United States v. Murphy

Opinions of the United

2003 Decisions States Court of Appeals

for the Third Circuit

3-19-2003

USA v. Murphy

Precedential or Non-Precedential: Precedential

Docket 01-3757

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PRECEDENTIAL

Filed March 19, 2003

UNITED STATES COURT OF APPEALS

FOR THE THIRD CIRCUIT

No. 01-3757

UNITED STATES OF AMERICA

v.

PETER A. MURPHY, Appellant

On Appeal From the United States District Court

For the District of New Jersey

(D.C. Crim. No. 00-cr-00778)

District Judge: Honorable Garrett E. Brown, Jr.

Argued: September 18, 2002

Before: BECKER, Chief Judge, SCIRICA and

MCKEE, Circuit Judges.

(Filed: March 19, 2003)

LAWRENCE S. LUSTBERG,

ESQUIRE (ARGUED)

KEVIN MCNULTY, ESQUIRE

Gibbons, Del Deo, Dolan, Griffinger

& Vecchione

One Riverfront Plaza

Newark, NJ 07102

Counsel for Appellant

2

CHRISTOPHER J. CHRISTIE,

ESQUIRE

United States Attorney

GEORGE S. LEONE, ESQUIRE

(ARGUED)

Chief, Appeals Division

Office of the United States Attorney

970 Broad Street, Room 700

Newark, NJ 07102

Counsel for Appellee

OPINION OF THE COURT

BECKER, Chief Judge:

This is an appeal by Peter A. Murphy following a jury

trial in which he was convicted on three counts of violating

the Travel Act, 18 U.S.C. § 1952 (the predicate offense being

bribery under New Jersey law, N.J.S.A. 2C:27-2), and three

counts of mail fraud, 18 U.S.C. §§ 1341 and 1346. Murphy

is the former Chairman of the Republican Party in Passaic

County, New Jersey (“the County”). The charged conduct

concerned a contracts-for-payments scheme that Murphy

allegedly organized by using his considerable influence over

Passaic County officials to procure contracts for Central

Medical Services, Inc. (“CMSI”). According to the

Government’s case, CMSI would then siphon off a certain

amount of funds received from the County contracts to a

panel of four individuals chosen by Murphy who performed

no useful services in return for the payment.

In its prosecution of the mail fraud charge, the

Government pursued three alternative theories of criminal

liability. The first theory alleged that Murphy defrauded

Passaic County of money and property. The second theory

accused him of participating in a scheme to defraud the

County of the honest services of its County Administrator,

who was involved in the bribery scheme. The Government’s

third theory charged Murphy with depriving the County of

its right to Murphy’s own honest services in the affairs of

the County.

3

This last theory relied on the decision of the Court of

Appeals for the Second Circuit in United States v. Margiotta,

688 F.2d 108 (2d Cir. 1982), which sustained the

conviction of a county chairman under similar

circumstances. Margiotta was decided over a strong dissent

by Judge Ralph K. Winter, who opined that the Court had

impermissibly allowed the jury to determine whether a

private party official involved himself so much in the

government that he acquired a fiduciary duty to its citizens,

and that such an inquiry was not based on any legal duties

articulated in federal or state law. The Government’s

Margiotta theory was that Murphy had attained such a

dominant role in the political system of Passaic County that

he could be considered the equivalent of a publicly elected

official, and that Murphy had a fiduciary duty to the

County and its citizens to provide honest services which he

breached by not informing County officials about the

fraudulent nature of the contracts-for-payments scheme.

The District Court permitted the Government to proceed

under Margiotta, and charged the jury accordingly. Murphy

contends that this court should not endorse the Margiotta

rationale because it is an overreaching interpretation of the

mail fraud statute. We agree and conclude, in accord with

Judge Winter, that Margiotta extends the mail fraud statute

beyond any reasonable bounds. In our recent decisions

interpreting honest services fraud, we emphasized the need

to establish a violation of state law in such cases to serve

as a limiting principle on the federal prosecution of local

political actors. See United States v. Panarella, 277 F.3d

678, 693 (3d Cir. 2002); United States v. Antico, 275 F.3d

245, 262 n.18 (3d Cir. 2001). Although the Government

suggests that Murphy’s violation of the New Jersey Bribery

Act, N.J.S.A. 2C:27-2, which was the predicate offense in

the Travel Act charges, could serve as the state law source

of a fiduciary obligation, we are not persuaded by this

argument. The Bribery Act does not create a fiduciary

relationship between Murphy and the public, just as no

other criminal statute creates such a relationship between

a defendant and the public. Without the anchor of a

fiduciary relationship established by state or federal law, it

was improper for the District Court to allow the jury to

create one. We will therefore reverse Murphy’s mail fraud

4

conviction and remand for a new trial in which the

Margiotta theory of mail fraud will not be submitted.

Because we find reversible error in the mail fraud counts,

we must consider whether the evidence the Government

presented to support its invalid Margiotta theory tainted the

jury’s verdict on the Travel Act counts as well. The key step

in this analysis is the identification of evidence admitted to

prove the mail fraud counts that would not be admissible

with respect to the charge of bribery under the Travel Act.

If such evidence exists that prejudiced the verdict on the

Travel Act, we must reverse the entire conviction. According

to our decision in United States v. Pelullo, 14 F.3d 881,

898-99 (3d Cir. 1994), our investigation into prejudice

requires an inquiry into whether: (1) the charges are

“intertwined with each other”; (2) the evidence supporting

the remaining counts is “sufficiently distinct to support the

verdict” on these 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 a

jury.”

Murphy contends that under Margiotta, the Government

was entitled to present evidence about his role in Passaic

County government that was prejudicial and not admissible

to prove bribery under the Travel Act. We agree. At trial, the

Government often justified its admission of evidence

regarding Murphy’s activities in the County that were

unrelated to the specific contracts-for-payments scheme

with CMSI by claiming that such evidence supported its

Margiotta theory of mail fraud. The jury evidently viewed

this evidence as concerning the mail fraud and Travel Act

counts because in a query to the District Court during its

deliberations, the jury asked how evidence of Murphy’s

political activities, which mostly included evidence to prove

the Margiotta theory, affected the elements of both criminal

offenses. Further, much of the evidence that related only to

the Margiotta theory was highly damaging because it

suggested that Murphy had the propensity to engage in

corrupt activities.

Finally, because Murphy wanted to limit the evidence of

his involvement in Passaic County politics in order to

lessen the appearance that he acquired a fiduciary duty to

5

the County under the Margiotta theory, it appears that he

might have employed a different defense strategy absent

this impermissible theory to counter the charge in the

Travel Act counts that he had the intent to engage in a

corrupt quid pro quo rather than ordinary and legal

patronage. We must therefore set aside the conviction on

Travel Act counts as well as the mail fraud counts, and

remand to the District Court for a new trial.

I.

The charged conduct arose out of a “contracts-for-

payments” scheme that involved the award of $1,207,199 of

Passaic County contracts in exchange for $72,879.25 in

payments to four individuals designated by Murphy. We

construe the facts on which Murphy’s conviction is based

“in the light most favorable to the Government, as we must

following the jury’s guilty verdict.” United States v. Perez,

280 F.3d 318, 323 (3d Cir. 2002) (citing Glasser v. United

States, 315 U.S. 60, 80 (1942)).

A. Murphy’s Influence in Passaic County Politics

The Government adduced extensive evidence at trial

about Murphy’s dominance of numerous aspects of Passaic

County’s politics. To understand this evidence, some

background on the County’s political system is necessary.

The County is managed by a seven-member Board of

Freeholders elected by the voters. The Freeholders have

ultimate legislative and administrative responsibility for the

County, which includes the approval of County contracts.

Because the Freeholders serve part-time and meet only

biweekly, an unelected County Administrator conducts the

day-to-day operations of the County and serves at the

pleasure of the Freeholders. The County Administrator is

charged with the responsibility to negotiate contracts on

behalf of the County, review and recommend contract bids

to the Freeholders, monitor the operations of contractors,

and approve payments on contracts.

During the relevant period, all seven Freeholders were

members of the Republican Party. As Republican Party

County Chairman, Murphy strongly influenced who in his

6

party ran for Freeholder, which Freeholders could run for

re-election, who would receive campaign funds, and how

the Board of Freeholders operated. Testimony by the

County Administrator, Nicola DiDonna, indicated that

Murphy hand-picked the membership of the Freeholder

committees in order to maintain control over the

Freeholders’ decision-making process.1 Murphy also took

an active role in determining the agenda of Freeholder

meetings, including making suggestions about how to vote

on resolutions, the selection of contract vendors, and the

employment of County personnel.

County Administrator DiDonna apparently owed his job

security to Murphy as well. Although DiDonna had been

appointed several years before Murphy assumed the

Chairmanship of the Republican Party, DiDonna testified as

to his belief that his continued enjoyment of his job

depended on a positive relationship with Murphy. He also

explained how Murphy communicated with the heads of the

various County agencies in order to influence their

selection of vendors for County contracts and applicants for

public employment positions. Although the Freeholders

approved the selection of contractors and County

personnel, Murphy directed the entire process. Murphy’s

role was not a secret, and potential contractors knew that

they needed his approval before presenting bids to DiDonna

or the Freeholders.

B. The Contracts-for-Payments Scheme

In early 1994, CMSI, a company seeking to provide

various services to Passaic County, hired Angelo Joseph

“Buddy” Fortunato, a former State Assemblyman who had

known Murphy’s father, to assist in obtaining County

contracts.2 Prior to that time, CMSI held no contracts with

1. Prior to the commencement of Murphy’s trial, DiDonna pleaded guilty

to two counts of conspiracy to commit mail fraud. In return for his

testimony against Murphy, DiDonna received a reduced sentence of 4

months incarceration.

2. Fortunato pleaded guilty to one count of conspiracy to commit mail

fraud. Like DiDonna, in return for testifying against Murphy, Fortunato

received a reduced sentence of 3 years of probation.

7

the County. Fortunato organized a meeting in February

1994 at Anthony’s, a restaurant owned by Murphy in

Totowa, New Jersey, at which Fortunato informed Murphy

of CMSI’s interest in doing business with the County, and

Murphy expressed interest in the idea. Murphy arranged a

follow-up meeting at his restaurant among the principals of

CMSI, Robert Jorgensen and Matthew Burstine, Fortunato,

Albert C. Lisbona (a mutual friend of Murphy and

Fortunato), County Administrator DiDonna, and himself to

see what types of contracts the County could award CMSI.

At that meeting, Jorgensen and Burstine proposed that

CMSI manage the County’s workers’ compensation claims,

and stated that they could save the County about a million

dollars from a reduction in abuse of the system.

Approximately a week later, Murphy spoke again with

Fortunato, Jorgensen, and Burstine when they were dining

at his restaurant. In response to Murphy’s complaint that

people were always pestering him for jobs, Burstine

suggested that he could help Murphy by creating a four

person “Panel” to advise CMSI. Murphy responded favorably

and proposed that the Panel be funded with a portion of the

proceeds from any contracts CMSI entered into with the

County. In order to pay the Panel the desired sum of

$100,000, Burstine and Murphy determined that about

$1,000,000 in County contracts would be necessary, which

Murphy would help to procure.

Shortly thereafter, Murphy provided Fortunato with a list

of four persons to serve as Panel members and the

amounts that each should be paid, which Fortunato relayed

to Burstine at CMSI. Murphy chose Curt Masklee, his best

friend and business partner; John Bonazzi, an undersheriff

in the Passaic County Sheriff ’s Department; Joseph

DiDonna, County Administrator DiDonna’s father; and

Joseph DiPasquale, a member of the State Waterfront

Commission to whom Murphy owed a political favor, to

serve as Panel members. There was circumstantial evidence

presented at trial that Murphy received a portion of

Masklee’s payments as a kick-back, and that DiDonna took

a piece of his father’s proceeds.

Murphy then began to put pressure on DiDonna to award

CMSI a County contract. When it became apparent that a

8

workers’ compensation contract would not be available,

Murphy pressed DiDonna to aid CMSI in bidding for a third

party administration (“TPA”) contract at the County jail,

regardless of CMSI’s lack of experience in this field.

DiDonna aided CMSI throughout the bidding process and,

notably, allowed it secretly to resubmit a bid after the

submission period expired because CMSI had previously

filed a bid that was considerably higher than those of its

competitors. DiDonna then recommended the CMSI bid to

the Board of Freeholders, while Murphy talked to several of

the Freeholders about the contract. On July 20, 1994, the

Board of Freeholders awarded the TPA contract to CMSI at

its revised bid of $165,000.

A short time after the contract was awarded to CMSI, the

Panel members had not yet received any payment. This

upset Murphy, who relayed his concern to Fortunato.

Fortunato explained that CMSI could not fulfill its

obligation under the scheme unless it received advance

payment on the TPA contract. Murphy contacted DiDonna,

who made three months’ worth of advance payment on the

contract even though it had been in effect for only two

weeks. In September 1994, the Panel met for the sole

purpose of receiving their checks according to the amounts

specified by Murphy. In order to conceal the operation, the

Panel members were paid by a shell corporation established

by Jorgensen and Burstine, called Physician’s Management,

and were instructed to pay taxes on the payments so that

the Panel appeared legitimate. This pattern continued:

Murphy would pressure DiDonna to ensure that CMSI was

paid by the County, and Murphy would press Jorgensen

and Burstine at CMSI to call another Panel meeting to

distribute payments. No actual work was ever done by the

Panel members, who did not have relevant expertise and

provided no business advice or guidance to CMSI. Murphy

was aware that the Panel members were being paid despite

the fact that they did no work.

In order to continue the operation, Murphy, Jorgensen,

and Burstine worked with DiDonna to find more County

contracts that could be awarded to CMSI. Over the next

year, DiDonna helped CMSI receive three more County

contracts: $39,625 for arranging drug and alcohol testing

9

for operators of large trucks and heavy machinery;

$173,250 to renew the TPA contract; and $624,000 to

provide nursing services at the Passaic County Jail.

The scheme began to unravel in May 1996 when

DiDonna became nervous about being pressured to find

even more contracts for CMSI and the possibility that his

father could be harmed if the scheme were exposed. Shortly

thereafter, two of the Panel members, Joseph DiDonna and

Curt Masklee, wrote letters of resignation. In June and July

of 1996, the United States Attorney’s Office approached

Burstine and Jorgensen and let them know that the

scheme had been uncovered. Although they both agreed to

cooperate with the Government’s investigation, Burstine

tipped off Fortunato, Lisbona, DiDonna, and Murphy about

the federal investigation and the possibility that CMSI’s

phones might be tapped. Nevertheless, the Government

managed to record Jorgensen and Burstine’s telephone

conversations and tape meetings during the next two years

in order to develop evidence presented at trial, including a

conversation between Fortunato and Jorgensen in which

Fortunato described the entire history of the scheme.

No further payments were made to the Panel nor

contracts awarded to CMSI after the Government’s

investigation was exposed in July 1996. In total, the Panel

members shared $72,879.25, which was derived from

$1,207,199 in County contracts awarded to CMSI.

C. Procedural History

Murphy was indicted by a grand jury. Counts One

through Four of the indictment charged Murphy with

violations of the Travel Act, 18 U.S.C. § 1952, the

underlying predicate offense being bribery under the New

Jersey bribery statute, N.J.S.A. 2C:27-2(a). The required

interstate commerce element on these counts was four uses

of the mails: two mailings of payments to the Panel, one

mailing of an invoice with respect to the TPA contract, and

one mailing of the nursing services contract. Counts Five

through Eight charged violations under the mail fraud

statute, 18 U.S.C. §§ 1341 and 1346, and were based upon

the same mailings cited in the Travel Act counts. The mail

10

fraud counts were predicated on three theories of liability:

first, that Murphy defrauded the County of “money and

property”; second, that Murphy caused County

Administrator DiDonna to breach his duty of honest

services to the County by failing to disclose material

information regarding the contracts awarded to CMSI; and

third, that Murphy defrauded the County of its right to

Murphy’s “honest services in the affairs of the County.”

The jury returned its verdict on May 14, 2001, convicting

Murphy on Counts One through Three (all Travel Act), and

Five through Seven (all mail fraud) but acquitting him on

Counts Four (Travel Act) and Eight (mail fraud). The jury’s

verdict was general, and did not specify which theory or

theories of mail fraud it believed Murphy had violated. At

the sentencing hearing, the District Court increased

Murphy’s offense level by eight levels since the convictions

involved a payment intended to influence an elected official

or any official holding a high-level decision-making or

sensitive position, pursuant to U.S.S.G. § 2C1.1(b)(2)(B).

The Court also imposed a four level increase under

U.S.S.G. § 3B1.1(a) because Murphy had organized criminal

activity involving five or more participants. On September

18, 2001, the District Court sentenced Murphy to 43

months of incarceration, 3 years of supervised release, a

fine of $20,000, restitution of $72,879.25 to Passaic

County, and a special assessment of $600.

Judgment was entered on September 24, 2001 and

Murphy filed a notice of appeal on the same day. The

District Court had jurisdiction over the case pursuant to 18

U.S.C. § 3231. We have appellate jurisdiction under 28

U.S.C. § 1291 and 18 U.S.C. § 3742.

II. The Margiotta Mail Fraud Theory

The indictment charged Murphy with four counts of mail

fraud pursuant to 18 U.S.C. §§ 1341 and 1346. To

recapitulate, each count alleged three theories of how

Murphy defrauded Passaic County: Theory One charged

him with defrauding the County of money and property;

Theory Two alleged a scheme to defraud the County of the

honest services of its County Administrator; and Theory

11

Three accused Murphy of violating his duty to provide the

County with his own honest services. As we have already

noted, Murphy contends that Theory Three stretched the

mail fraud statute beyond its reasonable bounds and

improperly relied on the oft-criticized holding of United

States v. Margiotta, 688 F.2d 108 (2d Cir. 1982), which

sustained the conviction of a county chairman under

similar facts. Murphy does not dispute the legal viability of

the Government’s other two theories, which we find legally

sufficient for the reasons discussed infra.

A. Review of General Verdicts

The Government contended at oral argument, and in

supplemental briefing, that according to United States v.

Asher, 854 F.2d 1483 (3d Cir. 1988), we should affirm the

mail fraud convictions even if we determine that Theory

Three, which relied on Margiotta, was not legally viable.

In Asher, the jury returned a general verdict convicting the

defendant of mail fraud, and thus did not specify whether

it followed the prosecutor’s monetary-loss or deprivation of

honest services theory. After the conviction, the Supreme

Court ruled in McNally v. United States, 483 U.S. 350

(1987), that honest services fraud was not a legally viable

theory of prosecution under § 1341. Despite not knowing

whether the jury relied on the now-impermissible honest

services fraud theory, we sustained the defendant’s

conviction in Asher because we were “unable to hypothesize

a set of circumstances under which this jury . . . could not

have found a fraudulent scheme that consisted solely of

depriving the citizens of their right to honest government

that did not also involve tangible losses. . . .” 854 F.2d at

1495-96.

The jury in this case also returned a general verdict, and

thus did not specify which of the Government’s theories of

mail fraud the jury believed Murphy had violated. In the

Government’s submission, even if we find the Margiotta

theory of mail fraud not legally viable, we must sustain

Murphy’s mail fraud conviction because, as in Asher, there

is no way that the jury could have found that Murphy

deprived Passaic County of its right to his honest services

without also finding that he devised a fraudulent scheme to

12

deprive the County of money, i.e., the payments to the

Panel. We need not evaluate the merits of the Government’s

contention, however, because the Supreme Court’s opinion

in Griffin v. United States, 502 U.S. 46 (1991), and our

interpretation of Griffin in United States v. Syme, 276 F.3d

131 (3d Cir. 2002), undermine Asher.

In Griffin, the Court articulated a “clear line”

distinguishing general verdicts that could have relied on a

factually insufficient theory from those that might have

been based on a legally invalid theory. 502 U.S. at 59. The

former would be sustained, but the latter would merit

reversal as the Court explained:

Jurors are not generally equipped to determine

whether a particular theory of conviction submitted to

them is contrary to law — whether, for example, the

action in question is protected by the Constitution, is

time barred, or fails to come within the statutory

definition of the crime. When, therefore, jurors have

been left the option of relying upon a legally inadequate

theory, there is no reason to think that their own

intelligence and expertise will save them from error.

Quite the opposite is true, however, when they have

been left the option of relying upon a factually

inadequate theory, since jurors are well equipped to

analyze the evidence.

Id.

In Syme, we examined Griffin and the Court’s prior

decisions concerning whether general verdicts consisting of

an unconstitutional, legally invalid, or factually inadequate

theory could be sustained. We concluded that “under

Griffin, if one of two or more alternative theories supporting

a count of conviction is either (1) unconstitutional, or (2)

legally invalid, then the reviewing court should vacate the

jury verdict and remand for a new trial without the invalid

or unconstitutional theory.” 276 F.3d at 144. We are

therefore satisfied that current precedent dictates that,

should we find one of the Government’s theories of mail

fraud legally invalid, we must reverse Murphy’s conviction

on the mail fraud counts and remand for a new trial

because the jury returned a general verdict.

13

B. The Margiotta Opinion; The District Court’s

Charge

We turn to the merits of Murphy’s contention that the

Government’s third theory of mail fraud, relying on

Margiotta, is legally invalid. The mail fraud statute, 18

U.S.C. §§ 1341 and 1346, provides in relevant part:

§ 1341: Whoever, having devised or intending to

devise any scheme or artifice to defraud . . .

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 20 years, or

both.

§ 1346: For the purposes of [18 U.S.C. § 1341, et

seq.], the term “scheme or artifice to defraud”

includes a scheme or artifice to deprive

another of the intangible right of honest

services.

We have interpreted this statute so that to prove mail

fraud, “the evidence must establish beyond a reasonable

doubt (1) the defendant’s knowing and willful participation

in a scheme or artifice to defraud, (2) with the specific

intent to defraud, and (3) the use of the mails . . . in

furtherance of the scheme.” United States v. Antico, 275

F.3d 245, 261 (3d Cir. 2001).

In Antico, we reviewed the history of the mail fraud

statute and its application to “honest services” fraud, which

is also sometimes referred to as the “intangible rights”

doctrine. Id. at 262 n.16. Until 1987, many courts applied

“scheme or artifice to defraud” in 18 U.S.C. § 1341 broadly

and extended it to schemes that defrauded citizens of their

right to honest government services. The Supreme Court

rejected this construction in McNally, supra, when it held

that the mail and wire fraud acts did not prohibit conduct

that defrauded citizens of their intangible right to honest

services, but only of money or property. 483 U.S. at 359.

That decision was informed by the Court’s application of

the rule of statutory construction that “when there are two

rational readings of a criminal statute, one harsher than

14

the other, we are to choose the harsher only when Congress

has spoken in clear and definite language.” Id. at 359-60.

Unhappy with this holding and in response to the Court’s

desire for a clear legislative voice, Congress enacted 18

U.S.C. § 1346, which sought to restore the mail fraud

jurisprudence to its status pre-McNally. Antico, 275 F.3d at

262 n.18; see also Cleveland v. United States, 531 U.S. 12,

20 (stating that “Congress amended the law specifically to

cover one of the ‘intangible rights’ that lower courts had

protected under § 1341 prior to McNally: ‘the intangible

right of honest services’ ”). Recognizing “Congress’ clear

intent in enacting § 1346,” this court held in Antico that

§ 1346 “includes the prosecution of state and local officials

and public employees for depriving the citizens they serve

of their right to honest services.” 275 F.3d at 262.

The prosecution of a private party official is, however, a

horse of another color. The only case cited by either party

that applied such an interpretation of the mail fraud

statute is Margiotta.3 In that case, the Court of Appeals for

the Second Circuit upheld the conviction of Joseph

Margiotta, the Chairman of the Republican Committee of

Nassau County and the Town of Hempstead, New York.

Like Murphy, Margiotta wielded significant political

influence and used this power to construct a contracts-for-

payments scheme far more extensive than that with which

Murphy was charged. 688 F.2d at 113-14. Margiotta was

indicted for, inter alia, one count of mail fraud, alleging that

he defrauded the citizens of either (1) the right to the

honest services of their government officials or (2) “the right

3. Aside from Margiotta, the Government can only muster a citation to

the Supreme Court’s opinion in McNally for the general proposition that

a county chairman may act like a public official and owe a fiduciary duty

to the government. This citation to McNally is unhelpful, however, since

the Court only assumed the facts as the government presented them for

the purposes of that case, and then went on to reverse the conviction

anyway. 483 U.S. at 352, 361. No other court has expressly followed

Margiotta, thus it remains the Government’s sole direct authority.

Indeed, it is questionable whether Margiotta is even good law any longer

in the Second Circuit since that Court has expressly foreclosed the use

of pre-McNally cases when construing the meaning of § 1346. See United

States v. Sancho, 157 F.3d 918, 921-22 (2d Cir. 1998).

15

to Margiotta’s honest and faithful participation in the

governmental affairs of the Town, County, and State.” Id. at

114.

On appeal, a divided panel of the Second Circuit rejected

Margiotta’s argument that an alleged deprivation of an

intangible right to one’s honest services under the mail

fraud statute could exist only when the defendant owed a

fiduciary duty to the victim based on a formal legal

relationship. 688 F.2d at 121-22. In the political context,

Margiotta had contended that the statute should only reach

public officials, who owe a fiduciary duty to their

constituents, and not party officials, who only owe a

fiduciary duty to their employer, the political party. Initially,

the panel recognized the pitfall in finding a private actor

equivalent to a public official for the purposes of criminal

liability and noted:

On the one hand, it is essential to avoid the Scylla of

a rule which permits a finding of fiduciary duty on the

basis of mere influence or minimum participation in

the processes of government. Such a rule would

threaten to criminalize a wide range of conduct, from

lobbying to political party activities, as to which the

public has no right to disinterested service. On the

other hand, the harm to the public arising from the

sale of public office and other fraudulent schemes

leads us to steer a course away from the Charybdis of

a rule which bars on all occasions, as a matter of law,

a holding that one who does not hold office owes a

fiduciary duty to the general citizenry even if he in fact

is conducting the business of government.

Id. at 122.

Despite these concerns, the panel approved a gestalt

approach that allowed the jury to derive a fiduciary duty on

the part of Margiotta based on (1) a general reliance test,

which looked at whether others relied on Margiotta

“because of a special relationship in the government,” and

(2) a de-facto control test that examined whether Margiotta

was “in fact mak[ing] governmental decisions.” Id. at 122.

The Court defended these tests by claiming that they

“recognize the important distinction between party business

16

and government affairs, permitting a public official to act in

accordance with partisan preferences or even whim, up to

the point at which he dominates government.” Id.

Although the panel recognized that there might be

federalism problems in using a federal criminal statute to

prosecute local political actors, it girded its holding by

citing New York state cases that supported the broad

proposition that political party officials might owe a

fiduciary duty to the citizenry under state law. Id. at 124-

25. Even so, the panel abjured a narrow holding that

“absent a showing of a violation of New York statute or a

duty imposed by New York law, a defendant may not be

found guilty” of mail fraud because the statute was enacted

to “prohibit the use of mails for promoting schemes

contrary to federal public policy.” Id. at 125. In other words,

although it found some state law that supported the

holding, the panel clearly rejected the contention that the

prosecution must prove that the defendant violated a state

law in order to sustain his mail fraud conviction. Id.

After approving this mail fraud theory, the Second Circuit

panel looked at the sufficiency of the evidence. It found that

the district court had correctly instructed the jury that “in

order to decide that Margiotta had breached his fiduciary

duty, it had to find that Margiotta had concealed from those

in Government who rely on his participation material

information concerning his entry into a corrupt agreement

to influence him in the performance of his governmental

functions.” Id. at 127 (quotations omitted). Further, the

panel noted that “an affirmative duty to disclose could

reasonably be inferred from the de facto employer-employee

relationship Margiotta enjoyed with the municipal

government.” Id. at 128. Finding ample evidence that the

jury could infer both a fiduciary duty and a breach thereof,

the Court affirmed the conviction of Margiotta on the mail

fraud count. Id.

The District Court in the case at bar relied extensively

and exclusively on Margiotta in its charge to the jury on the

Government’s Theory Three of mail fraud. The Court’s

reliance is evidenced, for example, in the charge to the jury,

which read in relevant part:

17

In order to find the defendant guilty of defrauding

Passaic County and its citizens of their right to his own

honest services you must find that the defendant

Murphy had a fiduciary duty and that he violated that

duty by failing to disclose material information. An

individual may have such a fiduciary duty even if he is

technically not an employee of the particular local

government—here, Passaic County. An individual who

knowingly undertakes the business of governing a

particular jurisdiction owes a duty of loyalty to the

citizens just as does one who formally holds public

office. An affirmative duty to disclose can reasonably be

inferred from what is essentially an employer-employee

relationship. Thus, you may find that the defendant

Murphy had a fiduciary duty to Passaic County and its

citizens, if you find that the work done by [the]

defendant was in substantial part the business of

Passaic-County [sic] government, rather than being

solely party business, and that the performance of that

work was intended by him and relied on by others in

Passaic County government as part of the business of

government in order to carry forward its affairs as a

whole. In determining whether the defendant had a

fiduciary duty, among other things, you should

consider whether the defendant regularly participated

in the selection of persons for public positions,

regularly participated in the selection of vendors for

Passaic County business, or otherwise regularly

participated in running Passaic County business. If

you find that defendant Murphy essentially served as a

fiduciary for Passaic County, then he had a duty to

disclose material information to those in Passaic

County government who relied on him.

Essentially, the charge stated that if Murphy knowingly

undertook governmental functions and others relied on

him, then he could have a fiduciary duty that he breached

by not notifying Passaic County of the arrangement to

award contracts to CMSI in return for payments to the

Panel.

18

C. Is Margiotta’s Honest Services Fraud Theory

Legally Viable?

1. The Parties’ Contentions; Judge Winter’s Dissent

Murphy urges us not to follow Margiotta for several

reasons. First, he points out that our recent decision in

United States v. Panarella, 277 F.3d 678 (3d Cir. 2002),

precludes a broad reading of Margiotta’s holding that a jury

may find that a party official has a fiduciary duty absent

any reference to a breach of fiduciary duty found in state

law. In Panarella, we held that “the existence of a violation

of state law . . . is sufficient to establish honest services

wire fraud,” though we did not resolve the issue of whether

a state law duty was necessary. Id. at 699 n.9. Second,

Murphy argues that the indictment and charge in this case

did not allege that Murphy had a fiduciary duty based on

New Jersey state law to disclose material information to

Passaic County. Finally, he contends that reading § 1346 as

imposing a fiduciary duty on local party officials without

reference to state law would violate the “clear statement”

rule, the principle of lenity, and that of federalism, which

we noted in United States v. Antico, supra, and Panarella,

were significant concerns regarding the application of the

statute. In support of his position, Murphy invokes Judge

Winter’s forceful Margiotta dissent, which illustrated the

numerous problems with allowing a jury to find a fiduciary

duty without any reference to established law.

Judge Winter opined that although the majority’s opinion

in Margiotta was based on precedents that pushed honest

services mail fraud to its logical limit in reaching public

officials, it was an unacceptable leap to allow “a jury [to]

find that a politically active person has sufficient influence

and power over the acts of elective officials to be subject to

the same duty as those officials so far as those acts are

concerned.” 688 F.2d at 142 (Winter, J., dissenting). In

Judge Winter’s view, the source of this “impermissible

result” was “an erroneous analogy between fiduciary

relationships involving private parties . . . and relationships

between politically active persons and the general citizenry

in a pluralistic, partisan, political system.” Id. Noting the

varying requirements of fiduciary duties in different

19

contexts (e.g., employer-employee, trustee-beneficiary,

director-shareholders, etc.), Judge Winter faulted the

majority for allowing a jury to find that a party official could

have a fiduciary duty absent some guidance. Id. Such a

result, Judge Winter reasoned, leaves juries the freedom “to

apply a legal standard which amounts to little more than

the rhetoric of sixth grade civics classes.” Id.

The Government asks us not to follow Judge Winter’s

dissent because it contends that it pertained to the

problems of “honest services” fraud generally, and Congress

has since resolved this concern by enacting § 1346 to allow

for these types of prosecutions. The Government also points

to this court’s decisions in Antico and Panarella, which held

that § 1346 was a sufficiently clear statement to permit the

prosecutions of public officials. Murphy finds the

Government’s citations to Antico and Panarella

unpersuasive; he notes that Judge Winter reasoned that for

private party officials “there is no description” of “a line

between legitimate patronage and mail fraud.” Id. at 115,

117. Murphy argues that we must draw such a bright line.

He claims that while government officials are bound by

their office to act in the public interest, a party official is an

entirely different creature. He further contends in his brief

that party officials “are expected to pursue their self-

interest. Far from impartial, they are entitled to be

partisan. In the rough-and-tumble of politics, they will

bring pressure upon public officials to favor their interests

above others’. . . .”

Murphy also cites our own precedent expressly rejecting

an analogy between county chairmen and government

officials in a one-person, one-vote case. Lynch v. Torquato,

343 F.2d 370, 372 (3d Cir. 1965). In Lynch, we determined

that “the normal role of party leaders in conducting internal

affairs of their party, other than primary or general

elections, does not make their party offices governmental

offices . . . .” Id. Rather, local party leaders “may be

responsible for raising and spending money in the party

interest”; “may plan and direct” campaigns, issue advocacy,

and voter registration drives; and “may administer political

patronage.” Id. While that case noted that there may be

some situations in which a party official’s activities could

20

be considered state action (e.g., when making emergency

nominations for public office), we squarely rejected the idea

of viewing county chairmen and government officials

equivalently. Id.

2. Is the Government’s Theory that a County

Chairman May Act Like a Public Official and Acquire a

Fiduciary Duty to the Local Government Viable?

We turn to an analysis of the Government’s Margiotta

theory. While the idea of allowing a jury to determine

whether a party official acted enough like a government

official is itself enough to give us pause, the Government

recognized belatedly in this appeal the apparent need for a

state law source to buttress its theory of honest services

fraud. As noted above, the Margiotta court skirted the issue

of whether state law is relevant to a mail fraud conviction.

688 F.2d at 105 n.2. Both parties here have recognized,

however, that in our decisions in Panarella and Antico we

noted that a violation of state law serves as an important

limiting principle on the scope of § 1346 honest services

fraud, which might be necessary to avoid lenity and

federalism concerns in federal prosecutions of state or local

political officials. Panarella, 277 F.3d at 693; Antico, 275

F.3d at 262 n.18.

Before determining whether a state law predicate is

indeed necessary, we need to see if the Government asserts

a valid predicate. The first time the Government actually

articulated a state law predicate, a violation of the New

Jersey Bribery Act, N.J.S.A. 2C:27-2, was in its brief on

appeal. Neither the indictment nor the charge informed the

jury that they needed to find that Murphy violated a state

law in order to determine whether he had a fiduciary duty

to Passaic County. Although the jury convicted Murphy of

violating the New Jersey Bribery Act, that served as the

predicate of the Travel Act counts and was not advanced in

connection with mail fraud. At all events, despite the

Government’s new appellate argument, we are not

persuaded that the New Jersey Bribery Act provides a

fiduciary duty on the part of Murphy as a party official to

disclose material information to Passaic County for several

reasons.

21

First, as noted above, the jury was never asked to

determine whether a fiduciary duty could be inferred from

the New Jersey Bribery Act. Theory Three of the charge

asked the jury to consider generally “whether the defendant

regularly participated in running Passaic county business,”

but it did not allege that Murphy was involved in a scheme

that violated the New Jersey Bribery Act, but rather that he

breached “a duty to disclose material information to those

in Passaic County government who relied on him.” While

the Government is correct in noting that N.J.S.A. 2C-27-2

applies to party officers as well as public officials, it cannot

point to anything in the statute that creates a fiduciary

duty on the part of party officials to disclose information to

the government. Rather, the statute only proscribes “the

solicit[ation], accept[ance], or agree[ment] to accept from

another . . . [a]ny benefit as consideration for a decision,

opinion, recommendation . . . .” Id. Moreover, while bribery

may often accompany breaches of a duty to disclose, see

Panarella, 277 F.3d at 695, and may even be the paradigm

case of honest services fraud committed by public officials,

see United States v. DeVegter, 198 F.3d 1324, 1327 (11th

Cir. 1999), the Government points to no case that found

that a bribery statute can create an obligation to provide

honest services without any preexisting legal duty.

This final point is the crux of the issue, and it presents

a slightly different question from that which we addressed

in Antico and Panarella. In those cases we assumed, based

on extensive pre-McNally case law, that public officials have

a duty to provide honest services to the public. We then

looked to state law to ascertain what standards of fiduciary

care the public officials were required to meet in order to

determine whether the officials defrauded the citizens of

their right to honest services.4 For example, in Antico, we

4. In Antico, the defendant was himself a public official. In Panarella, the

defendant was a private businessman who bribed a Pennsylvania State

Senator, but the Government’s theory was that the defendant was guilty

of being an accessory after the fact under 18 U.S.C. § 3 to a wire fraud

scheme to deprive the public of the State Senator’s honest services in

violation of 18 U.S.C. §§ 1343, 1346. 277 F.3d at 689. Thus, the central

inquiry was whether the State Senator had committed honest services

wire fraud—not whether the defendant had done so.

22

referred generally to state and local conflict of interest laws

to identify what fiduciary duties the defendant owed to the

public. 275 F.3d at 264. And, in Panarella, we found “that

the clarity of [the state’s] disclosure statute criminalizing a

public official’s nondisclosure of his sources of income

addresses rule of lenity concerns . . . more effectively than

does [a general prohibition against] ‘misuse of office for

personal gain.’ ” 277 F.3d at 693. These cases best support

Theory Two of the Government—that Murphy participated

in a scheme to defraud Passaic County of County

Administrator DiDonna’s honest services—since the bribery

statute clearly relates to services that DiDonna, as a public

official and fiduciary, owed to the citizenry.

These cases do not, however, answer the question

whether the New Jersey Bribery Act alone can create a

fiduciary relationship that could then serve as the predicate

for determining that Murphy himself owed honest services

to Passaic County and its citizens. Murphy submits that

McNally stands for the general proposition that absent a

“clear statement” from Congress, a court should not

“construe the [federal mail fraud] statute in a manner that

leaves its outer boundaries ambiguous and involves the

Federal Government in setting standards of disclosure and

good government for local and state officials.” 483 U.S. at

350. We agree. Although we have held that § 1346 was a

clear statement by Congress that it wished to criminalize

honest services fraud, see Antico, 275 F.3d at 261, we

recognized in Panarella the need for a “limiting principle

defining the scope of honest services fraud.” 277 F.3d at

694.

More specifically, this is because the plain language of

§ 1346 provides little guidance as to the conduct it

prohibits. We explained:

Deprivation of honest services is perforce an imprecise

standard, and rule of lenity concerns are particularly

weighty in the context of prosecutions of political

officials, since such prosecution may chill

constitutionally protected political activity. Moreover,

decisions of our own Court stating that “fraud is a

broad concept that ‘is measured in a particular case by

determining whether the scheme demonstrated a

23

departure from fundamental honesty, moral

uprightness, or fair play and candid dealings in the

general life of the community,’ ” [citations omitted] do

little to allay fears that the federal fraud statutes give

inadequate notice of criminality and delegate to the

judiciary impermissibly broad authority to delineate

the contours of criminal liability.

Id. at 698; see also Crandon v. United States, 494 U.S. 152,

158 (1990) (stating that the rule of lenity “serves to ensure

that there is fair warning of the boundaries of criminal

conduct and that legislatures, not courts, define criminal

liability”). We thus endorse (and are supported by) the

decisions of other Courts of Appeals that have interpreted

§ 1346 more stringently and required a state law limiting

principle for honest services fraud, as set forth in the margin.5

Murphy urges us to address the issue we reserved in a

footnote in Panarella: Whether a violation of a state-law

created fiduciary duty is required to sustain an honest

services fraud conviction. Id. at 699 n.9. Although

5. In United States v. Brumley, 116 F.3d 728 (5th Cir. 1997), for

example, the Court of Appeals for the Fifth Circuit held en banc that

state law must provide the specific honest services owed by the

defendant in a fiduciary relationship. Id. at 734. Looking at the plain

language of the statute, the Court found nothing “to suggest that

Congress was attempting in § 1346 to garner to the federal government

the right to impose upon states a federal vision of . . . an ethical regime.”

Id. Rather, “[u]nder the most natural reading of the statute, a federal

prosecutor must prove that conduct of a state official breached a duty

respecting the provision of services owed to the official’s employer under

state law.” Id.

Similarly, the Court of Appeals for the Second Circuit concluded that

§ 1346 stands “for the proposition that a scheme to harm another by

breach of a duty enforceable by an action in tort may support a

conviction for a scheme to defraud another of ‘honest services,’ ” United

States v. Handakas, 286 F.3d 92, 106 (2d Cir. 2002), but it then found

§ 1346 unconstitutionally vague as applied to a conviction of honest

services mail fraud based on the violation of duties to report material

information as mandated by state labor and constitutional law. Id. This

holding is much broader than this court’s in Panarella in that the

Hanadakas Court concluded that wrongs covered by state criminal and

contract law could not form the basis of a definition of “honest services.”

24

federalism concerns are paramount in federal prosecutions

of local political party officials, we do not think that this

case requires us to resolve that question. This is because

Panarella and Antico address the different issue of what

types of fiduciary duties are required, within the meaning

of honest services, when either state or federal law already

clearly establishes a fiduciary relationship. Here, in

contrast, the Government cannot identify any clearly

established fiduciary relationship or legal duty in either

federal or state law between Murphy and Passaic County or

its citizens. In other words, it cannot point to an

established “right” of honest services that Murphy owed to

the County or its citizens beyond a criminal statute, which

we do not believe can create a fiduciary relationship. The

Government’s use of the Margiotta theory of honest services

fraud therefore falls far outside the classical definition of

fraud. See Panarella, 277 F.3d at 695 (“Fraud in its

elementary common law sense of deceit . . . includes the

deliberate concealment of material information in a setting

of fiduciary obligation.”) (quoting United States v. Holzer,

816 F.2d 304, 307 (7th Cir. 1987)).

Reading the New Jersey Bribery Act as the Government

does would require us to find not merely a duty owed in

that statute, but also the predicate for a fiduciary

relationship between a county political chairman and the

public. We cannot endorse this methodology because all

criminal activity would breach a duty to the public not to

break the law that could then form the basis of a mail

fraud conviction. This outcome would, of course, run

counter to the federalism concerns we expressed

in Panarella about the potentially limitless application of

§ 1346. While we recognize that the New Jersey Bribery Act

properly restricts the conduct of party officials, probably in

recognition of their influential political position, we cannot

read it as creating a fiduciary or other legal relationship to

the public.

Without any legal basis for determining whether Passaic

County or its citizens had a right to Murphy’s honest

services, we conclude that it was improper for the District

Court to allow the jury to conjure such a duty out of a fog

of assumptions. In Panarella we warned about the “parade

25

of horribles envisioned by those who fear overly broad

application of the federal mail and wire fraud statutes.” 277

F.3d at 699. One example of such an overly broad

application we cited was from Judge Winter’s dissent in

Margiotta, in which he posited that under the Margiotta

theory, “[a] partisan political leader who throws decisive

support behind a candidate known to the leader to be less

qualified than his or her opponent because that candidate

is more cooperative with the party organization, is guilty of

mail fraud unless that motive is disclosed to the public.”

688 F.2d at 140 (Winter, J., dissenting). While Murphy’s

actions certainly were not the same as in this hypothetical,

we note that there is nothing in Margiotta that would

prevent an over-zealous prosecutor from pursuing this

scenario.

Further, we agree with Judge Winter that Margiotta fails

to provide any logical rationale for treating private party

officials in the same manner as public officials since such

a loose interpretation of the mail fraud statute creates “a

catch-all political crime which has no use but misuse.” Id.

at 144; see also John C. Coffee, Jr., Modern Mail Fraud:

The Restoration of the Public/Private Distinction, 35 Am.

Crim. L. Rev. 427, (Spring 1998) (“The overreach in

[Margiotta’s] theory is obvious and invades even the sphere

of the First Amendment.”).

Because Margiotta is in direct contravention of the

principles of honest services fraud we articulated in Antico

and Panarella, and the jury did not specify which theory of

mail fraud it believed Murphy violated, we will reverse

Murphy’s conviction on the mail fraud counts and remand

to the District Court for a new trial absent this legally

invalid theory.

III. Did Spillover of Margiotta Evidence “Taint” the

Entire Conviction?

Murphy contends that should we reverse on the mail

fraud counts, we must also vacate the entire conviction

because the evidence presented by the Government to

support its invalid Margiotta theory of mail fraud “tainted”

the jury’s verdict on the Travel Act counts as well. When we

26

find reversible error on one or more counts, we consider

“whether the presence of the [invalidated] count[s] had any

spillover effect sufficiently prejudicial to call for reversal” of

the remaining counts. United States v. Pelullo, 14 F.3d 881,

897-98 (3d Cir. 1994) (citation omitted).

The critical factor in any claim of “taint” is the existence

of evidence admitted to support the invalid counts that

would not be admissible to prove the remaining counts.

United States v. Cross, 308 F.3d 308, 318 (3d Cir. 2002).

Only if we find such evidence must we “consider whether

the verdict on the remaining count was affected adversely

by the evidence that would have been inadmissible at trial

limited to that count.” Id. This requires an 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 these 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 a jury.” Pellulo, 14 F.3d at 898-99.

Murphy claims that the Government was allowed to put

on a considerable amount of evidence to support its

Margiotta theory that would otherwise have been

inadmissible solely to prove bribery under the Travel Act.

As explained in Section II of this opinion supra, the

cornerstone of the Margiotta theory as applied in this case

was that Murphy acquired a fiduciary duty to Passaic

County and its citizens by virtue of his extensive influence

over the County’s governance. Because the jury would be

charged with determining whether this fiduciary duty

existed based on how Murphy participated in County

governance, the Government was entitled to present

evidence detailing all aspects of Murphy’s involvement in

County politics.

As Murphy points out, much of this evidence was not

directly related to the bribery charges under the Travel Act.

Murphy specifically identifies testimony by Passaic County

Administrator DiDonna and Panel member Curt Masklee

concerning the power Murphy wielded in the County and

statements that Murphy handpicked and controlled the

County Freeholders, ran County business at his restaurant,

and boasted that he had the jobs of 2,000 people in his

27

hands. [A132-38, 152-304.] Some of this evidence gave the

impression of Murphy as a back-slapping, corrupt party

boss.

More specifically, in testimony recorded in over 160 pages

of transcript, Masklee and DiDonna explicate Murphy’s role

in and control over Passaic County government as

exemplified by the following statements: Murphy would

“hold court” at his restaurant where he would discuss

County business; Murphy had an interest in who handles

County bonds; Murphy cooperated with the County Sheriff

to prevent State Senator Joe Bubba from countering

Murphy’s control of the County; there was an alliance

between Murphy and the County Sheriff since 1991 to

assert dominance over County affairs; Murphy allegedly

stated, “I hold the careers of people in my hand, 2,000

people, I hold their jobs in my hands”; Murphy

demonstrated to the vendors the power he had in the

County; Murphy determined on which committees the

Freeholders would serve so that he could have “ultimate

control”; Murphy got his friend appointed as County

Adjuster; Murphy’s orders to the Freeholders to confirm his

recommended appointments are more than a “mere

recommendation”; Murphy arranged for a part-time job for

an associate at the Office of Aging; Murphy aided a

subcontractor in his attempt to get paid by a contractor by

providing the contractor with an emergency County

contract in return; Murphy helped the son of a County

official get transferred to another government job; he helped

the same official’s campaign worker get a government

position; Murphy got a labor lawyer hired who was meant

to do work at the County hospital but instead spent his

time trying to get a bill passed in the State legislature that

would have provided the undersheriff with job protection;

Murphy ensured that there was always enough County

work for another lawyer, who would clear settlements of

County matters with Murphy before going to the

Freeholders; Murphy helped the State Democratic Party

chairman obtain consulting work in the County, including

as part of various construction contracts; Murphy

occasionally received flow charts of the County departments

from DiDonna so that he would know where he could place

individuals in County jobs; he also received the vender list,

28

which Murphy would use to solicit venders for political

fundraising; Murphy placed the wife of his friend Curt

Masklee on the Welfare Board, an autonomous County

agency; Murphy ordered a letter drafted to the State

Medical Examiner so that an individual who ran a local

funeral home could continue doing business with the

County Medical Examiner; at the request of the Sheriff,

Murphy had an individual appointed to handle security for

the Vo-Tech school; the Sheriff and Murphy also cooperated

to choose the appointment for Emergency Management

Coordinator, and Murphy pressed DiDonna to put this

choice before the Freeholders even after he did not appear

on the first selection list, which the Freeholders did

because he was “Murphy’s guy”; Murphy successfully urged

the County payroll supervisor to reduce the salary of the

newly elected County Clerk compared to the prior Clerk

because she sent a flier saying that the Sheriff endorsed

her without the Sheriff ’s approval; Murphy also told the

new Clerk whom he wanted her to hire as Deputy Clerk

and what that person’s salary should be, orders she should

follow if she would want a raise in the future; Murphy

would get people appointed to County jobs by disregarding

the Civil Service list; Murphy intervened to assist a relative

who worked for the County Utilities Authority in settling his

disability claim; Murphy helped a construction company

that built the County Administration Building get paid

when it was having problems with the County; Murphy

helped a fellow resident from Totowa get a raise and a job

title change; the Sheriff and Murphy collaborated in getting

the former police chief of Prospect Park appointed part time

director of the police academy; Murphy played a role in

arranging for raises for County attorneys by lobbying the

Freeholders; Murphy intervened to prevent a groundskeeper

at the hospital from getting fired; he also got the cook at his

restaurant a second job at the hospital, which posed

problems with the union because only this cook got the

weekend off (to work at Murphy’s restaurant); Murphy

created a legal instructor job in the County Counsel’s Office

to help an individual who needed health benefits; he also

got a lawyer who worked for a political rival a County job

so as to make that lawyer loyal to him and weaken his

rival; Murphy ordered the appointment of an insurance

29

agent on record for the County and a secretary in the

Public Works Department to similarly gain the loyalty of

these individuals who were associated with a political rival;

the president of the County College came to Murphy at his

restaurant asking for help in his reappointment, which

Murphy successfully did; Murphy urged the creation of a

job in the Department of Human Services for a lawyer who

needed a job, but this individual did no real work; Murphy

promoted the hiring of an individual for a post at the

County-run camp; Murphy helped Albert Lisbona, a Panel

member and friend of Murphy, in securing legal work for

the County on its bond issues in exchange for a monetary

kickback to Murphy;6 Murphy also arranged for the

provision of a piece of the bond issues work to an

accountant of his choosing; Murphy ordered the

Freeholders to set a certain salary for the County’s

Registrar of Deeds and his deputy; Murphy placed a lawyer

on the County high school’s payroll; Murphy helped a

political protege who lost an election to get a job in the

Community College; Murphy met with the head of the

County Parks Department at his restaurant and notified

the official that he supported him continuing in that

position; Murphy interceded to prevent the hospital from

laying-off its finance manager; Murphy determined who

would get the host benefit payments from the revenues

generated by the County’s waste transfer station; Murphy

got involved in negotiations to expand the size of the waste

transfer station and ostensibly represented the County in

this transaction; Murphy also negotiated a settlement with

the developer on a failed project to build an incinerator;

Murphy bailed out someone who purchased land for

development but was prevented from doing so because of

environmental reasons by having the County purchase the

land and turn it into a park; Murphy orchestrated a plan to

get a former Freeholder appointed as director of the County

6. It is particularly instructive that in response to Murphy’s objection to

DiDonna’s testimony on this unrelated kickback scheme, the

Government claimed that there was no issue of inadmissible character

evidence under Fed. R. Evid. 404 because the testimony related to

Murphy’s “give and take with respect to vendors,” which suggests

Murphy’s role in influencing County governance under Margiotta, but

does not imply any relevance to the bribery charge under the Travel Act.

30

Utilities Authority, and then negotiated a generous

severance package when the County sought to have the

newly-hired director fired from the job; and Murphy took

care of the County chairman for the Democratic Party by

supporting him on the Welfare Board.

The Government counters that this evidence would have

been admissible to prove bribery under the Travel Act in

order to show that Murphy had the opportunity and ability

to orchestrate the contracts-for-payments scheme. We do

not gainsay that some of this evidence might also have been

admissible under the Government’s first two theories of

mail fraud, and thus did not only go to the impermissible

Margiotta theory. However, we think that the proper method

for evaluating “taint” is to look at whether any “evidence

introduced to support the reversed count,” in this case, the

mail fraud counts, “would have been inadmissible at a trial

on the remaining count.” Cross, 308 F.3d at 317. “We deal

here with the three remaining counts — the Travel Act

counts incorporating the New Jersey Bribery Act. While we

agree that portions of this Margiotta evidence might still

have been admissible to prove the bribery or Travel Act

violations, we do not find this argument sufficient to avoid

Murphy’s charge of “taint” for several reasons. First, the

Government admitted before the District Court that its

reason for presenting much of this evidence was to prove its

Margiotta theory of mail fraud. For example, in response to

an objection by Murphy as to some testimony by Curt

Masklee, the Government stated that “there is going to be

hours of testimony from Mr. DiDonna, about Mr. Murphy’s

involvement on the Margiotta issues” and that “[t]he

evidence will show on a broader level that Mr. Murphy had

direct involvement in the operations of Passaic County

Government, and picking vendors, and picking employees

to work in the county, and then that goes directly to the

central issue in this case of Mr. Murphy’s involvement under

the Margiotta issues.” [A132, 133 (emphasis added).] This

enabled the Government to admit practically any evidence

on Murphy’s political activities without having to show its

relevance to the Travel Act counts.

Moreover, when the jury posed a question to the District

Court regarding the interpretation of evidence of Murphy’s

31

patronage activities, which substantially included evidence

designed to prove the Margiotta theory, the jury clearly

indicated that this evidence was central to its deliberations

on both the mail fraud and Travel Act counts. It is therefore

highly probable that the charges were “intertwined” in the

mind of the jury, and that the jury relied on the evidence

of Murphy’s political activities in its deliberations on the

Travel Act counts.

Murphy also argues convincingly that the absence of the

Margiotta theory of mail fraud would have greatly changed

his strategy at trial. Because evidence of Murphy’s political

involvement could be construed by the jury under this

theory as creating a fiduciary relationship, Murphy wanted

to minimize a discussion of his involvement in Passaic

County governance. On the other hand, such evidence

would have been useful to his defense to the Travel Act

charge that he did not have the requisite criminal intent to

turn the contracts-for-payments scheme into a corrupt quid

pro quo because he routinely engaged in such patronage,

which is legal. Absent the impermissible Margiotta theory,

it is likely that Murphy would have employed a different

defense strategy that would have allowed him free reign to

present his role in the County in order to rebut the

inferences that his participation in the scheme was

anything more than ordinary and legal patronage.

Finally, as discussed above, some evidence of Murphy’s

influence over the Passaic County government may be

relevant under the Travel Act counts in order to illustrate

Murphy’s role in the bribery scheme. But the quantum of

evidence introduced to show Murphy in effect acted as a

government official would not be necessary absent the

Margiotta theory. The Court specifically instructed the jury

that “[i]t is no defense to the charge of bribery that the

person receiving or soliciting the bribe . . . was not qualified

to act in the desired way whether because he had not yet

assumed office, or lacked jurisdiction, or for any other

reason.” Thus, any evidence of favor-trading or

inappropriate acts that did not have any relevance to the

elements of bribery or to Murphy’s opportunity to instigate

this particular contracts-for-payments scheme would be

irrelevant. The cumulative effect of unrelated evidence likely

32

left an impression with the jury that Murphy routinely

engaged in corrupt political activities and thus might have

had the propensity to engage in the charged contracts-for-

payments scheme.

We also note that “[w]hen evaluating taint or spillover

effect, courts have applied a test somewhat favorable to the

defendant.” Pellulo, 14 F.3d at 898. For the foregoing

reasons, we are satisfied that “the jury was likely to be

confused or relied upon improper evidence,” id., in its

deliberations on the remaining counts, and that there was

spillover of evidence from the improper Margiotta theory

that tainted those convictions as well. We will therefore

reverse the judgment and remand this case to the District

Court for a new trial on all counts in which the

Government may not use the Margiotta theory of honest

services fraud liability.7

A True Copy:

Teste:

Clerk of the United States Court of Appeals

for the Third Circuit

7. Because we will reverse the entire conviction and remand for a new

trial, we do not need to address Murphy’s arguments concerning

allegedly insufficient supplemental instructions in response to the jury’s

queries during its deliberations, and allegedly erroneous evidentiary and

sentencing rulings.