742 F.2d 682 (2nd Cir. 1984), 782, United States v. O'Grady

Docket Nº:782, Docket 82-1344.
Citation:742 F.2d 682
Party Name:UNITED STATES of America, Appellee, v. Edward O'GRADY, Defendant-Appellant.
Case Date:July 12, 1984
Court:United States Courts of Appeals, Court of Appeals for the Second Circuit
 
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742 F.2d 682 (2nd Cir. 1984)

UNITED STATES of America, Appellee,

v.

Edward O'GRADY, Defendant-Appellant.

No. 782, Docket 82-1344.

United States Court of Appeals, Second Circuit

July 12, 1984

Submitted Oct. 12, 1983.

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Barry M. Fallick, Rochman, Platzer & Fallick, New York City, for defendant-appellant.

Raymond J. Dearie, U.S. Atty., E.D.N.Y., Ronald E. DePetris, Chief Asst. U.S. Atty., L. Kevin Sheridan, Michael H. Gold, Asst. U.S. Attys., Brooklyn, N.Y., for appellee.

Before FEINBERG, Chief Judge, and LUMBARD, KAUFMAN, MANSFIELD, OAKES, VAN GRAAFEILAND, MESKILL, NEWMAN, KEARSE, CARDAMONE, PIERCE, WINTER and PRATT, Circuit Judges.

ON REHEARING EN BANC

MESKILL, Circuit Judge, joined by FEINBERG, Chief Judge, IRVING R. KAUFMAN, OAKES, JON O. NEWMAN, KEARSE, CARDAMONE, PIERCE, WINTER and GEORGE C. PRATT, Circuit Judges.

This is an appeal from a judgment entered in the United States District Court for the Eastern District of New York, Platt, J., convicting appellant after a jury trial of extortion under color of official right in violation of the Hobbs Act, 18 U.S.C. Sec. 1951 (1982). A divided panel of this Court affirmed the conviction of O'Grady on August 10, 1983. At the request of a member of this Court, a poll of the judges in regular active service was taken to determine if the case should be reheard en banc. A majority voted for the rehearing. The Court called for and received new briefs from the parties which addressed the issues discussed in the majority and dissenting opinions. Sitting en banc, we now vacate the panel opinion, reverse the conviction and remand to the district court for a new trial, because there was plain error in the charge given to the jury.

BACKGROUND

In 1972 the New York City Transit Authority (NYCTA) executed a contract with Pullman Standard under which NYCTA agreed to purchase from Pullman Standard 745 subway cars at a cost of nearly $210 million. 1 Edward O'Grady was employed by the NYCTA as superintendent of the Quality Control Section, Department of New Car Engineering. In 1981 a federal grand jury indicted O'Grady for violating the Hobbs Act by accepting an assortment of benefits from companies under contract to provide subway cars to the NYCTA. O'Grady was tried by a jury, found guilty and sentenced to one year probation plus a $10,000 fine.

The Hobbs Act proscribes extortion affecting interstate commerce, whether by "wrongful use of actual or threatened force, violence, or fear, or under color of official right." 2 18 U.S.C. Sec. 1951(b)(2) (1982). The Act is a powerful and effective

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law enforcement tool, providing for up to twenty years imprisonment, a $10,000 fine, or both. It has become a principal weapon in the government's arsenal against corruption in public affairs.

In United States v. Margiotta, 688 F.2d 108 (2d Cir.1982), cert. denied, 461 U.S. 913, 103 S.Ct. 1891, 77 L.Ed.2d 282 (1983), this Court held that extortion "under color of official right" occurs "when a public official makes wrongful use of his office," whether or not "the wrongful use of official power [is] accompanied by actual or threatened force, violence, or fear." Id. at 130-31. We are now asked to decide whether extortion under color of official right occurs when a public official merely accepts unsolicited benefits knowing that they were given because of his public office. We hold that it does not.

O'Grady had been involved in the contract negotiations and the ultimate selection of Pullman-Standard as the prime contractor for the purchase of the subway cars. Pullman-Standard engaged numerous subcontractors to help design, manufacture and assemble the new subway cars for what was commonly known as the R-46 project. Throughout the project, O'Grady was responsible for ensuring vendor compliance with contract specifications. Before any component of the new subway cars was put into full production, it had to be inspected and approved by O'Grady's department. If a component was defective from either a technical or aesthetic viewpoint, or failed to comply with contract specifications, O'Grady could force the vendor to make the necessary modifications at its own cost. The inspection process continued from the design stage through final production.

O'Grady's indictment charged him with "attempting to obtain and obtaining the benefits valued at approximately Thirty Thousand Dollars ($30,000) in entertainment, including but not limited to lunches, dinners, sports events, golf outings, weekend vacations and trips, from [vendors involved in the R-46 project], with the consent for such entertainment having been wrongfully induced under color of official right." 3 See App. for Appellant at 8. At

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trial, the government proved that during the nine year period covered by the indictment, O'Grady received from Pullman-Standard and its subcontractors over forty fully paid trips to various resorts throughout the country, 4 two "all events" season tickets to Madison Square Garden, countless rounds of free golf, meals and other benefits, altogether worth in excess of $34,000. O'Grady willingly accepted all of these benefits despite having instructed his subordinates not to accept anything from R-46 contract vendors.

O'Grady admitted having received the benefits, but he denied wrongdoing. He maintained that entertaining customers was an industry wide practice and that he was only one of many NYCTA officials who had received benefits from R-46 vendors. The evidence adduced at trial supported O'Grady's contention. Several R-46 contract vendors testified that it was company policy to entertain customers and that many NYCTA officials, including O'Grady's supervisors, had also been treated to meals, entertainment and trips. 5 From the vendor's perspective, the expense of entertaining customers was offset by the positive customer-vendor relationship and goodwill that it purchased. Moreover, the vendors could in most cases deduct for tax purposes the cost of the entertainment as an ordinary and necessary business expense.

O'Grady held the reins on the production process and he would often supervise on-site inspections himself. Vendors treated O'Grady, who was known to be an avid golfer, to countless rounds of golf in conjunction with his on-site inspection tours. Although most vendors considered O'Grady a fair man, "[h]e was a tough man when it came to enforcing the rights of the [NYCTA]." 6 Evidently it was difficult to sit down and do business with O'Grady as he was a very busy man. Vendors viewed the meals, trips and other entertainment conferred on O'Grady as a way to get his ear. There is no evidence in the record that O'Grady ever demanded or asked for a free meal, an expense-paid trip or a complimentary round of golf. The benefits he received were freely and willingly offered by the vendors. In the words of Pullman-Standard's project manager, "[i]t was our normal way of doing business." Trial Tr. at 187.

The trial judge instructed the jury that extortion under color of official right requires proof that (1) the defendant obtained property of another with his consent; (2) the consent was induced under color of official right; (3) the defendant knowingly and willfully obtained the property

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by those means; and (4) the defendant's actions in obtaining the property affected interstate commerce. O'Grady disputed only two elements. He denied having induced the benefits he received and having known the benefits were given to him because of his public office. He defended on the basis that the indictment merely described normal business practice. The district court instructed the jury:

If you find beyond a reasonable doubt that a company gave any benefit that it is alleged to have given in the indictment because the company reasonably believed that, in his official capacity, Mr. O'Grady had the power to take or withhold action that could hurt or benefit the company, or to affect or influence the inspection and delivery of the R-46 subway car, then you may find that the consent of the bestowing company was induced under color of official right, and if you further find beyond a reasonable doubt that the defendant knew that that [was] the reason travel and entertainment benefits were given to him, then the second element is satisfied; but if either or both of these facts has not been so proven beyond a reasonable doubt, then it is not, and you must find for the defendant.

Trial Tr. at 1785-86. The district court explained that "[t]he Government need not show that the defendant in words or otherwise, induced, requested, demanded, or solicited the benefits," id. at 1784, or that O'Grady "was influenced in his decisions by any favor he received," id. at 1783. O'Grady's attorney forcefully objected to the charge delivered by the district court 7 and offered his opinion that under the charge given, "President Reagan and Mrs. Reagan must be convicted, absolutely must," as must any "public official, who takes a cigarette or a cigar from anybody else." Id. at 1818-19. The jury returned a verdict of guilty and the district court thereafter sentenced O'Grady to a one year term of probation and a $10,000 fine. This appeal followed.

DISCUSSION

O'Grady argues that his conduct did not constitute extortion under color of official right. He urges the abandonment of precedent in this Circuit interpreting the Hobbs Act broadly, see United States v. Margiotta, 688 F.2d 108 (2d Cir.1982), cert. denied, 461 U.S. 913, 103 S.Ct. 1891, 77 L.Ed.2d 282 (1983); United States v. Trotta, 525 F.2d 1096 (2d Cir.1975), cert. denied, 425 U.S. 971, 96 S.Ct. 2167, 48 L.Ed.2d 794 (1976), in favor of a narrower reading that would limit the Act's scope to extortion accompanied by some form of duress. Relying heavily...

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