923 F.2d 970 | 2d Cir. | 1991
Lead Opinion
Lewis Novod appeals his conviction on seven counts of perjury, six counts of mail fraud, seven counts of wire fraud, and one count of conspiracy following a December 1989 jury trial in the District Court for the Southern District of New York. He was acquitted of three counts of mail fraud and one count of perjury. Judge Vincent L. Broderick imposed concurrent sentences of ten months’ imprisonment followed by three years’ supervised release. We affirm the perjury and conspiracy counts, and reverse the conviction on the wire and mail fraud counts.
Novod was indicted and tried for his part in assisting Frank Sacco and his nephew, Frank Armento, in their fraudulent attempt to obtain a permit to operate a waste dumpsite in New York State. Sacco and Armento owned and operated five such dumpsites throughout the State in the 1980s. In 1987, the State’s Department of Environmental Conservation (“NYSDEC”) closed three of those sites, located in Ra-mapo, Cornwall, and Tuxedo, for violations of New York environmental law. NYS-DEC also required Sacco to post a $4.5 million bond for the cleanup at the Tuxedo site. In 1988, NYSDEC closed the other two sites, located in Kent and Patterson, New York.
In 1988, Sacco and Armento agreed to purchase a nineteen-acre dumpsite in Montgomery, New York for $1 million. The purchase agreement was contingent upon the transfer of the site’s current dumping permit — under which its owners were allowed to dispose of construction and demolition debris at the property — to Sacco and Armento. Aware of their reputation with State officials because of their history of dumpsite violations, Sacco and Armento formed the Disposal Enterprise Corporation (“DEC”) to conduct the purchase and thereby conceal their identities. They also enlisted Stanley Dulman and Samuel Miller to serve as “front men,” and later hired Novod as their attorney. Novod had previously represented Armento in matters related to violations at the Kent and Patterson sites.
At a meeting in July, Ferry told Novod that Armento and Sacco had recently been found in violation of the environmental laws. She advised Novod that NYSDEC would require Miller, on DEC’s behalf, to sign an affidavit stating that neither he nor DEC had any relationship with Armento or Athena I. Although, after reading the. proposed affidavit, Miller was concerned about its inclusion of a statement that he had no business relationship with Armento, Novod instructed him to sign anyway. According to Miller, Novod “told me that I had no business dealing with Frank Armento, [that] I hadn’t had one; and that it was no problem, to just sign [the affidavit] and mail it back to him.” As submitted to NYSDEC, Miller’s affidavit was notarized by Novod’s signature and notary stamp.
In September 1988, Novod testified, under subpoena, before the grand jury investigating Sacco’s possible environmental violations and repeatedly denied knowledge of Sacco’s and Armento’s ties to DEC. For example, he stated, in response to a question, that Sacco has “no hidden interest” in DEC. He also denied that Armento had “anything to do with” DEC.
On October 7, 1988, the grand jury returned a sixteen-count indictment against Novod, Sacco and Armento. Novod was named in three of the counts, alleging mail fraud in violation of 18 U.S.C. §§ 1341 and 1342 and perjury in violation of 18 U.S.C. § 1623. The mail fraud count alleged that the defendants used the mails “with the aim of defrauding the New York State Department of Environmental Conservation and the inhabitants of Montgomery, New York and surrounding geographical areas into awarding a lucrative permit or transfer of permit to conduct alleged construction and demolition debris dumping.” Novod moved, in part, to dismiss that count because it alleged only a scheme to defraud the State of an intangible right, arguing that schemes with such objectives do not fall within the mail fraud statute as construed in McNally v. United, States, 483 U.S. 350, 107 S.Ct. 2875, 97 L.Ed.2d 292 (1987). A hearing was held before Chief Judge Brieant on March 21, 1989.
Before the court decided Novod’s motion, the grand jury found a twenty-seven-eount superseding indictment against Novod on April 19.
In an August 25 memorandum and order, Chief Judge Brieant dismissed two of the perjury counts but denied the motion as to the others. Addressing Novod’s argument on the fraud counts, the court concluded that the indictment alleged that the scheme sought to obtain sufficiently tangible property to satisfy McNally.
At trial, pursuant to Fed.R.Crim.P. 29, Novod moved for a judgment of acquittal on the fraud counts on the same grounds already argued. After a colloquy, Judge Broderick, to whom the case had been assigned for trial, denied the motion, stating that he would instruct the jury “that the government must prove beyond a reasonable doubt that it was the purpose of the scheme to obtain the permit through false pretenses and that as a matter of law the permit constitutes property.”
Novod raises four substantive challenges to his conviction: first, that the object of the alleged conspiracy was not “property” under the fraud statutes; second, that evidence was erroneously admitted evidence relating to his co-conspirators’ past environmental violations; third, that he was denied a fair trial; and fourth, that the impaneling of a juror who resided outside the Southern District violated his sixth amendment rights.
I.
Novod contends that the district court erred by instructing the jury that it could convict solely on a finding that the scheme sought to obtain the dumping permit and by not requiring a finding that the scheme sought to cause a pecuniary loss to the State. The author of this opinion and Judge Winter disagree, but nevertheless reverse Novod’s conviction as to the mail and wire fraud counts because we feel bound by United States v. Schwartz, 924 F.2d 410, 416-18 (2nd Cir.1991), which held that a permit to export goods was not “property” within the meaning of the §§ 1341 and 1343. The ensuing discussion sets forth the view of the author and Judge Winter that a permit to operate a waste dumpsite constitutes “money or property” under the federal mail and wire fraud statutes. Because of the disagreement of a majority of this court with the construction of the mail and wire fraud statutes in Schwartz, this opinion and the Schwartz opinion were circulated to the judges of this circuit for the purpose of deciding whether the issue should be resolved en banc. After circulation, the judges determined that the issue did not merit en banc review.
The mail fraud statute prohibits, in pertinent part, the use of the mails in furtherance of “any scheme or artifice to defraud, or for obtaining money or property by means of false or fraudulent pretenses, representations, or promises.” 18 U.S.C. § 1341.
Clarifying that holding the next term in Carpenter v. United States, 484 U.S. 19, 108 S.Ct. 316, 98 L.Ed.2d 275 (1987), the Court held that a scheme to purloin confidential information from The Wall Street Journal was properly prosecuted under the mail and wire fraud statutes. The “intangible nature” of the information did not “make it any less ‘property’ protected by the mail and wire fraud statutes,” the Court reasoned, and it concluded, “McNally did not limit the scope of § 1341 to tangible as distinguished from intangible property rights.” Id. at 25, 108 S.Ct. at 320. McNally and Carpenter taken together establish that “property” under the statutes encompasses things, however intangible, that are currently of value to their owners. But the cases say nothing about schemes to defraud a state government into granting a discretionary permit. In United States v. Evans, 844 F.2d 36 (2d Cir.1988), we addressed a scheme to deceive the United States about the true destination of arms sold to a foreign nation. The defendants, hoping to obtain the necessary government approval for the arms transfer, allegedly sought to conceal the fact that the arms were destined for Iran. According to the mail and wire fraud counts of the indictment, the “property” the scheme sought to be obtained comprised the arms themselves and the commissions from their sale. Id. at 37. Evans contended in part that the property must belong to the deceived party, here the United States. We did not reach this question because, citing McNally’s requirement that “any benefit which the Government derives from the statute[s] must be limited to the Government’s interests as property holder,” 483 U.S. at 359 n. 8, 107 S.Ct. at 2881 n. 8, we concluded that “the government must show that it had some property interest in the arms,” 844 F.2d at 40. We then rejected the Government’s contention that it had a property interest by virtue of its ability to control the transfer of the arms to foreign states. Id. at 40-42. The interest of the Government, which neither manufactured nor owned the weapons, was only “ancillary to a regulation, not to property.” Id. at 42. See also Corcoran v. American Plan Corp., 886 F.2d 16, 20-21 (2d Cir.1989) (New York State, as regulator, has no property interest in money stolen from private insurance companies).
Novod argues that NYSDEC’s interest in the dumping permit, which it issues in an effort to control environmental waste, is similarly “ancillary to regulation.” We believe, however, that the permit satisfies the requisites of “property” under the statutes. Unlike in Evans and Corcoran, Novod and his co-conspirators sought to obtain something tangible from the State. The defendants in those cases sought arms for international sale and insurance monies, and although the Government strictly regulated those fields, the property fraudulently obtained did not belong to the Government. Rather, the property belonged to private parties; the Government’s interest was solely in controlling the use of the property by those private parties and by others. In contrast, the dumping permit originates with NYSDEC; the decision whether to grant it to an applicant rests solely with the agency. By submitting to that application procedure, moreover, the applicant implies that it wants something that only NYSDEC has and can give. Without the agency’s assent, the permit remains with the agency. The process is tantamount to a contractual transaction where a buyer and seller agree on a mutually satisfactory exchange of consideration. Here, NYS-DEC’s offer to “sell” the permit to Novod and his co-conspirators was contingent on its first extracting from the “buyers” certain promises affecting how the permit would be used. The bargained-for exchange, in essence, would have been permit for promise.
Thus construed, the permit constitutes property within the reach of the fraud statutes. Novod would have us believe that
In reaching this conclusion, we reject No-vod’s implicit contention that a government has no property interest in the various forms of largess it bestows. The recipient of such largess has an undeniable property interest, see, e.g., Goldberg v. Kelly, 397 U.S. 254, 90 S.Ct. 1011, 25 L.Ed.2d 287 (1970); the state’s interest prior to conferring it is equally compelling. In United States v. Turoff, 701 F.Supp. 981 (E.D.N.Y.1988), for example, the court held that New York City taxi medallions — licenses to operate taxicabs in the City — were “property” under the fraud statutes. Responding to the assertion that the medallions, as a form of public licensure, had no value in the government’s hands, the court stated:
The sovereign can buy and sell and manufacture and derive proceeds ... only by virtue of the power it possesses as sovereign — namely its police power, its power to tax, etc.... To rob the sovereign of the due exercise of that power by schemes or artifices to defraud, is to rob it of “property” as surely as the goods or chattels or money obtained from a private person by similar schemes or artifices.
Id. at 989. As the court noted, the fact that certain rights — there, the right to operate a taxicab; here, the right to operate a dumpsite — become vested in the licensee upon conveyance by the government does not prevent the corollary conclusion that the license “originate[s] in the state” and is public property prior to being granted to a private party. Id. at 990; see also United States v. Martinez, 905 F.2d 709, 712-715 (3d Cir.1990); United States v. Paccione, 738 F.Supp. 691 (S.D.N.Y.1990). See generally Reich, The New Property, 73 Yale L.J. 733 (1964).
We realize that our decision is at odds with the law in several other circuits, see, e.g., United States v. Granberry, 908 F.2d 278, 280 (8th Cir.1990) (school bus operator permit is not “property” under the wire or fraud statutes); United States v. Kato, 878 F.2d 267, 268-69 (9th Cir.1989) (federal pilot licenses not property before government issuance); Toulabi v. United States, 875 F.2d 122, 125 (7th Cir.1989) (taxi drivers’ license, in city government’s hands, “is a promise not to interfere rather than a sliver of property”); United States v. Murphy, 836 F.2d 248, 254 (6th Cir.) (“unissued certificate of registration [to conduct bingo games] is not property of the State of Tennessee”), cert. denied, 488 U.S. 924, 109 S.Ct. 307, 102 L.Ed.2d 325 (1988); but see United States v. Martinez, 905 F.2d 709, 713-15 (3d Cir.1990) (state issued license to practice medicine held to constitute “property”). In our view, the contrary decisions misconstrue McNally and its repudiation of the “intangible rights” doctrine. Prior to that case, prosecutors regularly used the fraud statutes to combat
II.
Novod contends that the district court erroneously allowed Ferry, the NYS-DEC attorney and a central Government witness, to testify to Sacco’s and Armento’s prior violations of environmental law. Specifically, he objects to her testimony that in 1987 and 1988, NYSDEC forced Sacco to cease operations at several dump-sites in New York because of violations and that the cleanup of the Tuxedo site would cost $4.5 million. Novod objected to the testimony, arguing that it created a “prejudicial atmosphere of guilt by innuendo.” The objections were overruled. We agree with the Government that the court’s rulings were proper.
First, insofar as other evidence demonstrated Novod’s awareness of the prior violations, Ferry’s testimony established his motive for helping Sacco and Armento obtain the permit surreptitiously. During Ar-mento’s testimony, for example, the following exchange took place:
Q. Did you have a conversation with the defendant about the [Montgomery, New York] site?
A. Yes, I did mention it to him.
Q. When was that?
A. That was sometime shortly after the other sites had been closed down, and I guess it was early April.
Q. What did you tell him?
A. I told him that I had this site, and [Sacco] and I were looking to purchase it; ... and that we were having a little bit of a problem getting the permit transferred....
Q. Did you tell him what your problem was?
A. Well, I told him that the problem was going to be if [NYSDEC] knew that either myself or Frank Sacco were involved ... the permit wouldn’t be issued to us ... because we had both by this time been blackballed by [NYS-DEC],
Other testimony revealed that Novod had represented Sacco and Armento in matters relating to several of the dumpsites closed by NYSDEC because of those prior violations. Additionally, Ferry testified that she informed Novod that Sacco and Armen-to had operated certain dumpsites that “had to be closed for violations” and that any involvement by them with the present application could cause it to be disapproved.
“[Ejvidence of prior crimes, wrongs, or acts is admissible for any purpose other than to show a defendant’s criminal propensity,” as long as it is “relevant to some disputed issue in the trial” and satisfies the probative-prejudice balancing test of Fed.R.Evid. 403_ “Other crimes” evidence may be admitted to complete the story of the crimes charged.
United States v. Diaz, 878 F.2d 608, 615 (2d Cir.), cert. denied, — U.S. -, 110 S.Ct. 543, 107 L.Ed.2d 540 (1989) (citations omitted). Moreover, where such evidence concerns the prior acts of co-conspirators, there is little danger of the prejudice envisioned by Rule 404(b), which generally bars such evidence as it pertains to a defendant’s own prior acts. Id. at 616; 22 C. Wright & K. Graham, Federal Practice and Procedure § 5239 (1978 & Supp.1990). A balancing test to discern possible prejudice was therefore unnecessary.
Second, Ferry’s testimony was admissible for the additional purpose of proving that New York would have suffered a pecuniary loss had DEC been granted the permit. As noted, the superseding indictment alleged three possible theories of “property” of which the conspirators sought to defraud the State, one of which was the clean-up costs and litigation expenses incident to the operation of the dumpsite. By seeking admission of the disputed evidence, the Government sought to prove that Sacco and Armento had previously operated such dumps unlawfully and that they would cause the State to incur the alleged costs were they to operate the Montgomery dump in a similar fashion. Although we agree with Novod that the Government’s proof of this contention was insufficient, we nonetheless find that the admission of the testimony, as the Government attempted to make sufficient proof, was proper. At the time, the court had not yet decided not to charge the jury on this theory. The court did not inform the parties that it would so charge until its ruling on Novod’s Rule 29 motion, made at the close of the Government’s case.
Third, we do not believe Novod was prejudiced by admission of the disputed evidence. He argues that the testimony was “inflammatory” and “highly prejudicial” but does not convincingly demonstrate how. The evidence was relevant to show the nature and background of the activities of the conspiracy. Further, the district court was careful to strike testimony involving Sacco’s other prior misdeeds that were clearly of no relevance to Novod, such as his failure to file tax returns.
Still, as Novod contends, not all of the admitted testimony concerned environmental violations of which Novod was directly aware; much of it related to his general awareness of Sacco and Armento’s prior violations but did not indicate that he was aware of the specific dumpsites for which they were cited. Evidence about specific events that Novod knew nothing about is of questionable relevance to Novod’s motivation either for participating in the scheme to obtain the permit fraudulently or for covering up his clients’ ties to DEC before the grand jury. Nonetheless, we are satisfied that the court did not abuse its wide discretion in allowing the testimony. “ ‘[Djeterminations of relevance are entrusted to the sound discretion of the trial judge, and his decision will not be overturned unless he has acted arbitrarily or irrationally.’ ” Diaz, 878 F.2d at 614 (citations omitted). And although the court did not give a limiting instruction, the record indicates that Novod did not seek one, despite his previous objections to the testimony. “The established rule is that if a party objects but does not request a limiting instruction, he cannot complain of failure to give the instruction on review.” 21 C. Wright & K. Graham, Federal Prac
III.
In response to questioning during voir dire, one potential juror stated that she resided in Ulster County, which, until 1978, had been in the Southern District but since then has been part of the Northern District.
Novod now contends that his failure to object was not a knowing and voluntary waiver of his constitutional right because his trial counsel did not realize the true boundaries of the Southern District. We agree with the district court’s conclusion that the right to challenge the juror was waived. Novod did not object when the juror first identified her county of residence; nor did he do so once he became aware of the actual boundaries of the Southern District during the colloquy. Had timely objection been made prior to the jury’s deliberations, the court could have substituted an alternate juror. There is no claim that the juror was not otherwise qualified to serve. Absent some such showing of prejudice, the failure of No-vod’s counsel to recognize the residence issue and make a timely objection prevents Novod from raising the issue after trial and a jury verdict. See generally Davis v. United States, 411 U.S. 233, 93 S.Ct. 1577, 36 L.Ed.2d 216 (1973); United States v. Levasseur, 816 F.2d 37, 45 (2d Cir.1987).
IV.
Novod’s contentions that he was denied a fair trial because the Government filed the superseding indictment solely to defeat his pending motion to dismiss, and that Judge Broderick violated the law of the case by disregarding a prior ruling of Chief Judge Brieant concerning that essential element do not merit discussion.
The mail and wire fraud counts are reversed, and the perjury and conspiracy counts are affirmed.
. Sacco and Armento pleaded guilty to several of the counts in the first indictment.
. The wire fraud statute, 18 U.S.C. § 1343, is substantively identical to the mail fraud statute in all relevant respects, including the "money or property” requirement. Both statutes are construed identically. See United States v. Covino, 837 F.2d 65, 71 (2d Cir.1988).
. In the wake of McNally, Congress in 1988 enacted 18 U.S.C. § 1346, which provides that "the term 'scheme or artifice to defraud' in-eludes a scheme or artifice to deprive another of the intangible right of honest services.” This provision is not applicable here.
. We do not address the Government's contention that Novod’s scheme, by potentially depriving the state of cleanup costs and tax revenues, thereby satisfied the property requirement. Judge Broderick refused to charge the jury on these theories of property, listed as theories (b) and (c) in the superseding indictment. Consequently we have no occasion to decide whether, had Novod been convicted on the basis of either of those theories, the convictions would have been proper as a matter of law. Our decision is limited to the question of whether the instruction the district court did give — the permit-as-property theory — was proper.
. We are unpersuaded by the Government’s argument that Novod’s objection to this evidence must fail because his counsel elicited similar testimony on cross-examination. As Novod points out, the evidence of Sacco and Armento’s prior violations was admitted over defense objections, and once the objections were overruled and the jury heard that testimony, defense counsel had no choice but to attempt to limit its effectiveness by pursuing the objected-to topics on cross-examination.
. Apparently the jury summons was sent to the juror's old address inside the Southern District and was forwarded to her new address in Ulster County.
Concurrence Opinion
concurring:
I join in the majority’s opinion except for Part I, in which the majority explains why it disagrees with this court’s decision in United States v. Schwartz, 924 F.2d 410. As to Part I, I concur only in the result; unlike the majority, I agree with the analysis in Schwartz of 18 U.S.C. §§ 1341, 1343.
