United States v. Mandel

Decision Date31 March 1976
Docket NumberCrim. No. HM75-0822.
Citation415 F. Supp. 997
PartiesUNITED STATES of America v. Marvin MANDEL et al.
CourtU.S. District Court — District of Maryland

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Jervis S. Finney, U.S. Atty. for the District of Maryland, Barnet D. Skolnik, Ronald S. Liebman and Daniel J. Hurson, Asst. U.S. Attys., Baltimore, Md., for the United States of America.

Arnold M. Weiner, Baltimore, Md., for Marvin Mandel.

William G. Hundley, Washington, D.C., for W. Dale Hess.

Thomas C. Green, Washington, D.C., for Harry W. Rodgers, III.

Michael E. Marr, Baltimore, Md., for William A. Rodgers.

Norman P. Ramsey, Baltimore, Md., for Irvin Kovens.

Joseph A. DePaul, College Park, Md., for Ernest N. Cory, Jr.

MEMORANDUM

HERBERT F. MURRAY, District Judge.

On November 24, 1975, the defendants in this case were indicted under 18 U.S.C. § 1341 on twenty counts of mail fraud and under 18 U.S.C. § 1961 et seq., on four counts of prohibited patterns of racketeering activity. The defendants have now moved to dismiss the indictment, arguing, inter alia, that the indictment fails to allege a cognizable scheme to defraud, that it is vague and fatally defective, that it is premised on erroneous and unconstitutional assumptions concerning the duties of the Governor of the State of Maryland, that the racketeering counts are inapplicable on the facts alleged in the indictment, and that the indictment transgresses fundamental constitutional principles concerning the separation of powers and the relationship of the states to the federal government.1 Defendants have also filed alternative motions to strike certain portions of the indictment, and to certify unresolved questions of state law to the Maryland Court of Appeals. The Court heard oral argument on these motions on March 4, 1976.

I. THE MAIL FRAUD COUNTS
A. The Indictment

The indictment in this case charges that, beginning at some point between January 7, 1969, and the spring of 1971, and continuing thereafter until the date of the filing of the indictment, the defendants devised and intended to devise a scheme and artifice:

(a) To defraud the citizens of the State of Maryland, and its governmental departments, agencies, officials and employees, both executive and legislative, of their right to the conscientious, loyal, faithful, disinterested and unbiased services, actions and performance of official duties by MARVIN MANDEL, in his official capacities as Governor of the State of Maryland, free from bribery, corruption, partiality, willful omission, bias, dishonesty, deceit, official misconduct and fraud;
(b) To defraud the citizens of the State of Maryland, and its governmental departments, agencies, officials and employees, both executive and legislative, of their right to have the state's business and its affairs conducted honestly, impartially, free from bribery, corruption, bias, dishonesty, deceit, official misconduct and fraud, and in accordance with the laws and Code of Ethics of the State of Maryland;
(c) To defraud the citizens of the State of Maryland, and its governmental departments, agencies, officials and employees, both executive and legislative, of their right to have available and to be made aware of all relevant and pertinent facts and circumstances when:
(1) drafting, considering and deliberating upon proposed legislation for the State of Maryland with respect to the Maryland horse racing industry and to other matters;
(2) administering the laws of the State of Maryland with respect to the Maryland horse racing industry and to other matters; and
(3) transacting business for and on behalf of the State of Maryland;
(d) To obtain, directly and indirectly, money, property and other things of value, by means of false and fraudulent pretenses, representations, and promises, and the concealment of material facts, relating to the Marlboro Race Track, the Bowie Race Track, the Security Investment Company, Ray's Point, Inc., and to other matters.

The indictment goes on to allege that the defendants, as a further part of the scheme and artifice to defraud, entered into a "corrupt relationship" with one another in which each of them "would and did act with intent illegally to benefit, directly and indirectly, and through the use of fraud and deception, himself and other defendants." Count 1, paragraph 14. The allegations of the indictment focus primarily on the actions of the defendants with regard to certain transactions and legislation concerning Marlboro Race Track ("Marlboro") and on certain transactions, leases and contracts awarded by the State of Maryland to various enterprises in which the defendants are alleged to have held financial interests.

With regard to Marlboro, the indictment charges that defendants Hess, Kovens, Cory and William A. and Harry W. Rodgers, acquired financial interests in Marlboro in 1971 in a manner designed to conceal their acquisition of such interests. The indictment further charges that those defendants, through the use of a nominee, concealed the fact that defendant Kovens was a true beneficial owner of a financial interest in Marlboro, and that they arranged for another individual falsely to represent himself as the owner of the track. The charge continues that during the 1972 legislative session of the Maryland General Assembly, all of the defendants "would and did fraudulently conceal" from the legislature the "true identities of the owners" of Marlboro, causing the legislators to make decisions on legislative matters financially beneficial to the owners of Marlboro and, later, of Bowie Race Track ("Bowie"), without having the benefit of "complete and accurate information" regarding the identities of those owners. The indictment charges that defendant Mandel "would and did, both personally and through agents, in return for certain financial and other benefits . . . act with intent to aid and assist certain legislation and legislative matters financially beneficial" to Marlboro's owners. The indictment further charges that all of the defendants similarly "fraudulently concealed" from the Maryland Racing Commission the identities of Marlboro's owners, partially through the submission of a list of owners which is alleged to be substantially false. These actions, like those with respect to the Maryland General Assembly, are alleged to have been designed to cause the Commission to make decisions with respect to racing dates and other matters financially beneficial to the owners of Marlboro and later, Bowie, without the benefit of complete and accurate information regarding the true identities of the owners. As a further part of the scheme and artifice, the indictment charges, the defendants Hess, Kovens, Cory and Harry W. and William A. Rodgers caused to be merged the ownerships of Marlboro and Bowie in 1972, thereby acquiring for themselves financial benefits.

The indictment also charges that it was further a part of the scheme and artifice to defraud that defendant Mandel, as governor, would and did, directly and indirectly, permit and approve the awarding of "various contracts, leases and other benefits to business entities in which" defendants Hess, William A. and Harry W. Rodgers held financial interests, without revealing to the citizens or to the governmental bodies of the state "the full extent and true nature" of his business involvements with those defendants. Those involvements apparently include the "financial and other benefits" which defendant Mandel allegedly received as bribes for the purpose of influencing him in the course of his official duties and for his aid and assistance with regard to the legislative matters concerning Marlboro. In particular, the indictment charges that defendant Hess transferred to defendant Mandel 4/9 of Hess' interest in the Security Investment Company ("Security"), and concealed that transfer as well as subsequent payments made to defendant Mandel as a consequence of his financial interest in Security, through such means as falsification of tax returns and other documents. In addition, the indictment alleges that defendants Hess, Harry W. and William A. Rodgers "would and did allow" defendant Mandel to acquire a fifteen percent interest in "certain assets of substantial value", later formally owned by Ray's Point, Inc. ("Ray's Point"), and that such interest was concealed through the alteration of a certain record and by other means. The indictment charges further that defendant Mandel, for the purpose of concealing all of the activities noted above, deliberately deceived and misled the citizens of the state in a number of public statements.

While the factual allegations in the indictment make the scheme appear to be a complex and subtle one, the thrust of the charges is simple. In essence, the indictment charges that the defendants devised a scheme to defraud the citizens and the state of Maryland by bribing the Governor to assist legislation which would be financially beneficial to the owners of Marlboro (and later Bowie), the identities of such owners being deliberately concealed from the public, the legislature and the Racing Commission by all of the defendants. The indictment also charges that it was further a part of the scheme that defendant Mandel use his powers as Governor to channel state business to business entities in which defendants Hess, William A. and Harry W. Rodgers had financial interests, without revealing to the public or the governmental bodies involved his own business involvement with those defendants, including those interests in Security and Ray's Point which he had received from those defendants as bribes, and the existence of which was actively concealed by defendants Mandel, Hess and William A. and Harry W. Rodgers.

B. Does the indictment allege a cognizable scheme to defraud?

Title 18 U.S.C. § 1341 provides, in...

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