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United States v. Whiteagle

United States Court of Appeals, Seventh Circuit

July 21, 2014

UNITED STATES OF AMERICA, Plaintiff-Appellee,
v.
TIMOTHY G. WHITEAGLE, Defendant-Appellant

Argued June 6, 2013

Page 735

Appeal from the United States District Court for the Western District of Wisconsin, No. 11-cr-65-wmc -- William M. Conley, Chief Judge.

For UNITED STATES OF AMERICA, Plaintiff - Appellee: Laura A. Przybylinski Finn, Attorney, OFFICE OF THE UNITED STATES ATTORNEY, Madison, WI.

For TIMOTHY G. WHITEAGLE, Defendant - Appellant: Glenn C. Reynolds, Attorney, Madison, WI.

Before WOOD, Chief Judge, and POSNER and ROVNER, Circuit Judges.

OPINION

Page 736

Rovner, Circuit Judge.

A jury found Timothy G. Whiteagle guilty of (among other offenses) bribing and conspiring to bribe a Ho-Chunk Nation legislator in order to secure favorable treatment for three different vendors wishing to do business with the Nation. The district court ordered him to serve a prison term of 120 months. Whiteagle now appeals his conviction and sentence. We affirm.

I.

The Ho-Chunk Nation of Wisconsin, known formerly as the Wisconsin Winnebago Nation, is a federally recognized Indian tribe headquartered in Black River Falls, in the west-central region of the State. About half of the Nation's roughly 7,200 enrolled members live in Wisconsin. Among the Nation's four branches of government, its legislature possesses the authority to enter into contracts on behalf of the Nation. Clarence Pettibone served as one of those legislators from 1995 until 2011. During the time period relevant to this case, the legislature was comprised of eleven elected representatives; the total has since been enlarged to thirteen.

The Ho-Chunk Nation has been active in the gaming industry for over 30 years. Judge Crabb's decision in Oneida Tribe of Indians of Wisconsin v. Wisconsin, 518 F.Supp. 712, 719-20 (W.D. Wis. 1981), held that once Wisconsin's constitution was amended in 1973 to legalize bingo games licensed by the State, the State ceded its authority to restrict and regulate bingo on Native American reservations. Thereafter, many of Wisconsin's tribes and bands turned to bingo halls as a source of badly-needed revenue. The Ho-Chunk Nation established its first such hall in 1983, in a used trailer on tribal land in the Wisconsin Dells. See Bill Lueders, Wisconsin Center for Investigative Journalism, Casino profits give Ho-Chunk new outlook, Wis. State Journal, Mar. 3, 2014, at A1. With the Supreme Court's decision in California v. Cabazon Band of Mission Indians, 480 U.S. 202, 107 S.Ct. 1083, 94 L.Ed.2d 244 (1987), congressional enactment the following year of the Indian Gaming Regulatory Act, P.L. 100-497, 102 Stat. 2467 (1988), and Wisconsin's creation of a state lottery in 1987, the door was opened to the operation of full-fledged casinos by the tribes. By June 1992, the Governor of Wisconsin had entered into gaming compacts with all eleven of the State's tribes and bands, including the Ho-Chunk Nation, authorizing a range of gaming activities at tribal casinos including blackjack, electronic video games, slot machines, and " pull-tab" gambling tickets. Today, the Nation operates a network of six casinos in the State, at sites in or near Black River Falls, Madison, Nekoosah, Tomah, Baraboo (Wisconsin Dells), and Wittenburg. Wis. Legislative Reference Bureau, Research Bull. 97-1, The Evolution of Legalized Gambling in Wisconsin 21-27 (Sept. 1997).

The casinos have proven to be highly lucrative for the Ho-Chunk Nation. Currently it nets over $200 million annually from its gambling operations. The profits have enabled the Nation to establish a relatively generous set of benefits for its members, including annual per-capita stipends of $12,000 for adults and one-time payouts of up to $200,000 from a children's trust fund when a youth turns 18 and graduates from high school. See Lueders, Casino profits give Ho-Chunk new outlook ; Ho-Chunk may change how they dole out trust funds, Daily Herald (Arlington Hts., Ill.), May 6, 2014.

Cash Systems, Inc.

The large amount of revenue generated by casino gaming naturally attracts vendors seeking a share of the pie, along with influence peddlers who claim an ability to pave the way for such vendors among tribal

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officials. Cash Systems, Inc. fell into the former category. Cash Systems was one of a number of firms that specialize in what are described as cash-access or cash-resources services, which principally involve issuing cash to casino customers via automated teller machines and kiosks, check-cashing, and credit- and debit-card advances. (Cash Systems was acquired by a competitor in 2008 after it lost its contract with the Ho-Chunk Nation.) Key to the profitability of casino operations is maximizing the amount of cash on the casino floor--in other words, cash that customers have in their hands ready to spend. This is why cash-access services are important to casino operators: by making it easy for customers to access cash on the spot, they encourage customers to gamble away more of their money. In the early 2000s, Cash Systems was ahead of its peers in some of the services that it offered: it not only had the ability to process cash advances against a customer's credit or debit card, but it was pioneering the use of hand-held, mobile devices that enabled cash-access transactions to take place anywhere on the casino floor.

Timothy Whiteagle fell into the category of influence peddlers. Whiteagle, a member of the Ho-Chunk Nation, held himself out as an insider whose relationships with other tribal members and legislators offered interested vendors an entré e into the tribe's governance and gaming operations and, once there, a means of preserving the firm's business relationship with the tribe. Whiteagle conducted his business in part through his limited-liability company, Wolfbow Big Game Sources.

Cash Systems engaged Whiteagle in 2002 as a confidential consultant as the company was attempting to win a contract with the Nation to provide Ho-Chunk casinos with cash-access services. (Cash Systems was already serving as a subcontractor to the Nation's existing cash-access vendor, Bank Plus.) The firm agreed to pay Whiteagle a monthly salary of $22,500. Whiteagle's job was to engage in a behind-the-scenes effort to win the contract and, once the Nation engaged Cash Systems as its vendor in 2002, to help maintain that relationship. Cash Systems served as the Nation's cash-access services vendor for the next six years. During that time, it reaped over seven million dollars in revenue from the services it provided to the Nation. And over the course of those six years, it paid Whiteagle just under two million dollars.[1] That figure included both Whiteagle's monthly salary as well as a series of payments that Whiteagle solicited from Cash Systems on Pettibone's behalf. The total represented nearly 30 percent of the company's gross revenue on the contract.

The " in" with the tribal legislature that Whiteagle held out to Cash Systems was his relationship with Clarence Pettibone. Whiteagle's and Pettibone's parents were related and their families had known and socialized with one another for many years. Pettibone, as we have noted, had been serving in the Ho-Chunk legislature since 1995. During his tenure, he served on the legislature's finance and development committees and twice held the office of Vice President of the Nation. Pettibone was actively involved in cash access services. As Ho-Chunk legislator Ona Garvin

Page 738

testified, " If it had anything to do with check cashing, Clarence was on it." R. 187 at 66. Whiteagle represented to Cash Systems personnel that he would secure Pettibone's assistance in having Cash Systems selected (and maintained) as a vendor to the Nation by convincing Pettibone to serve as Cash System's champion in the Ho-Chunk legislature.

Cash Systems was one of three firms seeking to become the Nation's new cash-access vendor in 2002. The government presented testimony at trial indicating that when the matter came before the Ho-Chunk legislature in May 2002, there was no true consensus among the legislators as to which company among the three should be selected. As it turned out, a vote on the matter was called when a legislator who was outspoken in his opposition to Cash Systems left the chamber. Pettibone moved that the legislators present give their preliminary approval to enter into a contract with Cash Systems. The motion carried unanimously.

Whiteagle's mission from this point forward was to ensure that the contract with Cash Systems was finalized and to preserve the company's status as the Ho-Chunk Nation's cash-access vendor. To that end, he and Pettibone conferred regularly on the company's status with the Nation and specifically regarding the possibility that Cash Systems might be replaced by another cash-access provider. Kristine Fortney, who was married to Pettibone from 1994 to 2008, could remember overhearing at least 20 such conversations between her husband and Whiteagle. As Fortney recalled the discussions, Whiteagle would give Pettibone advice, if not instruction, as to what needed to be done to preserve Cash Systems' position. Whiteagle also wrote multiple emails to Pettibone giving him advice on how to ward off potential competitors to Cash Systems. See, e.g., Gov. Exs. 3-1(c) - (f). In one email, Whiteagle warned Pettibone that the two of them had to get a Cash Systems competitor " killed off" or they would " pay big time soon." Gov. Ex. 3-2(b). A natural inference from that statement is that Pettibone, like Whiteagle, stood to suffer financially if Cash Systems lost its contract with the Nation.[2]

Over the course of the next six years, Whiteagle would periodically ask Cash Systems personnel for money, over and above his monthly salary, to pay Pettibone, with the express purpose of ensuring that Pettibone would pursue favorable treatment for Cash Systems in the Ho-Chunk legislature. On occasion, Whiteagle would ask that these amounts be added to the balance of a series of loans Whiteagle had taken from the company. Cash Systems typically would accede to the requests, usually issuing the payments to Whiteagle's LLC. Whiteagle in turn converted the bulk of the payments into cash or cashier's checks. So in most instances, there is no direct evidence confirming that Whiteagle in fact transmitted the money to Pettibone. And as we shall see, one of Whiteagle's arguments is that he was simply shaking down Cash Systems for money that he kept for himself, and that he in fact never bribed Pettibone. As the ensuing account reveals, there certainly is ample evidence that Whiteagle told Cash Systems personnel he was bribing Pettibone; there is also, as we have just mentioned, substantial evidence that Whiteagle strategized with Pettibone as to the company's status as a vendor to the Nation. Although the proof confirming that Pettibone actually was

Page 739

bribed is, not surprisingly, less extensive, there is nonetheless sufficient evidence confirming that Pettibone had a corrupt relationship with Whiteagle and, in fact, was bribed to give favorable treatment to Cash Systems.

Bearing that out is the available documentary evidence confirming the transmission of at least some financial benefits from Cash System to Pettibone.

Between September 2002 and May 2006, Cash Systems wrote three checks that were directly payable either to Pettibone or to Park Institute Black River Falls (" Park Institute" ), a charitable organization that operated the small tae kwon do school that Pettibone operated to serve Ho-Chunk children. The record indicates that one of these payments, a check for $10,000 to Park Institute, was written at the specific behest of Whiteagle. In September 2005, Roscoe Holmes, an employee of Cash Systems, sent an email relaying Whiteagle's request to John Glaser, who had just been hired as the company's Executive Vice President for Sales and Marketing. Holmes described Pettibone to Glaser as " our allies [sic] political proponents [sic] at Ho-Chunk Nation" and indicated that the solicited donation to Pettibone's tae kwon do school was intended to " maintain[ ] the good faith relationship we have developed and ... help foster a more direct bond from a mutually gratifying prospective [sic]." Gov. Ex. 6-1. Cash Systems issued the check to Park Institute three weeks later.

Apart from such direct payments between Cash Systems and Pettibone's charity, Park Institute, there is also some evidence supporting an inference that the cash payments that Whiteagle solicited from Cash Systems on behalf of Pettibone were transmitted by Whiteagle to Pettibone. For example, on May 5, 2003, Cash Systems wired $6,000 to Whiteagle; and on the same day, Whiteagle withdrew $4,000 from his account to obtain a cashier's check in that amount payable to Pettibone (which Pettibone subsequently cashed). Gov. Ex. 16-2. One week later, Pettibone, in his capacity as the Ho-Chunk Nation's Vice-President, signed a final, one-year renewable contract with Cash Systems, formalizing the Nation's relationship with the company.[3] Financial records document at least four other instances in which there were wire-transfers of money by Cash Systems to Whiteagle, followed by the purchase of cashier's checks or money orders payable to Pettibone by Whiteagle. See Gov. Exs. 16-3 (wire transfer of $7,000 to Whiteagle, followed by Whiteagle's purchase of $5,000 cashier's check payable to Pettibone); 16-7 (wire transfer of $8,000 to Whiteagle, followed by Whiteagle's purchase of $5,000 cashier's check to Pettibone); 16-9 (wire transfer of $22,500 to Whiteagle, followed by Whiteagle's purchase of a $1,500 cashier's check to Pettibone); Gov. Exs. 16-4 & 16-5 (wire transfer of $4,267 to Whiteagle, followed by Whiteagle's issuance of $2,600 check to his daughter, who worked as his bookkeeper; his daughter in turn cashed the check and purchased five money orders each in the amount of $500 payable to Pettibone).

Cash Systems and its proponents (including Whiteagle and Pettibone) were taken by surprise in the Spring of 2006 when the President of the Ho-Chunk Nation, as head of its executive branch, unilaterally replaced Cash Systems with Certegy, a competitor in the cash-services field. Whiteagle emailed Brian Johnson at Cash Systems on May 2 reporting that

Page 740

" I talk[ed] to our man last night and he will be talking to the prez ... but he said the prez couldn't do that . . . . to sign the contract. I will be in Wittenberg today at the Legislative Meeting to make sure CS doesn't get kicked out." Gov. Ex. 9-4. (CS, of course, stood for Cash Systems.) On May 13, Pettibone cashed a $1,500 cashier's check from Whiteagle dated April 29, 2006. Three days later, Pettibone moved in the legislature to both terminate the contract with Certegy and reinstate the agreement with Cash Systems, arguing to his colleagues that the contract with Certegy had been signed improperly without the requisite legislative review. Both of his motions carried unanimously. But Cash Systems was reinstated on a month-to-month basis only; gone was the renewable one-year contract it had previously enjoyed.[4]

Cash Systems naturally wanted to regain the security of a longer-term contract. Whiteagle advised Cash Systems personnel that in pursuit of that goal, he needed additional funds to assure Pettibone's support for the company. In late December 2006, Whiteagle sent an email to Glaser, Cash Systems' Executive Vice-President, advising him of a proposal that he had discussed with Pettibone over the Christmas holiday. Whiteagle indicated that Pettibone was prepared to shepherd a two-year contract with Cash Systems through the Ho-Chunk legislature the following March; Pettibone (whom Whiteagle referred to by the initial C) believed he had the votes necessary in the legislature to approve such a contract. In return, Pettibone expected financial support from Cash Systems:

To do this, funds for his Mother who is suffering terribly from diabetes are needed for her future treatment at home. She has lost several fingers already. C wanted $17,750.00 for diagnostic and treatment equipment so her trips for Dialysis in Marshfield Wisconsin are limited. It[']s a very extreme hardship for the family and C. to take his mother to Marshfield Wisc. everyday at 6am which is a 120 mile roundtrip.
Plus C. would need $14,000 for his political campaign in January 2007.
These funds would be added to my $75,000 loan from CS. Wisconsin state campaign laws do not apply to reservation properties as proven over the years thru U.S. Supreme rulings. This amount would be an addendum to my loan agreement or contract with CS. I want to pay for these expenses and help C. as he has help[ed] me and CS for nothing. I can send these funds to him based upon ancient tribal custom and C. being a blood relative of mine.
I stress to CS this is my strategy to get the CS contract signed in March 2007.

Gov. Ex. 3-3(c) at 1 (emphasis in original). Cash Systems complied with the request by wiring the requested amounts of $14,000 and $17,750 to Whiteagle in early January; and records reveal that after the first of the two wire transfers was complete, Whiteagle immediately withdrew $1,500 in cash from his bank account. Gov. Exs. 16-17(a) & (b).

Similar requests from Whiteagle and payments by Cash Systems became a pattern over the next 18 months. Whiteagle would contact Cash Systems indicating that Pettibone needed additional money, typically for his campaign. In a number of emails, Whiteagle emphasized how important Pettibone was to the interests of Cash Systems. Pettibone's ongoing need for campaign funds " cost little money compare[d] to what he is capable of doing for

Page 741

us," Whiteagle wrote in a February 2007 email. Gov. Ex. 3-1(i). He added, more ominously, " If C is out CS is out." Id. (emphasis in original). In a June 2007 email asking for an $8,000 advance on his monthly salary to help defray legal expenses that Pettibone had incurred in connection with his campaign, Whiteagle admonished Glaser that the ability of Cash System to stay on as the Nation's cash-access provider depended on Pettibone's reelection (" I[f] we don't have C we don't have a man inside to protect and promote our interests." ) and that Pettibone would not overlook the favor. (" C doesn't forget a favor . . . . ever!!!!" ) Gov. Ex. 4-10. In a February 2008 email, Whiteagle sounded a note of urgency, indicating that he needed $7,500 right away to prevent a vote against Cash Systems in the legislature. " I need to do my work," Whiteagle wrote. " Each day gets worse as Mr. C is only one man and he is doing his best. By me working to lobby on CS['] behalf and get the support for Mr. C.[--] that has been a winning and financially rewarding formula." Gov. Ex. 9-13.

Cash Systems complied with these requests and remained as the Nation's cash-access vendor until 2008, although the promised two-year contract never did materialize. Typically, wire transfers to Whiteagle were followed in short order by cash withdrawals by Whiteagle. And in one instance the evidence indicates that Whiteagle used the withdrawn funds to purchase roughly $1,500 worth of buttons and other campaign materials for Pettibone.

In seeking these and other payments from Cash Systems, Whiteagle frequently sought the assistance of Johnson, who worked as an account manager in Cash Systems' customer service department. Johnson, who found it frustrating to deal with these requests, asked Whiteagle to reward him with a 25-percent cut of the amounts Whiteagle received. Whiteagle agreed. Over time, the kickbacks to Johnson amounted to more than $31,000. These payments would ultimately prove to be a key piece of evidence in the undoing of the scheme.

After Glaser joined Cash Systems and became familiar with Whiteagle's periodic requests for funds to pay Pettibone, he asked that Whiteagle support his requests with invoices in order to give the appearance that the payments were reimbursements for legitimate expenses. Whiteagle complied with Glaser's request by submitting invoices for items such as advertising, travel, legal, and promotional expenses. The invoices were false, as Whiteagle himself later admitted in his testimony, and their falsity was almost immediately apparent to Johnson, as the invoices were typically handwritten and devoid of receipts and other backup documentation. Yet, the company nonetheless honored the invoices and paid Whiteagle the requested amounts.

Money Centers of America

Notwithstanding the significant sums of money that Cash Systems was paying to Whiteagle and Pettibone, its status as the Nation's cash-access vendor came to an end in mid-2008, when the Nation replaced Cash Systems with Money Centers of America (" MCA" ). As it turned out, at the same time Whiteagle was telling Cash Systems he was working on its behalf, he was also working on behalf of MCA.

Whiteagle had been introduced to MCA's CEO, Chris Wolfington, in 2005. Soon thereafter, Whiteagle agreed to become a behind-the-scenes consultant for MCA. Wolfington arranged to pay Whiteagle for his services through Support Consultants, a consulting company owned by Kevin MacDonald. MacDonald had arranged the introduction between Whiteagle and Wolfington. According to

Page 742

MacDonald, MCA through Support Consultants ultimately paid Whiteagle a total of more than $650,000 between July 2008 and September 2009. MCA's director of corporate administration, Lauren Anderson, would later describe the indirect method of paying Whiteagle as " unique" in her experience with MCA and its outside consultants. R. 178 at 28.

MCA made an initial bid for the Nation's business in 2006, but was unsuccessful: Cash Systems remained as the Nation's provider of cash-access services. Nonetheless, MCA perservered in its efforts to establish a business relationship with the tribe, and toward that end, Wolfington maintained his behind-the-scenes relationship with Whiteagle. Ultimately, in 2008, the legislature voted to replace Cash Systems with MCA.

As with Cash Systems, Whiteagle would periodically make demands of MCA on Pettibone's behalf (as well as his own), although, so far as the record reveals, Whiteagle and Pettibone were not actually paid anything until the company obtained the contract in 2008. Nonetheless, Whiteagle made multiple demands--mostly for cash--before MCA was awarded the contract. In February 2007, for example, Whiteagle solicited a payment of $40,000 for Pettibone's re-election campaign, reminding Wolfington in an email that " [o]ur man C. did a lot for you over the months" and admonishing him that " C needs cash now not promises." Gov. Ex. 4-2. There is no evidence that MCA complied with this particular demand, and, indeed, an email that Whiteagle sent to Wolfington on March 10, 2008, suggested that while he and Pettibone were optimistic about MCA's prospects with the Ho-Chunk Nation, it was past time thI:\new2_data\Pagination\After_Meta\New Folder (4)\759-762_10.20.14\759\Fed07\759\759F3D734.htmat the company finally demonstrate some financial appreciation for both Whiteagle and Pettibone:

Altho its been a while for you to get in the door with the HCN we have kept our word, you are in!! We have devoted many months to prepare your way into the HCN without pay and be assured the next 5 days will determine what we do next with you with the HCN. Mr. C and I have discussed this thoroughly too that [i]f what you say changes and it[']s a continued pattern we will need to review our relationship. ...

Gov. Ex. 4-20 at 1 (emphasis in original). Pettibone was copied on this email.

A key point that distinguished MCA's bid for the Nation's business was its willingness to offer the Nation a license of its propriety " ONswitch" software, which would enable the Nation at some point in the future to provide its own cash-access services. In the March 10 email to Wolfington, Whiteagle had also suggested that MCA seek an up-front fee of $2.5 million for that license. " The tribe can be very fickle," Whiteagle would later testify in explaining why he suggested that MCA insist on payment in advance. R. 182 at 67. On March 19, Pettibone made a motion in the Ho-Chunk legislature to approve the recommendation of the Nation's business ...


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