United States v. Carruthers, 8790.

• Decision Date: 11 March 1946
• Docket Number: No. 8790.,8790.
• Citation: 152 F.2d 512
• Parties: UNITED STATES v. CARRUTHERS.
• Court: U.S. Court of Appeals — Seventh Circuit

152 F.2d 512 (1945)

UNITED STATES v. CARRUTHERS.

No. 8790.

Circuit Court of Appeals, Seventh Circuit.

December 27, 1945.

Writ of Certiorari Denied March 11, 1946.

Walter Bachrach and Edward J. Hess, both of Chicago, Ill. (Walter H. Moses, Morris Solomon, and H. G. Sheffner, all of Chicago, Ill., of counsel), for appellant.

J. Albert Woll, U. S. Atty., and William J. Connor, Asst. U. S. Atty., both of Chicago, Ill., for appellee.

Before EVANS and SPARKS, Circuit Judges, and BRIGGLE, District Judge.

Writ of Certiorari Denied March 11, 1946. See 66 S.Ct. 805.

BRIGGLE, District Judge.

Appellant was convicted in the lower court on 34 counts of a 36 count indictment. Counts 1 to 9, both inclusive, charge a violation of Section 77 q(a) (1) of Title 15 U.S.C.A.¹ Counts 10 to 35, both inclusive, charge a violation of Section 338 of Title 18 U.S.C.A.² and Count 36 charges a conspiracy to commit the substantive offenses described in Counts 1 to 35 both inclusive in violation of Section 88, Title 18 U.S. C.A.³ A nolle prosequi was entered as to Counts 5 and 9 at the close of the Government's case and the Court directed a verdict of acquittal of two co-defendants.

The indictment is so voluminous (143 pages of the printed record) that it is neither practical nor possible, within reasonable bounds, to state accurately and completely the charges there made. The first Count charges in minute detail a scheme and artifice to defraud on the part of the appellant and two co-defendants and this charge is carried forward into each succeeding count by reference. The scheme charged was that appellant organized the Neological Foundation ostensibly as a vehicle to disseminate the philosophy of self-betterment; that by radio programs, lectures and writings he solicited dues-paying members whom he called "students"; that by assuming scholarly degrees and by false representations as to his birth, education, wealth and studies in India and Tibet, he inspired his following with trust and confidence in himself and his teachings; that by talks and writings he solicited and induced his followers to invest their money in the Neological Foundation and several so-called business ventures he sponsored; that he represented that all money placed with him would be guaranteed against loss and that he would pay the lender 6% interest per annum and a 4% bonus; that the earnings from his organization and business ventures were insufficient to guarantee the principal or interest on the moneys placed with him; and as a result a great many of his investors were not repaid, their money having been appropriated by the appellant to his own use and benefit. The count charges that "from, on or about the first day of June, 1935, and continuously thereafter up to and including the date of the return of the indictment defendants unlawfully devised and intending to devise a scheme and artifice to defraud and for obtaining money and property by means of false and fraudulent pretenses, representations and promises, and by omissions to state material facts, from a certain class of persons * * * who were, would be induced to become, and who are members of the Neological Foundation, and who were desirous of making profitable and paying investments in the promissory notes, receipts and other evidences of indebtedness" of the defendant Carruthers or any of his various activities such as "Nan-Gene" and "Happy Hearts." This is followed by twenty paragraphs alleging in detail the facts claimed by the Government to constitute the alleged scheme and artifice. Each of the mailing counts then sets out specifically the mailing of a letter or other document in furtherance, as the indictment charges, of said fraudulent scheme.

Appellant began his operations in Pittsburg, Pennsylvania, about June, 1935, but early in 1936 moved to Chicago where the balance of the activities charged in the indictment originated. He organized the so-called Neological Foundation and lectured to the general public by radio and otherwise on the philosophy of right living, as he conceived it. He claimed to be a doctor of medicine and a doctor of divinity; told some that he was born in England, had studied for the ministry and later was a monk at a lamasary in Tibet, that he had been an aviator in the first world war and was shot down resulting in his becoming blind. He said he regained his sight by following the principles and teachings that he was then advancing to his various audiences. To some he administered to their physical needs and to others he gave mental solace. He obtained a following of large proportions and his Neological foundation acquired a membership in excess of 4,000, each member paying dues of two dollars per month. His followers were bringing their money to him by way of loans or contributions far in excess of the dues required. He undertook at one time to market a product to be used as a shampoo which he called "Nan-Gene" and his public were invited to invest, the invitation being accepted in large numbers by the faithful. Later the shampoo formula proved unsatisfactory and he substituted a laxative product to be marketed under the name of "Happy Hearts." He gave those who had invested in "Nan-Gene" the opportunity of withdrawing their funds or leaving them with him for the advancement of "Happy Hearts." Few, if any, undertook to withdraw, but by reason of their abiding faith in the "doctor" continued their investment in the laxative product. The faithful may have reasoned that if the public were not interested in cleaning their hair with "Nan-Gene" that they might in any event cleanse their intestinal tract with "Happy Hearts."

It would unduly lengthen this opinion to further recite the activities of appellant, but it is sufficient to say that at least some of his representations were completely without foundation in truth. He stipulated during the trial that prior to 1934 he had been known under the name of Henry J. Boerum, and that except for a period in the latter part of 1919 and 1920 he had never been out of the territorial boundaries of the United States. Mary Wells testified that her father's name was Henry Boerum and that she had a brother by the name of Henry Boerum whom she had not seen for 19 years, but believed the defendant Carruthers to be her brother. John W. Gage testified that he was married to Ellen Boerum who had a brother Henry whom he had not seen since 1919 but believed defendant Carruthers to be that Henry Boerum.

The principal attacks upon the judgment of the lower court rest upon the assertion by appellant that: —

1. The scheme to defraud alleged in the indictment is not alleged to have been devised prior to the alleged mailings.

2. The undisputed evidence shows that the recipient of the count letters had in each instance parted with his or her money prior to the mailing of the letters.

3. The Court's charge to the jury violated defendant's constitutional freedom of religion.

4. Defendant was unalterably prejudiced by a juror's reading during the trial of a newspaper article critical of defendant.

These points were appropriately raised and preserved during the trial and, although only points 3 and 4 were argued orally in this Court none were waived.

1. In support of point 1, appellant urges that the indictment alleges a continuous devising of the fraudulent scheme from June 1, 1935, to October 25, 1944, the date of the returning of the indictment and that, therefore, the scheme was not completely devised until the returning of the indictment and consequently the letters alleged to have been mailed could not have been mailed in furtherance of the fraudulent scheme. Counsel for appellant reasons that the pleader found it necessary to aver a continuing scheming and devising in order to avoid charging more than one separate and unrelated scheme. McLendon v. United States, 6 Cir., 2 F.2d 660. A consideration of the indictment as a whole leads us to the conclusion that the argument is somewhat specious but not to be accepted. While the scheme alleged has many variations and many ramifications and the activities resulting therefrom extended into numerous fields, there was, in fact, but one fraudulent scheme charged. The conclusion is inescapable that the many variations were but parts of a general fraudulent purpose to get something for nothing. See Worthington v. United States, 7 Cir., 64 F.2d 936, United States v. McAlpine, 7 Cir., 129 F.2d 737. We think the fair construction to be put upon the language used in the indictment is that the scheme was entered into on or about June 1, 1935, and remained thereafter until the returning of the indictment a complete, active and virulent plan and purpose of defendants. The pleader used the word "devised" which connoted the formation of a complete scheme prior to the mailing of the letters. Other language in the indictment bears out this construction and in no event could defendant have been misled. The Congress has said (18 U.S. C.A. § 556): "No indictment found and presented by a grand jury in any district or other court of the United States shall be deemed insufficient, nor shall the trial, judgment, or other proceeding thereon be affected by reason of any defect or imperfection in matter of form only, which shall not tend to the prejudice of the defendant." While we are not unmindful that the appellant asserts a total failure to charge an offense, yet we think the criticism directed at the indictment can be said to be one of form not resulting in any prejudice to defendants. We hold, therefore, that the indictment charged an offense and was not vulnerable to the motion in arrest.

2. Appellant also challenges his conviction for the reason, as he asserts, that each of the letters constituting the basis of each of the mailing counts, was mailed after the alleged fraud was committed and after the addressee had parted with all of the money paid by him or her to appellant. He reasons that the only...