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United States v. Wise

December 12, 1939


Appeal from the District Court of the United States for the Southern District of Indiana, Indianapolis Division; Robert C. Baltzell, Judge.

Author: Evans

Before EVANS, MAJOR, and KERNER, Circuit Judges.

EVANS, Circuit Judge.

These appeals challenge the conviction of the three appellants, John W. Moore, Sr., John W. Moore, Jr., and Russell E. Wise, who were charged with participating in a scheme to defraud and with the use of the mails in furtherance thereof, and with participating in a conspiracy to commit a Federal offense. Five others were also named in this indictment which contained twelve counts. Defendants, John W. Moore, Sr., and John W. Moore, Jr., were found guilty on all counts, and defendant Russell E. Wise was convicted on counts one and nine. Of the remaining defendants, two (Brown and Eikenberry) withdrew pleas of not guilty and substituted therefor, pleas of guilty; two defendants were found guilty on the first and twelfth counts; and the eighth defendant, Mrs. Trent (a sister of John W. Moore, Jr.) was granted a trial continuance because of illness. Four of the defendants who were sentenced have not appealed.

The most insistently assigned ground for reversal is the insufficiency of the evidence to support the verdict. Defendants, John W. Moore, Sr. and John W. Moore, Jr., also assign error in the rulings on evidence, the alleged improper argument by the district attorney, and the court's refusal to give a requested instruction.

Briefly stated, the scheme to defraud charged in the indictment was the sale of the commercial paper of controlled (and some non-controlled) corporations, represented to be secured by warehouse receipts. The alleged fraud consisted of issuing duplicate warehouse receipts for the same commodity or issuing warehouse receipts which misstated the quantity of merchandise. In some instances before and after the issuance of the warehouse receipts, the merchandise therein described was converted by the defendants, Moores.

The defendant Moores, father and son, operated through the continental Credit Corporation, which they organized. All of its stock was held by John W. Moore, Sr. and John W. Moore, Jr. (and Mrs. John W. Moore, Sr.), for which they gave a $500 bond and assigned some contracts with contemplated customers for the purchase and sale of promissory notes. They controlled or operated six companies*fn1 and contracted with some twelve companies*fn2 to purchase their promissory notes or to find purchasers therefor.

The trial was lengthy and the testimony, voluminous. Evidence there was that banks, in many instances, purchased notes which were secured by duplicate warehouse receipts; that is, two receipts covering identical merchandise. The proof conclusively established that many notes were sold secured by warehouse receipts covering merchandise which had theretofore been abstracted; and also that in other instances the merchandise represented by the warehouse receipts was not of the quality or quantity therein represented.

The Continental Credit Corporation was organized in April, 1933, and Mrs. John W. Moore, Sr. Received all the stock except qualifying shares held by the defendants, John W. Moore, Sr. and John w. Moore, Jr. The corporation hired several salesmen, mostly former state bank examiners, to sell the notes of the controlled corporations, or others, to small town banks, at a 5% discount. Banks throughout Indiana, Illinois, Kentucky, Ohio, and Iowa, were sold these notes, very often single notes. There was no evidence that these notes were not paid, or renewed, at maturity, until the Spring of 1937. It was then that the affairs of the Continental Credit Corporation became serious and its precariousness, more or less known. conditions became acute when a Fort Wayne bank refused to honor some fifty thousands of dollars of drafts against it. Moore. Sr., and Moore, Jr. Were called "on the carpet" by the officers of this bank and charged with "kiting" checks. It was about this time and more noticeably later, the proceeds of notes were not turned over to makers, and gross irregularities in regard to warehouse receipts and stored merchandise were practiced in increasing volume. A receiver was appointed for the Continental Credit corporation on June 9, 1937. Receivers were appointed for several of the controlled companies.*fn3

Sufficiency of the Evidence. There seems to be no doubt or uncertainty as to evidence of fraud. Quite impossible is the practice of a fraud without someone's planning and executing it. Here the fraud was boldly conceived and brazenly executed. The issuance of two and even five warehouse receipts for the same commodity, the overstatement of the amount and the quality of the commodity described in the warehouse receipt, the sale of hundreds of thousands of dollars of notes secured by these false and duplicated warehouse receipts, constituted fraud of the brassy, shameless type. Practicing it on a large scale or boldly, did not change its character.

Nor is the evidence connecting the Moores with this type of fraud hardly less persuasive than the evidence of the fraud itself. True, they made no admissions, no confessions, but short of admissions, little is lacking to connect them with the conception and execution of both the fraudulent scheme and its execution.

As to the use of the mails to further it, ample evidence exists to present a jury question. We, therefore, without hesitancy or doubt, reject the assault of the two Moores upon the sufficiency of the evidence to support their conviction. Other assignments of error by the Moores have been considered but need no separate discussion. They are rejected.

In reviewing, analyzing, and weighing the evidence which purports to connect defendant Wise with the fraudulent scheme and the mail's use in its furtherance, we have sought to apply the usual tests with due appreciation of the fact that a jury has found him guilty. Without going into great detail and relating the evidence which supports our assumption, we will merely say that we accept the verdict so far as the use of the mail is concerned and also assume as a verity that there existed a scheme to defraud. This narrows the inquiry to two controverted question: Did Wise know there was a scheme to defraud? Was he a party to it?

Wise is an attorney, thirty-seven years of age. He has been a member of the same law firm since shortly after his graduation in 1924. He is president of the Union Trust Company, having previously been its director. In '33 he became associated with the Moores in the Union Mortgage Company, a reorganized company, which was to handle mortgages financed by the R.F.C. In December of '33, the R.F.C. decided not to finance the ...

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