## Facts

- Defendants were associated with a partnership doing business as “National Stores,” selling new and used sewing machines and appliances, first in Los Angeles and later in Salt Lake City.
- The government alleged the business made installment sales of household sewing machines without collecting the minimum down payments required by Federal Reserve Regulation W.
- Regulation W required registrants to comply with specified credit terms, including a minimum 25% down payment for household sewing machines (loan value not exceeding 75% of sale price), and to maintain required records.
- Sales were made by employed salespeople who also kept the sales and credit records.
- The prosecution introduced evidence that a series of transactions reflected missing or inadequate down payments and other nonconforming credit terms.
- At trial, the case was submitted on the theory that a partner’s knowledge could be attributed to a co-partner and that employees’ acts and knowledge, while acting within the scope of employment, could be attributed to the employing partners.

## Issues

1. Whether, for criminal violations requiring “willfulness” under the Defense Production Act and Regulation W, an employee’s (or partner’s) knowledge and intent may be attributed to another partner acting as an employer/principal.
2. Whether jury instructions stating that partners were chargeable with employees’ willfulness and guilty knowledge improperly removed the statutory element of willfulness.
3. Whether the evidence was sufficient to support convictions of each defendant on the substantive counts and the conspiracy count.

## Decision

- The Tenth Circuit affirmed the convictions of Gordon and Tempkin and reversed as to Deverich and Stone based on differences in proof tying each defendant to the business and violations.
- The court held that, in this regulatory prosecution, partners/employers could be held criminally responsible for willful violations committed by employees (and co-partners) acting within the scope of their authority.
- The court upheld the challenged jury instructions, concluding they did not eliminate willfulness but permitted the jury to find willfulness satisfied through attribution of the agents’ state of mind.
- The court found the record contained substantial evidence supporting an inference that the violations were part of the business’s manner of operating, supporting the verdicts against the two principal partners.

## Legal Principles

- For certain regulatory offenses requiring “willfulness,” a principal/employer may be held criminally liable based on acts and guilty knowledge of agents acting within the scope of employment or partnership authority.
- A jury instruction attributing an agent’s willfulness to the principal does not necessarily convert the offense into strict liability where the legal theory permits attribution of mens rea.
- Sufficiency of evidence may vary among defendants in group business prosecutions; liability depends on proof connecting each defendant to the enterprise and the unlawful course of dealing.

## Conclusion

The Tenth Circuit treated Regulation W violations under the Defense Production Act as permitting agency-based attribution of willfulness, affirmed convictions of the two partners most closely tied to the business operations, reversed as to two others for lack of sufficient connection, and approved jury instructions charging partners with employees’ willful violations committed in the course of employment.


Gordon v. United States, 203 F.2d 248 (10th Cir. 1953)