Busch v. United States

• Decision Date: 08 October 1931
• Docket Number: 8753.,No. 8752,8752
• Parties: BUSCH v. UNITED STATES. GREIBLE v. SAME.
• Court: U.S. Court of Appeals — Eighth Circuit

52 F.2d 79 (1931)

BUSCH v. UNITED STATES.

GREIBLE v. SAME.

Nos. 8752, 8753.

Circuit Court of Appeals, Eighth Circuit.

July 20, 1931.

Rehearing Denied October 8, 1931.

P. H. Cullen, of St. Louis, Mo. (J. E. Carroll, Igoe, Carroll, Higgs & Keefe, and Abbott, Fauntleroy, Cullen & Edwards, all of St. Louis, Mo., on the brief), for appellant Busch.

Charles A. Houts, of Kansas City, Mo. (Mark A. Copeland, of Cleveland, Ohio, on the brief), for appellant Greible.

C. J. Stattler, Asst. U. S. Atty., of St. Louis, Mo. (Louis H. Breuer, U. S. Atty., of Rolla, Mo., on the brief), for the United States.

Before STONE and GARDNER, Circuit Judges, and MARTINEAU, District Judge.

GARDNER, Circuit Judge.

Appellants, who will herein be referred to as defendants, were, with one J. Sidney Green, indicted for violations of sections 215 and 37 of the Criminal Code (18 USCA §§ 338 and 88), in an indictment containing nine counts. They were charged with having devised a scheme to obtain money and property by false pretenses in connection with the sale of first mortgage real estate bonds, certificates of indebtedness, and securities of certain corporations named in the indictment, and in carrying it out, to have used the United States mails. The indictment is very long, occupying thirty pages of the printed record. The ninth count charged a conspiracy of the same defendants to violate section 215 of the Criminal Code (18 USCA §§ 88 and 338), but prior to trial, on motion of the United States district attorney, this conspiracy count was dismissed. At the close of the government's evidence in chief, on motion of the United States district attorney, counts 4 and 5 were dismissed, leaving counts 1, 2, 3, 6, 7, and 8, on all of which the jury returned a verdict of guilty as to these two defendants. Each defendant has filed a separate appeal, supported by separate briefs, but based upon a single printed record. The sufficiency of the indictment was assailed by demurrer interposed by each defendant, and the overruling of these demurrers is urged as error.

The indictment, so far as it relates to a scheme for the obtaining of money and property by means of fraudulent pretenses, representations, and promises, omitting formal parts, charges that these defendants, "having devised and intending to devise a scheme for the obtaining of money and property by means of false and fraudulent pretenses, representations and promises, from numerous and sundry persons, too numerous to mention herein, including the public generally, and particularly those who by the means hereinafter described (all hereinafter in this indictment called Victims), could be induced to give, send and pay their money and property to the said defendants and to William A. Busch and Company and the Securities Guaranteed Company, for the purchase of first mortgage real estate bonds, certificates of indebtedness and securities of The Larkspur Apartment Company, The Cardinal Apartment Company, The Superior-Payne Company, The Superior Lakeview Market Company, The Garden Court Realty Company, the Carnegie Hall Apartment and the Euclid Court Apartment, all of the City of Cleveland, in the State of Ohio, they, the said defendants, and each of them, would and did make, and cause to be made, false and fraudulent pretenses, representations and promises, through agents, by letters, circulars, pamphlets, and advertisements inserted in newspapers, to said Victims, in order to induce said Victims to give, send and pay their money and property to them, the said defendants and said companies, for the purchase of the aforesaid first mortgage real estate bonds, certificates of indebtedness and securities; that said defendants, and each of them, would and did offer for sale and sell to said Victims the aforesaid first mortgage real estate bonds, certificates of indebtedness and securities in denominations of $100.00, $500.00 and $1,000.00 each; that said false and fraudulent pretenses, representations and promises, so made and caused to be made by said defendants, and each of them, were in substance and effect as follows, to-wit:"

The indictment then, in detail and with unusual particularity, sets out in twenty numbered specifications, the pretenses, representations, and promises charged to have been made by the defendants, giving the names of the corporations, the instruments through which the alleged fraud was committed, and describing with particularity the means and methods alleged to have been employed by the defendants. The first of these specifications in substance charges that the Securities Guaranteed Company was organized for the express purpose of guaranteeing the bonds of other corporations, and having purchased the bonds, certificates of indebtedness, and securities of the Larkspur Apartment Company, the Cardinal Apartment Company, the Superior Payne Company, the Superior Lakeview Market Company, the Garden Court Realty Company, the Carnegie Hall Apartment Company, and the Euclid Court Apartment Company, would guarantee to the purchasers and holders of any and all of said bonds, the payment in full of the principal and interest thereon, and would set aside 14 per cent. of the proceeds of all bonds sold by said company and its agents, to create a trust fund; that all bonds so sold would be known and designated as trust guaranteed bonds, and that this guaranty eliminated the investment risk, and the investors would be able to buy first mortgage real estate bonds carrying a third party guaranty, both as to principal and interest, making them default proof; that trust guaranteed bonds were bonds on specific and individual properties and also trust guaranteed bonds, which meant that they carried a guaranty that made the investment secure to the holder. That this guaranty was not the guaranty of the individual corporation operating the project, but an absolute third party guaranty, which could be secured only by the application of insurance principles, through the establishment of a trust fund. That this trust fund was maintained by a premium of one-half of one per cent. of the total original bonded indebtedness of all trust guaranteed bond properties, and was paid into the fund semiannually during the entire life of the bond. That the combined total of the premiums, together with the original fund created by the guarantor, made up this trust fund which secured the guaranty. That the trust fund was held by a trust company which was under state supervision and a member of the Federal Reserve System. That the Securities Guaranteed Company was, therefore, offering investors only first mortgage real estate bonds that were trust guaranteed and whose guaranty was backed with a trust fund in the hands of a trust company, making the bondholders absolutely safe, and that in accordance with the long-established policy of the Securities Guaranteed Company, and in conformity with its guaranty trust agreement, the management and affairs of the issuing company remained under the careful scrutiny and supervision of the executive committee of the Securities Guaranteed Company, for the life of the bond. The specification then specifically negatives the truth of these representations, setting forth in detail the alleged falsity, and the knowledge of the defendants of such falsity.

The foregoing is simply referred to as disclosing the general character of the twenty specifications set out as a part of count 1. The others are quite or even more specific. In each of the other counts, the scheme as set out in count 1 is incorporated by reference. The indictment then proceeds to allege that the defendants, for the purpose of executing the scheme, and in attempting so to do, wilfully, knowingly, unlawfully, and feloniously, placed and caused to be placed in a post office of the United States, to be sent and delivered by the Post Office Department of the United States, the various letters set out in the separate counts of the indictment.

The demurrers go only to the sufficiency of the allegations charging the devising of the scheme to obtain money and property by means of false pretenses, and do not challenge that part of the indictment which charges the defendants with the use of the mails in the execution of the alleged scheme. It is urged that the indictment is bad because: (1) It fails to charge that the makers of the bonds were insolvent; (2) it fails to charge that the defendants made the representations and promises willfully or with the evil, corrupt, or unlawful intent to injure or defraud; (3) it contains a vast amount of prejudicial matter which could not be material on the issue of obtaining money or property by false pretenses; and (4) it fails to use the word "intent," or other word imputing dishonesty to the defendants. Summarizing the contention in this regard, counsel say: "Of course, the primary and principal feature upon which he relies is that the indictment fails to charge that the promises were made in bad faith, fails to charge that the representations, pretenses and promises were made with intent to defraud, or made `wilfully.'"

The devising of a scheme to obtain money by means of false pretenses is not in itself a crime under the laws of the United States. Such an act becomes a crime, under the act here involved, when, and if, the United States mails are used in carrying out such scheme. It is well settled that the use of the Post Office Department in the execution of the alleged scheme is the gist of the offense which the statute denounces. Cochran v. United States (C. C. A.) 41 F.(2d) 193, 197; Brady v. United States (C. C. A.) 24 F.(2d) 405, 59 A. L. R. 563; Barnard v. United States (C. C. A.) 16 F.(2d) 451.

As said by this court in Cochran v. United States, supra: "While the scheme or artifice must be sufficiently set forth so as to advise the defendants with the particulars thereof, yet the scheme need not be set forth with that particularity which would be required if the...