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victims have been beguiled into it, does the fraud begin to operate. Up to that point the schemers usually try to leave themselves in a position where they can withdraw from the enterprise or abandon their illegitimate purpose, should circumstances make such a change of procedure advisable.

More likely than not, there is no actual plot at the outset, and no plotting. The plan which culminates as a far-reaching fraud may be hatched in a single mind, with others joining at its bidding in the fashioning of details of the design, content in the thought that ultimately they will in some way, not expressed, profit. Or, if there are several 'master minds,' they may reach their understanding in the most casual way - no promises asked, none given. Only when the fraud is completed, when the entire design is exposed, comes the realization that mere chance did not accomplish the result. And the scheme may have been progressive; the plan may have developed with time; many overt acts which in retrospect are part of the plan may in fact have preceded in time its full formulation.

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Fall anything before he got the lease [italics the author's]. It may be that after Sinclair did get the lease Fall got some money from him by the argument that he favored Sinclair with the lease.

I mean that, suppose I did something for somebody and then later came around and asked a loan or a gift on the plea that I had done a service for him. If he should give me the money you could n't say that he was guilty of a conspiracy.

In the Stoneham case the fraud charged was that, in transferring his brokerage business to Dier, Stoneham failed to deliver over $5,000,000 of securities he was supposed to be holding for customers, but delivered only about $2,100,000 (much of this being of the 'cat and dog' variety), making a cash settlement as to the rest. When the 'bull market' started a few months later, Dier, 'short' of the securities undelivered, failed, with huge losses to creditors. The letters to customers mailed just before the transfer commenced stated that the 'accounts' would be transferred, which of course implied that the securities in the accounts would be transferred.

There is no doubt that a flagrant fraud was committed; in a recent related civil case the New York Appellate Division has sustained a jury verdict against Stoneham for the recovery of the value of securities undelivered. But in the criminal case the jurymen with whom I spoke explained to me painstakingly that they had acquitted Stoneham because of their inability to discover proof of an agreement between Stoneham and Dier, preceding the transfer of the accounts, that the full amount of the securities should not be delivered.

It is perfectly possible that there was no such previous agreement; that only after Stoneham had delivered to Dier the $2,100,000 of 'cat and dog' stock which he had in his vaults was

the arrangement made to substitute a cash settlement for the stock remaining undelivered. Such an arrangement would then have postdated the letters to customers, and there could be no conviction under the mail-fraud statute unless the jurymen inferred an agreement previous to the mailing of the letters an agreement possibly nonexistent in fact. If, on the other hand, we assume that there was a prior agreement, only Stoneham and Dier, who made it, could give direct proof of it-and they were both defendants. Necessarily, therefore, the proof of such an agreement 'beyond a reasonable doubt,' which the law exacts, would depend upon inference from circumstantial evidence, of which juries are notoriously, and possibly quite properly, shy.

Let it be noted, however, that whether Stoneham and Dier made such a previous agreement or not, whether they intended it from the inception of their transaction or not, the grim fact remains that a fraud costing thousands of investors millions of dollars was perpetrated. It is scarcely satisfying to the victims to say that the defendants must be acquitted because there is no proof that they intended to do what they did.

So, in the Daugherty case, the evidence amply showed that Jess Smith and others closely identified with the former Attorney-General received large blocks of securities which were traced from Richard Merton, the German director of the Société Suisse, through various brokerage houses, down to the Attorney-General's account in the Washington Court House Bank in Ohio, of which Mal Daugherty was president, where the investigators ran up against the destroyed records, the story of which is familiar history.

There was no doubt in the jury's mind, as the story was related to me,

that some of the Merton bonds found a destination with the former Attorney-General. The proposition which stumped the jurors and prevented them from reaching a verdict as to Daugherty was that nowhere was there direct evidence showing that he agreed with Merton, Miller, King, and the others beforehand upon the fraud ultimately consummated, and upon the payment and division of bribe money after the allowance of the Société Suisse's claim against the Alien Property Custodian. Such an agreement lay only in inference; so far as Daugherty was concerned, he never even saw Merton. It is quite conceivable that he knew no details of the plot, but merely aided it by writing the short letter of official approval which implicated him, and for which he doubtlessly got his reward. Under such circumstances, with the law standing as it does, it is small wonder that the jury found itself in true distress.

IV

Where lies the solution? It is obvious that in the prosecution of cases such as these the Government is not equipped to contend against the shrewd and subtle machinations of clever schemers whose every move is calculated to keep them just barely 'within the law,' with an antiquated legal machinery designed to cope with a far more simple and far less dangerous type of offender. The law strait-jackets the jury, and the prosecution is faced from the outset with an almost hopeless task. The task is not merely hopeless, but intellectually somewhat degrading. It amounts to creating such an overwhelming moral indignation in the jury's mind as to the enormity of the fraud perpetrated that the jury will be 'drugged' into a finding of a fraudulent initial scheme precedent to the consummation

of the fraud. Where the jury is intelligent and conscientious and scrupulously observes the court's charge of the law, it is practically futile ever to expect in this class of case a verdict of conviction.

The cure lies in 'putting teeth' into the law, in amending and strengthening it so that it may cope with the subtle type of fraud which is the cancer of modern finance, which is immensely profitable when successful, and which invites the participation of the sharpest and shrewdest of designing minds, frequently masking under cloaks of eminent respectability- the type of fraud in which the schemer's tracks are carefully covered as he goes along, so that only the results of the operation stand forth, and it is almost incredibly difficult to establish the earlier steps in the scheme.

Some of the judges of our higher courts have been very much aware of these statutory difficulties with our criminal law. Recently, Judge Learned Hand of the United States Circuit Court of Appeals, tracing the history of the law, stated in a case:

A conspiracy to perpetrate a civil fraud (under the common law) was a crime, though the fraud itself was not one. In the early eighteenth century, frauds in general were probably still crimes even when not of a public character, and not within the statute of false tokens, though the question was not settled . . . (and) afterward the doctrine was narrowed and only frauds of a public nature remained criminal.

...

...

The cure in part lies in legislation tending to make the proof of intent in

these fraud cases simple so far as the prosecution is concerned. It is high time to consider whether there should not be created by law a presumption of prior intention, which in every conspiracy and fraud case will impose upon the defendants the burden of proving that they did not from the outset intend the wrongful acts which are the true gravamen of their offense.

In homicide cases, the carrying of a dangerous weapon creates a legal presumption of intent to use it in the accomplishment of the offense, and the burden is on the defendant to negative and overcome such presumption. If the law will create such a presumption of intent where human life is at stake, why hesitate when the stakes are immeasurably less?

When a fraud is practised which has caused possibly thousands of guileless victims to suffer, is there any ground in reason or justice why those participating in the transaction should not be called upon to exonerate themselves and to establish by preponderating evidence that they possessed no wrongful intent? When a public official accepts bribe money after doing a discretionary official act, is there any fair reason why he should not be required to disprove a presumptive wrongful initial intent? I fail to see any such ground in either case. An outraged public conviction of the futility of our present legal equipment to cope with the situation demands a change. To blame the juries is beside the point and entirely to avoid the crux of the difficulty.

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HIDDEN TREASURE

BY ELLEN N. LA MOTTE

I

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FIFTY years ago, more or less, one is quite sure, either way, lived an old man in the large corner house at the end of our Street. It was an eighteenth-century house to begin with, but he modernized it according to the standards of fifty years ago, and put in white marble mantelpieces of ornate design, and faceted mirrors in the ceilings, to reflect the light from gilded chandeliers. Across from the drawing-room he built a large conservatory, with a black-and-white marble floor- a room with a glass end and a high curved glass roof, high enough to receive tall palms and tropical plants. He spent huge sums on the house, making it magnificent, but after the builders were out no one ever saw the inside of it during his lifetime.

He was rich and eccentric and lived alone, and rumor had it that he collected silver half crowns, just as one might collect threepenny bits. Now to collect threepenny bits, among such as you and me, is no light matter. Therefore to collect half crowns, to withdraw them completely from the needs of daily life without feeling it, means wealth indeed. But wealth he had, for the story goes that he covered one of his rooms with these silver half crowns, and set them into the plaster. The coins, so went the report, were placed together so closely, so precisely, so evenly and smoothly, that they covered the entire walls and ceiling of one room, and when it was thus covered he

papered the whole thing over with a disguising wall paper, so that no one knew which room it was. So well had he set in his half crowns that no coin showed through, and there were no little ridges or circles or depressions by which one could possibly recognize the silver room from any other.

Naturally the Street took a deep interest in this old man and his silver room, and there was much speculation as to which it might be. Some had it one room, some another, on this floor or that. Consensus of opinion finally placed it as the largest room in the house, because, if one was rich enough and odd enough to cover a little room, one was also rich and odd enough to cover the biggest. But, whichever it was, the old man kept his secret. No one could rob him without such fuss and disturbance and tearing of paper as would have aroused him; therefore no one ever attempted to rob him, our Street not being very enterprising in such matters.

At this point the story has an unsatisfactory ending. Many years ago the old man died, leaving no bank account, no papers, no hoard of gold, not so much as a farthing piece to be found anywhere. Nothing but the magnificent house, on which a fortune had been spent; yet not a trace of a fortune could be found. Had the money been buried or hidden in the house, or secreted elsewhere? No one knew. Moreover, no trace could be found of the silver room. Apparently there was none, which was contrary to

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