Full opinion text
BOREMAN, Circuit Judge: D. Spencer Grow and C. Oran Mensik, defendants below and appellants here, were indicted on February 19, 1963, in the United States District Court for the District of Maryland together with Charles F. Culver, A. Gordon Boone, J. Thomas Ellicott and Henry McGurren. The nine-count indictment charged them with devising a scheme to defraud and using the United States mails in furtherance of the scheme in violation of §§ 2 and 1341 0f Title 18, United States Code. On September 23, 1963, Culver tendered and the court accepted a plea of nolo contendere; Boone and Ellicott were to be tried separately. Various motions were heard on several separate days in September and October 1963. Pre-trial motions, including motions to suppress certain evidence, were denied by the court in a formal opinion. Starting to trial in Baltimore, Maryland, on October 11, 1963, eight days were consumed in selecting twelve jurors and two alternates. Motions filed on behalf of Grow, Mensik and McGurren for a transfer, previously argued and denied, were renewed and granted because of an apparent prejudice prevailing in the District of Maryland. The Maryland jurors thus selected were excused. The case was then transferred to Richmond, Virginia, for trial and, as to Grow, Mensik and McGurren, the trial proceedings commenced before a jury on November 4, 1963. The voir dire examination and selection of the jury had required three days. Honorable Roszel C. Thomsen, Chief Judge of the United States District Court for the District of Maryland, had been designated as the trial judge by the Honorable Simon E. Sobeloff, then the Chief Judge of this court. At the close of the Government’s case the judge granted McGurren’s motion for judgment of acquittal. Similar motions by Grow and Mensik were denied and these defendants elected not to testify in their own defense. The court did, however, direct the jury to return a verdict of acquittal as to Grow and Mensik on that portion of Count 1 which charged the defendants with using the United States mails for mailing a certain letter on October 28, 1959, and on Count 2, the case going to the jury on the remaining counts. The jury found Grow guilty on Counts 3 and 8 and Mensik guilty on Counts 6, 7 and 8. Motions for judgments n. o. v. or in the alternative for new trials were denied and sentences of fines and imprisonment were imposed. Each of the appellants challenges the sufficiency of the evidence to sustain his conviction. The facts, circumstances and transactions concerning which evidence was introduced are many and varied and to state them in detail would require volumes. We shall undertake to outline as briefly as possible those which the prosecution contends are sufficient, when viewed in the light most favorable to the Government to prove the guilt of Grow and Mensik beyond a reasonable doubt. In 1957 C. Oran Mensik, a Chicago savings and loan company operator, was president and chairman of the board of City Savings and Loan Association and a majority stockholder in 1st Guaranty Savings and Loan Association of Chicago. Late in the year 1957 he established in Maryland the Commercial Savings and Loan Association, and it was set up at Mensik’s direction by Robert Suchman who was a savings teller in a Chicago savings and loan association. Mensik dominated and controlled Commercial’s activities including those with respect to employees, advertising, investments and dividends. The guaranteed stock in Commercial was held by the Dollar Investment Co. of Chicago which Mensik dominated and whose nominal president was Robert Kramer, Mensik’s brother-in-law. In 1958 D. Spencer Grow was president of the Utah Savings and Loan Association and controlled Western Land Corporation, both of Utah, and was president of and owned the capital stock of Prudential Savings and Loan Association and Idaho Savings and Loan Association, both of Idaho. In April of 1959 Grow established his first savings and loan association in Maryland. He directed Harold Applegarth, of Baltimore, who was familiar with organizing and chartering savings and loan associations, to set up the First Fidelity Savings and Loan Association. Grow owned and controlled it and Applegarth became its president. International Guaranty and Insurance Co., Tangier, Morocco, purported to insure depositors’ savings accounts in Grow’s Utah Savings and Loan Association and Mensik’s Commercial Savings and Loan Association. The Insurance Commissioner of Utah, Carl Hulbert, advised Grow in the fall of 1958, in effect, that the funds of International Guaranty and Insurance Co. had been seized in California, that the Utah Insurance Department considered any insurance issued by that company as worthless and that Grow should cease advertising that the deposit accounts in Utah Savings and Loan Association were insured. This information obviously reached Mensik and in late 1958 he sent Robert Suchman and Henry McGurren, the latter a Chicago attorney and former “North American counsel” for International Guaranty and Insurance Co., to Salt Lake City, Utah, to meet with Grow and organize an insurance company to be used instead of International Guaranty. Financial Guaranty and Insurance Co., Tangier, Morocco, was formed and Grow and his close associates comprised its “Western Advisory Board.” McGurren became its “North American counsel.” In January of 1959 Grow summoned Harold Applegarth to Chicago. Apple-garth met with Grow, Mensik and Mc-Gurren. Grow informed Applegarth of his problems with the Utah Insurance Commissioner; Mensik informed Apple-garth of his problems in Chicago and Maryland (Mensik and Commercial had been indicted for mail fraud). Mensik and Grow employed Applegarth and instructed him to procure old savings and loan association charters and convert them into new savings and loan associations. Applegarth was told that, if savings and loan associations were to be successful in obtaining deposits, insurance was helpful, if not absolutely necessary, and there would be no difficulty in getting insurance. Applegarth acquired old Maryland charters in Baltimore and, at Mensik’s instruction, converted them into two new associations. The first was intended to be Mensik’s but as a courtesy he allowed Grow to acquire it and this was First Fidelity Savings and Loan Association. The guaranteed stock was held in Apple-garth’s name as nominee for Grow or Western Land Corporation. The second new association became Maryland Thrift Savings and Loan Association whose guaranteed stock was held in the name of Dollar Investment Co. for Mensik. This pattern of acquisition of savings and loan associations and concealed ownership by either Grow or Mensik was later repeated in First Guarantee Savings and Loan Association, Maryland District Savings and Loan Association, First Financial Savings and Loan Association, First General Savings and Loan Association and Maryland Financial Savings and Loan Association. On the day of its opening, March 24, 1959, First Fidelity Savings and Loan Association promptly acquired insurance for savings accounts from Financial Guaranty and Insurance Co. through Mc-Gurren, and Grow sent advertising material which had been prepared through Pace Advertising in Provo, Utah, to Ap-plegarth in Baltimore for a mailing campaign which was to begin on April 6, 1959. Grow’s Utah Savings and Loan Association and Mensik’s Commercial Savings and Loan Association acquired insurance coverage from Financial Guaranty and Insurance Co.; Suchman sent a $24,000 premium to McGurren. However, Utah Insurance Commissioner Hul-bert would not approve Financial Guaranty and Insurance Co. as an insurer on its name alone and requested Grow to furnish information on Financial’s background, officers, directors and stockholders. Hulbert warned Grow that a public hearing might be necessary. Following his initial request in early April 1959, Commissioner Hulbert twice more asked for supporting information on Financial Guaranty and Insurance Co. and on June 4, 1959, advised Grow that if he did not get the requested information he would issue a cease and desist order against Financial and publicize that it was not authorized to do business in Utah. Hulbert further advised Grow that for an insurance carrier to be acceptable to him, under Utah law, it must be a domestic company which could meet certain capital-surplus requirements and with $400,000 in U. S. Government or approved bonds on deposit with officials of one or more states for the availability of general creditors in case of company insolvency. Hulbert had directed Grow to cease advertising in Utah that Utah Savings and Loan Association’s accounts were insured and Grow had complied. The evidence clearly supports the inferences that the persistent request for information on Financial Guaranty and Insurance Co. and the possible consequences of public hearings concerning Utah Savings and Loan Association and Financial Guaranty threatened to thwart the advertising campaigns and ruin Grow’s and Mensik’s established savings and loan companies, as well as new ones in Maryland, and that Grow and Mensik were thus motivated to form a new insurance company which would quiet the Utah Commissioner and still be the subject of advertising and publicity to attract deposits and promote further expansion in Maryland. On or about April 15, 1959, Henry McGurren went to Toronto, Canada, and arranged with a young Canadian lawyer, David R. Vine, for the use of his office as a mailing address for International Guaranty and Insurance Co. and Financial Guaranty and Insurance Co., where any mail directed to them would be held for McGurren. Between mid-April and the end of June, 1959, in a series of meetings and through correspondence, McGurren advised Vine that he represented savings and loan association clients who wanted to form a Maryland insurance company which would engage in the insuring of accounts in privately owned savings and loan associations. Vine was directed to, and did, form two Canadian corporations (Lock Securities, Ltd., and Channel Investment, Ltd.). It was • understood that these companies were to hold the stock in a Maryland insurance company and the stock of the Canadian companies would, in turn, be held by two Tangier, Morocco, companies, namely, Prospectors and Investors. Ltd., and Nautilus Associates, Ltd. McGurren advised Vine: “I want to be sure that the stockholders, Nautilus Associates, Ltd., and Prospectors and Investors, Ltd., as the case may be, will always maintain a status so as to control the company either as a shareholder or by being in a position to change any director * * At about the same time that McGurren was meeting and corresponding with Vine, Mensik met with A. Gordon Boone of Maryland (the latter being one of the defendants named in the indictment) in Baltimore at the Emerson Hotel. Robert Suchman, who was present during a part of the discussion, testified that Mensik and Boone discussed the formation of a Maryland insurance company which would have some local stockholders and it was understood that Boone should select a manager or president and fix the salary he should receive. Grow obviously knew of the plan as he advised Apple-garth they would probably soon have a Maryland insurer to insure their accounts and that A. Gordon Boone would be connected with it. At a casual meeting in May 1959, Boone told Charles F. Culver, a general insurance agent and Boone's fellow member of the Maryland legislature, that he was forming an insurance company. Culver, who was experienced in the insurance business, asked that he not be forgotten and later, in August 1959, Boone informed Culver, who had suffered a heart attack and was then ill, that he, Culver, had been elected as the president of Security Financial Insurance Co. which had been incorporated in Maryland, that Culver’s salary was to be $200 per month and that he need not devote more than about two hours twice each week to the corporation’s affairs. Culver’s salary was substantially increased thereafter. In late June 1959 Grow advised Commissioner Hulbert that insurance for Utah Savings and Loan Association’s depositors would be available by July 13, 1959, and that the insuring company would satisfy the Commissioner’s requirements. Grow later postponed this date until the end of July and Hulbert fixed a deadline as of July 31. Prior to July 28, 1959, McGurren had given Vine an outline of the method of financing SFIC and on that date McGur-ren and Robert Kramer, Mensik’s brother-in-law, went to Toronto and with Vine carried the previous outline into effect. About $216,000, (3%) Canadian Government bonds, $50,000 in treasury bills, a $30,000 draft and a certified check for $100,000, aggregating in value approximately $400,000, were produced by McGurren. The bonds, bills, etc., were converted into cash and the funds were deposited in the Bank of Nova Scotia in accounts opened in the names of Lock Securities, Ltd., and Channel Investment, Ltd. Bank drafts in the amount of $390,000 were obtained with which to purchase “shares” of SFIC, according to Vine’s testimony. This left a small balance in each of the bank accounts established for Lock Securities and Channel Investment. Lock and Channel then issued promissory notes to specific companies for amounts owed to them, notes in the amount of $270,000 to Financial Guaranty and Insurance Co., about $100,000 in notes to Universal Fidelity Insurance Co., and about $30,000 in notes to Western Land Corporation. At McGurren’s request one note of $135,000 to Financial Guaranty and Insurance Co. was exchanged for two notes, one for $100,000 to Financial Guaranty and one for $35,-000 to First Fidelity Savings and Loan Association in Baltimore. These notes were delivered to McGurren and Vine testified that he later substituted “bearer notes” for the specific obligations from time to time at McGurren’s direction. On or about July 24, 1959, Grow advised Applegarth it appeared that First Fidelity Savings and Loan Association was going to have a Maryland insurer and that he wanted Applegarth, acting for First Fidelity, to do two things in that connection, namely, (1) purchase $30,000 worth of mortgage insurance from Financial Guaranty and Insurance Co., pursuant to instructions to be given by McGurren, and (2) purchase a mortgage in the amount of $42,000 from First Fidelity Thrift and Loan Association (located in Provo, Utah, of which Grow was president) on property which was covered by a prior $7,000 mortgage held by the First Fidelity Thrift. These two things were accomplished. (First Fidelity of Baltimore sent its checks to First Fidelity Thrift of Provo, the $7,-000 mortgage was paid and $35,000 was returned to First Fidelity of Baltimore. This amount was turned over to Henry McGurren in cash by Applegarth and McGurren said, “Well, you have got yourself an insurance company,” or words to that effect.) Mensik had previously instructed Robert Suchman, the president of Commercial Savings and Loan Association, to purchase mortgage insurance from Financial Guaranty and Insurance Co. and Suchman had paid in excess of $100,000 for it. However, Commercial never did receive a policy evidencing this mortgage insurance and First Fidelity Savings and Loan Association received its policy a year and a half later only after repeated requests from Applegarth. The Canadian drafts aggregating $390,000 were run through McGurren’s private bank account in Chicago and the funds were used to purchase New York drafts. On July 30 McGurren came to Baltimore and met with Boone and Suchman. Applegarth delivered $35,000 in cash to McGurren as stated above. Boone opened a bank account in the name of SFIC, used the drafts and cash to make an initial deposit of $425,000 and SFIC was incorporated in Maryland on July 30, 1959. Upon incorporation the following constituted SFIC’s Board of Directors: A. Gordon Boone, J. Thomas Ellieott, Boone’s law partner, and Lillian Kone, their secretary. The first meeting of the Board was held on July 31, 1959, and the officers elected were Charles F. Culver, President, Cazimir Szymaniski, Vice President, and Claude A. Hanley, a Baltimore attorney and former Maryland Insurance Commissioner, Secretary-Treasurer. El-licott and Lillian Kone immediately resigned as directors and others were elected. The Board of Directors was then composed of five persons, W. H. Lind, Michael J. Birmingham, A. Gordon Boone, Cazimir Szymaniski and Berth C. Isaac. The total authorized common capital stock of SFIC, 250,000 shares, was issued, each share having a par value of $1. 16,206 shares were issued to A. Gordon Boone, 10,206 shares were issued to J. Thomas Ellieott, 3,000 shares to Michael J. Birmingham and the remainder to the two Canadian companies, Lock Securities, Ltd., and Channel Investment, Ltd. Boone and Ellieott became SFIC counsel. Utah Commissioner Hulbert’s last deadline to Grow was by letter on September 2, 1959. He advised Grow that unless the insurance matter was straightened out by September 15, 1959, the steps, previously threatened, would be taken. On September 14, 1959, SFIC was licensed in Maryland and authorized to do business by the Maryland Insurance Department and on that very date binders of insurance on savings accounts were issued to the Utah Savings and Loan Association and First Fidelity Savings and Loan Association of Baltimore. Grow was in Baltimore and personally picked up the binders and delivered First Fidelity’s to Applegarth. In rapid succession SFIC issued thirty-to sixty-day binders of insurance on savings share accounts to the following associations and on the specified dates: Prudential Savings and Loan Association, Idaho, September 28, 1959; Maryland Thrift Savings and Loan Association, Baltimore, September 28, 1959; Idaho Savings and Loan Association, Idaho, November 16, 1959; Commercial Savings and Loan Association, Baltimore, December 1, 1959. As of December 1, 1959, SFIC purported to insure savings share accounts in four Grow associations and two Mensik associations. These binders were issued by SFIC without any audits or examinations of the associations and without any estimate of risks insured. At the “meeting” at which these binders were authorized the only director physically present was Boone and he voted the proxies of Szymaniski and Birmingham. At the time of the issuance of the insurance binders, applications had not been received and eligibility or initial premium payments of $1,000 had not been made. SFIC had little, if any, information or record concerning its insureds. At Grow’s direction and with his knowledge Applegarth back-dated First Fidelity’s correspondence with SFIC and the application for insurance after Grow had been issued the binder in September and the initial eligibility fee was not paid until December. Robert Suchman did the same thing for Commercial Savings and Loan Association at the direction of Mensik and, in response to an earlier inquiry from Such-man concerning applying for insurance from SFIC, Mensik said: “We do not want to get this insurance right away, Bob, because people will accuse us of being connected with the insurance company.” On December 12, 1959, Grow, Ellicott, Culver and others held a meeting at the offices of SFIC in Baltimore and correspondence and documents were prepared by a “Kelly Girl,” Miss Jean Ke-ene. Eligibility payments were made and an entire file, including a binder, was created for the Idaho Savings and Loan Association, Grow having brought appropriate stationery with him to Baltimore for this particular meeting. The explanation was offered through Culver that a duplicate file on Idaho was created to replace a file which El-licott said he had lost. A call from the Associated Press concerning insurance of Idaho Savings and Loan accounts and an impending visit from the Maryland Insurance Department’s examiner could well have precipitated these maneuvers. SFIC established two channels through which it proposed to receive information on the conditions and operations of insured savings and loan associations and associations seeking insurance. One was a form of “Monthly Report,” printed by SFIC and distributed to its insured saving and loan associations. The other regular source of information was Bernard S. Aiken. In the latter part of October 1959, SFIC had engaged the accounting firm of Sidney London and Co., but principally the services of an associate of that firm, Bernard S. Aiken, to make examinations of associations which applied for insurance and to reexamine insured associations on an annual basis. Aiken had previously made examinations of several Mensik associations and was hired by Culver, SFIC’s president, upon Suchman’s recommendation to Ellicott. Aiken submitted to SFIC written reports of his examinations and discussed them with Culver. Aiken also met with Men-sik in Chicago and discussed with Mensik various aspects of the savings and loan association examinations which he was making on behalf of SFIC. His discussions with Mensik included results of examinations of Commercial Savings and Loan Association, Maryland Thrift Savings and Loan Association, Maryland District Savings and Loan Association, First Financial Savings and Loan Association, First General Savings and Loan Association and Maryland Financial Savings and Loan Association. Particularly on these occasions he discussed with Mensik the critical portions of the reports labeled “Confidential Comments.” The expenses of these trips of Aiken to Chicago were borne by SFIC. In the summer of 1960 Boone, Ellicott and Culver met with Mensik and advised him that they were displeased with Aiken. Boone and Ellicott were displeased because Aiken had criticized certain legal fees paid to them by SFIC. Culver was dissatisfied because Aiken was not, in his opinion, giving a full picture of the condition of savings and loan associations in the report of examinations and because Aiken was too close to the insured associations. Mensik told them that “Bernie” (Aiken) was good to have because he was “flexible.” Aiken was retained as SFIC accountant. In January of 1960 Aiken was directed to begin an examination of the Utah Savings and Loan Association. C. M. Gilmour, an attorney of Salt Lake City, was hired by Boone to work toward getting SFIC licensed in the State of Utah. As a result, SFIC was furnished with an examination report by Aiken, a report letter from Gilmour and a third report identified by Aiken as a report of examination of the Utah Savings and Loan Association by the Banking Commissioner of Utah. These reports indicated, in effect, that Utah Savings and Loan Association was and had been in a very precarious financial condition due to Grow’s mismanagement. SFIC and Cul-ver had been informed through Aiken’s reports that Grow’s First Fidelity Savings and Loan Association was in bad financial condition, that its books were in horrible shape and that Applegarth, its president, was spending funds recklessly. Within a short time after the Gilmour letter was received in April of 1960, Culver discussed these conditions with Grow and continued to discuss them with him on every occasion that he saw him. Grow advised Culver that he was trying to work out these problems. Culver, in March of 1960, complained to Mensik in Chicago about Grow and the reported situation in the Utah Savings and Loan Association and First Fidelity. Mensik told Culver, Boone and Ellicott that Grow had had a difficult time and that he, Mensik, would talk with him. However, insurance binders on the Utah Savings and Loan Association and First Fidelity were continuously and automatically renewed by SFIC throughout 1960 and 1961. . About the middle of January 1960, Aiken reported to SFIC on Maryland Thrift Savings and Loan, informing SFIC that Maryland Thrift had assets of $43,000 and that for the eleven-month period ending November 30, 1959, it had a net loss from operations. He next examined this association as of April 30, 1960, and his report delivered to SFIC in early June 1960 disclosed that Maryland Thrift continued to have an operating loss and that the association had paid dividends illegally. SFIC’s Monthly Reports from Maryland Thrift indicated operating losses through 1961 but a growth in savings accounts from approximately $25,000 to more than $600,-000. Maryland Thrift had been issued an insurance binder on September 30, 1959, and it was never canceled. Maryland District Savings and Loan Association (a Mensik association) made application for insurance on December 15, 1959. Aiken’s report of December 23, 1959, informed SFIC that for the year ending that date the association had reported a loss. However, the insurance binder to Maryland District was issued by SFIC on December 28, 1959. Aiken’s subsequent reports informed SFIC that Maryland District had operated at a loss for the first four months of 1960, that the loss would likely continue and that Maryland District was operating from the same office as Commercial Savings and Loan Association in Baltimore. SFIC automatically renewed the insurance binders to Maryland District. Applegarth had purchased, for Grow, Broadway Savings and Loan Association but the name was later changed to First Guarantee Savings and Loan Association, chartered in Maryland. The stock was held by Irwin Phelps, a former Utah Savings and Loan employee, as nominee for Grow. Aiken transmitted to SFIC a report of an examination of this association on July 11, 1960, and the report disclosed that the total capital and liabilities of First Guarantee were $10,500, and that for the six-month period ending June 30, 1960, its income of over $14,500 was derived from interest on time deposits. SFIC approved the issuance of the policy to this association on July 19, 1960, effective July 1, 1960. The next Aiken report informed SFIC that First Guarantee Savings and Loan Association had operated at a deficit for the nine months ending March 31, 1961. Monthly Reports to SFIC indicated continued operating losses by First Guarantee but by May 31, 1961, it was disclosed that deposits had grown to over $800,000. Three Mensik savings and loan associations, First Financial, First General and Maryland Financial, were reported by Aiken as having just been incorporated and as not having engaged in any transactions involving a profit or loss. Further, Aiken reported their capitaliza-tions to be below $8,000 as of the dates of the reports sent to SFIC in June and July of 1960 and January 11, 1961. The first two associations were issued policies by SFIC on July 19, 1960, and Maryland Financial was issued a policy on January 15, 1961. One Murray Michael was president of Military Service Savings and Loan Association, Maryland, and in December of 1959 he approached Harold Applegarth, president of First Fidelity, concerning the possibility of obtaining SFIC insurance. Applegarth told Michael to see Grow and that if Grow became a part owner of Military Service Savings and Loan or obtained control over it, he would have a good chance of obtaining SFIC insurance. Applegarth repeated this conversation to Grow and Grow told him that Michael had been to Utah to see him and Grow directed Applegarth to take Michael to Culver so that Michael could apply for insurance. Michael applied for and obtained SFIC coverage. Aiken’s communications and SFIC’s Monthly Reports on Military Service Savings and Loan disclosed operating losses and that there were no complete records for over $800,000 in mortgages in which this association had invested its depositors’ funds. In the spring of 1960, Grow and Men-sik persuaded SFIC to insure another western savings and loan association, First Fidelity Thrift and Loan of Utah, although Culver was adamant in his opposition to the issuance of a binder since no audits or examinations of the association had been made. In this instance the binder was canceled in a short time due to Culver’s opposition and the apparent desire of Grow and Mensik that Culver be retained by SFIC. On one other occasion Culver resisted the automatic granting of insurance to a Mensik controlled association, the Progressive Annapolis Savings and Loan Association of Maryland. Mensik told Culver that he had invested a lot of money and needed the insurance. Culver resisted because he had given his word to another association in Annapolis, an independent not controlled by Grow or Mensik, that no other association there would be insured. Culver submitted his resignation, Boone and Mensik discussed it and both the application and resignation were withdrawn. However, Progressive Annapolis merged with an insured association, Hagerstown Savings and Loan Association, Maryland, and Mensik’s purpose was accomplished. In January of 1960 Boone, Ellicott and Culver flew to Salt Lake City, Utah, to meet Grow. Grow told them that it was urgent that SFIC be licensed in Utah so that he could advertise there that Utah Savings and Loan Association’s deposits were insured. Insurance Commissioner Hulbert was unavailable but the group met with Utah Banking Commissioner Taylor. Commissioner Taylor immediately demanded information as to who owned the company and who was behind the Canadian companies, Lock Securities and Channel Investment. They answered that they did not know. The Insurance Commissioner of Maryland received the same answer to the same question from Boone, Ellicott and Culver a short time later. In April of 1960 Boone, Ellicott and Culver went to Chicago to meet with Mensik and McGurren. They told Mensik of the pressure being applied by these insurance departments and that they had to have something in the way of information to give to the Commissioners. McGurren advised that he would try to get it. McGurren went to Canada and had Vine execute affidavits of ownership which stated that the books and records of' Lock Securities and Channel Investment disclosed that Vine, his wife and father were the sole shareholders of these companies. These affidavits were made on April 21, 1960. Vine’s father was then dead. On that same day or the day following, McGurren had Vine and his wife execute Declarations of Trust to the effect that they held the shares of Lock Securities and Channel Investment as nominees for Nautilus Associates, Ltd., and Prospectors and Investors, Ltd. The affidavits, which may be characterized as literally true but inherently misleading, were sent to SFIC and then forwarded to the Insurance Commissioners of Idaho, Utah and Maryland. From its very beginning SFIC conducted a campaign of promotion and advertising through letters, decals, plaques, shields, sample policies, financial statements and passbook stuffers. Sometime in March 1960 Ellicott had prepared for SFIC a “question-and-answer” brochure which, according to Culver’s testimony, was ordered from an advertising firm. Between March and December of 1960 these brochures were ordered by SFIC in large quantities, totaling over 175,000. Some were delivered to SFIC while others were delivered directly to First General Savings and Loan Association and First Financial Savings and Loan. In the “question-and-answer” brochure the first question was: “What is the Security Financial Insurance Corporation ?” The answer to this question was, in part, as follows: “The company is dedicated to guarantee the safety of savings in the institutions that it insured.” The ninth question was as follows: “What protection is offered savers who place funds in institutions insured by Security Financial Insurance Corporation ?” The answer to that question advised as follows: “Savings are protected by: a. Insurance company requires annual examinations of the insured institution, b. Security found in real estate mortgages, U. S. Government bonds and other assets, c. Sound, progressive operating policies. d. Insurance against loss offered by Security Financial Insurance Corporation.” SFIC was constantly receiving letters from depositors and prospective depositors in its insured savings and loan associations. Persons throughout the country were inquiring about the safety of their savings, about SFIC and about the savings and loan associations. Culver discussed the replies of SFIC with Boone and Ellicott, answered the inquiries and enclosed with the replies the question- and-answer brochures and other promotional material. Supplies of the question-and-answer brochures were distributed to the insured savings and loan associations which solicited them. Such-man testified that soon after the brochure was prepared Mensik told him that he liked the way it was written and directed Suchman to send it to shareholders of Commercial Savings and Loan who inquired about SFIC. Commercial had procured insurance from SFIC in December of 1959 and Suchman was Commercial’s president. The question-and-answer brochure was distributed to Grow-controlled associations in April 1960, and additional quantities were sent within ten days after the first distribution. In the fall of 1960 Grow visited First Guarantee Savings and Loan Association on at least two occasions. He checked the Association’s files to determine how depositors’ inquiries were being handled, whether printed matter was being sent and advised Phelps, then president of First Guarantee, how the inquiries should be answered. He particularly wanted SFIC’s brochure sent out and told Phelps it was a good brochure and that it answered people’s questions about SFIC. Late in 1960 or early in 1961, Mensik suggested to Culver that SFIC should engage in newspaper advertising and showed Culver a draft of an ad which had been prepared at Mensik’s direction by Sigmund Aiken, an advertising man. At a second meeting in late January or early February, Mensik was shown a layout of an ad prepared by another advertising agency. Mensik was pleased with the layout although he suggested unsuccessfully that it should include a list of savings and loan associations insured by SFIC. It was published by SFIC as a full-page advertisement in the Baltimore Sunday Sun on February 5, 1961. It read, in part: “Does your savings and loan association display this sign of Security in its offices and advertisements ? If it does, you’ll be interested to know your Savings and Loan Association earned the privilege of displaying this emblem * * In early April of 1961, Culver, Boone, Ellicott, Mensik and McGurren met in Baltimore to discuss a recently enacted Maryland law which had the effect of prohibiting SFIC from granting insurance to any additional savings and loan associations. By letter, Culver had agreed with the Insurance Commissioner of Maryland that SFIC would obey the law although it was not to become effective until two years later. Mensik criticized Boone and Culver for the passage of the law and particularly for agreeing to comply with the Commissioner’s demand. Mensik said it would destroy SFIC and its insured associations. Shortly after this meeting Culver tendered his resignation to McGurren. McGurren persuaded Culver to remain until a replacement could be found. Boone and Ellicott visited Chicago and upon their return the entire board of directors of SFIC resigned on July 17, 1961. A meeting of SFIC stockholders was held in Baltimore the following day. McGurren was present representing the stockholders and a new board of directors was elected. Its members were David F. Woods, George Christian, William Peat, Thomas Paul Raimondi and Richard Rosche. Mr. Woods was elected president and chairman of the board, while Mr. Rosche became office manager. Mr. Woods was a former public relations man, realtor and free-lance writer and had never been in the insurance business. Mr. Christian at the time was president of Maryland District Savings and Loan Association and had been assigned by Mensik and McGurren the duty of inspection of First General, First Financial, Maryland District, Progressive Annapolis and Maryland Thrift Savings and Loan Associations. Mr. Rosche at the time was manager of First General Savings and Loan Association. At about the time of his selection as office manager of SFIC, Rosche met with Mensik, McGurren and Kramer in Chicago and they outlined to him what his duties would be. Raimondi was then president of First Fidelity Savings and Loan Association and the holder of the guaranteed stock in First Guarantee Savings and Loan Association for Grow. Ellicott remained as counsel for SFIC. The Government contends that the foregoing recitals of evidence showed Grow’s part in controlling SFIC, his participation in the scheme and, consequently, his responsibility for the representations made to investors and prospective investors interested in obtaining an interest return on their deposits; that the Government’s evidence was sufficient to prove that Grow had a consuming interest in advertising, that he directed the advertising for First Fidelity Savings and Loan and the western associations in Utah and Idaho through Pace Advertising in Provo, Utah; that advertising of the insurance, of deposits by his controlled savings and loan associations was automatic and that his principal objective in the creation of SFIC was to place his associations in position to so advertise ; that the evidence showed specifically that Grow requested financial statements and was interested in them for advertising purposes; that he requested a supply of question-and-answer brochures prior to April 11, 1960; that a supply was sent upon solicitation; that within ten days after receiving the first supply 2000 more brochures were sent to each of Grow’s western associations; that he approved the brochure and instructed Phelps, president of First Guarantee, to send the brochure to depositors in response to inquiries. The Government further contends that the evidence relating to the issuance of insurance binders to Grow’s associations and their automatic renewal, the evidence of the backdating session of December 12, 1959, the testimony of Culver that everytime he saw Grow he discussed with Grow the reported poor conditions in First Fidelity and Utah Savings and Loan and that Grow stated he was trying to do something to correct the situation, all tend to support the inference that Grow had knowledge of the falsity of the representations. The Government further contends that the evidence discloses Mensik’s direct connection with the formation of the scheme and the use of the mails in furtherance thereof. The Government did not contend that all of the defendants named in the indictment were together at any one time and then and there planned and devised a scheme to defraud prospective depositors in the savings and loan associations insured by SFIC. The jury was so instructed. In substance and by way of summarizing, the prosecution contends: that the indictment charged and the evidence proved a scheme to defraud and to obtain money by means of false and fraudulent pretenses, representations and promises while at the same time willfully concealing material and qualifying facts; that the representations charged were that SFIC was dedicated to guarantee savings; that SFIC required reporting and examinations so that it could exercise strict supervision of the insured savings and loan associations and require them to maintain high standards of financial responsibility; that SFIC insured only qualified associations which had earned the right to insurance; that the specific representations were proved to have been made by letters, question- and-answer brochures, sample policies, financial statements and newspaper advertisements. Consistent with the theory of the prosecution, the court told the jury: “It is sufficient that a scheme to defraud and to obtain money by false pretenses and representations, as alleged in the indictment, was conceived in the minds of one or more of the five defendants who remain in the case, namely, Mensik, Grow, Boone, Ellicott and Culver [the court had at that time ended the ease as to McGur-ren]. If it was and if Grow or Men-sik, with knowledge of the scope of the scheme, knowingly and intentionally entered into and participated therein, then he would be a party to the scheme and responsible in law for the acts of his fellow participants, in furtherance of the scheme if committed during the existence of the scheme and his participation therein.” Again, consistent with the basic theory of the prosecution, the court explained to the jury that it was an essential element of the offenses charged that the making of at least one of the alleged representations or pretenses was a part of the scheme; that any such representation or pretense was untrue and was made in furtherance of the scheme and with knowledge of the falsity thereof when made; and that the jury must so find before it could convict on the substantive charges of use of the mails in furtherance of the scheme. The court further told the jury that the indictment charged that the defendants, while making false and fraudulent pretenses and representations would and did knowingly and willfully conceal material and qualifying facts as follows: (a) That SFIC was organized, incorporated and operated by the defendants for the primary purpose of enabling savings and loan associations controlled and dominated and to be controlled and dominated by the defendants Mensik, Grow, and Ellicott to advertise that savings accounts in said savings and loan associations were “insured”; and (b) That SFIC and its officers and directors were continually informed that savings and loan associations insured by SFIC, including those associations dominated and controlled by Ellicott, Grow and Mensik, were being operated in a manner inconsistent with sound financial practices and in a manner that jeopardized the safety and security of the funds invested by investors in savings accounts in their associations. The additional explanation was made that proof of such concealment was not an essential part of the case as was proof of one of the misrepresentations “an essential part,” but evidence with respect to alleged concealments might be considered by the jury in deciding “the points which are essential.” The Government produced evidence to show that Grow and Mensik were in the established business of operating savings and loan associations in which they had substantial and controlling financial interests although in several instances their ownership was concealed; that they knew their associations must be in position to openly and publicly represent that their depositors’ accounts were insured in order to attract deposits and to compete with other savings and loan associations whose deposit accounts were insured; that insurance purportedly provided by International Guaranty and Insurance Company (of Morocco) and next by Financial Guaranty and Insurance Co. (also of Morocco) was not approved by the Utah Insurance Commissioner; that Grow, Mensik, McGurren, and others were responsible for the creation, organization, and operation of SFIC under the circumstances and in the manner as hereinbefore shown; and that SFIC was created for the ostensible purpose of replacing Financial Guaranty and Insurance Co. as insurer of deposits primarily in savings and loan associations owned and controlled by Grow and Men-sik. Further insight into the nature of the alleged scheme to defraud may best be gleaned from the court’s explanation to the jury of the charges contained in the indictment. The court told the jury that it was “part of the scheme and artifice to defraud and obtain money and property by means of false or fraudulent pretenses, representations, and promises and in furtherance thereof that the six defendants named through the preparation and distribution of brochures, specimen insurance policies, advertising, leaflets, financial statements, newspaper advertising and correspondence, would and did make, cause to be made and approved the making of the following false and fraudulent pretenses, representations and promises, well knowing at the time that said pretenses, representations, and promises would be false and fraudulent when made.” The court further spelled out and explained to the jury that the four such fraudulent pretenses, representations, and promises charged as follows: (1) That SFIC was dedicated to guarantee the safety of the savings in the institutions that it insured; (2) That associations insured by SFIC earned the right to acquire insurance from SFIC by meeting high standards of financial responsibility required and enforced by SFIC; (3) That associations insured by SFIC were required by it to maintain high standards of financial responsibility and were therefore financially sound; (4) That SFIC, by requiring insured associations to submit to it monthly reports and periodic examinations and audits conducted on behalf of SFIC, exercised strict supervision over financial practices and operating procedures of associations insured by SFIC. The Conviction of Grow on Count 3 The indictment charges that the scheme to defraud was devised on or before June 16, 1959, that date being within the period when the plans for the creation of SFIC were being developed and pursued. However, according to the court’s holdings, assertedly based on the evidence, Grow’s complicity, if any, in the scheme consisted of his “adherence” to a scheme previously devised. As shown, the court directed a verdict in favor of both Grow and Mensik on Count 1 of the indictment which count was based on a letter prepared by Culver for SFIC containing alleged misrepresentations and mailed out by Culver on October 28, 1959. The court said: “In Count 1 I am satisfied that Mr. Culver, of course, sent the letter out. I am satisfied that.the scheme became a scheme to make false advertising no later than that date [October 28, 1959] because Mr. Culver sent out the misrepresentation letter on that date, but I find no evidence that Mr. Mensik of Mr. Grow had adhered to the false advertising aspects of the scheme at the time the Count 1 letter was sent in October, 1959. Therefore, I will direct a verdict for both defendants on Count 1.” Count 2 charged all defendants with the mailing of a letter dated November 27, 1959, but the court found no evidence of the adherence to the false advertising aspects of the scheme by either Grow or Mensik at the time of such mailing. Count 3 charged all the named defendants with mailing a letter on or about April 9, 1960, addressed to “Mr. and Mrs. Lillian I. Summers” in Romulus, New York, with which was enclosed one of the question-and-answer brochures. The letter is reproduced below. The letter was signed by “First Fidelity Savings & Loan Assn. Harold G. Applegarth, President.” One element of the offense defined by the mail fraud statute is that the mailing must be for the purpose of executing the fraud. Kann v. United States, 323 U.S. 88, 95, 65 S.Ct. 148, 89 L.Ed. 88 (1944). Significantly, Grow alone was convicted on this count, presumably because of his personal connection with the ownership and control of First Fidelity. Mensik was acquitted. Certainly there was no evidence that Grow himself mailed the letter. If the conviction on this count is to stand it must be on the theory that Grow directed Applegarth to mail the letter or that Grow was responsible for the act of one of his fellow participants “in furtherance of the scheme if committed during the existence of the scheme and his participation therein.” Applegarth was not named in the indictment as a defendant, nor was he criminally charged with having devised or having participated in the scheme. In an effort to show that Grow was familiar with the question-and-answer brochure, which contained the allegedly false representations, at the time of the mailing offense charged in Count 3, Mrs. Boulay, who was secretary to Culver, president of SFIC, testified that the brochures were first received by SFIC around March 31, 1960. She identified copies taken from SFIC files of certain one-sentence letters, all dated April 11, 1960, which she wrote advising of the shipment of a supply of the brochures to each branch of Grow’s Idaho and Prudential (of Idaho) associations. Each letter began with the salutation “Gentlemen,” and indicated that “As requested by Mr. Grow” she was sending a supply of the brochures by Railway Express. The court ruled that these letters and bills from the express company were admissible to prove that material was sent, but added: “If you want to show that they were sent at the request of Mr. Grow, you will have to produce someone to say they were.” Upon interrogation and cross-examination, Mrs. Boulay could not testify from personal knowledge as to the receipt of any such request from Mr. Grow. Nor was any other witness produced who testified to such request. There was no evidence, other than Mrs. Boulay’s letters noted above, pointing to the fact that Grow knew of the existence of the question-and-answer brochures by April 11, 1960. There may have been room to suspect that Grow then had such knowledge, but mere suspicion is not to be substituted for evidence. No letters from Grow or his associations were produced which would indicate a request for such brochures, and Mrs. Boulay testified that at no time did Mr. Grow ever call her and make such a request. There is no evidence that Culver or Mrs. Boulay sent the question-and-answer brochures to Applegarth at First Fidelity with a view to causing him to mail them to prospective or existing depositors. There is no evidence that Grow, up to that time, had ever discussed these brochures with Ap-plegarth, with any of the defendants, or with any other person. Consequently, there being no evidence that Grow himself mailed the letter and brochure in question on April 9, 1960, the only basis for finding that Grow caused the mailing is to draw an inference, seemingly wholly unsupported by evidence, that he had something to do with preparing or approving the brochure, or authorized or acquiesced in sending it to the various associations which he owned or controlled with the expectation that the associations, in turn, would mail them out to prospective .depositors. There is no showing that any other of Grow’s associations at or near that time ever- mailed a single question-and-answer brochure or that First Fidelity mailed any, other than the one with Applegarth’s April 9, 1960, letter. The court instructed the jury with respect to Count 3 that they could convict Grow (1) if they found that he willfully caused the letter to be mailed by an employee of First Fidelity, or (2) if Grow participated in the scheme and a “fellow participant” caused the mailing. The court further instructed that the jury could consider Culver a “fellow participant” if he and Grow participated in the scheme and that, if Culver distributed the brochure with the knowledge or expectation that it would be distributed by mail, or if such distribution could have been reasonably foreseen by him, “even though not actually intended,” the jury could find that Culver caused the mailing. We think this instruction was without proper supporting evidence. An inference is a logical deduction or conclusion from established fact. “ * * [C]harges of conspiracy are not to be made out by piling inference upon inference. * *. When the first or basic inference is impermissibly drawn it cannot thereafter serve to support other inferences upon which a subsequent finding is based. Furthermore, the court instructed the jury as follows: “Before you may find that a defendant, including Culver, caused something to be done, you must be satisfied from the evidence that the defendant possessed the capacity, authority or power to occasion another or others to do an act which the defendant might otherwise have done and that the defendant did in fact exercise that capacity, authority or power in the manner alleged in the indictment.” There was no evidence nor was there even a token effort by the prosecution to prove that Culver possessed any capacity whatever at the time of the mailing of the April 9, 1960, letter to cause First Fidelity or Applegarth to do anything. Upon an apparent presumption of such a capacity, acts of Culver were permitted to be ascribed to Grow through Applegarth. It is an impermissible conclusion that the SFIC mailing of the brochures to Grow’s Idaho associations on April 11, 1960, could establish that Grow had “adhered” to the false advertising scheme by way of the question- and-answer brochures, and the representations therein, on April 9, 1960. We think it was error to allow the jury to consider whether Grow caused Apple-garth to mail the Count 3 letter and the accompanying brochure on April 9, 1960, two days before the brochures were sent even to the Idaho associations. The Convictions of Mensik on Counts 6 and 7 Without consideration at this point of certain claims by Mensik of prejudicial errors in connection with his trial, which claims will be discussed infra, we turn to Mensik’s convictions on Counts 6 and 7. Count 6 charges all of the defendants named in the indictment with the mailing of a letter dated March 29, 1961, addressed to Mr. Harold M. Brightbill, R.D. #3, Myerstown, Pennsylvania, with one of the question-and-answer brochures for the purpose of executing and attempting to execute the scheme to defraud. This letter was written on stationery of SFIC and was signed by Albert K. Wood, Assistant Secretary. A copy of this letter is set forth below. Count 7 charges all of the defendants named in the indictment with the mailing of a letter dated March 30, 1961, addressed to Mr. Gerald C. Jansek, Cam-denton, Mo., with one of the question- and-answer brochures and an advertising leaflet of SFIC for the purpose of executing and attempting to execute the scheme to defraud. This was a letter from Commercial Savings and Loan Association, one of Mensik’s associations, and was signed by H. M. Ferrari, Office Manager. A copy of this letter is set forth below. Upon a challenge to the sufficiency of evidence to sustain a conviction it is axiomatic that the evidence, whether direct or circumstantial, including reasonable inferences to be drawn therefrom, must be viewed in the light most favorable to the prosecution, and the verdict will be upheld if there is evidence to support it. It was shown by an abundance of evidence that SFIC was organized for the primary purpose of providing an insurer of depositors’ accounts in savings and loan associations owned and operated by Mensik, Grow, and another of the named defendants, Ellicott. When International Guaranty and Insurance Co. (of Morocco) could not provide acceptable insurance Financial Guaranty and Insurance Co. (also of Morocco) was formed and undertook to provide insurance for Mensik and Grow’s associations. But it, too, proved to be unacceptable to the Utah Commissioner of Insurance. In the early through the middle part of 1959, Mensik and Boone discussed the formation of the Maryland insurance company, SFIC, and the various steps which were taken and which ultimately resulted in the incorporating and licensing of SFIC in September of 1959 have been outlined herein in sufficient detail. Certainly there was nothing illegal in the formation of SFIC, and the jury was so instructed. It was only one circumstance in a chain of circumstances entering into the devisal and development of the alleged scheme to defraud. It is unnecessary to again recite the evidence, viewed in the light most favorable to the Government, which clearly disclosed the personal interest of both Mensik and Grow in obtaining a marketable insurer for depositors’ accounts in savings and loan associations and their participation in the formation of SFIC. Culver’s connection with SFIC as president and principal managing officer was effected through Boone and the close contacts and relationships between Boone and Mensik were clearly shown by the evidence. On September 14, 1959, the day on which SFIC was authorized to do business in Maryland, binders of insurance on savings accounts were issued by SFIC to two of Grow’s associations and in rapid succession other binders were issued so that by December 1, 1959, four of Grow’s associations and two of Mensik’s associations were “insured.” The binder to Mensik’s Commercial Savings and Loan, Baltimore, was issued on December 1, 1959. Mensik had told his close associate, Suehman, that they did not want to get this insurance right away because people would accuse them “of being connected with the insurance company.” These binders were issued without any audits or examinations of the insured associations, without any estimate of the risks insured, in some instances without proper applications and without payment of the prescribed initial deposit or qualifying fee. The issuance of the binders was authorized by Boone, the only director physically present at the “meeting,” who voted the proxies of two who were obviously “dummy” directors. One of the five directors at that time was a close business associate of Mensik, two were closely associated with Grow (one Grow’s brother-in-law), and Boone was one of SFIC’s attorneys. Thus did SFIC begin its operations, issuing its binders of insurance without investigation or information as to possible risks involved and apparently with an attitude of reckless abandon in regard to the conditions and operations of Grow and Mensik associations. As hereinbe-fore shown, the court concluded that the scheme became a “scheme to make false advertising” no later than October 28, 1959, when Culver sent out from SFIC the misrepresentation letter mentioned in Count 1; but the court found no evidence that Mensik or Grow had adhered to the scheme at that time or on November 27, 1959, when the letter mentioned in Count 2 was mailed. Subsequently, after the evidence disclosed that the quéstion-and-answer brochures were sent to Grow’s two associations in Idaho on April 11, 1960, and to Mensik’s associations on March 31, 1960, the court announced: “I now have ruled that there is sufficient evidence that both Mensik and Grow adhered to this alleged scheme by April 11 in one case, and March 31 in the other, which is within all but the first two [as alleged in Count 1 and Count 2] of your mailings.” Soon after the question-and-answer brochure was prepared, Mensik told Suchman (who was then president of Mensik’s Commercial Savings and Loan) that he liked the way the brochure was written and directed Suchman to send it out for Commercial in response to inquiries concerning SFIC. One of the brochures was sent by mail with SFIC’s letter of March 29, 1961, which letter was written in response to a letter of inquiry concerning Commercial and one of the brochures was sent by mail with Commercial’s letter of March 30, 1961, which was in response to a letter received by Commercial itself which contained a request for information “about” that association. Mensik alone was convicted on Counts 6 and 7 drawn under the mail fraud statute and based upon the mailing of the letters of March 29, 1961, and March 30, 1961, and the brochures sent therewith. Mensik’s dominant control over the operations of Commercial was conclusively shown by the testimony of Suchman. Furthermore, the evidence disclosed Mensik’s close contacts with and his influence over Culver, his intimate knowledge of the manner in which the affairs of SFIC were being conducted and its operations in general. Unfavorable reports of operations of some of the Grow and Mensik associations insured by SFIC were presented to Mensik by Aiken, SFIC’s accountant, and were considered and discussed with Aiken by Mensik. The expenses of Aiken to Chicago for conferences with Mensik were paid by SFIC. According to the evidence, as early as January 1959, Grow, Mensik and Mc-Gurren met with Applegarth in Chicago (Mens