Petition — Margiotta v. United States

Supreme Court brief1983

Ask Donna

What actually matters in this document.

Text

92-1126

No.

IN THE

Supreme Court, U.S.

ee Se ee

JAN 4 1983

ALEXANDER L. STEVAS

CLERK

Supreme Court of the United States

OCTOBER TERM, 1982

JOSEPH M. MARGIOTTA,

Petitioner,

UNITED STATES OF AMERICA,

Respondent.

PETITION FOR A WRIT OF CERTIORARI TO THE

UNITED STATES COURT OF APPEALS

FOR THE SECOND CIRCUIT

EDWARD BENNETT WILLIAMS

Counsel of Record

IRVING YOUNGER

ROBERT L. WEINBERG

JOHN J. BUCKLEY, JR.

Hill Building

Washington, D.C. 20006

Attorneys for Petitioner

Of Counsel:

WILLIAMS & CONNOLLY

Hill Building

Washington, D.C. 20006

WILSON - Epes PRINTING Co., Inc. - 789-0096 - WASHINGTON, D.C. 20001

QUESTIONS PRESENTED

1. Whether the Court of Appeals erred in affirming

the federal mail fraud conviction of Petitioner, a political

party leader, on the theory that:

a. the federal mail fraud statute, 18 U.S.C. § 1341,

applies to alleged schemes to deprive the general elector-

ate of its “intangible right” to the fiduciary services of

private citizens who are active in the political process;

b. the federal mail fraud statute imposes on politi-

cally active individuals a federal fiduciary duty to render

“honest and loyal service” to the general electorate;

e. Petitioner’s political activity, including his posi-

tion as a political party leader and involvement in political

patronage, constituted a sufficient basis to render him a

quasi-governmental fiduciary and to require him to make

public disclosure of all “material information,” including

any “bias” or “conflict of interest” relating to his polit-

ical activities ;

d. the imposition of a new fiduciary duty on polit-

ical activists did not violate Petitioner’s right to free

expression and association under the First Amendment

and his right to fair notice and warning under the

Fifth Amendment.

2. Whether the Court of Appeals erred in affirming

Petitioner’s conviction of Hobbs Act extortion, 18 U.S.C.

§ 1951, on the theory that:

a. although he was not a public official, Petitioner

could nevertheless commit extortion “under color of offi-

cial right” because he possessed political influence over

public officials;

b. the evidence was sufficient to support Petitioner’s

extortion conviction, despite the absence of any extortion-

ate conduct by a public official or fearful state of mind

by the purported victim.

(i)

TABLE OF CONTENTS

I a ipwacdnesennccsaciiinane

F / / ] . alcncouhesncoeabanasdans

e .. a ccs cdl ndesencctnenctcscsnadons

V —

e .

B. Statement of Essential Fact?ss

C. Trial Court Proceedings

D. The Court of Appeals’ Decision

Reasons For Granting The Writ

II.

III.

The Decision Below Raises Issues of Great Im-

portance to the Political Process ana the Right

of Private Citizens to Engage In Political Ac-

S SESELEE SA eee

The Decision Below Is Inconsistent with this

Court’s Prior Decisions and Creates A Conflict

e œͤͤ .. ESS EE RE

A. The Decision Below that the Mail Fraud

Statute Punishes Political Activity By Pri-

vate Citizens Is Unprecedented and Unsup-

Gate EE mm;, . re oe

B. The Decision Below that the Mail Fraud

Statute Imposes Federal Fiduciary Duties

on Politically Active Citizens Is Unprece-

dented and Conflicts With Decisions of this

The Decision Below Is In Conflict With the

First Amendment Rights of Free Speech and

Association and Prior Decisions of this Court....

(iii)

„ o A ns N WW

TABLE OF CONTENTS—Continued

Page

IV. The Decision Below Is In Conflict With the

Fifth Amendment Right to Fair Notice and

Warning and Prior Decisions of this Court 18

V. The Decision Below that Petitioner Committed

Hobbs Act Extortion “Under Color of Official

Right” Conflicts with the Plain Meaning of the

Fee 20

TABLE OF AUTHORITIES

Cases: Page

Dirks v. Securities and Exchange Commission, 681

F.2d 824 (D.C. Cir. 1982), cert. granted, No.

82-276 (November 15, 1982) . 4

Erie R. Co. v. Tompkins, 304 U.S. 64 (1938) 16

Fasulo v. United States, 272 U.S. 620 (1926) 14

Lambert v. California, 355 U.S. 225 (195777 18

Parratt v. Taylor, 451 U.S. 527 (1981) 16

Police Department v. Mosley, 408 U.S. 92 (1972) 17

Santa Fe Industries, Inc. v. Green, 430 U.S. 462

TTT 16

United States v. Braasch, 505 F.2d 139 (7th Cir.

1974), cert. denied, 421 U.S. 910 (197555 22

United States v. Butler, 618 F.2d 411 (6th Cir.),

cert. denied, 447 U.S. 927 (1980) ce. 21

United States v. Lester, 363 F.2d 68 (6th Cir.

1966), cert. denied, 385 U.S. 1002 (1967)........ 21

United States v. Mandel, 591 F.2d 1347 (4th Cir.),

aff'd per curiam in relevant part, 602 F.2d 653

(1979) (en banc), cert. denied, 445 U.S. 961

000.ñ———————————7—— ie 13

United States v. Maze, 414 U.S. 395 (1974) 14

United States v. Nardello, 393 U.S. 286 (1959) 21

United States v. Ordner, 554 F.2d 24 (2d Cir.),

cert. denied, 484 U.S. 824 (197777 20

United States v. Rabbitt, 583 F.2d 1014 (8th Cir.

1978), cert. denied, 489 U.S. 1116 (1979)........ 22

United States v. Ruffin, 613 F.2d 408 (2d Cir.

. ͤ ... 20

United States v. Trotta, 525 F.2d 1096 (2d Cir.

1975), cert. denied, 425 U.S. 971 (1976) 20

United States v. Wiseman, 445 F.2d 792 (2d Cir.),

cert. denied, 404 U.S. 967 (19717) 21

Statutes:

, A passim

,,, ͤ . 1, 2, 13

, hdd cla leecbnd 1,2

eee . 2

TABLE OF AUTHORITIES—Continued

Miscellaneous: Page

Comment, The Intangible-Rights Doctrine and Po-

litical Corruption Prosecutions Under The Fed-

eral Mail Fraud Statute, 47 U. Chi. L. Rev. 562

c 14

IN THE

Supreme Court of the United States

OCTOBER TERM, 1982

No.

JOSEPH M. MARGIOTTA,

Petitioner,

UNITED STATES OF AMERICA,

Respondent.

PETITION FOR A WRIT OF CERTIORARI TO THE

UNITED STATES COURT OF APPEALS

FOR THE SECOND CIRCUIT

Petitioner Joseph M. Margiotta prays that a writ of

certiorari issue to review the judgment of the United

States Court of Appeals for the Second Circuit entered

in this case.

OPINIONS BELOW

The Court of Appeals, by divided vote, affirmed Peti-

tioner’s conviction of one count of mail fraud in violation

of 18 U.S.C. § 1341. It also affirmed Petitioner’s convic-

tion of five counts of Hobbs Act extortion in violation

of 18 U.S.C. § 1951. The Court of Appeals’ opinion, with

Judge Winter’s dissent, is reported at 688 F.2d 108 and

is set forth in the Appendix at la. Over the dissent of

four judges, the Court of Appeals denied without opinion

the Petition for Rehearing and Suggestion For Rehearing

En Bane (Pratt, J., not participating). The dissenting

opinion of Judges Oakes, Meskill, Newman and Winter

is set forth in the Appendix at 72a.

This case was previously the subject of two interlocu-

tory appeals. The Court of Appeals’ opinions issued in

relation thereto are reported at 646 F.2d 729 (1981) and

662 F.2d 181 (1981).

JURISDICTION

The judgment of the Court of Appeals was entered on

July 27, 1982. A timely Petition for Rehearing and

Suggestion for Rehearing En Banc was denied on Novem-

ber 5, 1982. This petition is filed within sixty days of

that denial. This Court has jurisdiction pursuant to 28

U.S.C. § 1254 (1).

STATUTORY PROVISIONS

The federal mail fraud statute, 18 U.S.C. § 1341, is

set forth in the Appendix at 74a; the Hobbs Act, 18 U.S.C.

§ 1951, is set forth in the Appendix at 75a; and the statu-

tory provision on Principals, 18 U.S.C. § 2(b), is set forth

in the Appendix at 77a.

STATEMENT

A. Introduction.

This case involves the most unprecedented and danger-

ous extension of the federal mail fraud statute and the

Hobbs Act that has ever been judicially permitted. Over

Judge Winter’s dissent, a divided panel of the U.S. Court

of Appeals for the Second Circuit (Kaufman, J.) holds

that under the mail fraud statute a private individual,

if he is politically active or influential, can acquire a

federal fiduciary duty of “honest and loyal“ service to

the general citizenry. Furthermore, the Court of Appeals

holds that if a private individual breaches this imputed

federal duty, as by failing to make a public disclosure

of a “bias” or “conflict of interest” when engaging in

political activity, he commits a criminal fraud in viola-

tion of the statute.

Applying this novel “intangible rights” theory, the

Court of Appeals affirms the conviction of Petitioner

Joseph M. Margiotta, a political party leader. It holds

that Petitioner breached this newly articulated federal

fiduciary duty through his failure, in making a political

patronage recommendation to local government officials,

to disclose that his advice was biased by an alleged “bribe

agreement” involving the sharing of insurance commis-

sions with political party members.

As Judge Winter notes in his dissent, the Court of

Appeals gives the mail fraud statute “a more sweeping

interpretation than any court which has addressed the

statute to date.” (A. 62a).2 It “expands that legisla-

tion beyond any colorable claim of Congressional intent

and creates a real danger of prosecutorial abuse for

partisan political purposes.” (A. 60a). If the statute

may be stretched to reach political party leaders like

Petitioner, “there is no end to the common political prac-

tices which may now be swept within the ambit of mail

fraud.” (A. 68a). The panel majority “not only creates

a political crime where Congress has not acted but also

lodges unbridled power in federal prosecutors to prose-

cute political activists.” (A. 7la). This “limitless ex-

pansion of the mail fraud statute subjects virtually every

active participant in the political process to potential

criminal investigation and prosecution.” (A. 69a).

Until the decision below, no court had held that the

mail fraud statute embraces a theory of “political crime”

by “political activists.” (A. 7la). Yet in this criminal

1 References herein to “A.” are to the Appendix to the Petition;

references to “C.A.” are to the Appendix filed in the Court of

Appeals; references to “R.” are to the Record on Appeal in the

Court of Appeals; and references to “Tr.” are to the transcript of

the second trial.

ease, with no basis in prior law, the Court of Appeals

devises a novel “intangible rights” theory applicable to

political activists and then retroactively finds that Peti-

tioner’s conduct violates the judicially enlarged statute.

This decision not only pushes the statute beyond all rea-

son, but poses a direct threat to the First Amendment

rights of all participants in the political process and

offends basic guarantees of fair notice and warning

under the Fifth Amendment. It also constitutes an un-

warranted intrusion upon the sovereign right of state

and local governments to define their own political

systems.

Earlier this Term the Court granted certiorari to de-

cide the question whether the anti-fraud provisions of

the federal securities law can be construed to impose

fiduciary duties on securities analysts. Dirks v. Securi-

ties and Exchange Commission, 681 F.2d 824 (D.C. Cir.

1982), cert. granted, No. 82-276 (November 15, 1982).

While it poses similar questions in a different setting, the

present case is of considerably greater importance, since

it involves criminal penalties in an area of constitu-

tionally protected conduct and applies to all participants

in the political process. The broad and perilous sweep

of the decision below demands that certiorari likewise be

granted.

The Court of Appeals’ holding that Petitioner com-

mitted Hobbs Act extortion “under color of official right“

is also unprecedented. Official extortion can be committed

only by a public official, which Petitioner is not. And

since Petitioner did not cause any public official to com-

mit “official” extortion, the “adopted capacity” doctrine of

18 U.S.C. § 2 (b) is inapplicable. In effect, the Court of

Appeals upholds Petitioner’s conviction on the theory that

his political influence requires that he be deemed a public

official for purposes of Hobbs Act extortion. This novel

and extreme holding distorts the elements of “official”

extortion and draws legitimate political activity within

the statute. Moreover, the erroneous indictment and jury

instructions under the mail fraud charge, which led to

the receipt of otherwise inadmissible evidence regarding

the Petitioner’s involvement in partisan politics, unfairly

prejudiced the jury’s consideration of the Hobbs Act

charges and require reversal of the conviction of those

counts as well.

B. Statement of Essential Facts.

Petitioner Joseph M. Margiotta is the Chairman of the

Republican Party of both the Town of Hempstead and

Nassau County. Upon assuming those positions in 1968

and 1969, respectively, Petitioner became involved in an

ongoing political patronage practice based on the sharing

of insurance commissions on municipal properties. This

patronage practice had openly existed throughout New

York State for more than fifty years and had been fol-

lowed by Democrats and Republicans alike. (Tr. 1305

06, 1440, 1724-30, 3168-76). Typically, a county or town

government would designate a “broker of record” to place

insurance on its properties. The broker, invariably chosen

on the basis of political affiliation, was not a public em-

ployee but simply an ordinary insurance agent who rep-

resented the municipality along with other private clients.

The broker’s compensation was in the form of commis-

sions which he received on the basis of the premiums paid

by the municipalities. Under this patronage practice the

broker would distribute a portion of these commissions to

other politically selected brokers who usually performed

no services.

After becoming Republican Chairman for the Town of

Hempstead in 1968, Petitioner was informed that Mor-

timer Weis, the insurance broker then designated by the

Town, was retiring from the business because of his

age. For many years Weis had been sharing his commis-

sions with designees of the Republican Party. (C.A. 893-

99). At the request of Richard B. Williams (“Williams,

Sr.”), who was a long-time political colleague and per-

sonal friend, Petitioner recommended that Williams’

firm, Richard B. Williams & Son, Inc. (the “Williams

Agency”), be chosen to succeed Weis. (C. A. 891-907).

In January 1969, based on the support of Ralph Caso,

a Republican who was the Town’s Presiding Supervisor,

the Williams Agency was designated as the Town’s

broker. In 1971 Caso, then County Executive, similarly

designated the Williams Agency as broker for the County.

Until 1978, when the practice was discontinued at Peti-

tioner’s request, the Williams Agency distributed a sub-

stantial portion of its commissions on Town and County

insurance to non-working brokers selected by Petitioner

and other Republican Party leaders.

During the more than fifty years that the insurance

system operated, neither the New York State Insurance

Department or any other State authority ever cited or

disciplined anyone for engaging in this patronage prac-

tice. Until 1978, no New York law prohibited the shar-

ing of municipal commissions among non-working brok-

ers. Until mid-1975, the New York State administration

operated its own—and substantially larger—insurance

patronage system, annually dispensing commissions of

almost $600,000 on State insurance to politically selected

brokers who performed no services. (Tr. 1154, 1168).

Existing authority confirmed the legality of the practice,

and an informal opinion in 1943 by the General Counsel

of the State Insurance Department had concluded that an

agent placing municipal insurance could lawfully be re-

quired to share his commissions with non-working brokers

who performed no services. This remained the Depart-

ment’s position until 1978 when Governor Carey promul-

gated a new State regulation requiring the performance

of services by recipient brokers. (C. A. 559-64, 575-76).

2 Petitioner discontinued the insurance patronage practice among

brokers in the County and Town when this State regulation was

proposed, and it had thus been ended long before the commence-

ment of the grand jury investigation in this case. The Williams

firm thereafter retained all its commissions. (C.A. 899-900).

Moreover, during 1978 hearings by 2 state commission on

the insurance patronage system, Petitioner was person-

ally assured by present and former Insurance Superin-

tendents that the patronage practice in the County and

Town was lawful under Insurance Department opinions.

(C. A. 897-98).

Despite this background, in 1980 Petitioner was in-

dicted on one count of mail fraud and five counts of

Hobbs Act extortion. Although the patronage practice

had existed since 1925 and involved thousands of persons

in varying ways, no one else was indicted. Count One

of the Indictment charged Petitioner with violating the

mail fraud statute by devising a scheme to deprive the

citizens of the State of New York, Nassau County, and

the Town of Hempstead of their alleged right to his

“honest and faithful participation . . . in [their] govern-

mental affairs.” (C.A. 17). The crux of the charge was

that Petitioner had a “secret understanding” with the

Williams Agency under which he would use his political

influence to have the Williams Agency designated as

broker, and in return the Agency would allegedly “kick-

back” 50 percent of its commissions to Republican Party

members selected by Petitioner. The government con-

tended that Petitioner’s political influence imposed on him

a fiduciary duty to be “honest and faith“ 11” to the gen-

eral citizenry and that he breached that duty, and thus

violated the mail fraud statute, by not disclosing to

County and Town officials that his political backing of

the Williams Agency was tainted by a “conflict of inter-

est” due to his alleged agreement to receive a “bribe.”

The Hobbs Act counts were based on separate instances

of commission sharing by the Williams Agency. The In-

dictment charged that each instance constituted Hobbs

Act extortion “under color of official right” because the

Williams Agency’s payments were induced by (i) its

“reasonable belief” that the Town Supervisor and County

Executive would appoint or dismiss as broker any person

whom Petitioner told them to appoint or dismiss, and

(ii) its “reasonable belief” that it would not be contin-

ued as broker if it did not make the payments. (C.A.

25). Alternatively, the Indictment charged that the com-

mission sharing was induced by Petitioner’s wrongful use

of fear.

C. Trial Court Proceedings.

There were two trials, the first resulting in a mistrial

when the jury was unable to reach a verdict after eight

days of deliberation.“ In the second trial the jury re-

turned a guilty verdict on all counts. The trial court

sentenced Petitioner to concurrent two-year terms of im-

prisonment on each count.

Although the mail fraud charge was based on an

alleged fiduciary breach, the trial court did not find that

Petitioner had any fiduciary duty under New York law

or had violated any state law. Moreover, although the

government attempted to show that Petitioner’s political

party role gave him substantia! political influence, the

trial court found that Petitioner did not have de facto

control over any governmental entity. Following the first

trial, the trial court stated that “(t]he only participation

concerning which there was evidence at trial was that

defendant was consulted about and recommended the

appointment of officials and employees to various posi-

tions in local government.” (C. A. 89-90). Despite the

traditional nature of Petitioner’s political activity, the

trial court nevertheless proceeded to adopt a theory under

which the jury could find that Margiotta was a fiduciary

if he “participate[d| in Governmental affairs.” The trial

court instructed the jury that, if Margiotta had under-

taken to “participate . . . in Governmental affairs hon-

estly and faithfully,” he would have committed fraud if

he made recommendations or gave advice “while conceal-

* The jury’s vote was reported as having been 8-4 or ®-3 in favor

of acquittal. (Tr. 470, R. 86, 87, 94).

ing... the fact that he ha[d] .. . agreed to receive a

bribe to influence him in the performance of his govern-

mental functions.” (C. A. 120-21).

The government's theory under the Hobbs Act was that

Petitioner was a de facto public official and personally

committed extortion “under color of official right.“ The

trial court rejected this theory but instead instructed that

Petitioner could be found guilty as a principal pursuant

to 18 U.S.C. § 2(b)* if he caused public officials “to con-

tribute in a substantial way to inducing the Williams

Agency to pay out the monies referred to in Counts Two

through Six.“ (C. A. 148). The trial court also instructed

the jury on extortion by wrongful use of fear.

D. The Court of Appeals’ Decision

The Court of Appeals’ opinion recognizes that “this

{is a] case of first impression” and concedes that it pre-

sents a “novel application of the mail fraud statute on

an ‘intangible rights’ theory to a non-office holder such as

Margiotta.” (A. 20a). It also acknowledges that the

“fiduciary duty associated with the public’s intangible

right to an individual’s honest and faithful participation

in governmental affairs has been accepted only where the

defendant is a public official.” (A. 22a) (emphasis

added). Consequently, “the instant case raises the novel

issue whether an individual who occupies no official pub-

lie office but nonetlicless participates substantially in the

operation of government owes a fiduciary duty to the

general citizenry not to deprive it of certain intangible

rights that may lay the basis for a mail fraud prosecu-

tion.” (A. 28a).

The Court of Appeals answers that question affirma-

tively. Postulating a federal common law of fiduciary

* Section 2(b) provides:

“Whoever willfully causes an act to be done which is directly

performed by him or another would be an offense against the

United States, is punishable as a principal.”

duty, the Court approves the trial court’s jury instruc-

tions, which it finds were based on “(1) a reliance test,

under which one may be a fiduciary when others rely

upon him because of a special relationship in the gov-

ernment, and (2) a de facto control test under which a

person who in fact makes governmental decisions may be

held to be a governmental fiduciary.” (A. 24a). The

Court of Appeals also holds that this duty arises under

the mail fraud statute itself and that no fiduciary duty

under state law need be shown, (A. 28a-29a). Recog-

nizing an “intangible right to ‘good government,’” the

Court of Appeals further states that no undertaking of

impartiality by Petitioner was required as a predicate

for this duty and that as a federal fiduciary Petitioner

“owed at least a duty to disclose material information or

give notice of his conflict of interest to those in govern-

ment who relied upon him.” (A. 21a, 34a, 37a).

In upholding Petitioner’s conviction for Hobbs Act ex-

tortion “under color of official right,” the Court of Ap-

peals stated that it sufficed if Petitioner caused the Town

and County to designate and retain the Williams Agency

as broker and that the Williams Agency made the chal-

lenged payments to retain its position. It stated that

Petitioner, although not a public official, could be liable

under 18 U.S.C. §2(b) for causing public officials un-

knowingly to use their power of office in such a manner

as would induce the payments.

Judge Winter dissented from the affirmance of the mail

fraud conviction. He stated that the panel “majority’s

use of mail fraud as a catch-all prohibition of political

disingenuousness expands that legislation beyond any

colorable claim of Congressional intent and creates a

real danger of prosecutorial abuse for partisan political

purposes.” (A. 60a). By a vote of six to four, the Court

denied rehearing en bane (Pratt, J., not participating).

REASONS FOR GRANTING THE WRIT

I. The Decision Below Raises Issues of Great Importance

to the Political Process and the Right of Private

Citizens to Engage In Political Activity.

This case presents major questions concerning the right

of private citizens, including political party leaders, to

engage in political activity without fear of criminal

prosecution. Under the guise of construing the federal

mail fraud statute, the Court of Appeals creates a new

federal criminal law requiring politically active persons

to act as “disinterested fiduciaries” for the whole elec-

torate. The defendant is not required to have intended

any monetary or tangible loss, to have held any fiduciary

status under state law, or to have violated any state or

local law. Instead, based solely on a defendant’s political

activity, juries are allowed to find federal fiduciary duties,

and attendant obligations to disclose, where none had pre-

viously been recognized. As Judge Winter notes, “Reduced

to essentials, the majority holds that a mail fraud con-

viction will be upheld when a politically active person is

found by a jury to have assumed a duty to disclose ma-

terial facts to the general citizenry and deliberately

failed to do so.” (A. 60a). Under this regime, a politi-

cally active person will now apparently be required to

be “impartial” when engaging in political speech or lob-

bying government, since he may otherwise unknowingly

violate his new federal fiduciary duty of “honest and

loyal” service to the general citizenry. (A. 37a).

Because this new criminal rule is not limited to any

specific kind of political activity, Judge Winter’s dissent

is correct in concluding that there is “no end to the

common political practices which may now be swept

within the ambit of mail fraud.” (A. 63a). Every polit-

ical leader, candidate, lobbyist, and interest group—even

an influential religious leader or newspaper editor—may

be exposed to criminal sanction based on involvement in

“governmental affairs.” The “fraudulent act” need con-

sist of nothing more than a failure to disclose a “bias,” or

“conflict of interest,” or other “material fact” in “cam-

paign literature,” “public speeches,” or other form of polit-

ical expression. (A. 63a, 64a). The Court of Appeals’ deci-

sion plainly strikes at the core of our system of self-

government, which is dependent upon the right of all

individuals to free expression and association. The deci-

sion below impermissibly “subjects politically active per-

sons to criminal sanctions based on what they say or do not

say in their discussions of public affairs.” (64a). It

seeks to impose on all political advocates, including party

leaders like Petitioner, an orthodoxy that is antithetical

to the First Amendment.

Judge Winter accurately states that the Court of Ap-

peals creates “a catch-all political crime which has no

use but misuse” and “vests federal prosecutions with

largely unchecked power to harass political opponents.”

(A. 69a n.5). Despite the obvious inhibition to the exer-

cise of free expression and association, the Court of

Appeals’ decision contains not “even the vaguest con-

tours of the legal obligations created,” but relies solely on

mere rhetoric about “the obligation to conduct govern-

mental affairs ‘honestly’ or ‘impartially,’ to ensure one’s

‘honest and faithful participation’ in government and to

obey ‘accepted standards of moral uprightness, funda-

mental honesty, fair play and right dealing.’” (A. 68a).

It thus forces all persons to act at their peril when en-

gaging in political activity.

In recognition of this very threat, the four judges who

dissented from the denial of en banc review concluded

that “the extension of the mail fraud statute, ... re-

flected in the panel decision, warrants en banc considera-

tion of the fundamental and recurring issue of whether

the statute applies to schemes to defraud members of the

public of intangible rights, such as a right to the faith-

ful performance of duty by a public official or a political

leader exercising equivalent authority.” (A. 78a). For

the same reason this Court should review the decision

below.

II. The Decision Below Is Inconsistent With This Court’s

Prior Decisions and Creates a Conflict in the Circuits.

A. The Decision Below that the Mail Fraud Statute

Punishes Political Activity By Private Citizens Is

Unprecedented and Unsupported.

As the Court of Appeals conceded (A. 22a), the spe-

cific fiduciary obligation alleged here—a duty to the gen-

eral citizenry requiring “honest and faithful” participa-

tion in governmental affairs—had previously been rec-

ognized as a proper basis for a federal mail fraud viola-

tion only where the defendant was a public official. E. g.,

United States v. Mandel, 591 F.2d 1847, 1858 (4th Cir.),

aff'd per curiam in relevant part, 602 F.2d 653 (1979)

(en banc), cert. denied, 445 U.S. 961 (1980). Neverthe-

less, the Court of Appeals expanded this controversial

“intangible rights” theory to mean that a private citi-

zen who engages in political activity is subject to the

same fiduciary duty that a government official owes to

the public and may be criminally prosecuted for a vio-

lation of that asserted duty.

This monumental extension of § 1341 creates an en-

tirely new class of mail fraud “crimes” never before rec-

ognized in the law and allows a federal prosecutor to

police the political activity of all citizens according to

his own notions of “sound morals” and “good govern-

ment.” (A. 21a). As Judge Winter's dissent correctly

states, the panel’s holding “finds not the slightest basis

in Congressional intent, statutory language or common

canons of statutory interpretation.” (A. 66a). As shown

by a recent analysis of the entire legislative history, which

the four dissenting judges cited below, the mail fraud

statute was directed at lottery swindles and other dis-

crete economic abuses. Its extension to cover fiduciary

breaches of any sort, and particularly by public officials

under a political “intangible rights” theory, lacks founda-

tion in Congressional intent. Comment, The Intangible-

Rights Doctrine and Political Corruption Prosecutions

Under The Federal Mail Fraud Statute, 47 U. Chi. L.

Rev. 562, 566-69 (1980). To the contrary, the legisla-

tive history “indicate[s] that the statute only reaches

schemes that have as their goal the transfer of something

of economic value to the defendant.” Id. at 566.

But whatever the propriety of the statute’s applica-

tion to fiduciary breaches by public officials, its extension

to regulate political participation by private persons in

“Governmental affairs” is beyond the pale. There is not

a scintilla of evidence that the far-fetched “fraud” theory

invoked against Petitioner was even recognized, much

less adopted by Congress, when this statute was enacted

in 1872, or in any of the subsequent amendments. As

shown in Judge Winter’s dissent,

“The legislative history of the mail fraud statute gives

no indication that the statute was ever intended by

Congress as an all-purpose weapon against political

corruption... . None of these [subsequent amenda-

tory] changes indicates that the Congress considered

mail fraud to be an appropriate statute for prosecut-

ing political corruption and deception. Even if there

were not a canon of construction calling upon us to

avoid broad construction of criminal statutes, the re-

cent extension of mail fraud by judicial fiat would be

unwarranted.” (A. 64a-65a n.4).

The decision below flies in the face of this Court’s direc-

tives that the mail fraud statute cannot be extended to

conduct that is not “in the nature of deceit or fraud as

known to the law or generally understood,” Fasulo v.

United States, 272 U.S. 620, 629 (1926), and that any

further expansion of the statute “must ... [be] at the

initiative of Congress and not of this Court.” United

States v. Maze, 414 U.S. 395, 405 n.10 (1974).

B. The Decision Below That the Mail Fraud Statute

Imposes Federal Fiduciary Duties on Politically

Active Citizens Is Unprecedented and Conflicts

With Decisions of this Court.

The Court of Appeals’ decision is additionally predi-

cated on the erroneous notion that the federal mail fraud

statute creates federal fiduciary duties. In holding that

Petitioner need not have owed any fiduciary duty under

state law, the Court of Appeals declared that the jury

was entitled to find a fiduciary duty under federal com-

mon law. The Court held in effect that the mail fraud

statute not only proscribes fraudulent deprivation of “in-

tangible rights” possessed by the body politic, but that it

actually creates such rights. Under the Court’s ap-

proach, federal juries are granted authority to fashion

new political rights and disclosure duties under the ru-

brie of “fiduciary duty“ -an open invitation for jurors

to impose their own unwritten “ethical code” and notions

of “good government.” These federal fiduciary duties can

be imposed by federal juries even where the state has

chosen not to require politically active citizens to serve

as quasi-governmental fiduciaries, but has instead guaran-

teed the full measure of free speech and association. Quite

plainly, this novel use of the mail fraud statute consti-

tutes an intrusion upon the sovereign right of the states

and their constituent local governments to define their

own political systems.“

5 As Judge Winter observed, “no violation of state or local law

is necessary to support the federal mail fraud conviction [under the

panel majority’s view] since a jury is free to find a federal duty to

disclose material facts.” (A. 61a).

In dicta, however, Judge Kaufman’s opinion additionally postu-

lates that Petitioner had a fiduciary duty under New York law

as well—a totally groundless assertion. The trial court found no

state-law duty and, as Judge Winter notes, “the majority cites no

New York authority establishing the duties they impose on political

activists or public officials.” Moreover, “there is nothing to indicate

that [political party] officers have legal obligations under state law

such as those imposed on Margiotta by the majority,” and “(t]he

The Court of Appeals decision is directly contrary to

the principle that “[t]here is no federal general common

law,” Erie R. Co. v. Tompkins, 304 U.S. 64, 78 (1938),

and no “federal common law of crimes” to be developed

by federal courts. Parratt v. Taylor, 451 U.S. 527, 531

(1981). As the Court of Appeals itself expressly ac-

knowledges (A. 29a), its decision is directly contrary to

this Court’s refusal to create federal fiduciary stand-

ards for the anti-fraud provisions of Rule 10b-5 of

the federal securities act. Santa Fe Industries, Inc. v.

Green, 430 U.S. 462 (1977). As the Court stated in

Santa Fe, “there may well be a need for uniform federal

fiduciary standards.. . [b]ut those standards should not

be supplied by judicial extension of 10b and Rule

10b-5....” Id., at 479-80. Ironically, while the Supreme

Court has held that there are no federal fiduciary duties

even under civil anti-fraud provisions, the Court of Ap-

peals holds that there are federal fiduciary duties under

criminal anti-fraud provisions.

III. The Decision Below Is In Conflict With the First

Amendment Rights of Free Speech and Association

and Prior Decisions of this Court.

The Court of Appeals’ decision directly impinges upon

the First Amendment. To require a political party or its

chairman to act as a “disinterested” fiduciary for the

whole electorate, including political opponents, abridges

the right of political association. Judge Winter points

out that “the majority is quite simply wrong in brush-

ing aside the First Amendment issues [since] . . . the

theory they adopt subjects politically active persons to

criminal sanctions based solely upon what they say or do

not say in their discussions of public affairs.” (A. 64a).

majority's assertions to the contrary are thus sheer ipse dizit.”

(A. 61a n.2). Finally, since Judge Kaufman’s cpinion holds that

New York law is irrelevant to a federal mail fraud violation, the

existence vel non of a state-law fiduciary duty is of no significance

under the decision below.

This kind of restriction on the content of political speech

violates the fundamental principle that “the government

has no power to restrict expression because of its mes-

sage, its ideas, its subject matter, or its content.” Police

Department v. Mosley, 408 U.S. 92, 95 (1972).

The Court’s decision is not only wrong but dangerous.

In Judge Winter’s words, “Quite frankly, I shudder at

the prospect of partisan political activists being indicted

for failing to act ‘impartially’ in influencing govern-

mental acts. . . In a pluralistic system organized on

partisan lines, it is dangerous to require persons exer-

cising political influence to make the kind of disclosure

required in public offerings by the securities laws.”

(A. 68a-69a). In fact, the Court’s decision imposes

disclosure obligations greater than those under the fed-

eral securities laws, since it takes the additional step

of allowing juries to impose federal fiduciary duties.

The panel opinion asserts that the trial court’s instruc-

tions somehow provide a “safe harbor” for party leaders

who simply stick to “party business” and avoid “gov-

ernmental affairs” (A. 25a)—a cryptic and, in practical

terms, non-existent distinction that is obnoxious to the

concept of democratic self-government and to the rights

of free speech and political association. Instructions

based on a nebulous, ad-hoc slogans like “participation in

Governmental affairs” are plainly inadequate as a stand-

ard for criminal liability and give the juries carte

blanche to invent crimes. The panel opinion finds solace

in the notion that the jury instructions contain a “reli-

ance test” and a “de facto control test.“ But it cites

no case under New York law, or the law of any jurisdic-

tion, holding that a private person becomes a fiduciary

for the general public under such a standard. These so-

* The panel opinion does not identify where the “de facto control”

test was supposedly contained in the jury instructions (C.A. 116-

17), which were in fact based exclusively on a vaguely formulated

“reliance” standard.

called “tests,” which amount to nothing more than a

transparent contrivance to fit this case, totally obliterate

the necessary distinction between public officials and pri-

vate individuals and put everyone at peril when en-

gaging in political activity. They contain no discernible

standard for determining the existence of the asserted

fiduciary duty, or the contours of the legal obligations

allegedly imposed. As Judge Winter states, “Juries are

simply left free to apply a legal standard which amounts

to little more than the rhetoric of sixth grade civics

classes.” (A. 68a).

IV. The Decision Below Is In Conflict With the Fifth

Amendment Right to Fair Notice and Warning and

Prior Decisions of this Court.

The Court of Appeals’ decision makes a mockery of

the Constitutional right to fair notice and warning.

Prior to the present Indictment, there was no theory

that a fiduciary duty—under federal or state law—

could arise based on “participation in Governmental] af-

fairs.” The Court gives no clue as to how anyone, much

less Petitioner, was supposed to perceive that he had

a fiduciary obligation which was acquired invisibly, un-

knowingly, and unwillingly. Its holding is in direct con-

flict with this Court’s decision that due process forbids

a conviction based on an affirmative legal duty of which

the defendant had no knowledge or probability of knowl-

edge. Lambert v. California, 355 U.S. 255 (1957).

The Court of Appeals’ decision opens the door to ar-

bitrary, capricious and discriminatory use of the federal

mail fraud statute. That misuse is illustrated dramat-

ically in the present case where only Petitioner was

prosecuted for a patronage practice that had existed for

more than fifty years and involved thousands of persons.

The Court of Appeals itself acknowledges that “the dis-

tribution of insurance commissions on municipal proper-

ties to non-working brokers was a patronage system

practiced by both Democrats and Republicans in the

County for decades.” (A. 19a). As Judge Winter like-

wise notes, “[E]ven as to the partisan distribution of

insurance commissions, the government concedes that

Margiotta’s conduct, so far as relevant to mail fraud,

was hardly unique; in fact, it was a state-wide prac-

tice.” (A. 70a).

Judge Winter's dissent points out that Petitioner's

Democratic counterpart had previously followed this pa-

tronage practice and that New York State openly oper-

ated its own—and much larger—insurance patronage

system.’ Commission sharing with non-working brokers

was shown to be so widespread that in his closing argu-

ment the prosecutor was finally forced to admit to the jury

that it was a “well-known practice” and that there was

al bsolutely nothing wrong” with it. (Tr. 3350, 3544).

I short, Petitioner was indicted, tried, and convicted

on a fiduciary rule that was literally unprecedented and

that has been applied to no one else. As Judge Winter

states, “Notwithstanding the statewide existence of what

in the majority’s view was mail fraud, only Margiotta

was indicted.” (A. 7la). The panel majority thus “not

only creates a political crime where Congress has not

acted but also lodges unbridled power in federal prosecu-

tors to prosecute political activists.” (A. 71a). “(T]he

potential for abuse through selective prosecution and the

degree of raw political power the freeswinging club of

mail fraud affords federal prosecutors” as a result of the

Court of Appeals’ opinion are “profoundly troubl[ing]”

7 By 1974, the New York State Office of General Services (“OGS”),

which through its Bureau of Insurance purchases insurance for

State agencies, annually dispensed commissions amounting to almost

$600,000 on State insurance to about 250 politically-selected brok-

ers who did no work. (Tr. 1154-58; 1168), On becoming the head

of OGS in 1971 and inquiring about the propriety of this patronage

system, Commissioner O'Hara was informed by the OGS staff that

“the splitting of commissions was a perfectly legal procedure” under

New York law and should be continued. (C. A. 1235).

concerns. (A. 70a). A decision of this nature cannot be

allowed to stand.

V. The Decision Below That Petitioner Committed Hobbs

Act Extortion “Under Color of Official Right” Con-

flicts With the Plain Meaning of the Statute.

Extortion “under color of official right“ can be com-

mitted only by a public official. United States v. Trotta,

525 F.2d 1096, 1100 n.7 (2d Cir. 1975), cert. denied, 425

U.S. 971 (1976). Because he was not a public official,

Petitioner lacked the requisite statutory capacity and

could not as a principal have committed “official” extor-

tion. The Court of Appeals held, however, that Petitioner

could nevertheless commit “official” extortion if he caused

Town and County officials “to contribute in a substantial

way to inducing the Williams Agency” to make the chal-

lenged payments. (A. 46a). The Court stated that if

Petitioner caused any public official to perform any offi-

cial acts, then under 18 U.S.C. § 2 (b) Petitioner would

have adopted both the acts and the capacity of the public

official. The Court thus concluded that if Petitioner

caused public officials to appoint and retain the Williams

Agency as broker, he would have committed “official” ex-

tortion.

As with the mail fraud count, this holding was un-

precedented. A person lacking the requisite capacity to

commit a specific offense is liable under the “adopted

capacity” doctrine of 18 U.S.C. §2(b) only where the

intermediary was actually caused to commit the criminal

act, See, e. g., United States v. Ruffin, 618 F.2d 408 (2d

Cir. 1979). The intermediary need not have had a crim-

inal intent. United States v. Ordner, 554 F.2d 24 (2d

Cir.), cert. denied, 484 U.S. 824 (1977). But to establish

that a “capacity” offense was indeed committed, it is nec-

essary that the person possessing the requisite capacity,

i.e., the public official, have in fact performed the specific

acts constituting the underlying substantive offense. Sec-

tion 2(b) thus states that a person is responsible as a

principal if he “willfully causes an act to be done which

if directly performed by him or another would be an

offense against the United States. Until the deci-

sion below, therefore, courts have agreed that where the

criminal statute requires a particular capacity, the per-

son “meeting the capacity requirements. . [must] en-

gage in the proscribed conduct,” since otherwise the un-

derlying offense would not have been committed. United

States v. Ruffin, 618 F.2d at 409. Accord, United States

v. Wiseman, 445 F.2d 792 (2d Cir.), cert. denied, 404

U.S. 967 (1971); United States v. Lester, 368 F.2d 68.

In the present case, the Indictment did not charge, the

instructions did not require the jury to find, and the

proof at trial did not show that Petitioner caused a pub-

lie official to commit “an act ... Which .. would be an

offense against the United States,” that is, extortion “un-

der color of official right” in violation of the Hobbs Act.

Consideration of each of the elements of the offense

demonstrates the absence of the requisite causation.

First, “official” extortion consists of a public official’s

wrongful use of his office to obtain money not due him

or his office. United States v. Nardello, 398 U.S. 286,

289 (1959). Unlike extortion by means of fear, extortion

“under color of official right” does not require any proof

of actual or threatened force, violence, or fear. Rather,

the “ ‘fear’ element on the part of the ‘victim’ [is] im-

plied from the public official’s position of authority over

the victim.” United States v. Butler, 618 F.2d 411, 418-

19 (6th Cir.), cert. denied, 447 U.S. 927 (1980).

Here, the Indictment did not charge, and the jury was

not required to find, that any public official personally

received, or transferred to third parties, any payment not

due him or his office. In fact, the public official involved,

Town Supervisor and County Executive Caso, was not

the recipient, directly or indirectly, of any payments by

the Williams Agency, nor did he direct any payments to

third parties.

Second, for official extortion there must be a “misuse of

one’s office to induce [the] payment. United States

v. Rabbitt, 583 F.2d 1014, 1027 (8th Cir. 1978), cert.

denied, 489 U.S. 1116 (1979). Here, the Indictment did

not charge, and the jury was not required to find, that

any public official misused his office to induce payments.

Petitioner did not cause Caso to demand or induce any

payments. In fact, it was undisputed that Caso was not

a party to any arrangement with the Williams Agency

concerning its commission sharing or payments, did not

misuse his public office to induce payments of money,

and did not engage in extortionate conduct violative of

the Hobbs Act. Caso testified that he was unaware of the

commission sharing, and the Court of Appeals acknowl-

edged that there was no misuse of Caso’s office. (A. 46a-

47a).

Finally, for official extortion it must be shown that the

victim’s “motivation for the payment focuse[d] on the

recipient’s office.” United States v. Braasch, 505 F.2d

139 (7th Cir. 1974), cert. denied, 421 U.S. 910 (1975).

The Indictment did not charge, and the jury was not

required to find, that the Williams Agency’s motivation

focused on the “recipient’s office.” The Indictment

charged instead that the Petitioner committed official ex-

tortion because the payments were induced by the Wil-

liams Agency’s perception of his political influence, that,

is, “by the Williams Agency’s reasonable belief that the

Nassau County Executive and/or Presiding Supervisor of

the Town of Hempstead, would appoint or dismiss, as

Broker of Record . . . any person whom the defendant told

him to appoint or dismiss in his capacities of TO W n

land] County Republican Chairman.” (C. A. 25). In

fact, Williams, Jr. testified that he made the commission

payments because of his understanding that his father

had a verbal contract with Margiotta and that he was

obligated under contract law to comply. (A. 451, 535-38).

No one, and especially not Williams Jr., suggested that

the Williams Agency shared commissions or made pay-

ments because of Caso, the power of Caso’s office, or any

extortionate conduct by Caso.

In sum, Petitioner was not charged with having

caused public official Caso to commit the actus reus of

“official” extortion. All that was charged was that Peti-

tioner influenced Caso to designate and retain the Wil-

liams agency as broker. But those actions by Caso did not

constitute “official” extortion—Caso obtained no money not

due him or his office (either personally or by transfer to

third parties) ; Caso did not misuse his office to induce any

payments; and the Williams Agency was not motivated

by Caso as the recipient of the money.“

Petitioner was held to have committed extortion

“under color of official right” simply because he possessed

influence over public officials. Under this view, anyone

who can influence government is subject to indictment

for extortion “under color of official right.” All that is

required is that the governmental action or inaction

have contribute fd]! in a substantial way” to inducing

the “payment.” (A. 46a). This doctrine totally distorts the

elements of extortion “under color of official right.” It is

§ The panel opinion argues that Caso's designation of the Williams

Agency as broker was “official” extortion because, had he been aware

that the Agency was making payments at Margiotta’s direction,

Caso could have been found guilty of extortion as a principal, (A.

44a-45a). The argument contains an obvious fallacy. If the Wil-

liams Agency’s payments were induced by wrongful use of fear,

then the fact of Caso’s knowledge might indeed make him liable as

a principal—but to extortion by fear, not “official” extortion. Under

the panel opinion’s hypothetical (as in this case), Caso would not

have committed official extortion because he would not himself

have demanded the payments, would not himself have received

money or directed it to third parties, and would not himself have

motivated the Williams Agency to make the payments,

indistinguishable from a general proscription against

anyone influencing government in exchange for any valu-

able consideration and thus criminalizes a whole range

of conduct that has traditionally been regarded as legiti-

mate lobbying and political activity.

In response to the point that its new statutory reading

draws “legitimate lobby and political activity” within

the Hobbs Act, the Court of Appeals contends simply

that these activities are sufficiently protected by the

jury instruction requiring that Petitioner be found to

have acted with “criminal intent.” (A. 48a). In sum,

the interpretation of the statute does not matter, since

only those with “criminal intent” will be prosecuted or

convicted. This argument hardly constitutes a justifica-

tion for the overextension of a criminal statute. Nor is

it likely that most party leaders, lobbyists or other polit-

ical activists would regard a prosecutor’s perception of

their criminal intent vel non as providing much protec-

tion. Under this analysis, there would be no need for

written criminal laws, since only those with “criminal

intent” need fear conviction.

Finally, the conviction on the Hobbs Act counts must in

any event be reversed because the inclusion of the im-

proper mail fraud count allowed the prosecution to intro-

duce otherwise irrelevant evidence concerning Petitioner’s

partisan patronage activities. This evidence was highly

prejudicial on the Hobbs Act counts and strongly tended

to bias the jury’s consideration of them.“

o The jury was instructed on both extortion by “fear” and extor-

tion “under color of official right.” Because the jury returned a

general verdict, the conviction must be reversed if either ground is

unsupported, Yates v. United States, 364 U.S, 298 (1957). More-

over, Petitioner challenges both grounds for conviction in this case.

CONCLUSION

For the reasons stated, the Petition should be granted.

Respectfully submitted,

EDWARD BENNETT WILLIAMS

Counsel of Record

IRVING YOUNGER

ROBERT L. WEINBERG

JOHN J. BUCKLEY, JR.

Hill Building

Washington, D.C. 20006

Attorneys for Petitioner

Of Counsel:

WILLIAMS & CONNOLLY

Hill Building

Washington, D. C. 20006

January 1983

APPENDIX

Page

Opinion of the Court of Appeals (688 F.2d 108) la

Order of the Court of Appeals Denying Petition

For Rehearing and Suggestion For Rehearing

eee oa eliale 72a

18 U.S.C. § 1841, Mail Fraud Statute ...................... 74a

18 U.S.C. § 1961, Hobbs A et 75

In 0.nccccssesecvesntesenevies: sovsovensees 77a

APPENDIX A

United States Court of Appeals

Second Circuit

No. 1288, Docket 82-1025

UNITED STATES OF AMERICA,

Appellee,

JOSEPH M. MARGIO TTA,

Appellant.

Argued June 2, 1982

Decided July 27, 1982

Before KAUFMAN and WINTER, Circuit Judges, and

WARD, District Judge.*

IRVING R. KAUFMAN, Circuit Judge:

The significant role played by political parties in mu-

nicipal government has been an often noted characteristic

of American urban life. Some critics, contributing to the

prevailing mythology that machine politics have controlled

the corridors of local government,' have highlighted the

opportunities available to those who hold the strings of

political power“ for defrauding the citizenry and reaping

personal gain through the sale of public office and other

favors. Other commentators, however, have asserted that

local party leaders have often served important function:

of political representation and association. In cities frag-

mented into diverse social and economic groups, it has

* Of the United States District Court for the Southern District

of New York, sitting by designation.

1 See J. Robertson, American Myth, American Reality 265-66

(1980).

2Sce J. Bryce, The American Commonwealth (2d ed. 1891).

been argued, party organizations have played a salutary

role in organizing large numbers of people, and fulfilling

their desires with patronage, jobs, services, community

benefits, and opportunities for upward social mobility.“

In sum, the line between legitimate political patronage

and fraud on the public has been difficult to draw.

Today, not unmindful of these competing visions of po-

litical history, we must consider where such lines may be

drawn in the context of a criminal prosecution for mail

fraud“ and extortion.’ Specifically, we are asked to de-

termine, inter alia, when, if ever, a political party leader

who holds no official government office but who partici-

See J. Robertson, supra note 1, at 265. For an amusing descrip-

tion, and justification, of the operation of a political machine, see

W. Riordon, Plunkitt of Tammany Hall (E. P. Dutton 1963).

#18 U.S.C. § 1841 (1976) provides in pertinent part:

Whoever, having devised or intending to devise any scheme

or artifice to defraud, or for obtaining money or property by

means of false or fraudulent pretenses, representations or

promises. .. for the purpose of executing such ucheme or

artifice or attempting so to do, places in any post office or au-

thorized depository for mail matter, any matter or thing

or takes or receives therefrom any such matter or thing, or

knowingly causes to be delivered by mail... any such matter

or thing, shall be fined not more than $1,000 or imprisoned not

more than five years, or both.

518 U.S.C. § 1951 (1976) provides in pertinent part:

(a) Whoever in any way or degree obstructs, delays, or affects

commerce or the movement of any article or commodity in

commerce by . . . extortion or attempts or conspires so to do,

commits or threatens physical violence to any person or prop-

erty in furtherance of a plan or purpose to do anything in

violation of this section shall be fined not more than $10,000

or imprisoned not more than twenty years, or both.

(b) As used in this section—

(2) The term “extortion” means the obtaining of property

from another, with his consent, induced by wrongful use of

actual or threatened force, violence, or fear, or under color of

official right.

pates substantially in the governance of a municipality

owes a fiduciary duty to the general citizenry, and what

conduct violates such a fiduciary duty. The issues before

us arise out of a criminal prosecution against Joseph M.

Margiotta, long-time Chairman of the Republican Com-

mittees of both Nassau County and the Town of Hemp-

stead, New York. The Government charges Margiotta

with one count of maul fraud in violation of 18 U.S.C.

§ 1841 (1976) and five counts of extortion in violation

of 18 U.S.C. § 1951 (1976) “ for activities in connection

with the distribution of insurance commissions on mu-

nicipal properties to Margiotta’s political allies. The Gov-

ernment presented “evidence of a scheme of fraud spun

into a web of political power“ “ at a trial before Judge

Sifton, at which nearly seventy witnesses testified during

a period of three weeks. After deliberating for eight days,

the jury announced it was hopelessly deadlocked, and the

trial judge declared a mistrial.

Upon a request by the Government, in anticipation of

a retrial, Judge Sifton reconsidered a number of legal and

evidentiary rulings made at the trial. The trial judge

entered an order in which he stated that the challenged

rulings would be followed at Margiotta’s second trial. The

Government then appealed to this Court for review of

Judge Sifton’s order prior to the retrial. We found those

portions of Judge Sifton’s order indicating the court

would abide by certain jury instructions at retrial were

not appealable pursuant to 18 U.S.C. § 3731 (1976) *

® See note 4, supra.

7 See note 5, supra,

8 United States v. Margiotta, 662 F.2d 131, 135 (2d Cir. 1981).

*18 U.S.C. § 3731 (1976) provides in pertinent part:

In a criminal case an appeal by the United States shall lie

to a court of appeals from a decision, judgment, or order of a

district court dismissing an indictment or information as to

any one or more counts, except that no appeal shall lie where

and, accordingly, dismissed the Government’s appeal in

that respect. While the portions of the order concerning

the judge’s evidentiary rulings were appealable, we con-

cluded that the district court had acted well within its

discretion, and affirmed the order on the evidentiary

rulings.

Margiotta’s retrial before Judge Sifton proved to be

another closely fought contest. Following a trial lasting

three weeks, the jury deliberated conscientiously for three

days. It returned a verdict of guilty on all six counts,

including the one count of mail fraud in violation of 18

U.S.C. § 1841 (1976) and the five counts of extortion in

violation of 18 U.S.C. § 1951 (1976). Judge Sifton sen-

tenced Margiotta to concurrent terms of imprisonment

of two years on each count.

Margiotta appeals to this Court from the judgment of

conviction entered by Judge Sifton. On appeal, he raises a

number of claims, several of which involve novel issues.

Margiotta argues that his conviction of mail fraud must

be reversed and the indictment dismissed on the grounds

that the federal mail fraud statute, 18 U.S.C. § 1341

(1976), does not embrace a theory of fiduciary fraud by

individuals who participate in the political process but

who do not occupy public office, and that Margiotta owed

no fiduciary duty to the general citizenry of Nassau

County and the Town of Hempstead under federal or

state law. Moreover, he asserts that the evidence was in-

the double jeopardy clause of the United States Constitution

prohibits further prosecution.

An appeal by the United States shall lie to a court of appeals

from a decision or order of a district court suppressing or

excluding evidence or requiring the return of seized property

in a criminal proceeding, not made after the defendant has been

put in jeopardy and before the verdict or finding on an indict-

ment or information

The provisions of this section shall be liberally construed to

effectuate its purposes.

sufficient to support a finding of fiduciary duty even if

it were held that the trial court’s instructions were not

erroneous as a matter of law. In addition, Margiotta

claims that the indictment and conviction violate his First

Amendment rights of freedom of expression, association

and petition, and that the mail fraud statute is imper-

missibly vague on its face and as applied to him on the

facts of this case. Furthermore, he asserts that he did

not fail to disclose material information in violation of the

mail fraud statute. Margiotta also claims that his con-

viction of five counts of extortion in violation of the Hobbs

Act, 18 U.S.C. § 1951 (1976), should be reversed and the

indictment dismissed because he did not commit extortion

“under color of official right” or through the wrongful use

of “fear,” and because the district court’s allegedly im-

proper instructions on the mail fraud count prejudiced the

jury’s consideration of the Hobbs Act charges. Finally,

Margiotta argues that Judge Sifton erred by admitting

Richard A. Williams’s hearsay account of his father’s al-

leged agreement with Margiotta. For the reasons stated

below, we reject Margiotta’s contentions, and affirm the

judgment of conviction in all respects.

I. Background

Since the conduct at issue in this case involves an in-

tricate scheme of fraud, we must set forth the facts in

detail. As noted above, Joseph M. Margiotta, was at all

relevant times the Chairman of the Republican Committee

of both Nassau County and the Town of Hempstead, New

York. Although he held no elective office, his positions as

County and Town Republican Chairman, according to the

Government, afforded him sufficient power and prestige to

exert substantial control over public officials in Hempstead

and Nassau County who had been elected to office as

candidates of the Republican Party. This control, it was

charged, enabled Margiotta to exercise influence over the

appointees of these elected officials as well. The spread of

his political tentacles over the governments of Town and

County allegedly offered Margiotta the opportunity to en-

gage in a highly remunerative fraudulent design involving

the distribution of insurance commissions on municipal

properties to his political associates.

The responsibility of the Nassau County Executive and

the Presiding Supervisor of the Town of Hempstead in

maintaining the properties owned and operated by their

respective jurisdictions was at the crux of this artifice.

The holders of these public offices were responsible for

obtaining insurance coverage for the properties owned by

the Town and County. As a matter of practice, the au-

thority for obtaining insurance on municipal properties

was delegated to a Broker of Record designated by the en-

tities and serving at their pleasure. The Broker of Record

was the only individual who acted on behalf of these juris-

dictions in placing insurance policies. The Broker received

as compensation for his services commissions consisting of

a portion of the monies paid by the municipalities for the

insurance policies.’®

According to the Government, this municipal insurance

activity was transformed into a scheme to defraud the

citizens of Hempstead and Nassau County in 1968, At

that time, Margiotta allegedly contrived the appointment

of Richard B. Williams & Sons, Inc., an insurance agency

(hereinafter the “Williams Agency” or “Agency”), as

Broker of Record for the Town of Hempstead. Richard B.

Williams determined to have the Agency designated as

Broker of Record for the Town, a position then held by

one Mortimer Weis. Williams allegedly met with Margi-

otta and Weis to strike a secret “deal”: The Williams

Agency would be named Broke: of Record for the Town

of Hempstead, and Weis would become a $10,000 a year

10 Moreover, it appears that Nassau County also occasionally

compensated the Broker of Record through personal services con-

tracts not subject to competitive bidding.

consultant to the Town. In return for the appointment,

the Williams Agency would set aside 50% of the insurance

commissions and other compensation it received, to be

distributed to licensed insurance brokers and others desig-

nated by Margiotta. Shortly thereafter, Ralph Caso, the

Presiding Supervisor of Hempstead, appointed the Wil-

liams Agency as Hempstead’s Broker of Record based on

Margiotta’s recommendation. In 1969, the Williams

Agency began to write insurance for the Town of Hemp-

stead, and commenced making “kickbacks” to brokers se-

lected by political leaders of local election districts in the

Town who were loyal to the appellant.

In 1970 Caso was elected County Executive of Nassau

County. After his election, Richard B. Williams met with

Margiotta to discuss the possibility of the Williams Agency

acting as Broker of Record for Nassau County. On Janu-

ary 1, 1971, the day on which he took office, Ralph Caso

designated the Williams Agency as Broker of Record for

Nassau County based on Margiotta’s recommendation.

Soon thereafter, the Williams Agency commenced to dis-

tribute 50% of the commissions it earned on Nassau

County properties to brokers and others politically allied

with Margiotta. Between 1969 and 1978, according to the

Government, the compensation paid the Broker of Record

in connection with this arrangement totalled in excess of

two million, two hundred thousand dollars. Among the

recipients of more than five hundred thousand dollars in

kickbacks were numerous insurance brokers who per-

formed no legitimate work, lawyers and other friends of

Margiotta who rendered no services in return for their

compensation, and the appellant himself. The concealment

of this fraudulent scheme, according to the Government,

was fostered through the preparation of fictitious property

inspection reports. As a result, it was made to appear

that the recipients of the insurance commission kickbacks

were legitimately earning their commissions. Moreover,

the Government has charged the insurance activities were

disguised by Margiotta through false and misleading testi-

mony during the course of an investigation by the New

York State Investigation Commission,

In November, 1980, a federal grand jury indicted Mar-

giotta on one count of mail fraud, in violation of 18 U.S.C.

§ 1841 (1976), and five counts of extortion, in violation

of 18 U.S.C, § 1951 (1976). The mail fraud count (Count

One) was based on a scheme to defraud the Town of

Hempstead, Nassau County, New York State, and their

citizens (1) of the right to have the affairs of the Town,

County and State conducted honestly, free from corrup-

tion, fraud and dishonesty, and (2) of the right to Margi-

otta’s honest and faithful participation in the govern-

mental affairs of the Town, County and State. The factual

predicate underlying Count One was the above-described

insurance commission ruse in which, pursuant to a secret

agreement, Margiotta arranged the appointment of the

Williams Agency as Broker of Record for the Town and

County in return for the Agency’s payment of kickbacks

to insurance brokers and others designated by Margiotta.

Counts Two through Six charged Margiotta with violating

the Hobbs Act by inducing the Williams Agency to make

the payments of the insurance commissions under color of

official right and by means of the wrongful use of fear.

Count Two charged Margiotta with extortion in connec-

tion with the payments to the insurance brokers who were

political allies. Count Three set forth a Hobbs Act viola-

tion based on Margiotta’s actions in obtaining monthly

payments in the amount of $2,000 from the Williams

Agency to attorneys William Cahn and his son Neil Cahn

between 1974 and 1975. Count Four was predicated on a

$10,000 payment by the Williams Agency to one Robert

Dowler, who allegedly entered into an agreement to pay

one-half of the money to Margiotta. Count Five described

a Hobbs Act offense arising from a series of payments

totalling more than $60,000 to Joseph M. Reilly, a New

York State Assemblyman, and Count Six charged Margi-

otta with extortion in connection with payments by the

Williams Agency to Henry W. Dwyer, a New York State

Assemblyman and consultant to the Nassau County Re-

publican Committeee.

The first of the appeals spawned by this indictment

arose from the pretrial maneuvering of the parties. On

January 6, 1981, Margiotta filed a pretrial motion to dis-

miss Count One," alleging, inter alia, that Count One

failed to state an offense pursuant to 18 U.S.C. § 1341,

that the Count was duplicitous, and that it was unconsti-

tutionally vague. In response, the Government submitted

an affidavit describing hundreds of items sent through the

mails upon which a charge of fraudulent use of the mail

could be based. Judge Sifton ruled that Count One stated

an offence under § 1341, but ordered the Government to

elect a single mailing to submit to the jury. The Gov-

ernment appealed Judge Sifton’s order to this Court,

which held that the order was appealable and that the

Government was not required to elect among the numerous

specified mailings. United States v. Margiotta, 646 F.2d

729 (2d Cir. 1981). Trial commenced on March 27, 1981.

While the Government presented evidence to prove that

Margiotta’s involvement in the insurance activities was a

scheme to defraud, Margiotta offered a defense of good

faith. He attempted to prove that he had no secret agree-

ment with the Williams Agency for the distribution of in-

surance commisisons as a quid pro quo for securing the

appointment of the Agency as Broker of Record. Ad-

miting that he recommended the Agency to be Broker of

Record for both the Town and the County and that he di-

rected the distribution of insurance commissions, he ar-

1} Margiotta’s pretrial motion to dismiss was filed under a prior

indictment that was superseded by an indictment filed on January

15, 1981. The principal change in the superseding indictment was

the addition of the word “secret” before the description of the

alleged fraudulent agreement between Margiotta and the Williams

Agency. This superseding indictment has been the predicate for all

subsequent proceedings.

10a

gued that his behavior was merely a longstanding political

patronage arrangement practiced for decades by Republi-

cans and Democrats alike. As noted above, after deliberat-

ing carefully for more than a week, the jury announced

that it could not agree on a verdict, and a mistrial was

declared.

This court’s second review of the Margiotta case fol-

lowed Judge Sifton’s declaration of the mistrial. In an-

ticipation of another hotly contested battle at the retrial,

the Government sought reconsideration of a number of

legal and evidentiary rulings Judge Sifton had made at

the first trial. The Government challenged Judge Sifton’s

instruction to the jury that for the Government to show

Margiotta had defrauded the citizens of Nassau County

and the Town of Hempstead of the right to have the

affairs of those entities conducted honestly, free from cor-

ruption, fraud and dishonesty, in violation of the mail

fraud statute as charged in Count One, the jury had to

find that Margiotta owed some kind of special fiduciary

duty to the citizenry.* The Government also sought re-

consideration of the district court’s related instruction

that a violation of mail fraud under Count One required

an additional showing of willful concealment.“ Moreover,

12 The district court declined to adopt the Government's requested

charge that a special fiduciary relationship need not be established

for it to prove the first “prong” of Count One, which charged that

Margiotta’s scheme to defraud the citizens of Nassau County and

the Town of Hempstead deprived them of the right to have the

affairs of those entities conducted honestly, free from corruption,

fraud, and dishonesty. The Government’s requested instruction

would have permitted the jury to find the defendant guilty of mail

fraud simply on the basis of a determination that Margiotta had

agreed to recommend the Williams Agency as Broker of Record in

return for the Agency’s participation in the kickback scheme, with-

out reference to the question of a breach of a fiduciary relationship

by the defendant.

18 See United States v. Marigotta, 662 F.2d 131, 137 (2d Cir.

1981).

lla

the Government contended that the district court erred in

declining to instruct the jury that Margiotta could be

found guilty, as a principal, of extortion under color of

official right in violation of 18 U.S.C. § 1951. Instead,

Judge Sifton instructed that Margiotta could be found

guilty of extortion pursuant to 18 U.S.C. § 2 (b) only if

the jury found that he had caused public officials acting

under color of official right to induce a victim to part with

money.“ The Government also took issue with certain

evidentiary rulings made by Judge Sifton at the first

trial.“ The Government appealed from Judge Sifton’s

order stating that he would follow these rulings at the

second trial. This Court affirmed the order on the evi-

dentiary rulings and dismissed the appeal with respect to

the challenged jury instructions on the ground that those

portions of the order relating to the jury instructions were

not appealable by the Government pursuant to 18 U.S.C.

§ 3731. United States v. Margiotta, 662 F.2d 181 (2d

Cir. 1981). In dismissing the Government’s appeal with

respect to the jury instructions, we explicitly stated we

intended to express no views on the merits of those claims.

At the second trial, the Government again sought to

prove that Margiotta’s participation in the insurance ac-

tivities amounted to an elaborate scheme of fraud in vio-

lation of the federal mail fraud and extortion statutes

rather than a mere political patronage system. The Gov-

418 U.S.C. §2(b) (1976) provides in pertinent part:

Whoever willfully causes an act to be done which if directly

performed by him or another would be an offense against the

United States, is punishable as a principal.

18 At the first trial, Judge Sifton had excluded (1) evidence that

Margiotta’s conduct violated New York law; (2) evidence of a

prior similar act involving the dependence of employee salary in-

creases on their agreement to contribute one percent of their salaries

to the Republican Party; and (3) certain statements of appellant’s

attorneys in a memorandum submitted to the Attorney General

in an attempt to persuade the Department of Justice that Margiotta

should not be indicted.

12a

ernment presented evidence to show that Margiotta had

deeply insinuated himself into the affairs. of government

in the Town of Hempstead and Nassau County, to the

point that he was in effect undertaking the business of

government and not simply the activities of the Republi-

can Party. This evidence was provided by testimony of

Ralph Caso, who was the Presiding Supervisor of the

Town of Hempstead until 1971 and Nassau County Execu-

tive until 1977. Caso stated that prior to his “break”

with Margiotta in 1976, he was “controlled” by Margiotta

in “the basic responsibilities that [he] was to carry out,”

including appointments to offices and positions such as the

Broker of Record.

While Caso’s successor, Francis Purcell, who still holds

the office of Nassau County Executive, did not describe

the same relationship of dominance over the affairs of

government in Town and County, the testimony of Margi-

otta himself and those who carried out his directives estab-

lished that the appellant exercised a vise-like grip over the

basic governmental functions in Hempstead and Nassau

County. In explaining his role in the selection of the Wil-

liams Agency for the position of Broker of Record, Margi-

otta testified that Richard B. Williams, an active partici-

pant in the political affairs of the Town of Hempstead and

Nassau County, had approached him in 1968 and asked to

replace Mortimer Weis as Broker of Record for the Town

of Hempstead. Margiotta determined that the Williams

Agency should replace Weis as the Broker of Record, and

this decision was implemented by Caso. In 1971, after

Ralph Caso was elected Nassau County Executive, Mr.

Williams again approached Margiotta to express his desire

to become Broker of Record for Nassau County. Margiotta

testified tat ne determined the Williams Agency “deserved

it above anybody else [he] thought was capable of han-

dling it.” On January 1, 1971, the day on which he took

office, Ralph Caso designated the Williams Agency as

Broker of Record for Nassau County based on Margiotta’s

recommendation.

13a

Moreover, Margiotta’s participation in the “govern-

mental administration of insurance affairs” involved more

than the selection of the Broker of Record. Margiotta him-

self testified that on one occasion he was directly involved

in discussions concerning efforts to obtain insurance for

the Nassau County Coliseum and the Veterans Hospital,

and that he was consulted by Alphonse D’Amato, then

Presiding Supervisor of the Town of Hempstead, about

the possibility of adopting a self-insurance plan following

inquiries by the New York State Investigation Commis-

sion. Insurance brokers Dowler and Curran corroborated

this evidence of Margiotta’s dominance in municipal in-

surance activities. They stated that when they sought

the Town and County business, they undertook discussions

with Margiotta, not with the public officials. After Margi-

otta declined their offers, they did not appeal to the public

officials because, as broker Curran testified, “there was no

place else to go.” Margiotta’s version of these discussions

does not put the lie to the assertion he told Curran that

“in view of [William’s] party service I had no intention

of taking any insurance away from him.” Similarly, after

Richard B. Williams, the founder of the Williams Agency,

died in 1978, Margiotta testified that William’s son,

Richard A. Williams, approached him to ask whether the

death of his father would affect their insurance arrange-

ment. Margiotta stated that he would always “retain and

recommend” the Williams Agency as Broker of Record.

Moreover, Margiotta conceded that if the Williams Agency

ever refused to follow his instructions concerning the dis-

tribution of portions of the insurance commissions, he

would have convened a meeting of the Executive Commit-

tee of the Republican Party, and would have recommended

that the Williams Agency be replaced as the Broker of

Record.

The municipal insurance activities were not Margiotta’s

sole concern in participating in municipal government.

14a

Margiotta also played a substantial role in making hiring

and promotion decisions. Margiotta's activities as a de

facto Department of Personnel for Nassau County were

described at trial by Alfred G. Riehl, the program staffing

officer of Nassau County, and Donald Woolnough, the Re-

publican headquarters functionary who was Margiotta’s

administrative assistant. Mr. Riehl assumed his duties as

program staffing officer following a meeting with Margi-

otta, at which the appellant directed Riehl to see Donald

Woolnough. Riehl and Woolnough discussed the procedure

for handling requests for employment, promotions and

raises. In essence, Riehl was informed that whenever a

position not covered by applicable civil service regulations

became available, Riehl should notify Woolnough. Wool-

nough testified that he would “disseminate” those jobs

paying less than $15,000 to local Republican Party lead-

ers unless a number of jobs were made available at one

time, in which case Margiotta would instruct Woolnough

on which local political districts should receive the employ-

ment opportunities. According to both Woolnough and

Margiotta himself, while Woolnough would interview ap-

plicants for positions as clerks, electricians and other types

of laborers to be hired by the municipal government, Mar-

giotta would interview individuals who were applying for

the higher level positions, such as candidates for County or

Town Attorneys and department heads. Riehl testified

that he contacted Woolnough on all cases involving hiring,

requests for promotions, and salary increases in excess of

$1,500. Woolnough stated that he would convey the in-

formation to Margiotta, who would often direct him to

check with the local leader. Margiotta would also person-

ally approve or disapprove promotions and salary increases

for Nassau County positions. According to Woolnough,

Margiotta’s approval would be based upon the individual’s

“political activity.” If a request for a raise or promotion

was denied, Riehl would simply inform the appropriate

department head of the decision, but would not proffer any

reasons for the denial.

15a

Margiotta played a similar role in the government of

the Town of Hempstead. Muriel DeLac, the Director of

Personnel for the Town of Hempstead stated that she fol-

lowed the “unvarying practice“ of seeking approval of

raises and promotions concerning positions with the Town

of Hempstead by forwarding a request to Donald Wool-

nough at the Republican Committee. The requests would be

returned with the notations, “approved” or “denied.” Ac-

cording to Ms. DeLac, the only individuals approved for

hiring were those referred by the leaders of the Republi-

can Party. One of Woolnough’s responsibilities was to

obtain lists from Nassau County and the Town of Hemp-

stead showing the names of all employees and the salary

they earned. Armed with this information, Margiotta and

his associates would study the relationship between the

amount of money earned by an individual and the amount

of money contributed to the Republican Party before ap-

proving or denying a request for a raise or promotion.”

In short, Margiotta’s role in the affairs of Nassau County

and the Town of Hempstead may be summarized in the

words of Donald Woolnough: “everything went through

his hands.”

According to the Government, Margiotta converted this

control over the governments of Town and County into a

16 According to Andrew Parise, the Chief Executive Assistant

to the Presiding Supervisor of the Town of Hempstead, it was com-

mon knowledge” that an employee was expected to contribute one

percent of his salary to the Republican Party. This expectation was

enforced by the Party’s control of the process governing raises and

promotions. At the first trial the district judge had precluded the

Government from describing the one percent system in detail on

the ground that its probative value was exceeded by its prejudicial

impact. As noted at page ——, after declaring a mistrial, Judge

Sifton stated in an order that he would follow this evidentiary

ruling at the second trial. On hearing the Government’s appeal from

this order, this Court affirmed on the ground that Judge Sifton acted

well within his discretion in balancing the probative value and

prejudicial impact. United States v. Margiotta, supra, 662 F.2d

at 142.

16a

scheme to defraud relating to the municipal insurance

activities. The tale of Margiotta’s allegedly corrupt agree-

ment was recounted at trial by Richard A. Williams, son

of Richard B. Williams, the founder of the Williams

Agency and close political associate of Margiotta. In 1968

Williams accompanied his father to a meeting attended by

Margiotta and Mortimer Weis. The younger Williams

waited outside the meeting room. Later, Williams was

advised by his father that the Williams Agency would be

named Broker of Record for the Town of Hempstead and

that the Agency had agreed to split its commissions on a

“50-50 basis.” Margiotta has conceded that this meeting

was held. Moreover, the testimony of Williams that his

father had agreed to set aside 50% of his commissions

was corroborated by documents prepared by Williams and

his father in 1969. These documents specified the amounts

of commissions the Williams Agency had received, and

showed, under a column labeled “50% of commissions,”

that the funds had been divided in half. The younger

Williams testified that his father had a conversation with

Margiotta prior to the appointment of the Williams

Agency as Broker of Record for Nassau County. The

Williams Agency continued to set aside 50% of the com-

missions it earned on Nassau County properties for distri-

bution to Margiotta’s political allies,

Through his control over the appointment process and

other aspects of municipal government, Margiotta had

thus generated a “slush fund,” the proceeds of which could

be distributed to purchase party loyalty, to assist friends,

or, for purposes he designated, in his words, “whenever

the spirit moved [him].” For example, attorney William

Cahn, a former district attorney for Nassau County, was

“retained” by the Williams Agency at a fee of $2,000

per month beginning in January, 1975 after Margiotta

asked whether the Williams Agency could “see its way

clear to retain [Cahn].” The Williams Agency paid Wil-

liam Cahn $24,000 per year in 1975 and 1976, and con-

17a

tinued to pay $2,000 per month in 1977. In April, 1977,

the Agency began making the payments to Cahn’s son,

Neil, after William Cahn told Margiotta that he wanted

his son to receive the money. The Williams Agency de-

ducted the payments to the Cahns from the amount allo-

cated from the commissioners earned by placing insurance

on Nassau County properties. Neither William nor Neil

Cahn rendered any legal services on behalf of the Williams

Agency.

Another beneficiary of the insurance scheme was

Michael D’Auria, a former State Supreme Court Justice

who was ultimately disbarred. Following Margiotta’s ap-

proval, the Williams Agency made a series of payments

totalling approximately $16,000 between 1971 and 1975 to

D’Auria, who did no compensable legal work. Moreover,

John Sutter, a Nassau County criminal lawyer, received

payments derived from the insurance proceeds. Sutter

represented Williams and several others, including Margi-

otta, William Cahn, Nassau County Executive Purcell,

New York State Assemblyman Joseph Reilly, and Deputy

Nassau County Executive Henry Dwyer, following in-

quiries by the New York State Investigation Commission

and a grand jury into state insurance practices in 1977.

Sutter never billed Margiotta or any of the other clients

except the Williams Agency and Nassau County. More-

over, it appears that Sutter billed the Williams Agency

for work incurred in representing one John Hansen in an

unrelated state criminal matter, pursuant to instructions

from Margiotta. Furthermore, the Government presented

evidence that Margiotta had arranged for a payment of

$5,000 to himself. Robert Dowler testified that Margiotta

and Dowler agreed to split a payment of $10,000 made by

the Williams Agency to Dowler.

To support its theory that the insurance arrangement

was a scheme to defraud rather than a good faith patron-

18a

age practice, the Government sought to prove that Margi-

otta tried to conceal the practice by directing the prepara-

tion of falsified property inspection reports by recipients

of the kickback payments who did no meaningful work.

According to the younger Williams, Margiotta convened a

meeting with Williams in 1975, responding to the growing

concern that the public exposure of the insurance activities

would cause embarrassment to the Republican Party. As

a result, from 1975 to 1978, the insurance broke who

received portions of the commissions earned by the Wil-

liams Agency were directed to make useless inspections of

properties and to write unnecessary reports. Thus, it was

made to appear that the recipients of the insurance pro-

ceeds were legitimately earning their commissions. In

addition, the Government presented evidence showing that

Margiotta attempted to disguise the insurance parties by

misleading the State Investigation Commission when it

inquired into the propriety of the insurance scheme in

1977 and 1978. Many of the recipients of the kickbacks,

represented by a group of attorneys whose fees were paid

by the Nassau County Republican Committee, misrepre-

sented to the Commission the reason they were receiving

the payments. The witnesses stated that they worked and

performed services for the money they received. Margi-

otta himself testified that his conversation with Williams

concerning the sharing of commissions in 1971 was moti-

vated in part by the workload facing the brokers.

At trial, Margiotta maintained that, although he recom-

mended the designation of the Williams Agency as Broker

of Record and expected the Agency to continue the in-

surance patronage system, his recommendation was not

made contingent upon a secret agreement to split the com-

missions on a “50-50 basis.” Margiotta asserted that his

practice of commission sharing among brokers was a good

faith continuation of a long-standing and widely-known

political patronage arrangement in New York. Margiotta

argued that until 1978, no New York law prohibited the

19a

sharing of municipal commissions among non-working

brokers.“ He emphasized that the insurance patronage

scheme was discontinued after Governor Carey proposed a

new State regulation requiring the performance of services

by brokers receiving commissions. John F. English,

former Nassau County Chairman of the Democratic

Party, Palmer Farrington, past Presiding Supervisor of

the Town of Hempstead, testified that the distribution of

insurance commissions on municipal properties to non-

working brokers was a patronage system practiced by

both Democrats and Republicans in the County for dec-

ades. Margiotta further asserted that he was not re-

sponsible for the preparation of fictitious property inspec-

tion reports, and that he did not lie to the State Investi-

gation Commission. After deliberating for several days,

the jury empanelled for his second trial convicted

Margiotta of mail fraud and five counts of extortion.

We have set forth at some length the factual contentions

of the Government and Margiotta so that the points

raised on appeal may be considered against the back-

ground of the bitterly contested trial.

On appeal, Margiotta raises a cluster of arguments in

support of his claims that his mail fraud and Hobbs Act

convictions should be reversed and indictment dismissed.

Moreover, he asserts that the trial court erred by ad-

mitting into evidence Richard A. Williams’s account of

his father’s alleged agreement with Margiotta. We turn

sow to the merits of Margiotta’s claims.

17 Moreover, Margiotta has called attention to an informal opinion

rendered in 1943 by the General Counsel of the State Insurance

Department concluding that a municipality could require a broker

who placed municipal insurance to share his commissions with other

brokers in the community. In response, the Government has noted

a 1950 Insurance Department memorandum stating that commission

sharing was desirable “in order to avoid political or other kinds of

favoritism.”

20a

II. Mail Fraud

Margiotta asserts that his conviction of mai] fraud

(Count One) must be reversed and the indictment dis-

missed on the grounds that the federal mail fraud statute,

18 U.S.C. § 1841 (1976), does not embrace a theory of

fiduciary fraud by private participants in the political

process, and that Margiotta owed no fiduciary duty to the

general citizenry of Nassau County or the Town of Hemp-

stead upon which a mail fraud offense could be based.

Count One alleged that Margiotta devised a scheme to de-

fraud Nassau County and the Town of Hempstead, New

York State, and the citizens of these jurisdictions, (1) of

the right to have the affairs of those entities conducted

honestly, free from corruption, fraud and dishonesty, and

(2) of the honest and faithful participation of Margiotta

in the governmental affairs of those entities. The basic

factual underlying Count One was the allegation that

Margiotta, who participated extensively in the selection

of public officeholders in Hempstead and Nassau County,

had entered into a secret agreement pursuant to which

the Williams Agency was designated Broker of Record on

the understanding that the Agency would kick back a

substantial portion of its commissions in accordance with

Margiotta’s instructions. Margiotta argues that an al-

leged deprivation of an “intangible right” to a defendant’s

honest and faithful services forms a predicate for a fed-

eral mail fraud violation only where the defendant shares

a fiduciary relationship with the putative victim. Assert-

ing that a fiduciary duty to the general citizenry requir-

ing honest and faithful participation in governmental af-

fairs has been recognized only in cases involving de-

fendants who are public officials, Margiotta concludes that

the novel application of the mail fraud statute on an

“intangible rights” theory to a non-office holder such ar

Margiotta represents an untenable and improper exten-

sion of the mail fraud statute beyond its permissible

bounds.

21a

In construing the elements of the mail fraud statute

in this case of first impression, we tread most cautiously.

As we have noted in another context, see United States v.

Barta, 635 F.2d 999, 1005-06 (2d Cir. 1980), cert. denied,

450 U.S. 998, 101 S.Ct. 1708, 68 L.Ed.2d 199 (1981),

1341 is seemingly limitless on its face. We are not un-

aware of the time-honored tenet of statutory construction

that ambiguous laws which impose penal sanctions are to

be strictly construed against the Government. /d. at 1001.

See also United States v. Wiltberger, 18 U.S. (5 Wheat.)

76, 5 L.Ed. 37 (1820). Concomitantly, it is indisputable

that there are situations in which the legislature has in-

tended to define broadly the scope of criminal liability.

Our task today is complicated because the broad provi-

sions of the mail fraud statute have been applied in a

context implicating two conflicting sets of values, both of

which merit stringent protections. On the one hand, the

prosecution under § 1341 of those who simply participate

in the affairs of government in an insubstantial way, or

exercise influence in the policymaking process, poses the

danger of sweeping within the ambit of the Nail fraud

statute conduct, such as lobbying and party association,

which has been deemed central to the functioning of our

democratic system since at least the days of Andrew

Jackson. On the other hand, an unduly restrictive reading

of § 1341, leading to the formulation of a rule that pre-

cludes, as a matter of law, a finding that a person who

does not hold public office owes a fiduciary duty to the

citizenry, regardless of that individual’s de facto control

of the processes of government, eliminates a potential

safeguard of the public’s interest in honest and efficient

government. While we conclude that there are limitations

on the application of the mail fraud statute to violations

of the intangible right to “good government,” we believe

that the statute reaches the conduct evidenced by the

appellant in this case.

22a

A. The applicability of the mail fraud statute.

Margiotta argues that the mail fraud statute cannot,

as a matter of law, embrace a theory of fiduciary fraud

by private participants in the political process. Specifi-

cally, he emphasizes that although § 1341 has been applied

to fiduciaries in both the public and private sectors, the

fiduciary duty associated with the public’s intangible

right to an individual’s honest and faithful participation

in governmental affairs has been accepted only where the

defendant is a public official. See, e.g., United States v.

Mandel, 591 F.2d 1847, 1358 (4th Cir.), aff'd en bane in

relevant part, 602 F.2d 653 (1979), cert. denied, 445 U.S.

961, 100 S.Ct. 1647, 64 L.Ed.2d 236 (1980); United

States v. Brown, 540 F.2d 364, 374 (8th Cir. 1976). We

reject Margiotta’s claim. In the private sector, it is now

a commonplace that a breach of fiduciary duty in viola-

tion of the mail fraud statute may be based on artifices

which do not deprive any person of money or other forms

of tangible property. See United States v. Barta, supra,

635 F.2d at 1005-06 (deprivation of employer’s right to

employee’s honest and faithful services); United States v.

Buckner, 108 F.2d 921 (2d Cir.), cert. denied, 309 U.S.

669, 60 S.Ct. 618, 84 L.Ed.2d 1016 (1940). Fraudulent

schemes designed to cause losses of an intangible nature

clearly come within the terms of the statute. See United

States v. Bronston, 658 F.2d 920 (2d Cir. 1981), cert.

denied, —— U.S. ——-, 102 S.Ct. 1769, 72 L.Ed.2d 174

(1982). A close reading of the statute supports this

result. Section 1341 prohibits “any scheme or artifice to

defraud, or for obtaining money or property by means of

false or fraudulent pretenses, representations or prom-

ises“ ** (emphasis added). Accordingly, the prohibition

against schemes or artifices to defraud is properly in-

terpreted to be independent of the clause “for obtaining

money or property.” See United States v. States, 488 F. 2d

761, 764 (8th Cir. 1973), cert. denied, 417 U.S. 909, 94

18 See note 4, supra,

28a

S.Ct. 2605, 41 L.Ed.2d 212 (1974). But see Comment,

The Intangible-Rights Doctrine and Political Corruption

Prosecutions Under the Federal Mail Fraud Statute, 47

U. Chi. L. Rev. 562 (1980) [hereinafter Comment —In-

tangible Rights“ ].

In the public sector, as the appellart correctly points

out, the mail fraud statute has been employed in prosecu-

tions of public officials who have allegedly deprived the

citizenry of such intangible rights as the right to good

government, or the right to the honest and loyal services

of its governmental officers. A number of courts have ap-

proved the prosecution of allegedly corrupt politicians who

did not deprive the citizens of anything of readily identi-

fiable economic value. See, e. g., United States v. Mandel,

supra; United States v. Keane, 522 F.2d 534 (7th Cir.

1975), cert. denied, 424 U.S, 976, 96 S.Ct. 1481, 47 L.Ed.

2d 746 (1976) ; United States v. States, supra. From these

cases, a basic principle may be distilled: a public official

may be prosecuted under 18 U.S.C. § 1841 when his alleged

scheme to defraud has as its sole object the deprivation of

intangible and abstract political and civil rights of the

general citizenry. The definition of fraud is thus con-

strued broadly to effectuate the statute’s fundamental

purpose in prohibiting the misuse of the mails to further

fraudulent enterprises of all kinds. See United States v.

States, supra, 488 F.2d at 764. See also Comment—ZJn-

tangible Rights, supra, at 564.

The instant case raises the novel issue whether an indi-

vidual who occupies no official public office but nonetheless

participates substantially in the operation of government

owes a fiduciary duty to the general citizenry not to

deprive it of certain intangible political rights that may

lay the basis for a mail fraud prosecution. In the private

sector cases, a formal employer-employee relationship is

not a prerequisite to a finding that a fiduciary duty is

owed. See, ¢.g., Oil & Gas Ventures—First 1958 Fund

Lid. v. Kung, 250 F.Supp. 744, 749 (S. D. N. V. 1966)

24a

(Weinfeld, J.) (fiduciary relation may be founded upon

dominance). Similarly, we do not believe that a formal

employment relationship, that is, public office, should be a

rigid prerequisite to a finding of fiduciary duty in the

public sector. Cf. United States v. Del Toro, 513 F.2d

656, 663 & n.4 (2d Cir.), cert. denied, 423 U.S. 826, 96

S.Ct. 41, 46 L.Ed.2d 42 (1975) (prosecution for conspiracy

to defraud the United States in violation of 18 U.S.C.

§ 371).

The drawing of standards in this area is a most difficult

enterprise. 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

public office owes a fiduciary duty to the general citizenry

even if he in fact is conducting the business of govern-

ment.

Although there is no precise litmus paper test, two time-

tested measures of fiduciary status are helpful: (1) a

reliance test, under which one may be a fiduciary when

others rely upon him because of a special relationship in

the government, and (2) a de facto control test, under

which a person who in fact makes governmental decisions

may be held to be a governmental fiduciary. See Coffee,

From Tort to Crime: Some Reflections on the Criminaliza-

tion of Fiduciary Breaches and the Problematic Line Be-

tween Law and Ethics, 19 Am.Crim.L.Rev. 117, 147

(1981) [hereinafter “Coffee, From Tort to Crime’);

Cheese Shop Int'l, Inc. v. Steele, 303 A.2d 689, 691 (Del.

Ch.), rev’d on other grounds, 311 A.2d 870 (Del.Supp.

25a

1973) ; Mobil Oil Corp. v. Rubenfeld, 72 Misc.2d 392, 399-

400, 339 N.Y.S.2d 623, 632 (Civ.Ct. 1972), aff'd, 77

Mise.2d 962, 357 N.Y.S.2d 589 (1974), rev’d on other

grounds, 48 A.D.2d 428, 370 N.Y.S.2d 943, 947 (2d Dep't.

1975), aff'd mem. 40 N.Y.2d 936, 390 N.Y.S.2d 57, 358

N.E.2d 882 (1976) ; In re Jennings Estate, 335 Mich. 241,

244, 55 N.W.2d 812, 813 (1952) (no fiduciary relation-

ship absent a showing of confidence, trust and reliance) ;

Trustees of Jesse Parke Williams Hospital v. Nisbet, 191

Ga. 821, 841, 14 S.E.2d 64, 76 (1941) (fiduciary status

based on position of dominance and control) ; Miranovitz

v. Gee, 163 Wis. 246, 249, 157 N.W. 790, 792 (1916)

(reliance on superior knowledge of fiduciary); see also

United States v. Mazzei, 521 F.2d 639 (3d. Cir.) (en

banc), cert. denied, 423 U.S. 1014, 96 S.Ct. 446, 46 L.Ed.

2d 385 (1975). These tests recognize the important dis-

tinction between party business and government affairs,

permitting a party official to act in accordance with parti-

san preferences or even whim, up to the point at which

he dominates government. Accordingly, the reliance and

de facto control tests carve out a safe harbor for the

party leader who merely exercizes a veto power over de-

cisions affecting his constituency. See Coffee, From Tort

to Crime, supra, at 147.

In light of these guidelines, the prosecution of Margi-

otta under the mail fraud statute was permissible, not-

withstanding the fact that the appellant held no official

public office. It cannot be gainsaid that Margiotta had a

stranglehold on the respective governments of Nassau

County and the Town of Hempstead. According to Don-

ald Woolnough, one of Margiotta’s principal assistants,

“everything went through his hands.” The evidence estab-

lished not only that he was responsible for the administra-

tion of the municipal insurance activities, but also that he

acted as a virtual Department of Personnel, with substan-

tial power over decisions concerning hiring, promotions

and salary increases. Others relied upon him for the

26a

rendering of important governmental decisions, and he

dominated governmental affairs as the de facto public

leader. As a result, the federal mail fraud statute prop-

erly supported a prosecution for Margiotta’s breach of at

least a minimum duty not to sell his substantial influence

and control over governmental processes.

Moreover, Judge Sifton’s charge to the jury was con-

sistent with the limitations we have delineated on the ap-

plication of the mail fraud statute to participants in the

political process who hold no public office. Judge Sifton did

not simply instruct that the jury could find that Margiotta

owed a fiduciary duty if he participated or had influence

in Nassau County and the Town of Hempstead. Instead,

the trial court charged that the jury should determine

whether Margiotta’s work “was in substantial part the

business of Government, rather than being solely party

business and that his performance of that work was in-

tended by him and relied on by others in Government as

part of the business of Government This charge

was harmonious with the guidelines we have articulated

today, and ensured that the jury’s consideration of the

mail fraud count was properly channelled. Cf. Penato v.

George, 52 A.D.2d 939, 942, 383 N.Y.S. 2d 900 (2d Dep’t

1976) (reliance is an important factor in determining

existence of fiduciary relationship), appeal dismissed, 42

N.Y.2d 908, 397 N.Y.S.2d 1004, 366 N.E.2d 1358 (1977);

Ahern v. Board of Supervisors of Suffolk County, 17

Mise.2d 164, 171, 184 N.Y.S.2d 894 rev’d on other

grounds, 7 A.D.2d 538, 185 N.Y.S.2d 669 (2d Dep’t 1959)

(Party chairman participates in governmental function

when nominating Commissioner of Elections).

Margiotta’s argument that the legislative history does

not support the application of the mail fraud statute to

private participants in the political process, regardless of

the extent to which they dominate the affairs of govern-

ment, is unavailing. While the mail fraud statute, origi-

nally enacted as § 301 of the Act of June 8, 1872, ch. 335,

27a

17 Stat. 283, 323, resulted from a recommendation of a

committee of postal officials for legislation “to prevent the

frauds which are perpetrated by lottery swindlers through

the mails,” '® § 1841 has never been limited to this narrow

purpose. See Coffee, From Tort to Crime, supra, at 123.

Yet no legislative history exists to suggest that Congress

has intended the mail fraud statute to deal only with

schemes to defraud involving money or property, see

United States v. States, supra, 488 F.2d at 764, let alone

to be subject to a hard-and-fast distinction between pub-

lic officeholders and dominant non-public officeholders in

cases involving intangible political rights. Accordingly,

our construction of § 1341 furthers the basic purpose of

the statute in proscribing the use of the mails to promote

fraudulent enterprises. See Durland v. United States, 161

U.S. 306, 16 S.Ct. 508, 40 L.Ed. 709 (1896). See gen-

erally Intent, Clear Statements, and the Common Law;

Statutory Interpretation in the Supreme Court, 95 Harv.

L. Rev. 892, 893 (1982) (instrumental approach is one

technique of statutory interpretation).

Furthermore, Margiotta’s prosecution does not exceed

the permissible bounds of the statutory language. More

than five decades ago, the Supreme Court stated that the

phrase “scheme to defraud” extends to “a great variety

of transactions.” Fasulo v. United States, 272 U.S. 620,

629, 47 S.Ct. 200, 202, 71 L.Ed. 443 (1926). In his brief,

appellant has conceded that a deprivation of an intangible

right to a defendant’s honest and faithful services properly

forms the basis for a mail fraud violation where the de-

fendant owes a fiduciary duty to the alleged victim. As a

result, while the question remains whether Margiotta

owed a fiduciary duty to the general citizenry of the

Town of Hempstead and Nassau County, there is no merit

19 Report of the Committee of Post Office Officials, 19-20 (March

30, 1870). See Comment, The Intangible Rights Doctrine and

Political-Corruption Prosecutions Under the Federal Mail Fraud

Statute, 47 U.Chi.L.Rev. 562, 567-68 (1980).

28a

to Margiotta’s claim that the language of the federal mail

fraud statute cannot embrace a theory of fiduciary fraud

by one, like the appellant, who has de facto control over

the process of government and is relied upon by others in

the rendering of essential governmental decisions.

B. Fiduciary Duty.

Margiotta argues that, even assuming the applicability

of the statute to his role in the insurance scheme, he owed

no fiduciary duty to the general citizenry under federal or

state law upon which a mail fraud violation could be predi-

cated. At the outset, we reject his contention 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 using the mails in furtherance of a scheme to

defraud on the basis of a breach of a fiduciary duty to the

citizenry. The mail fraud statute was enacted to prohibit

the use of the mails for promoting schemes deemed con-

trary to federal public policy. Early in the history of

§ 1341’s interpretation, the Supreme Court stated that

“Congress may forbid any such act done in furtherance

of a scheme that it regards as contrary to public policy,

whether it can forbid the scheme or not,” since “(t]he

overt act of putting a letter into the post office of the

United States is a matter that Congress may regulate.”

Badders v. United States, 240 U.S. 391, 398, 36 S.Ct. 367,

368, 60 L.Ed. 706 (1916). Accordingly, a violation of

local law is not an essential element of a scheme to de-

fraud in contravention of 18 U.S.C. § 1841. See, e. g.,

United States v. States, supra, 488 F.2d at 767; United

States v. Mandel, 591 F.2d at 1362. This principle

applies to the question of fiduciary duty as well. In

United States v. Barta, supra, 635 F.2d at 1007, we

stated that an employee’s duty to disclose material in-

formation to his employer need not be imposed by state

or federal statute. Rather, the duty not to conceal, and

in fact to reveal, material information could be deemed to

arise from the employment relationship itself. Id. Sve

generally United States v. Bush, 522 F.2d 641, 646 n.6

29a

(7th Cir. 1975) (a conviction for mail fraud is not de-

pendent upon a violation of state law), cert. denied, 424

U.S. 977, 96 S.Ct. 1484, 47 L.Ed.2d 748 (1976). But ef.

Santa Fe Industries, Inc. v. Green, 430 U.S. 462, 479-80,

97 S.Ct. 1292, 1804, 51 L.Ed.2d 480 (1977) (“There may

well be a need for uniform federal fiduciary standards...

[blut those standards should not be supplied by judicial

extension of § 10b and Rule 10b-5 [of the federal securi-

ties acts] ....”). Similarly, we need not examine state

law to determine whether Margiotta’s relationship of

dominance in municipal government gives rise to certain

minimum duties to the general citizenry. Justice Holmes

once wrote that “[m]en must turn square corners when

they deal with the Government.” Rock Island, A. & L. R.

Co. v. United States, 254 U.S. 141, 148, 41 S.Ct. 55, 56, 65

L.Ed. 188 (1920). It requires little imaginative leap to

conclude that individuals who in reality or effect are the

government owe a fiduciary duty to the citizenry. More-

over such a conclusion merely construes the elements of a

mail fraud violation and does not contravene the principle

that there is no “federal common law of crimes.” Parratt

v. Taylor, 451 U.S. 527, 531, 101 S.Ct. 1908, 1910, 68

L.Ed.2d 420 (1981).

Theoretically, the application of the federal mail fraud

statute to state and local political participants without

reference to state law principles of fiduciary duty raises

federalism concerns. Indeed, Margiotta has argued that

if New York State does not require individuals who are

not public officeholders to act in a disinterested manner,

a federal court’s application of such a requirement consti-

tutes an improper intrusion into the governmental affairs

of New York State, as well as the county and local govern-

ments. See generally National League of Cities v. Usery,

426 U.S. 833, 96 S.Ct. 2465, 49 L.Ed.2d 245 (1976). We

need not reconcile the principles of federalism with the

mandate of the mail fraud statute because Margiotta

owed a fiduciary duty to the citizenry of Hempstead and

Nassau County under New York law.

30a

It has been held in the New York courts that “[t]he

county committee [of the Republican Party] and its chair-

man are... trustees of party interests for the registered

voters of the party in that county.” In re Application of

Roosevelt, 9 Misc.2d 205, 160 N.Y.S.2d 747, 749-750

(Sup. Ct.), aff'd, 3 A.D. 988, 163 N.Y.S.2d 403 (Ist Dep’t

1957), aff'd, 4 N. V. 2d 19, 171 N. V. S. 2d 841, 148 N. E. 2d

895 (1958). The primary function of the Republican

Party Committees is “the promotion of Republican candi-

dates and policies.. Seergy v. Kings County Republi-

can County Committee, 459 F. 2d 308, 310 (2d Cir. 1972).

Margiotta argues that his fiduciary duty to the Republican

Party, which arises from his position as a party officer,

would be impaired by a finding of a fiduciary duty to the

citizenry requiring disinterested conduct. But while his

party position may have been the springboard to control

of the municipal governments, it is his participation in

government, not his party position, which creates his

fiduciary duty to the citizens. New York law clearly dis-

tinguishes between “public officers” and “party officers.”

See People ex rel. McMahon v. Clampitt, 34 Misc.2d 766,

767, 222 N.Y.S.2d 23, 25 (Ct.Spec.Sess. City of New

York 1961). The cases cited by Margiotta do not involve

the question whether dominance over the affairs of govern-

ment by an individual who is a party officer may create

a fiduciary duty to the citizenry with respect to those

affairs. In concluding that effective control over the proc-

esses of government may transform a mere party func-

tionary into a public fiduciary under New York law, we

are directed to § 3-502(2) of the New York Election Law.

Under this section, the Chairman of the Nassau County

Democratic and Republican Committees are given the au-

thority to nominate a Commissioner of the Nassau County

Board of Elections. In construing this section, one New

York court has concluded that since, in making the nomi-

nation, the County Chairman participates in a govern-

mental function, he is “to that extent a governmental

officer and is subject to the same mandatory power of this

31a

court when he fails to perform a duty imposed upon him

by law.“ Ahern v. Board of Supervisors of Suffolk County,

supra, 17 Misc.2d at 171, 184 N.Y.S.2d at 901. Accord-

ingly, New York law supports the position that a party

officer, who owes a duty to his party and its followers,

may owe certain minimum duties to the public as well,

as a result of the other obligations he assumes.

While Cardozo described the standard of behavior gov-

erning a fiduciary as “the punctilio of an honor the most

sensitive,” Meinhard v. Salmon, 249 N.Y. 458, 464, 164

N.E. 545, 546 (1928), such rhetoric does not assist in

determining when a fiduciary duty arises. Judge Sifton,

in his charge to the jury on the nature of the participa-

tion the jury had to find in deciding whether Margiotta

had a special duty to disclose the corrupt agreement,

adopted a standard consistent with two measures of

fiduciary duty recognized under New York law. As noted

above, the district court instructed the jury that it must

determine whether the work done by Margiotta was “in

substantial part the business of government, rather than

being solely party business and that his performance of

that work was intended by him and relied on by others in

Government as part of the business of Government.” This

instruction reflects the concepts of reliance, and de facto

control and dominance, which are at the heart of the

fiduciary relationship. See, e. g., Penato v. George, supra,

52 A.D.2d at 942, 383 N.Y.S.2d at 904-05; Mobil Oil

Corp. v. Rubenfeld, supra, 72 Misc.2d at 399-400, 399

N.Y.S.2d at 632; Ahern v. Board of Supervisors of Suffolk

County, supra. See generally Coffee, From Tort to Crime,

supra, at 147. Accordingly, the jury could properly find

that Margiotta owed a special duty to the electorate under

New York law.”

2° Moreover, the Government has contended that a fiduciary duty

was created by New York Election Law § 17-158 (McKinney 1978),

which proscribes the payment or receipt of valuable consideration

in connection with “any nomination or appointment for any public

32a

Moreover, these instructions did not differ to an im-

permissible extent from the prosecution’s “theory” charged

in the indictment, in violation of the Fifth Amendment

principle mandating reversal when the grand jury indicts

on one theory, and the petit jury convicts on another. See,

e.g., Stirone v. United States, 361 U.S. 212, 80 S.Ct. 270,

4 L.Ed2d 252 (1960). The Government’s theory in the

indictment, encapsulated in the two prongs of the charg-

ing paragraph, was that a finding of Margiotta’s guilt

could be predicated on his entering into an agreement

which defrauded Nassau County and the Town of Hemp-

stead of the right to have their affairs administered

honestly. In response to the defendant’s motion to dismiss,

the Government contended that an individual who know-

ingly and in fact undertakes the business of governing a

particular jurisdiction owes a duty of loyalty to the citi-

zens just as does one who is formally elected to public

office. As noted above, Judge Sifton did not simply charge

that mere participation in government, in the form of

consultation or recommendations concerning appointments

or salary increases, was sufficient to create such a fiduci-

office or place,” and by New York Penal Law § 200.50 (McKinney

1975), which makes it unlawful for a public official or party leader

to solicit or accept money in connection with nominations or appoint-

ments to “public office.” Judge Sifton concluded that the position

of Broker of Record for the Town of Hempstead and the County of

Nassau is not a “public office” or “place” within the meaning of

the New York statutes, and excluded evidence that Margiotta’s con-

duct violated these statutes. On appeal by the Government prior to

the second trial, we held that even if the position of Broker of

Record for the Town of Hempstead or Nassau County were a “public

office or place,” Judge Sifton acted well within his discretion in con-

cluding that the probative value of the evidence was outweighed

by the danger of unfair prejudice and confusion of the issues.

United States v. Margiotta, supra, 662 F.2d at 143. On this appeal,

we decline to hold that Judge Sifton erred in concluding that the

Broker of Record is not a “public office or place,” but note that

even if the Broker does not meet the definition of that phrase,

these statutes provide analogous authority for a finding of fiduciary

duty.

33a

ary duty. Instead, he charged that the jury had to find

that the work done by [Margiotta] was in substantial

part the business of Government rather than being solely

party business and that the performance of that work

was intended by him and relied on by others in Govern-

ment as part of the business of Government in order

to carry forward its affairs as a whole.” This charge

did not depart from the Government’s “theory of the

case.” Indeed, having been put on notice by Judge

Sifton prior to the second trial that the district court in-

tended to charge as it did, Margiotta raised no objection

that he would be tried on a theory never presented to the

grand jury.” See United States v. Garguilo, 554 F.2d 59

(2d Cir. 1977). Since Judge Sifton’s charge to the jury

did not permit conviction “upon theories and evidence that

were not fairly embraced in the charges made in the

indictment,” id. at 63, Margiotta did not suffer any

prejudicial variance warranting reversal.”

21We note that the Government did raise objections to the

propriety of the charge on a number of other grounds.

22 Margiotta raises an additional variance objection to Judge

Sifton’s jury instructions relating to Count One in which the jury

was charged that if the Williams Agency were found to be a

fiduciary based on its “participation in Governmental! affairs” and

if Margiotta had been a co-schemer with Williams in the breach of

that duty, Margiotta could be convicted of mail fraud as a result

of the non-disclosure of the corrupt agreement. We do not believe

this instruction subjected Margiotta to any prejudicial variance.

See United States v. Garguilo, 554 F.2d 59, 63 (2d Cir. 1977). The

charging paragraph of Count One detailed the participation of

others, including the Williams Agency, in the fraudulent scheme

to which Margiotta was a party in breach of a fiduciary duty to

the citizenry. Moreover, Count One specifically referred to 18

U.S.C. §2. While the Government principally focused on Ralph

Caso in attempting to prove liability pursuant to 18 U.S.C. § 2, the

Government throughout the trial emphasized the role of the Williams

Agency in municipal insurance affairs. Accordingly, aiding and

abetting of others, such as the, Williams Agency, to breach a

fiduciary duty owed by them to the public was a separate basis on

which the charges in Count One could properly have been sub-

34a

C. Sufficiency of the evidence of fiduciary duty.

Margiotta argues that the evidence was insufficient to

support a finding of fiduciary duty to disclose his secret

agreement to the public even under the trial court’s in-

structions to the jury. His claim that the Government did

not present sufficient evidence that he assumed govern-

mental functions concerning municipal insurance affairs

is plainly without merit. While one author has stated that

those who “govern most make the least noise,“ the

Government introduced ample evidence that Margiotta

was deeply involved in governmental affairs. The detailed

proof adduced at trial reveals more than a limited role

in giving political clearance for certain high-level appoint-

ments, such as County or Town attorneys and deputy de-

partment heads. Indeed, the evidence, including the testi-

mony of Margiotta himself, supports a reasonable in-

ference that Margiotta dominated the administration of

several basic governmental functions, including the mu-

nicipal insurance activities and the selection of individuals

to fill positions in government. As Donald Woolnough, one

of Margiotta’s principal assistants, testified, everything

relating to hiring, salaries and promotions “went through

his hands.” Moreover, the testimony of Margiotta and the

insurance brokers demonstrates that Margiotta wielded

similar power with respect to the selection of the Broker

of Record and the distribution of insurance commissions to

mitted to the jury. Furthermore, a finding that the Williams

Agency breached a fiduciary duty owed to the public as a result

of an undisclosed corrupt agreement with Margiotta has support

in the law, since the Broker for Nassau County and the Town of

Hempstead, like any broker, is an agent of his principal, in this

case the municipalities, see Bohlinger v. Zanger, 306 N.Y. 228,

231, 117 N.E.2d 338, 339 (1954); New York Insurance Law

§ 111(2) (McKinney 1981 Supp.), and owes a duty of loyalty and

good faith to this principal, including an obligation to exercise good

faith and reasonable diligence in procuring insurance on the best

terms he can. See generally 29 N. V. Jur., Insurance § 468.

20 J. Selden, Table-Talk: Power-State.

85a

political allies. Williams met with Margiotta to arrange

for the designation of the Williams Agency as Broker of

Record. Insurance brokers approached Margiotta, not the

individuals who officially held public office, to seek the

municipal insurance business. From the selection of the

Broker of Record, to such matters as obtaining insurance

for particular municipal facilities and approving an al-

teration in the methods of obtaining insurance, as well

as designation of the recipients of the insurance commis-

sions generated on municipal properties, it was reasonable

to infer that Margiotta undertook the business of govern-

ment in administering the insurance and other affairs of

Hempstead and Nassau County.

Furthermore, Margiotta claims that the evidence was

insufficient to prove that he made any “impartial” under-

taking that could lay the basis for a breach of fiduciary

duty. Admitting that he always acted in a strictly parti-

san political role, and that his sole responsibility was to

promote the election of Republican candidates and the

health of the Republican Party, Margiotta asserts that

there was a complete failure of proof to show that in

recommending the Williams Agency as the Broker of

Record, he made any representation that nis decision was

distinterested, impartial, or the result of a determination

based on merit. This argument is misdirected. The breach

of fiduciary duty on which his mail fraud prosecution has

been predicated is not his failure to make decisions on the

basis of merit, or on any misrepresentation or omission

concerning his partiality. Rather, the crux of Margiotta’s

impropriety is the secret scheme, pursuant to which his

recommendation of the Williams Agency was made on the

understanding that the Agency would kick back a portion

of its compensation to Margiotta’s political allies. Ample

evidence, including the testimony of Richard A. Williams

and Margiotta himself, supports the Government’s con-

tention that this secret deal was struck and followed over

the course of several years.

86a

Finally, Margiotta argues that even if it could be found

that he was a fiduciary and this arrangement with the

Williams Agency existed, the evidence did not establish

that he had an affirmative duty to disclose information to

County or Town officials concerning the basis for his

recommendation of the Agency as Broker of Record. The

district court instructed the jury that in order to decide

that Margiotta breached his fiduciary duty, it had to find

that Margiotta had concealed “from those in Government

who rely on his participation” material information con-

cerning his entry into a corrupt agreement “to influence

him in the performance of his governmental functions.”

It is undisputed that a defendant’s breach of a fiduciary

duty may be a predicate for a violation of the mail fraud

statute where the breach entails the violation of a duty

to disclose material information. See, e.g., United States

v. Newman, 664 F.2d 12 (2d Cir. 1981) ; United States v.

Barta, supra, 635 F.2d at 1006; United States v. Bush,

supra, 522 F.2d at 648 (city employee could be convicted

of mail fraud for depriving city and its citizens of his

honest and faithful services when such deprivation is com-

bined with material misrepresentations and active conceal-

ment). An affirmative duty of disclosure need not be

explicitly imposed, but may be implicit in the relationship

between the parties. In Barta, this Court stressed that an

employee’s duty to disclose material information to his

employer need not be the creation of a state or federal

statute. On the contrary, the employment relationship

itself may give rise to an obligation on the part of an

employee not to conceal, and in fact to reveal information

material to his employer’s business. United States v.

Barta, supra, at 1007. See also United States v. Bush,

supra.

In this case, an affirmative duty to disclose could reason-

ably be inferred from the de facto employer-employee re-

lationship Margiotta enjoyed with the municipal govern-

ment. Margiotta regularly participated in the selection

87a

of persons for public positions in Nassau County. Hav-

ing undertaken basic functions of government, he owed at

least a duty to disclose material information or give notice

of lus conflict of interest to those in the government who

relied upon him, just as an employee, under Barta, may

owe his employer a duty to disclose materia] information.

In addition to the evidence of non-disclosure of Margi-

otta’s agreement with the Williams Agency, the Govern-

ment presented evidence that Margiotta failed to disclose

the corrupt arrangement during the State Investigation

Commission’s inquiries, during which he portrayed the

artifice as an ordinary patronage practice. As a result,

ample evidence supports a finding that Margiotta assumed

an affirmative duty of disclosure, and breached it by his

failure to disclose material information.

D. Alleged First and Fourteenth Amendment limitations

on the mail fraud conviction.

Margiotta argues that the trial court’s fiduciary doc-

trine impairs important rights of free expression and

association, as well as the right to petition government to

effect political or social change. He asserts that Judge

Sifton’s instructions apply to all persons influencing gov-

ernment. As a result, Margiotta argues, the trial court’s

construction of § 1341 brings within the statute’s ambit

“the entire spectrum of political participation” in govern-

mental affairs, and thus criminalizes a substantial amount

of constitutionally protected conduct. See Grayned v.

Rockford, 408 U.S. 104, 114-15, 92 S.Ct. 2294, 2302, 33

L.Ed.2d 222 (1972). Such overbroad regulation, Margi-

otta continues, carries the potential of significant chill

arising from the likelihood of criminal prosecution. See

Broadrick v. Oklahoma, 418 U.S. 601, 93 S.Ct. 2908, 37

L.Ed.2d 830 (1978). Furthermore, according to the ap-

pellant, requiring a political party or its chairman to act

as a “disinterested fiduciary” for the general citizenry

abridges the cherished right of freedom of political associ-

38a

ation. See Citizens Against Rent Control/Coalition for

Fair Housing v. Berkeley, 102 8.Ct. 434, 486 (1981).

Moreover, Margiotta alleges, the imposition of criminal

liability pursuant to the district court's fiduciary doctrine

eviscerates the right of petition by interfering with the

efforts of political party leaders freely to lobby govern-

ment officials on behalf of their supporters. See generally

United Mine Workers v. Pennington, 381 U.S. 657, 670,

85 S.Ct. 1585, 1593, 14 L.Ed.2d 626 (1965) (First

Amendment protects concerted efforts to influence public

officials).

If the indictment and prosecution of Margiotta for mail

fraud on the basis of his breach of fiduciary duty to the

citizenry meaningfully implicated First Amendment in-

terests, we would be loathe to approve such an applica-

tion of the mail fraud statute. One of the essential pur-

poses of the First Amendment is to protect the unfettered

discussion of governmental affairs, see Mills v. Alabama,

384 U.S, 214, 218-19, 86 S.Ct. 1434, 1436-37, 16 L.Ed.2d

484 (1966), and the activities of lobbyists and others who

seek to exercise influence in the political process are basic

in our democratic system. The First Amendment concerns

raised by Margiotta, however, are a chimera. Count One

of the indictment and the pertinent jury instructions do

not address mere participation in the political process or

protected conduct such as lobbying or party association.

Rather than resting on a generalized breach of duty to

render distinterested services on the part of one who par-

ticipates in the political process in some unspecified way,

the indictment and prosecution focused on whether Margi-

otta’s corrupt agreement breached a fiduciary duty which

Margiotta owed as a result of his significant role in the

governance of Hempstead and Nassau County. Since the

conduct charged in the Indictment was within the power

of the United States Government to proscribe and there

is no indication that the application of the mail fraud

statute in this specific case would deter protected political

activities in other contexts, the prosecution of Margiotta

under Count One did not violate the First Amendment.

See Broadrick v. Oklahoma, supra, 418 U.S. at 615, 93

S.Ct. at 2917. Moreover, there is simply no authority for

the proposition that a conviction should be reversed and

an indictment dismissed because the underlying “theory”

of the case may be misused in other situations and mis-

applied to constitutionally protected conduct.

En passant, in response to Margiotta’s contention that

other political leaders are in jeopardy of prosecution, we

believe his argument overlooks our narrow construction of

the mail fraud statute. The necessity of meeting our

restricted tests for the existence of a duty as a govern-

ment fiduciary on the part of those who technically hold

no public office precludes the use of § 1841 for draguet

prosecutions of party officials.

We need only briefly consider Margiotta’s argument

that the mail fraud statute is impermissibly vague both

on its face and as applied to the facts of this case, Sec-

tion 1841 has withstood repeated challenges which have

raised the claim that it does not provide fair notice and

warning of the conduct proscribed by the statute. See,

¢.g., United States v. Louderman, 576 F.2d 1383, 1388

(9th Cir.), cert, denied, 489 U.S. 896, 99 S.Ct. 257, 58

L.Ed.2d 248 (1978). The broad language of the statute,

intended by Congress to be sufficientiy flexible to cover the

wide range of fraudulent schemes mankind is capable of

devising, is not unconstitutionally vague because § 1341

contains the requirement that the defendant must have

acted willfully and with a specific intent to defraud. See

Screws v. United States, 325 U.S. 91, 101-02, 65 S.Ct.

1081, 1035-36, 89 L.Ed. 1495 (1945); United States v.

Manfredi, 488 F.2d 588, 602 (2d Cir. 1978), cert. denied

sub, nom., LaCosa v. United States, 417 U.S. 986, 94 8. Ct.

2651, 41 L.Ed.2d 240 (1974). Judge Sifton appropriately

charged the jury on this element of the offense. More-

over, Margiotta knew that the conduct reached was likely

40a

to be contrary to law, since he conceded at trial that a

corrupt agreement pursuant to which he recommended

the Williams Agency on the condition that the Agency

kick back fifty percent of its commissions could be illegal.

In light of the inclusion of payments to non-brokers in

the scheme, the application of the mail fraud statute to

his artifice should have come as no surprise, As a result,

although he may not have anticipated the precise legal

theory according to which the insurance ruse was deemed

fraudulent, Margiotta was given fair warning that his

activities could cause him to run afoul of the federal mail

fraud statute.

E. Material Information,

Margiotta argues that he did not fail to disclose ma-

terial information in violation of the mail fraud statute.

Since the violation of an affirmative duty to disclose ma-

terial information coupled with a breach of fiduciary duty

violates § 1841, see United States v. Newman, supra, 664

F.2d at 19; United States v. Barta, supra, 635 F.2d at

1006, Margiotta claims that his conviction must be re-

versed because the information concerning the insurance

scheme he allegedly failed to disclose was not material, for,

as he asserts, any broker would not and could not reduce

commissions, This assertion simply flies in the face of the

evidence, The Williams Agency obviously was willing to

work for less than the amount of the commissions paid by

the municipalities, since it was relinquishing portions of

the commissions as kickbacks to be distributed to Margi-

otta’s political allies. If responsible officials in the Town

and County had known of the secret deal, the conceal-

ment of which excluded potential bidders whose competi-

tion might have lowered the price to the public, the mu-

nicipalities could have derived significant savings. Since

the concealment of the insurance arrangement deprived

4la

the public of a potential * reduction in the costs of owning

property, the information withheld by Margiotta was ma-

terial, Accordingly, this case is unlike United States v.

Ballard, 663 F.2d 534, 542 (5th Cir. 1981), in which the

court decided that the information withheld by the alleged

“fiduciaries” was not material on the ground that “the

price paid would have been unaffected by. . . disclosure.”

Moreover, Margiotta’s reliance upon § 188 of the New

York Insurance Law is misplaced. That section prohibits

a broker from rebating any portion of his commission di-

rectly to the insured. New York Insurance Law § 188

(McKinney 1966). In this case, the issue is not whether

a broker would have rebated a part of his commission to

the insured, the municipality, but whether it was possible

that the responsible officials could have found a broker

who would have been willing to accept a lower commission.

On appeal, Margiotte has conceded that “a broker could

theoretically agree to accept a lower commission,” al-

though he emphasizes that a witness, one Alfred Jaffee,

testified at trial that a broker would not reduce its

premium rate for only one municipality within a particu-

lar rate classification. On cross-examination, Jaffee ad-

mitted that a broker’s commission could be reduced, and

Richard A. Williams himself testified that on a few oc-

casions, he reduced the commissions on policies written for

the Town of Hempstead or Nassau County. Accordingly,

the information concerning Margiotta’s special arrange-

ment appears to have been highly material.

Since all of Margiotta’s claims concerning the mail

fraud count are without merit, we affirm the judgment of

conviction of mail fraud in violation of 18 U.S.C. § 1341.

“There is no requirement that the public actually suffer a

tangible harm, see United States v. Barta, 635 F.2d 999, 1006

(2d Cir. 1980), cert. denied, 450 U.S. 998, 101 S.Ct. 1703, 68

L.Ed.2d 199 (1981); the prosecution need only prove that some

actual harm or injury was contemplated, see United States v. Dizon,

686 F.2d 1388, 1399 n.11 (2d Cir. 1976).

42a

III. Hobbs Act Convictions.

A. Extortion.

Margiotta argues that his conviction under Counts Two

through Six charging violations of the Hobbs Act, 18

U.S.C. § 1951, should be reversed and the indictment dis-

missed. Section 1951 proscribes various kinds of extor-

tionate interference with interstate commerce, and defines

“extortion” as “the obtaining of property from another,

with his consent, induced by wrongful use of actual or

threatened force, violence, fear, or under color of official

right.“ 18 U.S.C. § 1951 (b) (2) (1976). Margiotta was

charged with violating the Act by inducing the Williams

Agency to make payments by means of wrongful use of

“fear,” and alternatively “under color of official right.”

Judge Sifton instructed the jury that it could find Margi-

otta guilty if it decided that he had employed one of these

two methods. We find no error infecting Margiotta’s con-

viction on five counts of extortion.

B. Extortion “under color of official right.”

Extortion “under color of official right” is committed

when a public official makes wrongful use of his office to

obtain money not due him or his office. United States v.

French, 628 F. 2d 1069, 1072 (8th Cir.), cert. denied, 449

U.S. 956, 101 S.Ct. 364, 66 L.Ed.2d 221 (1980); United

States v. Trotta, 525 F.2d 1096, 1100 n.7 (2d Cir. 1975),

cert, denied, 425 U.S. 971, 96 S.Ct. 2167, 48 L.Ed.2d 794

(1976). The public officer’s misuse of his office supplies

the necessary element of coercion, and the wrongful use of

official power need not be accompanied by actual or

threatened force, violence, or fear. See United States v.

Mazzei, supra, 521 F.2d at 644. The district court con-

cluded that although Margiotta was not a public official,

he could be found guilty of extortion “under color of

22 right” pursuant to 18 U.S.C. § 2 (b), which pro-

43a

(b) Whoever willfully causes an act to be done

which if directly performed by him or another would

be an offense against the United States, is punishable

as a principal.

Judge Sifton charged the jury that if it determined “that

the defendant willfully and knowingly caused officials of

the Town of Hempstead and County of Nassau under

color of office to contribute in a substantial way to induc-

ing the Williams Agency to consent to pay out the moneys

. . . then the defendant is as responsible for the official

action as if he was himself the public official concerned

and had performed the action directly.”

Margiotta asserts that the district court erred in apply-

ing 18 U.S.C. § 2(b) to this case because it was not shown

that Margiotta had caused a public official to commit

extortion “under color of official right” in violation of the

Hobbs Act and because the trial court’s instructions were

improper. We disagree, and conclude that the require-

ments of 18 U.S.C. § 2(b) were met. This section is based

on the precept that an individual with the requisite crimi-

nal intent may be held liable as a principal if he is a cause

in fact in the commission of a crime, notwithstanding that

the proscribed conduct is achieved through the actions of

innocent intermediaries.” United States v. Kelner, 534

F.2d 1020, 1022 (2d Cir.), cert. denied, 429 U.S, 1022,

97 S.Ct. 639, 50 L.Ed.2d 623 (1976). See also United

States v. Giles, 300 U.S. 41, 48-49, 57 S.Ct. 340, 344, 81

L.Ed. 493 (1937). It is unnecessary that the intermediary

20 As a result, 18 U.S.C. §2(b) accomplishes a different result

irom that intended through 18 U.S.C. §2(a) (1976), which pro-

vides in pertinent part:

(a) Whoever commits an offense against the United States

or aids, abets, counsels, commands, induces or procures its

commission, is punishable as a principal.

One cannot aid and abet another to do an innocent act within the

meaning of § 2(a). See United States v. De Cavalcante, 440 F.2d

1264, 1268 (3rd Cir. 1971).

44a

who commits the act have a criminal intent. United

States v. Kelner, supra, 584 F.2d at 1023; United States v.

Bryan, 483 F.2d 88, 92 (8rd Cir. 1973) (en banc). In

causing the innocent intermediary te commit the chal-

lenged actions, the individual adopts both the intermedi-

ary’s act and his capacity. See, e.g., United States v.

Ruffin, 618 F. 2d 408, 415 (2d Cir. 1979) ; United States v.

Wiseman, 445 F.2d 792, 795 (2d Cir.), cert. denied, 404

U.S. 967, 92 S.Ct. 346, 30 L.Ed.2d 287 (1971). Section

2(b) has been broadly interpreted to cover not only the

voluntary acts of a defendant’s agents, but also involun-

tary conduct on the part of his victims. See United States

v. De Cavalcante, 440 F.2d 1264, 1268 (8rd Cir. 1971).

These principles are consistent with Congressional intent.

The House Report accompanying an earlier version of

2 (b) stated that one of the principal purposes of the

section was to eliminate any doubt that an individual

who “causes the commission of an indispensable element

of the offense by an innocent agent or instrumentality, is

guilty as a principal,” in accord with such judicial deci-

sions as United States v. Giles, supra. H. Rep. No. 304,

80th Cong., Ist Sess. 2448-49 (1949). See generally

United States v. Ruffin, supra, 613 F.2d at 412-16.

In light of these guidelines, Margiotta could be found

guilty of extortion pursuant to 18 U.S.C. § 2(b). One of

the indispensable elements in the extortion kickbacks from

the Williams Agency was the official act of Ralph Caso

and other public officials of Nassau County and the Town

of Hempstead in appointing and retaining the Williams

Agency as Broker of Record. Had that conduct, which

the jury could reasonably find from the evidence was

caused by Margiotta, never occurred, the Williams Agency

would not have been in a position to make the challenged

payments. If the public officials were aware that the

Agency was making the kickbacks at the direction of

Margiotta as a result of their exercise of official power

in designating and retaining the Agency as Broker, the

45a

public officials could have been found guilty of extortion

as principals, for unlawfully obtaining the consent to the

payments under color of official right. See, e.g., United

States v. Butler, 618 F.2d 411 (6th Cir.), cert. denied,

447 U.S. 927, 100 8.Ct. 3024, 65 L.Ed.2d 1121 (1980);

United States v. Trotta, supra. In light of Ralph Caso’s

testimony that he was unaware of any commission shar-

ing by the Williams Agency and the absence of proof, or

contention by the Government, that Caso was party to the

secret understandings concerning the designation of the

Agency as Broker of Record for Town and County, it is

likely that the public officials could not be found guilty

of a Hobbs Act violation under color of official right, since

it could not be established they were aware that Margiotta

had caused them to exercise their power in a manner

which induced the Williams Agency to make the kickbacks.

Nonetheless, the defendant who caused them to act in this

way is viewed as having “adopt[ed] not only [their] act

but [their] capacity” as well. United States v. Ruffin,

supra, 618 F.2d at 415. See also United States v. Wise-

man, supra (defendants, who were private process servers,

could be found guilty of 18 U.S.C. § 242, which prohibits

those acting “under color of any law” from depriving

citizens of their civil rights, by operation of 18 U.S.C.

§ 2(b), where the defendants had caused a state employee,

the Clerk of the New York ty Civil Court, to enter judg-

ments against third persons, although the Clerk did not

know that the judgments were fraudulently obtained) ;

United States v. Lester, 368 F.2d 68 (6th Cir. 1966), cert.

denied, 385 U.S. 1002, 87 S.Ct. 705, 17 L.Ed.2d 542

(1967). Since Margiotta could reasonably be found to

have caused a public official to commit the act necessary

for inducing the Agency’s consent to make the kickback

payments, he could be convicted of extortion pursuant to

the provisions of 18 U.S.C. § 2(b), even though the public

official may have been a mere innocent intermediary, and

did not participate in all aspects of the extortionate enter-

prise that is the subject matter of the criminal offense.

46a

See United States v. Wiseman, supra. These principles

were reflected in Judge Sifton’s careful jury instruction,

that the jury would have to find that Margiotta had

“caused officials of the Town of Hempstead and Nassau

County under color of office to contribute in a substantial

way to inducing the Williams Agency to consent to pay

out the monies referred to in Counts Two through Six.”

In short, the jury could reasonably find that Margiotta

had caused public officials in Hempstead and Nassau

County to appoint and retain the Williams Agency as

Broker of Record, a prerequisite step in the process of

extorting insurance payments. The insurance commissions

simply could not have been generated but for this official

action. Moreover, this conclusion is not undercut by Mar-

giotta’s other arguments in support of his claim that he

could not be found guilty of obtaining money under color

of official right pursuant to 18 U.S.C, §2(b). His con-

tention that there is no proof that the Presiding Super-

visor of the Town of Hempstead or the Nassau County

Executive attempted to induce the Williams Agency to

make the payments or that the Agency was motivated to

make the kickbacks as a result of “the assertion of pres-

sure” by the public officials is unavailing. Affirmative

pressure in the form of force, fear, or direct solicitation

of money may transform an official’s act into a violation

of the Hobbs Act, but it is the utilization of the power of

public office to induce consent to the payments that is the

gist of an offense of obtaining money “under color of

official right.” See, e.g., United States v. Jannotti, 678

F. 2d 578 (8rd Cir.) (Hobbs Act covers actions by public

officials under color of official right even when payment is

not obtained by force, threats or use of force), cert.

denied, —— U.S. ——, 102 S.Ct. 2906, 72 L.Ed.2d ——

(1982). The use of public office, with the authority to

grant or withhold benefits, takes the place of pressure or

threats. In this case, the appointment and retention of the

Agency as Broker of Record thus satisfies the requirement

47a

of a use of public office or action “under color of official

right.” Moreover, it is clear that the victim’s “motivation

for the payment” of portions of the insurance commis-

sions focused on the public officials’ power of office. United

States v. Braasch, 505 F.2d 189, 151 (7th Cir. 1974), cert.

denied, 421 U.S. 910, 95 S.Ct. 1561, 48 L.Ed.2d 775

(1975). It is reasonable to conclude that the Williams

Agency consented substantially for the reason that the

positions held by the public officials, who were controlled

by Margiotta, gave the officials the power to choose an-

other as Broker of Record if the Agency did not consent

to the payments. See United States v. Hedman, 630 F.2d

1184, 1194 n.4 (7th Cir. 1980), cert. denied, 450 U.S. 965,

101 S.Ct. 1481, 67 L.Ed.2d 614 (1981).

Furthermore, it is not necessary to support a Hobbs

Act charge by showing that a public official offer a quid

pro quo in the form of some specific exercise of the powers

of his office or a forbearance to carry out a duty; a public

official may be guilty of obtaining money under color of

official right if the payments are motivated as a result

of his exercise of the powers of his public office and he is

aware of this fact. United States v. Trotta, swpra, 525

F. 2d at 1100. While the lack of awareness on the part

of the public officials may have relieved them of criminal

liability for extortion under color of official right, it does

not relieve Margiotta of criminal responsibility, for, pur-

suant to 18 U.S.C. §2(b), he could be found guilty of

having caused the public officials unknowingly to use

their power of office in such a manner that would induce

the payments. See United States v. Wiseman, supra. In

addition, Margiotta may not seek refuge in the claim that

Ralph Caso and the other public officials were not them-

selves the recipients directly or indirectly of payments by

the Williams Agency, and therefore did not make “wrong-

ful use of [public office] to gain personal financial re-

ward.” United States v. Butler, supra, 618 F.2d at 419.

A Hobbs Act prosecution may lie where the extorted pay-

ments are transferred to third parties, including political

48a

allies and political parties, rather than to the public of-

ficial who has acted under color of official right. See

United States v. Trotta, supra, 525 F.2d at 1098 n.2.

Finally, the focus of the prosecution on the actions of

Margiotta in causing public officials unknowingly to use

their power in such a way as to induce the Williams

Agency to make kickbacks to Margiotta’s political allies

and the carefully drawn instructions of the district court

ensured that Margiotta’s prosecution under the Hobbs Act

did not draw within its ambit conduct that has tradi-

tionally been viewed as legitimate lobbying and political

activity. Since Judge Sifton specifically charged that

Margiotta could be convicted only if the jury found that

he had acted with the requisite criminal intent, the ap-

plication of the Hobbs Act’s proscription of extortion

“under color of official right” by operation of 18 U.S.C.

2 (b) in this case does not open a Pandora’s box of li-

ability in connection with lobbying or other legitimate

political activities.

C. Extortion through wrongful use of “fear.”

As noted above, Judge Sifton alternatively instructed

the jury that it could find Margiotta had violated the

Hobbs Act by extortion through wrongful use of fear.

Margiotta claims that the evidence was insufficient as a

matter of law to establish that the payments made by

the Williams Agency were induced by the wrongful use

of fear. In light of the overwhelming evidence that the

principals of the Williams Agency understood the Agency

would lose its position as Broker of Record for Town and

County if it ceased making the payments specified in

Counts Two through Six, Margiotta’s claim is plainly

without merit.

Richard A. Williams first testified about his state of

mind when he was called as a witness before the New

York State Investigation Commission. When asked what

would happen if he did not make the payments to other

49a

insurance brokers, Williams responded that he believed the

municipal insurance business would be distributed to

someone else, and that he would be “excluded.” Williams's

testimony at trial concerning his state of mind in making

the challenged payments was generally consistent with

this prior testimony, and was sufficient for a reasonable

jury to find that the principals of the Williams Agency

had reasonably been induced to fear that the Agency’s

participation as Broker of Record would be terminated

if it did not make the payments in accordance with Mar-

giotta’s directions. See, e.g., United States v. Brown, 540

F.2d 364, 373 n.6 (8th Cir. 1976) ; United States v. Pro-

venzano, 334 F.2d 678, 687 (8rd Cir.), cert. denied, 379

U.S. 947, 85 S.Ct. 440, 18 L.Ed.2d 544 (1964). Proof

that the Williamses’ fear was reasonable includes Mar-

giotta’s own statement that he would convene a meeting

of the Executive Committee of the Republican Party in

the event that the Agency ceased making payments.

Moreover, putting the victim in fear of economic loss can

satisfy the element of fear required by the Hobbs Act.

See United States v. Brecht, 540 F.2d 45, 52 (2d Cir.

1976), cert. denied, 429 U.S. 1128, 97 S.Ct. 1160, 51

L.Ed.2d 573 (1977). Since the parties to the agreement

understood this would be the result, Margiotta was able

to exploit the fear of the brokers and thereby wrongfully

obtain portions of their insurance commissions with their

“consent.” See United States v. Furey, 491 F.Supp. 1048,

1061 (E. D. Pa.), aff'd without opinion, 636 F.2d 1211 (3d

Cir. 1980), cert. denied, 451 U.S. 913, 101 S.Ct. 1987,

68 L.Ed.2d 304 (1981). That the Agency concealed its

practice of reducing the amount of kickbacks as the size

of the commissions increased corroborates the finding that

the Agency feared the loss of the municipal insurance

business if Margiotta learned that the Agency was re-

neging on the secret deal to divide the commissions on a

“50-50 basis.“

We note that the evidence is particularly compelling as

to Count Three which charged extortion in connection

50a

with the payments to William and Neil Cahn, and Count

Five, which set forth a Hobbs Act violation arising from

payments to former Assemblyman Reilly. Margiotta di-

rected a series of monthly payments in the amount of

$2,000 to attorneys William Cahn and his son, as an al-

leged legal retainer by the Williams Agency. Margiotta

admitted that payments to lawyers were not part of any

prior patronage system. Moreover, on several occasions,

Richard A. Williams approached Margiotta to determine

whether the Agency could stop making payments to Cahn.

In 1976, Williams asked Margiotta if the Agency should

continue to make the payments, and Margiotta responded

in the affirmative. Later, in 1978, after continuing to

pay the monthly $2,000 kickbacks, Williams again sought

Margiotta’s permission to halt the payments. Although

Margiotta initially agreed, Cahn appealed to Margiotta,

and Williams was directed to commence making the pay-

ments again. After Williams’s third request, in 1979,

Margiotta gave his permission to cease making payments

to the Cahns. At trial, Margiotta admitted that his rec-

ommendation was relevant to Williams’s decision to con-

tinue to make the monthly payments. Although Williams

testified that he had a high opinion of Neil Cahn’s legal

abilities, he stated that the work done by William Cahn

for the Williams Agency was “insubstantial.” Accord-

ingly, ample evidence supports the inference that the

Cahn payments were induced by a reasonable fear stem-

ming from Margiotta’s power to ensure the Williams

Agency would suffer adverse consequences if it did not

follow his directions.

Count Five was based upon a series of payments total-

ling approximately $50,000 to Assemblyman Reilly in

1979 and 1980, after Margiotta allegedly terminated the

practice upon which he and Williams had agreed many

years earlier. In 1978, according to Margiotta himself,

he met with Williams to determine whether Williams

“could see his way clear” to continue Reilly as an em-

ployee at a salary of $25,000 each year. During the sev-

51a

eral years Reilly was paid by the Agency, he performed

no meaningful work, and generated only a few hundred

dollars in commissions. Williams testified that he under-

stood the Agency could lose the municipal insurance busi-

ness if the Agency did not continue to make the payments

to Reilly.

In light of this evidence, the jury could reasonably find

that the principals of the Williams Agency were induced

to make the payments by the fear they would lose their

position of Broker of Record if they did not comply with

Margiotta’s instructions. The jury could properly dis-

believe Williams’s isolated answer of “no” in response to

a question whether he had “any state of mind of fear at

the time [he] made any of these payments,” and that,

instead, he distributed portions of the commissions earned

by the Agency because he understood that he had “to live

up to” a verbal contract between the elder Williams and

Margiotta. In his testimony, Williams repeatedly made

clear his belief that the Agency would have lost the

municipal insurance commissions if it had breached its

secret agreement with Margiotta. Moreover, the jury

could reasonably infer that Williams did not believe he

was carrying out a “valid contract” from the evidence of

Williams’s participation in the creation of fictitious prop-

erty inspection reports, his dissembling testimony before

the New York State Investigation Commission, and the

decision to reduce the portions of the commissions dis-

tributed from the agreed upon fifty percent. Cf. United

States v. Barber, 668 F.2d 778, 783 n.2 (4th Cir. 1982)

(falsification of documents amply supports inference that

donations were compelled, not voluntary, campaign con-

tributions).

Furthermore, there is no merit to Margiotta’s claim

that he could not have induced the Williams Agency to

consent to the payments through the wrongful use of

fear because the Williams Agency initially approached

him to secure the positions of Broker of Record for Hemp-

52a

stead and Nassau County and therefore was a “willing

collaborator.” See United States v. Rabbitt, 583 F.2d

1014, 1027 (8th Cir. 1978), cert. denied, 489 U.S. 1116,

99 S.Ct

This text is long and has been trimmed here. Open the source document for the complete record.

This is a copy of a public record, reproduced as it was published. It is not legal advice, and it may not be the version a court would rely on. Check the official source before you cite it.