Preeman v. United States

• Decision Date: 28 June 1917
• Docket Number: 2346,2261,2233,2232,2224-2226,2347.,2237
• Citation: 244 F. 1
• Parties: PREEMAN et al. v. UNITED STATES.
• Court: U.S. Court of Appeals — Seventh Circuit

244 F. 1

PREEMAN et al. v. UNITED STATES.

Nos. 2224-2226, 2232, 2233, 2237, 2261, 2346, 2347.

United States Court of Appeals, Seventh Circuit.

June 28, 1917

Patrick H. Cullen, of St. Louis, Mo., and William S. Forrest, of Chicago, Ill., for plaintiffs in error.

Charles F. Clyne and Henry W. Freeman, both of Chicago, Ill., for the United States.

An indictment of 35 counts was returned against plaintiffs in error (hereinafter called defendants). Demurrers were overruled, and after a long trial a general verdict of guilty was found against all. Motions for new trial and in arrest being denied, judgments were entered, and the defendants sentenced. Each prosecutes a writ of error; the errors assigned, and the transcript, briefs, and arguments presented, being by stipulation applicable to all the defendants.

Counts 25, 26, and 35 charge defendants under section 37, U.S Criminal Code, with conspiring to violate section 215 of that Code; all the other counts charging in varying language a violation of said section 215. The general purport of the facts appearing from the very voluminous transcript will be set forth as briefly as may be.

In the early 80's a concern known as the Barr & Widen 'Commercial' Agency, composed of one Barr and one Widen, established a collection and credit reporting business or agency at St. Louis, Mo., for making local collections for and credit reports on merchants and others of that city. The concern did considerable business and enjoyed a good reputation. In about 1900 they began to do business outside of St. Louis; the solicitation and transaction of the collection business outside of St. Louis being thenceforth carried on under the name of Barr & Widen 'Mercantile' Agency. In 1904 Barr died. Shortly before his death defendant Wendler became associated with the concern as general manager of the 'Mercantile,' Widen attending to the affairs of the 'Commercial,' which under its old name continued to carry on the local business. In 1909 Wendler became a partner of Widen, but the names of the concern remained unchanged. Widen died in November, 1912. From time to time there was developed a plan for soliciting business from outside concerns all over the United States through agents instructed and trained to solicit contracts from prospective clients, and to obtain from them payment in advance of sums called 'realization charges.'

The plan of procedure during the period of time particularly here involved, for interesting the outside clients in the proposition, as appears from testimony of representatives of many of the concerns with whom the Mercantile had dealings, and of solicitors and agents through whom the business was conducted, was substantially as follows: Under the general direction of defendants Wendler and Preeman, at considerable expense persons were sent to various District Courts of the United States, there to examine the bankruptcy records, and tabulate the bankruptcies there shown for a considerable number of years back, listing the various creditors and data which the records disclosed as to the claims. This information was sent to Wendler at St. Louis, or to defendant Preeman at Chicago, his chief assistant. The data thus secured was classified, so that the bankrupt claims shown by the various court records to be owing to a concern of a given city would appear together. In the general office the data concerning the several creditors in a city about to be visited was transcribed upon cards; each card containing the information thus gathered in regard to outstanding bankrupt claims of a given creditor concern of the city. These cards were known as 'leads' or 'lead cards,' and all the cards for a given city were sent to the agent about to visit the city to afford the agent information which, when used as contemplated, was calculated to arouse or stimulate the interest of the prospective client in the proposed plan.

The proposition to join a commercial agency ordinarily striking no responsive chord in the prospect, the agent would casually inquire if the concern had not some time before sustained loss through a certain bankruptcy. Receiving an affirmative reply, the agent would suggest further facts in regard to the loss that the particular lead card showed, and might inquire as to other bankruptcies in which the lead card had informed him the prospect was interested. The prospect, not suspecting the deliberate manner whereby the information had been obtained, nor the purpose of it, would inquire how the agent knew of these things, and was informed that his concern made a specialty of looking up and collecting desperate claims, particularly from bankrupts, and would then suggest as to one or more of these bankruptcies that they had discovered a responsible silent partner, or that the debtor had concealed a large amount of assets or had in some other suggested manner perpetrated a fraud upon his creditors, and would often say that they had already instituted proceedings for other creditors of the same bankrupt which promised very early success, and would like to include . . . claim, and in many cases would state that attachment proceedings had been begun, or were about to be begun on discovered property, and that they had property secured sufficient to pay the creditors, and that it would be a matter of only a short time, frequently fixed by the agent, before the claims against the bankrupt, which were turned over to them, would be realized fully or in large part. The calculated and the frequent effect of such representations was to induce in the mind of the prospect a belief that, if the claim was turned over, payment within a short time (often designated) would be certain to follow.

This agent did not proceed so far as to suggest that the prospect should make any payment in advance, but he invariably suggested to the prospect that not only as to the claims referred to, but as to the collection of all old and desperate claims, his concern were specialists, and that, if the prospect would supply him with a list of all his old and desperate claims, he would send in the list to the home office, and obtain from the office a proposition for the collection of such claims, and that, if the prospect did not accept the proposition, no possible liability would be incurred. This appearing to be fair, a list of such old delinquent claims was prepared and given the agent, and was by him mailed to Wendler or Preeman. Thereupon a letter was sent by Wendler to the prospect, advising of receipt of the list handed the solicitor for the purpose of arriving at a basis for charge for the service, and that in due time a special agent will call and submit a contract.

In the course of a few weeks another person would call on the prospect, presenting a proposition for making the collections, which was in the form of a long contract, mostly in fine print. This man was known as the 'contract man' or 'closing man'; the solicitor who secured the list being known as the 'list man' or solicitor. Through the presentation of the proposed contract the prospect was first informed that he was expected to pay the agency in advance a specific sum which was written in the contract. It appears that the sum to be paid was usually arrived at through Mr. Preeman first making an estimate of the amount to be written in the contract as the 'minimum recovery,' to be later explained, which was arbitrarily fixed at approximately 20 per cent. of the total of the claims listed, and that the 'realization charge' was arbitrarily fixed at 25 per cent. of the 'minimum recovery,' so that, in case the prospect had submitted old claims aggregating, say, $20,000, the minimum recovery would be fixed at about $4,000, and the realization charge at about $1,000, which last amount the contract man undertook to get the prospect to pay in advance. Of course, the prospect generally demurred to paying anything in advance, particularly the amount asked, which was usually a substantial sum. In the excellent 'teamwork' which the evidence revealed, it appears that the contract man was also supplied with 'lead cards,' and in most instances he knew generally or specifically the particular sort of story the list man had told the prospect concerning the collectibility of the bankrupt claims. Such stories, which never had the remotest foundation in truth, beyond the fact that the bankrupt claims existed, the contract man would reiterate, and in many instances amplify, stating (out of whole cloth) the further progress that had been made in a particular matter, holding out roseate prospect of speedy realization thereon, in which case, through such collection alone, the required advance payment would be largely, if not fully, repaid, or even yield a surplus over the payment, but usually suggesting that, unless the prospect promptly came in he would lose the benefit of the proceedings which were in progress against the particular bankrupt debtor. That the list men and contract men well knew that all these stories of secret partners, concealed assets, fraud, attachment, and other proceedings, and all the representations as to the collectibility of the bankrupt claims were wholly false, appears from the fact that they themselves usually concocted the particular tale to suit the particular case.

To enable contract as well as list men to further impress the prospect, each of them was provided with a formidable outfit of letters of recommendation, some purporting to be originals, but most of them photographs or other reproductions, lauding the agency for its achievements, and some of them referring to specific instances where collections had been made from debtors who had gone into bankruptcy. Some of the latter were genuine letters, but the evidence shows they were...