Opinion ID: 175418
Heading Depth: 3
Heading Rank: 2

Heading: The Effect of Skilling on Appellants’

Text: appeal to be moot. 9 Honest Services Fraud Convictions (Count 5) Appellants argue that the Indictment and the District Court’s jury instructions with regard to honest services fraud are inconsistent with the Supreme Court’s decision in Skilling and therefore, the conviction under Count 5, “Conspiracy to Use the U.S. Mail to Defraud the Public of Defendant James’s Honest Services,” must be dismissed. Although James and Riley challenged the honest services charge on various bases, they did not argue below that honest services fraud was void for vagueness or should be limited to bribes or kickbacks.11 Therefore, the most appropriate standard of review is plain error under Federal Rule of Criminal Procedure 52(b).12 United States v. Marcus, 130 S. Ct. 2159, 2164 (2010). Pursuant to Federal Rule of Criminal Procedure 52(b), an appellate court may recognize a “plain error that affects substantial rights,” even if that error was “not brought to the court’s attention.” Fed. R. Crim. P. 52(b). Thus, an appellate court may, in its discretion, correct an error not raised at trial only where the appellant demonstrates that (1) there is an “error”; (2) the error is “clear or obvious, rather than subject to reasonable dispute”; [and] (3) the error “affected the appellant’s substantial rights, which in the ordinary case means” it “affected the 11 In particular, Appellants argued that the jury instructions to Count 5 were invalid because the District Court required merely a general finding of a violation of a common-law fiduciary relationship between a public servant and the public, rather than requiring a violation of a specific statute prohibiting non-disclosure of a conflict of interest. In light of Skilling and the disposition of Count 5, we need not address this claim. 12 While we have applied a plain error standard here, one could view its application here as somewhat harsh, given the defendant’s objection to the breadth of the honest services charge, see supra note12, and a Supreme Court opinion that was not easy to predict. 10 outcome of the district court proceedings.” Marcus, 130 S. Ct. at 2164 (citing Puckett v. United States, 129 S. Ct. 1423, 1429 (2009)). “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.” Johnson v. United States, 520 U.S. 461, 467 (1997) (quotation marks and citation omitted).
The first inquiry is whether the District Court erred because it failed to charge the jury in accordance with the Supreme Court’s limitation of honest services fraud in Skilling. The District Court charged the jury, consistent with the Indictment, that a conviction with respect to Count 5, “Conspiracy to Use the U.S. Mail to Defraud the Public of Defendant James’s Honest Services,” could be found if James breached one or more of the following three duties of honest services as a public official owed to the State of New Jersey and the City of Newark: (i) . . . knowingly committing acts related to his official positions that were unauthorized exercises of his official functions for the purpose of obtaining and receiving money and benefits for himself and others from the governments that he represented, contrary to N.J. Stat. Ann. § 2C:30–2;13 13 New Jersey Statute § 2C:30-2 states in pertinent part that, [a] public servant is guilty of official misconduct when, with purpose to obtain a benefit for himself or another or to injure or to deprive another of a benefit . . . [h]e commits an act relating to his office but constituting an unauthorized exercise of his official functions, knowing that such act is unauthorized or he is committing such act in an unauthorized manner. 11 (ii) as part of his fiduciary duty and his obligation pursuant to the circumstances set forth in Title 18, United States Code, Section 666(a)(1)(A),14 to refrain from stealing, taking by fraud, misapplying and misappropriating the assets of his public employers; and (iii) as part of his fiduciary duty, to disclose conflicts of interest to his public employers in official matters over which defendant JAMES exercised, and attempted to exercise, official authority and discretion, and to recuse himself where he had such conflicts of interest. Appendix on Behalf of Appellant Tamika Riley (“RA”) 152–53. As an introduction to all three, however, the District Court instructed the jury that honest services fraud does not require a scheme to defraud another to obtain money or property, and could instead be based on a violation of a duty of honest, faithful and disinterested service.15 The law of this circuit, prior to N. J. Stat. Ann. § 2C:30-2. 14 Section 666(a)(1)(A), in its pertinent part, makes any agent of a State or local government who “embezzles, steals, obtains by fraud, or otherwise without authority knowingly converts to the use of any person other than the rightful owner or intentionally misapplies . . . property,” liable for a federal offense. 18 U.S.C. § 666(a)(1)(A). 15 The District Court Judge specifically instructed the jury that [s]ince honest services mail fraud does not require a scheme to defraud another to obtain money or property, I will now instruct you on what a scheme to defraud another of honest services means . . . . [T]he right to honest services is the right that comes from a relationship of trust that one forms with another individual or with an institution. This is known in the law as a fiduciary relationship. [A] fiduciary is prohibited from acting to enrich himself on behalf of the principal. Since the fiduciary acts and speaks for the principal, the fiduciary also owes the principal that he 12 Skilling, did not require a different charge than that given by the District Court Judge here. See United States v. Antico, 275 F.3d 245, 264 (3d Cir. 2001) (holding that honest services fraud constituted a duty “to disclose material information affecting an official’s impartial decision-making and to recuse himself . . . regardless of a state or local law codifying a conflict of interest”). In light of Skilling, however, the failure to limit honest services fraud to “bribes and kickbacks,” Skilling, 130 S. Ct. at 2928, now constitutes legal error, see United States v. Retos, 25 F.3d 1220, 1229 (3d Cir. 1994) (stating that under Rule 52(b) “[a] deviation from a legal rule is error” (internal quotation marks and citation omitted)). For the same reason the second inquiry is met. An “error” is plain, clear, or obvious “where the error was unclear at the time of trial but becomes clear on appeal because the applicable law has been clarified.” Retos, 25 F.3d at 1230 (citing United States v. Olano, 113 S. Ct. 1770, 1777 (1993)). In April 2008, at the time of trial, there was no plain error in the honest services fraud charge given by the District Court Judge because it was consistent with the law of this circuit. See Antico, 275 F.3d at 264. The error became clear and obvious, however, when the Supreme Court’s decision in Skilling, on June 24, 2010, narrowed honest services fraud to “bribes and kickbacks.” Skilling, 130 S. Ct. at 2928. Thus, the error at issue here is a plain error and not “subject to reasonable dispute.” Marcus, 130 S. Ct. at 2164 (internal quotation marks and citation omitted). The third inquiry is whether the district court’s plain error affected appellant’s substantial rights. As mentioned above, this serves a duty of frankness and candor in matters that are of material importance to the principal. . . . A public official is a fiduciary for the public and the government he serves . . . [and] owes a duty of honest, faithful and disinterested service to the public and that official’s public employer. SA 1202:59–1203:62. 13 normally occurs where the error “affect[s] the outcome of the district court proceedings.” Marcus, 130 S. Ct. at 2164 (quotation marks and citation omitted). The Government concedes that the third alternative description of duty charged to the jury under honest services fraud is now “invalid” in light of Skilling, but argues that James and Riley would have been convicted under either of the other two theories of duty. “[I]f the jury was instructed on alternative theories of guilt and may have relied on an invalid one” it is subject to harmless-error review. Hedgpeth v. Pulido, 129 S. Ct. 530, 530, 532–33 (2008) (per curiam). Thus, we are called upon to perform what is essentially a harmless error inquiry.
“The test for harmless error is whether it is ‘highly probable that the error did not contribute to the judgment.’” United States v. Vosburgh, 602 F.3d 512, 540 (3d Cir. 2010) (citing United States v. Dispoz-O-Plastics, Inc., 172 F.3d 275, 286 (3d Cir. 1999)). The Government argues, in essence, that the error is harmless because the first two alternative theories of duty under Count 5 remained valid bases for finding a Count 5 conspiracy post-Skilling. This argument is not persuasive, however, because of the manner in which the now-erroneous description of honest services fraud was interwoven throughout the Count 5 jury charge. The very title of Count 5, “Conspiracy to Use the U.S. Mail to Defraud the Public of Defendant James’s Honest Services,” invites the application of the District Court’s charge to the jury regarding honest services fraud to the entire count. As indicated, the jury instructions for Count 5 began with an over-arching umbrella description of James’s fiduciary duty as a public official, which included the now-erroneous honest services definition. Shortly thereafter, the instructions charged that the “Indictment alleges that the Defendant James had the following [three] duties.” SA 1203:62. Although the Government argues that these three theories are “alternative” forms of conspiracy liability, and the first two are separate and distinct from James’s violation of honest services obligations 14 based on his failure to disclose his conflict of interest, the District Court Judge did not make such a clear distinction in his charge to the jury. Rather, the broad definition of honest services seems to apply to all three duties. While it is true that the jury convicted James of a substantive violation referred to in one of the alternative descriptions of duty, 18 U.S.C. § 666 (Count 4), we cannot be certain of how the jury utilized the broad definition of an honest services violation given in connection with the entire conspiracy charge. This is particularly true because the charge was described as “Conspiracy to Use the U.S. Mail to Defraud the Public of James Honest Services,” and because of the general manner in which the Government argued for conviction on Count 5. Rather, it appears highly probable that the nowerroneous honest services fraud definition contributed to the convictions on Count 5. The plain error, therefore, was not harmless. Lastly, because all three conditions are met this Court can choose to exercise its discretion only if “the error seriously affect[s] the fairness, integrity, or public reputation of judicial proceedings.” United States v. Cotton, 535 U.S. 625, 631 (2002). “We have held previously that affirming a conviction where the government has failed to prove each essential element of the crime beyond a reasonable doubt affect[s] substantial rights, and seriously impugns the fairness, integrity and public reputation of judicial proceedings.” United States v. Jones, 471 F.3d 478, 480 (3d Cir. 2006) (quotation marks and citations omitted). It is clear that as far as a conspiracy to commit honest services fraud, as set forth in 18 U.S.C. § 1346, the Government did not prove that fraud occurred by means of bribes or kickback as is now required by Skilling. Appellants focused on the definition of honest services because that was the heart of Count 5. In the context of this case, where the fraudulent act is the non-disclosure of a conflict of interest, it would demean the judicial process to attempt to put the genie back in the bottle by essentially rewriting the charge to the jury on Count 5 and assuming the jury made distinctions the Government did not bring out in its summation. 15