Opposition — Carr v. United States

OCTOBER TERM, 1977

LARRY A. CARR, PETIIIONER

Vv.

UNITED STATES OF AMERICA

RICHARD B. ANDERSON. PETITIONER

V.

UNITED STATES OF AMERICA

CLEO H. BULLARD. PETITIONER

Vv.

UNITED STATES OF AMERICA

ON PETITIONS FOR A WRIT OF CERTIORARI TO

THE UNITED STATES COURT OF APPEALS FOR

THE NINTH CIRCUIT

BRIEF FOR THE UNITED STATES

IN OPPOSITION

WaDE H. McCrer. Jr..

Solicitor General,

BENJAMIN R. CIVILETTI.

Assistant Attorney General,

JEROME M. Feit,

BARRY FRIEDMAN,

Attorneys,

Department of Justice,

Washington, D.C. 20530.

INDEX

Page

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CITATIONS

Cases:

Andresen v. Maryland, 427 U.S. 463 ...............064. 5

Beckwith v. United States, 425 U.S. 341 ............ 10

Bokine v. United States, 523 F. 2d 767 ............... 9

Brown v. United States, 411 U.S. 223 00.0... 5

Byrd v. Wainwright, 428 F. 2d 1017 .................6.. 8

Jenkins v. United States, 380 U.S. 445.00... 9

Lagow v. United States, 159 F. 2d 245,

certiorari denied, 331 U.S. 858, rehearing

ls Se ET. cenieensveconpesnssesnenemnnnatibtdeioents 6

Mancusi v. DeForte, 392 U.S. 364 .................04. 5-6

Opper v. United States, 348 U.S. 84 ..............0002.. 8

Oregon v. Mathiason, 429 U.S. 492 ..............0000:. 10

Schaffer v. United States, 362 U.S. S11 .........0..... 8

United States v. Bass, 4°0 F. 2d 846 ............0000... 9

United States v. Britt, 508 F. 2d 1052,

certiorari denied, 423 U.S. 825 .......... ee eeeeeeeees 6

i

Cases—(continued):

United States v. Echeles, 352 F. 2d 892 .............. X

United States v. Finkelstein, 526 F. 2d 517,

certiorari denied sub nom. Scardino v.

COE SaabGR, GES UB. GD ccesevcvecccccsececevcessesees 8

United States v. Kaplan, 554 F. 2d 958 .............. 8

United States v. Matlock, 415 U.S. 164 .............. 6

United States v. Miller, 425 U.S. 435 0.00.0... 5

United States v. Minieri, 303 F. 2d 550 .............. 9

United States v. Peterson, 549 F. 2d 654 ............ 9

United States v. Shuford, 454 F. 2d 772 ............. 8

Walsh v. United States, 371 F. 2d 135 ................ 9

Statutes:

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ed. SPINE Sadish dissccnicenecebietiasesenindidanieesibenie 2

ie SUNUEs.- TEE shai heocabicasag nceosenbtenspidtismnesdeiasameabaniiaianen 3

ar C TEMES TUREET ‘cteniadectnusatetdinraiieniesiniiniabaenbtiisisebiaiapnaiine 3

Fie EI: SF satensicdeiannpnabannnadaianaipainniedmamanmeaiaiahdileds 2, 3

Se bn TUE eibiachidiechdduahenisieaepcatcnnbdhaiaeinnesonsinbeiadumaiin 2

In the Supreme Court of the United States

OcTOBER TERM, 1977

No. 77-1232

LARRY A. CARR, PETITIONER

Vv.

UNITED STATES OF AMERICA

No. 77-6283

RICHARD B. ANDERSON, PETITIONER

V.

UNITED STATES OF AMERICA

No. 77-6291

CLeo H. BULLARD, PETITIONER

Vv.

UNITED STATES OF AMERICA

ON PETITIONS FOR A WRIT OF CERTIORARI TO

THE UNITED STATES COURT OF APPEALS FOR

THE NINTH CIRCUIT

BRIEF FOR THE UNITED STATES

IN OPPOSITION

OPINION BELOW

The opinion of the court of appeals (Pet. App. A)! is

not reported.

“Pet. App.” refers to the appendix to the petition in No. 77-6291.

(1)

Na a a ik i A a a a a aaa a a ee ne

2

JURISDICTION

The judgment of the court of appeals was entered on

May 12, 1977. A petition for rehearing was denied on

February 3, 1978. The petition for a writ of certiorari in

No. 77-6283 was filed on March 1, 1978, in No. 77-6291

on March 3, 1978, and in No. 77-1232 on March 4, 1978.

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

1254(1).

QUESTIONS PRESENTED

|. Whether a memorandum prepared by petitioner

Carr was properly admitted into evidence.

2. Whether the trial court erred in failing to grant

petitioner Carr's mid-trial motion for a severance.

3. Whether, as petitioner Bullard contends, the trial

judge acted improperly in requesting the jury to continue

its deliberations.

4. Whether testimony given by petitioner Anderson at

a non-custodial administrative hearing, where verbatim

Miranda warnings were not given, was properly admitted

into evidence against him at the instant trial.

STATEMENT

After a jury trial in the United States District Court for

the Southern District of California, petitioners were

convicted of conspiring to sell, and selling, unregistered

securities by the use of fraudulent, manipulative, and

deceptive practices. Petitioners Anderson and Bullard

were each convicted on six counts.? Petitioner Carr was

“These were conspiracy, in violation of 18 U.S.C. 371 (Count 1);

sale of unregistered securities, in violation of 15 U.S.C. 77e(a) and

IS U.S.C. 2 (Counts II and Il): fraud in the sale of securities, in

violation of IS U.S.C. 77q(a) and 18 U.S.C. 2 (Counts IV): and the

3

acquitted of selling unregistered securities but convicted

on the conspiracy and fraud charges (Counts | and IV).

Anderson was sentenced to three years’ imprisonment on

each of Counts | through IV and two years’ imprisonment

on the remaining counts, all terms to be served

concurrently. Bullard and Carr both received concurrent

18-month prison terms. The court of appeals affirmed

(Pet. App. A).

The evidence showed that, in late 1972, co-defendant

Smith conceived a plan to take over a shell corporation,

inflate the price of its stock to an artificial level, and then

“blow it off” to an unsuspecting public (Tr. 321-328, 691).

Bullard, the principal shareholder of Patterson Corpora-

tion, provided his firm as the vehicle for the manipula-

tion. He and Anderson revised the shareholder list of

Patterson so that the actual owners were dropped

(without their knowledge) and were replaced by nominees

of Bullard and Smith (Tr. 548-555, 573-575; Pet. App. 2).

The next step was to raise the price of the Patterson

stock. Smith and Anderson arranged for the acquisition

of helicopter parts variously valued at between $20,000

and $6 million in exchange for Patterson stock and a

small amount of cash (Tr. 344-347, 352). Financial

statements were then prepared which valued the parts at

the fictitious amount of $22 million (Gov't Exh. 57).

Through the use of payoffs and kickbacks, a number of

stock brokers were enlisted to “make a market” in

use of manipuiative and deceptive practices in the sale of securities, in

violation of 15 U.S.C. 78b and 78ff and 18 U.S.C. 2 (Counts V and

V1).

Petitioner Anderson was acquitted on three other counts charging

mail fraud and interstate transportation in furtherance of a fraud.

Co-defendants Charles D. Linza and Joseph R. Merola were

acquitted on all counts. Co-defendant Dalton Smith died prior to

trial.

4

Patterson through controlled sales among themselves (Tr.

1705-1710). The plan was to push Patterson's price from

its value of twenty-five cents to ten dollars per share, at

which point it would be “blown off” on the public. By

September of 1973, the scheme had inflated the stock

price to $2.25 per share (Tr. 2020).

In September 1973, Patterson acquired Carr’s construc-

tion company, Homes of America, and installed Carr as

Senior Vice-President for Marketing. Carr’s duties

included the preparation of various brochures that

portrayed Patterson as a financially sound organization

(Tr. 5468-£*%0). In reality, the material improperly

represented the assets by omitting financial liabilities and

including assets never held by the firm.

A month later Anderson was called to testify before

the Securties and Exchange Commission (SEC), where he

admitted elements of the fraud, testifying as to the falsity

of the financial reports issued by Patterson (Tr. 2649-

2666; Pet. App. 3).

On November |, 1973, Carr replaced Anderson as

President of Patterson (Tr. 5269). The SEC suspended

trading of Patterson’s stock on November 21, 1973.3

Despite this, there was an attempt to continue the

manipulation. According to the testimony of Michael

Gardner,* co-defendant Merola came to him at the

request of Carr seeking his assistance in reviving the

scheme. Merola told Gardner that Carr wanted him to

purchase the outstanding shares from Smith so that he

‘Patterson was then trading for $3 per share.

‘An unindicted co-conspirator who helped arrange for the stock

brokers who assisted in the manipulation of the price of Patterson

stock

5

could take charge of the scheme (Tr. 1764-1778).

However, this never occurred and the manipulation

collapsed.

ARGUMENT

1. Petitioner Carr claims (Pet. No. 77-1232, pp. 6-9)

that a memorandum he prepared should not have been

admitted into evidence, on the ground that its admission

violated his Fourth Amendment rights. This claim has no

foundation.

a. To begin with, Carr lacks standing to raise the issue

that the “Patterson Priorities” memorandum should have

been suppressed. He was not on the premises at the time

ihe document was obtained,’ he had neither a proprietary

nor a possessory interest in the property, and the offense

he was charged with did not include possession as one of

its elements. Brown v. United States, 411 U.S. 223, 229.

See also United States v. Miller, 425 U.S. 435.

Nor do the facts bear out Carr’s assertion that the

documents were not subject to seizure since they were

personal property. The documents were prepared by Carr

to promote the corporation; that he wrote them in his

own handwriting is irrelevant. Further, Carr made no

attempt to remove them when he resigned from Patterson.

The documents thus had a relation to Patterson and not

to Carr and accordingly he had no “reasonable expecta-

tion of freedom from governmental intrusion.” Mancusi

‘Carr had in fact resigned from Patterson prior to the time that the

documents were obtained.

‘Petitioner cites Andresen v. Maryland, 427 U.S. 463, as authority

on the issue that the memorandum was a personal record. However,

that case, which dealt with the privilege against self-incrimination,

only noted the obvious in separating a law clerk's handwritten title

search rftes which related to the defendant's legal business and not

his real estate company. /d. at 468, n. 2.

6

Vv. DeForte, 392 U.S. 364, 368. See also United States v.

Britt, 508 F. 2d 1052 (C.A. 5), certiorari denied, 423 U.S.

825: Lagow v. United States, 159 F. 2d 245 (C.A. 2),

certiorari denied, 331 U.S. 858, rehearing denied, 332 U.S.

785.

b. In any event, the documents were voluntarily turned

over to the government by Joe Stewman, an officer of

Patterson (Tr. 2936-2938). Holding the proper authority,

he could legitimately turn over corporate documents

voluntarily, as he did here, and thus remove any question

that they were improperly obtained. See United States v.

Matlock, 415 U.S. 164.

2. Petitioner Carr's other contention (Pet. No. 77-1232,

pp. 9-11), that a severance should have been granted him

owing to a conflict between co-conspirator Gardner's

testimony and Merola’s potential testimony, ts equaily

insubstantial.

Co-conspirator Gardner testified as a government

witness that in December 1973 or January 1974,

co-defendant Merola contacted him on behalf of Carr for

the purpose of arranging for Gardner to collect all the

outstanding Patterson stock from co-defendant Smith so

that Carr could revive the manipulation (Tr. 1772-1778).

In a statement he gave to Postal Inspector Ingraham

(Tr. 2929-2930), Merola had stated that Smith had told

him to retrieve all the Patterson stock so as to prevent

Gardner from obtaining funds that should go to Patter-

son.

The court ruled that Merola’s statement to Ingraham

was inadmissible on the ground that Merola may have

believed that he would not be prosecuted if he talked (Tr.

3097-3098). Merola stated that he would be willing to

testify at a separate trial. Carr then asked for a severance

Oe

I

at what was the mid-point of the trial. The judge denied

the motion (Tr. 3099-3100).

Petitioner’s complaint is that, because the severance

was denied and Merola’s statement to the Postal

Inspector was ruled inadmissible, he was deprived of an

opportunity to present critical exculpatory evidence. But

there is a basic flaw in the argument.

First, although Merola indicated that he would testify

at a subsequent trial, we do not know what his testimony

would have been: Petitioner Carr never tested the matter,

through a motion for a new trial or otherwise. It may or

may not be correct to suppose that Merola’s testimony

would have been consistent with his statement to the

Postal Inspector or otherwise helpful to Carr.

However, even assuming, with petitioner, that the

statement reflects what Merola would say at a severed

trial, it would not exculpate Carr. Indeed, what Merola

told the Inspector was that at one time Smith asked him

to obtain the Patterson shares from Gardner. Since

Gardner relinquished his shares before the last week of

September 1973 (Tr. 1758-1759), this request must have

occurred earlier. Although Carr is not implicated here,

this evidence is in no way inconsistent with Gardner's

testimony that later, in December 1973 or January 1974,

Merola relayed a message from Carr asking him

(Gardner) to obtain the shares from Smith, who now held

them. In sum, the statements are entirely compatible, and

there is no reason to believe that Merola, if called to

testify, would not have confirmed both of the two quite

separate incidents.’

“The court of appeals was mistaken in stating (Pet. App. 5) that

“the Government learned from Merola that his statement implicating

Carr in the revival of the scheme was not true.” All the Postal

8

Thus, even if the trial judge had allowed the statement

into evidence, the jury would have been able to recognize

the totally different situations. In light of this considera-

tion, and the overwhelming evidence linking Carr to the

conspiracy and fraud, the trial court acted within its

discretion to deny the motion to sever. See Schaffer v.

United States, 362 U.S. 511; Opper v. United States, 348

U.S. 84.8

ff

3. Petitioner Bullard contends (Pet. No. 77-6291, pp. 5-

8) that the trial judge improperly requested the jury to

continue its deliberations after it had reported itseif

“deadlocked.”’ The deliberations began after eleven weeks

Inspector learned from Merola was that he allegedly carried a

message from Smith to Gardner when the latter was in possession of

Patterson shares, and, as we have explained, this does not contradict

the evidence that Merola was also later used by Carr as an

intermediary.

‘Petitioner Carr further contends that the exculpatory testimony

and Merola’s willingness to give it at a separate trial necessitated a

severance. See United States v. Echeles, 352 F. 2d 892(C.A. 7). Even

assuming petitioner's contentions, granting a severance in this situa-

tion is a rare occurrence. See United States v. Finkelstein, 526 F. 2d

517 (C.A. 2), certiorari denied sub nom. Scardino vy. United States,

425 U.S. 960. A trial judge must weigh other factors. These include:

judicial economy in having to hold an additional trial (United States

v. Shuford, 454 F. 2d 772, 777 n. 5 (C.A. 4)), whether the potential

testimony would be subject to damaging impeachment (Byrd v.

Wainwright, 428 F. 2d 1017, 1021 (C.A. 5)), and the weight of the

testimony that would be presented (United States v. Kaplan, 554 F.

2d 958, 966 (C.A. 9)). Applied here, these considerations refute the

claim that the judge abused his discretion.

‘The instruction in question was (Tr. 6432):

Ladies and Gentlemen of the jury, at this time you will be

allowed to go home and tomorrow morning at 9:00 o° clock |

would request that you continue your deliberations following the

same pattern that you have previously. I'm not going to make

any comments beyond what | have just said.

9

of testimony in a complicated securities fraud trial,

involving six defendants and six counts. After what had

really been only two days of deliberations,'® the jury

reported that it had reached a verdict as to all but

defendant Bullard (Tr. 6431). The trial judge considered

this request and asked the jury to go home and convene

again in the morning. He refused to comment in any way.

The next morning, the jury returned its verdict convicting

Bullard.

This Court has held that a trial judge may properly

issue requests to a jury so long as they are not coercive.

Jenkins vy. United States, 380 U.S. 445. A simple request

that a jury continue its deliberations is not impermissibly

coercive.'! United States v. Peterson, 549 F. 2d 654(C.A.

9); United States v. Minieri, 303 F. 2d 550(C.A. 2). In the

context of a long and complex trial, requiring the jurors

to return and asking them to continue their deliberations

on a further day was well within bounds. See Walsh v.

United States, 371 F. 2d 135, 136 (C.A. 9). °

4. Petitioner Anderson asserts (Pet. No. 77-6283, pp. 5-

7) that his testimony at an administrative hearing should

not have been admitted into evidence, since the hearing,

he alleges, was a disguised criminal investigation, and he

was not given a verbatim Miranda warning. This claim is

insubstantial. b

‘The jury had also spent nearly three days hearing testimony read

back to them.

''Petitioner relies heavily on United States v. Bass, 490 F. 2d 846

(C.A. 5), for the proposition that a request to continue deliberations

can be coercive. However, this case significantly differs from Bass in

that the judge refused to make any comments. In Bass, the court

appeared to urge the jurors to reach a unanimous agreement. /d. at

854. Further, Bass has been significantly limited by the Fifth Circuit's

later ruling in Bokine v. United States, 523 F. 2d 767 (C.A. 5). There,

the court specifically found no coercion in a judge's request that the

jury continue to deliberate.

10 | 11

Anderson was called to testify before an attorney of the CONCLUSION

Securities and Exchange Commission concerning the

activities of Patterson Corporation (Tr. 2585-2586). The

SEC was investigating the market in Patterson’s stock in Respectfully submitted.

its role as regulator of the securities markets. The SEC's

investigation led to a suspension of trading in Patterson

stock on November 21, 1973, and a successful civil suit to

enjoin trading, filed on April Ii, 1974. Thus, what

The petitions for a writ of certiorari should be denied.

WADE H. McCree, Jr.,

Solicitor General.

petitioner portrays as a civil proceeding designed to BENJAMIN R. CIVILETTI,

gather criminal evidence, was in fact a valid investigation Assistant Attorney General.

to protect the securities purchasing public. JEROME M. Feit,

When Anderson appeared before the SEC he was BARRY FRIEDMAN,

voluntarily provided with a comprehensive review of his Attorneys.

rights (Tr. 2586-2589). In fact, the only divergence from APRIL 1978.

the standard Miranda warning was the absence of the

phrase that an attorney would be provided if he could not

afford one.'? This action went far beyond what the SEC

need have done. This Court has ruled in Beckwith v.

United States, 425 U.S. 341, that Miranda warnings need

only be given in cases of custodial interrogation. In that

case, the Internal Revenue Service was not required to

provide the warnings to a taxpayer being interviewed by

its investigators, even though the investigators were

concededly conducting a criminal inquiry. This case

involves no greater degree of custody or restraint by

government officials. See also Oregon v. Mathiason, 429

U.S. 492.

‘It should be noted that Anderson repeatedly waived his right to

counsel (Tr. 2588, 2627).

DOJ-1978.04