U.S. v. Garner

Decision Date29 December 1987
Docket Number86-1711,Nos. 86-1707,86-1734,s. 86-1707
Parties24 Fed. R. Evid. Serv. 476 UNITED STATES of America, Plaintiff-Appellee, v. Hensley GARNER, John J. Pagone, Nicholas A. Caputo, Harold J. Knies, Rhey A. Orme, Leo Gruenholz, Donald Hojnacki and Andrew Federinko, Defendants- Appellants. thru 86-1738, 86-1777.
CourtU.S. Court of Appeals — Seventh Circuit

William T. Huyck, Glenn Seiden, James A. Graham, Edward M. Genson, Thomas A. Corfman, Carol A. Brook, Chicago, Ill., for defendants-appellants.

James P. Fleissner, Asst. U.S. Atty., Chicago, Ill., for plaintiff-appellee.

Before WOOD and RIPPLE, Circuit Judges, and GORDON, Senior District Judge. *

RIPPLE, Circuit Judge.

Eight defendants appeal their convictions for violations of the Racketeer Influenced and Corrupt Organizations Act, 18 U.S.C. Sec. 1962(c) (RICO), and the Hobbs Act, 18 U.S.C. Sec. 1951. 1 The defendants were all House Drain Inspectors for the Department of Sewers of the City of Chicago. They raise on appeal nearly a score of issues. Their primary contentions are that they were improperly joined for trial, that the jury instructions were faulty, that inadmissible evidence was used against them, and that the evidence was insufficient to support their convictions. For the reasons set forth in the following opinion, we affirm all of the convictions.

I General Background

This case involves the payment of bribes by private sewer contractors to sewer inspectors of the City of Chicago. Sewer work on private property in Chicago is performed by contractors regulated by the city. All contractors must be licensed by the city, and a permit and inspection must be obtained for most sewer work.

Sewer contractors pay a fee to the city to obtain work permits. The amount of this fee varies depending on the job that will be done. Before a contractor begins a job, he is required to contact the Department of Sewers and report the type, location, and price of the work. This information is then transmitted to a central desk for assignment to an inspector. The inspector travels to the jobsite to check the contractor's work, handle citizen complaints, and accept the check or money order for the permit fee. Inspections are performed after the work is completed but before the excavation is filled in. Inspectors are not entitled to any payment other than the permit fee. After inspecting the job and accepting the permit fee, the inspectors return the fee to the permit desk by interoffice mail.

The government does not contend that the defendants ever failed to remit the permit fee. Rather, this case involves the payment of additional amounts to inspectors by contractors. At trial, the government presented evidence demonstrating that sewer contractors, as a matter of course, gave inspectors from $10 to $20 per inspection. The government contended that this system was the product of a conspiracy among the sewer inspectors, and that the receipt of these additional payments constituted acts of bribery and extortion. The defendants contended that there was no conspiracy among the inspectors, and that the additional payments to inspectors were mere gratuities and were not intended as bribes nor induced by extortion. 2

On July 17, 1985, a grand jury returned an 84-count indictment against 14 defendants, all of whom were inspectors for the Department of Sewers of the City of Chicago. In Count 1 of the indictment, all 14 defendants were charged with conspiracy in violation of the RICO statute, 18 U.S.C. Sec. 1962(d). This count of the indictment alleged that the defendants had agreed to conduct the affairs of the Department of Sewers through a pattern of racketeering activity, and it incorporated by reference the predicate acts alleged in the later individual RICO counts. In counts 2-15, each of the 14 defendants was charged with one count of violating the RICO statute, 18 U.S.C. Sec. 1962(c). The indictment alleged numerous acts of racketeering activity by each defendant in violation of the Illinois bribery statute and the Illinois official misconduct statute. 3 In Counts 16-84, each defendant was charged in five counts with extortion under color of official right in violation of the Hobbs Act.

Eight of the 14 defendants were tried jointly. The trial began on January 6, 1986 and concluded on February 21, 1986. The government's case centered on the testimony of more than 50 witnesses. Most of the witnesses were contractors or their agents who had paid money to inspectors. Many of these witnesses testified under a grant of immunity. Four witnesses were not contractors or their agents, including one of the most important witnesses, Aubrey Blunt, a sewer inspector, who testified under a plea bargain agreement.

The government also introduced a substantial amount of documentary evidence. Many of the sewer contractors retained records of various jobs, and some even kept records of payments to inspectors. Records of the Department of Sewers also were introduced that identified which inspectors had been assigned to particular jobs. Most of the evidence of bribery and extortion was provided by the direct testimony of contractors. As to each defendant, several contractors testified that they made payments to the inspector and that these payments were accepted. At least five contractors testified against each inspector. 4

The government did not provide as much evidence about the purpose of the payments. A number of contractors characterized the payments as "the system" or the "cost of doing business" in Chicago. Most witnesses testified that they had been trained to pay inspectors by a friend, relative, or co-worker in the business. In a few cases, the inspector explicitly requested payments. In other cases, the contractor paid the inspector for the purpose of encouraging the inspector to look the other way when there was an improper permit or when improper materials were used. Most common, however, was the statement that the payments were made to avoid generalized fears of harassment or delays.

Most of the defendants used the ambiguity regarding the purpose of the payments as their primary defense. These defendants contended that the payments were a longstanding tradition in the industry, that they represented nothing more than mere gratuities, and that there was no expectation by either contractors or inspectors of a quid pro quo. Defendants Harold Knies and Hensley Garner, however, did not use this defense. Defendant Knies contended that he had never received payments, and that there was no custom and practice of making payments. Defendant Garner claimed that there was insufficient evidence to believe beyond a reasonable doubt that he had committed any offenses.

Before the case went to the jury, the defendants moved for a judgment of acquittal on the conspiracy count; the motion was denied. The jury found all of the defendants not guilty of conspiracy. However, the jury found all of the defendants guilty of the individual RICO count, and seven of the eight defendants guilty of at least one extortion count. The defendants filed post-trial motions for new trials and for an arrest of judgment, which were denied. These appeals followed.

II Conspiracy Issues
A. Background
1. Procedural Context

The defendants filed various pretrial motions. The most important of these motions dealt with the conspiracy charge and with the government's intention to join the defendants for trial. The defendants contended that the conspiracy indictment was insufficient as a matter of law, and that there was no reasonable expectation that the conspiracy would be proved at trial. Therefore, they argued that joinder was inappropriate under Rule 8(b) of the Federal Rules of Criminal Procedure. 5 Several defendants also contended that the court should sever the trial, pursuant to Rule 14 of the Federal Rules of Criminal Procedure, 6 because a joint trial would severely prejudice the defendants. These motions were denied. Furthermore, the court ruled that there was sufficient evidence of conspiracy to warrant the admission of co-conspirators' statements under Rule 801(d)(2)(E) of the Federal Rules of Evidence.

2. Evidence of Conspiracy

As proof of the conspiracy, the government offered a good deal of "custom and practice" evidence. This evidence was admitted over the objection of the defendants. Custom and practice evidence consisted of testimony by contractors concerning the tradition of giving and receiving money in the sewer business. Contractors testified that it had long been customary in the business for inspectors to receive payments of $10 or $20, or even more, per inspection. They tesitifed that these payments were made because it was commonly understood that inspectors would cause hassles and delays if they were not paid. Some contractors testified that they were advised to make these payments by their parents or friends or prior employers, and that the regular practice was to conceal the payment from the customer by putting it in an envelope or folding the cash into the check for the permit fee.

The government also presented evidence of an established price structure for payoffs. For many years, the standard "fee" for a permit was $10. Later, the price went up to $20. One contractor testified that he was told by an inspector that "the price of poker went up." Tr. 10 at 1416. Several contractors testified that they were told by inspectors that the standard fee had gone up to $20. The defendants conceded at oral argument that there was evidence of "parallel conduct."

Aubrey Blunt, an inspector, testified that he was told by other inspectors that he should take the money out of the envelopes because it was for him, and that the purpose of the payments was to avoid hassles. Blunt related conversations between inspectors describing contractors as "all right" or "one of the good guys." Blunt testified that these expressions meant that...

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