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United States v. Sorich

April 15, 2008

UNITED STATES OF AMERICA, PLAINTIFF-APPELLEE,
v.
ROBERT SORICH, TIMOTHY MCCARTHY, JOHN SULLIVAN, AND PATRICK SLATTERY, DEFENDANTS-APPELLANTS.



Appeals from the United States District Court for the Northern District of Illinois, Eastern Division. No. 05 CR 644-David H. Coar, Judge.

The opinion of the court was delivered by: Williams, Circuit Judge

ARGUED MAY 1, 2007

Before RIPPLE, MANION, and WILLIAMS, Circuit Judges.

Despite the existence of a federal consent decree and other measures that for decades have sought to bring more transparency and legitimacy to the City of Chicago's civil service hiring, patronage appointments have continued to flourish. These defendants were key players in a corrupt and far-reaching scheme, based out of the mayor's Office of Intergovern-mental Affairs, that doled out thousands of city civil service jobs based on political patronage and nepotism. The government alleged that the defendants concealed what they were doing by falsely assuring city lawyers that their hires were legitimate, and then shredding evidence and hiding their involvement once a criminal investigation began. After an eight-week jury trial, three of the defendants were convicted of mail fraud and the fourth of making materially false statements to federal investigators. The centerpiece of their appeal is a challenge to the government's theory of prosecution: they contend that their behavior, while dubious, is not criminal, and that the honest services mail fraud statute, 18 U.S.C. § 1346, is unconstitutionally vague. We conclude that the defendants' actions do constitute mail fraud, and that the statute is not unconstitutionally vague as applied to the facts of this case. The defendants also argue that they did not deprive the city or the people of Chicago of any money or property, but the jobs that they wrongfully gave away were indeed a kind of property, so we reject this argument. Individual defendants also challenge the sufficiency of the indictment, the connection to the mails, and the sufficiency of the evidence against them, while one defendant argues that he was entitled to a sentencing adjustment for playing a minor role. Finding none of these arguments persuasive, we affirm on all counts.

I. BACKGROUND

The beating heart of this fraudulent scheme was the mayor's Office of Intergovernmental Affairs (IGA). Formally, the office serves as a liaison between the City of Chicago and state and federal governments and has no role in hiring for the city's 37,000 or so civil service jobs. Informally, the office coordinated a sizeable portion of the city's civil service hiring, ferreting out jobs to footsoldiers in the mayor's campaign organization and to other cronies.

The government introduced a substantial amount of evidence describing both the contours and the details of this long-running operation (it has likely been in place since before any of these defendants came to work for the city*fn1 ). We view the evidence in the light most favorable to the government since the jury found the defendants guilty. It includes testimony from former department heads, political campaign coordinators, personnel managers, and workers both hired and rejected; wiretaps of conversations; and documentary evidence, including hiring records, sham interview forms, and lists tracking job applicants and their sponsors. The most dramatic document is a spreadsheet showing all 5,700 patronage applicants and their sponsors between 1990 and 1997. The spreadsheet was kept on defendant Robert Sorich's laptop computer, and he attempted to destroy both the list and the computer, but both were turned over to the FBI in 1997 pursuant to a grand jury subpoena. FBI analysts were able to recover the spreadsheet.

Rather than describe this evidence in detail, we will provide an overview here, and will supply any relevant specifics in the analysis section below. Sorich was the mayor's so-called "patronage chief," and held the title Assistant to the Director of IGA. Defendant Timothy McCarthy was Sorich's deputy from 2001 to 2005 and often stepped into his shoes. Campaign coordinators would pass Sorich lists of campaign workers and volun- teers, whose names he would then send to the heads of various city departments-Aviation, Streets and Sanitation, Sewers, Water, etc.-for jobs. Defendants Patrick Slattery and John Sullivan held high positions in the Department of Streets and Sanitation.

During both individual and mass-hiring sequences, departmental managers like Slattery and Sullivan would hold sham interviews and then falsify interview forms in favor of the pre-selected "winners." The interview forms were often filled out weeks after the interviews, with one pile for blessed applicants (to be given high scores), and another for everybody else (to be given low scores). Some positions, such as tree trimmer, required merit tests but the results were frequently ignored. Evidence showed that Sorich even pressured departmental managers to hire applicants with drinking problems for positions that involved overseeing workplace safety.

This all went on despite the existence of multiple laws and personnel regulations forbidding the use of political considerations in hiring for civil service jobs, and mandating the awarding of those jobs on merit. These laws largely stem from the "Shakman Decrees," which are two federal consent decrees banning the use of politics in City of Chicago hiring that came into being as a result of litigation in the 1970s and '80s. Members of the scheme falsely signed "Shakman certifications," attesting that particular hiring sequences had not been influenced by political patronage.

Early on, the defendants moved to dismiss the indictment. The district court denied the motion, and many of the arguments that it rejected form the basis of this appeal. During trial the government moved to dismiss its first count of mail fraud, which implicated all four defendants, based on an insufficient connection to the mails. Sorich was convicted of two counts of mail fraud and acquitted of two counts. He received a sentence of 46 months' imprisonment. McCarthy was also convicted of two counts of mail fraud and sentenced to 19 months' imprisonment. Slattery was convicted of one count of mail fraud and given a 27-month sentence, and Sullivan was convicted of one count of giving a material, false statement to the FBI, and acquitted of one count of the same. He was sentenced to 60 days' imprisonment.

II. ANALYSIS

A. Mail fraud

The indictment posited two theories of mail fraud: that the defendants defrauded the city and the people of (1) money and property, and (2) the intangible right to the defendants' honest services as city officials. The jury filled out a general verdict form that did not specify under which theory it convicted. If the defendants were mounting a factual challenge to the sufficiency of the evidence, then sufficient evidence to convict on either theory would preserve the jury's verdict. But both theories must be legally sound-the honest services statute must be constitutional, for instance-in order for the guilty verdict to stand, and the defendants argue that the honest services theory was fatally flawed. See Griffin v. United States, 502 U.S. 46, 59-60 (1991); Tenner v. Gilmore, 184 F.3d 608, 611 (7th Cir. 1999); United States v. Sun-Diamond Growers, 138 F.3d 961, 972 (D.C. Cir. 1998). We begin with that argument, and then consider the defendants' narrower challenge to the money and property theory of mail fraud.

1. Honest Services Mail Fraud

The defendants' chief argument on appeal is that the district court's jury instructions on honest services mail fraud impermissibly expand the scope of that crime beyond the statute. They also contend that the honest services mail fraud statute is unconstitutionally vague, and that only state law can supply the fiduciary duty that runs between public officials and the citizenry. Before turning to those arguments, we provide a bit of background on honest services mail fraud.

a. Background and History

The mail fraud statute, 18 U.S.C. § 1341, criminalizes the use of the mails for carrying out a "scheme or artifice to defraud, or for obtaining money or property by means of false or fraudulent pretenses, representations, or promises." The courts had long interpreted this statute as encompassing schemes to defraud another not just of money and property, but also "intangible rights," chief among them the right of citizens to the honest discharge of public duties by public servants. The Supreme Court put an end to this theory in McNally v. United States, 483 U.S. 350, 360 (1987), holding:

Rather than construe the statute in a manner that leaves its outer boundaries ambiguous and involves the Federal Government in setting standards of disclosure and good government for local and state officials, we read § 1341 as limited in scope to the protection of property rights. If Congress desires to go further, it must speak more clearly than it has.

Congress then spoke. The year after the McNally decision it passed 18 U.S.C. § 1346, which reads in its entirety: "For the purposes of this chapter, the term 'scheme or artifice to defraud' includes a scheme or artifice to deprive another of the intangible right of honest services." The statute superseded McNally and reinstated the line of cases preceding it. See United States v. Rybicki, 354 F.3d 124, 136-37 (2d Cir. 2003) (en banc).

Broadly speaking, honest services fraud cases come in two types. In the first, an employer is defrauded of its employee's honest services by the employee or by another. In United States v. George, 477 F.2d 508, 509-10 (7th Cir. 1973), for example, an employee of television manufacturer Zenith granted a contract to another company to supply television cabinets in exchange for kickbacks. The Zenith employee, the worker at the cabinet factory, and a middleman all were convicted of depriving Zenith of its employee's honest services. In the second and more common type of case, the citizenry is defrauded of its right to the honest services of a public servant, again, by that servant or by someone else. For instance, in United States v. Warner, 498 F.3d 666 (7th Cir. 2007), the Illinois Secretary of State channeled state contracts and leases to a friend in return for paid vacations.

In both examples above, and in most honest services cases, the defendant violates a fiduciary duty in return for cash-kickbacks, bribes, or other payments. Not all fraud cases follow this precise pattern, as we shall see, but given the amorphous and open-ended nature of § 1346, see United States v. Brown, 459 F.3d 509, 520-21 (5th Cir. 2006), courts have felt the need to find limiting principles, and ours has been that the "[m]isuse of office (more broadly, misuse of position) for private gain is the line that separates run-of-the-mill violations of state-law fiduciary duty . . . from federal crime." United States v. Bloom, 149 F.3d 649, 655 (7th Cir. 1998) (emphasis added). We took our language from McNally, which summed up the existing law and characterized honest services mail fraud in this way. See 483 U.S. at 355. The limitation not only cabins zealous prosecutors by insuring that not every violation of a fiduciary duty becomes a federal crime, but also reduces the risk of creating federal common law crimes, which are not permitted. Bloom, 149 F.3d at 654-55. Other courts have crafted their own limiting principles to keep § 1346 from becoming too unwieldy. The Third and the Fifth Circuits have adopted "a state law limiting principle," meaning that ordinarily, honest services mail fraud only occurs when the defendant's scheme to defraud involves a violation of state law. See United States v. Murphy, 323 F.3d 102, 116-17 (3d Cir. 2003); United States v. Brumley, 116 F.3d 728, 734-35 (5th Cir. 1997) (en banc). Courts have also crafted special requirements in the limited context of honest services fraud in the private sector. See generally Kristen Kate Orr, Note, Fencing in the Frontier: A Look into the Limits of Mail Fraud, 95 Ky. L.J. 789, 797-99 (2007).

Our misuse-of-position-for-private-gain limitation has not been adopted by other circuits, and in fact has come in for its share of criticism. The Tenth Circuit, in rejecting the limitation, characterized it as an effort "to judicially legislate by adding an element to honest services fraud which the text and structure of the fraud statutes do not justify." United States v. Welch, 327 F.3d 1081, 1107 (10th Cir. 2003). And the Third Circuit stated that the requirement "adds little clarity to the scope of § 1346" and is, among other things "under-inclusive" because it would not cover a situation-such as an undisclosed conflict of inter-est-that does not actually yield a benefit. United States v. Panarella, 277 F.3d 678, 691-92 (3d Cir. 2002). The Tenth Circuit expresses a legitimate concern, for the only elements of mail fraud are (1) a scheme to defraud (entailing a material misrepresentation), (2) an intent to defraud, and (3) the use of the mails. See 18 U.S.C. ยง 1341; United States v. Henningsen, 387 F.3d 585, 589 (7th Cir. 2004). Nevertheless, in setting out the private gain requirement we have taken our cue from the Supreme Court's own characterization of honest services fraud in McNally, and to that extent consider ourselves in good company. But we also fear that both the Tenth and Third Circuits may have ...


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