Salas v. United States

• Decision Date: 24 June 1916
• Docket Number: 170.
• Citation: 234 F. 842
• Parties: SALAS v. UNITED STATES.
• Court: U.S. Court of Appeals — Second Circuit

234 F. 842

SALAS v. UNITED STATES.

No. 170.

United States Court of Appeals, Second Circuit.

June 24, 1916

William Rand, Jr., of New York City (Phanor J. Eder, of New York City, of counsel, and Vine H. Smith, of New York City, on the brief), for plaintiff in error.

H Snowden Marshall, U.S. Atty., of New York City (F. E Carstarphen and Harold Harper, Asst. U.S. Attys., both of New York City, of counsel), for the United States.

Before COXE and WARD, Circuit Judges, and CHATFIELD, District Judge.

WARD Circuit Judge.

This is a writ of error to a judgment convicting the defendant Salas of conspiring with one Bermudez and one Burke to defraud the United States under section 37 of the Penal Code, which reads:

'Sec 37. If two or more persons conspire either to commit any offense against the United States, or to defraud the United States in any manner or for any purpose, and one or more of such parties do any act to effect the object of the conspiracy, each of the parties to such conspiracy shall be fined not more than ten thousand dollars, or imprisoned not more than two years, or both.'

Burke was called as a witness by the government, the case severed, and Salas tried alone. He did not take the stand. Burke was a citizen of the United States, residing at Cristobal, Isthmus of Panama, and manager of the commissary department of the Panama Railroad Company, a corporation of the state of New York, while Bermudez and Salas were Spanish-Americans, residing and carrying on business at Colon in the republic of Panama.

The government proved that these three persons entered into an agreement at Colon to share equally in the profits to be made from sales of a certain brand of tobacco by Salas and Bermudez to the Panama Railroad Company. Burke, as manager of the department, was to order and pass upon the tobacco and approve the vouchers to be issued by the railroad company in payment for it. Between May 27, 1908, and February 9, 1914, such tobacco was sold to the value of about $200,000. Burke received his share of the profits made by the sellers in the form of drafts drawn in Colon upon firms or banks in New York City. These drafts are the overt acts pleaded in the indictment as intended to effect the object of the conspiracy.

No actual loss is proved to have been sustained in the purchase of the tobacco. The price paid was not shown to be unfair and it was all subsequently sold at a profit. An agreement to give an agent a share of the fair profits in goods sold to his principal, however indelicate or even immoral, is not a crime unless made so by statute. There is no pretense that there is any such statute in the republic of Panama. If, however, the conspiracy was to defraud the United States, as the government contends, then there was enough evidence of constructive fraud to justify conviction under section 37 of the Penal Code, provided the conspiracy, though formed in the republic of Panama, was effected in the United States. Crawford v. United States, 212 U.S. 183, 29 Sup.Ct. 260, 53 L.Ed. 465, 15 Ann.Cas. 392; Haas v. Henkel, 216 U.S. 462, 30 Sup.Ct. 249, 54 L.Ed. 569, 17 Ann.Cas. 1112.

The theory of the United States is that the Panama Railroad Company is a governmental department, and Burke, though on the pay roll of and paid by that company, was an officer of the United States. The trial judge so held as matter of law. The Isthmian Canal Commission was an agency of the United States under the supervision of the War Department, having complete control of the building of the canal. The United States was also the owner of the whole capital stock of the railroad company, absolutely dominating it and solely interested in its profits or losses. The government, however, continued the original corporate organization of the railroad company for its own purposes, among others to avoid the restrictions of certain laws of the United States applicable to the Commission. Accordingly there was created a department called the 'subsistence department,' composed of the labor, quarters, and subsistence department of the Commission, which furnished all food supplies to the employes on the Isthmus and the commissary department of the Panama Railroad Company, which bought, carried, and furnished all other merchandise and supplies. Burke was the manager of the latter. When the United States enters into commercial business it abandons its sovereign capacity and is to be treated like any other corporation. Bank of United States v. Planters Bank, 9 Wheat. 904, 6 L.Ed. 244. Although it absolutely owns the Panama Railroad Company and is the only person profiting or losing by its activities, still the railroad company sues and is sued just like any other corporation, in its own name. If this tobacco had been deficient in quality, the railroad company could have sued Salas to recover the damages, and if it had not been paid for Salas could have sued the railroad company for the price. Therefore we are of opinion that the combination proved did not defraud or intend to defraud the United States.

If, however, it be conceded that Burke, though on the pay roll of and paid by the railroad company, was an officer of the United States and acting as such in the purchase of tobacco, the agreement as proved did not, in our opinion, satisfy the requirements of the case. The statute clearly contemplates that the parties shall intend to defraud the United States and the indictment charged such an intent. The government offered in evidence a large mass of documents to prove the relations of the railroad company and the Commission and that the railroad company was a mere governmental department. We discover nothing in the evidence to justify the jury in finding, at least beyond a reasonable doubt, that Salas knew anything about these complicated relations, or that the United States was buying this tobacco through the railroad company. Indeed, Burke himself, who testified as a witness for the government, said that he considered himself to be an employe of the railroad company and not of the United States.

We come now to consider the overt acts. As the indictment was filed March 15, 1915, only two of the Colon drafts which are relied on are within the statute of limitations. Exhibits 29 and 31 are as follows:

Government's Exhibit 29.

'Draft...