Opinion ID: 184400
Heading Depth: 1
Heading Rank: 3

Heading: Mail Fraud Issues

Text: 26 Jurisdiction over the 1988 Merger Referendum Mail Fraud Count 27 The federal mail fraud statute makes it unlawful to use the U.S. mails in furtherance of any scheme or artifice to defraud, or for obtaining money or property by means of false or fraudulent pretenses, representations, or promises. 18 U.S.C. § 1341. One count of the indictment charged appellants under section 1341 for using the mails to advance a scheme (1) to defraud the union of its property--that is, the ballots for the 1988 merger referendum--and (2) to defraud union members of their right to secret ballots and to participate in a fair and honest election regarding the merger referendum. Ruling that this count failed to allege a fraudulent scheme to obtain property, the district court dismissed it, relying on McNally v. United States, which overturned a mail fraud conviction that rested on the theory that the defendants deprived a state's citizens and government of the right to have the state's affairs conducted honestly. 483 U.S. at 361, 107 S.Ct. at 2882. In McNally, the Court held that when enacting the mail fraud statute, Congress intended to prevent the use of the mails in furtherance of schemes to defraud others of money or property as traditionally defined, not of the intangible right to an honest and impartial government. 483 U.S. at 356-59, 107 S.Ct. at 2879-81. 28 The government filed an interlocutory appeal, challenging the district court's dismissal of the mail fraud count. On January 13, 1995, we reversed the district court and reinstated the count, ruling that the referendum ballots and the information they contained did in fact constitute property protected under section 1341. United States v. DeFries, 43 F.3d 707, 711 (D.C.Cir.1995). Pursuant to D.C. Circuit Rule 41, we withheld issuance of our mandate until seven days after disposition of any timely petition for rehearing. See D.C.CIR. R. 41. 29 Three weeks later, on February 7, the government moved for expedited issuance of our mandate, pointing out that the district court was almost ready to swear a jury. The next day, appellants filed an opposition to the government's motion to expedite as well as a petition for rehearing and a suggestion for rehearing en banc. Rather than issuing our mandate on February 10, we ordered the government to respond to appellants' pending rehearing petitions. On February 10, the government filed its reply to appellants' opposition to expedited issuance of the mandate, and on February 14 asked the district court to consider delaying empaneling the jury until this court issued its mandate. The district judge and counsel for the government discussed the implications of the fact that this court had not issued its mandate, expressing uncertainty as to the district court's ability to proceed to trial on that count prior to the mandate's issuance. When asked by the court, counsel for appellants said he thought the district court lacked jurisdiction absent the mandate, explaining that the mandate is key here. And ... the court of appeals understands that. Appellants' counsel also explained why he thought this court delayed issuing the mandate: [W]hat the court of appeals, I think, is looking at is the prospect that if it sends the mandate back and the case goes forward and then you're in the midst of trial and they have to recall the mandate, then you have got real problems. The district court took no action on the government's request, but on February 21, once jury selection was completed, the district court again raised the question of our mandate. After confirming that the mandate had not issued, counsel for the government, citing United States v. Salerno, 868 F.2d 524 (2d Cir.1989), argued that the court could proceed. The next day, the district court empaneled and swore the jury. On February 24, the government filed its reply to appellants' rehearing petition. On March 1, after the trial had been underway for a week, we issued our mandate. Over a month later, on April 7, we denied appellants' petition for rehearing. Appellants now argue that because we had not issued our mandate until after trial began, the district court lacked jurisdiction to proceed on the mail fraud count. Reviewing this jurisdictional claim de novo, see Board of Trustees v. Madison Hotel, Inc., 97 F.3d 1479, 1483 (D.C.Cir.1996), we agree. 30 The relationship between district court jurisdiction and the issuance of the appeals court mandate is clear and well-known: The filing of a notice of appeal, including an interlocutory appeal, confers jurisdiction on the court of appeals and divests the district court of control over those aspects of the case involved in the appeal. Griggs v. Provident Consumer Discount Co., 459 U.S. 56, 58, 103 S.Ct. 400, 402, 74 L.Ed.2d 225 (1982) (per curiam). The district court does not regain jurisdiction over those issues until the court of appeals issues its mandate. Johnson v. Bechtel Associates Professional Corp., 801 F.2d 412, 415 (D.C.Cir.1986) (per curiam). Courts have carved out a few narrow exceptions to this rule, such as where the defendant frivolously appeals, see United States v. LaMere, 951 F.2d 1106, 1109 (9th Cir.1991) (per curiam), or takes an interlocutory appeal from a non-appealable order, see United States v. Green, 882 F.2d 999, 1001 (5th Cir.1989). 31 Asking us to create an additional exception, the government argues that because we had issued our opinion by the time trial began, proceeding to trial prior to the issuance of the mandate neither caused confusion nor wasted judicial resources and thus did not contravene the purposes of the general rule on jurisdiction. As it did in the district court, the government relies primarily on Salerno, where the Second Circuit issued an order rejecting the defendants' interlocutory double jeopardy appeal, stating that a formal opinion would follow but also acknowledging that the trial was to begin that very same day. When defendants later challenged the district court's jurisdiction to try the case prior to the mandate's issuance, the Second Circuit held that the district court did indeed have jurisdiction when the case went to trial because the likelihood that the district court's ruling on double jeopardy would be affirmed hardened into a certitude when [the appeals] court issued its order. Salerno, 868 F.2d at 540. 32 Involving admittedly unusual facts, id., Salerno has no applicability to the case before us today. By clearly acknowledging the trial was to start on the very same day that it issued its order, the Second Circuit led the district court into believing it had jurisdiction to proceed with the trial. We gave no such message to the district court. To the contrary, when the government moved for expedited issuance of the mandate so that the district court could proceed to trial as scheduled, instead of immediately responding, we directed the government to reply to appellants' pending rehearing motions. The fact that one judge voted to rehear the case in banc demonstrates that this court was seriously considering the rehearing motions. Moreover, it is clear from the February 14 colloquy that both the government and the district judge clearly understood that this court had not completed its consideration of the issues raised in the interlocutory appeal, and that there was at least a serious question about the district court's jurisdiction. Unlike in Salerno, nothing had hardened into a certitude at the time the district court, choosing to disregard the fact that our mandate had not issued, proceeded to swear the jury and begin the trial. The district court thus lacked jurisdiction over the merger referendum mail fraud count when it proceeded to trial on February 22. We therefore reverse appellants' section 1341 convictions involving the 1988 merger referendum. 33 In reaching this conclusion, we fully understand that appellants' trial took several months, consuming thousands of hours of court and lawyer time. The mandate rule, however, is clear, well-established, and grounded in solid considerations of efficient judicial administration. Because jurisdiction is the power to act, it is essential that well-defined, predictable rules identify which court has that power at any given time. Kusay v. United States, 62 F.3d 192, 194 (7th Cir.1995). The mandate rule prevents the waste of judicial resources that might result if a district court, prior to the issuance of the appeals court's mandate, proceeds with a case, ruling on motions and hearing evidence, after which the appeals court reverses its original decision on rehearing. That we ultimately sustained the district court's jurisdiction in this case is of no moment; district court jurisdiction cannot turn on retrospective examination of appeals court action. Where, as here, our mandate had not issued, the district court lacked jurisdiction to proceed with trial whether we later sustained its jurisdiction or not. Fully aware that our mandate had not issued, the district court chose to proceed with trial. If the government wishes, the district court must now rehear the case. 34 Jury Instructions Regarding the 1989 and 1990 Election Mail Fraud Counts 35 Appellants challenge their other two mail fraud convictions--stemming from the 1989 national delegate election and the 1990 union officers' election--arguing that the district court's instructions enabled the jury to convict on the basis of activity not criminalized by the statute. Whether the district court properly instructed the jury on the standard for convicting appellants of mail fraud presents a question of law that we review de novo. See United States v. White, 116 F.3d 903, 924 (D.C.Cir.1997) (per curiam). We must determine whether, taken as a whole, [the instructions] accurately state the governing law and provide the jury with sufficient understanding of the issues and applicable standards. United States v. Washington, 106 F.3d 983, 1002 (D.C.Cir.) (per curiam), cert. denied, --- U.S. ----, 118 S.Ct. 446, 139 L.Ed.2d 382 (1997). 36 Like the 1988 merger referendum mail fraud count, the 1989 and 1990 mail fraud counts alleged a scheme to defraud the union of its ballots and to defraud union members of their right to secret ballots and fair elections. These counts also alleged that DeFries and Dodson schemed to defraud union members of their right to honest services of their union officers, agents, and representatives. This third theory was available for the 1989 and 1990 mail fraud counts, but not the 1988 merger referendum count, because in 1988 Congress responded to the McNally decision by amending the mail fraud statute to protect against schemes to deprive individuals of the intangible right of honest services as well as of money and property. 18 U.S.C. § 1346 (1994). Over appellants' objection that in our earlier DeFries opinion we had declined to hold that section 1341 protected the right to fair elections, see 43 F.3d at 709, 711, the district court instructed the jury on all three theories. 37 Appellants' challenge raises important questions about the mail fraud statute's reach. They argue that because the district court failed to instruct the jury that it had to find that the union's ballots were stolen or tampered with or that the union officers provided dishonest services, the jury could have convicted them solely because they engaged in proxy-voting, which they claim does not violate the statute. In considering this argument, we must first decide whether the mail fraud statute protects against schemes to defraud individuals of their right to secret ballots and fair elections. If we answer that question in the negative, then we must also decide whether proxy-voting constitutes a deprivation of union officials' honest services. 38 As to the first question, the Supreme Court held in McNally that section 1341 does not protect the intangible right of the citizenry to good government, clearly stating that the statute protects individuals against schemes to deprive them of their money or property only. McNally, 483 U.S. at 356, 107 S.Ct. at 2879-80. Elaborating on this holding five months later, the Court explained that the right to honest governmental services is an interest too ethereal in itself to merit the statute's protection. Carpenter v. United States, 484 U.S. 19, 25, 108 S.Ct. 316, 320, 98 L.Ed.2d 275 (1987) (extending McNally to the wire fraud statute, 18 U.S.C. § 1343). Prior to the honest services amendment to the mail fraud statute, three of our sister circuits held that under McNally, union members' right to fair elections is a similarly ethereal interest that does not constitute property under section 1341. See United States v. Townsley, 843 F.2d 1070, 1080 (8th Cir.), aff'd in part and vacated in part en banc on other grounds, 856 F.2d 1189 (8th Cir.1988); Ingber v. Enzor, 841 F.2d 450, 451 (2d Cir.1988); United States v. Gordon, 836 F.2d 1312, 1314 (11th Cir.1988) (per curiam). We agree. We think it particularly instructive that, in explaining the types of schemes that could not properly support a conviction under section 1341, the McNally Court referred to two election fraud cases as examples. 483 U.S. at 358, 107 S.Ct. at 2880-81 (citing United States v. Clapps, 732 F.2d 1148, 1152 (3d Cir.1984), and United States v. States, 488 F.2d 761, 764 (8th Cir.1973)). 39 The honest services amendment does not extend to all election practices that might be thought unfair. The jury could legitimately have convicted DeFries and Dodson of mail fraud only by finding that they participated in a scheme to defraud the union of its ballots or the union members of their right to appellants' honest services as union officers. The record contains adequate evidence to support such a conviction. The government presented credible though contested evidence that DeFries and Dodson participated in a scheme to tamper with election ballots in which union officials opened sealed ballots to see if they had been voted in favor of appellants' interests, discarding and replacing those ballots that had not. The government also presented evidence that union officials coercively collected ballots from union members. If accepted by the jury, such activity would constitute a deprivation of both the ballots as well as appellants' honest services. Cf. United States v. Jain, 93 F.3d 436, 441 (8th Cir.1996) (holding that section 1346 extends to private sector schemes), cert. denied, --- U.S. ----, 117 S.Ct. 2452, 138 L.Ed.2d 210 (1997). 40 The mail fraud instructions, however, failed to require the jury to find that union officials either defrauded the union of its ballots or provided services that were somehow dishonest. The district court instructed the jury that to convict, it had to find beyond a reasonable doubt that appellants knowingly devised or knowingly participated in a scheme or artifice to defraud as detailed in [the mail fraud counts] of the indictment. The court described the general nature of the alleged scheme to defraud: 41 [Appellants] did engage in a variety of conduct in violation of the MBA constitution, by-laws and election procedures, and in violation of [29 U.S.C. §§ 411, 481], including: 42 -- Soliciting and collecting unsealed ballots and voting them in favor of the defendants' interests; 43 -- Soliciting and collecting sealed ballots and unsealing them to determine how a union member had voted; 44 -- Discarding those ballots voted against the defendants' interests and replacing them with duplicates; 45 -- Using U.S. mails to request duplicate ballots in violation of union by-laws and election procedures; 46 -- Using the improperly obtained ballots to replace discarded ballots; 47 -- Using the U.S. mails to send and receive duplicate and original ballots, requests for duplicates, and completed duplicate ballots; 48 -- Causing original and duplicate ballots to be mailed so as to appear that union members had mailed the ballots themselves. 49 The last six activities involve either some form of tampering with the ballots or a dishonest service, each of which could support a conviction: The second, third, and fifth involve tampering with voted ballots; the fourth and sixth involve obtaining and sending duplicate ballots used to replace discarded ballots without voter authority; and the seventh involves giving the fraudulent appearance that union members had voted and mailed the ballots themselves. In contrast, the first activity--[s]oliciting and collecting unsealed ballots and voting them in favor of the defendants' interest--does not necessarily do so. As appellants argue, although the solicitation, collection, and marking of ballots in favor of appellants' interests may violate the union's constitution, by-laws, and election procedures, as well as the civil provisions of the Labor-Management Reporting and Disclosure Act, which prohibit the use of proxy-voting in union elections, those activities do not deprive the union of its property interest in the ballots or amount to a dishonest service. As the Supreme Court put it in McNally, to defraud commonly means to  'wrong[ ] one in his property rights by dishonest methods or schemes'  and typically involves  'the deprivation of something of value by trick, deceit, chicane or overreaching.'  483 U.S. at 358, 107 S.Ct. at 2881 (quoting Hammerschmidt v. United States, 265 U.S. 182, 188, 44 S.Ct. 511, 512, 68 L.Ed. 968 (1924)). There is nothing inherently dishonest or deceitful about soliciting, collecting, and marking unsealed ballots in favor of appellants' interests. The first activity listed in the jury instruction does not require that the ballots were voted in accordance with the voters' wishes, but neither does it require that the union officials voted them against or without regard to those wishes. Such activity would be dishonest or deceitful only if union officials failed to vote the collected ballots according to the voters' wishes or if they obtained the ballots coercively. 50 The government argues that soliciting, collecting, and voting unmarked ballots, even if in accordance with members' wishes, violate the mail fraud statute because such conduct breaches appellants' fiduciary duties to the union and its membership to protect their rights to secret ballots and fair elections. We have held, however, that violation of a fiduciary duty cannot, in and of itself, constitute a violation of the mail fraud statute, even if the other elements of a mail fraud conviction exist. United States v. Lemire, 720 F.2d 1327, 1335 (D.C.Cir.1983) ( '[N]ot every breach of a fiduciary duty works a criminal fraud.' ) (quoting United States v. George, 477 F.2d 508, 508 (7th Cir.1973)); see also United States v. Cochran, 109 F.3d 660, 667 (10th Cir.1997) ([I]t would give us great pause if a right to honest services is violated by every breach of contract or every misstatement made in the course of dealing.). To constitute a deprivation of honest services, the breach of fiduciary duty must have some element of dishonesty. See 18 U.S.C. § 1346. Our analysis in Lemire, a pre-McNally decision upholding wire fraud convictions, is particularly instructive. Involving an employee whose participation in an outside joint venture created a conflict of interest in violation of his employer's policy, Lemire held that breaches of fiduciary duty are criminally fraudulent only when accompanied by a misrepresentation or non-disclosure that is intended or is contemplated to deprive the person to whom the duty is owed of some legally significant benefit. Lemire, 720 F.2d at 1335. The misrepresentation or intentional non-disclosure--two inherently dishonest acts--converted the employee's breach of duty into a deprivation of his honest services as an employee. Id.; see also United States v. Frost, 125 F.3d 346, 368 (6th Cir.1997) (involving mail fraud convictions based on scheme to deprive a university of defendants' honest services as its employees because they failed to disclose an alleged conflict of interest). Even if it violates appellants' fiduciary obligations under federal law and union rules, proxy-voting, so long as it is not done coercively or against the voters' wishes, is not necessarily dishonest. 51 In sum, the district court's inclusion of the phrase [s]oliciting and collecting unsealed ballots and voting them in favor of the defendants' interests as the first of seven activities describing the alleged scheme to defraud inaccurately stated the law. Since the district court failed to instruct the jury that it had to find that appellants engaged in all seven of the alleged activities, the jury could have convicted appellants solely on the basis of the first. Because the government's case emphasized that appellants were guilty of mail fraud by depriving union members of a fair election, and because appellants never disputed that they had engaged in proxy-voting but instead vigorously contested the evidence of tampering and coercion, we cannot conclude with certainty that the jury charge, read as a whole, ... reveals that the jury could not have found the defendants guilty on an intangible rights theory, United States v. Perholtz, 836 F.2d 554, 559 (D.C.Cir.1988), or that the guilty verdict actually rendered in this trial was surely unattributable to the error, Sullivan v. Louisiana, 508 U.S. 275, 279, 113 S.Ct. 2078, 2081, 124 L.Ed.2d 182 (1993). Since the district court's erroneous instruction was not harmless beyond a reasonable doubt, see id., we reverse appellants' mail fraud convictions regarding the 1989 and 1990 elections.