Levine v. United States, 7809.

• Decision Date: 28 October 1935
• Docket Number: No. 7809.,7809.
• Citation: 79 F.2d 364
• Parties: LEVINE et al. v. UNITED STATES.
• Court: U.S. Court of Appeals — Ninth Circuit

79 F.2d 364 (1935)

LEVINE et al. v. UNITED STATES.

No. 7809.

Circuit Court of Appeals, Ninth Circuit.

September 9, 1935.

Rehearing Denied October 28, 1935.

Sherwood & Heiman, Revelle, Simon & Coles, and H. Sylvester Garvin, all of Seattle, Wash., for appellants.

J. Charles Dennis, U. S. Atty., and John Ambler, Asst. U. S. Atty., both of Seattle, Wash., for the United States.

Before WILBUR, DENMAN, and MATHEWS, Circuit Judges.

MATHEWS, Circuit Judge.

The indictment in this case was in seven counts, six of which charged Henry L. Levine, Robert M. Brown, J. L. Hodge, Mandel Michaelson, Benjamin Hendison, and three other defendants with using the mails in execution of a scheme for obtaining money by means of false and fraudulent pretenses, representations, and promises (Criminal Code, § 215, 18 USCA § 338). The seventh count charged them with conspiring to commit the offenses described in the other six counts (Criminal Code, § 37, 18 USCA § 88). Levine, Brown, Michaelson, and Hendison were convicted and sentenced on all counts of the indictment. Hodge was acquitted on the third and fifth counts and was convicted and sentenced on all the others. All the named defendants have appealed.

The scheme charged in the indictment was, in substance, that defendants would organize the Western States Gold Properties Corporation and would sell its stock at highly inflated prices; that such sales would be made by defendants through Maxwell Gates & Co., a corporation operated by defendants for that purpose only; that, to effect such sales, defendants would solicit orders for the purchase of stock of General Motors Corporation and, after securing such orders and the money of such intending purchasers, would induce them to change their orders and invest their money in stock of Western States Gold Properties Corporation; and that defendants would thereby obtain for themselves the money paid for such stock by the purchasers thereof.

This was to be accomplished by means of false pretenses, representations, and promises to the effect that Maxwell Gates & Co. was a legitimate brokerage concern doing a general brokerage business; that a pool had been formed for the purchase of stock of General Motors Corporation and had been able to purchase such stock below the market price; that investors purchasing such stock through Maxwell Gates & Co. would be permitted to share in the profits of said pool; that the stock of Western States Gold Properties Corporation was about to be listed on the New York Exchange; that investors purchasing said stock through Maxwell Gates & Co. would be able to sell it at a great profit; that Maxwell Gates & Co. would advise them when to sell and would make such sales for them; that a deal had been consummated whereby the property and assets of Western States Gold Properties Corporation would be sold to another corporation on terms which would give the stockholders $2 in cash for each dollar invested; that there was still opportunity for investors to purchase the stock of Western States Gold Properties Corporation at $1 per share; and that, by so doing, they would double their money in two or three weeks, without any risk whatsoever.

The indictment alleges, and the jury by their verdict found, that, having devised this scheme, defendants conspired to, and did, in execution thereof, place and cause to be placed in the post office at Seattle, Wash., to be sent and delivered by the post office establishment of the United States, the letters and circulars described in the indictment.

Appellants assign as error the denial of their motion for a directed verdict, thereby raising the question of the sufficiency of the evidence to sustain the verdict. We have examined the evidence and find it amply sufficient. The facts which it establishes or tends strongly to establish are as follows:

On September 19, 1933, appellants Brown and Hodge and one Milton S. Hurwitz organized the Western States Gold Properties Corporation, with a capital stock of 500,000 shares, which, without any consideration whatever, were issued to Hurwitz for the use and benefit of Brown, Hodge, and Hurwitz. The ostensible purpose of this corporation was to engage in the gold mining business. It never engaged in that or any other business, and never acquired or owned any property or assets of any kind or character. Its stock was worthless, and Brown, Hodge and Hurwitz knew it was worthless. Nevertheless, in September, October, November, and December, 1933, they and their agents and associates sold to a gullible and unsuspecting public 114,875 shares of this worthless stock and collected therefor $52,861.42, which, after paying commissions and selling expenses, was pocketed by Brown, Hodge, and Hurwitz. None of it went to the corporation.

Associated with Brown, Hodge, and Hurwitz in this fraudulent enterprise were several high-pressure salesmen, among whom were appellants Levine, Michaelson, and Hendison. These salesmen were former employees of Brown, and, like him, were well versed in the art of selling worthless stocks. They received commissions on their sales of Western States Gold Properties Corporation stock. They also knew perfectly well that this stock was worthless, and that, in selling it, they were perpetrating a fraud.

All sales of Western States Gold Properties Corporation stock were made through Maxwell Gates & Co., a corporation organized by Brown for the ostensible purpose of engaging in the brokerage business. It never engaged in that business nor in any business except that of selling stock of Western States Gold Properties Corporation. It was, in fact, a mere alias, a name under which, a mask behind which, appellants carried on their stock selling operations. Maxwell Gates & Co. had an office in Seattle, Wash., in and from which appellants carried on their campaign for the sale of Western States Gold Properties Corporation stock. All the appellants frequented the office of Maxwell Gates & Co. and actively participated in this selling campaign, in the course of which, and as a part of which, they mailed the letters and circulars described in the indictment.

Appellants in many instances effected sales of Western States Gold Properties Corporation stock by first soliciting orders for the purchase of stock of General Motors Corporation at prices several points below the market. After securing such orders and the money of such intending purchasers, appellants would inform them that they could not purchase General Motors Corporation stock at the prices named, and would then advise and induce such purchasers to change their orders and "invest" their money in the stock of Western States Gold Properties Corporation. In some instances appellants did not trouble to obtain their victims' consent before making such "investments" for them. In method, as in purpose, their whole campaign was fraudulent and dishonest.

All sales of Western States Gold Properties Corporation stock were made by means of false pretenses, representations, and promises, including those set forth in the indictment and many others. For example, in a letter prepared by Brown, Hodge, and Hurwitz, signed by Hodge and mailed by appellants to several hundred prospective purchasers of stock, it was stated that "The Western States Gold Properties Corporation owns and controls 17 claims and 134 patented acres situated in the famous Gold Hill Mining region of Southwestern Oregon," which statement, as appellants well knew, was an absolute falsehood. This is a fair sample of the misrepresentations by which appellants' victims were duped and defrauded.

Without going into further detail, it suffices to say that the evidence warrants the conclusion that appellants devised the scheme and entered into the conspiracy alleged in the indictment; that each and all of them participated therein, and that, in execution and furtherance thereof, they mailed or caused to be mailed the letters and circulars described in the indictment. We hold, therefore, that the jury's verdict is sustained by the evidence.

Appellants assign as error the admission of the Government's Exhibit 9 in evidence, the admission of the testimony of the government's witness Sawyer concerning representations made to him by one Lee, and the denial of appellants' motion to strike Sawyer's testimony. These assignments do not "quote the full substance of the evidence admitted," as required by our rule 11, and are, therefore, disregarded.

Appellants assign as error the alleged failure of the District Court to limit the effect of testimony concerning conversations and transactions with individual defendants, out of the presence of other defendants, by instructing the jury to disregard such testimony, except as to the defendants with whom such conversations and transactions were had, unless and until the jury should find that such conversations and transactions were authorized by the other defendants, or that the other defendants were parties to the conspiracy or to the scheme alleged in the indictment. They also assign as error the alleged failure of the District Court to limit, in the manner just stated, the effect of testimony concerning conversations and transactions with stock salesmen employed by defendants. These assignments are without merit. The only purpose or effect of the evidence therein referred to was to show that certain false pretenses, representations and promises were made by the persons with whom the conversations and transactions were had. The District Court sufficiently limited the effect of this evidence by instructing the jury as follows: "You are instructed a particular defendant or defendants herein is, or are, not liable for any false pretense or promise or representation unless such particular defendant or defendants personally made such false pretense, promise or representation or authorized the making of the same. * * * In this connection, you are instructed that you are not to consider...