other brokerage business than investment, insurance and real estate, and that the Rosenkranz defendants knew the precise nature and limited extent of his business.
There came a time when contracts with the Government were about to be obtained by Buckley in behalf of the school and when they were to be reduced to writing. At the time the first of such contracts was submitted the Rosenkranz defendants were called upon to sign a form of contract drafted by the War Department, which contained a warranty clause required by Executive Order of December 27, 1941 No. 9001, 51 U.S.C.A.Appendix § 611 note. This warranty clause read as follows: "The contractor warrants that he has not employed any person to secure this contract upon agreement for a commission, percentage, brokerage, or contingent fee. Breach of warranty shall give the Government the right to annual the contract or at its discretion to deduct from the contract price or consideration the amount of such commission, percentage, brokerage, or contingent fee. This warranty shall not apply to commissions payable by contractors upon contracts or sales secured or made by bona fide established commercial or selling agencies maintained by the contractor for the purpose of securing business."
It must be noted the War Department, in submitting this language which was to be used as to non-employment of contingent brokers, made it clear to defendants that the warranty was not intended to extend to a bona fide established investment broker maintained by defendants to obtain business. How, then, would the language be interpreted? Under some conditions a commission broker might be employed, that is, where he was an established commercial or selling broker. Under other conditions, a certain type of person -- one not an established broker -- might not be employed to secure the contract, under pain of possible annulment of the contract, or deduction of commissions from the contract price.
The evidence in this case shows one of the Rosenkranz defendants had some concern over the interpretation of this warranty and spoke to Buckley about it; that Buckley stated it did not apply, but was intended to refer only to employment of Congressmen. It seems that one of the Rosenkranz defendants then executed the contract with the warranty clause in it and thereafter, when additional contracts were presented with the same form of warranty, no further question was raised by any of the defendants with regard to it.
I am not committing myself to the interpretation attributed to Buckley, said to have been acquiesced in by the Rosenkranz defendants. But it is not entirely clear from the language of the President's Order and the history of its adoption as it has been outlined to me what is the evil type of broker intended to be guarded against.
Here the broker employed by the contractors was a commercial and a selling agent. He was one whose business customarily is conducted on a contingent fee basis. There is no evidence he had influence at the War Department or in the Army. There is no showing he made any questionable or improper contacts or that he planned any. So far as the evidence indicates, his entire relations with Government and Army officers were wholesome and proper.
The prosecution frankly has conceded there is question as to the meaning of the words "maintained by the contractor", in the President's Order, and that reason would seem to compel the view that the contractor would not offend the order simply because he occasionally employed a broker to obtain a contract.
Under these circumstances, must this Court conclude there is tangible evidence that the persons who employed this broker had an evil intent to frustrate the purpose of the President's Order, when or if, as appears reasonable to assume, they decided Buckley was a bona fide commission broker not denounced by the order? I think not. It seems to me that to reach such a conclusion in this case, the Court would have to presume guilty intent, whereas the correct rule of law is that the evidence of a wrongful intent in a criminal case must be clear and convincing.
It is true there is some evidence in this case indicating there came a time when the Rosenkranz defendants might have become convinced they had done a wrongful act in making the warranties. There is some indication that after an investigation by the Government began, the Rosenkranz defendants did some acts and made some statements indicative of a consciousness of wrong. But the evidence as to these acts and statements is quite and consistent with a fear that they unwittingly might have made a misstatement as with an acknowledgment that they knowingly had done wrong at the time the warranties were made. The evidence is not at all strong or convincing.
The testimony against Buckley is weaker than that against the Rosenkranz defendants. The prosecution agrees the corporation defendant must stand in the same position as its officers, the Rosenkranz defendants.
Because of the reasons stated, I have decided I must grant the motion of all defendants to direct a verdict of not guilty. Having come to this conclusion upon an assumption of Buckley's limited brokerage and knowledge by the Rosenkranz defendants of its limitations, and because of Mr. Fihelly's suggestion this morning that the Government does not desire to offer any further testimony on this point, of course, no purpose would be served by reopening the case for the further testimony.
The motion for a directed verdict in favor of the defendants will be granted.
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