Opposition Brief — Silverman v. United States

4

Page

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Jurisdiction . . . .------------------ een n nnn nnennennesennn* 2

Questions presented - - . .------------------------00 00 rr rr 2

Statutes involved - - --.----------------------22ceerreererne 3

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CITATIONS

Cases:

Allen v. United States, 164 U. 8. 492...----------------- 23

Allis v. United States, 155 U. 8. 117. ------------------- 23

Beavers v. Haubert, 198 U. 8. 77------------------------ 44

Corbett v. United States, 89 F. 2d 124-.------ sini 3 AF 29, 32, 39

Decker v. United States, 140 F. 2d 378, certiorari denied,

S51 U.S: T98....<5-5-- Li Sp hawes Gaseuasebesseee 30, 31

Gomila v. United States, 146 F. 2d Os oe anes 21

Graham v. United States, 120 F. 2d 543. .--------------- 28

Holmgren v. United States, 217 U. NOUN oc apuaneunesaee 23

Hirabayashi v. United States, 320 U. elven saxuiexn=s ine 37

Johnson v. United States, 318 U. 8. 189. ---------------- 23

Kann v. United States, 323 U. 8. 88- - . -------------- 28 30, 31

Kotteakos v. United States, decided June 10, 1946, Nos.

457 and 458, O. T. 1945----- itencasans ae

Mansfield et al. v. United States, 155 imp” f. Rey 43

McDonald v. Hudspeth, 113 F. 2d 984, certiorari denied,

$11 U. 8. 668........---.------ 2-22 ee eee nn ene =e- 44

McIntyre v. United States, 49 F. i Sa pinb wasn 38, 39

MeNear v. United States, 60 F. 2d 861. .---------------- 38, 39

Mitchell v. United States, 118 F. 2d 653; 126 F. 2d 550_--- 32, 33

Moody v. State, 164 Pac. 676- - - - ---------------------- 27

Pasqua v. United States, CEO POON Gees. ce eveecteceekue 22, 23

Savage v. United States, 270 Fed. 14, certiorari denied,

Oke U8. GAO. 2 oc da oe eon dee ene seen eos 30

Securities & Exchange Commission v. C. M. Joiner Leasing

Corp., 320 U. 8. 344..--.--------------------------° 42

Securities and Exchange Commission v. Howey, decided May

7, 1946, No. 843, O. T. 1954--.--------------------- 43

Smith vy. United States, 61 F. 2d 681, certiora i denied,

ATSB: ORG. cn be ccc cnnesasesecesnesce =55e" ake 29

(t)

717391—46——1

hh

II

Cases—Continued Page

Steiner v. United States, 134 F. 2d 931, certiorari denied,

I IE he ia ae Bie aaa tS ig cn netagk

United States v. Cohen et al., 145 F. 2d 82, certiorari de-

SM cc GR Gdn kde thandeccadhnackdek

United States v. Earnhardt, 153 F. 2d 472, certiorari

denied June 3, 1946, No. 1158, O. T. 1945__._..______- 34,

United States v. Kenofskey, 243 U. S. 440

United States v. Leathers, 135 F. 2d 507___..._.________-

United States v. Weisman, 83 F. 2d 470, certiorari denied,

3 $85 & &

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

Securities Act of 1933 (48 Stat. 74, as amended, 48 Stat. 905):

Sees ae ee Ge is Os le WE Dc cccecccucccccacecs

ees ae ee CO Wc GR Gs WUD Co cnccnenccnccunsecs

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wc

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ae

GInthe Supreme Court of the Hnited States -

OcToBeR TERM, 1946

No. 484

MILLARD C. Baker, IsaporE WALTER KAHN, BENJA-

min L. Levy, A. M, Sari, Witiiam B. Biro,

Gasrie, Diaz, AND EMANUEL M, BURGIN, PETI-

TIONERS |

Uv.

Unirep Srates oF AMERICA

No. 485

NaTHAN SILVERMAN, PETITIONER

v.

Unitrep States OF AMERICA

No. 486

RvusBEIN V. JOHNSON, PETITIONER

v.

UnitTep StTaTes OF AMERICA

ON PETITIONS FOR WRITS OF CERTIORARI TO THE UNITED

STATES CIRCUIT COURT OF APPEALS FOR THE FIFTH

CIRCUIT

BRIEF FOR THE UNITED STATES IN OPPOSITION

OPINION BELOW

The opinion of the circuit court of appeals (R.

2397-2409) is reported at 156 F. 2d 386.

(1)

—_—_”_

OO ROO

2

JURISDICTON

The judgment of the circuit court of appeals

- was entered July 10, 1946 (R. 2410), and peti-

tions for rehearing were denied August 12, 1946

(R. 2440). The petitions for writs of certiorari

were filed September 10, 1946. The jurisdiction

of this Court is invoked under Section 240 (a)

of the Judicial Code, as amended by the Act of

February 13, 1925. See Rules 37 (b) (2) and

45 (a), F. R. Crim. P.

QUESTIONS PRESENTED

1. Whether the trial court erred in instruct-

ing the jury with regard to (a) the presumption

of innocence, (b) credibility of witnesses, (ce) the

failure of petitioners to testify, and (d) the

requisite proof of petitioners’ connection with the

use of the mails.

2. Whether there was adequate proof of the

uses of the mails charged, and that the mails

were used in furtherance of the scheme to de-

fraud.

3. Whether there was proof of a single scheme

to defraud as charged in the indictment.

4. Whether ‘‘cash deeds’’ conveying parcels

of land and undivided interests in royalties on

aggregated parcels, coupled with collateral agree-

ments and promises as to exploitation operations,

are securities within the meaning of the Securi-

ties Act of 1933.

5. Whether petitioner Johnson was denied a

speedy trial.

3

STATUTES INVOLVED

The Securities Act of 1933 (48 Stat. 4, as

amended, 48 Stat. 905) provides in pertinent part

as follows:

Sec. 2 (1). The term ‘“‘security’’ means

any note, stock, treasury stock, bond, de-

benture, evidence of indebtedness, certifi-

cate of interest or participation in any

profit-sharing agreement, collateral-trust

certificate, preorganization certificate or

subscription, transferable share, invest-

ment contract, voting-trust certificate, cer-

tificate of deposit for a security, fractional

undivided interest in oil, gas, or other

mineral rights, or, in general, any interest

or instrument commonly known as a “‘se-

curity”, or any certificate of interest or

participation in, temporary or interim cer-

tificate for, receipt for, guarantee of, or

warrant or right to subscribe to or pur-

chase, any of the foregoing. [15 U.S. C.

77b (1).]

Src. 17 (a). It shall be unlawful for any

person in the sale of any securities by the

use of any means or instruments of trans-

portation or communication in interstate

commerce or by the use of the mails, di-

rectly or indirectly—

(1) to employ any device, scheme, or

artifice to defraud, or

(2) to obtain money or property by

means of any untrue statement of a ma-

terial fact or any omission to state a

material fact necessary in order to make

the statements made, in the light of the

+ eee

SESE hy SET TNE OE

4

circumstances under which they were made,

not misleading, or

(3) to engage in any transaction, prac-

tice, or course of business which operates

or would operate as a fraud or deceit upon

the purchaser. [15 U. S. C. 77q (a).]

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

338) provides in pertinent part:

Whoever, having devised or intending

to devise any scheme or artifice to de-

fraud, or for obtaining money or property

by means of false or fraudulent pretenses,

representations, 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 advertisement, whether ad-

dressed to any person 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 au-

thorized depository for mail matter, to be

sent or delivered by the post-office estab-

lishment of the United States, * * *

or shall knowingly cause to be delivered

by mail according to the direction 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 card,

package, writing, circular, pamphlet, or

advertisement, shall be fined not more

than $1,000, or imprisoned not more than

five years, or both.

TT

5

STATEMENT e

A seven-count indictment was returned in the

District Court for the Eastern District of Louis-

iana on September 4, 1942, charging that peti-

tioners and certain others’ had conceived and

executed a scheme to cefraud certain named in-

vestors in the sale of securities and had used the

United States mails in furtherance thereof (R.

2-36). The scheme to defraud is fully set forth

in count 1 (R. 3-18) and incorporated by refer-

ence in all of the subsequent counts, each of which

is predicated on a different mailing. Briefly, the

scheme described in count 1 was that petitioners

ereated and controlled the Plaquemines Land

Company, which had acquired and owned con-

siderable acreage of unimproved marsh and

swamp lands located in Plaquemines and St. Ber-

nard Parishes, Louisiana; that this land was

leased to the Gulf Refining Company, giving Gulf

the right to explore for oil on such land, with the

lessor and lessee sharing the interest in any re-

sulting mineral discovery; that petitioners then,

by various fraudulent promises and misrepre-

sentations, sold to various investors small parcels

of the land together with fractional undivided

interests in the mineral rights in larger tracts

under lease to Gulf, the sales being evidenced by

‘Others named in the indictment as confederates were

Frank I. Kiefer, Jr., Henry Manzella, and Harvey M. Over-

gaard. Overgaard was named but not indicted because of

his death prior thereto; defendant Manzella died prior to

trial, and defendant Kiefer was in the Army at that time.

PS “~~ --- RR AL OE ITE SENET

Oe ree ey Ee

6

so-called ‘‘cash deeds’’, and that in carrying out

the scheme, petitioners employed various devices

described in the indictment, and more fully de-

scribed in the discussion of the evidence, infra,

pp. 9-13.

Petitioners introduced no evidence on their be-

half but moved severally for directed verdicts on

all counts after the Government had rested (R.

96-130). The attorney for the Government also

moved to dismiss counts 6 and 7 because of

his inability to prove the use of the mails there

charged (R. 1678). The court directed verdicts

of not guilty on counts 3, 6, and 7 (R. 1685, 133),

and the jury found all the petitioners guilty on

counts 1, 2, 4, and 5 (R. 133). Petitioners were

given consecutive sentences on counts 4 and 5,

aggregating from 5 to 8 years, and a sentence of

5 years each on counts 1 and 2 to run concur-

rently with each other and with the sentences

imposed on count 4 or counts 4 and 5 (R. 171-

184). On appeal to the Circuit Court of Appeals

for the Fifth Circuit, the convictions were

affirmed (R. 2410).

The evidence in support of the convictions may

be summarized as follows:

The Plaquemines Land Company was incor-

porated on March 14, 1911, under the laws of

Louisiana and domiciled in the Parish of Orleans

(R. 1669; Gov. Ex. 413, R. 2291). The scheme to

defraud investors charged in the indictment began

in the late 1930’s and continued through the early

7

1940’s. Many of the activities were carried on

from the ostensible real estate offices maintained

under the name of Kiefer and Silverman in New

Orleans, in which many of petitioners were seen

and business of the company transacted. (R. 1033-

1042.) The Plaquemines Land Company had

acquired three large parcels of land aggregating

over 40,000 acres in St. Bernard and Plaquemines

Parishes in Louisiana, all of which was recorded

under the name of Plaquemines Land Company.

Various parcels of this land had been under

mineral lease to the Gulf Refining Company

beginning on June 13, 1935. The leases provided

that Gulf would retain seven-eighths’ interest in

any minerals discovered, and that a one-eighth

royalty on oil, gas, and other minerals found

would go to the lessor in addition to the payment

of an annual rental for the exploitation privilege.

(R. 1596-1600.)* These leases, with one excep-

2 A secretary employed at these offices testified as to coming

to know Silverman, Diaz, Bird, Kaker, Kahn, Manzella,

Kiefer, and Overgaard at the offices (R. 1036-1037) and as to

the various activities of Plaquemines Land Company en-

gaged in at.those offices (R. 1036-1042).

3 The leases to Gulf are shown in the record as follows:

Gov. Ex. 375, R. 1609, R. 2224-2235, covering St. Bernard

Parish Land, dated June 13, 1935, expiring by its terms on

June 12, 1940, release being issued by the Gulf company on

August 1, 1940; Gov. Ex. 376, R. 1609, 2235-2244, covering St.

Bernard Parish land, dated December 23, 1935, expiring for

failure to pay rental on December 23, 1939, release being

issued by the Gulf company on December 6, 1942; Gov. Ex.

377, R. 1597, 1600, 1609, covering St. Bernard Parish land,

dated April 4, 1936, expiring after a ten year period; Gov.

717391—_46—_2

8

tion, expired at intervals between December 1939

and May 1941 (R. 1601-1602). In the early part

of 1940, petitioner Baker, president of the Plaque-

mines Land Company, contacted C. A. Lomax, a

representative of the Gulf Refining Company,

and requested that Gulf not terminate one of the

then remaining leases (R. 1603). Mr. Lomax

indicated that the company had finished its seis-

mographic record of the land and was not inter-

ested in carrying the lease any longer (R. 1604).

However, Baker asked Lomax whether he would

not be willing to carry the lease on a free basis

(R. 1604), telling Lomax that the reason for his

request was that he, Baker, had deeds already

printed which showed the land being under lease

to-Gulf (R. 1635). Lomax ‘estified that he de-

clined Baker’s proposal because he was not join-

ing any scheme to sell land (R. 1641), although

final determination of that question was made by

the Houston office of the Gulf company /(R.

1642). Lomax further testified that while it was

possible that there was oil on the particular lands

and that Gulf could be mistaken, nevertheless this

would be an ‘‘anomaly,’”’ and that from their in-

Ex. 378, R. 1609, 2244-2248, covering Plaquemines Parish

land, dated April 24, 1936, release being issued by the Gulf

company on September 23, 1941; Gov. Exs. 379, 379a, R.

1600, 1601, 2249-2252, covering Plaquemines Parish land,

dated February 19, 1937, partial release issued by the Gulf

Company on September 23, 1941; Gov. Ex. 380, R. 1600, 1602,

2253-2256, covering Plaquemines Parish land, dated May 26,

1937, expiring for failure to pay rental on May 25, 1941

release being issued by the Gulf company on May 6, 1942.

9

vestigation of the situation Gulf was satisfied that

there was no oil there (R. 1614, 1624-1625).

Because of the size of the record and the

number of investor-witnesses, it is impractical,

within the limits of this brief, to set forth the

details of all of the various sales made in pur-

suance of the scheme. Therefore, we shall de-

scribe the essential aspects of the scheme as gen-

erally practiced and illustrate with a few actual

instances. The scheme was generally effected

as follows:

One of the petitioners would approach an in-

vestor, in most cases an aged person and oft-

times a woman (see, e. g., R. 292-293, 356-357,

465-466, 682-683, 965, 997-998, 1092), and offer

to sell him or her a few acres, perhaps 5 or 10,

of the Plaquemines Parish land. Typical repre-

sentations made by the salesman to induce a pur-

chase were that the land was in the heart of an

area which was being heavily exploited by big oil

companies, that Gulf Refining Company had an

underlying lease on these very lands and was

drilling for oil all around the area, and that,

therefore, the investor would be wise to purchase

the land which, when oil was discovered, as it un-

doubtedly would be, would become much more

valuable (see, e. g., R. 348, 375, 509, 532, 571,

«As to each of the phases of the scheme and practices of

petitioners, the record is replete with proof. We have for

convenience confined our citation of record references to

typical instances.

10

633, 789, 809, 849, 1067-1068, 1104-1105). In

addition, the investor was often told that he

would profit substantially on his share of the oil

royalties that would be paid on the land, or that —

if he bought, he would get an oil well (see, e. g.,

R. 335, 342, 817, 1104-1105, 1136). Other mis-

representations were made, such as that the pur-

chasers could live on the land or farm it (see,

e. g., R. 532, 550, 788-789, 999, 1125). Additional

sales were made to the same investors by one of

several techniques. One device was to precede a

second sales proposal with a visit by one of the

petitioners, who touted the value of the land and

the good sense or fortune of the investor in pur-

chasing these oil properties, or who represented

himself to be an agent of some large organization

interested in buying large tracts of the land and

paying a very substantial price, far above that

which the investor had paid for the particular

parcels, but stating that the organization would

not purchase from the investor unless he had a

larger tract to offer. Thereafter, another of the

petitioners would call on the investcr and offer

to sell him additional parcels. The investor would

then purchase additional land, but thereafter he

would not see the party who had touted the value

of the land or had offered to buy a large tract

from him. (See, e. g., R. 559-574, 536-538, 805-

810, 974-976, 906-922, 1163-1165.) Another tech-

nique was for one of the petitioners on the second

or third visit to represent himself as an ‘‘insider”’

11

in an oil company which was interested in buying

up large parcels of the particular land and which

would pay a very substantial price for such land.

This ‘‘insider’’ would state that he could not go

out and buy the land for his own account and

resell it to the company because of his affiliation,

but would offer to buy parcels of the land for the

investor at a low figure and then resell it for the

investor to his principal at a much higher figure,

provided that he would be given an agreed sub-

stantial share (normally 15 or 20%) of the profit

on such resale. The investor would then pur-

chase some of the land which the ‘‘insider’’ ob-

tained for him, but it was never resold as prom-

ised. (See, e. g., R. 414415, 498-499, 509-512,

560.) While the foregoing techniques and mis-

representations were the principal ones practiced

by the petitioners to sell the land, there were

others, which will appear as transactions with

some of the investors ave detailed.

In effecting the foregoing sales devices, peti-

tioners transacted business with the numerous in-

vestors in varying combinations. In every in-

stance, from two to eight of the petitioners would

see a particular investor at different times and

in varying roles. In one case, a particular peti-

tioner might be the original salesman, another

petitioner the ‘‘independent purchaser”’ or touter

giving the investor the impression that outsiders

were interested in purchasing the land at high

— . - a + OR on reer eee

12

prices, and a third or fourth petitioner would

then make a second or subsequent sale. In an-

other transaction petitioners would shift roles

and the one who had previously played the part

of salesman might become the independent pur-

chaser. The record is replete with evidence show-

ing that each of the petitioners at one time or

another worked with most, if not all, of the other

petitioners in connection with various sales. It

is, of course, impossible within the limitations

of this brief to detail] the evidence showing these

inter-relationships. However, an analysis of the

record illustrating these connections is attached

as an Appendix.

After the investor had agreed to purchase par-

cels of the land in Plaquemines Parish, and had

given the salesman cash, checks * or notes to cover

the purchase price, he received a so-called ‘‘cash

deed”? from Plaquemines Land Company as

grantor over the signature of Baker as president

thereof. The *‘cask deeds’’ were all substantially

the same, and, in addition to the provisions de-

scribing and conveying the parcels sold to the

investor, contained, without exception, provisions

’ Many of the checks were made payable to Plaquemines

Land Company (see, e. g., Gov. Ex. 84, R. 1874; Gov. Ex. 86,

R. 1879: Gov. Ex. 136-137, R. 1977). Those checks made

payable to one of the petitioners were, in many instances,

endorsed by one or more of the other petitioners (see, e. g..

Gov. Ex. 33, R. 1785; Gov. Ex. 80, R. 1868; Gov. Ex. 83,

R. 1873; Gov. Ex. 87, R. 1879; Gov. Ex. 89E, R. 1881;

Gov. Ex. 944A, R. 1897).

13

such as the following (Gov. Ex. 20 at R. 1768-

1789) :

The vendor hereunder reserves All of

the mineral rights on the land herein trans-

ferred and in lieu thereof the said Plaque-

mines Land Company does by these pres-

ents grant, bargain, sell, set over, abandon

and deliver with full warranty of title unto

the purchaser of above described tract of

land An Undivided Prorata Part of All

the Mineral Rights on the following de-

scribed lands (of which the acreage herein

transferred forms a part), as the acreage

herein transferred bears to the whole. Said

lands being located in Plaquemines Parish

in Township 16 South Range 16 East, to-

wit: [followed by legal description of the

sections subject to a Gulf lease]

Under date of May 26, 1937, the Plaque-

mines Land Company granted unto and in

favor of the Guif Refining Company a ten

year mineral lease covering the 1635 acres

above described. Which mineral lease pro-

vides for payment to owner or owners

thereof as their interest may appear of

record of the usual one-eighth royalty on

all oil, gas, and other minerals found and

saved from said land and for an annual

rental of twenty-five cents (25¢) per acre

per annum pending drilling. Which min-

eral lease is recorded C. O. B. 85, folio

65. [Italics supplied. ]

In almost every instance, the deed had either

already been recorded when it was received by

the investor from one of the petitioners person-

14

ally or by mail, or one of the petitioners assisted

the purchaser in accomplishing the recordation

(see, e. g., R. 349, 479-480, 790, 833-834, 1378).

The deputy clerk of court at Point a la Hache,

Louisiana (Plaquemines Parish), testified that it

was the practice for Baker to mail or bring the

deeds to his office and request him to record them

and either return them to Baker or mail them to

the indicated grantee (R. 1644). Moreover, each

of the cash deeds delivered to the purchasers con-

tained a clause stating that ‘Internal revenue

stamps as required by law have been attached to

recorded copy and cancelled’? [Gov. Ex. 112 at

R. 1948; italics supplied].

Transactions with typical individual investors

were as follows:

In June 1941, petitioner Safir contacted An-

drew E. Dupre, secretary of the New Orleans

Athletic Club, for the purpose of selling him some

of the Plaquemines land. Safir stated that the

land was very valuable, and that drilling for oil

would take place in the very near future. He

showed Dupre a map and pointed out the Quar-

antine Bay area, which was near the Plaquemines

Parish land, and stated to Dupre that the land

he intended to sell him was along that section.

He told Dupre that if a large company drilled,

Dupre would participate in the proceeds on a per

acre pro rata basis. Dupre thereupon purchased

five acres at $25 per acre. (R. 397-400.) In

August 1941, Dupre purchased an additional five

15

acres at $25 per acre from Safir (R. 405). There-

after, in early September 1941, petitioner Kahn

called upon Dupre and told him that he had

found out from the public records that Dupre

had purchased land in Plaquemines Parish and

that a friend of his would like to discuss a simi-

lar proposition. Petitioners Kahn and Levy

talked with Dupre, and Levy asked Dupre if he

would be interested in purchasing more of the

land at $60 per acre. Levy distinguished his

proposition from the previous purchases made

from Safir by telling Dupre that he would give

Dupre a one-eighth royalty interest, whereas in

Safir’s sales, Dupre had obtained only a one-six-

teenth interest. Levy further told Dupre that he

was blocking a large portion of this particular

land for the purpose of reselling it to associates

in New York City. Dupre then purchased five

acres at $60 per acre. (R. 406-410.) Later in

the month of September, Kahn and Levy visited

Dupre again and persuaded him to purchase five

more acres by telling him that there had been a

lot of activity in connection with the land and

that they wanted to offer him some more of the

land which a friend of theirs had purchased but

could not pay for (R. 411-412). Subsequently, in

September or October 1941, petitioners Levy and

Kahn again sold Dupre five additional acres at

$60 per acre on the representation that the land

would be sold in New York at a very handsome

717381—46—3

16

profit, and that they would all participate in the

profit on the resale (R. 413-415). Notwithstand-

ing these repeated promises that the land would

be resold, it never was (R. 417).

Prior to 1941, Rubein Johnson had sold some

land in Texas to Miss Lorena Duling, a 78-year-

old retired school principal in Jackson, Missis-

sippi. That transaction was not, as she testified,

‘““successful.”’ In January or February of 1941,

petitioner Silverman contacted Miss Duling and

told her that Johnson was sorry ahout the Texas

transaction and desired to give her five acres of

Plaquemines Parish land. The ‘‘gift’’ was made,

but three days later Silverman told her that she

would have to pay $250, which represented one-

half of the purchase price. She made this pay-

ment to Silverman, who told her that it was

almost a certainty that some large oil concern

would extend its holdings to the area close to her

five-acre plot, that she would have to have twenty

acres in order for her five-acre plot to be valuable,

since twenty acres were necessary to have a drill-

ing site, and that there was no doubt at all that

within thirty to sixty days her land would be a

desirable drilling site. Thereupon, Miss Duling

purchased an additional fifteen acres at $90 per

acre for a total of $1,350, which she paid in cash

to the defendant Silverman. Silverman told her

not to sell the land, because he believed that with-

in a few days or weeks it would increase in value

very much and that a big oil concern would pay

17

a good price for the property. He also told her

not to sell unless she communicated with him and

that he thought she could get as much as $200 an

acre. (R. 893-900, 937-940.)

Petitioner Diaz then contacted Miss Duling

and told her that he was a field buyer for one

of the big companies and that he had found

from the public records that she owned oil land.

He offered to buy her parcels at $135 per acre

and later in the afternoon increased the offer to

$185 per acre on the ground that he had been

so authorized by his company. He further told

her that if she had more land in the same sec-

tion, it would be more valuable. She told Diaz

that she couldn’t sell without consulting Silver-

man, whom Diaz denied knowing. Diaz told Miss

Duling that when she got ready to sell, to com-

munieate with him in New Orleans. She never

saw him thereafter. (R. 906-919.) After the

Diaz visit, Silverman advised Miss Duling not

to sell and to purchase more land in the same

locality. She ther purchased a substantial quan-

tity of land from Silverman at $90 and $100 per

acre (R. 915-922). Petitioner Safir saw Miss

Duling near the end of her transactions with Sil-

verman and sold her five acres at $90 an acre

after advising her to purchase the five acres

because it would fit in the corner of her land

and would thereby be a valuable piece of land

to have (R. 925). Miss Duling, during the course

RE ot Lae - ore

18

of the foregoing transactions, invested her total

life savings, in the amount of $9,750 (R. 930).

ARGUMENT

The facts set forth in the Statement, supra,

make it clear, as the court below well said, that

“‘the proof presents a record of rascality and

scoundrelism of the meanest and lowest kind, with

a grinding of the faces of the poor * * *” (R,

2407). Petitioners, however, claim that numer-

ous errors were committed by the trial court as

a result of which their convictions should be

reversed. Since the contentions in all three peti-

tions are substantially the same, we will discuss

them together in the following groupings and

order :

1. Errors in the instructions with regard to—

(a) Presumption of innocence;

(b) Credibility of witnesses;

(c) Refusal of petitioners to testify;

(d) Mailings.

2. Proof of the mailing involved in count 4 and

its relation to the scheme to defraud. .

3. Proof of petitioners’ connection,the mailing

involved in count 5 and the relation of the mailing

to the scheme.

4. Proof showing a single scheme as charged

in the indictment.

5. Proof of mailings in counts 1 and 2.

6. Whether the ‘‘cash deeds’’ involved in counts

1 and 2 are securities within the meaning of the

Securities Act of 1933.

19

1. (a) The trial judge instructed the jury on

the presumption of imnocence as follows (R.

1703-1704) :

* * * The defendants are not called

upon to prove themselves innocent of such

charges; they may rely upon the presump-

tion of innocence that attends them at all

times until and unless, in the course of the

trial, they are proved guilty beyond a rea-

sonable doubt. The rule of the presump-

tion of innocence imposes upon the gov-

ernment the burden of establishing the

guilt of each of the defendants beyond a

reasonable doubt. But, as forceful as that

rule is in the protection of one who stands

charged with crime, it must not be for-

gotten that it is not intended, nor has it

ever been intended, as extending aid to

one who in fact is guilty, so that he or

she may escape just punishment. The rule

is but a humane provision of law, intended

to prevent, so far as human agencies can,

the conviction of an innocent defendant,

but nothing more. You must, of course,

give serious consideration to this presump-

tion of innocence, when, once having re-

tired to deliberate upon your verdict, you

review, weigh and consider the whole body

of the evidence. As I have stated, the

burden rests upon the government, remem-

ber to prove, beyond a reasonable doubt,

that the defendants are guilty of the

charges laid against them in the indict-

ment. But this presumption of innocence

will avail the defendants no further, so

20

soon as prima facie evidence of the truth

of the charges laid against them in the

indictment is presented to the jury. That

prima facie evidence, if it satisfies the

jury, beyond a reasonable doubt, of the

guilt of the defendants bars the presump-

tion of innocence, because the presumption

is no evidence at all, and plays its part

only so long as there is absence of legal

evidence as to the particular fact to be

established. If such prima facie evidence,

which so brushes aside the presumption of

innocence when found worthy of belief by

the jury, is not met by the defendants’ op-

posing satisfactory evidence, then that

simple prima facie evidence, if it convinces

you gentlemen of the jury, as the final

judges of the fact, that guilt has been

proved, beyond a reasonable doubt, would

justify you in rendering a verdict of guilty

as charged. * * *

At the conclusion of all of his instructions, the

judge asked whether there were any objections

or exceptions to the charge, because “‘if any

counsel believes the Court has fallen into uncon-

scious error, the Court will gladly hear sugges-

tions from them for the possible correction of the

error’’ (R. 1723). Counsel for the petitioners in

No. 484 raised a question as to the clarity of the

instruction regarding the effect of prima facie

evidence (R. 1723-1724), whereupon the court

further instructed the jury (R. 1724):

During a part of the Judge’s charge,

there was specific reference to the subject

a ee

21

matter to which Mr. Wilkinson referred

and addressed the Court on, and the Court

did charge you, and did intend to charge

you, that if there is a case made out before

you, beyond a reasonable doubt, by simple

prima facie evidence, that would justify a

verdict of guilty. There is no requirement

under the law that any defendant offer any

testimony. However, if the prima facie

evidence, considered by you and deliberated

over, convinces you beyond a reasonable

doubt that the fact sought to be established

has actually been established and proved

to you in that fashion, beyond a reasonable

doubt, that would justify action by you

including a verdict of ——

The judge then asked whether that was ‘‘a satis-

factory explanation or not,’? to which counsel re-

plied, ‘I think so” (R. 1724). No other objec-

tions or exceptions were taken by any other of the

defense counsel to the instruction in question here

(see R. 1723-1739).

The court below held that under the foregoing

circumstances petitioners were in no position to

claim that error was committed by the trial court

(R. 2403). We believe this conclusion is entirely

correct, and that petitioners’ contentions here that

the instruction was highly prejudicial and erro-

neous (No. 484, Pet. 26-30; No. 485, Pet. 23-32 ;

No. 486, Pet. 14-16) is without merit. In Gemila

vy. United States, 146 F. 2d 372 (C. C. A. 5), upon

which petitioners rely, a similar inartfully worded

instruction that prima facie proof of guilt beyond

22

a reasonable doubt is sufficient to overcome the

presumption of innocence was held to be erro-

neous and that such error, accumulated with other

errors which made the case a doubtful one on the

evidence, required a reversal of the conviction.

That is not the situation here. Moreover, the

general tenor of the judge’s charge on the pre-

sumption of innocence was not objectionable. At

the outset of the disputed instruction, the trial

judge emphasized that the defendants were not

called upon to prove themselves innocent but

could ‘‘rely upon the presumption of innocence

that attends them at all times until * * * they

are proved guilty beyond a reasonable doubt’”’ (R.

1703). Although he spoke of overcoming the

presumption by prima facie evidence, he explained

that such evidence must be sufficient to convince

the jury beyond a reasonable doubt, and that it

could not be thus effective, unless not met by the

defendants’ opposing satisfactory evidence (R.

1703-1704). Moreover, since additional instruc-

tions on this point requested by one of the defense

counsel for purposes of clarification were con-

sidered satisfactory by such counsel, and since no

other objections to this charge were made, it is

clear that later contentions on appeal attacking

the instruction as unfair and improper were

mere afterthought. An almost identical charge

was involved in Pasqua v. United States, 146 F.

2d 522, arising in the same circuit court of ap-

peals. In that case, as here, no timely objection

23

to the charge was made, and the Fifth Circuit

held that “while that charge contains errors, the

guilt of the defendants is so overwhelmingly

shown by the record that we think the adminis-

tration of justice does not require us to take no-

tice of such errors.”” (146 F. 2d at 524.) This

Court denied a petition for a writ of certiorari

in which that conclusion was urged as error. 325

U. 8. 855. Of. also the charge in Allen v. United

States, 164 U. 8. 492, 500. And so here, in view

of the overwhelming proof of guilt, the cireuit

court of appeals properly rejected petitioners’

objection to the charge on the presumption of

innocence, raised for the first time on appeal.

Johnson v. United States, 318 U. 8. 189, 201;

Holmgren v. United States, 217 U. S. 509, 523-

524; Allis v. United States, 155 U. 8. 117, 122.

(b) For similar reasons there is no merit in

petitioners’ complaint (No. 484, Pet. 32-34) as

to the court’s instruction to the jury that ‘‘you

will bear in mind that, under the law, every wit-

ness is presumed to speak the trut > (R. 1704).

The foregoing sentence quoted by petitioners was

immediately preceded by the instruction (not

quoted) that (R. 1704):

* *

* In considering the credence and

weight you should accord the testimony

of any witnesses that you have heard tes-

tify, you will, as reasonable men, judge

his or her demeanor on the witness stand,

the manner of his or her testifying, which

717391—46-——-4

24

may or may not have demonstrated to you

an apparent lack of fairness, and unex-

plained hesitation or evasion in replying

to any question or questions, or any bias

or prejudice, either for or against either

the government or any one or more of the

defendants. * * *

While a court’s statement that witnesses are

presumed to tell the truth standing alone might

under some circumstances be prejudicial, it could

not be thus considered here, since it was tem-

pered by the immediately preceding statement

which unequivocally and properly left to the

jury the function of judging the credibility of

the witnesses from their demeanor in testifying,

unexplained hesitation or evasion, or bias or

prejudice. Moreover, in considering the claimed

possibility of prejudice, it should be noted that

the government witnesses were not impeached nor

was there any material inconsistency in their

testimony on direct and on cross-cxamination.

These circumstances, coupled with petitioners’

failure to make any objection or exception to

the instruction (see R. 1723-1739), their failure

to urge this point as error before the court below,

and the overwhelming proof of guilt, forecloses

petitioners’ contentions that the instruction con-

stituted reversible error.

(c) After the trial judge delivered his original

instructions to the jury, counsel for petitioners

Bird, Diaz, and Silverman requested him to

charge the jury further to the effect that their

25

failure to take the stand would not give rise to

any presumption against them. The other peti-

tioners stated that they did not desire to join in

this request. The court refused the charge, stat-

ing that the question was ‘“‘elementary.”’ (R.

1725-1729.) After the jury had been out ap-

proximately six hours, the judge recalled them,

and, among other things, gave the jury the in-

struction that had been requested earlier, pre-

ceded by the statement to the jury that the

court was in error in not granting the instruc-

tion when originally requested (R. 1736-1739).

The judge then asked whether there were any

objections or exceptions to this supplemental

charge, but none was made (R, 1739). Peti-

tioners’ contention here, as in the court below,

that this action of the judge constituted reversi-

ble error (No. 484, Pet. 34-36; No. 485, Pet. 34-

37; No. 486, Pet. 12-14), is conclusively answered

by the opinion below (R. 2404-2405) :

* * * hose defendants who told the

court that they did not want any exception

to the refusal of the court to give the

charge certainly cannot be heard to com-

plain of its not being given when first re-

quested. The other defendants, who did

ask for it and who, because they asked,

were entitled to it and could, therefore,

have complained if it had not been given,”

are in no better case. Before the jury

brought in its verdict, the court, after

*Bruno v. United States, 308 U. S. 287.

cmmeemmncnmme

frankly confessing error, gave a full and

correct charge on the point, and the de-

fendants neither excepted to its giving nor

asked further instruction. It is univer-

sally held that when an error has been com-

mitted and later it is corrected in a formal

ruling of the court, it may not be assigned

unless it is made clearly to appear that the

situation was such that the correction did

not remove the effects of the error com-

plained of.** Appellants argue that this is

such a case: that the jury having been

allowed to go without being properly in-

structed and having deliberated for many

hours, no doubt in that time discussing the

failure of the defendants to testify, it was

too late to do any good to instruct them in

the matter just before they brought in the

verdict. On the other hand, it may be more

cogently argued that if when the jury came

in for instructions they had not been able

to make up their minds, but were still un-

decided, this charge given at defendants’

request might well have been of the greatest

value to them, indeed of far more value

than if given as a part of the general

charge. But these are speculations. The

law is settled that cases are not reversed

unless it appears that the error complained

of has reasonably prevented substantial

justice being done. Where, as here, the

error has been openly confessed and de-

liberately corrected, with no complaint of

**Volkmor v. U. S., 13 F. (2) 594; Frantz v.

United States, 62 F. (2) 787.

eee

27

or exceptions to the manner or substance

of the correction made at the time, the

original failure to give the charge certainly

can not be held reversible error.***

*** Johnson v. U. S., 318 U. S. 189; United States

v. McGuire, 64 F. (2) 485; Burton v. U. S., 196 U.S.

283; State v. Moody, 167 Pac. 676.

Petitioners quote a part of the trial judge’s

instructions on the question of proof of mailing

wherein the trial judge told the jury that (R.

1714)

Under such state of facts, it is not neces-

sary for the jury to find that it was any

defendant on trial who has been proved

to have “‘placed’’ or ‘“‘caused to be placed’”’

[matter in the mails in executing the

scheme ].

Petitioners contend that the judge committed a

very fundamental error in giving this instruction

in that he told the jury in effect that petitioners

need not be shown to have had any connection

with the mailing in order to find them guilty (No.

484, Pet. 36-37). If the foregoing quotation were

the only charge given the jury on the question of

the required connection with the mailings, there

might be some merit in petitioners’ position.

However, petitioners have extracted this portion

of the charge from its context; the entire charge

on this subject made it clear that the jury could

not find petitioners guilty unless they were shown

to have had some connection with the mailing.

Thus, in the sentences immediately preceding that

a

28

quoted by petitioners, the judge instructed (R.

1713-1714) :

* * * The word ‘‘caused’’ in the phrase

used “‘placed or caused to be placed”’ in the

mails has a relatively broad meaning and

importance as the Supreme Court of the

United States has held, and is used in the

mail fraud statute in its well known sense

of “bringing about’’. Therefore, when the

indictment charges that these defendants

‘‘caused to be placed’’ certain therein de-

seribed mailable matter, under the remain-

ing counts four and five, of the original

four mail fraud counts, the said defendants

are one and all charged with having brought

about the use of the mails in the execution

of their alleged previously concocted scheme

and artifice to defraud,—no matter that

none of them ever contemplated or intended

the use of the mails for the carrying out

of such scheme;—no matter that none of

them knew that the mails were being so

used, they are, one and all, responsible for

such misuse of the mails, if the use of the

post office establishment was the natural,

proper consequence of their act in so form-

ing and planning said scheme or artifice

to defraud, and might reasonably have been

anticipated and foreseen by them.

This instruction was a sound exposition of the

applicable legal principles. See, e. g., Kann v.

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

v. Kenofskey, 243 U. S. 440, 443; Graham v.

United States, 120 F. 2d 543, 546 (C. C. A. 10);

United States v. Weisman, 83 F. 2d 470, 474

(C. C. A. 2), certiorari denied, 299 U. S. 560;

Corbett v. United States, 89 F. 2d 124 (C. C. A.

8); Smith v. United States, 61 F. 2d 681, 684

(C. C. A. 5), certiorari denied, 288 U. S. 608.

It is apparent, therefore, that the charge as a

whole gave the jury a clear and correct impres-

sion of the legal principles applicable in deter-

mining petitioner’s responsibility for the use of

the mails. That it must have been so understood

by petitioners is apparent also from the fact that

no objection or exception of the character here

in question was made when the instruction was

given (see R. 1723-1739), nor was this point

raised in the court below. Under such circum-

stances, petitioners are in no position to make

such a contention here.

2. Count 4 of the indictment was based upon

a sale by petitioner Diaz to Mr. and Mrs. M. E.

Fowler (R. 28-29). In connection with that

sale, Mr. Fowler gave Diaz a check dated June

26, 1940, for $1,395, drawn on a Pensacola,

Florida, bank, payable to Diaz (Gov. Ex. 323,

R. 2155). Diaz deposited the check in his New

Orleans bank, and thereafter, according to the

testimony of an official of the New Orleans bank,

the check was cleared in the ordinary course of

business through the United States mails for

collection on the drawee bank in Pensacola (R.

1026-1030). Petitioners raise several objections

to the proof on this count. First, they argue

30

that the use of the mails was not clearly shown,

since the envelope in which the check was trans-

mitted was not introduced in evidence, and be-

cause the use of the mails was proved only by

custom and usage; and second, that the clearance

of this check through the mails was not part of the

scheme to defraud but came after the completion

of the particular sale in question, so that mailing

was not a basis for conviction for mail fraud under

the controlling authority of Kann v. United States,

323 U.S. 88 (No. 484, Pet. 22-23, 43-44).

As to the first objection, introduction of the

envelope is not an absolute prerequisite to proof

of mailing, and the testimony of a bank official

based on custom and usage and upon special

markings on the check itself, are sufficient evi-

dence from which a jury could infer, as the jury

here apparently did, that the check was actually

transmitted through the mails. Decker v. United

States, 140 F. 2d 378, 379 (C. C. A. 4), certiorari

denied, 321 U. S. 792; United States v. Leathers,

135 F. 2d 507, 510 (C. C. A. 2); Savage v. United

States, 270 Fed. 14, 20-21 (C. C. A. 8), certiorari

denied, 257 U. S. 642. The second question raised

by petitioners, as to the application of the Kann

case, at first blush appears to have some merit.

The instant case is parallel to the Kann case in

that, in a sense, Diaz might be said to have had

the fruits of his fraud in hand prior to the mail-

ing of the check, and, in addition, the particular

a

31

sale to the Fowlers, in connection with which

the check was given, had been made prior to this

mailing. However, the parallelism ends at this

point. This sale to the Fowlers in June

1940 was only one in a series of numerous sales

made by various petitioners to them during a

period from March 1939 to March 1941 (cf. R.

1192, 1282), and all of these sales were, in turn,

only one small part of the scheme in its totality.

The scheme charged and proved was a continuing

one which was far from complete at the time

the particular check was cleared through the

mails. And it was necessary to its execution

that nothing should arise at any time which would

create suspicion on the part of any of the in-

vestors; everything had to work smoothly to keep

all of the investors lulled into the feeling that

they were participating in an honest and fruitful

enterprise. It follows, therefore, that it was es-

sential to the scheme to defraud and to the con-

tinuing activities of petitioners that the check

should clear smoothly and in proper fashion.

Under such circumstances, in view of the scope

and continuing character of the scheme to de-

fraud, it cannot be said, as in the Kann case,

where only a single and short lived scheme was

involved, that the clearance of the check was

brought about after the scheme had reached

fruition. On the contrary, as in Decker v. United

States, supra, in which certiorari was denied on

March 27, 1944, shortly before the granting of

32

certiorari in the Kann case, 321 U. S. 761, the

mailing by the bank here was intimately con-

nected with and essential to the smooth and un-

interrupted functioning of the continuing scheme.

See also Corbett v. United States, 89 F. 2d 124, 125-

126 (C.C. A.8).

3. In respect of count 5, petitioners in No. 484

contend that the proof was insufficient both as to

their connection with the mailing and as to show-

ing that the mailing was a part of the scheme to

defraud (Pet. 49-50). Count 5 was predicated

on one of the transactions with Miss Duling, in

connection with which she received, at Jackson,

Mississippi, a recorded ‘‘cash deed’’ mailed from

the clerk’s office at Pointe a la Hache, Louisiana,

on April 15, 1941. No question is raised as to

proof of mailing, since the envelope in which the

deed was transmitted was introduced in evidence

(Gov. Ex. 74, R. 1861). The claim that some of

the petitioners were not shown to have had any

connection with this mailing is negated by the

proof, outlined in the Statement, supra, and an-

alyzed under point 4, infra, showing that all of

the petitioners were engaged in a single, continu-

ing scheme to defraud. Petitioners, however, urge

that the mailing of this deed was no part of the

execution of the scheme to defraud, since Miss

Duling had already paid money for the tract in-

volved and acquired title prior to this mailing,

and they cite the second decision of the Circuit

Court of Appeals for the Tenth Circuit in Mitchell

a s

33

vy. United States, 126 F. 2d 550. The first Mitchell

decision, 118 F. 2d 653, was based upon an in-

dictment charging mail fraud in connection with

a single transaction involving the sale of land.

The mailing was predicated, as in the instant case,

on the transmittal of a recorded deed to the pur-

chaser. The Tenth Circuit held that the mailing

of this recorded deed played no part in the execu-

tion of the scheme charged in the indictment,

since that scheme did not envisage recording and

was complete before the mailing occurred. There-

after, the Government secured a new indictment

charging, as here, a continuing scheme to defraud

many victims. On appeal from the second con-

viction, the Tenth Circuit held that the convic-

tion was good on the basis of the proof adduced

and was within the framework of the indictment,

since recording was envisaged by the continuing

character of the fraud charged and proved. It is

apparent, therefore, that the first Mitchell decision

has no application here and that, as in the second

case, the indictment and proof here showed that

the mailing of the recorded deed occurred in the

course of a continuing scheme to defraud both the

particular investor and other investors. Not only

were other sales subsequently made to Miss Duling

(see Gov. Exs. 75-76, R. 1861-1866), but the sale

in question was not complete until she received the

‘cash deed”? mailed on April 15, 1941. Moreover,

it is evident that recordation played a vital part

in petitioners’ scheme (see Statement, supra, pp.

ia —

34

13-14) in that it lent an air of authenticity and pro-

priety to the transactions, and thus allayed sus-

picion while petitioners practiced their scheme to

load and reload the particular investor and to en-

snare other victims. Cf. United States v. Earn-

hardt, 153 F. 2d 472, 473-474 (C. C. A. 7), cer-

tiorari denied June 3, 1946, No. 1158, O. T. 1945.

Under such circumstances, the recordation was

for from an incidental or collateral phase of the

scheme, but was an integral part of its execution.

4, Petitioners also contend that while the in-

dictment charged a single scheme to defraud

and they were tried and convicted on this theory,

the proof in fact showed several separate and in-

dependent schemes (No. 484, Pet. 51-52; No. 485,

Pet. 8-22; No. 486, Pet. 21-22). Ancillary to

this argument are the several contentions that

proof of one petitioner’s connection with a par-

ticular sale or mailing could not be effective

against the others (see, e. g., No. 484, Pet. 44-45,

50; No. 485, Pet. 15-16). Petitioners rely upon

the recent decision of this Court in Kotteakos v.

United States, decided June 10, 1946, Nos. 457

and 458, O. T. 1945.

It is settled, of course, that in a mail fraud

prosecution, the Government need only establish

that particular transactions were in furtherance

of a common scheme in which various defend-

ants are implicated, not that each defendant par-

ticipated in each transaction. United States v.

Cohen et al., 145 F. 2d 82, 90-91, (C. C. A. 2), cer-

—

35

tiorari denied, 323 U.S. 799. The only question for

discussion, therefore, is whether the proof showed

that petitioners were, as charged, implicated in

a single scheme to defraud. From the character

of the proof summarized in the Statement, supra,

particularly on pp. 9-13, it is abundantly clear

that petitioners can draw no comfort from the

Kotteakos decision and that one single scheme

was established. As the court below stated R.

2408) :

* * * the record leaves in no doubt

that they formed one wolf pack. It shows

a concerted, plotting, scheming, and con-

niving in loading and reloading their vic-

tims, a concerted scurrying hither and

thither to find, a concerted stealthy stalk-

ing of their prey. It shows, too, a perfect

timing in crowding their victims and in

the final moving in for the kill. This could

not have been possible had there been no

general understanding, no underlying plan.

This concerted plotting and conniving is evident

from several different aspects of petitioners’ ac-

tivities. Thus, in almost every case, the so-

called ‘‘ecash deeds’? which the various investors

received were signed by Baker as president of

the Plaquemines Land Company. Most, if not

all, of the petitioners at one time or another

represented to various investors that they were

working for or connected with the Plaquemines

Land Company. The record also shows that the

combinations of petitioners which operated in

36

‘‘wolf packs’’ against various investors shifted

at various times, so that at one time or another

every petitioner worked with almost every other

petitioner in effecting sales. The shifting of

personnel and the relations of petitioners to each

other is unequivocally shown in the Appendix,

infra, pp. 46-48. In this setting the Kotteakos

decision, where the only common denominator

between all the defendants was the isolated fact

that a single defendant was shown to have had

dealings with all the others, is inapposite. As in

typical mail fraud, security fraud, and narcotics

ring cases, this case is one in which all of the

petitioners were shown to have been working in

a common scheme under common direction, with

a common interest and profit and with mutual

relationships and timing of action in which the

activities of one were intimately related to the

activities of the others. This was no mere thread

that bound petitioners together, but rather a

mutually binding chain of a common effort under

which they were working one for all and all for

one. Therefore, there was no error whatsoever

in charging, trying, and convicting petitioners on

the theory, abundantly proved by the evidence,

that they were engaged in a single conspiracy.

5. Petitioners also complain of the proof of

mailings on which counts 1 and 2 were predi-

cated (No. 484, Pet. 38-39). Since, as we have

shown, petitioners were validly convicted under

counts 4 and 5, and since those counts sustain

Pett A OOM

37

the concurrent sentences imposed, it is unneces-

sary to inquire into the validity of the convic-

tions on counts 1 and 2. Hirabayashi v. United

States, 320 U. S. 81, 85, 105. In any event, peti-

tioners’ contentions in respect of these counts

are untenable.

Counts 1 and 2 alleged the mailing of certain

letters addressed to the Deposit Guaranty Bank,

Jackson, Mississippi, on the letterhead of peti-

tioner M. C. Baker, 2110 Audubon Street, New

Orleans, Louisiana, and signed in his name as

president of the Plaquemines Land Company (R.

19-22; Gov. Ex. 143-144, R. 1992-1994). Each of

the two letters stated that there were enclosed the

original and two copies of a deed executed by

Plaquemines Land Company in favor of Nathan

Silverman for acreage (10 and 5 acres, respec

tively) in Section 30, Township 17 South, Range

17 East. An officer of the addressee bank testified

that the letters were received by the bank through

the mails, for they bore a stamp of the bank’s

mail department which was placed only on letters

received in the mails (R. 450-456). While the

deeds were not introduced in evidence, the bank

official identified bank records showing that the

enclosures had been received and that, as re-

quested in the letters, credits had been entered in

the Hibernia National Bank for the account of the

Plaquemines Land Company for the money paid

when the deeds were delivered in accordance with

the instructions in the letters (R. 450-451; Gov.

38

Ex. 143a, R. 1992; Gov. Ex. 144a, R. 1994). In

addition, the record shows that the parcels of land

referred to in the letters were included in a tract

under an exploitation lease to Gulf Refining Co.

which provided for the division of undivided

royalty interests among the owners of parcels in

the tract, and that parcels in the same section

(30) were sold by Silverman to Miss Duling, of

Jackson, Mississippi (see R. 923; Gov. Ex. 75, R.

1861-1863). In view of the testimony of the bank

official, there can be no question as to the adequacy

of the proof of the receipt of the letters through

the mails. And that they were mailed by Baker,

acting for Plaquemines Land Co., whose pur-

ported signature the letters bore, is evident from

the following: (1) the letters referred to land

which Plaquemines Land Co. controlled; (2) ecred-

its for the payments for the parcels referred to in

the letters were, in accordance with instructions in

the letters, made and received for the account of

Plaquemines Land Co.; and (3) Baker and Sil-

verman were shown by other substantial evidence

to have had close relationships in the affairs of

the Plaquemines Land Co. Cf. MeNear v. United

States, 60 F. 2d 861 (C. C. A. 10). Moreover,

since the letters carried a letterhead with a New

Orleans address which was shown to be the base

of operations for Plaquemines Land Co., there

was substantial basis for inferring that the mail-

ing occurred in New Orleans. Cf. McIntyre v.

United States, 49 F. 2d 769 (C. C. A. 6). These

39

factors collectively were sufficient circumstantial

evidence to establish a prima facie case to go to

the jury for their determination whether Baker

mailed the letters from New Orleans to the bank

in Jackson. Cf. Steiner v. United States, 134 F.

9d 931, 934 (C. ©. A. 5), certiorari denied, 319

U. S. 774; Corbett v. United States, 89 F. 2d 124,

127 (C. ©. A. 8); McNear v. United States, 60 F.

2d 861, 863 (C. C. A. 10); McIntyre v. United

States, 49 F. 2d 769 (C. C. A. 6).

6. Petitioners argue further that there was no

proof of the character of the deeds enclosed with

the letters involved in counts 1 and 2, since these

deeds were not introduced in evidence, and that

even if the deeds were presumed to be like the

other ‘‘cash deeds’’ in evidence, they were not

securities within the meaning of the Securities

Act of 1933 (No. 484, Pet. 40-42; No. 486, Pet.

9-12). However, there was an abundance of cir-

cumstances from which the jury could properly

have inferred that these deeds were typical of

the many “cash deeds’ in evidence. Briefly,

those circumstances were that the parcels re-

ferred to in the letters were included in a sec-

tion and a larger tract controlled by Plaquemines

Land Co. and sold to numerous investors by peti-

tioners in small parcels of a comparable size;

that the large tract referred to in the letters was

under an exploitation lease to Gulf Refining Co.,

under which royalties were reserved to the title

—

40

holders; that in every other of the many instances

of sales of parcels of the land in the tracts under

lease to Gulf, petitioners employed the ‘‘cash

deed*’ device; and that Baker and Silverman were

principal figures in the operations of Plaque-

mines Land Co. It is apparent, therefore, that

the jury properly concluded that the deeds re-

ferred to in the letters upon which counts 1 and

2 were predicated must have been so-called ‘‘cash

deeds.”’

The ‘‘cash deeds’’ utilized by petitioners were,

by their language and the circumstances of their

use, securities under Section 2 (1) of the Securi-

ties Act of 1933 (supra, p. 3), both as ‘‘frac-

tional undivided interests in oil rights and as

‘investment contracts.’”’ The deeds typically re-

cited that the grantee was given, in addition to

the land, less the mineral rights therein, ‘‘an

undivided Prorata Part of All the Mineral

Rights”’ in the larger described tracts already

under a lease providing for payments of royal-

ties to the land owners (see Statement, supra,

p. 13). By its literal language, therefore, the

‘‘cash deed’’ conveyed to the investor-purchaser

not merely particular acreage, but also an un-

divided share with other investor-purchasers in

potential oil royalties. In terms the deed falls

squarely within the meaning of a “‘security”’ as

defined in the Securities Act, which includes,

inter alia, ‘‘fractional undivided interests in oil

4l

and gas right’? (see p. 3, supra) And the

substance of the transactions with the many in-

vestor-purchasers supports the conclusion that

petitioners were selling “investment contracts”’

within the meaning of the definition “‘security”’

in the Act. Petitioners impressed investors with

the fact that they were selling the land because

of its value as oil land and for the profit that

the investors might realize from their undivided

interests in the royalties that would result from

exploitation, or from resale of the acreage by the

promoters. Indicative of the intent of the pro-

moters is the fact that they had attempted to per-

suade the Gulf Refining Company to continue

its exploitation leases and that the promoters’

objective was to enable them to represent that

the lands were under exploitation by Gulf. More-

over, the land conveyed by the ‘“‘cash deeds,”’ being

marsh land unsuitable for resident*.. or eultiva-

tion purposes, had little or no value independent

of the suecess of the promised oil exploitation.

The investors purchased the land at high prices

primarily on the basis of these representations

and not because they could or intended to occupy,

utilize, or develop the land themselves. Under

such circumstances, it is patent that what the

investors were offered and what they purchased

‘Even where the deeds did not employ this literal

language, they did actually convey by other language “frac-

tional undivided interests” in the mineral rights. See, e. g-,

Gov. Ex. 365, R. 2215-2216.

42

was not land per se, but an interest in a specula-

tive promotion, the essence of which was the ex-

ploitation and development by others to the end

of a mutual sharing by all investors in an un-

divided interest in oil royalties. In this connec-

tion, the decision of this Court in Securities and

Exchange Commission v. C. M. Joiner Leasing

Corp., 320 U.S. 344, is apposite. In that case, cer-

tain promoters offered and sold to distant public

investors instruments purporting to be assign-

ments of leasehold interests in portions of a three-

thousand acre tract of potential Texas oil and gas

land, and they represented to investors that they

would earn a profit because of drilling operations

which were being carried on on the tract. Even

though the instruments of assignment did not, as in

the instant case, employ terminology unequivocally

bringing them within the definition of securities

in the Securities Act, this Court held that the

defendants were selling ‘‘investment contracts’”’

within that definition and stated that (320 U. S.

at 348, 349, 352-353) :

Their proposition was to sell documents

which offered the purchaser a chance, with-

out undue delay or additional cost, of shar-

ing in discovery values which might follow

a current exploration enterprise. * * *

* * * * *

It is clear that an economic interest in

this well-drilling undertaking was what

brought into being the instruments that

defendants were selling and gave to the

43

instruments most of their value and all of

their lure. The trading in these documents

had all the evils inherent in the securities

transactions which it was the aim of the

Securities Act to end.

* 7 7: * *~

Nor ean we agree with the court below

that defendants’ offerings were beyond the

scope of the Act because they offered leases

and assignments which under Texas law

conveyed interests in real estate. In ap-

plying acts of this general purpose, the

courts have not been guided by the nature

of the assets back of a particular document

or offering. The test rather is what char-

acter the instrument is given in commerce

by the terms of the offer, the plan of dis-

tribution, and the economic inducements

held out to the prospect. In the enforce-

ment of an act such as this it is not in-

appropriate that promoters’ offerings be

judged as being what they were repre-

sented to be.

See also Securities and Exchange Commission V.

Howey, decided May 27, 1946, No. 843, O. T. 1945 ;

Mansfield et al. v. United States, 155 F. 2d 952

(C. C. A. 5); United States v. Earnhardt, 153 F.

9d 472 (C. C. A. 7), certiorari denied June 3, 1946,

No. 1158, O. T. 1945.

7. The only remaining issue is the contention

of petitioner Johnson that the trial court erred

in not granting his motion for a directed ver-

dict predicated on his claim that he had been

improperly denied the right to a speedy trial pro-

44

vided by the Sixth Amendment (No. 486, Pet. 6, 16-

21). It is true that almost eighteen months elapsed

from the filing of the indictment (September 4,

1942) until commencement of the trial (February

28, 1944). However, it does not follow that this

delay abridged the right to a speedy trial, because

that right is necessarily relative and must be consid-

ered with regard to the practical administration of

justice. Beavers v. Haubert, 198 U. S. 77, 86; see

also McDonald v. Hudspeth, 113 F. 2d 984, 986

(C. C. A. 10), certiorari denied, 311 U. S. 683.

Thus considered, there was no substantial in-

fringement of Johnson’s rights under the Sixth

Amendment. The record shows that Johnson’s

arraignment was delayed until May 26, 1943, due

to his efforts to negotiate a favorable sentence in

the event he would plead guilty (R. 190-192,

201-202); that on September 28, 1942, he had

been sentenced on another charge in the Southern

District of Mississippi to three years’ impris-

onment in a federal penitentiary and was incar-

cerated during the interval between the indict-

ment and trial here, but not on account of the

instant prosecution (R. 190-192); that due to

delay in apprehending one of the defendants (R.

192) and to the crowded calendar of the district

court, the case could not be tried at an earlier

date (R. 193); and that Johnson did not claim

or show that his defense was impeded in any

way by the delay or that witnesses on his behalf,

if any, were no longer available (R. 192-193).

og

—— =

45

In the light of such cireumstances, the delay in

trying Johnson cannot be said to have been ex-

cessive or oppressive.

CONCLUSION

The decision below is correct, and the case in-

volves no conflict of decisions. It is respectfully

submitted that the petitioners for writs of certiorari

should be denied.

J. Howarp McGratu,

Solicitor General.

THERON L. CAUDLE,

Assistant Attorney General.

4 Ropert S. ERDAHL,

, SuEtpon E. BERNSTEIN,

V Attorneys.

OcToBER 1946.

4

Tables 1 and 2 below are based on an analysis

of the record to show the interrelationships of the

APPENDIX

various petitioners in the many sales of the

Plaquemines Parish land. Table 1 lists the names

of the petitioners who dealt with each investor-

witness, with supporting record references. Table

2 is a summary analysis of the references in Table

1 to show the actual interrelationships.

TABLE 1

[The order of petitioners’ names following that of each investor-witness indicates the time

sequence of dealings]

Investor Salesman Record Ref.

ee Lee (R. 233-234.)

er iia habcanacousabadéanicucs (R. 331, 334-335.)

oS 0 Rr ee (R. 340-341.)

Kahn and Baker____-___________- (R. 341-342.)

een Silverman & Kiefer_____._______| (R. 356-357.)

Silverman, Baker, Kahn & | (R. 374.)

Kiefer.

a SE yidenitaenoweueerssah (R. 396-398.)

Ret een akin nant (R. 406-407.)

Kahn & Levy_- (R. 407-412.)

Kahn & Levy_____- (R. 413-415.)

eee Ser Aa (R. 465-469.)

Levy & Kahn (R. 482-483.)

eee ESC (R. 532-534.)

eee (R. 536-537.)

Safir. ...- ; (R. 538.)

incase cccaee RES ee Teer fe

Johnson (alias Hunter) (R. 557-558.)

ees 5 (R. 563-564.)

las (R. 558, 572.)

Baker (R. 567-569.)

ree (R. 565, 570-571.)

Diaz __- = (R. 572.)

Burgin (alias Bryce) - - (R. 559.)

Sa (R. 573-574.)

Safir. (R. 574.)

BIB so occ ccnuc. Safir. (R. 631-634.)

Diaz. (R. 634-638.)

Johnson (R. 639-42.)

BOE | GAkunsne piaaees (R. 644-646.)

47

Taste 1—Continued

Investor Salesman Record Ref.

Breisacher.......----| Bird.-.------------------------- (R. 682-683.)

DB in iccuttusasenssaneacchannnd (R. 685-687.)

NC (R. 689-691.)

Silverman & Johnson (alias | (R. 604-699.)

Hunter).

Levy & Kahn..-..-.-.------------ (R. 713.)

Levy & Dias..---.-------------- (R. 713-716.)

Diaz & Overgaard.---..---------- (R. 701-705.)

eee I issn sienna scceceicsncsnses (R. 787-789.)

NE gc cunnnsacmnndesonianscenns (R. 791-792.)

Hershey......------- ee (R. 805-806:)

EO (R. 808-810.)

ea Kahn & Levy....--------------- (R. 815-818.)

ee Te rr (R. 819.)

ee oe (R. 820.)

Kahn & Levy...---------------- (R. 822-824.)

Burgin (alias “‘Denny”’)--------- (R. 821-822.)

Kebn & Lavy.....-------------- (R. 825-826.)

IE onc cciwncedcnccnssncsnenes (R. 828-829.)

eT Kebn & Levy....-------.------- (R. 848-852.)

Keto & tovy.....--.....-.----- (R. 852-853.)

ee GilwermemM...........---.-------- (R. 892-894, 897-899, 937-940.)

eee (R. 905-906, 912.)

Te (R. 911, 920-922.)

Johnson & Overgaard ----------- (R. 921.)

(R. 924-925.)

Monjure-Matthews _| Safir_--------------------------- (CR. 966-968.)

Oven... ... ..2s20cccnecce (R. 968-970.)

Johnson (alias Hunter). --------- (R. 967-971.)

Sivertaem. .... ....-....-2....+-+«- (R. 974-977.)

ee (R. 974-975, 978-979.)

a TID. c.conccncoscscustesesnnenss (R. 997-1001.)

ee (R. 1002-1004.)

Diaz, Silverman & Kiefer_.__.-- | CR. 1004-1007.)

PER... cc ccsnccnes a (R. 1058-1062.)

ae (R. 1065-1066.)

Kahn & Baker _---------------- | (R. 1066-1069.)

Geengeent.. .. ....-.22n--no= | (R. 1070.)

ae ee | (R. 1071.)

SSG ae | CR. 1072-1073.)

Northrop CS | CR. 1092-1093, 1098-1099.)

SE eee!

Burgin (alias Bryce) - - -- ---- (R. 1097-1098.)

Borges. - - - - - Kiefer cecheddas. gape (R. 1104-1106.)

Kiefer & Silverman_..._-----.--| (R. 1107.)

Silverman & Diaz_____--.-.----- | (R. 1109-1110.)

Rasmussen. . - BINS dis, occas (R. 1124-1128.)

Safir & Kahn-.------.---------- (R. 1132-1133.)

DE cincndcnkdccccecateensuss (R. 1135-1136.)

Rs ccucd kh cakas snsosndeseess (R. 1136-1138.)

cu ccupabeencnseeaesnct (R. 1140.)

eer Kahn & Manzella.._------------ (R. 1159-1161.)

. 1163-1164.)

. 1164-1165.)

A

48

TaBLeE 1—Continued

Investor

Salesman

Record Ref.

Fowler- White

Coleman

Kiefer & Silverman

Diaz & Overgaard......_...__.-.

Burgin (alias Bryce) --._--_--- a

Diaz & Baker-~-

Kiefer & Silverman... ---.--_---

5a eae nS ERE

Kiefer, Silverman & Manzella_-

(R. 1187-1195).

(R. 1220-1224.)

(R. 1234-1239, 1260.)

(R. 1239-1246, 1254, 12590, 1264

- 1290).

- 1291-1294).

- 1422-1423.)

. 1424.)

- 1426-1432.)

TABLE 2

[The figure 1 indicates that the petitioners designated were involved in the same sale or sales;

2 indicates that petitioners dealt with the same investor or investors, though not in connec-

tion with the same sales; 3 indicates that petitioners accompanied each other when dealing

with particular investors. There is no overlapping in the figures given, however, because,

in each instance of contact with an investor, only that figure which most aptly describes

the interrelationship between the two or more petitioners involved is used. Nor do the

figures reflect the number of instances in which the particular relationship existed, although

that factor is partially illustrated in Table 1.)

}

. |

Baker —t Kahn | Levy | Safir | Bird —_ Burgin] Diaz

Baker XXXXX 3] 1,23] 1,2 | eee 2 1,2 1,2.3

Silverman. 3 | xxxxx | 3 | 1 2 12] 1.23 2 1,2,3

Kahn 1,23] 128) XXXXx | L238] 1,23 2 1,2 121 1,23

Levy 1,2 1} 123] xxxxx |} 2 2 1,2 1,2 1,2

ee 2 2) 123] 2) xxxxx 2 2 1,2] 1,23

ee 1,2 | 2 | 2 2 | XXxXxx 2 2 2

Johnson ___-_- 2} 1,23 | 1,2 1 2 2 | xxxxx 2 1,2

Burgin... ___- 2 2 1,2 | 1,2 1,2 2 2 | xxxxx 2

Diaz___ 2,1 123 | Ms 123] 1,23 2 1,2 12| xxxxx

|

U. &. GOVERNMENT PRINTING OFFICE: 1946