United States v. Corlin

• Citation: 44 F. Supp. 940
• Decision Date: 27 April 1942
• Docket Number: No. 14806-Y.,14806-Y.
• Court: U.S. District Court — Southern District of California
• Parties: UNITED STATES v. CORLIN et al.

44 F. Supp. 940

UNITED STATES v. CORLIN et al.

No. 14806-Y.

District Court, S. D. California, Central Division.

April 27, 1942.

COPYRIGHT MATERIAL OMITTED

COPYRIGHT MATERIAL OMITTED

Wm. Fleet Palmer, U. S. Atty., Norman W. Neukom, Asst. U. S. Atty., and Ralph E. Lazarus, Asst. U. S. Atty., all of Los Angeles, Cal., for the Government.

Ames Peterson, of Los Angeles, Cal., for defendant Corlin.

David H. Cannon, of Los Angeles, Cal., for defendants Rockwell and Frankfort.

Ben L. Blue, of Los Angeles, Cal., for defendants Berliner, Coleman, Edelman, Friedman, Kay, Landfield, Nudelman, Pereira, Rubins, and Milo.

YANKWICH, District Judge (after stating the facts as above).

In announcing the decision in this case, I desire to advert briefly to some fundamental legal principles which govern prosecutions under the mail fraud statute (18 U.S.C.A. § 338).

The aim of the statute is to punish the use of the mails in furtherance of schemes to defraud. And, while it is said generally that the gist of the offense is the use of the mails, the statement means nothing more than that the basis for federal intervention lies in the use of the mails. For, without it, constitutional power would be lacking in the Federal Government to punish frauds which, by their nature, are localized and do not partake of an interstate character. A scheme to defraud is, of course, the first element of the offense. Without it, the use of the mails would not be illegal. United States v. Young, 1914, 232 U.S. 155, 34 S.Ct. 303, 58 L.Ed. 548; Havener v. United States, 10 Cir., 1931, 49 F.2d 196. In Postal Decisions, 1939, page 237, we find this summary of the necessity for, and the meaning of, a "scheme to defraud": "Devising of scheme. — The devising of some scheme or artifice to defraud, or to obtain money or property by fraudulent representations, etc., is the first ingredient of the offense, which becomes punishable when the mails are used in its execution or attempted execution. The words `intending to devise' are the legal scales by which the scheme is to be weighed, and require that the intent and scheme to defraud shall exist at the time the mails are used. To devise a scheme or artifice to defraud is to form a plan, device, or trick to perpetrate a fraud upon another, and devising of it continues as long as the scheme is in process of execution. It is not necessary that accused by the inventor or originator of the scheme or artifice, which may be as old as falsehood, or that when the artifice was devised the schemers should have worked out all the details of its execution."

In United States v. Dexter, D.C.Iowa 1907, 154 F. 890, 896, a "scheme" is defined: "A `scheme' may be said to be a design or plan formed to accomplish some purpose. An `artifice' may be said to be an ingenious contrivance or device of some kind, and when used in a bad sense the word corresponds with `trick' or `fraud.' Hence a `scheme or artifice' to defraud, within the meaning of this statute, would be to form some plan or devise some trick to perpetrate a fraud upon another."

No person can be convicted of the offense unless it be shown, beyond a reasonable doubt, that he, knowingly, devised a scheme to defraud and that the mails were used in furtherance of it. The offense is one requiring specific intent. Without it, the offense cannot be committed. Because of this, good faith of the accused is a complete defense.

As one court has stated: "The ultimate issue of fact was whether defendants were actuated by an intent to defraud when using the mails." Sandals v. United States, 6 Cir., 1914, 213 F. 569, 574. In the same opinion we find this language:

"A man may be visionary in his plans and believe that they will succeed, and yet, in spite of their ultimate failure, be incapable of committing conscious fraud. Human credulity may include among its victims even the supposed imposter. If the men accused in the instant case really entertained the conviction throughout that the oil properties and the stock in dispute possessed merits corresponding with their representations, they did not commit the offense charged. As Mr. Justice Brewer said in Durland v. United States, 161 U.S. 306, 313, 16 S.Ct. 508, 511 (40 L.Ed. 709):

"`The significant fact is the intent and purpose. The question presented by this indictment to the jury was not, as counsel insists, whether the business scheme suggested in this bond was practicable or not. If the testimony had shown that this Provident Company, and the defendant, as its president, had entered in good faith upon that business, believing that out of the moneys received they could by investment or otherwise make enough to justify the promised returns, no conviction could be sustained, no matter how visionary might seem the scheme.'

"In Rudd v. United States 8 Cir., 173 F. 912, 913, 97 C.C.A. 462, 463, the scheme to defraud and the circulars sent through the mails to promote it concerned a machine designed as an attachment to a pump for lifting water, which was shown to be `contrary to well-known fundamental physical laws.' In respect of the defense of honest belief in the efficiency of the machine, Judge Hook said:

"`The main defense was that, though the machine may have been impracticable, the accused honestly believed in its efficiency, and that what he did was without intent to defraud. Of course, if this was so, there was no violation of the law which was designed to prevent the use of the post office in intentional efforts to despoil.'"

See, also, Harrison v. United States, 6 Cir., 1912, 200 F. 662; Gold v. United States, 8 Cir., 1929, 36 F.2d 16, 32.

In some respects, this case is unique.

Ordinarily, in cases of this character, involving misrepresentations in sales, we find, as defendants, all the officers of the Company who have a proprietary interest in its assets, to which are, often, added some of the most prominent of the salesmen who profited mostly from the sales. Here, however, only one of the officers of the company, Corlin, is selected for prosecution. The other officer, who is, practically, a fifty per cent owner of the business of the land company, appears in an inculpatory role. None of the employees actually in charge of the office is prosecuted, although most of them are brought in to testify for the Government, as to the misdeeds of the one accused owner. The result is an indictment, which originally contained thirty-one counts of mail fraud violation and one count of conspiracy (18 U.S.C.A. § 88) and seventeen defendants. With the dismissal of five of the counts by the Government and of the conspiracy count by the Court, there still remain twenty-six counts. The number of defendants actually on trial has been reduced to fourteen. As to two, the Government has dismissed, the other entered a plea of nolo contendere. Thus, of all the defendants before the Court, in this case, only one has a proprietary interest in the business. The others were salesmen.

So we have the unusual situation of one officer and stockholder of a land-owning company, which has existed and operated for a long period of years, being charged with devising a scheme with his salesmen to use the mails to defraud. Singularly, as one of Government counsel conceded, there is no direct evidence of any sales meetings at which anyone, either a salesman-defendant or the owner-defendant, gave any instructions to any of the salesmen along the line charged in the indictment.

Yet the Government would fasten criminality on the owner-defendant and all these agents for the acts of the others upon inferences to be drawn from the fact that they made representations of the same character. This anomalous situation has resulted in the suggestion made by counsel for the Government, in the closing argument, that, because of the absence of concert of action between these various salesmen-defendants, perhaps, each of them should be found guilty only on the counts which specifically referred to him. This suggestion is but the measure of the weakness of the Government's position. The scheme to defraud is pleaded in Count One and is embodied, by reference, in the preamble to every count in the indictment. And the indictment, in each count, charges not separate defendants with a scheme to defraud and the mailing of the particular letter, but each and all of them. The individual sale, through the use of the mails, to be criminally actionable, must refer back to the scheme. And a verdict which would find certain defendants guilty only as to certain transactions which they handled would, in itself, negate the existence of the scheme. For, if there be a fraudulent scheme to which the defendants were knowingly parties, each is liable for the acts of the others. See, Robinson v. United States, 9 Cir., 1929, 33 F. 2d 238, 240; Bogy v. United States, 6 Cir., 1938, 96 F.2d 734, 741; Alexander v. United States, 8 Cir., 1938, 95 F.2d 873, 878, 880; Baker v. United States, 8 Cir., 1940, 115 F.2d 533, 540. On the other hand, if each defendant is guilty only in relation to the sale which he made, then we have not one scheme, but as many schemes as there are defendants. Individual representations, unrelated to each other, and not a part of a scheme to defraud, cannot be given the dignity of a scheme to defraud. See, Rude v. United States, 1935, 10 Cir., 74 F.2d 673.

It is thus axiomatic that before any of the defendants can be found guilty, there must be shown, beyond a reasonable doubt, that a scheme to defraud through the use of the mails was devised by them or some of them in which they all participated. And the scheme must be proved substantially as laid. Hass v. United States, 8 Cir., 1938, 93 F.2d 427, 435; Rude v. United States, 10 Cir., 1935, 74 F.2d 673, 677. The indictment has laid the scheme within a narrow compass, both as to time and character. The beginning of the scheme is laid in the indictment as "on or about the year 1937 and thereafter to and including...