U.S. v. Schmidt

• Decision Date: 26 April 1985
• Docket Number: 84-1119 and 84-1497,Nos. 83-3290,s. 83-3290
• Citation: 760 F.2d 828
• Parties: UNITED STATES of America, Plaintiff-Appellee, v. Hyman SCHMIDT, Marvin Gene Grulke, Chester Folak, Defendants-Appellants.
• Court: U.S. Court of Appeals — Seventh Circuit

Page 828

760 F.2d 828

UNITED STATES of America, Plaintiff-Appellee, v. Hyman SCHMIDT, Marvin Gene Grulke, Chester Folak Defendants-Appellants.

Nos. 83-3290, 84-1119 and 84-1497.

United States Court of Appeals Seventh Circuit.

Argued Nov. 5, 1984.

Decided April 26, 1985.

Dean J. Polales, Asst. U.S. Atty., Chicago, Ill., for plaintiff-appellee.

Elliot Samuels, Kenneth L. Cunniff, Thomas Corfman, Chicago, for defendants-appellants.

Before ESCHBACH and POSNER, Circuit Judges, and WISDOM, Senior Circuit Judge. ^*

ESCHBACH, Circuit Judge.

Hyman Schmidt and Chester Folak, former deputies with the Cook County Sheriff's Department, and Marvin Grulke, a self-employed public-auction liquidator, were involved in a multi-faceted scheme to extort money from judgment and tax debtors at the expense of judgment creditors and the State of Illinois. For their parts in the scheme, they were convicted of multiple counts of mail fraud, 18 U.S.C. Sec. 1341, and extortion, 18 U.S.C. Sec. 1951. On appeal, Schmidt challenges the sufficiency of the evidence supporting several of his extortion convictions, and the length of his sentence. Folak challenges the denial of his post-trial motion to withdraw the stipulations upon which the court's findings of guilt were based. Grulke claims that he was promised immunity from prosecution, and that he never should have been indicted. We affirm the convictions.

I.

Defendants Chester Folak and Hyman Schmidt were employed as Cook County Sheriff's Deputies, and were assigned to the Levy Department. The Levy Department is responsible for the enforcement of all seizure warrants and writs of execution directed against delinquent taxpayers and judgment debtors owning property in Cook County, Illinois. ¹ As deputies, the defendants were instructed to levy upon the personal property of the debtors pursuant to the writ of execution or seizure warrant. They were required to make proper service of the warrant or writ upon the debtor, inventory the debtor's property and safeguard it pending an auction, post proper notices of public auction of the property, collect the monies owed by the debtor or conduct a public auction of his property, and remit the proceeds to the Sheriff's Office for disbursement in satisfaction of the writ of warrant. The deputies were also responsible for issuing accurate bills of sale for the debtor's property to successful bidders. Defendant Marvin Grulke was self-employed as a liquidator engaged in the business of purchasing assets at public auction for the purpose of resale. Folak and Schmidt, aided by Grulke, did not, however, faithfully execute their duties as Sheriff's Deputies. Instead, they embarked on a scheme to use their positions to line their pockets at the expense of judgment creditors, the State of Illinois, and victimized debtors. The scheme had a number of facets. At times, the defendants rigged auction sales by setting a pre-arranged price at which the debtor would be allowed to retain his assets. The defendants would then retain a portion of the price, fail to conduct a public auction, and arrange for the return of the debtor's assets to the debtor. At times, the defendants looted assets seized from debtors while these assets were in the defendants' care and custody. Defendants sometimes accepted money or other property for their own use in order to allow a debtor to continue to operate his business.

Defendants were charged in a 47-count indictment with violations of 18 U.S.C. Sec. 1341 (mail fraud) and 18 U.S.C. Sec. 1951 (extortion). Before trial, defendant Grulke moved to suppress statements and evidence against him, arguing that he had cooperated with the government in reliance on the prosecutor's promises of immunity. A hearing on the motion to suppress was held before a magistrate, and the district court substantially adopted the magistrate's findings that the prosecutors had not at any time offered Grulke immunity, nor had they given Grulke any reason to believe that he would be immunized in return for his cooperation. The case was then heard by the district court judge. All of the evidence, including the government's exhibits, was stipulated to by the government and the defendants. ²

Grulke, who was charged in 15 counts of the indictment, was found guilty of three counts of mail fraud and three counts of extortion ³ and acquitted of nine other counts. Folak was found guilty on nineteen counts of mail fraud and nine counts of extortion and acquitted of eleven other counts. Schmidt was found guilty on three counts of mail fraud and five counts of extortion and acquitted of eleven other counts. ⁴

II.

A.

Hyman Schmidt contends that the evidence was insufficient to support his convictions on Counts 22, 25, and 36 for extortion. He also argues that the district court abused its discretion in sentencing him to serve seven years in prison. We examine each contention in turn.

1. Extortion Convictions

Relying on United States v. Addonizio, 451 F.2d 49 (3d Cir.1971), cert. denied, 405 U.S. 936, 92 S.Ct. 949, 30 L.Ed.2d 812 (1972), Schmidt argues that the conduct described in the stipulations concerning Counts 25 and 36 constitutes, at most, bribery and not extortion. According to Schmidt,

while bribery [is] a voluntary payment made in order to exert undue influence upon the performance of an official duty, extortion involves payment in return for something to which the payor is already legally entitled.

Id. at 72 (quoting Hornstein v. Paramount Pictures, 22 Misc.2d 966, 37 N.Y.S.2d 404 (1942)) (emphasis in original). Since the debtors involved in these counts were not legally entitled to the benefits they received, Schmidt reasons, the conduct described cannot be extortion.

It is unclear from the Addonizio opinion whether the court accepted the distinction pressed by Schmidt here, ⁵ see id. at 73. It is absolutely clear, however, that this court has repeatedly rejected it. See, e.g., United States v. Hedman, 630 F.2d 1184 (7th Cir.1980), cert. denied, 450 U.S. 965, 101 S.Ct. 1481, 67 L.Ed.2d 614 (1981); United States v. Price, 617 F.2d 455, 457 (7th Cir.1979); United States v. Braasch, 505 F.2d 139, 151 (7th Cir.1974), cert. denied, 421 U.S. 910, 95 S.Ct. 1561, 43 L.Ed.2d 775 (1975).

Schmidt next argues that his convictions for extortion in Counts 25 and 36 must be reversed because there is no evidence that he coerced or induced the payments that he received; he argues, in effect, that the payments were merely gratuities. Schmidt relies heavily on United States v. O'Grady, 742 F.2d 682, 692-93 (2d Cir.1984) (en banc), in which the court found erroneous a jury instruction on extortion that "omitted an essential element of the offense, to wit, a finding that [the defendant] misused his office to obtain benefits not due him ...." The court explained that

to prove the crime of extortion under color of public office the government must show that the public official induced the benefits received. The fact of public office supplies the potential threat or force necessary, but it is the wrongful use of that office to induce benefits that constitutes the crime.

Id. at 688 (footnote omitted; emphasis in original). While the O'Grady court would not require the government to "prove that the public official demanded or directly solicited the benefits received, or that he offered a specific quid pro quo," it would require that the government "show that the power of public office was misused in such a way as to induce the giving of benefits." Id. at 688-89. The court recognized that several other courts of appeals including this one, see e.g., United States v. Hedman, 630 F.2d 1184, 1195 (7th Cir.1980), cert. denied, 450 U.S. 965, 101 S.Ct. 1481, 67 L.Ed.2d 614 (1981), had specifically rejected the notion that proof of inducement by the public official is necessary. Nevertheless, the court "[did] not read those decisions to permit a conviction for extortion under color of official right absent evidence that the public official had misused his office to obtain the benefits." O'Grady, 742 F.2d at 689.

Our prior cases clearly hold that

[i]t is settled law in this Circuit ... that in a ... prosecution for extortion under color of official right it is unnecessary to show that the defendant induced the extortionate payment .... The government is merely required to prove that a public official obtained money to which he was not entitled and which he obtained only because of his official position.

Hedman, supra, 630 F.2d at 1195. See also United States v. Braasch, 505 F.2d 139, 151 n. 8 (7th Cir.1974) ("coercive" extortion not only type outlawed by 18 U.S.C. Sec. 1951; also illegal to accept payoffs "under color of official right," and that offense does not require proof of coercion), cert. denied, 421 U.S. 910, 95 S.Ct. 1561, 43 L.Ed.2d 775 (1975).

However, we need not disagree with O'Grady 's holding that some "misuse" of office is required in order to affirm Schmidt's convictions for extortion. The evidence under Count 25 shows that Schmidt accepted money from a tavern owner on three occasions and, in return, allowed the tavern to remain open instead of closing it and executing a writ of execution. The district court could have found from evidence that Schmidt twice returned to the tavern to collect additional payments, that Schmidt solicited the payments he received. ⁶ The evidence under Count 36 shows that Folak suggested to the owner of an automobile parts company upon whom he had served a seizure warrant that he would allow the owner to buy back the business for a payment to Folak, Schmidt, and a third person. The owner paid Schmidt $500, and no auction was ever held. The evidence was more than sufficient to show that Schmidt did not passively accept a "gratuity," but, along with Folak, actively solicited an illegal payment. ⁷

Schmidt also claims that the evidence of extortion under Count 22 is insufficient, contending that there is no evidence that he...