Roe v. United States

• Decision Date: 15 June 1963
• Docket Number: No. 19713.,19713.
• Citation: 316 F.2d 617
• Parties: D. H. ROE and Stratoray Oil, Inc., Appellants, v. UNITED STATES of America, Appellee.
• Court: U.S. Court of Appeals — Fifth Circuit

316 F.2d 617 (1963)

D. H. ROE and Stratoray Oil, Inc., Appellants, v. UNITED STATES of America, Appellee.

No. 19713.

United States Court of Appeals Fifth Circuit.

April 19, 1963.

Rehearing Denied June 15, 1963.

COPYRIGHT MATERIAL OMITTED

Beale Dean, Wm. C. Pannell, Fort Worth, Tex., for appellants.

Robert S. Travis, Asst. U. S. Atty., Fort Worth, Tex., Barefoot Sanders, U. S. Atty., for appellee.

Before RIVES, JONES, and BROWN, Circuit Judges.

JOHN R. BROWN, Circuit Judge.

This case is back with us again. On the first appeal, Roe v. United States, 5 Cir., 1961, 287 F.2d 435, cert. denied, 368 U.S. 824, 82 S.Ct. 43, 7 L.Ed.2d 29, we reversed because the trial Court in effect directed the jury to find that the promotional transactions involving oil and gas leases constituted the sale of "investment contracts" thereby setting in motion the requirement of an SEC registration statement if the mails are used in the sale or delivery of a security. As before, the jury on the second trial found the Defendants Roe and his corporation, Stratoray, guilty on two sets of counts charging the making of a sale¹ and the delivery² of a security contrary to §§ 77e (a) (1) and (2), 15 U.S.C.A. §§ 77e(a) (1) and (2).³

Other than specific exceptions to the Court's charge, none of which we find of any real merit, the substantial points of error now urged concern the admission of evidence. These fall in two main groups. The first, while concerned with substantially the same pieces of evidence, has two subdivisions. In brief, complaint is made of the receipt of certain exhibits because (a) these constituted evidence of a sale or delivery of securities other than those specifically charged in the several counts and (b) were in any event subsequent to the count mailings (see notes 1 and 2, supra) and hence were immaterial in establishing the crimes charged. The second group relates to evidence as to criminal prosecution, plea of guilty and conviction of Loui White and civil injunctions obtained against him by the SEC presumably for similar violations with respect to similar sales of Utah oil leases. For reasons discussed, we conclude the Court did not err in the receipt of this challenged evidence and accordingly affirm.

On this appeal no attack is, or could be, made on the sufficiency of the evidence which, for all practical purposes, is the same as on the former trial.⁴ This greatly simplifies the treatment of the evidentiary errors here asserted. For our discussion is to be read in the light of the more detailed recitation of the activities there held by us to constitute the sale or delivery of "investment contracts." It sharpens analysis, however, to capsulate the problem. The thing sold or offered for sale was the entire (7/8ths) mineral lease in specific small tracts. As such, this was not the sale of a "fractional undivided interest in oil, gas, or other mineral rights," 15 U.S.C.A. § 77b. Consequently, with SEC regulation depending on the transaction constituting an investment contract, something "more than a mere offering of naked leasehold rights"⁵ was required. The "something more" is, as the Supreme Court put it, "a contract, transaction or scheme whereby a person invests his money in a common enterprise and is led to expect profits solely from the efforts of the promoter or a third party" with the test being whether the "profits are to come solely from the efforts of others."⁶ Applying these principles as to the colorful activities of Roe and his corporate shadow, Stratoray, we had no difficulty in concluding that the promotional sales literature and activities "spelled out in terms which the gullible, young and old, could understand" that great profits "would come from sales of the leases at * * * fabulously increased prices together with overriding royalties in future production reserved in such transfers," not by reason "of the operation of these leases by the purchasers, but solely because of activities of persons other than the purchasers." 287 F.2d 435, 438. The "economic inducement" to prospective purchasers, we said, was the "chance to make a great deal of money from activities * * * carried on by persons other than the purchasers." The purchasers, we went on, "were told * * * that after they acquired these pieces of property (leases), the activity and energies and expenditures of others — the backers of the test wells — would produce earnings on the investment." And that, we concluded, "is enough." 287 F.2d 435, 439.

This brief résumé is more than background. It reveals at the very outset that for there to be a crime, it took a lot more than proof of the isolated count mailings. Obviously, the statute (see note 3, supra) does not require that the entire "sale" be consummated in one single mailing. It is enough that in the execution of the sale, there has been at least one essential use of the mails.⁷ This would include any "integral step in the making of the contract of sale," United States v. Greenberg, S.D.N.Y., 1962, 30 F.R.D. 164. Cf. United States v. Hughes, S.D.N.Y., 1961, 195 F.Supp. 795. And the term "sell" or "sale" is intended to be used in a broad sense. See Creswell-Keith, Inc. v. Willingham, 8 Cir., 1959, 264 F.2d 76 at 80.

Thus, Count 15 charged that on June 15, 1956, the "* * * defendants, did wilfully * * * make use of the mails to sell * * *" an investment contract "the * * * mails being" used on that date when the "defendants * * * wilfully * * * caused to be placed in an authorized depository * * a letter addressed" to a named purchaser. The phrase "to sell" means at least "in order to sell," that is, in order to consummate a sale. We may assume (without deciding) that where the charge is for making a "sale" or for using mails to "sell" as distinguished from a charge of an unlawful "offer to sell" the Government must prove that as to that transaction there was ultimately a completed sale. But we reject the contention of defendants based on the 1954 amendments⁸ that the term "to sell" as here charged must mean a completed transaction as of the time of the receipt of the count mailing by the purchaser.

Without specifically discussing each challenged exhibit (or related testimony), we think it is sufficient to state that evidence before and after the count mailing date may be admissible. It will be admissible if relevant to the broad question of "investment contract." This, as we earlier pointed out, is essentially the problem of proving the "something more" than the mere sale of a mineral lease. That will include all of the material transmitted to the particular purchaser named in the charge in which the jury could say the "economic inducement" is expressed or implied. The cut-off time would ordinarily run as late as the last piece of material bringing about the completed purchase. And even that time limitation must be flexible and hence pretty generally left to the wise discretion of the trial Judge. Thus, as an example, circumstances might be such that a jury could conclude that in a high pressure sales campaign, the promoters thought it wise to allay apprehension of those who had purchased by a continuation of reassuring literature. Likewise, such material would be admissible in showing any one or more or all of the uses of the mails in the course of bringing about the sale as ultimately consummated.

In addition to the use of such material in establishing the "investment contract" and the purposeful use of the mails in the consummation of the specified sale, the evidence was admissible here for other reasons. All was put in issue by the plea of not guilty. That meant that in addition to the elements already discussed, the Government had to establish (a) the identity of the defendants as the actors, and (b) that their actions were wilfully and knowingly done in order to effectuate the sale. When it comes to the requisite quality of "wilfulness,"⁹ it is apparent that considerable latitude must be accorded in the receipt of evidence under the considerate discretion of the trial Judge. For when intent, as distinguished from knowledge, is being established, it matters not whether the acts are prior or subsequent to the time of the crime charged. "Intent is a state of mind difficult of precise proof and, therefore, evidence of other and surrounding circumstances may be received for the purpose of proving such intent. Acts done and declarations made after the act of which the defendant is accused are admissible as bearing on intent." Shreve v. United States, 9 Cir., 1939, 103 F.2d 796, 803, cert. denied, 308 U.S. 570, 60 S.Ct. 84, 84 L.Ed. 479.¹⁰

As a part of this claim of error, defendants assert additional contentions. They argue that receipt of evidence not tied directly to the count mailing allows the jury to consider transactions which involve the proposed sale of securities other than the ones specified in the charge. Presumably that results because the sales literature, representations, etc. invite purchases generally and not merely the particular one finally consummated. Likewise, they continue, it exposes the jury to the contaminating influence of much inflammatory, but otherwise irrelevant, material not directly related to the specified sale. As examples of this, they point to the boastful extravagant claims of Roe's expertise, fabulous, but genuine, oil wells in earlier fields, and the like. To eliminate the latter, they insist that the trial Court, as a minimum, should have edited out such portions by suitable deletions.

We regard these criticisms as unfounded. In the final analysis they add up to the proposition that the Court is to try the defendants, not upon the basis of their own promotional sales material, but rather upon a reconstruction of them with such excisions, deletions and verbal surgical treatment as the trial Judge might think necessary to keep the resulting product from conveying an inflammatory or adverse impression. But as Mr. Justice Jackson observed...