Petition — Tallant v. Henson

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IN THE ocT 4 1975

Supreme Court of the Anitdd States

OCTOBER TERM, 1975

No 6597522?

FRED C. TALLANT, SR..,

WILLIAM M. WOMACK, JR.,

Petitioners,

JAMES H. HENSON,

UNITED STATES MARSHAL

NORTHERN DISTRICT OF GEORGIA,

AND

ALLEN L. CHANCEY, JR.

UNITED STATES MAGISTRATE

NORTHERN DISTRICT OF GEORGIA,

Respondents

MOTION FOR LEAVE TO FILE PETITION FOR ORIGINAL

WRIT OF HABEAS CORPUS, PETITION FOR ORIGINAL WRIT

OF HABEAS CORPUS, AND BRIEF IN SUPPORT THEREOF

CARL L. SHIPLEY

1108 National Press Building

Of Counsel: Washington, D.C. 20045

SHIPLEY SMOAK & AKERMAN (202) 783-1647

National Press Building

Washington, D.C. 20045 E. LEWIS HANSEN

. 2400 Gas Light Tower

CANDLER, COX, ANDREWS Atlanta, Georgia 30303

& HANSEN (404) 588-9400

2400 Gas Light Tower

Atlanta, Georgia 30303 Attorneys for Petitioners

THE CASILLAS PRESS, INC.-1717 K Street. N. W.—Washington, 0. C.-223-1220

(i)

TABLE OF CONTENTS

MOTION FOR LEAVE TO FILE PETITION FOR

ORIGINAL WRIT OF HABEAS CORPUS

SUBSCRIPTION AND VERIFICATION .

JURISDICTION .

REASONS FOR NOT MAKING APPLICATION TO

THE DISTRICT COURT .

QUESTIONS PRESENTED

STATUTORY PROVISIONS .

STATEMENT OF CASE

ARGUMENT .

CONCLUSION

DISTRICT COURT ORDER OF June 23, 1975.

DISTRICT COURT ORDER OF September

16, 1975 are ae oe

INDICTMENT OF April 17, 1974 .

TABLE OF CASES

Accardi v. Shaughnessy,

347 U.S. 260 (1954)

Carafas v. LaVallee,

391 U.S. 234 (1968).

Appendix i

. Appendix ii

Appendix iii

5, 14, 15, 18, 21

. 20

(ii)

Page IN THE

Cooper v. Aaron, Supreme Court of the Unite? States

oo a eee ee ee s » £8

OCTOBER TERM, 1975

Eagles v. Samuels,

ee es a

Jones v. Cunningham

= ae cin ae ee eae ee 11 FRED C. TALLANT, SR.,

WILLIAM M. WOMACK, JR.,

Peyton v. Rowe,

PT. <¢ & «5-4 0% © % : ee i Petitioners,

Vv.

United States v. Giordano, JAMES H. HENSON

416 U.S. 505, 94 S.Ct. 1820(1974) ...... 15, 18, 21 UNITED STATES MARSHAL

United States v. Tallant and Womack, NORTHERN DISTRICT OF GEORGIA,

Crim. Action No. 74-225A, AND

§ ek 8 8 ee ee a

_ ALLEN L. CHANCEY, JR.

sraTures UNITED STATES MAGISTRATE

NORTHERN DISTRICT OF GEORGIA,

eee eae : Respondents.

i wn. - « « « = & * es * coe.

A ee ee ee er ee a 6 . MOTION FOR LEAVE TO FILE

a (oS eee ae PETITION FOR ORIGINAL WRIT

Pu Ces «+ 6 © 6+ 8 & @ @ . « 7,12, 15, 16, 18, 19 OF HABEAS CORPUS

Pie « ¢ < 6 « e-*s -(—e ae & 2 oe

Petitioners Fred C. Tallant, Sr. and William M. Womack,

UNITED STATES CONSTITUTION Jr. move the Court for leave to file their petition for

award of an original writ of habeas corpus, or an order

0 Ee eee ee a ge ge eee ee directing the United States Marshal and the United States

. Magistrate for the Northern District of Georgia, Respon-

dents herein, to show cause why a writ of habeas corpus

should not be granted in accordance with the prayer of

their petition herein, and why this Court should not

summarily hear and determine the facts, and dispose of

this matter as law and justice require.

Respectfully submitted,

CARL L. SHIPLEY

1108 Nationa), Press Building

Washington, D.C. 20045

(202) 783-1647

E. LEWIS HANSEN

2400 Gas Light Tower

Atlanta, Georgia 30303

Of Counsel: (404) 577-9400

SHIPLEY SMOAK & AKERMAN

National Press Building

Washington, D.C. 20045

(202) 783-1647

-CANDLER, COX, ANDREWS & HANSEN

2400 Gas Light Tower

Atlanta, Georgia 30303

(404) 577-9400

Fred C. Tallant, Sr.

120 Copeland Road, N.E.

Atlanta, Georgia 30328

William M. Womack, Jr.

120 Copeland Road, N.E.

Atlanta, Georgia 30328

Petitioners

Subscribed and sworn to before me this day of

October, 1975.

Notary Public

IN THE

Supreme Court of the Mnited States

OCTOBER TERM, 1975

No.

FRED C. TALLANT, SR.,

WILLIAM M. WOMACK, JR.,

Petitioners,

JAMES H. HENSON

UNITED STATES MARSHAL

NORTHERN DISTRICT OF GEORGIA,

and

ALLEN L. CHANCEY, JR.

UNITED STATES MAGISTRATE

NORTHERN DISTRICT OF GEORGIA,

Respondents.

PETITION FOR ORIGINAL WRIT OF

HABEAS CORPUS AND BRIEF IN

SUPPORT THEREOF

JURISDICTION

This Court’s jurisdiction is invoked under 28 U.S.C.2241.

Petitioners are in custody under the authority of the United

States, and committed for trial before the United States Dis-

trict Court for the Northern District of Georgia on October

14, 1975. Their custody is in violation of the Constitution

and laws of the United States, as set forth herein below.

REASONS FOR NOT MAKING APPLICATION

TO THE DISTRICT COURT

The United States District Court for the Northern

District of Georgia has failed and refused to accord peti-

tioners their right to Constitutional due process by denying

their various motions to dismiss the unlawfully obtained

indictment herein. (See Appendix i and ii herein.) Appli-

cation to the District Court has been and will be futile

because the District Court fails and refuses to follow deci-

sions of this Court which are the supreme law of the land.

Section 20 of the Securities Act of 1933 specifically

protects petitioners from the institution of criminal pro-

ceedings except upon precondition of an exercise of his

discretion by the Attorney General of the United States

by which he determines criminal proceedings are “neces-

sary” after review of “evidence” transmitted to him by the

Securities and Exchange Commission. In addition, Congress

in Section 3 of the Securities Act of 1933 has exempted

intrastate transactions from the criminal penalties of that Act.

The SEC bypassed the Attorney General in this case, and asked

the United States Attorney directly to obtain an indictment.

Petitioners were indicted individually for violation of

the criminal provisions of said Act on April 17, 1974, and

arraigned before the above Court on August 20, 1974, when

they pleaded not guilty. Since then they have had their

liberty restrained by respondents United States Marshal

James H. Henson and United States Magistrate Allen L.

Chancey, Jr. for the Northern District of Georgia by rea-

son of restrictions on their movements and liberty under a

non-surety bond while in the custody of respondents.

Petitioners are scheduled for trial before Judge Richard = .

Freeman on October 14, 1975, in the said United States

District Court for the Northern District of Georgia unless

this Court accords them their constitutional right to be

free of restraint, and directs that Court to dismiss the in-

dictment in disposing of the matter as law and justice re-

quire under 28 U.S.C. 2243. The District Court has failed

and refused to follow the supreme law of the land. Accardi

v. Shaughnessy, 347 U.S. 260 (1954); Cooper v. Aaron,

358 U.S. 1 (1958).

QUESTIONS PRESENTED

1. Whether petitioners can be lawfully indicted and

prosecuted for alleged violation of Section 17 of the Secu-

rities Act of 1933 on the basis of intrastate securities

transactions specifically exempted by Congress from the

criminal penalties of said Act?

2. Whether petitioners can be lawfully indicted and

prosecuted for violation of Section 17 of the Securities

Act of 1933 by the Secur.ties and Exchange Commission

and the United States Attorney without first according

petitioners their statutory right to an independent exercise

of prosecutive discretion by the Attorney General of the-——— -

United States to determine whether to “institute the neces-

sary criminal proceedings” as a precondition to indictment

as required by Section 20 of said Act?

STATUTORY PROVISIONS INVOLVED

l. 15 U.S.C. 77c:

“(a) Except as hereinafter expressly provided,

the provisions of this subchapter shall not apply

to any of the following classes of securities: ....

(ii) Any security which is part of an

issue offered and sold only to persons resident

within a single State or Territory, where the issuer

of such security is a person resident and doing

business within or, if a corporation, incorporated

by and doing business within, such State or

Territory.”

2. 15 U.S.C. 77q:

“(a) It shall be unlawful for any person in

the offer or sale of any securities by the use of

any means or instruments of transportation or

communication in interstate commerce or by the

use of the mails, directly or indirectly —

(1) to employ any device, scheme, or

artifice to defraud, or

(2) to obtain money or property by

means of any untrue statement of a material

fact or any omission to state a material fact

necessary in order to make the statements made,

in the light of the circumstances under which

they were made, not misleading, or

(3) to engage in any transaction, prac-

tice, or course of business which operates or

would operate as a fraud or deceit upon the

purchaser.

(b) It shall be unlawful for any person, by

the use of any means or instruments of transpor-

tation or communication in interstate commerce

or by the use of the mails, to publish, give pub-

licity to, or circulate any notice, circular, adver-

tisement, newspaper, article, letter, investment

service, Or communication which, though not pur-

porting to offer a security for sale, describes such

security for a consideration received or to be re-

ceived, directly or indirectly, from an issuer,

underwriter, or dealer, without fully disclosing

the receipt, whether past or prospective, of such

consideration and the amount thereof.

of this title shall not apply to the provisions of

this section.”

3. 15 U.S.C. 77t (b):

“Whenever it shall appear to the Commission

that any person is engaged or about to engage in

any acts or practices which constitute or will con-

stitute a violation of the provisions of this title,

or of any rule or regulation prescribed under

authority thereof, it may in its discretion, bring

an action in any district court of the United

States, United States court of any Terrirtory, or

the United States District Court for the District

of Columbia to enjoin such acts or practices,

and upon a proper showing a permanent or tem-

porary injunction or restraining order shall be

granted without bond. The Commission may

transmit such evidence as may be available con-

cerning such acts or practices to the Attorney

General who may, in his discretion, institute the

necessary criminal proceedings under this title.

Any such criminal proceeding may be brought

either in the district wherein the transmittal of

the prospectus or security complained of begins,

or in the district wherein such prospectus or

security is received.”

4. U.S.C. 77x:

“Any person who willfully violates any of

the provisions of this subchapter, or the rules

and regulations promulgated by the Commission

under the authority thereof, or any person who

willfully, in a registration statement filed under

this subchapter, makes any untrue statement of

a material 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.”

STATEMENT OF CASE

Petitioners are principal officers and directors and con-

trolling persons of Preferred Land Corporation, a publicly

owned Georgia corporation with 7,311,539 Class A com-

mon shares and 100,000 Class B common shares outstand-

ing in the ownership of approximately 5,000 Georgia

shareholders. As at fiscal year end May 31, 1975, the

corporation’s assets were $22,429,049; liabilities were $12,-

175,065; shareholders’ equity was $10,253,984: and retained

earnings were $1,684,662. The corporation buys, sells

and develops land. It was chartered by the Superior

Court of Fulton County, Georgia on May 18, 1967 and

has its main office in Atlanta, Georgia. {ts authorized

capital stock is 8,000,000 shares of $0.05 par value Class

A common stock and 2,000,000 shares of $0.05 par value

Class B common stock. Petitioners own all of the 100,000

shares of outstanding Class B stock. The Class A stock was

distributed intrastate to Georgia residents only upon regis-

tration of the shares authorized and approval of various

prospectuses by the Securities Commissioner of the State

of Georgia, who issued licenses for the sale of the Class A

shares to Georgia residents, as follows:

- ee

Georgia Issuer’s Share Number of

Date License No. Price Shares

June 23, 1967 No. 67-39 10¢_ _—:1,200,000

October 23, 1967 No. 67-66 25¢ _—:1,100,000

April 1, 1968 No. 68-13 50¢_ _—:1,100,000

August 21, 1968 No. 68-43 $1.00 1,100,000

January 17, 1969 No. 69-2 $2.00 1,100,000

July 3, 1969 No. 69-54 $3.00 1,100,000

January 13, 1970 No. 70-2 $5.00 1,000,000

All of the above issues of securities were distributed

pursuant to the referred-to “Issuer’s Licenses For the Sale

of Securities Under the Georgia Securities Act,” signed by

Ben W. Fortson, Jr., Secretary of State, Commissioner of

Securities of the State of Georgia.

Each offering was by means of a prospectus approved

by the Georgia Securities Commissioner, prepared in accor-

dance with the Georgia Securities Act, and covered by an

Issuer’s Bond with The Travelers Indemnity Company as

surety on the bond.

All sales were to Georgia residents only, and exempt

from the registration requirements and other provisions of

the federal Securities Act of 1933, and were so deter-

mined to be after investigation by the Securities and Ex-

change Commission itself in 1970. As intrastate securities

transactions, the above sales were specifically exempt from

federal criminal jurisdiction under that Act by the terms

of the Act itself.

No criticism or question concerning the corporation,

its officers and directors, or petitioners, or the distribution

of its securities, has ever been made by the Securities

Commissioner of the State of Georgia, and no claim has

+ epeeme te

ever been made under the Issuer’s Bond covering the

distributions.

The corporation is now and has always been profit-

able, solvent, and a successful going concern. It has paid

one dividend, and the fair market value of its assets sub-

stantially exceeds the cost and/or depreciated cost of assets

shown in the independently audited balance sheet. No

shareholder has ever involuntarily incurred 1¢ of loss by

reason of his investment. All shares were sold in accor-

dance with the terms of the Georgia State licenses outlined

herein and on the basis of the material disclosures in the

prospectuses approved by the State of Georgia.

In April, 1974 the Securities and Exchange Commission

forwarded an investigative file concerning Preferred Land

Corporation directly to the United States Attorney for the

Northern District of Georgia. On April 4, 1974 the U.S.

Department of Justice acknowledged that the SEC had

transmitted the file to Atlanta directly for “prosecutive

consideration.” On April 17, 1974 the United States At-

torney obtained an indictment naming petitioners as having

allegedly caused prospectuses containing material false state-

ments and admissions to be used in selling the intrastate

securities of Preferred Land Corporation, in violation of

the civil provisions of Section 17 of the federal Securities

Act of 1933, and charging th-i this violation of the Sec-

tion 17 civil antifraud provisions constituted a federal

crime, despite the fact that Congress has specifically exemp-

ted intrastate securities from all provisions of the Securities

Act of 1933 except the civil antifraud provisions. (United

States v. Tallant and Womack, Crim. Action No. 74-225A,

U.S. Dist. Ct. No. D. Ga.) (App. iii hereto). As a result

of the April 17, 1974 indictment, petitioners were arraigned

and taken into custody on August 20, 1974 by respondents,

and have been in custody since on a non-surety bond

which restricts their liberty and freedom, and are commit-

ted for trial under the indictment on October 14, 1975.

ARGUMENT

Under 28 U.S.C. 2241, the Supreme Court may

grant an original writ of habeas corpus when a petitioner

is in custody “in violation of the Constitution or laws .. .

of the United States,” or when “He is in custody under

or by color of the authority of the United States or is

committed for trial before some court thereof... .” Peti-

tioners now are in “custody” for purposes of the Great

Writ. Jones v. Cunningham, 371 U.S. 236 (1963). Under

28 U.S.C. 2243 this Court can and should grant an original

writ of habeas corpus to petitioners or direct the respon-

dents to show cause why the Great Writ should not be

granted, and should dispose of the matter as law and jus-

tice require by dismissing the indictment (Peyton v. Rowe,

391 U.S. 54 (1968)), for the following reasons, all as sup-

ported by the facts and matters sworn to by petitioners

in this application:

1. Congress has not authorized the Securities and

Exchange Commission to institute criminal proceedings

against petitioners or any target defendant. Instead, Con-

gress, the exclusive law-making and policy-making branch

of the national government (Art. I, U. S. Constitution),

has mandated that the independent discretion of the

Attorney General of the United States shall be interposed

between the recommendation of possibly overzealous bureau-

crats of the SEC as to whether to “institute the necessary

criminal proceedings against petitioners.”” Section 20 of

the Securities Act of 1933 provides that “‘Whenever it shall

appear to the Commission that any person is engaged or

about to engage in any acts or practices which constitute

or will constitute a violation of the provisions of this title,

or of any rule or regulation prescribed under authority

thereof, it may in its discretion, bring an action in any

district court of the United States ... to enjoin such acts

or practices.” (Emphasis supplied; 15 U.S.C. 77t(b).)

The above language of Congress is noteworthy and

exact — the SEC is only given discretion to bring civil in-

junctive actions for present or prospective violations, not

on probable cause, but “whenever it shall appear” a viola-

tion may occur. While it may bring an injunction action

on mere suspicion, or even on a speculative appearance,

which may be only in the eye of the beholder, it may not

“institute” criminal proceedings.

Congress did not give the SEC “discretion” to insti-

tute criminal proceedings on that or any other basis. In-

stead, it mandated in Section 20 of the 1933 Act (15

U.S.C. 77t (b):

“The Commission may transmit such evidence as

may be available concerning such acts or practices

to the Attorney General who may, in his discretion,

institute the necessary criminal proceedings under

this title.”’ (Emphasis supplied.)

The above language raises three questions involving

the indictment of petitioners and pursuant to which they

are held in custody and are committed for trial:

(a) Did the Attorney General exercise his indepen-

dent discretion on SEC transmitted “evidence” as petition-

ers have a due process right to expect?

(b) Are the criminal proceedings “necessary” in this

case, since it is clearly an intrastate matter within the

states-rights exemption from the criminal (not civil) penal-

ties of a federal Act and subject only to Georgia State

criminal jurisdiction?

a eee ee ~

show them to be indicted for intrastate securities trans-

actions, not indictable under “this title” within the fair

meaning of the intrastate exemption from all provisions of

the Securities Act of 1933 but the civil antifraud provi-

sions of Section 17 (15 U.S.C. 77(c)(a)(ii))?

The answer to the first question is “No.” On April

4, 1974 the Assistant Attorney General wrote to the United

States Attorney clearly revealing that the SEC, in its

discretion, had bypassed the Attorney General’s discretion,

contrary to the requirement of Section 20 of the 1933

Act, and transmitted its prosecutive recommendation di-

rectly from the SEC to the United States Attorney, thus

depriving petitioners of their right given by Congress to

have an independent exercise of discretion by the Attorney

General as to whether criminal proceedings were “necessary,”

and whether there was probable cause to “institute” crimi-

nal proceedings.

That the SEC bypassed the Attorney General is clear

beyond question from the following letter of April 4,

1974, sworn to as a true copy by petitioners in this

verified application:

“HEP:TJM:EJB:efs

113-19-26 APR 4 1974

ADMITTED

Government Exhibit

84=82-A

Mr. John W. Stokes, Jr.

United States Attorney

Atlanta, Georgia

Re: Preferred C ratio

Dear Mr. Stokes:

We understand that the Securities and Exchange

Commission has referred its investigative files to you

in the above matter for prosecutive consideration

and that the Statute of Limitations may soon bar

prosecution. Please advise us if we can be of any

assistance to you in expediting the handling of

this matter.

Sincerely,

HENRY E. PETERSEN

Assistant Attorney General

Criminal Division

By: THOMAS J. McTIERNAN

This Court has said that when Congress vests “discre-

tion” in an official, citizens have a constitutional right to

have that discretion exercised in good faith — not bypassed.

In a habeas corpus proceeding in this Court’s landmark case

of Accardi v. Shaughnessy, 347 U.S. 260, 267 (1953), it

was said: a

“And if the word ‘discretion’ means anything in a

statutory or administrative grant of power, it means

that the recipient must exercise his authority ac-

cording to his own understanding and conscience.

“. . .we object to the Board’s alleged failure to

exercise its own discretion...” (447 US at 263 )

Petitioners herein object to the Attorney General’s

failure to exercise his own discretion as to whether institu-

tion of criminal proceedings against them is “necessary” in

this case. They have a right under the Accardi case to an

exercise of discretion by the Attorney General.

In the Accardi case, supra, this Court said:

“The crucial question is whether the alleged conduct

of the Attorney General deprived petitioner of any

of the rights guaranteed him by the statute. . .”

The first question, then, raised by petitioners in the

case at bar is whether the SEC, by sidestepping the Attor-

ney General’s discretion, deprived them of the rights guaran-

teed by Section 20 of the Securities Act of 1933 (15 U.S.C.

77t(b)) to have an independent exercise of his discretion

by the Attorney General based on “evidence” transmitted

to him by the SEC as a necessary precondition to a valid

indictment. Petitioners submit that the conduct of the SEC

did just that.

Petitioners’ view is supported by this Court’s decision

in United States v. Giordano, 416 U.S. 505, 94 S. Ct. 1820

(1974), where it was held that Congress did not intend that

the power to authorize wiretap applications be exercised by

This applies with equal force to the Board and the any official other than the Attorney General himself, as desig-

Attorney General. In short, as long as the regu-

lations remain operative, the Attorney General

denies himself the right to sidestep the Board or

dictate its decision in any manner.”

In the case at bar, Congress has denied the SEC the

right to sidestep the Attorney General and his discretion.

In the Accardi case this Court objected to the failure of

the Board of Immigration Appeals to exercise its discretion

as to a deportation order:

nated by Congress. That case involved the collateral question

of whether the Attorney General could delegate his “‘discre-

tion.” This Court said he could not. This Court went farther

arid held that the Attorney General must exercise his discre-

tion to authorize wire taps before any application to a court

is made, and rejected the suggestion that he can later ratify

actions taken by his assistant in his absence (416 U.S. __,

94 S.Ct. at 1830, footnote 12). In the Giordano case it was

held that wire-tap evidence obtained as a result of authority

unlawfully granted by an assistant to whom the Attorney

General had delegated his discretionary power must be sup-

pressed under the Fourth Amendment. In the case at bar,

petitioners urge that an indictment obtained on request of

the SEC by the United States Attorney prior to a good

faith and independent exercise of his “discretion” by the

Attorney General as a critical and necessary precondition as

to whether institution of criminal proceedings against peti-

tioners was “‘necessary”’ under Section 20 of the 1933 Act,

should be dismissed. Their custody and restraint of freedom

as a result of apprehension under that indictment should be

terminated under 28 U.S.C. 2241-43 and the Fifth Amend-

ment. Congress intended that the power to issue original

writs of habeas corpus by this Court pursuant to 28 U.S.C.

2241-43 should be used in proper cases, and this is such an

extraordinary case.

The importance of an independent exercise of his cwn

prosecutive discretion by the Attorney General in accoidance

with the plain language of Section 20 of the 1933 Act (15

U.S.C. 77t(b)) cannot be overemphasized. Nearly 40 years

ago former Justice Jackson of this Court, when he was

Attorney General, gave an address entitled “The Federal Prose-

cutor” at the Second Annual Conference of United States

Attorneys held in the Department of Justice Building on

April 1, 1940 (see 24 J. Am. Jud. Soc. 18 (1940) for text),

at which he said:

“The prosecutor has more control over life, li-

berty and reputation than any other person in

America. His discretion is tremendous. He can

have citizens investigated and, if he is that kind

of person, he can have this done to the tune of

public statements and veiled or unveiled intima

tions. Or the prosecntor may choose a more

subtle course and simply have a citizen’s friends

interviewed. The prosecutor can order arrests,

present cases to the grand jury in secret session,

and on the basis of his one-sided presentation of

the facts, can cause the citizen to be indicted and

held for trial. He may dismiss the case before

trial... . While the prosecutor at his best is one

of the most beneficient forces in our society,

when he acts from malice or other base motives,

he is one of the worst. . .

“With the law books filled with a great assortment

of crimes, a prosecutor stands a fair chance of

finding at least a technical violation of some act

on the part of almost anyone.”

The operation of our national securities markets as a

capital-raisine mechanism in a free-enterprise society is vital

and in need of public confidence. Because of the adverse

impact of wholesale criminal prosecutions when injunctions,

administrative proceedings, and lesser sanctions better serve

the cause of justice, Congress has removed institution of

federal criminal proceedings under the 1933 Act from the

discretion of the SEC or United States Attorney. Rather

than risk the ills of prosecutive overkill in the securities

field, where federal and state laws overlap, where important

and headline-exciting local businessmen are apt to be in

voived, and where the vague words of the federal securities

laws are peculiarly susceptible of wide-swinging interpreta-

tions (e.g., Section 24 of the 1933 Act imposes 5 years or

$5,000 or both as a penalty for willful violation of “any

of the provisions of this subchapter,” a vague statute

stretching over 27 separate paragraphs and many pages, and

each of which has been subjected to dozens of different

interpretations in 90 federal district courts in hundreds of

cases and thousands of SEC administrative and staff inter-

pretations since 1933), Congress has required the SEC to

transmit its “evidence” to the Attorney General himself,

not the United States Attorney, for an independent exer-

cise of the Attorney General’s “discretion” concerning

whether it is “necessary” in a given case to “institute ...

criminal proceedings” (15 U.S.C. 77t(b)).

In this case, the discretion of the Attorney General

was sidestepped, in flagrant violation of the very words of

Section 20 of the Act and this Court’s holdings in Accardi

v. Shaughnessy, 347 U.S. 260 (1954) and U.S. v. Giardano,

416 U.S. 505, 94 S.Ct. 1830 (1974).

A federal grand jury has no jurisdiction to return an

indictment and a United States Attorney has no authority

to seek an indictment for alleged criminal violations of the

Securities Act of 1933, absent_an independent exercise of

prosecutive discretion by the Attorney General himself as a

necessary precondition to the institution of criminal pro-

ceedings. Petitioners have a constitutional right to have

the indictment herein dismissed forthwith, rather than to

suffer the ordeal and destructive impact of a criminal trial.

The answer to the second question posed by petition-

ers, i.e. is federal criminal prosecution “necessary,” the

answer again is “No.” Congress has not made the criminal

penalties of the 1933 Act applicable to intrastate transactions.

Section 24 of the 1933 Act is applicable only to inter-

state securities transactions (15 U.S.C. 77x). Section 3(a)

(ii) of the Act (15 U.S.C. 77c(a)(ii)) specifically states that

the Act “shall not apply” to intrastate transactions of the

kind involved herein “except as hereinafter expressly pro-

vided.” (Emphasis supplied.) In Section 17(c) of the Act,

antifraud section, it is specifically provided that the Section

3 intrastate exemption does not apply “to the provisions of

this section” — i.e., Section 17 specifically, and no other.

The exercise of his discretion by the Attorney General

on “evidence” transmitted by the Securities and Exchange

Commission (“SEC”) as a necessary precondition to institu-

tion of criminal proceedings under the 1933 Act serves two

national policies. First, it assures that the mature and

independent prosecutive judgment of a cabinet officer comes

into play before civil or administrative proceedings are re-

jected and criminal proceedings instituted under the 1933

Act. Second, it protects persons like petitioners from ad-

ministrative judgments of regulatory bureaucrats, who may

be totally unfamiliar with the Fifth and Sixth Amend-

ments or the fine tuning of our criminal justice system.

There is no similar specific exeption to the intrastate

exemption in the criminal penalty Section 24 of the 1933

Act, or, for that matter, in the criminal reference Section

20 of the Act (15 U.S.C. 77x and 77t(b)). Thus it must

follow that Congress simply has not made intrastate secu-

rities transactions subject to federal criminal jurisdiction

under the 1933 Act. That has been left as a state, not a

federal, matter. This is consistent with the Ninth and

Tenth Amendments, and the federal-state system of dividing

interstate and intrastate jurisdiction.

This Court can see a garbled stretching of the law in

the very words of the indictment attached hereto as Appen-

dix iii. The alleged 1933 Act violations on which the en-

tire indictment is based are contained in the first five

Counts. Each of Counts One through Five, it may be

seen, alleges material false statemerits and admissions “all

in violation of Section 77q(a), Title 15, U.S. Code.” Then

underneath is a subscript “$10,000/2 years or both.”

The cited section is Section 17 of the 1933 Act, the

civil, not the criminal section, which says not one word

about “$10,000/2 years or both,” or any other penalty.

Section 17 makes certain violative conduct “unlawful.”

But that “unlawful” conduct does not become criminal

under the 1933 Act unless it is “willful” as provided in

Section 24 of the Act. The statements in the indictment

are false on their face and would mislead a jury. There

is no criminal penalty in Section 77q(a), Title 15, U.S.

Code. The criminal penalty is contained in Section 77x,

Title 15, U.S. Code, and is “$5,000/5 years or both,” but

is made specifically not applicable to intrastate transactions

by Section 77c, Title 15, U.S. Code.

And so it may be seen that petitioners have not been

and are not now indictable under Section 77q(a), Title 15,

U.S. Code, as cited by the indictment, since that is not a

criminal section and imposes no penalty. It only makes

violations “unlawful,” a civil wrong. Section 77x alone

makes “willful” violations criminal, and subject to fine or

imprisonment. Since intrastate transactions are exempt

from the criminal penalties for “willful” violation, all as

outlined hereinabove, there is no jurisdiction in a federal

grand jury to indict for violation of Section 17 on the

basis of intrastate transactions. Thus, the answer to the

third question posed by petitioners in this application, i.e.,

whether they are indictable under Section 77q(a), Title 15,

U.S. Code, must be yet another “No.”

This Court has said that while mere error in a pro-

ceeding is not sufficient to support a grant of the writ,

that “Deprivation. . .of basic and fundamental procedural

safeguards, an assertion of power to act beyond the autho-

rity granted..., and action without evidence... ,” are

examples of the showing necessary. Eagles v. Samuels,

329 U.S. 304, 313 (1946). Petitioners submit their case

makes the necessary showing. Carafas v. LaVallee, 391

U.S. 234 (1968).

This Court has reaffirmed Chief Justice Marshall’s

thought that decisions w1 this Court, like the Constitution

itself and the laws made thereunder, are the supreme law

of the land under Article VI, and that judges, like all other

officers, are bound by their oaths under Article VI to obey

the spirit as well as the letter, the basic principle as well

as the rule of the case, of its decisions. Cooper v. Aaron,

358 U.S. 1 (1958). If Cooper v. Aaron means what it

says, then the Accardi and Giordano cases make it impera-

tive that this Court dismiss the indictment herein for want

of exercise of his discretion by the Attorney General as a

precondition for institution of criminal proceedings. Failure

of the district court to abide by the rule in the Accardi

and Giordano cases by dismissing the indictment on

grounds petitioners have been denied the procedural safe-

guards given them by Congress in Section 20 of the 1933

Act and Section 3 of that Act, deprives petitioners of due

process. The District Court has failed its duty to obey the

supreme law of the land as set out in the Accardi and

Giordano cases.

CONCLUSION

For the reasons set forth herein, petitioners request

that this Court forthwith award them the Great Writ or

issue an order directing the respondents to show cause why

the writ should not be granted, and that the Court sum-

marily hear and determine the facts, and dispose of the

matter as law and justice require, pursuant to 28 U.S.C.

2243, and as requested by petitioners herein. If this

Court will not vindicate petitioners’ rights, who will? This

is the rare and exceptional case where only an original

writ of habeas corpus awarded by fig Court, and the dis-

position of the matter per 28 U.S.C. 2243, will do justice

at a time when it counts. See Ex parte Hudgings, 249

U.S. 378 (1919); Matter of Heff, 197 U.S. 488 (1905);

Ex parte Grossman, 267 U.S. 87 (1925).

Respectfully submitted,

CARL L. SHIPLEY

1108 National Press Building

Washington, D.C. 20045

(202) 783-1647

times E. LEWIS HANSEN

Light T

SHIPLEY SMOAK & AKERMAN pining nea powell

National Press Building 577-9400

Washington, D.C. 20045 ‘ 7 Petitio

mers

CANDLER, COX, ANDREWS & 9 4/#0™meys or

HANSEN

2400 Gas Light Tower

Atlanta, Georgia 30303

FRED C. TALLANT, SR.

120 Copeland Road, N.E.

Atlanta, Georgia 30328

WILLIAM M. WOMACK, JR.

120 Copeland Road, N.E.

Atlanta, Georgia 30328

Petitioners

Subscribed and sworn to before me this day of

October, 1975.

Notary Public

APPENDIX i

UNITED STATES DISTRICT COURT

NORTHERN DISTRICT OF GEORGIA

ATLANTA DIVISION

THE UNITED STATES

vs. : CRIMINAL ACTION

No. 74-225-A

FRED C. TALLANT, ET AL.

[Filed June 23, 1975]

ORDER

This is a prosecution for fraud in the sale of securities,

mail fraud, conspiracy, and obstruction of justice. See 15

".S.C. § 77q(a); 18 U.S.C. 8 371, 1341 and 1505. Ina

prior order, this court denied in part defendants’ motion to

dismiss the indictment based on objec.ons to the array of

the Grand Jury, but deferred a final ruling pending submis-

sion of evidence by the Government regarding the vote of

the Grand Jury. United States v. Tallant, Criminal Action

No. 74-225A (N.D. Ga. March 11, 1975). The Government

has filed an affidavit to the effect that fifteen grand jurors

voted to return the indictment; therefore, as noted in the

prior order, the disqualification of orte of their members

does not compel dismissal of the indictment. See id; Rules

6(b\2) and 6(f), Fed. R. Crim. P. Defendants concede that

this information requires rejection of their motion. Accord-

ingly, the motion to dismiss the indictment because of de-

fects in the array of the Grand Jury is DENIED.

This action is also pending on several other motions, in-

cluding “‘combined motions” for discovery and inspection,

a motion to inspect Grand Jury minutes, a motion to dis-

miss the indictment, and a motion for a bill of particulars.

These motions will be discussed s, riatim.

In the “combined motions”, defendants seek discovery,

as pointed out by the Goverr.ment, of virtually the entirety

of the Government’s case. Defendants seek to discover all

written, as well as oral statements made by the defendants

to Government agents; all tangible and documentary evidence

in the possession of the Government; a list of all Govern-

ment witnesses, includinginformants and other persons having

information relevant to the charges in the indictment; copies

of “any prior criminal record [of Government witnesses? ]

... available to the attorney for the Government;” and all

evidence favorable to the defendants. Defendants predicate

their motion on Rules 16 and 17(c), Fed. R. Crim. P. and

the due process clause. In opposition, the Government points

out that Rule 17(c) is not a discovery device, e.g., Bowman

Dairy Co. v. United States, 341 U.S. 214 (1951); that some

of the matters raised in this motion are more properly raised

in the motion for a bill of particulars; that some of the in-

formation sought is not discoverable under the Jencks Act;

and that a request for virtually all of the Government’s tan-

gible and documentary evidence is unreasonable and over-

broad, and impermissible under Rule 16(b). The Govern-

ment’s contentions in this regard are correct; and moreover,

it appears, on review of the Government’s response, that

some <f the information sought by the instant motion has

been provided by the Government, thereby rendering a por-

tion of the motion moot. Arguably the only portion of the

motion which may not be moot deals with the production

of documentary and tangible evidence, see Local Court R.

181.414; and this court agrees that a generalized request for

such evidence is insufficient. On the other hand, the old,

strict limitations on discovery, some of which the Govern-

ment obviously seeks to rely on in this action, have largely

been eliminated by modern practice. See generally 8 J.

Moore, Moore’s Federal Practice 4 16.05[4] (1975). The

emphasis under modern practice is on reasonableness and

cooperation by counsel. This emphasis is carried forward

in the local rules of this court. See Local Court R. 181.43.

In accordance with the foregoing, it is inappropriate for

this court to rule on the remaining viable portions, if any,

of the motion for discovery at this tfine. Should defendants

desire additional discovery, they should ensure that their re-

quest fully complies with the letter and spirit of Local Court

R. 181.43, et seg. Furthermore, to the extent defendants

desire additional discovery pursuant to Rule 16, Fed. R.

Crim. P., they should fully comply with Local Rule 91.5

(conference with opposing counsel) and Local Rule 91.1

(motion must be accompanied by memorandum of law).

Accordingly, the “combined motions” are hereby DENIED

as moot, without prejudice to the filing of subsequent mo-

tions for discovery, not later than fifteen (15) days from the

date of this order, upon compliance with the aforemention-

ed procedural requirements.

The motion to inspect Grand Jury minutes has also been

mooted in part by the aforementioned affidavit relating to

the vote of the Grand Jury, to the extent that the motion

is prec‘cated on possible undue influence by the disqualified

juror. The other portions of the motion remain viable; how-

ever, it is evident that defendants seek, in part, to challenge

the sufficiency of the Government’s evidence presented to

the Grand Jury. It is well-settled that an indictment is not

subject to challenge on the ground that the Grand Jury acted

on the basis of inadequate or incompetent evidence. See, e.g.,

United States v. Calandra, 414 U.S. 338, 345 (1974); Cos-

tello v. United States, 350 U.S. 359 (1956); United States

v. Newcomb, 488 F.2d 190 (Sth Cir. 1974). As a result, a

motion to inspect Grand Jury minutes predicated on this

ground is insufficient. Defendants also seek to inspect the

Grand Jury minutes to determine the effect of pre-trial pub-

licity on the deliberations of the Grand Jury. Defendants

have also filed a motion to dismiss the indictment on this

ground. In light of the disposition of this motion, as dis-

cussed below, inquiry into the Grand Jury minutes on this

ground is unwarranted. As a final matter, the inspection of

Grand Jury minutes to determine the effect of defendants’

being unable to appear during the deliberations of the Grand

Jury is also not warranted, since prospective indictees “‘may

not, as a matter of a constitutional right, compel transcrip-

tion of the grand jury proceeding, attend the proceedings

personally or through counsel, cross-examine witnesses at

the proceeding, or introduce evidence or compel the intro-

duction of exculpatory evidence at the proceeding.” Cohen

v. Stokes, Civil Action No. 75-765 (N.D. Ga. April 22, 1975);

reconsideration denied, (N.D. Ga. May 6, 1975). See United

States v. Calandra, supra. Accordingly, defendants’ motion

to inspect the Grand Jury minutes is hereby DENIED.

Defendants have also filed a motion to dismiss the indict-

ment. The indictment in question charges defendants with

violation of the securities laws, mail fraud, obstruction of

justice, and conspiracy, and consists of twelve counts, con-

taining substantial recitation of overt acts and other informa-

tion regarding the charges. Because of the length of the in-

dictment, and the length of defendant’s motion with regard

to dismissal of the indictment, to the extent possiole, the

court will consider the merits of defendants’ arguments in

relation to the various counts of the indictment to which

they apply.

The first portion of the motion to dismiss relates to Counts

I- VI! of the indictment. These counts charge defendants

with five types of activities alleged to be violative of § 77

of the Securities Act of 1933, 15 U.S.C. 877q(a). Four of

these activities are listed in Count I. First, the indictment

charges that defendants

did, directly and indirectly, wilfully and knowing-

ly employ a device, scheme and artifice to defraud,

obtain money and property by means of untrue

statements of material facts and omissions to state

material facts necessary in order to make the state-

ments made, in the light of the circumstances

under which they were made, not misleading, and

engage in transactions, practices and a course of

business which operated and would operate as a

fraud and deceit upon purchasers of said securi-

ties .. . whom defendants believed could be in-

duced to purchase said securities... .

Following this allegation, Count I lists several pages of acts

purportedly constituting this violation. In essence, these

acts consist of the sale of securities on time payment plans,

the reacquisition of the securities upon default by the pur-

chasers, and the resale of the stock as original issue stock.

On resale, the defaulted stock was purportedly falsely repre-

sented to be original issue stock, the proceeds of which would

be used for the purpose of Preferred Land Corporation (here-

inefter PLC). This portion of Count I also charges defend-

ants with causing certain corporate records to be falsified in

order to conceal the allegedly fraudulent scheme.

I the first portion of defendants’ motion specifically relates to

Counts I-V of the indictment; but the substance of this portion of the

motion applies equally to all of the securities fraud counts, including

Count VI.

Paragraph (2) of Count I alleges that “defendants made

and caused to be made divers false, misleading and fraudu-

lent representations, pretenses and promises, both orally and

in writing, well knowing that said representations . . . were

false.” The representations listed consist of alleged state-

ments in a prospectus, dated January 8, 1969, regarding the

source of the common stock offered by means of that pro-

spectus, the amount and disposition of the net proceeds, and

the potentiality of a public market for the shares. No spe-

cific instances of “oral” misrepresentations are charged. The

third species of conduct charged in Count I relates to the

actual marketing of the PLC stock. This portion of the in-

dictment alleges that “defendants concealed and omitted and

caused to be concealed and omitted in prospectuses, sales

presentations, solicitations and otherwise, material facts nec-

essary in order to make the statements made, in the light

of the circumstances under which they were made, not mis-

leading. .. .”’ The specific omissions and misstatements re-

late to the resale of reacquired stock without providing in-

vestors with information regarding the disposition of the

proceeds of the sale; information consisting of the price at

which the stock was reacquired; and information regarding

the availability of the stock to employees, officers and direc-

tors of PLC and friends of defendant Tallant at substantially

lower prices. The last portion of Count I sets forth the

overt act necessary to the consummation of the alleged fraudu-

lent scheme and necessary to constitute a violation of the

securities laws: the mailing of 1,000 shares of PLC stock,

on or about April 18, 1969, to Mary N. Hancock.

In support of their motion to dismiss Count I, defendants

reassert, in part, their arguments regarding the insufficiency

of the evidence before the Grand Jury, arguing that the alle-

gations in the indictment were part of a “rigged presentation”

in violation of defendants’ Fifth Amendment rights. Defend-

ants contend that “[l] ike a spider weavirig a web, the U.S.

ttorney’s office has strung together a series of [legal] busi-

ness actions . . . to make it look ominous by reciting the

large figures as to stock issued, but omitting the de minimus

figures of the [defaulted] stock... [resold by defendants] .”

Defendants also argue that as they may not be convicted for

“causing” violations of the Act, the facts alleged do not con-

stitute a violation of the 1933 Act. Furthermore, defend-

ants contend that all their activities were legal under Georgia

law and subject to the intrastate exemption provided by 15

U.S.C. § 77c; therefore defendants argue that these activities

may not be violations of federal law. Finally, defendants

contend that all stock sold was original issue stock, rather

than “defaulted” stock as alleged, arguing that if defendants

had been permitted to appear before the Grand Jury, the

“truth of the matter” would have been revealed.

To the extent that defendants have repeated arguments

with respect to the sufficiency of evidence before the Grand

Jury, their contentions have already been disposed of. As

noted above, the insufficiency of the evidence before the

Grand Jury is not a basis for dismissal of the indictment.

Moreover, to the extent that defendants dispute the factual

contentions of the indictment, the remedy is to convince the

petit jury members, at trial, of the veracity of their side of

the story. As a general matter, the question of whether or

not a particular defense may be raised by means of a Rule

12(b) motion turns on whether or not that defense may be

decided solely on issues of law. See United States v. Miller,

491 F.2d 638, 647 (Sth Cir. 1974). In essence, a motion

to dismiss is appropriate if “trial of the facts surrounding

the commission of the alleged offense would be of no assist-

ance in determining the validity of the defense.” 8 J. Moore,

supra, 412.04 at 12-15 (Supp. 1975). The defense asserted

in this portion of the instant motion is a defense on the

merits and must be asserted at trial; therefore it is necessary

to turn to the portion of the motion which may be con-

strued as raising a legal contention which may properly be

disposed of by means of a motion to dismiss. In this pos-

ture, the question for resolution is whether an indictment

which alleges that defendants “‘caused” reacquired stock to

be sold as original issue stock, published misleading state-

ments regarding the stock, and caused falsification of corpo-

rate records in furtherance of the scheme states a violation

of the 1933 Act.

Defendants argue that a violation of the 1933 Act requires

specific intent, and that a series of transactions legal under

Georgia law may not constitute a scheme involving specific

intent to defraud under federal law. In addition, noting

that the transactions in issue purportedly qualify for the

aforementioned intrastate exemption, defendants argue that

the activities involved here concern essentially Georgia intra-

state matters and that it would be unreasonable to require

a prospectus legal under Georgia law to meet some unspeci-

fied S.E.C. requirement under federal law. Defendants con-

tend that such a result would make the S.E.C. a censor of

all Georgia-licensed security transactions.

In response to this argument, the Government correctly

notes that the intrastate exemption is not applicable to crimi-

nal conduct, such as that charged here: “The exemptions

provided in section 77c of this title shall not apply to the

provisions of this section.” 15 U.S.C. § 77q(c). Similarly,

relying on a case involving the mail fraud statute, 18 U.S.C.

§ 1341, the Government notes that control over the use of

the mail lies with Congress and not with the states, and that

Congress may forbid any mailing contrary to public policy,

whether or not the scheme violates state law. United States

v. Edwards, 458 F.2d 878, 880 (Sth Cir. 1972). See Parr v.

United States, 363 U.S. 370 (1960). This court agrees with

the Government that these same principles are equally appli-

cable in an action involving mail fraud and securities fraud:

for, under 15 U.S.C. § 77q(a), use of the mails is an essen-

tial element of the offense. See, e.g., Harper v. United States,

143 F.2d 795 (8th Cir. 1944); Holmes v. United States, 134

F.2d 125 (8th Cir. 1943). See generally, United States v.

Ashdown, 509 F.2d 793 (Sth Cir. 1975). Thus, irrespective

of whether or not the conduct in question violated state

law, upon employment of the jurisdictional key, use of the

mails, there is no doubt that the federal courts may punish

alleged wrongdoers for conduct which violates federal law.

An offense under § 77q of the 1933 Act contains two

essential elements: (1) a scheme to defraud purchasers of

securities and (2) the use of the mails in furtherance of that

scheme. See Holmes v. United States, supra. The existence

of a scheme to defraud is a question for the jury, id.; and,

the allegations in the instant complaint are sufficient to set

forth such a scheme. What must be shown at trial is that

“the scheme had an impact on the investo: and that the

mails were used in employing the scheme. United States

v. Ashdown, supra. Defendants also argue that specific in-

tent to defraud must be shown, but this contention is sub-

ject to some dispute. See United States v. Schaefer, 299

F.2d 625 (7th Cir.), cert. denied, 370 U.S. 917 (1962). In

any event, allegations that defendants caused certain acts to

be done in furtherance of their fraudulent scheme are suffi-

cient to withstand the instant motion to dismiss. See United

States v. Constant, 501 F.2d 1284, 1286-87 (Sth Cir. 1974).

In summary, in considering the sufficiency of an indict-

ment, it is well-settled that an indictment need not be draft-

ed in the precise terms of the statute, but that the indict-

ment is sufficient if it gives the defendants “notice of the

10a

offense . . . charged and permits an accurate determination

of the extent to which [they] may plead former acquittal

or conviction if future prosecutions are brought against

[them].” Jd. at 1287. The allegations relevant to the charged

charged offenses in Count I of the indictment clearly fulfill

this standard.

Defendants’ allegations with respect to the insufficiency

of the other charges relevant to the securities fraud aspect

of this case are similar. These charges are contained in Counts

II - VI of the indictment. These counts involve separate in-

stances of the same allegedly improper conduct, and incorpo-

rate most of the allegations set forth in Count I. This con-

duct is described as follows:

On or about April 20, 1969 defendants. . . did,

directly and indirectly, wilfully and knowingly, in

the offer and sale of securities, .. . by use of the

mails, employ the aforesaid scheme and artifice to

defraud, obtain monies and properties by means

of untrue statements of material facts necessary

in order to make the statements made, in the

light of the circumstances under which they were

made, not misleading, and engage in transactions

.. . which operated and would operate as a fraud

and deceit upon the purchasers of said securities,

These various counts set forth five separate instances in

which defendants allegedly used the mails to deliver certifi-

cates of PLC stock to defrauded purchasers. For the reasons

stated above, these allegations are also sufficient to state vio-

lations of the 1933 Act; and defendants’ arguments to the

contrary are without merit.

lla

Defendants also contend that Counts I - VI should be

dismissed because “[b]y no stretch of the mind can it be

said Congress intended for prosecutorial discretion in

securities cases developed by the S.E.C. and referable to

the Attorney General, to be an exercise of prosecutorikl

discretion to be sub-delegated to a civil service employee

{the assistant United States Attorney] instead of a Presi-

dential appointee.” In addition, defendants contend that

this action is barred by the applicable statute of limitations.

See 18 U.S.C. § 3282 (5 years).

In response to these contentions, the Government

points out that identicalclaims with respect to the

prosecutorial discretion issue have been authorifatively

determined adversely to defendants, and defendants do

not now contend otherwise. See Preferred Land Corp. v.

Stokes, Civil Action No. 74-720 (N.D. Ga. Apr. 17, 1974),

aff'd mem.____F.2d____ (Sth Cir. 1974); Tallant v. Moye,

__ US. , 95 S. Ct. 156 (1974) (motion for leave

to file writ of mandamus denied); id, _— F.2d

(Sth Cir. 1974). In response to the statute of limitations

aspect of the motions, the Government points out that

its allegation that the conduct charged in Count I

occurred “on or about April 18, 1969” is sufficient to

withstand the instant motion. The indictment in ques-

tion was filed on April 17, 1974. If indeed, the act

necessary to execute the scheme charged in Count I, use

of the mails, was consummated prior to the listed date,

then it is possible that defendants’ may be protected by

the statute of limitations. See United States v. Ashdown,

supra at 797-98. This is an evidentiary question which

should more properly be raised at trial. See United

States v. Miller, supra. The other charged acts allegedly

12a

occurred more recently and are apparently not encom-

passed by the portion of this motion founded on statute

of limitations grounds.

Defendants also predicate their motion to dismiss

Counts I - VI of the indictment on adverse, pre-trial and

pre-indictment publicity. Since this ground applies equally

to the indictment in its entirety, it will be discussed last;

therefore it is appropriate to turn to defendants’ argu-

ments with regard to the other offenses charged in the

indictment: mail fraud, obstruction of justice, and

conspiracy.

The, portions of the indictment relevant to the mail

fraud charge consist of Counts VII - X. These counts

incorporate certain of the allegations of Count I and list

separate instances in which “defendants for the purpose

of executing the aforesaid scheme and artifice and

attempting to do so, caused to be placed in an author-

ized depository for mail... .” certain materials

relevant to the allegedly fraudulent securities transactions

in issue. This wording substantially tracks the wording

of 18 U.S.C. § 1341 and is clearly sufficient to allege

a violation of that statute. United States v. Constant,

supra. Defendants do not contend otherwise, but argue

instead that the alleged fraudulent scheme was completed

when the contracts for the sale of securities were entered

into, and that the use of the mails was too remote from

the alleged misrepresentation by defendants regarding the

nature of the stock sold to be an integral or essential

part of the alleged scheme. This contention is without

merit and has been specifically rejected by the Count of

Appeals for the Fifth Circuit: “[I]t is a well-established

principle of mail fraud law that use of the mails after the

13a

money [from sale of stock] is obtained may nevertheless

be ‘for the purpose of executing’ the fraud.” United

States v. Ashdown, supra at 799.

The conspiracy charge is contained in Count XI of

the complaint, which also lists three overt acts in fur-

therance of the conspiracy: (1) presentation of falsified

stock trar*fer records to S.E.C. investigators; (2) deposit

by defenaant Womack of $5,000.00 received as proceeds

from the sale of 2,500 shares of PLC stock; and (3)

deposit by defendant Tallant of $10,000.00 received as

proceeds from the sale of 5,000 shares of PLC stock.

Defendants contend that presentation of falsified records

to the S.E.C. cannot be an overt act in furtherance of a

mail fraud conspiracy, arguing also that until the records

are subject to an S.E.C. subpoena, alleged falsification of

those records cannot be a violation of 15 U.S.C. § 77q.

Finally, defendants contend that overt acts two and three

above are normal business transactions and that there is

no causal connection between the investors named in

those acts and the alleged scheme to defraud. In oppo

sition, the Government points out that two of the in-

vestors named in the aforementioned overt acts are also

named as being defrauded pursuant to the allegations of

Counts IV and V. Furthermore, the Government points

out that defendants have not cited any authority in

support of their argument that presentation of falsified

records to the S.E.C. may not constitute an overt act in

furtherance of a stock fraud conspiracy. On the other

hand, the Government has cited cases to the effect that

showing later perfected actions is sufficient to prove a

conspiracy, e.g, United States v. Milisci, 465 F.2d 700,

703 (5th Cir.), cert. denied, 409 U.S. 1076 (1972); and

to the effect that the overt act need not be criminal in

14a

and of itself, e.g Reese v. United States, 353 F.2d 732,

734 (Sth Cir. 1965). In sum, the Government argues,

and this court agrees that “one overt act, whether lawful

or unlawful, committed in pursuance of a conspiracy, is

sufficient to charge defendants with commission of an

unlawful act.” Defendants’ arguments to the contrary are

without merit.

The last count of the indictment alleges that defendant

Womack “‘corruptly influenced, obstructed and impeded

and endeavored to influence, obstruct and impede [an

S.E.C. proceeding] . . . in that defendant Womack

caused certain stockholder ledger records of Preferred

Land Corporation to be falsified and presented them to

[the S.E.C.]investigators. . . .” Defendant contends

that falsification of records before a proceeding is com-

menced is not a violation of 18 U.S.C. § 1505, and that

presentation of previously falsified records is likewise not

a violation. Defendant also argues that this count of the

indictment is unduly vague, since it fails to list the

persons defendant Womack caused to falsify the entries,

the time and date and the manner in which the entries

were falsified, and where or on which of the 7,000 pages

of ledger entries the falsifications appear. The only aw<—

authority cited in support of these arguments is United

States v. Batten, 226 F. Supp. 492 (D.D.C. 1964), cert.

denied 380 U.S. 912 (1965). This case is not in point,

since it involved intimidation of a witness and a motion

for judgment of acquittal. In fact, the Batten court

specifically noted that g 1505 “is broad enough to cover

any activity which would influence or intimidate a wit-

ness who might be called to testify.”” Jd. at 494:

(emphasis added). Similarly, the statute is broad enough

arguably to include falsification of records in anticipation

15a

of an agency subpoena. In any event, this court has

concluded the presentation of intentionally falsified

records to the S.E.C. constitutes an offense under

§ 1505. Defendant Womack’s arguments to the contrary

are without merit.

In response to defendant’s vagueness argument, the

Government points out that an indictment which sets

out the elements of the offense is sufficient, particularly

when drafted substantially in the words of the statute.

E.g,, United States v. Debrow, 346 U.S. 374 (1953);

United States v. Fischetti, 450 F.2d 34 (6th Cir. 1971),

cert. denied 405 U.S. 1016 (1972); Esperti v. United

States, 406 F.2d 148 (Sth Cir.), cert. denied 394 U.S.

100 (1969). Arguably, the indictment might have been

more specific as to the dates of the S.E.C. investiga-

tion, and the exact date of the hearing at which defend-

ant allegedly presented the falsified records, see United

States v. Alo, 439 F.2d 751 (2d Cir.), cert. denied, 404

U.S. 850 (1971); however, under the circumstances of

this case, the omission of such dates does not render

Count XII of the indictment so vague as to warrant its

dismissal.”

The final argument espoused in support of the motion

to dismiss relates to allegedly prejuditial pre-trial publicity.

— courts have approved indictments céntaining language to

the effect that a defendant “wilfully” violated § 1505. E.g. United

States v. Alo, supra at 756. Where willfulness is specifically set

out in a statute, it is an essential element of the offense and must

be charged in the indictment. Eg. United States v. Fischetti,

supra at 39, Willfulness ianguage does not appear in g 1505;

therefore the absence of such language in the instant indictment

does not render that indictment defective.

16a

Although defendants’ contentions in this regard relate only

to the counts founded on the securities law violations, it

would seem that prejudicial publicity, if any, would

equally taint the entire indictment. In support of their

motion, defendants have submitted an exhibit, consisting

of fifteen or more newspaper articies published in the

Atlanta Journal, during a period of two years, from

December, 1972 through February, 1974. Defendants

contend that these articles were part of a campaign to

encourage enactment of a new Georgia Blue Sky Law,

and that they were so slanted against defendants as to

appeal to the passions and prejudices of the Grand Jury

and the United States Attorney and thereby make them

incapable of considering the evidence impartially. In

response, the Government notes that all of the articles

were published before the indictment was returned, and

that the only article appearing thereafter was a technical

S.E.C. release not disseminated to the general public. As

a result, the Government correctly notes that the question

for the court must relate solely to the effect of the pre-

indictment publicity on the Grand Jury proceedings.

With regard to this question, the Government argues

that dismissal of an indictment because of pre-indictment

publicity requires more than mere conjecture regarding

possible Grand Jury bias and prejudice, noting that pre-

indictment publicity alone is insufficient. E.g., Estes v.

United States, 335 F.2d 609, 613 (Sth Cir. 1964), cert.

denied, 379 U.S. 964 (1965). This court agrees that

defendants have not made a sufficient showing of bias

or prejudice on the part of the Grand Jurors or the U.S.

Attorney, for there is no doubt that the burden on

defendants in such cases is heavy:

17a

It does not appear that any indictment has thus

far been dismissed on [the] ground [of pre-

indictment publicity]. Though objection is

pitched on the bias of the grand jurors, its

underlying basis should probably be a violation

of due process, predicated on the generating of

prejudicial publicity by the government.

8 J. Moore, supra 96.03[4] at 6-42.3- .4 (emphasis

added). There is no allegation or indication in the record

that the Government was the driving force behind the

various newspaper articles alleged to be prejudicial.

Moreover, the articles, albeit somewhat slanted toward

the goal of enacting more effective state securities laws,

are reasonable examples of investigative journalism which

generally recite factual details regarding the various

judicial and agency actions involving PLC and its principal

officers. In fact, several of the articles discuss lawsuits

which were actually instituted by defendants herein.

Under these circumstances, this court agrees with the

following comments:

To accept the contention urged by the

defendants as a rule of law would produce

absurd results since no one who is prominent

and well known could be charged with the

commission of any crime because the charge

against such a person no doubt would cause

very large and widespread adverse publicity,

precluding an indictment.

United States v. Hoffa, 205 F. Supp. 710, 717 (S.D. Fia.),

cert. denied, 371 U.S. 892 (1962). If indeed, adverse

publicity has or might affect defendants’ forthcoming

trial, the court has more than adequate resources to

alleviate the effects of such publicity. See Shepard v.

18a

Maxwell, 384 U.S. 333 (1966). Dismissal of the indict-

ment is not one of the remedies that should be invoked

in this case.

Accordingly, for the reasons set forth hereinabove, all

of the defendants’ objections to the sufficiency of the

indictment are without merit; therefore their motion to

dismiss the indictment, or certain counts of the indictment,

is hereby DENIED.

The final motion submitted by defendants is a motion

for a bill of particulars. Defendants’ request contains

some thirty-five numbered paragraphs, and, as stated by

defendants, seeks to discover the “locations, times, persons

involved, or the substance of the various alleged criminal

violations” charged. As such, this motion is in effect a

substitute, in part, for the “combined motions”’ discussed

above and is also directed to the legal sufficiency of the

indictment. In response, the Government argues that a

motion for a bill of particulars is not intended to provide

a means by which defendants may compel the Government

to disclose its evidence, concluding that the instant motion

should be denied in toto.

The function of a bill of particulars in a criminal case

is to render an indictment sufficiently specific to apprise

a defendant of the nature and the cause of the accusa-

tion in order that he may prepare for trial, may be spared

surprise at trial and, after judgment, may be able to plead

the record in judgment in bar of a further prosecution for

the same offense. E.g., United States v. Bearden, 423

F.2d 805 (Sth Cir.), cert. denied, 400 U.S. 836 (1970);

Downing v. United States, 348 F.2d 594 (Sth Cir.), cert.

denied, 382 U.S. 901 (1965). Moreover, when the demand

goes “to the governmeat’s proof rather than to a clarifi-

cation of the indic!ment. . . [it] cannot be granted on a

19a

motion for a bill of particulars.” United States v. Smith,

341 F. Supp. 687, 690 (M.D. Ga. 1972). In the instant

case, some of the information sought might serve to

clarify the indictment; however, in conjunction with

clarification, it is evident that the Government would be

required to reveal, in part, evidence relative to the pre-

sentation of its case. In this case, the indictment, some °

fourteen pages long, taken in conjunction with the

lengthy S.E.C. investigation and the various judicial

actions involving the securities transactions forming the

basis for this case, is more than adequate to inform

defendants on the nature of the case and enable them

to adequately prepare for trial. In fact, this court agrees,

in large part with the Government’s assertion that

“[s]eldom does an indictment go so far to acquaint a

defendant with the charges against him.” The one

deficiency, as noted above, concerns the omission of

specific dates regarding the conduct allegedly constituting

the obstruction of justice charge in Count XII. In addi-

tion, the court has also concluded that disclosure of

similar information regarding the dates and places of

certain of the conduct charged in paragraphs (2) and (3)

of Count I would also be warranted. This information

should be provided to enable defendants to properly

defend against these charges.

Accordingly, defendants’ motion for a bill of

particulars is DENIED, except insofar as it relates to

information sought by numbered paragraphs (7) - (9),

(13), and (35). With respect to the information sought

ir. paragraph (35), the Government is hereby ORDERED

to provide defendant Womack with the exact date or

dates of the S.E.C. proceedings at which he allegedly

presented falsified records. With respect to the informa-

tion sought in paragraphs (7) - (9), the Government is

20a

hereby ORDERED to inform defendants of the exact

dates on which the alleged oral communications were

made, the places where they were made, and the persons

to whom they were made. With respect to the informa-

tion sought in paragraph (13), the Government is hereby

ORDERED to inform defendants of the dates of the

alleged sales presentations and solicitations and similar

activities giving rise to the conduct charged in Count I,

paragraph (3) of the indictment, as well as the place where

these activities were carried out. In all other respects,

defendants’ motion for a bill of particulars is DENIED.

In sum, this court has DENIED defendants’ motion to

dismiss because of irregularities in the Grand Jury pro-

ceedings, including disqualification of one of the Grand

Jurors; DENIED without prejudice the motions for dis-

covery and inspection; DENIED the motion to inspect the

Grand Jury minutes; DENIED the motion to dismiss the

indictment on the ground of its insufficiency; and DENIED

in part and GRANTED in part the motion for a bill of

particulars.

IT IS SO ORDERED.

This, the 20th day of June, 1975

/s) RICHARD C. FREEMAN

UNITED STATES DISTRICT JUDGE

21a

APPENDIX ii

UNITED STATES DISTRICT COURT

NORTHERN DISRICT OF GEORGIA <

ATLANTA D'VISION

6 * ® e *

ORDER

This is a prosecution for fraud in the sale of securities,

mail fraud, conspiracy, and obstruction of justice. See 15

U.S. 877q(a); 18 U.S.C. 88371, 1341, and 1505. The action

is presently before the court on defendants’ motion for

“severance, election and to dismiss certain counts” and on

defendants’ motion to reconsider a portion of the order of

this court entered on June 20, 1975. These motions will

be discussed seriatim.

THE MOTION FOR SEVERANCE

As noted above, this motion is a joint motion for

severance and/or for dismissal; however, following the

filing of the instant motion, this court entered an order

completely disposing of the legal arguments raised by de-

fendants with respect to dismissal of the indictment.

United States v. Tallant, Crim. Action No. 74-225A (N.D.

Ga. June 20, 1975). The essence of these arguments, as

expressed in the instant motion, relates to defendants’

contention that a series of business transactions legal under

Georgia law cannot be illegal under federal law, noting that

the securities sales in issue were licensed in Georgia and

subject to the “states rights” exemption regarding intrastate

sales of securities provided by federal law. In addition,

defendants argue that they cannot be convicted of a crimi-

nal offense since the provisions of Section 17 of the Secu-

rities Act of 1933 only relate to civil and mot criminal

fraud. This latter contention is wholly without merit, as

22a

a brief review of the numerous cases cited by this court in

the June 20, 1975 order will indicate. E.g., United States

v. Ashdown, 509 F.2d 793 (Sth Cir. 1975). Similarly, de-

fendants’ “states rights” arguments have likewise been dis-

posed of in that order:

(T]he intrastate exemption is not applicable to

criminal conduct, such as that charged here:

“The exemptions provided in section 77c of this

title shail not apply to the provisions of this sec-

tion.” 15 U.S.C. §77q(c)....[C] ontrol over the

use of the mail lies with Congress and not with

the states, and... Congress may forbid any mail-

ing contrary to public policy, whether or not

the scheme violates state law. [citations omitted].

...[T]hese same principles are equally applicable

in an action involving mail fraud and securities

fraud; for, under 15 U.S.C. 877q(a), use of the

mails is an essential element of the offense. [ci-

tations omitted]. Thus, irrespective of whether

or not the conduct in question violated state law,

upon employment of the jurisdictional key, use

of the mails, there is no doubt that the federal

courts maj punish alleged wrongdoers for con-

duct which violates federal law.

United States v. Tallant, supra at p. 8 (emphasis added).

Turning to the arguments specifically related to the

question of misjoinder under Rule 8, Fed. R. Crim. P. and

the propriety of severance under Rule 14, it is evident

that defendants’ contentions relate primarily to misjoinder

of offenses under Rule 8(a) rather than misjoinder of de-

fendants under Rule 8(b). Under Rule 8(b), the courts

have ruled that “improper joinder is inherently prejudicial

and that granting of a motion for severance, where there

has been misjoinder, is mandatory and not discretionary ....”

23a

United States v. Bova, 493 F.2d 33, 35 (Sth Cir. 1974).

See McElroy v. United States, 164 U.S. 76 (1896). This

court does not doubt that joinder of two defendants

charged with wholly separate offenses, albeit similar offen-

ses, would be inherently prejudicial; however, as discussed

in the June 20, 1975 order, the indictment in issue here

charges defendants, the president and chief executive offi-

cer and the chief financial officer of Preferred Land Corp.,

with conspiring to effectuate a scheme to defraud the pur-

chasers of Preferred Land securities. As pointed out by

the Government, the execution of a single scheme to de-

fraud may involve more than one criminal offense. F.g.,

Sanders v. United States, 415 F.2d 621 (Sth Cir. 1969),

cert. denied, 329 U.S. 792 (1946); United States v. Anzel-

mo, 319 F.2d 1106, 1122-23 (E.D. La. 1970). Similarly,

under Rule 8(b), two defendants who have allegedly con-

spired to effectuate this scheme and who are accordingly

guilty of the same offenses, if they are guilty of any of-

fenses at all, may be indicted together, tried together, and

ultimately acquitted or convicted together. In fact, even

where co-defendants are charged with separate crimes, where

the series of transactions are sufficiently interrelated and

intertwined, a joint trial would be permissable. United

States v. Strand, ____ F.2d___, Civil Action No. 74

4096 (Sth Cir. Aug. 15, 1975). As a result, further

consideration of misjoinder under Rule 8(b) is not

warranted.

Defendants do not argue that joinder in this case is

“inherently prejudicial’ under Rule 8(b), but base their

arguments instead on the provisions of Rule 8(a), which

reads in relevant part as follows:

Two or more offenses may be charged in the

same indictment. . . in a separate count for each

offense if the offenses charged . . . are of the same

or similar character or are based on the same

24a

act or transaction or on two or more acts or

transactions connected together or constituting

parts of a common scheme or plan.

Defendants contend that each offense in the present indict-

ment is based on a different statute with different statu-

tory elements, different facts, different dates, and involving

different persons. As a result, defendants argue that the

offenses charged “are not offenses of the same character,

and they are not based on the same transactions or con-

nected together or parts of a common scheme.” In oppo-

sition, the Government argues that the essence of the

instant action involves a single scheme, charged in count I

of the indictment, which must be proved in order to con-

vict defendants of the offenses charged in counts I-X of

the indictment, noting also that evidence of the acts

charged in counts XI and XII is admissable to prove the

requisite intent with respect to the violations alleged in

counts I-X. The Government’s contentions are correct.

As noted above, the essence of this action involves a

series of transactions, consummated over a number of

years, which allegedly constitute part and parcel of a

scheme to defraud the purchasers of Preferred Land stock.

Defendants’ contentions to the contrary are simply without

merit. Certainly, misjoinder under Rule 8(b) may be per

se prejudicial, United States v. Bova, supra; however, per-

haps in recognition that two separate, but otherwise iden-

tical trials of the same allegedly illegal scheme would not

serve the interests of justice or of judicial economy, defen-

dants do not seek severance for misjoinder under Rule 8&(b).

Instead, defendants seek severance of the various counts of

the indictment according to the offenses charged, i.e.

defendants seek separate trials of the counts charging

securities fraud, mail fraud, conspiracy, and obstruction

of justice. See Rule 8(a). Alleged misjoinder under

Rule 8(a) does not result in “inherent” or per se

25a

prejudice; and, pursuant to the terms of Rule 14, the

question of severance is committed to the sound dis-

cretion of the court. E.g.,United States v. Pacheco,

489 F.2d 554 (Sth Cir. 1974); United States v. Perez,

489 F.2d 51 (Sth Cir. 1973), cert. denied, 417 U.S.

945 (1974).

The relevant considerations with respect to severance

under Rule 14 have been discussed as follows:

The rules are liberal in permitting joinder at

trial, both of offenses and of defendants. -Al-

though this permits wide latitude on the prose-

cution in determining the form in which the

case is to be prosecuted the trial court has both

the duty and the authority to order a severance

at any time during the trial if it believes that

impermissible prejudice would otherwise result.

Thus, the serious problem of reconciling the

sometimes competing interests of trial economy

and danger of prejudice to defendants neces-

sarily resides in the discretion of the trial judge.

Motions for severance under Rule 14 have rarely

been granted and the trial court’s decision has

not been disturbed absent a clear showing of

abuse. [citations omitted.] The general rule

has been, and remains, that persons jointly in-

dicted should be tried together, especially in

conspiracy cases.

United Stataes v. Perez, supra at 65. Although the dis-

tinctions between Rule 8(a) and Rule 8(b) often involve

impossibly fine differences of degree; and although mis-

joinder under Rule 8(b) may sometimes be inherently

prejudicial, it is clear that the trial judge may remedy this

prejudice at any time, when it appears; however, absent

any showing of prejudice whatsoever, inherent or otherwise,

26a

severance is simply not warranted. /d. (defendant must

show “compelling” prejudice, rather than merely “some”

prejudice); accord, United States v. Pacheco, supra.

Every complex, multi-count conspiracy case involves

some difficulty and confusion to the jury, the court, and

the parties, and hence some degree of prejudice; however,

the mere fact that the case involves “multitudinous and

complex transactions” is not reason to hold separate trials

on each aspect of this indictment. See United States v.

Wayman, 510 F.2d 1020 (Sth Cir. 1975). In this case,

the relationship between the various counts is quite appa-

rent, and some or all of the evidence necessary to estab-

lish the substantive offense charged in count I, is equally

necessary to establish the offenses charged in the other

counts.!. See United States v. Pacheco, supra. As a fe-

sult, this court has concluded that joinder of defendants

and offenses in this action serves the purposes inherent in

Rule 8, by avoiding “duplication of time and effort of

both the prosecution and the courts and minimiz[ing] the

prejudice to the defendants.” United States v. Gentile,

supra, at 630. Accordingly, defendants’ motion for

severance or an election under Rule 14 is hereby DENIED.

MOTION FOR RECONSIDERATION

In this motion, defendants once again raise their

curious “states rights” arguments founded upon the in-

applicable intrastate exemption, arguing also that violation

of 15 U.S.C. §77q is not a crime; however, the essence of

their argument in support of the instant motion concerns

1“ twWyhen the facts underlying each offense are so closely connected

that proof of such facts is necessery to establish each offense, joinder

of defendants and offenses is proper.” United States v. Gentile, 495

F.2d 626, 630 (Sth Cir. 1974).

27a

their contention that the United States Attorney may not

usurp the discretion of the Attorney General in deter-

mining whether criminal prosecutions may be instituted

for violation of the antifraud provisions of the Securities

Act of 1933. Defendants argue that this court should

make a “specific ruling dismissing the indictment herein

in its entirety as improperly obtained by the U.S. Attor-

ney in the absence of an exercise of discretion by the

Attorney General under §20g of the Securities Act of

1933 [15 U.S.C. 877t(b)].”

In the prior order, this court noted that these con-

tentions had been authoritatively determined adversely to

defendants by three courts, including the United States

Supreme Court, e.g., Tallant v. Moye, 419 U.S. 821 (1974)

(motion for leave to file writ of mandamus denied); how-

ever, defendants now argue that these courts did not con-

sider the merits of the arguments, but merely based their

decision on the general reluctance of courts to intervene

preemptively in the criminal process by the use of extra-

ordinary writs. See, e.g., Cohen v. Stokes, Civil Action

No. 75-765 (N.D. Ga. April 22, 1975), reconsideration

denied, (May 6, 1975); cf. United States v. Calandra,

414 U.S. 338 (1974). While this contention may be

partially correct, insofar as the res judicata or collateral

estoppel aspects of defendants’ ptior applications for

extraordinary relief are concerned, this court has reviewed

the transcript of the oral hearing conducted before Judge

Moye in Preferred Land Corp. v. Stokes, Civil Action No.

74-720 (N.D. Ga. Apr. 17, 1974), aff'd mem. __ F.2d

(Sth Cir. Dec. 11, 1974); and it is clear that arguments

identical to those asserted in the instant motion were

also raised in that action. Irrespective of the reasons

for the decisions of the various courts on this matter?

2None of the courts previously reviewing this issue entered a formal

opinion; therefore, it is impossible to determine whether these courts

concluded that the actions filed were without merit on conceptual,

procedural, or substantive grounds.

28a

this court has concluded that defendants’ arguments are

without merit.

In support of their arguments, defendants rely on

the plain language of 15 U.S.C. §77t(b), the legislative

history of a proposed amendment to that statute, and the

recent decision of the Supreme Court on a purportedly

analogous issue. See United States v. Giordano, 416 U.S.

505 (1974). Defendants have not cited any statutory

language in 18 U.S.C. 88371, 1341 or 1505, which pre-

ludes the exercise of prosecutorial discretion on the part

of the United States Attorney, her have they cited any

authority for the proposition that a properly constituted

grand jury may not return an indictment for violation of

those statutory provisions absent approval from the Attor-

ney General of the United States. Defendants in effect

argue that since the discretion to prosecute violations of

the securities fraud laws is vested solely in the Attorney

General, the prosecution of other interrelated offenses or

offenses predicated on the same fraudulent scheme must

likewise be vested solely in the Attorney General. This

contention is wholly without merit; for such an argument

would virtually emasculate the prosecution of federal of-

fenses when any regulatory agency, such as the S.E.C.,

F.T.C. or H.E.W. arguably has been assigned primary

supervisory, investigatory, and civil enforcement authority

over the scheme in issue. Defendants’ arguments must

likewise fail with respect to those counts of the subject

indictment predicated solely on violation of the securities

laws.?

30n review of the order entered in this action on June 20, 1975,

this court notes that it erroneously included count VI of the indict-

ment among the securities fraud counts. See United States v. Tallant,

supra at p. 18 n. 1; id pp. 411. This is largely a clerical error

which did not affect the substantive outcome of that order, and

which may be corrected at any time under Rule 36, Fed. R. Crim. P.

29a

United States v. Giordano, supra, while instructive,

does not support defendants’ position. In that case, the

Court was presented with mandatory terms of the portions

of the Omnibus Crime Control and Safe Streets Act of

1968 dealing with issuance of wiretap authorizations by

the Attorney General. 18 U.S.C. 82516(1). The Court

concluded that the plain language of the act, as well as

its legislative history, precluded issuance of wiretap orders

on the initiative of investigative officers, noting that under

the statute, “(t]he mature judgment of a particular, re-

sponsible Department of Justice official is interposed as a

critical precondition to any judicial error.” Jd. at 515-16.

(emphasis added.)* In reaching this conclusion, the Court

rejected the Government’s argument that the statute in

question, by merely vesting a duty in the Attorney Gene-

ral, was not intended to preclude delegation of this duty

to other responsible officers under the provisions of 28

U.S.C. 8510:

As a general proposition, the argument is

unexceptionable. But here the matter of dele-

gation is expressly addressed by §2516 and the

power of the Attorney General in this respect

is specifically limited to delegating his authority

to “any Assistant Attorney General specially des-

ignated by the Attorney General.” Despite §510,

Congress does not always contemplate that the

duties assigned to the Attorney General may be

freely delegated.

Id. at 514 (emphasis added). As another example of a

statute circumscribing the general provisons of § 510, the

4Under the express terms of §2516(1), the particular, responsible

official, is “[t]he Attorney General, or any Assistant Attorney General

specially designated by the Attorney General. . . .” Jd. (emphasis added.)

30a

Court cited 18 U.S.C. §245(a)(1), which provides for certi-

fication by the Attorney General of civil rights prosecu-

tions, “which function of certification may not be dele-

gated.” Jd. There is no similar provision with respect to

15 U.S.C. 877t(b).

A fair reading of the statutory provision in issue in-

dicates that pursuant to the express terms of the statute,

it was designed to affect the power of the S.E.C. and not

designed to limit the normal power of delegation entrusted

to the Attorney General.5 In fact, the legislative history

cited by defendants herein, far from supporting their theory,

actually supports the proposition that Congress was simply

concerned with the proper boundaries that should be im-

posed upon the authority of the S.E.C., and did not intend

to circumscribe the delegatory discretion of the Attorney

General under 28 U.S.C. 8510. The statute itself is couched

in permissive rather than mandatory terms; and, unlike the

wiretap authorization statute construed in Giordano, and,

unlike 18 U.S.C. 8245(a)(1), the statute does not contain

an express or implicit limitation on the authority of the

Attorney General to “delegate” or to “designate” an ap-

propriate prosecutorial official. As a result, this court

agrees with the comments of Solicitor General Bork, con-

tained in his brief on the matter submitted to the Supreme

Court in Tallant v. Moye, supra:

[T]he statute, upon which petitioners rely, does

not state that stock fraud cases may be brought

only when personally authorized by the Attorney

> The statute in question provides in relevant part as follows:

“The Commission may transmit such evidence as may be available

concerning such acts or practices to the Attomey General who may,

in his discretion, institute the necessary criminal proceedings under

this subchapter.” 15 U.S.C. §77t(b).

3la

General, but rather that the Securities and Ex-

change Commission may refer cases to him for

prosecution. The evident purpose of this section

was to insure that, in cases where the Commis-

sion determined that criminal prosecutions were

warranted but the United States Attorney de-

clined to prosecute, the Commission would be

entitled to have its evidence reviewed by the

Attorney General or his delegate.

Moreover, under any construction 15 U.S.C.

§77t(b) does not require personal action by the

Attorney General, for the Attorney General has

power to delegate “any function.” 28 U.S.C.

8510.

Under Giordano, and in light of the arguments of the par-

ties and the plain language of the statute, this court has

concluded that irrespective of whether the matter has

been authoritatively foreclosed by the aforementioned de

cisions of the courts that have considered defendants’ ap-

plications for extraordinary relief, the United States At-

torney, and his authorized assistant, did not exceed their

authority in presenting this matter to the grand jury and

in acting upon the resulting indictment. Cf. United States

v. Parrott, 248 F. Supp. 196, 199 (D. D.C. 1965) (rec-

ommendation to prosecute referred by S.E.C. to U.S. At-

torney, but indictment dismissed on speedy trial grounds).

See also United States v. Parrott, 425 F.2d 972 (2d Cir.),

cert. denied, 400 U.S. 824 (1970) (affirming conviction

on indictment returned in New York). Defendants argu-

ments to the contrary are without merit.

Accordingly, for the reasons hereinabove expressed,

defendants’ motion for reconsideration is hereby DENIED.

32a

In sum, this court has denied defendants’ motion for

severance, concluding that a joint trial of the offenses al

leged in the indictment and the parties herein would not

be inherently prejudicial or otherwise so prejudicial as to

be improper under Rule 8(a) or 8(b), thereby warranting

severance under Rule 14. The defendants’ motion for

reconsideration has also been DENIED.

IT IS SO ORDERED.

This, the 16th day of September, 1975.

/s/ RICHARD C. FREEMAN

United States District Judge

33a

APPENDIX iii

IN THE

UNITED STATES DISTRICT COURT FOR

THE NORTHERN DISTRICT OF GEORGIA

ATLANTA DIVISION

* baa * * *

CRIMINAL INDICTMENT

THE GRAND JURY CHARGES:

COUNT ONE

1. From on or about May 18, 1967, and continuing up

to and including the date of the filing of this indictment, the

defendants, FRED C. TALLANT, SR. and WILLIAM M.

WOMACK, JR. (hereinafter sometimes singularly referred to

by their surnames and collectively as ““defendants’’), in‘ the

Northern District of Georgia and within the jurisdiction of

this Court, bu use of the mails in the offer and sale of se-

curities, namely the Class A Common Stock of Preferred

Land Corporation (hereinafter referred to as “PLC”’), a Geor-

gia corporation, did, directly and indirectly wilfully and

knowingly employ a device, scheme and artifice to defraud,

obtain money and property by means of untrue statements

of material facts and omissions to state material facts neces-

sary in order to make the statements made, in the light of

the circumstances under which they were made, not mislead-

ing, and engage in transactions, practices and a course of

business which operated and would operate as a fraud and

deceit upon purchasers of said securities, said purchasers

being generally that class of persons (hereinafter sometimes

referred to as “PLC investors”) whom defendants believed

could be induced to purchase said securities, all in the fol-

lowing manner:

34a

(a) On May 18, 1967 defendant TALLANT caused PLC

(ie., Preferred Land Corporation) to be incorporated under

the laws of Georgia with an authorized capital of 8,000,000

shares of $.05 par value Class A common stock and 2,000,

000 shares of $.05 par value Class B common stock, with

offices in Atlanta, Georgia. Shareholders of Class A common

stock of PLC were empowered to elect and did elect two

directors, while shareholders of Class B common stock of

PLC were empowered to elect and did elect three directors.

Defendant TALLANT effected control of PLC through own-

ership of 80% of its outstanding Class B common stock and

caused himself to be elected its President and a director and

his brother-in-law, defendant WOMACK, to be elected Secre-

tary-Treasurer and a director of PLC.

(b) Defendants TALLANT and/or WOMACK controlled

and owned directly or beneficially, several close Georgia cor-

porations, to wit: Tallant Properties, Inc., Tallant and Com-

pany, Atlanta Seals, Inc., Fidelity Securities, Inc., The Bos-

ton Company and Tri-Equity, Inc., which said corporations

defendants utilized in said scheme in the manner hereinafter

described.

tinuing to the date of the filing of this indictment, defend-

ants offered and sold and caused to be offered and sold to

PLC investors shares of the Class A common stock of PLC

for the purported purpose of financing PLC, as follows.

i. On or about June 8, 1967 defendants caused PLC

to commence a public offering of 1,200,000 shares of PLC

Class A common stock at $.10 per share.

ii. On or about October 16, 1967 defendants caused