A defense attorney for tobacco heir Smith Bagley portrayed his client today as reflecting the same concern for employe well-being that once typified the corporate personnel practices of his late grandfather, R. J. Reynolds, father of the tobacco empire.
In a jury trial here that began Monday, the government has accused Bagley and four other defendants of allegedly looting an employe profit-sharing plan in order to inflate artifically the stock of a now-defunct company that Bagley once controlled.
The 11-count criminal fraud and conspiracy indictment, handed down last March 14, alleges that between Feb. 1, 1974 and April 15, 1975 Bagley and the others used employe funds to manipulate stock of the company, Washington Group Inc., of Winston-Salem. The indictment charges also that they misapplied funds from North-western Bank of Winston-Salem for the same purpose.
Bagley, a socially prominent Washington resident, first came to public attention as an active fundraiser for Jimmy Carter's presidental campaign. Before his legal troubles, Bagley and his wife, Vicki, often entertained administration figures at their Georgetown home.
On Monday, a jury was paneled that is predominantly male (three-women), white (one black) and young, with the majority apparently under 40 years old. Today, the jury had to wrestle with the complex financial terminology that is a key to this complicated case.
The jury learned definitions for such phrases as "negative good will," "inventory write downs" and convertible debentures. Government witness George W. Fulk, the former treasurer of Washington Group, occupied the stand for most of the day as he defined financial jargon.
Defense attorneys got Fulk to confirm that Bagley got the very best expert financial advice on the handling of his employes' profit sharing plans.
The government alleges that Bagley and the other defendants, most notably James Gilley, who was chief financial officer of the Washington Group, conspired to shift the Employe profit-sharing plans from one trustee bank to another in order to use the funds to boost the company's sagging stock price.
In switching eight profit-sharing plans from Wachovia Bank and Trust Co. of Winston-Salem to American Bank and Trust Co. of Pennsylvania, in Reading, the government alleges the defendants caused 50 percent of the assets - mostly blue-chip stocks - to be sold at a loss of $480,000 to Washington Group employes. Those funds then were allegedly invested in Washington Group stock.
Defense attorneys today argues that the price of those blue-chip stocks, under the trusteeship of Wachovia, had been slipping badly in 1974 and that this was the reason Bagley and Gilley caused the profit-sharing plans to be shifted.
On Monday, Judge Merhige heard a motion for dismissal of charges against one of the defendants, Dewey W. Chapple Jr., a former vice president of Northwestern Bank. Chapple's attorney, John Morrow, said he had sent his clients to the Winston-Salem office of FBI agent Zachary Low to review documents and that Chapple allegedly had told the agent some of the defense attorney's planned tactics for the trial.
Morrow claimed that the conversation violated Chapple's Fifth Amendment rights against self-incrimination and Sixth Amendment rights to effective counsel. Lawyers for the other defendants are considering asking Merhige to throw out charges against their clients, too.
The other two defendants in the case are William F. Thomas, vice president of Interstate Securities Inc. in Winston-Salem, and Shirley Grubb, an administrative assistant to Bagley.