UNITED STATES DISTRICT COURT FOR THE NORTHERN DISTRICT OF ILLINOIS, EASTERN DIVISION
January 10, 1989
UNITED STATES OF AMERICA, Plaintiff,
RICHARD GINSBURG, Defendant
The opinion of the court was delivered by: SHADUR
MEMORANDUM OPINION AND ORDER
MILTON I. SHADUR, UNITED STATES DISTRICT JUDGE
In early 1984 Richard Ginsburg ("Ginsburg") was convicted of 19 counts of mail fraud under 18 U.S.C. § 1341 ("Section 1341") and one count of racketeering under 18 U.S.C. § 1962(c) ("RICO"), all stemming from Ginsburg's payments to fix cases during the course of his law practice before the Cook County Board of Appeals ("Board"). Ginsburg has joined the spate of defendants prompted by McNally v. United States, 483 U.S. 350, 107 S. Ct. 2875, 97 L. Ed. 2d 292 (1987) to seek retroactive relief: He has filed this 28 U.S.C. § 2255 ("Section 2255") habeas corpus petition to obtain an order vacating his convictions. For the reasons stated in this memorandum opinion and order, his petition is granted.
Ginsburg's convictions flow from a scheme, beginning in 1975, in which he and his then law partner Theodore Schmidt made cash payments to Board employees to obtain reductions in real estate tax assessments on properties owned by the law firm's clients. Ginsburg was found guilty on all counts after a joint trial before a jury, and on April 26, 1984 this Court dealt with his sentence in these terms:
1. Imposition of sentence was suspended on all counts, and he was placed on concurrent probation for a five-year period.
2. In addition to his required compliance with all the regular terms and conditions of probation, he was ordered:
(a) to make restitution in the amount of $ 150,000; and
(b) to perform 1,000 hours of community service.
3. On the RICO count he was ordered to forfeit his $ 225,000 half interest in the firm's tainted legal fees, with the restitution payments to be credited against that forfeiture.
Ginsburg took an appeal, in which he challenged only the forfeiture order. After an initial reversal in an unpublished opinion, our Court of Appeals ultimately affirmed this Court in an en banc decision ( United States v. Ginsburg, 773 F.2d 798 (7th Cir. 1985)).
Ginsburg has completed his community service, has paid the full $ 150,000 in restitution and has begun to pay the balance due on his forfeiture. His probation runs through April 26, 1989.
By now every defendant of any vintage convicted under the so-called "intangible rights" theory of mail fraud
is aware that McNally has construed Section 1341 to require that the fraud must have been intended to deprive the victim or victims of money or property. Our Court of Appeals has most recently described its post-McNally efforts in these terms ( United States v. Folak, 865 F.2d 110 (7th Cir. 1988)(emphasis in original, citations omitted except for cases referred to later in this opinion)):
We have expressly held that McNally applies retroactively on collateral attack of a conviction. United States v. Magnuson, 861 F.2d 166 (7th Cir. 1988) . . . . Although we have set aside a number of defendants' mail fraud convictions where they had been indicted for scheming to defraud victims solely of some intangible right, see Magnuson, supra; . . . United States v. Holzer, 840 F.2d 1343 (7th Cir.), cert. denied, [ 486 U.S. 1035], 108 S. Ct. 2022 [100 L. Ed. 2d 608] (1988) (" Holzer II "), the presence of some language referring to an intangible rights theory is not always fatal to the indictment. For example, where an indictment alleges multiple schemes, some of which serve to defraud victims of property and others that deprive them of some intangible right, we have treated as surplusage any intangible rights theory of fraud that was "easily separable" from allegations of a scheme to defraud of money or property. . . . We have also held that where a single set of facts establishes both a scheme to defraud a victim of money or property, as well as a deprivation of some intangible right, McNally does not require setting aside the conviction. . . . United States v. Wellman, 830 F.2d 1453, 1462-63 (7th Cir. 1987). In each of the above cases, we have looked beyond the language used to characterize the scheme in the indictment, to the underlying substance of the indictment, in order that we might determine if it ultimately alleges a scheme involving money or property. Under McNally, an indictment alleges a violation of the mail fraud statute if it charges a defendant with conduct that would normally result in some kind of "concrete economic harm." Wellman, 830 F.2d at 1462.
Ginsburg now says his conviction was improperly obtained under the old "intangible rights" theory rather than in accordance with McNally.
Section 2255 Analysis
Section 2255 allows a federally-convicted prisoner who is "in custody" to attack his conviction collaterally. Ginsburg satisfies the "in custody" requirement because "he is under the legal restraints imposed by probation" ( Gill, 673 F. Supp. at 277 and cases cited therein). Government Mem. 2 concedes that.
United States v. Frady, 456 U.S. 152, 167, 71 L. Ed. 2d 816, 102 S. Ct. 1584 (1982) teaches the normal standard of review of a Section 2255 motion "is the 'cause and actual prejudice' standard enunciated in Davis v. United States, 411 U.S. 233, [36 L. Ed. 2d 216, 93 S. Ct. 1577] (1973), and later confirmed and extended in Francis v. Henderson, 425 U.S. 536, [48 L. Ed. 2d 149, 96 S. Ct. 1708] (1976), and Wainwright v. Sykes, 433 U.S. 72, [53 L. Ed. 2d 594, 97 S. Ct. 2497] (1977)." Although the post-McNally decisions in our Court of Appeals have not expressly addressed this issue as to pre-McNally "intangible rights" convictions, under Frady, id. at 168 any defendant challenging a conviction on an objection not raised in the district court must show "both 'cause' excusing his double procedural default, and 'actual prejudice' resulting from the errors of which he complains."
Ginsburg Mem. 1 -- 3
says he did object to the indictment's "intangible rights" theory. Ginsburg's motion to dismiss the indictment argued (Government Mem. Ex. A, at 12) (footnotes omitted):
Moreover, the theory must be rejected because it seeks further to expand liability under the mail fraud statute without any evidence of supporting legislative intent. The "intangible rights" theory already is the subject of severe criticism because of its present overly broad application. The present indictment represents but another step in this over-expansion.
Government Mem. 3 says:
The defendant noted the scholarly criticism of the intangible rights doctrine, but did not urge the Court to dismiss the mail fraud counts on this basis.
Whether or not that handling by Ginsburg's able counsel amounts to having preserved the issue before this Court as a procedural matter, Ginsburg Mem. 2 -- 6 admits he did not raise the issue on appeal. In Frady terms that is clearly a procedural default requiring Ginsburg to show "cause."
Ginsburg Mem. 2 -- 6 to 7 then asserts he satisfies the "cause" requirement as expounded in Reed v. Ross, 468 U.S. 1, 82 L. Ed. 2d 1, 104 S. Ct. 2901 (1984). That contention poses a difficult question -- one that fortunately need not be resolved for current purposes.
Reed dealt at some length with the relationship between the "cause" requirement and the "novelty" of the constitutional issue that counsel had failed to raise in the underlying proceedings.
Justice Brennan, writing for the Court, began by noting (468 U.S. at 13)(citations omitted):
Because of the broad range of potential reasons for an attorney's failure to comply with a procedural rule, and the virtually limitless array of contexts in which a procedural default can occur, this Court has not given the term "cause" precise content. . . . Nor do we attempt to do so here. Underlying the concept of cause, however, is at least the dual notion that, absent exceptional circumstances, a defendant is bound by the tactical decisions of competent counsel, . . . and that defense counsel may not flout state procedures and then turn around and seek refuge in federal court from the consequences of such conduct.
Next Justice Brennan turned to the contrasting situation in which no intentional strategic decision can be inferred: counsel's failure "to raise a constitutional issue reasonably unknown to him" (id. at 14) because of its novelty (id. at 15-16). That led to the basic principle for which Ross is now recognized (id. at 16):
Accordingly, we hold that where a constitutional claim is so novel that its legal basis is not reasonably available to counsel, a defendant has cause for his failure to raise the claim in accordance with applicable state procedures.
Then, drawing upon United States v. Johnson, 457 U.S. 537, 73 L. Ed. 2d 202, 102 S. Ct. 2579 (1982), Reed, id. at 17 (citations omitted) fleshed out the concept of "novelty" in terms of "three situations in which a 'new' constitutional rule, representing a 'clear break from the past,' might emerge from this Court":
First, a decision of this Court may explicitly overrule one of our precedents. . . . Second, a decision may "overtur[n] a longstanding and widespread practice to which this Court has not spoken, but which a near-unanimous body of lower court authority has expressly approved." . . . And, finally, a decision may "disapprov[e] a practice this Court arguably has sanctioned in prior cases." . . . By definition, when a case falling into one of the first two categories is given retroactive application, there will almost certainly have been no reasonable basis upon which an attorney previously could have urged a state court to adopt the position that this Court has ultimately adopted. Consequently, the failure of a defendant's attorney to have pressed such a claim before a state court is sufficiently excusable to satisfy the cause requirement.
That analysis should logically translate with equal force into a situation in which (1) the underlying conviction was obtained in a federal rather than a state court and (2) the new rule of law involves statutory rather than constitutional interpretation. With those changes, Ginsburg seeks to qualify under the second of Reed's three "novel" situations. One part of that qualification is indisputable: Magnuson, 861 F.2d 166, 1988 U.S. App. LEXIS 14970, at 2 has now expressly held McNally is to be applied retroactively in a Collateral attack on a conviction. And as for the other Reed requirement, at the time Ginsburg was convicted the "intangible rights" doctrine was widely approved by the lower courts. It was consistently reaffirmed by our own Court of Appeals, where it had originally been announced (see, e.g., United States v. Holzer, 816 F.2d 304, 309-10 (7th Cir. 1987)(" Holzer I ")), and about half the other Courts of Appeals had also upheld and applied the doctrine (see cases listed in Justice Stevens' dissent in McNally, 107 S. Ct. at 2883 n.1).
Despite that, this Court held in Gill (an early post-McNally decision) that a defendant in a legal position comparable to Ginsburg's did not satisfy the first ("cause") branch of the Frady analysis.
This Court's reasoning drew heavily not only on Reed but on how Smith v. Murray, 477 U.S. 527, 91 L. Ed. 2d 434, 106 S. Ct. 2661 (1986) had read and applied Reed. As Gill, 673 F. Supp. at 280 said of the defendant in that case:
He must rely on the idea that at the time of his conviction three years ago the idea that there could not be an intangible-rights fraud prosecution under Section 1341 was a "claim . . . so novel that its legal basis [was] not reasonably available to counsel . . ." ( Reed v. Ross, 468 U.S. 1, 16, 104 S. Ct. 2901, 2910, 82 L. Ed. 2d 1 (1984)). For that purpose Smith v. Murray, 477 U.S. 527, 106 S. Ct. 2661, 2667, 91 L. Ed. 2d 434 (1986) teaches "the question is not whether subsequent legal developments have made counsel's task easier, but whether at the time of the default the claim was 'available' at all." No claim can be said to be "unavailable" in that sense where that claim had previously been made in the lower courts ( id. 106 S. Ct. at 2667-68).
This opinion will not repeat this Court's further analysis in Gill, id. at 280-81, which it continues to find persuasive -- though this Court also continues to recognize "there might perhaps be room for difference of opinion on that score" ( id. at 281). Indeed, since Gill the only two Courts of Appeals to have considered the issue have ruled otherwise, finding that defendants who had not disputed their "intangible rights" convictions before McNally did have "cause" under the Reed analysis for not having done so ( Dalton, 862 F.2d 1307; Shelton, 848 F.2d at 1490). Yet surprisingly neither of those courts even mentioned the post-Reed decision in Smith, although it seems plain to this Court that Smith must be recognized as at least equally definitive and as providing a limiting definition of what claims are "novel" and "unavailable" for purposes of analyzing whether a defendant had "cause" for not having asserted such claims.
On the issue of "cause" Ginsburg stands in a particularly vulnerable position. There is no question his counsel were well aware of the arguments against "intangible rights" mail fraud prosecutions -- they asserted them before this Court. That hardly bespeaks "novelty" in the Reed-Smith sense. Nor is this a situation in which Ginsburg's able counsel would have had to take a bootless appeal just to preserve the "intangible rights" issue for the future contingency that McNally ultimately converted to reality. Counsel in fact took an appeal on Ginsberg's behalf, raising an issue (RICO forfeiture) that was not only a difficult one but was potentially "certworthy."
What that means is that counsel's raising of the "intangible rights" issue before the Court of Appeals (where Ginsburg was anyway) would have been entirely cost-free -- and, though this is not necessary to the analysis, it would have been equally cost-free to raise the issue even before the Supreme Court if certiorari had been sought on the forfeiture question.
About the only answer this Court can conceive of is that Ginsburg's lawyers might have perceived that adding to their appellate brief an issue such as an attack on the "intangible rights" conviction (an issue on which our Court of Appeals had previously spoken several times) would be potentially dilutive of the force of the forfeiture argument. Everyone who has practiced before the appellate courts knows it is best to go with your strongest arguments, even if that means giving up others (whether simply to avoid clutter or to prevent your solid arguments from being tainted by contentions that the appellate court would be expected to dismiss out of hand).
But that is the classic example of lawyer strategy,
which Reed itself rejected as "cause." After the already-quoted language stating criminal defendants are "bound by the tactical decisions of competent counsel" (468 U.S. at 13) -- at least "absent exceptional circumstances" (id.) -- the Court went on to say ( id. at 14)(citations omitted):
In general, therefore, defense counsel may not make a tactical decision to forgo a procedural opportunity -- for instance, an opportunity to object at trial or to raise an issue on appeal -- and then, when he discovers that the tactic has been unsuccessful, pursue an alternative strategy in federal court. . . . Procedural defaults of this nature are, therefore, "inexcusable," . . . and cannot qualify as "cause" for purposes of federal habeas corpus review.
Accord, Smith, 477 U.S. at 534.
All this would lead this Court to adhere to its Gill ruling on the absence of "cause," a ruling that would apply to Ginsburg on an even stronger -- an a fortiori -- basis. One factor alone has led this Court to a different result -- a factor identified by one of the Courts of Appeals that has reached the contrary outcome. Shelton, 848 F.2d at 1490 n.4 has said this:
In view of the Court's conclusion in Davis, 417 U.S. at 346-47, 94 S. Ct. at 2305, that conviction and punishment for conduct that is not criminal would undoubtedly result in a complete miscarriage of justice presenting exceptional circumstances, a compelling argument can be made that the claim raised in the instant proceedings is available in a section 2255 motion without regard for whether the petitioner had cause for any default.
In partial support of that proposition Shelton refers to our Court of Appeals' dictum in United States v. Angelos, 763 F.2d 859, 861 (7th Cir. 1985):
About all that can be offered as a generalization is that if the defendant can show that under no possible view of his conduct was he guilty of a federal crime, the conviction will be set aside as "otherwise subject to collateral attack" under 28 U.S.C. § 2255.
And cf. Murray v. Carrier, 477 U.S. 478, 496, 91 L. Ed. 2d 397, 106 S. Ct. 2639 (1986):
Accordingly, we think that in an extraordinary case, where a constitutional violation has probably resulted in the conviction of one who is actually innocent, a federal habeas court may grant the writ even in the absence of a showing of cause for the procedural default.
McNally teaches that a defendant convicted of mail fraud where there has been no deprivation of money or property is someone who has been found guilty even though he or she has not committed a federal crime. In that circumstance this Court is prepared to bypass what it would otherwise view as the absence of "cause."
It therefore proceeds to the "prejudice" element of the Frady analysis.
2. Actual Prejudice
As the end of the preceding section has indicated, conviction and punishment for an act that the law does not make criminal is "a paradigm miscarriage of justice" ( United States v. Keane, 852 F.2d 199, 205 (7th Cir. 1988)). If Ginsburg was convicted under a theory McNally knocked out (and thus convicted of a non-crime), he has suffered "actual prejudice" in the Frady sense.
Wellman, 830 F.2d at 1462 requires this Court to:
look to the substantive allegations of the indictment and the jury instructions to determine whether the conduct alleged and necessarily found to have occurred by the jury constituted an offense.
That calls for a two-pronged inquiry:
1. whether the indictment states an offense in light of McNally-Carpenter ; and
2. whether, in light of the instructions, the jury " necessarily found the existence of a scheme to defraud someone of 'property' within the meaning of McNally " ( Keane, 852 F.2d at 205 (emphasis in original)).
A. Validity of the Indictment
In McNally-Carpenter terms the indictment charging Ginsburg had to allege someone was deprived of "property" -- be it tangible or intangible property. For that purpose, Ginsburg's Section 2255 challenge stands on a different footing from a direct appeal scenario. Burchfield v. United States, 544 F.2d 922, 924 (7th Cir. 1976)(citations omitted) has said:
In the § 2255 situation the indictment cannot be questioned unless it is so defective on its face as not to charge an offense under any reasonable construction. . . . The type of facial defect required to raise successfully a challenge in this situation has been characterized as "obviously defective.". . . In one of the more recent cases enunciating the standard, . . . the court referred to previous cases and the standards established. The defect must be of a fundamental nature, the sufficiency of an indictment is not subject to collateral attack save in exceptional circumstances, and the indictment must be so defective on its face as not to charge any offense under any reasonable construction.
Even so, the United States understandably faces substantial difficulties post-McNally. With the "intangible rights" theory having been so firmly entrenched in this Circuit, prosecutors regularly drafted pre-McNally indictments in those terms (just as district judges, including this one, made evidentiary and other trial rulings on the same basis). Now courts are called upon to indulge a type of post-hoc "what if" analysis of previously-litigated cases, deciding whether the indictments and convictions would have survived a wholly different climate. Little wonder that the Court of Appeals' opinions essaying such reconstructive efforts are not always easy to reconcile.
In this instance the indictment begins in typical pre-McNally fashion (para. 7,
7. Beginning at least as early as November, 1975, the exact date being unknown to the Grand Jury, and continuing until the date of this indictment, in the Northern District of Illinois, Eastern Division,
RICHARD A. GINSBURG, and THEODORE J. SCHMIDT,
defendants herein, together and with other co-schemers both known and unknown to the Grand Jury, devised and intended to devise a scheme:
(a) to defraud the Board of Appeals and the citizens of Cook County of their right to loyal, faithful, and honest services of Donald Erskine, Jimmie Smith, Thomas Lavin, Stephen Gorny and others in the performance of acts related to their public employment;
(b) to defraud Cook County and its citizens, its public officials, and its public employees of their right to have the business of the Board of Appeals conducted honestly, fairly, and impartially, free from corruption, collusion, partiality, dishonesty, bribery and fraud; and
(c) to defraud Cook County and its citizens of their right to have real estate property taxes assessed and collected free from the influence of corruption, collusion, partiality, dishonest[y], bribery and fraud; which scheme was in substance as follows :
Those allegations clearly have their origins in the now prohibited "intangible rights" theory, and Government Mem. 12 admits that. But that does not end the inquiry, for this Court must continue to "look to the substantive allegations" ( Wellman, 830 F.2d at 1462) to see if they "charge any offense under any reasonable construction" ( Burchfield, 544 F.2d at 924).
And Keane, 852 F.2d at 205 (citing to Wellman) makes it clear that:
An indictment adverting principally to rights to faithful service still may lead to a valid conviction if the prosecution shows that the defendant defrauded someone out of property, including intangible property.
Were this Court writing on a clean slate, it would find the Ginsburg indictment sufficient. As the emphasized language and the colon in the para. 7 quotation reflect, the later paragraphs in the same count must also be looked at in defining the scheme (that is the normal meaning of "which scheme was in substance as follows"). And para. 8 says the Ginsburg-Schmidt law practice before the Board (charged as "part of the scheme to defraud") was:
for the purpose of obtaining real estate property tax assessment reductions on behalf of their clients.
To implement their scheme, para. 12 says Ginsburg and Schmidt "caused [Board employees] to fraudulently process complaints filed at the Board of Appeals by RICHARD A. GINSBURG and THEODORE J. SCHMIDT on behalf of their clients and to fraudulently grant real estate property tax assessment reductions on those complaints." That same para. 12 goes on to charge that those Board employees:
fraudulently reduced assessments in approximately 650 cases filed on behalf of the clients of defendants RICHARD A. GINSBURG and THEODORE J. SCHMIDT. Said fraudulent assessment reductions totaled in excess of $ 20 million.
Finally para. 14 says:
the real estate assessment reductions which were obtained pursuant to the scheme to defraud were maintained on certain properties by the Assessor of Cook County and by the Board of Appeals for up to three succeeding years.
Certainly Cook County ("County") has a property right in its assessed taxes. Under the allegations in the indictment, the fraudulent reductions in the assessments on the properties of Ginsburg's clients reduced their taxes ratably. If that had cost County money, it would have constituted a deprivation of "property" (see United States v. McManigal, 1988 U.S. Dist. LEXIS 12004, at 4 (N.D. Ill.), relying on Keane, 852 F.2d at 205).
But that is not the way the real estate tax system works. Real estate taxes are a function of three separate but related factors:
1. the total revenue ("TR" for "total revenue") County has determined is necessary to meet its operating budget for the fiscal year;
2. the sum of the equalized assessed valuations of all the properties within County's tax base ("TAV" for "total assessed valuations"); and
3. the tax rate ("r" for "rate"), which is determined by dividing the total revenue by the total assessed valuations:
r = TR/TAV
Total revenue, because it is determined in advance, must of course remain constant in setting the tax rate (TR = TAV x r). What that means is that a reduction in the assessed valuations of Ginsburg's clients' properties -- because it also reduces TAV -- increases tax rate r. Though County would thus lose nothing in total revenue as the result of Ginsburg's fraudulent scheme, all County taxpayers other than Ginsburg's clients would end up paying more than they would have but for that scheme.
In sum, two possible approaches to the "money or property" issue would appear to sustain the indictment:
1. If County's right to collect taxes from Ginsburg's clients (viewed alone, without taking into account the right to collect from all other taxpayers) is considered the relevant "property" interest, the charged scheme would deprive County of that property.
2. If taxpayers other than Ginsburg's clients are considered to have the relevant "property" interest in the amount of their own real estate taxes, the charged scheme would deprive them of part of that property.
Whatever the conceptual difficulties with either or both those theories, they appear to find support in the cases (Lynch, Carter and McManigal in the same tax assessment fraud context; and cf. Bailey, 859 F.2d at 1275-76).
That final thread might have been expected to lead us out of the McNally-Carpenter labyrinth (at least so far as the Ginsburg indictment is concerned). But the thread of logic (if that is indeed what has been spun up to now) is snapped by the Court of Appeals' recent decision in Magnuson. That case, like this one, involved a charged scheme to obtain fraudulent reductions in property tax assessments -- this time in Marion County, Indiana. After examining the indictment there, Magnuson, 861 F.2d 166, 168 concluded:
In light of McNally, it is clear that the indictment failed to allege a proper basis for a mail fraud conviction.
Magnuson's indictment was strikingly similar to that against Ginsburg. Indeed, the charging paragraphs of the Magnuson mail fraud counts (Count 2 para. 2, Count 3 para. 2 [also incorporated by reference into Count 4] and Count 6 para. 5) track the "intangible rights" language of the Ginsburg mail fraud counts (para. 7, quoted earlier in this opinion) almost word for word -- even to the extent of following that language with the identical clause:
which scheme was in substance as follows:
Then the next paragraph of each Magnuson count, like Ginsburg para. 8 (also quoted earlier), charged that the lawyers' purpose (again "part of the scheme" to defraud) was to obtain assessment reductions.
Finally each Magnuson count (Count 2 paras. 4 and 5, Count 3 paras. 4 and 5 [again incorporated by reference into Count 4] and Count 6 paras. 7-9) matched very closely the earlier-quoted Ginsburg charges that the scheme sought to obtain fraudulent reductions.
Thus read as a whole, the Magnuson indictment would seem to charge a scheme to deprive someone of money or property in precisely the same sense as already discussed at length in this opinion. Yet Magnuson, 861 F.2d 166, 168 (emphasis in original) held:
Totally absent from the 24 page indictment are any allegations that Marion County, Center Township or the people of the localities lost any money or property. Cf. United States v. Eckhardt, 843 F.2d 989, 997 (7th Cir. 1988), where the indictment contained a combination of readily separable theories. The indictment in the instant case sought convictions only for the deprivation of intangible rights.
Because the Magnuson indictment appears legally indistinguishable from that involved in this case, the just-quoted conclusion that the indictment there failed to state an offense forces the same conclusion here.
To be sure, Magnuson poses difficulties not only in how it characterizes the indictment there but also in how it seems to depart from other Seventh Circuit teaching as to the examination of indictments (particularly Wellman's instruction to "look to the substantive allegations" and Burchfield's command to see if the indictment "charge[s] any offense under any reasonable construction").
And Magnuson seems wrong in its emphasis on the absence of allegations (or of proof, id. at 6-7) that tax revenues were actually lost as a result of the scheme. It is black-letter law that a scheme or conspiracy is to be tested by the intent of the schemers or conspirators to accomplish the unlawful purpose, whether or not they succeed. Keane, 852 F.2d at 205 (emphasis in original) put the matter succinctly:
But the mail fraud statute proscribes fraudulent schemes ; it does not confine penalties to those whose schemes succeed in raking off cash, a point no less valid today than when emphasized on direct appeal. . . .
No proof of actual deprivation of money or property should be demanded, so long as the jury (properly charged, to be sure) could rationally have drawn the inference beyond a reasonable doubt that such a result was intended by the schemers. And surely the jury in Magnuson, like the jury here, could have determined the tax lawyers were bribing the tax officials not for their health but to obtain favorable (and fraudulent) results to which the lawyers' clients were not entitled.
But if the issue is to be revisited, it must be by the Court of Appeals and not by a district court bound by Magnuson. In light of that case, this Court must hold (albeit with reluctance) that the indictment here failed to charge mail fraud offenses cognizable under McNally-Carpenter.
That conclusion obviates any need to inquire whether the jury necessarily found the existence of a scheme to deprive someone of money or property ( Keane, 852 F.2d at 205; Wellman, 830 F.2d at 1462-63). But because Magnuson did use the jury instructions and the evidence presented at trial in that case to support its conclusion, this opinion will explore that question as well.
B. Significance of the Jury's Verdict
Whenever a challenged pre-McNally indictment sounded in "intangible rights" terms, Bailey, 859 F.2d at 1276 (adapted to this case) says the court reviewing the conviction:
must examine the jury instructions, along with the evidence and arguments at trial to see if the jury necessarily convicted [Ginsburg] of conduct that constituted an offense.
That task will be essayed next.
In the "elements" instruction on the mail fraud charges, Ginsburg's jury was told the government had to prove two propositions beyond a reasonable doubt (Government Mem. Ex. C, at 65):
First, that the defendant that you are considering knowingly and intentionally, devised, intended to devise, or participated in the scheme to defraud that is described in the indictment, and second, that for the purpose of carrying out that scheme or attempting to do that, the defendant that you are considering caused the United States Mails to be used in the manner that is charged in the particular count. You will look at each count separately, see what it charges, and see whether, in your judgment, the government has proved that proposition beyond a reasonable doubt.
"Intent to defraud" and "scheme to defraud" were defined this way (id. at 66, 68):
That phrase, intent to defraud used in the charges of mail fraud in Counts 1 to 19, and those counts are incorporated into Count 20 as well, means that the acts charged were done knowingly with the intent to deceive the Board of Appeals, Cook County, and Cook County citizens, public officials and public employees in order to cause the loss of the loyal, faithful, or honest services of the Board of Appeals employees Donald Erskine, Jimmie Smith, Thomas Lavin, James Woodlock and Stephen Gorny in their performance of their official duties, or in order to cause the loss of the honest, fair or impartial assessment and collection of real estate property taxes.
* * * *
A scheme to defraud under this mail fraud statute, means some plan to deprive another of something of value by fraudulent means.
And the sole example of a "scheme to defraud" given to the jury in the instructions was this (id. at 68):
A scheme by bribery of public officials to cause them to grant favorable results to people seeking those results, may constitute a scheme to defraud within the meaning of the mail fraud statute, and that is so whether or not the results obtained through the bribery scheme could have been obtained through some honest means.
As the earlier discussion reflects, the reference back in those instructions to "the scheme to defraud that is described in the indictment" has been read by Magnuson as not charging a "money or property" deprivation scheme. Yet it is plain that the jury in this case could readily have found Ginsburg defrauded someone out of "money or property." Given the jury instruction that a bribery scheme seeking to obtain favorable results for the lawyers paying the bribes would constitute a "scheme to defraud" under the mail fraud statute, and given the evidence before it, the jury could surely have concluded that:
1. Ginsburg engaged in a scheme to bribe Board employees.
2. That scheme's purpose was to obtain favorable results from Board for Ginsburg's clients.
3. Those intended favorable results were fraudulent reductions in tax assessments, and in turn fraudulent reductions in taxes, for Ginsburg's clients.
4. Any such intended reductions in taxes were intended "to deprive another of something of value [money] by fraudulent means" under the extended analysis earlier in this opinion.
Under that line of reasoning Ginsburg would indeed have been convicted of a scheme to deprive someone of property -- of money. Such a conviction would certainly survive McNally-Carpenter.
But the lesson of Bailey, Keane and like post-McNally cases is that such a possibility is not enough. Necessity is the hallmark of a valid conviction: Could the jury have found Ginsburg guilty of an "intangible rights" scheme (one seeking to deprive County and its citizens of honest government) without also necessarily having found the existence of a scheme to deprive someone of money or property? Nor is that question foreclosed by the unquestionable fact that the "intangible rights approach was such a centerpiece of the trial" ( Keane, 852 F.2d at 205). This opinion turns, then, to that inquiry.
First, it is true that "intent to defraud" was defined in purely "intangible rights" language. This Court's instructions referred to "the loss of loyal, faithful, or honest services of the Board" and to "the loss of the honest, fair or impartial assessment and collection of real estate property taxes" (Government Mem. Ex. C, at 65). As might have been expected pre-McNally, no specific mention was made of any loss of money or property.
Second, "scheme to defraud" was defined (as in Bailey and Wellman) as "some plan to deprive another of something of value," but the term "value" was never defined in so many words. In the context of that instruction, the jury might have equated "value" with "the loss of the loyal, faithful, or honest services of the Board" -- though that would hardly seem a normal reading of the term "value" by a lay reader.
Indeed, immediately after that instruction this Court gave the jury its only specific example of a scheme to defraud (id. at 68):
A scheme by bribery of public officials to cause them to grant favorable results to people seeking those results may constitute a scheme to defraud. . . .
As already noted, the jury's finding of such a scheme would certainly have produced a conviction sustainable under McNally-Carpenter.
Wellman, 830 F.2d at 1463 said of the instructions in that case:
What is crucial is that the "scheme to defraud" was not defined in such a way as to allow conviction for conduct which was not an offense.
And Bailey also upheld a conviction where, as here and as in Wellman, "scheme to defraud" was specifically defined in terms of "depriv[ing] another of something of value by fraudulent means" and where (859 F.2d at 1277):
Unlike United States v. Holzer, 840 F.2d 1343, 1346 (7th Cir. 1988), nothing in the instructions specifically advised the jury that "intangible rights" could be "something of value" for purposes of finding a scheme.
It is equally true that no instruction here specifically said "intangible rights" could be "something of value." That might perhaps be viewed as a semantic quibble, because nothing in the instructions specifically negated that possibility either, and it must be remembered the search now under way is for what the jury must necessarily have done. What would control that issue for this Court (pace Magnuson) is the fact that there is no other scheme to defraud that the jury could possibly have found here. There was only one way in which County and its citizens were sought to be deprived of honest government -- of the honest services of Board employees -- and that was by Ginsburg's seeking to subvert the tax assessment system by bribing those people to get favored treatment (that is, lower assessments) for Ginsburg's clients.
To put it simply, if there were indeed a scheme to defraud County and its citizens of intangible rights, it necessarily took the form of a money-or-property deprivation scheme of the kind described earlier in this opinion. Those two were inextricably intertwined, and the jury could not have found the former without finding the latter beyond a reasonable doubt. But for Magnuson, the inquiry into the instructions would yield the same answer as in Wellman and Bailey (where the jury was given the identical definition of "scheme" as meaning "some plan to deprive another of something of value"): a sustainable McNally-Carpenter conviction.
Just a few words should be added about one aspect of the evidence (or more accurately the non-evidence) in the case. As might have been expected in the pre-McNally era, this Court -- faithful to the "intangible rights" teachings of our Court of Appeals -- tailored its evidentiary rulings to what was then established law. At trial Ginsburg's counsel wanted to go through a host of the property assessment files to show that the ultimate results actually obtained could be justified on some legitimate valuation methodology. This Court rejected that evidence as irrelevant to a scheme to deprive County and its citizens of an honestly administered tax assessment system -- one free from the presence of Ginsburg's bribes. Of course that response was not tailored to the money-or-property deprivation regime announced only later in McNally.
But the answer would seem to be the same in those terms even in light of McNally. It has already been pointed out that it is conventional wisdom that a scheme need not be successful to be prosecutable. Where the scheme is one to bribe public officials to obtain favorable results, that is enough for conviction whether or not those results were obtained. Consequently a fraudulent briber who uses the mails to implement that scheme should not be able to escape guilt by showing that the same results might have been obtained honestly.
In sum, this opinion's separate look at what the Ginsburg jury did -- if divorced from Magnuson -- would indicate a sustainable set of mail fraud convictions. However, the parallel between Magnuson and this case (with the reference back, in this Court's jury instructions, to the indictment for the description of the "scheme to defraud") appears to taint the jury verdict here as well.
* * * *
Before our Court of Appeals' recent pronouncement in Magnuson, Ginsburg's mail fraud convictions would have withstood the onslaught of McNally (as clarified by Carpenter and as applied in the series of Seventh Circuit opinions that have engaged in the revisionist historical inquiry forced by McNally). Magnuson compels a different answer. Though the issue certainly should be looked at by higher authority, this Court must conclude Ginsburg's mail fraud convictions were unsustainable in money-or-property terms. They are therefore vacated.
Ginsburg was also convicted of one count of racketeering under RICO, with the charged predicate acts comprising (1) the multiple acts of mail fraud charged in the first 19 counts and (2) three separate acts of bribery in violation of Illinois law. Ginsburg Mem. 1 -- 10 to 12 urges dismissal of the RICO count as well. Essentially Ginsburg argues that because the jury returned a general "guilty as charged" verdict, there is no way to know which predicate acts the jury used -- the tainted acts of mail fraud or the bribery acts (which would not suffer the same flaw).
All the government says in response is this (via a footnote, Government Mem. 17 n.8):
If this Court vacates the mail fraud convictions and the racketeering conviction (on the grounds that the alleged mail frauds wire [sic -- should be "were"] used as predicate racketeering acts), it is the government's position that the proper order would be for a new trial, so the defendant could be retried on the racketeering count if the government so elected. See United States v. Holzer, 840 F.2d 1343, 1352 (7th Cir. 1988).
That implicit concession that if the mail fraud counts go, the racketeering conviction also falls is plainly correct, for ( Cramer v. Fahner, 683 F.2d 1376, 1379 (7th Cir. 1982)(citation omitted)):
Where a verdict is supportable on one ground but not another, and it is impossible to tell which grounds the jury selected, the conviction is unconstitutional.
Holzer II, 840 F.2d at 1349-52 indeed counsels the vacation of Ginsburg's RICO conviction.
As to whether Ginsburg remains vulnerable to a retrial on the RICO charge, that too is settled by the affirmative answer in Holzer II, id. (although our Court of Appeals ordered that result without expressly discussing the double jeopardy issue). This Court will follow that mandate without further examination of that issue (see n.20).
Accordingly Ginsburg's RICO conviction is also vacated. This Court will await the government's decision as to whether it wishes to retry him on that charge.
Based on our Court of Appeals' recent Magnuson decision, Ginsburg's Section 2255 petition must be granted. His conviction is vacated in its entirety -- on all 19 counts of mail fraud under Magnuson's reading of McNally and on the single RICO count via a kind of infectious invalidity. This case is set for a status hearing at 9 a.m. January 24, 1989 to discuss its future.
Date: January 10, 1989