United States v. Frontier Asthma Co., 4492-C.

• Decision Date: 30 January 1947
• Docket Number: No. 4492-C.,4492-C.
• Citation: 69 F. Supp. 994
• Parties: UNITED STATES v. FRONTIER ASTHMA CO. et al.
• Court: U.S. District Court — Western District of New York

69 F. Supp. 994

UNITED STATES v. FRONTIER ASTHMA CO. et al.

No. 4492-C.

District Court, W. D. New York.

January 30, 1947.

George L. Grobe, U. S. Atty., and R. Norman Kirchgraber, Asst. U. S. Atty., both of Buffalo, N. Y., for plaintiff.

James O. Moore, Sr. and Dow Vroman, both of Buffalo, N. Y., for defendants.

KNIGHT, District Judge.

On October 16, 1946, a grand jury of this District reported an indictment charging the defendants with the violation of the mail fraud statutes. Title 18 U.S.C.A. § 338.

Defendants move to dismiss the indictment on the ground that in proceedings before the Federal Trade Commission of the United States these defendants were severally subpoenaed and compelled to testify respecting the transactions, matters and things set forth in the aforesaid indictment, that the testimony of the individual defendants in such proceedings was connected in a substantial way with the charges contained in the indictment and that such indictment is a prosecution of the individual defendants and subjects them to penalties and forfeitures for and on account of transactions concerning which they testified, and that it is unlawful and contrary to the provisions under Act of September 26, 1914, Chap. 311, sec. 9, 38 Stat. 722, 15 U.S.C.A. § 49.

The plaintiff makes a counter motion to dismiss the defendants' motion on several grounds to which particular reference will be hereinafter made.

The defendant Frontier Asthma Co. is a corporation organized in 1908 and was engaged in the manufacture and sale of a product alleged to be a treatment for the malady known as "asthma".

On or about October 25, 1939, the Federal Trade Commission of the United States commenced a proceeding against the abovenamed corporation and the individual defendants herein, and others who have since died, charging them with acting in concert in devising a scheme and artifice to defraud in connection with the offering for sale a medical preparation for use in the treatment of asthma. The defendants answered on or about November 13, 1939, and, in 1941, the Commission served an amended and supplemental complaint which was the same as the original complaint, except as to the substitution of three individuals in place of three named in the original complaint. A Trial Examiner was named, the first hearing was held on April 3, 1943, and the last on October 21, 1944, when the testimony was closed, and the Trial Examiner made his report on November 24, 1944, in which he found the facts as charged in the complaint laid by the Commission. On September 12, 1946, the Commission entered a cease and desist order against the defendants in the proceeding, and this order was served on the defendants on September 26, 1946. We are not now concerned with a question as to the facts regarding the qualities, sale or distribution of the said treatment. As appears from the aforesaid order of the Federal Trade Commission the general plan employed in the sale of defendants' product was the insertion in various publications advertisements asserting the effectiveness of the product and offering a free trial sample to those answering the advertisement. Upon receipt of an answer, the Company sent a circular letter enclosing a so-called history blank and asking recipient to fill it in and return to the Company. Upon the return of the history blank, this was referred to one of the individual defendants, each of whom is a physician and was a stockholder of the corporation. Except upon a showing of certain specific physical conditions, the physician prepared a purported prescription, turned it in to the corporation which prepared a one ounce bottle of the preparation in accordance with the prescription, and sent it to the individual correspondent as a free trial sample. At the same time the physician to whom the history blank had been delivered sent a letter and recommendation of a regular course of treatment. If an order for the treatment was given, a full size bottle of the preparation was sent out.

The defendant Edward O. Spillman was the vice-president of the Frontier Asthma Co., and also the general manager for the Frontier Method Physicians, which latter organization included the other individual defendants herein, associated under the name "Frontier Method Physicians." The individual defendants, Spillman, Post, Partridge, and Van Duzee, testified in the proceedings before the Federal Trade Commission. The defendants Stanton and Bonham were subpoenaed and appeared before the Trial Examiner. They did not testify, but a stipulation was entered into between the attorneys for the respective parties that testimony of these individuals would be the same in substance as that of the other individual defendants therein. The Commission issued its cease and desist order forbidding the dissemination of any advertisement representing that the preparation aforesaid constitutes a cure or remedy for asthma, that it possesses any therapeutic value, that it builds up the system or prevents attacks of asthma and that such preparations are safe or harmless, without making certain exclusions.

The indictment aforesaid contains five separate counts, each charging the crime hereinbefore stated on five several dates, to wit: January 10, 1946, April 23, 1946, April 24, 1946, April 10, 1946, and May 8, 1946.

The plaintiff moves to strike out the motion to dismiss as respects the defendant Frontier Asthma Co., because the immunity statute does not apply to a corporation. Clearly the statute does not apply, and the defendant now consents to such motion.

Plaintiff moves to strike out the motion to dismiss as respects the defendant Edward O. Spillman on the ground that the immunity statute does not apply to an officer testifying as to transactions he performed as an officer of the corporation. The immunity statute does not apply insofar as he may be required to produce and testify concerning the books and the records of the corporation whether made by him as an officer of the corporation or by another authorized to make it. "And where an officer of a corporation has possession of corporate records which disclose his crime, there is no ground upon which it can be said that he will be forced to produce them if the entries were made by another, but may withhold them if the entries were made by himself. The books are no more his private books in the latter case than in the former; * * *. In both cases production tends to criminate; and if requiring him to produce compels him to be a witness against himself in the one case, it does so equally in the other. * * *" Wilson v. United States, 221 U.S. 361, 31 S.Ct. 538, 543, 55 L.Ed. 771, Ann.Cas.1912D, 558. See also United States v. Watson, D.C., 266 F. 736; United Mine Workers v. Coronado Coal Co., 8 Cir., 258 F. 829; United States v. Illinois Alcohol Co., 2 Cir., 45 F.2d 145; United States v. Lay Fish Co., D.C. 13 F.2d 136. That motion must be granted. However, in view of the conclusion we reach as to immunity based on the claim that the proceedings before the Commissioner and the proceedings before the grand jury relate to the same transaction, matter and thing, any determination on this ground for striking the motion for dismissal is not material.

The government urges as a ground for striking out defendants' motion that the testimony of the individual defendants given before the Trade Commission was given voluntarily and no claim of immunity was made before testifying. It was unnecessary for any of the defendants to claim immunity. The sole question is whether he testified as to transactions, matters or things on which this indictment is laid. United States v. Pardue, D.C. 294 F. 543; United States v. Monia, 317 U.S. 424, 63 S.Ct. 409, 87 L.Ed. 376; United States v. Andolschek, 2 Cir., 142 F.2d 503. The government now concedes this.

The next ground of the plaintiff for dismissal is that no evidence concerning any of the criminal acts alleged in the indictment was adduced before the Federal Trade Commission. Defendants' Notice of Motion recites that as a ground for dismissal these defendants pursuant to subpoenas testified before the Trial Examiner "respecting the transactions, matters and things set forth in the indictment * * * and that such testimony so compulsorily adduced from the Defendants is the basis upon which the charge on which the indictment is founded."

Each of the individual defendants in his affidavit in support of the defendants' motion declares "I have fully and fairly stated the facts of this case to my attorneys * * * and, after said statement, I am advised by my attorneys, and verily believe, that the testimony which I gave before the Federal Trade Commission * * * inhibits the United States of America from prosecuting * * * me * * * for and on account of the transactions, matters or things concerning which I testified or produced evidence, * * * and that such transactions, matters and things, * * * are the matters, facts and allegations set forth in the indictment." The only support for this recital in the notice of motion is in these affidavits. They are insufficient for various grounds. First, they are insufficient because made on information and belief. "* * * the verification of the plea is merely upon information and belief. To permit an investigation as to character or sufficiency of proof before a grand jury under a plea so verified would open the door to abuse and an intolerable practice. It would be an invitation to every defendant to thus uncover, before trial, * * *," United States v. Nevin, D.C., 199 F. 831, 836. Kastel v. United States, 2 Cir., 23 F. 2d 156. A plea in abatement, which in effect this is, on information and belief is...