United States v. Painter, No. 8680.

• Court: United States Courts of Appeals. United States Court of Appeals (4th Circuit)
• Writing for the Court: SOBELOFF, , BRYAN, Circuit , and LEWIS
• Citation: 314 F.2d 939
• Parties: UNITED STATES of America, Appellee, v. Finley McAdoo PAINTER, Appellant.
• Decision Date: 11 March 1963
• Docket Number: No. 8680.

314 F.2d 939 (1963)

UNITED STATES of America, Appellee,
v.
Finley McAdoo PAINTER, Appellant.

No. 8680.

United States Court of Appeals Fourth Circuit.

Reargued January 10, 1963.

Decided March 11, 1963.

314 F.2d 940

Keith L. Newman, Huntington, W. Va., for appellant.

George D. Beter, Asst. U. S. Atty. (Harry G. Camper, Jr., U. S. Atty., on brief), for appellee.

Before SOBELOFF, Chief Judge, BRYAN, Circuit Judge, and LEWIS, District Judge.

SOBELOFF, Chief Judge.

After a trial extending over six days a jury in the United States District Court for the Southern District of West Virginia found Finely McAdoo Painter Guilty on a five-count indictment charging use of the mails, and of radio and television in interstate commerce, with intent to defraud. 18 U.S.C.A. §§ 1341, 1343. The main contention made on this appeal is that the evidence was not sufficient to warrant the jury's finding that he had devised a scheme to defraud, and that therefore the District Court should have directed a judgment of acquittal in accordance with the defendant's motion. Our reading of the record compels us to hold that the conviction must stand.

A recital of the proof adduced by the Government necessarily begins with October 9, 1959, when Painter launched an extensive advertising campaign to encourage the general public to invest in a real estate project. Nine days later he organized and became sole owner of a company chartered as the Credit Discount Corporation. Prospective investtors

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were told that Credit Discount owned a valuable 140-acre parcel of land known as the Peck Farm, situated adjacent to Huntington, West Virginia, and that this property was to be subdivided, developed, and improved by housing construction. It was represented that the company would pay eight to twelve per cent interest on all loans of $1000 or more "plus the return of entire principal in 12 months" and that such investments would be "fully secured by 12-month corporate notes." The advertisements further proclaimed that Credit Discount held "numerous properties over the city" and that it "had more than double the amount of assets to take care of these notes."

For more than a year Painter persisted in relaying to the public by mail, radio, television, and personal interview his promises of quick profits. That success of the promotional campaign depended upon interstate communications is undisputed.¹ The messages apparently bore fruit, for it is conceded that about a dozen persons relied thereon and invested a total of $24,000. And yet it is a striking fact that Credit Discount never took title to the Peck Farm or refunded, with but one exception,² any portion of the principal sum to the investors.

The record discloses that the Peck Farm was not acquired until December 14, 1959, when it was conveyed for the first time not to Credit Discount, but to State Motor Sales, Inc., another company also controlled by Painter as sole shareholder. On February 17, 1960, he and his wife incorporated a third entity and named it the Credit Realty Corporation. Shortly thereafter State Motor Sales transferred the Peck Farm to the new company. After holding this property for less than four months, Credit Realty reconveyed it to State Motor Sales on July 18. Later still, the Peck Farm was transferred back to Credit Realty, but not once did it pass to Credit Discount, which purportedly held the real estate as security for the "fully secured" corporate notes issued to investors. The debtor, Credit Discount, remained wholly without assets during the entire period, except for a brief interlude when it was in possession of two other properties of relatively inconsequential value.³

As the Peck Farm, the very keystone of the financial structure, shuttled back and forth between interlocking corporations at his personal whim, Painter continued to assure his investors that it was Credit Discount's primary asset. The confusion created by the deceptive similarity of the two corporate names, Credit Discount and Credit Realty, was compounded by joining both corporations in the same advertising. According to Philip R. Reeder, office manager for Credit Discount, this strategy was intended to cause the public to associate the corporations as one, rather than to distinguish between them as separate entities.⁴

Meanwhile, barren of assets and thus insulated from potential claims of its creditors, Credit Discount was being

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steadily drained by Painter of its investment funds as they were received. This callous abuse of his position of trust was nowhere better portrayed than in Reeder's testimony. He swore that Painter instructed him to divert the Credit Discount money into the bank account of State Motor Sales, then in serious financial difficulty. He testified explicitly that Painter avowed to him that the purpose of these transfers was to make certain that these funds would be beyond the reach of the investors when their notes matured. Checks were drawn on Credit Discount's account to cover overdrafts of State Motor Sales to purchase a pair of airplanes, to make political contributions, and for other uses known only to Painter and unrelated to the purpose for which...