United States v. Fernandez, Peter N. ( 2002 )

In the
United States Court of Appeals
For the Seventh Circuit
Nos. 99-4203, 99-4205, and 99-4210
United States of America,
Plaintiff-Appellee,
v.
Peter N. Fernandez, III, Peter N. Fernandez,
Jr., and Kenneth K. Getty,
Defendants-Appellants.
Appeals from the United States District Court
for the Northern District of Illinois, Eastern Division.
No. 97 CR 835--Ruben Castillo, Judge.
Argued February 21, 2001--Decided March 7, 2002
Before Posner, Kanne, and Diane P. Wood,
Circuit Judges.
Kanne, Circuit Judge. On October 27,
1998, defendants Peter N. Fernandez,
Jr., Peter N. Fernandez, III, and Kenneth
K. Getty, were convicted of eight counts
of mail fraud in violation of 18 U.S.C.
sec.sec. 1341 and 1346, four counts of
theft of funds in violation of 18 U.S.C.
sec. 666, five counts of engaging in
monetary transaction in property derived
from unlawful activities in violation of
18 U.S.C. sec. 1957, and four counts of
money laundering in violation of 18
U.S.C. sec. 1956. The indictment provided
that between the summer of 1996 and April
1997, defendants engaged in a scheme
designed to defraud the Village of Lyons
by rigging bids submitted for municipal
building projects and then laundering the
proceeds. On appeal, defendants argue
that their convictions should be vacated
because: (1) their activities fell beyond
the purview of 18 U.S.C. sec. 1341, (2)
neither the mail fraud counts nor the
jury instructions embraced "materiality"
as an essential element of the offense,
(3) independent of the mail fraud counts,
the money laundering counts cannot
survive, (4) the jury instructions
regarding the elements of money
laundering were inconsistent and
contradictory, and (5) the government
failed to establish a necessary element
of the alleged 18 U.S.C. sec. 666
violations. We find each of these
arguments to be unpersuasive and affirm
the defendants’ convictions.
I. History
Defendants were charged with eight
counts of mail fraud, four counts of
theft of funds, five counts of engaging
in monetary transaction in property
derived from unlawful activities, and
four counts of money laundering. In
essence, the indictment alleged that
defendants engaged in a scheme designed
to defraud the Village of Lyons by
rigging bids submitted for municipal
building projects and then laundering the
proceeds. Each defendant entered a plea
of not guilty. A jury convicted each
defendant on all counts and the district
court sentenced Getty to 66 months
imprisonment, Fernandez, Jr. to 60 months
imprisonment, and Fernandez, III to 48
months imprisonment.
The Village of Lyons is a municipal
corporation and a political subdivision
of the State of Illinois. Getty served as
one of six elected trustees on the Lyons’
Board of Trustees from 1991 until March
1996. As a trustee, Getty received a
modest salary of $3,400 per year. In
addition to being a trustee, Getty also
owned his own insurance business, Kenneth
K. Getty Insurance Company. On March 19,
1996, the presiding mayor of Lyons
resigned for personal reasons. The Board
then selected Getty to serve as acting
mayor until April 1997.
Shortly after becoming acting mayor,
Getty took certain steps to centralize
his power. For example, Getty caused the
village manager, who oversaw the day-to-
day operations of Lyons, to be terminated
without cause. Within weeks of the
village manager’s termination, the
position was eliminated, and Getty
assumed the village manager’s full-time
duties. Additionally, Getty sought to
complete certain municipal building
projects in Lyons in order to increase
his chance of success in the next mayoral
election. The projects included the
renovation of the Village Hall and the
construction of a new Village Public
Works garage.
Getty consulted with his friend, Peter
Fernandez, Jr., regarding the two
building projects. Fernandez, Jr. was the
sole owner of Norman-Marc Associates
Design Build Firm ("Norman-Marc"). Soon
thereafter, Getty chose, and the Board
approved, Norman-Marc to serve as the
first ever "Village Architect." Andrew M.
Fernandez, Fernandez, Jr.’s younger
brother and a licensed architect,
occasionally provided architectural
services to Norman-Marc. However, Norman-
Marc was not a licensed architectural
firm, and Fernandez, Jr. was not a
licensed architect. Although the Board
approved Norman-Marc’s designation as
"Village Architect," only Getty and
Fernandez, Jr. negotiated the details of
Norman-Marc’s compensation. Getty agreed
to pay Norman-Marc $100 per hour for
consulting work, in addition to
commissions on construction projects
equivalent to 9% of the total cost of
each project.
In June 1996, the Board authorized Lyons
to solicit bids for both the renovation
of the Village Hall and the construction
of a new Public Works garage. Combined,
these projects were estimated to cost
approximately $1 million. As the cost of
these projects would exceed $10,000,
Illinois law required Lyons to conduct a
formal bidding process, awarding the
construction contracts to the lowest
qualified bidder. Lyons employed a pre-
qualification process whereby potential
bidders would submit pre-qualification
questionnaires, requiring background and
financial information. Lyons would review
the submitted questionnaires prior to
accepting bids on the projects in order
to determine whether the bidder was
sufficiently qualified for the projects.
After the Board approved the
construction plans, Getty directed that a
one-day notice soliciting pre-
qualification applications be placed in
the Des Plaines Valley News, a weekly
newspaper with a circulation of 5,000, as
opposed to the Suburban Life Citizen,
which had a circulation of 30,000 and
usually served as the forum for Village
bid solicitations. The notice directed
interested bidders to obtain the pre-
qualification questionnaires from Lyons’
Building Department Commissioner, Michael
Kerrigan. Kerrigan testified at trial,
however, that he never received any
requests for pre-qualification
questionnaires.
Evidence presented at trial revealed
that Getty, Fernandez, Jr., and
Fernandez, III caused pre-qualification
questionnaires to be submitted by four
companies-- Randolph I. Anderson
Development Company, Inc. ("Randolph"),
Thompson Enterprises, Riverside
Construction Corporation ("Riverside"),
and Midwest Industrial Construction, Inc.
("Midwest").
Before trial, the parties stipulated
that Randolph I. Anderson was a full-time
practicing attorney and that Randolph,
the construction company, did not exist.
Anderson was a friend of the Fernandez
family and personally agreed to submit a
pre-qualification questionnaire. However,
Anderson decided not to submit a bid on
the projects.
Thompson Enterprises also was not a
valid company. Jeffery Thompson was
Fernandez, III’s former classmate and
friend. Thompson testified at trial that
during the summer of 1996, Fernandez, III
encouraged him to submit a bid for the
projects. At the time, Thompson was
employed as a computer systems analyst
for the Square D Company. Thompson
testified that in mid-August, he met with
Fernandez, Jr. and Fernandez, III. At
this meeting, the Fernandezes gave
Thompson a completed pre-qualification
questionnaire bearing the name "Thompson
Enterprises." Although the questionnaire
listed Thompson’s home telephone number
and address, Thompson testified that he
was not affiliated with such a company.
Thompson also testified that most of the
information on the questionnaire was
false, including purported clients and
information regarding previous projects.
Additionally, the questionnaire was pre-
dated for July. Thompson also testified
that during this meeting, Fernandez, Jr.
calculated the dollar amounts that
Thompson was to submit as bids for the
projects. Fernandez, III and Thompson
typed this information onto bid forms,
and then Thompson signed his name.
Fernandez, Jr. instructed Thompson not to
talk to anyone from the Board who might
try to contact him. Additionally,
Fernandez, Jr. told Thompson to change
his outgoing home answering machine
message to indicate that the caller had
reached Thompson Enterprises.
Riverside owner and long-time friend of
Getty, Jack Andersen, testified that
Getty personally requested that Riverside
bid on the projects. Further, Andersen
testified that Getty requested that
Riverside "bid high." Andersen explained
that Riverside was a union shop with
prices generally too high for
municipalities, and that Riverside
primarily did concrete work. Andersen
also stated that Getty filled out the
pre-qualification questionnaire and the
bid forms on behalf of Riverside.
Andersen explained that on August 13,
1996, Getty visited Andersen’s office and
asked Andersen general questions about
Riverside. During the visit, Getty
presented Andersen with a blank pre-
qualification questionnaire and bid
forms, and asked Andersen to signed them.
Anderson complied. Andersen testified
that the following day he received from
Getty, via facsimile, a completed pre-
qualification questionnaire dated July
29, 1996, and completed bid forms for the
two projects. He testified that all of
the forms were going to be submitted on
behalf of Riverside. Although the forms
were purportedly completed by Riverside,
Andersen testified that he did not
complete any of them.
Finally, Fernandez, III submitted a pre-
qualification questionnaire and bids on
behalf of Midwest. Fernandez, III listed
three clients as references for Midwest.
All three clients subsequently testified
that Midwest had never done any work for
them. Since 1994, Fernandez, III had
worked as construction superintendent for
a company named Industrial Construction,
Inc. ("Industrial"). It was Fernandez,
III’s duty at Industrial to bid on
projects. James Zakovec, the owner of
Industrial, testified that he thought
that Fernandez, III was bidding on the
Lyons projects on behalf of Industrial,
not on behalf of Midwest. Zakovec
testified that eventually he and
Fernandez, III agreed that Industrial
would work as Midwest’s subcontractor on
the two projects.
Lyons awarded the contracts to Midwest
because Midwest’s bids were the lowest
bids the Board received. Lyons agreed to
pay Midwest $963,200 to complete the two
projects. Midwest subcontracted with
Industrial for $784,200. Thus, Midwest
stood to make $179,000 on the completed
projects.
It was not until after Midwest submitted
the lowest bid and the Board selected
Midwest’s bid that Fernandez, III filed
Articles of Incorporation in the State of
Illinois for Midwest and sought an
Employer Identification Number for
Midwest. Additionally, Midwest did not
secure worker’s compensation and employer
liability insurance until after the bids
were awarded. Through his contacts in the
insurance industry, Getty helped Midwest
secure the insurance policies.
One month after receiving the contracts,
Midwest opened a bank account. Fernandez,
III and Fernandez, Jr. were the
signatories on the account. By April,
1997, Fernandez, Jr. and Fernandez, III
had deposited checks and cash from Lyons
totaling $722,960. Evidence was presented
at trial which revealed that Midwest
wrote seven checks to "Cash" from the
account, totaling $32,200. Additionally,
$51,400 in checks were written to
Fernandez family members and $17,521.79
in checks were used to pay personal, non-
business expenses.
Additionally, throughout the
aforementioned events, Norman-Marc was
providing its purported architectural
services to Lyons. Through December 1997,
Norman-Marc deposited checks from Lyons
totaling approximately $148,000. Of that
amount, $136,097.50 was related to work
Norman-Marc had done on the two projects
that had been awarded to Midwest. Between
June 1996 and June 1997, checks totaling
$126,450 were written from Norman-Marc’s
account to "Cash" and to various
Fernandez family members.
During the course of construction,
Fernandez, Jr. requested and Getty
approved multiple change orders on the
projects. The change orders added
$320,219 to the amount Lyons owed
Midwest. By the time a new building
commissioner issued a "stop-work" order
in April 1997, Midwest’s net profit on
the projects was $93,271.
On September 8, 1998, Getty, Fernandez,
Jr., and Fernandez, III were charged in a
twenty-one count Superseding Indictment.
Counts 1 through 8, the mail fraud
counts, detailed the bid-rigging scheme
and provided that defendants devised to
defraud Lyons of money and property by
means of false and fraudulent pretenses,
representations, and promises and
material omissions; to deprive Lyons and
its citizenry of their right to Getty’s
honest services as the mayor of Lyons;
and to deprive Lyons and its citizenry of
their right to Fernandez, Jr.’s honest
services as Village Architect. Each count
listed a different mailing used to
further defendants’ scheme to defraud
Lyons and Lyons’ citizenry./1 Counts 9
through 12 charged defendants with
obtaining by fraud funds in excess of
$5,000 on four separate occasions from
Lyons, a local government, which receives
in excess of $10,000 per year under
federal programs. Counts 13 through 17
charged defendants with knowingly
engaging in a monetary transaction in
criminally derived property of a value
greater than $10,000, which was derived
from mail fraud. Each of these counts
listed an individual check drawn from
Midwest’s bank account in an amount
greater than $10,000. Finally, Counts 18
through 21 charged defendants with
conducting a financial transaction
involving the proceeds of the mail fraud,
with the intent to promote the carrying
on of the mail fraud, knowing that the
property involved in the financial
transaction represented theproceeds of
some form of unlawful activity. Again,
each of these counts listed a separate
check drawn from Midwest’s bank account
used to make partial payments to
Industrial for construction work
performed on the two projects.
On October 27, 1998, the jury returned
a verdict finding Getty, Fernandez, Jr.,
and Fernandez, III guilty on all counts.
II. Analysis
A. Mail Fraud
Defendants present three arguments in
support of their assertion that their
mail fraud convictions should be vacated.
First, defendants claim that their
activities fell beyond the purview of 18
U.S.C. sec.sec. 1341/2 and 1346/3
because the government failed to prove "a
legally cognizable scheme to defraud."
Second, defendants claim that their
activities fell beyond the purview of 18
U.S.C. sec.sec. 1341 and 1346 because the
mailings that the government used as the
basis for defendants’ mail fraud
convictions were not mailings used "in
furtherance of a scheme." Third,
defendants claim that neither the
indictment nor the jury instructions
embraced the concept of "materiality" as
an essential element of mail fraud and
therefore, because the government failed
to establish an essential element of the
crime, the defendants argue that they
were not proven guilty beyond a
reasonable doubt.
1. Scheme to Defraud
Defendants’ first argument on appeal
lacks merit and warrants minimal
discussion. Defendants contend that the
government needed to prove a
"contemplated harm to the victim" in
order to prove a "scheme to defraud."
Normally, when a defendant challenges the
sufficiency of the evidence presented, we
review the evidence in a light most
favorable to the government and if any
evidence can support the conviction, the
defendant’s efforts must fail. See United
States v. Seward, 272 F.3d 831, 835 (7th
Cir. 2001). In this case, however, we do
not have to review the sufficiency of the
evidence because to establish their prima
facie case, the government did not have
to prove a contemplated harm to a victim
as the defendants contend. This court has
repeatedly stated that to convict for
mail fraud under 18 U.S.C. sec. 1341, the
government must prove three elements: (1)
that the defendant participated in a
scheme to defraud; (2) that the defendant
intended to defraud; and (3) that the
defendant used the mails in furtherance
of the scheme. See id. This Circuit has
never required the government to
establish a "contemplated harm to the
victim." Defendants’ reliance on United
States v. D’Amato, 39 F.3d 1249, 1257 (2d
Cir. 1994) ("[D]eceit must be coupled
with a contemplated harm to the victim.")
(quotation omitted) and on United States
v. Jain, 93 F.3d 436, 441 (8th Cir. 1996)
(quoting D’Amato) is misplaced. Even if
D’Amato were the law in this Circuit,
defendants ignore the D’Amato court’s
explanation that fraudulent intent, which
is essential to a scheme to defraud, may
be inferred from the scheme "[w]hen the
’necessary result’ of the actor’s scheme
is to injure others." 39 F.3d at 1257. In
this case, the necessary result of the
defendant’s actions was to deprive Lyons
and its citizenry of the opportunity to
award and receive construction work at
the most competitive price and the honest
services of Getty and Fernandez, Jr.
Contrary to defendants’ assertion, we
fail to find anything in the language of
United States v. Bloom, 149 F.3d 649 (7th
Cir. 1998), to support their position
that this Circuit requires the government
to prove a contemplated harm to a victim.
In Bloom, this court compared a violation
of state-law fiduciary duties and federal
mail fraud. See id. at 654-58 (explaining
that in order to establish mail fraud
under the intangible rights theory the
government must show that an employee
misused his position for private gain).
Bloom says nothing about a contemplated
harm to a victim, much less that such
harm must be established in order to
sustain defendants’ convictions.
2. Mailings in Furtherance of the
Scheme
Next, defendants argue that the
government failed to prove that they used
the mails in furtherance of a scheme to
defraud. See Seward, 272 F.3d at 835. In
challenging the sufficiency of the
evidence against them, defendants "face[
] the usual stringent standard of review:
if the evidence presented at trial, taken
in the light most favorable to the
prosecution, can support the jury’s
conclusion, [defendants’] effort[s] must
fail." Id.Initially, defendants assert that any
purported scheme ended on August 20,
1996, the date that Midwest was awarded
the contracts by Lyons. Thus, they argue,
because the mailings listed in counts 2
through 8 in the indictment all
transpired after August 20, the mailings
occurred after any purported scheme had
ended. Further, defendants claim that
even if the scheme did not end on August
20, the mailings listed in the indictment
were ancillary to, and not in furtherance
of, any purported scheme. We find
defendants’ arguments unpersuasive.
Defendants’ scheme to defraud involved
depriving Lyons and its citizenry of
money and property and the honest
services of Getty and Fernandez, Jr.
Defendants’ scheme did not end on August
20, as the defendants would have this
court believe. Rather, defendants’ scheme
continued through April 1997--when the
stop-work order was issued--because until
the stop-work order was issued, Midwest
continued to receive payments from Lyons
and defendants continued to conceal the
truth about their bid- rigging scheme.
Moreover, in Seward, this court
explained that while "the mail fraud
statute does not reach every single use
of the mails that is in any way remotely
related to a scheme to defraud," a
mailing will be considered in furtherance
of the scheme if it is "incidental to an
essential part of the scheme. . . . In
other words, the success of the scheme
must in some measure depend on the
mailing." Id. at 835-36 (citations
omitted). We find that the mailings
listed in Counts 2 through 8 are, in
fact, essential parts of defendants’
scheme. For example, Count 2 charges
defendants with sending a letter to
Thompson Enterprises informing Thompson
that it was not a successful bidder and
Count 4 charges defendants with sending a
letter from Getty to Midwest informing
Midwest that its bid had been selected.
These notifications were not merely
ancillary to the execution of the fraud,
rather, each of these letters furthered
defendants’ scheme by falsely portraying
to anyone who examined Lyons’ records
that the bids submitted were legitimate,
thereby concealing the true nature of the
scheme. Similarly, the mailings in Counts
3 through 8 all contributed to the
success of defendants’ scheme./4 Each
mailing helped to further the scheme by
falsely portraying the legitimacy of
Midwest. Defendants needed Midwest to ap
pear legitimate in order to collect
payments from Lyons. Thus, the mailings
charged in the indictment were in
furtherance of the scheme to defraud.
3. Materiality
Finally, relying on Neder v. United
States, 527 U.S. 1, 25, 119 S. Ct. 1827,
144 L. Ed. 2d 35 (1999), defendants argue
that "materiality" is an essential
element of mail fraud and because the
indictment and the jury instructions
failed to allege materiality, the
government failed to prove an essential
element of the crime. Thus, defendants
contend that their convictions should be
vacated. In Neder, the Supreme Court held
that "materiality" is an essential
element of "scheme to defraud" under the
mail fraud statute. See id. This court
has explained that "[a] false statement
is material, [and thus may potentially
establish violation of wire and mail
fraud statutes], if it has a natural
tendency to influence, or is capable of
influencing, the decision of the
decisionmaking body to which it was
addressed." United States v. Gee, 226
F.3d 885, 891 (7th Cir. 2000) (quotation
omitted).
Because defendants did not challenge the
indictment prior to trial, the indictment
will be deemed sufficient "unless it is
so defective that it does not, by any
reasonable construction, charge an
offense for which the defendant is
convicted." United States v. Gooch, 120
F.3d 78, 80 (7th Cir. 1997) (quotation
omitted). We do not find the indictment
to be so defective. The indictment
alleged (1) that the defendants, by
submitting three illegitimate bids,
rigged the bidding process, (2) that
defendants prepared false responses to
pre-qualification questionnaires, and (3)
that the defendants’ scheme included
"false and fraudulent pretenses,
representations, and promises and
material omissions" intended to cause
Lyons to lose money and property. These
allegations encompassed the concept of
materiality. The defendants’ alleged
actions clearly would have influenced
Lyons’ decision to award the contracts to
Midwest. Defendants knew that a
reasonable person, particularly a Trustee
voting on who to award the contracts to,
would attach importance to such matters
as whether the bidding company existed,
whether the company had experience, and
whether costs were projected by the
company in good faith rather than
contrived estimates.
With respect to the jury instructions,
because defendants did not raise this
objection in the court below, we review
only for plain error. See United States
v. Olano, 507 U.S. 725, 732-34, 1135 S.
Ct. 1770, 123 L. Ed. 2d 508 (1993). We
will reverse only if the error was (1)
clear and uncontroverted at the time of
appeal and (2) affected substantial
rights, which means the error affected
the outcome of the district court
proceedings. See United States v. Holmes,
93 F.3d 289, 292-93 (7th Cir. 1996)
(quotation omitted)./5 While we
recognize that the district court did not
explicitly instruct the jury on
"materiality," we find that, when viewed
in their entirety, the jury instructions
encompassed the concept of materiality.
In this case, the judge charged the
jury: "In considering whether the
government has proven a scheme to
defraud, it is essential that one or more
of the false pretenses, representations,
promises and acts charged in the portion
of the indictment describing the scheme
be proved." The judge then stated that
"[a] scheme to defraud is a scheme that
is intended to deceive or cheat another
and to obtain money or property or cause
the loss of money or property to another
or to deprive another of someone’s honest
services." Finally, the judge explained
that "’intent to defraud’ means that the
acts charged were done knowingly with the
intent to deceive or cheat a victim in
order to cause a gain of money or
property to the defendant or to deprive
another of someone’s honest services."
Again, materiality has been defined as
having "a natural tendency to influence,
or is capable of influencing, the
decision of the decisionmaking body to
which it was addressed." Gee, 226 F.3d at
891 (quotation omitted). We believe that
these instructions adequately required
the jury to find that the defendants made
false representations which were capable
of influencing, and thereby deceiving,
Lyons. Thus, these instructions viewed in
their entirety adequately embraced the
concept of materiality. See also United
States v. Reynolds, 189 F.3d 521, 525 n.2
(7th Cir. 1999) (explaining that
instructions adequately placed the
question of materiality before the jury
even though the instructions did not
explicitly use the term "materiality");
United States v. Pribble, 127 F.3d 583,
589 (7th Cir. 1997) (same)./6
B. Money Laundering Counts
Next, defendants challenge their money
laundering convictions./7 Defendants
assert that the money laundering
convictions and sentences should be
vacated because the district court gave
inconsistent and contradictory money
laundering jury instructions. We do not
agree with defendants’ characterization
of the jury instructions.
Because defendants did not object to the
money laundering instructions at trial,
we review defendants’ challenge for plain
error. See Olano, 507 U.S. at 732-34.
Defendants were charged with violations
of 18 U.S.C. sec.sec. 1957(a) and
1956(a)(1)(A)(i)./8 The district court
instructed the jury that the government
must prove "[1] that the defendant
engaged or attempted to engage in a
monetary transaction, [2] that the
defendant knew the transaction involved
criminally derived property, [3] that the
property had a value greater than
$10,000, [4] that the property was
derived from mail fraud, and [5] that the
transaction occurred in the United
States." The district court then stated:
The government must prove that the
defendant knew that the property
represented the proceeds of some form of
activity that constitutes a felony under
state or federal law. The government is
not required to prove that the defendant
knew that the property involved in the
transaction represented the proceeds of
mail fraud.
Defendants argue that initially the
district court instructed the jury that
in order to sustain the money laundering
counts, the criminally derived property
had to be derived from mail fraud. Then,
according to defendants, the district
court told the jury that the government
needed only to prove that the property
represented the proceeds of some form of
activity that constitutes a felony under
state or federal law. Defendants now
argue on appeal that these instructions
were confusing and directly
contradictory.
Defendants, however, fail to see the
difference between the relevant
instructions. As stated in the
instructions, the government did not need
to prove that the defendants knew the
criminally derived property was derived
from mail fraud, only that the defendants
knew that the transaction involved some
form of criminally derived property.
Additionally, the government needed to
prove that the criminally derived
property was, in fact, derived from mail
fraud. The instructions in question
presented these two different elements
that the government needed to establish.
Thus, the jury instructions were neither
inconsistent nor contradictory.
C. Theft of Funds
Finally, defendants argue that their
convictions under 18 U.S.C. sec. 666
should be vacated./9 Defendants assert
that the government failed to establish a
necessary element of the offense, the
requisite link between a federal interest
and the defendants’ fraud. We do not
believe that it is necessary for the
government to establish such a link.
Section 666 punishes an agent of a local
government who obtains through fraud
property valued at $5,000, or more, from
a local government that receives, in any
one-year period, benefits in excess of
$10,000 from federal funds. See 18 U.S.C.
sec. 666. In United States v. Grossi, a
township supervisor was convicted of
taking brides in exchange for payments
out of the town’s general assistance
program in violation of 18 U.S.C. sec.
666. 143 F.3d 348, 349-50 (7th Cir.
1998). On appeal, the defendant asserted
that since the township’s general
assistance program was funded entirely by
local sources, the requirement that the
local government receive $10,000 in
federal funds was not satisfied. See id.
at 350. In reply to the defendant’s
argument, this court explained that
"money is fungible and its effect
transcends program boundaries." Id.Because the parties stipulated at trial
that Lyons received over $10,000 under a
federal program in 1996 and 1997, it was
not necessary for the government to
further establish a link between the
defendants’ fraud and a federal interest.
See id.III. Conclusion
For the foregoing reasons, we AFFIRM the
convictions of Getty, Fernandez, Jr., and
Fernandez, III.
FOOTNOTES
/1 Count 1 charges defendants with a mailing sent to
Midwest. Count 2 charges defendants with a mail-
ing sent to Thompson Enterprises. Count 3 charges
defendants with mailing Midwest’s Article of
Incorporation to the Secretary of the State of
Illinois. Count 5 charges defendants with a
letter containing an Employer Identification
Number for Midwest. Count 6 charges defendants
with a mailing from an insurer to Midwest con-
taining Midwest’s worker’s compensation and
employer liability insurance policy. Finally,
Counts 7 and 8, charge defendants with mailing
checks from Industrial to one of its subcontrac-
tors, Mathis Plumbing, for work Mathis Plumbing
performed on the Lyons projects.
/2 Title 18 of The United States Code Section 1341
is entitled "Frauds and Swindles." It provides:
Whoever, having devised or intending to devise
any scheme or artifice to defraud, or for obtain-
ing money or property by means of false or
fraudulent pretenses, representations, or promis-
es . . . for the purpose of executing such scheme
or artifice or attempting to do so, places in any
post office or authorized depository for mail
matter, any matter or thing whatever to be sent
or delivered by the Postal Service . . . shall be
fined under this title or imprisoned not more
than five years, or both.
/3 Title 18 of the United States Code Section 1346
defines scheme to defraud, which includes "a
scheme or artifice . . . designed to deprive
another of the intangible right of honest servic-
es."
/4 Count 3 charges defendants with mailing Midwest’s
Articles of Incorporation to the Secretary of the
State of Illinois. Count 5 charges defendants
with a letter containing an Employer Identifica-
tion Number for Midwest. Count 6 charges defen-
dants with a mailing from an insurer to Midwest
containing Midwest’s worker’s compensation and
employer liability insurance policy. Finally,
Counts 7 and 8 charge defendants with mailing
checks from Industrial to one of its subcontrac-
tors, Mathis Plumbing, for work Mathis Plumbing
performed on the Lyons projects.
/5 We are aware that the defendants argue that their
objection to the jury instructions should be
deemed timely because it was based upon an inter-
vening Supreme Court decision. Although we do not
find the defendants’ argument persuasive, under
a harmless error standard of review our decision
would be the same.
/6 We reiterate what we stated in Reynolds, "[a]-
lthough there is no plain error here, in the
future, given the Court’s ruling in Neder, dis-
trict courts should include materiality in the
jury instructions for sec. 1344." 189 F.3d at 525
n.2.
/7 Defendants assert that independent of the mail
fraud counts, the money laundering counts (13-21)
cannot survive. Because we are affirming defen-
dants’ convictions under the mail fraudstatute,
it is not necessary to discuss this argument.
/8 18 U.S.C. sec. 1956(a)(1)(A)(i) punishes "[w]hoe-
ver, knowing that the property involved in a
financial transaction represents the proceeds of
some form of unlawful activity, conducts or
attempts to conduct such a financial transaction
which in fact involves the proceeds of specified
unlawful activity with the intent to promote the
carrying on of specified unlawful activity." 18
U.S.C. sec. 1957(a) punishes "[w]hoever . . .
knowingly engages or attempts to engage in a
monetary transaction in criminally derived prop-
erty of a value greater than $10,000 and is
derived from specified unlawful activity."
/9 Title 18 of the United States Code section 666
provides in part:
(a) Whoever, if the circumstance described in
subsection (b) of this section exists--(1) being
an agent of an organization, or of a State,
local, or Indian tribal government, or any agency
thereof--(A) embezzles, steals, obtains by fraud,
or otherwise without authority knowingly converts
to the use of any person other than the rightful
owner or intentionally misapplies, property that-
-(i) is valued at $5,000 or more, and (ii) is
owned by, or is under the care, custody, or
control of such organization, government, or
agency; or (B) corruptly solicits or demands for
the benefit of any person, or accepts or agrees
to accept, anything of value from any person,
intending to be influenced or rewarded in connec-
tion with any business, transaction, or series of
transactions of such organization, government, or
agency involving any thing of value of $5,000 or
more; or (2) 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.
(b) The circumstance referred to in subsection
(a) of this section is that the organization,
government, or agency receives, in any one year
period, benefits in excess of $10,000 under a
Federal program involving a grant, contract,
subsidy, loan, guarantee, insurance, or other
form of Federal assistance.
(c) This section does not apply to bona fide
salary, wages, fees, or other compensation paid,
or expenses paid or reimbursed, in the usual
course of business.