Borre v. U.S.

• Decision Date: 05 August 1991
• Docket Number: No. 90-1632,90-1632
• Parties: Kurtis B. BORRE, Petitioner-Appellee, v. UNITED STATES of America, Respondent-Appellant.
• Court: U.S. Court of Appeals — Seventh Circuit

Page 215

940 F.2d 215

Kurtis B. BORRE, Petitioner-Appellee, v. UNITED STATES of America, Respondent-Appellant.

No. 90-1632.

United States Court of Appeals,

Seventh Circuit.

Argued Sept. 12, 1990.

Decided Aug. 5, 1991.

William Hedrick (argued), O'Keefe, Lewis & Bruno, Skokie, Ill., for petitioner-appellee.

Joseph Duffy, Ira H. Raphaelson, Robert W. Kent, Jr. (argued), Asst. U.S. Attys., Crim. Div., Chicago, Ill., for respondent-appellant.

Before WOOD, Jr., and EASTERBROOK, Circuit Judges, and GRANT, Senior District Judge. ^{* **}

HARLINGTON WOOD, Jr., Circuit Judge.

In 1980, an affiliate of the United States Cable Corporation ("United States Cable") sought a cable television franchise from the Village of Fox Lake, Illinois ("Fox Lake"). The affiliate was unwilling, however, to subject itself to the uncertainty of competitive bidding, and sought to secure the award by means of an under-the-table payment. Lee Lovett, an attorney acting as an agent of the affiliate, offered and gave a 5% ownership interest in the franchise to Richard Hamm, the mayor of Fox Lake, for Hamm's assistance in securing the approval of Fox Lake's Board of Trustees. Hamm, in turn, recruited Board member Richard Gerretsen by offering him a 2% interest. Kurtis Borre, in exchange for a 1% interest, agreed to act as a nominee for the purpose of concealing Hamm's and Gerretsen's interests in the affiliate. In January 1981, the Board of Trustees awarded a cable television franchise to the affiliate.

Borre, for his role in the scheme, was charged in the first and fifth counts of an April 1985 indictment. Count I charged Borre under 18 U.S.C. Sec. 371 (conspiracy to commit an offense against the United States). Count V charged Borre under 18 U.S.C. Sec. 1341 (mail fraud). Pursuant to a plea agreement, Borre pleaded guilty to both counts and was sentenced to five years of probation on each count, the sentences to run concurrently.

After learning that a codefendant's convictions had been vacated under McNally v. United States, 483 U.S. 350, 107 S.Ct. 2875, 97 L.Ed.2d 292 (1987), ¹ Borre sought relief under 28 U.S.C. Sec. 2255. ² The district court vacated Borre's conviction for mail fraud under the rationale that the objective of the underlying scheme did not constitute a property interest under McNally. As to the conspiracy count, the district court found it ambiguous, interpreted it as charging a conspiracy to commit mail fraud, and vacated it under McNally as well. An order to this effect was entered on October 16, 1989, just over one year before Borre's term of probation would have expired.

I.

As an initial matter, we must clarify the very narrow parameters under which Borre's convictions may be reviewed. Borre's arguments were raised in a petition filed under 28 U.S.C. Sec. 2255, which limits relief to "an error of law that is jurisdictional, constitutional, or constitutes a 'fundamental defect which inherently results in a complete miscarriage of justice.' " Carreon v. United States, 578 F.2d 176, 179 (7th Cir.1978) (quoting Davis v. United States, 417 U.S. 333, 346, 94 S.Ct. 2298, 2305, 41 L.Ed.2d 109 (1974)); 28 U.S.C. Sec. 2255. Borre also pleaded guilty to the charges, and "[o]nce a plea of guilty has been entered, non-jurisdictional challenges to the constitutionality of the conviction are waived and only the knowing and voluntary nature of the plea may be attacked," ³ And in addition to restraints on the types of issues that may be raised, the failure to raise issues on direct appeal bars a petitioner from raising them in a section 2255 proceeding unless he or she makes a showing of good cause for and prejudice from that failure. ⁴ It is against this backdrop that we first address Borre's mail fraud conviction.

II.

By 1987, the mail fraud statute had significantly expanded the prosecutorial reach of United States attorneys. Its language, which criminalized schemes or artifices "to defraud, or for obtaining money or property by means of false or fraudulent pretenses, representations, or promises," 18 U.S.C. Sec. 1341, had been interpreted broadly with regard to property interests, see, e.g., Durland v. United States, 161 U.S. 306, 16 S.Ct. 508, 40 L.Ed. 709 (1896), as well as those interests that really had nothing to do with property. Indeed, every court of appeals addressing the issue concluded that the statute's use of the disjunctive "or" after "to defraud" would allow prosecution under the theory that victims had been deprived of "intangible rights" such as the right to honest public officials and the right to corruption-free government. McNally, 483 U.S. at 358, 107 S.Ct. at 2880.

McNally changed all of that by holding that the mail fraud statute encompassed only property rights; the "to defraud" language would not independently support a prosecution under the intangible rights theory and intangible rights would not otherwise fall within the statute's broad definition of property. Id. at 358-60, 107 S.Ct. at 2880-81. But setting aside for a moment this unanticipated interpretation of the mail fraud statute, the underlying facts required only a straightforward application of a very simple rule: if an indictment issues solely under an invalid theory and the jury instructions allow conviction solely under an invalid theory, then any resulting conviction is invalid. See id. at 361, 107 S.Ct. at 2882 ("the jury instruction on the substantive mail fraud count permitted a conviction for conduct not within the reach of Sec. 1341"). ⁵ The prosecutor in McNally pursued only an intangible rights theory. When that theory was invalidated, nothing remained to support the defendants' convictions.

McNally's interpretation of the mail fraud statute raised a jurisdictional issue that was clearly the proper subject of a postconviction petition under section 2255. The case was not decided, moreover, until well after Borre was convicted (establishing good cause for failing to raise the argument earlier), and a retroactive application of McNally could invalidate Borre's conviction for mail fraud (meeting the prejudice element of Williams ). United States v. Lovett, No. 87 C 8978 (85 CR 284), 1988 WL 53246 (N.D.Ill. May 16, 1988); see Toulabi, 875 F.2d at 123-25. We have the ability, therefore, to delve into the merits of Borre's challenge.

Had it gone before a jury, Borre's case promised to be a reenactment of McNally. The indictment charged, inter alia, that Borre and his cohorts deprived Fox Lake and its citizens of the faithful and honest services of Mayor Hamm as well as the right to corruption-free government. The government relied heavily on these intangible rights theories at the trial of one of Borre's codefendants, see Lovett, No. 87 C 8978, and it is a fairly safe bet that the government would have pursued those same theories to persuade the jury of Borre's guilt. Borre pleaded guilty, however; he brought the process to a close before the government had the opportunity to commit what in retrospect would have been a fatal mistake.

Borre's guilty plea does not resolve the McNally question, but it certainly alters the analysis. In contrast to those cases involving defendants who invoked their right to a jury trial, the government's use of an intangible rights theory need not be fatal when the defendant has entered a plea of guilty. See United States v. Eckhardt, 843 F.2d 989, 997 (7th Cir.) (guilty plea), cert. denied, 488 U.S. 839, 109 S.Ct. 106, 102 L.Ed.2d 81 (1988); see also Toulabi, 875 F.2d at 125 (noting that indictment could state offense under mail fraud statute even though it was "brimming with the buzz-words of the intangible rights doctrine")- ; cf. Ranke v. United States, 873 F.2d 1033 (7th Cir.1989) (plea of nolo contendere). As outlined in Eckhardt and Ranke, we look first to the indictment to determine whether any of the charges to which Borre pleaded guilty are sufficient to state an offense. See generally FED.R.CRIM.P. 7(c). If so, then the indictment is valid and we must determine whether Borre pleaded guilty to conduct that is consistent with the portion of the indictment deemed sufficient under McNally. If either of these criteria is not satisfied, then we must affirm the district court's decision to vacate Borre's mail fraud conviction. See Eckhardt, 843 F.2d at 996-98; see also Ranke, 873 F.2d at 1036-37.

A. The Indictment

Count V of the indictment, the mail fraud count, charged that the defendants:

[D]evised and intended to devise and participate in a scheme to defraud:

(a) the Village of Fox Lake and its citizens of their right to the legal, faithful and honest services of Richard Hamm in the performance of acts related to his public employment;

(b) the Village of Fox Lake and its citizens, its public officials and its public employees of the right to have the business of the Village of Fox Lake conducted honestly, fairly and impartially, free from collusion, partiality, dishonesty, conflicts of interest, and fraud;

(c) the Village of Fox Lake and its citizens, its public officials and its public employees of the right to make a cable television franchise award with full disclosure of ownership interests; and to obtain the Village of Fox Lake cable television franchise contract by means of false and fraudulent representation and promises, knowing them to be false when made....

The government concedes that the first two theories are invalid but argues that the third theory alleges a deprivation of property in the form of a cable television franchise. If valid, the third theory would support Borre's conviction because it is "easily separable" from the remainder of the indictment. See Ranke, 873 F.2d at 1035 & n. 3; Eckhardt, 843 F.2d at 997.

In order to find that the indictment is valid, however, the circumstances of this case require an affirmative answer to two separate questions. First, did Fox Lake have a property interest in its cable television franchise? Second, did the scheme to which Borre...