U.S. v. Blood, 86-5554

• Decision Date: 05 December 1986
• Docket Number: No. 86-5554,86-5554
• Parties: 7 Employee Benefits Ca 2613, 22 Fed. R. Evid. Serv. 156 UNITED STATES of America, Plaintiff-Appellee, v. George W. BLOOD, Defendant-Appellant.
• Court: U.S. Court of Appeals — Fourth Circuit

Page 1218

806 F.2d 1218

7 Employee Benefits Ca 2613, 22 Fed. R. Evid.

Serv. 156

UNITED STATES of America, Plaintiff-Appellee, v. George W. BLOOD, Defendant-Appellant.

No. 86-5554.

United States Court of Appeals, Fourth Circuit.

Argued Oct. 6, 1986.

Decided Dec. 5, 1986.

R. Douglas Jones, Baltimore, Md., for appellant.

Katharine J. Armentrout, Asst. U.S. Atty. (Breckinridge L. Willcox, U.S. Atty., Catherine C. Blake, First Asst. U.S. Atty., Baltimore, Md., on brief), for appellee.

Before RUSSELL and WILKINS, Circuit Judges, and BUTZNER, Senior Circuit Judge.

WILKINS, Circuit Judge:

George W. Blood appeals his convictions on one count of embezzlement from an employee welfare benefit plan fund subject to the Employee Retirement Income Security Act of 1974 (ERISA), two counts of failure to file required ERISA reports, four counts of income tax evasion, and four counts of subscribing to false income tax returns. Blood asserts that the trial court erred in denying his motion for acquittal as to the ERISA counts because the government's proof affirmatively established that the fund at issue was not connected with an ERISA plan. Blood also contends that the trial court abused its discretion in refusing to admit as evidence questions proposed by the government on voir dire and remarks made by government counsel in opening statement which referred to the plans in question as "insurance." Finally, Blood argues that the trial court abused its discretion in admitting into evidence portions of a decision from a prior civil tax court case to which Blood was a party. We find no error and affirm.

I.

In 1975, Blood established Fortement Association, Inc. (Fortement) to market prepaid legal services plans (Plans) to employers and employee organizations, which then offered the plan to employees. For a set monthly fee ($8 to $12) which was collected by the sponsoring employer or employee organization and forwarded to Fortement, a Plan member was entitled to certain limited legal services from private attorneys who had contracted with Fortement to provide such services for a percentage of each member's dues. A percentage of the fee was also paid to management and marketing companies, owned and controlled by Blood, in exchange for promotional and administrative services provided to Fortement.

In 1978, Blood retained an attorney experienced in ERISA matters for the purpose of making sure that the Plans would comply with the requirements of ERISA. Additionally, Blood received an advisory opinion from the Department of Labor that one of the first Plans was a qualified ERISA plan. ¹ The Plans were promoted and advertised as ERISA plans, and Blood testified that he believed that he was complying with ERISA.

Blood admitted that during 1980-1983, some attorneys were not paid the full amount due to them under their contracts with Fortement and the management and marketing companies were paid more than their contractual allocations. Corporate records revealed that various personal and familial expenses were paid on behalf of Blood by the management and marketing companies, either by direct payment or by payment through other corporations owned and controlled by Blood.

Fortement, as administrator of ERISA plans, was required to file annual financial reports for each Plan. A trust agreement with Maryland General Hospital provided that Fortement would assume full responsibility for meeting all the Department of Labor filing requirements under ERISA. Additionally, in January 1979, Blood assured the personnel director of Maryland General Hospital that Fortement would make all required filings under ERISA. No annual report was filed for the Maryland General Hospital Group Legal Services Plan for the 1979 or 1980 filing years.

Books and ledgers of the companies owned and controlled by Blood show that he received certain payments, advances, or loans from the companies throughout the years 1979-1982. Blood and his wife filed joint income tax returns for the years 1979-1982 which did not report the amount of such payments as income.

II.

An ERISA employee welfare benefit plan is defined, in part, as:

[A]ny plan, fund, or program ... established or maintained by an employer or by an employee organization, or by both, to the extent that such plan, fund, or program was established or is maintained for the purpose of providing for its participants or their beneficiaries, through the purchase of insurance or otherwise, (A) medical, surgical, or hospital care or benefits, or benefits in the event of sickness, accident, disability, death or unemployment, or vacation benefits, apprenticeship or other training programs, or day-care centers, scholarship funds, or prepaid legal services....

29 U.S.C.A. Sec. 1002 (West 1985) (emphasis added). A Department of Labor regulation provides that the term "employee welfare benefit plan" shall not include a group or group-type insurance program offered by an insurer to employees or members of an employee organization, under which:

(1) No contributions are made by an employer or employee organization;

(2) Participation [sic] the program is completely voluntary for employees or members;

(3) The sole functions of the employer or employee organization with respect to the program are, without endorsing the program, to permit the insurer to publicize the program to employees or members, to collect premiums through payroll deductions or dues checkoffs and to remit them to the insurer; and

(4) The employer or employee organization receives no consideration in the form of cash or otherwise in connection with the program, other than reasonable compensation, excluding any profit, for administrative services actually rendered in connection with payroll deductions or dues checkoffs.

29 C.F.R. Sec. 2510.3-1(j) (1985).

The government's ERISA expert testified on cross-examination that the Plans administered by Fortement met these four criteria; i.e., no contributions were made by the employer or employee organization, participation was completely voluntary, the sole function of the sponsor was to publicize the program, collect fees, and remit them to Fortement, and the sponsors received no remuneration for administrative services. However, the expert further testified that the Plans were not excluded under the regulation, because they were not group insurance programs.

The issues concerning the motion for acquittal on the ERISA counts and the admissibility of the government's references to the Plans as "insurance" are intertwined. Blood argues that the government's reference to the Fortement Plans as "prepaid legal insurance plans" during opening statement and in written proposed voir dire questions submitted to the court, constituted a judicial, or at least an evidentiary, admission that the Plans were in fact "insurance." Therefore, Blood contends the testimony of the expert that the four criteria were satisfied, taken with the government's admission that the Plans were insurance, affirmatively established, as a matter of law, that the Plans were not ERISA plans and the trial court erred in denying his motion for acquittal as to the ERISA counts.

In the proposed voir dire questions submitted by the government, Fortement was referred to as "a company in the business of providing prepaid legal insurance plans to various employee groups and credit unions such as the employees of the Maryland General Hospital." In opening statement, government counsel stated: "In this case Mr. Blood is charged with embezzlement, theft, or conversion, from a trust fund that was connected with a prepaid legal insurance plan under the name of Fortement." Several other references to "legal insurance plans" and "prepaid insurance plans" were made in the voir dire requests and opening statement.

The trial court found that the submission of the requests for voir dire was not an admission: "It is just a statement by the government. It doesn't mean anything.... Because they called...