United States v. Charles T. Pieper

Citations: 854 F.2d 1020; 9 Employee Benefits Cas. (BNA) 2697; 1988 U.S. App. LEXIS 11530; 1988 WL 86571Docket: 87-1589

Court: Court of Appeals for the Seventh Circuit; August 12, 1988; Federal Appellate Court

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Charles T. Pieper, previously Chief Executive of Teamsters Local 344 and its health and pension funds, was convicted by a jury on multiple charges, including soliciting and accepting kickbacks in violation of 18 U.S.C. § 1954, filing false income tax returns under 26 U.S.C. § 7206(1), conspiracy to solicit kickbacks and defraud the government under 18 U.S.C. § 371, and conducting the affairs of an employee pension fund through racketeering activity in violation of the Racketeer Influenced and Corrupt Organizations Act (RICO). Pieper appealed his conviction, arguing that: (1) § 1954 was not applicable to his actions and that the evidence was insufficient for a conviction under that statute; (2) the evidence was inadequate to support his RICO conviction; and (3) the district court erred in refusing to dismiss seven counts of the indictment due to multiplicity. He also challenged the district court's decision to impose certain prosecution costs, including jury costs and witness expenses. The appellate court affirmed his convictions on RICO and § 1954 claims and the multiplicity issue but reversed the assessment of court reporter fees. The case involved Pieper's role in transferring the pension fund's assets to Marshall and Ilsley Bank, where he and a bank vice president, Gary Landru, orchestrated a scheme to charge borrowers a kickback from mortgage loans, sharing the proceeds.

In July 1981, Landru sought two mortgage loans: a $280,000 commercial mortgage from Bruch Brothers and a $92,000 mortgage from Mr. and Mrs. Dale Bluvstein. The Bruch loan closed on August 13, 1981, while the Bluvstein loan did not. Landru received kickbacks totaling $11,160—$8,400 from Bruch Brothers and $2,760 from the Bluvsteins—which he split with Pieper. On August 20, 1981, the Fund's board rescinded the delegation of investment responsibilities to the Executive Committee, citing Pieper's claim that the duties were too time-consuming. M. I. was appointed as the investment agent effective September 1, 1981. Despite this change, Landru continued to direct disbursements and collect kickbacks, totaling approximately $220,000, shared with Pieper, with neither reporting this income on their tax returns. Additionally, Bruch provided home improvements to Landru and Pieper, valued at roughly three percent of his last seven loans, using bogus receipts.

On August 8, 1986, a grand jury indicted Pieper on multiple counts, including conspiracy and soliciting graft related to the pension fund, as well as tax fraud. Pieper's pretrial motions to dismiss certain counts were unsuccessful. The jury convicted him on conspiracy, RICO, and tax counts, as well as eleven counts of receiving kickbacks. A special verdict mandated Pieper to forfeit $48,951, half of the total kickbacks received. On appeal, Pieper argued that the evidence was insufficient to support his conviction under 18 U.S.C. § 1954, claiming he did not intend to be influenced regarding pension fund matters. The court noted the heavy burden on appellants to challenge the sufficiency of the evidence and affirmed that the trial evidence was adequate to support Pieper's conviction.

Conviction under 18 U.S.C. Sec. 1954 necessitates that a trustee of an employee pension benefit fund either receives or solicits any form of value with the intent to influence decisions related to the fund. Pieper argues that he lacked authority under the Investment Agency Agreement to grant or deny loans, thus claiming he could not have accepted kickbacks relevant to his duties. Additionally, he contends that since potential customers were unaware of any union involvement and that the fund's assets were not adversely affected, he did not violate Sec. 1954. 

These arguments are insufficient. Pieper conflates the two prongs of Sec. 1954, as conviction can arise from receiving kickbacks 'because of' or 'with intent to be influenced regarding' fund decisions. His conviction stemmed from his union and fund positions, making his defense regarding lack of influence irrelevant to the 'because of' prong. Pieper's assertion of lacking actual or apparent authority to control fund investments does not exempt him from liability, as Sec. 1954 applies to those with ostensible power over such decisions. Evidence suggests he had such authority, as the kickback agreement was made before the board's decision to relieve him of investment responsibilities, and he instructed the initiation of loans. Thus, his claims of non-participation appear disingenuous, as the scheme operated effectively while he merely received kickbacks.

Pieper's argument that he can only be found in violation of the 'because of' prong of Sec. 1954 if the borrowers were aware of his union position or informed about the kickback arrangement is fundamentally flawed. This reasoning misplaces focus on the borrowers' state of mind rather than on Pieper's actual receipt of kickbacks. To convict Pieper under Sec. 1954, the government only needed to demonstrate that he received the kickbacks due to his status, which conferred him ostensible authority over the Fund's investment decisions. The statute's inclusion of the 'because of' clause indicates that Congress intended to encompass all fiduciaries benefiting improperly from their decisions, not just those with intent to be influenced. The jury's conviction was supported by sufficient evidence, and accepting Pieper's view would undermine the statute, allowing illicit acts to evade legal scrutiny through deception.

Furthermore, it is incorrect for Pieper to claim that no borrower recognized his role with the Fund, as evidenced by George Bruch, a contractor who was aware of Pieper's position and his influence on loan approvals. Additionally, despite the board's resolution to delegate investment management to an outside firm, Pieper retained significant authority. The Investment Agency Agreement specified that M. I. would act under the trustees' direction, indicating Pieper's continued influence over investment decisions. Although he may have stepped back from direct management, he retained the authority to instruct M. I. on loan approvals, demonstrating that he did not fully relinquish control over the Fund's investment actions.

Pieper contests his RICO conviction on two grounds: he claims he did not commit the necessary predicate offenses and argues that the evidence did not sufficiently demonstrate a connection between his racketeering activities and the operations of the Fund, thus failing to show he participated in the enterprise's conduct. The court had previously determined the evidence supported a jury finding that Pieper violated Sec. 1954, so the focus here is on the alleged insufficiency of evidence for the RICO charge, particularly the lack of demonstrated effect on the enterprise from his kickback solicitation and acceptance.

To establish the required nexus under Sec. 1962(c), the government must prove: (1) the defendant engaged in racketeering acts, (2) the defendant's relationship with the enterprise facilitated the commission of these acts, and (3) the acts had some effect on the enterprise. Pieper argues that his kickback scheme was unrelated to his union or Fund roles and did not influence the Fund's operations. He further asserts that not all loan recommendations from Landru were approved by Lincoln and that Landru did not expect his payments would facilitate loan approvals.

However, the court concluded that a rational jury could find beyond a reasonable doubt that Pieper's actions affected the Fund. Pieper’s role as Chairman allowed him to create and profit from the kickback scheme. The scheme directly impacted the Fund's loan decisions, which were influenced by the borrowers’ willingness to pay kickbacks, potentially affecting their repayment capabilities. Therefore, Pieper's assertion of no nexus between his actions and the Fund's conduct was rejected.

Additionally, Pieper challenged the district court's denial of his motion to dismiss several counts based on multiplicity. These charges involved him unlawfully soliciting and receiving building materials and services from George Bruch in exchange for loan commitments from the Fund, with separate counts for different loans, including those to Bruch and the KBC Partnership, where Bruch was a partner.

The test for multiplicity in this circuit is whether each count necessitates proof of a unique fact. Pieper argues that the counts related to seven loans to George Bruch are multiplicitous, claiming he received only a single benefit from multiple loans. However, the court found that Pieper received multiple benefits from several home improvement projects, each involving distinct facts such as different dates, methods of misapplication, and amounts. Consequently, the counts are not considered multiplicitous. 

Pieper also contests the district court's decisions regarding the assessment of prosecution costs and the awarding of court reporter fees for daily transcripts. The court maintains that it has limited grounds to overturn cost awards unless a clear abuse of discretion is demonstrated. The district court's decision not to prorate certain costs was upheld, as much of the evidence served dual purposes related to both convicted and acquitted counts. However, the award for daily transcript costs was deemed improper since the transcripts were primarily for the prosecution's convenience. The ruling affirms Pieper's convictions but reverses the award of daily transcript costs, remanding for modification of the cost order. The decision is affirmed in part, reversed in part, and remanded with directions.