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United States v. Minnec.

April 27, 1939


Appeal from the District Court of the United States for the Northern District of Illinois, Eastern Division; Philip L. Sullivan, Judge.

Author: Major

Before EVANS, SPARKS, and MAJOR, Circuit Judges.

MAJOR, Circuit Judge.

Appellant was charged in a sixteen-count indictment with use of the United States mails in furtherance of a scheme to defraud by means of false pretenses, representations and promises in violation of Section 338, Title 18, U.S.C., 18 U.S.C.A. ยง 338. He was tried by a jury, found guilty upon all counts and from the judgment pronounced thereon this appeal is taken.

While numerous errors are assigned, the ones principally relied upon, and in fact, the only ones argued and discussed by appellant are:

(1) The trial court erred in overruling the appellant's general and special demurrer to the indictment and each count thereof

(2) That the court erred in overruling the appellant's motion asking the court to instruct the jury to return a verdict of not guilty at the close of the appellee's evidence, and also at the close of all of the evidence, and in overruling the appellant's motion for a new trial.

(3) That the court erred in admitting prejudicial and incompetent evidence.

The indictment, as is usual in such cases, describes at great length, the scheme and artifice devised. In substance, it is alleged that the appellant devised a scheme to defraud and to obtain money by means of false and fraudulent pretenses, representations and promises from certain named persons, as well as those unnamed, residing in divers states, by the incorporation of the Cosmopolitan Mutual Benefit Association and the Lincoln National Aid Association, the avowed object of which was for charitable and beneficial purposes; to assist and provide for the sick, needy and disabled members and for the wants of the widows, orphans and dependents; that Certificates were issued to members, conferring benefits, less than promised, by literature and statements made by the appellant and his agents; the manner of soliciting members and of operating the business, the forms of the Certificates and the provisions therein are set forth in detail, and the indictment particularly specified wherein such provisions are misleading and fraudulent; that a large portion of the contributions received from the members was appropriated by the appellant to his own use; that false and deceptive information was conveyed to the public, and particularly to prospective members by means of the circulars, pamphlets, catalogs, folders and letters by which persons were induced to become members; that no medical examination was required and that persons were solicited, who, by reason of advanced age and physical infirmities would be likely to die from certain diseases which precluded them from receiving anything more than nominal benefits; that the appellant, by reason of proxies obtained from members, was in the absolute control and management of the associations and used his power and authority in compelling members and their beneficiaries to settle claims against the associations without regard to the legality of such claims under the terms and conditions of the Certificates, thus enabling him to appropriate to his own use a large portion of the assessments received from members. The alleged fraudulent provisions of the Certificates are set forth in detail, as well as the fraudulent claims and statements made in pamphlets and literature prepared and distributed by the appellant as a means of inducing persons to become members and pay assessments. In brief, it is charged that the associations were operated for the benefit of the appellant rather than for the benefit of the members of the associations, and the details in support of that allegation are set forth. Following the description of the scheme and artifice to defraud, each count of the indictment contains a verbatim description or copy of a document or instrument which it is charged the appellant placed, or caused to be placed in the United States mail as a means of executing the alleged scheme and artifice.

That the mails were used in the manner charged is not in dispute. The attack on the indictment is directed at the alleged scheme and the criticism in this respect has to do with a number of allegations, which, it is argued, are indefinite and merely represent the conclusion of the pleader. Authorities are cited to the effect that every necessary allegation in an indictment must be directly and affirmatively alleged, and that charges by implication, intendment or conclusion are insufficient. No doubt, the rule in this respect is well established, but we think it has no application in the instant situation. True, as pointed out by the appellant, there are numerous statements in the indictment, which, if considered by themselves, might properly be termed as conclusions and in some respects, uncertain and indefinite.It can not be held, however, that an indictment which goes into great detail in describing the scheme or artifice to defraud, is bad merely because it contains some statements which may properly be termed as conclusions. In the instant case, such statements may be ignored and yet we find direct and positive averments, which, in our judgment are sufficient to charge a violation of the statute. In fact, it appears the various elements of the scheme are charged with greater prolixity than the circumstances require. While the scheme to defraud is a necessary element of the offense charged, yet the gist o the offense is the use of the mails, and it is only essential that the scheme be charged with such particularity as will enable the accused to know what he may be expected to meet on trial.*fn1 That the appellant was so informed, there can be no doubt.

We now give consideration to the alleged error of the trial court in its refusal to direct a verdict for the appellant. With the voluminous record before us, containing several hundred exhibits it is somewhat difficult to discuss the evidence in an opinion of reasonable length. In the beginning, we think it is not inappropriate to call attention to the fact that this court recently in United States v. Littlejohn, 7 Cir., 96 F.2d 368, considered and decided a similar case where the facts were almost identical with those of the instant case. The facts, as set forth in our opinion in that case, insofar as they relate to the scheme charged, could very well be incorporated here without doing injustice to either side. Counsel for the appellant, in the oral argument before this court, when inquiry was made as to what distinction could be made between the facts in the two cases, pointed out only one minor distinction, which was of no consequence.

We shall, briefly, we hope, considering the circumstances, relate what we regard as the more material facts and circumstances. Prior to the organization of the associations in question, appellant had been active in the operation of similar associations, among them being the Bankers Insurance Corporation, The American Peoples League and the American Peoples Mutual Benefit Association, all of which at or prior to the time of the organization of the associations in question, ceased to do business. On May 29, 1933, appellant and others obtained a charter for the Cosmopolitan under the laws of the State of Indiana, authorizing a society not for pecuniary profit. On February 28, 1934, the appellant obtained a charter under the laws of the State of Delaware for the Lincoln National Aid Association, the objects of which were the same as those of the Cosmopolitan. The two associations proceeded thereafter to solicit members and to issue Certificates. Appellant was President of both and acted in that capacity throughout the entire period involved in this case. No person other than he had any voice in the organization, operation, control or management of such associations. His situation was thus by reason of the fact that when a member joined the association he was required, by proxy, to authorize the appellant to act for such member in all matters pertaining to the associations.

Solicitation for memberships, as well as for representatives to solicit the same, was carried on by means of advertisements in various periodicals and magazines. Salesmen's kits were mailed to those who evidenced any interest. The advertisements, salesmen's kits, periodicals, and in fact, all literature mailed in connection with the operation of these associations, appealed to the representatives and to those to whom literature was mailed to become members, and solicited all members to become representatives for the associations. No discrimination was used in the selection of representatives. They were authorized to collect $5 initiation fee, and $1 registration fee from each applicant, to be retained by them as their commission, and to solicit the application of eligible persons from one to eighty years of age.

The business of both associations was actually transacted in an office in Berwyn, Illinois, with the same personnel and officers. An office of nominal character was maintained in Hammond, ...

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