U.S. v. DeFries
| Citation | 43 F.3d 707 |
| Decision Date | 07 April 1995 |
| Docket Number | No. 94-3110,94-3110 |
| Parties | 148 L.R.R.M. (BNA) 2266, 310 U.S.App.D.C. 56 UNITED STATES of America, Appellant, v. Clayton Eugene DeFRIES, a/k/a Gene; Clyde E. Dodson; Reinhold Schamann, a/k/a Fred; Claude W. Daulley; Alexander C. Cullison, a/k/a Doc; Karl M. Landgrebe; Donald K. Masingo; Michael A. Ribera; George Butler, Jr.; William M. Fast; Walter J. Browne; Thaddeus Kedzierski, a/k/a Ted; Durwin W. Davis; Michael A. Baker; Vincent T. Oliveri; Paul T. Reyburn, Appellees. |
| Court | United States Courts of Appeals. United States Court of Appeals (District of Columbia) |
Appeal from the United States District Court for the District of Columbia, 93cr00117.
Frank J. Marine, Atty. U.S. Dept. of Justice, argued the cause for appellant. With him on the briefs were Eric H. Holder, Jr., U.S. Atty., Sotiris A. Planzos and Stephen D. Kelly, Attys., U.S. Dept. of Justice.
Stuart A. Levey argued the cause, for appellees DeFries, et al. With him on the brief, for appellee DeFries was R. Stan Mortenson. Michele A. Roberts was on the brief, for appellee Dodson. Richard A. Hibey was on the brief, for appellee Schamann. Gerard F. Treanor, Jr., and Judith Wheat were on the brief, for appellee Daulley. Thomas G. Green, Mark Hopson and Jeffrey T. Green were on the brief, for appellees Cullison and Baker. Donald T. Bucklin entered an appearance, for appellees Cullison and Baker. Stuart F. Pierson and Richard L. Cys were on the brief, for appellee Masingo. Robert L. Tucker, Asst. Federal Public Defender, was on the brief, for appellee Ribera. A.J. Kramer, Federal Public Defender, entered an appearance, for appellee Ribera. James E. Sharp and Paul L. Knight were on the brief, for appellees Butler and Kedzierski. Henry W. Asbill and L. Barrett Boss were on the brief, for appellee Fast. Thomas E. Scott and Henry Salas were on the brief, for appellee Davis. Steven C. Tabackman was on the brief, for appellee Oliveri. Francis D. Carter was on the brief, for appellee Reyburn.
Before: WILLIAMS, HENDERSON, and ROGERS, Circuit Judges.
Opinion for the Court filed by Circuit Judge STEPHEN F. WILLIAMS.
The defendants in this case are union officials indicted for crimes relating to their manipulation of union elections and misuse of union offices. Counts three and four of the indictment charged them with mail fraud under 18 U.S.C. Sec. 1341 for their alleged theft, alteration, and destruction of ballots in a 1988 union merger referendum. The district court dismissed those counts on the grounds that the theft of ballots, and the resulting interference with union members' rights to the honest conduct of union affairs, did not constitute significant deprivations of union property, and thus, under McNally v. United States, 483 U.S. 350, 107 S.Ct. 2875, 97 L.Ed.2d 292 (1987), were not cognizable under Sec. 1341, 858 F.Supp. 1. Because we find that the referendum ballots and the information that they embodied indeed constitute "property" within the meaning of Sec. 1341, we reinstate those counts of the indictment and remand for trial.
The fifteen defendants are former national, regional, and local officials of the District No. 1-Pacific Coast Division, Marine Engineers Beneficial Association, a formerly independent labor organization that was merged into the National Maritime Union in March 1988. In June 1993, a federal grand jury returned a ten-count indictment alleging that from September 1984 through December 1991 the defendants had fraudulently procured their election and re-election to union offices and had managed the affairs of the union so as to enrich themselves at union expense, negotiating for themselves roughly two million dollars' worth of severance payments following the union merger. The indictment specifically charged the defendants with one count of racketeering, one of embezzlement, two of conspiracy, two of extortion, and four of mail fraud.
The two mail fraud counts at issue here relate to the defendants' alleged interference with an internal referendum on the proposed union merger conducted through the mails in early 1988. The indictment alleged that various of the defendants collected unmarked ballots from union members and voted them in favor of the merger, opened sealed ballots and replaced anti-merger votes with ones favoring the merger, and obtained and voted duplicate ballots, all in violation of the union's by-laws. Other defendants were accused of supervising and directing the operation. The indictment charged that the mailing of false referendum ballots constituted an illegal scheme to defraud the union and its members of two separate property interests, specified in indictment paragraphs 88(a) and (b): actual property in the form of the referendum ballots (p 88(a)), and "property rights guaranteed by [the] union Constitution, Bylaws and election procedures ... and by [federal labor law] to vote in secret and to participate in a fair and honest election regarding the 1988 merger referendum" (p 88(b)). The indictment stated that the two unions (and later their pension trusts) did actually merge as a result of the referendum's apparent approval of the proposed merger agreement.
In district court, defendants challenged these mail fraud counts on the grounds that neither of the union's two interests identified in the indictment constituted property protected against deprivation by the mail fraud statute as interpreted by the Supreme Court in McNally. The district court agreed. It held that the union members' asserted right to fair elections was analogous to (if less nebulous than) the general public's right to honest government, an interest found in McNally to be insufficiently like property for it to be protected by 18 U.S.C. Sec. 1341. Although the court did not specifically address the question of whether or not the ballots themselves constituted property, it clearly implied that their only value was to effect the union members' rights to a democratic organization and that the ballots thus had no value cognizable under the mail fraud statute. The district court dismissed the two counts, and the government now appeals.
The federal mail fraud statute makes it unlawful to use the mails in furtherance of "any scheme or artifice to defraud, or for obtaining money or property by means of false or fraudulent pretenses, representations, or promises," 18 U.S.C. Sec. 1341. In McNally, 483 U.S. at 358-60, 107 S.Ct. at 2880-82, the Court held that the phrases "to defraud" and "for obtaining money or property" are not wholly disjunctive; rather, the concept of "fraud" has historically entailed some deprivation of money or property, and the statute therefore reaches only those schemes designed to interfere with another's property rights. TheMcNally Court accordingly overturned a conviction for mail fraud that was based on the defendants' having deprived the citizens and government of Kentucky only of their "right to have the Commonwealth's affairs conducted honestly," id. at 352, 107 S.Ct. at 2878, and not of any property right, traditionally considered. 1
We do not address the government's claim that rights to honest union governance (the basis of p 88(b) of the indictment) are so different from political rights as to render McNally inapplicable, but turn directly to the character of the allegedly stolen ballots, the focus of p 88(a). Defendants concede, as they must, that these ballots were indeed the tangible property of the union: the election procedures detailed in the union's constitution make clear that the union is solely responsible for the preparation and distribution of official ballots, that union members may not transfer these ballots freely, and that the ballots must be returned to the union and secured in a depository to which no other parties have access. Rather, the defendants argue that these ballots are of de minimis value--that they are worth no more than the paper and ink with which they are printed--and therefore fail to meet some threshold standard of significance implicit in the mail fraud statute.
It is difficult to see where the defendants find this de minimis exception. The mail fraud statute speaks only of "money or property" generally, not of property above a certain value. McNally incidentally quotes language from a 1924 case suggesting that the words " 'to defraud' ... usually signify the deprivation of something of value by trick, deceit, chicane or overreaching," 483 U.S. at 358, 107 S.Ct. at 2881 (emphasis added) (quoting Hammerschmidt v. United States, 265 U.S. 182, 188, 44 S.Ct. 511, 512, 68 L.Ed. 968 (1924)), but it does so simply to demonstrate that the mail fraud statute protects only traditional forms of property; there is no suggestion that once the subject of a fraud is determined to be property, it must additionally meet some threshold of value.
Given the absence of any statutory hint of a threshold minimum, it is hardly surprising that several courts have found Sec. 1341 applicable to what at first glance appear to be exceedingly small property interests. For example, several circuits have held that unissued permits in the hands of the state--"mere pieces of paper and ink," to borrow a phrase from the defendants' brief--count as property of the government, so that obtaining a permit through a dishonest application constitutes fraud. Thus in United States v. Bucuvalas, 970 F.2d 937, 945 (1st Cir.1992), the court held that 18 U.S.C. Sec. 1341 applied to the defendants' fraudulent acquisition of city liquor and entertainment licenses, reasoning that the scheme deprived the city of "the right to control the issuance" of the licenses. In doing so, the court looked beyond the pieces of paper to the interests they signified. And United States v. Martinez, 905 F.2d 709, 714-15 (3d Cir.1990), found mail fraud in the defendant's dishonest...
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