United States of America v. STEVEN McLAUGHLIN

PRECEDENTIAL
UNITED STATES COURT OF
APPEALS FOR THE THIRD CIRCUIT
No. 00-2550
UNITED STATES OF AMERICA
v.
STEVEN McLAUGHLIN,
Appellant
On Appeal from the United States
District Court for the Eastern District of
Pennsylvania
(D.C. No. 98-cr-00545-1)
District Judge: Hon. Jan E. DuBois
Submitted Under Third Circuit LAR
34.1(a) October 7, 2004
Before: SLOVITER, VAN
ANTWERPEN and COW EN, Circuit
Judges
(Filed: October 20, 2004)
Stephen James Binhak
Key Biscayne, FL 33149
Attorney for Appellant
Patrick L. Meehan
United States Attorney
Laurie Magid
Deputy United States Attorney
for Policy and Appeals
Robert A. Zauzmer
Assistant United States Attorney
Senior Appellate Counsel
Bea L. Witzleben
Assistant United States Attorney
Kathy A. Stark
Philadelphia, PA 19106
Attorneys for Appellee
OPINION OF THE COURT
SLOVITER, Circuit Judge.
This is an appeal by Steven
McLaughlin from his conviction and
sentence following a jury trial on a
superceding indictment charging him with
conspiracy in violation of 18 U.S.C. § 371,
multiple counts of stealing and embezzling
union funds in violation of 29 U.S.C. §
501(c) and 18 U.S.C. § 2, one count of
failing to disclose material facts in a report
filed with the Secretary of the Department
of Labor (“DOL”) in violation of 29
U.S.C. §§ 431, 439(b), and perjury in
violation of 18 U.S.C. § 1623.
The principal issue presented is
whether the District Court erred by
instructing the jury that materiality was a
question of law, rather than fact, for
purposes of 18 U.S.C. § 1623 and 29
U.S.C. § 439(b) and, if so, whether such

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error was harmless.1
I.
McLaughlin served as President of
the Eastern Montgomery County Area
Local No. 2233 (“EMCAL”), an affiliate
of the American Postal Worker’s Union
(“APWU”), from January 1992 until
December 1994. APWU, a national labor
union whose membership consists of
various United States Postal Service
employees, has five regional offices,
w h i c h a re further divided i n to
approximately 1,300 geographically-based
sections called “Locals.” EMCAL is the
Local for postal employees operating in
E a s t e r n M o n t g o m e r y C o u n t y ,
Pennsylvania.2
The Go vern men t presented
evidence of McLaughlin’s expenditures
for car repairs, local hotel stays, and
purchases of electronic equipment paid for
by union funds on a charge card issued to
M c L a u g h l i n a n d E M C A L . T he
Government argued that these purchases
were for McLaughlin’s personal benefit
and hence not authorized under EMCAL’s
constitution. In addition, the Government
attempted to prove that McLaughlin had
embezzled from EMCAL by causing
unauthorized payroll checks to be issued in
his name and by causing EMCAL to
overpay him for health insurance, life
insurance, and retirement benefits.
Finally, the Government also sought to
prove that McLaughlin had filed a report,
known in labor parlance as an “LM2
report,” with the DOL in 1993 in which he
had failed to disclose his receipt of certain
benefits and reimbu rsements from
EMCAL as required by law.
In his defense, McLaughlin testified
that other individuals affiliated with
EMCAL had also used the charge card,
and introduced as Defense Exhibit 2 the
customer’s carbon copy of a receipt on
EMCAL’s charge card for a purchase at a
Staples Office Supplies store with a
signature purporting to be that of James
Martello, an E M CA L ex ecuti ve.
McLaughlin testified Martello had used
the card and then had given him the
receipt.
O n c ross-ex amin ation, th e
Government produced the merchant’s copy
of the receipt, identical except that it bore
McLaughlin’s signature rather than
Martello’s. On cross-exam ination,
McLaughlin conceded that, apart from the
disparate signatures, the two documents
1 The District Court had jurisdiction
pursuant to 18 U.S.C. § 3231; this court
has jurisdiction pursuant to 28 U.S.C. §
1291.
2 The indictment also charged
Nancy Zemo, the former
Secretary/Treasurer of EM CAL, with
conspiracy to steal and embezzle funds
from the union and multiple counts of
stealing and embezzling union funds.
She was acquitted of four of the
substantive counts and convicted of all
the other charges. Her convictions are
not at issue on this appeal.

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appeared identical.
The jury was unable to reach a
unanimous verdict, the District Court
declared a mistrial, and the grand jury
returned a superceding indictment
charging the same offenses as the original
indictment with the addition of a perjury
count based on McLaughlin’s testimony
regarding Martello’s use of the charge card
at Staples.
On the retrial, McLaughlin’s
counsel informed the Court that he was
unable to locate the Staples receipt
previously admitted as Defense Exhibit 2.
The Court informed the parties that it had
made and retained photocopies of all the
exhibits, including Defense Exhibit 2, and
McLaughlin’s defense counsel stated that
he would not object to the use of such a
copy at the trial.
Before instructing the jury, the
District Court advised the parties it
intended to instruct the jury that the issues
of materiality with respect to the perjury
and false reporting charges were questions
of law that it had decided in the United
States’ favor. Defense counsel objected,
arguing that materiality was a question of
fact for the jury. The District Court
overruled this objection. With respect to
the charge that McLaughlin had failed to
disclose a material fact to the DOL, the
District Court instructed the jury that:
The second element of the
crime . . . requires that the
Government prove, beyond
a reasonable doubt, that the
L M 2 report for 1993
contained false statements
o r r e p r e se n ta t i o n s of
material facts or []omitted
material facts.
I instruct you, as a matter of
law, that statements on the
1993 LM2 rep ort o f
e x p e n s e s , i n c l u d i n g
reimbursed expenses, which
must be set forth on
Schedule 9 of the report are
material facts under the
statute. I instruct you on
that as a matter of law. So
you need not concern
yourself with the issue of
materiality.
Supp. App. at 1030. Similarly, with
respect to the 18 U.S.C. § 1623 charge, the
District Court instructed:
The question whether the
alleged false testimony was
material is a question of law
for me to decide. It is not a
question of fact for you, the
jury, to determine.
And I instruct you that the
matters as to which it is
charged that defendant,
Steven McLaughlin made
false statements . . . were
material to the proceedings
before the court. Thus, you
need not decide the question

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of materiality.
Supp. App. at 1037. Thereafter, the jury
convicted McLaughlin on all charged
counts.
Following the sentencing hearing,
the Court sentenced McLaughlin to serve
a total period of incarceration of twenty-
four months. In addition, the District
Court imposed a total of three years
supervised release, restitution in the
amount of $18,000, and a special
assessment of $1,050.3
This appeal followed.
II.
W e generally review jury
instructions under the abuse of discretion
standard. Appellate review, however, is
plenary when the question is whether a
district court’s instructions misstated the
law. Walden v. Georgia-Pacific Corp.,
126 F.3d 506, 513 (3d Cir. 1997).
A.
In United States v. Gaudin, 515
U.S. 506 (1995), the Supreme Court of the
United States held that “materiality” is an
element of 18 U.S.C. § 1001 (“makes any
materially false, fictitious, or fraudulent
statement”), and thus, under the Fifth and
Sixth Amendments, materiality is a
question that must be determined by a jury
rather than a judge in an 18 U.S.C. § 1001
proceeding. Two years later, relying on its
decision in Gaudin, the Court in Johnson
v. United States, 520 U.S. 461 (1997), held
that materiality is an element of 18 U.S.C.
§ 1623 (“knowingly makes any false
material declaration”), and therefore, it is
a question for the jury. Based on these
precedents, we conclude that the District
Court’s instruction removing from the jury
the issue of materiality in its consideration
of McLaughlin’s violation of 18 U.S.C. §
1623 was an error of law.
In contrast to 18 U.S.C. § 1623,
neither the Supreme Court nor this court
has decided whether materiality is an
element of 29 U.S.C. § 439(b). That
statute provides:
Any person . . . who
knowingly fails to disclose a
material fact, in any
document [or] report . . .
required under . . . this
subchapter shall be fined not
more than $10,000 or
imprisoned for not more
than one year, or both.
29 U.S.C. § 439(b) (emphasis added). As
is true respecting 18 U.S.C. § 1623 and 18
U.S.C. § 1001, the statutory text of 29
U.S.C. § 439(b) expressly requires that the
fact allegedly withheld be “material.”
Compare Johnson, 520 U.S. at 465 (“The
statutory text expressly requires that the
3 McLaughlin has completed his
service of the period of incarceration,
and is currently serving his period of
supervised release.

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false declaration be ‘material.’ Gaudin
therefore dictates that materiality be
decided by the jury, not the court.”), with
United States v. Wells, 519 U.S. 482, 489-
91 (1997) (holding that “materiality” is not
element of 18 U.S.C. § 1014, a statute that
does not contain materiality requirement in
text). In other words, the logic of Gaudin
and Johnson compels a finding that
materiality is an element of 29 U.S.C. §
439(b). See United States v. W. Indies
Transp., Inc., 127 F.3d 299, 305 (3d Cir.
1997) (“Failure to submit the issue of
materiality to the jury was error. . . . That
Gaudin involved perjury under 18 U.S.C.
§ 1001 rather than 18 U.S.C. § 1546, the
relevant statute here, is not significant
given the identical character of the
materiality element in both perjury
statutes.”) (emphasis added).
In sum, “materiality” is an element
of both 29 U.S.C. § 439(b) and 18 U.S.C.
§ 1623. Thus, the District Court’s decision
to resolve the issue as a matter of law,
rather than submitting it to the jury as a
question of fact, violated McLaughlin’s
rights under the Fifth and Sixth
Amendments. The instructions, therefore,
were in error.
B.
Rule 52(a) of the Federal Rules of
Criminal Procedure, which governs direct
appeals from judgments of conviction in
the federal system, provides that “[a]ny
error, defect, irregularity or variance that
does not affect substantial rights must be
disregarded.” Although Rule 52(a), by its
terms, applies to all errors where a proper
objection is made at trial, the Supreme
Court has recognized a limited class of
fundamental constitutional errors that
“defy analysis by ‘harmless error’
standards.” Arizona v. Fulminante, 499
U.S. 279, 309 (1991). Errors of that type
are so intrinsically harmful as to require
automatic reversal without regard to their
effect on the outcome. For all other
constitutional errors, the Supreme Court
teaches that reviewing courts must apply
Rule 52(a)’s harmless-error analysis and
must disregard errors that are harmless
“beyond a reasonable doubt.” Chapman v.
California, 386 U.S. 18, 24 (1967).
In Neder v. United States, 527 U.S.
1 (1999), the Court, relying on Gaudin,
held that materiality is an element of the
federal tax fraud, mail fraud, wire fraud,
and bank fraud statutes under which the
appellant had been convicted. Thus, the
Court held that the district court’s jury
instructions, which had resolved as a
matter of law the materiality elements of
those charges, were in error.
Although the defendant there (as
here) had lodged a timely objection to the
e r r o n e o u s i n s t r u c t i o n s r e g a r d i n g
materiality, the Court distinguished the
error at issue – a jury instruction that
omitted materiality as an element of the
offense – from the constitutional violations
it had previously found were not subject to
harmless-error review. See, e.g., Gideon
v. Wainwright, 372 U.S. 335 (1963);
Tumey v. Ohio, 273 U.S. 510 (1927).
Those cases contained a “‘defect affecting

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the framework within which the trial
proceeds, rather than simply an error in the
trial process itself.’” Neder, 527 U.S. at 8
(quoting Arizona v. Fulminante, 499 U.S.
279, 310 (1991)). Such errors “‘infect the
entire trial process,’” Neder, 527 U.S. at 8
(quoting Brecht v. Abrahamson, 507 U.S.
619, 630 (1993)), and “‘necessarily render
a trial fundamentally unfair.’” Neder, 527
U.S. at 8 (quoting Rose v. Clark, 478 U.S.
570, 577 (1986)).
By contrast, Neder held that an
instruction that omits an element of the
offense does not necessarily render a
criminal trial fundamentally unfair or an
unreliable vehicle for determining guilt or
innocence. The Neder Court therefore
held that the harmless error review
codified at Rule 52(a) applies when a trial
court erroneously instructs a jury that
materiality is a question of law to be
resolved by the court rather than a question
of fact to be resolved by the jury.
Under the test set forth in Chapman
v. California, 386 U.S. 18 (1967), to
determine whether a constitutional error is
harmless, a reviewing court must decide
whether the record shows “beyond a
reasonable doubt that the error complained
of did not contribute to the verdict
obtained.” Id. at 24. In other words, an
“otherwise valid conviction should not be
set aside if the reviewing court may
confidently say, on the whole record, that
the constitutional error was harmless
beyond a reasonable doubt.” Delaware v.
Van Arsdall, 475 U.S. 673, 681 (1986).
Turning first to McLaughlin’s
conviction under 29 U.S.C. § 439(b), we
note that the United States must prove that
the defendant submitted a required
document or report in which he
“‘knowingly fail[ed] to disclose a material
fact.’” A fact is “material” if it has “‘a
natural tendency to influence, or [is]
capable of influencing, the decision of the
decisionmaking body to which it was
addressed.’” Gaudin, 515 U.S. at 509
(quoting Kungys v. United States, 485
U.S. 759, 770 (1988)). Moreover, the
issue is whether an omission was capable
of influencing and not whether the
omission actually exerted any influence on
the factfinder. Thus, an omission can be
material even if no one actually relied on
it. In re Cohn, 54 F.3d 1108, 1114 (3d Cir.
1995).
McLaughlin was charged under 29
U.S.C. § 439(b) with failing to disclose
certain items on a required annual public
disclosure report, known as an “LM2
report,” which he had prepared and filed
on EMCAL’s behalf with the DOL. Such
reports are the means by which the DOL,
union members, and the general public
obtain financial information about a
particular union. In an LM2 report, a
union must disclose, among other things,
disbursements it has made to its officers –
including salaries, reimbursed expenses,
and direct or indirect payments. Here, the
Government alleged that McLaughlin had
omitted $11,099.04 on the 1993 LM2
r e p o r t – $ 6 , 5 4 7 . 6 2 i n a l l eg e d
reimbursements McLaughlin received
from EMCAL for meals, mileage, parking

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and tolls, and $4,551.42 in alleged life,
health, and retirement benefits.
McLaughlin notes that the verdict
form that was eventually submitted to the
jury with respect to the 29 U.S.C. § 439(b)
count did not subdivide or otherwise break
down the various alleged reimbursements
and benefits that he had purportedly failed
to report in the 1993 LM2 report. Rather,
the verdict form simply asked for a
decision of guilty or not guilty. He points
out that at sentencing the District Court,
for purposes of calculating a loss amount
as to the embezzled funds, gave him
“credit” for several expected pay increases
that he had foregone as President by
offsetting his foregone salary increases
against the extra benefits and remuneration
McLaughlin had fraudulently received.
McLaughlin argues that in light of the
District Court’s crediting at sentencing,
this court should find that he had disclosed
approximately 90% of his earnings and
reimbursements, and thus that the jury,
properly instructed, may not have found
that the omitted information was
“material.”
McLaughlin’s argument is flawed.
First, his 90% calculation is dubious. In
arriving at this figure, McLaughlin makes
multiple unwarranted inferences and
conclusions. Second, it is unclear how the
District Court’s calculation of loss amount
as to the embezzled funds (the subject of
one of the crimes) is in any way related to
the monetary value of the reimbursements
and benefits McLaughlin failed to disclose
in the 1993 LM2 report (the subject of the
other crime at issue).
More fundamentally, even if we
were to conclude that McLaughlin’s 90%
figure was correct, there can be no
conclusion but that th e om itted
information in the LM2 report was
material. McLaughlin argues that the total
monetary value of the omitted information
was small in comparison with his total
salary and EMCAL’s total expenditures
for 1993. This however, is irrelevant. As
noted by the United States Court of
Appeals for the Sixth Circuit:
The fact that the misstated
amounts are relatively small
when compared with total
union expenditures is not
particularly relevant to the
issue of materiality. Instead,
the relevant inquiry is
w h e t h e r t h e f a l s e
information is of the type
t h a t i s c a p a b l e o f
influencing a decision of an
agency, as opposed to an
e x a m i n a t i o n o f t h e
magnitude of the falsehood.
Hughes v. United States, 899 F.2d 1495,
1499 (6th Cir. 1990); see also United
States v. Norris, 749 F.2d 1116, 1122 (4th
Cir. 1984) (stating, in context of 18 U.S.C.
§ 1001, “it is not the size of the payments
but it is the act of making a false statement
about the payments that is material”).
Certainly, the undisclosed information in
the LM2 report was capable of influencing
the decision of the decisionmaking body to

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which it was addressed. Gaudin, 515 U.S.
at 509. Under 29 U.S.C. § 431(b)(3),
McLaughlin was required to disclose all of
the reimbursements and benefits he
received from EMCAL. His omissions
were therefore material.
We reach the same conclusion with
respect to McLaughlin’s conviction for
perjury under 18 U.S.C. § 1623, based on
his testimony during the first trial that
Martello had used the charge card to make
a legitimate union purchase at Staples. On
appeal, McLaughlin argues that his
primary defense at that trial to the 29
U.S.C. § 501(c) charges was that every
expenditure made with the charge card
was a legitimate EMCAL expense. Thus,
he continues, his testimony that other
union officials used the charge card was
tangential to his theory of the case.
Because this defense revolved around the
legitimacy of the charged expenditures, not
the identity of the charge card’s user,
McLaughlin argues that his statements
regarding Martello’s purported use of the
charge card were immaterial. He also
suggests that the jury’s inability to return a
verdict after the M arch trial calls into
question the materiality of his lies.
We do not find McLaughlin’s
arguments convincing. Whether or not
union officials other than McLaughlin had
used the charge card was an important
issue at the March 1999 trial. Testimony
suggesting that other individuals had used
the charge card was capable of raising
doubts in jurors’ minds as to whether
McLaughlin was guilty. McLaughlin’s
testimony respecting Martello and the
receipt, which directly contradicted
Martello’s trial testimony that he had been
unaware of the existence of the charge
card, was plainly capable of influencing
the jury.
We also find McLaughlin’s
argument regarding the March 1999
mistrial unpersuasive. The fact that the
March 1999 jury was unable to return a
verdict is not germane to the issue of
whether the jury in the second trial would
have found materiality if given the
opportunity to have done so.
In sum, it is patent that
McLaughlin’s false testimony respecting
Martello’s use of the charge card had a
natural tendency to influence and was
capable of influencing the decision of the
decisionmaking body to which it was
addressed, Gaudin, 515 U.S. at 509. We
are satisfied that a properly instructed jury
could not have found otherwise. Thus,
although the District Court incorrectly
instructed the jury, we conclude that the
record shows “beyond a reasonable doubt
that th[is] error . . . did not contribute to
the verdict obtained.” Chapman, 386 U.S.
at 24.
III.
McLaughlin also argues that his
counsel provided ineffective assistance by
losing a critical piece of evidence and in
turn by stipulating to damaging facts
regarding the evidence.

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It is well settled in this court that
Sixth Amendment ineffective assistance of
counsel claims under Strickland v.
Washington, 466 U.S. 668 (1984), are
generally not entertained on a direct
appeal. See, e.g., United States v.
Headley, 923 F.2d 1079, 1083 (3d Cir.
1991). This refusal to entertain Strickland
claims on direct review stems from the
reality that “such claims frequently involve
questions regarding conduct that occurred
outside the purview of the district court
and therefore can be resolved only after a
factual development at an appropriate
hearing.” Gov’t of Virgin Islands v. Zepp,
748 F.2d 125, 133 (3d Cir. 1984) (internal
quotations and citations omitted); see also
United States v. Theodoropoulos, 866 F.2d
587, 598 (3d Cir.1989) (“[T]he proper
avenue for pursuing such a claim is
through a collateral proceeding.”).
We have, however, recognized a
narrow exception to the rule that a
defendant cannot argue on direct appeal
that counse l’s perfo rman ce fa iled
constitutional standards. As we stated in
Headley, “[W]here the record is sufficient
to allow determination of ineffective
assistance of counsel, an evidentiary
hearing to develop the facts is not needed.”
923 F.2d at 1083. This case does not fit
into this narrow exception.
The record must be developed as to
the facts surrounding counsel’s possession
and storage of Defense Exhibit 2, as well
as the cause or causes of its loss.
Similarly, on the record before us, we
cannot determine the reasonableness of
counsel’s stipulation that the photocopy of
Defense Exhibit 2 (introduced as
Government’s Exhibit 282 at retrial) and
the merchant’s copy of a receipt received
from Staples’ corporate headquarters
(Government’s Exhibit 265-A at the
retrial) were, in fact, part of the same
multi-page receipt. Where a claim of
ineffective assistance of counsel is based
on attorney incompetence, the lack of a
fully developed record often precludes a
comprehensive inquiry into the elements
of strategy or tactics that may have entered
into defense counsel’s challenged decision.
Zepp, 748 F.2d at133.
Neither aspect of McLaughlin’s
Strickland claim fits into that narrow class
of ineffectiveness claims amenable to
review on direct appeal. McLaughlin’s
ineffective assistance of counsel claim is
thus premature.
IV.
For the reasons set forth, we will
affirm the District Court’s judgment of
conviction and sentence and dismiss
without prejudice the appeal to the extent
that it claims ineffective assistance of
counsel.

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