United States v. Ferrara, 965

• Decision Date: 05 November 1971
• Docket Number: No. 965,Docket 71-1069.,965
• Citation: 451 F.2d 91
• Parties: UNITED STATES of America, Plaintiff-Appellee, v. Fred FERRARA and Arthur Russell, Defendants-Appellants.
• Court: U.S. Court of Appeals — Second Circuit

451 F.2d 91 (1971)

UNITED STATES of America, Plaintiff-Appellee, v. Fred FERRARA and Arthur Russell, Defendants-Appellants.

No. 965, Docket 71-1069.

United States Court of Appeals, Second Circuit.

Argued July 12, 1971.

Decided November 5, 1971.

Harold Baer, Jr., Asst. U.S. Atty. (Whitney North Seymour, Jr., U.S. Atty., Richard BenVeniste, W. Cullen McDonald and Jack Kaplan, Asst. U.S. Attys., of counsel), for plaintiff-appellee.

Mozart G. Ratner, Washington, D.C. (Bernard Ries and George Kaufmann, Washington, D.C., on the brief), for defendants-appellants.

Before FRIENDLY, Chief Judge, and LUMBARD and OAKES, Circuit Judges.

OAKES, Circuit Judge:

Fred Ferrara and Arthur Russell appeal from convictions, after trial before Harold R. Tyler, Jr., Judge, and a jury, on nine counts of a fourteen count indictment charging violations of the "Landrum-Griffin Act," officially called the Labor-Management Reporting and Disclosure Act of 1959.¹ During the period covered by the indictment, Messrs. Ferrara and Russell were president and secretary-treasurer, respectively, of Local 11, Chain Service Restaurant, Luncheonette and Soda Fountain Employees and Bartenders Union (AFL-CIO), hereafter Local 11 or the Union.

The counts on which each of the appellants was convicted charged them as follows: One, with causing Local 11 to make a loan in excess of $2,000 for the benefit of James Gleason, a third officer of the Union, contrary to 29 U.S.C. § 503 (a); Two, with failing to report the Gleason loan in Local 11's Annual Report, in violation of 29 U.S.C. §§ 431(b) and 439(b), (d); Four, Eight and Nine, with causing Local 11 to spend money for leasing several autos for the period 1964-67 (Count Four), for gas and oil used exclusively by appellant Ferrara (Count Nine), and for payments to the Freeport Tuna Club (Count Eight), all contrary to 29 U.S.C. § 501 (c) (embezzlement and conversion); and Eleven to Fourteen inclusive with failure properly to report as disbursements to Union officers the amounts referred to in Counts Four, Eight and Nine, as well as additional sums, in reports filed in each of the years 1965-68 for the preceding year, contrary to 29 U.S.C. §§ 431(b) and 439(b), (d).

Acquittals were had on four counts — charging conversion of Union funds by improper expenditures — Counts Five (meals), Six (prescription drugs), Seven (tobacco) and Ten (liquor), and on Count Three charging appellant Russell with failure to maintain certain required records.

As appellants' arguments are many, and vary from count to count, we will refer to them separately.

Counts One and Two relate to the Gleason loan, one made to a Local 11 business agent from the Officers' Retirement Fund in the amount of $3,000 on or about September 23, 1965. Taking the evidence in the light most favorable to the Government, United States v. Kahaner, 317 F.2d 459 (2d Cir.), cert. denied, 375 U.S. 836, 84 S.Ct. 74, 11 L.Ed.2d 65 (1963), appellants, longtime chief officials of Local 11, knew that Union funds in excess of $2,000 could not be directly loaned to Gleason, since he was an "officer or employee" of the Local within the direct prohibition of 29 U.S.C. § 503(a). That they knew this is established by the testimony of the Union's attorney, who testified that he also advised them that "the union was a labor organization as defined by the Landrum-Griffin Act," but that it would be proper to make a loan from the "Officer's Pension Fund of Local 11," a retirement plan trust sometimes referred to in the record as the "Officers' Retirement Fund" or "Retirement Plan" (referred to hereafter as Retirement Fund or Fund).

A loan was made indirectly to Gleason by Ferrara and Russell from money in the Retirement Fund. A $3,000 check on the Fund, payable to Gleason, was voided and a subsequent check was drawn by Russell, payable to William Schamber, a Walgreen Drug Company food and fountain manager and member of Local 11's executive board from 1956 to 1967. Schamber endorsed the check and gave the Local security in the form of a statement that, after a stated date, 80 per cent of his (Schamber's) salary could be deducted until the loan was repaid. Appellants concededly knew that the loan was going to Gleason, knowledge that would make the loan improper if it were an indirect loan by the Union under 29 U.S.C. § 503(a). We thus need not determine whether the loan was made through Schamber as a conduit because, on the one hand, as the Government argues and as Gleason testified, appellant Ferrara told Gleason that the Local's attorney thought it was "illegal for anybody to take a loan," but not illegal for a manager like Schamber to receive it, or because, on the other hand, as appellants contend, Gleason was not financially responsible and Schamber was.²

Was the Retirement Fund here an instrumentality of the Union, however, so as to justify treatment of the loan as a matter of law — as it was treated by the court below — as an "indirect" loan made by the Union? It is plain that, generally speaking, retirement plan trusts are not included in the definition of a labor organization in § 3(i) of the Act, 29 U.S.C. § 402(i).³ Rather, they generally fit within the definition of a "trust in which a labor organization is interested," as separately set forth in the Welfare and Pension Plans Disclosure Act, § 3(1), 29 U.S.C. § 402(1). The Government points out that the Union created the Retirement Fund and could abolish it, that there were no outside or independent trustees, and that no one but a Union officer or employee could benefit from the Fund. The Government also suggests that after the first year all the money deposited in the Fund account came from the general moneys of the Union and claims — although this is doubtful⁴ — that in the event of termination, all sums over and above those vested in the beneficiaries are to revert to the Union. The appellants argue, as they did to the court below, that the Retirement Fund was separately approved by the Internal Revenue Service (although it affects fewer than 25 employees),⁵ that there was no commingling of Retirement Fund money with Union money, and that in the event of termination the interests of the participating members "fully vest. * * *."⁶ Thus, appellants' argument runs, the Fund was a separate and independent entity.

Whether the Government's or the appellants' thesis is correct was never submitted as an issue to the jury, the trial court assuming that the sums in the Retirement Fund consisted of Union money. To be sure, the trial court did give appellants the benefit of a charge with respect to intent, based upon the Union attorney's alleged advice, but the question whether the Retirement Fund money was really the Union's was not submitted.

The trial court reasoned, and the Government argues, that, if the Fund were not treated as Union money for the purposes of 29 U.S.C. § 503(a), the Landrum-Griffin Act would have a hole in it "so big that a fleet of abuses sic can go in through it abreast." But we cannot rewrite the statute for Congress.

This is a criminal statute we are construing, and we have been admonished not to "enlarge the reach of enacted crimes by constituting them from anything less than the incriminating components contemplated by the words used in the statute." Morissette v. United States, 342 U.S. 246, 263, 72 S.Ct. 240, 250, 96 L.Ed. 288 (1952). There is separate legislation controlling welfare and pension benefit plans and requiring disclosure of loans made from such plans.⁷ Here a jury might find the Fund to be a bona fide separate and distinct entity and not one established to evade legal prohibitions against certain disbursements of union funds, or it might find, to the contrary, that the fund was an instrumentality of the Union, as occurred in United States v. Pipefitters Local Union 562, 434 F.2d 1116, 1121 (8th Cir. 1970), cert. granted, 402 U.S. 994, 91 S.Ct. 2168, 29 L.Ed.2d 160 (1971). See also United States v. Roth, 333 F.2d 450, 453 (2d Cir. 1964) (2-1 decision), cert. denied, 380 U.S. 942, 85 S.Ct. 1020, 13 L.Ed.2d 961 (1965). This is not necessarily to hold, as did Bryan v. United States, 373 F.2d 403 (5th Cir. 1967), and United States v. England, 347 F.2d 425 (7th Cir. 1965), that even undisputed facts must be submitted to the jury. Rather, the record before us does not permit us to rule as a matter of law with either party. Without a jury finding on the question whether the loan from the Retirement Fund was "indirectly" from the Union, we are required to reverse on Count One, which carries Count Two with it,⁸ and remand for a retrial with appropriate instructions.

We sustain the convictions on Counts Four, Eight and Nine, however, the counts charging unlawful expenditures of Union funds, and on Counts Eleven to Fourteen inclusive, charging failure to report those expenditures.

Count Four charged appellants with unlawfully causing Local 11 to spend over $33,000 in 1964-67 for long-term auto leasing; Count Nine charged appellants with causing the Local to spend over $1,600 for appellant Ferrara's gas and oil expenditures. The principal defense — that the auto leases and gas expenditures were a necessary adjunct to Union organizing activities — was presented to the jury and rejected by it under appropriate instructions. By its verdict of guilty the jury found that appellants, without authority and for personal purposes, entered into long-term auto leases for themselves and their Union friends. The defense that Local 11's executive board had authorized the lease, which would not prevail if the Union were dominated as this one may have been, United States v. Silverman, 430 F. 2d 106, 123 (2d Cir. 1970), cert. denied, 402 U.S. 953, 91 S.Ct. 1619, 29 L.Ed.2d 123 (1971); see United States v. Dibrizzi, 393 F.2d 642, 645 (2d Cir. 1968), was also disbelieved by the jury in light of the testimony of four executive board members that such leasing was never discussed, let alone...