United States v. Borland

• Decision Date: 09 February 1970
• Docket Number: Crim. A. No. 1936.
• Citation: 309 F. Supp. 280
• Parties: UNITED STATES of America v. David BORLAND et al.
• Court: U.S. District Court — District of Delaware

309 F. Supp. 280

UNITED STATES of America v. David BORLAND et al.

Crim. A. No. 1936.

United States District Court, D. Delaware.

February 9, 1970.

COPYRIGHT MATERIAL OMITTED

F. L. Peter Stone, U. S. Atty., and Norman Levine, Asst. U. S. Atty., Wilmington, Del., for plaintiff.

Bruce M. Stargatt and Jack B. Jacobs of Young, Conaway, Stargatt & Taylor, Wilmington, Del., for defendants Arthur Wilson and St. Clair O. Parsons.

OPINION

LATCHUM, District Judge.

The Grand Jury returned an indictment on December 18, 1968 in which Arthur Wilson and St. Clair O. Parsons were charged with conspiring to violate 29 U.S.C. § 186(b) (1), 18 U.S.C. § 1001 and 18 U.S.C. § 2314. The background facts out of which the indictment arose may be summarized as follows:

Defendant Wilson is the president and defendant Parsons the business delegate of Local Union 1694, International Longshoremen's Association. Members of the local union are employed by Wilmington Stevedores, Inc. to unload vessels at the Wilmington Marine Terminal. The contract between Wilmington Stevedores, Inc. and the union requires a specified number of workers to unload each hole of a ship docked at the Marine Terminal. The number of workers required varies with the size and type of cargo. The group employed to unload a hole of a ship is normally referred to as a work gang. Each individual longshoreman is assigned a five digit number, called a "port number", which is recorded in the timekeeper's book on the day that the individual works. Salary checks are made out in accordance with the hours of work attributed to each individual, as identified by his port number on the company records.

The indictment charges that it was part of the conspiracy for the defendants to cause the port numbers of individuals to be recorded in the records of the company on days when the individuals were not working. As a result of this alleged falsification, payroll checks would be made payable to individuals for time periods when they had not been at work. After obtaining these checks by fraud and forging the signatures of the payees, the conspirators would then retain the proceeds of the forged checks or otherwise cause the proceeds to be distributed to other than the named payees of the payroll checks.

The defendants have based their motion for dismissal of the conspiracy counts on three principal grounds:¹ first, that the object of the conspiracy stated in subparagraph (a) of Count I is not an offense under § 302(b) of the Labor Management Relations Act of 1967, 29 U.S.C. § 186(b); second, that Count I is impermissibly vague in describing the offenses alleged in subsections (b) and (c) as the second and third objects of the conspiracy; third, that subsection (c) of Count I fails to negate the statutory exception to the offense defined by 18 U.S.C. § 2314.²

Count I charges that the first object of the alleged conspiracy, subsection (a), was an offense in violation of section 302(b) of the Labor Management Relations Act of 1947, 29 U.S.C. § 186 (b). An examination of the indictment, even viewed in the light most favorable to the government, reveals that the first object of the alleged conspiracy does not constitute an offense under section 302(b) of the Labor Management Relations Act of 1947, 29 U.S.C. § 186 (b) (1). This section of the statute is concerned with the extortion or acceptance of bribes by union representatives for the purpose of impairing the normal processes and relationships of collective bargaining. There is no allegation in the indictment that any payment obtained through the scheme alleged in Count I was procured by the defendant union officers or given by the employer with the intent to affect the ordinary functioning of collective bargaining. The allegations of the indictment do not indicate that the stevedoring company issued the checks allegedly involved in the present scheme other than in the good faith belief that the employees identified by their port numbers were entitled to payment for the number of hours indicated by the timekeeper's records.

Arroyo v. United States, 359 U.S. 419, 79 S.Ct. 864, 3 L.Ed.2d 915 (1959) held that § 302(b) was not intended to reach the kind of fraud allegedly involved in the present case. In Arroyo, the petitioner was the president of the union which represented the employees of two affiliated corporations. The petitioner, in his capacity as a union leader and representative on a joint committee administering the union welfare fund, asked the employer to give him two $7500 checks for deposit to the welfare fund. The union representative, however, did not deposit the checks to the existing welfare fund but instead placed them in another account. He subsequently withdrew the funds from this account and converted the funds to his own use.

Although the Supreme Court in Arroyo considered the petitioner's fraud "reprehensible and immoral" and assumed that it was punishable under "state criminal law", the Court nevertheless found that the petitioner's conduct was not within the purview of § 302(b). After careful analysis of the legislative history of § 302 the Supreme Court concluded that "when Congress enacted § 302 its purpose was not to assist the States in punishing criminal conduct traditionally within their jurisdiction, but to deal with problems peculiar to collective bargaining."³ Referring to the Congressional debates at the time of the consideration and passage of the Labor Relations Act of 1947, the Court pointed out that "there was not the slightest indication that § 302 was intended to duplicate state criminal laws. Those members of Congress who supported the amendment were concerned with corruption of collective bargaining through bribery of employee representatives by employers, with extortion by employee representatives, and with the possible abuse by union officers of the power which they might achieve if welfare funds were left to their sole control."⁴ Count I of the indictment here under consideration does not charge extortion or acceptance of any payment intended to affect the collective bargaining relationship between Union Local 1694 and Wilmington Stevedores, Inc. Since the allegations of Count I do not charge the defendants with any offense which § 302 was intended to cover, the first object of the conspiracy (Count I, subsection (a)) charging the commission of such a crime must be stricken.

The government's attempt to distinguish Arroyo is not persuasive. According to the government, the checks misappropriated in Arroyo were "paid to a trust fund" within the specific terms of the exemption provided by § 302(c) (5) and therefore their receipt by the petitioner was not prohibited under the terms of § 302(b). In contrast, the government urges that in the present action the checks whose misappropriation was the object of the conspiracy were not payments exempt under any provision of § 302(c) and, therefore, their fraudulent procurement by union officials was not beyond the coverage of the statute.

In Arroyo, the Supreme Court found that the misappropriated checks had been "paid to a trust fund" within the precise terms of § 302(c) (5) and, therefore, the receipt and misappropriation of the checks by the union representative was not within the scope of § 302 (b).⁵ The syllogism followed in Arroyo, therefore, is not applicable, since the checks allegedly misappropriated here were not within one of the categories of payment exempt under § 302 (c),⁶ as were the checks "paid to a trust fund" in Arroyo. The question before this Court, therefore, is whether the fraudulent procurement and misappropriation of payroll checks here should be found prohibited by § 302 (b), while the misappropriation of checks "paid to a trust fund" in Arroyo was found to be beyond the scope of § 302 (b).

The basic premise of Arroyo was that § 302(b) was concerned with bribery and extortion affecting the process of collective bargaining, and not with the duplication of existing state criminal law. Starting with the recognition that § 302(b) was concerned with protecting the process of collective bargaining, it is difficult for this Court to conclude that § 302(b) exempts from punishment the misappropriation of checks payable to a union welfare fund, but at the same time makes punishable the misappropriation of payroll checks. In light of the purpose of § 302(b) to protect collective bargaining, there is no reason to punish one type of fraud, but not the other. Further, to find § 302(b) applicable in this case but not in the circumstances of Arroyo would require further irrational distinctions to be made in the application of the statute. For example, if a scheme were directed to stealing and forging only the salary checks of union officers or other employee representatives covered by § 302(c) (1), such larceny, according to the government's position, would be exempt from the coverage of the statute "because the delivery of checks was a lawful payment, being within the confines of a recognized exception to § 302(b)." The checks which were to be stolen would be payment to a representative of employees as compensation for or by reason of, his service "as an employee." The checks would come within the literal terms of the exemption provided by § 302(c) (1) and therefore, their receipt, regardless of when the intent to misappropriate the checks was formed, would not be within the coverage of the statute. In contrast, in the present case, where checks payable to employees not within the categories of § 302(c) (1) were misappropriated, the statute would apply.⁷ This is an absurd result — a result which confirms that in light of Arroyo the first object of the present controversy does not constitute an offense under § 302(b).

Defendants also challenge the second object of the conspiracy as vague and legally insufficient. The second object of the conspiracy, according to subsection (b) was "in a matter within the jurisdiction of any...