U.S. v. Mitchell, 88-5529

Decision Date28 August 1989
Docket NumberNo. 88-5529,88-5529
Citation877 F.2d 294
PartiesUNITED STATES of America, Plaintiff-Appellee, v. Michael B. MITCHELL; Clarence M. Mitchell, III, Defendants-Appellants.
CourtU.S. Court of Appeals — Fourth Circuit

William Moses Kunstler, New York City, John J. McDermott (O'Connor & Hannan; Sean Connelly, Brand & Lowell, Washington, D.C., Michael Milleman, on brief), for defendants-appellants.

Gary Patrick Jordan, First Asst. U.S. Atty., Bel Air, Md. (Breckinridge L. Willcox, U.S. Atty., Washington D.C., Max H. Lauten, Asst. U.S. Atty., Baltimore, Md., on brief), for plaintiff-appellee.

Before HALL, SPROUSE, and CHAPMAN, Circuit Judges.

K.K. HALL, Circuit Judge:

Michael B. Mitchell and Clarence B. Mitchell, III ("appellants" or "the Mitchells") appeal their convictions of corruptly endeavoring to obstruct a congressional investigation, 18 U.S.C. Sec. 1505, and of wire fraud, 18 U.S.C. Sec. 1343. Michael Mitchell also appeals his conviction on a separate count of wire fraud. Finding no error as to any of the convictions, we affirm.

I.

This is another of the many prosecutions related to Wedtech Corporation, a manufacturing firm located in the South Bronx, New York. Wedtech was a rather small manufacturing firm until, in 1979, it became certified as a minority small business under the Small Business Administration's ("SBA") 8(a) program. Under the 8(a) program, government agencies set aside certain contracts to be awarded to minority-owned businesses on a noncompetitive basis. Wedtech qualified for this program because its principal shareholder and president, John Mariotta, is Hispanic.

Once qualified under the program, Wedtech became extremely successful, so much so that its stock was publicly traded on the New York Stock Exchange. This tremendous success led to serious questions and numerous complaints concerning Wedtech's continuing eligibility for a program intended to help small minority businesses.

These complaints eventually reached Parren J. Mitchell, the representative from Maryland's Seventh Congressional District. Congressman Mitchell chaired the House Committee on Small Business, the committee with oversight authority of the SBA's minority business program. In response to the growing controversy surrounding Wedtech, Mitchell instigated an investigation into the situation. On July 27, 1984, the chief investigator for the Small Business Committee hand-delivered a letter from the Committee to the SBA regional offices in New York City requesting that all of the files on Wedtech be turned over to the Committee.

News of this investigation quickly reached Wedtech and touched off a flurry of activity to stop it. Because nearly all of Wedtech's business was derived from the SBA program, any loss of eligibility would have been highly detrimental. The corporation's officers moved quickly to lobby Congressman Mitchell, enlisting several friendly congressmen in the effort. None of these efforts proved fruitful, however, and the investigation continued.

Richard Strum, an assistant vice-president at Wedtech, was one of the company's officials involved in the effort to stop the investigation. Strum called Anthony Loscalzo, one of Wedtech's marketing consultants. Loscalzo, who was located in Illinois, had previously lived and worked in the Baltimore area and had kept close ties with the Mitchells, who are brothers and members of a prominent black political family in the area. Loscalzo advised Strum that the Mitchells might be able to help Wedtech with the investigation because of their close relationship with their uncle, Congressman Mitchell.

Strum flew to Baltimore on September 24, 1984, and arranged to meet with Michael Mitchell the next evening. At the meeting, Strum told Michael that he had been referred to him by Loscalzo and that Wedtech needed the committee's investigation stopped. Michael responded that for a substantial fee he could "get rid of the problem." Strum did not close the deal and told Michael that he first had to contact his superiors at Wedtech. The meeting ended with the understanding that Strum would get back to the Mitchell brothers if Wedtech were interested.

After the meeting, Strum called Loscalzo. Loscalzo informed Strum that he and Michael had a longtime fee-splitting arrangement whereby Loscalzo received one-third of all fees from referral clients. Strum and Loscalzo agreed that they would split this referral fee 50-50.

When Strum returned to New York on September 26, he returned to an organization that was growing increasingly anxious. Through contacts in the New York City SBA office, Wedtech officials had learned that on September 24, Congressman Mitchell had sent a confidential letter to SBA stating that the Committee's review of Wedtech had led to substantive questions concerning the company's continued participation in the minority set-aside program. The letter further stated that the Committee wanted SBA to thoroughly investigate the situation and listed several specific inquiries to be made. 1

When Strum was told of the letter, he immediately made several telephone calls to Maryland to set up a meeting with the Mitchells. Eventually, a meeting was arranged for October 1 at the law offices of Michael Mitchell.

At the October 1 meeting, Wedtech was represented by Strum, Loscalzo, executive vice-president Mario Moreno, and its president, Mariotta. After explaining the Wedtech operation to the Mitchells, Moreno complained that the investigation initiated by their uncle was creating a serious problem. He indicated that if the Mitchells could solve this problem, Wedtech would be in a position to do a lot of business with them.

Michael Mitchell responded that he was familiar with the investigation and that he and his brother could stop it for a fee of $50,000. He cautioned the group that the investigation was moving quickly and that the fee should be paid as soon as possible because the brothers would take no action until it was received. Michael then drafted a "retainer letter" which stated that the $50,000 fee was to retain his law firm for future legal services. Strum and Moreno both testified that the letter was a cover-up for the real purpose of the fee. 2

The next day, a $50,000 check was hand-delivered from Wedtech to Michael's law offices. Bank records show that the check was cashed immediately and that from it Loscalzo received $16,666.66, which he divided equally with Strum. Other than Strum and Loscalzo, no one at Wedtech was aware of this "fee-splitting" arrangement.

There is no evidence in the record that the Mitchells took any further action to influence the investigation. In fact, there is no evidence that either Michael Mitchell or any other member of his law firm performed any legal services on behalf of Wedtech after he received the fee. Nonetheless, once the fee was paid, Wedtech's officials perceived that the investigation had been thwarted.

Because Wedtech's officials were pleased with the Mitchells' ability to persuade their uncle, in February, 1985, another $50,000 was paid to them to influence the Committee to begin an investigation of one of the company's competitors. As before, there is no evidence that either brother did anything further to influence the Committee and the fee was split with Loscalzo and Strum.

In May, 1987, after an extensive federal investigation of Wedtech, the Mitchells were named in a five-count indictment. All of the counts arise from the initial $50,000 payment. The first two counts charged the brothers with endeavoring to obstruct a congressional investigation and a corresponding conspiracy charge. The third and fourth counts were for wire fraud and were based on Strum's use of the wires in arranging the October 1, 1984, meeting. The government alleged that this meeting set up a fraudulent scheme between the Mitchells and Wedtech's officers to disburse corporate funds for an unlawful purpose, i.e., obstruction of the investigation. The fifth count charged Michael with wire fraud and was based on Strum's September 25, 1984, call to Loscalzo. The fraudulent scheme alleged was Loscalzo's breach of his fiduciary duty to Wedtech by referring the Mitchells' employment so that he could receive a kickback of one-third of the fee. The government maintained that this was a separate scheme to defraud Wedtech of corporate funds.

Jury selection commenced on October 21, 1987. The original venire panel was dismissed, however, because some jurors were tainted by racist comments made in the jurors' lounge. Jury selection from a new venire commenced on October 26. Following voir dire, the government used seven of its ten peremptory challenges to strike black members of the panel. The jury eventually selected contained nine whites and three blacks, one of whom was the foreperson.

Following two days of deliberations, the jury acquitted the Mitchells of count one, conspiracy to obstruct a congressional investigation, and of the wire fraud charged in count four. The brothers were convicted on count 2, endeavoring to obstruct a congressional investigation, and on the wire fraud charged in count 3. Michael was also convicted on the separate wire fraud charged in count five. After denial of their post-trial motions, Michael and Clarence were both fined and sentenced to 30 months on each count, with the sentences to run concurrently. This appeal followed.

II.

Appellants raise several arguments. Their primary contention is that they did not "corruptly" endeavor to influence a House investigation as that phrase is used in 18 U.S.C. Sec. 1505. They maintain that since no "illegal means" of influence, such as bribery or extortion, was ever contemplated, their agreement to stop the investigation solely by their ability to influence Congressman Mitchell through their close relationship is not a corrupt endeavor. Rather, they contend that they were...

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