U.S. v. Rauhoff, 75--1207

• Decision Date: 11 November 1975
• Docket Number: No. 75--1207,75--1207
• Parties: UNITED STATES of America, Plaintiff-Appellee, v. Talmadge G. RAUHOFF, Defendant-Appellant.
• Court: U.S. Court of Appeals — Seventh Circuit

Page 1170

525 F.2d 1170

UNITED STATES of America, Plaintiff-Appellee, v. Talmadge G. RAUHOFF, Defendant-Appellant.

No. 75--1207.

United States Court of Appeals, Seventh Circuit.

Argued Sept. 16, 1975.

Decided Nov. 11, 1975.

David P. Schippers, Chicago, Ill., for defendant-appellant.

Samuel K. Skinner, U.S. Atty., Donald C. Shine, Asst. U.S. Atty., Chicago, Ill., for plaintiff-appellee.

Before STEVENS and SPRECHER, Circuit Judges, and GRANT, Senior District Judge. ^*

GRANT, Senior District Judge.

Appellant Talmadge G. Rauhoff brings this appeal from his conviction by a jury on all counts of a twenty-one count indictment. Rauhoff was indicted for his involvement from 1968 to 1970 in a scheme to bribe Illinois Secretary of State Paul Powell in order to procure and retain contracts for the production of Illinois license plates.

The scheme was apparently originated by James S. White and J. Patrick Stoltz in 1968. At that time White was the Chief Purchasing Agent in the Secretary of State's office. His duties included supervision of the purchase of Illinois vehicle license plates, and he reported directly to Powell. Stoltz was the owner and executive officer of the Metal Stamping Corporation of Conway, Arkansas. Metal Stamping Corporation was a subcontractor of the King Seeley Thermos Corporation of Macomb, Illinois, which had been the exclusive recipient of the Illinois license plate contract since 1940. Stoltz wanted the contract for his corporation, Metal Stamping. When White informed Powell of Stoltz's desire, Powell said that it was all right with him as long as he, Powell, did not lose money in the changeover. Powell was reportedly receiving $20,000 per year from King Seeley.

White arranged for a November, 1968, meeting in Chicago with James P. Manning, a former King Seeley license plate expert who acted as an adviser to Powell on license plate matters from September 1968 to June 1969. Manning liked the idea. White suggested that Rauhoff be included in the scheme because he could acquire the large sums of money which would be necessary without arousing suspicion. That same afternoon, Rauhoff agreed to participate, and the three men began to formulate the plan.

White, Manning, Stoltz and Rauhoff met again in Chicago in December, 1968. In February, 1969, Stoltz traveled to Chicago for another meeting. The plan which emerged from these meetings, in short, was as follows:

Metal Stamping retained Manning as its Illinois representative, in which position he was to receive a 'commission.' In turn, Manning was to assign his commission to Strucolite, Inc., a dummy Illinois corporation whose shareholders were Manning, Rauhoff and White. Rauhoff held White's shares as nominee. The payoffs to Powell, as well as the profits for the others, were to come from Strucolite's funds. On Rauhoff's suggestion, the payoffs to Powell were set at $30,000 instead of the $25,000 upon which White and Manning had earlier agreed. This figure later reached $50,000 when King Seeley 'upped the ante' to $40,000. At Rauhoff's suggestion, John M. Leonard was selected as lawyer for the group.

When the bids were opened in White's office in February, 1969, Metal Stamping had underbid King Seeley, and Powell awarded the contract to Metal Stamping.

The method of payment need not be recounted in great detail here. It appears, however, that Rauhoff acted as a 'money launderer,' an essential link in the procedure by which Metal Stamping's checks to Strucolite became cash for Powell's shoeboxes. On one occasion in January, 1970, Rauhoff went to Manning's office with two checks totaling $15,000, both of which were drawn on Strucolite's account and made payable to Manning. Rauhoff sought to have Manning endorse the checks so that he, Rauhoff, could take cash to Springfield. Manning was reluctant to endorse the checks because of the tax consequences to him. Rauhoff told him to treat it as salary and that he would be given money to pay the taxes on it.

Some $80,000 was ultimately paid to Powell prior to his death in October, 1970. The only apparent source of Strucolite income was the assignment of Manning's 'commissions', which amounted to approximately $487,000.

In 1974, Rauhoff, Leonard, Stoltz, Strucolite and Metal Stamping were indicted by a federal grand jury. White, Manning and Powell were named as unindicted co-conspirators. Nine counts of the indictment charged mail fraud in violation of 18 U.S.C. § 1341 (1970), (Counts Two through Ten); ten charged use of interstate facilities to promote bribery in violation of 18 U.S.C. § 1952 (1970), (Counts Eleven through Twenty); one charged conspiracy to commit interstate bribery and mail fraud in violation of 18 U.S.C. § 371 (1970), (Count One); and one charged aiding in the preparation and submission of a false corporate tax return in violation of Int.Rev.Code of 1954, § 7206(2), (Count Twenty-one). Stoltz and Leonard pled guilty to certain counts of the indictment prior to trial and were fined and placed on probation. Strucolite pled guilty to the conspiracy count subsequent to Rauhoff's trial, and was fined. Metal Stamping was dismissed as a party defendant on the motion of the government. A jury found Rauhoff guilty on each count of the indictment. He was sentenced to three years imprisonment on each count, the sentences to run concurrently.

Rauhoff raises several issues for review by this court:

1. Whether there was sufficient involvement of interstate facilities to support federal jurisdiction under § 1952.

2. Whether the mailings charged as violations of § 1341 were in furtherance of a scheme or artifice to defraud.

3. Whether there was sufficient evidence to support the findings of guilty on Counts One and Twenty-one.

4. Whether White's testimony should have been suppressed on the grounds of misuse of the grand jury process and misuse of the immunity statutes.

5. Whether Rauhoff was punished for exercising his right to a trial by jury.

I--FEDERAL JURISDICTION UNDER THE TRAVEL ACT

18 U.S.C. § 1952(a) (1970) provides:

' § 1952. Interstate and foreign travel or transportation in aid of racketeering enterprises.

'(a) Whoever travels in interstate or foreign commerce or uses any facility in interstate or foreign commerce, including the mail, with intent to--

'(1) distribute the proceeds of any unlawful activity; or

'(2) commit any crime of violence to further any unlawful activity; or

'(3) otherwise promote, manage, establish, carry on, or facilitate the promotion, management, establishment, or carrying on, of any unlawful activity;

'and thereafter performs or attempts to perform any of the acts specified in subparagraphs (1), (2), and (3) shall be fined not more than $10,000 or imprisoned for not more than five years, or both.'

Ten counts of the indictment charged violation of the Travel Act. One of these counts is distinctly different from the other nine: Count Twenty involves the use of commercial airline service to transport Stoltz from Arkansas to Chicago for his February 1969 meeting with Manning to discuss the latter's 'commission'. The remaining Travel Act counts (Counts Eleven through Nineteen) charge use of the Federal Reserve System for the purpose of bribery; federal jurisdiction over each of these counts is based upon the travel of the commission checks, payable to Strucolite and drawn on the funds of Metal Stamping, through interstate facilities from the depositary bank in Chicago to the drawee bank in Arkansas.

Rauhoff argues that the use of interstate facilities was at best minimal, incidental and so peripheral as to amount to mere happenstance, and as such cannot form the basis for federal jurisdiction under the Travel Act. We cannot agree. Contrary to Rauhoff's assertions, this court's holdings in United States v. Isaacs, 493 F.2d 1124 (7th Cir.), cert. denied, 417 U.S. 976, 94 S.Ct. 3184, 41 L.Ed.2d 1146 (1974), and United States v. Altobella, 442 F.2d 310 (7th Cir. 1971), do not compel reversal of his convictions on Counts Eleven through Nineteen.

In Altobella, we recognized that Congress did not intend to exercise its full constitutional powers in the area of local law enforcement when it enacted § 1952, but rather intended to attack criminal activities extending beyond the borders of a single state in order to aid, rather than to replace, local law enforcement efforts. In Altobella, the defendants' activity amounted to no more than extortion, a state offense; the purported basis for federal jurisdiction was the defendants' acceptance from their victim of a check written on an out-of-state bank, and their cashing of the check. We noted that the use of the interstate facilities 'was purely incidental to appellant's sordid scheme. Their purpose would have been achieved equally well if the victim had borrowed $100 from associates at the hotel or written a check on a local bank. Moreover, the unlawful activity which followed the cashing of the check was merely the payment of $50 to Patterson.' Accordingly, we held that while the defendants had certainly committed a crime, it was not a federal crime. We did not hold, however, that use of the Federal Reserve System could never form the basis for federal jurisdiction under § 1952.

Isaacs dealt with a scheme to bribe, among others, the governor of Illinois. Three of the nineteen counts in Isaacs charged violation of the Travel Act, and federal jurisdiction was again founded upon use of the Federal Reserve System. Three of the checks used to distribute the proceeds of the bribery scheme had been drawn on a bank in Alton, Illinois; when the recipients of the bribes deposited the checks in Illinois banks, the checks cleared through the Federal Reserve Bank in St. Louis, Missouri. This court rejected the government's efforts to distinguish Altobella, and held that 'the use of interstate facilities here was so minimal incidental, and fortuitous, and so peripheral to the activities of Isaacs, Kerner and the other...