US v. Turoff
| Decision Date | 22 December 1988 |
| Docket Number | No. CR-87-185.,CR-87-185. |
| Citation | 701 F. Supp. 981 |
| Parties | UNITED STATES of America, Plaintiff, v. Jay L. TUROFF, Donald Sherman, and Ronald Sherman, Defendants. |
| Court | U.S. District Court — Eastern District of New York |
Laurence A. Urgenson, Chief Asst. U.S. Atty., Brooklyn, N.Y., for plaintiff.
Edward Rappaport, New York City, for Jay L. Turoff.
Michael Rosen, New York City, for Donald Sherman.
Gerald L. Shargel, New York City, for Ronald Sherman.
Defendants have moved to dismiss the indictment in this case on the ground that, under the holding in McNally v. United States, 483 U.S. 350, 107 S.Ct. 2875, 97 L.Ed.2d 292 (1987), it fails to allege a violation of the mail fraud statute, 18 U.S.C. § 1341.
For the reasons stated below, defendants' motion is denied.
Superseding Indictment "the indictment", ¶ 12 (emphasis added).
According to the indictment, in late 1978, the TLC, which regulates the City's medallion taxicabs, authorized the issuance of 100 temporary taxi medallions to a corporation ("Research Cab Corporation") to be formed by defendant Donald Sherman. The purpose of the temporary medallions was to test the feasibility of diesel engines in New York City taxicabs.
The indictment alleges that in late 1980, the TLC's chairman, defendant Turoff, caused an additional 23 unauthorized medallions to be diverted to his codefendants and placed on gasoline- and diesel-powered taxicabs registered to Research Cab and to Tulip Cab Corporation. These taxicabs allegedly operated in the City from late 1980 to early 1985. Defendants Donald and Ronald Sherman allegedly deposited the proceeds from those taxicabs, which exceeded $500,000, in the bank account of a shell corporation ("Exdie Cab Corporation").
Allegedly, defendants never paid the TLC the annual license renewal fees for the unauthorized medallions. In connection with the conspiracy, the defendant Turoff allegedly gave false and misleading information to the TLC Commissioners and the Mayor's office, and destroyed TLC records on the Tulip Cab Corporation and all the defendants allegedly gave false and misleading information to the New York State Commission of Investigation. The indictment alleges fourteen instances in which the mails were used to effectuate the scheme.
The mail fraud statute under which defendants have been indicted was first enacted in 1872. In its present form, it now reads:
Whoever, having devised or intending to devise any scheme or artifice to defraud, or for obtaining money or property by means of false or fraudulent pretenses, representations, or promises, or to sell, dispose of, loan, exchange, alter, give away, distribute, supply, or furnish or procure for unlawful use any counterfeit or spurious coin, obligation, security, or other article, or anything represented to be or intimated or held out to be such counterfeit or spurious article, for the purpose of executing such scheme or artifice or attempting to do so, places in any post office or authorized depository for mail matter, any matter or thing whatever to be sent or delivered by the Postal Service, or takes or receives therefrom, any such matter or thing, or knowingly causes to be delivered by mail according to the direction thereon, or at the place at which it is directed to be delivered by the person to whom it is addressed, any such matter or thing, shall be fined not more than $1,000 or imprisoned not more than five years, or both.
Defendants move to dismiss the indictment on the ground that it does not state a cognizable violation of the mail fraud statute as interpreted in McNally v. United States, 483 U.S. 350, 107 S.Ct. 2875, 97 L.Ed.2d 292 (1987). In McNally, the Supreme Court reversed the mail fraud convictions of Charles J. McNally and James E. Gray on the ground that the mail fraud statute does not reach schemes which violate "the intangible right of the citizenry to good government." Id., 107 S.Ct. at 2879. The case involved a scheme devised by Gray, who held two top government posts in the Kentucky state government, and Howard P. "Sonny" Hunt, a state Democratic party chairman who had been given de facto power by the governor to select the insurance agencies from which the state would buy its policies. Hunt selected a certain agency as the state's agent for securing a workmen's compensation policy, on the condition that that agency would share any resulting commissions in excess of $50,000 a year with twenty-one other insurance agencies specified by Hunt. Among the designated agencies was one controlled by Hunt and Gray (who had formed it for the exclusive purpose of obtaining the excess commissions). McNally served as the agency's front man.
The District Court instructed the jury it could convict McNally and Gray of mail fraud if it found that they had been part of a scheme through which the agency controlled by Hunt and Gray had received the excess commissions and either Hunt or Gray had failed "to disclose his interest in the agency to persons in state government whose actions or deliberations could have been affected by that disclosure." Id., 107 S.Ct. at 2879. The jury convicted defendants, and the Court of Appeals affirmed the convictions, relying on many prior decisions holding that "the mail fraud statute proscribes schemes to defraud citizens of their intangible rights to honest and impartial government." Id.
The Supreme Court reversed, holding that "the mail fraud statute clearly protects property rights, but does not refer to the intangible right of the citizenry to good government." Id. The Court framed the issue in the case narrowly:
The issue is thus whether a state officer violates the mail fraud statute if he chooses an insurance agent to provide insurance for the State but specifies that the agent must share its commissions with other named insurance agencies, in one of which the officer has an ownership interest and hence profits when his agency receives part of the commissions. We note that as the action comes to us, there was no charge and the jury was not required to find that the Commonwealth itself was defrauded of any money or property. It was not charged that in the absence of the alleged scheme the Commonwealth would have paid a lower premium or secured better insurance. Hunt and Gray received part of the commissions but those commissions were not the Commonwealth's money. Nor was the jury charged that to convict it must find that the Commonwealth was deprived of control over how its money was spent. Indeed, the premium for insurance would have been paid to some agency, and what Hunt and Gray did was to assert control that the Commonwealth might not otherwise have made over the commissions paid by the insurance company to its agent.... We hold, therefore, that the jury instruction on the substantive mail fraud count permitted a conviction for conduct not within the reach of § 1341.
Id., 107 S.Ct. at 2881-82 (footnote omitted).2
The Court also held that, absent a clearer indication from Congress3, it could not find that the mail fraud statute had criminalized defendants' failure to disclose their interest in the agency to persons in state government, in view of the fact that state law apparently did not prohibit such nondisclosure. Id., 107 S.Ct. at 2882 n. 9.
Most significantly for this case, the Court in McNally held that, because the mail fraud statute "had its origin in the desire to protect individual property rights, ... any benefit which the Government derives from the mail fraud statute must be limited to the Government's interest as property-holder." Id., 107 S.Ct. at 2881 n. 8. Accordingly, in the present case, the government's failure to demonstrate the City's interest "as property-holder" in the medallions would be fatal to that charge in the indictment that is based upon the fraudulent procurement of the medallions.
However, even if the court accepted this argument, the indictment would still stand insofar as it is based on the scheme to avoid payment of license renewal fees. Money is the most concrete and tangible of property. In Reiter v. Sonotone Corp., 442 U.S. 330, 99 S.Ct. 2326, 60 L.Ed.2d 931 (1979), the Court stated: On this basis alone, defendant's motion to dismiss the indictment must be denied. Id. 442 U.S. at 338, 99 S.Ct. at 2330 (citation omitted).
As regards the medallions, the court concludes that the fraudulent misappropriation of them deprived the City of a property interest cognizable under the mail fraud statute.
Defendants cite United States v. Evans, 844 F.2d 36 (2d Cir.1988) for the proposition that the City's interest in the...
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