Getchell v. United States, 17338.

• Decision Date: 02 September 1960
• Docket Number: No. 17338.,17338.
• Citation: 282 F.2d 681
• Parties: Harry S. GETCHELL, Hollis Rinehart, William F. Powers and Francis E. Getchell, Appellants, v. UNITED STATES of America, Appellee.
• Court: U.S. Court of Appeals — Fifth Circuit

282 F.2d 681 (1960)

Harry S. GETCHELL, Hollis Rinehart, William F. Powers and Francis E. Getchell, Appellants, v. UNITED STATES of America, Appellee.

No. 17338.

United States Court of Appeals Fifth Circuit.

September 2, 1960.

Cody Fowler, Walter Humkey, Harvie S. DuVal, Emmett W. Kehoe, Miami, Fla., Paul Kickliter, Herbert S. Phillips, Tampa, Fla., Chester Bedell, Jacksonville, Fla., for appellants.

James L. Guilmartin, U. S. Atty., Miami, Fla., for appellee.

Before RIVES, Chief Judge, and TUTTLE and BROWN, Circuit Judges.

RIVES, Chief Judge.

This appeal is from judgments of conviction for violation of the mail fraud statute,¹ or of Section 17(a) (1) of the Securities Act of 1933² 15 U.S.C.A. § 77q(a) (1), or of both. Of the twelve-count indictment, five counts must be considered. Each of the four defendants was found guilty on Count Six. Hollis Rinehart and Harry S. Getchell were found guilty also on Count Eight. Francis E. Getchell was found guilty on both of said Counts and also on Counts One, Five and Nine.³

The prosecutions grew out of the financial collapse of a business enterprise embracing both Florida Palms, Inc., and a proposed corporation to be called Florida Alpha Pulp Corporation. Francis E. Getchell was the principal figure in the enterprise — President and director of Florida Palms, Inc., and promoter and organizer of both corporations. The enterprise was, practically speaking, "his" enterprise. Harry S. Getchell was the son of Francis E. Getchell and was named Vice President and a director of Florida Palms, Inc. He served as an aide to his father in promotional and organizational activities, and was the inventor, real or purported, of the process which the enterprise was designed to exploit. Hollis Rinehart was the personal attorney to Francis E. Getchell and was attorney for both corporations. In addition, he was named as Secretary and a director of Florida Palms, Inc., and for a certain time was named also as Treasurer of that corporation. William F. Powers was a certified public accountant who kept the books and accounts of Florida Palms, Inc. He was to become Treasurer, Comptroller, and a director of Florida Alpha Pulp Corporation upon its formation.

The alleged device, scheme, or artifice to defraud was described in Count One of the indictment and adopted by reference in each of the other Counts. False representations were allegedly made by the defendants to prospective purchasers of the stock of Florida Palms, Inc. and the pre-organization certificates for stock in the proposed Florida Alpha Pulp Corporation that the Getchells had developed a process for producing alpha-cellulose pulp from Sabal or cabbage palm trees, which are found in abundance in the Okeechobee, Florida area. The indictment charged that the defendants made a number of additional misrepresentations to prospective investors.

Counts Six and Eight charged the defendants with violations of Section 17 (a) (1) of the Securities Act of 1933. Counts One, Five and Nine charged them with violations of the mail fraud statute. A particular use of the mails was alleged in each Count as essential to constitute the federal offense charged.

Count Six, on which each of the defendants was found guilty, charged that the defendants on or about the 26th day of March, 1955, knowingly caused to be delivered by mail a preorganization subscription for the purchase of stock of the proposed Florida Alpha Pulp Corporation addressed to C. William Curtis, 344 Ribault Avenue, Daytona Beach, Florida.

In the examination of Curtis as a witness for the Government, the mimeographed preorganization subscription for the purchase of stock referred to in Count Six was identified as Government Exhibit 75. The only proof of its mailing was the testimony of Curtis that he received it "through the mail to my home address." The exhibit purports to be signed by F. E. Getchell as Trustee and by F. E. Getchell on behalf of Florida Palms, Inc. The district court admitted Exhibit 75 in evidence against F. E. Getchell, but at the time of its introduction directed that it "is not to be considered at this time against the other defendants." There was no evidence that any of the other defendants knowingly caused this exhibit to be mailed. The exhibit was never introduced in evidence against any of the defendants other than Francis E. Getchell. As to Count Six, therefore, it is clear that the district court erred in refusing to direct an acquittal of the defendants Powers, Rinehart and Harry S. Getchell.

Rinehart, Harry S. Getchell and Francis E. Getchell were convicted also on Count Eight. That Count charged that the defendants on or about the 24th day of February, 1955, knowingly caused to be delivered by mail a certain letter addressed to Edward S. Fox, 318 Vermont Avenue, Daytona Beach, Florida. A copy of this letter to Fox is as follows:

"Rinehart & Gibbs "Counsellors at Law "Ingraham Building "Miami 32, Florida "Cable Address "RINCAR "Hollis Rinehart "William W. Gibbs "February 24, 1955 "Edward S. Fox "318 Vermonth (sic) Avenue "Daytona Beach, Florida "Re: Florida Alpha Pulp Corp.

"Dear Mr. Fox:

"As you may know, Mr. Getchell is about ready to complete the incorporation of the above company. As Secretary, I am writing all subscribers to confirm their subscription, and specifically for the purpose of learning just how they wish their certificates issued.

"Please give me the above information promptly.

"Very truly yours "(s) Hollis Rinehart"

There was no proof that either or both of the Getchells knowingly caused Rinehart to mail this letter. Apparently the letter was Rinehart's own idea. Before receiving the letter, its addressee Fox had fully paid for his subscriptions, and had actually sold five hundred of the four thousand shares subscribed for by him for $4,000.00, the subscription price for the entire four thousand shares.

Count Eight charges a violation of 15 U.S.C.A. § 77q(a) (1), quoted in footnote 2, supra, and which, for convenience, is again quoted:

"§ 77q. Fraudulent interstate transactions

"(a) It shall be unlawful for any person in the sale of any securities by the use of any means or instruments of transportation or communication in interstate commerce or by the use of the mails, directly or indirectly —

"(1) to employ any device, scheme, artifice to defraud, or * * * *."

That provision is somewhat ambiguous as to the type of mailing (when, as in this case, the use of the mails is charged) that will violate the statute; that is, whether the mails must be used (1) simply in effecting the sale, or (2) in the employment of the device, scheme, or artifice to defraud. The criminal provisions of the Securities Act are certainly as broad as those of the mail fraud statute.⁴ They may be broader, depending on whether fraud or the use of the mails is considered to be the gist of the offense under the Securities Act. Professor Loss notes his view that the cases which hold that fraud is the gist of the offense seem better considered, but that "* * * there is some authority that under Section 17(a) of the Securities Act * * * the use of the mails is the `gist' of the offense — the corpus delicti — as it is under the mail fraud statute." Loss Securities Regulation, p. 877. He further cites a Commission case,⁵ as expressing the view that there is nothing in the language of the mail fraud statute or the Securities Act "which would justify the requirement that the fraud or device must be more intimately related to the use of the mails * * * under one statute than under the other."

That question of statutory construction need not be decided in this case, for Count Eight places the phrase "by the use of the mails" considerably removed from "the sale of securities," but immediately adjacent to "willfully employ said scheme, and artifice to defraud,"⁶ so that the ordinary and natural meaning of the charge is that the defendants did "by the use of the mails, willfully employ said scheme and artifice to defraud."

Rinehart's letter contained no offers, promises or representations. It employed neither directly nor indirectly any device, scheme, or artifice to defraud. Compare Parr v. United States, 363 U.S. 370, 80 S.Ct. 1171, 4 L.Ed.2d 1277. It was, at most, "merely incidental and collateral to the (alleged) scheme and not a part of it." Kann v. United States, 1944, 323 U.S. 88, 95, 65 S.Ct. 148, 151, 89 L.Ed. 88. In our opinion, the district court should have directed a judgment of acquittal of each of the defendants as to Count Eight. The judgments of conviction of Powers, Rinehart and Harry S. Getchell must therefore be reversed. The judgment of conviction of Francis E. Getchell alone remains to be considered.

The enterprise in question dates back to the summer of 1953, when Francis E. Getchell arrived in the town of Okeechobee, Florida. The purpose of his visit, as disclosed soon after his arrival, was to promote and organize a corporation which would manufacture paper pulp from the cabbage palm. Such a venture was, so far as the record discloses, entirely novel, but it promised to be extremely lucrative if successful.⁷ And Getchell maintained that such success was possible. His optimism in this regard apparently stemmed from his belief in a process on which he had been working for many years and on which his son, Harry Getchell, or at least so Getchell contended, made significant advances.

Immediately upon his arrival, Getchell set out to get his enterprise started. His first step was the execution of a number of contracts with the ranchers living in the area whereby he obtained the right to cut and remove cabbage palm trees from their land. With the help of Jackson C. Coker, a director of the local Chamber of Commerce, whose acquaintance he made shortly after his arrival, Getchell eventually obtained cutting rights to some 449,000 acres of land from seventeen different persons.

At this point, Getchell, with the assistance of his...