United States v. Mortimer

• Decision Date: 17 March 1941
• Docket Number: No. 190.,190.
• Parties: UNITED STATES v. MORTIMER.
• Court: U.S. Court of Appeals — Second Circuit

118 F.2d 266 (1941)

UNITED STATES v. MORTIMER.

No. 190.

Circuit Court of Appeals, Second Circuit.

March 17, 1941.

Walter Brower and Bernard Tompkins, Sp. Assts. to Atty. Gen., for the United States.

Theodore Kiendl, of New York City (John T. Dooling and Earl E. Keyes, both of New York City, on the brief), for appellant.

Before L. HAND, AUGUSTUS N. HAND, and CLARK, Circuit Judges.

CLARK, Circuit Judge.

In 1935, appellant, George T. Mortimer, was indicted with five other persons, all officers of the New York Title and Mortgage Company in 1930, '31, and '32, for using the mails to defraud and for conspiring to do so. 18 U.S.C.A. §§ 338, 88. Of this group, Cyril H. Burdett, a vice-president of the company, died during the course of the trial; Joseph C. Shields, a vice-president, was acquitted; Harry H. Kahler, chairman of the board of directors, pleaded guilty; and H. P. Williams, chairman of the executive committee, Mortimer, the president, and H. F. Breitwieser, a vice-president, were convicted on various substantive counts, while Williams and Mortimer were also convicted on the conspiracy count. Mortimer alone appeals from the conviction and the resulting judgment of imprisonment and fine.

The fraudulent acts and the conspiracy charged against these defendants were allegedly in pursuance of the New York Title and Mortgage Company's business, which was the lending of money on the security of metropolitan mortgages and the sale to the public of mortgages or of certificates of participation therein. In substance, the fraud consisted of selling the company's guaranteed mortgages and participation certificates on the basis of the high degree of security they had, at a time — during 1931-32 — when the value of much of the security was inadequate to protect the loans, and the condition of the guaranteeing company was precarious. On March 14, 1933, the New York Superintendent of Insurance prohibited further sale of securities; on August 4, 1933, he took over the company for rehabilitation. The exact amount of the losses sustained by the company's clients does not appear. Admittedly they were very substantial.

The evidence clearly shows that an offense was committed. The company was active in its sales campaign during 1931-32 to the point of aggressiveness. It resorted to newspaper advertising, circular letters, and pamphlets, and employed a large staff of agents, none of whom, however, seem to have been acquainted with the condition of the company or the actual value of the mortgages. The one characteristic of the company's mortgages and certificates which it consistently and almost exclusively sought to call to the attention of prospective investors was their inherent and superlative security. It emphasized that "every dollar is secured by a first lien on improved real estate worth more than one and one-half times the amount of the mortgage." It promised that this margin of collateral and "the bond of a responsible borrower protect you against the possibility of loss," and that its own guarantee of them insured "safety of principal and an unfailing income." In an outburst of unrestrained confidence, it characterized its investments as "safe for great insurance companies," "legal investments," "depression-proof," "like certified checks," "Secure as the Bedrock of New York."

But these assurances were quite false. The amounts at which many of the properties were appraised were shown to have been deduced from, rather than determinative of, the amounts of the mortgages; and the appraisals were far above any reasonable evaluation of the properties at that time. Several of the so-called "responsible borrowers" were judgment-proof employees of the company itself. At least as early as February, 1932, in appellant's own words, the condition of the company-guarantor was "alarming." Far from being depression-proof, the security of these investments probably became questionable about the summer of 1931, as a result of the precipitous decline of real property values in June. It seems that during the fall of 1931 the company invoked a clause allowing it to delay payments against several holders of matured certificates, and that unpaid calls, foreclosures, and defaults on interest payments and taxes progressively increased from that time. Obviously properties on which there had been defaults could not serve as collateral adequate for legal investments. The steady decline in the amount of the company's cash and other liquid assets had then begun, and it was increasing the amount of its non-liquid assets pledged for loans. All this was made abundantly clear by a series of treasurer's reports during April and May, 1932; but the customary practices continued as long as appellant was president, indeed until his successor, about a month after his resignation on November 30, 1932, ordered that the sale of certificates cease.

Appellant's defense, in substance, was that, however reprehensible may have been the conduct of the company's affairs, none of these matters were brought home to him individually. He claimed ignorance of the appraisal practices, the use of dummy bondsmen, the nature of the company's advertising, the imminence of its insolvency, and the issuance of certificates under mortgages on properties subject to arrears of taxes and interest and on foreclosed properties. During all this period, however, appellant was in active charge of the company's policies along with Kahler and Williams. He conferred regularly with them on all matters of general importance, and received frequent reports on all aspects of the company's business. These facts alone would be sufficient to justify an inference that he was not unaware of practices so customary as those demonstrated, or conditions of such general significance. United States v. Dilliard, 2 Cir., 101 F.2d 829, 835, certiorari denied 306 U.S. 635, 59 S.Ct. 484, 83 L.Ed. 1036; United States v. Bob, 2 Cir., 106 F.2d 37, 40, 125 A.L.R. 502, certiorari denied 308 U.S. 589, 60 S.Ct. 115, 84 L.Ed. 493. But there is much direct evidence of his active participation, so much, indeed, that the question he raises as to its sufficiency seems hardly sincere. He himself professes to have been in personal control of the management of foreclosed property, against which certificates were issued, and for which the dummy bondsmen were largely used. There was evidence that he was on the appraisal committee, and that he passed on much of the advertising, of which a large part appeared in his name. The treasurer's confidential reports of May-June, 1932, drawn up particularly for him, Williams, and Kahler, could not have failed to bring to his attention the tax arrearages and the critical condition of the company. We conclude that appellant's guilt was clearly established.

Most of the other grounds of the appeal do not require extended consideration. One was that appellant had been required to answer a question directed at his failure, on invitation, to appear before the grand jury. The objection seems to be that he was thereby deprived of his privilege against self-incrimination. That privilege, however, in respect of anything connected with the offense charged here, was clearly waived by his offer to testify at the trial. Raffel v. United States, 271 U.S. 494, 46 S.Ct. 566, 70 L.Ed. 1054; United States v. Buckner, 2 Cir., 108 F.2d 921, certiorari denied 309 U.S. 669, 60 S.Ct. 613, 84 L.Ed. 1016; Tomlinson v. United States, 68 App.D.C. 106, 93 F.2d 652, 114 A.L.R. 1315, certiorari denied 303 U.S. 646, 58 S.Ct. 645, 82 L.Ed. 1107; Commonwealth v. Smith, 163 Mass. 411, 40 N.E. 189. There being no other reason for exclusion, the question was properly allowed, since it was relevant to the issue of appellant's credibility. Raffel v. United States, supra.

Objection was made to certain allegedly inflammatory language in the summation by the United States attorneys. Some of the summation, which referred to purchasers of certificates named in the indictment who had died before they could be called as witnesses, was said to insinuate that they had committed suicide as a result of their losses; but a reading of these passages reveals no foundation for this charge. None of the other passages seem to have been objectionable; certainly they do not justify reversal. United States v. Buckner, supra, 108 F.2d at page 929; United States v. Dilliard, supra, 101 F.2d at page 837; United States v. Socony-Vacuum Oil Co., 310 U.S. 150, 237, 60 S.Ct. 811, 84 L.Ed. 1129.

The most serious objection, technically, is that made to the admission in evidence of a number of charts...