The opinion of the court was delivered by: FULLAM
The defendant George X. Schwartz has been found guilty by a jury of conspiring, in violation of 18 U.S.C. § 1962(d), to violate provisions of the Racketeer Influenced and Corrupt Organizations Statute, 18 U.S.C. § 1962(c) ("RICO" conspiracy), and, together with co-defendant Harry P. Jannotti, of conspiring to obstruct commerce in violation of the Hobbs Act, 18 U.S.C. § 1951(a). Before trial, both defendants sought dismissal of the Indictment on constitutional grounds, alleging various forms of prosecutorial misconduct. Extensive hearings were held, but I concluded that decision must await the further development of the record at trial. At the conclusion of the Government's case, and again at the conclusion of all of the evidence, the defendants sought judgment of acquittal pursuant to F.R.Crim.P. 29, and renewed their motions to that end after the jury's verdict. This Opinion addresses both sets of motions, which to some extent involve similar or closely related issues.
At all pertinent times, the defendant Schwartz was President of the Philadelphia City Council, and the defendant Jannotti was a member of City Council. The Government's evidence at trial proved that Schwartz accepted $ 30,000 and Jannotti accepted $ 10,000 from undercover F.B.I. agents who purported to be representatives of wealthy Arab investors contemplating construction of an elaborate hotel complex in Philadelphia. There is no dispute about the defendants' receipt of the payments, and the evidence permitted, although it did not compel, the inference that the payments represented bribes paid in exchange for the defendants' assurances of using their official positions to pave the way for expeditious completion of the project.
The Hobbs Act, 18 U.S.C. § 1951(a) makes criminal the conduct of
"whoever in any way or degree obstructs, delays, or affects commerce or the movement of any article or commodity in commerce, by robbery or extortion or attempts or conspires so to do...."
The issue to be decided is whether the Government succeeded in proving the necessary nexus between the defendants' actions and interstate commerce. The Government introduced no evidence on that subject, arguing instead that the jury should be permitted to infer, on the basis of common knowledge, that a hotel project of the magnitude of the one under discussion (ultimately stated to be approximately $ 34 million) would necessarily involve interstate commerce; and that, in any event, the transfer of funds for the project by the foreign investors would fall within the definition of commerce as used in the Hobbs Act.
For present purposes, I shall assume that the evidence permitted the jury to conclude that, if the project had in fact been a genuine project, it would have required the movement of articles in interstate commerce, and that the payment of these bribes would have affected such commerce by depleting the funds available for carrying out the project. The problem which remains is that there never was any such planned project. The Arabs, their plans, and their money, were all entirely fictitious.
At an earlier stage of this litigation, by Order entered August 18, 1980, I dismissed those counts of the Indictment which charged substantive offenses under the Hobbs Act, reasoning that there was no possibility that the bribe payments could actually have affected commerce. I declined at that time to dismiss the conspiracy charge, however, on the theory that the Government might be able to prove that the defendants had an actual conscious intent to obstruct interstate commerce, and that legal impossibility of fulfillment of such intent would not be a defense to a conspiracy charge. I also left open the possibility that proof of a conspiracy to commit acts which, if completed, would affect commerce, might suffice to establish federal jurisdiction.
There is no contention that the evidence at trial proved that interference with interstate commerce was a conscious object of the alleged conspiracy. And, upon further reflection, I am now of the opinion that this Court's jurisdiction under the Hobbs Act has not been established.
Another aspect of this problem should perhaps be mentioned. Extortion, as used in the statute, is defined as
"... the obtaining of property from another, with his consent, induced by wrongful use of actual or threatened force, violence, or fear, or under color of official right." (s 1951(b)(2).)
As discussed in my August 18, 1980 Memorandum, there is some lack of unanimity among appellate decisions as to whether "consent induced...under color of official right" covers ordinary bribery, or whether some element of coercion is required to be shown. While it is now clear in this Circuit that the use of official position to obtain money unlawfully is covered by the Hobbs Act, all of the decisions on that subject in this Circuit involved situations in which a demand or request for payment could reasonably be perceived as having emanated from the public official. I am aware of no appellate decision, in any circuit, upholding a Hobbs Act conviction on the basis of a bribe which was neither requested by the official, nor perceived by the payor as either necessary or at least helpful. In contrast, the evidence in the present case clearly establishes that not only did the defendants not request payment, they made it very clear that the payments would not be necessary.
To permit the convictions of Hobbs Act conspiracy in this case to stand would represent a substantial stretching of the definition of extortion, and a corresponding expansion of federal jurisdiction in derogation of the criminal jurisdiction of state courts. In my judgment, it is impermissible to treat federal jurisdiction thus doubly expansively: first by extending it to passive acceptance of gratuities by public officials, and second by extending it to purely hypothetical situations.
The guilty verdict on Count III of the Indictment will be vacated, and Count III will be dismissed for lack of jurisdiction.
In Count II of the Indictment, the defendants were charged with conspiracy to conduct the affairs of an enterprise, to wit, the law firm of Criden, Johanson, Dolan, Morrissey and Cook, of which co-defendant Howard Criden was a partner, through a pattern of racketeering activity, to wit, the payment of bribes to public officials. The defendant Jannotti was acquitted on this count; the Government's own evidence tended to show that he was not even aware of the existence of the law firm, probably did not know that Howard Criden was a lawyer, and may very well have had no knowledge of bribery activities other than the single payment to him. The defendant Schwartz was convicted, and the question is whether the evidence adequately supports the verdict.
The evidence makes clear that only three of the lawyers associated with the law firm mentioned in the Indictment had any knowledge of the illegal activities of Criden, or shared in the proceeds. Indeed, the law firm named in the Indictment appears to have been a loosely-structured, flexible arrangement, in which decisions as to whether particular fees belonged to the firm or to individual lawyers were made on an ad hoc basis, after the fact. Criden and Johanson received fees for their part in introducing the undercover agents to public officials who accepted bribe payments. Johanson received a bribe payment himself, and Criden both received payment from the undercover agents for his services, and, in some instances, received a portion of the bribe from the recipient of the bribe. Some of the money was distributed among Johanson, Criden and Cook, and some of it was placed in a safe deposit box to which only those three had access. On one occasion, when the law firm needed cash to meet its expenses, Criden arranged to have $ 2500 removed from the safe deposit box and paid to the firm, ostensibly as fees received from inactive corporations he controlled.
It is also reasonably clear that Criden, Johanson and Cook labored under the assumption that the law firm, or certain portions of the law firm, would be performing legal services for the Arabs' hotel enterprise and other business involvements in Philadelphia. Indeed, the prospect of such lucrative law business was an important part of the motivation of the three men.
Taken as a whole, I believe the circumstances established on this record permitted the jury reasonably to conclude that Criden's bribery activities were undertaken in his conduct of the affairs of the law firm. See, e.g., U. S. v. Scotto, (2d Cir. Sept. 2, 1980), 28 Crim.L.R. 2026.
The conviction of Mr. Schwartz on Count II of the Indictment required proof that he knowingly participated in a conspiracy, one of the objects of which was Criden's conduct of the affairs of the law firm through a pattern of bribes. The defendant contends that, whereas the evidence does justify the inference that Mr. Schwartz knew that Criden was involved in at least two bribe transactions, those in which Schwartz and Jannotti received payments, the conclusion that Schwartz intended to aid Criden in conducting the affairs of Criden's law firm by that means is totally unfounded.
For many years Mr. Schwartz was a partner in a large center city law firm, which is now known as Blank, Rome, Comisky and McCauley (hereinafter "Blank, Rome"). He withdrew from the active practice of the law in about 1970 or 1971, and severed all connections with the firm at that time. However, his son is now associated with that firm, and Mr. Schwartz himself continues to be personally friendly with various members of that firm. In the course of his meeting with the undercover agents, Schwartz was asked to recommend a law firm which, in his judgment, would do a good job in handling the legal affairs of the proposed hotel project. He mentioned three firms, one of which was Blank, Rome. Shortly thereafter, while having lunch with a partner in the Blank, Rome firm, Schwartz alerted him to the possibility that the Arabs might be interested in retaining Blank, Rome, and also explained that Criden apparently expected his own firm to share in the work, and in any fees which might be generated. It was agreed that Criden's law firm would not be able to participate, because Johanson, a member of City Council, was a member of that firm. There was no further discussion of the project with the Blank, Rome firm, but it appears that shortly thereafter, Criden and Cook discussed the possibility of severing their connection with the existing law firm, and joining Blank, Rome in some fashion, if the hotel project materialized, and if the Arabs should select Blank, Rome as their counsel.
I believe the evidence permitted the jury to conclude that the defendant participated in the bribe transaction with knowledge that Criden was also a participant, that Criden was engaged in a series of similar transactions, and that Criden's activities occurred in the course of his conduct of the affairs of Criden's law firm. In my view, it was not necessary for the Government to prove that Schwartz fully supported all of Criden's long-range goals. Moreover, there is authority for the proposition that proof of scienter and mens rea which suffices for conviction of the predicate offenses also suffices for conviction of RICO conspiracy based upon those predicate offenses. U. S. v. Boylan, 620 F.2d 359 (2d Cir. 1980).
The defendant, relying on U. S. v. Elliott, 571 F.2d 880 (5th Cir. 1978), argues that the Government was required to prove that he specifically intended to participate in the conduct of the affairs of the enterprise through a pattern of racketeering activity, that is, it must be shown that the defendant himself participated in at least two acts of racketeering. Upon close reading of the opinion in that case, it is not altogether clear that the court goes that far; there is room for an interpretation to the effect that participation in a single act of racketeering, with knowledge that it was part of a pattern of similar acts, would suffice. Be that as it may, there was evidence in the present case from which the jury could reasonably have concluded that Schwartz had some involvement in the Jannotti bribe transaction as well as his own.
Taken as a whole, and viewed in the light most favorable to the Government, the evidence in this case sufficed to enable a reasonable jury to conclude, with the requisite assurance, that the essential elements of the crime charged in Count II of the Indictment were made out, as to the defendant Schwartz. It therefore becomes necessary to address the entrapment and due process defenses asserted.
Discussion of the law of entrapment properly begins with a brief recapitulation of the decisions of the Supreme Court on this subject. In Sorrells v. U. S., 287 U.S. 435, 53 S. Ct. 210, 77 L. Ed. 413 (1932), a prohibition agent, masquerading as a businessman-tourist, persuaded the defendant to obtain for him a half-gallon of whiskey. The defendant yielded to repeated requests, made in the course of a social gathering in which the prohibition agent emphasized his World War I military service in the same unit as the defendant. The Court unanimously held that these circumstances, if established, amounted to impermissible entrapment. The majority, in an opinion by Chief Justice Hughes, took the position that Congress could not have intended the National Prohibition Act to apply to sales induced by government agents from otherwise innocent defendants, and held that the entrapment defense should have been submitted to the jury. The Chief Justice referred to
"... the duty of the Court to stop the prosecution in the interest of the Government itself, to protect it from the illegal conduct of its officers, and to preserve the purity of its courts." (287 U.S. at p. 446, 53 S. Ct. at p. 214.)
The concurring opinion by Mr. Justice Roberts, in which Justices Brandeis and Stone joined, rejected the majority's statutory-intent analysis, but agreed that, if the facts were as asserted by the defendant, no conviction would be permissible. They felt that the issue was properly one for the Court, rather than the jury; the language of the concurring opinion suggests an admixture of due process and supervisory power concepts.
In Sherman v. U. S., 356 U.S. 369, 78 S. Ct. 819, 2 L. Ed. 2d 848 (1958), a government informant first met the defendant, a former drug addict, at the office of a physician who was treating both men for addiction-related problems. Thereafter, there were several accidental meetings (e.g., at a drug store where both had their prescriptions filled) in the course of which the two became friendly, compared notes, etc. The informant pretended to be desperately in need of drugs, and repeatedly urged the defendant to obtain some for him. The defendant eventually yielded to these importunings, helped the informant obtain drugs, and became readdicted himself. It was at that point that the informant first contacted law enforcement agents about the defendant, although he had previously acted as informant in other cases. The defendant had twice been convicted of drug-related offenses, several years earlier.
The entrapment issues were presented to a jury, which nevertheless convicted the defendant. The Supreme Court unanimously held that the conviction must be reversed, and that the Government's own evidence established entrapment as a matter of law.
The majority opinion, by Chief Justice Warren, cited Sorrells, and seems to have adopted its legislative intent rationale. The net effect of the majority opinion, at any rate, is that the line is to be drawn between trapping the unwary innocent, and trapping the unwary guilty, into the commission of a crime. Mr. Justice Frankfurter's concurring opinion, in which he was joined by Justices Douglas, Harlan and Brennan, rejected the legislative intent analysis of Sorrells, and the predisposition analysis of the majority, and urged adoption of an objective test, focusing upon the conduct of the government agents: if the conduct of the government agents was such as to be likely to cause a person of reasonably firm moral convictions to stray from the path of righteousness, the case should be dismissed. The standards of permissible governmental inducement should be the same for all defendants, whether predisposed or not.
In U. S. v. Russell, 411 U.S. 423, 93 S. Ct. 1637, 36 L. Ed. 2d 366 (1973), government agents furnished a chemical substance, P2P, not in itself contraband, to the defendant in order to enable him successfully to complete the unlawful manufacture of methamphetamine. In a 5-to-4 decision, the Court upheld the conviction. The majority opinion reaffirmed and clarified the Sherman and Sorrells holdings adopting the subjective approach, and ruled that creative involvement by government agents is not a defense which may be asserted by a predisposed defendant. The dissenters, in opinions by Justices Douglas and Stewart, argued for the objective approach adopted by Mr. Justice Frankfurter in Sherman.
In Hampton v. U. S., 425 U.S. 484, 96 S. Ct. 1646, 48 L. Ed. 2d 113 (1976), the defendant claimed that it was the Government which, through an informant, actually supplied the drugs which the defendant was prosecuted for distributing. It was conceded that the defendant was predisposed, and he therefore did not request a jury instruction on entrapment as defined by the majority in Russell. He did, however, specifically request a charge to the effect that, if the jury believed that the drugs had been supplied by the Government, there could be no conviction.
By a 5-to-3 vote, the Supreme Court upheld the conviction. The plurality opinion by Mr. Justice Rehnquist, in which Chief Justice Burger and Mr. Justice White joined, expressed the view that there can never be a successful entrapment defense if the defendant is predisposed, and that a defendant may be heard to complain that the conduct of government agents was so egregious as to amount to a violation of due process only if his own due process rights were violated.
Finally, although not directly pertinent, the recent decision in U. S. v. Payner, 447 U.S. 727, 100 S. Ct. 2439, 65 L. Ed. 2d 468 (1980) should be mentioned. In that case, agents of the Internal Revenue Service hired a firm of private detectives to steal a briefcase from a third party, and helped them photograph numerous documents found therein. These documents led to the discovery of other evidence which formed an important part of the Government's case against the defendant. Conceding that the defendant lacked standing to assert Fourth Amendment issues, the trial court nevertheless, in the exercise of its supervisory powers, suppressed the evidence and set aside the conviction. The Supreme Court, in a 6-to-3 decision, reversed, and reinstated the conviction. The majority opinion, by Mr. Justice Powell, held that it was improper to invoke the court's supervisory power in these circumstances. Only persons whose own Fourth Amendment rights are violated have standing to invoke the exclusionary rule.
The guiding principles which emerge with clarity from these pronouncements of the Supreme Court include the following:
1. It is perfectly proper for law enforcement officials to engage in undercover activities, including deception and trickery, where both the purpose and effect of their activities is to enforce the law by ferreting out and exposing criminal activities. Entrapment issues arise only where the Government induces or persuades a person to commit a crime, or actually participates in the commission of the crime.
2. Under no circumstances is it permissible to convict of crime a non-predisposed defendant who was induced by government agents to commit the crime charged. No member of the Supreme Court has ever expressed any doubt as to the correctness of this principle, although varying reasons have been put forth from time to time for its justification.
3. A predisposed defendant may properly be convicted notwithstanding he was induced by government agents to commit the particular crime charged, so long as the inducement is not such as would be likely to cause a person of reasonably firm moral convictions to stray into criminality. For some members of the Court, this is true because, in their view, a predisposed defendant cannot successfully assert an entrapment defense under any circumstances. For other members of the Court, this is true because entrapment should be viewed as a matter of the objective reasonableness of the conduct of the government agents. Neither of these approaches is fully accepted by a majority of the Court. There is, however, majority acceptance of a middle ground, set forth in the following paragraph.
4. A predisposed defendant may properly be convicted notwithstanding governmental inducement or creative involvement, unless the conduct of the government agents was so outrageous as to violate fundamental concepts of fairness; that is, unless the conduct of the government agents was so outrageous as to be deemed a violation of due process. The converse of this statement, namely, that even a predisposed defendant cannot be convicted if the Government's conduct amounted to a violation of due process, probably also represents the view of a majority of the members of the Court, although some may regard it as still an open question, and it is probable that opinions concerning what is, and what is not, sufficiently outrageous conduct can be expected to vary.
There are several pertinent decisions of the courts of appeals which shed light upon the proper application of the principles established by the foregoing Supreme Court decisions to particular fact situations. Before proceeding to a discussion of these intermediate appellate decisions, certain general observations are in order.
The second, and perhaps less obvious, point is that the term "inducement" in the entrapment context is often used in a broad sense, to include very different forms of governmental activity; and that the Supreme Court's resolution of the objective-subjective controversy does not mean that the precise nature of the governmental activity alleged to constitute inducement in a particular case is no longer significant.
Most of the cases dealing with entrapment have been narcotic cases. Indeed, virtually all of the Supreme Court decisions on this subject have involved some form of contraband. Because of the special problems of detection and proof involved in narcotics cases, and because of the extreme danger to the public inherent in narcotics trafficking, it is plainly necessary to avoid placing undue restrictions upon the scope of permissible police activities in that area. ...