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United States v. Lupton

September 1, 2010

UNITED STATES OF AMERICA, PLAINTIFF-APPELLEE,
v.
LARRY LUPTON, DEFENDANT-APPELLANT.



Appeal from the United States District Court for the Eastern District of Wisconsin. No. 07-CR-219-Lynn Adelman, Judge.

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

ARGUED JANUARY 13, 2010

Before BAUER, MANION, and TINDER, Circuit Judges.

Larry Lupton was a real estate broker assigned to facilitate the sale and leaseback of a building owned by the State of Wisconsin. In the course of soliciting bids for the sale, Lupton also solicited kickback payments from the broker for one of the competing prospective buyers-and claimed to have made similar overtures to others. In return for the payments, Lupton promised to crunch the numbers so that certain proposals came out on top. The broker from whom Lupton sought a kickback reported the incident to the authorities and was outfitted with equipment to record his future dealings with Lupton. After the informant recorded several incriminating conversations with Lupton, FBI agents twice interviewed Lupton, who categorically denied any involvement in illicit activity. Not-withstanding Lupton's denials, a grand jury indicted him on four charges: corrupt solicitation, wire fraud, and two counts of making false statements to government officials. After a bench trial from which his proffered expert testimony was excluded, Lupton was found guilty of all four counts. He appeals both the exclusion of his expert's testimony and the validity of his convictions. We affirm in all respects.

I. Background

When the State of Wisconsin decided to sell and re-lease one of its buildings in early 2007, it entered into an exclusive listing agreement with real estate firm UGL Equis ("Equis"), with which it had a master contract dating back to 2004. Under the terms of the listing agreement, Wisconsin was to pay Equis a 4.3% commission on the expected $20-$30 million sale price. Equis designated one of its independent-contractor vice presidents, Larry Lupton, as one of two point persons for the sale. Lupton was tasked with soliciting proposals from parties interested in the deal, evaluating the bids, and recommending the top few to the State, who would then decide which proposal to accept. Under his contract with Equis, Lupton would be paid a negotiable percentage-usually about 50%-of Equis's commission if he closed the sale.

In February 2007, Lupton sent out a memorandum soliciting proposals from prospective buyers and received a number of responses. Using an evaluation matrix that compared different features of the bids, Lupton identified some of the top proposals. In March, he contacted the bidders whose proposals rose to the top and asked them to submit final letters of intent ("LOIs") containing more detailed bid information. To assist the prospective buyers with the formulation of their LOIs, Lupton provided them with a sample LOI. The sample LOI contained a confidentiality clause, which most of the contenders imported into their final LOIs verbatim.

The prospective buyers submitted their LOIs in March, and on April 4, 2007, Lupton contacted Gabriel Silverstein, the broker for one of the top contenders, Chicago-based Zeller Realty Group. Lupton informed Silverstein that Zeller was a particularly strong contender for the purchase. He then told Silverstein that brokers for two of the other top contenders had offered to pay him a kickback in exchange for a strong recommendation to the State that it accept their bids. Lupton went on to explain that the proposed kickbacks were about one-quarter to one-half of the fee that the brokers expected to receive if the transaction went through, roughly one percent of the building's purchase price (which Lupton was supposed to ensure was in the range of $20-$30 million). Silverstein understood Lupton to be seeking a kickback of about $75,000.

Silverstein promptly reported the April 4 conversation to Wisconsin law enforcement authorities. Those authori-ties in turn contacted the FBI, and the FBI outfitted Silverstein and his telephone with recording devices and instructed him to arrange a meeting with Lupton. Silverstein met with Lupton on April 26, 2007, and told him that he wanted to "revisit another conversation that [Lupton] initiated about two weeks ago"-the April 4 conversation about kickbacks. Silverstein asked Lupton what he was expecting from Silverstein, and Lupton explained that he wasn't "making much money" at Equis, so he "talked to a couple of parties" who "already agreed to pay [him] between a quarter and a half point." Lupton continued, "I just want to make assurance . . . that if I could put you into that situation . . . that you guys can get me a quarter point."

Silverstein asked Lupton, "[H]ow would you envision doing that?" Lupton replied, "Take the taxes out and you . . . just give me . . . you know cash or check sort of thing or you could just allocate it as a consulting fee to a different company I have, which is NACO. North American Commercial Opportunities. . . . I mean, whatever way is . . . you know way is easier, I guess, you know." Lupton then clarified that "obviously I don't want anything in writing you know, 'cause you know, I don't want it leaked back to the State . . . or to Equis . . . ." Silverstein asked Lupton if he should "just come back up here and meet you or pay you separately? Is that what you're thinking?" to which Lupton responded, "Yeah. Yeah." He assured Silverstein that he was "not trying to get greedy," however. (Not greedy, perhaps, but self-inter- ested all the same. Lupton expressed to Silverstein concern about Equis's-and thereby his own-take from the sale potentially getting halved, and evidence introduced at trial also showed that he had substantial gambling losses and minimal income to offset them.)

As the conversation continued, Silverstein asked Lupton how he planned to "make sure we're going to be your guys." Lupton explained that he would "make sure that you guys know the expectations of the State. I mean I got to just make sure that you guys are in line to be the top, you know, the top one or two . . . ." He told Silverstein, "I run the analysis and basically back you." "I mean as long as you guys come back in the right range . . . ." Lupton qualified his willingness to help Silverstein, despite his expressed preference to award the deal to a Midwestern firm like Zeller, informing him that "I got to do technically the right thing for the State." Yet Lupton went on to assure Silverstein that he would let him know if the other bidders' offers changed substantially so Zeller would have a chance to match or undercut the bids: "you guys can ah come back in and . . . match it." Lupton then told Silverstein the identities of the other bidders that remained in contention, as well as some of their proposed contractual terms that Zeller would have to match or beat. The two wrapped up their conversation by discussing some of the provisions that Zeller planned to include in its final proposal.

The next morning, Lupton telephoned Silverstein unexpectedly. Lupton gave Silverstein the details of the current best offer, a proposal submitted by a New Jersey firm, Roebling Investments. The Roebling bid hadn't been finalized; it was verbal and Lupton hadn't even seen the written proposal yet. Lupton explained that he "wanted [Silverstein] to [have] a heads up" about the bid, and he promised to "let [Silverstein] know" Roebling's final numbers once he got them in writing. Lupton followed through on his promise on April 30, 2007, when he called to let Silverstein "know where the best LOI came back at." Lupton then provided Silverstein with the details of Roebling's updated bid, notwithstanding the confidentiality clause in Roebling's proposal, and told him that he would "call back here in a few hours" once everything was fully finalized.

Again true to his word, Lupton called Silverstein back later that evening. He confirmed that the Roebling bid was, as Silverstein put it, "in the same spot as before." He then told Silverstein that a bid from a California company, Arlen Capital, had come in via e-mail but that he had been unable to open the document on his cell phone. Lupton asked Silverstein to give him some time to review the Arlen bid and ended the call. Roughly twenty-five minutes later, Lupton called Silverstein back and reached Silverstein's voicemail. He left a detailed message about Arlen Capital's bid, and opined that Zeller's "only competition is really Roebling." He asked Silverstein to call him the next day so they could talk about the Arlen Capital bid and Zeller's final bid.

Silverstein didn't wait until the next day; he called Lupton back almost immediately. During this third April 30 phone call, Lupton said that Arlen Capital's bid "doesn't make a whole lot of sense," and Silverstein expressed relief that nothing had changed. He explained to Lupton that it would have been "weird" if he had needed to call Zeller to encourage it to rework its final bid, which he stated he was only about fifteen minutes away from submitting to Lupton. (There is some evidence indicating that Zeller was given more time than its competitors to complete its bid.)

The next day, May 1, 2007, Lupton told Silverstein that he had presented his analysis of the bids to someone from the State. He claimed that he had "made the recommendations to . . . put your guys, you know, number one and then put Roebling number two." Lupton continued, "So I think you guys are there unless they make for drastic changes. . . . You should be okay." Lupton notified Silverstein that he would be meeting with the Wisconsin Secretary of State in a few days, and the Secretary would decide then which bid the State would accept. Lupton indicated that he had already provided Silverstein with the "transaction application forms" that he would need to fill out if Zeller was chosen as the buyer. Lupton also asked Silverstein to provide him with some background information on Zeller so he could "have it prepared" in case the Secretary of State asked him for it.

On May 10, 2007, a little more than a week after Lupton's last recorded conversation with Silverstein, and after state officials involved in the sale had been interviewed, FBI and Wisconsin Department of Justice special agents descended on Lupton's office to execute a search warrant they had procured. Before searching Lupton's office, the agents asked Lupton a number of questions about his handling of the building sale. Lupton told the agents that he had never disclosed confidential bid information. He explained that bidders occasionally asked him if there was anything they could do to improve their chances, but that he always responded by providing general information and advice. The agents also asked Lupton about his expected compensation for the sale, and Lupton told them that he expected Equis alone to pay him; he did not mention any "commission splits," legitimate or otherwise. At the end of the interview, the agents again asked Lupton if he had ever provided a potential buyer with specific details from a competitor's proposal. Lupton reiterated that he had never done so. The agents advised Lupton not to contact anyone else involved in the sale.*fn1

Immediately after the agents left, however, Lupton telephoned Silverstein. Lupton asked Silverstein, "out of curiosity," whether "the FBI . . . contacted you at all? On this . . . building?" Silverstein said, "FBI? Why?" Lupton explained that he wasn't sure what was going on but that he "got a couple . . . calls from them" and wasn't sure "if it['s] actually the FBI or who they you know state they are." Silverstein asked what the callers had been saying, and Lupton said the calls were about "deal structures that have been leaked out and you know so forth." Silverstein told Lupton he found that interesting. Lupton continued, "Somehow it got leaked out at someplace so I'm not sure from where." Lupton then ended the call so he could "check with some other parties to see what's going on."

On May 18, 2007, agents again interviewed Lupton, this time with his attorney present. Lupton again denied providing potential buyers with specific details from other bids. The agents also asked Lupton about seeking payments from potential buyers, and Lupton stated that it would be unusual for someone in his position to receive a share of the buyer's commission in the form of cash. The agents then asked Lupton about any such arrangement he might have had with Silverstein. Lupton initially responded that he did not recall any arrangement. Later on in the interview, however, he recalled that Silverstein had offered to pay him part of the buyer broker's commission. He said that if a cash payment had been mentioned, it had been by Silverstein. Lupton did not recall any mention of payment in the form of a check payable to NACO, his out-of-state shell corporation. Again, he asserted that if anything like that had been discussed, Silverstein had broached the topic. Lupton made no mention of Wisconsin's brokerage statutes, or his conception of his duties thereunder.

A grand jury issued a four-count indictment against Lupton on August 14, 2007. Count I charged that between April 4 and May 10, 2007, Lupton "corruptly solicited, demanded, and agreed to accept something of value from [Silverstein], intending to be influenced and rewarded in connection with a business, transaction, and series of transactions" involving the State of Wisconsin. 18 U.S.C. § 666(a)(1)(B). Count II alleged that Lupton "knowingly devised and participated in a scheme to defraud Equis and the State of Wisconsin of both property and the right of honest services," and used a telephone to do so, in violation of 18 U.S.C. §§ 1343 & 1346. Counts III and IV alleged that Lupton knowingly and willfully made false statements to the FBI agent who interviewed him. See 18 U.S.C. § 1001. The statement alleged to be false in Count III was Lupton's May 10, 2007, assertion that he had never provided prospective buyers with specific ...


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