State v. Douglas

• Decision Date: 20 November 1944
• Docket Number: 8594
• Citation: 16 N.W.2d 489,70 S.D. 203
• Parties: STATE OF SOUTH DAKOTA, Respondent, v. WILLIAM G. DOUGLAS, Appellant.
• Court: South Dakota Supreme Court

70 SD 203, 16 NW2d 489 (1944)

STATE OF SOUTH DAKOTA, Respondent v WILLIAM G. DOUGLAS, Appellant South Dakota Supreme Court Appeal from the Circuit Court, Brown County, SD Hon. Van Buren Perry, Judge #8594—Reversed Van Slyke & Agor, Aberdeen, SD Attorneys for Appellant. George T. Mickelson, Attorney General E. D. Barron, Assistant Attorney Gen., Pierre, SD Elmer Thurow, State’s Attorney, Aberdeen, SD Attorneys for Respondent. Opinion Filed Nov 20, 1944

BAKEWELL, Circuit Judge.

The defendant, William G. Douglas, the then State Treasurer of this State, was prosecuted and tried in the Circuit Court of Brown County on an information containing four separate counts, of which counts 1, 2 and 4 charged a violation of SDC 55.9917 and count 3 was grounded on SDC 55.2304. He was acquitted as to count 2, but convicted as to counts 1, 3 and 4 and sentenced to pay fines aggregating $5,000 and to serve a total of five years in the penitentiary, from which judgment of conviction he has appealed.

Count 1 of the information charges in substance that defendant on April 14th, 1940, being then and there the State Treasurer of this state, used $302,791.58 of state funds in his custody to purchase certain South Dakota internal improvement bonds which were outstanding obligations of the state and of a par value of $260,000 from the Clarence J. Burns Company, and that this company and one Phill T. Burns in consideration of such purchase paid to defendant the sum of $1,000 in money and thereby defendant made a profit out of state money of which he had custody.

Counts 2 and 4 relate respectively to the purchase on May 26th, 1940, of South Dakota internal improvement bonds of the par value of $200,000 from the Burns Company for $233,799.77 and a repayment to defendant of $500 and the purchase on July 10th, 1939, of soldiers’ compensation bonds of the par value of $70,000 from the Clarence J. Burns Company for $79,000.38 and a repayment to and resulting profit for defendant of $51.10.

Count 3 relates to the same $51.10 which defendant is charged in count 4 with having received from the Clarence J. Burns Company and Phill T. Burns as a profit from the use of state funds in his custody, but here he is charged with having received it for the performance of a duty of his office in the registration of the $70,000 of soldiers’ compensation bonds referred to in count 4.

The prosecution resulted from a series of transactions between the defendant in his official capacity and one Phill T. Burns, vice president of the Clarence J. Burns Company, a corporation, engaged in the bond brokerage business at Aberdeen, South Dakota. The details of these transactions as developed at the trial and as they relate to counts 1 and 2 of the information are substantially as follows:

The defendant became State Treasurer on January 1st, 1939. When he entered upon the duties of his office the State of South Dakota had outstanding certain bond issues, to-wit: Soldiers’ bonus, rural credit and internal improvement bonds. His predecessor in office had inaugurated the practice of using money as it accumulated in the several bond sinking funds for the purchase of such of these several outstanding unmatured obligations of the state as could be advantageously acquired. This practice was continued by the defendant and its legality and propriety as a profitable and proper investment is not here questioned. The mechanics of the purchase of these bonds which had been set up by defendant’s predecessor and which was followed by the defendant was to buy these bonds from such banks, bond houses and brokers as had acquired them for resale. The evidence shows the purchase of bonds by both the defendant and his predecessor in office to have been made through a large number of banks, brokers and investment houses in Minneapolis, St. Paul, Chicago, Omaha, Sioux City and elsewhere, including the firm of Clarence J. Burns Company of Aberdeen, South Dakota. The purchase price of all the bonds so purchased was paid by treasurer’s checks issued by the defendant and the evidence discloses that total purchases of bonds were made by the defendant from the Clarence J. Burns Company to the amount of slightly less than $2,300,000. In April, 1941, Phill T. Burns agreed to sell defendant $15,000 of Rural Credit Bonds for $15,421 and sent defendant an invoice for these bonds on that basis. Defendant thereupon sent a check to Burns for the amount of the invoice and followed this with a further remittance of $27,000 for the purchase of still another bond issue which, however, Burns failed to deliver. This latter amount, after long delay, was finally recovered by defendant from Burns, but the $15,000 of Rural Credit Bonds were not forthcoming. It then developed that Burns had used the purchase money of the latter issue in speculation in the stock market and was unable either to repay it or to deliver the bonds. Upon learning this the defendant brought the matter to the attention of the Attorney General’s office. with the result that Burns was charged with embezzlement and tried thereon in Brown County. At the trial Burns made charges of wrongdoing against the defendant and other state officers, claiming that such officers had, in concert with each other and with him, divided a profit arising from a certain bond transaction had in June 1939. The prosecution of Burns for embezzlement resulted in a directed verdict on his motion for acquittal and this was immediately followed by the arrest and trial of this defendant and the other state officers so incriminated, and incidentally, of Phill T. Burns. To this charge Burns immediately plead guilty while the other defendants stood trial and were acquitted. Defendant was then charged with the offenses which are the subject of this prosecution and Burns, who had not yet been sentenced and was free on bail, appeared in the role of star witness for the state. He testified that some time shortly after defendant took office he called upon defendant and solicited a continuation of the patronage he had enjoyed with defendant’s predecessor during his tenure of office. He fixed this conversation as having occurred in June or July of 1939. Although denied by defendant, Burns testified that in this conversation he told the defendant Douglas that he would try to protect him for 30 % of anything he made on any business given him by Douglas. He further testified that after he promised to pay defendant this 30% of his profits he purchased the South Dakota internal improvement bonds described in count 1 of the information for $299,794.30 and immediately thereafter resold them to defendant as State Treasurer for $302,791.58 for which he received a treasurer’s check. He further testifies that thereafter and on or about April 12th, 1940, he placed $1,000 in currency in an envelope and then in company with one Pete Schneider, an employee of the Burns Company, drove from his office in Aberdeen to Pierre where he contacted defendant in his office. He then relates that he, with Schneider and the defendant, left the Treasurer’s office in the capitol building and entered witness’s automobile in which they then drove to defendant’s residence. Here the witness testifies he handed the envelope in which he says was contained the $1,000 to defendant. The witness Schneider corroborated Burns as to the trip from Aberdeen to Pierre and as to Burns having handed the envelope to defendant, but says that he does not know what was contained in the envelope. Defendant says there was only $40 in the envelope, but admits that this $40 together with $150 in June, 1939, $50 in August, 1939, $50 at Christmas time in 1939 and another $50 in October, 1940, were paid to him by Phill T. Burns as contributions to his campaign fund and as a Christmas present and in this respect defendant’s testimony is not disputed by the witness Burns or otherwise.

The offenses charged are not grounded on the fact that defendant expended state funds in purchasing these obligations, in excess of his official power, nor that the purchase price thereof was excessive, but only that in connection with the use of such funds he made a profit for himself in violation of the Constitution and laws of this state.

The Constitution, Art. XI, Sec. 11, provides:

“The making of profit, directly or indirectly, out of state, county, city, town or school district money, or using the same for any purpose not authorized by law, shall be deemed a felony and shall be punished as provided by law.”

The statute involved is SDC 55.9917, which is as follows:

“The making of profit, directly or indirectly, by the State Treasurer, out of any money in the State Treasury belonging to the state, with the custody of which the State Treasurer is charged, by loaning or otherwise using it, or the removal by the State Treasurer, or by his consent, of such money or any part thereof, out of the vault or safe of the Treasurer’s Department, or out of any legal depository of such money, except for the payment of the sums authorized by law to be paid, for the purpose of depositing the same, under the provisions of chapter 55.24, in banks which shall have qualified as depositories, shall constitute a felony, and upon conviction thereof, shall subject the Treasurer to imprisonment in the State Penitentiary for a term not exceeding two years or a fine not exceeding five thousand dollars, or to both such fine and imprisonment, and the Treasurer shall be liable upon his official bond for all profits realized from such unlawful use of such funds.”

This statute had its inception as Chap. 229, Laws of 1909, where it appears as Sec. 10. This act creates a State Board of Finance in much detail provides for the designation by such board of public depositories for state funds, for interest thereon computed on daily balances to be payable to the state and for the bonding of such depositories. It specifically...