Opposition — Otterbein v. United States

Supreme Court, U.§&

”*

FILED

APR 90 1079}

No. 78-1226

MICH AP Bones I2. CLERK

oe em wee. a eee

In the Supreme Court of the United States

OCTOBER TERM, 1978

FREDERICK J. OTTERBEIN, PETITIONER

Vv.

UNITED STATES OF AMERICA

ON PETITION FOR A WRIT OF CERTIORARI TO

THE UNITED STATES COURT OF APPEALS FOR

THE FOURTH CIRCUIT

BRIEF FOR THE UNITED STATES

IN OPPOSITION

WapDE H. McCreE, Jr.

Solicitor General

PHILIP B. HEYMANN

Assistant Attorney General

JOHN T. BANNON, JR.

Attorney

Department of Justice

Washington, D.C. 20530

INDEX

Page

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REA IEDR ESE TD AN i a 1]

CITATIONS

Cases:

Booton v. Hanauer, 541 F. 2d 296 .............. 10

Colautti v. Franklin, No. 77-891 (Jan.

Ok I pineal to ionclipsscmnibsunenenecse 8

Rogers v. United States, 422 U.S. 35)... 10

United States v. Armocida, 515 F. 2d 29 ... 10

United States v. Dono, 428 F. 2d 204,

CBRE. GOOG, SED UG, GED covccsccccescccecccccceecs 10

United States v. Harriss, 347 U.S. 612 .......... 8

United States v. Jones, 542 F. 2d 186 ......... 10

United States v. Mazurie, 419 U.S. 544 ........ 7

United States v. Natioral Dairy Products

I a a duauhanconsace 8

United States v. Powell, 423 U.S. 87 oo... 7

United States v. Taylor, 569 F., 2d 448,

SNUG, em, GIS UB. GS ccccccccscccccncsccesee 9-10

Page

Constitution, statutes and rule:

United States Constitution, First

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Pe ee WOU IID centsetncstrcepdaniacaetea cel 5

_ Miscellaneous:

1 E. Devitt & C. Blackmar, Federal Jury

Practice and Instructions (1977) .......cccce000. 10

In the Supreme Court of the Hnited States

OCTOBER TERM, 1978

No. 78-1226

FREDERICK J. OTTERBEIN, PETITIONER

Vv.

UNITED STATES OF AMERICA

ON PETITION FOR A WRIT OF CERTIORARI TO

THE UNITED STATES COURT OF APPEALS FOR

THE FOURTH CIRCUIT

BRIEF FOR THE UNITED STATES

IN OPPOSITION

OPINION BELOW

The opinion of the court of appeals is not reported.

JURISDICTION

The judgment of the court of appeals was entered

on December 8, 1978. A petition for rehearing was

denied on January 9, 1979. The petition for a writ of

certiorari was filed on February 7, 1979. The

jurisdiction of this Court is invoked under 28 U.S.C.

1254(1).

QUESTIONS PRESENTED

1. Whether petitioner was prejudiced by the testimony

of an expert witness.

2. Whether there was sufficient evidence to support

petitioner’s conviction.

(1)

3. Whether 18 U.S.C. 664, which forbids conversion

or embezzlement of funds of an employee pension

benefit plan, is unconstitutionally vague.

4. Whether the trial court was required to poll the

jury to determine whether any member had read a

newspaper report of the trial.

5. Whether it was improper for the trial court to

offer to answer questions about its instructions after

the jury had deliberated for five hours without

reaching a verdict.

STATEMENT

Following a jury trial in the United States District

Court for the District of South Carolina, petitioner

was convicted on eight counts of converting funds of

an employee pension benefit plan, in violation of 18

U.S.C. 664. He was sentenced to one year’s imprison-

ment and two years’ probation. The court of appeals

affirmed (Pet. App. 3-5).

The evidence at trial showed that petitioner, the

controlling stockholder of Universal Enterprises,

directed John Bevon, the company’s general manager,

to negotiate a collective bargaining agreement with

Local 1422A of the International Longshoremen’s

Association (ILA) (Tr. 99, 188). After several meetings

that petitioner attended, the company signed a

collective bargaining agreement with Local 1422A (Tr.

101, 191-192, 203-205). By the express terms of that

contract, the company agreed to participate in a

comprehensive employee benefit plan that provided

both pension and welfare benefits for its employees.

The company also agreed to make quarterly con-

tributions to the National ILA Pension Trust to fund

those pension and welfare benefits.

Because all of the necessary trust documents were

not yet available, the company agreed to deposit its

contributions to the pension and welfare plan in an

escrow account, where the funds would be kept until

the National ILA Pension Trust called for them (Tr.

126-127, 179).! The escrow account was opened at the

First Federal Savings and Loan Association in

Charleston, South Carolina, and the company regularly

deposited its contributions in the escrow account (Tr.

124, 200). Between September 1975 and July 1976, the

company made 45 deposits, totalling $24,267, (Tr. 82-

83). During each payroll period the money owed the

pension and welfare plan was set aside and deposited

in the account (Tr. 198).?

On July 29, 1976, petitioner asked the company’s

general manager, John Bevon, to make a withdrawal

from the escrow account (Tr. 202).5 Bevon refused to

do so, warning petitioner that such action would be

improper (ibid.). Petitioner then revoked Bevon’s

authority to make withdrawals from the escrow

account and transferred that authority to himself (Tr.

79). After petitioner took control of the escrow

account, he personally deposited five more checks. On

each occasion, the accompanying voucher designated

'The company’s general manager, John Bevon, informed

petitioner that it was necessary to physically segregate the funds

belonging to the pension and welfare plan from the corporation’s

general funds (Tr. 198, 208-209).

2The deposit vouchers that accompanied the checks payable to

the escrow account were clearly designated for the “welfare fund

and pension fund” (Tr. 245-249).

'Universal’s general manager was the only corporate officer

authorized to make withdrawals from the escrow account.

the deposit as a pension and welfare fund contribution.

Several of the checks were signed by petitioner (Tr.

251-262). Each such payment into the escrow account

was recorded in the corporate ledger as a contribution

to the pension and welfare fund (Gov. Ex. 357).4

Between July 30, 1976, and May 13, 1977, petitioner

made eight withdrawals from the escrow account,

totalling $31,500 (Tr. 81-82). Those withdrawals nearly

depleted the $32,181 contained in the account (Gov.

Exs. 225, 370). The money withdrawn from the escrow

account was deposited by petitioner in the company’s

general corporate account in the Bank of North

Charleston (Tr. 89-96, 251-262, 273-277).5

During an FBI interview in January 1977, petitioner

Stated that the escrow account was not a working

capital account, but was “strictly for the health,

welfare and pension funds” (Tr. 501). Petitioner stated

that he established the account for contributions to the

pension and welfare fund. When asked if all of the

company’s contributions to the pension fund were

currently in the escrow account, petitioner replied that

the pension fund money was owed to the union and

was available upon request. In fact, the escrow account

was nearly depleted and Universal did not possess

sufficient cash reserves to replace the money withdrawn

from the account (Tr. 501-505; Gov. Ex. 370). During

a subsequent interview with the FBI, petitioner

retracted parts of his earlier statement. He admitted

‘Pursuant to the collective bargaining agreement, the company

mailed weekly reports to Local 1422A, listing the amounts of

pension and welfare funds that were paid into the escrow account

(Tr. 109-110, 121-122).

‘During this period, petitioner increased his ownership of the

company from 51% to 70%. The new stock that petitioner caused

the company to issue to himself had a par value of $31,500—pre-

cisely the amount taken from the escrow account (Tr. 463-475).

that the escrow account was in fact used for “working

capital” and stated that the company’s obligation to

make contributions to the pension fund were unclear

(Tr. 519-523).

ARGUMENT

1. Petitioner contends (Pet. 13-15) that it was plain

error to allow an expert witness called by the

government to testify that the escrow account was an

employee pension benefit plan because the proper

designation of the account presented a question of law

for the court.

An official of the Department of Labor, called by

the government. as an expert witness, testified regarding

the administration of the Employee Retirement Income

Security Act of 1974 (ERISA) (Tr. 291-292). Respon-

ding to a hypothetical question, he stated his opinion

that an escrow account having the characteristics of

the account here involved would be an employee

pension benefit plan within the meaning of ERISA

(Tr. 314-320). Petitioner made no objection, agreeing

that an expert witness could express an opinion as to

whether the plan was covered by the statute (Tr. 292-

294). Petitioner later called his own expert witness who

testified that the escrow account was not an employee

pension benefit. plan covered by ERISA (Tr. 549-582),

and contended that this was a question for the jury

(Tr. 824).

Under these circumstances, petitioner is precluded

from contending that the question was solely a

question of law for the court. See Fed. R. Evid.

103(a)(1). Moreover, any error in admitting evidence on

this subject inured to the benefit of petitioner. As the

court of appeals pointed out (Pet. App. A4 n.*), the

escrow account, as a matter of law, was covered by

the statute.° Thus, if the question were treated solely

- Petitioner cites no authority suggesting that the escrow account

was not an employee pension benefit plan covered by the statute.

as a question of law, as petitioner claims it should have

been, the proper course would have been to instruct

the jury that statutory coverage existed. Giving

petitioner the opportunity to persuade the jury

otherwise certainly did not prejudice him.

2. Petitioner further contends (Pet. 15-18) that

without the testimony of the government’s expert

witness, there was insufficient evidence to sustain his

conviction.

However, the evidence adduced at trial, wholly apart

from the testimony of the expert witness, established

that the funds in the escrow account were part of an

employee pension benefit plan and that petitioner was

fully aware of that fact. The statute (29 U.S.C.

1002(2)) defines an employee pension benefit plan to

include

any plan, fund, or program * * * to the extent

that by its express terms or as a result of

surrounding circumstances such plan, fund, or

program *** provides retirement income to

employees * * * reguardless of the method of cal-

culating the contributions made to the plan, the

method of calculating the benefits under the plan

or the method of distributing benefits from the

plan.

The evidence at trial established that the money in the

escrow account was part of an employee pension

benefit plan within this definition. The account was

established by the company pursuant to a collective

bargaining agreement, which called for contributions to

fund employee retirement benefits. Petitioner was well

aware of the purpose of the account and of the duty

to disburse it to the ILA pension trust. The evidence

also showed that petitioner was told by the company’s

general manager that it was necessary to segregate

pension fund contributions from general corporate

assets (Tr. 204, 213-214). Moreover, the vouchers

attached to the checks deposited in the account clearly

designated the deposits as pension and welfare con-

tributions (Tr. 251-252). In his first interview with the

FBI, petitioner stated without hesitation that the

escrow account contained funds segregated for welfare

and pension benefits (Tr. 501-505). In sum, the

evidence overwhelmingly established that the account

was an employee pension benefit plan account within

the meaning of the statute, and further showed that

petitioner was aware of that fact.

3. Petitioner also argues (Pet. 18-21) that the

statutory provisions under which he was convicted are

void for vagueness.

The statute (18 U.S.C. 664) broadly forbids any

person to embezzle or unlawfully and willfully abstract

or convert to his own use or the use of another person

any of the funds of any employee pension benefit plan,

or of any fund connected with an employee pension

benefit plan. As noted above, an employee pension

benefit plan is defined to include any plan, fund or

program “to the extent that by its express terms or as

a result of surrounding circumstances such plan, fund,

or program * * * provides retirement income to

employees” (29 U.S.C. 1002(2)).

This statute afforded petitioner fair notice that he

was not at liberty to convert funds designated as

employee pension funds for private use. Vagueness

challenges not implicating First Amendment or related

rights must “be examined in the light of the facts of

the case at hand.” United States v. Mazurie, 419 U.S.

544, 550 (1975); United States v. Powell, 423 U.S. 87,

92-94 (1975). It is irrelevant that there may be

difficulty in determining: whether certain marginal cases

are subject to the statute if the general coverage of the

statute is clear and the defendant’s conduct falls within

that coverage. See, e.g., United States v. Harriss, 347

U.S. 612, 617 (1954); United States v. National Dairy

Products Corp., 372 U.S. 29, 32-33 (1963). Since the

funds here involved were held in escrow for the sole

purpose of providing retirement and welfare benefits

for employees and since petitioner was clearly aware of

that fact, he may not contend that the statute provided

inadequate warning.’

4. Petitioner also argues (Pet. 21-24) that the district

court erred in failing to poll the jury to determine

whether any member had read a newspaper article that

appeared during the course of the trial.

During the second day of trial, a former employee

of the company testified that he had made inquiries

about his pension rights. He also testified that he had

been fired for leaving work early. At the conclusion of

his testimony, the district court asked the witness

whether he was fired before or after inquiring about the

pension fund. The witness replied that he was fired

after making the inquiry (Tr. 357). Petitioner did not

object to the question or the answer.

The next day, defense counsel brought to the court's

attention a newspaper article in the morning edition

’Colautti v. Franklin, No. 77-891 (Jan. 9, 1979), relied on by

petitioner, has no relevance here. In that case, the Court

determined that a statutory provision regulating abortions was

unconstitutionally vague. The court pointed out that the statute

permitted conviction of physicians “without regard to fault” and

had the effect of chilling the constitutional right to receive

abortions. Slip op. 14-17. In this case, in contrast, the statute

does not chill the exercise of a constitutional right, and the

district court specifically charged the jury that petitioner could not

be convicted unless the government proved beyond a reasonable

doubt that petitioner acted with fraudulent intent in taking

the money (Tr. 806-807).

of The State, a Columbia, South Carolina newspaper.*

The article reported that the witness had testified that

he was fired as a result of his inquiries about the pension

fund.’

Petitioner’s counsel pointed out that the article was

inaccurate because it stated that the witness had been

fired shortly after inquiring about the pension fund

when in fact he had been fired several months later

(Tr. 363). The court asked defense counsel on four

separate occasions what it should do to avoid any

possible prejudice. Defense counsel offered no

suggestions (Tr. 365, 369, 371, 372). The court also

asked whether defense counsel sought an instruction to

the jury to disregard the answer of the _ witness

regarding his dismissal. In addition, the court asked

counsel if he was seeking a mistrial (Tr. 371-372).

Counsel did not seek either type of relief.

In these circumstances, the court below properly

rejected petitioner's claim that the publication of the

article required a reversal of his conviction. The article

appeared only once, on the third day of a five-day

trial and after the jury had been warned several times

not to discuss, listen to, or read anything concerning

the trial outside of the courtroom (Tr. 135, 136, 229,

446-448). There was nothing inflammatory about the

article, and petitioner suggested no additional steps to

avoid the possibility of prejudice. The failure of the

trial court to poll the jury sua sponte was not

reversible error. See, e.g., United States v. Taylor, 569

F, 2d 448, 454 (7th Cir.), cert. denied, 435 U.S. 952 (1978);

*The article appears on pages 177a-178a of the appendix filed in

the court of appeals. It was printed in “Section C” of the

newspaper.

’The article also contained a background discussion of the trial,

summarized the testimony of prior witnesses, and discussed certain

theories of the prosecution and the defense.

10

United States v. Jones, 542 F. 2d 186, 194 (4th Cir. 1976);

Booton v. Hanauer, 541 F. 2d 296, 298 (Ist Cir. 1976);

United States v. Armocida, 515 F. 2d 29, 48-49 (3d Cir.

1975).

5. Finally, petitioner contends (Pet. 24-27) that the

district court erred by communicating with the

members of the jury after they had deliberated without

reaching a verdict.

After the jury had deliberated for five hours, the

district court, in the presence of petitioner and his

counsel, inquired if it could be of assistance with

respect to any of the legal issues before them (Tr.

843). In response to the question of one juror, the

court restated portions of the instructions that it

previously had given without objection (Tr. 843-848).

At that time, defense counsel did not object either to

the question or the court's response. When the jury

retired once again, the court asked petitioner's

attorneys if they wished to take exception to anything

the court had said. Both indicated that they had no

objection (Tr. 851). While it may be preferable for the

trial court to receive written rather than oral questions

from the jury (1 E. Devitt & C. Blackmar, Federal Jury

Practice and Instructions § 18.13, at 603 (1977)), the dis-

trict court’s receipt of an oral question does not constitute

reversible error, particularly where the defendant offers

no objection to that procedure. United States v. Dono,

428 F. 2d 204, 209 (2d Cir.), cert. denied, 400 U.S. 829

(1970). '°

Petitioner's reliance on Rogers v. United States, 422 U.S. 35

(1975), is also misplaced. In Rogers, the Court disapproved a com-

munication, between the trial judge and the jury that took place

without the knowledge of the defendant or his attorney. In the

present case, petitioner and his lawyer were present and had the

opportunity to object to the district court's procedure.

CONCLUSION

The petition for a writ of certiorari should be

denied.

Respectfully submitted.

Wave H. McCrer, JR.

Solicitor General

Puitie B. HEYMANN

Assistant Attorney General

JOHN T. BANNON JR.

Attorney

AprRIL 1979

DOJ-1979-04