U.S. v. Phillips, 90-7721

• Decision Date: 10 May 1994
• Docket Number: No. 90-7721,90-7721
• Citation: 19 F.3d 1565
• Parties: 146 L.R.R.M. (BNA) 2341, 128 Lab.Cas. P 11,087 UNITED STATES of America, Plaintiff-Appellee, v. Thermon PHILLIPS, E.B. Rich, USX Corporation a/k/a United States Steel Corporation, Defendants-Appellants.
• Court: U.S. Court of Appeals — Eleventh Circuit

Page 1565

19 F.3d 1565

146 L.R.R.M. (BNA) 2341, 128 Lab.Cas. P 11,087

UNITED STATES of America, Plaintiff-Appellee, v. Thermon PHILLIPS, E.B. Rich, USX Corporation a/k/a United

States Steel Corporation, Defendants-Appellants.

No. 90-7721.

United States Court of Appeals, Eleventh Circuit.

May 10, 1994.

Albert C. Bowen, Jr., Beddow, Erben & Bowen, Birmingham, Tommy Nail, Birmingham, AL, for Phillips.

J. Mark White, White, Dunn & Booker, Birmingham, AL, for Rich.

William N. Clark, L. Drew Redden, Redden, Mills & Clark, Reed, Smith, Shaw & McClay, Birmingham, AL, W. Thomas McGough, Jr., Pittsburgh, PA, Leonard L. Scheinholtz, William Bittman, Reed, Smith, Shaw & McClay, Washington, DC, J. Michael Jarboe, Pittsburgh, PA, for USX.

Frank W. Donaldson, U.S. Atty., Birmingham, AL, Michael V. Rasmussen, Asst. U.S. Atty., for appellee.

Dixie L. Atwater, Ogletree, Deakins, Nash, Smoak & Stewart, Washington, DC, for amicus-Chamber of Commerce.

Appeal from the United States District Court Northern District of Alabama.

Before TJOFLAT, Chief Judge, COX, Circuit Judge, and FAY, Senior Circuit Judge.

TJOFLAT, Chief Judge:

This case involves a steel producer's payment of kickbacks, in the form of illegal pension payments, to union officials, in violation of the Labor Management Relations ("Taft-Hartley") Act Sec. 302, 29 U.S.C. Sec. 186 (1988), and its failure to notify the employee pension plan's participants that the plan had been amended to provide for such payments, as required by the Employee Retirement Income Security Act ("ERISA") Secs. 101, 102, 104, 29 U.S.C. Secs. 1021, 1022, 1024 (1988). A jury found that the steel producer and the union officials, by arranging for the pension payments, violated the Taft-Hartley Act, and it convicted them under the Act's criminal enforcement provisions, 29 U.S.C. Sec. 186(d). In addition, the jury found the steel producer guilty under ERISA's criminal enforcement provision, 29 U.S.C. Sec. 1131 (1988), for failing to notify the pension plan's participants of the change in their pension plan. Finally, the jury found that the steel producer, by making the kickbacks, had engaged in a scheme to defraud the pension plan's beneficiaries The steel producer and the union officials, contending on several grounds that the trial court denied them a fair trial, and, in the case of the union officials, appropriate sentences, ask us to set aside the district court's judgment and order a new trial. We find their contentions meritless, and accordingly affirm their convictions and the union officials' sentences.

in violation of the mail fraud statute, 18 U.S.C. Sec. 1341 (1988).

I.

The steel producer in this case is the USX Corporation ("USX"). Headquartered in Pittsburgh, Pennsylvania, USX is a major steel manufacturer; it owns and operates a number of steel mills throughout the United States. The steel workers in these mills are represented by the United Steelworkers of America, International Union ("Union"), which also is headquartered in Pittsburgh, Pennsylvania. A prime, or "basic," collective bargaining agreement, negotiated by USX and the Union's principal officers every three years, governs, among other things, the rates of pay (including pensions) of these workers. ¹ "Local" collective bargaining agreements (between USX and the Union's locals), which are negotiated after the basic agreement is reached, cover working conditions such as crew sizes, shift times, and craft assignments, at specific steel mills. These local agreements are negotiated by the Union's district directors and sub-district directors responsible for the Union's district in which the steel mill is located.

The plan that led to the kickbacks in this case evolved during the negotiation of a local agreement between USX and the ten locals at USX's Fairfield Steel Mill ("Fairfield") in Birmingham, Alabama. The negotiations began in September 1983, six months after USX and the Union had reached a basic agreement. At the time, the steel market was depressed and many of USX's mills were idle, including Fairfield. USX was not willing to resume production at these mills unless the locals agreed to a permanent reduction in the labor force, the elimination of "incentive" pay, and the discontinuation of certain restrictive work practices.

Fairfield was located in the Union's District 36. ² Thermon Phillips and E.B. Rich, the Union officials convicted in this case, were District Director and Sub-District Director, respectively, of District 36; accordingly, the Union assigned them to negotiate the local agreement for the Fairfield steelworkers. William Miller, USX Vice President for Labor Relations, was the USX officer who met with Phillips and Rich and signed, for USX, the local agreement they eventually reached. Miller acted under the direction of J. Bruce Johnston, USX Executive Vice President for Employee Relations. Johnston, in turn, reported to David Roderick, the Chief Executive Officer and Chairman of the Board of Directors of USX.

Phillips and Rich were full time Union employees; the Union paid their salaries and provided their fringe benefits. Years earlier, Phillips and Rich had worked for USX: Phillips from 1948 to 1951 and Rich from 1949 to 1964. At the time they left USX's employment, the basic agreement provided that a worker who wanted to leave USX to become a Union employee, such as a district or sub-district director, could request USX to grant him a one-year "leave of absence." If USX granted the leave, the worker would continue to accrue, for pension purposes, "continuous service" for one year; if requested, USX could extend the leave for one additional year. USX could not extend a worker's leave of absence beyond that, however, because the basic agreement contained a provision limiting a leave of absence to two consecutive years. ³ In order to prevent a break Neither Phillips nor Rich returned to USX after leaving its employment in 1951 and 1964, respectively; therefore, at the time they began negotiating the local agreement for the locals at Fairfield in 1983, they had lost whatever right they may have had to receive a USX pension. Nonetheless, Phillips and Rich decided to condition the local agreement they were negotiating, and thus the resumption of production at Fairfield, on USX's willingness to award them enough "continuous service" to entitle them immediately to retire from USX's employment and receive a pension. They also decided to demand similar treatment for six members of Phillips' staff and Bruce Thrasher, the Union's District Director of District 35, all of whom were full-time Union employees and ineligible for a USX pension. ⁴

in his continuous service, and thus to save his pension, a worker who had left USX to accept Union employment had to return to USX before his leave of absence expired.

The negotiations over a new local agreement for Fairfield lasted approximately four months and involved several meetings. At the first meeting, Phillips and Rich told Miller that the Union could no longer abide the provision of the basic agreement that limited a leave of absence to two years; the Union wanted the provision amended to authorize the granting of an unlimited leave of absence for those who wished to leave USX to accept Union employment. Miller told Phillips and Rich that USX would not agree to such an amendment, and they did not pursue the matter.

Amending the basic agreement to remove the two-year limitation on leaves of absence would not have entitled Phillips and Rich to receive pensions from USX, because the proposed amendment would apply only to current USX employees, not to former employees who had severed all ties with the company. Whether or not Phillips and Rich were aware of this fact, they subsequently made their intentions clear when, following their second meeting with Miller, Rich took him aside, said "you accommodate us and we'll accommodate you," handed him a piece of paper, and told him to "take care" of the matter. The piece of paper read as follows:

The persons whose names are listed below were active employees of [USX] until they were granted a leave of absence for a specified period of time. They are:

PHILLIPS, Thermon

THRASHER, Bruce

WILLIAMS, Jimmie Lee

GURLEY, Ralph T.

RICH, E.B.

STATUM, Carl

PEARSON, Virgil L.

SHEPHERD, Fred A.

NEWELL, David L.

Those leaves of absence are hereby extended for an indefinite period of time until such person dies or takes pension. Those listed employees will accrue continuous service for pension purposes only. Upon such time as the employee applies for pension, their pension will be calculated as if they had worked during the leave of absence (excluding percentage formula). The type and amount of pension will be governed by the [basic agreement] in effect at the time the employee applies for pension.

(Emphasis added) (social security numbers omitted). If USX agreed, Phillips and Rich (along with the others listed on the paper) would receive pensions with monthly payments Following a meeting in October 1983, Phillips and Rich told Miller that there would be no local agreement at Fairfield until USX authorized the pensions. Miller responded that the company knew of no way that the pensions could be paid. Negotiations on other issues continued.

of hundreds of dollars and present values of over $80,000. Miller sent the piece of paper to Johnston, who, after consulting Roderick, instructed Miller to reject Phillips' and Rich's request.

While Miller and Phillips and Rich were negotiating a local agreement for Fairfield, USX also was negotiating local agreements with several of the Union's other district directors. In each case, USX demanded concessions similar to those being demanded from Phillips and Rich. The Union refused to grant the concessions, and by mid-November all negotiations ceased. Nevertheless, Miller continued to communicate with Phillips and Rich. On December 23, 1983, Miller met with Johnston and Roderick to...