United States v. Eugene Boffa, Sr., Robert Boffa, Sr., Louis S. Kalmar, Sr., and Chandler Lemon

Citations: 688 F.2d 919; 111 L.R.R.M. (BNA) 2901; 1982 U.S. App. LEXIS 16333Docket: 81-2660

Court: Court of Appeals for the Third Circuit; August 25, 1982; Federal Appellate Court

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Eugene Boffa, Sr., Robert Boffa, Sr., Louis Kalmar, Sr., and Chandler Lemon appealed their convictions for racketeering offenses under 18 U.S.C. § 1962(c, d) and mail fraud under 18 U.S.C. § 1341. The appeal followed an eleven-count indictment that included co-defendants Francis Sheeran, David Mishler, and Robert Rispo. Key charges included conspiracy to violate the Racketeer Influenced and Corrupt Organizations Act (RICO) and substantive RICO violations, alongside specific counts of mail fraud against Eugene Boffa, Sr. and Chandler Lemon.

The court outlined the RICO statutory framework, emphasizing that it is unlawful for individuals associated with an enterprise to engage in racketeering activities. The definition of "enterprise" encompasses both formal legal entities and informal groups. The indictment detailed sixty-two racketeering acts stemming from violations of federal statutes related to mail fraud and labor leasing. It described a criminal enterprise operated through nine labor leasing corporations and one vehicle leasing corporation, with the appellants allegedly controlling and participating in these operations for financial gain.

The indictment outlines various predicate acts, including violations of mail fraud, the Taft-Hartley Act, and 18 U.S.C. § 1503 (obstruction of justice). Specifically, Eugene Boffa, Sr. and Chandler Lemon are charged with ten counts of mail fraud related to a "labor switch" at the Inland Container Corporation in Newark, Delaware. The scheme involved transferring labor leasing contracts from a controlled corporation to another ostensibly independent entity, which was also controlled by the defendants. This switch aimed to secure the cooperation of a union official by providing him benefits, thereby depriving employees of their rights under the National Labor Relations Act and existing collective bargaining agreements.

Between 1971 and 1977, Eugene Boffa, Sr. controlled Universal Coordinators, Inc. (UCI), which leased truck drivers represented by the Teamsters Local 326. Following a union election in November 1976, Boffa and co-defendant Francis Sheeran planned to terminate UCI’s contract and replace it with a new company, Preferred Personnel, which Boffa established. Lemon misrepresented his connection to Boffa and UCI when offering drivers to Inland, claiming they would demand lower wages. This resulted in UCI drivers losing their jobs after Inland accepted Preferred Personnel’s offer.

Additionally, Robert Boffa, Sr. faces nine counts of mail fraud related to a similar labor switch at Continental Can Corporation in Van Wert, Ohio. From 1967 to 1975, UCI provided drivers to Continental Can but faced contract termination after a fee dispute. Boffa then redirected the contract to Country Wide Personnel (CWP), which he controlled, intending to charge higher fees to Continental while paying the Teamsters Local 908 drivers less. The indictment indicates that mail was used to execute these schemes, particularly through termination notices sent to UCI drivers.

Robert Boffa, Sr. instructed co-defendants Mishler and Rispo to inform UCI drivers at the Continental Plant of their job loss due to contract termination. Mishler and Rispo, representing CWP, offered employment to these drivers at reduced wages while denying any affiliation between CWP and UCI. UCI subsequently sent termination notices to the drivers, which served as the basis for mail fraud allegations. The indictment claims that former UCI employees, now working for CWP at the Van Wert, Ohio facility, were deprived of economic benefits under the NLRA and their collective bargaining agreement with Local 908.

The indictment further alleges that Eugene Boffa, Sr. and Louis Kalmar, Sr., co-owners of UCI, provided Francis Sheeran with a 1975 Lincoln Continental for a month free of charge, intending to influence his actions as president of Teamsters Local 326, in violation of 29 U.S.C. 186. They also allegedly agreed to sell the vehicle to Sheeran below market value to further influence him.

In a separate charge, Eugene Boffa, Sr. is accused of submitting false records from All Purpose Leasing, Inc. to a grand jury, violating 18 U.S.C. 1503. The jury convicted all four appellants on conspiracy and substantive RICO counts, with Eugene Boffa's convictions stemming from ten mail fraud violations related to the labor switch at Inland Container, five Taft-Hartley violations involving Sheeran, and one obstruction of justice violation. Chandler Lemon's convictions were based on ten mail fraud violations linked to the Inland switch, while Robert Boffa faced five mail fraud violations at Continental Can, and Louis Kalmar had four Taft-Hartley violations related to the automobile lease.

The jury determined that the appellants had ownership interests in the corporations implicated in the indictment, subjecting these interests to forfeiture under 18 U.S.C. 1963(a). Following the verdict, the district court sentenced the appellants to prison terms ranging from eight to 20 years, imposed fines up to $47,000, and ordered the forfeiture of their corporate interests. The appellants argue that the labor switches were merely unfair labor practices under the NLRA and should not constitute mail fraud crimes under 18 U.S.C. 1341.

The mail fraud statute, 18 U.S.C. § 1341, imposes criminal penalties for schemes to defraud or obtain money or property through false pretenses. The Supreme Court has established that this statute is not limited to traditional definitions of fraud, leading to a broad interpretation that encompasses any fraudulent schemes involving the postal system. Most courts have rejected the notion that § 1341 only targets schemes defrauding individuals of tangible assets, recognizing that it also applies to schemes that deprive individuals of intangible rights or interests, such as loyalty from an attorney, honest service from employees, or privacy rights. Legislative history suggests that the statute's aim is to address schemes that ultimately result in the transfer of economic value to the defendant. The Fourth Circuit has emphasized that the statute covers any scheme contrary to public policy and ethical standards. While the theory of prosecuting mail fraud based on intangible rights is acknowledged, it is noted that the application of this theory must remain within reasonable limits as intended by Congress, with the legislative history providing limited guidance on specific intangible rights.

Congressional guidance exists in statutory interpretation, indicating that courts typically do not give significant weight to the intentions expressed by later Congresses. However, the Supreme Court acknowledges that examining subsequent legislative actions can clarify vague statutory provisions. Courts may consider later Acts to extend the ambiguous language of earlier statutes, particularly when assessing the scope of intangible rights in mail fraud cases.

An analysis of the language and legislative history of a federal statute is essential to determine its applicability in a mail fraud prosecution. Specifically, courts are cautious about allowing mail fraud prosecutions for schemes that undermine the intent of Congress regarding the rights in question. 

In the case at hand, the indictment claims that the appellants deprived employees of economic benefits tied to rights guaranteed by the National Labor Relations Act (NLRA), specifically the rights to self-organization, collective bargaining, and mutual aid. The appellants argue that this constitutes a deprivation of "intangible rights" and assert that violations of NLRA Section 7 should not serve as a basis for mail fraud prosecution. Conversely, the Government contends that the indictment focuses on schemes that deprive employees of economic interests, which aligns with traditional mail fraud statutes, thus asserting that the appellants’ actions fall within the legal framework for prosecution.

Appellants argue that the indictment accurately describes a scheme that deprives employees of their rights under the National Labor Relations Act (NLRA) rather than tangible property or money. The government’s framing of these rights as "economic benefits" does not change their fundamental nature; the rights themselves are intrinsically linked to economic value. The indictment's essence raises the question of whether depriving employees of NLRA Section 7 rights falls under the mail fraud statute, necessitating an analysis of congressional intent behind the NLRA. 

Key policies of the NLRA include its remedial focus and the authority of the National Labor Relations Board (NLRB) in handling unfair labor practices. Historical context shows that earlier drafts of the NLRA suggested criminal penalties for unfair practices, but the final version emphasizes remedial actions instead, allowing the NLRB to issue orders for employers to cease unfair practices and provide affirmative remedies such as employee reinstatement. The Supreme Court has reinforced the NLRA’s remedial purpose, clarifying that it is not intended to impose punitive measures but to protect employee rights and address grievances without criminal penalties or fines.

The principles from Republic Steel are pertinent, emphasizing that the National Labor Relations Board (NLRB) cannot impose punitive measures, reflecting Congress's intent for the National Labor Relations Act (NLRA) to be remedial rather than punitive. Legislative debates on the Taft-Hartley amendments in 1947 reveal that Congress aimed to ensure violations of civil provisions under the NLRA would not incur criminal penalties. Senator Taft clarified that the term "unlawful" in section 303(a) does not imply criminal prosecution under federal conspiracy laws, but rather establishes civil liability for damages without criminal consequences. The absence of criminal sanctions in section 8 of the NLRA further indicates that Congress did not intend for employers to face criminal liability for unfair labor practices. Allowing criminal prosecutions based on unfair labor practices, such as mail fraud, would introduce penalties that the NLRA was designed to avoid. The excerpt references United States v. DeLaurentis and United States v. Bailes, which both rejected criminal prosecutions linked to unfair labor practices, reinforcing the legislative history's indication that criminal penalties were not intended under the NLRA. The court expresses a shared reluctance to permit criminal charges based on unfair labor practices, underscoring that Congress did not intend to broadly expand criminal liability in labor relations.

The NLRA grants the NLRB exclusive authority to determine unfair labor practices, a principle emphasized by the Supreme Court to ensure a uniform federal labor law developed by an expert agency. The overarching interest in a consistent interpretation of the NLRA suggests that Congress did not intend for schemes defrauding employees of Section 7 rights to fall under the mail fraud statute. The district court and jury were required to resolve statutory questions meant for the NLRB, specifically whether the actions in question constituted unfair labor practices. The court provided jury instructions on what constitutes such a practice, detailing the obligations of employers regarding collective bargaining agreements, including notification and negotiation requirements. The court noted that issues regarding the existence and violation of Section 7 rights are complex legal questions not suitable for jury resolution in a criminal context. Consequently, it is concluded that Congress did not intend for the mail fraud statute to apply to unfair labor practices, indicating that schemes depriving employees of Section 7 rights do not constitute a crime under this statute.

The indictment claims that the appellants unlawfully deprived employees of economic benefits derived from their collective bargaining agreement, including wages and seniority rights. This conduct is considered fraud under the mail fraud statute, as the benefits stem from a contractual rather than a statutory basis, despite being linked to rights under the National Labor Relations Act (NLRA). The mail fraud statute prohibits schemes that use deception to deprive individuals of tangible property interests. 

Additionally, Eugene Boffa, Sr. and Chandler Lemon are accused of depriving employees at the Inland Container plant of the honest services of Francis Sheeran, the elected president of Teamsters Local 326. Courts have upheld mail fraud convictions for similar deprivations of rights, including the obligation of employees to provide loyal services. 

Union officials have a fiduciary duty to their members, as established by Section 501(a) of the Labor Management Disclosure Act of 1959 (LMDRA), which mandates that union officials must act in the best interests of their organization and members, avoiding conflicts of interest. This fiduciary responsibility extends beyond financial transactions, affirming the members' right to honest and faithful services from union officials as a matter of federal law.

The LMDRA does not exclude the right to prosecute under the mail fraud statute for schemes to defraud union members of their intangible rights, despite being the sole source of such rights. The legislative history of the LMDRA does not indicate that Congress intended to exempt this intangible right from mail fraud prosecution, contrasting with the NLRA, which has a structured remedial purpose. Section 501(a) of the LMDRA sets a duty standard for union officials and allows union members to sue for breaches, suggesting that remedies are not exclusive. There are no federal regulations that comprehensively govern union-member relations, and the LMDRA provides no sanctions against third parties that influence union officials' fiduciary duties. Thus, schemes defrauding employees of their union officials' honest services do fall under the mail fraud statute.

Appellants Eugene Boffa, Sr., Robert Boffa, Sr., and Chandler Lemon argue that since the mail fraud allegations relate to actions that might constitute unfair labor practices, the indictment should be dismissed under the NLRB's primary jurisdiction doctrine. They claim that if their actions are arguably prohibited by the NLRA, it precludes enforcement of federal statutes against that conduct. The Supreme Court's Garmon decision outlines that when actions are arguably covered by the NLRA, state and federal courts should defer to the NLRB to prevent interference with national labor policy. However, the question remains unresolved whether this doctrine displaces a federal criminal statute that independently prohibits conduct also covered by the NLRA. Appellants assert that the primary jurisdiction principle is not confined to state regulations but extends to other jurisdictions as well.

Appellants argue that the NLRA's congressional policy on labor dispute regulation could be compromised by conflicting federal regulations, suggesting that this should prevent mail fraud prosecutions relating to NLRA-prohibited activities. However, this argument is flawed upon closer inspection of the primary jurisdiction doctrine. First, the doctrine, rooted in constitutional principles of federal supremacy, indicates that allowing states to regulate conduct within the scope of federal regulation poses a risk of conflict between federal and state authority. This concern does not apply when a federal criminal statute potentially overlaps with NLRB jurisdiction. Second, the primary jurisdiction doctrine is judicially created, derived from the Supreme Court's interpretations of congressional intent. Courts must determine whether Congress intended for the NLRA to supersede state regulations on "arguably prohibited" conduct. When both the NLRA and another federal statute regulate the same conduct, the focus shifts to whether the NLRA implies a repeal of existing federal criminal laws. The Supreme Court has consistently shown a reluctance to accept implied repeals unless there is a clear conflict. No evidence suggests Congress intended to repeal federal laws regulating criminal conduct in labor matters, and the NLRA's legislative history indicates it was not meant to displace laws regarding fraud or violence.

The bill's procedure is less effective than existing law in preventing fraud and violence by unions or their members. There is no indication in the language or legislative history that federal criminal statutes should not be used against union members or officials who employ violence to achieve collective bargaining objectives. The mail fraud statute’s applicability does not conflict with the National Labor Relations Act (NLRA) since the overlap between the two statutes is limited. The mail fraud statute criminalizes the use of mail to further any fraudulent scheme, while the NLRA addresses conduct that interferes with employees' statutory rights. Thus, engaging in conduct that may be "arguably prohibited" under the NLRA does not exempt individuals from mail fraud prosecution.

The court emphasized that previous cases support the notion that the NLRA does not completely preempt the application of federal criminal statutes like the mail fraud statute. As a consequence of these findings, the convictions of Eugene Boffa, Sr. and Chandler Lemon for mail fraud must be reversed and remanded for a new trial due to potential reliance on section 7 allegations, which are not applicable to the mail fraud counts. The court references several cases to support its conclusions regarding the proper use of statutes and the necessity for retrial.

Each appellant was convicted of conspiracy and substantive RICO counts. Robert Boffa, Sr. and Chandler Lemon's RICO convictions relied solely on mail fraud predicate acts. Due to potential jury reliance on section 7 allegations, their RICO convictions will be reversed, and a new trial will be ordered for the relevant counts. Conversely, Eugene Boffa, Sr. and Louis Kalmar, Sr.'s RICO convictions remain intact as they are supported by additional predicate acts, including multiple violations of 29 U.S.C. § 186(a) (Taft-Hartley) and an obstruction of justice charge under 18 U.S.C. § 1503. 

The jury determined that Boffa and Kalmar committed four Taft-Hartley violations by causing UCI to provide a month’s free use of a vehicle to Francis Sheeran, intending to influence his actions as President of IBT Local 326. The indictment detailed seven racketeering acts corresponding to APL’s receipt of payments and the free use period. While appellants do not dispute the Taft-Hartley violations, they argue that only one violation should apply under the circumstances. The court addressed this multiplicity issue, affirming that each delivery of value to a union official constitutes a separate violation under the statute. Indirect payments are also considered separate violations, as supported by existing case law.

Appellants' challenge to the indictment is deemed meritless as it properly alleges that UCI provided four "things of value" to Sheeran by paying APL for the use of a 1975 Lincoln. Their primary concern is the sufficiency of evidence for multiple Taft-Hartley violations necessary to meet the RICO plurality requirement. Testimony revealed that Sheeran was led to believe he could use vehicles from Boffa at no charge. The 1975 Lincoln was purchased with UCI funds but titled to APL, indicating it was intended for Sheeran’s use. Evidence showed conflicting lessee designations, with UCI listed in one document and Sheeran in another. While dual invoices were issued to both UCI and Sheeran, APL's bookkeeper noted that no invoices were processed for Sheeran. Monthly payments from UCI to APL for the Lincoln were credited to UCI’s account, and Sheeran's name appeared in APL records only after a subpoena. 

Appellants argue that no jury could reasonably conclude that these payments represented distinct Taft-Hartley violations, emphasizing Sheeran's lack of understanding of the payment arrangement. However, the inquiry should focus on what was delivered by the appellants, not what Sheeran perceived. Moreover, the appellants claim that the payments were merely sham transactions between UCI and APL, designed to disguise a gift of free use of the vehicle to Sheeran.

Appellants argue that lease payments for an automobile cannot be considered "things of value" since UCI essentially owned the car, contending that UCI's provision of the car to Sheeran for four months represents a single "thing of value" rather than four separate instances. The Government counters that each monthly lease payment by UCI to APL represents a distinct "thing of value" acquired for one month's use of the car, and that this interpretation is valid for jury consideration. Key points supporting the Government's position include the legal separation of UCI and APL as distinct entities, monthly billing practices, confirmed payments made by UCI, and APL's accounting of these payments as receivables. The jury could reasonably conclude that failure to make these payments would have resulted in the termination of Sheeran's use of the vehicle, supporting the classification of each payment as a separate "thing of value" under 29 U.S.C. 186(a). 

The district court's jury instructions were deemed adequate, clarifying that each delivery must be proven beyond a reasonable doubt to establish multiple violations of the Taft-Hartley Act. The court defined "deliver" and "thing of value" sufficiently for the jury to determine if the monthly payments constituted separate deliveries. Kalmar’s challenge regarding insufficient evidence for his involvement in the payments was reviewed and found lacking, as the evidence suggested he directed each payment due to his ownership stake in UCI, awareness of Sheeran's use of the car, and his signature on one of the checks. Additional challenges to their RICO convictions were also raised by the appellants.

Appellants contend that the district court erred by not instructing the jury that a conviction for RICO conspiracy requires each appellant to have personally agreed to commit two predicate acts as outlined in the indictment. They cite United States v. Elliott, which establishes that an individual must objectively manifest an agreement to engage in enterprise affairs through two or more predicate crimes for a RICO conspiracy conviction. The district court's jury instruction required a finding beyond a reasonable doubt that a defendant knowingly became a member of the conspiracy and defined "pattern of racketeering" as committing at least two alleged racketeering acts. The court found no significant difference between the requested instruction and what was given, concluding there was no error in the jury instruction.

Additionally, appellants argue that the RICO conspiracy charge in the indictment violates the ex post facto clause of the Constitution, claiming the indictment allowed for convictions based on agreements formed before RICO took effect. They reference United States v. Brown, which held that indictments for conspiracies prior to RICO’s effective date could violate the ex post facto principle without proper jury instructions. However, the district court instructed the jury that a conviction could only be based on conspiracies existing after July 14, 1975, ensuring that the verdict was not based on pre-RICO conspiracies. Consequently, the court found no reversible error regarding this issue.

Appellants argue that the district court erred by not instructing the jury that the predicate acts in the indictment must be interconnected to establish a "pattern of racketeering activity" for a RICO conviction. They claim this omission constitutes plain error under Fed. R.Civ. P. 52(b). However, since appellants do not assert that the predicate acts were unrelated, they cannot demonstrate prejudice from the lack of instruction. Kalmar contends that a Taft-Hartley violation should be considered a lesser included offense of a substantive RICO violation, but the court disagrees, citing that Congress generally does not allow multiple convictions for greater and lesser offenses arising from the same criminal conduct. While the Blockburger test applies, it is merely a rule of statutory construction, and precedent shows that Congress intended for RICO convictions to coexist with convictions for the predicate crimes. The court holds that a lesser included offense instruction requested by Kalmar would contradict congressional intent, affirming the district court's rejection of this instruction. Finally, Eugene Boffa, Sr. claims ineffective assistance of counsel due to his attorney cross-examining a witness who had previously received immunity, but this issue was not raised in the district court, leading the court to decline consideration on direct appeal.

Appellants challenged the judgments of forfeiture on multiple grounds, claiming these objections had been raised in the district court; however, the record did not support this assertion. The court determined that the arguments related to special interrogatories should not be raised for the first time on appeal. One significant point of discussion was that the indictment allegedly failed to specify the extent of the appellants' interests in the forfeited properties, as required by Federal Rule of Criminal Procedure 7(c)(2). The indictment stated that "all (of each appellant's) control and ownership" in the specified corporations was subject to forfeiture. The court rejected the appellants' claim of deficiency, aligning with the Second Circuit's interpretation that such a general allegation meets the requirement of the rule.

Other contentions from the appellants included the district court’s omission of certain jury instructions, issues with special interrogatories, and improper prosecutorial comments. The court found no reversible error in these claims. The convictions of Eugene Boffa, Sr. and Chandler Lemon for seven counts of mail fraud were reversed, and the case was remanded for a new trial on specific counts. Additionally, the conspiracy and substantive RICO convictions of Robert Boffa, Sr. and Chandler Lemon were reversed, with remand for retrial on related counts. The judgments of forfeiture resulting from these convictions were vacated. The court affirmed Eugene Boffa, Sr.'s RICO convictions based on the jury's findings of racketeering activities, but directed the district court to vacate his sentence concerning mail fraud allegations and reconsider the forfeiture order in light of the appeal's outcome.

RICO convictions against Louis Kalmar, Sr. are affirmed based on four violations of 29 U.S.C. § 186(a), but the forfeiture judgments against him are vacated for the district court to reassess their implications following this appeal. Rispo pleaded guilty before trial, while Mishler's case was dismissed. Sheeran was convicted in a separate trial and is appealing. Eugene Boffa, Sr. and Chandler Lemon were convicted of seven counts of mail fraud, with Boffa acquitted of predicate acts related to a labor switch at Crown Zellerbach Corporation. The indictment includes obstruction of justice allegations against Boffa based on falsified records. Kalmar argues that jury instructions led to a misinterpretation regarding Sheeran's lease obligation and claims harmful error, but the court finds that the jury's focus was appropriately directed by special interrogatories and instructions to consider each offense and defendant separately. Kalmar also requests a new trial based on perceived prejudicial spillover from the labor switch evidence, but the court believes sufficient safeguards were in place to mitigate this concern.