Opinion ID: 184400
Heading Depth: 1
Heading Rank: 4

Heading: Embezzlement Issues

Text: 52 Appellants assert they were entitled to a judgment of acquittal on the embezzlement count because the government failed to prove the severance payments triggered by the merger of the two unions were unauthorized. Under 29 U.S.C. § 501(c) (1994), a union official who embezzles, steals, or unlawfully and willfully abstracts or converts to his own use or the use of another union funds is subject to criminal liability. Appellants argue that lack of authorization is an essential element of a § 501(c) violation. 53 Although we have not squarely confronted this issue, see United States v. Lawton, 995 F.2d 290, 294 n. 4 (D.C.Cir.1993), we agree that a § 501(c) violation requires the unauthorized appropriation of union property. See United States v. Stockton, 788 F.2d 210, 217 (4th Cir.1986). While some of our sister circuits weigh lack of authorization as only one of many factors in determining whether a defendant possessed fraudulent intent under § 501(c), see, e.g., United States v. Welch, 728 F.2d 1113, 1118 (8th Cir.1984), the language of the statute dictates that it should be considered a distinct element of the offense. Applying the traditional meaning of legal terms, it does not make any sense to say that a union officer can embezzle, steal, or convert property he is authorized to take. 54 In this case, appellants argue that no rational jury could have found that the severance payments were unauthorized. They point to evidence establishing: (1) the union's bylaws empowered the District Executive Committee to set compensation for all union officers and employees; and (2) the severance payments were made pursuant to a formal, written severance plan, duly adopted (and subsequently amended) by the Committee in accordance with that authority. But that evidence is not determinative on the matter. At the time the officers' severance fund was created, the Committee set aside an astounding 44% of the union's liquid assets for this purpose. Furthermore, the severance plan was later amended to make the merger of PCD/MEBA and NMU a triggering event for payment. Therefore, when the two unions merged, DeFries, Dodson, Daulley, and two others received almost $2 million in severance pay even though each immediately assumed a similar job in the merged union. Presumably fearing the membership's reaction to their scheme, appellants employed a strategy of concealment. They did not disclose the severance plan's existence to the union's independent auditor until over one year after its adoption. More important, the membership was kept completely in the dark as to any of its details until after the unions were merged and the payments were made. At the time of the merger referendum, members had no idea that their yes votes would transfer a sizable portion of the union's treasury to appellants' personal pockets. By concealing the severance plan and its terms, appellants prevented the union membership from exercising its authority to terminate or modify the severance payments pursuant to Article 7, Section 3 of the union's bylaws, which authorized the Committee to establish officers' compensation unless otherwise directed by a majority vote of the membership. As appellants do not dispute that the union's bylaws allowed the union membership to cancel or alter the severance plan, and members, indeed, initiated a civil lawsuit to recover the payments once they were discovered, it is not reasonable to say that the severance payments were authorized even accepting appellants' construction of the term. To be sure, under the union's bylaws, the members gave their implicit assent to the Committee's determinations regarding officers' compensation by not reversing their decisions. But, the membership was prevented through appellants' subterfuge from exercising its ultimate authority to prevent this looting of the union treasury, and authorization secured without disclosure of ... material information is a nullity. See United States v. Butler, 954 F.2d 114, 119 (2d Cir.1992). 55 The government further argues that even if appellants had secured authorization for the severance payments in a manner consistent with the union's bylaws, appellants could not have been authorized as a matter of law to breach their fiduciary duty to hold [union] money and property solely for the benefit of the organization and [the union's] members.... 29 U.S.C. § 501(a) (1994). To be sure, in United States v. Boyle, 482 F.2d 755 (D.C.Cir.1973), we held that a union officer could not use authorization as a defense when he converted union funds for a plainly illegal campaign contribution, but the case only stands for the basic proposition that a union officer cannot be authorized as a matter of law to engage in specifically proscribed criminal acts. It would extend Boyle considerably to hold that an action that would otherwise constitute a breach of fiduciary duty under § 501(a) may not be authorized as a matter of law. On the other hand, a very general delegation in the union's bylaws may not be thought adequate to authorize a manifestly unreasonable specific act. Since we hold that appellants were not authorized, we need not decide this issue. 56 Without even considering the troubling evidence that appellants secured the triggering mechanism for their severance payments through election fraud, there is more than enough evidence in the record to withstand appellants' request for a judgment of acquittal on the embezzlement count. As a fallback position, appellants, however, also assert that a new trial on this count is required because of the district court's failure to properly instruct the jury regarding the separate authorization element of the offense. At a minimum, they argue the jury should have been instructed that the government was obligated to prove either the lack of authorization or the lack of good faith belief that the payments would benefit the union. While it is true that the jury charge was perhaps imprecise because at one point it subsumed the authorization question into the fraudulent intent inquiry, we are satisfied that the instructions nonetheless adequately described the elements of the embezzlement offense. See Stockton, 788 F.2d at 217-18. 6 We detect no reversible error in this aspect of the district court's charge. 57 Shifting from the authorization element of a § 501(c) violation to the question of intent, appellants argue that the district court's failure to give appellants' requested advice-of-counsel jury instruction constitutes reversible error. Appellants' defense to the embezzlement count was largely based on their reliance on the advice of their outside counsel, Angelo Arcadipane, a partner at Dickstein, Shapiro & Morin. According to testimony presented at trial, Arcadipane advised appellants that the severance payments were completely legal. Because [g]ood faith reliance upon advice of counsel ... establish[es] a defense to specific intent crimes, United States v. Hansen, 772 F.2d 940, 947 (D.C.Cir.1985), such as § 501(c), appellants assert that the jury should have been given an instruction that good-faith reliance on advice of counsel was a defense to embezzlement. 58 A defendant is entitled to an advice-of-counsel instruction if he introduces evidence showing: (1) he made full disclosure of all material facts to his attorney before receiving the advice at issue; and (2) he relied in good faith on the counsel's advice that his course of conduct was legal. United States v. Lindo, 18 F.3d 353, 356 (6th Cir.1994). 7 The district court is required to give this instruction if there is 'any foundation in the evidence' sufficient to bring the issue into the case, even if that evidence is 'weak, insufficient, inconsistent, or of doubtful credibility.'  United States v. Duncan, 850 F.2d 1104, 1117 (6th Cir.1988) (quoting United States v. Phillips, 217 F.2d 435, 443 (7th Cir.1954)). It seems clear to us that the district court abused its discretion by refusing appellants' request for an advice-of-counsel instruction. Misstating the law, the district court observed, my problem is that the evidence as it stands right now is equally consistent with an inference to the effect that the advice of counsel was used as subterfuge as it was that the defendants genuinely and in good faith relied upon it. The district court obviously believed that there was at least the requisite foundation for appellants' advice-of-counsel defense but was under the incorrect understanding that appellants instead were obliged to satisfy a preponderance of the evidence standard in order to be entitled to the instruction. 59 On appeal, the government defends the district court's ruling by claiming that appellants failed to disclose several material facts to Arcadipane and did not rely on his advice in good faith. However, our review of the record indicates that appellants set forth more than sufficient evidence to earn an advice-of-counsel instruction. The government produces a laundry list of supposedly material facts appellants allegedly did not disclose to Arcadipane, focusing on the argument that Arcadipane was unaware of appellants' attempts to conceal the severance plan's existence. The evidence clearly indicates, however, that Arcadipane was generally aware of how the union operated and the degree to which the severance plans had been disclosed to the membership and auditors at the time he issued his final opinion that the payment of the severance benefits was legal. No client ever tells his or her lawyer every single fact that a good lawyer probes before giving advice. Indeed, clients do not typically even know which facts a lawyer might think relevant. (That is, in part, why they consult lawyers.) So long as the primary facts which a lawyer would think pertinent are disclosed, or the client knows the lawyer is aware of them, the predicate for an advice-of-counsel defense is laid. Even if we were to regard Arcadipane's advice as questionable, he was adequately informed about the details of appellants' conduct. 60 The government also argues that appellants did not rely on Arcadipane's advice in good faith because (1) DeFries dictated to Arcadipane the formula and terms of the severance plan; and (2) appellants did not adhere to Arcadipane's advice to limit severance payments to one month's salary per year of service. According to the government, the evidence establishes that DeFries manifested his intent to implement the severance plan before receiving Arcadipane's legal opinion. The government unfairly ascribes nefarious motives to common attorney-client interaction. A client often comes to his lawyer with a plan and asks him to find a way to implement it in a legal manner. Fitting a client's objective into a legally acceptable formula is a large part of lawyering. Similarly, attorneys often advise their clients to act more cautiously than the law requires. It is an important part of a lawyer's job to warn his clients about behavior that, while not illegal, nonetheless has the potential to embroil a client in controversy. Although in this case Arcadipane did suggest appellants reduce the amount of the severance payments in order to minimize the prospect of legal challenge, he ultimately advised that the final version of the plan was legal. If we were to conclude that a client did not rely on his attorney's advice in good faith anytime he disregarded one of his attorney's suggestions, the scope of the advice-of-counsel defense would be very narrow indeed. 61 We turn to the question of whether the district court's error is reversible. A refusal to give a jury instruction is reversible error only if the requested instruction (1) is substantively correct; (2) was not substantially covered in the charge actually delivered to the jury; and (3) concerns an important point in the trial so that the failure to give it seriously impaired the defendant's ability to effectively present a given defense. United States v. Taylor, 997 F.2d 1551, 1558 (D.C.Cir.1993). 62 The government does not dispute that the requested advice-of-counsel instruction was substantively correct but maintains that the jury was adequately instructed with regard to appellants' defense. The government points out the jury was informed that the government was obligated to prove that the defendants had acted with the knowledge that [they] violated the law and the jury was further told that the defendants maintain that receipt of the severance payments was done in full compliance ... with the advice of counsel. Although the charge allowed the defense to argue in summation that appellants had believed the payments were legal because they had been so advised by Arcadipane, the jury was not exposed to one critical piece of the puzzle: good-faith reliance on advice of counsel was a valid defense that, if proved, required acquittal. 63 The government's position fails to give due consideration to the prosecutor's conduct in closing argument to the jury. After successfully preventing the defense from obtaining the advice-of-counsel instruction, the prosecutor explicitly told the jury that reliance on Arcadipane's advice is not a defense and he informed members of the jury that [the court] will not read any instruction regarding reliance on Angelo Arcadipane's advice. Reading the jury instructions in their entirety and viewing them in light of the prosecutor's comments, members of the jury were left with the incorrect impression that reliance on advice of counsel was merely an excuse offered by appellants and not a legitimate defense. Appellants were entitled to an instruction explaining the legal significance of their defense and not just a statement summarizing the defense theory. See United States v. Newcomb, 6 F.3d 1129, 1132, 1139 (6th Cir.1993). 64 Once it is accepted that the advice-of-counsel instruction was not substantially covered by other aspects of the charge, it seems obvious that this omission seriously impaired appellants' ability to present their chosen defense. Beginning with the opening statement, appellants' main defense to the embezzlement count was that they did not act with fraudulent intent because of their good faith reliance on Arcadipane's advice. But when the district court listed a number of factors for the jury to consider in assessing appellants' intent, it did not even mention the advice of counsel. Not only did this suggest to the jury that appellants' central defense was irrelevant to the question of intent, but when the intent instructions did not mention the specific defense, the jury may have been led to believe that appellants' main defense was actually inconsistent with the law. See Duncan, 850 F.2d at 1118. The district court's error seriously prejudiced appellants' ability to receive a fair trial on the embezzlement count. 65 We, therefore, reverse appellants' § 501(c) convictions.