United States v. Center Veal & Beef Co.

Decision Date25 July 1947
Docket NumberDocket 20622-20624.,No. 274-276,274-276
Citation162 F.2d 766
CourtU.S. Court of Appeals — Second Circuit

George Trosk and Kaufman, Gallop, Climenko, Gould & Lynton, all of New York City, for appellants Frank J. Murray Co., Inc., Center Veal & Beef Co., Inc., and Siegfried Hermann.

Joseph C. Kenney, of New York City (Jesse Climenko and Joseph C. Kenney, both of New York City, of counsel), for appellant Albert Merlis.

Frederick H. Block and John F. X. McGohey, U.S. Atty., both of New York City, (Bruno Schachner, of New York City, Asst. U.S. Atty., of counsel), for the United States.

Before L. HAND, SWAN, and AUGUSTUS N. HAND, Circuit Judges.

L. HAND, Circuit Judge.

The defendants, Hermann and Merlis and their companies, were charged with buying false ration cheques, with fraudulently obtaining subsidies from the Defense Supplies Corporation, and with conspiracy to commit both these crimes. The charge against them for buying forged ration cheques was in seventy-six counts, each count for a separate cheque (we shall speak of it as the "Information"); the charge for fraudulently obtaining subsidies was in twenty-five counts, each count for a separate payment (we shall speak of it as the "Subsidy Indictment"). Judge Picard submitted all the counts in the three accusations to the jury, except counts 9, 12, 13, 14 and 15 of the "Subsidy Indictment," and the jury brought in a verdict of guilty on all counts submitted. The judge dismissed counts sixteen to twenty-five, inclusive, of the "Subsidy Indictment." He then sentenced Merlis and Hermann to five years on each count of the "Subsidy Indictment," the sentences to run concurrently; and to $5000 fine on each count cumulatively. The only corporate defendant in the "Subsidy Indictment" was the Frank J. Murray Co., Inc., and he sentenced it to a fine of $5000 on each count. Under the "Information" he sentenced Merlis and Hermann to one year's imprisonment on each of the seventy-six counts — the sentence to run concurrently with the sentence on the two indictments — and he fined them $1000 each on the first fifty counts; and he fined each corporation $1000 on each of the first fifty counts. Under the conspiracy indictment he sentenced Merlis and Hermann to two years' imprisonment — the sentence to run concurrently with the other sentences; he fined each $5000; and he fined each corporation $5000. The result was that Merlis and Hermann have been sentenced to imprisonment for five years, and each to a fine of $105,000; the Frank J. Murray Co., Inc., has been fined $105,000, and the Center Veal & Beef Co., $55,000. Upon this appeal the appellants depend chiefly upon the insufficiency of the evidence; but they also complain of the conduct of the trial by the judge and the prosecutor; and that the conspiracy indictment was invalid, the object of the conspiracy having been in part accomplished. We proceed first to state the evidence and to discuss the inferences which the jury was justified in making from it.

The Center Company was a wholesale meat seller which bought most, though not all its meat from the Murray Company, a butcher which bought cattle direct from the breeders. Both were corporations, and Hermann and Merlis owned all the shares of each, half and half (Hermann had assigned his interest in the Center Company to his wife; but it is not necessary to say that a jury would be justified in finding that this was a mere fetch to conceal his continued interest). He was president of the Murray Company, and Merlis was president of the Center Company. The two companies had a single New York office, but the Murray Company's butchery was at Chester, New York; it did not appear that Merlis ever went to Chester, but Hermann was at times at the New York office. Beginning in June, 1943, the Murray Company began to file with the Defense Supplies Corporation applications for subsidies, which the regulations allowed to butchers to cover the "spread" between what they had to pay to the unregulated breeders, and the "ceilings"which limited the prices they might charge to wholesalers or retailers. Each of these petitions had alleged that the Murray Company had filed with the O.P.A. a statement of the number of pounds of meat it had butchered, the number of points it had received from wholesalers; and that the statement had been accompanied by ration cheques of the Murray Company, to the order of the O.P.A. upon its ration point account in its own bank. Until April, 1944, all these petitions were false, because the Murray Company had never filed any such statements with O.P.A. and had not of course filed any ration cheques with them.

It does not appear how or why the O.P.A. learned that the Murray Company had been getting subsidies in this way; but it did learn so at least as early as April, 1944, and it demanded an accounting. The Murray Company then filed cheques drawn on its account for the deficiency up to date, together with a statement covering all past transactions. Since its point account in the bank was not large enough at the time to meet the necessary drafts, it built it up by cheques of the Center Company drawn on the Center Company's point account in another bank for past purchases from the Murray Company. On the other hand, as the Center Company's own account was not itself large enough to cover these drafts, that company built it up by the deposit of forged ration cheques, purporting to be drawn by meat dealers upon a New Jersey bank. These the Center Company procured as follows. They were in blank — without payees — and the company bought them from one, Tapen, a wholesale meat dealer, who had them from Bertola, a painter, who forged the makers' names upon blank cheques, which he got from the bank's teller, Hahn. As the cheques were presented at the bank, Hahn abstracted them before they were charged against the supposed makers' accounts — out of the four names used only one was fictitious. Thus the Center Company got a credit in its point account when the clearing house — Federal Reserve Bank — credited the cheques to its account in its own bank, and Hahn's bank never apparently discovered that any charge had been made against it. How the charge, which must have appeared in the clearing house accounts, was concealed from Hahn's bank does not appear; but it makes no difference, for concededly the scheme was for a time successful. The Center Company continued to buy these cheques until the autumn of 1944, when the fraud was discovered; but not until it had bought cheques for about twelve million points, which — since the only testimony is that the price was one dollar a thousand — a jury might conclude had cost $12,000.

The guilt of the Murray Company upon those counts of the "Subsidy Indictment" which covered petitions filed before the Center Company began to pay ration cheques, is too clear for debate. Only someone in authority could conceivably have had any motive so to fill the company's treasury: moreover, it is incredible that the practice should have gone on for so long as it did without, not only the connivance, but the active direction, of Hermann. The fact that his signature to the petitions was not proved — if it was not — is irrelevant; if he was not the guilty person, a jury would have had to assume that some subordinate, who could not profit a penny, vicariously continued throughout the period to filch money from the United States and pour it into Hermann's and Merlis' pockets. Picard, J., left to the jury all the counts of the "Subsidy Indictment" (except, as we have said, numbers 9, 12, 13, 14, 15) upon the theory that, even after the Center Company had begun to pay ration cheques, if the cheques delivered to the O.P.A. were based upon the forged cheques deposited by the Center Company, the statements were fraudulent. Later Picard, J., out of what was perhaps an excessive caution, dismissed counts 16 to 25 inclusive, leaving only those ten counts charging petitions filed during the period when no statements and no cheques whatever were filed with the O.P.A. On these ten counts the sentences against Hermann and the Murray Company are impregnable.

The only question as to the "Information" is whether Merlis knew that the cheques were forged, — if so, he and the Center Company were guilty on all counts. That he could not have supposed that he was engaged in lawful transactions is apparent from their very nature, although there was corroboratory evidence. Such cheques could not be the subject of lawful sale; their only permissible use was in the purchase of meat and the jury was justified in imputing to Merlis knowledge of this basic condition of the business. The only even plausible argument is that, although he may have known that the cheques were in some way illicit, nothing proved that he knew them to have been forged. This can easily be shown to be without foundation; for there were only three possibilities: the cheques might have been bought from the makers; they might have been stolen; they might have been forged. The first we can rule out at once; no wholesaler or retailer, even if fraudulently disposed, would be likely to sell points, which were absolutely necessary to his own accounts. Moreover, if he did, he would not sell them to a confederate at such a price that the confederate could get his share of the loot by selling them at one dollar a thousand. Again, it was impossible that they should have been stolen from the makers; for they were in blank and yet they were for a given number of points. That meant that, although the wholesaler or retailer had drawn them to cover some specific purchase, he had left the...

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