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United States of America v. Antoin Rezko

March 3, 2011

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

Defendant Rezko moves for a new trial based on the Supreme Court's recent decisions in Skilling v. United States, __ U.S. __, 130 S.Ct. 2896, 177 L.Ed.2d 619 (2010), and Black v. United States, __ U.S. __, 130 S.Ct. 2963, 177 L.Ed.2d 695 (2010). Defendant's motion is denied.

BACKGROUND

On June 4, 2008, a jury convicted Defendant Antoin Rezko of sixteen counts charged in the Superseding Indictment after over three months of trial and over two weeks of jury deliberations. Specifically, the jury convicted Defendant on twelve counts of honest services 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). The jury acquitted Defendant Rezko on eight separate counts, including three honest services fraud counts (Counts 3, 9, 10), four bribery counts (Counts 18, 19, 21, 22), and attempted extortion (Count 16).

The jury convicted Defendant Rezko for participating in a 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 Rod Blagojevich's administration and Stuart Levine's membership on two State of Illinois boards to influence the actions of these boards for private gain. Stuart Levine was a member of both 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 State 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 these boards to influence the actions of TRS and the Planning Board for the benefit of themselves and others, and to carry out the scheme. The jury also convicted Defendant Rezko of two counts of aiding and abetting bribery (Counts 17 and 20). Both of the bribery counts had corresponding honest services fraud counts. In addition, the jury convicted Defendant of two counts of money laundering -- Counts 23 and 24 -- that related to the transaction underlying the honest services fraud convictions charged in counts 1 and 2.

On November 12, 2008, the Court denied Defendant Rezko's motion for judgment of acquittal or in the alternative for a new trial. (R. 632.) Defendant subsequently asked the Court to strike the January 6, 2009 sentencing date. (R. 646.) Since that time, the parties have repeatedly asked the Court to delay Defendant's sentencing date, presumably because of Defendant's potential cooperative efforts. On November 4, 2010, Defendant asked for a sentencing date, although the parties subsequently jointly asked the Court to strike the date and move it to the Fall*fn1 . On November 18, 2010, Defendant filed another motion for a new trial pursuant to Federal Rule of Civil Procedure 33 based on the Supreme Court's rulings regarding honest services fraud in Skilling v. United States, __ U.S. __, 130 S.Ct. 2896, 177 L.Ed.2d 619 (2010), and Black v. United States, __ U.S. __, 130 S.Ct. 2963, 177 L.Ed.2d 695 (2010). After the parties briefed the motion, the Court held oral argument on January 28, 2010.

LEGAL STANDARD

Under Federal Rule of Criminal Procedure 33, a district court "may vacate any judgment and grant a new trial if the interest of justice so requires." United States v. McGee, 408 F.3d 966, 979 (7th Cir. 2005). 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).

ANALYSIS

Defendant argues that he is entitled to a new trial based on the Supreme Court's recent opinions in Skilling v. United States, 130 S.Ct. 2896, 2931 (2010), and Black v. United States, 130 S.Ct. 2963, 2968 (2010) because one of the honest services fraud jury instructions given at his trial was erroneous in light of the change in law. Defendant further argues that the error was not harmless because it enabled the jury to convict him on an honest services fraud theory that the Supreme Court has declared is no longer good law.

I. Timeliness of the Motion

Before proceeding to the merits of Defendant's motion, the Court first addresses the timing of it. Under Federal Rule of Criminal Procedure 33, a defendant must file a motion for a new trial within fourteen days after the guilty verdict if the motion is not grounded on newly discovered evidence. See Fed.R.Crim.P. 33(b)(2). The parties do not dispute that Defendant Rezko failed to file his new post-trial motion within fourteen days of the June 4, 2008 jury verdict. Given that the Supreme Court's rulings upon which Defendant relies did not issue until June 24, 2010, Defendant could not have filed this motion fourteen days after the verdict. Defendant instead filed the motion on November 18, 2010, approximately five months after the Supreme Court's ruling in Skilling and Black, and three weeks after the Seventh Circuit's ruling on the Black remand from the Supreme Court. Defendant informed the Court and the government of his intention to file such a motion on November 4, 2010 -- six days after the Seventh Circuit's opinion in Black.

The government argues that the motion is untimely because Rezko made a strategic decision to delay the filing and that the decision does not constitute "excusable neglect" justifying its delay. According to the government, "nothing prevented Rezko from filing his motion promptly after the Supreme Court issued its decision" in Black and "there was no reason to expect that the decision on remand in that case would provide guidance regarding the honest services instructions in this case." (R. 709, Sur-reply at 2.)

Defendant maintains that because the Court granted him leave to file the new post-trial motion at the November 4, 2010 status hearing, the Court extended the time for the post-trial motion on its own initiative. In support of this argument, Defendant relies on Rule 45(b)(1), which states:

(1) When an act must or may be done within a specified period, the court on its own may extend the time, or for good cause may do so on a party's motion made:

(A)before the originally prescribed or previously extended time expires; or

(B)after the time expires if the party failed to act because of excusable neglect.

Fed.R.Crim.P. 45(b)(1). Contrary to Defendant's assertion, the Court's minute entry allowing him to file the present post-trial motion does not amount to the Court acting "on its own" to "extend the time" period, especially because the parties did not raise any timeliness issues at the November 4, 2010 status hearing.

In the alternative, Defendant argues that his post-trial motion is timely because it was the result of excusable neglect pursuant to Rule 45(b)(1). "The Supreme Court in Pioneer Inv. Servs. Co. v. Brunswick Assoc. Ltd. P'ship, 507 U.S. 380, 395, 113 S.Ct. 1489, 123 L.Ed.2d 74 (1993) listed the factors a district court should consider when evaluating a claim of excusable neglect, which include the danger of prejudice to the defendant, and the reason for the delay." Murphy v. Eddie Murphy Prods., Inc., 611 F.3d 322, 324 (7th Cir. 2010); see also Raymond v. Ameritech Corp., 442 F.3d 600, 606 (7th Cir. 2006) ("We have held that Pioneer applies whenever "excusable neglect" appears in the federal procedural rules."). More specifically, the "standard for reviewing whether neglect was 'excusable' is an equitable one, taking into consideration relevant circumstances, including (1) the danger of prejudice to the non-moving party; (2) the length of the delay and its impact on judicial proceedings; (3) the reason for the delay (i.e., whether it was within the reasonable control of the movant); and (4) whether the movant acted in good faith." McCarty v. Astrue, 528 F.3d 541, 544 (7th Cir. 2008); see also Pioneer Inv. Servs., 507 U.S. at 395 (determination of excusable neglect is "an equitable one, taking account of all relevant circumstances surrounding the party's omission."). Appellate review of a district court's excusable neglect determination is for an abuse of discretion. See McCarty, 528 F.3d at 544; Raymond, 442 F.3d at 606.

Defendant Rezko argues that the reason for his delay under the first Pioneer factor weighs in his favor because he has been cooperating with the government and agreed to delay sentencing while remaining incarcerated. Moreover, during the two years he has been incarcerated, the Supreme Court narrowed the scope of the honest services fraud statute, 18 U.S.C. § 1346, upon which he was convicted. See Skilling v. United States, 561 U.S. ___, 130 S.Ct. 2896, 177 L.Ed.2d 619 (2010), and Black v. United States, 561 U.S. ___, 130 S.Ct. 2963, 177 L.Ed.2d 695 (2010). The government, however, points out that the length of delay in filing the present motion was within Defendant's control because the Supreme Court decided Skilling and Black on June 24, 2010, yet Defendant did not file the present motion until November 18, 2010. Defense counsel explain that they waited until the Seventh Circuit's October 29, 2010 decision in Black so that they could determine what, if any relief, was available to Defendant. Defense counsels' argument has some merit because the Seventh Circuit's decision in Black provided guidance to the Court in applying the Black and Skilling holdings.

The government argues that the reason for Defendant's delay in filing his post-trial motion was the result of a strategic decision relating to his upcoming sentencing hearing and to his attempt "to maximize the government's interest in utilizing him as a witness in return for a sentencing reduction." (R. 709, Sur-reply at 3.) Because the Court rescheduled Defendant's sentencing hearing for later this year, any concern that Defendant's timing was strategic based on the requested January sentencing date is no longer at issue. Moreover, even if the reasons for Defendant's delay are questionable, "Pioneer makes clear that the standard is a balancing test, meaning that a delay might be excused even where the reasons for the delay are not particularly compelling." United States v. Brown, 133 F.3d 993, 997 (7th Cir. 1998).

Next, the government maintains that this delay is prejudicial under the first Pioneer factor. The government specifically argues that Defendant's delay carries the possibility that the re-trying of this criminal matter would be more difficult due to the passage of time. See United States v. Munoz, 605 F.3d 359, 371 (6th Cir. 2010) ("proper inquiry is the potential prejudice stemming from having to retry the case after a delay, rather than merely from having to respond to a belated motion") (emphasis in original); Murphy, 611 F.3d at 324 ("defendants would suffer prejudice from delaying the resolution of this case"). The government has not, however, identified how the five month time period between the Skilling and Black decisions and Defendant's filing of this motion is prejudicial. Further, the other Pioneer factors, including the interests of efficient judicial administration, weigh strongly in favor of permitting this late motion. See Pioneer, 507 U.S. at 398; Brown, 133 F.3d at 996. Deciding the present post-trial motion on the merits serves the interests of judicial economy for appellate purposes, namely, Defendant will be able to appeal all of the relevant issues in one appeal. Based on the weighing of the Pioneer factors and the unusual circumstances in this matter given the timing of the Supreme Court's decisions narrowing the honest services statute, Defendant has established that the timing of his post-trial motion was the result of excusable neglect under Rule 45(b)(1)(B).

II. Instructions

The Supreme Court addressed the scope and constitutionality of Section 1346 in Skilling v. United States and Black v. United States. In reaching its holding, the Supreme Court reviewed the history of the honest services statute based on case law pre-dating McNally v. United States, 483 U.S. 350, 107 S.Ct. 2875, 97 L.Ed.2d 292 (1987), and noted that the "'vast majority' of the honest-services cases involved offenders who, in violation of a fiduciary duty, participated in bribery or kickback schemes." Skilling, 130 S.Ct. at 2927-28. Based on this history and to "preserve the statute without transgressing constitutional limitations," the Supreme Court held that "§ 1346 criminalizes only the bribe-and-kickback core of the pre-McNally case law." Id. See also United States v. Boone, 628F.3d 927, 929 (7th Cir. 2010) (noting that the Supreme Court held that "in order to avoid vagueness problems, § 1346 must be read as criminalizing only bribery and kickback schemes.").

The Supreme Court noted that the honest services "prohibition on bribes and kickbacks draws content not only from the pre- McNally case law, but also from federal statutes proscribing-and defining-similar crimes." Skilling, 130 S.Ct. at 2933. Although the Supreme Court did not define the types of bribery and kickback schemes that the honest services statute prohibits, it specifically referenced 18 U.S.C. §§ 201(b), 666(a)(2) and 41 U.S.C. § 52(2), as well as pre-McNally case law relying on bribery and kickback schemes. Section 201(b) of Title 18 provides that bribery of public officials occurs where an individual "directly or indirectly, corruptly gives, offers or promises anything of value to any public official or person who has been selected to be a public official, or offers or promises any public official or any person who has been selected to be a public official to give anything of value to any other person or entity, with intent ... to influence any official act; or ... to induce such public official or such person who has been selected to be a public official to do or omit to do any act in violation of the lawful duty of such official person." Similarly, anyone who is a public official or a person selected to be a public official who, "directly or indirectly, corruptly demands, seeks, receives, accepts, or agrees to receive or accept anything of value personally or for any other person or entity, in return for ... being influenced in the performance of any official act ... or being induced to do or omit to do any act in violation of the official duty of such official or person" commits bribery. 18 U.S.C. § 201(b)(2).

Section 666(a)(2) of Title 18 provides that an individual commits bribery if he: corruptly gives, offers, or agrees to give anything of value to any person, with intent to influence or reward an agent ... of a State ... in connection with any business, transaction, or series of transactions of such organization, government, or agency involving anything of value of $5,000 or more.

18 U.S.C. § 666(a)(2). See generally United States v. Oros, 578 F.3d 703, 710 (7th Cir. 2009). Finally, 41 U.S.C. § 52(2) provides: "The term 'kickback' means any money, fee, commission, credit, gift, gratuity, thing of value, or compensation of any kind which is provided, directly or indirectly, to [enumerated persons] for the purpose of improperly obtaining or rewarding favorable treatment in connection with [enumerated circumstances]."

The Supreme Court also cited several cases as defining the scope of the honest services statute on prohibiting bribes and kickbacks, including United States v. Ganim, 510 F.3d 134, 147-149 (2d Cir. 2007)(Sotomayor, J.), United States v. Whitfield, 590 F.3d 325, 352-353 (5th Cir. 2009), and United States v. Kemp, 500 F.3d 257, 281-286 (3d Cir. 2007). Skilling, 130 S.Ct. at 2934 (2010). These cases involved honest services fraud involving bribery and payments made in exchange for a promise to perform an official act.

Because the indictment in Skilling involved three objects of the charged conspiracy -- honest services fraud, money or property fraud and securities fraud -- the Supreme Court remanded the case for the court to conduct a harmless error analysis. Similarly, because the honest services counts of convictionin Black each carried both a pecuniary fraud and honest services fraud theory, the Supreme Court remanded the case to the Seventh Circuit to conduct a harmless error analysis.

A. The Instruction at Issue

Based on the Supreme Court's holding in Skilling, Defendant Rezko challenges the following instruction to the jury:

A public official or employee deprives the public or his employer of his honest services when he misuses his position, or the information he obtains in it, for the purpose of illegitimately obtaining gain for himself or another.

(R. 543, Jury Instructions, at 29.) Defendant argues that this instruction was erroneous because the Court did not instruct the jury that payment of a bribe or kickback was an essential element of honest services fraud. The Court agrees -- on its face, the instruction did not require the jurors to find that the charged scheme involved bribery or kickbacks.

The government contends, however, that the instruction is not erroneous because this instruction, unlike the one in Black, required the jury to find that the official misused his position in order to "illegitimately obtain[] gain." Looking solely at the instruction, this language does not cure the legal defect because the jury was never instructed that the fraud had to involve a bribe or kickback scheme. As such, the instruction was erroneous under Skilling and Black.

B. Harmless Error Analysis

An erroneous jury instruction does not automatically mandate a new trial. Instead, the question becomes whether the instructional error was harmless. In Hedgpeth v. Pulido, 129 S.Ct. 530');">129 S. Ct. 530, 531 (2008), the Supreme Court noted that "a reviewing court finding such error should ask whether the flaw in the instructions 'had substantial and injurious effect or influence in determining the jury's verdict.'" Hedgpeth, 555 U.S. 57, 129 S.C. 530, 531 (quoting Brecht v. Abrahamson, 507 U.S. 619, 623 (1993)). "On harmless-error review, the government has the burden of establishing that it is clear beyond a reasonable doubt that the jury would have convicted absent the error." United States v. L.E. Myers Co., 562 F.3d 845, 855 (7th Cir. 2009), citing United States v. Mansoori, 480 F.3d 514, 523 (7th Cir.2007). See also United States v. Ramirez, 574 F.3d 869, 884 (7th Cir. 2009).

The Seventh Circuit recently applied the harmless error standard in United States v. Black, 625 F.3d 386, 388 (7th Cir. 2010). A jury convicted Conrad Black of three fraud counts and one count of obstruction of justice. Each fraud count had both an honest services theory and pecuniary fraud theory associated with it. Because the jury returned a general verdict ...


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