United States v. Monjar

• Decision Date: 01 December 1944
• Docket Number: No. 8416-8427.,8416-8427.
• Citation: 147 F.2d 916
• Parties: UNITED STATES v. MONJAR et al. SAME v. MOORE et al.
• Court: U.S. Court of Appeals — Third Circuit

147 F.2d 916 (1944)

UNITED STATES v. MONJAR et al. SAME v. MOORE et al.

No. 8416-8427.

Circuit Court of Appeals, Third Circuit.

Argued May 4, 1944.

Decided December 1, 1944.

As Amended February 26, 1945.

COPYRIGHT MATERIAL OMITTED

Daniel O. Hastings, of Wilmington, Del. (Ayres J. Stockly and John Van Brunt, Jr., both of Wilmington, Del., on the brief), for appellants.

Stewart Lynch, of Wilmington, Del., and E. Russell Kelly, of Washington, D. C. (Robert S. Rubin, Sp. Counsel, and W. Victor Rodin, Atty., Securities and Exchange Commission, both of Philadelphia, Penn., on the brief), for appellee.

Before JONES and McLAUGHLIN, Circuit Judges, and GANEY, District Judge.

McLAUGHLIN, Circuit Judge.

There were two indictments in these cases. Under the first, covering appeals Nos. 8416 to 8420, inclusive, the defendants, Hugh B. Monjar, Josephine T. Monjar, Abraham J. Cook, John Fenton Jones and Clement O. Drew were indicted for: violations of the Mail Fraud Act, 18 U.S.C.A. § 338; for violations of the fraud provisions of the Securities Act, 15 U.S.C.A. § 77q (a) (1), and for conspiracy to violate the Mail Fraud Statute and the fraud provisions of the Securities Act, 18 U.S.C.A. § 88. There were twenty-five counts in the first indictment. Counts 1 to 15, inclusive, 23 and 24, charged violations of the Mail Fraud Statute. Counts 16 to 22, inclusive, charged violations of the fraud sections of the Securities Act. Count 25 charged conspiracy to violate the Mail Fraud Statute and the fraud provisions of the Securities Act. The court directed verdicts in favor of the defendants on counts 1, 4, 9, 19 and 22. All of the defendants to the first indictment were found guilty on all remaining counts with the exception of Josephine T. Monjar, who was found guilty under the conspiracy count alone.

The second indictment, embracing appeals Nos. 8421 to 8427, inclusive, consists of a single count for conspiracy. It is similar to count 25 in the first indictment, with nine additional paragraphs added which set up acts and conduct of the second group of defendants after the first indictment had been returned. There were twelve persons originally named in the second indictment. Ten of these were tried. Leo F. Jones, Geenty and Clark, were acquitted by the jury. Moore, Lindh, Fitzpatrick, Willard, Candlin, Cruser and Maddams were convicted. The cases were tried together over a period of four months and consumed sixty trial days. These appeals are on behalf of all of the persons who were convicted.¹

The appellants urge: (1) That their demurrers to the indictments should have been sustained: (2) That their requests for bills of particulars should have been allowed: (3) That the evidence was insufficient to support a verdict of guilty as to any defendant on any count of either indictment. In addition to this general proposition, it is also contended that the evidence was insufficient to sustain the convictions of John Fenton Jones, Josephine T. Monjar, two of the defendants in the first indictment, and of Moore, Lindh, Cruser, Fitzpatrick, Candlin, Willard and Maddams, the defendants who were convicted under the second indictment: (4) That there were errors by the court consisting of; failure to properly admonish the jury concerning certain opening comment by the United States attorney and in making prejudicial remarks to the jury in the course of an exception being noted to this; in making a statement regarding the presence of the defendants in court; in certain evidence rulings, and in the charge.

It is stressed on the demurrer argument that no count of either indictment set forth with sufficient accuracy and particularity any crime, did not inform the defendants of a specific offense charged against them, and did not protect any of the defendants against subsequent prosecution. As stated, the first count of the first indictment and the single count of the second indictment are practically identical. They charge that the defendants from January 1, 1928, up to the date of the respective indictments devised, and intended to devise, a scheme and artifice to defraud various persons who were and are members of an organization known as the Mantle Club and to obtain from them by means of false and fraudulent representations and promises, their money and property. The scheme and artifice is related with great detail in the succeeding fifty-one paragraphs which take up twenty-two printed pages of the appendix. The next fourteen counts of the first indictment charge that the defendants thereto mailed, or caused to be mailed, certain letters, which are set out in full, in connection with the fraud and contrary to the statute, etc. The twenty-third and twenty-fourth counts of the first indictment allege receipt by the defendants through the mails, of letters in connection with the fraud. The sixteenth to twenty-second, inclusive, counts of the first indictment charge that the defendants employed the fraudulent scheme in the sale of certain evidences of indebtedness by the use of means and instruments of communication in interstate commerce and by use of the United States mails. The particular documents referred to are set out in full. The twenty-fifth count of the first indictment, for conspiracy to violate the Mail Fraud Act and the Securities Act, incorporates the reference count 1 as part of it and charges the commission of eleven separate overt acts for the purpose of effecting the object of the conspiracy. The second indictment charges that the defendants there named conspired to violate the Mail Fraud and Securities Act. It details the same charges as set out in the first count of the first indictment with additional allegations, as a further part of the scheme, of acts and conduct on the part of the defendants, together with those named in the first indictment, at or about the time of the return of the first indictment and thereafter. The indictment concludes by stating twelve overt acts of the defendants.

The entire alleged fraudulent scheme is disclosed in the voluminous indictments. Its alleged object, namely, to fraudulently obtain money from members of a club promoted by the appellants is plainly stated. The money was obtained from the members in various ways; through initiation fees and dues, through personal loans to the defendant, Hugh B. Monjar, through sales of the Key Magazine, through sales of two ethics books of Hugh B. Monjar and through payments for ritual costumes. All of this, including the use of the United States mails in the mail fraud counts and the use of means and instruments of communication in interstate commerce and of the United States mails in connection with the security counts is gone into at considerable length.

The defendants in their demurrers especially attack the security counts alleging no violation of the Securities Act because no use of the mails or telegraph is stated which induced a purchase of a security or a use of those facilities in the delivery of a security. They argue that there was no offense under the statute because the communications were not addressed by the defendants or some of them directly to the persons to whom it was intended to make a sale. We fail to see the justification of any such attempted narrow construction. Loan meetings of the branch units of the club were the heart of that part of the charged fraud concerning the sale of loans. The primary purpose of such meetings was to sell PL loans. Knowledge of what happened at those meetings and their tangible results in the form of cash statements and covering bank drafts were necessary to the defendants. That information was supplied by the letters and telegrams which are the source of the security counts.² Those letters and telegrams were all sent to Cook, the treasurer of the club, by one or the other of his co-defendants or by a loan agent. Obviously, they were in furtherance of the sale of the loans.

The case of United States v. Williams, 1 S.E.C. Jud.Dec. 51 (D.C.S.D.Cal.1935), unreported officially, is urged by the defendants in support of their position on this point. That decision is not applicable on its facts. The court points out in that case that the letter there involved "was sent, as stated, on the advice of a Deputy District Attorney, and, certainly, it was not sent for the purpose of doing anything in conjunction with the scheme." In Kopald-Quinn & Co. v. United States, 5 Cir., 101 F.2d 628, certiorari denied Ricebaum v. United States, 307 U.S. 628, 59 S.Ct. 835, 83 L.Ed. 1511, it was charged that the scheme of the defendants was to unload worthless stocks on their customers and not as they pretended, to serve their customers by helping them make money. The selling was done by verbal contact and negotiation. The only use of the mails had to do with written confirmations of sales. The defendants stressed, as here, that there was no use of the mails to effect sales and that the use of the mails proven was consequent upon and after the making of a sale and merely incidental. It was also contended that to constitute an offense under the Securities Act it was necessary to prove a scheme to effect sales and the actual making of sales of securities by mail. The court said (101 F.2d page 632): "We think the construction thus urged for the Act unduly narrows the language used in it, unduly limits its scope and effect. We think the count alleges an offense under the Act, and that the proof supports the allegation."

In Pace v. U. S., 5 Cir., 94 F.2d 591, letters expressing thanks for orders for stock given to defendant's salesman were held to sufficiently charge offenses under the Securities Act. The demurrer was overruled in that case. In Landay v. United States, 6 Cir., 108 F.2d 698, which concerned another offense under Section 17 (a) (1) of the Securities Act, the only mailing alleged was of a letter acknowledging receipt of an order to purchase and a check received in payment for the security. The...