United States v. McLaughlin

• Court: Court of Appeals for the Third Circuit
• Decided: October 20, 2004
• Docket: 00-2550
• Status: Published

Opinion

Opinions of the United 2004 Decisions States Court of Appeals for the Third Circuit

10-20-2004

USA v. McLaughlin Precedential or Non-Precedential: Precedential

Docket No. 00-2550

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Recommended Citation "USA v. McLaughlin" (2004). 2004 Decisions. Paper 167. http://digitalcommons.law.villanova.edu/thirdcircuit_2004/167

This decision is brought to you for free and open access by the Opinions of the United States Court of Appeals for the Third Circuit at Villanova University School of Law Digital Repository. It has been accepted for inclusion in 2004 Decisions by an authorized administrator of Villanova University School of Law Digital Repository. For more information, please contact Benjamin.Carlson@law.villanova.edu. PRECEDENTIAL Patrick L. Meehan United States Attorney UNITED STATES COURT OF Laurie Magid APPEALS FOR THE THIRD CIRCUIT Deputy United States Attorney for Policy and Appeals Robert A. Zauzmer Assistant United States Attorney No. 00-2550 Senior Appellate Counsel Bea L. Witzleben Assistant United States Attorney Kathy A. Stark UNITED STATES OF AMERICA Philadelphia, PA 19106

v. Attorneys for Appellee

STEVEN McLAUGHLIN, Appellant OPINION OF THE COURT

SLOVITER, Circuit Judge. On Appeal from the United States District Court for the Eastern District of This is an appeal by Steven Pennsylvania McLaughlin from his conviction and (D.C. No. 98-cr-00545-1) sentence following a jury trial on a District Judge: Hon. Jan E. DuBois superceding indictment charging him with conspiracy in violation of 18 U.S.C. § 371, multiple counts of stealing and embezzling Submitted Under Third Circuit LAR union funds in violation of 29 U.S.C. § 34.1(a) October 7, 2004 501(c) and 18 U.S.C. § 2, one count of failing to disclose material facts in a report Before: SLOVITER, VAN filed with the Secretary of the Department ANTWERPEN and COW EN, Circuit of Labor (“DOL”) in violation of 29 Judges U.S.C. §§ 431, 439(b), and perjury in violation of 18 U.S.C. § 1623. (Filed: October 20, 2004) The principal issue presented is whether the District Court erred by instructing the jury that materiality was a Stephen James Binhak question of law, rather than fact, for Key Biscayne, FL 33149 purposes of 18 U.S.C. § 1623 and 29 U.S.C. § 439(b) and, if so, whether such Attorney for Appellant error was harmless.1 by union funds on a charge card issued to M c L a u g h l i n a n d E M C A L . T he I. Government argued that these purchases were for M cLaughlin’s personal benefit McLaughlin served as President of and hence not authorized under EMCAL’s the Eastern Montgomery County Area constitution. In addition, the Government Local No. 2233 (“EMCAL”), an affiliate attempted to prove that McLaughlin had of the American Postal Worker’s Union embezzled from EMCAL by causing (“APWU”), from January 1992 until unauthorized payroll checks to be issued in December 1994. APWU, a national labor his name and by causing EMCAL to union whose membership consists of overpay him for health insurance, life various United States Postal Service insurance, and retirement benefits. employees, has five regional offices, Finally, the Government also sought to w h i c h a re further divided i n to prove that McLaughlin had filed a report, approximately 1,300 geographically-based known in labor parlance as an “LM2 sections called “Locals.” EMCAL is the report,” with the DOL in 1993 in which he Local for postal employees operating in had failed to disclose his receipt of certain E astern M on tgom ery Co unty, benefits and reimbu rsem ents from Pennsylvania.2 EMCAL as required by law.

The Go vern men t presented In his defense, McLaughlin testified evidence of McLaughlin’s expenditures that other individuals affiliated with for car repairs, local hotel stays, and EMCAL had also used the charge card, purchases of electronic equipment paid for and introduced as Defense Exhibit 2 the customer’s carbon copy of a receipt on 1 EMCAL’s charge card for a purchase at a The District Court had jurisdiction Staples Office Supplies store with a pursuant to 18 U.S.C. § 3231; this court signature purporting to be that of James has jurisdiction pursuant to 28 U.S.C. § Ma r te llo, a n E M CA L ex ecuti v e. 1291. McLaughlin testified Martello had used 2 the card and then had given him the The indictment also charged receipt. Nancy Zemo, the former Secretary/Treasurer of EM CAL, with On c ross-ex amin ation, th e conspiracy to steal and embezzle funds Government produced the merchant’s copy from the union and multiple counts of of the receipt, identical except that it bore stealing and embezzling union funds. McLaughlin’s signature rather than She was acquitted of four of the Martello’s. On cross-exam ination, substantive counts and convicted of all McLaughlin conceded that, apart from the the other charges. Her convictions are disparate signatures, the two documents not at issue on this appeal.

2 appeared identical. a reasonable doubt, that the L M 2 report for 1993 The jury was unable to reach a contained false statements unanimous verdict, the District Court o r r e p r e se n ta t i o n s o f declared a mistrial, and the grand jury material facts or []omitted returned a superceding indictment material facts. charging the same offenses as the original indictment with the addition of a perjury I instruct you, as a matter of count based on McLaughlin’s testimony law, that statements on the regarding Martello’s use of the charge card 1993 LM2 rep ort o f at Staples. expenses, including reimbursed expenses, which On the retrial, McLaughlin’s must be set forth on counsel informed the Court that he was Schedule 9 of the report are unable to locate the Staples receipt material facts under the previously admitted as Defense Exhibit 2. statute. I instruct you on The Court informed the parties that it had that as a matter of law. So made and retained photocopies of all the you need not concern exhibits, including Defense Exhibit 2, and yourself with the issue of McLaughlin’s defense counsel stated that materiality. he would not object to the use of such a copy at the trial. Supp. App. at 1030. Similarly, with respect to the 18 U.S.C. § 1623 charge, the Before instructing the jury, the District Court instructed: District Court advised the parties it intended to instruct the jury that the issues The question whether the of materiality with respect to the perjury alleged false testimony was and false reporting charges were questions material is a question of law of law that it had decided in the United for me to decide. It is not a States’ favor. Defense counsel objected, question of fact for you, the arguing that materiality was a question of jury, to determine. fact for the jury. The District Court overruled this objection. With respect to And I instruct you that the the charge that McLaughlin had failed to matters as to which it is disclose a material fact to the DOL, the charged that defendant, District Court instructed the jury that: Steven McLaughlin made false statements . . . were The second element of the material to the proceedings crime . . . requires that the before the court. Thus, you Government prove, beyond need not decide the question

3 of materiality. statement”), and thus, under the Fifth and Sixth Amendments, materiality is a Supp. App. at 1037. Thereafter, the jury question that must be determined by a jury convicted McLaughlin on all charged rather than a judge in an 18 U.S.C. § 1001 counts. proceeding. Two years later, relying on its decision in Gaudin, the Court in Johnson Following the sentencing hearing, v. United States, 520 U.S. 461 (1997), held the Court sentenced McLaughlin to serve that materiality is an element of 18 U.S.C. a total period of incarceration of twenty- § 1623 (“knowingly makes any false four months. In addition, the District material declaration”), and therefore, it is Court imposed a total of three years a question for the jury. Based on these supervised release, restitution in the precedents, we conclude that the District amount of $18,000, and a special Court’s instruction removing from the jury assessment of $1,050.3 the issue of materiality in its consideration of McLaughlin’s violation of 18 U.S.C. § This appeal followed. 1623 was an error of law.

II. In contrast to 18 U.S.C. § 1623, neither the Supreme Court nor this court W e generally review jury has decided whether materiality is an instructions under the abuse of discretion element of 29 U.S.C. § 439(b). That standard. Appellate review, however, is statute provides: plenary when the question is whether a district court’s instructions misstated the Any person . . . who law. Walden v. Georgia-Pacific Corp., knowingly fails to disclose a 126 F.3d 506, 513 (3d Cir. 1997). material fact, in any document [or] report . . . A. required under . . . this subchapter shall be fined not In United States v. Gaudin, 515 more than $10,000 or U.S. 506 (1995), the Supreme Court of the imprisoned for not more United States held that “materiality” is an than one year, or both. element of 18 U.S.C. § 1001 (“makes any materially false, fictitious, or fraudulent 29 U.S.C. § 439(b) (emphasis added). As is true respecting 18 U.S.C. § 1623 and 18 U.S.C. § 1001, the statutory text of 29 3 U.S.C. § 439(b) expressly requires that the McLaughlin has completed his fact allegedly withheld be “material.” service of the period of incarceration, Compare Johnson, 520 U.S. at 465 (“The and is currently serving his period of statutory text expressly requires that the supervised release.

4 false declaration be ‘material.’ Gaudin terms, applies to all errors where a proper therefore dictates that materiality be objection is made at trial, the Supreme decided by the jury, not the court.”), with Court has recognized a limited class of United States v. Wells, 519 U.S. 482, 489- fundamental constitutional errors that 91 (1997) (holding that “materiality” is not “defy analysis by ‘harmless error’ element of 18 U.S.C. § 1014, a statute that standards.” Arizona v. Fulminante, 499 does not contain materiality requirement in U.S. 279, 309 (1991). Errors of that type text). In other words, the logic of Gaudin are so intrinsically harmful as to require and Johnson compels a finding that automatic reversal without regard to their materiality is an element of 29 U.S.C. § effect on the outcome. For all other 439(b). See United States v. W. Indies constitutional errors, the Supreme Court Transp., Inc., 127 F.3d 299, 305 (3d Cir. teaches that reviewing courts must apply 1997) (“Failure to submit the issue of Rule 52(a)’s harmless-error analysis and materiality to the jury was error. . . . That must disregard errors that are harmless Gaudin involved perjury under 18 U.S.C. “beyond a reasonable doubt.” Chapman v. § 1001 rather than 18 U.S.C. § 1546, the California, 386 U.S. 18, 24 (1967). relevant statute here, is not significant given the identical character of the In Neder v. United States, 527 U.S. materiality element in both perjury 1 (1999), the Court, relying on Gaudin, statutes.”) (emphasis added). held that materiality is an element of the federal tax fraud, mail fraud, wire fraud, In sum, “materiality” is an element and bank fraud statutes under which the of both 29 U.S.C. § 439(b) and 18 U.S.C. appellant had been convicted. Thus, the § 1623. Thus, the District Court’s decision Court held that the district court’s jury to resolve the issue as a matter of law, instructions, which had resolved as a rather than submitting it to the jury as a matter of law the materiality elements of question of fact, violated McLaughlin’s those charges, were in error. rights under the Fifth and Sixth Amendments. The instructions, therefore, Although the defendant there (as were in error. here) had lodged a timely objection to the erroneous instruc tions re gard ing B. materiality, the Court distinguished the error at issue – a jury instruction that Rule 52(a) of the Federal Rules of omitted materiality as an element of the Criminal Procedure, which governs direct offense – from the constitutional violations appeals from judgments of conviction in it had previously found were not subject to the federal system, provides that “[a]ny harmless-error review. See, e.g., Gideon error, defect, irregularity or variance that v. Wainwright, 372 U.S. 335 (1963); does not affect substantial rights must be Tumey v. Ohio, 273 U.S. 510 (1927). disregarded.” Although Rule 52(a), by its Those cases contained a “‘defect affecting

5 the framework within which the trial Turning first to McLaughlin’s proceeds, rather than simply an error in the conviction under 29 U.S.C. § 439(b), we trial process itself.’” Neder, 527 U.S. at 8 note that the United States must prove that (quoting Arizona v. Fulminante, 499 U.S. the defendant submitted a required 279, 310 (1991)). Such errors “‘infect the document or report in which he entire trial process,’” Neder, 527 U.S. at 8 “‘knowingly fail[ed] to disclose a material (quoting Brecht v. Abrahamson, 507 U.S. fact.’” A fact is “material” if it has “‘a 619, 630 (1993)), and “‘necessarily render natural tendency to influence, or [is] a trial fundamentally unfair.’” Neder, 527 capable of influencing, the decision of the U.S. at 8 (quoting Rose v. Clark, 478 U.S. decisionmaking body to which it was 570, 577 (1986)). addressed.’” Gaudin, 515 U.S. at 509 (quoting Kungys v. United States, 485 By contrast, Neder held that an U.S. 759, 770 (1988)). Moreover, the instruction that omits an element of the issue is whether an omission was capable offense does not necessarily render a of influencing and not whether the criminal trial fundamentally unfair or an omission actually exerted any influence on unreliable vehicle for determining guilt or the factfinder. Thus, an omission can be innocence. The Neder Court therefore material even if no one actually relied on held that the harmless error review it. In re Cohn, 54 F.3d 1108, 1114 (3d Cir. codified at Rule 52(a) applies when a trial 1995). court erroneously instructs a jury that materiality is a question of law to be McLaughlin was charged under 29 resolved by the court rather than a question U.S.C. § 439(b) with failing to disclose of fact to be resolved by the jury. certain items on a required annual public disclosure report, known as an “LM2 Under the test set forth in Chapman report,” which he had prepared and filed v. California, 386 U.S. 18 (1967), to on EMCAL’s behalf with the DOL. Such determine whether a constitutional error is reports are the means by which the DOL, harmless, a reviewing court must decide union members, and the general public whether the record shows “beyond a obtain financial information about a reasonable doubt that the error complained particular union. In an LM2 report, a of did not contribute to the verdict union must disclose, among other things, obtained.” Id. at 24. In other words, an disbursements it has made to its officers – “otherwise valid conviction should not be including salaries, reimbursed expenses, set aside if the reviewing court may and direct or indirect payments. Here, the confidently say, on the whole record, that Government alleged that McLaughlin had the constitutional error was harmless omitted $11,099.04 on the 1993 LM2 beyond a reasonable doubt.” Delaware v. r e p o r t – $ 6 , 5 4 7 . 6 2 i n a l l eg e d Van Arsdall, 475 U.S. 673, 681 (1986). reimbursements McLaughlin received from EMCAL for meals, mileage, parking

6 and tolls, and $4,551.42 in alleged life, other crime at issue). health, and retirement benefits. More fundamentally, even if we McLaughlin notes that the verdict were to conclude that McLaughlin’s 90% form that was eventually submitted to the figure was correct, there can be no jury with respect to the 29 U.S.C. § 439(b) conclusion but that th e om itted count did not subdivide or otherwise break information in the LM2 report was down the various alleged reimbursements material. McLaughlin argues that the total and benefits that he had purportedly failed monetary value of the omitted information to report in the 1993 LM2 report. Rather, was small in comparison with his total the verdict form simply asked for a salary and EMCAL’s total expenditures decision of guilty or not guilty. He points for 1993. This however, is irrelevant. As out that at sentencing the District Court, noted by the United States Court of for purposes of calculating a loss amount Appeals for the Sixth Circuit: as to the embezzled funds, gave him “credit” for several expected pay increases The fact that the misstated that he had foregone as President by amounts are relatively small offsetting his foregone salary increases when compared with total against the extra benefits and remuneration union expenditures is not McLaughlin had fraudulently received. particularly relevant to the McLaughlin argues that in light of the issue of materiality. Instead, District Court’s crediting at sentencing, the relevant inquiry is this court should find that he had disclosed whether the false approximately 90% of his earnings and information is of the type reimbursements, and thus that the jury, t h a t i s c a p a b le o f properly instructed, may not have found influencing a decision of an that the omitted informatio n was agency, as opposed to an “material.” e x a m i n a t io n o f t h e magnitude of the falsehood. McLaughlin’s argument is flawed. First, his 90% calculation is dubious. In Hughes v. United States, 899 F.2d 1495, arriving at this figure, McLaughlin makes 1499 (6th Cir. 1990); see also United multiple unwarranted inferences and States v. Norris, 749 F.2d 1116, 1122 (4th conclusions. Second, it is unclear how the Cir. 1984) (stating, in context of 18 U.S.C. District Court’s calculation of loss amount § 1001, “it is not the size of the payments as to the embezzled funds (the subject of but it is the act of making a false statement one of the crimes) is in any way related to about the payments that is material”). the monetary value of the reimbursements Certainly, the undisclosed information in and benefits McLaughlin failed to disclose the LM2 report was capable of influencing in the 1993 LM2 report (the subject of the the decision of the decisionmaking body to

7 which it was addressed. Gaudin, 515 U.S. testimony respecting Martello and the at 509. Under 29 U.S.C. § 431(b)(3), receipt, which directly contradicted McLaughlin was required to disclose all of Martello’s trial testimony that he had been the reimbursements and benefits he unaware of the existence of the charge received from EMCAL. His omissions card, was plainly capable of influencing were therefore material. the jury.

We reach the same conclusion with We also find McLaughlin’s respect to McLaughlin’s conviction for argument regarding the March 1999 perjury under 18 U.S.C. § 1623, based on mistrial unpersuasive. The fact that the his testimony during the first trial that March 1999 jury was unable to return a Martello had used the charge card to make verdict is not germane to the issue of a legitimate union purchase at Staples. On whether the jury in the second trial would appeal, McLaughlin argues that his have found materiality if given the primary defense at that trial to the 29 opportunity to have done so. U.S.C. § 501(c) charges was that every expenditure made with the charge card In sum, it is patent that was a legitimate EMCAL expense. Thus, McLaughlin’s false testimony respecting he continues, his testimony that other Martello’s use of the charge card had a union officials used the charge card was natural tendency to influence and was tangential to his theory of the case. capable of influencing the decision of the Because this defense revolved around the decisionmaking body to which it was legitimacy of the charged expenditures, not addressed, Gaudin, 515 U.S. at 509. We the identity of the charge card’s user, are satisfied that a properly instructed jury McLaughlin argues that his statements could not have found otherwise. Thus, regarding Martello’s purported use of the although the District Court incorrectly charge card were immaterial. He also instructed the jury, we conclude that the suggests that the jury’s inability to return a record shows “beyond a reasonable doubt verdict after the M arch trial calls into that th[is] error . . . did not contribute to question the materiality of his lies. the verdict obtained.” Chapman, 386 U.S. at 24. We do not find McLaughlin’s arguments convincing. Whether or not III. union officials other than McLaughlin had used the charge card was an important McLaughlin also argues that his issue at the March 1999 trial. Testimony counsel provided ineffective assistance by suggesting that other individuals had used losing a critical piece of evidence and in the charge card was capable of raising turn by stipulating to damaging facts doubts in jurors’ minds as to whether regarding the evidence. McLaughlin was guilty. McLaughlin’s

8 It is well settled in this court that counsel’s stipulation that the photocopy of Sixth Amendment ineffective assistance of Defense Exhibit 2 (introduced as counsel claims under Strickland v. Government’s Exhibit 282 at retrial) and Washington, 466 U.S. 668 (1984), are the merchant’s copy of a receipt received generally not entertained on a direct from Staples’ corporate headquarters appeal. See, e.g., United States v. (Government’s Exhibit 265-A at the Headley, 923 F.2d 1079, 1083 (3d Cir. retrial) were, in fact, part of the same 1991). This refusal to entertain Strickland multi-page receipt. Where a claim of claims on direct review stems from the ineffective assistance of counsel is based reality that “such claims frequently involve on attorney incompetence, the lack of a questions regarding conduct that occurred fully developed record often precludes a outside the purview of the district court comprehensive inquiry into the elements and therefore can be resolved only after a of strategy or tactics that may have entered factual development at an appropriate into defense counsel’s challenged decision. hearing.” Gov’t of Virgin Islands v. Zepp, Zepp, 748 F.2d at133. 748 F.2d 125, 133 (3d Cir. 1984) (internal quotations and citations omitted); see also Neither aspect of McLaughlin’s United States v. Theodoropoulos, 866 F.2d Strickland claim fits into that narrow class 587, 598 (3d Cir.1989) (“[T]he proper of ineffectiveness claims amenable to avenue for pursuing such a claim is review on direct appeal. McLaughlin’s through a collateral proceeding.”). ineffective assistance of counsel claim is thus premature. We have, however, recognized a narrow exception to the rule that a IV. defendant cannot argue on direct appeal that counse l’s perfo rman ce fa iled For the reasons set forth, we will constitutional standards. As we stated in affirm the District Court’s judgment of Headley, “[W]here the record is sufficient conviction and sentence and dismiss to allow determination of ineffective without prejudice the appeal to the extent assistance of counsel, an evidentiary that it claims ineffective assistance of hearing to develop the facts is not needed.” counsel. 923 F.2d at 1083. This case does not fit into this narrow exception.

The record must be developed as to the facts surrounding counsel’s possession and storage of Defense Exhibit 2, as well as the cause or causes of its loss. Similarly, on the record before us, we cannot determine the reasonableness of