United States v. Sam Ford Fishbein and Leonard M. Yordon

AS TO FISHBEIN

Sam Ford Fishbein, convicted on Count 1 (Conspiracy), 18 U.S.C. § 371 , Counts 2 to 8, and 10 to 15 (Fraud in the Sale of Securities), 15 U.S.C. § 77q(a) and Count 21 (Use of Mails to Defraud), 18 U.S.C. § 1341 , of a 22-count indictment, appeals.

In June, 1961, a group consisting of Fishbein and four others acquired interests in six motels, two of which were located in Phoenix, and one each in the cities of Tucson, Houston, Tulsa, and San Diego. The purchase price was $4,000,000.00, of which $35,000.00 was paid down and the balance secured by mortgages on the purchased property. This group then organized the Hiway-House Hotels, Inc. (hereafter Hiway-House) and transferred the motels to it in exchange for 150,000 shares of common stock, par value $1.00 per share. The corporation then offered to the public 225,000 shares of common stock at a price of $4.80 per share. HiwayHouse itself employed a group of salesmen and conducted the promotion. ■

HiwayHouse did not prosper. From the beginning it operated with substantial losses. Within the period between the date of its incorporation and November, 1963, the retained earning deficit was $1,148,156.31. In November,…