277 F.3d 678 (3rd Cir. 2002), 01-1739, United States v Panarella

Docket Nº:01-1739
Citation:277 F.3d 678
Party Name:UNITED STATES OF AMERICA, v. NICHOLAS PANARELLA, JR., APPELLANT
Case Date:January 11, 2002
Court:United States Courts of Appeals, Court of Appeals for the Third Circuit
 
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277 F.3d 678 (3rd Cir. 2002)

UNITED STATES OF AMERICA,

v.

NICHOLAS PANARELLA, JR., APPELLANT

No. 01-1739

United States Court of Appeals, Third Circuit

January 11, 2002

Argued: July 31, 2001

On Appeal From the United States District Court For the Eastern District of Pennsylvania (D.C. Crim. No. 00-cr-00655) District Judge: Honorable Marvin Katz

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Richard L. Scheff, Esquire (argued), Jill Baisinger, Esquire, Montgomery, McCracken, Walker & Rhoads, Llp, 123 South Broad Street Philadelphia, PA 19109, for Appellant.

Patrick L. Meehan, Esquire, United States Attorney, Robert A. Zauzmer, Esquire, Assistant United States Attorney, Chief of Appeals, Catherine L. Votaw, Esquire, Gregory A. Paw, Esquire, (argued), Assistant United States Attorneys, 615 Chestnut Street, Suite 1250 Philadelphia, PA 19106, for Appellee.

Before: Becker, Chief Judge, Ambro, and Weis, Circuit Judges.

OPINION OF THE COURT

Becker, Chief Judge.

Defendant Nicholas Panarella, Jr. appeals from a judgment of the District Court convicting him of being an accessory after the fact to a wire fraud scheme by F. Joseph Loeper, Jr., then a Pennsylvania State Senator, to deprive the public of his "honest services" as a legislator. See 18 U.S.C. SS 3, 1343 & 1346. Panarella contends that the superseding information to which he unconditionally pleaded guilty failed to charge an offense, and alternatively, that his guilty plea lacked an adequate factual basis under Federal Rule of Criminal Procedure 11(f). Panarella does not dispute that the facts alleged in the superseding information are sufficient to charge him with being an accessory after the fact to Loeper's scheme to deprive the public of his "honest services" if, under the applicable law, such a scheme existed. Instead, Panarella contends that the facts alleged in the superseding information do not establish that Loeper committed "honest services" wire fraud in violation of 18 U.S.C. SS 1343 & 1346, and that Panarella therefore cannot be charged as an accessory.

Section 1343 provides, in relevant part, that

[w]hoever, having devised... any scheme... to defraud,... transmits... by means of wire... in interstate or foreign commerce, any writings, signs, signals, pictures, or sounds for the purpose of executing such scheme or

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artifice, shall be fined under this title or imprisoned not more than five years, or both.

Section 1346 elaborates on the meaning of "scheme to defraud," stating that "[f]or the purposes of this chapter, the term `scheme or artifice to defraud' includes a scheme or artifice to deprive another of the intangible right of honest services." We will refer to this type of fraud as "honest services fraud."

Panarella argues that because the superseding information does not allege that Panarella's payments to Loeper were bribes, or that Loeper's actions as Senator were improperly influenced by the payments he received from Panarella, Loeper did not deprive the public of his honest services. According to Panarella, in the absence of such allegations, the mere fact that Loeper failed to disclose his income from Panarella's business while speaking and voting against proposed legislation that would have significantly harmed Panarella's business does not amount to honest services fraud. The government responds that to establish that Loeper engaged in honest services wire fraud, it is not necessary to show that his actions as Senator were influenced by his financial relationship with Panarella, but only that Loeper unlawfully concealed a financial interest while taking discretionary action that directly benefitted that interest.

As a threshold matter, the parties dispute whether Panarella's challenge to the sufficiency of the superseding information is waived by his unconditional guilty plea. Panarella relies on our decisions in United States v. Cefaratti, 221 F.3d 502, 507 (3d Cir. 2000), and United States v. Spinner, 180 F.3d 514, 516 (3d Cir. 1999), and Federal Rule of Criminal Procedure 12(b)(2), which provides that "objections... that [the indictment or information] fails... to charge an offense... shall be noticed by the court at any time during the pendency of the proceedings." Maintaining that the fact that the charging language in the superseding information tracks the language of the relevant criminal statute is sufficient to conclude that it charges an offense, the government attempts to distinguish challenges that an indictment or information fails to allege a necessary element of an offense, which the government concedes survive a guilty plea, from challenges that the specific facts alleged in an indictment or information are beyond the reach of the relevant criminal statute, which is what it submits is at issue in this case. Disagreeing with the government's position, we hold that Rule 12(b)(2) and our cases applying this Rule permit a defendant who enters an unconditional guilty plea to argue on appeal that the specific facts alleged in the charging document do not amount to a criminal offense.

Turning to the merits, we reject Panarella's claim that, because the superseding information contains no allegation that Panarella's payments to Loeper improperly influenced Loeper's actions as State Senator, the specific facts alleged in the superseding information fail to establish that Loeper deprived the public of his honest services. Rather, we hold that where a public official conceals a financial interest in violation of state criminal law and takes discretionary action in his official capacity that the official knows will directly benefit the concealed interest, the official has deprived the public of his honest services, regardless whether the concealed financial interest improperly influenced the official's actions. Moreover, because Panarella's challenge to his guilty plea under Rule 11(f) rests on the same legal theory as his challenge to the sufficiency of the superseding information -- namely, that there was an inadequate factual basis for concluding

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that Loeper's official conduct was improperly influenced by his income from Panarella -- we reject his Rule 11(f) challenge. Accordingly, we will affirm the judgment of the District Court.

I.

For purposes of determining the sufficiency of the superseding information, we assume the truth of the following facts alleged in the superseding information. Panarella operated a tax collection business that entered into contracts with various state and local government bodies to collect taxes owed to them under state and local tax laws. In particular, Panarella's business received significant revenue from enforcement of Pennsylvania's "business privilege tax." Panarella developed special expertise and secured marketing advantages in enforcing the business privilege tax against non-resident businesses operating in the taxing jurisdiction but not having a physical place of business within the jurisdiction. His tax collection business depended largely on his ability to produce revenue for local governments by collecting Pennsylvania's business privilege tax from non-resident business. Beginning in 1993, he engaged Senator Loeper as a business consultant. Between 1993 and 1997, Panarella paid Loeper more than $330,000 for his consulting services.

Beginning in 1994, while Majority Leader of the Pennsylvania Senate, Loeper supported Panarella's business development efforts by appearing with him before local governments in Pennsylvania and attending meetings with him and the Secretaries of two Pennsylvania state agencies, the Department of Revenue and the Pennsylvania Higher Education Assistance Authority, in an attempt to obtain state collection contracts for Panarella. Moreover, in 1994 and 1995, Loeper spoke and voted against proposed legislation that would have restricted the enforcement of the business privilege tax against non-resident businesses and significantly harmed Panarella's business. These restrictions were eventually defeated.

While he was a Senator, Loeper failed to disclose his income from Panarella as required by 65 Pa. C.S.A. SS 1104(a) & 1105, filing false Statements of Financial Interest with the Pennsylvania Ethics Commission for the calendar years 1993 through 1997. To conceal his financial relationship with Loeper, Panarella directed third parties to make payments to Loeper on Panarella's behalf, although the government does not specifically allege that Panarella reimbursed these third parties. Then, in August of 1997, Loeper lied to a reporter about the sources of his income, and Loeper and Panarella asked a third party who paid Loeper on Panarella's behalf to lie to the reporter about the nature of the payments. In addition, Panarella edited the third party's response to a letter from the reporter inquiring into the basis for the third party's payments to Loeper.

A grand jury returned an indictment charging Panarella with seven counts of aiding and abetting mail fraud and wire fraud in violation of 18 U.S.C. SS 2, 1341, 1343 & 1346. Panarella moved to dismiss the indictment for failure to state a federal crime, but the District Court denied the motion. Represented by experienced counsel, Panarella subsequently signed a plea agreement in which he agreed to plead guilty to a superseding information charging him with one count of being an accessory after the fact to a wire fraud scheme to deprive the public of Loeper's honest services. The superseding information alleged that Loeper had engaged in an honest services wire fraud scheme in violation of 18 U.S.C. SS 1343 & 1346 and charged Panarella with being an accessory after the fact in violation of 18 U.S.C. S 3.

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Eschewing the benefit of Rule 11(a)(2), which permits the entry of a conditional plea of guilty under which...

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