Morgan v. United States

• Decision Date: 06 September 1938
• Docket Number: No. 11125.,11125.
• Citation: 98 F.2d 473
• Parties: MORGAN et al. v. UNITED STATES.
• Court: U.S. Court of Appeals — Eighth Circuit

98 F.2d 473 (1938)

MORGAN et al. v. UNITED STATES.

No. 11125.

Circuit Court of Appeals, Eighth Circuit.

August 9, 1938.

Rehearing Denied September 6, 1938.

L. E. Gwinn, of Memphis, Tenn., and Edward H. Coulter, of El Dorado, Ark. (Kelly Brown, of Muskogee, Okl., on the brief), for appellants.

Leon B. Catlett, Asst. U. S. Atty., of Little Rock, Ark. (Fred A. Isgrig, U. S. Atty., of Little Rock, Ark., on the brief), for the United States.

Before STONE, SANBORN, and VAN VALKENBURGH, Circuit Judges.

VAN VALKENBURGH, Circuit Judge.

January 8, 1932, the Cherokee Public Service Company, a Delaware corporation, and the Municipal Gas Company, an Oklahoma corporation, were both adjudged bankrupt in the district court of the United States for the Eastern District of Arkansas. The causes were referred to J. H. Schneider, referee. On the same day W. D. Dickinson was appointed receiver, and, on February 18, 1932, was elected trustee for both companies. The Cherokee Company was organized to gather gas for wholesale distribution in the City of Muskogee, Oklahoma, and the Municipal Gas Company was organized for the purpose of retailing gas in that city, depending primarily upon the Cherokee Company for its supply of gas. The jurisdiction in bankruptcy is not challenged. Prior to bankruptcy both appellants, who are brothers, were intimately connected with the control, management, and ownership of both companies. After bankruptcy trustee Dickinson employed Monroe B. Morgan as general manager to assist in the operation of the companies.

On or about August 15, 1935, M. B. Morgan advised the trustee that it was necessary to obtain an additional supply of gas to meet distribution requirements. Accordingly, by letter and wire, M. B. Morgan and S. R. Morgan took the matter up with representatives of the Pure Oil Company, an Ohio corporation, at Muskogee, Oklahoma, and Chicago, Illinois, with the object of entering into a contract with that company for the purchase of the gas desired. The intermediate steps taken in the negotiations leading to the final consummation of the contracts, which, in large measure, evidence the scheme upon which this prosecution is founded, are too numerous and involved to warrant extended recital in this opinion. It will be sufficient for our purposes that the Pure Oil Company agreed to furnish the required gas to the trustee to the maximum amount of 15,000,000 cubic feet per month at the rate of eight cents per thousand cubic feet delivered; that it (the seller) would at its own expense construct a six inch pipe line from the refinery of the seller to the receiving line of the buyer. There was in this offer no requirement for a minimum amount of gas which the trustee would be required to take. Thereupon, the Morgans organized a so-called corporation under the name "Oklahoma Petroleum Products Company", advising the Pure Oil Company that it had become necessary to change the name of the nominee thus.

The contract between the Pure Oil Company and the Oklahoma Petroleum Products Company was substantially as above stated. The contract between the latter company (owned by the Morgans) and Dickinson, trustee, provided for gas to be supplied at fifteen cents per thousand cubic feet, at a minimum per month amounting to $2,250. This contract also required a $2,000 cash deposit, and the payment by the trustee of $2,500 for making the pipe line connection, which the Pure Oil Company had agreed to make at its own expense. To the trustee M. B. Morgan explained that Oklahoma Petroleum Products Company was the trade name of the Pure Oil Company in Muskogee, Oklahoma. The difference in the price per thousand cubic feet was explained to him by the representation that the B. T. U.'s in this gas would have to be blended with air which would increase the volume of the gas, and thereby reduce the cost down to about eight cents, as the trustee had been led to understand.

The government charged that by these methods the bankrupt estates had suffered a loss of $10,000 procured from the trustee by defendants through deception and fraud. The indictment is in seven counts based upon fraudulent use of the mails in furtherance of a scheme and artifice to defraud. The verdict of the jury found the defendants guilty upon the second, fourth, fifth, sixth and seventh counts, and not guilty upon the first and third counts. The sentences as to each defendant were ordered to run consecutively.

The brief of appellants is of excessive length and its arrangement, likewise, fails to accord with the provisions of our rules. There are forty-two errors assigned, and these are grouped under three headings: "Assignments of Error"; "Brief of Authorities"; and "Argument"; each divided into eighteen identical subjects lettered A to R, inclusive. This led to confusion of repetition and over-lapping of discussion, thereby casting additional burden upon consideration of the case.

Under letter A of all three groups the sufficiency of the indictment is challenged. That instrument is long and scrupulously explicit in detailing the scheme to defraud and the methods by which appellants are charged with diverting and converting the funds of the bankrupt estates. The letters pleaded are all effective in furtherance of the fraud charged. Incidentally it may be noted that, in a prosecution for devising a scheme to defraud, the matter mailed must, of course, have some relation to, and must be a step in, attempted execution of the scheme, but this need not necessarily appear on its face. Barnes v. United States, 8 Cir., 25 F.2d 61. And letters not mentioned in the indictment, but of similar character, are admissible as bearing upon the character of the scheme and its participants. Davis v. United States, 8 Cir., 9 F.2d 826. The letters introduced between the various parties concerned shed light upon the entire transaction. No error was committed in their admission, and certainly no prejudice is shown to have resulted therefrom. The use of the mails charged in the indictment is not challenged in the errors assigned. Such may be proved by circumstantial evidence and, we think, was so proved in the instant case. Cochran v. United States, 8 Cir., 41 F.2d 193; Corbett v. United States, 8 Cir., 89 F.2d 124, 127. The motion in arrest of judgment is based in terms upon the alleged failure of the indictment to charge an offense, and was properly overruled.

Error is assigned to the action of the trial court in denying petitions for continuance, and for severance and a separate trial of M. B. Morgan. We find from the record no abuse of discretion in denying these petitions. The two Morgan brothers were so closely associated in the transactions involving the offense charged, that the application for severance was entirely without warrant.

Objection is made to the introduction of the written memorandum contract prepared by Augustus, the Chicago representative of the Pure Oil Company, in conformity with the original understanding that that company was to contract directly with trustee Dickinson. This was the contract in substantial terms between the Pure Oil Company and Oklahoma Petroleum Products Company, and is evidence of the charges made in furtherance of the scheme to defraud charged. It was properly admitted.

Appellants made three applications for subpoenas duces tecum to compel the production of certain checks drawn by appellant Monroe B. Morgan, which checks bore the endorsement of trustee Dickinson. The stated object was to lay the foundation for impeachment of Dickinson on the ground that he had exacted from M. B. Morgan one-half the latter's salary as assistant to the referee. These applications were denied upon the ground that they constituted an attempt to impeach Dickinson upon a matter collateral and irrelevant to any issue in the case on trial. Irrespective of any possible merit of the applications, it appears from the record that Dickinson testified to having cashed a number of checks for M. B. Morgan, whose credit at banks was impaired; but denied that Morgan had ever "given him a cent in his whole life". The issue was therefore before the jury and the presence of the checks would have added nothing substantial to the charge.

Appellants charge error in the refusal of the court to permit them to show a common custom in organizing and operating corporations in Oklahoma and other states. The Oklahoma Petroleum Products Company was organized purely as a Morgan corporation, and the informality of the method employed was stressed by the government at the trial. The irregularities and informalities employed...