Sandals v. United States

• Decision Date: 05 May 1914
• Docket Number: 2396.
• Citation: 213 F. 569
• Parties: SANDALS et al. v. UNITED STATES.
• Court: U.S. Court of Appeals — Sixth Circuit

213 F. 569

SANDALS et al. v. UNITED STATES.

No. 2396.

United States Court of Appeals, Sixth Circuit.

May 5, 1914

[Copyrighted Material Omitted]

Plaintiffs in error were convicted on charges of using the United States mails in execution of a scheme to defraud. The scheme is set out in the first count of the indictment, and is incorporated into the subsequent (seven) counts by specific reference; and its execution as far as alleged is shown in the ordinary manner in each of the counts. The scheme as devised and intended by defendants was, in substance, to defraud numerous persons, some of whom are named and still others unknown, and to obtain from them money by means of false and fraudulent pretenses, representations, and promises; and to effect these ends letters, circulars, and communications were to be sent through the post office establishment of the United States. The scheme also involved the formation of a partnership and a corporation, the former under the name of Sandals, Griffin &amp Co., and the latter under that of the Sterling Oil Company to be incorporated under the laws of Arizona in March, 1909; and, under the partnership name, the defendants were to engage in business as fiscal agents of the corporation to sell its capital stock. A contract for this purpose was to be made between defendants and the corporation, providing that they should turn over to it (in trust, subject to conditions that need not here be mentioned) certain oil properties located in Illinois and Oklahoma, for which the corporation should issue to them a large number of shares of its paid-up capital stock; that they should apply 60 per cent. of the proceeds of sales toward the discharge of certain obligations they had incurred upon the acquisition of the properties and their equipment for the production of oil. It was further designed as part of the scheme that defendants should then, through letters, circulars, and communications, represent that the company was operating a number of large and productive oil properties and marketing the oil at great profit, was sinking and planning to sink numerous wells, and was possessed of the best oil properties in the land; that large parts of the purchase prices of the properties had been paid, and from time to time further payments would be made until the obligations were discharged; that out of its net proceeds the company was paying a monthly dividend of 2 per cent. and an additional quarterly dividend of 3 per cent. upon the purchase price of each share of stock.

Further, it was alleged that these representations were made, but that defendants knew they were not true; that the prices at which the stock was sold were arbitrarily fixed by defendants; that the dividends were wholly fictitious and false; and that the purpose was to sell the stock and convert large portions of the proceeds to defendants' own use.

Copies of some of these letters, circulars, and communications are set out in the portions of the several counts which allege execution of the scheme. There does not seem to be any dispute as to the authenticity of the originals, nor as to the fact that they were at the dates alleged (beginning in May and ending in October, 1910), addressed and mailed, with proper postage prepaid, in the post office of the United States in the city of Cleveland, Ohio, where the offices of the defendants and of the corporation were maintained.

At the beginning of the trial defendants' counsel objected to the introduction of evidence, because the indictment did not charge an offense punishable by law. At the close of plaintiff's evidence defendants moved the court to direct a verdict in their favor on the grounds of insufficiency of the indictment and of the evidence; and at the close of all the evidence defendants moved that they be discharged and the case against them dismissed for like reasons. These matters were overruled, and exceptions allowed. Assignments of error touching these and other rulings are presented here, and are disposed of in the opinion, so far as they are regarded as of present importance.

T. F. Turner, of Canton, Ohio, and John J. Sullivan and Jerome F. Patterson, both of Cleveland, Ohio, for plaintiffs in error.

U. G. Denman, of Toledo, Ohio, for the United States.

Before WARRINGTON and DENISON, Circuit Judges, and SATER, District judge.

WARRINGTON Circuit Judge (after stating the facts as above).

We are convinced that the judgment below will have to be reversed and a new trial awarded for error in the charge; but in the first place we shall dispose of several initial questions which might otherwise recur at the next hearing.

It is urged that two distinct dates are laid in each count of the indictment as the time of the offense. This is a mistake. Counsel seem to be in doubt whether the offense charged was committed when the scheme was devised or when it was carried into execution. While defendants were entitled to be so advised of the particulars of the scheme as to enable them to prepare their defense (Foster v. United States, 178 F. 166, 171, 101 C.C.A. 485 (C.C.A. 6th Cir.)), yet devising the scheme was not the offense. The offense denounced by the statute was the alleged use of the post office establishment in execution of the scheme. Milby v. United States, 120 F. 1, 4, 57 C.C.A. 21 (C.C.A. 6th Cir.); O'Hara v. United States, 129 F. 551, 554, 64 C.C.A. 81 (C.C.A. 6th Cir.); Gould v. United States, 209 F. 730, 734, 126 C.C.A. 454 (C.C.A. 8th Cir.); Stockton v. United States, 205 F. 462, 466, 123 C.C.A. 530, 46 L.R.A. (N.S.) 936 (C.C.A. 7th Cir.); Lemon v. United States, 164 F. 953, 957, 90 C.C.A. 617 (C.C.A. 8th Cir.); Brooks v. United States, 146 F. 223, 226, 76 C.C.A. 581 (C.C.A. 8th Cir.).

The indictment appears to have been drawn in accordance with old section 5480, Revised Statutes (U.S. Comp. St. 1901, p. 3696), and consequently was more than adequate in its allegations under section 215 as construed in United States v. Young, 232 U.S. 156, 161, 34 Sup.Ct. 303, 58 L.Ed. . . . .

It is further claimed that defendants could not be prosecuted because the scheme is laid as of January, 1909, and section 215 of the federal Penal Code was not enacted until January, 1910. This ignores alike the statutory inhibition existing in 1909 (section 5480), the time shown to have been consumed in developing the scheme, and the allegations charging defendants with having intended to execute it at the times they used the mails after the passage of the law. Besides, section 215 seems to contemplate, among others, a situation like this; for it provides:

'Whoever, having devised * * * any scheme * * * to defraud * * * shall, for the purpose of executing such scheme * * * place, or cause to be placed, any letter * * * in any post-office, * * * to be sent or delivered by the post-office of the United States, * * * shall be fined,' etc. 35 Stat.p. 1130.

And, moreover, section 343 expressly authorizes the prosecution and punishment of offenses committed prior to enactment of the Penal Code 'in the same manner and with the same effect as if this act had not been passed.' 35 Stat. p. 1159; Smith v. United States, 208 F. 131, 132, 125 C.C.A. 353 (C.C.A. 8th Cir.). It cannot be, then, that where only the devising of the scheme occurred before the passage of the act, its execution thereafter is any the less an offense.

Enough has been said to dispose of the objection made at the opening of the trial to the introduction of any evidence, and also of the motion made at the close of plaintiff's evidence to direct a verdict in favor of defendants, on the ground of insufficiency of the indictment.

The claim of insufficiency of evidence, also offered in support of this motion, was waived by the introduction of evidence for defendants. Gould v. United States, supra, 209 F. 735, 126 C.C.A. 454; Simpson v. United States, 184 F. 817, 820, 107 C.C.A. 89 (C.C.A. 8th Cir.); Leyer v. United States, 183 F. 102, 104, 105 C.C.A. 394 (C.C.A. 2d Cir.); Burton v. United States, 142 F. 57, 59, 73 C.C.A. 243 (C.C.A. 8th Cir.). The motion made at the close of all the evidence, that the defendants be discharged and the case dismissed for insufficiency of evidence, was rightly denied. And, since the evidence to be adduced at the next hearing may differ from that offered at the last trial, we content ourselves with saying that the present record required submission of the case to the jury.

We are thus brought to a consideration of the charge of the court. The complaint of counsel for defendants is in effect that portions of the instructions respecting some of the facts and also the conduct of persons not on trial, were such as to prevent the jury from exercising a free and independent judgment. This may be better understood in connection with a brief statement of the position taken by defendants at the trial and some portions of the charge to which the complaint relates. The defense and the claim of defendants, as well as the tendency of proofs they offered through their own testimony and that of others, including correspondence, contracts, and the like, were in substance a denial of fraudulent intent, and, on the contrary, an insistence of good faith, in every transaction alleged in the indictment and shown in the evidence; that prior to the date of the alleged scheme to defraud they had arranged to secure certain oil property, first by option and later by lease, which they had good reason to...