United States v. Louis Parise, Jr.

GARTH, Circuit Judge,

dissenting:

Louis Parise, Jr. has been convicted and sentenced to serve thirty months in federal prison for racketeering. The jury convicted Parise of engaging in a pattern of racketeering acts by making cash payments to union officials John Pegan and Deborah Rywelski in exchange for referring injured union members to an attorney associated with Parise. The difficult question raised in this appeal is whether Parise’s conduct qualifies as a “racketeering activity,” which turns on whether his conduct constituted a violation of Pennsylvania’s commercial bribery statute, 18 Pa. C.S.A. § 4108. See 18 U.S.C. § 1962 (c); Brokerage Concepts, Inc. v. U.S. Healthcare, Inc., 140 F.3d 494, 521 (3d Cir.1998). If Parise’s conduct did not violate § 4108, then his RICO conviction cannot stand.

The government’s theory is that Parise’s referral payments violated § 4108 because Pegan and Rywelski acted “in relation to the affairs” of the union when they referred union members to Parise and Bernard Sacks, Esq. in exchange for payments from Parise. The majority has agreed with this theory, and has affirmed Parise’s conviction and sentence.

I disagree with the majority’s conclusion that Parise’s conduct violated § 4108. I believe that the majority’s broad interpretation of the “in relation to the affairs” language of § 4108 represents an unwarranted expansion of its scope contrary to its “carefully circumscribed” meaning, Brokerage Concepts, 140 F.3d at 528 , and that the record reveals no evidence that Parise violated § 4108 when the statute is properly construed. Accordingly, I respectfully dissent.

I.

Pennsylvania is one of twenty states that criminalizes commercial bribery for influencing an agent’s conduct “in relation to the affairs” of the agent’s principal. 1

Pennsylvania’s commercial bribery statute is representative of these statutes. Its text reads:

(a) Corrupt employee, agent or fiduciary. — -An employee, agent or fiduciary commits a misdemeanor of the second degree when, without the consent of his employer or principal, he solicits, accepts, or agrees to accept any benefit from another person upon agreement or understanding that such benefit will influence his conduct in relation to the affairs of his employer or principal.

(c) Solicitation. — A person commits a misdemeanor of the second degree if he confers, or offers or agrees to confer, any benefit the acceptance of which would be criminal under [subsection (a) ] of this section.

18 Pa.C.S.A. § 4108. Courts interpreting the “in relation to the affairs” language in the century since commercial bribery stat *805 utes were first enacted have held universally that the core of the offense is the breach of an agent’s duty of loyalty. See, e.g., Note, Bribery in Commercial Relationships, 45 Harv. L.Rev. 1248, 1249 n. 10 (1932) (“The breach of fiduciary duty has been considered the foundation of the offense [of commercial bribery.]”). Pennsylvania is no exception: in Commonwealth v. Bellis, 484 Pa. 486 , 399 A.2d 397 (Pa.1979), the Pennsylvania Supreme Court stated that “the purpose of [Pennsylvania’s commercial bribery statute] is to require an agent, employe[e,] or servant to possess an undivided duty of loyalty to his principal.” Id. at 400 (internal quotations omitted). This is consistent with the Pennsylvania legislature’s Official Comment associated with § 4108, which states that the statute’s purpose is to criminalize bribery in “relationships where a duty of fidelity is owed.” This duty of loyalty is breached only when an employee acts contrary to the interest of his employer.

The precise scope of conduct criminalized by the “in relation to the affairs” language in state commercial bribery statutes identical to Pennsylvania’s has been the subject of a substantial body of ease law. These cases have established a consistent and certain meaning for the text we must interpret. 2 According to these cases, the duty of loyalty protected by the statute is not violated unless the agent (here, Pegan or Rywelski) accepts a payment in exchange for conduct that puts the interests of the payor (here, Parise and Sacks) above the contrary interests of the principal (here, NMU, the union). See, e.g., D.E. Ytreberg, Annotation, Validity and Construction of Statutes Punishing Commercial Bribery, 1 A.L.R.3d 1350 , 1361, 1965 WL 13223 (1965) (noting that in the cases interpreting the “in relation to the affairs” language, actions that did “not affect the employer’s interest in any way” were not criminal); 11 C.J.S. Bribery § 3 (1995) (noting that commercial bribery statutes “require the offer of a bribe to an employee with the intent that he promote the interests of the person offering the bribe over those of his employer”).

Accordingly, it is not commercial bribery to induce an agent to accept payment for conduct that does not adversely affect the interests of the agent’s principal. See People v. Jacobs, 309 N.Y. 315 , 130 N.E.2d 636, 637 (N.Y.1955)(overturning conviction of photographer who paid bursar for list of names of ocean liner passengers, because there was no evidence that release of the names of the passengers was contrary to the interests of the ocean liner company). Further, it is not commercial bribery to induce an agent to accept payment in an attempt to influence conduct over which the agent has no control. See State v. Nadeau, 81 R.I. 505 , 105 A.2d 194 (R.I.1954) (overturning commercial bribery conviction of councilman for planning to accept payment to attempt to influence selection of city police chief, because councilman had no control over selection process).

An illustrative example of these principles is People v. Graf, 261 A.D. 188 , 24 N.Y.S.2d 683 (App.Div.1941). In Graf , a New York appellate court reversed the conviction of a union official who had accepted expense payments from management. Management had wanted to expand the territorial scope of its sign making business beyond New York, and sought to have Graf travel to union headquarters outside of New York to encourage the union members outside of New York to allow the sign company to accept work there. When the union refused to pay Grafs travel expenses, management made a secret arrangement with Graf to do so. Graf was subsequently indicted and convicted of commercial bribery. The basis of the charge was that Graf had accepted payments from management that had induced him to act “in relation to the affairs” of his union.

On appeal, Graf argued that his conduct was not “in relation to the affairs” of the union. The Appellate Division agreed, noting inter alia that Graf had done nothing that could be construed as putting the inter *806 ests of the sign company over those of his union. Even though Graf had secretly accepted payments to do union-related activity, “the action taken by [Graf] was favorable to the union.” Id. at 687. This was insufficient to constitute commercial bribery, the court held, because the statute “requires proof of payment of money to influence an agent in a way inconsistent with his duties towards his employer.” Id. (emphasis added).

As these cases indicate and our court recently recognized, the scope of Pennsylva^ nia’s commercial bribery statute is “carefully circumscribed.” Brokerage Concepts, 140 F.3d at 528 . Of course, this does not mean that it is impossible for payments made in exchange for an agent’s referral to a third party to constitute commercial bribery. See, e.g., Hastings v. Fidelity Mortgage Decisions Corp., 984 F.Supp. 600, 606-07 (N.D.Ill.1997) (Civil RICO) (denying motion to dismiss for failure to state a claim under Illinois commercial bribery statute for referral payment scheme, but noting that plaintiffs had survived 12(b)(6) dismissal only “barely,” and noting that “[i]f this set of facts were presented to us at the summary judgment stage, we would be inclined to grant judgment for the defendants”); cf. Brokerage Concepts, Inc. v. U.S. Healthcare, Inc., No. 95-1698, 1995 WL 455969 (E.D.Pa. July 27, 1995) (Civil RICO) (denying motion to dismiss for failure to state a claim of corruption of a disinterested person under 18 Pa. St. Ann. § 4108(b) in a referral scheme involving health care company). However, it does mean that making payments in exchange for agents’ referrals constitutes commercial bribery only when the agent has put the interests of the payor above the contrary interests of the agent’s principal. See Jackson v. Radcliffe, 795 F.Supp. 197, 206 (S.D.Tex.1992) (Civil RICO) (holding that hospital that referred clients to a radiologist in exchange for 30% of the radiologist’s fees did not violate commercial bribery statute by breaching duty of loyalty to patients).

II.

An application of these legal principles to Parise’s payments to Pegan and Rywelski leads ineluctably to the conclusion that these payments did not constitute commercial bribery. The record simply fails to support the view that Pegan and Rywelski acted in any way contrary to the interests of the union when they referred injured union members to Parise and Sacks. There is no evidence that Pegan and Rywelski put Parise’s and Sack’s interests over the union’s because the union was completely disinterested in which lawyer an injured seaman retained for a personal lawsuit.

Under the statute, an employee may not take a bribe if it will “influence his conduct in relation to the affairs of his employer or principal.” 18 Pa.C.S.A. § 4108(a) (emphasis added). Although an individual seaman obviously has an interest in which lawyer represents him, an individual seaman is not the employer or principal of the port agents; the union as a collective whole is the port agent’s employer or principal. Thus, whether or not a seaman knew that the port agents were receiving referral fees, the port agents did not, under this Pennsylvania statute, owe an individual seaman a duty of loyalty.

I begin with the union’s position on its port agents accepting referral payments. The record reveals that the entire union leadership knew of the cash payments, and even encouraged them. Referral payments were considered rewards for loyal port agents, whose official duties focused on the much more mundane tasks of accounting and producing weekly financial reports for higher union officials. App. 743. As the Government concedes in its brief, “the [union] historically allowed its officials (usually port agents) to refer injured members to designated maritime lawyers in exchange for cash payoffs. Indeed, Parise, Sr. admitted that as union president he sometimes fielded member requests for legal referrals, and that he expressly allowed port agents to refer members to personal injury attorneys.” Appel-lee’s Br. at 8 (emphasis added and citations omitted). In other words, the payments were part of the union’s standard procedure, endorsed by the union president himself.

In light of the union’s express allowance (if not encouragement) of referral payments, it is unclear how port agents could have been acting contrary to the union’s interests in *807 receiving them. See Jacobs, 130 N.E.2d at 637 (holding that an employee could not be guilty of violating commercial bribery statute because employer knew of payment and declined to stop it; employer’s allowance reflected fact that payment could not have been contrary to employer’s interest).

Further, although the union had no interest in union members’ selection of a personal injury lawyer, the testimony of Pegan and Rywelski reveal that they were not acting contrary to the best interests of the union when they referred seamen to Parise Jr. and Sacks. 3 John Pegan, the port agent for Boston, first became acquainted with Sacks when Pegan became unsatisfied with the lawyer he had hired three years earlier to represent him in a personal injury action. App. 663. Acting on the advice of Louis Parise, Sr., Pegan consulted with Sacks, who advised Pegan that “it wouldn’t be feasible” to switch lawyers at that time “because of all the investigation work” that Pegan’s lawyer had already performed. App. 665. Pegan believed that Sacks was a good lawyer: Pegan testified that he “had heard” that Sacks “got good results in the injury cases.” App. 667. Thus, when the union members in Boston were “not satisfied with [Boston maritime lawyers] ... [and] want[ed] somebody else,” App. 667, Pegan would refer the members to Parise, Jr. and Sacks.

Similarly, there is no evidence that Deborah Rywelski, who acted as the port agent in Charleston, South Carolina, was acting contrary to the union’s interest when she made attorney referrals. When a member would come to her and ask her for a lawyer, she testified, she would give the member Parise, Jr.’s card. Rywelski would then explain that Parise, Jr. was an investigator for Sacks, and that Parise, Jr.’s father was the head of the union. App. 530. She would tell the union member, “Call him up. If you like what they’ve got to say, fine. [I]f you don’t, I know some other attorneys I can send you to.” Id. (emphasis added). As in State v. Nadeau, supra, the port agents had no control over which lawyer an individual seaman would eventually choose; they could not themselves commit the union members to Sacks’s representation.

The union’s express allowance of the payments, combined with the testimony of Ry-welski and Pegan, reveals that there is no evidence that Pegan and Rywelski placed the interests of Sacks and Parise, Jr. ahead of the interest of the union in accepting payments from Parise, Jr. Pegan thought that Sacks was a good lawyer, and even sought Saeks’s representation for himself. Rywelski was very careful to explain that Sacks was only one of several attorneys to whom she could refer the member, and directed the member to accept Sacks’s representation only if the member “liked what [Parise, Jr. and Sacks had] to say.” The union leadership not only knew of the referral payments, but encouraged and even directed them. Given these facts, there is simply no evidence that the union had an interest in which lawyer a member retained and no evidence that Rywelski or Pegan acted against the interests of the union in referring injured union members to Parise, Jr. and Sacks. Accordingly, Parise, Jr.’s payments to Rywelski and Pegan for making the referrals could not constitute commercial bribery.

III.

The majority’s understanding of § 4108 is dramatically different from the one I have presented. As I see it, the majority’s approach has five significant flaws.

1. Failure to follow the accepted interpretation of commercial bribery.

In the absence of definitive authority in Pennsylvania, 4 the majority’s refusal to ac *808 knowledge a century of law from other jurisdictions interpreting the same or similar commercial bribery statutes is perplexing. As I have previously pointed out, some twenty states have commercial bribery statutes that contain § 4108’s exact phrase. See note 1, supra. Most of the relevant cases (especially Graf, Jacobs, Nadeau, and Radclijfe) advance an interpretation of the commercial bribery statute that is very different from that offered in the majority’s opinion, and that would lead to a contrary result. The majority opinion seeks to distinguish only Nadeau, see Maj. Op. at 800-01 n. 10, and declines to discuss the other statutes I have cited and the other cases. Id. Hence, it neither reconciles those cases with its approach, nor explains why they were wrongly decided, if in fact it believes they were.

2. Failure to identify any breach of loyalty owed to the union as the employer of the port agents.

My second objection is the majority’s focus on union members, who are not the port agents’ employers, as distinct from the union itself, which is the port agents’ employer. It should be remembered that the commercial bribery statute requires and Beilis emphasizes that an agent must possess an undivided loyalty to his principal, that is, his employer. The record reveals that none of the actions taken by the port agents in any way affected adversely or were disloyal to the union. Indeed, one would be hard pressed to argue that the port agent’s referral activities were adverse to the union members, but of course, that is irrelevant. As I have stated repeatedly, the port agent must have been disloyal to the union to meet the statutory standard and be held criminally liable.

One can search far and wide in the majority opinion and in the record but still cannot ascertain disloyalty or adverse actions taken by Pegan and Rywelski with respect to the affairs of the union. Hence, the holding of Beilis, as distinct from the standard applied in Beilis, is inapposite to Parise’s appeal. Beilis, which is cited by the majority at 799-800, is a classic example of conflict of interest, falling within the purview of § 4108’s reach. In Beilis, a city councilman accepted payment from third parties to negotiate on their behalf with the councilman’s employer or principal. This action adversely affected the City of Philadelphia’s interest and affairs. It would have been impossible for Beilis to negotiate on behalf of his third party clients and against the City of Philadelphia without breaching his duty of loyalty to the City.

But Parise is not Beilis because Parise’s payments to Pegan and Rywelski did not involve the union, and it is the union which is the employer of the two port agents. An example furnished to me by one of my colleagues highlights this distinction. He posited:

Suppose an individual visits a hospital to receive an inoculation required for foreign travel. After receiving his shot, the patient asks the doctor if she knows where the patient could get his vision checked before departing. If the doctor refers the patient to an optometrist from whom she had received payments in exchange for referrals, is the doctor guilty of commercial bribery (and, by extension, a RICO violation)? Even assuming that making referrals is part of the hospital’s affairs, the doctor has not committed commercial bribery because she has not acted contrary to the interest of her employer, the hospital.

*809 Even if the referral is contrary to the patient’s interest (as a referral to an allegedly poor attorney may be contrary to a union member’s interest), the overarching principle upon which Beilis is predicated requires an agent’s “undivided loyalty to his employer.” Thus, extending the bribery statute to cover payments for “employment-related activity” leaves it without limit and far exceeds the text of the statute and the import of Beilis.

3. Invading the function of the legislature.

My third objection is that the majority’s interpretive approach seems to me inconsistent with a proper judicial role. As the Supreme Court stated in United States v. Bass, 404 U.S. 336 , 92 S.Ct. 515 , 30 L.Ed.2d 488 (1971), “legislatures and not courts should define criminal activity.” Id. at 348 , 92 S.Ct. at 523 . Courts must be careful not to expand the reach of criminal statutes by judicial fiat because citizens should not be sent to “languish[ ] in prison unless the [legislature] has said they should.” Id. (quoting Henry Friendly, Mr. Justice Frankfurter and the Reading of Statutes, in Benchmarks, 196, 207 (1967)); see also Yates v. United States, 354 U.S. 298, 310 , 77 S.Ct. 1064, 1072 , 1 L.Ed.2d 1356 (1957) (Harlan, J.) (absent legislative guidance, criminal statutes are to be strictly construed).

The majority recognizes these principles, see Maj. Op. at 798-99, but has not honored them. It has chosen simply to reject the long-established meaning of the “in relation to the affairs” language, and has substituted its own, much broader interpretation. As the majority acknowledges, a few months ago our Chief Judge stated in a civil RICO case that commercial bribery in Pennsylvania is “a carefully circumscribed crime,” Brokerage Concepts, 140 F.3d. at 528 (Becker, C.J.), and refused to expand the reach of § 4108 to include conduct that would not otherwise be criminal under the statute. The majority turns the Brokerage Concepts holding on its head — the case stands for the proposition that the reach of the criminal bribery statute should not be expanded, yet the majority cites the ease for the proposition that the criminal bribery statute should not be limited in accordance with established principles of criminal statutory interpretation. The Brokerage Concepts case requires that the courts not expand § 4108 beyond its current parameters; I submit that a broadening of the scope of conduct criminalized by § 4108 is best left to the Pennsylvania legislature.

4. Majority’s misapplication of its broad reading of § 4108 to this case.

My fourth objection relates to the majority’s application of its newly fashioned standard to the facts of this case. The majority reasons that port agents regularly referred injured union members to lawyers, such that paying port agents for those referrals influenced their work-related conduct. Maj. Op. at 802-03. However, the record is clear that the port agents almost always received payments in exchange for their attorney referrals. According to Sacks’ testimony, payments were the standard practice in the union: the question was not whether the port agents would be paid for their referrals, but who would pay. App. 160-66. Even the Government’s brief concedes this, stating that the union “historically allowed its officials (usually port agents) to refer injured members to designated maritime lawyers in exchange for cash payoffs.” Appellee’s Br. at 8.

Absent evidence that port agents regularly referred injured union members to lawyers when they were not being paid off to do so, and more importantly, absent any record evidence of adverse effects on the union, 5 I do not understand how the majority can conclude that making attorney referrals was part of the union’s affairs. Surely, if it was part of the union “affairs” to refer seamen to lawyers, then there would be substantial evidence of port agents referring union members to lawyers when no payments were involved. The record only supports the view *810 that port agents regularly engaged in activities of no concern to their employer and beyond the scope of their employment (which was focused on accounting and financial reporting). They simply took advantage of their acquaintances with the injured seamen and enhanced their income by making attorney referrals.

5. Overextended reading of the port agents’ scope of employment.

My fifth and final objection has to do with the actual and not the hypothetical functions of the port agent. The record discloses that their established duties embraced primarily accounting and financial reporting. App. 743. 6 Any referrals made, whether to doctors, lawyers, therapists, accountants, barbers, or the like, were undertakings beyond the scope of their employment. The fact that they were paid for these activities could be of no moment to the union, their employer, and indeed could not be deemed evidence of disloyalty to the union. On the other hand, had the port agents falsified their financial reporting and accounting or disclosed to a third party confidential union information in return for a payment by a third party, that falsification or disclosure would have been evidence of disloyalty to the union and would have constituted commercial bribery because it affected the affairs of the union, their employer.

The port agents could not have been fired or sanctioned, and indeed they were not, for taking monies for referrals, but common sense dictates that had they affected their employer’s interest by falsifying or in any way not truthfully performing their accounting and financial reporting functions in exchange for third party monies, their jobs would be at risk, to say nothing of criminal liability being visited upon them.

IV.

Given Louis Parise, Jr.’s intimate involvement in his father’s schemes over a period of years, he may have violated several criminal statutes. However, the United States prosecuted Parise, Jr. on a RICO charge based only on a tenuous reading of a rarely used state criminal statute. In the course of affirming Parise, Jr.’s conviction, the majority has extended the statute just enough to include his conduct within its grasp. A fair and consistent interpretation of the statute, however, reveals that Parise, Jr. has been convicted and sentenced to serve thirty months in prison for conduct that did not constitute the crime of commercial bribery.

Accordingly, I respectfully dissent.

. States that presently criminalize commercial bribery for influencing an agent's conduct “in relation to the affairs” of the agent’s principal include Alabama, see Ala.Code § 13A-11-120 (1975); Arizona, see Ariz.Rev.Stat. § 13-2605; Connecticut, see Conn. Gen.Stat. § 53a-160; Illinois, see 720 III. Comp. Slat. 5/29A-1; Louisiana, see La.Rev.Stat. Ann. § 14:73; Michigan, see Mich. Comp. Laws Ann. § 750.125 ; Minnesota, see Minn.Stat. Ann. § 609.86; Mississippi, see Miss.Code Ann. § 97-9-10 (1972); Nevada, see Nev.Rev.StaL. § 207.295; New Hampshire, see N.H.Rev.Stat. Ann. § 638:7; New York, see N.Y. Penal Law § 180.00 (McKinney); North Dakota, see N.D. Cent.Code, § 12.1-12-08; Oklahoma, see Okla. Slat. tit. 21, § 380; Pennsylvania, see 18 Pa. Cons.Stat. Ann. § 4108; Rhode Island, see R.I. Gen. Laws § 11-7-4(1956); South Carolina, see S.C.Code Ann. § 16-17-540 (Law.Coop.1976); South Dakota, see S.D. Codified Laws § 22-43-1 ; Texas, see Tex. Penal Code § 32.43; Utah, see Utah Code Ann. § 76-6-508 (1953); Wisconsin, see Wis. Slat. Ann. § 134.05.

. Although most of the cases have arisen outside of Pennsylvania, the fact that they have established a certain meaning for the text in question makes these cases a natural source of interpretive authority. See Simmler v. City of Philadelphia, 329 Pa. 197 , 198 A. 1, 3 (Pa.1938) (looking lo the interpretalions of the same language in statutes by other state courts in order to interpret a vague Pennsylvania statute).

. Pegan and Rywelski testified under immunity agreements, as did Sacks.

. The few cases in Pennsylvania that interpret § 4108 do not address the issue at hand. United States v. Johns, 742 F.Supp. 196 (E.D.Pa.1990), aff'd, 972 F.2d 1333 (3d Cir.1991) (table), is inapplicable because if involved the quintessential example of commercial bribery. In Johns , an employee, responsible for purchasing supplies and services for his employer, chose vendors for his employer in exchange for kickbacks from the vendors. The employer certainly had an interest in which vendors provided the employer goods and services. In this case, the port agents gave seamen (who were not the port agents' employers or principals) advice on who to choose as a *808 personal injury lawyer. The port agents themselves had no control over who the seamen would choose as a lawyer, and the port agents' employer, the union, had no control or interest over the seamen's choice of a lawyer.

Likewise, Pennsylvania v. Bellis, 484 Pa. 486 , 399 A.2d 397 (1979), involved a city councilman's representation of third parties in their contractual dealings with the city and its agencies. The contracts at issue in Beilis were between the third party entities who paid the councilman a fee and the councilman's employer, the city. Thus, the councilman was taking money to help third parties gain advantages with his employer. In this case, the port agents did not receive referral fees from Sacks so that Sacks could represent the port agents' employer, the union, in its affairs. Rather, individual union members chose Sacks to be their personal lawyers to assist them in pursuing their personal, not union, claims.

. The majority refers to Mr. Gerasimos as having provided legal referrals without receiving any payments. Maj. Op. at 802. Gerasimos, however, characterized this function as an unofficial duty, not an official duty, of a port agent. App. 737. The other reference by the majority to a vice-president who did not take money for attorney referrals obviously was not a port agent.

. The union's constitution and by-laws specifically describe the duties of a port agent. Kenneth Gerasimos, a union vice-president and former port agent of NMU, agreed that the constitution and by-laws accurately reflected the duties of a port agent, which provides:

Branch [port] agent shall be responsible for implementing the directives of the division chairman and council in the port or ports of their jurisdiction. They shall be prepared to account financially or otherwise for the activities of their port or ports whenever demanded by the division chairman. In any event, they shall prepare and forward to the district treasurer a weekly financial report showing in detail weekly income and expenses and complying with all other accounting directions issued by the district treasurer.

The majority relies upon the preamble of the NMU constitution, rather than this provision specific to port agents, to define the scope of the port agents’ employment. The preamble describes the union’s purpose with respect to its members, while the provision above cited describes the port agents' duties with respect to the union.