U.S. v. Margiotta

• Citation: 688 F.2d 108
• Decision Date: 27 July 1982
• Docket Number: D,No. 1238,1238
• Parties: , 11 Fed. R. Evid. Serv. 727 UNITED STATES of America, Appellee, v. Joseph M. MARGIOTTA, Appellant. ocket 82-1025.
• Court: United States Courts of Appeals. United States Court of Appeals (2nd Circuit)

Page 108

688 F.2d 108

74 A.L.R.Fed. 139, 11 Fed. R. Evid. Serv. 727

UNITED STATES of America, Appellee, v. Joseph M. MARGIOTTA, Appellant.

No. 1238, Docket 82-1025.

United States Court of Appeals, Second Circuit.

Argued June 2, 1982.

Decided July 27, 1982.

Irving Younger, Washington, D. C. (Edward Bennett Williams, Robert L. Weinberg, John J. Buckley, Jr., Gerson A. Zweifach, Williams & Connolly, Washington, D. C., of counsel), for appellant.

Edward R. Korman, U. S. Atty., E. D. New York, Brooklyn, N. Y. (Vivian Shevitz, Larry J. Silverman, Asst. U. S. Attys., E. D. New York, Brooklyn, N. Y., of counsel), for appellee.

Before KAUFMAN and WINTER, Circuit Judges, and WARD, District Judge. ^*

IRVING R. KAUFMAN, Circuit Judge:

The significant role played by political parties in municipal government has been an often noted characteristic of American urban life. Some critics, contributing to the prevailing mythology that machine politics have controlled the corridors of local government, ¹ have highlighted the opportunities available to those who hold the strings of political power ² for defrauding the citizenry and reaping personal gain, through the sale of public office and other favors. Other commentators, however, have asserted that local party leaders have often served important functions of political representation and association. In cities fragmented into diverse social and economic groups, it has been argued, party organizations have played a salutary role in organizing large numbers of people, and fulfilling their desires with patronage, jobs, services, community benefits, and opportunities for upward social mobility. ³ In sum, the line between legitimate political patronage and fraud on the public has been difficult to draw.

Today, not unmindful of these competing visions of political history, we must consider where such lines may be drawn in the context of a criminal prosecution for mail fraud ⁴ and extortion. ⁵ Specifically, we are asked to determine, inter alia, when, if ever, a political party leader who holds no official government office but who participates substantially in the governance of a municipality owes a fiduciary duty to the general citizenry, and what conduct violates such a fiduciary duty. The issues before us arise out of a criminal prosecution against Joseph M. Margiotta, long-time Chairman of the Republican Committees of both Nassau County and the Town of Hempstead, New York. The Government charges Margiotta with one count of mail fraud in violation of 18 U.S.C. § 1341 (1976) ⁶ and five counts of extortion in violation of 18 U.S.C. § 1951 (1976) ⁷ for activities in connection with the distribution of insurance commissions on municipal properties to Margiotta's political allies. The Government presented "evidence of a scheme of fraud spun into a web of political power" ⁸ at a trial before Judge Sifton, at which nearly seventy witnesses testified during a period of three weeks. After deliberating for eight days, the jury announced it was hopelessly deadlocked, and the trial judge declared a mistrial.

Upon a request by the Government, in anticipation of a retrial, Judge Sifton reconsidered a number of legal and evidentiary rulings made at the trial. The trial judge entered an order in which he stated that the challenged rulings would be followed at Margiotta's second trial. The Government then appealed to this Court for review of Judge Sifton's order prior to the retrial. We found those portions of Judge Sifton's order indicating the court would abide by certain jury instructions at retrial were not appealable pursuant to 18 U.S.C. § 3731 (1976) ⁹ and, accordingly, dismissed the Government's appeal in that respect. While the portions of the order concerning the judge's evidentiary rulings were appealable, we concluded that the district court had acted well within its discretion, and affirmed the order on the evidentiary rulings.

Margiotta's retrial before Judge Sifton proved to be another closely fought contest. Following a trial lasting three weeks, the jury deliberated conscientiously for three days. It returned a verdict of guilty on all six counts, including the one count of mail fraud in violation of 18 U.S.C. § 1341 (1976) and the five counts of extortion in violation of 18 U.S.C. § 1951 (1976). Judge Sifton sentenced Margiotta to concurrent terms of imprisonment of two years on each count.

Margiotta appeals to this Court from the judgment of conviction entered by Judge Sifton. On appeal, he raises a number of claims, several of which involve novel issues. Margiotta argues that his conviction of mail fraud must be reversed and the indictment dismissed on the grounds that the federal mail fraud statute, 18 U.S.C. § 1341 (1976), does not embrace a theory of fiduciary fraud by individuals who participate in the political process but who do not occupy public office, and that Margiotta owed no fiduciary duty to the general citizenry of Nassau County and the Town of Hempstead under federal or state law. Moreover, he asserts that the evidence was insufficient to support a finding of fiduciary duty even if it were held that the trial court's instructions were not erroneous as a matter of law. In addition, Margiotta claims that the indictment and conviction violate his First Amendment rights of freedom of expression, association and petition, and that the mail fraud statute is impermissibly vague on its face and as applied to him on the facts of this case. Furthermore, he asserts that he did not fail to disclose material information in violation of the mail fraud statute. Margiotta also claims that his conviction of five counts of extortion in violation of the Hobbs Act, 18 U.S.C. § 1951 (1976), should be reversed and the indictment dismissed because he did not commit extortion "under color of official right" or through the wrongful use of "fear," and because the district court's allegedly improper instructions on the mail fraud count prejudiced the jury's consideration of the Hobbs Act charges. Finally, Margiotta argues that Judge Sifton erred by admitting Richard A. Williams's hearsay account of his father's alleged agreement with Margiotta. For the reasons stated below, we reject Margiotta's contentions, and affirm the judgment of conviction in all respects.

I. Background

Since the conduct at issue in this case involves an intricate scheme of fraud, we must set forth the facts in detail. As noted above, Joseph M. Margiotta, was at all relevant times the Chairman of the Republican Committee of both Nassau County and the Town of Hempstead, New York. Although he held no elective office, his positions as County and Town Republican Chairman, according to the Government, afforded him sufficient power and prestige to exert substantial control over public officials in Hempstead and Nassau County who had been elected to office as candidates of the Republican Party. This control, it was charged, enabled Margiotta to exercise influence over the appointees of these elected officials as well. The spread of his political tentacles over the governments of Town and County allegedly offered Margiotta the opportunity to engage in a highly remunerative fraudulent design involving the distribution of insurance commissions on municipal properties to his political associates.

The responsibility of the Nassau County Executive and the Presiding Supervisor of the Town of Hempstead in maintaining the properties owned and operated by their respective jurisdictions was at the crux of this artifice. The holders of these public offices were responsible for obtaining insurance coverage for the properties owned by the Town and County. As a matter of practice, the authority for obtaining insurance on municipal properties was delegated to a Broker of Record designated by the entities and serving at their pleasure. The Broker of Record was the only individual who acted on behalf of these jurisdictions in placing insurance policies. The Broker received as compensation for his services commissions consisting of a portion of the monies paid by the municipalities for the insurance policies. ¹⁰

According to the Government, this municipal insurance activity was transformed into a scheme to defraud the citizens of Hempstead and Nassau County in 1968. At that time, Margiotta allegedly contrived the appointment of Richard B. Williams & Sons, Inc., an insurance agency, (hereinafter the "Williams Agency" or "Agency"), as Broker of Record for the Town of Hempstead. Richard B. Williams determined to have the Agency designated as Broker of Record for the Town, a position then held by one Mortimer Weis. Williams allegedly met with Margiotta and Weis to strike a secret "deal": The Williams Agency would be named Broker of Record for the Town of Hempstead, and Weis would become a $10,000 a year consultant to the Town. In return for the appointment, the Williams Agency would set aside 50% of the insurance commissions and other compensation it received, to be distributed to licensed insurance brokers and others designated by Margiotta. Shortly thereafter, Ralph Caso, the Presiding Supervisor of Hempstead, appointed the Williams Agency as Hempstead's Broker of Record based on Margiotta's recommendation. In 1969, the Williams Agency began to write insurance for the Town of Hempstead, and commenced making "kickbacks" to brokers selected by political leaders of local election districts in the Town who were loyal to the appellant.

In 1970 Caso was elected County Executive of Nassau County. After his election, Richard B. Williams met with Margiotta to discuss the possibility of the Williams Agency acting as Broker of Record for Nassau County. On January 1, 1971, the day on which he took office, Ralph Caso designated the Williams Agency as Broker of Record for Nassau County based on Margiotta's recommendation. Soon thereafter, the Williams Agency commenced to distribute 50% of the commissions it earned on Nassau County...