IN RE: Alsco-Harvard Fraud Litigation

Case MDL No. 54 Document 2 Filed 04/29/15 Page 1 of 9
= Jz DEAR Ce :
' THE JUDICIAL PANEL J
: ON EET Fe | Co	Vii Ziad RT N So .
MULTIDISTRICT LITIGATION Qc
Pi PERN! . : i Co
Cc Ci i FE ROY
IN RE ALSCO-HARVARD ) |
FRAUD LITIGATION ) DOCKET NO. 54
OPINION AND ORDER SA
BEFORE ALFRED P. MURRAH, CHAIRMAN, AND JOHN MINOR WISDOM,
EDWARD WEINFELD, EDWIN A. ROBSON, WILLIAM H. BECKER,
JOSEPH S. LORD, III, AND STANLEY A. WEIGEL, JUDGES OF THE
PANEL CL
PER CURIAM SR
These actions arise from an alleged multi-million SE
dollar fraud on the United States perpetrated by Andrew |
L. Stone and Francis N. Rosenbaum through their controlled
corporations, Chromcraft Corp. and its successor, Alsco, : Lo :
Inc., prime contractors in the production of rocket
launchers. From approximately 1963 to 1965, these corpora-
tions allegedly represented to the Government that they had :
purchased launcher components from Bregman Electronics, Inc. A
and Scientific Electronics, Inc., when in fact they had SE
purchased the raw materials for the components themselves .
and had them assembled by a third party at a materially :
lower price than was represented. The Government money I RR
paid to Bregman and Scientific was allegedly transferred to Co N
Swiss bank accounts controlled by Stone and Rosenbaum. oo

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De
CC) The parties refer to this as the Bregman-Scientific phase
of the fraud. Later, in what the parties refer to as the
Republic phase, similar payments were allegedly made to
| and retained by Republic Electronic Industries, Inc. Stone,
Rosenbaum and othersl/ pled guilty to criminal charges ‘
resulting from their activities and are presently confined
in federal penitentiaries.
Six civil actions growing out of the alleged fraud
are now pending in four different districts. See attached
Schedule A. The Government has filed essentially similar
actions in two different districts, seeking recovery of its
damages from Stone, Rosenbaum, Chromcraft and Alsco on
® theories of false claims, breach of warranties and Govern=-" ment mistake. Alsco and Harvard Industries, Inc., the
Ra survivor of a later merger with Alsco, each brought actions2/
alleging securities law violations in connection with the
fraud against Stone, Rosenbaum and a number of other
defendants. Albert G. Katz, an Alsco stockholder, filed a
similar derivative suit in the Northern District of Ohio.
Harvard also brought a separate action against Republic
Electronics in the Southern District of New York for
damages arising from Republic's participation in the fraud
1/ Evelyn Price, Stone's secretary and Robert B. Bregman,
president of Bregman Electronics.
C 2/ These actions have been consolidated in the Eastern |District of Missouri.

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( Following a hearing on the motion of Stone and Rosenbaum
for coordinated or consolidated pretrial proceedings, the
Panel has concluded that all related actions should be
transferred to the District of Columbia for coordinated or
: consolidated pretrial proceedings. The parties admit that a
number of fact questions concerning the alleged fraud are
common to each of the involved actions.3/ Those opposing the
| motion contend that for various reasons coordinated or con-
solidated pretrial proceedings would not serve the convenience
of the parties or their witnesses or promote the just and
efficient conduct of the litigation, but these contentions
are unpersuasive.
® The Government argues that information gathered for itsearlier criminal action has made formal discovery unnecessary
— in its civil actions, that it will soon be ready for trial of
those actions, and that coordinated or consolidated pretrial .
proceedings might delay it in reaching trial. Certain defen-
| dants in the Alsco and Harvard actions present the converse :
argument that their liability is dependent on the outcome of
the Government actions and that allowing those actions to
proceed on their own might well eliminate the multidistrict
3/ Movants stress the importance of the common fact ~
questions concerning the engineering and cost of the component
parts supplied to Chromcraft and Alsco, the existence and
operation of the Swiss bank accounts, the organization and
control of the involved corporations, and Government con-
@® tracting practices and procedures.
—

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character of this litigation.
It is far from certain that the Government will be able
to avoid formal discovery procedures. The criminal indictment
and the present allegations of the civil complaints focus
mainly on the Bregman-Scientific phase of the fraud, about
which it is agreed the Government possesses substantial
evidence. But all of these actions, including the Government's,
also involve the later Republic phase of the fraud; and the
Government's preparedness on this phase is disputed. The
Government conceded at oral argument that it was considering
amending its complaints and joining additional defendants to
cover this phase more fully and this would apparently require
C at least some exploration of the relevant facts by deposition- or otherwise. The movants assert that few of the documents
oo thus far assembled by the Government relate to the Republic
transactions and it is probable that even if the Government
is satisfied with its files, the defendants may wish to use
* discovery procedures to prepare for trial.
Even if minimal discovery is required in the Government
actions?’ there is no reason why coordinated or consolidated
pretrial proceedings should delay the Government in pressing
rere ———————
4/ The Government at argument estimated that, at the
least, it would depose two or three witnesses for discovery
: purposes and six to eight in order to preserve their testimony
for trial.
®

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. oo | | i.
CC) for summary judgment or trial of its actions. We havepreviously stressed the competence of the transferee judge
to pass on summary judgment motions, In re Butterfield
Patent Litigation,	__ F. Supp.__ (J.P.M.L. Feb 2, 1970)
and Section 1407 (a) authorizes the remand of an action by
the Panel "at or before the conclusion of ... pretrial
proceedings." (Emphasis added). All parties are agreed
on the primacy of the Government's claim and we are
certain that the handling of that claim can be expedited
| while going forward with discovery efforts in the other
actions. See In re Frost Patent Litigation, 316 F. Supp. 977
(J.P.M.L. 1970); In re Antibiotic Drug Cases,
| 299 F. Supp. 1403 (J.P.M.L. 1969); In re Antibiotic Drug
C Cases, 295 F. Supp. 1402, 1404 (J.P.M.L. 1968).
a A number of individual defendants in the Alsco and
Harvard actions maintain that their liability rests on
| individual facts not common to the other actions and that
participation in Section 1407 pretrial proceedings would
be a severe hardship on them. As we have often stated, the
increase in expenses for the parties to these proceedings RB
will be "more than offset by savings from and convenience
of, coordinated or consolidated pretrial proceedings directed
by the transferee judge." In re Plumbing Fixtures Litigation,
302 F. Supp. 795, 796 (J.P.M.L. 1969).
®

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CC) The only remaining question is the selection of an
appropriate transferee court. Stone and Rosenbaum suggest
either the District of Columbia or the Eastern District of
Missouri while those opposing transfer suggest the District
of Columbia, if there must be a transfer, because of the
documents collected there by the Government. Here, as in
antitrust actions, the Government files are likely to be
the subject of much discovery and pretrial proceedings
should therefore be conducted in the District of Columbia.
As is often the case when multidistrict litigation
is transferred to a district with a heavy caseload, the
Panel has been required to arrange for the assignment of
an outside judge to handle these actions. See In re San
® Juan Puerto Rico Air Crash Disaster Litigation. 316 F. Supp.
— 981 (J.P.M.L. 1970) In re Silver Bridge Disaster
Litigation, 311 F. Supp. 1345 (J.P.M.L. 1970) In re
Seeburg-Commonwealth United Litigation, 312 F. Supp. 909
(J.P.M.L. 1970). Judge Charles	R. Weiner
of the Eastern District of Pennsylvania
has indicated his willingness to take these cases and,
with the cooperation and approval of all involved, has been
assigned to the District of Columbia.
IT IS, THEREFORE, ORDERED that those actions listed on
Schedule A pending in Districts other than the District of
Columbia be and the same hereby are transferred to the
® United States District Court for the District of Columbia

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CC) ~ pursuant to 28 U.S.C. §1407. With the written consent of
that court, all actions on Schedule A are hereby assigned
to the Honorable ‘Charles R. Weiner for coordinated	or
© consolidated pretrial proceedings.
®
®

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~ 1. if :
® DOCKET NO. 54 SCHEDULE .Aoo : DISTRICT OF COLUMBIA
United States v. Andrew L. Stone, et al. Civil ActionNo. 230-69
EASTERN DISTRICT OF MISSOURI :
United States v. Andrew L. Stone, et al. civil ActionNo. 69 C 24(2)
Alsco, Inc. v. Andrew L. Stone, et al. Civil Action: No. 69 C 173(3).
Harvard Industries, Inc. v. Andrew L. Stone, Civil Action
et al. No. 70 C 66(3)
" SOUTHERN DISTRICT OF NEW YORK
| Harvard Industries, Inc. v. Republic ~ @ivil ActionElectronic Industries, Inc. "No, 70 Civ 1113
® NORTHERN DISTRICT OF OHIO
Albert G. Katz, etc. v. Andrew Stone, et al. Civil Action
- _ No. C68-685
’ . . ]

Case MDL No. 54 Document 2 Filed 04/29/15 Page 9 of 9
DOCKET NO. 54 EER tT
® BEFORE THE JUDICIAL PANEL ON MULTIDISTRICT LITIGATIONU[T 8 are i4 IE i
IN RE ALSCO-HARVARD FRAUD LITIGATION HR TR Ed
Andrew I,. Stone v. William D. Hurlev, et al., C.D. EERE iq
Calif., Civil Action No. 76-0373 (DDW) : Fs£5
MOTION WITHDRAWAL ORDER | =
On April 30, 1976, two of the defendants in the above- al
captioned action moved the Panel for an order transferring
this action to the District of the District of Columbia for
coordinated or consolidated pretrial proceedings, pursuant
to 28 U.S.C. §1407, with the actions previously transferred to
and pending in that forum. In re Alsco-Harvard Fraud
Litigation, 325 F. Supp. 315 (J.P.M.L. 1971); 328 F. Supp.
1405 (J.P.M.L. 1971). Opposed to transfer were plaintiff RE
Stone, and defendants Marine Midland Bank and James Kay. \
Recently, plaintiff Stone and five of the eleven
defendants involved in this action have stipulated to a ;
dismissal of this action with prejudice. For this reason, :
movants, who are parties to this stipulation, have withdrawn
‘their transfer motion. . - .
9 It IS THEREFORE ORDERED that the motion to transfer the
WW above-captioned action to the District of the District of Pa|
Columbia under 28 U.S.C. §1407 be, and the same hereby is, ideemed withdrawn. :
FOR THE PANEL: | |
. 2. Y: 0 |
Chairman iy
: I =|