Ingber v. Enzor

• Citation: 664 F. Supp. 814
• Decision Date: 15 July 1987
• Docket Number: No. 87 Civ. 4693-CLB.,87 Civ. 4693-CLB.
• Parties: Brian INGBER, Petitioner, v. Lee ENZOR, Superintendent, FCI Danbury, Respondent.
• Court: U.S. District Court — Southern District of New York

664 F. Supp. 814

Brian INGBER, Petitioner, v. Lee ENZOR, Superintendent, FCI Danbury, Respondent.

No. 87 Civ. 4693-CLB.

United States District Court, S.D. New York.

July 15, 1987.

Elkan Abramowitz, Todd Krouner, Obermaier, Morvillo, Abramowitz & Iason, New York City, for petitioner.

Michael Chertoff, Sp. Asst. U.S. Atty., Rudolph W. Giuliani, U.S. Atty., S.D.N.Y., New York City, for respondent.

MEMORANDUM AND ORDER

BRIEANT, Chief Judge.

The Supreme Court decision in McNally v. United States, ___ U.S. ___, 107 S.Ct. 2875, 97 L.Ed.2d 292 (1987), requires that this Court reconsider, on this petition brought under 28 U.S.C. § 2255, the mail fraud convictions of Brian Ingber on Counts Five and Nine of the Indictment in this case. In McNally, the Supreme Court, after a decade of denials of certiorari in many cases decided to the contrary, finally gave explicit recognition to the fact that the mail fraud statute, 18 U.S.C. § 1341, is limited in scope to the protection of money or tangible property, and "does not refer to the intangible right of the citizenry to good government." ___ U.S. at ___, 107 S.Ct. at 2879.

On January 16, 1986, after a jury trial, Brian Ingber was convicted of violating the mail fraud statute in connection with his election to the office of Supervisor of the Town of Fallsburg, Sullivan County, New York. Charged in the Indictment as Count Nine, the election fraud scheme had been severed from the remaining counts in the Indictment charging fraud in the procurement and administration of a public works contract. These counts were tried separately to the Court and, on June 18, 1986, Ingber was convicted on Count Five, mail fraud arising out of the delivery of an authorization to award a sewer contract, and on Count Ten, false statements made in an attempt to cover up, during the subsequent investigation, Ingber's involvement in the sewer contract fraud. Familiarity of the reader with the Court's findings and supplemental findings as to these counts is assumed. See Findings and Conclusions, June 18, 1986; Memorandum and Order, July 22, 1986.

The Court of Appeals has affirmed all three convictions in an unpublished memorandum opinion dated February 4, 1987, No. 86-1402.

Count Nine

We are concerned here primarily with Count Nine of the Indictment, which charged, inter alia, that Brian Ingber defrauded the citizens of Fallsburg "of their ballots and of their rights to a fair and impartial electoral process," essentially by falsifying voting documents, including voter registration forms, applications for absentee ballots, and absentee ballots which were then cast in Ingber's favor and tabulated by the Sullivan County Board of Elections. The Indictment also charged Ingber with obtaining the "salary, powers and privileges" of the office of Supervisor by means of "false and fraudulent absentee ballot applications, ballot envelopes, and ballots." This conduct violated state election law and could have been prosecuted in the New York courts as a "class E" felony carrying a maximum penalty of four years, as contrasted with federal mail fraud carrying a maximum penalty of five years. See N.Y. Election Law § 17-132 (McKinney's 1978).

The prosecution proceeded on the theory that Ingber's participation in the ballot fraud deprived the citizens of Fallsburg of their intangible right to a fair election with results free from dilution by intentionally cast false ballots, and also deprived the citizens of their own right to vote. Ingber's receipt by mail of his Certificate of Election from the Sullivan County Board of Elections was alleged as the requisite predicate mailing under § 1341.

Ingber appealed the conviction on Count Nine on the ground that the prosecution relied on insufficient proof of use of the mails. Rejecting this argument, the Court of Appeals stated in its unpublished affirmance of the conviction,

"the mailing of the certificate of election was not, as Ingber posits, merely a confirmation of the vote count. Under New York law, a county canvassing board decides which individuals have been elected, and, based upon that determination, the board of election transmits a certification `naming the office to which such canvassing board has declared him elected.' N.Y.Elec.Law. § 9-212 (McKinney's Supp.1987), whereupon the certificate constitutes prima facie proof of the validity of the recipient's election.... Ingber had not achieved the very objective of the scheme—the right to exercise the powers of Town Supervisor—until he was informed of his victory by the certificate of election. Thus, the mailing was in furtherance of the scheme to defraud and Ingber was properly convicted on count 9 of the indictment."

At trial, this Court was constrained by a line of decisions from our Court of Appeals holding that schemes to defraud citizens of their intangible rights to honest and impartial government, and similar breaches of fiduciary duty in the private sector, will sustain a mail fraud prosecution. See, e.g., United States v. Von Barta, 635 F.2d 999, 1006 (2d Cir.1980), cert. denied 450 U.S. 998, 101 S.Ct. 1703, 68 L.Ed.2d 199 (1981); United States v. Bronston, 658 F.2d 920, 926 (2d Cir.1981), cert. denied, 456 U.S. 915, 102 S.Ct. 1769, 72 L.Ed.2d 174 (1982); United States v. Margiotta, 688 F.2d 108, 121 (2d Cir.1982), cert. denied, 461 U.S. 913, 103 S.Ct. 1891, 77 L.Ed.2d 282 (1983).

This interpretation of the mail fraud statute now has been soundly rejected. The Supreme Court will no longer allow the lower courts to "extend the wide mouthed purse seine of `mail fraud' to include mere breaches of a fiduciary duty of honesty and loyalty." United States v. Von Barta, No. 79 Cr. 774-CLB, slip op. (S.D.N.Y. April 21, 1980), rev'd on this ground, 635 F.2d 999.

Beginning in 1980 with United States v. Von Barta, our Court of Appeals, with the tacit acquiescence of the Supreme Court, read into the mail fraud statute a prohibition of a scheme by an employee to defraud an employer of its right to his honest and faithful services. The scheme in Von Barta's case was both simple and traditional. Defendant, a salesman and trader employed by a securities firm, colluded with an employee of another such firm to establish an undercapitalized vehicle in order to make vast overnight speculative trades in government securities. In a form of whimsy seldom found among swindlers, they named the trading vehicle Piwacket Corporation (from Pyewacket, the black cat in John Van Druten's 1951 play Bell, Book and Candle). They concealed their ownership of Piwacket from their respective employers, and Von Barta falsely told his employer that Piwacket was controlled by "established Long Island arbitrageurs." Confirmations of securities transactions passed through the mails.

Treating as "precedents" cases decided by the Fourth and Ninth Circuit Courts of Appeals, our Court of Appeals in Von Barta held that "artifices designed to cause losses of an intangible nature also violate the mail fraud and wire statutes." 635 F.2d at 1006, citing United States v. Bohonus, 628 F.2d 1167 (9th Cir.), cert. denied, 447 U.S. 928, 100 S.Ct. 3026, 65 L.Ed.2d 1122 (1980); United States v. Condolon, 600 F.2d 7 (4th Cir.1979); United States v. Louderman, 576 F.2d 1383 (9th Cir.), cert. denied, 439 U.S. 896, 99 S.Ct. 257, 58 L.Ed.2d 243 (1978). The court also cited with approval United States v. Bush, 522 F.2d 641, 648 (7th Cir.1975), cert. denied, 424 U.S. 977, 96 S.Ct. 1484, 47 L.Ed.2d 748 (1976), in which a city employee was prosecuted for concealing his interest in a firm that held the exclusive rights to prepare advertising displays for the city's major airport, and United States v. States, 488 F.2d 761 (8th Cir.1973), cert. denied, 417 U.S. 909, 94 S.Ct. 2605, 41 L.Ed.2d 212 (1974), in which political candidates were prosecuted for using fraudulent voter registrations and applications for absentee ballots to influence the outcome of their elections.¹

Common to these cases is an employee's or public official's breach of a fiduciary duty to his employer or the public at large. The "additional element" transforming "a mere fiduciary breach into a criminal offense is a violation of the employee's duty to disclose material information to his employer." Von Barta, 635 F.2d at 1005 n. 14, 1006. See also United States v. Newman, 664 F.2d 12 (2d Cir.1981) (employees of investment bank said to have breached duty to inform employer of their own insider-trading activities related to clients' impending mergers and acquisitions), cert. denied, 464 U.S. 863, 104 S.Ct. 193, 78 L.Ed.2d 170 (1983); United States v. Weiss, 752 F.2d 777 (2d Cir.) (corporate officer prosecuted for concealing diversion of corporate funds to unknown presumably political purposes), cert. denied, 474 U.S. 944, 106 S.Ct. 308, 88 L.Ed.2d 285 (1985).

Secure in the knowledge that the Supreme Court had repeatedly declined to review such expansive and unfounded constructions of the mail fraud statute, the Second Circuit continued its descent down this slippery slope. Affirming the conviction in United States v. Bronston, 658 F.2d 920 (2nd Circ.1981) the court extended its Von Barta holding to permit the mail fraud prosecution of a lawyer, also a state legislator, who allegedly breached his duty of undivided loyalty to a client of his law firm, by concealing his promotion, for a fee, of the efforts of a competitor of that client in obtaining a city bus stop shelter franchise. Although the lawyer did not personally represent the firm's client, and had no access to any confidential information regarding that client's bus stop shelter bid, his letter writing on legislative letterhead and negotiations on behalf of the competitor, which violated his ethical duty as a lawyer to avoid or disclose conflicts of interest, sufficed to invoke the mail fraud statute. In a development that compares to the current distention of the insider trading laws, the court held that "proof that the fiduciary...