Isaacs v. United States

Decision Date20 April 1962
Docket Number16663,16662,No. 16655,16669.,16656,16655
PartiesFred ISAACS, Appellant, v. UNITED STATES of America, Appellee. Harry H. ISAACS, Appellant, v. UNITED STATES of America, Appellee. Fred A. OSSANNA, Appellant, v. UNITED STATES of America, Appellee. Benson M. LARRICK, Appellant, v. UNITED STATES of America, Appellee. Earl A. JEFFORDS, Appellant, v. UNITED STATES of America, Appellee.
CourtU.S. Court of Appeals — Eighth Circuit



Melvin H. Siegel, Minneapolis, Minn., for Fred and Harry H. Isaacs. Leonard, Street & Deinard and Gary J. Meyer, Minneapolis, Minn., were with him on the brief.

S. P. Gislason, New Ulm, Minn., for Fred A. Ossanna and Ray G. Moonan, Minneapolis, Minn., was with him on the brief.

Robert J. King, Minneapolis, Minn., for Benson M. Larrick and Hvass, Weisman & King, Minneapolis, Minn., were with him on the brief.

Harry H. Peterson, Minneapolis, Minn., for Earl A. Jeffords, and Donald K. Smith, Minneapolis, Minn., was with him on the brief.

Hyam Segell, Sp. Asst. to the Atty. Gen., for appellees and Miles W. Lord, U. S. Atty., Minneapolis, Minn., was with him on the brief.

Before JOHNSEN, Chief Judge, and VAN OOSTERHOUT and MATTHES, Circuit Judges.

MATTHES, Circuit Judge.

Appellants Fred A. Ossanna, Benson M. Larrick and Harry H. Isaacs were found guilty by a jury of mail and wire fraud violations, transporting property fraudulently obtained in interstate commerce and of a conspiracy to commit offenses against the United States; appellants Fred Isaacs and Earl A. Jeffords were found guilty of a conspiracy. The trial took place in the United States District Court, District of Minnesota, Fourth Division, with the Honorable Gunnar H. Nordbye presiding. Judgments of convictions were entered on the jury's verdicts. Separate appeals have been taken but all appeals will be disposed of in one opinion.

Preliminarily, a brief résumé of the background and the factual situation forming the genesis of the prosecution will be of assistance to a clearer understanding of the issues presented on appeal.

The Twin City Rapid Transit Company was the parent company of the following subsidiaries: Minneapolis Street Railway Company, the St. Paul City Railway Company, the Minneapolis and St. Paul Suburban Railroad Company, Twin City Motor Bus Company, the Minnetonka and White Bear Navigation Company, the Rapid Transit Real Estate Corporation, and the Transit Supply Company.1

The parent company was established in 1891, its stocks and securities have been listed on the New York Stock Exchange since 1895, and its approximately 450,000 shares of common stock are held by approximately 3,000 shareholders situated throughout the United States and Canada.

Prior to January 1, 1950, the Company operated an electric street railway system over approximately 430 miles of street railway lines in the Twin City area of Minneapolis and St. Paul, Minnesota, and the suburbs thereof. The Company generated and distributed the electricity necessary in the operation of the system. It owned power plants where electricity was generated, electrically operated streetcars, an overhead system of cables, trolley wires and poles, the track system of steel rails, streetcar barns, real estate and an underground transmission system, consisting of copper wires encased in lead cables laid in tunnels which generally followed street patterns throughout the Twin City area.

Before 1949 the Company's management was under the presidency of D. J. Strouse. One Charles Green, a substantial shareholder in the Company, was elected president of the Company in November, 1949. Fred A. Ossanna, one of the appellants herein, was then appointed general counsel of the Company.

Green's duration as president was short-lived. Apparently because of procedures he employed strife developed among members of the board of directors, with Ossanna becoming the head of one faction and Green leading the other faction. Ossanna organized a stockholders' committee and conducted a proxy campaign which brought about the ouster of Green. He was replaced by Emil B. Aslesan, who served from March, 1951, to September, 1951, when Ossanna became president.

The Ossanna administration embarked upon a program of rapid conversion from streetcars to busses. This program caused a vast amount of property previously utilized in the operation of the street railway system to become surplus, and these prosecutions are based upon the procedures employed in the disposition of the surplus property or in connection with such disposition.

A brief statement of the occupation of the parties and their relationship, if any, to the Company should be made before other aspects of the trial proceedings are considered.

Fred A. Ossanna has been a lawyer since 1921 and prior to becoming associated with the Company, practiced his profession in Minnesota; at the time he organized the stockholders' committee in 1951, Ossanna was the direct and beneficial owner of 200 shares of the preferred stock and 11,500 shares of the common stock of the Company. He was president of the Company during the period of the alleged violations.

James H. Towey became a member of the board of directors with the advent of the Ossanna administration, and was secretary and treasurer of the Company during the period of the alleged violations. For a brief period of time he was in charge of the scrap program. He was a member of the Ossanna stockholders' committee organized for the proxy campaign and owned 170 shares of preferred and 5,700 shares of the common stock of the Company.

Benson M. Larrick with prior experience in the maintenance and operation of busses, was employed by the Company in 1952 and was placed in charge of the scrap resulting from the conversion. Larrick was made a director in 1954 and remained with the Company until 1957. During this period he was general manager, vice-president and assistant to the president.

Isadore Blumenfield, although not a member of the stockholders' committee referred to, was the real owner of a substantial number of shares of stock of the Company. He was a friend and close business associate of Ossanna.

Harry H. Isaacs was president of American Iron & Supply Company (American Iron), which acquired the greater portion of the overhead and underground scrap and salvage from the Company, and is also a partner in American Salvage & Supply Company. (Other partners were Fred Isaacs and Theodore Landy). Harry Isaacs was also a partner in Mid-Continent Development and Construction Company which also acquired certain real estate and scrap from the Company. (There were five other partners including Isadore Blumenfield and his attorney, Robert Levitt).

Earl A. Jeffords was a realtor doing business as J & C Holding Company. He was the owner of 500 shares of the common stock of the Company at the time the stockholders' committee was organized and functioned, and was a member of that committee.

Fred Isaacs, the son of Harry H. Isaacs, was secretary of American Iron and partner in the American Salvage & Supply Company; he actively participated in the acquisition of the overhead and underground surplus scrap acquired from the Company.

In this setting we proceed to consideration of the indictments upon which appellants were tried, and other formal proceedings in the trial court.

The indictments are lengthy, but may be summarized as follows: Indictment No. 4-59-CR. 77, returned September 18, 1959, was in 17 counts, and named as defendants the appellants Ossanna, Larrick, Harry Isaacs, and Jeffords, and also James H. Towey and Isadore Blumenfield.2 Within this indictment, four separate statutory offenses were charged, to wit: use of mails to execute a scheme to defraud (18 U.S.C.A. § 1341);3 use of wire communication in furtherance of a scheme to defraud (18 U.S.C.A. § 1343);4 transportation in interstate commerce of goods knowingly converted or taken by fraud (18 U.S.C.A. § 2314);5 and conspiracy to commit an offense against the United States (18 U.S.C.A. § 371).6 As may be seen, each of these offenses depends directly (or in the case of § 371, perhaps indirectly) upon the presence of a scheme to defraud. In Count I of this indictment, the scheme was described in detail — there it was alleged that all of the named defendants (save Jeffords) were participants in "a scheme and artifice to defraud (the Transit Company) and the stockholders * * of real and personal property, and for obtaining for themselves and others not entitled thereto money and properties by means of false and fraudulent pretenses, representations, and promises." For the purpose of later discussion, it is important to bear in mind that this "overall scheme" is the keynote and common thread running throughout the separate counts, and it is this scheme — "to loot the Transit Companies" — that serves to bind appellants together in guilt. After recital of the fraudulent scheme generally, as quoted above, Count I of the indictment then proceeded to recite some 17 transactions alleged to be "a part of said scheme and artifice." For the sake of brevity, these transactions have been characterized in trial and in the briefs under five headings: 1) fraud in dispositions of scrap and salvage; 2) fraud in sale of Mexican notes; 3) fraud in sale of the Hopkins Right-of-Way; 4) fraud as to commissions paid to defendant Jeffords; and 5) fraudulent transactions involving sale of lots to defendant Towey. It is important to note at this point that all of these transactions involved dispositions of Company assets.

This preliminary recital of the "overall scheme" and parts thereof, was realleged in each of the subsequent mail fraud and fraud by wire counts. Counts I through XIII were based upon the "mail fraud," or "wire fraud" statutes, each alleging mail or wire communications upon separate stated dates. Counts I through III...

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