U.S. v. Kenney

• Decision Date: 14 August 1990
• Docket Number: No. 86-1296,86-1296
• Citation: 911 F.2d 315
• Parties: 30 Fed. R. Evid. Serv. 1159 UNITED STATES of America, Plaintiff-Appellee, v. Jerry KENNEY, Defendant-Appellant.
• Court: U.S. Court of Appeals — Ninth Circuit

Page 315

911 F.2d 315

30 Fed. R. Evid. Serv. 1159

UNITED STATES of America, Plaintiff-Appellee, v. Jerry KENNEY, Defendant-Appellant.

No. 86-1296.

United States Court of Appeals Ninth Circuit.

Argued and Submitted March 14, 1989.

Decided Aug. 14, 1990.

Francisco Leon, Donau & Bolt, Tucson, Ariz., for defendant-appellant.

Joanne Y. Maida, Asst. U.S. Atty., Seattle, Wash., for plaintiff-appellee.

Appeal from the United States District Court for the District of Arizona.

Before BRUNETTI, KOZINSKI and NOONAN, Circuit Judges.

BRUNETTI, Circuit Judge:

The appellant was convicted on five counts of a seven-count indictment charging him with mail fraud, interstate travel with the intent to facilitate an unlawful activity, and conspiracy for his role in a kickback scheme involving transactions related to the Washington Public Power Supply System ("WPPSS"). He seeks reversal on the basis of the court reporter's loss of a portion of the trial transcript, the disqualification of trial counsel, the testimony of an Assistant United States Attorney, and the Supreme Court's decision in McNally v. United States, 483 U.S. 350, 107 S.Ct. 2875, 97 L.Ed.2d 292 (1987). We reverse the appellant's mail fraud convictions on the basis of McNally, and affirm on the remaining counts.

FACTS AND PROCEEDINGS BELOW

This case arose out of a $12.3 million fixed-cost fire protection contract between WPPSS and Cosco/Zurn Industries, Inc. ("Cosco"). The appellant was an independent sales representative for several companies that were involved in the WPPSS project, including Cosco. While the appellant's primary responsibility with Cosco was securing contracts with WPPSS, he was also involved in finding subcontractors for Cosco to perform work related to its contracts with WPPSS. These subcontractors would pay commissions directly to the appellant.

Control-X Corporation was a construction company that entered subcontracts with Cosco to perform painting services and provide fire equipment hangers. The appellant was instrumental in arranging these contracts between Cosco and Control-X, which led to the indictment against him. Walter Marsh was an owner of Control-X who testified for the government. Marsh claimed that the appellant informed him that Gerald Silverman of Cosco would have to be "taken care of" if Control-X were to be awarded a contract.

Marsh testified that he understood this to be a solicitation for a bribe. He and the appellant later traveled from Washington to Los Angeles to meet with Silverman and discuss the proposed contracts. At this meeting the appellant participated in negotiations, which included discussion of a payment of $10,000 to Silverman. The meeting concluded with the signing of a painting contract for $825,000, which included an advance payment to Control-X of $50,000 that was characterized as a mobilization fee. The appellant's commission was ten percent of the contract price plus twenty percent of any subsequent change orders. Additionally, Nor-Tec, a partnership in which the appellant had an interest, was to receive one-half of the mobilization fee. Marsh, in turn, was to receive one-half of Nor-Tec's share of the mobilization fee. Marsh later met with Silverman in Pasco, Washington, and paid him $10,000 in currency. Control-X contracted with Long Painting Company to perform the work under the contract for $312,000.

Negotiations for the hanger contract were similarly consummated, except that the appellant did not travel to Los Angeles with Marsh. Again, Silverman was to receive $10,000 and Control-X was to receive a $50,000 advance payment. The appellant's commission was the same. Nor-Tec was not included in this transaction. Further developments, which are not relevant to this appeal, led to indictments against Silverman and the appellant. Marsh received immunity for his testimony against the appellant.

Counts I through III of the indictment charged the appellant with mail fraud in violation of 18 U.S.C. Sec. 1341 and 1342. Counts IV through VI charged violations of the Travel Act, 18 U.S.C. Sec. 1952, and count VII charged the appellant with conspiracy in violation of 18 U.S.C. Sec. 371. Count V was later dismissed. After a jury trial the appellant was found guilty on counts II, III, IV, VI, and VII.

DISCUSSION

A. The Lost Transcript

The appellant's first argument is that the court reporter's loss of a portion of the trial transcript prevents adequate review of the record and requires us to remand this matter for a new trial. This loss, the appellant argues, constitutes a violation of 28 U.S.C. Sec. 753(b), which requires the court reporter to keep a verbatim record of the proceedings. The lost portion of the transcript contains a portion of the cross examination and redirect examination of Walter Marsh.

The appellant contends that this portion of the transcript contains rulings by the trial court limiting cross examination that constitute an abuse of discretion. A substitute statement, however, was prepared and approved by the trial court in accordance with Rule 10(c) of the Federal Rules of Appellate Procedure, which permits the substitution of a statement that has been prepared from the memories of the parties. Rule 10(c) provides:

If no report of the evidence or proceedings at a hearing or trial was made, or if a transcript is unavailable, the appellant may prepare a statement of the evidence or proceedings from the best available means, including the appellant's recollection. The statement shall be served on the appellee, who may serve objections or proposed amendments thereto within 10 days after service. Thereupon the statement and any objections or proposed amendments shall be submitted to the district court for settlement and approved and as settled and approved shall be included by the clerk of the district court in the record on appeal.

Statements were prepared by both the appellant and the appellee from their recollections of the testimony that was contained in the lost transcript. The trial court resolved the differences in the proposed statements and approved as settled the statement that was prepared by the government, finding that it "comport[ed] with the recollection and trial notes of the Court." There is no indication that the appellant raised any objection to this recapitulation until now.

Both parties rely on United States v. Piascik, 559 F.2d 545 (9th Cir.1977), cert. denied, 434 U.S. 1062, 98 S.Ct. 1235, 55 L.Ed.2d 762 (1978), which involved a court reporter's failure to record closing arguments in a criminal trial. The Piascik court declined to follow a fifth circuit rule that required reversal and a new trial in a similar situation, instead relying on Brown v. United States, 314 F.2d 293 (9th Cir.1963), which held that "[t]he appropriate procedure is to vacate the judgment and remand for a hearing to determine whether appellant was prejudiced by the error in failing to record the arguments." Id. at 295. Despite the fact that no Rule 10(c) hearing was held to reconstruct the record, Piascik's convictions were affirmed because defense counsel waived the recording of closing arguments and because the court concluded that any error alleged was harmless. Piascik, 559 F.2d at 550.

Here the trial court reconstructed the record in accordance with Rule 10(c). The appellant had the opportunity to raise timely objections to the substituted portion of the record, and he failed to do so. Any violation of section 753(b) has been remedied, and the appellant will not be permitted to contest the validity of the portion of the record that was substituted under Rule 10(c). Moreover, there is nothing in the substituted record to indicate trial errors occurred that would require reversal. The appellant has failed to show that any error was committed in the lost portion of the record, he has failed to show that the record in its present form is insufficient to review any claims of error, and he has failed to show that he has been prejudiced by the partial loss of the record. See Commercial Credit Equipment Corp. v. L & A Contracting Co., 549 F.2d 979, 980 (5th Cir.1977). This argument fails.

B. The McNally Instruction

The appellant argues, and the appellee concedes, that the jury was improperly instructed, under the Supreme Court's recent decision in McNally v. United States, 483 U.S. 350, 107 S.Ct. 2875, 97 L.Ed.2d 292 (1987) regarding the elements of mail fraud, 18 U.S.C. Secs. 1341-42. The parties are correct, and the appellant's convictions under counts II and III must be reversed.

The McNally Court limited the scope of mail fraud to the protection of property rights and held that a defendant could not be convicted of mail fraud for participating in a scheme to defraud citizens of their intangible right to honest government. McNally, 107 S.Ct. at 2882. In the present case the jury was allowed to find the appellant guilty of mail fraud if they concluded that the appellant "devised or intended to devise a scheme ... to defraud Cosco ... or Zurn's stockholders of their right to the loyal, faithful, and unbiased services of [the appellant]." McNally was decided after the appellant was convicted, but the McNally rule is fully retroactive and must be applied to this case. See United States v. Mitchell, 867 F.2d 1232 (9th Cir.1989). Accordingly, the appellant's convictions for mail fraud under counts II and III of the indictment are reversed.

The appellant further argues that his remaining convictions for Travel Act violations and conspiracy must also be reversed for the same reason. This argument fails. Mail fraud did not support either conviction, nor were these convictions affected by the defective instruction. The jury was specifically instructed that bribery was the underlying offense in counts IV and VI under the Travel Act. On count VII for conspiracy the jury answered a special verdict form in the affirmative when asked whether the object of the conspiracy was the corrupt...