Opinion ID: 797855
Heading Depth: 2
Heading Rank: 7

Heading: Investigation, Trial, and Sentencing

Text: 37 As part of the investigation into the failure of the Town & Country Bank and John James, federal investigators interviewed Jennings on January 29, 2003. Jennings acknowledged that he was an investor in Northern Pole with an equity position and said he had an oral agreement with Northern Pole to receive a share of the future revenues of the business project if and when the project became profitable. Jennings also acknowledged that he had authored CIP legislation that benefitted Northern Pole, and that he had met with a division head of NSP on behalf of Northern Pole. However, Jennings claimed there was no conflict of interest because he received no current financial benefit to himself. Any benefit he would receive, he contended, would not occur until the future, when he was out of the legislature. 38 On April 19, 2005, a grand jury returned a seven-count superseding indictment against Jennings. The indictment charged Jennings with four counts of honest services mail fraud, in violation of 18 U.S.C. §§ 1341 and 1346. The indictment alleged that Jennings was guilty of depriving the citizens of Minnesota of the intangible right to the honest and faithful services he owed to them in his capacity as a state representative. The indictment also charged Jennings with one count of conspiracy to commit honest services mail fraud, under 18 U.S.C. § 371, and two counts of money laundering, under 18 U.S.C. § 1957. The indictment charged that the money from the scheme that benefitted Jennings personally be forfeited to the government, pursuant to 18 U.S.C. § 981(a)(1)(C), 28 U.S.C. § 2461(c), and 18 U.S.C. § 982(a)(1). The case proceeded to trial. 39 At trial, the government called James Bernstein, Minnesota Commissioner of Commerce from July of 2000 to January of 2003, and the man who had approved NSP's proposal to provide CIP funds to Northern Pole. The government asked Bernstein whether the fact of Jennings's financial interest in NSP's CIP proposal would have affected Bernstein's analysis of that proposal. Jennings objected to the government's question on the grounds that it was a hypothetical question that assumed Jennings's guilt. The district court overruled Jennings's objection. Bernstein testified that knowing Jennings had a financial interest in the CIP proposal [a]bsolutely would have affected his analysis. Bernstein stated that the Commission would have rejected the proposal. You can't do a CIP proposal to someone who's got a vested interest in it. You can't do it. When asked again on cross-examination, Bernstein testified, [m]y conclusion is that—and I can say this emphatically— that any legislator who had a financial interest in a company that was asking us to approve a CIP proposal, if they would have disclosed that, we would never, ever have awarded that money. 40 The government also offered into evidence a note that Jessica Vitalis authenticated as having been written in George Vitalis's handwriting. The note summarized a July 24, 2000 conversation George Vitalis had with Jennings, in which Jennings provided the names and phone numbers of officials at NSP involved in the CIP funding request, along with details of the loan repayment to the FDIC for the Town & Country loan extended to M & M. Jennings objected to the introduction of the note on hearsay, Confrontation Clause, and foundational grounds. The district court admitted the note into evidence as a statement by a co-conspirator pursuant to Federal Rule of Evidence 801(d)(2)(E). 41 During trial, the court solicited proposed jury instructions from both parties. Jennings's proposed theory of defense stated that [i]f you find that the government has not proven Mr. Jennings intentionally failed to comply with the disclosure standards set by the State of Minnesota with respect to his sponsorship of the CIP legislation, then he acted in good faith and lacked the requisite intent to defraud. The government's proposed instructions regarding what it must prove before Jennings could be convicted for honest services mail fraud stated, in pertinent part, that [a] public official has an affirmative duty to disclose material information to the public employer. 42 The court rejected Jennings's proposed instruction, and instructed the jury in Instruction No. 9B that: 43 A public official has a duty to disclose material financial information to the public employer. When an official fails to disclose a material financial interest in a matter over which he has decision-making power, the public is deprived of the intangible right to the official's honest services, whether or not a tangible loss to the public is shown. To decide what constitutes material financial information, you may consider the standards and rules set by a person's employer, in this case the Minnesota House of Representatives. 44 However, the mail fraud statute does not encompass every instance of official misconduct, even reprehensible misconduct resulting in the official's personal financial gain. That is because the government must prove, beyond a reasonable doubt, that the official intended to defraud the public of its right to his honest services. 45 The court thus adopted the substance of the government's proposed instruction regarding a public official's duty to disclose information. Jennings also objected to Instruction No. 9B on the grounds that the jury should have been instructed that the government was required to prove gain or loss. 46 The jury convicted Jennings of two counts of mail fraud and one count of money laundering. The jury acquitted Jennings on the remaining charges. 47 At the sentencing hearing, Jennings objected to the court's application of United States Sentencing Guideline § 2C1.7, the guideline provision entitled Fraud Involving Deprivation of the Intangible Right to the Honest Services of Public Officials. 8 Jennings argued that the court should instead apply § 2C1.3, the Guideline provision concerning Conflict[s] of Interest, which is referenced in § 2C1.7. The district court found that § 2C1.7 was the proper guideline provision under the facts of this case, stating that Jennings's offense of conviction was not covered more specifically under § 2C1.3. 48 Using U.S.S.G. § 2C1.7, the district court determined that Jennings had a base offense level of ten. The court then determined the loss amount to be $284,398, which resulted in a twelve-level enhancement. See U.S.S.G. §§ 2C1.7(b)(1)(A)(ii) and 2B1.1(b)(1)(G). After adding one level for the money laundering conviction, see U.S.S.G. § 2S1.1(b)(2)(A), Jennings's total offense level was twenty-three. When combined with a Category I criminal history, Jennings was subject to an advisory Guidelines range of forty-six to fifty-seven months in prison. The court sentenced Jennings to forty-eight months' imprisonment and ordered Jennings to forfeit the proceeds from the scheme that benefitted him personally, an amount of $284,398. The district court also ordered restitution in the amount of $284,398, to Minnesota Power and NSP. Thus, the court ordered Jennings to pay a total of $568,796.00. 49 Jennings now appeals his conviction and sentence. Jennings first argues that the evidence was insufficient to support his conviction. Specifically, Jennings argues that the government did not present evidence sufficient to prove that Jennings had a duty to disclose his interest in Northern Pole. Second, Jennings contends that the district court erred in instructing the jury in two respects: the jury should have been instructed that the government was required to prove a violation of state law, and the jury should have been instructed that the government was required to prove gain or loss in an honest services mail fraud scheme. Third, Jennings challenges two of the district court's evidentiary rulings. Jennings argues that the court erred in allowing Commissioner Bernstein to testify that the disclosure of Jennings's financial interest in the NSP's grant of CIP funds to Northern Pole would have resulted in the Commission's rejection of the proposal. He also argues that the district court erred in admitting George Vitalis's handwritten note pursuant to Federal Rule of Evidence 801(d)(2)(E) because the government failed to link the note to a conspiracy. Fourth, Jennings contends that the district court erred by ordering Jennings to forfeit $284,398. Jennings argues that an order of forfeiture was only authorized under the money laundering offense and not the mail fraud offense, that the order violated the Ex Post Facto Clause, and that the forfeiture order was barred by a one-year statute of limitations. Jennings does not challenge the court's restitution order. Finally, Jennings argues that the district court erred by applying U.S.S.G. § 2C1.7, rather than § 2C1.3. We address each of Jennings's arguments in turn.