United States v. Crummer

Citation151 F.2d 958
Decision Date11 December 1945
Docket NumberNo. 3155.,3155.
PartiesUNITED STATES v. CRUMMER et al.
CourtUnited States Courts of Appeals. United States Court of Appeals (10th Circuit)

Theodore L. Thau, Sp. Asst., of Washington, D.C. (Randolph Carpenter, U. S. Atty., and Eugene W. Davis, Asst. U. S. Atty., both of Topeka, Kan., Alexander J. Brown, Jr., Sp. Asst. U. S. Atty., of Chicago, Ill., and Roger S. Foster, Sol., Robert S. Rubin, Asst. Sol., and Alexander Cohen, Atty., Securities and Exchange Commission, all of Philadelphia, Pa., on the brief), for appellant.

Francis X. Busch, of Chicago, Ill., and W. F. Lilleston and Glenn Porter, both of Wichita, Kan. (R. B. Caldwell, of Kansas City, Kan., E. R. Sloan and Thomas M. Lillard, both of Topeka, Kan., and Harry C. Castor and Joseph G. Carey, both of Wichita, Kan., on the brief), for appellees.

Before PHILLIPS, BRATTON, and MURRAH, Circuit Judges.

BRATTON, Circuit Judge.

Roy E. Crummer, nine other individuals, and two corporations were indicted in the United States court for Kansas under Section 215 of the Criminal Code, 18 U.S.C.A. § 338, which in presently material part provides:

"Whoever, having devised or intending to devise any scheme or artifice to defraud, or for obtaining money or property by means of false or fraudulent pretenses, representations, or promises, * * * shall, for the purpose of executing such scheme or artifice or attempting so to do, place, or cause to be placed, any letter, * * * writing, * * * in any post office * * * to be sent or delivered by the post office establishment of the United States, * * * shall be fined not more than $1,000, or imprisoned not more than five years, or both."

It was alleged in the first count of the indictment that the defendants, from on or about January 1, 1931, and continuously thereafter up to and including the date of the return of the indictment, unlawfully devised and intended 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 certain named persons and divers others who were desirous of recovering their money and property theretofore invested in municipal bonds and other securities issued by Panama City, Florida.

It was then alleged that the scheme and artifice was in substance that the defendants would and did, from on or about January 1, 1931, and thereafter dominate and control Brown-Crummer Investment Company; that they would and did on May 1, 1931, organize, under a writing entitled bondholders' protective committee agreement, a bondholders' protective committee which would be under the domination and control of the defendants; that they would and did provide in the agreement that holders of any securities designated by the committee might become parties thereto by depositing their securities with Brown-Crummer Investment Company; that they would and did withhold from the persons to be defrauded information in respect to the terms of the agreement; that they would and did on September 1, 1931, amend the agreement so as to provide that by the deposit of a security with the committee, the depositor would be conclusively deemed to have transferred and conveyed to the committee every right against anyone whomsoever, whether fixed and determined or inchoate, and whether known or unknown to the depositor or the committee; that they would and did on May 1, 1934, organize R. E. Crummer and Company, a corporation, and thereafter dominated and controlled it; that from May 1, 1934, to December 31, 1938, Brown-Crummer Investment Company and R. E. Crummer and Company would carry on joint operations in the purchase, sale, trading and holding in trust of municipal bonds, including the obligations of Panama City, and that after December 31, 1938, the defendants would continue in the name of R. E. Crummer and Company all of such joint operations theretofore carried on in the name of the two corporations; that they would and did on November 10, 1942, organize and thereafter completely dominate and control The Crummer Company, a corporation; and that they would and did on or about January 1, 1943, and thereafter, continue and consummate all pending and incomplete negotiations, dealings, business affairs, and activities theretofore carried on in the name of R. E. Crummer and Company.

It was alleged as the further substance of the scheme that for the purpose of deceiving and misleading the persons to be defrauded and in order to induce them to part with their Panama City bonds, interest thereon not represented by coupons, and interest coupons, the defendants would and did make false and fraudulent pretenses, representations, and promises concerning the business of Brown-Crummer Investment Company and R. E. Crummer and Company, concerning their ability in representing and assisting the persons to be defrauded in obtaining payments on past due bonds and interest thereon issued by Panama City, concerning their negotiations with the officials of Panama City for payments to be made, concerning the prospects of recovery of money and property upon the bonds and interest obligations of the persons to be defrauded, and concerning the efforts and intentions of the defendants to effect an early refinancing of the obligations of Panama City; and that they would and did employ and retain a staff of salesmen and agents for the purpose of effecting frequent personal contacts with the persons to be defrauded and making to them numerous false and fraudulent statements, suggestions, and recommendations in order to obtain from such persons the custody and control of their Panama City bonds and interest obligations. It continued to allege as the further substance of the scheme that the defendants would and did compose, phrase, and arrange certain forms of powers of attorney and other writings designated as temporary representation agreements, and extensions thereof; that they would and did falsely and fraudulently induce the persons to be defrauded to sign and deliver to the defendants such representation agreements, together with their past due Panama City bonds and accrued interest thereon, and their past due interest coupons appurtenant to such bonds; that they would and did thereafter withhold from such persons information concerning the status, value, and disposition of such bonds and interest coupons appurtenant to them; that they would and did convert the interest obligations to their own use and benefit, to the loss and injury of the persons to be defrauded; that they would and did involve the bonds and interest thereon, and the interest coupons, obtained from the persons to be defrauded, in litigation in two specifically described cases in the United States Court in Florida; that they would and did obtain judgments in such cases; that they would and did collect from Panama City large sums of money and new refunding bonds on the judgment in one of the cases and large amounts of new refunding bonds on the judgment in the other case; that they would and did withhold from and fail to disclose to the persons to be defrauded information concerning the collection of such money and new refunding bonds; that they would and did fail and refuse to make accounting for such money and new refunding bonds; and that they would and did fraudulently convert to their own use and benefit a large part of such money and new refunding bonds, to the loss and injury of the persons to be defrauded.

It was charged as the further substance of the scheme that the defendants would and did on or about May 22, 1942, enter into an agreement with Panama City to refund the outstanding indebtedness of the city; that they would and did, upon the issuance of new refunding bonds, exchange the defaulted bonds and accrued interest thereon, and defaulted coupons, which they had acquired from the persons to be defrauded under the temporary representation agreements, and extensions thereof, for the new refunding bonds; and that they would and did fraudulently convert to their own use and benefit a large part of the money and property recovered by them from the persons to be defrauded and from officials of Panama City on behalf of the persons to be defrauded. In addition, it was charged as the further substance of the scheme that the defendants would and did falsely and fraudulently represent, pretend, and promise to the persons to be defrauded that the defendants would collect money due to such persons on their bonds and interest coupons, and would represent such persons in any legal actions at a cost to them of five per cent of the amount collected on principal and ten per cent of the amount collected on interest, when in truth and in fact they did not intend to represent such persons on that basis, but, on the contrary, they dealt with and used such bonds and accrued interest as their property and for their own benefit; and that they would and did in one of the described cases in the United States Court in Florida obtain judgment in the amount of $247,480.94, upon which judgment they collected $75,643.20 in cash and in addition thereto $241,605.55 in the form of new refunding bonds, converted to their own use and benefit a large part of such cash and a large part of such bonds, and withheld from the persons to be defrauded information in respect of the judgment and the collection thereon.

And it was charged as the further substance that the defendants would and did falsely represent to the persons to be defrauded that if all holders of Panama City original bonds had demanded the original coupon rate of six per cent, the refunding program would never have been able to operate, as the city could not possibly have produced sufficient funds with which to meet the obligation, whereas in truth and in fact, as the defendants well knew, the payment of the original rate by the city would not and did not affect the operation of the...

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