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United States v. Rezko

November 12, 2008

UNITED STATES OF AMERICA, PLAINTIFF,
v.
ANTOIN REZKO, DEFENDANT.



The opinion of the court was delivered by: Amy J. St. Eve, District Court Judge

MEMORANDUM OPINION AND ORDER

On June 4, 2008, after extensive pretrial proceedings, an over three month trial, and over two weeks of jury deliberations, a jury convicted Defendant Antoin Rezko on sixteen counts in the Superseding Indictment, and acquitted him on eight counts. They convicted him on twelve counts of mail or wire fraud (Counts 1, 2, 4-6, 7-8, and 11-15), two counts of aiding and abetting bribery (Counts 17 and 20), and two counts of money laundering (Counts 23 and 24). Defendant now seeks judgment of acquittal pursuant to Rule 29 of the Federal Rules of Criminal Procedure or a new trial pursuant to Rule 33 of the Federal Rules of Criminal Procedure. Defendant's motion is denied.

BACKGROUND

On October 5, 2006, a grand jury returned a Superseding Indictment (the "Indictment") against Defendant Rezko and co-schemer Stuart Levine.*fn1 (R. 96-1, Superseding Indictment.)

The Indictment charged that Defendant Rezko committed the following offenses: 1) mail or wire fraud, in violation of 18 U.S.C. §§ 1341, 1343, including the deprivation of the intangible right to honest services, in violation of 18 U.S.C. § 1346; 2) attempted extortion, in violation of 18 U.S.C. § 1951; 3) aiding and abetting Stuart Levine's bribery concerning a federally funded program, in violation of 18 U.S.C. § 666; and 4) money laundering, in violation of 18 U.S.C. § 1956.

After extensive discovery and motion practice, Defendant proceeded to trial. Jury selection commenced on March 3, 2008. During the course of the trial, over 30 witnesses testified, and the Court admitted over 200 exhibits into evidence. The government also introduced extensive recordings from Title III wire taps on Stuart Levine's telephones. The government intercepted the telephone calls during the course of the charged scheme.

The jury began its deliberations on May 15, 2008. (R. 548-1.) On June 4, 2008, the jury returned its verdict against Defendant Rezko. (R. 565-1.) Specifically, the jury found Defendant guilty of mail fraud, as charged in Counts 1, 2, 7, 8, 11, and 12; wire fraud, as charged in Counts 4, 5, 6, 13, 14, and 15; aiding and abetting bribery, as charged in Counts 17 and 20; and money laundering, as charged in Counts 23 and 24.(Id.)

The thrust of the conviction was Defendant's scheme to defraud the people of the State of Illinois that he carried out with Stuart Levine and others. Specifically, Defendant Rezko was convicted of using his influence with Governor Blagojevich's administration and Stuart Levine's membership on two State of Illinois boards to influence the actions of these boards for private gain. Co-schemer Levine was a member of 1) the Board of Trustees of the Teacher's Retirement System of the State of Illinois ("TRS"), a public pension plan that provided benefits for teachers employed by the Illinois public schools, and 2) the Illinois Health Facilities Planning Board ("Planning Board"), an Illinois Sate board that reviewed applications submitted by hospitals that wanted to build new facilities in Illinois. The jury convicted Rezko of defrauding the beneficiaries of TRS and the people of the State of Illinois of the honest services of Stuart Levine as a board member of TRS and the Planning Board. Rezko and Levine further used Rezko's influence with the Blagojevich administration and Levine's roles on the boards to influence the actions of TRS and the Planning Board for the benefit of themselves and others, and to carry out the scheme.

ANALYSIS

I. Legal Standards

Defendant has moved under both Federal Rule of Criminal Procedure 29 for a judgment of acquittal, and Federal Rule of Criminal Procedure 33 for a new trial. Specifically, Defendant asserts that he is entitled to judgment of acquittal for the following: 1) the money laundering charges impermissibly merged with the mail fraud charges; 2) the government failed to introduce sufficient evidence to prove that the money laundering transactions were designed to conceal or disguise; 3) the government failed to prove Defendant's intent to defraud beyond a reasonable doubt; and 4) the government failed to prove the mailing charged in Count 11 beyond a reasonable doubt. Defendant Rezko further argues that he is entitled to a new trial because the Court should disregard Stuart Levine's testimony because it was so incredible, and without his testimony, the government cannot sustain its burden.

A. Judgment of Acquittal

Defendant asserts that he is entitled to a judgment of acquittal pursuant to Federal Rule of Criminal Procedure 29 ("Rule 29"). Under Rule 29, a court must enter a judgment of acquittal if, after considering all the evidence in the light most favorable to the Government, it concludes that "the record contains no evidence, regardless of how it is weighed, upon which a rational trier of fact could find guilt beyond a reasonable doubt." United States v. Cummings, 395 F.3d 392, 397 (7th Cir. 2005) (internal citation and quotation omitted). Where the defendant challenges the sufficiency of the evidence presented at trial, the court must "consider the evidence in the light most favorable to the prosecution, drawing all reasonable inferences in the government's favor," and a "[r]eversal is appropriate only when, after viewing the evidence in such a manner, no rational jury could have found the defendant to have committed the essential elements of the crime." United States v. Macari, 453 F.3d 926, 936 (7th Cir. 2006) (internal quotation omitted). See United States v. Emerson, 501 F.3d. 804, 811 (7th Cir. 2007) ("[w]e must determine whether, after viewing the evidence in the light most favorable to the prosecution, any rational trier of fact could have found the essential elements of the crime beyond a reasonable doubt.") The Court cannot "weigh the evidence or second-guess the jury's credibility determinations." United States v. Spells, 537 F.3d 743, 747 (7th Cir. 2008) (citations and quotations omitted).

B. Rule 33--New Trial

Defendant also contends that he is entitled to a new trial. Federal Rule of Criminal Procedure 33 ("Rule 33") provides for a new trial where, after considering the credibility of the witnesses, the court concludes that the jury's verdict is "so contrary to the weight of the evidence that a new trial is required in the interest of justice." United States v. Washington, 184 F.3d 653, 657 (7th Cir. 1999). A court may also grant a new trial "in a variety of situations in which the substantial rights of the defendant have been jeopardized by errors or omissions during trial."

United States v. Eberhart, 388 F.3d 1043, 1048 (7th Cir. 2004) (quoting United States v. Kuzniar, 881 F.2d 466, 470 (7th Cir. 1989)), overruled on other grounds by Eberhart v. United States, 546 U.S. 12, 126 S.Ct. 403, 163 L.Ed. 2d 14 (2005).

II. Merger and Sufficiency of the Evidence for Money Laundering (Counts 23 & 24)

Defendant Rezko argues that the Court should grant judgment of acquittal on Counts 23 and 24 given the holdings in two opinions issued by the Supreme Court while the jury was deliberating ― United States v. Santos, __ U.S. __, 128 S.Ct. 2020, 170 L.Ed. 2d 912 (2008) and Regalado Cellular v. United States, __ U.S. __, 128 S.Ct. 1994, 170 L.Ed. 2d 942 (2008). Both Counts 23 and 24 are money laundering charges, in violation of 18 U.S.C. § 1956(a)(1)(B)(i). Section 1956(A)(1)(B)(i) makes it a crime to engage in a financial transaction "involv[ing] the proceeds of specified unlawful activity... knowing that the transaction is designed in whole or in part... to conceal or disguise the nature, the location, the source, the ownership, or the control of the proceeds of specified unlawful activity." 18 U.S.C. § 1956(a)(1)(B)(i). In order to prove Defendant Rezko guilty of either of these counts, the jury had to find the following:

First, that defendant knowingly conducted or attempted to conduct a financial transaction;

Second, the property involved in the financial transaction in fact involved the net proceeds of mail fraud as charged in Counts 1 and 2;

Third, the defendant knew that the property involved in the financial transaction represented the net proceeds of some form of unlawful activity; and Fourth, the defendant knew that the transaction was designed in whole or in part to conceal or disguise the nature, the source, the ownership, or the control of the net proceeds of mail fraud as charged in Counts 1 and 2.

See United States v. Esterman, 324 F.3d 565, 569 (7th Cir. 2003).

Both Counts 23 and 24 were premised on the checks Sheldon Pekin paid to Joseph Aramanda from Pekin's finder's fee based on TRS's investment with Glencoe Capital. Specifically, the evidence at trial established that Shelly Pekin and Stuart Levine met in approximately December 2002 to discuss TRS investing money with Glencoe Capital, a private equity firm in which Pekin was an investor. TRS was seeking firms with which to invest benefits for teachers. TRS's Board reviewed all investment proposals for TRS's funds submitted by private investment management companies. Pekin wanted Levine to introduce Glencoe Capital to TRS. Levine agreed to do so and to use his influence and board position with TRS to obtain money for Glencoe Capital from TRS ― for a portion of Pekin's finder's fee from Glencoe Capital. Pekin and Levine both testified that they had additional discussions after that initial meeting wherein they discussed Glencoe Capital paying Pekin a finder's fee for the TRS investment, and Levine getting a percentage of that fee. During several subsequent discussions, Levine told Pekin that he would have to split his finder's fee with another individual at Levine's direction.

After meeting with Defendant Rezko in Defendant's office in early 2003, Levine testified that he changed the recipient of the finder's fee at Rezko's direction, although he did not learn the new recipient until after TRS had approved the investment. Levine testified the he was willing to forego his portion of the finder's fee and instead direct the fee as Rezko told him because he "wanted to further ingratiate [himself] with Mr. Rezko, and [he] had already determined that [he] wasn't going to take a part of the fee.... And [he] thought it good business sense." Levine thereafter contacted Mr. Bauman, the Executive Director of the TRS, and asked him to have a meeting with Glencoe Capital and to "make sure they got an investment."

Glencoe Capital got the investment.

The evidence showed that in August 2003, the TRS Investment Committee of the Board voted to allocate $50 million to Glencoe Capital to invest. The Board was not aware of Levine's or Rezko's financial interest in the transaction when it approved the transaction, even though Levine was a member of the TRS Board. Furthermore, Mr. Bauman did not disclose Levine's request to make it happen.

Based on the investment, Pekin expected to receive a finder's fee of $375,000 from Glencoe Capital. The evidence showed that Pekin received over $250,000 of his finder's fee from Glencoe Capital through several checks. (Gov. Ex. Glencoe Checks Group.) Specifically, Glencoe Capital issued him the following checks: 1) a check in the amount of $62,500, dated September 12, 2003; 2) A check in the amount of $125,000, dated January 9, 2004; 3) a check in the amount of $93,750, dated March 1, 2004; and 4) a check in the amount of $93,750, dated May 26, 2004. (Id.)

At Rezko's direction, Levine testified, and the taped telephone conversations corroborated, that he directed Pekin to pay a portion of his finder's fee to Joe Aramanda, an individual Pekin did not know. Pekin thereafter, at Levine and Rezko's direction, issued two $125,000 checks to Aramanda's company ― J.R.A. Investments, LLC ― out of the proceeds of the $375,000 from the fraudulent scheme. (Gov. Ex. Aramanda Check 1 & Aramanda Check 2.) At the time Pekin gave Aramanda the March 4, 2004 checks, he had already received over $250,000 from his finder's fee from Glencoe Capital. (Gov. Ex. Glencoe Checks Group.) Count 23 charged Defendant in connection with the March 4, 2004, $125,000 check to Aramanda, and Count 24 charged him with the April 26, 2004, $125,000 check to Aramanda.

A. United States v. Santos

Defendant Rezko argues that Santos requires an acquittal on Counts 23 and 24 because the mail fraud and money laundering charges "merge" because both charges are based solely on the distribution of the receipts ― rather than the profits ― of the underlying mail fraud scheme. The evidence at trial, however, established that the checks at issue in Counts 23 and 24 were profits of the honest services mail fraud scheme, not receipts, thus Defendant's argument fails.

In Santos, the Supreme Court addressed the meaning of "proceeds" under the money laundering statute, 18 U.S.C. 1956(a)(1)(A)(i). The defendant in Santos had been convicted of one count of conspiracy to launder money (18 U.S.C. § 1956(a)(1)(A)(i) and 1956(h)) and two counts of money laundering (1956(a)(1)(A)(i)). His conviction was based on payments the defendant made to winners and runners in his illegal lottery business. The payments were made using the receipts from the defendant's illegal lottery operation. Although the convictions were upheld on direct appeal, the Seventh Circuit had affirmed setting the convictions aside based on a motion under 28 USC § 2255. The Supreme Court affirmed the judgment of the Seventh Circuit.

In a four justice plurality opinion authored by Justice Scalia, the plurality held that "proceeds" in Section 1956(A)(1)(a)(i) means profits, not receipts, derived from specified unlawful activity. Justice Scalia noted that Section 1956 does not define proceeds, and that no common meaning of proceeds exists. Given the ambiguity in the meaning of proceeds, "[t]he rule of lenity requires ambiguous criminal laws to be interpreted in favor of the defendants subjected to them" Id. at 2025. "Because the'profits' definition of'proceeds' is always more defendant-friendly than the'receipts' definition, the rule of lenity dictates that it should be adopted." Id.

In reaching its holding, the plurality expressed its concern with "merger" under the money laundering statute. Merger occurs when the money laundering conviction "merges" with the underlying crime generating the proceeds such that a separate conviction on the underlying crime would be tantamount to a conviction on the money laundering offense. As the plurality noted:

The merger problem is not limited to lottery operators. For a host of predicate crimes, merger would depend on the manner and timing of payment for the expenses associated with the commission of the crime. Few crimes are entirely free of cost, and costs are not always paid in advance. Anyone who pays for the costs of a crime with its proceeds-for example, the felon who uses the stolen money to pay for the rented getaway car-would violate the money-laundering statute. And any wealth-acquiring crime with multiple participants would become money-laundering when the initial recipient of the wealth gives his confederates their shares. Generally speaking, any specified unlawful activity, an ...


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