Moore, Friendly and Hays, Circuit Judges.
Milton Silverman appeals from his conviction on an eighteen-count indictment and from the denial of his motion for a new trial. The first eight counts of the indictment charged Silverman with the conversion of union funds which were paid to printing companies for the benefit of a political campaign. Count nine involved an expenditure of union funds by Silverman at a union convention. The next four counts (ten through thirteen) charged payments of union funds to Silverman for his use in awarding "Christmas gratuities." Count fourteen charged embezzlement of the proceeds from the sale of an asset of an employee welfare fund. Count fifteen involved the reporting on a Labor-Management Report of the political printing expenditure in count one. False reporting was also charged in counts sixteen and seventeen, involving the payments described in counts ten through thirteen. The final count charged the making of false entries in the books and records of the unions.
The jury found Silverman guilty on all counts except counts sixteen and seventeen. Silverman was sentenced to four months to be served concurrently on counts one through fifteen and four months to be served consecutively on count eighteen. He was also fined $1,000 on each of the sixteen counts upon which he was found guilty.
The facts as to each of the counts (except counts nine and fifteen as to which no challenge to the sufficiency of the evidence is made) will be more fully discussed below. It is sufficient for purposes of introduction to give a general background only. In 1965 and 1966 Milton Silverman was President of Local 810, International Brotherhood of Teamsters; Business Manager of Local 1614, International Brotherhood of Electrical Workers; and a Trustee and the Administrator of United Wire, Metal and Machine Welfare Fund and United Wire, Metal and Machine Pension Fund. These four affiliated labor organizations had common headquarters in Manhattan and were governed by interlocking slates of officers. The organizations had grown out of a predecessor founded by Silverman twenty-four years earlier. Local 810 had a membership of 10,000 and Local 1614 had 3,500 members. They had collective bargaining agreements with approximately 300 employers in New York and New Jersey. Local 810 had net assets of about $200,000 while Local 1614 carried a deficit of around $51,000. Each local shared in the joint welfare fund, which had assets of $10 million, and the joint pension fund, which had assets of $6 million.
The Sufficiency of the Indictment
Silverman argues that the convictions on counts one through fifteen of the indictment must be reversed because (1) these counts failed to state an offense, (2) the court lacked jurisdiction and (3) the court allowed an impermissible amendment to the indictment. These arguments are based upon the proposition that the indictment failed to allege that the unions were involved in interstate commerce. The indictment, tracking the language of the statute,*fn1 states that:
"The defendant, unlawfully, wilfully and knowingly, directly and indirectly, did embezzle, steal, abstract and convert, to his own use, and the use of another, monies, funds, securities, property and other assets of a labor organization of which he was an officer and by which he was employed, to wit, Local 810, International Brotherhood of Teamsters and Local 1614, International Brotherhood of Electrical Workers, as hereinafter set forth.
(Title 28, United States Code, Section 501(c), Title 18, United States Code, Section 2)"
There is no dispute that there was sufficient proof of the requisite connection with interstate commerce. It was established that both unions were certified representatives of employees under the provisions of the National Labor Relations Act. Pursuant to 29 U.S.C. § 402(j)(1), this fact requires that the unions shall be deemed labor organizations engaged in an industry affecting commerce. Nor is there any dispute that the jury was properly charged that it must find the unions to be labor organizations engaged in an industry affecting commerce in order to return a verdict of guilty.
Rule 7(c) of the Federal Rules of Criminal Procedure requires that the indictment contain "a plain, concise and definite written statement of the essential facts constituting the offense charged." This requirement performs three constitutionally required functions. It permits the accused "to be informed of the nature and cause of the accusation" as required by the Sixth Amendment. It prevents any person from being "subject for the same offense to be twice put in jeopardy of life or limb" as required by the Fifth Amendment. Finally, it preserves the protection given by the Fifth Amendment from being "held to answer for a capital, or otherwise infamous crime, unless on a presentment or indictment of a Grand Jury." 8 Moore, Federal Practice para. 7.04 at 7-15 (1969). On appeal, Silverman does not protest that the first two of these functions have not been fulfilled. He was adequately informed of the specific accusations and thus able to prepare his defense. The crime was stated definitely enough to permit a plea of former jeopardy if the acts were made the subject of a later charge. However, he contends that the third function has not been fulfilled. Invoking the legal history of the grand jury as a buffer against tyranny, he states that an allegation of each essential element of a crime must be in the indictment "as a testament to its having been before the grand jury." Applt's Brief at 21.
The policy underlying the requirement of specificity in the indictment is similar to that which forbids the amendment of an indictment without resubmission to a grand jury. It is to prevent the usurpation of power by the court and prosecutor in allowing a defendant to be convicted "on the basis of facts not found by, and perhaps not even presented to, the grand jury which indicted him." Russell v. United States, 369 U.S. 749, 770, 8 L. Ed. 2d 240, 82 S. Ct. 1038 (1962). This policy is effectuated by preventing the prosecution from modifying the theory and evidence upon which the indictment is based. See generally, 8 Moore, Federal Practice para. 7.05. The question presented on this appeal is whether the indictment reveals that all the essential elements for conviction were presented to the grand jury, and deliberated upon and charged by them. We must also decide whether the prosecutor has attempted to rely at the trial upon theories and evidence that were not "fairly embraced in the charges made in the indictment." Russell v. United States, 369 U.S. 749, 793, 8 L. Ed. 2d 240, 82 S. Ct. 1038 (1962) (Harlan, J., dissenting).
The indictment uses the term of art, "labor organization," and then specifies two particular labor organizations by referring to Locals 810 and 1614.*fn2 An indictment must be read to include facts which are necessarily implied by the specific allegations made. United States v. Martell, 335 F.2d 764, 765-66 (4th Cir. 1964); United States v. Varlack, 225 F.2d 665, 669-70 (2d Cir. 1955); Hewitt v. United States, 110 F.2d 1, 5-6 (8th Cir.), cert. denied, 310 U.S. 641, 84 L. Ed. 1409, 60 S. Ct. 1089 (1940); Hagner v. United States, 285 U.S. 427, 431-33, 76 L. Ed. 861, 52 S. Ct. 417 (1932); Grant v. United States, 291 F.2d 746, 748-49 (9th Cir.), cert. denied, 368 U.S. 999, 7 L. Ed. 2d 537, 82 S. Ct. 627 (1961); Gonzales v. United States, 286 F.2d 118, 120 (10th Cir.), cert. denied, 365 U.S. 878, 6 L. Ed. 2d 190, 81 S. Ct. 1028 (1960); Finn v. United States, 256 F.2d 304, 306-07 (4th Cir. 1958).*fn3 Just as the use of the words "labor organization" in the statutory section defining the criminal offense involved necessarily implies the fact that the labor organization is engaged in an industry affecting commerce pursuant to 29 U.S.C. § 402(i), so the use of that term of art in the indictment necessarily implies that the essential element of interstate commerce is charged in the indictment. To contend otherwise would be to argue that the defendant was not sufficiently informed of the charges against him to allow preparation of a defense and that he could not be protected from being later placed in jeopardy for the same acts. Such arguments are concededly not presented by this case since Silverman was not prejudiced in such a manner. We must conclude that the indictment, as drafted, was sufficient to charge the essential element of interstate commerce.
Even though the indictment is drafted to charge the essential elements, the question remains whether on its face it presents evidence which assures us that such essential elements were presented to the jury and deliberated upon by them in returning the indictment. Cf. Russell v. United States, 369 U.S. 749, 770-71, 8 L. Ed. 2d 240, 82 S. Ct. 1038 (1962). The presence of such evidence would insure that the defendant is not tried upon a theory or evidence which was not fairly embraced in the facts upon which the grand jury based its charges. The events described in the indictment were quite specific as to the dates of the transactions, the amounts involved and the parties from whom the funds were taken. Such allegations were sufficient to guard against giving improper discretion to the court and the prosecutor to vary the trial proof from the theory upon which the indictment was based. This is not a case wherein the indictment alleged facts showing one violation of federal law (interference with interstate importation of sand) and proof was allowed at trial of another violation (interference with interstate importation of steel). Stirone v. United States, 361 U.S. 212, 4 L. Ed. 2d 252, 80 S. Ct. 270 (1960). A situation similar to Stirone would be presented if the indictment had alleged that Silverman was an officer of Local 810 only and a conviction were permitted on proof that funds of Local 1614 had been embezzled. Nor is this a case wherein the grand jury might have relied upon specific evidence showing a violation of federal law (deception of the Comptroller of the Currency) which the trial judge permitted to be stricken from the indictment at trial. Ex parte Bain, 121 U.S. 1, 30 L. Ed. 849, 7 S. Ct. 781 (1886). A situation similar to Bain would be presented if the trial judge had amended the indictment at trial to delete reference to one of the two Locals. No one could suppose that the prosecutor would be free to roam at large in proving elements of the crime so explicitly stated. This statement is also true with respect to the allegation of interstate commerce. The connection with interstate commerce upon which the indictment must rest is that the specific unions named were "labor organizations" in the statutory sense. The specification of the unions involved protects Silverman from the evils of facing charges not made before the grand jury.
Evidence that the specific allegation of interstate commerce was presented to the grand jury is not absent from the face of the indictment. In count eighteen the indictment specifically refers to "a labor organization engaged in an industry affecting commerce, to wit, Local 810, International Brotherhood of Teamsters, and Local 1614, International Brotherhood of Electrical Workers." It would be absurd to think that the grand jury could have found such a fact on count eighteen and have been in ignorance of it when they indicted on the other counts.*fn4
The arguments that the court lacked jurisdiction and made an impermissible amendment to the indictment may be quickly disposed of. Lack of jurisdiction would exist only if the indictment did not charge a federal crime through failure to allege a connection with interstate commerce. An impermissible amendment would have been made only if the judge's charge had allowed or required proof of elements not charged in the indictment. Since we have decided that the words, "labor organization . . ., to wit, Local 810, International Brotherhood of Teamsters and Local 1614, International Brotherhood of Electrical Workers," can be read to allege and require proof of the essential element of interstate commerce, there is no merit in Silverman's contentions on these points.
Counts One Through Eight -- The " Political Contributions "
During the summer of 1965, Silverman was approached by Stanley Steingut, a Brooklyn Democratic leader, who asked for financial support for the candidacy of Abraham Beame and his running mates in the 1965 mayoralty campaign. Silverman agreed. Pursuant to the instructions of the administrator of the Beame Campaign, bills totaling $12,144.20 were sent to the two locals by two creditors of the Beame Campaign -- Scoop Printing Company, Inc. and Behl Printing Co. The Scoop bills stated that they were for various stationery items ordered by the union. The Behl bills bore the notation that they were for printing for political primaries. The Scoop bills are the subjects of counts one through eight. On October 27, 1965, Local 810 paid $2,581.37 to Scoop for the benefit of the Beame Campaign (count one). Between November 29, 1965 and June 21, 1966, Local 1614 paid $2,581.38 in seven equal installments to Scoop for the benefit of the Beame Campaign (counts two through eight).
Since my brothers Friendly and Hays are of the opinion that the conviction on counts one through eight must be reversed, the majority opinion as to these counts is to be found in the separate opinion of Judge Friendly (Judge Hays concurring). My views on these counts are set forth below and constitute my dissenting opinion.
All the parties conceded and the jury was charged that a political contribution per se by a union is not unlawful. The issue is rather whether the contributions were properly authorized and made for the benefit of the union. The unions' constitutions and by-laws were introduced to show that the unions had the power to make political contributions. The minute books revealed that resolutions purporting to ratify past political contributions and to authorize further contributions were passed by the membership of Local 810 on September 16, 1965 and by the membership of Local 1614 on September 24, 1965 and by the executive boards of both locals on September 24, 1965.*fn5
On appeal, Silverman contends that there is insufficient evidence to support a conviction under section 501(c) of the Labor-Management Reporting and Disclosure Act of 1959 (the Act). That section makes liable for criminal punishment anyone "who embezzles, steals, or unlawfully and willfully abstracts or converts to his own use, or the use of another, any of the * * * assets of a labor organization of which he is an officer * * *." After reviewing the reported decisions in prior convictions under this statute, Silverman urges that there is no theory upon which the facts of this case can be said to constitute a violation of section 501(c). An initial issue is whether the conduct revealed in this case is of the type that Congress sought to prevent by imposing criminal sanctions.
The purposes and policies of the Act are revealed in section 2. Congress found from investigations of the labor and management fields that
"there have been a number of instances of breach of trust, corruption, disregard of the rights of individual employees, and other failures to observe high standards of responsibility and ethical conduct * * *." 29 U.S.C. § 401(b).
In section 501 Congress defined "in the broadest terms possible the duty which the new federal law imposes upon a union official." Highway Truck Drivers and Helpers Local 107 v. Cohen, 182 F. Supp. 608, 617 (E.D. Pa.), aff'd per curiam, 284 F.2d 162 (3d Cir. 1960), cert. denied, 365 U.S. 833, 81 S. Ct. 747, 5 L. Ed. 2d 744 (1961). Section 501(c) created "a new Federal crime of embezzlement of any funds of a labor organization." Colella v. United States, 360 F.2d 792, 799 (1st Cir.), cert. denied, 385 U.S. 829, 17 L. Ed. 2d 65, 87 S. Ct. 65 (1966). The crime is defined with the use of traditional terms and may be committed by several means. It was the plain intention of Congress to hold officers and employees strictly responsible as fiduciaries for the union funds entrusted to them and this intention should not be subverted by the use of indirect methods. United States v. Harrelson, 223 F. Supp. 869 (E.D. Mich. 1963).
The fiduciary role that labor officials must occupy is defined in section 501(a) to include a duty to hold the union's property solely for the benefit of the union and to expend it only in accordance with its constitution, by laws and resolutions. Decisions finding violations of the criminal provision of section 501(c) have also emphasized the elements of appropriate union benefit and proper union authorization. Section 501(c) is read as requiring an intent to deprive the union of the use of its funds and either a lack of union benefit from the expenditure or a lack of proper authorization for the expenditure. In Harrelson, supra, the violation of section 501(c) "consisted in the use of union funds for political purposes with knowledge that such use was unauthorized and with the intent to deprive the union of its use of the funds." 223 F. Supp. at 871. The opinion gives no indication as to whether there was an issue as to union benefit from the expenditure, but there can be no doubt that it was unauthorized. In Woxberg v. United States, 329 F.2d 284 (9th Cir. 1964), the court affirmed one conviction because the jury could have concluded the issues of union approval and fraudulent intent adversely to the appellants, id. at 293, and reversed certain other convictions since there was no evidence of the required intent, id. at 294.
It is clear that when there is no possible union benefit from the use of the union funds made by the official, it makes no difference whether the use was authorized. Thus, in United States v. Dibrizzi, 393 F.2d 642 (2d Cir. 1968), the jury could have found that the expenditures "were personal non-business expenses and in no way incurred in furtherance of the union's business." Our court stated that:
"Even if appellant may have established that his expenses were, as he claims, authorized and adopted by the union, such does not absolve him of his crimes * * *." 393 F.2d at 645.
Silverman argues that the basis of the Dibrizzi decision is that in no circumstances could a labor organization have the power to authorize payments of the personal non-union expenses of its officers. His rationale, stated in broader terms, would be that in every case where there is no union benefit, the authorization is ultra vires the union. Analogy is drawn to the Highway Truck Drivers case, supra, wherein an expenditure for legal expenses incurred by union officials in defending against criminal charges was enjoined under section 501(b). Such an expenditure was held to be outside the legitimate aims and purposes of the union as expressed in its constitution and as inconsistent with the aims, purposes and spirit of the Act. 182 F. Supp. at 620. If the interpretation of section 501(c) urged by Silverman were adopted, then every violation of that section would always involve both a lack of union benefit and a lack of authorization. The absence of benefit to the union would be sine qua non of the offense and absence of a lawful authorization would become a concomitant element -- present only through logical necessity. I would reject this interpretation of section 501(c). The purpose of Congress in enacting the Act was to preserve "high standards of responsibility and ethical conduct." 29 U.S.C. § 401(a). This purpose can only be fulfilled if the lack of authorization which indicates that the official's action is in breach of his fiduciary responsibilities is interpreted to include not only purported authorizations which are ultra vires but also those which are sham or procured through fraud upon the union membership. Under this broader view of unlawful authorization, a lack of union benefit will not always be accompanied by a lack of authorization. Indeed, cases may present themselves where a union benefit is present and yet the fact that the authorization was a sham or procured through fraud would make section 501(c) applicable.
Silverman states that a charge under § 501(c) is not supported by "a showing of bad judgment in pursuing union ends even if the pursuit were unauthorized." Applt's Brief at 34. Cited as authority for this statement is a cryptic passage in Colella v. United States, 360 F.2d 792, 804 (1st Cir.), cert. denied, 385 U.S. 829, 17 L. Ed. 2d 65, 87 S. Ct. 65 (1966). That case involved a padded expense account as to which the jury was charged that it must find the items to have "not been spent for a union purpose." The defendant claimed that he was prejudiced by the omission of the words, "whether such expenditures were or were not authorized." If the jury found that there was a union benefit and yet no authorization, the defendant would have been acquitted under the instruction as given. Therefore, the court said there was no prejudice in the charge. This could have been for either of two reasons: (1) It is a correct statement of the law that the presence of a benefit takes the act out of the prohibition of the statute whether authorized by the union or not, or (2) The presence of a union benefit does not immunize an act when the act is unauthorized and is done with fraudulent intent, but defendant was not prejudiced since the charge was more favorable than that to which he was entitled. I prefer the latter interpretation of the case.
To hold otherwise would be to encourage the freewheeling exercise of dictatorial power by labor leaders over the membership of their unions. Lawless transactions would occur which were only arguably or through the use of hindsight for the benefit of the union. Enforcement of "high standards of responsibility and ethical conduct" would be curtailed when the unbridled use of union funds can be immunized from the sanction of criminal liabilities by the fortuitous existence of a collateral union benefit. Overzealousness in government supervision of the fiduciary role of labor leaders is avoided by the requirement that a criminal intent be demonstrated in addition to the lack of either authorization or union benefit. The existence of a bona fide union benefit would be strong evidence that there was no intent to deprive the union of the use of its funds.
The charge given the jury in this case presented the issues of intent, authorization and benefit fairly and accurately (Tr. 1127-32, 1191). Silverman does not object on appeal that these instructions were in error. His objection is that under no theory were the facts sufficient to support the jury's verdict. In deciding whether, as a matter of law, the evidence presented no question for the jury, we must look at the evidence in a manner most favorable to the ...