United States v. Ellicott, 9052

• Decision Date: 14 September 1964
• Docket Number: No. 9052,9106,9317.,9111,9052
• Citation: 336 F.2d 868
• Parties: UNITED STATES of America, Appellee, v. J. Thomas ELLICOTT, Lewis L. Fleury, and Harvey C. Jones, II, Appellants. UNITED STATES of America, Appellee, v. Lewis L. FLEURY and Harvey C. Jones, II, Appellants. UNITED STATES of America, Appellee, v. J. Thomas ELLICOTT, Appellant (two cases).
• Court: U.S. Court of Appeals — Fourth Circuit

336 F.2d 868 (1964)

UNITED STATES of America, Appellee, v. J. Thomas ELLICOTT, Lewis L. Fleury, and Harvey C. Jones, II, Appellants.

UNITED STATES of America, Appellee, v. Lewis L. FLEURY and Harvey C. Jones, II, Appellants.

UNITED STATES of America, Appellee, v. J. Thomas ELLICOTT, Appellant (two cases).

Nos. 9052, 9106, 9111, 9317.

United States Court of Appeals Fourth Circuit.

Argued April 30, 1964.

Decided September 14, 1964.

Leroy W. Preston, Baltimore, Md., for appellant Lewis L. Fleury.

L. Robert Evans, Towson, Md., for appellant Harvey C. Jones, II.

Harris James George, Towson, Md., and Leon H. A. Pierson, Baltimore, Md., for appellant J. Thomas Ellicott.

Benjamin R. Civiletti, Asst. U. S. Atty., and Thomas P. Curran, Atty., Dept. of Justice (Thomas J. Kenney, U. S. Atty., on brief), for appellee.

Before SOBELOFF, Chief Judge, and HAYNSWORTH and BRYAN, Circuit Judges.

ALBERT V. BRYAN, Circuit Judge.

Mail fraud was charged to J. Thomas Ellicott, Lewis L. Fleury, and Harvey C. Jones II in an indictment of them as principals and aiders for devising, and furthering by use of the mails, a scheme to defraud two savings and loan associations in Baltimore, Maryland. 18 U.S.C. §§ 1341 and 1342. These appeals against their conviction must prevail, because utilization of the mails to prosper the plan was not proved beyond a reasonable doubt.

Fleury, a lawyer, in 1961 discovered the Knight and Arpin tracts of land, located in Baltimore County, which although zoned as residential were in fact within an industrial area. Procuring an option or preference to buy them at $31,348.90 and $115,000.00, respectively, he approached Jones, an attorney, who in turn also interested Ellicott in them. Ellicott was actually the owner as well as the president and counsel of both the Monumental City Savings and Loan Association and the First Union Savings and Loan Association. On condition they would participate in any profits, these concerns committed themselves to lend sufficient moneys for the ultimate acquisition of these properties as agreed among Fleury, Jones and Ellicott.

Thereupon Fleury obtained the incorporation of Premier Investment and Realty Company and Jones procured two charters, one for Valley Development Company and the other for Gunpowder Development Company. Through appropriate assignments Premier acquired the option on the Knight tract at $31,348.90, and a contract to buy the Arpin land for $115,000.00. Premier then agreed to sell the Arpin contract to Gunpowder for $67,000.00, Premier at the same time promising to pay all expenses incident to obtaining for Gunpowder a loan not to exceed $260,000.00 on the Arpin tract and to pay advance interest thereon for 18 months. Simultaneously, Gunpowder agreed to sell the Arpin contract to First Union for $184,500.00, and at the same time First Union agreed to resell the Arpin tract to Gunpowder for $256,000.00. The entire amount of the last purchase was to be represented and secured by a loan from First Union to Gunpowder. All these agreements were subsequently consummated in proper conveyances.

Shortly thereafter, December 12, 1961, Premier assigned to Valley for $25,500.00 its option to purchase the Knight property, Premier likewise covenanting to pay the expenses of the procurement by Valley of a mortgage on the Knight property not to exceed $98,000.00 and to prepay 18 months interest thereon. Next day Valley sold the Knight tract to Monumental for $59,000.00. On the same date Monumental contracted to resell this property to Valley for $98,000.00, with the whole purchase price evidenced and secured by a mortgage from Valley to Monumental in that amount. These arrangements were concluded in valid conveyances.

All of these transactions were accomplished, or caused to be accomplished, through the joint personal and immediate action of the accused appellants, the corporations owned or organized by them being simply the respective alter ego of each of them. The moneys for all purposes, including expenses of conveyancing and attorneys' fees, came from the funds of the two associations. Thus, at the sole risk of the associations, Fleury, Ellicott and Jones among themselves drew handsome profits and attorneys' fees. In addition, Jones' corporations without cost to him acquired ownership of the two tracts, subject of course to the mortgages but with the interest thereon partly paid. None of the three new corporations had any appreciable subscribed capital. Ellicott also shared in the real estate commissions on the sales from Knight and Arpin. He made no accounting of his gains or fees to either association.

Aside from the personal advantage to him, the aim of Ellicott was to show a profit upon the books of the associations so as to attract and retain investors. The associations had been running earnings-deficits, and in the summer of 1961 they advertised the payment of 5% dividends. This representation multiplied their deposits. True, the promised dividends were paid in December, 1961 but only on the basis of the paper income derived from sale of the tracts. As entered on the books these were: Monumental $37,449.05 and First Union $68,012.25.

The three counts of the indictment were predicated on the facts just recited, and differed only in the occasion on which the mail was used to carry out the agreement.

The defendants contended that the sales to and by the associations were at fair and sound valuations — thus that the loans were adequately secured — because of the potential worth of the land when rezoned industrial. Hence, they urged there was no fraud in the scheme. Finally, the specified uses of the mail were explicitly denied.

A jury waived, the District Judge dismissed the first count but convicted on the second and third. He found that together the defendants had planned to defraud, and had knowingly defrauded, the associations by appropriating their moneys to the personal enrichment of the accused; by violating and assisting in violating the fiduciary officer-obligations of Ellicott to the associations; and in not revealing to these institutions the true nature of the so-called profits. Adoption of the mails to these ends was likewise found.

I. The act of mailing in the second count was the deposit by Jones of a letter addressed to the State Tax Commissioner, State Office Building, 301 West Preston Street, Baltimore, Maryland, containing the articles of incorporation of Valley. The office of the Commissioner — State Department of Assessments and Taxation — was located in Baltimore on the seventh floor of the State Office Building, in two rooms. No. 702 was the Charter Department, while No. 703 was occupied for other functions of the Commissioner. Applications for Maryland charters were initiated and processed in this Department.

As the draftsman of the Valley charter, Jones testified that it was not mailed to the Department but was delivered in person between 4:45 and 4:50 P.M., Friday, December 8, 1961. He states he gave it to a woman employee sitting at the customers' desk. His office is in Towson, Maryland, a short distance from Baltimore.

To prove the papers arrived by mail and not by hand delivery, the Government introduced Jones' transmittal letter, dated December 8, 1961 stamped by a date-time machine as received on Monday, "Dec. 11, 9:39 A.M. '61". In addition, every woman working in Room 702 on Friday, December 8, 1961, was called to the stand and none of them could recall Jones' delivery of a letter on that date. Of course, this testimony was not given until the trial, more than a year later.

They unanimously testified to the customary mechanics of handling the mail: that it is brought from the control mail room in the building each morning and put on a central table in Room 702; that an electric envelope-slicing machine and an electric time and stamping machine are on the table; that the envelopes are thus opened mechanically by four women and the contents thus dated; that the documents so received are then given to the appropriate division; that the charters on reaching the review desk are initialed by the reviewer and the time of receipt rubber-stamped thereon as it appears in the stamp of the electric machine; and that the mail is usually assorted and distributed by 10 o'clock each morning.

The electric date-stamping, it was stated, was applied only to those communications which had come through the mail. Any matter otherwise coming in, it was added, was directly referred to one of two examiners and would not be received by any other employee. The Commissioner's office emphasizes the importance of the notation of the hour and day of the receipt of a charter to determine priority as between applicants.

This modus operandi; the early Monday morning hour of the machine-stamping on Jones' letter; the endorsement of the same time on the charter; and the women's testimony that they could not recall a personal delivery on Friday afternoon, December 8, 1961 comprised the Government's proof of Jones' use of the mail.

Independently of Jones' denial, however, the prosecution's case is shaken by proof of this defendant's test of the system a year later in preparation for trial. An envelope containing a charter was manually delivered to Room 702 between 4:45 and 4:50 P.M., Friday, November 30, 1962 — the hour and day corresponding with the indictment missive's transmission. Though hand-sent it was put through the date-time machine. This tends to disprove the contention that only mail was machine-stamped. Further detraction from the testimony of the exclusive use of the mechanical dater for mail comes from two of the women clerks in Room 702 who said that sometimes they had stamped non-mail letters with the machine. Thus the test-letter was not the only disproof of the uniformity of the practice.

In rebuttal the Government points out that the test establishes that letters are actually dated as received. This, it continues, proves...