On Appeal from the United States District Court for the District of New Jersey. D.C. Criminal No. 74-555.
Seitz, Chief Judge, Van Dusen and Weis, Circuit Judges.
The defendants Dansker, Haymes, Orenstein, Diaco, Valentine, Valentine Electric, and Investors Funding Corporation were convicted under a three count indictment charging them with conspiracy to violate the Travel Act, 18 U.S.C. § 1952, and with substantive violations of the statute. Count I alleged that they had conspired to utilize the facilities of interstate commerce to bribe Burt Ross, the mayor of Fort Lee, New Jersey, and the defendant Nathan Serota, vice-chairman of the Fort Lee Parking Authority, in order to gain zoning variances and other official approvals which would permit the construction of a large shopping center complex in Fort Lee. The remaining counts of the indictment charged them with the bribe of Ross (Count II) and the bribe of the defendant Serota (Count III). The remaining defendant, Serota, was convicted solely under Count III of the indictment which charged him with accepting a bribe in violation of New Jersey law. The defendants have appealed, alleging numerous infirmities in their convictions.
The evidence, viewed in the light most favorable to the government, Glasser v. United States, 315 U.S. 60, 86 L. Ed. 680, 62 S. Ct. 457 (1942), may be summarized as follows: Fort Lee, N.J., is a community of approximately 40,000 residents located at the western terminus of the George Washington Bridge. In 1971, Arthur Sutton began acquiring real estate in that community for commercial development. His efforts were financed to a large extent by the defendant Investors Funding Corporation ("IFC").*fn1 During 1972 and 1973, the financing arrangement between Sutton and IFC was used by the principals of IFC, defendants Dansker, Haymes, and Orenstein (the "IFC defendants"), to divert approximately $5,000,000 in IFC funds to their personal use.
Although much of the property acquired by Sutton and IFC was zoned non-commercial, they ultimately decided to build a huge shopping center complex on it. To this end, Sutton petitioned the Fort Lee Board of Adjustment in late 1973 for zoning variances permitting the construction of the project. Plans for the complex were announced publicly in early 1974.
A large segment of Fort Lee's populace reacted strongly to the proposal. One of the leaders of this opposition was the defendant, Nathan Serota, the vice-chairman of the Fort Lee Parking Authority. Serota was a builder on Long Island but resided in an expensive condominium apartment located in Fort Lee near the proposed project complex. Although he took no action in his capacity as a public official, Serota paid for advertisements in local newspapers opposing the project and helped form a citizens group which brought lawsuits against the developers. In addition, he organized and financed a slate of candidates for the Borough Council who made the proposed complex the major issue in the upcoming elections. However, Serota and the project's opponents concentrated their immediate efforts on blocking approval of the developers' petition for variances then pending before the local Board of Adjustment.
Public hearings on Sutton's petition began before the Board of Adjustment in early March 1974. From the outset, Serota, accompanied by counsel, regularly attended the hearings and took an active part in them. By April, it became evident that the project had little chance of gaining the needed variances.
At this point defendant, Andrew Valentine, president of the defendant, Valentine Electric Company,*fn2 approached Sutton and offered to assist in obtaining official approval for the project in exchange for an opportunity to receive the electrical contract for the complex. At a subsequent meeting between them, Valentine suggested that their problems could be solved by buying off the two major opponents of the project, Serota and Mayor Ross. Sutton then relayed this proposal to the IFC defendants who approved such an approach and agreed to finance it.
In the weeks that followed, Serota was contacted by Valentine. They worked out an agreement under which Serota would sell his Fort Lee apartment, valued at $500,000, to the developers for $900,000. In addition, Serota would agree to cease his opposition to the project and take active steps to secure its approval in a modified form. Serota was to also receive an additional $200,000 in cash on the date his apartment was sold.
The actual sale of Serota's apartment was consummated on May 15. Under the terms of the contract, Serota sold his apartment for $900,000 ($250,000 down, $650,000 in deferred payments) to Herman Lasker, defendant Orenstein's brother-in-law, as agent for an undisclosed principal. The purchaser agreed to sublease the apartment back to Serota rent-free until September 30, 1978. The contract also contained a provision stating that Serota agreed to halt his opposition to the project. However, no mention at all was made of Serota's agreement to assist in obtaining official approval for the project or the additional $200,000 in cash he received on the closing date.
Having "taken care" of Serota, the defendants turned their attention to Mayor Ross. On May 19, a meeting took place between Ross and the defendant Joseph Diaco, a principal of Valentine Electric, at which Diaco sought to have Ross postpone the Board of Adjustment's decision on Sutton's petition which was then scheduled for May 22. When Ross indicated that he could not, Diaco asked him, "Would money help?". The meeting closed with Ross' agreement to meet with the developers' attorneys, but only after the Board of Adjustment rendered its decision. Ross secretly reported the incident to the United States Attorney's Office the following day, and thereafter worked with it in its investigation of the matter.
On May 22, Ross met with Diaco once again and had several telephone conversations with him. Diaco continually urged him to delay the Board's decision scheduled for that evening. This time, however, he offered him first $200,000, then $400,000, and finally $500,000 for his cooperation. During the last phone conversation of the day, which was taped, Diaco repeated his $500,000 bribery offer and threatened to expose "something about [Ross'] administration" if he refused to go along. Ross, however, would only agree to meet with the defendants' attorneys after the variances had been turned down.
As expected, without Ross' intervention the Board voted down Sutton's petition. An outright rejection carried with it dire financial consequences for IFC which was then heavily indebted to several New York banks. Consequently, in order to placate IFC's creditors, Sutton and the IFC defendants decided to submit a modified version of the project to the Board in the near future. It was imperative that this modified proposal quickly receive official sanction. To this end, Valentine was again enlisted to attempt to secure Ross' assistance.
On May 24, Ross, wearing a body recorder provided by the FBI, met with Diaco in a Hackensack, N.J. restaurant. They discussed the means by which approval of the project in its revised form could be obtained. For his assistance, Ross was offered $100,000 as an advance to evidence Diaco's good faith, with an additional $200,000 to $400,000 to be forthcoming. Ross feigned acceptance of the proposal and agreed to meet further with Diaco and Sutton.
Ross' meeting with Diaco and Sutton took place on May 26, in a Paramus, N.J. diner. Ross was again equipped with a body recorder. The three discussed in detail the modified version of the project. Sutton stated that approval of it was needed by June 17. They then turned to the subject of the bribe. Ross indicated that he did not believe that $100,000 was overly generous. However, he accepted $100,000 in cash from Diaco. Later that day, he delivered this money to the FBI.
By May 29, IFC was under heavy pressure from the New York banks holding its notes. In order to avoid financial disaster a definite date on which the modified proposal would be placed on the Board's agenda was needed. Consequently, the IFC defendants contacted Sutton and urged him to finalize arrangements.
The following day, Ross, Sutton, and Diaco met once again. The three agreed that the revised plan would be submitted to the Board on June 7. It was hoped that official approval could then be obtained within ten days. For his part in the scheme, Ross would receive $200,000 in cash when the Board approved the plan and an additional $200,000 in monthly installments of $25,000. This proved to be the final clandestine meeting between Ross and any of the defendants for on May 31, the initial indictments in this prosecution were handed down.
Originally, Sutton and Diaco were indicted for conspiracy to bribe Mayor Ross. This first indictment was dismissed with leave of the court after Sutton was permitted to plead guilty to a lesser offense in exchange for his agreement to furnish evidence on behalf of the government. Thereafter, a second indictment was handed down against all the defendants in the instant appeal. This second indictment was superseded by a third which charged the defendants with the identical crimes, but contained additional allegations and corrected arguable defects in the second. The defendants appeal from their convictions under this third indictment.
Defendant Serota has raised numerous challenges to his conviction under Count III, the principal of which is that his conduct failed to violate the Travel Act, 18 U.S.C. § 1952. The Travel Act makes it a federal offense for an individual to utilize the facilities of interstate commerce with the intent "to further any unlawful activity". It goes on to define "unlawful activity" as the crimes of 'extortion, bribery, or arson in violation of the laws of the State in which committed or of the United States". Serota was charged with violating this federal statute by accepting a bribe in violation of the laws of New Jersey. He vigorously asserts, however, that the actions charged and proven against him fail to constitute bribery under any definition of the crime.
At the outset we note that the Travel Act incorporates into federal law New Jersey's substantive law of bribery for this particular case, even though it contains a more expansive definition of the crime than that found at common law. The Travel Act does not reach only those state offenses which would have constituted the crimes of "extortion, bribery, or arson" at common law. Rather, all state offenses which can be generically classified under those headings fall within its purview. United States v. Nardello, 393 U.S. 286, 21 L. Ed. 2d 487, 89 S. Ct. 534 (1968).
This broad interpretation of the Act has enabled it to encompass state statutory expansions of the crimes of extortion, bribery and arson over the years, and thus more effectively carry out its purpose of aiding local law enforcement efforts to combat "pernicious undertakings which cross state lines ". Hence, in Nardello, the Supreme Court held that the defendant's "shakedown" operation could constitute extortion within the meaning of the Travel Act even though a private citizen could not commit the crime of extortion at common law and the particular state involved classified the defendant's activities as blackmail.
As will become evident in our discussion of New Jersey law, the conduct prohibited by the relevant New Jersey bribery statute easily comes within the generic term bribery. Consequently, we will analyze Serota's activities in terms of New Jersey law in determining whether they violated the Travel Act.
In maintaining that his conduct failed to constitute the acceptance of a bribe, Serota raises two main arguments. First, he contends that it was neither charged nor proven that the alleged bribers paid him any monies because of his status as vice-chairman of the Fort Lee Parking Authority. In this regard, he points out that there is no record evidence indicating that the influence he agreed to exert on behalf of the developers derived in any way from his official position or that the alleged bribers believed that he could influence public decisions concerning the project by virtue of his public office. Secondly, he asserts that the government made no effort to establish that he was to act in a manner other than that permissible for any private citizen in attempting to influence official actions with respect to the project.
The government contends, however, that Serota's arguments are immaterial under its construction of the relevant New Jersey law. That law does not require that a public official agree to be influenced in connection with his official duties. Indeed, the recipient need not be a public official at all. Rather, the government maintains, the crime is made out whenever the recipient agrees to accept payment with the "corrupt intent" to influence any official action whatsoever.
Although arguing that any individual may be guilty of accepting a bribe under New Jersey law, the government asserts that the requisite corrupt intent is much easier to establish when a public official is the recipient. Since a public official is bound by rules of honesty and integrity far more stringent than those imposed on private citizens, it argues that it need only be shown that a public official accepts a personal benefit in exchange for his agreement to influence any official action, whether in a lawful manner or not.
Under its interpretation of the relevant New Jersey law, the government insists that the evidence below is sufficient to sustain Serota's conviction. It is undisputed that Serota was a public official who accepted monies from the developers. The evidence justified a finding that, in exchange for this payment, he agreed not only to halt his opposition to the project, but also to take affirmative steps to secure official approval for it in a modified form. In this latter respect, the record indicates: (a) that Serota agreed to issue a public statement favoring the modified project's construction; (b) that he changed his stance at the Board of Adjustment's hearings from one opposing the project to one supporting it in a reduced format; (c) that shortly after the sale of his apartment, he told Valentine, "We can take care of the hearings. We'll cooperate with you"; and (d) that he agreed to speak to his slate of candidates in order to induce them to support a limited project and, if ultimately elected, to assist in obtaining official approval for it. The government concludes that an agreement by a public official to influence governmental action in this manner in exchange for money establishes his " corrupt intent" and thus violates New Jersey's law of bribery.
The pertinent New Jersey statute provides as follows:
Any person who directly or indirectly gives or receives, offers to give or receive, or promises to give or receive any money, real estate, service or thing of value as a bribe, present or reward to obtain, secure or procure any work, service, license, permission, approval or disapproval, or any other act or thing connected with or appertaining to any office or department of the government of the state or of any county, municipality or other political subdivision thereof, or of any public authority, is guilty of a misdemeanor.
Certainly, on its face, it would appear to encompass Serota's conduct. It does not require that the recipient of a bribe be a public official, or if a public official, that he agree to be influenced with respect to his official duties. Nor does it require that the recipient somehow attempt to influence governmental action in an unlawful or otherwise corrupt manner. Rather, the statute, by its terms, makes it unlawful for any individual to accept any benefit in exchange for his agreement to influence any official action in any manner.
Obviously, the statute cannot be read in such a literal fashion without running afoul of the first amendment. The government implicitly concedes this point by attempting to engraft a "corrupt intent" element onto it. Consequently, we must resort to the relevant New Jersey case law in order to obtain the proper construction of the statute.
Our analysis of the most recent New Jersey cases construing the statute indicates that it was designed to reach only that conduct which has been the traditional concern of the law of bribery - conduct which is intended, at least by the alleged briber, as an assault on the integrity of a public office or an official action. The only expansion of the common law crime seemingly effected by the statute is that any individual may be convicted of accepting a bribe if he in fact possesses, or creates the appearance that he possesses, the ability to influence official conduct. In expanding the law's ambit to include both actual and would-be brokers of governmental corruption, the New Jersey legislature apparently intended to deter all individuals willing to purchase such governmental influence, and thus better insulate public actions from corruption. See State v. Ferro, 128 N.J. Super. 353, 320 A.2d 177 (App. Div.), cert. denied, 65 N.J. 566, 325 A.2d 700 (1974). However, whether the recipient is a public official or a private citizen, the gravamen of the offense remains the same. The recipient must agree to utilize whatever apparent influence he might possess to somehow corrupt a public office or an official act.
A close examination of both cases relied on by the government for its broad interpretation of the statute supports our more narrow construction. In State v. Sherwin, 127 N.J. Super. 370, 317 A.2d 414 (App. Div.), cert. denied, 65 N.J. 569, 325 A.2d 703, cert. dismissed, 419 U.S. 801, 95 S. Ct. 9, 42 L. Ed. 2d 32 (1974), the defendant, New Jersey's Secretary of State, was convicted of accepting a bribe under the statute in question. He had urged the state's Commissioner of Transportation to reject the low bid on a highway contract in favor of that submitted by a contractor who had enlisted his aid by contributing $10,000 to his political party. On appeal, the defendant argued, among other things, that he could not be found to have violated the statute without showing that he possessed the official authority to effect the governmental action sought.
In affirming his conviction, the court found it immaterial that he lacked such official authority. However, the court did not base its decision on the mere fact that the defendant was a public official as the government seems to suggest. Rather, the court found that the defendant had violated the statute because he had used the "opportunity was used to perform a public duty as a means of acquiring an unlawful benefit". 317 A.2d at 422. Obviously, the "public duty" referred to was that of the Department of Transportation, since the defendant possessed none with respect to the highway contract involved. Hence, liability was predicated on the fact that the defendant, in exchange for favors, had agreed to utilize whatever apparent influence*fn3 he might possess to undermine the integrity of the decision-making processes of that governmental body.
That the essence of the offense remains an agreement to corrupt a public office or action is even more evident in State v. Ferro, supra. There, the defendant was the local leader of the Democratic Party but held no public office. He was convicted of accepting a bribe upon a showing that he had accepted money from two defendants in pending state criminal prosecutions in exchange for his agreement to use his influence in order to secure for them favorable treatment from the local probation office and state courts. In affirming his conviction, the court rejected his argument that N.J.S.A. 2A:93-6 did not reach the activities of private citizens. Rather, the court found that the statute was aimed at both actual and would-be brokers of governmental corruption, and that, as a result, any individual could be guilty of accepting a bribe so long as he created an understanding with the briber that "he [could] influence matters in connection with an official duty." 320 A.2d at 179. As the court went on to state:
"The most reasonable interpretation of this provision is that it was designed to broaden the offense of bribery so as to include the peddling of influence by a person in an apparent position of access to a public official. Such activity is not penalized by the common law. Yet, being a common evil which denigrates the integrity of our public institutions, the Legislature undoubtedly intended to proscribe such conduct." (emphasis added). 320 A.2d at 180.
Our construction of the pertinent New Jersey bribery statute, then, differs greatly from that pressed upon us by the government. The statute does not make criminal an agreement by a public official to influence, in an otherwise lawful manner, governmental action unrelated to his office because, in entering such an agreement, he violates some nebulous standard of propriety imposed on public officials by law. Rather, in order to establish a violation of the statute, it must be demonstrated: (a) that the alleged recipient, whether he be a public official or not, possessed at least the apparent ability to influence the particular public action involved; and (b) that he agreed to exert that influence in a manner which would undermine the integrity of that public action.
In view of the government's erroneous interpretation of the relevant law, it is not surprising that the evidence adduced below, even when viewed in the light most favorable to the government, is insufficient to sustain a conviction under the statute, properly construed. With respect to the first factor noted above, although it is clear that Serota was a public official, the government failed to produce any evidence whatsoever indicating that he had any ability, actual or apparent, to influence official decisions concerning the project in his official capacity, or that the alleged bribers believed he could do so by virtue of his public office. Indeed, on the record before us, it is not even clear that the developers were aware of the fact that Serota was the vice-chairman of the Fort Lee Parking Authority. Hence, on the facts of this case Serota's status as a public official, a factor crucial to the government's theory of criminality,*fn4 really has no bearing on the issue of whether Serota's activities violated the particular statute involved.
Moreover, an examination of the record fails to disclose any evidence suggesting that Serota had any access to the Board of Adjustment in some unofficial capacity which the developers were interested in purchasing. Rather, the only influence, discernible from the record, which Serota possessed in these matters was that derived from his activities as a private citizen vocally opposing the project's development. And, a fair reading of the record indicates that it was in this capacity as "the leader of the . . . biggest portion of the opposition" that he was approached by the developers.
Turning to the second prong of our analysis, we agree that the evidence introduced by the government conclusively establishes that Serota agreed to halt his previous opposition to the project and publicly exert his considerable influence in the developers' behalf. However, even though the evidence demonstrates that he agreed to take "affirmative" steps to secure official approval for the project in a modified form, without more, it fails to justify a finding that, in so doing, he was to engage in any conduct that would corrupt the activities of the Board of Adjustment. Certainly, his public reversal of his prior stance against the project, even if motivated by financial considerations, could not subvert the integrity of that governmental body. Nor would his efforts to induce his slate of candidates to endorse a limited project since they obviously possessed no authority whatsoever in these matters prior to their election.
The only remaining piece of evidence relied on by the government - Serota's statement to the effect that he would "take care" of the hearings by cooperating with the developers - fails to raise an inference of criminality when viewed in the context of the entire record. As previously noted, there was no record evidence suggesting that Serota could influence the Board of Adjustment in any manner other than by ceasing his opposition to the project and publicly supporting its construction. Hence, against this background, Serota's statement can only be reasonably interpreted as his agreement to take a stance in favor of the project before the Board. See United States v. Cades, 495 F.2d 1166, 1169-70 (3d Cir. 1974); United States v. Finnerty, 470 F.2d 78, 81 (3d Cir. 1972). Moreover, even if this single statement could support some inference of ...