United States v. Culver

• Decision Date: 03 October 1963
• Docket Number: Cr. No. 26195.
• Parties: UNITED STATES of America v. Charles F. CULVER, A. Gordon Boone, D. Spencer Grow, C. Oran Mensik and Henry McGurren.
• Court: U.S. District Court — District of Maryland

224 F. Supp. 419

UNITED STATES of America v. Charles F. CULVER, A. Gordon Boone, D. Spencer Grow, C. Oran Mensik and Henry McGurren.

Cr. No. 26195.

United States District Court D. Maryland.

October 3, 1963.

COPYRIGHT MATERIAL OMITTED

Joseph D. Tydings, U. S. Atty., Stephen H. Sachs and Benjamin R. Civiletti, Asst. U. S. Attys., Baltimore, Md., and Thomas P. Curran, Attorney, Department of Justice, Washington, D. C., for United States.

Alan H. Murrell, Baltimore, Md., for defendant Culver.

G. C. A. Anderson and John F. King, Baltimore, Md., for defendant Boone.

Edward P. Morgan, E. Tillman Stirling and Welch, Mott & Morgan, Washington, D. C., for defendant Grow.

Edward J. Calihan, Jr., Chicago, Ill., for defendant Mensik.

Maurice J. Walsh, Chicago, Ill., for defendant McGurren.

THOMSEN, Chief Judge.

This nine-count indictment for mail fraud, 18 U.S.C. § 1341, is based upon alleged false representations and concealments with respect to the insurance protection afforded depositors in certain savings and loan associations¹ under policies issued by Security Financial Insurance Corporation (SFIC). Judge Watkins granted a severance with respect to J. Thomas Ellicott, one of the original defendants. The defendant Culver has pleaded nolo contendere. The other defendants have filed a great many motions and have adopted each others' motions, upon all of which this Court has ruled. The only motions calling for discussion are:

I. The motions to dismiss the indictment on a number of overlapping grounds, including (A) vagueness, uncertainty and failure to state an offense, (B) duplicity, (C) insufficient allegations as to the mailings, and (D) failure to allege that certain acts were done knowingly or wilfully;

II. The motions to suppress the corporate papers and records of SFIC and of several associations, obtained in various ways discussed below, or produced in response to grand jury subpoenas or trial subpoenas addressed to the corporations or to persons other than defendants.

THE INDICTMENT

The first count charges:

Paragraph 1—(a) SFIC was incorporated in Maryland in July 1959,² licensed in September 1959, and from that time until July 1962 issued policies of insurance on savings accounts in savings and loan associations.

(b) Defendant Culver was an incorporator of SFIC, president from July 1959 to July 1961, and a director from December 1959 to July 1961.

(c) Defendant Boone was an incorporator of SFIC, and was a director and its attorney from July 1959 to July 1961.

(d) Defendant Ellicott was an incorporator of SFIC, was a director from July 1959 to July 1961 and acted as its attorney from July 1959 to January 1962. He also dominated and controlled the business and affairs of two Maryland savings and loan associations from specified dates in 1960 until July 1962.

(e) Defendant Mensik dominated and controlled the business and affairs of six Maryland associations, including Commercial, Maryland Thrift and Maryland District from specified dates in 1957 until May 1962, July 1962 or later.

(f) Defendant Grow dominated and controlled the business and affairs of one Idaho and two Utah associations from June 1959 until after July 1962, and of two Maryland associations, namely, First Fidelity, from before June 1959 to April 1961, and First Guarantee, from June 1960 to September 1961.

(g) Defendant McGurren was an attorney at law licensed to practice in Illinois.

Paragraph 2. From about June 1959 until about July 1962, the six defendants devised a scheme and artifice to defraud any and all persons who were investors in, or could be induced to become investors in, savings accounts of certain associations, to wit, those associations which would and did represent to such investors and potential investors that savings accounts were insured by SFIC, and to obtain money and property by means of false and fraudulent pretenses, representations and promises; and it was as a part of said scheme and artifice to defraud and to obtain money and property by means of false and fraudulent pretenses, representations and promises, and in furtherance thereof that:

(a-b) In July 1959 the six defendants would and did organize and incorporate SFIC in Maryland, and in September 1959 would and did obtain a license authorizing it to do business as an insurance company in Maryland.

(c-j), (m-q) On various dates from September 1959 to January 1961, the six defendants would and did issue and cause to be issued on behalf of SFIC binders of insurance to each of the fourteen associations named in Paragraph 1(d)-(f) of the indictment, purporting to insure against loss the savings accounts in the respective associations.

Subparagraphs (k) and (l) contain similar allegations with respect to policies issued to two associations known respectively as Military Service and Phoenix; the persons controlling these two associations were not specified.

(r) From time to time during the period of the scheme the six defendants would and did issue and cause to be issued similar policies with respect to accounts in other associations organized or caused to be organized by defendants Grow and Mensik.

(s) The six defendants would and did prepare and distribute, cause to be prepared and distributed, and approve the preparation and distribution, by mail and otherwise, of brochures, specimen insurance policies, advertising leaflets, financial statements, newspaper advertisements and correspondence designed and intended by the defendants to lead the investing public to believe that savings accounts in associations insured by SFIC were desirable and secure investments because said associations were financially sound and strictly supervised by SFIC.

(t) The six defendants would and did organize SFIC or cause it to be organized, and would and did exercise and cause to be exercised, the corporate power and authority of SFIC in order to attract the investment of funds by the investing public to associations organized, dominated and controlled by the defendants Ellicott, Grow and Mensik, to the personal gain and benefit of the defendants Ellicott, Grow and Mensik.

Paragraph 3. It was a part of said scheme and in furtherance thereof that the six defendants through the preparation and distribution or brochures and other items referred to in Paragraph 2(s) would and did make and cause and approve the making of the following false and fraudulent pretenses, representations and promises, well knowing at the time that said pretenses, representations and promises would be false and fraudulent when made:

(a) That SFIC was dedicated to guarantee the safety of savings in the institutions that it insured.

(b) That associations insured by SFIC earned the right to acquire insurance from SFIC by meeting high standards of financial responsibility required and enforced by SFIC.

(c) That associations insured by SFIC were required by SFIC to maintain high standards of financial responsibility and were therefore financially sound.

(d) That SFIC, by requiring insured associations to submit to it monthly reports and by periodic examinations and audits conducted on behalf of SFIC, exercised strict supervision over the financial practices and operating procedures of associations insured by SFIC.

Paragraph 4. It was a part of said scheme and in furtherance thereof that while making the false and fraudulent pretenses, representations and promises referred to in Paragraph 3, the six defendants would and did wilfully conceal:

(a) That SFIC was organized and operated by the six defendants for the primary purpose of enabling associations controlled and dominated by defendants Mensik, Grow and Ellicott to advertise that savings accounts in said associations were "insured".

(b) That SFIC and its officers and directors were continually informed that associations insured by SFIC, including those associations dominated and controlled by the defendants Ellicott, Grow and Mensik, were being operated in a manner inconsistent with sound financial practices and in a manner which jeopardized the safety and security of the funds invested by investors in savings accounts in those associations.

Paragraph 5. That on or about October 28, 1959, the six defendants did, for the purpose of executing the aforesaid scheme and artifice and attempting to do so, place and cause to be placed in an authorized depository for mail matter in the State and District of Maryland to be delivered by the United States Post Office Department a letter addressed to Mr. C. K. Raynor, 13 Lilly Street, Newburgh, New York, containing a balance sheet of SFIC.

The other eight counts are the same as the first count, except for the dates of the mailings (from November 27, 1959 to July 11, 1961), the names of the addressees, and the material enclosed (e. g. specimen policies of SFIC, brochures and other advertising material dealing with SFIC).

I. MOTIONS TO DISMISS

A. Vagueness, Uncertainty and Failure to State an Offense

The indictment is not vague and uncertain. It follows "Form 3, Indictment for Mail Fraud", in the Appendix of Forms attached to the Federal Rules of Criminal Procedure. United States v. Bagdasian, 4 Cir., 291 F.2d 163, 164, 165 (1961), cert. den. 368 U.S. 834, 82 S.Ct. 60, 7 L.Ed.2d 36 (1961); United States v. Suchman, D.Md., 206 F.Supp. 688, 689, 690 (1962). It meets the tests set out in Russell v. United States, 369 U.S. 749, 769, 771, 82 S.Ct. 1038, 8 L.Ed.2d 240 (1962). See also Martin v. United States, 10 Cir., 285 F. 2d 150, 151 (1960), cert. den. 365 U.S. 853, 81 S.Ct. 818, 5 L.Ed.2d 816; United States v. Hoffa, S.D.Fla., 205 F.Supp. 710, 716, 717 (1962).

Defendants argue that the alleged misrepresentations (see (3) (a), (b), (c) and (d), above) are vague. But they are the representations which the defendants themselves are alleged to have made or caused to be made; they are not standards selected by the grand jury. Whether or not misrepresentation (a), standing alone, might be considered too...