United States v. Frank Mazzei

521 F.2d 639, 1975 U.S. App. LEXIS 13422

• Court: Court of Appeals for the Third Circuit
• Decided: July 29, 1975
• Docket: 75-1357
• Status: Published

Opinions

OPINION OF THE COURT

SEITZ, Chief Judge.

Defendant Frank Mazzei appeals from his conviction after a jury trial of two counts alleging extortion in violation of the Hobbs Act, 18 U.S.C. § 1951 (1970). His challenge raises questions regarding the jurisdictional reach of the Hobbs Act and the substantive content of the crime of extortion which it defines.

The parties are in basic agreement on the facts. B.M.I., Inc., a Pennsylvania corporation and the victim of the alleged extortion, is the holding company of sixteen subsidiaries which engage in interstate businesses largely relating to the manufacture and installation of bulk refractory materials used in blast furnaces. B.M.I. is headquartered in a building at 700 Bingham Street, Pittsburgh, Pennsylvania, title to which is in the name of a wholly-owned subsidiary, Pneumatic Concrete Corporation. Accounting services for B.M.I. and all its subsidiaries are centered in the building and services such as billing and payments of accounts receivable are carried out by B.M.I. for all its subsidiaries from the office.

Prior to 1971, only one-half of the second floor of the Bingham Street building was occupied. Apart from B.M. I.’s offices on this floor, the remainder of the second floor and the whole first and third floors were vacant. Leo Kelly (“Kelly”), secretary-treasurer of B.M.I. and all its subsidiaries, was anxious to lease the unused space to reduce overhead costs. Kelly spoke with Gerald R. Creehan, a director of a local bank, about the possibility of securing tenants. Mr. Creehan had learned that the defendant, a Pennsylvania state senator, was seeking office space on the South-side of Pittsburgh. Defendant was reportedly seeking a location in his district for the Pittsburgh regional office of the new Bureau of State Lotteries, even though as a legislator he had no statutory power with respect to the Bureau’s leasing practices. Kelly asked Mr. Cree-han to set up a meeting with the defendant.

A meeting was held in November 1971 between defendant and Kelly at which leases were mentioned but not discussed in detail. The defendant later visited the premises, and at Kelly’s invitation, a dinner meeting was held on January 8, 1972, where leases were again discussed generally. At approximately the same time, the premises were inspected by a representative of the Department of Property and Supplies, the state authority responsible for securing office space for state agencies, to determine their suitability for occupancy as a lottery office.

Without prior notice, defendant visited Kelly at the B.M.I. office on January 11, 1972, to suggest the rental which B.M.I. should submit in its proposal to the state. Kelly testified that at this meeting defendant informed him that “it was the practice on all state leases that a ten per cent of the gross amount of the rentals would be paid to a senate finance re-election committee. . . . ” The payment was to be in cash at the beginning of the lease. Defendant then proceeded to compute the gross rental and the ten per cent payment on a pad in Kelly’s office. The page on which defendant had made his calculations was received into evidence at trial.

On January 13, 1972, Kelly submitted a proposal to the Department of Property and Supplies for lease of a portion of the first floor of the Bingham Street building to the Bureau of Lotteries. The executed lease was received from the state on March 23 or 24, 1972, and shortly thereafter defendant inquired of Mr. Creehan whether Kelly had left an envelope for defendant at Creehan’s bank. At defendant’s request, Mr. Creehan relayed the message to Kelly, who authorized the withdrawal and delivery to defendant of $8,755, which Kelly computed to be ten per cent of the gross rental B.M.I. would receive under the lease. The money was delivered personally to defendant in late March 1972.

In November or December 1972, defendant stopped in at the B.M.I. offices to ask Kelly if he was interested in leasing space to the Department of Labor and Industry, again an executive agency with which defendant had no statutory connection. On December 27, 1972, defendant brought officials from the Departments of Property and Supplies and Labor and Industry to view the premises. Other state officials visited during the spring of 1973. Sometime shortly before April 14, 1973, Kelly and defendant discussed B.M.I.’s proposal for the Labor and Industry lease. Defendant again suggested the rental B.M.I. should propose and informed Kelly that the same ten per cent arrangement would be in effect. B.M.I. submitted a proposal, later revised at defendant’s behest, that led to receipt of an executed lease from the state on July 20, 1973. After defendant indicated that he had to have his cash payment that same day, Kelly delivered $11,300 (10% of the gross rental) to defendant’s secretary at his nearby office. Defendant acknowledged receipt of the money by telephone.

On appeal, defendant challenges his conviction on two grounds: (1) the transactions from which the charges arose lacked sufficient impact on interstate commerce to give rise to federal jurisdiction over them and (2) his receipt of money did not amount to extortion within the meaning of the Hobbs Act. Defendant also challenges a portion of his sentence which ordered his removal from state office as beyond the power of the district court.

Effect on Interstate Commerce

Defendant acknowledges that in enacting the Hobbs Act, Congress intended to “use all the constitutional power [it] has to punish interference with interstate commerce . . . .” Stirone v. United States, 361 U.S. 212, 215, 80 S.Ct. 270, 272, 4 L.Ed.2d 252 (1960). He contends, however, that the transactions involved here did not touch upon interstate commerce and that, therefore, the Hobbs Act cannot constitutionally be construed to embrace his conduct.

Defendant has admitted that although B.M.I. does no interstate business itself, it is “legitimate” to identify B.M.I. with its wholly controlled subsidiaries that are engaged in substantial interstate operations. Conceding the interstate character of the B.M.I. enterprise, defendant still contends that federal jurisdiction is lacking because the lease transactions in which B.M.I. were engaged here are “local” in nature. He urges that only if we can find that the lease transactions themselves affected interstate commerce may we assess the impact of the alleged extortion on interstate commerce.

The government, on the other hand, urges us to find both federal jurisdiction and Hobbs Act coverage on the theory that some $20,000 in payments to defendant depleted the assets of B.M.I. and thereby affected its power to operate in interstate commerce. This position accords with our previous holdings that where the resources of an interstate business are depleted or diminished “in any manner” by extortionate payments, the consequent impairment of ability to conduct an interstate business is sufficient to bring the extortion within the play of the Hobbs Act. United States v. Addonizio, 451 F.2d 49 (3rd Cir. 1971), cert. denied, 405 U.S. 936, 92 S.Ct. 949, 30 L.Ed.2d 812 (1972); United States v. Provenzano, 334 F.2d 678 (3rd Cir.), cert. denied, 379 U.S. 947, 85 S.Ct. 440, 13 L.Ed.2d 544 (1964). Defendant would distinguish these cases on the ground that in each there was a direct and immediate effect on interstate commerce that is wholly lacking here.

Despite the local character of the lease transactions giving rise to the alleged extortion in this case, we are of the opinion that the depletion of B.M.I.’s assets provides a jurisdictional basis under the Hobbs Act for the maintenance of this action. B.M.I. owns subsidiaries which purchase materials in a number of states for use in manufacturing products sold in almost every state. As a result of defendant’s actions, funds available to B.M.I. for use in such interstate activities have been diminished and its interstate business must to this extent be curtailed. Because of this effect on interstate commerce, the fact that the alleged extortion arose from a local lease to a state agency is not dispositive, for “[i]f it is interstate commerce that feels the pinch, it does not matter how local the operation which applies the squeeze.” United States v. Women's Sportswear Mfrs. Ass’n, 336 U.S. 460, 464, 69 S.Ct. 714, 716, 93 L.Ed. 805 (1949). Although enunciated in an antitrust context, the principle stated in the quoted language has broad application to questions regarding congressional power under the commerce clause. See, e. g., Heart of Atlanta Motel v. United States, 379 U.S. 241, 85 S.Ct. 348, 13 L.Ed.2d 258 (1964).

We therefore conclude that the Hobbs Act may constitutionally be construed to reach the indirect burdens placed on interstate commerce by the extortionate activities alleged in this case and that such a construction of the statute accords with Congressional intent to proscribe extortion which “in any way or degree obstructs, delays, or affects commerce.” 18 U.S.C. § 1951(a).¹ United States v. De Met, 486 F.2d 816 (7th Cir. 1973), cert. denied, 416 U.S. 969, 94 S.Ct. 1991, 40 L.Ed.2d 558 (1974); United States v. Augello, 451 F.2d 1167 (2d Cir. 1971), cert. denied, 405 U.S. 1070, 92 S.Ct. 1518, 31 L.Ed.2d 802 (1972); cf. United States v. Staszcuk, 517 F.2d 53 (7th Cir. 1975); (in banc) cert. pet. filed 43 U.S.L.W. 3675 (June 13, 1975) (jurisdiction under the Hobbs Act may be satisfied by showing a “realistic possibility that an extortionate transaction will have some effect on interstate commerce.”) •

Extortionate Nature of Defendant’s Conduct

Defendant also contends that his conduct, whatever other laws it might violate, does not constitute extortion within the meaning of the Hobbs Act. The statute defines extortion as

The obtaining of property from another, with his consent, induced by wrongful use of actual or threatened force, violence, or fear, or under color of official right.

Defendant characterizes the payments made to him as B.M.I.’s voluntary purchase of his influence in an area in which he had no official power and in which he never pretended to have any official power. He further contends that there was no element of coercion present, and that therefore he could not be guilty of extortion even if he had been acting “under color of official right.”

It is clear, of course, that defendant had no statutory power as a state senator to control the granting of leases by state executive agencies. But in order to find that defendant acted “under color of official right,” the jury need not have concluded that he had actual de jure power to secure grant of the lease so long as it found that Kelly held, and defendant exploited, a reasonable belief that the state system so operated that the power in fact of defendant’s office included the effective authority to determine recipients of the state leases here involved. See United States v. Price, 507 F.2d 1349 (4th Cir. 1974) (per curiam); United States v. Staszcuk, supra (adopting by reference the panel opinion at 502 F.2d 875 (7th Cir. 1974) on this point). Such an exploitation involves the wrongful use of official power that has long been punished at common law as extortion “under color of public office.” See, e. g., Commonwealth v. Wilson, 30 Pa. Super. 26 (1906). The issue of Kelly’s belief and its reasonableness was a jury question which was submitted under appropriate instructions.²

Kelly’s belief in defendant’s power over state leases in his district is amply established by the record. In his most succinct statement in this respect, Kelly testified:

I thought that was the method that state leases were handled. I just accepted it as gospel.

I don’t know how it works in Harrisburg. . . . [TJhere has to be that influence and power, and they were letting the senator do it.

Furthermore, we find after a careful review of the record in the light most favorable to the government, Glasser v. United States, 315 U.S. 60, 80, 62 S.Ct. 457, 86 L.Ed. 680 (1942), that the evidence permitted the jury to find that Kelly’s belief in defendant’s power was reasonable. With respect to the first lease, we note that there were rumors that defendant was looking for space for the lottery office. Kelly’s meetings with defendant in December 1971 and January 1972 produced an inspection by an official of the Department of Property and Supplies even though no one from B.M.I. had contacted anyone other than defendant. Also, defendant suggested that B.M.I. propose to the state a rental of $4.25 per square foot, which he said was the rate at which a recent state lease in Philadelphia had been awarded and the highest that the state would approve. These representations by the defendant himself suggest an intimate awareness of state leasing practices.

When defendant opened negotiations with respect to the second lease and brought officials to inspect the premises, other officials from the Department of Labor and Industry appeared without any request from B.M.I. personnel. As with the lottery lease, defendant suggested a proposed rental for submission to the state, this time at $4.90 per foot because parking spaces would be provided. When B.M.I. did not follow his recommendation and submitted to the state a proposal of $4.35 per foot that excluded janitorial services, defendant quickly called Kelly to advise him that the proposal should be at the higher rate he suggested and must cover janitorial services. Kelly told defendant to “put it in at $4.90,” and without the submission of a revised proposal by B.M.I., the state returned a lease with a rate of $4.90 which required B.M.I. to provide the additional services. Furthermore, on two occasions in July 1973, defendant assured Kelly that B.M.I. would secure the Labor and Industry lease. One such assurance was given in a meeting on July 18, 1973, where defendant calculated the five year gross rental figure, on which the ten per cent payment would be based, on a paper introduced into evidence at trial. In these computations, defendant used a yearly rental of $22,569.40, the rental computed at the $4.90 rate and the exact rental stated in the lease received by B.M.I. from the state two days later.

Thus, defendant had the ability to initiate state inspection of the premises, to specify rental rates that would be and were acceptable to the state, and to alter B.M.I.’s proposal on the second lease. Also, throughout the lease negotiations, defendant displayed to Kelly intimate knowledge of the decision making process involved in the granting of state leases. This, in our view, constituted sufficient evidence to justify a finding by the jury that Kelly could reasonably have believed that as a concomitant of his official position defendant possessed not mere influence over state leases but in fact had effective power to determine to whom these leases were awarded even though his office gave him no such de jure power.

Defendant urges, however, that even if he did have some power to influence the awarding of state leases, he still did not commit extortion in his receipt of payments of some $20,000 from B.M.I. He acknowledges that in United States v. Kenny, 462 F.2d 1205 (3rd Cir.), cert. denied, 409 U.S. 914, 93 S.Ct. 233, 34 L.Ed.2d 176 (1972), we held that the Hobbs Act is to be read disjunctively and approved an instruction that extortion could be established either when property is obtained through the use of fear or by one acting under color of official right. 462 F.2d at 1229. He contends, however, that a coercive use of office must be established even when the prosecution is based on the alternate ground of “color of official right,” and relies on the statement of this court in Addonizio that “while the essence of bribery is voluntariness, the essence of extortion is duress.” 451 F.2d at 72. We do not agree with this contention because we are satisfied that in such a prosecution, any element of coercion that may be required to establish extortion under the Hobbs Act is supplied by the misuse of the defendant’s official power.

The definition of extortion in the Hobbs Act is substantially that of its predecessor statute, the Anti-Racketeering Act of 1934, ch. 569, §§ 1-6, 48 Stat. 979. Unfortunately, however, the legislative history of neither statute provides any hint of congressional intent in adopting this definition of extortion, other than statements by proponents of the Hobbs Act that the statute did no more than incorporate the conventional definition of extortion contained in New York law. See, e. g., 91 Cong.Rec. 11842 (1945) (remarks of Rep. Walter); id. at 11843 (remarks of Rep. Michener).

We must, therefore, look to the face of the statute to determine its meaning. As we noted in Kenny, the “under color of official right” language

repeats the common law definition of extortion, a crime which could only be committed by a public official, and which did not require proof of threat, fear, or duress. 462 F.2d at 1229, citing United States v. Nardello, 393 U.S. 286, 289, 89 S.Ct. 534, 21 L.Ed.2d 487 (1969).

Under the common law definition, color of public office took the place of the coercion implied in the ordinary meaning of the word extortion. United States v. Sutter, 160 F.2d 754 (7th Cir. 1947). Further support for the proposition that overt coercion need not be proved in a Hobbs Act prosecution for receipt of property “under color of official right” is supplied by the disjunctive wording of the statute which strongly implies that a showing of “force, violence or fear” is not required when the prosecution is based on the theory that money was obtained through wrongful exercise of the power of office.

V/e conclude that Kenny properly read the statute and that a showing of the inducement of payments “under col- or of official right” may replace proof of the coercion of “force, violence or fear” in a Hobbs Act prosecution. A violation of the statute may be made out by showing that a public official through the wrongful use of office obtains property not due him or his office, even though his acts are not accompanied by the use of “force, violence or fear.” United States v. Staszcuk, supra (adopting by reference the panel opinion at 502 F.2d 875 (7th Cir. 1974) on this point); United States v. Price, supra. We do not construe Addonizio to hold to the contrary, since that case was submitted to the jury only on the theory that money had been obtained through the use of fear, and the question presented here and in Kenny was not before the court there.

We are convinced, therefore, that the evidence in this case justified a finding by the jury that the payments to defendant were induced by an exploitation of Kelly’s reasonable belief that defendant’s position as a state senator provided him with effective control over the state leases here involved even though he lacked de jure authority to act in this sphere. In consequence, we conclude that consent to the payments was “induced . . . under color of official right” and in violation of the Hobbs Act even without proof of the exercise of overt coercion.

Removal From Office

In its sentence of April 11, 1975, the district court ordered defendant removed from office as a Pennsylvania state senator. On June 2, 1975, the Pennsylvania Senate purported to expel defendant from office. Although we take notice of the Senate’s action, we reject the government’s urgings that because of the intervening expulsion we should decline to treat the question of the propriety of the order of removal on the ground of mootness. In the first place, we cannot assume that defendant concurs in the propriety of his expulsion by the Senate, and this matter has not yet been adjudicated. Thus, the controversy regarding his right to remain in the state Senate is still a live issue. In addition, failure to address the issue of removal would leave unresolved a challenged assertion of the power of a federal court to remove a state official from office. The significance of the assertion of federal power by the district court in this particular context demands that we determine defendant’s challenge.

The district court purported to act pursuant to a Pennsylvania statute, 65 P.S. § 121 (Supp.1974), which provides that upon conviction in a court of record of extortion or other specified crimes, any person holding public office “shall forfeit his office, and the sentence imposed by the court shall include the direction for the removal from office of such person.” The government contends that although the district court had no power to impose any penalty beyond that specified by Congress for violation of the Hobbs Act, it did have the power to enforce what the government construes as an automatic forfeiture of office by operation of the Pennsylvania statute. It offers alternate theories to sustain the district court’s order: (1) removal could be imposed as a condition of release pending appeal; (2) the court has the inherent power to enforce the policy expressed in the statute; or (3) the court could take notice of and enforce a collateral consequence of defendant’s conviction.

We perceive no basis upon which the district court’s order of removal was justified. Removal from office was in no sense imposed as a condition of release pending appeal, and indeed, could not have been, since release after conviction is determined on the basis of considerations of likelihood of flight and danger to the community, 18 U.S.C. § 3148 (1970), and not on whether defendant might infringe the public policy of Pennsylvania by remaining in office. Nor can we find any authority for inherent power in the district court to enforce the policy of the Pennsylvania statute. As a court of limited jurisdiction, the district court possessed only the power to act in this criminal case which Congress has given it by statute. As the Supreme Court has stated:

The law of our country takes care that not the weight of a judge’s finger should fall upon any one, except as specifically authorized. In re Bonner, 151 U.S. 242, 259, 14 S.Ct. 323, 326, 38 L.Ed. 149 (1894).

We can see no escape from this principle by arguments that the district court’s order was not penal in nature, but merely the enforcement of a “judicially noticeable collateral consequence of defendant’s conviction.” The simple and unassailable fact is that Congress has given the district court no power to take any action in sentencing a defendant except to impose a punishment within the limits prescribed by statute. The order of removal was beyond the power of the court.

The order directing defendant’s removal from office is separate and distinct from the remainder of the district court’s sentence. We are in a position, therefore, to adjudicate its invalidity without disturbing the clearly authorized sentence of fines and imprisonment. For this reason, we will exercise our power to correct the sentence rather than remanding the case for the execution of this ministerial act.

The judgment of the district court will be modified by deleting that portion directing that defendant be removed from the office of Pennsylvania State Senator. As thus modified, the judgment will be affirmed.

1 . We do not consider that an absence of effect on interstate commerce is shown by the fact that B.M.I. had a net cash inflow by reason of entering into the leases. Although B.M.I. undoubtedly used defendant’s influence to put itself in a position where the award of state leases was likely, at that point it had the right to receive the full rental, described by state officials as completely reasonable, without paying defendant some $20,000 to insure that the lease opportunities were not lost.

2 . A portion of the court’s instruction was that the defendant could be convicted if the jury found “that Leo Kelly reasonably believed that the senator’s official functions included the securing of leases with the Commonwealth of Pennsylvania” and “that Senator Mazzei used his office or wrongfully used his official power.”