UNITED STATES v. FRUEHAUF

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Argument of S. Hazard Gillespie, Jr.

Chief Justice Earl Warren: Number 91, United States, Appellant, versus Roy Fruehauf.

Mr. Gillespie.

Mr. S. Hazard Gillespie, Jr.: Chief Justice, may it please the Court.

In this case, the Government appeals by direct appeal from the oral ruling of the United States District Court for the Southern District of New York, dismissing an indictment on motion before trial.

The indictment which is in the record is in two counts.

Charges in the first count that all of the defendants except the defendant Dave Beck were employers of employees in an industry affecting commerce and unlawfully paid and delivered and agreed to pay and deliver to Dave Beck, President of the International Brotherhood of Teamsters, a representative of the employees mentioned, a thing of value to wit money in the amount of $200,000.

The second count charges that the defendant Dave Beck received and accepted and agreed to receive and accept a thing of value, to wit, this money, in the amount of $200,000.

The close of each count, it is stated that the acts alleged in the respective counts, constitute a violation of Section 302 of the Labor Management Relations Act of 1947, the Taft-Hartley Act, which specifically makes it "unlawful” for any employer to pay or deliver or to agree to pay or deliver any money or other thing of value to any representative of any of his employees who are employed in an industry affecting commerce."

The statute also makes it a crime to accept or receive money or thing -- other thing of value.

Just prior to the trial of this case in the District Court, the Government filed a memorandum with the trial judge in which the Government acknowledged.

What is the fact that this payment and delivery to Beck of $200,000 was made to him as a loan.

The District Court, treating the memorandum as a judicial admission, ruled that since the payment and delivery and the receipt and acceptance of the $200,000 were on a loan basis.

The statue was not violated and there was no offense as a matter of law.

It is from this ruling of the District Court that this appeal is prosecuted.

Motions to affirm were made in this Court at the early brief and probable jurisdiction was noted on October 10 of last year.

In our submission, the District Court ruling is error.

The plain language of the section prohibits any payments or delivery of money to a representative of employees except those expressly authorized.

The purpose and the context of the Section, we believe accord with this literal meaning.

And the legislative history shows the intent of Congress to prohibit all financial dealings except those specifically authorized.

Now, I will expend on each of those three points briefly and then deal whether -- with what I understand to be the two principle contentions of the appellees which are as follows, as I understand them.

First, the appellees contend that an amendment of the statute in 1959, in the Kennedy Urbandale -- Urbandale which included among other things adding the term "lend" to the prohibitions already extant against paying or delivering money.

Evidence's, Congress' own understanding that the statutory prohibition had not theretofore included alone, and then, their second contention as I understand it that to construe the statutory prohibition in the earlier legislation of which was against paying or delivering money as including a prohibition against paying or delivering on loan, would deprive the accused of that unequivocal warning which every criminal statute should convey.

As I said, I'll -- the converse of this second proposition of the appellees is the Government's first point.

We insist, respectfully, that the plain language of the statute as enacted in 1947, made it lawful or unlawful for an employer to pay or deliver "any money or other thing of value to a representative of his employees as well as the receipt or acceptance thereof by the representative”.

Now, deliver, which is the term of the statute according to the dictionary meaning, is to give or transfer.

Receive.

Again, according to the dictionary meaning is to take something that is offered.

As we see it, every loan contemplates or has as an essential element, transfer, delivery and acceptance of the matter alone.

When an employer makes a loan of $200,000 to a representative, he, to paraphrase the statute, pays or delivers money to the representative and then latter receives or accepts money from the employer.

Justice Potter Stewart: Mr. Gillespie.

Mr. S. Hazard Gillespie, Jr.: Yes, sir.

Justice Potter Stewart: This loan had been at 8% interest, would there be a statutory violation?

Mr. S. Hazard Gillespie, Jr.: Well, I would say, unquestionably so, Mr. Justice Stewart, without any question.

I think that may bear on the subject of whether this was in other thing of value but it sees the position of the Government that the payment or delivery of money at the outset was a square violation of the clear provisions of the statute and no matter what the interest rate might be, there would be a violation.

Justice John M. Harlan: Your -- your argument assume that it's a bona fide loan --

Mr. S. Hazard Gillespie, Jr.: That --

Justice John M. Harlan: -- and the fair rate of interest --

Mr. S. Hazard Gillespie, Jr.: I think we must, Your Honor, for the question that has been put to the Court at the present time.

The -- the jurisdictional statement makes it clear that it's just the question of loan and I think that Your Honors must assume that it was a bona fide loan at a fair rate of interest.

Now, there's some colloquy in the record which is before Your Honors which indicates somewhat to the contrary but I think in fairness to the defendants that I must say that the question that was put before this Court is a bona fide loan.

Justice John M. Harlan: Supposing -- supposing the transaction had been a purchase of Beck's house and the purchase price have been paid to Beck, would that have been a --

Mr. S. Hazard Gillespie, Jr.: Well, Your Honor, there are some exceptions in the statute which permit certain transactions.

I believe that a purchase of a house would come within such an exception.

Justice John M. Harlan: Is that exception in your brief?

Mr. S. Hazard Gillespie, Jr.: I believe it is at least -- no, as a matter of fact, it is not, Your Honor.

The statue is set out but not all portions of it are there.

But my judgment would be that that would come within one of these sections and my assistant has brought to my attention that there is as I thought such an exception with respect to the sale or purchase of an article or commodity at the prevailing market price in the regular cost of business.

There is such an exception.

Now --

Chief Justice Earl Warren: Isn't that the question that -- that this loan was for 2% instead of the normal interest rate with any concern with us in this case?

Mr. S. Hazard Gillespie, Jr.: Well, Your Honor, I -- I honestly think not.

Chief Justice Earl Warren: Well then, would you -- would you state why because we may make (Voice Overlap) --

Mr. S. Hazard Gillespie, Jr.: Well, only because I think in fairness to the defense, we must consider the question as it was put to the Court in our jurisdictional statement which was squarely the question presented is whether a loan of money comes within the foregoing prohibitions.

And I think, to expand the question as we outlined it to Your Honors when you noted, probable jurisdiction would not be proper.

Actually, the record does disclose that it was at 2% and that there were certain favors conferred with regard to that.

But I feel that the question that Your Honors must address yourself squarely to with regard to this and -- and may very well been why Your Honors thought this was desirable to bring up and to -- or at least to consider this question, was this matter of loan as such, whether it comes within the square prohibitions as we feel it does of this statute.

Justice Felix Frankfurter: Unless the -- I beg your pardon (Voice Overlap) --

Chief Justice Earl Warren: What do the -- how did the Court of Appeals treat it?

Did they --

Mr. S. Hazard Gillespie, Jr.: Your Honor, this was my direct appeal from the District Court --

Chief Justice Earl Warren: Oh, yes.

Yes.

Mr. S. Hazard Gillespie, Jr.: -- being the dismissal of an indictment.

Chief Justice Earl Warren: How -- how did the Court treated it?

Mr. S. Hazard Gillespie, Jr.: Your Honor, it just said that because it was a loan, it didn't come within the provisions.

The -- the -- it was an oral ruling very, very brief and -- and practically, nothing is said under such.

I might say that another District Court has held that the loan of a tugboat for 24 hours came squarely within the provisions of the Act and upheld an indictment under -- that's in the Northern District of New York.

Justice Felix Frankfurter: I was going to ask you, Mr. Gillespie or rather qualify your statement that this Court must treat it in the terms in which you put it to us, unless -- my unless is unless the record justifiably, it's going to be approved that this is a -- a contrive case and I think that there's nothing to justify there.

Mr. S. Hazard Gillespie, Jr.: I do -- I don't think so on this record and I think in fairness to the defendants, I should take that position squarely, Your Honor.

Justice Charles E. Whittaker: I think that construed (Inaudible) back to a more collateral state of law?

Mr. S. Hazard Gillespie, Jr.: Your Honor, I -- I think that that again, I don't want to deprive the position that I'm taking of every advantage possible but I -- I really feel that the question that led Your Honors probably to consider this case was whether or not a loan, assuming it was a bona fide loan, came within the prohibitions of this -- of this statute.

Chief Justice Earl Warren: But where did we get the -- the information that this was a 2% loan.

I don't see it in the indictment.

Mr. S. Hazard Gillespie, Jr.: It is not in the indictments, Your Honor but in --

Chief Justice Earl Warren: Did you raise it in your brief?

Mr. S. Hazard Gillespie, Jr.: -- it -- it was in -- it was in the memorandum of law which was filed with the Court at the opening of the trial and which was the judicial admission which the District Court said, gave rise to the fact that this was a loan and which led the Court under the circumstances to say, "A loan does not come within the prohibitions of the statute."

I think I can point that out to you.

I think, if Your Honors will turn to page 12 and 13 of the record, you will find a detailed statement of what was in the brief.

And you will find at the bottom of page 13 on the right that only 4000 interest, approximately half of the interest due which was 4%, so there's only 2%, was actually paid and that was remitted in the form of a check dated May 3, 1950 from -- 1955 from Linda who was Beck's attorney to Seymour.

Now, I think that is probably where the information with regard to the 2% came to Your Honors' attention.

The loan was set up at 4% but only 2% was in fact paid.

Justice John M. Harlan: Because you -- your indictment alleges the -- the thing of value, the full proceeds of the loan.

It doesn't allege the increment, the unfair increment that it might be involved into the (Inaudible).

Mr. S. Hazard Gillespie, Jr.: It does not.

Justice John M. Harlan: So you're -- if the -- your part from that position, you might run in trouble so as to the indictment, isn't it?

Mr. S. Hazard Gillespie, Jr.: That -- I think that is correct.

I think that is correct, Mr. Justice Harlan.

Well, this Court previously on both the Ryan case and the Arroyo case as we see it has ascribed their literal meaning to other terms used in Section 302.

In the first of these cases, that is the Ryan case, the Court concluded as Your Honors will remember that the term in the statute representative of employees included the president of the union as well as the union itself even though by contract, the union was turned to the exclusive bargaining representative.

And so doing, the opinion stated as the statute reads, "It appears to be a criminal provision malum prohibitum, which outlaws all payments with stated exceptions between the employer and representative."

And then in the Arroyo case which of course followed by some years, the Ryan case, while the majority of the Court held against the Government's prosecution by deciding that one of the exceptions to the prohibitions of this Section had been precisely followed.

The opinion noted in connection with the statute as a whole that a literal construction of this statute does no violence to common sense.

Now, we ask no other consideration here than that.

That the language of this statute be followed precisely and that the 1454 delivery of this money as the first step in this loan, fell squarely within its prohibitions.

As of course, this Court knows, Section 302 of the Labor Management Relations Act of 1947 was enacted as a part of a comprehensive revision of federal labor policy.

In the light of experience, came under the Wagner Act and was aimed to practices which Congress considered destructive of the integrity of collective bargaining.

One way in -- in which Congress sort to preserve and protect that integrity was by outlawing all unauthorized payments between employers and representatives to ensure that they would deal at arm's length.

Now, a loan of a large sum of money can be just as corrosive of that absolute separateness sought by Congress as an outright gift.

Indeed, it would be our submission that the obligation of the representative would not be merely that of one who has behold him for have favored about him as in the case of a gift.

But if the loan is for a large sum of money and is on demand or becomes overdue, it places the borrower at the absolute mercy of the employer.

Boswell in the light of Johnson had this to say and I think it fits this situation rather perfectly.

The way to make sure of power and influence is by lending money confidentially to your neighbors at a small interest or perhaps no interest at all and having their bonds in your possession.

The specific language of 302 was intended to and did cover any delivery or receipt of money that might cause such an abuse.

Justice John M. Harlan: This is irrespective of the intent which is delivered.

Mr. S. Hazard Gillespie, Jr.: I think that is correct, Your Honor.

Justice John M. Harlan: This is not like the ordinary bribery statute where you have two --

Mr. S. Hazard Gillespie, Jr.: I think this Court has -- has said and has noted the fact, Your Honor that this is not a -- a bribery statute in that sense that you have to establish that two weeks before you are going into negotiations, you came around and slipped something under the table.

This is an outright prohibition against the delivery or payment of money at any time or other thing of value at any time.

It does not have to be shown in the context of an actual transaction as between the representatives.

Justice John M. Harlan: That has a bearing on ways to the way you construe the statute though.

Mr. S. Hazard Gillespie, Jr.: Possibly so, Your Honor.

It possibly so but it seems to me the prohibition is clear there regardless.

The structure of 302, I think also points towards the same construction.

Subsections (a) and (b) which we've been dealing with thus far are the broad prohibitions.

The exceptions to these prohibitions are set forth in (c), and these exceptions are carefully defined, extremely detailed and very narrow.

I'm not going to take Your Honors' time now to go through them but when you look at those exceptions, you will see very clearly that the Congress knew what it was doing when it was drafting these exceptions and that it gave comparable consideration to the exceptions it wished to make.

And that it accepted only those things which would be free from abuse like a purchase and sale of a house, the checking off of union dues with written authority and that type of thing.

And this is persuasive evidence, we submit, to paraphrase this Court's opinion in the Bernanke case, the wiretapping case that had Congress intended to allow employers to pay or deliver money on loan, it would have said so.

But not only the literal meaning and underlying purpose of the statute but the legislative history, supports the Government's view that all payments or deliveries of money, whether on loan or otherwise, were intended to be within the prohibitions.

Almost exactly this same language of Section 302 first appeared at the second session of the 79th Congress in 1946 when Senator Byrd proposed an amendment to what was then known as the case bill.

It covered almost identically what we have here.

Speaking of the purpose of the amendment, Senator Byrd said, "It prohibits the employer to pay for any representative of any of these employees to collect or attempt to collect any money or other thing of value for the use of such representative or in trust or otherwise."

Some senators were concerned over the broadness of the proscriptions particularly Senator Pepper was concerned.

And he argued that language forbids every type of delivery by employer to employees and every type of receipt by employees from employer except to payment of compensation for services rendered and the so-called checkoff.

Senator Taft who was also a strong supporter of the Amendment had this to say.

"With regard to the very wording, I assert that once we permit an agent to obtain money for his own use or for any purpose, it is affirmatively a dubious practice, an immoral practice and unless it is used for purposes which are properly defined by law, it should not be permitted."

Now, this Amendment was adopted by the full Congress, the House of Representatives passed it and then the President vetoed the case bill and it failed to pass over his veto.

They went back the next year and went to work on this again and similar language was introduced in the Senate Committee.

A majority of the Committee reported out against it but Senator Taft and Senator Ball and Senator Smith of New Jersey filed a minority report, brought the matter up, the specific language on the floor of the Senate in 1947 and over many protestations, the Section 302 was passed into law.

Justice Felix Frankfurter: Of course, if -- if Congress had used Senator Taft's language prohibiting any union officials from obtaining money for his use, you -- you wouldn't be here and wouldn't be bothered with the problem which is --

Mr. S. Hazard Gillespie, Jr.: Well, perhaps that -- perhaps that is so, Your Honor but still, I think the language is clear enough that -- that --

Justice Felix Frankfurter: What I'm saying is --

Mr. S. Hazard Gillespie, Jr.: I'm afraid, you're probably right, sir.

But nowhere in the course of the history of Section 302 is that it would be from any indication by explicit statement or implied suggestion that the Congress did not intend to forbid every sort of financial transaction except those authorized between the employers and representatives of employees.

And we would say that further to indicate the burden of the intended coverage of the statute.

Congress went beyond simply the delivery or payment of money when they prohibited also the delivery of any other thing of value, and a substantial loan of money which I mentioned just a moment ago, qualifies under both prohibitions of the statue.

Justice Felix Frankfurter: How many specific exceptions are there, Mr. Gillespie?

Mr. S. Hazard Gillespie, Jr.: There are five.

Justice Felix Frankfurter: Five.

Mr. S. Hazard Gillespie, Jr.: Yes, there are five.

Justice Felix Frankfurter: Is there any -- is there one binding -- principle of binding differentiation of -- among the five?

Mr. S. Hazard Gillespie, Jr.: I would think not sir, except that -- that -- I would say that in a -- in the case of every one of them, they are not situations where they could be the subject of abuse in any way.

Justice Hugo L. Black: And they're not printed in your brief, are they?

Mr. S. Hazard Gillespie, Jr.: They're not, Your Honor.

They are not printed in the brief.

They are very long and quite detailed because they involve the matter of these trust funds that could be created for that purpose.

Now, if I may now turn to the appellees' contention that because 302 was amended in 1959 to include the words among others "lend" and "loan", this evidence is a view on the part of Congress.

That previously, a payment or delivery of money or a thing of value on loan was not prohibited by the clear language of the statue itself and the unequivocal legislative history.

The 1959 Amendment to 302 was not fashioned and cannot be reshaped to support their argument as we see it.

The legislative history surrounding the 1959 Amendment shows that it was predominantly concerned with getting after middlemen and agents, the so-called labor consultant to whom the money might be given and then he might pass it on to the labor -- or to the representative of employees.

Justice Felix Frankfurter: This Amendment came after this -- this provision, did it not?

Mr. S. Hazard Gillespie, Jr.: That is correct, Your Honor.

Justice Felix Frankfurter: Was there any reference made to it?

Mr. S. Hazard Gillespie, Jr.: To --

Justice Felix Frankfurter: Was there any reference made to this -- to this litigation?

Mr. S. Hazard Gillespie, Jr.: Well, there was no reference made to this litigation because the litigation didn't come until after the Amendment.

The -- the Amendment came following the transaction that's involved heretofore.

The Committee reporting on the bill, the Senate Committee reporting on this bill in 1959 had this to say, "The intent of these amendments is to forbid any payment or bribe by an employer or anyone who acts in the interest of an employer whether technically or not and to forbid the receipt of any such bribe by any person whether an individual, an officer or employee of a labor organization or a committee representing employees."

Now, the very absence of any reference and the Senate Committee report is absolutely silent, there is no reference to -- specifically to loans or lending in this report, the Senate Committee report or to their being a noble appendage to this law.

I think it indicates that the legislation was designed to deal with this problem of middlemen and --

Justice William J. Brennan: Was this transaction one of those investigated in connection with --

Mr. S. Hazard Gillespie, Jr.: It was, Your Honor, it was.

Justice William J. Brennan: Before the --

Mr. S. Hazard Gillespie, Jr.: It was one of those that were disclosed before the McClellan Committee.

That is correct.

Now, even the statement of the author of the bill, Senator Kennedy, which was made after he -- the -- the legislation had been passed.

That it prohibits loans by employers or unions to union officers, does not mean that the 1947 Act did not also prohibit the payment or delivery of money on a loan basis.

It think to -- to suggest that the words "lend" and "loan" crept into this legislation and they did so and I emphasize this, totally without comment in the Committee reports as an exaltation to prosecutors to go after what was already prohibited by the 1947 Act but which actually was only disclosed in these McClellan hearings which led to these amendments regarding labor consultants and so forth.

And there is support for this suggestion in this part of the Committee report where it says, "Although these provisions of existing law would punish most forms of bribery or extortion, if they were vigorously enforced by prosecuting officers."

The testimony before the McClellan Committee revealed loopholes which both employer representatives and union officials turned to advantage at the expense of employers -- employees.

I emphasize again, there's nothing in the report with regard to the "lend" and "loan" being one of those loopholes.

Justice Felix Frankfurter: But as -- in the hearings before the McClellan Committee, did non-prosecuted loans lay on, particularly, is it part --

Mr. S. Hazard Gillespie, Jr.: I think not, sir.

Justice Felix Frankfurter: -- as against --

Mr. S. Hazard Gillespie, Jr.: No.

Justice Felix Frankfurter: -- outright gifts?

Mr. S. Hazard Gillespie, Jr.: No, no, they did not, Your Honor.

Now, turning to the second contention in a -- just one moment, of the appellees that by the absence of the words "lend" and "loan" from the earlier Act, it lacked the unequivocal warning to which an accused is entitled.

This brings me back to where I started.

We have seen that the statute clearly states that it shall be unlawful for an employer to pay or deliver money to a representative of its employees.

And it's hard for me to see a more clear expression of the intent of the Congress and if we are correct that a payment or delivery of money is an indispensable part of a loan.

And I submit that it must be, then appellees' contention comes down, it seems to me, to that out of the traffic violator who claims that because he backed up again, across an intersection after he went through a red light, he did not violate the ordinance prohibiting the initial transgression.

The Government submits that the ruling of the District Court should be reversed and this case be remanded for trial.

Justice Felix Frankfurter: May I ask whether your whole argument presupposes that there is no ambiguity in the legislation that a fair reading must -- and a part of the word almost necessarily that it would be torturing what is now written to exclude (Inaudible)

Mr. S. Hazard Gillespie, Jr.: I think so, Your Honor.

Justice Felix Frankfurter: That is your position?

Mr. S. Hazard Gillespie, Jr.: Yes, it is, Your Honor.

I think that language is -- is very clear indeed.

Thank you.

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

Mr. S. Hazard Gillespie, Jr.: Yes, sir.

Justice Hugo L. Black: You're sent back for trial with the only case that would be tried whether this loan has been made?

Mr. S. Hazard Gillespie, Jr.: Well perhaps I'm speaking for the defendants when I say, I think it should be, Your Honor.

Justice Hugo L. Black: Well, I --

Mr. S. Hazard Gillespie, Jr.: I -- I mean I -- the defendants might want it.

There might be issues that the defendants would raise that I'm not familiar with in a moment but so far as the -- excuse me.

Justice Hugo L. Black: What are the defenses, do you think could be raised under your argument.

Mr. S. Hazard Gillespie, Jr.: I believe, Your Honor there are no other defenses that could be raised.

Justice Hugo L. Black: Well, the sole question would be whether you made a loan that would represent the employee of its employer.

Mr. S. Hazard Gillespie, Jr.: That is correct.

Now, I don't want to speak for the defense in this regard.

I don't think it's quite fair for me to do so but --

Justice Hugo L. Black: Well, I -- I was just trying to find out.

Mr. S. Hazard Gillespie, Jr.: I believe that Judge Sugarman who was the District Judge who made this ruling felt that he had cleared everything else out of the way, as a matter of law, statute of limitations and various other considerations.

Justice Hugo L. Black: Well, that of course, I didn't mean (Voice Overlap) --

Mr. S. Hazard Gillespie, Jr.: Well, I think that's stated.

I'm not stating it on you.

Justice Hugo L. Black: I think on the merits.

Mr. S. Hazard Gillespie, Jr.: On the -- that is correct, Your Honor.

Justice Hugo L. Black: Your position is that making the loan even though bona fide, backed up by mortgage or anything else, would violate the Act.

Mr. S. Hazard Gillespie, Jr.: That is correct, Your Honor.

Absolutely.

That might be --

Chief Justice Earl Warren: But I wonder why you can't speak for the defendant, can you speak for the prosecution that this case went back.

Wouldn't the prosecution relied merely on the fact that it -- it was a loan or -- or would you do as I gather from -- from the transcript that it was an irregular transaction throughout that it could not have been processed through any financial institution.

And that there was only -- that the interest was -- was not paid and that the -- it was not the -- the interest on the loan was -- was not a normal rate of interest.

That's the -- that's what you're trying to sustain, this indictment on in -- in the lower court as I read this transcript.

Now, when it goes back, what is the issue?

Is it just that it's a -- it's a mere loan or -- or is the issue that -- that it's a -- it's a fake loan that -- and that he -- he -- the borrower was acquiring something through that -- that loan that he could not acquire through a legitimate loan.

Mr. S. Hazard Gillespie, Jr.: You Honor, the case goes back to the District Court, if I am still in the position to prosecute it at that time.

It would be my intention in trying the case to set out the facts of the loan just as we understand those facts to be.

Our position would be, however, that this was a loan.

That is the basis on which we're before this Court and we would proceed on that basis.

Now, if the -- if there is denial in any form of the receipt of this loan or anything of that sort, I suppose it's within the power of the jury to determine the facts and that that would include as I understand it, the -- all the surrounding facts with regard to this transaction.

Chief Justice Earl Warren: But you say it's a -- in the Court, will you get back there, the prosecution says it's a loan.

Mr. S. Hazard Gillespie, Jr.: That is correct, Your Honor.

Chief Justice Earl Warren: The defense says, "Yes, it's a loan."

Mr. S. Hazard Gillespie, Jr.: That's right.

Chief Justice Earl Warren: And do you then say, "Well, we want to show that this -- this is not a regular loan."

That this is an irregular transaction and that it had -- had ramifications that honest people wouldn't indulge into -- to -- in -- in making a $200,000 loan and it was not an honest rate of interest and so forth because all those things were raised -- raised by the district attorney in the court -- in the court below at the time this was -- at the time this was decided against you and -- and that's why I was a little surprised when you started right up and said, "We'll make no point of any of that.

We'll -- we -- we just say it's a loan, period.

Mr. S. Hazard Gillespie, Jr.: Your Honor, I feel in fairness.

The reason that I stick to that in this Court is that I feel that is the basis on which Your Honors --

Chief Justice Earl Warren: Well, suppose you let us decide on what basis we took it.

Mr. S. Hazard Gillespie, Jr.: Right.

Chief Justice Earl Warren: And you tell us what --

Mr. S. Hazard Gillespie, Jr.: Well --

Chief Justice Earl Warren: -- your theory is.

Mr. S. Hazard Gillespie, Jr.: -- that was the representation that the Government made, Your Honor.

That I feel at the time that we -- in our jurisdictional statement and therefore, I didn't think it was proper to go beyond that on this (Voice Overlap).

Chief Justice Earl Warren: Do you want to limit -- limit it to that --

Mr. S. Hazard Gillespie, Jr.: I think we should, Your Honor.

Chief Justice Earl Warren: -- here but you -- you don't say how it would be if we decide it in your favor when it got back to the -- the -- to the lower court.

Mr. S. Hazard Gillespie, Jr.: I would say that when we came to try the case, we could put all of the facts before the jury.

Justice Felix Frankfurter: Let me see if I understand it, the answer you made first to Justice Black and Chief Justice.

You say that as a matter of law, if this indictment is sustained, you would put into evidence by whatever witness or documents necessary, the naked facts of this loan and if you chose, you would say, your -- the Government rests and would feel that the District Judge if the defendant also rest to that and let the case go to the jury.

Mr. S. Hazard Gillespie, Jr.: Absolutely.

Justice Felix Frankfurter: The fact that it's within your prosecutorial privilege to do what prosecutors usually do trying to make in it -- sometimes redundant, a superfluous additional testimony to make the jury understand the human implications of the jury.

Mr. S. Hazard Gillespie, Jr.: My -- quite correct, Your Honor and of course the defense that may go in may call for certain rebuttal testimony.

We just don't know where it would be.

Chief Justice Earl Warren: Well, I think there's -- there's one thing in your -- in your jurisdictional statement that also bore on this situation, says, the two counts of indictment filed on June 17th, 1959 in United States District Court for the Southern District of New York, charged five defendant employers that having paid and delivers money in the amount of $200,000 to a representative of their employees and charged the defendants' representative with having received the money in violation of Section 302.

In the pretrial memorandum, the Government stated that it intended to prove that the defendant employers had loaned $200,000 unsecured and at an actual rate of about 2% to the defendants represented through an intricate exchange of checks.

Now, why should we -- why should we have overlooked that when we -- when we granted this -- when we know that probable jurisdiction.

Why did you state that to us if you didn't want us to believe that -- that that was the situation?

Mr. S. Hazard Gillespie, Jr.: Well, Your Honor --

Chief Justice Earl Warren: Why didn't you just say that the sole question is whether -- whether there was a -- a loan of $200,000?

Mr. S. Hazard Gillespie, Jr.: Well, Your Honor, I -- I believe --

Chief Justice Earl Warren: You might have saved a lot of time.

Mr. S. Hazard Gillespie, Jr.: Well, Your Honor, I thought that we were bound by what we have stated as the question presented here which is on page 2 of this jurisdictional statement and I felt in fairness to the defendants that we shouldn't go beyond that in trying to urge, Your Honors to come to -- I felt we were bound by that --

Chief Justice Earl Warren: But you did -- but you did in your jurisdictional statement.

Mr. S. Hazard Gillespie, Jr.: Well, Your Honor that of course is the judicial admission with which we were charged in the District Court.

That statement which is of course is on the record but I feel that -- that Your Honors, in coming to your conclusion with regard to this are bound to consider this as a bona fide loan and -- and that that is the question that's before the Court.

Thank you.

Justice Hugo L. Black: If we do that then when we go down and try it again and you weren't here, there wouldn't be any question about it.

Mr. S. Hazard Gillespie, Jr.: That's right.

Justice Hugo L. Black: Unless it's called in faith, it would be admitted to be a bona fide because our opinion would be based upon that.

Mr. S. Hazard Gillespie, Jr.: I just think that's so as -- as well, exactly.

Chief Justice Earl Warren: Then you wouldn't -- then you wouldn't maintain the law that it was not a bona fide loan.

Mr. S. Hazard Gillespie, Jr.: Well, I think Mr. Justice Frankfurter stated exactly what our position would be, Mr. Chief Justice that what we would do is to present the facts.

Chief Justice Earl Warren: But we've got -- we've got it from Justice Frankfurter --

Mr. S. Hazard Gillespie, Jr.: Right, right.

But we would present the facts [Laughs], we would present the facts, Your Honor and take that position.

Chief Justice Earl Warren: All right.

Mr. S. Hazard Gillespie, Jr.: Thank you.

Chief Justice Earl Warren: Mr. Nizer.

[Laughter]

Justice Felix Frankfurter: Mr. Nizer.

Argument of Louis Nizer

Mr. Louis Nizer: May --

Justice Felix Frankfurter: I don't say that I'm on both sides of this case.

[Laughter]

Mr. Louis Nizer: May it please Your Honors.

The notice of appeal as set forth on the question presented on this appeal on page 48 of the transcript of record, bears out, my learned friend's statement that this question as a jurisdictional matter is limited to the assumption of a bona fide loan because there, the question is presented as to whether the payment of money by an employer to a representative of his employees intending repayment of said money with interest is within the proscription of Section 302.

And in page 2 of the brief of the Government, the questions stated a little more elliptically is -- the question presented is whether a loan of money comes within the foregoing prohibitions and the jurisdiction of this Court is based upon that assumption under the Havas case.

Or else, if there were any questions of fact and we differ incidentally with the statements that had been repeatedly made here but to be consistent --

Chief Justice Earl Warren: Yes.

Mr. Louis Nizer: -- with the fact that this is the sole question before Your Honors.

We wish to point out that under the Havas case which Your Honors recently decided, there would be no jurisdiction in this Court that this weren't simply a matter of construction of the statute on the assumption of a bona fide loan as stated in this case.

Chief Justice Earl Warren: We'll recess now Mr. Nizer.

Print this transcript Transcript: 

Argument of Louis Nizer

Chief Justice Earl Warren: -- continue.

Mr. Louis Nizer: Thank you, sir.

May it please the Court.

If Congress had intended to proscribe loans as well as gifts in the original act, it could've done so simply by adding the word "lend" and "loan" as it did 12 years later when after congressional investigations in McClellan Committee hearings.

It appeared that there were a number of loan transactions at which time Senator Kennedy set upon the record as it appears.

"This isn't against the law but don't you think we ought to do something about this situation?"

And the amendment resulted thereafter.

But there is one aspect to this problem which -- about which we can be dogmatic, said this Court in the Bell case, it is that when Congress has the will, it can express it particularly in so simple a matter as an evidence that could do in this case.

Indeed, there are two contemporaneous statutes within one year of this one in which Congress was not contempt with the word payment or gift or contribution but did provide lend and loan in the statute.

And most significantly Your Honors, in those cases too, the language appeared, payment of money or other thing of value.

And the Congress did not deem the words "or anything of value" to encompass a loan, and specifically provided the word lend and loan.

The classic tenant of construction with respect to common words even in none criminal statutes and particularly, I stress in the penal statute which is malum prohibitum and requires fair warning to the citizens.

Is that the verbs will be given the limitation of their ordinary market place use, even though linguists and scholars may define larger meanings for them.

So the word “pay” in market place usage, means "to discharge an obligation," it doesn't mean "to initiate one" as you do when you make a loan.

There are many synonyms for the word pay on the dictionaries but no one will find lend as one of those synonyms.

And similarly, the word “deliver”, in its market place usage which is required for fair warning to the average citizen malum prohibitum statute.

The word “deliver” is never associated with loan.

You don't deliver a loan, you make one, as this Court said in the Western Union Lend Group case were the word was ship or commodity, child labor statute.

Ship did not apply to a telegram.

You don't ship a telegram, you send it.

The statute clearly fails to proscribe and wasn't ever intend to proscribe loans at the time that it was enacted.

And therefore, it is not proper we think for the Government to presume that this language maybe ambiguous.

As this Court said in the Bell case when Congress leaves to the judiciary the task of imputing to Congress an undeclared will, the ambiguity should be resolved in favor of lenity, even ambiguity wouldn't aid the Government in this situation.

Nor, may the Government presume that in order to effectuate the beneficent purpose of the statute that it should be broadened to cover other categories which Congress in its wisdom might well have found consistent with its general purpose.

This Court has repeatedly rejected that invitation stating at one case.

It is Congress which defines the penal law.

It is Congress which defines the crime that ordains the punishment, not the Court.

Justice Hugo L. Black: Mr. Nizer.

Chief Justice Earl Warren: Mr. Nizer, I beg your pardon.

Justice Hugo L. Black: I -- I want to ask you a question too about the question the Chief Justice asked.

The Government stated for the Court here, that its position was two-fold.

First is, its indictment simply charge the violation of statute frankly in the word statute, which is correct, isn't it?

Mr. Louis Nizer: Well, it was very incorrect in this case because they charged that the delivery -- the payment was $200,000, a thing of value to wit $200,000 period.

They omitted the fact that it was loan --

Justice Hugo L. Black: Well, actually -- but they did (Voice Overlap) --

Mr. Louis Nizer: In the language of the statute.

Justice Hugo L. Black: That -- that's right.

Mr. Louis Nizer: Yes, Your Honor.

Justice Hugo L. Black: (Voice Overlap) language of the statute?

Mr. Louis Nizer: Yes, Your Honor.

Justice Hugo L. Black: And then Mr. Guzzetta, who was he?

Mr. Louis Nizer: The counsel who tried the case for the Government, United States Attorney.

Justice Hugo L. Black: He said, “What I tried to indicate was that the Government's position is two-fold if it wasn't a loan, the juries determinate -- determine on the basis to the facts which they hear that this was the outer clothing, fabricated by one highly complex intercorporate transaction, didn't make this transfer a loan, clearly, it would come within the statute."

Then he says, "There would be no problem in my mind at all.

Secondly, if the jury decided it was a loan, I wouldn't say that that would preclude them from finding a verdict of guilty.”

Now, if -- if the question is whether the indictment is passed because it didn't say or described it more definitely but it happened, that could go to the Court of Appeals.

Why?

That we have to pass on this case on the basis that it was a genuine bona fide loan when the question was raised the other way and when the -- indictment didn't charge that.

Mr. Louis Nizer: The -- the -- Your Honor has put his finger on the knob of the matter with respect to that discussion with Government counsel.

In order to be consistent with our position that this raises solely a matter of construction with respect to whether a bona fide loan is a violation of the statute, I shall not, even under the invitation of that question, state to Your Honor the facts which where alleged in this very record, which indicated its bona fides and full interest and all the rest.

Justice Hugo L. Black: But they couldn't -- they did not amend the indictment?

Mr. Louis Nizer: They did not sir, that's right.

But when they found the dismissal on their hands and wished to present the question which would permit them jurisdictionally to come directly to this Court and bypass the Court of Appeals, as Your Honor indicated, might have been the situation if there were a factual issue.

They then phrased the question on page 48 on their appeal, assuming even the total repayment with interest and incidentally, that was conceded here that the whole loan had been repaid long before there was an investigation before the McClellan Committee and also interest.

But there was a dispute that arose and incidentally, it's a dispute not conceded as to whether it was the $8,000 interest or the $4,000 interest.

In order to avoid those factual issues which would not have entitled it to come directly to this Court?

They presented the question as an abstract academic question as to whether a loan, a bona fide loan but full interest on -- collateralized in all the other conditions imposed is a violation of this statute.

They not only said that at page 48 in their notice of appeal but in their brief at page 2.

Justice Hugo L. Black: But suppose they did --

Mr. Louis Nizer: Then --

Justice Hugo L. Black: -- and it comes to us and we find that there's another issue with reference to the construction.

And the indictment charges something which might be proven to the issue.

Your legal issue as to whether or not a bona fide loan would violate the law as one but there is still the question that I'm -- is this Court bound (Voice Overlap) --

Mr. Louis Nizer: I believe it is.

Justice Hugo L. Black: -- you will ignore the fact that the indictment charge more than the Government is saying here or arguing here.

Mr. Louis Nizer: We think that's a fetal variance for that matter but to answer your question directly, Your Honor as we see it.

I think that the Government, by its position, has bound this Court to consider this appeal solely on the question of bona fide loan and that it cannot now go back to the Court of Appeals or that this Court (Voice Overlap) --

Justice Hugo L. Black: But we have a duty to send it back there, would it not, if there were before us, the issue of construction, even though we had taken it.

Mr. Louis Nizer: If it were only the construction of this question which is what the Havas case which Your Honors recently decided, a very recent case on jurisdictional rights on direct appeal, was to the effect that unless the construction of the statute as determined by the lower court is the sole issue before the Court.

And I -- this -- this Court will not entertain jurisdiction and has not.

And therefore, we are not here at all properly unless Mr. Gillespie takes the position he's honorably taken in the matter, the case is United States against Havas, 355 U.S.

The decision having been rendered on the basis of Government admission below with respect to basic facts despite the statement which seems confusing that Mr. Guzzetta made.

I can point out that in the entire argument, that statement was not only contradicted but indeed, there was evidence given as conceded in the Government's brief that would indicate that there wasn't even a relationship between this loan and any labor relations.

It was for example, illustrated at page 31 that appears in the record, that there was a -- only 289, page 18 of the record, only 289 employees of 10,000 in this company that even belong to this union and they never negotiated the contract with the --

Justice Hugo L. Black: But that's a question of fact.

Mr. Louis Nizer: Precisely, and I -- I say that there are many questions of fact which are in this record which Your Honor referred to Mr. Guzzetta's statement.

And I say that is all out in this case, and that we are here on this sole legal question as Mr. Gillespie, I think rightly said and is constrained to say, I don't think there is -- would be jurisdiction otherwise that --

Justice Charles E. Whittaker: (Inaudible)

Mr. Louis Nizer: I don't think so, Your Honor.

I think the Government chooses to exercise it prerogatives of a direct appeal to the Supreme Court and if this Court entertains it, we made a motion to affirm.

We didn't think there was even a question here that was worthy of this argument, we were wrong.

But if this Court chooses to entertain that matter, I think the Government has concluded itself from any other position and I think if I may respectfully say so as this Court precluded by its procedure.

Justice Felix Frankfurter: Your answer carries with it or underlying your answer is an assumption, namely that -- that the Government can bind -- that the Government can bind itself to contract the scope of an indictment which includes, not only a question that can come here but it left at large the question that couldn't come here.

Mr. Louis Nizer: I'm not sure that I would put it as broadly as that, Your Honor, though that maybe a part of it.

I --

Justice Felix Frankfurter: I'm not -- I'm not saying you can't do that --

Mr. Louis Nizer: Yes, I --

Justice Felix Frankfurter: I just think it goes right back to us.

Mr. Louis Nizer: Oh, I think it can.

But I say I don't think it's necessary to go that far by the procedure of this appeal presenting this question that's the only thing left for this Court and think that --

Justice Felix Frankfurter: But this Court has on more than one occasion, I think within my time, had obtained noted probable jurisdiction on what's purported to be a direct review from a District Court then when it got here, found that other prices were implicated which required the case to be sent back to the Court of Appeals.

Now, that route or that disposition can be avoided in this case as I see it only on the assumption that the Government can and having power to do so, did restrict the proof -- the only proof which it has prepared to present under this broader indictment.

Mr. Louis Nizer: Yes, I think --

Justice Felix Frankfurter: As I understood Mr. Gillespie.

That's what he's undertaking to do.

Mr. Louis Nizer: Yes.

That's right, Your Honor.

But may I -- in order --

Justice Charles E. Whittaker: (Inaudible)

Justice Felix Frankfurter: Didn't amend it.

Mr. Louis Nizer: No, didn't amend but it was a judicial admission and was so held to be by the Court and I think rightly so and it's repeatedly made again and again.

The judicial admission is that this was a loan fully pre -- repaid within a year -- several years before it came, before the McClellan Committee.

Justice Hugo L. Black: But that's not what the grand jury charged.

Mr. Louis Nizer: And that is a vice, which if anything is not to be charged against us but would make a -- a return to the Court of Appeals, a futile act.

We think that this indictment in itself is at such variance with the statement of the Government on this appeal and in the Court below that it couldn't be sustained in any event.

There wasn't a payment of $200,000.

There wasn't.

And I think it shows a self-doubt that the drafters of the indictment that they could frankly state that it was a loan because they thought the indictment would be dismissed if they stated that frankly.

Justice Felix Frankfurter: Well, we can't pass on whether it was or wasn't a loan, can we, here?

Mr. Louis Nizer: No, it's conceded that it was.

You -- Your Honors on (Voice Overlap) --

Justice Felix Frankfurter: So that -- so that the -- if the intervention of Justice Black a minute ago is pertinent.

If the grand jury charge something which is not provable under it, because it's a different thing once to be proved or a -- or a contracted thing was to be proved which couldn't be contracted, then we can entertain it and the case should be properly here.

And I revert to my question or rather my statement.

I believe was to be correct, that underlying both conditions must be the assumption that what was put to Judge Sugarman, namely, that the Government says, "Hereafter, we will -- under this indictment as they may assuming the law with them."

Prove the indictment by proving the loan, whether they can shut the door for everything else by that restriction.

Mr. Louis Nizer: May I --

Justice Felix Frankfurter: -- I see no reason why the Government can by bill of particulars, restrict itself what it occurred to prove under the indictment which allowed them to prove more.

Mr. Louis Nizer: May I respectfully suggest that the point I wish to argue with respect to the interpretation of this statute, may make academic even the question which seems to be troubling us as to what the proper procedure is with respect to this because I don't think there will be any difficulty if I may be permitted to make the following point which encompasses both.

Justice Felix Frankfurter: If you make -- if you make the argument that you made in resisting the entertainment of the jurisdictional statement.

And if you make the argument on the merits, it doesn't help us.

Mr. Louis Nizer: No, not on the merits.

Justice Felix Frankfurter: It doesn't -- it -- it can't -- it can't possibly confirm that what this get down to, is this an effort or I mean any purpose to one that this involves an assumption of jurisdiction which we haven't got.

Mr. Louis Nizer: Well, clearly under the Criminal Appeals Act, this Court has jurisdiction to review a construction of a statute by a District Court.

And the Havas case held precisely that this Court has been limiting by its own choice to that construction.

And therefore, I think this Court -- this case is properly here on the only way in which it could've gotten here which the Government chose but I should like to make the following argument because I think it throws an umbrella over the whole question so that we needn't worry about where the shape holds.

The whole point of the Governments position seems to be and I do not wish to be put in a position as if I were cuddling about technical matters while the moral issues were against us.

The whole point of the Government's position seems to be that it is -- wishes to be in the posture of seeking to preserve the beneficent purpose, the high and concededly proper ethical purpose of this statute against delimitation.

I want to point out to Your Honors that bribery which has been mentioned here just like theft and murder is malum in se.

It requires a proof of criminal intention which is a defense opportunity, it -- it's a protection for the accused.

And on those cases whether the Act is as clear as it might be isn't of great importance because the defendant was about to commit a -- a wrong against the moral order which he knew irrespective of language.

But this statute is malum prohibitum and more remarkably, no criminal intension need be proven, the prosecutor's way is eased, has -- has been indicated here just to prove a loan no matter how innocent they say would convict this man.

And in such a case, this Court, as an old tradition has held that there must be the clearest and fairest warning to the citizens so that that which was legal yesterday and is now illegal, he may know precisely what that is.

When the Congress carves out of the permissive area, a zone which it says, "Henceforth, is criminal."

The obligation upon it for clarity to the citizen is of the greatest moment.

There is no room here for arguments about refinements of language, double meaning, ambiguity.

The fact that lawyers can honestly differ on this is at self fatal to this statute and that is why Your Honors, I call Your Honors attention to the kind decisions you have rendered.

For example, a self-propelled vehicle, motor vehicle, not running on rails may not be shipped, not held to apply to an airplane, even though we know an airplane is self-propelled and doesn't run on vehicles on -- on rails but if Congress meant that it should've said -- said that in a malum prohibitum statute.

A statute which says that you may not ship indecent books, papers or writings is not held to apply to a letter because if Congress meant to warn the citizens that he may not send an indecent letter, it should've included the word lend.

A statute which says, "Spirituous liquors or wines are forbidden," in interstate commerce under certain circumstances does not apply to log a beer and this Court even made the observation when they was -- the point made that there was scientific evidence of its alcoholic content.

The Court said, "The purpose of this statute is to give fair, clear, unequivocal warning to the average citizen."

Not to get scientific evidence about the degree of alcohol.

A statute which forbids the carrying of a knife is held not to apply to a razor.

If Congress -- if the legislature meant it.

Now, these -- this type of decision, which applies peculiarly in malum prohibitum cases comes with greater impact in this case because it has been held in this case that the criminal intention, mens rea, need not be proved in this case.

So, we have a decent citizen of impeccable reputation.

I'm talking of the clients we represent who would not have made a loan, had he known, had he been given fair warning that the lend or loan as was put 12 years later in the statute was prohibited.

Whose lawyers would not have permitted him to do this act, makes a loan which is repaid concededly and now --

Chief Justice Earl Warren: Mr. Nizer, may I -- may I just inject this at this point, Mr. Nizer.

It seems to me that from reading this transcript, that this position as to -- as to whether it was a loan was rather forced on the -- on the prosecution, rather than him accepting them.

Mr. Guzzetta said on page 14 of the record that he hoped to make this as clear as the trial progresses that their position is actually two-fold, he says, "A loan if Your Honor please, is something that relates to a state of mind between the person who is receiving the money and the person who is giving the money and again, the repayment which actually occurred in this case is only one aspect to whether or not the transfer of funds between one party or from one party to another is actually a loan."

Then there was -- there was an argument over several pages and the judge intimated that the Government -- that the Government was to be bound by the first three or four pages of that memorandum which had been submitted.

And Mr. Guzzetta said, "I think Your Honor, we are limited to the four corners of the indictment although you may disagree with me on this point."

And the Court said very strongly, "Mr. Guzzetta, because my brief is only the first three or four pages, which Your Honor read from and the Court interrupts, the first three or four pages dealt with what you promised to prove the facts."

Mr. Guzzetta, "Precisely, as supplemented by my statement in case there was ambiguity.

I don't know that an Assistant United States Attorney ever bound the Government before like this."

The Court, "Well, Mr. Guzzetta, I've had the experience where a man got up before a jury and got kicked out on his opening statement."

And Mr. Guzzetta said this, "That's a different matter.

My opening statement is yet to come."

And then, the Court adopted this -- this theory and this interpretation of -- of a -- an indictment that was valid.

And can -- can this Court be bound by that order of the District Court?

Mr. Louis Nizer: I should like to make three answers to that observation, Your Honor, if Your Honor will permit.

First, I call to your attention that that entire colloquy with Mr. Guzzetta begins by his stating, "And again, the repayment which actually occurred in this case," and then he goes on, "to argue about requirements."

That followed, the Court's citation on page 10 or 11, Your Honor read from page 13, 14 --

Chief Justice Earl Warren: 14, I think --

Mr. Louis Nizer: Immediately 14, immediately before, that Your Honors --

Chief Justice Earl Warren: Yes.

Mr. Louis Nizer: -- will find a quotation from the brief filed by the Government in which it can state it clearly that the facts which the Government intended to prove in its brief, not Mr. Guzzetta's second thoughts on the matter.

But the facts which they intended to prove was that there was a $200,000 loan that it was repaid in full.

It was originally supposed to have been placed with a bank.

The only request was to help them place it and incidentally, it was later as this record shows, placed with the Manufacturers Trust Company, that's at page 19.

And it was fully repaid with full interest to the Manufacturers Trust Company.

This was an intro of stopgap arrangement and the fact that it was stopgap also appears on page 19 as Your Honors -- as Your Honor will see.

Chief Justice Earl Warren: Well, that's a question of fact, isn't it?

Mr. Louis Nizer: Well, that's what Your Honor read with respect to Mr. Guzzetta's promises.

Chief Justice Earl Warren: Yes.

Mr. Louis Nizer: And I -- I observed.

My second answer therefore is that the Government has a right to waive the position taken there which it did not only in its memorandum but subsequently thereto and on this appeal.

And I think the Government is bound by its waiver of its position.

And I don't think that in its waiver, it sacrificed anything, Your Honor.

I don't think that Your Honor would want me to be drawn into a factual analysis that appears in this record because that would be arguing the facts.

But they -- the reason, Your Honor, may surmise that they waived all of that was, that there was nothing that they could have preserved if they haven't waived it.

Justice Felix Frankfurter: Isn't the thing -- the truth of the matter, Mr. Nizer, with this one -- one observation that an old lawyer might make and takes in as much -- as much of modernity as he can?

Every once in a while, we call you -- you have price purchase.

It's true to the matter that this is an evil result of a pretrial conference that 50 years ago, if this had come up, the case could have gone to trial.

And if the case had gone to trial, Mr. Gillespie or his -- one of his assistants would've made an opening statement.

Mr. Louis Nizer: I think (Inaudible)

Justice Felix Frankfurter: If in the opening statement, the jury would have been told they are going to prove a loan, you would've moved that the indictment be dismissed on the opening statement of counsel.

And if Judge Sugarman has then made the ruling that he did.

I can't imagine that we wouldn't have had a right of appeal.

Mr. Louis Nizer: Yes, and Your Honor, to demonstrate how true that is, I didn't wish to make the motion until the opening of counsel.

And the Court then said, "So far as what is that you wish the opening of counsel to demonstrate?"

I said, "The loan," and he said, "Well, let's submit again," he read it into record.

That's precisely how it occurred and I may say with respect to Judge Sugarman that he did this knowledgeably for the purpose of presenting the Government's right to appeal directly here.

He said so and spoke to counsel later and said, "I wanted this without an opening so that there would be no double jeopardy."

He was doing this to help -- pardon.

Justice Hugo L. Black: (Inaudible) to another question then.

Mr. Louis Nizer: Help the Government.

Justice Hugo L. Black: As I read this record, at the very time Judge Sugarman handed down his opinion claiming if the Government had waived this, the Government's counsel claiming it hadn't waived it.

It said, "You are picking out a statement of the first two or three pages of the brief written by the assistant prosecuting attorney trying to hold the Government bound by that."

And then he explained that link that this indictment charged more than the judge was holding him down to.

And did not -- what -- what authority did the judge have to bind the government at the very time it was saying, "We don't waive any such things."

Mr. Louis Nizer: The --

Justice Hugo L. Black: "We want to try this case on the issues that if it's a loan."

Mr. Louis Nizer: Mr. Justice Black, I was present and I may say to Your Honor that the record would show that the Government counsel, Mr. Guzzetta did not really go that far.

Justice Hugo L. Black: But read page 34.

Mr. Louis Nizer: Yes, I know page 34 but the entire colloquy and the statement read into the record and the present question on appeal indicates clearly.

And, if Your Honor will be good enough to read my statement of -- on the motion as to what the facts were because at that time, it was proper to argue the matter, Your Honors will see that on the conceded documents that were referred to, there couldn't be any question of a doubt.

But that this was a bona fide loan, indeed, it was even collateralized as I argue.

Justice Hugo L. Black: But to that -- that's arguing the facts.

Mr. Louis Nizer: But isn't that what Your Honor is --

Justice Hugo L. Black: What I'm talking about is this argument of Mr. Guzzetta on page 34 on this motion to dismiss while you were taking the position that the Government waived.

Mr. Guzzetta said, "We didn't waived.We are not waiving."

And the Court went ahead and held that the Government had waived it anyhow and deprived them of the right to try the issue raised by the indictment.

Mr. Louis Nizer: But the reason that the court held that he had waived it was because he did still not deny the facts in the memorandum which were filed have he said --

Justice Hugo L. Black: The facts --

Mr. Louis Nizer: -- the fact.

Justice Hugo L. Black: But he said there were two -- there was a two-fold case there.

One of them was with reference to the loan to which you referred to certain facts as -- as a loan.

The other one was that we are also proceeding on the basis that it was not a loan and in fact it was a bogus loan.

That -- that was his argument to the judge.

Mr. Louis Nizer: Well, I don't --

Justice Hugo L. Black: The judge told him and said, "You have waived it in your original brief, the first three pages of it."

Mr. Louis Nizer: They do not now claim that it was a bogus loan, they cannot so claim it was repaid long before there was even an inquiry before the McClellan Committee and they have so conceded.

Justice Hugo L. Black: Well, that -- that wouldn't keep it from -- necessarily.

It had nothing to do with -- yes, but that wouldn't necessarily keep it from being a bogus loan.

Mr. Louis Nizer: Well, if -- if the -- if the proposition is, may I respectfully say to Your Honor, that if the proposition is that the Government may not waive that issue as it has today on a number of occasions in its brief and by taking this appeal, then I am wrong.

But if I understand that the Government has a right to say, "I waive all these considerations and I'm here solely on the academic question which is raised on the construction of statute and I should think they are bound by that and that there is nothing immoral or improper and they're waiving something, that's for their judgment to do.

And I don't think that they exercise their judgment with any sacrifice to Government position."

Since my time is running out, I would make your indulgence to make just one of the brief points.

Chief Justice Earl Warren: (Voice Overlap)

Mr. Louis Nizer: And I don't -- do not wish to exceed my time.

And that's the matter of the amendment and the alleged legislative history with respect to that amendment.

There could not be anything more conclusive than the legislative history with respect to this amendment in demonstrating conclusively that it was -- that the loan was not previously proscribed and that it is now under the amendment for the first time.

I refer only to a few matters.

And since my time is virtually up, I would like to indicate them elliptically.

Chief Justice Earl Warren: You may take two or three minutes (Voice Overlap) --

Mr. Louis Nizer: Thank you Judge.

Thank you.

First, I have indicated that Senator Kennedy, when this very transaction came before him and there were a number of other loans in other industries said and the Government admits this in its brief, at page 10 and 33 of its brief that the Judge -- Senator Kennedy said, "There is no law against it," meaning this very transaction, "but don't you think this raises ethical questions that we have or to take cognizance --

Justice William J. Brennan: (Inaudible)

Mr. Louis Nizer: Yes, Your Honor.

Yes, after this was testified.

This -- this incident having occurred three or four years before and having been repaid whatnot.

But there were other incidents, and at this time he said, "There's no law against it but let me ask Mr. Fruehauf," the very defendant here."

Don't you think this raises ethical questions and we ought to take some cognizance and do something about it?"

And counsel read from the Senate introduction, the preamble, the word "loophole."

Somebody put it a little more meanly and said there were loopholes and the statute is going to plug them.

Doesn't that indicate that this was not prohibited originally?

Then Senator Goldwater, who is also a member of the Committee, Mr. Justice Brennan said, "This adds a prohibition on any loan, adds with respect to this amendment."

Mr. Meany the CIO, the President said, "This insane in substance."

Mr. Robert Kennedy who was counsel for the McClellan Committee wrote a letter to all congressmen indicating the purpose of the amendment.

And in that letter he said at page 24, "It prohibits loans by employers."

Representative Elliot, who was the cosponsor of this amendment said, "It adds -- adds to the existing proscription, the fact that you may not lend money."

Chief Justice Earl Warren: Was that hearing before or after the judgment in this case?

Mr. Louis Nizer: Long before the hearing.

Chief Justice Earl Warren: Before.

Mr. Louis Nizer: Long before, Your Honor.

In other words, the sequence here is, the loan is made in 1954, repaid in 1955, McClellan Committee 1957, amendment, 1959.

And Your Honor, the Harvard Law Review, from an academic viewpoint analyzing this also and we quote, it says, "This adds a proscription.

Loans are now prohibited."

And I wish therefore to conclude with this observation, that the most that can be said for the Government position, which is that this was merely clarified.

Something that already existed in the statute is that if it is necessary to clarify.

If there is even that much doubt taking it on that extreme posture, then under these prohibitum cases where criminal intention needn't be proved and a citizen should be given fair warning, that in itself is fatal to the kind of a statute which does not give a warning and tell a man that from henceforth, you may not make a loan.

For under common law, it was not illegal to make even a gift, not only a loan and the citizen should have been told that.

So that it seems to us there's only one other case pending since 1947 to this date involving a loan.

This is not a matter which involves a large evasion of the purposes of this statute.

In 1959, this amendment was passed and henceforth every citizen knows there can be no transaction involving a loan bona fide or -- or otherwise.

So that this is academic, it's a moot proposition involving this one case under circumstances where no warning was given to this citizen.

It therefore appears to us that there's no need, even if there would be merit otherwise, in a procedure which would send this back for other procedures.

If it matters in Your Honor's discretion, I should think it would exercise your discretion to close this matter for there is nothing more involved in the case and it was justly construed in the first instance.

Thank you --