Schauble v. United States, 8697.

• Decision Date: 16 April 1930
• Docket Number: No. 8697.,8697.
• Parties: SCHAUBLE v. UNITED STATES.
• Court: U.S. Court of Appeals — Eighth Circuit

40 F.2d 363 (1930)

SCHAUBLE v. UNITED STATES.

No. 8697.

Circuit Court of Appeals, Eighth Circuit.

April 16, 1930.

E. B. Silvers and E. H. Wright, both of Kansas City, Mo. (M. E. Casey, of Kansas City, Mo., on the brief), for appellant.

S. M. Carmean, Asst. U. S. Atty., of Kansas City, Mo. (William L. Vandeventer, U. S. Atty., of Kansas City, Mo., on the brief), for the United States.

Before STONE and VAN VALKENBURGH, Circuit Judges, and DAVIS, District Judge.

VAN VALKENBURGH, Circuit Judge.

Appellant was indicted and convicted for fraudulent use of the mails under section 215 of the Criminal Code (18 USCA § 338). The indictment contained seven counts, and conviction resulted upon each count. The court imposed sentences of fine and imprisonment, the terms of imprisonment to run concurrently. The indictment is too long for repetition here. In general it charges that appellant had devised a scheme and artifice to defraud, and for obtaining money by means of false and fraudulent representations, pretenses, and promises, from a certain class of persons then residents in divers states of the United States; that is to say, "from the persons whom said defendant should, by the means hereinafter described, induce to send and pay their money and property to said defendant, under the name of Investors Daily Guide, for the purchase of so-called `Advance Guarantees,' `Decline Guarantees' and `Spread Guarantees' based on and relating to the fluctuation in price of grain, wheat, corn and oats in the future, and to convert said money and property to his own use without giving or intending to give to said persons to be defrauded anything of an equivalent value therefor, which said scheme and artifice was to be effected by the use and misuse of the Post Office establishment of the United States by said defendant himself, and by inciting, encouraging and causing other persons to enter into communication and correspondence with him by means of said Post Office establishment of the United States, said use and misuse of said Post Office establishment being a part of said scheme and artifice. * * *"

The indictment, in describing the scheme, alleges that appellant was to designate himself as manager of the Investors' Daily Guide, which was not incorporated, otherwise organized, nor having any legal entity, appellant being the sole owner, and person interested therein. That said Investors' Daily Guide should be held out as a regularly established, reputable, and substantial concern, of high business standing, financially responsible, and engaged in a legitimate business connected with operations in grain. By means of letters, circulars, and other printed matter, the public were to be advised that the Investors' Daily Guide dealt extensively in what were called "Advance Guarantees," "Decline Guarantees," and "Spread Guarantees," as a protection against futures and cash transactions; that such were traded in extensively by professional brokers and grain shippers, to whom they were profitable, and that, through the Investors' Guide, they might be equally available and profitable to outside traders, less experienced and less familiar with grain operations. The customer would pay to the appellant, through this so-called Investors' Guide, and through submanagers and employees designated by appellant, $12.50 for an "Advance Guarantee," or a "Decline Guarantee," and twenty-five dollars for a "Spread Guarantee." A "Spread Guarantee" includes both an "Advance" and a "Decline" in one contract. Upon receipt of the money appellant would issue to the patron a contract, usually effective for a seven-day period, and dealing with 10,000 bushels of grain. In this contract he agreed to pay the customer one cent per bushel for each cent the market fluctuated above the price specified in an "Advance Guarantee," or below the price specified in a "Decline Guarantee," during the contract period. Of course a "Spread Guarantee" covered both rise and fall in the same contract. This specified price, above or below which the market might fluctuate with profit to the customer, was fixed by appellant and was supposed to be set with respect to the market price on the day the contract was issued. Concerning this procedure, the indictment charges thus:

"Said defendant further planned as a part of said scheme and artifice that upon receipt of said money he would give to said person so remitting the same a memorandum receipt, confirmation or contract therefor, bearing the date of receipt of said money, and indicating that said person had purchased Advance, Decline or Spread Guarantees, any or all of them, as ordered in that particular transaction, and depending as to the amount of grain upon the amount of money sent to the defendant by said person; and he further planned under his said scheme and artifice that in said memorandum receipt, confirmation or contract, and therein only, he would arbitrarily fix the prices in said Advance, Decline and Spread Guarantees for each person so remitting money to him, so that such person would not know the actual Guarantee prices at which he was buying until he had forwarded his money and received said memorandum from the defendant so fixing said prices; and the defendant planned that such arbitrary price in case of a purchase of an Advance Guarantee should be several cents above the market price of the grain on which said Advance Guarantee was purchased, and in case of the purchase of a Decline Guarantee then the price would be fixed several cents below such market price, and if a Spread Guarantee were purchased then he would fix such arbitrary prices several cents above and below such market price; and that said Guarantee prices so arbitrarily fixed by him as aforesaid, above and below said memorandum date market prices, should and would be fixed at a figure so far above and so far below said receipt date market prices, that there would be no probability of the market price fluctuating to such a point above or below the market price of the grain covered by said guarantees as would result in a profit to said person so to be defrauded."

The indictment further charges that in letters, circulars, or printed advertising matter, appellant would represent that "the market has only to move one cent beyond the price of your protection to afford you the chance of taking a difference of $100 on each 10,000 bu.; 2c, $200; 3c, $300; 4c, $400; 5c, $500, etc."; but that in the face of this statement a profit, if shown, would be limited to $200 on a $25 investment, and in that proportion.

As a part of the foregoing representation the following appears in one of the exhibits in large letters: "Your Cost is limited to $12.50 on each 10,000 bu. of wheat, corn or oats." In the same exhibit this statement appears: "We charge no commission, as this is covered in the price specified for Advance and Decline Guarantees when bought." It was the practice, however, in the rare cases in which a profit accrued, to charge a commission of one-fourth of 1 per cent. per bushel on the amount won, and a like commission for reinvesting or rebooking such earnings, all without the knowledge or consent of the customer, and to send him, in lieu of cash, a credit memorandum showing the balance placed to his credit on the books of the Investors' Daily Guide.

There are many other details of the fraud charged, but the foregoing will be sufficient to disclose its nature and scope.

Five points are urged and relied upon by appellant in brief and argument. They are:

(1) The court erred in overruling appellant's motion to quash the indictment and his motion for the return of certain papers and documents alleged to be the property of appellant, wrongfully in the possession of the government officers, and to have been used wrongfully in procuring the indictment.

(2) The indictment is fatally defective in that it fails to allege affirmatively the facts relied upon, but attempts to plead the facts by inference and recital.

(3) The evidence failed to prove the scheme charged. The indictment attempted to allege a scheme to defraud a specific class and there was no attempt to prove the existence of a class.

(4) The evidence failed to establish a fraudulent intent.

(5) The assistant United States attorney committed reversible error in his argument to the jury.

1. The motions to quash and for return of papers, and the evidence taken upon these motions, all recite that prior to the returning of the indictment there was a hearing before a solicitor of the Post Office Department, representing the Postmaster...