Court Opinion

ID: 8827708
Source: CourtListenerOpinion
Date Created: 2022-11-26 15:52:38.704186+00
Date Added: 2024-06-11T17:04:49.818120
License: Public Domain

LUSE, District Judge
(after stating the facts as above). This record presents some 44 assignments of error, under which are presented 91 legal propositions in support of the contentions for reversal by plaintiffs in error. Mr. Messing’s death, and the resultant abatement of proceedings as to him, renders it unnecessary to consider some of these, but the number remaining is sufficiently large to render it inadvisable to deal with each separately within the compass which this opinion may reasonably take. All have had careful consideration.
[1] The sufficiency of the indictment is challenged on several grounds, the first of which is a failure to name the persons whose money or property it is alleged the scheme or artifice was devised to obtain. In this connection the language of the first count is illustrative of all of the counts, and charges that the defendants devised a scheme and artifice for obtaining money and property from “a certain class of persons, then resident in divers states of the United States, by means of false and fraudulent pretenses and representations, that is to say, from the persons whom said defendants should, by means hereinafter described, induce to give, send, and pay their money and property to said defendants under the name of the Consumers’ Packing Company.”
In each of the counts, save the fifth, sixth, seventh, and ninth, it is averred that the letter set out and alleged to have been mailed was to “a person who then was one of said persons of said class of persons.” In the .counts just enumerated this phrase is omitted, and it is apparent. from the character of the letters set out that théy were not mailed to persons whose contribution in money or property was sought. The gist of these letters has already been stated. In our view it is. quite apparent that the indictment charges the equivalent of a-scheme to *23obtain the money or property of the public and whomsoever thereof might respond to the inducements and representations to be made by the means as charged “of oral statements and divers letters and printed advertisements and prospectuses.” Under the scheme as charged the defendants could not themselves know, when they devised it, the particular persons who would be injured. It was the proper province of the indictment to describe the scheme as it was devised as accurately as possible, and in those cases where the scheme is of the nature of a dragnet to capture all of the public who may be attracted to_ and entangled in its mesh, without regard to individuals, it would quite clearly be inaccurate and misleading to attempt to name the persons designed to be injured. To do so would characterize the scheme as one aimed at the particular individuals, when in fact the scheme as devised did not do so. As we view it, the scheme here set out as alleged to have been devised contemplated the public as its field of operation, and we see no reason for requiring that those who may be injured as the scheme is executed be named nor excuse given for omitting their names. The nature”of the scheme is itself sufficient reason for the omission. The indictment, in our opinion, falls outside that under consideration in the case of Larkin v. U. S., 107 Fed. 697, 46 C. C. A. 588, and within the class considered in the case of Mounday v. U. S., 225 Fed. 965, 140 C. C. A. 93, and Finnegan v. U. S., 231 Fed. 561, 145 C. C. A. 447.
[2] As to counts numbered 5, 6, 7, and 9, the additional objection is made that the letters mailed were not alleged to have been to any person of the class of persons whom it was intended to injure. It does appear, however, that each of the letters was written and mailed for the purpose of forwarding the alleged scheme. Under section 215, C. C., it is an offense if the mailing is in execution of or by way of an attempt to execute the scheme. It is not necessary that the use of the mails be for communicating with a person intended to be injured. Larkin v. U. S., 107 Fed. 697, 701, 46 C. C. A. 588; Preeman v. U. S., 244 Fed. 1, 156 C. C. A. 429. It was said in the Larkin Case:
“It is within 'the statute if, in aid of the scheme to defraud, the mails be used to open correspondence with the intended victim, or ‘any person.’ ”
Quite clearly each of the letters set out in each of the four counts last enumerated comes within that category.
[3] On the oral argument it was earnestly urged that the indictment fails to allege sufficiently the scheme or artifice by which it was designed to obtain money or property by false and fraudulent pretenses; reliance being had on the decision of this court in the case of Dalton v. U. S., 127 Fed. 544, 62 C. C. A. 238. There the indictment failed because the statements as to tire scheme to defraud were so placed with reference to the description of the class of persons intended to be defrauded asrto have no force, except as part of such description, and in addition there were no positive allegations of the falsity of the pretenses, such allegations appearing only in the “whereas” clause, so called. Thus in the Dalton Case the indictment charged that the defendant “had devised a scheme to defraud a class of persons not capable of being resolved into individuals, * * * that is to say, such of the persons, being publishers of newspapers * * * as should accept and *24publish * * * a certain advertisement. * * * ” At the places following the words “that is to .say,” where omissions have been indicated above, appeared words from which it could be inferred that the advertisement was one purporting to be sent by a regular advertising agency entitled to credit, and then followed the language “whereas, in truth and in fact, the Independent Advertising Agency aforesaid was not a bona fide advertising agency at all, but was a fictitious and fraudulent concern contrived” for the purpose of inducing the persons to be defrauded to accept and publish said advertisement on credit. The phrase “that is to say” quite clearly presaged a more detailed description of the class of persons only. In the instant case, however, the language is that the defendants did devise a scheme and artifice for obtaining money and property from “a certain class of persons * * * by means of false and fraudulent pretenses and representations, that is to say, from the persons whom said defendants, should, by means hereinafter described, induce to give * * * their money and property to said defendants * * * upon pretenses and representations, to be made * * * to the effect,” and here followed the substance of the alleged representations, after which appear the positive allegations that the defendants “by said pretenses and representations” intended to have “said persons” believe in the existence of the facts represented to exist, and then appear positive and direct allegations that such pretenses and representations were and would be false to the knowledge of defendants, and pointing out wherein their falsity had, did, and would lie. No formal rule exists requiring that in indictments of this nature the description of the class of persons designed to be injured shall be in any particular manner separated from a description of the scheme devised. By placing the phrase “that is to say” immediately after the reference to the “false and fraudulent pretenses and representations,” it is made clear that the pleader intended thereafter to describe such pretenses and representations. When, however, he inserts immediately after the phrase “that is to say” a description of the persons designed to be injured, no one, it seems to üs, would fail to understand that the language following the phrase “that is to say” was designed to describe, not only the class of persons, but the fraudulent pretenses and representations as well. In other words, the phrase “that is to say,” we believe, quite plainly introduces allegations both as to the persons to be injured and the scheme by which the injury was intended to be inflicted. Further, the weakness inherent in the mere recitals introduced by the word “whereas,” made prominent in the Dalton Case, is entirely absent here. We apprehend that the defendants were apprised by this indictment'with reasonable certainty of the nature of the accusation to the end that their defense might be properly prepared and a judgment be pleaded in bar to any subsequent prosecution for the same offense, and hence is not open to this attack.
[4] Combining in the indictment charges of violation of section 215, C. C., with conspiracy counts, is also complained of. Despite criticism of the practice found in a few opinions cited by counsel for plaintiffs in error, the propriety of such practice is, we believe, altogether too well settled to warrant question at this time. Sidebotham et al. v. U. *25S., 253 Fed. 417, 165 C. C. A. 159; Preeman v. U. S., 244 Fed. 1, 156 C. C. A. 429; Jacobsen v. U. S. (C. C. A.) 272 Fed. 401; Ryan v. U. S., 216 Fed. 37, 132 C. C. A. 257; U. S. v. Rabinowich, 238 U. S. 85, 35 Sup. Ct. 682, 59 L. Ed. 1211; Kelly v. U. S., 258 Fed. 392, 169 C. C. A. 408; Schwartzberg v. U. S., 241 Fed. 348, 154 C. C. A. 228. Indeed, in their reply brief counsel for plaintiffs in error state:
“The misjoinder we complain of is not so much that disclosed on the face of the indictment, although we point out that this practice also has been criticized. But our complaint is that when the evidence developed, and it was apparent that there was no real proof of any conspiracy, so much of the mass of evidence as against each defendant became so irrelevant as against the others that the court should not have permitted the joint trial to proceed.”
Thus the real contention is based upon the claimed absence of proof of conspiracy. In view of our conclusion hereinafter stated that there is evidence to sustain the finding of conspiracy, the real basis of counsel’s complaint in this regard fails.
[5] It is also contended that as to each of the first 13 counts of the indictment, charging violation of section 215, there was a misjoinder of defendants, in that as to each count the particular letter therein charg<ed to have been mailed can be ascribed only to the defendant who mailed or caused the same to be mailed. In view of what was said in Preeman v. U. S., 244 Fed. 1, 156 C. C. A. 429, this contention cannot be upheld. It was there said:
“Without the use of the mails the formulation and execution of thé fraudulent scheme would have been an utter impossibility. It follows that all who participated in the scheme contemplated the use of the mails in the execution of their common design; and when to this end” two of the defendants “made use of the mails it was not only on their own behalf, but as well on behalf of their coparticipants, and their acts in this regard became the acts of each of them. This is not less true where the prosecution is under section 215 than under the charge of conspiracy.”
This language, we believe equally applicable to this case. The magnitude of the operations charged and proven here, together with the methods used by way of advertisements in the newspapers, the distribution of prospectuses by mail and otherwise, the maintenance of branch offices in various important cities of the country, the sending of stock salesmen broadcast throughout the land, all show conclusively that all connected with the enterprise must have anticipated and known that the mails would be used in its prosecution* as a matter of course.
[6] Next it is urged that conviction under the substantive counts and also under the fourteenth count, which charges conspiracy to devise the scheme and to use the mails for the purpose of mailing the letters, all as stated in the first 13 counts, involves a double penalty. This question it is not deemed necessary to determine. No reversal should result here, even if the contention of the plaintiffs in error should prevail in this particular, for if conviction of plaintiff in error Ader was proper under the fifteenth count and any one of the first 13 counts, it must be affirmed; and, if conviction of plaintiff in error. Skolnik was proper under any single count of the indictment, it also must be affirmed. Pierce v. U. S., 252 U. S. 239, 40 Sup. Ct. 205, 64 *26L. Ed. 542; Abrams v. U. S., 250 U. S. 616, 40 Sup. Ct. 17, 63 L. Ed. 1173; Claassen v. U. S., 142 U. S. 140, 12 Sup. Ct. 169, 35 L. Ed. 966. The fifteenth count charges conspiracy and alleges numerous acts done to effect its object by way of letters mailed, meetings held, minutes signed, etc., in addition to the letters set out in the other counts. That the fifteenth count, therefore, was properly combined with the first 13 counts, is established by the authorities already cited, and that conviction and sentence does not constitute a double penalty is ruled by the opinion of this court in the Preeman Case, supra, 244 Fed. 1, 156 C. C. A. 429.
{7] It is further urged that the facts proven on the trial are insufficient to sustain the judgments against plaintiffs in error in that they are not inconsistent with innocence, indicating nothing more than exaggeration or trickiness of method at the most, and that the evidence in fact demonstrated that legitimate business was being promoted and conducted.
The facts have already been sketched. Aside from details which serve to arouse suspicion and characterize the enterprise as trickily dishonest, such as designating the business of Monroe Pfaelzer as that of Eli Pfaelzer & Sons, in striking resemblance to the names of the two other firms of Pfaelzer & Sons; the advertising of the personnel of the so-called advisory board, the ostensible chairman of which knew nothing about it; the circumvention of the' regulations of the state licensing authorities; the “fiscal agency” devices for abstracting funds from the treasury-of the corporation; the increase of the authorized capital stock from $1,000,000 to $5,000,000; the sending out of notices to the salesmen that the price of the stock would go up “next Monday” ; the giving of the impression that the beef marked with a P in the Guggenheim plant was that of Pfaelzer — aside from these and numerous other details that might be mentioned, there is the evidence to the effect that the stock-selling campaign was from the start based upon the representations that a small packing plant and business was owned or at least controlled by the Consumers’ Packing Company which formed the nucleus for the upbuilding of the $25,000,000 annual business predicted for the enterprise, and that the business was a going, profitable one which had already attained a volume of $2,000,000 annually and that such business was being conducted by the corporation, cattle were being slaughtered in considerable number daily, and that by July, 1918, the business warranted the payment of a dividend of 4 per cent., or at the rate of 16 per cent, per annum. Contrasted with these representations, the jury were entitled to find that the transfer of the Monroe Pfaelzer business was in fact never effected, or, if it was, not a dollar of its earnings found its way into the treasury of the packing company, and that no packing business with the stability and money investment implied thereby was either owned, controlled, or operated; that the business of Monroe Pfaelzer had at no time exceeded the gross amount of $800,000 per annum; that the Consumers’ Packing Company was engaged in no productive business, earned no dividends, and that the dividends paid were paid out of the moneys received in payment for the capital stock of the corporation for the purpose of inducing further *27purchases of stock. The evidence tends to prove that from the beginning plaintiff in error Ader, with S. C. Kops, fully understood that successful financing of the enterprise required that an existing business b,e found and used, and EH Pfaelzer came in to furnish that requisite. The promotion of the corporation was based upon the idea that in order to he successful it was necessary to represent that a small, but successful, packing concern was being financed, and needed only to be properly financed and enlarged to become a tremendous success to the profit of the fortunate investors in its capital stock.
It is urged that a valuable site was obtained and a modem packing plant was being constructed at the time when the affairs of the corporation were wound up; that in February, 1919, prior to the institution of the bankruptcy proceedings, the sum of $20,000 was deposited in a state court as a fund to which dissatisfied purchasers of stock might resort to compensate themselves, and that thus1 is established conclusively the good faith, of the enterprise. We do not believe those facts are to be given such far-reaching effect. The deposit of the funds in the state court was in a receivership proceeding and was deposited under a species of duress, a price paid for the dismissal of the receivership proceedings, and, while such deposit was a fact properly to he considered by the jury in arriving at the good faith of the enterprise, it is hardly of sufficient weight to overcome the evidence of the existence of a scheme to obtain money by false and fraudulent pretenses. So also was the fact that a site had been acquired and a plant in process of construction. The evidence discloses that, with the purchase of the site and the commencement of the construction of the plant, such facts were much stressed for the purpose of effecting sales, and in view of the fact that the authorized capital stock had been -so substantially increased with intent, no doubt, to continue the sale thereof, we think it was for the jury to give to the facts the effect they deemed them entitled to. It is within the probabilities that the money expended for the land and plant was expended for a purpose similar to the expenditures for unearned dividends. Furthermore, as said in Foster v. U. S., 178 Fed. 172, 101 C. C. A. 492:
“The fact that the business conducted was an actual business does not prevent its being within the statute, provided it was the basis of a fraudulent scheme.”
See Sparks v. U. S., 241 Fed. 777, 154 C. C. A. 479; Bettman v. U. S. 224 Fed. 819, 140 C. C. A. 265; McConkey v. U. S., 171 Fed. 829, 96 C. C. A. 501.
[3] We are therefore of the opinion that the jury were warranted in finding that a scheme to obtain money and property of the subscribers to the stock of the Consumers’ Packing Company by false pretenses and representations within the meaning of section 215, C. C., in fact existed. Likewise, in our judgment, the existence of the conspiracy was properly a jury question. Ample circumstantial evidence was presented to warrant the jury in concluding that an agreement was arrived at to devise and execute the plan of selling the stock of the corporation by means of false and fraudulent representations, and to use the mails for its execution. The evidence also affords proof of the overt acts set *28in the fifteenth count, thus warranting the jury in finding the violation of section 37, C. C., charged in the last-named count. That the violation of both the latter statute and section 215, C. C., charged in the indictment, were brought home to plaintiff in error Ader by the evidence, cannot well be doubted.
[9] As to plaintiff in error Skolnik, it is insisted that she was a mere employee of the Consumers’ Packing Company, and as such merely acquiesced in, but took no part in, forwarding the scheme, and in so far as she made use of the mails it was done in a mere clerical capacity. But the evidence not only tended to prove that she was engaged in various capacities as a clerk, cashier, and bookkeeper, but also that she acted as assistant secretary and treasurer of the Consumers’ Packing Company and that she was the secretary of the J. H. Mitchell Company, and in addition she appears to have voluntarily assumed to assist both herself and the other defendants by making sales-of stock, and a careful scanning of the record which her contentions have elicited leads us to believe that there was ample evidence upon which the jury might find that Skolnik, with guilty knowledge of the scheme, associated herself with the other defendants in forwarding its object. Whether her participation went so far as to warrant her being held a coconspirator under the fifteenth count it is unnecessary to decide. Proper conviction under any one of the first 13 counts will, as has already been indicated, sustain the judgment against her. None of the letters bearing Miss Skolnik’s signature are made the subject of any of the 13 substantive' counts, but the evidence discloses that on August 29, 1918, Miss Skolnik received from Mr. Shaw money in payment for the stock which is the subject of the indictment letter to him, set out in count 2. In November, 1918, she used the mails to. correspond with William C. Janz, and a letter to him dated January 25, 1919, in execution of the scheme, is made the subject of the twelfth count of the indictment; also the indictment letter of the thirteenth count of D. Kaplan was preceded by correspondence between him and Miss Skolnik in reference to his stock. Under these circumstances we are of the opinion that the juiy were warranted in finding, at least as to the 3 counts last hereinabove mentioned, that the use of the mails as charged in those 3 counts was brought home to Miss Skolnik. In this connection it should be borne in mind that, as said in Schwartzberg v. U. S., 241 Fed. 348, 154 C. C. A. 228:
“The gist of conspiracy is the agreement, the substance of an offense under section 215 is the prosecution of a fraudulent purpose, toward the execution or fulfillment whereof the mail is used. One may form and accomplish it, with or without assistance; but all who with criminal intent join themselves even slightly to the principal schemer are subject to the statute, although they may know nothing but their own share in the aggregate wrongdoing.”
Complaint is made because evidence going to show the good intent of the defendants was excluded. If this were so, undoubtedly it would be serious, but the error assigned relates to the exclusion of certain testimony sought to be elicited upon the cross-examination of the defendant L. A. Davis, originally a defendant, but who had pleaded guilty, and who was testifying as a government witness. The evidence *29sought was not properly cross-examination, and no error can be predicated upon the court’s 'ruling. Foster v. U. S., 178 Fed. 165, 177, 101 C. C. A. 485.
Error is also assigned upon the ground that in the cross-examination of plaintiff in error Skolnik government’s counsel was permitted to introduce in evidence in the trial of this case the remarks and opinions of the District Judge expressed during the investigation of the affairs of the packing company in bankruptcy proceedings. This error is based upon a misapprehension of the record as we read it. The opinions of the District Judge were expressly excluded by the trial court. Some of his questions as they were put to the witness in the bankruptcy proceedings were verbatim, and the substance of others were put to the witness with the usual question as to whether she had not answered such questions in a particular manner on the prior, hearing, thus following substantially the usual course of handling such matters. We see no error here.
[10] It is earnestly insisted that prejudicial error was committed in permitting various witnesses to relate the statements to them of various salesmen who approached them in endeavors to sell the stock of the packing company. The claimed errors are grounded: First, upon the alleged want of evidence showing the authority of the salesmen to represent the defendants; and, second, the absence of authority on the part of the defendants to said salesmen to make the representations testified to. As to the first ground, it may be said that in all or nearly all cases the activities of the salesmen were followed up by the defendants, or some of them, in the usual course of business, and their authority thus properly established, or, in any event, sufficient evidence was offered to authorize the jury to find such authority. That the salesmen were employed by the corporation rather than the defendants as individuals is immaterial in view of the evidence warranting the jury in finding that the corporation was being used by the defendants in the execution of the alleged scheme to defraud.
“It is a rule of the criminal law as well as the civil that corporate agencies cannot shield themselves behind the corporation, where they are the actual and efficient actors in committing a fraud or an offense.” Kelly v. U. S., 258 Fed. 392, 401, 169 C. C. A. 408, 417, and cases cited.
With reference to the second ground of attack upon this class of evidence, it may be observed that, while there was some variation in the statements of the various agents, the evidence tended to show an established course of business by way of sending out agents with intent that such agents should make representations with reference to the alleged existing Pfaelzer plant, its business, the existing business of the Consumers’ Packing Company, its profits and dividends, and, upon the whole, we are of the opinion that the statements of the various salesmen were of the same general import as the defendants designed they should make, and that the admission of such evidence was not and did not constitute prejudicial error. See Whitehead v. U. S., 245 Fed. 385, 396, 157 C. C. A. 547.
[11] A number of alleged irregularities in the course of the trial below are also complained of. , First among these is the refusal of the *30trial court to grant defendants a separate trial. In the veiy nature of things, from what has already been said, it must be clear that no error was committed in this regard which the plaintiffs in error may take advantage of. This was a matter peculiarly within the sound discretion of the trial court. U. S. v. Ball, 163 U. S. 673, 16 Sup. Ct. 1192, 41 L. Ed. 300; Sparf v. U. S., 156 U. S. 51, 15 Sup. Ct. 273, 39 L. Ed. 343; U. S. v. Marchant, 12 Wheat. 480, 6 L. Ed. 700.
“That some defendants bad a very small part in wrongdoing as compared with others does not reasonably entitle them, to separate trials, if all the doings of all the defendants are (by the nature of the charge) to be proven as ejusdem generis.” Schwartzberg v. U. S., 241 Fed. 848, 154 C. C. A. 228.
[12] Separation of the jury during the trial is also complained of. This also was within the discretion of the trial court; care being taken to properly caution the jury against permitting any outside influences. This was done in the instant case. Furthermore, no defendant requested that any other course be pursued. It is also complained that government’s counsel by improper invective prejudiced the rights of plaintiffs in error. Granting that some of the statements of-government’s counsel were highly colored, we are not prepared to say that the remarks were so far outside the evidence and inferences legitimately to be derived therefrom as the same was viewed from the 'government’s standpoint as to be erroneous. Quite certainly ho error in the handling thereof by the trial court can be predicated thereon.
[13] During the course of the trial the defendant Troost approached one of the jurors, and in substance said that he 'should never have been tried with Mr. Ader; that he should have been tried separately; that he should never have been indicted. The juror thus approached reported the incident to the trial judge, who, in the absence of the jury, informed the attorneys. It appears further that the juror reported to the court that he could hardly recall what it was that Troost said; that he did not pay any attention to him; and that the court instructed the juror to forget it and not communicate about it to any other juror. No motion to withdraw the juror was made by counsel for the plaintiffs in error. Apparently the incident was not considered serious nor prejudicial, or plaintiffs in error thought best to proceed with the case. Manifestly, we think, it was the duty of the defendants to ask leave to withdraw a juror on that ground if they then deemed themselves prejudiced by the incident. Having determined to take chances of a favorable verdict, no error can now be predicated upon the incident.
[14] After verdict plaintiffs in error filed a motion for a new trial .and in support of such motions offered affidavits disclosing newspaper accounts dealing with the incident above referred to, wherein one of the defendants (Troost) approached one of the jurors and had some conversation with him.' The trial court considered the affidavits and denied the motion. Having exercised his discretion, no exception can be sustained to This denial of the motion. Katz v. U. S. (C. C. A.) 273 Fed. 157. This case is readily distinguished from that of Mattox v. U. S., 146 U. S. 140, 13 Sup. Ct. 50, 36 L. Ed. 917, and Ogden v. U. S., 112 Fed. 523, 50 C. C. A. 380, wherein the trial court declined to exercise its discretion, and also readily distinguishable from the case *31of Simmons v. U. S., 142 U. S. 148, 12 Sup. Ct. 171, 35 L. Ed. 968, wherein the Supreme Court approved of the exercise of the discretion of the court in permitting the withdrawal of a juror and directing a new trial. In fact, we see no reason to disagree with the trial court in the exercise of his discretion.
[15] Claim is made that certain instructions of the trial court were erroneous. No objection nor exception was made to the instructions in the court below, and hence they are not now properly reviewable here. Lewis v. U. S., 146 U, S. 370, 13 Sup. Ct. 136, 36 L. Ed. 1011; Hickory v. U. S., 151 U. S. 303, 14 Sup. Ct 334, 38 L. Ed. 170; St. Clair v. U. S., 154 U. S. 134, 14 Sup. Ct. 1002, 38 L. Ed. 936; Rosenblatt v. U. S. (C. C. A.) 271 Fed. 435. However, in view of the other incidents claimed by plaintiffs in error to have rendered the trial below unfair, we have scanned the instructions, and are of the opinion that they are substantially free from objectionable matter, and on the whole record we conclude that neither of the plaintiffs in error was denied any substantial right whereby a fair trial was prevented, and hence that the judgments of the trial court should be, and they are, affirmed.