U.S. v. Mittelstaedt

• Decision Date: 10 August 1994
• Docket Number: 1797,D,Nos. 1435,s. 1435
• Citation: 31 F.3d 1208
• Parties: -5865 UNITED STATES of America, Appellee, v. Arthur MITTELSTAEDT and John Johnsen, Defendants-Appellants. ockets 93-1645, 93-1713.
• Court: U.S. Court of Appeals — Second Circuit

Page 1208

31 F.3d 1208

74 A.F.T.R.2d 94-5865

UNITED STATES of America, Appellee, v. Arthur MITTELSTAEDT and John Johnsen, Defendants-Appellants.

Nos. 1435, 1797, Dockets 93-1645, 93-1713.

United States Court of Appeals, Second Circuit.

Argued May 11, 1994.

Decided Aug. 10, 1994.

Marvin Zevin, Mineola, NY (Paula Schwartz, Frome, Yanelli, Zevin & Civardi, Mineola, NY, of counsel), for defendant-appellant Arthur Mittelstaedt.

Judd Burstein, New York City (Kim P. Bonstrom, Marc Fernich, of counsel), for defendant-appellant John Johnsen.

David James, Asst. U.S. Atty. E.D.N.Y., Brooklyn, NY (Zachary W. Carter, U.S. Atty., Peter A. Norling, Asst. U.S. Atty., Faith E. Gay, Sp. Asst. U.S. Atty., Office of U.S. Atty. E.D.N.Y., of counsel), for appellee.

Before: NEWMAN, Chief Judge, JACOBS, and LEVAL, Circuit Judges.

JACOBS, Circuit Judge:

Defendant John Johnsen served as the consulting engineer for two Long Island communities, and abused his influence with local government on zoning and planning matters by engaging in real estate projects there, using partners to conceal his participation. Johnsen and one of his confederates, Arthur Mittelstaedt, appeal from their convictions in the United States District Court for the Eastern District of New York for conspiracy to commit mail fraud, in violation of 18 U.S.C. Sec. 371, and for filing false income tax returns, in violation of 26 U.S.C. Sec. 7206. Johnsen also was convicted of eight substantive counts of mail fraud, in violation of 18 U.S.C. Sec. 1341, and appeals from five of these.

Johnsen argues on appeal that the trial court erred in refusing to give a "missing witness" charge and that five of the substantive mail fraud counts must be reversed because the district court failed to charge the jury that, under the mail fraud statute, concealed information is only material if it has an impact on the value of the transaction. Mittelstaedt argues, inter alia, that his conduct did not constitute mail fraud depriving the towns of "money or property" because, at the time of the acts charged, the "honest services" of a government employee was not "money or property" within the meaning of the mail fraud statute. He also contests his conviction on the false tax return counts. We agree that Johnsen's convictions for substantive mail fraud, under counts four through eight of the indictment, must be reversed; we also agree that Mittelstaedt's conviction for conspiracy to commit mail fraud must be reversed; and we affirm in all other respects.

Background

The charges in this case all arise from Johnsen's position in the 1980s as a consulting engineer to the Town of Southampton and to the Village of Westhampton Beach, both in New York State. In that role, Johnsen made reports and recommendations regarding the construction of public works projects and the creation of land subdivisions, prepared contract specifications and reviewed bids for public improvements contracts, conducted inspections to ensure satisfactory completion of public contracts, and generally provided advice on a range of public engineering matters. Johnsen's position gave him the opportunity--which he exploited--to misappropriate information, and to influence planning boards improperly in respect of projects in which he had a secret interest.

This appeal concerns four development projects. In chronological order of their inception, they are: 271 Flanders Road in Southampton; 11 Glovers Lane in Westhampton Beach; Hampton Park in Southampton; and 10-12 Glovers Lane in Westhampton Beach. The transactions involved slightly different sets of confederates, including Mittelstaedt, Harry Tew, and Edward Broidy (who testified at trial under a grant of immunity); and transpired over a period of years. During that time, the mail fraud and wire fraud statutes were amended in a way that has a bearing on this appeal. On June 24, 1987, the Supreme Court held in McNally v. United States, 483 U.S. 350, 107 S.Ct. 2875, 97 L.Ed.2d 292 (1987), that the federal mail fraud statute, 18 U.S.C. Sec. 1341, did not prohibit schemes to deprive citizens of their intangible right to honest government. On November 18, 1988, Congress amended the mail and wire fraud statutes to cover schemes to deprive others of "the intangible right of honest services." 18 U.S.C. Sec. 1346. The outcome of this appeal in part turns on the facts of the four transactions and the timing of the transactions in relation to the statutory amendment.

A. 271 Flanders Road

In the late 1970s, Johnsen became acquainted with Edward Broidy, a local contractor and developer who occasionally constructed sidewalks and curbs for Southampton. As consulting engineer to the town, Johnsen established the specifications for the public projects on which Broidy bid, and assisted Broidy in processing the paperwork. Through this association, the two became close friends.

In the early 1980s, Johnsen and Broidy conceived a plan to build a sports facility in Southampton that would accommodate ice skating, basketball, and the circus. Broidy introduced Johnsen to Arthur Mittelstaedt, a landscape architect in the firm of Ward Associates, whom Broidy had known for decades. After several meetings, Mittelstaedt joined the venture with Broidy and Johnsen. These three agreed that Broidy would front as the developer, that the ownership interests of Johnsen and Mittelstaedt would be concealed, that Johnsen would locate a suitable parcel of land and facilitate matters that came before the town planning board, and that Mittelstaedt would produce architectural drawings and make presentations to the town, holding himself out as an impartial expert recommending approval.

Johnsen located a drive-in theater in Southampton as a site for the project. The property was in the shape of a "T," with the base on Flanders Road. In order to have sufficient frontage, it was thought necessary to acquire adjacent Flanders Road properties on either side of the drive-in. Before any attempt was made to purchase property, Mittelstaedt wrote a letter to Southampton on the letterhead of "Peconic Sports, Inc.," a fictitious corporation. The letter, which reflects an evident change in what was originally intended to be Mittelstaedt's role as an impartial expert, requested a meeting with the planning board to discuss the proposed complex. He subsequently made a presentation to the board, and the board unanimously approved the project in October 1982.

Broidy and Johnsen then met with the drive-in's owner, United Artists, to negotiate the purchase of the drive-in, with Johnsen ostensibly acting as an advocate for the town's interests. United Artists wanted far more money than the partners were willing to pay, but it proposed that it might be willing to let the land go to Broidy for little or nothing if it could obtain a zoning variance for a multiplex theater that it wanted to build at another location. Though Johnsen rejected this proposal at the meeting, he told Broidy to call the company's president and inform him that they might be able to help him with the town's architectural review board.

While those discussions continued, Broidy negotiated for the purchase of the adjacent properties. He managed to obtain an option for one, but the owner of 271 Flanders Road insisted on an outright sale for $45,000, with $2,000 down, another $2,000 on closing, and assumption of two mortgages on the land. Broidy agreed in September 1982, and paid the $4,000 cash out of his own funds. Johnsen and Mittelstaedt each contributed funds to equalize their investments with that of Broidy, and Mittelstaedt deposited this money in a partnership bank account Mittelstaedt opened in the name of "JA & E" (the first-name initials of the partners).

Mittelstaedt then wrote a letter to the town, recommending that it join Broidy in the purchase of the drive-in. Soon after, however, negotiations with United Artists broke down, the deal fell through, and the partners placed a "for sale" sign on the property at 271 Flanders Road. In response, Broidy received a call from Paul Council, director of community development for the town, who expressed an interest in acquiring the property for use as a child care center.

Nothing in the record supports an inference that any member of the partnership inspired the bid that the town ultimately made. The town obtained two independent appraisals, which determined that a fair market price for the land was $108,000. Council then relayed this offer to Broidy, at the same time demanding a $10,000 kickback for putting the deal together. Because the partners had planned to ask $90,000 for the property, they decided to pay the bribe. Broidy funded the kickback, and Johnsen and Mittelstaedt each contributed money into the JA & E account to once again equalize their investments.

Southampton purchased 271 Flanders Road in August 1984. The proceeds were deposited directly into the JA & E account.

B. 11 Glovers Lane

Late in 1984, Broidy found a house for sale at 11 Glovers Lane in Westhampton Beach that he believed would be a good location for retail stores. He discussed this prospect with Johnsen and Mittelstaedt, who agreed to join the venture as equal partners. The partnership kept Johnsen's interest a secret, because his advice would be sought by the board on an anticipated zoning re-classification.

The property was deeded to Broidy and Mittelstaedt on May 14, 1985, with the $11,800 downpayment drawn from the JA & E bank account. Approval was sought from the Westhampton Beach planning board for conversion of the property to commercial space. In support of the application, Broidy submitted plans that had been drawn up by a surveyor named Ed Bullock, with whom Johnsen had previously worked.

The planning board met several times to consider the proposal for 11 Glovers Lane. At each meeting, Broidy would present the plans, and the members of the board would comment and raise objections. Johnsen was always present in...