United States v. Bob, 377.

• Decision Date: 09 October 1939
• Docket Number: No. 377.,377.
• Citation: 106 F.2d 37
• Parties: UNITED STATES v. BOB et al.
• Court: U.S. Court of Appeals — Second Circuit

106 F.2d 37 (1939)

UNITED STATES v. BOB et al.

No. 377.

Circuit Court of Appeals, Second Circuit.

July 26, 1939.

Writ of Certiorari Denied October 9, 1939.

Raphael P. Koenig, of New York City (Koenig, Bachner & Koenig and Seymour L. Mantell, all of New York City, of counsel), for defendants-appellants Charles V. Bob and H. Tracy Rogers.

James E. Wilkinson, of New York City, for defendant-appellant William Wiseman.

John T. Cahill, U.S. Atty., of New York City (Leo C. Fennelly and Raymond Ickes, Asst. U. S. Attys., both of New York City, of counsel), for the United States.

Before L. HAND, CHASE, and CLARK, Circuit Judges.

Writ of Certiorari Denied October 9, 1939. See 60 S.Ct. 115, 84 L.Ed. ___.

CLARK, Circuit Judge.

Of the defendants who appeal here, Bob and Rogers appeal from a judgment of conviction upon an indictment charging them in five counts with using the mails in execution of a scheme to defraud, and in one count with conspiring to that end, in the sale of stock of Coronado Gold Mines, Inc., and Kelly Gold & Silver Mines, Inc. 18 U.S.C.A. § 338 and 18 U.S.C.A. § 88. The third defendant, Wiseman, was not convicted on the conspiracy count and therefore appeals only from his conviction on the five counts of using the mails to defraud. In addition to the three defendants here, the indictment named as defendants two other individuals, Morse and Peterson, as to whom a severance of trial was granted, and three corporations — the two gold mine companies, together with Bankers Service Corporation (a financial advisory service) — who were convicted, but did not appeal. The indictment also named several other persons as co-conspirators, without including them as defendants. Of these, certain ones were prosecuted on a separate indictment. It was alleged in this indictment that the stock of Coronado Gold Mines, Inc., was sold on misrepresentations that the company was producing gold and earning money; that the price of the stock on the New York Mining Exchange was manipulated through wash sales; and that thereafter the Coronado stockholders were reloaded with the stock of Kelly Gold & Silver Mines, Inc., on misrepresentations that that company also was earning money.

The extensive trial below was necessarily devoted largely to testimony as to the organization of the two gold mine companies and what they did towards acquiring and developing gold mines, and the manner and means by which their stock was pressed into the hands of the general public. On this appeal it is virtually conceded that the stock-selling scheme was fraudulent, as, indeed, the testimony abundantly demonstrated. As to the Coronado Company, it appeared that it acquired an old mine in Idaho and later leased another, neither of which produced any commercial ore, that is, ore which could be mined at a profit, or any revenue for the company. Indeed, the testimony indicated for the first mine, the only one developed at all, an average value of $2.00 to $2.50 of gold per ton, with a cost of mining and milling of at least $7 per ton, although defendant Rogers, as president of the company, was writing the stockholders of a report by "one of the country's most capable mining engineers" that the high-grade ore in this mine averaged from $20 to $30 per ton, and that some ore was found which had run as high as $400 and $500 per ton. A large block of the Coronado stock was acquired by Bankers Service Corporation, a corporation owned by the defendant Morse, and was by it distributed to the public by high pressure salesmanship, at prices which netted $158,000 profit after taking out commissions and paying the cost price. Meanwhile a show of an active market was made by extensive wash sales and market manipulation on the New York Mining Exchange. Thereafter the Kelly Company was organized and its stock offered for sale to the Coronado stockholders. The Kelly Company acquired a mine in California, which it operated for about a year at a loss in excess of $85,000 — money obtained from stock sales and loans, including a large stock purchase by, and a loan from, Coronado — although it was represented, by defendant Wiseman in selling its stock, to be making money, and in fact declared nine monthly dividends.

Without attempting to attack the cumulative weight of this evidence, defendants seek either to show errors in law at the trial or to disassociate themselves from the scheme, at least at the time of the crimes specifically charged in the indictment. Thus, they contend that the offense is barred by the statute of limitations, because the scheme to defraud terminated more than three years before May 24, 1938, the day the indictment was returned. 18 U.S. C.A. § 582. It is also urged, on behalf of the defendant Bob, that he had withdrawn from the scheme prior to the end of the three-year period on May 24, 1935.

We think there is ample evidence to support the jury's conclusions both that the scheme as a whole continued, and that Bob was actively connected with it, after May 24, 1935. Without attempting to rehearse all the testimony, it may be pointed out that at least two sales of Kelly stock were shown to have been made on or after that date, that stock of the Kelly Company was issued thereafter, that there remained to be disposed of 350,843 out of a total of 500,000 shares of Kelly stock, and that the conspiracy, previously proven by ample evidence, had not then been fully consummated. In addition, there was testimony that in August, 1935, Bob directed a settlement of claims made by the defendant Wiseman, who had threatened to go to the district attorney and who then agreed to "coöperate," and also testimony by Fennessy, president of the Kelly Company and named as a co-conspirator, that in December, 1935, he and Bob asked one of the stockholders to use his influence with a stockholders' committee then becoming active in that company to get the committee to defer action until the Reconstruction Finance Corporation had given a definite reply on a loan application made by the company in May, 1935. This evidence is ample to show that the scheme to defraud continued within the period of limitation. United States v. Rollnick, 2 Cir., 91 F.2d 911, 918.

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