United States v. Hirsch

• Decision Date: 03 December 1934
• Docket Number: No. 112.,112.
• Citation: 74 F.2d 215
• Parties: UNITED STATES v. HIRSCH et al.
• Court: U.S. Court of Appeals — Second Circuit

74 F.2d 215 (1934)

UNITED STATES v. HIRSCH et al.

No. 112.

Circuit Court of Appeals, Second Circuit.

December 3, 1934.

David P. Siegel, of New York City (Charles H. Tuttle and Milton B. Seasonwein, both of New York City, of counsel), for appellants Gorlitz and Hirsch.

Solomon Charles Sugarman, in pro. per.

Martin Conboy, U. S. Atty., of New York City (Joseph E. Brill and Francis A. Mahony, Asst. U. S. Attys., both of New York City, of counsel), for the United States.

Before MANTON, AUGUSTUS N. HAND, and CHASE, Circuit Judges.

MANTON, Circuit Judge.

The appellants were indicted in twenty counts charging them, and others, with using the mails in furtherance of a scheme to defraud (U. S. C. title 18, § 338 18 USCA § 338), and in one count of conspiracy to violate the mail fraud statute (U. S. C. title 18, § 88 18 USCA § 88). The proof established the scheme or artifice by which they defrauded the various victims to be the incorporation and use of the Sheldon Hosiery Company, Inc., and the Mills Research Corporation, through which they popularized and sold hosiery for women throughout the United States. It was represented by them that, if the victims would send appellants $1, they would receive in return therefor six pairs of full-fashioned pure silk hosiery, guaranteed not to run, valued retail at between 90 cents and $1 a pair in the best shops. The offer was said to expire in 30 days, and thereafter such hosiery could only be purchased through dealers and shops at increased prices. If the purchasers were dissatisfied for any reason, upon request, their money would be "cheerfully refunded." But, upon receipt of remittances of $1 from the purchasers, the appellants would not send six pairs of silk hosiery to their purchasers as promised, but in lieu thereof would merely acknowledge receipt of the remittance in a letter inclosing three order cards, and advising them that, in order for them to obtain the hosiery, they would have to induce three other persons likewise to send to the appellants $1 with the order cards, and, upon receipt of the moneys and order cards, the appellants would immediately send the stockings to the purchasers. They did not send the stockings to these purchasers.

The twenty-first count charged a conspiracy, beginning July 1, 1932, and continuing to the date of the filing of the indictment, September 1, 1933, to use the mails in furtherance of the scheme referred to in the first twenty counts, and it set forth overt acts done in pursuance of the conspiracy.

The evidence clearly connects each appellant with the conspiracy and the substantive offenses charged. Sugarman and three other defendants formed the Sheldon Hosiery Company about December 19, 1932. Arrangements were made with Jules Gorlitz, Inc., and the Kramer Hosiery Company, prior to the filing of the certificate of incorporation in the county clerk's office December 19, 1932, for the purchase of hosiery on a cash basis. Some were used to start these endless "chains." About 496½ dozen pairs were purchased from December 21, 1932, to January 31, 1933. There was an exhaustion of supply and no cash on hand to buy additional supplies. However, thereafter hosiery was again supplied to the corporation and the business expanded through the intervention of Hirsch. Were it not for Hirsch joining and supplying funds and credit, the scheme would have ended at the time of his entry. The place of business was enlarged and more employees placed at work. The entire stock of the Sheldon Hosiery Company was transferred to Hirsch at his demand. He installed a representative to protect his interests and make daily reports to him. At Hirsch's suggestion the Mills Research Corporation was organized. It employed 70 workers in two places of business. Hirsch agreed to purchase 7,000 dozen pairs so that "they might be sent out to get things started." Five thousand dozen pairs of these were distributed in half dozen lots to the first 10,000 people making remittances of $1 each; 1,000 dozen in single pairs to the next 12,000 people remitting $1; 1,000 dozen pairs were used when necessary to satisfy "squawks" and "chains."

After study and approval by Sugarman, three circular form letters were sent through the mails to women. The first contained an alluring description of the quality and texture of the hose; an order blank was inclosed to be filled out and returned to the appellants with $1 in a self-addressed envelope. The second was used to acknowledge receipt of the order blank and remittance, and inclosed three additional blank order cards together with self-addressed envelopes. In this there was an exaggerated description of the hosiery, and it stated that the purchasers would obtain six pairs without further cost upon condition, however, that they induced each of three friends likewise to remit $1 for six pairs of Sheldon hosiery. The third informed the victims that six pairs of hosiery were being shipped in accordance with the order, and it also inclosed three blank order cards and contained an offer of six pairs of stockings absolutely free to the victim upon condition that each of the three friends to whom the cards would be distributed would purchase six pairs of hosiery for $1. Such letters started the endless "chains" of dollars to appellants. By this scheme it was pretended that the victim would get "six pairs of these marvelous full-fashioned, rich silk hosiery for One Dollar"; that the stockings were of a quality for which the purchaser "would have to pay normally at least 95 ¢ a pair in the best shops"; that the hosiery could be obtained "in any assortment of sizes, styles and colors for less than 17 ¢ a pair"; that it was an advertising offer; that the only condition attached was that the victim would "recommend our hosiery to your friends and help us to tell every woman about Sheldon hose"; that the company would cheerfully make refunds in the event of dissatisfaction; and that not more than six pairs of $1 hose would be sold to any one customer and the offer would expire in 30 days.

The evidence showed these representations to be false. The use of the mails was established as to each of the substantive counts of the indictment upon which conviction has been had.

Sugarman actively participated in incorporating the company, passing upon the literature, and partook of the profits of the enterprise. He represented that he had a "connection," through an assistant in the Department of Justice in Washington, which would protect the enterprise. An assistant of the Attorney General's office (not now in the service) met defendants Rosen and Penn with Sugarman in a hotel in New York City, whereupon Sugarman and Rosen explained the details of their scheme to this assistant who said he had known of similar schemes, and that a "fraud order" by the Post Office Department would not issue, and that no criminal prosecution of persons engaged in this scheme would follow. The assistant said he would arrange to have it assigned to a friendly post office inspector in the event of an investigation of the subject, and, in return for procuring this, Sugarman promised to give him "G strings for his violin" (a bribe). Sugarman made ten or twelve trips to Washington for the purpose of delivering moneys to this government employee. At this time Hirsch had become a partner in the scheme. There were visits from a post office inspector who investigated the affairs of both corporations. The appellants all knew of this investigation and continued in the enterprise, and, in the presence of Hirsch and Gorlitz, Sugarman telephoned to the assistant in Washington promising to come down bringing a bribe.

When the appellant Hirsch entered the scheme, he knew of these activities of Sugarman and the other defendants. He instructed his representatives to give large sums of money to Sugarman for use in the bribing of this official and for Sugarman's expense money in traveling to Washington.

In February, 1933, an interview was obtained with a special assistant to the Attorney General in charge of postal fraud cases, at which time Sugarman outlined his scheme, and he was then advised that undoubtedly a fraud order would issue if they continued, and that those engaged would be subject to criminal prosecution. Nevertheless, the appellants continued sending out the literature through the corporations, and thereafter, at a conference attended by the appellants and other defendants, it was agreed to send Sugarman to Washington to give more protection money. As complaints came in from the victims for nonreceipt of the hosiery and demands for refunds were made, trickery was resorted to and false statements made to them; various untruthful excuses were offered. These letters were shown to each of the appellants and approved by them. It is unnecessary to enumerate the excuses mentioned in the letters.

The president of the Mills Research Corporation, when it was organized at Hirsch's proposal, used a fictitious name to avert suspicion because of the similarity of the literature distributed by both companies. When the government and postal inspector came, a person who masqueraded under a fictitious name as president of the company submitted to questioning by the post office inspector, for which he was paid a considerable sum of money. The efforts of the postal authorities to conduct an investigation of the enterprise were hindered and obstructed by the appellants. Misinformation was given. The government inspector made known to them that a fraud order would issue and that those engaged would be subject to prosecution. A contract was produced between the Sheldon Company and Jules Gorlitz Company under date of February 23, 1933, written by Gorlitz after the visit of the government inspector, with the approval of the appellants. This contract contained false statements; it was used to mislead and obstruct the investigation, and...