United States v. Spano, Michael ( 2005 )

In the
United States Court of Appeals
For the Seventh Circuit
____________
Nos. 03-1110, 03-1113 & 03-1195
UNITED STATES OF AMERICA,
Plaintiff-Appellee,
v.
MICHAEL SPANO, SR., EMIL SCHULLO,
and JAMES INENDINO,
Defendants-Appellants.
____________
Appeals from the United States District Court for
the Northern District of Illinois, Eastern Division.
No. 01 CR 30—Ruben Castillo, Judge.
____________
ARGUED JANUARY 20, 2004—DECIDED MARCH 24, 2005
____________
Before CUDAHY, KANNE, and EVANS, Circuit Judges.
KANNE, Circuit Judge. A jury found Emil Schullo, the
Director of Public Safety for the Town of Cicero, Illinois,
guilty of accepting a bribe valued at $5000 or more in
violation of 18 U.S.C. § 666(a)(1)(B), and of the theft of at
least $5000 from a federally funded program in violation of
§ 666(a)(1)(A). His co-defendants, Michael Spano and James
Inendino, were charged and convicted of, among other
offenses, paying the bribe in violation of § 666(a)(2), and
2 Nos. 03-1110, 03-1113 & 03-1195
aiding and abetting the theft in violation of 18 U.S.C. § 2and § 666(a)(1)(A). The jury also found all three men guilty
of conspiring to embezzle, steal, or obtain by fraud monies
owned by an organization receiving federal funds, namely,
the Town of Cicero, under 18 U.S.C. § 371 and
§ 666(a)(1)(A).
Schullo’s responsibilities as Cicero’s Director of Public
Safety included oversight of the town’s police, fire, and health
departments. The charges in this case arose out of a private
investigation initiated by Schullo to determine whether three
police officers lived outside of Cicero’s boundaries in
violation of a town ordinance. The ordinance required that
town employees, including police officers and firefighters,
live within the town limits. The investigation was allegedly
prompted by a formal labor grievance filed by the town’s
firefighters, who initially discovered that the three police
officers lived outside Cicero. The firefighters’ grievance
claimed that the residency requirement for town employees
was being applied disparately and that they too should be
allowed to live outside Cicero’s boundaries.
Evidence at trial showed that the Town of Cicero paid
$75,831.24 for the investigation commissioned by Schullo—
an investigation that in reality had only $34,456.90 of “le-
gitimate” expenses associated with it and which apparently
was never used in resolving the firefighters’ grievance. The
remaining $41,374.34 paid by the town was divided up among
the various co-conspirators, including Schullo, Spano, and
Inendino.
The defendants in this consolidated appeal argue, as they
did below, that § 666 is unconstitutional, either on its face
or as applied to them, and thus their convictions must
necessarily be vacated.
Nos. 03-1110, 03-1113 & 03-1195 3
I. Analysis
At the heart of the defendants’ constitutional challenges
to § 666 is the contention that the statute is void for failure
to require a connection between the alleged theft/bribe and
the federal funds received by the town. Broadly stated, to
establish a case under § 666, the government need only
prove that an agent of an organization, state, local, or Indian
tribal government (or any agency thereof) was offered or
accepted a bribe worth $5000 or more (see § 666(a)(1)(B)) or
stole that amount (see § 666(a)(1)(A)) and that the org-
anization, government, or agency received $10,000 under a
federal program in any one-year period (see § 666(b)).1 We
previously have held, without addressing the constitutional-
ity of § 666, that a plain reading of the statute requires no
nexus between the bribe and the federal funds received—in
other words, the bribe need not be linked to federal funds to
violate the law. See United States v. Grossi, 143 F.3d 348, 350
(7th Cir. 1998); United States v. Fernandez, 282 F.3d 500, 511
(7th Cir.), cert. denied, 537 U.S. 1028 (2002). With regard to
their as-applied challenge, the defendants assert that we
are wrong not to read a nexus requirement into § 666.
The defendants mount their facial challenge against § 666
under United States v. Lopez, 514 U.S. 549 (1995), and
United States v. Morrison, 529 U.S. 598 (2000), two cases
that struck down federal statutes regulating gun possession
near schools and gender-motivated violence, respectively.
The statutes at issue in those cases were enacted under the
Commerce Clause. Critical to the Supreme Court’s unconsti-
1
The parties here stipulated that the Town of Cicero received in
excess of $10,000 from the federal COPS (“Community-Oriented
Policing Services”) program, a program intended to help put more
police on the streets in Cicero. The defendants argue that the
theft/bribe at issue here had no impact on the COPS program
funding.
4 Nos. 03-1110, 03-1113 & 03-1195
tutionality determination in those two cases was the finding
that the effects on interstate commerce of the activities
Congress attempted to ban were too attenuated to warrant
federal oversight. See Lopez, 514 U.S. at 561; Morrison, 529
U.S. at 615-17. The defendants claim that the same is true
here: Congress, which purported to enact § 666 under the
Spending Clause, did not sufficiently tie the theft/bribe to
federal monies and, as a result, failed to supply the necessary
justification for federal criminalization of such actions.
Alternatively, the defendants argue that Congress, in en-
acting § 666, improperly exceeded its enumerated powers
under either or both the Spending Clause and the Necessary
and Proper Clause of the Constitution. U.S. CONST. art. I.
All of the defendants’ arguments were dispositively re-
jected by the Supreme Court in its recent decision, Sabri v.
United States, 124 S. Ct. 1941 (2004). Sabri held § 666(a)(2)
to be facially constitutional and found that no nexus be-
tween the bribe and federal funds is required.2 Id. at 1945.
2
The Supreme Court granted certiorari in Sabri during the brief-
ing of this matter. The defendants acknowledged in their reply
brief that the issue to be answered in Sabri “expressly addresses”
the matters raised here on appeal. We note that the petitioner in
Sabri challenged only § 666(a)(2) and that the defendants chal-
lenge § 666 as a whole, having been convicted under, variously,
§§ 666(a)(1)(A), (a)(1)(B), and (a)(2). However, we see no reason for
any differentiation in analysis among the (a)(1) and (a)(2) charges,
which are basically two sides of the same coin (agents stealing
federal funds/accepting bribes versus giving bribes to agents), and
defendants do not argue otherwise. Further, nothing in the
Supreme Court’s Sabri opinion leads us to a different conclusion.
In particular we note that the Supreme Court stated it granted
certiorari to resolve a circuit split “over the need to require a
connection between forbidden conduct and federal funds” and then
goes on to list cases from various circuits demonstrating the split.
Sabri, 124 S. Ct. at 1945. Those cases all involved the application
(continued...)
Nos. 03-1110, 03-1113 & 03-1195 5
In Sabri, the Supreme Court readily found, contrary to
the defendants’ position, that § 666(a)(2)’s enactment was
a valid exercise of Congress’s Article I powers:
Congress has authority under the Spending Clause
to appropriate federal monies to promote the general
welfare, Art. I, § 8, cl. 1, and it has corresponding au-
thority under the Necessary and Proper Clause, Art. I,
§ 8, cl. 18, to see to it that taxpayer dollars appropriated
under that power are in fact spent for the general wel-
fare, and not frittered away in graft or on projects
undermined when funds are siphoned off or corrupt
public officers are derelict about demanding value for
dollars. Congress does not have to sit by and accept the
risk of operations thwarted by local and state improbity.
Section 666(a)(2) addresses the problem at the sources
of bribes, by rational means, to safeguard the integrity
of the state, local and tribal recipients of federal dollars.
Id. at 1946 (internal citations omitted). The Court also
found that the legislative record confirmed Congress acted
appropriately within the Necessary and Proper Clause
when enacting § 666. Id. at 1947 (“Congress’s decision to
enact § 666 only after other legislation had failed to protect
2
(...continued)
of § 666(a)(1)(B)—agents demanding or accepting bribes—not
§ 666(a)(2), the provision under which petitioner Sabri was
indicted. See, e.g., Grossi, 143 F.3d at 348 (stating that Grossi
“demanded and received bribes,” a § 666(a)(1)(B) offense); United
States v. Lipscomb, 299 F.3d 303, 308 (5th Cir. 2002) (defendant
convicted under § 666(a)(1)(B)); United States v. Zwick, 199 F.3d
672, 675 (3d Cir. 1999) (same); United States v. Santopietro, 166 F.3d
88, 91 (2d Cir. 1999) (same), all cited in Sabri, 124 S. Ct. at 1945.
We therefore conclude that the Supreme Court did not intend to
limit its holding to § 666(a)(2), would find § 666(a)(1) constitu-
tional on the same grounds, and would similarly find no nexus
requirement for § 666(a)(1) offenses.
6 Nos. 03-1110, 03-1113 & 03-1195
federal interests is further indication that it was acting
within the ambit of the Necessary and Proper Clause.”).
The Supreme Court also specifically rejected petitioner
Sabri’s reliance on the Lopez/Morrison line of cases, which
defendants here echo. The Court noted that the statutes at
issue in Lopez and Morrison failed because of their clear lack
of a direct connection to commerce or any sort of economic
enterprise and because the nexus articulated by Congress—
preservation of social prosperity and productivity—ex-
panded Commerce Clause authority beyond limit. Sabri,
124 S. Ct. at 1947. The Court distinguished § 666(a)(2) from
the Lopez and Morrison statutes by finding a direct link
between § 666(a)(2) and congressional spending power:
No piling [of inferences] is needed here to show that
Congress was within its prerogative to protect spending
objects from the menace of local administrators on the
take. The power to keep a watchful eye on expenditures
and on the reliability of those who use public money is
bound up with congressional authority to spend in the
first pace, and Sabri would be hard pressed to claim, in
the words of the Lopez Court, that § 666(a)(2) “has
nothing to do with” the congressional spending power.
Id.
Finally, although Sabri involved a facial constitutional
challenge only, the opinion also forecloses the defendants’
as-applied challenge. The defendants argue that to be con-
victed under § 666, the government had to prove a connec-
tion between the theft/bribe and the COPS program funding
received by the town. In granting certiorari, the Court spe-
cifically noted our position, outlined in Grossi, that no nexus
is required between the forbidden conduct and the federal
monies to support a conviction under § 666. Sabri, 124 S. Ct.
at 1945. The Court subsequently approved our reasoning in
Grossi that no direct connection is necessary, because any
misuse of funds covered by the statute ultimately affects the
monies provided by the federal government:
Nos. 03-1110, 03-1113 & 03-1195 7
It is true . . . that not every bribe or kickback offered or
paid to agents of governments covered by § 666(b) will
be traceably skimmed from specific federal payments,
or show up in the guise of a quid pro quo for some
dereliction in spending a federal grant. But this possi-
bility portends no enforcement beyond the scope of
federal interest, for the reason that corruption does not
have to be that limited to affect the federal interest.
Money is fungible, bribed officials are untrustworthy
stewards of federal funds, and corrupt contractors do
not deliver dollar-for-dollar value. Liquidity is not a
financial term for nothing; money can be drained off
here because a federal grant is pouring in there. And
officials are not any the less threatening to the objects
behind federal spending just because they may accept
general retainers.
Id. at 1946 (citations omitted); cf. Grossi, 143 F.2d at 350
(“Yet money is fungible and its effect transcends program
boundaries. The general assistance program has more to
spend on welfare (or dangle as a lure for bribes) if the fed-
eral government meets some of the Township’s other ex-
penses.”). Therefore, the district court was correct in finding
that a nexus between the theft/bribe and the federal funds
received by the Town of Cicero was not an element of the
crimes with which the defendants were charged.
Based on the Supreme Court’s Sabri opinion, we find 18
U.S.C. § 666 constitutional on its face and as applied to
the defendants. Because the other issues raised by the
defendants hinge on a finding that § 666 is unconstitutional,
we need not address them.
One final matter we must address, however, is the effect
of the recent Court decision in United States v. Booker, 125
S. Ct. 738 (2005), on the defendants’ sentences. In Booker,
the Court reaffirmed the holding of Apprendi v. New Jersey,
530 U.S. 466 (2000), and extended its principles to the fed-
8 Nos. 03-1110, 03-1113 & 03-1195
eral Sentencing Guidelines, holding that “[a]ny fact (other
than a prior conviction) which is necessary to support a
sentence exceeding the maximum authorized by the facts
established by a plea of guilty or a jury verdict must be
admitted by the defendant or proved to a jury beyond a
reasonable doubt.” Booker, 125 S. Ct. at 756. In its remedial
holding, the Court excised the mandatory provisions of the
Guidelines. See id. at 757. As a result, district courts now
have the discretion to sentence outside the ranges set in the
Guidelines, and we review these sentences for reasonable-
ness. See id. at 765-66.
The defendants failed to raise in the district court an
Apprendi-based objection to their sentences. Accordingly,
we review for plain error. “Under [the plain error] test, be-
fore an appellate court can correct an error not raised at
trial, there must be (1) error, (2) that is plain, and (3) that
affect[s] substantial rights.” United States v. Cotton, 535
U.S. 625, 631 (2002) (citation and internal quotation marks
omitted). “If all three conditions are met, an appellate court
may then exercise its discretion to notice a forfeited error,
but only if (4) the error seriously affect[s] the fairness, in-
tegrity, or public reputation of judicial proceedings.” Id.The record discloses that all three defendants received
sentences mandated by the Guidelines and increased on the
basis of facts found by the judge, not the jury—in other
words, their sentences were imposed under a sentencing
scheme that we now know is unconstitutional. Their sen-
tences, therefore, were imposed in error, and the error is
plain. See United States v. Paladino, No. 03-2296, 2005
WL 435430, at *7 (7th Cir. Feb. 25, 2005). We cannot
determine, however, whether the defendants would have re-
ceived the same sentences had the district court been free
to exercise the broad sentencing discretion now afforded in
the wake of Booker. In short, we are unable to resolve
whether the defendants’ substantial rights were affected
when they received sentences imposed under the mandatory
Guidelines system.
Nos. 03-1110, 03-1113 & 03-1195 9
As we concluded in Paladino, the “only practical way . . .
to determine whether the kind of plain error argued in these
cases has actually occurred is to ask the district judge.”
Paladino, 2005 WL 435430, at *10. To that end, we “order
a limited remand to permit the sentencing judge to deter-
mine whether he would . . . reimpose his original sentence.”
Id. If the district court determines that the defendants
would have received the same sentences, we will conclude
that the defendants were not prejudiced and the plain error
challenge must fail. We will then affirm the original
sentences, provided they are reasonable. See id. (citing
Booker, 125 S. Ct. at 765).
On the other hand, if the district court decides that differ-
ent sentences would have been appropriate in the exercise
of greater discretion, “we will vacate the original sentence
and remand for resentencing.” Paladino, 2005 WL 435430,
at *10. Regardless of whether the district court decides to
resentence the defendants, the court should abide by the
process we set forth in Paladino to provide an appropriate
explanation for its decision. See id.II. Conclusion
For the foregoing reasons, we AFFIRM the defendants’
convictions. As to the defendants’ sentences, however, we
order a limited remand of this case in accordance with the
remedial procedure adopted by this circuit in Paladino. The
district court is directed to return this case to us at the
completion of its sentencing determination, pursuant to the
procedure set forth in Paladino.
10 Nos. 03-1110, 03-1113 & 03-1195
A true Copy:
Teste:
________________________________
Clerk of the United States Court of
Appeals for the Seventh Circuit
USCA-02-C-0072—3-24-05