Barnes v. United States

• Decision Date: 15 March 1928
• Docket Number: No. 7792.,7792.
• Parties: BARNES v. UNITED STATES.
• Court: U.S. Court of Appeals — Eighth Circuit

25 F.2d 61 (1928)

BARNES v. UNITED STATES.

No. 7792.

Circuit Court of Appeals, Eighth Circuit.

March 15, 1928.

M. H. Boutelle and A. H. David, both of Minneapolis, Minn., for plaintiff in error.

Lafayette French, Jr., U. S. Atty., of St. Paul, Minn.

Before WALTER H. SANBORN and BOOTH, Circuit Judges, and MUNGER, District Judge.

MUNGER, District Judge.

The plaintiff in error pleaded guilty to the first count of an indictment, which alleged that he and others had devised a scheme to defraud and had mailed a letter in executing the scheme, contrary to the provisions of section 215, Penal Code (18 USCA § 338). Prior to this plea the plaintiff in error had demurred to the indictment claiming that it stated no offense. After sentence, the plaintiff in error obtained this writ of error, and thereby challenges the sufficiency of the first count of the indictment to support the judgment. The chief ground of objection is that the letter set out in the indictment and alleged to have been mailed in pursuance of the scheme to defraud does not show a purpose of executing, or of attempting to execute, the scheme to defraud. The indictment charged, in substance, that the plaintiff in error Joseph U. Barnes, Richard C. Thompson, Eugene B. Barnes, and Earl M. Andereck, unlawfully devised a scheme to defraud Selmer M. Johnson and others, and that the scheme was that Joseph U. Barnes, being the president, Richard C. Thompson, being the vice president, Eugene B. Barnes, being the treasurer, and Earl M. Andereck, being the secretary, of the Interstate Securities Company, a South Dakota corporation, having an office at Minneapolis, would fraudulently pretend to be engaged in the business of selling first mortgages and bonds, secured by first mortgages on real estate, and would pretend that all the mortgages were first mortgages on good farming lands, and that the mortgages and bonds were wise, safe, secure, and bed-rock investments and of the full value stated on the face of such securities. It also charged that these representations would be made by the defendants for the purpose of obtaining purchasers for the mortgages and bonds, who would pay to defendants the face value thereof. It then charged that the defendants did not intend to sell any mortgages, or bonds secured by mortgages, which would be first liens on good farming lands or on real estate, did not intend that the mortgages and bonds would be wise, safe, secure, and bed-rock investments, and of the value stated on the face thereof, but intended to sell bonds and mortgages of no value, and that the mortgages would be on lands incumbered by prior mortgages for the full value of the lands, and the mortgages would be executed by persons of no financial responsibility. The indictment then alleges that the defendants, after having devised this scheme, in and for executing the scheme and attempting so to do, placed in the post office at Minneapolis, Minn., a letter with inclosures in a postage prepaid envelope, directed to A. W. Johnson at Albert Lea, Minn. This letter and one of the inclosures is set forth in full in the indictment. The letter is as follows:

"Business Established 1885.

"Interstate Securities Company, "Farm Mortgages, City Mortgages, Bonds, "Capital and Surplus $300,000.00.

"Officers:

"Joseph U. Barnes, President "Richard C. Thompson, Vice Prest "Eugene B. Barnes, Treasurer "Earl M. Andereck, Secretary.

"Directors:

"Hon. E. C. Issenhuth "Joseph U. Barnes "Frederick B. Wright, "Richard C. Thompson, "Oric O. Whited, "Eugene B. Barnes, "George W. Andrick, "Earl M. Andereck.

"Minneapolis, Minnesota, March 31, 1922.

"A. W. Johnson, Albert Lea, Minn. — Dear Friend Johnson: I was greatly delighted this morning to receive your letter requesting investments and was also greatly pleased to see the position to which you have been elected. In making an investment, the fundamental factor is safety; the next important factor is rate. I am inclosing descriptions of several mortgages which I can recommend to you, in the full confidence that they will prove very desirable from every standpoint.

"While several of these are drawn at 6 per cent., or 6½ per cent., we will net you 7 per cent. on any which you select. In addition, we will allow a 2 per cent. cash discount as a slight remuneration for your services in going to the bother to handle the investments. For your brother, I would suggest either the Leamy $1,000 mortgage or $1,000 of the mortgage bonds in either the Sarbaugh, Jensen, or Lindahl. These latter three are ordinary mortgages, in which the borrowers have signed a number of gold bonds for the aggregate amount loaned, instead of signing one note. The advantage is that it gives the small investor an opportunity to participate in the high grade mortgages, even though he may not have enough money to invest, to allow him then to purchase the entire issue.

"In the case of the three bond issues the insurance, recorded mortgage, and completed abstract are held in our vaults, we indorsing the bonds purchased and issuing title guaranty certificates. We have found the bond issues especially desirable, as there usually is a large equity, never making it necessary to resort to foreclosure.

"For your other party, we would suggest either the Ogren $600 or the Ostrander $800. The Ogren is a good title quarter section farm, which is valued at about five times the amount loaned. We find these small loans excellent, as the borrowers are making the farms more valuable from year to year.

"The Ostrander $800 is on a farm on which we had a loan of $1,000 in 1910. That $1,000 loan was paid off, and recently Mr. Ostrander came to us and wanted to borrow $800. And the fact that 12 years ago we had a larger loan on the same place, and it was paid off, makes us extremely confident that the $800 loan will be eminently satisfactory.

"When making a selection, I think it would be well for you to make first and second choice in each case, as there are only a few of the bonds left and they are selling every day.

"As far as interest is concerned, we will make a note of the interest coming to us out of the first coupon, so you will not have to pay the accrued interest at this time. If you wish to get your funds at work promptly, you can send us a draft for the proper amount, less your 2 per cent., or if you prefer send us a draft for the entire amount and we will send you the 2 per cent. by separate check.

"The farmers are going to be prosperous, and farm mortgages the safest investments in the country. I am confident that the inclosed offerings are worthy of your entire confidence and shall be very glad to hear from you.

"With personal regards, sincerely yours, "Richard C. Thompson, "RCT-R Vice President."

The inclosure is entitled "Office of Interstate Securities Company." It undertakes to describe a loan made to Fern H. Jensen, stating particulars about its amount, rate of interest, date of payments, description of the lands securing it, and ends with the statement: "We believe this farm furnishes ample security for the bonds with this loan and that the bonds will prove entirely satisfactory investments. Interstate Securities Company." The inclosure was indorsed with a further description of the Fern H. Jensen loan and the statements:

"Negotiated by Interstate Securities Company."

"The money you put into our mortgages is wisely and safely invested. Interstate...