243 F. 84 | 9th Cir. | 1917
The defendants Chas. A. Elder, W _ D. _ Deeble, and George M. Derby (plaintiffs in error), together with eight others, were indicted under section 37 of the Criminal Code (Act March 4, 1909, c. 321, 35 Stat 1096 [Comp. St. 1916, § 10201]) for conspiracy to violate section 215 (Comp. St. 1916, § 10385), in using the mails in furtherance of a scheme to defraud. The plaintiffs in error were convicted, and the other defendants were acquitted.
The indictment charged, in substance, that in January, 1911, Elder, Deeble, Derby, and others were in exclusive control of the affairs of the Los Angeles Investment Company, a California corporation at Los Angeles; that defendants conspired to defraud divers persons, inducing them by false and fraudulent representations to purchase of shares and bonds in the corporation at prices greatly in excess of their value, and for the purpose of executing the scheme would place, and cause to be placed, letters, -circulars, etc., in the mail of the United States, in which mail matter they would pretend'that the earnings of the company were grossly in excess of what they actually were, and that the cash balances on hand were grossly in excess of the actual balances; that the stock was increasing in actual value at the rate of 5 per cent, of its par value per month; that a so-called “Guarantee Fund” was maintained under the control of the Globe .Savings Bank of Los Angeles for the protection of the stock purchasers, and that there were and would be in this fund amounts grossly in excess of what it actually contained, and that no one ever had or could buy a single share of stock in the company except upon payment of the full purchase price in cash or by a one-third cash payment with the remainder in notes; that the payment of certain so-called “Gold Notes” was secured by a first lieu on the treasury and real estate of the corporation, and that the entire stock premium's were held for the future benefit of stockholders, and that the dividends declared upon the stock were paid out and would be paid out of the earnings and profits of the corporation, and if a balance was due the corporation from stockholders, including defendants, all dividends payable to such stockholders would be applied on the amount owing by them; that the defendants, as a part of the conspiracy, would issue to themselves about 1,000,000 shares of the stock of the corporation without consideration therefor, and would pay to themselves dividends upon it, and would divert money of the corporation to the “Guarantee Fund,” and would divert money to “Home Makers,” a corporation controlled and managed by defendants.
The overt acts charged consisted of mailing of letters and copies of “Homes of Los Angeles,” a paper published each month by defendants in the name of the Los Angeles Investment Company. These alleged published representations related to “Gold Notes” as safe and
The testimony is voluminous, but the gist of much of it is as follows: Elder, Deeble, and Derby were the president, secretary, and treasurer, respectively, of the Los Angeles Investment Company, and all three were directors and in control. Elder was also director and president of “Home Makers,” a corporation owned by the defendant, and was trustee of the “Guarantee Fund,” and also director and president of the Globe Savings Bank. Deeble and Derby were also directors and officials in the “Home Makers” and in the Globe Savings Bank. They sold 5,000,000 shares of the capital stock of the Los Angeles Investment Company, of the par value of $1 each, for over $16,-000,000. They also sold the obligations of the “Gold Notes,” of more than $2,000,000, and certificates of over $500,000. 670,588 shares of the capital stock of the Investment Company were issued to the 11 persons who had been included in this indictment, at an aggregate price of $1,30.6,305.75, charged against the 11, leaving $18,246,622.81, for which the stock and obligations of the company were sold to the public. Counsel for the United States accepts the statement of counsel for defendants, that the “company had throughout its history paid a quarterly cash , dividend amounting to 7 per cent, per annum, upon the market value of the stock at the time of the dividend. The company had also advanced in each of the eight nondividend months every year
“Question: From wliat source can you pay 28 per cent a year in cash dividends?”
“Answer: All dividends are paid from profits on real estate, interest on loans, building profits, architectural, rental, and insurance departments, etc. 'The last annual statement showed profits for the preceding year to be, for real estate. $2(51,319.85); for interest, $180,000.00; and for building construction, $10,191.89.”
At a directors' meeting held on May 7, 1901, the directors present, Elder, Decble, Derby, and Fay, declared a dividend of 200 per cent, on the paid-up capital stock of the corporation “out of the surplus earnings of the corporation airead]? accrued and hereafter to accrue,” payable to the stockholders in proportion to their several holdings. A resolution passed the same day also provided that the stockholders might purchase with the dividends treasury stock to the entire amount of the dividends, at $1 per share if purchased, on or before May 31, 1901, and the president and secretary were authorized to sell treasury stock to the amount of $1,000 to pay the debts of the company. There was evidence to the effect that wdien this 200 per cent, dividend was declared the outstanding capital stock was 2,000 shares, which made the dividend $4,000; but it appears that at that time there was a deficit on the books of the company amounting to $696.57. In August, 1901, this deficit was covered by “surplus earnings of the corporation hereafter to accrue,” in this way: 2,081 shares of stock in a corporation called the Automatic Tool Company was placed on the books as worth 40 cents a share, a total of $771.44, which, covered the deficit and left a small excess. But the evidence showed that 46 shares of stock in the tool company cost the Dos Angeles Investment Company 10 cents a share, that 522 shares cost 5 cents a share, and 1,513 shares cost 2 cents a share; that the 1,513 shares were acquired on July 31, 1901, one day before the deficit created by the dividend was covered by putting the tool company stock at 40 cents a share. Subsequently the stock of the Automatic Tool Company was charged off to profit and loss In installments. Notwithstanding such conditions, the company continued to advertise that cash dividends had been declared, and that
When the adoption of the proposed “Blue Sky Law” was being advocated in California, “Homes” in February,. 1913, and in subsequent issues, opposed such proposed legislation; but stated that, before the law could be effective, the Los Angeles Investment Company would be a closed corporation, with no stock for sale, and therefore would not be brought within the provisions of the proposed law.- The contemplated disposition of the stock of the company was advertised in an interview had with Elder, wherein Elder spoke of expected sale of the property of the company, 6,000 acres, to certain capitalists at $3,000 per acre. Another effort to sell stock seems to have been made, by advertising to the effect that a bankers’ syndicate was being formed to buy all the shares of the Investment Company remaining unsold on the last day of May, 1913. Stockholders were advised that the syndicate was open for them to come into, and that the syndicate intended to .buy at $4.35 a share. But on June 1st over 200,000 shares of the capital stock of the company were still unsold. The officers of the Investment Company then as of date of May 31, 1913, transferred these 200,000 and more shares from the Investment Company’to the “Guarantee Fund,” at $4.30 per share, in acceptance of an offer of die “Guarantee Fund” to the company, spread upon the minutes of the director’s meeting of the Investment Company of May 7, 1913. The consideration named for this transfer was $860,176.30, upon terms, one-third cash, and the balance by note executed by Elder and Derby as trustees of the “Guarantee Fund,” dated May 31, 1913, due three
There is nothing to show that the grand jury had been considering any charge against the Los Angeles Investment Company before Mr. Gear read his statement to the body. The foreman of the grand jury and the secretary filed counter-affidavits saying that the grand juror Gear was not present at any time during the deliberations or the proceedings upon which the indictments against these defendants were based or returned; that he left the grand jury room before the matter was taken up or considered, and did not return, and never was present in the grand jury room when the matters were heard or considered or discussed by the members of the grand jury; and that the statement read by Mr. Gear on November 11th had been thereafter given by the foreman to the United States attorney, and was not thereafter read or considered in the proceedings or deliberations of the jury. The grand juror Gear himself, in an affidavit, denied that he had ever told Derby that, if the matter of the Los Angeles Investment Company should come before the grand jury, he might need a friend, and denied that the question of his being on the grand jury ever was mentioned; but said that when he called on Derby he sent in a card, upon which he wrote, “Will Mr. Derby see Col. Gear, 4306 E. First street, member of United States grand jury?” Mr. Gear further says in his affidavit that he did not attend the sessions of the grand jury while the investigation of the officers of the Los Angeles Investment Company was in progress, heard none of the evidence, and did not vote on the indictment, and never talked to any member of the grand jurjr in reference to the company, and never tried to influence or persuade any member of the grand jury to vote to indict the officers of the company; that he considered it his duty to present the matter to the grand jury as he did, because he had received through the United States mails literature in reference to the “Gold Notes” in which a client of his had invested a thousand dollars.
There is no doubt of the fact that, if a grand juror knows that a crime has been committed which is properly the subject of investigation by the grand jury of which he is a member, it is his duty to¡ call the matter to the attention of his fellow grand jurors. Of course, if he is in any way personally or otherwise directly concerned, he should excuse himself from participation in the investigation and the deliberations of the grand jury with respect to the matter. Clearly, in the present case, the grand juror did nothing illegal, and we affirm the ruling that there was no sufficient ground for quashing the indictment.
“We are dealing with a motion for a new trial, the denial of which cannot he treated as more than matter of discretion or as ground for reversal, except in very plain circumstances indeed. Mattox v. United States, 146 U. S. 140 [13 Sup. Ct. 50, 36 L. Ed. 917]. See Holmgren v. United States, 217 U. S. 509, [30 Sup. Ct. 588, 54 L. Ed. 861, 19 Ann. Cas. 778]. It would be hard to say that this case presented a sufficient exception to the general rule The judge did not reject the affidavit, but decided against the motion on the assumption that more than it ventured to allege was true. As to his exercise of discretion, it is to be remembered that the statutes or decisions of many states expressly allow the separation of the jury even in capital cases. Other states have provided the contrary. The practice has varied, with perhaps a slight present tendency in the more conservative direction. If the mere opportunity for prejudice or corruption is to raise a presumption that they exist, it will he hard to maintain jury trials under the conditions of the present day.”
A number of exceptions are based upon the action of the court in admitting and excluding certain testimony. We have examined them, and find no substantial error in the rulings of the court. Nor do we find error in the instructions which stated the law carefully and with sufficient fullness to enable the jury to understand the principles which should control in their consideration of the evidence.
Believing that no substantial reason is advanced for holding that the defendants did not have a fair and legal trial, the judgment is affirmed.