United States v. Schwartz

• Decision Date: 14 March 1986
• Docket Number: 84-1102,83-1276
• Parties: UNITED STATES OF AMERICA, Plaintiff-Appellant v. SOL C. SCHWARTZ, RAYMOND F. LANE, FRANK C. MAROLDA, and ABE CHAPMAN, Defendants-Appellees
• Court: U.S. Court of Appeals — Ninth Circuit

785 F.2d 673

107 Lab. Cas. (CCH) P10,141

UNITED STATES OF AMERICA, Plaintiff-Appellant v. SOL C. SCHWARTZ, RAYMOND F. LANE, FRANK C. MAROLDA, and ABE CHAPMAN, Defendants-Appellees

Nos. 83-1276, 84-1102

UNITED STATES COURT OF APPEALS FOR THE NINTH CIRCUIT

April 11, 1984, No. 83-1276, Argued; March 12, 1985, No. 84-1102, Argued

March 14, 1986

JUDGES: Duniway and Anderson, Circuit Judges, and Coughenour, * District Judge.

* The Honorable John C. Coughenour, United States District Judge for the Western District of Washington, sitting by designation.

OPINION BY: ANDERSON

OPINION

ON PETITION FOR REHEARING - GRANTED IN PART, DENIED IN PART

J. BLAINE ANDERSON, Circuit Judge:

It is ordered that the petition for rehearing is DENIED IN PART and GRANTED IN PART.

The opinion filed June 18, 1985 (763 F.2d 1054) is withdrawn.

In these consolidated appeals, the United States challenges the district court's dismissal of a total of fifteen counts, which were originally brought against the defendants under one indictment. We reverse as to the counts involved in Appeal No. 83-1276 and we dismiss Appeal No. 84-1102 because we find it is barred by the Double Jeopardy Clause.

I. BACKGROUND

Defendant Marolda was president of Local 19, the San Jose affiliate of the Hotel and Restaurant Employees Union (HREU). Defendant Lane was secretary-treasurer of HREU Local 28 in Oakland-Contra Costa. Both men also served as trustees of their union's health and welfare and pension benefit plans. In 1978, Marolda was convicted and sentenced for embezzling union funds. 1 In 1979, Lane pled guilty to one count of embezzling union funds.

The government alleged, and sought to prove at trial, that due to these criminal convictions, Marolda and Lane were in danger of losing their union offices. In an effort to salvage the situation, the government alleged, Lane and Marolda agreed to merge their two locals, thereby eliminating election challenges the two were facing. One of the two was allegedly to remain in control of the merged union in order to ensure the financial health of both men.

A merger required the approval of the HREU International president, however, and the president in this case proved to be reluctant. In order to persuade the International president to approve the merger, Lane allegedly enlisted the help of defendants Schwartz and Chapman, executives affiliated with Amalgamated Insurance Agency of Chicago. Lane allegedly hoped that the Chicago defendants would be able to exert a certain amount of favorable influence over the International president. In return for this favorable influence, claimed the government, Lane and Marolda agreed to reopen bidding on their respective locals' benefit plans and eventually award the administration of those plans to the Chicago defendants.

From this alleged factual scenario, a federal grand jury indicted the defendants on fifteen counts. Count One alleged a conspiracy to commit wire fraud, in violation of 18 U.S.C. §§ 371, 1343. Counts Two through Twelve charged defendants with separate criminal acts of wire fraud, in violation of 18 U.S.C. § 1343. Counts Thirteen and Fourteen alleged violations of 18 U.S.C. § 1954 by accepting or soliciting a thing of value with the intent to influence benefit plan trustees. Count Fifteen charged Lane and Marolda with conspiracy to violate 29 U.S.C. § 501(c) by allegedly arranging for a life salary for Marolda.

On October 21, 1983, the district court dismissed Counts Thirteen and Fourteen, finding that the conduct alleged in the indictment is not criminalized by section 1954. These two counts were severed for purposes of appeal, and the district court refused to stay the February 21, 1984 trial date on the remaining counts. The government's appeal of the dismissal of Counts Thirteen and Fourteen proceeded to oral argument before this court (No. 83-1276).

Meanwhile, defendants' jury trial on the remainder of the indictment began as scheduled. At the close of the government's case, the district court granted defendant's motion for acquittal on all remaining counts. 2 The government appeals this judgment as well (No. 84-1102). We consolidated the cases for consideration on appeal.

II. DISCUSSION

The questions involved in this appeal, whether or not the Double Jeopardy Clause bars appeal and the statutory construction of section 1954, are legal questions. As such, we are permitted to review them freely under the de novo standard of review. United States v. McConney, 728 F.2d 1195 (9th Cir.) (en banc), cert. denied, 469 U.S. 824, 105 S. Ct. 101, 83 L. Ed. 2d 46 (1984).

A. No. 84-1102

Defendants Lane and Marolda were, in addition to officers of their respective locals, trustees of a total of six benefit plans: (1) Local 28 Oakland Welfare Fund; (2) Local 28 Oakland Pension Fund; (3) Local 28 Contra Costa Welfare Fund; (4) Local 28 Contra Costa Pension Fund; (5) Local 19 Welfare Fund; and (6) Local 19 Pension Fund.

Counts One through Twelve of the indictment alleged three common objectives of the scheme to defraud. The first objective was to deprive the two locals of the loyal and honest services of Lane and Marolda in the performance of their duties as officers. The second alleged objective was to deprive the six benefit plans of the loyal and honest services of Lane and Marolda in their roles as trustees. The third objective charged was to obtain money and property from the two locals and their respective benefit plans by false and fraudulent pretenses.

The defense moved pretrial to dismiss the indictment on grounds of duplicity and vagueness. The district court denied the motion, relying on United States v. Mastelotto, 717 F.2d 1238 (9th Cir. 1983). The court reasoned that the transactions alleged in the wire fraud counts were "within the conceivable contemplation of a greedy mind" and, therefore, could be viewed as one unitary scheme to defraud. The court went on to caution the government, however, that under Mastelotto it would be required to prove the entire unitary scheme or, in other words, it must prove all three objectives as to each benefit plan and local as alleged in the indictment.

Subsequently, when the government finished its case-in-chief, the district court granted defendants' motion for judgment of acquittal, pursuant to Fed. R. Crim. P. 29. Citing Mastelotto and United States v. Miller, 715 F.2d 1360 (9th Cir. 1983), modified, 728 F.2d 1269 (9th Cir. 1984), rev'd, 471 U.S. 130, 85 L. Ed. 2d 99, 105 S. Ct. 1811 (1985), the court ruled that there was a fatal variance because the government failed to present sufficient proof as to a number of the benefit plans as alleged in Counts One through Twelve, and, therefore, had not proven all of the objects of the unitary fraud scheme. 3 The government now appeals, arguing that the district court's actions amounted to a dismissal rather than acquittal, thereby allowing this appeal and eventually a new trial on a narrower indictment.

Appellate jurisdiction over government appeals in criminal cases is authorized by 18 U.S.C. § 3731, except when the Double Jeopardy Clause bars further prosecution. It is settled law under the Double Jeopardy Clause that "[a] judgment of acquittal, whether based on a jury verdict of not guilty or on a ruling by the court that the evidence is insufficient to convict, may not be appealed. . . ." United States v. Scott, 437 U.S. 82, 91, 57 L. Ed. 2d 65, 74, 98 S. Ct. 2187 (1978) (footnote omitted). In determining whether an appeal is barred by the Clause, the Supreme Court has instructed that the label applied by the district court, whether "acquittal" or "dismissal," is not dispositive. "The trial judge's characterization of his own action cannot control the classification of the action." Scott, 437 U.S. at 96, 57 L. Ed. 2d at 77. Thus, applying substance over from to a district court's judgment of acquittal, appeal is barred if the court "evaluated the Government's evidence and determined that it was legally insufficient to sustain a conviction." United States v. Martin Linen Supply Co., 430 U.S. 564, 572, 51 L. Ed. 2d 642, 651, 97 S. Ct. 1349 (1977).

The crucial inquiry before this court, therefore, is to determine whether the district court's judgment was a true acquittal as evidenced by a legal evaluation of the government's case. For its part, the government readily admits that certain parts of the indictment were specifically dismissed for lack of evidence, thereby amounting to an acquittal as to those parts. The government does not appeal those specific findings. The crux of the government's argument, however, is that despite the label of "acquittal" used by the court, the judgment on Counts One through Twelve was in fact partly "a dismissal" based on the ruling of law that there was an impermissible variance. The government opines, therefore, that it is not barred from appealing or seeking a retrial on the individual parts of the scheme which the district court did not specifically reject for lack of sufficient evidence.

In most cases, the government's argument would be well taken. This case, however, involved an indictment for wire fraud. As such, the district court correctly recognized Mastelotto and Miller as the governing circuit authority. Together, Mastelotto and Miller established a special framework for consideration of wire fraud indictments in this circuit. The rule of Miller, based on the Fifth Amendment's grand jury guarantee, was that a conviction could not stand where the trial proof showed a fraudulent scheme much narrower than, even though wholly included within, the scheme indicted by the grand jury. The reasoning was that a grand jury's willingness to indict someone for a broad wire fraud scheme does not establish that the same grand jury would have indicted the person for a substantially narrower scheme.

The district court recognized this peculiar rule and, from the beginning, exhibited an understanding of it as well as an intention to hold the...