U.S. v. Miller

• Decision Date: 24 June 1993
• Docket Number: D,389,Nos. 388,s. 388
• Citation: 997 F.2d 1010
• Parties: UNITED STATES of America, Appellee, v. Melvin MILLER and Jay Adolf, Defendants-Appellants. ockets 92-1239, 92-1260. Second Circuit
• Court: U.S. Court of Appeals — Second Circuit

Page 1010

997 F.2d 1010

UNITED STATES of America, Appellee, v. Melvin MILLER and Jay Adolf, Defendants-Appellants.

Nos. 388, 389, Dockets 92-1239, 92-1260.

United States Court of Appeals,Second Circuit.

Argued Nov. 12, 1992.

Decided June 24, 1993.

Gerald B. Lefcourt, New York City (John C. Coffee, Jr., Joshua L. Dratel, Sheryl E. Reich, of counsel), for defendant-appellant Melvin Miller.

Paul F. Corcoran, Oyster Bay, NY, for defendant-appellant Jay Adolf.

Matthew E. Fishbein, Asst. U.S. Atty. for the E.D. of N.Y., Brooklyn, NY (Andrew J. Maloney, U.S. Atty. for the E.D. of N.Y., David C. James, Susan Corkery, Asst. U.S. Attys. for the E.D. of N.Y., of counsel), for appellee.

Before: NEWMAN, CARDAMONE, and MAHONEY, Circuit Judges.

MAHONEY, Circuit Judge:

Defendants-appellants Melvin Miller and Jay Adolf appeal from judgments of conviction entered April 20, 1992 in the United States District Court for the Eastern District of New York, Raymond J. Dearie, Judge, after a jury convicted them of six counts of mail fraud in violation of 18 U.S.C. § 1341 (1982); one count of using a false, fictitious, and assumed name for the purpose of conducting a mail fraud in violation of 18 U.S.C. § 1342 (1982); and one count of conspiracy to commit mail fraud in violation of 18 U.S.C. § 371 (1982). Appellants contend that the acts with which they were charged did not constitute criminal violations proscribed by the mail fraud statute because they did not involve the obtention of "money or property" by fraud within the meaning of § 1341.

We agree, and reverse the convictions.

Background

Miller and Adolf were attorneys practicing in partnership together as "Adolf & Miller." Miller was also a member of the New York State General Assembly, and had served since 1987 as Speaker of the Assembly. Adolf was counsel to the Speaker, both during Miller's tenure and those of Miller's two predecessors.

In 1983, Miller and Adolf were retained by tenants of the Philip Howard Apartments (the "Philip Howard"), an apartment complex of approximately 640 units located at 1655 Flatbush Avenue, Brooklyn, New York, to represent them in negotiations with Tiara Realty Company ("Tiara"), the owner of the complex, concerning a proposed conversion of the Philip Howard from rental units to cooperative apartments. The conversion plan proposed by Tiara (the "Plan") was a "non-eviction" plan, under which tenants who elected not to purchase their units could remain as lessees while the landlord would remain the owner of their units. The landlord would also be free to resell these units to outside purchasers. The owners of those "occupied" apartments would receive rent from those tenants under the governing leases, but would be bound by the terms of the leases as well as any applicable rent control or rent stabilization regulations. Once a tenant vacated an occupied apartment, however, the owner would be free to sell it on the open market.

In a cooperative apartment, purchasers acquire shares of the corporation that owns the apartment building. The number of shares attributable to a given apartment derives from the size and location of the apartment, as well as any special features, such as a terrace. In order for the Plan to be declared effective under New York law and the conversion to go forward, at least fifteen percent of the tenants had to agree to purchase their apartments. To help meet this requirement, Tiara offered tenants the opportunity to purchase their units at a reduced "insider" price. This insider price was nominally $67.50 per share, but included credits for apartment improvements that resulted in an effective price of approximately $61.00 per share. From September 1983 to the summer of 1984, Miller and Adolf negotiated the insider price with Tiara on behalf of the tenants of the Philip Howard.

Isaac Rokowsky was a principal of Tiara. Aviezer Cohen was employed by Tiara as manager of the Philip Howard. Meyer Rosenbaum was a New Jersey nursing home operator and real estate investor. Rosenbaum and Cohen were acquainted with one another, as well as with Miller, as a result of previous dealings in real estate investments.

During the conversion process, Cohen advised Rosenbaum that a number of Philip Howard apartments were potentially available for sale to third parties under the terms of the Plan. Rosenbaum viewed the opportunity favorably, and assembled a group of like-minded private investors (the "Group") to consider the possibility of purchasing a number of units for resale. Cohen subsequently informed Miller that Rosenbaum headed this Group, and that the Group was interested in investing in the Philip Howard. After completing their representation of the Philip Howard tenants, Miller and Adolf agreed to represent the Group in connection with the purchase of apartments in the Philip Howard.

Rokowsky testified that Miller stated to him that the Group was interested in purchasing "maybe $2 million" worth of occupied apartments. Occupied apartments were less costly than vacant apartments because, as previously indicated, occupied apartments were subject to lease and rent regulation restrictions and could not be immediately resold. Ultimately, however, the Group decided to invest in both occupied and vacant apartments.

Rosenbaum testified that he raised $2.3 million from the Group, but believed that upon his recommendation, the Group would have contributed an additional $200,000 to $300,000 to purchase additional units. At trial, however, Rosenbaum could not recall communicating this possibility directly to Miller or to Adolf. Rosenbaum testified that after an initial conversation with Miller confirming Miller's representation of the Group, Rosenbaum instructed Miller to channel all further communications with Rosenbaum through Cohen.

As manager of the Philip Howard, Cohen was familiar with the size, layout, and features of many of the apartments in the complex, and was aware of when occupied apartments might become vacant. Based significantly upon Cohen's knowledge of which units were the most desirable, Miller negotiated the sale by Tiara of 122 apartments, ninety of which were occupied and thirty-two of which were vacant.

Miller and Adolf's fee from the Group was based upon the difference between the price that the Group was willing to pay for shares of occupied apartments and the price at which Tiara agreed to sell. No commission was to be paid on shares for vacant apartments, the price for which was negotiated to be $110.00 per share. After discussions with Cohen, Rosenbaum agreed to pay $71.00 per share for occupied apartments. This decision was informed, at least in part, by Rosenbaum's estimation of an insider selling price of $67.00-$68.00, although Rosenbaum testified that the size of Miller and Adolf's fee was immaterial to him.

This fee arrangement was memorialized by an agreement executed by the firm Adolf & Miller, Rosenbaum, and Cohen (the "Fee Agreement") on November 5, 1984, which provided:

The undersigned nominees [Rosenbaum and Cohen] for the purchasers of shares of stock representing 90 occupied apartments in the Philip Howard Apartments, Brooklyn, New York acknowledge that they have agreed to pay $71.00 per share for said shares and agree and acknowledge that the differential of any price below $71.00 per share will be retained by Adolf & Miller, 220 East 42nd Street New York City as their total brokerage and legal fees in connection with this transaction or such fees will be paid by the seller; Adolf & Miller agrees to represent purchasers in the future sales of individual apartments at a fee of $300.00 per sale.

The Fee Agreement was apparently the only documentation of the relationship between Miller, Adolf, and the Group.

Under the Fee Agreement, Miller and Adolf anticipated a fee of approximately $10.00 per (occupied apartment) share conveyed to the Group. In the aggregate, this fee amounted to approximately $238,000. Unbeknownst to Rosenbaum, Miller and Adolf had agreed that Cohen would receive as a "finder's fee" fifty percent of any fee earned by Miller and Adolf from the Group. Similarly, unbeknownst to Miller and Adolf, Cohen had an agreement with Rosenbaum to share fifty percent of any profits Rosenbaum received from the Group's eventual resale of the apartments.

Cohen testified that shortly after Tiara agreed to sell the 122 units, he suggested that Miller, Adolf, and he invest their anticipated fee in a number of the apartments that Tiara was willing to sell. On November 2, 1984, Miller wrote Cohen a letter that stated the terms of his agreement with Tiara and enclosed a schedule of the 122 apartments that Tiara had agreed to sell. In the letter, Miller stated: "We must decide which of the ap[a]rtments are going to the [G]roup and which you will reserve for personal purchase."

At trial, the parties disputed the meaning of the reference to "personal purchase." Cohen testified that the expression referred to Miller and Adolf as well as Cohen. Miller testified that at that juncture, Cohen was investing on his own behalf (perhaps in conjunction with others unknown to Miller) and not with Miller and Adolf. Miller further testified that he and Adolf did not agree to invest in the units that Cohen selected for "personal purchase" until late December 1984 or early January 1985. In any event, Cohen selected seven vacant apartments (including a furnished "model" apartment) noteworthy for their attractive features, such as terraces or views, and one occupied apartment that was about to become vacant.

At Miller's direction, an initial draft of a subscription agreement that covered all 122 apartments was revised and redrafted into two separate subscription agreements: one for the eight apartments (the "Apartments") designated by Cohen (the "Cohen Agreement"), the other for the remaining 114 apartments (the "Rosenbaum Agreement"). The Cohen Agreement covered 456 cooperative shares representing one...