United States v. Stone

| D.N.J. | Mar 2, 1905

LANNING, District Judge

(after stating the facts). The first cause of demurrer to the indictment is that “the indictment does not negative the exceptions contained in the statute and regulations mentioned in said indictment.” This objection to the indictment is based on the provision in section 4400 of the Revised Statutes [U. S. Comp. St. 1901, p. 3015] which excepts public vessels of the United States from the legislation contained in title 52 concerning “Regulation of Steam Vessels.” Sections 4405, 4417, and 4488 [U. S. Comp. St. 1901, pp. 3017, 3024, 3055], the provisions of which are plainly referred to in the indictment, are, with section 4400, parts of title 52. The rule for negativing exceptions in pleadings is frequently stated to be that, if the exception is contained in the enacting clause of the statute, the party pleading must show that the accused is not within the exception, but that, if it be in a subsequent clause or statute, or in a proviso, that is matter of defense, which must be shown by the accused. In United States v. Cook, 17 Wall. 168" court="SCOTUS" date_filed="1872-12-18" href="https://app.midpage.ai/document/united-states-v-cook-88735?utm_source=webapp" opinion_id="88735">17 Wall. 168, 21 L. Ed. 538, the rule was stated with a material modification of the form in which it is usually expressed. In that case it was said:

“Where a statute defining an offense contains an exception in the enacting clause of the statute, which is so incorporated with the language defining the offense that the ingredients of the offense cannot be accurately and clearly described If the exception is omitted, the rules of good pleading require that an indictment founded upon the statute must allege enough to show that the accused is not within the exception; but if the language of the section defining the offense is so entirely separable from the exception that the ingredients constituting the offense may be accurately and clearly defined without any reference to the exception, the pleader may safely omit any such reference, as the matter- contained in the exception is matter of defense, and must be shown by the accused.”

The substance of the charge in the indictment now under review is that the defendants are guilty of a conspiracy to defraud the United States, contrary to the provisions of section 5440 of the Revised Statutes. In that section there is no exception. Section 5440 is not a part of title 52, concerning “Regulation of Steam Vessels.” It is a part of title 70, concerning “Crimes,” and was originally passed in 1867, while sections 4400, 4405, 4417, and 4488, now in title 52, in the forms in which they at first stood, were not passed until 1871. As the exception referred to is in a section of the statute passed subsequent to the enactment of section 5440, as the two sections are not now in the same title, and as section 4400 defines no ingredient of the offense mentioned in section 5440,1 think the first ground of demurrer is invalid.

The second cause of demurrer is that “the indictment alleges no intent on the part of the said defendant to defraud the United States.” This is not necessary. The charge is that the defendants conspired to defraud the United States, and the intent to defraud will be inferred from the unlawful agreement set forth in the indictment. United States v. Donau, Fed. Cas. No. 14,983.

The fourth cause of demurrer is that “said indictment does not show that the life preservers mentioned therein did not come up to the requirements of the law or the regulations mentioned in said indictment.” The statute requires that the board of supervising inspectors shall fix and determine by their rules and regulations the kind of life preservers that shall be used on steamers navigating the ocean, or any lake, bay, or sound of the United States, and also that they shall establish all necessary regulations required to carry out in the most effective manner the provisions of the law and such regulations when approved by the Secretary of Commerce and Labor. Those rules and regulations i equire every life preserver to contain “at least six pounds of good cork, which shall have a buoyancy of at least four pounds to each pound of cork.” The rules and regulations of the board of inspectors have the force of law, not only by virtue of the express language of section 4405 of the Revised Statutes, but by virtue of the rule stated in the Kollock Case, 165 U.S. 526" court="SCOTUS" date_filed="1897-03-01" href="https://app.midpage.ai/document/in-re-kollock-94627?utm_source=webapp" opinion_id="94627">165 U. S. 526, 17 Sup. Ct. 444, 41 L. Ed. 813" court="SCOTUS" date_filed="1897-03-01" href="https://app.midpage.ai/document/in-re-kollock-94627?utm_source=webapp" opinion_id="94627">41 L. Ed. 813, and Caha v. United States, 152 U. S. 212, 14 Sup. Ct. 513, 38 L. Ed. 415" court="SCOTUS" date_filed="1894-03-05" href="https://app.midpage.ai/document/caha-v-united-states-93825?utm_source=webapp" opinion_id="93825">38 L. Ed. 415. The indictment charges with sufficient clearness that the defendants intended that eight of the blocks of cork manufactured by them should be used in the manufacture of one life preserver, that eight of the blocks first delivered weighed but five and one-half pounds, and that, in order to bring them up to the requisite weight of six pounds, there was inclosed in the center of each of two hundred and fifty blocks subsequently delivered a half pound of iron, with intention that one of the blocks containing the iron should be used with seven light-weight blocks, so that the life preservers thus made of eight blocks would each weigh six pounds. I think the indictment sufficiently alleges that the life preservers did not fulfill the requirements of the law and the rules and regulations of the board of supervising inspectors.

The fifth cause of demurrer is that “said indictment does not show facts constituting a crime, for the reason that the intention of the law and regulations is that life preservers shall have the buoyancy of at least twenty-four pounds, and the indictment does not show or allege that the life preservers in question would not have had a buoyancy of at least twenty-four pounds if made up as alleged in said indictment.” The rules provide that it shall be the duty of the inspector to see by actual examination that every life preserver contains “at least six pounds of good cork.” From the allegations in the indictment it appears that the life preservers proposed to be made up from the blocks furnished by the defendants would not contain six pounds of good cork. It is an essential provision of the rule that a life preserver shall not only have a buoyancy of at least four pounds to each pound of cork, but that it shall also contain at least six pounds of good cork.

The third and sixth causes of demurrer are as follows: “The said indictment does not show any act of the said defendant by which the United States was 01 could be defrauded;” and “the said indictment does not show any act or conspiracy within the meaning of section 5440 of the Revised Statutes of the United States.” These two causes present the most serious questions raised by the demurrers. It is insisted that the life preservers to be made from the blocks furnished by the defendants were not to be delivered to the United States or sold to the United States, and that the United States therefore could not, by any of the acts charged in the indictment, be defrauded. It is also said that the indictment, to be good, must show that the defendants have entered into a conspiracy to violate some criminal statute of the United States. But such construction of the section renders the clause relating to the defrauding of the United States meaningless. The section provides that, if two or more persons conspire “either to commit any offense against the United States or to defraud the United States in any manner or for any purpose,” they shall, if one or more of them do any act to effect the object of the conspiracy, be liable to a penalty. The defendants’ construction of the section would make it apply only to a conspiracy to commit an offense against the United States. It is evident that the meaning of the section is much broader. If two or more persons conspire “to defraud the United States,” not merely contrary to the provisions of any criminal statute, but “in any manner or for any purpose,” they shall, if one or more of them do an act to effect the object of the conspiracy, be punishable therefor. May not the United States be defrauded “in any manner or for any purpose” except where it is deprived of its taxes, moneys, or property? If there be a conspiracy between two or more persons to deceive the officers of the government in their execution of a governmental duty for the purpose of securing their unwitting approval of what the law condemns, is not that a conspiracy to defraud the United States of one of its governmental functions? Section 5440 is a revision of section 30 of the act entitled “An act to amend existing laws relating to internal revenue, and for other purposes,” approved March 2, 1867 (14 Stat., 484, c. 169). In its original form the clause concerning the defrauding of the United States was “to defraud the United States in any manner whatever.” If it be assumed that the section in its original form, and as a part of the act of 1867, was not applicable to any frauds except those concerning the internal revenue, the section in its present form and place cannot be so limited. In the revision of 1878 it was transferred from its place in the internal revenue law to a place in the law concerning crimes, and to the subdivision of crimes entitled “Crimes against the Operations of the Government.” At the same time the clause concerning frauds was changed to the form “to defraud the United States in any manner or for any purpose.” Obviously, it was the legislative intention by these changes of language and place to make the section applicable not only to conspiracies to defraud the United States of its revenue, but to every conspiracy to defraud the United States, whatever the purpose of the conspiracy might be. In United States v. Whalan, Fed. Cas. No. 16,669, Judge Nowell, of the District Court for the District of Massachusetts, declared that the word “conspiracy” in section 6440 has a more comprehensive meaning than is given to it by the common law, “because it includes defrauding the United States in any manner whatever, whether the fraud had been declared a crime by any statute or not,” and that the section “has a wide application, and covers all frauds which human ingenuity can devise.” In United States v. Thompson (C. C.) 29 F. 86" court="U.S. Cir. Ct." date_filed="1886-11-22" href="https://app.midpage.ai/document/united-states-v-thompson-8125621?utm_source=webapp" opinion_id="8125621">29 Fed. 86, it was held that the section as it now stands “must be construed to include every conceivable case of conspiracy to defraud the United States; that is, to deprive or divest it of any property, money, or thing otherwise than as the law requires or allows.” In Palmer v. Colladay, 18 App. Cas. 426, the Court of Appeals of the District of Columbia, commenting on section 5440, said:

“It is claimed by appellee that to defraud the United States must mean to deprive it of money wrongfully, or of something of money value; and that a falsehood or trick by which its officers are deceived in the matter of selecting those who are to perform work for it could not be a fraud against the United States. We do not agree to this proposition. The civil service commission is a legal agency of the United States, created by act of Congress; and through it the President undertakes to find and appoint such persons as may best promote the efficiency of the civil service; and to that end regulations are prescribed by means of which the age, health, character, knowledge, and ability for the branch of service into which he seeks to enter, of each candidate, may be fully ascertained. If falsehoods are imposed upon the persons charged with the duty of ascertaining these qualifications, and made to take the place of facts, then the United States is defrauded, is deprived by deceit of the knowledge justly due to its officers in the proper discharge of its business, and it is thereby liable to obtain a less efficient employe. We think the trial court may properly hold that the appellee’s alleged conduct, in co-operation with the candidate in this case, in making a false statement as to her past experience, constitutes an offense under this section 5440; and that such attempt at deception, if successfully carried out, would defraud the United States, within the meaning of the law.”

It was the opinion of the Circuit Court of Appeals of the First Circuit, as expressed in Curley v. United States, 130 F. 1" court="1st Cir." date_filed="1904-03-01" href="https://app.midpage.ai/document/curley-v-united-states-8754461?utm_source=webapp" opinion_id="8754461">130 Fed. 1, that Congress intended, by section 5440, to protect the government “in its rights, privileges, operations, and functions against all fraudulent operations, impositions upon its rights as well as properties, and to this end employed the most general terms and the broadest possible phraseology.” It was there held that the words “defraud” and “deceive” are nearly synonymous, and that section 5440 “contemplates wrongs other and beyond conspiracies to commit distinct statutory offenses against the United States,” and that the government may “safeguard itself against being defrauded out of its right to administer an intelligent and honest service in the interests of the people.” In that case the indictment was for a conspiracy to defraud the United States, and the charge was that one of the defendants, desiring to procure an appointment as letter cárrier, unlawfully agreed with the other of the defendants that the latter should falsely impersonate the former at a civil service examination, sign the name of the former to the examination papers, and thus secure for the former the placing of his name on the list of persons eligible to appointment as letter carriers. On the trial the defendants were convicted, and the Circuit Court of Appeals refused to disturb the verdict, holding that the defendants by the acts proven against them were guilty of defrauding the United States.

The indictment now under review charges that by the scheme above outlined the defendants sought to deceive Kahnweiler’s Sons and their purchasers and the government’s inspectors, and to cause the inspectors unwittingly to approve the life preservers that might be made out of the blocks manufactured by the defendants. Unquestionably, the acts charged show that the defendants intended to deceive and defraud Kahnweiler’s Sons. But, to constitute a crime under section 5440, the defendants must have conspired to defraud the United States. Assuming on these demurrers, as I must do, that the acts charged in the indictment are true, it appears that the Nonpareil Corkworks were notified of the shortage in weight of the 1,750 blocks first delivered, and that they were requested “to make the said blocks heavier, so that eight of them would weigh at least six pounds, and so pass inspection under the laws and regulations aforesaid when used in such life preservers.” The Nonpareil Corkworks therefore had notice of the purpose for which Kahnweiler’s Sons intended to use the blocks, and, after receiving that notice the defendants, according to the charge in the indictment, conceived and carried out the infamous scheme of concealing in each of the 250 blocks last delivered a half pound of iron. The evident purpose of such concealment was to lead the inspectors to believe that the life preservers made from the blocks furnished by the Nonpareil Corkworks each contained “at least six pounds of good cork,” and thus to induce them to approve what, if the facts should be known, they could not approve. Such deception of the agents of the United States for such a purpose is a deprivation of the United States of a right essential to the due administration of the law, and a defrauding of the United States, within the meaning of section 5440. The indictment charges a conspiracy to commit this fraud and acts by two of the defendants to give effect to the conspiracy. The case clearly comes, I think, within the doctrine of the authorities above cited.

The demurrers must be overruled, and the defendants required to plead.