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Pfaff v. United States

June 25, 1936

PFAFF
v.
UNITED STATES; HUGHEL V. SAME



Appeals from the District Court of the United States for the Southern District of Indiana, Indianapolis Division.

Author: Evans

Before EVANS, Circuit Judge, and LINDLEY and BRIGGLE, District Judges.

EVANS, Circuit Judge.

An indictment was returned in the District Court, Indianapolis Division, which charged the appellant in No. 5702 and the appellant in No. 5733 with violation of section 215 of the United States Criminal Code (18 U.S.C.A. ยง 338). Both appellants were convicted and sentenced to the penitentiary and to pay fines. Separate appeals were taken which were consolidated for oral argument, and both cases will be disposed of in one opinion.

The assignments of error are directed to the indictment, the sufficiency of the evidence to support the conviction, and prejudice suffered by appellants on account of inflammatory newspaper headlines and comments of court and counsel which, it is charged, prejudiced the jury against both appellants. Disregarding other assignments of error, counsel in both appeals have centered their attack on the insufficiency of the evidence to sustain the verdict and have most earnestly argued that their clients are innocent, that circumstances pointing to guilt may be satisfactorily explained on the hypothesis of innocence. They assert that appellants were the victims of the prejudicial influence of newspaper headlines and that court's and counsel's observations were potent because of the close and heated fact dispute.

We have been impressed by the earnest ness of counsel. Their faith in their clients' innocence, notwithstanding the verdict of the jury, is apparent. As a result, we have examined the evidence with great care to ascertain whether the same can be fairly reconciled with appellants' asserted innocence, as well as to determine the decisive issue in the case, viz., whether the evidence called for the submission of the issue of guilt to the jury.

Appellants assert that they were the victims of the adverse business conditions which not only swamped but wiped out many other reputable, sound financial houses. They say they erred only because the rally in prices and prosperity was delayed longer than they expected -- a mistaken view entertained by many others in positions both high and low.

Their business was to purchase and sell securities and to recommend investments to others. They were well established and enjoyed a good reputation which was well earned and deserved. The rapid decline in the price of securities and the expectation that revival was near at hand led to the growth of unjustifiable hopes, but in all of the doings and transactions of Pfall & Hughel, Inc., which appellants operated, there was no criminal misconduct, no scheme to defraud, and no intent to cheat any customer. This is the position of counsel for appellants.

It is the Government's urge, on the other hand, that, while P. & H., Inc. enjoyed a good reputation for years and conducted a sizable business at a profit, there came a time in its history when due to the depression and the sinking prices, the capital of the company was wiped out and it was bankrupt to the knowledge of appellants who were its officers, operators, and principal owners. It is argued that, at this time in a vain and desperate effort to recoup their fortune, appellants conceived the scheme, which they carried out, of defrauding the customers by selling securities to them on account, or partial payment, which they could not and did not deliver when the last installments were paid by the purchasers. In order to prevent a demand for securities when payments were completed, appellants caused their sales agents to sell additional securities to such purchasers, also on installment plan, and thus then postponed the date of delivery of securities.

Our conclusion is that the evidence permits of no construction or explanations that would justify a court in taking the case from the jury. A directed verdict was properly denied.

Whatever may have been the motives -- however hopeful the appellants may have been of a quick rally, the solemn and inescapable facts are -- This company was insolvent, a wreck on the rocks of the 1929 financial debacle. So were appellants, individually. Their customers were unaware of their condition or that of their company. To recoup their fortunes and that of their company they sold, on the installment basis, stock which they did not possess. They used the money to purchase more speculative securities (stock of a brewery) in the hope that their rise would be higher and faster than the securities sold. They were mistaken. They and their company sank deeper into the mire. The deeper they sank the greater became their efforts to extricate themselves and the worse they sinned against others.

At least the evidence points to such a conclusion. Not only is there evidence to support the existence of such a plan or scheme, but there is almost no evidence from which a contrary conclusion can be legitimately drawn.

Nor are we satisfied that there was any prejudicial error committed by court or counsel. It appears that the newspapers were quite indifferent to their obligations to assist in the securing of a fair trial, but their indifference did not affect the jurors because it does not appear that any juror read or was influenced by what he saw in the newspapers. They were admonished by the court not to read articles pertaining to the case.

In the course of the trial, upon receipt of certain evidence which reflected on appellants, the court made certain observations in the presence of the jury to which appellants' counsel took exception and also asked to withdraw a juror. What took place in the presence of the jury is the basis for the charge of ...


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