Petition — Bane v. United States

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QCT 24 1978

Supreme Court of the United State

(_™

Ar?

——

October Term, 1978

No. @8-693

JOSEPH M. BANE, SR.,

Petitioner,

VS.

UNITED STATES OF AMERICA,

Respondent.

PETITION FOR A WRIT OF CERTIORARI

To the United States Court of Appeals

For the Sixth Circuit

IsAAc SCHULZ

Louis RECHER

Forp, WHITNEY, CRUMP & SCHULZ

1500 Williamson Building

Cleveland, Ohio 44114

216 696-3444

JOHN F. CHAMBERS

RIPPLE, CHAMBERS & STEINER

1820 First Federal Building

Detroit, Michigan 48226

313/961-0130

Attorneys for Petitioner,

Joseph M. Bane, Sr.

Of Counsel:

EUGENE GRESSMAN

School of Law

University of North Carolina

Chapel Hill, N.C. 27514

919/933-5106

October 23, 1978

THE GATES LEGAL PUBLISHING CO., CLEVELAND, OCHIO—TEL, (216) 621-5647

TABLE OF CONTENTS

Opinion Below ..........--------------:-sssesecsceeeeceeeeeneneeenetecenaeneetes l

I nc acienneontneghinhiniscnnniananneineesis sespauateceae 1

Question Presented ...................--.--.--.-----sse-csecseceseeeesees I 2

Statutory Provision Involved .................-------:+:1----ee 2

IN UE I cca ecsnenemnesnasane sass domiaiantiorrats 2

Reasons for Granting the Writ—

1. This Case Raises Significant and Unique Ques-

tions Concerning the Reach of 29 U.S.C. $501(c) 8

2 The Lower Courts Have Exhibited Confusion

and Conflict in Applying 29 U.S.C. §501(c) ....... 1l

ceca pa tenet Tia A a oe SOO 14

Appendix—

Opinion of the United States Court of Appeals for

the Sixth Circuit affirming conviction (decided

and filed August 25, 1978) .................. Seana Al

Opinion of the United States District Court of the

Eastern District of Michigan, Southern Division,

denying in part and allowing in part defendant's

motions to acquit and for judgment of acquittal

notwithstanding the verdict (decided June 21,

8 s(t hana et A9

Government’s Exhibit 1 A28

Opinion of the United States District Court on Mo-

tion to Reconsider (July 13, 1977) | A30

TABLE OF AUTHORITIES

Cases

Colella v. United States, 360 F.2d 792 (1st Cir. i966) ... 11

Gurton v. Arons, 339 F.2d 371 (2nd Cir. 1964) ................ 8

United States v. Goad, 490 F.2d 1158 (8th Cir. 1974) ... 18

United States v. Nell, 526 F.2d 1223 (5th Cir. 1976) ... 12

United States v. Ottley, 509 F.2d 667 (2nd Cir. 1975) ....12, 13

United States v. Santiago, 528 F.2d 1130 (2nd C*:. 1976) 12

United States v. Sullivan, 498 F.2d 146 (1st Cir. 1974) 12

Statute

Title 29. United States Code, Section 501(c) .... 2,3, 7,8, 9,

10, 11, 12

Supreme Court of the United States

October Term, 1978

JOSEPH M. BANE, SR.,

Petitioner,

vs.

UNITED STATES OF AMERICA,

Respondent.

PETITION FOR A WRIT OF CERTIORARI

To the United States Court of Appeals

For the Sixth Circuit

Petitioner, Joseph M. Bane, Sr., respectfully petitions

for a writ of certiorari to review the judgment of the

United States Court of Appeals for the Sixth Circuit en-

tered in this proceeding on August 25, 1978.

OPINION BELOW

The opinion of the United States Court of Appeals

for the Sixth Circuit (Appendix, w fra, p. Al) is unre-

ported. The judgment of the United States District Court,

for the Eastern District of Michigan, Southern Division

(Appendix, infra, p. A9), is reported at 433 F. Supp. 1286.

JURISDICTION

The judgment of the United States Court of Appeals,

Sixth Circuit, affirming the judgment of the United States

District Court for the Eastern District of Michigan, South-

ern Division, against petitioner, was entered on August

)

25, 1978. Mr. Justice Stewart signed an order extending

the time for filing the petition for certiorari to and includ-

ing October 24, 1978, pursuant to Rule 22(2) of the Supreme

Court. The jurisdiction of this Court is invoked under

28 U.S.C. §$1254(1).

QUESTION PRESENTED

Whether a union president can be convicted of the

crime of embezzlement of union funds under 29 U.S.C. $591

payments to a union organizer after the organizer has be-

come too ill to perform all his normal duties and where the

government has not proved the absence of substantial

benefit to the union from keeping the organizer on the

payroll,

STATUTORY PROVISION INVOLVED

United States Code, Title 29.

Section 501(c). Embezzlement of Assets; Penalty

Any person who embezzles, steals, or unlawfully and

willfully abstracts 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 indi-

rectly, shall be fined not more than $10,000 or imprisoned

for not more than five years, or both.

STATEMENT OF THE CASE

Petitioner, Joseph M. Bane, Sr., was charged in a

nine-count indictment by a grand jury as follows: counts

one through seven, for violation of 18 U.S.C. $1341 (mail

fraud) in seven different time periods from on or about

November 5, 1970, to on or about March 26, 1974; count

eight, for conspiracy to violate 18 U.S.C. $1341 and 29

US.C. §501(c); and count nine, for violation of 29 U.S.C.

$501(c), in which it was charged that petitioner embezzled

$37,700.81 from the International Brotherhood of Teamsters

(IBT).

A. Hiring of William Hoffa

In 1967, the defendant, Joseph M. Bane, Sr., president

of Teamster Local 614, Pontiac, Michigan, contacted the

International Brotherhood of Teamsters to secure organiz-

ing assistance for the local (R. 368).* This assistance

was required because of the inexperience of the local’s

organizers and business agents (R. 368). The International,

by its then president, James R. Hoffa, suggested that Local

614 employ the services of William Hoffa, the brother

of James R. Hoffa (R. 368, 369, 377, 378) and that the

International fund such employment with a periodic sub-

sidy to the local. Mr. William Hoffa, like his brother,

was a long-time union employee having served the union

as both a business agent and organizer for some thirty-

eight years (R. 251, 270, 367, 378).

B. Subsidy Program

Under the subsidy program the International paid One

Thousand Dollars ($1,000) per month to the local to aid

the local’s organizing efforts; the subsidy was renewable

semiannually (R. 7). Twice each year, Bane, by letter

addressed to the president of the International, requested

2 continuation of the subsidy for the next sixth-month

“Reference is to the Appendix in the Court of Appeals below.

period (R. 57-59, 61, 63, 64, 65, 66, 67, 68). After appro-

priate authorization by the International officials (R. 62,

68, 73, 75, 78, 81, 87, 89, 93, 94). the International issued

monthly checks of $1,000 to the local (R. 69, 70) and

the funds were then deposited in an account maintained

by Local 614 (R. 71, 94). The local used these funds

exclusively to pay Mr. Hoffa’s monthly salary (R. 369).

None of these moneys were ever paid to or for the benefit

of Bane.

The International at all times knew that the $1,000

per month subsidy payments were being used by Local

614 to pay William Hoffa’s salary (R. 79, 80, 88, 90, 92,

96, 98) and both the original subsidy and each extension

thereunder were approved and authorized by the Interna-

tional with this knowledge (R. 57-59, 60, 61, 64, 66, 67,

72, 73, 75, 76, 77, 78, 79, 81, 82, 84, 88, 89, 90, 92, 94,

98, 99, 101, 102 and numerous other citations in the Trial

Transcript). The trial court found that such payments

were properly authorized and directed the jury accordingly

(R. 447, 448).

C. Course of William Hoffa’s Employment

From 1967 until his retirement on December 31, 1973

(R. 100), William Hoffa continued in the employ of Local

614 under this subsidy arrangement (R. 88, 90-98). During

this period of employment he served as a_ business

agent/organizer (R. 108, 112, 149, 240, 251, 256, 270, 288,

289, 304, 367). The government has not contended nor

is there any basis for contention that Hoffa’s employment

from 1967 to 1970 was invidious in any respect or that

the purpose of employing Hoffa was to raid the union

treasury. Hoffa fully performed all the duties required

of him as a union organizer. However, from 1970 until

his death in 1976, William Hoffa’s health seriously deterio-

rated (R. 152, 284, 297, 298, 302, 313. 318, 319, 375). He

became afflicted with a number of diseases including gout,

edema, cirrhosis, emphysema, diabetes and heart disease

(R. 128, 245-246). Again, at no time prior to the onset

of these illnesses did the government ever question the

propriety of his employment; it was only during the 1970

to 1973 period when his health prevented him from fully

performing his duties that his employment became the

subject of this embezzlement indictment.

The state of William Hoffa’s ill-health during this

three-year period was no secret; it was known to various

top officials of the International including Frank E. Fitz-

simmons, its president (R. 274, 355-357), Murray Miller,

former secretary-treasurer (R. 101, 274, 355-357) and

Thomas Flynn, former secretary-treasurer and predecessor

to Mr. Miller (R. 356); and it was with this knowledge that

each of these individuals approved the payments of the sub-

sidy to Local 614 for Hoffa’s salary (R. 81, 89). Mr.

Hoffa’s ever worsening state of heaith was also known to

the executive secretary of the Michigan Teamster Joint

Councils of 43 (R. 333-334), to officials of other teamster

locals (R. 329), to numerous employees of Local 614 and

to outsiders having business with the local (R. 101, 124,

125, 152, 163, 165, 245, 254, 260, 274, 275, 288, 289, 329,

332, 334, 347, 355, 356).

Because of his illnesses, Hoffa was not at all times

able to perform his duties, but he did werk whenever

he was able (R. 129, 375), and he was continuously paid

his full salary (R. 83, 105, 112, 370-373). During the three-

year period covered by the indictment, he performed nu-

merous organizing, charitable, grievance reconciliation, ad-

ministration and other general services on behalf of Local

614 ‘defendant adduced evidence that Hoffa provided or-

ganizing leads, R. 104, 151, 154, 268, 357; directly aided

in organizing activities, R. 125, 149, 150, 151, 153; obtained

employer health and welfare plan contributions, R. 164;

prepared and distributed handbills and posters, R. 154,

165, 316-318; handled employer/employee grievances, R.

240, 241, 252, 253, 263, 280; performed charitable work,

R. 244, handled jurisdictional disputes, R. 261; collected

union dues, R. 262, 285, 365; verified compliance with

union contracts, R. 264; and assisted other business agents

and organizers and performed general services for the

union, R. 250, 272, 284, 301, 303, 312). He also was fre-

quently present, available for assignment or carrying out

his duties at the local headquarters during this period

R. 123, 129, 137, 141, 155, 159, 167, 248, 270, 280, 282,

284, 288, 297, 298, 300, 301, 323, 326, 330, 332, 336, 338,

346, 349, 350, 352.

D. Teamster Sick Pay Policy

Although no formal union resolution was ever intro-

duced at trial, unrebutted testimony was given by numer-

ous union officials and employees that it was the union’s

policy to pay sick employees their full salary during periods

of illness (R. 101, 102, 138, 257, 258, 259, 277, 305, 329,

364, 365). This policy was also shown to be the union’s

actual practice (R. 119, 257, 277, 306, 329, 334, 364, 365).

The defendant, in accordance with this policy and practice

(R. 83, 96, 105, 106, 112, 370-373), approved regular salary

payments to William Hoffa during his periods of illness.

E. Trial and Conviction

At the close of the government’s case, the defendant

moved for a judgment of acquittal (R. 170). The trial

court denied the motion (R. 239) and held that the essential

factors to be considered in determining whether Bane had

violated the embezzlement statute were (1) whether Bane

had a good faith belief that the funds were being used

for union business and (2) whether the union had au-

thorized the expenditures (R. 236) and the court charged

the jury accordingly. Appendix, infra, A25-26. Whether

a benefit actually accrued to the union as a result of

employing Hoffa was, in the court’s view, not material

for a conviction and no charge on that issue was made.

Based on the good faith standard, the jury found peti-

tioner guilty of six of the seven counts of mail fraud

and of violating $501(c); petitioner was acquitted of one

count of mail fraud and conspiracy. Petitioner moved

for a judgment of acquittal after the jury verdict. The

district court granted a new trial on the six mail fraud

counts but denied the motion as to the §501(c) violation.

Appendix, infra, p. A27.

Petitioner raised two issues on appeal: first, whether

a union official could embezzle funds within the meaning

of §501(c) by making validly authorized salary payments

to an experienced but incapacitated union employee, when

those payments have at least a colorable benefit to the

union and do not benefit the union official himself; second,

if so, whether the government must demonstrate, as an

element of a §501(c) charge, that there resulted no benefit

to the union from expenditure of the authorized payment.

The Sixth Circuit Court of Appeals held that §501(c)

permits a conviction essentially on two mental elements:

(1) fraudulent intent to deprive a union of its funds and

(2) lack of a good faith belief that the expenditure was

for the legitimate benefit of the union. According to the

Court, “. . . it is not necessary for the government to

prove that the expenditure did not actually benefit the

union. To require such proof could absolve a defendant

of liability when an otherwise fraudulent appropriation

of funds fortuitously had some beneficial effect upon the

union. Such a requirement would also be inconsistent

with the strict fiduciary duty imposed upon union officials

by §501.” Appendix, infra, pp. A6-A7. Petitioner con-

tends that, without such proof, the burden of justifying

union expenditures is on the defendant and a jury can

convict any union official when it disagrees with his deci-

sion to expend funds. This result is particularly egregious

in a case such as this because the decision whether to

continue to pay an employee who has become sick is in-

herently managerial and discretionary.

REASONS FOR GRANTING THE WRIT

1. This Case Raises Significant and Unique Questions

Concerning the Reach of U.S.C, 29 §501(c)

Unless reviewed by this Court, the decision below

will constitute a dangerous and authoritative precedent

for applying $501(c) to a situation never contemplated

by Congress. By permitting a federal court jury to substi-

tute its judgment for that of a union officer as to whether

and when an employee should have been discharged and

whether and when the union has received full value for

authorized expenditures, the Sixth Circuit has sanctioned

a most questionable invasion into the internal affairs of

unions. As was said by the Second Circuit in Gurton

v. Arons, 339 F.2d 371, 375 (2nd Cir. 1964), “the provis.ons

of the Labor Management Reporting and Disclosure Act

were not intended by Congress to constitute an invitation

to the courts to intervene at will in the internal affairs

of unions. . . The internal operations of unions are to

be left to the officers chosen by the members to manage

those operations except in the very limited instances ex-

pressly provided for by the Act.”

Mxpressly abjuring any requirements that the Govern-

ment prove that an authorized expenditure did not in

fact benefit the union, the Sixth Circuit has effectively

placed on the defendant the burden of proving the exis-

tence of such a benefit. At the same time, the Sixth

Circuit has held that the presence or absence of such

a benefit is “relevant” to the two statutory elements that

the government must prove: (1) that the defendant had

a fraudulent intent to deprive the union of its funds, and

(2) that the defendant lacked a good faith belief that

the expenditure was for the legitimate benefit of the union.

What is not explained is how the government can escape

any burden of proving what concededly is a “relevant”

factor in the government’s establishment of the statutory

offense described in $501(c).

This novel shift in the burden of proof is exacerbated

here by the fact that the authorized expenditure of union

funds to employ the organizing services of William Hoffa

unquestionably benefitted Local 614 throughout the 1967-

1970 period when Hoffa was physically able to perform

all of his tasks. Logic and common sense dictate that

it should be the burden of the government to prove that

such benefit decreased so substantially during the 1970-

1974 period, when Hoffa’s health became progressively

worse, that petitioner must have acquired a new and fraud-

ulent intent to deprive the union of its funds and have

lost his previous good faith belief that the expenditure

of union funds to pay Hoffa was for the legitimate benefit

of the union.

The government’s theory was that, when Hoffa became

ill in 1970, petitioner should at some time have removed

Hoffa from the union payroll, because Hoffa no longer

was able to participate in organizing campaigns and no

longer could be considered <n organizer for whom peti-

tioner could legitimately requesi and receive subsidies.

In short, the government sought only to prove that in

the 1970-1974 period Hoffa had not personally organized

any companies. But the government did not attempt to

prove the status of Hoffa’s health or, more importantly,

that Hoffa’s continued affiliation with Local 614 was with-

out substantial benefit to that union. Rather, petitioner

was put to the burden of explaining to the jury why

he decided to continue subsidy payments to Hoffa—i.e

that Local 614 still obtained substanuai benefits trom

Hoffa’s affiliation despite his illness. Obviously, the jury

disagreed with petitioner’s business judgment in this re-

spect.

This case involves nothing more devious or under-

handed than continuing to pay a full salary to an employee

who has suffered a physical deterioration, a deterioration

that rendered him incapable of performing all of his work

at all times. Here the government seeks to establish a

$501(c) embezzlement out of the unfortunate circum-

stances of that human deterioration. It seems only fair

to insist that the government prove that the resulting

decline in services rendered by an employee to the union

was sO gross, so complete and so obvious so as to reflect

upon the good faith and intent of those who continued

to make authorized payments to the employee.

One must question whether Congress ever intended

to elevate the inefficiencies and inabilities of a seriously

ill employee into the crime of embezzlement by the one

authorized to pay his salary and one must question whether

Congress, in enacting $501(c), ever contemplated that

the business judgment of the employer who decides to

continue the sick employee on the payroll could be second-

guessed and made the basis for a criminal conviction. Cer-

tainly nothing in the language of §501(c) or in the legisla-

tive history of the Landrum-Griffin Act looks to any such

invasion and criminalization of internal union judgments.

2. The Lower Courts Have Exhibited Confusion and

Conflict in Appiying U.S.C. 29 §501(c)

Not surprisingly, the application of the standards em-

ployed by the Sixth Circuit in affirming the conviction

of this case finds no parallel in any other federal court

decision, No other court has confronted the problem of

applying the §501l(c) embezzlement concept where an

employee's health status drastically changes. But if one

concentrates on the significance of the “union benefit”

notion, which the Sixth Circuit said lay within the peti-

tioner’s burden of proof, one finds but confusion and con-

flict among the Circuits.

In Colella v. United States, 360 F.2d 792 (1st Cir.

1966), the defendant, an experienced labor organizer em-

ployed by the International Union of Electrical, Radio and

Machine Workers (IUE) AFL-CIO, was indicted under

299 U.S.C. $501(c) for inflating hotel and car rental bills

incurred while pursuing IUE’s interests in Puerto Rico

during a major strike. The defendant admitted these alle-

gations but asserted that such action was necessary “. . . to

recover monies spent for liquor, for payment to picket

captains, and for other purposes ‘which could not be cov-

ered by strike relief... ..” Id. at 796. The First Circuit

Court approved a jury charge that “*‘. . . in order to

warrant the defendant’s conviction, the evidence must con-

vince you beyond a reasonable doubt that the defendant

submitted his requests for payment with the criminal intent

to obtain money which had not been spent for a union

purpose and did thereafter use that money for a non-

union purpose.” Id. at 804 (emphasis added). Under

this standard, the government must prove a lack of union

benefit (“non-union purpose’) to sustain a $501(c) convic-

tion. The First Circuit Court stated that such would be

the case even where the expenditures, as here, are autho-

rized. Id. at 804.

Colella still represents the law on this subject in the

First Circuit. See, for example, United States v. Sullivan,

498 F.2d 146, at 148-149 (1st Cir. 1974). Therefore, where

a union official, charged with a §501(c) embezzlement,

is found to have acted with a fraudulent intent in making

authorized expenditures for a union purpose, the union

official’s guilt or innocence will turn on whether he is

tried in the Sixth Circuit or the First Circuit. In the

Sixth Circuit, the defendant in these circumstances will

be guilty even though the expenditure benefited the union.

In the First Circuit, the defendant will be innocent so

long as the funds were used for a union purpose.

The Second Circuit has held that where expenditures

are authorized, a good faith belief that the funds were being

used for union business will exculpate a defendant, United

States v. Santiago, 528 F.2d 1130, at 1133-1134 (2nd Cir.

1976), but actual benefit or lack of benefit to the union is

only relevant insofar as it reflects on the presence or ab-

sence of other essential §501(c) elements, United States v.

Ottley, 509 F.2d 667, at 671 (2nd Cir. 1975). The Sixth

Circuit agrees with the holding in Ottley (Appendix, infra,

p. A6), as does the Fifth Circuit, United States v, Nell, 526

F.2d 1223, note 13 (5th Cir. 1976).

On the other hand, the Second Circuit has stated that

where expenditures are not authorized and there is not

even a good faith belief that they were authorized, “[ilf

these [funds] actually were used for union business ... we

doubt that Congress intended to hold such expenditure

criminal.” Ottley, swpra, note 6 (emphasis added). How-

ever, according to the Eighth Circuit, where disbursements

are not authorized a showing of union benefit is not even

relevant to disprove fraudulent intent to deprive a union

of its funds. United States v. Goad, 490 F.2d 1158, at 1166

(8th Cir. 1974). Goad added, however, that “. . . the issue

of union benefit might k> material where there was proper

authorization... . Id. at 1163 (emphasis added).

These decisions underscore the confusion which must

be resolved by this Court. If proof of a substantial absence

of union benefit is not required to sustain a §501(c) con-

viction, the government and juries, with the benefit of

hindsight and relying solely on the element of criminal in-

tent to defraud, will be free to second-guess union officials

whose decisions, which may turn out to be wrong or ill-

advised. do not amount to a theft of union funds.

CONCLUSION

For these reasons, a writ of certiorari should issue to

review the judgment and opinion of the Sixth Circuit.

Respectfully submitted,

IsAAC SCHULZ

Louis RECHER

Forp, WHITNEY, CRUMP & SCHULZ

1500 Williamson Building

Cleveland, Ohio 44114

216/696-3444

JOHN F. CHAMBERS

RIPPLE, CHAMBERS & STEINER

1820 First Federal Building

Detroit, Michigan 48226

313/961-0130

Attorneys for Petitioner,

Joseph M. Bane, Sr.

EUGENE GRESSMAN

School of Law

University of North Carolina

Chapel Hill, North Carolina 27514

919/933-5106

Of Counsel

APPENDIX

OPINION OF THE COURT OF APPEALS

FOR THE SIXTH CIRCUIT

(Filed August 25, 1978)

No. 77-5333

UNITED STATES COURT OF APPEALS

For THE SIXTH CIRCUIT

UNITED STATES OF AMERICA,

Plaintiff-Appellee,

JOSEPH M. BANE, SR.,

Defendant-Appellant.

APPEAL from the United States District Court

for the Eastern District of Michigan,

Southern. Division

Before: Puiiiips, Chief Circuit Judge, CELEBREZZE,

Circuit Judge, and NEESE,* District Judge.

CELEBREZZE, Circuit Judge. Appellant, Joseph M.

Bane, Sr., was found guilty by a jury of misappropriating

union funds in violation of 29 U.S.C. § 501(c).’ The prin-

*The Honorable C. G. Neese, United States District Judge fo:

the Eastern District of Tennessee, sitting by designation.

1. 29 U.S.C. § 501(c):

Any person who embezzles, steals, or unlawfully and wil-

fully abstracts 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 not more than $10,000 or imprisoned for not more than

five years, or both.

cipal issues raised on appeal require this court to delineate

the elements of the crime set forth in § 501(c) and to de-

termine whether the district court’s jury instructions prop-

erly reflected those elements. For reasons stated below,

we affirm.

Appellant was president of Local 614 of the Interna-

tional Brotherhood of Teamsters in Pontiac, Michigan, at

all times relevant to this cause. In 1967, appellant re-

quested for Local 614 a subsidy of $1,000 per month from

the Teamsters international union. This subsidy was pro-

posed to enable Local 614 to hire an experienced union

organizer. James R. Hoffa, then Teamsters international

president, approved the subsidy for six months, subject to

renewal. Appellant used the subsidy to hire James R.

Hoffa’s brother, William Hoffa, as an organizer. The sub-

sidy was renewed at appellants’ request for subsequent

six-month periods through 1974 on the approval of James

R. Hoffa and his successor Frank E. Fitzsimmons.

The government demonstrated that during the period

covered by the indictment (viz., November 1970 through

March 1974) William Hoffa was a “no-show” and did no

organizing work for Local 614.* He continued to receive

the internatonal’s subsidy payments from Local 614, how-

ever, throughout this period. Appellant regularly sub-

mitted forms to the international union showing that the

subsidy was used to pay William Hoffa for organizing.

Appellant and William Hoffa were indicted in early

1976 for seven counts of mail fraud, one count of conspiracy

and one count charging violation of § 501(c) both as

2 All of the facts contained in this paragraph are undisputed.

3. This was, of course, disputed by appellant but we must

view the evidence most favorably to the government. Glasser v.

United States, 315 U.S. 60, 80 (1942).

principals and aiders and abettors. All counts arose from

the same events—William Hoffa’s “no-show” job. Wil-

liam Hoffa died of natural causes before trial. Appellant

presented two somewhat inconsistent defenses at trial.

First, he claimed that William Hoffa had become too ill to

work for Local 614 and that during the period covered by

the indictment the payments made to William Hoffa were

pursuant to an informal union sick pay policy. Second,

appellant claimed that William Hoffa actually did work as

an organizer for Local 614 during this time. As to the first

defense, it was conceded that William Hoffa was ill, which

illnesses eventually led to his death, but there was suf-

ficient evidence for the jury to conclude either that he

was not too ill to work or that, if too ill to work, the pay-

ments were not really made pursuant to any sick pay

policy. As to the second defense, there was more than

sufficient evidence for the jury to find that William Hoffa

did not work as an organizer for Local 614.

The jury found appellant guilty of six of the seven

counts of mail fraud and of violating § 501(c); appellant

was acquitted of one count of mail fraud and conspiracy.

Appellant moved for a judgment of acquittal after the jury

verdict. The district court granted a new trial on the six

mail fraud counts but denied the motion as to the § 501(c)

violation, 433 F. Supp. 1286 (E.D. Mich. 1977), so that only

the § 501(c) count is presently before us.

Appellant’s principal arguments on appeai are twofold.

First, he claims the fact that the payments to William Hoffa

were authorized and had at least a “colorable” benefit to

the union insulates him from liability under § 501(c).

Second, he argues that, even if authorization was not a valid

defense, the district court should have instructed the jury

that it had to find that there was no actual benefit to

the union from the payments made to William Hoffa. Both

of these arguments are without merit.

We have held that in enacting § 501 Congress imposed

the broadest possible fiduciary duty upon union officers

and employees. United States v. Vitale, 489 F.2d 1367, 1368

(6th Cir. 1974), citing United States v. Silverman, 430 F.2d

106, 113 (2d Cir.), modified on other grounds 439 F.2d 1198

(2d Cir. 1970), cert. den. 402 U.S. 953 (1971). See also

United States v. Nell, 526 F.2d 1223, 1232 (Sth Cir. 1976);

United States v. Goad, 490 F.2d 1158, 1161-62 (8th Cir.),

cert. den. 417 U.S. 945 (1974). ‘The language in the stat-

ute, ‘embezzles, steals, or unlawfully and willfully abstracts

or converts .. .,, would seem to cover almost every kind of

a taking, whether by larcency, theft, embezzlement or con-

version.” United States v. Harmon, 339 F.2d 354, 357 (6th

Cir. 1964), cert. den. 380 U.S. 944 (1965). We have upheld

a § 501(c) conviction on facts similar to those in the in-

stant case, United States v. Decker, 304 F.2d 702 (6th Cir.

1962), and the conduct alleged by the government here

clearly comes within the statute’s coverage of “Any person

who embezzles, .. . or unlawfully and willfully abstracts or

converts to... the use of another, any of the moneys [or]

funds ... of a labor organization of which he is an officer.

. 2’ Section 501(c) was meant “to protect general union

memberships from the corruption, however novel, of union

officials and employees.” United States v. Sullivan, 498

F.2d 146, 150 (1st Cir.), cert. den. 419 U.S. 993 (1974), citing

United States v. Harmon, supra, 339 F.2d at 357-58. Thus,

appellant’s § 501(c) conviction as either a principal or an

aider and abettor must be upheld if the district court prop-

erly instructed the jury on the elements of a § 501(c)

offense.

Section 501(c) cases are usually one of two types—

one type involves unauthorized expenditures of union

funds‘ and the other involves authorized expenditures.”

This circuit has never had occasion to expressly delineate

the elements of a § 501(c) offense in a case involving

unauthorized expenditure of union funds. See United

States v. Nell, supra, 526 F.2d at 1232; United States v.

Goad, supra, 490 F.2d at 1166. See also United States v. Rob-

inson, 512 F.2d 491 (2d Cir.), cert. den. 423 U.S. 853 (1975),

United States v. Silverman, supra, 430 F.2d at 113-17

(Moore, J., dissenting in part). Nor do we have occasion

to do so here since the district court instructed the jury

that the payments to William Hoffa were authorized by

both the international and local union.’ We thus assume

that the expenditures were authorized and analyze the case

on that basis.

4. This opinion will use “expenditure” to include al! types of

(mis)appropriations of union funds, with “funds” being used to

include “moneys, funds, securities, property, or other assets.”

5. Cf. United States v. Boyle, 482 F.2d 755, 764 (D.C. Cir.),

cert. den. 414 U.S. 1076 (1973), in which the court upheld a

§ 501(c) conviction because the ultimate use of the union funds

was illegal irrespective of any issue concerning authorization.

See generally Annot., 15 A.L.R.3d 939, § 10.

6. United States v. Harmon, 339 F.2d 354 (6th Cir. 1964),

and United States v. Decker, 304 F.2d 702 (fith Cir. 1962), both

involved unauthorized expenditures of union funds but neither

case required the court to spell out the § 501(c) elements in that

context. Instead, the court only answered the defendants’ con-

tentions that the evidence was insufficient to support the convic-

tions.

Lod

7. We agree with the government that the district court

could have properly instructed the jury that a guilty verdict was

warranted if the funds were not being erypended as authorized,

even though an expenditure was authorized. The failure to so

instruct, however, worked in appellant’s favor since it removed

from the jury’s consideration one possible theory supporting guilt.

The simple fact that authorization was not an issue in this

case demonstrates the flaw in appellant’s argument that authoriza-

tion constitutes a complete defense to a § 501(c) charge. As given

to the jury, authorization or lack thereof was totally irrelevant

since authorization was taken as assumed.

In a § 501(c) case in which the expenditure of union

funds was authorized the government must prove two

distinct but interrelated elements.* First, it must prove

that the defendant had a fraudulent intent to deprive the

union of its funds and, second, that the defendant lacked a

good faith: belief that the expenditure was for the legitimate

benefit of the union.® United States v. Santiago, supra, 528

F.2d at 1133-34; United States v. Ottley, supra, 509 F.2d at

671-72; United States v. Dibrizzi, 393 F.2d 642, 644-45 (2d

Cir. 1968); Colella v. United States, 360 F.2d 792, 798 (1st

Cir.), cert. den. 385 U.S. 829 (1966); Doyle v. United States,

318 F.2d 419, 422 (8th Cir. 1963).

Whether or not the expenditure did, in fact, legiti-

mately benefit the union is relevant both to the defendant’s

good faith belief therein and his fraudulent intent. Ottley,

supra, 509 F.2d at 671. An actual union benefit would tend

to make good faith belief therein more likely and fraudu-

lent intent less likely, and vice versa. But, contrary to ap-

pellant’s argument, it is not necessary for the government

to prove that the expenditure did not actually benefit the

union.'® To require such proof could absolve a defendant

8. The same rules would apparently apply if the defendant

had a good faith belief that the expenditure was authorized, Goad,

supra, 490 F.2d at 1166, or that the union would authorize it,

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

den. 425 U.S. 972 (1976), and United States v. Ottley, 509 F.2d

667, 671 (2d Cir. 1975). .

9. The government must, of course, prove in every § 501(c)

case that it involves “[1] the moneys, funds, securities, property,

or other assets [2] of a labor organization [3] of which [the

defendant] is an officer, or by which he is employed.” These

elements were stipulated in this case.

10. United States v. Vitale, supra, 489 F.2d at 1369, did not

hold that the government must prove an actual absence of benefit

to the union in a § 501(c) case involving an authorized expen-

diture. While the court did note language which could be so read,

that passage was a quotation from the portion of Judge Moore’s

opinion in Silverman, supra, 430 F.2d at 113-17, which was a

(Continued on following page)

of liability when an otherwise fraudulent appropriation of

funds fortuitously had some beneficial effect upon the

union. Such a requirement would also be inconsistent with

the strict fiduciary duty imposed upon union officials by

§ 501.

We have examined the district court’s jury instruc-

tions'' in light of the above legal standards. We believe

Footnote continued—

dissenting opinion; the second circuit’s views have been more

precisely set forth in Santiago and Ottley. The holding in Vitale

was simply that there was sufficient evidence to support the guilty

verdict. There was no conceivable benefit to the union from the

misappropriation of funds involved there and the court had no

need to address the issue of benefit to the union or good faith

belief therein.

It should be noted that both appellant’s brief and reply brief

filed in this court pretermit any mention of Vitale and the only

other opinions of this court interpreting § 501(c), Harmon, supra,

and Decker, supra.

11. The district court instructed the jury, in part, as follows:

To determine whether these funds of the Union which were

paid to William Hoffa were embezzled, you must ask your-

selves if the Defendant had a good faith belief that the Union

funds which were paid to William Hoffa were being used for

the benefit of the Union. Thus, the Government must prove

beyond a reasonable doubt that the Defendant did not have a

good faith belief that the Union funds which were paid to

William Hoffa were for the benefit of the Union. If you are

not convinced beyond a reasonable doubt that the Defendant

did not have a good faith belief that the funds paid to William

Hoffa were for the benefit of the Union, an embezzlement

would not have occurred within the meaning of the law.

On the other hand, if you are convinced beyond a reason-

able doubt that the Defendant did not have a good faith Felief

that the funds paid to William Hoffa were for the benefit of

the Union, that the Defendant acted knowingly and wilfully,

then an embezzlement would have occurred within the mean-

ing of the law.

I would now like to define for you what I mean by a

good faith belief. A good faith belief, as commonly used,

means a belief or state of mind denoting honesty of purpose,

freedom from intention to defraud. Generally speaking, it

means being faithful to one’s duty or obligation.

(Continued on following page)

that the instructions properly focused the jury’s attention

on the need for the government to prove that appellant

did not have a good faith belief that the subsidy payments

to William Hoffa were for the legitimate benefit of the

union. The instructions, taken as a whole, also gave the

jury adequate opportunity to consider actual benefit to the

union from this expenditure insofar as that related to ap-

pellant’s good faith belief therein and his concomitant

fraudulent intent.

All of the other issues raised by appellant have been

considered and found to be without merit.

The judgment of the district court is affirmed.

Footnote continued—

I also want to define the term “Union benefit” or “Benefit

to the Union.” A benefit to the Union is something that

furthers the interests of the members and the institution of a

labor union. A benefit to the Union occurs when some legit-

imate purpose of the Union is advanced. A benefit to the

Union does not occur if the benefit that occurred only inured

to an individual. With regard to expenditures that are or are

not Union benefits, some expenditures are clearly in further-

ance of the interests of the Union. While others are so clearly

not in the furtherance of the Union purpose that such a claim

is scarcely credible. Others may depend on the facts of a

particular case.

In determining whether there was or was not a Union

benefit in this case, you should examine the purposes and

results of the payments and use your best judgment to decide

if there reasonably was any gain for the members of Local 614

or for the International Brotherhood of Teamsters in the sub-

sidy payments made to Willam Hoffa as alleged.

The district court’s instructions on fraudulent intent were

found elsewhere in the charge and are not objected to on appeal.

We note that the district court focused on the word “em-

bezzlement” and omitted mention of the other statutory terms,

“abstracts” and “converts.” The latter terms were probably more

appropriate on the facts of this case but we can see no prejudice

to appellant from their omission.

We do not mean to suggest that the above quoted jury instruc-

tions should be used as a model in future trials since further re-

finement would be appropriate in light of this opinion. We merely

uphold the quoted instructions as adequate on the facts of this case.

OPINION OF THE UNITED STATES

DISTRICT COURT

(Dated June 21, 1977)

Criminal Action: 6-80372

UNITED STATES DISTRICT COURT

EASTERN District OF MICHIGAN

SOUTHERN DIVISION

UNITED STATES OF AMERICA,

Plaintiff,

VS.

JOSEPH M. BANE, SR.,

Defendant.

OPINION

Joseph M. Bane, Sr. was charged in a nine count

indictment by a grand jury as follows: counts one through

seven for violations of 18 U.S.C. $1341 (mail fraud) in

seven different time periods from on or about November 5,

1970 to on or about March 26, 1974;' count eight for con-

spiracy to violate 18 U.S.C. $1341 and 29 U.S.C. $501 (c),

1. Count one covers the period November 5, 1970 to May 13,

1971; count two covers May i3, 1971 to September 209, 1971; count

three covers from September 20, 1971 to May 4, 1972; count four

covers May 4, 1972 to December 5, 1972; count five covers Decem-

ber 5, 1972 to July 6, 1973; count six covers July 6, 1973 to

February 12, 1974; count seven covers February 12, 1974 to

March 26, 1974.

Al0

and count nine for violation of 29 U.S.C. $501 (c) in which

it was charged that he embezzled $37,700.81 from the

International Brotherhood of Teamsters (IBT).”

William H. Hoffa, once a co-defendant in this case,

died prior to the commencement of trial. William H.

Hoffa’s brother, James R. Hoffa, had at one time been

the President of the International Brotherhood of Team-

sters. Joseph M. Bane, Sr. is the President of Local 614

of that Union.

Trial took place before a jury. In essence, the govern-

ment’s theory was that William H. Hoffa, being the brother

of James R. Hoffa, was fitted into a “no show” job as a

“union organizer” for Local 614. This arrangement was

facilitated by several periodic letters* in which Bane

represented to the International Union that Hoffa was

working as an organizer when, in fact, he was not. Hoffa’s

salary as an organizer was paid under this arrangement

as a special “subsidy” by the International Union.

The government’s proof showed that beginning in 1967

and periodically thereafter an organizing subsidy was

sought from the International Union. In various letters

to IBT Bane stated that this subsidy was needed to permit

Local 614 to hire an experienced organizer to help out

with the organizing of employees of a large list of poten-

tial companies. In reliance on these letters the Inter-

national Union duly authorized the subsidy.

2. Count nine also charges aiding and abetting in the viola-

tion of 501(c). Title 18, U.S.C., §2 provides that one who aids

and abets another in the commission of a crime shall be punished

as a principal. Accordingly, the convictions as both a principal

and of aiding and abetting in this case merge into one conviction

as a principal.

3. For the purposes of establishing the offense of mail fraud,

the use of the U.S. mails was clearly shown, and is not in issue.

All

The government offered no proof that William H.

Hoffa was not in fact doing some organizing work in the

period from 1967 (at the inception of the subsidy) to 1969

(just prior to the period covered by the indictment}. The

government’s theory was that some time prior to the

periods covered by counts one through seven of the indict-

ment, a change occurred. Thereafter, from 1970 to 1974,

William H. Hoffa, by arrangement, stopped doing any

work, but the requests by Bane for the subsidy, and the

payments (now allegedly unlawful) to William H. Hoffa

continued. This was the claimed embezzlement.

Bane presented a two-pronged defense: first, that

William H. Hoffa did in fact work as an organizer, and

that no embezzlement could have occurred; and in second,

that William H. Hoffa was too ill to work and the subsidy

was in fact used as a ‘sick pay’ arrangement which, he

argues, was a well-established union practice. While it is

possible for these two seemingly inconsistent defenses to

be consistent (i.e., William H. Hoffa did work for part of

the period, but was too sick for the rest of the period),

the proof presented did not so indicate. The testimony,

even of the same witnesses as to these aspects, often

suggested both that William H. Hoffa was too ill to work

and that he was working at the same time.‘

4. A typical example is the testimony of William H. Hoffa’s

son, called as a witness for the defense, who testified as follows:

“Q. Do you know a man by the name of William Hoffa?

A. Yes, sir, he was my father.

Q@. And we're going to start with the years 1970 to

December 31st of 1973.

A. Okay.

Q. Did you know at that time that your father became

ill and became progressively more ill during those years?

A. Definitely.

(Continued on following page)

Al2

The government offered substantial testimony tending

to show that William H. Hoffa did not work at all. It

offered no direct testimony that William H. Hoffa was not

in fact being paid ‘sick pay’ or that he was healthy.

At the close of proofs Bane moved for a directed

verdict of acquittal claiming that the government had

failed to show a lack of union benefit from the use of

the subsidy funds. Although there was a conflict in the

evidence as to whether William H. Hoffa did work, Bane

argues that the testimony that William H. Hoffa was too

ill to work was uncontradicted, and thus the use of the

subsidy as a union benefit, 7.e., paying a long-time em-

ployee ‘sick pay’, was incontrovertibly established. Ac-

cordingly, Bane argues the government failed to present

any proof as to one of the claimed essential elements under

Footnote continued—

Q. And did you know by whom he was employed, during

those years?

A. Teamsters Union Local 614.

Q. And do you know how long at that particular point,

say 1970, your father had been employed by the Teamsters?

A. At that point—you want me to say how long he had

been employed by that union?

Q. Yes, from before 1970 down when he started with

the union. -

A. Oh, he been with the union 35, 50 years, at least.

I wouldn’t know the exact dates.

Q. And during the years of 1970, Fall and December

31st of 1973, did you have an occasion to visit your father at

the union hall?

A. Oh, yes.

Q. How often?

A. I would say on an average no less than two times a

month.

Q. Okay. And what was he doing when you visited him

at that hall?

A. Behind his desk making phone calls or seeing people

who were in the union, under his supervision.”

Al3

29 U.S.C. $501 (c), and that if there was no embezzlement

there was no mail fraud or conspiracy. That motion was

taken under advisement and the case was submitted to

the jury.

The jury found Bane guilty of the first six of the

seven counts of mail fraud, and of embezzlement of union

funds. They acquitted him of one count of mail fraud

(count seven) and the conspiracy charge in count eight.

Bane then renewed his motion adding a motion for judg-

ment of acquittal notwithstanding the verdict.

Both motions essentially require a similar task. The

Court must view the evidence in a light most favorable

to the government, and inquire if such evidence can sup-

port a verdict of guilty.” United States v. Garnes, 355

5. See also Colella v. United States, 360 F.2d 792 (1st Cir.),

cert. denied, 385 U.S. 829 (1966), where at 802-3, the court stated:

As to the latter motion, made at the conclusion of all the

evidence, defendant asserts that there was insufficient evi-

dence to justify a finding by the jury of criminal intent and

conversion to defendant’s use. Our standard of review is

that of determining whether the evidence viewed most favor-

ably to the government and all reasonable inferences there-

from support the jury’s verdict. United States v. Quagliato,

7 Cir., 1965, 343 F.2d 533, cert. denied, 381 U.S. 938, 85 S.Ct.

1771, 14 L.Ed.2d 702; Genstil v. United States, 1 Cir., 1964,

326 F.2d 243, cert. denied, 377 U.S. 916, 84 S Ct. 1179, 12

L.Ed.2d 185. .

Using this standard, we cannot say the jury was irrational

in its finding of guilt. The knowledge of the falsity of ex-

pense vouchers was admitted. Despite the parade of defen-

dant’s witnesses attesting to the practice of falsity, the jury

had heard the President, Secretary-Treasurer, and Comptrol-

ler of the union testify to their ignorance of such a practice

and the lack of authority. While defendant and a number of

other witnesses testified to defendant’s having spent money

liberally for lunches, drinks, prescriptions, travel, and other

union purposes, the jury could have disbelieved all. Or, be-

lieving much of this testimony, it could have believed there

was a balance unaccounted for and willfully and wrongfully

converted to defendant’s own use. The jury might well have

(Continued on following page)

Al4

F.2d 276 (6th Cir. 1965); United States v. Callan, 426 F.2d

939, 942 (6th Cir. 1970). In addition, the motion for

judgment of acquittal notwithstanding the verdict requires

the Court to reexamine the instructions upon which the

case was submitted to the jury.

MAIL FRAUD

A re-examination of the jury instructions requires

that the convictions on counts one through six be set aside.

In charging the jury, the Court in essence defined mail

fraud as any embezzlement in violation of 29 U.S.C. $50!

Court stated (emphasis added):

“Because the matter of the charge of embezzlement is

of primary importance in this case and must be found

by you in order to find whether or not the Defendant

is guilty or innocent of the remaining counts, I will

charge you first on that count...”

Similary, when the Court charged specifically on mail

fraud, the charge relied heavily on the earlier definition of

embezzlement,

Footnote continued—

considered that witnesses had testified to a practice of falsity

relating chiefly to liquor expense and have felt there was no

good reason why defendant failed to obtain and forward

receipts for food, travel, and other respectable items making

up the largest part of his expenditures. It might have be-

lieved the union Secretary-Treasurer that defendant had no

authority to bring his family to Puerto Rico. It might have

drawn adverse conclusions from the destruction of minutes of

a union meeting devoted to charges of falsity, the deposit of

some monies in defendant’s personal bank account, or even an

attempt in defendant’s presence to change the testimony of

witness Ugarte.

The district court properly allowed the jury to make iis

own assessment of the evidence.

Al5

“The three factual elements required to be proved by

the government beyond a reasonable doubt in order

for you to find the Defendant guilty of mail fraud in

each of the seven counts referred to are these: first,

that the Defendant devised a scheme to [sic] artifice to

embezzle union funds and that union funds were em-

bezzled. In this connection, keep in mind my instruc-

tions on the law as they apply to Count 9, the count

charging alleged embezzlement of union funds. To

put it another way, it is necessary for you first to find

beyond a reasonable doubt that the crime of em-

bezzlement was committed, and that the Defendant

was involved in that crime before you can find that

the crime of mail fraud was committed by him .. .”

The elements constituting a 501 (c) embezzlement will

be set forth in greater detail in discussing the conviction

on count nine. The essence of such a crime, however, un-

like fraud, is the breach of a fiduciary duty by a union

leader entrusted with union funds in regard to those funds.

Mail fraud, under 18 U.S.C. $1341, requires a “scheme

or artifice to defraud,” which incorpo. ates the common law

elements of fraud.° United States v. Maze, 468 F.2d 524

(6th Cir. 1972), aff'd, 414 U.S. 395 (1973); United States

v. Grow, 394 F.2d 182 (4th Cir.), cert. denied, 393 U.S. 840

(1968); United States v. Dreer, 457 F.2d 31 (3rd Cir. 1972);

United States v. Curtis, 537 F.2d 1091 (5th Cir. 1976);

United States v. Keane, 522 F.2d 534 (7th Cir.), cert. denied,

424 U.S. 976 (1975). Actual, rather than ‘constructive’

fraud is what is meant for the purposes of criminal prose-

6. Except that the fraud need not be successful or completed

This grows out of the language of 501(c) which expressly punishes

any “scheme or artifice to defraud”; United States v. Reid, 533

F.2d 1255 (D.C. Cir. 1976).

Al6

cution under the mail fraud statute. Post v. United States,

407 F.2d 319 (D.C. Cir.), cert. denied, 393 U.S. 1092 (1968);

United States v. Mandel, 415 F. Supp. 997 (D. Md. 1976).

The test for embezzlement, which focuses on the De-

fendant’s good faith in disbursing union funds falls short

of requiring the specific intent to defraud at the time of

mailing which must be shown to establish mail fraud. A

“scheme to defraud” connotes planning in advance; United

States v. Nance, 502 F.2d 615 (8th Cir.), cert. denied, 420

U.S. 926 (1974), and involves a planned misrepresentation

of a material fact in existence at the time of the mailing

of the statement. A scheme to defraud must involve a

statement which is calculated to deceive; United States v.

Beitscher 467 F.2d 269 (10th Cir. 1972).

That the jury may have found, when focusing on the

embezzlement instructions, that Bane acted in bad faith

in disbursing the union subsidy from the International

Union does not necessarily mean that they would find that

at the time he was requesting the subsidy he intended to

disburse the funds in bad faith when those funds were

received.

The Court’s charge did include a later instruction on

the elements of fraud. However, the earlier misleading

charge was not sufficiently cured by such a brief correct

instruction so as to insure that the jury, in rendering its

verdict of guilty, was applying the correct legal standard

for mail fraud. Jury instructions are to be judged as a

whole. Cupp v. Naughten, 414 U.S. 141 (1973); United

States v. Mattucci, 502 F.2d 883, 888-9 (6th Cir. 1974). In

order for instructions not to mislead a jury they should be

consistent and harmonious; Sm’th v. United States, 230

F.2d 935, 939 (6th Cir. 1956). [“The fact that one instruc-

tion is correct does not cure the error in giving another

Al7

inconsistent with it.”]. See also United States v. Reid, 517

F.2d 953, 965; Berrier v. Egeler, ........ FP. Supe. ........ (E.D.

Mich. 1976).

This is not to say that the Court should direct a ver-

dict of acquittal on these counts. There was evidence that

the International Union was knowingly and willfully mis-

led by Defendant Bane into paying an “organizing sub-

sidy” for Hoffa who was not to do any organizing work.

The jury’s guilty verdict in part was the application of

the wrong legal standard and therefore this part of the

verdict must be set aside in favor of a new trial.

EMBEZZLEMENT OF UNION FUNDS

The crucial portion of the defense motion, however,

pertains to the of [sic] conviction of embezzlement con-

tained in count nine. The elements of a violation of 29

U.S.C. $501 (c) vary somewhat with the facts of each case

to which the law is to be applied. First, where it is clear

that an expenditure of union funds is authorized and these

funds are in fact used for the legitimate benefit of the

union, there can be no violation of the law. United States

v. Silverman, 430 F.2d 106, modified on other grounds, 439

F.2d 1198 (2d Cir.), cert. denied, 402 U.S. 953 (1970);

United States v. Dibrizzi, 393 F.2d 642 (2d Cir. 1968);

United States v. Colella, 360 F.2d 792 (1st Cir.), cert. de-

nied, 385 U.S. 829 (1966); United States v. Goad, 490 F.2d

1158 (8th Cir.), cert. denied, 417 U.S. 945 (1974).

Bane argues that these two propositions are undis-

puted here. Since the government admits that the subsidy

was authorized, Bane argues that because the government

failed to submit testimony that William H. Hoffa was

healthy, it failed to place in issue the question of the use

of the funds for a legitimate union benefit, for Bane says,

{

Als

it was the undisputed policy of the Teamsters to pay such

‘sick pay’ to their own employees who were unable to

work.’

However, the policy of paying such sick pay by the

Teamsters, as testified to at trial, was by no means an

absolute or assumed practice, and thus uncontroverted in

its applicability to William H. Hoffa. It was spoken of

as somewhat of an uncertain, although probable, thing.

For example Walter Sacharczyk, a man who had been

the President of Teamsters Local 334 for some sixteen

years and had been with the Teamsters for forty-four

years, and would certainly be expected to know of such

a policy, cautiously testified in response to questions by

defense counsel,

“A... . Marshall was sick for a long period

of time and he was paid.

Q. Would you say it was a policy then?

A. Well, if you get sick, you got nothing else

to draw your money from, it would be more or less

like an obligation on the local for whom you were

working that if you are off sick for a short period

of time, whatever period of time they maintain you

on the payroll.”

Similarly, inconclusive testimony also came from George

C. Sholp, a man who had been with the Teamsters for

many years, and had been an executive board member

of his own Teamster local:

7. As defense counsel stated in his opening statement,

“We will show that it was union policy when somebody was ill

tu keep them on payroll even if Mr. Hoffa did nothing and

that the union can’t treat its members any worse than it

wants the employer that signs contracts with them to treat

their employees; to treat the person whose [sic] worked for

35 or 38 years like he was garbage when they come ill.”

Alg

“A. Myself, for one; I had a heart attack in 1961

and I was in Ford Hospital for three weeks. And

I worked part-time for abcut six months and I was

paid continuously. Also Mr. Charles Duebeck, Local

337, was off for years. I think, three or four years

with cancer. And he was paid at ali times. And

the custom was, to my knowledge, that I do not know

of anybody who was off ill who was not paid when

they were off ill, any local union.”

The jury was entitled to consider both what these

union officials were able to say and what they failed

to say, and to consider the tenor and hesitancy of their

statements, and to draw inferences therefrom.

In order to obtain a renewal of the subsidy for each

six month period, Bane sent the International Union

monthly reports and a renewal request letter,® all of which

8. One such letter (Government Exhibit #12) was read into

the record:

“February 12, 1974

“Attention: Mr. Frank E. Fitzsimmons

‘General President

“Dear Sir and Brother:

“At this time we are requesting an extension of another

six months on the organizing subsidy from the Internationai

Brotherhood of Teamsters in the amount of $1,000 per month.

“Your consideration in granting this extension will be

greatly appreciated.

“Fraternally yours,

“TEAMSTERS UNION LOCAL NO. 614

“Joseph M. Bane

“President”

Q. Sir, there is certain handwriting that appears in the

upper right-hand corner of Government 12. Do you recognize

it?

A. Yes, I do.

(Continued on following page)

A20

suggested that William H. Heffa was doing organizing

work and, significantly, none of which mentioned that

he was ill. Assistant United States Attorney Shulman

aptly suggested, in his closing argument, that the jury

might infer from Bane’s failure to mention Hoffa’s illness

that ‘sick pay’ in the form of such a special subsidy might

not have been granted by the International Union,

“Now, the contention of the defense is that if

he was ill and didn’t work, it was sort of a standard

policy of the IBT to pay ill employees. ...

... if it was the policy of the Teamsters to pay

people who are ill, and there is nothing wrong with

it, why didn’t he just tell him? They wrote letters

every six months renewing the authorization through

Footnote continued—

Q. Would you please read it and identify what is on

there and to whom the initials belong?

A. Okay. “Six months, F.E.S. Frank E. Fitzsimmons”

These renewal letters must be considered in the context of the

other reports that the International Union required that were

testified to,

Q. In this particular instance then, sir, are you saying

that Local 614 had its own account number within the finan-

cial record system of the International Brotherhood for the

disbursement of and receipt of a subsidy payment?

A. Yes, we could summarize all the disbursements to

him.

Q. Now, if you move down to the lower part of the page

where there is a listing it says “description” and under that

appears “organizing subsidy,” is that correct?

A. Yes, sir.

Q. Does that refer back then to the subsidy that was

requested in the authorization letter?

A. Yes.

Also, they must be viewed in connection with the original letter

requesting the subsidy (Government Exhibit +1) which is at-

tached as an appendix to this opinion.

A21

the whole period of the indictment. They told them

that they needed it for organizing.”” (emphasis added )

Thus, the jury could have found that, in this case,

it was not a matter of established policy of the International

Union, whose funds were being used, to pay an employee

such as William H. Hoffa sick benefits in the evenv that

he became too ill to do the special organizing work for

which he was being subsidized.

In the alternative, if the jury accepted this as a legiti-

mate union policy, and therefore accorded any ‘sick pay’

paid to William H. Hoffa the status of a union benefit

as that term was defined for them by the Court, there

was still a question for the jury as to whether William

H. Hoffa was too ill to work throughout the entire period

covered by the indictment. The government offered con-

siderable testimony and documentary evidence tending to

show that during the entire period of the indictment Wil-

liam H. Hoffa did no organizing work. The only two

times when William H. Hoffa was seen at the union hall

or in another union context, which are undisputed were,

(1) when he came in to pick up his paychecks, and (2)

when he helped settle a dispute with an employer on

behalf of a teamster union member who happened to have

9. And the prosecutor further argued,

“Now, what we have shown you is a series of documents

which show that they did some organizing activity. Now,

when the organizing activity was in process, they put that on

the form and at the bottom of this document. Now, when

they had nothing to report, they put that on the form.

Well, the purpose of this exercise, where you see two of

these in a row with nothing to report, is to get a point across.

_.. Now you have got to keep in mind that the lynchpin

of this whole thing is why sub:nit these forms to get paid.

Why doctor the forms if in fact you don’t have to doctor them

to get paid?”

A22

been closely related to him,'® through other long-standing

business dealings. This is not to say that there was no

evidence that William H. Hoffa did no work. There was

some evidence but it may have been disbelieved by the

jury.

The fact that the jury convicted Bane of counts one

through six, but acquitted him of count seven suggests

that they may have considered that only during the time

period covered by count seven was William H. Hoffa too

ill to work. It is significant in this connection that count

seven covered the most recent time period, and the evi-

dence suggested that William H. Hoffa’s physical condition

became worse as time went on.'! In addition, Bane’s

contention that William H. Hoffa was working may have

been taken by the jury as an admission that he was not

10. With regard to this latter incident, the prosecution argued

that it was more of a favor by William H. Hoffa than an official

union action,

“He didn’t work with anybody. He di n’t organize any com-

panies. He shows up at Price Brothers. We must have had

six witnesses on Price Brothers. Who was he out there for a

complaint for? Mr. Malowsky. Who is Mr. Malowsky? His

renter for 20 odd years. And who else shows up? Mr. Bane

and Mr. Walker every day. That’s not organizing. That’s

not his duties, but give him that if you want to. The com-

pany was already organized. He was getting paid to organize

the unorganized.”

11. Even defense counsel, in his closing argument agreed

with this.

‘Mind you, those weren’t the companies for all three years or

for 38 months. Those companies were just the last months

in ’73 when the testimony shows Mr. Hoffa was at his sickest

time. Mind you, to be fair, why weren’t they for all 41

months.” (emphasis added)

It appears that the jury may have accepted this limited defense

contention in acquitting in count seven. This further suggests

that the jury fully understood that William H. Hoffa’s inability

to work due to his illness, if true, was not merely a plea for

sympathy, but rather a valid business concern of the unicn.

a _ _—errrrrrrrrrrrrrreeeeeeeeeeeeeeeeeee

A23

too ill to work throughout the period of the indictment—

even if the jury did not accept that he was in fact working.

Accordingly, there was substantial evidence for the

jury to decide that William H. Hoffa was not ill during

the periods covered by counts one through six of the

indictment,” or that it was not a union benefit if he

was ill to pay him sick pay.

In United States v. Ottley, 509 F.2d 667 (2d Cir. 1975),

the Second Circuit took the lead in expanding upon the

elements of a 501 (c) violation as set forth in Silverman,

supra, and other prior cases. Silverman had stated that

the existence of a 501 (c) depended upon “whether the

contributions were properly authorized and made for the

benefit of the union.” (430 F.2d, at 113). Judge Moor,

dissenting in part, in Silverman, noted that the elements

of a 501 (c) violation would have to vary under different

circumstances. See 430 F.2d, at 113. The Eighth Circuit

followed this reasoning in United States v. Goad, 490

F.2d 1158 (8th Cir.), cert. denied, 417 U.S. 945 (1974),

in holding that, in the absence of a valid authorization,

a finding that the union would have authorized or ratified

the expenditure had they known would acquit the defen-

dant.

In Ottley, the Second Circuit dealt with a case where

the funds expended for a car were not authorized, and

were also not used for the benefit of the union. Ottley,

the union president, had approved cars for several other

union officials, including one Byrne. The other cars were

12. Although the convictions as to counts one through six

have been set aside in favor of new trial because the jury was not

given a correct legal standard—that of fraud as opposed to em-

bezzlement—the jury’s finding may be informative where, as here,

embezzlement is at issue. If the jury found that he was able to

work and did not during six (or any) of the seven time periods

at issue this element of embezzlement would be established.

A24

used to go to and from union meetings, etc., and so led

to some union benefit. Byrne, however, could not drive

and so he gave the car to his wife for her personal use,

and took taxis (which he also charged to the union as

an expense). Ottley, who had approved the car for Byrne,

was prepared on appeal to accept that the car was not

used for union benefit, but argued that he did not know

that Byrne couldn’t drive and assumed the car had been

properly used. The Second Circuit, having in mind the

purpose of 501 (c) to create a fiduciary duty on the part

of union officials, acknowledged that on those facts the

crucial element for the government to show was Ottley’s

lack of a good faith belief that there was a union benefit.

The opinion in Ottley did not set aside the elements as

stated in Silverman on Silverman’s facts. See also United

States v. Santiago, 528 F.2d 1130 (2d Cir. 1976).

What emerges from this complex judicial experience

is a crime whose elements, at least for the purposes of

judicial definition, vary in each case. Four possible fact

questions may (but need not) arise:

(1) Whether the expenditure of union funds is

duly authorized;

(2) Whether the union, if it knew of the expendi-

ture would so authorize;

(3) Whether the expenditure of union funds is

made for the benefit of the union; and

(4) Whether the officer, in making the expendi-

ture, had a good faith belief that the funds were

being used icr the benefit of the union.

If the funds are clearly authorized and clearly for

the benefit of the union, there can be no violation of

501 (c), as indicated earlier; see also Silverman, supra.

A25

If, however, assuming the funds to be duly authorized,

the expenditure was not for the benefit of the union,

then the union official’s lack of good faith belief in a

union benefit, and not the benefit itself, becomes an essen-

tial element of the crime; Ottley, supra. On the other

hand, if an expenditure is instead not authorized, an essen-

tial element of the crime becomes whether or not the

union, if it had known of the expenditure, would have

approved or ratified it. If not, then the duty imposed

by 501 (c) has been violated; Goad, supra. If the union

would have approved the expenditure, then the govern-

ment still must prove either lack of union benefit or lack

of good faith belief in union benefit as required by the

tests set forth earlier.

In the present case, the authorization has not been

questioned and the jury was so instructed. Whether or

not the funds were used for the benefit of the union,

however, as well as whether or not Bane had a good

faith belief that they were to be used for the benefit

of the union were both open to question because of the

evidence adduced at trial. Faced with a choice, the Court,

without objection by either party, focused the jury’s atten-

tion on the question as to the defendant’s good faith belief

that the funds were being used for the benefit of the

union.

“To determine whether these funds of the union

which were paid to William Hoffa were embezzled,

you must ask yourselves if the defendant had a good

faith belief that the union funds which were paid

to William Hoffa were being used for the benefit of

the union. Thus, the government must prove beyond

a reasonable doubt that the defendant did not have

a good faith belief that the union funds which were

paid to William Hoffa were for the benefit of the

A26

union. If you are not convinced beyond a reasonable

doubt that the defendant did not have a good faith

belief that the funds paid to William Hoffa were for

the benefit of the union, then an embezzlement would

not have occurred within the meaning of the law.

On the other hand, if you are convinced beyond a

reasonable doubt that the defendant did not have a

good faith belief that the funds paid to William Hoffa

were for the benefit of the union, and that the de-

fendant acted knowingly and willfully, then an em-

bezzlement would have occurred within the meaning

of the law.

“T would now like to define for you what I mean

by ‘good faith belief’. A good faith belief, as com-

monly used, means a belief or state of mind denoting

honesty of purpose; freedom from intention to defraud;

generally speaking, it means being faithful to one’s

duty or obligation.”

This test, which began in Ottley, and was referred

to with approva! in United States v. Santiago, 528 F.2d

1130 (2d Cir. 1976),’* serves to protect the defendant.

It broadens his defense in a manner that carries out the

underlying purpose of 501 (c), which sought to create

a duty of candor and trust on the part of the union officials.

13. In Santiago, as here, there was some doubt as to whether

the funds were used for the benefit of the union, and the trial

court charged the jury to consider whether or not defendant had

a good faith belief that the use of the funds was for the union’s

benefit (at 1133-4);

The trial judge instructed the jury to measure appellant’s

conduct by the test we approved in United States vy. Ottley, 509

F.2d 667, 671 (2d Cir. 1975), viz. did appellant have a good-faith

belief that the funds were being used for union business and that

the union had properly authorized the expenditures or would

properly ratify them. Measured by this test, appellant’s conduct

was found wanting. We see no error.

A27

Accordingly, where there is no doubt as to the employ-

ment of funds being for the benefit of the union, the

Court may consider the existence or lack of union benefit

as the appropriate legal issue.'* Where, as here, there

is a question as to whether the funds were used for personal

or union benefit, the appropriate issue becomes not whether

there in fact was a benefit to the union. but rather whether

the defendant had a good faith belief that the funds were

being used for the benefit of the union. Thus, for example,

a union official who had placed a sauna in his home with

union funds might argue that the union derived a benefit

from having healthier officials. However, a jury consider-

ing whether he, in good faith, believed this, might still

return a guilty verdict. On the other hand, as in Ottley,

this standard protects the innocent union official without

whose knowledge funds are embezzled.

Defendant’s motion must be granted in part and denied

in part. The convictions on counts one through six of

the indictment are set aside for a new trial; the verdicts

of not guilty as to counts seven and eight, of course,

stand, and the verdict of guilty on count nine must also

stand. An appropriate order is entered contemporaneously

herewith.

/s/ JOHN FEIKENS

United States District Judge

Date: June 21, 1977,

Detroit, Michigan.

14. Note that if funds were not authorized, and the finder of

fact concluded that their expenditure would not be ratified by the

union membership had they known of the expenditure (as in a

ease where the union by laws or resolutions prohibit the expen-

diture) even if the funds were used for the union’s benefit, a

breach of the duty imposed by 501 (c) would have occurred.

A28

APPENDIX:

Government’s Exhibit +1

GENERAL DRIVERS AND HELPERS, LOCAL No. 614

of the

INTERNATIONAL BROTHERHOOD OF TEAMSTERS,

CHAUFFEURS, WAREHOUSEMEN AND HELPERS

OF AMERICA

1410 S. Telegraph Road

Phones: JOrdan 6-3836

FEderal 4-4573

Pontiac, Michigan

President

Joseph M, Bane

Secretary-Treasurer

Rex F. Liles

February 13, 1967

International Brotherhood of Teamsters

Chauffeurs, Warehousemen & Helpers of America

25 Louisiana Avenue, N. W.

Washington, D. C. 20001

Attention: Mr. James R. Hoffa, General President

Dear Sir and Brother:

Per our telephone conversation of February 7, 1967

in which I requested assistance, it is my understanding

this assistance will be in the form of a subsidy from

the International Brotherhood of Teamsters in the amount

of $1,000.00 per month for a six (6) month period subject

to renewal at the end of said six months.

This assistance is needed due to recent excessive or-

ganizing expenses. In the last few months we have had

several elections conducted by the National Labor Relations

A29

Board such as: Mills Products, Inc., where we merged

with the Independent Metal Union of Walled Lake, Mich-

igan, Local 614 was chosen as the bargaining agent for

the 250 people employed there. At G & W Engineering

an election was conducted by the National Labor Relations

Board on February 3, 1967 and the 90 people employed

there chose Local 614 as their representative. At American

Plastics Local 614 again was chosen as representative for

the 200 employees. We are in the process of negotiating

agreements for these companies.

The following is a list of companies we are currently

working on.

Terry Machine Co., Drayton Plains, Michigan

Interstate Manufacturing, Romeo, Michigan

Morgan Electric, Southfield, Michigan

Searay, Oxford, Michigan

Manufacturing Products, Troy, Michigan

Briney Manufacturing, Pontiac, Michigan

Gilbert Shoes, Pontiac, Michigan

Ford Tractor, Romeo, Michigan

Grimaldi Car Sales, Pontiac, Michigan

Stahl Company, Plymouth, Michigan

We are also in need of an experienced organizer who

has had some background in this field. As you know,

my business agents and organizers are fairly new.

Any assistance you can render will be appreciated.

Fraternally yours,

Teamsters’ Local Union No. 614

s/ JosEPH M. BANE

Joseph M. Bane

President

JMB: lb

ce: file

A30

OPINION ON MOTION TO CONSIDER

(Dated July 13, 1977)

Criminal Action: 6-80372

UNITED STATES DISTRICT COURT

EASTERN DISTRICT OF MICHIGAN

SOUTHERN DIVISION

UNITED STATES OF AMERICA,

Plaintiff,

VS.

JOSEPH M. BANE, SR.,

Defendant.

OPINION

Joseph M. Bane, Sr. moves the Court to reconsider a

denial! of his earlier motion for judgment of acquittal. He

argues that the Court, in its earlier opinion, set forth an

incorrect legal standard for upholding his conviction for

embezzlement of union funds. He bases his argument on

two recent cases which were not brought to the Court’s

attention at earlier arguments; United States v. Vitale, 489

F.2d 1367 (6th Cir. 1974); United States v. Hart, 417 F.

Supp. 1314 (S.D. Iowa 1976).

While these two cases do, at times, set forth different

legal standards in some of their language from that applied

by the Court in its earlier opinion in the present case, the

cases can readily be reconciled on their facts. Bane points

out that Vitale states (at 1369):

“Section 501(c) is read as requiring an intent to de-

prive the union of the use of its funds and either a

A3l

lack of union benefit from the expenditure or a lack

of proper authorization for the expenditure.” (empha-

sis in original)

In so saying, however, the Court in Vitale was quoting from

United States v. Silverman, 430 F.2d 106, 114 (2d Cir. 1970),

cert. denied, 402 U.S. 953, 91 S.Ct. 1619, 29 L.Ed.2d 123

(1971). Silverman, referred to in detail in the Court's ear-

lier opinion in the present matter was correct in so stating

on its facts. More recent caselaw' was considered con-

trolling.

Hart, cited by Bane, does state in so many words

that once a union expenditure is authorized no embezzle-

ment can occur. On its facts, since the funds in Hart were

used for the purpose for which they were authorized, that

standard may have been correct. In the present case, how-

ever, the government’s theory was that Bane received a

subsidy authorized for disbursement for union organizing

but used, in fact, to be paid to a man who did not work at

all. If the Hart standard were applied as argued by Bane,

any expenditure, once the funds for it were approved—

even if that approval was not for the purpose it was ac-

tually used for—would be beyond the reach of the law. In-

sofar as language in the Hart opinion suggests otherwise,

this Court respectfully differs.

Accordingly, no reason is presented for reconsidera-

tion, and Defendant’s motion must be denied. An ap-

propriate order is entered contemporaneously herewith.

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

denied, 417 U.S. 945, 94 S.Ct. 3068, 41 L.Ed.2d €65 (1974), for

example, was decided contemporaneously to Vitale, and United

States v. Ottley, 509 F.2d 667 (2d Cir. 1975) was decided subse-

quent to Vitale. Ottley is well recognized as a leading case in a

trend toward refining the simplistic holding of Silverman.

This is a copy of a public record, reproduced as it was published. It is not legal advice, and it may not be the version a court would rely on. Check the official source before you cite it.