U.S. v. Kelley, s. 97-2486
| Decision Date | 14 August 1998 |
| Docket Number | 97-2487 and 97-2488,Nos. 97-2486,s. 97-2486 |
| Parties | UNITED STATES of America, Appellee, v. Vince KELLEY, Appellant. UNITED STATES of America, Appellee, v. Jan KELLEY, Appellant. UNITED STATES of America, Appellee, v. PAVCO CO., Appellant. |
| Court | U.S. Court of Appeals — Eighth Circuit |
Stephen C. Wilson, Jackson, MO, argued, for Appellant.
David M. Rosen, Asst. U.S. Atty., St. Louis, MO, argued, for Appellee.
Before RICHARD S. ARNOLD, 1 Chief Judge, and McMILLIAN and MAGILL, Circuit Judge.
Vince Kelley, Jan Kelley, and PAVCO Co. appeal from final judgments entered in the United States District Court 2 for the Eastern District of Missouri upon a jury verdict finding appellants guilty of 5 counts of mail fraud. For reversal, appellants contend that the district court erred in (1) failing to hold an evidentiary hearing on and denying their motions to dismiss the indictment because of selective or vindictive prosecution, (2) denying their motions for judgment of acquittal on the mail fraud counts because of the insufficiency of the evidence, and (3) refusing to withdraw the evidence related to the dismissed counts and to instruct the jury not to consider that evidence in its deliberations on the mail fraud counts. For the reasons discussed below, we affirm the judgments of the district court.
Jurisdiction in the district court is based upon 18 U.S.C. § 3231 and in this court upon 28 U.S.C. § 1291. The appeals were timely filed pursuant to Fed. R.App. P. 4(b).
This case involved a scheme to obtain money in which appellants falsely represented that their employees were union members entitled to union scale wages, union dues and other benefits when in fact only a small number of such employees were union members. Appellants pocketed the difference (which amounted to thousands of dollars) and did not pass on the moneys to the union or the employees.
In 1984 or 1985 Clyde "Nip" Kelley, who is Vince Kelley's father, decided to begin a new construction company in Cape Girardeau, Missouri. According to the government's theory of the case, Nip Kelley had two problems--he wanted the new company to be eligible to bid on contracts as a special category contractor, even though he was not a member of a special category, and he wanted the new company to be a non-union employer, even though he was contractually obligated to operate as a union employer. In order to circumvent these problems, Nip Kelley enlisted the aid of his son and his son's wife, Vince Kelley and Jan Kelley. Nip Kelley in essence asked Vince and Jan Kelley to "front" for him and run the new company (PAVCO).
PAVCO bid on contracts as a special category contractor and hired mostly non-union employees. One of the contracts was the Procter & Gamble plant in Neelys Landing, Missouri; Fru-Con Construction Co. (Fru-Con) was the general contractor. Fru-Con hired PAVCO as one of its subcontractors. The subcontractors signed 2-year contracts. PAVCO bid on and was awarded three 2-year contracts for 1991-1993, 1993-1995 and 1995-1997. Vince Kelley prepared the bid package and submitted it to Fru-Con. The Craftsmen Independent Union (union) prepared an "affiliation letter" to notify Fru-Con and other contractors which subcontractors were affiliated with the union. According to the government's theory of the case, in the construction industry, "affiliation" means that all of the employees of the subcontractor are members of the union with which the subcontractor claimed affiliation. PAVCO represented to the union that it was "affiliated" and the union so informed Fru-Con (and others).
Fru-Con required its subcontractors to complete time and material forms showing their employees' base rate of pay, their union affiliation, if any, and the required union dues and benefits payments. Vince Kelley filled in these forms showing the union base rate of pay, union dues and union benefits. However, most of the PAVCO employees were not union members. The forms thus misrepresented the union status of PAVCO employees and caused Fru-Con to believe erroneously that PAVCO was affiliated with the union. Fru-Con relied on the bid package information in reviewing and awarding contracts and as a basis for paying subcontractors' employees. In other words, on the basis of the information submitted by PAVCO in its bid package, including the time and material forms, PAVCO was over-billing Fru-Con because Fru-Con paid PAVCO employees the union base pay rate, union dues and union benefits. Fru-Con could have contracted with non-union companies and would have paid non-union rates.
Vince Kelley and Jan Kelley prepared and mailed "subcontract receipt affidavits and lien waivers" with billing statements to Fru-Con. Most of these documents were prepared and mailed to Fru-Con by Jan Kelley. Fru-Con reviewed them and paid PAVCO on the basis of these documents. As noted, these documents showed PAVCO employees as union employees and requested payment for their labor as union employees. Jan Kelley knew that the documents represented PAVCO employees as union employees even though she also knew that few PAVCO employees were in fact union employees and thus were not entitled to union wage rates, union dues or union benefits.
As a result of this scheme, Fru-Con overpaid appellants $38,879.60 in union dues and union benefits payments for the 1991-1993 contract. According to the government's theory of the case, appellants did not forward these funds to the union or to PAVCO employees but instead simply kept them. The same thing happened with respect to the 1993-1995 (total of $87,570.83 in overpayments) and 1995-1997 contracts. Fru-Con discovered the inconsistencies in the 1995-1997 bid package and requested clarification from Vince Kelley. Vince Kelley sent Fru-Con documents which showed that PAVCO was not "affiliated" with the union and that PAVCO employees were non-union but had been paid union wage rates and benefits. Fru-Con stopped contracting with PAVCO.
Ironically, during these years, Vince Kelley was a trustee of the union health and welfare fund. In addition, several PAVCO employees had asked Vince Kelley about health insurance and he told them that there was no health insurance, even though Fru-Con had paid PAVCO more than $83,000 for benefits including health insurance.
This case began as an investigation by the United States Department of Labor of alleged union misconduct. Government agents discovered the PAVCO scheme and suspected union officials might be involved. During this period, Fred Kelley, who is Nip Kelley's brother and Vince Kelley's uncle, was the head of the union. Government agents met with Vince Kelley and his attorney and sought Vince Kelley's cooperation in the investigation of the union. Vince Kelley essentially denied he knew anything and refused to cooperate. After further investigation, labor investigators met with Vince Kelley and his attorney a second time. Government agents outlined their case and proposed that, in return for his cooperation, Vince Kelley could plead guilty and his wife would not be charged. Vince Kelley again denied any knowledge and refused to cooperate.
In August 1996 a federal grand jury charged Vince Kelley, Jan Kelley and PAVCO with mail fraud, making false statements and concealing facts in reports required to be kept under Title I of the Employee Retirement Income Security Act of 1974 (ERISA), and embezzlement of union assets. Counts I through V alleged that each appellant committed mail fraud in violation of 18 U.S.C. § 1341; Counts VI through X alleged that each appellant made false statements in documents required by ERISA in violation of 18 U.S.C. § 1027; and Counts XI through XVI alleged that Vince Kelley embezzled union assets in violation of 18 U.S.C. § 664. The day before trial was scheduled to begin, appellants filed motions to dismiss the indictment alleging selective and vindictive prosecution and requested an evidentiary hearing. The basis for the motions was the discovery of Painters & Allied Trades Local Union No. 1292 v. Loyd Slinkard Painting Co., No. 1:96CV57 LMB (E.D.Mo.) (Slinkard ), a civil ERISA action filed against a contractor by a union to collect union dues and benefits payments allegedly due under a collective bargaining agreement. The district court denied the motions to dismiss and for an evidentiary hearing.
The case was tried to a jury. At the close of the case, the district court granted judgment of acquittal in favor of all appellants on the ERISA false statement counts (VI-X) and in favor of Vince Kelley on the union embezzlement counts (XI-XVI). The jury found appellants guilty on the remaining 5 mail fraud counts. The district court sentenced Vince Kelley to 21 months imprisonment, 2 years supervised release, restitution in the amount of $35,000, and a special assessment of $250; Jan Kelley to 15 months imprisonment, 2 years supervised release, restitution in the amount of $30,000, and a special assessment of $250; and PAVCO to 5 years probation, restitution in the amount of $37,683.18, and a special assessment of $1,000. These consolidated appeals followed.
First, appellants contend that the district court erred in denying their motions to dismiss the indictment for vindictive or selective prosecution. Appellants argue the prosecution was vindictive because Vince Kelley refused to cooperate with the Department of Labor's investigation of the union. They also argue the prosecution was selective because a similarly situated employer was not criminally prosecuted. Appellants also argue the district court erred in failing to hold an evidentiary hearing because they proffered sufficient evidence to raise a reasonable doubt about the propriety of the government's conduct. The district court denied their motions, filed on the day before trial was to begin,...
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