United States v. Sprinkle

• Decision Date: 18 April 1932
• Docket Number: No. 329.,329.
• Citation: 57 F.2d 968
• Parties: UNITED STATES v. SPRINKLE et al.
• Court: U.S. Court of Appeals — Second Circuit

57 F.2d 968 (1932)

UNITED STATES v. SPRINKLE et al.

No. 329.

Circuit Court of Appeals, Second Circuit.

April 18, 1932.

David P. Siegel, of New York City (Alfred J. Talley and Milton B. Seasonwein, both of New York City, of counsel), for appellants.

George Z. Medalie, U. S. Atty., of New York City (Leon Leighton and Seymour D. Altmark, both of New York City, of counsel), for the United States.

Before MANTON, L. HAND, and SWAN, Circuit Judges.

SWAN, Circuit Judge.

The indictment charged the two appellants and two other defendants, who were acquitted, with using the mails in a fraudulent stock-selling scheme involving the sale of shares of a corporation known as Associated Dental Products, Inc. False and fraudulent promissory misrepresentations were alleged, namely, that the corporation would establish numerous distributing depots throughout the United States, that it would pay dividends in the near future, and would be in a position to pay dividends, and that the defendants would receive no salary, commission, or remuneration of any kind out of the moneys obtained from the sale of its stock. The theory of the defense was the defendants' lack of criminal intent and their honest belief, however ill-founded, in the ultimate success of their enterprise. But whatever the proof might warrant as to the other misrepresentations charged in the indictment, there was clearly sufficient for the jury to find fraudulent misrepresentations as to the receipt of commissions. It is not denied that the appellants did in fact receive commissions, amounting to many thousands of dollars, on all the shares sold, and there was credible testimony that they represented they would not. That promissory representations, if made without the intent to perform, are a sufficient basis of fraud in prosecutions of this sort, needs no elaboration in view of our recent decision in United States v. Rowe, 56 F.(2d) 747, March 14, 1932. Hence the evidence was clearly sufficient to go to the jury. This is not seriously challenged; the errors chiefly relied upon relate only to the conduct of the trial.

The record is voluminous and the evidence took a wide range, including testimony of false representations other than those charged in the indictment. The admission of such evidence is charged as error. Much of it related to false statements concerning the assets and sales of another corporation controlled by the defendants and known as Lockxon Tooth Manufacturers, Inc. The Lockxon corporation was organized in 1922 to manufacture and deal in artificial teeth. When Associated Dental Products was incorporated in 1925, it acquired exclusive control of the output of the Lockxon company, and this fact was emphasized in the prospectus of Associated Dental Products as a basis for the expectation of large earnings. Under these circumstances the condition and business of the Lockxon company had a relevant bearing upon the good faith of the defendants in making promissory representations as to the payment of dividends and the establishment of a chain of distribution depots by Associated Dental Products. Marshall v. United States, 197 F. 511 (C. C. A. 2), is distinguishable, for it does not appear that any such relationship existed between the two societies there involved. If the Marshall Case stands for the proposition that false representations not alleged in the indictment are always incompetent, it no longer represents the law of this circuit. United States v. Shurtleff (C. C. A.) 43 F.(2d) 944, 947. False statements outside the scheme charged were competent to show the defendants' fraudulent intent. If such false statements were part of the fraudulent scheme charged, they should have been alleged as such in the indictment, and proof of them without such allegations constituted a variance. The practice of putting into the indictment only a part of the fraudulent scheme on which the prosecution means to rely is not to be commended; it may go far enough to work injustice....