U.S. v. Ottley, 185

• Citation: 509 F.2d 667
• Decision Date: 07 January 1975
• Docket Number: D,No. 185,185
• Parties: 88 L.R.R.M. (BNA) 2368, 75 Lab.Cas. P 10,612 UNITED STATES of America, Appellee, v. Peter OTTLEY, Defendant-Appellant. ocket 74--1731.
• Court: United States Courts of Appeals. United States Court of Appeals (2nd Circuit)

Page 667

509 F.2d 667

88 L.R.R.M. (BNA) 2368, 75 Lab.Cas. P 10,612

UNITED STATES of America, Appellee, v. Peter OTTLEY, Defendant-Appellant.

No. 185, Docket 74--1731.

United States Court of Appeals Second Circuit.

Argued Nov. 11, 1974.

Decided Jan. 7, 1975.

Joel N. Rosenthal, Asst. U.S. Atty. (Paul J. Curran, U.S. Atty., S.D.N.Y., Lawrence S. Feld, Asst. U.S. Atty., on the brief), for appellee.

Seymour M. Waldman, New York City (Waldman & Waldman, Louis Waldman, New York City, on the brief), for defendant-appellant.

Before FRIENDLY, FEINBERG and GURFEIN, Circuit Judges.

FEINBERG, Circuit Judge:

Union president Peter Ottley appeals from a judgment of conviction on three counts of a 46-count indictment charging him with violations of the Labor Management Reporting and Disclosure Act of 1959 (LMRDA), 29 U.S.C. § 401 et seq., and the Welfare and Pension Plan Disclosure Act, 29 U.S.C. § 301 et seq. Ottley was tried before a jury and Judge Marvin E. Frankel in the United States District Court for the Southern District of New York and sentenced to three months imprisonment and a $15,000 fine on the three counts. Of the 46 counts in the indictment, two were dismissed on the Government's motion prior to trial and 21 were dismissed at the close of the Government's case; the jury acquitted Ottley of all but three of the remaining 23 counts, including all the embezzlement charges where Ottley was indicted as a principal. Ottley was found guilty on two counts of aiding and abetting Peter Byrne, another union official, to embezzle union funds in violation of 29 U.S.C. § 501(c) by leasing and maintaining at union expense, an automobile for the personal use of Byrne's wife, and on one count of failure to maintain records in sufficient detail to substantiate Ottley's claim for weekly reimbursed cash expenses, as required by 29 U.S.C. § 436. For reasons indicated below, we reverse and remand for a new trial on these three counts.

The facts

During the 1968--1972 period covered by the indictment, Ottley was president of Local 144, Service Employees International Union, AFL--CIO, an organization representing hotel, hospital, and nursing home employees in the greater New York City area. He was also a member of the Executive Board of the International and on the Boards of Trustees of many of the welfare and pension funds associated with the union. First elected chief executive officer of his union in 1950, Ottley had been a leading force in its growth and success.

In the same period, Peter Byrne was the secretary-treasurer of the Local and the second man in the union hierarchy after Ottley. He was indicated along with Ottley, and on the two automobile embezzlement counts in which Ottley was charged as an aider and abettor, Byrne was the principal. In January 1974, Byrne pleaded guilty to a single misdemeanor, which would not bar him from further union office, and was sentenced to six months probation and a $500 fine. ¹ The two automobile counts against Byrne were dropped. Ottley's conviction, however, bars him both from holding union office ² and also, we are told, from receiving his pension of approximately $15,000 per year for life. Ottley is now 66 years of age.

The two automobile embezzlement counts involved the payment out of union funds over a four-year period of $9,067.18 to the lessor of an automobile for Byrne and $2,726.12 to Texaco Oil Company on credit card charges. Ottley testified that Byrne had asked for the car to take care of union business and that he did not know or inquire whether Byrne had a license or knew how to drive. Byrne, on the other hand, said that he had told Ottley he had no license and could not get one because of his poor eyesight. Byrne testified that the automobile was used by his wife each day to commute from their New Jersey home to her job at a Manhattan hospital and that normally he would accompany her into the City to a convenient subway station from which he would continue to union headquarters. The credit card slips for the maintenance of the automobile were generally signed by Mrs. Byrne at a service station near their home, and Ottley approved their payment by the union. Byrne testified that since he used the car to get back and forth from work he thought it served a union purpose. Ottley said that he did not inquire how the car was being used but assumed it was used for union purposes. However, Byrne apparently took cabs, for which he was reimbursed, when he conducted union business out of the office. The Byrne automobile was but one of a number leased by the Local for use by union officials, only one of which (Ottley's), apparently, was specifically authorized.

On the failure to maintain records counts, most of the evidence was not in dispute. Ottley and Byrne were the only two union officers authorized to receive reimbursed expenses for monies expended on union business. Each week they submitted petty cash vouchers showing the week's expenses and were reimbursed that amount. As a rule they did not keep bills or receipts for those expenses. Ottley testified that he did not know that more detailed records were required to be kept. On this issue, the Government introduced circumstantial evidence, described later, to prove Ottley's knowledge of his fiduciary responsibilities.

On appeal, Ottley claims that on the automobile embezzlement counts the judge's charge to the jury was incorrect and that there was insufficient evidence to convict. On the failure to maintain records count, Ottley argues, inter alia, that there was insufficient evidence to establish a knowing and wilful failure to comply with the statute, that the court erroneously charged the jury on these elements, that Ottley was not a 'person' required to file the records, and that various evidentiary rulings were improper.

The automobile embezzlement counts

Ottley's first contention is that the court improperly charged the jury on the automobile embezzlement counts. While the court's charge on the 22 embezzlement counts presented to the jury was extensive, the essence of the charge under 29 U.S.C. § 501(c) was:

In the circumstances of this case and in the circumstances of all the charges of embezzlement, you will have to consider a central question of these two matters, first whether the particular expenditure you are considering was in fact duly authorized by the union under its prescribed procedures; second, whether, even if the expenditure was not authorized, the defendant believed in good faith that he had authority to make that expenditure.

Defense counsel had requested a charge that if Ottley believed that the expenditures would benefit the union or 'that they had been or would be authorized' by the union, he would not be guilty of violating section 501(c). The court, however, refused to so charge.

The proper interpretation of section 501(c), which is reproduced in the margin, ³ was considered by this court in United States v. Silverman, 430 F.2d 106 (2d Cir.), modified on other grounds, 439 F.2d 1198 (2d Cir. 1970), cert. denied, 402 U.S. 953, 91 S.Ct. 1619, 29 L.Ed.2d 123 (1971). In that case, Judge Friendly, writing for the majority, ⁴ pointed out that section 501(c) is a 'larceny-type' statute, paralleling many other 'larceny-type' offenses in the criminal code. Citing Morissette v. United States, 342 U.S. 246, 72 S.Ct. 240, 96 L.Ed. 288 (1952), the majority said that the common thread of these statutes is

that the defendant, at some stage of the game, has taken another person's property or caused it to be taken, knowing that the other person would not have wanted that to be done

and that, in enacting section 501(c)

Congress subjected union officers or employees to the same test of criminal liability as government employees, bank officers and the like--not to a lower one.

430 F.2d at 126--127. As in Silverman, the Government's claim here is not that Ottley

'embezzled' or 'stole' the unions' assets in the ancient sense of those terms; the claim is that he unlawfully and willfully converted monies to the use of another. It is easy to understand how a union employee does this when he 'unlawfully and willfully' uses union funds in a manner that works to the personal benefit of himself or the payee and does not benefit the union, whether or not the union went through the form of authorization; the 'union' presumably would have objected if it had been able to speak freely. Such was this court's holding in United States v. Dibrizzi, 393 F.2d 642, 645 (2nd Cir. 1968), and the First Circuit's in Colella v. United States . . ..

430 F.2d at 127. The majority in Silverman then went on to say that the insufficiency of evidence made it unnecessary to decide

whether a payment made in a bona fide belief that it was for a union's benefit and that it had been authorized or would be ratified can ever be swept under 29 U.S.C. § 501(c) . . ..

Id. However, the majority characterized that proposition as 'doubtful' and also cited with approval, as already indicated, Colella v. United States, 360 F.2d 792, cert. denied, 385 U.S. 829, 87 S.Ct. 65, 17 L.Ed.2d 65 (1966). In that case, the First Circuit noted with approval a charge under section 501(c) that, in effect, told the jury to acquit 'if the jury felt that the defendant had spent for a union purpose, albeit unauthorized.' 360 F.2d at 798-799, 804.

The central question in a case such as this is usually whether the defendant had the requisite criminal intent. Under Silverman, we do not think that issue can be narrowed solely to whether the expenditure of union funds had been authorized or whether defendant believed that to be the case. If Ottley in good faith believed that Byrne's automobile was being used for union business and that the union had authorized the expenditure or would ratify it, he did not violate section 501(c). Whether the expenditure did benefit the union would, of course, be relevant to Ottley's alleged bona fide belief that it did.

In short,...