U.S. v. Alexander, 87-7070

• Decision Date: 02 August 1988
• Docket Number: No. 87-7070,87-7070
• Citation: 850 F.2d 1500
• Parties: 47 Ed. Law Rep. 871, 26 Fed. R. Evid. Serv. 598 UNITED STATES of America, Plaintiff-Appellee, v. Dan G. ALEXANDER, Jr., and Norman Grider, Defendants-Appellants.
• Court: U.S. Court of Appeals — Eleventh Circuit

Page 1500

850 F.2d 1500

47 Ed. Law Rep. 871, 26 Fed. R. Evid. Serv. 598

UNITED STATES of America, Plaintiff-Appellee, v. Dan G. ALEXANDER, Jr., and Norman Grider, Defendants-Appellants.

No. 87-7070.

United States Court of Appeals Eleventh Circuit.

Aug. 2, 1988.

Richard G. Alexander, Alexander & Knizley, Christopher Knight, Haas & Knight, Mobile, Ala., Carter G. Phillips, Sidney & Austin, Washington, D.C., for Dan C. Alexander.

James Atchison, William B. Jackson, II, Mobile, Ala., for Norman grider.

J.B. Sessions, Richard W. Moore, U.S. Attys., Mobile, Ala., for U.S.

Appeals from the United States District Court for the Southern District of Alabama.

Before HILL and HATCHETT, Circuit Judges, and FLOYD R. GIBSON ^*, Senior Circuit Judge.

HILL, Circuit Judge:

In this case, the appellants challenge their convictions on charges of mail fraud, extortion and racketeering. They maintain that the mail fraud convictions were obtained in violation of McNally v. United States, --- U.S. ----, 107 S.Ct. 2875, 97 L.Ed.2d 292 (1987). We reverse in part, based upon McNally, and affirm in part.

I. FACTS

The appellants, Dan Alexander and Norman Grider, were charged in an eleven count indictment. Count one charged the appellants with a pattern of racketeering activity in violation of 18 U.S.C. Sec. 1962(c) (RICO). Count two charged that the appellants violated the Hobbs Act, 18 U.S.C. Sec. 1951, by engaging in a scheme to extort money from architects who obtained contracts with the Mobile County School Board. Finally, counts three through eleven charged the appellants with using the United States Mail in a scheme to defraud the Mobile County School Board and the citizens of Mobile County in violation of 18 U.S.C. Sec. 1341. Following a trial in the district court, the jury found Alexander and Grider guilty on all counts, and they were sentenced to imprisonment. A third co-defendant, Hiram Bosarge, was acquitted.

The facts in this case involve three schemes in which Dan Alexander used his position on the Mobile County School Board to obtain money from businesses and individuals who wished to do business with the school board. Norman Grider participated in two of those schemes. To summarize briefly, the first scheme was charged as predicate act number one under count one of the indictment. In this scheme, Alexander used his position on the school board to obtain an efficiency study contract for Gulf South Engineers, Inc. In exchange, officials of Gulf South paid Alexander $9,500.

The second scheme was charged in count two and as predicate act number five in count one of the indictment. Between 1980 and 1984 the school board approved the construction of four new schools in Mobile County, and architects were notified that they should submit applications for the projects. Assistant Superintendent Lenwood "Pete" Landrum was responsible for reviewing the applications and recommending an architect for each project. Grider and Alexander worked together to influence Landrum's selection of the architects and to extract various "finders-fees" from the architects who were selected. At trial, Landrum and a number of the architects testified as to the appellants' tactics.

The third scheme was charged in counts three through eleven and as predicate act number three under count one of the indictment. This scheme involved the school board's award of a contract for the installation of an energy management system in over seventy schools in Mobile County. George Hamlin, an engineer in Mobile, was initially unable to obtain a contract with the school board for the energy management system. He then formed a corporation, Energy Research Group, Inc. (ERG), and spoke with Grider about the possibility of obtaining the contract. Hamlin ultimately agreed to pay Grider fifteen percent of the contract if Grider would use his connections to get the school board to award the contract to ERG. Grider spoke with Alexander who then strongly supported the contract in the school board. ERG obtained a 1.6 million dollar contract for the project in August of 1982. Hamlin paid Grider approximately $240,000, and Grider transmitted various sums of money to Alexander in the form of legal fees and indirect campaign contributions. The school board mailed payments under the contract on at least nine separate occasions, corresponding to mail fraud counts three through eleven in the indictment.

II. DISCUSSION

A. Mail Fraud

The appellants challenge their convictions for mail fraud under counts three through eleven of the indictment based upon the Supreme Court's decision in McNally. They argue that the convictions cannot stand because the jury may have found them guilty of depriving the local citizens of their right to honest and impartial government, which was held insufficient under the mail fraud statute in McNally. We agree.

The judge instructed the jury that the mail fraud scheme had three objects, including the object which McNally holds is insufficient. The court instructed the jury as follows:

"[t]he second object alledged [sic] is that the Defendants Dan Alexander and Norman Grider sought to fraudulently deprive the citizens of a county of their right to have the county's business conducted honestly, impartially, and free from corruption, bias, and official misconduct."

(R14-3301-3302) If the jury convicted the defendants based upon this object of the scheme, the convictions may not stand. The government argues, however, that the jury could not find that the defendants were guilty of depriving the citizens of honest government without also finding that they sought to obtain money through the contract with ERG. We disagree. The instruction stated: "[t]o convict on any or all of Counts Three through Eleven, you need only to find that the scheme sought to achieve only one of these objectives...." (R14-3303) The jury was specifically charged that any one of the objects was sufficient. While it is likely that the jury found that the defendants were involved in a scheme to obtain money, it remains possible that the jury found the defendants guilty under the theory struck down in McNally. The instruction expressly provided the jury with that alternative. We therefore reverse the defendants' convictions under counts three through eleven.

B. Hobbs Act

The appellants challenge their convictions under count two on a variety of grounds. First, the appellants contend that the government failed to establish a link between their extortionate scheme and interstate commerce, which is a jurisdictional prerequisite under the Hobbs Act. The government's burden under this requirement is not great. The Supreme Court has stated: "[t]hat Act speaks in broad language, manifesting a purpose to use all the constitutional power Congress has to punish interference with interstate commerce by extortion, robbery or physical violence. The Act outlaws such interference 'in any way or degree.' " Stirone v. United States, 361 U.S. 212, 215, 80 S.Ct. 270, 272, 4 L.Ed.2d 252 (1960). The reach of Congress' power under the Commerce Clause is, of course, extensive. Therefore, the government need only show a minimal effect on interstate commerce to sustain jurisdiction under the Hobbs Act. See United States v. Haimowitz, 725 F.2d 1561, 1573 (11th Cir.), cert. denied, 469 U.S. 1072, 105 S.Ct. 563, 83 L.Ed.2d 504 (1984).

In attempting to establish a link with interstate commerce in this case, the government relied upon the "depletion of assets" theory. "Under that theory, 'commerce is affected when an enterprise, which either is actively engaged in interstate commerce or customarily purchases items in interstate commerce, has its assets depleted through extortion, thereby curtailing the victim's potential as a purchaser of such goods.' " United States v. Jackson, 748 F.2d 1535, 1537 (11th Cir.1984) (quoting United States v. Elders, 569 F.2d 1020, 1025 (7th Cir.1978)). In the present case, the extortion scheme clearly reduced the assets of the architects. They were paid a set fee by the school board, and they were forced to pay large sums of that money to Grider. Thus, if the government had offered proof that the architects purchased items which had come from out of state, which is almost certainly the case, the link with interstate commerce would have been established. However, the government did not offer proof of the architects' activity in interstate commerce. Instead, the government introduced evidence that the school board purchased items from outside the state of Alabama, and the government was thus required to establish that the school board's assets were depleted in some way.

In order to establish that the school board's assets were depleted as a result of the extortion scheme, the government offered proof that the school board received less valuable services for its money because the architects were selected based upon their willingness to pay kickbacks rather than based upon their professional abilities. ¹ There was evidence that Grider selected architects who were struggling financially and who were thus more susceptible to his pressure. At one point, Alexander asked Landrum to expedite payment to one of the architects because the architect was going into debt and needed money. There was testimony by two of the architects indicating that they were indeed struggling. Landrum also testified that one of the architects was constantly behind schedule and that other architects had to be called in to help with the work. Landrum stated that he had more problems with this dilatory architect than he had ever experienced with another architect. Having reviewed the evidence in the record, we conclude that the government offered sufficient proof to support a finding that the school board received less than it otherwise would have as a result of the appellants' scheme. ² It is clear that the architects were not the only victims of the extortion. This depletion of the school board's assets,...