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United States v. Folak

decided: December 19, 1988.

UNITED STATES OF AMERICA, PLAINTIFF-APPELLEE,
v.
CHESTER FOLAK, DEFENDANT-APPELLANT



Appeal from the United States District Court for the Northern District of Illinois, Eastern Division. No. 82 CR 417 -- Nicholas J. Bua, Judge.

Cummings, Coffey and Kanne, Circuit Judges.

Author: Coffey

COFFEY, Circuit Judge.

Chester Folak was convicted following a bench trial on stipulated facts of a total of 28 counts of mail fraud, 18 U.S.C. § 1341, and extortion, 18 U.S.C. § 1951, arising out of his activities as a Cook County Sheriff's Deputy. We affirmed Folak's conviction on direct appeal. United States v. Schmidt, 760 F.2d 828 (7th Cir.), cert. denied, Folak v. United States, 474 U.S. 827, 88 L. Ed. 2d 71, 106 S. Ct. 86 (1985). In the meantime, the Supreme Court decided McNally v. United States, 483 U.S. 350, 107 S. Ct. 2875, 97 L. Ed. 2d 292 (1987), holding that the mail fraud statute does not prohibit schemes to defraud the people of their "intangible rights," such as the right to an honest and impartial government. Folak contends that, because he was indicted under an intangible rights theory, McNally requires us to set aside his conviction. He requested relief in the district court in the form of a motion to set aside his conviction pursuant to 28 U.S.C. § 2255 and a petition for a writ of coram nobis. The district court denied Folak relief, and we affirm.

I

Chester Folak was a Deputy in the Cook County Sheriff's Department assigned the task of enforcing seizure warrants and writs of execution against delinquent taxpayers and judgment debtors. Folak's job was to serve a copy of the seizure warrant or writ of execution on the debtor, make an accurate inventory of the debtor's personal property, collect money owed from the debtor and/or conduct a public auction of the debtor's personal property, and remit all monies collected from the debtor or the auction to the Cook County Sheriff's office for disbursement to the appropriate party. Instead of faithfully discharging those duties pursuant to his oath of office, Folak and his co-defendants devised a scheme to enrich themselves at the expense of judgment creditors, the State of Illinois, and the debtors. Although the scheme took various forms, each instance of mail fraud was actually a variation on the same basic theme. In most scenarios, Folak was assigned to serve a seizure warrant on a business that was delinquent in paying its state taxes. Instead of "seizing" the assets, however, Folak would arrange with the debtor to purchase the assets of his or her own business under a new name, with a portion of the purchase price going to the State, and the remainder going to Folak and his cohorts. No public auction would be held. Folak would then report to the Department of Revenue that the business had been sold at public auction for whatever price he deemed appropriate to turn over to the state, after extracting his own "fee" for services rendered.

Count 2 of the indictment provides one typical example of how the scheme worked. The indictment alleged and the stipulated facts established that Folak was assigned a seizure warrant against Gayle's Car Wash, Inc., for back taxes of $25,049.20 owed the State of Illinois. Folak approached the owner of the car wash and told her that her business would have to be closed and sold pursuant to the warrant, but that she could repurchase the business if she formed a new corporation. The car wash operator told Folak she could raise $8,000 and she obtained a cashier's check in this amount, made payable to the Sheriff of Cook County. In the meantime, she received Articles of Incorporation from the Illinois Secretary of State for Ted and Jimmy's Car Wash, Inc. At Folak's request, the owner then obtained, in place of the cashier's check for $8,000, a different cashier's check in the amount of $6,500 and gave Folak the remainder of the $8,000 ($1,500) in cash. Folak in turn gave the $6,500 check to the Sheriff's Levy Department, along with a false report that the assets of Gayle's Car Wash had been sold at public auction for $6,500 to Ted and Jimmy's Car Wash. Of the remaining $1,500 cash he received from the owner, Folak gave $100 to the Sheriff's office as payment for Sheriff's fees and commissions. The remaining $1,400 was never submitted to the state.

Count 42 of the indictment illustrates a second common permutation of Folak's fraudulent scheme. Folak was assigned a seizure warrant in the amount of $121,216.91 against the Golden First, Inc. liquor store. Although the estimated value of the store's inventory at the time of the seizure was somewhere between $20,000-$25,000, Folak prepared only a partial listing of the inventory. He and his friends then helped themselves to a large portion of the inventory, never holding a public auction. Instead, Folak falsely reported that the inventory had been sold at public auction for $3,000, listing a fictitious purchaser at a fictitious address. Thus, Folak and his co-defendants obtained liquor worth approximately $20,000.

Most of the transactions making up the mail fraud counts took one of these two basic forms, sometimes involving a combination of both. Other times, Folak would accept payment from the debtor completely in the form of cash, rather than divided into cashier's check/cash amounts, but in every instance Folak turned over to the state less cash than he had received. The amount of cash he and his co-defendants would keep varied from case to case, with $370 representing the low end of the scale and $6,900 representing the high end. The amount and type of inventory they would help themselves to varied from shoes to a rocking chair to $20,000 worth of liquor. On some occasions, Folak accepted money or goods such as free gasoline from a debtor, in return for Folak agreeing to look the other way while the debtor removed all of the business' inventory and assets, leaving nothing for the state to seize toward payment of back taxes. All in all, the government estimated that Folak and his co-defendants had obtained in excess of $35,000, plus substantial goods, merchandise and services.

Based upon these activities, Folak and his two co-defendants were charged with a total of 47 counts of mail fraud and extortion. Count 1 of the indictment outlined the broad parameters of the mail fraud scheme, alleging that Folak and the others had:

a. The Illinois Department of Revenue of:

(1) money;

(2) its right to have seizure warrants and public auctions conducted thereon executed by the Sheriff's Office honestly, fairly, and free from craft, trickery, deceit, corruption, dishonesty, and fraud; and

(3) its right to have payments on taxes, interest, and penalties owed to the State of Illinois collected and remitted honestly, fairly, and free from craft, trickery, ...


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