298 F. 428 | 2d Cir. | 1924
Plaintiffs in error, with others, were indicted for using the mails in the execution of a scheme to defraud (a stock-swindling enterprise), under C. C. § 215 (Comp. St. § 10385). The usual conspiracy count under C. C. § 37 (Comp. St. § 10201), was added. The persons now seeking review are such of the defendants as were convicted upon any of the counts. Atkin, Kalor, and Boetzel were convicted of conspiracy only. This case must be remitted for a new trial, as we are convinced that prejudicial error exists, rendering •it impossible to avoid the result indicated.
The story of this scheme, for our purposes, may be given very briefly. The plan of operations was fo form a corporation and sell its stock, par $5 a share. The nominal business of the concern was - the manufacture and/or sale of cereal foods. The part of the scheme constituting fraud and wrongful use of the mails was the sort of rép
The method of proving this well-known kind of offense did not vary in the main form from that ordinarily followed, and too familiar to require description. One of the episodes testified to, or at least asserted as true by, the prosecution, was that some of the defendants sold this stock on a 50 per cent, commission and charged and received for it 50 per cent, above par. Another incident of this case, unusual in such prosecutions and material to the result we have reached, js that the general outline of the scheme, if not its detail, was conceived in the brain of one Elsworth, who died before indictment found. This man was plainly the leader, and a man of fertile intellect, who had been concerned with the manufacture and/or sale of cereal foods for a considerable number of years, who was said to have been previously identified with one or two very well' known businesses of that kind. It is not too much to say on this record that, if the scheme was fundamentally honest or radically dishonest, it was legitimate or illegitimate in accordance with Elsworih’s purpose and intent. In fact, this dead man’s character and mental make-up furnished the frame and surrounding containing. the efforts of the men who were actually brought to trial.
Under these circumstances a witness who had been in the same, employment with Elsworth, and had worked with and under him, was asked this question :
“Did any company controlled by Mr. Edward Elsworth succeed under his management?”
Over due objection the witness was permitted to give his opinion that none of Elsworth’s enterprises had succeeded. This is a typical question and ruling. We think this was clear and prejudicial error, and obviously affected several of the defendants very directly. The defense o'f some of them was in the main that they relied on Elsworth, admired him, and trusted him. If such defendants chose to take the stand, cross-examination as to what they knew or ought reasonably to have suspected concerning Elsworth, his history, and his business was entirely proper; but to bring in a stranger to the indictment, and permit him to tell what he thought of Elsworth’s financial history, was not only immaterial (which is frequently a frivolous objection), but it was trying the defendants above indicted on another man’s opinion concerning one deceased.
The plaintiff in error Atkin is a lawyer, though apparently not a practitioner. He stated that for some years past he had been “engaged with a great many companies that had been selling stock,” and admitted that his duty consisted in telling his employers “how to keep the post office inspectors pacified and how to get them off their shoulders.”
After the decéase of Elsworth certain papers were found on or in his desk and in his handwriting. They are apparently memoranda suggestive of intended talks with various of his subordinates, but par
“What is my answer if asked why we sold some stock at $7.50 and some at $5? I think I had better start in with my story, and not wait to find out what complaint he has.”
There was no evidence that Atkin had taken any part in the making of this memorandum, or that he had ever seen it—something which he himself denies. But this piece of paper was admitted in evidence against all the defendants, and plainly tended to prove that Elsworth recognized himself as (to put it mildly) on the defensive for trying to sell stock at such a high price. It is, of course, true that any act or declaration of any conspirator, done or said in furtherance of the conspiracy, during the progress thereof and before its termination, is evidence against all the conspirators. But this rule of law does not mean that the rules of evidence are dispensed with in proving the act or declaration which is to be evidence against all.
To permit this piece of paper to go into evidence ■ simply because it was in Elsworth’s handwriting (no other reason appears) was like calling Elsworth from his grave. There was no objection 'to cross-examining Atkin about the matter suggested by this memorandum, but to put the memorandum itself in evidence as a method of proving Elsworth’s state of mind was wrong, because it.did not in the least prove the state of mind of the other defendants, especially those other than Atkin.
Atkin took the witness stand and admitted or stated that he had perused the law books with respect to prosecutions under C. C. § 215. He was asked whether he had read the decision of this court in Wilson v. United States, 190 Fed. 427, 439, 111 C. C. A. 231, 243. He said he had. After some discussion concerning this once well-known prosecution the cross-examiner read to the jury (over due objection) the following from our decision:
“The commission of 50 per cent, for the sale of United Wireless stock was most remarkable. A court may almost take judicial notice of the fact that the stock of a corporation selling .for twice its par value does not require the payment of such a commission to dispose of it. If it does, the selling price must be altogether artificial. The inference must be either that the company is fraudulent, if the commission is not excessive, or that the commission, is fraudulent, if the company is what it purports to be.”
That it was error to permit the reading of this opinion to the jury cannot be doubted-. Press, etc., Co. v. McDonald, 63 Fed. 238, 11 C. C. A. 155, 26 L. R. A. 53; Harrison v. United States, 200 Fed. 662, 119 C. C. A. 78. Whether it was prejudicial error as against Atkin, considering his admissions of legal learning in this department oí the law,_ may perhaps be doubted; and since the trial judge without exception described the scheme proven under this indictment in words quite as strong as those quoted from our decision above cited, it is urged that what the judge in charge could say could be quoted from other judges.
Many other points have been submitted in argument, but they are for the most part matters of discretion. Abuse of discretion may amount to error; we do not think that any treatment of these matters would assist upon the new trial, which is hereby ordered.
