Court Opinion

ID: 9473038
Source: CourtListenerOpinion
Date Created: 2023-08-05 04:17:44.506888+00
Date Added: 2024-06-11T17:43:17.174985
License: Public Domain

JON O. NEWMAN, Circuit Judge,
dissenting in part:
Believing that an unconstitutional constructive amendment of the indictment occurred at appellant’s trial, I respectfully dissent from those portions of the majority’s opinion and resulting judgment that affirm the RICO and underlying mail fraud convictions. In recent years, this Court has tolerated an extraordinary expansion of mail and wire fraud statutes to permit federal prosecution for conduct that some had thought was subject only to state criminal or civil law.1 That “inexorable expansion,” United States v. Siegel, 717 F.2d 9, 24 (2d Cir.1983) (Winter, J., dissenting in part), has been questionable on its own terms, but whether we have rewritten the federal fraud statutes or only permitted prosecutors to apply the imprecise terms of these statutes in imaginative ways, there can be little doubt that the modern scope of federal fraud statutes now covers an extremely broad range of conduct. The current breadth of these statutes makes it especially important that in fraud prosecutions courts vigilantly enforce the Fifth Amendment requirement that a person be tried only on the charges contained in the indictment returned by the grand jury. A criminal statute of broad scope creates some risk that conduct will be punishable even though the perpetrator may have doubted in good faith that his actions fell within the coverage of the statute. To that apparently tolerable risk is added a wholly unacceptable and unconstitutional risk when the prosecutor describes one type of actionable conduct in the indictment and then convicts the defendant for significantly different conduct. I believe that the RICO and mail fraud convictions obtained in this case are an egregious example of a constructive amendment of an indictment, in violation of the Fifth Amendment.
The core allegation of the RICO and the predicate mail fraud counts against Solomon Weiss was his participation in a scheme to defraud. The scheme charged in the indictment was a scheme to extract bribes and convert corporate checks. The scheme for which Weiss stands convicted, however, was a scheme to create a cash fund for his corporate employer. Since the alleged extraction of bribes and conversion of corporate funds were alleged to be in breach of the defendant’s fiduciary duties to his corporate employer, the plain implication of the indictment is that the bribery and conversion were accomplished to the detriment of the corporation. However, creation of the cash fund, for which Weiss was convicted, was indisputably for the benefit of the corporation. The two schemes are fundamentally different in their nature and their effect. They may even be different in their criminality, since bribery and conversion of corporate funds are undoubtedly unlawful, whereas creation of a cash fund for a corporation’s benefit may not be. To appreciate what happened in this case one must examine first the precise terms of the indictment and then the prosecution’s case as presented to the jury.
*792The indictment charged in Count 1 a RICO offense, 18 U.S.C. § 1962(c) (1982), accomplished through a series of mail fraud violations, 18 U.S.C. § 1341 (1982). Counts 2 through 5 alleged the mail fraud violations, consisting of the mailing of four letters in the execution of a scheme to defraud. The scheme is described in three paragraphs of Count 1, under the heading “Object of the Scheme.” These paragraphs are realleged in the mail fraud counts. The first object of the scheme was that Weiss and others “did secretly and corruptly extract and accept cash bribes in return for which they caused Warner to purchase common stock in the Westchester Premier Theatre ... thereby violating their fiduciary duties to Warner and its shareholders ____” Indictment, Count 1, ¶ 4. The second object was that Weiss and others “did secretly and corruptly siphon and convert approximately $221,950 in checks which belonged to Warner and its shareholders, thereby violating their fiduciary duties to Warner and its shareholders____” Id. ¶ 5. The third object was that “in order to siphon and to convert the checks from Warner and to conceal the fraudulent conversion of those checks,” Weiss and others “did cause fraudulent documents to be prepared”; the “documents represented ... that the checks ... were being paid to third parties for services rendered to Warner” when in fact the “services were non-existent.” Id. ¶ 6. The scheme charged in the indictment is plainly a scheme to accept bribes and to convert corporate funds, with false check entries made to conceal the conversion. A further paragraph of the indictment, headed “Methods and Means,” details various check and cash transactions between Warner and Westchester Premier Theatre (“WPT”) or persons associated with WPT.
The indictment makes no mention of a scheme to create a cash fund for Warner. It is not just a matter of omitting the precise words “cash fund.” The indictment gives no indication whatever that Warner ever had a cash fund or that the purpose or effect of the scheme was to assemble a corporate cash fund. In fact, the detailed allegations of the “Methods and Means” paragraph plainly charge that Weiss, not Warner, ended up with the $170,000 cash obtained as a result of the scheme described in the indictment: “defendant, SOLOMON WEISS, secretly and fraudulently accepted a $50,000 cash bribe,” id. ¶ 7(a); “defendant, SOLOMON WEISS, accepted $20,000 in cash,” id. ¶ 7(c); “defendant, SOLOMON WEISS, ... received ... $100,-000 in cash,” id. 117(h).
At trial, the very first description of the crime that the jury heard was the following statement in the prosecutor’s opening: “The government’s evidence in this case will show that over a six-year period, certain high executives at Warner Communications, this nation’s largest entertainment corporation, schemed to defraud the company of their duty to provide honest and faithful services to the company’s stockholders by creating a cash fund of approximately $170,000.” (Emphasis added). The prosecutor then detailed what his evidence would be concerning what he now called “the Warner cash fund.” The cash that the indictment had accused Weiss of receiving was now described as received by Weiss “on behalf of Warner.”
The prosecutor’s evidence detailed precisely how Weiss participated in adding cash to the Warner cash fund. His involvement began shortly after Leonard Horowitz, a stock broker interested in raising capital for WPT, approached Jay Emmett, a Warner vice-president, and offered him $50,000 in a brown paper bag as a “loan,” if Emmett would buy 10,000 shares of WPT stock. Emmett declined for himself but took the proposal to Steven Ross, Warner’s chairman. Ross told Emmett that Warner could not accept the loan but that Horowitz “ought to meet with Sol Weiss and maybe [h]e could be helpful in the Warner cash fund.” The balance of the evidence showed just how helpful to the Warner cash fund Weiss could be.
Initially, Weiss arranged for Warner to purchase 20,000 shares of WPT stock for $150,000, and WPT kicked back $50,000 in cash to Warner and promised an additional *793$50,000. When WPT defaulted on its promised kickback, Weiss secured for Warner $20,000 of the anticipated $50,000 cash by issuing $50,000 of checks for non-existent services to persons associated with WPT who returned to Warner $20,000 in cash. Subsequently Weiss arranged for Warner to buy an additional 20,000 shares of WPT stock for $100,750, and WPT promised to kick back an additional $100,000 in cash. When WPT defaulted on this second kickback obligation, Weiss secured the $100,000 in cash for Warner by issuing $171,950 of checks for non-existent services to persons associated with WPT who returned to Warner $100,000 in cash. The end result was that Warner acquired 40,000 shares of WPT stock and added $170,000 to the Warner cash fund at a total cost of $472,700.
As the case was put to the jury, the District Judge made unmistakably clear that the cash fund was the essence of the scheme to defraud. After explaining that the mail fraud offenses were offenses in their own right as well as the essential predicates of the RICO offense and that the first element of the mail fraud offenses was “the existence of a scheme to defraud,” Judge Lowe said, “Now, the government contends that the fraudulent scheme was the creation of a cash fund at Warner.” Then, accepting the prosecutor’s shift from a bribery/conversion scheme to a cash fund scheme, the District Judge did not tell the jury that Weiss’s guilt turned on whether he had extracted bribes or converted corporate funds, as the indictment alleged; instead she instructed that the jury could not convict on the RICO and mail fraud counts if “the government has not proven beyond a reasonable doubt that the cash fund alleged in the indictment existed” because “then the government will not have proven that essential element of the crime of mail fraud.” Of course, the cash fund was nowhere alleged in the indictment.
What occurred here is not simply a variance such as occurs when the evidence proves some facts materially different from those alleged in the indictment. See United States v. Pelose, 538 F.2d 41, 45 n. 8 (2d Cir.1976). In this case the very nature of the crime of which Weiss was convicted is significantly different from the crime charged in the indictment. That is a constructive amendment of the indictment, which violates the Fifth Amendment. Stirone v. United States, 361 U.S. 212, 80 S.Ct. 270, 4 L.Ed.2d 252 (1960); see Ex parte Bain, 121 U.S. 1, 7 S.Ct. 781, 30 L.Ed. 849 (1887).
A corporate official indicted for a scheme to extract bribes and convert corporate funds has a constitutional right not to be convicted unless a jury is told that he must be proven beyond a reasonable doubt to have extracted bribes or converted corporate funds. He cannot be convicted of a scheme to add to a corporate cash fund when the indictment against him contains no allegations of such conduct. The distinction between the scheme alleged in the indictment and the scheme for which the jury convicted is too fundamental to be ignored. The accusation that Weiss extracted bribes is plainly an allegation that he pocketed money as the price for being influenced in his job. Yet it is undisputed that he did no such thing. The Government’s bill of particulars disclaimed “that Weiss kept for his own personal use any of the money he received from Horowitz.” As the Government assures us, “At no time, did the prosecutor ever argue that Weiss personally enriched himself at Warner’s expense.” Brief for Appellee, 29 n. *. Rather than take a bribe to hurt his company, Weiss fulfilled the board chairman’s hope that he could be “helpful” to his company by adding to its cash fund.2 The *794essence of bribery and conversion on the part of a corporate employee is acting to the detriment of a corporation. The essence of assembling a corporate cash fund, if such be unlawful, is the breach of a fiduciary’s obligation to make material disclosures, an obligation that we have held violates the mail fraud statute in this context only when it is proven that the funds were used for noncorporate purposes. United States v. Siegel, supra, 717 F.2d at 14.
I do not doubt that some of Weiss’s conduct could have been the basis of a valid mail fraud conviction. The issuance of checks falsely prepared to reflect the performance of non-existent services is a fraud on someone, ultimately the shareholders, who are deprived of an opportunity to know how corporate funds are being spent. But Weiss was not convicted of a scheme to falsify checks. The scheme, as explained to the jury by the prosecutor and the trial judge, was a scheme to assemble a corporate cash fund. The falsification of documents, which the indictment alleged was only a means for achieving the conversion objective of the scheme that was charged, cannot on appeal become the basis for affirming a conviction that was secured when the jury found the defendant guilty of a scheme to assemble a corporate cash fund.
The various arguments advanced to excuse or mitigate the fundamental switch from the crime charged to the crime proved are unavailing. Whether Weiss was surprised or prejudiced, or was himself at fault for not objecting to the prosecutor’s opening, the evidence, or the jury charge, is all beside the point because a constructive amendment of an indictment is the “[deprivation of such a basic right” that it cannot be “dismissed as harmless error.” Stirone v. United States, supra, 361 U.S. at 217, 80 S.Ct. at 273. Weiss does not complain of overreaching argument, inadmissible evidence, or an incorrect statement of the law in the charge; his point is that the notice requirement of the Fifth Amendment has been violated. It is the totality of the trial that demonstrates the correctness of his position. Nor can I accept as justification the District Court’s view that the cash fund theory “simply traced the proceeds of the illegal scheme.” United States v. Weiss, 579 F.Supp. 1224, 1244 (S.D.N.Y.1983). At trial, as the jury charge made crystal clear, creation of the cash fund was the illegal scheme for which Weiss was convicted. That the fund was also the proceeds of the scheme alleged in the indictment does not permit the shift from one scheme to the other.3 Equally unpersuasive to me is the majority’s slightly different explanation that the reference to the cash fund in the jury instructions was only a “short-hand expression” for the scheme charged in the indictment. 752 F.2d at 789. Helping to raise secret cash for a corporation does not strike me as shorthand for accepting bribes.
Nor do I find the majority’s invocation of prior decisions of this Court especially helpful to the effort to salvage Weiss’s convic*795tion. The majority cites United States v. Heimann, 705 F.2d 662, 665-66 (2d Cir.1983), to show that we have been reluctant to regard an alleged shift in the Government’s theory or proof as a constructive amendment of an indictment. Yet Heimann involved no shift at all in the theory of the crime alleged and only the most inconsequential shift in the proof. The only shift this Court detected was a slight variation between the indictment and the proof with respect to the time when the defendant’s dealings with the victims first became fraudulent. Id. at 666-68. In United States v. Sindona, 636 F.2d 792, 797-99 (2d Cir.1980), cert. denied, 451 U.S. 912, 101 S.Ct. 1984, 68 L.Ed.2d 302 (1981), we concluded that no prejudicial variance occurred when the core allegation of the indictment was concealment of the fact that the funds in question did not belong to the defendant and the proof showed that the concealment occurred because the funds were obtained by means of a fiduciary contract, rather than by means of embezzlement, as language of the indictment had alleged. In United States v. Knuckles, 581 F.2d 305, 308-12 (2d Cir.), cert. denied, 439 U.S. 986, 99 S.Ct. 581, 58 L.Ed.2d 659 (1978), a conviction for distribution of a controlled substance was upheld though the indictment alleged heroin and the proof showed cocaine. These cases, involving slight variances as to details, provide no support for the total shift that occurred in this case between the crime for which Weiss was indicted and the crime for which he was convicted.
I agree that Weiss’s conviction on three counts of perjury should be affirmed and therefore dissent only as to the RICO and mail fraud convictions. Though this dissent is of no help to Weiss, it may enforce some protection for others if it prompts the Government in future fraud cases to think through the nature of the crime it wishes to allege and then spell out the offense in a carefully drafted indictment, instead of confronting the defendant with its theory of criminality for the first time at trial.

. See, e.g., United States v. Siegel, 717 F.2d 9 (2d Cir.1983); United States v. Margiotta, 688 F.2d 108 (2d Cir.1982), cert. denied, 461 U.S. 913, 103 S.Ct. 1891, 77 L.Ed.2d 282 (1983); United States v. Newman, 664 F.2d 12 (2d Cir.1981); United States v. Bronston, 658 F.2d 920 (2d Cir.1981), cert. denied, 456 U.S. 915, 102 S.Ct. 1769, 72 L.Ed.2d 174 (1982); United States v. Von Barta, 635 F.2d 999 (2d Cir.1980), cert. denied, 450 U.S. 998, 101 S.Ct. 1703, 68 L.Ed.2d 199 (1981).

. The evidence underscored just how dutiful Weiss was. Horowitz testified that he had his first dealings with Weiss at Warner’s offices just moments after Emmett, as Emmett testified, had presented the first WPT proposal to Ross, who instructed Emmett to have Horowitz meet with Weiss. According to Horowitz, Weiss counted out the $50,000 in the paper bag produced by Horowitz and then said he would be back in a few minutes. When Horowitz asked whether Weiss was going to see Ross, Weiss replied that "we don’t use that name around *794here." Weiss returned in a few minutes and increased the first transaction from a purchase of 10,000 shares and a kickback of $50,000 for the Warner cash fund to a purchase of 20,000 shares and a kickback of $100,000 for the Warner cash fund.

. The issue might be somewhat closer if Weiss had not been charged with a mail fraud scheme, but instead had been charged with an offense directly based on obtaining the secret cash fund and then convicted for an offense directly based on possessing it. Compare United States v. Gaddis, 424 U.S. 544, 548, 96 S.Ct. 1023, 1026, 47 L.Ed.2d 222 (1976) (receipt or possession of proceeds of bank robbery not lesser included offense within federal bank robbery provisions), with Dove v. Peyton, 343 F.2d 210, 213 (4th Cir.1965) (receiving stolen property is lesser included offense within offense of larceny under explicit Virginia statutory provision, Code of Virginia § 18.1-107 (1950)). But even if lesser included offense concepts could be enlisted in such a situation, they provide no basis for upholding what occurred here, where a conviction that can be viewed at best as based on a scheme to funnel proceeds from wrongdoing into a cash fund was obtained under an indictment alleging a scheme to commit the wrongdoing.