Gillespie v. State

⁴⁸ Offutt, J., delivered the opinion of' the 'Court. ! The appellants in these oases were tided and convicted by three judges in the Criminal Court of Baltimore City of a conspiracy to defraud existing and prospective customers of the Union Finance 'Company, “a common law trust,” hereinafter called the trust. Judgment and sentence followed the verdict in each case, and from these judgments these appeals t^ere - taken. . Demurrers interposed to the indictment by each -defendant were, overruled by the court, and in the course .of the trial eight exceptions were noted to the court’s ruling's on questions of evidence.

Those rulings we are now asked to review. Before considering the questions thus presented, we will fefet to such of the facts of the case as are undisputed and to such facts as may for the purposes o-f this opinion -be assumed, which we consider essential to an adequate 'understanding of the legal propositions we are called upon to consider. For some years prior to the alleged conspiracy in this case public attention had been attracted to the activities of certain speculative investors in stocks- and bonds throughout the country who operated wha-t popularly came to be known -as “blind pools.” The plan under which these pools operated appeared to be tbis: Investors- or depositors deposited with the operator o-f the pool money to be used 'by him in gambling on tbe stock market either on margin or by purchase outright of securities, and the profits or losses resulting from his op<erations were prorated among the investors or depositors in proportion to the amount of money they had invested or deposited. The operations o-f these pools had become so extensive, and the public interest iu them so- acute, iu the 'City of Baltimore in 1922, that an association o-f bankers and brokers of that city, ..known as the “blue sky commii-ttee,” undertook an investigation of their operations, and -as a result the members of tbe committee were led to doubt whether the earnings claimed by -the “blind pool” operators -could be shown to exist. ⁴⁹ They consulted the Attorney General of the State'to ascertain whether the operation of these pools violated any law of the State, and were told that it did not.

They then approached the B'altimlore Hews, a newspaper published in Baltimore City, and asked the managers of that newspaper to take the matter up and investigate it, which they agreed to do. From that time, about July 28th, 1922, to quote Mr. Locke, chief editorial writer of the Hews, “a series of articles casting suspicion upon the operation of the blind pools beginning on July 28th, I think, and continued practically every day for about a month and a half, following up through the receivership; that included1 the Griswold challenge, the opinions of prominent bankers etc. as to the feasibility of their claiming to do what they claimed to do, and that was supplemented by our own efforts to ascertain information as to bow they transacted business and what their progress was.” On August 10th, 1922, the Baltimore Hews published an interview with Mr. B.. Howell Griswold, a member of the banking firm of Alexander Brown & Sons, in which he challenged the “blind pool” operators to submit their hooks without cost to themselves to some firm of accountants, to he selected either by Judge John O. Bose of the United States -Oourt or by the Governor of the State. Among those affected by this campaign against “blind pools” was Emory M. Hewton, who was jointly indicted with the appellants in these two appeals, and who operated1 the Union Finance Company, common law trust.

That “company” is described in the indictment as a common law trust, but what its nature, powers and functions are does not appear from anything to- be found in the record. Whenever money was invested or deposited in the trust, a certificate was issued therefor which certified that “ * * * has deposited $......in an account opened and managed by The Union Finance Company for the purpose of buying and selling securities, listed on the Hew York Stock Exchange, and other stock exchanges, participation in syndicates, pools, etc. In ⁵⁰ consideration of said management The Union Finance Company is to receive thirty per centum from this account and the said * * * to receive seventy per centum of monthly disbursements. “It is also understood that the said * * * can withdraw all or any part of * * * account upon sixty days’ written notice to The Union Finance Company. Said notice to be given on the first day of the calendar month, and that the amount of the withdrawal shall not participate in any profits from the date of said notice, and in the case of'the death of the above depositor the amount entered on this certificate is at once due and payable to the heirs and assigns of said party.” 'Shortly after the publication of the Griswold challenge, ISTewton, on August 15th, 1922, engaged William A. Gillespie, a public accountant, to make an audit of the books of the trust to determine whether it was solvent and whether it did deal in securities. ■ The actual work of the audit was under the supervision of Harold B. Dickey, Jr., who had been employed as an accountant by Gillespie on a salary since 1'9'lY. Upon the conclusion of the audit on August 18th, 1922, Gillespie addressed a letter to the Union Finance Company, which contained the following statements: “Pursuant to your instructions, we report we have made an audit of the books and accounts of your company from the date of beginning operations to August 15, 1922, and have found same to be correct. “We find your company to be solvent and capable of meeting all obligations and contracts entered into with your clients. “We further certify that your company purchases and sells listed securities in large volume, and your inventory of securities at the market at the close of business August 15, 1922, shows a substantial surplus over and above your obligations.” That letter was on August 19th published by the Union Finance 'Company as a paid advertisement in the Baltimore ⁵¹ Hews and the Evening ¡Sun, and later in the morning papers.

Some time after that Mr. James Locke of the Baltimore Hews, as the result of information he had received concerning the audit, instructed Mr. Ucker, also- connected with the same paper, to make some inquiries as to it. Later Mr. Gillespie, at his own request, had an interview with Mr. Locke, at which the solvency of the company was discussed, and at the same interview the valuation placed upon shares of the California Oil and Mining Corporation by Mr. Gillespie in the audit was questioned. That stock had been bought at twenty cents a share, but had been valued at fifty cents a share by Gillespie on the strength of an offer of the Prudential Securities Company made on or about August 16th, 1922, to buy it at that price. A few days later Gillespie, with Hewton and Dickey, again visited Mr. Locke and discussed with him the statement in the letter referred to above, that the Union Finance Company bought and sold listed securities in large volume.

Later Hewton called on .Locke and told him that some of the securities in which the trust traded had been bought on straight margin and others on the partial payment plan. Subsequently Gillespie, Dickey and Hewton were indicted for conspiracy to defraud the existing and prospective investors or customers of the Union Finance Company by inducing them to invest or deposit their money with it in the belief that it was solvent, able to meet its contracts and obligations, and that it dealt in securities in large volume, whereas it was insolvent, was not able to meet its contracts and obligations, and did not deal in securities in large volume. That indictment rested upon the- theory that the valuation placed by Gillespie upon the stock of the California Oil and Mining Corporation and the Jockey Club Internationale of Mexico was false, and that the money which the •company had paid as commissions to its solicitors had been 'improperly treated as an asset, and that, had the correct valuation been given these stocks, and the item of eommis ⁵² sion as an asset eliminated, the audit would' have shown the company to he insolvent. Whether the letter written by Gillespie was fraudulent depended mainly, first, upon whether his valuation of the oil stock and the jockey club stock was excessive; second, whether be was justified in treating money which the trust had paid out for commission® as an asset; third, whether1 the trust owed its depositors 100 per1 cent, of their deposits; and fourth, whether it dealt in listed securities in large volume.

The oil stock and the jockey club stock were both unlisted,, and their values were fixed by Dickey and Gillespie, upon the basis of the cost price of the jockey club stock and of the price offered by the Prudential ¡Securities Company for the oil stock. Their conduct in treating the commissions paid as an -asset they justified) by what they contended was the standard practice in accountancy. As to the statement that the trust dealt in listed securities in large volume, it did apt-pear that it had bought on margin some stock, and that it had bought on the partial payment plan listed stocks costing over $300,000, although at the time the increased valuation Was placed on the California oil stock all the listed stocks then held for it had declined in price. In addition to- what has been stated, the account was criticised 'because the accountants bad treated an item of $1,000' which could uot be found among the assets of the company, as a debt due by its manager, and .an item of $5,45 9'. 02 which ISTewton had personally received from the trust funds as an account receivable.

Turning now to- the propositions presented by the appeals,, the first, question with which we are called upon to deal is the propriety of the court’s ruling on the demurrers to the indictment, and in connection with that question we will state what we understand to be the law of criminal conspiracy applicable to the question before us, as that law is established in this State. In dealing with the subject of criminal conspiracy we must look for the law almost entirely to oases rather than to' ⁵³ statutes, since the only statutes which could materially affect any consideration of the subject, 20 Ed. 1, 28 Edw. 1 and 33 Edw. 1 , relate only to a comparatively small part of the law on that subject as it is now established. v The law of criminal conspiracy as it is now understood and administered appears to have taken its rise from the proceedings of the Star ¡Chamber, and is almost entirely the product of judicial decisions. Sir James Fitzjames Stephen, in his History of this Crimmal Low of England, vol. 2, page 227, et seq., says: “Conspiracy has much analogy to .an attempt to commit a crime. It consists in an agreement between two or more persons (as is commonly said)‘.to do an unlawful act’ or to ‘do a lawful act by unlawful means.’ In other words, it is an agreement to do anything' unlawful, Whether the thing agreed upon is in itself an ultimate object, or only a means to an end lawful or unlawful.

The crime of conspiracy regarded as -an inchoate offense calls for little observation, but it has a remarkable history. In very early times the word had a completely different meaning from that which we attach to it. * * * “The earliest meaning of conspiracy was thus a combination to carry on legal proceedings in a vexatious or improper way, and the writ of conspiracy and the power given by the Articvli super Chantas to proceed without such a writ, were the forerunners of our modern actions for malicious prosecution. Originally, therefore, conspiracy Was rather a particular kind of civil injury than ¡a substantive crime, but like many other civil injuries, it was also punishable on indictment, at the suit of the king, and upon a conviction the offender was liable to an extremely severe punishment which was called ‘the villain judgment.’ The Star Chamber first treated conspiracies to commit crimes, or, indeed, to do anything unlawful as substantive offences, and after the ¡Restoration, this, amongst other doctrines of theirs found its way into the Court of ¡King’s Bench. The doctrine was expressed so widely or loosely that it became in course of time a head of ⁵⁴ law of great importance, and capable of almost indefinite extension.

In various cases the definition that a conspiracy is an -agreement to do an unlawful act was held to mean something more than an agreement to do an act which is in itself criminal when done by a. -single person, the word ‘unlawful’ being used in -a sense closely approaching to immoral simply, and amounting at least to immoral and at -the same time injurious to the public.” In Holdsworth’s History of English Law, vol. 5, p. 203, referring'to the same subject, the author says: “B-ut we have seen that, historically, conspiracy is more closely connected with - offences against the administration of justice; and that it was almost exclusively from this point of view that it w-as treated by the mediaeval common law. The modern law on this subject really springs from these two diverse yet connected roots. Hudson could class- together conspiracy and false accusation. But when he was writing this classification was ceasing to have the- meaning which it once possessed, because conspiracies which bad no reference to false accusations were being punished by the Star Chamber. “The Star Chamber assumed1 jurisdiction over all cases of conspiracy.

Though -Coke once maintained that a person acquitted on a criminal indictment must proceed, not by bill in the Star Chamber but by the-criminal procedure of the commbn law, Lord Ellesmere maintained that in this case as in all others the Star Chamber had jurisdiction; and his view prevailed. Moreover the -Star Chamber punished false and malicious accusations made before itself -or before- the court ■of chancery and- it punished criminally conspiracies which would only have been the ground for an action upon the ease at common law. Further, it adopted the common-law rule applicable to actions on the ease for conspiracy, and punished a single -accuser who had falsely and maliciously taken such proceedings. 1 “But it is clear that under these circumstances- the element-of conspiracy will tend to evaporate. 'The gist of the offense ⁵⁵ will be ratber the malicious attempt to ruin another by a false charge than the conspiracy to effect this result: It was inevitable, therefore,, as Stephen has said, that conspiracy should come to be regarded as a form of attempt to commit a wrong. It was so regarded in, the sentence given in-the Star Chamber against those who attempted to fight duels; and in the Poulterers’ Gase it was ruled in the Star Chamber that the mere conspiracy, though nothing was executed, was an offense.

But, if a conspiracy is so regarded, why restrict it to conspiracies to commit some offense in relation to legal proceedings? The Star Chamber acted upon this view; and, just as it punished all kind's of attempts to commit wrongful acts, so, a fortiori, it punished all kinds of conspiracies to commit the many varied offenses punishable either by it or by the common law courts. When the Star Chamber Vas abolished, the two divergent streams of doctrine which resulted from the mediaeval precedents and the rules evolved in the Star Chamber, produced some very complex developments in the law of crime and- tort.” The leading ease in this State on the subject is State v. Buchanan, 5 H. & J. 317 , decided by this Court in 1821. In that case certain defendants were indicted for a conspiracy to defraud the Bank of the United States and, in disposing of a demurrer filed to the indictment in that case, this Court, in an opinion in which there was a very exhaustive and elaborate review and discussion of the cases and the principles relating to the question, stated this to be the clearly settled law in this State: “1st.

That the offense of conspiracy is of common law origin, and not restricted or abridged 'by the Statute 33 Edward 1. “2nd. That a conspiracy .to do ariy act that is criminal per se, is an indictable offense at eommlon law. “3rd. That an indictment will lie at common law: 1st. Eor a Conspiracy to do an act not illegal, nor punishable if done by an individual, but immoral only. 2nd.

For a conspiracy to do an act neither illegal nor immoral in an indi ⁵⁶ vidual, but to effect á purpose, which, has a tendency to prejudice the public. 3rd. Eor ,a conspiracy to extort money from another, or to injure his reputation by means not indictable if practiced by an individual, as by verbal defamation, and that, whether it be to charge him with an indictable offense or not. 4th. Eor a conspiracy to cheat and defraud a third person, accomplished hy means of an act which would not in law amount to an indictable cheat, if effected hy an individual. 5th. Eor a malicious conspiracy, to1 impoverish or ruin a third person in his trade or profession. 6th.

Eor a conspiracy to defraud a third person by means of an act not per se unlawful, and though no person be thereby injured. 7th. Eor a bare conspiracy to cheat or defraud a third person, though the means of effecting it should not be determined on at the time. 8th. That a conspiracy is a substantive offense and punishable at common' law, though nothing be done in execution .of it. And 9th.

That in a prosecution for a conspiracy it is sufficient to state in the indictment the conspiracy and the object of it, and that the means ‘by which it Was intended to be accomplished need not be set out, being only matters of' evidence to prove the charge, and not the crime itself, -and may be perfectly indifferent “Erom all which it results that every conspiracy to do an unlawful act, or to do a lawful act for an illegal, fraudulent, malicious or corrupt purpose, or for a purpose which has a tendeucy to prejudice the public iu general, is at common law an indictable offense, though nothing be done in execution of it, and no matter by what means the conspiracy was intended to be effected; which may 'be perfectly indifferent, and makes no ingredient of the crime, and, therefore, needs not he stated in the indictment.” After that decision the first ease in which the principles involved in the question before ns were discussed was Blun v. State, 94 Md. 376 , decided in 1902, and in that case the court, referring to the sufficiency of the indictment filed in it, said: ⁵⁷ “Eo demurrer having been interposed to the indictment, we would not be warranted in reviewing it here, but we deem it proper to say in order to avoid the creation of any doubt upon the question, that we regard the sufficiency of this indictment as established by the decision in State v. Buchanan, 5 H. & J. 317 , where all the authorities were elaborately reviewed. Eo decisions in this State are more highly regarded than those rendered by Chief Justice Buchanan, and we think his. opinion in that case is sustained by the weight of authority.” Later, in Lanasa v. State 109 Md. 607 , criminal conspiracy was again defined in somewhat different language in an opinion filed by Judge Burke, in which this Court again approved the Buchanan case, saying: “Upon the settled law of this State, and upon the authority of well-reasoned cases in other jurisdictions, we cannot agree that the count assailed is in any respect defective, or that the judgment should be arrested. A conspiracy may be described in general terms,, as; a combination of two or more persons, by some concerted action, to accomplish some criminal or unlawful purpose; or to accomplish some purpose, not in itself criminal or’ unlawful, by criminal or unlawful means. It is not essential that the act intended to be done should be punishable by indietment.

The essence of the offense consists in the unlawful agreement and combination of the parties; and, therefore, it is completed Whenever such combination is formed, although no act be done towards carrying the main design into effect. 3 Greenleaf on Evidence, 2nd Ed., secs. 8'9-91. It may be said that this statement of the law by Mr. Greenleaf announces the almost universally accepted doctrine upon the subject of criminal conspiracy. This is made perfectly apparent by the numerous citations from text books and reports contained in the briefs filed in this case. It is the rule which has obtained in this State since the great case of the State v. Buchanan, 5 H. & J. 317 , in which will be found a collection of many cases in which an unexecuted conspiracy to commit acts not in themselves indictable offenses was held to be a criminal conspiracy.” In ⁵⁸ Garland v. State, 112 Md. 90 , after again, approving the statement of the law of criminal conspiracy in the Budhanan case, the 'Court quoted with approval a passage from 8 Cyc. 664, which to au extent supplemented that statement hut iu no sense qualified it.

The passage referred to is this: “Iu charging the intended offense, the indictment need only he certain to a common intent. The crime intended to he aocomplished by the conspiracy need not be described in the indictment with the accuracy or detail which would be essential to au indictment for the commission of the offense itself, but need only be designated as it is known to the common law or defined by statute. Allegations of acts which if committed would have constituted the crime are not required; but where the intended offense has no designation at common law, or having a designation the indictment does not so refer to it, but attempts to state its ingredients, they must be stated •as fully as if the indictment were for the commission of the offense itself. If the purpose of the conspiracy be the doing of an act Which is not an offense at common law, but only by statute, such purpose must he set forth in such a maimer as to show that it is within the terms of the statute.” In Archer v. State, 145 Md. 144 , in further reference to the same subject this’Court, through Judge Adkins, said: “(a) ‘The indictment must show that the conspiracy was to defraud some person or some class of persons.

It is not necessary that there be a definite person or number of persons, if it is shown that some one was to be defrauded. An allegation showing a conspiracy to defraud the general public oí a particular class is sufficient.’ 5 R. C. L. 1083. Where the conspiracy is directed against a particular person or the object of the conspiracy has been effected so that the person oi persons intended can be ascertained, he or they should be designated by name, or the reason why such designation is not made should he stated; but where no intent as to any particular person was formed it should charge an intended wrong against some person, persons or class of persons or the general public. This, however, will be sufficient without des ⁵⁹ ignating any particular individual.’ 12 Corpus Juris, 617. * * * In a conspiracy of the kind charged in this case it could not be known by the alleged conspirator on whom it would operate; and the 'then customers of traversers and those who might be induced to become such, were properly treated as a class.

The Maryland cases cited by appellant deal with an entirely different class of cases. “(b) ‘In a prosecution for a conspiracy it is sufficient to state in the indictment the conspiracy and the object of it; and the means by which it was intended to be accomplished need not be set out, being only matters of evidence to prove the charge and not the crime itself.’ State v. Buchanan, 5 H. & J. 317 .” And that conclusion was approved in the case of Lockhart v. State, 145 Md. 602 . Now, Whether the law of criminal conspiracy as it has been stated and defined in this 'State took its rise from the three Ordinances against Conspirators of Edward I; whether it grew out of the efforts of the Court of Star Chamber to reach and punish .offenses deemed prejudicial to the public interest but which had not theretofore been regarded as crimes, or whether it originated in the vague and undefined body of customs, rules and precedents known as the common law, is a matter of purely