Kann v. United States

Decision Date04 December 1944
Docket NumberNo. 35,35
Citation323 U.S. 88,89 L.Ed. 88,157 A.L.R. 406,65 S.Ct. 148
PartiesKANN v. UNITED STATES,
CourtU.S. Supreme Court

Mr. Simon E. Sobeloff, of Baltimore, Md., for petitioner.

Mr. William A. Paisley, of Washington, D.C., for respondent.

Mr. Justice ROBERTS delivered the opinion of the Court.

We took this case because it involves important questions arising under § 215 of the Criminal Code.1 The section provides that 'Whoever, having devised * * * any scheme or artifice to defraud, or for obtaining money or property by means of false or fraudulent pretenses, representations, or promises * * * shall, for the purpose of executing such scheme or artifice or attempting so to do, place, or cause to be placed, any letter, * * * in any post office, or * * * cause to be delivered by mail according to the direction thereon, * * * any such letter, * * * shall be fined not more than $1,000, or imprisoned not more than five years, or both.'

The petitioner and six others were indicted in three counts for using the mail in execution of a scheme to defraud. Petitioner's co-defendants pleaded nolo contendere. He was tried and convicted on the second and third counts, and the Circuit Court of Appeals affirmed the conviction.2

The indictment alleged that Triumph Explosives, Inc., is a Maryland corporation engaged in the manufacture of munitions, for the United States, a large amount of whose stock is held by the general public; that petitioner was President and a director, one of his co-defendants was an officer and director and five of them salaried executive and administrative employes of the company. The indictment continued that the defendants devised a scheme to defraud Triumph and its stockholders and obtain money for themselves by diverting part of the profits of Triumph on its Government contracts to a corporation known as Elk Mills Loading Corporation and distributing such profits through salaries, dividends, and bonuses to be paid by Elk Mills to the defendants; that, in pursuance of the scheme, Elk Mills was organized, some defendants elected officers and directors, and others elected consultants at substantial salaries, and 49% of its stock distributed to five defendants, who were administrative employes of Triumph, without consideration; that Triumph, pursuant to the plan, subcontracted a Government contract to Elk Mills for 51% of the latter's stock, on a basis which would yield Elk Mills large profits, and would involve utilization of the employes and services of Triumph in the performance of the subcontract; and that the defendants, pursuant to the scheme, received from Elk Mills salaries and bonuses for which no substantial services were rendered, and dividends, to the detriment of Triumph. It was alleged that the fraudulent scheme was misrepresented upon the minutes of Triumph and false reasons for the transaction given. Further, that, pursuant to the scheme, it was to be represented that some of the defendants would purchase with their own money, and convey to Elk Mills, certain lands for the issue to them of 49% of the stock of Elk Mills, whereas it was not intended that these defendants should use their own funds in purchasing the land to be transferred in payment of the stock, and that this plan was carried out. In summary, it was charged that the scheme was such that Triumph should be deprived of the profits rightfully belonging to it and these profits should be distributed amongst the defendants through the instrumentality of Elk Mills; that bonuses were to be paid to each of the defendants out of the profits of Elk Mills, and such bonuses were paid.

In the first count it was charged that the defendants, for the purpose of executing the scheme, caused to be delivered by mail a check drawn by Elk Mills on the Peoples Bank of Elkton, Maryland, in favor of petitioner.3 In the second, it was charged that, for the same purpose, the defendants caused to be placed in the post office at Elkton a check drawn by one Jackson on Industrial Trust Company of Wilmington, Delaware. In the third, it was charged that, for the same purpose, the defendants caused to be delivered by mail a check drawn by Elk Mills on the Peoples Bank of Elkton in favor of one of the defendants, Willis.

At the trial the Government proved the corporate existence of Triumph, proved that Triumph held Government contracts, that Elk Mills was incorporated and became subcontractor of a Government contract, that the stock of Elk Mills was distributed amongst certain of the defendants and Triumph, as in the indictment alleged, that, under the subcontract, Elk Mills was in receipt of substantial profits and that these profits were used to pay salaries and bonuses to the defendants, including petitioner. The Government offered evidence tending to prove that certain of these actions had been concealed from other directors of Triumph and that the true situation was discovered when a federal officer made an audit of Triumph's transactions under Government contracts.

The petitioner offered evidence tending to prove that in order to expand Triumph's business two banks had loaned large sums to Triumph under written agreements which restricted the amount it could invest in capital assets and restricted the salaries and bonuses it could pay; that the four defendants who were executive employes were dissatisfied with their compensation and threatened to leave Triumph unless they should receive increased compensation; that the directors of Triumph devised the plan of incorporating Elk Mills and subcontracting with it to make possible the payment of salaries and bonuses without violating Triumph's agreements with its banks; that petitioner had no other motive in participating in the transactions relating to Elk Mills, and that, upon being advised of the arrangement, Triumph's banks were of opinion that it did not violate the agreements.

It was proved by the Government that one Jackson contracted with Triumph for the building of a factory for Elk Mills on land conveyed to Triumph by several of the defendants. Some of these defendants informed the contractor that he might use the timber standing on the land in the construction of the building. After he had done so they falsely represented to him that they owned the timber and that he must pay them some $12,000 for it. He did so, by a check, to their order, and, in turn, billed Triumph for the same amount. There was evidence that the petitioner was asked whether it was proper to pay the bill and that he stated he did not see why not. It is not contended that the petitioner received any of this money, and his evidence tended to show he had no knowledge of this fraud perpetrated on Triumph.

The use of the mails proved under count 2 was this: The check of Jackson, the contractor, for purchase of the timber, to the order of defendants Deibert, Feldman, Kann (not petitioner), Prial, and Willis, was by them endorsed and cashed at the Peoples Bank of Elkton, Maryland, and was, by that bank, deposited in the mail to be delivered to the bank in Wilmington, Delaware, on which it was drawn.

With respect to the third count, the proof was that Elk Mills delivered its check on the Peoples Bank of Elkton for $5,000 to Willis, one of the executive employes, as a bonus. It was endorsed by Willis and deposited with the Farmers Trust Company of Newark, Delaware. The Newark bank mailed the check to the Peoples Bank of Elkton.

The petitioner contends, first that there is no substantial evidence that the transactions involving Elk Mills' subcontract were other than innocent transactions intended to finance the Government contracts held by Triumph, in conformity to that Company's agreements with the bank; or, if the transactions were for an improper purpose, there is no proof that he was a party to any improper use of funds. Secondly, the petitioner urges that he admittedly received no money from the checks which are described in counts 2 and 3, and there is no proof he had knowledge, or reasonable cause to...

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  • Faryniarz v. Jose E. Ramirez, JR Chem, LLC
    • United States
    • U.S. District Court — District of Connecticut
    • November 9, 2015
    ...leaving all other cases to be dealt with by appropriate state law.'" Schmuck v. United States, 489 U.S. at 710 (citing Kann v. United States, 323 U.S. 88, 95 (1944)). "To be part of the execution of the fraud, however, the use of the mails need not be an essential element of the scheme." Id......
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    • United States
    • U.S. District Court — Southern District of West Virginia
    • October 1, 1967
    ...additionally urges, isolates him from any excursion by those checks thereafter in interstate commerce. Kann v. United States, 323 U.S. 88, 65 S.Ct. 148, 89 L.Ed. 88 (1944) is the vehicle for his argument that, having received his cash, he has no further interest in the checks or their inter......
  • U.S. v. Espy, Criminal Action No. 97-0335 (RMU).
    • United States
    • U.S. District Court — District of Columbia
    • December 23, 1997
    ...will have to establish that use of the mails was at a minimum "a part of the execution of the fraud," Kann v. United States, 323 U.S. 88, 95, 65 S.Ct. 148, 151, 89 L.Ed. 88 (1944), or is "incident to an essential part of the scheme." Pereira v. United States, 347 U.S. 1, 8, 74 S.Ct. 358, 36......
  • U.S. v. Oxman
    • United States
    • U.S. Court of Appeals — Third Circuit
    • September 28, 1984
    ...not, however, violate federal law; only the use of the mailings to effectuate the scheme does so. See Kann v. United States, 323 U.S. 88, 94-95, 65 S.Ct. 148, 150-151, 89 L.Ed. 88 (1944); United States v. Tarnopol, 561 F.2d 466, 471 (3d The twenty-second count charges a conspiracy in violat......
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11 books & journal articles
  • Mail and wire fraud.
    • United States
    • American Criminal Law Review Vol. 42 No. 2, March 2005
    • March 22, 2005
    ...of lawful tax statements not chargeable even though defendants who caused them to be mailed misappropriated funds); Kann v. United States, 323 U.S. 88, 95 (1944) (stating statute reaches "only those limited instances in which the use of the mails is a part of the execution of the fraud, lea......
  • Mail and wire fraud.
    • United States
    • American Criminal Law Review Vol. 43 No. 2, March 2006
    • March 22, 2006
    ...of lawful tax statements not chargeable even though defendants who caused them to be mailed misappropriated funds); Kann v. United States, 323 U.S. 88, 95 (1944) (stating statute reaches "only those limited instances in which the use of the mails is a part of the execution of the fraud, lea......
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    • United States
    • American Criminal Law Review Vol. 44 No. 2, March 2007
    • March 22, 2007
    ...school was not chargeable because gas company's bill collection procedure was "immaterial" to defendants' scheme); United States v. Kann, 323 US 88, 94, (1944) (finding defendants' scheme reached fruition once fraudulently obtained checks were honored; mailings that were part of further pro......
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    • American Criminal Law Review Vol. 46 No. 2, March 2009
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    ...school was not chargeable because gas company's bill collection procedure was "immaterial" to defendants' scheme); United States v. Kann, 323 U.S. 88, 94, (1944) (finding defendants' scheme reached fruition once fraudulently obtained checks were honored; mailings that were part of further p......
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