Kriebel v. United States

Citation8 F.2d 692
Decision Date12 March 1925
Docket Number3479.,No. 3478,3478
PartiesKRIEBEL v. UNITED STATES. POMMERY v. SAME.
CourtUnited States Courts of Appeals. United States Court of Appeals (7th Circuit)

Robert N. Golding and Weymouth Kirkland, both of Chicago, Ill., for plaintiff in error Kriebel.

David Stansbury, of Chicago, Ill., for plaintiff in error Pommery.

John Elliott Byrne, of Chicago, Ill., for the United States.

Before EVANS, PAGE and ANDERSON, Circuit Judges.

PAGE, Circuit Judge.

Plaintiffs in error were found guilty as charged in the indictment. The first count charges that Kriebel and Pommery, under the name of Kriebel & Co., devised a scheme and artifice for obtaining money by means of false and fraudulent pretenses and representations, in that by use of the mails they falsely represented that they were buying and holding for their customers, until fully paid for, shares of stock dealt in upon the stock exchanges. The second and third counts are the same as the first, except that each charges a different use of the mails. The fourth count charges conspiracy.

Plaintiff in error Kriebel, in No. 3478, and Pommery, in No. 3479, were tried together, but are prosecuting their writs separately. The examination of some 300 exhibits, not in the abstract, nor listed or certified to by the District Judge, has entailed a great amount of unnecessary work.

Kriebel commenced the business in question September 1, 1917, and incorporated it in February, 1918. Except that it bought from Kriebel in March, 1918, some stocks of unknown value and assumed Kriebel's debts of $41,482.73, for which Kriebel was given $60,000 in capital stock, Kriebel & Co. never had any assets not taken from purchasers. Kriebel and his wife always constituted a majority of the board of directors, and the business was always under his absolute control.

The public was told that under the so-called "Kriebel systematic savings plan" any one could select and purchase from Kriebel & Co. standard investment stocks and bonds by paying in cash 20 per cent. of the cost of the stocks selected, and that Kriebel & Co. would buy those stocks and carry them for the purchaser upon a contract by the purchaser to pay the remaining 80 per cent. (plus 10 per cent. thereof) in 20 equal monthly installments, without interest, and that the purchaser was to receive all dividends upon the stock and interest on the bonds purchased. The 10 per cent. was to be the sole compensation to Kriebel & Co. for all its services and expenses, including the carrying of the stock during the period of partial payments. When stock was ordered, Kriebel & Co. issued to the purchaser a contract, certifying to the purchase and the down payment, with coupons covering deferred payments. By every sort of seductive advertising through the mails, the people were told about the plan, and that any one owning one of those contracts immediately obtained control of securities of the value of five times the initial payment.

In an advertising booklet, "Getting Ahead," Peter Perkins represents the purchasing public, and Roberts represents Kriebel & Co. Perkins tells Roberts of his desire to become an owner of stocks, although he is a man of very small means. Roberts says: "I will buy these stocks for you, and you can pay me 20 per cent. down and the balance in 20 equal monthly payments. I am going to make a charge of 10 per cent. for the deferred balance for the 20 months, and give you all the dividends that are declared by the various companies during that time."

Again, in "Theory and Practice of Successful Investing," another advertisement, Kriebel asks and answers the question for the careful purchaser: "But, if I should need cash, can I sell? You can sell at any time. * * * If you were in need of cash, you would naturally sell only enough of your stocks to provide the necessary amount."

Kriebel's "Principles of Profitable Investing" is a paragon of good, sound advice and caution to investors, evidently intended to impress the public with the knowledge, ability, caution, and honesty of the Kriebel concern. The public is warned against the danger of buying on margins, viz.: "Too frequently it happens that a type of securities houses unduly tempt, and in fact encourage, people to buy on margins. * * * The injustice of this sort of publicity is great. * * * It encourages hazardous speculation, pure gambling, and financial loss usually follows."

In February, 1921, in its magazine called "Investment," Kriebel & Co., as a sort of cap sheaf to all assurances that had gone before, told the public: "The Kriebel systematic saving plan has long since passed the experimental stage. With many thousands of contracts in force in all parts of the United States and in Canada, theory becomes worthless, and argument is quite beside the mark. * * * The Kriebel plan has been in operation during a period that includes boom times, hard times, peace and war, and a stock market that has for the most part been decidedly weak. None of these conditions affect its successful operation noticeably. The investors who buy on the Kriebel plan buy for keeps. They do not trade in and out of the market. They are strictly investors — not speculators — and they invest whenever they are ready, regardless of conditions. * * * The Kriebel plan is a safe form of investment, because we deal in high-grade securities; we buy them outright immediately upon receipt of your order; the payments in hand are always ample to protect you against decline; and we charge a fee for the service that is sufficient to cover operating expenses and leave us a fair margin of profit."

By every fair reading of the advertisements the public was led to believe that: (a) Kriebel & Co. had worked out and thoroughly tested a plan by which the public could safely purchase stocks under the Kriebel plan; (b) that Kriebel & Co. had looked to every element of safety for the protection of purchasers, and was equipped to carry out on its part the contracts it was offering; (c) that it thoroughly understood the risks and dangers and almost certain financial loss attendant upon buying on margins, gambling, and speculating in stocks; (d) that the stocks purchased by customers were immediately purchased and carried for purchasers as their stocks; (c) that those stocks commenced at once to earn dividends that belonged to the purchaser.

What was done to carry out the plan? In a confidential letter to the clients of Kriebel & Co., Kriebel, over his own signature, said that the gross volume of business to January 1st of each of the following years was: 1918, $17,620.89; 1919, $88,977.09; 1920, $665,937.18; 1921, $2,881,042.51; and to January 1, 1922, $4,582,035.83. No stocks were bought at the time contracts were made with customers, and up to May 20, 1920, when Kriebel & Co. had sold $900,000 in stocks, "Mr. Kriebel thought it advisable to go out and buy $900,000 worth of stocks, which he bought from Winkleman & Co.," New York brokers. As many of the stocks theretofore sold were curb stocks, upon which they could not borrow money, they "put approximately the same amount of money into listed securities." Those stocks, 13,633 1/3 shares, costing $995,246.20, were bought from Winkleman on margin in June, 1920, and immediately resold for $3.60 more than their purchase price. The next purchase of stocks by Kriebel & Co. was through Keene & Co., a brokerage concern consisting of Keene and the defendant Pommery, who started business in March, 1920. Keene was really an employé of Pommery. In July, 1920, Pommery told Keene, "Well, we are going to do a little Chicago business," and then told him about the commissions to be charged. Orders were received through the mail for several odd lots; odd lots being lots of less than 100 shares, and 100-share lots or more being known as round lots. Keene and Pommery continued together until February, 1921. During that time there were $239,478.11 worth of odd-lot stocks bought and delivered to Kriebel by Keene & Co.

March 15, 1921, Pommery, with one H. P. Mills, under the name of H. P. Mills & Co., made the same sort of arrangement he had had with Keene. On the day Mills was employed by Pommery, Kriebel and Pommery were in the private office together, and thereafter Kriebel was there once a month, frequently for four or five hours at a time. The Mills and Pommery relations were discontinued September 15th of that year. Between April 1 and July 1, 1921, $1,500,000 worth of stocks were bought for Kriebel & Co. All round lots bought by Mills & Co. were resold, many of them on the same day. Odd lots were delivered to Kriebel & Co. In April, 1921, Mills & Co. bought 11,800 shares for Kriebel & Co. for $366,400, and in the same month sold the same stock for $368,900. In June there were purchased 62,913 shares for $999,217, that were resold in the same month for $1,027,204. When Mills' curiosity was aroused as to why such transactions were being made and so much in commissions paid, Pommery said, "That is the way ...

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2 cases
  • Hass v. United States
    • United States
    • U.S. Court of Appeals — Eighth Circuit
    • January 18, 1938
    ...The intent of the defendants in these respects is a necessary inference from the facts stated in the indictment. Kriebel v. United States, 7 Cir., 8 F.2d 692, 695, 696; Ewing v. United States, 9 Cir., 136 F. 53, The contention that because the indictment charges the consummation of the sche......
  • United States v. Brown
    • United States
    • U.S. District Court — District of Alaska
    • August 22, 1951
    ...States v. Sorcey, 7 Cir., 151 F.2d 899, 903, suffices, in my opinion, to overcome the presumption of prejudice. Cf. Kriebel v. United States, 7 Cir., 8 F.2d 692, 696. The remaining contentions appear to be lacking in merit and will not be I am of the opinion, therefore, that the motion for ......

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