Source: http://openjurist.org/286/f3d/92
Timestamp: 2015-01-28 16:16:28
Document Index: 632716099

Matched Legal Cases: ['§ 1734', '§ 220', 'art. 1', '§ 17', '§ 220', '§ 220', '§ 371', '§ 1956', '§ 5324', '§ 5316', '§ 1001', '§ 371', '§ 5324', '§ 1341', '§ 1341', '§ 1346']

286 F3d 92 United States v. K Handakas | OpenJurist
286 F. 3d 92 - United States v. K Handakas	Home286 f3d 92 united states v. k handakas
286 F3d 92 United States v. K Handakas 286 F.3d 92
UNITED STATES of America, Appellee,v.Vassilios K. HANDAKAS, Defendant-Appellant.
Docket No. 00-1751.
Decided March 22, 2002.
Lisa Fleischman, Assistant United States Attorney, Brooklyn, NY (Alan Vinegrad, United States Attorney for the Eastern District of New York; Susan Corkery, Richard Weber, Assistant United States Attorneys, on the brief. Barbara D. Underwood, Chief Assistant United States Attorney; David C. James, Assistant United States Attorney, on the supplemental brief), for Appellee.
James B. Lebow, Bournazos & Matarangas, New York, NY, for Defendant-Appellant.
Before: FEINBERG, JACOBS, CABRANES, Circuit Judges.
Judge FEINBERG dissents in part by separate opinion.
Vassilios K. Handakas appeals from the judgment of conviction and sentence entered in the United States District Court for the Eastern District of New York (Weinstein, J.), following his conviction by a jury of (inter alia) conspiracy to commit mail fraud by depriving the New York City School Construction Authority ("SCA") of its "intangible right of honest services," conspiracy to launder the proceeds of the mail fraud, and the structuring of financial transactions to evade currency reporting laws.
The mail fraud conspiracy count arises out of work done for the SCA by a Handakas-owned construction company and the violation of [1] the "prevailing rate of wage" contract provision required by New York's "Little Davis-Bacon Act," and [2] other certification and reporting requirements in the construction contracts. The government's deprivation of "honest services" theory was all that was left of the mail fraud charge after a special jury verdict absolved Handakas of the alternative theory that Handakas conspired to defraud the SCA of its "money or property."
On appeal, Handakas maintains: [1] that the two structuring counts are multiplicitous, because the indictment charged that Handakas engaged in structuring over two consecutive 12-month periods, without alleging that he engaged in two separate structuring schemes; [2] that the "honest services" provision of the mail fraud statute is inapplicable to the conduct charged; [3] that (alternatively) there is insufficient evidence of intent to commit mail fraud; and [4] that the money laundering conviction, which is based entirely on the laundering of funds derived from the unlawful activity of mail fraud, must fall for the same reasons. Additionally, Handakas argues in a pro se brief and in a supplemental brief by counsel that his mail fraud conviction cannot stand because the "honest services" provision of the mail fraud statute is unconstitutionally vague, and that we must reverse the money laundering conviction as well, which is wholly premised on the mail fraud.1
We hold: [1] that the structuring counts are multiplicitous because they do not allege separate structuring schemes, and [2] that the "honest services" provision of the mail fraud statute is void for vagueness as applied to Handakas. Accordingly, we reverse the conviction on the mail fraud conspiracy count, as well as the money laundering conspiracy count dependent thereon, and one of the counts of structuring; the sentence is vacated, and the case is remanded to the district court for resentencing on the remaining structuring count and the other counts undisturbed on this appeal.
* On appeal, we consider the facts in the light most favorable to the government. See Jackson v. Virginia, 443 U.S. 307, 319, 99 S.Ct. 2781, 61 L.Ed.2d 560 (1979).
Handakas, in his capacity as president and sole shareholder of Astro Waterproofing Restoration Company ("Astro"), submitted a number of successful general contracting bids to the SCA, a public benefit corporation that oversees construction projects performed on New York City schools. The mail fraud conviction arises out of his wilful breach of certain contractual obligations undertaken by Astro.
In awarding its contracts, the SCA follows state law mandating that, inter alia: [1] the SCA award all contracts to the lowest qualified bidder, see N.Y. Pub. Auth. Law § 1734 (McKinney 2001); and [2] the successful bidder pay project workers "prevailing rate of wages," and submit certified payroll records that so certify as a condition of receiving payment. N.Y. Lab. Law § 220, et seq. (McKinney 2000); see also N.Y. Const. art. 1 § 17. Under § 220, "[a]ny person or corporation that wilfully pays ... less than [the] stipulated wage scale ... shall be guilty of a misdemeanor and ... shall be punished for such first offense by a fine of five hundred dollars or by imprisonment for not more than thirty days...." N.Y. Lab. Law § 220 (McKinney 2000).
In the course of the projects, Handakas submitted certified payroll records that reflected compliance with the prevailing rate of wage requirement. Handakas, in fact, paid his workers substantially less than half the prevailing rate of wage.
Additionally, there was evidence that Handakas left certain workers's names off the payroll and fraudulently substituted other names, that he manipulated the record of the number of hours worked, and that the SCA paid Handakas based upon his false submissions. It is, however, doubtful that the government is entitled to the benefit of findings and inferences based on this evidence, which bears upon possible financial harm to the SCA. Although the government argued to the jury that the SCA suffered financial loss, i.e., that the SCA was deprived of money or property as well as "honest services," the jury found by special verdict that Handakas was guilty of mail fraud only on the ground that he deprived the SCA of its "intangible right of honest services" — and not on the ground that the SCA was deprived of money or property.
In league with two subcontractors, Handakas funneled large transfers (disguised as subcontractor payments) to himself for personal expenses and to family members in Greece. Handakas formed a series of shell corporations that received such phony payments from Astro and wired the money back to Handakas, directly or indirectly, in the United States or Greece.
On May 14, 1998, Handakas was arrested at an airport, en route to Greece, carrying $102,000 without having made the currency disclosure report required by law. The arrest triggered further investigations, and eventually the indictment. Handakas was convicted on all counts of the indictment: one count of conspiracy to commit mail fraud by depriving another of "the intangible right of honest services" (in violation of 18 U.S.C. §§ 371, 1341, 1346); one count of conspiracy to launder money (in violation of 18 U.S.C. §§ 1956(h), 3551, et seq.); two counts of illegally structuring financial transactions to evade reporting requirements (in violation of 31 U.S.C. §§ 5324(a)(3), (c)(2)); one count of failure to file a currency report (in violation of 31 U.S.C. §§ 5316(c)(1)(A), 5322(a)); one count of making a materially false representation (in violation of 18 U.S.C. § 1001(a)(2)); and one count of conspiracy to defraud the United States (in violation of 18 U.S.C. §§ 371, 3551, et seq.).
Handakas was sentenced to a prison term of 70 months, and was ordered to pay a $500,000 fine, $638,350.27 in restitution, and a $700 special assessment.
The multiplicity challenge to the structuring counts is raised for the first time on appeal. Generally, we review challenges "not brought to the attention of the [district] court" for plain error. Fed. R.Crim.P. 52(b); see also United States v. Thomas, 274 F.3d 655, 660 (2d Cir.2001). However, "there is a strong argument that if the alleged multiplicity is clear from the indictment the failure to raise this objection prior to trial constitutes a waiver." United States v. Chacko, No. 96-519, 1997 WL 481862, at *4 (S.D.N.Y. Aug.21, 1997); see also Fed.R.Crim.P. 12(b)(2) (requiring that "[d]efenses and objections based on defects in the indictment or information" be raised prior to trial).2 But we will apply plain error review, because the parties agree that plain error is the standard and did not brief the question of whether the alleged multiplicity was apparent on the face of the indictment.
To demonstrate plain error, Handakas must show: "(1) error, (2) that is plain, and (3) that affect[s] substantial rights." Johnson v. United States, 520 U.S. 461, 466-67, 117 S.Ct. 1544, 137 L.Ed.2d 718 (1997) (quoting United States v. Olano, 507 U.S. 725, 732, 113 S.Ct. 1770, 123 L.Ed.2d 508 (1993)) (internal quotation marks omitted, alteration in original). "If all three conditions are met, an appellate court may then exercise its discretion to notice a forfeited error, but only if (4) the error seriously affect[s] the fairness, integrity, or public reputation of judicial proceedings." Id. at 467, 117 S.Ct. 1544 (quoting Olano, 507 U.S. at 732, 113 S.Ct. 1770) (internal quotation marks omitted, alteration in original).
An indictment is multiplicitous when it "charges in separate counts two or more crimes, when in law and fact, only one crime has been committed." Chacko, 1997 WL 481862, at *4 (quoting United States v. Holmes, 44 F.3d 1150, 1153-54 (2d Cir.1995)); see also Blockburger v. United States, 284 U.S. 299, 304, 52 S.Ct. 180, 76 L.Ed. 306 (1932) ("The applicable rule is that, where the same act or transaction constitutes a violation of two distinct statutory provisions, the test to be applied to determine whether there are two offenses or only one is whether each provision requires proof of an additional fact which the other does not."). When the same statutory offense is charged as two separate counts, the proper question is whether Congress intended the counts to constitute separate "unit[s] of prosecution." Bell v. United States, 349 U.S. 81, 82-83, 75 S.Ct. 620, 99 L.Ed. 905 (1955). If the intent of Congress is unclear, "the ambiguity should be resolved in favor of lenity," id. at 83, 75 S.Ct. 620; "doubt will be resolved against turning a single transaction into multiple offenses," id. at 84, 75 S.Ct. 620.
Count two charges Handakas with knowingly and intentionally structuring (and assisting in the structuring of) transactions exceeding $100,000 in order to evade tax reporting requirements over the period May 1996 through May 1997. Count three charges Handakas with the same offense over the period May 1997 through May 1998.
"[Title 31 s]ection 5324 forbids structuring transactions with a `purpose of evading'" certain statutory reporting requirements. Ratzlaf v. United States, 510 U.S. 135, 140, 114 S.Ct. 655, 126 L.Ed.2d 615 (1994). The government maintains that counts two and three are separate units of prosecution because the structuring occurred over a 24-month period and involved the concealment of more than $100,000 within each 12-month period. However, no provision of the statute indicates that a single course of structuring can be segmented based on 12-month intervals (or any other intervals of time) or by the amount of funds in any interval.
The statute's penalty enhancement provision, on which the government apparently relied, provides that a structuring offense is "aggravated" where the structured funds: [1] exceed $100,000 within a 12-month period, and [2] are "part of a pattern of any illegal activity." 31 U.S.C. § 5324(d)(2). But that provision is intended to enhance sentences for more serious structuring offenses; it is not a device for segmenting and compounding a single offense.
On appeal, the government looks elsewhere for support. It notes (correctly) that courts "often look[] to the source of the funds structured ... rather than the number of deposits, in deciding the allowable unit of prosecution." Appellee's Br. at 28 (discussing United States v. Nall, 949 F.2d 301, 307 (10th Cir.1991)). The government then argues that the source of funds for each count was distinct because
Handakas wrote separate checks of under $10,000 each. Therefore, each check cashed for him by the subcontractors was a separate transaction, with a separate source of funds, i.e. the check itself, physically distinct from the other checks.
Id. at 29 (emphasis added). This argument — that an individual deposit can in fact constitute an "allowable unit of prosecution," id. at 28 — violates the distinction, based on Nall, between the number of sources and the number of transactions. Nall, 949 F.2d at 308 (holding that there was only one source for three separate bank deposits where all of the money came from one lump sum payment to the defendant, and that, accordingly, there was only one structuring count).
The drawing of each check cannot constitute an "allowable unit of prosecution," because "the structuring itself, and not the individual deposit, is the unit of crime." United States v. Davenport, 929 F.2d 1169, 1172 (7th Cir.1991) (emphasis added). Each and every structuring offense, by nature, entails multiple transfers of funds in amounts small enough to avoid detection. Ratzlaf, 510 U.S. at 136, 114 S.Ct. 655 (defining the structuring of transactions as the "break[ing] up [of] a single transaction above the reporting threshold into two or more separate transactions"); United States v. Scanio, 900 F.2d 485, 488 (2d Cir.1990) ("[P]ersons ... `structure' their currency transactions ... [by] engag[ing] in multiple transactions each involving slightly under $10,000 [so] as to avoid triggering the financial institutions' filing obligations."), overruled on other grounds by Peck v. United States, 73 F.3d 1220 (2d Cir.1995). Accordingly, the number of structuring offenses (i.e., "units of prosecution") is not determined by the number of fractional, sub-liminal transactions made for concealment. See Nall, 949 F.2d at 308 (holding that government improperly charged three structuring violations where defendant made three deposits and "source of each deposit was the same lump sum ..., identical except for the date of the deposit"); Davenport, 929 F.2d at 1171 ("The government's position leads to the weird result that if a defendant receives $10,000 and splits it up into 100 deposits he is ten times guiltier than a defendant who splits up the same amount into ten deposits.").
Because we find no precedential or statutory support for the multiple structuring charges, conviction on two separate counts constituted an "error" that is "plain." United States v. Olano, 507 U.S. 725, 732, 113 S.Ct. 1770, 123 L.Ed.2d 508 (1993); see also Johnson v. United States, 520 U.S. 461, 466-68, 117 S.Ct. 1544, 137 L.Ed.2d 718 (1997) (holding that an error is "plain" if the "law at the time of trial was settled and clearly contrary to the law at the time of appeal.").
As to whether the error "affect[s] substantial rights," id. at 467, 117 S.Ct. 1544, Handakas bears the burden of showing prejudice that "affected the outcome of the district court proceedings." United States v. Gore, 154 F.3d 34, 47 (2d Cir. 1998). Depending on how the counts were grouped in the Pre-sentence Investigation Report, the duplicative structuring count may have had no impact on Handakas's sentence; the Supreme Court has held, however, that prejudice inheres in a multiplicity error regardless of its impact on the sentence:
The remedy of ordering one of the sentences to be served concurrently with the other cannot be squared with Congress' intention. One of the convictions, as well as its concurrent sentence, is unauthorized punishment for a separate offense. The second conviction, whose concomitant sentence is served concurrently, does not evaporate simply because of the concurrence of the sentence. The separate conviction, apart from the concurrent sentence, has potential adverse collateral consequences that may not be ignored. For example, the presence of two convictions on the record may delay the defendant's eligibility for parole or result in an increased sentence under a recidivist statute for a future offense. Moreover, the second conviction may be used to impeach the defendant's credibility and certainly carries the societal stigma accompanying any criminal conviction. Thus, the second conviction, even if it results in no greater sentence, is an impermissible punishment.
Ball v. United States, 470 U.S. 856, 864-65, 105 S.Ct. 1668, 84 L.Ed.2d 740 (1985) (internal citations omitted) (emphasis in original); see also United States v. Coiro, 922 F.2d 1008, 1015 (2d Cir.1991) (citing Ball, 470 U.S. at 865, 105 S.Ct. 1668). Although the parties have not briefed the impact of the second structuring count on Handakas's sentence, we hold under Ball that the multiplicity error is prejudicial.
It remains to be decided whether we will exercise our discretion to notice the plain error, which we may do if the error "seriously affect[s] the fairness, integrity or public reputation of judicial proceedings." Olano, 507 U.S. at 736, 113 S.Ct. 1770 (alteration in original). Because we are already remanding on other grounds, Handakas will in any event be resentenced; no interest of the prosecution, the public, or the courts would be served by subjecting Handakas on resentencing to punishment for two structuring offenses when he committed one. Under these circumstances, we think it would adversely affect the fairness and integrity of the sentencing process to require the district court to do that.
Accordingly, we remand the two structuring convictions "with instructions to have the District Court exercise its discretion to vacate one of the convictions." Ball, 470 U.S. at 865, 105 S.Ct. 1668; see also Coiro, 922 F.2d at 1015 (quoting Ball, 470 U.S. at 865, 105 S.Ct. 1668).
The elements of mail fraud are: [1] "a scheme or artifice to defraud," [2] furthered by the use of the mail, [3] to deprive another of money, property, or "the intangible right of honest services." 18 U.S.C. §§ 1341, 1346; see also United States v. Zagari, 111 F.3d 307, 327 (2d Cir.1997). The first element requires: [i] the existence of a scheme to defraud, [ii] specific intent to defraud on the part of the defendant, and [iii] material misrepresentations. United States v. Autuori, 212 F.3d 105, 115 (2d Cir.2000) (citing United States v. D'Amato, 39 F.3d 1249, 1256-57 (2d Cir.1994); Neder v. United States, 527 U.S. 1, 25, 119 S.Ct. 1827, 144 L.Ed.2d 35 (1999)). The second element is satisfied if the mail is used or if its use is reasonably foreseeable. Pereira v. United States, 347 U.S. 1, 8-9, 74 S.Ct. 358, 98 L.Ed. 435 (1954); see also Durland v. United States, 161 U.S. 306, 315, 16 S.Ct. 508, 40 L.Ed. 709 (1896) (holding that mailings need not be effective). The first two elements are easily satisfied on this record.
As to the third element, the statutory wording requires that there be a deprivation of money, property, or "the intangible right of honest services." 18 U.S.C. §§ 1341, § 1346. At trial, the government contended that the SCA suffered loss on all three scores. The theory of "honest services" argued to the jury by the government was that "[t]he SCA had a right to determine how its contracts would be fulfilled," and that Handakas "took away that right." Joint Supplemental App. ("J.S.A.") at 1919-20.
As to whether the SCA was deprived of "money or property," conflicting evidence was adduced at trial. That question was then decided via a special verdict form, supplied by the district court, which separately asked whether the SCA was deprived [i] of money or property, or [ii] of "honest services." The jury checked off only that the SCA was deprived of "honest services." The district court thus carefully assured that each theory of the prosecution would be separately considered and decided. As a result, this case compels us to review in isolation a conviction for theft of "honest services."
On appeal, the government suggests that the jury was confused. Specifically, the government argues that the jury must have found that the sub-prevalent wages paid to Astro's workers resulted in subpar work and thus in an injury to the SCA's money or property, and that the "money or property" finding was not checked off only because the jury deemed one check-mark to be enough. However, the verdict form was clear enough; and the jury was instructed, (largely) in words of one syllable, that "[y]ou can answer yes to both or yes to 1 or yes to neither...." J.S.A. at 2113.
Evidence on both sides was offered as to each theory of loss; the form separately canvassed the jury; the charge lucidly explained the options and how to express them; and the government sought no improvement in the form or the charge. The government must accept and live with an adverse jury finding. See United States v. Powell, 469 U.S. 57, 63, 105 S.Ct. 471, 83 L.Ed.2d 461 (1984) (noting "the unreviewable power of a jury to return a verdict of not guilty for impermissible reasons") (quoting Harris v. Rivera, 454 U.S. 339, 346, 102 S.Ct. 460, 70 L.Ed.2d 530 (1981)). Accordingly, because the conviction rests wholly on the "honest services" theory (and because narrower grounds do not exist for reversal on the mail fraud count), we must decide the outcome-determinative question as to whether the term "honest services" is unconstitutionally vague as applied to Handakas.
The Due Process Clauses of the Fifth and Fourteenth Amendments require the legislature to specify the elements of criminal offenses. "There are no constructive offenses; and, before one can be punished, it must be shown that his case is plainly within the statute." Fasulo v. United States, 272 U.S. 620, 629, 47 S.Ct. 200, 71 L.Ed. 443 (1926). A criminal statute is void for vagueness if it fails to give notice of the conduct prohibited or fails to channel the discretion of the prosecution:
As generally stated, the void-for-vagueness doctrine requires [1] that a penal statute define the criminal offense with sufficient definiteness that ordinary people can understand what conduct is prohibited and [2] in a manner that does not encourage arbitrary and discriminatory enforcement.
Kolender v. Lawson, 461 U.S. 352, 357, 103 S.Ct. 1855, 75 L.Ed.2d 903 (1983); see also Vill. of Hoffman Estates v. Flipside, Hoffman Estates, Inc., 455 U.S. 489, 102 S.Ct. 1186, 71 L.Ed.2d 362 (1982); Smith v. Goguen, 415 U.S. 566, 94 S.Ct. 1242, 39 L.Ed.2d 605 (1974); Grayned v. City of Rockford, 408 U.S. 104, 92 S.Ct. 2294, 33 L.Ed.2d 222 (1972); Papachristou v. City of Jacksonville, 405 U.S. 156, 92 S.Ct. 839, 31 L.Ed.2d 110 (1972). "[A] court must first determine whether the statute gives the person of ordinary intelligence a reasonable opportunity to know what is prohibited and then consider whether the law provides explicit standards for those who apply it." Chatin v. Coombe, 186 F.3d 82, 87 (2d Cir.1999) (quoting United States v. Strauss, 999 F.2d 692, 697 (2d Cir.1993)).
In short, the statute must give notice of the forbidden conduct and set boundaries to prosecutorial discretion.
The doctrine of "honest services" was originally judge-made law. Courts construed the term "any scheme or artifice to defraud" to include schemes to deprive another of "the intangible right of honest services." See, e.g., United States v. Clapps, 732 F.2d 1148, 1152-53 (3d Cir.1984); United States v. Bohonus, 628 F.2d 1167, 1172 (9th Cir.1980); United States v. Isaacs, 493 F.2d 1124, 1150 (7th Cir.1974); United States v. States, 488 F.2d 761, 764-67 (8th Cir.1973).
Over time, the "honest services" doctrine became applicable to four general categories of defendants: [1] government officials who defraud the public of their own honest services; [2] elected officials and campaign workers who falsify votes and thereby defraud the electorate of the right to an honest election; [3] private actors who abuse fiduciary duties by, for example, taking bribes; and [4] private actors who defraud others of certain intangible rights, such as privacy. McNally v. United States, 483 U.S. 350, 362-64 n. 1-4, 107 S.Ct. 2875, 97 L.Ed.2d 292 (1987) (Stevens, J., dissenting) (surveying the pre-McNally scope of the doctrine).
Within these four categories, the doctrine grew in an "uneven" way, case-by-case and circuit-by-circuit; and court after court warned of prosecutorial abuse. United States v. Brumley, 116 F.3d 728, 733 (5th Cir.1997) (en banc) (listing cases applying "honest services" in varying ways); see also United States v. Martin,