Scheib v. United States

• Decision Date: 18 May 1926
• Docket Number: No. 3578-3589.,3578-3589.
• Citation: 14 F.2d 75
• Parties: SCHEIB v. UNITED STATES, and eleven other cases.
• Court: U.S. Court of Appeals — Seventh Circuit

14 F.2d 75 (1926)

SCHEIB v. UNITED STATES, and eleven other cases.^*

Nos. 3578-3589.

Circuit Court of Appeals, Seventh Circuit.

March 11, 1926.

Rehearing Denied May 20 and September 18, 1926.

A. R. Russell, of St. Louis, Mo., for plaintiff in error Scheib.

John F. Robbins, of Indianapolis, Ind., for plaintiff in error Anderson.

Robert C. Merritt, of Dallas, Tex., for plaintiff in error Webb.

Patrick H. Cullen, of St. Louis, Mo., for plaintiff in error Sacks.

Luther Day, of Cleveland, Ohio., for plaintiff in error Bovard.

Floyd J. Mattice, of Indianapolis, Ind., for plaintiffs in error Carter and McCallum.

Frederick Van Nuys, of Indianapolis, Ind., for plaintiff in error Jones.

Martin M. Hugg, of Indianapolis, Ind., for plaintiffs in error Haight and Willis.

Benjamin P. Epstein, of Chicago, Ill., for plaintiff in error Sax.

Cassius C. Shirley, of Indianapolis, Ind., for plaintiff in error Jaqua.

Homer Elliott, of Indianapolis, Ind., for the United States.

Before ALSCHULER, EVANS, and PAGE, Circuit Judges.

ALSCHULER, Circuit Judge.

1. Plaintiffs in error, 12 in number, with 7 others, were together indicted, charged with violation of sections 215 and 37 of the federal Criminal Code (Comp. St. §§ 10201, 10385). Sebring, one of the defendants, died before trial. Hawkins and Sapp defaulted and not tried. Two of them, Succop and Clark, were acquitted. The rest were convicted. Two of these, Sutton and Harrington, accepted the penalty, which, in their cases, was a fine only. Defendants Scheib, Bovard, Webb, Sacks, Carter, and Jones were each sentenced to five years' imprisonment and $2,000 fine; Haight, Willis and Jaqua, each two years' imprisonment and $2,000 fine; and defendants Anderson, McCallum, and Sax one year. The verdict was general, and the penalties imposed were upon each of the 16 counts, to run concurrently. The indictment is voluminous — 132 pages of the printed record. Each of the first 15 counts alleges the same scheme to defraud, charging in each a separate use of the mails in its execution.

Briefly stated, the fraudulent scheme charged had for its object selling to the public capital stock of the Hawkins Mortgage Company and of its subsidiaries, various so-called welfare loan societies, at prices vastly in excess of their value; that the defendants were to falsely represent to the intended victims that the shares of stock would yield large dividends, and be of large and increasing value, and that the business was being profitably conducted; the fact being that defendants knew the stocks had little or no value, that the fixed sale prices were fictitious, and that the corporate business was being conducted at large and growing annual loss. That they would falsely represent that preferred stock in the welfare societies would be a safe and profitable investment, and that the Hawkins Mortgage Company, with its $9,000,000 of assets, would stand back of each welfare society; the defendants well knowing that the Hawkins Company did not have $9,000,000, or anywhere near that amount, in assets, and that it was not in fact back of the welfare societies, but was drawing large amounts from them, and thus reducing what assets they had. That the defendants would cause the Hawkins Mortgage Company to purchase or otherwise obtain control of other mortgage and loan companies which were supposed to be in trouble, but which had assets of value, and would enter into arrangements whereby the Hawking Mortgage Company would control the board of directors of such other companies, and through false representations as to the value of the stock of the Hawkins Mortgage Company induce those who held stock or contract interests in such other mortgage and loan companies to exchange same for stock of the Hawkins Mortgage Company. And the defendants should falsely represent to the holders of stock and other interests in such other mortgage or loan companies that thereafter those companies could not profitably operate, and urging that such stock or other interests could and should be exchanged at par for stock in the Hawkins Mortgage Company; that the Hawkins Mortgage Company and its predecessors had been in honorable and successful business of generally similar nature for nearly 100 years, and that its assets were more than $9,000,000, and paid-up capital and surplus and undivided profits were more than $2,000,000; that such representations were known by the defendants to be untrue, and that they intended thus to possess themselves of the assets of such other mortgage and loan companies by exchanging therefor stock of the Hawkins Mortgage Company, which had little or no value. That these defendants would devise for circulation a so-called "guaranty bond" of the Hawkins Mortgage Company, wherein it should be falsely represented that the bond secured to holders of preferred stock of the welfare societies payment of substantial dividends thereon, and would refer to such bonds in the company's literature for the purpose of inducing the public to buy preferred stock of the welfare companies, but that the defendants knew the Hawkins Mortgage Company would not and did not intend to advance such dividends, but, on the contrary, would withhold from the societies a part of their funds as dividends, and thus make it appear that the Hawkins Company out of its own funds was paying the guaranteed dividends, all for the purpose of fraudulently inducing others to buy stock of the welfare societies.

That there should be organized a concern known as the Cincinnati Bond & Investment Company, in control of some of the defendants, and that such bond and investment company would circulate literature from which the public should conclude that it was an independent concern, and had investigated the Hawkins Mortgage Company and found it to be a sound concern, in which every investment would be secured; the object being to produce in the intended victims the belief that this independent company was giving its good faith judgment upon the security afforded by investment in the stock, in order to stimulate the public to buy more of it, whereas the defendants knew that the Cincinnati Bond & Investment Company was but an instrument of the Hawkins Mortgage Company, created only for the purpose of falsely and fraudulently influencing the public to buy the stock of the Hawkins Mortgage Company and of the welfare societies. That defendants would falsely represent that they created a "pool" of common stock of Hawkins Mortgage Company, in order to build up and protect the market for the Hawkins Mortgage Company stock, and increase its selling price, and should represent that funds of widows and orphans would be absolutely protected from loss, and that the Hawkins Mortgage Company would protect the stockholders, and stand back of the welfare societies, whose stockholders would have the double protection of the welfare society itself and the Hawkins Mortgage Company bond guaranteeing the safety of the money invested, which would be further secured by all the loans made by the welfare societies, and that dividends would be regularly paid on the welfare society stock to the extent of 8 per cent. in each; that all such representations and statements defendants knew to be false. That the defendants, under the pretense of salaries, loans, bonuses, commissions, and drawing accounts, would convert to their own use whatever was paid in by their intended victims in consideration for their purchase of the aforesaid stock.

Each of the 15 counts concludes with an allegation that, for the purpose of executing the alleged scheme, the defendants, on the date and at place named, deposited in the United States post office for transmission to the addressee, a letter contained in an envelope, the address whereon is set forth, but no further description is made of the letter. The sixteenth count charges a conspiracy to violate section 215 of the Criminal Code, through the defendants' conspiring and combining to form a fraudulent scheme, such as is set out in the previous counts, and to make unlawful use of the United States post office establishment in the execution of such scheme. A large number of overt acts are charged as being in furtherance of the alleged conspiracy.

2. There is plainly nothing in the contention that the scheme alleged is not sufficiently definite, or does not constitute such a fraudulent scheme as is contemplated by the statute.

It is contended that all the counts are defective, in that each of them charges a plurality of schemes, artifices, or conspiracies. We do not regard them as properly subject to this objection. The general purpose of inducing persons to buy or exchange for stock of the Hawkins Mortgage Company and of the welfare societies, to the distinct disadvantage of such persons, runs through the entire indictment. Surely each separately alleged manifestation of the same general purpose to defraud the public does not constitute a distinct scheme or artifice, but is only a detail in the general plan to induce persons to part with money or other valuable thing in exchange for the practically valueless stock. The unity of the alleged scheme or artifice to defraud sufficiently appears from the indictment, and the various means to that end which the indictment charges do not in and of themselves constitute allegations of separate schemes, artifices, or conspiracies.

The first 15 counts are attacked, because they do not set out or describe the letters charged to have been mailed. It is urged that, unless the letter itself is set out, one might not be able to defend against a second prosecution for the mailing of the same letter. But practically the danger is not apparent. In the first prosecution the letter would have to be produced, as well as evidence to connect it with the fraudulent scheme. On a second prosecution it might be shown by evidence whether the letter then relied on was the same as that which was the subject of the first ...