Frank v. United States, 4960.

• Decision Date: 29 April 1955
• Docket Number: No. 4960.,4960.
• Citation: 220 F.2d 559
• Parties: Ben H. FRANK, Appellant, v. UNITED STATES of America, Appellee.
• Court: U.S. Court of Appeals — Tenth Circuit

220 F.2d 559 (1955)

Ben H. FRANK, Appellant, v. UNITED STATES of America, Appellee.

No. 4960.

United States Court of Appeals, Tenth Circuit.

March 16, 1955.

Rehearing Denied April 29, 1955.

COPYRIGHT MATERIAL OMITTED

John B. Ogden, Oklahoma City, Okl., for appellant.

Paul W. Cress, U. S. Atty., Oklahoma City, Okl., and William H. Timbers, General Counsel, Securities and Exchange Commission, Washington, D. C. (H. Dale Cook, Asst. U. S. Atty., Guthrie, Okl., Elizabeth B. A. Rogers, Washington, D. C., and Leo Fred Wyrick, Attys., Securities and Exchange Commission, Fort Worth, Tex., on the brief), for appellee.

Before MURRAH and PICKETT, Circuit Judges, and SAVAGE, District Judge.

SAVAGE, District Judge.

The Appellant, Ben H. Frank, appeals from a conviction on the first five counts of an eleven count indictment which charges using the mails in a scheme to defraud in the sale of securities in violation of Section 17(a) of the Securities Act of 1933, 15 U.S.C.A. § 77q(a). Counts 6 to 11 inclusive, which charged Frank with using the mail for the purpose of executing a scheme to defraud in violation of the mail fraud statute, 18 U.S.C. § 1341, were dismissed, one by the government for lack of evidence and the others by the court on the ground that the mailing of the letter alleged in each count occurred after the investment had been made.

Frank was found guilty by a jury verdict of having, from about November 1, 1949, to about January 14, 1952, made use of the mails in carrying out a scheme to defraud by making false and fraudulent representations and by failing to state material facts in the procurement of funds by sale of securities for the drilling of oil wells. Continuously since 1939, Frank has been engaged in the promotion of oil drilling ventures financed by funds obtained from investors. His efforts to complete a commercial producing oil well have not met with success. The funds obtained from investors for the purpose of drilling wells have been his only source of income.

In soliciting investments, he has exploited an alleged oil finding device which he calls a "magnetic logger", but which in common parlance is referred to as a "doodle bug".

In 1946 or 1947, he used funds obtained from investors other than those named in the indictment to commence the drilling of a well known as Evans No. 1 on a 160 acre tract of land in Muskogee County which one of his controlled companies had acquired.

His conviction is based upon his scheme to solicit loans to complete the drilling of the Evans No. 1 well and to be used in the drilling of additional wells principally upon the 160 acre tract which Frank represented to be proven acreage. During the period involved investors were solicited directly and through newspaper advertisements and induced to invest in the project by reliance upon many alleged misrepresentations. The investor received on each $150 invested a ten-year note for that amount upon representation that the loan would be repaid even if the oil venture was unsuccessful. In addition, the investor received a contract which provided for an option to purchase for $1.00 a 2/40ths of a 1/16th working interest in the tract.

The investors were solicited from time to time to make further investments. Three letters from Frank to O'Connor were made the basis for Counts 1, 2 and 5 of the indictment. After receipt of each of these letters, dated respectively April 16, May 2 and May 28, 1951, O'Connor was solicited and induced to make separate investments. He received another letter dated January 14, 1952, but did not make another investment. The basis of Counts 3 and 4 are letters from Frank to Dennis who made separate investments after the receipt of such letters.

The first two misrepresentations alleged in the indictment pertained to the magnetic logger. The proof that such representations were made is found in the prospectus which Frank admitted using both by mailing and by way of demonstrations in making sales. In this prospectus prepared by Frank, it is stated:

"After ten years of work, and thousands and tens of thousands of experiments, Ben H. Frank has perfected what he calls a Magnetic Logger. A machine or device by means of which he can locate an oil pool, tell approximately the depth of the producing saturated Oil Sands to within 25 to 150 feet, and roughly gauge the size of the well when fully and properly completed, all before the well is drilled or even started.

"While perfecting this device, Ben H. Frank made over 100 sworn reports on wells before they were drilled. About 94 out of 100 of these reports were approximately correct. On the tenth year, Ben H. Frank made the last discovery which made this practically 100% sure. He spent over ten years and over $100,000 in experimentation to get it. While mistakes can still occur, due to the human factor, in this machine or any other; as for instance when the operator of a typewriter or adding machine hits the wrong key, mistakes must occur; yet if used carefully and properly, the results being as scientific and sure as the Laws of Nature and Physics, should always be correct and accurate."

It is also alleged in the indictment that Frank falsely represented that the Evans No. 1 well had encountered oil sands at the approximate depths of 420, 860 and 1040 feet; that eight oil saturated sands were located at various depths and that 32,640,000 barrels of oil could be recovered from the 160-acre tract. It is further charged in the indictment that Frank falsely stated that a $300 investment would return a profit of approximately $200,000. These representations are likewise established by statements appearing in the prospectus. Other misrepresentations are alleged in the indictment which need not be detailed.

In addition, material omissions are charged in the indictment based on Frank's alleged failure to state that at least five dry holes had been drilled on locations where the magnetic logger had forecast production; that 23 dry wells had been drilled within an eight-mile radius of the tract and that most of the sands which Frank represented to be underlying his Muskogee County leases had been encountered in the drilling of such dry holes.

There was no controversy of consequence with respect to material representations alleged to have been made by Frank. Conceding in the main that representations were made by him as charged and proved by the government, he bases his defense upon the twofold premise that such representations were true or, at least, were made in good faith and believed by him to be true.

Frank does not contend that the evidence is insufficient to support the conviction, but he seeks reversal because of alleged errors committed by the trial court in the admission and exclusion of evidence, and in the instructions to the jury, and because of alleged prejudicial conduct of the presiding judge during the trial.

The wholesale attack made on the evidentiary rulings of the court may be adequately disposed of by discussing together objections of a similar nature. Some objections are so patently frivolous that they will not be noticed.

The testimony of certain investor witnesses is said to be incompetent and prejudicial because it pertained to mailings after investments had been made. These objections relate to an identical letter dated January 14, 1952, received by numerous investors. Frank claimed that the court should have directed the jury not to consider the testimony of witnesses who received this letter, the mailing of which was the basis for the dismissed mail fraud counts. His argument is based upon the assumption that this letter and the testimony of investor witnesses in connection therewith became inadmissible for all purposes when it developed that the mailings of that letter were insufficient to establish violations of the Mail Fraud Statute. No authorities are...