Criminal prosecution by the United States of America against Theodore E. Smith. On motion to quash the indictment. Indictment quashed.
On motion to quash indictment for misuse of mail under section 215, in which the scheme to defraud is charged as follows:
"The said defendant, at the times hereinafter in this and all of the other counts of this indictment alleged, was an agent of the said Singer Sewing Machine Company, Incorporated, and, as such agent, the said defendant had the custody and control of property and money belonging to the said Singer Sewing Machine Company and was authorized to sell and rent said property and to collect money for and belonging to the said company, and to receive in exchange for sewing machines belonging to the said company and sold and rented by the said company and by the said defendant as agent, contracts for the payment of purchase prices and for rentals for such sewing machines to be signed by the purchasers and lessees of said property, and it was the duty of the said defendant, as agent aforesaid, to report to the said Singer Sewing Machine Company the business done by him as agent aforesaid and to account for and remit moneys collected by him for the said Singer Sewing Machine Company. Now the said defendant, being such agent and entrusted with the property and money of said Sewing Machine Company in the Norfolk division of the District of Nebraska, devised and schemed that he would defraud the said Sewing Machine Company by means of false and fraudulent pretenses and representations and convert to his own use property and money belonging to said company, and that he would continue from time to time in various amounts and values to convert such property and money to his own use and benefit, that he would not report to said company all of the sales made by him, nor account for all the money to be collected by him as such agent, that he would continue to act as agent of the said company, and that, in the execution of said scheme and artifice and as a part thereof, he would, for the purpose of avoiding detection and in order that he might from time to time on future dates further defraud the said Singer Sewing Machine Company in the manner aforesaid and for the purpose of deceiving said company, falsely report sales of sewing machines belonging to the said company, which had been entrusted to his custody and control as such agent, and that he would deliver and cause to be delivered to the said Singer Sewing Machine Company certain false, fraudulent and forged instruments purporting to be contracts and agreements of purchasers and lessees of such sewing machines and which would purport to contain promises of such purchasers and lessees to pay for said sewing machines at future dates in installments, and which instruments would purport to recite the postoffice addresses of the apparent makers of said promises, and that he would cause said Singer Sewing Machine Company to accept said false, fraudulent and forged instruments as though they were genuine, and that he would himself keep and would not account for the money he would in fact receive for said sewing machines, and to avoid detection and to enable said defendant to further defraud said Singer Sewing Machine Company the said defendant, as a part of said scheme and artifice, planned that he would intercept and cause to be delivered to himself letters and papers relating to such pretended sales which would be sent by the said Singer Sewing Machine Company mailed and addressed to the names represented to have signed said false, fraudulent and forged contracts.
"And the grand jurors aforesaid, upon their oaths aforesaid, do further present that the said pretenses and representations as aforesaid to be made to the said Singer Sewing Machine Company, as said defendant, when so devising said scheme and artifice, well knew, and at the times and places of committing the several offenses in this indictment hereinafter charged, would well know, were and would be false and fraudulent pretenses and representations in this, that the said reports of sales so to be made by him to the said Singer Sewing Machine Company would be and were false in that the sales were not made as reported and that the defendant, in fact, would have and did sell machines for cash which he would not report, and that the postoffice addresses to be given of persons represented to have purchased sewing machines would be and were false and fictitious, and that the said instruments purporting to be promises of purchasers to pay for machines represented to have been sold to them were and would be false, fraudulent and forged and would not truly represent an actual transaction had by the said defendant as agent for said Singer Sewing Machine Company."
For the purpose of executing the scheme so charged, the defendant sent letters, which are set out and are in the form of reports of sales and collections.
WOODROUGH, District Judge (after stating the facts as above).
The defendant was the Singer Sewing Machine agent at the Norfolk, Neb., branch house. It is claimed that in the course of his employment he collected money on machines sold in the territory and embezzled the proceeds of various of the sales; and to cover up the embezzlements, he reported sales to fictitious persons, and mailed in sales contracts forged with the fictitious names, and also intercepted letters mailed by the company to such fictitious persons. It was stated in argument that he had been accused in the state court and acquitted, and this is the second indictment against him in the federal court in regard to the same matters. The first indictment here was quashed and he challenges the jurisdiction of this court to put him in jeopardy on this one. What the prosecutor has tried to do in this indictment is to charge the criminal acts of the defendant as a scheme to defraud and to hold him under section 215 of the federal Criminal Code for mail fraud. To that end the pleader charges that the defendant devised a scheme to defraud his company by means of false and fraudulent pretenses and representations, and mailed certain letters for the purpose of executing the scheme.
The hundreds of decisions under Cr. Code § 215 (18 USCA § 338) leave no doubt that by its provisions the jurisdiction of the federal government over crimes has been vastly extended. The language of the section is broad and comprehensive, and the purpose is constitutional. Still it does not sweep away all state power to effectually and finally acquit an accused person of at least some of the crimes on the calendar. The Congress has not said that every one who attempts to or does commit any crime and uses the mails to further or conceal it shall be amenable to the federal jurisdiction. The phrase "scheme to defraud and for obtaining money" has limitations, notwithstanding that some element of deceit and fraud does enter into either the perpetration or the attempt to escape from the consequences of almost any crime that can be imagined. When Cain slew his brother Abel, he answered inquiry with equivocation which smacks of fraud. Yet I would be surprised to hear it argued that his transgression was a scheme to defraud.
So, when this indictment is analyzed, it sticks out that the defendant's claimed offense is embezzlement and using the mails to cover it up. His offense is therefore cognizable by the state and not the federal government, and, if it be true that he was acquitted, there ought to be an end of it.
I am not unmindful of the allegations to the effect that the defendant was mailing false reports and statements to his employer in order to hold on to his job, so that more of his employer's property or money would come into his hands and so he would be enabled to and would embezzle further from time to time and still continue to hide his guilt. These must be disregarded as mere subtleties insufficient to turn acts of embezzlement and concealment thereof into a scheme to defraud. Of course an agent who has embezzled fears both the justice of the state and the anger of his employer. In a certain sense he hides his crime to hold his job. Equally, of course, an embezzlement temporarily concealed by falsehoods leads directly to others if for nothing else than to repay enough to keep the earlier ones from being discovered. This indictment fairly implies that such were the happenings here and nothing else. Possibly, then, as to some particular sewing machines he caused to be sent to him the defendant may have schemed to defraud, but the effort to identify the total of his several crimes as a single scheme is too specious to stand up.
I am satisfied that the indictment is void on two technical grounds. Considered as a charge of devising a scheme to defraud, it is too vague and uncertain to inform the defendant of the nature and cause of the accusation. It is obvious that the agent did not intend to embezzle all the sewing machines sent to the agency or to forge all the sales and rental contracts or to falsify all his reports. His criminal conduct concerned only certain particular ones of the items of business with which he had to do. Yet there is no way of telling from the indictment what transactions are going to be brought forward on the trial. He was the agent for a number of years and had many dealings. This form of charge fails to apprise him what transactions are to be singled out on the trial and made the basis of the prosecution. Despite all circumlocution, the real intendment is that from time to time, while he was working for the company as its agent, the defendant embezzled one or another item of property or collection and then tried to hide it. He ought not to be put upon his trial therefore except upon a charge that clearly identifies the transactions intended to be relied on.
The second technical ground is that the defendant did not use the mails to obtain the goods or moneys of his employer, but solely to hide the fact that he had converted them. There is no intimation that he had gotten the agency through any fraud. The burden is that, being the agent and having obtained the goods and moneys in that capacity, he embezzled them, and, having embezzled, made false representations to hide it.
But the real vice of the indictment lies deeper. It is really a subterfuge to avoid the limitations set by the statute on federal jurisdiction and to encroach upon and override the lawful authority of the state. As the great array of mail fraud prosecutions that have been sustained in the federal courts are reviewed, it will be found in every case that there was a definite scheme and letters to execute a scheme, clearly distinguishable from a crime committed and letters to hide and cover it up. It is a distinction of very far-reaching importance, and ought to be scrupulously regarded by prosecutors. The courts must scrutinize carefully the substance of the charge as well as the mere form in which it is beclouded, and, where it appears as in this case that the jurisdiction is in the state and not the federal government, the accused should not again be put in jeopardy.
The indictment should be quashed.