United States v. Reed, 17-30296

• Decision Date: 05 November 2018
• Docket Number: No. 17-30296,17-30296
• Citation: 908 F.3d 102
• Parties: UNITED STATES of America, Plaintiff-Appellee v. Walter P. REED; Steven P. Reed, Defendants-Appellants
• Court: U.S. Court of Appeals — Fifth Circuit

908 F.3d 102

UNITED STATES of America, Plaintiff-Appellee

v.Walter P. REED; Steven P. Reed, Defendants-Appellants

No. 17-30296

United States Court of Appeals, Fifth Circuit.

FILED November 5, 2018

Jordan Samuel Ginsberg, Kevin G. Boitmann, Diane Hollenshead Copes, Esq., Jeffrey Ryan McLaren, Assistant U.S. Attorneys, U.S. Attorney's Office, Eastern District of Louisiana, New Orleans, LA, for Plaintiff-Appellee.

Richard T. Simmons, Jr., Attorney, Hailey, McNamara, Hall, Larmann & Papale, L.L.P., Metairie, LA, Walter Rimmer Woodruff, Jr., Mandeville, LA, for Walter P. Reed.

Autumn Alycia Town, Law Office of Autumn Town, New Orleans, LA, for Steven P. Reed.

Before HIGGINBOTHAM, SMITH, and CLEMENT, Circuit Judges.

PATRICK E. HIGGINBOTHAM, Circuit Judge:

Walter Reed served as District Attorney for Louisiana’s 22nd Judicial District from 1985 to 2015. Federal prosecutors charged him and his son, Steven Reed,¹ with conspiracy to commit wire fraud and money laundering and substantive counts of both wire fraud and money laundering. Walter Reed also drew additional counts of wire fraud, false statements on income tax returns, and mail fraud. The jury convicted on all but one count, and both defendants appeal. We vacate and remand the district court’s imposition of joint and several liability for monetary forfeiture, but otherwise affirm.

I

The Reeds were indicted on nineteen counts.² While overlapping in certain ways, the counts fall into three categories.

The first set of counts were drawn from both defendants’ use of Walter Reed’s District Attorney campaign funds. The prosecution argued that Walter Reed solicited funds from donors on the premise that those funds would be used to facilitate his reelection, but instead used them for personal expenses unrelated to his campaign or the holding of public office—on multiple occasions, hiring Steven Reed to perform work at prices that did not correspond to the services provided. The defendants responded that each allegation had an innocent explanation.

Count 1 alleged that the Reeds conspired to engage in wire fraud and money laundering by funneling campaign funds to Steven Reed. The indictment described 21 overt acts on behalf of the conspiracy, linked to three distinct events. First, Walter Reed paid Steven Reed about $14,000 in campaign funds for producing an anti-drug service announcement worth only $2,000. Second, Walter Reed paid Steven Reed’s company, Globop, about $550 for bar services at a "housewarming party" unrelated to the campaign.³ And third, Walter Reed paid Steven Reed’s other company, Liquid Bread, to provide "Bar Services: Beverages and Liquor" at a campaign event featuring the band America, the "America Event." The prosecution presented evidence that Liquid Bread only provided bar services and did not provide alcohol at the event, but that Walter Reed nonetheless paid Steven Reed $12 per person for 2,450 people. The prosecution also alleged that Walter Reed suggested to two other companies providing services at the America Event that they each pay Steven Reed $5,000 out of the amount Walter Reed’s campaign had paid them, but that he did not disclose either $5,000 payment on his campaign finance reports. After receiving payment from the America Event, Steven Reed paid down a loan for which Walter Reed was the guarantor and on which Steven Reed had begun to incur late charges. Counts 7, 9, and 10 alleged that both defendants committed wire fraud and money laundering related to the America Event.

Counts 2–6 and 8 dealt with Walter Reed’s additional use of campaign funds for personal expenditures. The prosecution alleged that Reed spent campaign funds to purchase dinners, restaurant gift cards, and flowers—all for non-campaign purposes. It further alleged that he used campaign funds to pay for dinners with Pentecostal pastors and their families, then used those dinners to recruit referrals for the private legal practice he operated concurrently with his District Attorney service. As the prosecution explained, on one occasion, Walter Reed used campaign funds to host one of these dinners, requested that his firm reimburse him because he obtained a referral during the dinner, and then kept the reimbursement for himself until the investigation was underway.⁴ It presented evidence at trial that the same pastor who gave Walter Reed the referral sought a "referral fee" in the form of a contribution to a church gymnasium, and after his firm declined to provide that fee, Walter Reed "donated" $25,000 of campaign funds for a church gymnasium.

The jury convicted both defendants of all counts related to use of Walter Reed’s campaign funds, except for one money laundering count involving a $5,000 payment to Steven Reed at the America Event.

The second broad category of counts, counts 11–14, alleged that Walter Reed underreported income on his tax returns, including for failing to report campaign funds he had converted to personal use. The prosecution contended that Reed owed the Internal Revenue Service about $40,000 in unpaid taxes. The jury convicted Walter Reed of all tax counts.

The final category of counts, counts 15–19, alleged mail fraud related to Walter Reed’s representation of St. Tammany Parish Hospital. The prosecution presented evidence that the Hospital entered into a representation agreement with the District Attorney’s office, but that from 1994 to 2014, Reed began depositing checks meant for the D.A.’s office into a personal bank account for a business entity he owned with his ex-wife, "Walter Reed Old English Antiques." It argued that the Hospital intended to enter into a relationship with the D.A.’s office, not with Reed in his personal capacity. The prosecution presented evidence that Reed was aware that the Hospital Board had repeatedly reaffirmed the D.A.’s office ’s designation as special counsel, and that Reed sent another attorney from the D.A.’s office when he was unable to attend Board meetings. It also presented testimony that in response to press inquiries, Reed asked one assistant district attorney who often attended meetings in his place to sign a false affidavit that Reed offered to pay him to attend. Reed’s defense was that there was a misunderstanding, and that he had been under the impression that the Hospital began retaining him in his personal capacity in 1994. The jury also convicted Reed of all mail fraud counts.

The district court sentenced Walter Reed to a below-guidelines term of imprisonment of 48 months, and Steven Reed to a below-guidelines term of probation. It ordered Walter Reed to pay a $15,000 fine and $605,244.75 in restitution. It also imposed forfeiture of $46,200 jointly and severally against both defendants, and of $609,217.08 solely against Walter Reed. In determining how much forfeiture to impose, the district court declined to impose forfeiture for the "housewarming party" that the prosecution had identified as one of the 21 overt acts supporting the conspiracy count.⁵ Because the court concluded that there was sufficient evidence of other overt acts to support the conspiracy charges, however, this affected the forfeiture amount but not the defendants’ conspiracy convictions.

The Reeds raise several distinct issues on appeal. We reject all but one: the imposition of joint and several forfeiture liability.

II

One of the principal arguments of the Reeds is that in prosecuting offenses drawn from misuse of Walter Reed’s D.A. campaign funds,⁶ the jury was asked to convict the Reeds of violation of campaign finance law, a denial of due process and "federalism."⁷ We review here de novo ,⁸ and reject the contention.

The Reeds chiefly rely on the Supreme Court’s decision in McDonnell v. United States ,⁹ which was issued after trial but before the district court denied the Reeds’ post-trial motions for judgment of acquittal.¹⁰ It called on the Supreme Court to interpret "official act" in the federal bribery statute 18 U.S.C. § 201 —"any decision or action on any question, matter, cause, suit, proceeding or controversy, which may at any time be pending, or which may by law be brought before any public official, in such official’s official capacity, or in such official’s place of trust or profit."¹¹ The Court declined to read the definition broadly, determining that the phrase "official act" implicated only a limited set of decisions or actions "involv[ing] a formal exercise of governmental power that is similar in nature to a lawsuit before a court, a determination before an agency, or a hearing before a committee."¹²

Focusing on statutory text and precedent, the Court also noted "significant constitutional concerns" with a broader reading bringing a risk of "a pall of potential prosecution" over relationships between public officials and their constituents, reminding that it could not "construe a criminal statute on the assumption that the Government will use it responsibly."¹³ Relatedly, the Court observed that "the term ‘official act’ is not defined ‘with sufficient definiteness that ordinary people can understand what conduct is prohibited,’ or ‘in a manner that does not encourage arbitrary and discriminatory enforcement’ "—implicating due process concerns.¹⁴ And, finally, it identified "significant federalism concerns" attending a reading of "official act" that "involves the Federal Government in setting standards of good government for local and state officials."¹⁵

While honest services fraud and the definition of "official act" in the bribery statute are not at issue here,¹⁶ the Reeds argue that McDonnell does control; that as with the McDonnell prosecution’s reliance on the term "official act," this case hinged on the interpretation of Louisiana campaign finance law’s prohibition on the use of campaign funds for purposes unrelated to the campaign or the holding of public office.¹⁷ The prosecution offered testimony from the CPA who prepared Walter Reed’s campaign disclosure reports and from Kathleen Allen, Ethics Administrator and...