Petition — Lachance v. United States

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80-1706 "Tre >

APR 18 \981

In The !

ALEXANDER L. STEVAS,

CLERK

Supreme Court of the United Stave

October Term, 1980

Docket No. ........ eer

DOUGLAS LaCHANCE,

\ Petitioner,

Vi

UNITED STATES OF AMERICA,

Respondent.

PETITION FOR A WRIT OF CERTIORARI TO THE

UNITED STATES COURT OF APPEALS

FOR THE SECOND CIRCUIT

JOHN J. TIGUE, JR.

Counsel of Record for

Petitioner Douglas LaChance

80 Pine Street

New York, New York 10005

(212) 422-4030

Of Counsel

KOSTELANETZ & RITHOLZ

PETER J. DRISCOLL

ELLIOT SILVERMAN

PETITION FOR A WRIT OF CERTIORARI TO THE

UNITED STATES COURT OF APPEALS FOR THE

SECOND CIRCUIT. ;

Petitioner prays that a writ of

certiorari issue to review a decision of

the United States Court of Appeals for

the Second Circuit entered on February

12, 1981.

Questions Presented

1. Did the court below err in

holding that the Taft-Hartley Act, 29

U.S.C. §186(b), is an absolute criminal

prohibition against any union official

acquiring an ownership interest in a

business which does not, but theoretically

could, employ union members?

2. Did the court below err in

affirming convictions of tax evasion

based on a factual theory of venue which

was prejudicially at variance with the

legally insufficient theory on which the

case had been initiated, tried and

submitted to the jury?

ey.

3.. Did the court below err in

upholding the cross-examination of the

defendant as to the prior unrelated

criminal convictions of his alleged

associates?

4. Did the court below err in

affirming convictions under the Taft-

Hartley Act on a legally insufficient

theory of venue?

5. Did the court below err in

upholding a sentence which was based in

part on Mr. LaChance's alleged post-

trial refusal to cooperate with the

Government in reliance on his constitutional

privilege against self-incrimination?

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TABLE OF CONTENTS

Table of Authorities .

Opinion: Below... 6k 08s

PUSLOGLSCLOR 6 ks G8 ee

Constitutional Provisions. . .

Statutory Provisions .

Statement of the case

Reasons for ee eneene the

Wr it . e . ” . e ° ° . 7 °

CUE SION gg reer ar Gig ty ig oe

TABLE OF AUTHORITIES

Cases

Arroyo v. United States, ge

U. - WA9 (igeee ee ke ;

Chiarella V5 ere States,

ib. 222 (1980)...

Dunn v. United States, 442

Doc AUG CAMPER a once

Ingram v. United States, 360

. 672 (1959). e e . - e o

Rewis v. United States, 401

OY Mees BOW SASEEP a es a

Ses

16

42

Roberts v. United States, 445,

U.s, 952 Cisse). > os

Salerno v. United States, 610

F.2d 419 (8th Cir. 1979).

Spies v. United States, 317

~ 492 (1943) ree

United States v. Black Cloud,

0 er Se

(1979). 9 a ue Ss Ole iss os

United States v. Carman, 577

: th cir. 1978). .

United States v. Chestnut,

(2d Cir. 1976)

cert. ‘denied, 429 U.S. 829

BE tS Peppa te OR Boe ‘ :

United States v. Crawford, 438

: th Cir. I971).

United States v. DeDominicus,

; 7. (2d Uiz.

1964) gk ah cals, i

United States v. Gosser, 339

th Cir.) , cave.

denied, 382 U.S. 819 (1964).

United States v. Granello, 365

d Cir.

cert. denied, 386 U.S.

949 (1967) :

United States v. Johnson, 323

OM BE oe ite bar we esuttl

whi

28

25

26

32, 34-35

30

30

26

38

7.

United States v. Labarbera,

7 Beets Cir.

1978) er ee ee

Unted States if Lippi, 190

upp. Sey. i

United States v. Miesch, 370

: d Cir. 1966) .

United States v. Ochoa, 609

; th Cir. 1980). .

United States v. Overton, 470

d Cir. 1972),

cert. denied, 411 U.S. ah

(1973). oe. he eee . ‘

United States v. penne 313

f th Cir. 1963).

United States v. Roth, 333

(2d Cir. 1964),

cert. denied, 380 U.S.

942 (1966) y ae

United States v. Vi Eo, 435

5th r.),

cert. denied, 403 U.S.

508 (19071) P

United States v. Walden, 464

4th Cir “Fe

cert. denied, 409 U.S

867 (1972) ; ;

Statutes

29: U.S.C. §7201.. ,

Seow Ge $406. koe es SS

SF Sane eee ee ef

phi ae

19

32

34

18

36, 37

20-21

32-34

39-40

27

16-22, 38

17-18

29 U.S.C. §504 .

Federal Rules of Criminal

Procedure, Rule 18 ..

Miscellaneous

Senate Report No. 187,

89th Cong., lst Sess.

(1959) . ‘ (

House Report No. 741

89th Cong., lst Sess.

5 3p eee eee ‘

fee 8

19

38

17,22

17

hacegtin. . 4

Opinion Below

The unpublished opinion and order

of the United States Court of Appeals

for the Second Circuit is printed in

Appendix A hereto.

Jurisdiction

The judgment of the United States

Court of Appeals was entered on February

12, 1981. Jurisdiction of this Court is

invoked pursuant to 28 U.S.C. §1254(1).

Constitutional Provisions

Amendment V

"No person *** hat! be compelled

in any criminal case to be a witness

against himself, nor be deprived of

life, liberty or property, without due

process of law; ***"

Amendment VI

"In all criminal prosecutions, the

accused shall enjoy the right to a

ate

speedy and public trial, by an impartial

jury of the State and District wherein

the crime shall have been ies tie aed:

which district shall have been previously

ascertained by law, and to be informed

of the nature and cause of the accusation;

eek"

Statutory Provisions

The following statutory provisions

are involved herein: 29 U.S.C. §186,

printed in Appendix B hereto; 26 U.S.C.

§7201, printed in Appendix C hereto; and

Rule 18, Federal Rules of Criminal |

Procedure, printed in Appendix D hereto.

Statement of the Case

Petitioner Douglas LaChance was

charged on February 20, 1980, in an

indictment filed in the United States

District Court for the Southern District

ae

of New York. The 136-count indictment

charged Mr. LaChance, then president of

the Newspapers and Mail Deliverers'

Union ("NMDU"), with 64 counts of

extortion of money, by means of fear of

economic harm, from certain wholesale

newspaper delivery companies ("the

wholesalers") in violation of 18 U.§.C.

§1951 (the Hobbs Act), 64 counts of

receiving this money in violation of 29

U.S.C. §186(b) (The Taft-Hartley Act),

four counts of receiving funds from Russ

Trucking Company in violation of 29

U.S.C. §186(b), one count of conducting

the affairs of the NMDU through a

pattern of racketeering by means of the

Taft-Hartley and Hobbs Act charges in

violation of 18 U.S.C. §1962 (the

R.1.C.0. statute), and three counts of

-9-

*%

willfully failing to report these funds

on his 1976, 1977 and 1978 federal

income tax returns in violation of 26

U.S.C. §7201.

The trial of these charges commenced

on May 1, 1980. The District Court

entered a judgment of acquittal at the

close of the Government's case on twelve

counts. On May 15, 1980, the jury

returned a verdict of guilty on all

counts submitted to them and a special

verdict of forfeiture of Mr. LaChance's

union office pursuant to 18 U.S.C.

§1963.

On June 26, 1980, the District

Court sentenced Mr. LaChance to a total

of twelve years and four months imprisonment

and imposed fines totalling $100,000.

The District Court ordered immediate

atts

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execution of the verdict of forfeiture,

and stayed the fine and impri3onment

pending appeal,

The evidence at trial involved

allegations of payments to Mr. LaChance

by wholesale newspaper dealers, each of

which was the subject of parallel Hobbs

Act and Taft-Hartley Act charges, The

direct evidence on each of the wholesaler

counts connecting the alleged demand or

payment to Mr. LaChance consisted, at

best, of no more than the virtually

uncorroborated testimony of a single

witness, generally a middleman employed

by the wholesalers. Mr. LaChance took

the stand and denied receiving or

demanding any of the payments.

The Government also offered evidence,

unrelated to the other charges, regarding

payments by Russ Trucking, which were

eile

the subject only of Taft-Hartley counts.

Russ Trucking is a small, historically

non-union trucking company that nightly

delivers the El Diario newspaper froma .

Connecticut printing plant to Manhattan

where NMDU employees of the El Diario

distribute it.

The day-to-day management of Russ

Trucking was done by an accountant, with

aid and advice from Leon Braunstein, a

consultant to several of the wholesalers,

and th alleged principal middleman for

the wholesaler payments. The Government

introduced some evidence indicating that

Mr. LaChance owned the company, ond took

this position in summation.

The accountant testified that he

drew various checks to two alleged no-

show employees and checks to cash at Mr.

LaChance's direction, and gave these

checks or cash generated from the checks

-]2-

ae

“

to Mr. LaChance at Mr. LaChance's home

on Long Island. The proceeds of all of

these checks were alleged in the tax

evasion counts to be unreported income

and in Counts 130 through 133 as having

been received in violation of 29 U.S.C.

§186 in that the NMDU "could and would"

admit Russ Trucking employees to membership.*

The evidence relating only to the

Russ Trucking counts (and to the tax

evasion counts insofar as the Russ

Trucking payments are included in those

counts) included a tape recorded con-

versaticn admitted over strong defense

objecttion, allegations of association

with convicted criminals, involvement in

corporate skimming, participation

*There was no evidence that the NMDU

ever tried to organize Russ Trucking or

that any of. the employees applied for or

would be eligible Sor NMDU membership. |

There was no evidence that the NMDU |

represents or would represent the ;

employees of any independent truckers. “4

-13-

a

in other crimes, use of no-show employees,

falsification of books and records, con-

cealment of ownership interests and

other matters which the Government

argued on summation showed Mr. LaChance's

lack of credibility when he denied

receiving the alleged payments which are

the subjects of all of the other counts

of the indictment. Accordingly, it is

respectfully submitted that if this

Court determines that the convictions on

the Russ Trucking and tax evasion

counts were improper, Mr. LaChance is

entitled to a new trial on all remaining

counts.

‘On February 12, 1981, the United

States Court of Appeals for the Second

Circuit reversed the convictions on a

three Taft-Hartley counts on the grounds

that no basis for venue in the Southern

District of New York was established,

The Court of Appeals affirmed the convictions

-14-

on all other counts, and remanded the

case for resentencing to reflect the |

reversal of the three counts. On March

4, 1981, the District Court resentenced

Mr. LaChance to twelve years imprisonment

and a fine totalling $98,500, and ordered

him to surrender on March 30, 1981. Mr.

LaChance surrendered as ordered and is

currently serving his sentence at the

United States correctional institution

at Danbury, Connecticut .*

*The United States District Court for

the Southern District of New York exercised

jurisdiction in this case pursuant to 18

U.S.C. §3231. The jurisdiction of the

United States Court of Appeals for the

Second Circuit was invoked pursuant to

28 U.S.C. §1291.

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REASONS FOR GRANTING THE WRIT

I.

The Court of Appeals, in holding

that 29 U.S.C. §186 is an absolute

prohibition against any union official

acquiring an ownership interest in a

business which does not, but theoretically

could, employ union members, rendered

a decision interpreting the Taft-

Hartley Act in conflict with the

statute's language, history and purpose.

The Court of Appeals’ holding on.

the "Russ Trucking" counts that the

Taft-Hartley Act, 29 U.S.C. §186(b), is

an absolute prohibition against any

union official acquiring an ownership

interest in a business which does not,

but theoretically could, employ union

members raises an important question as

to the limitations which Congress intended

to and did impose upon the right to

contract of every union official and

employer in this nation. The Court of

Appeals' holding totally ignores Congress’

-16-

express statement when amending and

supplementing the Taft-Hartley Act in

the Labor-Management Reporting and

Disclosure Act of 1959 that a labor

official's ownership interests in non-

union employers which the union is not

actively seeking to organize need not

even be disclosed under 29 U.S.C. §432

“because they are not matters of public

concern", Sen. Rep. No. 187, 89th

Cong., lst Sess, (1959), reprinted in 2

U.S. Code Cong. & Ad. News 2318, 2331

(1959). See also H. Rep. No. 741 (1959),

reprinted in id., 2424 at 2433.

4 The facts in the present case

demonstrate the harsh result of the

Second Circuit's incorrect interpretation

of section 186. Mr, LaChance was convicted

on Counts 130-133 on the theory that

sometime after he was elected president

of the 4000-member NMDU, he became a

oe

"|

ie

concealed owner of and then received

funds from a historically non-union

corporation, Russ Trucking Company,

which had three to four employees, who

because of the nature of Russ Trucking's

business and its geographical location

allegedly could have been represented by

the NMDU. Neither the NMDU nor the Russ

Trucking employees made any attempt to

unionize the company. There was no

allegation at trial that Russ Trucking

was a sham, or that it was being used as

a conduit for prohibited funds from some

other employer. See United States v.

Overton, 470 F.2d 761 (2d Cir. 1972),

cert.denied, 411 U.S. 909 (1973). This

alleged ownership interest is not required

to be disclosed under 29 U.S.C. §432

since the NMDU was not actively seeking

to. unionize Russ Trucking. It is impossible

that Congress intended for someone to

become a convicted criminal and barred

*-18-

from all union activities for over five

years (29 U.S.C. §504) for an act which

Congress did not believe presented a

sufficiently serious conflict of interest

to even require public disclosure.

In the only known reported analogous

case where the Government previously

contended that the receipts of a dividend

by a bona fide shareholder-union official

was a criminal violation of section 186,

the District Court held that the section

"was intended to reach only certain

forms of bribery and extortion and was

not designed to be a sweeping regulation

or prohibition of all forms of conflict

of interest." United States v. Lippi,

190 F. Supp. 604 (D.Del. 1961). As the

legislative history indicates, Lippi is

clearly incorrect: section 186 is not

an absolute prohibition.

The purpose of Section 186 was to

prevent bribing of labor representatives,

.°19-

extortion of employers and abuse of

welfare funds. Arroyo v. United States,

359 U.S. 419, 425-26 (1959). The statute

was made as broad as possible to prevent

abuse, United States v. Roth, 333 F.2d

450 (2nd Cir. 1964), cert.denied, 380

U.S. 942 (1966), by prohibiting the

passing of “something of value", 29

U.S.C. §186(a), from employer to representative

without the necessity of proof that

bribery or extortion was intended. This

does not, however, mean that every

transfer of funds between employer and

representative is prohibited. There

could be no question, for example, that

section 186 would prevent a employer

from paying funds to a representative to

satisfy a judgment the representative

obtained against the employer for injury

sustained due to the employer's negligence

in a car accident. As Roth suggests,

the "something of yalue”" must be a thing

-20-

potentially capable of the abuses to be

guarded against. 333 F.2d at 454.

Where as here, the transfers of

funds arose out of right unrelated to

the employer-representative relationship,

nothing of value within the terms of the

Act existed. Since a corporation owner

is entitled to withdraw excess profits

from the corporation, the funds that

pass to him in this manner are his as a

matter of right and are not "something

of value" in the nature of a potential

bribe or extortion payment.

Any doubt that Congress intended

section 186 to cover the present case,

characterized by the Court of Appeals as

a "conflict of interest", [See Appendix

at A8-A9, infra] is removed by Congress's

express statements when amending the

Taft-Hartly Act in 1959:

Se

"Embezzlement, bribery,

extortion and similar offenses

are made Federal crimes by the

committee bill. There are three

reasons for relying upon the

milder sanction of Tepostise

an sclosure to e nate

improper conflicts of interest;

(1) The searchlight of

g publicity is a strong deterrent.

This is a new and treacherous

field for legislation. Apart

from a few narrow statutes

there are no general laws

imposing criminal penalties

upon those who enter into

conflicts of interest in

breach of fiduciary duties,

Before adopting extreme measures

it is wise to see whether milder

sanctions are sufficient.

Sen. Rep. No. 187, supra in 2 U.S. Code

Cong. & Ad. News 2332-33(1959) (emphasis

added).

. The decision of the Court of Appeals

is thus at war the language, history and

purpose of the Taft-Hartley Act, and

should be reversed.

=22-

2S ae

If,

, The Court of Appeals, in

conflict with appliable decisions

of this Court and of other Court

of Appeals, upheld venue on the

tax evasion counts on a factval

theory which was prejudicially

at variance with the legall

insufficient theory on ~ the

case had been initiated, tried

and submitted to the jury.

Since it was undisputed that Mr.

LaChance's tax returns were not prepared,

signed or filed in the Southern District

of New York, the only allegation in the

tax evasion counts of the indictment

which could arguably serve as a basis

for venue in the Southern District was

that Mr. LaChance "received cash payments"

in that district. Before and during

trial, the Government's theory, adopted

by the trial court, was that the mere

“demanding, and receiving of large

amounts of cash payments in the Southern

District" which were later not reported

-23-

lide it

on the defendant's tax returns "established

the jurisdictional nexus". The Court of

Appeals, in direct contravention of this

Court's holding in Dunn v. United

States, 442 U.S. 100 (1979), affirmed

Mr. LaChance's conviction on these

counts on the basis of the Government's

theory, argued for the first time on

appeal, that "affirmative acts of evasion"

had been committed in the Southern

District of New York, in that Mr. LaChance

took care to ensure that cash was used

in making the payments and that Mr.

LaChance kept no records.

Dunn v. United States, 442 U.S.

100, 106 (1979) held that when a criminal

case is initiated, tried and submitted

to the jury on one factual theory, it

"offends the most basic notions of due

process" to uphold the conviction on

2b

aS

%

another theory which was neither charged

in the indictment nor submitted to the

jury. Accord, Chiarella v. United States,

445 U.S. 222, 236-37 & n.21 (1980);

Rewis v. United States, 401 U.S. 808,

814 (1971); United States v. Carman, 577

F.2d 556, 565 (9th Cir. 1978). If the

factual theory relied upon at trial was

insufficient as a matter of law, reversal

of the conviction is required even if

"the same result would likely obtain on

retrial". Dunn v. United States,

supra, 442 U.S. at 107.

Here, the theory of venue argued by

the Government at trial, that venue is

proper in a tax evasion prosecution in

any district where the defendant merely

received income in cash, is plainly

incorrect, Retail businesses receive

income in cash every day, but no violation

of the tax laws is committed unless some

225<

step is taken to conceal the income and

a tax return is prepared which omits

such income. Venue is proper only “when

the defendant's actions [in the district]

have progressed to the point where a

court can confidently conclude that a

crime has been committed." United States

v. Chestnut, 533 F.2d 40, 47 (2d Cir,

1976), cert. denied, 429 U.S. 829 (1977).

The mere receipt of income is not a

violation of the tax laws. United States

v. Granello, 365 F.2d 990, 994 (2d Cir.

1966), cert. denied, 386 U.S. 949 (1967).

Even if the theory accepted by the

Court of Appeals, that venue is proper

in any district where the defendant

committed an affirmative act of evasion,

were legally sufficient, Mr. LaChance

was clearly prejudiced by the failure to

present this issue to the jury. Spies

=26<

*%

v. United States, 317 U.S. 492, 499

(1943) held that 26 U.S.C. §7201 requires

a wilful and positive attempt to evade

or defeat a federally imposed tax which

must be proven by "conduct, the likely

effect of which would be to mislead or

to conceal" if a motive to evade taxes

played any part in such conduct, The

existence of a tax evasion motive is a

jury question. Id. at 500. Here, the

jury might well have found that other

alleged violations of law were the sole

motive for any concealment. See Ingram

v. United States, 360 U.S. 672, 679

(1959). Likewise, a substantial question

existed as to whether the alleged acts

of concealment occurred in the Southern

District of New York or indeed, if they

io OF

*%

occurred at all.* Failure to place this

issue before the grand jury thus requires

reversal. United States v. Black Cloud,

590 F.2d 270 (8th Cir. 1979) ,**

¥fThere was no evidence of any steps

taken by LaChance to assure that the

alleged payments were in cash. No

support in the record for this allegation

was cited by either the Government or

the Court of Appeals. Further, since

LaChance lived in the Eastern District

of New York, any alleged failure to keep

records arguably occurred there, Moreover,

records concerning some of the alleged

payments, allegedly created in the

Southern District at LaChance's direction

and with his assistance, were introduced

in evidence at trial as Government

exhibits.

**The jury was not instructed on venue

as to tax evasion. The jury was instructed

that the crime of tax evasion required

an affirmative act of evasion; but the

only affirmative act mentioned in this

regard in the instructions was the

filing of a false tax return. Acts of

concealment were referred to in the

instructions only as possible circumstantial

evidence of wilfulness. The jury was

not instructed, however, that such acts

could be considered for venue purposes

under any circumstances.

-28-

7%

IT!l.

The Court of Appeals rendered

a decision upholding the cross-

examination of Mr. LaChance as

to prior convictions of his

alleged associates, in conflict

with applicable decisions of

other Courts of Appeals.

Mr. LaChance, who did not put his

character in issue, was cross-examined

concerning his knowledge of the prior

unrelated convictions of Matthew Troy, a

personal friend and well-known local

politician, for tax evasion and grand

larceny, of a Charlie DeLutro, a/k/a

Charlie West, who was briefly mentioned

in a tape recording as someone with whom

Mr. LaChance was going to meet on an

issue unrelated to the case, for extortion,

and of Peter DiPalermo, an acquaintance,

for narcotics, counterfeiting and "numerous"

instances of tax evasion. None of these

men were co-defendants or alleged unindicted

co-conspirators, Defense counsel's

-29-

objections were sustained only as to the

Troy question.* The cross-examination

concerning associates’ convictions for

serious offenses, including some of the

precise offenses with which Mr. LaChance

was charged, violated his substantial

rights by putting before the jury insinuations

that Mr. LaChance had a general criminal

| propensity because he associated with

convicted felons. Any attempt at "guilt

by association" is, of course, impermissible.

United States v. DeDominicus, 332 F.2d

207 (2d Cir. 1964); United States v.

Gosser, 339 F.2d 102, 112 (6th Cir.),

cert. denied, 382 U.S. 819 (1964) (same).

¥Despite the trial court's sustaining of

the defendant's repeated objections, the

prosecutor asked 21 separate questions

regarding Mr. Troy.

-30-

The Court of Appeals, agreeing that

these questions were "ill-advised in

view of the risk of prejudice to the

defendant" [A4 infra], , nevertheless

upheld the trial court's refusal to

grant a mistrial on the ground that

these questions were permissible to

rebut Mr. LaChance's general theory of

defense which the Court of Appeals

characterized as claims that Mr. LaChance

always acted in the best interest of the

union and avoided even the appearance of

impropriety.

This holding violates the settled

law that evidence of criminal acts of

associates only is permissible, when

character is not in issue, to prove an

element of the Government's case or to

contradict a specific factual state-

alin

ment made by the defendant in his

direct testimony. United States v.

Labarbera, 581 F.2d 107, 109 (5th Cir.

1978); United States v. Vigo, 435 F.2d

1347, 1350 (5th Cir.), cert. denied, 403

U.S. 908 (1971); United States v.

Crawford, 438 F.2d 441, 444-45 (8th Cir.

1971); United States v. Miesch, 370

F.2d 768, 773 (3rd Cir. 1966)(to rebut

entrapment defense by showing pred-

isposition).

Mr. LaChance's direct testimony

concerning what the Second Circuit

characterized as avoiding the appearance

of impropriety in his associations was

only that: (1) he denied ever meeting

alone with one alleged middleman in

contradiction to that person's testimony

and (2) that he made it a practice never

to meet alone with two of the seven

employers involved in the case. He

+ 32-

ae

2

freely admitted meeting alone with the

principal alleged middleman. Likewise,

Mr. LaChance's direct testimony concerning

what the Second Circuit characterized as

his "best interest of the union" defense

[A4 infra], was only that (1) he never

missed a union meeting (2) he was a

trustee of the union pension and welfare

fund and (3) that he twice rejected

bribe offers by the principal alleged

middleman. The questions concerning Mr.

LaChance's alleged associates could not

serve as contradictions of any of these

statements.

The Court of Appeals' holding

directly contradicts the holdings of the

Fifth and Eighth Circuits. In United

States v. Vigo, 435 F.2d 1347 (5th

Cir.), cert. denied, 403 U.S. 908 (1971),

defendant testified that she knew nothing

about narcotics and knew no one who had

w Ste

dealings in narcotics with co-defendant.

Cross-examination establishing that her

husband was convicted of a narcotics

offense and was a friend of co-defendant

(but not involved with narcotics dealings

with co-defendant) was held reversable

error since the highly prejudicial

cross-examination did not relate to the

"precise point" as to which defendant

testified on direct. Id. at 351. In

United States v. Ochoa, 609 F.2d 198,

204-206 (5th Cir. 1980), the court held

that defendant, who had both offerred

character evidence and denied complicity

in drug transactions, had not opened the

door to testimony as to her brother's

convictions for importing drugs. In

United States v. Crawford, 438 F.2d 441

(8th Cir. 1971), defendant testified

that he never handled narcotics. Cross-

examination as to his knowledge of

-34-

certain associates’ drug addiction and

drug convictions was "far broader" than

the direct testimony and required reversal

for unfairly connecting him "in the eyes

of the jury with an entire group of

undesirables", id. at 446, precisely what

the prosecution did to Mr. LaChance. See

also United States v. Labarbera, 581

F.2d 107 (Sth Cir. 1978) (reversal required

ou: teiatedasibla attempt to taint

defendant's character through guilt by

association with question as to son's

arrest for similar but unrelated offense).

If the cross-examination in Ochoa, Vigo

and Crawford went impermissibly beyond

fair rebuttal to the defendant's direct

testimony, the same standard requires

reversal in Mr. LaChance's case.

The Court of Appeals’ conclusion

that "the questions did not impermissibly

contribute to the verdict" [A4 infra] is not

supportable. The credibility of Mr,

-35-

*%

LaChance was crucial to this case, "and

any error which reflected upon or tended

to impeach the credibility of the defendant

may not be said to be insubstantial”.

United States v. Pennix, 313 F.2d 524,

531 (4th Cir. 1963).*

The Court of Appeals‘ found no

prejudice because the jury already had

evidence that two alleged conspirators

in the instant charges had been convicted

(by plea agreement) for their part in

the alleged scheme. The difference in

jury impact due to relevance and degree

is clear. What Mr. LaChance complains

of is evidence concerning unrelated

prior convictions of persons he allegedly

voluntarily chose as personal associates.

¥0n the basis of this cross-examination,

counsel for the government argued in

gummation that there “is a convicted

hoodlum that this man [Mr. LaChance] is

associating with."

~%6-

The Court of Appeals also found

this cross-examination to be harmless

since it "constituted a small fraction

of the cross examination of the defendant"

[A4 infra] and in light of the other

evidence at trial. But clearly the

Government did not consider its evidence

so strong that it did not to have to

resort to trying to show guilt by

association.

When, in the prosecution of a

defendant, counsel for the

government indulges in unfair

and improper cross-examination,

the only purpose of which is

to degrade the defendant and

to prejudice the jury against

him, the government, upon

appeal, will not ordinarily be

heard to say that the methods

which were used did not have

the effect which they were

obviously intended to have.

United States v. Pennix, supra, quoting

Salerno v. United States, 61 F.2d 419, °

424 (8th Cir. 1932).

a3$7<

*%

IV.

The Court of Appeals affirmed

convictions on numerous counts

on a legally insufficient theory

of venue, in violation of Mr.

LaChance's constitutional rights.

Mr. LaChance's constitutional right

to be tried in the district where the

offenses were allegedly committed was

violated by numerous counts of the

indictment involving alleged violations

of the Taft-Hartley Act, 29 U.S.C.

§186(b). U.S. Const., Amend. VI; Rule

18, F.R.Cr.P.; United States v. Johnson,

323 U.S. 273, 276 (1944).

In the district court and on appeal,

Mr. LaChance challenged the sufficiency

of the evidence of venue as to Counts

27, 38-41, 79-81, 107, 114-16, 122, 127-

29, and 130-33. The Court of Appeals

reversed the convictions on Counts 127-

29, and affirmed the convictions on all

other counts on the basis of reasoning

which is unsupported by the record and

-38-

ssiapials nial

RAY

’%

ae eS i. At _

insufficient as a matter of law. For

example, as to Count 107, alleging that

Feldman, an employer, made a payment in

1979 to Mr. LaChance through Braunstein,

an alleged middleman, the Court of

Appeals held that “the jury could

reasonably infer from th[e] evidence

that the payment in question, though

delivered in the Eastern District [of

New York], originated from conduct

occurring in the Southern District" [A8

infra]. The "conduct" which the Court

of Appeals refers to is a reference in

the record to a conversation between

Braunstein and Feldman in 1959, twenty

years before the payment in question and

many years before Mr. LaChance ever

became involved with the union. The

reasoning of the Court of Appeals is

similar as to all of the other challenged

counts. [See A5-8, infra]. Surely,

-39-

*-%

3 ta

odes

this can be no basis for venue as to Mr.

LaChance. If a principal-may not be

tried in the place where his accessory

acted, United States v. Walden, 464 F.2d

1015, 1019-20 (4th Cir.), cert. denied,

409 U.S. 867 (1972), surely a principal

may not be tried in a place where his

accessory allegedly committed a similar

crime twenty years earlier.

Vv.

The Court of Appeals erred

in beara a sentence which

was enhanced in part on account of

Mr. LaChance's reliance on his

constitutional rights, in

violation of an applicable

decision of this Court.

The Government asked the District

Court to enhance Mr. LaChance' sentence

on account of his alleged refusal to

cooperate with the Government after

trial. Mr. LaChance objected to the

District Court's consideration of this

factor, since his refusal was based on

-40- .

his assertion in good faith of his

constitutional privilege against self

incrimination and thus could not be the

basis for drawing any adverse inference.

See Roberts v. United States, 445 U.S.

552, 559-61 (1980). The District Court,

in imposing a sentence exceeding twelve

years imprisonment plus fines totalling

$100,000, stated that certain factors

urged by the Government were not being

relied on, but did not exclude reliance

on Mr. LaChance's alleged failure to

cooperate. Since reliance on this

factor would violate Mr. LaChance's

constitutional rights and contravene a

recent decision of this Court, the

sentence should be vacated; at the very

least, a remand to clarify the record is

necessary.

CONCLUSION

For the reasons above stated, the

petition for a writ of certiorari should

be granted.

:

Respectfully submitted,

JOHN J. TIGUE, JR.

Attorney for Petitioner

Douglas LaChance

80 Pine Street

| New York, New York 10005

Es (212) 422-4030

a.

; ee

Of Counsel

Kostelanetz & Ritholz

Peter J. Driscoll

Elliot Silverman

*%

APPENDIX A

UNITED STATES COURT OF APPEALS '

FOR THE SECOND CIRCUIT

At a Stated Term of the United

States Court of Appeals for the Second

Circuit, held at the United States Court-

house in the City of New York, on the

12th day of February one thousand

nine hundred and eighty-one.

Present: HONORABLE J. EDWARD LUMBARD

HONORABLE JAMES L. OAKES,

HONORABLE JON O. NEWMAN,

Circuit Judges.

UNITED STATES OF AMERICA,

Plaintiff-Appellee,

-Ve-

DOUGLAS LaCHANCE,

Defendant-Appellant.

Derensant Spar) ene Douglas LaChance,

former President of the Newspaper and

Mail Deliverers Union (NMDU), appeals

from a judgment of the District Court for

the Southern District New York (Milton

Pollack, yogee) convicting him after a

jury trial of 58 counts of extorting |

labor 2 dog ea violation of 18 U.S.C.

§1951 (the Hobbs Act), 62 counts of

receiving unlawful labor payments in

violation of 29 U.S.C. §186 (the Taft-

Neat

ae

Hartley Act) one count of conducting the

affairs of NMDU through a pattern of

racketeering in violation of 18 U.S.C. §

1962 (the RICO Act), and 3 counts of tax

evasion in violation of 26 U.S.C. §7201.

We affirm in part and reverse in part.

1. The motion to suppress the tape

recording of the conversation between La

Chance and DiPalermo was properly denied.

The officers’ transcript of the conversation

and the affidavit submitted in support of

the application for an amendment of the

eavesdropping warrant disclosed probable

cause to believe that the conversation

concerned loansharking in violation of

New York's usury laws. The claim that

the supporting affidavit was rendered

deliberately or recklessly false by

inaccuracies in the accompanyingy transcript

did not entitle the defendant to relief

under Franks v. Delaware, 438 U.S. 154

(1978). A presumption of validity attached

to supporting affidavits. Id. at l17l.

After listening to the recording, Judge

Pollack found that the officers’ transcript

was reasonably accurate. Based on our

own comparision of the tape and the

transcript we cannot say that this finding

was clearly erroneous. Accordingly,

suppression on this ground was not required.

See United States v. Barnes, 604 F,2d

T21I

: cir. 1979), cert. denied,

100 S.Ct. 1833 (1980). The claim that

the affidavit was false and misleading in

its allegation of compliance with minimization

standards is without merit. The materials

submitted to the District Court reflected

a reasonable effort to intercept onl

narcotics-related conversations intel ving

one of the individuals named in the

pate

7%

warrant. DiPalermo was so named. The

words that were interpreted by the monitoring

officer as evidence of usury were spoken

only moments after the interception

began. DiPalermo had been overheard

discussing usury only days earlier. To

continue the interception of this non-

innocent conversation for an additional

seven minutes after these words were

spoken was not unreasonable, and reasonableness

is all that the statute demands. See

United States v. Manfredi, 488 F.2d 588,

r. 1973), cert.denied, 417 U.S.

936 (1974).

2. Admission of the tape recording

was well within the scope of the District

Court's discretion, A tape recording

should be excluded for inaudibility only

when the “unintelligible portions are so

substantial as to render the recording as

a whole untrustworthy." United States v.

Bryant, 480 F.2d 785, 790 (2d Cir. 1973).

Schitdise, the inaudibility of a part of

a tape recording goes to weight, not

admissibility. United States v. Provenzano,

615 F.2d 37, 40 n.4 (2d Cir.), cert. denied,

100 S.Ct. 2921 (1980). Judge Pollack was

able to "hear reasonably clearly the

matters set forth in the again Uf and

he concluded that it was "certainly

sufficiently intelligible . .. that a

jury listenting to (it) could reach a

fair conclusion as to what the subject

matter was." After listening to the |

tape, we agree. We note, moreover, that

the jurors were given the Government -

and defense-prepared transcirpts of the

recording and were instructed to make

their own findings of what the recording

contained. Admission of the recording was

py ts

Ee

-

*%

i

Reals s. )

proper in every respect. See United States

v. Carson, 464 F.2d 424, 436-37 (2d

Cir.), cert. denied, 409 U.S. 949 (1972).

3. The cross-examination of LaChance

concerning his knowledge of the criminal

records of Troy, DiPalermo, and West was

ill-advised in view of thr risk of prejudice

to the defendant, but the prosecutor's

questions did not warrant a mistrial and

are not cause for reversal. The questions

objected to were at least arguably permissible

to rebut LaChances' claims that he always

had acted in the best interests of NMDU

and had strived in his associations to

avoid even the appearance of impropriety.

Accordingly, there is no basis for reversal

on the ground that the questions were

"purely inflammatory" and were asked in

bad faith. The claim that the jury could

have convicted soley because the questions

may have disclosed a general criminal

propensity is meritless. The questions

concerned the defendant's knowledge of

the criminal records of others, not his

own criminal record. The jury already

knew that LaChance associated with at

least two persons (Braunstein and O'Hearn)

who had been convicted of making unlawful

labor payments. Seven other individuals

testified that they also made unlawful

payments to LaChance. Viewing the prosecutor's

Sande pane which constituted a small

raction of the cross-examination of the

defendant, in light of the entire record

developed during the course of the two-

week trial, we are convinced that the

questions did not impermissibly contribute

to the verdict,

~A4-

=e

7%

4. The evidence of venue on the

tax counts, viewed in a light most favorable

to the Government, was sufficient to

permit the jury to find that LaChance

committed an affirmative act of tax

evasion in the Southern District. The

evidence showed that LaChance received

cash payments in the Southern District

that he failed to report on his federal

tax return. Care was taken to ensure

that the payments were in cash, and no

records of the payments were kept by

LaChance. See United States v. Spies,

317 U.S. 492, 499 (1943).

5. The evidence of venue on the

Taft-Hartley counts was at least marginally

sufficient as to all but the counts

involving the Weinberg acquisition payments.

a. The evidence as to the Russ

Trucking payments (counts 130-33) showed

that the cash that was demanded and

received by LaChance was obtained at his

direction from a Manhattan bank. The

jury could infer from this evidence that

in each instance the violation of §186(b)

began or continued in the Southern District

within the meaning of 18 U.S.C. §3237,

b. The evidence as to the Weinberg

layoff payment in October 1976 (count

127) showed that this was merely another

"usual payment of $3,000 per man” that

Weinberg previously had delivered to

LaChance through Braunstein. See App,

1072, 1102-03, 1114-15, 1161. “The evidence

further showed that Braunstein conducted

his affairs from his office in the Southern

District. See App, 814-15, 921-22, 953.

-A5-

*%

We think the jury reasonably could infer

from these circumstances that the payment

in question was part of an vnleerul

course of conduct that began or continued

in the Southern District.

c. The evidence as to the Weinberg

acquisition payments of December 1977

(count 127), February 1978 (count 128),

and July 1978 (count 129) was insufficient

to permit a finding of venue in the

Southern District. So far as we can

tell, there was no evidence that payments

of this nature had been made in the past

to LaChance at the urging of Braunstein.

It appears that the payments were first

suggested to Weinberg by Alvino in Weinberg's

office in the Eastern District, pursuant

to conversations between Alvino and

LaChance at an unspecified location, and

delivered by Alvino to LaChance in the

Eastern District, App. 1074-83, 1168.

The convictions on these counts must be

reversed.

d. The evidence as to the Gelfand

labor-peace payments (counts 38-41) was

marginally sufficient to permit a finding

of venue in the Southern District.

Gelfand testified that Braunstein was the

intermediary between the wholesalers and

NMDU, App. 1008; that he consulted Braunstein

gp. his problems with NMDU, App.

1009, particularly during the wholesalers'

cht Ti 3 in the Southern District, App.

1008, 1009-10; and that Braunstein had

told him that he would have to make

payments to the Union, App. 1010-11, The

evidence showed that Braunstein told

other wholesalers that a “laundry list"

of payments had to be made to the Union,

-A6-

vay

App. 301. Braunstein collected labor-

peace payments from the other wholesalers.

Finally, Gelfand testified that he made

the payments in question to LaChance

pursuant to Braunstein's suggestion.

App. 1016. There was no direct evidence

as to where this conversation occurred,

but we think the jury reasonably could

infer from the totality of the circumstances

that Braunstein either made this particular

suggestion in the Southern District or

that Gelfand's practice of making labor

peace-payments had its origins in conduct

ocurring in that District. Accordingly,

we conclude that although the payments in

question were delivered in New Jersey, a

sufficient basis was shown to infer that

the payments were solicitated in the

Southern District,

e. The evidence as to the Gelfand

Christmans payments of 1976-78 (counts

78-91) and the Gelfand election payments

of 1976-78 (counts 114-16) was essentially

the same as the evidence concerning the

labor-peace payments, and we conclude, by

the same reasoning applicable to those

payments, that the evidence was marginally

sufficient to support a finding of venue

in the Southern District on these counts

as well. Braunstein collected Christmas

and election payments every year from the

other wholesalers who also relied on

Braunstein to avoid and resolve problems

with the leadership of NMDU. See App,

826-30. These payments appear to have

been part of the "laundry list" of payments

that Braunstein discussed with all the

wholesalers, including Gelfand, at the

meetings in the Southern District. See

App. at 301, 1008-11. Thus even thought

eave

the payments were delivered in New Jersey,

we think the jury could reasonably conclude

that the payments were part of an unlawful

course of conduct that began or continued

in the Southern District.

f. The evidence as to the Feldman

election payment of May 1979 showed that

when Feldman joined the suburban Wholesaler's

Association, Braunstein informed him that

he would have to make payments for "certain

things." App. 633-34. Thereafter,

Feldman delivered election payments to

Braunstein either in the latter's office

or in a Howard Johnson's in the Bronx.

App. at 637-39. We think the jury could

reasonably infer from this evidence that

the payment in question, though delivered

in the Eastern District, originated from

conduct occurring in the Southern District.

*%\

g. The evidence as to the Feldman

contract payment of May 1979 (count 122)

showed that after Feldman was informed by

Braunstein of the payoff scheme, he made

payments to Braunstein in connection with

the negotiation of every subsequent

collective bargaining agreement. App.

633-34. Here again, we conclude that the

: payment in question, though delivered in

the Eastern District, could be viewed by $

the jury as part of a course of conduct

that began or continued in the Southern

District.

5. The convictions on the Russ

Trucking counts are supported by sufficient

evidence, and the jury instructions as to

these counts were proper. There was

ample evidence that the Russ Trucking

drivers would or could become members of

NMDU but for LaChance's conflict of

-A8-

*%

a i :

yoo Del

interest. NMDU represents employees

engaged in the handling and delivery of

newspapers in a territory that included

Connecticut, the location of Russ Trucking,

and the Russ Trucking drivers do this

very type of work. The 1974 agreement

between NMDU and El Diario could not

reasonably be interpreted to preclude

unionization of Russ Trucking's employees.

the fact that the charge conformed to the

literal terms of the absolute statutory

prohibition against payments by any

employer to an officer of a union that

would admit to membership the employer's

employees is no cause for holding that

the charge was erroneous. The meaning of

the statute is clear. Moreover, the

scope of the prohibition conveyed by the

plain terms of the statute did not require

a qualifying instruction that the statute

would not apply to LaChance if he owned

Russ Trucking. The literal terms of the

statute make no exception for firms in

which a union official may have an ownership

interest, and Congress wanted the statute

to have the broadest possible scope in

order to protect employees. See United

States v. Roth, 333 F.2d 450, 453 (2d

Cir. 1964), cert.denied, 380 U.S. 942

(1965); United States v. Annunziato, 293

F.2d 373, 379 (2d Cir.), cert.denied, 368

U.S. 919 (1961). The jury could reasonably

find that the Russ Trucking payments were

detrimental to the interests of the

firm's employees. Such abuse of union

power, which the statute was intended to

prevent, is not beyond the reach of the

statute merely because the payee may have

an ownership interest in the payor. See

“A9-

v

oo

United States v. Overton, 470 F.2d 761

ts ), cert.denied, 411 U.S. 909

(1973).

6. The claim that the convictions

on the Hobbs Act counts must be reversed

for lack of evidence of reasonable rear

is without merit. The jury was properly

instructed that to prove a Hobbs Act

violation the Government had to show that

the wholesalers made the payments out of

a reasonable fear of economic injury.

See United States v. Daley, 564 F.2d 645,

650 x

r. ), cert.denied, 435 U.S.

933 (1978). The issue of each wholesaler's

state of mind was peculiarly within the

province of the jury. See United States

v. Sears, 544 F.2d 585 (2d Cir.

Moreover, the evidence as to each of the

disputed counts was clearly sufficient.

Klinghoffer testified that Braunstein

told him that he would have to make

payments in connection with the contract

with NMDU, App. 382, and Klinghoffer also

testified from experience that union

problems could be "very costly," App.

379. The claim that he made the payments

just to be "friendly" does not accurately

reflect his testimony. He stated that it

was good business to be friendly with

union officials, App. 426, in order to

avoid “very costly" problems. The absence

of testimony by Passaic executives did

not preclude a jury finding that the

Passaic payments were delivered to LaChance

through Braunstein out of a reasonable

‘fear of economic injury. Braunstein's

testimony and that of the other wholesalers

amply supported a finding that all the

executives who made payments to LaChance

through Braunstein did so to avoid retaliation.

-A10-

*%

Nicol's testimony showed that Metropolitan

made the payments on Braunstein's "laundry

list" to avoid "bad trouble." App. 301-

04. The claim that the strike payments

were not made out of a reasonable fear

is frivolous. Braunstein believed that

unless the payments were made, the

wholesalers would not be "permitted" to

handle the interim papers. App. 839.

The testimony of the other wholesalers

showed that they shared his belief that

the payments were absolutely required.

See App. 186-87, 639-40, 1085, 1027-08.

7. The claim that the sentence was

improper under United States v. Hendrix,

505 F.2d 1233 (2d Cir. 1974), cert.denied,

423 U.S. 897 (1975), is without merit in

light of United States v. Grayson, 438

U.S. 41, 52 (1978), which permits a

court to weight the defendant's perceived

perjury as a facter in determining an

appropriate sentence.

For the foregoing reasons, we

reverse the convictions on counts 127,

128, and 129, affirm the judgment in all>

other respects, and remand for resentencing

in light of the reversal of the convictions

on counts 127, 128, and 129. The

mandate shall issue forthwith.

LS fy Edward Lumbard

{s/

“eo James L. Oakes

/s/

Hon. Jon O. Namaian

Circuit Judges.

1. The effective aggregate sentence on

all counts was imprisonment of 12 years,

four months, and a fine of $100,000. The

sentence on each of counts 127, 128, and

129 was two months' imprisonment and fine

of $500. Two-month sentences on all 62

of the Taft-Hartley counts, including

these three counts, were to run consecutively

to each other for a total, on those

counts,of 10 years, four months. This

total term is to run concurrently with

the ten-year term imposed on the RICO

count. Two-year’ sentences on the three

tax counts were to run concurrently with

each other but consecutively to the

sentences on all other counts. All fines

were cumulative. Therefore, reversal of

the convictions on three of the Taft-

Hartley counts will presumably result in

a reduction of six months in the aggregate

sentence on the Taft-Hartley counts to a

total of nine years and ten months;

however, this will presumably result in

only -.a four-month reduction in the aggregate

sentence on all counts, since the two

years on. the tax will still result in a

total aggregate sentence of 12 years.

Reversal of conviction on the three Taft-

Hartley counts will gree reduce the

aggregate fines by $1,500 to a total of

$98,500. In entering a revised judgment,

the District Court may wish to consider

revising Part C, covering the Taft-

Hartley counts, to make clear that

counts 64, 67, 75, 77, and 78 were

dismissed; absence of that notation after

the reference in the judgment to counts

"62 through 81" appears to make the total

of Taft-Hartley counts greater by five

than the true number.

-Al2-

Yo

~

APPENDIX B

29 U.S.C. §186.

Restrictions on financial transactions

Payment or lending, etc., of money by

employer or agent. to employees, repre-

sentatives, or labor organizations

(a) It shall be unlawful for any employer

or association of employers or any

person who acts as a labor relations

expert, adviser, or consultant to an

employer or who acts in the interest or

an employer to pay, lend, or deliver, or

agree to pay, lend, or deliver, any

money or other thing of value --

(1) to any representative of any

of his employees who are employed

in an industry affecting commerce;

or |

(2) to any labor organization,

or any officer or employee thereof,

which represents, seeks to represent,

or would admit to membership, any

of the employees of such employer

who are employed in an industry

affecting commerce; or

(3) to any employee or group or

committee of employees of such

employer employed in an industry

affecting commerce in excess of

their normal compensation for the

purpose of causing such employee

pat ps or committee directly or

ndirectly to influence any other

employees in the exercise of the

-Al3-

‘%

right to organize and becgets collectively

through representatives of their own

choosing; or

(4) to any officer or employee of a

labor organization engaged in an industry

affecting commerce with intent to influence

him in respect to any of his actions,

decisiors, or duties as a representative

of employees or as such officer or

employee of such labor organization,

Request, demand, etc., for money or

other thing of value

(b) (1) It shall be unlawful for any

person to request’, demand, receive, or

accept, or agree to receive or accept,

any payment, loan, or delivery of any

money or other Coane of value prohibited

by subsection (a) of this section.

(2) It shall be unlawful for any

labor organization, or for any person

acting as an officer, agent, representative,

or employee of such labor organization,

to demand or accept from the operator of

any motor vehicle (as definded in part

II of the Interstate Commerce Act)

employed in the transportation of property

in commerce, or the pings of any such

operator, any money or other thing of

value payable to such organization or to

an officer, agent, representative or

employee thereof as a fee or charge for

the unloading, or in connection th the

unloading, of the cargo or such vehicle:

Provided, That nothing in this paragraph

shall be construed to make unlawful any

payment by an employer to any of his

employees as compensation for their

services as employees.

“~Al4-

°%

5 Eee

(c) The provisions of this section

shall not be applicable (1) in respect

to any money or other thing of value

payable by an employer to any of his

employees whose established duties

include acting si ea for such employer

in matters of labor relations or personnel

administration or to any representative

of his employees, or to any officer or

employee of a labor organization, who is

also an employee or former employee of

such employer, as compensation for, or

by reason, of, his service as an employee

of such employer; (2) with respect to

the payment or delivery of any money or

other thing of value in satisfaction of

a judgment of any court or a decisign or

award of an arbitrator or impartial

chairman or in compromise, adjustment,

settlement, or release of any claim,

complaint, grievance, or dispute in the

absence of fraud or duress; (3) with

respect to the sale or purchase of an

article or comodity at the ee

market price in the regular course o

business; (4) with respect to money

deducted from the wages of employees in

payment of membership dues in a labor

organization: Provided, That the

employer has received from each employee,

on whose account such deductions are

made, a written assignment which shall

not be irrevocable for a period of more

than one year, or beyond the termination

date of the applicable collective agreement,

whichever occurs sooner; (5) with respect

to money or other thing of value paid to

a trust fund established by such representative,

for the sole and exclusive benefit of

the employees of such employer, and

their families and dependents (or of

such employees, families, and dependents

-Al5-

cite

eee ae.

jointly with the employees of other

employers making similar payments, and

their families and dependents): Provided,

That (A) such payments are held in trust

for the purpose of paying, either from

principal or income or both, for the

benefit of employees, their families and

dependents, for medical or hospital

care, pensions on retirement or death of

employees, compensation for injuries or

illness resulting from occupational

activity or insurance to provide any of

the foregoing, or unemployment benefits

or life insurance, disability and sickness

insurance, or accident insurance; (B)

the detailed basis on which such payments

are to be made is specified in a written

agreement with the employer, and employees

and employers are equally represented in

the administration of such fund, together

with such neutral persons as the representatives

of the employers and the representatives

of employees may agree upon and in the

event the employer and employee groups

deadlock on the administration of such

fund and there are no neutral persons

empowered to break such deadlock, such

— provides that the two groups

shall agree on an impartial umpire to

decide such dispute, or in event of

their failure to agree within a reasonable

length of time, an impartial umpire to

decide dispute shall, on petition of

either group, be appointed by the district

court of the United States for the

district where the trust fund has its ‘

principal office, and shall also contain :

provisions for an annual audit of the

trust fund, a statement of the results -

of which shall be available for inspection

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by interested persons at the Pate ipes

office of the trust fund and at suc

other places as may be designated in

such written agreement; and (C) such

payments as are intended to be used for

the purpose of providing pensions or

annuities for employees are made to a

separate trust which provides that the

funds held therein cannot be used for

any purpose other than paying such

pensions or annuities; (6) with respect

to money or other thing of value paid by

any employer to a trust fund established

by such representative for the purpcse

of pooled vacation, holiday, severance

or similar benefits, or defraying costs

of apprenticeship or other training

programs: Provided, That the requirements

of clause (B) of the proviso to clause

(5) of this subsection shall apply to

such trust funds; (7) with respect to

money or other thing of value paid by

any employer to a pooled or individual

trust fund established by such representative

for the purpose of (A) scholarships for

the benefit of employees, their families,

and dependents for study at educational

institutions, or (B) child care centers

for preschool and school age dependents

of employees: Provided, That no labor

organization or employer shall be required

to bargain on the establishment of any

such trust fund, and refusal to do so

shall not constitute an unfair labor

practice: Provided further, That the

requirements of clause (B) of the proviso

to clause (5) of this subsection shall

apply to such trust funds; or (8) with

respect to money or any other thing of

value paid by any employer to a trust

fund established by such representative

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for the purpose of defraying the costs

* of legal services for employees, and

their families, and dependents for

counsel or plan of their choice: Provided,

That the requirements of clause (8B) of

the proviso to clause (5) of this subsection

shall apply to such trust funds: Provided further,

That no such legal service shall be

. furnished: (A) to initiate any proceeding

directed (i) against any such employer

or its officiers or agents except in

workman's compensation cases, or (ii)

against such labor organization, or its

parent or subordinate bodies, or their

officers or agents, or (iii) against any

other employer or labor organization, or

their officers or agents, in any matter

arising under subchapter II of this

chapter or this chapter; and (B) in any

proceeding where a labor organization

would be prohibited from defraying the

costs of legal services by the provisions

of the Labor-Management Reporting and

Disclosure Act of 1959.

eee

_ Penalty for violations

(d) Any person who willfully violates

> -any of the provisions of this section

- shall, upon conviction thereof, be

j guilty of a misdemeanor and be subject

to a fine of not more thant $10,000 or

to imprisonment for not more than one

- year, or both.

Jurisdiction of courts

“ (e) The district courts of the United

- $tates and the United States courts of

. Territories and possessions shall have

| jurisdiction, for cause shown, and

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subject to the provisions of section 381

of Title 28 (relating to notice to

opposite party) to restrian violations

of this section, without regard to the

provisions of chapter 6 of this title.

Effective date of provisions

(f) This section shall not apply to

any contract in force on June 23, 1947

until the expiration of such contract,

or until July 1, 1948, whichever first

occurs.

Contributions to trust funds

(g) Compliance with the restrictions

contained in subsection (c)(5)(B) of

this section upon contributions to trust

funds, otherwise lawful, shall not be

applicable to contributions to such

trust funds established by collective

agreement prior to January 1, 1946, nor

shall subsection (c)(5)(A) of this

section be construed as prohibiting

contributions to such trust funds if

prior to January 1, 1947, such funds

contained provisions for pooled vacation

benefits.

APPENDIX C

26 U.S.C. §7201

Attempt to evade or defeat tax

Any person who willfully attempts

in any manner to evade or defeat any tax

imposed by this title or the payment

thereof, shall, in addition to other

penalties provided by law, be guilty of

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a felony and, upon conviction thereof, —

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

imprisoned not more than 5 years, or

both, together with the costs of prosecution.

APPENDIX D

Rule 18, Federal Rules of Criminal Procedure.

Place of Prosecution and Trial

Except as otherwise permitted by

statute or by these rules, the prosecution

shall be had in a district in ich the

offense was committed. The court shall

fix the place of trial within the district

with due regard to the convenience of

the defendant and the witnesses,

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