U.S. v. Spano

• Decision Date: 01 September 2005
• Docket Number: No. 03-1590.,No. 03-1140.,No. 04-1014.,No. 03-1408.,No. 03-1176.,No. 03-1111.,No. 03-1172.,No. 03-1180.,No. 04-1095.,No. 04-1035.,No. 04-1073.,No. 04-1057.,No. 04-1072.,No. 03-1114.,No. 04-1125.,03-1111.,03-1114.,03-1140.,03-1172.,03-1176.,03-1180.,03-1408.,03-1590.,04-1014.,04-1035.,04-1057.,04-1072.,04-1073.,04-1095.,04-1125.
• Parties: UNITED STATES of America, Plaintiff-Appellee/Cross-Appellant, v. Michael SPANO, Sr., et al., Defendants-Appellants/Cross-Appellees, and Bonnie LaGiglio, Defendant-Appellant.
• Court: U.S. Court of Appeals — Seventh Circuit

Page 599

421 F.3d 599

UNITED STATES of America, Plaintiff-Appellee/Cross-Appellant, v. Michael SPANO, Sr., et al., Defendants-Appellants/Cross-Appellees, and Bonnie LaGiglio, Defendant-Appellant.

No. 03-1111.

No. 03-1114.

No. 03-1140.

No. 03-1172.

No. 03-1176.

No. 03-1180.

No. 03-1408.

No. 03-1590.

No. 04-1014.

No. 04-1035.

No. 04-1057.

No. 04-1072.

No. 04-1073.

No. 04-1095.

No. 04-1125.

United States Court of Appeals, Seventh Circuit.

Argued April 5, 2005.

Decided September 1, 2005.

COPYRIGHT MATERIAL OMITTED

David E. Bindi (argued), Office of the United States Attorney, Chicago, IL, for Plaintiff-Appellee/Cross-Appellant.

Michael B. Nash, Chicago, IL, for Defendant-Appellant.

Franklin C. Cook, Freeport, IL, Michael B. Nash (argued), Chicago, IL, Alexander M. Salerno, Berwyn, IL, Alan M. Dershowitz (argued), Cambridge, MA, Nathan Z. Dershowitz, Dershowitz, Eiger & Adelson, New York, NY, Francis C. Lipuma (argued), Chicago, IL, Corey B. Rubenstein (argued), David J. Stetler, Stetler &amp Duffy, Francis C. Lipuma, R. Eugene Pincham, Jr., Chicago, IL, Stephen E. Eberhardt, Tinley Park, IL, for Defendants-Appellants/Cross-Appellees.

Before POSNER, EASTERBROOK, and EVANS, Circuit Judges.

POSNER, Circuit Judge.

The seven defendants were convicted after a three-month jury trial of a variety of federal offenses, including mail fraud, RICO, and money laundering, arising out a scheme to defraud the Town of Cicero, Illinois. (Bonnie LaGiglio, however, was convicted only of a tax offense.) They received prison sentences ranging from 41 to 151 months, as well as being ordered to forfeit a total of $4 million in proceeds of their fraud (plus two real estate parcels) — a fraud that cost the Town more than $10 million. Their appeals, together with the government's cross-appeal, which seeks higher sentences for all but Bonnie LaGiglio, present more than 20 issues, but many of them are too insubstantial to require discussion. Because the sentences were based in part on factfindings made by the judge, the government concedes that the defendants are entitled to the limited remand authorized by United States v. Paladino, 401 F.3d 471, 483-84 (7th Cir.2005), though to nothing more. The force of the concession is obscure, in light of the government's cross-appeal; but that is for later.

Cicero is self-insured for its employees' health benefits, and until 1992 used the Travelers insurance company to process the bills submitted to the Town by providers of health care to its employees. That year the Town switched to Specialty Risk Consultants. SRC, created by two of the defendants, was the instrument of the fraud; other defendants were Town officials, including the President of the Board of Trustees (i.e., mayor), Loren-Maltese. Millions of dollars that the Town paid to SRC were siphoned to a partnership, Plaza Partners, which was a tool of the conspirators and provided them with money and other things of value, including a golf course and a horse farm. The fraud, which continued until it was unmasked in 1996, has done nothing for the reputation of Cicero, a town notorious as the headquarters of Al Capone, Hanania v. Loren-Maltese, 212 F.3d 353, 354 (7th Cir.2000); Laurence Bergreen, Capone: The Man and the Era 97-99 (1996); Matthew Engel, "Spirit of Capone Lives on in Mobtown, Illinois: Mayor's $12m Scam Follows in Footsteps of Scarface, Baldy and the Big Tuna," Guardian (London), Aug. 31, 2002, p. 3, and with an 80-year history of links to organized crime. "Is Cicero Ready for Reform?," Chicago Tribune, Apr. 3, 2003, p. 22.

Loren-Maltese, though a key player in the fraud by virtue of her position as the Town's mayor, received only modest remuneration — primarily reimbursement of 100 percent of her medical bills; Cicero's benefits plan entitled her to only 80 percent. She points out that there was a practice predating the fraud of reimbursing additional amounts upon written authorization by a Town official; her predecessor had been reimbursed for 100 percent of his medical bills on this basis, and presumably she would have been as well even if SRC had not replaced Travelers as the administrator of the Town's plan.

She argues that if the extra coverage she received was not in exchange for her complicity in the fraud, she is not guilty of the form of fraud, with which she was charged, that consists of an official's depriving the government of his or her honest services. 18 U.S.C. §§ 1341, 1343, 1346; United States v. Martin, 195 F.3d 961, 965-66 (7th Cir.1999). The argument is a non sequitur. A participant in a scheme to defraud is guilty even if he is an altruist and all the benefits of the fraud accrue to other participants, Lombardo v. United States, 865 F.2d 155, 159-60 (7th Cir.1989); cf. United States v. Moede, 48 F.3d 238, 242 (7th Cir.1995); United States v. Blasini-Lluberas, 169 F.3d 57, 65 (1st Cir.1999); United States v. Oplinger, 150 F.3d 1061, 1065 (9th Cir.1998), just as a conspirator doesn't have to benefit personally to be guilty of conspiracy — a point so obvious that we can't find a case that states it, although it is implicit in statements of the elements of conspiracy, of which personal benefit is not one. E.g., United States v. Duran, 407 F.3d 828, 835-36 (7th Cir.2005); United States v. Miller, 405 F.3d 551, 555-56 (7th Cir.2005). For that matter, neither the scheme to defraud, United States v. Tadros, 310 F.3d 999, 1006 (7th Cir.2002); United States v. Pimental, 380 F.3d 575, 585 (1st Cir.2004), nor the conspiracy, e.g., United States v. Bond, 231 F.3d 1075, 1079 (7th Cir.2000); United States v. Martin, 228 F.3d 1, 10-11 (1st Cir.2000), has to succeed in inflicting harm for the participants to be guilty.

In the case of a successful scheme, the public is deprived of its servants' honest services no matter who receives the proceeds. In any event there was evidence that as a reward for her participation Loren-Maltese received accelerated reimbursement and, more important, reimbursement of 100 percent of the medical expenses incurred by members of her family; there was no evidence that her predecessor had received such largesse.

She makes the related complaint that she should not have been found liable to forfeit more than $3 million of illegal proceeds, since so little of that amount found its way into her pocket. But the proceeds of a conspiracy are a debt owed by each of the conspirators. United States v. Genova, 333 F.3d 750, 761 (7th Cir.2003); United States v. Masters, 924 F.2d 1362, 1369-70 (7th Cir.1991); United States v. Edwards, 303 F.3d 606, 643-44 (5th Cir.2002). It would be absurd to treat them more leniently than the law treats a lawful partnership, all of whose members are severally as well as jointly liable for the partnership's debts.

A number of cases, it is true, though none in this circuit, require the defendant to forfeit only so much of the proceeds (not received by him) of the fraud as were foreseeable to him, e.g., United States v. Fruchter, 411 F.3d 377, 384 (2d Cir.2005); United States v. Bollin, 264 F.3d 391, 419 (4th Cir.2001); United States v. Corrado, 227 F.3d 543, 558 (6th Cir.2000); United States v. Hurley, 63 F.3d 1, 22 (1st Cir.1995), by analogy to the liability of a conspirator for only those misdeeds of his coconspirators that were foreseeable by him. Id. Other cases do not discuss this requirement. We have found no case that rejects it, but we note that there is a difference between criminal liability for the acts of others and liability on a debt created by partners in a criminal scheme. No matter; Loren-Maltese authorized payments by the Town to SRC and knew that SRC was a fraud and so should have foreseen the possibility of a massive loss. She does not argue the contrary or even that foreseeability is required for a forfeiture.

The only other significant issue she raises concerns the judge's exclusion, as being unreliable, of minutes of meetings of the Town's Board of Trustees held several months after the government's investigation of the fraud became public knowledge. Loren-Maltese presided at meetings of the Board and other conspirators were among its members. The minutes of the meeting of January 6, 1997, contain a statement by one of the conspirator members (though he was acquitted), DeChicio, that no payments had been made by the Town to SRC since October 1996. That was false. A week later the minutes were amended to state that at the January 6 meeting Loren-Maltese had twice asked DeChicio whether any payments had been made to SRC "since the October 1996 Board Meeting at which time the board directed no further monies be paid to [SRC] unless by Town Board approval." Neither the minutes of the October meeting nor those of the January 6 meeting had mentioned any such direction. The inference of doctoring, even in the case of the unamended version of the January 6 minutes, is strong, and the public-records exception to the hearsay rule is inapplicable when the "circumstances indicate lack of trustworthiness." Fed.R.Evid. 803(8); Beech Aircraft Corp. v. Rainey, 488 U.S. 153, 167-68, 109 S.Ct. 439, 102 L.Ed.2d 445 (1988).

The provision is tailor-made for a case in which the records are controlled by the defendants themselves rather than by clerks assumed to be disinterested. Reynolds v. Green, 184 F.3d 589, 596 (6th Cir.1999); Peppers v. Ohio Dept. of Rehabilitation & Correction, 50 Ohio App.3d 87, 553 N.E.2d 1093, 1094-95 (1988); compare Espinoza v. INS, 45 F.3d 308, 310 (9th Cir.1995). As we explained recently in Kikalos v. United States, 408 F.3d 900, 904 (7th Cir.2005), with reference to the parallel hearsay exception for business records, Fed.R.Evid. 803(6), "when the record keeper, rather than being a clerical or professional employee, is a principal with a strong motive to falsify the records, the district judge may deem them so unreliable as to be unworthy of consideration by the jury; in the language of the rule, they are to be excluded if `the...