Hendrey v. United States

• Decision Date: 04 April 1916
• Docket Number: 2546.
• Citation: 233 F. 5
• Parties: HENDREY et al. v. UNITED STATES.
• Court: U.S. Court of Appeals — Sixth Circuit

233 F. 5

HENDREY et al. v. UNITED STATES.

No. 2546.

United States Court of Appeals, Sixth Circuit.

April 4, 1916

Caruthers Ewing, of Memphis, Tenn. (E. G. McAdams, of Oklahoma City Okl., and Ralph Davis, of Memphis, Tenn., of counsel), for plaintiffs in error.

Hubert F. Fisher, U.S. Atty., and W. D. Kyser, Asst. U.S. Atty both of Memphis, Tenn.

Before WARRINGTON, KNAPPEN, and DENISON, Circuit Judges.

DENISON Circuit Judge.

The four plaintiffs in error, Hendrey, Davis, Brooks and Wynne were, jointly with five others, Cooke Toenges, Chick, Bonds and White, indicted in the court below, for violating section 215 (using mails to defraud, R.S. Sec. 5480) and section 37 (conspiracy, R.S. Sec. 5440), of the Criminal Code (Comp. St. 1913, Sec. 10,201). ^[1] fraudulent banking scheme, and, in each count, a different letter or paper sent through the mails in furtherance of the scheme. The fifth count charged a conspiracy to violate the law by the same mailing which was the basis of the third count. The jury acquitted White on all counts. Toenges and Chick were generally acquitted by direction of the court, and Cooke escaped by a nolle pros. The jury found no one guilty under count 1, but convicted Hendrey under counts 2, 3, 4 and 5, and the other four respondents on counts 3, 4 and 5. The court arrested the verdicts of guilty on the second and third counts; Bonds absconded; and the four plaintiffs in error were sentenced each to three years' imprisonment on the fourth count, and to two years' additional imprisonment on the fifth count, and to pay fines of $1,000 each under each of these two counts

This situation leaves for consideration only the fourth and fifth. The substantive offense now involved, and denounced by section 215, in its present form, is the depositing or causing to be deposited in the mails a letter or advertisement in execution or attempted execution of an existing scheme or artifice to defraud. The specific act, upon which the fourth count rests, is the mailing, at Memphis, of a copy of the Memphis Commercial Appeal, of July 1, 1911, addressed to J. E. Patterson, of Columbus, Miss., and containing the semiannual statement of the All Night and Day Bank of Memphis, as required by the banking laws of Tennessee (Shan. Code, pt. 1, tit. 14, c. 7).

For present purposes, we assume, and without intending to decide, that whoever publishes a bank statement in a newspaper may be thought to 'cause to be placed' in the post office an 'advertisement,' if copies of that newspaper regularly go to subscribers through the mails. The course of the trial below indicates that defendants' counsel raised no such question, even if it does not show their practical concession that the crime could be so made out; we see no occasion to look into a question which has been given that aspect.

We observe that most of the respondents' acts involved in the testimony and relied upon to prove a scheme to defraud were apparently violations of the banking laws of Tennessee and of the other states where the different banks were located, and that since the bank statement of the fourth count and the letters of the other counts were incidental to the ordinary or the required conduct of the banks, the practical effect of this situation is to call upon the laws or the courts of the United States to punish citizens of a state for violating laws of that state. The peculiarities of the present case make it a very extreme instance of such resort to the federal law; and yet, since the amendment to section 215, it is entirely clear that the scheme to defraud need have no original relation whatever to the laws of the United States, and that the mere incidental or unpremeditated use of the mails may give to the federal courts the trial of any state law offense which involves defrauding another person-- this result being accomplished by the broad definitions of 'defraud' and 'scheme or artifice' which are now accepted. Bettman v. U.S., 224 F. 819, 140 C.C.A. 265; Tucker v. U.S., 224 F. 833, 140 C.C.A. 279. If it be true, as is sometimes thought, that there was no deliberate intent to extend so far the federal criminal jurisdiction, restriction can come only from Congress.

Taking up the fourth count: This newspaper deposit in the mails is said to have been 'for executing and effecting said scheme and artifice to defraud'; and so it must first be determined what is the 'said' scheme or artifice to which this clause refers. This question is exceedingly difficult to answer. This count is reproduced in the margin ^[2] (including in brackets the matter also comprised in the fifth count).

A careful reading of the nearly 2,000 typewritten pages of the trial record discloses no clear and consistent theory as to the identity of the fraudulent scheme in connection with which the respondents were on trial; the proceedings during the two weeks of trial indicate fluctuating views as to what the real issue was; and so it becomes additionally necessary to find and identify this scheme in the indictment. This document covers three subjects: Recitals of the scheme, statements of what was done pursuant thereto and denials of the truth of the things assumed in the scheme. The first or main scheme recited seems to be: (1) To organize or otherwise gain control of six banks in four states, which banks (a) should not be financially responsible or able to do a legitimate banking business, (b) should be allied together under control of one or another respondent, and operated in the interest of each other by colorable, mutual transfer of securities, and (c) three of which should issue false and fraudulent certificates of deposit; and (2) to hold out all the banks as responsible and to solicit and receive deposits therein. The statement of acts done pursuant to the scheme recites the organization of seven banks (including the six first named), one or more of the defendants being connected with and in control of each bank, but there being no statement that all the defendants had to do with any one bank. By way of denial, the indictment then alleges that at the different times involved it was a fact, known to respondents, that these banks were not 'bona fide, reliable, legitimate and financially responsible banks. ' It then returns to what is, in effect, though not in form, a further recital of the scheme, and says that, at the time of soliciting for the Memphis bank, the deposits of Patterson and the public, by the statement of July 7, 1911, it was intended by defendants fraudulently to convert such deposits to their own use. Obviously, there can be no complete scheme to defraud, unless some person or class is to be defrauded, and the only persons who could be defrauded by the organization and maintenance of a bank which was 'not responsible and legitimate' would be those who bought its stock at a price which was too high, or became its creditors when it was (or became) insolvent. Memphis bank and those of another bank-- for example, the one at Kansas City--is not apparent. In what manner the maintenance of the Memphis bank as a going concern, when it should have been closed, and the receipt therein of deposits which it was a fraud upon depositors to accept, would defraud depositors in the Kansas City bank, is not revealed. So, only in the most indirect way, if at all, can it be said that mailing this statement to Patterson was 'in the execution or attempted execution' of any fraudulent plan regarding the Kansas City bank, or the Oklahoma City bank, or the Little Rock bank, or the Trust Company of Hot Springs, or of Siloam Springs, or of Memphis; and since the fraudulent scheme described in the indictment must be that identical scheme in the execution of which the advertisement was mailed, we are persuaded toward the conclusion-- even if not surely led thereto-- that this prosecution must rest on such parts of the recited general scheme as were directed against the solvency and the good faith existence of the Memphis bank. Reference to other varying and fraudulent schemes, having to do with all the banks or having to do with the Memphis bank only, can be extracted from this indictment, but none of these schemes could be carried into execution or attempted to be-- save in the most remote and consequential way-- by mailing to Patterson the copy of the Memphis newspaper. The scheme or artifice in furtherance of which this semiannual statement was sent to him must have been something which could be furthered or which defendants thought could be furthered by such sending.

However if it be assumed that a construction is possible which would make the broad, general, four-state scheme the one upon which the indictment depends, the prosecution is no better off. Upon that theory, it would not be supported by any evidence justifying conviction. Davis had no connection with the organization or management of any bank, excepting that at Oklahoma City; nor did Bonds with any excepting the one at Kansas City (and one of the small trust companies); while Hendrey, Brooks and several other respondents had to do only with the Memphis bank (and its subsidiary trust company). There is nothing distinctly and fairly tending to show that any two respondents participated in any scheme to organize or acquire or to control, in a fraudulent way, the seven banks named, or any two of the chief banks in the list. Association merely between one of the main banks and one of the trust companies falls so far short of the general, seven-member plan as to be an essentially different thing. The evidence is convincing that each man, Davis, Bonds and Hendrey, was primarily and substantially engaged in operating his own bank; that each was willing to get from the others favors for himself or for his bank; and that these...