U.S. v. Keane

Decision Date18 August 1975
Docket NumberNo. 74-1979,74-1979
Citation522 F.2d 534
PartiesUNITED STATES of America, Plaintiff-Appellee, v. Thomas E. KEANE, Defendant-Appellant.
CourtU.S. Court of Appeals — Seventh Circuit

John Powers Crowley, Jerome H. Torshen, Chicago, Ill., for defendant-appellant.

Samuel K. Skinner, Asst. U. S. Atty., Gary L. Starkman, James S. Montana, Jr., Philip C. Parenti, Tyrone C. Fahner, Assts. to U. S. Atty., Chicago, Ill., for plaintiff-appellee.

Before SPRECHER and BAUER, Circuit Judges, and EAST, * Senior District Judge.

SPRECHER, Circuit Judge.

This appeal seeks review of the conviction of Thomas E. Keane, former Alderman of Chicago's Thirty-First Ward and Chairman of the City Council's Committee on Finance, for violation of 18 U.S.C. § 1341 (mail fraud) 1 and 18 U.S.C. § 371 (conspiracy). 2


On May 2, 1974, a 21-count indictment was returned against the defendant Keane. The indictment alleged a mail fraud scheme in violation of 18 U.S.C. § 1341 in which Keane would purchase through nominees, in some cases with advance information, tax delinquent properties at the Cook County scavenger sale in 1966; that these properties would be held in various land trusts without disclosure of the beneficiaries; that they would receive favorable treatment, in having certain encumbrances removed, by the City Council and its various committees and subcommittees, without disclosure of Keane's interest in the properties and with Keane voting on matters that favorably affected his interest; that Keane would vote to authorize the acquisition of parcels in areas in which there were properties in which he had an interest and that he used his position and influence to aid in the sale of the properties to various private and governmental interests.

The indictment went on to allege that the outlined scheme defrauded the City of Chicago, its citizens and Keane's fellow aldermen of their right to the "conscientious, loyal, faithful, disinterested and unbiased services, decisions, actions and performance of official duties" by the defendant and their right to have the City's business and its affairs conducted "honestly, impartially, free from deceit, craft, trickery, corruption, fraud, undue influence, dishonesty, conflict of interest, unlawful obstruction and impairments, and in accordance with the laws of the State of Illinois and the City of Chicago. . . ."

The indictment also charged Keane with conspiring with John Hennessey, Sr. (hereinafter Hennessey) and John Hennessey, Jr. (hereinafter Junior), both unindicted coconspirators, to violate the mail fraud statute in violation of 18 U.S.C. § 371.


Although the evidence is in places conflicting, the basic outline of the alleged scheme is sufficiently clear. 3 In early 1965, a list of tax delinquent properties to be sold at Cook County's scavenger sale scheduled for June 1966, pursuant to Ill.Rev.Stat. ch. 120, § 716a, was published. The purpose of this sale was to place property upon which taxes had not been paid for ten years back on the tax rolls by allowing the purchaser at the scavenger sale to obtain title clear of county tax liens by paying only current and the preceding two years' taxes.

In early April 1965, discussions commenced between Hennessey, Nathan Schwartz and the defendant concerning the formation of Alpine Investments to purchase properties at the 1966 scavenger sale for investment purposes. 4 In connection with this venture there was established Chicago Title and Trust land trust No. 53129, into which properties acquired by Alpine were to be placed and in which all three partners had equal one-third beneficial interests.

In preparation for the 1966 scavenger sale Alpine, the day-to-day operations of which were run by Hennessey, hired Junior, John Babbington and Vincent Schall to research the properties to be sold. Approximately a month prior to the sale, Keane, Hennessey and Junior met in Hennessey's office to discuss the properties on which to bid. The three of them went through some of the Sidwell map books of the City and Keane made pencil comments on the borders of the map such as "No," "check title, taxes, etc.," "If nobody else buys," "O.K." "If cheap," "NG," "Page NG, but only for a song," and "Check Park." According to Hennessey's testimony Keane said that they should buy all the lots they could in the 87th and Mackinaw area because the government was going to construct a big project there.

Prior to the sale, the three partners, each of whom had invested approximately $100,000, arranged for a $300,000 loan at LaSalle National Bank to purchase scavenger sale properties, assuring the bank that it would be paid out of proceeds from the sale of lots acquired. When the loan was eventually called it was paid by a $275,000 loan from the Jefferson State Bank arranged by Keane.

The scavenger sale began on June 6, 1966, and lasted for about five weeks. Hennessey participated in the sale for the first week and then left responsibility for Alpine's bidding to Junior and Harry Rubenstein, an attorney for Alpine. Properties were bid for in the name of either John Hennessey, Sr. or Ada Sills, Rubenstein's wife's maiden name. Alpine was the second largest purchaser at the sale, purchasing 1,878 parcels of property at a total cost of $208,543.


In order to obtain clear title after the statutory two year period of redemption ran, 5 it was necessary for Alpine to remove the special assessment liens against each parcel. Special assessments are a means of financing local improvements such as alleys, sewers, streets and other improvements which benefit the adjacent properties. Special assessment bonds are issued to the contractor evidencing his right to payment for the work performed. Bondholders 6 are paid from the special assessment fund established to receive the payments from the private property owners and used to pay the principal and interest on special assessment bonds. According to the testimony at the trial no City funds are contributed to this fund, but the fund does pay to the City's general corporate fund up to five percent of the original assessment, presumably to cover administration expenses.

Bondholders, although having no direct action against the City, in the event of default may recover on the bonds by an action against the property. In order to remove the lien of the special assessment bondholders on the parcels it purchased, it was necessary for the Alpine partners, 7 in the name of the land trust that held the property, to cause foreclosure proceedings to be instituted. In cases where there were outstanding bondholders this was accomplished by filing a "Request for Foreclosure of Special Assessment Liens." For properties in Chicago, this application is forwarded to the staff of the Subcommittee on Special Assessments, a subcommittee of the Committee on Finance of the City Council, so that the Subcommittee can set a minimum bid to be made by the applicant at the subsequent foreclosure proceeding, commenced by the City of Chicago in the Circuit Court of Cook County. Although the judge could reject the minimum bid as inadequate or the bondholders could actually participate in the foreclosure sale thereby bidding the price up, in practice the minimum bid set by the Subcommittee invariably ended up as the purchase price. The money received from the sale is paid to the County Collector and transmitted through the special assessment fund to the bondholders.

At all times relevant to this case the chairman of the Subcommittee on Special Assessments was Alderman Fifielski, who was appointed to the position by Keane. There was testimony that Hennessey met Fifielski in Keane's outer office at City Hall and said "Alderman, we have some special assessments we would like to have foreclosures on. Would you call a meeting?" Fifielski subsequently held a meeting on June 26, 1970.

The evidence clearly showed that prior to this meeting Fifielski had set minimum bids for foreclosures at 30 to 60 percent of the principal amount due on the special assessment bonds. At the June 26, 1970 meeting of the Subcommittee, almost all of the 32 parcels of property in which the defendant had an interest were assigned minimum bids of approximately 10 percent.

The other procedure followed by the Alpine investors to obtain title clear of special assessment liens was "Compromise Offers in Lieu of Foreclosures." In the early 1930's the special assessment fund had redeemed a substantial number of bonds. Thus, some of the parcels in which the defendant had an interest were subject to liens for which there were no bonds outstanding. In this situation a property owner in order to clear the lien is required to settle the claim of the special assessment fund by making payment to it. If the comptroller, to whom application is made, determines that there are no outstanding bondholders, a compromise offer based on a standard formula is transmitted to the Subcommittee on Special Assessments. The compromise figure was always equal to "sales and costs" which Alderman Fifielski testified was the amount that the special assessment fund paid when it originally redeemed the outstanding bonds. 8

In both the case of "Requests for Foreclosures of Special Assessment Liens" and "Compromise Offers in Lieu of Foreclosures," the Subcommittee reports, with its recommendations, were inserted in the report of the Finance Committee, which at all times relevant to this case would be introduced to the full City Council by the defendant. After introduction of such reports, if there was no objection or debate desired, the matter would be referred to the omnibus bill and be voted on at the end of the day along with other matters. 9 On numerous occasions the defendant Keane voted in favor of omnibus bills containing "Requests for Foreclosures" and "Compromise Offers in Lieu of Foreclosure" proposals relating to properties in which he had an interest. 10 Keane never disclosed...

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    ...whether someone acted with intent to deceive, a jury must of course consider the totality of the circumstances. United States v. Keane, 522 F.2d 534, 544 (7th Cir. 1975), pet. for cert. filed, 44 USLW 3379 (U.S. Dec. 19, 1975). Even acts which are innocent in and of themselves may be fraudu......
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