U.S. v. Biaggi, Nos. 35
| Court | United States Courts of Appeals. United States Court of Appeals (2nd Circuit) |
| Writing for the Court | Before FEINBERG and NEWMAN, Circuit Judges, and MISHLER; JON O. NEWMAN |
| Citation | 909 F.2d 662 |
| Parties | , 36 Cont.Cas.Fed. (CCH) 75,902, 30 Fed. R. Evid. Serv. 673 UNITED STATES of America, Appellee, v. Mario BIAGGI, Stanley Simon, Richard Biaggi, Peter Neglia, John Mariotta, and Bernard Ehrlich, Defendants-Appellants. ockets 88-1530, -1531, -1532, -1533, -1543, 89-1015. |
| Docket Number | 23,26,25,Nos. 35,27,D,24 |
| Decision Date | 29 June 1990 |
Page 662
30 Fed. R. Evid. Serv. 673
v.
Mario BIAGGI, Stanley Simon, Richard Biaggi, Peter Neglia,
John Mariotta, and Bernard Ehrlich, Defendants-Appellants.
-1533, -1543, 89-1015.
Second Circuit.
Decided June 29, 1990.
Page 669
James M. LaRossa, New York City (Karen F. Silverman, Arie Bucheister, LaRossa, Mitchell & Ross, New York City, on the brief), for defendant-appellant Mario Biaggi.
Charles Haydon, New York City (Paul A. Victor, Dublirer, Haydon, Straci & Victor, New York City, on the brief), for defendant-appellant Simon.
Dominic F. Amorosa, New York City, for defendant-appellant Richard Biaggi.
Alan R. Kaufman, New York City (Buchwald & Kaufman, New York City, on the brief), for defendant-appellant Neglia.
Jeffrey Glekel, New York City (Albert J. Boro, Jr., Skadden Arps Slate Meagher & Flom, New York City, on the brief), for defendant-appellant Mariotta.
Peter J. Driscoll, New York City (Catherine L. Redlich, Kostelanetz Ritholz Tigue & Fink, New York City, on the brief), for defendant-appellant Ehrlich.
Edward J.M. Little, Asst. U.S. Atty., New York City (Benito Romano, U.S. Atty., Michele Hirshman, Vincent L. Briccetti, Celia Goldway Barenholtz, Asst. U.S. Attys., Mary Shannon Little, Sp. Asst. U.S. Atty., Donna Merris, Law Clerk, New York City, on the brief), for appellee.
Before FEINBERG and NEWMAN, Circuit Judges, and MISHLER, Senior District Judge. *
JON O. NEWMAN, Circuit Judge:
This is an appeal by six defendants, including a former United States Congressman, from convictions arising out of the affairs of the Wedtech Corporation, a manufacturing company located in New York City that received contracts from the Defense Department. The defendants are former Congressman Mario Biaggi; his son, Richard Biaggi; the Congressman's former law partner, Bernard Ehrlich; the former Bronx Borough President, Stanley Simon; the former chief executive officer of Wedtech, John Mariotta; and the former New York regional administrator of the Small Business Administration, Peter Neglia. The six defendants appeal from judgments of conviction entered November 18, 1988, 1 in the Southern District of New York (Constance Baker Motley, Judge) after a five-month jury trial.
The appeal presents a host of issues. It also requires some consideration of the distinction between bribes and extortion payments, on the one hand, and political contributions and legal fees, on the other hand. The distinction is clear in theory, but this case demonstrates how blurred the line can become in practice when a company that
Page 670
requires political assistance and legal services in dealing with governmental bureaucracies makes payments to office holders and lawyers associated with them. Though the distinction is implicated in this case, we are satisfied that the risk of mischaracterizing lawful political contributions and legal fees as bribes and extortion payments did not reach the point where rights of the defendants were denied. Other considerations, however, lead us to reverse convictions of some defendants on some counts. We affirm the convictions of all defendants on at least two counts.To promote understanding of the many issues in this complex case we set forth first the undisputed facts of Wedtech's history and then the Government and the defense contentions concerning the different activities that form the basis for the criminal charges.
Undisputed Facts. Wedtech began its existence as Welbilt Electronic Tool & Die Corporation ("Welbilt"), a small sheet metal fabricating company located in the South Bronx. Welbilt changed its name to Wedtech in 1983 when it made a public offering of its stock. For convenience, we will refer to the company at all times as "Wedtech." Defendant John Mariotta founded the company and remained chairman until company officials ousted him in 1986. In 1975 Wedtech was accepted into the Small Business Administration's "Section 8(a)" program, under which minority-owned businesses are eligible for government contracts without competitive bidding. See 15 U.S.C. Sec. 637(a) (1988). Mariotta is of Puerto Rican descent.
In 1978 defendant Mario Biaggi, then a Congressman from the Bronx, met Mariotta and Fred Neuberger, a co-owner of Wedtech. In addition to serving in Congress, Biaggi was at that time a partner in a small law firm, known as Biaggi & Ehrlich. His law partner was defendant Bernard Ehrlich. Wedtech retained Biaggi & Ehrlich, initially at an annual retainer of $20,000. The retainer was subsequently increased in stages to $150,000. Biaggi withdrew as a member of the law firm in 1979, after the House of Representatives adopted Rule XLVII, which limited outside income of members of the House to 30 percent of their salaries. 2 The law firm bought his partnership interest for $320,000 to be paid over a ten-year period. Biaggi remained in an "of counsel" relationship to the firm. Biaggi's son, defendant Richard Biaggi, became a partner in the firm in 1983.
Starting in 1978, Biaggi (all references are to the father, unless otherwise indicated) contacted various governmental officials on behalf of Wedtech, urging awards of contracts from the Defense Department through the SBA's section 8(a) program and loans from the Economic Development Administration. In addition to Biaggi, Wedtech also benefitted from the services of attorney E. Robert Wallach, former White House assistant Lyn Nofziger, and other Washington lobbyists. Wallach frequently contacted then White House Chief of Staff Edwin Meese on Wedtech's behalf.
Among the benefits achieved for Wedtech by its lobbyists and lawyers were the awards of a $27 million contract in 1982 to make small engines for the Army and a $24 million contract in 1984 to make pontoons (raft-like structures carried on ships to aid in unloading) for the Navy. Despite these contract awards, Wedtech experienced serious financial difficulties and ultimately filed for bankruptcy at the end of 1986.
Contentions Concerning Criminality. The Government's evidence against the defendants came primarily from four Wedtech officials, Fred Neuberger, Mario Moreno, Lawrence Shorten, and Anthony Guariglia. These four cooperating witnesses had been charged with a series of federal and state violations arising out of their activities at Wedtech and had pled guilty pursuant to plea agreements. All four testified under grants of use immunity. Their testimony concerned six basic matters:
Page 671
1. The Five Percent Stock Interest. When Wedtech went public, the company issued two and one-half percent of its stock to Ehrlich and an equal percent to Richard Biaggi. The Government contended that Richard was given his share as a nominee for his father, that the total five percent stock interest was paid as a bribe to influence Congressman Biaggi to use the powers of his office to secure government contracts for Wedtech, and that the payment was made in response to an extortionate demand by the Congressman, aided by Ehrlich. A restriction precluded sale of the shares for two years, a circumstance that made it difficult to ascertain their value when issued. The law firm's accountant placed the value, when issued, at $35,000 for each recipient. After the restriction was lifted, Ehrlich and Richard Biaggi sold about one-third of their shares, each realizing more than $600,000.
The defendants contended that the five percent stock interest was transferred to the partners of the law firm, Ehrlich and Richard Biaggi, in fulfillment of a previous promise to reward the firm for its loyalty to Wedtech in the early days when the firm billed modestly for legal services, declined to insist on prompt payment, and did not bill at all for some services. Defendants also contended that Richard Biaggi was issued the stock for himself as a partner in the law firm, and not as a nominee for his father.
2. The $50,000 Loop Drive Payment. After Wedtech obtained the pontoon contract from the Navy, it needed a waterside property at which to test the vessels and identified a site known as One Loop Drive, located in the Bronx. The property was owned by New York City. To secure the City's willingness to lease the property, Ehrlich sought the assistance of defendant Stanley Simon, who was then the Bronx Borough President and a member of the Board of Estimate, which approved City leases. Simon arranged for Wedtech officials to meet with Susan Frank, the City's Commissioner of Ports and Terminals. Over the course of a few days in June 1984, a three-year lease was negotiated whereby the City agreed to rent the Loop Drive property to Wedtech for $50,000 a year, well below the annual rent of $125,000 the City had initially requested. Ehrlich negotiated the lease terms on behalf of Wedtech. Ehrlich and his firm also negotiated with a corporation that occupied the building at One Loop Drive to assure Wedtech's use of the site's parking lot in connection with waterside activities required to fulfill the pontoon contract.
The lease required approval of the Board of Estimate. Wedtech needed prompt approval in order to satisfy the Navy that it had the waterside site needed to perform the contract. To secure approval at the Board's June 13 meeting required unanimous consent, since the matter had arisen too quickly to be placed on the agenda for that meeting. Two Board members objected, and, consequently, the item was deferred until July. Biaggi called Simon and demanded his assistance in having the lease approved at a subsequent meeting. According to Moreno, Ehrlich reported that Biaggi had "punished" Simon, warning him "that his next election depended on Mario Biaggi's support and that he had to start moving really quick." The Board approved the lease at its July 12 meeting.
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