Appendix — Hopps v. United States

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APPENDIX J

UNITED STATES COURT OF APPEALS

FOR THE FOURTH CIRCUIT

No. 8976

Unitep States or America, Appellee;

- vB.

Srewart B. Hopps, Abpellant.

UNITED STATES COURT OF APPEALS

FOR THE FOURTH CIRCUIT

No. 8976

Uxitep States oF AMERICA, a

‘VS.

Stewart B. Hopps, A ppellant..

APPFAL FROM THE Unitep States District. Court FoR THE

District oF MaryLanp, aT Battimore. Roszer C.

THOMSEN, CHIEF JUDGE.

Decided April 2, 1964.)

=

(Argued November 4, 1963.

Before Be.x, Circuit Judge, and Butzser! District Judge.

Edward P. Morgan (Herbert E. Forrest and Edward S.

O'Neill, Welch, Mott and Morgan, and Thomas J. Ken-

ney on brief) for Appellant, and Joseph J. Tydings,

United States Attorney, and J. Hardin Marion, III,

Assistant United States Attorney, for Appellee.

Butzxer, District Judge:

Stewart B. Hopps appeals from a judgment of conviction

entered upon the verdict of a jury finding him guilty of

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two counts of an indictment which charged him with use

of the mails in a scheme to defraud in violation of 18 U.S.C.

§ 1341.1 His grounds for reversal are the insufficiency of

the evidence to establish his guilt, error in the District’s

Judge’s charge to the jury, and the denial of motions to

suppress evidence which was seized without a search war-

rant. We affirm the judgment of conviction.

‘The indictment alléges that as a part of a scheme to

defraud, Hopps caused a brochure describing the Inter-

national Guaranty and Insurance Company to be delivered

by mail te the Insurance Commissioner and to the Better

Business Bureau in Baltimore, Maryland. The indictment

charges the brochure falsely and fraudulently described

the company with respect to its reinsurance facilities and

the assets listed in its balance sheet. Stocks and bonds in-

cluded among the assets, the indictment charged, were

valueless securities of: four companies Hopps caused to be

chartered. in Panama. Cash and funds due to the company

were also charged to be falsely stated.

218U.S.C. § 1341. Frauds and swindles.

‘Whoever, having devised or intending to devise any scheme

or artifice to defraud, or for obtaining money or propeity, by

means of false or fraudulent pretenses, representations, or

promises, or to sell, dispose of, loan, exchange, alter, give away,

distribute, supply, or furnish or procure for‘unlawful use any

counterfeit or spurious coin,, obligation, security, or other

articie, or-anything represented to be or intimated or held out

to be such counterfeit or spurious article, for the purpose of

executing such scheme or artifice or attempting so to do; places

‘in- any post office or authorized depository for mail matter,

any matter or thing whatever to be sent or delivered by the

Post Office. Department, or takes or receives therefrom, any

such matter or thing, or knowingly causes to be delivered by

mail according to the direction thereon, or at the place at which

it is directed to be delivered by the person to whom it is

addressed, any such matter or thing, shall be fined not more

than $1,000 or imprisoned not more than five years, or both.”’

3a

The District Judge charged the jury that the evidence

was insufficient to convict Hopps with respect to the allega-

tions pertaining to the reinsurance facilities and to cash .

and funds due to the company. He also charged that the

evidence’ concerning reinsurance contracts should be con-

sidered only on the issue of Hopps’ willfulness. Thus, the

only misrepresentations submitted to the jury —

the stocks and bonds listed as assets.

I.

Hopps challenged the sufficiency of the evidence by mo-

tion for judgment of acquittal and post-conviction motions.

He argues that the verdict rests on inferences insufficient

to sustain conviction, and further that the inferences were

contravened by substantial ‘evidence. Our reading of the

record leads us to believe that the District Court and the

jury were not as tightly circumscribed as Hopps urges.

The evidence supports the jury’s verdict.

Hopps had broad experience in the insurance business,

particularly in the field of reinsurance. He recognized that

‘insurance of savings and loan companies would provide a

large and lucrative business. In order to furnish insurance

facilities he used a small company chartered in Tangier

named West Indische Herverzckering Maatschappij. Hopps

arranged for.the sale of this company to several American

investors. He did not directly acquire any stock and he was

not an officer of the company. His principal. activity was

advisor or consultant. The name of the company was

changed to International Guaranty and Insurance Com-

pany in November 1957.

In his role as adviser, Hopps pervaded the affairs of .

International. Although its legal home office was nominally

in Tangier in the banking house of Mars Et Cie, little

business was transacted there. Hopps, operating in the

United States, dictated letters and documents for the sig- .

natures of many persons. He prepared letters addressed

<<?

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to Mr. J. Rene Mars in Tangier, and then dictated the

- from Mr. Mars. For this purpose he maintained

h A iters. The old one was used to write the letter

ars and an electric machine was used to write

ited States ostensibly to Mr. Mars. To perfect

_jon, the ribbon copies of letters originating in

‘toe «sted States to Mars were destroyed and only carbon

cog.cs were kept in the office files.

1

Numerous letters and documents were prepared for the ©

signature of E. S. Van Galder, who was cast in the role of

an international banker and administrateur of the com-

pany. None of the many.witnesses who testified in the

case ever saw or talked with Van (ialder. Hopps dictated

Van Galder’s letters and prepared documents for his sig-

nature. At Hopps’ direction, Van Galder’s name was

signed to the ietters and documents by Hopps’ son or sec-

retary.

An investigation made by a prospective American inves-

tor. in Tangier yielded scant knowledge of the company.

The impression of foreign control of the company, upon

which Hopps relied in part for his defense, was a fiction

created by Hopps’ activities in the United States.

In November 1957 Hopps arranged for the preparation

of a statement of the financial condition of the company as

of September 30, 1957, which was filed with the Insurance

Commissioner of the State of Nevada. Included among the

assets were 5% bonds of Finance Republique S.A., with

a market value of $501,610.00. The statement listed as

additional assets 125 shares of Instituto Azeca de Creditos

y Trust, Pref. (5%,6¢) stock with the market value of

$174,803.75; 140 shares of Cie Intereuropean de Navi-

gacion, Pref. (514%) stock with a market value of $206,-

710.00: and 140 shares of Cie Centrala du Gas, Pref.

(514°) stock with a market value of $201,266.68.

The statement, represented that the stocks had been ae-

quired from a predecessor company and set out in detail in

és

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dividends received in 1955, 1956 and 1957. The statement

was prepared by a bookkeeper employed by Hopps. The

bookkeeper received the cost data concerning the stocks

and bonds from Hopps’ son and the information concern-

ing market value and dividends from Hopps.

From the evidence the jury could find that the companies

whose stocks and bonds were listed on the September 30,

‘ 1957 balance sheet were not then in existence. In November

1957 Hopps dirgcted that a letter bearing the signature of

E. S. Van Gialder be delivered to a New York attorney.

The letter requested the attorney to incorporate three of

the corporations in Panama. Shortly thereafter directions

were given to incorporate the fourth company. The corpo-

rations had the same directors, two of whom were em-

ployees or associates of Hopps and the third a stenographer

in a,.New York law office. The directors attended no meet-

ings and did not authorize the issuance of stocks or bonds.

The companies did business neither in‘ Panama nor. the

United States. Hopps paid for their incorporation and

was reimbursed by International.

In the early part of 1958, Hopps and his associates be-

came eware of apprehension in the insurance industry gen-

erally concerning insurance of domestic savings and Joan

associations by foreign companies. In addition, a complaint

was rectived concerning an association which was insured

by International. Hopps’ first inclination was to ignore the

criticism and to solve the specifie complaint by cancelling

the policy that related to it. His associates, however, be-

lieved thaf the inquiries should be answered. Accordingly

a brochure was prepared for wide circulation in the United

States. Hopps supplied an abbreviated balance sheet of

International as of December 21, 1957 for the brochure.

The names of the companies issuing stocks and bonds which

were included among the assets of International were not

listed in the brochure. Hopps di¢tated for the signature of

an officer of the company the letters transmitting the

brochure by mail to addressees in Maryland.

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The District Judge charged the jury that Hopps could

be convicted only upon proof that the stocks and bonds

were worthless, ‘‘not worth the.paper they were written

on’’. Hopps contends the jury could make such a finding

_ only by a progression of. inferences that were. insufficient

to establish his guilt. He argues that the evidence failed

to establish that the stocks. and bonds listed in the balance

sheet of December 31,. 1957, which was mailed to the

Maryland addressees, were the same stocks and bonds

listed by name in the balance sheets of September 30, 1957.

He contends that only by inference could this fact be estab-

lished. He urges that his conviction rests upon the further

inference that the stocks and bonds were valueless because

the companies were chartered after the balance sheet of

. September 30, 1957 was prepared, and upon the inference

that no other corporations .with the same names existed

prior to the formation of the companies chartered in Pan-

ama in’December 1957. — :

In support of this position Hopps relies upon United

"States y. Ross, 92 U.S. 281 (1875) and Wesson vy. United

_ States, 172 F.2d 951 (8th Cir. 1949) which express the

principle that a verdict cannot be predicated upou infer-

ences drawn from other inferences or upon presumptions

resting on the basis of other presumptions. Hopps’ reli-

ance upon the doctrine of these cases is misplaced. His

conviction dees not rest upon a progression of presump-

tions. From the testimony of an accountant concerning the

bonds, and a bookkeeper concerning the stocks and bonds,.

the jury could find that the stocks and bonds listed in the

two balance sheets were the same. The jury could find

the securities were worthless from the manner in which

the balance shects were prepared, the facts relating to

the Panamanian companies, and the investigation of the

affairs of International in Tangier. —_—

‘Hopps testified the stocks and bonds were issued by cor-

porations bearing similar names that were in existence

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prior to the time the companies were chartered in Panama.

He also testified that he did not know the stecks and bonds

were valueless. This testimony, he argues, exonerates him

on the basis of the doctrine that ‘‘once the predicate for the

ultimate inference has been contravened by. substantial

evidence it ceases to have validity.’’ He relies upon Ribaste

v. United States, 44 F.2d 21 (8th Cir. 1930); Ezzard v.

United States, 7 F.2d 808 (Sth Cir. 1925). These cases do

not require that his conviction. be reversed. The facts in

_ this case make them inapplicable. Hopps’ conviction does -

not rest upon inferences supported only by inferences. Sub- -

stantial evidence supports the verdict of the jury. Under

well settled principles the verdict must be sustained. Glasser

v. United States, 315 U.S. 60, 80 (1942).

. IT.

Hopps urges that the District Judge erred in instructing

the jury that it could consider the evidence with respect to

reinsurance facilities in determining whether Hopps. will-

fully caused the brochures to be mailed as‘ a = of the

alleged scheme. to defraud.

The testimony about reinsurance was contradictory.

Hoppe testified that International had ‘reinsurance facili-

ties commensurate with the description in the brochure.

From the testimony of other witnesses the jury could find

that the company lackéd these facilities and that Hopps

knew of this deficiency.

Paragraph 5 of the indictment charged:

‘‘Beginning on or about August 1, 1957, and con-

tinuing until(on or about April 3, 1958, the defendants,

Stewart B. Hopps and Robert Hoppe devised arid in-

tended to devise a scheme and artifice to defraud and

to obtain money by means of false and fraudulent pre-

tenses and representations from those persons in the

United States of America who, relying upon the

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claimed assets of the corporation of Tangier, Morocco,

could be induced to purchase insurance coverage from

3+ 9? ‘

it. rc |

The brochure did not des¢ribe the reinsurance facilities

as ‘‘assets’’ and for that reason the District Judge declined

to charge the jury that conviction could be based upon the

representation concerning the company’s reinsurance facili-

ties. The District Judge very carefully explained to the

jury all of the elements of the crime charged in the indict-

ment. His reference to the reinsurance facilities is found

in the following excerpt from the charge:

‘*The brochure is also alleged by the indictment to have

been false im one additional! particular; that is 12(a), where

the indictment alleges that ‘the brochure falsely and fraud-

ulently represented that International Guaranty and Insur-

ance Company had extensive reinsurance facilities with

companies of age, standing, and stability, and with millions

_in assets; and that International Guaranty and Insurance

Company reinsures anything above a small net retention on

general business. As the Defendant, Hopps, well knew,

International Guaranty and Insurance Company did not

have éxtensive reinsurance facilities; it had not reinsured

_ any of the insurance coverage which had previously been

written on risks in the United States of America; it had

no reasonable prospect of being able to reinsure any of the

insurance coverage then being written on risks in the United

States.”’ .

‘*Now, I instruct. you that you may consider the evidence

offered on that point,-on the question of wilfullness on the

_ part of Stewart B. Hopps; that is, whether Stewart B.

- Hopps wilfully caused the letters and brochures to*be

mailed as part of the alleged scheme to defraud and

to obtain money by means of false and fraudulent pre-

tenses and. misrepresentation; and that he knew, at the time

the brochures were mailed, that the brochure was false and

‘ : 7

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fraudulent in the two particulars | have referred to (name-

ly, the bonds of Republic Finance or Finance Republique;

and the stocks of the other three Panamanian corpora-

tions).

‘*As I nave said, if you find that the statements in the -

brochure with respect to reinsurance were false, that would

not prove the Defendant guilty of the offenses charged,

which are being submitted to you for your consideration.

_ He can only be found guilty of the offenses charged if you

find him guilty, beyond a_reasonable doubt, of the essential

elements of those charges as they are stated to you in these

instructions.’’

The- Digtriet Judge did not err. In Aiken v. United

States, 108 F.2d 182, 183 se Cir. wi Judge Dobie

wrote:

“Fraudulent intent, as a mental element of crime,

(it has been observed) is too often difficult to prove by

direct and convincing evidence. In many cases it must. -

be inferred from a scries Of seemingly isolated acts

and instances which have been rather aptly designated

as badges of fraud.- Whlien these are sufficiently nu-

, merous they may in their totality properly justify an

inference of a fraudulent intent; and this is true even

though each act or instance, standing by itself, may

seem rather ‘unimportant. ne ge

ITI.

The defendant has assigned error to the Court’s refusal -

to suppress papers that were obtained in California, New

York and Maryland.

The District Judge held extensive hearings on the mo-

tions to suppress.’ e papers fall into three general

classifications—International’s records, records of other

2 United States x. Hopps, 215 F.Supp. 734 (D. Md. 1962)

10a

corporations in which Hopps was interested, and Hoppa’

personal records. The District Judge suppressed Hopps’

personal records; he denied the motions to suppress the

corporations’ records.’

Hopps asserts that the District Judge’s findings of fact

with respect to the motions to suppress ‘are not supported

by the record.and are contrary to the facte. An examina-

tion of the record fails to sustain this assignment of error.

The findings are supported by the evidence—-much of which

was in conflict—and by reasonable inferences drawn from

the evidence.

In early 1958 the California Insurance Department be-

gan to investigate International to determine whether it

was operating in violation of the California Insurance

‘Code. In March the Insurance Commissioner had gathered

sufficient information to indicate that International was un-

lawfully conducting an insurance business in San Fran-

cisco, California in an office at 4)7 Montgomery Street,

which was also used by Hopps and other corporations in

which he was interestec.

Before taking any ‘ilies: the California officials con-

ferred with the general counsel of International, and at his

request, deferred instituting proceedings. However, the

Insurance Commissioner, having learned a few days later

that assurances given to defer action were not being ob-

served, promptly petitioned the Superior Court of ‘San

Francisco County for the appointment of a conservator.*

This Court vested all International’s assets in the Insur-

? Hopps’ contention that all’ the papers which were seized are his

personal property is not supported by che record. Also an examina-

tion of the exhibits introduced into evidence discloses that the

Distriet Judge properly determined the exhibits were corporate ©

records.

_* These proceedings were filed in accordance with Cal. Ins. Code

Ann. § 1011.

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ance Commissioner, appointed the Commissioner conserva-

tor of International, directing him to take possession of

all the company’s books records and property, and enjoin-

ing Hopps, his associates and employees from transacting

International’s business and disposing of its assets.

The day the order appointing a conservator was entered,

a representative of the Insurance Commissioner called at

417 Montgomery Street and was told by Hopps’ employees

that no records of International were there. That evening

and the next day Hopps and some of. his staff removed

certain records of International from the San Francisco

office to Phoenix, Arizona. Hopps and International’s gen

eral counsel engaged Lloyd Dinkelspiel and Eugene S.

Clifford, members of a law firm which had represented

Hopps in other matters, to represent International in the

conservatorship proceedings. The District Judge found

that these lawyers were supposed to look out-for nore”

personal interests as well.

A few days later a press release was issued by California

officials, with the approval of Dinkelspiel, stating that

-International’s management had agreed to give the Com-

missioner full access to the records of the company and

had announced their intention to permif full. disclosure of

_ the affairs of the company.- Pursuant to’this arrangement,

two investigators from the: office of the Insurance “Com-

missioner met Clifford at 417 Montgomery Street. The

-investigators examined file cabinets in the outer office and

the vault. They did not go into Hopps’ small private office.

It was Clifford’s responsibility to see that they’ did not

rummage through Hopps’ personal files. Clifford in-

spected everything that the investigators wished to re-

move. He declined to permit them to remove certain files

and they acquiesced in his jadgment. The investigators

removed a number of papers after review by Clifford and

ata aes :

~e.

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+. ° International challenged the jurisdiction of the Califor-

nia court and the facts upon which the order appointing

the conservator had been obtained. Its motion to vacate

the order appointing the conservator was denied. The

California court terminated the business of International

in California and appointed the Insurance Commissioner

its liquidator.. While the papers were in custody of the

. state officials, postal inspeetors were permitted to examine

them.

“In March 1960, when the secinaiiliialk: were almost con-

cluded, the California-court ordered the Insurance Com:

thissioner to return the papers to International. However,

srg the papers were still in the hands of the Commission-

, Subpoenas were issued out of the United States District

C ea for the District of Maryland directed to the Insur-

ance Commissioner and to Clifford as attorney for Inter-

national, calling on them to produce the records in the

District Court for a criminal trial that preceded the trial

of this case. Clifford filed ‘a petition in the United States

District Court for the Northern District of California, -

where the Judge modified the subpoenas. The California,

court also modified its previous order that the papers be

returned to International. . There was no objection to the

transmission of the papers pursuant to the subpoenas after

they had been made more definite on application of the

United States District Court for the Northern District of

California. The papers were-sent to the District of Mary-

land and placed in the custody of the United States a

ney for that District.

In 1959 the Attorney. General of New York initiated an

inquiry into the practice of certain savings and loan asso-

ciations within New York. In connection with this inquiry

Loretta C.Lindhauer was served with a subpoena duces

tecum, requiring her-to appear before -the AttorneysGen-

eral of New York to produce files pertaining to Interna-

®

13a

tional.’ Miss Lindhauer had been Hopps’ personal secre-

tary for many years. .At this time ‘she was on the payroll

of Anglocan, a corporation in which Hopps was interested.

She had custody of the records in an office used by Hopps

and various corporations in which he was interested. Miss

Lindhauer was advised by Hopps to consult his New York

attorneys. They suggested that she consult her own attor-

ney. Miss Lindhauer, acting upon her counsel’s advice

and through arrangements made by him, delivered the

record: to a Special Assistant Attorney General and iden-

tified them.

The records were sent te the District of Maryland by

the New York Attorney General’s office pursuant to a

_ Subpoena duces tecum issued in this case at the request

of the United States Attorney. :

The Maryland papers were obtained by subpoena duces

- teeum directed against the International Guaranty and In-

surance Underwriters, which had an office in Silver Spring,

Maryland. In early 1958 Hopps had an interest in this

corporation. The District Judge found that prior to the

time the subpoena was served other persons had assumed

control from Hopps. The attorney for the corporation on

‘April 22, 1958 delivered’ io the Government the records

of the corporation called for in the subpoena. The corpo-

ration did not contest the subpoena.

We find no error in the District Judge’s denial of the

motions to suppress the corporate records. Although some

of the papers originally were obtained by officials of the

states of California and New York, the District Judge

correctly held that in determining whether they should be

suppressed, Federal standards must be applied. Elkins -

v. United Siates, 364 U.S. 206 (1960).

The rights secured to Hopps by the Fourth Amendment

were not violated by refusal to suppress the corporations’

* This action was taken under N.Y. Gen. Bus. Law Art. 23-A

§ 352.

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papers. Peel v. United States, 316 F.2d 907 (5th Cir.

1963). Since Wilson v. United States, 221 U.S. 361 (1911)

it has been recognized that an officer of the corporation

ean not assert his. rights. under the Fifth Amendment to

prevent the usé of corporate records which have been pro-

duced by lawful means.* |

The mandate of the Fourth Amendment can not be

stated in absolute terms. Harris v. United States, 331 US.

145, 150 (1947). Rigid adherence to the concept that a

corporation is an entity distinct from its officers and stock-

holders may not always be an ippropriate basis for de-

termination of constitutional rights. Silrerthorne Lumber

Co. v. United States, 251 U.S. 385 (1920) suggests that

under facts and circumstances—not present in this case—

an individual may be aggrieved by’ the illegal search and

seizure of corporate records.’ The clarification of staius

to envoke the Fourth Amendment found in Jones v. United

States, 362 U.S. 257 (1960) is consistent with this prin-

ciple. Indeed, such a conclusion was reached in Henzel v.

United States, 296 F.2d 650 (5th Cir. 1961)." There the

* This principle is reviewed in United States v. White, 322 US.

694; 699 (1944).

*Suppression of corporate records upon the motion of its sole

shareholder who asserted violation of rights secured to him by the

Four mendment has been denied although the records were

cr iNegally seized. Lasow vy. United States, 159 F.2d 245

(2nd . TAS) ; cert. denied 331 U.S. 858 (1947). In the present

ease, however, the seizure was not unlawful.

8 Sev also United States v. Kanan, No, C-16284 D. Ariz. Aug. 9,

1°93. There the Court, after concluding that corporate officers had

standing to suppress corporate documents, applied state law to

determine the legality of the seizure. We are of the opinion that

the Rules of Decision Aet, 28 U.S.C. 1652, upon which reliance

was placed for the application of state law, provides no basis for

determining the admissibility of evidence in a federal criminal

prosecution. The requirements of the Fourth Amendment must be

tested by federal law. Elkins v. (nited States, 364 U.S, 206 (1960),

lda

president and sole stockholder of a corporation was ac-

corded standing to challenge the search and seizure of

corporate papers. The circumstances of that case are quite

different from the case at bar. There a judgment ereditor

obtained a general levy on the corporation's assets. A dep-

uty sheriff permitted a postal inspector to accompany him ~

to the corporation’s plant, to search the premises and to

seize corporate books and records which were in the presi-

dent’s office.

The pertinency of the caveat expressed in Henzel* is

demonstrated by another case decided by the Fifth Cireuit

eighteen months later. In Peel v. United States, 316 F.2d

907 (5th Cir. 1963) corporate records were obtained by

a county official by subpoena duces tecum. He permitted

federal officials to inspect them.. The records were sub-

poenaed by the United States Attorney after they had heen

surrendered by the county officia! to the United States

Attorney’s office for use at the trial. Upon these facts,

which are quite similar in their material aspects to the case

at bar, the Court denied suppression of the corporate ree-

ords onthe ground that a subpoena duces tecum was the

- lawful way to require production of the records.

We find nothing in the facts and cireumstances of this

ease that requires the suppression of the corporate records.

_None of these records was unlawfully seized. The Califor-

nia proceedings were valid. Their constitutionality has

been sustained. Neblett vy. Carpenter, 305 U.S. 297 (1938). -

* The Court stated at 296 F.2d 653:

“This is not to say that every emplovee of a corporation

ean attack. the illegal seizure of corperate property if the

~ *rnity of the search are proposed to be used against him:

Each case must be decided on its own faets. We only hold

that, under the facts presented here, the appellant had a

sufficiewt interest in the property seized and premises searched

to enable him to challenge the propriety of the Government's

conduct under Rule 41(e).""

16a

The order of the California Court did not mention the lo-

cation of the papers, but this omission is not fatal The

California officials obtained the papers from the’San Fran-

cisco office by agreement with International’s counsel.

The examination of the papers by New York and Federal

officers while they were in the custody of the California

officials and their transmittal to Maryland pursuant to a ~

subpoena duces tecum does not require their suppression.

Dier v. Banton, 262 U.S. 147 (1923): Ex Parte Fuller, 262

‘U.S. 91 (1923); Johnson v. United States, 228 U.S. 457

(1913).

The acquisition of the New York papers by the Attorney

General was lawful. The sections of the General Business

Law of New York, under which the subpoena was issued,

have been held constitutional. Dunham v. Ottinger, 243

N.Y. 423, 154 N.F. 298 (1926).” 4

Hopps challenges the validity of the New York subpoena

‘because it was directed to Miss Lindhauer, who, he con-

tends, was not authorized by him to comply with it. This

contention is without merit. The District Judge was cor-

rect in determining from the evidence that she was the cus-

todian of the corporate records. a

Hopps claims immunity provided by. Article 23-A, § 359

of the New York General Business Law. Sce People v. - |

Adams, 292 N.Y. 65, 54 N.E. 2d 10 (1944), and Dunham

vy. Ottinger, 243 N.Y. 423, 154 N.E. 298 (1926). Hopps’

however, did not testify in the New York proceedings nor

produce any documents pursuant to subpoena. His claim

that the New York proceedings were directed against him

19 In this case at 154 N.E. 301 the Court of Appeals of New York

considered the New York statute to be similar to laws of other

states whose constitutionality has been sustained by the United

States Supreme Court. Among the eases cited in illustration are

Hall vy. Geiger-Jones Co., 242 US. 539 (1917) ; Caldwell vy. Siour

Falls Stock Yards Co., 242 US 559 (19¥7).

17a

personally and that the manner in which ies papers were

acquired was a subterfuge to defeat his immunity is not

_ supported by the weight of the evidence. Hopps, therefore,

does not come directly or indirectly within the provisions

of 4 359. .

A subpoena duces tecum may be so broad and so indefi-

nite that it violates the Fourth Amendment’s prohibition

of unreasonable searches. Federal Trade Commission v.

American Tobacco Company, 264 U.S. 298 (1924): Hale v.

Henkel, 201 U.S. 43 (1906). Hopps’ reliance upon this

doctrine with respect to the New York papers and the

Maryland papers is not supported by the evidence. With

respect to both subpoenas duces tecum the Distriet Judge

was justified in ‘finding that they commanded only the pro-

duction of records relevant to the investigation being pur-

sued, and that they were not unreasonably broad.

The New York subpoena did not require the production

of all corporate records in the custody of Miss Lindhauer.

On the contrary it specified with reasonable particularity

the subjects to-which the papers related and was limited to

a reasonable period of time. Miss Lindhauer readily iden-

tified the files which were sought. The Maryland papers —

were comparatively few in number and were delivered by

the attorney for the éorporation for which. the subpoena

had been served without difficulty or protest. The disclo-

sure sought was not unreasonable. The production of the

records pursuant to the subpoena did not violate Hopps’

rights under the Fourth Amendment. McPhaul v. United

States, 364 U.S. 372 , 382 (1960) : Oklahoma Press Pub. Co.

v. Walling, 327 US. 186, 208 (1946); Brown y. United

States, 276 U.S. 134, 143 (1928).

_ Hopps argues that the Trial Court erred in utilizing the

information obtained through the search and seizure of

the California papers as justification for the search and

seizure. The record refutes this contention. The District

18a

Judge carefully pointed out that he did not use the doeu-

ments to determine whether they should be suppressed.”

Hopps’ assertion that the District Judge failed to grant

him a hearing to determine whether the suppressed docu-

ments provided leads fur the prosecution and thus tainted

the investigation is also without merit. The District Judge

specifically stated that he would afford Hopps a hearing on

this issue. The hearing was held and although Hopps

introduced no testimony on this issue, he was afforded an

opportunity to do so. Moreover, the record shows that the

District Judge at this heari.g considered whether Hopps’

individual papers tainted the investigative leads. His

rulings in this respect are nowhere shown to, be erroneous.

" We find no merit in the contentions of the appellant. The

judgment of the District Court, is therefore,

Affirmed,

” ,

I

,

11 Jn the transeript of proceedings of January 9, 1963 at page 8,

the Court said - . .

‘‘ Defendants argue as though statements of fact im the docu-

ménts had been used to support or justify thésearch. Not so.

The search was justified by the order of the CAifornia Court,

the agreement of Dinkelspiel, and the aequieseence of Ciifford.”’

This comment is fully substantiated by the record on the motions

to suppress. ‘ A

19a

UNITED STATES COURT OF APPEALS

FOR THE FOURTH CIRCUIT

No. 8976

Unsirep States or America, Appellee,’

. v.

Stewart B. Hor. 3s, Appellant

Order Denying Petition for Rehearing En Banc

Upon consideration of the petition for rehearing ‘en

bane filed in this case by Stewart B. Hopps, Appellant, the

Court is of the opinion that no ground has been shown

therein for a rehearing, and, therefore, it is

Orperep that said petition be, and it is hereby denied

and dismissed.

Simon Sosevorr ,

United States Circuit Judge

Ciement F. Haynsworrtn, Jr.

United States Cireuit Judge

oa Herpert S. Bozeman ;

United States Circuit Judge

Apert V. Bryan .

United States Cireuit Judge.

J. Spexcer Bei Sie

ae United States Cireuit Judge

A true copy,

Teste:

Mavrice 8S. Dean, Clerk

- U.S. Court of Appeals for the

Fourth Circuit

By Mancaret L. Davis

Deputy Clerk

(Seat)

April 23rd, 1964.

20a

GENERAL BUSINESS LAW

(New. York).

ArticLe 23-A

. ‘oe 6

Section 352. Investigation by attorney-general

1. Whenever it shall appear to the attorney-general,

either upon complaint or otherwise, that in the advertise-

ment, purchase or sale within this state or any commodity

dealt in on any-exchange within the United States of

America or the delivery of which is contemplated by trans-

fer of negotiable documents of title all of which are here-

inafter called commodities, or that in the issuance, ex-

change, sale promotidh, negotiation advertisement or dis-

tribution within thi#@state, of any stocks, bonds, notes,

evidences of interest or indebtedness or other securities,

including cil and mineral deeds or leases and any interest

therein, sold or transferred in whole or in part to the pur- *

-_ chaser where the same do not effect a transfer of the title

in fee simple to the land, or negotiable documents of title,

or foreign currency orders, calls or options therefor herein-

after called security or, securities, any person, partner-

ship, corporation, company, trust or association, or any

agent of employee thereof, shall have employed, or em-

ploys, or is about to employ any device, scheme or artifice

to defraud, or that any person, partnership, corporation,

Company, trust or association, or any agent or employee

thereo® shall have made, makes or ttempts to make in

the state fictitious or pretended purchases or sales of

securities or co.nmodities or that any person, partnership,

corporation, company, trust or association, or agent or

employee thereof shall have employed, or employs, or is -

about to employ, any deception, misrepresentation, con-

cealment, suppression, fraud, false pretense or false prot..-

ise, or shall have engaged in or engages in or is_about to-

engage in any practice or transaction or course of business

relating t. the purchase, exchange or sale of securities or

,

+)

Yer 2la

commodities which is-fraudulent, or in violation of law

and which has operated or which would operate as a fraud

upon the purchaser, or that any dealer; as defined by sec-

tion three hundred and fifty-nine-e of this article, or any

agent or employee thereof, has sold or offered for-sale or

is attempting to sell or is offering for sale any security

or securities in violation of the provisions of said section,

- any oné or all 01 which devices, schemes, artifices, fictitious

or pietended purchase or sales of sécurities or commodities,

deceptions, misrepresentations, concealments, suppressions,

frauds, false pretenses, tulse promises, practices, trans-

* actions and courses of business are hereby declared to be

and are herein after referred to as a fraudulent practice

on’ fraudulent practices or he believes it to be in the

public interest that an investigation be made, he may in

his discretion either require or permit such person, part-

. nership, corporation, company, trust or association, or 2 ny

agent or employee thereof, to file with him a statement in

“writing under oath or otherwise as to all the facts and

circumstances concerning the subject matter which he

believes it is to the public interest to investigate, and for

that purpose may prescribe forms upon which such state-

ments shall be made. The attorney-general may also re-

quire such other data and information ax he may deem

relevant and may make such special and independent in-

vestigations as he may deem necessary in connection with

the matter.

2. The attorney-general, his deputy or. other officer desig-

nated by him is empowered to subpoena witnesses, compel

their attendance, examine them under vath before him or.

a magistrate, a court of record or a judge or justice thereof

and require the production of any books or papers which

he deems relevant or material to the inquiry. Such power

of subpoena ard examination shall not abate or terminate

————-54- -

' So in original. Probably should be ‘‘or.’’

by reason of any action or proceeding brought by the at-

torney-general under this article.

3. No person shall be excused from attending such in-—

quiry in pursuance to the mandates of a subpoena, or from

‘producing a paper or book, or from being examined or

required to answer a question on the ground of failure of

tender. or payment of a witness fee and/or mileage, unless

at the time of such appearance or production, as the case

may be, such witness makes demand for such payment as

a condition precedent -to the offering of testimony or pro-—

duction required by the subpoéna and unless such pay-

ment is not thereupon made. The provisions for payment

of witness fee and/or mileage do not apply to any officer,

director or person ip the employ of any person, partner-

ship, corporation, company, trust or association whose

conduet or practices are being investigated.

1. If a person subpoenaed to attend such inquiry fails,

to obey the command of a subpoena without reasonable

cause, or if a person in attendance upen such inquiry shall

without reasonable cause refuse to be. sworn or to be ex-

ainined or to answer a question or tc produce a book or

paper when ordered so to do by the officer conducting such

inquiry, or if a person, partnership, corporation, company,

trust or association fails to perform any act required here-

under to be performed, be shali be guilty of 4 misdemeanor.

5. It shall be the duty of all pubiic officers, their deputics,

assistants, subordinates, clerks or employees and all other

persons to render and furnish to the attorney-general, his

deputy or other designated officer when ‘requested all in-

formation and assistance in their possession or within, their

power. ‘Any officer participating in such inquiry and any

person examined as a witness upon such inquiry who shall

disclose to any person other than the attorney-general the

name of any witness examined or any other information

‘

Lo

23a

obtained upon such inquiry except as directed by the at- -

torney -general shall be guilty of misdemeanor.

Section 354. Examination of witnesses and preliminary

injunction

Whenever the attorney-general has determined to com-

; mence an action under this article, he | may present to any

justice of the supreme court, before beginning such action,

an application in writing for an order directing the person

or persons mentioned in the application to appear before

the justice of the supreme court or referee designated in

such order and answer such questions as may he put to’

‘them or to any of them, or to produce suck papers, docu-

ments and books coucerning the alleged fraudulent prac-

tices to which the action which he hax dete rmined to bring.

relates, and it shall be the duty of the justice of the supreme

court to whom such application for the order is made to

grant such application. The application for such order

made by the attorney-geuera] may simply show upon his

information and belief that the testimony of such person

or persous is material and’ necessary. The provisions of

the civil practice act, relating to an application for an order

for the examination of witnesses before the commence-

ment of an action and the‘method of proceeding on such .

examination, shall not apply except as herein prescribed.’

The order shall be granted by the justice of the supreme

court to whom the application nas been made with such —

preliminary injunction or stay as may appear to such

justice to be proper and expedient and shall specify the

time when and place where the witnesses are required to

appear. The justice or referee may adjourn such exainina-

tion from time to time and witnesses must attend aecord-

ingly. The testimony of each witness must be subscribed

by him and all must be filed in the office of the clerk of

the county in which such order for examination is filed.

* . em * * * . * * o:

24a - | »

Section 359, Immunity

_ Upon any investigation before the attorney-general or

his deputy or other officer designated by him, or in any

-criminal proceeding before any court, magistrate or grand

jury, pursuant to or for a violation of any of the provi:

sions of this atticle, the attorne% reneral, his.depaty or -

other officer designated by him. or ‘court, magistrate or

grand jury, may confer immunity in accordance with the

provisions of section two ‘thousand four hundred forty- °

seven of the penal law. |