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Toulabi v. United States

decided: May 15, 1989.


Appeal from the United States District Court for the Northern District of Illinois, Eastern Division. No. 85 CR 332 -- James B. Moran, Judge.

Posner, Easterbrook, and Ripple, Circuit Judges.

Author: Easterbrook

EASTERBROOK, Circuit Judge

To be a taxi driver in London, a person must master The Knowledge (468 difficult routes through London's labyrinth), a process that usually takes two years, and so demonstrate ability to go smoothly from one place in the city to any other. Financial Times of London, March 22, 1989, page 16. To be a taxi driver in Moscow, a person must acquire the CIA's map of the city, for until recently the USSR's own street maps were intentionally inaccurate, omitting such landmarks as the headquarters of the KGB. New York Times, Sept. 3, 1988 (reporting the Soviet Union's release of accurate maps for the first time since the late 1930s). To be a taxi driver in Chicago, a person must pay a fee of $50 and answer correctly 20 out of 25 questions on a test of local geography. An aspirant alternatively could pay between $350 and $600 to Reza Toulabi, whose henchmen in the Division of Public Vehicle Operations would furnish the would-be cabbie with the answers to the quiz. Perhaps more important to Toulabi's customers, his confederates would arrange for the license to issue without the City's inquiring of the Immigration and Naturalization Service whether an alien applicant was authorized to work in the United States.

In 1985 a jury convicted Toulabi of mail fraud. The mail was used to send the licenses to the clients, cf. Schmuck v. United States, 489 U.S. 705, 109 S. Ct. 1443, 103 L. Ed. 2d 734 (1989); the fraud was the deceit practiced on the City of Chicago, which was led to issue licenses to persons not entitled to receive them. At the time of the indictment and conviction, this circuit adhered to the "intangible rights doctrine", under which a scheme to deprive a governmental body of the honest services of its employees satisfied the fraud element of the statute. The indictment laid out an "intangible rights" scheme, charging that Toulabi and retainers defrauded "the citizens of the City of Chicago of their right to the loyal, faithful and honest services of [the two employees] in the performance of acts related to their public employment", and of "their right to have the business of the [agency] conducted honestly, fairly, impartially, free from corruption, collusion, partiality, dishonesty, bribery and fraud, and in accordance with the laws of the City of Chicago". Why the United States should be so interested in enforcing "the laws of the City of Chicago" is something of a mystery. The mailings here were not the mechanism of deceit. State and local governments commonly prosecute violations of their own laws, and Toulabi was not so well-connected that he lived without anything to fear from local authorities. Congress has never considered the proper role of federal law in prosecuting garden-variety governmental corruption, apart from the extortion covered by the Hobbs Act -- hence the need to create theories such as the intangible right to honest services, when any statute designed for local corruption could be written less elliptically. So long as the intangible rights approach prevailed, however, the decision to pursue cases of this sort lay within the discretion of the federal prosecutor.

McNally v. United States, 483 U.S. 350, 97 L. Ed. 2d 292, 107 S. Ct. 2875 (1987), rejected the intangible rights doctrine, holding that a scheme violates 18 U.S.C. § 1341 only if it deprives the victim of "property". Ever since, federal prosecutors have been waging a rear-guard action to preserve convictions secured under prior law. When the jury must have found a deprivation of property, we affirm on direct appeal even though the indictment was cast in terms of intangible rights. E.g., United States v. Wellman, 830 F.2d 1453 (7th Cir. 1987). The court examines the evidence and Instructions to piece together the conclusions that the jury necessarily reached. If the jury could have founded its verdict on the intangible rights doctrine, we set the judgment aside even though the indictment might have supported a verdict on a proper charge.

When the case arrives on collateral attack, as this one does (Toulabi was on probation by the time he filed his petition under 28 U.S.C. § 2255), things are not so simple. Collateral relief is available only when the custody violates the Constitution or laws of the United States. A change of law showing that the indictment does not state an offense may supply the foundation for relief, Davis v. United States, 417 U.S. 333, 41 L. Ed. 2d 109, 94 S. Ct. 2298 (1974). And Magnuson v. United States, 861 F.2d 166, 167(7th Cir. 1988), holds that McNally is the sort of fundamental change that must be applied under § 2255. How should McNally properly be taken into account?

Surely not by giving the defendant what amounts to a second appeal of his conviction. Davis tells us that a change of law showing that the defendant has been punished "for an act that the law does not make criminal", 417 U.S. at 346, entitled the prisoner to relief. So a court must inquire whether the indictment states an offense. Should it do more? Section 2255 authorizes all inquiries usually made on collateral attack, and a prisoner may ask the court to determine whether there was sufficient evidence to allow a reasonable trier of fact to conclude, beyond a reasonable doubt, that the defendant committed a crime. Jackson v. Virginia, 443 U.S. 307, 61 L. Ed. 2d 560, 99 S. Ct. 2781 (1979). Section 2255 also allows courts to redress a defect that "so infected the entire trial that the resulting conviction violates due process", Cupp v. Naughten, 414 U.S. 141, 147, 38 L. Ed. 2d 368, 94 S. Ct. 396 (1973). This language has been used since Davis to support collateral review if the instructions omit an essential element of the offense and therefore undermine the fairness of the trial. Henderson v. Kibbe, 431 U.S. 145, 155-57, 52 L. Ed. 2d 203, 97 S. Ct. 1730 (1977) (holding that the omission from the instructions of an element of the offense did not require a new trial, although it would have called for reversal on direct appeal). The extent of this review remains a contentious issue. Compare Cole v. Young, 817 F.2d 412, 423-27 (7th Cir. 1987), with id. at 435-40 (dissenting opinion); cf. Pope v. Illinois, 481 U.S. 497, 502-03, 95 L. Ed. 2d 439, 107 S. Ct. 1918 (1987).

Which of these inquiries a court conducts on collateral attack is the defendant's choice. The prisoner could contend that the indictment fails to state an offense while conceding (by silence) that the evidence would have been sufficient under Jackson had the charge been adequate. The prisoner might focus on the jury instructions, contending that they omitted an element essential (in retrospect), and that the shortfall was so serious that it violated the Due Process Clause as Cupp and Henderson have applied it to missing-instruction cases. No matter the tack used, the parties and court must have in mind the difference between direct and collateral review. See Johnson v. United States, 805 F.2d 1284, 1288 (7th Cir. 1986); Johnson v. United States, 838 F.2d 201 (7th Cir. 1988). Sometimes our court has approached McNally cases in this spirit. See United States v. Doe, 867 F.2d 986, 989-90 (7th Cir. 1989); cf. United States v. Keane, 852 F.2d 199 (7th Cir. 1988) (when § 2255 is unavailable because the sentence ended before the filing of the challenge, the scope of review is more confined). On other occasions, however, the court has not even mentioned the difference between direct and collateral review, examining the record and jury instructions as if the case were on direct appeal. E.g., Messinger v. United States, 872 F.2d 217 (7th Cir. 1989); Lombardo v. United States, 865 F.2d 155 (7th Cir. 1989). Our case shows why this might occur. Toulabi contended exclusively that the indictment failed to state an offense. He was content to surrender any arguments based on the evidence and the jury instructions. The United States Attorney replied, however, that the court must scrutinize the evidence and the instructions, and it chastised Toulabi for failing to supply these tools of decision. The prosecutor then briefed the issues just as if this were a direct appeal, and Toulabi responded in kind. This is a common sequence in McNally cases on collateral attack, and it is then not surprising when the court -- without mentioning the difference between direct and collateral attack -- proceeds to conduct a second full review. The prosecutor's curious choice precludes us from deciding in today's case how far an appellate court should inquire into the record and instructions of a case on collateral review after McNally. We accept the case as the parties have presented it, examining the record and instructions as we would on direct appeal.

Toulabi's indictment, although brimming with the buzz-words of the intangible rights doctrine, may well state an offense under § 1341 given Carpenter v. United States, 484 U.S. 19, 108 S. Ct. 316, 98 L. Ed. 2d 275 (1987). Just as a newspaper may have a property interest in information about the stock market, see Carpenter, so the City of Chicago may have a property interest in its test for hacks. See United States v. Thomas, 686 F. Supp. 1078 (M.D.Pa. 1988). Confidentiality may be important to the integrity of the licensure program, just as holding the contents of its columns confidential until publication may be important to the integrity of the Wall Street Journal's reportage, which affects its profitability. Unlike the Journal, which sells papers, the City does not sell tests. Nonetheless, it had an investment in the test. Once the information got out the City may have had to design a new test, at some expense. Maps of Chicago are more readily available (and more accurate) than those of Moscow, and Chicago does not have a property interest in the fact that Cornell Avenue is east of Drexel Street, but the particular questions it chooses to ask are distinct from the plat of the City. Cf. Rockford Map Publishers, Inc. v. Directory Service Co., 768 F.2d 145 (7th Cir. 1985). Tests are not free goods; many services keep their tests secure and charge stiff fees for writing one (the Educational Testing Service, the designer of the College Board exams, is a good example).

We need not decide whether an indictment limited to the contention that Toulabi defrauded Chicago out of the value of its geography test would state an offense, or whether this indictment would have supported his conviction had the instructions informed the jury that depriving Chicago of the value of the test was an essential ingredient of the crime. The instructions actually said the opposite, telling the jury that "it is not necessary that the government prove all of the false pretenses, representations, promises, and acts charged". These other "pretenses, representations, promises, and acts" included depriving Chicago of the honest services of its employees in a way indistinguishable from the scheme involved in McNally. Accepting bribes to issue licenses did not deprive Chicago of property; it fattened the City's treasury by $50 (the license fee) for each extra license issued.

Belatedly the government has discovered two "property" interests in this scheme: in the licenses themselves, and in the right to control the activities of the employees of the Division of Public Vehicle Operations. Neither shows that Toulabi's jury must have found that his scheme deprived Chicago of property.

The license may be property from the driver's perspective, in the sense that he may not be compelled to surrender the entitlement except on proof of wrongdoing. For constitutional purposes an entitlement depending on substantive criteria is "property". E.g., Barry v. Barchi, 443 U.S. 55, 64 n. 11, 61 L. Ed. 2d 365, 99 S. Ct. 2642 (1979) (license to train horses); Dixon v. Love, 431 U.S. 105, 52 L. Ed. 2d 172, 97 S. Ct. 1723 (1977) (Illinois driver's license). From the governments perspective, however, the license is a promise not to interfere rather than a sliver of property. Chicago does not put a cap on the number of chauffeurs' licenses it will issue (quite unlike the limit on the number of taxi medallions). All the license signifies from the City's perspective is that the driver met the substantive criteria for the profession -- which in Chicago means a rudimentary knowledge of the street layout and the ability to communicate in English, nothing more. The check with the INS to determine whether an alien applicant is entitled to work vindicates national rather than local policy, and this, too, is a regulatory rather than property interest. Taxi driving is not something made possible by dint of the City's resources; it is something the applicant can do without the City's assistance, and the license simply signifies that the City will not hinder or penalize one who pursues this line of work. Cf. Scott v. Village of Kewaskum, 786 F.2d 338, 340 (7th Cir. 1986).

As for the government's interest in ensuring that employees' activities conform with the substantive rules of law: that's the intangible rights doctrine by another name. See Ward v. United States, 845 F.2d 1459 (7th Cir. 1988); United States v. Holzer, 840 F.2d 1343 (7th Cir. 1988). All the "intangible right" ever amounted to was the interest of the government in having employees earnestly carry out the law, rather than pursue an antagonistic private agenda. Holzer, 840 F.2d at 1348, rejects the contention that McNally is limited to cases in which no state law required the bribed servants to act other than as they did. Judge Holzer, who accepted money in exchange for his decisions, frustrated the power of the government to carry out legal norms every bit as much as Toulabi and cohorts undercut Chicago's ability to decide who shall receive a chauffeur's license, yet we held that § 1341 did not make a federal crime out of ...

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