Thursday, February 10, 2005

Sixth Circuit Mail Fraud Decision

The Sixth Circuit issued a decision on Feb. 8 (U.S. v. Douglas) reversing the dismissal of an indictment of two former United Auto Workers representatives charging them with mail fraud, conspiracy, and Hobbs Act extortion related to union demands made as part of a contract negotiation.  Donny Douglas and Jay Campbell were officials of Local 594, and during negotiations for a contract at a Pontiac, Mich., truck factory, allegedly they demanded that the company hire Campbell's son and the son-in-law of a former Local official as "skilled tradesmen" even though neither met the qualifications for that position (which pays over $100,000 per year).  The mail fraud count alleged that the the defendants deprived union members of property, namely the right to compete for the skilled tradesman positions that were improperly given to the relatives, and honest services fraud.  The district court dismissed the money/property allegation, relying on the Supreme Court's decision in Cleveland v. United States, 531 U.S. 12 (2000), that held unissued government licenses were not property. The Sixth Circuit reversed, stating that "We are persuaded by the government’s argument that, were the right to compete to have such little value—indeed, value equivalent to an unissued government license—then the union would not bother to bargain collectively for this hiring system . . .  The right to compete guaranteed by the collective bargaining agreement in this case is sufficient to constitute property for purposes of the mail fraud statute." The district court dismissed the honest services claim because the government only alleged an unfair labor practice and the indictment did not identify how the defendants breached their fiduciary duty.  The Sixth Circuit rejected that reasoning too, holding that "The indictment has only to allege that defendants devised a scheme to defraud, involving use of the mails for the purpose of executing the scheme. The indictment sufficiently makes these allegations." (ph)

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