Kaplan v. United States

• Decision Date: 11 May 1925
• Docket Number: No. 248.,248.
• Citation: 7 F.2d 594
• Parties: KAPLAN et al. v. UNITED STATES.
• Court: U.S. Court of Appeals — Second Circuit

7 F.2d 594 (1925)

KAPLAN et al. v. UNITED STATES.^*

No. 248.

Circuit Court of Appeals, Second Circuit.

May 11, 1925.

Hays, Podell & Shulman, of New York City (Julius M. Mayer, Herman Shulman, and A. Kane Kaufman, all of New York City, of counsel), for plaintiffs in error.

Emory R. Buckner, U. S. Atty., of New York City (Moses Polakoff, Asst. U. S. Atty., of New York City, of counsel), for the United States.

Before HOUGH, MANTON, and HAND, Circuit Judges.

HAND, Circuit Judge.

The defendants were indicted with one Smythe and a corporation for a conspiracy to violate the Bankruptcy Act (Comp. St. §§ 9585-9656), by concealing property of the corporation from its trustee, when appointed. The outlines of the conspiracy as proved were as follows:

Abe Kaplan advertised in the newspapers to secure the assistance of a man familiar with the business of selling plumbers' supplies. Smythe answered, and after an interview Kaplan introduced him to his brother, Meyer, who talked with him, and agreed that he was a promising assistant. Thereafter Abe Kaplan and Smythe in Manhattan consulted a lawyer, one Muney, and directed him to incorporate a company, which he did. A shop was opened in Brooklyn under the direct management of Smythe, who ordered supplies from manufacturers. The general conduct of the business justified the jury in finding that from the start the whole venture had been a scheme devised by Abe Kaplan and Smythe, or one of them without the other's connivance, to obtain supplies, make quick sales, collect the proceeds, and then allow the company to fall into bankruptcy, making off with such loot as might meanwhile have been gathered.

The points presented on this writ are as follows: (1) That there was no evidence sufficient to connect Meyer Kaplan with the conspiracy; (2) that the overt acts were either not sufficiently proved or were committed before the conception of the conspiracy; (3) that the direction of a verdict in favor of Smythe should have made impossible the conviction of the Kaplans; (4) that testimony procured from the Kaplans severally under examination in the bankruptcy proceedings should not have been admitted. These we take up seriatim.

As we have said, when Abe Kaplan first engaged Smythe, he consulted with his brother and procured his assent to the employment. Meyer at the time said that he had anticipated going into the business and had agreed to help Abe as much as possible. Again, when Abe Kaplan and Smythe went to open the company's account in a Brooklyn bank, it was Meyer Kaplan who deposited $10,000 in bills with the manager, Schwartz, introduced Smythe, and told Schwartz that checks were to be drawn in the names of Smythe and one L. Bloom, his brother-in-law, or of Bloom alone. In fact, L. Bloom was the name of Meyer Kaplan's wife, and it was she who later signed the signature card, which Schwartz gave to Meyer Kaplan on the day of the interview. It was she, also, who for a time signed all checks drawn by the company. Meyer Kaplan disclaimed any definite knowledge of his wife's connection with the business, and asserted that it was a private matter between her and his brother, amounting, as he vaguely understood it, to a loan. Inherently this was extremely improbable; it was rendered more so by his false statement to Schwartz that the Bloom who was to sign checks was his brother-in-law.

We must suppose, if Meyer Kaplan was honest, that he then supposed that his wife's brother, who appears nowhere else, was to be in the business, and that later, unknown to him, this purpose was changed, and his wife substituted. In his examination in the bankruptcy proceedings, the brother-in-law did not figure. His initial interest and approval of Smythe's original employment, his daily visits to the shop, his payment of the money to open the account, his introduction of his brother and Smythe to the bank, and his taking possession of the books, as to all of which some evidence was given, preclude any reasonable conclusion, except that he was using his wife's name as a cover, either because he wanted to keep clear in general of any apparent connection with the business, or because, as was the fact, his connection with an earlier bankruptcy made it undesirable for his own name to appear. There seems to us ample evidence to hold him as one of the persons actively associated in the business.

Three overt acts were laid, one the interview in Muney's office in Manhattan, at which Abe Kaplan and Smythe were present, another, which was not proved at all, and a third, which, though we think that it was prima facie proved, presents difficulties of jurisdiction which we do not find it necessary to consider. Though these acts did not include Meyer Kaplan, he might still be indicted and tried in Manhattan under the rule in Hyde v. United States, 225 U. S. 347, 32 S. Ct. 793, 56 L. Ed. 1114, Ann. Cas. 1914A, 614, and Brown v. Elliott, 225 U. S. 393, 32 S. Ct. 812, 56 L. Ed. 1136. The point raised as respects the first act is that, since it occurred before the incorporation of the bankrupt company, it could not be an overt act in pursuance of a conspiracy to which that company was a party.

We are to suppose that the three individuals, the Kaplans and Smythe, from the outset had in contemplation the incorporation of the company, its business, its subsequent bankruptcy, and its concealment of assets belonging to the trustee. The company, though of course a necessary contrivance in their plan, and formally the bankrupt, was merely a means by which they should execute their designs. We see no reason to doubt that the formation of a plan to create such a company and put it through a dishonest bankruptcy would alone have been a crime punishable under the statute, though the plan had been nipped before it succeeded, or abandoned even before the company was incorporated. The plan presupposed the participation of the bankrupt; that was enough, if followed by an overt act.

That the conspiracy is a totally separate crime from the crime of concealment under the Bankruptcy Act is shown by United States v. Rabinowich, 238 U. S. 78, 35 S. Ct. 682, 59 L. Ed. 1211. In Cohen v. United States, 157 F. 651, 85 C. C. A. 113, we held that the bankrupt corporation was not a necessary party to an indictment for conspiracy, and in Kaufman v. United States, 212 F. 613, 129 C. C. A. 149, Ann. Cas. 1916C, 466, that an...