U.S. v. Price, s. 85-5040
| Decision Date | 14 April 1986 |
| Docket Number | Nos. 85-5040,s. 85-5040 |
| Citation | 788 F.2d 234 |
| Parties | 122 L.R.R.M. (BNA) 2053, 104 Lab.Cas. P 11,936, 20 Fed. R. Evid. Serv. 476 UNITED STATES of America, Appellee, v. Charles D. PRICE, Appellant. UNITED STATES of America, Appellee, v. Herman O. McMAHAN, Appellant. (L), 85-5041. |
| Court | U.S. Court of Appeals — Fourth Circuit |
Coming B. Gibbs, Jr., Charleston, S.C., Anthony F. Gonzalez, Tampa, Fla., (Gibbs & Holmes, Charleston, S.C., Samuel R Mandelbaum, Tampa, Fla., on brief), for appellants.
Dale L. DuTremble, Asst. U.S. Atty., Charleston, S.C., (Vinton D. Lide, U.S. Atty., Columbia, S.C., on brief), for appellee.
Before WIDENER and PHILLIPS, Circuit Judges, and HILTON, United States District Judge for the Eastern District of Virginia, sitting by designation.
In 1978, Herman McMahan was elected business manager of Local 601 of the International Iron Workers Union in Charleston, South Carolina. As business manager, McMahan's duties included representing the union to the public, negotiating contracts with contractors, and recruiting new members. During all times relevant to this case, Charles Price was the elected business and financial agent of Local 808 of the International Iron Workers Union in Orlando, Florida. As business agent, his duties and obligations substantially mirrored those of McMahan.
When McMahan was elected business manager, Local 601 was over $30,000 in debt to the International Union. By 1984, the financial situation of Local 601 had improved significantly; so much so, that the debt to the International Union was paid off in full and a new union hall was constructed.
The dramatic improvement in the financial well-being of Local 601 was due in part to McMahan signing up new members from outside of South Carolina. In 1981, opponents within the union alleged that these new members' credentials were not being properly examined prior to their admission to the union. As a result, the International sent an examiner to Local 601 to investigate these complaints. Union records show that the examiners did investigate the complaints and found no violations of union rules and none were reported by the examiner.
In February 1982, agent James Settle of the Federal Bureau of Investigation began to investigate the membership application process at Local 601. As a result of Settle's investigation, a Federal Grand Jury in Charleston, South Carolina, returned an indictment against, among others, Herman McMahan and Charles Price, appellants herein.
The indictment charged that McMahan, as business agent for Local 601, was responsible for certifying to the International Union that applicants were qualified and to insure the "proper use, preparation and transmittal of all the membership applications." It was alleged that the defendants engaged in a "scheme or artifice to defraud the union and its members of their right to McMahan's and Price's faithful and disinterested performance of official duties, free from corruption, partiality, dishonesty and fraud," in violation of 18 U.S.C. Sec. 1341. It was further alleged that the defendants "embezzled and converted to their own use monies, properties and other assets of the local unions, that is, the Form 7 membership application, in exchange for sums ranging from $500 to $1,000, a portion of which they applied to their own benefit," in violation of 29 U.S.C. Sec. 501(c). Lastly, the indictment charged the defendants with one count of conspiring to commit mail fraud and to embezzle union property in violation of 18 U.S.C. Sec. 371.
The details of the scheme to defraud, as alleged in the indictment, were that Price would recommend certain workers for membership and would then obtain three blank money orders for payment of the alleged membership fees. These members would be recommended to Local 601 by Price and McMahan would approve the applications and in turn receive monies "over and above the fees set by the union." In furtherance of this scheme, the defendants caused a Form 7 membership application, for which they had received monies in excess of the set fees, to be delivered through the U.S. mails to the International. The embezzlement counts were premised on the allegation that the defendants embezzled and converted to their own use, the Form 7 application, in exchange for sums in excess of the set fees, and that the excess was applied to their own use and benefit.
On August 23, 1984, the defendants were arraigned and entered pleas of not guilty to all charges. A motion to dismiss the indictment was filed on September 12, 1984, claiming that counts one through sixteen failed to charge the elements of mail fraud because there was no allegation of financial loss to the union. It was further stated that the indictment failed to properly allege the elements of the offense of embezzlement. These motions were denied.
A jury trial of this cause was held before Judge C. Weston Houck on October 19, 1984 through November 12, 1984. At the close of all the evidence, Judge Houck granted judgments of acquittal on three of the mail fraud counts and three of the embezzlement counts; eliminating six counts against McMahan and two against Price. Later, Judge Houck directed a verdict on an additional mail fraud count and an additional embezzlement count against Price alone.
The jury returned a verdict of guilty against McMahan on twenty-three counts and nineteen counts against Price. Both filed timely notices of appeal.
On appeal, the defendants raise numerous assignments of error. They first contend the District Court erred in not granting judgments of acquittal as to all counts in the indictment against McMahan and Price because the union investigator had previously found no violation. This finding, they assert, would serve as a bar to a subsequent federal criminal prosecution. We disagree.
Criminal laws are not passed by the legislature solely for the benefit of individual citizens or individual organizations but for the good of the public as a whole. Only a duly appointed or elected prosecutor representing the public is empowered to decide whether to bring charges in a particular case. Additionally, one of the purposes of the Landrum-Griffin Act, of which 29 U.S.C. Sec. 501(c) is a part, was "to expose conflicts of interests and to stamp out embezzlement and self dealing by union officials." McNamara v. Johnston, 522 F.2d 1157, 1163 (7th Cir.1975). Were federal prosecutors to be barred from indicting and prosecuting union officials for such conduct by a finding of no violation by a union investigator, the intent of the Landrum-Griffin Act would be undermined. Enforcement of criminal statutes cannot depend upon the outcome of internal investigations by autonomous labor unions. Therefore, we find no error in the district court's denial of judgments of acquittal based upon the union's finding of no violation.
Appellants next contend that the trial judge erred in denying their motion for judgment of acquittal on the mail fraud counts because a financial loss and detriment to the union was neither alleged nor proven.
The indictment alleged that Price and McMahan devised a scheme to defraud the union of their "faithful and honest services." This allegation, they claim, is deficient because the government, to support a conviction under 18 U.S.C. Sec. 1341, must prove economic loss or injury to the union as an essential element of the crime of mail fraud.
In United States v. McNeive, 536 F.2d 1245 (8th Cir.1976), the court noted that:
... In interpreting the language of the mail fraud statute, courts have identified numerous types of schemes that are violative of the statute. These various schemes fall broadly into two categories.
The first category, which comprises the bulk of mail fraud cases, includes the many deceptive schemes which are intended to defraud individuals of money or other tangible property interests. There can be little dispute that these schemes are within the scope of Sec. 1341 since they involve calculated efforts to use misrepresentations and other deceptive practices to induce the innocent or unwary to give up some tangible interest...
The second category of Sec. 1341 deceptive schemes is comprised of those which operate to deprive individuals of intangible rights or interests... This expansive interpretation was deemed justified since limiting Sec. 1341 to deprivations of tangible interests alone would weaken the efficacy of the statute by excluding from its scope the multifarious schemes which deprive innocent victims of significant, often constitutionally protected, intangible rights.
536 F.2d at 1248, 1249. Cited with approval in United States v. Mandel, 591 F.2d 1347, 1361 (4th Cir.1979), conviction aff'd in relevant part, 602 F.2d 663 (4th Cir.1979) (en banc), cert. denied, 445 U.S. 961, 100 S.Ct. 1647, 64 L.Ed.2d 236 (1980).
It is clear that intangible rights may be the target of a scheme to defraud under 18 U.S.C. Sec. 1341. In Mandel, Marvin Mandel, Governor of the State of Maryland, and others, were indicted for mail fraud and racketeering. The mail fraud counts charged that the defendants had devised a scheme and artifice "to defraud the citizens of the State of Maryland, and its governmental departments, agencies, officials and employees, both executive and legislative, of their right to the conscientious, loyal, faithful, disinterested and unbiased services, actions and performance of official duties of Marvin Mandel, in his official capacities as Governor of the State of Maryland." Mandel at 1353. This court noted in Mandel that "at this late date, there can be no real contention that many schemes to defraud a state...
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