Hyney v. United States , 44 F.2d 134 ( 1930 )

HICKS, Circuit Judge.

Hyney, president, Emerson, vice president, and Wilson, treasurer, of Hyney, Emerson & Co., a corporation, were indicted for a violation of section 215 of the Criminal Code (18 USCA § 338). A nolle prosequi was entered as to Emerson and Wilson. Hyney was acquitted upo-n the first count and convicted upon the- remaining eleven. The indictment averred that the defendants had devised a scheme to obtain money by means of false and fraudulent representations made to a class of persons, some being particularly mentioned, who desired to purchase stock iu corporations engaged in the business of buying and selling stocks and bonds. It also charged many and various representations as false and fraudulent elements of the scheme. We concern ourselves with only those deemed materially important, viz., that the corporation had among its assets stocks and bonds of the value of $617,224.67; that it had a surplus and profit to the amount of $186,340.15, and that it could on April 30, 1925, liquidate its business and have a balance left o f $200,000. See Sasser v. U. S., 29 F.(2d) 76, 77 (C. C. A. 5).

There are one hundred and eighty-one assignments of error. We review here only those discussed in appellant’s brief. Kahn v. U. S., 20 F.(2d) 782, 783 (C. C. A. 6).

(1) Motion to Quash. — The indictment is predicated upon the following clause of the statute, to wit: “Or shall knowingly cause to be delivered by mail according to the direction thereon * * * any such letter. * * * ” The principal complaint is that the indictment-fails to aver, as applicable to all counts, that the letters or other communications had any directions thereon, as contemplated by the statute.. The point is not well made. In each count the indictment, letter, or other communication is set out verbatim. The first count is illustrative of all. In addition to the copy of the indictment letter, the indictment fairly and substantially gives the defendant to understand that this letter was inclosed in a postpaid envelope and carried through and by the mails “to the post-office of address”; that it was addressed to J. M. Peterson, one of the persons intended to be defrauded, and “according to, the address thereon” was caused by-defendants to be delivered from a post office at Manistee, Mich. The insistence that the phrase in the indictment, “according to the address thereon,” refers to the typewritten address on the letterhead of Hyney, Emerson & Co. on which the indictment letter to Peterson of April 7, 1925, was written, rather than to the address upon the postpaid envelope inclosing the letter, is not convincing. When thought of in connection with the post office -establishment, the term “letter” signifies a communication inclosed,, sealed, and stamped and being carried as first-class mail.

It is insisted that the last clause of the statute, to wit, “or at the place at which it is directed to be delivered by the person to whom it is addressed,” is ambiguous. A transposition of phrases would no doubt clarify the meaning of the clause,, but the point is not involved here. The indictment is not predicated upon this clause.

There is no intrinsic merit in the objection that the indictment fails to aver that appellant or any defendant deposited in the mail any letter or circular. The indictment is drawn under that particular clause of the statute declaring it an offense to “knowingly cause to be delivered by mail according to the direction thereon * * * any such letter, * * * ” and substantially followed this clause accompanied by allegations, indicated above, which seem to us sufficient to advise defendant of the specific offense with which he was charged. U. S. v. Hess, 124 U. S. 483, 8 S. Ct. 571, 31 L. Ed. 516; Moffatt v. U. S. (C. C. A. 8) 232 F. 522, 530; Moore v. United States (C. C. A. 7) 2 F.(2d) 839, and Freeman v. United States (C. C. A. 3) 20 F.(2d) 748, relied upon by appellant are not in point. They are evidently based upon other and distinct clauses of the statute.

Nor is it necessary that the indictment aver that false pretenses, representations, or promises were actually made or intended to be made directly to any person or class of persons. It is sufficient to allege that defendant devised or intended to devise any scheme or artifice to defraud generally, and set forth only the names of the intended victims if known, or, if unknown, then the class of persons to be defrauded. U. S. v. Young, 232 U. S. 155, 161, 34 S. Ct. 303, 58 L. Ed. 548; Durland v. U. S., 161 U. S. 306, 313, 16 S. Ct. 508, 40 L. Ed. 709; O’Hara v. U. S., 129 F. 551, 554 (C. C. A. 6); Finnegan v. U. S., 231 F. 561, 564 (C. C. A. 6); McBryde v. U. S. (C. C. A. 6) 7 F.(2d) 466; U. S. v. Farmer (D. C.) 218 F. 929, 932.

The objection that the first count of the indictment avers eight different schemes and! artifices is without controlling merit. This objection is predicated upon the following averment in the first count of the indictment, to wit: “That before and at the several times of the commission of the several offenses hereinafter set forth, defendants had devised and did devise a certain scheme and artifice, etc.” It is of course necessary that each count should embrace a distinct offense, but this may be accomplished by proper references in any one count to any other, as was done in this ease, the first count referring to the dates of the different offenses as set forth in the succeeding counts and the succeeding counts incorporating by reference to the first count the artifice or scheme. Blitz v. U. S., 153 U. S. 308, 316, 14 S. Ct. 924, 38 L. Ed. 725; Foster v. U. S., 178 F. 165, 171 (C. C. A. 6).

The indictment alleges that among other pretenses the defendant represented that the “corporation had among its assets stocks and bonds of the value of $617,-224.67”; that this representation was false “in this, that among the stocks and bonds included in the alleged assets of the corporation was a large amount, approximately $400,000.00 of stocks and bonds of but little if any real value.” It is insisted that this description, to wit, “$400,000.00 of stocks and bonds” is not sufficiently particular. We do not agree. We think the clause sufficiently informative. The highest degree of certainty in an indictment is not required. Certainty to a common intent is sufficient. Finnegan v. U. S., supra; Tyomies Pub. Co. v. U. S., 211 F. 385, 389 (C. C. A. 6). Moreover the element of false representations, not being the gist of the offense, need not be alleged with the certainty requisite in charging unlawful use of the mails. Colburn v. U. S., 223 F. 590 (C. C. A. 8); Savage v. U. S., 270 F. 14, 18 (C. C. A. 8).

(2) Bill of Particulars. — We cannot review the denial of the motion for a bill of particulars. This matter was in the court’s discretion and there is no evidence of any abuse of it. Horowitz v. U. S., 262 F. 48, 49 (C. C. A. 2); Savage v. U. S., supra.

(3) Motion for Directed Verdict. —We do not consider the weight of the evidence. We review only the legal question whether the evidence was sufficient to support the verdict. If as a matter of law the evidence of every element of the offense is so substantial as to justify a verdict of guilty, if believed by the jury beyond a reasonable doubt, then the denial of the motion was proper; otherwise not. Pierce v. U. S., 252 U. S. 239, 251, 40 S. Ct. 205, 64 L. Ed. 542; Rosengarten v. U. S., 32 F.(2d) 644, 645 (C. C. A. 6); Fraina v. U. S., 255 F. 28, 34 (C. C. A. 2). It is not seriously urged that the representations and pretenses averred in the indictment were true in fact or that the appellant did not cause the indictment letters to be delivered by mail. The chief contention here is that the element of fraudulent intent was not sustained. Hyney, Emerson & Co., organized in 1917 as a partnership, became a corporation in July, 1922. It owned more than $300,000 from the beginning. Its principal business was buying and selling bonds. It was capitalized at $300,000 preferred stock, and $150,000. common. Appellant never owned any of the preferred stock. The common or voting stock was originally divided between appellant and Emerson, two-thirds to appellant and one-third to Emerson. Later appellant gave 100 shares of common stock to Wilson. None of the three paid anything for their stock. However, they drew dividends thereon. Appellant did, however, from time to time pay in certain funds as the business demanded it. Appellant was president, and there is evidence tending to show that he was in general charge as a superior officer. His particular function was to negotiate the purchase of bond issues. Wilson was treasurer. Emerson was vice president, and his special duty was to superintend bond sales. The business flourished during 1922 and 1923. Thereafter it was unsuccessful., The evidence tends to show that from the beginning of 1925 its losses were heavy and continuous and that by March its funds were very low and it was being pressed to meet its obligations; that Wilson advised appellant of the situation and that thereupon appellant originated a campaign to sell the preferred stock of the company. The company owned and was holding in its vault certain blocks of bonus common stocks of various corporations acquired by it through appellant in connection with the purchase of various bond issues. There is nothing to indicate that any substantial compensation passed for these stocks. There is substantial evidence that preparatory to the selling campaign and at appellant’s request and- direction Wilson and Emerson caused these stocks to be entered as assets upon the books of the company (page 110 of the journal) at a valuation of $400,000. As a matter of fact they were practically worthless. They were not saleable or acceptable at the banks as collateral. There is also evidence tending to show that “because it wouldn’t look good on a financial statement” and at appellant’s direction an indebtedness of the corporation for more than $215,000, principal and interest due the former partnership, was without any payment whatever thereon arbitrarily removed from the books; that a surplus of $186,340.15 was entered upon the books when as a matter of fact there was no surplus; that appellant directed Wilson to make up and deliver to him a condensed statement from the books thus reformed, which statement was further condensed by appellant himself; that appellant then called a meeting of salesmen at the office of the company for April 7, 1925, as preliminary to the selling campaign, presided over and addressed the meeting, urged the salesmen to push the campaign and submitted to them certain highly colored and laudatory circular matter, to be used therein, together with the condensed statement above indicated, which was glaringly false, and there is a presumption that appellant as president, chief stockholder, and the active head of the corporation knew of its falsity. Bettman v. U. S., 224 F. 819, 828 (C. C. A. 6). As a result there was sold about $20,000 worth of the company’s preferred stock at the par value of $100 per share. This stock was without value. A receivership followed in October.

Based upon this and other evidence not discussed we conclude that the jury was justified in its finding of fraudulent intent and that the defense that appellant did not direct a manipulation of the books; that ho was ignorant of their contents; that he did not know the financial situation of the company or the value of its stock assets which he himself had acquired in 1923 and 1924; that he left the bookkeeping entirely to the bookkeepers and the financial affairs of the company entirely to Wilson and Emerson; and that the stock selling scheme was an honest effort to acquire capital for the enlargement of the business, was incredible. The motion for a directed verdict was therefore properly denied.

Intent may be implied from established facts. Wuichet v. U. S., 8 F.(2d) 561, 562 (C. C. A. 6). Nor can it be said that the evidence in the aggregate- is as consistent with innocence as with guilt. To acquire new capital either to enlarge the business or to pay debts was legitimate, but if the scheme to acquire it was fraudulent the intent to use the money lawfully did not render it less so. Sparks v. U. S., 241 F. 777, 782 (C. C. A. 6); Foster v. U. S., supra. Nor does the payment of dividends on July 1,1925, nor repurchase of some of the shares, even after July 1st, according to an original policy of the company, point convincingly to innocence. The jury may have properly concluded that the payment of dividends and the repurchase of stock was an effort to allay suspicion and retain confidence, especially where it was apparent that there were no profits out of which to pay dividends and no available assets out of which to repurchase stock, except the proceeds of other sales.

(4) Books of the Corporation. — There was no reversible error in permitting their introduction. The . evidence indicates that they were correctly kept, with the exception of the particularly relevant entries on page 110 of the journal under date of March 31, 1925, heretofore referred to. The evidence tending to show appellant’s relation thereto and the use he thereafter made of these entries gave them exceptional relevancy. See Bettman v. U. S., supra; Wilson v. U. S., 190 F. 427, 437 (C. C. A. 2); Arnold v. U. S., 7 F.(2d) 867, 870 (C. C. A. 7); Foster v. U. S., supra. Without detailed discussion, we are satisfied that the connection of appellant 'with the books may be easily differentiated from the situation in McDonald v. U. S., 241 F. 793, 800 (C. C. A. 6), and the Worden Case (C. C. A.) 204 F. 1, therein cited.

(5) Circumstantial Evidence. — It was not erroneous to instruct the injury upon circumstantial evidence. The charge in this respect was unexcepted to and was pertinent because the evidence was largely circumstantial, as it is in substantially all eases involving knowledge and intent.

(6) Character Evidence. — Appellant had lived in Chicago for twenty years and did business there. The witness Cooper lived at Kenosha, Wis., about 52 miles from Chicago. The witness Conger lived at Grand Rapids. They were introduced to testify as to the character of appellant for truth- and veracity. Their testimony was excluded because they were not acquainted with the general reputation of appellant in Chicago. This was in accordance with the general rule of evidence on the subject and was not error. Wigmore on Ev. (2d Ed.) vol. 3, § 1615; Wharton’s Crim. Ev. (10th Ed.) vol. 1, § 58; Waddingham v. Hulett, 92 Mo. 533, 5 S. W. 27; Knode v. Williamson, 17 Wall. (84 U. S.) 586, 588, 21 L. Ed. 670. Further, if we should venture to extend the rule to evidence of general reputation at points distant from Chicago as a básis for supporting character evidence, the difficulty remains that these witnesses advanced no testimony touching such general reputation at either point upon which evidence of good character might be predicated.

Finding no reversible error, the judgment of the District Court is affirmed.