In the

United States Court of Appeals

For the Seventh Circuit

No. 98-3760

United States OF AMERICA,

Plaintiff-Appellee,

v.

Gregory Swan,

Defendant-Appellant.

Appeal from the United States District Court

for the Northern District of Illinois, Eastern

Division.

No. 97 CR 105-3--Charles R. Norgle, Sr., Judge.

Argued December 10, 1999--Decided August 10,

2000

Amended April 25, 2001

 Before Easterbrook, Rovner, and Diane P.

Wood, Circuit Judges.

 Diane P. Wood, Circuit Judge. From 1987

until 1994, Gregory Swan worked for the

City of Chicago. During the last two

years of that period, his specific job

was for 13th Ward Alderman John Madrzyk.

Unfortunately for the City, neither

Madrzyk nor Swan had its best interests

at heart. This case is Swan’s appeal from

his convictions for participating in a

racketeering conspiracy in violation of

the Racketeer Influenced and Corrupt

Organizations Act (RICO), mail fraud,

theft of funds, extortion, money

laundering, obstructing the IRS, failing

to file tax returns, and using a false

social security card. The district court

sentenced him to five years’ imprisonment

on counts 1 (racketeering), 2

(racketeering conspiracy), 5 and 6 (theft

of funds), 7 and 14 (extortion), and 8

(money laundering). He received 12 months

on counts 3 and 4 (mail fraud), 9

(obstructing the IRS), 10, 12, and 13

(failure to file tax returns), and 15 and

16 (use of a false Social Security card).

All counts were to run concurrently with
each other. In addition, the court

ordered three years of supervised release

and ordered Swan to pay $100,000 in

restitution.

 Swan’s appeal challenges the jury

instructions used to convict him on the

RICO count; the sufficiency of the

evidence against him for conviction on

the RICO charges and the mail fraud

charges; and the district court’s

admission of evidence of his gambling and

failure to complete work that others had

hired and paid him for. We affirm all but

Swan’s conviction on count 1.

I

 Swan and Madrzyk cheated the City in a

number of ways. The two of them created

four "ghost jobs" enabling Swan, his son

(Greg Swan), his girlfriend (Sharon

Nova), and another friend (David Sipich)

to receive paychecks and benefits from

the City of Chicago without doing any

actual work. Madrzyk received a kickback

from each of the ill-gotten paychecks.

Swan and Madrzyk also referred people and

companies who came to Madrzyk seeking

City assistance such as rezoning and

inspection help to Swan’s "consulting"

firm. These people then paid a

"consulting fee" to the firm,

notwithstanding the fact that neither

Swan, the firm, nor Madrzyk did anything

more for them than the Alderman was

required to do as part of his position.

Swan attempted to cover up these schemes

by failing to report his income from the

ghost jobs and the consulting fees to the

IRS. By 1994, as Swan became more

desperate, he lied to federal agents

about the sources of his income and began

to use false social security numbers for

various purposes. He also stopped using

bank accounts in a desperate effort to

eliminate the paper trail related to his

income, and he used other people as

intermediaries for his illegal gains.

II

 Eventually, of course, federal

authorities caught up with him and

brought the charges now before us. Swan,

Madrzyk, and two others were charged in a

superseding indictment with violations of

18 U.S.C. sec.sec. 1962(c) (RICO),

1962(d) (RICO conspiracy), 1341 (mail

fraud), 1951 (extortion), 1956 (money
laundering), 666 (theft of funds), and 2

(aiding and abetting various counts), as

well as 26 U.S.C. sec.sec. 7212

(obstructing the IRS) and 7203 (failure

to file tax returns) and 42 U.S.C. sec.

408 (use of a false Social Security

card). (Madrzyk eventually pleaded guilty

and testified against Swan under a grant

of immunity.) To violate RICO sec.

1962(c), a person employed by or

associated with an enterprise that is

engaged in, or that conducts activities

that affect interstate or foreign

commerce, must conduct or participate,

directly or indirectly, in the conduct of

that enterprise’s affairs through a

pattern of racketeering activity or

collection of unlawful debt. In order to

have conducted or participated in the

enterprise’s affairs under section

1962(c), the person charged must have had

"some part in directing those affairs."

Reves v. Ernst & Young, 507 U.S. 170, 179

(1993). In other words, she must have

participated in the operation or

management of the enterprise itself. See

id. at 183; Goren v. New Vision Int’l.

Inc., 156 F.3d 721, 727-28 (7th Cir.

1998). Reves also held that "[a]n

enterprise might be ’operated’ or

’managed’ by others ’associated with’ the

enterprise who exert control over it . .

. ." 507 U.S. at 184.

 Overlooking this requirement of control

(perhaps mistakenly relying on pre-Reves

jurisprudence), the government insisted

upon and the court permitted the

following jury instruction on count 1:

The terms "conduct" and "participate in

the conduct of the affairs of the

enterprise" include the performance of

acts, functions or duties which are

necessary to or helpful in the operation

of the enterprise.

There was no additional instruction

requiring a finding of operation or

management of the enterprise. The court

gave that instruction over Swan’s

objection. Swan both objected and asked

the court to instruct the jury that the

simple giving of directions and

performance of tasks necessary or helpful

to the organization, without more, was

insufficient. The court rejected his

position because it thought that Reves

applied only to civil RICO prosecutions

and thus that Swan’s proposed instruction
did not correctly state the law.

 We review the trial court’s jury

instructions with deference, analyzing

them as a whole to determine if

theyaccurately state the law. See United

States v. Kelly, 167 F.3d 1176, 1178 (7th

Cir. 1999). Even if we find that a jury

instruction was erroneous, we will

reverse only if we believe that the

instruction confused the jury and

therefore prejudiced the defendant. See

id. at 1179.

 In this case, it is plain that the RICO

jury instruction was deficient. We

reiterate: "simply performing services

for an enterprise, even with knowledge of

the enterprise’s illicit nature, is not

enough to subject an individual to RICO

liability under sec. 1962(c)." Goren, 156

F.3d at 728. The instruction the court

gave could not have given the jury any

idea that it needed to find that Swan

participated in the management or

operation of the enterprise.

 The government argues that any error in

the instruction was harmless and thus

does not justify reversal. While we have

no problem with the general proposition

that harmless error analysis applies to

jury instructions, see Neder v. United

States, 527 U.S. 1, 18 (1999), we do not

agree that this particular error could be

called harmless. To affirm the RICO

conviction here, we would have to find

that it was "clear beyond a reasonable

doubt that a rational jury would have

found the defendant guilty absent the

error." Id.; see also Lanier v. U.S., 205

F.3d 958, 964 (7th Cir. 2000). That we

find impossible to do on this record. It

is true that the jury found Swan guilty

of conspiring to violate sec. 1962(c)

when it convicted him on the charge in

count 2 of violating 18 U.S.C. sec.

1962(d). But this did not supply the

missing finding relating to participation

in the management or operation of the

enterprise--a finding that the jury had

no need to make under the court’s

instruction--for the simple reason that a

sec. 1962(d) conspiracy conviction does

not require the jury to find that the

defendant was an operator or manager of

the enterprise. See Brouwer v.

Raffensperger, 199 F.3d 961, 967 (7th

Cir. 2000). To convict Swan on count 2,

the jury needed only to find that he
knowingly agreed to facilitate the

activities of those operators or managers

to whom sec. 1962(c) can apply (such as

someone like Madrzyk). See id. And the

facts established by the record (that

Swan received a ghost payroll check, took

on clients referred to him by Alderman

Madrzyk, failed to file tax returns, and

used a false Social Security card) do not

prove that he managed or operated the

"enterprise" (which here was apparently

the City of Chicago itself). Because the

record does not contain overwhelming

evidence that Swan managed or operated

the enterprise, and because the jury was

not fully informed as to the elements of

a RICO violation, we reverse Swan’s

conviction on count 1.

 This conclusion, we note, however, will

have no effect on the amount of time Swan

spends in prison, even though it will

entitle him to a modest adjustment of the

special assessment he must pay. Count 1

was grouped, for sentencing purposes,

with counts 2, 5-6, and 8-16 under

U.S.S.G. sec. 3D1.2. The offense level

determined for the group depended not on

count 1, but on count 8, money

laundering, because U.S.S.G. sec. 3D1.3

provides that the offense level for the

group is derived from the count with the

highest offense level, which was money

laundering at an offense level of 25. The

total combined offense level is therefore

not affected by reversal of the RICO

charge.

 

III

 Swan argues next that there was

insufficient evidence to convict him of

violating either the racketeering or the

mail fraud counts. Because we are

reversing his sec. 1962(c) conviction on

other grounds, we address only the

sufficiency of the evidence to support

his mail fraud conviction. As we

constantly observe, the governing

standard of review makes success on such

a claim exceedingly hard. We must draw

all reasonable inferences in favor of the

government, and we affirm if any rational

fact finder could have determined that

Swan was guilty beyond a reasonable

doubt. See United States v. Yoon, 128

F.3d 515, 523 (7th Cir. 1997). 

 A mail fraud violation occurs when

someone "for the purpose of executing [a]
scheme or artifice [to defraud] or

attempting . . . to do [so]," places in

the mails something to be delivered by a

mail carrier. 18 U.S.C. sec. 1341; see

United States v. Keane, 522 F.2d 534, 551

(7th Cir. 1975). Swan’s conviction rests

on his use of the mails to defraud the

Hinsdale Orthopedic Association. Around

December 13, 1994, Blue Cross/Blue Shield

mailed a check for $171 to Hinsdale

Orthopedics to reimburse it for the

medical services it rendered to Nova,

Swan’s girlfriend. Swan had a hand in

this mailing because he helped procure

the "ghost" job for Nova that provided

her with the Blue Cross/Blue Shield

insurance policy. Swan did not have to

mail the check himself to be guilty of

mail fraud. He only needed to cause it to

be mailed or to commit some act that

would cause the mailing of the check to

be reasonably foreseeable. See Keane, 522

F.2d at 551. When Swan got Nova the ghost

job, which came with pay and benefits, it

became reasonably foreseeable that Blue

Cross/Blue Shield would reimburse medical

institutions for her care.

 Swan claims that the check was not

mailed "for the purpose of executing [the

fraud]," as sec. 1341 requires. He points

out that United States v. Maze, 414 U.S.

395, 402 (1974) held that mail fraud

charges were not supported where the

evidence showed that reimbursement checks

had been mailed by banks to hotels after

the defendant had already used stolen

credit cards to obtain services from the

hotels. But the point of Maze was that

the defendant had already completed the

fraud when he left the hotels. Whether or

not the banks actually paid the hotel

bills did not affect the defendant. Here,

in contrast, the Blue Cross/Blue Shield

check served an important purpose in

furthering the fraud: without the check,

the fraud would have been frustrated,

because Hinsdale would simply have turned

to Nova for payment. Nova would not have

received fraudulently obtained medical

services for free. She remained

personally liable for the services she

had received until the bill was paid by

someone. The evidence of the Blue

Cross/Blue Shield mailing was sufficient

to form the basis for Swan’s mail fraud

conviction.

IV
 Swan’s final quarrel is with the

district court’s decision to allow the

government to present evidence of his

gambling and of his failure to perform

consulting services as promised. We

review the trial court’s evidentiary

decisions for abuse of discretion. See

United States v. Garcia, 986 F.2d 1135,

1139 (7th Cir. 1993). 

 Normally, evidence of prior bad acts is

not admissible to show character traits

and conformity with those traits. See

Fed. R. Evid. 404(b). Such evidence is

nonetheless admissible where (1) it is

relevant to establish some matter in

issue other than the defendant’s

propensity to commit the crime, (2) it

shows that the defendant actually

committed the prior bad acts, and (3) its

probative value is not substantially out

weighed by the danger of unfair

prejudice. See Fed. R. Evid. Rules

404(b), 403; United States v. Asher, 178

F.3d 486, 492 (7th Cir. 1999). The

government argued that the evidence here

was necessary to fill out the witnesses’

stories so that they would make sense to

the jury (see, e.g., United States v.

Gill, 58 F.3d 334, 337 (7th Cir. 1995)),

and that the evidence helped to explain

Swan’s intent and motive to commit the

crimes. We do not find these grounds

persuasive. This is not a case like

United States v. Mobley, 193 F.3d 492

(7th Cir. 1999), in which the prosecution

was allowed to introduce evidence of

gambling because the defense made the

question of cash flow relevant. Here, the

references to Swan’s gambling were

gratuitous. None of Swan’s fraudulent

activity was inextricably related to his

gambling or failure to perform

contractual duties. Witnesses could have

explained their relationships with Swan

without mentioning that they met him

while gambling, and they could have

discussed their giving Swan money for

services without adding that in the end

he did not follow through. Moreover, the

fact that Swan gambled did little to

explain why he wanted to steal money.

Most people want money for a variety of

reasons, and the government did not

attempt to show any special circumstances

such as a large gambling debt hanging

over Swan’s head that would have provided

him with a particularly weighty motive to

steal. The fact that Swan did not perform

services for some clients may evidence
intent to extort, but his actual taking

of their money, also introduced into

evidence, proved that intent. The nonperformance of the services added little

or nothing. 

 Even though the admission of the

evidence was probably error under Rules

404 and 403 of the Federal Rules of

Evidence, we think it clear on this

record that any error was harmless. See

Garcia, 986 F.2d at 1139. The victims of

Swan’s extortion testified against him;

several witnesses testified that Swan set

up the ghost jobs and paid Madrzyk

kickbacks; and Madrzyk himself took the

stand to testify against Swan. There was

overwhelming evidence that Swan was part

of a RICO conspiracy, and committed the

fraudulent acts with which he was

charged. 

V

 In sum, we Affirm all of Swan’s

convictions with the single exception of

the conviction under Count 1, which we

Reverse. The case is Remanded to the

district court for correction of the

sentence and the special assessment

inaccordance with this opinion.