United States v. Gaf Corporation, Gaf Chemicals Corporation, Jay & Company, Inc., James T. Sherwin, Gaf Corporation, James T. Sherwin

928 F.2d 1253, 32 Fed. R. Serv. 591, 1991 U.S. App. LEXIS 4473
CourtCourt of Appeals for the Second Circuit
DecidedMarch 18, 1991
Docket444, 445, Dockets 90-1352, 90-1353
StatusPublished
Cited by78 cases

This text of 928 F.2d 1253 (United States v. Gaf Corporation, Gaf Chemicals Corporation, Jay & Company, Inc., James T. Sherwin, Gaf Corporation, James T. Sherwin) 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
United States v. Gaf Corporation, Gaf Chemicals Corporation, Jay & Company, Inc., James T. Sherwin, Gaf Corporation, James T. Sherwin, 928 F.2d 1253, 32 Fed. R. Serv. 591, 1991 U.S. App. LEXIS 4473 (2d Cir. 1991).

Opinions

DALY, District Judge.

INTRODUCTION

Three trials have been started in this matter. The verdicts here appealed came at the conclusion of the third trial, which began November 13, 1989, and lasted five weeks before Judge Lowe and a jury. Although appellants have presented various issues for our consideration in their consolidated appeal, our primary concerns relate to the effect of the government’s amendment of its bill of particulars, the trial court’s ruling on the defendants’ request that the original bill be admitted into evidence for comparison, the government’s rebuttal summation concerning the subject of the amendment, and the trial court’s ruling on the defendants’ request for an instruction concerning the chief defense theory, which was integrally related to the amendment and the government’s rebuttal summation.

GAF and Sherwin appeal from judgments convicting them of conspiring to violate the federal securities and anti-fraud laws, in violation of 18 U.S.C. § 371, price manipulation of the common stock of Union Carbide Corporation from October 1, 1986 through November 10, 1986, in violation of 15 U.S.C. §§ 78i(a)(2), 78ff, and 18 U.S.C. § 2, securities fraud for the manipulative purchases of Union Carbide stock on October 29, 1986, and October 30, 1986, in violation of 15 U.S.C. §§ 78j(b), 78ff, 17 C.F.R. § 240.10b-5, and 18 U.S.C. § 2, wire fraud, in violation of 18 U.S.C. §§ 1343, 2, and aiding and abetting the making and maintaining of false books and records by a securities broker-dealer, in violation of 15 U.S.C. §§ 78q(a), 78ff, 17 C.F.R. §§ 240.-17a-3, 240.17a-4, and 18 U.S.C. § 2. The court sentenced Sherwin to concurrent six-month terms of imprisonment to be followed by concurrent one-year terms of probation. The court also imposed a mandatory $50 special assessment on each count of which he was convicted, for a total assessment of $400. GAF was fined $250,000 on each each count, for a total fine of $2 million, and the court also imposed a $50 special assessment on each count, for a total assessment of $400.

The defendants’ chief contention at both the second and third trials was that evidence indicated that Boyd Jefferies, the founder of Jefferies & Company, rather than Sherwin, was responsible for unlawful trades taking place in November, 1986, that the government believed originally that these trades were linked to the trades for which Sherwin was ultimately convicted, and so noted in its original bill of particulars, and that since there was reasonable doubt concerning who was responsible for the November trades, there must be reasonable doubt concerning who was responsible for the trades which were the subject of the third trial.

We hold that the unusual history and circumstances of this case required that the court admit into evidence the original bill of particulars for the jury’s comparison, and that the court give an instruction similar to that requested concerning the defendants’ theory of the case. Because the court refused to admit the original bill into evidence, and refused to give the requested instruction, we believe that the chief defense theory was not fairly presented to the jury. Accordingly, as discussed below, we reverse the judgments of convic[1256]*1256tion and remand this case to the district court for a new trial.

DISCUSSION

1. FACTS

After an unsuccessful tender offer for Union Carbide in December 1985, GAF held nearly 10% of Union Carbide’s common stock, or approximately 10 million shares. Shortly after October 2, 1986, GAF decided to solicit bids for the possible sale of some or all of its Union Carbide block, and assigned Sherwin, GAF’s Vice-Chairman, to oversee this process. Sherwin solicited bids from the then-leading block traders in the nation, including Jefferies & Company. The block bids which GAF received were generally a fraction of a point lower than publicly-quoted market prices.

The government’s evidence indicated that the market price for Union Carbide stock had declined from a high of $2572 per share in April 1986 to a low of $20 per share on October 7, 1986. Although the price of Union Carbide began a recovery in mid-October, on October 28, 1986, it closed at a price ($21% per share) lower than the day before for the first time since October 7, 1986. That same day, market information indicated a large supply of Union Carbide stock available for sale below $22.

According to Boyd Jefferies, who testified for the government, GAF’s Chairman Samuel Heyman called him in mid-October to tell him to expect a call from Sherwin. Jefferies testified that Sherwin called later that day to inquire whether Jefferies, if so asked, could make Union Carbide stock close at a particular price or higher for several days in a row. Jefferies testified that he replied affirmatively, and that Sher-win assured him that GAF would guarantee Jefferies against any loss. Jefferies testified that he then informed James Melton, Jefferies & Company’s chief trader, of the substance of this conversation, and that Melton should do whatever Sherwin asked if Sherwin called while he was out of the office.

Jefferies further testified that on October 29, 1986, Sherwin called him, indicated that he wanted to proceed with their plan, and asked if Jefferies could close Union Carbide at $22 or higher that day. Jeffer-ies responded affirmatively, and then called Melton in Los Angeles, where he was based, to relay the request.

The evidence indicates that on October 29, 1986, shortly before the 4:00 p.m. close of the New York Stock Exchange, Melton called a brokerage firm in New York and placed an order to buy 140,000 shares of Union Carbide stock. In executing Melton’s request, the brokerage firm first bought 50,000 shares of Union Carbide at $21%, exhausting the supply of shares at that price. One minute later, the broker bought 2000 shares of Union Carbide stock at $22 per share. The exchange “specialist” in Union Carbide then executed three “market on the close” orders at $22. Union Carbide closed on October 29, 1986 at $22 per share.

After the close of the New York Stock Exchange, Melton purchased 8000 shares of Union Carbide stock on the Pacific Stock Exchange at $22 per share.

On October 30, 1986, Union Carbide traded at below $22 per share until Melton again intervened. He instructed his broker to purchase 27,100 shares at $217/s in a series of trades from 3:34 P.M. until 3:53 p.m. Then, in the last two trades of the day in Union Carbide, Melton, through his broker, purchased 10,000 shares at $2278. Union Carbide stock closed on October 30, 1986 at $2278 per share.

Free access — add to your briefcase to read the full text and ask questions with AI

Related

Moll v. Telesector
94 F.4th 218 (Second Circuit, 2024)
United States v. McPartland, Spota
81 F.4th 101 (Second Circuit, 2023)
Alejo A. Hamilton v. State of Missouri
Missouri Court of Appeals, 2022
State of Tennessee v. William Brian Robinson
Court of Criminal Appeals of Tennessee, 2020
Karlsen v. Kilpatrick
378 F. Supp. 3d 237 (W.D. New York, 2019)
United States v. Kerri L. Kaley
Eleventh Circuit, 2019
United States v. Sampson
898 F.3d 270 (Second Circuit, 2018)
United States v. Thomas
214 F. Supp. 3d 187 (E.D. New York, 2016)
North Jersey Media Group Inc. v. United States
836 F.3d 421 (Third Circuit, 2016)
Leon v. Fedex Ground Package System, Inc.
163 F. Supp. 3d 1050 (D. New Mexico, 2016)
United States v. Tarantino
617 F. App'x 62 (Second Circuit, 2015)
Aquent LLC v. Mary Stapleton & Italent LLC
65 F. Supp. 3d 1339 (M.D. Florida, 2014)
United States v. Marsh
568 F. App'x 15 (Second Circuit, 2014)
Commonwealth v. Keo
3 N.E.3d 55 (Massachusetts Supreme Judicial Court, 2014)
United States v. Barrera
950 F. Supp. 2d 461 (E.D. New York, 2013)
United States v. James and Mallay
712 F.3d 79 (Second Circuit, 2013)
United States v. Aleynikov
785 F. Supp. 2d 46 (S.D. New York, 2011)
United States v. Carmona
361 F. App'x 166 (Second Circuit, 2010)

Cite This Page — Counsel Stack

Bluebook (online)
928 F.2d 1253, 32 Fed. R. Serv. 591, 1991 U.S. App. LEXIS 4473, Counsel Stack Legal Research, https://law.counselstack.com/opinion/united-states-v-gaf-corporation-gaf-chemicals-corporation-jay-company-ca2-1991.