UNITED STATES v. GRAYSON
No. 136, Docket 20836
Circuit Court of Appeals, Second Circuit
March 4, 1948
166 F.2d 863
The Company contends that it is also entitled to 6% interest “on $34,875.50 for supplies taken by the Government on November 22, 1942; paid July 8, 1943.” We find no evidence in the record to support this assertion.
[REDACTED] The jury‘s verdict was well within the evidence. While the total award was much less than the amount claimed by the Company, it exceeded by about $40,000 the highest estimate made by any Government expert witness.
Our conclusion is that the judgment reflects all elements of value which lawfully might be considered in determining the issue of the just compensation to which the Company was entitled, and that no errors of law were committed by the trial court which would warrant a reversal.
The judgment is affirmed.
John F. X. McGohey, U. S. Atty., for Southern District of New York, of New York City (Bruno Schachner and John J. Donovan, Jr., Asst. U. S. Attys., both of New York City, of counsel), for appellee.
Before L. HAND, SWAN and FRANK, Circuit Judges.
L. HAND, Circuit Judge.
Grayson was indicted in forty-three counts: twenty-two for fraudulent use of the mails;1 twenty for violating the Securities Act of 1933;2 and one for conspiring to commit the crimes laid in the earlier counts. At the conclusion of the evidence the judge withdrew from the jury a number of the charges of misrepresentation which together made up the fraudulent scheme, and dismissed a number of the counts; the jury convicted the accused upon all counts that were submitted to them, including the conspiracy count, which it will not be necessary to consider separately. The scheme which the prosecution sought to prove was to sell to customers interests in “royalties” in the Texas, Oklahoma and other oil fields, or to act as their broker in procuring “royalties” from others. It is the practise in these regions for the owner of the surface—the “tract“—to convey to oil companies the right to sink a well and withdraw the oil, or to reserve the right to a part of the oil upon conveying the fee in the “tract” to the oil company. The common arrangement in either case is for the oil company to account to the owner for one-eighth of the oil withdrawn, and this right is called a “royalty.” In the case at bar all the “royalties” came from “tracts” on which wells had been sunk, and in all the wells were in active operation. The fraud charged may be stated generally as consisting of representing to customers that the “royalties,” of which they bought fractional shares, had a longer prospective income producing power than they had in fact; that they were stable, dependable investments; that the cheques the customers would receive were “income“; and that the price they paid was less than the value of the interest received. Upon this appeal Grayson raises four
Towards the end of 1943 Grayson and three others entered upon a joint venture to buy oil “royalties,” and sell them to customers, or to buy “royalties” for customers as brokers. They procured a list of persons, supposed to have investments—for the most part persons of small means—to whom they mailed a postcard, offering them gratuitous financial advice. Since the card itself contained no false statements, the prosecution relied upon what the partners told the customers at the personal interviews to which the card led. These representations were in general of the kind alleged in the indictment, and were amply proved at the trial by testimony of the customers. It is not necessary, in the view we take, to consider in detail what they were; for the purpose of the appeal we will accept Grayson‘s contention that they were all in the nature of recommendations of “royalties” as highly desirable investments, as insuring a reliable income over a long period of time—at times comparable with the customer‘s life—and as worth more than the price paid. (We can find nothing to justify the notion that the prosecution has abandoned the charge of misrepresentation as to value.) Moreover, not only did the testimony of the customers amply prove what was said to induce them to buy, but from the testimony of Grayson‘s confederate, Berman, the jury could have concluded that he did not believe what he and Berman professed to believe about the “royalties“; in short, if it was a fraud to inveigle the customers into purchases by hopes of profit which the confederates did not themselves entertain, there was evidence to support the verdict.
[REDACTED] As we understand it, Grayson‘s objection is not that the prosecution failed to prove what it set out to prove, but that opinions, promises, or representations as to the future, will not support a charge of fraud. We have repeatedly held the opposite.3 Indeed, it has been the law ever since 1896,4 that to promise what one does not mean to perform, or to declare an opinion as to future events which one does not hold, is a fraud. It is true that in Chaplin v. United States5 the Court of Appeals for the District of Columbia by a divided court felt bound to hold otherwise in a prosecution for obtaining money under false pretences. We have recently refused to follow this ruling in a prosecution for evading the Selective Service Act
[REDACTED] In charging that the trial was unfair Grayson relies upon several incidents, of which we will first take up the three least important. One of these is that he was indicted under an alias, by coupling with the name, Grayson, his former name, Gellis, which had been lawfully changed. We can see no justification for the use of the alias, and the practise has been several times condemned.10 No issue could come up as to Grayson‘s identity, and an alias—even a single alias—can serve no purpose but to arouse suspicion that the accused is a person who has found it useful or necessary to conceal his identity. Next, the receipt in evidence of the opinion of the Securities and Exchange Commission in Charles Hughes & Co., Inc. v. Securities and Exchange Commission was entirely proper; for Grayson and Berman had discussed the effect of this holding, and the extent to which they should guide their conduct by it. Last, to ask Grayson‘s expert whether some of his earlier clients had not been enjoined by a court, or whether their publication had not also been enjoined, was not reasonable cross examination; but Grayson did not object to the first question—though later he did move to strike it out—and the second question the judge ruled out. We see no reason to suppose that the prosecutor did not believe that the questions were proper, and in any event this was at most an irregularity. These three occurrences of which only two at most were improper, would not in our judgment even remotely tend to justify a reversal.
[REDACTED] Some of the testimony brought out from customers was, however, more serious. We wish to distinguish, particularly in the light of what we said in United States v. Brown,11 between what the accused says to his customers and what the customers say about their own circumstances, financial or personal. It often happens that what a customer tells of his interview with the accused, or what the correspondence beween them discloses, contains matters extremely damaging and likely to
arouse the jury. In the case at bar such an instance was the testimony of one of the customers that during his efforts to induce her to buy “royalties” Grayson made amorous advances to her. That testimony was, however, entirely relevant, despite the extravagant protest of the accused at the time, and apparently the judge‘s doubts—for it is never a ground of objection to evidence directly relevant to the crime that it exposes the accused to odium, or even implicates him in another crime. In this instance all that took place was part of the means by which the customer was to be induced to buy: although he was on pleasure bent, apparently Grayson had a frugal mind. It is true that a judge has discretion to rule out even relevant evidence if it is not cogent and is more likely to distract, than to inform, the jury; but that cannot be said of the very communications between the accused and his victims. So far as these incidentally arouse the hostility of the jury, he is without relief. Nearly all the evidence complained of falls under this head; but there were three instances that do not; and it is difficult altogether to justify the prosecutor in their introduction. First, we can find no reason for asking one customer whether he had a son in the service, after he had already testified that he had so told Berman. Second, it was certainly unwarranted to ask another customer whether what she paid was all that she had in the world. Third, it was unnecessary a second time to ask a customer whether she was married; and, when she coupled her second answer with the statement that her husband was in the service, it is hard to resist a doubt whether the addition may not have been expected. However, these even in conjunction would not justify reversal in so long a trial; and, so far as concerns the first and fourth points upon the appeal, we should affirm the judgment without hesitation. There remain the second and third: the introduction of the “Offering Sheets” and the exclusion of the “Sales Reports.”
In order to prove that Grayson could not have supposed that the “royalties” were as
[REDACTED] White, as a qualified expert, was entitled to form his opinion as to the future life of the “royalties“—and therefore indirectly as to their present value—from his personal observation and by recourse to any other competent evidence which was introduced at the trial; and it was proper for him to state in tabulated form his conclusions from all evidence properly in the case. We will assume that the reports of the state commissions were competent as official documents; in any event Grayson does not apparently challenge them. The judge received the “Offering Sheets” as also competent under the same exception to the hearsay rule. Official in one sense of course they were, for the dealers had filed them in obedience to a regulation of the Securities and Exchange Commission; but not all documents required to be filed by law are competent evidence of all that they record. The exception is confined to transactions of which it is not only the duty of an official to make entry, but which must themselves have come within his knowledge in the course of his duties.12 Wigmore13 extends the exception to transactions of the recording officer‘s subordinates, who perform their duties under his supervision; and it is hardly conceivable that this should not be right, although Great Northern Ry. v. Washington14 may be thought to be the
Nor was this the only error, for the “Sales Reports” should not have been excluded. These documents were required to be filed with the Securities and Exchange Commission by registered dealers in oil “royalties” for every sale made by them, and all contained the sale price. They were in two forms; one for a sale to a customer, the other for a sale to another dealer. Grayson issued a subpoena to the Commission to produce a number of reports of such sales, some of which related to interests in the same twenty-two “royalties” laid in the indictment. Of these one was in 1944, some were in 1942 and the rest were scattered back as far as 1936. He offered these in evidence, and proposed supplementing them by proving how much oil had been taken from the wells since the sales had been made. The prosecution objected to their receipt on two grounds: (1.) they were too remote to be material, and (2.). they were privileged because of regulations of the Commission which enacted that they “shall be kept confidential unless the Commission shall order otherwise.”19 The judge examined them, held that they were too remote to be relevant and excluded them; it does not appear that he made any ruling upon the question of privilege.
[REDACTED] We do not think that they were too remote. It does not appear whether the sale in 1944 was of a “royalty” in which Grayson had dealt, although presumably it was, since he had included it in his subpoena. Be that as it may, we cannot say that those of 1942 or of even earlier years were without probative value. It is quite true that the value of a “royalty” in 1944 was not proved by showing how much oil had been taken out since the earlier sale had been made, even though one corrected the sale price by any changes in the price of oil. More important were the factors of “water encroachment” in the “tract,” and the “decline curve” of the production of oil; but these had already appeared in
Conviction reversed; cause remanded.
FRANK, Circuit Judge (concurring).
I agree that we must reverse for the reasons stated by my colleagues. I would, however, also hold that, even in the absence of the errors which they hold reversible, we should reverse because of (1) the needless use of the alias,1 and (2) the three instances of testimony, by victims, the admission of which my colleagues describe as improper2 but which they regard as harmless. Whether any one of those errors standing alone would be enough to require reversal need not be considered. But combined, I think they deprived defendant of a fair trial; they come within the recent