ARROYO v. UNITED STATES

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Argument of John R. Hally

Chief Justice Earl Warren: Number 246, Wadelmior Arroyo, Petitioner, versus United States of America.

Mr. John R. Hally: May it please the Court.

Chief Justice Earl Warren: Mr. Hally, you may proceed.

Mr. John R. Hally: Mr. Chief Justice, Members of the Court.

This case presents a question of the intended scope of Section 302 of the Taft-Hartley Act.

The defendant was indicted and convicted in the District Court of Puerto Rico after a jury trial for violation of subsection (b) of that Act and his conviction was affirmed by the Court of Appeals for the First Circuit.

He contends in this Court in which he is proceeding in forma pauperis as he has throughout.

His conduct, which there was evidence, did not constitute an offense within Section 302 because the structure of the Act is of some significance to the resolution of the question, I will comment on it briefly.

Subsections (a) and (b), respectively, make it unlawful for an employer to pay to a union representative money and for a union representative to receive money from the employer.

Subsection (c) in form halves out exceptions to the foregoing flat prohibitions.

The most important ones of which are the payment of the dues of union members deducted by the employer pursuant to duly authorized check off and the one involved in this case, payment by the employer to a trust fund established by the union for the payment of welfare benefits pursuant to a collective bargaining agreement.

Subsection (d) of the Act makes the willful violation of the section a misdemeanor, and subsection (e) of the Act gives to the Federal District Courts equity jurisdiction without regard to the provisions of the Norris-LaGuardia Act to restrain violations of the section.

The defendant was indicted in 1955 for a violation of subsection (d) in that he received $15,000 from two employers on February 24th, 1953.

At that time, he was the president of a Puerto Rican local of the International Longshoremen's Association which represented units of employees of two Puerto Rican sugar processing concerns.

In February of that year, the defendant, on behalf of his local, had negotiated with the employers the collective bargaining agreement for the ensuing three years.

The Government's -- that agreement contained an expressed provision for the establishment of a welfare fund to be administered jointly by the employer and the union.

The Government's evidence was that at the signing of the agreement, the defendant requested that the employer's two checks to be their contribution to the fund pursuant to the terms of the agreement in the amount of $7500 each to be delivered to him in order that he might exhibit them to the union members at a meeting that night.

These checks were made payable to the union not to the defendant and each had attached to it a voucher expressly stating that it constituted the employer's contribution to the union welfare fund established under the collective bargaining agreement signed that day.

This was February 21st.

On February 24th, the defendant deposited the checks endorsed by the secretary of the local and by himself in a Puerto Rican bank.

The account was expressly in the name of the pension fund or whether the welfare fund of the union.

It appeared that the single prior fund established in this industry that is between this employer and this union had been deposited in a different Puerto Rican bank, but it did not appear that in any other respects, the establishment of the fund by deposit differed from the prior practice.

This was February 24th.

On March 2nd, the defendant presented to that bank a resolution signed by officers of the local authorizing him to withdraw checks from the fund on his sole signature.

At the trial, one of the alleged signers of the resolution denied his signature.

However, there was evidence which was not contradicted that other officers of the local had, in fact, signed the resolution.

Admittedly, the practice as to the single prior fund established in this unit by the union had been to have the checks from the welfare fund countersigned by the employer representative and by the defendant as the representative of the employees.

This was on March 2nd.

The first withdrawal from the fund was on March 16th, that is the first withdrawal on which the Government introduced evidence, on March 16th, almost three weeks after the date as of which the defendant is alleged to have violated the Act by receiving money from the employer and almost a month after the date as to which he actually took physical possession of the two checks for $15,000, there was evidence which was introduced over the strenuous objection of the defendant that some of these withdrawals were for the personal benefit of the defendant or for board union but non-welfare fund purposes such as the purchase of office files and equipment and the payment of union salaries.

The case was -- the -- this evidence indicated that on March 26th, the balance remaining on the first bank account was withdrawn by the defendant and deposited in another bank account in a general union account as to which he again had sole power of withdrawal.

And the Government again presented evidence over objection as to withdrawals in this account extending through April 14th, 1953 or almost two months after the period as to which the defendant was alleged to have violated the Act by receiving money from the employer.

The case was submitted to the jury on instructions that if you should find that the defendant had complete and sole control of the fund either as of the time he received the checks or as of the time he deposited them on the bank, you should find the defendant guilty.

One other fact is relevant, we believe.

The Government conceded several times in the proceeding below that the employers had not violated the Act because they had made their payments bona fide within the exemption of subsection (c), namely, to a trust fund established by the union.

The petitioner's position is that on such a record, whatever might be true on an indictment for embezzlement or some other crime, a violation of Section 302 was not made out.

Quite the contrary, we say that the evidence shows a payment to the -- by the employer to the defendant within the expressed exemption of subsection (c) covering payments by the employer to a union welfare fund established by collective bargaining agreement.

Justice John M. Harlan: In your argument (Inaudible) what you're saying, in fact, I understand it, you cannot reach (Inaudible)

Mr. John R. Hally: I'm not sure that even --

Justice John M. Harlan: In other words, if you had received by a trust fund, and certainly under the theory on (Inaudible) cases under the jury, the element of intent (Inaudible) determine whether at the moment you receive this money (Inaudible)

Mr. John R. Hally: Well, having in mind that the statute contemplates that these trust funds will “be established by the employee but with less formality”, there would be true of a probate administered trust.

I would say that even with the emendation Your Honor suggests that there had been a payment to a trust fund, a receipt by a trust fund here.

The money have been put in a bank in a --

Justice John M. Harlan: It's only a trust fund.

Now, in theory (Inaudible)

Mr. John R. Hally: Well, I don't think --

Justice John M. Harlan: (Inaudible) in that case because the statute doesn't say receive (Inaudible)

Mr. John R. Hally: Well, I would take advantage of the fact that the statute doesn't say that, but I think that the trust fund had -- had vitality here as shown by the evidence of the employer's attempt to participate in this administration in the evidence in the case that at a subsequent period, the defendant discussed his administration of the fund with the employer.

In any event, I wouldn't think that that intent theory in which the Government relies on an appeal would necessarily bear upon the suggestion Your Honor made.

In other words, in that case, the control theory on which the case was submitted to the jury might be more relevant.

But the Government here is proceeding upon a theory that the defendant's guilt depends upon the intent with which he receives the money.

Justice John M. Harlan: (Inaudible) the exception, however, does not have (Inaudible) language.

Therefore, I suppose you (Inaudible) since the exception requires only that the payments (Inaudible) there's no dispute here that the payment was in good faith (Inaudible)

Mr. John R. Hally: That is a portion of the defendant's case here.

In other words, this statute is malum prohibitum.

And we think that the Act which produces criminality should be definite and precise.

There having been a concession that the payment was made to the trust fund within the exception, we say that absent proof that there was a sham considered in by both the employer and the defendant to make this a bribe.

But absent that, the determination of criminality should depend upon those facts.

And we rely upon the facts that subsection (e) of the Act gives equity jurisdiction to the federal courts to restrain and prevent violations of the so-called trust fund.

In other words, Congress had before.

And at the time of enactment of 302, evidence that union leaders had used these trust funds for purposes other than that which the employer had purportedly paid them over.

One of the things they were particularly concerned with was the use for political purposes or strike funds.

Accordingly, Congress wrote in to subsection (c) a series of regulations as to how the fund should be administered, limited purposes upon which it could be expended.

But since the use of those moneys for those broad purposes would not have been criminal in 1947 and 1948, we suggest that you cannot infer now or cannot infer that Congress had in 1947 and 1948 an intent to make them criminal.

Instead, you have to look at the scheme of draftsmanship of 302 and conclude that in giving equity jurisdiction in subsection (e), Congress was looking to the federal courts to have power to restrain these post payment episodes and incidents in a manner in which a probate court or a court in equity would administer a trust, in other words, on the civil side.

And what the Government is attempting to do here is to retroactively create criminality from episodes, events which really occurred one month, even two months after the period of the event of which the indictment deals with the payment and receipt.

Justice William O. Douglas: I suppose the employer would be liable under (a) if he was in cahoots, paid this to a trust fund knowing that the employee would be --

Mr. John R. Hally: That is right.

We say that is the only case of sham.

One of the arguments of the Government here is that our argument produces the possibility of sham.

We say it produces the possibility of sham only if you concede, assuming the first case, that the case is within the statute.

Clearly, if the employer intended to buy the union representative by casting it in a form of payment to the welfare fund and the evidence was adduced that both sides knew it, then it would be a case of bribery within the expressed purpose of (a) and (b) because that is another reason why we say quite apart from literally applying the language of the statute to our acts, we rely on something broader than that, although we feel that under principles of strict construction of criminal statutes, it would be sufficient for us to do as I have done in the preceding portion of my argument, literally apply the language.

But we rely upon the fact that the legislative history of 1947 and 1948 shows that subsections (a) and (b) were directed to the twin crimes of bribery and extortion and the impediments they imposed upon collective bargaining since it is clear that what happened here was neither bribery nor extortion, we say that the Act does not apply, that is subsection (b) does not apply to defendant's conduct.

The Government has reviewed the legislative history which is put out in our brief into a greater extent in the Government's brief, and agrees with us that the prime purpose of subsections (a) and (b) was the prevention of bribery and extortion.

However, it argues an additional generalized purpose, which I shall discuss in a moment.

Justice Charles E. Whittaker: May I ask (Inaudible)

Mr. John R. Hally: As far as federal law would be concerned, I wouldn't know.

I will assume not.

This would be a case governed by insular law.

And the record shows on page 20 that at the time the defendant proceeded to trial here, there was an insular indictment that is in the state courts to the island courts for embezzlement pending against it.

And so, in the sense, that comes back to our case that the -- there is no need to stretch 302 to deal with the facts of this case because it was either dealt with by state or insular law.

It is dealt with the state and insular law if it is an embezzlement and that the jury shall find on a charge of indictment for embezzlement or 302 was not intended to deal with it.

We say that looked at broadly, these facts would represent themselves to the average lawyers if it's a case of embezzlement.

Assuming that true, a taking from the trust fund, not a taking from the employer or receiving from him since much of the evidence on which the Government relies covers a period of two months after the crucial date, it's a taking from the trust fund.

And that the recent legislative activity of the Congress in which they have exhaustively reviewed the evidence of cases of personal misuse and abuse of union funds and union trust funds for the benefit of leaders, have had designed and propounded legislation to cure that, is the strongest legislative history showing that this case is not within Taft-Hartley as it was enacted in 1947 and as 302 was a form of it.

Congress --

Unknown Speaker: (Voice Overlap) --

Mr. John R. Hally: -- did not have before it at that time anything more than the use by union leaders of the funds for sweeping purposes such as political purposes or strike fund benefits.

It was not then considering this question of abuse for personal gain of abstractions.

And the strongest evidence that as -- to repeat myself, is that Senator Kennedy, the Kennedy-Ives Bill of the last term, the Kennedy-Irwin Bill of this term has an expressed provision in it which would cover embezzlement taking and manipulation of the funds which would clearly cover the facts of this case and would permit an indictment.

Justice John M. Harlan: But supposing under paragraph (a) required giving Christmas presents to the head of the union, is that (Inaudible) to be indicted for that under (a)?

Mr. John R. Hally: I believe it could be because --

Justice John M. Harlan: It's a bribery statute.

Mr. John R. Hally: It's a -- it is a bribery statute.

Justice John M. Harlan: (Voice Overlap) the presents got no element of bribery, I mean --

Mr. John R. Hally: Well, of course, there again, it might be a --

Justice John M. Harlan: -- good faith.

Mr. John R. Hally: -- it might be a factual question as a practical matter.

That particular episode might be covered under subsection -- under the exemption of 2 of (c) (1) payment or (c) (1) or (c) (4), I guess, and then with the payment of the employees wages.

In other words, that's cut out from the flat prohibition of (a), the employer can pay the union man his wages if he's a shop steward or on the payroll.

In the case, Your Honor, of course, it might be covered as a practical matter by that.

Justice Charles E. Whittaker: (Inaudible)

Mr. John R. Hally: That is correct, but I doubt if anything turns on it.

The Government has not argued that.

Nowhere in the case was it suggested that anything other than the intent or perhaps the power of the defendant over this fund rendered his activity illegal.

I took it out from the exemption of (c).

Apparently, the practice is or at least it was in the case of the single prior fund that the union establishes a trust fund by a bank account because it goes on a trust fund established by such representative.

So that in this case, it was paid to the union the trust fund not having an independent legal entity or existence paid to the union and with vouchers attached showing that it was paid.

That, I think, is important.

The vouchers attached to the check showing it was paid to the trust fund so that I think in effect, that it would have been paid to the trust fund with those vouchers attached the checks.

Justice Potter Stewart: The -- the payee of the check was the union.

Mr. John R. Hally: It was the union with the vouchers as I have said attached showing that it was payment expressly for the union welfare fund established by the collective bargaining agreement of the same day.

Justice Potter Stewart: May I ask you one other question?

Chief Justice Earl Warren: There's no question of --

Justice Potter Stewart: Excuse me.

Chief Justice Earl Warren: Oh, pardon.

Go ahead.

Justice Potter Stewart: (Inaudible)

Chief Justice Earl Warren: No question of any collusion here between the employee, employer and -- and (Voice Overlap) --

Mr. John R. Hally: Absolutely devoid because of this expressed concession by --

Chief Justice Earl Warren: Yes.

Mr. John R. Hally: -- the Government that the -- that the employer was absolutely guiltless that bona fide, he intended to make its payment within the exemption upon which we rely.

Justice Potter Stewart: Mr. Hally, did you say that the record in this case shows that there is -- there is or has been an indictment of this matter --

Mr. John R. Hally: Yes.

Justice Potter Stewart: -- or insular law (Voice Overlap) --

Mr. John R. Hally: It's the most pleading reference but it is in the record.

It's on page 20 and it's in the form of a subpoena.

Justice Potter Stewart: Does it show that it's for the same conduct with the question here?

Mr. John R. Hally: I don't -- I don't know the status of that case.

To answer your question, it is for the crime of embezzlement.

That's the language --

Justice Potter Stewart: It all shows.

Mr. John R. Hally: Yes.

And that's why I say that that is ample reason not to strain this statute with the broad and definite legislative history of relating to crimes of extortion and bribery to cover this case, this -- this noble case.

The Government conceded this at several points and that there is no necessity to which the odd constructional theory which the Government relies on here.

I would like to say that the Government's theory does not warrant a different result from the one from which I have been arguing or call for a different reading of the legislative history.

As I understand the Government's theory, they review the legislative history to find the sentiments of certain senators in 1947 and 1948 who were concerned over the fact that union funds were being used by leaders for purposes other than that on which they were purportedly paid over.

And specific examples were given in the debates of the use for political purposes, the Republicans being in power at the time.

And there was the concern over the use of strike funds that they might overwhelm small employers with these huge sums they were acquiring.

But the Government concludes that there was an intent on the part of the senators to prevent these funds from being used for any purpose than that for which they were paid on a specific exemption granted in subsection (c).

And from that, they then argue that if the payment has been made within the exemption of (c) but received by the union man with the intent at the time to make another use of it, then (b) -- (b) has been violated, subsection (b), (a) relates to employer.

We --

Justice Hugo L. Black: Suppose a man -- suppose a man had paid this money into the funds, could he be indicted that he embezzled the (Inaudible)

Mr. John R. Hally: Not -- not under 302.

Justice Hugo L. Black: (Voice Overlap) federal statute?

Mr. John R. Hally: I don't know whether there is a general federal statute relating to embezzlement.

I would gather not based on this current legislative history of Congress.

Justice Hugo L. Black: Could be under the (Inaudible)

Mr. John R. Hally: Well, that's just what we contend that he could not under this side.

There's no other provision of Taft-Hartley.

Justice Hugo L. Black: He -- he did not pay the money into the fund.

Mr. John R. Hally: No, they --

Justice Hugo L. Black: I mean the -- the labor union man did not pay into the fund?

Mr. John R. Hally: He just deposited it in the fund and then there was the evidence of these withdrawals, some of which were for personal benefit from which the --

Justice Hugo L. Black: He -- you mean, he took all the evidence, showed he took it up later of the fund?

Mr. John R. Hally: No, there's selected evidence.

The total -- the charge, the indictment is for receiving $15,000 which is the total amount of the employer's contribution of fund.

The Government's evidence accounted for about $2200 of that $15,000, and one can only infer that much of the other withdrawals were either legitimate or for some reason, the Government didn't choose to put them in evidence.

But he didn't take all of it on this record and some of that $2200 which he did take was for broad union purposes such as office files or equipment but the Government argued that it was not a welfare fund purpose.

But he deposited that check with the voucher showing that it was a payment for a trust fund within (c) in a bank, and the first such withdrawal by him was three months.

I'll strike that three.

Justice Hugo L. Black: Deposited in a bank in his name.

Mr. John R. Hally: In the name of the union trust fund.

And that was the prior practice.

And I think -- well, it was the prior practice in this industry.

Justice Hugo L. Black: He took it out of that fund.

Mr. John R. Hally: And he took it out of that fund three weeks for the first time.

The first such withdrawal, it was only a small partial one was three weeks after the establishment by the deposit in the bank of the trust fund.

And we say that fact is significant in showing the extremely strained and tangential relationship of the defendant's activities to the indictment which is a charge of receiving from the employer on February 24th.

Justice John M. Harlan: Well, supposing he had taken the checks the same day --

Mr. John R. Hally: And ran away.

Justice John M. Harlan: -- forged the endorsements, stuck it into his property, cashed it and stuck it into his account --

Mr. John R. Hally: I think that is --

Justice John M. Harlan: -- would your case be different --

Mr. John R. Hally: I think that's the hard case.

Justice John M. Harlan: -- under the statute?

Mr. John R. Hally: That's the hard case.

And I -- I really don't have made my mind up on it.

I -- I think possibly -- certainly that could go to a jury without anybody feeling there'd been any great abuse, I think, of the intent.

But I think probably logic requires me to say that even that case, so long as you had as you do here, the expressed concession by the Government that the employer had bona fide made his payment within the exemption that that -- even that case wouldn't be in the Act but I --

Justice John M. Harlan: I think that's a (Inaudible) you raised on.

I don't --

Mr. John R. Hally: I would.

Justice John M. Harlan: (Voice Overlap) -- you argue all this other stuff.

Mr. John R. Hally: I do.

I -- I do, aided by Your Honor's suggestion, come to that conclusion.

To advert again to the Government's theory that the jury were instructed that the intent with which the defendant took this money and approved that intent, they go back to the subsequent takings.

It was crucial to his guilt.

We say the short answer to that is that the case was not tried on that theory.

The instructions of the judge to the Court were repeated.

They appear principally on Record 237, that if you find the defendant had complete and sole control over the funds, and that's said twice on that page, you shall find him guilty, a known instruction as of which the defendant's guilt depended upon the intent with which he received the money, the word “intent” which is certainly a word of art in the criminal law, would have been crucial in the instruction with reference to the defendant's act.

But that word, that particular word is no way used -- the word “objective” is -- the word “intent” is no way used in the judge's instructions.

And certainly, the Court of Appeals for the First Circuit didn't deal with this case as having been presented to the jury on any theory that the defendant's guilt depended upon his intent in taking the money, it analyzed it that his guilt depended upon the control.

Justice John M. Harlan: Well, intendment would be an important factor because you turn to answer Justice Douglas is that employer pay money ostensibly to a trust fund but knowing that it was a phony trust fund, the courts here would be not within the exception under (Inaudible)

Mr. John R. Hally: Well, I think even in that case, the evidence might proceed without particular examination into the subjective intents of the parties.

For example, if it were shown that the employer said something about he was going to pay off the fellow or something like that.

In other words, it would be -- it -- I don't think intent, the statute after all is malum prohibitum.

And this Court has so characterized that the intent should be crucial.

And I would not admit to an intent, of course, possibly to determine whether there had been a sham payment intent might become relevant.

But certainly, not in this case where there is no evidence of possibility of contention of sham.

The -- as I say, the principal -- the dispositive answer to the Government's argument is the case was not tried on this theory of intent.

And as this Court said in Jones against the United States last term, the Government cannot sustain on appeal a case or a conviction on a theory which is not supported by the record below.

The principal other reason why we feel that the statute or the Government's theory, particularly, is not supported or is not correct, is that they misread the scheme of draftsmanship of 302 and ignore the equity jurisdiction given in subsection (e) to the courts to restrain these post event -- these post payment and receipt activities.

Congress didn't intend to make them criminal on the basis of the acts and events appearing days, weeks and months after the payment.

The event surrounding the fact of payment was where to determine criminality.

The subsequent activities which might constitute an abuse of trust would be covered by the equity powers of court.

Chief Justice Earl Warren: We'll, recess now.

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Argument of John R. Hally

Mr. John R. Hally: -- and that is we feel the unfairness inherent in the scope of the evidence, it opens up to use by the Government in such a trial.

We have charged this here or raised it as a second question namely that there was a fatal variance between -- fatal and prejudicial variance between the indictment and the particulars and the proof.

The Government contends that we have, in effect, smuggled a question in.

I don't -- I feel that it was fairly raised, but certainly, it was not expressly raised on the petition for a certiorari, but we feel that it's clear on the record.

The defendant here was indicted for receiving $15,000 on February 24th.

He asked for particulars and the Government said it was -- it was received in the form of two checks, for $7500 each on February 21st.

At that point, the defendant fairly foresaw, I submit, the scope approved for the trial, February 21st, the collective bargaining agreement, February 24th.

Instead of the trial, he was met with evidence of these withdrawals of moneys from the bank accounts extending to April 14th, almost two months after the date specified in these particulars.

Even if this is not available to us as in the point on appeal, we say that this fact cuts to the invalidity on the Government's theory.

Because certainly, if evidence, two months after the date which Section 302 deals with, namely, the receiving or the paying by the employer, the receiving by the employee can be used, why could an evidence six months, eight months, a year, payments to welfare funds are made annually under such a scope of evidence, the entire dealings between the employer and the employee would be available to the Government and its proof in all trust funds, in all subsequent breaches of them could be brought within the ambit of 302, which should be clearly contrary to the obvious intent of Congress in now dealing with taking up grappling and attempting legislation to cover this whole subject of misuse for personal benefit of trust fund moneys.

Chief Justice Earl Warren: Mr. Grimm.

Argument of Eugene S. Grimm

Mr. Eugene S. Grimm: May it please the Court.

This is a labor racketeering case in the very real sense.

I first would like to lay one ghost that has arisen with respect to this notation on page 20 of the record.

It indicates a summons for trial for embezzlement.

I made an inquiry regarding that and I've been informed by the United States attorney from Puerto Rico, that the prosecution of Arroyo in Superior Court Ponce Division involved two charges for embezzlement of funds belonging to the union of the Central Mercedita, Ponce local, committed April 14th and May 11th, 1953.

Jury trial was held and Arroyo was acquitted March 12th, 1957, which was after this prosecution.

In any event, it's clear that the substance of the charges -- a charge, in this case, was not the substance of the trial in Puerto Rico local court.

Justice Hugo L. Black: May I ask you, is it the reason he could not be indicted for embezzlement there on the evidence that you have?

Mr. Eugene S. Grimm: Yes, sir.

That's the --

Justice Hugo L. Black: You're going to (Voice Overlap) --

Mr. Eugene S. Grimm: That's the heart -- that's the heart of our argument in this case, Your Honor.

Justice Hugo L. Black: Then he could not be prosecuted for embezzlement of these funds?

Mr. Eugene S. Grimm: That's right.

Chief Justice Earl Warren: With the -- with the embezzlement charges in Puerto Rico, the same transactions?

Mr. Eugene S. Grimm: Your Honor, I'd gather from the statement in this telegram since it involved in -- an embezzlement from the union that it was not the same as the charges -- as the charges in this case that is the substance was different.

Chief Justice Earl Warren: Maybe it --

Mr. Eugene S. Grimm: But in --

Chief Justice Earl Warren: -- inquires acquittal, because it's from a trust fund and not the union.

Mr. Eugene S. Grimm: Well, perhaps so, Your Honor, but I was going to go on and say but in any event, that would be the second trial.

You see and there was it -- it would raise no question of form of jeopardy or anything of the sort here, so far as this case is concerned.

Second, I'd like to turn --

Justice William O. Douglas: Is that the same transaction?

Mr. Eugene S. Grimm: Sir?

Your Honor?

Justice William O. Douglas: The same transactions?

Mr. Eugene S. Grimm: I gather from the information which I have that they are not the same transactions.

They were committed on different dates.

Here, the allegation is that and a proof is that the offense occurred February 21st and in the local trial judging from this charge were based on a transaction occurring April 14th and a later one, May 11th which was well beyond the --

Justice Hugo L. Black: Same year?

Mr. Eugene S. Grimm: Same year, yes, Your Honor.

I'd like to turn to the statute now.

Much has been said, but I'd like to outline the exact language of the statute.

On page 2 and 3 and 4 of the Government's brief, 302 (b) is the basis of this prosecution.

And 302 (b) says, "It shall be unlawful for any representative of any employees who are employed in an industry affecting commerce to receive, or accept, or to agree to receive or accept from the employer of such employees any money or other thing of value."

Now, (c), "The provisions of this section shall not be applicable -- and skipping down to 5 at the bottom of the page, "With respect to money or other thing of value paid to a trust fund established by such representative for the sole and exclusive benefit of the employees of such employer and their families."

And then on page 4 at the top of the page, "Provided that such payments are held in trust for the purpose of paying medical benefits and other welfare benefits and (b) the detailed basis on which such payments are to be made is specified in a written agreement with the employer and employees and employers are equally represented in the administration of such fund."

In other words, the fact that petitioner deposited this money in a -- in a bank account labelled, "welfare fund" is not at all important.

This payment was illegal unless that fund was jointly administered.

There had to be employer participation and dispensation of that fund.

Justice John M. Harlan: Well, so far as the employer -- and there was a time he paid it, that was to be the situation.

Mr. Eugene S. Grimm: That's right, Your Honor.

Justice John M. Harlan: So, you don't question the good faith of the employer?

Mr. Eugene S. Grimm: Not at all, sir.

Justice John M. Harlan: And it's applying to this section?

Mr. Eugene S. Grimm: Not at all.

But our point is the fact that the bank account on which he deposited these checks was labelled, welfare fund, does not alter the case at all.

So long as he was the one who had sole control over that fund and sole authority to dispense the funds, the receipts of the money was illegal and --

Justice Hugo L. Black: But didn't he have sole authority under --

Mr. Eugene S. Grimm: Sir?

Justice Hugo L. Black: -- the contract?

Mr. Eugene S. Grimm: Sir?

Justice Hugo L. Black: Was the money paid under the contract which gave the employer partial authority over the funds?

Mr. Eugene S. Grimm: Yes, sir.

On page 26 of the record, the collective bargaining agreement entered into by the parties contained Article 6.

Article 6 reads as follows that is impertinent part, "The employer shall -- shall establish a fund which shall be known as the welfare fund in the amount of $15,000."

And then it specifies the things for which this fund can be spent.

And then the last paragraph, "This welfare fund shall be administered by a committee that will be appointed by mutual agreement between the union and the employer.

The committee thus appointed shall furnish the employer monthly, with a written statement of the disbursements made from said fund."

Justice Hugo L. Black: Was there such a mutual agreement?

Mr. Eugene S. Grimm: Yes, sir.

Well, that -- this is -- this is the agreement, Your Honor.

Justice Hugo L. Black: This is the agreement.

Mr. Eugene S. Grimm: This is the agreement which was signed on February 21st, 1953.

Now to -- to put --

Justice Hugo L. Black: But the only thing that the deviation then from this is, as I gathered, that that the man put the money in a new deposit, calling it welfare fund is that it?

Mr. Eugene S. Grimm: Well, from the facts which you've heard so far, Your Honor, you would gather that impression.

But that is not the fact that was proved at the trial and that's why I'd like to go on to the facts a little more.

Justice Hugo L. Black: What is -- what is the deviation from this, specifically?

Mr. Eugene S. Grimm: The -- the deviation is simply this.

These parties have been negotiating together for -- well, ever since 1949.

And as a matter of fact petitioner as president of his union local has served as chief negotiator for the union and a Mr. Goyco has served as negotiator for the employers.

Now, there were two employers, but they were operated as one enterprise.

And they had been negotiating since 1949.

There had been a previous contract entered into for the year 1952.

That contract provided for the establishment of a welfare fund in the sum of $15,000.

The previous fund was to be dispensed under joint control by a committee.

It had been dispensed under joint control by a committee.

It had pending disbursement.

It had been deposited in a bank account established in the Bank of Ponce, Puerto Rico.

That bank account was still in existence and two signatures, one for the union and one for the employer were required to draw checks against that account.

Now, when they were negotiating this new contract, the question came up as to who was to serve on the disbursement committee for this welfare fund.

At that time, petitioner affirmatively stated that he wanted to be the union representative on this disbursing committee.

Now, he had been the representative on the previous committee as well.

And so, that was no novelty.

But this, we claim, as a false representation, because it, at least, it clearly indicated to the employer that he was willing to accept the principle of joint control over this fund.

And that was the only basis upon which the fund could be established and that was one of the things which the employer have in mind when returned the check over to him.

Now, there is a second item here.

At the time the contract was signed, the previous year, the welfare fund had been deposited by a representative of the employer.

However, petitioner stated that he wanted to show the checks to a meeting of the employees to be held that evening.

And he agreed to deposit those checks in the then existing welfare fund bank account in the Bank of Ponce, Puerto Rico.

Justice Hugo L. Black: That was his duty under the contract?

Mr. Eugene S. Grimm: That -- that was his -- that was his duty under the verbal understanding with the employer at the time that the checks were turned over to him.

On that basis, because of his official position as president and chief negotiator, because he had previously served on the welfare fund committee, because he had nominated himself to be a member of the new committee, because he agreed to deposit the checks in the then existing bank account which required two signatures to -- to withdraw funds from that account, on that basis, the checks were turned over to him.

Now, instead of depositing those checks in the then existing bank account, he took those checks to a different bank, the National City Bank of Ponce, Puerto Rico, and he opened a new account.

And --

Justice Hugo L. Black: And made them to his own use, is it?

Mr. Eugene S. Grimm: Yes, Your Honor.

Now, that new account was labeled, welfare fund, but he deposited the check in -- in the new bank account and a few days later, he turns up with the union resolution, but purports to be a resolution of the board of directors of the union and that resolution says, "That as a result of consideration by the union board of directors, we have authorized the petitioner to draw upon this welfare fund on his own signature."

Now, we showed, the Government proved that trial, presented evidence from which the jury could infer that that resolution was spurious, from beginning to last.

The meeting of the board of directors which purportedly had passed that resolution never took place.

There were two signatures appearing on that resolution at the time it was introduced in evidence, one was petitioners', one was -- belonged to a Silvagnoli, the union secretary.

Silvagnoli testified his signature was a forgery.

Petitioner presented testimony from witnesses, the union vice president for instance, testified -- well, he had signed this resolution originally, but it had been torn at the bottom and perhaps his -- his signature has been torn off that is at least -- that was the inference he wanted to convey.

But even that witness -- the defense witness conceded that Silvagnoli's signature, the signature of the union secretary appeared to be a forgery.

Justice Hugo L. Black: Wouldn't -- would he had been punishable in Puerto Rico by forgery and by embezzlement under those circumstances?

Mr. Eugene S. Grimm: Your Honor, I --

Justice Hugo L. Black: He have been --

Mr. Eugene S. Grimm: Provided that Puerto Rico has a fairly standard -- I would say no, Your Honor.

Justice Hugo L. Black: No?

Mr. Eugene S. Grimm: I would say no.

Justice Hugo L. Black: For forgery?

Mr. Eugene S. Grimm: For forgery.

Justice Hugo L. Black: I understood you to say that forgery was admitted.

Mr. Eugene S. Grimm: Well, that the signature -- by that I meant to say that the signature was false.

It was false.

But I understand forgery to -- well, no.

I said, yes, it would be a forgery because he used it --

Justice Hugo L. Black: Why wouldn't be embezzlement when he takes the money and supposed just go -- he had (Inaudible) collecting that money, but he just want to let the fund that he got it out and convert it to his own use?

Wouldn't that be embezzlement?

Mr. Eugene S. Grimm: Well, we say no, Your Honor.

That is larceny by trick because from the very beginning, from the very moment that he received those checks and converted them into money, he had no intent except to convert them to his own use.

Justice Hugo L. Black: What if it's larceny by trick?

Is that punishable in Puerto Rico?

Mr. Eugene S. Grimm: I do not know, Your Honor.

But it's certainly punishable by Section 302 (b) and this, we show, through the legislative history of the section.

Now, back to this question of forgery, since he presented this resolution to the bank and cause the bank to rely upon it, in -- in permitting -- in changing the signature card or permitting a signature to be cut -- card to be made out on his own signature, it might constitute forgery under Puerto Rican law, although, as I say, I'm not specific as to Puerto Rican law.

But --

Justice Hugo L. Black: It certainly could make it punishable couldn't it?

Mr. Eugene S. Grimm: As --

Justice Hugo L. Black: At a local (Voice Overlap) --

Mr. Eugene S. Grimm: -- a statute -- a local statute could be drawn, I suppose, that would make it punishable as forgery in which would fall within what we -- we regard as a reasonable statement of the crime of forgery.

Justice Felix Frankfurter: May I ask, what is the (Inaudible)

Chief Justice Earl Warren: Well, Mr. Grimm, I was going to ask you this.

He accomplished this fraud by means of one kind of forgery, let me give you another kind of forgery and see if it -- you would still be under this act.

Suppose, he took this check and deposited it in the proper fund, the fund that should have been deposited in and immediately drew a check, signed it himself and forging the signature of the second (Voice Overlap) --

Mr. Eugene S. Grimm: Of the employer representative --

Chief Justice Earl Warren: -- having -- having the intention all the time to do.

This would be -- as we did here.

Would he still be under this act?

Mr. Eugene S. Grimm: Well, Your Honor, if he can assume by as part of the question that here -- that that was his intent from the moment he got the checks --

Chief Justice Earl Warren: Yes.

Mr. Eugene S. Grimm: -- and that he always had a fraudulent intent.

Chief Justice Earl Warren: Yes.

Mr. Eugene S. Grimm: Well, then, I would say that he either committed larceny by trick or false pretenses.

Chief Justice Earl Warren: Yes, but what I'm asking is not whether he committed those crimes, its forces committed crimes but as he commit the crime under this act?

Mr. Eugene S. Grimm: Yes, sir.

They would fall under 302 (b), whereas embezzlement we -- at least as this case was tried, the embezzlement would not.

Chief Justice Earl Warren: Right.

Now, let me -- let me point -- go a little farther.

And suppose at the time that he got the check, he got it with his design -- his purpose in mind and then he immediately forged one check and then a month later, he forged another and two months later, he forged another.

And he did it throughout -- throughout the year.

Would -- would all of those forgeries be elements of this crime, what do you think?

Mr. Eugene S. Grimm: Well, Your Honor, is it --- is it part of the question that from the very moment he received the checks, he had this intent to convert it to his own use?

Chief Justice Earl Warren: Yes.

Mr. Eugene S. Grimm: Yes.

Chief Justice Earl Warren: Yes.

Mr. Eugene S. Grimm: Yes.

Chief Justice Earl Warren: And he asked them to give it to him instead of somebody else.

He got it for that purpose we'll assume.

And -- but he -- he took the money out of the fund from time to time, throughout the year.

Mr. Eugene S. Grimm: And of course he maintained personal control over it, so nobody else could divert it while -- or at least, took some steps so it would be available to him.

Chief Justice Earl Warren: Well, I -- I suppose the only reason he got it out of the funds would be because he -- he forged the checks.

Mr. Eugene S. Grimm: Yes, but then because he had some sort of personal control.

Chief Justice Earl Warren: (Voice Overlap) person control of -- of that fund because there were three of them that did.He was one of only (Voice Overlap) --

Mr. Eugene S. Grimm: Well, so long as -- so long as it is true that he had that -- entertain that intent from the beginning --

Chief Justice Earl Warren: Yes.

Mr. Eugene S. Grimm: -- then we have larceny by trick punishable by this section and not embezzlement.

Chief Justice Earl Warren: I don't -- it only took him to get it out of this plot?

Mr. Eugene S. Grimm: Yes, Your Honor.

But the difficulty is that arises only theoretically because as a practical matter when you put the question to a jury when you can -- when the petitioner could show that a valid deposit was made and perhaps some of the money spent for a welfare fund purpose under joint disbursement and then later a forged check -- he uses a forged check to draw funds from it, then it is almost certain that a jury will infer -- well the funds was validly established.

And there was once upon a time, at least, a valid welfare fund from which he later embezzled money.

But, of course, so long as we can assume as part of the question that he never intended to permit the establishment of the valid welfare fund, then we have larceny by trick punishable by Section 302 (b).

Chief Justice Earl Warren: Suppose he's not only put the money in the fund and then withdrew it by his own signature and a forged signature, but he also forged some other documents to indicate that it was for the legitimate welfare fund expenditure, would you still say that it was under the Act?

Mr. Eugene S. Grimm: Well, so long as you have some sort of evidence by which you can pierce the sham --

Chief Justice Earl Warren: Yes.

Mr. Eugene S. Grimm: -- that he uses, as we -- as we had here then that would be true, Your Honor.

Yes, sir.

Chief Justice Earl Warren: Seeking when we had that intent at the time he took it?

Mr. Eugene S. Grimm: Yes, sir.

And thus far, I carried the facts to the point where he's deposited the money.

Justice Felix Frankfurter: Before you go on, may I clarify this, in my own, haven't clarified this in my own mind.

His welfare fund, although I (Inaudible) this welfare fund shall be administered by a committee, will be appointed by mutual agreements usually with the employer, what does that in committee?

Mr. Eugene S. Grimm: The committee was to -- yes.

Justice Felix Frankfurter: A what (Voice Overlap) --

Mr. Eugene S. Grimm: There -- there was a verbal agreement between the party that Goyco was to represent the employer and petitioner was to represent the employee.

And if you will read the statute closely, it is only necessary to have two parties, one for the representative and one for the employer.

It's not necessary to have a neutral party, however, it is customary to have a neutral party, a third person.

Justice Felix Frankfurter: What I want to know is whether this fund satisfies a welfare fund so far as the administration (Inaudible) --

Mr. Eugene S. Grimm: Well, whether it satisfied the statute as being a proper welfare fund?

Justice Felix Frankfurter: Well, it -- it can't satisfy the statute, unless it satisfies the welfare agreement can't it?

Mr. Eugene S. Grimm: That's quite true, Your Honor.

Justice Felix Frankfurter: It did satisfy the welfare agreement.

Did the -- did the fund, into which he paid the check, satisfy the virtues of the welfare agreement?

Mr. Eugene S. Grimm: No, sir.

Justice Felix Frankfurter: And why not?

Mr. Eugene S. Grimm: Because the fund in which he deposited the checks could be drawn upon by him alone.

Justice Felix Frankfurter: But I understood you to say that there was a private agreement that that could be said.

Mr. Eugene S. Grimm: No, sir.

It was expressly agreed between the parties at the time the contract was signed that the checks would be deposited in the then existing welfare fund bank account and two signatures were required to draw funds from that account, petitioners and the representative of the employer.

Justice Felix Frankfurter: It wasn't there -- what about this old testimony that he -- he would be the sole (Inaudible)

Mr. Eugene S. Grimm: Your Honor, that came -- that -- there -- there is no testimony to that affect.

That was in the false resolution which he presented to the bank.

Justice Felix Frankfurter: Or were then -- in your answer to this that while there was a committee, while there was a provision for a committee, in fact the fund which this money -- into which this money, this check was paid was a different fund outside the scope of the welfare agreement.

Mr. Eugene S. Grimm: That's correct, you -- Your Honor.

Justice Felix Frankfurter: (Voice Overlap) the scope of the welfare agreement you argued is outside the scope of the defense of provided (a).

Mr. Eugene S. Grimm: That's right, Your Honor.

Justice Felix Frankfurter: Is that your argument?

Mr. Eugene S. Grimm: Yes, sir.

And therefore, the -- a valid welfare fund never came into existence since it did not -- the payment was an illegal payment, the receipt -- well, the receipt by petitioner was an illegal receipt.

Justice Felix Frankfurter: Am I right in reading this statute as making -- as satisfying the statute, if the Government proves that an employee of the employer receives money, suppose you proved that and do no more, would that -- the Government's work and the Government rest in or as the case is made.

In other words, my question is, is the provider of (c) an affirmative defense --

Mr. Eugene S. Grimm: Or --

Justice Felix Frankfurter: Would approve to which the burden is on the defendant?

Mr. Eugene S. Grimm: Or must the Government negative the exception.

Justice Felix Frankfurter: What are the --

Mr. Eugene S. Grimm: Well, I --

Justice Felix Frankfurter: (Voice Overlap) done in this case, the Government (Voice Overlap) --

Mr. Eugene S. Grimm: As a matter -- as a matter of fact, in this case, the Government negative the exceptions.

Justice Felix Frankfurter: So I don't have to worry --

Mr. Eugene S. Grimm: So that we do not reach it here.

I would like to say something about the evidence now what happened after he deposited this money.

Chief Justice Earl Warren: May I ask you just once more --

Mr. Eugene S. Grimm: Yes, sir.

Chief Justice Earl Warren: -- and then I hope I won't have troubled you again, but I would like to ask you this.

When the employer made -- tendered this check --

Mr. Eugene S. Grimm: Yes, sir.

Chief Justice Earl Warren: -- to the petitioner, did it satisfy its legal obligation so far as payment to that fund is concerned?

Mr. Eugene S. Grimm: Its obligation --

Chief Justice Earl Warren: In other words, did it have a right to pay through those channels and by giving this check to the petitioner, did it legally satisfy its obligation?

Mr. Eugene S. Grimm: Was it technically lawful, a technically lawful payment?

Chief Justice Earl Warren: Leave out the word, “technical.”

Was it -- was it a lawful way for them to -- to pay their obligation under this collective bargaining agreement?

Mr. Eugene S. Grimm: Well, I suppose, strictly speaking, the check should've been made payable to the welfare fund instead of to the union.

However, since they had agreed that it was to be deposited in the then existing bank account and because they had agreed as to who their representatives were to be on the committee dispersing the fund, then the situation is just as though they had handed the checks to any other person whom they trusted and said, “Take these down to the bank and deposit them.”

Chief Justice Earl Warren: Well is that the --

Mr. Eugene S. Grimm: And it would satisfy their obligation under the collective bargaining agreement --

Chief Justice Earl Warren: Yes, well, if anybody --

Mr. Eugene S. Grimm: -- and under the law.

Chief Justice Earl Warren: If anybody misappropriates and after that, who are they misappropriating it from, the employer or from the recipient of the amount?

Mr. Eugene S. Grimm: Well, of -- of course, the embezzlement, if the fund had ever been established -- here, let me say that the chief reason why we're willing to say that embezzlement does not fall under Section 302 (b) is because the case was tried on that theory.

The judge expressly ruled, well, if this fund had been established and any embezzled that wouldn't be under the Act, but it is the way it -- the jury can find that it is under the Act this way.

And so the question -- there, the embezzlement would be from the fund.

Now, I would suppose that the legal title to that fund rests in the trustee, one of them being the employer's representative.

And that the beneficial interest in that fund rests in the employee.

Justice William O. Douglas: I suppose one way of reading the -- the trust fund exception is that it means something different from what Mr. Hally said that all trust fund transactions are exempt.

Whether good faith or bad faith, whether employer --

Mr. Eugene S. Grimm: Oh --

Justice William O. Douglas: -- had bribed through a trust fund or whether the employee tends to get money unlawfully from the trust fund but all that so -- not covered by the Act.

That goes further than the petitioner's counsel went but --

Mr. Eugene S. Grimm: Oh, yes.

But that's -- that's where his argument would necessarily lead.

That the -- that the section would cover only bribery and extortion.

And in fact, perhaps it actually wouldn't even cover that if you --

Justice William O. Douglas: You told that all -- that all transactions in and by, and through trust funds, are exempt, that's one way of reading the Act.

Mr. Eugene S. Grimm: You mean -- you mean --

Justice Felix Frankfurter: (Voice Overlap) --

Mr. Eugene S. Grimm: -- you mean he'd -- he'd like to read it that way?

Justice William O. Douglas: No, no.

I'm -- I'm -- this is another way of reading it.

You -- neither -- neither party has suggested it, but I'm suggesting that's the possible way of reading the exemption.

Mr. Eugene S. Grimm: Oh, no, Your Honor.

I -- I would -- I would say, no.

Certain -- certainly at least, so far as this case is concerned, a welfare fund which is simply a sham which is (Inaudible) certainly the law is not so feeble as to be unable to penetrate that and that is our case here.

But even so, I think that the legislative history shows very clearly that Congress wanted to forbid all payments from the employers to employees except certain ones.

One of the certain ones they are willing to authorize were welfare fund payments.

But that was authorized only if it was made in a certain way for a specified purpose under dual control.

And so a welfare fund payment which went to a fund which was not under dual control, would be an illegal payment, an illegal payment under this section and that is provided with the employer, did it knowingly, and if he thought that there was to be dual control and the representative took it not intending dual control which is this case, it's an illegal payment, absolutely illegal.

I --

Justice Hugo L. Black: You suggested -- you suggested something that's causing just one addition about this -- about this being a sham.

Mr. Eugene S. Grimm: A sham.

Justice Hugo L. Black: Could you show that all the money that was ever paid by the employer, does this involve all that was ever paid on account of the welfare fund?

Mr. Eugene S. Grimm: Your Honor, I wanted -- I've been trying to get to the fact after the deposit for sometime here.

This is what happened.

He made this deposit and he presents this resolution and then a few days later, he begins writing checks.

Now the first thing he did was transfer $1300 to his personal checking account.

And then he drew a check against the fund for cash and he endorsed it and he gave it to a Pontiac dealer as a down payment on a new automobile.

And then a few days later, Goyco, the employer's representative, found out that the money hadn't been deposited in the welfare fund bank account and he protested.

And so petitioner went down -- petitioner stated, “Well, I'm going to control this fund by myself.”

And he went down and he withdrew the rest of the money or the bank asked him to withdraw it, but in any event, 10 days after he started to draw upon this account, there was -- he had spent over -- there were over $5000 was gone from the $15,000.

And so he took the balance now over into some $9800 and he put that in a general union account.

And then he continued to draw against it for personal purposes.

He paid off -- he paid for a refrigerator which he had purchased and he paid for a household furnishing and then he bought some furniture equipment for union officers and diverted -- diverted it in that way.

And then eventually, he comingled it with general union funds, so that became a loss, of course, forever.

Now -- well, shortly after he did that, he called it -- he expelled the union -- the union secretary from the union.

The union secretary was normally required to draw checks against general union funds, you see.

And so, he expelled the secretary from the union and called a meeting of the workers and announced that he wanted to write -- the right to draw checks against general union funds on his own signature, you see.

And thereafter, he did draw upon general union funds into which the -- the balance of the welfare fund had been forged.

Now, it's true that -- of course, I confess that Mr. Hally and I are a part on this so far as I can see the Government proved a specific diversion of over $3000 of this money.

But as to the balance, none of it went it to the proper welfare fund into the preexisting welfare fund bank account.

And petitioner never did account for it.

And steadfastly refused to account for it, even though as to time and time again and never had to this day.

Justice John M. Harlan: Would you take two seconds to -- I realize your time is being burned up here.

Two seconds to deal with the problem that bothers me that I raised with Mr. --

Mr. Eugene S. Grimm: Yes, sir.

Justice John M. Harlan: -- your adversary.

You understand my problem, I hope.

Mr. Eugene S. Grimm: Well, I -- I think so.

Very early, you stated that perhaps Section (c) should -- could be read to require of the mutuality or reciprocity of some sort.

Justice John M. Harlan: Now, drew that Section (c) is satisfied once the employer makes a payment as you've said he did make that satisfied the conditions to the welfare fund, irrespective of what the recipient, the union officer who did, may have been invited.

Mr. Eugene S. Grimm: Well, I --

Justice John M. Harlan: Literally read that it seems -- what seemed to me they've satisfied the exception.

Mr. Eugene S. Grimm: Well, and you -- and you would say then that it's enough if one party complies with, you know.

Justice John M. Harlan: No.

That the employer -- the exception relates only to the Act of the employer treating paid as meaning the employer who is required to make a payment.

Mr. Eugene S. Grimm: Well that -- there -- that takes us directly to the legislative history of Section 302 (b) and it was well laid out there on the floor of the Senate to try and put it as briefly as I can.

Section 302 came in to the law.

Well, at first arose in 1946.

At that time we just had a steel strike, a General Motors strike and United Mine Workers were then on strike.

And one of the contentions of the United Mine Workers was this, they refused to negotiate further until the operators agreed to pay a royalty of 10 cents a ton, on every ton of coal mined.

Now, Mr. Lewis stated this money is to go into a fund.

That fund will be used to pay pensions, to pay welfare, medical benefits and to provide educational aid to minors.

Now, Mr. -- Senator Byrd offered an amendment to the case bill which was pending at that time.

And case bill was designed to amend the National Labor Relations Act and he said, “Well, we want to forbid this kind of payment unless there's some sort of control over it.”

And after much discussion, it was agreed that they should authorize welfare funds, but that some sort of control should be provided.

Senator Ball offered an amendment to Byrd's original amendment which cast Section 302 in almost exactly the form which it has today.

And he said at that time and we quote on page 21 of our brief, he said at that time, "That if they weren't very careful, these welfare funds might be used for organizational activities or something of that sort."

And as he said, after all, Mr. Lewis might regard that as educational aid to miner -- to mining industry or to miners.

Now, here's a clear case where he -- where he envision the giving of the money for a proper purpose, that is a welfare fund purpose, but accepted with a hidden intent to use it for something else, to use it for organizational activities.

And similarly, of course, Section 302 then passed as far as the case bill was vetoed by the President and in 1947, when the Taft-Hartley Act was passed, Senator Ball again offered, 302 from the floor of the Senate.

And at that time he stated that he wanted to ensure unless we -- on page 23 of our brief, this is a statement with which he introduced Section 302 (b).

Unless we make sure that such funds, welfare funds, when they are established, are really trust funds -- trust funds and are actually used for the benefit to employees specified in the agreement.

There is a very grave danger that the funds will be used for the personal gain of union leaders or for political purposes or other purposes not contemplated when they are -- when they are established.

Now, this -- clearly here, he envisioned the case where the money is given for a proper welfare purpose, but accepted with a secret intent to use it for another and improper purpose.

And Congress specifically intended to require that both parties must intend to establish a welfare fund before this payment would be lawful.

Now, Senator Ball's comments are not the isolated comments of simply one senator from the floor of the Senate.

And similarly, Senator Byrd and Senator Noland and Senator Taft, their remarks which we have set forth in considerable detail, which I've attempted to summarize very hurriedly here, are far more persuasive than you -- than in the usual case because these Senators proposed 302 as an amendment to the case bill in 1946.

They protested the omission of 302 from the committee bill of the Senate in 1947.

They offered 302 from the floor of Senate in 1947 and got it accepted.

They prevailed upon the House to receive in 1947 and - and accepted in the conference bill as they put across the whole Taft-Hartley Act toward the President's veto.

Now, these are not isolated comments.

These are the statements of the men who did the most to put 302 into the law.

They demanded mutual -- they demanded that both parties act honestly and with an honest purpose.

And the fact that the employer thought he was contributing to a bonafide trust fund is not controlling in this case.

Justice William J. Brennan: Before you sit down, Mr. Grimm, I gather any variance for the requirements of (a), (b) and (c) to isolate the inefficient, the Government's position would be a payment to such a fund would not be a payment when authorized.

Is that right?

Mr. Eugene S. Grimm: Well, that -- that's right, Your Honor.

It would not be a payment to a welfare fund.

Justice William J. Brennan: Well now, is that to say as -- that those were some those rather complicated requirements.

Suppose in all innocence, one of those requirements is not met and employer paid a union leader or an employer paid a fund, though it's not --

Mr. Eugene S. Grimm: Well --

Justice William J. Brennan: -- necessary to the conduit of the union leader --

Mr. Eugene S. Grimm: Well, I think --

Justice William J. Brennan: (Inaudible)

Mr. Eugene S. Grimm: I would -- I would not think so, Your Honor.

I would think that there would have to be some sort of knowing -- at all events, in this case, it's immaterial because clearly there can be no doubt of what this was not of innocent diversity.

Justice William J. Brennan: Are you -- are you -- is the Government limiting its position though the situation where you suggest is a case here.

He'd never had any intention of receiving it as a payment for a pension fund?

Mr. Eugene S. Grimm: Or will --

Justice William J. Brennan: Or paying it at the -- that happened to be an indictment against the employer?

Mr. Eugene S. Grimm: Well, I don't think that it would be necessary to entertain the kind of evil intent shown here.

Justice William J. Brennan: That's when I just want to have to --

Mr. Eugene S. Grimm: Necessarily, that is an intent to divert it to his personal use.

I think that if he intended to divert to a political activity, for example, that would be unlawful.

Or intended to do divert it to many other purposes which might be even proper -- even laudable, there are many instances (Voice Overlap) --

Justice William J. Brennan: (Voice Overlap) that even -- that if actually, the intent was to pay or to receive moneys for a pension fund, the fact that there were imperfection in the sense that (a), (b), and (c) were not complied with to the letter, would not create a violation?

Mr. Eugene S. Grimm: I -- I would think that would not be a violation.

I would think that so -- so long as there is substantial compliance with these two requirements, one, dual control, and number two, proper welfare purposes that is medical benefits, pensions and things of that sort.

That if there was a technical shortcoming, that is a failure perhaps, to -- well, in this case, the drawing of the check to the union instead of the welfare fund, of course, I think it would be very deep.

I would hate to take that case to a jury.

Chief Justice Earl Warren: Mr. Grimm, suppose the --

Mr. Eugene S. Grimm: They would hurt (Inaudible) I don't think it would be a violation.

Chief Justice Earl Warren: Suppose that this man had a secret intent not to put it into that trust fund or welfare fund, but he intended to use it for what would be legitimate purposes of the union and he put it into -- to a union account, in an account such as this and dispensed it, for strictly legitimate union purposes --

Mr. Eugene S. Grimm: But union purpose --

Chief Justice Earl Warren: -- if the money -- if the money was there's.

We'll be under the Act?

Mr. Eugene S. Grimm: Yes, Your Honor.

Because a welfare fund is not given for the union, it's given for the employees, sir.

Chief Justice Earl Warren: No money -- but I'm talking --

Mr. Eugene S. Grimm: Oh, yes.

Chief Justice Earl Warren: -- about this act, that in the question of whether it would be embezzlement --

Mr. Eugene S. Grimm: Yes.

Chief Justice Earl Warren: (Voice Overlap) matter some other -- some other crime, but to become under this act.

Mr. Eugene S. Grimm: Yes, sir.

Congress, I think, showed very clearly -- remember here, one of the requirements of the section is that (a) on the top of page 4, "Such payments are held in trust for the purpose of paying -- either paying welfare benefits.

And (b), the detailed basis on which such payments are to be made is specified in a written agreement."

In other words, Congress wanted to make sure that welfare payments would be welfare payments.

And they even went so far as to specify that the fund out of which you pay pensions must be a separate fund from that out of which you pay medical benefits.

And I think this was to ensure that the pension fund could be set up on a sound financial basis and some of the -- and to ensure that some of the employees would not later find that the money had run out.

These funds are for the benefit of the -- of the worker, not for the benefit of the union and not for the benefit of the employer necessarily except in the sense that each will get better performance from the worker as a result of them.

Chief Justice Earl Warren: Mr. Grimm, what -- when -- when he did what he did in this case, did he commit any other federal crime than this one?

Mr. Eugene S. Grimm: So far as I know, Your Honor, no.

Chief Justice Earl Warren: Thank you very much.

Justice Hugo L. Black: May I ask you one other question?

Were the charges set out on page 241 given or refused?

I can't tell from the record.

Mr. Eugene S. Grimm: Page 2 --

Justice Hugo L. Black: As request for a special instructions for the jury.

Mr. Eugene S. Grimm: Page -- request for a special instruction.

Justice Hugo L. Black: 241.

Mr. Eugene S. Grimm: Those -- there are six of them and I believe that -- I believe that they were not.

However, I think perhaps the sixth was given.

Justice Hugo L. Black: The sixth -- was the second -- second given or refused.

Rebuttal of John R. Hally

Mr. John R. Hally: Your Honor --

Rebuttal of Eugene S. Grimm

Mr. Eugene S. Grimm: I think the -- go ahead.

Rebuttal of John R. Hally

Mr. John R. Hally: Page 201, the Court says, “I deny all the special standards.”

Justice Hugo L. Black: Page 201?

Rebuttal of Eugene S. Grimm

Mr. Eugene S. Grimm: Yes, that's it.

Rebuttal of John R. Hally

Mr. John R. Hally: Six special charges have been denied of this counsel.

Rebuttal of Eugene S. Grimm

Mr. Eugene S. Grimm: Yes.

However, I should -- I should say here about the charge in this case as we've indicated on page 10 of the brief.

He gave a charge which submitted this issue to the jury saying that, "If the employer, in delivering money, deliver -- delivers it for the exclusive purpose of creating a fund, the representative receiving that money, must have the same objective in mind.

Now, if his objective is different and if he gets hold of the money and does not comply with the provisions of this section as to the fund, then he cannot claim of what the employer said must guide you, you must be guided simply by what happened.

What were the circumstances under which this money came in to the possession of the defendant?

If you believe that from the time the defendant received said sum of money from the employers, he had complete and sole control of said money in violation of the collective bargaining agreement -- agreement and the law and utilize such money or any part of it for his personal benefit, then I charge you that the defendant has violated the above mentioned section of the law.

Now, here, the entire context -- sometimes he uses the word, "control", sometimes he uses the word, "motives", sometimes he uses the word, "intent".

But so far as he uses motive and intent, he means the same thing.

And that, I think, is shown by the context of his remarks.

And he submitted to the jury the sole question that there is in this case and we contend that question is this.

We say that the evidence to show that from the negotiation of this contract onward from that very moment on, petitioner had no intention to do anything except get hold of that money for his personal use and that he never did anything except things that enabled him to get that personal control over the funds.

And that was a theory upon which this case went to the jury.

Did he accept the money for funds or for --

Justice Hugo L. Black: I understood you to say the reason I have to get, I understood your case -- you'd rest the case on the idea that he had not deposited the check that implies to the bargaining agreement?

Mr. Eugene S. Grimm: That's right, Your Honor.

Justice Hugo L. Black: Well, this charge request that he'd be acquitted that the jury believed that he had deposited, notice was illegal.

Mr. Eugene S. Grimm: Well, here, the judges referring to the preexisting bank account which was subject to dual control and that two signatures were required.

Rebuttal of John R. Hally

Mr. John R. Hally: Do I have any time?

Chief Justice Earl Warren: Well, you have -- you have some.

Mr. John R. Hally: I believe, I have a minute.

I'd --

Chief Justice Earl Warren: You have three minutes, I think, about three minutes and you may have a couple of more, if you wish, you may take five minutes to sum up your argument.

Mr. John R. Hally: Because the Government's theory of this case varied somewhat from the lower court toward appeal, my brief in all aspects doesn't need it, so I would like to take this time to point out the principal reasons why we feel this theory of this is not apt.

The first one, I renew my argument that the instructions do not support the Government's contention that the case was submitted to the jury on an intent basis.

I've said during my argument that the word was never used once, with reference to the defendant's conduct.

The word was read by Mr. Grimm as objective, intend as a word of art in the criminal law and if the judge had intended to submit it on that basis, he was -- he would've used that intent.

The Court of Appeals for the First Circuit did not consider that the case was submitted to the jury on that basis.

So, I don't think it's supported by the record below this theory.

In the lower court, the Government had a different theory, this theory of control, if the defendant had complete and sole control over the fund, then this crime was brought within the Act.

Here, we're told the intent -- the theory is intent.

It's not supported by the record.

The second point I'd like to make is that the Government's reading of the legislative history is -- is not supported by the statutory analysis.

One of the purposes Congress was obviously concerned with would be the union leader who took the money, pay to the welfare fund and then later decided to divert it without any contemporaneous intent decided to divert it to political purposes or the strike fund purposes.

Under the Government's theory, you couldn't reach that man even though Congress was obviously concerned with him because he didn't have the contemporaneous intent.

The Government's theory puts everything upon the man having the intent to use it for the unprescribed purpose at the time he received the money.

Surely, we should not attribute to Congress an intent in 302 which wouldn't begin to reach the bulk of the cases which the Congress obviously had in mind in enacting that statute.

That's why the position or the reading of the statute and its framework which we contend for, is the only one who accomplished it.

Namely, that these events which happened after the payment and receipt, are to be taken cared of by the equity powers and the federal jurors in the federal District Court.

Mr. Justice Brennan's question referred to a violation of say the arbitration agreement, provision for appointment of a neutral arbitrator, provision for the appointment of an annual audit.

Surely, all of these things which could only happen after the event could not retroactively make the payment and receipt illegal.

The Congress was looking there to the equity powers on the civil side of the federal court to cure the Act.

And they were not looking to these crimes of misuse for personal purposes even with intent at that time.

And they are now looking to that subject.

They have drafted the statute.

It seems with -- on the eve of passage in some form or another which would clearly cover the case, there was no reason to stretch this statute and this is certainly a stretching to cover the facts of this case.