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United States v. Laudani.

March 16, 1943


Appeal from District court of the United States for District of New Jersey; George A. Welsh, Judge.

Author: Jones

Before BIGGS, MARIS, and JONES, Circuit Judges.

JONES, Circuit Judge.

Laudani, the appellant, and one Rossi, along with several others, were charged in each of a number of counts in fourteen separate indictments with having induced, by means of intimidation, threats of dismissal, etc., certain named employees of a company doing work, financed in part by grants from the United States, to give up to the defendants portions of the employees' weekly compensation in alleged violation of the Act of June 13, 1934, c. 482, Sec. 1, 48 Stat. 948, 40 U.S.C.A. § 276b, commonly known as the "Kick-Back Act". The court, on the government's motion, severed as to all defendants except Laudani and Rossi on five of the indictments, which were thereupon tried together. Rossi was acquitted. Laudani was convicted on one or more of the counts in each of the indictments tried except one as to which the government consented to a dismissal. Laudani appeals from the ensuing judgment of sentence.

The appellant contends that the evidence was insufficient to convict on any of the counts in the indictments, but we deem it unnecessary to treat with that contention, for in our opinion the facts alleged and proven by the government do not lay a case within the purview of the statute cited. This question was raised timely by the appellant's demurrers and motions to quash before plea; by his motion for directed verdict of acquittal at the close of the government's case as well as at the close of the entire case; and by his motion in arrest of judgment after verdict. All of these motions were overruled or denied.

It is therefore unnecessary to recite in detail the evidence with respect to each of the specific counts whereon convictions were had. A statement of the basic facts common to all of the counts in all of the indictments will be sufficient for the consideration of the question which we deem crucial. (Incidentally, there was also at trial what we consider to be reversible error to which we shall make reference later because of its significance to trials in general.) Except for appropriate differences in names, dates and sums of money allegedly exacted from employees, all of the counts of the several indictments are couched in identical language and supply the following factual situation.

Between January 1, 1937, and May 15, 1938, there was under construction at Weehawken, New Jersey, certain public work known as the Weehawken Plaza under a general contract between the Port of New York Authority and George M. Brewster & Son, Inc., and a sub-contract between the Brewster company and the Cape Ann Granite Company for the furnishing and setting of granite rubble facing and coping necessary in the construction. The work was financed in part by Grants from the United States. Laudani, the appellant, was foreman for the Cape Ann Granite Company and, as such, had authority to employ and discharge stone masons and other stone workers in connection with the work. He knew that the rate of pay for such employees, as fixed and posted on the work, was a certain amount per hour over the period of time involved in the indictments and that all workers so employed were entitled to receive compensation in full at the posted rate of pay without deduction for any purpose whatever. Notwithstanding, Laudani and one or more of his representatives, as the indictments alleged, induced by threats of dismissal, etc., certain named employees of the Cape Ann Granite Company to give to and for Laudani and one or more of his representatives parts of such employees' wages to which the latter were entitled for work and labor performed on the particular work.

Section 1 of the Act of June 13, 1934, 40 U.S.C.A. § 276b, whereon the indictments are based, provides that, "Whoever shall induce any person employed in the construction, prosecution, or complection of any public building, public work, or building or work financed in whole or in part by loans or grants from the United States, or in the repair thereof to give up any part of the compensation to which he is entitled under his contract of employment, by force, intimidation, threat of procuring dismissal from such employment, or by any other manner whatsoever, shall be fined not more than $5,000, or imprisoned not more than five years, or both."

From a reading of the statute it seems plain that the evil aimed at is the inducing of an employee, engaged in work of the character specified, "to give up any part of the compensation to which he is entitled under his contract of employment". The "contract of employment" referred to of course means the contract between the employee and his employer. United States v. Golder et al., D.C.E.D. Pa., 11 F.Supp. 870, 871. Essential, therefore, to the crime as defined by the statute is the impairment, violation or derogation of the employee's contractual right with respect to the wages he is to receive. As the person capable of so offending, because of the requisite privity of contract, is the employer, the statute as written necessarily has application to a situation where the employee gives up or cedes a portion of his contractual wage to or in favor of or at the instance of the employer or one acting for or on behalf of the employer. In the Golder case, supra, Judge Kirkpatrick of the District Court for the Eastern District of Pennsylvania, said that "If the workman receives the whole amount of the wages which the employer ployer agreed to pay him when he went to work and is not compelled to give back or to waive any part of it, the act has not been violated." Further specifying in United States v. Charlick, D.C.E.D. Pa., 26 F.Supp. 203, 205, the same Judge stated, and we think correctly, that "The offense at which it [the "Kick-Back Act"] is aimed is, compelling workmen to return to their employers wages to which the contract between the employer and his employees entitles them." The views thus expressed in the Golder and Charlick cases, supra, as to the aim and scope of the statute were quoted with approval by the Comptroller General in a decision (A-90983) rendered the Secretary of the Treasyrt on December 14, 1939. See 19 Comp.Gen. 576, 577, 578.

The conclusion that the offense denounced by the statute consists of inducing an employee to give up a portion of his wages in derogation of his contract of employment (necesarily to the enrichment of the other party thereto) finds further confirmation in the expressed purpose of the statute. According to its title, it was designed "To effectuate the purpose of certain statutes concerning rates of pay for labor, by making it unlawful to prevent anyone from receiving the compensation contracted for thereunder, and for other purposes." 40 U.S.C.A. §§ 276b, 276c. So long, therefore, as the employer pays his employees the wages to which they are entitled under their contracts of employment and the employees are not induced or required to give back any part of their compensation, it cannot be said that they have been prevented from receiving the compensation to which their contracts of employment entitle them. What happens to the compensation after the employee has received it in full, and wholly without relation to or effect upon his contract of employment, is a matter with which this statute does not purport to deal.

The legislative history of the Act leaves little doubt that it was intended to penalize contractors who, enjoying federal work or work federally aided, unconsionably enrich themselves at the expense of their employees in denial of their contracts of employment. In reporting favorably the bill (S. 3041), which eventuated in the Act, the Senate Committe on the Judiciary stated that hearings had " * * * revealed that large sums of money have been extracted from the pockets of American labor, to enrich contractors, subcontractors, and their officials." The report also quoted from "one of the great leaders of labor" to the effect that "It has been a common practice for contractors constructing Federal buildings to pay the employees the prevailing rate as determined by the Secretary of Labor and then have them return a certain amount to the contractor. * * * " Senate Report No. 803, 73rd Cong. 2d Sess. In the House, whose Committee on the Judiciary also reported the bill (S. 3041) favorably, the Committee report stated that "This bill is aimed at the suppression of the so-called 'kick-back racket' by which a contractor on a Government project pays his laborers wages at the rate the Government requires him to pay them, but thereafter forces them to give back to him a part of the wages they have received." House Report, No. 1750, 73rd Cong. 2d Sess.

Nor is it entirely without significance that Sec. 2 (48 Stat. 948,) which was expressly included in the Act as an aid in the enforcement of Sec. 1 (the penal provision), authorizes the Secretary of the Treasury and the Secretary of the Interior jointly to make reasonable regulations "for contractors or subcontractors on any such building or work, * * * ." Of course, no distinction is to be drawn, and we make none, between work for which the government directly lets a contract to which "the prevailing rate" of wage to the contractor's employess attaches by virtue of the Act of March 3, 1931, c. 411, § 1, 46 Stat. 1494, as amended, 40 U.S.C.A. § 276a et seq., and federally aided work performed for other public agencies to which rates of pay to employees attach by virtue of competent federal departmental regulations. The "Kick-Back Act" is broad enough to embrace all work financed in whole or in part by federal funds. In fact, the bill (S. 3041) was purposely amended in such regard in Senate committee. See Senate Report, supra.

But nowhere in the Act, its title, or its legislative history is it suggested that it was intended thereby to reach an extortioner or blackmailer (not privy to the contract of employment) merely because the persons upon whom such an offender preys receive their compensation as employees of a contractor doing public work financed in whole or in part by federal aid. Nor would a court be justified in so extending the statute. Being penal, it is to be strictly construed and not extended by judicial construction beyond what the legislature has written. United States v. Resnick 299 U.S. 207, 209, 57 S. Ct. 126, 81 L. Ed. 127. The sanctions of the "Kick-Back Act" are directed at offending employers amenable to federal regulations. Equally reprehensible though it is for one not the employer to exact tribute from a workman upon threat of disturbing him in his employment, no greater need for federal protection of workers against the threats of extortioners or blackmailers in general is indicated simply because their employer happens to derive all or a part of his income from work dependent upon federal loans or grants. All other workers merit no less consideration. But extortion or blackmail visited upon private persons in respect of their private rights or property are offenses which, under our federal system, have been left to the criminal administration of the states.*fn1 A proper regard for that tradition requires that a federal criminal statute be not construed so as to duplicate state offenses unless Congress has plainly exhibited an intention so to do. Such should be the approach in construing a federal statute, particularly because of the historic role of the states in ordinary matters of criminal administration and because the same personal conduct can be made both a state and a federal offense without violating the double jeopardy clause of the Constitution. Jerome v. United States, 63 S. Ct. 483, 87 L. Ed. , decided February 1, 1943. Under the construction of the statute, here involved, which the government necessarily urges in an effort to sustain the indictments, the blackmailer, who, wholly unconnected with his victims' employment, requires and receives a part of the employee's wages each week for withholding knowlecge of something which the latter desires to keep secret from his employer lest he lose his job, would be equally indictable. Clearly, the statute was not so intended.Furthermore, any such extension of its scope suggests the possible invasion of the field of private rights and wrongs, unrelated to any federal interest or concern, which Congress is without constitutional warrant to enter upon. "The regulation of the conduct of its own citizens belongs to the state, not to the United States." United States v. Constantine, 296 U.S. 287, 296, 56 S. Ct. 223, 227, 80 L. Ed. 233.

None of the indictments in this case alleges that the employer did not pay its employees the wages to which they were entitled under their contracts of employment, or that the employees were prevented from receiving their wages in full, or that Laudani's exactions from employees were made for or at the instance of the employer. Nor were these omissions of material allegation mere oversights. The indictments specifically allege that the sums exacted from the employees were paid to or for Laudani. And the government proved at trial that the employer had paid its employees their wages in full in accordance with their contracts of employment, knew nothing of any exactions by Laudani or anyone else, and disapproved of such conduct on the part of anyone. Consequently, it is our opinion that the indictments were fatally defective in that they failed to allege an offense under the ...

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