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United States v. Riedel

February 17, 1942


Before EVANS, SPARKS, and MAJOR, Circuit Judges .

Defendant was convicted and sentenced for violations of section

EVANS, Circuit Judge .

Seizure of Books and Records . The bill of exceptions does not contain the evidence received on this issue. It does show that the Securities and Exchange Commission obtained possession of the books and apparently on a subpoena duces tecum. That subpoena is not in the bill of exceptions. Whether it was addressed to a corporation or to an individual does not appear. It also appears that a motion was made by defendant to suppress this evidence, and a hearing was had at the conclusion of which the court denied the motion.

The testimony received at this hearing is not in the bill of exceptions, and defendant is, therefore, in no position to raise the question he seeks to present.

We need not therefore consider the Government's contention that the evidence was, in fact, obtained pursuant to a subpoena duces tecum directed to a corporation and served upon one having possession of the books of said corporation, and therefore legal. Essgee Company of China v. United States , 262 U.S. 151, 158, 43 S. Ct. 514, 67 L. Ed. 917.

Accomplice . We may dismiss without elaboration, the contention that the evidence in this case came largely from the lips of an accomplice. Such evidence, under innumerable decisions of the Federal Court, is sufficient, even standing alone, to support a conviction. Heitler v. United States , 7 Cir., 244 F. 140.

Duplicitous Indictment . The charge that each of the three counts in the indictment is duplicitous because the two defendants charged therein acted in concert to effectuate their scheme to defraud, through the use of the mails, must be rejected. Preeman v. United States , 7 Cir., 244 F. 1, 9. The fact that out of the allegations which were necessary to sustain an indictment under section 338, Title 18, U.S.C.A., there may have been facts showing an unlawful conspiracy to violate section 77q, Title 15 U.S.C.A. (which is denied) does not make it duplicitous.

Sufficiency of the Evidence . More serious is the question raised by defendant that the scheme to defraud was completed when the second necessary step, to-wit, the use of the mails in furtherance of said scheme, occurred. In short, it is defendant's contention that the mails were not used in furtherance of the scheme to defraud. While denying that there was a scheme to defraud, he also argues that, as a matter of law, it (the scheme to defraud) must have been over before the letters or cards were mailed, and, therefore, the mailing was not in furtherance of the scheme to defraud.

The ruling on this contention turns on a study of the facts. If the scheme to defraud were over, or had been abandoned, there could be no use of the mails in furtherance of it. The words "in furtherance of" as applied to the scheme may be established only when the scheme is still in existence.

We are satisfied, however, that the evidence shows, and rather clearly, that the scheme was not over. A scheme to defraud may well include later efforts to avoid detection of the fraud. A fraudulent scheme would hardly be undertaken, save for profit to the plotters. Avoidance of detection and prevention of recovery of money lost by the victims are within, and often a material part of, the illegal scheme. Further profit from the scheme to defraud, as such, may be over, and yet the scheme itself be not ended.

Security Negotiated . Whether the issuance of a certificate by the trust estate, in consideration of the surrender of the stock, issued by defendant's corporation, concerned a "security" within the purview of the Securities Act of 1933, is also determinable solely from the evidence. If the certificate were not a security, there could be no valid conviction on six of the counts.

We are convinced from a reading of the "voucher certificate" and a study of the circumstances under which it was issued, that this document falls within the meaning of the term "security" as that word is used and defined in section 77b (1) of 15 U.S.C.A., section 201 (1) of the Act. Securities and Exchange Commission v. Crude Oil Corp. , 7 Cir., 93 F.2d 844, 849. Courts have given to this Act and its language, a liberal construction, one consistent with its purpose. Under these authorities we are convinced a sale may include an exchange of property.In other words, one may sell a security and be paid therefor in cash, or in another security, or in any other object of value such as a house, - a horse, etc.

When defendant caused the trust estate to issue its certificates in place of the stock certificates previously issued by the corporation (also controlled by defendant), and such exchange operated as, and was a part of, the fraud which defendant practiced on the purchaser, a violation of the Act occurred. The jury was well justified, from all the evidence, in finding that such was the transaction here in question.

It is, of course, not incumbent upon the Government to sustain conviction on each of the nine counts of the indictment upon which the jury found the defendant guilty (although it has done so). It is sufficient if there be a valid conviction on any of the counts. For the ...

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