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United States District Court, Northern District of Illinois, E.D

July 26, 1983


The opinion of the court was delivered by: Shadur, District Judge.


Michael Freedman ("Freedman") and Randall Scott Moore ("Moore") have been indicted for (1) conspiracy to commit extortion, extortion and attempted extortion in violation of 18 U.S.C. § 1951 (the "Hobbs Act") (Counts I to IV) and (2) mail fraud in violation of 18 U.S.C. § 1341 ("Section 1341") (Counts V and VI).*fn1 This Court's May 12, 1983 memorandum opinion and order (562 F. Supp. 1378, the "Opinion") dismissed Counts I through IV. Freedman and Moore have now renewed their earlier motions (addressed to the original indictment) to dismiss Counts V and VI. For the reasons stated in this memorandum opinion and order their motion is granted.

Background Facts and Counts V and VI*fn2

As detailed more fully in the Opinion, 562 F. Supp. at 1380, Freedman and Moore were at all relevant times licensed Illinois attorneys. They had been retained to represent Sean O'Toolis ("O'Toolis") in pending Illinois criminal prosecutions. They conspired to obtain and then did obtain from O'Toolis payments they represented they would use to bribe the judge presiding at O'Toolis' criminal trial. There is no allegation in the Indictment asserting any approach to or involvement by any state judge in the alleged scheme.

Counts V and VI are substantially identical, charging two separate mailings in violation of Section 1341 (each Count's ¶ 12). Paragraphs 1-4 of those Counts:

    1. identify Freedman and Moore as Illinois
  attorneys and O'Toolis as a state criminal

    2. recite a portion of Illinois' bribery
  statute, Ill.Rev.Stat. ch. 38, § 33-1;*fn3 and

    3. specify Cook County Circuit Court judges are
  public officers (whose bribery would therefore
  violate that state statute).

Paragraphs 5-11 state the substance of Counts V and VI:

    5. From in or about November of 1981, through
  and including in or about February of 1982, at
  Chicago, in the Northern District of Illinois,
  Eastern Division, and elsewhere,


defendants herein, together with co-schemers known and unknown to the grand jury, devised and intended to devise a scheme:

      (a) to defraud Cook County, its citizens and
    the Circuit Court of Cook County of their right
    to have the legal and judicial process of the
    Circuit Court of Cook County conducted
    honestly, fairly and impartially, free from
    corruption, collusion, dishonesty, bribery and
    fraud, and in accordance with the laws of the
    State of Illinois; and

      (b) to defraud Cook County, its citizens and
    the Circuit Court of Cook County of their right
    to the services, decisions, actions and
    performance of legal duties by
    defendants . . ., in their capacities as
    attorneys practicing before the Circuit Court
    of Cook County, free from corruption, bribery,
    dishonesty and fraud; which said scheme is set
    forth more fully below.

    6. It was a part of the scheme that
  defendants . . . would and did represent to their
  client, Sean O'Toolis, that he would not be
  convicted if he paid approximately $3,000 to

    7. It was further a part of the scheme that the
  defendants . . . would and did represent that
  they would use a substantial part of the money
  provided by their client to bribe the judge in
  their client's cases.

    8. It was further a part of the scheme that on
  or about December 16, 1981, defendant MICHAEL
  FREEDMAN met with client, Sean O'Toolis, in
  Chicago, Illinois, and represented that the
  $1,500 portion of the requested payment provided
  by their client would be used to pay the judge in
  his pending cases.

    9. It was further a part of the scheme that on
  or about January 8, 1982, defendants . . . met
  with their client, Sean O'Toolis, in their law
  office at 30 West Washington Street and
  represented that the $300 portion of the
  requested payment provided to them by their
  client would be used to pay the judge in his
  pending cases.

    10. It was further a part of the scheme that on
  or about January 21, 1982, already having
  received earlier payments, defendant MICHAEL
  FREEDMAN solicited and received an additional
  $500 from his client based upon the defendant's
  representation that the money was needed to pay
  the judge in his client's pending cases.

    11. It was further a part of the scheme that
  defendants . . . would and did mail to their
  client correspondence relating to the pending
  Circuit Court of Cook County case of their

Those paragraphs thus charge a scheme to defraud the public of some "intangible rights," but there is no allegation defendants (1) held public office, (2) had influence over a public official or (3) were actually involved with any "known [or] unknown" public official in their purported bribery arrangement and alleged scheme.*fn4

Private Citizens and Public Duties

  Section 1341 provides:
  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, or to sell, dispose of, loan, exchange,
  alter, give away, distribute, supply, or furnish
  or procure for unlawful use any counterfeit or
  spurious coin, obligation, security, or other
  article, or anything represented to be or
  intimated or held out to be such counterfeit or
  spurious article, for the purpose of executing
  such scheme or artifice or attempting so to do,
  places in any post office or authorized
  depository for mail matter, any matter or thing
  whatever to be sent or delivered by the Postal
  Service, or takes or receives therefrom, any such
  matter or thing, or knowingly

  causes to be delivered by mail according to the
  direction thereon, or at the place at which it is
  directed to be delivered by the person to whom it
  is addressed, any such matter or thing, shall be
  fined not more than $1,000 or imprisoned not more
  than five years, or both.

It is too late to argue, as an original proposition, that it strains that statutory language to embrace "intangible rights" schemes to defraud — such as those by public officials to deprive their constituencies of the right to good government or honest services. Section 1341 prosecutions of public officials for depriving citizens of their "intangible rights" to good government or to honest services are too well established. See, e.g., United States v. Margiotta, 688 F.2d 108, 121 (2d Cir. 1982), cert. denied, ___ U.S. ___, 103 S.Ct. 1891, 77 L.Ed.2d 282 (1983); United States v. Mandel, 591 F.2d 1347, 1358-62 (4th Cir.), aff'd en bane in relevant part, 602 F.2d 653 (4th Cir. 1979), cert. denied, 445 U.S. 961, 100 S.Ct. 1647, 64 L.Ed.2d 236 (1980); United States v. Keane, 522 F.2d 534, 546 (7th Cir. 1975), cert. denied, 424 U.S. 976, 96 S.Ct. 1481, 47 L.Ed.2d 746 (1976); United States v. Isaacs, 493 F.2d 1124, 1149-50 (7th Cir.), cert. denied, 417 U.S. 976, 94 S.Ct. 3183, 41 L.Ed.2d 1146 (1974). And there is no doubt a private attorney who uses the mails to carry out a scheme to defraud involving the actual bribery of public officials is indictable under Section 1341 on an "intangible rights" theory. See United States v. MeManigal, 708 F.2d 276, 278-82 (7th Cir. 1983).

Thus the United States would seem to have had no difficulty in shaping an invulnerable Section 1341 indictment against Freedman and Moore whether or not the state court judge had been implicated in their alleged scheme:

    1. If he or she had been, an "intangible
  rights" indictment would lie under

    2. If he or she had not been — if the alleged
  Freedman-Moore representations to O'Toolis were
  false — a garden-variety scheme to defraud
  O'Toolis (not the public) would appear to be
  chargeable under Section 1341.*fn5

    3. If the government were uncertain how the
  jury might view any evidence as to the judge's
  involvement, a two-count indictment (one charging
  "intangible rights" as described in paragraph 1,
  the other charging conventional mail fraud as
  described in paragraph 2) would cover both
  alternatives and leave the fact resolution to the

But for whatever reasons, Counts V and VI invoke a different
concept entirely. They pose the question whether Freedman and
Moore can have devised a scheme to defraud the citizenry of
good government if they were in no way connected in that
scheme to a public official.
  Freedman and Moore*fn6 contend (Mem. 1) they cannot as
private citizens be prosecuted under such a Section 1341
"intangible rights theory." In response the government relies
(Ans.Mem. 1-6) principally on the general breadth of Section
1341 as interpreted by the courts, but also specifically on
the analysis in Margiotta. But on analysis.

Margiotta actually supports defendants' position.*fn7

Defendant Margiotta, a political leader without public office, was prosecuted under both the Hobbs Act and Section 1341. Judge Kaufman's opinion for the court made Margiotta's position between private and public life the central factor in the propriety of his Section 1341 prosecution on an "intangible rights" theory (688 F.2d at 121-25, citations and footnote omitted):

  The instant case raises the novel issue whether
  an individual who occupies no official public
  office but nonetheless participates substantially
  in the operation of government owes a fiduciary
  duty to the general citizenry not to deprive it
  of certain intangible political rights that may
  lay the basis for a mail fraud prosecution. In
  the private sector cases, a formal
  employer-employee relationship is not a
  prerequisite to a finding that a fiduciary duty
  is owed. . . . Similarly, we do not believe that
  a formal employment relationship, that is, public
  office, should be a rigid prerequisite to a
  finding of fiduciary duty in the public
  sector. . . .

  The drawing of standards in this area is a most
  difficult enterprise. On the one hand, it is
  essential to avoid the Scylla of a rule which
  permits a finding of fiduciary duty on the basis
  of mere influence or minimum participation in the
  processes of government. Such a rule would
  threaten to criminalize a wide range of conduct,
  from lobbying to political party activities, as
  to which the public has no right to disinterested
  service. On the other hand, the harm to the
  public arising from the sale of public office and
  other fraudulent schemes leads us to steer a
  course away from the Charybdis of a rule which
  bars on all occasions, as a matter of law, a
  holding that one who does not hold public office
  owes a fiduciary duty to the general citizenry
  even if he in fact is conducting the business of

  Although there is no precise litmus paper test,
  two time-tested measures of fiduciary status are
  helpful: (1) a reliance test, under which one may
  be a fiduciary when others rely upon him because
  of a special relationship in the government, and
  (2) a de facto control test, under which a person
  who in fact makes governmental decisions may be
  held to be a governmental fiduciary. . . . These
  tests recognize the important distinction between
  party business and government affairs, permitting
  a party official to act in accordance with
  partisan preferences or even whim, up to the
  point at which he dominates government.
  Accordingly, the reliance and de facto control
  tests carve out a safe harbor for the party
  leader who merely exercises a veto power over
  decisions affecting his constituency. . . .

  In light of these guidelines, the prosecution of
  Margiotta under the mail fraud statute was
  permissible, notwithstanding the fact that the
  appellant held no official public office. It
  cannot be gainsaid that Margiotta had a
  stranglehold on the respective governments of
  Nassau County and the Town of Hempstead.
  According to Donald Woolnough, one of Margiotta's
  principal assistants, "everything went through
  his hands." The evidence established not only
  that he was responsible for the administration of
  the municipal insurance activities, but also that
  he acted as a virtual Department of Personnel,
  with substantial power over decisions concerning
  hiring, promotions and salary increases. Others
  relied upon him for the

  rendering of important governmental decisions,
  and he dominated governmental affairs as the de
  facto public leader. As a result, the federal
  mail fraud statute properly supported a
  prosecution for Margiotta's breach of at least a
  minimum duty not to sell his substantial
  influence and control over governmental
  processes. . . .

  Margiotta's argument that the legislative history
  does not support the application of the mail
  fraud statute to private participants in the
  political process, regardless of the extent to
  which they dominate the affairs of government, is
  unavailing. While the mail fraud statute,
  originally enacted as § 301 of the Act of June 8,
  1872, ch. 335, 17 Stat. 283, 323, resulted from a
  recommendation of a committee of postal officials
  for legislation "to prevent the frauds which are
  perpetrated by lottery swindlers through the
  mails," § 1341 has never been limited to this
  narrow purpose. . . . Yet no legislative history
  exists to suggest that Congress has intended the
  mail fraud statute to deal only with schemes to
  defraud involving money or property, . . . let
  alone to be subject to a hard-and-fast distinction
  between public officeholders and dominant
  non-public officeholders in cases involving
  intangible political rights. Accordingly, our
  construction of § 1341 furthers the basic purpose
  of the statute in proscribing the use of the mails
  to promote fraudulent enterprises. . . .

  Furthermore, Margiotta's prosecution does not
  exceed the permissible bounds of the statutory
  language. More than five decades ago, the Supreme
  Court stated that the phrase "scheme to defraud"
  extends to "a great variety of
  transactions." . . . In his brief, appellant has
  conceded that a deprivation of an intangible
  right to a defendant's honest and faithful
  services properly forms the basis for a mail
  fraud violation where the defendant owes a
  fiduciary duty to the alleged victim. As a
  result, while the question remains whether
  Margiotta owed a fiduciary duty to the general
  citizenry of the Town of Hempstead and Nassau
  County, there is no merit to Margiotta's claim
  that the language of the federal mail fraud
  statute cannot embrace a theory of fiduciary
  fraud by one, like the appellant, who has de
  facto control over the processes of government
  and is relied upon by others in the rendering of
  essential governmental decisions. . . .

  Margiotta argues that, even assuming the
  applicability of the statute to his role in the
  insurance scheme, he owed no fiduciary duty to
  the general citizenry under federal or state law
  upon which a mail fraud violation could be
  predicated. At the outset, we reject his
  contention that absent a showing of a violation
  of New York statute or a duty imposed by New York
  law, a defendant may not be found guilty of using
  the mails in furtherance of a scheme to defraud
  on the basis of a breach of a fiduciary duty to
  the citizenry. . . .

  Margiotta argues that his fiduciary duty to the
  Republican Party, which arises from his position
  as a party officer, would be impaired by a
  finding of a fiduciary duty to the citizenry
  requiring disinterested conduct. But while his
  party position may have been the springboard to
  control of the municipal governments, it is his
  participation in government, not his party
  position, which creates his fiduciary duty to the
  citizens. . . .

  As noted above, the district court instructed the
  jury that it must determine whether the work done
  by Margiotta was "in substantial part the
  business of government, rather than being solely
  party business and that his performance of that
  work was intended by him and relied on by others
  in Government as part of the business of
  Government." This instruction reflects the
  concepts of reliance, and de facto control and
  dominance, which are at the heart of the
  fiduciary relationship. . . . Accordingly, the
  jury could properly find that Margiotta owed a
  special duty to the electorate under New York

Judge Kaufman's extended comments make it clear Section 1341 was able to reach private citizen Margiotta on an "intangible rights" theory only because:

    1. Margiotta's actual "stranglehold" over local
  governments meant (a) others could reasonably
  rely on his relationship to government power and
  (b) he in fact made governmental decisions; and

    2. Margiotta's actual participation in
  government gave rise to a fiduciary duty to the

Merely stating those factors reveals Freedman and Moore cannot be reached by Margiotta's analysis. Indeed Margiotta's emphasis on its defendant's exercise of de facto public power compels the conclusion Freedman and Moore could not have schemed to defraud the citizenry in the way charged by the Indictment.

As a fallback position the government claims Freedman and Moore as lawyers (Indictment ¶ 5(b)) owed a fiduciary duty to the public via their professional ethical obligations (Ans. Mem. 3-4). But a lawyer's basic duty is to be an advocate for his client, see Polk County v. Dodson, 454 U.S. 312, 322 & n. 13, 102 S.Ct. 445, 452 & n. 13, 70 L.Ed.2d 509 (1981). True, a lawyer also has "ethical obligations to the judicial system," id. at 323, 102 S.Ct. at 452. But as the Court said in Polk County, id. at 319, 102 S.Ct. at 450, criminal defense representation "is essentially a private function . . . for which state office and authority are not needed." Professional ethical violations, "although bearing on intent to defraud, do not in and of themselves establish the substantive crime of mail fraud" under Section 1341. United States v. Rabbitt, 583 F.2d 1014, 1025 (8th Cir. 1978), cert. denied, 439 U.S. 1116, 99 S.Ct. 1022, 59 L.Ed.2d 75 (1979).

Here the government, like the losing party in Polk County, tries to make the idea that a lawyer is "an officer of the court" (Polk County, 454 U.S. at 318, 102 S.Ct. at 450) carry too much baggage, id. at 319 n. 9, 102 S.Ct. at 450 n. 9:

  Although lawyers are generally licensed by the
  States, "they are not officials of government by
  virtue of being lawyers." In re Griffiths,
  413 U.S. 717, 729, 93 S.Ct. 2851, 2858, 37 L.Ed.2d 910

What is missing from the Indictment is thus decisive: There is no allegation of any nexus between defendants and a person or office in a position to defraud the citizenry of their "intangible rights."


Essentially the defect in Counts V and VI parallel the defect that doomed Counts I to IV, see 562 F. Supp. at 1384-90. Defendants' motion to dismiss Counts V and VI of the Indictment is granted.

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