Brief for the Respondent in Opposition — Epstein v. United States

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CITATIONS

Cases:

Clarke v. United States, 132 F. 2d 538, certiorari denied, 318

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Hallowell v. United States, 253 Fed. 865, certiorari denied,

_ 249 U.8. 615 oe Fee Pen e i tales

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United States vy. Cohen, 145 F. 2d 82, certiorari denied,

323 U. S. 799

Statute:

Criminal Code, Sec, 215 (18 U. 8S, C. 338)_......

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Guthe Supreme Court of the Wited States

OcroBerR TERM, 1945

No. 1149

Louis Epstein, PETITIONER

v.

Unitep States oF AMERICA

ON PETITION FOR 4 WRIT OF CERTIORARI TO THE UNITED

STATES CIRCUIT COURT OF APPEALS FOR THE SECOND

CIRCUIT

BRIEF FOR THE UNITED STATES IN OPPOSITION

OPINIONS BELOW

The opinion of the cireuit court of appeals (R.

483-490) has not yet been reported. The opinion

of the district court denying petitioner’s motion

to dismiss at the close of the Government’s case

appears at pages 439-445 of the record.

JURISDICTION

The judgment of the circuit court of appeals

was entered March 26, 1946 (R. 491). The peti-

tion for a writ of certiorari was filed April 23,

1946. The jurisdiction of this Court is invoked

(1)

2

under Section 240 (a) of the Judicial Code, as

amended by the Act of February 13, 1925. See

also Rules 37 (b) (2) and 45 (a) of the Federal

Rules of Criminal Procedure, effective March 21,

1946.

QUESTION PRESENTED

Whether the evidence is sufficient to establish

that the mailings charged in the indictment were

in execution of the scheme to defraud in which

petitioner was associated.

STATUTE INVOLVED

Section 215 of the Criminal Code (18 U. 8S. C.

338) provides in pertinent part as follows:

Whoever, having devised or intending to

devise any scheme or artifice to defraud, or

for obtaining money or property by means

of false or fraudulent pretenses, represen-

tations, or promises, * * * shall, for

the purpose of executing such scheme or

artifice or attempting so to do, place, or

cause to be placed, any letter, postal card,

package, writing, circular, pamphlet, or ad-

vertisement, whether addressed to any per-

son residing within or outside the United

| States, in any post office, or station thereof,

or street or other letter box of the United

States, or authorized depository for mail

matter, to be sent or delivered by the post-

office establishment of the United States, or

shall take or receive any such therefrom,

| whether mailed within or without the

United States, or shall knowingly cause to

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3

be delivered by mail according to the direc-

tion thereon, or at the place at which it is

directed to be delivered by the person to

whom it is addressed, any such letter, postal

eard, package, writing, circular, pamphlet,

or advertisement, shall be fined not more

than $1,000, or imprisoned not more than

five years, or both.

STATEMENT

An indictment in six counts was returned

against petitioner and three others in the District

Court for the Southern District of New York,

charging use of the mails in execution of a scheme

to defraud various factors by the kiting of checks,

securing the discounting of notes falsely alleged

to represent the purchase price of motion picture

quipment, and false representations respecting

urported contracts for the sale of motion picture

achines to the United States Government (R.

13). Petitioner waived a jury trial and was

tried alone (R. 17). He was convicted on five of

six counts,’ and sentenced to imprisonment

foy¥ one year and one day on each, the sentences to

concurrently (R. 463). On appeal to the

uit Court of Appeals for the Second Circuit,

(R. 431).

4

Wilfred Cohen, one of the defendants named in

the indictment, had been borrowing money from

another defendant, Sussman, paying him interest

at the rate of six percent per week (R. 19-22).

In January 1942, Sussman introduced petitioner

to Cohen, stating that petitioner was the man

from whom he had obtained some of the money he

had loaned Cohen (R. 18). Cohen showed peti-

tioner a motion picture machine owned by Spot-

light Productions, Inc., a corporation owned by

Cohen (R. 16, 22).

Subsequently, petitioner, Cohen, and Sussman

met to discuss the form of loans to Cohen (R. 23).

Cohen told petitioner that he could not discount

notes made by petitioner and Sussman with fac-

tors unless he could produce evidence of the pur-

pose for which the notes were taken (R. 24, 25).

Petitioner suggested chattel mortgages on motion

picture machines as security for the notes, but

Cohen convinced him that conditional bills of sale

would be more feasible (R. 216-217). Petitioner

agreed that, if an investigation were made, he

would state that he had purchased machines from

Cohen (R. 25).

Thereafter, petitioner and Sussman executed

promissory notes to Cohen’s order and also signed

fictitious purchase orders for motion picture

equipment, conditional bills of sale, and estoppel

certificates stating that the notes were genuine

and incontestable (R. 25-27). Cohen discounted

Vv

these notes with various factors (R. 28). He

agreed to pay petitioner and Sussman $400 each

per $10,000 worth of notes used (R. 27-28).

In May 1942, Cohen arranged for a similar

group of loans through petitioner and Sussman

by the same device of notes for fictitious sales of

motion picture equipment (R. 30-32). Cohen

told petitioner that he intended to use the pro-

ceeds of these notes to pay off the notes previously

signed by petitioner and Sussman (R. 30). Peti-

tioner suggested to Cohen a factor who might be

willing to discount notes at a lower rate than

Cohen was paying (R. 31).

This process was constantly repeated for the

next sixteen months, the amount of the notes in-

" ereasing each time (R. 58-59, 60-61, 63-64, 66-68,

71-72, 74-75, 77, 94-104, 113-114, 354). After

August 1942, conditional bills of sale were not

used, but estoppel certificates were signed (R. 107,

116-118, 120-121, 130, 132-136, 138, 159, 162-164,

167-168). Still later, at Cohen’s request, the

form of the notes was changed to have a corpora-

tion dominated by Sussman as maker and Suss-

man and petitioner as endorsers, or Spotlight

Productions as maker and Sussman and _ peti-

tioner as endorsers (R. 171-172, 173-175, 178).

In all, the notes signed or endorsed by petitioner

and Sussman totaled $700,000, of which $127,790

remained unpaid in December 1943 (R. 346).

6

In some instances factors had their own forms

of estoppel certificates and, when Cohen so in-

formed petitioner and Sussman, they executed

such forms (R. 51-54). At Cohen’s request, peti-

tioner mailed such an estoppel certificate to a fae-

tor (R. 64-65).

During the period that the notes were being

discounted, Cohen also arranged with petitioner to

use a bank account of petitioner’s corporation,

the New Union Square Hotel Corporation, for

the purpose of “‘kiting’’ checks. Cohen at first

paid petitioner $50 for each $5,000 worth of

checks drawn. Subsequently, he paid petitioner

$100 per week, and later $150 per week for the

use of the account. (R. 78-89, 90-92, 122-131,

137, 143-144, 188-189, 267.)

In November 1942, Lectern Service, which had

been discounting notes signed by petitioner and

Sussman on Cohen’s representations that the

notes were given for the purchase of machinery

(R. 321-323), and which then held obligations

amounting to approximately $25,000 in the form

of notes, Union Square Hotel Corporation checks,

and Cohen checks (R. 415-416), refused to dis-

count further obligations of this character (R.

415). Accurate Factors, another company which

had been discounting notes signed by petitioner

and Sussman in the belief that they represented

the purchase price of machinery (R. 371), had

fixed $5,000 as the maximum amount of such

7

notes which it would discount (R. 372). In Jan-

uary and February 1948, Cohen told these fac-

tors that he would give them assignments of

money allegedly due him from the Treasury De-

partment of the United States for motion picture

equipment sold in connection with war bond sales.

He produced false invoices of sales from Spot-

light Productions to the Treasury Department

and forged letters of confirmation on official sta-

tionery of the Treasury Department. (R. 147-

154, 386-387.) He stated that the Treasury —

Department was to make payment through the

American Railway Express upon the delivery of

machines to the express company, and he dis-

played to the factors express company checks pro-

cured by sending ‘‘dummy”’ packages by express

c. o. d. and paying therefor at the point of deliv-

ery (R. 392-394, 399). The ‘‘count letters’’ were

all forged Treasury confirmations mailed by

Cohen to Spotlight Productions (count 1, Ex. 31,

R. 149-150, 457; count 3, Ex. 32, R. 150-151, 458;

count 4, Ex. 33, R. 152, 459; count 5, Ex. 34, R.

152, 460; count 6, Ex. 35, R. 152, 461). On the

basis of the fictitious assignments of money due

from the Treasury, both Accurate Factors and

Lectern Service continued to lend considerable

sums of money to Cohen during 1943 (R. 148, 154,

156-158).

During the period that Cohen was obtaining

money on forged Treasury confirmations, he con-

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8

tinued to discount notes endorsed by petitioner

and Sussman (R. 159, 162, 163-164, 167-168, 170-

171, 178, 180-181, 384, 387). Such notes were

accepted during this period by both Accurate

Factors and Lectern Service, the two factors who

were taking the fictitious assignments of Treasury

obligations (R. 384-385, 418-420).

In August 1943, Cohen told petitioner that

some of the notes petitioner had endorsed would

not be paid (R. 195). Petitioner at first stopped

payment on the specific notes which Cohen told

him would be defaulted. Subsequently he

stopped payment on all except those Cohen said

he would pay off. (R. 277-278.) Petitioner told

an official of his bank that he was stopping pay-

ment on one of the notes because he expected new

machines (R. 334-335). He had previously told

this official that he was interested in the motion

picture business (R, 336). In October 1943, peti-

tioner loaned Cohen $10,000, receiving in ex-

change post dated checks for $16,000 (R. 198-

199). Later, petitioner gave Cohen $7,000 which

was to be repaid at the same ratio of 8 to 5 (R.

200).

Some time in November 1943, Cohen told peti-

tioner and Sussman that if he did not raise

$100,000 there would be trouble (R. 202, 204) ;

that there was ‘‘a criminal angle,’’ because of

“these phoney bills and everything”’ (R. 204).

He also said that a post office inspector had been

)

trying to reach him (R. 204). Sussman stated

that he had not personally mailed ‘the letters,”’

and petitioner remained silent (R. 204-205).

Cohen testified that during the period up to

October 1943, he had not told petitioner that he

had any business dealings with the Treasury

or that he was obtaining money on the basis of

false Treasury letters (R. 155, 433-434).

ARGUMENT

Petitioner urges (Pet. 2, 9-12) that, in view

of Cohen’s testimony that he did not inform peti-

tioner of the fraudulent Treasury letters, the

evidence is insufficient to support petitioner's

conviction for the mailing of the forged Treasury

letters charged in the indictment. This conten-

tion was carefully considered and rejected by

both the district court (R. 443-445) and the eir-

cuit court of appeals (R. 486-489) on the ground

that the Treasury letters were merely part of

a geneval scheme contemplating the use of the mails

to which petitioner was a knowing party.

We submit that the decisions below are correct.

It is a well established principle of mail fraud

law that one who becomes a party to a scheme to

defraud which may reasonably be anticipated to

involve the use of the mails is liable for mail-

ings performed or caused by his confederate in

execution of the scheme, even though he may not

have been aware of the specific use of the mails

RET 1

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which forms the basis of the indictment. Kann v.

United States, 323 U. S. 88, 93; United States v.

Cohen, 145 F. 2d 82, 90 (C. C. A. 2), certiorari

denied, 323 U. S. 799; Clarke v. United States,

132 F. 2d 538, 540 (C. C. A. 9), certiorari denied,

318 U. S. 789; Spivey v. United States, 109 F. 2d

181, 184 (C. C. A. 5), certiorari denied, 310 U. S.

631; Shreve v. United States, 103 F. 2d 79°, 813

(C. C. A. 9), certiorari denied, 308 U. S. 570;

Hallowell v. United States, 253 Fed. 865, 5068

(C. C, A. 9), certiorari denied, 249 U.S. 615.

There can be no question that, in this case, peti-

tioner was a party to a scheme which contem-

plated the use of the mails, for he himself agreed

to and did send through the mails an estoppel

certificate required by one of the factors (p. 6,

supra). The only issue before the trial court on

this aspect of the case, therefore, was whether

petitioner joined a scheme limited to the particu-

lar transactions in which he directly participated,

or whether he was a party to the general scheme

to defraud charged in the indictment. We think

that on the evidence the courts below were war-

ranted in finding that petitioner had so tied him-

self to Cohen’s plans and that the false Treasury

assignments were so integral a part of the scheme

in which petitioner had associated himself that

he must be considered particeps criminis as to all

phases of the scheme.

ll

Petitioner’s willingness to do whatever Cohen

suggested in order to further the fiction that

Cohen was an active, successful businessman is

apparent. He deferred to Cohen’s request that

the notes to be discounted be supported by fieti-

tious bills of sale rather than chattel mortgages.

He allowed Cohen to use his corporate checking

account to “‘kite’’ checks in any amount. He

signed any form of estoppel certificate which was

presented to him. When Cohen decided that cor-

porate notes with petitioner and Sussman as en-

dorsers were better than notes with petitioner and

Sussman as makers, petitioner acceded without

question to Cohen’s request for a change of form.

Furthermore, the success of the Treasury assign-

ment aspect of the scheme was made possible by the

fact that the prior fictitious sales to petitioner and

Sussman had given Cohen’s transactions the ap-

pearance of business activity. At the same time,

the money secured by assigning the fraudulent

Treasury obligations enabled Cohen to continue

operations and made possible further issuance and

discount of notes endorsed by petitioner and Suss-

man during the same period. In one instance,

Cohen used $25,000 in notes signed by petitioner

to redeem fictitious Treasury obligations on which

payment was allegedly delayed by the Federal

Government (R. 419-421). The Treasury obli-

gations were thus part of Cohen’s whole scheme

of financial juggling, a scheme which peti-

PG WRENS SANA, RR Qty ROP ae SENOS ES <3

12

tioner had knowingly joined and in which he had

actively participated. Considered in narrower

compass, the Treasury obligations were a device to

prevent discovery and to permit continued opera-

tion of the particular scheme with which peti-

tioner was unquestionably associated, the scheme

to keep Cohen in a financial position to use peti-

tioner’s endorsements on notes for a price. Un-

der the circumstances, therefore, petitioner was

properly held liable for the mailings charged in

the indictment.

CONCLUSION

| "The decision below involves merely the applica-

tion of well established principles of law to the

particular facts of this ease, and presents no ques-

tion requiring further review by this Court. We

therefore respectfully submit that the petition for

a writ of certiorari should be denied.

J. Howarp McGrath,

Solicitor General.

THERON L, CAUDLE,

Assistant Attorney General.

Rosert 8S, ErpDAHL,

BEATRICE ROSENBERG,

Attorneys.

May 1946.

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