Ader v. United States

¶18. Post office @=>48(4)&emdash;Indictment held sufficient although naming only eiass of persons intended to be defrauded. An indictment

¶2for using the mails in pursuance of a scheme to de- fraud, in violation of Criminal Code, § 215 (Comp. St. § 10385), was not defective, as failing to name the persons intended to be defrauded, where it was alleged a class of persons was intended to be defrauded. 2. Post

¶3office @=>35&emdash;Use of the mails need not he for communicating with per» son to be injured. Under Criminal Code, §

¶4215 (Comp. St. § 10385), it is an offense if the mailing is in execution of, or by way of, an attempt to execute the fraudu- lent scheme, and it is not necessary that the use of the mails be for com- municating with a person intended to be injured. 3. Post office @=>48(4)&emdash;IntlietmBEit

¶5held to sufficiently describe scheme to defraud. In a prosecution under Criminal Code,

¶6§ 215 (Comp. St. § 10385), for using the mails in pursuance of a scheme to defraud, the indictment held to sufficiently describe tbe fraudulent scheme, the selling of stock in a practically nonexistent meat packing business. 4. Indictment and information @=>129(1)&emdash;Combining charges

¶7of violation of statute with conspiracy counts held proper. In a prosecution under Criminal Code, § 215

¶8(Comp. St. § 10385), for using the mails in pursuance of a scheme to defraud, the combining in the indictment of charges of violation of section 215 with conspiracy counts held proper practice. 5. Post office @=n35&emdash;Mailing by one defendant of

¶9letter is act of ail defendants. In a prosecution under Criminal Code, § 215 (Comp. St.

¶10§ 10385), for using the mails in pursuance of a scheme to defraud, held, that the act of one defendant in mailing a letter in pursuance of the scheme to defraud was the act of all defendants, where all connected with the scheme must have known that the mails would be used in its prosecution. ®s»For other cases see same topic & KBT-NUMBER in all

¶11Key-Numbered Digests'& Indexes •Certiorari denied 260 U. S. &emdash;, 43 Sup. Ct. 247,

¶12*146. Criminal law <@=>1209 — Conviction under conspiracy counts and mail fraud counts held not to involve double penalty.

¶13In prosecution for fraudulent use of the mails, with conspiracy counts, held, that conviction under the substantive counts and also under conspiracy counts did not involve a double penalty.

¶147. Post office <@=>49 — Evidence held to sustain conviction for using mails to defraud.

¶15In a prosecution under Criminal Code, § 215 (Comp. St. § 10385), for using the mails in pursuance of a scheme to defraud, evidence ox the fraudulent character of the scheme, the selling of stock in a practically nonexistent meat packing business, held sufficient to sustain conviction, although it appeared that a site was actually purchased and a plant was in process of construction.

¶168. Conspiracy <@=>48 — Evidence held sufficient to go to jury.

¶17In prosecution for conspiracy under Criminal Code, § 37 (Comp. St. § 10201), to use the mails to carry out a scheme to defraud, evidence as to the conspiracy held sufficient to go to the jury.

¶189. Post office <@=>49 — Evidence held to show participation by defendant in scheme to defraud by use of mails.

¶19In prosecution for using the mails to carry out a scheme to defraud, evidence held to show that one of the defendants did not act in a mere clerical capacity, but, with guilty knowledge of the scheme, associated herself with the other defendants in forwarding its object.

¶2010. Post office <@=>35 — Defendants liable for fraudulent acts of agent of corporation in use of mails which they centro!.

¶21As respects liability for using the mails to carry out $ scheme to defraud, the selling of stock in a practically nonexistent meat packing business, tbe fact that stock salesmen were employed by the corporation rather than defendants as individuals held immaterial, in view, of evidence that the corporation was being used by the defendants in the execution of the alleged scheme.

¶22II. Criminal law <@=>622(1)— Granting separate trial held discretionary.

¶23In a prosecution for use of the mails to carry out a fraudulent scheme, held, that the trial court’s refusal to grant defendants a separate trial was a matter within its sound discretion.

¶2412. Criminal law <@=>854(2) — Permitting separation of jury held within trial court’s discretion.

¶25In a prosecution for using the mails to carry out a fraudulent scheme, held, that the separation of the jury during the trial was discretionary; care having been taken to properly caution tbe jury against permitting any outside influences.

¶2613. Crimina! law <@=>1044 — Defendants cannot complain that one of the jurors was approached when they did not ask leave to withdraw a juror on that ground.

¶27In a prosecution for using the mails to carry out a fraudulent scheme, where one of the defendants approached one of the jurors and said that he should never have been tried with, another defendant, and that he should never have been indicted, tbe matter could not be complained of by such other defendant, where his counsel made no motion to withdraw a juror on such ground.

¶2814. Criminal law <@=>II56(1) — Denial of new triál in exercise of discretion not reviewabie.

¶29Where the trial court considered affidavits offered with motion for new trial and exercised a discretion by denying the motion, his action was not reviewabie.

¶3015. Criminal law <@=>1038(i), 1056(1) — Instructions not objected or excepted to below not reviewabie.

¶31Where no objection or exception was made to the instructions in the court below, they were not reviewabie.

¶32^=»For other cases see same topic & KEY-NUMBER in all Key-Numbered Digests & Indexes

¶33*15In Error to'the District Court of the United States for the Eastern Division of the Northern District of Illinois.

¶34Edward J. Ader and Goldie A. Skolnik, with Abraham J. Messing, since deceased, were convicted of an offense, and bring error.

¶35Affirmed.

¶36Edward J. Ader, Abraham J. Messing, and Goldie A. Skolnik, with others, were convicted under an indictment charging conspiracy to violate section 215 under section 37 of the Criminal Code (Comp. St § 10201), and also violation of section 215 (section 103S5), and bring error.

¶37The indictment of 15 counts was returned against plaintiffs in error and five others, namely, Eli Pfaelzer, Edward H. Troost, Benjamin B. Turner, Louis A. Davis, and John M. Kantor. Defendants Pfaelzer and Davis pleaded guilty. As to the others demurrers were .overruled, motions to quash denied, and a long trial ensued, all being found guilty on all counts. Motions for a new trial and in arrest being denied, judgments were entered and the defendants sentenced. Ader was sentenced to imprisonment for five years on each of the counts 1 to 13, inclusive, of the indictment such sentence to run concurrently, and for two years on each of counts 14 and 15, said sentence to run concurrently; sentence on counts 14 and 15 to begin to run at tbe expiration of the sentence on counts 1 to 14, and’ that he forfeit -and pay to the United States a fine in the sum of !?10,OCO. Miss Skolnik was sentenced to imprisonment in the county jail of Cook county, 111., for six months, and that she forfeit and pay a fine of ?1,000. Plaintiffs in error, Ader, Messing, and Skolnik, each prosecuted a writ of error, hut by stipulation transcript, briefs, and arguments were presented and beard together. After submission of the cause here plaintiff in error Messing died, and, that event being suggested on the record, all proceedings in the cause with reference to him were ordered abated.

¶38Counts 1 to 13, inclusive, of the indictment each charged a violation by all defendants of section 215 of tbe Criminal Code, while counts 14 and 15 charged a conspiracy under section 37 of said Code to violate said section 215. All counts succeeding No. 1 by reference incorporated a part or parts of the latter count, which, in brief, charged that the defendants aft Chicago on and before February X, 1918, devised a scheme for obtaining money and property from a certain class of persons by means of false and fraudulent pretenses and representations. The class of persons were described as those whom the defendants should “by means hereinafter described” induce to give, send, and pay their money and property to the defendants under the name of Consumers’ Packing Company, then and at all times mentioned a corporation under the management and control of the defendants, for subscribing for and purchasing shares of stock in said corporation. The means described were charged to be representations and pretenses which were to be made in the name of the corporation to the persons above referred to by tbe defendants, either directly or through agents of the corporation, by means of oral and written statements, printed advertisements, prospectuses, etc., to the effect that the corporation was engaged in good faith in the business, commonly called the packing business, of purchasing live animals in stockyards markets where tbe same are sold, slaughtering such animals, and seUing the meat resulting from such slaughter; that said business of said corporation had been, was, and would be a successful and paying business; that said persons would be greatly benefited financially by subscribing for and purchasing said shares of said stock, in that large dividends would he paid to them, and the value of the stock would he greatly enhanced over the price at which defendants were selling; that large dividends had in fact been paid by said corporation which had theretofore acquired a packing business, to wit, the business of Eli Pfaelzer & Sons, who for 30 years had been doing a successful packing business in the Union Stockyards at'Chicago aforesaid, it being the intent of the defendants by said means to cause said persons to understand and believe that the said corporation had been, was, and would continue to be engaged in a bona fide and successful packing business, and that the exchanging of their money and property for shares of said stock in said corporation would for that reason he a paying and profitable investment. The *16indictment further charged that, when devising the scheme, defendants well knew that said pretenses and representations were not and would not be true, but were and would be false and fraudulent, in that the corporation had not been, was not, and would not be engaged in good faith in the packing business, and that persons giving, sending, and paying their money and property to the defendants would not he benefited, financially or otherwise, by subscribing for or purchasing shares of stock, either by the payment of dividends thereon or by the enhancement of the value of the stock, and in that no dividends whatever had been paid upon the shares of stock out of its earnings or otherwise than out of the money and property received from the persons whom the scheme was designed to injure in exchange for the shares of stock, and that the corporation had not acquired any packing business at all from Eli Pfaelzer & Sons, and further charged that at all the times and at the place mentioned the defendants well knew and would well know that the Consumers’ Packing Company had not been, was not, and would not be engaged in good faith in a packing business owned or acquired by it or in any successful or paying business whatever, except the business carried on by the defendants in the name of the corporation of disposing of stock in the corporation as above indicated, which was and would be a losing and unprofitable investment for such subscribers. The first count further-charged that, having devised the scheme and artifice, and for the purpose of executing the same, the defendants placed and caused to be placed in the post office at Chicago for delivery by mail a letter addressed and to be carried by mail to one Fred Frazier, who is alleged to be one of the persons of the class of persons referred to in the indictment. Counts 2 to 13, both inclusive, contain appropriate references to the scheme and artifice for obtaining money and property by means of false and fraudulent pretenses and representations described in the first count, and each count charged the mailing of a letter in execution of such scheme. All except counts 5, 6, 7, and 9 charged the person to whom the letter mailed was addressed to be one of the class of persons whom it was intended by the scheme to injure as alleged in the first count. This allegation is omitted in the four counts last enumerated, each of which discloses that the letters were not intended for such a person, the letter set out in count No. 5 being to a Mr. Fomund, then acting as stock sales manager for the Consumers’ Packing Company in New York City, urging him to greater efforts in stock salesmanship. The letters set out in counts 6 and 7 were both addressed and charged to have been mailed to Mr. Emerson, secretary of state of the state of Illinois, and related to the continuance of the packing company’s license to sell its stock under the Illinois Blue Sky Law, so called while the letter set out in the ninth count was addressed to Mr. Terry at Viola, 111., soliciting him to become a local representative and stock salesman of the packing company in his community.

¶39The fourteenth count charged a conspiracy on the part of all of the defendants to commit the several offenses charged in the first 13 counts of the indictment “by the means and in the manner set forth in the first count”; the overt acts charged being the several acts of placing in the post office the letters mentioned in the preceding 13 counts. The fifteenth count charged the defendants, with having conspired among themselves and divers other persons to the grand jurors unknown to offend against section 215 of the Criminal Code, and that the defendants so conspired in devising a scheme and artifice for obtaining money and property by means of false and fraudulent pretenses and representations described in the first count of the indictment, and that the defendants among themselves and with other persons conspired, for the purpose of executing such scheme and artifice, to place, and caused to be placed, various letters, writings, circulars, and pamphlets in the post office at Chicago. For overt acts this count presents the mailing of the letters and other writings mentioned in the first 13 counts of the indictment, and also several additional letters not mentioned in previous counts of the indictment, as well as acts of some of the defendants in presenting resolutions to meetings of the board of directors of the packing company, the signatures to minutes of various meetings wherein dividends were authorized to be paid, the signing by the defendant Pfaelzer of minutes of a *17directors’ meeting, authorizing a credit to Pfaelzer of some $45,000 for labor, energy, effort, and skill expected to he furnished and exercised by Pfaelzer on behalf of the corporation, the ordering of printing by other defendants, the insertion of advertisements in newspapers, there being some 10 overt acts alleged in addition to those severally set out in the first 13 counts of the indictment.

¶40The facts developed by the testimony are too numerous and complex to warrant an attempt to outline them in detail, but their purport may be briefly sketched as follows: The Consumers’ Packing Company was organized as a corporation, under the laws of the state of South Dakota in the_ month of February, 1918, and continued in business until the month of April,_ 1919. when its affairs were wound up in bankruptcy proceedings in the District Court for the Northern District of Illinois, Eastern Division. In December, 1917, one Eli Pfaelzer was engaged in business in the stockyards in Chicago and was associated with his two sons, Monroe and Ellard. Their business Rvas that of meat brokers or jobbers, and consisted of buying meat products from packing plants, and particularly that operated by Guggenheim Bros., and selling the same in and about the city of Chicago. The business was conducted under the name of Monroe Pfaelzer, and its physical assets consisted of a desk and telephone located in the Guggenheim plant, together with a few automobile trucks in which the meats were delivered to customers. The nature of this business, together with its physical assets, remained substantially unchanged throughout the period to which this recital relates. Eli Pfaelzer had been employed at the Chicago stockyards for many years and had conducted the business above referred to with his sons for approximately three years prior to February, 1918. Douis Pfaelzer & Sons and Bernhard Pfaelzer & Sons were two well-known firms engaged in business in the stockyards. In December, 1917, plaintiff in error Ader seems to have conceived the idea that a packing house proposition in Chicago was a good one, and suggested his idea to a stock salesman by the name of Samuel C. Kops, and at the time also suggested that Eli Pfaelzer would fit in well as a practical packer, and Kops was directed by Ader to see whether he could organize a number' of stock salesmen to successfully dispose of the stock. At Ader’s suggestion, Mr. Messing applied for and secured a charter of incorporation from the state of South Dakota, the authorized capital stock of the corporation being placed at $1,000,000. The incorporators were Samuel C. Kops and tiro of his associatt. stoek salesmen, Jacob Wallenstein and Bernhard Eosenow. The organization of the corporation was completed in February, 1918, and officered as follows: Eli Pfaelzer, president and general manager; Bernhard Rosenow, vice president; A. J. Messing, secretary and treasurer. Besides these men, there were on the board of directors four others, two of whom were placed upon the board without being first apprised of that fact, together with the defendant Benjamin E. Turner and plaintiff in error Edward J. Ader. None of the incorporators invested any money in the organization. Ader and Messing each received 500 shares of stock, for which they gave nonnegotiable notes bearing no interest. Immediately after its organization an extensive campaign to sell the stock of the corporation was inaugurated and continued throughout its business life. The company had its main office in Chicago, and later on opened offices in New York City, Boston, Pittsburgh, and Cleveland for the purpose of selling its stock, having more than 100 salesmen in Chicago and vicinity, and the stock was sold through the efforts of these salesmen and by means of prospectuses distributed by them and through the mails and by means of correspondence carried on by the use of mails. While the packing company secured an option from Eli Pfaelzer to purchase all the latter’s stock, implements and utensils, automobiles, trucks, etc., dated February 25,1918, by the terms of which the packing company might elect to purchase the property mentioned at a valuation to be appraised, ■ but not to exceed $50,000, and there is evidence in the record by way of a purported bill of sale dated March 16, 1918, from Eli Pfaelzer & Sons to the packing company covering the property of the former, it is undisputed tliat in fact the business of Eli Pfaelzer & Sons, so far as it existed or the business of Monroe Pfaelzer, was continued in its operation by the Pfaelzers without *18any change until the month of November, 1918, and that at no time did the Consumers’ Packing Company receive a dollar from the operation of the Pfaelzer business. In the month of November, 1918, the Monroe Pfaelzer bank account was garnisheed by same third party, necessitating a change in their methods of doing business, and for a time thereafter the bills of the Pfaelzer business were paid by the Consumer^ Packing Company until December 17th, at which time the packing company opened an account with the Guggenheim concern and bought some livers, tails, beef tenders, brains, and tripe to the amount of $452.12 during the period from December 17, 1918, to February 4, 1919, when the packing company discontinued-that line of activity. It will be noted that the packing company thus suspended its brief incursion into the meat business prior to the institution of the bankruptcy proceedings,' which were commenced February 15, 1919. It is the government’s contention that the bill of sale above referred to was never so executed and delivered as to be effective, and prominent among the facts upon which the contention is based is the provision of the option for the making of an appraisal, a purported written appraisal signed by one witness who testified he knew nothing about it, the fact that the consideration claimed to have been paid for the transfer of the Pfaelzer property, to wit, 5,000 shares of stock in the packing company, was turned back to the corporation by Pfaelzer to be used in the payment of increased commissions to stock salesmen as hereinafter indicated, together with the statement contained in one of the prospectuses ordered printed by plaintiff in error Ader some time in August, 1918, in which it is stated that the Consumers’ Packing Company * • … has an option on the business of Eli Pfaelzer & Sons. At all events, except for the short period from December 17, 1918, to February 4, 1919, the Consumers’ Packing Company was not itself engaged in any meat business, and during that time its operations were carried on at a loss. In fact, its activities were confined to the disposal of its stock and the acquiring of a site and the construction of a packing plant thereon. It appears that at the time when plaintiff in error Ader and the defendant Pfaelzer first opened negotiations with reference to the matter Pfaelzer had a verbal arrangement or option with Guggenheim Bros, for the purchase of certain lands in the stockyards for $150,000, and later, after it was determined to proceed with the Consumers’ Packing Company venture, Pfaelzer secured a written option on the property which was turned over to the packing company, and in the spring of 1918 negotiations were had between officers of the packing company and Guggenheim Bros., resulting in a contract for the purchase of the lands for $140,000, and during the period under consideration here all but $20,000 of this purchase price was actually paid. In the spring of 1918 contracts were let for the building of a modern packing house upon the lands obtained, and on March 1, 1919, the sum of $171,090.61 had been expended in the construction of the building. It was in October, 1918, that the first operations by way of dismantling old buildings upon the site were commenced. So far as appears from the evidence the construction of the new building went steadily forward until the corporation was thrown into bankruptcy. Probably the activities of the Consumers’Packing Company as a corporation are summarized with • sufficient accuracy by stating that they were confined to disposing of its capital stock, the acquisition of a site and partial construction of a packing house, the furnishing of funds for Eli Pfaelzer & Sons to continue the business during the month of November, 1918, and the carrying on of the small meat jobbing business from December 17,1918, to February 4,1919. Its principal business, however, is clearly shown by the evidence -to have been the marketing of its capital stock. This was done in the main through organizations which denominated themselves fiscal agents. The first of these fiscal agents was a partnership which went under the name of S. O. Kbps & Co., which was organized very shortly after the organization of the Consumers’ Packing Company and upon the suggestion of plaintiff in error Ader. The partners were Ader, Messing, S. C. Kops, A. E. Kops, Jacob Wallenstein, and Bernhard Rose-now. The four last named were all associated together as stock salesmen, and Rosenow was vice president and director of the Consumers’ Pack*19ing Company. A contract was entered into between S. O. Kops & Co. and the Consumers’ Packing Company whereby the former were to sell the capital stock of the latter an,d receive 25 per cent, on the par value of the stock sold, plus a $2.50 bonus above par for their services and expenditures in selling stock. It became known that the Illinois secretary of state objected to so high a commission, and another contract was executed between the two concerns whereby a smaller percentage of commission was apparently agreed upon, and the latter contract was submitted to the secretary of state, but as between the parties thereto the original contract was retained as the basis of settlement. Plaintiff in error Ader and Messing shared equally with the other partners in Kops & Co. in the earnings of the partnership. Kops & Co., however, was short lived, and there followed a short period in which the corporation sold the stock direct, defendants Kantor and Davis acting as sales managers upon substantially the same basis of compensation, and later other fiscal agencies were organized known respectively as the J. H. Mitchell Company and the L. A. Davis Company, in all of which, however, plaintiff in error Ader was interested and received a share in the commission. In fact, during the sales managerships of Kantor and Davis, Ader demanded and received a share of the commissions. Plaintiff in error Skolnik was also an officer of the Mitchell Company, or at least acted as such, as will he more fully stated later on. Plaintiff in error Ader was active in opening the branch offices above mentioned, in assisting in the securing of salesmen, in distributing prospectuses and advertisements to the salesmen, and to the New York papers, in which he was assisted by plaintiff in error Skolnik. At the main office in Chicago the fiscal agencies, so called, occupied the same suite of offices with the Consumers’ Packing Company. The state authorities of Ohio limited the sale price of the stock to $10 per share, and, as already indicated, the secretary of state of Illinois, in whose care was the issuance of licenses for the sale of such securities, limited the commission to be paid by the packing company to 20 per cent, of the par value of the stock, and considerable evidence was developed showing the methods by which the fiscal agencies and the corporation circumvented such limitations. The act of Eli Pfaelzer in turning back to the corporation 5,000 shares of the stock issued to him (ostensibly in payment for his business) for the purpose of raising extra funds with which to pay the fiscal agents, so called, has already been referred to. Giber blocks of promotion stock were similarly handled. Early in 1819 plaintiff in error Ader caused a check to be signed for $4,000 in favor of his brother for legal services ostensibly, but the check was in fact issued with a view to using the proceeds in the payment of excessive commissions. Tire officers of the Consumers’ Packing Company, and particularly plaintiff in error Ader, took a prominent part in the preparation of the prospectuses, advertisements in the newspapers, and in instructing and advising with the stock salesmen in the employ of the corporation or the fiscal agencies, and in carrying on correspondence through the mails concerning the sale of the stock.

¶41From the outset these prospectuses and advertisements, though worded with considerable care, clearly asserted that the Consumers’ Packing Company had acquired control of a going packing business theretofore owned and successfully operatéd by Eli Pfaelzer & Sons. Early in the campaign it was asserted that the last-named firm had been successfully established in the stockyards at Chicago for more than 30 years, but upon pressure brought by the Illinois secretary .of state this was corrected to assert Eli Pfaelzer’s success as a packer for a period of 30 years and the success of the firm of Pfaelzer & Sons for many years. In these advertisements the idea was fostered that the Consumers’ Packing Company was operating a packing plant already existing which only needed to be enlarged; that the gross business theretofore conducted by Eli Pfaelzer had been built up by him to an amount annually in excess of $2,-000,000; that the business being conducted by the Consumers’ Packing Company through Eli Pfaelzer & Sons consisted of slaughtering animals and the dressing of meats, at times the representation being that such business was conducted at the plant of Eli Pfaelzer & Sons, and at other times that such slaughtering was being conducted at the packing plant of Guggenheim Bros., who received the offal for their services. The gist of the repre*20sentations which the evidence shows was systematically insisted upon was that the Eli Pfaelzer & Sons business, control of which had been acquired by the Consumers’ Packing Company, was a bona fide, packing business consisting of the buying of cattle, slaughtering the same, dressing and disposing of the meat products in a plant for years successfully operated, but upon a small scale, the purpose of the Consumer’s Packing Company being to enlarge and extend an ' already existing and profitable business. Prior to July 1, 1918, the advertisements and prospectuses and sales talks of the salesmen laid stress upon the earnings of the large packing companies located at the stockyards in Chicago as indicating what properly might be expected in the way of earnings by the Consumers’ Packing Company, when it had extended and developed the existing packing business of Eli Pfaelzer & Sons, but shortly before July 1st the representations took the form of statements as to the amount of killing that was being done by the Consumers’ Packing Company and the profit that had already been made in the operation of the business, and that a dividend on the basis of 16 per cent, annually would be paid July 1st, and in July, 1918, a dividend of 4 per cent, was declared and paid to those stockholders who had fully paid their stock subscriptions. These dividends, however, were paid out of the moneys received in payment for stock, and not out of any earnings of the corporation. In November, 1918, a similar dividend of like amount was declared and paid. After the declaration of the first dividend the salesmen were provided with canceled dividend checks with which to impress prospective buyers, and the fact that dividends were only paid to those stock purchasers who had paid in full for 'their purchases was also used to incite those who had subscribed for the stock to make their payments promptly. The representation that the business then operated by the Consumers’ Packing Company was paying dividends equal to 16 per cent, per annum was used effectively as a basis of the claim that the business would be extended to a gross business of §25,000,000 annually, yielding enormous profits to the fortunate investors. To those more cautious prospects, who desired to investigate personally before investing, the plant of Guggenheim Bros, was shown, and some were given to understand that the cattle of Eli Pfaelzer were being slaughtered at the Guggenheim plant on behalf of the Consumers’ Packing Company for a charge by way of the retention of the offal as already indicated, while others were given to understand that the Guggenheim Bros, plant was the Pfaelzer plant. On some occasions halves of beef stamped with the letter P were referred to in such manner as to lead the prospect to believe that the P stood for Pfaelzer and meant that the meat belonged to Eli Pfaelzer & Sons, while in fact it had no such meaning, but, on the contrary was to be read with another letter appearing upon the corresponding half of beef and indicated ownership by an entirely different concern.

¶42While the company was put to considerable expense in connection with the sale of its stock by way of securing approval of its issue on the part of the •Capital Issues Committee of the federal government, and securing licenses to sell in the various states from the state authorities having charge of such matters, its main expenditures seem to have been by way of commissions to the various fiscal agents, so called. Of the sums so received by them, a substantial amount is shown by the evidence to have finally been received into the private bank accounts of plaintiff in error Ader and a smaller amount received by plaintiff in error Skolnik. The net result of the operations of the packing company from the month of February, 1918, until March 1, 1919, was that the company had net tangible assets valued at §353,973.05, while the cash receipts on sales of the capital stock totalled on said day §807,101.62, leaving upwards of §453,000 expended substantially in the sale of its capital stock, a loss to Eli Pfaelzer of §27,000 and the payment of’ §13,206.70 by way of the dividends above referred to.

¶43It is not deemed necessary to outline in detail the part which plaintiff in error Ader played in the program outlined above. The idea of organizing the corporation was conceived by him, and he and Kops discussed the necessity of having a going business as a nucleus for the Consumers’ Packing Company in order that the stock might readily be sold, and it was at his suggestion that the corporation was organized and the initial stock selling force gathered.' *21The evidence shows clearly that. Ader was the presiding genius of the entire enterprise, and it was he who took pains immediately upon a director being given that office to obtain the latter’s undated resignation in order that, as was testified by one witness, Ader might “pull it at any time.” There is some testimony tending to indicate that Pfaelzer deceived plaintiff in error Ader into thinking that the Pfaelzer business was a packing business and a going concern earning substantial profits, but the evidence also shows that Ader and Pfaelzer had been acquainted for some time previous to the organization of the Consumers’ Packing Company, and the close supervision which Ader had over all matters of the corporation make it hardly credible that he did not know fully what the Pfaelzer business in fact was. He on various occasions addressed the stock salesmen, formulated sales talks for them, prepared and made the suggestions with regard to the prospectuses, suggested the formation of the various so-called fiscal agencies, shared in their commissions, and during the period when Kantor and Davis were acting as sales managers selling the stock of the company direct to the subscribers insisted upon sharing in their compensation. There is evidence tending to show the payment of money direct from the Consumers’ Packing Company treasury to Ader’s private account or to that of the Abbott Investment Company, a mercantile or collection agency owned by him, without return of any kind, and there is ample evidence indicating that a substantial part of the funds paid to the various fiscal agencies ultimately came into the possession of Ader. He oversaw the opening of the New York office and informed the salesmen employed by that office that the corporation was paying dividends of 16 per cent, per year, 4 per cent.' quarterly, and he arranged for advertisements in various publications containing the representations or statements of fact in substance as alleged by the government. Hte took part in the securing of permission from various state authorities to sell stock of the corporation in those states. When it transpired that the. secretary of state of Illinois desired an audit of the books of the company in order to determine whether to permit the continuance of the sale of the.company’s stock in Illinois, and it became important that accounts should be furnished such auditors showing the result of the operation of the Pfaelzer business from March, 1918, to the time of the audit in December, 1918, the testimony indicates that Ader was cognizant of, and a party to, the manufacture of stockyard accounts and planned to have plaintiff in error Skolnik so copy the statement of accounts compiled by the witness Theobald so that such accounts would appear as though made fromi time to time in the usual course of business. It is in evidence that in January, 1919, after it had been determined that the January, 1919, quarterly dividend would not be paid, and when a subscriber for stock came into the offices of the company with $1,000 to complete the payment of his stock and refused to pay the money over unless he was assured that the dividend for January would be paid, Ader directed that he should be so assured, and the evidence is replete with letters signed by Ader and received by the addressees in the usual course of the mails relating to the sale of stock, the payment for same, and the remittance of dividends. In April plaintiff in error Ader became the secretary and treasurer of the company, and remained such until his resignation after proceedings in bankruptcy had been commenced.

¶44Plaintiff in error Skolnik had been for some time prior to the organization of the Consumers’ Packing Company a stenographer and confidential clerk of plaintiff in error Ader, and the evidence tends to show that beginning in April, 1918, she was active in the affairs of the Consumers’ Packing Company; that she corresponded with various subscribers for stock in the corporation and sent out letters of about the same tenor as were usually Sent out from the office of the company upon similar subjects and on occasion she signed letters as assistant secretary and treasurer of the company. She delivered the prospectuses complained of to the salesmen for the company, and had such insight into, the accounts of the company that one witness, an accountant, testified that he sought information from her about items in the accounts which he did not understand. It appears that she was secretary of the J. H. Mitchell Company, having and exercising, as such, authority to withdraw funds of that concern from the bank. It appears that she withdrew such funds in favor of both plaintiff in error Ader and Mr. Messing; ■ that she *22had signed checks of the Mitchell Company,for various amounts in favor of Ader and Messing, respectively during the period from May to July, 1918, and yet, in December, 1918, denied knowledge of who the J. H. Mitchell Company were, as testified by Dehler, an auditor engaged in making an audit of the Consumers’ Packing Company’s books. On occasion she signed checks in favor of the Mitchell Company on the bank account of the Consumers’ Packing Company, evidently with authority. Although denied by her, as is in fact much of what has been related with regard to her, the defendant L. A. Davis testified that in February, 1919, he asked Skolnik to obtain some canceled checks from the bank, and when the witness received them from Skolnik a number of them were missing, among which were some payable to Skolnik, and one of considerable amount to Ader, and that when asked' what had become of these missing checks she said: “A little bird must have destroyed them.” Again, it is in evidence that she sold a small amount of stock in the Consumers’ Packing Company, making about the usual representations with reference to dividends, and received the usual commission.

¶45It was plaintiff in error Skolnik to whom was assigned, and who performed, the duty of keeping track of sales from the 5,000 shares of stock which had been issued to and then returned by Eli Pfaelzer.

¶46Jacob G. Grossberg, of Chicago, Ill., and Wallace Streeter, of Washington, D. C. (Jas. Hamilton Rewis and Edward Maher, both of Chicago, Ill., of counsel), for plaintiffs in error.

¶47Chas. F. Clyne, U. S. Atty., and Edwin L. Weisl, Asst. U. S. Atty., all of Chicago, Ill., for the United States.

¶48Before BAKER and ALSCHULER, Circuit judges, and RUSE, District Judge.