Wilson v. United States

• Decision Date: 20 August 1911
• Docket Number: 295.
• Parties: WILSON et al. v. UNITED STATES.
• Court: U.S. Court of Appeals — Second Circuit

190 F. 427

WILSON et al. v. UNITED STATES.

No. 295.

United States Court of Appeals, Second Circuit.

August 20, 1911

In Error to the Circuit Court of the United States for the Southern District of New York.

Christopher C. Wilson and others were convicted of using the mails to effect a scheme to defraud, and they bring error. Affirmed.

Writ of error to review a judgment of the Circuit Court, Southern District of New York, taken by the defendants, Christopher C Wilson, William W. Tompkins and Francis X. Butler.

Said defendants, together with William A. Diboll and George H Parker, were convicted under an indictment charging them, in the first three counts, with using the mails to effect a scheme previously devised by them to defraud, in violation of section 5480 of the Revised Statutes (U.S. Comp. St. 1901, p 3696), ^[1] and, in the fourth count, with conspiring to commit an offense against the United States in violation of section 5440 of the Revised Statutes (page 3676); said offense against the United States forming the basis of the conspiracy count being the misuse of the mails in violation of section 5480.

Arthur M. King, for plaintiff in error Wilson.

John B. Stanchfield, for plaintiff in error Tompkins.

W. Bourke Cochran, for plaintiff in error Butler.

H. A. Wise, U.S. Atty., and G. H. Dorr, Asst. U.S. Atty. (Robert Stephenson, of counsel), for the United States.

Before LACOMBE, WARD, and NOYES, Circuit Judges.

NOYES Circuit Judge (after stating the facts as above).

The most material questions presented by the assignments of error are these:

(1) Whether the first three counts of the indictment are based upon a statute in force when the alleged offenses were committed;

(2) Whether the first three counts set forth the scheme or artifice in question otherwise than by way of recital;

(3) Whether the averments in these counts limit the charge to using the mails to obtain money by false pretenses;

(4) Whether it was necessary for the government to show damage to persons buying the stocks;

(5) Whether the selling of the personal stock was fraudulent;

(6) Whether the fourth count charges a conspiracy to commit an offense against the United States;

(7) Whether the conspiracy count is barred by the statute of limitations;

(8) Whether there was a single or two separate conspiracies;

(9) Whether error was committed in the admission of documentary evidence; (10) Whether the evidence was sufficient to warrant the conviction of all the defendants. ^[2]

The contention of the defendants regarding the first question is that the counts charging the misuse of the mails are based upon section 215 of the Criminal Code which went into effect January 1, 1910, and not upon section 5480 of the Revised Statutes which was in force at the time of the commission of the alleged offenses, and that the Criminal Code in relation to such offenses is ex post facto.

The relevant portions of the statutes in question are printed in the footnote ^[3] and from a comparison of them it appears that the Criminal Code adds the words, 'by means of false or fraudulent pretenses, representations or promises' to the language of section 5480.

The indictment, in the general description of the offense, charges that the defendants 'devised and intended to devise a scheme and artifice to defraud divers persons of their money and property in and by inducing by false and fraudulent representations and pretenses, and by fraudulent artifices and devices, said persons to part with such money and property.'

It is urged that this use by the pleader of certain phrases appearing in the Criminal Code and not expressly appearing in the prior statute, necessarily establishes that the indictment is based upon the former and not upon the latter, and that as the Code increases the penalty and was not in force when the offense was committed the indictment based upon it is void.

In our opinion, however, the facts stated in the indictment, as distinguished from the general description, clearly disclose a scheme or artifice to defraud within section 5480, and this would undoubtedly be sufficient even if the characterization of the offense were inappropriate. But, in our opinion, the general description in the indictment is not an inappropriate description of a 'scheme or artifice to defraud' under section 5480. We think that a person who induces others by 'false and fraudulent representations and pretenses' to part with their property is guilty of devising 'a scheme or artifice to defraud' within the meaning of the statute.

If then the indictment properly state an offense under the statute in force when it was committed, its validity is in no way affected by the fact that it may also be sufficient to state an offense under the later statute carrying a heavier penalty. So the indictment being sufficient under the statute it is immaterial whether the pleader had it or the Code in mind when he drew the indictment. Indeed, he may very well have had the language of the Code in mind as preserving the provisions of the statute with the interpretation placed upon them by the courts.

With respect to the second question which we are to consider, the defendants contend that the first three counts of the indictment are bad because the scheme or artifice is pleaded by way of recital and not by direct averment.

The point of this contention is that the counts in question charge that the defendants on a given day had devised a scheme to defraud, and it is said that these allegations do not constitute positive averments of the commission of the offense of which the fraudulent scheme was a necessary part. In our opinion, however, the charge that at a particular time the defendants had devised a fraudulent scheme, sufficiently charges that the defendants theretofore did devise such scheme.

The defendants' contention with respect to the third question stated is that the indictment by adding the words 'in and by inducing by false and fraudulent representations and pretenses' to the express language of the statute, limits the charge to the offense of scheming to obtain money by false pretenses and of using the mails to that end. Based upon this proposition these further contentions are made:

(1) That the offense of obtaining money by false pretenses is not a 'scheme and device' within the statute.

(2) That if such offense be within the statute, the trial court erred in receiving evidence of false pretenses and representations as to the future.

Here again we think that the defendants lay too much stress upon the general description of the offense contained in the indictment. The particulars of the scheme are stated at length and it appears clearly that the defendants are not charged merely with misrepresentations as to past facts but as to the future as well. But even confining ourselves to the general description, we think the government not tied down to the common law offense of obtaining money by false pretenses. The defendants are charged with devising a 'scheme and artifice to defraud' not only by inducing persons to part with their money by false representations but 'by fraudulent artifices and devices.' Taking the averments together we think that a 'scheme and artifice' within the meaning of the statute is averred.

Notwithstanding the argument of the defendants we have no doubt that a scheme to induce persons to purchase stock in a corporation by false and fraudulent representations that the money paid for it would go into the treasury of the corporation for development purposes; that the officers of the corporation would not sell their shares and believed that they would become of enormous value; that stock held by officers was nontransferable; that only treasury stock was on the market, and that all increases in the selling price of the stock were justified by the development of the business, is a 'scheme and device to defraud' within the meaning of the statute. We cannot accept the defendants' contention that the mails are open for the dissemination of 'plain, blunt, customary misstatements.' On the contrary, we think that the purpose of the statute was the broad one of preventing the use of the mails to despoil the public, whether such result was intended to be accomplished by means of plain falsehoods, or by the most glittering, alluring and complicated contrivances.

In Durland v. United States, 161 U.S. 313, 16 Sup.Ct. 511 (40 L.Ed. 709), the Supreme Court of the United States said:

'But beyond the letter of the statute is the evil sought to be remedied, which is also significant in determining the meaning. It is common knowledge that nothing is more alluring than the expectation of receiving large returns on small investments. Eagerness to take the chances of large gains lies at the foundation of all lottery schemes, and, even when the matter of chance is eliminated, any scheme or plan which holds out the prospect of receiving more than is parted with appeals to the cupidity of all.

'In the light of this the statute must be read, and so read it includes every thing designed to defraud by the representations as to the past or present, or suggestions and promises as to the future.

'It was with the purpose of protecting the public against all such intentional efforts to despoil, and to prevent the post office from being used to carry them into effect, that this statute was passed; and it would strip it of value to confine it to such cases as disclose an actual misrepresentation as to some existing fact, and exclude those in which is only the allurement of a specious and glittering promise.'

The defendants' contention in respect of the fourth question stated is that it does not appear from the indictment or proof that the stock...