Before DUFFY, FINNEGAN and LINDLEY, Circuit Judges.
The appeal in 10104 is prosecuted by Alfred Sylvanus and Arcadia National Insurance Company, who were indicted jointly with Voyle Clark Johnson, appellant in 10105. The indictment charged all three defendants in 17 counts with use of the mails in attempted execution of a scheme to defraud in the sale of accident and sickness insurance policies, and in one count, the 18th, with conspiracy to commit the same offense, all in violation of Sections 338 and 88, Title 18 U.S.C. 1946 Edition, now Sections 1341 and 371, Title 18 U.S.C. Counts 5, 7, 8 and 10 of the indictment were dismissed. The jury found all defendants guilty upon each of the remaining 14 counts including that charging conspiracy, and the court entered judgments thereon.
In the two appeals, defendants urge that the District Court erred in, (1), overruling motions to dismiss the indictment; (2), denying motions for acquittal at the end of the government's evidence and at the close of all the evidence and, (3), prejudicial conduct in ruling upon evidence and otherwise in the conduct of the trial. Under (1) defendants suggest that the conduct of insurance business is regulated exclusively by state law and that, in view of the McCarran Act, Secs. 1011-1015, Title 15 U.S.C.A., the acts of Congress relied upon by the government do not apply to the offenses charged; under (2), that the evidence failed to disclose any fraudulent or criminal intent; that the policies offered to the public are not ambiguous but are rather in the form and of the substance required by Illinois law; that the advertising literature relied upon by the government did not misrepresent any material fact and, finally, that the evidence does not sustain the verdict of guilty upon the conspiracy count. They assert, under (3), that the court improperly admitted certain evidence, wrongfully refused to receive other evidence, prejudicially questioned witnesses and improperly denied instructions tendered by defendants and that the argument of the United States Attorney was unfair and prejudicial.
The indictment charged the use of the mails for the purpose of executing a scheme to defraud upon the part of the corporate insurance company, its president, Sylvanus, and one of its general agents, Johnson. The averments were essentially that the corporation, Sylvanus and Johnson grossly misrepresented the company's accident and sickness insurance policies in advertisements in magazines, almanacs and other publications and in circular letters mailed to prospective customers and that upon ensuing applications, the company issued policies not such as advertised but limited in character, misleading, ambiguous and inconsistent.
Defendants contended in their motion to dismiss that the indictment was fatally defective because of Public Law 15, 79th Congress, 15 U.S.C.A. §§ 1011-1015, popularly referred to as the McCarran Act, which provides that "No Act of Congress shall be construed to invalidate, impair, or supersede any law enacted by any State for the purpose of regulating the business of insurance, or which imposes a fee or tax upon such business, unless such Act specifically relates to the business of insurance * * *." It is clear, we think, that, by this legislation, the Congress established a public policy upon the part of the national government to refrain from interference with the regulation and taxation of insurance companies by the several states. Consequently, defendants insisted and renew the argument here, that inasmuch as it was the intent of the Congress to remove the federal government from all regulation of insurance companies and, inasmuch as this prosecution involved the propriety of the operation of the business of Arcadia, under the terms of the McCarran Act the court was without jurisdiction to entertain and determine the cause. However, we believe that it can not properly be said that this indictment has to do with the regulation of insurance business in Illinois. Rather it has to do with the question of whether defendants have used the mails in pursuance of a scheme so to manipulate their authorized regulated business in Illinois as to result in fraudulent deception of its prospective policy holders. The charge is not that the corporate charter should be ignored or that the administrative officers of Illinois may not perform their statutory duties and supervise and regulate the company's insurance business in Illinois, but goes to the use of the mails, over which the Congress has, by the Constitution, paramount power and authority. It matters not that the alleged fraudulent actors might be prosecuted under the law of Illinois. The indictment charges simply that acts of deception amounting to a scheme to defraud have been committed by defendants, in conducting their authorized business, and that defendants have availed themselves of the mails in execution or attempted execution of that scheme. It is immaterial that the fraudulent plan itself is outside the jurisdiction of Congress, Badders v. U.S., 240 U.S. 391, 36 S. Ct. 367, 60 L. Ed. 706, or that the scheme charged involved a transaction forbidden by the laws of the state. O'Hara v. U.S., 6 Cir., 129 F. 551.
We conclude, then, that it was not the intent of the Congress, by its passage of the McCarran Act, to surrender control of the use of the mails or to cease to authorize the federal courts to determine whether the mails have been utilized in attempted execution of a scheme to defraud and that the district court, by entertaining jurisdiction, did not interfere with regulation of the insurance company by the state but properly overruled the motions to dismiss the indictment.
Determination of the propriety of the denial of the motion for acquittal has necessitated extended consideration of the evidence upon our part, in order to ascertain whether it required submission to the jury. Defendant Arcadia National Insurance Company is successor to the Arcadia Mutual Casualty Company, and the Mohawk Insurance Association, in both of which Sylvanus was the essentially interested party, having been president and manager of each. Arcadia has made, from time to time, contracts with various sales agencies. Among them was the International Insurance Agency, which had its office with that of Arcadia. Sylvanus owned 51% of its stock and the remaining shares were owned by other investors in the insurance company. Another was the United States Insurance Agency, owned and operated by defendant Voyle Clark Johnson, a practicing lawyer at 30 North LaSalle Street, Chicago, where he conducted also agencies for some small mail-order institutions. Under his contract he was to receive a commission of 70% of the first monthly premiums and 50% of all renewals. Though Johnson wrote his own advertising copy, he conferred with and submitted it to Sylvanus for approval before it was sent out. Various other agencies had contracts with Arcadia, but their activities, we think, are not essentially important here.
We have before us a voluminous record. It is impossible within the compass of a reasonably limited opinion to mention all the facts. However, it is clear that very glowing advertisements were published in the form of circular letters and magazine advertisements. In various letters concerning security policies L-101 and L-102, it was said: "Think of receiving $25.00 cash, each week, to help you through a long period of disability * * * In addition * * * the policy provides up to $8,000.00 cash death benefits. * * * Save your loved ones from the Terrible Money Worries that nearly always come when the breadwinner's income is abrubtly stopped because of sickness or a sudden accident. Get Your Security Policy at once and know that you will get Quick Cash when you need it. The Security Policy pays up to $8,000.00 cash for accidental death; up to $8,000.00 cash for loss of hands, eyes or feet; up to $1,875.00 cash for loss of one hand or foot; up to $250.00 for sickness; many other liberal benefits, all as plainly specified and clearly explained in the Policy itself. The premium rate remains the same regardless of your age (between 16 and 75) no matter how long you keep it in force. * * * You need no physical examination so there will be no delay in getting your policy and you can then know you are protected. * * * You will be happy to have the protection that supplies the needed cash to pay the bills. * * * You can do little to prevent misfortune coming to your home, but you can and should see to it that your loved ones are provided for should your regular income be stopped by sickness or accident. * * * There has never been a failure of a Mutual Casualty Company in the United States. This is Your Guarantee that you will receive cash benefits promptly as provided in the liberal Security Policy. * * * Get a Policy and know that you will have immediate cash to pay the multitude of bills that come with sickness and accidents."
Concerning the L-102 policy, it was said: "Remember, Sickness - Accident - Tragedy strikes quickly, without warning. Your income stops. There may be weeks without wages. Nothing but bills! bills! bills! They pour in and pile up. You must face bills for Doctors, Medicine, Hospital, and Nursing Care. Bills for Groceries and Milk. Your rent becomes overdue; a few dollars savings left in the bank. ... Gone. Now You Can give yourself and your family the sheltering care of an Arcadia Policy. What marvelous safety it provides. * * * The Arcadia Policy takes care of you, provides sympathetic, true-hearted protection. This wonderful policy brings comfort, quick aid, ready cash help in time of need. The Arcadia Policy guards you against expense of Sickness and Accident; against the possibility of lost income. It protects you, gives your family quick cash to pay the bills. It brings wonderful cash benefits. ... at a time when you need cash most ... when all your money is pouring out, nothing coming in. Wonderful Benefits With Payment Guaranteed. * * * No Medical Examination required. * * * The payment of benefits is Guaranteed by this old reliable insurance Comapny. Each and every claim Must Be Paid strictly in accordance with provisions of the policy. Thousands and thousands and thousands of dollars have already been paid to policyholders. * * * the policy provides up to $3,750.00 cash death benefits, also hospital benefits, identification and financial aid. You are guaranteed against any increase in rates and assessment at any time."
Concerning the so-called "complete coverage" policy L-105, the Arcadia wrote: "When illness or injury disables you, you want to be certain that cash will always be available to pay for Doctors, Medicine, Hospital and other necessities to put you back on your feet. $3,000.00 in case of accidental death, $3,000.00 for loss of limbs or sight, $100.00 per month for sickness, $100.00 per month for accident, Additional benefits for hospitalization, * * * nondisabling injuries, * * * or emergencies.Refund of premiums with compound interest in case of accidental death. Women, too, can have this 8-way unlimited protection and without extra cost." In another letter it was said: "Think of this: The 'American Sentinel' Policy is not a limited policy ... definite benefits are paid for sickness or accident. What's more, there is not one extra penny of cost to women." Many other letters varying somewhat in tone but containing the same or similar representations with regard to each of the policies were received in evidence.
Typical examples of the magazine advertising follow: "Get a Security Policy so you will get cash quick when you have worrisome bills to pay. We mail you check every week as specified in Policy to help you pay your bills in time of adversity. Pays cash weekly when you need financial help. Pays up to $5,000.00 cash accumulated benefits for accidental death, loss of hands, eyes, or feet; $25.00 cash weekly for sickness; $25.00 cash weekly for accidents, all as specified in policy. $5,000.00 accumulated benefits for accidental death, $100.00 per month for accident, $100.00 per month for sickness, $100.00 emergency cash, $100.00 hospital expense. * * * The fully guaranteed Arcadia Sickness and Accident policy, offered by a staunch-old reliable company pays cash quickly for sickness or accident. No quibbling or red tape. No ifs, ands, or buts ... At the amazing low cost of $1.00 per month, you can collect up to $100 per month for sickness or accident, extra cash for hospital care, and up to $3,000 for loss of life, limbs or sight. '3 a day pays you 100 a month; pays your family $3,000 in sickness and accident.'"
Concerning the "complete coverage" policy, advertisements in various magazines read as follows: "Here is a policy without any loopholes. No ifs, ands or buts about this insurance. No tricky wording or legal catchphrases to keep you from collecting should sickness or accident befall. Every word of this policy is clear and understandable. * * * Thousands of claims paid. Any man or woman between the ages of 16 and 75 may apply for this wonderful policy without physical examination."
Defendant Johnson wrote similarly; among his statements were: "Remember, Sickness - Accident, Tragedy strikes quickly, without warning. Your income stops. There may be weeks without wages. Nothing but bills! bills! bills! They pour in and pile up. You must face bills for Doctors, Medicine, Hospital, and Nursing Care. Bills for Groceries and Milk. Your rent becomes overdue; the few dollars saving left in the bank ... Gone! Now You Can give yourself and your family the sheltering care of an Arcadia Policy. What marvelous safety it provides.* * * How comforting it is to know that your own loved ones need never wonder about money on hand when sickness or accident strikes. I am particularly glad you are taking steps to apply for this wonderful policy that protects you in so many ways - the kind of insurance you need in times like these. The 'Arcadia' Policy protects you twenty-four hours a day, seven days a week, every single week in the year. * * * The 'Arcadia' Policy takes care of You, provides sympathetic, true-hearted protection, * * * brings comfort, quickaid, ready cash help in time of need, guards you against expenses of Sickness or Accident; against the possibility of lost income. It protects you, gives your family quick cash to pay the bills. It brings wonderful cash benefits ... at a time when you need cash most ... when all your money is pouring out, nothing coming in. * * * If you are between the ages of 16 and 75 you can apply. No Medical Examination required. You can have this valuable document that pays maximum benefits of $5,000.00 for specified accidental death, or for specified loss of hands, feet, or eyesight; benefits of $25.00 each week for specific accidents, and $100.00 per month monthly benefits for disability due to sickness - Money for Emergency Aid, doctor bills, hospital, nurses - all the above as stated clearly in the amazing Arcadia Policy. * * * Cash is certainly what you need when you are laid up - it takes cash - real cash money to pay the doctor, nurse, landlord, for medicines, food and all the other bills that pile up so fast. Yes, you should have the sheltering protection of an Arcadia Policy. * * * Please realize that your situation is far more serious than you may believe. * * * I am surprised that you have not sent your application for the wonderful 'Arcadia' policy I offered to send you on my 10-day Free inspection plan, all ...