Opinion ID: 3026413
Heading Depth: 3
Heading Rank: 2

Heading: Holck’s and Umbrell’s Wire Fraud Convictions

Text: Holck and Umbrell lead off their attack on their wire fraud convictions by arguing that their convictions under the bribery theory of honest services fraud must be vacated because that theory was not charged in the indictment. We deem an indictment sufficient so long as it “(1) contains the elements of 12 This case is distinguishable from United States v. McNeive, 536 F.2d 1245 (8th Cir. 1976), where the Eighth Circuit concluded that a chief plumbing inspector’s acceptance of unsolicited gratuities that were attached to applications for permits that required only ministerial action did not amount to honest services fraud. Id. at 1251. Even if Kemp’s actions here were largely ministerial, Kemp’s role in setting the scheme in motion and then demanding payment was of a far more insidious order than the passive behavior of the defendant in McNeive. 34 the offense intended to be charged, (2) sufficiently apprises the defendant of what he must be prepared to meet, and (3) allows the defendant to show with accuracy to what extent he may plead a former acquittal or conviction in the event of a subsequent prosecution.” United States v. Vitillo, --- F.3d ----, 2007 WL 1805332 (3d Cir. 2007) (internal quotation marks omitted). Moreover, “no greater specificity than the statutory language is required so long as there is sufficient factual orientation to permit the defendant to prepare his defense and to invoke double jeopardy in the event of a subsequent prosecution.” United States v. Rankin, 870 F.2d 109, 112 (3d Cir. 1989). We exercise plenary review over this challenge. United States v. Hedaithy, 392 F.3d 580, 590 n.10 (3d Cir. 2004). We conclude that the indictment here adequately charged Holck and Umbrell with the bribery theory of honest services wire fraud. The wire fraud counts of the indictment (counts 1522) plainly alleged honest services fraud, charging Holck and Umbrell with engaging in “a scheme to defraud the City of Philadelphia and its citizens of the right to defendant COREY KEMP’S honest services in the affairs of the City of Philadelphia.” (App. at 587.) Then, the specific factual allegations – some of which were incorporated by reference to the allegations of the conspiracy charge, see Fed. R. Crim. P. 7(c)(1) (“A count may incorporate by reference an allegation made in another count.”); see also United States v. Markus, 721 F.2d 442, 444 (3d Cir. 1983) – were sufficient to alert Holck and Umbrell that the government planned to pursue both theories. The indictment refers to “the benefits that HOLCK and UMBRELL extended to Kemp with the intent to influence KEMP’s official actions” (App. at 491), and charges that “defendants GLENN K. HOLCK and STEPHEN M. UMBRELL, on behalf of their employer, Commerce Bank, provided benefits to Kemp in the form of otherwise unavailable loans in exchange for favorable decisions by KEMP as Treasurer of Philadelphia” (App. at 554). These allegations were sufficient to charge Holck and Umbrell with honest services fraud under a bribery theory, and accordingly, we reject Holck and Umbrell’s argument that the indictment should have been dismissed. 35
Holck and Umbrell next claim that the District Court misstated the law when instructing the jury on the bribery theory of honest services fraud, such that the jury was invited to convict if it concluded that Holck and Umbrell had provided benefits to Kemp in a “general attempt to curry favor.” We exercise plenary review over whether the District Court correctly stated the law, and consider “whether the charge, taken as a whole, properly apprise[d] the jury of the issues and the applicable law.” Armstrong v. Burdette Tomlin Mem’l Hosp., 438 F.3d 240, 245 (3d Cir. 2006) (alteration in original) (internal quotation marks omitted). While we agree with Holck and Umbrell that bribery may not be founded on a mere intent to curry favor, we nevertheless reject their challenge to the District Court’s instructions. As Holck and Umbrell recognize, there is a critical difference between bribery and generalized gifts provided in an attempt to build goodwill. The Supreme Court has explained, in interpreting the federal bribery and gratuity statute, 18 U.S.C. § 201, that bribery requires a quid pro quo, which includes an “intent ‘to influence’ an official act or ‘to be influenced’ in an official act.” United States v. Sun-Diamond Growers of Cal., 526 U.S. 398, 404 (1999) (quoting 18 U.S.C. § 201(b)). This may be contrasted to both a gratuity, which “may constitute merely a reward for some future act that the public official will take (and may already have determined to take), or for a past act that he has already taken,” and to a noncriminal gift extended to a public official merely “to build a reservoir of goodwill that might ultimately affect one or more of a multitude of unspecified acts, now and in the future.” Id. at 405. This discussion is equally applicable to bribery in the honest services fraud context, and we thus conclude that bribery requires “a specific intent to give or receive something of value in exchange for an official act.” Id. at 404-05. Holck and Umbrell arrive at their conclusion that this requirement was elided by the instructions only by reading certain sections of the jury charge out of context, which “is not the way we review jury instructions, because a single instruction 36 to a jury may not be judged in artificial isolation, but must be viewed in the context of the overall charge.” United States v. Park, 421 U.S. 658, 674 (1975). Read fairly, the instructions proffered by the District Court repeatedly emphasized the critical quid pro quo, explaining that “[t]o establish such bribery the government must prove beyond a reasonable doubt that there was a quid pro quo, . . . that the benefit was offered in exchange for the official act.” (App. at 9642.) The Court continued, “where there is a stream of benefits given by a person to favor a public official, . . . it need not be shown that any specific benefit was given in exchange for a specific official act. If you find beyond a reasonable doubt that a person gave an official a stream of benefits in implicit exchange for one or more official acts, you may conclude that a bribery has occurred.” (App. at 9643.) Finally, the Court explained, “[t]o find the giver of a benefit guilty, you must find that the giver had a specific intent to give . . . something of value in exchange for an official act, that is, that the accused had the specific intent to engage in such a quid pro quo exchange.” (App. at 9643-44.) This instruction correctly described the law of bribery, and left no danger that the jury would convict upon merely finding that Holck and Umbrell provided benefits to Kemp in a general attempt to curry favor or build goodwill. Moreover, we agree with the government that the District Court’s instruction to the jury that it could convict upon finding a “stream of benefits” was legally correct. The key to whether a gift constitutes a bribe is whether the parties intended for the benefit to be made in exchange for some official action; the government need not prove that each gift was provided with the intent to prompt a specific official act. See United States v. Jennings, 160 F.3d 1006, 1014 (4th Cir. 1998). Rather, “[t]he quid pro quo requirement is satisfied so long as the evidence shows a ‘course of conduct of favors and gifts flowing to a public official in exchange for a pattern of official actions favorable to the donor.” Id. Thus, “payments may be made with the intent to retain the official’s services on an ‘as needed’ basis, so that whenever the opportunity presents itself the official will take specific action on the payor’s behalf.” Id.; see also United States v. Sawyer, 85 F.3d 713, 730 (1st Cir. 1996) (stating that “a person with continuing and long-term interests before an official 37 might engage in a pattern of repeated, intentional gratuity offenses in order to coax ongoing favorable official action in derogation of the public’s right to impartial official services”). While the form and number of gifts may vary, the gifts still constitute a bribe as long as the essential intent – a specific intent to give or receive something of value in exchange for an official act – exists. This theory was accurately and entirely presented to the jury in the jury instructions, and accordingly, we reject Holck and Umbrell’s argument that the instructions as proffered were inadequate.
Holck and Umbrell next present three arguments that the District Court’s jury instructions concerning the failure-todisclose theory of honest services fraud were legally erroneous. If, as Holck and Umbrell argue, the alternative theory is legally invalid, we must vacate their convictions. See Syme, 276 F.3d at 144. Our review over whether the District Court correctly stated the law is plenary. Armstrong, 438 F.3d at 245. For the reasons discussed below, we conclude that the District Court correctly charged the jury. Holck and Umbrell first argue that the jury instructions were inconsistent with our decision in Panarella. According to Holck and Umbrell, when we held in Panarella that a “public official who conceals a financial interest in violation of state criminal law while taking discretionary action that the official knows will directly benefit that interest commits honest services fraud,” 277 F.3d at 694, we ruled that the discretionary action must benefit the public official himself, and not the person or organization that provided the benefit. They thus argue that the District Court’s instructions, which permitted the jury to convict upon finding that Kemp took “a discretionary official action benefitting the giver of the benefit” (App. at 9644), wrongly stated the law. A complete analysis of Panarella plainly demonstrates the defectiveness of Holck and Umbrell’s position. In Panarella, Loeper, while Majority Leader of the Pennsylvania Senate, worked as a business consultant for a tax collection 38 business. Id. at 681. Loeper failed to disclose his income from the business as required by state law, and spoke and voted against bills that would have harmed that business. Id. We held that this conduct constituted honest services fraud, and emphasized the importance of disclosing conflicts of interest. Id. at 696-97. We explained: Were it easy to detect and prosecute public officials for bribery, the need for public officials to disclose conflicts of interest would be greatly reduced. . . . One reason why federal and state law mandates disclosure of conflicts of interest, however, is that it is often difficult or impossible to know for sure whether a public official has acted on a conflict of interest. The only difference between a public official who accepts a bribe and a public official who receives payments while taking discretionary action that benefits that payor, as Loeper did in this case, is the existence of a quid pro quo whereby the public official and the payor agree that the discretionary action taken by the public official is in exchange for payment. Recognizing the practical difficulties in proving the existence of such a quid pro quo, disclosure laws permit the public to judge for itself whether an official has acted on a conflict of interest. Id. at 697 (emphasis added) (citation omitted). This explanation is consistent with our opinion in Antico, where we emphasized, broadly, the duty of a public official “to disclose material information affecting an official’s impartial decision-making.” 275 F.3d at 264. Accordingly, we reject Holck and Umbrell’s argument that the discretionary action must directly benefit the public official, and hold that honest services fraud encompasses a situation where a public official conceals a financial interest in violation of state criminal law while taking discretionary action that the official knows will directly benefit the individual or organization behind that financial interest. We thus reject Holck and Umbrell’s challenge on this front. Holck and Umbrell next argue that the jury instructions misstated the law because they did not require the jury to find 39 that Holck and Umbrell failed to disclose a financial interest in violation of a state criminal law. However, this argument misapprehends Pennsylvania’s statutory structure. The District Court read to the jury the provisions of 65 Pa. Cons. Stat. § 1103(a)-(c), all of which are felonies. See 65 Pa. Cons. Stat. § 1109(a). Thus, we also reject this claim. Finally, Holck and Umbrell contend that the District Court’s instructions about the species of loans that public officials are required to report were incomplete. They argue that in addition to the proffered instructions, which stated that “a commercially reasonable loan made in the ordinary course of business” is exempt from the reporting requirement,13 the District Court should have informed the jury that “the financial terms of the loan must be below-market or that the loan must be outside the ordinary course of business.” To the extent that the language proposed by Holck and Umbrell adds anything to the District Court’s instruction, we conclude that the District Court was not obligated to include it. Holck and Umbrell’s authority for their position – 4 Pa. Code § 7.153(b)(3) and Executive Order No. 16-92 – concerns gifts that public officials are prohibited from accepting, and are thus inapposite here. The crucial issue is whether Kemp was required to report the loans; whether he was entitled to accept the loans is a different matter altogether. Accordingly, we conclude that the District Court correctly and fully14 instructed the jury about the 13 These instructions were consistent with Pennsylvania law, which requires public officials to report “[t]he name and address of the source and the amount of any gift or gifts valued in the aggregate at $250 or more and the circumstances of each gift,” 65 Pa. Cons. Stat. § 1105(b)(6); in defining “gift,” the statute excludes from the general definition “a commercially reasonable loan made in the ordinary course of business,” §§ 1102, 13A03. 14 The District Court instructed the jury that to determine whether the loans provided by Kemp were gifts that were required to be reported, it should consider “whether defendant Holck and/or defendant Umbrell followed established Commerce Bank 40 governing law concerning loans.
Holck and Umbrell’s final challenge to their honest services wire fraud convictions is that the government presented insufficient evidence to sustain those convictions under a bribery theory. According to Holck and Umbrell, the government failed to prove: (1) that they made a payment to Kemp; (2) that they received a benefit from Kemp; and (3) that the two were directly connected. As noted above, we will “view the evidence in the light most favorable to the Government and sustain the verdict if any rational juror could have found the elements of the crime beyond a reasonable doubt.” United States v. Cartwright, 359 F.3d 281, 286 (3d Cir. 2004) (internal quotation marks omitted). As we held above, bribery requires a specific intent to give or receive something of value in exchange for an official act. We note that evidence of a “quid pro quo can be implicit, that is, a conviction can occur if the Government shows that [the defendant] accepted payments or other consideration with the implied understanding that he would perform or not perform an act in his official capacity.” Antico, 275 F.3d at 257. As we have recognized, “‘the official and the payor need not state the quid pro quo in express terms, for otherwise the law’s effect could be frustrated by knowing winks and nods.’”15 Id. at 258 (quoting United States v. Bradley, 173 F.3d 225, 231 (3d procedures applicable for similar loans, whether they intended to give a benefit or gift to defendant Kemp, whether the loans were commercially reasonable, made in the ordinary course of business, whether the loans were considered by defendant Kemp to be a benefit or gift, the terms of the loan and other factors . . . that you consider material.” (App. at 9651.) This appropriately conveyed to the jury the many-faceted issue. 15 While we made that statement while discussing the Hobbs Act, it is no less applicable in the present context. See, e.g., United States v. Woodward, 149 F.3d 46, 57 (1st Cir. 1998) (permitting similar form of proof in honest services fraud case). 41 Cir. 1999)). We first reject Holck and Umbrell’s argument that the benefits that they were accused of bestowing on Kemp – a variety of loans – cannot constitute bribes (or the quid of a quid pro quo) because they were made at the prevailing interest rates in the regular course of business. As a factual matter, a reasonable jury certainly could have found that these loans were not advanced in the usual course of business and were instead extended to Kemp and his friends solely because of Kemp’s position. For instance, Umbrell agreed to loan $7,500 unsecured to a person Kemp described as having “shaky credit” without even seeing an application or speaking to the borrower. Umbrell’s stated purpose for approving this loan was to make Kemp “look good.” Moreover, Kemp’s mortgage loans were approved by Holck and Umbrell before Kemp filed an application, and despite the fact that Commerce’s computer program and underwriter rejected the mortgages. Indeed, an underwriter from Commerce testified that the procedures used to approve this loan failed to comply with standard practice. This evidence is sufficient to support a jury’s conclusion that these loans were made available to Kemp only because he was the treasurer. Moreover, as a legal matter, we conclude that providing a loan to a public official (or his friends or family) that would have otherwise been unavailable to that official or available at a higher interest rate may constitute a bribe. This is consistent with our discussion in Antico where, concerning quid pro quo under the Hobbs Act, we broadly described a bribe as involving “payments or other consideration.” Id. at 257 (emphasis added). Further, the conclusion comports with the federal bribery statute, which refers to “anything of value,” and other general definitions of bribery. See, e.g., Black’s Law Dictionary 186 (7th ed. 1999) (defining “bribery” as “[t]he corrupt payment, receipt, or solicitation of a private favor for official action”). It also takes account of the commonsense notion that a loan may be of immense value to the recipient: for instance, here, Kemp’s mortgage loan allowed him to purchase a house. Our conclusion that a loan may constitute the quid in a 42 bribery prosecution is also supported by the relevant caselaw. Most notably, in United States v. Gorman, 807 F.2d 1299 (6th Cir. 1986), the defendant argued that a loan was not a “thing of value” under § 201 because he fully repaid the loan with interest. Id. at 1304. The Sixth Circuit rejected that argument, because at the time that the defendant received the loan he was having “severe financial difficulties” and it was unclear whether such a loan would have been available to him in the ordinary course of business. Id. at 1305. The court focused on the value that the recipient “subjectively attache[d] to the items received.” Id. A loan was also recognized as a potential quid in United States v. Williams, 705 F.2d 603 (2d Cir. 1983). There, a United States Senator was convicted under the federal bribery statute for “seeking funds for the financing and purchase of a mining venture in which he had an interest in exchange for his assistance in obtaining government contracts for the venture.” Id. at 612. One of the two sorts of funds that the senator sought was a $100 million loan that was to be repaid with interest. Id. at 620. The court never questioned that the loan could serve as a bribe, and termed the evidence against the senator “overwhelming.” Id. at 612; see also United States v. Crozier, 987 F.2d 893, 901 (2d Cir. 1993) (“[A]s we have held in connection with § 201, any payment that the defendant subjectively believes has value, including a loan, constitutes a thing ‘of value’ within the meaning of § 666(c)”). Thus, we conclude that loans, so long as they are granted in exchange for an official act, may drive a bribery prosecution.16 We also conclude that Holck and Umbrell’s assertion that they did not receive any benefit from Kemp is contradicted by the record evidence. Despite Holck and Umbrell’s protestations, a reasonable jury could undoubtably have concluded that Kemp provided a benefit to them when he rigged the bidding for the NTI line of credit in Commerce’s favor. The government showed that after Commerce submitted its bid, Kemp told White to tell Holck and Umbrell not to submit their bids first, because 16 Indeed, given that the government must also prove the loan was given in exchange for some official action, there is little danger that honest loans will trigger criminal liability. 43 then Kemp could tell White about the other bids. This alone permitted a reasonable jury to conclude that Kemp intended to benefit Commerce to the detriment of other banks. Then Kemp called Holck and gave him specific instructions about how Commerce could tweak its initial bid to guarantee that its bid would win – a courtesy that he did not extend to any other bank. Indeed, when Wachovia attempted to rebid, Kemp ignored its request. While a second round of bidding was instituted – on the orders of Kemp’s boss and against Kemp’s wishes – only Commerce was told exactly what to bid to ensure success. This evidence was plainly sufficient for the jury to conclude that Holck and Umbrell received a benefit from Kemp. Finally, we reject Holck and Umbrell’s contention that the government failed to present evidence of a pro demonstrating that Holck and Umbrell extended loans to Kemp in exchange for favorable treatment. Especially damaging to Holck and Umbrell’s position is the June 24, 2003 phone call between Umbrell and Kemp. There, Umbrell agreed to waive the $3,500 appraisal fee for the church loan, and then, while the two discussed the renewal of some of Philadelphia’s certificates of deposit with Commerce, Kemp told Umbrell that Umbrell could always speak to Kemp directly because “you are my f__king guy. . . . So you get special treatment.” While Kemp did not elaborate about why Umbrell was his “guy,” the jury certainly could have inferred that it was because of the consistent flow of loans and perks – including the waiver of the appraisal fee discussed moments before – that Holck and Umbrell extended. The evidence also showed that not only did Kemp say that Holck and Umbrell would get special treatment – they did. The NTI bidding process is a particularly egregious example. Further, the government showed that Holck and Umbrell believed that they would receive this special treatment, as illustrated by the phone call between White, Holck, and Umbrell, where Holck appeared surprised that any bank besides Commerce would get a second opportunity to bid, stating that “you know we made . . . the revised proposal to Corey? . . . And something’s not smelling right.” Similarly, Kemp’s explanation of the NTI transaction to his friend, in which Kemp stated that Commerce Bank had better take care of him because he hooked them up with the NTI deal, evinced his understanding that he 44 was giving Holck and Umbrell special treatment in exchange for loans. This course of conduct permitted the jury to infer that Kemp had agreed with Holck and Umbrell that he would take official action in their favor in exchange for their providing him loans and benefits. Accordingly, we conclude that the government presented sufficient evidence to support the jury’s verdict against Holck and Umbrell on the honest services wire fraud charge.17