U.S. v. Gannon

• Decision Date: 30 June 1981
• Docket Number: No. 80-1108,80-1108
• Citation: 684 F.2d 433
• Parties: UNITED STATES of America, Plaintiff-Appellee, v. Thomas GANNON, Defendant-Appellant.
• Court: U.S. Court of Appeals — Seventh Circuit

Page 433

684 F.2d 433

UNITED STATES of America, Plaintiff-Appellee, v. Thomas GANNON, Defendant-Appellant.

No. 80-1108.

United States Court of Appeals Seventh Circuit.

Argued En Banc Feb. 19, 1981.

Decided June 30, 1981.

Jerome Rotenberg, Chicago, Ill., for defendant-appellant.

Thomas P. Sullivan, U. S. Atty., William R. Coulson, Asst. U. S. Atty., Chicago, Ill., for plaintiff-appellee.

Before FAIRCHILD, Chief Judge, and SWYGERT, CUMMINGS, PELL, SPRECHER, BAUER, WOOD and CUDAHY, Circuit Judges.

PELL, Circuit Judge.

Appellant Thomas Gannon was convicted of 29 counts of violating The Real Estate Settlement Procedures Act of 1974, 12 U.S.C. §§ 2601, 2607(b) (1976) (RESPA), by accepting payments for Torrens filings which were in excess of those authorized by state law. Each extra payment was the basis of a separate count of the indictment. Appellant, a counterman in the Torrens section of the Cook County, Illinois Recorder of Deeds office, acknowledged that he received and accepted the excess payments from local bank representatives whose filings he had handled. He claims, however, that RESPA does not apply to these payments because they were "gratuities," not "portions of the charges" made for settlement services "other than for services actually performed." 12 U.S.C. § 2607(b). A panel of this Court initially agreed with appellant's interpretation and reversed his conviction. United States v. Gannon, No. 80-1108 (7th Cir., Nov. 3, 1980). This opinion follows an en banc rehearing.

I

The undisputed evidence presented at appellant's trial reveals the following. The purpose of the Torrens section is to guarantee the title of Cook County real estate registered with it by issuing title certificates for the property. The counterman deals directly with the public by accepting land registration and transfer documents, examining the documents for correctness, transmitting the documents to other employees so that a new title certificate can be prepared if necessary, and charging and accepting the appropriate fees for these services. The fees are set by state statute and the countermen receive a salary in return for which they are to provide the public with prompt and courteous service.

Since the fall of 1977, a sign has been displayed in the Torrens section which states:

ATTENTION

OFFICE REGULATIONS PROHIBIT MEMBERS OF THE STAFF FROM

ACCEPTING GRATUITIES FROM ANY SOURCE IN THE

CONDUCT OF OFFICIAL BUSINESS.

In addition, in the fall of 1977, appellant signed a typed statement which provides:

The undersigned hereby acknowledges and understands that the acceptance of gratuities from any source in the conduct of office business is strictly forbidden. Violators of this regulation will be subject to disciplinary action.

A number of the section's customers are employees of various local banks or savings and loan institutions. The institutions are federally insured and use the Torrens services in the course of providing real estate loans. The bank employees can either phone ahead to the Torrens office for an appointment with a specific counterman, or can arrive at the office without an appointment and wait in a line for service. They can pay for the Torrens service either in cash or by check which is given to the counterman in return for a stamped receipt.

A number of bank employees testified at appellant's trial that when they submitted the relevant documents and fees to appellant for Torrens registration or transfer, they gave two or three dollars to appellant in addition to the statutory amount. It is uncontested that appellant accepted these extra payments. The employees testified that they were told by their superiors, usually during training, that they should regularly make these additional payments to the countermen. Although there was no testimony that appellant requested or solicited these extra payments, one of the bank employees, Cheryl Olk, testified that after she ceased making the payments for her bank, appellant told her that she worked for a "cheap bank" and that if "something were not done," the bank's "work would not get done." ¹ All of the bank employees testified that in return for the additional payments, they believed that they received "prompt" and good service from appellant.

II

The basis of this appeal is that these extra payments were unsolicited "gratuities," which, although they may have violated state statutes or office regulations, did not violate RESPA because they were not the evil § 2607(b) was intended to address.

Section 2607 provides in pertinent part:

§ 2607. PROHIBITION AGAINST KICKBACKS AND UNEARNED FEES

-BUSINESS REFERRAL

(a) No person shall give and no person shall accept any fee, kickback, or thing of value pursuant to any agreement or understanding, oral or otherwise, that business incident to or a part of a real estate settlement service involving a federally related mortgage loan shall be referred to any person.

-SPLITTING CHARGES

(b) No person shall give and no person shall accept any portion, split, or percentage of any charge made or received for the rendering of a real estate settlement service in connection with a transaction involving a federally related mortgage loan other than for services actually performed.

-FEES, SALARIES, COMPENSATION, OR OTHER PAYMENTS

(c) Nothing in this section shall be construed as prohibiting ... (2) the payment to any person of a bona fide salary or compensation or other payment for goods or facilities actually furnished or for services actually performed....

Appellant makes two arguments in support of his contention that § 2607(b) was not intended to apply to his actions. First, he claims that the gratuities were not a "portion" of the "charge made ... for the rendering of real estate settlement services." Second, he contends that he performed real estate settlement services in return for the gratuities.

Regarding appellant's first argument, we must initially recognize the findings made by the district court that the "gratuities were a regular portion of the payments for the rendering of settlement services," and that the "(a)gents of the banks were given the impression that gratuities had to be paid in order to get the work done." Appellant claims that these comments were not formal factual findings requiring the application of the "clearly erroneous" standard. We disagree with appellant's characterization, however, irrespective of the standard applied, it appears the "comments" were adequately supported in the record.

To come within the scope of § 2607's prohibitions, a charge need not be imposed pursuant to a state statute or local regulation, or even be the result of a specific demand by the counterman. HUD regulations provide that an "agreement or understanding" for the referral of business that is illegal under § 2607(a)

need not be verbalized but may be established by practice, pattern, or course of conduct pursuant to which the payor and the recipient of the thing of value understand that the payment is in return for the referral of business.

24 C.F.R. § 3500.14(c) (1980). We think a similar definition should be imposed upon the term "charge" in subsection (b). See Weiner v. Swales, 217 Md. 123, 141 A.2d 749, 750 (1958) ("charges" are "the expenses which have been incurred, or disbursements made, in connection with a contract, suit, or business transaction"). In this case, it is clear that the two- or three-dollar gratuities were as much a part of the "charge" imposed upon the customers as was the statutorily imposed segment. It is a reasonable inference from the evidence that in general, the continued "prompt" service was preconditioned upon the regular payment of these "gratuities." The inference is buttressed by the testimony regarding the training information passed to the institutions' employees which reflects that the custom of paying the "gratuities" was well established in the business community. ² Any remaining doubt concerning the deontic nature of the extra payments was put to rest by appellant's statement to Olk that if her bank did not "do something" about the cessation of the "gratuity" payments, the bank's work "would not get done."

Regarding appellant's second argument, appellant concedes that in return for his salary from the Torrens office, it was his obligation to render all customers prompt and good service, and that the reasonable value of the services he rendered was equal to the statutory portion of the "charges" he imposed. Therefore, appellant must have accepted the extra payments for something other than rendering his settlement services. Appellant cannot avoid liability under § 2607(b) simply by refusing to perform his mandated duties unless he is given a "gratuity," and thus claiming that he was "performing a real estate settlement service" in return for the extra payments.

The difficulty the panel focused upon in the original opinion concerned the construction of the phrase "received for". In essence, the panel concluded that it would be impossible for a single individual to violate § 2607(b) because he could not both accept a portion of the charge "received for" the rendering of real estate settlement services, and also accept the same charge "other than for services actually performed." If the services were not performed, the panel held, the charge could not have been received "for" the performance of those services. We think this construction of § 2607(b) is too restrictive.

Although it is true that, in general, a criminal statute must be strictly construed, United States v. Campos-Serrano, 404 U.S. 293, 297, 92 S.Ct. 471, 474, 30 L.Ed.2d 457 (1971) (citation omitted), it is also a well established rule of statutory construction that a court will presume against interpreting a statute in a way that will render it meaningless or ineffective. FTC v. Manager, Retail Credit Co., Miami Branch Office, 515 F.2d 988, 994 (D.C.Cir.1975) (citations omitted). In this case, not only does ...