Fed. Sec. L. Rep. P 98,363 United States of America v. Joseph Margala

Joseph Margala appeals his convictions for three counts of fraud in the purchase of securities under 15 U.S.C. § 78j(b) and 12 counts of mail fraud under 18 U.S.C. § 1341 . He also seeks review of two of the conditions imposed on his probation. We hold that both the convictions and the conditions are proper.

I. Facts

This case concerns Margala’s use of the mails to conceal a very complicated scheme to freeze out a corporation’s public shareholders and underpay them for their stock. Although the scheme itself did not violate federal law, it supplies the background needed to appreciate the significance of the facts withheld and misstated in the letters.

A. The Scheme

Margala was the general manager of California Business Service and Audit Co. (CBS&A), which did bookkeeping work for small businesses. CBS&A ran into financial difficulties in the late 1960’s. Walter Wencke, a prominent San Diego lawyer and businessman, masterminded a series of transactions that enabled him and a few others, including Margala, to take unfair advantage of CBS&A’s uncertain condition.

There seem to have been five basic steps in the scheme. First, Wencke gained control of CBS&A. Crateo Corporation, a…