Bowen v. United States

• Decision Date: 29 April 1946
• Docket Number: No. 13066.,13066.
• Parties: BOWEN v. UNITED STATES.
• Court: U.S. Court of Appeals — Eighth Circuit

153 F.2d 747 (1946)

BOWEN v. UNITED STATES.

No. 13066.

Circuit Court of Appeals, Eighth Circuit.

February 21, 1946.

Writ of Certiorari Denied April 29, 1946.

Charles F. Lamkin, Jr., of Kansas City, Mo. (Warrick, Koontz & Hazard, of Kansas City, Mo., on the brief), for appellant.

Robert T. Wright, Sp. Asst. to U. S. Atty. of Chicago, Ill. (Sam M. Wear, U. S. Atty., and David A. Thompson, Asst. U. S. Atty., both of Kansas City, Mo., and Theodore L. Thau, Sp. Asst. to Sol., Securities

and Exchange Commission, of Washington, D. C., on the brief), for appellee.

Before STONE, SANBORN, and THOMAS, Circuit Judges.

Writ of Certiorari Denied April 29, 1946. See 66 S.Ct. 980.

SANBORN, Circuit Judge.

The indictment in this case charged Leslie G. Bowen, Ray H. Andrews, and Peter A. Marxen with having devised a scheme to defraud and for obtaining money and property by means of false and fraudulent pretenses, representations and promises in connection with the sale of "pre-organization certificates" of Bowen Industries, an unincorporated association, and of stock and promissory notes of Bowen Industries, Inc., the successor of Bowen Industries. The indictment contained thirteen counts, each covering an instance in which the mails were used. The first six counts were based upon § 17(a) of the Securities Act of 1933, 15 U.S.C.A. § 77q(a).¹ The seventh and eighth counts were based on § 5(a) of the same Act, 15 U.S.C.A. § 77e (a).² The remaining counts of the indictment were based upon the Mail Fraud Statute, 18 U.S.C.A. § 338.³

The defendants entered pleas of not guilty and were tried. The jury convicted Bowen on all counts of the indictment, and acquitted his co-defendants. The court sentenced Bowen to three years imprisonment under each count, the sentences to be served concurrently.

Bowen asserts that his conviction should be set aside upon the following grounds:

1. That the trial court erroneously received in evidence summaries, prepared by a government witness, which (a) contained misleading, inflammatory and prejudicial statements not based on evidence, and (b) were based in part upon a statement made by the defendant Andrews after he had withdrawn from the scheme.

2. That the court erroneously instructed the jury (a) that "the charge in the first six counts of the indictment was made out by failure to state a material fact, the absence of which would make a fact stated misleading," and (b) "that a scheme to defraud was proved if a defendant intentionally made a single false statement." The quotations are from appellant's brief.

3. That the court erred in giving a supplemental charge to the jury after they had deliberated for ten hours and the foreman had advised the court that they were deadlocked eleven to one.

Since the validity of the indictment and the sufficiency of the evidence are not challenged by this appeal, it is unnecessary to state in detail the charges contained in the indictment or the facts which the government's evidence tended to prove. If Bowen was properly convicted upon any count of the indictment, the judgment appealed from must be affirmed, because the sentence upon all the counts is less than the maximum sentence which might have been imposed under any one count.⁴

As is usual in such cases as this, the indictment describes the alleged scheme to defraud in the first count. The scheme is then incorporated in the other counts by reference. The government asserts that in the seventh and eighth counts, which charged violations of § 5(a) (2) of the Securities Act, the allegations relating to the scheme were surplusage, and that the evidence conclusively showed that securities had been willfully issued by Bowen and sent through the mails without his having on file with the Securities and Exchange Commission the registration statement required by the Act. It is therefore contended that Bowen was properly convicted upon those counts, even if errors were committed by the trial court in the receipt of evidence and in the court's instructions to the jury affecting other counts in which the scheme was an essential ingredient. We find it unnecessary to decide this question.

For the purposes of this opinion, the facts which the evidence of the government tended to prove may be stated briefly as follows: Bowen, an inventor, in or about 1932 succeeded in interesting certain investors in financing a plan to manufacture and sell devices which he had originated or was about to originate. He then had a small shop at Independence, Missouri. The devices which he proposed to make and sell included, among others, a motorless washing machine, a two-speed sprocket for a bicycle, a speed reducer, a pedal boat, and a refrigerator. Bowen subsequently opened a shop in Chicago for the purpose of making some of these devices. His project started out as an unincorporated association called Bowen Industries. It was incorporated in April, 1942, as Bowen Industries, Inc. It was financed before incorporation by the sale of "pre-organization certificates," to be later exchanged for stock. The certificates, which were also called "units", were sold for $100 each. Meetings of the investors were for a time held in a restaurant operated by the defendant Andrews in Kansas City, Kansas. Andrews assisted Bowen in the sale of the certificates, and, after the incorporation of the association, became secretary of the company. He remained its secretary until February 11, 1943, when he was ousted and was succeeded by Marxen. Stock of Bowen Industries, Inc., was issued in exchange for the "pre-organization certificates" of Bowen Industries. Thereafter the company was financed by issuing notes to various stockholders. According to the company's records, $193,720 was obtained from the sale of "pre-organization certificates," and $45,168.46 from the issuance of promissory notes. Bowen was the organizer of the project and at all times controlled its activities. He became president of the company and a majority stockholder. Misrepresentations were made by Bowen in connection with the sale of the securities, and the mails were used. The project was a failure.

The main issue upon the trial, as is usual in such cases, was whether Bowen's project was conceived and was executed by him and his co-defendants in good faith and without intent to defraud purchasers of the securities, or whether it was a scheme to defraud and to obtain money by false and fraudulent representations and promises.

It is necessary first to consider whether the summaries to which Bowen refers were improperly admitted in evidence and were prejudicial.

The summaries were based upon such files, records and accounts relating to receipts and disbursements as the accountant and investigator for the Securities and Exchange Commission, who prepared the summaries, was able to locate. The summaries were intended to indicate the moneys which the records showed were received from investors, and the purposes for which the moneys were disbursed. The accountant's testimony was that the records were incomplete and inadequate, and that, prior to the incorporation of Bowen Industries, most of the moneys received from investors were deposited in the personal bank accounts of Bowen and Andrews.

Exhibit 274, which was substituted for Exhibit 269, may be taken as typical of the summaries which were received in evidence.⁵

Bowen asserts that the statements in the summaries "withdrawals for which there is some explanation," and "withdrawals for which there is no explanation," were misleading and prejudicial. The accountant who prepared the summaries, both on direct and on cross-examination explained exactly what he meant by these statements, and that his testimony and the summaries related solely to explanations or lack of explanations in the books, records, files and accounts, and in a statement of Andrews, all of which were in evidence. The court instructed the jury that "the use of this language the statements in the summaries has no significance, other than that which the witness has assigned to it in his explanation, and with that customary instruction they the summaries may be admitted." It is not conceivable to us that the jury was, or could have been, misled by the statements in the summaries to which Bowen takes exception.

Exhibit 271, a summary of deposits and withdrawals by Andrews from his account in the First State Bank of Kansas City, Kansas, was based in part on Exhibit 273, a statement obtained from Andrews in May, 1944, more than a year after he had severed his connection with Bowen, and this statement is also reflected in Exhibit 274. Bowen asserts that Andrew's statement was a narrative of past events by an exparticipant in the alleged scheme, and was therefore hearsay as to Bowen. But the statement taken from Andrews in 1944 was admissible against him and was in no way hurtful to Bowen. Andrews concededly handled for Bowen some of the funds collected from investors and for which Bowen and Andrews were accountable. Exhibit 271 shows total deposits in Andrews' bank account of $33,327.03, and total withdrawals of $32,927.52. "Withdrawals for which there is some explanation" amount to $23,717.76, and include what is entitled "Estimated and unsupported claim by Andrews to personal funds included in above deposits," amounting to $6,250. The withdrawals from Andrews' account "for which there is no explanation" amount to $2,959.76. The figure of $6,250, "claim to personal funds," was based upon the statement (Exhibit 273) taken from Andrews, and reduced the unexplained withdrawals of Andrews by that amount. In Exhibit 274, the $6,250 was listed as a disbursement, and reduced the amount shown to be unaccounted for by Bowen Industries, Inc., and was therefore of benefit to Bowen.

There is no valid reason for being captious about these summaries. They tended to show that Bowen and his co-defendants did not keep adequate books and records and that it was impossible to...