US v. Goodrich, 86-387-Civ-T-15B.

Decision Date13 June 1988
Docket NumberNo. 86-387-Civ-T-15B.,86-387-Civ-T-15B.
Citation687 F. Supp. 567
PartiesUNITED STATES of America, v. Lawrence I. GOODRICH.
CourtU.S. District Court — Middle District of Florida

Fran Carpini, Tampa, Fla., for U.S.

Lee Fugate, Clearwater, Fla., for Goodrich.

MEMORANDUM ORDER

CASTAGNA, District Judge.

I.

Count III of the original indictment in this case charged the defendant with a violation of the federal mail fraud statute, 18 U.S.C. § 1341. That Count alleged that the defendant, an attorney who represented clients in zoning matters before the Hillsborough County Commission, had used the mails to defraud the citizens of Hillsborough County, Florida, of "the honest, true, faithful, unbiased, and disinterested services, decisions, and performance" of the Hillsborough County Commission and of the right to have the Commission's business affairs "conducted honestly and impartially and free from deceit, graft, corruption, fraud, undue influence, dishonesty and bribery."

After the original indictment was handed up, the Supreme Court handed down McNally v. United States, ___ U.S. ___, 107 S.Ct. 2875, 97 L.Ed.2d 292 (1987), which held that a scheme to defraud state citizens of their intangible rights to honest and impartial government did not constitute a mail fraud. 107 S.Ct. at 2881. Under McNally, a scheme to defraud runs afoul of the mail fraud statute only if it is devised to defraud the victim of money or property. Id. The McNally Court acknowledged that this holding ran contrary to a long-established line of cases from the lower federal courts. Id. ___ U.S. at ___, 107 S.Ct. at 2880 (citing as examples United States v. Clapps, 732 F.2d 1148 (3d Cir.1984), and United States v. States, 488 F.2d 761 (8th Cir.1973)). But the McNally Court found its decision compelled by its construction of the language of the mail fraud statute. Id. at ___, 107 S.Ct. at 2881. The Court based this statutory construction on the somewhat sparse legislative history to 18 U.S.C. § 1341. Two other sources also informed the Court's decision —the Doctrine of Lenity, which calls for the least harsh rational interpretation of criminal statutes, id. at ___, 107 S.Ct. at 2881, and a federalism interest in keeping federal authorities from assuming the role of standardbearer of honesty and integrity for state and local governments, id.

The defendant moved to dismiss Count III of the original indictment on the authority of McNally. The government, in turn, obtained a superseding indictment. Count III of the superseding indictment again charges the defendant with mail fraud. But in place of the above-quoted language regarding the right to the honest and faithful services of the County Commission, Count III of the superseding indictment alleges that the defendant has defrauded the citizens and government of Hillsborough County of three types of property. In essence those properties are: First, the cost of conducting "sham" commission meetings; second, the value of bribes paid to individual commissioners (based on a constructive trust theory); third, the right to control zoning decisions. The defendant has moved to dismiss Count III of the superseding indictment, contending that that Count fails to allege a violation of the mail fraud statute because none of the three alleged objects of the scheme to defraud is in fact "property."1 Each of the government's theories of "property" shall be considered in turn.

II. Cost of Sham Commission Meetings

The first property interest alleged by Count III of the superseding indictment to have been defrauded of the government and citizens of Hillsborough County is:

the salaries, emoluments, and services of elected and appointed personnel of Hillsborough County, Florida, and the use of equipment of Hillsborough County, Florida, in the analysis, review, revision of planing and zoning records and consideration by the Board of County Commissioners and various departments and offices of Hillsborough County in regard to zoning petitions which were approved by the Board of County Commissioners because of payments of bribes in violation of Florida Statutes.

(Superseding indictment at 20). As noted, this portion of the indictment charges essentially that the various commission meetings at which zoning petitions were considered were a mere charade. The indictment does not allege, nor does the government in its briefs contend, that the purported mail fraud caused the county to incur any expenses over and above the cost of conducting regularly-scheduled commission business. Instead, the government contends that the commissioners' salaries were paid and incidental expenses were incurred in conducting sham meetings designed to reach a result foreordained by the payments of bribes.

This theory finds its strongest support (and perhaps its genesis) in Justice Stevens' dissenting comment that the McNally decision's property requirement should not stand in the way of the prosecution of corrupt officials since "when a person is being paid a salary for his loyal services, any breach of that loyalty would appear to carry with it some loss of money to the employer — who is not getting what he paid for." McNally v. United States, 107 S.Ct. at 2890 & n. 10 (Stevens, J., dissenting). Of course, Justice Stevens' remarks in dissent are just that — remarks in a dissent — and, in the absence of an endorsement from the McNally majority,2 are entitled to only so much respect as they command by the force of their logic. At least in the case before this Court, Justice Stevens' comments carry little persuasive power.

The property interest alleged to have been denied the victim here — what the government contends Hillsborough County paid salaries for but did not get — is the "honest and faithful services" of the county commissioners, an interest the Supreme Court has characterized as "too ethereal in itself to fall within the protection of the mail fraud statute." Carpenter v. United States, ___ U.S. ___, ___, 108 S.Ct. 316, 320, 98 L.Ed.2d 275 (1987). Upon closer examination this argument is just the "intangible rights" theory by another name. Indeed, this case is not even distinguishable from McNally on this score, unless one assumes it was never brought out at McNally's trial that one of the co-defendants who had devised the scheme to defraud, Gray, was paid a salary by the Commonwealth of Kentucky. But such a reading of McNally would vitiate that decision of meaningful effect, save the anomalous case in which the scheming employee or public official was performing on a pro bono basis. Furthermore, nothing in McNally suggests that it could be distinguished on these grounds. Compare McNally, 107 S.Ct. at 2882 (taking note of factors not presented to the jury). This Court declines to give McNally such a narrow reading.

As was the case in McNally, additional problems are present here because the individuals alleged to have been bribed, the county commissioners, were governmental officials. A determination whether the commissioners failed to discharge their duties faithfully and honestly would require a determination whether the commissioners breached their sworn duties of office. Such a determination would necessarily involve the Court in "setting standards of disclosure and good government for local ... officials." — the very evil the McNally Court sought to guard against.3McNally v. United States, 107 S.Ct. at 2881. Thus allegiance to the principles articulated in McNally requires that the government not be allowed to proceed on this theory.

Constructive Trust of Bribe Money

The second property interest that the government alleges the defendant defrauded the people of Hillsborough of is:

the value and proceeds of bribes paid to elected members of the Board of County Commissioners of Hillsborough County, Florida, to induce them to violate their duty to the government and citizens of Hillsborough, County, Florida, of conducting the business of Hillsborough County, Florida, honestly, impartially, and free from deceit, graft, corruption, fraud, undue influence, dishonesty, and bribery.

(Superseding indictment at 20-21). Thus the government argues that any bribes paid to the individual commissioners are in fact the property of the county. This theory, too, has its origins in Justice Stevens' McNally dissent. There, Justice Stevens suggested a way around the McNally holding:

`if an agent receives anything as a result of his violation of a duty of loyalty to the principal, he is subject to a liability to deliver it, its, value, or its proceeds, to the principal.' ... This duty may fulfill the McNally majority's `money or property' requirement in most kickback schemes.

McNally v. United States, 107 S.Ct. at 2890 n. 10 (Stevens, J., dissenting) (quoting Restatement (Second) of Agency § 403 (1958)).

At least two of the Circuit Courts of Appeals have taken up this suggestion with alacrity. See United States v. Runnels, 833 F.2d 1183 (6th Cir.1987) (upholding mail fraud conviction even though constructive trust theory was not presented to the jury); see also United States v. Richerson, 833 F.2d 1147, 1156-58 (5th Cir.1987) (applying plain error doctrine); United States v. Fagan, 821 F.2d 1002, 1010 n. 6 (5th Cir.1987) (same); but see United States v. Ochs, 842 F.2d 515 (1st Cir.1988); United States v. Holzer, 840 F.2d 1343 (7th Cir.1988). The Eleventh Circuit Court of Appeals, however, has left the question open. See United States v. Italiano, 837 F.2d 1480, 1486 & 1487 n. 5 (11th Cir.1988); accord United States v. Conover, 845 F.2d 266, 270-271 (11th Cir.1988); cf. United States v. Covino, 837 F.2d 65, 72 n. 2 (2d Cir.1988) (refusing to speculate on theories not contained in the indictment). Accordingly, this Court considers the question afresh.

Under the law of constructive trusts, a fiduciary is liable to turn over to the principal any money or property received as a result of the breach of his duty of trust. See generally 5 Scott, The Law of...

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2 cases
  • U.S. v. Goodrich, 88-3491
    • United States
    • U.S. Court of Appeals — Eleventh Circuit
    • April 27, 1989
    ...influence them relating to a rezoning of real property. The district court dismissed the mail fraud count of the superceding indictment. 687 F.Supp. 567. The district court addressed each of the three types of property listed in the mail fraud count and found that the government had present......
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    • U.S. District Court — Southern District of Alabama
    • June 27, 1988

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