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Lombardo v. United States

decided: January 12, 1989.

JOSEPH LOMBARDO AND ROY L. WILLIAMS, PETITIONERS-APPELLANTS,
v.
UNITED STATES OF AMERICA, RESPONDENT-APPELLEE



Appeal from the United States District Court for the Northern District of Illinois, Eastern Division. No. 81 CR 269--Prentice H. Marshall, Judge.

Bauer, Chief Judge, Cummings and Cudahy, Circuit Judges.

Author: Cummings

CUMMINGS, Circuit Judge.

Defendants Joseph Lombardo and Roy L. Williams, together with three co-defendants, were each convicted in the United States District Court for the Northern District of Illinois of nine counts of wire fraud in violation of 18 U.S.C. § 1343, one count of conspiracy to bribe a United States Senator in violation of 18 U.S.C. § 371, and one count of traveling interstate with the intent to promote bribery in violation of 18 U.S.C. § 1952. Lombardo received an aggregate sentence of 15 years plus substantial fines. In addition to fines, Williams received a ten-year prison term. This Court affirmed the convictions.*fn1

Following the 1987 decision of the Supreme Court in McNally v. United States, 483 U.S. 350, 107 S. Ct. 2875, 97 L. Ed. 2d 292, defendants returned to the district court to mount a collateral attack on the validity of their convictions pursuant to 28 U.S.C. § 2255. McNally reversed an accepted interpretation of mail fraud*fn2 by the courts in holding that the mail fraud statute contemplates only offenses designed to obtain property rights fraudulently in contrast to schemes depriving the victim of intangible rights. Both the defendants and the United States concede that McNally is to be applied retroactively since the defendants' convictions cannot stand if their conduct no longer constitutes criminal activity. United States v. Keane, 852 F.2d 199, 205 (7th Cir. 1988).

Judge Prentice Marshall was the trial judge. After reviewing the indictment, evidence and lengthy instructions given to the jury in their 1982 trial, he denied defendants' motions to vacate their convictions, as well as their motions to reconsider. The court found that the indictment and jury instructions alleged two objectives of the wire fraud scheme in the conjunctive, one involving property rights and the other involving the impermissible intangible rights theory. As a result, the jury was required to find a deprivation of property rights in order to convict the defendants, rendering the intangible rights language mere surplusage. We affirm.

I

Because the defendants are contesting their convictions, we must review all evidence in the light most favorable to the government. United States v. Bentley, 825 F.2d 1104, 1107 (7th Cir. 1987), certiorari denied, 484 U.S. 901, 108 S. Ct. 240, 98 L. Ed. 2d 198. Defendants were convicted for their conduct surrounding the sale of a piece of property, known as Wonderworld, located in Las Vegas, Nevada, and owned by the Teamsters Central States Pension Fund ("Pension Fund"). At the time of the sale of the property, defendant Williams was the President of the Central Conference of Teamsters ("Teamsters") while defendant Lombardo's vocational status was "something of a mystery". 737 F.2d at 599. The Wonderworld property was located in close proximity to the residence of then United States Senator Howard Cannon. Senator Cannon, together with his neighbors, became interested in purchasing the Wonderworld property in order to prevent it from being used for commercial development.

During the transaction in question, legislation was pending in Congress which would lead to the deregulation of the trucking industry, a move strongly opposed by the Teamsters. As Chairman of the Senate Committee on Commerce, Senator Cannon was in a position to influence the future of the legislation. Since Senator Cannon and the Pension Fund each possessed something of value to the other party, the defendants participated in communications with the Senator for the objective of selling the Wonderworld property to him for $1,400,000 to the exclusion of higher bids, with the hope of influencing his position toward the deregulation legislation.

Defendants' ability to control the sale of the Wonderworld property was diluted by the necessity of delegating control over the assets of the Pension Fund to a management company, Victor Palmieri and Company, in order for the Pension Fund to retain its tax-exempt status. As a result, in order to consummate the sale of the Wonderworld property to the Senator as promised, the defendants were forced to pursue a less direct method of influence by encouraging the withdrawal of other potentially higher bids for the property. At the behest of defendant Lombardo, Thomas O'Malley and Andrew Massa, Pension Fund trustees, persuaded Allen Glick to withdraw his $1,600,000 bid for the Wonderworld property. Glick in turn persuaded his business partner, Fred Glusman, to withdraw his independent bid of $1,600,000. In spite of the defendants' efforts, Wonderworld was eventually sold to a corporation unrelated to the defendants for $1,600,000.

II

In order to convict the defendants of wire fraud, two elements must be proven: (1) a scheme to defraud; and (2) use of wire communications in furtherance of the scheme.*fn3 Prior to McNally, courts had interpreted the mail fraud statute (18 U.S.C. § 1341), which criminalizes schemes "to defraud" or schemes to obtain "money or property by means of false or fraudulent pretenses . . .", in the disjunctive, enabling conviction for schemes to defraud which did not necessarily include the deprivation of property rights. See McNally at 2880. Accordingly, defendants' convictions in McNally were based on instructions charging the jury that the defrauding of the citizens of their intangible rights to honest and impartial government was sufficient to constitute mail fraud without a finding that the victims of the fraud were deprived of anything of value.

McNally involved the funnelling of insurance policies by the two defendants to insurance companies controlled or nominally owned by the defendants. Based on this transaction, defendants were charged with defrauding the Commonwealth of Kentucky and its citizens of their right to have "the Commonwealth's business and its affairs conducted honestly, impartially, free from corruption, bias, dishonesty, deceit, official misconduct, and fraud" and obtaining money and other things of value by fraudulent means. McNally at 2878, n.4.

In reversing defendants' convictions the Supreme Court relied on the legislative intent surrounding the codification of the statute and the plain meaning of the words "to defraud". Its opinion concluded that § 1341 criminalizes only those offenses involving the deprivation of property rights by a scheme or artifice to defraud. "As the Court long ago stated, however, the words 'to defraud' commonly refer 'to wronging one in his property rights by dishonest methods or schemes,' and 'usually signify the deprivation of something of value by trick, deceit, chicane or overreaching.'" McNally at 2881, quoting Hammerschmidt v. United States, 265 U.S. 182, 188, 68 L. Ed. 968, 44 S. Ct. 511. The Court held that the value which is the subject of mail fraud ...


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