U.S. v. Bursten

• Citation: 560 F.2d 779
• Decision Date: 15 September 1977
• Docket Number: Nos. 76-1711 and 76-1712,s. 76-1711 and 76-1712
• Parties: UNITED STATES of America, Plaintiff-Appellee, v. Lawrence BURSTEN and Solomon Seidel, Defendants-Appellants.
• Court: United States Courts of Appeals. United States Court of Appeals (7th Circuit)

Page 779

560 F.2d 779

UNITED STATES of America, Plaintiff-Appellee, v. Lawrence BURSTEN and Solomon Seidel, Defendants-Appellants.

Nos. 76-1711 and 76-1712.

United States Court of Appeals Seventh Circuit.

Argued May 26, 1977.

Decided Aug. 12, 1977.

Rehearing Denied Sept. 15, 1977.

Edward M. Genson, Sam F. Adam, Chicago, Ill., for defendants-appellants.

Richard L. Kieser, U. S. Atty., John S. Leonardo, Asst. U. S. Atty., South Bend, Ind., David H. Coffman, Crim. Div., Dept. of Justice, Washington, D. C., for plaintiff-appellee.

Before CLARK, Associate Justice, ^* and CUMMINGS and SPRECHER, Circuit Judges.

PER CURIAM.

In this appeal, defendants Bursten and Seidel contest the sufficiency of the evidence to establish the requisite federal jurisdictional elements of the Travel Act ¹ and an evidentiary ruling regarding the willingness of the Government's key witness to submit to a polygraph test. We affirm.

I

Defendants were convicted by a jury under a three count indictment charging one count of conspiracy to defraud the United States and two counts of substantive violation of the Travel Act for their use of a facility in interstate commerce in furtherance of a bribery scheme which violated Indiana law. The proof adduced at trial, according the Government the benefit of all favorable inferences, may be summarized as follows. The Local Housing Authority of East Chicago, Indiana (HAEC) is an agency staffed by officials of the city which was established to facilitate the development of housing for resident low income persons. The housing authority executed this function through either agreeing in advance to purchase a completed housing project or assuming the role of general contractor for such a project itself. Most of the funding for these projects was provided by the Department of Housing and Urban Development (HUD). Although HUD exercised some degree of supervision over the project, the local housing authority retained considerable latitude in the selection of a general contractor.

Benjamin Lesniak, the Government's key witness, served as the Executive Director of HAEC from 1965 to 1973. The duties attendant to this position included researching contract proposals submitted to HAEC, formulating recommendations to the HAEC Board of Directors regarding the selection of a general contractor for specific projects, ² and conducting various administrative tasks. Lesniak testified pursuant to a grant of immunity embodied in a plea agreement, wherein he pleaded guilty to charges of conspiracy and income tax evasion in connection with his acceptance of bribes on an unrelated project.

Lesniak became involved with defendants during the fall of 1968. At a meeting in the office of the mayor of East Chicago, defendant Bursten and several of his associates, all of whom were Milwaukee businessmen, indicated to Lesniak their desire to build a housing project in that city and their willingness to conform to payoff requests from HAEC and city officials in order to secure a contract. Subsequent to this encounter, the Milwaukee businessmen entered into a partnership for the explicit purpose of planning and constructing the housing project, doing business thereafter as the East Chicago Development Company (ECDC). ³ A final payoff figure of $100,000, to be paid in cash, was negotiated, in return for HAEC's cooperation. This compact proved fruitful, in that ECDC was awarded a $7.3 million contract by HUD. It was further agreed that in the event the venture proved more successful than anticipated, ECDC would supplement the emoluments paid to Lesniak.

Ultimately, two additional payments were made to Lesniak by ECDC, and it is these expenditures which form the basis for the criminal charges. Both payments were disguised in the following manner: third parties were persuaded to write checks payable to Lesniak. Defendants, in turn, wrote checks drawn on ECDC's Milwaukee account payable to businesses controlled to some extent by those third parties.

Specifically, the first payment of $20,000 was camouflaged as a "loan" to Euclid Steel, a subcontractor on the project. John Rakoczy, owner of Euclid Steel, was persuaded to "loan" Lesniak $20,000; in turn, ECDC would "loan" Rakoczy an identical sum. On April 16, 1971, in the presence of both defendants, Rakoczy tendered two checks totalling $20,000 to Lesniak in exchange for Lesniak's note. Defendants, as agreed, proffered a $20,000 check drawn on ECDC to Rakoczy, in return for his note. ⁴ No collateral of any type was involved; this "loan" was never repaid. ⁵ The Government introduced these documents as evidence at trial. Defendants stipulated to facts indicating that the $20,000 check drawn on ECDC's account at the American City Bank and Trust Company in Milwaukee, and signed by both defendants, was deposited in East Chicago, then sent by bank delivery service through Chicago, Illinois and on to the Milwaukee drawee bank for collection.

Regarding the second payment, defendant Bursten arranged for a loan of $5,000 from the Glendale National Bank in Milwaukee, of which he was a director, to Lesniak's brother, John, who deposited this money in Lesniak's account. To repay this loan, defendants tendered to Lesniak on September 22, 1971 a $6,000 check drawn on ECDC and payable to Mid-States Engineering, a firm in which John Lesniak had an interest. Lesniak passed this check to John, in exchange for three checks drawn on Mid-States Engineering, totalling $5,880. ⁶ Lesniak subsequently reimbursed his brother, who repaid the bank. Each of these documents was introduced as evidence by the Government at trial. Again, defendants stipulated that the $6,000 check drawn on ECDC and payable to Mid-States Engineering was deposited in Hammond and sent through Chicago to the drawee Milwaukee bank for collection.

Defendants did not dispute the physical evidence at trial, but steadfastly maintained that the transactions denominated as "payoffs" by Lesniak were actually legitimate business loans. ⁷ Upon conviction, each defendant was sentenced to concurrent prison terms of five years on each count and a fine of $10,000.

II

Defendants urge on appeal that this court's precedential decisions interpreting the Travel Act mandate reversal, since use of the bank check delivery service involved here so minimally affected the execution of the bribery scheme that such utilization cannot be use of "a facility in interstate commerce" within the purview of the Travel Act, citing United States v. Isaacs, 493 F.2d 1124 (7th Cir.), cert. denied, 417 U.S. 976, 94 S.Ct. 3183, 41 L.Ed.2d 1146 (1974); United States v. McCormick, 442 F.2d 316 (7th Cir. 1971); and United States v. Altobella, 442 F.2d 310 (7th Cir. 1971). See also Rewis v. United States, 401 U.S. 808, 91 S.Ct. 1056, 28 L.Ed.2d 493 (1971). The Government counters this assertion by contending that our recent decision in United States v. Peskin, 527 F.2d 71 (7th Cir. 1975), cert. denied, 429 U.S. 818, 97 S.Ct. 63, 50 L.Ed.2d 79 (1977), is controlling here. We agree.

Peskin involved facts remarkably similar to those of the case at bar. Kaufman & Broad, Inc., (K&B) a home builder, negotiated a purchase of two large parcels of land for residential development in the village of Hoffman Estates, Illinois, the sale being contingent upon K&B obtaining satisfactory rezoning of the property. In order to accomplish this rezoning, K&B distributed $35,000 to various officials of Hoffman Estates, using Peskin, an attorney, as a conduit. Payment was accomplished as follows. An Illinois subsidiary of K&B wrote four checks totalling $100,000 payable to Peskin, this sum to cover his fees for legal services rendered in the transaction, the $35,000 payment to village officials (which was also ostensibly a fee), and any income tax liability incurred by Peskin as a result of the $35,000 bribe being characterized as a fee. Within a day or two of transmittal of each of these checks to Peskin, K&B drew a check on its account in a Detroit Bank payable to the Illinois subsidiary. These checks were first deposited in the subsidiary's Chicago account to replace the funds doled out to Peskin, and then transmitted from bank to bank until ultimately arriving at the drawee bank in Detroit for collection. In response to Peskin's appellate claim that the use of facilities in interstate commerce, i.e., various banks and a Chicago-Detroit carrier system, was so minimal and incidental as to be insufficient to invoke federal criminal jurisdiction under the Travel Act, Judge Fairchild, speaking for the court, averred:

The transmission of funds to Mr. Peskin was essential to the carrying on of the illegal activity. . . . The deposit and interstate clearance of the Detroit checks were essential in fact to the payment of Peskin, although he . . . (was) unaware of the details. We do not consider this use of interstate facilities "minimal" and "incidental" as those terms have been used in this context.

527 F.2d at 77.

Here, checks drawn on the ECDC account in a Milwaukee bank were transferred to third parties as the agreed-upon reimbursement for prior payments to Lesniak. These reimbursements, which permitted ECDC to camouflage the actual nature of the transaction and treat the payments as purportedly legitimate tax deductions, were crucial to the success of the bribery scheme. Rakoczy's agreement to "loan" Lesniak $20,000 on behalf of Euclid Steel was obviously contingent upon ECDC's promise to "loan" a corresponding amount to Euclid Steel. Similarly, the machinations of ECDC with respect to Glendale National Bank and Mid-State Engineering were necessary in order to complete the transfer of funds through John Lesniak to his brother, Benjamin. The interstate clearance of these checks, as in Peskin, was "essential to the carrying on of the illegal activity," 527 F.2d at 77, and thus constitutes a basis for prosecution under the Travel Act.

Defendants make no reference to Peskin in either their...