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because this is more than just refreshing the recollection, this is the actual record of the trial; is it not?

Mr. CASEY. Yes.

Senator BROOKE. On page 103 of the transcript, and I read from this transcript the judge's language. Now you will notice there are two branches to this thing about how you get to punitive damages. I am not going to repeat it because I think you have got it.

One is the willful intentional taking of something, knowing you are doing it, and the other is almost that, but not quite. It is a reckless, gross negligence of a sort as to constitute wanton conduct being utterly indifferent to the rights of Mr. Fields under all the circumstances. Applying it as best I can to the evidence in this case, whatever you may find the facts to be, I would say the only way you could get to it on the latter branch would be this: To find from the evidence and by its greater weight, that Mr. Casey should have known that because Cuddahy was a young man just out of law school, because he had been given the job of reading Law Review articles and condensing them and composing his own material, using copyrighted material to compose and put together his own material; that if he said to Cuddahy what in fact he says he said, to look it over and see if it has any ideas we don't have, that he must inevitably have known, or should have known, that what did happen would in all probability occur and you may reach the conclusion, that that conduct constituted gross negligence or wanton reckless indifference to the rights of Mr. Fields, even though stopping short of an intentional taking.

You see the difference, I think.

Now my question to you is, what did you mean if you, in fact, said to Mr. Cuddahy, look it over and see if it has any ideas we don't have?

First of all, did you make that statement to Mr. Cuddahy?
Mr. CASEY. I made a statement to that effect.

Senator BROOKE. What did you mean by it?

Mr. CASEY. What I meant was that he should review this manuscript against our book, see if there was any ideas or new material that we hadn't covered or dealt with properly and my purpose in doing that was so I could follow through and make an assignment or give an assignment to Mr. Fields. That was my purpose in giving Mr. Cuddahy that manuscript.

The report I got back was that it was legalistic and technical and there wasn't anything we hadn't covered, and I wrote to Mr. Fields promptly saying, I didn't think we would be able to work at 3,000 miles distance. I wasn't going to give him any assignments as I tentatively said I would.

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Senator BROOKE. And in that conversation with Mr. Cuddahy, was it your intention that Mr. Cuddahy take the Fields' material that did not already have, and use it yourself? Mr. CASEY. No, Senator, it was not.

Senator BROOKE. Did your lawyer raise an exception to this charge by the trial judge?

Mr. CASEY. I don't know about that. I do know in commenting on the verdict, he said there was no evidence that there was any wilful intent on the part of Mr. Casey to take this, no evidence that he acted with malice.

Whether he raised an exception to the charge, I don't remember from my review of the transcript. I probably ran through that portion of it very quickly.

Senator BROOKE. Mr. Garfield was your attorney?

Mr. CASEY. No, Mr. Diskin was my attorney. Mr. Garfield was the plaintiff's attorney.

Senator BROOKE. My 10 minutes have expired, Mr. Chairman. I reserve the right to question further.

The CHAIRMAN. Senator Cranston?

Senator CRANSTON. Mr. Casey, with regard to the matter of sealing the transcript in the Fields case, is the purport of what you said today, after having an opportunity to refresh your memory in reading the transcript that the agreement or idea of sealing the transcript came out of a meeting in the judge's chambers and it was, therefore, assumed that the judge would have made the order in court, and that you perhaps confused sealing the record with his order that did come from him that no transcript of any portion of the trial, whatsoever, shall be made or sold or delivered to any person whatsoever?

Mr. CASEY. Well, I think that is my testimony.

In this matter my recollection at the previous hearing somewhat coincides with Judge Craven's recollection, that this became a live issue when Mr. Fields spoke to the court stenographer about getting a copy of that transcript of the plaintiff's summation after we settled the case.

At that time I brought up the question of wheher the record should be sealed. I testified last time this was at the judge's initiative and my recollection is that this is something generally accepted and agreed upon, and the judge had taken the step necessarily to implement it. Senator CRANSTON. Yes, that is what I understood you to be saying. Have there been any investigations by the SEC on any alleged violations by you of SEC laws?

Mr. CASEY. Not that I know of.

I have asked for a computer search to be made and all the companies on which I have been a director and I understand it is negative.

Senator CRANSTON. Do you have any memory of any other matters that you were involved in, in which the SEC at any point had any occasion to talk to you or your attorney about such matters?

Mr. CASEY. I have no recollection of any such matters.

Senator CRANSTON. Were there any allegations or demand letters that came to you on any alleged violations that were settled before they reached any court?

Mr. CASEY. No, never, Senator.

Senator CRANSTON. Thank you very much.

The CHAIRMAN. Senator Packwood?

Senator PACKWOOD. No questions, Mr. Chairman.

The CHAIRMAN. Senator Stevenson?

Senator STEVENSON. Mr. Casey, in 1952 you formed the Kalvar Corp. and from 1952 to 1965 you were a director of that corporation, is that correct?

Mr. CASEY. Yes.

Senator STEVENSON. You were also a member of the executive com mittee?

Mr. CASEY. I became a member of the executive committee of that corporation in, I would guess, 1964 when it was in trouble. It got into financial trouble and I was asked to take on the chairmanship of the executive committee.

Mr. STEVENSON. You recall the suit by the stockholders of Kalvar against you and the management of Kalvar to block an exchange of about 20,000 shares of Kalvar stock for all of the stock of Standard Office?

Mr. CASEY. I recall that, too; yes.

Senator STEVENSON. Now, in your statement of today you say that approximately 85 percent of the stock of S. O. Systems, Inc., was owned by six stockholders.

Where do they reside?

Mr. CASEY. Four of them resided outside of California, two of them resided in California.

The acquisition of Kalvar by SOS contemplated consolidating the activities of these two companies in New Orleans and they moved to New Orleans and were going to work there. So at the time of the closing they moved to New Orleans.

Senator STEVENSON. At the time of the agreement and the offering, what percentage of the stock of S. O. Systems was owned by residents of California?

Mr. CASEY. I really don't know that.

I have, incidentally, the general counsel of Kalvar, who is in the hearing room here and he is in a better position to deal with these questions than I am. I was concerned with the transaction from the standpoint of the business interests to be served.

It was finally consummated on the advice of three law firms; my own law firm in New York, the McCall, Chaffe firm in Louisiana, and another law firm in San Francisco.

These three firms advised the way it should be consummated.

Senator STEVENSON. It is my understanding and perhaps this can be put forth by someone else, that over 80 percent of the stock of SOS was owned by five California residents.

You did mention in your statement that in addition to the 85 percent of the stock owned by six stockholders, there were 300 other stockholders owning the remaining 15 percent, and many of them registered in California.

It is not, perhaps, terribly important. The point is that under the law of California, at the time, a permit from the California Corporation Commission was required before the transaction could be consummated in California. Prior to issuing the permit, the commission could conduct a hearing on the fairness, justice, and equity of the offer to the stockholders.

Is it true that to avoid the delay involved in obtaining a permit and effectively to evade the jurisdiction of the California Commission, you recommended moving the controlling stockholders of SOS from California to New Orleans in order to consummate the transaction there? Mr. CASEY. No; I don't think that is true, Senator.

I didn't recommend that they do anything. The purpose of the California review was to see that the California shareholders offer made to them was fair.

The complaint here is not that the offer made was unfair to the SOS shareholders. It was that Kalvar was offering too much. That was the genesis of the whole dispute.

Now, it was decided that this transaction had to be consummated promptly, or it would not serve the business purpose. These SOS executives wanted to merge with Kalvar, if they did they would have to move to New Orleans.

Counsel for Kalvar took a position that Kalvar was a Louisiana corporation and it was making an offer and it was perfectly appropriate and proper for them to decide that it should be closed in Louisiana. If that decision was made, there was no need to go through a hearing in California.

Nevertheless, counsel representing Kalvar in California did talk to the California commissioner. At that time he agreed that the prospectus covering the Kalvar shares were to be offered, which had been filed with the SEC or mailed to the California shareholders, so their ratification could be made with knowledge that the thought would satisfy his requirements. But the transaction was consummated on that basis.

Six years have passed and there never had been any complaints from the California corporation commissioner and I consider it a closed matter.

Senator STEVENSON. If it wasn't your advice, would it be fair to say that pursuant to the opinion of your law firm, that the controlling stockholders of SOS were flown from California to New Orleans for a prospectus transaction?

Mr. CASEY. I don't have any recollection of that.

Certainly we didn't fly them from California to New Orleans.

Senator STEVENSON. Let me then put a hypothetical question to you. If the facts are that in order to escape the jurisdiction of the corporation commission in California, a lawyer should recommend to the offering corporation that the offerees should be transferred out of California and to New Orleans in order to effect that transaction without the permission of the California corporation commissioner. would you approve, apart from the legality?

Mr. CASEY. I do not think there is anything that I can find, anything to criticize, if grownup men decide that they want to consummate a transaction quickly, if they decide they do not need the protective services of the California Corporation Commission, and if they decide to go to New Orleans where it is perfectly proper to close a transaction quickly. I find it hard to find anything to criticize there.

You are talking about grownup men who made this decision they did not need whatever protective services the California Corporation Commission is going to give them. There was no reason not to bring about that transaction in Louisiana.

Senator STEVENSON. When you say "grownup men," are you referring to all of the stockholders?

Mr. CASEY. I refer only to the principals who closed the transaction in New Orleans.

Senator STEVENSON. The principals in this case, including all of the stockholders?

Mr. CASEY. As far as I know, two or three of the principal stockholders. This was a decision made between them and the management

of Kalvar in order to close the transaction properly and as I said before, there were two or three independent law firms who told them this was entirely appropriate.

Senator STEVENSON. You don't feel any of the other stockholders in SOS had any real interest?

Mr. CASEY. There was no need to make an offer to them. We were prepared to do it if it could be arranged. We were ready to have the hearing but the management subsequently decided that acquiring that additional amount of stock wasn't worth the effort.

Lots of times there is no need for a corporation to decide to acquire all of the shares of another company.

Senator STEVENSON. But the laws are intended to protect all of the stockholders.

Mr. CASEY. The law is intended to protect those shareholders to whom an offer is made.

Senator STEVENSON. That is your view of the California securities law?

Mr. CASEY. I am not an expert on the California securities law. Senator STEVENSON. Would that be your view as chairman of the SEC?

Mr. CASEY. You would have to be more specific.

Senator STEVENSON. Well, let me put it this way. Taking that same hypothetical case, you indicated you saw nothing wrong with the principals getting together to consummate this transaction in New Orleans outside of the jurisdiction of California.

Would you see nothing wrong with it either as chairman of the SEC?

Mr. CASEY. I don't think my view as chairman of the SEC would be any different than that as a lawyer. The California shareholders have whatever rights they may have.

If the principal shareholders are taking a price excessive, in relationship to what they are paying, they have an action against them. That is a difference between the minority and majority stockholders. Senator STEVENSON. Well, my 10 minutes have expired. Maybe we can resume a little later.

Mr. CASEY. Senator, do you want to take some of the other witnesses. that I have?

The CHAIRMAN. Well, Senator Packwood, I believe, is next.
Senator PACKWOOD. I have no questions, Mr. Chairman.

The CHAIRMAN. How about you. Senator Brock?

Senator BROCK. Just a couple of points, Mr. Casey.

First, I would like to state for the record that I thought the recitation in the record of losing your-letting Mr. Garfield get under your skin was interesting and somewhat dramatic. I don't think it is really relevant to this hearing.

What I got out of this entire session is both you and the judge have some difficulty of recalling every detail of something that happened 9 years ago.

Mr. CASEY. I think the judge and I would agreed to that.

Senator BROCK. If I could just summarize the situation in the Fields' case, vou personally. while you are responsible as any manager of any business enterprise is for his employee, you personally had nothing

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