United States v. Rice Growers Ass'n of California

• Decision Date: 17 February 1953
• Docket Number: No. 32880.,32880.
• Citation: 110 F. Supp. 667
• Parties: UNITED STATES v. RICE GROWERS ASS'N OF CALIFORNIA et al.
• Court: U.S. District Court — Northern District of California

110 F. Supp. 667

UNITED STATES v. RICE GROWERS ASS'N OF CALIFORNIA et al.

No. 32880.

United States District Court N. D. California, S. D.

February 17, 1953.

Wallace Howland, Special Asst. to the Atty. Gen., Lyle Jones, Trial Atty., San Francisco, Cal., Chauncey Tramutolo, U. S. Atty., for plaintiff.

Harold C. Faulkner, Wallace Sheehan and Harry M. Creech, San Francisco, Cal., for defendants Rice Growers Assn. of Cal., Harry M. Creech and William Crawford.

Joseph L. Alioto, San Francisco, Cal., for defendants Rice Growers Assn. of Cal., and George W. Brewer.

Jerome B. White and Raymond L. Sullivan, San Francisco, Cal., for defendant Rosenberg Bros. & Co., Inc.

Edward D. Bronson, San Francisco, Cal., for defendant C. E. Grosjean Rice Milling Co.

OLIVER J. CARTER, District Judge.

Defendants were indicted for having wilfully and knowingly conspired together to defraud the United States and the Commodity Credit Corporation, an agency of the United States, in violation of 18 U.S.C. § 371, and for having wilfully and knowingly concealed by trick, scheme and device a material fact in a matter within the jurisdiction of the Commodity Credit Corporation, in violation of 18 U.S.C. § 1001. Evidence has been introduced by the government, and at the conclusion of this phase of the trial, each of the defendants has moved, under Rule 29(a) of the Federal Rules of Criminal Procedure, 18 U.S.C., for a judgment of acquittal.

Each of these motions is urged upon the same two grounds. It is argued that the evidence offered by the government can not, as a matter of law, establish the guilt of the defendants of the crimes charged beyond a reasonable doubt. The other ground is the contention that the facts which the government seeks to prove in this case have been conclusively determined in favor of the defendants in a prior adjudication of this court and are, as between the government and these defendants, res judicata. The prior adjudication to which reference is made is a verdict of acquittal rendered in the case of United States v. Rice Growers Association of California, et al., Criminal No. 32879.^*

The transaction which is the nucleus of the indictment was a sale of a quantity of rice to Commodity Credit Corporation. Before discussing the transaction itself it would be well to first identify all who had any connection with that transaction.

First there are the defendants. Rice Growers Association of California, hereinafter referred to as RGA, is a cooperative corporation, formed and existing under the laws of the State of California. From undisputed evidence offered by the government, certain facts about RGA were established. It is a comparatively large cooperative marketing association, composed of more than 700 members, all of whom are growers of rice. It is the largest cooperative engaged in the marketing of rice in the United States. Each year its business operations involve the sale of tremendous quantities of rice for many millions of dollars.

Rosenberg Bros. & Co., Inc., hereinafter called Rosenberg, and C. E. Grosjean Rice Milling Company, hereinafter called Grosjean, are corporations who engage commercially in the milling and sale of rice. William Crawford is a commercial rice miller doing business under the trade name and style of Woodland Rice Company, hereinafter called Woodland. George W. Brewer, Oscar F. Zebal, and Ralph Crowe are officials of the various corporate defendants. The government entered a nolle prosequi on November 16, 1951 as to Crowe. Harry M. Creech is chairman of a voluntary and unincorporated trade association of California rice mills called California Rice Exporters, which has among its members officials and representatives of RGA, Rosenberg, Grosjean and Woodland.

On the government side of the case, there are involved several agencies of the United States. Commodity Credit Corporation, hereinafter referred to as CCC, is a corporation and an agency of the United States, organized and existing under the laws of the United States. CCC exists within the Department of Agriculture and is concerned with agricultural commodities, their prices and farm income. 15 U.S.C.A. § 714. Among the powers of CCC are the support of prices of agricultural commodities through loans and purchases, 15 U.S. C.A. § 714c(a), and the procurement of agricultural commodities for sale to other government agencies and to foreign governments, 15 U.S.C.A. § 714c(c).

Production and Marketing Administratration, hereinafter referred to as PMA, is another governmental agency existing within the framework of the Department of Agriculture. It acts as the agent of CCC in the negotiation and formation of contracts for the purchase, by CCC, of agricultural commodities. It also receives, and accepts or rejects, agricultural commodities sold to CCC.

The subject matter with which these parties dealt was rice. This opinion will discuss two kinds of rice. First, there is paddy rice, which is also called rough rice. Paddy rice is rice in the form in which it comes from the fields, before it is polished or otherwise milled or processed. Second, there is milled rice, which is rice that has been polished in order to put it into a state in which it is usable as food.

Now as to the transaction itself. On January 26, 1949, RGA entered into an option agreement with CCC. This agreement was called a "Purchase Agreement" and was executed upon a prepared government form. Pursuant to its terms, RGA paid to CCC the sum of $6,000 in return for which it acquired the right to sell to CCC any quantity up to and including 600,000 bags of paddy rice at a price to be determined by an ascertained formula, provided that the right was exercised within 30 days following April 30, 1949. The method by which the right to sell was to be exercised was that RGA should notify a PMA County Committee of an intention to sell a specified quantity and to request delivery instructions therefor. After issuance of delivery instructions by the County Committee, RGA was required to deliver the rice within 15 days, unless the County Committee determined that more time was required for delivery.

On May 26, 1949, RGA notified the County Committee that it desired to sell the maximum quantity of rice allowable under the option agreement and requested delivery instructions. Contemporaneously with this action, defendant Brewer, the General Manager of RGA, wrote a letter to Mr. Fred Entermille, Assistant Director of the Grain Branch of PMA, in Washington, D.C. This letter was a confirmation and written summary of the substance of a prior telephone conversation between the two to the effect that it was understood between the parties that RGA would continue to sell on the open market rice from that quantity covered by the agreement, and that no delivery instructions would be issued as to this rice without the consent of RGA.

Other action taken by RGA on May 26, 1949, was the execution of option agreements with Rosenberg and Woodland, two of the defendants who are commercial millers. These options gave RGA the right to purchase from each of the commercial millers a quantity of rice not to exceed a specified percentage of the volume of rice which RGA might deliver under its purchase agreement with CCC. The agreements required delivery of any rice sold under these agreements to RGA, and the options to buy were to be exercised by RGA by notifying the respective seller within five days after receiving delivery instructions from CCC.

Time passed, and as of July 22, 1949, no delivery instructions for rice had yet been issued to RGA. During the interim period between May 26 and July 22, Entermille, on behalf of PMA, had conversations relative to the purchase by CCC of the rice under the purchase agreement with RGA, with Brewer, on behalf of RGA, and Creech, who was considered by PMA as a source of expert information on the California rice market. These conversations dealt with the possibility of CCC buying rice for ECA to send to China under the existing purchase agreement with RGA and with the idea of changing the pending purchase transaction between RGA and CCC from one for paddy rice to one for milled rice. On July 22, 1949, headquarters of PMA in Washington instructed the San Francisco PMA office to enter into an agreement with RGA to assemble the paddy rice covered by the purchase agreement, to mill that rice, and then deliver it to PMA.

Conferences were then held between representatives of PMA and RGA relative to the formation of such an agreement. The instrument which contained the agreement which was formed was drawn up by an attorney of the staff of PMA. This instrument, which was a contract for the sale, by RGA to CCC, of milled rice, was executed on July 26, 1949. On the same day delivery instructions were issued, which instructions were amended on the next day to correctly conform to the agreement. Thereafter, rice was milled in the mills of RGA, Rosenberg, Grosjean and Woodland, and delivered from these respective mills to the point designated by PMA. The rice which was milled by the commercial millers was billed to RGA, and after RGA had collected for the rice from CCC, it paid the commercial mills the same price which it had been paid, plus the cost of transportation. All documents accompanying the rice were issued in the name of RGA, and waybills under which rice was shipped from the commercial mills showed the place of shipment as having been not from such mills, but from the mill of RGA.

The question raised by the instant motions is whether or not there is sufficient evidence to allow a reasonable man to conclude that the defendants are guilty of the crimes with which they are charged. With respect to the first count of the indictment, guilt would be established by evidence sufficient to establish a conspiracy on the part of defendants to defraud CCC by selling to it under the 1948 Rice Price Support Program rice which was not eligible for purchase...