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United States v. Byers

November 13, 1934


Appeal from the District Court of the United States for the Southern District of New York.

Author: Chase

Before MANTON, AUGUSTUS N. HAND, and CHASE, Circuit Judges.

CHASE, Circuit Judge.

During the month of February, 1931, the appellant Byers, who had been a legal aid investigator for the American Legion and since 1925 had been department adjutant and welfare officer for the Department of Michigan, became interested in obtaining surplus army clothing for the needy in Michigan both within and without the Legion. After considerable investigation, during which the possibility and means for obtaining the clothing were fully canvassed, he made arrangements to secure what he wanted and, after other attempts at initial financing had failed, to have sufficient money from two special funds controlled by the state of Michigan used from which to advance the amounts which had to be paid the government for the material. It was then intended to distribute the clothing through the posts of the Legion and through other organizations in the state engaged in relief work and to receive from such bodies the cost of the clothing sent to each so that the advances made from state funds could be returned within sixty days. Byers, before any of the material was received from the government, made a determined and successful effort to have the price reduced 50 per cent. During the formation of the plan, Byers conferred with a Mr. Caplan in Detroit who, it was hoped at first, would supply the money for the purchases and, in May, 1931, Caplan introduced Byers to appellant Krieger as a man with considerable experience in obtaining such surplus material from the government. From then on Krieger actively participated with Byers in forming and carrying out the plan for getting and disposing of this clothing.

For the purpose of this appeal it will be unnecessary to describe in detail all that was done. It is sufficient to know that on December 21, 1931, Byers signed an order for 10,000 units. This order contained a clause providing that the units would not be sold, and, as the plan to distribute through organizations who would pay the cost was known to the officials of the War Department, it is evident that such a disposition of the clothing was not considered a sale within the meaning of the restriction in the order.

The material was shipped to Michigan, where one-half was placed in a storage warehouse in Detroit and the remainder sent to Lansing. This clothing had been kept many years by the government, and, when Byers tried to secure a loan from a Detroit warehouse with which to pay the purchase price to the government, only 60 per cent. of the value could be obtained. As this was not sufficient, the state of Michigan was then persuaded to advance the money. In the meantime Byers sent 10 per cent. of the clothing to New York where Krieger sold it to commercial buyers ostensibly to establish the value of the remainder for the purpose of obtaining a loan to pay the purchase price.

While all this was going on, Byers learned that more of the clothing could be had from the government, and on March 6, 1932, placed a second order, which contained no resale restriction, and which was filled by shipping the clothing to Byers in Michigan. The government was paid in full the purchase price of both orders.

Time went on, and despite some effort to distribute the clothing to the needy, not enough money was obtained in this way to replenish the special funds of the state. None of the goods ordered on March 6th arrived in Detroit before April 7, 1932, and before they were all received the weather had become too warm for such heavy clothing to be much needed. Moreover, the funds of the state had to be replaced in June.

About the 16th of April, but whether in accordance with the original plan of the appellants or not has not yet been decided, Byers began sending more of the clothing to Krieger in New York, who received it and sold it to commercial buyers at prices in excess of the price paid the government. Part of the proceeds of these sales were used to repay the state for its advances. There is evidence to the effect that the appellants divided the remainder between themselves.

Although the appellants urge error on the ground that the evidence was insufficient for submission of the case to the jury, the contrary stands out so clearly that only the refusal of the court to charge that the government must prove that the conspiracy existed before the goods were procured by them need be considered. There was no other serious error. The failure to charge as requested, however, requires that the judgment be reversed and the cause remanded for a new trial.

The appellants were charged in the indictment as follows:

"The said defendants * * * continuously throughout the period of time beginning the first day of June, 1931, and to and including the date of the filing of this indictment, * * * did unlawfully, wilfully and knowingly conspire, combine, confederate and agree with each other * * * to defraud the United States concerning its governmental rights and functions of administering the sale of surplus war merchandise; * * * of and concerning its right to have those who deal with the government do so honestly; * * * of and concerning its governmental right to determine with a full knowledge of the true facts whether to sell or not to sell certain surplus merchandise; of and concerning its governmental function and right to impose conditions and terms, when and to whom it would make sales of war surplus merchandise."

"It was further a part of said conspiracy that the defendants * * * would obtain surplus army merchandise at reduced prices under a representation that such materials would be used in welfare work by charitable organizations and would be given away and not resold, when in truth and fact the said defendants then and there intended to sell said merchandise, and did sell said merchandise."

The indictment further alleges that a part of the conspiracy was to place an order and request a reduced figure by appearing before the House Military Affairs Committee and by the defendants having Byers designated as welfare officer of the state of Michigan and in that capacity place an order for the merchandise as for charitable purposes and having obtained the merchandise to place it ...

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