Henderson v. United States

Citation202 F.2d 400
Decision Date27 February 1953
Docket NumberNo. 11368.,11368.
CourtUnited States Courts of Appeals. United States Court of Appeals (6th Circuit)

C. P. J. Mooney and Eugene P. Boyd, Memphis, Tenn., on the brief, for appellant.

John Brown, Thomas C. Farnsworth and Edward N. Vaden, Memphis, Tenn., for appellee.

Before SIMONS, Chief Judge, and McALLISTER and MILLER, Circuit Judges.

Rehearing Denied April 30, 1953. See 204 F.2d 126.

MILLER, Circuit Judge.

Appellant, J. Stacey Henderson, was indicted, together with J. Lewis Rout and Guy L. Parker, under a 10-count indictment, four of which counts were under the Mail Fraud Statute, § 1341, Title 18, U.S.Code, five of which counts were under the Security and Exchange Statute, § 77, Title 15 U.S.C., with the remaining count being a conspiracy charge under § 371, Title 18, U.S.Code. Appellant was tried alone, a severance being granted as to Rout and Parker. A jury found appellant guilty under Count 1 of the indictment, which involved the Mail Fraud Statute, and not guilty under the remaining nine counts. He was sentenced to five years' imprisonment and a fine of $1,000, from which judgment this appeal was taken.

Count 1 of the indictment charges that from June 9, 1948, and continuing up to the date of the filing of the indictment, namely, September 6, 1950, the defendants devised a scheme and artifice to defraud various parties named therein and others too numerous to set out, being persons who could be induced to invest in fractional undivided interests in oil and gas rights, the scheme in substance being as follows. Henderson was an oil well operator engaged in the promoting and drilling of exploratory wells for oil and gas; that he acquired an oil and gas lease covering 33.45 acres of land in Caddo Parish, Louisiana, called Tract No. 1, which he divided into fractional undivided interests or units of 1/32nd each, which were offered to members of the public at a price of $1,000 per unit; that thereafter Henderson also acquired an oil and gas lease on 5.13 acres of land adjoining the 33.45 acres in Caddo Parish, Louisiana, called Tract No. 2, which he divided into fractional undivided interests or units of 1/64th each, which were offered to the public at a price of $1,000 per unit; that the defendants thereupon engaged in intensive sales campaigns to distribute the units to the public generally, and for the purpose of deceiving and misleading investors and to induce them to invest in said oil and gas interests, made divers false and fraudulent representations and promises, which they knew to be false when made, which representations were (a) that an oil well being drilled by Henderson on Tract No. 1 was located about 50 feet away from a well which had been drilled by the Gulf Refining Company, which was completed with an initial production of 1,600 barrels per day, but due to faulty cementing, the well blew out and was lost, (b) that as a result of said blowout, the landowner sued the Company for negligence on account of the faulty cementing of the well, with the result that the lease was involved in litigation for a number of years, and because of which no further effort was made by the Gulf Refining Company to develop the property, (c) that when the litigation was settled a political friend of Henderson acquired this valuable lease and Henderson was able to purchase it from him for the sum of $6,500, (d) that the pool had been undrained since the blowout and lawsuit, that oil was still under Tract No. 1, and it was only necessary to drill a well and provide the necessary equipment to produce it, (e) that an oil and gas lease could be purchased on land adjoining Tract No. 1 for the sum of $250 and that if this sum were advanced to Henderson prior to the bringing in the well on Tract No. 1 this money would be used by Henderson for the purchase of said lease, (f) that Henderson's well on Tract No. 1 had come in in a big way, and that information gained in drilling this well had made it certain that the mother pool was under Tract No. 2 where he was to drill a new well, and that he would guarantee that the new well would produce 300 to 1,000 barrels of oil per day, and (g) that he would guarantee that the production in the well on Tract No. 2 would double the production of the well on Tract No. 1, and for that reason there would be 64 undivided interests sold at $1,000 each in the well on Tract No. 2, whereas he was limiting the well on Tract No. 1 to 32 undivided interests; and that for the purpose of executing the scheme and artifice the defendants on or about November 27, 1948, knowingly caused to be delivered by mail, according to the directions thereon, a check dated November 27, 1948, in the amount of $500 drawn by J. W. Keller on the Hardeman County Savings Bank, enclosed in an envelope addressed to Mr. Jack Pirtle, c/o Hi-Hat Cafe, Memphis, Tennessee.

Appellant's defense was that he acted in the utmost good faith in these transactions, and, based upon all the information coming into his possession, he thought there was an excellent opportunity of securing production on both the leases; that his obligations under his contracts with the investors were to drill the designated test wells which obligation he fully performed; and the fact that the leases failed to produce oil or that the appellant did not spend all of the money received from the sale of the undivided interests in performing his drilling operations did not constitute the venture a scheme or artifice to defraud. With particular reference to the Keller transaction set out in Count No. 1, he claimed that Keller was a volunteer investor to whom no representations had been made; that no misrepresentations of fact had been made with respect to Tract No. 2 in which Keller bought his undivided interests; and that the appellant did not in any way cause Keller to mail his check in payment of his undivided interest in Tract No. 2.

On this appeal, appellant contends that it was error on the part of the District Judge to overrule his motion for a judgment of acquittal made at the close of the Government's evidence and renewed at the conclusion of all the evidence, in that there was no substantial evidence that he was guilty of any scheme to defraud as charged, or that the use of the mails in the Keller transaction was for the purpose of executing the alleged scheme, or that any of the alleged misrepresentations were made with the intent to influence, or did in fact have any influence on Keller. He also complains of the admission of incompetent evidence to his substantial prejudice. For the purposes of determining whether the evidence was sufficient to support the conviction, we must take that view of the evidence, with inferences reasonably and justifiably to be drawn therefrom, most favorable to the Government, and to determine therefrom whether the finding was supported by substantial and competent evidence, and where there is substantial and competent evidence, which if believed, supports the conviction, the appellate court can not weigh the evidence or determine the credibility of witnesses. Direct proof of willful intent is not necessary. It may be inferred from the acts of the parties, and such inference may arise from a combination of the acts, although each act standing by itself may seem unimportant. It is a question of fact to be determined by the jury from all the circumstances. Battjes v. United States, 6 Cir., 172 F.2d 1, 5.

We are of the opinion that there was substantial evidence on the part of the Government tending to show a scheme or artifice to defraud. Evidence was introduced showing that Henderson, with some unfavorable experience in the promotion and drilling of exploratory wells for oil, and without funds, moved to Memphis in May or June, 1948, where he undertook to meet and interest certain people in an oil lease held by him. This lease on a 33.45-acre tract in Caddo Parish, Louisiana, was acquired by Henderson from C. B. Lambert on August 14, 1948, for approximately $500. Henderson told several investors that he was able to secure the lease through a political friend for $6,500. He also told investors that this tract had produced a 1,600-barrel well a day, but that litigation had tied up the tract for about 20 years. There was evidence showing that in 1908, the Gulf Refining Company had a lease of 245 acres which included the two tracts herein involved, and that during the next two or three years they drilled wells on the entire tract with four or five located on the 33-acre tract. These wells were pumped out and thereafter abandoned by Gulf Refining Company by 1914. There was evidence negativing any litigation regarding this tract of land. Henderson's operations were a straight drilling operation and not a secondary recovery or other operation usually used to secure oil from depleted fields. The marketing of the 32 units would produce about $30,000. Henderson told Rout that it would cost about $5,000 to get the hole drilled and estimated that there was a possible profit of $20,000 out of the first tract. He stated to Rout "there was money to be made on top of the ground as well as from under it," and that in the event of a dry hole he could charge that to poor geology or lay it on the geologist. There were sold 34 ¼ units of 1/32nd each, resulting in an oversale of the existing units. Henderson knew it was oversold. This resulted in Henderson retaining no interest in this tract.

Operations on Tract No. 1 started in August, 1948. After drilling about 800 feet, material difficulties were encountered and operations were abandoned on that particular well and were moved over a few hundred feet to another location where Henderson drilled another well to 2,350 feet. Oil was struck, the flow of which quickly decreased in volume. Over a period of time there was a total production of approximately 100 barrels of commercial oil, and operations on Tract No. 1 were...

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