author: STEVENS, Circuit Judge.

text:
    UNITED STATES of America, Plaintiff-Appellee, v. EWIG BROS. CO., INC., a corporation, and Eugene W. Ewig, an individual, Defendants-Appellants. UNITED STATES of America, Plaintiff-Appellant, v. VITA FOOD PRODUCTS OF ILLINOIS, INC., a corporation, and Lawrence T. Schweig, an Individual, Defendants-Ap-pellees.
    Nos. 73-1008, 73-1454.
    United States Court of Appeals, Seventh Circuit.
    Argued Jan. 7, 1974.
    Decided Aug. 28, 1974.

      Adrian P. Schoone, Racine, Wis., for appellants Ewig Bros. Inc. et al.
    Gregory B. Hovendon, Chief, Consumer Affairs Section, U. S. Dept, of Justice, Washington, D. C., David J. Cannon, U. S. Atty., Milwaukee, Wis., Charles J. Raubicheck, U. S. Dept, of H. E. W., Washington, D. C., for the United States in No. 73-1008.
    James R. Thompson, U. S. Atty., Gary L. Starkman and Robert B. Schaefer, Asst. U. S. Attys., Chicago, 111., Gregory B. Hovendon, Chief, Consumer Affairs Section, U. S. Dept, of Justice, Charles J. Raubicheck, U. S. Dept, of H. E. W., Washington, D. C., for the United States in No. 73-1454.
    Patrick W. O’Brien, Chicago, 111., for Vita Food Products of 111., Inc. et al.

      Before HASTINGS, Senior Circuit Judge, and STEVENS and SPRECHER, Circuit Judges.
   STEVENS, Circuit Judge.

There are two ways to state the principal question presented by these appeals. Narrowly, the issue is whether residues of DDT and dieldrin in smoked chubs are “food additives” within the meaning of § 201 (s) of the Federal Food, Drug and Cosmetic Act. A somewhat more disturbing way to state the same question is whether all of the fish in the Great Lakes are “adulterated” as a matter of statutory definition. If they are, the Administrator may have, at least for the present, virtually unbridled power to eliminate all such fish from our food supply. We therefore attach special importance to the additional questions presented in the Vita Food appeal. That appeal, unlike the Ewig Bros, appeal, requires us to consider the

legal significance of an “interim guideline” announced in a press release on April 22, 1969, as well as the district court’s findings that the testing methods used by the government’s experts were not sufficiently reliable to demonstrate that Vita’s smoked chubs contained more DDT than the guideline permits.

A total ban on the future use of DDT would not resolve the problem presented by this case. Although the levels of DDT contamination are declining, we must assume that the chemical, or its derivatives, will survive as an ingredient of all or most foods for some time.

Scientists seem to agree that if the DDT level is high enough, the food should not be consumed by man and, conversely, if the amount is sufficiently small, ingestion of DDT may be harmless. Danger levels have not been precisely defined. The record demonstrates, however, that in fish levels in the range of 5 parts per million are neither (a) generally recognized among qualified experts as safe, nor (b) demonstrably injurious to health or unfit, for human consumption. At the levels disclosed by the record before us, the effect on human health is somewhat uncertain.

Unquestionably DDT is a “pesticide chemical” as that term is defined in § 201 (q) of F.D.C.A. See 21 U.S.C. § 321 (q). Pursuant to statutory procedures, tolerances have been established for its use in or on various raw agrieul-tural commodities, including fruits, vegetables, and meat. Such foods may therefore contain DDT within the prescribed tolerance limits without being “adulterated.” It does not follow, however, that a level which is either safe or unsafe for one food would be equally safe or unsafe for another food. With respect to the foods for which DDT tolerances have been set, it is reasonable to infer that the rule-making process may have been invoked either by the FDA itself, by manufacturers or distributors of the pesticide, or by farmers or producers who are interested in using DDT as a pesticide. Fishermen, however, have never had any interest in using or selling DDT themselves; its presence in the environment is a condition of their work —and also of the business of distributing or processing fish — for which they are not responsible and which they have no interest whatsoever in perpetuating. In short, unlike farmers and pesticide salesmen, they have never had any interest in adding DDT to the environment or to the food supply. From their point of view, it is not an item which is added to their products; it is a natural component of the fish before it is caught, let alone processed.

In this case the government’s claim that defendants’ chubs are “adulterated” is not predicated on a claim that the particular fish defendants sell contain a poisonous substance or are otherwise unfit for food pursuant to either subpara-graph (1) or subparagraph (3) of § 402 of the F.D.C.A. Under those subpara-graphs the government would have the burden of proving that the fish are actually harmful to man. Instead, the government’s claim is predicated on § 402(a)(2)(C), under which it need only prove that “such substance is not generally recognized, among experts qualified by scientific training and experience to evaluate its safety, as having been adequately shown through scientific procedures . . . to be safe under the conditions of its intended use . . . .” § 201 (s) of the F.D.C.A., 21 U.S.C. § 321 (s).

It is the government’s position that a fair analysis of the statutory scheme Congress has enacted, including the allocation of decision-making responsibility between the agency and the judiciary, justifies proceeding under this section. For if, as the government contends, DDT is a food additive, the Food and Drug Administration may itself decide when products containing quantities of DDT should be removed from public consumption, without having to rely upon the decisions — possibly inconsistent with one another — of different federal judges determining danger to health under §§ (a)(1) and (a)(3) on a case-by-case basis.

The question, then, is whether DDT and dieldrin in defendants’ processed fish are “food additives” within the meaning of § 201 (s).

I.

We have recently identified the principal purposes of the food additive amendment of 1958. Neither the purpose to establish a procedure for premarketing clearance of untested food additives, nor the intent to permit the evaluation of such products to encompass a consideration of their benefits, as well as their potential for harm, seems directly relevant to the question before us. Rather, we are concerned with products which, at least primarily, were intended to be regulated as pesticide chemicals rather than as food additives. It is therefore appropriate to review the development of the pesticide chemical legislation enacted in 1954 as well as the food additive amendment itself.

Prior to 1938 a poisonous substance added to a food during processing would not cause adulteration unless the government could prove that the food itself, as opposed to the added substance, was unsafe. After 1938, however, the statute has focused attention on the character of the added substance. Section 406 of the 1938 Act prohibited the use of poisonous or deleterious substances unless industry demonstrated that the substance was required for processing and also persuaded the Administrator to issue a tolerance regulation permitting use in amounts below a specified level. Pending the promulgation of such a tolerance regulation, the addition of any poisonous or deleterious substance — even traces which could not possibly affect the safe character of the end product— constituted adulteration as a matter of law. The “per se” approach adopted in 1938 placed the burden of proving safety upon industry and, as a matter of procedure, mandated marketing delays until after formal administrative review could be completed.

Although the 1938 Act authorized the promulgation of regulations limiting the amount of pesticide residues that remain in or on food (since such chemicals were obviously “poisonous or deleterious”), only one such regulation was actually issued during the subsequent 15-year period. The absence of such formal tolerance regulations was attributable, in part, to the expense and complexity of the rule-making procedure and, in part, to the required showing that use of the added substance be essential or unavoidable during processing. Instead of employing the statutory procedure, the F.D.A. exercised practical control by means of an extra-legal system of unofficial and informal tolerances.

The pesticide chemical amendment of 1954 was adopted to enable industry to make effective use of these poisonous products, even when not absolutely necessary, and to simplify, expedite, and improve the tolerance rule-making procedure — as well as to remove uncertainty from the law.

The 1954 Act created a category of added poisonous substances known as “pesticide chemicals” and authorized their use in or on “raw agricultural commodities” unless they were “unsafe” within the meaning of a newly enacted § 408. That section provided that every pesticide chemical was “unsafe” unless exempted by the Secretary or used within a tolerance limit prescribed by the Secretary. Except insofar as courts would continue to read a de minimis exception into the new requirements, and except insofar as the Administrator would decline to prosecute minor violations, every pesticide chemical was unsafe and caused adulteration unless and until it was the subject of a tolerance and thereafter used in conformity with the tolerance. As a matter of practice, a large number of tolerances were promulgated; the use of DDT and dieldrin was thereafter lawful as long as residues of these pesticides on raw agricultural commodities did not exceed specified limits.

Just as the pesticide chemical amendment in 1954 created a new category of added substances which automatically caused adulteration unless exempted or used in conformity with an established tolerance, so did the 1958 amendment create still another new category — food additives — which also, by definition, caused adulteration unless exempted or used within a prescribed tolerance. Section 402, describing' adulterated food, was amended to include any food which bears or contains an “unsafe” food additive, and every such additive was deemed unsafe unless used in compliance with a tolerance regulation issued under a new § 409.

Thus, congressional efforts to define and regulate adulterated food in the 20 years before 1958 reflected a consistent desire to rationalize the law by reducing the circumstances in which the F.D.A. must prove actual danger to a quantity of food and by establishing a system of tolerances which will both protect the public and enable industry to operate effectively.

The legislative history of the 1958 Bill indicates concern about the difficulties present when dangerous substances could not be proscribed by per se rules. Since Congress used broad language in order to eliminate such difficulties, we should not construe it narrowly. The language, set forth in full above, defines a food additive as any substance, “the intended use of which results or may reasonably be expected to result, directly or indirectly, in its becoming a component or otherwise affecting the characteristics of any food . . . Although Congress was primarily concerned with substances used by a food processor, neither the language nor the history of the 1958 Act limits its application to such substances. The words “the intended use of which” are not confined, as they easily could have been confined, to use in food processing.

Vita has argued that a process, such as smoking, during which nothing new is added to a food, cannot “transmogrify” a preexisting component of a food into an additive. But whether the food be fish, fruit, or meat, if the component is a pesticide chemical, we think that is exactly what Congress intended.

Although it may seem odd to place the label “additive” on a chemical substance which was a component of the raw product and which is not changed by processing, Congress’ choice of that label does not result in any “transmogrification.” Before processing, DDT is a “pesticide chemical” on a raw product; after processing, it is an “additive.” Since there is no tolerance for DDT on fish, both before and after processing the presence of the DDT causes fish to be adulterated without any proof that it is actually unfit as food. Defendants’ contention, if accepted, would result in the anomaly that a chemical such as DDT would adulterate all raw fish, but adulteration of processed fish would be determined on an uncertain case-by-case basis. We conclude that such a construction of the statute is illogical and unacceptable.

This conclusion is confirmed by the full text of the description of products which are “unsafe” — and therefore “adulterated” — because they contain food additives. Subsection (a) (2) (C) of § 402 provides that a food is adulterated:

“. . . if it is, or it bears or contains, any food additive which is unsafe within the meaning of section 409: Provided, That where a pesticide chemical has been used in or on a raw agricultural commodity in conformity with an exemption granted or a tolerance prescribed under section 408 and such raw agricultural commodity has been subjected to processing such as canning, cooking, freezing, dehydrating, or milling, the residue of such pesticide chemical remaining in or on such processed food shall, notwithstanding the provisions of sections 406 and 409, not be deemed unsafe if such residue in or on the raw agricultural commodity has been removed to the extent possible in good manufacturing practice and the concentration of such residue in the processed food when ready to eat is not greater than the tolerance prescribed for the raw agricultural commodity,”. 72 Stat. 1784. (Emphasis added.)

Quite clearly the need for the proviso arose from the fact that the definition of a “food additive” is broad enough to include any residue of a pesticide chemical remaining in or on food after processing. Prior to the 1958 amendment only raw agricultural commodities could be adulterated as a matter of law because of the presence of such an added chemical; processed foods were not subject to that risk. Accordingly, prior to a1958, the exemption for such pesticide chemicals used within tolerance limits on raw agricultural commodities was sufficient to avoid the risk of “per se” adulteration for all food subject to that risk. But when the “per se” concept was enlarged to encompass processed food, which might, of course, contain some chemical residue, it became necessary either (a) to make the “food additive” and the “pesticide chemical” categories mutually exclusive, or else (b) to enact a specific proviso to cover the area of overlap. Congress made the latter choice.

The proviso which Congress enacted avoids the necessity for duplicate tolerances, one covering the use of the chemical on the raw commodity and the second applying to the same chemical after processing. The fact that an express proviso was needed to avoid that consequence confirms our reading of the food additive definition as broad enough to encompass pesticide chemical residues in processed food.

Thus, the tolerances for DDT and dieldrin in or on raw fruits, vegetables, and meat are adequate to avoid adulteration caused by the residues remaining after the foods are processed. Without such tolerances, we think it is clear that the presence of DDT in or on such foods will cause adulteration pursuant to subparagraph (a)(2)(B) in their raw state, and that the same consequence will follow from subparagraph (a)(2)(C) after processing. We are also persuaded that these chemicals have the same impact on fish in the Great Lakes. As long as no tolerances have been established, the raw chubs are adulterated within the meaning of (a)(2)(B) because they contain an unsafe pesticide chemical; after processing, by virtue of (a)(2)(C), the chubs are adulterated because they contain an unsafe food additive. We think this is evident from the entire statutory scheme, the definitional language, and the relevant legislative history. We hold, therefore, that the DDT and diel-drin found in defendants’ smoked chubs were “food additives” and, since not protected by'any tolerance, the chubs were “adulterated” as a matter of law.

II.

Vita Food argues, in the alternative, that even if DDT and dieldrin are food additives, we should nevertheless affirm because the government failed to prove that residues of these chemicals exceeded the limits specified in the F.D. A. interim enforcement guidelines. In its opinion the district court stated that there is never “perfect certainty” in any scientific analysis and that the government’s test methods were “not sufficiently reliable for me to find by the greater weight of the evidence and as a controlling fact that the chubs sampled by FDA in April 1972 contained DDT concentration in excess of 5 ppm.” 356 F.Supp. 1213, 1221.

Neither party has contested the applicability of the F.D.A.’s 5 ppm enforcement guideline. Nevertheless, it is clear that the government might have argued that the enforcement guideline was merely adopted as an internal standard to determine when it would be appropriate to initiate an enforcement proceeding, and that publication in a Press Re*lease was merely intended to give industry fair notice of its internal standards. By way of analogy, a police department might adopt a policy of not enforcing a 55 mile speed limit unless a motorist’s speed exceeded 65 miles per hour. Under such a policy, at a trial it would not be - necessary to prove anything more than a speed in excess of 55. By comparison, the F.D.A. might as a matter of discretion withhold enforcement unless it found residues of over 5 ppm, but have no legal obligation to prove anything more than a trace to establish statutory adulteration.

We do not so interpret the interim guidelines before us in this case; for both the language of the Press Release and the government’s treatment of it in this case indicates that it was meant to operate more like a rule of general applicability than a mere prediction of how the agency would choose to exercise its prosecutorial discretion. Accordingly, even though the government was not obligated to adopt any interim guideline, and might have let industry accept the responsibility for initiating tolerance proceedings, it correctly assumed the burden of proving that appellant violated the specified limits.

The district court considered the AOAC method of testing for chemical residues insufficiently precise for the government to sustain its burden. It is clear, however, that the enforcement guidelines must have been adopted on the assumption — shared by government and industry — that existing methods of testing DDT were sufficiently accurate to permit meaningful administration of the limits specified therein. The AOAC method was used by both the government technicians and by the expert employed by appellant. However imprecise that method may be, the record indicates that it is the best method that can be used. Certainly the government must be permitted to use the best testing method yet devised by analytical chemists, for the enforcement guidelines must have been predicated upon that method. Therefore, without disagreeing with the district court’s observation that the AOAC method falls short of perfect certainty, we cannot accept the view that it may not be used to evaluate appellants’ compliance with the guidelines. The district court’s contrary determination was clearly erroneous.

Acceptance of the AOAC method as the proper standard for measuring residues of pesticide chemicals in fish leads inexorably to the conclusion that the government met its burden of proving repeated violations of the guidelines. In July and August of 1969, and again in the fall of 1969, the F.D.A. collected and analyzed smoked chubs shipped by Vita in interstate commerce and found quantities of DDT and its derivatives ranging from 5.97 ppm to 9.67 ppm. Tr. 663-665. After this case had been commenced, additional samples were analyzed and found to contain 5.37 to 9.28 ppm. These samples were subsequently analyzed by an expert employed by appellant; he found that three out of the seven samples contained DDT in excess of 5 ppm and that the other ranged from 3.89 to 4.37. Finally, in October of 1972, samples were sent to Seattle for analysis with results ranging from 5.42 ppm to 6.54 ppm. Tr. 623.

Whether we accept the government’s evidence at face value — and since we have held that the AOAC procedure is acceptable, and since the detailed records supporting the government’s conclusion are in the record, there is persuasive reason to do so — whether .we assume that the truth lies somewhere in between the views of the respective litigants’ experts, or even if we take the defendants’ evidence, it is perfectly clear that the limit specified in the 1969 guidelines has been violated. A shipper of processed food may violate the statute even if some, or even a majority, of its food is not adulterated. The evidence is un-contradicted that the Act as implemented by the guideline, has been violated.

Vita argues, however, that there really is no significant difference between DDT levels of 5 ppm and levels as high as 8 ppm. But that is an argument that should not be addressed to us; it may properly be asserted as a reason for setting a tolerance at 8 ppm or perhaps even higher. The F.D.A. need not have set its guideline limit at 5 ppm, but it did so, and industry has not seen fit to invoke the statutory procedures for establishing a different tolerance level. In these circumstances, the government has met its burden by proving that the guidelines have been exceeded repeatedly.

The judgment in United States v. Vita Foods is therefore reversed and remanded for the entry of appropriate relief. In view of the nature of the case and the trial judge’s familiarity with the technical materials in the record, Circuit Rule 23 shall not apply.

The judgment in United States v. Ewig Bros. Co. is affirmed.

      . Section 201 of F.D.C.A., enacted as part of the “Food Additive Amendment of 1958,” 72 Stat. 1784, is codified as 21 U.S.C. § 321. The definition of “food additive” reads as follows:
      (s) The term “food additive” means any substance the intended use of which results or may reasonably be expected to result, directly or indirectly, in its becoming a component or otherwise affecting the characteristics of any food (including any substance intended for use in producing, manufacturing, packing, processing, preparing, treating, packaging, transporting, or holding food; and including any source of radiation intended for any such use), if such substance is not generally recognized, among experts qualified by scientific training and experience to evaluate its safety, as having been adequately shown through scientific procedures (or, in the case as a substance used in food prior to January 1, 1958, through either scientific procedures or experience based on common use in food) to be safe under the conditions of its intended use; except that such term does not include—
      (1) a pesticide chemical in or on a raw agricultural commodity; or
      (2) a pesticide chemical to the extent that it is intended for use or is used in the production, storage, or transportation of any raw agricultural commodity ; or
      (3) a color additive ; or
      (4) any substance used in accordance with a sanction or approval granted prior to September 6, 1958, pursuant to this chapter, the Poultry Products Inspection Act (21 U.S.C. 451 and the following) or the Meat Inspection Act of March 4, 1907, as amended and extended ; or
      (5) a new animal drug.

      . Section 402 of F.D.C.A., 21 U.S.C. § 342, defines adulterated food. The provisions of subparagraphs (a)(2)(B) and (a)(2)(C), which pertain, respectively, to pesticide chemicals on raw agricultural commodities and to food additives are relevant here; they are quoted in n. 11, infra.

      . Enforcement responsibility presently resides in the Administrator of the Environmental Protection Agency. ’ The respective functions of the Secretary of H.E.W., the Secretary of Agriculture, and the Administrator, and the transfers effected by Reorganization Plan No. 3 of 1970, effective as of December 2, 1970, are outlined in United States v. Goodman, 486 F.2d 847, 848-849 (7th Cir. 1973).

      . The Ewig Bros, case was brought, as a companion to complaints filed against five other defendants which distributed raw chubs, as opposed to the smoked chubs distributed by Ewig. In all six cases, the parties stipulated that the quantity of DDT in the chubs exceeded the informal guidelines, and, in the five raw chub cases, that DDT was a “pesticide chemical” and that the fish were “raw agricultural commodities” within the meaning of § 201 of F.D.C.A. (see 21 U.S. C. § 321 (q) and (r)). In all cases Judge Gordon rejected the defendants’ argument that the Administrator was required by statute to establish tolerance limits for DDT in fish before he could claim that the presence of DDT residues resulted in adulteration. In the Ewig case, Judge Gordon also held that DDT in the processed chubs is a food additive. lie entered permanent injunctions in all six cases.
      On September 29, 1973, we affirmed the judgments in the five cases involving raw chubs and entered an order holding the Ewig appeal for decision with Vita Food. See United States v. Goodman, 486 F.2d 847, 849 n. 10. In that case we held that the Administrator is not required to establish by regulation permissible tolerances of DDT and its derivatives before initiating enforcement proceedings or obtaining injunctive relief in such a proceeding. Judge Sprecher’s opinion in that case describes the enforcement guideline, the evidence of growing national concern over DDT content in fish, and portions of the statutory scheme which could have been invoked by the raw chub distributors to establish tolerances for DDT residues in tlieir products. The only contention raised by Ewig Bros, on this appeal is that Judge Gordon erroneously held that DDT residues in smoked chubs are a “food additive.”

      . Concentration levels vary in different kinds of tissue. It is higher in Great Lakes fish than in most other foods, and especially high in the fat tissue and in fish caught in certain parts of Lake Michigan.

      . See also United States v. Goodman, supra, 486 F.2d 851-853.

      . The government made no effort to establish adulteration as defined in subparagraphs (a) (1) or (a) (3) of § 402. See 21 U.S.C. § 342.

      . See 40 C.F.R. § 180.147. Thus, for example, a tolerance of seven parts per million lias been established for a number of items including “fat of meat from cattle, goats, liogs, horses, and sheep . . . spinach, squash, ...” and a tolerance of only one part per million for a number of other items, such as artichokes, peanuts and radishes. Tolerances have also been established for dieldrin. 40 C.F.R. § 180.137.

      . Different foods are, of course, consumed in differing quantities and absorbed into the body under differing conditions. The elimination of fat by consuming only fillet of the fish, for example, may significantly reduce the intake of DDT.

      . Sections 402(a)(1) and 402(a)(3), codified in 21 U.S.C. § 342, provide :
      A food shall be deemed to be adulterated — (a) Poisonous, insanitary, etc., ingredients.
      (1) If it bears or contains any poisonous or deleterious substance which may render it injurious to health; but in ease the substance is not an added substance such food shall not be considered adulterated under this clause if the quantity of such substance in such food does not ordinarily render it injurious to health ; * * * # *
      (3) if it consists in whole or in part of any filthy, putrid, or decomposed substance, or if it is otherwise unfit for food.

      . That section, also codified in 21 U.S.C. § 342, provides that a food shall be deemed adulterated
      (C) if it is, or if it bears or contains, any food additive which is unsafe within the meaning of section 348 of this title: Provided, That where a pesticide chemical has been used in or on a raw agricultural commodity in conformity with an exemption granted or a tolerance prescribed under section 346a of this title and such raw agricultural commodity has been subjected to processing sucli as canning, cooking, freezing, dehydrating, or milling, the residue of such pesticide chemical remaining in or on sucli processed food shall, notwithstanding the provisions of sections 346 and 348 of this title, not be deemed unsafe if such residue in or on the raw agricultural commodity has been removed to the extent possible in good manufacturing practice and the concentration of such residue in the processed food when ready to eat is not greater than the tolerance prescribed for the raw agricultural commodity ....
      Subsection (a) (2) (B) provides a similar standard:
      (B) if it is a raw agricultural commodity and it bears or contains a pesticide chemical which is unsafe within the meaning of section 346a (a) of this title ....

      . The government clearly met that burden in this case.

      . See Continental Chemiste Corp. v. Ruckel-shaus, 7 Cir., 461 F.2d 331, 340-341 (1972).

      . United States v. Lexington Mill & Elevator Co., 232 U.S. 399, 34 S.Ct. 337, 58 L.Ed. 658.

      . See n. 3, supra.

      . To soften the impact of a rule which appeared to establish that food containing even traces of a deleterious substance was adulterated as a matter of law, some courts read the de minimis qualification which had existed under the previous statute, United States v. 133 Cases of Tomato Paste, 22 F.Supp. 515 (E.D.Pa.1938), into the new statute. See 338 Cartons, More or Less, of Butter v. United States, 165 F.2d 728 (4th Cir. 1947). See also United States v. 484 Bags, More or Less, 423 F.2d 839, 841 n. 1 (5th Cir. 1970).

      . The procedure before the 1954 amendments was described in the Senate Report as follows:
      Under existing law, added poisonous and deleterious substances — and most pesticide chemicals fall in this class — must be kept out of foods unless they are required in production or cannot be avoided by good manufacturing practice. When such a substance is required in production — as many pesticide chemicals are required in growing agricultural crops — a tolerance may be established by the Secretary of Health, Education, and Welfare, but only after a formal public hearing. Detailed findings of fact and conclusions must be made by the Secretary as to the required use of the pesticide and the residue levels that may safely be tolerated.
      Sen.Rep.No.1635, 83rd Cong., 2d Sess., 2 U. S.Code Cong. & Admin.News 1954, p. 2627.

      . This system was apparently authorized by § 306 of the 1938 Act, codified as 21 U.S.C. § 336, which provides :
      Nothing in this chapter shall be construed as requiring the Secretary to report for prosecution, or for the institution of libel or injunction proceedings, minor violations of this chapter whenever he believes that the public interest will be adequately served by a suitable written notice or warning.
      Some of the difficulties with this system are canvassed in Judge Frank’s dissenting oi)in-ion in United States v. 449 Cases, Containing Tomato Paste, 212 F.2d 567, 575-581 (2d Cir. 1954).

      . The primary purpose of the bill is to assure greater protection of the public health by improving, simplifying, and speeding up the procedure under the Federal Food, Drug, and Cosmetic Act, for regulating the amount of residue which may remain on raw agricultural commodities after use of pesticide chemicals. * * * * *

        A primary objective in drafting the bill was to develop legislation that would provide for prompt administrative action to permit effective use of pesticide chemicals without hazard to the public health; legislation that would be safe for consumers and practical for producers.
      Sen.Itep.No.1635, 83rd Cong., 2d Sess., supra n. 17, at p. 2627.

      . See Note 20 on page 721.

        20. . . . [CJontrol . . . exercised through unofficial and informal tolerances . . . [, since] the necessary tolerances have not yet been issued . . . has been responsible for uncertainty under the law. It has handicapped the Government in enforcing the law, the grower in complying with the law, and the pesticide manufacturer and Federal and State agencies in discharging their responsibility for advising and making recommendations to the grower with respect to the use of pesticide chemicals.
      Sen.Rep. No. 1635, 93rd Cong., 2d Sess., supra n. 17 at p. 2627.

      . This section is codified as 21 U.S.C. § 346a.

      . See n. 16, supra. We have found no case applying or refusing to apply the de minimis exception to products containing pesticide chemicals.

      . See n. 8, supra.

      . . [U]nder existing law the Federal Government is unable to prevent the use in foods of a poisonous or deleterious substance until it first proves that the additive is poisonous or deleterious. To establish this proof through experimentation with generations of mice or other animals may require 2 years or even more on the part of the relatively few scientists the Food and Drug Administration is able to assign to a particular problem. Yet, until that proof is forthcoming, an unscrupulous processor of foodstuffs is perfectly free to purvey to millions of our people foodstuffs containing additives which may or may not be capable of producing illness, debility, or death.
      Sen.Rep.No.2422, 85th Cong., 2d Sess., 3 U. S.Code Cong. & Admin.News 1958, p. 5300.

      . See n. 1, supra.

      . See the passage from the Legislative History of the Act, quoted in n. 28, infra. Note the use of the words- “principal examples” in the language which has been emphasized by Vita Foods.

      . [T]his court is acutely aware of the fact that it is not the proper body to more narrowly define broad standards in this area so that they can be applied in a particular case. Courts know neither what is necessary for the health of the consuming public nor what can reasonably be expected from the canning industry. Furthermore, this is not a determination that should be made individually for each case on the basis of expert testimony. The Food and Drug Administration should set definite standards in each industry which, if reasonable, and in line with expressed Congressional intent, would have the force of law.
      United States v. 1,500 Cases More or Less, Tomato Paste, 236 F.2d 208, 211 (7th Cir. 1956).

      . Thus, for example, consider the excerpt from the Senate Report:

        Legislative History

      The legislation also covers substances which may reasonably be expected to become a component of any food or to affect the characteristics of any food. These substances are generally referred to as “incidental additives.”
      The principal examples of both intentional and incidental additives %re substances intended for use in producing, manufacturing, packing, processing, preparing, treating, packaging, transporting, or holding food.
      On the other hand, substances which may accidentally get into a food, as for example, l>aints or cleaning solutions used in food processing plants, are not covered by the legislation. These additives are generally referred to as “accidental additives,” since these substances if properly used may not reasonably be expected to become a component of a food or otherwise to affect the characteristics of a food. If accidental additives do get into food, the provisions of the Food, Drug, and Cosmetic Act dealing with poisonous and deleterious substances would be applicable.
      Sources of radiation (including radioactive isotopes, particle accelerators and X-ray machines) intended for use in processing food are included in the term “food additive” as defined in this legislation.
      Exempted from the scope of the legislation are (1) pesticide chemicals in or on raw agricultural commodities which are already covered by the pesticide chemicals amendment to the Federal Food, Drug, and Cosmetic Act (Public Law 518, 83d Cong.) ; (2) residues of pesticide chemicals unavoidably remaining on processed foods not in excess' of tolerances prescribed by Food and Drug Administration for raw agricultural commodities; and (3) substances already approved under the provisions of the Federal Food, Drug, and Cosmetic Act or tlie Meat Inspection Act of Marcli 4, 1907.
      The Secretary is given authority by this legislation to exempt by regulation food additives for investigational use by qualified experts when consistent with the public health.
      Sen.Rep.No.2422, 85th Cong., 2d Sess., supra n. 24, at p. 5304.

      . It is not clear whether it is completely accurate to characterize these observations in the district court’s opinion as findings of fact. • Since the court had held that DDT is not a food additive, the government could not prevail unless it proved that the quantity of DDT in Vita’s smoked chubs made them unfit for food or injurious to health. Clearly, the government did not sustain that burden. Under the district court’s view of the law, which we have rejected, its observations about the unreliability of the government’s test methods and about the sufficiency of the evidence proving excessive residues of DDT were unnecessary to its decision. On the other hand, its finding “that the test method to be used by processors of smoked chub is not sufficiently precise for a finding of fact that the chubs sampled in April 1972 contained DDT concentrations in excess of 5 ppm,” 356 F.Supp. at 1221, can fairly be termed an alternative ground for granting judgment for the defendants. For if DDT in processed food was not a food additive under § 321 (s), and if the government failed to prove it a known health hazard, a conclusion that the preponderance of the evidence did not sustain a conclusion that defendants’ fish exceeded 5 ppm would have been unnecessary. If such a finding is in fact an alternative ground for decision, it must be sustained unless it is clearly erroneous. Rule 52(a), Fed.R.Civ.P.

      . This appears to be F.D.A.’s position with respect to its 0.5 ppm guideline for mercury in swordfish, since it has contended that that guideline is without legal significance. See Hearings on the -Effects of Mercury on Man and the Environment Before the Sub-comm. on Energy, Natural Resources, and the Environment of the Senate Comm, on Commerce, 91st Cong., 2d Sess., pt. 1, at 36, cited in Note, Health Regulation of Naturally Hazardous Foods: The FDA Ban on Swordfish, 85 I-Iarv.L.Rev. 1025, 1028-1029 (1972).

      . The 1969 Press Release stated in part:
      The interim limit of 5 ppm for DDT residues will apply to all fish marketed interstate. Pesticide monitoring by FDA, however, indicates that DDT residues are below 1 ppm in 90 percent of the fish marketed in this country.
      Tolerances for DDT residues in other foods vary from product to product. The tolerance is .05 ppm for milk and 7 ppm for a wide variety of fruits and vegetables and in the fat of meat. FDA has taken steps to reduce a number of these where experience has shown that lower levels are practicable. App. 123.

        The 0.3 ppm enforcement guideline for dieldrin has been in existence for more than 20 years. App. 62. The Record discloses no reason why its legal significance is different from that for DDT.

      . The government engaged in a protracted evidentiary hearing for the purpose of establishing that Vita’s fish contained DDT in excess of 5 ppm, without ever contending, so far as we can determine from the record, that such proceedings were unnecessary.

      . The Press Release contains no language similar to that found in the “Merger Guidelines” released by the Department of Justice to inform the business community of its enforcement policy for Section 7 of the Clayton Act: “[T]hese guidelines are announced solely as a statement of current Department policy, subject to change at any time without prior notice . . . .” Department of Justice “Merger Guidelines,” p. 1. See United States v. Atlantic Richfield Co., 297 F.Supp. 1061, 1073 (S.D.N.Y.1969).

      . Cf. Nixon v. United States, - U.S. -, 94 S.Ct. 3090, 41 L.Ed.2d 1039 (1974); Vitarelli v. Seaton, 359 U.S. 535, 539, 79 S.Ct. 968, 3 L.Ed.2d 1012; United States ex rel. Accardi v. Shaughnessy, 347 U.S. 260, 74 S.Ct. 499, 98 L.Ed. 681; United States v. Heffner, 420 F.2d 809 (4th Cir. 1970). We do not suggest that there is anything to prevent the F.D.A. from changing the guideline it has enunciated, or even from enforcing the statute Congress has enacted with no guideline at all. Although there are objections to enforcement in this way, see Judge Frank’s dissenting opinion in United States v. 449 Cases Containing Tomato Paste, supra n. 18, the industry would clearly have a remedy in the statutory procedure for the establishment of tolerances. 21 U.S.C. § 348. We hold only that, for purposes of this litigation, the Enforcement Guideline is binding upon F.D.A., notwithstanding the informal manner of its release, as if it were a general rule published in accord with the requirements of the Administrative Procedure Act.

      . A cheek test, run by a second chemist, yielded a range from 6.06 ppm to 9.88 ppm. See Defendants’ Ex. 15.


source: Caselaw Access Project

author: ELY, Circuit Judge:

license: Public Domain

text:
    UNITED STATES of America, Appellee, v. Fred H. WATTS, Appellant.
    No. 73-3141.
    United States Court of Appeals, Ninth Circuit.
    Sept. 5, 1974.

      Milton J. Silverman (argued), San Diego, Cal., for appellant.
    James W. Meyers, Asst. U. S. Atty. (argued), San Diego, Cal., for appellee.
    Before ELY and GOODWIN, Circuit Judges, and EAST, District Judge.

       Honorable William G. East, Senior United States District Judge, Eugene, Oregon, sitting by designation.

   OPINION

ELY, Circuit Judge:

In a non-jury trial Watts was convicted of one count of conspiracy to bribe public officials, two counts of bribing public officials, and seven counts of knowingly giving false testimony before a grand jury.

Watts was a part-owner of several corporations and had been granted loans through the efforts of two Small Business Administration [hereinafter S.B. A.] officials. Mallette, a loan officer, and Pellow, a staff attorney, shared a fee or “kickback” of five percent of the amount of each loan in return for obtaining the two loans for Watts. Watts testified before the grand jury investigating the two officials and was charged with perjury in connection with his testimony.

Here, Watts raises the following issues: (1) whether the evidence was sufficient to support his conviction on each of the perjury counts; (2) whether the trial court erred in admitting Watts’ grand jury testimony at the trial; (3) whether the trial court erred in refusing to admit polygraph evidence offered by the defense; (4) whether the trial court erred in overruling a magistrate’s decision concerning discovery.

We do not entertain the challenge to the sufficiency of the evidence. There was no motion for a judgment of acquittal in the trial court, and we see no such “manifest miscarriage of justice” as to warrant our review of the evidence notwithstanding the lack of the ordinarily prerequisite motion. Matthews v. United States, 394 F.2d 104, 105 (9th Cir. 1968); Beckett v. United States, 379 F.2d 863, 864 (9th Cir. 1967).

The appellant’s second argument, that the trial court erred in admitting Watts’ grand jury testimony, is based on the contention that a grand jury witness suspected of a criminal offense must be so informed by the prosecutor and further informed of the crimes which he is suspected of having committed. Here, the appellant had been advised of his Miranda rights on each occasion that he was called to testify. Furthermore, before he presented his grand jury testimony, he was fully advised of the nature of the investigation, and he acknowledged that he understood. Thus, Watts was clearly given the full extent of his constitutional rights.

Third, Watts contends that the results of his polygraph examination should have been admitted into evidence. See United States v. DeBetham, 470 F.2d 1367 (9th Cir. 1972), cert. denied, 412 U.S. 907, 93 S.Ct. 2299, 36 L.Ed.2d 972 (1973). However, we cannot say that the trial judge clearly abused his discretion in rejecting the offer. United States v. Bagsby, 489 F.2d 725 (9th Cir. 1973); United States v. Salazar-Gaeta, 447 F.2d 468, 469 (9th Cir. 1971).

Watts’ final argument is that the trial court erred in overturning the magistrate’s discovery rulings. Those rulings would have required the Government to provide Watts with transcripts of grand jury testimony, including testimony protected by the Jencks Act, and to provide the trial judge with transcripts of grand jury testimony believed by the Government to be immaterial and irrelevant. Watts failed to make the required showing of “particularized need” as to any of the material he sought, except as to the testimony of one witness. Dennis v. United States, 384 U.S. 855, 872-873, 86 S.Ct. 1840, 16 L.Ed.2d 973 (1966); United States v. Thompson, 493 F.2d 305 (9th Cir. 1974). See generally, United States v. Thoresen, 428 F.2d 654, 668-669 (9th Cir. 1970) (Ely, concurring). And see, especially, Goldstein, The State and the Accused: Balance of Advantage in Criminal Procedure, 69 Yale L.J. 1149, 1184 (1960); Developments in the Law — Discovery, 74 Harv. L.Rev. 940, 1057 (1961). Generally, the defense attorney argued that he needed all the grand jury testimony because any of it might possibly be utilized to impeach prosecution witnesses. But as to one witness, whom he was able to identify by name, defense counsel recited the general nature of the grand jury testimony sought and specified the prosecution witness whom he intended to impeach by such testimony. Since the attorney was seeking to discover that which was contained in secret grand jury proceedings, he could scarcely have been more specific in demonstrating the necessary “particularized need” in respect to the one witness. Thus, the District Court erred in its denial to the defense of this particular testimony. We have concluded, however, that the testimony sought by the defense was not material and that, hence, the District Court’s error was harmless.

Affirmed.

      . 18 U.S.C. § 3500.


text:
    John R. HANSEN, Appellant, v. Raymond W. MAY, Appellee.
    No. 74-1048.
    United States Court of Appeals, Ninth Circuit.
    Aug. 15, 1974.

      John R. Hansen, in pro. per.
    W. Anthony Park, Atty. Gen., Boise, Idaho, for appellee.
    Before HAMLEY, ELY and TRASK, Circuit Judges.
   OPINION

ELY, Circuit Judge:

This appeal is from the District Court’s summary denial of Hansen’s “Petition for Writ of Habeas Corpus”. Hansen, a state prisoner, alleged in his “Petition” that when he was placed in maximum security confinement, all his personal property was confiscated and that upon his release from the restricted confinement, over half of his property was not returned. Contending that the taking of his property constituted an illegal search and seizure and an infringement of his due process rights, Hansen sought the return of his property or the cash equivalent of its value.

While Hansen drafted his complaint on the standard form, “Petition for Writ of Habeas Corpus,” he clearly indicated that he was not challenging any conviction or seeking release from custody, but only seeking the return of his property or reimbursement therefor. He, in fact, claimed access to the District Court on the basis of 42 U. S.C. § 1883 (sic) (obviously meaning 1583). Despite the labeling of his complaint, he was, therefore, entitled to have his action treated as a claim for relief under the Civil Rights Act. See Wilwording v. Swenson, 404 U.S. 249, 92 S.Ct. 407, 30 L.Ed.2d 418 (1971). Pleadings drafted by laymen, proceeding in propria, persona, are to be interpreted by the application of less rigid standards than those applied to formal documents prepared by lawyers. Haines v. Kerner et al., 404 U.S. 519, 92 S.Ct. 594, 30 L.Ed.2d 652 (1972).

Our court has held that a prisoner is entitled to the Fourth Amendment’s protection from unreasonable searches and seizures. United States v. Savage, 482 F.2d 1371, 1372 (9th Cir. 1973), cert. denied, 415 U.S. 932, 94 S.Ct. 1446, 39 L.Ed.2d 491 (1974).

Even assuming that Hansen’s Fourth Amendment claim is without merit and that his jailers were justified in gathering his belongings for protection whije he was in maximum security confinement, Hansen alleged that some of his property was not returned to him. He also claimed that he was thus deprived of his property without due process of law.

The Supreme Court has held that property rights are cognizable and protectible under the Civil Rights Act. Lynch v. Household Finance Corp., 405 U.S. 538, 92 S.Ct. 1113, 31 L.Ed.2d 424 (1972). May, the warden of the prison, argues that the Lynch doctrine does not apply to state prisoners. There is no authority to support this contention. To the contrary, the Supreme Court cited Lynch in vacating and remanding an action in which a state prisoner had attempted to seek the return of personal property taken by two custodial officers. Weddle v. Dir., Patuxent Insti., 405 U.S. 1036, 92 S.Ct. 1318, 31 L.Ed.2d 577 (1972). See also Montana v. Harrelson, 469 F.2d 1091 (5th Cir. 1972).

The warden also argues that even if a state prisoner’s claim of property loss is cognizable in a civil rights action, May’s petition was yet insufficient in two respects.

First, May contends that the Civil Rights Act creates only personal liability and that Hansen did not allege that May personally took an active part in the confiscation of the property. If Hansen’s pleading was defective in this respect, the defect could easily have been corrected by amendment. Even if Hansen does not claim that May personally participated in the confiscation, if Idaho, by statute, imposed liability upon the warden for the misconduct of his subordinates, May could be responsible under 42 U.S.C. § 1983. Hesselgesser v. Reilly, 440 F.2d 901 (9th Cir. 1971). Finally, even assuming that May could not properly be held personally responsible, Hansen could have amended his complaint to state a claim by adding as defendants those prison officials who did gather and hold his personal property. Hansen should have been given his established right to amend his pleading before the court summarily denied his petition. Potter v. McCall, 433 F.2d 1087 (9th Cir. 1970); Keeton v. Procunier, 468 F.2d 810 (9th Cir.), cert. denied, 411 U.S. 987, 93 S.Ct. 2276, 36 L.Ed.2d 965 (1972). May had filed no responsive pleading. See Rule 15(a) Fed.R.Civ.P.

Second, May argues that Hansen’s complaint is insufficient because May did not allege that the conduct in question was in pursuance of a systematic policy of discrimination against a class or group of persons. Our court subsequently recalled the January 14, 1974, opinion in Wheeler v. Procunier, No. 72-1523 (9th Cir.), upon which May bases his second contention. See the second revised opinion on rehearing in Wheeler v. Procunier, (9th Cir. Dec. 23, 1974).

The District Court’s Order is reversed, and the cause is remanded for further proceedings not inconsistent with this opinion.

Reversed and remanded.


author: DURFEE, Senior Judge.

text:
    Jack KERBS, Plaintiff-Appellee, v. FALL RIVER INDUSTRIES, INC., a Colorado corporation, et al., Defendants-Appellants.
    No. 73-1640.
    United States Court of Appeals, Tenth Circuit.
    Argued March 20, 1974.
    Decided Sept. 6, 1974.
    Rehearing Denied Oct. 3, 1974.

      Arthur W. Zarlengo, Denver, Colo., for defendants-appellants.
    Leonard W. Burningham of Moffat, Welling, Paulsen & Burningham, Salt Lake City, Utah (Richard H. Moffat, Salt Lake City, Utah, on the brief), for plaintiff-appellee.
    Before DURFEE, Senior Judge, and HILL and McWILLIAMS, Circuit Judges.

       Honorable James R. Durfee, Senior Judge, United States Court of Claims, sitting by designation.

   DURFEE, Senior Judge.

This action arises under Section 10 of the Securities Exchange Act of 1934, 15 U.S.C. § 78j, and Rule 10b-5 of the Securities and Exchange Commission, 17 C.F.R. § 240.10b-5. Plaintiff, Jack L. Kerbs, seeks to recover $6,200 lost in the course of dealings with defendants, whose conduct, it is alleged, operated a fraud or deceit upon him. Following a trial to the court, judgment was entered in plaintiff’s favor against defendants Marlin H. Thompson, Fall River Industries, Inc. and Securities Transfer, Ltd. Defendants appeal contending (a) that the evidence adduced at trial was insufficient to support the trial court’s findings of fact, and (b) that such evidence, in any event, failed to establish any of the elements required to make out a case under Section 10 and Rule 10b-5.

The complaint included the following allegations: that one Dial and Thompson met with plaintiff on two occasions during the latter months of 1971 and early months of 1972, and that at said meetings they induced plaintiff to enter into an agreement whereby plaintiff would obtain a loan from the Utah State Employee’s Credit Union in the amount of $10,000; that said funds were to be divided between Dial, who was to receive $6,200, and plaintiff, who was to retain the balance; that as security for said agreement Dial assigned, transferred and delivered to plaintiff a stock certificate, No. N887, for 25,000 shares of the capital stock of defendant Fall River Industries, Inc.

It was further alleged that during the course of the aforementioned meetings defendant Thompson represented himself to plaintiff as president of Fall River Industries; that at all times defendant Thompson acted in concert with Dial, and acted on behalf of himself and as an officer or agent of defendant Fall River Industries; that on two occasions during the course of these negotiations plaintiff telephoned defendant, Securities Transfer, Ltd. (the transfer agent for Fall River Industries), and inquired as to the status of stock certificate No. N887 of said corporation, and that on both occasions plaintiff was informed that said stock certificate represented free-trading stock; that in reliance upon the representations of each of the defendants plaintiff entered into the agreement with Dial and accepted the Fall River Industries’ stock certificate, which was represented by each and every defendant as being a valid and true stock certificate; that Securities Transfer, Ltd. subsequently notified plaintiff that said stock certificate was not a part of their records; that all of the foregoing acts of defendants constitute a scheme or artifice to defraud plaintiff; that all of the defendants engaged in acts which operated a fraud upon plaintiff; that said acts involved the use of an instrumentality of interstate commerce and the mails; and that as a result of the representations of Dial, Thompson and Fall River Industries, and of the refusal of Securities Transfer, Ltd. to transfer stock certificate No. N887, he was damaged in the amount of $6,200.

Defendants denied the alleged misconduct, but admitted that Securities Transfer refused to transfer certificate No. N887 because said certificate had been stolen and was not a part of the transfer agent’s records.

Plaintiff and defendant Thompson were the only two witnesses to testify at trial.

Kerbs told of his course of dealings with defendants, and of three meetings at which Glen Dial and Marlin Thompson were present. He stated that a few days prior to the first meeting Dial and another person had approached him to discuss an arrangement whereby Kerbs would use certain Fall River Industries stock as collateral for a bank loan. Kerbs would keep part of the proceeds of the loan, in order to relieve himself of certain financial difficulty, and he would turn over the remainder of said proceeds to Dial. The first meeting at which Thompson was present was conducted in a motel room in January, 1972; the meeting had been arranged by telephone. It was during this first assembly at the motel room that Dial transferred Fall River stock certificate No. N887 to Kerbs. The certificate showed that Danny W. Cress was its owner; it was for 25,000 shares. There was a general discussion between Dial and Kerbs concerning the value of Fall River stock, and concerning the use of certificate No. N887 as security for the anticipated loan. Kerbs testified that he had no specific conversation with Thompson at this time, except for a greeting, but that Thompson was present during the discussion between himself and Dial. Kerbs stated that he was aware at this time of Thompson’s position as president of Fall River Industries, in that Thompson’s signature and office appeared on the face of the stock certificate transferred and delivered to him.

Kerbs further testified that, prior to finalizing his loan with the Utah State Employee’s Credit Union, he had telephoned the American National Bank in Denver, Colorado, and had received verification of the signature of Danny W. Cress, which appeared on the stock power and assignment. An officer of that bank had guaranteed Cress’ signature. Kerbs stated that he also had had a telephone conversation with a party in the office of defendant Securities Transfer in Florida to check the validity of stock certificate No. N887.

The amount of the loan actually obtained by Kerbs from the credit union was $9,800. Kerbs received a check for $6,200, and the balance of $3,600 was handled as an accounting transaction, representing the amount already owed by Kerbs to the credit union. Kerbs testified that four or five days after the first meeting with Dial and Thompson, and subsequent to his receipt of the loan payment, he returned to the same motel room and gave Dial a personal check for $6,200. Thompson had temporarily left the room to purchase a “pop,” and had returned. Dial and Kerbs proceeded to the latter’s bank where Dial endorsed Kerbs’ check and received a cashier’s check from the bank in the amount of $6,200.

Kerbs also stated that when he next met with Dial and Thompson, Thompson delivered to him another stock certificate of Fall River Industries, certificate No. N888, as well as another stock pow-. er and assignment. It was Kerbs’ understanding that this certificate was to be used for a loan arrangement similar to that involving certificate No. N887. Certificate No. N888 also showed its owner to be Danny W. Cress, and it was also for 25,000 shares. Kerbs stated that he had a discussion with Thompson at this point in time, lasting about fifteen minutes or so, concerning Fall River Industries. Subsequently, on February 1, 1972, Kerbs returned to the motel room, where Dial, the only one present at the time, signed a document acknowledging receipt back of stock certificate No. N888. It was on this occasion that Dial and Kerbs executed their written agreement concerning stock certificate No. N887. That agreement provided that in consideration of the loan obtained by Kerbs, the proceeds of which were divided between Dial and Kerbs, Dial thereby assigned, transferred and delivered to Kerbs stock certificate No. N887; that it was understood that if Dial should fail to pay to Kerbs the sum of $6,200, together with interest, by May 1, 1972, that Kerbs would have the right to sell sufficient shares to pay for the $10,000 indebtedness; and further that Kerbs would retain, for his own benefit, 2,000 shares of said capital stock.

Thompson testified on behalf of defendants. He stated that he had become president of Fall River Industries in September, 1969, and that he was president at the time the transactions involved in this lawsuit were taking place. He testified that he sold his interest in Fall River Industries in January or February of 1972. Thompson described Dial as a friend and a business associate. He occasionally shared the same motel room with Dial, and met with him on almost every occasion when he was in Salt Lake City, Utah. Thompson testified that Dial had occasional access to the files of the company, that Dial was at one time vice-president of Fall River Industries, and that Dial did not own any shares of Fall River capital stock.

Thompson further testified that stock certificate No. N887 was a forged certificate, and that it was not an authorized and issued certificate of Fall River Industries; that he had no knowledge as to how Dial came into possession of the certificate, and that he believed it had been in the possession of Securities Transfer, Ltd.; that Danny W. Cress, whose name appeared on both stock certificates Nos. N887 and N888, was his stepson; that Danny W. Cress was not the owner of certificate No. N887 in the amount of 25,000 shares, but that the signature of Cress appearing on the stock power and assignment appeared to be valid.

Thompson denied any knowledge of dealings between Dial and Kerbs, and of the transactions' between them. He stated that he was present in the motel room with Dial when a particular person was engaged in conversation with Dial, but that he had páid no attention to the person or to the discussion. Thompson also denied that he delivered stock certificate No. N888 to Kerbs, but stated that on one occasion he delivered a manila envelope, the contents of which were unknown to him, to an unknown person through the door of the motel room where Dial was staying.

It is undisputed that Securities Transfer refused to transfer the Fall River stock to plaintiff because certificate No. N887 was not a part of the transfer agent’s records.

The trial court made findings of fact, based upon the evidence presented at trial, as follows: that defendant Marlin H. Thompson, at all times pertinent to the matters involved in this lawsuit, was an officer of defendant Fall River Industries ; that during the latter part of January 1972, and the early part of February 1972, Thompson induced plaintiff to enter into and perform an agreement whereby plaintiff gave defendants $6,200 in exchange for a stock certificate representing 25,000 shares of Fall River Industries; that defendant Securities Transfer was the transfer agent for Fall River Industries, and was contacted by telephone by plaintiff prior to the aforementioned transaction, and that the transfer agent represented to plaintiff that certificate No. N887 was good, free-trading stock; that during the period when defendant Thompson was inducing plaintiff to purchase the stock in question, the meetings between plaintiff and Thompson were arranged by telephone; that certificate No. N887, and the assignment attached thereto, were sent to defendant Securities Transfer to be transferred to plaintiff, and that the transfer agent refused to transfer the same, claiming that the certificate was not a part of its records; and that the aforementioned stock certificate and assignment attached thereto were fraudulent and all of the defendants, at all pertinent times, knew so. The trial court concluded that all of the defendants, and each of them, engaged in acts which operated as a fraud or deceit upon plaintiff in connection with the purchase or sale of a security; that defendants used a means or instrumentality of interstate commerce to engage in these acts; and that plaintiff is entitled to judgment against defendants in the amount of $6,200, plus interest and costs.

We have carefully considered the entire record before us, and we have given serious attention to defendants’ claim that the evidence adduced at trial is insufficient to support the crucial findings of fact made by the trial court. It is our conclusion that there is ample evidence in the record to support the trial court’s findings with respect to the participation of defendants Thompson and Fall River Industries in the fraud perpetrated upon plaintiff. Accordingly, we are bound by those findings on appeal. Stevens v. Vowell, 343 F.2d 374 (10th Cir. 1965); Springer v. Townsend, 336 F.2d 397 (10th Cir. 1964). We reach a different conclusion, however, with respect to the sufficiency of the evidence to support the trial court’s findings as to the involvement of defendant , Securities Transfer in the fraudulent scheme. The only evidence on the matter is the testimony of Kerbs that he telephoned Securities Transfer in Florida and that he was informed by an employee of that company that certificate No. N887 was good, free-trading stock. Standing alone, this evidence is insufficient to support the conclusion that Securities Transfer was a participant in the fraudulent scheme herein involved, and the record is devoid of any other evidence which would indicate complicity on the part of the transfer agent. Plaintiff’s counsel admitted, upon questioning at oral argument, that there was really nothing in the record before us to link the transfer company to the course of dealings between plaintiff and Dial, Thompson and Fall River Industries. The trial court’s finding that Securities Transfer engaged in acts which operated as a fraud or deceit upon plaintiff, in connection with the purchase or sale of a security, is clearly in error.

Defendants next assert that the evidence adduced at trial failed to establish the elements required to make out a case under § 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5. It is now well established that a violation of the provisions of § 10 (b) gives rise to a private cause of action. See Superintendent of Insurance of New York v. Bankers Life & Casualty Co., 404 U.S. 6, 13 n. 9, 92 S.Ct. 165, 169, 30 L.Ed.2d 128, 134 (1971); Crist v. United Underwriters, Ltd., 343 F.2d 902, 903 (10th Cir. 1965); 6 L. Loss, Securities Regulation 3869-3873 (1969). Jurisdiction will be established, and a case will be made out under the statute and the rule, if plaintiff is successful in proving (1) the use of the mails or instrumental-ities of interstate commerce; (2) the purchase or sale of a security; and (3) the use of a manipulative or deceptive device. Stevens v. Vowell, supra,, 343 F.2d at 378; Boone v. Baugh, 308 F.2d 711, 713 (8th Cir. 1962). The issues relative to the establishment of these required elements of plaintiff’s cause are considered in turn.

The first argument advanced by defendants is, in effect, that the court lacked jurisdiction over the subject matter of this action. To meet the jurisdictional requirements of § 10 of the Act and Rule 10b — 5 the manipulative or deceptive device or contrivance must be shown to have been accomplished by the use of some means or instrumentality of interstate commerce or of the mails, or of some facility of any national securities exchange. It is not required by the statute or the rule that the manipulative or deceptive device or contrivance be a part of or actually transmitted in the mails or instrumentality of interstate commerce; it is sufficient that such a device or contrivance be employed in connection with the use of the instruments of interstate commerce or the mails. Stevens v. Vowell, supra, 343 F.2d at 378-379; Ellis v. Carter, 291 F.2d 270, 274 (9th Cir. 1961); Boone v. Baugh, supra, 308 F.2d at 714. We have seen from the evidence adduced at trial that at least one of the meetings between Kerbs and Thompson — at which the scheme to defraud plaintiff was carried out — was arranged during the course of a telephone conversation between Kerbs and Dial. Defendants would have us hold that the required nexus between the manipulative device or contrivance and the use of an instrumentality of interstate commerce has not been established, because neither Thompson nor Fall River Industries were themselves party to these telephone communications. Defendants’ argument is unconvincing. It is evident that throughout the course of their dealings with plaintiff, and in the implementation of their scheme to defraud him, Dial and Thompson acted for and on behalf of each other, with a common purpose, and with a common goal; each played his respective role in the overall plan to induce plaintiff to enter into the transaction herein involved. The fact is that a meeting at which defendants acted in violation of § 10 and Rule 10b — 5 was arranged by the telephonic communications of one acting in concert and in conspiracy with them, and in furtherance of their common unlawful scheme. The establishment of these facts, we believe, is clearly enough to satisfy the jurisdictional requirements of the statute and the rule that the proscribed deceptive device or contrivance used by defendants be employed in connection with the use of an instrumentality of interstate commerce; and we so hold. Nor can we dispose of this issue in defendants’ favor merely because the telephone messages used to arrange such meeting between plaintiff and Thompson involved mirastate communications. Both intrastate and interstate telephone communications are part of an aggregate telephonic system as a whole. Cf. Lipinski v. United States, 251 F.2d 53, 56 (10th Cir. 1958). And as long as the instrumentality itself is an integral part of an interstate system, Congress has power, when necessary for the protection of interstate commerce, to include intrastate activities within its regulatory control. See Weiss v. United States, 308 U.S. 321, 60 S.Ct. 269, 84 L.Ed. 298 (1939); N. L. R. B. v. Jones & Laughlin Steel Corp., 301 U.S. 1, 57 S.Ct. 615, 81 L.Ed. 893 (1936). Accordingly, we hold that proof of intrastate telephonic messages in connection with the employment of deceptive devices or contrivances is sufficient to confer jurisdiction in a § 10(b) and Rule 10b — 5 action. Myzel v. Fields, 386 F.2d 718, 727 (8th Cir. 1967); Ingraffia v. Belle Meade Hospital, Inc., 319 F.Supp. 537, 538 (E.D.La. 1970); Childs v. RIC Group, 331 F.Supp. 1078, 1082 (N.D.Ga.1970), aff’d, 447 F.2d 1407 (5th Cir. 1971); Lennerth v. Mendenhall, 234 F.Supp. 59, 63 (N.D.Ohio 1964); Nemitz v. Cunny, 221 F.Supp. 571, 575 (N.D.Ill.1963).

Defendants next assert that the evidence in this case does not establish a “purchase or sale” of a “security” within the ambit of § 10(b) of the Act and Rule 10b — 5. A “security” is defined in the act, at 15 U.S.C. § 78c(a)(10), as

“ * * * any note, stock, treasury stock, bond, debenture, certificate of interest or participation in any profit-sharing agreement * * * preor-ganization certificate or subscription, transferable share, investment contract * * * for a security, or in general, any instrument commonly known as a ‘security’; or any certificate of interest or participation in, temporary or interim certificate for, receipt for, or warrant or right to subscribe to or purchase, any of the foregoing * *

As used in the Act, the term “security” “embodies a flexible rather than a static principle, one that is capable of adaptation to meet the countless and variable schemes devised by those who seek the use of the money of others on the promise of profits.” S. E. C. v. W. J. Howey Co., 328 U.S. 293, 299, 66 S.Ct. 1100, 1103, 90 L.Ed. 1244, 1250 (1946); accord, Tcherepnin v. Knight, 389 U.S. 332, 338, 88 S.Ct. 548, 554, 19 L.Ed.2d 564, 570 (1967). Whether a particular transaction involves a security depends upon the facts and circumstances of the case. See e. g., S. E. C. v. C. M. Joiner Leasing Corp., 320 U.S. 344, 64 S.Ct. 120, 88 L.Ed. 88 (1943). Vincent v. Moench, 473 F.2d 430 (10th Cir. 1973). Substance is exalted over form and emphasis should be placed upon economic reality. Vincent v. Moench, supra at 435; Continental Marketing Corp. v. Securities & Exchange Com’n, 387 F.2d 466, 470 (10th Cir. 1967). We have no difficulty in fitting the forged certificate that was transferred and delivered to plaintiff into the statutory definition of “security.”

The statute defines the term “purchase” to include “any contract to buy, purchase, or otherwise acquire”, 15 U.S.C. § 78c(a) (13), and the term “sale” to include “any contract to sell or otherwise dispose of”, 15 U.S.C. § 78e(a) (14). As recognized by the Court of Appeals in Dasho v. Susquehanna Corp., 380 F.2d 262, 266 (7th Cir. 1967), cert. denied sub nom Bard v. Dasho, 389 U.S. 977, sh S.Ct. 480, 19 L.Ed.2d 470 (1967), this broad language included in the statutory definitions

“ * * * indicates an intention by Congress that the words ‘purchase’ and ‘sale’ are not limited to transactions ordinarily governed by the commercial law of sales. The purpose is evidently to make control of securities transactions reasonably complete and effective to accomplish the purpose of the legislation.”

See also, Knauff v. Utah Construction & Mining Co., 408 F.2d 958, 961 (10th Cir. 1969); Vine v. Beneficial Finance Company, 374 F.2d 627, 634 (2d Cir. 1967), cert. denied 389 U.S. 970, 88 S.Ct. 463, 19 L.Ed.2d 460 (1967). In the instant case, stock certificate No. N887 for 25,000 shares of Fall River stock was assigned, transferred and delivered to plaintiff to be used as collateral for a loan. The agreement between plaintiff and Dial provided that sufficient shares of the transferred stock could be sold by plaintiff to cover Dial’s indebtedness to him, in the event that Dial failed to pay back the $6,200 owed. Moreover, the contract provided for the retention by plaintiff of 2,000 shares of Fall River stock in consideration of the loan obtained by him. We are compelled to the conclusion that the transaction herein involved is a “purchase” and “sale” of a security, falling squarely within the statutory definition of those terms.

Defendants’ final argument is that there was no evidence presented at trial to implicate them in an unlawful scheme or device to defraud Kerbs. Violation of § 10(b) of the Act is predicated upon the use of a manipulative or deceptive device or contrivance in contravention of the rules and regulations that the Securities and Exchange Commission might prescribe. Rule 10b — 5 provides that it shall be unlawful (a) to employ any device, scheme, or artifice to defraud; (b) to make any untrue statement of material fact or to omit to state a material fact necessary in order to make the statements made, in the light of the circumstances under which they were made, not misleading; or (c) to engage in any act, practice or course of business which operates or would operate as a fraud or deceit upon any person. The securities laws should be construed not technically and restrietively, but flexibly in order to effectuate their remedial purpose. As stated by the Court in A. T. Brod & Co. v. Perlow, 375 F.2d 393, 397 (2d Cir. 1967):

“We believe that § 10(b) and Rule 10b — 5 prohibit all fraudulent schemes in connection with the purchase or sale of securities, whether the artifices employed involve a garden type variety of fraud, or present a unique form of deception. Novel or atypical methods should not provide immunity from the securities laws.”

Accord, Richardson v. MacArthur, 451 F.2d 35, 40 (10th Cir. 1971).

Essentially, defendants’ position is that Thompson’s mere presence at the meetings between plaintiff and Dial is less than active participation in Dial’s fraudulent scheme, and as such defendants are not liable under Rule 10b — 5. It is contended that the mere silence or inaction of Thompson is insufficient to establish defendants’ participatory involvement in inducing plaintiff into transactions with Dial, when a contrary inference of non-participation and non-inducement is, according to defendants, equally compelling. The problem with defendants’ argument is that it confines the issue presented to a simplified and inappropriate analytical framework, and it ignores applicable principles of securities law which have heretofore been formulated. Under § 10(b) and Rule 10b — 5 knowing assistance of or participation in a fraudulent scheme gives rise to liability equal to that of the perpetrators themselves. Strong v. France, 474 F.2d 747, 752 (9th Cir. 1973); Anderson v. Francis I. DuPont & Co., 291 F.Supp. 705, 709 (D.Minn. 1968); Brennan v. Midwestern, etc., Life Ins. Co., 259 F.Supp. 673, 682 (N. D.Ind. 1966); Pettit v. American Stock Exchange, 217 F.Supp. 21, 28 (S.D.N.Y. 1963). Moreover, one who aids and abets a fraudulent scheme may be held accountable even though his assistance consists of mere silence or inaction. Strong, supra, 474 F.2d at 752; Anderson, supra, 291 F.Supp. at 709; Brennan, supra, 259 F.Supp. at 682. We must conclude, on the basis of the record before us, that the activities of Thompson and Fall River Industries constituted knowing assistance and participation in a fraudulent scheme, in contravention of 10(b) of the statute and Rule 10b— 5.

The evidence upon which the trial court based its findings of fact and conclusions of law shows that Thompson was present at meetings during which the fraudulent transaction between Dial and plaintiff was arranged and discussed; that plaintiff was made aware, during the first motel room meeting, that Thompson was president of Fall River Industries, and that plaintiff at that time accepted transfer and delivery of 25,000 shares of Fall River stock; that Thompson knew Dial owned no stock in Fall River Industries, and further knew that his stepson, Danny Cress, did not own certificate No. N887 in the amount of 25,000 shares. As a corporate “insider” possessed of material information pertinent to the legitimacy of the Dial-Kerbs securities transaction, Thompson was obliged to speak out. The duty of disclosing material facts is one imposed upon “insiders” by § 10 and Rule 10b — 5. Thompson not only breached that duty, but allowed his presence and acquiescence to lend the appearance of legitimacy to an otherwise fraudulent deal. That is enough to support liability under the statute and the rule. There is, moreover, additional evidence of Thompson’s participation in the scheme to defraud plaintiff. Kerbs testified that Thompson delivered stock certificate No. N888 to him at another meeting in Dial’s motel room, and that Thompson at that time gave him “a pretty good rundown” on Fall River Industries. The trial court permitted Kerbs to testify as to this transaction involving certificate No. N888, also in Danny Cress’ name and for 25,000 shares, over defendants’ objection as to its relevance. It was Kerbs’ understanding that that certificate was to be used for a loan arrangement, similar to that involving certificate No. N887. Kerbs’ testimony as to this meeting and discussion with Thompson was clearly relevant as evidence of an overall scheme to defraud plaintiff, and the trial court did not abuse its discretion in allowing its admission: The totality of facts and circumstances herein indicates, as the trial court found, that Thompson was a knowing participant in the fraudulent scheme against Kerbs; such participation constitutes conduct proscribed by § 10 and Rule 10b — 5, and as such, is sufficient to establish liability under the statute and the rule.

Finally, defendant Fall River Industries argues that even if Thompson, its president, is liable for fraud and deceit, there is no basis on which to impute that fraud and deceit to the corporation, because plaintiff made no showing that Thompson was acting within the scope of his corporate authority or employment. The general rule that a principal is liable for the fraud and misrepresentations of his agent while acting within the scope of his authority or employment is fully applicable to corporations, even though the corporation did not authorize the fraud, or could not even be deemed to know of the fraud. See 37 Am.Jur.2d Fraud and Deceit § 321; 19 C.J.S. Corporations § 1278. The Restatement of Agency, Second (1958), at § 261, states the applicable principle as follows:

“A principal who puts a servant or other agent in a position which enables the agent, while apparently acting within his authority, to commit a fraud upon third persons is subject to liability to such third persons for the fraud.”

And § 262 of the Restatement provides:

“A person who otherwise would be liable to another for the misrepresentation of one apparently acting for him is not relieved from liability by the fact that the servant or other agent acts entirely for his own purposes, unless the other has notice of this.”

We have found no Utah caselaw directly in point, but we are convinced that the Utah courts would not differ from these articulated principles of agency law.

Fall River Industries made Thompson its principal officer, placing him in a position to speak for and on behalf of the corporation. Plaintiff was aware of Thompson’s presidency of Fall River Industries, having been introduced to him, and having seen his name on stock certificate No. N887 in the space provided for the signature of the corporation’s president. Thompson testified that he had spoken to many persons about Fall River Industries, and he stated “I was trying to sell a company.” Fall River Industries clearly permitted Thompson, in the course of his dealings with plaintiff and with others, to hold himself out as a spokesman for the corporation and as a promoter of its business interests. We hold that Fall River Industries is liable to plaintiff because Thompson, its president, acting within the scope of his apparent authority as principal officer and agent of the corporation, engaged in conduct which violated the provisions of § 10 of the Act and Rule 10b — 5. See Securities and Exchange Commission v. First Securities Company of Chicago, 463 F.2d 981 (7th Cir. 1972), cert. denied sub nom. McKy v. Hochfelder, 409 U.S. 880, 93 S.Ct. 85, 34 L.Ed.2d 134 (1972).

For the foregoing reasons, the judgment entered against defendants Thompson and Fall River Indústries, Inc. will be affirmed; the judgment entered against defendant Securities Transfer, Ltd. will be reversed.

      . Glen Dial, who was named as a defendant in this action, was never served with a summons and a copy of the complaint, and .was therefore not a party in the trial court proceedings.

      . Kerbs testified about liis conversation with Thompson, as follows: “He was telling me how good Fall River was and how it was a full-registered company, and a bunch of things that I didn’t really know that much about. But he was giving me a pretty good run clown on the company.”

      . The fact of the conversation with Securities Transfer was admitted by the trial judge only for the purpose of showing Kerbs’ state of mind and not to show the truth of the matters discussed.

      . The pertinent portion of the Act is codified at 15 U.S.C. § 78j (1970), and reads as follows :
      “It shall be unlawful for any person, directly or indirectly, by the use of any means or instrumentality of interstate commerce or of the mails, or of any facility of any national securities exchange— *****
      (b) To use or employ, in connection with the purchase or sale of any security registered on a national securities exchange or any security not so registered, any manipulative or deceptive device or contrivance in contravention of such rules and regulations as the Commission may prescribe as necessary or appropriate in the public interest or for the protection of investors.”

      . Kule 10b-5, 17 C.F.R. § 240.10b-5 (1973), reads as follows:
      “It shall be unlawful for any person, directly or indirectly, by the use of any means or instrumentality of interstate commerce, or of the mails or of any facility of any national securities exchange—
      (a) To employ any device, scheme, or artifice to defraud, * * * * *
      (b) To make any untrue statement of a material fact or to omit to state a material fact necessary in order to make the statements made, in the light of the circumstances under which they were made, not misleading, or
      (c) To engage in any act, practice, or course of business which operates or would operate as a fraud or deceit upon any person, in connection with the purchase or sale of any security.”

      . It will also be observed that, while the Courts of Appeals are divided on the question of the necessity of proving scienter to establish liability under Rule 10b-5, the pronouncements of this circuit on the matter have been clear and consistent. As stated by Judge Hill in Stevens v. Vowell, supra, 343 F.2d at 379:
      “ * * * It is not necessary to allege or prove common law fraud to make out a case under the statute and rule. It is only necessary to prove one of the prohibited actions such as the material misstatement of fact or the omission to state a material fact.” Citing Royal Air Properties, Inc. v. Smith, 312 F.2d 210 (9th Cir. 1962); Ellis v. Carter, 291 F.2d 270 (9th Cir. 1961); and Matheson v. Armbrust, 284 F.2d 670 (9th Cir. 1960), cert. denied, 365 U.S. 870, 81 S.Ct. 904, 5 L.Ed.2d 860 (1961).

        Accord, Mitchell v. Texas Gulf Sulphur Company, 446 F.2d 90, 97 (10th Cir. 1971); Allen v. H. K. Porter Co., 452 F.2d 675, 678 (10th Cir. 1971).