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United States v. O'Grady

July 12, 1984

UNITED STATES OF AMERICA, APPELLEE,
v.
EDWARD O'GRADY, DEFENDANT-APPELLANT



Appeal from a judgment of the United States District Court for the Eastern District of New York, Platt, J., convicting appellant after a jury trial of extortion under color of official right in violation of the Hobbs Act, 18 U.S.C. § 1951 (1982). On rehearing en banc, Court holds that district court erred in instructing the jury that "the Government need not show that the defendant in words or otherwise, induced, requested, demanded, or solicited the benefits." Panel opinion vacated, judgment reversed and remanded for new trial. Meskill, Circuit Judge, wrote the majority opinion for the en banc court, in which Feinberg, Chief Judge, Kaufman, Oakes, Newman, Kearse, Cardamone, Pierce, Winter and Pratt, Circuit Judges, joined; Pierce, Circuit Judge, filed a separate concurring opinion, in which Feinberg, Chief Judge, Kaufman, Kearse and Cardamone, Circuit Judges, joined; Newman, Circuit Judge, filed a separate concurring opinion in which Winter and Pratt, Circuit Judges, joined; Van Graafeiland, Circuit Judge, filed a separate opinion concurring in part and dissenting in part; and Mansfield, Circuit Judge, filed a dissenting opinion, in which Lumbard, Circuit Judge, joined.

Author: Meskill

Before: FEINBERG, Chief Judge, LUMBARD, KAUFMAN, MANSFIELD, OAKES, VAN GRAAFEILAND, MESKILL, NEWMAN, KEARSE, CARDAMONE, PIERCE, WINTER, and PRATT, Circuit Judges.

MESKILL, Circuit Judge, joined by FEINBERG, Chief Judge, KAUFMAN, OAKES, NEWMAN, KEARSE, CARDAMONE, PIERCE, WINTER and PRATT, Circuit Judges:

This is an appeal from a judgment entered in the United States District Court for the Eastern District of New York, Platt, J., convicting appellant after a jury trial of extortion under color of official right in violation of the Hobbs Act, 18 U.S.C. § 1951 (1982). A divided panel of this Court affirmed the conviction of O'Grady on August 10, 1983. At the request of a member of this Court, a poll of the judges in regular active service was taken to determine if the case should be reheard en banc. A majority voted for the rehearing. The Court called for and received new briefs from the parties which addressed the issues discussed in the majority and dissenting opinions. Sitting en banc, we now vacate the panel opinion, reverse the conviction and remand to the district court for a new trial, because there was plain error in the charge given to the jury.

BACKGROUND

In 1972 the New York City Transit Authority (NYCTA) executed a contract with Pullman Standard under which NYCTA agreed to purchase from Pullman Standard 745 subway cars at a cost of nearly $210 million.*fn1 Edward O'Grady was employed by the NYCTA as superintendent of the Quality Control Section, Department of New Car Engineering. In 1981 a federal grand jury indicted O'Grady for violating the Hobbs Act by accepting an assortment of benefits from companies under contract to provide subway cars to the NYCTA. O'Grady was tried by a jury, found guilty and sentenced to one year probation plus a $10,000 fine.

The Hobbs Act proscribes extortion affecting interstate commerce, whether by "wrongful use of actual or threatened force, violence, or fear, or under color of official right."*fn2 18 U.S.C. § 1951(b)(2) (1982). The Act is a powerful and effective law enforcement tool, providing for up to twenty years imprisonment, a $10,000 fine, or both. It has become a principal weapon in the government's arsenal against corruption in public affairs.

In 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, 51 U.S.L.W. 3789 (U.S. May 2, 1983), this Court held that extortion "under color of official right" occurs "when a public official makes wrongful use of his office," whether or not "the wrongful use of official power [is] accompanied by actual or threatened force, violence, or fear." Id. at 130-31. We are now asked to decide whether extortion under color of official right occurs when a public official merely accepts unsolicited benefits knowing that they were given because of his public office. We hold that it does not.

O'Grady had been involved in the contract negotiations and the ultimate selection of Pullman-Standard as the prime contractor for the purchase of the subway cars. Pullman-Standard engaged numerous subcontractors to help design, manufacture and assemble the new subway cars for what was commonly known as the R-46 project. Throughout the project, O'Grady was responsible for ensuring vendor compliance with contract specifications. Before any component of the new subway cars was put into full production, it had to be inspected and approved by O'Grady's department. If a component was defective from either a technical or aesthetic viewpoint, or failed to comply with contract specifications, O'Grady could force the vendor to make the necessary modifications at its own cost. The inspection process continued from the design stage through final production.

O'Grady's indictment charged him with "attempting to obtain and obtaining the benefits valued at approximately Thirty Thousand Dollars ($30,000) in entertainment, including but not limited to lunches, dinners, sports event, golf outings, weekend vacations and trips, from [vendors involved in the R-46 project], with the consent for such entertainment having been wrongfully induced under color of official right."*fn3 See App. for Appellant at 8. At trial, the government proved that during the nine year period covered by the indictment, O'Grady received from Pullman-Standard and its subcontractors over forty fully paid trips to various resorts throughout the country,*fn4 two "all events" season tickets to Madison Square Garden, countless rounds of free golf, meals and other benefits, altogether worth in excess of $34,000. O'Grady willingly accepted all of these benefits despite having instructed his subordinates not to accept anything from R-46 contract vendors.

O'Grady admitted having received the benefits, but he denied wrongdoing. He maintained that entertaining customers was an industry wide practice and that he was only one of many NYCTA officials who had received benefits from R-46 vendors. The evidence adduced at trial supported O'Grady's contention. Several R-46 contract vendors testified that it was company policy to entertain customers and that many NYCTA officials, including O'Grady's supervisors, had also been treated to meals, entertainment and trips.*fn5 From the vendor's perspective, the expense of entertaining customers was offset by the positive customer-vendor relationship and goodwill that it purchased. Moreover, the vendors could in most cases deduct for tax purposes the cost of the entertainment as an ordinary and necessary business expense.

O'Grady held the reins on the production process and he would often supervise on-site inspections himself. Vendors treated O'Grady, who was known to be an avid golfer, to countless rounds of golf in conjunction with his on-site inspection tours. Although most vendors considered O'Grady a fair man, "he was a tough man when it came to enforcing the rights of the [NYCTA]."*fn6 Evidently it was difficult to sit down and do business with O'Grady as he was a very busy man. Vendors viewed the meals, trips and other entertainment conferred on O'Grady as a way to get his ear. There is no evidence in the record that O'Grady ever demanded or asked for a free meal, an expense-paid trip or a complimentary round of golf. The benefits he received were freely and willingly offered by the vendors. In the words of Pullman-Standard's project manager, "it was our normal way of doing business." Trial Tr. at 187.

The trial judge instructed the jury that extortion under color of official right requires proof that (1) the defendant obtained property of another with his consent; (2) the consent was induced under color of official right; (3) the defendant knowingly and willfully obtained the property by those means; and (4) the defendant's actions in obtaining the property affected interstate commerce. O'Grady disputed only two elements. He denied having induced the benefits he received and having known the benefits were given to him because of his public office. He defended on the basis that the indictment merely described normal business practice. The district court instructed the jury:

If you find beyond a reasonable doubt that a company gave any benefit that it is alleged to have given in the indictment because the company reasonably believed that, in his official capacity, Mr. O'Grady had the power to take or withhold action that could hurt or benefit the company, or to affect or influence the inspection and delivery of the R-46 subway car, then you may find that the consent of the bestowing company was induced under color of official right, and if you further find beyond a reasonable doubt that the defendant knew that that [was] the reason travel and entertainment benefits were given to him, then the second element is satisfied; but if either or both of these facts has not been so proven beyond a reasonable doubt, then it is not, and you must find for the defendant.

Trial Tr. at 1785-86. The district court explained that "the Government need now show that the defendant in words or otherwise, induced, requested, demanded, or solicited the benefits," id. at 1784, or that O'Grady "was influenced in his decisions by any favor he received," id. at 1783. O'Grady's attorney forcefully objected to the charge delivered by the district court*fn7 and offered his opinion that under the charge given, "President Reagan and Mrs. Reagan must be convicted, absolutely must," as must any "public official, who takes a cigarette or a cigar from anybody else." Id. at 1818-19. The jury returned a verdict of guilty and the district court thereafter sentenced O'Grady to a one year term of probation and a $10,000 fine. This appeal followed.

Discussion

O'Grady argues that his conduct did not constitute extortion under color of official right. He urges the abandonment of precedent in this Circuit interpreting the Hobbs Act broadly, see 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, 51 U.S.L.W. 3789 (U.S. May 2, 1983); United States v. Trotta, 525 F.2d 1096 (2d Cir. 1975), cert. denied, 425 U.S. 971, 48 L. Ed. 2d 794, 96 S. Ct. 2167 (1976), in favor of a narrower reading that would limit the Act's scope to extortion accompanied by some form of duress. Relying heavily on the dissent of Judge Aldisert in United States v. Cerilli, 603 F.2d 415 (3d Cir. 1979), cert. denied, 444 U.S. 1043, 62 L. Ed. 2d 728, 100 S. Ct. 728 (1980) (citing United States v. Mazzei, 521 F.2d 639 (3d Cir.) (en banc) (Gibbons, J., dissenting), cert. denied, 423 U.S. 1014, 46 L. Ed. 2d 385, 96 S. Ct. 445 (1975)), O'Grady argues that Congress intended to rely on the New York law of extortion to define the crime under the Hobbs Act. Under New York law, extortion under color of official right required the unlawful seizure of personal property, the receipt of an unauthorized fee by misrepresentation or the official's use of force or fear. Cerilli, 603 F.2d at 433 (Aldisert, J., dissenting). O'Grady claims that United States v. Kenny, 462 F.2d 1205 (3d Cir.), cert. denied, 409 U.S. 914, 935 S. Ct. 233, 34 L. Ed. 176 (1972), deviated from the congressional intent when it stated that extortion did not require force, threats, or use of fear. We found these arguments unpersuasive in United States v. Margiotta, 688 F.2d at 130-31, and see no reason to overrule that decision.

Having rejected O'Grady's broad arguments, however, we nonetheless hold that the district court erroneously instructed the jury that the mere acceptance of benefits by a public official is extortion under color of official right if the official knew that his office was the motivation behind the giving of the benefits. "Extortion "under color of official right" is committed when a public official makes wrongful use of his office to obtain money not due him or his office." United States v. Margiotta, 688 F.2d 108, 130 (2d Cir. 1982) (emphasis added), cert. denied, 51 U.S.L.W. 3789 (U.S. May 2, 1983). The conduct proscribed by the Hobbs Act is the wrongful use of public office, not merely an acceptance of benefits. Although receipt of benefits by a public official is a necessary element of the crime, there must also be proof that the public official did something, under color of his public office, to cause the giving of benefits.

Extortion under color of official right was added to the federal criminal law in the 1940s to combat racketeering in interstate commerce. Anti-Racketeering Act of 1946, Pub. L. No. 79-486, § 1(c), 60 Stat. 420 (1946) (amending the Anti-Racketeering Act of 1934, Pub. L. No. 73-376, 48 Stat. 979 (1934)). See United States v. Cerilli, 603 F.2d at 431 (Aldisert, J., dissenting) (quoting United States v. Local 807 of International Brotherhood of Teamsters, 315 U.S. 521, 529, 86 L. Ed. 1004, 62 S. Ct. 642 (1942)). The federal courts have converted the crime from a narrow prohibition aimed at public officials who demand or receive a fee not due them or their office, or who extort money by force or violence, into a broad license for "federal authorities to police influence peddling in the political process of the states." United States v. Mazzei, 521 F.2d at 652 (Gibbons, J., dissenting); see Ruff, Federal Prosecution of Local Corruption: A Case Study in the Making of Law Enforcement Policy, 65 Geo. L.J. 1171, 1183 (1977).

The practical effect of the district court's instruction is to further extend the reach of the statute and to impose upon all public officials an affirmative obligation not to accept benefits of any type or form. The statute is thus transformed from a vehicle to eradicate extortion and robbery in interstate commerce into a professional ethics standard governing public officials.

The instruction of the district court does not square with this Court's decision in United States v. Margiotta, 688 F.2d 108 (2d Cir. 1982), cert. denied, 51 U.S.L.W. 3789 (U.S. May 2, 1983). In Margiotta, this Court examined the government's burden of proof in a Hobbs Act prosecution for extortion under color of official right. Joseph Margiotta was Chairman of the Republican Committee of Nassau County and the Town of Hempstead, New York. Although not an elected official, Margiotta wielded considerable control over certain public officials and governmental functions in those municipalities. Margiotta had negotiated a deal with the Williams Agency, an insurance broker, under which he agreed to appoint the Agency as Broker of Record with full power to place insurance on all municipal properties in exchange for the Agency's promise to designate fifty percent of its insurance commissions to be distributed at Margiotta's direction to others as political favors. Margiotta was indicted for, among other things, "violating the Hobbs Act by inducing the Williams Agency to make the payments of the insurance commissions under color of official right." Id. at 114. Margiotta defended, unsuccessfully, on the ground that his appointment of the Williams Agency as Broker of Record was not contingent upon a secret agreement to divvy insurance commissions, and that "commission sharing among brokers was a good faith continuation of a long-standing and widely-known political patronage arrangement in New York." Id. at 119.

Margiotta's conviction was affirmed on appeal. Writing for this Court, Judge Kaufman held that "affirmative pressure in the form of force, fear, or direct solicitation" is not necessary to establish inducement because the power inherent in public office supplies the necessary pressure or threat. Id. at 132. Instead, "it is the utilization of the power of public office to induce consent to the payments that is the gist of an offense of obtaining money "under color of official right." Id. The evidence established that the Williams Agency consented to the kickback arrangement only because Margiotta would have, as he testified, replaced it as Broker of Record had it not consented. Consequently, there was sufficient evidence to support a finding that "power of office [was used] in such a manner that would induce the payments." Id. at 133. Thus, Margiotta was guilty of violating the Hobbs Act not because he was powerful but because he used the power of public office to induce payments not due him or his office.

The district court's charge to the jury in this case permitted the jury to find O'Grady guilty of extortion under color of official right absent any proof that he wrongfully used his office to induce the benefits he received. Essentially, the district court equated the mere acceptance of benefits by a public official with wrongful use of public office and permitted the jury to infer inducement if it found that the R-46 vendors bestowed benefits on O'Grady because of his public office and that O'Grady knew what motivated the bestowal. The district court instructed the jury:

The Government need now show that the defendant in words or otherwise, induced, requested, demanded, or solicited the benefits from the companies involved.

So long as the motivation for the bestowal of any of the benefits focused on Mr. O'Grady's office -- that is, so long as the office or the fact of his official position, induced the payments -- and so long as the defendant knew such was the case -- then the conduct falls within the ambit of the Statute.

Trial Tr. at 1784.

As Margiotta made clear, to prove the crime of extortion under color of public office the government must show that the public official induced the benefits received.*fn8 The fact of public office supplies the potential threat or force necessary, but is the wrongful use of that office to induce benefits that constitutes the crime. The charge given by the district court eliminated the government's burden of proving that O'Grady used his office to induce or obtain the benefits he received. Judge Kaufman's opinion in United States v. Magriotta is replete with references to this indispensable element of the crime: "extortion "under color of official right" is committed when a public official makes wrongful use of his office to obtain money not due him or his office," 688 F.2d at 130; "it is the utilization of the power of public office to induce consent to the payments that is the gist of [the] offense," id. at 132; "a public official may be guilty . . . if the payments are motivated as a result of his exercise of the powers of his public office," id. at 133; and, public officials are guilty if they "use their power of office in such a manner that would induce the payments," id.

While the government is not required to prove that the public official demanded or directly solicited the benefits received, or that he offered a specific quid pro quo in exchange for the benefits, United States v. Trotta, 525 F.2d 1096, 1100 (2d Cir. 1975), cert. denied, 425 U.S. 971, 48 L. Ed. 2d 794, 96 S. Ct. 2167 (1976), the government must show that the power of public office was misused in such a way as to induce the giving of benefits. Cf. United States v. Dozier, 672 F.2d 531, 537 (5th Cir.) ("the prohibited exchange is the same: a public official may not demand payment as inducement for the promise to perform (or not to perform) an official act"), cert. denied, 459 U.S. 941, 51 U.S.L.W. 3303, 103 S. Ct. 252, 74 L. Ed. 2d 197 (U.S. Oct. 18, 1982); United States v. Trotta, 525 F.2d at 1100 ("the pressure exerted by Trotta by means of the power of his public office to induce the payment of money is, in itself, the misuse of the office"); United States v. Mazzei, 521 F.2d 639, 643 (3d Cir.) (en banc) (jury could conclude that extortion under color of official right occurred "so long as it found that [the extorted party] held, and defendant exploited, a reasonable belief that . . . the power in fact of defendant's office included . . . effective authority"), cert. denied, 423 U.S. 1014, 46 L. Ed. 2d 385, 96 S. Ct. 446 (1975).

We recognize that several other courts of appeals have explicitly rejected the notion that proof of inducement is necessary. See, e.g., United States v. Jannotti, 673 F.2d 578, 595 (3d Cir.) (en banc), cert. denied, 457 U.S. 1106, 73 L. Ed. 2d 1315, 102 S. Ct. 2906 (1982); United States v. Hedman, 630 F.2d 1184, 1195 (7th Cir. 1980), cert. denied, 450 U.S. 965, 67 L. Ed. 2d 614, 101 S. Ct. 1481 (1981); United States v. Butler, 618 F.2d 411, 417-18 (6th Cir.), cert. denied, 447 U.S. 927, 100 S. Ct. 3024, 65 L. Ed. 2d 1121 (1980); United States v. Price, 617 F.2d 455, 458 (7th Cir. 1979); United States v. Braasch, 505 F.2d 139, 151 (7th Cir. 1974), cert. denied, 421 U.S. 910, 43 L. Ed. 2d 775, 95 S. Ct. 1561 (1975). However, we do not read those decisions to permit a conviction for extortion under color of official right absent evidence that the public official misused his office to obtain the benefits. Certainly the facts of those cases, and of most reported decisions construing extortion under color of official right, establish conduct from which inducement can readily be inferred. See United States v. Jannotti, 673 F.2d at 596 (payment made after "assurances that there would be no obstacles" to construction of hotel project); United States v. Hedman, 630 F.2d at 1188-91 (city building inspectors accepted concealed payoffs in return for nonenforcement of housing code); United States v. Butler, 618 F.2d at 418 (town public works commissioner accepted money from developer in exchange for moving up priority of his projects); United States v. Price, 617 F.2d at 458 (victim testified that if he did not pay city electrical inspector money, he would later have to pay "twice something for the same job"); United States v. Braasch, 505 F.2d at 151 (protection money extorted from bar owners by police officers); see also United States v. Dozier, 672 F.2d 531, 538 (5th Cir.) (state commissioner of agriculture "asked for ten thousand dollars in return for granting a charter to the owner of a livestock auction barn"), cert. denied, 459 U.S. 941, 103 S. Ct. 252, 74 L. Ed. 2d 197, 51 U.S.L.W. 3303 (U.S. Oct. 18, 1982); United States v. Barber, 668 F.2d 778, 781 (4th Cir.) (state liquor control commissioner removed quantities of state-owned liquor from state warehouses and subsequently billed the liquor suppliers for the shortage), cert. denied, 459 U.S. 829, 103 S. Ct. 66, 74 L. Ed. 2d 67, 51 U.S.L.W. 3254 (U.S. Oct. 4, 1982); United States v. Scacchetti, 668 F.2d 643, 646 (2d Cir.) (judge offered to assist automobile businessman with a license suspension case in return for free auto repair service), cert. denied, 457 U.S. 1132, 73 L. Ed. 2d 1349, 102 S. Ct. 2957 (1982); United States v. French, 628 F.2d 1069, 1072 (8th Cir.) (city marshal accepted cash in return for settlement of forfeited bonds), cert. denied, 449 U.S. 956, 66 L. Ed. 2d 221, 101 S. Ct. 364 (1980); United States v. Williams, 621 F.2d 123, 125-26 (5th Cir. 1980) (school board member asked for and received airline tickets and cash from contractors doing business with the school board), cert. denied, 450 U.S. 919, 101 S. Ct. 1366, 67 L. Ed. 2d 346 (1981); United States v. Grande, 620 F.2d 1026, 1030 (4th Cir.) (reasonable inference that city housing director misused office by accepting money from prospective contractors in return for supplying cost data on prospective projects), cert. denied, 449 U.S. 830, 919, 101 S. Ct. 98, 66 L. Ed. 2d 35 (1980); United States v. Summers, 598 F.2d 450, 452-53 (5th Cir. 1979) (town public works official told contractor to "come up with five percent of the total bid price" if he wanted to get the contract); United States v. Cerilli, 603 F.2d 415, 418

(3d Cir. 1979) (state transportation official demanded payments as a condition to state's leasing of privately owned snow removal equipment), cert. denied, 444 U.S. 1043, 62 L. Ed. 2d 728, 100 S. Ct. 728 (1980); United States v. Wright, 588 F.2d 31, 34-35 (2d Cir. 1978) (school board official's exchange of letter of intent to renew a contract for cash evidence of extortionate demand), cert. denied, 440 U.S. 917, 59 L. Ed. 2d 467, 99 S. Ct. 1236 (1979); United States v. Harding, 563 F.2d 299, 301 (6th Cir. 1977) (real estate commission's executive director sold copies of licensing exam and answers in advance of exam date), cert. denied, 434 U.S. 1062, 55 L. Ed. 2d 762, 98 S. Ct. 1235 (1978); United States v. Adcock, 558 F.2d 397, 400 (8th Cir.) (state liquor commissioner took kickbacks in return for his persuading liquor commission to purchase victims' wine), cert. denied, 434 U.S. 921, 54 L. Ed. 2d 277, 98 S. Ct. 395 (1977); United States v. Brown, 540 F.2d 364, 372-73 (8th Cir. 1976) (city building commissioner proposed scheme to funnel fees for demolition work to him which construction companies agreed to for fear of retribution); United States v. Hall, 536 F.2d 313, 317-18, 320-21 (10th Cir.) (allegation that governor in exchange for cash agreed to exert his influence for the benefit of the victims), cert. denied, 429 U.S. 919, 97 S. Ct. 313, 50 L. Ed. 2d 285 (1976); United States v. Hathaway, 534 F.2d 386, 394 (1st Cir.) (state redevelopment authority director "used the office of [redevelopment director] to initiate and induce payments" in exchange for fair consideration of contract proposals), cert. denied, 429 U.S. 819, 50 L. Ed. 2d 79, 97 S. Ct. 64 (1976); United States v. Trotta, 525 F.2d 1096, 1097-98 (2d Cir. 1975) (indictment charged town public works commissioner with demanding and obtaining political contributions from contractors under his control), cert. denied, 423 U.S. 1014 (1975); United States v. Mazzei, 521 F.2d 639, 643 (3d Cir.) (en banc) (victim testified that he gave state senator cash because he "thought that was the method that state leases were handled"), cert. denied, 423 U.S. 1014, 46 L. Ed. 2d 385, 96 S. Ct. 446 (1975); United States v. Price, 507 F.2d 1349, 1350 (4th Cir. 1974) (per curiam) (payment of cash to county councilman in exchange for assurances that occupancy permit would be ...


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