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Fournier v. United States

April 16, 1932


Appeal from the District Court of the United States for the Eastern Division of the Northern District of Illinois; John P. Barnes, Judge.

Author: Evans

Before EVANS and SPARKS, Circuit Judges, and BALTZELL, District Judge.

EVANS, Circuit Judge.

Appellant was convicted and sentenced to thirty months in the penitentiary for a violation of section 338, title 18, USCA (Criminal Code, ยง 215); i.e., using the United States mails in furtherance of a scheme to defraud. Assigned errors deal with (a) alleged defects in the indictment, (b) alleged misconduct of the prosecuting attorney, (c) admission of evidence over appellant's objection, and (d) insufficiency of the evidence to support the charge preferred in the indictment.

Consideration of the last-stated error will be first undertaken as it offers an opportunity to state and study the facts.

The record disclosed substantial evidence to this effect: Fournier was a stockbroker who dealt in listed and unlisted stocks. His alleged scheme to defraud was limited to his handling of stock in the Bildwell Construction Company, an unlisted stock, the sale of which was authorized by the Securities Commission of Illinois up to the fall of 1929, at which time the permit to sell it was revoked by that body.

Appellant's method of handling this stock was first to fill an order for a customer for a well-known listed stock, and then to persuade the customer to sell that stock and buy B.C. stock on margin, $1 per share down and the balance ($4) subject to call. Shortly after the sale of the B.C. stock to the customer and the payment of $1 a share was made, a call for additional margin would be made on the customer. If the margin were put up, another call was made. If the call were not met, the stock was almost always sold for the unpaid price, the purchaser losing his down payments.

The evidence further showed that appellant did not, when he sold the stock to the customer, purchase such stock, nor did he in fact sell the stock when he so reported to his customer. The entire transaction was, so far as he was concerned, a bookkeeping transaction. He received the money from the customer, and, if the latter failed to meet the call, he forfeited the payment. If the purchaser made all payments on the stock, appellant purchased the stock and secured the certificate. The taint of fraud appears from the fact that when appellant sold out the customer for the balance due -- say, $4 per share -- he would at the same time buy like stock (on his books) for another customer at $5. There were no real sales except when the purchaser paid $5 per share for the stock. All other so-called sales were paper transactions between appellant and customers. All payments made by the customers were taken by the appellant and by him retained. His call for margins, when not met, resulted in his selling out the customer. His selling out the customer was, in fact, merely a closing of the account on his books and his retaining all the money paid down by the customer.

That appellant was well within the prohibition of the statute in devising and working his scheme to defraud, we have no doubt.

A "scheme to defraud" has been defined times without number. See 18 USCA ยง 338 notes, pages 140, 145. It is well settled that to establish such a scheme, it is not necessary that there should be actual misrepresentation of an existing fact. It is sufficient if the proposed venture be presented in such a way as is calculated to carry out the intent to deceive. McCarthy v. U.S. (C.C.A.) 187 F. 117.

The offense defined by this statute calls for the presence of two essential elements: (a) The existence of a scheme to defraud; and (b) the placing or causing to be placed in the post office of a letter, post card, etc., for the purpose of executing the scheme. In a scheme to defraud the significant fact is the intent and purpose. In Durland v. United States, 161 U.S. 306, 314, 16 S. Ct. 508, 511, 40 L. Ed. 709, it was said: "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 gist of the scheme to defraud in the instant case, as alleged in the indictment and proved on the trial, was the pretended selling of unlisted stocks of shady character on margin, the calling on the customer for more margin, and the selling out of the customer, when as a matter of fact there was no stock purchased by appellant at the time he accepted the down payment or subsequent payments on margin from the customer and no sale of the stock when the customer failed to meet the margin call. To effectuate this illegal scheme, the accused first sold a listed stock and, if the customer had a profit, would recommend its sale and the reinvestment in B.C. stock; the amount of the stock sold being such that a margin sale was necessary and the customer could not meet the subsequent calls for margin. The pretended sell-out followed, and appellant reaped a profit in a sum equal to the amount the customer had made as down payments on his supposed purchase.

It would perhaps be more accurate to say that the proof bearing upon the charge was sufficient to justify a jury in finding the facts to be as thus described. The appellant did not deny any of the facts brought out by the Government, and the logical inferences deducible therefrom were not materially qualified, explained, or disputed by other witnesses.

In view of what has been said concerning the scheme, it is unnecessary to consider separately the attack upon the indictment. Appellant's counsel has with zeal and ingenuity endeavored to show that the facts charged in the indictment were consistent with the innocence of accused. The opposite conclusion, however, is unavoidable. The facts stated, it seems to us, indicated an evil intent back of an executed scheme to defraud the customers out of their down payments, or margins on fictitious sales which the customers believed, and had reason to believe, were bona fide sales. The stock in the B.C. Company was represented as full of promise, and its early ...

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