United States v. Isaacs
| Decision Date | 19 February 1974 |
| Docket Number | No. 73-1409,73-1410.,73-1409 |
| Citation | 493 F.2d 1124 |
| Parties | UNITED STATES of America, Plaintiff-Appellee, v. Theodore J. ISAACS and Otto Kerner, Jr., Defendants-Appellants. |
| Court | U.S. Court of Appeals — Seventh Circuit |
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Sherman C. Magidson, Warren D. Wolfson and Jackson H. Welch, Chicago, Paul R. Connolly, Thomas E. Patton, Washington, D. C., for defendants-appellants.
James R. Thompson, U.S. Atty., Gary L. Starkman, Samuel K. Skinner, William T. Huyck, Glynna W. Freeman and Michael D. Monico, Asst. U.S. Attys., Chicago, Ill., for plaintiff-appellee.
Before JOHNSEN, LUMBARD and BREITENSTEIN, Senior Circuit Judges.*
Following a six-week trial before a jury in the Northern District of Illinois, Theodore J. Isaacs and Otto Kerner, Jr., were found guilty on February 19, 1973 of a variety of offenses arising out of their activities on behalf of certain Illinois racing interests in return for bribes of more than $150,000 each. Isaacs and Kerner were both convicted on all those counts of an indictment which charged an 18 U.S.C. ž 371 conspiracy to violate the Travel Act, 18 U.S.C. ž 1952 and the Mail Fraud Act, 18 U.S.C. ž 1341 (Count I); use of interstate facilities in furtherance of bribery, 18 U.S.C. ž 1952 (Counts II through V) and mail fraud, 18 U.S.C. ž 1341 (Counts VI through XIII). Kerner was also convicted of perjury before a grand jury, 18 U.S.C. ž 1623 (Count XIV), false statements to Internal Revenue agents, 18 U.S.C. ž 1001 (Count XV), tax evasion, 26 U.S.C. ž 7201 (Count XVI) and false statement in a tax return, 26 U.S. C. ž 7206(1) (Count XVII). Isaacs was also convicted of tax evasion, 26 U.S.C. ž 7201 (Count XVIII), and false statement in a tax return, 26 U.S.C. ž 7206(1) (Count XIX).
After considering post-trial motions, the district judge on April 19, 1973 dismissed five counts against each defendant, Counts V, VII, X, XI and XII. He sentenced both defendants to three years' imprisonment and fines totalling $50,000 ($10,000 each on Counts I, II, III, and IV, and Count XVI as to Kerner, and Count XVIII as to Isaacs), the prison sentences running concurrently on all remaining counts against each defendant, the fines accumulating consecutively on five counts against each defendant.
We affirm the convictions of Isaacs and Kerner on Counts I, VI, VIII, IX, and XIII, and reverse their convictions on Counts II, III, and IV. We also affirm the conviction of Kerner on Counts XIV, XV, XVI, and XVII and the conviction of Isaacs on Counts XVIII and XIX.
The indictment, returned December 15, 1971, named five defendants:
William S. Miller, chairman of the Illinois Racing Board, IRB, by appointment of Kerner, and
Faith McInturf, Miller's secretary.
Joseph Knight was severed because of illness; he died after the trial. When Miller agreed to make full disclosure in August 1972 he and McInturf were granted immunity and the charges against them were ultimately dismissed. Miller testified; he and Marjorie L. Everett, on behalf of whose racing interests the bribery was allegedly undertaken, were the two principal government witnesses. Mrs. Everett was named as an unindicted coconspirator in the government's bill of particulars.
Our discussion of the numerous claims of error requires a summary of the evidence, from Kerner's campaign for election in 1960 to the disclosures and the investigations in 1969, 1970 and 1971.
For many years prior to 1960 Marjorie Lindheimer Everett had assisted her father, Benjamin Lindheimer, in the operation of his thoroughbred racing interests in the Chicago area. Lindheimer controlled Arlington Park Jockey Club which owned Arlington Park race track, and he also controlled Washington Park Jockey Club which owned Washington Park race track. Another entity in the picture is Balmoral Jockey Club, BJC, a racing company. Mrs. Everett owned some BJC stock at the time of her father's death and desired to continue his racing enterprises. Miller, a friend of Lindheimer and than a member of IRB, which at the time allocated thoroughbred racing dates, agreed to help her. Chicago Thoroughbred Enterprises, CTE, was organized and financed by bank loans of more than $8 million. CTE issued 3,000 shares of stock of which 2,000 went to Mrs. Everett who pledged them at the bank as collateral to secure the CTE loan. Arlington Park Jockey Club and Washington Park Jockey Club became divisions of CTE. The transactions in evidence relate to the acquisition and disposition, by Isaacs and Kerner, of stock in CTE, BJC, and a later formed company, Chicago Harness Racing Company, CHR.
Otto Kerner was the Democratic candidate for governor of Illinois in 1960. Miller assisted in financing his campaign and, through Miller, Mrs. Everett's companies contributed $45,000 in cash to Kerner's campaign. It is not claimed by the government that any impropriety is attached to these contributions. Monies which Miller collected were given to Theodore Isaacs who managed Kerner's campaign. After Kerner's election, he appointed Isaacs as Director of the Department of Revenue and Miller as chairman of IRB. Isaacs invited Miller to suggest new members for appointment to the Racing Board and Mrs. Everett, through Miller, recommended the appointment of Ernest Marsh and Donald McKellar to the Racing Board and James Hayes to the Harness Racing Commission. Kerner made the appointments so recommended. Later, Miller and Mrs. Everett objected to the appointments of A. J. Monaco and David Meyers and those appointments were not made.
In 1961 Miller suggested to Mrs. Everett that she enter the field of harness racing to get more income from greater use of Arlington Park and Washington Park facilities. To accomplish this it was necessary to obtain legislation to permit one corporation to own two race tracks, to allow a racing company to conduct a meet at a track other than its own and to authorize a foreign corporation to own and operate race tracks in Illinois. Senate Bill 717, which approved such corporate actions, was lobbied through the Illinois legislature by Miller and it became law with Kerner's signature.
CTE spent over $5,000,000 to equip Washington Park for harness racing. Washington Park Trotting Association, WPTA, was organized to run the meets and it made a lease with CTE contingent upon the receipt of racing dates from the Harness Racing Commission. Rental was in the form of a percentage of the gross handle. WPTA stock was made available to various Illinois legislators and issued to nominees.
In 1962, Chicago Harness Racing, Inc., CHR, was organized by Mrs. Everett and Miller and had the same landlord-tenant relationship with CTE as did WPTA. The initial CHR stockholders were Chicago businessmen. The common shares were placed for a time in a voting trust to maintain the control of Mrs. Everett. Miller suggested to her that 50,000 shares of CHR stock be made available for distribution to those who he thought might help the company. These 50,000 shares play a prominent part in subsequent events. Together, WPTA and CHR earned about $6,000,000 for CTE during the period 1962-1968.
According to Mrs. Everett, Miller informed her that Isaacs would act as liaison between Miller and Governor Kerner on racing matters. Miller thought it essential that she have a friend in the Kerner administration in order to ensure the award of racing dates at CTE's tracks and generally favorable consideration from the governor. While their testimony disagreed as to who initiated the subject, Mrs. Everett and Miller discussed the desirability of making racing stock available to Kerner and Isaacs. As a result, on November 8, 1962 Mrs. Everett sent Miller a handwritten note which read:
The next day, November 9, Miller met with Kerner and Isaacs in the governor's Springfield office and told them of Mrs. Everett's stock offer. According to Miller, Kerner said "That's very nice of Marj." When Kerner took the stand he admitted seeing Miller on November 9 but denied that anything had been said about Mrs. Everett's offer of stock. Kerner testified that the only discussion at the meeting related to the racing dates that had been scheduled for the next year. However, the government evidence showed that the final racing dates were not scheduled until a board meeting on November 20. Kerner testified that he first heard of stock being available from Joseph Knight and he agreed to invest in it on Knight's recommendation. However, it is undisputed that nothing was done to set aside the stock or to take it up until four years later in the summer of 1966. At the time of Mrs. Everett's November 1962 offer of CTE stock at $1,000 a share it was worth $2,500 a...
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