Appendix — Keane v. United States

APPENDIX A

UNITED STATES OF AMERICA,

Plaintiff-Appellee,

v.

THOMAS E. KEANE,

Defendant-Appellant.

No. 74-1979.

United States Court of Appeals, Seventh Circuit.

522 F.2d 534

Before Sprecuer and Baurr, Circuit Judges, and Easr,*

Senior District Judge.

Sprecuer, Circuit Judge.

This appeal seeks review of the conviction of Thomas

K. Keane, former Alderman of Chicago’s Thirty-First

Ward and Chairman of the City Council’s Committee on

Finance, for violation of 18 U.S.C. $ 1341 (mail fraud) !

* Senior District Judge William G. East of the District of Oregon

is sitting by designation.

718 U.S.C. § 1341 provides:

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 prom-

ises, or to sell, dispose of, loan, exchange, alter, give away, dis-

tribute, supply, or furnish or procure for unlawful use any coun-

terfeit or spurious coin, obligation, security, or other article, or

anything represented to be or intimated or held out to be such

counterfeit or spurious article, for the purpose of executing such

scheme or artifice or attempting so to do, places in any post

office or authorized depository for mail matter, any matter or

thing whatever to be sent or delivered by the Postal Service, or

App. 2

and 18 U.S.C. § 371 (conspiracy).?

I

On May 2, 1974, a 21-count indictment was returned

against the defendant Keane. The indictment alleged a

mail fraud scheme in violation of 18 U.S.C. § 1341 in which

Keane would purchase through nominees, in some cases

with advance information, tax delinquent properties at

the Cook County scavenger sale in 1966; that these prop-

erties would be held in various land trusts without dis-

closure of the beneficiaries; that they would receive favor-

able treatment, in having certain encumbrances removed,

by the City Council and its various committees and sub-

committees, without disclosure of Keane’s interest in the

properties and with Keane voting on matters that favor-

ably affected his interest; that Keane would vote to au-

thorize the acquisition of parcels in areas in which there

were properties in which he had an interest and that he

used his position and influence to aid in the sale of the

properties to various private and governmental interests.

( footnote continued)

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

ingly causes to be delivered by mail according to the direction

thereon, or at the place at which it is directed to be delivered by

the person to whom it is addressed, any such matter or thing,

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

than five years, or both.

218 U.S.C. § 371 provides in relevant part:

If two or more persons conspire either to commit any of-

fense against the United States, or to defraud the United States,

or any agency thereof in any manner or for any purpose, and

one or more of such persons do any act to effect the object of

the conspiracy, each shall be fined not more than $10,000 or

imprisoned not more than five years, or both.

App. 3

The indictment went on to allege that the outlined

scheme defrauded the City of Chicago, its citizens and

Keane’s fellow aldermen of their right to the ‘‘conscien-

tious, loyal, faithful, disinterested and unbiased services,

decisions, actions and performance of official duties”’ by

the defendant and their right to have the City’s business

and its affairs conducted ‘honestly, impartially, free from

deceit, craft, trickery, corruption, fraud, undue influence,

dishonesty, conflict of interest, unlawful obstruction and

impairments, and in accordance with the laws of the State

of Illinois and the City of Chicago... .”’

The indictment also charges Keane with conspiring with

John Hennessey, Sr. [hereinafter Hennessey] and John

Hennessey, Jr. [hereinafter Junior], both unindicted co-

conspirators, to violate the mail fraud statute in violation

of 18 U.S.C. § 371.

A

Although the evidence is in places conflicting, the basic

outline of the alleged scheme is sufficiently clear.* In early

1965, a list of tax delinquent properties to be sold at Cook

County’s scavenger sale scheduled for June 1966, pursu-

ant to Ill. Rev. Stat. ch. 120, § 716a, was published. The

purpose of this sale was to place property upon whit)

taxes had not been paid for ten years back on the tax

rolls by allowing the purchaser at the scavenger sale to

obtain title clear of county tax liens by paying only cur-

rent and the preceding two years’ taxes.

In early April 1965, discussions commenced between Hen-

nessey, Nathan Schwartz and the defendant concerning

the formation of Alpine Investments to purchase proper-

* Part I is by no means a complete summary of all the facts. More

detailed recitals of the evidence, where necessary, are reserved for

later parts in considering defendant’s arguments on this appeal.

App. 4

ties at the 1966 scavenger sale for investment purposes.‘

In connection with this venture there was established Chi-

cago Title and Trust land trust No. 53129, into which prop-

erties acquired by Alpine were to be placed and in which

all three partners had equal one-third beneficial interests.

In preparation for the 1966 scavenger sale Alpine, the

day-to-day operations of which were run by Hennessey,

hired Junior, John Babbington and Vincent Schall to re-

search the properties to be sold. Approximately a month

prior to the sale, Keane, Hennessey and Junior met in

Hennessey’s office to discuss the properties on which to

bid. The three of them went through some of the Sidwell

map books of the City and Keane made pencil comments

* This was not the first time that Hennessey and Keane had be-

come business partners. In 1947, two years after he had become an

alderman, Keane entered into a business venture with Hennessey to

purchase special assessment bonds.

Eventually this enterprise gave way to other business ventures

between the two, including the formation in 1963 of THAK Invest-

ments to purchase speciai assessment bonds and vacant tax delin-

quent lots. THAK properties were placed in Illinois State Bank

land trust No. 139 of which Keane and Hennessey were equal bene-

ficiaries. According to Hennessey, he stopped purchasing properties

for THAK in his own name at Keane’s suggestion, because Keane

was concerned that too many people knew that there were partners.

In addition, prior to the formation of THAK but with similar

purpose, there was created Wabash Investments. The equal part-

ners in this venture were Hennessey, Nathan Schwartz and Adeline

Keane, the defendant’s wife. The government claimed that Mrs.

Keane took no active part in this venture and served merely as a

front for her husband's investment. The defendants introduced evi-

dence attempting to show that the funds invested in her name were

her own. Properties acquired by Wabash were placed in Illinois

State Bank land trust No. 149.

The bulk of the alleged scheme deals with Alpine lots, but in some

instances Wabash and THAK lots were involved.

as a a a. ear BL mes

SP RRP IEA MM FNS PE! LEAL RAD PPLE AOE TONE PE ERS EE PS

ERTIES ALA YES CRN TO a PRM SEN ENT AOe NP ANAS ESI RIS BOR NT LSE

App. 5

on the borders of the map such as ‘‘No,’’ ‘‘check title,

taxes, etc.,’’ ‘‘If nobody else buys,’’ ‘‘O.K..’’ ‘‘If cheap,”’’

““NG,’’ ‘‘Page NG, but only for a song,’’ and ‘‘Check

Park.’’ According to Hennessey's testimony Keane said

that they should buy all the lots they could in the 87th and

Mackinaw area because the government was going to con-

struct a big project there.

Prior to the sale, the three partners, each of whom had

invested approximately $100,000, arranged for a $300,000

loan at LaSalle National Bank to purchase scavenger sale

properties, assuring the bank that it would be paid out of

proceeds from the sale of lots acquired. When the loan

was eventually called it was paid by a $275,000 loan from

the Jefferson State Bank arranged by Keane.

The scavenger sale began on June 6, 1966, and lasted

for about five weeks. Hennessey participated in the sale

for the first week and then left responsibility for Alpine’s

bidding to Junior and Harry Rubenstein, an attorney for

Alpine. Properties were bid for in the name of either

John Hennessey, Sr. or Ada Sills, Rubenstein’s wife’s

maiden name. Alpine was the second largest purchaser

at the sale, purchasing 1,878 parcels of property at a total

cost of $208,543.

B

In order to obtain clear title after the statutory two

year period of redemption ran,° it was necessary for Al-

pine to remove the special assessment liens against each

parcel. Special assessments are a means of financing local

5 Alpine received a certificate of purchase for each parcel pur-

chased, subject to the original owners right of redemption at any

time up to two years from the date of the scavenger sale by paying

the bid price plus statutory interest. Approximately 300 to 400

properties purchased by Alpine at the scavenger sale were redeemed.

App. 6

improvements such as alleys, sewers, streets and other

improvements which benefit the adjacent properties. Spe-

cial assessment bonds are issued to the contractor evidenc-

ing his right to payment for the work performed. Bond-

holders *® are paid from the special assessment fund estab-

lished to receive the payments from the private property

owners and used to pay the principal and interest on spe-

cial assessment bonds. According to the testimony at the

trial no City funds are contributed to this fund, but the

fund does pay to the City’s general corporate fund up to

five percent of the original assessment, presumably to

cover administration expenses.

Bondholders, although having no direct action against

the City, in the event of default may recover on the bonds

by an action against the property. In order to remove the

lien of the special assessment bondholders on the parcels

it purchased, it was necessary for the Alpine partners,’

in the name of the land trust that held the property, to

cause foreclosure proceedings to be instituted. In cases

where there were outstanding bondholders this was ac-

complished by filing a ‘‘Request for Foreclosure of Spe-

cial Assessment Liens.’’ For properties in Chicago, this

application is forwarded to the staff of the Subcommittee

on Special Assessments, a subcommittee of the Committee

on Finance of the City Council, so that the Subcommittee

can set a minimum bid to be made by the applicant at the

® Generally the contractors discount these bonds to lenders or in-

vestors, thus receiving immediate payment for their work without

waiting for the various installments to fall due.

7 Properties owned by THAK and Wabash were also subject to

liens of special assessment bondholders and with respect to the re-

moval of such liens, and the charges in the indictment relating to

such removal, are considered in the same light as Alpine properties.

App. 7

subsequent foreclosure proceeding, commenced by the City

of Chicago in the Cireuit Court of Cook County, Although

the judge could reject the minimum bid as inadequate or

the bondholders could actually participate in the fore-

closure sale thereby bidding the price up, in practice the

minimum bid set by the Subcommittee invariably ended

up as the purchase price. The money received from the

sale is paid to the County Collector and transmitted

through the special assessment fund to the bondholders.

At all times relevant to this case the chairman of the

Subcommittee on Special Assessments was Alderman

Fifielski, who was appointed to the pasition by Keane.

There was testimony that Hennessey met Fifielksi in

Keane’s outer office at City Hall and said ‘‘Alderman, we

have some special assessments we would like to have fore-

closures on. Would you call a meeting?’’ Fifielski subse-

quently held a meeting on June 26, 1970.

The evidence clearly showed that prior to this meeting

Fifielski had set minimum bids for foreclosures at 30 to

60 percent of the principal amount due on the special as-

sessment bonds. At the June 26, 1970 meeting of the Sub-

committee, almost all of the 32 parcels of property in

which the defendant had an interest were assigned mini-

mum bids of approximately 10 percent.

The other procedure followed by the Alpine investors

to obtain title clear of special assessment liens was ‘‘Com-

promise Offers in Lieu of Foreclosures.’’ In the early

1930’s the special assessment fund had redeemed a sub-

stantial number of bonds. Thus, some of the parcels in

which the defendant had an interest were subject to liens

for which there were no bonds outstanding. In this situa-

tion a property owner in order to clear the lien is required

to settle the claim of the special assessment fund by mak-

ing payment to it. If the comptroller, to whom application

is made, determines that there are no outstanding bond-

App. 8

holders, a compromise offer based on a standard formula

is transmitted to the Subcommittee on Special Assess-

ments. The compromise figure was always equal to ‘‘sales

and costs’? which Alderman Fifielski testified was the

amount that the special assessment fund paid when it

originally redeemed the outstanding bonds.*

In both the case of ‘‘Requests for Foreclosures of Spe-

cial Assessment Liens’’ and ‘‘Compromise Offers in Lieu

of Foreclosures,’’ the Subcommittee reports, with its rec-

ommendations, were inserted in the report of the Finance

Committee, which at all times relevant to this case would

be introduced to the full City Council by the defendant.

After introduction of such reports, if there was no objec-

tion or debate desired, the matter would be referred to the

omnibus bill and be voted on at the end of the day along

with other matters. On numerous occasions the defendant

8 The government attempted to show that Alpine properties and

other properties in which Keane had an interest received compro-

mise offers that were lower than the total amounts due considering

the original principal and accrued interest on the special assessment

warrants originally issued. The defendants introduced evidence that

showed that all properties were treated equally, and that it was the

“sales and costs” figure that was significant in determining the com-

promise offers set. There does not appear to be a reasonable basis

from the exhibits introduced upon which to conclude that properties

in which Keane had an interest received any more favorable treat-

ment than other properties that were handled through the “Com-

promise Offer in Lieu of Foreclosure” procedure.

® The omnibus bill usually contains fairly perfunctory matters and

is generally passed by a unanimous vote. The procedures of the City

Council provide that if any alderman objects to an item being voted

upon in the omnibus, then debate and a roll call vote should be held.

Additionally, any matter may be referred back to committee or be

reconsidered at the next council meeting.

EET TI REI ELLE OE ELLE IGE SS. LODE LEMP LIOR»

App. 9

Keane voted in favor of omnibus bills containing ‘‘Re-

quests for Foreclosures’? and ‘‘Compromise Offers in

Lieu of Foreclosure’? proposals relating to properties in

which he had an interest.” Keane never disclosed his in-

terest in these properties to his fellow aldermen.

At trial the government called a number of aldermen,

who testified that they would have voted against the pro-

posals if they had known of Keane’s interest or would

have demanded further investigation and debate on the

matter. The defense produced a number of aldermen who

testified that they would have voted the same way, even if

they had known of Keane’s interest, assuming the prop-

erties in which he had an interest were accorded the same

treatment as those in which he had no interest.

C

The final phase of the allegedly fraudulent scheme dealt

with the disposition of Alpine and other properties owned

by various land trusts, in which the defendant Keane had

an equitable interest as beneficiary. The indictment al-

leged that Keane used undue influence and inside informa-

tion in relation to the disposition of some of the properties.

The undue influence charge is based on transactions with

three governmental agencies. In May 1968, Keane voted

in the City Council to authorize the Chicago Housing Au-

thority (C.H.A.) to aequire properties located in the En-

10Tn all, 121 Alpine, Wabash and THAK lots received City

Council approval for foreclosure requests on 17 separate dates.

Keane introduced and voted favorably upon such motions on all 17

dates. Likewise, 122 Alpine, Wabash and THAK lots received City

Council approval for compromise offers in lieu of foreclosure on 24

separate dates. Keane introduced and voted favorably upon these

motions on each occasion.

App. 10

glewood, Woodlawn and Lawndale areas of Chicago, not-

withstanding the fact that Alpine had an interest in prop-

erties in these areas. Hennessey testified that he was with

Keane during the summer of 1968 when Keane called

Charles Swibel, Chairman of the C.H.A. and said ‘‘Char-

lie, this is Tom Keane. John Hennessey and I own some

lots. We would like to have you buy some of them.’’ Hen-

nessey, on Keane’s instructions, went to see Swibel.”

Keane denied ever requesting Swibel to purchase any

lots. Eventually approximately 60 parcels were sold to

C.H.A.

Five parcels in which Keane had an interest were sold

to the Chicago Dwelling Association (C.D.A.). C.D.A. is

a non-profit corporation for which the C.H.A. acts as a

purchasing agent.

In the spring of 1968, Hennessey gave Gerald Broderick,

a C.D.A. attorney, a long list of properties that he had

available. Initially Hennessey was informed that the

C.D.A. could not buy the lots because of improper zoning.

On July 23, 1968, pursuant to instructions from Ira Bach,

C.D.A. Executive Director, Broderick sent a letter to Rob-

ert Snow, the individual in charge of C.H.A. land acquisi-

tion, requesting C.H.A. to purchase some lots located on

or near Watkins Avenue and stating that Bach had in-

formed him (Broderick) that Swibel wanted the lots pur-

chased ‘‘as swiftly as possible.’’ This letter was written

during the same summer that Keane had asked Swibel to

purchase some of Alpine’s lots. Broderick received a let-

ter from Snow dated July 26, 1968, stating that the sub-

ject properties were not in an area designated by the City

Council,? and that the zoning was not suitable for C.H.A.

11 Hennessey testified that Swibel treated him in a curt manner.

12 When the C.H.A. expended funds for acquisition of properties

for C.D.A., it was subject to the restriction that it only purchase

property in areas previously approved by the City Council.

BLEED THROUGH

~~.

App. 11

needs and was not likely to be rezoned. Snow suggested

C.D.A. use its own funds for acquiring the properties.

After receiving this letter Broderick sent a memorandum

to James Phillips, his immediate supervisor, restating the

same problems raised in Snow’s letter and also indicating

that the ‘‘per unit land cost is over twice what we normally

pay.’’ Notwithstanding these problems, the five Watkins

Avenue lots were acquired by C.D.A. in September 1968.

The final transaction in which the government alleges

undue influence involved sales to the Metropolitan Sani-

tary District (M.S.D.). M.S.D. threatened condemnation

of 102 lots in which the defendant had an interest and

offered to purchase them for $150 per lot. Thereafter, a

meeting was held with Robert Wiss, an attorney repre-

senting M.S.D., Harry Rubenstein, attorney for Alpine,

Hennessey and Keane. During the meeting Wiss indi-

cated that the top appraisal was $700 per lot. Ultimately

the lots were purchased by M.S.D. for approximately $775

per lot.

The primary transaction on which the government pred-

icates its use-of-inside-information charge (as opposed to

the undue-influence sales) is the sale of three lots to the

Chicago Department of Urban Renewal (D.U.R.) in the

87th and Mackinaw area. As previously stated Keane had

told Hennessey to acquire as much property as possible in

this area because a big government project was going

up.

In August 1966, after the scavenger sale, the City made

its first definitive public move by requesting $129,000 in

federal funds under the Neighborhood Development Pro-

gram** to undertake a study to determine whether the

area would qualify as an urban renewal project. Previ-

ously, there had been a great deal of public discussion con-

18 Under this program the federal government provides two-thirds

and the City provides one-third of the funds.

-

App. 12

cerning this area. In January 1967, the City Council with

Keane voting in the affirmative, notwithstanding his in-

terest in approximately 30 parcels in the area, designated

the area ‘‘slum and blighted’’ and thereby authorized the

D.U.R. to begin acquiring properties in the area. After

a series of negotiations ** the D.U.R. eventually acquired

three lots in which the defendant had an interest.

14The government introduced detailed evidence concerning these

negotiations. According to the evidence certain large portions of the

area were slated for early acquisition. Earl L. Neal, Special As-

sistant Corporation Counsel in late 1968, arranged for appraisals

on parcels in these areas and began the preliminary steps for con-

demnation proceedings. Subsequent to this in January 1969, Keane

inquired of Lewis Hill, Commissioner of D.U.R., allegedly for a

friend and without disclosing his own interest in the properties,

whether D.U.R. would allow improvement of lots by property own-

ers in the project area. Hennessey testified that Keane told him to

write and send a list of the properties that they owned in the area

to Hill. Hennessey sent such a list indicating that he owned the

properties. Hill recognized the properties as the ones which Keane

had referred to in their previous discussions.

Upon receipt of their letter, Hill instructed Walter Sroka, director

of land acquisition for D.U.R., to obtain appraisals in the properties

listed, notwithstanding the fact that many of them were outside the

areas marked for first acquisition, “because the owner has requested

that we proceed to acquire as quickly as possible.” The appraisals

were ordered. Finally, on July 14, 1969, Neal sent three form letters

to Hennessey offering to acquire three parcels in the primary acqui-

sition area. These three lots were the only ones purchased, although

at one point Hill indicated to Keane that five additional parcels

might be purchased, but because of a lack of federal funds they were

not.

At one point the government argues that Keane used his influence

with Hill to get these lots purchased. This might be a reasonable

conclusion from the evidence in the above paragraph, but seems

slightly inconsistent in view of Keane’s effort to keep his interest

undisclosed from Hill. It is possible, however, that Keane was put-

ting pressure on Hill to buy the properties, notwithstanding the fact

that Keane did not want Hill to know who was the beneficiary of

his efforts.

REE TI LEER ILI LIE I OE LER SSE GMD At EEL I 3 AION BES IE BES f OBA NIELS iinet

App. 13

The other transaction which the government states rep-

resents the use of inside information is the sale of Alpine

and THAK lots to the Chicago Park District. In February

of 1970, Keane gave Hennessey a copy of a ‘‘Chicago Park

District inter-office correspondence’? which Keane said had

been given to him by Alderman Fitzpatrick, chairman of

the City Council Committee on Buildings and Zoning. The

correspondence indicated that the Park District would con-

demn various properties owned by Alpine and THAK.

Two years later, the lots specified in the inter-office cor-

respondence were acquired by the Park District.

In addition to public agencies there were sales to private

parties as well. National Homes Corporation eventually

acquired 75 lots after extensive negotiations with Keane

and other Alpine partners and employees. United States

Steel acquired five lots in the 87th and Mackinaw area not

wanted by D.U.R. for $12,500. Keane was referred to

United States Steel by Lewis Hill and after contacting an

old friend there, he was referred to the appropriate offi-

cers.

The government introduced evidence at trial that on the

parcels sold to M.S.D., D.U.R., C.H.A., C.D.A., Chicago

Park District and National Homes Corporation, there was

a gross profit of $167,471.30. On cross-examination it

15 For some reason this figure does not include the sales to United

States Steel. The government figures showed the profits broken

down as follows:

Purchaser Profit On Sale Parcels Sold

Metropolitan Sanitary District $ 55,954.82 102

Department of Urban Renewal 7,658.17 3

Chicago Housing Authority 53,893.90 58

National Homes Corporation 32,170.85 45

Chicago Dwellings Association

(THAK) 1,119.64 5

Chicago Park District (THAK

and Alpine) 16,673.92 5

TOTALS $167,471.30 218

App. 14

was determined that this figure did not include expenses

to Alpine and THAK such as taxes, overhead and sales

commissions to Junior. The defendant introduced evi-

dence that Keane had a net loss of $26,032.07 for all trans-

actions involving THAK and Alpine properties.

Keane was found guilty by a jury of conspiracy and 17

counts of mail fraud. From this conviction the defendant

appeals, citing four principal matters that he contends

require reversal: (1) the evidence adduced at trial was

insufficient as a matter of law to constitute a fraudulent

scheme; (2) assuming the existence of a fraudulent

scheme, the mailings were not in furtherance of that

scheme; (3) the Illinois State statutes read to the jury

were inapplicable to the facts of this case; and (4) the

district judge made erroneous rulings on evidentiary and

other trial matters.

II

The government alleged and introduced evidence of a

fraudulent scheme involving the defendant with respect

to three general areas. First, the government contends

that it was improper for Keane to acquire properties at

the 1966 scavenger sale, in some instances using inside

information. Second, that it was improper for Keane to

vote on matters in the City Council affecting land in which

he had an interest without disclosing that interest, and in

the case of ‘‘Requests for Foreclosures’’ to receive prefer-

ential treatment. And finally, it was improper that the

defendant use the influence of his office for his own per-

sonal benefit in the disposition of properties in which he

had an interest, and that he sell parcels that he had ac-

quired through the aid of inside information.

The defendant, on the other hand, contends that there

was no fraudulent scheme, that it was not improper for

App. 15

Keane to acquire parcels at the 1966 scavenger sale, that

his actions in the City Council were pro forma votes on

matters in which the City of Chicago had no interest, and

finally that there was inadequate proof with respect to

the undue influence and the advance information charge.

In some respects we agree with the defendant’s posi-

tion insofar as he suggests that certain actions to which

the government attempts to attribute criminality were

either not by themselves criminal or not supported by

sufficient evidence to draw the inferences the government

wishes us to draw. This does not mean, however, that in

viewing the evidence in the light most favorable to the

government, Glasser v. United States, 315 U.S. 60, 80, 62

S.Ct. 457, 86 L.Ed. 680 (1942), there was insufficient proof

to establish an overall scheme violative of the mail fraud

statute. It is not necessary for all aspects of an alleged

scheme to be illegal in their separate parts, but rather

only that the scheme viewed as a whole involve fraudulent

conduct. Holmes v. United States, 134 F.2d 125 (8th Cir.),

cert, denied, 319 U.S. 776, 63 S.Ct. 1434, 87 L.Ed. 1722

(1943) ; United States v. Brandom, 273 F.Supp. 253 (E.D.

Wis. 1967).

The purpose of the mail fraud statute is to prevent the

post office from being used to carry schemes to defraud

into effect. Parr v. United States, 363 U.S. 370, 389, 80

S.Ct. 1171, 4 L.Ed.2d 1277 (1960). The two necessary ele-

ments for violation of the mail fraud statute are forma-

tion of a scheme with intent to defraud and the use of

mails in furtherance of that scheme. United States v. Sha-

vin, 287 F.2d 647, 649-50 (7th Cir. 1961). The statute in-

eludes a broad proscription of behavior for the purpose of

protecting society. United States v. Owen, 231 F.2d 831

(7th Cir.), cert. denied, 352 U.S. 843, 77 S.Ct. 42, 1 L.Ed.

2d 59 (1956). A specific violation of state law, although

App. 16

covered by the statute, United States v. Flarman, 495 F.2d

344, 349 (7th Cir.), cert. denied, 419 U.S. 1031, 95 S.Ct.

512, 42 L.Ed.2d 306 (1974), is not necessary to obtain a

conviction for mail fraud. United States v. States, 488 F.2d

761, 767 (8th Cir. 1973), cert. denied, 417 U.S. 909 and 950,

94 S.Ct. 2605, 41 L.Ed.2d 212 (1974); United States v. Ed-

wards, 458 F.2d 875, 880 (Sth Cir.), cert. denied, 409 U.S.

891, 93 S.Ct. 118, 34 L.Ed.2d 148 (1972). Rather the

‘*{l]aw puts its imprimatur on... accepted moral stan-

dards and condemns conduct which fails to match the

‘reflection of moral uprightness, of fundamental honesty,

fair play and right dealing in the general and business life

of members of society.’’’ Blachly vy. United States, 380

".2d 665, 671 (Sth Cir. 1967). Neither the ultimate success

of the fraud nor the actual defrauding of a victim is ecru-

cial to a successful prosecution. United States vy. Reicin,

497 F.2d 563, 571 (7th Cir.), cert. denied, 419 U.S. 996, 95

S.Ct. 309, 42 L.Ed.2d 269 (1974); United States v. George,

477 F.2d 508, 512 (7th Cir.), cert. denied, 414 U.S. 827, 94

S.Ct. 49, 38 L.Ed.2d 61 (1973); Shavin, supra at 651-52.

With these basic principles in mind we turn separately

to each of the three fundamental aspects of the scheme.

A

With respect to the acquisition of properties at the coun-

ty scavenger sale, we believe that it was clearly improper

and therefore actionable under the mail fraud statute for

the defendant to make use of inside advance information

obtained by virtue of his official position for his own per-

sonal gain. See, e. g., United States v. Peltz, 433 F.2d 48,

52 (2d Cir. 1970), cert. denied, 401 U.S. 955, 91 S.Ct. 974,

28 L.Ed.2d 238 (1971); United States v. Groves, 122 F.2d

87, 90 (2d Cir.), cert. denied, 314 U.S. 670, 62 S.Ct. 135, 86

L.Ed. 536 (1941); United States v. Buckner, 108 F.2d 921,

926 (2d Cir.), cert. denied, 309 U.S. 669, 60 S.Ct. 613, 84

L.Ed. 1016 (1940).

EL LPH IDOE EG BIS IESE EPO ELLIE SEM S

App. 17

In United States v. Buckner where the defendants were

in a fiduciary position with a group of bondholders, the

court said: ‘{uJsing a fiduciary position . .. to obtain

secret profits based upon inside information is not only a

breach of trust, but an active fraud on the bondholders.”

Buckner, supra at 926. Similarly, in United States v.

Groves the court said in reference to corporate officers

that *‘there was certainly the use by a fiduciary of inside

information to his own benefit and to the detriment of his

eestui, which, when involving use of the mails, we have

recently held to be within contemplation of the mail fraud

statute.’’ Groves, supra at 90. Finally in United States

v. Peltz, where a conspiracy to defraud was involved and

the defendant was charged with receiving advance inside

information from an employee of the S.E.C., the court

said: ‘‘[p]ublie confidence essential to the effective fune-

tioning of government would be seriously impaired by any

arrangement that would enable a few individuals to profit

from advance knowledge of governmental action.’’ Peltz,

supra at 52.

These cases taken together show that advance dissemi-

nation and use of governmental information by a few

individuals impairs the functioning of government and

that when the use is made by a public official it amounts

to a breach of a fiduciary duty which is clearly actionable

under the mail fraud statute. Post v. United States, 132

U.S. App. D.C. 189, 407 F.2d 319, 329 (1968), cert. denied,

393 U.S. 1092, 89 S.Ct. 863, 21 L.Ed.2d 784 (1969); United

States v. Dorfman, 335 F.Supp. 675, 679 (S.D.N.Y. 1971),

aff'd, 470 F.2d 246 (2d Cir. 1972), cert. dismissed, 411 U.S.

923, 93 S.Ct. 1561, 36 L.Ed.2d 317 (1973); United States

v. Hoffa, 205 F.Supp. 710, 716 (S.D. Fla.), cert. denied,

371 U.S. 892, 83 S.Ct. 188, 9 L.Ed.2d 125 (1962).

App. 18

With respect to the acquisition of a significant number

of parcels in the 87th and Mackinaw area, the evidence in

its form most favorable to the government showed that

while discussing what properties to acquire at the scaven-

ger sale, Keane told Hennessey to buy in this area because

a ‘‘big government project’? was going up. Subsequently,

30 parcels in this area were purchased.

Although the defense introduced evidence to show that

discussions concerning urban renewal in this area had been

going on for a decade, the government introduced evidence

that it was not until August 21, 1966 (after the scavenger

sale), that an announcement was made to the public that

the area had definitely been designated to undergo study

to see if it qualified for urban renewal. Thereafter, the

area was designated by the City Council, with Keane vot-

ing in the affirmative, as ‘‘slum and blighted’’ and the

D.U.R. began acquiring land in the area including three

lots in which the defendant had an interest.

Although the evidence is not overwhelming on the use

of advance information charge, and it is possible to inter-

pret the evidence as representing shrewd business judg-

ment on Keane’s part, we cannot say that the jury was

not entitled to believe that Keane made use of advance

information to acquire substantial amounts of property in

an area prior to the public announcement indicating that

the area was being considered for urban renewal. This

use of advance information by a public official as we have

said violates the mail fraud statute.

B

The next aspect of the charged fraudulent scheme in-

volved Keane’s participation in official City Council pro-

ceedings, without disclosure, on matters in which he had

a financial interest. It is clear to us that one who breaches

ILO AI UNE TE PRY BLO ORE MB So MSL ANNA EE NAT WOM ESS MNS: SIENNA MT SNS

App. 19

the public trust by actively concealing a personal financial

interest from the public and from a public body charged

with the responsibility of passing judgment on matters di-

rectly affecting that financial interest, and on which he

serves and in which he participates in the formulation of

the collective judgment of that body, pursuant to his offi-

cial duties, may be prosecuted for mail fraud. Cf. United

States v. Barrett, 505 i'.2d 1091 (7th Cir. 1974), cert. de-

NOG seis oe. aes , 99 S.Ct. 1951, 44 L.Ed.2d 450 (1975) ;

United States v. Isaacs, 493 F.2d 1124 (7th Cir.), cert.

denied, 417 U.S. 976, 94 S.Ct. 3184, 41 L.Ed.2d 1146 (1974).

As this court said in United States v. Isaacs, where a

former Illinois governor was prosecuted for accepting

bribes given in an effort to obtain more favorable racing

dates ‘‘|t|he citizens of Illinois were defrauded of Kern-

er’s honest and faithful service as governor,’’ notwith-

standing the fact that no actual pecuniary loss to the State

of Hlinois was shown. IJsaacs, supra at 1150. Similarly,

in United States v. Barrett, where the Cook County Clerk

was found guilty of accepting money from a voting ma-

chine manufacturer for purchasing the City’s voting ma-

chines from the company, and where the insurance on those

machines was placed through an agency that received 25

percent of the premiums paid by Cook County to the in-

surance carrier and passed on 15 percent of that amount

to the defendant, the court quoted approvingly the lan-

guage of the /saacs decision finding a scheme that defrauds

the public out of the honest and faithful services of a pub-

lic official cognizable under the mail fraud statute. Barrett,

supra at 1104.*° Finally, in Shushan v. United States, 117

‘© See also United States v. Faser, 303 F.Supp. 380 (E.D.La.

1969), where the court said “[t]hat it is a violation of the statute

in question |mail fraud] if a person defrauds the State out of the

‘loyal and faithful services of an employee.’” Jd. at 384.

a WET Re ERAS SG WAPI ns Alea Ana BED GET RR IN OMG ONLY AMAL ANI PEE TR UML TEN RA

App. 20

F.2d 110 (5th Cir.), cert. denied, 313 U.S. 574, 61 S.Ct. 1085,

85 L.Ed. 1531 (1941), an indictment was sustained that

alleged that a member of a public board used his infiuence

to obtain approval for refunding bonds for a percentage

of the profit without disclosing this interest, and that by

reason of the secret interest of the board member the

‘‘Board was... deprived of [the] fair judgment of one of

its members, who assiduously and corruptly influenced

and persuaded the other members... .’’ Id. at 115.”

With respect to ‘‘Requests for foreclosures of Special

Assessment Liens,’’ as we stated in Part I B supra, prior

to the June 26, 1970 subcommittee meeting, Alderman

Fifielski had set minimum bids at 30 to 60 percent of the

principal due on the outstanding special assessment bonds.

At that meeting when 32 parcels of property in which

the defendant had an interest were acted on, Fifielski set

minimum bids of 10 percent.

17 Much of the language in Shushan is applicable to the facts of

this case.

[Defendant] had been a member of the Board for seven years,

and was Chairman of the Finance Committee, apparently with-

out other members on it. He was a lawyer, and his advice and

opinion had weight with the Board. In the adoption of this con-

tract, and in the several refundings under it, according to the

stenographic reports of the meetings, he did most of the ques-

tioning and arguing with Newman and Harris, made most if

not all of the motions to accede to their proposals, and voted

for them. The votes were always unanimous. No other member

of the Board knew or suspected his interest in the matter. He

says he concealed it lest it might influence them to be more

favorable. We think the jury could well conclude that in his

position his conduct was so irreconcilable with public duty and

private morality that neither he nor anyone privy to it could

intend fairness and honesty.

Shushan, supra at 120 (emphasis added).

ERE LEENA EAA INE AME PWT ARTES” PAPO SAY SEATS SR ADITAT, «A,

pe Mare ee eS

App. 21

The defendants attempted to show through the testi-

mony of Fifielski and the introduction of exhibits that sub-

sequent to the June 26 meeting, low bids around 10 per-

cent would be set if the application presented to the sub-

committee did not have a proposed minimum bid, and that

if it did, the amount of the proposed minimum, assuming

it was greater than 10 percent, would be set. The evidence

clearly showed, however, that this purported pattern was

not followed consistently after the June 26 meeting. De-

fendant’s own exhibit showed that four parcels considered

at the October 13, 1970 meeting of the Subcommittee had

minimum bids of 59.6 percent notwithstanding the fact

that no proposed minimum was included by the applicant.’®

Also inconsistent with the defendant’s meeting of January

21, 1971, for which the defense did not prepare a summary,

although it prepared summaries for earlier and later meet-

ings. Government counsel pointed to a number of parcels

handled on that date for which no proposed bids were sub-

mitted by the applicant, but for which percentages were set

well above 10 percent.”

#8 Alderman Fifielski testified that these exceptions to the pur-

ported post-June 26 rule may have been caused by his accepting the

recommendations of the Subcommittee’s staff, rather than calculat-

ing 10 percent of the principal amount due. He said he may have

done this because he may have been in a hurry.

1® The defendant points out that when Harry Rubenstein took over

the preparation of Alpine’s applications for foreclosures he did in-

sert bids on the applications and while some other properties with-

out such bids in which the defendant had no interest were getting

10 percent treatment, the Alpine properties were receiving substan-

tially higher percentages. The fact that not all properties of Alpine

received the favored 10 percent treatment, of course, does not mean

that on June 26, 1970 they were not receiving favored treatment.

RETNA SATE 2», a PO te

App. 22

Even if it were true that Alderman Fifielski, starting

with the June 26, 1970 meeting, changed his policy with

respect to minimum bids, it is quite clear that as of that

date properties in which Keane had an interest received a

lower percentage than applications submitted by others

up to that time. Whether such a new policy was justified,

perhaps under normal circumstances would be left to the

judgment of the chairmen of the Special Assessment Sub-

committee and the Finance Committee. This, however,

should not have been the case when the new policy was

to begin on a day when properties in which the chariman

of the Finance Committee had an interest were to be con-

sidered. As of that date numerous aldermen testified that

they would have considered in more detail the foreclosure

requests which they approved had they known of Keane’s

interest. In any event there was sufficient testimony to

show that the 10 percent policy was not consistently ap-

plied after the June 26 meeting, and from which the jury

could believe that Keane introduced and voted on pro-

posals granting properties in which he had an interest

special treatment.

With respect to ‘‘Compromise Offers in Lieu of Fore-

closures,’’ the evidence was weak that properties in which

the defendant had an interest received more favorable

treatment than property belonging to other members of

the public. *° Regardless of this fact it still remains true

that the defendant as Finance Committee Chairman in-

troduced proposals with respect to properties in which he

had an interest and thereafter voted on them without dis-

closing his interest. Keane owed a duty to the other alder-

men to disclose his interest so that they could consider the

20 See note 8, supra.

App. 23

propriety of compromising a lien of the City’s special as-

sessment fund in favor of a City alderman. The fact that

his properties may have received treatment which was the

same as all other members of the public, and that he would

have in all probability received this compromise offer even

if he had disclosed his interest, does not change the fact

that he did receive a benefit from the City Council’s action

without ever informing his colleagues of his interest.

The defendant contends that with respect to ‘‘Compro-

mise Offers in Lieu of Foreclosures’’ the most the govern-

ment has shown was a failure to disclose a personal pe-

cuniary interest in matters presented before the City Coun-

cil, and that this amounts to no more than constructive

fraud, which is not actionable under the mail fraud stat-

ute. Epstein v. United States, 174 F.2d 754 (6th Cir.

1949).*! In Epstein the defendants, who were officers of

brewing corporations, were charged with buying supplies

from another company in which they had a financial in-

terest at excessive prices. The court first held that there

was insufficient proof that an excessive price was charged

and that there was a fatal variance between the indict-

ment and the subsequently adopted government theory

that defendant’s failure to disclose their interest in the

supply companies to their respective boards of directors

21 Defendant’s constructive fraud argument based on Epstein is

clearly inapplicable to those properties which were subject to the

“Request for Foreclosure” proceedings. As we have said with re-

spect to that procedure there can be no question that defendant’s

properties were treated preferentially, and thus, Keane who was in

a fiduciary position was voting to approve minimum bids applicable

to his properties, while at the same time the City Council did not see

fit to grant similar percentages to properties belonging to other mem-

bers of the public.

App. 24

was sufficient to constitute the fraud. Jd. at 763. The

court also stated that the receipt of money from another

corporation by a director ‘‘without disclosure of interest to

the board of directors does not constitute the perpetration

of an active, intentional fraud upon his corporation where

there is good faith, fair dealing, and benefit to the corpora-

tion, of which he is a director.’’ Id. at 765. **

We do not believe that Epstein necessarily requires a

holding that properties treated by the ‘‘Compromise Offer

in Lieu of Foreclosure’’ procedure were not the subject

of a fraudulent scheme. We note first that this court has

recently distinguished the Epstein case. In United States

v. George, 477 F.2d 508 (7th Cir.), cert. denied, 414 U.S.

827, 94 S.Ct. 49, 38 L.Ed.2d 61 (1973), the rationale of

Epstein was not applied to a situation where the defendant,

a buyer for Zenith did not disclose to that company that

he was receiving a kickback from companies from which

he purchased supplies for Zenith. The court after noting

2 Notwithstanding the fact that the court made a finding of fatal

variance between the indictment and the evidence and that it indi-

cated there was only minimal evidence of the defendant's interest

in the supply companies, Epstein, supra at 769, the case is still cited

for the proposition that a mere failure to disclose is insufficient to

be cognizable under the mail fraud statute.

In addition to the statement quoted in the text the court after re-

stating that the transactions involved were fair to the defendants’

corporations stated :

Certainly, a mere disclosure of interest could not convert an

actual fraud with a wrongful purpose to injure or deceive, into

an honest, moral transaction with a purpose to benefit. It is

this consideration that serves as a criterion for distinguishing

cases cited by the government to sustain its contention that lack

of disclosure of interest—or secret profits, as the government

terms it—proves actual fraud in this case.

Id. at 768.

App. 25

that the George defendant, unlike the Epstein defendant,

was required to turn over his secret profit to the employer

he defrauded, went on to state that non-disclosure in

George was essential to the fraudulent scheme.** While

the comparison between George, and Epstein and the pres-

ent case is difficult, because of the factual distinctions with

respect to profit, we believe that the cases are not incon-

sistent with our conclusion that Keane’s conduct with re-

spect to ‘‘Compromise Offers in Lieu of Foreclosures’’ was

violative of the mail fraud statute. **

This case, unlike Epstein, involves a public official. In

recent years the mail fraud statute in this circuit has been

used increasingly with approval to prosecute public officials

for violating their constituents of their right to loyal, faith-

ful and honest public service. Barrett, supra; United

States v. Staszcuk, 502 F.2d 875 (7th Cir. 1974), rev’d in

part on rehr’ing, 517 F.2d 53 (7th Cir. 1975), petition for

cert. filed, 43 U.S.L.W. 3675 (U.S. June 24, 1975); Issacs,

supra. In the factual circumstances of this case Keane’s

failure to disclose to his fellow aldermen his interest in

23 The court in George said:

There was no reason to believe disclosure by the defendants in

Epstein would have, under the particular circumstances there,

made any bargaining difference to the breweries, but Yonan’s

[George defendant] disclosure, in addition to making the scheme

impossible, would have enabled Zenith to realize a substantial

discount.

George, supra at 513 n. 5.

24 For other cases where the failure to disclose has been considered

actionable under the mail fraud statute see generally United States

v. Simon, 425 F.2d 796, 806-08 (2d Cir. 1969), cert. denied, 397

U.S. 1006, 90 S.Ct. 1235, 25 L.Ed.2d 420 (1970) ; United States v.

Miller, 210 F.Supp. 716 (S.D. Tex. 1962).

i Pe ee ie ee ee Te ae ee en oe eR

App. 26

matters pending before the City Council coupled with his

other actions amounted to ‘‘conduct which fails to match

the ‘reflection of moral uprightness, of fundamental hon-

esty, fair play and right dealing in the general and busi-

ness life of members of society.’ ’’ Blachly; supra at 671.

In addition this case involves more than ‘‘mere’’ non-dis-

closure. The evidence showed that Keane and his co-con-

spirators actively attempted to conceal the defendant’s

interest by the use of nominees when purchasing property,

and by the use of land trusts to hold the acquired parcels.”

It is also obvious that disclosure of Keane’s interest in

properties subject to ‘‘Compromise Offer in Lieu of Fore-

closure’’ procedures could have well led to discovery of

Keane’s interest in properties subject to ‘‘Request for

Foreclosure’’ procedures, which were clearly getting fa-

vored treatment. The defendant’s failure to disclose his

interest affirmatively misled his fellow aldermen and the

alleged scheme was of such a nature that it ‘*depended for

[its] success upon concealment and deception and could

not conceivably [have] be[en] carried out by the guilty

[party] without covering up the true facts.’ Epstein,

supra at 767.

Finally, defendant contends that the City’s involvement

in both procedures for clearing special assessment liens is

minimal. He argues that in cases of ‘*Requests for Fore-

closures’’ only a minimum bid was set by the City Coun-

cil, that this had to be subsequently approved by a court,

and that the bondholders although receiving their pay-

ments from the special assessment fund, had no claim

75 The use of nominees and land trusts are not in and of them-

selves illegal but must be viewed within the total factual context in-

volved. Holmes v. United Statzs, 134 F.2d 125 (8th Cir.), cert. de-

nied, 319 U.S. 776, 63 S.Ct. 1434, 87 L.Ed. 1722 (1943).

App. 27

against the City for any unpaid amount on the bonds. In

effect what the defendant asks us to hold is that the City

Council’s action in approving ‘‘ Requests for Foreclosures’’

had no effect and served no purpose—that the action by

the Council was entirely superfluous. We refuse to so hold.

While it may be true that with respect to sophisticated

bondholders who generally made private deals with own-

ers who were seeking foreclosure so that the amount of

the minimum bid set by the Council made no difference, **

there are situations in which unsophisticated, nonprofes-

sion individuals hold the special assessment bonds. 27

These individuals especially, as well as professional bond-

holders, had the right to rely on the City Council to per-

form its function of setting a fair bid, one that reflected the

fact that these bonds were not worth full value because

of the long time they had been in default, but one that

*6 Generally what occurs is that once the minimum is set the bond-

holder meets with the property owner and through negotiations agree

on an amount in addition to the bondholder’s share of the minimum

bid. The bondholder accepts the settlement figure in exchange for

not bidding at the foreclosure sale. At what dollar level the nego-

tiations begin depends on the minimum bid, but otherwise that

amount is irrelevant.

*7 The defendant contends that there was no proof that any bond-

holder did not settle, and the government argues that there was no

showing that all bondholders did settle. We consider this point ir-

relevant. Whether individuals sought to reach private settlements

or not does not change the fact that the City Council had devised a

plan which seemingly offered some protection to members of the

public. The defendant Keane through his actions sought to subvert

that plan. If all bondholders did indeed settle, his scheme did not

meet with success, but success of a fraudulent scheme is not re-

quired by the cases for a mail fraud conviction. United States v.

Shavin, 287 F.2d 647, 651-52 (7th Cir. 1961).

— peceueereesceumem SVG PORE DT REST IN IO COONS

iene eieciartsernimieene SSRIS

App. 28

reflected the fact that they were still of some value. In

this regard the City Council was to act as an arbiter by

setting a minimally fair price,** a proposition that with

respect to properties in which Keane had an interest, was

not always true.

With respect to ‘‘Compromise Offers in Lieu of Fore-

closures’’ we disagree with the defendant’s contention that

the City Council’s action amounted to a nullity and that

the City had no interest in these matters. ‘‘Compromise

Offers in Lieu of Foreclosures’’ came about because the

City, through the special assessment fund, during the de-

pression, retired special assessment bonds. The defendant

would have us believe that it made no difference whether

the Fund ever received back any of the monies expended.

This contention is belied by the fact that there existed a

procedure to effect compromise offers for repayment to

the Fund. While it is not clear how these funds are or

will be used in the future, we cannot say that the City

has no interest in using them again as it did in the depres-

sion or in some other manner.

We therefore reject the defendant’s claim, made with

respect to both ‘‘Compromise Offers in Lieu of Fore-

closures’’ and ‘‘Requests for Foreclosures,’’ that these

were pro forma matters in which the City had no interest

and the voting on which, even without the disclosure of

defendant’s interest, did not constitute fraudulent con-

duct. The fact that normally these were perfunctory mat-

ters left to the Subcommittee on Special Assessments and

the Committee on Finance to handle because of their ex-

*8 The defendant argues that these minimum bids were subject to

court approval. It is undisputed, however, that except in very few

cases, the amount ultimately set by the court was the minimum bid

approved by the Council.

——

App. 29

pertise and were routinely approved, is all the more reason

why Keane should have disclosed his interest. Involved

in this case were not votes on major policy issues, where

even if disclosure of a personal interest was not made,

there still would have been serious consideration given to

the merits of a proposal by public officials. Instead we

have a situation where other aldermen relied on the ex-

pertise and presumably the objectivity of Keane’s com-

mittee and the Special Assessment Subcommittee. Had

they known that this objectivity did not exist, they would,

as some testified, have requested further information and

study regarding the proposals. It was this right to the

defendant’s faithful service and the right to be apprised

of material circumstances with regard to the special as-

sessment foreclosures and compromises upon which they

voted, that Keane’s colleagues, and through them the pub-

lic, were defrauded.

C

The final part of the alleged scheme was the disposition

of the properties. In relation to this aspect of the scheme

the government charged the use of advance information,

which we considered in Part I] A, supra, and the use of un-

due influence by the defendant. With respect to the use of

undue influence the government offered evidence detailing

the sale of properties to the C.H.A. and C.D.A. through

Charles Swibel and the sale to M.S.D. See Part I C, supra.

We have no doubts that use by a public official of his

position and influence to obtain personal benefits can, un-

der appropriate circumstances, constitute a fraudulent

scheme in violation of the mail fraud statute. Bradford

v. United States, 129 F.2d 274 (5th Cir.), cert. denied, 317

U.S. 683, 63 S.Ct. 205, 87 L.Ed. 547 (1942). Such conduct

falls within the type condemned by United States v. Blach-

ly, supra at 671. We have reviewed carefully the record in

—_— LOEEEE LLL SGIO NG IAT LEELA ALE PT DIP Y 5 IS

App. 30

this case and we believe that with respect to the sale and

attempted sale of certain properties to C.D.A., the evi-

dence was sufficient for the jury to believe that Keane used

undue influence.

The evidence consisted of Hennessey’s testimony that

Keane called Swibel and asked him to purchase some of

their properties. Despite Swibel’s apparent anger at the

request, properties were eventually acquired by C.D.A.

pursuant to Swibel’s desire. These and other properties

were acquired or considered for acquisition, according to

the evidence, despite the fact they were improperly zoned,

were unlikely to be rezoned, were outside a City Council

designated area and were significantly more costly than

similar properties acquired by C.D.A. From the evidence

the jury could reasonably assume that Keane had put pres-

sure on Swibel, and that his conduct was part of a scheme

that was violative of the mail fraud statute. 7°

lil

The next major argument made by the defendant is that

the mailings that are the basis of each count were not in

furtherance of the alleged fraudulent scheme. *°

Although it is not necessary that a scheme contemplates

the use of the mails as an essential element, Pereira v.

United States, 347 U.S. 1, 8, 74 S.Ct. 358, 98 L.Ed. 435

(1954), it is necessary that the alleged mailing be ‘‘for

the purpose of executing the scheme, as the statute re-

quires.’’ Kann v. United States, 323 U.S. 88, 94, 65 S.Ct.

*° With respect to the sale of lots to M.S.D., we believe that stand-

ing alone the evidence was insufficient to justify the conclusion that

undue influence was used by Keane.

3° At trial the government on its own motion dismissed Counts

V, IX and XVIII.

App. 31

148, 151, 89 L.Ed. 88 (1944). Each mailing that forms a

basis for a count must be in furtherance of executing the

fraudulent scheme. United States v. Maze, 414 U.S. 395,

94 S.Ct. 645, 38 L.Ed.2d 603 (1974) ; Stasecuk, supra at 880;

Isaacs, supra at 1151-52. In addition, it is not necessary

to establish a violation of the mail fraud statute that the

defendant actually mailed anything himself, but it is suffi-

cient if he caused it to be mailed, or does an act with knowl-

edge that the use of the mails will follow in the ordinary

course of business or that it can reasonably be foreseen.

Pereira, supra at 8-9.

We note at the outset of this section that the government

alleged and offered evidence that there was one overall

scheme to obtain property, clear special assessment liens

and dispose of properties. Criminality, with respect to any

phase, as discussed in Part II, supra, is sufficient assuming

that the count mailing in question dealt with a general as-

spect of the whole scheme or with properties which were

the subject of some fradulent part of the scheme.

A

The first of three groups of mailings deals with the re-

ceipt of proceeds from the fraudulent scheme. Since the

scheme would have no value without the sale of the prop-

erties, all the mailings relating to the negotiations and the

ultimate sale of properties either acquired by virtue of

inside information, subject to City Council action in which

the defendant participated to clear special assessment

liens or disposed of through the use of undue influence,

are proper counts. A mailing in furtherance of the collec-

tion of proceeds from a fraudulent scheme is sufficient un-

der the mail fraud statute. Pereira, supra at 8; United

States v. Britton, 500 F.2d 1257, 1259 (8th Cir. 1974).

_—_— IME iG PAGING IIS OOS RICE NIELS NAIA ONE EER Sr

Taste

App. 32

The Counts VI and XIX letters dealt with a problem in

the proposed sale of properties, some of which had been

the subject of City Council action, to National Homes

Corporation. Resolution of this problem was essential to

the eventual sale.

The Counts VIII, XIV, XV and XX mailings all dealt

with the offer and acceptance of real estate contracts be-

tween the Alpine partners and United States Steel. The

properties that United States Steel purchased, although

apparently not subject to City Council action to remove

special assessment liens, were among the group that was

purchased by the Alpine partners pursuant to advance in-

formation about the 87th and Mackinaw development proj-

ect. *

Count II involved a letter from the City offering to

purchase from the Alpine partners a lot obtained because

of advance information about the 87th and Mackinaw de-

velopment project. *

Count IV involved a sale of parcel, which had been sub-

ject to City Council action, to C.H.A. The letter referred

to matters necessary to complete the sales transaction.

Count XII involved a letter dealing with the acquisition

of property, not subject to City Council action, by C.D.A.

From all the evidence the jury conld believe that the

C.D.A.’s acquisition of this parcel was attributable to

Keane’s use of undue influence on Swibel.

31 The fact that these properties were disposed of by the defendant

and his partners to a party not anticipated by the advance informa-

tion is insignificant. The fraudulent scheme was acquiring the prop-

erties with inside information, the actual disposition of the properties

to any purchaser, completed the scheme.

32 We deem it insignificant that the City made the initial offer.

ELE LS LAS IRE IS LOE LIDIA IRE E § IOV SELLE A I CT ti 8 ERENT AE CE INTE YS

App. 33

Only the Count I mailing in this group is insufficient to

sustain a conviction. That letter was merely an acknowl-

edgement of payment from Hennessey to Leon Mayer, a

purchaser of Alpine lots. The acknowledgement served no

purpose in the fraud and was not connected with the col-

lection of proceeds from the fraud.* See, e.g., United

States v. Isaacs, 364 F.Supp. 895, 903 (N.D. Il. 1973), aff’d,

493 F.2d 1124 (7th Cir.), cert. denied, 417 U.S. 976, 94 S.Ct.

3184, 41 L.Kd.2d 1146 (1974). Accordingly, the conviction

on Count I is reversed.

B

The second major area into which the account mailings

have been classified are those relating to financing the

scheme. The Count LI mailing is a letter from Hennessey,

which accompanied a check for $35,000 to the Jefferson

State Bank in partial payment due on the loan of the Al-

pine partners. The beneficial interest of Alpine’s land

trust No. 53129 was assigned to the Jefferson State Bank

as collateral. Thus, repayment of the money borrowed to

purchase the parcels ** was necessary to prevent the fruits

of Alpine’s venture from being lost to the Jefferson State

Bank. Continuation of ownership so that the parcels could

be disposed of for a profit, was essential to the overall

scheme.

33 The second paragraph of this letter stated that the second pay-

ment, which was due in ninety days, was without interest. This let-

ter did not purport to be a second billing or even attempt to nego-

tiate the payment procedures. The reference appears to be no more

than a casual reminder to Mayer that his next payment was without

interest—something that was not particularly beneficial to the Alpine

partners and which was at most merely incidental to the scheme.

*#In actuality the Jefferson State Bank loan was used to pay off

another bank loan, the proceeds of which had been used in the actual

purchase at the 1966 scavenger sale.

i — SEYRET PER LB RLS ASHES FTSEL BESS

App. 34

The mailings of Counts XI and XIII, however, stand

on a different footing. Both letters involve mailings by

Bernard Feinberg, President of the Jefferson State Bank

to Hennessey acknowledging payments on the loan. The

government’s argument that keeping the loans current

worked to the benefit of the conspirators may well be true,

but it still does not make the acknowledgments received

from the bank an integral part of or in furtherance of the

scheme. United States v. Isaacs, 364 F.Supp. at 903. The

convictions on Counts XI and XIII are reversed.

C

The final area in which the count mailings have been clas-

sified are those in furtherance of concealment of the fraud-

ulent scheme. See e.g., United States v. Joyce, 499 F.2d

9, 18 (7th Cir.), cert. denied, 419 U.S. 1031, 95 S.Ct. 512, 42

L.Ed.2d 306 (1974).

The Count VII mailing was a letter from a trust officer

at Chicago Title and Trust to Nathan Slutzky granting per-

mission to the latter to file an appearance in foreclosure

of special assessment cases involving Chicago Title and

Trust land trust No. 53129 in which Alpine properties were

held. While it is probably true, as tne defendant argues

that it did not make much difference who represented the

Alpine interest at the various Subcommittee meetings, ob-

taining an attorney for such representation was undoubt-

edly necessary and also allowed Keane, although a lawyer,

to avoid representing the Alpine partnership himself, thus

keeping his interest secret. *

The Count X mailing is an invoice from the trust depart-

ment of the Illinois State Bank seeking compensation for

3° We reject defendant’s contention that since Keane did not know

that Hennessey had engaged Slutzky that he was not responsible for

the mailing. Keane and Hennessey were in the project jointly and

the fact that Keane delegated day-to-day responsibility for Alpine’s

affairs to Hennessey does not relieve him of responsibility.

App. 35

services rendered in relation to Land Trust No. 149. This

land trust held properties that were accorded favorable

treatment at the June 26, 1970 meeting of the Subcommit-

tee on Special Assessments. Payment of trust fees, as re-

quested by the invoice, played a direct role in keeping

Keane’s interest undisclosed. **

Counts XVI and XVII involved letters from the trust

department of the Illinois State Bank in response to Hen-

nessey’s request for an accounting of what properties re-

mained in Land Trust No. 149 * and 139. At various times

both trusts contained properties which had been accorded

preferential treatment by the City Council. A reply in re-

sponse to a letter seeking information as to whether any

of these properties remained, so presumably they could be

sold, is in furtherance of the scheme.

IV

The defendant next challenges the use by the government

of certain Illinois statutes and a rule of the City Council,

and the reading of them to the jury, all of which defen-

dant argues either do not apply to him or were not violated

by his actions. Having previously concluded that even

without reference to the challenged material that the

scheme in which Keane was involved was violative of the

mail fraud statute, in this section it is only necessary to

8*It is conceded that land trust No. 149 held only properties

owned by Wabash Investments in which Keane’s wife was a part-

ner. The evidence was conflicting as to whether Mrs. Keane was

a bona fide investor or whether she represented only investment

interests of her husband. The jury was certainly entitled to believe

the latter alternative, given the testimony concerning Keane’s con-

trol over Wabash Investments and the fact that Wabash properties

were submitted to Fifielski’s Subcommittee on June 26, 1970, along

wih THAK and Alpine properties.

37 See note 35, supra.

App. 36

consider whether the statutes and City Council rule were

totally inapplicable to this case and so prejudicial so as to

require a reversal. *

38 Since the crux of this case does not depend on the violation of

specific Illinois statutes, we find no merit in defendant’s contention

that the court below should have abstained from trying this case,

because of the complex state regulatory scheme involved or the

pending state civil action against the defendant.

The state court civil proceeding against the defendant was dis-

missed on the grounds that the plaintiff lacked standing because “not

one cent of the City’s money is expended” and because “no public

trust [is] involved in the case at bar.” City of Chicago ex rel. Cohen

v. Keane, No. 74 CH 2825 (Cir. Ct. of Cook County, Sept. 20,

1974) (order).

We note first that the thrust of Judge Cohen’s decision was that

there could be no standing where there had been no loss of City

funds. The court made no definitive ruling on the applicability of

the challenged statutes to the facts of this case. The fact that under

Illinois law a loss to the city must be shown before standing

is granted to a plaintiff, Golden v. City of Flora, 408 Ill. 129, 96

N.E.2d 506 (1951), stands in sharp contrast with actions for mail

fraud for which no loss to the victim needs be shown. United States

v. Reicin, 497 F.2d 563 (7th Cir.), cert. denied, 419 U.S. 996, 95

S.Ct. 309, 42 L.Ed.2d 269 (1974).

Even if the state court had determined that the statutes were in-

applicable, although persuasive, we would not be bound by that de-

cision inasmuch as conviction for mail fraud is not dependent upon

a violation of state law. United States v. States, 488 F.2d 761, 767

(8th Cir. 1973), cert. denied, 417 U.S. 909 and 950 (1974) ; United

States v. Edwards, 458 F.2d 875, 880 (5th Cir.), cert. denied, 409

U.S. 891, 93 S.Ct. 118, 34 L.Ed.2d 148 (1972). Finally, it is also

clear that an acquittal or assurances from state officials to the de-

fendant that what he did was proper is not sufficient to stay a fed-

eral prosecution for mail fraud. See generally United States v.

Hutul, 416 F.2d 607, 626 (7th Cir. 1969), cert. denied, 396 U.S.

1007, 1012 and 1024, 90 S.Ct. 562, 573, 599, 24 L.Ed.2d 499, 504,

517 (1970) ; United States v. Sylvanus, 192 F.2d 96, 106 (7th Cir.

1951), cert. denied, 342 U.S. 943, 72 S.Ct. 555, 96 L.Ed. 701

(1952) ; United States v. Anzelmo, 319 F.Supp. 1106, 1117 (E.D.

La. 1970).

GER TOES Pea Ree ES

App. 37

The district judge prefaced his reading of the Illinois

statues and the City Council rule with the following:

In deciding whether the defendant defrauded the

City of Chicago and its citizens and Keane’s fellow

aldermen of their right to the loyal and faithful services

of the defendant Keane and of their right to have the

City’s business and its affairs conducted honestly and

free from conflict of interest in accordance with the

laws of the State of Illinois and the City of Chicago,

you may consider the Illinois statutes and Rule 14 of

the Rules of Order of the City Council of the City of

Chicago that I am going to bring to your attention.

Following the reading of the statutes and rule the judge

instructed :

Now, the existence of such laws and the City Coun-

cil rules serve to define the standard of conduct ex-

pected of the defendant Keane by the citizens of Chi-

cago and the defendant’s fellow aldermen. You may

consider them for that purpose. The existence of such

laws and City Council rules may also be considered by

you as relevant to the defendant’s intent to defraud if

any such intent existed.

Although the defendant objected initially to the reading

of the statutes and rule, once the trial judge decided they

would be read, defendant’s counsel approved the above

instructions. We were directed to no point in the record

where the defendant requested that the Illinois statutes

and City Council rule be further explained to the jury.

Therefore, we consider whether the failure to explain them

further was plain error and thus reversible without objec-

tion below. Fed. R.Crim.P. 52(b).

There is no rule that the reading of a statute as part of

a charge to the jury is per se insufficient. See generally

Casella v. United States, 449 F.2d 277, 283 (3d Cir. 1971),

cert. denied, 405 U.S. 929, 92 S.Ct. 981, 30 L.Ed.2d 803

(1972) ; United States v. Powell, 145 U.S. App. D.C. 332,

tS eR SN

App. 38

449 F.2d 994, 998 (1971). This is even more true where, as

here, the statutes and rule were only one aspect of the

whole case rather than the basis of the charges against the

defendant. Complete instructions as to what actions can

constitute a fraudulent scheme under the mail fraud stat-

ute without reference to the Illinois statutes and City

Council rule were given. The statutes and rule were of-

fered to show the general conduct expected of the defen-

dant, so that the jury could better determine if there was

a fraudulent scheme. ** While it might have been helpful

to the jury to give a more detailed explanation of the state

laws and Council rule, we cannot say it was plain error not

to do so.

The only question that remains with respect to the state

statutes and the City Council rule is whether it was error

for them to be judicially noticed, and presented to the

jury.

Ill. Rev. Stat. ch. 24, § 3-14-4 provides that no municipal

officer shall be interested in the purchase of any property

sold for taxes or assessments. * On its face the provision

38 The defendant argues that the state statutory scheme was so

complex that further explanation was required. The difficult ques-

tion with regard to the statutes was their applicability to the present

case, a question that the district judge resolved against the defen-

dant.

49 Tl]. Rev. Stat. ch. 24, § 3-14-4 provides:

No municipal officer shall be interested, directly or indirect-

ly, in any contract, work, or business of the municipality, or in

the sale of any article, whenever the expense, price, or consid-

eration of the contract, work, business, or sale is paid either

from the treasury or by any assessment levied by any statute

or ordinance. No municipal officer shall be interested, directly

or indirectly, in the purchase of any property which (1) belongs

to the municipality, or (2) is sold for taxes or assessments, or

(3) is sold by virtue of legal process at the suit of the munici-

pality.

PILE EIN OP MORE! | SFLIEEL ROE LIIGCT BO," j

App. 39

would appear to bar Keane from participating in any

scavenger sales where property was being sold for taxes

in Illinois. While we might be persuaded to agree with

the defendant that such a broad reading of the statute

would be beyond the obvious legislative purpose of avoid-

ing conflict of interests, we nevertheless believe that a

reasonable interpretation of the statute would have barred

Keane from participating in the 1966 Cook County scaven-

ger sale where a large number of parcels to be sold were

located within Chicago. “

“ Although the 1966 scavenger sale was for properties on which

county taxes were delinquent, we were advised at oral argument that

the county would turn over to the City, a substantial amount of

money with respect to parcels located within Chicago.

In addition, Ill. Rev. Stat. ch. 120, § 716a, the section pursuant

to which the 1966 scavenger sale was held provides that “The State

of Illinois or any taxing district . . . may bid at such sale.” Simi-

larly, Ill. Rev. Stat. ch. 120, § 725 provides:

Any incorporated city, town or village, or corporate authori-

ties, commissioners, or persons interested in any special assess-

ment or installment thereof, may become purchaser at any sale,

and may designate and appoint some officer or person to attend

and bid at such sale on its behalf.

We reject the defendant’s argument that the City could under no

circumstances have been a bidder at this sale because the sale did not

involve the extinguishment of special assessments. On their face

neither section 716a nor 725 make such a condition a prerequisite to

the City exercising its power to acquire real property for corporate

purposes.

The above being true, it would not be unreasonable to believe

that the legislature sought to prohibit purchases by municipal officals

of property within their municipality sold for taxes or special as-

sessments by the county as is the situation in this case. Not only

does such an interpretation prevent potential conflict of interest but

(footnote continued )

App. 40

The next statute of which the defendant complains is

Ill.Rev.Stat. ch. 102, § 3 which prohibits any public official

from being interested in any contract upon which such of-

fiicer may be called upon to vote. This is a classic con-

flict of interest statute. The government’s position is that

‘‘eompromise offers’’ and ‘‘minimum bids’’ were in effect

agreements between the City and Keane on which he was

required to vote. Thus, Keane was in a classic conflict of

interest situation. Without deciding that a state court

would apply this statute to this situation, it is sufficient to

say that the jury was free to accept the defendant’s argu-

ment that no contract was really involved because of the

pro forma nature of the transaction and the alleged minis-

terial functions of the City Council. The introduction of

the statute, however, was not reversible error.

(Footnote continued)

also avoids use of advance or inside information concerning prop-

erties within their city, by municipal officials.

In addition, section 3-14-4 prohibits municipal officers from being

interested in the sale of any article whenever the price is paid from

the treasury of the municipality. At least with respect to land sold

to D.U.R. for the redevelopment program, the City was responsible

for one-third of the cost. Even if the City made in kind contribu-

tions, as defendant contends, the reading of the statute was relevant

as to the state policy against conflict of interests.

42 Tl], Rev. Stat. ch. 102, § 3 provides in part:

No person holding any office, either by election or appoint-

ment under the laws or constitution of this state, may be in any

manner interested, either directly or indirectly, in his own name

or in the name of any other person, association, trust or corpo-

ration, in any contract or the performance of any work in the

making or letting of which such officer may be called upon to

act or vote.

LEPOTELIIIELGL LEE EMO LIBEL NEAL EDGR EE ORIG. PRED RE CEE TNE GE, 1 =

pa Te

App. 41

Another Illinois statute which was judicially noticed

and read to the jury and of which the defendant complains

is Ill.Rev.Stat. ch. 102, § 3.1 which compels disclosure of all

beneficial owners of property sold to any local govern-

mental unit. ** The defendant argues that the statute im-

posed a duty only on Hennessey to disclose the beneficial

owners, since he was the managing agent of the properties.

The government responds that a conspiracy was alleged

in the indictment, and that Hennessey’s failure to disclose

Keane’s interest in writing, so as to keep it from public

view, is attributable to the defendant. A co-conspirator

need not have knowledge of every detail of the plan. See,

e.g., Blumenthal v. United States, 332 U.S. 539, 557, 68 S.

Ct. 248, 92 L.Ed. 154 (1947); United States v. Fellabaum,

408 F.2d 220, 224 (7th Cir., cert. denied, 396 U.S. 818 and

858, 90 S.Ct. 55, 125, 24 L.Ed.2d 69, 109 (1969). Under

these circumstances it was not error to read section 3.1 to

the jury so it would be apprised of the fact that it was the

3 Til. Rev. Stat. ch. 102, § 3.1 provides:

Before any contract relating to the ownership or use of real

property is entered into by and between the State or any local

governmental unit or any agency of either and a trustee who

has title to such real property or a managing agent having

power to contract in relation to such real property, such trustee

or managing agent must disclose the identity of every owner

and beneficiary having any interest, real or personal, in such

property. The disclosure shall be in writing and shall be sub-

scribed by such trustee or managing agent under oath. This

Section shall be liberally construed to accomplish the purpose

of requiring the identification of the actual parties benefitting

from any transaction with a governmental unit or agency in-

volving the procurement of the ownership or use of real prop-

erty thereby.

This statute became effective on September 30, 1969, and thereafter

ten lots in which Keane had an interest were sold to the C.H.A.

App. 42

policy of Illinois to require disclosure of interests in trans-

actions conducted with public agencies.

The final statute, the reading of which the defendant ub-

jects to, is Ill.Rev. Stat. ch. 38, § 33-3 which provides that

a public officer commits a misdemeanor when he ‘‘|k |now-

ingly performs an act which he knows he is forbidden by

law to perform.’’ Our disposition with regard to the

previous statutes makes it clear that the reading of this

statute was not error. **

In addition to objections to the Illinois statutes, the de-

fendant also objects to the reading of City Council Rule 14

which provides:

Every member who shall be present when a question

is stated from the Chair shall vote thereon, unless ex-

cused by the Council or unless he is personally in-

terested in the question, in which case he shall not

vote.

The last sentence, which is mandatory in nature, on its

face belies defendant’s contention that the rule was direct-

ed only at requiring aldermen to vote on all matters and

not directed at conflict of interests. The defendant makes

similar arguments with respect to the rule as he made in

connection with his effort to show that no fraudulent

scheme against the City was involved. See Part II B,

supra. For the same reasons we gave in rejecting defen-

dant’s claim earlier, it is clear that the reading of this

rule was not erroneous and was properly admissible to

show a standard of conduct expected among aldermen and

to show Keane’s fraudulent intent.

*4The question of whether defendant knowingly committed any

act that was forbidden was, of course, a jury question, and is irrele-

vant to the issue of whether this section should have been read or

not.

SLL LELR TEE AG BET BETO ESAS TEN TE NET AIL D EE BBY OS BENE LIVE

App. 43

We conclude that it was not error for the district judge

to judicially notice and then present to the jury the pre-

viously discussed Illinois Statutes and City Council rule.

¥

The defendant’s final contentions raise challenges with

respect to certain evidentiary rulings and other matters

which arose during the course of the trial.

A

The defendant argues that he was wrongfully deprived

of a random assignment of a trial judge by the action of

the Executive Committee of the Northern District of IIli-

nois in assigning the case to Judge Decker pursuant to

their procedures for handling ‘ protracted, difficult or wide-

ly publicized cases.’’ General Order, Northern District of

Illinois, Eastern Division (May 17, 1972). For the reasons

stated by the Executive Committee in its memorandum

opinion, United States v. Keane, 375 F.Supp. 1201 (N.D.

Ill. 1974), we find the defendant’s argument without merit.

See also United States v. Braasch, 505 F.2d 139, 147 (7th

Cir. 1974), cert. denied, ........ SY senesn , 95 S.Ct. 1562, 43

L.Ed.2d 775 (1975).

B

The next claimed error is with respect to the letter from

Gerald Broderick, an attorney for C.D.A., to Robert Snow,

land acquisition director for C.H.A., dealing with the

acquisition of property by C.H.A. for C.D.A. use. See Part

I C, supra. The challenged portion of the letter read ‘Mr.

Bach (C.D.A. Executive Director] informed me [ Brod-

erick] that Mr. Swibel [C.H.A. Chairman and C.D.A. Di-

rector] told him to purchase these lots as swiftly as pos-

sible... .’’ The letter was introduced in support of the

government’s claim that Keane used undue influence on

Swibel in order to have certain lots purchased.

App. 44

A writing is a business record if it was made in the regu-

lar course of business and it was the regular practice of

such business to make such a record. 28 U.S.C. § 1732. It

is clear that a letter from one party to another, if done in

the normal course of business can qualify as a business

record. See United States v. Kelly, 349 F.2d 720, 772-73

(2d Cir. 1965), cert. denied, 384 U.S. 947, 86 S.Ct. 1467, 16

L.Ed.2d 544 (1966); Grummons v. Zollinger, 240 F.Supp.

63 (N.D. Ind. 1964), aff’d, 341 F.2d 464 (7th Cir. 1965). It

is also clear from all of the testimony concerning the rela-

tionship between C.H.A. and C.D.A., that the letter in ques-

tion met the above requirements. *

The thrust of defendant’s challenge is directed at the

fact that Broderick’s letter purports to repeat what Swibel

told Bach as related by Bach to Broderick. The fact that

Broderick, who was in effect the maker of the record, was

told something by Bach does not render the record inad-

missible. Many business records are made by the entry of

data related by one employee either orally or through

memorandum to another employee responsible for recora-

keeping. In this case, unlike the cases on which the defen-

dant has relied,** Bach was under a ‘‘business duty’’ to

repo:t accurately to Broderick since the acquisition of land

was an integral part of C.D.A.’s functions. United States

v. Karnap, 477 F.2d 390, 392 (4th Cir.), cert. denied, 414

45 The government states and the defendant does not challenge in

his reply brief that defense counsel stipulated to the entire C.D.A.

file in which the Broderick letter was included. Even when the let-

ter was about to be read to the jury defense counsel conceded that

it was a business record.

© See, e. g., United States v. Burruss, 418 F.2d 677 (4th Cir.

1969) ; United States v. Shiver, 414 F.2d 461 (Sth Cir. 1969).

NIM IRIEL ALLE LD IORI BLEEP EEN. Cai DOGS GELS LEDS AAS OLY BN BFE NIL SE

—

App. 45

U.S. 867, 94 S.Ct. 66, 38 L.Ed.2d 87 (1973); United States

v. Smith, 452 F.2d 638, 640 (4th Cir. 1971), cert. denied, 406

U.S. 910, 92 S.Ct. 1617, 31 L.Ed.2d 822 (1972). In addition,

Broderick’s letter was contemporaneous with Bach’s re-

port to him and there appears to have been no motive to

misrepresent on the part of either Bach or Broderick. V. J.

Wigmore, Evidence, §§ 1526, 1527 (3d ed. 1940).

The defendant argues, however, that Bach could not have

Broderick include on the ‘‘business record’’ the fact that

Swibel told him to ‘‘purchase these lots as swiftly as pos-

sible... .’’ because it is hearsay and Bach could not have

testified as to what Swibel told him. We disagree.

Whether any given out-of-court statement is hearsay

depends on the issue for which it is offered. In the present

case the ultimate issue is whether Keane used his influence

on Swibel, with the particular testimony intended to show

that after Keane talked with Swibel that Swibel took action

to have the lots purchesed.

In one sense Swibel’s statement is similar to an order,

and is not capable of being true or false, and thus it is not

offered for the truth of any matter asserted. It is offered

solely for the fact that the statement was made, which

standing by itself makes it relevant on the question of

whether Keane had requested Swibel to purchase some of

his properties.

To the extent that Bach’s statement carries with it an

implied assertion that Swibel desired or intended to have

the lots purchased, it represents a declaration of his state

of mind, capable of being shown only by Swibel’s state-

ments and subsequent actions and thus is admissible as an

exception to the hearsay rule. VI Wigmore, supra § 1729;

C. MeCormick, Law of Evidence, § 294—95 (1972). There

was no error in the introduction of the Broderick letter.

App. 46

C

The defendant next contends that in certain respects

the trial judge unduly limited his right to cross-examina-

tion.

He first complains about the sustaining of the govern-

ment’s objections to defendant’s questions about the intent

of Hennessey and Junior with regard to the alleged

scheme. He argues that if neither Hennessey nor Junior

had the requisite criminal intent, then Keane could not be

convicted on the conspiracy count.

We have reviewed the question placed by defense counsel

to Hennessey and we agree with the government’s conten-

tion that it dealt only with Hennessey’s state of mind with

respect to Alpine’s bargaining strength with public agen-

cies, and not with respect to the alleged fraudulent scheme

as a whole. This being so the issue of Hennessey’s in-

a2 tent to defraud was never placed in issue.

Furthermore, there were a sufficient number of denials

of wrongdoing by both Hennessey and the defendant for

the jury to be apprised of their claim of no wrongful intent.

The jury, however, had sufficient evidence of the actions of

Hennessey, Junior and Keane from which to conclude that

there existed the requisite criminal intent.

The defendant also argues that he was limited in his

cross-examination of Earl Neal and Nathan Slutzky. With

respect to Neal any error was clearly non-prejudicial and

harmless in that the defendant adopted Neal as its own

witness and obtained an answer to the question that had

been the subject of the government’s objection.

With respect to Slutzky the defense was not allowed to

ask on cross-examination if he had ever received other

than 10 percent minimum bid treatment when representing

Hennessey and Keane on dates other than June 26, 1970.

BLEED THROUGH

App. 47

Again, without holding that the trial judge improperly lim-

ited cross-examination, any error was clearly harmless.

The defendant made its showing through government and

defense summary exhibits that properties in which Keane

had an interest ¢'1 not always receive 10 percent treatment.

In any case the fact is not a significant defense to the

government’s theory of the case and our resolution of the

primary issues on appeal.

D

The defendant next objects to the evidence introduced by

the government in rebuttal. One of the questions placed

into issue was Keane’s intent to defraud with respect to

the charged scheme. After first questioning Keane con-

cerning a 1962 incident in which the City Council placed

Keane on notice that, when voting on matters affecting

his law clients he had an obligation to disclose this in-

terest, the government inquired of Keane whether he had

been involved in the representation of the American Na-

tional Bank in 1967 with regard to a zoning matter on

which he had voted. Keane denied any representation of

the Bank, any conversation with Mr. Don Reuben concern-

ing this matter and any payment for services rendered.

On rebuttal Reuben testified that he had in fact talked

with Keane about the Bank’s zoning problem, and that

Keane and Alderman Paul Wigoda had agreed to work

for the accomplishment of the Bank’s request. In addi-

tion, evidence was introduced showing that shortly after

Wigoda had received a check for $15,000 for representing

the Bank, Keane was given a check from Wigoda for $7,500.

The evidence was proper to show a prior similar act

by Keane of non-disclosure of matters in which he was

47 See, e. g., note 19, supra.

—— 2 FREESE IO A I EST EEE DRE NE ROT TRE LT CARL SIN PERE SE CTI

App. 48

interested and on which he voted. The evidence was pro-

bative of Keane’s intent to defraud. Evidence of prior

similar acts are ‘‘particularly appropriate where, as with

mail fraud, criminal intent is an essential element of the

crime charged.’’ United States v. Hutul, 416 F.2d 607, 624

(7th Cir. 1969), cert. denied, 396 U.S. 1007, 1012 and 1024,

90 S.Ct. 562, 573, 599, 24 L.Ed.2d 499, 504, 517 (1970).

See also United States v. Hoffman, 415 F.2d 14, 18—19

(7th Cir.), cert. denied, 396 U.S. 958, 90 S.Ct. 431, 24 L.Ed.

2d 423 (1969); United States v. Marine, 413 F.2d 214, 216

(7th Cir. 1969), cert. denied, 396 U.S. 1001, 90 S.Ct. 550,

24 L.Ed.2d 493 (1970).

E

The defendant also raises objections in relation to the

charge given to the jury.

The defendant challenges the instruction to the jury that

it could consider the evidence concerning the American

National Bank transaction with respect to Keane’s intent

during the pendency of the alleged scheme. The jury was

clearly instructed that the defendant was not on trial for

this transaction and for the reasons we gave for the ad-

missibility of the rebuttal testimony, we find no error in

the instruction given. See Part V D, supra.

The defendant next contends that it was error not to give

his proffered instruction which stated that the C.H.A.,

C.D.A. and M.S.D. were state-created agencies, separate

and distinct from the City of Chicago. The defendant

argues that by refusing to give this instruction the jury

was prevented from considering the defense theory of the

ease that Keane could not have been in a conflict of interest

position with these agencies.

*8 We have previously discussed defendant’s argument concerning

the instructions given to the jury in connection with the Illinois

State statutes and City Council rule 14. See Part IV, supra.

BLEED THROUGH

wa

App. 49

We note first that the government never contended, nor

was it necessary to their case, that the agencies were one

and the same as the City, and in any event Keane was not

precluded from presenting evidence on his theory.. See

e. g., United States v. Tremont, 429 F.2d 1166, 1169—70

(1st Cir.), cert. denied, 400 U.S. 831, 91 S.Ct. 63, 27 L.Ee.

2d 63 (1970). Giving the proffered instruction would have

served only to emphasize an evidentiary fact proved at

trial by one side. United States v. Thomas, 484 F.2d 909,

912 (6th Cir. 1973), cert. denied, 415 U.S. 924, 94 S.Ct.

14, 28, 39 L.Ed.2d 480 (1974); United States v. Terry, 362

F.2d 914, 916 (6th Cir. 1966), cert. denied, 385 U.S. 1029,

87 S.Ct. 758, 17 L.Ed.2d 676 (1967); Blawner v. United

States, 293 F.2d 723, 737—38 (8th Cir.), cert. denied, 368

U.S. 931, 82 S.Ct. 368, 7 L.Ed.2d 193 (1961).

We note further that Keane was in a position to vote

on acquisition sites for C.H.A. and C.D.A., so that the de-

fendant’s theory of no possible conflict of interest was not

entirely accurate. In addition, the sale of propertiies to

governmental agencies, in almost all cases, only completed

the fraudulent scheme which had been implemented by

Keane’s actions in clearing special assessments liems or

his use of advance information in acquiring parcels. In

any event the failure to give the instruction was harmless

error. In cases of sales to C.H.A. and C.D.A. where the

claim of undue influence arguably was necessary to sus-

tain the conviction,” there was a sufficient relationshiip be-

“The only counts to which the instruction the defense offered

could have been relevant were Counts IV and XII involved sailes of

properties to the C.H.A. and C.D.A. None of the other counts; were

premised on an undue influence charge. Count IV involved prop-

erties which had been the subject of City Council action and tthere-

fore has a basis for the finding of guilty independent of the wndue

influence charge.

PILE LA II LORE ORE,

App. 50

tween the functions of the agencies and the City Council

for the jury to believe that Keane was in a position to

exert influence notwithstanding the fact that the agencies

were independent.

F

The final charge of reversible error is in connection with

the closing argument of the government. Specifically de-

fendant claims that the prosecution repeatedly and without

evidence in the record referred to Keane’s power and

‘‘clout’’ and his potential control of the testimony of many

of the witnesses called in this ease.

It is clear that ‘‘[wJhile a continuously inflammatory

argument may be grounds for reversal, courts have long

recognized that, on the other hand, the prosecutor cannot

be restricted to a sterile recitation of uncontroverted

facts.’’ United States v. Greene, 497 F.2d 1068, 1085 (7th

Cir. 1974), cert. denied, 420 U.S. 909, 95 S.Ct. 829, 42 L.Ed.

2d 839 (1975). See also Brandom v. United States, 431

F.2d 1391, 1397 (7th Cir. 1970), cert. denied, 400 U.S. 1022,

401 U.S. 942, 91 S.Ct. 586, 950, 27 L.Ed.2d 634, 28 L.Ed.2d

223 (1971). In addition we must consider defendant’s claim

in the conte» of the whole closing argument and the fact

that the alleged errors related to only a brief part of a

hotly contested four-week trial. Greene, supra at 1085.

Similarly, it is clear that ‘‘unflattering characterizations of

*° The only factual inaccuracy which the defendant claims the

government made was that Keane had denied voting on the Ameri-

can National Bank zoning matter which in fact he did not deny. It

is clear from the record that counsel accidentally misspoke. Indeed,

the government was attempting to show that Keane did vote with-

out disclosing his interest. The trial judge upon defense objection

stated that he was going to rely on the jury for their recollection of

the evidence. The error was clearly harmless. United States v.

Maenza, 475 F.2d 251, 254 (7th Cir. 1973).

BLEED THROUGH

App. 51

a defendant will not provoke a reversal when such descrip-

tions are supported by the evidence.’’ United States v.

Windom, 510 F.2d 989, 994 (Sth Cir. 1975; United States

v. Cook, 432 F.2d 1093, 1106 (7th Cir. 1970), cert. denied,

401 U.S. 996, 91 S.Ct. 1224, 28 L.Ed.2d 535 (1971).

We find the defendant’s argument as to the characteriza-

tion of Keane without merit. There was sufficient evidence

of his long tenure as an alderman and as chairman of the

powerful Finance Committee. Similarly, there was proof

that he appointed the chairman of the Subcommittee on

Special Assessments and served on other council commit-

tees and other public commissions. Keane contacted

numerous public officials and others in attempts to dispose

of Alpine, THAK and Wabash lots, and it was not im-

proper for the government to in effect argue that these

contacts were available to Keane because of his position

of power.™

With respect to government counsel’s remarks that some

of the witnesses called and others not called were subject

to the influence of Keane, we find no error. There was no

government. statement that Keane had suborned perjury,

only that some of the witnesses called were in positions

where they may have felt obliged to please Keane. This

amounted to no more than permissible argument on their

*1In addition we reject the defendant’s claim that references to

Keane as a wealthy man and the ease with which he, as opposed to

others, obtained a large loan was reversible error. While it is true

that appeals to a juror’s pecuniary interest are improper, we believe

that here the reference was not directly related to the pecuniary in-

terest of the jurors. The reference to the ease of obtaining loans

was consistent with the government’s theory of Keane’s use of in-

fluence to obtain benefits. There was no statement that the benefit

to Keane was at the expense of the jurors. Thus this case is unlike

United States v. Trutenko, 490 F.2d 678 (7th Cir. 1973).

oe

App. 52

purpose for testifying as they did and on their credibility.

United States v. DeAngelis, 490 F.2d 1004, 1008 (2d Cir.),

cert. denied, 416 U.S. 956, 94 S.Ct. 1970, 40 L.Ed.2d 306

(1974); United States v. Capello, 327 F.2d 378, 379 (2d

Cir. 1964); United States ex rel. Kirk vy. Petrelli, 331 F.

Supp. 792, 796 (N.D.I11.1971), aff’d by order, 492 F.2d 1245

(1974). See also ABA Standards for Criminal Justice. The

Prosecution Fumction, § 5.8(b), commentary, (approved

draft, 1971).

The evidence generally showed close working relation-

ships between Keane, and Hill, Neal and Swibel, in-

dividuals on which the government commented during clos-

ing argument. The government can prove its case in any

manner it desires, so long as it meets its burden in a fair

manner. If it desires to call some witnesses only for lim-

ited purposes or chooses not to call others and the defen-

dant, as here, argues that this represents a weakness in the

government case, the defendant invites a response as to

why the government chose the trial strategy that it did.

See e. g., United States v. Nowak, 448 F.2d 134, 141 (7th

Cir. 1971), cert. denied, 404 U.S. 1039, 92 S.Ct. 714, 30

L.Ed.2d 731 (1972); United States v. Lawler, 413 F.2d 622,

628 (7th Cir. 1969); cert. denied, 396 U.S. 1046, 90 S.Ct.

698, 24 L.Ed.2d 691 (1970). There was no reversible error

committed by the prosecutors during their closing and re-

buttal arguments.

We have examined other contentions of trial error and

find them equally without merit.

For all of the foregoing reasons we reverse the convic-

tion as to mail fraud Counts I, XI, XIII, and affirm the con-

viction on mail fraud Counts I, III, IV, VI, VII, VIII, X,

XII, XIV, XV, XVI, XVII, XIX, XX. We also affirm

the Count XXI conspiracy conviction.

Affirmed in part and reversed in part.

BLEED THROUGH

App. 53

APPENDIX B

UNITED STATES COURT OF APPEALS

For the Seventh Circuit

Chicago, Illinois 60604

October 20, 1975.

Before

Hon. ROBERT A. SPRECHER, Circuit Judge

Hon. WILLIAM J. BAUER, Circuit Judge

Hon. WILLIAM G. EAST, Senior District Judge*

UNITED STATES OF AMERICA, Plaintiff-Appellee,

No. 74-1979 vs.

THOMAS E. KEANE, Defendant-Appellant.

Appeal from the United States District Court

for the Northern District of Illinois, Eastern Division.

No. 74 CR 359

Bernard M. Decker, Judge.

ORDER

On consideration of the petition for rehearing and

suggestion that it be heard en banc filed in the above-en-

titled cause, no member of the panel and no judge in

regular active service** having requested that a vote be

taken on the suggestion for an en banc rehearing, and the

panel having voted to deny a rehearing,

IT IS ORDERED that the petition for rehearing and

suggestion that it be reheard en banc be, and the same are

hereby, DENIED.

* Senior District Judge William G. East of the United States

District Court for the District of Oregon is sitting by designation.

** Judge John Paul Stevens disqualified himself from any con-

sideration of the petition for rehearing en banc.