Little v. United States

Decision Date03 June 1964
Docket NumberNo. 17401.,17401.
Citation331 F.2d 287
PartiesJames E. LITTLE, Appellant, v. UNITED STATES of America, Appellee.
CourtU.S. Court of Appeals — Eighth Circuit

COPYRIGHT MATERIAL OMITTED

Samuel Raban, St. Louis, Mo., Raymond M. Briggs, Memphis, Tenn., for appellant.

John A. Newton, Asst. U. S. Atty., St. Louis, Mo., Richard D. FitzGibbon, Jr., U. S. Atty., St. Louis, Mo., and Mahlon M. Frankhauser and William D. Goldsberry, Attorneys, Securities and Exchange Commission, Washington, D. C., for appellee.

Before VAN OOSTERHOUT, RIDGE and MEHAFFY, Circuit Judges.

RIDGE, Circuit Judge.

Appellant was convicted on eight (8) of the ten (10) counts of an indictment duly returned, charging violations of Section 17(a) of the "Securities Act of 1933."1 15 U.S.C.A. § 77q(a). He appeals from concurrent sentences imposed therefor. Two counts of the indictment were dismissed by the Government before their submission to the jury.

The primary issue raised and to be resolved in this timely appeal relates to the "use of the mails, directly or indirectly" to bring appellant's violations of the Securities Act, supra, as a crime within federal jurisdiction. As that issue is here presented there is no question as to the sufficiency of the evidence to establish fraudulent representations as having been made by appellant to induce certain identified investors to purchase specifically described worthless "securities"2 as detailed in each count of the indictment on which he was found guilty. Hence it is sufficient to presently state that on the evidence adduced, the Government established facts from which the jury could have found, beyond a reasonable doubt, that appellant, at all times here material, did knowingly and intentionally make certain false and untrue statements to induce identified investors, living in St. Louis County, Missouri, who had checking accounts with banks situate in that State, to deliver to him checks drawn on such banks, payable to the Star Oil Company, as a means of purchasing worthless, fractional interests in oil and gas leases, described as "Blackburn Leases A and B," located in Green County, Kentucky. None of the material representations established as inducing such investors to make those purchases were true. As a consequence, appellant was duly indicted for violation of Section 17 (a) of the Securities Act, supra.

In each count of the indictment returned, it was specifically charged, among other things, that appellant by the use of the means and instruments of transportation and communication in interstate commerce did — "unlawfully, willfully and knowingly — employ (a) device, scheme and artifice to defraud and obtain money and property" from the person duped, by "unlawfully, willfully and knowingly" causing a check, identified in each count of the indictment, "to be delivered by the means and instruments of transportation in interstate commerce — from Memphis, Tennessee, to Federal Reserve Bank of St. Louis, St. Louis, Missouri," — payable against the account of the duped investor — which check appellant "deposited with the National Bank of Commerce in Memphis, Memphis, Tennessee," (hereinafter called "National") all "in violation of Section 77q(a)" supra.

It was on February 9, 1959, that appellant opened a checking account under the name of Star Oil Company3 with National. Each of the checks received by appellant from the duped investors was, by false representation, made payable to "Star", at the specific direction of appellant and accordingly deposited by him in "Star's" checking account. Though appellant admittedly transported such checks from St. Louis, Missouri, to Memphis, Tennessee, — to bring him criminally within the ambit of Section 17(a), supra, each count of the indictment only charged a "transportation in interstate commerce" of each such check by "means and instruments of transportation and communication in interstate commerce — from Memphis, Tennessee, to St. Louis, Missouri." The various counts of the indictment alleged the transportation to be either via the "Railway Express Agency" or by "United States Mail."

The Government's evidence established each of the checks was deposited with National, in respect to deposit slips, which established that National acted only as Star's collection agent in securing the proceeds of the checks. All such checks were received by National for deposit "with the distinct understanding that credit" thereof to Star's checking account was "subject to final payment and to receipt of proceeds of final payment in cash or solvent credit" to National, "at its own office." Notwithstanding such contractual conditions, it is appellant's contention that the checks "were not deposited for collection" but that National became a "holder in due course" thereof. Hence he says he may not be held responsible for National's transportation of the checks for "clearance" which admittedly he knew would be by use of the "mails" or other means of interstate commerce. More specifically, it is appellant's contention that because it was National's practice, unless overdrafts appeared, to immediately credit Star's checking account with the amount of the duped depositor's checks, as and when they were deposited, and appellant was allowed to make withdrawals from such account, against the amount so credited, before the duped investor's check was "cleared" through the Federal Reserve Bank of St. Louis, he cannot be found guilty of violating Section 17(a), supra. So contending, appellant argues that under the law relating to "bills and notes" and "banking" — National thereby became a "holder in due course" as to each such check when it was deposited with National. Under such circumstances, appellant asserts, "the mailing or transportation" of the checks here considered could not have been caused by him, "directly or indirectly"; and that under the above circumstances National, as a matter of law, cannot be considered as being an agent for or on his behalf, as the Government here contends.

It is on the above singular hypothesis that appellant asserts he cannot be found guilty of violating Section 17(a), supra, and seeks to have his convictions set aside. As support therefor, appellant relies on the following authorities: Kann v. United States, 323 U.S., 88, 89, 65 S. Ct. 148, 89 L.Ed. 88 (1944); Parr v. United States, 363 U.S. 370 (1960); Douglas v. Federal Reserve Bank of Dallas, 271 U.S. 489, 46 S.Ct. 554, 70 L.Ed. 1051 (1926); United States v. Schaefer, 299 F.2d 625 (7 Cir. 1962), cert. den. 370 U.S. 917, 82 S.Ct. 1553, 8 L.Ed.2d 497; Getchell v. United States, 282 F.2d 681 (5 Cir. 1960); Lowrance Motor Co. v. First National Bank, 238 F.2d 625, 59 A.L.R.2d 1164 (5 Cir. 1956); United States v. Taylor, 217 F.2d 397, 398 (2 Cir. 1954); Harper v. United States, 143 F.2d 795 (8 Cir. 1944); Darwin v. Jess Hickey Oil Corp., 153 F.Supp. 667 (D.C. N.D.Texas, 1957).

We shall not follow appellant in all the argument he undertakes to make and which he attempts to fortify by the above-cited authorities. That the contention made by appellant is not apposite to the crimes for which he was charged and found guilty; and, that the above-cited authorities pertaining to mail "fraud prosecutions," and other violations of the Securities Act of 1933, are patently distinguishable on their facts and law applicable, is made manifest when the following propositions are contemplated and properly postulated.

The Kann and Parr cases, supra, cover prosecutions under the Mail Fraud Statute, 18 U.S.C.A. § 1341; or conspiracy to do so, in violation of 18 U.S. C.A. § 371. We do not consider the facts in those prosecutions under the Mail Fraud Statute, to be wholly apposite to appellant's prosecutions for violation of Section 17(a) of the Securities Act of 1933, supra. There can be no question about the proof essential to sustain convictions under the Mail Fraud Act, as considered in Kann, Parr, and other cases cited by appellant, supra. But we are not here concerned with a prosecution for "mail fraud."

As we said in Harper v. United States, 143 F.2d 795, 801 (8 Cir. 1944):

"The devising of a scheme or artifice to defraud or to obtain money by means of fraud or false pretenses is not a crime either under the Securities Act or the Mail Fraud Act. It becomes a crime only in the event that in furtherance of the scheme or artifice to sell securities any means or instruments of transportation or communication in interstate commerce or the mails be employed." (Emp. added.)

More recently, we said in Creswell-Keith, Inc. v. Willingham, 264 F.2d 76, 80 (8 Cir. 1959):

"The courts have uniformly held that (the Securities Act of 1933) applies when the mails are used in furtherance of a fraudulent scheme, irrespective of whether the misrepresentations were transmitted by mail or in interstate commerce.
"* * * It is our best judgment that Congress inserted the mails and interstate commerce provision in (the Securities Act of 1933) for the purpose of establishing federal jurisdiction, and that Congress intended to assert its full constitutional power in granting civil relief from fraudulent transactions" (par. added)

when related to the sale of worthless securities, as defined in that Act. We think that is true also as to the criminal sanctions provided in Section 17(a), supra.

The "evil at which the Securities Act is directed is the fraud in the sale of securities." United States v. Cashin, 281 F.2d 669, 674 (2 Cir. 1960). That being the congressional purpose and intendment to be covered by the "Securities Act of 1933," a fortiori, the law of "sales" and impact of fraud in relation to "sales", rather than the principles of "banks and banking" or "bills and notes," should be considered in making practical application of that Act to a given set of facts. In other words, it is our opinion that a scheme to defraud, in relation to a sale of securities, and the use of the mails in...

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