Van Riper v. United States, 13 F.2d 961 (2d Cir. 1926)

*962 *963 *964 Joseph F. Kroppy, of New York City, for plaintiff in error Hedrick.

Alexander T. Hussey, of New York City, for plaintiffs in error Sweet and Ish.

Patrick J. Dowd, of Waltham, Mass., John P. Feeney, of Boston, Mass., and Thomas H. Mahoney, of New York City, for plaintiffs in error Maloney and McCluskey.

Andrew Foulds, Jr., of New York City, for plaintiff in error L. C. Van Riper.

Harlah E. Cecil, of New York City, for plaintiff in error C. E. Van Riper.

Alexander Ackerson, of New York City, pro se.

Guido Pantaleoni, Jr., of New York City, for the United States.

Before MANTON, HAND, and MACK, Circuit Judges.

HAND, Circuit Judge (after stating the facts as above).

We can see no reason to say that there were involved in this case two separate schemes to defraud. Such a scheme, when shared among several, becomes a conspiracy, so that in fact the conspiracy count adds nothing of substance to the charge, except as it relieves the prosecution of the necessity of showing the connection of all the defendants to be charged at the date of the posting of the letters laid in the indictment. The same rules which govern the trial of conspiracies are therefore applicable to such trials. Hence, if the conspiracy was continuous, the scheme to defraud was continuous. It is quite true that most of the several defendants entered and left this scheme at different times, and this, as will appear, had an effect upon the result, but it did not turn it into a series of separate schemes. We agree that mere identity of content will not make identical two schemes which have no common participants (Terry v. U. S. [C. C. A. 9], 7 F.[2d] 28), and that a scheme or conspiracy may be definitively abandoned, though some of the participants resurrect it later, because it is defined as much by the persons who engage in it as by the purposes they have in view. But in the case at bar Maloney and McCluskey sold or tried to sell Parco stock from the very beginning in June until May of 1925, when the whole business was stopped. They formed the nucleus from which the rest slipped away, and to which Ackerson and Rabinowitz, and later Brown, for a second time, adhered.

Moreover, though there was an interval in the selling of stock, there was no abandonment of the scheme, because Ackerson had already suggested to Maloney that he go into his employ before the elder Van Riper left, and under circumstances which showed that he had acquainted himself with Van Riper's plans, better than Maloney himself. In so reviving the moribund business and taking over both salesmen and Resnick the stenographer, Ackerson continued the old scheme and the organization, at least in part. At any rate the jury might have so concluded, just as they might have concluded that, in offering Parco stock after they opened the "uptown" offices, they were acting with Ackerson's knowledge and in accordance with their original understanding with him. Thus it appears to us that the learned judge was right in overruling the point.

The question of chief importance, however, is not that, but whether the case should have gone to the jury. The defendants have argued their position, ignoring the case of Durland v. U. S., 161 U.S. 306, 16 S. Ct. 508, 40 L. Ed. 709, which set down the rule, long recognized in civil deceit, that a promise which the promisor does not mean to perform, or knows that he cannot, is as good a ground for prosecution as a misrepresentation of some fact outside his mind. It was not necessary here for the prosecution to rest upon the statements made about the well at Parco or the plant at Nitro, or to show that the defendants knew them to be false. It was enough for it to prove that they had no belief that the stocks had the value which they ascribed to them, or that they were wholly sceptical as to the prospects of the well and the other property. They represented themselves as believing in these prospects, and that was a material fact likely to influence their customers. We have twice very recently discussed the question, and need do no more than refer to our own decisions. Bentel v. U. S., 13 F.(2d) 327, June 17, 1926; Knickerbocker Merchandising Co. v. U. S., 13 F. (2d) 544, July 14, 1926. The jury might therefore convict these defendants because it concluded that they were in a far better position to judge than the unsophisticated public to whom they sold, and that they had no belief in the possibility of striking oil or in the gasoline plant's becoming a valuable asset, but thought it the merest gamble. If they had no more belief than that, it did not justify their gaudy predictions of success, nor is it an excuse to protest that they might themselves have been deceived. It was for the jury to say whether or not they were, or *965 whether they were without any belief one way or the other.

These defendants were connected with the business throughout, as we have already said. Whatever their ignorance while the drilling continued and the "downtown" offices remained open, they could have had no further illusion while in Ackerson's employ. The case is too plain for argument, without the evidence of the deceits by which they persuaded existing shareholders to take on new shares; i. e., "reloading them," as the phrase goes, by promises that their holdings, if completed, had already found a market.

Whatever may be said as to the original connection of Lewis E. Van Riper with the business, he was in active charge of the Moore street offices after Hedrick left on August 10th. He did not finally abandon it until November, and he knew, or at least he could be found to have known, that on September 13, 1924, the drilling had stopped, and that there was no further justification for holding out the promises for the future of the well which were made thereafter, as, for example, in the issue of the Analyst of October 18th. Whether or not any sales were made after that date is unimportant; that issue betrays the scheme and it is enough.

Moreover, the disposition so shown is not to be limited to the precise time of that issue. Van Riper was an officer of the Parco Company, had been closely associated with Hedrick from the outset, and it was a proper indeed, in our opinion, an inevitable inference that he shared with the rest whatever knowledge they had. If, as we think, the jury was justified in concluding that the scheme was a fraud at an earlier period, say from July 15th, the date of the earliest count, they were justified in supposing that Van Riper was equally in it with the rest.

This defendant had only a slight connection with the enterprise, and it would in our judgment be appropriate to reduce his sentence. But with that we have nothing to do. He was constantly at his father's office in room 201 Moore street, and took part in the business, at least to the extent of receipting for the money taken in, and of signing, if not dictating, some of the letters in Hedrick's name. He is also said to have overheard Maloney and McCluskey at work upon their "reloading" operations. We, of course, recognize that in such cases a man, especially a subordinate, may go along in ignorance of the purposes of his superiors. That may have been the case here; in such matters absolute certainty is impossible. But when we consider that he was Lewis Van Riper's son, and engaged daily in his office, it appears to us that the extent of his acquaintance with what went on must rest with the jury.

This defendant especially insists upon the insufficiency of the evidence to charge him, chiefly based upon his supposed withdrawal from New York on August 10th. We cannot agree in the argument. Among them all he was the head and front; his name was used on all the circulars and correspondence, and more generally than that of any one else in oral communications with customers. It is incredible that this should have been done without his consent, even if Resnick is wrong in supposing that she heard Maloney and McCluskey use his name within his hearing in selling Parco stock. It is, indeed, true that he left New York before affairs were in extremis, but that by no means proves that he had cut his communications with the business. On the contrary, he stopped over at Wyoming for several days to examine the well, where he must have learned the facts.

It is argued that he could not be held criminally responsible for what took place in his absence, on the theory that a man may not commit crime through an agent. But we do not to-day distinguish between principals and accessories before the fact, the only distinction which was ever important in the subject. That crime may not be imputed to a principal through implied authority is not to the point. Hedrick left an organization in New York which he had created more than any one else; it used his name and would presumably keep on. He knew that it would sell stock, and he had been privy to its sales. Until he dissociated himself from his fellows, he remained in the scheme and in the conspiracy. If those who were left had diverged widely from the earlier common practices, a question might arise; but they did not. The conduct of the sales, at least through August, the jury might find to be part of a scheme to which Hedrick remained a party.

However, it is not necessary to depend upon his personal observations at Wyoming, *966 or what was done when he left, for it was clearly a question for the jury how far Sweet, on his return in June, told him the truth, especially about casing in a 50-barrel well, and how far Brown's wires throughout July served to open his eyes. It is hardly credible that these men were engaged in deceiving each other. The jury was to say how much he was informed of the facts, how far he believed that the stock had value, and whether while directly in charge he supposed that the scheme was honest.

Finally, there was no warrant whatever for saying that all the Parco shares were treasury stock, conceding that the 250,000 shares which Hedrick got for the well were such, though the asset had no market value at the time. The only other shares which could possibly be regarded as treasury stock were 750,000 issued to Hedrick on August 8th, for the leases at Nitro. At best only 40 per cent. of the capitalization of the company had ever become treasury shares, and only 10 per cent. when the prospectus was issued, which stated that all shares were such. The peculiarly indefensible sales to Tefft served to throw light upon Hedrick's honesty.

Sweet was the company's president, and negotiated the contract with Kuykendall and the lease with Tingley. His defense is that he was not aware of what was being said in the circulars which went out from 15 Moore street. It was on his letter to Hedrick that the first circulars were issued, containing the false statement about casing in the 50-barrel well, and on his return he saw and talked with Hedrick. He was at times at the offices at 15 Moore street, and attended some meetings there. It is, of course, impossible to say that he must have known how the stock was being sold, nor is it necessary. A man who connects himself so closely with such an enterprise presumably has a live interest in it, which leads him to keep informed. His opportunities for information and his motive to get it justify a conclusion which he may be called upon to answer. In the end the question lies with a jury how far he has succeeded. In the case at bar his proved misstatements about the Wyoming well no doubt went far to overthrow his story, but in any case the issue is not for us.

Ish was the secretary and apparently had only a small part in the enterprise. As in the case of Van Riper, the younger, it would be reasonable to reduce his sentence. Yet there was again enough evidence to hold him. He was at the office and addressed some of the mail to customers. One instance was proved against him of an interview with Peck, one of the customers. Peck complained of being tricked, and Ish professed to agree with his complaint. Later, however, Ish ratified the transaction by signing Peck's certificate. There was evidence also from which the jury could suppose that Ish had set on one of the salesmen to try to secure further money from Peck, which he had told Ish he would not use for new shares. This incident shows him in a relation to the stock selling which formed a basis, taken with the rest, on which a jury might depend. It took place at the very end of September, at a time when the whole enterprise was clearly doomed. Any shares sold could not have been innocent, unless the seller was altogether ignorant of the condition of the company.

This defendant had, so far as appears, nothing to do with the scheme until the end of October, though he had known the elder Van Riper and Maloney before. He told Maloney of Van Riper's proposed withdrawal, which was a surprise to Maloney, and offered him employment in the office which he proposed to set up. This he opened at 500 Fifth avenue about the middle of November, taking over, from the Moore street offices, Maloney, McCluskey, and Resnick, and employing in addition one Rabinowitz. The name he chose for the firm was James Loftus & Co., though it was disputed whether there ever was a Loftus. Ackerson himself adopted an alias, Martin Sands, and Maloney and McCluskey sold stocks; that being the business. Again, there is a dispute whether Parco shares were sold, but that we cannot settle. It is enough that there was testimony to that effect; testimony which, if we were called on to pass upon it, we should not hesitate to believe. Later the firm changed its name to Holton & Abbott, after Rabinowitz had left, and Brown, who had drifted back from Wyoming, had been taken on by Ackerson. H. P. Douglas & Co. and Craig, Matthews & Co. have a somewhat ghostly but unimportant relation to these firms, all of them apparently ephemeral creatures, well suited to the purposes of their creators.

This showing amply justified the jury in finding Ackerson guilty. As we have said of Maloney and McCluskey, any sales of Parco shares at that time, or effort to sell them, was the barest fraud. It is preposterous to argue that the jury had no right to say that Ackerson, who clothed himself dishonestly *967 and took over the ruins of a broken-down scheme, must have known what his subordinates were about. If he had an innocent explanation to make of what on its face was a common enough trap for the guileless, it rested with him to show it, and he did not. Men do not set up a business of such a kind under a false name, employing cheats as their active assistants, and keep aloof and ignorant of the means by which the profits are made.

However, Ackerson was not connected with any enterprises of Maloney and McCluskey after April 10, 1925. Rabinowitz, who testified for the prosecution, expressly says that he was not in the firms of J. A. Foster and E. Lenroot, and that J. A. Foster & Co. was formed on April 10, 1925, over three months after he had left Ackerson's employ because of some differences between them. It is true that Elkins once saw Ackerson at the office of Lenroot, but that does not warrant the inference that he was connected with it. Therefore we must conclude that the evidence does not implicate Ackerson in the scheme at the time when the letters laid in counts 7 and 9 were posted. The crime consists in the posting of the letter (U. S. v. Young, 232 U.S. 156, 161, 34 S. Ct. 303, 58 L. Ed. 548), and if the defendant was not in the scheme when the letters were posted he was not a principal or an accessory to the crime then committed. Thus it happens, apparently by mere chance, that the evidence will not support the conviction of Ackerson, except on the conspiracy count. On that it will, because it is enough that for five months he was attached to the scheme, even though during that time no one of the letters laid in the counts was mailed.

Ackerson's motion to amend the return needs no more than an allusion. There is no reason to suppose that the newspapers which the jury saw affected their verdict; but, if so, it was a matter of discretion for the trial judge.

Error is assigned because of many of the rulings in the admission of evidence. The most important was the failure to limit the declarations of certain of the defendants to themselves and to those who were then in the conspiracy. Such declarations are admitted upon no doctrine of the law of evidence, but of the substantive law of crime. When men enter into an agreement for an unlawful end, they become ad hoc agents for one another, and have made "a partnership in crime." What one does pursuant to their common purpose, all do, and, as declarations may be such acts, they are competent against all. Hitchman C. & C. Co. v. Mitchell, 245 U.S. 229, 249, 38 S. Ct. 65, 62 L. Ed. 260, L. R. A. 1918C, 497, Ann. Cas. 1918B, 461; Conn. Mut. L. Ins. Co. v. Hillmon, 188 U.S. 208, 23 S. Ct. 294, 47 L. Ed. 446. For this reason, merely narrative declarations are not competent. But it is also a part of the law of joint crimes that, when a party joins an existing group already so engaged, he assumes responsibility for all that has been done theretofore. Anonymous, 6 Mod. 43; People v. Mather, 4 Wend. (N. Y.) 229, 258, 259, 260, 21 Am. Dec. 122; Comm. v. Rogers, 181 Mass. 184, 194, 63 N.E. 421; 1 Russell on Crimes (8th Ed.) 190; 1 Bishop, New Criminal Law, § 642. For this reason all that was done before he entered may be used against him, but obviously not what was done after he left, Logan v. U. S., 144 U.S. 263, 309, 12 S. Ct. 617, 36 L. Ed. 429; Brown v. U. S., 150 U.S. 93, 14 S. Ct. 37, 37 L. Ed. 1010.

It was therefore entirely proper to admit against him all that had been done before Ackerson came into the conspiracy, but it was strictly speaking improper to admit against those who had left in October what was done thereafter, and possibly as against Ackerson what Maloney and McCluskey did after he had left on April 10, 1925. All that it was, however, necessary to do as respects this proof, was to caution the jury that they were not to consider the evidence against those who had left the enterprise. The trial occupied seven weeks; the record consists of over 2600 typed pages of evidence, filled in large part with repeated objections to the admission of evidence, argued at length. The trial judge declined to make specific rulings upon the motions to strike out evidence, since they were of unimaginable prolixity, and would have served no conceivable purpose, but to confuse the jury. Very properly he left the matter to be dealt with in his colloquial charge. There he told them that, if they concluded that any defendant had actually and in good faith withdrawn from the conspiracy at any time, he was no longer responsible for the acts of those who remained, nor was he bound by their declarations, even though made in pursuance of the conspiracy; that it was a question of fact for them whether any given defendant had in fact so withdrawn. This told the jury the law quite as effectively as indeed, more so than formal rulings striking out the proof.

*968 Indeed, in a case of this kind it is extremely doubtful whether such admonitions have any serious importance. We do, indeed, continue to give them, though the whole matter is highly technical, since in nine cases out of ten it is impossible for any one, lay or legal, to divide his mind into proof-tight compartments, and forget at one moment what he must use at another. Assuming, however, that the instruction was necessary, it would reduce the trial of a cause to the most sterile logomachy to insist on more than was done here. Perhaps chiefest of all the counts in the indictment against our criminal procedure is based upon the sophistries which have pervaded it in respect of rulings on evidence. Reversals for formal errors are a crying scandal, which has brought the whole system into disrepute.

The only other question of evidence which seems to us important is the admission of telephone talks between customers of the defendants and persons at the other end of the wire, who represented themselves as speaking from the offices at 15 Moore street, or "uptown," and who generally gave the name, Hedrick, or that of some one in the employ of the defendants. Usually the witness professed to be able to recognize the voice of his interlocutor, though the evidence was often unsatisfactory; but there were some instances that can hardly rest upon that. In most cases it was the witness who was called on the telephone. We do not think that the competency of the testimony inevitably depended upon the witness' recognition of the voice. Other circumstances may be enough sufficiently to identify the speaker. If, for example, a man were to write a letter, properly addressed to another, and were to receive a telephone call in answer, professing to come from the addressee, and showing acquaintance with the contents of the letter, it would in our judgment be a good enough identification of the speaker to allow in the proof, though in the end, of course, the issue of identity would be for the jury. This is the reasoning on which a complete correspondence is admitted, once its origin is established, so long as it continues to be consecutive in substance. Wigmore, § 2153.

The decisions hold, though not with entire unanimity, that when a witness calls up at the proper number in a telephone book the person whose admissions are relevant, and gets an answer from one professing to be the person called, it is prima facie proof of identity; that is, that the proof is equal to an interview with some one found at the office of the party in question. Holzhauer v. Sheen, 127 Ky. 28, 104 S.W. 1034; Miller v. Leib, 109 Md. 414, 72 A. 466; Theisen v. Detroit, etc., Co., 200 Mich. 136, 166 N.W. 901, L. R. A. 1918D, 715; Union Construction Co. v. Western Union Tel. Co., 163 Cal. 298, 125 P. 242; Godair v. Ham. Nat. Bank, 225 Ill. 572, 80 N.E. 407, 116 Am. St. Rep. 172, 8 Ann. Cas. 447; Knickerbocker Ice Co. v. Gardiner, etc., Co., 107 Md. 556, 69 A. 405, 16 L. R. A. (N. S.) 746; Wigmore, § 2153. The case is not the same, to be sure, when the declarant calls up the witness, for the declaration of the speaker cannot establish his identity; but even then as we have suggested, the substance of the communication may itself be enough to make prima facie proof.

In the case at bar Parco stock was almost certainly not being sold by any one outside the offices at 15 Moore street, and later, except at the offices uptown. There is, of course, a theoretical possibility that others might sell it, but it was extremely remote. The kind of solicitation was the same as it was proved that Maloney and McCluskey and others in the office used to beguile customers. The calls were upon customers to whom sales had already been made by the defendants, presumably known only to them. The chance that these circumstances should unite in the case of some one who did not speak from the offices seems to us so improbable that the speaker was sufficiently identified. Of course, this did not identify him as the person whose name he gave; indeed, we may be substantially sure that ordinarily he was not that person. But the jury might conclude that he was either Maloney, or McCluskey, or some other salesman in the office, and the other proof was again enough to allow the jury to find that the defendants were privy to the way in which Parco stock was sold, and to the devices used, by their salesmen. Therefore, we think that the testimony was competent.

The judgment is affirmed as follows:

As to Hedrick, on counts 1, 3, 5, 6, and 10.

As to L. C. Van Riper, on counts 1, 2, 3, 4, 5, 6, and 10.

As to Sweet, on counts 1, 3, 5, 6, and 10.

As to Ish, on counts 1, 3, 5, 6, and 10.

As to C. E. Van Riper, on counts 1, 3, 5, 6, and 10.

As to Maloney and McCluskey, on all counts.

As to Ackerson, on count 10.

As to the other counts it is reversed.

*969 Judge MANTON, through absence, has not read this opinion, but concurred in the result, except as to Hedrick, in respect of counts 1 and 6.