Thomas v. United States

• Decision Date: 05 December 1955
• Docket Number: No. 14355.,14355.
• Citation: 227 F.2d 667
• Parties: Richard THOMAS, Appellant, v. UNITED STATES of America, Appellee.
• Court: U.S. Court of Appeals — Ninth Circuit

227 F.2d 667 (1955)

Richard THOMAS, Appellant, v. UNITED STATES of America, Appellee.

No. 14355.

United States Court of Appeals Ninth Circuit.

May 18, 1955.

Rehearing Denied August 29, 1955.

Writ of Certiorari Denied December 5, 1955.

Gary W. Sawtelle, Los Angeles, Cal., Darrel G. Brown, Tucson, Ariz., for appellant.

Jack D. H. Hays, U. S. Atty., Phoenix, Ariz., Robert O. Roylston, Asst. U. S. Atty., Tucson, Ariz., W. S. Tucker, Atty., Securities & Exchange Commission, San Francisco, Cal., William H. Timbers, Atty., S. E. C., Washington, D. C., for appellee.

Before STEPHENS and FEE, Circuit Judges, and WIIG, District Judge.

Writ of Certiorari Denied December 5, 1955. See 76 S.Ct. 194.

JAMES ALGER FEE, Circuit Judge.

Richard Thomas and Walter E. Powell were convicted after a trial before a jury on three counts of an indictment charging violations of 15 U.S.C.A. § 77q(a) (2), which reads:

"(a) It shall be unlawful for any person in the sale of any securities by the use of any means or instruments of transportation or communication in interstate commerce or by the use of the mails, directly or indirectly * * *

"(2) to obtain money or property by means of any untrue statement of a material fact or any omission to state a material fact necessary in order to make the statements made, in the light of the circumstances under which they were made, not misleading."

They were acquitted upon Count 4, which charged conspiracy between these defendants to commit the substantive offenses. Powell does not appeal.

Counts 1 and 2 were based upon the same alleged sale of common stock of Thomascolor, Inc., to Jerome K. George and Myrtle T. George for $3,500.00 by means of untrue statements of material facts known by defendants to be untrue when made and by omissions to state material facts, which representations and omissions are alleged in detail. The difference between these two counts is that, in the first, use of the mails in the consummation of the sale is alleged, and, in the second, use of means and instruments of transportation is set up, in that defendants caused Powell to travel by commercial airline from Los Angeles to Phoenix.

Count 3 set up a similar sale of securities to Bailey Spencer, with alleged untrue statements of material facts and alleged omissions to state material facts, wherein it was also set up that in this sale defendants caused Thomas to travel by private motor vehicle from the vicinity of Los Angeles to Phoenix and Willcox, Arizona.

The evidence shows the following situation: Thomas invented a color photographic process which was patented. He organized Thomascolor, Inc., of which he was president, to exploit the process. This corporation prepared a statement for filing with the Securities and Exchange Commission. Ebasco Services were employed to review the statement, assist in obtaining registration and for further services. In December, 1947, following hearings, sale of securities was approved. There were only two small sales of stock. Upon recommendation of Ebasco, the registration statement was withdrawn about March, 1948. There were efforts to obtain private financing without public sale of stock until the summer of 1949. Thomascolor was in bad financial condition during the latter period, if it was not then insolvent, of which condition there was evidence.

The evidence as to the incidents upon which the charges were based is briefed here. On December 29, Mr. and Mrs. George were in Los Angeles, California. On the evening before, Powell, calling on long distance telephone from Los Angeles to Mr. George in Phoenix, had first mentioned Thomascolor, inquiring whether the latter was satisfied with his job, and asked him to come to California as Powell had something good for him. There Powell introduced Thomas to George, and the two defendants, in a lengthy conversation, induced the Georges to buy stock in the corporation by means of representation shown to be false. The purchase agreement was prepared in the office of Thomas on the letterhead of Richard Thomas and bears his signature. The stock offered for sale is therein described as personally owned by Thomas. This offer was accepted according to its terms by the signature of George. Later that day, Powell traveled by plane with the Georges from Los Angeles, California, to Phoenix, Arizona, where he registered at the Adams Hotel. He next appeared with Thomas at the residence of the Georges in Phoenix on the evening of December 31, 1948. Thomas was at that time also registered at the same hotel. Powell and Thomas talked to Bailey Spencer concerning the purchase of stock in Thomascolor at this hotel in Phoenix on the next day, January 1. They further made representations to Spencer at his home on January 3, and there received his check for stock. On January 4, Thomas and Powell were registered at Frank's Auto Court, at Willcox, Arizona, with a Cadillac car bearing California License No. 445166. At this time, they obtained approximately fourteen hundred dollars from the Georges. However, the Georges advised they had not been able to raise the entire purchase price, and defendants instructed them in Arizona to mail the balance of the money to the Thomascolor address in Los Angeles, which the Georges later did. The stock certificates delivered to the Georges were in the name of Thomas and endorsed by him. Both Thomas and Powell had a conversation with Spencer in Phoenix at the Adams Hotel concerning the purchase of stock about January 1, 1949. Powell later called at Spencer's home at Willcox on January 3, 1949, where he delivered a distributorship agreement and picked up Spencer's check for $3,000.00, made payable to Thomas at Powell's instruction, in payment for the stock and distributorship. The check is endorsed "Richard Thomas." The stock certificates were later delivered to Spencer by mail.

The sufficiency of the indictment was not raised. However, this process was extremely inartistic. The single transaction of the sale of the stock to the Georges is divided between two counts in order to relate this unified transaction, first, with use of the mails and, second, with the use of means of transportation in...