United States v. Jannotti

• Citation: 501 F. Supp. 1182
• Decision Date: 26 November 1980
• Docket Number: Crim. No. 80-166.
• Parties: UNITED STATES of America v. Harry P. JANNOTTI, George X. Schwartz.
• Court: U.S. District Court — Eastern District of Pennsylvania

501 F. Supp. 1182

UNITED STATES of America v. Harry P. JANNOTTI, George X. Schwartz.

Crim. No. 80-166.

United States District Court, E. D. Pennsylvania.

November 26, 1980.

Joseph M. Fioravanti, James J. Rohn, Asst. U. S. Attys., Philadelphia, Pa., Richard Ben-Veniste, Washington, D. C., for the Government.

J. Clayton Undercofler, III, Philadelphia, Pa., for Jannotti.

Richard A. Sprague, Pamela W. Higgins, Philadelphia, Pa., for Schwartz.

MEMORANDUM AND ORDER

FULLAM, District Judge.

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.

I. HOBBS ACT CONSPIRACY

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.

The Government's position, adopted in the Court's charge to the jury, is that the matter should be viewed from the perspective of the defendants. If, as the defendants perceived the matter, the actions they conspired to carry out could realistically have had an effect on interstate commerce, the Government contends, they can properly be convicted of Hobbs Act conspiracy. I am constrained to disagree. Federal jurisdiction is not conferred by a defendant's erroneous perceptions. The criminal jurisdiction of a federal court is conferred by the laws enacted by Congress. While the jurisdictional reach of the Hobbs Act is undoubtedly extensive, touching conduct having only minimal or potential impact upon commerce (broadly defined), it does not operate to confer federal jurisdiction over purely hypothetical potential impacts on commerce which could never occur.

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." (§ 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.¹

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.

II. RICO CONSPIRACY

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.

There was ample evidence that Criden engaged in a pattern of racketeering activity, that is, that he was involved in a series of bribes to public officials. And there was adequate and uncontradicted evidence to the effect that the law firm of Criden, Johanson, Dolan, Morrissey and Cook purchased supplies and equipment from out-of-state vendors, represented out-of-state clients, and acted as counsel in interstate transactions. Whether Criden's bribery activities occurred in the conduct of the affairs of the law firm is a closer question, as is the issue of Schwartz's knowing participation in a conspiracy having as its object the conduct of the affairs of that law firm.

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...