United States v. Fernandez, Peter N.

In the

United States Court of Appeals

For the Seventh Circuit

Nos. 99-4203, 99-4205, and 99-4210

United States of America,

Plaintiff-Appellee,

v.

Peter N. Fernandez, III, Peter N. Fernandez,

Jr., and Kenneth K. Getty,

Defendants-Appellants.

Appeals from the United States District Court

for the Northern District of Illinois, Eastern Division.

No. 97 CR 835--Ruben Castillo, Judge.

Argued February 21, 2001--Decided March 7, 2002

Before Posner, Kanne, and Diane P. Wood,

Circuit Judges.

Kanne, Circuit Judge. On October 27,

1998, defendants Peter N. Fernandez,

Jr., Peter N. Fernandez, III, and Kenneth

K. Getty, were convicted of eight counts

of mail fraud in violation of 18 U.S.C.

sec.sec. 1341 and 1346, four counts of

theft of funds in violation of 18 U.S.C.

sec. 666, five counts of engaging in

monetary transaction in property derived

from unlawful activities in violation of

18 U.S.C. sec. 1957, and four counts of

money laundering in violation of 18

U.S.C. sec. 1956. The indictment provided

that between the summer of 1996 and April

1997, defendants engaged in a scheme

designed to defraud the Village of Lyons

by rigging bids submitted for municipal

building projects and then laundering the

proceeds. On appeal, defendants argue

that their convictions should be vacated

because: (1) their activities fell beyond

the purview of 18 U.S.C. sec. 1341, (2)

neither the mail fraud counts nor the

jury instructions embraced "materiality"

as an essential element of the offense,

(3) independent of the mail fraud counts,

the money laundering counts cannot

survive, (4) the jury instructions

regarding the elements of money

laundering were inconsistent and

contradictory, and (5) the government

failed to establish a necessary element

of the alleged 18 U.S.C. sec. 666

violations. We find each of these

arguments to be unpersuasive and affirm

the defendants’ convictions.

I. History

Defendants were charged with eight

counts of mail fraud, four counts of

theft of funds, five counts of engaging

in monetary transaction in property

derived from unlawful activities, and

four counts of money laundering. In

essence, the indictment alleged that

defendants engaged in a scheme designed

to defraud the Village of Lyons by

rigging bids submitted for municipal

building projects and then laundering the

proceeds. Each defendant entered a plea

of not guilty. A jury convicted each

defendant on all counts and the district

court sentenced Getty to 66 months

imprisonment, Fernandez, Jr. to 60 months

imprisonment, and Fernandez, III to 48

months imprisonment.

The Village of Lyons is a municipal

corporation and a political subdivision

of the State of Illinois. Getty served as

one of six elected trustees on the Lyons’

Board of Trustees from 1991 until March

1996. As a trustee, Getty received a

modest salary of $3,400 per year. In

addition to being a trustee, Getty also

owned his own insurance business, Kenneth

K. Getty Insurance Company. On March 19,

1996, the presiding mayor of Lyons

resigned for personal reasons. The Board

then selected Getty to serve as acting

mayor until April 1997.

Shortly after becoming acting mayor,

Getty took certain steps to centralize

his power. For example, Getty caused the

village manager, who oversaw the day-to-

day operations of Lyons, to be terminated

without cause. Within weeks of the

village manager’s termination, the

position was eliminated, and Getty

assumed the village manager’s full-time

duties. Additionally, Getty sought to

complete certain municipal building

projects in Lyons in order to increase

his chance of success in the next mayoral

election. The projects included the

renovation of the Village Hall and the

construction of a new Village Public

Works garage.

Getty consulted with his friend, Peter

Fernandez, Jr., regarding the two

building projects. Fernandez, Jr. was the

sole owner of Norman-Marc Associates

Design Build Firm ("Norman-Marc"). Soon

thereafter, Getty chose, and the Board

approved, Norman-Marc to serve as the

first ever "Village Architect." Andrew M.

Fernandez, Fernandez, Jr.’s younger

brother and a licensed architect,

occasionally provided architectural

services to Norman-Marc. However, Norman-

Marc was not a licensed architectural

firm, and Fernandez, Jr. was not a

licensed architect. Although the Board

approved Norman-Marc’s designation as

"Village Architect," only Getty and

Fernandez, Jr. negotiated the details of

Norman-Marc’s compensation. Getty agreed

to pay Norman-Marc $100 per hour for

consulting work, in addition to

commissions on construction projects

equivalent to 9% of the total cost of

each project.

In June 1996, the Board authorized Lyons

to solicit bids for both the renovation

of the Village Hall and the construction

of a new Public Works garage. Combined,

these projects were estimated to cost

approximately $1 million. As the cost of

these projects would exceed $10,000,

Illinois law required Lyons to conduct a

formal bidding process, awarding the

construction contracts to the lowest

qualified bidder. Lyons employed a pre-

qualification process whereby potential

bidders would submit pre-qualification

questionnaires, requiring background and

financial information. Lyons would review

the submitted questionnaires prior to

accepting bids on the projects in order

to determine whether the bidder was

sufficiently qualified for the projects.

After the Board approved the

construction plans, Getty directed that a

one-day notice soliciting pre-

qualification applications be placed in

the Des Plaines Valley News, a weekly

newspaper with a circulation of 5,000, as

opposed to the Suburban Life Citizen,

which had a circulation of 30,000 and

usually served as the forum for Village

bid solicitations. The notice directed

interested bidders to obtain the pre-

qualification questionnaires from Lyons’

Building Department Commissioner, Michael

Kerrigan. Kerrigan testified at trial,

however, that he never received any

requests for pre-qualification

questionnaires.

Evidence presented at trial revealed

that Getty, Fernandez, Jr., and

Fernandez, III caused pre-qualification

questionnaires to be submitted by four

companies-- Randolph I. Anderson

Development Company, Inc. ("Randolph"),

Thompson Enterprises, Riverside

Construction Corporation ("Riverside"),

and Midwest Industrial Construction, Inc.

("Midwest").

Before trial, the parties stipulated

that Randolph I. Anderson was a full-time

practicing attorney and that Randolph,

the construction company, did not exist.

Anderson was a friend of the Fernandez

family and personally agreed to submit a

pre-qualification questionnaire. However,

Anderson decided not to submit a bid on

the projects.

Thompson Enterprises also was not a

valid company. Jeffery Thompson was

Fernandez, III’s former classmate and

friend. Thompson testified at trial that

during the summer of 1996, Fernandez, III

encouraged him to submit a bid for the

projects. At the time, Thompson was

employed as a computer systems analyst

for the Square D Company. Thompson

testified that in mid-August, he met with

Fernandez, Jr. and Fernandez, III. At

this meeting, the Fernandezes gave

Thompson a completed pre-qualification

questionnaire bearing the name "Thompson

Enterprises." Although the questionnaire

listed Thompson’s home telephone number

and address, Thompson testified that he

was not affiliated with such a company.

Thompson also testified that most of the

information on the questionnaire was

false, including purported clients and

information regarding previous projects.

Additionally, the questionnaire was pre-

dated for July. Thompson also testified

that during this meeting, Fernandez, Jr.

calculated the dollar amounts that

Thompson was to submit as bids for the

projects. Fernandez, III and Thompson

typed this information onto bid forms,

and then Thompson signed his name.

Fernandez, Jr. instructed Thompson not to

talk to anyone from the Board who might

try to contact him. Additionally,

Fernandez, Jr. told Thompson to change

his outgoing home answering machine

message to indicate that the caller had

reached Thompson Enterprises.

Riverside owner and long-time friend of

Getty, Jack Andersen, testified that

Getty personally requested that Riverside

bid on the projects. Further, Andersen

testified that Getty requested that

Riverside "bid high." Andersen explained

that Riverside was a union shop with

prices generally too high for

municipalities, and that Riverside

primarily did concrete work. Andersen

also stated that Getty filled out the

pre-qualification questionnaire and the

bid forms on behalf of Riverside.

Andersen explained that on August 13,

1996, Getty visited Andersen’s office and

asked Andersen general questions about

Riverside. During the visit, Getty

presented Andersen with a blank pre-

qualification questionnaire and bid

forms, and asked Andersen to signed them.

Anderson complied. Andersen testified

that the following day he received from

Getty, via facsimile, a completed pre-

qualification questionnaire dated July

29, 1996, and completed bid forms for the

two projects. He testified that all of

the forms were going to be submitted on

behalf of Riverside. Although the forms

were purportedly completed by Riverside,

Andersen testified that he did not

complete any of them.

Finally, Fernandez, III submitted a pre-

qualification questionnaire and bids on

behalf of Midwest. Fernandez, III listed

three clients as references for Midwest.

All three clients subsequently testified

that Midwest had never done any work for

them. Since 1994, Fernandez, III had

worked as construction superintendent for

a company named Industrial Construction,

Inc. ("Industrial"). It was Fernandez,

III’s duty at Industrial to bid on

projects. James Zakovec, the owner of

Industrial, testified that he thought

that Fernandez, III was bidding on the

Lyons projects on behalf of Industrial,

not on behalf of Midwest. Zakovec

testified that eventually he and

Fernandez, III agreed that Industrial

would work as Midwest’s subcontractor on

the two projects.

Lyons awarded the contracts to Midwest

because Midwest’s bids were the lowest

bids the Board received. Lyons agreed to

pay Midwest $963,200 to complete the two

projects. Midwest subcontracted with

Industrial for $784,200. Thus, Midwest

stood to make $179,000 on the completed

projects.

It was not until after Midwest submitted

the lowest bid and the Board selected

Midwest’s bid that Fernandez, III filed

Articles of Incorporation in the State of

Illinois for Midwest and sought an

Employer Identification Number for

Midwest. Additionally, Midwest did not

secure worker’s compensation and employer

liability insurance until after the bids

were awarded. Through his contacts in the

insurance industry, Getty helped Midwest

secure the insurance policies.

One month after receiving the contracts,

Midwest opened a bank account. Fernandez,

III and Fernandez, Jr. were the

signatories on the account. By April,

1997, Fernandez, Jr. and Fernandez, III

had deposited checks and cash from Lyons

totaling $722,960. Evidence was presented

at trial which revealed that Midwest

wrote seven checks to "Cash" from the

account, totaling $32,200. Additionally,

$51,400 in checks were written to

Fernandez family members and $17,521.79

in checks were used to pay personal, non-

business expenses.

Additionally, throughout the

aforementioned events, Norman-Marc was

providing its purported architectural

services to Lyons. Through December 1997,

Norman-Marc deposited checks from Lyons

totaling approximately $148,000. Of that

amount, $136,097.50 was related to work

Norman-Marc had done on the two projects

that had been awarded to Midwest. Between

June 1996 and June 1997, checks totaling

$126,450 were written from Norman-Marc’s

account to "Cash" and to various

Fernandez family members.

During the course of construction,

Fernandez, Jr. requested and Getty

approved multiple change orders on the

projects. The change orders added

$320,219 to the amount Lyons owed

Midwest. By the time a new building

commissioner issued a "stop-work" order

in April 1997, Midwest’s net profit on

the projects was $93,271.

On September 8, 1998, Getty, Fernandez,

Jr., and Fernandez, III were charged in a

twenty-one count Superseding Indictment.

Counts 1 through 8, the mail fraud

counts, detailed the bid-rigging scheme

and provided that defendants devised to

defraud Lyons of money and property by

means of false and fraudulent pretenses,

representations, and promises and

material omissions; to deprive Lyons and

its citizenry of their right to Getty’s

honest services as the mayor of Lyons;

and to deprive Lyons and its citizenry of

their right to Fernandez, Jr.’s honest

services as Village Architect. Each count

listed a different mailing used to

further defendants’ scheme to defraud

Lyons and Lyons’ citizenry./1 Counts 9

through 12 charged defendants with

obtaining by fraud funds in excess of

$5,000 on four separate occasions from

Lyons, a local government, which receives

in excess of $10,000 per year under

federal programs. Counts 13 through 17

charged defendants with knowingly

engaging in a monetary transaction in

criminally derived property of a value

greater than $10,000, which was derived

from mail fraud. Each of these counts

listed an individual check drawn from

Midwest’s bank account in an amount

greater than $10,000. Finally, Counts 18

through 21 charged defendants with

conducting a financial transaction

involving the proceeds of the mail fraud,

with the intent to promote the carrying

on of the mail fraud, knowing that the

property involved in the financial

transaction represented theproceeds of

some form of unlawful activity. Again,

each of these counts listed a separate

check drawn from Midwest’s bank account

used to make partial payments to

Industrial for construction work

performed on the two projects.

On October 27, 1998, the jury returned

a verdict finding Getty, Fernandez, Jr.,

and Fernandez, III guilty on all counts.

II. Analysis

A. Mail Fraud

Defendants present three arguments in

support of their assertion that their

mail fraud convictions should be vacated.

First, defendants claim that their

activities fell beyond the purview of 18

U.S.C. sec.sec. 1341/2 and 1346/3

because the government failed to prove "a

legally cognizable scheme to defraud."

Second, defendants claim that their

activities fell beyond the purview of 18

U.S.C. sec.sec. 1341 and 1346 because the

mailings that the government used as the

basis for defendants’ mail fraud

convictions were not mailings used "in

furtherance of a scheme." Third,

defendants claim that neither the

indictment nor the jury instructions

embraced the concept of "materiality" as

an essential element of mail fraud and

therefore, because the government failed

to establish an essential element of the

crime, the defendants argue that they

were not proven guilty beyond a

reasonable doubt.

1. Scheme to Defraud

Defendants’ first argument on appeal

lacks merit and warrants minimal

discussion. Defendants contend that the

government needed to prove a

"contemplated harm to the victim" in

order to prove a "scheme to defraud."

Normally, when a defendant challenges the

sufficiency of the evidence presented, we

review the evidence in a light most

favorable to the government and if any

evidence can support the conviction, the

defendant’s efforts must fail. See United

States v. Seward, 272 F.3d 831, 835 (7th

Cir. 2001). In this case, however, we do

not have to review the sufficiency of the

evidence because to establish their prima

facie case, the government did not have

to prove a contemplated harm to a victim

as the defendants contend. This court has

repeatedly stated that to convict for

mail fraud under 18 U.S.C. sec. 1341, the

government must prove three elements: (1)

that the defendant participated in a

scheme to defraud; (2) that the defendant

intended to defraud; and (3) that the

defendant used the mails in furtherance

of the scheme. See id. This Circuit has

never required the government to

establish a "contemplated harm to the

victim." Defendants’ reliance on United

States v. D’Amato, 39 F.3d 1249, 1257 (2d

Cir. 1994) ("[D]eceit must be coupled

with a contemplated harm to the victim.")

(quotation omitted) and on United States

v. Jain, 93 F.3d 436, 441 (8th Cir. 1996)

(quoting D’Amato) is misplaced. Even if

D’Amato were the law in this Circuit,

defendants ignore the D’Amato court’s

explanation that fraudulent intent, which

is essential to a scheme to defraud, may

be inferred from the scheme "[w]hen the

’necessary result’ of the actor’s scheme

is to injure others." 39 F.3d at 1257. In

this case, the necessary result of the

defendant’s actions was to deprive Lyons

and its citizenry of the opportunity to

award and receive construction work at

the most competitive price and the honest

services of Getty and Fernandez, Jr.

Contrary to defendants’ assertion, we

fail to find anything in the language of

United States v. Bloom, 149 F.3d 649 (7th

Cir. 1998), to support their position

that this Circuit requires the government

to prove a contemplated harm to a victim.

In Bloom, this court compared a violation

of state-law fiduciary duties and federal

mail fraud. See id. at 654-58 (explaining

that in order to establish mail fraud

under the intangible rights theory the

government must show that an employee

misused his position for private gain).

Bloom says nothing about a contemplated

harm to a victim, much less that such

harm must be established in order to

sustain defendants’ convictions.

2. Mailings in Furtherance of the

Scheme

Next, defendants argue that the

government failed to prove that they used

the mails in furtherance of a scheme to

defraud. See Seward, 272 F.3d at 835. In

challenging the sufficiency of the

evidence against them, defendants "face[

] the usual stringent standard of review:

if the evidence presented at trial, taken

in the light most favorable to the

prosecution, can support the jury’s

conclusion, [defendants’] effort[s] must

fail." Id.

Initially, defendants assert that any

purported scheme ended on August 20,

1996, the date that Midwest was awarded

the contracts by Lyons. Thus, they argue,

because the mailings listed in counts 2

through 8 in the indictment all

transpired after August 20, the mailings

occurred after any purported scheme had

ended. Further, defendants claim that

even if the scheme did not end on August

20, the mailings listed in the indictment

were ancillary to, and not in furtherance

of, any purported scheme. We find

defendants’ arguments unpersuasive.

Defendants’ scheme to defraud involved

depriving Lyons and its citizenry of

money and property and the honest

services of Getty and Fernandez, Jr.

Defendants’ scheme did not end on August

20, as the defendants would have this

court believe. Rather, defendants’ scheme

continued through April 1997--when the

stop-work order was issued--because until

the stop-work order was issued, Midwest

continued to receive payments from Lyons

and defendants continued to conceal the

truth about their bid- rigging scheme.

Moreover, in Seward, this court

explained that while "the mail fraud

statute does not reach every single use

of the mails that is in any way remotely

related to a scheme to defraud," a

mailing will be considered in furtherance

of the scheme if it is "incidental to an

essential part of the scheme. . . . In

other words, the success of the scheme

must in some measure depend on the

mailing." Id. at 835-36 (citations

omitted). We find that the mailings

listed in Counts 2 through 8 are, in

fact, essential parts of defendants’

scheme. For example, Count 2 charges

defendants with sending a letter to

Thompson Enterprises informing Thompson

that it was not a successful bidder and

Count 4 charges defendants with sending a

letter from Getty to Midwest informing

Midwest that its bid had been selected.

These notifications were not merely

ancillary to the execution of the fraud,

rather, each of these letters furthered

defendants’ scheme by falsely portraying

to anyone who examined Lyons’ records

that the bids submitted were legitimate,

thereby concealing the true nature of the

scheme. Similarly, the mailings in Counts

3 through 8 all contributed to the

success of defendants’ scheme./4 Each

mailing helped to further the scheme by

falsely portraying the legitimacy of

Midwest. Defendants needed Midwest to ap

pear legitimate in order to collect

payments from Lyons. Thus, the mailings

charged in the indictment were in

furtherance of the scheme to defraud.

3. Materiality

Finally, relying on Neder v. United

States, 527 U.S. 1, 25, 119 S. Ct. 1827,

144 L. Ed. 2d 35 (1999), defendants argue

that "materiality" is an essential

element of mail fraud and because the

indictment and the jury instructions

failed to allege materiality, the

government failed to prove an essential

element of the crime. Thus, defendants

contend that their convictions should be

vacated. In Neder, the Supreme Court held

that "materiality" is an essential

element of "scheme to defraud" under the

mail fraud statute. See id. This court

has explained that "[a] false statement

is material, [and thus may potentially

establish violation of wire and mail

fraud statutes], if it has a natural

tendency to influence, or is capable of

influencing, the decision of the

decisionmaking body to which it was

addressed." United States v. Gee, 226

F.3d 885, 891 (7th Cir. 2000) (quotation

omitted).

Because defendants did not challenge the

indictment prior to trial, the indictment

will be deemed sufficient "unless it is

so defective that it does not, by any

reasonable construction, charge an

offense for which the defendant is

convicted." United States v. Gooch, 120

F.3d 78, 80 (7th Cir. 1997) (quotation

omitted). We do not find the indictment

to be so defective. The indictment

alleged (1) that the defendants, by

submitting three illegitimate bids,

rigged the bidding process, (2) that

defendants prepared false responses to

pre-qualification questionnaires, and (3)

that the defendants’ scheme included

"false and fraudulent pretenses,

representations, and promises and

material omissions" intended to cause

Lyons to lose money and property. These

allegations encompassed the concept of

materiality. The defendants’ alleged

actions clearly would have influenced

Lyons’ decision to award the contracts to

Midwest. Defendants knew that a

reasonable person, particularly a Trustee

voting on who to award the contracts to,

would attach importance to such matters

as whether the bidding company existed,

whether the company had experience, and

whether costs were projected by the

company in good faith rather than

contrived estimates.

With respect to the jury instructions,

because defendants did not raise this

objection in the court below, we review

only for plain error. See United States

v. Olano, 507 U.S. 725, 732-34, 1135 S.

Ct. 1770, 123 L. Ed. 2d 508 (1993). We

will reverse only if the error was (1)

clear and uncontroverted at the time of

appeal and (2) affected substantial

rights, which means the error affected

the outcome of the district court

proceedings. See United States v. Holmes,

93 F.3d 289, 292-93 (7th Cir. 1996)

(quotation omitted)./5 While we

recognize that the district court did not

explicitly instruct the jury on

"materiality," we find that, when viewed

in their entirety, the jury instructions

encompassed the concept of materiality.

In this case, the judge charged the

jury: "In considering whether the

government has proven a scheme to

defraud, it is essential that one or more

of the false pretenses, representations,

promises and acts charged in the portion

of the indictment describing the scheme

be proved." The judge then stated that

"[a] scheme to defraud is a scheme that

is intended to deceive or cheat another

and to obtain money or property or cause

the loss of money or property to another

or to deprive another of someone’s honest

services." Finally, the judge explained

that "’intent to defraud’ means that the

acts charged were done knowingly with the

intent to deceive or cheat a victim in

order to cause a gain of money or

property to the defendant or to deprive

another of someone’s honest services."

Again, materiality has been defined as

having "a natural tendency to influence,

or is capable of influencing, the

decision of the decisionmaking body to

which it was addressed." Gee, 226 F.3d at

891 (quotation omitted). We believe that

these instructions adequately required

the jury to find that the defendants made

false representations which were capable

of influencing, and thereby deceiving,

Lyons. Thus, these instructions viewed in

their entirety adequately embraced the

concept of materiality. See also United

States v. Reynolds, 189 F.3d 521, 525 n.2

(7th Cir. 1999) (explaining that

instructions adequately placed the

question of materiality before the jury

even though the instructions did not

explicitly use the term "materiality");

United States v. Pribble, 127 F.3d 583,

589 (7th Cir. 1997) (same)./6

B. Money Laundering Counts

Next, defendants challenge their money

laundering convictions./7 Defendants

assert that the money laundering

convictions and sentences should be

vacated because the district court gave

inconsistent and contradictory money

laundering jury instructions. We do not

agree with defendants’ characterization

of the jury instructions.

Because defendants did not object to the

money laundering instructions at trial,

we review defendants’ challenge for plain

error. See Olano, 507 U.S. at 732-34.

Defendants were charged with violations

of 18 U.S.C. sec.sec. 1957(a) and

1956(a)(1)(A)(i)./8 The district court

instructed the jury that the government

must prove "[1] that the defendant

engaged or attempted to engage in a

monetary transaction, [2] that the

defendant knew the transaction involved

criminally derived property, [3] that the

property had a value greater than

$10,000, [4] that the property was

derived from mail fraud, and [5] that the

transaction occurred in the United

States." The district court then stated:

The government must prove that the

defendant knew that the property

represented the proceeds of some form of

activity that constitutes a felony under

state or federal law. The government is

not required to prove that the defendant

knew that the property involved in the

transaction represented the proceeds of

mail fraud.

Defendants argue that initially the

district court instructed the jury that

in order to sustain the money laundering

counts, the criminally derived property

had to be derived from mail fraud. Then,

according to defendants, the district

court told the jury that the government

needed only to prove that the property

represented the proceeds of some form of

activity that constitutes a felony under

state or federal law. Defendants now

argue on appeal that these instructions

were confusing and directly

contradictory.

Defendants, however, fail to see the

difference between the relevant

instructions. As stated in the

instructions, the government did not need

to prove that the defendants knew the

criminally derived property was derived

from mail fraud, only that the defendants

knew that the transaction involved some

form of criminally derived property.

Additionally, the government needed to

prove that the criminally derived

property was, in fact, derived from mail

fraud. The instructions in question

presented these two different elements

that the government needed to establish.

Thus, the jury instructions were neither

inconsistent nor contradictory.

C. Theft of Funds

Finally, defendants argue that their

convictions under 18 U.S.C. sec. 666

should be vacated./9 Defendants assert

that the government failed to establish a

necessary element of the offense, the

requisite link between a federal interest

and the defendants’ fraud. We do not

believe that it is necessary for the

government to establish such a link.

Section 666 punishes an agent of a local

government who obtains through fraud

property valued at $5,000, or more, from

a local government that receives, in any

one-year period, benefits in excess of

$10,000 from federal funds. See 18 U.S.C.

sec. 666. In United States v. Grossi, a

township supervisor was convicted of

taking brides in exchange for payments

out of the town’s general assistance

program in violation of 18 U.S.C. sec.

666. 143 F.3d 348, 349-50 (7th Cir.

1998). On appeal, the defendant asserted

that since the township’s general

assistance program was funded entirely by

local sources, the requirement that the

local government receive $10,000 in

federal funds was not satisfied. See id.

at 350. In reply to the defendant’s

argument, this court explained that

"money is fungible and its effect

transcends program boundaries." Id.

Because the parties stipulated at trial

that Lyons received over $10,000 under a

federal program in 1996 and 1997, it was

not necessary for the government to

further establish a link between the

defendants’ fraud and a federal interest.

See id.

III. Conclusion

For the foregoing reasons, we AFFIRM the

convictions of Getty, Fernandez, Jr., and

Fernandez, III.

FOOTNOTES

/1 Count 1 charges defendants with a mailing sent to

Midwest. Count 2 charges defendants with a mail-

ing sent to Thompson Enterprises. Count 3 charges

defendants with mailing Midwest’s Article of

Incorporation to the Secretary of the State of

Illinois. Count 5 charges defendants with a

letter containing an Employer Identification

Number for Midwest. Count 6 charges defendants

with a mailing from an insurer to Midwest con-

taining Midwest’s worker’s compensation and

employer liability insurance policy. Finally,

Counts 7 and 8, charge defendants with mailing

checks from Industrial to one of its subcontrac-

tors, Mathis Plumbing, for work Mathis Plumbing

performed on the Lyons projects.

/2 Title 18 of The United States Code Section 1341

is entitled "Frauds and Swindles." It provides:

Whoever, having devised or intending to devise

any scheme or artifice to defraud, or for obtain-

ing money or property by means of false or

fraudulent pretenses, representations, or promis-

es . . . for the purpose of executing such scheme

or artifice or attempting to do so, places in any

post office or authorized depository for mail

matter, any matter or thing whatever to be sent

or delivered by the Postal Service . . . shall be

fined under this title or imprisoned not more

than five years, or both.

/3 Title 18 of the United States Code Section 1346

defines scheme to defraud, which includes "a

scheme or artifice . . . designed to deprive

another of the intangible right of honest servic-

es."

/4 Count 3 charges defendants with mailing Midwest’s

Articles of Incorporation to the Secretary of the

State of Illinois. Count 5 charges defendants

with a letter containing an Employer Identifica-

tion Number for Midwest. Count 6 charges defen-

dants with a mailing from an insurer to Midwest

containing Midwest’s worker’s compensation and

employer liability insurance policy. Finally,

Counts 7 and 8 charge defendants with mailing

checks from Industrial to one of its subcontrac-

tors, Mathis Plumbing, for work Mathis Plumbing

performed on the Lyons projects.

/5 We are aware that the defendants argue that their

objection to the jury instructions should be

deemed timely because it was based upon an inter-

vening Supreme Court decision. Although we do not

find the defendants’ argument persuasive, under

a harmless error standard of review our decision

would be the same.

/6 We reiterate what we stated in Reynolds, "[a]-

lthough there is no plain error here, in the

future, given the Court’s ruling in Neder, dis-

trict courts should include materiality in the

jury instructions for sec. 1344." 189 F.3d at 525

n.2.

/7 Defendants assert that independent of the mail

fraud counts, the money laundering counts (13-21)

cannot survive. Because we are affirming defen-

dants’ convictions under the mail fraudstatute,

it is not necessary to discuss this argument.

/8 18 U.S.C. sec. 1956(a)(1)(A)(i) punishes "[w]hoe-

ver, knowing that the property involved in a

financial transaction represents the proceeds of

some form of unlawful activity, conducts or

attempts to conduct such a financial transaction

which in fact involves the proceeds of specified

unlawful activity with the intent to promote the

carrying on of specified unlawful activity." 18

U.S.C. sec. 1957(a) punishes "[w]hoever . . .

knowingly engages or attempts to engage in a

monetary transaction in criminally derived prop-

erty of a value greater than $10,000 and is

derived from specified unlawful activity."

/9 Title 18 of the United States Code section 666

provides in part:

(a) Whoever, if the circumstance described in

subsection (b) of this section exists--(1) being

an agent of an organization, or of a State,

local, or Indian tribal government, or any agency

thereof--(A) 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 that-

-(i) is valued at $5,000 or more, and (ii) is

owned by, or is under the care, custody, or

control of such organization, government, or

agency; or (B) corruptly solicits or demands for

the benefit of any person, or accepts or agrees

to accept, anything of value from any person,

intending to be influenced or rewarded in connec-

tion with any business, transaction, or series of

transactions of such organization, government, or

agency involving any thing of value of $5,000 or

more; or (2) corruptly gives, offers, or agrees

to give anything of value to any person, with

intent to influence or reward an agent of an

organization or of a State, local or Indian

tribal government, or any agency thereof, in

connection with any business, transaction, or

series of transactions of such organization,

government, or agency involving anything of value

of $5,000 or more; shall be fined under this

title, imprisoned not more than 10 years, or

both.

(b) The circumstance referred to in subsection

(a) of this section is that the organization,

government, or agency receives, in any one year

period, benefits in excess of $10,000 under a

Federal program involving a grant, contract,

subsidy, loan, guarantee, insurance, or other

form of Federal assistance.

(c) This section does not apply to bona fide

salary, wages, fees, or other compensation paid,

or expenses paid or reimbursed, in the usual

course of business.