United States v. Sten Thordarson, Martin Fry, Craig Dunbar, Martin Salgado, and Charles Wise

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UNITED STATES of America, Plaintiff-Appellant, v. Sten THORDARSON, Martin Fry, Craig Dunbar, Martin Salgado, and Charles Wise, Defendants-Appellees.

No. 80-1239.

United States Court of Appeals, Ninth Circuit.

May 20, 1981.

Rehearing and Rehearing En Banc Denied Aug. 5, 1981.

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action was collateral to the IRS proceedings and that the Longs continually urged the district court to act on their pending motion for summary judgment. The BEA‘s claim of surprise by the grant of summary judgment is not well taken. The nature of the BEA‘s delay was inexcusable and contrary to the purposes of the FOIA.

Turning to the issue of prejudice, the record showed that Susan Long would suffer undue prejudice by the delay that amendment of the answer would cause. The harm to her ability to secure grants for her research and, concommitantly, her ability to advance her career as an instructor and social scientist was clear on the record.

The BEA argues that any prejudice to Susan Long “pales by comparison to the prejudice the Government would experience if it must give up the documents at issue without a full hearing on the merits.” The BEA, however, did not clearly press this point in its January 12 motion for amendment. Although the BEA did submit affidavits to the district court, which had previously been filed in the IRS case, the affidavits did not specifically and independently address the impact of the release of the tapes here at issue and the allegations of harm to IRS law enforcement activities were vague and conclusory. Moreover, nothing in the BEA‘s accompanying legal memorandum even addressed the amendment issue as a separate matter.

Even considering the BEA‘s Rule 60(b) motion for reconsideration of denial of leave to amend, which addressed with some-what greater specificity the allegations of harm to the Government‘s law enforcement program, we are not persuaded that the district court abused its discretion in refusing to vacate its prior orders. We note, in addition, that this claim of harm is hotly disputed.⁵ We might be intrigued by the law enforcement argument on a different record, but are constrained here by the BEA‘s inexcusable failure to make that record. Moreover, we find the Government‘s allegations that irreparable harm will result from release of the tapes difficult to credit in light of the BEA‘s failure to take even the most basic steps to raise the issue in the district court.

V. CONCLUSION

For the reasons set forth above, we AFFIRM the four rulings of the district court before us.

We have also determined that plaintiffs are entitled to an award of attorney fees and costs in the proceedings below and on appeal and REMAND the case to the district court to determine those amounts. See 5 U.S.C. § 552(a)(4)(E).

Charles C. Wehner, Sp. Atty., Los Angeles, Cal., for plaintiff-appellant.

Jan Lawrence Handzlik, Stilz, Boyd, Levine & Handzlik, Los Angeles, Cal., for defendants-appellees.

Before PREGERSON, FERGUSON and NORRIS, Circuit Judges.

NORRIS, Circuit Judge:

The government appeals from a district court order dismissing a ten-count indictment charging defendants with violating 18 U.S.C. §§ 1962(d), 1952, and 844(i), and 29 U.S.C. § 501(c). This court has jurisdiction under 18 U.S.C. § 3731. We reverse.

I. Facts

In 1978, the employees of the Redman Moving and Storage Company of Thousand Oaks, California, elected Teamsters Local 186 as their bargaining agent. When Redman refused to recognize the union, Local 186, aided by Teamsters Local 389, called a strike against the company. During the time of the strike, Redman trucks in California, Arizona and Connecticut were damaged or destroyed.

In November of 1979, a ten-count indictment was filed in the United States District Court for the Central District of California, alleging that the defendants—all officers or employees of Local 186 or Local 389—conspired to destroy Redman trucks in an effort to coerce Redman into recognizing the Teamsters.

The indictment charges defendants with the use of explosives to damage vehicles used in interstate commerce in violation of 18 U.S.C. § 844(i)¹ (Counts 2 and 3); travel in interstate commerce to commit arson in violation of the Travel Act, 18 U.S.C. § 1952² (Counts 4 and 5); conversion of union funds in violation of 29 U.S.C. § 501(c)³ (Counts 6 through 10); and conspiracy to conduct the affairs of an enterprise through a pattern of racketeering activity in violation of the Racketeer Influenced and Corrupt Organization Act (RICO), 18 U.S.C. § 1962(d)⁴ (Count 1).⁵ The alleged pattern of racketeering included the conduct charged substantively in Counts 2 through 10.

The district court dismissed all ten counts of the indictment. The RICO, Travel Act and explosives charges (Counts 1–5) were dismissed on the authority of

United States v. Enmons, 410 U.S. 396, 93 S.Ct. 1007, 35 L.Ed.2d 379 (1973), which the district court read as “preclud[ing] federal prosecution for violent activity which occurs during the course of a legitimate labor dispute” absent specific authorization from Congress.

United States v. Thordarson, 487 F.Supp. 991, 995 (C.D.Cal.1980). The conversion of union funds charges were dismissed for failure to allege essential elements of the offense.

II. Counts 1 through 5: United States v. Enmons

In

Enmons, the defendants were striking union members charged with using violence to obtain higher wages and other employment benefits in violation of the Hobbs Act, 18 U.S.C. § 1951. The issue was whether acts of violence committed during a lawful strike for the purpose of inducing an employer‘s agreement to legitimate collective bargaining demands constituted extortion, defined by the Hobbs Act as “the obtaining of property from another, with his consent, induced by wrongful use of actual or threatened force, violence or fear.” 18 U.S.C. § 1951(b)(2).⁶

In interpreting the statute, Justice Stewart, writing for the majority, focused on the word “wrongful,” and reasoned that because it would be redundant to speak of “wrongful violence” or “wrongful force,” Congress must have intended “wrongful” to limit the statute‘s coverage “to those instances where the obtaining of the property would itself be ‘wrongful’ because the extortionist has no lawful claim to the property.”

410 U.S. at 400, 93 S.Ct. at 1009–1010. Accordingly, the Court held that violence to achieve legitimate union objectives is not within the Hobbs Act‘s prohibition because there is no “wrongful” taking of the employer‘s property when union members receive wages and benefits in exchange for genuine services bargained for by the employer.

The Court found support in the legislative history of the Hobbs Act for its interpretation of “extortion“. The predecessor of the Act, § 2 of the Anti-Racketeering Act of 1934, 48 Stat. 979, proscribed the exaction of valuable consideration by force, violence or coercion, but expressly excepted “the payment of wages by a bona-fide employer to a bona-fide employee.” In enacting the Hobbs Act, Congress eliminated this express wage exception in response to the Supreme Court‘s decision in

United States v. Local 807, 315 U.S. 521, 62 S.Ct. 642, 86 L.Ed. 1004 (1942). In that case, the Court had held that the wage exception immunized from prosecution under the Anti-Racketeering Act New York City truck drivers who “by violence and threats exacted payments for themselves from out-of-town truckers in return for the unwanted and superfluous service of driving out-of-town trucks to and from the city.”

Enmons, 410 U.S. at 402, 93 S.Ct. at 1010. The

Enmons Court, however, despite Congress’ repeal of the express wage exception in enacting the Hobbs Act, read the legislative history as evidencing an intent to preserve an exemption for violence in pursuit of legitimate collective bargaining objectives.

Id. at 404–07, 93 S.Ct. at 1012–1013. In particular, the Court pointed to assurances given during the floor debate that the Hobbs Act would not interfere with legitimate labor activity and that a simple assault during a strike would not become a federal crime under the Act.

Id.⁷

The Court noted that the broad interpretation of extortion advanced by the government would reach “all overtly coercive conduct in the course of an economic strike ... [with the result that] [t]he worker who threw a punch on a picket line or the striker who deflated the tires on his employer‘s truck would be subject to a Hobbs Act prosecution and the possibility of twenty years’ imprisonment and a $10,000 fine.”

Id. at 410, 93 S.Ct. at 1015. In rejecting this reading of the statute, the Court concluded:

[I]t would require statutory language much more explicit than that before us here to lead to the conclusion that Congress intended to put the Federal Government in the business of policing the orderly conduct of strikes. Neither the language of the Hobbs Act nor its legislative history can justify the conclusion that Congress intended to work such an extraordinary change in federal labor law or such an unprecedented incursion into the criminal jurisdiction of the States.

Id. at 411, 93 S.Ct. at 1015.

The defendants contend that the effect of

Enmons is to place violence during the course of legitimate strike activity beyond the reach of all federal criminal laws. We cannot agree. There is no basis in the Court‘s decision or its underlying rationale for the creation of an ”

Enmons doctrine” of immunity applicable to all federal criminal statutes.⁸ We read

Enmons as holding only that the use of violence to secure legitimate collective bargaining objectives is beyond the reach of the Hobbs Act.

The Court‘s holding in

Enmons turned on its reading of the specific language of § 1951—particularly the term “wrongful” in the definition of extortion—and its reading of the Hobbs Act‘s singular legislative history. By contrast, the defendants have not cited, and we have not found, anything in the statutory language or the legislative history of the Travel Act, RICO or § 844 of Title 18 which indicates that Congress intended to exclude from the reach of those statutes violence in the pursuit of legitimate union objectives. Indeed, our reading of those statutes suggests that Congress intended no such exemption.⁹

The Travel Act, on its face, applies to “[w]hoever travels in interstate ... commerce or uses any facility in interstate commerce ... with intent to ... promote, manage, establish, carry on ... arson in violation of the laws of the State in which committed or of the United States.” 18 U.S.C. § 1952. Section 844(i) of Title 18 covers “[w]hoever maliciously damages or destroys, or attempts to damage or destroy, by means of explosive, any ... vehicle ... used in interstate commerce ... or in any activity affecting interstate ... commerce.” RICO provides that it shall be unlawful to conspire “to conduct or participate ... in the conduct [of an] enterprise‘s affairs through a pattern of racketeering activity ....” 18 U.S.C. § 1962(c), (d). Racketeering activity includes “any act or threat involving ... arson ... which is chargeable under state law and punishable by imprisonment for more than one year; ... any act which is indictable under title 18, United States Code ... Section 1952 ... [and] any act which is indictable under Title 29, United States Code, ... Section 501(c).” 18 U.S.C. § 1961(1).

These statutes are written in general terms and make criminal the prescribed conduct without regard to the status or ultimate objectives of the person engaging in it.¹⁰ See, e. g.,

United States v. Roselli, 432 F.2d 879, 885 (9th Cir. 1970), cert. denied,

401 U.S. 924, 91 S.Ct. 883, 27 L.Ed.2d 828 (1971) (Travel Act);

United States v. Perrin, 580 F.2d 730, 733 (5th Cir. 1978), aff‘d,

444 U.S. 37, 100 S.Ct. 311, 62 L.Ed.2d 199 (1979) (Travel Act);

United States v. Campanale, 518 F.2d 352, 363–64 (9th Cir. 1975), cert. denied,

423 U.S. 1050, 96 S.Ct. 777, 46 L.Ed.2d 638 (1976) (RICO);

United States v. Field, 432 F.Supp. 55, 57–58 (S.D.N.Y.1977), aff‘d,

578 F.2d 1371 (2d Cir. 1978) (RICO). We consider it improbable that Congress, having determined that arson and the willful misuse of explosives constituted a sufficiently grave threat to persons and property to warrant the imposition of federal criminal sanctions, intended to make the imposition of such sanctions depend upon whether the person who willfully causes the fire or explosion did so for his own personal gain or for the gain of members of his union.

Nor do we consider the policy arguments advanced in

Enmons applicable to this case. In

Enmons, the Court focused on the special characteristics of the crime of extortion which embraces any act or threat of violence, however, minor, used to obtain the property of another. The underlying concern was that to apply a federal extortion statute in the context of the collective bargaining process would transform minor acts of labor violence punishable by state law into federal felonies, thus placing the federal government in the business of policing the routine conduct of strike activity.

There is little, if any, risk that the crimes charged in this indictment, if applied to labor violence, would involve the federal government in policing routine strike activity. The destruction of vehicles used in interstate commerce by means of explosives and travel in interstate commerce to commit arson are hardly the sorts of minor picket line violence that the

Enmons Court feared would be transformed into federal crimes under the Hobbs Act.

Moreover, there is no basis for the contention that the indictment in this case constitutes an unintended incursion into state criminal jurisdiction. Both RICO and the Travel Act explicitly prohibit conduct also chargeable under state laws of arson. 18 U.S.C. § 1961(1); 18 U.S.C. § 1952(b)(2). In addition, the legislative history of 18 U.S.C. § 844 clearly shows that it was enacted in response to the perceived “absence of any effective state or local controls” over explosives. H.R.Rep.No.91–1549, 91st Cong. 2d Sess., reprinted in [1970] U.S.Code Cong. & Ad.News at 4007, 4013. See also

United States v. Dawson, 467 F.2d 668, 671–73 (8th Cir. 1971), cert. denied,

410 U.S. 956, 93 S.Ct. 1427, 35 L.Ed.2d 689 (1972). Thus, to the extent that this indictment, by reaching conduct also punishable under state law, represents an incursion into state criminal jurisdiction, it was an incursion plainly and deliberately undertaken by Congress.¹¹

To uphold the dismissal of Counts 1 through 5, we would be required to create an exemption for labor violence that would necessarily be applicable to all federal criminal statutes. As counsel for the defendants candidly admitted during oral argument, if an ”

Enmons doctrine” were to immunize a union official from federal prosecution under the Travel Act or § 844(i), it would, in all logic, immunize from federal prosecution a union official—or, indeed, an employer—desperate enough to resort to kidnapping to achieve collective bargaining objectives. To carve out a narrow exemption from a federal extortion statute on the basis of its language and legislative history, as the Supreme Court did in

Enmons, is one thing; to exempt a wide range of violent behavior from all federal criminal liability, despite plain language that prohibits such conduct, is quite another.¹²

The defendants nevertheless contend that the federal regulation of labor union activities through a comprehensive scheme of predominantly civil remedies evidences a Congressional intent to exempt labor violence from federal criminal prosecution. This argument is without merit. The federal labor laws do not purport to govern all unlawful conduct engaged in by union members and officials. Thus, while acts of violence directed at an employer during a strike may be found, in some circumstances, to restrain or coerce employees in the exercise of their rights guaranteed under § 7 of the National Labor Relations Act, see e. g.,

NLRB v. Union Nacional de Trabajadores, 540 F.2d 1 (1st Cir. 1976), cert. denied,

429 U.S. 1039, 97 S.Ct. 736, 50 L.Ed.2d 750 (1977);

NLRB v. United Mines Workers, 429 F.2d 141, 147–48 (3rd Cir. 1970), they are not in and of themselves unfair labor practices. Cf.

Linn v. Plant Guard Workers, 383 U.S. 53, 63, 86 S.Ct. 657, 663, 15 L.Ed.2d 582 (1966) (defamation arising during a labor dispute is not an unfair labor practice absent showing that it interfered with exercise of specific rights guaranteed under the National Labor Relations Act). Moreover, even to the extent that the federal labor laws do reach union violence to achieve collective bargaining objectives, it is clear that they do not provide the exclusive remedy for such violence. See

Linn v. Plant Guard Workers, supra;

Auto Workers v. Wisconsin Board, 351 U.S. 266, 272–73, 76 S.Ct. 794, 798–799, 100 L.Ed. 1162 (1956). Defendants concede, for example, that arson and the destruction of property by means of explosives may be prosecuted under state criminal laws whether or not those acts also constitute unfair labor practices.¹³ Nothing in the language or legislative history of federal labor legislation suggests that federal criminal statutes—enacted to supplement state criminal sanctions—should not similarly be available to punish union members and officials who try to achieve collective bargaining goals by means of the kind of violence charged in the indictment before us.

The defendants’ reliance on

United States v. DeLaurentis, 491 F.2d 208 (2d Cir. 1974), is also misplaced. In

DeLaurentis, the federal government invoked an 1870 civil rights statute to prosecute union officials for threatening and intimidating union members in violation of § 7 of the National Labor Relations Act, which gives an employee the right to refrain from engaging in concerted union activities. In reversing the conviction, the Second Circuit held that Congress did not intend § 7 violations to be enforced under the 1870 Civil Rights Act, 18 U.S.C. § 241,¹⁴ but rather intended such violations to be enforced by the procedures and sanctions provided by the National Labor Relations Act. In this case, the undisputed availability of state criminal law demonstrates that the procedures and civil sanctions set forth in the National Labor Relations Act were not intended to be the exclusive means of regulating violence to achieve collective bargaining objectives. Moreover, in contrast to the broad language of the 1870 Civil Rights Act prohibiting persons from conspiring to “injure, oppress, threaten or intimidate any citizen in the free exercise or enjoyment of any right or privilege secured him by the ... laws of the United States,” the language of the statutes involved in this appeal plainly and specifically reaches the acts of violence alleged in the indictment.

We therefore reverse the dismissal of Counts 1 through 5 of the indictment.

III. Counts 6 through 10: the § 501(c) Violations

The government also appeals from the district court‘s dismissal of Counts 6 through 10 of the indictment which charge the defendant with using union funds to destroy Redman trucks in violation of § 501(c) of the Landrum-Griffin Act, 29 U.S.C. § 501(c). Section 501(c) prohibits a union officer or employee from converting union funds to his own use or the use of another.¹⁵

The district court dismissed Counts 6 through 10, apparently for failure to allege essential elements of the offense. See

United States v. Thordarson, 487 F.Supp. 991, 995–99 (C.D.Cal.1980). The district court held that the essential elements of § 501(c) include (1) a fraudulent intent to deprive the union of its funds and (2) either a lack of union authorization or an absence of a good faith belief in benefit to the union.

Id. at 996–97. Not finding these elements alleged in the indictment,¹⁶ the district court dismissed.

Id. at 998–99.

The government contends that the use of union funds for an illegal purpose constitutes a per se violation of § 501(c) under

United States v. Boyle, 482 F.2d 755 (D.C.Cir.1973), cert. denied,

414 U.S. 1076, 94 S.Ct. 593, 38 L.Ed.2d 483 (1973). This court, like the court below, declines to follow

Boyle and the per se rule it espouses. We nevertheless conclude that the district court erred in dismissing the indictment for failure to allege the essential elements of a § 501(c) offense. We hold that neither a lack of union authorization nor an absence of good faith belief in union benefit need be alleged in an indictment as essential elements of § 501(c), and that the indictment in this case adequately alleged fraudulent intent. We reverse, therefore, the district court‘s dismissal of Counts 6 through 10.

A. United States v. Boyle

The defendant in

Boyle was convicted of violating § 501(c) by using union funds to make campaign contributions. The contributions were illegal under 18 U.S.C. § 610 (repealed Pub.L. No. 94–283, Title II, § 201(a), 90 Stat. 496 (1976)) which prohibited labor unions from contributing money to candidates for federal office. On appeal, the defendant challenged his conviction on two grounds. First, he contended that to convict under § 501(c) the jury must find either that the expenditure was made without union authorization or that the union derived no benefit from the expenditure. Second, he argued that § 501(c) was intended to punish only knowingly illegal or ultra vires expenditures. The Court of Appeals for the District of Columbia rejected both contentions.

The D.C. Circuit noted that “[n]o officer or union governing body could in all logic believe that a transfer for a criminal purpose was for a legitimate union purpose, was authorized by the union constitution or by-laws, or was for the union‘s benefit.”

United States v. Boyle, 482 F.2d at 765. Nor was there any “hint in either the statute or its legislative history that indicates a Congressional intent to excuse from the ambit of § 501(c) transfers for a criminal purpose.”

Id. The Court thus concluded “[i]f the use to which the money is knowingly transferred is unlawful, then the transfer constitutes a violation of § 501(c).”

Id. at 764.

In this case, the union funds were allegedly used for the purpose of financing the destruction of Redman trucks. The government argues that since the expenditure was for an unlawful purpose the indictment is sufficient to state a § 501(c) offense under the

Boyle decision. We, however, like the district court, find

Boyle unpersuasive.¹⁷

Section 501(c) states a “larceny-type” offense.

United States v. Marolda, 615 F.2d 867, 872–73 (9th Cir. 1980) (Judge Larson, concurring);

United States v. Silverman, 430 F.2d 106, 126–27 (2d Cir.), modified on other grounds,

439 F.2d 1198 (1970), cert. denied,

402 U.S. 953, 91 S.Ct. 1619, 29 L.Ed.2d 123 (1971). Although the scope of criminal liability under § 501(c) extends beyond the common law offense of larceny and the old statutory crime of embezzlement, the essence of the § 501(c) crime, like the older crimes of embezzlement and larceny is the “tak[ing] [of] another‘s property ... knowing that the other person would not have wanted that to be done.”

United States v. Silverman, 430 F.2d at 126–27;

United States v. Andreen, 628 F.2d 1236 at 1241. Thus, it is well established that proof of a specific criminal intent to deprive the union of its funds is required to make out a § 501(c) violation.

The

Boyle court, however, would in effect irrebuttably presume the requisite criminal intent where union funds are used for a criminal purpose. The effect of such an approach would be to impermissibly convert a “larceny-type” statute requiring a fraudulent intent to deprive the union of its funds into a statute subjecting individual officers and employees to criminal liability for union expenditures made for prohibited purposes.¹⁸ In addition, such an interpretation would permit a conviction under § 501(c) without a finding by the trier of fact that the defendant has “taken another person‘s property ... knowing that the other person would not have wanted that to be done.”

United States v. Silverman, 430 F.2d at 126–27. We conclude that such an approach improperly presumes an essential element of a § 501(c) offense. Accordingly, we decline to follow

Boyle.

B. The Essential Elements of § 501(c)

Since it is not disputed that fraudulent intent is an element of § 501(c), we must consider whether lack of authorization and lack of good faith belief in union benefit are also elements of § 501(c). In two recent cases this circuit addressed this issue without totally resolving it.

United States v. Andreen, 628 F.2d 1236, 1242 (9th Cir. 1980);

United States v. Marolda, 615 F.2d 867, 869–70 (9th Cir. 1980).

In

Marolda, the defendant was convicted of violating § 501(c) after the court‘s instructions to the jury failed to mention lack of authorization or lack of union benefit. The court reversed the conviction because of a prejudicial variance between the jury instructions and the language of the indictment, which had explicitly alleged both lack of authorization and lack of union benefit.

Id. at 870. Thus the court was not required to reach the issue whether either or both are essential elements of § 501(c). Judge Larson, however, in a well-reasoned concurring opinion, addressed the issue and concluded that neither lack of authorization nor lack of union benefit is an essential element.

Id. at 872. Rather, he wrote, both bear on the issue of criminal intent.

In

Andreen, the court held that if the government established lack of authorization, it need not prove lack of union benefit.¹⁹

628 F.2d at 1242–43. The court expressly left open the issue now before us—whether the government must allege and prove lack of union benefit if it fails to establish lack of authorization—although in dictum it approved the position taken by Judge Larson in his concurring opinion in

Marolda.

Andreen, 628 F.2d at 1242. We also agree with Judge Larson and now hold that neither lack of authorization nor lack of good faith belief in union benefit is an essential element of § 501(c). Neither, therefore, need be alleged in the indictment, even though we recognize that evidence of either or both is likely to be admissible at trial as bearing on the issue of criminal intent to convert union funds to the defendant‘s own use or the use of another.

Section 501(c) is one of a number of statutes in which Congress has extended federal jurisdiction to cover common law theft crimes. As noted by Judge Friendly in

United States v. Silverman, 430 F.2d at 126, the language of § 501(c) resembles the language of such “larceny-type” statutes as 18 U.S.C. §§ 641, 645, 655–61.²⁰ In determining the elements of § 501(c), we are strongly influenced by the doctrine of these other “larceny-type” statutes.

Judge Larson, in his concurrence in

Marolda, suggests that Congress, in enacting § 501(c), “was merely transmuting common law theft crimes involving union funds and committed by union officers or employees into Federal crimes.”

615 F.2d at 872. The Supreme Court has stated in dictum that 18 U.S.C. § 641 was intended to combine the common law theft crimes and also outlaw acts which might fall into the “gaps or crevices” separating those crimes.

Morissette v. United States, 342 U.S. 246, 271, 72 S.Ct. 240, 254, 96 L.Ed. 288 (1952). As we read the legislative history of § 501(c), Congress’ intent in passing it was the same as with § 641.²¹ We see no evidence that Congress, in enacting § 501(c), intended to

add any new elements to the common law theft offenses except those necessary to show federal jurisdiction and subject matter: that the accused is (1) an official or employee (2) of a labor organization (3) involved in interstate commerce, and that (4) the funds belong to the labor organization.

United States v. Bane, 583 F.2d 832, 836 n.9 (6th Cir. 1978), cert. denied,

439 U.S. 1127, 99 S.Ct. 1044, 59 L.Ed.2d 88 (1979) (identifying the jurisdictional elements of § 501(c));

Silverman, 430 F.2d at 111 (same). Instead, as stated in

Morissette, supra, Congress intended to simplify some of the technical requirements of the common law crimes.

We therefore see no reason to add lack of authorization or lack of good faith belief in union benefit to the list of essential elements of § 501(c). Neither of the two has a counterpart in the elements of the common law theft crimes or of the other federal theft statutes.²² “Congress subjected union officers or employees to the same test of criminal liability as government employees, bank officers and the like—not to a lower one.”

Silverman, 430 F.2d at 127. The two elements which the government must allege and prove, in addition to jurisdictional elements, in making out a § 501(c) violation, are the same as those announced by the Supreme Court for § 641: fraudulent intent and conversion to the defendant‘s own use or the use of another.

Morissette, 342 U.S. at 271–72, 72 S.Ct. at 254.²³ See also

United States v. Durnin, 632 F.2d 1297, 1300 (5th Cir. 1980).²⁴

We do think that lack of authorization, lack of union benefit, and the defendant‘s failure to believe that there is authorization or union benefit, all are likely to bear on the essential element of fraudulent intent. See

Andreen, 628 F.2d at 1242–43;

Marolda, 615 F.2d at 873 (Larson, J., concurring). In a particular case, these factors may be crucial in determining the defendant‘s intent. In such a case, a jury instruction concerning them is likely to be appropriate.

For example, in this case, appellants are free to argue that they had no criminal intent because they believed that blowing up trucks conferred a benefit on the union and that the union, were it able to speak, would have wanted its money spent for such an unlawful purpose. The government can argue the contrary and in so doing is free to introduce evidence that destroying the trucks was unauthorized and did not work to the benefit of the union members as a whole. The trier of fact will then have to determine whether the government has proved its case that the defendants have “taken another person‘s property ... knowing that the other person would not have wanted that to be done,”

Andreen, 628 F.2d at 1241, quoting

Silverman, 430 F.2d at 126–27, and that “the ‘union’ presumably would have objected if it had been able to speak freely.”

Silverman, 430 F.2d at 127.

In conclusion, we hold that the indictment need merely allege fraudulent intent, and need not allege lack of authorization nor lack of belief in union benefit.

C. The Sufficiency of the Indictment

The district court in this case apparently held that the indictment was insufficient not only because it failed to set forth either lack of authorization or lack of good faith belief in union benefit, but also because it failed to adequately allege fraudulent intent. Upon review of the indictment, however, we find that fraudulent intent is adequately alleged.

Counts 6, 9, and 10 of the indictment allege that the defendants “did embezzle, steal, and unlawfully and willfully abstract and convert to their own use and the use of another” the funds of the union. Counts 7 and 8 of the indictment allege that the defendants “did embezzle, steal and unlawfully convert to their own use and the use of another” the funds of the union. Language just like that in Counts 6, 9 and 10 has been held to constitute a sufficient allegation of criminal intent under § 501(c). See

Colella v. United States, 360 F.2d 792, 798–99 (1st Cir.), cert. denied,

385 U.S. 829, 87 S.Ct. 65, 17 L.Ed.2d 65 (1966);

Doyle v. United States, 318 F.2d 419, 420–22 (8th Cir. 1963). The word “wilfully,” read in the context of the statutory language used in the indictment as a whole, is sufficient to allege the requisite criminal intent. See

United States v. Illinois Central Railroad Co., 303 U.S. 239, 242, 58 S.Ct. 533, 534–535, 82 L.Ed. 773 (1938) (“In statutes denouncing offenses involving turpitude, ‘wilfully’ is generally used to mean with evil purpose, criminal intent or the like“).²⁵ The language in Counts 7 and 8, though less complete, adequately informs the defendants of the charges against which they must defend. See

Hamling v. United States, 418 U.S. 87, 117, 94 S.Ct. 2887, 2907, 41 L.Ed.2d 590 (1974).

The judgment is reversed and the cause remanded for further proceedings consistent with this opinion.

Notes

1

18 U.S.C. § 844(i) provides that: Whoever maliciously damages or destroys, or attempts to damage or destroy, by means of an explosive, any building, vehicle, or other real or personal property used in interstate or foreign commerce or in any activity affecting interstate or foreign commerce shall be imprisoned ... or fined ... or both. The Travel Act penalizes anyone who travels in interstate commerce with intent to carry on an “unlawful activity” and does thereafter carry on such activity. 18 U.S.C. § 1952(a)(3). And it includes extortion in its definition of “unlawful activity.” 18 U.S.C. § 1952(b). RICO prohibits “racketeering activity” in various contexts, 18 U.S.C. § 1962, and extortion chargeable under state law is explicitly included in the definition of such activity. 18 U.S.C. § 1961(1)(A).

2

18 U.S.C. § 1952 provides in pertinent part that: (a) Whoever travels in interstate or foreign commerce, or uses any facility in interstate or foreign commerce, including the mail, with intent to ... (2) commit any crime of violence to further any unlawful activity; or (3) otherwise promote, manage, establish, carry on, or facilitate the promotion, management, establishment, or carrying on, of any unlawful activity, and thereafter performs or attempts to perform any of the acts specified in subparagraphs (1), (2), and (3), shall be fined ... or imprisoned ... or both. (b) As used in this section “unlawful activity” means (1) any business enterprise involving gambling, liquor on which the Federal excise tax has not been paid, narcotics, or prostitution offenses in violation of the laws of the State in which they are committed or of the United States, or (2) extortion, bribery, or arson in violation of the laws of the State in which committed or of the United States.

3

Section 501(c) provides that: (c) Any person who embezzles or converts to his own use, or the use of another, any of the moneys, funds, securities, property, or other assets of a labor organization of which he is an officer, or by which he is employed, directly or indirectly, shall be fined ... or imprisoned ... or both.

4

Section 1962(d) provides: It shall be unlawful for any person to conspire to violate any of the provisions of subsections (a), (b), or (c) of this section. Section 1962(c) provides: It shall be unlawful for any person employed by or associated with any enterprise engaged in, or the activities of which affect, interstate or foreign commerce, to conduct or participate, directly or indirectly, in the conduct of such enterprise‘s affairs through a pattern of racketeering activity ... An “enterprise” as defined by § 1961(4) includes: any individual, partnership, corporation, association, or other legal entity, and any union or group of individuals associated in fact although not a legal entity. A “pattern of racketeering activity” as defined by § 1961(5): requires at least two acts of racketeering activity, one of which occurred after the effective date of this chapter and the last of which occurred within ten years (excluding any period of imprisonment) after the commission of a prior act of racketeering activity. “Racketeering activity” as defined by § 1961(1) includes: (A) any act or threat, involving murder, kidnaping, gambling, arson, robbery, bribery, extortion, or dealing in narcotic or other dangerous drugs, which is chargeable under State law and punishable by imprisonment for more than one year; (B) any act which is indictable under any of the following provisions of title 18, United States Code: ... Section 1952 (relating to racketeering) ... and (C) any act which is indictable under title 29, United States Code, ... section 501(c) (relating to embezzlement from union funds).

5

The BEA has asserted that release of the data would lead to disclosure of investigatory techniques and procedures and would risk circumvention of the IRS‘s law enforcement activities. The BEA contends that release of the source data would be “nothing less than supplying a blueprint” for tax avoidance, see Appellant‘s Brief at 9, because anyone knowledgeable in statistics could develop a DIF scoring system similar to formulae used by the IRS to score returns for their audit potential. Susan Long has asserted, on the other hand, that the allegations of harm are inapplicable because the IRS presently screens returns for audit using DIF formulae constructed from Cycle 6 data and, in a lengthy discussion of statistical procedures, that the IRS‘s DIF system cannot be reconstructed in a way that will harm the IRS‘s enforcement activities. See note 5 on page 1326.

17

Although the district court found the

Boyle decision “troubling“, it sought to distinguish

Boyle on its facts.

Boyle, the district court found, involved an expenditure of union funds which was prohibited by criminal statute. In the present case, the specific expenditure—the reimbursement for expenses—was not prohibited by statute, only the eventual use of the money to destroy trucks was illegal, and so the district court held that

Boyle did not apply.

Thordarson, 487 F.Supp. at 997–98. We, however, find

Boyle indistinguishable from the present case on its facts. The § 501(c) violation in

Boyle involved a transfer from the United Mine Workers’ (UMW) treasury to the UMW‘s legislative and lobbying arm. While the transfer was to facilitate the making of unlawful contributions, the transfer itself was not unlawful. See

id. at 758–59 and n.8.

18

The holding in

Boyle converts § 501(c) from a “larceny-type” statute to a statute criminalizing union expenditures for certain purposes. Such a reading would make criminal certain breaches of fiduciary duty despite the absence of a specific intent to deprive the union of its funds. We find no support in the legislative history for such a reading of the statute. First, the precursors to §§ 501(a) and 501(c) were added to the Act at different times. These precursors are first found in S. 1555, 86th Cong., 1st Sess. (1959). Section 109(a) of S. 1555, as reported from the Committee on Labor and Public Welfare on April 14, 1959, is almost identical to § 501(c). See 105 Cong.Rec. 5980 (1959). There was no federal fiduciary obligation in the bill at that time. See S.Rep.No. 187, 86th Cong., 1st Sess. (1959), reprinted in [1959] U.S. Code Cong. & Ad. News, 2318, 2376–77 (Minority views). A fiduciary obligation was added to the bill by an amendment proposed by Senator McClellan, 105 Cong.Rec. 6525, on April 23, 1959, as § 509, and later renumbered § 609. 105 Cong.Rec. 6523–28 (1959). The subsequent House Bill, H.R. 8342, included § 109(a) of S. 1555 almost verbatim as § 501(c), but strengthened the fiduciary obligation by replacing § 609 of S. 1555 with § 501(a). See 105 Cong.Rec. 15549–50 (1959) (remarks of Rep. Bolling);

Id. at 15888 (text of H.R. 8342). Second, the legislative history states that § 501(b), and not § 501(c), was meant to be the enforcement provision for § 501(a). The discussion of fiduciary duties in the analysis of H.R. 8342 discusses § 501(b) as the enforcement provision for § 501(a) and fails to mention § 501(c). See H.R.Rep.No. 741, 86th Cong., 1st Sess. (1959) reprinted in [1959] U.S. Code Cong. & Ad. News 2424, 2479–80 (Supplementary views). The Senate Republicans’ remarks on the conference bill, reported by Senator Goldwater, state that the purpose of § 501(c) is to make embezzlement and other thefts of union funds federal crimes as well as state crimes, while the purpose of § 501(b) is to enforce the fiduciary duty of union officials. See 105 Cong. Rec. 19766 (1959) (remarks of Sen. Goldwater).

19

The issue on appeal in

Andreen was the sufficiency of the evidence for a conviction under 18 U.S.C. § 664. The court treated the case as though it were a § 501(c) conviction because § 664, which relates to employee welfare and pension plans, uses language that parallels § 501(c).

20

The key language in 29 U.S.C. § 501(c) is “embezzles, steals, or unlawfully and willfully abstracts or converts to his own use, or to the use of another.” The comparable language in 18 U.S.C. § 641 is “embezzles, steals, purloins, or knowingly converts to his use or the use of another“; the language in 18 U.S.C. § 656 and § 657 is “embezzles, abstracts, purloins, or willfully misapplies.”

21

The Senate Minority Report on S. 1555 states that § 109(a), the precursor to § 501(c), does nothing more than make the state crimes of embezzlement and theft federal crimes for union officials, and does not give union members any additional protection. S.Rep.No. 187, 86th Cong., 1st Sess. (1959), reprinted in [1959] U.S. Code Cong. & Ad. News 2318, 2401 (Minority views, Appendix B). Senator Goldwater, commenting on this section, renumbered 209(a), stated that it merely created “concurrent jurisdiction” and was “like gilding the lily.” 105 Cong.Rec. 10099 (remarks of Sen. Goldwater). We have found nothing in the legislative history to contradict these remarks. See also note 18 supra.

22

The elements of embezzlement, when codified in a statute such as 18 U.S.C. § 641, are: (1) a trust or fiduciary relationship, (2) that the property claimed embezzled is embraced within the meaning of the statute, (3) that it came into the possession or care of accused by virtue of his employment, (4) it is property of another, (5) that his dealing therewith constituted a fraudulent conversion or appropriation of same to his own use, and (6) such was with the intent to deprive the owner thereof.

United States v. Powell, 294 F.Supp. 1353, 1355 (E.D.Va.1968), aff‘d,

413 F.2d 1037 (4th Cir. 1969). The elements of common law larceny are (1) a wrongful taking and carrying away (asportation), (2) of the personal property of another, (3) with the fraudulent intent to deprive the owner of his property without his consent.

United States v. Barlow, 470 F.2d 1245, 1251 (D.C. Cir. 1972); see also

Morissette v. United States, 342 U.S. 246, 267 n.28, 72 S.Ct. 240, 251–253 n.28, 96 L.Ed. 288 (1952). Larceny is usually incorporated in a federal theft statute in a broadened form by means of the words “steal” or “purloin“: “Stealing, having no common law definition to restrict its meaning as an offense, is commonly used to denote any dishonest transaction whereby one person obtains that which rightfully belongs to another, and deprives the owner of the rights and benefits of ownership, but may or may not involve the element of stealth usually attributed to the word purloin”

Morissette, 342 U.S. at 268 n.28, 72 S.Ct. at 251–253 n.28, quoting

Crabb v. Zerbst, 99 F.2d 562, 565 (5th Cir. 1938). Conversion is even broader than stealing, since it can be accomplished without a wrongful taking (where the converter‘s initial possession was lawful) and without any intent to keep possession, so long as the property is misused or abused.

Morissette, 342 U.S. at 271–72, 72 S.Ct. at 254. Thus the addition of elements of lack of authorization or lack of union benefit is directly counter to the thrust of the federal theft statutes to eliminate the technicalities of the common law offenses. See generally

Id. at 263–73, 72 S.Ct. at 249–255.

23

Although

Morissette does not explicitly state that conversion is an element of § 641, that is the effect of

Morissette‘s reasoning.

Morissette states that “[p]robably every stealing is a conversion,”

342 U.S. at 271, 72 S.Ct. at 254, and then shows that a stealing is a conversion with the added elements of a wrongful taking and an intent to retain possession.

Id. at 272, 72 S.Ct. at 254. Embezzlement and purloining, the other two offenses combined to make § 641, are also conversions with other elements added: to purloin is to steal with the element of stealth,

id. at 268 n.28, 72 S.Ct. at 251–253 n.28, and conversion is an established element of embezzlement. See, e. g.,

United States v. Powell, supra, 294 F.Supp. at 1355. It is thus clear from

Morissette that any violation of § 641 must involve a conversion.

24

We recognize that there appears to be considerable support in other circuits for the defendant‘s position that there are additional essential elements to § 501(c)—although we note that those circuits fail to agree on what the additional elements are. The Sixth Circuit has adopted the view that § 501(c) does not require a showing of lack of authorization or lack of union benefit, but does require a showing of fraudulent intent and a lack of good faith belief in authorization and union benefit.

United States v. Bane, 583 F.2d 832 (6th Cir. 1978), cert. denied,

439 U.S. 1127, 99 S.Ct. 1044, 59 L.Ed.2d 88 (1979). The Fifth Circuit has held that the elements of § 501(c) include fraudulent intent and either actual lack of authorization or lack of a good faith belief in union benefit.

United States v. Dixon, 609 F.2d 827 (5th Cir. 1980); see also

United States v. Nell, 526 F.2d 1223 (5th Cir. 1976) (fraudulent intent and lack of authorization sufficient). But see

United States v. Durnin, 632 F.2d 1297, 1300 & n.5 (5th Cir. 1980) (suggesting that authorization is irrelevant if fraudulent intent is “thoroughly established“). The Eighth Circuit agrees that fraudulent intent and lack of authorization are sufficient, but has reserved the issue as to what elements in addition to fraudulent intent are required if the expenditure is authorized.

United States v. Goad, 490 F.2d 1158 (8th Cir.), cert. denied,

417 U.S. 945, 94 S.Ct. 3068, 41 L.Ed.2d 665 (1974). Finally, the Second Circuit has held that the elements of § 501(c) are fraudulent intent and either lack of authorization (or ratification) or lack of good faith belief in union benefit.

United States v. Santiago, 528 F.2d 1130, 1133–34 (2nd Cir.), cert. denied,

425 U.S. 972, 96 S.Ct. 2169, 48 L.Ed.2d 795 (1976). But see

United States v. Silverman, 430 F.2d 106, 117–18, 126–27 (2nd Cir.), modified on other grounds,

439 F.2d 1198 (1970), cert. denied,

402 U.S. 953, 91 S.Ct. 1619, 29 L.Ed.2d 123 (1971) (Judge Moore suggests lack of actual union benefit, and not a lack of belief in union benefit, is required if authorization is present; Judges Friendly and Hays agree arguendo).

25

The district court, in discussing the fraudulent intent issue, stated that “[i]t is unlikely that there was a fraudulent intent to deprive the union of its funds because reimbursement for the expenses incurred in labor organizing, and particularly strike-oriented activities, are probably not for acts ‘that the union would not have wanted ... done.‘”

United States v. Thordarson, supra, 487 F.Supp. at 998. This suggests that the district court may have dismissed the indictment not because the indictment failed to allege fraudulent intent, but because the court doubted that fraudulent intent could be proved at trial. If this was the district court‘s reasoning, it was in error. An indictment is sufficient if it adequately alleges the elements of the offense and fairly informs the defendant. See

Hamling v. United States, supra, 418 U.S. at 117, 94 S.Ct. at 2907 and

United States v. Bailey, 444 U.S. 394 at 414, 100 S.Ct. 624 at 636, 62 L.Ed.2d 575 (1980). The strength of the government‘s case is not at issue. However difficult it may be to prove fraudulent intent on the facts of this case, the government is entitled to an opportunity to present its proof.

PREGERSON, Circuit Judge (concurring and dissenting):

Because section 501(c) of the Landrum-Griffin Act is expressly designed to regulate the conduct of union officials in the use of union funds, I agree that the district court erred in dismissing those counts of the indictment that charged violations of section 501(c), and join in Parts I and III of the court‘s opinion. I cannot agree, however, with the majority‘s view of the scope of

United States v. Enmons, 410 U.S. 396, 93 S.Ct. 1007, 35 L.Ed.2d 379 (1973). I believe that the rationale animating

Enmons precludes the application of RICO, the Travel Act, or 18 U.S.C. § 844(i) to violence incidental to a legitimate labor dispute. Accordingly, I dissent from Part II of the majority‘s opinion.

The majority distinguishes

Enmons from the case at bar by reading it as based on the specific language and legislative history of the Hobbs Act. I agree with the district court, however, that “it is inaccurate to so narrowly limit the case.”

United States v. Thordarson, 487 F.Supp. 991, 992–93 (D.C.C.D.Cal.1980). The Court in

Enmons explicitly stated that even had the language and history of the Hobbs Act not precluded its application to violence during legitimate labor disputes, policy reasons would make such application improper.

410 U.S. at 411, 93 S.Ct. at 1015. The Court voiced its reluctance, absent unmistakably compelling statutory language, to conclude “that Congress intended to put the Federal Government in the business of policing the orderly conduct of strikes.”

Id. This policy is as appropriate here as in

Enmons and counsels against extending RICO, the Travel Act, or section 844(i) to “the use of force to achieve legitimate collective-bargaining demands.”

410 U.S. at 408, 93 S.Ct. at 1014.

The majority neglects this policy consideration. The only policy argument stated in

Enmons that the majority acknowledges is that “the special characteristics of the crime of extortion” made the Court fear that applying the Hobbs Act to labor disputes risked transforming minor picket line violence into federal crimes. The majority scarcely recognizes that applying the Travel Act or RICO to labor disputes creates the same risk, since extortion is one of the “unlawful activities” to which the Travel Act applies and is included in RICO‘s definition of “racketeering activity.”¹

More serious, however, is the majority‘s failure to appreciate that the

Enmons decision rests not solely on the interpretation of the particular statute involved there, but on a broad, historically justified concern that the federal government not intrude into the business of policing the orderly conduct of legitimate labor disputes. Punishing lawlessness perpetrated during labor disputes has historically been and should continue to be the province of the States and their law enforcement authorities. I therefore respectfully dissent from Part II of the court‘s opinion.

Case Details

Case Name: United States v. Sten Thordarson, Martin Fry, Craig Dunbar, Martin Salgado, and Charles Wise

Court Name: Court of Appeals for the Ninth Circuit

Date Published: May 20, 1981

Citation: 646 F.2d 1323

Docket Number: 80-1239

Court Abbreviation: 9th Cir.