Federman v. United States, 4164.

• Decision Date: 18 January 1930
• Docket Number: No. 4164.,4164.
• Citation: 36 F.2d 441
• Parties: FEDERMAN v. UNITED STATES.
• Court: U.S. Court of Appeals — Seventh Circuit

36 F.2d 441 (1929)

FEDERMAN v. UNITED STATES.

No. 4164.

Circuit Court of Appeals, Seventh Circuit.

December 4, 1929.

Rehearing Denied January 18, 1930.

Joseph G. M. Browne, of Brooklyn, N. Y., and Solon J. Carter, of Indianapolis, Ind., for appellant.

Albert Ward, of Indianapolis, Ind., for the United States.

Before ALSCHULER, EVANS, and PAGE, Circuit Judges.

PAGE, Circuit Judge.

Five persons were charged, in four counts of an indictment, with using the mails in a scheme to defraud and in the fifth count with a conspiracy. Appellant, Federman, the defendants Cowgill and E. Porter Ayres, were convicted on the first four counts. Defendants Edwin B. Ayres and Walter W. Bray were acquitted. Federman only appeals.

The issues relied on are: (a) Failure to prove the scheme to defraud; (b) failure to prove that appellant used or caused the mails to be used; (c) error in admitting evidence; (d) erroneous refusal to strike out testimony; (e) prejudice to appellant by reason of evidence admitted under the conspiracy count, on which he was acquitted.

Henry G. Steinbrenner, who was indicted but died before the trial, purchased, in bankruptcy, the assets of the defunct Burdick Tire & Rubber Company, at Noblesville, Ind., and, in connection therewith assumed a receiver's debt to the Huntington County State Bank of $55,000. Although the evidence is not very clear, it seems that, to settle the $55,000 indebtedness, and for other purposes not fully disclosed, nine $10,000 notes were given by the Steinbrenner Rubber Company to Edwin B. Ayres, who was indicted and acquitted in this case, and Wesley W. Hawley, officers of the Huntington County State Bank. Mr. Steinbrenner put up some $67,000 of his personal bonds to secure those notes. Steinbrenner got stock of the corporation to the amount of those notes, and, although it seems probable that part of the notes were paid by the sale of the Steinbrenner bonds, yet it also appears that the balance was paid by the corporation. It does not appear what other consideration Steinbrenner paid for the Burdick assets, but he sold those assets to the corporation and received therefor the whole of the common capital stock of the corporation in payment. It does not appear that Steinbrenner put anything into the corporation other than as above stated, or that it had any other assets, except merchandise purchased, which was either paid for out of the corporation assets or not at all. When merchandise was sold by the corporation, trade acceptances were taken therefor, and, because of business conditions, many of them were not paid as they matured, and, not having money to conduct the business, the evidence shows appellant devised a scheme to finance the business until, as is claimed, conditions became better and they could refinance the business.

The corporation had many banks where it did business, among which were the Guardian National Bank and the Central Trust Company, of Chicago, and the First National Bank, of Noblesville, Ind., of which defendants Cowgill and Bray were, respectively, cashier and assistant cashier, and the Huntington County State Bank, of Huntington, Ind., of which defendants Edwin B. Ayres and E. Porter Ayres were, respectively, president and cashier.

The scheme devised by appellant was made possible by the fact that it took about four days to clear a check from one bank to another. Taking advantage of that fact, the corporation drew checks upon one bank, where it had no funds or insufficient funds, in favor of one of its other banks, and, before the check reached the drawee bank for payment a check was drawn upon another bank in favor of the...