190 F. 427 | 2d Cir. | 1911
(after stating the facts as above). The most material questions presented by the assignments of error are these:
(1) Whether the first three counts of the indictment are based upon a statute in force when the alleged offenses were committed;
(2) Whether the first three counts set forth the scheme or artifice in question otherwise than by way of recital;
(3) Whether the averments in these counts limit the charge to using the mails to -obtain money by false pretenses;
(4) Whether it was necessary for the government to show damage to persons buying the stocks;
(5) Whether the selling of the personal stock was fraudulent;
(6) Whether the fourth count charges a conspiracy to commit an offense against the United States;
(7) Whether the conspiracy count is barred by the statute of limitations ;
(8) Whether there was a single or two separate conspiracies;
(9) Whether error was committed in the admission of documentary evidence;
The relevant portions of the statutes in question arc printed in the footnote
The indictment, in the general description of the offense, charges that the defendants “devised and intended to devise a scheme and artifice to defraud divers persons of their money and property in and by inducing by false and fraudulent representations and pretenses, and by fraudulent artifices and devices, said persons to part with such money and property.”
It is tirged that this use by the pleader of certain phrases appearing in the Criminal Code and not expressly appearing in the prior statute, necessarily establishes that the indictment is based upon the former and not upon the latter, and that as the Code increases the penalty and was not in force when the offense was committed the indictment based upon it is void.
In our opinion, however, the facts stated in the indictment, as distinguished from the general description, clearly disclose a scheme or artifice to defraud within section 5480, and this would undoubtedly be
The point of. this contention is that the counts in question charge that the defendants on a given day had devised a scheme to defraud, and it is said that these allegations do not constitute positive averments of the commission of the offense of which the fraudulent scheme was a necessary part. In our opinion, however, the charge that at a particular time the defendants had devised a fraudulent scheme, sufficiently charges' that the defendants theretofore did devise such scheme.
(1) That the offense of obtaining money by false pretenses is not a “scheme and device” within the statute.
(2) That if such offense be within the statute, the trial court erred in receiving evidence of false pretenses and representations as to the future.
Here again we think that the .defendants lay too much stress upon the general description of the offense contained in the indictment. The particulars -.of the scheme are stated at length and it appears clearly that the defendants are not charged merely with misrepresentations as to past facts but as to the future as well. But even confining ourselves to the general description, we think the government not tied down tq the common law offense of obtaining money by false pretenses. The defendants are charged with devising a “scheme and artifice to defraud”' not only by inducing persons to part with their money by false representations but “by fraudulent artifices and devices.” ■ Taking the averments together we think that a “scheme and artifice” within the meaning of the statute is averred.
In Durland v. United States, 161 U. S. 313, 16 Sup. Ct. 511 (40 L. Ed. 709), the Supreme Court of the United States said:
“But beyond tbe letter of tbe statute is the evil sought to be remedied, which is also significant hi determining the meaning. It is common knowledge that nothing is more alluring than the expectation of receiving large returns on small investments. Eagerness to take the chances of large gains lies at the foundation of all lottery schemes, and, even when the matter of chance is eliminated, any scheme or plan which holds out the prospect of receiving more than is parted with appeals to the cupidity of all.
“In the light of this the statute must he read, and so read it includes every thing designed to defraud by the representations as to the past or present, or suggestions and promises as to the futuro.
* * * * ¡Ü * * * * * * * *
“It was with the purpose of protecting the public against all such intentional efforts to despoil, and to prevent the post office from being used fo earry them into effect, that this statute was passed; and it would strip it of value to confine it to such cases as disclose an actual misrepresentation as to some existing fact, and exclude those in which is only the allurement of a spefeious and glittering promise.”
It is not necessary to determine in this case whether actual injur}’ is an essential element of a civil action for fraud. There are some cases which hold that even in such an action a party is entitled to the benefit of the terms of the fraudulent contract and" that the measure of damage is the difference between the real value of the property purchased and the value which it is represented to have. On the other hand it is held in other cases — and much more ■ logically — that an action of fraud is in disaffirmance of the fraudulent contract and that a party can only recover-according to the extent of his injury, viz., the difference between the value of that which he paid and that which he received.
But whatever may be the rule in civil cases, we are satisfied that damage is not made an essential element of the federal statutory of
Any other construction of the statute would deprive it of all force in dealing with fraudulent schemes in the guise of legitimate corporate enterprises and would place a premium on lies and deceit: It would only be necessary to deal in a stock of uncertain value, e. g., of a corporation owning patent rights, and all the false and fraudulent statements imaginable could be made with impunity and the mails he used to prey upon the public. Purchasers would not obtain that which they were promised; their money would be obtained by false and fraudulent representations, but in how many cases could the government show that they failed to get their money’s worth? How could the real value of such shares he established?
In Kellogg v. United States, 126 Fed. 323, 326, 61 C. C. A. 229, 232, this court said of the statute now under consideration:
“Since Congress did not make tlie benefit of the wrongdoer an element, it would seem to be judicial legislation for the courts to require such benefit to be alleged and proved.”
As a corollary to this conclusion we think it follow's that damage to purchasers from which benefit to the wrongdoer would result, is likewise not necessary to be alleged and proved.
In Horn v. United States, 182 Fed. 727, 105 C. C. A. 169, the Circuit Court of Appeals for the Eighth Circuit stated the essential elements of an indictment under section 5480 without including damage, and with respect to the allegation of the indictment concerning the value of the stocks which the fraudulent scheme was devised to sell, said:
“It is sufficiently alleged that the stock of the mining company was not of the value that the defendants were to falsely represent it to be.”.
In so far as Miller v. United States, 174 Fed. 35, 98 C. C. A. 21, is in conflict with the conclusions stated, we are unable to follow it.
The indictment fixes the date of the conspiracy as December 8, 1908, which was within three years of the filing of the indictment, it seems to be conceded, however, that the date of the original agreement, the meeting of the minds of defendants, was more than three years before the indictment and that if the date of such agreement can be treated as the date of the conspiracy, it was barred by the statute of limitations. It is also practically conceded, in view of the decision of the Supreme Court in United States v. Kissel, 218 U. S. 601, 31 Sup. Ct. 124, 54 L. Ed. 1168, that if, the conspiracy were a continuing-one it was not barred by the statute because its operation continued at least up to the date specified in the indictment.
In our opinion the averments of the indictment with respect to the nature of the conspiracy as well as the proof itself show that it was necessarily a continuous one. Tn the language of Mr. Justice Holmes in the Kissel Case, “A conspiracy is a partnership in criminal purposes.” Such a complex and far-reaching partnership as that described in the indictment requires continuance of operation to accomplish its object and continues until such purposes are accomplished or the partnership abandoned. •
We are unable to appreciate the distinction between a conspiracy to close a factory so that it will not be a competitor of the conspirators —as in the Kissel Case —and a conspiracy to dispose of a large amount
It is also urged that the Kissel decision is inapplicable because the present indictment does not contain in express terms a continuando. As just pointed out, however, we think that the averments of the indictment with respect of the nature of the conspiracy necessarily involved the allegation that the conspiracy was a continuous one and were equivalent to an express allegation that it had continuance in time.
With respect to the eighth question before us the defendant Butler especially urges that the proof offered to support the indictment establishes not one conspiracy but two, and that with one of them' said defendant had no connection.
For the purpose of showing the sales of personal stock by the defendants in the face of representations that no personal stock was being sold and that the only stock being sold was treasury stock of the United Wireless Company, the government was permitted to introduce the stock books of that coi'poration together with tabulations based thereon.
(1) Of their constitutional right granted by the sixth amendment to be confronted with the witnesses against them;
(2) Of the rule against hearsay testimony.
Without passing upon the question whether a strict adherence to the constitutional provision required all the persons who made the entries in the books to be called as witnesses or whether the testimony was of such nature as to constitute a recognized exception to the rule, it is sufficient to say that we think the defendants waived their constitutional privilege if it existed.
No point was made that' the witnesses who made the entries were not called. The accuracy of the books was not questioned. The only ground of objection was that the defendants were not responsible for books which they did not keep; “in other words, that these people are not chargeable in a criminal litigation with entries in the books to the making of which they are not shown to have been parties.”
The question then resolves itself into the inquiry whether the rule against hearsay testimony operates against the admission of the books or whether the trial court was right in overruling the objection made by the defendants as just stated. Manifestly the testimony was relevant and material. As the defendants themselves say, it went to the very heart of the case. Manifestly also the stock books would be considered to furnish the very best history of its shares in any business matter or transaction in commercial life. Regular entries, such as books of this nature contain, afford the basis of undertakings of the greatest magnitude and it would be a rare case where investor or man of business would call for the verification of entries by employes, which verification could ordinarily be obtained only with much difficulty.
In our opinion these considerations should have great weight in a court of law although we do not feel called upon in the present case to state any broader exception to the hearsay rule than the necessities of the case require. It is sufficient now to say that we think in any case, civil or criminal, where the question presented is whether statements made by a party relating to, or involving an inquiry into, the history!' or transfers of the shares of a corporation or representations concerning the financial condition of a corporation are true or false, and no contention is made that the books of the corporation have not been accurately kept, that such books — the stock books and other books —regularly kept in due course of business should be received in evidence in proof of the statements they contain. It would he practically impossible to establish the truth or falsity of the statements or representations in any other way. If possible it would involve — taking the stock books for example — a lamentable waste of time serving no useful purpose, to establish the actual signatures in hundreds of cases where no one suggests that any signature is a forgery.
It is apparent from an examination of the record that the defendant Wilson was the master mind in the scheme for the exploitation of the United Wireless Company and it is not seriously contended in his behalf that there was not sufficient evidence of his guilt upon all the counts to go to the jury.
The defendants Tompkins and Butler stand in a different position. They were undoubtedly under the domination of the defendant Wilson. They took comparatively minor parts in the general plan. If the government were required to establish the scheme to defraud or the’ existence of the conspiracy by testimony limited to the acts of these particular defendants, it would undoubtedly fail. But such would be the result in the case of any complex scheme participated in by a number of persons if it were sought to hold one of the less conspicuous participants by proof confined to its own acts. In every such case the existence of the conspiracy must necessarily be shown by general evidence and the vital question then is whether the particular defendant actually took part in it. And in view of the fact' that the sentences imposed upon these defendants might have been imposed for conviction under the conspiracy count alone, it seems only necessary to consider that question here.
Moreover, in considering the testimony concerning these defendants, it must be borne in mind that combinations and conspiracies are seldom to be proved by formal agreements. All the facts and circumstances must be considered and the acts of the particular defendants must be looked at with reference to them. Moreover, the question is not what view this court would take of the testimony but what view the jury had the right to take of it. The judgment cannot be reversed unless the-evidence were such that the trial court erred in submitting the question of the guilt of these defendants to the jury.
. We have carefully considered the testimony concerning the defendant Tompkins, although we think that no useful purpose would be served by reviewing it in detail. It is sufficient to say that in view of the connection of this defendant with the prior De Forest Company and of his continuous connection with the United Wireless Company in various capacities as well as of his participation in the selling agency agreement and of his other acts as disclosed by the record, we think that there was evidence to warrant the jury in finding his guilty knowledge of, and participation in, the conspiracy and scheme to defraud.
So, we have carefully considered the testimony concerning the defendant Butler. We were impressed upon the argument with a doubt whether there was sufficient evidence to go to the jury connecting him with the conspiracy, but an examination of the record convinces, us that the trial court was right in submitting to the jury the question
With respect to both the defendants Tompkins and Butler, there was one item of evidence — the agency agreement in which they both participated — which, in and of itself, was most suspicious and furnished some ground at least for the jury to draw the inference of guilty knowledge. 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.
For these reasons, we reach the conclusion that no error was committed in the trial of the three defendants. Moreover, after an examination of the evidence, we think that their conviction was right: While their original purpose may have been legitimate, while they may have believed in the future of wireless telegraphy, we are satisfied that they deliberately entered into a scheme to take advantage of the public interest in a great and meritorious invention to sell to the public thousands of shares of stock which they knew to be practically worthless. They could accomplish their objects only through the use of the mails, and through the use of the mails has come their condemnation under a federal statute. But the judgment will not serve the purpose it ought to serve if it be regarded merely as inflicting punishment on these defendants. It should reach far beyond them and serve as a warning to that vast crowd of speculators, promoters, gamblers and adventurers who pose as men of business and affairs and carry on their operations in the borderland between legitimate undertakings and criminal schemes. It ought to bring home to their understanding that the misappropriation of other peoples’ moneys is not distinguished from larceny by designating the process a great corporate enterprise; that inducing hundreds of men and women to part with hundreds of thousands of dollars for worthless securities calls for condemnation just as much as cheating in the sale of a single musical instrument or photograph album; that after all there is no merit in wholesale knavery over cheap tricks or in gilded devices over barefaced swindles, and, furthermore, that neither swindlers of high degree nor cheats of low station can employ with impunity the mails of the United States in aid of their fraudulent schemes.
The judgment of the Circuit Court is affirmed.
While the questions stated in the text are regarded as the most important in the case and the opinion is, for that reason, confined to an examination of them, it must be understood that the court has examined and considered all the other assignments of error which have been urged or relied upon by any of the defendants. It is thought to be sufficient to say, in respect of them, that, in the opinion of the court, they disclose no reversible error.
E. S. § 5480 as amended: “If any person having devised or intending to devise any scheme or artifice to defraud, * * * to be effected by either opening or intending to open correspondence or communication with any other person, whether resident within or outside of the .United States, by means of the post office establishment of the United States, ® * * shall, in and for executing such scheme or artifice, or attempting to do so, place any letter or packet in any post office of the United States, or take or receive any therefrom, such person, so misusing the post office establishment, stall be punishable by a fine of not more'than five thousand dollars, and by imprisonment for not more than eighteen months, or by botli such punishments.* * *''
Criminal Code, § 215: “Whoever, having devised or intending to devise any scheme or artifice to defraud, or for obtaining money or property by means of false or fraudulent pretenses, representations, or promises * * * shall, for the purpose of executing such scheme or artifice or attempting so to do, place, or cause to be placed, any letter, postal card, package, writing, circular, pamphlet, or advertisement, whether addressed to any person residing within or outside the United States, in any post office, or station thereof, or street or letter box of the United States, * * * shall be fined not more than one thousand dollars, or imprisoned not more than five years or both.”
Certain other books and reports were also introduced in evidence, but we think their admission governed by the same general principles as the Stock books and they are not separately considered.