Coleman v. United States, 12022.

• Decision Date: 12 May 1948
• Docket Number: No. 12022.,12022.
• Citation: 167 F.2d 837
• Parties: COLEMAN et al. v. UNITED STATES.
• Court: U.S. Court of Appeals — Fifth Circuit

167 F.2d 837 (1948)

COLEMAN et al. v. UNITED STATES.

No. 12022.

Circuit Court of Appeals, Fifth Circuit.

May 12, 1948.

James V. Allred, of Houston, Tex., and Ronald Smallwood, of Harlingen, Tex., for appellants.

Brian S. Odem, U. S. Atty., and William R. Eckhardt, Asst. U. S. Atty., both of Houston, Tex., for appellee.

Before SIBLEY, McCORD, and LEE, Circuit Judges.

LEE, Circuit Judge.

Appellants were tried under an indictment containing ten counts, each of which charged the mailing of a particular letter in furtherance of a scheme to defraud in violation of Section 338, Title 18 U.S.C.A. The jury found both guilty on all counts except Count 6, upon which, by agreement, a directed verdict of not guilty was returned.

In 1932, appellants, Negroes, husband and wife, became interested in the care of unfortunate and underprivileged Negro children in the Texas Rio Grande Valley. In 1933, they published in a local paper a letter dealing with the need for an orphans' home and training school for such children. In 1934, appellants incorporated the Valley Orphanage and Vocational Training School, with a charter from the State of Texas. Appellants contributed their own properties and time to the orphanage and for eight years conducted it as best they could with the fruits of their own labor and occasional donations. In 1941, they were approached by one W. F. Pohlen, an advertising man who specialized in conducting fund-raising campaigns for charitable organizations, and as representatives of the orphanage they entered into a two-year contract with Pohlen to conduct a fund-raising campaign by mail. It was at this time that the Government claims that they conceived their scheme to defraud. The campaign conducted by Pohlen brought in a good deal of money, the greater portion of which was received by or paid to Pohlen under his contract. In 1943, appellants contracted with Pohlen to purchase his mailing lists, office machinery, and the equipment used in the preparation of campaign letters, the purchase price to be paid from moneys received as contributions. Pohlen received over $14,000 in payment under this second contract, and, when in March, 1944, the final payment was made to him, all of the equipment, etc., was shipped to the orphanage. From that time on, with the possible exception of the Christmas 1944 letter, all begging letters were prepared at and sent out from the orphanage, and the appellants, for the orphanage, received whatever money came in. No records appear to have been kept by appellants or by the orphanage which would form the basis for any kind of audit to establish the actual receipts or expenditures of all of these moneys by the corporation. There is enough evidence in the record to show that a scheme to defraud may have existed, and appellants do not deny this. But they contend that they themselves acted in good faith, that the representations made in the name of the Santa Rosa Orphanage¹ were not intended to deceive and were at most no more than exaggerated assertions of the institution's need. With that contention as their basic premise, they appeal chiefly on two grounds: (1) that a great deal of evidence highly prejudicial to their cause was admitted over objection, to show intent to defraud by use of the mails; and (2) that the trial court in charging the jury (a) gave charges and (b) refused to give requested charges which, in both instances, affected their substantial rights and were highly prejudicial.

As in most mail fraud cases, the question of intent here is paramount because the good faith of a defendant in a mail fraud case is ordinarily a complete defense. Gold v. United States, Huston v. United States, 8 Cir., 36 F.2d 16. Good faith and intent are questions for the jury, but a distinction must be drawn between intent to defraud, and carelessness or improvidence. McDonald v. United States, 6 Cir., 241 F. 793. "Often the line between honest belief and purposeful misrepresentation is fine and indistinct, between the two, however, lies guilt or innocence, and where the evidence is evenly balanced between guilt and innocence, a conviction cannot stand." Estep v. United States, 10 Cir., 140 F.2d 40, 42.

In the voluminous record (some 2,000 pages long) there is evidence of possible misappropriation by appellants of funds received from the campaign in such instances as the purchases of certain parcels of land, and the purchases of a second-hand Cadillac car and of a second-hand Chrysler. There was testimony from which the jury could infer that the appellants had converted funds to their own use. On the other hand, there was testimony to explain or justify most of those purchases. Appellants testified that they put in more than they took out. In the absence of any accurate or detailed records of income and expenditures kept by the appellants as managers of the orphanage, the question would necessarily have to be resolved by the jury upon the basis of their view of the credibility of the witnesses, and this in turn would be largely influenced by the evidence as a whole. If the evidence of conversion had been all, the conviction could not successfully be questioned. But there was also admitted other evidence of which appellants complain. Government counsel were permitted over strong objection to show at great length that the appellants had no license as was required by Texas law to operate an orphange or to solicit funds for such a project; that appellants had failed to file income tax returns for the orphanage or in the alternative to file claim for its exemption as a charitable institution; and that appellant M. Coleman had threatened bodily harm to the receiver appointed by the State Court for the orphanage in other proceedings. The question is whether such evidence of misconduct was admissible to show the requisite intent to defraud, and, if not, whether the error was one which affected appellants' substantial rights.

Rule 52(a) of the Federal Rules of Criminal Procedure, 18 U.S.C.A. Following section 687, provides that any error, defect, irregularity, or variance which does not affect substantial rights shall be disregarded. The rule is almost a restatement of the rule on appeal. Section 391, Title 28 U.S.C.A. reads as follows:

"* * * On the hearing of any appeal, * * * the court shall give judgment after an examination of the entire record before the court, without regard to technical errors, defects, or exceptions which do not affect the substantial rights of the parties."

The argument that evidence of collateral unlawful acts is admissible to prove intent is "based purely on the doctrine of chances, and it is the mere repetition of instances, and not their system or scheme, that satisfies our logical demand. Yet, in order to satisfy this demand, it is at least necessary that prior acts should be similar. Since it is the...