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United States v. Andreadis

decided: September 1, 1966.


Lumbard, Chief Judge, and Waterman and Moore, Circuit Judges.

Author: Waterman

WATERMAN, Circuit Judge.

Appellants, John Andreadis, a/k/a John Andre, and Drug Research Corporation, a company that Andre controlled, appeal from judgments of conviction entered after a jury trial before Judge Bartels in the United States District Court for the Eastern District of New York. Appellants were indicted, tried, and convicted on forty-two counts of knowingly using either the United States mails or radio and television communication in interstate commerce, in furtherance of an intentional scheme to defraud prospective purchasers of the product "Regimen Tablets" by false or fraudulent pretenses, representations and promises in violation of 18 U.S.C. §§ 1341 (mail fraud)*fn1 and 1343 (wire fraud);*fn2 on one count of conspiring to violate the federal statutes just cited in violation of 18 U.S.C. § 371; and on one count of causing to be introduced and delivered in interstate commerce, with intent to defraud and mislead, a quantity of cartons of a product labeled "Regimen Tablets," together with a display kit, which contained statements that were false and misleading in violation of 21 U.S.C. §§ 331(a), 333(b) and 18 U.S.C. § 2. We find no error and affirm the judgments on all counts.

"Regimen Tablets," manufactured for, and sold by, appellants, consisted of supplies of three pills, a green pill containing 22.5 mg. of benzocaine plus vitamins and minerals that was supposed to deaden the tongue and sense of taste; a pink pill containing 648 mg. of ammonium chloride and various vitamins that was supposed to act as a diuretic; and a yellow pill containing 75 mg. of phenyl-propanol-amine (PPA) that was supposed to act as an appetite depressant. Boxes of "Regimen Tablets" were sold, without prescription, over-the-counter, in two sizes; a $3 box containing 78 tablets, a so-called 10 day supply; and a $5 box containing 156 tablets, a so-called 20 day supply.

For a period of years between the mid-1950's and 1962, when the Federal Drug Administration finally removed "Regimen Tablets" from the market, appellants devised and executed a scheme to merchandise this product as a miracle weight-reducing drug. At the start Drug Research Corporation, controlled by Andre, who was also its President,*fn3 used mail order advertising to sell "Regimen Tablets." The advertising material mailed to the public claimed that "Regimen Tablets" was a new "wonder drug for fat people" that made possible "no diet reducing" and that without dieting, special eating, or giving up "the kinds of food you like to eat" the pills would cause "your body to lost weight the fastest acting way * * *." In 1957, Andre retained Kastor-Hilton, Chesley, Clifford & Atherton, Inc. (hereinafter Kastor-Hilton), an advertising agency, to develop advertising copy to be placed in various national media.*fn4 Kastor-Hilton remained Andre's advertising agency for the "Regimen Tablets" account until 1961. During that time reliance on mail order advertising to sell the product was replaced by reliance on more sophisticated advertising techniques. Kastor-Hilton arranged for advertisements to be placed in the newspapers of every major city in the country, in magazines of national circulation, and on programs televised on all the major networks, which claimed that "Regimen Tablets" made possible "no-diet" reducing, or reducing "without dieting" and that the pills had been "clinically tested" or "proven clinically effective." In certain instances these claims were qualified when a national magazine or television program refused to accept the "Regimen Tablets" copy as first submitted by Kastor-Hilton, but Andre agreed to such changes grudgingly and he ordered Kastor-Hilton to retain these extravagant claims in the copy submitted to other, less particular, media. Without much doubt, the most successful of the advertising schemes devised by Kastor-Hilton for "Regimen Tablets," and assuredly the most spectacular, involved the use of "endorsers," that is, individuals who for a period of time would appear each week, "live," on a television program, demonstrate their weekly weight loss, which usually was quite substantial,*fn5 and state inter alia that they were losing the weight while eating the foods they normally ate and "without dieting," that, "thanks to Regimen Tablets [they] felt satisfied with a fraction of the calories [they] used to eat * * *," and that they "never felt better."

Each of the counts charging a scheme to defraud by means of false or fraudulent pretenses, on which appellants were convicted, set forth a specific instance in which the United States mails or interstate radio or television communication had been utilized by appellants to disseminate their advertising claims that "Regimen Tablets," taken as directed, would cause a person of normal health to lose weight "without dieting," or that this product made possible "no-diet reducing" and that it had been "clinically tested" or "proven clinically effective." The thrust of the Government's case was that there was here an intent to defraud because these representations and statements were scientifically and factually false, and yet appellants continued to include these representations and statements in their advertisements for "Regimen Tablets."*fn6 It is the Government's contention that proof of these facts sufficed to convict appellants under 18 U.S.C. §§ 1341 and 1343 on each of the counts on which they were convicted. This contention will bear some further analysis.*fn7 But, assuming for present purposes that the Government is correct and that proof of this set of facts warrants the conclusion that 18 U.S.C. §§ 1341 and 1343 were violated, the essential issue before us becomes that of determining whether the Government adduced evidence sufficient to support the jury's determination that this set of facts existed in every instance in which it returned a verdict of guilty.

At the outset we note that, first, on appeal from a jury conviction we must view the evidence in the light most favorable to the Government, United States v. Press, 336 F.2d 1003, 1009 (2 Cir. 1964), cert. denied, 379 U.S. 965, 973, 85 S. Ct. 658, 13 L. Ed. 2d 559 (1965), and second, when the verdict of the jury is attacked for an alleged lack of evidence to support it, the verdict will not be set aside if it is supported by substantial evidence, e.g., United States v. Valenti, 134 F.2d 362 (2 Cir.), cert. denied, 319 U.S. 761, 63 S. Ct. 1317, 87 L. Ed. 1712 (1943). Within this perimeter of the area of permissible review, we hold that the Government presented evidence sufficiently probative to support its claims that certain representations and statements found in most advertising for "Regimen Tablets" were scientifically and factually false, that appellants knew them to be false, and, despite this falsity and appellants' knowledge thereof, appellants continued to include these representations and statements in their advertising. A brief summary of the evidence tending to support these claims follows.

In order to establish that appellants' advertising claims were scientifically false the Government introduced two expert witnesses, Dr. Jean Mayer and Dr. Arthur Grollman, both of whom were well-qualified to assess the scientific merit of the claims that "Regimen Tablets" would cause a person to lose weight "without dieting," and would make possible "no-diet reducing." Taken together, the testimony of Drs. Mayer and Grollman almost conclusively established that a dosage level of PPA double that found in "Regimen Tablets" would not, even when combined with the other ingredients found in "Regimen Tablets," cause a loss of weight unless accompanied by a diet. Dr. Grollman also testified that certain Andre-sponsored clinical tests of the effectiveness of "Regimen Tablets" could not have produced valid scientific results and that the results of these Andre-sponsored clinical tests were flatly contradicted by the Fazekas test, a test of the effectiveness of PPA recognized as authoritative by experts on the problem of obesity.

In order to establish that appellants knew that the claims they made for "Regimen Tablets" were scientifically false the Government introduced evidence tending to prove that several impartial observers had called Andre's attention to the mass of material that cast fundamental doubt on the truthfulness of the claims made for "Regimen Tablets," but that Andre had ignored all requests that he modify his advertising unless he could substantiate his claims and had only diluted his claims when prominent advertising media had refused to run the undiluted claims, and even then had only diluted the copy supplied to the media that objected. For example, it was established that throughout the period of the popularity of "Regimen Tablets" the National Better Business Bureau compiled the comments of organizations, like the American Medical Association and the New York Academy of Medicine Consultants, that had expressed doubts about the effectiveness of "'Regimen Tablets," and that the Bureau had brought these well-documented expressions of doubt to the attention of Andre and his associates in the hope that the extravagant unsupported claims would be withdrawn; and that the attempts of the Bureau were entirely unsuccessful, even when the Bureau's President personally carried its case to Andre in October 1957. On several occasions several advertising media detailed to Andre and his associates their doubts as to the effectiveness of "Regimen Tablets" and the truthfulness of the scientific claims made for the product. The Kansas State Board of Health refused to allow "Regimen Tablets" to be advertised in Kansas on the ground that the Andre-sponsored clinical studies did not substantiate the claims made for "Regimen Tablets." Although Andre knew this, his only response was to dispatch an agent to Kansas in an attempt to get the Kansas Board to reverse its position. Finally, it was established that in July 1959 a Better Business Bureau bulletin and an article in the New York Times reported the results of the clinical study conducted by Dr. Joseph F. Fazekes of the District of Columbia General Hospital, and others. This study, recognized as authoritative by experts on the problem of obesity, concluded that those patients who had taken the "Regimen" dosage of 75 mg. of PPA, as well as double that dosage, lost no more weight than those taking a placebo. Andre and his associates knew of this report and discussed its conclusions but nevertheless failed to modify the advertising claims made for "Regimen Tablets." We think this evidence substantially supports the Government's position that the "without dieting" and "proven clinically effective" claims made by appellants for "Regimen Tablets" were scientifically false, that appellants knew they were false, and that, knowing of the falsity, they nevertheless continued to include these claims in their advertising.

We find equally convincing the Government's evidence that many of appellants' advertising claims were factually false, that appellants knew these claims to be false, and that they nevertheless continued to include them in their "Regimen Tablet" advertising. Most of the Government's evidence, relating to this branch of its case, concerned statements made by various of the "live" endorsers. Since this evidence was largely cumulative we think it suffices for our purposes to summarize the Government's case as it related to the first of the "live" endorsers only, a Mrs. Dorothy Bryce. Mrs. Bryce stated on national television that until she began to take "Regimen Tablets" she had been unable to lose weight, that "without dieting" the tablets had caused her to lose 25 pounds in six weeks, and that she "never felt better" than she did during this period of rapid weight loss. In fact, as Mrs. Bryce testified at trial, she had previously successfully reduced her weight through dieting, she had continued to diet strenuously during the six week period in which she lost the 25 pounds,*fn8 and she became ill during this period of strenuous dieting. Other "live" endorsers also testified that they strenuously dieted in order to lose weight, and then attributed this weight loss to "Regimn Tablets" during their nationwide television appearances.*fn9

In order to establish that appellants knew the statements made by the "live" endorsers were factually false the Government first introduced testimony of the endorsers to the effect that they had been instructed to diet when they were hired: George Levine, the liaison between Kastor-Hilton and Andre, corroborated this by testifying that when Andre interviewed endorsers he invariably asked them whether they had dieted before and impressed upon them the fact that "Regimen will not burn off fat!" The Government also introduced substantial evidence tending to prove that many of Kastor-Hilton's employees, including Richard King, who was in control of the "live" endorser campaign, knew that Bryce and the other endorsers were dieting. George Bailey, a former account executive for "Regimen Tablets," testified that there was much general discussion at Kastor-Hilton to the effect that the endorsers were dieting. Finally, the Government established that Kastor-Hilton kept Andre well informed about the progress of the "live" endorsers' campaign, and that Andre in turn supervised that campaign closely. Viewed cumulatively, the evidence adduced by the Government convincingly established that many of the claims made by the "live endorsers" were factually false. The Government's evidence was also sufficient to support the proposition that appellants knew these claims were false. The Government did not prove that Andre specifically directed Kastor-Hilton to advertise the factually false claims, knowing them to be false, but as he reviewed and approved the "live" endorser campaign this does not insulate him from liability for their propagation. Harris v. United States, 261 F.2d 792, 796 (9 Cir. 1958), cert. denied, 360 U.S. 933, 79 S. Ct. 1446, 3 L. Ed. 2d 1546 (1959). Andre's agent, the Kastor-Hilton agency, certainly knew that the endorsers' statements were factually false and it was permissible for the jury to infer that Kastor-Hilton, through Levine, conveyed this fact to Andre.*fn10 United States v. Press, supra, 336 F.2d at 1009; see United States v. Lichota, 351 F.2d 81 (6 Cir. 1965), cert. denied, 382 U.S. 1027, 86 S. Ct. 647, 15 L. Ed. 2d 540 (1966). The jury's verdict may be upheld on this ground alone, but we add as an alternative ground for upholding it that a person in Andre's shoes should not be able to insulate himself from liability under 18 U.S.C. §§ 1341 and 1343 by contending he was not told that the claims made for his product by his advertising agency were false, even if the contention should happen to be true. We would hold, if it were not so clear that we need not reach the point, that Andre had some affirmative duty to insure that the claims the agency made for "Regimen Tablets," his product that he had arranged to have advertised by the agency, were true. See United States v. Baren, 305 F.2d 527, 532 (2 Cir. 1962); Stone v. United States, 113 F.2d 70, 75 (6 Cir. 1940). A person in Andre's shoes, having failed totally to discharge this responsibility in even the slightest measure, should not be permitted to escape the consequences of his inattention.*fn11

Before this court, appellants raise no substantial question as to the sufficiency of the evidence adduced by the Government and summarized above. Appellants do advance nine grounds that they urge require us to reverse the judgments of conviction entered below. They first urge that all the convictions for violating 18 U.S.C. §§ 1341 and 1343 must be reversed, because the Government failed to adduce proof of an essential element of guilt under those sections. Second, appellants argue that alleged prosecutorial misconduct denied appellants a fair trial. Appellants raise four questions concerning the admission of allegedly inadmissible evidence, each of which they contend requires reversal. One portion of the trial court's charge to the jury is alleged to have denied appellants a fair trial because it was hopelessly confusing. Finally, appellants argue there was insufficient evidence to convict on the conspiracy count and on the misbranding count, and they raise several other questions that relate to the misbranding count alone. We turn to consider each of the grounds for reversal urged by appellants.

Appellants argue that all the convictions for violating 18 U.S.C. §§ 1341 and 1343 must be reversed because the Government failed to prove, as to each of the substantive counts on which they were convicted, that some person or persons were actually defrauded. Appellants recognize that the great weight of authority is to the effect that in prosecutions for mail fraud or wire fraud it is not essential that the Government allege or prove that purchasers were in fact defrauded. E.g., Pereira v. United States, 347 U.S. 1, 8, 74 S. Ct. 358, 98 L. Ed. 435 (1954); Gusow v. United States, 347 F.2d 755, 756 (10 Cir.), cert. denied, 382 U.S. 906, 86 S. Ct. 243, 15 L. Ed. 2d 159 (1965). They also recognize that this is the settled rule in this circuit for wire fraud prosecutions, e.g., United States v. Whiting, 308 F.2d 537, 540 (2 Cir. 1962), cert. denied, Crowe v. United States, 372 U.S. 909, 919, 83 S. Ct. 722, 9 L. Ed. 2d 718 (1963), and that this rule, in this circuit, has long been considered equally well settled in prosecutions for mail fraud. E.g., United States v. Rowe, 56 F.2d 747, 749 (2 Cir.) (L. Hand, J.), cert. denied, 286 U.S. 554, 52 S. Ct. 579, 76 L. Ed. 1289 (1932). Nevertheless, they argue that this court in United States v. Baren, supra, reversed this established rule and that proof that purchasers were defrauded is now required in all mail fraud prosecutions; they argue further that the "logic" of the new Baren rule requires its application to wire fraud prosecutions as well. We disagree. To be sure, this court did state, in passing, in Baren that "in every mail fraud case, there must be a scheme to defraud, representations known by defendants to be false and some person or persons must have been defrauded." 305 F.2d at 528. But we think it clear that the Baren panel did not intend that this statement should overrule prior decisions in this circuit, for no mention was made of these prior cases, nor was it stated that a new rule was being formulated. Moreover, had a member of the court believed that Baren had overruled United States v. Rowe, supra, and its progeny, the decision would have been committed to all the qualified judges sitting in banc. See Tellier v. Commissioner of Internal Revenue, 342 F.2d 690, 692 n. 3 (2 Cir. 1965), aff'd on other grounds, 383 U.S. 687, 86 S. Ct. 1118, 16 L. Ed. 2d 185 (1966). For all of these reasons the portion of Baren quoted above can only be understood as a sui generis exception, suggested by the peculiar facts of Baren, to the general rule that in prosecutions under 18 U.S.C. § 1341 the Government is not required to prove that individual purchasers were actually defrauded.*fn12 Baren involved a prosecution for an allegedly fraudulent scheme to sell knitting machines to housewives: at the outset the court in that case stressed the "fundamental fact" that there was "no charge in the indictment that the machine was in any way defective or that it was incapable of performing a satisfactory knitting job." 305 F.2d at 529. In a case like Baren, in which the product apparently could do what its advertising, and its other promotional matter said it could do, it may well be advisable to require that the Government produce evidence tending to prove that, despite this, purchasers were in some manner defrauded; otherwise honest merchants could, without justification, become the victims of "a few disgruntled purchasers." 305 F.2d at 533. Cf. United States v. Rabinowitz, 327 F.2d 62 (6 Cir. 1964). But what was said in Baren has no application in the present case or in a case like the present case. Here the Government's claim, a claim amply supported by its trial proofs, was that the product in question was totally unable to do what its advertising and other promotional material said it could do; in such a case proof that particular purchasers were individually defrauded is completely superfluous.

Appellants' second argument is that they were denied a fair trial because Martin Pollner, the Assistant United States Attorney who prosecuted the case, improperly collaborated with one Peter Wyden, author of a book "The Overweight Society," which dealt in part with the "Regimen" fraud and was published on March 22, 1965, and of a magazine article dealing exclusively with the "Regimen" fraud, which appeared in the May 1, 1965 issue of "T. V. Guide." We find this argument unconvincing. In the first place, we cannot characterize Pollner's conduct as improper. Pollner, on several occasions, permitted Wyden to examine, in his (Pollner's) office, depositions which were a matter of public record that had been taken in connection with a previous civil libel proceeding against "Regimen Tablets" commenced by the Food & Drug Administration. Pollner refused to comment on the then pending criminal prosecution, he requested a pre-publication copy of the book so that he could check its contents, and he repeatedly urged Wyden to ask his publishers to delay publication until after the trial. Once Pollner learned Wyden had agreed to write an article on the "Regimen" fraud for "T. V. Guide" he asked that the article not be published until the trial was concluded. Wyden and his publishers ignored Pollner's requests and both the book and the magazine article were published before the trial's conclusion.*fn13 It seems clear that Pollner took no steps to ignite interest in having any material published that dealt with the "Regimen" fraud; this interest had already been kindled by the FDA's earlier civil libel proceeding against "Regimen Tablets" and the earlier New York State prosecution of these appellants and others for violating that state's false advertising statutes.*fn14 Thus, this is clearly not a case in which the prosecution itself initiated the intrusion of the press into the process of the trial. Compare Sheppard v. Maxwell, 384 U.S. 333, 86 S. Ct. 1507, 1521, 16 L. Ed. 2d 600 (1966); Stroble v. State of California, 343 U.S. 181, 201, 72 S. Ct. 599, 96 L. Ed. 872 (1952) (Frankfurter, J., dissenting). Secondly, the trial court on two occasions asked the jury specifically whether they had read either the book or the magazine article and on both occasions each juror replied in the negative. Furthermore, the court repeatedly and emphatically admonished the jury to avoid all contact with any publicity concerning the case. Appellants point to no facts tending to establish ...

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