Opposition Brief — King v. United States

Supreme Court, U.S.

“ FILED

APR 17 1989

F. SPANIOL, JR.

No. 88-1079

Jn the Supreme Court of the Gnite

OCTOBER TERM, 1988

ROGER KING, PETITIONER

v.

UNITED STATES OF AMERICA

ON PETITION FOR A WRIT OF CERTIORARI

TO THE UNITED STATES COURT OF APPEALS

FOR THE SECOND CIRCUIT

BRIEF FOR THE UNITED STATES IN OPPOSITION

WILLIAM C. BRYSON

Acting Solicitor General

EDWARD §.G. DENNIS, JR.

Assistant Attorney General

JOSEPH C. WYDERKO

Attorney

Department of Justice

Washington, D.C. 20530

(202) 633-2217

: tox x i

es Ninn gs

QUESTION PRESENTED

Whether, under McNally v. United States, No. 86-234

(June 24, 1987), petitioner was properly convicted of mail

fraud for participating in a scheme to inflate the price of

equipment offered for sale to two municipalities.

(1)

TABLE OF CONTENTS

Page

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TABLE OF AUTHORITIES

Cases:

Carpenter v. United States, No. 86-422 (Nov. 16, 1987)... 5,6

McNally v. United States, No. 86-234 (June 24, 1987).... 4,5

United States \. Andreadis, 366 F.2d 423 (2d Cir. 1966) .. 5

United States \ Asher, 854 F 2d 1483 (3d Cir. 1988), cert.

denied, No. 88-532 (Jar Ee eS alt Amar Fe le 6

United State Estow 422 F.2d 1060 (2d Cir.), cert.

denied, 39 ED Rel nit on ebay oy 5

United State e444 F 2d 36(2d Cir. 1988)....... 8

United State ¢ : F 2d 1002 (Sth Cir. 1987),

cert. de ‘ “SY iJa Ae Re 7

United State 830 F.2d 621 (7th Cir. 1987) .... 7

United State Perr 842 F 2d 343 (D.C. Cir. 1988),

cert. denied, No. 87-1946 (Oct. 3, 1988) ............. 6-7

United States v. Pict 835 F.2d $17 (3d Cir. 1987),

cert. denied, No. 87-1465 (May 31, 1988) ............ 7

United States y. Richerson, 833 F.2d 1147 (Sth Cir.

ey ayia ce 7

Cir. 1988), cert. denied, No. 88-1111 (Mar. 20, 1989) .. 6

United States v. Shelton, 848 F.2d 1485 (10th Cir. 1988) .. 7. 8

5

8

United States v. Starr, 816 F.2d 94 (2d Cir. 1987) ........

Wisniewski v. United States, 353 U.S. 901 (1957) ........

Statutes:

Anti-Drug Abuse Act of 1988, Pub. L. No. 100-690,

a | 8

I Me de ac ue uwasces vas 1,4

IV

Miscellaneous:

134 Cong. Rec. $17,376 (daily ed. Nov. 10, 1988)

Jn the Supreme Court of the United States

OCTOBER TERM, 1988

No. 88-1079

ROGER KING, PETITIONER

v.

UNITED STATES OF AMERICA

ON PETITION FOR A WRIT OF CERTIORARI

TO THE UNITED STATES COURT OF APPEALS

FOR THE SECOND CIRCUIF

BRIEF FOR THE UNITED STATES IN OPPOSITION

OPINION BELOW

The opinion of the court of appeals (Pet. App. 1a-4a) is

reported at 860 F.2d 54.

JURISDICTION

The judgment of the court of appeals was entered on

October 24, 1988. The petition for a writ of certiorari was

filed on December 22, 1988. The jurisdiction of this Court

is invoked under 28 U.S.C. 1254(1).

STATEMENT

Following a jury trial in the United States District Court

for the Southern District of New York, petitioner was con-

victed on two counts of mail fraud, in violation of 18

U.S.C. 1341. He was sentenced to three months’ imprison-

ment, to be followed by one year of probation. The court

of appeals affirmed.

(1)

2

1. As the court of appeals summarized: “The evidence

against [petitioner] showed that he participated in a

scheme in which the prices of various equipment offered

for sale to two municipalities were inflated. Under the

scheme, [petitioner] broke the offering price down into

several separate components so that corrupt municipal

purchasing agents could evade competitive bidding re-

quirements applicable to higher priced items. The total of

these prices was then inflated in order to obtain money to

pay kickbacks to those agents.” Pet. App. 3a.

The evidence at trial is described in more detail in the

government’s brief in the court of appeals (Gov’t C.A. Br.

2-15). It showed that petitioner, the vice-president of John

J. King of Monroe, Inc. (“J.J. King”), a distributor of

highway maintenance equipment, engaged a person he

knew as Vince Silon to sell used equipment on a commis-

sion basis in the fall of 1986. Silon was actually Vincent

Wincelowicz, an undercover FBI agent investigating cor-

ruption in the sale of equipment and supplies to New York

municipalities.

In November 1986, Wincelowicz brought Richard

Conklin, the highway superintendent for the Town of

Deerpark, New York, to J.J. King to inspect a second-

hand truck to be used for snow removal. During the visit,

Wincelowicz asked petitioner if J.J. King could accom-

modate Conklin by breaking up the total amount to be

charged Deerpark into several small bills in order to avoid

competitive bidding. Petitioner agreed to do so. In a sub-

sequent tape-recorded telephone conversation, petitioner

quoted a price of $6,500 to Wincelowicz, broken down

into three parts. He also promised Wincelowicz a $500

commission on the sale. Gov’t C.A. Br. 3-4.

Wincelowicz later told petitioner in another tape-

recorded telephone conversation that Conklin wanted the

price increased by $2,000, which Conklin would pocket,

3

and that Conklin also wanted to add a plow to the truck.

Petitioner responded that a plow would cost $800. Peti-

tioner further suggested that Wincelowicz should “take

care of” Conklin. Pursuant to the discussion, petitioner in-

creased the price by $2,875 to cover Conklin’s kickback

and the plow, and broke the bill into four parts. After the

truck was delivered to Deerpark and the Town paid its

four bills totalling $9,375, petitioner gave Wincelowicz a

check for $2,875, which represented Conklin’s kickback

and an additional commission for Wincelowicz. Gov’t

C.A. Br. 4-7.

The other scheme involved the City of Mount Vernon,

New York. After learning that the City would be buying a

“spreader” (a device used to spray sand or salt on icy

roads), Wincelowicz gave an advance kickback of $500 to

Ronald Iaboni, the City’s Commissioner of Public Works.

Petitioner advised Wincelowicz that a large spreader

would cost about $6,000. In tape-recorded conversations

in November and December of 1986, Wincelowicz said

that it again would be necessary to break the bill into

smaller parts and that $2,000 would have to be added for

laboni. Petitioner ultimately agreed to charge $10,200, to

be billed in five parts. Wincelowicz similarly arranged for

the City of Mount Vernon to buy a small spreader, which

petitioner said should cost about $3,000, for $6,000. That

sum included a $1,000 kickback. The small spreader was

delivered in February of 1987 and the City promptly paid a

bill for $3,820 that petitioner had submitted. No further

payments had been made, and the large spreader had not

been delivered, when Wincelowicz’s undercover assign-

ment ended abruptly, in March 1987, after he was iden-

tified as an FBI agent. Gov’t C.A. Br. 7-15.

2. The court of appeals affirmed petitioner’s convic-

tion (Pet. App. la-4a). The court first rejected petitioner’s

4

claim that the mail fraud convictions could not stand

because the government had failed to prove that either the

Town of Deerpark or the City of Mount Vernon actually

lost money. Petitioner’s claim was based on testimony that

the truck Deerpark bought was worth the sales price! and

the fact that the Mount Vernon transaction had not been

completed. The court observed: “[A]s we have said many

times, the validity of a mail fraud conviction does not

hinge upon a showing of actual loss by the intended vic-

tim. It is enough that [petitioner] knowingly devised a

scheme to defraud and caused the use of the mails in fur-

therance of the scheme. * * * [U]ltimate success is not an

element of the crime.” Pet. App. 3a (citations omitted).

The court of appeals also concluded that this Court’s

decision in McNally v. United States, No. 86-234 (June 24,

1987), did not require reversal of petitioner’s convictions

since “[t]he schemes here were unquestionably directed at

money in municipal treasuries” (Pet. App. 4a). The court

explained that “(t]he fact that kickbacks were also in-

volved in McNally is of no aid to [petitioner] because the

legal theory of those convictions was based on the alleged

deprivation of intangible rights, while [petitioner’s] con-

viction was specifically bottomed on the deprivation of

what is undeniably property in a traditional sense” (ibid.).

—

ARGUMENT

1. Contrary to petitioner’s contention (Pet. 8-9), proof

of an actual loss of money or property by the intended vic-

tim is not an essential element of mail fraud. The mail

fraud statute, 18 U.S.C. 1341, prohibits persons who,

' Although petitioner’s witness examined the truck the day before

he testified and stated that it was worth at least $10,000, he was not

aware that the truck’s engine had exploded within a month of its

delivery and had been replaced. Gov’t C.A. Br. 18.

5

“having devised or intending to devise any scheme or ar-

tifice to defraud,” from using the mails “for the purpose of

executing such scheme or artifice or attempting to do so.”

The statute therefore expressly reaches not only those per-

sons who successfully carry out schemes to defraud, but

also those who intend to devise such schemes and attempt

to execute them. Accordingly, the statute does not require

the government to prove that the victim of the scheme to

defraud was actually defrauded; the government is only

required to prove that a defendant “contemplated some

actual harm or injury” to the victim of the scheme. United

States v. Starr, 816 F.2d 94, 98 (2d Cir. 1987) (emphasis in

original); see also United States v. Eskow, 422 F.2d 1060,

1064 (2d Cir.), cert. denied, 398 U.S. 959 (1970); United

States v. Andreadis, 366 F.2d 423, 431 (2d Cir. 1966).

This Court’s decision in McNally v. United States, No.

86-234 (June 24, 1987), did not alter that long-standing

principle. The defendants there were convicted of mail

fraud on the theory that their scheme had deprived the

citizens of Kentucky of their intangible right to honest

government. Holding that the mail fraud statute is

“limited in scope to the protection of property rights” (slip

op. 10), the Court reversed. Noting that “the Government

now relies in part on the assertion that the petitioner ob-

tained property by means of false representations,” the

Court concluded that the convictions could not be upheld

on that basis because “there was nothing in the jury charge

that required such a finding” (slip op. 10-11) (emphasis

added). All that the jury in McNally had to find to con-

vict, as the Court subsequently noted in Carpenter v.

United States, No. 86-422 (Nov. 16, 1987), was that Ken-

tucky had been deprived of the defendants’ “honest and

faithful service, an interest too ethereal in itself to fall

within the protection of the mail fraud statute” (slip op.

6).

6

Nor does this Court’s decision in Carpenter support

petitioner’s contention. In that case, the Court made clear

that the property protected by the mail fraud statute in-

cludes intangible property, stating that “McNally did not

limit the scope of §1341 to tangible as distinguished from

intangible property rights” (slip op. 6). Indeed, the Court

reiterated that the mail fraud statute “reach[es] any

scheme to deprive another of money or property by means

of false or fraudulent pretenses, representations, or prom-

ises” (id. at 7), and held that a conspiracy to trade on an

employer’s confidential business information is within the

reach of the statute.

McNally and Carpenter therefore established that the -

mail fraud statute did not reach schemes to defraud

citizens of their intangible rights to honest and impartial

government, but was limited in scope to the protection of

property rights. Nothing in McNally or Carpenter,

however, required the government to prove that the victim

of the scheme suffered an actual loss of money or proper-

ty. Instead, McNally and Carpenter simply required the

government to show that the object of the scheme was to

deprive the victim of money or property.

The decision of the court of appeals in this case is thus

fully consistent with McNally and Carpenter. This case in-

volved a straightforward kickback scheme through which

petitioner agreed to pay unearned commissions to the

municipal purchasing agents in order to sell his equipment

to the municipalities. The other courts of appeals that

have addressed the issue since McNally have overwhelm-

ingly agreed that normal kickback schemes involve prop-

erty loss within the meaning of McNally by inflating the

victim’s costs. United States v. Rico Industries, Inc., 854

F.2d 710 (Sth Cir. 1988), cert. denied, No. 88-1111 (Mar.

20, 1989); United States v. Asher, 854 F.2d 1483 (3d Cir.

1988), cert. denied, No. 88-532 (Jan. 17, 1989); United

7

States v. Perholtz, 842 F.2d 343 (D.C. Cir. 1988), cert.

denied, No. 87-1946 (Oct. 3, 1988); United States v. Pic-

colo, 835 F.2d 517 (3d Cir. 1987), cert. denied, No.

87-1465 (May 31, 1988); United States v. Richerson, 833

F.2d 1147 (Sth Cir. 1987); United States v. Fagan, 821

F.2d 1002 (Sth Cir. 1987), cert. denied, No. 87-589 (Jan.

11, 1988).

2. There is likewise no merit in petitioner’s contention

that the decision of the court of appeals here conflicts with

the decisions in United States v. Gimbel, 830 F.2d 621 (7th

Cir. 1987), and United States v. Shelton, 848 F.2a 1485

(10th Cir. 1988).

In Gimbel, the Seventh Circuit held that a scheme to

avoid filing currency transaction reports was a scheme to

defraud the Treasury Department of “intangible rights” in

data rather than a scheme to deprive the government of

money or property. Rejecting the government’s argument

that it may have been deprived of tax revenues because the

information, if disclosed, might have led to an assessment

of tax deficiencies, the court concluded that the possibility

of such an assessment did not convert the scheme into one

to defraud the United States of money (830 F.2d at

626-627). In this case, by contrast, the intended effect on

the municipalities’ treasuries was direct rather than

speculative. Moreover, and contrary to petitioner’s con-

tention (Pet. 9), the Seventh Circuit did not read McNally

to require proof of an actual loss of money or property by

the victim as an element of mail fraud. Indeed, the court

expressly declined to “express any view as to whether a

scheme that has not reached fruition, and in which there is

no resulting loss of money or property, may ever form the

basis of a mail fraud prosecution” (830 F.2d at 627 n.3).

In Shelton, the Tenth Circuit reversed the mail fraud

convictions of two county commissioners who took

kickbacks from suppliers selling goods to the county.

Contrary to petitioner’s contention, though, the court in

Shelton did not hold that proof of an actual loss by the

victim was an element of mail fraud. Instead, the court

merely concluded that the money er- erty that is the

object of the scheme to defraud must eee

The court pointed out that, under the unusual facts of that

case, “the evidence at trial tended to show that the sales

were made at a previously established low price and that

the kickbacks were paid out of the suppliers’ profits”

rather than out of inflated prices paid by the county (848

F.2d at 1491). Here, by contrast, as in most kickback

cases, the court of appeals correctly concluded (Pet. App.

3a-4a) that the evidence established that the kickbacks

would ultimately be paid by the Town of Deerpark and the

City of Mount Vernon.?

3. Finally, Congress recently amended the federal

fraud statutes to provide that a “ ‘scheme or artifice to

defraud’ includes a scheme or artifice to deprive another

of the intangible right of honest services.” Anti-Drug

Abuse Act of 1988, Pub. L. No. 100-690, § 7603, 102 Stat.

4508. The legislative history of the new provision explains

that “[t]his section overturns the decision in McNally v.

United States * * *. The intent is to reinstate all of the

? Petitioner also mistakenly claims that the decision of the court of

appeals here conflicts with United States v. Evans, 844 F.2d 36 (2d

Cir. 1988). To be sure, the court in Evans stated in dictum that “[i]f a

scheme to defraud must involve the deceptive obtaining of property,

the conclusion seems logical that the deceived party must lose some

money or property” (id. at 39). Taken in the context of its entire

discussion, however, the court was simply considering whether the

money or property that the defendants sought to obtain as a result of

the scheme to defraud must belong to the alleged victim, and not

whether the victim must suffer an actual loss of money or property. In

any event, petitioner’s claim of an intracircuit conflict raises an issue

for the court of appeals, and not this Court, to resolve. Wisniewski v.

United States, 353 U.S. 901, 902 (1957).

9

pre-McNally caselaw pertaining to the mail and wire fraud

statutes without change.” 134 Cong. Rec. $17,376 (daily

ed. Nov. 10, 1988). As the court of appeals stated (Pet.

App. 3a), the rule that the victim of a scheme to defraud

need not actually lose money or property was well

established prior to McNally. Even if the opinion in

McNally had questioned that rule, that case will no longer

govern mail fraud prosecutions in the future, as Congress

has made plain. Moreover, persons who participate in

schemes to bribe municipal employees may now be prose-

cuted for depriving the citizens of their intangible right to

honest government, whether or not the municipalities lost

money or other property. Thus, there is no prospective im-

portance to petitioner’s contention.

CONCLUSION

The petition for a writ of certiorari should be denied.

Respectfully submitted.

WILLIAM C. BRYSON

Acting Solicitor General

EDWARD S.G. DENNIS, JR.

Assistant Attorney General

JOSEPH C. WYDERKO

Attorney

APRIL 1989

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