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United States v. Lore

December 2, 2005; as amended December 23, 2005

UNITED STATES OF AMERICA
v.
JOSEPH LORE, APPELLANT IN NO. 03-3043
UNITED STATES OF AMERICA
v.
DENISE BOHN, APPELLANT IN NO. 03-3217
UNITED STATES OF AMERICA
v.
JOSEPH PELLICCIA, APPELLANT IN NO. 03-4349
UNITED STATES OF AMERICA
v.
WILLIAM HURLEY, APPELLANT IN NO. 03-4350



On Appeal from the United States District Court for the District of New Jersey (D.C. Crim. No. 99- cr-00292-4/3/6/5). Honorable Mary Little Cooper, District Judge.

The opinion of the court was delivered by: Greenberg, Circuit Judge.

PRECEDENTIAL

Submitted under Third Circuit LAR 34.1(a) October 28, 2005

BEFORE: SLOVITER, FISHER, and GREENBERG, Circuit Judges

OPINION OF THE COURT

I. INTRODUCTION

These matters come on before this court on partially consolidated appeals following convictions at a jury trial in the district court on December 17, 2001, and the subsequent entry of judgments of convictions and sentences on July 10, 2003, as to Joseph Lore, July 25, 2003, as to Denise Bohn, and October 31, 2003, as to Joseph Pelliccia and William Hurley. The case originated on June 2, 1999, when a grand jury returned an indictment against Bohn, Eugene G'Sell and John Angelone charging them with conspiracy to embezzle funds from Local 1588 of the International Longshoremen's Association (the "union" or "Local 1588"), contrary to the Labor-Management Reporting and Disclosure Act of 1959, 29 U.S.C. § 501(c) ("section 501(c)"), in violation of 18 U.S.C. § 371. Subsequently, a grand jury returned a superseding indictment on December 19, 2000, charging defendants-appellants, Lore, Bohn, Pelliccia and Hurley (collectively, "defendants"), along with Thomas Rackley, who is not a party on these appeals, among other things, with conspiracy to embezzle and embezzlement of funds from Local 1588. In these proceedings, defendants appeal from their convictions by challenging numerous rulings by the district court made prior to, during, and after their three-week trial that began in November 2001. Lore and Bohn, but not Pelliccia and Hurley, also challenge their sentences in light of United States v. Booker, 543 U.S. , 125 S.Ct. 738 (2005).

II. FACTUAL AND PROCEDURAL HISTORY

A. The Parties and Conduct at Issue

Local 1588, which is headquartered in Bayonne, New Jersey, is a labor organization comprised of longshoremen, dockworkers and others who service the shipping industry.*fn1 In 1990, the government asserted that its president and secretary-treasurer, respectively Blaze Terraciano and Dominic Sanzo, had allowed organized crime elements into the union. As a result, the government initiated a civil RICO action against Local 1588 seeking to purge the union of these elements.*fn2 The civil RICO action culminated in a consent order by which the executive board of Local 1588 agreed, inter alia, that the union's officers and employees would not associate with Lore with regard to any union business. The order was unusual inasmuch as Lore was not an officer or member of Local 1588 but rather was the hiring agent for International Terminal Operations, a waterfront entity that employed many Local 1588 members. In that capacity Lore controlled the work assignments of many union members.

In December 1990, Local 1588 elected G'Sell and Angelone as its president and secretary-treasurer, respectively, to replace Terraciano and Sanzo, who had been implicated in the civil RICO action. Lore exerted significant influence over their election, but his influence over Local 1588 was not limited to the selection of its leadership for he exercised significant control over its payroll by directing that the union place certain individuals, including Pelliccia and Hurley, on it.

Bohn, who was Terraciano's daughter, and was involved romantically with Lore, staffed the Local 1588 office. According to Angelone, she gave herself the title "Administrator." Bohn was responsible for Local 1588's day-to-day financial operations, a power that she exercised to give herself complete control over its books and records. Thus, she drafted paychecks, paid bills, and conducted bank transactions for the union. Her control was so complete that she did not allow anyone else access to the union's financial records and checkbook-- not even Angelone, who replaced Sanzo as Local 1588's secretary-treasurer. Bohn enjoyed numerous benefits incidental to her employment, including the use of a leased BMW, the expenses for which Local 1588, at Lore's prompting, paid. Furthermore, Bohn received a Christmas bonus in an amount of her choice. Clearly, Bohn was secure in her position for Lore successfully intervened on her behalf when Angelone suggested terminating her employment.

As we have indicated, on June 2, 1999, a grand jury returned an indictment charging G'Sell, Angelone, and Bohn with conspiring to embezzle funds from Local 1588. In particular, the indictment charged them with abusing union credit cards by improperly charging personal expenses and obtaining kickbacks from vendors and service providers who performed services for Local 1588. G'Sell and Angelone pleaded guilty to one count of the indictment pursuant to cooperating plea agreements, and, as a result, they testified on behalf of the government at the trial in this case.

In the superseding indictment returned on December 19, 2000, the grand jury charged, inter alia, that Lore, Bohn, Pelliccia, Hurley and Rackley embezzled large sums of money from Local 1588 over a period of years.*fn3 These defendants pleaded not guilty following which there was a three-week trial on the superceding indictment at which the government alleged and demonstrated that they used three methods to embezzle union funds: (1) a salary diversion scheme; (2) credit card abuse; and (3) service provider kickbacks.

B. Salary Diversion Scheme

The salary diversion scheme appears to have been defendants' most lucrative method of embezzlement. The scheme was uncomplicated but effective. To carry it out Bohn prepared paychecks for union members who were officers or employees of Local 1588, independently of and in addition to their primary employment on the waterfront. She did not, however, deliver the checks to the designated payees. Rather, in a typical case G'Sell would endorse a check with the payee's name, and G'Sell or Bohn then would take the check to a bank to be cashed. Thereafter, the cash was returned to the union hall for disbursement, where half was delivered to Lore, usually by G'Sell, and the other half went to the designated payee.

G'Sell testified that, after being elected president of Local 1588 in 1990, he understood that half of his and Angelone's salaries would be diverted to Lore. G'Sell further testified that he similarly diverted to Lore half of Pelliccia's and Hurley's salaries, along with the salaries of other persons, at various times while Local 1588 employed them. According to G'Sell, he informed each participant in the scheme of the salary diversion to Lore, and they all acquiesced. G'Sell testified that Bohn was aware of the salary diversion scheme and, on at least one occasion, helped him count the money. Even though it may seem strange that the payees would permit the diversion of such significant portions of their payments from the union, even without regard for Lore's undoubted hold over the union and the effect that that power had on the union officials, their acquiescence in the scheme is actually not so surprising when it is considered that testimony at the trial indicated that at least some of the payees performed little or no useful services for Local 1588.*fn4 Thus, it appears that the payees sometimes were giving up something to which they were not entitled. Therefore, in at least those instances, the union and its membership, and not the payees, could be regarded as the sole victims of the scheme.*fn5 In total, the government alleged that Lore and his co-conspirators diverted over $750,000 from Local 1588 through the salary diversion scheme.

C. Credit Card Abuse

As union officers, G'Sell and Angelone obtained American Express cards for union purchases and Local 1588 paid the American Express bills. Through the use of these cards G'Sell and Angelone incurred approximately $20,000 and $10,000, respectively, in charges unrelated to the union. Bohn, though not issued a union credit card, also participated in the credit card abuse by using G'Sell's card. For instance, she spent at least $11,000 in union funds on liquor and on merchandise from a music store, dispatching G'Sell to retrieve her items and to pay for them with his union credit card. Sharon Carballo, who had been a close friend of Bohn during the time of the criminal conduct in this case, testified regarding Bohn's spending habits and stated that she witnessed Bohn use G'Sell's union credit card for purchases unrelated to Local 1588's business at a department store.

D. Service Provider Kickbacks

Lore, Bohn, G'Sell and Angelone orchestrated the kickback scheme with vendors and service providers. For example, one kickback involved Jack Doris who furnished the union with apparel-- hats, jackets, sweatshirts and other clothing items.After receiving checks from Bohn for apparel, he would cash the check at a bank and return to the union hall with the kickback in cash, which he would give to Bohn or G'Sell or both.

The vendor kickback scheme also involved various renovation and construction projects at the union hall. For instance, on several occasions the union commissioned the services of a fence company that Lore's longtime friend, Joe Toscano, owned. In one instance, Toscano's company constructed an eight-foot fence along one side of the union hall parking lot and then constructed an identical eight-foot fence a mere three inches in front of the first. Angelone testified that the second fence was unnecessary, and cost double the cost of the first fence. The government alleged that Toscano substantially overcharged the union on the fence project, and that he kicked back the overcharge to Lore. In another instance, the union hired Vito Bilotta to perform paving and roofing work. In his dealings with Local 1588, Bilotta dealt exclusively with Bohn, with whom he may have been involved romantically. She drafted weekly checks for Bilotta's services, totaling approximately $70,000, but there were no work orders or invoices supporting the expenditures. In describing Lore's influence over the construction and renovation at the union hall, Angelone recounted how Lore instructed him to cease negotiating for lower prices on union hall construction and remodeling.

E. Proceedings in the District Court

The trial on the superceding indictment began October 9, 2001, but the court declared a mistrial the following day after certain jurors observed Lore making a threatening gesture toward the government's first witness, G'Sell. Consequently, the court selected a new jury following which the trial began again on November 7, 2001. After three weeks of testimony, the court submitted the case to the jury on December 12, 2001. The jury returned a verdict of guilty as to all defendants on all counts on December 17, 2001. Subsequently the court sentenced Lore, Bohn, Pelliccia, Hurley and Rackley to custodial terms of 70 months, 38 months, 24 months, 18 months and 13 months, respectively, followed by appropriate periods of supervised release.*fn6 Defendants (not including Rackley) have timely appealed. Thus, as we have indicated, Rackley is not a party to these proceedings. The district court had jurisdiction under 18 U.S.C. § 3231, and we have jurisdiction pursuant to 28 U.S.C. § 1291 and 18 U.S.C. § 3742(a).

III. DISCUSSION*fn7

A. Section 501(c) Convictions

1. Statutory Interpretation

Defendants raise two arguments concerning the reach of 29 U.S.C. § 501(c). They argue that the salary diversion scheme was beyond the scope of the conduct that section 501(c) prohibits, and Bohn adds that she is not within the class of persons the section covers. The district court rejected both arguments. We exercise plenary review over defendants' challenge to the district court's interpretation of 29 U.S.C. § 501(c). See United States v. Urban, 404 F.3d 754, 762 (3d Cir. 2005).

a. Conduct Covered by Section 501(c)

Lore, Pelliccia and Hurley contend that the salary diversion scheme underlying their convictions is beyond the reach of section 501(c) which provides in pertinent part:

Any person who embezzles, steals, or unlawfully and willfully abstracts or converts to his own use, or the use of another, any of the moneys, funds, securities, property, or other assets of a labor organization of which he is an officer, or by which he is employed, directly or indirectly, shall be fined not more than $10,000 or imprisoned for not more than five years, or both.

29 U.S.C. § 501(c).*fn8 In United States v. Silverman, 430 F.2d 106 (2d Cir. 1970), the court explained the crime that Congress intended to establish in enacting section 501(c):

[Congress has] gone beyond the common law offense of larceny and the old statutory crime of embezzlement because 'gaps or crevices have separated particular crimes of this general class and guilty men have escaped through the breaches,' Morissette v. United States, 342 U.S. 246, 271-72, 72 S.Ct. 240, 254, 96 L.Ed. 288 (1952). But, as was there held, despite minor variations in language the common thread is that the defendant, at some stage of the game, has taken ...


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