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UNITED STATES v. MCCRAE

July 21, 1972

UNITED STATES of America
v.
John McCRAE


Luongo, District Judge.


The opinion of the court was delivered by: LUONGO

John McCrae was convicted by a jury on two counts charging (1) concealment, in a document required by the Welfare and Pensions Plan Disclosure Act, of the fact that a one million dollar Certificate of Deposit (CÅ), issued by Provident Bank and owned by the Carpenters Health and Welfare Fund, had been loaned for use as collateral for a loan by Provident Bank to a Vanderbilt Corporation, for which a fee of $10,500 had been paid to the Fund; and (2) embezzlement of the $10,500 fee, property of the Fund, in violation of 18 U.S.C. § 1027 and § 664.

 There is now before the court defendant's motion for new trial, in support of which three grounds are asserted:

 1. The government denied defendant due process of law by withholding evidence which would have been favorable to defendant;

 2. The court permitted improper cross-examination of a character witness; and

 3. Government counsel violated defendant's Fifth Amendment privilege against self-incrimination by improper comment on defendant's failure to testify.

 The evidence, viewed in the light most favorable to the verdict winner, the government, disclosed the following facts:

 Two employee benefit plans (including the Health and Welfare Fund, hereinafter Fund) were set up by employer building contractors and the Carpenters' Union. The plans were administered by four Trustees, two representing the employer building contractors and two representing the Union. McCrae was employed by the Trustees as the salaried supervisor of the plans responsible for day to day operations and supervision of other employees of the plans who kept the books and records of receipts and disbursements.

 On January 30, 1969, pursuant to arrangements earlier made, the Vanderbilt Corporation borrowed from the Fund a one million dollar CÅ for use as collateral for a loan and caused a check of Systems Capital Corporation in the amount of $10,500 to be delivered to representatives of the Fund as the fee for use of the C/D. McCrae was present at the Provident Bank when the CÅ was turned over by two of the Trustees of the Fund. The $10,500 check was delivered either to McCrae or jointly to McCrae and one of the Trustees.

 Under the terms of the plans, bank accounts could be opened only upon authorization of all four Trustees. On March 20, 1969, an account entitled "Investment Fund" (an account not authorized by the four Trustees) was opened at City Bank with the deposit of the $10,500 check. The account card bore the signature conceded to be that of John McCrae. There was no activity in the account until June 13, 1969 when it was closed by the cashing of a check drawn on that account bearing the alleged signature of John McCrae as maker and drawn to the order of a Joseph Gallagher. There were only two Joseph Gallaghers who were members of the Carpenters' Union at the time in question and each appeared and testified that he had not received the proceeds of that check.

 James O. Whitall, who was the president of City Bank, testified that McCrae had approached him about opening an account as a means of diverting the $10,500 fee from the Fund. Whitall testified that although he knew it was illegal, he cooperated with McCrae because he didn't want to lose the Carpenters' Union business. He arranged to withhold statements for the account and he (Whitall) was present in the bank on June 13, 1969 when the check closing the account was cashed. Whitall verbally authorized the cashing of the check and when he did so, he saw McCrae standing at the teller's window.

 There was no record in the books of the Fund of the loan of the CÅ or of the fee earned for the loan. Such transactions should have been recorded in the books and, if recorded, would have been noted by the Fund's auditor in his report since such loan would have been beyond the powers of the Trustees under the terms of the plans. The forms required to be filed under the Welfare and Pension Plans Disclosure Act were prepared from the books and records of the Fund and failed to disclose the transaction or the fee.

 The three grounds asserted by defendant in support of the motion for new trial will be discussed separately. Considered separately or in combination, they do not merit a new ...


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