UNITED STATES OF AMERICA v. FRANK ANTICO, Appellant
NO. 00-1446
UNITED STATES COURT OF APPEALS FOR THE THIRD CIRCUIT
November 28, 2001
2001 Decisions, Paper 278
Before: SCIRICA, AMBRO AND GIBSON, Circuit Judges
On Appeal From the United States District Court For the Eastern District of Pennsylvania (D.C. Crim. No. 98-242-01). District Judge: Honorable Jan E. DuBois. Argued: April 5, 2001. *Honorable John R. Gibson, United States Circuit Judge for the Eighth Circuit, sitting by designation.
2001 Decisions Opinions of the United States Court of Appeals for the Third Circuit
11-28-2001
USA v. Antico
Precedential or Non-Precedential:
Docket 00-1446
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Recommended Citation
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UNITED STATES COURT OF APPEALS FOR THE THIRD CIRCUIT
NO. 00-1446
UNITED STATES OF AMERICA
v.
FRANK ANTICO, Appellant
On Appeal From the United States District Court For the Eastern District of Pennsylvania (D.C. Crim. No. 98-242-01) District Judge: Honorable Jan E. DuBois
Argued: April 5, 2001
Before: SCIRICA, AMBRO AND GIBSON* Circuit Judges
(Filed: November 28, 2001)
_________________________________________________________________
*Honorable John R. Gibson, United States Circuit Judge for the Eighth Circuit, sitting by designation.
Attorneys for Appellant, Frank Antico, Sr.
Michael R. Stiles, Esquire United States Attorney, Eastern District of Pennsylvania
Robert E. Courtney, Esquire Assistant United States Attorney Chief, Organized Crime Division
Walter S. Batty, Jr., Esquire Assistant United States Attorney
Richard P. Barrett, Esquire (Argued) Assistant United States Attorney 615 Chestnut Street, Suite 1250 Philadelphia, PA 19106
Attorneys for Appellee, United States of America
OPINION OF THE COURT
AMBRO, Circuit Judge:
Frank Antico, Sr. (“Antico“) appeals his conviction and sentence in the United States District Court for the Eastern District of Pennsylvania (“District Court“) on one count of racketeering in violation of
On appeal, Antico asserts that he is entitled to a new trial for three reasons: (1) the District Court‘s failure to instruct the jury, during its charge on Hobbs Act extortion, of the necessity of finding an inducement or a quid pro quo; (2) the failure of the Government to prove a scheme to defraud the citizens of Philadelphia of their intangible right to his honest services; and (3) the insufficiency of the District Court‘s jury instruction on materiality as an element of wire fraud. We reject these allegations of error and affirm Antico‘s conviction on Counts One through Sixteen of the superseding indictment.
Antico also argues that his conviction of wire fraud on Counts Seventeen and Eighteen, which involve his securing permits for a prostitution business after he left the City of Philadelphia‘s Department of Licenses and Inspections, should be reversed as a result of the Supreme Court‘s ruling in Cleveland v. United States, 531 U.S. 12 (2000), that such a permit does not constitute property within the meaning of the wire fraud statute. We agree, and reverse Antico‘s conviction on these counts.
Finally, Antico challenges the District Court‘s enhancement of his sentence for a leadership role in an otherwise extensive criminal extortion activity and its loss computation on the wire fraud counts. In light of our reversal of conviction on two of the wire fraud counts, and
I. Factual and Procedural Background
Antico‘s indiscretions, which we summarize in this section, expose a pervasive abuse of government services. In the following recitation of the schemes on which Antico‘s conviction was based, we construe the facts in the light most favorable to the Government, as we must following the jury‘s guilty verdict. Glasser v. United States, 315 U.S. 60, 80 (1942).
Between 1983 and January, 1996, Antico held various positions at the Department of Licenses and Inspections (“L&I“) for the City of Philadelphia (the “City“). L&I‘s function is to administer and enforce the City‘s code requirements, including building, electrical, fire, health, housing, business, and zoning regulations. Officials of L&I are empowered to issue zoning and use permits and licenses according to a first-come-first-served policy, conduct inspections, and enforce applicable codes and regulations through citations and cease and desist orders. Persons aggrieved by these decisions may appeal to the Zoning Board of Adjustment (“ZBA“). Antico worked at L&I at various times as a Zoning Examiner, a Code Administrator, and the Business Regulatory Enforcement Director. In these positions, he had the discretionary authority to approve zoning and use permits and licenses, and to cite and close businesses for violations of the City‘s ordinances and the laws of Pennsylvania, particularly those governing adult cabarets and topless bars. The extortion and wire fraud schemes that Antico concocted while he was a public official at L&I and after he left its employ are detailed below.
A. Extortion Schemes -- RICO Acts 1-13, 15, 16 and Extortion Counts 2-10
1. Extortion of Westside Check Cashing
On December 22, 1994, L&I closed for zoning violations one of Westside Check Cashing‘s stores, located at 5th and Lehigh Avenues in Philadelphia. The controller of the check
Several days later, Antico called the controller and the owner of the business and told them he wanted a piece of jewelry to give to his wife for their anniversary. They selected some items, including a diamond pendant appraised at $3,275, and sent them to Antico‘s office by courier. The owner and his controller testified that they decided to send the jewelry to Antico and not bill him for it because of Antico‘s position with L&I. The zoning issue that led to the store closing on December 22 was still pending and they were concerned that Antico would use his position with L&I to keep the business closed. They understood from their conversation with Antico that he did not intend, nor did he ever offer, to pay for the jewelry. Once the conditions of the permit were satisfied, Antico permitted the store to reopen.
2. Extortion of Maureen McCausland2
Maureen McCausland met Antico in 1983 when Antico was working in L&I‘s zoning section. McCausland approached Antico to obtain a zoning and/or use permit registration for a prostitution business at 2132 Market Street in Philadelphia. Her zoning application read “nude modeling studio” and Antico advised her instead to call the business a “modeling studio” on the application. McCausland did so, and she received the license. She later paid Antico $500 for getting the permit for her.
This began a pattern of Antico receiving payments from McCausland for approval of zoning and/or use registration permits for a number of other prostitution businesses she opened over the years. She paid Antico $500 when she applied for the permit and $500 when she received it. McCausland also paid Antico additional sums of money and had sex with him so that he would use his position at L&I
McCausland‘s testimony was corroborated by the applications for zoning and use registration permits introduced into evidence. These applications were prepared by Antico and listed the use as “modeling studio” or “physical therapy.”
3. Extortion of Adult Cabarets in Philadelphia-- Wizzards, Pin Ups, Tattletales and Teazers
Between 1993 and 1995, Antico served as the Business Regulatory Enforcement Director for L&I, supervising the unit that enforced compliance with the zoning code. Most pertinent to this scheme, Antico was responsible for regulating adult cabarets and their compliance with the zoning code.
The Philadelphia Code defines an adult cabaret as “[a]n adult club, restaurant, theater, hall or similar place which features topless dancers, go-go dancers, exotic dancers, strippers, male or female impersonators or similar entertainers exhibiting specified anatomical areas or performing specified sexual activities.” Philadelphia Code S 14-1605. A business that meets this definition is considered a regulated use and is prohibited from operating within 1,000 feet of another regulated use or within 500 feet of a residential area. According to L&I policies, all adult cabarets are required to be licensed or to receive a variance from the ZBA. In addition, the dancers at a licensed cabaret (or a cabaret permitted to operate as such while it sought a license) cannot perform in a lewd or obscene manner.3
The scheme with respect to Antico‘s extortion of Wizzards began with John Messina, John Meehan, and Frank Antico, Jr. (Antico‘s son) forming Pan Enterprises, Inc. to operate Wizzards, an adult cabaret located at 38th and Chestnut Streets in Philadelphia. Initially, Messina provided the start-up money and held 89% of the corporation. Messina gave 10% and the manager position to Meehan because of his experience in operating topless clubs. Meehan, in turn, introduced Messina to Antico, Jr.
Meehan and Antico, Jr. told Messina that if Antico, Jr. received a 1% interest in Pan Enterprises and a position as a weekend manager, defendant Antico would use his position with L&I to help Wizzards operate. Messina agreed to this arrangement and to paying Meehan and Antico, Jr. part of their weekly salaries in cash without reporting it to the taxing authorities.
Antico guided Wizzards through the permitting and licensing process at L&I. In addition, when Wizzards opened for business on September 23, 1993, Antico arranged to have two competing clubs shut down for code violations. After Wizzards opened, Antico frequented the club and received complimentary drinks, food, and parties for himself and his friends. While Antico was present, the dancers violated the code restrictions on lewd dancing, yet Antico issued neither citations nor cease and desist orders.
After operating Wizzards for a few months, Messina and other investors began to quarrel with Meehan and Antico, Jr. over the club‘s management. Although the club was crowded and appeared to be doing well, the books did not reflect this success. When Messina and the investors tried to take a more active role in the club‘s management, Meehan and Antico, Jr. objected and threatened to have L&I shut the club down. In fact, in March 1994, Antico came into the club and closed it down because the dancers were performing in a lewd manner. A former employee of Wizzards testified that Meehan told that employee that he knew the club would be shut down, but would be permitted to reopen the next day. According to this employee, Meehan was “flexing his muscles.”
When Davis informed Meehan of these instructions, Meehan responded that Antico, Jr.‘s father was the head of L&I and that Wizzards was operating at his mercy. On June 16, 1994, Meehan and Antico, Jr. resigned their employment with Wizzards. Within two hours defendant Antico closed Wizzards for lewd dancing.
b. Pin Ups
In August of 1995, Antico, Antico, Jr., and Meehan met with the owners of Pin Ups to discuss the sale of the club to Antico, Jr. and Meehan. At a follow-up meeting, the owners turned down the offer made by Antico, Jr. and Meehan. Two weeks later, on September 8, 1995, L&I inspectors arrived at Pin Ups, conducted an inspection and closed the club for electrical violations.
Prior to the closure, some of the Pin Ups dancers knew the club was going to be shut down and arranged to dance at Tattletales, another topless club located nearby. The owners of Tattletales also knew that Pin Ups was going to be shut down and arranged for additional staffing and liquor for the night.
On the night of the inspection, one of the owners of Pin Ups, suspecting that the closure was in response to their refusal to sell the club, told defendant Antico that if Pin Ups was not reopened the next day, he was going to “call the Feds.” Antico permitted Pin Ups to reopen before the electrical violations were corrected.
c. Tattletales
Steve Owens and Greg Bertino opened Tattletales in July 1995. Antico was a regular customer and advised the two
Despite Antico‘s advice, the dancers at the club did not follow the dancing restrictions or the Code. Antico, however, did not cite the club for violations. Instead, he was treated to free drinks, meals, and couch dances. Owens and Bertino did this to gain favor with Antico and to maintain good relations with L&I. The two also gave Antico $500.
d. Teazers
Thomas Killeen was an owner of Teazers, a topless club located at 20th Street and Oregon Avenue in Philadelphia. In connection with the opening on September 23, 1993 of Wizzards, Antico closed Teazers and another bar owned by Killeen because the dancers were violating L&I restrictions.
Subsequent to its reopening, Antico began to patronize Teazers. Killeen would socialize with Antico and give him free drinks. Antico eventually asked Killeen for, among other things, the repeated use of one of Killeen‘s limousines from his limousine company. Killeen acquiesced because of Antico‘s position in L&I and never billed him for the use. Killeen ultimately hired limousines from other companies because he did not want Antico to be seen in one of his vehicles. In addition, Antico asked for, and Killeen let him use, six field-level box seats for several Phillies games. Antico gave Killeen a list of games he wanted to attend and sent an L&I employee to pick up the tickets.
4. Beach Club
Frank Cascerceri was the owner of the Beach Club, a nightclub formerly located along the Delaware River in Philadelphia. Cascerceri testified that he built a pool at the club and hired an expediter4 to apply for permits from L&I.
To avoid the risk of not getting L&I approval, Cascerceri hired Ricciardi. He paid her $625 for her assistance, although Ricciardi testified that she did very little to obtain the permit. Shortly after he hired Ricciardi, Cascerceri received his approval from L&I.
5. Extortion of Barbara Williams6
Barbara Williams worked as an expediter in Philadelphia from 1984 to 1989. To circumvent L&I‘s first-come-first-served rule of processing applications, Williams would turn to Antico on her urgent matters and pay him to process her paperwork ahead of others. She also paid Antico to prepare particularly complex zoning applications. Typically, Williams would give Antico batches of permits to process at one time, and paid him according to the number of applications he processed. The payments ranged from $30 to $75 per application. Williams estimated that Antico extorted approximately $5,000 from her during her work as an expediter.
B. Mail and Wire Fraud Scheme Involving Elizabeth Ricciardi -- RICO Acts 14A-F and Wire Fraud Counts 11-16
Antico‘s employment with L&I required him to refrain from using his position to secure advantages for himself or his family members. The Philadelphia Code provides that
In the late 1980s, Ricciardi had two children by Antico. Initially, Antico failed to make child support payments, forcing Ricciardi to file a child support petition in the Philadelphia Court of Common Pleas, Family Court
Division. The child support order at that time was $60 per week. Antico volunteered to pay child support if Ricciardi would withdraw the petition, which she agreed to do. He made three payments, then stopped.
In lieu of the payments, Antico offered to establish Ricciardi as an expediter. She was reluctant to accept, knowing nothing about the expediting business, but Antico told her that he would take care of everything. This was not an empty promise. Antico referred clients to Ricciardi who needed licenses and permits from L&I. Ricciardi would call Antico when a client hired her. Antico would then tell Ricciardi how to fill out the applications or would complete them himself. Ricciardi was known to use Antico‘s office at L&I to do her work, and he would have city employees pick up and deliver her paperwork and watch her children. Antico personally worked on 564 of the 748 building permit, and 288 of the 322 zoning permit, applications filed by Ricciardi and submitted them under her name. 9 Moreover, Antico was the one who approved the permits and applications submitted by her business. Antico neither publicly disclosed a conflict of interest nor disqualified himself from taking official action in these matters, as required by Section 20-607 of the Philadelphia Code. As a result of this arrangement, Ricciardi admits to earning over $700,000 during the course of the arrangement.
In 1993, upon discovering that Antico was signing permit applications on behalf of Ricciardi, L&I Commissioner Levin transferred Antico and moved the responsibility for permit approvals to a different manager. Antico was no longer the head of the zoning department, and his job responsibilities no longer included approving permit applications.
In January 1996, Antico left L&I and established an expediting business in Philadelphia under the name Frank P. Antico, Zoning Consultant, Advisor, and Technician of the Philadelphia Code. In 1997, Maureen McCausland requested Antico‘s services to reopen a prostitution business. Unbeknown to Antico, McCausland was cooperating with the Federal Bureau of Investigation (“FBI“) at the time and this request was part of a Government operation. Antico assisted McCausland with her permit application, which declared the facility to be a modeling studio/physical fitness business at 1212 Walnut Street, Philadelphia.11 Antico attempted to hide his involvement by having another expediter submit the applications.
* * * * *
On September 30, 1998, a federal grand jury in the Eastern District of Pennsylvania returned an eighteen count superseding indictment. The Government charged Antico with sixteen racketeering acts under the umbrella of one RICO count (Count One), nine of which were also charged as substantive Hobbs Act extortion counts (Counts Two through Ten), and six of which were charged as substantive wire fraud counts (Counts Eleven through Sixteen). Antico was charged with two additional substantive wire fraud counts (Counts Seventeen and Eighteen) that do not fall under the RICO umbrella count. The jury convicted Antico of all eighteen counts in the superseding indictment. With respect to the RICO count, the jury concluded that fifteen of the sixteen predicate racketeering acts were proven.12
II. Legal Discussion
This Court has jurisdiction of an appeal from a judgment of conviction and sentencing pursuant to
A. Requirement of Inducement or Quid Pro Quo in Hobbs Act Extortion
Antico challenges the District Court‘s instructions to the jury with respect to Hobbs Act extortion under “color of official right.” The Hobbs Act provides in relevant part:
(a) Whoever in any way or degree obstructs, delays, or affects commerce or the movement of any article or commodity in commerce, by robbery or extortion or attempts or conspires so to do, or commits or threatens physical violence to any person or property in furtherance of a plan or purpose to do anything in violation of this section shall be fined not more than $10,000 or imprisoned not more than twenty years, or both.
(b) As used in this section--
. . .
(2) The term `extortion’ means the obtaining of property from another, with his consent, induced
by wrongful use of actual or threatened force, violence, or fear, or under color of official right.
Specifically, Antico argues that the District Court should have charged the jury to determine whether he induced his extortion victims into giving him gifts and favors with a promise or threat of an official act in return or, at a minimum, that a quid pro quo was reached between them. This Court exercises plenary review over the alleged failure of the District Court to charge the jury properly on a matter of law. United States v. Bradley, 173 F.3d 225, 230 (3d Cir. 1999).
1. Inducement
With respect to Antico‘s claim that an inducement instruction should have been charged to the jury as per subsection (b)(2) of the Hobbs Act, the Supreme Court in Evans v. United States, 504 U.S. 255 (1992), clearly rejected inducement as an element of the offense of extortion “under color of official right.” Id. at 256. The Supreme Court affirmed the ruling of the Court of Appeals for the Eleventh Circuit, which held that
the requirement of inducement is automatically satisfied by the power connected with the public office. Therefore, once the defendant has shown that a public official has accepted money in return for a requested exercise of official power, no additional inducement need be shown. The coercive nature of the official office provides all the inducement necessary.
2. Quid Pro Quo
Antico also asserts that the District Court should have charged the jury to find a specific quid pro quo . He cites to a trilogy of Supreme Court cases -- McCormick v. United States, 500 U.S. 257 (1991), Evans v. United States, 504 U.S. 255, and United States v. Sun Diamond Growers of Cal., 526 U.S. 398 (1999) -- in support of his argument.
Antico begins by citing to the cornerstone Supreme Court case on Hobbs Act extortion--McCormick, which held that an explicit quid pro quo is necessary for conviction under the Hobbs Act when a public official receives a campaign contribution. In McCormick, the Supreme Court ruled that the District Court erred by instructing the jury that such a quid pro quo was not necessary. McCormick 500 U.S. at 274.15
The logic the Supreme Court employed in McCormick follows the fine line between what is legal campaign activity and the “forbidden zone of conduct.”
[T]o hold that legislators commit the federal crime of extortion when they act for the benefit of constituents or support legislation furthering the interests of some of their constituents, shortly before or after campaign contributions are solicited and received from those
beneficiaries, is an unrealistic assessment of what Congress could have meant by making it a crime to obtain property from another, with his consent,“under color of official right.” To hold otherwise would open to prosecution not only conduct that has long been thought to be well within the law but also conduct that in a very real sense is unavoidable so long as election campaigns are financed by private contributions or expenditures, as they have been from the beginning of the Nation. It would require statutory language more explicit than the Hobbs Act contains to justify a contrary conclusion.
Because the line is so subtle, the Supreme Court ruled in McCormick that an overt quid pro quo is a necessary proof in the context of campaign contributions.
The receipt of such contributions is also vulnerable under the Act as having been taken under color of official right, but only if the payments are made in return for an explicit promise or undertaking by the official to perform or not to perform an official act. In such situations the official asserts that his official conduct will be controlled by the terms of the promise or undertaking. This is the receipt of money by an elected official under color of official right within the meaning of the Hobbs Act.
Antico appears to favor extending the McCormick explicit quid pro quo ruling to non-elected public employees outside the context of campaign contributions because the state of mind necessary to convict in the two contexts is the same. However, the Supreme Court noted that its holding was limited to campaign contributions.
McCormick does not challenge any rulings of the courts below with respect to the application of the Hobbs Act to payments made to nonelected officials or to payments made to elected officials that are properly determined not to be campaign contributions. Hence, we do not consider how the “under color of official
right” phrase is to be interpreted and applied in those contexts.
Id. at 268-69. In light of this express limitation, we decline Antico‘s invitation to extend McCormick to apply to his situation. The quid pro quo can be implicit, that is, a conviction can occur if the Government shows that Antico accepted payments or other consideration with the implied understanding that he would perform or not perform an act in his official capacity “under color of official right.”
In Evans, decided one year after McCormick, the Supreme Court ruled that a jury instruction containing an implicit, as opposed to an explicit, quid pro quo requirement in the context of campaign contributions passed muster under McCormick. The Supreme Court stated:
We reject petitioner‘s criticism of the instruction, and conclude that it satisfies the quid pro quo requirement of McCormick v. United States, because the offense is completed at the time when the public official receives a payment in return for his agreement to perform specific official acts; fulfillment of the quid pro quo is not an element of the offense. . . . We hold today that the Government need only show that a public official has obtained a payment to which he was not entitled, knowing that the payment was made in return for official acts.
Evans, 504 U.S. at 268. In other words, no “official act” (i.e., no “quo“) need be proved to convict under the Hobbs Act. Nonetheless, the official must know that the payment -- the “quid“-- was made in return for official acts.
Outside the campaign contribution context, where Antico‘s case falls, the line between legal and illegal acceptance of money is not so nuanced. The Hobbs Act simply states that use of one‘s office to obtain money or services not due is extortion: “the Government need only show that a public official has obtained a payment to which he was not entitled, knowing that the payment was made in return for official acts.” Id. Antico would read into the phrase “knowing the payment was made in return for official acts” a requirement that the jury be instructed using the express words “quid pro quo.”
In addition, we rejected Antico‘s argument when we affirmed, in part, the District Court‘s holding in United States v. McDade, 28 F.3d 283 (3d Cir. 1994), affirming in part and dismissing on other grounds, 827 F. Supp. 1153 (E.D. Pa. 1993). Analyzing both the McCormick and Evans cases, the District Court in McDade concluded that “[g]iven the language of the Supreme Court‘s opinion, I find that McCormick does not require a quid pro quo for extortion outside the context of campaign contributions.” 827 F. Supp. at 1171; accord United States v. Davis, 967 F.2d 516 (11th Cir. 1992). “[S]ince I can find no language in the Opinion of the Court in Evans which explicitly extends the quid pro quo requirement, and since the facts of Evans did not require the Court to extend McCormick, I respectfully do not interpret the Court‘s opinion so broadly as did those concurring and dissenting Justices [in Evans].” McDade, 827 F. Supp. at 1171 n.8. We reiterate our agreement with McDade.
The relevant inquiry is whether the District Court‘s instruction satisfied the implicit quid pro quo requirement where non-campaign contribution
So if a public official agrees explicitly or implicitly to take or withhold some action for the purpose of obtaining money for someone else, that constitutes extortion. The public official need not fulfill the promise of the payor to do or not to do an official act, although the official‘s failure to influence may be considered along with all of his conduct in determining whether or not he possessed the intent to commit the crime. The crime is completed at the time when the public official knowingly accepts the benefit in return for his agreement to perform or not to perform an act related to his office. Moreover, the government does not have to prove that there was an express promise on the part of the public official to perform a particular act at the time of the payment.
In sum then, it is sufficient if the public official understands that he is expected, as a result of the payment, to exercise particular kinds of influence or to do certain things connected with his office as specific opportunities arise.
Bradley, 173 F.3d at 231 (emphasis added).
The District Court‘s charge to the jury in Antico‘s case, after specifically reading the relevant portions of the
Extortion under color of official right is the use of one‘s position as a public official or the authority of public office to obtain money or services not due the official or his public office. Such extortion violates the
Hobbs Act .. . .
If you decide that the defendant was given money or goods or services not due the office he represents, you must then decide whether the defendant used the authority of his office or position to obtain the money, goods or services. The third element is wrongful obtained consent of the giver. The Government must prove beyond a reasonable doubt that these items were
given to the defendant in connection with his power and authority as a public official. The giver may have initiated the exchange and the parties may be on friendly terms. These are factors to be considered in deciding whether the giver gave the payments, goods or services because he believed the defendant would use his office for acts not properly related to his official duty or whether instead the giver was making a voluntary contribution.
Unless you decide beyond a reasonable doubt that the defendant knew the giver‘s consent was wrongfully obtained, that is, that the money, goods or services were given in connection with the defendant‘s misuse of his official position rather than being given voluntarily, you cannot convict the defendant.
(Emphases added).
No specific instruction to find an express quid pro quo was given. Nor did the District Court specifically negate such a requirement as the trial court did in McCormick. As the District Court noted, “I didn‘t not grant the Government‘s points, by the way, . . . which asked me to charge that no quid pro quo was required and no inducement was required. I just didn‘t charge it.” Antico argues that a jury instruction failing to mention quid pro quo falls short of the mark.
We disagree with Antico‘s interpretation of the Supreme Court‘s intent. Considering the District Court‘s instructions as a whole, and the highlighted phrases in particular, which require a finding of Antico‘s knowledge of a “connection” between the payment and the misuse of his office, we find that they sufficiently convey the implicit quid pro quo approved in Evans and BradleyHobbs Act extortion under color of official right without the need to prove that the official action (or inaction) occurred.
Lastly, Antico cites to the recent case of United States v. Sun-Diamond Growers of Cal., 526 U.S. 398 (1999), as an
As a result, the Court held in Sun-Diamond that, “in order to establish a violation of
In contrast to the illegal gratuity statute, the
B. Intangible Rights of Honest Services
1. Sufficiency of the Government‘s Proof
The jury found that the Government had proven all of the mail and wire fraud racketeering acts under the
In relevant part, the mail and wire fraud statutes provide:
Whoever, having devised or intending to devise any scheme or artifice to defraud, or for obtaining money or property by means of false or fraudulent pretenses, representations, or promises . . . [uses the mails or wires, or causes their use] for the purpose of executing such scheme or artifice . . . shall be fined under this title or imprisoned not more than five years, or both.
Courts have interpreted the term ” `scheme or artifice to defraud’ [to] include a scheme or artifice to deprive another of the intangible right of honest services,” United States v. Woodward, 149 F.3d 46 (1st Cir. 1998) (citing United States v. Sawyer, 85 F.3d 713, 723-24 (1st Cir. 1996)), giving rise to the “intangible rights doctrine.”16 This doctrine reaches public and private fraud at the state and local levels, including prosecutions of public officials or employees who have failed to provide honest services to the citizenry they serve.17 Although our interpretation of the scope of the mail and wire fraud statutes is not boundless, we have construed a “scheme or artifice to defraud” to encompass intangible rights. Clapps, 732 F.2d at 1149-53 (affirming the conviction of a county political party chairman who defrauded nursing home residents of their absentee ballots and marked them in favor of the party‘s candidate); United States v. Frankel, 721 F.2d 917, 920-21 (3d Cir. 1983) (“Schemes to defraud come within the scope of the statute even absent a false representation.“); United States v. Boffa, 688 F.2d 919, 931 (3d Cir. 1982) (concluding that a scheme to defraud employees “of the loyal, faithful, and honest services of their union official alleges a crime within the scope of the mail fraud statute“). Given Congress’ clear intent in enacting
Antico argues that while “discharge of debt” of a family member may pose a conflict of interest, his “nepotistic gifting” to his girlfriend does not rise to an actionable deprivation of his honest services under the mail or wire fraud statutes. He denies that he had a financial interest in Ricciardi‘s business at the time alleged in the indictment because his debt, if any, had mathematically been discharged at the time of the indictment. With respect to his intent to defraud, Antico argues that he never actively concealed from his colleagues at L&I either that he had children with Ricciardi or that he set her up in the expediting business. Thus a requisite element of fraud is missing. We address each of these contentions in turn.
Honest services fraud typically occurs in two scenarios: (1) bribery, where a legislator was paid for a particular decision or action; or (2) failure to disclose a conflict of interest resulting in personal gain. Woodward, 149 F.3d at 54-55. This duty to disclose a conflict of interest arises in the private sector from the fiduciary relationship between an employer and an employee. In the public sector, the duty is oftentimes prescribed by state and local ethics laws. In the latter context,
[a] public official has an affirmative duty to disclose material information to the public employer. See
Silvano, 812 F.2d at 759. When an official fails to disclose a personal interest in a matter over which she has decision-making power, the public is deprived of its right either to disinterested decision making itself or, as the case may be, to full disclosure as to the official‘s potential motivation behind an official act. See id. (upholding conviction of city fiduciary who failed to disclose material information about unnecessary spending of city money for secret enrichment of fiduciary‘s friend). Thus, undisclosed, biased decision making for personal gain, whether or not tangible loss to the public is shown, constitutes a deprivation of honest services.
We agree with the Government that Antico‘s duty to disclose material information with respect to his conflict of interest with Ricciardi arose from state and local law. Antico disagrees, arguing that the state and local conflict of interest laws that governed his conduct while at L&I contained a loophole for “girlfriends.”
Therefore, Antico owed the City a duty to disclose this financial arrangement, the failure of which constitutes honest services fraud.
Antico correctly notes that “the broad scope of the mail fraud statute . . . does not encompass every instance of official misconduct that results in the official‘s personal gain.” Czubinski, 106 F.3d at 1076 (citing Sawyer, 85 F.3d at 725) (reversing conviction of IRS employee on mail fraud charges for unauthorized browsing of taxpayer files absent a showing of impartial performance of public servant‘s duties); United States v. Holzer, 816 F.2d 304, 309 (7th Cir. 1987) (“We do agree that the words `scheme or artifice to defraud’ don‘t reach everything that might strike a court as unethical conduct or sharp dealing“). However, even if we were to read these conflict of interest provisions as restrictively as Antico suggests, we find that his conduct violated the fiduciary relationship between a public servant charged with disinterested decision-making and the public he serves. Id. at 307 (“Fraud in its elementary common law sense of deceit -- and this is one of the meanings that fraud bears in the [mail fraud] statute . . .-- includes the deliberate concealment of material information in a setting of fiduciary obligation. A public official is a fiduciary toward the public . . . .” ). Duties to disclose material information affecting an official‘s impartial decision-making and to recuse himself exist within this fiduciary relationship regardless of a state or local law codifying a conflict of interest. Id. at 309; Silvano, 812 F.2d at 759-60. Antico‘s exercise of his discretionary authority in both filling out and approving the applications submitted by Ricciardi without disclosing his interest in the scheme goes beyond the mere ministerial function excused in Czubinski and into the realm of interested decision-making. When coupled with the duty imposed by state and local conflict of interest
Antico also contends that “absent deceit, concealment, demonstrable public harm or other active fraud,” his conviction for wire fraud cannot stand. We disagree. In the context of honest services fraud, where “undisclosed, biased decisionmaking for personal gain, whether or not tangible loss to the public is shown, constitutes a deprivation of honest services,” Sawyer, 85 F.3d at 724, an active fraud or deceit is not necessary.
[T]he courts that have accepted the notion that a deprivation of intangible rights is within the statute[ ] recognize that an active misrepresentation is not necessary. Instead, the prosecution need prove only a recognizable scheme formed with intent to defraud regardless of how that intent manifests itself in execution. For example, a public official engaged in bribery by mail need not actively make any misrepresentations in order to violate section 1341.
Frankel, 721 F.2d at 920-21. “The legal meaning of `fraud’ is not limited to deceit or misrepresentation; it includes overreaching, undue influence, and other forms of misconduct.” Holzer, 816 F.2d at 309. Nor is a showing of public harm required. Sawyer, 85 F.3d at 724 (“. . . whether or not tangible loss to the public is shown“); Holzer, 816 F.2d at 308 (“It is irrelevant that . . . [Holzer‘s] conduct caused no demonstrable loss either to a litigant or to the public at large.“); Silvano, 812 F.2d at 760 (“It is immaterial whether [the defendant] personally profited from the scheme or whether the City suffered a financial loss from it.“) (citing United States v. Lemm, 680 F.2d 1193, 1205 (8th Cir. 1982)); United States v. Mandel, 591 F.2d 1347, 1358 (4th Cir. 1979) (approving the prosecution of allegedly corrupt politicians who did not deprive the citizens of anything of economic value); United States v. Keane, 522 F.2d 534 (7th Cir. 1975) (same).
In this case, Antico‘s failure to disclose his financial interest in the success of Ricciardi‘s expediting business