Monday, December 6, 2010

United States v. Redzic[1]

Opinion handed down December 6, 2010
Link to Eighth Circuit Opinion

On remand from the United States Supreme Court, the Eighth Circuit Court of Appeals held that the defendant’s convictions for mail fraud and wire fraud under an “honest services” theory, a theory that was not explicitly stated in the indictment, trial arguments, or jury instructions, did not amount to a constructive amendment of the indictment. The court also held that defendant’s bribery conviction was supported by sufficient evidence.

I. Facts and Holding

Mustafa Redzic owned Bosna Truck Driving School, a commercial truck driving school in St. Louis, Missouri.[2] After completing school, students were required to take a test that consisted of a written exam and a three-part driving exam consisting of a “pre trip inspection, a skills test, and a road test.”[3] The test was administered by either a state facility or by a private company certified by the State of Missouri.[4]

One of these private companies was Commercial Drivers Training Academy (CDTA), located in Sikeston, Missouri.[5] Troy Parr was responsible for overseeing the tests that CDTA administered.[6] Mr. Parr, in an attempt to get more business, began to “omit entire portions of the driving exam or administer it in only a fraction of the time necessary for a proper evaluation. These short tests did not meet the minimum requirements set by the state for [commercial drivers license (CDL)] testing.”[7] Parr used this system of “short testing” on Redzic’s students and would file the corresponding paperwork with false indications that the students had completed the requirements to receive a commercial driver’s license.[8]

On one occasion, at Redzic’s request, Parr submitted paperwork for two students who had never gone to CDTA.[9] On another occasion, Redzic made a promise that one of his potential students would pass the driving test even though she could not operate a manual transmission.[10] Evidence also showed that Redzic paid CDTA in excess of $50 and $200 on at least twelve different occasions, which Parr split between himself and the other examiners.[11] Redzic also made cash payments of $600 and $2,500 to Parr on two occasions.[12] Parr testified that he had been helping Redzic try to obtain state certification for Bosna and that Redzic had offered him employment, a salary of 150 percent of his current salary, a free apartment, bonuses, and free vacations.[13]

Redzic was convicted in federal court of mail fraud, wire fraud, bribery, and conspiracy.[14] He did not offer any evidence at trial but did file two motions for judgment of acquittal; one at the close of the Government’s case and another at the close of all of the evidence.[15] Both motions were denied, and Redzic was convicted by a jury on all counts.[16] Following his convictions, Redzic filed a motion for a “new trial and a motion for judgment of acquittal.”[17] One issue raised for the first time in the post-trial motions was that ‘CDLs are not property under the federal fraud statutes.[18] The district court denied both motions, and the Eight Circuit affirmed.[19] The U.S. Supreme Court granted certiorari and vacated the judgment, returning the case to the Eighth Circuit for consideration in light of its decision in Skilling v. United States.[20]

On remand, the Eighth Circuit held that the indictment, the government’s trial arguments, and the jury instructions showed a scheme to defraud Missouri of Parr’s honest services through a bribery scheme because the scheme was reasonably described in the indictment, trial arguments, and jury instructions even though the honest services theory was never explicitly mentioned.[21]

II. Legal Background

A. The Phrase “Honest Services” and the Effect of Its Exclusion from the Indictment

The Eighth Circuit began by examining Redzic’s convictions for mail and wire fraud.[22] The federal mail fraud statute states that “‘[w]hoever, having devised . . . any scheme or artifice to defraud, or for obtaining money or property by means of false or fraudulent pretenses, representations or promises . . . [uses the mails in furtherance of the scheme shall be punished by imprisonment or fine or both].’”[23] The federal wire fraud statute is substantially similar to the mail fraud statute.[24]

The U.S. Supreme Court has determined that the language in these statutes only applies to deprivations of property and does not include “‘the right to have [a state’s] affairs conducted honestly.’”[25] However, under section 1346, the term “‘scheme or artifice to defraud’” does include a deprivation of the “right to honest services.”[26] In Skilling v. United States, the Court held that section 1346 “criminalizes only ‘fraudulent schemes to deprive another of honest services through bribes or kickbacks.’”[27]

In Redzic, Redzic argued that the Government failed to proceed on this “honest services” theory and instead focused on the theory that the State of Missouri was defrauded of property in the form of CDLs.[28] Therefore, Redzic asserted that his convictions should be overturned because, as a matter of law, “fraudulently obtaining a license from a government agency does not deprive that agency of property in the sense of §§ 1341 or 1343.”[29] In response, the Government argued that Missouri was deprived of its right to Parr’s honest services through the use of bribes.[30] Redzic responded that since he was not charged with depriving Missouri of honest services, but instead with defrauding Missouri of property, the government was constructively amending the indictment in violation of his Fifth Amendment protection against double jeopardy.[31]

The Eighth Circuit stated that “[a]n indictment is insufficient if it fails to allege an essential element of the crime charged.”[32] However, in making this determination, it is not necessary that a particular word or phrase appear in the indictment when the element alleged is substantially stated in some form.[33] The court noted that although the indictment did not explicitly use the phrase “honest services,” it still sufficiently stated the substance of the bribery scheme.[34] The court reviewed the indictment, stating the provisions that it believed to make the indictment sufficient to implicitly state an honest services theory: Parr worked for the state as a CDL examiner; licensing of truck drivers served economic and safety needs of the state; Parr would give short tests to Redzic’s students as per an agreement between them; Parr certified two of Redzic’s students who never showed up to be tested; Parr would falsely complete paperwork stating that the students who took the short tests had passed all of the testing; and Redzic benefitted from this scheme.[35]

Additionally, sections 1341 and 1343 were cited in the indictment and created the substantive offenses for which Redzic was charged.[36] Since section 1346 does not create one of the substantive offenses at issue, but rather only further defined the offenses, its inclusion in the indictment was not necessary.[37] While inclusion of the term “honest services” in the indictment would have been preferable, failing to include the term was not fatal.[38] Since the indictment clearly alleged Redzic’s conduct, including his role in Parr’s wrongdoing and promises of future employment, and the indictment also cited to the appropriate substantive statutes which incorporate the fraudulent services theory, the court concluded that the indictment was sufficient.[39]

B. The Phrase “Honest Services” and Its Exclusion from the Government’s Trial Arguments

Redzic argued that since the Government’s trial arguments did not mention “honest services,” the Government’s focus on a loss of property theory at trial was misplaced.[40] The court disagreed, stating that because the government continually referenced Parr’s practice of administering inadequate short tests, which undermined the state’s efforts to promote highway safety, the government was implicitly arguing the theory that the honest services Parr owed the State of Missouri had been withheld.[41] Therefore, Redzic’s second point on appeal also failed.[42]

C. The Phrase “Honest Services” and Its Exclusion from the Jury Instructions

Redzic also argued that the jury was only instructed on a deprivation of property theory and that attempting to uphold his conviction on the “honest services” theory would violate his Sixth Amendment right to a jury trial.[43] The court noted that the jury instructions correctly stated the substantive elements for mail and wire fraud and that the instructions identified the scheme in detail by stating: “‘Troy Parr and the defendant submitted by mail to the State of Missouri false test records for Commercial Drivers License tests purportedly given to the defendant's students.’”[44] After observing the contents of what the jury instructions, the court reasoned that they did not merely suggest fraud by Redzic in obtaining the CDLs, but that he also used a state agent who withheld his honest services in order to secure these licenses.[45]

Again, the court noted that while it would have been preferable to include the term “honest services” in place of “property” in the instructions, this omission was not fatal.[46] The court reasoned that because the elements of mail fraud appeared in the instructions and because Redzic’s scheme was characterized as one in which a state agent was used and acted in dereliction of his duties, the instructions, when read as a whole, adequately conveyed the applicable law.[47]

Redzic argued that the indictment was insufficient to charge him under the honest services theory and cited Stirone v. United States to support his claim.[48] In Stirone, the indictment charged the defendant with interference with sand importation into Pennsylvania.[49] However, the jury instructions allowed the jury to consider whether the defendant’s conduct would have disturbed any future exportation of steel from Pennsylvania.[50] The U.S. Supreme Court held that the jury should not have had the choice to convict him of something that was not considered by the grand jury.”[51]

The Eighth Circuit distinguished the present case by noting that, although the phrase “honest services” was not used in the indictment, the grand jury considered facts that were essential to the conviction.[52] In Redzic, there was no invitation for the petit jury to wander beyond the allegations contained in the indictment.”[53] Based on all of the above, the Eighth Circuit held that the jury instructions were “sufficient to support a conviction for the fraudulent deprivation of honest services through a bribery scheme.”[54]

D. Sufficient Evidence for Bribery

Redzic additionally argued that his payments were merely gratuities, whereas section 666(a)(2) prohibits bribery.[55] Section 666(a)(2) states that whoever “‘corruptly gives, offers, or agrees to give anything of value to any person, with intent to influence or reward an agent of an organization or of a State, local or Indian tribal government, or any agency thereof, in connection with any business, transaction, or series of transactions of such organization, government, or agency involving anything of value of $5,000 or more[ ] shall be fined under this title, imprisoned not more than 10 years, or both.’”[56] Redzic specifically argued that the government failed to prove that he gave the money as a bribe with the intent to “influence or reward.”[57]

After reviewing the evidence of the various payments from Redzic to Parr, the court determined that the jury could find that Redzic possessed the intent to induce Parr to keep using substandard tests to Bosna students and thus the evidence was sufficient to convict Redzic of bribery.[58]

E. Holding

The Court of Appeals for the Eighth Circuit held that the indictment, the government’s trial arguments, and the jury instructions showed a scheme to defraud Missouri of Parr’s honest services through a bribery scheme because the scheme was reasonably described in the indictment, trial arguments, and jury instructions even though the honest services theory was never explicitly mentioned.[59]

III. Comment

The Eighth Circuit’s decision in Redzic sheds light on the meaning of section 1346 and its “honest services” theory after the U.S. Supreme Court’s holding in Skilling v. United States. The court makes clear that, even if an indictment explicitly states that the Government is proceeding on a deprivation of property theory, if the substantive elements for mail fraud and wire fraud are presented in the indictment, trial arguments, and jury instructions, then the indictment is still sufficient to support a conviction under section 1346’s “honest services” theory even though this theory is never explicitly mentioned.

The court still requires that the allegations in the indictment clearly spell out the course of conduct for which the defendant is on trial and citation to the appropriate substantive statutes for mail fraud and wire fraud. However, since sections 1341 and 1343 incorporate the fraudulent deprivation of honest services found in section 1346, it need not be explicitly mentioned in the indictment.[60]

The Government should be aware, however, that the court still prefers that the “honest services” theory is specifically mentioned in the indictment, arguments, and jury instructions when the Government proceeds on this theory.[61] What Redzic makes clear is that failure to include this is not always fatal.[62]

-Adam J. Wallach

[1] 627 F.3d 683 (8th Cir. 2010).
[2] Id. at 685.
[3] Id. at 685-86.
[4] Id. at 686.
[5] Id.
[6] Id.
[7] Id.
[8] Id.
[9] Id.
[10] Id.
[11] Id.
[12] Id.
[13] Id.
[14] Id. (citing 18 U.S.C. §§ 1341, 1343, 666(a)(2), 371).
[15] Id.
[16] Id.
[17] Id.
[18] Id. at 686-87.
[19] Id. at 687, 685.
[20] Id. at 685. See Skilling v. United States, 130 S.Ct. 2896 (2010).
[21] Redzic, 627 F.3d at 693.
[22] Id. at 687.
[23] Id. (quoting 18 U.S.C. § 1341 (2010)).
[24] Id. (citing 18 U.S.C. § 1343 (2010)).
[25] Id. (quoting McNally v. United States, 483 U.S. 350 (1987)).
[26] Id. (quoting 18 U.S.C. § 1346 (2010)).
[27] Id. (quoting Skilling v. United States, 130 S.Ct. 2928, 2931 (2010)).
[28] Id.
[29] Id.
[30] Id. at 687-88.
[31] Id. at 688.
[32] Id.
[33] Id. (quoting United States v. Mallen, 843 F.2d 1096, 1102 (8th Cir. 1988)).
[34] Id.
[35] Id.
[36] Id.
[37] Id.
[38] Id. at 689.
[39] Id.
[40] Id.
[41] Id.
[42] Id.
[43] Id.
[44] Id.
[45] Id. at 689-90.
[46] Id. at 690.
[47] Id.
[48] Id. (citing Sitrone v. United States, 316 U.S. 212 (1960)).
[49] Redzic, 627 F.3d at 690.
[50] Id.
[51] Id.
[52] Id.
[53] Id.
[54] Id. at 691.
[55] Id. (citing 18 U.S.C. § 666(a)(2)).
[56] Id. The monetary requirements were stipulated to being met in this case by the parties. Id.
[57] Id.
[58] Id. at 692.
[59] Id. at 693.
[60] Id. at 688.
[61] Id. at 689.
[62] Id.