Petition for Writ of Certiorari — Novak v. United States (No. 06-418)

| Supreme Gourt, US.

(1, Sworame Gout

No. 9 6-418 SEP 21 2006

OFFICE OF THE CLERK

In The

Supreme Court of the Anited States

¢

CHARLES NOVAK,

Petitioner,

V.

UNITED STATES OF AMERICA,

Respondent.

On Petition For A Writ Of Certiorari

To The United States Court Of Appeals

For The Second Circuit

«

PETITION FOR A WRIT OF CERTIORARI

e

DIARMUID WHITE

Counsel of Record

BRENDAN WHITE

WHITE & WHITE

148 East 78th Street

New York, NY 10021

(212) 861-9850

Attorneys for Petitioner

COCKLE LAW BRIEF PRINTING CO. (800) 225-6964

OR CALL COLLECT (402) 342-2831

QUESTIONS PRESENTED

1. When a union official, unbeknownst to the em-

ployer, extracts kickbacks from employees — in the form of

a portion of their cashed paychecks in return for job

assignments — does the union official violate 29 U.S.C.

§ 186(b)(1), which makes it a crime for a union official to

receive a thing of value from an employer?

2. In holding that Petitioner violated Section

186(b)(1) by extracting kickbacks from employees, did the

Court of Appeals for the Second Circuit, where half of all

prosecutions for violations of Section 186(b)(1) occur,

create a constructive offense extending the reach of a

criminal] statute to conduct not proscribed by Congress?

3. In holding that Petitioner violated Section

186(b)(1) by extracting kickbacks from employees, did the

court of appeals disregard both the language of the statute

and its purpose, namely, to prevent employers from tam-

pering with the loyalty of union officials and prevent union

officials from extorting employers?

PARTIES TO THE PROCEEDING BELOW

The parties to the proceeding in the court whose

judgment is sought to be reviewed were as in the caption.

ill

TABLE OF CONTENTS

Page

Questions Presented................::eceeeeeeeeeees iehiiesaaiaie i

Parties to The Proceeding Below ............ steceeesnseoeesees ii

Table of Authorities ee eee aia! suahenadeanesbias iv

RINE SEINE sc conscniivenecsenshusnibintanconeevensebernieenoneinionie 1

a adel enable nnmanen mR IaOne 1

Statutory Provisions Involved ............:csssceecseeeeerereees 2

IE, GE GD Gi iisrscicxiscnvctccravcteviascsinisonseneareietes 2

Reasons for Granting The Petition .................cseseeeee 5

IN scdiscinticteiccntaxkoniséutetendatesmpicenssressnrenivectnanin 11

Appendix

Judgment of The United States Court of Appeals

ae See SE III sepeceitch cae tnscevdcotneceonendacmninnenie App. 1

Opinion of The United States Court of Appeals for

NE EN icciecsnsincctesdrcennntiomdcseieivsvumenbedeioes .App. 4

iv

TABLE OF AUTHORITIES

Page

CASES

Arroyo v. United States, 359 U.S. 419 (1959).............. 6, 8,9

Brennan v. United States, 240 F.2d 253 (8th Cir.

BE oiveihcescaccouiidsasaneenash debigakduneadescuaniecdidsniialaccadseuiaaaiotan 6

Dowling v. United States, 473 U.S. 207 (1985).............0 10

Fasulo v. United States, 272 U.S. 620 (1926) .............eee8ee 10

Haley v. Palatnik, 509 F.2d 1038 (2d Cir. 1975)............000 9

Kornholz v. United States, 269 F.2d 897 (10th Cir.

MOND iiscicdiaterilddtindicduisakiniihasdadenip aedeaiiddcmatiaaine 6

United States v. Bass, 404 U.S. 336 (1971) ........... ee eeeeeeees 10

United States v. Billups, 692 F.2d 320 (4th Cir.

Di sicisiscisslcansieistereateastaicoibitiatiesdnsaaratelmmuadenae 6

United States v.. Bloch, 696 F.2d 1213 (9th Cir.

PE sictisccthakartéhdsiuddasinaiudatiidescesienidetionselsasipmanddinbindees ys 6

United States v. Carlock, 806 F.2d 535 (5th Cir.

MIT scsinh-dhcasSacsdsccisiuastacseasensamecin deemed inna tisiacemmutaaaael 6,7

United States v. Cody, 722 F.2d 1052 (2d Cir.

DE cccisslnhisintniintadaviagpasinasisiadenadediitiamiapanialings 4, 7, 8,9, 10

United States v. Gruttadauro, 818 F.2d 1323 (7th

Re FINED sins ipecstacabaopiakundeteidesedeoddpihbenisistanieadaaniaeduiaai mean 6

United States v. Phillips, 19 F.3d 1565 (11th Cir.

is iicacininsicesd ci ciciiieiiakidénddiapeastabatiancaaeednmeanas rede 6,7

United States v. Schurr, 775 F.2d 549 (3d Cir. 1985)......... 6

United States v. Toney, 527 F.2d 716 (6th Cir. 1975).......... 6

United States v. Walsh, 928 F.2d 7 (1st Cir. 1991) ............. 7

Vv

TABLE OF AUTHORITIES — Continued

Page

STATUTES

Bee APT TOPE chic ienennientnseninienieninisiiendenicaanicabieninaiaiimaimaiaanaen 3

Te ST achciinicicdestniiianihctentebiniiidiciauliedaniadaaitiailieaaiicniala 2

Sa SI SIE svecthceinateienqniiisnsceneakestbiieenietietsasediiannidanidins 2

Se arial TE. UE sx senuisucssaheisicsdiarepiiubbeciaecibaiasinicueiicipiiceabadediaiiie 6

ir NIE A 0 STINE eesisieintienacinanen setetetiadbiidebcidainie eamaimooneiaaaial 3

INP Dat ivissdianvioscidcieneleestianiaiecanatiiciesicisesaeteasielaneiiionial 3

re Oe eel ateirectsaphisecnisnnnaubcinuiscanisastestiaiansatnhamnilealonestabadaize 1

SUPA SITL Eas Ut TE cacontnionsschichiginenigisiiestsiogiiniebsdesiasanipeiiiaitdeaiinelbat passim

MISCELLANEOUS

U.S. Code Cong. & Admin. News, 86th Cong. Ist

Sess. 1959, Vol. II

PETITION FOR A WRIT OF CERTIORARI

Petitioner prays for a writ of certiorari to review the

judgment of the United States Court of Appeals for the

Second Circuit in this case.

¢

OPINION BELOW

The United States Court of Appeals for the Second

Circuit, in an opinion reported at 443 F.3d 150 and repro-

duced in the appendix at App. 4, affirmed in part the

judgment of the United States District Court for the

Eastern District of New York, convicting Petitioner princi-

pally of unlawful receipt of labor payments by a union

official, in violation of 29 U.S.C. § 186(b)(1), and racketeer-

ing, conspiracy and money laundering offenses predicated

on his violation of Section 186(b)(1). The court of appeals

subsequently disposed of unresolved issues on the appeal

in an unpublished summary order reproduced in the

appendix at App. 1. There was no district court opinion.

¢

JURISDICTION

The judgment of the court of appeals was. finally

entered on July 6, 2006, after all issues had been resolved.

(App. 1) This petition for a writ of certiorari is being timely

filed within ninety days of entry of the judgment, in

compliance with Rule 13.3 of this Court’s rules. The

Court’s jurisdiction is invoked under 28 U.S.C. § 1254.

¢

STATUTORY PROVISIONS INVOLVED

Title 29, United States Code, Section 186(a)(1) pro-

vides:

It shall be unlawful for any employer or as-

sociation of employers or any person who acts as

a labor relations expert, advisor or consultant to

an employer, or who acts in the interest of 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 employ-

ees who are employed in an industry affecting

commerce.

Title 29, United States Code, Section 186(b)(1) pro-

vides:

It shall be unlawful for any person to re-

quest, demand, receive or accept or agree to re-

ceive or accept any payment, loan, or delivery of

any money or other thing of value prohibited by

subsection (a) of this section.

¢

STATEMENT OF THE CASE

1. A superseding indictment in the Eastern District P

of New York charged Petitioner, then a vice-president and

business manager of Local One of the International Union

of Elevator Constructors, with various offenses related to

his position as a union official, including receiving unlaw-

ful labor payments (29 U.S.C. § 186(b)(1)), causing false

ERISA statements to be made (18 U.S.C. § 1027), mail

fraud (18 U.S.C. § 1341), money laundering (18 U.S.C.

3

§ 1956(a)), racketeering (18 U.S.C. § 1962(c)) and conspir-

acy (18 U.S.C. §§ 371, 1956(h) and 1962(d)).

2. The relevant offense conduct was succinctly

described by the court of appeals in affirming Petitioner’s

conviction, following a jury trial, for receiving unlawful

labor payments and derivative offenses’: for a variety of

reasons, collective bargaining agreements required con-

tractor-employers to pay union employees for certain

hours not actually worked (“no-show hours”); a time sheet

would be submitted for an employee claiming the hours;

and the contractor-employer would issue a check payable

to that employee. (App. 6)

Novak’s scheme took advantage of the contrac-

tors’ payments by requiring the check’s recipient

to kick back a portion of the wages received for

the no-show hours. These kickback payments to

Novak were made without the contractors’

knowledge.

(App. 6)

3. The Government had conceded in summation that

“the contractors in all these cases didn’t know that the

defendant was getting the money” (COA App. 126), then

argued with respect to the charge of receiving unlawful

labor payments that it did not matter whether or not the

contractor knew the defendant was getting the money:

* Petitioner’s convictions for RICO and RICO conspiracy, conspir-

acy to violate the laws of the United States, money laundering and

money laundering conspiracy are all predicated upon his conviction for

receiving unlawful labor payments. The court of appeals reversed

Petitioner’s conviction for mail fraud — which had provided an alternate

predicate for those offenses — and his conviction for causing false ERISA

statements to be made.

4

If money goes from a construction contractor

to the union vice president who doesn’t work for

the construction contractor, and even if that

money goes indirectly, that’s an unlawful labor

payment, period, as long as the defendant knows

it is coming from a construction contractor. Just

no excuses. Jt doesn’t matter if the construction

contractor knew that the defendant was getting

_the money or didn’t know. That’s the unlawful

labor payment.

* * .

[T]hese construction contractors are not know-

ingly issuing paychecks for the defendant to get

because if they did, they are committing a crime.

This has nothing to do with whether it works out

both for the contractor and for the union for them

to work out a settlement. That may well be true.

It doesn’t work out for the contractor if he is

committing a crime.

So the contractors in all these cases didn’t

know that the defendant was getting the money.

(COA App. 124-26; emphasis added.)

4. On appeal, the court of appeals framed the ques-

tion presented as “whether Novak’s conviction for violating

§ 186(b)(1) can be sustained if the contractors were not

aware that a portion of their payments to their employees

was being received by a union representative” (App. 7-8)

and answered it in the affirmative, rejecting Petitioner’s

claim that he had not received payments from employers,

as required by 29 U.S.C. § 186(b)(1). The court of appeals,

relying solely on its interpretation of its own precedent in _

United States v. Cody, 722 F.2d 1052 (2d Cir. 1983), held

that Petitioner received unlawful payments from employ-

ers because “even though the payment does not violate the

statute, its receipt by a labor representative can do so,”

although, the court added, for this to be the case, “we

understand the rule of Cody to be that such conviction

requires a showing that the transfer from the employer to

the employee and the transfer from that employee to the

union official are so closely related as to constitute a single

transaction.” (App. 9)

The court of appeals then concluded that “the employ-

ees’ receipt of paychecks from the contractors, and the

employees’ subsequent payments to Novak, were so closely

related that a jury could conclude that the transfers in this

case, like those in Cody, were actually between an em-

ployer and a union representative.” (App. 11) The court,

however, pointed to nothing in the record indicating that

the employees’ receipt of paychecks from the contractors

and the employees’ subsequent payments to Petitioner

were any more “related” than is typical of an employee’s

receipt of payroll checks and disbursement of their pro-

ceeds.

*

REASONS FOR GRANTING THE PETITION

Since Half of All Prosecutions for Viola-

tions of 29 U.S.C. § 186(b)(1) Occur in The

Courts of The Second Circuit, Certiorari

Should Be Granted to Avoid A Court-

Created “Constructive Offense” Extending

The Reach of A Criminal Statute to Con-

duct Not Proscribed by Congress.

1. Petitioner estimates that half of all prosecutions

for violations of 29 U.S.C. § 186(b)(1) occur in the district

6

courts of the Second Circuit.’ Since the purpose of 29

U.S.C. §186(a) and (b) is to prevent employers from

tampering with the loyalty of union officials and to pre-

vent union officials from extorting employers, see Arroyo uv.

United States, 359 U.S. 419, 425-26 (1959), neither the

purpose nor the language of the statute is served by

extending its reach, as the Second Circuit has, to a union

official’s receipt of kickback payments from employees

without the employer’s knowledge. Such conduct is no

doubt prosecutable under the Hobbs Act, 18 U.S.C. § 1951,

but not under 29 U.S.C. § 186.

Except for the Second Circuit, no other circuit court of

appeals, so far as research has disclosed, has affirmed a

conviction under 29 U.S.C. § 186(b)(1) where the employer

was unaware that a payment or other thing of value was

provided to the union representative.’ Certiorari should be

* A LEXIS search for the term “186(b)(1) & union” in the “US Court

of Appeals-Al] Circuits-Selected Criminal! Material” database disclosed

54 cases, 27 of them in the Second Circuit.

* See, e.g., United States v. Schurr, 775 F.2d 549, 551 (3d Cir. 1985)

(union officials received “secret cash payments” from employers for

labor peace); United States v. Billups, 692 F.2d 320, 331 (4th Cir. 1982)

(employer “passed Billups an envelope containing $2,000 cash”); United

States v. Carlock, 806 F.2d 535, 555 (5th Cir. 1986) (employer, at union

official’s direction, rented equipment from former daughter-in-law of

official); United States-v. Toney, 527 F.2d 716, 718 (6th Cir. 1975)

(defendant requested and received payment from contractor); United

States v. Gruttadauro, 818 F.2d 1323, 1325 (7th Cir. 1987) (employer

paid union official to avoid unionization of employees), Brennan uv.

United States, 240 F.2d 253, 260 (8th Cir. 1957) (employer “circuitously

conveyed” to union officials payments as part of plan to break strike),

United States v. Bloch, 696 F.2d 1213, 1214 (9th Cir. 1982) (union

officials demanded and accepted money from music promoter to ignore

union rule); Kornholz v. United States, 269 F.2d 897, 902 (10th Cir.

1959) (employer made payments on union official’s notes and charged

payments on company books as “labor relations expenses”), United

(Continued on following page)

granted to avoid expanding the reach of the statute beyond

conduct proscribed by Congress.

2. The statutory proscription against union repre-

sentatives receiving payments from employers, 29 U.S.C.

§ 186(b)(1), cross-references em loyers making the pay-

ments to union representatives, 29 U.S.C. § 186(a)(1). In

pertinent part, Section 186(b)(1) makes it unlawful “for

any person to request, demand, receive or accept or agree

to receive or accept any payment ... or other thing of

value prohibited by subsection (a),” and Section 186(a)(1)

in turn makes it unlawful “for any employer or [agent of

an employer] to pay, lend, or deliver, or agree to pay, lend,

or deliver any money, or other thing of value ... to any

representative of any of his employees.” The notion that an

employer need not know he or she is making the payment

is not a logical interpretation of the statute’s plain lan-

guage, which cannot reasonably be read to mean that a

union official “reque«t[s], demand[s], receive[s] or accept(s]

any payment” from an employer who does not even know

of any payment.

States v. Phillips, 19 F.3d 1565, 1566 (11th Cir. 1994) (steel producer

paid “kickbacks, in the form of illegal pension payments, to union

officials”).

In cases like United Siates v. Carlock, 806 F.2d 535, and United

States v. Walsh, 928 F.2d 7 (1st Cir. 1991) (while being compensated by

employer, urion member performed work on union official’s home), the

facts set forth in the opinions leave open the possibility that the

employer did not know the union official was receiving the thing of

value, but this circumstance was neither raised nor addressed in those

cases. The Second Circuit's own precedent, United States v. Cody, 722

F.2d 1052, is similar in this respect, as discussed below. In the instant

case, on the other hand, it was conceded by the Government that “the

contractors in all these cases didn’t know that the defendant was

getting the money.” (COA App. 126).

8

3. In Arroyo v. United States, 359 U.S. 419, which

held that a union representative’s misappropriation of

money lawfully paid by an employer to a union welfare

fund was not a violation of the statute proscribing receipt

of a thing of value by a union representative from an

employer, the Court added the following caveat:

This is not to say that the statute requires mu-

tuality of guilt for the conviction of either the

employer or the representative of employees. An

employer might be guilty under subsection (a) if

he paid money to a representative of employees

even though the latter had no intention of accept-

ing. A representative might be guilty if he co-

erced payments from an innocent and unwilling

employer.

Id. at 423-24.

This eminently logical caveat concerning “mutuality of

guilt” has taken on a life of its own in the Second Circuit,

where in United States v. Cody, 722 F.2d 1055,‘ and now

in this case, the court appears to have interpreted the

caveat to mean that the employer need not know of a

‘ In Cody, the “thing of value” received by the union official was

chauffeuring services by the employer’s fully salaried employees, who

performed no other duties for the employer. 722 F.2d at 1056. In

rejecting Cody’s claim-that the prosecution had failed to prove that “the

employers had intentionally given the services of their employees” to

him, id. at 1059, the court of appeals cited Arroyo for the proposition

that “nothing in the statute ‘requires mutuality of guilt for the convic-

tion of either the employer or the representative of employees.” Jd.,

quoting Arreyo, 359 U.S. at 423. Although the Cody opinion supported

the inference that the employer knew the chauffeuring services were

being provided to the official, the court of appeals in the instant case

stated that nothing in Cody “compels this reading” and that Arroyo

“suggested otherwise.” (App. 10)

9

union official’s receipt of something of value in order for

the official to have received it from the employer, a conclu-

sion not supported by Arroyo’s context or the statute’s text.

An employer who does not know of any payments is

surely not violating Section 186(a)(1) by “payling],

lend[ing], or deliver[ing]” money to a union official. The

employer’s lack of guilt, however, is irrelevant to the

question of the union official’s guilt, because, regardless of

the employer’s liability, the union official is not in any

event receiving any payment from the employer. The court

of appeals, on the other hand, in a sort of inverted analy-

sis, reasoned that a requirement that the employer know

of the payment would conflict with Cody, and by extension

with Arroyo, because “mutuality of guilt” is not a prerequi-

site for conviction. (App. 10). This, as has been shown, is

an erroneous application of the caveat in Arroyo.

The “rule of Cody,” as the court of appeals has re-

ferred to it (App. 9), that transforms kickbacks extorted by

a union official from employees, after they cashed their

paychecks, into payments received from employers, who

had no knowledge of such kickbacks, conflicts with the

terms of statute and with language itself.

4, That a union official “received” a payment from an

employer who did not know of it makes even less sense

when one considers the statute’s purpose, i.e., to “protect

the collective bargaining process by eliminating the

corruptive influence of side payments by employers to

union representatives” and “to prohibit employee repre-

sentatives from engaging in extortion against their em-

ployers.” Haley v. Palatnik, 509 F.2d 1038, 1040-41 (2d

Cir. 1975); see also Arroyo v. United States, 359 U.S. at

425-26; U.S. Code Cong. & Admin. News, 86th Cong. Ist

10

Sess. 1959, Vol. Il, p. 2360 (“The intent of these [1959]

amendments to section 302(a) and (b) [of the Taft-Hartley

Act, 29 U.S.C. § 186,] is to forbid any payment or bribe by

an employer ... and to forbid the receipt of any such bribe

by any person, whether an individual, an officer or em-

ployee of a labor organization or a committee representing

employees”). If the employer does not know of a payment

to a union official, it seems plain that the employer can be

neither corrupting the official nor being extorted by him.

Here, the employees, unbeknownst to the employers,

kicked back a portion of their cashed paychecks to Peti-

tioner in order to keep working, conduct no doubt criminal,

but not under 29 U.S.C. § 186.° And the employees cannot

be deemed agents of the employer and conduits for unlaw-

ful payments — by, for example, agreeing with the em-

ployer to pass inflated wages on to a union official — since

the employers did not know of the payments.

5. “There are no constructive offenses; and before

one can be punished, it must be shown that his case is

plainly within the statute.” Fasulo v. United States, 272

U.S. 620, 629 (1926); see also Dowling v. United States,

473 U.S. 207, 213 (1985) (“Federal crimes, of course, ‘are

solely creatures of statute’”) (citation omitted); United

States v. Bass, 404 U.S. 336, 348 (1971) (“legislatures and

not courts should define criminal activity”).

But here the court of appeals has created a construc-

tive offense in concluding that “the employees’ receipt of

* Indeed, even if an employer had mere knowledge that a union

official was extorting kickbacks from an employee, it is doubtful that

the employer would be violating Section 186(aX1) by “payling],

lend{ing], or deliver[{ing]” money to a union official.

11

paychecks from the contractors, and the employees’

subsequent payments to Novak, were so closely related

that a jury could conclude that the transfers in this case,

like those in Cody, were actually between an employer and

a union representative.” (App. 11) In the absence of any

evidence that the employees’ receipt of paychecks from the

contractors and the employees’ subsequent payments to

Petitioner were any more “related” than is typical of the

receipt of payroll checks and disbursement of their pro-

ceeds, the court of appeals, not Congress, has defined a

new crime.

CONCLUSION

The petition for a writ of certiorari should be granted.

Dated: New York, New York

September, 2006

Respectfully submitted,

DIARMUID WHITE

Counsel of Record

BRENDAN WHITE

WHITE & WHITE

148 East 78th Street

New York, NY 10021

(212) 861-9850

Attorneys for Petitioner

App. 1

UNITED STATES COURT OF APPEALS

FOR THE SECOND CIRCUIT

SUMMARY ORDER

THIS SUMMARY ORDER WILL NOT BE PUBLISHED

IN THE FEDERAL REPORTER AND MAY NOT BE

CITED AS PRECEDENTIAL AUTHORITY TO THIS OR

ANY OTHER COURT, BUT MAY BE CALLED TO THE

ATTENTION OF THIS OR ANY OTHER COURT IN A

SUBSEQUENT STAGE OF THIS CASE, IN A RELATED

CASE, OR IN ANY CASE FOR PURPOSES OF COL-

LATERAL ESTOPPEL OR RES JUDICATA.

At a stated term of the United States Court of Appeals

for the Second Circuit, held at the Thurgood Marshall

United States Courthouse, at Foley Square, in the City of

New York, on the 6th day of July, two thousand and six.

Present:

HON. SONIA SOTOMAYOR,

HON. ROBERT A. KATZMANN,

Circuit Judges,

HON. RICHARD K. EATON,

Judge.*

UNITED STATES OF AMERICA,

Appellee,

v. No. 05-0108-cr

CHARLES NOVAK,

Defendant-Appellant.

* The Honorable Richard K. Eaton, Judge of the United States

Court of International] Trade, sitting by designation.

App. 2

Appearing for Appellant: DIARMUID WHITE, White &

White, New York, NY.

Appearing for Appellee: CHARLES S. KLEINBERG,

(Roslynn R. Mauskopf, United

States Attorney for the Eastern

District of New York, on the

brief, Peter A. Norling, of

counsel), Brooklyn, NY.

UPON DUE CONSIDERATION, it is hereby OR-

DERED, ADJUDGED, AND DECREED that the judgment

of the United States District Court for the Eastern District

of New York (Trager, J.) is AFFIRMED in part and RE-

VERSED in part, and the case is REMANDED for resen-

tencing.

By published opinion dated April 3, 2006, we affirmed

Novak’s convictions for unlawful receipt of labor payments

and for the RICO conspiracy and substantive RICO

violations. United States v. Novak, 443 F.3d 150, 156, 162

(2d Cir. 2006). We also reversed Novak’s convictions for

mail fraud and for making false statements under the

Employee Retirement Income Security Act. Jd. at 159, 162.

Finally, we ordered supplemental briefing on the impact of

our reversals on Novak’s convictions for money laundering,

conspiracy to commit money laundering, and “The No-

Show Jobs Conspiracy.” Jd. at 162. By letter dated May 2,

2006, Novak conceded that our reversals have no effect on

his other convictions, obviating any need for further

consideration of Novak's appeal.

For the foregoing reasons and those stated in our

earlier opinion, the judgment of the district court is AF-

FIRMED in part and REVERSED in part, and the case is

REMANDED for resentencing pursuant to United States v.

App. 3

Fagans, 406 F.3d 138, 140 (2d Cir. 2005). We also VACATE

the mandate that was erroneously issued on July 6, 2006,

and direct the clerk’s office to issue a new mandate, in due

course, consistent with this order.

FOR THE COURT:

ROSEANN B. MACKECHNIE,

CLERK

By: Richard Alcantara, Deputy Clerk

App. 4

UNITED STATES OF AMERICA, Appellee, v.

CHARLES NOVAK, Defendant-Appellant.

Docket No. 05-0108-cr

UNITED STATES COURT OF APPEALS

FOR THE SECOND CIRCUIT

443 F.3d 150; 2006 U.S. App. LEXIS 8187;

152 Lab. Cas. (CCH) P10, 640

November 18, 2005, Argued

April 3, 2006, Decided

COUNSEL: DIARMUID WHITE, White & White, New

York, NY, for Defendant-Appellant.

CHARLES 8S. KLEINBERG (Roslynn R. Mauskopf, United

States Attorney for the Eastern District of New York, on

the brief; Peter A. Norling, of counsel), Brooklyn, NY, for

Appellee.

JUDGES: Before: SOTOMAYOR and KATZMANN,

Circuit Judges, and EATON, Judge.*

OPINION BY: Richard K. Eaton

OPINION: EATON, Judge.

Defendant-Appellant Charles Novak (“Novak”) ap-

peals from a January 7, 2005 judgment of conviction

entered in the United States District Court for the Eastern

District of New York (Trager, J.) following a jury trial.

Novak was found guilty of offenses related to his position

as a union official, including the unlawful receipt of labor

payments (29 U.S.C. § 186(b)(1) (2000)), making false

* The Honorable Richard K. Eaton, Judge of the United States

Court of International Trade, sitting by designation.

App. 5

statements under the Employee Retirement Income

Security Act (“ERISA”) (18 U.S.C. § 1027 (2000)), mail

fraud (18 U.S.C. § 1341 (2000)), money laundering (18

U.S.C. § 1956(a) (2000)), racketeering (18 U.S.C. § 1962(c)

(2000)), and conspiracy (18 U.S.C. §§ 371, 1956(h) and

1962(d) (2000)). He was sentenced principally to 108

months’ imprisonment. Before us is Novak’s appeal of the

convictions for unlawful receipt of labor payments, mail

fraud, making false ERISA statements, and, consequently,

the conspiracy and Racketeering Influenced and Corrupt

Organization Act (“RICO”) charges. For the reasons set

forth below, we affirm the convictions for unlawful receipt

of labor payments and for the RICO conspiracy and

substantive RICO violations, reverse the convictions for

mail fraud and making false ERISA statements, and order

supplemental briefing regarding Novak’s remaining

convictions.

ie

Novak was the vice-president and business manager

of Local One of the International Union of Elevator Con-

structors (“Local One” or “the Union”). Among other

things, the Union’s members operate the temporary

elevators used to carry workers at construction sites in

New York City. Part of Novak’s job was to ensure that

employers (usually construction contractors) at the sites

complied with the Union’s collective bargaining agree-

ment. Novak received his salary directly from Local One.

At each job site, a “lead operator” supervised the other

Union operators and decided what hours they were to

work. In addition, at the close of each work week, the lead

operator filled out the employees’ time sheets, submitted

App. 6

them to a representative of the employer, and often dis-

tributed the weekly paychecks to the elevator operators.

The lead operator’s salary was paid by the contractor, not

the Union. Nevertheless, Novak determined which Union

members would act as lead operators.

The evidence at trial demonstrated that the submitted

time sheets regularly included hours not actually worked

by Union members. For a variety of reasons, however, the

contractors agreed to the submission of these “no-show”

hours. For example, the discovery that a contractor was

using non-union labor to operate the elevators might lead

to the issuance of a check to a Local One operator for

hours not actually worked. This payment would constitute

a settlement for the contractor’s violation of the collective

bargaining agreement. On other occasions, advance

agreements between the Union and a contractor would

allow the use of non-union labor, or permit a contractor to

employ Union elevator operators for fewer than the

contractually agreed-upon -hours. These agreements

required the contractor to pay the Union operators as if

they had worked those hours. In each case, a time sheet

would be submitted for a Local One member claiming the

hours, and the contractor would issue a check payable to

that member. Novak’s scheme took advantage of the

contractors’ payments by requiring the check’s recipient to

kick back a portion of the wages received for the no-show

hours. These kickback payments to Novak were made

without the contractors’ knowledge.

In order to gain the cooperation of the Union members

in his corrupt arrangement, Novak used his power to

assign jobs. Local One maintained hiring lists, which con-

tained the names of members who had been laid off or were

between jobs. According to Union practice, a preference was

App. 7

to be accorded Union members who had been on the list

for the longest period of time. In other words, those who

had been out of work the longest were to be the first hired.

Novak, however, with the assistance of his chosen lead

operators, would often ignore the hiring lists and instead

refer for work favored Union members whom he trusted to

participate in his kickback plan without objection. By

controlling the lead operators and the assigned Union

workers, Novak assured his receipt of the kickback pay-

ments. This activity served as the foundation for Novak’s

indictment and subsequent convictions at trial.

II.

“Tt [is] unlawful for an officer of a labor organization

to receive or accept anything of value from someone who

employs members of that labor organization.” United

States v. Cody, 722 F.2d 1052, 1057 (2d Cir. 1983); 29

U.S.C. § 186(b)(1). Likewise, it is also a crime for an

employer to “pay, lend, or deliver” anything of value to any

representative of his or her employees. 29 U.S.C.

§ 186(a)(1). “[A]Jny person’ who willfully violates this

section shall, upon conviction thereof, be guilty of a fel-

ony.” 29 U.S.C. § 186(d)(2). Novak argues that his convic-

tion under § 186(b)(1) should be overturned because the

contractors were not aware that he was receiving any of

the money paid to the operators. According to Novak, this

absence of knowledge by the contractors is fatal to the

Government’s charge. It is the Government’s position, and

that of the district court, that Novak’s receipt of a portion

of the contractors’ payments as kickbacks was alone

sufficient to justify a conviction under the statute. This

being the case, we must determine whether Novak’s

conviction for violating § 186(b)(1) can be sustained if the

App. 8

contractors were not aware that a portion of their pay-

ments to their employees was being received by a union

representative.

We first note that not all payments from an employer

to a labor representative are prohibited by § 186. For

instance, the statute provides an exception for certain

payments made by an employer for deposit in an employee

trust fund. See 29 U.S.C. § 186(c).’ Indeed, the Supreme

Court in Arroyo v. United States, 359 U.S. 419, 79 S. Ct.

864, 3 L. Ed. 2d 915 (1959), reversed the conviction of a

union official who deposited,-for his own account, checks

from an employer intended for deposit into such a fund.

While acknowledging that the actions of the union repre-

sentative were not devoid of criminality, the Court found

that the conduct did not amount to a violation of § 186.

Justice Stewart explained, “the checks were drawn by the

employers and delivered to the petitioner as payment to a

union welfare fund. Their receipt by [petitioner], therefore,

was not a violation of the federal statute, whether his

intent to misappropriate existed at the time of receipt or

was formed later.” Arroyo, 359 U.S. at 424. Thus, Arreyo

stands for the proposition that a lawful payment, lawfully

received, even if later converted, does not support a

conviction under § 186.

" The statute provides that:

The provisions of [§ 186] shall not be applicable . . . (5) with

- respect to money or other thing of value paid to a trust fund

established by such representative, for the sole and exclu-

sive benefit of the employees of such employer, and their

families and dependents.

29 U.S.C. § 186(c).

App. 9

Where employer payments received by a union repre-

sentative are not within a statutory exception, however,

the result has been different. See Cody, 722 F.2d at 1052.

In Cody, a jury convicted the defendant, the leader of a

local union, of “receiving illegal benefits from employers in

violation of 29 U.S.C. § 186(b)(1).” Jd. at 1055. The basis

for the conviction was defendant’s participation in an

arrangement whereby members of his union were paid by

their employers to perform construction-related work, but

instead spent their working hours acting as his personal

chauffeurs. Jd. at 1056. On appeal, defendant maintained

that the government failed to establish that the employers

intended to provide him with the services and, thus, that

his conviction should be reversed. In upholding the convic-

tion, this Court held “that nothing [in § 186] ‘requires

mutuality of guilt for the conviction of either the employer

or the representative of employees.’” Jd. at 1059 (quoting

Arroyo, 359 U.S. at 423). To convict the defendant, “it was

enough to show that the employers paid, lent or delivered

the chauffeurs and that [defendant] accepted their ser-

vices.” Id. Moreover, the Court rejected defendant’s argu-

ment that his case was outside the scope of the statute

because the services he received were from the employees

as opposed to the employers, by stating that “to hold that

these services came from other than the employers ...

would allow § 186 to be circumvented almost at will.” Jd.

at 1060. Thus, under Cody, even though the payment does

not violate the statute, its receipt by a labor representative

can provide the basis for a conviction under § 186(b)(1).

For this to be the case, however, we understand the rule of

Cody to be that such conviction requires a showing that

the transfer from the employer to the employee and the

transfer from that employee to the union official are so

closely related as to constitute a single transaction.

App. 10

Novak’s central argument is that Cody implicitly

recognizes that the employers knew that their employees

were providing personal chauffeur services. Nothing in

Cody, however, compels this reading. Rather, this Court’s

observation that mutuality of guilt is not a prerequisite for |

the conviction of either an employer or a labor representa-

tive suggests otherwise. Moreover, that observation is

consistent with the statute’s structure. While sections

186(a) and (b) state that the making and receiving of

certain payments are illegal without imposing an intent

requirement, section 186(d) provides that, for a statutory

violation to be found, an individual must have acted

willfully. See 29 U.S.C. § 186(d). Thus, because the em-

ployers in Cody did not willfully transfer something of

value to the union representative, they were not guilty of a

crime. Nonetheless, Cody’s willful receipt of the employees’

services, paid for by their employers, warranted his

conviction.

We find that the facts in Cody are significantly similar

to those presented here. The employers in Cody engaged in

the same conduct as the contractors in this case, i.e., they

issued checks to employees as compensation. In botk

cases, the employees then provided a union representative

with money or something of value resulting from that

compensation. In each case, the employers were the source

of the payment and the recipient was a union representa-

tive. The nature of the arrangements in both cases ren-

dered the transfer of the money or other benefit from the

contractor to the employee and then to the union official a

single transaction. That is, in Cody, this Court found that

there was no difference between the proven arrangement

and one in which the employers “simply paid the salary of

some person Cody had hired to be his chauffeur.” Cody,

App. 11

722 F.2d at 1060. Here, the kickbacks to Novak were

inextricably linked to the employees’ receipt of the pay-

checks from the contractors. Had the employees not

agreed, for whatever reason, to participate in Novak’s

scheme, they would not have received paychecks from the

contractors. Thus, the employees’ receipt of paychecks

from the contractors, and the employees’ subsequent

payments to Novak, were so closely related that a jury

could conclude that the transfers in this case, like those in

Cody, were actually between an employer and a union

representative. Because we find the scenario presented

here to be substantially the same as that found in Cody,

we affirm Novak’s conviction for receipt of unlawful labor

payments under § 186(b)(1).

III.

A.

Novak next disputes his conviction for mail fraud

under 18 U.S.C. § 1341. The foundation for the mail fraud

charge lay in Novak’s receipt, through the mail, of portions

of the money that the contractors paid Local One members

for the no-show hours. That is, the indictment charged

Novak with using the mail to defraud and to obtain the

property of the contractors. The statute prohibits using the

mail in furtherance of “any scheme or artifice to defraud,

or for obtaining money or property by means of false or

fraudulent pretenses, representations, or promises.” 18

U.S.C. § 1341. This Court has interpreted this statutory

language as requiring the government to show “proof of a

‘scheme or artifice to defraud,” which itself demands a

showing that the defendant possessed a fraudulent intent.

United States v. Starr, 816 F.2d 94, 98 (2d Cir. 1987)

(quoting 29 U.S.C. §§ 1341, 1343). While this language

App. 12

does not require the government to prove that the victims

of the fraud were actually injured, the government “must,

at a minimum, prove that defendants contemplated some

actual harm or injury to their victims.” Jd. (emphasis in

original). Indeed, “[o]nly a showing of intended harm will

satisfy the element of fraudulent intent.” Jd. Thus, the

question presented on this appeal is whether Novak, as a

part of the kickback scheme, contemplated harming the

contractors.

B.

According to the Government, the element of fraudu-

lent intent is satisfied by the contractors’ unwitting

participation in Novak’s plan. The Government’s conten- _

tion is that the contractors would never have issued

checks for the no-show hours had they known that a

portion of the money would be received by Novak, since

doing so would have exposed them to criminal liability for

unlawful payments to an employee representative under

29 U.S.C. § 186(a). Novak counters that no such harm to

the contractors was ever intended. Rather, the money

came from the Union members, thus suggesting that, if

any harm was intended, it was to the property rights of

the operators and not the contractors.

While not explicitly set out, Novak’s argument is that

there was insufficient evidence to find that he intended to

defraud the contractors. See Starr, 816 F.2d at 97. “We

review a claim of insufficient evidence de novo.” United

States v. Lewter, 402 F.3d 319, 321 (2d Cir. 2005) (citations

and internal quotation marks omitted). A defendant

seeking a reversal of the jury’s verdict on this ground,

however, “ ‘faces a heavy burden, because we must view

App. 13

the evidence in the light most favorable to the government

and ask only whether a rational jury could find beyond a

reasonable doubt’ that the appellant intended or contem-

plated some harm to the [contractors].” United States v.

Frank, 156 F.3d 332, 335 (2d Cir. 1998) (quoting United

States v. LaBarbara, 129 F.3d 81, 84 (2d Cir. 1997)).

~ While Novak’s burden is indeed heavy, when faced

with similar facts this Court has found the position urged

by the Government to be untenable. In Starr, the defen-

dants were owners of a bulk mail service. Customers of the

service would calculate the postage for their mail and then

issue a check to the defendants in that amount. Defen-

dants’ plan involved burying those pieces subject to higher

postage rates under the lower-priced bulk mail, thus

ensuring that the higher-priced mail would be sent at the

bulk rate and allowing the defendants to keep for them-

selves the difference in postage. See Starr, 816 F.2d at 96.

Given the relatively brief searches undertaken by Postal

Officials, the defendants’ scheme was, for a time, success-

ful. Once their plan was uncovered, the government

charged them with having violated the mail fraud statute

by defrauding their customers. Jd. at 95. In reversing the

jury's guilty verdict, this Court found that, although the

customers were unquestionably deceived, no evidence

indicated that the defendants intended to defraud them.

Id. at 99. In other words, while the customers’ assumption

that the money they paid to defendants would be directed

toward a lawful purpose did “implicitly constitute a part of

the bargain between the parties, that defeated expectation

alone [did] not affect the nature or quality of the services

{sic} that was the basis of the customers’ bargain.” Id. at

99-100. Therefore, this Court found that defendants

possessed no intent to defraud their customers because

App. 14

“the customers received exactly what they paid for.” Jd. at

98.

The Government argues that the holding in Starr has

been modified by this Court’s subsequent opinions in

United States v. Schwartz, 924 F.2d 410 (2d Cir. 1991),

United States v. Frank, 156 F.3d 332 (2d Cir. 1998), and

United States v. Walker, 191 F.3d 326 (2d Cir. 1999). For

the Government, these opinions permit a conviction under

the mail fraud statute if the victims would not have

entered into the transaction had they known of the decep-

tion. We examine each cited case in turn.

In United States v. Schwartz, the defendants bought

night vision goggles by falsely promising to abide by the

manufacturer’s explicit conditions that: (1) the merchan-

dise not leave the United States until the proper export

certificates were obtained; (2) the identity of the end user

be revealed; and (3) the merchandise not be sold in viola-

tion of the applicable arms export laws. See Schwartz, 924

F.2d at 414, 420-21. Despite their promises to fulfill these

conditions, the defendants smuggled the merchandise into

Argentina, provided the manufacturer with a false end

user, and sold the merchandise in violation of the arms

exports laws. Id. at 414. The defendants were then

charged with wire fraud under 18 U.S.C. § 1343’ for

“falsely representing, over interstate wires, that proper

arms export licenses would be obtained before the goggles

were shipped outside the United States.” United States v.

* The Schwartz Court noted that “[blecause the mail fraud and the

wire fraud statutes use the same relevant language, we analyze them

the same way.” Schwartz, 924 F.2d at 416 (citation omitted).

App. 15

Berg, 710 F. Supp. 438, 439 (E.D.N.Y. 1989).* Upon appeal

of the conviction, this Court found that the receipt of full

monetary compensation for the goods, and thus the avoid-

ance of pecuniary harm, did not necessarily mean that the

manufacturer, a government contractor, “received all it

bargained for.” Schwartz, 924 F.2d at 421. Indeed, the

Court found that the illegal export and sale of the mer-

chandise “deprived [the manufacturer] of the right to

define the terms for the sale-of its property,” and resulted

in a loss of business good will. Jd. Given the central nature

of the promises to the completion of the sale, the Court

held that defendants’ “misrepresentations went to an

essential element of the bargain.” Jd. Thus, even though

full payment was made for the merchandise, an intent to

harm the manufacturer was shown by the defendants’ acts

and the conviction was affirmed. Jd.

In United States v. Frank, the transaction involved a

contract between a sewage transport company and various

New York State municipalities for the removal of raw

sewage and its subsequent disposal at sea. Newly enacted

federal regulations required that the raw sewage be

disposed of 106 miles from the shore, a significant increase

from the previous distance of twelve miles. See Frank, 156

F.3d at 334-35. The contract called for the municipalities

to be charged based on the operating costs incurred for

moving the sewage the full distance. Id. at 335. The

evidence indicated that the municipalities “paid a pre-

mium for that service.” Jd. Nevertheless, the transport

company continually dumped the waste at distances far

less than those contracted for, thereby resulting in a

* When tried by the district court, the case appealed in Schwartz

was referred to as United States v. Berg.

App. 16

windfall equal to the difference between the contract price

and the actual operating costs. Jd. As in Starr, the defen-

dant argued that the municipalities had received exactly

what they bargained for, i.e., sewage removal. This Court

found the argument to be without merit given the pre-

mium paid by the municipalities for disposal of the waste

at the federally required distance. Jd. That is, compliance

with the regulations was an essential part of the bargain

and thus, unlike in Starr, the municipalities did not get

what they paid for. This Court, therefore, found the

evidence sufficient to establish that the transport company

possessed an intent to harm the municipalities. Jd.

Finally, in United States v. Walker, the defendants, an

immigration attorney and a language interpreter, chal-

lenged their convictions for mail fraud based on a scheme

in which they filed fraudulent work authorization and

asylum applications with the Immigration and Naturaliza-

tion Service on behalf of their clients. See Walker, 191 F.3d

at 331-32. As part of the plan, the clients signed blank

forms, which the defendants subsequently completed with

one of a series of stories previously found to garner a

successful result in the application process. Jd. Acknowl-

edging that “[the] case [bore] a surface resemblance to

United States v. Starr,” this Court went on to distinguish it

on its facts. Jd. at 335. Unlike the defendants in Starr, the

defendants in Walker “consistently misrepresented to their

clients the nature and quality of the legal services they

were providing.” Jd. This Court further noted that “in

Starr, the clients dealt with the defendants just as they

would have dealt with an honest business. [In Walker], the

clients were obliged to become parties to a dishonest scheme

and were required to sign false statements themselves.” Id.

at 336. Indeed, “the applications embroiled several of [the

App. 17

clients] in legal difficulty, forcing them to sign cooperation

agreements to avoid prosecution.” Jd. at 336 n.1. As a

result, this Court found that “there was sufficient proof

that Walker intended to harm his clients by charging

substantial fees for dishonest legal representation.” Jd. at

336. Thus, because the clients did not get what they

bargained for, this Court found that the defendants in-

tended to cause them harm. Jd.

We find unconvincing the Government’s argument

that the instant case falls within the ambit of Schwariz,

Frank, and Walker. An intent to harm a party to a transac-

tion cannot be found where the evidence merely indicates

that the services contracted for were dishonestly com-

pleted. That is the teaching in Starr. In Schwartz, Frank,

and Walker, an intent to harm was found because the

defendants’ compliance with the law in carrying out their

contractual obligations was a fundamental part of the

bargain between the parties. Although the Government

insists that the contractors would not have paid for the no-

show hours had they been aware that Novak would receive

a portion of the money, that hypothetical contention is

inadequate to support a finding of fraudulent intent. To

support a mail fraud claim, “the harm contemplated [in a

scheme to defraud] must affect the very nature of the

bargain itself. Such harm is apparent where there exists a

‘discrepancy between benefits reasonably anticipated

because of the misleading representations and the actual

benefits which the defendant delivered, or intended to

deliver.’” Starr, 816 F.2d at 98 (quoting United States v.

Regent Office Supply Co., 421 F.2d 1174, 1182 (2d Cir.

1970)). Here, as in Starr, the contractors received all they

bargained for, and Novak’s conduct did not affect an

essential element of those bargains. Without more, the

App. 18

evidence is insufficient to show the requisite intent to

harm. Because the Government failed to carry its burden

of establishing that Novak intended to harm the contrac-

tors, we find the evidence insufficient to support the jury’s

verdict regarding the mail fraud charge, and thus reverse

Novak’s conviction on that count.

IV.

A.

Next, Novak asserts that his convictions under 18

U.S.C. § 1027° on three counts of making false ERISA

statements should be overturned because the Eastern

District of New York was not a proper venue for these

charges. The statements that were the basis of these

counts were reports made pursuant to Title I of ERISA

relating to employee welfare and benefit plans. Specifi-

cally, it was alleged that Novak knowingly and intention-

ally reported in ERISA documents false information

regarding the no-show hours attributed to several Union

* Section 1027 provides that:

Whoever, in any document required by title I of the Em-

ployee Retirement Income Security Act of 1974 (as amended

from time to time) to be published, or kept as part of the re-

cords of any employee welfare benefit plan or employee pen-

sion benefit plan, or certified to the administrator of any

such plan, makes any false statement or representation of

fact, knowing it to be false, or knowingly conceals, covers

up, or fails to disclose any fact the disclosure of which is re-

quired by such title or is necessary to verify, explain, clarify

or check for accuracy and completeness any report required

by such title to be published or any information required by

such title to be certified, shall be fined under this title, or

imprisoned not more than five years, or both.

18 U.S.C. § 1027.

App. 19

members. At the close of the Government’s case, Novak

made a motion pursuant to Rule 29 of the Federal Rules of

Criminal Procedure’ for a judgment of acquittal on these

counts, asserting that venue in the Eastern District of

New York was improper because the evidence demon-

strated that the conduct on which the charges were based

took place solely in the Southern District of New York.’

The Government concedes that the Eastern District was

not a proper venue for the charges, but argues that the

venue defect was apparent on the face of the indictment,

and that Novak thus waived his right to contest venue by

failing to object prior to trial. The district court agreed and

denied Novak’s motion.

B.

“Both Rule 18 of the Federal Rules of Criminal Proce-

dure and the Constitution require that a person be tried

* Under the Federal Rules of Criminal! Procedure:

After the government closes its evidence or after the close of

all the evidence, the court on the defendant’s motion must

enter a judgment of acquittal of any offense for which the

evidence is insufficient to sustain a conviction. The court

may on its own consider whether the evidence is insufficient

to sustain a conviction. If the court denies a motion for a

judgment of acquittal at the~close of the government’s evi-

dence, the defendant may offer evidence without having re-

served the right to do so.

Fed. R. Crim. P. 29(a).

* Novak, having been acquitted of the other charges included in the

Rule 29(a) motion, the only offenses contained.in the motion relevant to

this appeal are those regarding the false ERISA statements.

App. 20

for an offense where that offense is committed.” United

States v. Cabrales, 524 U.S. 1, 5, 118 S.Ct. 1772, 141

L. Ed. 2d 1 (1998) (citations and internal quotation marks

omitted); see also United States v. Anderson, 328 U.S. 699,

703, 66 S. Ct. 1213, 90 L. Ed. 1529 (1946) (“The locus

delicti must be determined from the nature of the crime

alleged and the location of the act or acts constituting it.”).

Indeed, the Constitution protects a criminal defendant’s

right to proper venue in two places: Article III; and the

Sixth Amendment.® An example of the strength of that

protection is manifested in the principle that, when an

indictment charges a defendant with multiple counts,

“yenue must be proper with respect to each count.” United

States v. Beech-Nut Nutrition Corp., 871 F.2d 1181, 1188

(2d Cir. 1989).

“The constitutional underpinning and importance of

proper venue dictate that waiver of objections to venue

should not be readily inferred.” United States v. Price, 447

F.2d 23, 27 (2d Cir. 1971). That being the case, this Court

has found a waiver of the right to challenge venue in a

” Pursuant to Rule 18 of the Federal Rules of Criminal Procedure:

Unless a statute or these rules permit otherwise, the gov-

ernment must prosecute an offense in a district where the

offense was committed. The court must set the place of trial

within the district with due regard for the convenience of

the defendant and the witnesses, and the prompt admini-

stration of justice.

Fed. R. Crim. P. 18.

* Article III, § 2, cl. 3 of the Constitution provides that “the Trial of

all Crimes ... shall be held in the State where the said Crimes shall

have been committed.” Similarly, the Sixth Amendment requires that

“in all criminal prosecutions, the accused shall enjoy the right to a

speedy and public trial, by an impartial jury of the State and district

wherein the crime shall have been committed.”

App. 21

criminal trial only under extraordinary circumstances.

One such circumstance is “when the indictment or state-

ments by the prosecutor clearly reveal [a venue] defect but

the defendant fails to object.” Id.; see also United States v.

Khan, 821 F.2d 90, 93 (2d Cir. 1987) (finding waiver in

light of a clear defect in venue apparent on the face of the

indictment); United States v. Levasseur, 816 F.2d 37, 45 (2d

Cir. 1987) (agreeing with the district court that defendant

had waived his right to contest venue at the close of

evidence where “the indictment gave clear notice of venue

defects.”). Therefore, even though it is afforded significant

Constitutional protection, a defendant’s right to proper

venue is a personal defense subject to waiver. See United

States v. Calderon, 243 F.3d 587, 590 (2d Cir. 2001).

These cases establish a clear rule concerning the

timeliness of a defendant’s objection to venue in a criminal

action. When the defect in venue is apparent on the face of

the indictment, a defendant waives the right to contest the

issue if he or she fails to object prior to trial. It follows

that, when a venue defect is not clear on the face of the

indictment, a defendant may raise the objection for the

first time in a motion for acquittal at the close of the

government’s evidence.

With respect to the ERISA charges, Novak’s indict-

ment contained a narrative paragraph stating that the

unlawful activity took place “within the federal judicial

districts listed below and elsewhere.” In addition, this

portion of the indictment contained a grid, with a column

headed “Federal Judicial District.” For each charge, the

grid listed the Southern District of New York as the

Federal Judicial District. Thus, a fair reading of the Novak

indictment, taking into account the information contained

in the narrative as well as that contained in the grid, is

App. 22

that the filing of the false reports took place in “the South-

ern District of New York and elsewhere.”

In support of its contention that this language demon-

strated an obvious venue defect, the Government points to

a Ninth Circuit case, United States v. Johnson, 297 F.3d

845 (9th Cir. 2002). In Johnson, the indictment bore some

similarity to that charging Novak. There, a narrative

paragraph and a grid were used to charge the defendant

with wire fraud under 18 U.S.C. § 1543. Johnson, 297 F.3d

at 876. The narrative paragraph stated that the acts

constituting the wire fraud took place “in the District of

Arizona and elsewhere.” Jd. The grid then set out the

origin and destination of each offending telephone call

under columns marked “Call From,” and “Call To.” Jd. As

to eight of the counts, an examination of the information

in these columns revealed that the acts constituting the

crimes charged took place entirely outside the District of

Arizona. Jd. Under these facts, the Ninth Circuit held that

the venue defect was apparent on the face of the indict-

ment and noted that “[i]t is clear from [the] grid that

certain counts did not involve any activity within the

District of Arizona, as certain counts did not list Arizona

as either the site of origination or the site of destination.”

Id. at 861. Put another way, because the indictment

contained all of the facts relating to the situs of the crimes

charged, it was evident that there was no relation between

the alleged acts and the District of Arizona.

There are important differences between the indict-

ment in Johnson and the one at issue here. In Johnson, all

of the information relating to the location of the alleged

acts was contained in the “Call From” and “Call To”

columns in the indictment. Here, there was no such

clarity. That is, nothing in Novak’s indictment precluded

App. 23

the conclusion that at least some of the charged criminal

activity occurred in the Eastern District of New York.

Indeed, because Novak’s Union activities included conduct

in both the Southern and Eastern Districts of New York,”

he could have reasonably believed that the “and else-

where” language meant that the Government intended to

produce some evidence at trial linking the ERISA crimes

to both the Southern and Eastern Districts. Thus, the

venue defect was not evident on the face of the indictment.

As a result, we hold that Novak’s venue objection

made at the close of the Government’s evidence was timely ©

and, as the Government concedes, meritorious. We thus

reverse, for improper venue, Novak’s convictions for

making false ERISA statements in violation of 18 U.S.C.

§ 1027.

V.

Novak was also convicted of conspiracy to violate the

RICO statute, as well as substantive RICO violations. The

mail fraud conviction, and the convictions for receipt of

unlawful labor payments, served as the predicate acts

required to prove a pattern of racketeering activity under

18 U.S.C. § 1962(c). See 18 U.S.C. § 1961(5) (defining a

“pattern of racketeering activity” as requiring “at least two

acts of racketeering activity.”). Because we affirm Novak’s

multiple convictions for receiving unlawful labor payments,

the RICO conspiracy and substantive RICO convictions are

* Novak was responsible for territory that included the East Side of

Manhattan, Staten Island, and part of Queens. Thus, part of his job

was in the Eastern District of New York, and part of it was in the

Southern District of New York.

App. 24

unaffected by the mail fraud reversal. We therefore affirm

these convictions.

VI.

The briefing before the Court as to how our reversals

may affect Novak’s convictions on other counts was neces-

sarily limited. Therefore, we direct the parties to submit

supplemental briefs addressing the question of whether

our reversals have eliminated the underlying acts required

for Novak’s convictions for money laundering (Count 29),

conspiracy to commit money laundering (Count 36), and

“The No-Show Jobs Conspiracy” (Count 3).

VII.

Novak was sentenced on December 1, 2004, prior to

the Supreme Court’s decision in United States v. Booker,

543 U.S. 220, 125 S. Ct. 738, 160 L. Ed. 2d 621 (2005). At

sentencing, Novak objected under Blakely v. Washington,

542 U.S. 296, 124 S. Ct. 2531, 159 L. Ed. 2d 403 (2004), to

the compulsory application of the Sentencing Guidelines

and thus preserved the error. See United States v. Fagans,

406 F.3d 138, 140 (2d Cir. 2005). Although we agree with

the parties that this case must ultimately be returned to

the district court for resentencing, we await ordering

remand until we have considered the parties’ supplemen-

tal briefs.

————=—————EEE

Vil.

We have considered Novak’s remaining claims and

find them to be without merit.

App. 25

IX.

For the foregoing reasons, we AFFIRM Novak’s

convictions for unlawful receipt of labor payments, RICO

conspiracy, and substantive RICO violations. We RE-

VERSE the convictions for mail fraud and for making false

ERISA statements. Finally, the Office of the Clerk of Court

will issue a scheduling order for the submission of the

supplemental briefs referenced above.