Fed. Sec. L. Rep. P 94,534 United States of America v. John Dioguardi and Louis Ostrer

492 F.2d 70, 1974 U.S. App. LEXIS 10706
CourtCourt of Appeals for the Second Circuit
DecidedJanuary 4, 1974
Docket113-114, Dockets 73-1759, 73-1769
StatusPublished
Cited by134 cases

This text of 492 F.2d 70 (Fed. Sec. L. Rep. P 94,534 United States of America v. John Dioguardi and Louis Ostrer) is published on Counsel Stack Legal Research, covering Court of Appeals for the Second Circuit primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
Fed. Sec. L. Rep. P 94,534 United States of America v. John Dioguardi and Louis Ostrer, 492 F.2d 70, 1974 U.S. App. LEXIS 10706 (2d Cir. 1974).

Opinions

LUMBARD, Circuit Judge:

John Dioguardi and Louis Ostrer appeal from judgments of conviction entered on April 12, 1973, after a three-week jury trial held in January 1973 in the Southern District, and from the denial by Chief Judge Edelstein of new trial motions. The forty-count indictment was filed May 27, 1971, against the appellants and seven others.1 Count one charged the defendants with conspiring, in violation of 18 U.S.C. § 371 to violate provisions of the federal securities laws and regulations, 15 U.S.C. §§ 77q(a), 77x, 78j(b), and 78ff, and Rule 10b-5, 17 CFR 240.-10b-5,2 and the federal mail and wire fraud statutes, 18 U.S.C. §§ 1341 and 1343. The remaining counts charged substantive violations of these same provisions, except 18 U.S.C. § 1343.

On January 26, 1973, the jury found Ostrer guilty on eleven of the seventeen counts submitted to them by the court, and Dioguardi on four of the nineteen counts submitted as to him.3 Prior to [73]*73sentencing, the defendants moved for a new trial or, in the alternative, for an evidentiary hearing. The. basis for this motion was an unsolicited letter from one of the jurors to Dioguardi which allegedly established the ineompetency of that juror. In reliance on this, and on. the provisions of 28 U.S.C. § 1865 (b)(4), they claim that they had been deprived of their right to have their ease heard and decided by a panel of twelve competent jurors. Judge Edel-stein denied the motion on April 12th. He sentenced Dioguardi to nine years’ imprisonment and a $30,000 fine, and Ostrer to three years’ imprisonment and a $55,000 fine.4

In addition to their objections relating to alleged juror incompetency, the defendants raise four other claims of error in the conduct of the trial: first, that the government prosecutor’s argument in summation, to the effect that neither defendant called witnesses to contradict the government’s testimony, was improper comment on each appellant’s failure to testify in view of the assertion by each that he alone was in a position to contradict the government’s witnesses; secondly, that it was error for the trial court to have refused to charge, as requested, that the testimony of admitted perjurers and felons was to be scrutinized with care and caution; thirdly, that it was improper for the trial court to have ruled that Dioguar-di’s acquittal of another crime could not be proved when the government intended to utilize the acts underlying the acquittal to show a prior course of illegal conduct; finally, that consecutive sentences for Dioguardi on two of the counts charging securities law violations, counts 16 and 17, were improper since the underlying facts constituted only a single offense.

We find the defendants’ arguments unpersuasive and we accordingly affirm the convictions below and let Dioguardi’s sentences stand.

I.

The evidence at trial revealed a scheme to manipulate the price of the stock of Belmont Franchising Corporation (“Belmont"), a substantially worthless over-the-counter security. The book value of the stock was almost negligible (Belmont’s assets were essentially paper holdings in other concerns); it had been traded for only a short time for at most a few dollars a share.5

[74]*74In January of 1970 Michael Heller-man, who pleaded guilty and testified for the government, began steps to drive up the price of Belmont stock, first to $5 or $6 a share and then to nearly $50 a share. At that time two stock manipulators, Anthony Soldano and Fred Goodman, in concert with Hellerman, commenced acquiring substantially all of the 28,720 known publicly tradeable shares of Belmont. Goodman and Sol-dano executed their purchases ostensibly through the open market, using brokers who quoted prices for Belmont through the National Quotation Bureau’s pink sheets for over-the-counter securities. These purchases created the appearance of an active public market in the stock.

By early March, 1970 Goodman and Soldano had caused the market price of Belmont as quoted in the pink sheets to reach $15 a share. They did this primarily through directions to their brokers, who traded small quantities of the stock among themselves. In the meantime, Goodman and Soldano had acquired control, they believed, of all the outstanding stock.

At this point Hellerman’s role became paramount. According to his testimony, he already had an understanding with Dioguardi that “whatever I did in the future, ... he would have 25 per cent.” It had also been agreed between Hellerman, on one side, and Goodman and Soldano on the other that once the price of Belmont stock reached $15, Hel-lerman and his associates would purchase all the stock at the $15 level, with a $5 per share kickback, prior to further manipulation upwards. In confirming this arrangement with Goodman and Soldano, Hellerman took Soldano to Dioguardi’s office “to make sure it was on the record.”

According to Hellerman, it was at this time in early March that he brought Os-trer into the scheme, although the two were only recently acquainted. Ostrer agreed to commit himself to buy 14,000 shares of Belmont at $15 a share ($210,000 total), with the understanding that he would split any future profits with Hellerman, that Hellerman would guarantee him against loss, and that a loan of the purchase money would be arranged so that he would not have to “lay out a quarter” of the $210,000. Purchase orders in Ostrer’s name or in his behalf were to be made through various New York Stock Exchange firms.

Ostrer then placed orders in his own name and in his sister’s for 14,000 shares of Belmont. However, most Exchange firms which he approached refused to accept his orders, and he was forced to place relatively large block orders through firms where brokers were already in league with Hellerman.6

Contemporaneously, Hellerman made arrangements with others to purchase the remaining 14,000 or so shares of Belmont. These individuals were able to pay the selling brokers (at the $15 a share price), but Ostrer was unable to raise the $210,000 needed to “hold up” his end of the deal, a circumstance which left his brokers unpaid. According to Hellerman, he thereupon obtained a loan for Ostrer through Dioguardi. The funds, totalling $60,000, came from Hickey DiLorenzo, at an interest rate of íVz% a week. DiLorenzo also demanded and received $24,000 from Hellerman [75]*75for this favor (part of the kickback profits already made).

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Bluebook (online)
492 F.2d 70, 1974 U.S. App. LEXIS 10706, Counsel Stack Legal Research, https://law.counselstack.com/opinion/fed-sec-l-rep-p-94534-united-states-of-america-v-john-dioguardi-and-ca2-1974.