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United States v. Kimmel

decided: January 20, 1960.


Author: Moore

Before CLARK, WATERMAN and MOORE, Circuit Judges.

MOORE, Circuit Judge.

Appellant was convicted by a jury for using the mails to defraud in violation of section 1341 of Title 18 United States Code. From the judgment of conviction appellant appeals, assigning as errors: (1) submission to the jury on insufficient evidence; (2) reception in evidence of work-papers of a deceased accountant; and (3) various rulings by, and a portion of the charge of, the trial judge. Specifically, Kimmel was charged with knowingly mailing a false financial statement on October 17, 1953 to Credit Exchange, Inc. for the purpose of obtaining credit. Appellant concedes that the figures were false. He urges that the government failed to prove his knowledge of their falsity and that the statement was mailed for the purpose of obtaining credit.

For some years prior to 1953 Kimmel had been engaged in a retail sportswear business under the name of Rita's. Between January and September of 1953 Kimmel sought and obtained several loans in addition to purchasing merchandise on credit. On or about September 15 Kimmel requested an additional loan from Abraham Gewirtz,*fn1 his millionaire landlord. Gewirtz's accountant, Richardson, was not satisfied with the financial figures shown to him at this time.Kimmel stated that his accountant had resigned and asked Richardson to bring the books up to date. Richardson replied that he would do so as Gewirtz was interested in the financial position of the business. Richardson assigned William Mohrsfelder,*fn1 a member of his staff, to this job.

From September 16 to October 9 Mohrsfelder worked at Rita's on a "write-up job" (the posting of books from available records without verifying the accounts). He had to rely on Kimmel to provide him with all unpaid invoices. On October 9 Mohrsfelder submitted to Richardson a balance sheet showing accounts payable as $9,794.74 (the government proved as at least $25,928.13) and notes and taxes as $12,527.30 (the government proved as at least $20,576.24). His work sheets for accounts payable listed 37 creditors (the government proved a total of 57).

Shortly thereafter a meeting was held between Kimmel, Mohrsfelder, Gewirtz, and Martin Gewirtz (a nephew of Abraham Gewirtz, referred to as "Martin"). On looking over the balance sheet and work sheets of Mohrsfelder, Gewirtz questioned Kimmel and Mohrsfelder as to how the accounts payable were arrived at. They stated that Kimmel had given all the bills to Mohrsfelder. Subsequently, it was decided that Martin would invest $15,000 for a 30% interest in an incorporation of Rita's. On October 13 Rita's Accessories, Inc. (Rita's) was formed; Kimmel was named as president and Martin as vice president and treasurer. The following day Kimmel executed a stockholders' agreement, as president and in his individual capacity, in which he warranted the accuracy of the balance sheet.

On October 15 Kimmel asked Richardson to fill out the credit form employed by Credit Exchange, Inc. Using the same figures, Richardson completed the statement, dated it October 13, and returned it to Kimmel. Kimmel signed it and mailed it to Credit Exchange, Inc. on October 17. In reliance upon these figures they recommended Rita's for credit up to $500.*fn2 In January 1954 two sellers extended credit to Rita's on the basis of this recommendation.

Shortly after incorporation Kimmel had to submit several checks to Martin for his signature. These were in payment of monthly installments most of which were not listed on the balance sheet. When Martin evinced some concern, Kimmel assured him his corporate interest would be credited for them.

Early in November 1953, Kimmel hired an accountant, Arthur Grossman, on a part-time basis. One of Grossman's duties was to pay bills as evidenced by invoices. Noticing that the dates had been altered on some of the bills, he questioned Kimmel and was told that they were post-dated or were for shipments which arrived after the dates on the invoices. Sometime in December 1953 Grossman discovered a wad of invoices, including some with changed dates, lying on a shelf. On confrontation Kimmel showed no surprise and told him they were bills which would eventually be paid, again explaining that they were post-dated or dated prior to receipt of the merchandise. Grossman, not satisfied with these answers, told Martin about them. Kimmel's explanation to Martin was that the manufacturers must have erred in the dates of payment and that they would be paid.A day or two later at a meeting between Gewirtz, Grossman, Martin and Kimmel, Kimmel merely shrugged his shoulders when Gewirtz angrily inquired why these invoices had not been previously brought to his attention.

Between the incorporation on October 13, 1953 and subsequent bankruptcy on March 12, 1954, Kimmel repeatedly sought loans from Gewirtz, who yielded on two occasions, lending $2,500 after the meeting concerning the bills discovered by Grossman, and the same amount in January or February 1954.

The record overwhelmingly establishes Kimmel's personal familiarity with the debts of Rita's not included in the financial statement mailed to Credit Exchange, Inc. Two of the creditors, not listed in the accounts payable, had been dunning him for overdue payments during September and October 1953. A loan for $5,000 had been obtained in September, first installment to be paid October 15, and on October 14 Kimmel had acknowledged this debt to Martin. Checks for two bank notes which were being paid in monthly installments were submitted for Martin's signature shortly after the incorporation. The repeated requests for loans prior to and after incorporation indicate knowledge of Rita's financial structure.

The events surrounding Martin's investment belie Kimmel's plea of ignorance. In order to obtain Gewirtz's approval of this investment by his nephew, Kimmel realized that the financial structure of Rita's must appear basically sound. Mohrsfelder had to rely on him for the production of all unpaid bills. That Kimmel inadvertently overlooked many of these invoices when he represented to Gewirtz that he had given all of them to Mohrsfelder is implausible in light of the alteration of dates (for which different explanations were given), his lack of surprise on the finding of the wad of bills by Grossman, and his inability to give a satisfactory explanation to Gewirtz.

Although the primary purpose of these financial machinations was to promote the investment by Martin, a further benefit was sought when the statement containing these figures was mailed to Credit Exchange, Inc. At the top of this form appears the following paragraph:

"I (We) give you below a statement of my (our) assets and liabilities taken from my (our) books, reflecting the financial condition of my (our) business as of the date appearing below, based upon actual inventory taken and submitted for the purpose of obtaining credit or insurance through your agency for the ...

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