process.

Both of these imperative due process considerations

require the granting of certiorari, and will be discussed

briefly and seriatim.

(i) Consideration of ‘‘Crimes’’ Without Convictions.

There is no more deeply ingrained concept of due pro-

cess than that a man should not be deprived of his liberty

for crimes he has not committed, and for which he has not

been tried or convicted. Nevertheless, the present entirely

uncireumscribed area of sentencing ‘‘discretion”’ permits

this precise unthinkable occurrence to happen, as here,

again and again.

Relying on this Court’s 1949 decision in Williams v.

New York, supra, many lower courts have permitted trial

judges unbridled discretion in considering any and all

material, suppe ‘ed or unsupported, about a defendant’s

unrelated ‘‘criminai activity.’

As general concepts of due process and fairness have

subsequently been expanded by this and other courts, the

Williams decision has come under frequent attack, and

commentators’* and judges” have suggested that it be

limited strictly to its facts.

** See, e.g., Note: Due Process of Felony Sentencing 81 Harv.

L. Rev. 821 (1968); Berkowitz, supra.

*® As Judge Swygert of the Seventh Circuit recently wrote,

I recognize that present authority may permit a sentencin

judge to consider hearsay statements even when they relate to

other criminal activity for which there has not been a conviction

(citing Williams and other subsequent authorities). It should be

noted, however, that in Williams the defendant did not challenge

i \

In the absence of recent guidance from this Court, the

lower courts have grappled with the question with widely

differing results.

Some Circuits have refused to allow sentencing con-

sideration of prior criminal acts unless there is proof of

an actual, constitutionally valid conviction, ¢.g., Baker v.

United States, 388 F. 2d. 931, 933-34 (4th Cir. 1965) (lay-

ing down minimal standards for presentence reports).

See U. S. v. Janiec, 464 F. 2d. 126, 129 (3rd Cir. 1972).

Other Circuits, relying on Williams, clearly allow con-

sideration of all criminal behavior, whether or not result-

ing in conviction, e.g., U. S. v. Johnson, supra (7th Cir.),

U. S. v. Doyle, 348 F. 2d. 715, 721 (2d Cir. 1965).

Still another approach is taken by the Ninth Circuit,

which has held that information about other criminal

activity may not be considered unless it essentially meets

a probable cause standard. U. 9. v. Weston, 448 F. 2d.

626 (9th Cir. 1971), cert. den. 404, U.S. 1061 (1972)."*

Even the American Bar Association has taken a posi-

tion, specifically recommending that all arrests and other

the contention o> ae committed oo crimes. The

specific question of use of prior arrests pending charges

an ant adie Williams and I believe the case should be

strictly limited to its facts. U.S. v. Johnson, 507 F. 2d 826 (7th

Cir. 1974) cert. den. 95 S. Ct. 1682 (1975) ( te —

ons oe ae in ). Accord, U.S. v. Weston,

448 F. 2d 626, 631, 663 ( ir. 1971).

76 The Weston rationale has been followed by other courts, ¢.g.,

United States v. Williams, 499 F. 2d 52, 55 (1st Cir. 1974), Nickens

v. State, 34 Md. App. 284, 301 A. 2d 49 (1973) and discussed

approvingly by commentators, e.g., Note, Criminal Procedure; Prob-

able Cause and Due Process at Sentencing, 50 N. Car. L. Rev. 925

(1972), Note: Toward a Probable Cause Standard in Sentencing,

34 Md. L. Rev. 133 (1974). A variation in this approach is that

taken by the Fifth Circuit which — vacation of sentence “based

on es not su in record.” U.S. v. Looney, 501

F. 2d 1039, 1042 (Sth Cir. 1974).

dispositions short of judgment should be excluded from

2g cage reports. A.B.A., Project on Minimum Stand-

a or Criminal Justice, Probation, p. 37 (A

Draft, 1970). , —

at Whatever this Court may finally determine on this issue

it is clear that it is now overripe for decision, and that the

uniform administration of criminal justice would best be

served by granting certiorari and resolving the question

once and for all.

(il) The Right to Cross Examination and Confrontation.

Reading together this Court’s due process prohibition

on sentences based on misinformation, Townsend v. Burke,

334 U.S. 736 (1948), and its more recent determination

that due process requires counsel at sentencing Mempa v.

Rhay, 389 U.S. 128 (1967),"" one is compelled to the con-

clusion that those safeguards deemed the ‘‘minimal require-

ments of due process’’ are also required at sentencing.

Indeed, this Court’s expansion of those requirements and

the instances in which they are constitutionally mandated,

see pp. 21-22, supra, requires such a conclusion and the

accompanying disavowal of dicta in Williams v. New York

to the contrary."*

"' There the Court reiterated the holding of Gideon i

wright, 372 _ 335 (1963), as standing for the p it +7

appointment counse! is required “at every sta a criminal

proceeding where sult iantial rights of a cated command may be

affected. Mempa, supra, at p. 134. It went on to hold, that “In

particular, Townsend Vv. Burke, supra, illustrates the critical nature

of sentencing in a criminal case... .”id.

"8 In Williams, of course, the defendant never requested con-

frontation or cross examination; Williams, ra, at 244

many courts and commentators have since polated a a. oe

restrictive principle for which it is cited far beyond

what the facts See, e.g., U. S. v. Picard, 464 F.2d. 215

219 (1st Cir. 1972), U.S. v. Trigg, 392 F.2d 860, 869 (7th Cir.).

lies Williams” has changed dramatically. Note: D ;

Felony Sentencing, supra at pp. 827-28. a Ona

This court’s consistent 10 year line of procedural due

process cases in the area of criminal prosecution is simi-

larly compelling.

Since Kent v. United States, 383 U.S. 541 (1966) and

In re Gault, supra, this Court has required minimum safe-

guards in quasi-criminal proceedings previously character-

ized as ‘‘discretionary.’’

Next, sentencing was expressly recognized as an integral

part of the criminal process where counsel was required,

Mempa v. Rhay, supra, and a due process hearing was re-

quired at a post sentencing procedure where the defendant

was subject to additional punishment. Specht v. Patterson,

386 U.S. 605 (1967).

Subsequently, this Court held that sentences based upon

consideration of a prior record including convictions ob-

tained without a lawyer violated Townsend v. Burke, supra,

and must be set aside. U.S. v. Tucker, 404 U.S. 443 (1972).”

Finally, in two post-conviction situations which were

expressly recognized as ‘‘not a part of the criminal prose-

cution,’’ this Court extended the ‘‘minimum requirements

of due process’’ including the right to confrontation and

cross examination to parole and probation revocation pro-

7° In holding that a sentence possibly based on convictions ac-

knowledged by the defendant but obtained without a lawyer must

constitutionally be set aside, the Court in Tucker returned to the

underlying rationale of Gideon v. Wainwright, 372 U.S. 335 (1963),

the basic unreliability of convictions so obtained. The Court speci-

fically found “quite beside the point” the question of whether the

outcome of those prosecutions would have been different if the

defendant had been aided by counsel, id. at p. 447-48. If considera-

tion of a conviction for a crime obtained after trial but without

counsel is “misinformation of constitutional magnitude,” id., p. 447,

how 1 unreliable is consideration of “convictions” with

no trial at all.

ceedings. Morrissey v. Brewer,’ supra, at p. 489, Gagnon

v. Scarpelli, supra, at p. 781.

There is no way to square this line of cases, particularly

Morrissey v. Gagnon" with denial of the right, at sentenc-

ing, to rebut allegedly incorrect or inaccurate information*?

by confrontation and cross examination.**

This Court should grant certiorari to correct this glar-

ing anamoly and to insure that due process safeguards are

available wherever constitutionally mandated.

8° In Morrissey, Justice Powell noted that revocation i

parole or probation is tke a trial in thet it has “two analydcally

distinct components.” The first, like the criminal trial itself, is

whether the parolee has, in fact, acted in violation of one or more

of the conditions of his parole. The second, analagous to sentencing,

is whether the parolee should be recommitted to prison, or whether

other steps should be taken. Morrissey, supra, at pp. 479-80. Sig-

nificantly, he found that in requiring two hearings to determine these

two —- questions, the latter must be “less summary . . . be-

cause decision under consideration is the ultimate [one].” id. It

is the determination of this latter dispositional issue, i.e., the second

a. which requires confrontation and cross examination. id.,

§! This Court’s recent decision in Wolff v. McDonnell, 418 U.S.

539 (1974) is in no sense to the contrary. Unlike sentencing, prison

disciplinary ———- are not “a part of the criminal prosecution,”

id., p. 55. Even more significantly, Justice White distinguished Mor-

rissey V. Gagnon stating

. - - OMe cannot automatically apply procedural rules designed

for free citizens in an open society, or for parolees or proba-

tioners under only limited Testraints, to the very different situa-

a ne ee eae oe. id.,

In the spectrum thus Grawn by the Court, the still free citizen who

pousedurel geotections han Ge pascine or pockunons che han ar

p or probati

— parolee or p oner who has al-

*? It is precisely for this purpose that the rights of confrontation

and cross examination have and been applied. Greene v

McElroy, supra, at pp. 496-97.

83 This is the position taken by the A.B.A., Standards

to n iseee Ss my he 9 iw Soe Section 5.4 ( ao

Draft, ‘ ote, Process in Felony encin

Harv. L. Rev. 821, 824-25 (1968). eee, Oe

—

——

CONCLUSION

For all of the above reasons, this Court should grant

a writ of certiorari to review the judgment below.

Respectfully submitted,

Kerstin Bootn Gien

Attorney for Petitioner Vincent Alot

36 West 44th Street

New York, New York 10036

(212) 869-1940

New York, New York

September 2, 1975

APPENDIX

UNITED STATES COURT OF APPEALS

For tre Seconn Crrcvir

-or

Nos. 1144, 1150, 1159, 1171—-September Term, 1973.

(Decided July 7, 1975.)

Docket Nos. 74-1220, 74-1278

74-1614, 74-1727

-_ ——

Unitep States oF AmMEniIcA,

Plaintiff-Appellee,

—against—

Vincent Axor, et al.,

Defendants-A ppellants.

Before:

Moore and Frinxperc, Circuit Judges,

and Paumieni, District Judge.*

Ow Petition ror REHEARING

Per CurtmmM:

Appellants Vincent Aloi and Ralph Lombardo have

urged in a petition for rehearing that the failure to

charge willfulness as to Count 18 was not waived and

was plain error under the Jaw of this circuit, citing, e.g.,

Umted States v. Howard, 506 F.2d 1131 (2d Cir. 1974),

and United States v. Fields, 466 F.2d 119 (2d Cir. 1972).

° Of the United States District Court for the Southern District of New

York, sitting by designation.

6093

However, in view of Judge Knapp’s charge to the jury,

applying the principles of Pinkerton v.

United States,

328 U.S. 640 (1946), and in view of the broad definition

of “use” we have earlier approved, 511 F.2d at 599-600,

we do not agree that there was plain error.

The petition for rehearing is denied.

460—7-9-75 USCA—4147

UNITED STATES COURT OF APPEALS

For tue Secon» Circuit

Nos. 1144, 1150—September Term, 1973.

1159, 1171

(Argued June 24, 1974 Decided January 31, 1975.)

Docket Nos. 74-1220, 74-1278

74-1614, 74-1727

i 2

Unitep States or AMERICA,

Plaintiff-A ppellee,

-—against—

Vincent Avo, Jonx Driocvarpt,

Ratex Lomparvo and Jonx Savino,

Defendants-A ppellants.

Before:

Moore and FEnserc, Circuit Judges, and

Patmirnt,” District Judge.

Appeal by appcllants from judgments of conviction of

conspiracy to violate certain securities laws (all appel-

lants), of use of a false and misleading offering circular

(all appellants), and of wire fraud (Appellants Aloi, Dio-

guardi and Lombardo) entered after a jury trial in the

United States District Court for the Southern District

of New York, Hon. Whitman Knapp, Judge.

6057

Affirmed as to Appellants Aloi, Dioguardi, and Lom-

bardo and reversed as to Appellant Savino.

—— ——_ -—~+e >

Kristen Bootn Guen, New York, N.Y. (Michael

Ratner, of Counsel), for Appellant Aloi.

GretcHeN Wuite Osperman, New York, N.Y.

(Jay Goldberg, of Counsel), for Appellant

Dioguardi.

Jory A. Brenner, Mineola, N.Y. (Gustave H.

Newman, New York, N.Y., of Counsel), for

Appellant Lombardo.

Geratp L. Smarcer, New York, N.Y. (La Rossa,

Shargel & Fischetti, of Counsel), for Ap-

pellant Savino.

Bancrort Litrieririp, Jr., Assistant United

States Attorney (I’aul J. Curran, United

States Attorney for the Southern District

of New York, Alan R. Kaufman, T. Gor-

man Reilly, Peter I. Truebner, Daniel

Beller, S. Andrew Schaffer, Assistant

United States Attorneys, of Counsel), for

Appellee.

+e.

Moorg, Circuit Judge:

Vincent Aloi, John Dioguardi, Ralph Lombardo and John

J. Savino were convicted under Count 1 of conspiracy to

violate federal securities laws. 15 U.S.C. $§ 77q(a), 77s(a),

77x, 17 C.F.R. §§ 230.256 and 240.10b-5, 18 U.S.C. $§ 371,

372. All four were also convicted under Count 18 of use

of a false and misleading offering circular. Aloi (Count

10), and Dioguardi and Lombardo (Count 9) were con-

victed of wire fraud. All defendants appeal. For the

6058

reasons hereinafter stated, we affirm the convictions of

Aloi, Dioguardi and Lombardo and reverse the convictions

of Savino.

The various appellants raise so many points of alleged

reversible error, the separate points of each being in-

corporated by reference by the others, that some initial

general analysis and sifting of the facts must be made.

The main charge, Count 1, alleges a conspiracy, the ob-

ject of which was unlawfully, wilfully and knowing!y to

offer and to sell to the public common stock of a com-

pany, At-Your-Service Leasing Vorp. (AYSL), which was

in a weak financial condition and consistently operated at

a loss. The original purpose of the financing was to raise

money for AYSL to enable it to pay off loans on which

certain of the defendants who owned AYSL were person-

ally obligated and to raise additional funds to carry on

the business.

A conspiracy of this nature resembles a mosaic or a

jig-saw puzzle. The picture consists of a myriad of in-

dividual pieces which when placed together reveal the ul-

timate image. Many artisans are frequently required,

each contributing his segment. Despite the number of

separate participants, it is one picture. And so here. An

effort will be made sketchily to portray the part each ap-

pellant-conspirator and certain co-conspirators played.

At all relevant times, AYSL was an automobile leasing

corporation doing business in West New York, New Jer-

sey. Its owners and managers were defendants Sanford L.

Price, Arthur Ferdinand, Murray A. Handler, J. Jack

Ganek, and Edmund Graifer.' Defendants Andrew Nelson’

and Gerald Miller’ conducted business as Tech-Ec Systems

1 Price, Ferdinand, Handler and Ganek were also certified public accoun-

tante. They were indicted but their trial was severed.

2 Nelson was indicted and pleaded guilty.

3 Miller pleaded guilty.

6059

(financial consultants). Miller was also an attorney.

In and subsequent to July 1969, Nelson, a financial con-

sultant (Tech-Ee) agreed with the principals of AYSL to

arrange an AYSL stock issue for a $20,000 fee. The issue

was to be an unregistered exempt (Regulation A) issue

of 100,000 shares at $3 a share, 50,000 shares of which

had to be sold within 90 days of the SEC effective date,

April 8, 1970, or the subscribed money refunded.

An offering circular was prepared by Nelson and Miller

dated as of April 8, 1970. Apparently a broker-dealer,

TDA Securities, Inc., whose principals were defendants

Gilbert C. Dragani, Donald Fisher and Louis Nova,‘ was

ostensibly supposed to be the underwriter. The offering

circular was most explicit. In bold type on the first page

it stated: “TuHese Soares Invotve a Hicu Decree or Risk.”

Under “Risk Factors to be Considered,” were listed seven-

teen factors, any one of which should have deterred a

prospective purchaser from buying the stock. And until

the conspiracy commenced, no one ‘id.

To summarize briefly, at this point there was an offering

circular under which $300,000, less proper expenses, could

potentially be obtained from the public. Graifer’s and

AYSL’s financial conditions were such that they needed

money by fair means or foul. Fair means having failed,

they chose to investigate the possibilities of the other

alternative.

There being no AYSL stock sales, Graifer as an owner

and manager was called upon by his associates to remedy

the situation. From this point on, the pieces of the mosaic

began to be filled in rapidly. Graifer had a friend, Ralph

Lombardo, and another friend in Florida, Sebastian Aloi,‘

4 | Dragani, Fisher and Nova were indicted and pleaded guilty.

5 Sebastian Aloi, originally indieted, was severed for health reasons

prior to trial.

6060

——_

father of Vincent Aloi.* Graifer and Lombardo went to

Florida to consult with Sebastian. Sebastian instructed

Lombardo to get in touch with a Michael Hellerman, a

well-known stock swindler, to sce if he could put the sale

across. Hellerman was associated with defendant John

Dioguardi, who owned a percentage of Hellerman’s profits.

Thereafter, Lombardo, to whom Hellerman owed $10,000

on a loan, approached Hellerman, who agreed, after seeing

the offering circular, to sell 50,000 shares provided he re-

ceived a secret kickhack of $45,000, “under the table”, half

of which, he said, had to be paid immediately in order to

bribe brokers to tout the stock.

Lombardo and Hellerman then proceeded to Dioguardi’s

office to obtain Dioguardi’s approval of Hellerman’s par-

ticipation therein, which was granted. Lombardo, Heller-

man and Dioguardi then telephoned Sebastian in Florida

and informed him of the terms. Thus, there was a guar-

antee by Sebastian of Graifer’s performance and by Dio-

guardi of Hellerman’s.

About the middle of June, because Graifer was unable

or unwilling to pay the required $22,500, Lombardo pro-

duced and delivered $22,500 (half of the $45,000) to Dio-

guardi’s office." By July 7th, the expiry date for the sale

of the 50,000 shares, Hellerman, despite his previous suc-

cesses, had failed to cause the stock to be sold. Accord-

ingly, Dioguardi returned the $22,500 to Lombardo.

Somewhat collateral to the stock sale but definitely re-

lated thereto was an incident which brought three addi-

tional defendants into the picture, Pasquale Fusco,’ John

6 Because of the two Alois, first »ames will be used to identify them.

7 Details of delivery of $22,500 to « defendant Ira Schultz in an abor-

tive attempt to induce him to try to sel] the stock and the return of

$22,000 thereof are omitted.

8 Fusco became il] during the trial and was severed.

6061

Savino and Vincent Aloi, Sebastian’s son. Hellerman in

a previous unsuccessful stock deal had lost $10,000 belong-

ing to Fusco and Savino. They were apparently withoat

power to obtain its return without the aid of Dioguardi.

Fusco and Savino were friends of Vincent and through an

Aloi-Dioguardi arrangement, Hellerman was to pay the

$10,000 when financially able to do it. When Fusco and

Savino learned that Hellerman was going to receive $45,000

without making any provision to pay them, Fusco said

that he would see Vincent to obtain his aid in getting their

money back. This development temporarily halted any

efforts to sell AYSL stock but Graifer, who was most se-

riously affected by the stoppage, again went to Florida,

saw Sebastian and explained the difficulty. Sebastian told

him not to worry, telephoned his son, Vincent, and al-

though he spoke to Vincent in Italian, immediately there-

after told Graifer in English that everything would be

straightened out and that Hellerman and the stock deal

would be reinstated. Hellerman was informed by Dioguardi

that he could continue with his scheme but that Vincent had

specified some variation in the former terms. Out of Hel-

lerman’s $45,000, Fusco and Savino were to receive $10,000,

Hellerman was to repay Lombardo the $10,000 loan and

Dioguardi was to receive the $25,000 balance.

Despite the passing of July 7th, the expiry date for the

legal sale of the stock, money camie in from sales effected

by Hellerman and his henchmen, namely, brokers engaged

by him.

On July 28, 1970, some three wecks after the legal expiry

date, a purported “closing” under Hellerman’s supervision

took place. Present were Lombardo, Hellerman, Graifer,

Ferdinand (a principal of AYSL), Nelson and Winter

(Hellerman’s attorney). Hellerman produced $150,000 in

‘checks (50,000 shares at $3 a share), some bogus and some

6062

not honored. Hellerman arranged to have TDA backdate

its records to July 7th to give an appearance of legality.

Subsequently these checks to the extent of $127,500 became

good.

In August 1970 Graifer, from the proceeds, delivered the

$45,000 to Lombardo. Lombardo passed it on to Dioguardi.

Dioguardi then gave $20,000 of this sum to Vincent who

then distributed $10,000 to Fusco and Savino and $10,000

to Lombardo. The remaining $25,000 Dioguardi used to

repay that amount on an indebtedness owed by him and

Hellerman. This manner of this distribution was there-

after confirmed, each to the other, including Graifer.

Concerning activities after these events, it is sufficient to

say that Hellerman, consistent with his reputed skill in

this sort of activity, then conducted a series of spurious

manipulations in the AYSL stock and reported them at

least to Graifer and Lombardo.

Again to summarize, what had started as an effort to

raise money for AYSL had been taken over by Hellerman,

Lombardo, Vincent Aloi and Dioguardi as a scheme to

obtain money from the public via the sale of AYSL stock

for their own use and purpose without disclosure of this

fact to the purchasers.

Before embarking on a more detailed analysis of the

many points raised by appellants’ counsel, some comment

upon the trial must be made based upon an appellate per-

spective as obtained from the record. The trial lasted for

over eight weeks. The transcript was almost 6000 pages,

of which hundreds of pages were devoted to colloquy be-

tween court and counsel. The four appellants were repre-

sented by experienced defense lawyers whose seizure of

every opportunity technical and otherwise on behalf of

their clients in aid of their defense bespeaks the adequacy

10a

of their representation. Scores of motions for a mistrial

are sprinkled throughout the reeord.

Fundamentally the case resolved itself into a question

of witness credibility. The government’s principal wit-

nesses were Graifer and Hellerman. heir criminal ree-

ords were well known. Following usual trial strategy

techniyue, the government on its <irect examination

brought out much of their past records hoping to amelio-

rate, and soften if possible, the attack on cross-examina-

tion. Defense counsel thereafter devoted a high percentage

of their time in establishing that these two witnesses,

particularly Hellerman, had committed many crimes, in

Hellerman’s case stock swindles, check forgeries, tax eva-

sion, frequent perjury, even ordinary stealing. Graifer, too,

was “Graifer, the thief, the self-confessed perjurer.”

(Tr. 5066).

The government in turn introdrced an agreement it had

made with Hellerman under which he purportedly com-

mitted himself to tell the truth in exchange for many lenien-

cies and financial benefits—of which more later.

Defense counsels’ conception of the issues on the trial

is best obtained from their own surmmations. To one defense

counsel there was “no question of the fact that Mr. Heller-

man and his cohorts perpetrated a swindle upon the public

and cheated innocent victims.” (Tr. 5066). To another there

was “no dispute that there were criminal acts committed

in connection with the stock fraud of At-Your-Service Leas-

ing.” (Tr. 5184). And all, during trial and summation,

devoted a large portion of their efforts to demonstrating

that Graifer and Hellerman were completely unworthy of

belief. Belief or disbelief, being solely a jury function, the

only law question is: was the jury given proper instruc-

tions for its determination? Factually, were appellants so

tied into Hellerman’s swindle as to constitute a conspiracy?

6064

lla

Corollary to the main issue of conspiracy are the ques-

tions of the conduct of the prosecution in establishing it

and the sufficiency of the trial court’s charge in outlining

the factual issues to be determined by the jury.

The reviewing problem has not been rendered easier of

solution by the government's bricf. With little supporting

proof the government assumes two groups, the Aloi and

the Dioguardi, reminiscent of the Montagues and the Capu-

lets, each group being charged with having entered into

an agreement with the other to perpetrate the sale of

worthless AYSL stock to the public (Govt. Br. p. 5). Its

hyperbole in description is in many instances unsupported

by the record or by any record references justifying its

statements.

For this reason and because of the many appellate points

raised by appellants’ counsel, a detviled analysis of the

entire record has been required. In so doing, it must be

remembered that every departure from normal courtroom

procedure does not constitute reversible error. And trial

strategy should be |eft in the hands of counsel, who in this

case ranked amongst the ablest of the criminal defense bar.

Probably no criminal charge is inore difficult of definition

than conspiracy. In short, there must be a conspiracy to

commit a crime. Conspiracy itself has been defined as an

agreement or a concert of action. Individuals, about to

commit a crime, however, do not sit down and draft their

agreement with the meticulousness of a corporate mort-

gage. Therefore, the conspiracy must most frequently be

upon the facts and words of the alleged conspirators or the

inferences drawn therefrom.

The conspiracy charged is that the defendants “did com-

bine, conspire, confederate and agree together and with

each other to commit certain violations of federal law, to

wit, violations of Title 15, United States Code, Sections

6065

12a

77q(a), 77s(a), 77x and 17 C.F.R. ¢§ 230.256 and 240.10b-5.”

As “Objects of the Conspiracy”, the indictment in substance

alleged that as a part of the conspiracy the defendants

would offer AYSL stock for sale, by means of communica-

tion in interstate commerce, employ schemes to defraud,

obtain money by means of untrue statements and omissions

of material facts and engage in practices which would op-

erate as a fraud and deceit upon the purchasers of AYSL

stock in violation of 15 U.S.C. §77q(a). Also as parts of

the conspiracy were alleged the use of a false and mislead-

ing offering circular (15 U.S.C. § 77s(a) and Rule 256(e),

17 C.F.R. § 230.256(e) and Form 1A, Schedule I), and the

employment of manipulative devices in connection with the

purchase and sale of AYSL stock (Rule 10b-5, 17 C.F.R.

§ 240.10b-5).

As “Means of the Conspiracy,” the facts by which the

defendants and co-conspirators would and did carry out

the conspiracy and which are to some extent outlined

herein, were set forth in the greatest detail.

We iurn now to the principal errors asserted by the in-

dividual appellants.

Lombardo:

Lombardo challenges the sufficiency of the evidence to

establish that he was a knowing member of a conspiracy

to violate the securities laws of the United States.

A conspiracy to be criminal must, of necessity, encompass

a crime. As the tria] court charged, the jury could find

a defendant guilty of conspiracy or aiding and abetting

only if it were established that he knew of the unlawful

purpose of the conspiracy. There is more than sufficient

proof in the record from which a jury could have found

or inferred the following facts with respect to Lombardo.

Graifer and Lombardo were friends. When the desired

sales of AYSL stock were apparently not capable of he-

ing made, Graifer turned to Lombardo for help. Lombardo

13a

knew of the hopeless financial] condition of the company

because Graifer had given him an offering circular disclos-

ing it. Together they went to Florida to seek Sebastian’s

suggestions. Sebastian suggested Hellerman, who was rep-

resented as being “with” or in partnership with Dioguardi,

and said that if Hellerman could do the deal Sebastian

would contact Dioguardi. Upon their return to New York

a meeting with Hellerman was arranged at which the of-

fering circular was shown to Hellerman. Hellerman then

- regaled Lombardo and Graifer with his other stock swin-

dies. Hellerman indicated that he could do the deal if

Dioguardi approved but demanded $45,000 “under the ta-

ble” for himself. He claimed that he needed 50% of this

amount in advance (“up front”) to bribe brokers to tout

the stock. Lombardo also demanded from Grailer to be put

on the AYSL payroll at $200 a week and free use of AYSL

ears and credit cards.

Lombardo and Hellerman then proceeded to Dioguardi’s

office where, after a further discussion all three, Lombardo,

Dioguardi and Hellerman, by telephone told Sebastian in

Florida of their agreement.

It was Lombardo who delivered the $22,500 to Dio-

guardi, who in turn told Hellerman and Kelsey to give it

to Schultz who was going to try to sell the stock. Schultz

had no success and the money was returned, Lombardo

being present at the time. Hellerman then told Lombardo

that he could do the deal without the advance money.

A new deal was arranged for the distribution of the

$45,000 which Vincent approved and which was known to

Lombardo whereby Fusco and Savino were to receive

$10,000, Lombardo $10,000 and Dioguardi $25,000, which

Dioguardi applied on account of a debt.

At the purported closing held on July 28, 1970, at which

funds represented by Hellerman as obtained from the sale

6067

14a

of the stock in the amount of $127,500 were displayed,

Lombardo was present.

Lombardo thus occupied a key role in Hellerman’s

swindle from the initial meeting down to the closing. He

participated in most of the meetings with Dioguardi to

promote the swindle and had a definite monetary stake

therein, including his $200 a week fron: AYSL and other

emoluments plus his $10,000, paid out of the $45,000. And

Lombardo’s telephone call to Sebastian was both in fur-

therance and in execution of the scheme in that Sebastian

had to approve or confirm the deal. We conclude there-

fore that there was ample evidence to support Lombardo’s

conviction under Count 1.

Lombardo claims that Hellerman’s testimony of a

$10,000 loan by Lombardo to Hellerman at a highly

usurious rate of interest was so prejudicial as to deprive

him of a fair trial. A count (count 38) based upon this

loan had been severed and Lombardo contends that no

reference should have been made to it.

There is no question but that Lombardo received re-

payment in the amount of $10,000 out of the proceeds of

Hellerman’s swindle. To this extent testimony concern-

ing the loan was admissible. Furthermore, its existence

could have justified an inference that it might have been

an influencing factor in Lombardo’s participation in the

conspiracy.

To refute the denial by Lombardo of the Hellerman

loan the government introduced evidence of many other

loans made by Lombardo to others. These loans were al-

leged to appear on certain lists in Lombardo’s handwrit-

ing. Admission of these lists for cross-examination pur-

poses may have been proper as an attack on credibility.

Whether the government intended this restrictive purpose

or introduced the lists to prove Lombardo a loanshark

6068

15a

is debatable. However, the court in its charge endeavored

to confine the admission to a credibility issue.

Lombardo charges that the government sought to de-

grade him in the eyes of the jury by revealing his extra-

marital relationship with a young lady. However, this

testimony was properly adduced in light of his presenta-

tion of himself as a family man.

Lombardo also claims that information obtained from

his testimony given before a State Grand Jury in Nassau

County as to which he was given immunity formed the

basis for much of his cross-examination and that the use

of these “Immunized Transactions” (Lombardo, Br. 49)

deprived him of a fair trial. If, however, the information

revealed was either already known or came from inde-

pendent sources, this argument fails. The trial court

investigated the facts in an evidentiary hearing and con-

cluded that the prosecution had not made use of such

testimony. There is no basis for holding the court’s

ruling to have been clearly erroneous.

Dioguardi:

All the appellants, particularly as stressed in Dio-

guardi’s brief, attack the court’s charge, claiming that

it was inaccurate, inadequate, and insufficient. Because

the jury’s duty is to weigh the facts in light of the court’s

instructions as to the law, attention must be turned ini-

tially to the charge itself.

The court quite accurately, though briefly, outlined “the

basic criminal] enterprise that the government claims to

have established.” (Tr. 5487-5488). It started with

Graifer’s AYSL financial problems, continued through

his “more or less legitimate means” to unload the cor-

poration on the public, Graifer’s subsequent meetings

with Sebastian, Lombardo, Hellerman and Dioguardi,

their placing the stock scheme in the hands of Hellerman

6069

16a

and the accomplishment of the conspiracy by the unload-

ing of the stock. In addition, the court gave a_ brief

sketch of the respective roles which the government con.

tended each defendant occupied, Dioguardi authorizing

Hellerman to proceed and supervising his conduct, Vin-

cent entering the conspiracy to take care of the Fusco-

Savino claim against Hellerman, Savino to have his claim

satisfied, and Lombardo, the original negotiator to “more

or less run herd on the operation.”

The jury was told briefly but adequately that the crime

of conspiracy is “substantially as follows”:

If two or more persons, any two, conspire to com-

mit any offense against the United States and one or

more of such persons does any act to effect the ob-

ject of the conspiracy, each shall be guilty of a crime.

(Tr. 5490-91).

Three elements were stated: (1) conspiracy; (2) an object

—namely, commission of an offense against the United

States; and (3) an act to effect the unlawful objective.

The court then proceeded by asking “What is a conspiracy”

and answered the question by saying “A conspiracy in

ordinary layman’s language is no more or less than a

common understanding entered into between two or more

persons to achieve an unlawful objective.” (Tr. 5490).

A “vice” of the court’s charge, according to Dioguardi,

lies in these words:

“.. I advise you as a matter of law that the ob-

jectives of this conspiracy as described by the govern-

ment, namely, obtaining moneys from the public by

fraudulently pumping worthless securities into the or-

dinary channels of commerce could not be accom-

plished without violating the above-mentioned statutes

and you would be entitled to conclude that any de-

6070

17a

fendant whom you find to have intended such objec-

tives, must have contemplated the violation of those

statutes.” (Tr. 5492).

This was followed with the admonition that if a conspiracy

were found that “all of them become guilty of any crim-

inal act performed in the furtherance of that conspiracy,

whether or not any of them individually had anything to

do with that particular unlawful act or even knew of its

existence.” (Tr. 5494).

This charge, argues Dioguardi, in effect constitutes an

amendment of the indictment in that the jury could have

found Dioguardi guilty if “he [Dioguardi] associated him-

self with Hellerman in an on-going scheme, beginning in

1969, to obtain money from the public in fraudulent secu-

rity transactions, even though the grand jury did not frame

the conspiracy count in this fashion.” (Dioguardi Br. 33).

This argument is tied in with, and dependent upon, his

claim of error in the admission of proof that beginning

in 1969 Dioguardi had 25% (raised to 50% in the Belmont

[a previous Hellerman stock swindle] stock fraud) of

everything Hellerman did and of proof to a limited extent

of the Belmont deal. Dioguardi’s claim that the injection

of Hellerman’s Jmperial and Belmont frauds into the case

thereby allegedly forced him to defend himself in three

separate trials is not well founded. None of the issues in

those cases was before the jury here. And despite pro-

tracted colloquy between court and counsel as to whether

the outcome of those cases should be presented to the jury,

it was not.

The trial court’s charge, according to Dioguardi, did not

accurately define the offenses (Counts 1 and 18) and their

respective elements. His criticism is that the court did not

read the applicable statutes to the jury but merely stated

6071

18a

that if they found certain facts then the crime charged

had been committed as a matter of law, citing Morris v.

United States, 156 F.2d 525 (9h Cir. 1946), and United

States v. Leru, 153 F.2d 995 (3rd Cir. 1946). In particular,

Dioguardi claims that the court should have defined the

terms “fraudulent”, “material” and “undisclosed under-

writer” and should have been charged that any material

omissions from the offering circular had tobe willful.

Criticism is also levelled at the brevity of the court’s

charge. This was a long trial; the jury had heard and

seen many witnesses. At the conclusion of the trial they

must have had a fairly good idea as to the issues. The

summations of the four counsel for the four defendants

and the government highlighted the salient contentions.

The value to a jury of a four or five hour charge will un-

doubtedly be a subject for judicial debate for years to

come. The so-called “boiler plate” section of the charge

has been built up over the generations to a highly dispro-

portionate size by adding the omissions held to have been

error by appellate courts in their decisions over the years.

An attempt at brevity is now characterized as “‘plain error”

—a term of art tantamount to saying that a defendant has

not had a fair trial.

If error is “plain” one might well ask: plain to whom?

Apparently not to the experienced defense counsel during

the trial. These counsel were given by the court a copy of

its charge in another similar case and advised by the court

that it proposed to give a somewhat similar charge as to

the substantive counts. Rule 30, F.R.Cr.P. must be given

some meaning. Its purpose is obvious, namely, to give the

trial judge an opportunity to remedy any defects which

counsel believe may exist.

Dioguardi claims error as to him in the introduction of

an alleged partnership agreement with Hellerman whereby

6072

19a

he was entitled to a certain percentage of Hellerman's

profits obtained through his swindles. Such proof did not

constitute a variance from the indictment or introduce prej-

udicial evidence of other unrelated crimes. The relationship

with Helierman and Dioguardi had to be developed to show

Dioguardi’s place in the AYSL stock fraud. Witness:

Graifer’s question to Sebastian when Hellerman’s name was

mentioned as to how and why Dioguardi was involved.

(Tr. 477). The evidence, as well outlined in Dioguardi’s

brief, discloses a close relationship to the AYSL swindle

from the initial time when Hellerman said he had to con-

sult Dioguardi before he could proceed with the deal

through the various meetings at his office, his various tele-

phone calls to Sebastian and his interest in keeping his

hands on the pursestrings of $45,000 of the proceeds.

Aloi:

Aloi (Vincent) would have his participation limited to

an effort to help his friends, Fusco and Savino, obtain

payment of the alleged indebtedness of Ilellerman to them.

However, the proof and the reasonable inferences there-

from lend themselves to factual conclusions quite beyond

any such restricted purpose and activity. When Vincent

was inforined that Fusco and Savino had not been provided

for out of Hellerman’s $45,000, he must have known the

details as to its proposed source and must have communi-

cated with Lombardo on the subject. He was a definite par-

ticipant through orders to Lombardo to obtain the return

of the $22,500 (half of the $45,000) given to Hellerman.

The telephone call from Sebastian in Florida to Vincent

in Suffern, N.Y. is not without significance, and from the

consequences thereof the jury would have been justified

in believing that the subject matter of the conversation was

not limited to the merits of Florida weather. Graifer had

6073

20a

gone to Florida to complain about the interruption of the

stock deal purportedly by Fusco and Savino. Sebastian,

although speaking in Italian to Vincent, at the conclusion

of the call said in English “everything will be straightened

out”—and indeed it was. Hellerman was reinstated but the

terms of the $45,000 payment were altered. The terms

(there was testimony that Dioguardi told Hellerman that

he could proceed on new terms set by Vincent) called for a

distribution at the end of the deal by Vincent and Dioguardi

who would pay $10,000 to Fusco and Savino; and $10,000

to Lombardo. The remaining $25,000 Dioguardi used in

payment of an unrelated indebtedness.

Vincent was obviously interested in the outcome of the

stock sale (“He just wanted to know what was going on.”

Tr. 1860) He knew that the stock issue was to be the source

of the money with which the conspirators were dealing and

when he heard that Hellerman had actually sold more than

50,000 shares of AYSL stock said that he would take the

matter up with Dioguardi. Vincent’s argument that the

proof shows (at the “very worst”) only that he “knew

that some kind of stock swindle was going on,” ignores the

many facts establishing that he participated in keeping the

swindle going and that through his hands passed much of

the proceeds thereof.

At the July 28, 1970 closing Lombardo was there “to

report back to Vinny (Aloi) how everything was going.”

At the closing Hellerman was told by Lombardo to get in

touch with Dioguardi and that Vincent and Dioguardi would

“straighten out the money” (Tr. 1864). When the money

became available Graifer received $45,000 which he deliv-

ered to Lombardo, who in turn delivered it to Vincent for

the distribution above described. Each of the beneficiaries

on various occasions thereafter acknowledged their bene-

factions to one or more of the other defendants.

6074

2la

Conversations concerning the stock deal between Vin-

cent, Lombardo and Graifer continued through 1970 and

into early 1971.

Vincent’s present contention that there were multiple

conspiracies and that his only participation in the events

related to an endeavor to retrieve $10,000 for his friends

is belied by the evidence.

Vincent claims that he was unconstitutionally prevented

from taking the stand because the trial judge had ruled

in advance that a state court perjury conviction (then on

appeal) could be used to impeach him. (Whether he would

have taken the stand is conjectural. No offer of proof

was submitted by his counsel.)

Apparently the circuits are in conflict on the impeachment

use of a non-final (namely, still on appeal) conviction.

This circuit has recently considered the question in United

States v. Soles, 482 F.2d 105 (2d. Cir.), cert. demied, 414

U.S. 1027 (1973) in which Judge Friendly analyzed the

merits of the conflicting views. In both Soles and this

case the previous conviction was closely related to credi-

bility (in Soles, bribery; here perjury). We, therefore,

continue to adhere to the rule that the trial judge has

discretion to allow the use for impeachment purposes of

a conviction under appeal and for the reasons stated in

Soles.

Vincent also claims that the indictment was unlawfully

amended by the addition of some twenty alleged co-con-

spirators on the eve of the trial. Such a practice is not

to be commended but on appellate review the question is:

how were the defendants prejudiced thereby? Of the added

co-conspirators only Shustek’s conversations bore upon

the issues, and these were merely cumulative.

6075

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Savino:

No facts whatsoever were presented by the government

sufficient to establish that Savino was a member of the

conspiracy alleged in the indictment. The far-fetched and

unjustifiable inferences sought to be drawn by the govern-

ment in an effort to tie him into the conspiracy attest to

the lack of any foundation upon which to rest his convic-

tion, The facts surrounding Savino’s involvement are clear.

Prior to the conception of the AYSL stock offering

and as a result of a $10,000 loss sustained by Savino and

Fusco on stock of a previous Hellerman venture (Trimat-

ric), Hellerman had agreed to repay this amount to them

when financially able to do so. There is no basis for the

government’s inference that Savino must have known that

Trimatric was a Hellerman swindle nor was there any

proof that it was. Whatever may be the reasons for Hel-

lerman’s admission of this obligation, they are irrelevant

to the conspiracy here charged.

When Savino and Fusco fortuitously learned that Hel-

lerman might be in funds (the $45,000 from the AYSL

deal) they were naturally desirous of receiving the $10,000

repayment promised when Hellerman’s financial condition

permitted. Their knowledge of how best to apply pressure

is evidenced by their turning to Vincent for his help in

obtaining repayment. And it may very well be that Vin-

cent insisted as a condition of Hellerman’s proceeding with

his planned stock swindle that Fusco and Savino be paid

Hellerman’s indebtedness to them.

To obtain a commitment for payment from Hellerman,

Vincent may have temperarily stopped the AYSL deal,

but this act did not inject Savino into the conspiracy. The

government makes a wholly unjustified assumption that if

Savino knew or suspected that Hellerman was engaging

in another of his many stock swindles that fact automatic-

ally made Savino a conspiratorial participant therein. Nor

6076

23a

does the fact that the $10,000 was paid to Savino and

Fusco out of Hellerman’s ill-gotten gains place him in

such a category.

The government argues that Savino knew or must have

known that Hellerman’s AYSL stock deal was a fraud

and that “he had access to the man who ultimately stopped

it and started it again, Vincent Aloi.” (Gov’t Br. 40).

Only with restraint can this argument be characterized as

a non sequitur.

In summary, there is no proof that Savino was a par-

ticipant in any way in Hellerman’s stock fraud set forth

in the indictment and in the operations employed in its

accomplishment. Whether he induced Vincent to aid him

in the recovery of the Hellerman debt is no part of, or

relevant to, Count 1 of the indictment.

Since Savino was never a member of the unlawful con-

spiracy alleged in Count 1, we must also reverse his con-

viction under the substantive Count 18. United States v.

Cantone, 426 F.2d 902 (2d Cir.) cert. denied, 400 U.S. 827

(1970).

The Government-Hellerman Agreement:

Dioguardi and his co-appellants strongly attack an

agreement made by the government with Hellerman to

induce him to testify. As Dioguardi’s counsel quite ac-

curately states: “The extent of the consideration given to

Michael Hellerman to induce him to testify was extraor-

dinary.” (Dio. Br. p. 55)—and indeed it was. He had

swindled the public out of millions of dollars; he had failed

to pay income taxes; he had promised as a condition of

leniency to refrain from further criminal! activities, which

promise he broke. Even when pretending to be in the gov-

ernment camp he was surreptitiously engaging in further

swindles, brazenly admitting that “I thought I could get

6077

24a

away with giving information to the government and mak-

ing money on the side.” (Tr. 2377).

But the government was aparently willing to forego

further prosecutions and collections of large amounts of

income tax to secure his testimony.

Counsel for Dioguardi argues that “any witness who

takes the stand is obligated, by virtue of the oath he takes,

to testify truthfully,” and that as a result “no special agree-

ment with him was necessary to secure truthful testimony.”

Therefore, he contends that it was highly improper for the

government to argue in summation that the government’s

agreement with Hellerman put the imprimatur of truth

upon his testimony. The government even sought to rein-

force Hellerman’s questionable credibility by disclosing

its threat, under the terms of the agreement, to prosecute

him for perjury if he testified falsely.

However, whether this incident deprived appellants of

a fair trial must be considered in light of all the circum-

stances, The jury had seen and heard Graifer and Heller-

man. They had heard appellants’ counsel day after day

blast their capacity for veracity. The agreement was

merely one of many items to bear upon the question. It is

to be doubted that an agreement could override the effect

of the many unconscionable crimes which counsel paraded

before the jury as perpetrated by these witnesses. Further-

more, the question of credibility was properly presented

to the jury by the court.

Joint Trial With Dioquardi:

Vincent and Lombardo claim denial of due process be-

cause of prejudice resulting from being tried with Dio-

guardi. This prejudice could have been avoided, they

claim, by the granting of a severance. In short, these de-

fendants assert that Dioguardi’s reputation as an under-

6078

25a

world figure and the introduction during the trial of his

extensive criminal record, his continuing arrangement with

Hellerman, and his associations with various other no-

torious persons contaminated them because of trial joinder.

During the jury voir dire, which required three days,

the trial court allowed the defense twenty peremptory

challenges and the prosecution twelve. Vincent takes ex-

ception to the court’s ruling that the peremptory challenges

had to be exercised unanimously rather than by allotment

of separate challenges. However, prior to the use of these

challenges, many jurors had been excused for cause. A

jury of twelve with six alternates was finally selected.

But even thereafter the trial judge personally interviewed

each juror and alternate as to prejudice. Quite naturally

in any multi-defendant trial there will be differences in

degree of guilt and possibly degree of notoriety of the

defendants. There may be some likelihood that proof ad-

mitted as to one or more defendants will be harmful to

the others. However, this possibility does not necessarily

justify individual trials. Faced with this situation the

trial judge took every feasible step to obtain an unbiased

jury.

During the trial Dioguardi and Lombardo elected to

take the stand. Under such circumstances the government

was entitled to inquire into their past criminal activities.

Vincent, despite his protestation that “[he] and Savino

played minor if not negligible roles” (Aloi Br. p. 47), took

an important part in the conspiracy, particularly in the

disposition of the proceeds of the fraud.

Finally as to prejudice resulting from the joint trial

Vincent asserts that the charge “was totally inadequate

to deal with any, let alone all, of the prejudicial testimony

allowed into the trial.” (Aloi Br. p..53). Of course the

trial judge could have consumed hours in analyzing every

6079

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bit of evidence which applied only to a particular defen-

dant, but the conclusion would hot have been different

from the charge as given, namely, “evidence offered or ad-

mitted only (sic) one defendant should not be considered

in connection with your determination of the guilt or in-

nocence of any other defendant.” (Tr. 5479).

Considering the nature of the case and the roles which

each defendant played, severance was properly denied.

The Wire Fraud Counts:

Lombardo and Dioguardi attack their convictions under

Count 9 on the ground that the telephone call to Sebastian

was not made for the purpose of “executing” (18 U.S.C.

§ 1343) the stock swindle scheme but at most was “for

the purpose of concocting a conspiracy” or “for the pur-

pose of formulating a conspiracy to defraud”, purposes al-

legedly not proscribed by the statute. There was adequate

proof to rebut any assumption that the conspiracy was

created or concocted in this telephone call. To the contrary

the scheme had been formulated and was already in ex-

istence. Sebastian’s approval, to the conspirators at least,

was a required part of the scheme. The call was definitely

in furtherance of the conspiracy.

Vincent’s conviction under Count 10 was based upon the

telephone conversation with Sebastian in June 1970. Vin-

cent claims that the judge’s charge was reversibly erroneous

because he charged that any defendant “already found

guilty of conspiracy” could be found guilty if the call were

made “in furtherance of the snlawful scheme to defraud

alleged in the indictment,” :(Vincent’s Br. 37,. This use

of the words “in furtherance” instead of “in execution of”

constitutes, so argues Vincent, a fatal variance. Such an

argument is quite unrealistic. A single call concerning the

scheme might well be an important ingredient thereof with-

6080

27a

out it being the complete execution thereof. In this in-

stance, despite the Vincent-Sebastian conversation being in

Italian, the purpose of Graifer’s visit to Sebastian. his

conversation in English as to the problems facing the stock

scheme and Sebastian’s statements to Graifer in English

justify the inference and a jury conclusion that the use of

the telephone wire was in connection with, in furtherance

of and thus, in execution of, the conspiracy.

Count 18—Use of a False and Misleading Offering Circular:

The indictment alleged that the defendants “willfully

used and caused to be used” a false offering circular.

Vincent argues that there were no material misrepresen-

tations in the offering circular and in any event that there

was no “use” of any offering circular so far as he was

concerned. He points to the fact that the circular had been

filed with the SEC ard become effective on April 8, 1970,

and that he did not enter the conspiracy (a conspiracy is

not conceded by him) until the June 1970 Florida telephone

call from Sebastian. Therefore, Vincent concludes that he

cannot be found guilty of committing the substantive crime

(Count 18) which took place prior to his alleged entry

therein. United States v. Cantone. supra, 426 F.2d at 904.

As to the argument that there was a variance between

indictment and proof in that “the offering circular was

never ‘used’ in any common sense of the term” (Aloi Br.

27), Vincent would restrict the word “use” to the delivery

thereof to a purchaser or prospective purchaser prior to

the sale. There is no sound basis for any such limitation.

The proposed offering circular had to be filed with the

SEC. On the basis of the representations therein the Reg.

A exemption requested would or would not be granted.

Once granted, no securities could be sold unless the cir-

6081

ee ae

cular were furnished to the prospective purchaser at least

48 hours prior to the mailing of the confirmation. To be

sure, the offering circular was not used in the manner

normally to be expected, namely, mailed to prospective

purchasers before sale were consummated.’ But having

been filed with the SEC, it was the genesis of the subse-

quent plan to defraud, and, facially at least, the existence

of the filed circular lent an aura of legitimacy to the

scheme.

Whether the offering circt‘ar contained any false or mis-

leading statements or any material omissions at the time

of its original filing need not be resolved because when

the Hellerman plan was conceived and carried out, i.e.,

when the circular was “used” and after Vincent had joined

the conspiracy, it certainly became false. 17 C.F.R.

§ 230.256(e) provides: “In no event shall an offering cir-

cular be used which is false or misleading in light of the

circumstances then existing.” The circumstances then exist-

ing bore no relationship whatever to the circumstances

existing on April 8, 1970.

The subsequent Hellerman role had not been disclosed,

the appropriation of $45,000 to their own use by the con-

] The government states in ite Brief that “the offering circulars were

‘used’ as well, in other ways than being mailed to purchasers,” and that

“There was clear circumstantial evidence that the offering circulars were

sent to purchasers of AYSL stock.” The statements are followed by the

declaration that “at the time Hellerman mailed the offering circulars

to purchasers of the stock he knew that the cireular was false... .”

(Gov't Br. 51). There is no proof in the record that Hellerman mailed

or caused to be mailed an offering circular to any purchaser. Unable

to supply proof or record references for these unfounded assertions, the

government lamely retreats to the position that “it follows that the jury

eould have reasonably inferred that Hellerman sent (or gave) the offer-

ing circulars to his purchasers... .” (Gov’t Br. 52). However, even

this unwarranted assumption is undereut by the actual proof that the

circulars were delivered to Nelson, who did not mail them but delivered

them to Hellerman, who in turn failed to mail them. Only certain con-

firmations were mailed and received by purchasers.

ane -

a le 29a

spirators was not revealed, and the “use of proceeds” rep-

resentation had been rendered completely false. Hellerman

and Lombardo knew, from having had the circular in their

hands, that their planned nefarious scheme was not set

forth therein. Dioguardi knew of the fraudulent selling

acheme because Helleman had told him of his plan.”

Dioguardi, Lombardo and Vincent put themselves in

Hellerman’s hands, as their agent, their co-conspirator or

their abettor (terminology in this situation is not of the

essence) to accomplish a fraud. Tlie method used by Hel-

lerman may have been of little interest to them, the bene-

ficiaries, but they cannot claim to have been mere specta-

tors watching the game from the sidelines. The proof shows

that all three had their glasses trained upon the game

which Hellerman was playing and that they were intensely

observing, and interested in, every move.

The proof was more than adequate to justify the con-

clusion of a conspiracy. Nor can the conspirators escape

responsibility for the acts of their co-conspirator. They

chose to give Hellerman carte blanche to conceive, manage

and carry out their fraud. Under the doctrine of Pinker-

ton v. United States, 328 U.S. 640 (1946), they are liable

for substantive crimes committed in furtherance of the

conspiracy.

That innocent people were injured by the defendants’

stock swindle was a point little stressed at the trial. The

prosecution was so obsessed by its two-family (Aloi-

Dioguardi) hierarchical theory and its concentration of

proof on the machinations relating to the division of the

stock swindle proceeds, that the source of the funds to be

realized from the swindle played a minor part in its

10 Hellerman explained that he would sell the AYSL stock, first by

bribing brokers, and then by having buy and sel] confirmations made

up showing a two-point spread to convince people to buy on the basis

that they had a sure profit in the stock. Tr. 1804-06.

30a

presentation. However, we think the victims of the plan

are worthy of mention. Five witnesses were produced who

testified that at the behest of Hellerman’s broker-salesmen

they had purchased and paid for the worthless AYSL

stock. They paid by checks, which were produced along

with the confirmations they had received by mail. Since

it may reasonably be assumed that none of the conspira-

tors was coming to the rescue of AYSL out of their own

pockets, it would be an equally reasonable inference that

the $127,500 came from illegal sales to innocent and de-

frauded purchasers.

The Sentences Imposed:

Vincent and Lombardo contend that their sentences were

improperly imposed. Vincent was sentenced to five years

on the conspiracy count (Count 1) plus a $10,000 fine, to

four years (consecutive) on the false circular count (Count

18) plus a $5,000 fine, and a five-year suspended sentence

plus a $1,000 fine on the wire fraud count (Count 10)—a

total of nine years and fine of $16,000. Lombardo was

sentenced to concurrent terms of five years on Counts 1

and 18 and a suspended five vears on Count 9. He, too,

was fined a total amount of $16,000. These appellants

claim that hearsay material contained in the probation

report and in a special sentencing memorandum submitted

by the government at the request of the trial judge may

have caused the judge to sentence them for offenses other

than those for which they were convicted.

This court recently considered the question of a govern-

ment sentencing memorandum in United States v. Rosner,

485 F.2d 1213 (2d Cir., 1973), cert. denied, 417 U.S. 950

(1974). The factual situation was somewhat different there

in that the government submitted the memorandum ez

parte to the court which kept it for some two months. Only

3la

on the day of sentencing was it disclosed. The court then

denied a requested opportunity to study and rebut, if pos-

sible, the contents. Under the “unusual circumstances”

(485 F.2d at 1231) of the Rosner case, this court remanded

for sentencing before another judge. Here, however, the

memorandum was put into the hands of defense counsel a

week prior to sentencing. Forty-one pages of colloquy were

devoted by counsel to exploring and answering the allega-

tions therein (A. 132-173). Analysis of this colloquy reveals

that defense counsel were aware of the bases for the gov-

ernment’s recommendations and forcefully pointed out the

hearsay and asserted irrelevant nature thereof.

In the Seventh Circuit case of United States v. Solomon,

422 F.2d 1110 (7th Cir.), cert. denied, 399 U.S. 911 (1970),

the court was faced with the problem of the effect upon

the mind of the sentencing judge of a confidential report

on the defendant prepared by the prosecutor in connection

with a proceeding for revocation of bail for the trial court’s

inspection in camera. Although the court under the par-

ticular facts of that case felt that resentencing was not

required, it said:

Hereafter in this Circuit, however, a trial court shall

not consider im camera, a prosecutor’s report about a

defendant prior to sentencing or ruling on post-con-

viction motions unless the pertinent factual informa-

tion is summarized for or disclosed to defense counsel]

with appropriate safeguards.

Id. at 1121 (emphasis in original).

Somewhat similar situations have been considered by

the courts where there has been non-disclosure by the sen-

tencing judge of presentence reports or other information

regarding a defendant from prosecutor to court. If dis-

closure of a presentence report under appropriate circum.

6085

32a

stances be important, how much more so is the disclosure

of a memorandum prepared by the prosecutor containing

not only accusations of other crimes but also his own opin-

ion as to the sentences. See generally the discussion of the

subject in Rosner, supra; United States v. Brown, 470 F.2d

285 (2d Cir. 1972); United States v. Malcolm, 432 F.2d 809

(2d Cir. 1970); Haller v. Robbins, 409 F.2d 857 (1st Cir.

1969) ; United States vy. Fischer, 381 F.2d 509 (2d Cir. 1967),

cert. denied, 390 U.S. 973 (1968). Although a document

such as this prosecutor’s memorandum may not be utilized

by the judge in camera, here there was full disclosure and

an equally full opportunity to rebut.

The court’s sentences here were within the permissible

sentences for the crimes charged and we find no reversible

error in the sentencing procedure.

Electronic Surveillance :

Pursuant to an order of the trial court dated November

21, 1973, the United States Attorney for the Southern Dis-

trict of New York by letter dated November 29, 1973, spec-

ifically inquired of the Assistant Attorney General, Crim-

inal Division, as to any conversations overheard or inter-

cepted by electronic surveillance in which the defendants

Vincent, Dioguardi, Lombardo, Savino or Fusco were par-

ties. The reply was negative except as to an October 2,

1964, conversation monitored by the FBI at which Dio-

guardi was present. Further inquiry revealed nothing

thereafter. The Department of Justice in its search cov-

ered the Internal Revenue Service, the United States Postal

Service, the United States Secret Service, the Bureau of

Aleohol, Tobacco and Firearms, the Drug Enforcement Ad-

ministration, the Bureau of (Customs, the Central Intel-

ligence Agency, the United States Department of Labor,

the United States Department of Defense and the United

States Department of State.

6086

%. 33a

The trial judge was duly notified of the negative results

of the requested inquiry. Copies of the correspondence

between the United States Attorney, the Department of

Justice and the trial judge were sent to all appellate coun-

sel. We find that this inquiry constitutes full compliance

with the trial court’s order and with the principles enu-

merated in United States v. Smilow, 472 F.2d 1193 (2d

Cir. 1973).

Other Allegedly Prejudicial or Irrelevant Testimony:

Appellants contend that the prosecution intentionally in-

troduced inflammatory testimony with no object «ther than

to prejudice the jury against the defendants. The use of

nicknames was brought out, e.g., Charles San Filippo, as

“Charlie Lamb Chops”, Vincent as “Big Vinny’’, Philip

Yovanovich as “Philly Rag-”, Fusco as “Checko Brown”.

The fraudulent broker, Gary Fredericks, was identified

as a brother-in-law of Sonny Franchese, a rather publicized

criminal. References were also made to Jimmy Hoffa and

the Teamsters Union. Although this prosecution practice

is to be condemned, the expressions, whether they be

nicknames or underworld words of art (e.g., “sit-down”,

“with”, “honorable man”, “audience” and “hangout”) will

not be presumed to have had such contaminating signifi-

cance in the minds of the jurors as to have deprived the

defendants of a fair trial. Both prosecution and defense

counsel were dealing with defendants and witnesses who in

many instances had been steeped in crime. For their re-

spective advantages counsel did not minimize this fact.

The witnesses frequently resorted to their own jargon. Our

task is to try to estimate its effect on the jury in light of

a resolution of the “fair trial” question. Of necessity this

appraisal] must be made on the basis of its effect upon this

court. Against the background of an eight weeks’ trial

6087

34a

with scenes frequently emotional, we do not believe that

these epithets occasionally interspersed throughout the

testimony materially diverted the attention of the jury

away from their task.

Conclusion:

In final analysis the question to he answered, after a re-

view of the indictment, the appendix, the transcript and

the voluminous briefs of all four appellants, is: have they

had a fair trial? The indictment put them on notice as to

the charges against them. For eight weeks appellants con-

centrated upon the lack of credibility on the part of their

accusers. They did not seriously question Hellerman’s

stock swindle—only their connection therewith. The court’s

charge, although it could have defined and stressed the

elements of the crimes charged in the various counts with

greater specificity, adequately presented the factual issues

for jury determination. lor these reasons we affirm the

judgments of conviction as to appellants Lombardo, Dio-

guardi and Vincent Aloi and reverse as to appellant Savino.

35a

APPENDIX C

15 USC § 77s(a). Special powers of Commission

(a) The Commission shall have authority from time to

time to make, amend, and rescind such rules and regula-

tions as may be necessary to carry out the provisions of

this subchapter, including rules and regulations governing

registration statements and prospectuses for various

classes of securities and issuers, and defining accounting,

technical, and trade terms used in this subchapter. Among

other things, the Commission shall have authority, for the

purposes of this subchapter, to prescribe the form or forms

in which required information shall be set forth, the items

or details to be shown in the balance sheet and earning

statement, and the methods to be followed in the prepara-

tion of accounts, in the appraisal or valuation of assets

and liabilities, in the determination of depreciation and

depletion, in the differentiation of recurring and nonrecur-

ring income, in the differentiation of investment and operat-

ing income, and in the preparation, where the Commission

deems it necessary or desirable, of consolidated balance

sheets or income accounts of any person directly or in-

directly controlling or controlled by the issuer, or any per-

son under direct or indirect common control with the issuer ;

but insofar as they relate to any common carrier subject

to the provisions of section 20 of Title 49, the rules and

regulations of the Commission with respect to accounts

shall not be inconsistent with the requirements imposed

by the Interstate Commerce Commission under authority

of such section. The rules and regulations of the Com-

mission shall be effective upon publication in the manner

which the Commission shall prescribe. No provision of this

subchapter imposing any liability shall apply to any act

done or omitted in good faith in conformity with any rule

36a

or regulation of the Commission, notwithstanding that

such rule or regulation may, after such act or omission, be

amended or rescinded or be determined by judicial or

other authority to be invalid for any reason.

15 USC § 77x. Penalties

Any person who willfully violates any of the provisions

of this subchapter, or the rules and regulations promul-

gated by the Commission under authority thereof, or any

person who willfully, in a registration statement filed un-

der this subchapter, makes any untrue statement of a ma-

terial fact or omits to state any material fact required to

be stated therein or necessary to make the statements

therein not misleading, shall upon conviction be fined not

more than $5,000 or imprisoned not more than five years,

or both.

May 27, 1933, c. 38, Title I, § 24, 48 Stat. 87.

Rule 256(a)-(e); 17 C.F.R. 230.256(a)-(e). Filing and use of

the offering circular

(a) Except as provided in paragraph (c) of this section

and in § 230 257—

(1) No written offer of securities of any issuer

shall be made under §§ 230.251 to 230.262 unless an

offering circular containing the information specified

in Schedule I of Form 1-A is concurrently given or

has previously been given to the person to whom the

offer is made, or has been sent to such person under

such circumstances that it would normally have been

received by him at or prior to the time of such

written offer ; and

(2) No securities of such issuer shall be sold

under this regulation unless such an offering circular

37a

is furnished to the person to whom the securities are

expected to be sold at least 48 hours prior to the

mailing of the confirmation of sale to such person, or

is sent to such person under such circumstances that

it would normally be received by him 48 hours prior

to his receipt of confirmation of the sale; Provided,

however, if the issuer is required to file reports

pursuant to section 13(a) or 15(d) of the Securities

Exchange Act of 1934, as amended, the offering cir-

cular may be furnished with or prior to the confirma-

tion of sale.

(b) In the case of transactions effected on a securities

exchange, delivery of the offering circular shall be deemed

to have been made if prior to such transactions a reasonable

number of copies of the offering circular have been fur-

nished to the exchange for delivery to any person or per-

sons requesting copies thereof.

nication, or any radio or television broadcast, which states

from whom an offering circular containing the information

specified in Schedule I of Form 1-A may be obtained and in

addition contains no more than the following information

may be published, distributed or broadcast at or after the

commencement of the public offering to any person prior to

sending or giving such person a copy of such circular:

(1) The name of the issuer of such security ;

(2) The title of the security, the amount being

offered, and the per-unit offering price to the public;

(3) The identity of the general type of business

of the issuer; and

(4) A brief statement as to the general character

and location of its property.

38a

(d) The offering circular may be printed, mimeo-

graphed, lithographed, or typewritten or prepared by any

similar process which will result in clearly legible copies.

If printed, the body of the offering circular and all notes

to financial statements and other tabular data included

therein shall be in roman type at least as large and as

legible as 10-point modern type. However, to the extent

necessary for convenient presentation, financial statements

and other tabular data, including tabular data in notes,

may be set in type at least as large and as legible as 8-point

modern type. All such type shall be leaded at least 2

points. .

(e) If the offering is not completed within nine months

from the date of the offering circular, a revised offering cir-

cular shall be prepared, filed and used in accordance with

these rules as for an original offering circular, except that

in the case of offerings under stock purchase savings stock

option or other similar plans for the benefit of employees,

if the offering is not completed within 12 months from the

date of the offering circular, a revised offering circular

shall be prepared, filed and used in accordance with these

rules as for an original offering circular. In no event shall

an offering circular be used which is false or misleading in

light of the circumstances then existing.

This is a copy of a public record, reproduced as it was published. It is not legal advice, and it may not be the version a court would rely on. Check the official source before you cite it.