## Facts

- AVM Corporation, a voting-machine manufacturer, had securities registered under the Securities Exchange Act of 1934 and was required to file periodic reports and proxy materials with specified disclosures.
- Lloyd Dixon, Jr., AVM’s president, caused AVM to make substantial loans to him, including more than $65,000 in 1971.
- SEC proxy rules under § 14(a), including Schedule 14A Item 7(e), required disclosure of officers’ indebtedness to the issuer, including the maximum amount outstanding, the nature of the debt, the amount outstanding near the filing date, and the interest rate.
- AVM’s accountants provided Dixon with internal forms intended to collect information about transactions between AVM and its officers and employees.
- Dixon did not list his insider loans on the forms, and AVM’s proxy statements and related filings omitted disclosure of his indebtedness.
- The government alleged Dixon knowingly caused false or misleading filings and proxy materials by omitting required information about his loans.

## Issues

1. Whether the evidence was sufficient to prove a “willful” violation under Exchange Act § 32(a) based on Dixon’s nondisclosure of insider loans.
2. Whether SEC disclosure rules promulgated under Exchange Act §§ 13 and 14 were valid and sufficiently definite to serve as predicates for criminal prosecution under § 32(a).
3. Whether claimed reliance on accountants or other advisers, and related jury-instruction challenges, required reversal.

## Decision

- The Second Circuit affirmed Dixon’s convictions on all six counts.
- The court held that SEC proxy and reporting rules issued under §§ 13 and 14 could support criminal liability under § 32(a) when the violation is willful.
- The court found sufficient evidence for the jury to infer willfulness from Dixon’s omission of his loans despite being prompted by forms seeking officer-related transactions.
- The court rejected Dixon’s reliance defense on the ground that any professional preparation depended on information Dixon failed to provide.
- The court found no reversible error in the jury instructions or other trial rulings when reviewed as a whole.

## Legal Principles

- Valid SEC rules promulgated under the Exchange Act’s reporting and proxy provisions can have the force of law for purposes of § 32(a) criminal enforcement.
- “Willfulness” under § 32(a) may be proven through circumstantial evidence showing knowing wrongdoing or conscious avoidance, including deliberate omission of plainly required disclosures.
- A corporate officer’s reliance on accountants or counsel does not negate willfulness when the officer withholds or omits material facts necessary for accurate filings and proxy disclosures.
- In proxy and reporting prosecutions, the government must prove willfulness, but it need not accept a claim of ignorance where the defendant’s position and conduct support an inference of knowing nondisclosure.

## Conclusion

The court upheld Dixon’s Exchange Act convictions, concluding that SEC proxy and reporting rules can ground § 32(a) prosecutions and that the evidence permitted a finding that Dixon willfully caused AVM’s filings and proxy materials to omit required disclosure of his substantial insider loans.


United States v. Dixon, 536 F.2d 1388 (2d Cir. 1976)