In the Courts

Changes in the Advisory Sentencing Guidelines Are Not Ex Post Facto Laws

In United States v. Demaree, No. 05-4213 (7th Cir. Aug. 11, 2006), the Seventh Circuit held that changes made to the now-advisory sentencing guidelines after the completion of a crime that result in longer sentences do not violate the ex post facto clause of the Constitution.

The defendant pled guilty to wire fraud and tax offenses related to her alleged embezzlement of nearly $300,000. Between the time she committed the crimes and her sentencing, the Sentencing Guidelines were amended. The effect of the amendment was to increase her recommended sentence from a range of 18 to 24 months, to a range of 27 to 33 months. On appeal, the defendant argued that the new sentencing guidelines are an ex post facto law that cannot be applied to her crimes, which were completed before the new guidelines were instituted. The Seventh Circuit disagreed. The circuit court explained that the purpose of the ex post facto clause is to protect people from being 'blindsided by a change in the law' and not to enable criminals to calculate with precision the punishments they should expect. The court acknowledged that a change that resulted in a defendant being punished more severely than would have been possible at the time the crime was committed could implicate the ex post facto clause. But the court explained that, because the guidelines are merely advisory and changes in the guidelines do not effect the maximum punishment permissible, the ex post facto clause does not apply.

First Circuit Says the Victim of Bank Fraud Need Not Be the Institution Targeted by Defendant

In United States v. Edelkind, No. 05-2125 (1st Cir. Sept. 13, 2006), the First Circuit upheld a conviction for bank fraud under 18 U.S.C. ' 1344 despite the fact that the institution to which the defendant made his false representations was neither federally insured nor the institution ultimately defrauded.

The defendant was convicted at trial of four counts of bank fraud. Defendant's scheme allegedly involved making fraudulent representations to a mortgage broker in order to secure mortgages and lines of credit. The mortgage broker, which was not federally insured, 'table funded' the loans, meaning that it approved the loans contingent on finding another lender to buy the loan. The broker did, in fact, sell the loans to a federally insured institution. On appeal, the defendant argued that because ' 1344 applies only to frauds on federally insured institutions, and because the fraud must be knowingly executed, he cannot be convicted of a fraud on the uninsured mortgage broker or on the insured institution which was not a knowing target of his fraud. The First Circuit disagreed. The circuit court held that where the federally insured institution is taking part in a single, integrated transaction and is thereby injured by a defendant who intended to defraud at least one party to the transaction, the causal connection is sufficient to establish liability.

Evidence of Public Official's Involvement in Scheme Not Required to Sustain Honest Services Fraud Conviction

In United States v. Potter, 05-2676, 05-2677, 05-2678 (1st Cir. Sep. 8, 2006), the First Circuit held that neither evidence that the ultimate target of a bribery scheme was involved in the scheme, nor evidence of precisely what actions were sought from him, is needed to sustain a conviction for honest-services fraud.

Defendants were convicted after a jury trial of wire fraud and conspiracy to commit wire fraud on charges stemming from an alleged scheme to bribe a high-ranking member of the Rhode Island House of Representa-tives. The scheme involved paying a former partner of the legislator over $4 million to influence legislation affecting the defendants' business. No evidence was introduced that the legislator was a party to or knew of the scheme. Nor was there any evidence introduced as to the precise legislation the defendants sought to influence or how that influence would be accomplished. The defendants appealed their convictions, challenging the sufficiency of the evidence. On appeal, the First Circuit held that under the facts of this case ' where over $4 million was paid to a lobbyist with the explicit aim of influencing future legislation, and that lobbyist has close business ties to the legislator ' a jury is entitled to infer that some of the money was intended to reach the legislator, even if there was no evidence presented concerning the precise way the money would reach him. The court also held that nothing in the language nor the policy of the wire fraud statute sets forth a requirement that one of the parties to the fraud be a public official, noting that even evidence that the legislator refused to participate would not bar a conviction for the other parties to the scheme.

Sixth Circuit Refuses to Extend Honest-Services Fraud Statute to Cover Other Intangible Rights

In United States v. Turner, No. 05-6326 (6th Cir. Aug. 31, 2006), the Sixth Circuit held that election fraud does not fall within the scope of honest-services fraud because although 18 U.S.C. ' 1346 addresses the deprivation of the intangible right of honest services, it does not apply to other intangible rights. The court also declined to apply 18 U.S.C. ' 1341 to election fraud under a 'salary fraud' theory.

Defendant was convicted of mail fraud and conspiracy to commit mail fraud in connection with schemes to commit election fraud in two separate electoral campaigns. The allegations included both making illegal campaign contributions and 'vote hauling,' which is the practice of making illegal payments to transport voters to the polls. The mail fraud convictions were secured under two theories: first, that the defendant's actions deprived citizens of the intangible right to the honest services of a candidate under 18 U.S.C. ' 1346; and second, that the defendant's actions violated 18 U.S.C. ' 1341 in that they amounted to a scheme to defraud the state or its citizens of money or property in the form of the salary associated with the public office at issue in the election. On appeal, the Sixth Circuit held that election fraud does not fall within the scope of honest-services fraud as codified by 18 U.S.C. ' 1346, noting that although 1346 was passed in reaction to McNally v. United States , 483 U.S. 350 (1987), which invalidated the use of ' 1341 to prosecute deprivations of 'intangible rights,' ' 1346 does not encompass all the intangible rights (such as the right to fair elections) which were recognized by the courts before the McNally decision. Rather, the statute is limited to the intangible right to honest services, which does not include the right to fair elections. The circuit court went on to hold that the salary fraud theory was also inapplicable because election fraud may deprive the citizens of the right to select the person who receives the salary, but it does not deprive the government of the salary itself, which must be paid to someone in any event. The circuit court vacated the convictions and dismissed the indictment, commenting that if Congress intends for the mail fraud statutes to apply to state election fraud it must 'speak more clearly than it has.'

Changes in the Advisory Sentencing Guidelines Are Not Ex Post Facto Laws

In United States v. Demaree, No. 05-4213 (7th Cir. Aug. 11, 2006), the Seventh Circuit held that changes made to the now-advisory sentencing guidelines after the completion of a crime that result in longer sentences do not violate the ex post facto clause of the Constitution.

The defendant pled guilty to wire fraud and tax offenses related to her alleged embezzlement of nearly $300,000. Between the time she committed the crimes and her sentencing, the Sentencing Guidelines were amended. The effect of the amendment was to increase her recommended sentence from a range of 18 to 24 months, to a range of 27 to 33 months. On appeal, the defendant argued that the new sentencing guidelines are an ex post facto law that cannot be applied to her crimes, which were completed before the new guidelines were instituted. The Seventh Circuit disagreed. The circuit court explained that the purpose of the ex post facto clause is to protect people from being 'blindsided by a change in the law' and not to enable criminals to calculate with precision the punishments they should expect. The court acknowledged that a change that resulted in a defendant being punished more severely than would have been possible at the time the crime was committed could implicate the ex post facto clause. But the court explained that, because the guidelines are merely advisory and changes in the guidelines do not effect the maximum punishment permissible, the ex post facto clause does not apply.

First Circuit Says the Victim of Bank Fraud Need Not Be the Institution Targeted by Defendant

In United States v. Edelkind, No. 05-2125 (1st Cir. Sept. 13, 2006), the First Circuit upheld a conviction for bank fraud under 18 U.S.C. ' 1344 despite the fact that the institution to which the defendant made his false representations was neither federally insured nor the institution ultimately defrauded.

The defendant was convicted at trial of four counts of bank fraud. Defendant's scheme allegedly involved making fraudulent representations to a mortgage broker in order to secure mortgages and lines of credit. The mortgage broker, which was not federally insured, 'table funded' the loans, meaning that it approved the loans contingent on finding another lender to buy the loan. The broker did, in fact, sell the loans to a federally insured institution. On appeal, the defendant argued that because ' 1344 applies only to frauds on federally insured institutions, and because the fraud must be knowingly executed, he cannot be convicted of a fraud on the uninsured mortgage broker or on the insured institution which was not a knowing target of his fraud. The First Circuit disagreed. The circuit court held that where the federally insured institution is taking part in a single, integrated transaction and is thereby injured by a defendant who intended to defraud at least one party to the transaction, the causal connection is sufficient to establish liability.

Evidence of Public Official's Involvement in Scheme Not Required to Sustain Honest Services Fraud Conviction

In United States v. Potter, 05-2676, 05-2677, 05-2678 (1st Cir. Sep. 8, 2006), the First Circuit held that neither evidence that the ultimate target of a bribery scheme was involved in the scheme, nor evidence of precisely what actions were sought from him, is needed to sustain a conviction for honest-services fraud.

Defendants were convicted after a jury trial of wire fraud and conspiracy to commit wire fraud on charges stemming from an alleged scheme to bribe a high-ranking member of the Rhode Island House of Representa-tives. The scheme involved paying a former partner of the legislator over $4 million to influence legislation affecting the defendants' business. No evidence was introduced that the legislator was a party to or knew of the scheme. Nor was there any evidence introduced as to the precise legislation the defendants sought to influence or how that influence would be accomplished. The defendants appealed their convictions, challenging the sufficiency of the evidence. On appeal, the First Circuit held that under the facts of this case ' where over $4 million was paid to a lobbyist with the explicit aim of influencing future legislation, and that lobbyist has close business ties to the legislator ' a jury is entitled to infer that some of the money was intended to reach the legislator, even if there was no evidence presented concerning the precise way the money would reach him. The court also held that nothing in the language nor the policy of the wire fraud statute sets forth a requirement that one of the parties to the fraud be a public official, noting that even evidence that the legislator refused to participate would not bar a conviction for the other parties to the scheme.