Searching over 5,500,000 cases.

Buy This Entire Record For $7.95

Download the entire decision to receive the complete text, official citation,
docket number, dissents and concurrences, and footnotes for this case.

Learn more about what you receive with purchase of this case.

United States v. Warner

September 7, 2006


The opinion of the court was delivered by: Judge Rebecca R. Pallmeyer


Defendants Lawrence E. Warner and George H. Ryan, Sr. were charged in a 22-count second superseding indictment with (1) conspiring to use the resources of the State of Illinois for their personal and financial benefit and for the benefit of Ryan's family members, the Citizens For Ryan political campaign committee, and various political and business associates, in violation of the Racketeer Influenced and Corrupt Organizations Act ("RICO"), 18 U.S.C. § 1962(d); and (2) devising a scheme to defraud the people of the State of Illinois and the State of Illinois of money, property, and the right to the honest services of Ryan and other State of Illinois officials, in violation of the federal mail fraud statute, 18 U.S.C. §§ 1341, 1346. In addition, Defendant Ryan was separately charged with making materially false, fictitious, and fraudulent statements during several FBI interviews in violation of 18 U.S.C. § 1001(a)(2); obstructing and endeavoring to obstruct the Internal Revenue Service in the correct reporting of income and the collection of taxes in violation of 26 U.S.C. § 7212(a); and filing materially false tax returns in violation of 26 U.S.C. § 7206(1). Defendant Warner was separately charged with extortion under the Hobbs Act, 18 U.S.C. § 1951; money laundering, 18 U.S.C. § 1956 (a)(1)(B)(i); and structuring currency transactions in violation of 31 U.S.C. §§ 5324(a)(3) and (d)(2). On April 17, 2006, following a six-month trial, a jury convicted both Defendants on all counts. Both have moved for a judgment of acquittal or, in the alternative, for a new trial. They argue that the evidence was insufficient to convict them on several of the charges, that the RICO charges were improper for several reasons, and that jury problems so infected their convictions as to violate due process. Defendant Warner argues, in addition, that he was prejudiced by being tried together with Defendant Ryan and that the court erred by denying his numerous requests for severance. For the reasons set forth in this opinion, the motions are granted with respect to Counts Nine and Ten and otherwise denied.

I. The Evidence Supported Defendant Ryan's and Warner's Convictions Under Count One

Defendants Ryan and Warner were each convicted of one count of conspiring to violate RICO in violation of 18 U.S.C. § 1962(d). Ryan contends that the evidence was insufficient to establish that Ryan knew of the alleged conspiracy and intended to join it. Ryan Rule 29 Mot. at 3. In addition, both Defendants Ryan and Warner argue that the Government failed to prove that they knowingly agreed to the single conspiracy charged in the Indictment. See Ryan Rule 29 Mot. at 2--4; Warner Rule 29 Mot. at 2--3. Ryan further contends that the alleged conspirators pursued divergent, at times conflicting, goals, which are inconsistent with the single, unitary objective alleged in the Indictment. Ryan Rule 29 Mot. at 3--4. Finally, Ryan argues that the Government failed to prove that the varied criminal conduct alleged in the Indictment was carried out by a single enterprise. Ryan Rule 29 Mot. at 4. Before addressing the Defendants' arguments, the court notes that its review of the jury's findings is extremely deferential. United States v. Gougis, 432 F.3d 735, 743--44 (7th Cir. 2005). The court views the evidence in the light most favorable to the government, and defers to the jury's credibility determinations. Id. at 743. Only if there is no evidence in the record from which the jury could find guilt beyond a reasonable doubt will the court overturn the jury's verdict. Id. at 743--44.

A. The Circumstantial Evidence of an Agreement to Violate RICO was Sufficient

"To prove a RICO conspiracy, the government must show (1) an agreement to conduct or participate in the affairs (2) of an enterprise (3) through a pattern of racketeering activity." United States v. Olson, 450 F.3d 655, 664 (7th Cir. 2006). Consistent with general conspiracy law, direct evidence of an agreement is not required to prove a RICO conspiracy; rather, "an agreement can be inferred from the circumstances." United States v. Neopolitan, 791 F.2d 489, 501 (7th Cir. 1986); see also United States v. Diaz, 876 F.2d 1344, 1352 (7th Cir. 1989) ("Because conspiracies are carried out in secret, direct proof of agreement is rare.") (citation and quotations omitted).

1. The Evidence Supported the Jury's Conclusion that Ryan Knew of and Intended to Join the Conspiracy

Ryan argues that his conduct during his terms as Secretary of State and Governor was incompatible with that the government's position that he knowingly acted to further the interests of a RICO conspiracy, as he "often acted contrary to his own interests" in serving the interests of the State. Ryan Rule 29 Mot. at 3. Several witnesses did testify that, generally, Ryan put policy considerations ahead of politics, see, e.g., Tr. at 4010 (Fawell); Tr. at 13500 (Wright). There was, however, substantial evidence regarding specific transactions from which the jury could reasonably conclude that Ryan knowingly steered government benefits to his friends and associates. See, e.g., Tr. at 10461--63 (Sherman) (testifying that Ryan intervened on Warner's behalf with respect to a lease in Joliet, Illinois); Tr. at 10162--65 (Nelson) (testifying that Ryan intervened on Warner's behalf with respect to a lease in Bellwood, Illinois); Tr. at 8143--46 (Covert) (testifying that Ryan insisted that the specifications for validation stickers include a requirement beneficial to Warner's client, American Decal); 6636, 6651 (Chamness) (Ryan asks an SOS employee to deal with Harry Klein with respect to a building in South Holland, and is later upset when he believes that the employee and not Ryan has told Klein that a deal has been struck.). Although the jury was not required to find that the State overpaid for the contracts and leases that were entered into, United States v. Fernandez, 282 F.3d 500, 507 (7th Cir. 2002), the jury could reasonably have concluded that Ryan's intervention on his friends' behalf had a negative impact on the State. See, e.g., Tr. at 11045--46 (Norusis) (testifying that the State overpaid for the Joliet and Bellwood leases); Tr. at 8635--37 (Covert) (testifying that the changes to contract specifications, which Ryan asked him to pull back quietly, would have fostered "open competition").

Ryan asserts that his alleged co-conspirators-in particular, Fawell, Swanson, Juliano and Udstuen-did not tell Ryan what they were doing, and suggests there is no basis for concluding that he joined a conspiracy with them. Ryan Rule 29 Mot. at 3. Based upon the evidence that Ryan personally steered contracts and leases to his friends and associates, the jury could reasonably conclude that Ryan knowingly embraced the conspiracy's common purpose, even if he did not "participate in every aspect of the conspiracy." United States v. Magana, 118 F.3d 1173, 1186 (7th Cir. 1997) (internal quotations and citation omitted); cf. Tr. at 5381--82 (Fawell) (testifying that Fawell, not Ryan, oversaw the use of state employees for political purposes). This evidence was bolstered by evidence that Ryan attempted to conceal the benefits he conferred upon, and received from, Warner and others. See, e.g., Gov't Exs. 28-012, 28-024 (Ryan did not report gifts and benefits he received from Klein and others on his annual Statements of Economic Interest); Tr. at 8145 (Covert) (testifying that Ryan told him to withdraw changes to contract specifications disadvantageous to Warner "without drawing a lot of attention to it"); Tr. at 3551--52, 3580, 3584--85 (Fawell), 14546--49 (Sonneveld) (Ryan approves Fawell's recommendation to dismantle Inspector General's office). There was sufficient circumstantial evidence in the record for the jury to conclude that Ryan knew of and intended to join the conspiracy, even if his co-conspirators did not divulge everything they were doing to further the conspiracy's interests.

2. The Record Supports the Jury's Finding of a Single RICO Conspiracy

"Multiple conspiracies exist when there are separate agreements to effectuate distinct purposes." United States v. Ceballos, 302 F.3d 679, 688 (7th Cir. 2002). By contrast, a single conspiracy exists when "the evidence, viewed in the light most favorable to the government, establishes that the co-conspirators joined to effectuate a common design or purpose." Id. If the government demonstrates that the "co-conspirators embraced a common criminal objective, a single conspiracy exists, even if the parties do not participate in every aspect of the scheme." United States v. Jones, 275 F.3d 648, 652 (7th Cir. 2001). Both Ryan and Warner contend that the evidence at trial was insufficient to prove a single RICO conspiracy.

As charged in the Indictment, the conspiracy's overall objective was to use state resources for the personal benefit of Ryan and his associates. See Indict. Count I, ¶¶ 9--17. In his Rule 29 motion, Ryan divides the co-conspirators into two categories: (1) those who were concerned with political objectives (Fawell and Juliano); and (2) those who were concerned with their own financial interests (Warner, Udstuen, Swanson, Drazek and Tom Ryan). Ryan Rule 29 Mot. at 3--4. Viewing the evidence in the light most favorable to the government, as the court is required to do, these purportedly competing goals do not, as Ryan contends, indicate multiple conspiracies. Rather, they were integral to the conspiracy's overall objective to use state resources for personal benefit. Fawell and Juliano furthered the interests of the conspiracy by helping to conceal the improper use of state resources. See, e.g., Gov. Ex. 01-019 (December 1994 Fawell memo to Ryan regarding the Inspector General's office); Tr. at 7039--40 (Juliano). Their actions benefitted Ryan politically, certainly, but they also allowed the conspirators to continue perpetrating their schemes. Indeed, the two interests went hand-in-hand: without continued access to the offices of government, there were no contracts, leases, or other benefits to share. And while Fawell did testify that he reigned in Warner's influence early in Ryan's first term as Secretary of State's Office, he also testified that he (Fawell) advised Warner to "get a couple of clients -- a couple of clients for the office, which is normal, and, you know, don't get involved in a lot of smaller stuff. " Tr. at 2768. Although Fawell believed that this was "normal" political behavior, it was a key component of the Indictment against Defendant Warner. See Indict. ¶¶ 4(B); 14--88.

Warner, for his part, contends that the "abundance of evidence" presented unrelated to Warner belies the Government's theory that Warner participated in a single conspiracy with his alleged co-conspirators. Warner Rule 29 Mot. at 2. As discussed, the government was not required to prove that Warner participated in every aspect of the alleged scheme, so the fact that the government put on evidence that did not pertain to Warner does not mean, or even suggest, that there were multiple conspiracies. The court concludes that the evidence was sufficient to prove a single objective.

B. The Evidence Was Sufficient to Support the Jury's Finding of a Single RICO Enterprise

Defendant Ryan argues that the evidence at trial failed to show that Ryan conducted the affairs of the State of Illinois, the enterprise identified in the Indictment, through a pattern of racketeering activity. Instead, Ryan contends that he acted through two distinct governmental offices, the Secretary of State and the Governor, which constitute distinct enterprises. Ryan Rule 29 Mot. at 5. To the extent that this argument is directed to the viability of the State as an enterprise, generally, this court previously addressed this issue at some length and concluded that the State of Illinois may serve as a RICO enterprise. See United States v. Warner, No. 02 CR 506, 2004 WL 1794476, at *13--16 (N.D. Ill. Aug. 11, 2004). Nothing in the evidence at trial persuades the court to revisit that conclusion.

Nor is the court persuaded that the evidence necessitates finding multiple enterprises. Although the majority of the schemes alleged in the Indictment originated during Ryan's tenure as Secretary of State, the performance of several of those schemes spanned Ryan's terms as both Secretary of State and Governor. See, e.g., Count II, ¶¶ 89--97 (allegations concerning benefits received by Ryan from Harry Klein from 1993 through 2002); Count II, ¶¶ 98--115 (allegations concerning benefits received by Ryan from Ron Swanson from the mid-1990s through 2002). Moreover, money continued to flow from leases and contracts that Ryan steered to Warner during his years as Secretary of State even after Ryan took office as Governor. See Count II, ¶ 23 (stickers contract); ¶ 82 (Bellwood lease); ¶ 88 (Joliet lease). Likewise, the false statement Counts (Counts Eleven through Thirteen) pertain to false statements then-Governor Ryan made to federal investigators about conduct that occurred during his tenure as Secretary of State. Consequently, the substance of the allegations in the Indictment and the evidence presented at trial do not lend themselves to being parsed in the manner advanced by Defendant Ryan. The court reaffirms its previous conclusion that the State of Illinois may, as a matter of law, serve as a RICO enterprise, and concludes that the evidence presented at trial was sufficient to support the jury's finding that the government proved a single enterprise.

II. Mail Fraud Counts

At the heart of the government's case against Defendants Ryan and Warner is a massive, unitary scheme "to defraud the people of the State of Illinois, and the State of Illinois, of money, property and the intangible right to the honest services of defendant Ryan and other officials and employees of the State of Illinois." Indict., Count II, ¶ 3. The Indictment sets out a scheme spanning from 1990 to 2002 that included the award of state contracts and leases, the provision of non-public information and participatory status in government decisionmaking, and the grant of low-digit license plates to Ryan's friends and supporters, including Warner, in exchange for monetary and non-monetary benefits to Ryan and those close to Ryan, all of which was concealed by various false statements, nondisclosures, and structured behavior. Id. at ¶¶ 4-6. Although the entirety of the scheme is set out in Count Two, mailings related to particular sequences appear as separate counts.

The jury convicted Ryan and Warner on each count alleged against them. Ryan and Warner challenge this verdict as insufficiently supported by the evidence. Namely, Ryan argues that "there has been no showing that Ryan took official action 'in return' for cash, gifts or some other compensation." Ryan's Rule 29 Mot. at 8. Warner argues that the government never demonstrated his access to material nonpublic information or that he made material false statements. Warner's Rule 29 Mot. at 3--5. Warner also argues that the mailing in Count Two was not in furtherance of the scheme. Warner's Post-Trial Mot. at 24--25. In addition, both Defendants argue that there was a prejudicial variance between the single scheme charged in the indictment and the multiple schemes proved at trial. Ryan's Post-trial Mot. at 66; Warner's Rule 29 Mot. at 2. The defendants also challenge the verdict on strictly legal grounds. Ryan asserts that these counts were unconstitutionally vague. Ryan's Rule 29 Mot. at 18. Warner asserts that the court erred in referencing state law in instructing the jury on these counts. Warner's Post-Trial Mot. at 22.

As noted, in considering the sufficiency of the evidence, the court must view the evidence "'in the light most favorable to the prosecution, and as long as any rational jury could have returned a guilty verdict, the verdict must stand.'" United States v. Hausmann, 345 F.3d 952, 955 (7th Cir. 2003) (quoting Jones, 222 F.3d at 352)). In United States v. Henningsen, the Seventh Circuit stated:

The mail fraud statute prohibits devising a "scheme or artifice to defraud, or for obtaining money or property by means of false or fraudulent pretenses, representations, or promises," and executing that scheme by use of the mails. 18 U.S.C. § 1341. A conviction must satisfy three elements: (1) the defendant's participation in a scheme to defraud; (2) the defendant's intent to defraud; and (3) the defendant's use of the mails in furtherance of the fraudulent scheme. 387 F.3d 585, 589 (7th Cir. 2004). Under the mail fraud statute, a "scheme or artifice to defraud" includes a scheme to deprive a person or persons (in this case, the citizens of Illinois) of their intangible right to honest services. 18 U.S.C. § 1346. "As direct evidence of a defendant's fraudulent intent is typically unavailable, 'specific intent to defraud may be established by circumstantial evidence and by inferences drawn from examining the scheme itself that demonstrate that the scheme was reasonably calculated to deceive persons of ordinary prudence and comprehension.'" United States v. Owens, 301 F.3d 521, 528 (7th Cir. 2002) (quoting United States v. Paneras, 222 F.3d 406, 410 (7th Cir. 2000)).

Ryan notes that no government witness ever testified that he saw Ryan take a "corrupt dollar" and no one ever testified that Ryan took an official action with regard to any of the contracts or leases at issue in return for a gift or some benefit. Ryan's Rule 29 Mot. at 8--9. Without such testimony, Ryan argues, the evidence is not sufficient to support his conviction of mail fraud. To the extent that Ryan is arguing that he had to personally benefit from the scheme in order to be convicted, Ryan's Rule 29 Mot. at 9, that argument was foreclosed, as this court held prior to trial, by the Seventh Circuit's decision in United States v. Spano, 421 F.3d 599, 603 (7th Cir. 2005); United States v. Warner, No. 02 CR 506, 2005 WL 2367769, at *2 (N.D. Ill Sept. 23, 2005). The Spano court observed, "A participant in a scheme to defraud is guilty even if he is an altruist and all the benefits of the fraud accrue to other participants . . . . In the case of a successful scheme, the public is deprived of its servants' honest services no matter who receives the proceeds." Spano, 421 F.3d at 603. The series of checks mentioned above and introduced into evidence demonstrate that even if the government did not prove that Ryan benefitted from the charged scheme, Warner, Udstuen, Swanson, and Klein benefitted in the form of lobbying and rental fees. Similarly, the court is not persuaded to revisit its determination that the government was not required to prove a strict quid pro quo-a particular payment or benefit for a specific official act. Warner, 2005 WL 2367769, at *4. What the government was required to show, however, was that Ryan "accepted gifts or other consideration with the understanding that he would perform or not perform acts in his official capacity in return." Id.

The government introduced a great deal of evidence of Ryan's acceptance of gifts and benefits. Gov't Resp. at 10--11. For example, Warner provided favorable construction and insurance benefits to members of Ryan's family, Gov. Ex. 08-056, Tr. at 17090 (Fairman); invested in Ryan's son's business, Gov. Ex. 08-087, 08-088; and provided favorable financial treatment to Comguard, a company associated with Ryan's brother. Gov. Ex. 09-001, 09-002; see Gov't Resp. at 14--15. Ron Swanson paid for Disney World accommodations for Ryan's daughter, Gov. Ex. 28-009, and gave the Ryans numerous gifts, Gov. Ex. 16-040, 16-045, 16-029. While there was no evidence of Ryan directly accepting cash, there was evidence that Ryan gambled regularly and carried substantial amounts of cash, despite having withdrawn comparatively little from his bank accounts from 1993 to 2002. See Tr. at 15279 (McAvoy), Tr. at 7844, 7860 (Borisy); Tr. at 2979 (Fawell); Gov. Ex. 16-089, 33-501.

Ryan argues that the evidence was insufficient to prove that he had the requisite intent to violate the mail fraud statute. Specifically, Ryan contends that he was not aware of, or otherwise involved in, "many of the alleged suspect transactions." Ryan Rule 29 Mot. at 9--16. The court will address each of the mail fraud counts in turn.

A. The Evidence Was Sufficient to Support the Jury's Verdict on Count Two

Count Two of the Indictment charged Ryan and Warner with mail fraud in connection with a contract awarded to ADM by the Secretary of State's office. The SOS office sometimes contracted with outside vendors for products and services. Tr. at 8032 (Covert). Vehicle registration stickers, which help law enforcement determine whether drivers are driving with valid license plates, are one such product. Id. at 8033. Each department within the SOS office was responsible for establishing contract specifications that vendors were required to meet in order to be awarded a contract to provide services to the State. Id. at 8034. James Covert, the director of the SOS Office's vehicle-services department during Ryan's tenure as SOS, testified that the department had established procedures for determining contract specifications and awarding contracts. Id. at 8035--36. In early 1991, Covert had a meeting with Larry Warner in which Warner informed Covert that he had "authority to speak for Secretary Ryan." Id. at 8053. At this same meeting, Warner told Covert that the SOS Office should "continue doing business with American Decal," a company that produced validation stickers and was one of Warner's lobbying clients. Id. Warner further asked Covert not to do business with an American Decal competitor, 3-M. Id. at 8054. Thereafter, Warner and Covert had weekly meetings, and, Covert testified, he generally did what Warner asked him to do. Id. at 8056, 8060.

As American Decal already had the vehicle services contract, it necessarily satisfied the existing contract specifications. Other companies, however, had difficulty satisfying those requirements. Id. at 8064. The issue came to a head in 1993, when Mr. Covert learned that a number of companies claimed to be capable of manufacturing superior products that did not comply with contract specifications at that time. Id. at 8119. Covert and another SOS employee convened a committee to review the specifications, and the committee recommended changing the specifications in a way that would have opened the contract for other bidders. Id. at 8120, 8126, 8135--36. Mr. Covert agreed to implement the changes, but soon afterwards, he received an angry call from Warner, in which Warner claimed that Covert was going to put him out of business and that Warner would "take care of it." Id. at 8140, 8144. The next day, Covert received a stern call from then-Secretary Ryan in which Ryan told Covert to withdraw the changed specifications "without drawing a lot of attention to it." Id. at 8145. Covert complied with this direction despite his belief that the changes to the specifications were in the State's best interests. Id. at 8146.

At trial, Ryan pointed that ADM's contract with the SOS Office was entered into before Ryan became SOS, and that there were sound law-enforcement rationales for keeping the contract specifications as they were. As the government contended, however, though the contract did not originate during Ryan's tenure as SOS, his actions ensured that the contract would remain in place, to Warner's benefit. Moreover, the jury was entitled to reject the defense's theory that Ryan was motivated by law-enforcement interests and not his own interests and those of his friends in making his decision regarding the sticker contract specifications. Ryan's direct intervention on Warner's behalf, and his attempt to conceal his intervention by directing Covert to withdraw the specifications quietly, amply support the jury's verdict with respect to Count Two.

Warner also challenges Count Two on the grounds that the mailing identified in the indictment and introduced at trial was not in furtherance of the license plate registration sticker/ADM lobbying contract scheme. Warner Post-Trial Mot. at 24--25. Warner notes that this mailing occurred in 2000, but that the evidence at trial demonstrated that his association with ADM had ended several years prior. A mailing is considered in furtherance of a scheme to defraud even where it is incidental to an essential part of the scheme. United States v. Fernandez, 282 F.3d 500, 508 (7th Cir. 2002); see also United States v. Koen, 982 F.2d 1101, 1107 (7th Cir. 1992) (reading "in furtherance" broadly). Aristoteles Mpougas testified that the 2000 payment related to a one-year 1998 contract for license plate registration stickers with the Secretary of State's Office entered into while Ryan still held that office. A dispute arose concerning payments on that contract and the State of Illinois only paid American Decal for the shipment of stickers related to this contract when the dispute was resolved in 2000. As the government notes, the indictment specifically refers to payments from the Secretary of State's Office to ADM from 1991 until 2000. (Indict., Count II, ¶ 23). Payment on a contract Warner originally used his influence and access to Ryan to help secure was an essential part of the scheme. Gov't Resp. at 32. The 2000 mailing was thus in furtherance of the scheme.

B. The Evidence Was Sufficient to Support the Jury's Verdict on Count Three

Count Three of the Indictment charged Ryan and Warner with mail fraud in connection with the lease of an SOS facility in Joliet. In late 1994, SOS considered finding a new location for driver and administration facilities it leased in Hinsdale. Tr. at 2802-03 (Fawell); Tr. at 10462 (Sherman). At that time, Leonard Sherman was director of the department of administrative hearings for SOS. Tr. at 10452 (Sherman). Scott Fawell testified that in the course of multiple conversations about finding an alternative location to the Hinsdale site, Defendant Ryan told Fawell he (Ryan) had "hooked up" Sherman with Defendant Warner. Tr. at 2804--05 (Fawell). For his part, Sherman testified that Ryan called him and said he had heard that Sherman was looking for a new site, and that Sherman should contact Warner for help finding a site. Tr. at 10463 (Sherman). Todd Borisy, a member of Ryan's security detail, overheard Ryan and Warner talking about Warner buying property in Joliet. Tr. at 7822--24 (Borisy). After Sherman and Warner inspected a building in Joliet, SOS leased and moved into that building in January 1995. Tr. at 10471, 10479 (Sherman). The owner of record on the lease was an LLC, Tr. at 10484 (Sherman), but Warner was the true owner, having bought the property in October 1994. In short, the government alleged, Warner bought the Joliet building and concealed his ownership interest, while Ryan steered Sherman into locating the SOS offices there.

Defendant Ryan asks for a judgment of acquittal on all the mail fraud courts, but he has not specifically addressed the sufficiency of the government's evidence as to the Joliet lease; rather, Ryan generally argues that "with regard to many of the alleged suspect transactions, Ryan had no involvement." Ryan Rule 29 Mot. at 9. If this is the extent of his attack on the sufficiency of the evidence on Count Three, it necessarily fails. As noted above, Fawell, Sherman, and Borisy all testified as to Ryan's (and Warner's) direct involvement. Ryan put Sherman in contact with Warner to look for a new site, and the jury could reasonably infer from Borisy's testimony that Ryan knew Warner owned the Joliet building at the time. The evidence supports the jury's verdict on Count Three.

C. The Evidence Was Sufficient to Support the Jury's Verdict on Count Four

Count Four of the Indictment charged Ryan and Warner with mail fraud in connection with contracts awarded to IBM, another Warner lobbying client, by the SOS Office. As of early 1991, Honeywell/Bull ("Honeywell") held the existing mainframe computer system contract with the SOS Office. Tr. at 11665 (Udstuen); Tr. at 12532 (Cavallaro). The SOS Office was, however, seeking to upgrade its computer system, Tr. at 11665 (Udstuen), and both Honeywell and IBM were interested in obtaining the contract for that upgrade. Tr. at 5850 (Cook). Warner and Udstuen learned about the SOS Office's intentions, Tr. at 122245--46, and attempted to profit from that knowledge, and from their relationship with Ryan, by arranging a deal with Honeywell: in exchange for a large sum of money (the precise amount was disputed) or a percentage of the contract, Warner and Udstuen would see to it that Honeywell received the prospective mainframe upgrade contract. Tr. at 5548--49, 5552--53 (Wuttke); Tr. at 5876--77 (Cook). Warner and Udstuen later retracted their offer, saying that it would be a conflict of interest, but suggested that Honeywell retain Ron Swanson. Tr. at 5557 (Wuttke). Swanson offered to secure the contract for Honeywell in exchange for $750,000, an offer that Honeywell rejected. Tr. at 5561.

Robert Cook, Honeywell's lobbyist at that time, told Ryan about the episode with Warner and Udstuen in a meeting on September 24, 1991. Tr. at 5875--5890 at (Cook); Gov. Ex. 04-003. Although Cook's account differed in some respects from Wuttke's recollection, in both accounts Warner and Udstuen promised to deliver Honeywell the mainframe upgrade contract. Ryan acknowledged that Warner and Udstuen were his advisors, stated that he did not approve of what they had done, and assured Cook he would "get to the bottom of it." Id. at 5886. When Ryan contacted Cook the next day, however, he simply told Cook that Udstuen had a different recollection of the meeting with Honeywell and that, as far Ryan was concerned, the matter was "settled." Id. at 5889.

Despite being aware of Warner's and Udstuen's scheme to shakedown Honeywell, Ryan authorized Warner and Udstuen to assist in the process of hiring a new Director of the Information Services Department in late 1991. Tr. at 12526 (Cavallaro). Among the Director's responsibilities was assisting in the selection of the mainframe computer upgrade contract. Id. at 12532. Warner and Udstuen interviewed a candidate for the Director position, Frank Cavallaro, and ascertained that Cavallaro would be supportive of selecting IBM for the mainframe computer upgrade contract. Tr. at 12528--29 (Cavallaro). Warner and Udstuen recommended Cavallaro to Ryan, who then hired Cavallaro as Director of Information Services. Over time, Cavallaro, believing that Warner was acting with Ryan's authority, performed official actions that benefitted Warner. Id. at 12557 (testifying that he temporarily "held up" IBM projects at Warner's request because Warner was Secretary Ryan's "[g]ood friend."). Around this same time in early 1991, an IBM representative approached Udstuen for a lobbyist referral, as IBM was interested in doing business with the SOS Office. Tr. at 11642--45. Udstuen referred IBM to Warner. Id.

In approximately March 1993, Warner entered into a written contract with IBM, retroactive for services beginning in July 1, 1992, and under which IBM agreed to pay Warner a percentage of all revenues, up to $1 million, that were received in connection with SOS contracts. Although this deal was very lucrative for Warner, Mr. Cavallaro testified that he was not aware that Warner did anything to lobby the SOS Office. Indeed, the government put into evidence a letter from Warner to IBM from August 1993 in which Warner discusses the mainframe contract as if it had been a foregone conclusion, and the basis for lobbying payments under the contract, two years before Ryan formally awarded the mainframe computer upgrade contract to IBM. Tr. at 11666 (Udstuen); Gov. Ex. 04-021.

At trial, Ryan argued that IBM was the most suitable company to replace the mainframe computer, and that Ryan acted according to what his advisors recommended. The government did not dispute IBM's merits, or its suitability for the mainframe project. The issue, according to the government, was whether Warner was permitted to profit from IBM with Ryan's tacit approval. The jury could have reasonably concluded that Warner's IBM proceeds were a direct result of the access that to the SOS Office that Ryan gave Warner. When Ryan learned that Udstuen and Warner had attempted to shakedown Honeywell, Ryan excused their conduct and then gave them even greater access to the SOS Office. Ryan authorized Udstuen and Warner to select Cavallaro as the Director of the Information Services Department after ascertaining Cavallaro's preference for IBM. Having affixed a pro-IBM employee in a key SOS position, Warner parlayed his knowledge of the SOS Office's intentions into a profitable deal with IBM. Udstuen, in turn, benefitted through an arrangement with Warner whereby Udstuen received a portion of the money that Warner received from ADM and IBM. According to Udstuen, Ryan blessed this arrangement. The evidence supports Count Four.

D. The Evidence Was Sufficient to Support the Jury's Verdict on Count Five

Count Five of the Indictment charged Ryan and Warner with mail fraud in connection with Warner's money-laundering arrangement with Udstuen and co-schemer Alan Drazek. As discussed in more detail infra, Warner arranged, with Ryan's blessing, for Udstuen to receive one third of the proceeds arising from Warner's lobbying arrangements with ADM and IBM. These same contracts, as previously discussed, were attributable to Warner's relationship with Ryan and the access to the SOS Office that this relationship afforded. As charged in this count, Warner caused a check to be written on an account controlled by his company, Omega Consulting Group. Warner deposited the proceeds of his IBM lobbying arrangement into Omega's account. The Omega check was then made out to American Management Resources ("AMR"), a company controlled by co-schemer Alan Drazek. Warner caused the Omega/AMR checks to be sent to Udstuen, who would, in turn, send the checks to Drazek. Drazek cashed the checks, keeping a portion for his troubles and delivering the balance, in cash, to Udstuen. This arrangement served no purpose other than to disguise the provenance of the proceeds. Viewing the evidence in the light most favorable to the government, the court concludes that the jury could have reasonably concluded that the flow of State benefits to Ryan's associates, and the effort to conceal that flow, support the conclusion that the Defendants acted with the requisite fraudulent intent.

E. The Evidence Was Sufficient to Support the Jury's Verdict on Count Six

Count Six of the Indictment charged Ryan and Warner with mail fraud in connection with the lease of a building in South Holland, Illinois. In early 1997, Ryan proposed leasing from his friend Harry Klein a building that Klein owned in South Holland, Illinois. Tr. at 9475 (Klein). Klein expressed interest, and Ryan told Mike Chamness, Director of Drivers' Services, to contact Klein. Tr. at 6636 (Chamness). During his phone conversation with Chamness, Ryan told Chamness that he (Ryan) wanted to tell Klein personally when there was a deal. Id. at 6636. An SOS employee, James Esslinger, was dispatched to inspect the property and determine whether it was suitable as a commercial-drivers-license ("CDL") facility. Tr. at 6266 (Esslinger). Esslinger, the head of the SOS's property management division, in fact concluded that the building was not ideally suited for a CDL facility, but it was the only site that the property-management division considered because, he testified, it was the only property that were told to consider. Id. at 6263, 6266--67. Esslinger further testified that he was directed by his superior, Mr. Chamness, to prepare an inaccurately favorable assessment of the property. The contract was executed with little negotiation, and on terms that were very favorable to Klein. Tr. at 9488 (Klein); Tr. at 6280--82 (Esslinger). Indeed, Chamness, who had already received an angry phone call from Ryan after he mistakenly concluded that Chamness had told Klein that the deal was done, decided that the best course was to defer to his superiors on any remaining deal points. Tr. at 6654--65. With respect to two such issues, the contract's termination clause and the timing of "build-out" payments to Klein, Ryan told Chamness to do what Klein wanted. Tr. at 6660--64 (Chamness). The lease was not signed by "autopen," as was often the case with such contracts, but instead by Ryan in his own hand. Tr. at 6289--91 (Esslinger).

There was ample evidence in the record to support the government's position that this lease was foisted on SOS staff because Ryan wanted to do his friend a favor. Ryan's personal intervention on Klein's behalf initiated the transaction, and Ryan remained involved thereafter. Ryan maintains that Chamness and Esslinger "recommended" the lease, Ryan Post-Trial Mot. at 14, but it is clear from their testimony that they were doing nothing more than acquiescing in the decision made by Ryan. In the end, the State was saddled with a property that was, in the estimation of at least two SOS employees, suboptimal from the standpoint of price and suitability.

F. The Evidence Was Sufficient to Support the Jury's Verdict on Count Seven

In Count Seven, the government charged both Defendants with mail fraud in connection with a $18,902.79 from Viisage Technologies to National Consulting Company, a firm controlled by Warner. Viisage was the successful bidder on a contract to provide technology that would enable the SOS to switch from drivers' licenses produced with film to digital drivers' licenses, which use digital images capable of being stored in the SOS computer system. In fact, Viisage was originally the only bidder in response to the request for proposal ("RFP") issued by SOS; the office declined to accept that bid and instead reissued the RFP in an effort to generate more competition. Viisage bid again on the project; its proposal to provide the technology for $1.113 per card was significantly lower than the proposal made by the only other bidder, Unisys. Michael Chamness, the Director of Driver's Services, testified that Viisage was the best choice for the contract, and the government has not argued that the choice of Viisage was inappropriate. See Tr. At 6813--14 (Chamness).

Instead, the evidence establishes that Defendant Warner, who attended an SOS meeting in 1995 where the concept of digital licensing was first proposed, was able to use his access to that information for personal gain. He initially solicited the vendor that provided film licenses, but that vendor declined to pay Warner, who was not at time a registered lobbyist, his requested "lobbying" fee. Soon after an August 1, 1996 meeting at which Viisage and Unisys made presentations to SOS officials, including Ryan and Fawell, Warner telephoned Chamness and learned that Chamness viewed Viisage as the likely vendor. Three weeks later, Warner met with a Viisage vice president and offered to help Viisage win the contract in exchange for a 5% commission on Viisage's revenues. A few weeks after that, Viisage signed a lobbying agreement that made no mention of Warner himself, and Warner never registered as a lobbyist for Viisage.

Fawell testified that he discussed Warner's role as Viisage's lobbyist with Ryan. In addition, the government presented evidence that, some time in 1996, Ryan met with a Unisys lobbyist and communicated to Unisys through him that Unisys was "on the wrong horse" in working with its co-venturer, NBS, on the digital licensing proposal. At Ryan's suggestion, a Unisys official spoke to Warner; Warner arranged a conference call with the Unisys official and a Viisage representative in an unsuccessful effort to establish a joint venture between Unisys and Viisage.

Even before the contract was awarded, Warner was confident enough that Viisage would win it that he guaranteed Ryan friend Ron Swanson a $36,000 share of the lobbying fee. Warner and his friend Larry Stern purchased shares of Viisage prior to the announcement that Viisage had won the state contract. After the contract award was publicly announced, Viisage's registered lobbyist signed an agreement assigning its rights under the lobbying contract to National Consulting Company, a firm controlled by Warner.

From this evidence, the jury could reasonably have found that, by virtue of his relationship with Ryan, Warner obtained access to information about the digital licensing contract and secured a share of the profits for himself, and that Warner attempted to conceal his role. The fact that Warner's call to Chamness occurred soon after the August 1, 1996 Viisage presentation; Fawell's testimony that he discussed Warner's role with Ryan; and Ryan's communications with Unisys, all support the finding that Ryan knew of and blessed the arrangement. The evidence supports the jury's verdict on Count Seven.

G. The Evidence Was Sufficient to Support the Jury's Verdict on Count Eight

Count Eight of the Indictment charged Ryan and Warner with mail fraud in connection with a building that Warner leased to the SOS Office in Bellwood, Illinois. In 1992, Warner learned that the SOS Office was seeking office space for the SOS Department of Police. Tr. at 2772 (Fawell). In discussing the possibility of leasing a building owned by Warner to the SOS Office, Fawell told Warner that he (Fawell) was concerned about possible political ramifications for Ryan if the press discovered Warner's interest in the property. Tr. at 2773 (Fawell). Warner assured Fawell, in Ryan's presence, that no one would discover his interest because he was "buried in the paperwork." Id. at 2774, 3010. Several days later, Ryan directed Fawell to put Warner in touch with Alex Nelson, the Director of Physical Services. Id. at 2777, 5106. Mr. Nelson testified that Warner told him that "[w]e found a place for the cops," and he gave Nelson the name and number of a real estate company to call. Tr. at 10163 (Nelson). Fifteen minutes later, Nelson received a call from Ryan informing him about a property in Bellwood and giving Nelson the name and number of the same real estate company. Id. at 10164. Nelson inspected the property, found it suitable, and a lease was executed. Id. at 10167. The executed lease does not disclose Warner's interest in the property, Tr. at 3010 (Fawell), nor was Nelson aware that Warner owned the property at that time. Tr. at 10167--68 (Nelson). When Ryan was interviewed by the FBI about this lease, he stated that he did not know that Warner had an interest in the Bellwood property. Tr. at 8157 (Ruebenson).

At trial, Ryan argued that the lease had been vetted by his subordinates and found suitable. But there was sufficient evidence from which the jury could have concluded that Ryan steered the lease to Warner, in a top-down fashion, and that the approval of his subordinate was a mere formality. Moreover, the layers of deception surrounding the transaction support the jury's finding that the Defendants acted with the requisite intent.

H. The Evidence Was Insufficient to Support the Jury's Verdict on Count Nine

Count Nine of the Indictment charged Ryan and Warner with mail fraud in connection with a commission contract that Warner executed relating to property at 17 North State Street. The Indictment describes an incident in mid-1991 in which Warner directs an SOS Official ("SOS Official F") to contact the owner of the building at 17 North State, in which Warner has a non-disclosed financial interest. Indict., ¶ 73. Warner and Ryan then cause the SOS Office to execute a six-year lease of the building, and Warner profits handsomely. Id. But the evidence of this incident, which would have made this sequence analogous to South Holland and other schemes, did not materialize. In closing argument, the government argued that Warner, by virtue of his position as a member of Ryan's transition team, learned that the SOS Office was seeking to relocate certain facilities then located at 188 W. Randolph Street in Chicago. Tr. at 10151, 10154 (Nelson). What this evidence does not show is that Warner was privy to, and acted upon, information that was not publicly available. Warner did execute a leasing agency agreement with the property's owner pursuant to which he received a 6% commission when the SOS office executed a lease there. Gov. Ex. 05-005. But unlike South Holland and Joliet, there is no evidence that Ryan steered this contract to Warner. The government also asserted in closing argument that the lease was in the name of one of Warner's companies, National Consulting Company ("NCC"), and executed by an individual, Adolph Ottaviani, who was not affiliated with NCC. But absent evidence that Warner obtained the contract improperly, the court his hard-pressed to distinguish this contract from any other in which the real party in interest is acting through an agent. The court concludes that the evidence was insufficient for the jury to conclude beyond a reasonable doubt that either defendant acted with the requisite intent. The court therefore grants the Defendants' motions for a judgment of acquittal on Count Nine.

I. The Evidence Was Insufficient to Support the Jury's Verdict on Count Ten

Count Ten of the Indictment charged Ryan alone with mail fraud in connection with the Governor's Office's selection of Grayville, Illinois for a maximum security prison. Around January 2001, the Illinois Department of Corrections ("IDOC") announced that three locations had been selected as finalists for the site of the prison. Tr. at 13599--600 (Bettenhausen). At a meeting involving high-ranking officials from the Governor's Office and the IDOC, Defendant Ryan selected Grayville as the prison site, though the participants at the meeting agreed that the decision would not be made public at that time. Tr. at 13602--04. Immediately after the meeting, however, Ryan did in fact leak this confidential information to his friend Ron Swanson in the presence of Matthew Bettenhausen, who was present at the meeting in his capacity as deputy governor for criminal justice and public safety. Id. at 13598, 13604. Mr. Bettenausen testified that after the meeting broke up, Ryan bumped into Swanson in the receiving area outside the then-Governor Ryan's office. Id. at 13604. Indeed, Swanson spent a lot of time in and around the Governor's office. See, e.g., id. at 13661--62; 13829--30, 13832 (Wright). According to Bettenhausen, when Ryan told Swanson that Grayville had been selected, Bettenhausen interjected that the information was confidential. Swanson stated that he understood, but asked to be present at the public announcement of Grayville's selection. Ryan directed Bettenhausen to see to it that he (Swanson) was notified. Id. at 13605--06.

Soon after the meeting at which Grayville was selected as the site for the new prison, Swanson marketed his services as a lobbyist to a business association affiliated with Grayville. The Grayville association entered into an agreement pursuant to which Swanson would lobby for the selection of Grayville as the site for the proposed prison in exchange for a lobbying fee of $50,000. Tr. at 14028 (Williams). (The $50,000 cashiers check that Swanson received from this business association is the mailing charged in Count Ten). After accepting the money, Swanson falsely assured his primary liaison with the business association, Dr. Clyde Wilson, and others affiliated with the group, that he was actively lobbying on their behalf. Id. at 14040. Of course, he was doing no such thing. On the morning that Ryan was to make the official announcement of the selection of Grayville, Bettenhausen again ran into Swanson in the Governor's offices, and Swanson asked Bettenhausen to deliver a message to Ryan. Tr. at 13615 (Bettenhausen). Swanson asked that, in his public announcement, Ryan thank Dr. Wilson particularly as a supporter of Grayville's efforts to obtain the prison. Id. At a public ceremony in Grayville on April 12, 2001, Ryan formally announced his selection of Grayville and did thank Dr. Wilson as Swanson had requested. Id. at 13616.

The government stipulated that the process by which Grayville was selected was not influenced by Swanson or anyone else, Tr. at 13646--47 (Bettenhausen), and the merits of the choice of Grayville as a prison site are undisputed. Ryan contends that in disclosing that choice to Swanson, he acted negligently at worst. Ryan Rule 29 Mot. at 15. Bettenhausen testified that, from his perspective, Ryan bumped into Swanson by chance after the meeting about Grayville. Tr. at 13651 (Bettenhausen). The information was conveyed to Swanson in the presence of others, and Bettenhausen told Swanson, in Ryan's presence, that the information was to remain confidential. No witness testified that Ryan was aware that Swanson had entered into the sham lobbying contract, or put into evidence circumstances from which the jury could infer such awareness.

In support of Ryan's conviction on this count, the government relies chiefly on Ryan's disclosure of material, confidential information to his good friend within minutes of Grayville's selection. Id. at 13667. This, according to the government, proves that the disclosure was not inadvertent. The government also relies on the fact that Ryan acceded to Swanson's request, communicated to him by Bettenhausen on the trip down to Grayville, to thank Dr. Wilson. Even viewing this evidence in the light most favorable to the verdict, however, the court is not satisfied that these circumstances establish Ryan's guilt in connection with the Grayville lobbying contract.

Although Ryan should not have disclosed confidential information to his friend, he heard Matthew Bettenhausen warn Swanson that the selection of Grayville was confidential. Perhaps Ryan could infer from Swanson's request that he publicly acknowledge Dr. Wilson that Swanson had pretended to have influenced the Grayville choice; but the court is unwilling to sustain a conviction by "piling inference upon inference." United States v. Harris, 942 F.2d 1125, 1129 (7th Cir. 1991) (citation and internal quotation marks omitted). The fact that a short time elapsed between the end of the meeting and Ryan's disclosing the information to Swanson is equally consistent with the inference that the disclosure was inadvertent as it is with the inference that it was purposeful. Id. at 1129--30 ("[W]here the evidence as to an element of a crime is equally consistent with a theory of innocence as a theory of guilt, that evidence necessarily fails to establish guilt beyond a reasonable doubt.") (quoting United States v. Delay, 440 F.2d 566, 568 (7th Cir. 1971)). And while Swanson's request to thank Dr. Wilson might appear unusual, Ryan was not in a position to clarify the matter on his way down to the Grayville ceremony with Bettenhausen. The court concludes that the evidence was insufficient to support Defendant Ryan's conviction on Count Ten.

J. The Evidence at Trial Demonstrated a Single Scheme to Defraud

Ryan and Warner challenge their mail fraud convictions on the ground that while the Indictment set out a single scheme to defraud, the government's evidence at trial established disconnected schemes, and this variance prejudiced the defense. Ryan points to three aspects of the purported scheme: (1) the Secretary of State's Office's leases of Warner's property; (2) the termination of the Inspector General's investigation; and (3) Ryan's leak of confidential information about the placement of the prison in Grayville. According to Ryan, "[t]hese allegations alone concern schemes of three very different natures. The evidence showed different participants, acting at different times, on different matters. The government failed to prove the interrelationship between these separate schemes necessary to prove a unitary scheme to defraud." Ryan's Post-Trial Mot. at 66. Warner sets out a laundry list of evidence admitted against Ryan alone in his renewed motion for severance as evidence of a prejudicial variance. Warner's Rule 29 Mot. at 2-4. The government characterizes the Defendants' challenge as an argument that the concept of a single scheme is irreconcilable with the notion that Ryan held two separate offices, that of the Secretary of State and Governor. Gov't. Resp. at 28.

Defendants' "variance" argument, too, is a challenge to the sufficiency of the evidence. See United States v. Townsend, 924 F.2d 1385, 1389 (7th Cir.1991) ("a conspiracy variance claim amounts to a challenge to the sufficiency of the evidence supporting the jury's finding that each defendant was a member of the same conspiracy.") Where a defendant asserts a variance claim, a reviewing court reviews the evidence in the light most favorable to the government. United States v. Wilson, 134 F.3d 855, 865 (7th Cir. 1998). The fact that the evidence introduced at trial might also be consistent with an alternate theory is irrelevant. Townsend, 924 F.2d at 1389. Thus, "[e]ven if the evidence arguably establishe[s] multiple conspiracies, there is no material variance from an indictment charging a single conspiracy if a reasonable trier of fact could have found beyond a reasonable doubt the existence of the single conspiracy charged in the indictment." United States v. Williams, 272 F.3d 845, 862 (7th Cir. 2001) (citations omitted).*fn1 Furthermore, a defendant must show prejudice from the variance. United States v. Hewlett, 453 F.3d 876, 879 (7th Cir. 2006).

Ryan argues that the government offered "no proof of a unitary agreement to act through a single enterprise pursuant to an overall objective," in part because the alleged conspiracies at the SOS and the governor's office were "wholly distinct." Ryan Post-Trial Mot. at 65. As discussed, the court is not persuaded by Ryan's characterization of the two Illinois offices as such separate and distinct enterprises that no conspiracy could carry over from one to the other; indeed, several of the schemes alleged in the indictment spanned Ryan's occupancy in both positions. See supra I. B.

Moreover, Ryan's assertion that the government must show proof of a "unitary agreement" is incorrect, for the element of agreement, while necessary for a conspiracy offense, is not a prerequisite to a conviction for mail fraud. See United States v. Adeniji, 221 F.3d 1020, 1026 (7th Cir. 2000). Ryan's variance claim will thus be defeated if the jury could reasonably have found the existence of a scheme with a common unifying objective. In United States v. Polichemi, for example, the Seventh Circuit rejected the defendants' variance argument in finding a single wire fraud scheme in a plan to market phony financial instruments to investors. 219 F.3d 698, 706 (7th Cir. 2000). The defendants defrauded about 30 different investors, in factually different transactions, and the same people did not participate in every "subscheme." Id. Nonetheless, the court, noting the defendants' "common design and purpose to defraud investors," concluded that the jury could have found a single scheme despite the fact that each defendant's role varied somewhat from transaction to transaction. Id.; cf. United States v. Camiel, 689 F.2d 31, 36-37 (3d Cir. 1982) (holding that the jury could not have found a single unified scheme where the indictment charged a single ghost payroll scheme among Democratic Party loyalists, but where the evidence showed at least two warring factions in the Party).

The government notes that the nature of the scheme was that Ryan would give his co-schemers access to nonpublic information and government decisionmaking from which the co-schemers could secure lucrative lobbying contracts and leases in exchange for benefits directed by the co-schemers to Ryan and third parties close to Ryan. Gov't Resp. at 29. The government also notes that sequences that do not immediately fit this pattern often played the role of protecting the aforementioned arrangements. Id. at 29. Thus, in order for Ryan and his cronies to continue turning confidential information into lucrative contracts and leases, the IG office had be dismantled, Ryan as Governor had to cover his misdeeds as Secretary of State with false statements to the FBI and IRS, and Warner had to avoid filing as a lobbyist for Viisage. Although Ryan is correct to say that these sequences took place at different times and often involved different people, the jury could have reasonably concluded all are directed toward the fraud scheme or toward efforts to conceal that scheme and prevent its discovery.

Finally, while Warner was not involved in every transaction-he was not part of the South Holland lease, for example-this fact alone does not establish a variance. Warner's lack of participation in any individual episode does not necessarily negate the existence of a single scheme. United States v. Lanas, 324 F.3d 894, 899 (7th Cir. 2003); Polichemi, 219 F.3d at 706 (finding a single scheme despite the fact that one defendant did not even meet the others until the scheme was well underway).

K. The Court is Not Persuaded by Defendants' Constitutional Challenges

Both Defendants raise constitutional arguments as well. Ryan argues somewhat summarily that the mail fraud charges are vague because the United States Code does not define the phrase "intangible right to honest services." Ryan Rule 29 Mot. at 16--17. Thus, contends Ryan, there is "confusion" over what kind of conduct is prohibited. Id. at 17. Ryan cites this court's statement in United States v. Fawell, No. 02 CR 310, 2003 WL 21544239, at *3 (N.D. Ill. July 9, 2003) that "'the line should have been clear to Mr. Fawell when he crossed it' by diverting state resources for personal and political use," arguing that the line was not clear for Ryan. Ryan Rule 29 Mot. at 17. The court is not persuaded. First, although the term "intangible right to honest services" may not be defined by statute, the term has been addressed by the courts, both before and after section 1346 was enacted in 1988. See, e.g., United States v. Bloom, 149 F.3d 649, 656-57 (7th Cir. 1998) ("An employee deprives his employer of his honest services only if he misuses his position (or the information he obtained in it) for personal gain."); United States v. Isaacs, 493 F.2d 1124, 1150 (7th Cir. 1974) (upholding the conviction of an Illinois governor for defrauding the citizens of Illinois of his "honest and faithful services"). Second, the evidence at trial established that both Defendants*fn2 took great pains to conceal their activities. Ryan lied to the IRS and FBI. Warner structured his behavior, buried his name in leases, and omitted his name entirely from lobbying forms. These actions provide a strong inference that the Defendants were aware of the boundary between legal and illegal conduct.

More serious is Warner's argument that the court erred in citing state law while instructing the jury on mail fraud. Warner's Post-Trial Mot. at 22. The court instructed the jury that the "scheme to defraud" element of section 1341 could be defined as a scheme to "deprive the people of the State of Illinois of their intangible right to the honest services of their public officials or employees." Final Jury Instr. at 76; see 18 U.S.C. § 1346 ("'scheme or artifice to defraud'" includes a scheme or artifice to deprive another of the intangible right of honest services."). The court then referred to provisions of the Illinois Constitution and Illinois statutes that were applicable to state officials during the relevant time. Final Jury Instr. at 88. Both before and after these references to Illinois law, the court instructed the jury that "[n]ot every instance of misconduct or violation of a state statute by a public official or employee constitutes a mail fraud violation." Id. at 88, 93.

In his post-trial motion, Defendant Warner argues that the court's references to Illinois law were improper because they allowed the jury to convict on federal mail fraud, RICO, and money laundering charges based on the jury's determination that Defendants violated state law.*fn3 Warner Post-Trial Mot. at 22-23. This appears to be an extension of his argument at the close of the government's case that state law cannot provide a foundation for an "honest services" mail fraud charge. Warner Rule 29 Mot. at 6. The court declines to decide the extent to which a federal mail fraud conviction can be based on state law violations because, in the court's opinion, the jury instructions sufficiently precluded the possibility that the jury returned federal convictions based on violation of Illinois law.

As a preliminary matter, the court acknowledges that Warner's argument applies to both defendants, even though Warner was not a public official.*fn4 The court instructed the jury that the government did not allege that Warner was a public official, and that only Ryan owed a duty of honest services to the people of Illinois. Final Jury Instr. at 82-83. But the court also instructed the jury that only one participant in a scheme need be a public official. Id. at 79. Thus, although the court referred to Illinois law in the context of Ryan's duty of honest services, Warner was implicated as an alleged participant in a scheme with Ryan.

Warner, citing Bloom, 149 F.3d 649, and United States v. Martin, 195 F.3d 961 (7th Cir. 1999), argues that "the Seventh Circuit has rejected the proposition that State law may provide a foundation for an 'honest services' mail fraud charge." Defendant Warner's Motion For Judgment Of Acquittal And Motion To Dismiss Or Strike, at 6. This is incorrect. Bloom held that a defendant's breach of fiduciary duty, standing alone and absent misuse of a public position, is insufficient to support an honest services mail fraud charge; rather, the test is whether a public official breaches that duty by misusing his position for personal gain. 149 F.3d at 655-57; see also Hausmann, 345 F.3d at 956 (expressing doubt that an intangible rights theory of mail fraud applies to cases of breach of fiduciary duty "with nothing more," but nonetheless affirming defendant's conviction because he misused his fiduciary relationship, at the expense of the party to whom to the duty was owed, for personal gain). Indeed, the court in Bloom emphasized that the defendant was not charged as a public official, nor with violating state law. 149 F.3d at 654-55. In Martin, the Seventh Circuit declined to address whether a fiduciary duty of honest services should be defined by state law or by federal common law because the parties did not properly develop the issue on appeal. 195 F.3d at 967. But the court "for now" declined to impose a requirement that this fiduciary duty must be grounded in state law. Id. Thus, the Seventh Circuit does not mandate that a fiduciary duty of honest services be defined only by reference to state law; however, the Seventh Circuit does not appear to prohibit any consideration of state law in determining the nature of that duty.

In any event, the court need not decide the issue because in instructing the jury in this case, the court did not tell the jury to determine whether Ryan breached his duty to provide honest services by determining whether Ryan violated Illinois law, or that any violation of an Illinois law related to public service resulted in a per se violation of the duty to provide honest services. The court merely instructed the jury that certain provisions of Illinois law were "applicable" during the relevant time period, and then described these provisions. Final Jury Instr. at 89-92. Before doing so, the court cautioned the jury that not every violation of state law gave rise to a mail fraud violation. Id. at 88. The court reiterated this instruction afterwards. Id. at 93. Moreover, the court gave a general instruction as to the role of state law in this case: "[I]t is not enough to find that one or both of the defendants violated Illinois law, but instead you must consider Illinois law along with all of the elements of law that I instruct you on. Your job is to decide whether the government has proved, beyond a reasonable doubt, every element of each particular federal offense you are considering." Id. at 32 (emphasis added).

These references to Illinois law were designed to aid the jury in ascertaining the nature and scope of Ryan's duty to provide honest services as an Illinois public official. Indeed, given that Ryan was an Illinois official, with duties defined by Illinois statutes and the Illinois Constitution, it is difficult to imagine how one could conceive of Ryan's duty to provide honest services to the people of Illinois, without any reference to the standards of conduct prescribed by the people of Illinois. The court did not, however, require that the jury find a state law violation in order to find mail fraud. Indeed, after describing the applicable Illinois law, and (again) cautioning that not every state law violation constitutes mail fraud, the court reiterated the test the jury must use in determining whether a public official defrauded the public of honest services: whether the official "misuse[d] his position . . . for private gain for himself or another." Final Jury Instr. at 93. This instruction tracks the Seventh Circuit's holdings in Bloom and Hausmann, and in the court's opinion accurately states the law in this circuit.

In his post-trial motion, Warner cites Supreme Court cases holding that state law does not control the definition of federal criminal offenses. Warner Post-Trial Mot. at 23. See, e.g., Taylor v. United States, 495 U.S. 575, 590-91 (1990) (holding that the definition of "burglary" in a federal gun law did not depend on state law definitions). The court finds this authority inapplicable here because the court never instructed the jury to adopt any state law definition when considering the mail fraud charges. Warner also argues that principles of federalism are violated when the mail fraud statute is used to criminalize, on a federal level, conduct traditionally dealt with by state law. Warner Post-Trial Mot. at 23-24. The court is mindful of these federalism concerns, but finds this contention inapplicable to this case as well. The jury did not convict Defendants of using the mails to violate state law; rather, the jury found that Ryan used ...

Buy This Entire Record For $7.95

Download the entire decision to receive the complete text, official citation,
docket number, dissents and concurrences, and footnotes for this case.

Learn more about what you receive with purchase of this case.