Appeal from the District Court of the United States for the Southern District of Illinois, Southern Division; J. Earl Major, Judge.
Before SPARKS and TREANOR, Circuit Judges, and LINDLEY, District Judge.
The defendant and three others were indicted under section 338, title 18, United States Code, 11 U.S.C.A. § 338, for using the United States mails to defraud. The defendant and his codefendant Henson C. Robinson were found guilty, and from the court's judgment pronounced upon the verdict of the jury this appeal was prosecuted.
The defendant relies upon the following propositions: (1) The evidence was not sufficient to establish the essential elements of the offense charged, and consequently, the trial court erred in refusing to direct a verdict of not guilty. (2) Highly prejudicial error was committed by the trial court by admitting evidence (a) as to conversations of persons not in the presence of the accused, and (b) as to salaries of employees, income and expenses of the defendant's company. (3) Reversible error was committed by the trial court in its charge to the jury and in refusing to give certain instructions requested by defendant.
The conduct of the defendant, which was the basis of the charge of fraudulent use of the mails, consisted of his activities which were connected with the organization and management of the business of the National Aid Society of Indiana, the National Colored Aid Society of Indiana, and the National Aid Society of Colorado. The Indiana Societies were organized in August, 1930, under a statute of the State of Indiana, which authorized the organization of corporations not for pecuniary profit. It was recited in the articles of incorporation that the objects for which the National Aid Society was being formed were "to unite reputable men and women of the Caucasian race who are wage earners, not for profit, but for the purpose of giving aid to widows, widowers, creditors and others dependent on its deceased members (nothing in the above shall be construed as to include caring for dependent children) and to aid its members who become totally disabled, all such aid to be by voluntary contributions and not by fixed dues or assessments." The articles of incorporation for the National Colored Aid Society of Indiana were substantially the same as those of the National Aid Society of Indiana, except that membership in the former was limited to the negro race.The incorporators and first directors of both Societies were A. C. Littlejohn, C. F. Rapp, and H. C. Robinson; and they continued to act as directors for the period during which the alleged fraudulent acts were committed. Littlejohn was made secretary-treasurer and served as such until April 11, 1935. The two Societies began to solicit members and to issue to them certificates in the general form of insurance policies. An extensive advertising campaign for agents was carried on under the direction of Littlejohn and the Societies relied upon agents thus obtained to build up the membership.
Some time after the formation of the Indiana Societies ouster proceedings were instituted by the Attorney General of Indiana against the Colored Aid Society and a decree of ouster was entered on the ground that the Society, a corporation, was engaged in a profit-making business enterprise which was not authorized by its charter or the law under which it was incorporated, and which was unlawful and in violation of the statutes of the State of Indiana. During the ouster litigation the business of the National Colored Aid Society of Indiana was discontinued and its membership transferred to the National Aid Society of Colorado which had been organized by defendant and some of his employees under the nonprofit corporation act of Colorado. The Colorado organization had substantially the same objectives under its charter as the National Colored Aid Society, but the membership of the Colorado Society was not limited to persons of the negro race.
In addition to the foregoing corporations Littlejohn and his associates organized under the general corporation act of the State of Indiana the National Agency Corporation with power to act as proxy, or attorney in fact, for members of the three Aid Societies. After the formation of the latter organization the form of application blank included an authorization to the National Agency Corporation to act as the proxy and agent of the applicant for membership. Defendant was the owner of all the stock in the National Agency Corporation except a few shares issued for organization purposes, and, consequently, exercised the voting power of approximately the entire membership of the various National Aid Societies.
The National Aid Society continued to function under the control of Littlejohn until early in the year 1935. On March 11, 1935, a representative of the Post Office Department interviewed the defendant Robinson with respect to the business of the National Aid Societies, and on the following day he interviewed defendant Littlejohn in connection with the same matter.
On April 11, 1935, Littlejohn entered into a contract with one LeBlanc of Lafayette, Louisiana, for the sale of all the stock of National Agency Corporation to Mr. LeBlanc, which carried with it the control of all National Aid Societies through proxies held by the National Agency Corporation. The following day, April 12, 1935, the files and records of the National Aid Society, including some of the correspondence, the claim files and applications, the addressograph, application files, account cards, addressograph plates, some typewriter desks and chairs, were removed by truck to Lafayette, Louisiana; and on April 13, 1935, when a subpoena was served on defendant and certain other officials of the National Aid Societies, the only records which were obtained thereby consisted of some of the books of the Societies. Subsequently a portion of the claim files, applications, etc., were obtained from the purchaser, LeBlanc, who had in the meantime moved the business of the Societies to Orange, Texas. The only other assets of the Society transferred to the purchaser, LeBlanc, consisted of several drafts for the total sum of $7,739.75.
Mr. Littlejohn's testimony respecting the contract for the sale of the stock to LeBlanc was, in part, as follows: "Mr. LeBlanc also offered to give me an amount equal to two months' contribution collections out of the two societies, which then would have amounted to something like $100,000.00 or $120,000.00. He gave me a draft for $10,000.00 which bounced back;would not honor the draft after shipping all the stuff down there; he did not say why. * * * For the stock, filing cabinets, addressograph and all things like that I think I got a total of thirteen thousand dollars; it belonged to me because it came out of the expense account."
The financial result of the operation of the National Aid Society of Indiana during the period that Littlejohn acted as secretary-treasurer is indicated by the following summary:
Total contributions received by this Society up to
Total death and disability claims paid during same period 366,323.67
Compensation drawn by appellant during same period 220,005.05
Benefit fund overdrawn on same date 2,293.71
Balance in expense fund on same date ...