United States v. Robertson

• Decision Date: 04 December 1959
• Citation: 181 F. Supp. 158
• Parties: UNITED STATES of America, v. Thomas E. ROBERTSON, American-Canadian Oil & Drilling Corporation, Thomas E. Robertson Company, Inc., Defendants.
• Court: U.S. District Court — Southern District of New York

181 F. Supp. 158

UNITED STATES of America, v. Thomas E. ROBERTSON, American-Canadian Oil & Drilling Corporation, Thomas E. Robertson Company, Inc., Defendants.

United States District Court S. D. New York.

December 4, 1959.

S. Hazard Gillespie, Jr., U. S. Atty., for S. D. New York, New York City, for the United States, Anthony R. Palermo, Asst. U. S. Atty., Rochester, N. Y., of counsel.

Walter & Tepper, Brooklyn, N. Y., for defendants, Julian C. Tepper, Brooklyn, N. Y., of counsel.

HERLANDS, District Judge.

Novel questions involving the interpretation of the following two penal provisions of the Securities Act of 1933 15 U.S.C.A. § 77e(a) (1) and § 77q(a) (1) are raised by defendants' motion to dismiss various counts of a twenty-count indictment:

Section 77e(a) (1)

"(a) Unless a registration statement is in effect as to a security, it shall be unlawful for any person, directly or indirectly —

"(1) to make use of any means or instruments of transportation or communication in interstate commerce or of the mails to sell * * * such security through the use or medium of any prospectus or otherwise; or * * *."

Section 77q(a) (1)

"It shall be unlawful for any person in the offer or sale of any securities by the use of any means or instruments of transportation or communication in interstate commerce or by the use of the mails, directly or indirectly —

"(1) to employ any device, scheme, or artifice to defraud, or

"(2) * * *."

The counts may be grouped and considered in terms of the four grounds of attack upon them.

I. Counts 1 to 15

The gist of each of these counts is that the defendants, in the offer and sale of a security, by use of the means and instruments of transportation and communication in interstate commerce and by the use of the mails, employed a device, scheme and artifice to defraud named investors. U.S.C.A. title 15, § 77 q(a) (1). Defendants claim that these counts are "vague and indefinite."

The attack embodied in this branch of defendants' motion is without force.

Preliminary paragraphs 1, 7, 8, 9, 10, 11 and 12 of the indictment clearly indicate that the three defendants are charged jointly with the violations pleaded in counts 1 through 15.

Moreover, Rule 7(c) of the Federal Rules of Criminal Procedure, 18 U.S.C.A. is satisfied. The wording of the indictment enables the defendants to understand the nature of the accusation, gives them the needed information to prepare their defense, and makes it possible for them to plead the judgment in bar of another prosecution for the same offense should occasion for doing so arise. United States v. Josephson, 2 Cir., 1947, 165 F.2d 82, 85, certiorari denied 1948, 333 U.S. 838, 68 S.Ct. 609, 92 L.Ed. 1122, rehearing denied 1948, 333 U.S. 858, 68 S. Ct. 731, 92 L.Ed. 1138, motion for leave to file a second petition for rehearing denied 1948, 335 U.S. 899, 69 S.Ct. 294, 93 L.Ed. 434; United States v. Miller, 2 Cir., 1957, 246 F.2d 486, 488, certiorari denied 1957, 355 U.S. 905, 78 S.Ct. 332, 2 L.Ed.2d 261.

II. Counts 9, 12 and 13

Another attack on these three counts is that they do not state that the mailed letter was mailed to induce or bring about a sale; and that the indictment does not refer to the contents or substance of each of the letters so as to link them with any of the preliminary paragraphs 1 to 11 of the indictment.

The attack embodied in this branch of defendants' motion is likewise without force.

An indictment drawn substantially in the language of the statute, as is the indictment at bar, is amply sufficient, provided that it sets forth all the elements of the crime and its generality neither prejudices the defendants in the preparation of their defense nor endangers their constitutional guaranty against double jeopardy. United States v. Achtner, 2 Cir., 1944, 144 F.2d 49, 51. The defendants' argument is fallacious because, under section 77q(a) (1) it is not necessary for the indictment to plead that the mails were used to induce or bring about the sale, provided the indictment pleads that the defendants, while using the mails "in the offer or sale of any securities," employed a device, scheme or artifice to defraud. See United States v. Monjar, 3 Cir., 1944, 147 F.2d 916, 920-921 and cases there discussed, certiorari denied 1944, 325 U.S. 859, 65 S.Ct. 1191, 1192, 1193, 1194, 89 L.Ed. 1979.

Furthermore, the contents of the letters involved in counts 9, 12 and 13 need not be set forth in the indictment itself. See Moffitt v. United States, 10 Cir., 1946, 154 F.2d 402, 405, certiorari denied 1946, 328 U.S. 853, 66 S.Ct. 1343, 90 L.Ed. 1625; Wilson v. United States, 2 Cir., 1921, 275 F. 307, 312-313, certiorari denied 1921, 257 U.S. 649, 42 S. Ct. 57, 66 L.Ed. 416.

Counts 9, 12 and 13 of the indictment effectively employ the statutory language.

III. Counts 1, 2, 3, 14 and 15

These counts, as amplified by certain extrinsic facts stipulated by the Government and the defendants for purposes of this motion, charge a crime under 15 U.S.C.A. section 77q(a) (1). The stipulated facts are:

A. With respect to counts 1, 2 and 3, the checks which the alleged victims gave the defendants in payment of the stock were deposited for collection in banks by use of the mails by defendants or were deposited by defendants in banks which thereafter transmitted the checks by mail to the drawee banks for purpose of collection.

B. With respect to counts 14 and 15, the checks which the alleged victims gave the defendants in payment of the stock were transported in interstate commerce by the defendants for the purpose of having the checks deposited and collected.

C. The use of the mails (in counts 1, 2 and 3) and the use of the facilities of interstate commerce (in counts 14 and 15) took place after the defendants had received the checks from the alleged victims. This represented the only use of the mails and the facilities of interstate commerce in the transaction.

Does the above-described use of the mails and the facilities of interstate commerce after the alleged victims paid for the stock by check constitute a use of the mails or the facilities of interstate commerce "in the sale" of securities within the meaning of section 77q(a) (1)?

The answer to this question is not furnished by the original legislative history of section 77q(a) (1). While the House and Senate hearings and reports shed light on numerous other penal provisions in this and related corporate securities legislation (Herlands, Criminal Law Aspects of the Securities Act of 1933, 67 U.S.Law Rev. 562-575, 615-627 1933; Herlands, Criminal Law Aspects of the Securities Exchange Act of 1934, 21 Va. L.Rev. 139 1934), they do not supply a specific and positive clue to the meaning of the particular phrase under consideration.

Nor can the problem be solved by matching maxim against maxim. The prosecution, urging the court to construe the words "in the sale" broadly in order to effectuate the legislative purpose of protecting the investing public, cites the maxim that a remedial statute (here, the Securities Act of 1933) should be liberally interpreted. Defendants counter with the canon that a penal statute (the provision under consideration) should be strictly construed.

The brocard is an ancient and universal legal phenomenon. Robson, Civilisation And The Growth Of Law, 59-64 (1935). It is rarely a tool of analysis. We have been warned against using legal formulas to dodge difficulty or to "save us from the anguish of judgment." See Marke, The Holmes Reader, 138-139, 142-144 (1955); Frankfurter, Some Reflections On The Reading Of Statutes, 47 Col.L.Rev. 527, 544 (1947). "Mere catchwords, labels and clichés no longer smooth the path of justice as they so often did in the past." Robert Lawrence Company, Inc. v. Devonshire Fabrics, Inc., 2 Cir., 1959, 271 F.2d 402, 407.

The court will not mechanically apply the maxim of strict construction of penal statutes. See Jackson, Problems Of Statutory Interpretation, 1948, 8 F. R.D. 121, 124; 3 Pound, Jurisprudence 663 (1959); Hall, Strict or Liberal Construction of Penal Statutes, 48 Harv.L. Rev. 748, 762-767 (1935); Quarles, Some Statutory Construction Problems and Approaches in Criminal Law, 3 Vand.L. Rev. 531, 538 (1950); Note, Criminal Law and Procedure — Statutory Construction, 32 Mich.L.Rev. 976, 981 (1934).

Faced with a similar maxim-contest, the Supreme Court has reiterated that the chief desideratum is to adopt a construction that will best manifest the legislative intent. Securities and Exchange Commission v. C. M. Joiner Leasing Corp., 1943, 320 U.S. 344, 353-355, 64 S.Ct. 120, 88 L.Ed. 88. As phrased by Mr. Justice Jackson, the governing "doctrine" is "that courts will construe the details of an act in conformity with its dominating general purpose, will read text in the light of context and will interpret the text so far as the meaning of the words fairly permits so as to carry out in particular cases the generally expressed legislative policy." Securities and Exchange Commission v. C. M. Joiner Leasing Corp., supra, 320 U.S. 350-351, 64 S.Ct. 123. In the final analysis, the judicial responsibility is to effectuate the fairly discernible Congressional objectives by reading the statute "with some imagination of the purposes which lie behind" it. Lehigh Valley Coal Co. v. Yensavage, 2 Cir., 1914, 218 F. 547, 553, certiorari denied 1915, 235 U.S. 705, 35 S.Ct. 282, 59 L.Ed. 434, quoted in United States v. N. Y., N. H. & H. Railroad Company, 2 Cir., 1959, 276 F.2d 525; United States v. Brown, 1948, 333 U.S. 18, 25-26, 68 S.Ct. 376, 92 L.Ed. 442; United States v. Alpers, 1950, 338 U.S. 680, 683, 70 S.Ct. 352, 94 L.Ed. 457; Roschen v. Ward, 1929, 279 U.S. 337, 339, 49 S.Ct. 336, 73 L.Ed. 722; Bell v. United States, 1955, 349 U.S. 81, 83, 75 S.Ct. 620, 99 L.Ed. 905; United States v. Shirey, 1959, 359 U.S. 255, 258, 263, 79 S.Ct. 746, 3 L.Ed.2d 789; United States v. Turley, 1957, 352 U.S. 407, 413, 77 S. Ct. 397, 1 L.Ed.2d 430.

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