THE INSURANCE INVESTIGATIONS Mr. Justice Danforth said in the case of the People v. Dumar: "... The Penal Code recognizes that the moral guilt of the two offenses was the same and swept away the theory by which the court had felt constrained to distin guish them in principle. By it larceny is so treated (Chapter 4) as to include not only the offense as defined at common law and by 2 R. S., 679, 690, but also embezzle ment, obtaining money by false pretenses, and felonious breach of trust." The offenses committed by these life insurance directors, in just the form that they now appear, are to be dealt with for the first time in our courts, in applying these provisions of the Penal Code. It is diffi cult and, perhaps, unwise to undertake to define fraud, lest, as Howenden once observed, "by making the definition too exclusive and inclusive, opportunities for avoiding the consequences of fraudulent purposes and acts would be furnished by trimming and shading the fraudulent trans action so as to escape the consequences of their fraud." Lord Hardwicke has written to the same purpose and effect. Take, for instance, the transactions between the presi dents of two of the companies under in vestigation, where a treaty of reciprocity was established, by the terms of which President Jones loaned President Smith and President Smith loaned President Jones (I don't like to mention their names) $200,000, or whatever the sum may have been, at one or one and one-half per cent interest, when the prevailing rate was two and one-half or three per cent, which last-mentioned rate was the one that the presidents were under obligations to their cestui que trusts to pro cure. Must it not follow that the fraudulent acts by which the beneficiaries of the com pany were cheated out of the difference between one and one-half per cent and the prevailing rate, had their money withheld, and that it was by amost devious process perverted to the use of persons making these loans?
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The acts of "the high financier" must square with the penal provisions referred to, and it is difficult to see how any ingenuity of counsel can bring about any other result than punishment. The essence of the offense is fraud, and in the final analysis of these transactions, fraud must appear in the clearest outlines. There is still another section of the Penal Code that may be applicable to some of the transactions of these insurance directors which have now become a matter of record. Section 1 68 of the Penal Code defines con-v spiracy as follows: "If two or more persons conspire either: "4. To cheat and defraud another out of property by any means which are in them selves criminal or which, if executed, would amount to a cheat, or to obtain money or any other property by false pretenses . . . each of them is guilty of a misdemeanor." The situation furnishing the basis for the consideration of principles of common law rests upon the theory that the directors of a corporation are practically trustees, with the whole body of policy-holders as cestui que trusts. These two provisions of the Penal Code, it would seem, must be laid down against the acts of the trustees of the life insurance companies now under investigation. If evi dence to the sanie effect as the testimony already taken, shall be given before our Grand Jury, it is difficult to see how the offenders can escape the consequences of their acts. If it is found, however, that these provisions of the Penal Code are not applicable to the offenses under considera tion, it will be high time then to recast some of our Penal Statutes. If it can be found that federal supervision of life insurance is within the functions applicable to inter state commercial relations, an important safeguard will be established. NEW YORK, N.Y., November, 1905.
