United States v. Tamika Riley

PRECEDENTIAL

UNITED STATES COURT OF APPEALS

FOR THE THIRD CIRCUIT

___________________

Nos. 08-3361, 08-3413, 08-3758, and 08-3759

___________________

UNITED STATES OF AMERICA,

Appellant in 08-3758 & 08-3759

v.

TAMIKA RILEY AND SHARPE JAMES

Tamika Riley, Appellant in 08-3361

Sharpe James, Appellant in 08-3413

___________________

On Appeal from the United States District Court

for the District of New Jersey

(D.C. No. 2-07-cr-00578)

District Judge: Honorable William J. Martini

___________________

Argued April 13, 2010

Before: SLOVITER and NYGAARD, Circuit Judges, and

RESTANI,* Judge

(Opinion Filed: September 16, 2010)

___________________

Gerald Krovatin ARGUED

*

Honorable Jane A. Restani, Chief Judge of the United

States Court of International Trade, sitting by designation.

Krovatin Klingeman

744 Broad Street

Suite 1903

Newark, NJ 07102

Alan D. Bowman ARGUED

Suite 105

Gateway One

Newark, NJ 07102

Attorneys for Appellants

Norman Gross ARGUED

Office of United States Attorney

Camden Federal Building & Courthouse

401 Market Street

P.O. Box 2098, 4th Floor

Camden, NJ 08101

Paul J. Fishman

Ralph J. Marra, Jr.

George S. Leone

Office of United States Attorney

970 Broad Street

Room 700

Newark, NJ 07102

Attorneys for Appellee

___________________

OPINION OF THE COURT

___________________

RESTANI, Judge.

Defendant-Appellants and Cross-Appellees

(“Appellants”) Sharpe James (“James”) and Tamika Riley

(“Riley”) were convicted in the United States District Court for

the District of New Jersey of three counts of mail fraud (Counts

1–3) as part of a scheme to convey City-owned property in

violation of 18 U.S.C. § 1341 and 2, one count of fraud (Count

2

4) involving a local government receiving federal funds in

connection with the fraudulent sale of City-owned properties in

violation of 18 U.S.C. § 666(a)(1)(A) and 2, and one count of

conspiracy (Count 5) to defraud the public of James’s honest

services contrary to 18 U.S.C. §§ 1341 and 1346, in violation of

18 U.S.C. § 371. These five counts are collectively called the

“Land Fraud Counts.” Additionally, Riley was convicted of

three counts of housing assistance mail fraud in violation of 18

U.S.C. § 1341 and 2, and three counts of tax fraud for her failure

to report income in violation of 26 U.S.C. § 7206(1). Appellants

appeal the Land Fraud Counts. For the following reasons we

will reverse the convictions on Count 5 and affirm the

convictions on Counts 1–4.

I. Factual Background and Procedural History

A. Facts

The jury convicted Sharpe James and Tamika Riley of the

Land Fraud Counts for engaging in a fraudulent scheme to assist

Riley’s purchase of City-owned parcels of real property under

the South Ward Redevelopment Plan (“SWRP”). Sharpe James

was the Mayor of Newark, New Jersey for twenty years between

July 1986 and June 2006. James was also a New Jersey State

Senator representing the 29th Legislative District from 1999

until 2008. Tamika Riley, who had an intimate relationship with

James, was the owner and chief executive officer (“CEO”) of

Tamika Riley, Inc. (“TRI”), a public relations firm specializing

in the entertainment industry.

1. South Ward Redevelopment Plan

In the aftermath of the 1967 Newark riots, many residents

abandoned the city, and the market for properties substantially

eroded. During this time, home ownership was extremely low

and lenders often would not provide financing to acquire

property in Newark. In 1998, in order to address these problems,

Newark adopted the SWRP, which was designed to sell parcels

of distressed, City-owned real property at low prices to pre-

approved developers, without advertisement and public bidding.

3

In exchange, the purchaser contracted to construct new or

renovated housing on those parcels,1 which would then be sold,

occupied, and returned to the City’s tax rolls, in order to

revitalize the residential real estate market and redevelop

Newark.

The New Jersey Department of Economic and Housing

Development (“DEHD”) managed the SWRP process. Initially,

the DEHD conducted a pre-qualification process that screened

applicants to ensure they had experience in the construction of

residential property and the ability to finance the projects. Once

DEHD approved an application, department officials drafted a

resolution and the contracts, which were then reviewed by the

attorneys in the Newark Corporate Counsel’s Office (“Corporate

Counsel”),2 the City Clerks office, and the Municipal Council.3

After the resolutions were approved by the Municipal Council,

the DEHD was responsible for enforcing the contractual

provisions to renovate the distressed properties.

The SWRP proved successful and profitable to

participants early on. By 2001-2002, the market for Newark real

estate surged and applicants for SWRP property flooded the

DEHD with requests. This success prompted the Municipal

1

The contracts specifically forbade “speculation in

landholding.” Supplemental Appendix For the United States

(“SA”) 611:217; 1456 § 17(a). “Speculation” involved purchasing

the real property merely for resale at a higher price, rather than for

renovation.

2

Corporate Counsel reviewed the resolutions and contracts

for form and legality.

3

The city of Newark elects both a Mayor, who is the chief

of the city, and a Municipal Council, which serves as the

legislature. The Mayor is empowered, subject to Municipal

Council approval, to sell real property owned by the City. The

Municipal Council, without conducting its own investigation,

reviewed and considered the DEHD resolutions to determine

whether it would authorize the contracts.

4

Council to pressure the program to accommodate “local

entrepreneurs” and minorities with little or no development

experience. Thus, the DEHD abandoned the pre-qualification

process and no longer required applicants to have development

experience so long as an applicant had “the right team” to fulfill

the obligations under the contract.

2. James’s Control Over the SWRP

James was very involved in the SWRP process as were

his subordinates. Basil Franklin (“Franklin”) served as Chief of

Housing Production under the James Administration and

reported directly to James’s Deputy Mayor who was also the

Director of the DEHD. James met frequently with his Deputy

Mayor to discuss the availability and allocation of properties

under the SWRP.4 The Deputy Mayor would then direct

Franklin to approve the SWRP application of those who had

been recommended by James.

During the time period at issue, James and the Municipal

Council disagreed as to who had the power to select eligible

persons to receive City property under the SWRP. After the

Municipal Council prevailed in litigation against the Mayor

regarding this issue, James successfully sponsored legislation in

2004, Senate Bill 967, that authorized the Mayor alone to select

persons eligible for SWRP property.

3. James and Riley’s Relationship and

Riley’s Acquisition of SWRP Properties

In 1999, Riley introduced the Mayor to a Newark-born

professional basketball player, Eric Williams (“Williams”).

4

In 2005, a friend of James went to James’s home and asked

him how to acquire property through the SWRP. James revealed

detailed knowledge about which parcels were available for sale,

who had acquired such properties in the past, and stated that if his

friend applied for property he would “take care of” the process.

SA 506:37.

5

Williams had recently signed a contract with the Boston Celtics

and was interested in investing in his home town of Newark.

Shortly after the Williams introduction, James’s Deputy Mayor

brought Riley and her friend to Franklin’s office and told

Franklin that James wanted him to “help these ladies acquire

some property.” SA 229:172. Franklin knew that Riley had no

experience as a real estate developer, but at the time Riley

applied for property the pre-qualification process had been

abandoned.

Both James and Riley contest the duration of their

intimate relationship. Nonetheless, James was aware that the

City transferred real estate parcels to Riley because in his official

capacity as Mayor, James signed each of the contracts

transferring the properties to TRI. Riley maintained calendars

and daily “agenda” lists containing innumerable notations

regarding her communications with James about the status of her

acquisitions of City-owned property from 2001 through 2006.

James was also copied on a letter “advising” Riley that certain

City-owned properties were set aside for acquisition by her

company. Further, in April 2000, Riley wrote a letter to James,

thanking him for his assistance in helping her to obtain City-

owned properties.

Riley acquired City-owned property in three phases.

Phase I consisted of four properties and Phase II consisted of

three properties. Although the Municipal Council approved the

sale of five other Phase III parcels to Riley in 2002, she was

unable to close on the properties because James informed

Franklin that the City “will not do any more business with

Tamika Riley until further notice.” SA 235:196. In 2004, Riley

resumed her pursuit of the SWRP properties (amended Phase III)

and the Municipal Council authorized the sale of four other

properties to Riley.

Riley developed only two of all the parcels she purchased

under the SWRP. As to those properties that she did not

6

develop, Riley quickly turned around and sold them for a profit.5

Riley’s access to SWRP property ended in 2006, however, when

a new mayoral administration instituted legal proceedings to

block the sale of the properties to her.

B. The Indictment, Trial, and Sentencing

In July 2007, a federal grand jury sitting in Newark

returned a 33-count indictment. The District Court severed the

first twenty counts and the Government submitted a redacted and

renumbered indictment (hereinafter, “Indictment”).6 Counts 1–5

of the Indictment, the Land Fraud Counts, include Counts 1–3,

which charged James and Riley with mail fraud as part of the

scheme to convey City-owned property to Riley between 2002

and 2005, in violation of 18 U.S.C. §§ 1341 and 2.7 Count 4

charged James and Riley with fraud involving a local

government receiving federal funds, in connection with the

fraudulent sale of City-owned properties to Riley in 2005, in

violation of 18 U.S.C. §§ 666(a)(1)(A) and 2. Count 5 charged

James and Riley with conspiracy to defraud the public of

James’s honest services between 1999 and 2006, contrary to 18

U.S.C. §§ 1341 and 1346, in violation of 18 U.S.C. § 371.

Counts 6–9 (collectively, the “Housing Fraud Counts”) charged

Riley with housing assistance fraud in violation of 18 U.S.C.

§§ 1341 and 2. Finally, Counts 10–13 (collectively, the “Tax

Fraud Counts”) charged Riley with tax evasion in violation of 26

U.S.C. § 7206(1).

5

For example, Riley paid $18,000 for the Phase II properties

and without making any improvements sold them for $80,000 a

month later.

6

The group of severed counts charged James with a scheme

to defraud the City of Newark of money and property through the

misuse of City of Newark credit cards.

7

Title 18 U.S.C. § 2 states that “[w]hoever commits an

offense against the United States or aids, abets, counsels,

commands, induces or procures its commission, is punishable as a

principal.” 18 U.S.C. § 2.

7

Trial began on February 26, 2008. On April 16, 2008,

following five weeks of testimony, the jury convicted James and

Riley on all five Land Fraud Counts and Riley on Counts 6–13.

On July 23, 2008, the District Court denied Appellants’ post-trial

motions. The District Court sentenced James and Riley to a

custodial sentence of twenty-seven months and fifteen-months

respectively. James and Riley appealed the Land Fraud

convictions and the Government cross-appealed the sentences.8

II. Discussion

This Court has jurisdiction to hear the instant appeal

pursuant to 28 U.S.C. § 1291. The appeal is limited to the Land

Fraud Counts (Counts 1–5). In light of the recent United States

Supreme Court decision in Skilling v. United States, 130 S. Ct.

2896 (2010), Appellants seek a reversal of Count 5, the

conspiracy to defraud the public of James’s honest services.9

James also argues that if Count 5 falls, then all the Land Fraud

Counts should fall. Although we will reverse Appellants’

convictions under Count 5, we do not find that there is spillover

prejudice sufficient to taint Counts 1–4. Further, we will affirm

the convictions under Counts 1–4 because the District Court did

not err when it denied Appellants’ post trial motions.10

8

Riley does not appeal her housing assistance fraud or tax

fraud convictions.

9

Skilling was decided after this appeal was argued and was

not available to the District Court, but we are bound by it. See

United States v. Asher, 854 F.2d 1483, 1487 (3d Cir. 1988); see

also Griffith v. Kentucky, 107 S. Ct. 708, 716 (1987) (“[A] new

rule for the conduct of criminal prosecutions is to be applied

retroactively to all cases, state or federal, pending on direct review

or not yet final, with no exception for cases in which the new rule

constitutes a ‘clear break’ with the past.”).

10

Initially, the Government sought to cross-appeal the

sentences of both Appellants because the District Court allegedly

did not apply any adjustment under the honest services guideline.

In light of Skilling, however, the Government considers the cross-

8

A. Skilling v. United States and Appellants’ Honest

Services Fraud Convictions Under Count 5

1. Skilling v. United States

In June 2010, the United States Supreme Court decided

Skilling and addressed the issue of whether the jury properly

convicted Skilling of conspiracy to commit honest services wire

fraud. Skilling, 130 S. Ct. at 2907. Jeffrey Skilling, a longtime

Enron officer, was Enron’s chief executive officer from

February until August 2001, when he resigned. Id. Less than

four months after Skilling resigned from Enron, the company

declared bankruptcy. Id. The jury convicted Skilling “with

conspiracy to commit securities and wire fraud; in particular, it

alleged that Skilling had sought to ‘depriv[e] Enron and its

shareholders of the intangible right of [his] honest services.’”

Id. at 2908.

The Supreme Court considered the scope and

constitutionality of the honest services statute and determined

that “[t]o preserve the statute without transgressing

constitutional limitations,” § 1346 criminalizes only “fraudulent

schemes to deprive another of honest services through bribes or

kickbacks.” Skilling, 130 S. Ct. at 2928, 2931. The Supreme

Court rejected the Government’s argument that § 1346 should

also encompass “undisclosed self-dealing by a public official . . .

[such as] the taking of official action by the [official] that

furthers his own undisclosed financial interests while purporting

to act in the interests of those to whom he owes a fiduciary

duty.” Id. at 2932 (internal quotation marks and citation

omitted). Because the Government in Skilling did not allege that

Skilling accepted bribes or kickbacks, the Supreme Court

determined that Skilling’s honest services fraud conviction was

flawed and vacated the Fifth Circuit’s affirmance of Skilling’s

conspiracy conviction. Id. at 2934–35.

2. The Effect of Skilling on Appellants’

appeal to be moot.

9

Honest Services Fraud Convictions

(Count 5)

Appellants argue that the Indictment and the District

Court’s jury instructions with regard to honest services fraud are

inconsistent with the Supreme Court’s decision in Skilling and

therefore, the conviction under Count 5, “Conspiracy to Use the

U.S. Mail to Defraud the Public of Defendant James’s Honest

Services,” must be dismissed. Although James and Riley

challenged the honest services charge on various bases, they did

not argue below that honest services fraud was void for

vagueness or should be limited to bribes or kickbacks.11

Therefore, the most appropriate standard of review is plain error

under Federal Rule of Criminal Procedure 52(b).12 United States

v. Marcus, 130 S. Ct. 2159, 2164 (2010). Pursuant to Federal

Rule of Criminal Procedure 52(b), an appellate court may

recognize a “plain error that affects substantial rights,” even if

that error was “not brought to the court’s attention.” Fed. R.

Crim. P. 52(b). Thus,

an appellate court may, in its discretion, correct an error

not raised at trial only where the appellant demonstrates

that (1) there is an “error”; (2) the error is “clear or

obvious, rather than subject to reasonable dispute”; [and]

(3) the error “affected the appellant’s substantial rights,

which in the ordinary case means” it “affected the

11

In particular, Appellants argued that the jury instructions

to Count 5 were invalid because the District Court required merely

a general finding of a violation of a common-law fiduciary

relationship between a public servant and the public, rather than

requiring a violation of a specific statute prohibiting non-disclosure

of a conflict of interest. In light of Skilling and the disposition of

Count 5, we need not address this claim.

12

While we have applied a plain error standard here, one

could view its application here as somewhat harsh, given the

defendant’s objection to the breadth of the honest services charge,

see supra note12, and a Supreme Court opinion that was not easy

to predict.

10

outcome of the district court proceedings.”

Marcus, 130 S. Ct. at 2164 (citing Puckett v. United States, 129

S. Ct. 1423, 1429 (2009)). “If all three conditions are met, an

appellate court may then exercise its discretion to notice a

forfeited error, but only if (4) the error seriously affect[s] the

fairness, integrity, or public reputation of judicial proceedings.”

Johnson v. United States, 520 U.S. 461, 467 (1997) (quotation

marks and citation omitted).

i. Plain Error Review

The first inquiry is whether the District Court erred

because it failed to charge the jury in accordance with the

Supreme Court’s limitation of honest services fraud in Skilling.

The District Court charged the jury, consistent with the

Indictment, that a conviction with respect to Count 5,

“Conspiracy to Use the U.S. Mail to Defraud the Public of

Defendant James’s Honest Services,” could be found if James

breached one or more of the following three duties of honest

services as a public official owed to the State of New Jersey and

the City of Newark:

(i) . . . knowingly committing acts related to his official

positions that were unauthorized exercises of his official

functions for the purpose of obtaining and receiving

money and benefits for himself and others from the

governments that he represented, contrary to N.J. Stat.

Ann. § 2C:30–2;13

13

New Jersey Statute § 2C:30-2 states in pertinent part that,

[a] public servant is guilty of official misconduct when,

with purpose to obtain a benefit for himself or another or

to injure or to deprive another of a benefit . . . [h]e

commits an act relating to his office but constituting an

unauthorized exercise of his official functions, knowing

that such act is unauthorized or he is committing such act

in an unauthorized manner.

11

(ii) as part of his fiduciary duty and his obligation

pursuant to the circumstances set forth in Title 18, United

States Code, Section 666(a)(1)(A),14 to refrain from

stealing, taking by fraud, misapplying and

misappropriating the assets of his public employers; and

(iii) as part of his fiduciary duty, to disclose conflicts of

interest to his public employers in official matters over

which defendant JAMES exercised, and attempted to

exercise, official authority and discretion, and to recuse

himself where he had such conflicts of interest.

Appendix on Behalf of Appellant Tamika Riley (“RA”) 152–53.

As an introduction to all three, however, the District Court

instructed the jury that honest services fraud does not require a

scheme to defraud another to obtain money or property, and

could instead be based on a violation of a duty of honest, faithful

and disinterested service.15 The law of this circuit, prior to

N. J. Stat. Ann. § 2C:30-2.

14

Section 666(a)(1)(A), in its pertinent part, makes any agent

of a State or local government who “embezzles, steals, obtains by

fraud, or otherwise without authority knowingly converts to the use

of any person other than the rightful owner or intentionally

misapplies . . . property,” liable for a federal offense. 18 U.S.C.

§ 666(a)(1)(A).

15

The District Court Judge specifically instructed the jury

that

[s]ince honest services mail fraud does not require a scheme

to defraud another to obtain money or property, I will now

instruct you on what a scheme to defraud another of honest

services means . . . . [T]he right to honest services is the

right that comes from a relationship of trust that one forms

with another individual or with an institution. This is

known in the law as a fiduciary relationship. [A] fiduciary

is prohibited from acting to enrich himself on behalf of the

principal. Since the fiduciary acts and speaks for the

principal, the fiduciary also owes the principal that he

12

Skilling, did not require a different charge than that given by the

District Court Judge here. See United States v. Antico, 275 F.3d

245, 264 (3d Cir. 2001) (holding that honest services fraud

constituted a duty “to disclose material information affecting an

official’s impartial decision-making and to recuse himself . . .

regardless of a state or local law codifying a conflict of

interest”). In light of Skilling, however, the failure to limit

honest services fraud to “bribes and kickbacks,” Skilling, 130 S.

Ct. at 2928, now constitutes legal error, see United States v.

Retos, 25 F.3d 1220, 1229 (3d Cir. 1994) (stating that under

Rule 52(b) “[a] deviation from a legal rule is error” (internal

quotation marks and citation omitted)).

For the same reason the second inquiry is met. An

“error” is plain, clear, or obvious “where the error was unclear at

the time of trial but becomes clear on appeal because the

applicable law has been clarified.” Retos, 25 F.3d at 1230

(citing United States v. Olano, 113 S. Ct. 1770, 1777 (1993)). In

April 2008, at the time of trial, there was no plain error in the

honest services fraud charge given by the District Court Judge

because it was consistent with the law of this circuit. See

Antico, 275 F.3d at 264. The error became clear and obvious,

however, when the Supreme Court’s decision in Skilling, on

June 24, 2010, narrowed honest services fraud to “bribes and

kickbacks.” Skilling, 130 S. Ct. at 2928. Thus, the error at issue

here is a plain error and not “subject to reasonable dispute.”

Marcus, 130 S. Ct. at 2164 (internal quotation marks and citation

omitted).

The third inquiry is whether the district court’s plain error

affected appellant’s substantial rights. As mentioned above, this

serves a duty of frankness and candor in matters that are of

material importance to the principal. . . . A public official

is a fiduciary for the public and the government he serves .

. . [and] owes a duty of honest, faithful and disinterested

service to the public and that official’s public employer.

SA 1202:59–1203:62.

13

normally occurs where the error “affect[s] the outcome of the

district court proceedings.” Marcus, 130 S. Ct. at 2164

(quotation marks and citation omitted). The Government

concedes that the third alternative description of duty charged to

the jury under honest services fraud is now “invalid” in light of

Skilling, but argues that James and Riley would have been

convicted under either of the other two theories of duty. “[I]f the

jury was instructed on alternative theories of guilt and may have

relied on an invalid one” it is subject to harmless-error review.

Hedgpeth v. Pulido, 129 S. Ct. 530, 530, 532–33 (2008) (per

curiam). Thus, we are called upon to perform what is essentially

a harmless error inquiry.

ii. Harmless Error Review

“The test for harmless error is whether it is ‘highly

probable that the error did not contribute to the judgment.’”

United States v. Vosburgh, 602 F.3d 512, 540 (3d Cir. 2010)

(citing United States v. Dispoz-O-Plastics, Inc., 172 F.3d 275,

286 (3d Cir. 1999)). The Government argues, in essence, that

the error is harmless because the first two alternative theories of

duty under Count 5 remained valid bases for finding a Count 5

conspiracy post-Skilling.

This argument is not persuasive, however, because of the

manner in which the now-erroneous description of honest

services fraud was interwoven throughout the Count 5 jury

charge. The very title of Count 5, “Conspiracy to Use the U.S.

Mail to Defraud the Public of Defendant James’s Honest

Services,” invites the application of the District Court’s charge

to the jury regarding honest services fraud to the entire count.

As indicated, the jury instructions for Count 5 began with an

over-arching umbrella description of James’s fiduciary duty as a

public official, which included the now-erroneous honest

services definition. Shortly thereafter, the instructions charged

that the “Indictment alleges that the Defendant James had the

following [three] duties.” SA 1203:62. Although the

Government argues that these three theories are “alternative”

forms of conspiracy liability, and the first two are separate and

distinct from James’s violation of honest services obligations

14

based on his failure to disclose his conflict of interest, the

District Court Judge did not make such a clear distinction in his

charge to the jury. Rather, the broad definition of honest

services seems to apply to all three duties.

While it is true that the jury convicted James of a

substantive violation referred to in one of the alternative

descriptions of duty, 18 U.S.C. § 666 (Count 4), we cannot be

certain of how the jury utilized the broad definition of an honest

services violation given in connection with the entire conspiracy

charge. This is particularly true because the charge was

described as “Conspiracy to Use the U.S. Mail to Defraud the

Public of James Honest Services,” and because of the general

manner in which the Government argued for conviction on

Count 5. Rather, it appears highly probable that the now-

erroneous honest services fraud definition contributed to the

convictions on Count 5. The plain error, therefore, was not

harmless.

Lastly, because all three conditions are met this Court can

choose to exercise its discretion only if “the error seriously

affect[s] the fairness, integrity, or public reputation of judicial

proceedings.” United States v. Cotton, 535 U.S. 625, 631

(2002). “We have held previously that affirming a conviction

where the government has failed to prove each essential element

of the crime beyond a reasonable doubt affect[s] substantial

rights, and seriously impugns the fairness, integrity and public

reputation of judicial proceedings.” United States v. Jones, 471

F.3d 478, 480 (3d Cir. 2006) (quotation marks and citations

omitted). It is clear that as far as a conspiracy to commit honest

services fraud, as set forth in 18 U.S.C. § 1346, the Government

did not prove that fraud occurred by means of bribes or kickback

as is now required by Skilling. Appellants focused on the

definition of honest services because that was the heart of Count

5. In the context of this case, where the fraudulent act is the

non-disclosure of a conflict of interest, it would demean the

judicial process to attempt to put the genie back in the bottle by

essentially rewriting the charge to the jury on Count 5 and

assuming the jury made distinctions the Government did not

bring out in its summation.

15

3. Prejudicial Spillover

James argues that all of his convictions hinged on the

honest services doctrine and thus all the Land Fraud Counts must

fall with Count 5. “Generally, invalidation of the convictions

under one count does not lead to automatic reversal of the

convictions on other counts.” United States v. Pelullo, 14 F.3d

881, 897 (3d Cir. 1994). Rather, prejudicial spillover analysis

requires a finding that “there was a spillover of evidence from

the reversed count that would have been inadmissible at a trial

limited to the remaining count.” United States v. Cross, 308

F.3d 308, 319 (3d Cir. 2002). “If the answer is ‘no,’ then our

analysis ends, as the reversed count cannot have prejudiced the

defendant.” Id. at 318. If the answer is “yes,” however, “we

must ask whether the error was harmless, that is, whether it is

highly probable that the error did not prejudice the jury’s verdict

on the remaining counts.” United States v. Gambone, 314 F.3d

163, 181 (3d Cir. 2003). Harmlessness is determined by

conducting a four-part inquiry into whether,

(1) the charges are intertwined with each other; (2) the

evidence for the remaining counts is sufficiently distinct

to support the verdict on th[ose] counts; (3) the

elimination of the invalid count significantly changed the

strategy of the trial; and (4) the prosecution used language

of the sort to arouse the jury.

United States v. Murphy, 323 F.3d 102, 118 (3d Cir. 2003)

(quotation marks omitted) (citing Pelullo, 14 F.3d at 898–99).

With respect to the first Cross prong, whether there is

now-inadmissible evidence stemming from the reversed count,

post-Cross cases have universally analyzed the admissibility of

the evidence supporting the fallen count in a hypothetical trial

limited to the remaining count. See e.g., United States v. Lee,

612 F.3d 170, 180 (3d Cir. 2010); United States v. Atiyeh, 402

F.3d 354, 373–74 (3d Cir. 2005); Murphy, 323 F.3d at 118;

Gambone, 314 F.3d at 181 (3d Cir. 2003). Appellants, however,

have not pointed to any specific evidence admitted at trial that

would now be inadmissible as a result of the reversal of Count 5.

16

Nonetheless, James argues that there is indeed spillover

prejudice because of the intertwined nature of the Land Fraud

Counts (Counts 1–5) and the pervasive theme of honest services

fraud throughout this case. In order to address Appellants’

arguments we will assume arguendo that there is some leeway in

the application of the Cross threshold inquiry.

Counts 1–3 charged James and Riley with substantive

mail fraud as part of the scheme to convey City-owned property

to Riley between 2000 and 2006, in violation of 18 U.S.C.

§ 1341. The federal mail fraud statute states in relevant part

that,

[w]hoever, having devised or intending to devise any

scheme or artifice to defraud, or for obtaining money or

property by means of false or fraudulent pretenses,

representations, or promises . . . deposits or causes to be

deposited any matter or thing whatever to be sent or

delivered by any private or commercial interstate carrier .

. . any such matter or thing, shall [have committed a

federal offense].

18 U.S.C. § 1341. Thus, in order to find a defendant guilty of

mail fraud under § 1341, the prosecution must prove that: (1)

there was a scheme to defraud; (2) the defendant acted with the

intent to defraud; and (3) the defendant used the mails to further

or carry out the scheme. United States v. Jimenez, 513 F.3d 62,

81 (3d Cir. 2008) (citing United States v. Pharis, 298 F.3d 228,

234 (3d Cir. 2002)).

Count 4 charged James and Riley with fraud and

misapplication of public property involving a local government

receiving federal funds, in connection with the fraudulent sale of

City-owned properties to Riley in 2004 and 2005, in violation of

18 U.S.C. § 666(a)(1)(A). Section 666(a)(1)(A), in its pertinent

part, states that any agent of a State or local government who

“embezzles, steals, obtains by fraud, or otherwise without

authority knowingly converts to the use of any person other than

the rightful owner or intentionally misapplies, property,” is liable

17

for a federal offense. 16 18 U.S.C. § 666(a)(1)(A).

As discussed above, Count 5 charged James and Riley

with “Conspiracy to Use the U.S. Mail to Defraud the Public of

Defendant James’s Honest Services,” contrary to 18 U.S.C.

§§ 1341 and 1346, in violation of 18 U.S.C. § 371.17 Section

1346 states that “[f]or 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.” 18

U.S.C. § 1346. In all five of the Land Fraud Counts, fraud,

particularly fraud in the form of an undisclosed conflict of

interest, was the common thread and the core element of the

charge. The question remains, however, as to whether there is

any difference between the fraud charged under §§ 1341 and 666

and the honest services fraud charged under § 1346. This

distinction is best seen through a review of the general history of

mail fraud and honest services mail fraud.

Congress enacted the original mail fraud provision in

1872 and proscribed the use of the mails to advance “any scheme

or artifice to defraud.” McNally v. United States, 483 U.S. 350,

356 (1987). In 1909, Congress codified the Supreme Court’s

decision in Durland v. United States, 161 U.S. 306 (1896), and

confirmed that the purpose of the mail fraud statute was to

protect property rights. McNally, 483 U.S. at 357. The amended

16

Section 666 was “designed to create new offenses to

augment the ability of the United States to vindicate significant acts

of theft, fraud, and bribery involving Federal monies which are

disbursed to private organizations or State and local governments

pursuant to a Federal program.” United States v. Cicco, 938 F.2d

441, 444 (3d Cir. 1991) (internal quotation marks and citation

omitted).

17

Section 371 states that it is a federal offense “[i]f two or

more persons conspire either to commit any offense against the

United States, or to defraud the United States, or any agency

thereof in any manner or for any purpose, and one or more of such

persons do any act to effect the object of the conspiracy . . . .” 18

U.S.C. § 371.

18

statute prohibited, as it does today, “any scheme or artifice to

defraud, or for obtaining money or property by means of false or

fraudulent pretenses, representations, or promises.” 18 U.S.C.

§ 1341. Subsequent Courts of Appeals decisions emphasized

“Congress’ disjunctive phrasing . . . [and] interpreted the term

‘scheme or artifice to defraud’ to include deprivations not only

of money or property, but also of intangible rights.” Skilling,

130 S. Ct. at 2926. Thus, the doctrine of honest services fraud

was born and the Supreme Court in Skilling attributes its

ultimate development to the Fifth Circuit’s opinion in Shushnan

v. United States, 117 F.2d 110 (1941). Id.

Over the next forty-six years, Courts of Appeals most

often applied the theory of honest services fraud to the bribery of

public officials. Id. Courts eventually extended the theory to the

private sector and “by 1982, all Courts of Appeals had embraced

the honest-services theory of fraud.” Id. at 2927. In 1987,

however, the Supreme Court addressed the constitutionality of

the honest-services doctrine and limited the mail fraud statute to

the protection of property rights. McNally, 483 U.S. at 359–60.

The following year, Congress responded unequivocally and

unambiguously. Congress amended the law and reinstated the

intangible right to honest services under the Anti-Drug Abuse

Act of 1988. Cleveland v. United States, 531 U.S. 12, 19–20

(2000); see 18 U.S.C. § 1346.

Over the next two decades courts were “[a]lert to

§ 1346’s potential breadth” and as a result “the Courts of

Appeals [were] divided on how best to interpret the statute.”

Skilling, 130 S. Ct. at 2928. The Supreme Court noted that

although circuit courts have disagreed on several issues,

including “whether § 1346 prosecutions must be based on a

violation of state law,18 . . . whether a defendant must

contemplate that the victim suffer economic harm, . . . [or]

whether the defendant must act in pursuit of private gain,” Id. at

2928 n.37, none of the courts “had throw[n] out the statute as

18

This was the focus of Appellants disagreement with the

District Court’s honest services charge.

19

irremediably vague.” Id. at 2928. Thus, Skilling sought to

construe the intent of Congress in its promulgation of § 1346 and

held that Ҥ 1346 criminalizes only the bribe-and-kickback core

of the pre-McNally case law.” Id. at 2931.

In observing this back and forth between the courts and

Congress, it appears that to distinguish between the fraud of

§§ 1341 and 666, as opposed to that of § 1346, one must look to

the object of the deprivation and not the underlying fraudulent

act. The underlying fraudulent act (e.g., the misrepresentation or

omission of a material fact) can be exactly the same in all three

provisions, as is the case here.19 Consequently, despite James’s

contention, the mere fact that Counts 1–3 charge Appellants with

a “Scheme to Improperly Favor Close Companion Through

Fraudulent Sale of City Properties,” does not render the counts

automatically invalid under Skilling. Although, as indicated, the

underlying fraudulent act in these counts is non-disclosure of a

conflict of interest, which makes it seem very near to honest

services fraud, what distinguishes Counts 1–3 from honest

services fraud is the object of the fraud.

Under § 1341, the deprivation at issue is “money or

property.” Under § 666(a)(1)(A), the deprivation is also

“property.” Under § 1346, the deprivation of one’s honest

services is “biased decision making for personal gain.” 20 United

19

Fraud in and of itself is difficult to construe and “is not

capable of precise definition.” United States v. Goldblatt, 813 F.2d

619, 624 (3d Cir. 1987). We have stated that fraud can be

“measured in a particular case by determining whether the scheme

demonstrated a departure from fundamental honesty, moral

uprightness, or fair play and candid dealings in the general life of

the community.” Id.

20

Because § 1346 is only applicable to the mail and wire

fraud chapter of Title 18, the honest services doctrine does not

apply to the “fraud of property” of § 666(a)(1)(A). Section 1346

states, “[f]or 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.” 18 U.S.C. § 1346.

20

States v. Antico, 275 F.3d 245, 264 (3d Cir. 2001).

Nonetheless, the Government need not prove actual loss to the

locality to satisfy the elements of the mail fraud statute. United

States v. Copple, 24 F.3d 535, 544 (3d Cir. 1994). It seems,

therefore, that the risk of exposure to such a loss of money or

property is sufficient to distinguish §§ 1341 and 666(a)(1)(A)

fraud from honest services fraud.21 See United States v. Asher,

854 F.2d 1483, 1494 (3d Cir. 1988).22 Here, the District Court

“This chapter” refers to Chapter 63, “Mail Fraud and Other Fraud

Offenses.” Section 666, on the other hand, is in Chapter 31,

“Embezzlement and Theft.”

21

With respect to Count 4, intentional misapplication of

property under § 666(a)(1)(A), is also a possible basis for

conviction, which implicates a risk of loss of tangible property.

22

In Asher, we illuminated this distinction between what is

deprived under mail fraud as opposed to that of honest services

fraud. As mentioned above, the Supreme Court in McNally

invalidated the honest services doctrine and scaled back § 1341

mail fraud to “fraud of money or property.” Before Congress

reinstated the honest services doctrine, this circuit and many others

were required to distinguish between those cases that were raised

pursuant to the recently invalidated honest services doctrine and

those that properly fell within the scope of a “scheme to defraud of

money or property.” See, e.g., Asher, 854 F.2d at 1489–1494. In

making this distinction, we determined that,

Although the outcomes in the post-McNally cases . . .

var[ied] depending on the facts, indictments, and jury

instructions of the particular case, a common thread running

through each of these cases [could] be discerned. While we

recognize that cases may fall on either side of the

McNally/Carpenter line, those cases that have sustained mail

fraud convictions have done so where the “bottom line” of the

scheme or artifice had the inevitable result of effecting

monetary or property losses to the employer or to the state.

This common thread appears despite references in the

indictments, proofs, or instructions to violations of intangible

21

charged that the alleged scheme must contemplate depriving

another of money or property. The Government demonstrated

that the scheme was to get property into Riley’s control when

others more qualified than Riley were waiting in line for these

properties. Whether or not the City of Newark actually lost

money or experienced significant delay in the rehabilitation of

the properties involved in Riley’s transactions, there was risk of

that occurrence because of her lack of experience and privileged

position. Neither is likely to encourage optimal performance

under the program. In fact, Riley did not perform her contractual

obligations. The jury had these facts before it when it

considered the Appellants’ fraudulent intentions and whether the

scheme was to deprive another of money or property. Further,

the District Court did not refer to honest services fraud in its jury

instruction on mail fraud in the earlier counts. There seems to be

little likelihood that the jury used the conflict of interest

underlying all of the fraud claims to satisfy the additional

elements of the separately charged and argued Counts.

Consequently, there is no purpose in further addressing the four-

part harmlessness test as we are convinced that this case presents

no exception warranting departure from step-one of the Cross

analysis. There was no evidence relevant to Count 5 that would

not have been admitted with respect to Counts 1–4.

rights.

Essentially, therefore, where rights are involved whose

violation would lead to no concrete economic harm, and

where those rights are the only rights involved in the case,

McNally’s proscriptions would prevent upholding conviction

on appeal. Where, on the other hand, a violation of the rights

involved would result in depriving another of something of

value, and the indictment, the proofs and the instructions are

based on that fact, then the presence of intangible rights

language will not prove fatal on appeal.

Asher, 854 F.2d at 1494. This discussion leads to the conclusion

that mail fraud under § 1341 requires that the fraud, at the very

least, expose the allegedly defrauded party to actual or potential

loss of money or property.

22

B. Motion for a Judgment of Acquittal

James and Riley assert that the District Court committed

reversible error when it denied their motion for a judgment of

acquittal on Counts 1–5. Because of our disposition as to Count

5, we will address this allegation with respect to Counts 1–4

only. “We exercise plenary review over a district court’s grant

or denial of a motion for acquittal based on the sufficiency of the

evidence, applying the same standard as the district court.”

United States v. Silveus, 542 F.3d 993, 1002 (3d Cir. 2008).

In reviewing the sufficiency of the evidence, “we must

view the evidence in the light most favorable to the

Government.” United States v. Pearlstein, 576 F.2d 531, 534

(3d Cir. 1978). This Court affords “deference to a jury’s

findings . . . [and] draw[s] all reasonable inferences in favor of

the jury verdict.” United States v. Anderskow, 88 F.3d 245, 251

(3d Cir. 1996) (internal quotation marks and citation omitted).

The jury’s verdict will be overturned “only when the record

contains no evidence, regardless of how it is weighted, from

which the jury could find guilt beyond a reasonable doubt.”

United States v. Miller, 527 F.3d 54, 62 (3d Cir. 2008) (quoting

United States v. Thayer, 201 F.3d 214, 218–19 (3d Cir. 1999)).

Because the reviewing court must treat all of the incriminating

evidence as true and credible, “[t]he burden on a defendant who

raises a challenge to the sufficiency of the evidence is extremely

high.” United States v. Lore, 430 F.3d 190, 203–04 (3d Cir.

2005) (citing United States v. Serafini, 233 F.3d 758, 770 (3d

Cir. 2000)).

As discussed above, to sustain a conviction of Counts

1–3, mail fraud under § 1341, the prosecution must prove that:

(1) there was a scheme to defraud; (2) the defendant acted with

the intent to defraud; and (3) the defendant used the mails to

further or carry out the scheme. Jimenez, 513 F.3d at 81 (citing

Pharis, 298 F.3d at 234). Count 4 required the Government to

prove the following five elements: (1) James was an agent of the

government of the City of Newark; (2) the City of Newark was a

local government, that in a one-year period received federal

benefits under the federal program involving a grant, contract,

23

subsidy, loan, guarantee, insurance, or other form of Federal

assistance in excess of $10,000; (3) James embezzled, stole,

obtained by fraud, or otherwise without authority knowingly

converted or intentionally misapplied property; (4) such property

belonged to, was in the care, custody, or control of the City of

Newark; and (5) the value of such property obtained by his

conduct was $5000 or more. 18 U.S.C. § 666(a). Aiding and

abetting violations of §§ 1341 and 666 was also charged.

1. James

James challenges the sufficiency of the evidence with

respect to the “scheme to defraud” element of Counts 1–4.

Specifically, James argues that the Government did not prove

fraud because: (1) the intimate relationship between James and

Riley was not proven; (2) James did not “improperly” favor

Riley because Riley was not treated any differently than any

other prospective developer; (3) James’s only “act” with respect

to Riley and the properties was ministerial in nature because he

merely signed contracts that were previously reviewed by the

Corporate Counsel and approved by the Municipal Council; (4)

any omission of their alleged relationship was not material

because the existence of any relationship between James and

Riley would not have disqualified Riley from acquiring property;

and (5) James did not receive any benefit because of the non-

disclosure. These allegations will be addressed in turn.

First, Riley conceded at trial that they had an intimate

relationship. Further, the Government presented evidence that

indicates that Appellants went on multi-day vacations to

California and the Dominican Republic, and had frequent

interactions of both a personal and business nature. For

example, James and Riley attended sporting events together,

such as the U.S. Open and boxing matches, and appeared at a

Broadway performance together in New York City.

Additionally, Johnny Jones (“Jones”), James’s close political

confidant, personally helped Riley obtain a lease to City-owned

office space for TRI even though his position in the Newark

Government did not normally involve such minor matters.

Indeed, when Riley was not satisfied with the renovations of the

24

office space, she threatened to contact the Mayor regarding the

issue. James attended the grand opening of the TRI office and

cut the ribbon at the occasion. James also directed his security

detail, while on duty, to use his credit card, purchase, and install

an air conditioner in the bedroom of Riley’s apartment. A

member of this same security detail testified that on one

occasion James, upon hearing that Riley called, stated he did not

want to talk to Riley because she was “dating someone.” In light

of this evidence presented by the Government, a reasonable jury

could have found sufficient evidence to support a finding of an

intimate relationship between James and Riley.

Second, James argues that he did not “improperly” favor

Riley because Riley was not treated any differently than any

other prospective developer. The facts, taken in a light most

favorable to the Government, indicate that Riley had a “twenty-

four direct connect” to James, and that James was Riley’s

“‘hook’ in the City.” This relationship resulted in Riley’s access

to City-owned properties that were otherwise unavailable to

most people without development experience. Prospective

buyers were supposed to have personal experience in the

construction of residential property and the ability to obtain

financing for the projects. After the pre-qualification process

was abandoned, the applicant was supposed to be surrounded by

the right “team” of people who had the experience or financial

capacity to deliver what was required under the SWRP. The

evidence suggests that Riley had none of the above. Franklin

knew that Riley had no experience as a real estate developer and

would not have qualified to acquire SWRP properties as the

program was initially operated. Further, Riley did not find a

developer for the properties until after she was awarded the

contracts for the Phase I properties, and thus did not otherwise

have a “team” surrounding her when she received the first

properties.

Despite this fact, James’s Deputy Mayor and Director of

DEHD, Alfred Faiella (“Faiella”), brought Riley and her friend

to Franklin’s office and told him that James wanted Franklin to

25

“help these ladies acquire some property.” 23 Riley subsequently

received a list of City-owned property available for purchase and

in April 2000, Riley sent a letter to James thanking him for

“opening doors” and helping her acquire City-owned properties.

The Government also presented two witnesses who were

experienced real estate developers in the Newark area, and were

unable to obtain approval for City-owned property. In the case

of Wendee Bailey (“Bailey”), because she was unable to obtain

City property, she began by renovating, financing, and finding

buyers for two of Riley’s Phase I properties. In the end,

however, Riley sold Bailey the subsequent properties outright

without undertaking any renovations of her own. In one

instance, Bailey purchased three properties from Riley for

$80,000—properties for which Riley paid a total of $18,000.

Consequently, the jury could have reasonably inferred that James

treated Riley differently from other developers and improperly

favored her.

Third, James argues that his only “act” with respect to the

properties was purely ministerial because he merely signed

contracts that were previously reviewed by the Corporate

Counsel and approved by the Municipal Council. The evidence

presented, however, allows for a different conclusion regarding

James’s control over the SWRP process. The SWRP was

considered James’ “baby.” James met frequently with his

Deputy Mayor Faiella, who was also Director of the DEHD, and

Faiella occasionally told Franklin that James wanted certain

persons to receive particular parcels of SWRP property.

In at least one instance, when Franklin did not follow up

on the request by someone “sent” by James, James called

Franklin personally and directed him to meet with the applicant

23

James contests the admissibility of this statement. As

discussed below, however, the District Court did not abuse its

discretion when it admitted the alleged hearsay statement. See

infra Part II.E.

26

again.24 James also demonstrated his control over the SWRP

process by informing friends as to how they could acquire

property through the SWRP and indicating he would “take care

of” their application. In the case of Prentis Thompson

(“Thompson”), James showed Thompson a stack of paperwork

regarding applications for SWRP properties that James kept in

his home. James revealed detailed knowledge about which

parcels were available for sale and who had acquired such

properties in the past and represented that he was “in charge” of

the process.

Further, James insured his ability to select eligible people

for SWRP properties through his position as a New Jersey State

Senator. James and the Municipal Council disagreed as to who

had the power to select eligible persons to receive City property

under the SWRP. After the Municipal Council prevailed in

litigation against the Mayor regarding the issue, James

successfully sponsored legislation in 2004, Senate Bill 967, that

authorized the Mayor alone to exercise that power.

James was well aware that the City was transferring real

estate parcels to Riley. In his official capacity as Mayor, James

signed each of the contracts transferring the properties to TRI.

Riley maintained calendars and daily “agenda” lists containing

innumerable notations regarding her communications with James

about the status of her acquisitions of City-owned property from

2001 through 2006. James was also copied on a letter

“advising” Riley that certain City-owned properties were being

set aside for acquisition by her company.

Additionally, James was able to stop and start the

disposition of properties to Riley. In September 2002, Riley sent

24

James called Franklin and told him to meet James at a

furniture store in Newark, but Jackie Mattison (“Mattison”),

James’s former Chief of Staff, met Franklin there in his stead.

Mattison told Franklin that he wanted to acquire some property and

when Franklin failed to follow-up on Mattison’s request, James

called Franklin and directed him to meet with Mattison again.

27

Franklin a proposal for the purchase of the initial Phase III

properties, which was approved by the DEHD and the Municipal

Council. After the contracts were signed, but before Riley was

able to close on the Phase III properties, James informed

Franklin that the City “will not do any more business with

Tamika Riley until further notice,” and Riley never acquired

those properties. In 2004, however, Riley resumed her pursuit of

SWRP properties and the Municipal Council authorized the sale

of four other properties to Riley. Consequently, the jury could

have reasonably concluded that James’s relationship to the

SWRP was not purely ministerial.

James also argues that any control he may have exercised

over the SWRP process was “cured” by the review of each

contract conducted by the Newark Corporate Counsel, the City

Clerk’s office and the Municipal Council. A reasonable jury

could have concluded otherwise, however, because James does

not contest that he did not disclose his relationship with Riley.

As established above, there is sufficient evidence for a jury to

have concluded that Appellants had an intimate relationship.

The SWRP contracts for properties expressly prohibited an

official of Newark to “have any personal interest, direct or

indirect, in the Contract.” SA 1530. The Government presented

two witnesses, Joanne Watson (“Watson”), former head of

Newark’s Corporate Counsel’s office, and Augusto Amador, a

Municipal Council member during the time at issue, who stated

that Appellants’ relationship would have been material to their

decision to approve the contracts. Thus, the evidence taken in a

light most favorable to the Government suggests that review of

the contracts by other City government entities could not have

“cured” James’s control over the SWRP process because they

did not possess the information necessary to properly assess the

legitimacy of the contracts.

Fourth, James argues that any omission of their alleged

relationship was not material because the existence of any

relationship between James and Riley would not have

disqualified Riley from acquiring property. A misrepresentation

or omission is material when it has a “natural tendency to

influence, or [is] capable of influencing, the decision of the

28

decisionmaking body to which it was addressed.” United States

v. Wells, 519 U.S. 482, 489 (1997) (quoting Kungys v. United

States, 485 U.S. 759, 770 (1988)). As discussed above, the

Government presented two witnesses who approved Riley’s

contracts—a Municipal Council member and the former head of

the Newark Corporate Counsel’s Office—and both stated that

they would have regarded Riley’s intimate relationship with

James as material to the decision to approve the property

transaction. Watson stated that even if the relationship had been

terminated at the time James signed the contracts it would have

been material to the Corporate Counsel’s decision and thus

should have been disclosed. Consequently, a reasonable jury

could have found James’ omission of his intimate relationship

with Riley was material and thus, even if the relationship would

not have per se barred Riley from acquiring property, it should

have been disclosed.

Fifth, James argues that there can be no extension of

criminal liability for a fraud where the defendant did not receive

any cognizable benefit because of the non-disclosure. To

support a fraud conviction it is “not necessary for the

Government to demonstrate that [the defendant] personally

benefitted from [the] scheme.” United States v. Goldblatt, 813

F.2d at 624. Even if a benefit to the defendant was required,

however, a reasonable jury could have concluded that James

benefitted through his personal relationship with Riley. By

providing a means for Riley to gain income from the City’s

assets, James was otherwise relieved from expending his own.

Thus, a reasonable jury could have concluded that James did

receive a cognizable benefit even though he did not accept

directly any of the proceeds from Riley’s sale of the properties.

2. Riley

Lastly, Riley argues that she did not have the requisite

intent to commit § 1341 mail fraud (Counts 1–3) and that the

evidence only supported a conclusion that Riley intended to

comply with her contractual obligations as she understood them

with the advice of counsel. In light of the evidence, however, a

reasonable jury could conclude that Riley had the requisite intent

29

to defraud. The SWRP contract specifically states that “[t]he

Redeveloper represents and agrees that its purchase of the

Property, and its other undertakings pursuant to the Contract,

are, and will be used, for the purpose of redevelopment of the

Property and not for speculation in land holding.” SA 1456 ¶

17(a). Riley developed two of the four properties from Phase I

in accordance with her obligations under the contract. Riley

submitted pictures of the two redeveloped parcels to support her

application for the Phase II properties, but omitted mention of

the two Phase I properties she sold without renovation. Riley

sold the Phase II properties without making any improvements.

Again, with respect to the Phase III properties, Riley asserted

that she planned to redevelop the properties and that she had

renovated the properties from Phases I and II. Riley again sold

the Phase III properties without undertaking any improvements

to the properties. Juries may infer intent from circumstantial

evidence. See United States v. D’Amato, 39 F.3d 1249, 1256

(2d Cir. 1994) (stating that in determining sufficiency of the

evidence “pieces of evidence must be viewed not in isolation but

in conjunction . . . and the jury’s verdict may be based on

circumstantial evidence” (internal quotation marks and citations

omitted)). Thus, a reasonable jury could have concluded that

Riley’s intent to defraud was demonstrated by her promises to

renovate the SWRP properties and her failure to fulfill those

commitments for all but two of the properties she received.

Further, for similar reasons, Riley’s intent to defraud is

not abated by any alleged reliance on her lawyers. Riley’s

former attorneys testified that they did not “advise her” that her

activities violated her contractual obligations. If Riley had

discussed the legality of her schemes with her lawyers, and they

advised her that her actions were legal, such evidence might

have refuted her intent to defraud the City of Newark. See

United States v. Bilzerian, 926 F.2d 1285, 1292 (2d Cir. 1991)

(stating in the context of securities law that “conversations with

counsel regarding the legality of his schemes would have been

directly relevant in determining the extent of his knowledge and,

as a result, his intent”). The testimony indicates, however, that

Riley employed the attorneys primarily to help her sell the

properties and neither provided counsel regarding her

30

obligations under the SWRP. What the evidence does show, as

mentioned above, is that the SWRP applications and contracts

were clear that Riley had an obligation to renovate the

properties. Riley demonstrated her understanding of this

obligation by her misrepresentation to the Municipal Council

that she renovated the properties she sold and her promises to

undertake such renovations with respect to future properties.

Thus, a reasonable jury could have determined that the evidence

was sufficient to demonstrate Riley’s intent to defraud the City

of Newark even if her lawyers did not advise her of the nature of

her acts.

In conclusion, a review of the evidence presented at trial

leads us to conclude that a rational jury could have found that

James defrauded the City of Newark and Riley had the requisite

intent to defraud the City.25 The District Court did not err when

it denied a motion for judgment of acquittal based on the

insufficiency of the evidence. In proper deference to the jury’s

verdict, the convictions for Counts 1–4 will be affirmed.

C. Joinder and Lack of Severance of Riley’s Tax

Offense Counts

We review de novo whether joinder is proper under

Federal Rule of Criminal Procedure 8(b). See Jimenez, 513 F.3d

at 82. We review a district court’s denial of a motion to sever

under Federal Rule of Criminal Procedure 14 for abuse of

25

The Government argues that to convict James on Count 4,

the jury was not required to find that he acted with the intent to

defraud or participated in a scheme to defraud. Rather, the

conviction could have been based on a finding that James

“misapplied” City property. The Government argues that the

evidence proved that James misapplied the SWRP properties by

causing them to be transferred to Riley, not for the authorized

purpose of renovation, but so she could improperly receive the

proceeds of flipping the properties, an unauthorized purpose.

Because we find sufficient evidence for the jury to have convicted

James on the basis of fraud we need not address this argument.

31

discretion. See Lore, 430 F.3d at 205.

1. Joinder of the Land Fraud Counts and

the Tax Fraud Counts

James asserts that the District Court erred in joining the

Land Fraud Counts (Counts 1–5), in which both James and Riley

are implicated, with Riley’s Tax Fraud Counts (Counts 10–13)

under Federal Rule of Criminal Procedure 8(b).26 Rule 8(b)

states:

The indictment or information may charge 2 or more

defendants if they are alleged to have participated in the

same act or transaction, or in the same series of acts or

transactions, constituting an offense or offenses. The

defendants may be charged in one or more counts

together or separately. All defendants need not be

charged in each count.

Fed. R. Crim. P. 8(b). Under Rule 8(b) there must be a

“transactional nexus” between the defendants for the counts to

be properly joined. See Jimenez, 513 F.3d at 82–83.

Additionally, there is a strong preference to try defendants

named in a single indictment together in order to “conserve state

funds, diminish inconvenience to witnesses and public

authorities, and avoid delays in bringing those accused of crime

to trial.” Id. at 82 (quoting United States v. Lane, 474 U.S. 438,

449 (1986)).

James argues that Riley’s tax offenses were completely

separate from the fraud counts and thus were not within the

purview of Rule 8(b). Despite James’s contention, “[j]oinder of

tax and non-tax claims is not unusual.” United States v. McGill,

26

We note that on appeal James asserts only that he was

prejudiced by joinder of Riley’s Tax Fraud Counts (Counts 10–13)

and not Riley’s Housing Fraud Counts (Counts 6–9). Thus, we will

addresses the issue of joinder of Riley’s Tax Fraud Counts (Counts

10–13) only.

32

964 F.2d 222, 241 (3d Cir. 1992). “It is appropriate to combine

tax charges against one defendant with fraud charges against that

same defendant and other codefendants if the tax evasion

charges arise directly out of the common illicit enterprise.”

United States v. Bibby, 752 F.2d 1116, 1121 (6th Cir. 1985).

In this case, it was Riley’s failure to report income earned

from the land fraud scheme that led to her Tax Fraud Counts.

Because the tax evasion arose directly from the land fraud

proceeds, it was in the interest of judicial efficiency to join these

claims. See Jimenez, 513 F.3d at 82. Thus, the District Court

properly joined the Land fraud Counts and Riley’s Tax Fraud

Counts under Federal Rule of Criminal Procedure 8(b).

2. Motion For Severance

James argues that the District Court abused its discretion

when it denied his motion for severance because the inclusion of

the Tax Fraud Counts prejudiced the jury against him.27 The

Federal Rules of Criminal Procedure permits a court to sever

counts that have been properly joined under Rule 8(b) “[i]f the

joinder of offenses or defendants in an indictment . . . appears to

prejudice a defendant . . . .” Fed. R. Crim. P. 14. Severance

should only be granted “if there is a serious risk that a joint trial

would compromise a specific trial right of one of the defendants,

or prevent the jury from making a reliable judgment about guilt

or innocence.” United States v. Urban, 404 F.3d 754, 775 (3d

Cir. 2005) (quoting Zafiro v. United States, 506 U.S. 534, 539

(1993)). A defendant must “pinpoint clear and substantial

prejudice resulting in an unfair trial.” United States v. McGlory,

968 F.2d 309, 340 (3d Cir. 1992) (internal quotation marks and

citation omitted). Thus, “[i]t is not enough to show that

severance would have increased the defendant’s chances of

acquittal.” Id.

27

It is not entirely clear from James’ brief whether he is

appealing the District Court’s denial of severance. The Court has

chosen to address the issue as if James had raised the discretionary

issue properly on appeal.

33

In this case James has not pinpointed any specific

instance of substantial prejudice resulting in an unfair trial.

Rather, James merely asserts that the jury was unable to

compartmentalize the evidence. Juries, however, “are presumed

to follow their instructions.” Zafiro, 506 U.S. at 540–41 (citing

Richardson v. Marsh, 481 U.S. 200, 211 (1987)). The District

Court specifically instructed the jury that it “must separately

consider the evidence against each defendant on each offense

charged, and . . . must return a separate verdict for each

defendant on each offense.” SA 1196:34. These strict

instructions are “persuasive evidence that refusals to sever did

not prejudice the defendants.” Lore, 430 F.3d at 206 (internal

quotation marks and citation omitted). Thus, there was no

“serious risk” of “compromis[ing] a specific trial right” by

keeping the Land Fraud Counts and the Tax Fraud Counts

joined. Urban, 404 F.3d at 775 (internal quotation marks and

citation omitted). The simple fact that the evidence produced at

trial was “not germane to all counts against” James, does not

entitle James to a separate trial. United States v. Console, 13

F.3d 641, 655 (3d Cir. 1993); accord McGlory, 968 F.2d at 340

(“[T]he mere introduction of other crimes evidence against one

defendant does not entitle a co-defendant to a separate trial.”).

In conclusion, Riley’s Tax Fraud Counts were properly

joined initially with the Land Fraud Counts because the counts

were substantially related as the tax fraud arose from Riley’s

failure to report her income from the land fraud scheme.

Additionally, the District Court did not abuse its discretion when

it denied James’s motion for severance because James did not

point to any specific prejudice. Further, any prejudice that might

have resulted from the joint trial was easily cured by the District

Court’s jury instructions.

D. Motion for Mistrial

James argues that the District Court abused its discretion

34

when it denied his motion for mistrial.28 “We review the denial

of a motion for a mistrial based on a witness’s allegedly

prejudicial comments for an abuse of discretion.” Lore, 430

F.3d at 207 (citing United States v. Xavier, 2 F.3d 1281, 1285

(3d Cir. 1993)). Three factors must be analyzed to determine

whether the defendant was prejudiced: “(1) whether [the

witness’s] remarks were pronounced and persistent, creating a

likelihood they would mislead and prejudice the jury; (2) the

strength of the other evidence; and (3) curative action taken by

the district court.” Lore, 430 F.3d at 207 (citing Xavier, 2 F.3d

at 1285).

At issue is the testimonial statement of Basil Franklin,

James’s Chief of Housing Production for the City of Newark,

about a meeting he had with Jackie Mattison (“Mattison”),

James’s former Chief-of-Staff. Mattison had been convicted of

a criminal offense, United States v. Bradley, 173 F.3d 225 (3d

Cir. 1999), and was serving a sentence of work release when he

met with Franklin. The District Court instructed the

Government to direct Franklin not to mention that Mattison had

been incarcerated or in a work release program, which would

imply that Mattison had been previously convicted of a crime.

During the course of the Government’s direct examination of

Franklin, however, Franklin twice mentioned that Mattison was

involved in a work release program.29 James immediately

28

We note that although Riley joined the motion for mistrial

in sidebar, she does not appear to appeal the denial.

29

The testimony proceeded as follows:

[Prosecutor]: So what happened when you and Jackie Mattison

met in the furniture store

[Witness]: He told me that he was on a work release

program.

[Prosecutor]: I’ll move to strike that.

What, if anything, did Jackie Mattison tell you

about property?

[James’s attorney]: Your honor, may we approach, please?

[The Court]: In a moment, in a moment.

35

moved for a mistrial.

The District Court denied James’s motion for a mistrial,

but agreed to give a curative instruction at defense counsel’s

request. The District Court took a ten minute break to allow

counsel to speak with James and decide. After the break,

defense counsel chose not to ask for an instruction from the

court because he did not want to exacerbate any alleged

prejudice. The witnesses’s testimony resumed, lasting the rest of

the day and into the following two days. At the conclusion of

the trial, the District Court instructed the jury that James was not

being charged with doing anything unlawful with Mattison, nor

was he involved in the conduct that placed Mattison on work

release.

Addressing the three-factor test to determine prejudice we

look to the nature of the statement first. Franklin’s improper

remarks consisted of two references to a “work release program”

in testimony that spanned three days over the course of a five

week trial. Thus the remarks cannot be characterized as either

pronounced or persistent, nor were they systematic. See United

[Prosecutor]: What, if anything, did Jackie Mattison tell you

about property?

[Witness]: He told me that he was in the work release

program and participate–

[James’s attorney]: Judge, may we approach?

[Prosecutor]: May I Lead, your Honor?

[The Court]: Yeah. Just ask him–just with respect to the

property, did he have any conversations with you

just as to property?

[Witness]: Yeah. He told me that–that–he said–

[Prosecutor]: Did–

[Witness]: He said that he needed–

[The Court]: All right, just a moment.

[Witness]: –an income.

[The Court]: We’ll have a break.

SA 211:104–05.

36

States v. Morena, 547 F.3d 191, 194 (3d Cir. 2008) (finding

prejudicial misconduct because of the prosecutions “systematic

injection of evidence of drug use and dealing” by the defendant);

Lore, 430 F.3d at 207 (considering one improper remark by a

witness over the course of five days of testimony to not be

“pronounced and persistent”); Xavier, 2 F.3d at 1285 (finding

that five or six angry outbursts by a witness were neither

pronounced nor persistent).

Second, there is no question that the jury did not solely

rely upon the fact that Mattison was on work release or that

Franklin met with Mattison to convict James. The relevance of

the evidence was merely to demonstrate James’s control over the

SWRP properties. There was a significant amount of evidence

presented to prove James’s control over the properties and the

SWRP process. See discussion supra Part I.A.2; see also

Morena, 547 F.3d at 196 (finding that the “other evidence” was

insufficient to overcome the prejudice and sustain a conviction

because it consisted only of “the testimony of one witness who

[had] significant credibility issues and a few items of

circumstantial evidence”). In this case, the strength of the other

evidence is sufficient to outweigh any possible prejudice

Franklin’s statements may have inflicted on James.

Finally, the third factor addresses whether curative action

taken by the lower court mitigates any potential prejudice. In

this case the District Court indicated that it was willing to give

immediate curative instructions, but James declined the offer to

prevent further attention being drawn to Franklin’s statements.

At the end of the trial, however, the District Court instructed the

jury that “[t]here is no charge in this Indictment that the

Defendant Sharpe James did anything unlawful, directly or

indirectly, with respect to the sale of any Newark property to

Jackie Mattison.” These instructions are presumed to have

cured any potential prejudice from Franklin’s improper remarks.

See Lore, 430 F.3d at 207 (finding no prejudice, in part, because

although the defendant “declined the district court’s offer to

issue a specific curative instruction at the time of [the witness’s]

statement, the court subsequently instructed the jury” in a

manner which sought to cure any prejudice).

37

In conclusion, Franklin’s comment that Mattison was on

work release did not prejudice James because the statements

were not “pronounced and persistent,” the strength of the other

evidence was sufficient to convict James, and the District Court

cured any potential prejudice through its instructions to the jury.

Consequently, the District Court did not abuse its discretion

when it denied James’s request for a mistrial.

E. Alleged Hearsay Statement

James argues that the District Court erred by admitting a

hearsay statement during the course of Franklin’s testimony.

“We review a district court’s decision to admit or exclude

evidence for abuse of discretion, although our review is plenary

as to the district court’s interpretation of the Federal Rules of

Evidence.” Marra v. Phila. Hous. Auth., 497 F.3d 286, 297 (3d

Cir. 2007).

At issue is Franklin’s testimony that Alfred Faiella

(“Faiella”), the Deputy Mayor and Director of the DEHD, came

to his office with Riley and another woman and “smiling and

jokingly [said] that the Mayor want[ed Franklin] to help these

ladies acquire some property.” From this statement Franklin

testified that he understood it to mean that “the Mayor want[ed

him] to . . . vet her and assist her, if possible, in acquiring

property.” James objected to Franklin’s statement, and argues

on appeal that the statement is inadmissible because Faiella was

not acting lawfully when he made the comment and thus, was

not acting within the scope of his employment.30

The District Court allowed Franklin’s testimony as a non-

hearsay statement admissible under Federal Rule of Evidence

30

James does not argue that his own statement to Faiella was

inadmissible. We assume, therefore, that James’s statement was

properly admitted under Federal Rule of Evidence 801(d)(2)(A),

which states that “[a] statement is not hearsay if . . . [t]he statement

is offered against a party and is . . . the party’s own statement, in

either an individual or representative capacity.”

38

801(d)(2)(D). Rule 801(d)(2)(D) states that “[a] statement is not

hearsay if . . . [t]he statement is offered against a party and is . . .

a statement by the party’s agent or servant concerning a matter

within the scope of the agency or employment, made during the

existence of the relationship.” 31 Fed. R. Evid. 801(d)(2)(D).

Thus, this rule requires that when making an admission on

behalf of the defendant, the declarant be both authorized and

acting within the scope of employment.

Faiella was the Deputy Mayor and Director of the DEHD

and thus was authorized to direct Franklin as to who should be

considered for SWRP properties. Franklin testified that Faiella

had the final say on all property allocations and that “everything

went through Alfred Faiella.” Franklin also indicated that “from

time to time [Faiella] would mention that X, Y, or Z person

recommended that we try to . . . to vet a person to do the

development.” Consequently, as Franklin’s supervisor, it was

within the scope of Faiella’s employment to instruct Franklin of

his duties regarding SWRP properties. See Marra, 497 F.3d at

297–98 (“[B]eing a direct decision-maker, of course, constitutes

strong proof that a statement was made within the scope of

employment[.]” (internal quotation marks and citation omitted));

Ryder v. Westinghouse Elec. Corp., 128 F.3d 128, 134 (3d Cir.

1997) (holding that executives who had authority to make

personnel decisions were acting within the scope of their

employment when they stated their views on the state of the

workforce).

Despite James’s assertion, a statement of illegal activity

can still be within the scope of employment and can be

admissible under 801(d)(2)(D). See Cline v. Roadway Express,

Inc., 689 F.2d 481, 488 (4th Cir. 1982) (holding that testimony

of certain managers’ statements indicating that they understood

31

James’s brief mentions Federal Rule of Evidence

801(d)(2)(C), while discussing the test of agency. Because this

rule is not mentioned anywhere else in James’s submissions, and

the District Court allowed the statement in under 801(d)(2)(D), the

Court assumes that the reference to 801(d)(2)(C) was in error.

39

the new policy was designed to replace older workers with

younger ones, which was an alleged violation of the Age

Discrimination in Employment Act, was admissible under Fed.

R. Evid. 801(d)(2)(D) as admissions of agents concerning a

matter within the scope of their employment). In sum, the

District Court did not err in its interpretation of the Federal

Rules of Evidence when it admitted Franklin’s testimony of

Faiella’s statement on the basis that it constituted a non-hearsay

utterance of an agent, which is admissible under Federal Rule of

Evidence 801(d)(2)(D).

F. The Government’s Summation Remark

James argues that the United States’ inappropriate

comment during its rebuttal summation “merely capped an

avalanche of unfairness” that warrants reversing the

conviction.32 Because James did not seek a mistrial in the

District Court challenging the Government’s closing remark, this

court reviews the District Court’s decision not to grant a mistrial

sua sponte for plain error. Virgin Islands v. Charleswell, 24 F.3d

571, 576 (3d Cir. 1994). A plain error occurs when the

“prosecutor’s comments [are] so serious as to ‘undermine the

fundamental fairness of the trial and contribute to a miscarriage

of justice.’” United States v. Pungitore, 910 F.2d 1084, 1126 (3d

Cir. 1990). Thus, we may reverse if the prosecutor’s comments

deprived James of a fair trial.

There is no per se rule against invitations to a jury to

“send a message.” Greenleaf v. Garlock, Inc., 174 F.3d 352, 364

n.9 (3d Cir. 1999). The type of counsel misconduct that

warrants granting a new trial is not generally a single isolated

inappropriate comment, but rather repeated conduct that

“permeate[s]” the trial. Blanche Rd. Corp. v. Bensalem Twp.,

32

The prosecutor stated in its rebuttal summation that, “[a]t

the end of the day you have a decision to make. Are you going to

turn your head away from this type of corruption, say it’s business

as usual, what can I do? Or are you going to make a statement, say

it loud and clear, send a message.” SA 1183:193–94.

40

57 F.3d 253, 264 (3d Cir. 1995), overruled on other grounds by

United Artists Theatre Circuit, Inc. v. Twp. of Warrington, 316

F.3d 392, 400 (3d Cir. 2003). Although his complaint suggests

it occurred, James does not point to specific conduct of a similar

nature which allegedly permeates the case. While the

Government concedes that the prosecutor’s “send a message”

comment was improper, there was an immediate and sustained

objection that cut off the prosecutor’s remarks. Further, the

District Court directly addressed the inappropriate nature of the

“send a message” comment in its instructions to the jury. The

District Court, in its curative jury instruction given the day after

the prosecutor’s comment, stated that

you must not think of your verdict as sending a message

to anyone. Yesterday you heard me sustain an objection

to [the prosecutor’s] suggestion in summation that you

should “send a message” by your verdict.

I sustained the objection because this was an

improper comment. You must reach your verdict in this

case based solely on the evidence, on the facts as you

determine them based on the law as I present it to you

now, without concern for public opinion or anything else

outside of this case. That is what the law requires.

SA 1191:14. This jury instruction clearly addressed the

improper comment and thus even if there were some risk of

prejudice it was cured because “juries are presumed to follow

their instructions.” Richardson v. Marsh, 481 U.S. 200, 211

(1987). In sum, the prosecutor’s statement did not deprive

James of a fair trial, and there was no plain error.

III. Conclusion

In conclusion, in light of the Supreme Court’s recent

decision in Skilling, we will reverse the Count 5 convictions as

to James and Riley. We will affirm the Counts 1–4 convictions

as to James and Riley because there is sufficient evidence from

which the jury could have found Appellants guilty beyond a

reasonable doubt. Finally, we affirm the District Court’s denial

of James’s post-trial motions and do not find that the District

41

Court erred in any of the challenged determinations. We will

remand for the District Court to perform any re-sentencing

necessitated by the Count 5 reversal.

42