Phelps v. United States

• Decision Date: 13 June 1947
• Docket Number: No. 13110-13113.,13110-13113.
• Citation: 160 F.2d 858
• Parties: PHELPS v. UNITED STATES. PETERS v. SAME. LECHNYR v. SAME. HICKS v. SAME.
• Court: U.S. Court of Appeals — Eighth Circuit

160 F.2d 858 (1947)

PHELPS v. UNITED STATES.

PETERS v. SAME.

LECHNYR v. SAME.

HICKS v. SAME.

Nos. 13110-13113.

Circuit Court of Appeals, Eighth Circuit.

April 3, 1947.

Rehearing Denied June 13, 1947.

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O. A. Blanchard, of St. Paul, Minn. (Jerome Hoffmann, John A. Burns and Walter T. Ryan, all of St. Paul, Minn., and Ray G. Moonan, of Waseca, Minn., on the brief), for appellants.

William P. Murphy and James J. Giblin, Asst. U. S. Attys., both of St. Paul, Minn., (Victor E. Anderson, U. S. Atty., of St. Paul, Minn., on the brief), for appellee.

Before THOMAS, JOHNSEN and RIDDICK, Circuit Judges.

Rehearing Denied June 13, 1947. See 161 F.2d 940.

JOHNSEN, Circuit Judge.

Appellants were convicted by a jury, under 18 U.S.C.A. § 88,¹ of having conspired to defraud the United States of the proper administration of its regulations relating to the rationing of rubber tires.² The regulations had been promulgated by the Office of Price Administration under the Emergency Price Control Act of 1942 and the Second War Powers Act, 1942, both as amended.³

The indictment ran against ten defendants. The Government dismissed as to one.⁴ Two others pleaded guilty. The remaining seven stood trial. Three were acquitted and four were convicted. Two of the convicted and two of the acquitted were or had been officials in the district office of the OPA at St. Paul, Minnesota. All of the convicted have appealed.

The conspiracy was alleged to have covered a period from about April 1, 1943, to about February 1, 1945. Sixteen overt acts were set out in the indictment. The gravamen of the charges was that the defendants, with intent to thwart the purposes and provisions of the rationing regulations, had conspired, among themselves and with other persons unknown, to obtain a monopoly on the used-tire stocks accumulated at tire inspection stations throughout Minnesota; to effect the release and delivery of such tires to defendant Peters (convicted) and defendant Reed (plead guilty); to have such tires released to Peters and Reed without proper inspection by OPA tire examiners; to secure the inclusion in such tires of re-usable tires and tires which could be repaired or recapped; to permit Peters or Reed to purchase such tires at such prices as they might arbitrarily fix; to have Peters or Reed sell the tires before or after recapping them; and to allow all of the defendants in some manner and measure to profit from these operations.

As is generally familiar, after we were catapulted into World War II, the civilian rubber situation in this country soon became acute. All excess automobile tires, other than those in the hands of manufacturers and dealers, were required to be turned in, and the sale of usable tires, whether new or old, was placed under rationing control. The OPA regulations permitted a user to obtain a tire for replacement purposes, only upon application to and action by a rationing board, after an inspection of the old tire by some authorized tire inspector and a certification of its condition indicative of the need for replacement. Under the definitions in the regulations, it was intended that there should be neither a certification of need nor a granting of replacement, if the tire was "capable of being used, or capable of being repaired for use" by the owner. § 1315.201(a) (34). It also was provided that "No inspector may certify any fact concerning the condition of tires or tubes without making a personal and adequate inspection to determine such fact." § 1315.603 — Amendment 63.

The regulations contained a further provision that "No person participating in the administration of Ration Order No. 1A shall act officially in any matter arising thereunder as to which he has any interest, by reason of business connection or relationship by blood, marriage or adoption." § 1315.301(b). Notwithstanding this provision, appointments were made generally of tire dealers as inspectors, because ordinarily they were the only ones having the experience, equipment and location necessary to the practical handling in a community of the required inspections. There existed, of course, in this situation the possibility that a dealer might unconsciously or otherwise allow his interest in selling a tire to influence his inspection and certification. Tire inspectors, however, were "subject to the supervision of tire examiners employed by the Office of Price Administration" (§ 1315.307 — Amendment 63), and dealers were required to hold all replaced tires, subject to examination by an OPA tire examiner, for a period of thirty days, unless the earlier release of such tires was permitted by an authorized OPA representative. §§ 1315.307(a) (1), 1315.704(a) (2) — Amendment 79. In addition, a rationing board could require further inspection and certification by such inspector or inspectors as it might designate, before acting upon a replacement application.

The task of supervising and checking the work of the numerous inspection stations (approximately 2700 initially in Minnesota and more designated from time to time)⁵ obviously was a sizable one. At least partially for the purpose of facilitating the work of its tire examiners (and in part also to promote the movement of the tires into scrap channels), the St. Paul OPA district office conceived the idea of having the American Legion of Minnesota get the tire dealers to donate the replaced tires to the Legion and having the members of the Legion collect and deposit the tires at central locations, where they would be available for OPA examination — the inducement to the Legion being that it was to receive the proceeds from the scrap when sold.⁶ Attempts to put the plan into operation in a number of localities, however, soon demonstrated its lack of vitality, and it died a natural death. It is mentioned here because of the use which defendant Peters (convicted) and defendant Walker (plead guilty) undertook to make of it in the early stages of the alleged conspiracy, as will afterwards appear.

As another means of lightening and improving its tire rationing activities, the St. Paul office had attempted also to get a central truck tire inspection station established in the St. Paul-Minneapolis area, under the operation of some concern which was not engaged in the tire business.⁷ The plan was to require that all truck tires be submitted to the central station for reinspection, after their condemnation by a regular inspection station, before applications for replacement would be considered by the rationing board, and that the tires, if replacement was approved by the central station, be left at the station for thirty days, where they would be available to OPA tire examiners, regardless of when or where the truck owners might be able to obtain their replacements. It was believed that, in addition to facilitating the task of OPA tire examiners, (and of more specific urgency at the time) the requiring of reinspection at a central station would substantially reduce the number of applications for truck-tire replacements being submitted to the rationing board and would secure generally a longer use of such tires by truck operators. The Fruehauf Trailer Co., on the solicitation of the St. Paul OPA office, agreed to establish a central truck tire inspection station on its Twin-Cities premises. After the station had been in operation for a time, the national office of OPA recognized the possibilities of such a plan, approved it for use throughout the country and adopted regulations to cover the establishment and operation of such stations. As with the Legion scrap-collection plan, the establishing of the St. Paul central station is of relevance here because of the part which its operations came to play (unbeknownst to Fruehauf) in the activities of the alleged conspirators.

Under the Government's theory, the conspiracy had its genesis about the time defendant Peters (convicted) sought to get into the business of manufacturing boots and reliners for tires, and thereafter continued to grow and spread until its disruption as a result of the disclosures made by defendant Norris (dismissed by the Government).

The pre-war supply of boots and reliners, which were capable of prolonging the life of many old tires, had been exhausted, and these accessories apparently were no longer being manufactured in the area. Peters, who had not previously been in the boot and reliner business, saw its possibilities, negotiated a deal for the equipment of a previous manufacturer, and was anxious to get under way. At about this same time, the two defendant OPA officials (acquitted) who primarily had been responsible for the formulation of the Legion-scrap-collection and the central-inspection-station plans professed also to have become concerned about the shortage of boots and reliners and to have given consideration to what could be done about it. One of them testified that he invited all former boot and reliner manufacturers in the Twin Cities, as well as Peters, to his office for a conference, and that Peters alone responded. The Government attempted to show by the other manufacturers that they had never received and had no knowledge of any such invitation.

In any event, Peters and the OPA official conferred. According to the evidence, Peters stated that all he needed in the situation was a supply of scrap tires from which to make boots and reliners. The OPA official within a short time gave him a letter, with the approval of the other acquitted official (a superior), appointing him a "deputy tire examiner" for OPA. This put Peters in a position to make official releases of all tires held by any inspection station in the district for OPA examination, and, of course, supplied him also with a prestiged entry to buy or otherwise acquire the tires for his business. Another such letter was shortly thereafter issued to one of Peters' employees, defendant Monson (acquitted),...