U.S. v. Rooney

• Decision Date: 04 October 1994
• Docket Number: D,No. 1057,1057
• Citation: 37 F.3d 847
• Parties: UNITED STATES of America, Appellee, v. John P. ROONEY, Jr., Defendant-Appellant. ocket 93-1625.
• Court: U.S. Court of Appeals — Second Circuit

Page 847

37 F.3d 847

UNITED STATES of America, Appellee, v. John P. ROONEY, Jr., Defendant-Appellant.

No. 1057, Docket 93-1625.

United States Court of Appeals, Second Circuit.

Argued March 11, 1994.

Decided Oct. 4, 1994.

J. Shane Creamer, Philadelphia, PA (Dilworth, Paxson, Kalish & Kauffman, of counsel), for defendant-appellant.

Paul D. Silver, Asst. U.S. Atty., Albany (Gary L. Sharpe, U.S. Atty. for the N.D. of N.Y.), for appellee.

Before: WALKER and JACOBS, Circuit Judges, and OWEN, District Judge. ^*

WALKER, Circuit Judge:

This case presents the question of whether a broadly worded federal bribery statute can criminalize a demand by a real estate developer for further contracting services in return for prompter and more certain payment to the contractor by the developer making the demand. Defendant, a lawyer and sometime real estate developer, was convicted following a jury trial in the Northern District of New York (Bernard A. Friedman, Judge, of the Eastern District of Michigan, sitting by designation) of corruptly soliciting a thing of value intending to be influenced in connection with a federally funded housing project, in violation of 18 U.S.C. Sec. 666(a)(1)(B) (Count III). Defendant was also convicted of making a false statement and concealing a material fact in a submission to the government, in violation of 18 U.S.C. Sec. 1001 (Counts I and II). For the reasons that follow, we reverse the judgment of conviction on Count III and remand with instructions for the district court to dismiss that count. On Counts I and II, we vacate the judgment of conviction and remand for further proceedings consistent with this opinion.

BACKGROUND

The defendant, John P. Rooney, Jr., is an attorney who undertook to develop a modest federally-funded housing project for the elderly in Columbia County, New York. Rooney and his wife formed a partnership, Dawnwood Properties, to be the project manager. The project was funded through the Farmers Home Administration ("FmHA"), a federal agency, which sets strict conditions on its lending for such projects. The FmHA insists on a first priority mortgage; requires, in addition to a promissory note, a security agreement pledging the project's revenue and fixtures; and demands that applicants contribute at least five percent of the projected cost of the project. Further, the FmHA limits an applicant's return on investment to eight percent. Rooney complied with these requirements. He met the capital requirement by contributing as the project's site two acres of land out of a larger undivided tract of seventy acres that he owned.

The FmHA advanced funds to meet the costs of the project. These costs are generally broken down into "hard" costs, which are basically the costs of construction, and "soft" costs, which include all other allowable costs of a project such as attorneys fees, architect fees, closing costs and title insurance. Soft costs may be estimated and funds for them loaned in advance, but the FmHA then requires receipts substantiating these costs before further soft cost monies are loaned.

DeBrino Caulking, the general contractor, began construction in 1985. In due course, Rooney submitted receipts to the FmHA for soft cost expenditures paid with monies advanced by the agency. It is the alleged impropriety of one of these receipts that is the basis for the two Sec. 1001 violations charged in Counts I and II of the indictment. The details of this occurrence will be set forth later in this opinion.

The facts giving rise to Count III were unrelated to the submission of cost justifications to the FmHA. Rather, they largely concerned Rooney's dealings with the general contractor, DeBrino Caulking. By late 1989, the project had experienced numerous construction delays and had substantially exceeded its initial cost projection. These delays were partly attributable to ongoing disagreements between Rooney and DeBrino Caulking's president Lewis Houghtaling.

By February of 1990, some five years into the project, the FmHA's loans amounted to $1,042,000, but still additional costs had been incurred. As general partner of Dawnwood Properties, Rooney was personally obligated to pay the contractor for such additional costs as well as to repay all funds borrowed through the FmHA. Thus, Rooney had a choice. He could remain personally liable to DeBrino Caulking for these additional costs, or he could apply for more loans from the FmHA to immediately pay off DeBrino Rooney, knowing that Houghtaling preferred immediate payment, tried to capitalize on this option by asking during a conversation with Houghtaling that, in return for obtaining further lending from the FmHA, the contractor install a pond adjacent to the development at no additional cost to the project. If Houghtaling would construct the pond, at a cost to DeBrino Caulking not to exceed $26,000, Rooney would apply for further funds from the FmHA to pay off the additional costs of the project. If not, Rooney would continue to owe DeBrino Caulking directly. All parties agree that, since the pond would alter the scope of the project, it would have had to be approved by the FmHA.

Caulking, but thereby increase his own indebtedness to the agency.

Uncomfortable with Rooney's proposal, Houghtaling contacted an official at the FmHA who convinced him to tape record conversations with Rooney. During these recorded conversations, which constituted the government's primary evidence on Count III, Rooney reiterated his proposal to Houghtaling. At trial and on this appeal, it has been the government's position that Rooney's offer to apply for additional FmHA loans to make prompt payment to DeBrino Caulking in exchange for the construction of the pond constituted a corrupt solicitation in violation of 18 U.S.C. Sec. 666(a)(1)(B). Houghtaling eventually rejected Rooney's deal, and no pond was ever constructed.

The jury returned a guilty verdict on all three counts. The district court denied Rooney's post-trial motion for judgment of acquittal and sentenced him to five months' confinement at a community correctional facility to be followed by five months' home detention, and other monetary penalties. This appeal followed and Rooney has remained free on bail pending its disposition.

DISCUSSION

I. 18 U.S.C. Sec. 666 (Count III)

We begin our discussion with Count III, in which Rooney was convicted of corruptly soliciting a thing of value intending to be influenced in connection with a federally funded project in violation of 18 U.S.C. Sec. 666(a)(1)(B). We note at the outset that the facts in this case are a departure from the typical Sec. 666 prosecution. In the usual Sec. 666(a)(1)(B) case, a government employee or private individual demands or accepts a kickback, personal bribe, or gratuity from an individual in exchange for the awarding of a contract, the disbursement of federal funds, or some other favorable treatment. See, e.g., United States v. Coyne, 4 F.3d 100, 111 (2d Cir.1993) (county executive provided assistance in obtaining architectural contract for individual in exchange for $30,000 payment), cert. denied, --- U.S. ----, 114 S.Ct. 929, 127 L.Ed.2d 221 (1994); United States v. Santopietro, 996 F.2d 17, 18 (2d Cir.1993) (mayor used his political position to influence decisions by various city agencies in return for bank loans and cash payoffs), cert. denied, --- U.S. ----, 114 S.Ct. 921, 127 L.Ed.2d 215 (1994); United States v. Concepcion, 795 F.Supp. 1262, 1268 (E.D.N.Y.1992) (employee of New York City Human Resources Administration assisted in welfare fraud in exchange for cash payments). In such cases, the government's interests are sacrificed by the corrupt activities of the responsible parties.

In this case, by contrast, Rooney is not a public official. Nor is he a member of a private nonprofit organization which has responsibility for distributing federal funds. Rather, he is a private individual involved in a private development project that happens to have as its lender the federal agency FmHA. Further, unlike the typical case, the charge against Rooney is unrelated to any dispensing of government largesse. Rather, as a private developer, Rooney remains personally liable for the costs of the project, whether to the contractor directly or to the FmHA for loans made on behalf of the project. Thus, the only government favor that Rooney had within his control to dole out was the proceeds of a FmHA loan upon which he himself would remain liable. Finally, Rooney did not seek to divert government funds for the project to himself through a kickback or otherwise. Neither party has brought to our attention nor has our own research disclosed Our concern in this opinion is with the allowable reach of Sec. 666. When evaluating the scope of a federal criminal statute, we must look closely to its language, legislative history, and purpose. See Dowling v. United States, 473 U.S. 207, 214-18, 105 S.Ct. 3127, 3131-34, 87 L.Ed.2d 152 (1985); Bifulco v. United States, 447 U.S. 381, 387, 100 S.Ct. 2247, 2252, 65 L.Ed.2d 205 (1980). We are also mindful of the proposition that "[b]ecause interpretations of criminal statutes which would 'criminalize a broad range of apparently innocent conduct' are disfavored, it is our task to ascertain whether Congress intended the statute to be so all-encompassing." United States v. Yip, 930 F.2d 142, 149 (2d Cir.) (quoting Liparota v. United States, 471 U.S. 419, 426-27, 105 S.Ct. 2084, 2088-89, 85 L.Ed.2d 434 (1985)), cert. denied, --- U.S. ----, 112 S.Ct. 197, 116 L.Ed.2d 157 (1991).

any case in which Sec. 666 has been applied in such a situation.

In beginning our analysis, it is important to understand the context in which Sec. 666 was enacted. Section 666 was originally enacted in 1984 in response to several federal appellate decisions that held that state and local government officials and members of private organizations that distribute federal monies did not fall within the...