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United States v. Li

May 25, 1995

UNITED STATES OF AMERICA,

PLAINTIFF-APPELLEE, CROSS APPELLANT,

v.

WILLIAM LI,

DEFENDANT-APPELLANT,

AND

DANNY HOGAN,

DEFENDANT-CROSS APPELLEE.



Appeal from the United States District Court for the Northern District of Illinois, Eastern Division.

No. 93 CR 897--William T. Hart, Judge.

Before CUMMINGS, FLAUM, Circuit Judges, and WALTER, District Judge. *fn1

WALTER, District Judge.

ARGUED MARCH 27, 1995

DECIDED MAY 25, 1995

Defendants Li and Hogan were convicted in a kickback scheme between a Chicago union (General Services Employees Union Local 73) and a health care provider. Hogan was a business agent for the union who acted as liaison between the union's trust fund, *fn2 which paid for health benefits, and health care providers. Li was a dentist who owned a company, Health Administrators, Inc. (HA), which secured commitments from Chicago area dentists to provide dental care at reduced rates. Hogan was not the union's decision maker as to which health care companies actually received the union contracts. It is not apparent that Li knew this.

During the time at issue, Richard Wesley and Harry Kurshenbaum served as the union's representatives on the Board of the Trust Fund; participating employers also had representatives. In his discussions with the Board regarding prospective health care providers, Hogan recommended only one dental care provider: HA. Not surprisingly, HA won the contract, which proved extremely lucrative and HA grew many-fold. After HA won the contract, Hogan told Li that Hogan's wife, Mary Beth Schlesinger, owned a graphics design business named Morley Graphics. Hogan suggested Li hire her. Schlesinger met with Li once and her firm did virtually no work for this meeting. Thereafter, Morley Graphics received monthly checks from HA for roughly 10 percent of whatever HA earned from the union that month. Schlesinger testified that Hogan ran the checks through her corporate account to avoid any "conflict of interest" questions from the union regarding his "commissions." She received over $36,000 from HA in the fifteen months between September 1987 and December 1988.

Li was convicted of both a conspiracy and a substantive count under 18 U.S.C. sec. 1954. He appeals. A jury convicted Hogan of both counts plus a money laundering count under 18 U.S.C. sec. 1956. Upon motion, the District Court granted a judgment of acquittal on the money laundering count. The government appeals the district court's judgment of acquittal.

DISCUSSION

The first argument raised on appeal relates to incriminating statements Li made to his former partner Clayton Hayes, who testified for the government. Li and Hayes were partners in another dental care provider similar to HA named Illinois Pacific Dental. Hayes had provided the federal government information in three or four other investigations prior to the Li/HA affair. When Hayes heard that Li might be indicted, he arranged a meeting with Li to discuss the situation. He also called Hahne, an agent he knew in the Labor Department, to find out if Li had been indicted. Hahne confirmed that Li had been indicted; that Hayes would meet with Li and that they would discuss the indictment.

At the meeting, Li made certain admissions to Hayes. After the meeting, Hahne arranged a meeting between Hayes and the Assistant U.S. Attorney prosecuting this case. Hayes testified for the government at the grand jury and at trial. Li sought to suppress these admissions at trial on the grounds that the government effectively used Hayes as a quasi informant, post indictment, to gather damaging testimony in the absence of Li's named counsel. The district court denied Li's motion to suppress. On appeal, Li argues this denial violated the Sixth Amendment.

Massiah v. United States established that the Sixth Amendment prohibits the government from deliberately eliciting incriminating statements from a defendant, in the absence of counsel, after the defendant has been indicted. 377 U.S. 201 (1964). To find a Sixth Amendment violation, the statements in question must have been (1) deliberately elicited (2) by a government agent. United States v. York, 933 F.2d 1343, 1355 (7th Cir. 1991). This court reviews the district court's factual finding that Hayes was not a government agent for clear error. United States v. Malik, 680 F.2d 1162, 1165 (7th Cir. 1982). We may, however, draw our own legal conclusions from the lower court's factual findings. United States v. York, 933 F.2d at 1358.

In this case, there is no question that Hayes deliberately elicited the information from Li. Hayes testified that he arranged a meeting with Li in order to protect his investment in Pacific Union Dental, his partnership with Dr. Li. In other words, Hayes deliberately elicited the information from Li in order to be fully informed about any potentially harmful effect on their joint venture.

Here we focus on the second prong; whether Hayes was a government agent. We have previously refused to extend this concept to "an individual, acting on his own initiative, [who] deliberately elicits incriminating information." United States v. Malik, 680 F.2d 1162, 1165 (7th Cir. 1982). Traditional principles of agency help determine government agent status. United States v. York, 993 F.2d 1343, 1357 (7th Cir. 1991). Control is an essential element of these principles; there must be an understanding between the parties that the principal is in control while the agent serves subject to that control. Id., (quoting Federal Pants, Inc. v. Stocking, 762 F.2d 561, 564 (7th Cir. 1985)). Hayes was a business owner acting on his own initiative. Though he contacted the government, it was in an attempt to receive information rather than relay it. The evidence ...


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