Bettman v. United States

Decision Date20 July 1915
Docket Number2740.
Citation224 F. 819
CourtU.S. Court of Appeals — Sixth Circuit

[Copyrighted Material Omitted]

Plaintiff in error was indicted upon two counts, under section 215 of the Criminal Code of the United States, for using the mails to promote a scheme and artifice to defraud and to obtain money and property by means of false and fraudulent pretenses, representations, and promises. There was conviction under both counts, and sentence of imprisonment and to pay the costs of prosecution. To summarize the indictment:

The first count alleges, in substance sufficient for present purposes, that defendant at the time of the transactions in question was the president (and a large stockholder) of the Bettman-Johnson Company, an Ohio corporation, with general supervision and control of its affairs, the corporation being in business in Cincinnati in the manufacture and sale extensively of liquors and preserved fruits; that defendant on or about a date named desired to obtain large sums of money for the corporation through the services of E. Naumburg & Co., a New York brokerage firm engaged in buying commercial paper and placing the same in the hands of banks and other investors, it being the custom of Naumburg & Co. to obtain from those whose paper they intended to so handle statements regarding the financial condition of the borrowers, upon which those taking the paper relied; that accordingly, in order to obtain the credit necessary to float the proposed paper, the corporation and defendant made a financial statement of the affairs of the corporation; that this statement was intended by defendant to and did show that the assets of the corporation as of March 1, 1913, were $1,252,962.23, and its liabilities $440,581.44 the latter consisting of bills payable in the amount of $384,196.54 and accounts payable amounting to $31,384.90; that the list of liabilities was intended by defendant to be and was false and fraudulent, in that (a) the bills payable of the corporation amounted at the time stated to $326,889.37 in excess of the amount given in said statement, and (b) the accounts payable were at the time $146,862.52 more than the amount shown by the statement, and that the list of liabilities was thus false and fraudulent to the extent of $473,751.94; that in furtherance of the alleged scheme, and for the purpose of so obtaining such money, defendant sent this financial statement to Naumburg & Co., contained in a letter of the corporation, by defendant as its president, dated April 29, 1913, and caused by defendant to be mailed in the United States post office at Cincinnati, Ohio, for transmission and delivery to Naumburg & Co., with the intention that the latter should, in reliance upon the statement, buy the corporation's notes, and should send copies of the statement to various banks and others recommending their purchase of the paper, all of which was done with the intention on the part of defendant and the corporation that such investors should believe in the truthfulness of the financial statement; and that, had defendant correctly given therein the actual amount of the corporation's liabilities, the money and credit sought to be obtained through Naumburg & Co. could not have been secured.

The second count differs from the first principally in the facts that no reference is made to Naumburg & Co., and that the financial statement referred to is alleged to have been sent by mail to the Fifth-Third National Bank of Cincinnati, on May 1, 1913; that bank alone being alleged as intended to be defrauded, and having, in reliance upon the statement, loaned the corporation $15,000 on its notes.

Motion to direct verdict, made by defendant at the close of the government's case, was overruled, defendant offering no proof.

F. F. Dinsmore and Thos. H. Darby, both of Cincinnati, Ohio (Dinsmore & Shohl and Darby & Benedict, all of Cincinnati, Ohio, on the brief), for plaintiff in error.

E. P. Moulinire, Asst. U.S. Atty., of Cincinnati, Ohio.

Before WARRINGTON, KNAPPEN, and DENISON, Circuit Judges.

KNAPPEN Circuit Judge (after stating the facts as above).

1. Reversal of the judgment below is asked on several grounds: The first ground is that the facts stated in the indictment do not constitute a 'scheme or artifice' within the meaning of section 215 of the Criminal Code, the material portions of which are copied in the margin. [1] Defendant's contention, broadly stated, seems to be that the statute does not apply to the act of one engaged generally in a legitimate business otherwise legitimately conducted, but who for the purpose of obtaining money, property or financial credit makes a knowingly false statement of his financial condition, either in a single instance or in a series of similar instances, not joined together, but independent of each other, but is confined to broader and more comprehensive frauds, such as the case of a business systematically and designedly so conducted generally that through false representations persons are induced to part with their money or property in the belief that they are getting something different from or better and worth more than what is actually being furnished, and especially to so-called 'confidence games' and swindling devices, whereby the mails are resorted to for deceiving the ignorant and credulous generally by appeals to passion for gain by an untruthful and seductive setting forth of the advantage and attractiveness of the scheme exploited. It is urged that a clear distinction exists between 'an intent to defraud' and the formation of a 'scheme or artifice to defraud'; in other words, that the statute does not apply to the ordinary case of actual or attempted obtaining of money or property by false and fraudulent pretenses and representations, even though the post office establishment of the United States is employed in the execution of such fraudulent design.

We think the language and history of the statute, and the interpretation generally given it by the courts, forbid the narrow construction contended for. The statute as first passed (June 8, 1872, 17 Stat. 323) lacked the words 'or for obtaining money or property by means of false and fraudulent pretenses, representations, or promises,' found in article 215 of the Criminal Code; it made an original intention to employ the post office establishment a necessary element of the offense, and permitted the indictment to charge offenses to the number of three when committed within the same six calendar months, with provision for a single sentence proportioning the punishment 'especially to the degree in which the abuse of the post office establishment 'especially as an instrument into such fraudulent scheme and device. ' The statute was later amended in a respect not immediately material, and became section 5480 of the Revised Statutes.

Long before the adoption of the Criminal Code the all-embracing scope of the statute had been affirmed by repeated decisions. In the leading case of Durland v. United States, 161 U.S. 306, 313, 16 Sup.Ct. 508, 511 (40 L.Ed. 709) it was held to include 'everything designed to defraud by representations as to the past or present, or suggestions and promises as to the future. ' Among the decisions of this court which have construed the statute equally broadly may be cited Foster v. United States, 178 F. 165, 172, 101 C.C.A. 485. As there, and elsewhere in substance, said, the statute was enacted to protect the public against all intentional efforts to despoil through the medium of the post office establishment.

That, in order to fall within the statute, a scheme need not be designed to defraud the public generally or the credulous especially, is established by Weeber v. United States (C.C.) 62 F. 740, decided at the circuit by Mr. Justice Brewer (Judges Caldwell and Sanborn concurring), and by the decision of this court in Horman v. United States, 116 F. 350, 53 C.C.A. 570, in an opinion written by the present Mr. Justice Day, in each of which cases a scheme to blackmail directed solely and specifically against a given individual or group of individuals was held a scheme to defraud within the meaning of the statute. An application for writ of certiorari in the Horman Case was denied by the Supreme Court (187 U.S. 641, 23 Sup.Ct. 841, 47 L.Ed. 345). See, also, Goldman v. United States (C.C.A. 6) 220 F. 57, 135 C.C.A. 625. The proposition that the scheme or artifice to defraud contemplated by the statute is limited to such schemes or artifices as are accomplished by deception or trick was expressly rejected in the Horman Case. As there pointed out by Mr. Justice Day (116 F. 352, 53 C.C.A. 572), while the term 'artifice' signifies deceit or trickery, the word 'scheme' itself does 'not necessarily involve trickery or cunning. A scheme may include a plan or device for the legitimate accomplishment of an object. But to come within the terms of the statute under consideration the artifice or scheme must be designed to defraud,' and the term 'defraud' was held to mean only 'the wrongful purpose of injuring another. ' A fraudulent scheme may be within the statute, even though used in the prosecution of an established business, legitimate if honestly conducted. Harris v. Rosenberger (C.C.A. 8) 145 F. 449, 455, 76 C.C.A. 225, 13 L.R.A. (N.S.) 762; Foster v. United States, supra; Harrison v. United States (C.C.A. 6) 200 F. 662, 119 C.C.A. 78. In the late case of United States v. Stever, 222 U.S. 167, 173, 174, 32 Sup.Ct. 51, 53 (56 L.Ed. 145) Mr. Justice Lurton said:

'A scheme to defraud by means of false pretenses is, as we have seen, 'a scheme or artifice to defraud' within the plain meaning and purpose of this section' (5480).

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