deprive union members of their "right to democratic participation in [union] affairs . . . including the right to vote in secret and to participate in a fair and honest election [and] to the honest services of their union officers . . ." in connection with the 1989 and 1990 elections. ( Id., PP 98, 104).
Defendants contend that, simply stated, none of those interests represent the "property rights" contemplated by McNally as enjoying protection under § 1341. Hence, Counts Three and Four, and Counts Six and Seven do not, according to defendants, charge offenses upon which they can be brought to trial. "Property rights," say the defendants, possess "minimum, irreducible characteristics" that separate property interests from all others; namely, they must have pecuniary value; they must be capable of ownership; and they must be transferable. (Memorandum of Law in Support of Defendants' Motion, pp. 4-10).
The government responds that the integrity of any labor union's electoral process is guaranteed to its members by the union's own constitution and by-laws, and by the Labor Management Reporting Disclosure Act of 1959 ("LMRDA"), 29 U.S.C. §§ 411 et seq. (1988). It cites numerous cases -- all, unfortunately, civil cases -- decided under the LMRDA that speak of the rights of union members to participate in union affairs as being "economic," or "a source of wealth," or a means to a "livelihood." The government also analogizes to Hobbs Act cases, 18 U.S.C. § 1951 (1988), under which even allegations of criminal wrongdoing have been sustained against the contention that rights extorted from union members by threats or violence were not "property." See e.g., United States v. International Brotherhood of Teamsters, 708 F. Supp. 1388, 1397-99 (S.D.N.Y. 1989).
There are, however, obvious dangers presented for a lower court in assessing the implications of the McNally doctrine in a mail fraud prosecution by drawing upon learning from other lower court cases, decided under statutes other than 18 U.S.C. § 1341 (and for other purposes), and, in particular, cases antedating McNally. The Supreme Court decided McNally under § 1341, the very mail fraud statute at issue here, and it did so substantially upon what it discerned to be Congress' legislative intent. Moreover, there are at least three post-McNally circuit court decisions holding McNally to have effectively overruled older precedent allowing prosecutions under § 1341 for election frauds such as that charged here where the "victims," i.e., the bodies politic, had been deprived of no more than a fair election.
There are, apparently, no contrary decisions.
Elsewhere in the Indictment (Count Five), five of the defendants are charged with embezzlement, aided and abetted by others, in that they allegedly devised a plan to make, and then purported to authorize, exorbitant lump sum "severance" payments to themselves in an aggregate amount of nearly $ 2 million. The ballots of the union members whose votes were allegedly usurped by the defendants in the 1988 merger referendum may hypothetically have enabled them to accomplish it. If so, the ballots were of immense value, and as assuredly "property" in the McNally sense, as, for example, electronic access cards that enable withdrawals to be made from depositors' bank accounts. They were, literally and figuratively, the keys to the union treasury.
But the government does not allege the connection. Counts Three and Four allege only that the mail fraud with which the defendants are charged was intended to deprive the union and its members of a regular election in accordance with the union's constitution and by-laws. To be sure, the concept of an untainted election is less ambiguous than the notion of "good government" which the Supreme Court dismissed in McNally as unable to claim protection under § 1341. But it still partakes insufficiently of the qualities of property in the McNally sense in the opinion of three circuit courts of appeals. See Supra, note 6. This Court is not disposed to take issue with them, and Counts Three and Four of the Indictment will be dismissed.
The operative dates for the offenses with which defendants are charged in Count Six are October 1, 1989, to November 30, 1989, and, in Count Seven, October 1, 1990, through December 31, 1990. Twice more, after 1988, the government alleges, the defendants corrupted the union's election processes (using the mails to do so) to produce results satisfactory to them in the selection of delegates to the national convention in 1989 and union officers in 1990.
By 1989, however, 18 U.S.C. § 1341 did not stand alone in defining the interests protected when McNally was decided. In 1988, in reaction to the McNally decision, Congress enacted § 1346, adding "the intangible right of honest services" to the otherwise unenumerated "property" rights it was a crime to deprive another of by a scheme or artifice to defraud using the mails.
Defendants argue that, insofar as the "services" expected of them in relation to union elections, there were none: union by-laws of the time required the union president to "designate an Impartial Administrator to supervise the conduct of the election." The "duties" of the "Impartial Administrator" included the distribution, collection, and tallying of the votes, and "such other measures as he may deem necessary to assure a fair and impartial election." If the elections were fraudulent, defendants contend, the fault must lie with the "Impartial Administrator."
The government responds that the LMRDA, specifically, 29 U.S.C. § 501(a), provides, in pertinent part, that the "officers . . . of a labor organization occupy positions of trust in relation to [the] organization and its members as a group."
It is therefore the duty of each such person . . . to hold its money and property solely for the benefit of the labor organization and its members to manage, invest, and expend the same in accordance with its constitution and bylaws and any resolutions of the governing bodies adopted thereunder . . . .
29 U.S.C. § 501(a). The government also quotes from provisions of the union constitution and by-laws establishing criteria for voting procedures within the union, including a secret ballot and a secure depository for the ballots while the election is in progress to prevent tampering. And it cites to numerous civil cases holding, in various contexts, that union officers are fiduciaries and obliged to act as such in matters affecting the union and its members generally, not merely with respect to its money and property.
It is unnecessary here, however, to decide whether the supervision of the union elections (and the attendant responsibility for their legitimacy) is a delegable function of union officers, or whether the officers' fiduciary duties extend beyond faithful stewardship of the union's tangible assets. Since 1988, § 1346 has expressly declared "honest services" to be an interest protected by the mail fraud statute, and it appears to the Court that the "honest services" any organization is entitled to expect of its officers includes, at a minimum, that the officers themselves refrain from corrupting the organization's election proceedings, which is precisely what the government charges the defendants with here.
For the foregoing reasons, therefore, it is, this 1st day of July, 1994,
ORDERED, that defendants' motion to dismiss Counts Three and Four is granted; and it is
FURTHER ORDERED, that the motion to dismiss Counts Six and Seven is denied.
Thomas Penfield Jackson
U.S. District Judge