United States v. Henderson

• Decision Date: 04 August 1971
• Docket Number: No. 20541,20546.,20541
• Citation: 446 F.2d 960
• Parties: UNITED STATES of America, Appellee, v. A. R. HENDERSON, Also Known as Bobby Henderson, Appellant. UNITED STATES of America, Appellee, v. John A. O. SWAVING, Appellant.
• Court: U.S. Court of Appeals — Eighth Circuit

446 F.2d 960 (1971)

UNITED STATES of America, Appellee, v. A. R. HENDERSON, Also Known as Bobby Henderson, Appellant.

UNITED STATES of America, Appellee, v. John A. O. SWAVING, Appellant.

Nos. 20541, 20546.

United States Court of Appeals, Eighth Circuit.

August 4, 1971.

COPYRIGHT MATERIAL OMITTED

Joseph P. Stevens, Minot, N. D., for appellant Henderson.

Jonathan C. Eaton, Jr., Orlin W. Backes, Minot, N. D., for appellant Swaving.

Gary Annear, Asst. U. S. Atty., Fargo, N. D., Harold O. Bullis, U. S. Atty., Tom Boyle, Staff Atty., Denver, Colo., for appellee.

Before ALDRICH,^* LAY and BRIGHT, Circuit Judges.

LAY, Circuit Judge.

Defendants John A. O. Swaving and A. R. Henderson, a/k/a Bobby Henderson, appeal their convictions on two counts of securities fraud under 15 U.S. C.A. § 77q(a). Henderson additionally appeals his conviction on two counts of mail fraud under 18 U.S.C.A. § 1341. The jury found Swaving innocent of the mail fraud counts and both defendants were found not guilty of a conspiracy count.¹ The alleged offenses occurred in the State of North Dakota. On appeal error is alleged as to the insufficiency of the evidence, the instructions to the jury, the admission of hearsay as to conversations and conduct of the alleged co-conspirator, one Emil J. Dombowsky,² and error is alleged as to the admission of documentary evidence. We affirm the judgments against both defendants.

The basic facts show that in 1963 Emil J. Dombowsky and two others incorporated Shoppers Charge Plan, Inc. (hereinafter Shoppers Charge) in North Dakota. The company issued personal credit cards which would be honored for purchases at participating stores. The corporation purchased the credit card charge slips from the stores at a six percent discount and in turn would bill and collect the full sale amount from the customer. In order to finance the Shoppers Charge operation thirty day demand notes and loan deposit agreements were sold to individual investors. The notes purported to carry seven percent interest.

In late 1963 or early 1964, the sole stockholders were Dombowsky, his wife and a Russ Morrison. Defendants Henderson and Swaving became associated with Shoppers Charge in 1966.³ Although neither owned stock, defendant Henderson assumed the title of "Business Manager" and Swaving was the "Account Executive." Both defendants were active in selling the demand notes as well as in soliciting new stores to join the credit plan. The evidence showed some $500,000 was raised by the corporation between 1963 and 1966; of that amount approximately $400,000 was raised in 1966. The defendants, like the other salesmen for the corporation, received a fifteen percent commission on all security sales besides a small salary. The evidence showed that at the time of trial Henderson had received $18,275.19 in advances; Swaving $10,555.84. According to these records Henderson was entitled to $19,183.95 in commissions while Swaving was credited with $8,210.74. Both defendants had used their "Executive" Shoppers Charge credit cards at various stores so that their balances owing were $5,282.47 for Henderson and $15,969.05 for Swaving.⁴ Swaving produced a statement for $15,000 allegedly owed to him by the corporation for services and a receipt signed by Dombowsky for $696 which Swaving had allegedly paid on his outstanding balance.

The evidence adduced by the government showed that Henderson made sales of the demand notes to eleven persons, one brought him a security fraud count and another the mail fraud count. Swaving made several sales to the other security fraud count victim. According to a CPA's review of its financial records the corporation was at all times insolvent during its operation. The evidence is replete with instances where only isolated interest payments were made to investors. Only a few people ever received back any of their principal investment. When confronted by the officers of the successor corporation which forced him out, Dombowsky admitted his responsibility for taking and misusing "a lot of funds" but not all of it. Neither defendant took the stand.

The North Dakota Commissioner of Securities commenced an investigation of Shoppers Charge on March 14, 1966, concerning its sales of short-term promissory notes. The Commissioner determined that these notes constituted securities and that their sale without state registration was unlawful. At a May 6, 1966, meeting with the Commissioner, Dombowsky furnished what he purported to be a complete list (later found deficient) of all Shoppers Charge investors, and he promised to offer all investors a full refund with interest and to refrain from further sales until such time as the company was in compliance with North Dakota securities law. On these assurances no formal action was taken at that time by the Commissioner. However, found in the records of Shoppers Charge was a document signed by Swaving to Dombowsky, dated July 28, 1966, as a receipt of payment for "Services rendered" with a notation, "$1,000 to be delivered to D.H. at Commissioner of Securities office." At that time Donald R. Holloway was the Deputy Securities Commissioner as an Assistant Attorney General assigned to the Securities Commission. Holloway testified that Swaving came to his office on August 23, 1966, and offered him two expensive wristwatches which Holloway refused. Later when Swaving was questioned about the $1,000 by an officer of SCP Credit Card Corp. (the successor corporation) during an audit of the books, Swaving said that it had been given him "to get the State Securities Commissioner off our back. * * *" Holloway never took anything from Swaving.

The defendants point to several factors to support their contention that they lacked the necessary criminal intent. The CPA who audited the books and records of Shoppers Charge testified that it would have taken several days of steady work to ascertain the true financial condition of the company and that only one record existed from which this could have been done. Further, it would have been "nigh unto impossible" for anyone but an expert accountant to come to the right conclusion. There is ample evidence that Dombowsky kept the books and records under lock and key, opening them to no one but a bookkeeper who was once hired to transcribe journal entries.

It is also urged that the defendants had no knowledge of the insolvency of the company, that at all times they were acting in good faith in making the misrepresentations, that Dombowsky was "a one man show," that they were unaware of any scheme, that they did not profit beyond their earned commissions and wages, and that the evidence showed they later warned investors about Dombowsky. On the other hand, the jury weighed evidence that Swaving had a good working knowledge of the corporation records in that he displayed familiarity with the books and records during an examination after the successor corporation took over. He even at times pointed out that certain letters and instruments were missing from the files. There was testimony that Swaving boasted that while he was "crooked," he was too smart to be caught; that his name would not be found on any legal documents and that there wasn't any evidence that anybody would get against him. As mentioned above, the jury received evidence that Swaving took $1,000 from Dombowsky and attempted to bribe the Deputy Commissioner of Securities.

As to the defendant Henderson, the jury heard evidence that he managed the office during Dombowsky's absence; that he signed many business letters and securities. As business manager he dealt with several of the investors and held out that the company was in good financial condition and purchase of the notes was a "good investment." In August, 1966, in order to induce a previous investor Emil Wanner to commit an additional $5,000, Dombowsky sent Henderson to deal with him. Henderson represented that the company at that time was financially hard up and needed money. At the same time Henderson borrowed from another investor, Elmer H. Shafer, $15,000 on behalf of the corporation. The evidence showed that Henderson was fully aware of the intervention of the North Dakota Securities Commission into the corporation's activities. As discussed, Dombowsky had previously promised to comply with the Commissioner's requirements. Yet after this promise Henderson wrote a letter to one investor on August 8, 1966, indicating some knowledge of the financial condition of the corporation as well as his willingness to operate the scheme in disregard of the state authorities.⁵

We cannot say as a matter of law that the evidence negates intent to defraud or precludes a finding that the defendants consorted with Dombowsky in a fraudulent scheme. The question presented here is one requiring factual resolution. Viewing the evidence in light most favorable to the government, we find the evidence sufficient to uphold the jury's determination that the overall circumstances sustained a finding of defendants' intent and participation in a scheme to defraud. The standards of proof surrounding intent and guilty participation have been amply discussed in recent cases and need no further amplification. See, United States v. Smallwood, 443 F.2d 535 (8 Cir. 1971); United States v. Porter, 441 F.2d 1204 (8 Cir. 1971); United States v. Prionas, 438 F.2d 1049 (8 Cir. 1971).

Complaint is made here, as in the recent Porter case, that the jury's verdict of not guilty in the conspiracy count rules out all evidence except that relating specifically with the substantive counts charged. There is no basis to attack the verdict as inconsistent. See United States v. Porter, supra; Koolish v. United States, 340 F.2d 513 (8 Cir. 1965), cert. denied 381 U.S. 951, 85 S.Ct. 1805, 14 L.Ed.2d 724. The evidence is undisputed that Henderson and Swaving did not join Dombowsky's activities until 1966. The conspiracy charged in the indictment allegedly was formed in 1963....