Opinions of the United 1994 Decisions States Court of Appeals for the Third Circuit
7-12-1994
United States of America v. Henry Precedential or Non-Precedential:
Docket 93-7267
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Recommended Citation "United States of America v. Henry" (1994). 1994 Decisions. Paper 80. http://digitalcommons.law.villanova.edu/thirdcircuit_1994/80
This decision is brought to you for free and open access by the Opinions of the United States Court of Appeals for the Third Circuit at Villanova University School of Law Digital Repository. It has been accepted for inclusion in 1994 Decisions by an authorized administrator of Villanova University School of Law Digital Repository. For more information, please contact Benjamin.Carlson@law.villanova.edu. UNITED STATES COURT OF APPEALS FOR THE THIRD CIRCUIT
No. 93-7267
UNITED STATES OF AMERICA, Appellant
V.
THOMAS HENRY; MOWRY MIKE
ON APPEAL FROM THE UNITED STATES DISTRICT COURT FOR THE MIDDLE DISTRICT OF PENNSYLVANIA (D.C. Criminal No. 92-00308)
Argued December 7, 1993
Before: BECKER and NYGAARD, Circuit Judges and WEIS, Senior Circuit Judge
(Opinion Filed July 12, l994 )
WAYNE P. SAMUELSON, ESQUIRE United States Attorney MARTIN C. CARLSON, ESQUIRE (Argued) Assistant United States Attorney Federal Building 228 Walnut Street P.O. Box 11754 Harrisburg, PA 17108 Attorneys for Appellant
PAUL J. KILLION, ESQUIRE Killion & Metz 214 Pine Street P.O. Box 11670 Harrisburg, PA 17101 Attorney for Appellee Thomas Henry
JAMES J. ROSS, ESQUIRE (Argued) Bowers & Ross 820 Kennedy Drive P.O. Box 280 Ambridge, PA 15003 Attorney for Appellee Mowry Mike
1 OPINION OF THE COURT
NYGAARD, Circuit Judge. The government appeals the district court's dismissal
of a twenty-one count indictment charging Thomas Henry and Mowry
Mike with conspiracy, bank fraud, and wire fraud in connection
with an alleged bid-rigging scheme. For the following reasons,
we will affirm the dismissal of the indictment.
I.
Between 1986 and 1988, Thomas Henry was the Comptroller
of the Delaware River Joint Toll Bridge Commission (the
"Commission"). The Commission, a bi-state agency, operates and
maintains twenty-one bridges spanning the Delaware River between
New Jersey and Pennsylvania. Among these bridges are seven toll
bridges that generate more than ten million dollars in revenue
annually.
The Commission is governed by ten Commissioners, five
of whom are appointed by the Governor of New Jersey and confirmed
by the New Jersey Senate and five of whom represent Pennsyl-
vania's Governor, Treasurer, Auditor General and Transportation
Secretary. Mowry Mike, Pennsylvania's Executive Deputy Auditor
General, served as Auditor General Donald Bailey's representative
on the Commission between 1986 and 1988. Mike also was a
political operative and campaign fund-raiser for Bailey during
his unsuccessful runs in 1986 for the Democratic nomination for
2 the United States Senate and in 1988 for re-election as Auditor
General.
The charges in the indictment were based on Henry's and
Mike's alleged corruption of the process by which banks were
chosen to be the depositories of the Commission's toll bridge
revenues. The Commission invested the money in short-term
certificates of deposit at banks selected through competitive
bidding. As the Commission's Comptroller, Henry was responsible
for this process and, according to the indictment, had "a
fiduciary obligation to deal with Commission funds and other
public money in a forthright and honest fashion." He would
notify interested banks that the Commission had money it wished
to deposit and that they could submit confidential bids to him in
writing or by telephone by a certain deadline. After the
deadline passed, the funds would be deposited with the bank
meeting the Commission's financial requirements that offered the
highest interest rate on the certificates of deposit.
According to the indictment, on ten occasions Henry
disclosed bid information to Mike and another individual in the
Auditor General's office, who in turn disclosed it to a
representative of one bank, Bank A. Bank A was thus allegedly
able to narrowly outbid the other banks by offering a slightly
higher rate of interest and, as a result, received deposits of
$34,278,000 in Commission funds. In return, representatives of
Bank A allegedly afforded Mike expedited handling on a $50,000
car loan and contributed more than $10,000 to various political
3 campaigns, including Auditor General Bailey's Senate campaign, in
which Mike was involved.
Count one of the indictment charged Henry and Mike with
conspiracy to violate the federal mail, wire and bank fraud
statutes, in violation of 18 U.S.C. § 371. Counts two through
twenty-one charged ten counts of bank fraud in violation of 18
U.S.C. § 1344, and ten counts of wire fraud in violation of 18
U.S.C. § 1343, for each occasion on which the bidding information
allegedly was compromised.1 The indictment asserted that in
rigging the bids, "Henry violate[d] his fiduciary duty and
Commission custom, practices and policies" and "Henry, Mike and
their [unindicted] co-conspirators defrauded the other banks
bidding for these public funds of money and property, in that
[they] denied these other bidding banks a fair and honest
opportunity to receive this public money" or "a fair and honest
opportunity to bid on" it.
The district court dismissed all of these counts,
finding that the scheme alleged in the indictment, although unethical, did not involve a deprivation of property as required
by McNally v. United States, 483 U.S. 350, 107 S. Ct. 2875
(1987), and therefore could not constitute mail, wire or bank
fraud. The district court had jurisdiction under 18 U.S.C.
§3231, and we have jurisdiction under 28 U.S.C. § 1291 and 18
1 The indictment also contained a twenty-second count charging Mike alone with obstructing justice during the investigation into the scheme, but this count was dismissed without prejudice pending this appeal.
4 U.S.C. § 3731. Our review of the district court's dismissal of
the indictment on the grounds of legal insufficiency is plenary.
II.
In McNally v. United States, 483 U.S. 350, 107 S. Ct.
2875 (1987), the Supreme Court held that the federal mail fraud
statute did not prohibit a scheme to defraud a state and its
citizens of the intangible right to honest government, but rather
only proscribed schemes to defraud their victims of money or
property. Shortly thereafter, in Carpenter v. United States, 484
U.S. 19, 25, 108 S. Ct. 316, 320 (1987), the Court indicated that
the mail and wire fraud statutes likewise do not reach schemes to
defraud an employer of its intangible right to its employee's
honest services. Carpenter made clear, however, that although a
property right is required under McNally, it need not be a
tangible one. The statutes cover schemes to defraud another of
intangible property, such as confidential business information.
Id. at 25-26, 108 S. Ct. at 320-21.
In response to McNally, Congress extended the fraud
statutes' sweep to schemes to defraud the intangible right of
honest services, see 18 U.S.C. § 1364, but that extension does not apply to this case. It did not become effective until
November 18, 1988, well after the bid-rigging alleged in the
indictment ceased, and it is not retroactive. See Kehr Packages,
Inc. v. Fidelcor, Inc., 926 F.2d 1406, 1417 n.4 (3d Cir.), cert.
denied, 501 U.S. 1222, 111 S. Ct. 2839 (1991). Therefore, to
state an offense under the federal fraud statutes, the indictment
5 against Henry and Mike must allege a scheme that meets McNally's
standards.2
Initially, we see an intangible rights problem with the
indictment's allegations involving Henry's derelictions of his
duties to the public and the Commission. Under McNally and
Carpenter, a government official's breach of his or her
obligations to the public or an employee's breach of his or her
obligations to an employer cannot violate the fraud statutes. See
Carpenter, 484 U.S. at 25, 108 S. Ct. at 320; McNally, 483 U.S.
at 355, 107 S. Ct. at 2879. These theories, however, were not
the only ones relied upon in the indictment. Indeed, the
indictment's focus was not on the Commission or the public, but
on the competing banks: its fraud claims were grounded on the
allegation that Henry's and Mike's scheme defrauded these banks
of a fair opportunity to bid to receive the Commission's funds.3
The government now argues that Henry's and Mike's scheme also
defrauded the Commission of its confidential business information
2 McNally and Carpenter involved the mail and wire fraud statutes, but their principles apply equally to the bank fraud statute because the operative language of all three is the same. See 18 U.S.C. §§ 1341, 1343, 1344. 3 The focus on the competing banks as the scheme's victims is obviously necessary in the bank fraud counts, see United States v. Goldblatt, 813 F.2d 619, 623-24 (3d Cir. 1987) (noting that 18 U.S.C. § 1344 is aimed at losses to banks), and it is understandable in the other counts because of the unusual nature of this particular scheme. Bid-rigging by public officials typically results in a government entity paying more than it otherwise would have for goods or services, see, e.g., United States v. Osser, 864 F.2d 1056, 1062-63 (3d Cir. 1988), United States v. Asher, 854 F.2d 1483, 1495-96 (3d Cir. 1988), cert. denied, 488 U.S. 1029, 109 S. Ct. 836 (1989), but the Commission allegedly made money here, receiving a higher interest rate on its deposits as a result of the scheme.
6 and the right to control how its money was invested, but these
theories were not advanced in the indictment and cannot save it
on appeal.4 See United States v. Zauber, 857 F.2d 137, 143 (3d
Cir. 1988), cert. denied, 489 U.S. 1066, 109 S. Ct. 1340 (1989).
The question, then, is whether a fair bidding opportunity is a
property right of the competing banks. If it is, the presence of
any intangible rights allegations will not invalidate the
indictment. See United States v. Asher, 854 F.2d 1483, 1494 (3d
Cir. 1988), cert. denied, 488 U.S. 1029, 109 S. Ct. 836 (1989).
We note that once the Commission's deposits actually
were awarded to one of the bidding banks, they legally would be
considered the property of that bank. It is a fundamental
principle of banking law that money deposited with a bank becomes
the bank's property, and the bank may use it as its own. In re
Erie Forge & Steel Corp., 456 F.2d 801, 804 (3d Cir. 1972)
(citing Prudential Trust Company's Assignment, 223 Pa. 409, 413,
72 A. 798, 799 (1909)); Lebanon Iron Co. v. Donnelly & Co., 29
F.2d 411, 412 (E.D. Pa. 1928). Here, however, the money had not
yet been deposited, and there is no way of knowing to which, if
any, of the bidding banks it would have gone. Even in a fair
process, Bank A might still have won the deposits. The issue, 4 Because the loss of control theory was not alleged, we need not decide whether such a deprivation satisfies McNally. See United States v. Zauber, 857 F.2d 137, 147 (3d Cir. 1988) (questioning whether McNally supports the argument that the right to control money constitutes property), cert. denied, 489 U.S. 1066, 109 S. Ct. 1340 (1989). But see United States v. Martinez, 905 F.2d 709, 714-15 (3d Cir.) (holding that state's "right to keep its medical licenses to itself and to bestow them on persons who had fairly earned them" is property), cert. denied, 498 U.S. 1017, 111 S. Ct. 591 (1990).
7 therefore, is whether the competing banks' interest in having a
fair opportunity to bid for something that would become their
property if and when it were received is in itself property. We
conclude that it is not.
In holding that the Wall Street Journal was deprived of
property in violation of the mail and wire fraud statutes when
one of its reporters disclosed the timing and contents of his
column before it was published, the Carpenter Court emphasized
that the law had long treated confidential business information
as "'a species of property to which the corporation has the
exclusive right and benefit, and which a court of equity will
protect through the injunctive process or other appropriate
remedy.'" See Carpenter, 484 U.S. at 26, 108 S. Ct. at 320-21.
Thus, to determine whether a particular interest is property for
purposes of the fraud statutes, we look to whether the law
traditionally has recognized and enforced it as a property right.
See United States v. Evans, 844 F.2d 36, 41 (2d Cir. 1988) ("That
the right at issue . . . has not been treated as a property right
in other contexts and that there are many basic differences
between it and common-law property are relevant considerations in
determining whether the right is property under the federal fraud
statutes.").
The competing banks' interest in a fair bidding
opportunity does not meet this test. Clearly, each bidding
bank's chance of receiving property -- the deposits if its bid
were accepted -- was, at least in part, dependent on the
condition that the bidding process would be fair. This
8 condition, which is all that the bidding banks allegedly lost,
was thus valuable to them, but it is not a traditionally
recognized, enforceable property right. At most, the condition
is a promise to the bidding banks from those in charge of the
process that they would not interfere with it. It is not a grant
of a right of exclusion, which is an important aspect of
traditional property. See Carpenter, 484 U.S. at 26-27, 108 S.
Ct. at 321. Violation of this condition may have affected each
bidding bank's possible future receipt of property, but that does
not make the condition property. The government bases its argument that the banks' interest in a fair bidding opportunity is property on a Seventh Circuit decision, United States v. Ashman, 979 F.2d 469 (7th Cir. 1992), cert. denied, ___ U.S. ___, 114 S. Ct. 62 (1993). We believe, however, that Ashman does not support the government's contention. In Ashman, a number of traders of commodities futures contracts at the Chicago Board of Trade ("CBOT") were convicted of mail and wire fraud, among other things, for manipulating trades. The defendants were all either "locals" (who traded on their own accounts) or "brokers" (who executed orders from customers). Trading at the CBOT took place in pits on the trading floor through "open outcry:" traders seeking to buy or sell, either for themselves or for customers, openly and audibly bid on or offered each contract so that all other traders in the pit could accept the bid or offer. Id. at 475. However, [i]n a "match" (the most recurrent type of fraud charged in the indictment), a broker traded buy and sell orders in equal quantities with a cooperating local. The two traders simply agreed on the price of the trade rather than bidding or offering the customer order in the open market and securing the best price available. The broker thereby filled the customers' orders by selection and not on the market.
Id. at 477. Most of the matches involved "market on close" orders directing the broker to execute just before the close of trading at the best possible price. Id. at 476-77. The defendants filled these orders after the day's legitimate trading had ended at a selected price within that day's closing range (the span between the highest and lowest prices actually traded in the market during the period immediately before the close of trading). Id. These matches resulted in profits for the local:
9 The broker sold a customer's sell order to the local at a lower price than the price at which he bought a different customer's buy order from the same local. The local thereby would buy low and sell high with the customer orders from the broker, guaranteeing that the local made money.
Id. at 477.
The defendants mounted a McNally challenge, arguing that matching trades did not involve the deprivation of property
since the customers received just what they asked for when their
orders were filled at a price within the closing range. Id. at
477. The Seventh Circuit disagreed insofar as matching denied
the customers the opportunity to obtain a better price, but
concluded that where the customers had no such opportunity,
matching did not violate the fraud statutes. Id. at 477-79. The
court thus invalidated the convictions for matching trades on
"limit days" when the commodity's price was fixed and no other
price was being traded in the pit, because "[m]erely denying a
customer the opportunity to obtain the limit price by open outcry
rather than by arranged trades [is] the kind of intangible
deprivation that McNally held could not constitute mail fraud."
Id. The government attempted to save the limit day convictions
by arguing that the matching deprived other traders in the pits
of the opportunity to profit on the trades, but the court
rejected this claim as nothing more than the untenable "assertion
that open outcry trading by itself constitutes a property right
protected under the mail and wire fraud statutes[.]" Id. We
see no difference between the other traders' interest in open
outcry trading, which the Seventh Circuit held not to be property
10 in Ashman, and the competing banks' interest in a fair bidding
process, which we hold not to be property here. Thus, Ashman
supports our conclusion, not the government's position.
Our determination that the fair opportunity to bid is
not a property right of the competing banks seals the fate of
this indictment. It is irrelevant that, as the government points
out, the scheme allegedly afforded its participants tangible
benefits -- over $34,000,000 in deposits for Bank A, and
favorable loan treatment and campaign contributions to his
political allies for Mike. The same was true in McNally, but did
not save the convictions there. McNally involved a self-dealing
patronage scheme in which the Kentucky Democratic Party Chairman,
a cabinet official, and a private individual arranged with the
company securing the Commonwealth's workers compensation
insurance that, in exchange for a continuing relationship, it
would share the commissions it received from insurers with
companies the defendants controlled. McNally, 483 U.S. at 352-
53, 107 S. Ct. at 2877-78. In reversing mail fraud convictions
obtained under the theory that the scheme defrauded Kentucky's
citizens and government of the intangible right to have the
Commonwealth's affairs conducted honestly, the Supreme Court
stated: there was no charge and the jury was not required to find that the Commonwealth itself was defrauded of any money or property. It was not alleged that in the absence of the alleged scheme the Commonwealth would have paid a lower premium or secured better insurance. [The defendants] received part of the commissions but those commissions were not the Commonwealth's money. . . .
11 Id. at 360, 107 S. Ct. at 2882 (emphasis added). Just as the
insurance commissions in McNally were not from the Commonwealth,
the benefits Bank A and Mike received were not from the competing
banks, and therefore those benefits cannot save the indictment
here.
III.
In sum, we conclude that the indictment against Henry
and Mike does not allege a scheme to defraud its victims of a
property right and therefore does not state offenses under the
federal fraud statutes. We therefore will affirm the district
court's dismissal of the indictment.5
USA v. Henry 93-7267
WEIS, Circuit Judge, dissenting.
The case before us is not based on an "ethereal" right,
but rather presents a far more substantial property right -- the
ability of the other bidding banks to profit from a fund of more
than $34 million, a not insignificant amount even in these days.
That conclusion is not contrary to McNally v. United States, 483 U.S. 350 (1987), a case that was quite narrow in its actual
holding. The Court concluded that although property rights are
5 In light of our disposition of the government's appeal, we dismiss Mike's cross-appeal from the district court's denial of his motions for discovery and suppression as moot.
12 "clearly" within the protection of the mail fraud statute, "the
intangible right of the citizenry to good government" is not. Id.
at 356. That the Court had not intended to drastically narrow
the scope of the statute became evident in Carpenter v. United
States, 484 U.S. 19 (1987), a case decided in the following Term.
In Carpenter, the Court decided that confidential
business information is a property right and that a scheme to
disclose such information was within the proscription of the mail
and wire fraud statutes even though the owner sustained no
monetary loss. Id. at 25. In categorizing confidential business
information, the Court explained: "[I]ts intangible nature does
not make it any less `property' . . . . McNally did not limit
the scope of § 1341 to tangible as distinguished from intangible
property rights." Id. Reiterating the broad scope of the
statute, the Court commented: "As we observed last Term in
McNally, the words `to defraud' in the mail fraud statute have
the `common understanding' of `wronging one in his property
rights by dishonest methods or schemes, and usually signify the
deprivation of something of value by trick, deceit, chicane or
overreaching.'" Id. at 27 (quoting McNally, 483 U.S. at 358 (internal quotations omitted)).
In a post-McNally case, United States v. Asher, 854
F.2d 1483, 1494 (3d Cir. 1988), we concluded that the test for
determining whether a deprivation is cognizable under the mail
fraud statute is:
"[W]here rights are involved whose violation
would lead to no concrete economic harm, and
13 where those rights are the only rights
involved in the case, McNally's proscriptions
would prevent upholding conviction on appeal.
Where, on the other hand, a violation of the
rights involved would result in depriving
another of something of value, and the
indictment . . . [is] based on that fact,
then the presence of intangible rights
language will not prove fatal . . . ."
See also United States v. Piccolo, 835 F.2d 517 (3d Cir. 1987).
We returned to the property concept in United States v.
Martinez, 905 F.2d 709 (3d Cir. 1990), where the defendant had
been convicted of fraudulently obtaining a medical license from
the state by the use of forged school transcripts. The defendant
argued that an unissued license was not property under McNally's
reasoning and was without value to the state. Id. at 713. We
rejected this argument, finding "nothing in the Supreme Court's
jurisprudence on the mail fraud statute that requires or supports
this theory of incipient or embryonic property." Id. In
declining to follow decisions in other circuits that
distinguished between issued and unissued licenses, we concluded
that Congress had not intended the reach of the mail fraud
statute "to be dependent on artificial constructs and fleeting
distinctions." Id. at 715. Rather, we read the statute as
"broadly protecting property interests." Id.
The deprivation of property rights in conjunction with
the federal fraud statutes has been addressed in the bid-rigging
14 context. For example, in Ranke v. United States, 873 F.2d 1033,
1039-40 (7th Cir. 1989), the Court upheld a conviction even
though the purchaser of services actually suffered no loss
because the successful bidder absorbed the bribes for
confidential information out of its own profits. See also Belt
v. United States, 868 F.2d 1208, 1214 (11th Cir. 1989)
(confidential bidding information as a result of bribery was a
violation of the wire fraud statute). The thrust of these cases,
however, was on the loss of property by persons soliciting bids
rather than those submitting the bids.
The indictment here focuses on the loss of property by
the competing bidders and not by the Commission. The indictment
charges that defendants executed "a scheme and artifice to
defraud federal chartered and insured financial institutions of
money and property by depriving these financial institutions of a
fair and honest opportunity to bid on public money . . . ."6 No
loss, either of pecuniary interest or of confidential
information, on the part of the Commission is mentioned in the
indictment, and thus, a Carpenter-type fraud is not asserted.
The indictment is somewhat unartfully worded in
asserting that the other banks were denied the opportunity to
bid. As a recitation of the facts in the indictment makes clear,
6 Although the majority notes that the Commission allegedly made money because it received a higher interest rate on this deposit as a result of the fraud, it is possible that without the confidential information and the necessity for making political campaign contributions in return, Bank A would have made higher bids. The situation, therefore, is the same as in Ranke where the successful low bidder absorbed the costs of the bribes in its price.
15 however, the loss incurred by the competing bidders was actually
the opportunity to have a legitimate bid accepted, not merely
submitted. See Ginsburg v. United States, 909 F.2d 982, 984 (7th
Cir. 1990) (court is to look at specific conduct alleged and not
at the legal characterization of facts set forth in the
indictment).
Unlike the majority, I believe that the unsuccessful
banks had a sufficient property interest in a legitimate bidding
process to support the fraud charges here. The wire fraud
statute is not to be given a narrow construction, but is instead
to be interpreted to guard the public (including banks) against
the many fraudulent schemes that the fertile minds of the
criminally inclined may devise.
Transferring property concepts from one area of the law
to another must be done cautiously with an appreciation of the
differing circumstances and aims of the law that are implicated.
With due recognition of the limitations that must be placed on
transpositions of this nature, however, it seems to me that the
tort of interference with prospective contractual relationships
is a legitimate reference point.
The conduct of defendants as detailed in the indictment
was palpably dishonest and was specifically intended to deprive
the other banks of profitable contracts with the Commission. The
competing bank submitting the highest legitimate bid had an
enforceable proprietary interest that was harmed. This is
demonstrated by the fact that the unsuccessful bidder would have
had a civil remedy against these defendants and Bank A for the
16 tortious interference with prospective contractual relationships.
Restatement (Second) of Torts § 766B provides that one
who intentionally and improperly interferes with another's
prospective contractual relations is subject to liability for any
resultant pecuniary harm if the improper conduct caused a third
person not to enter into an agreement. See Leonard Duckworth,
Inc. v. Michael L. Field & Co., 516 F.2d 952, 955 (5th Cir. 1975)
("[T]he common law has long held that the reasonable expectancy
of a prospective contract is a property right to be protected
from wrongful interference in the same sense as an existing
contract is protected."); see also Small v. United States, 333
F.2d 702, 704 (3d Cir. 1964); Dupree v. United States, 264 F.2d
140, 143 (3d Cir. 1959).
The same philosophy was expressed in a different
context, almost a century ago. "[T]he notion is intolerable that
a man should be protected by the law in the enjoyment of
property, once it is acquired, but left unprotected by the law in
his efforts to acquire it. The cup of Tantalus would be a
fitting symbol for such a mockery." Brennan v. United Hatters of North America, Local No. 17, 65 A. 165, 171 (N.J. 1906). For an
even earlier holding, see Keeble v. Hickeringill, 103 Eng. Rep.
1127 (Q.B. 1707) (defendant's actions in frightening away ducks
from plaintiff's pond supported a claim for damages even though
plaintiff had never taken possession of the fowl).
In Bruce Lincoln-Mercury, Inc. v. Universal C.I.T. Credit Corp., 325 F.2d 2, 13 (3d Cir. 1963), we observed that the
law extends its protection further in the case of interference
17 with existing contracts than in precontractual interference, but
does draw a line beyond which no one may go in deliberately
intermeddling with the business affairs of others. "The interest
protected is [a] reasonable expectation of economic advantage."
Id. (footnote omitted). See W. Page Keeton et al., Prosser and
Keeton on the Law of Torts § 130 (5th ed. 1984).
The victims' loss in this case is not theoretical like
the deprivation of faithful government service excluded by
McNally, but is instead concrete and measurable. The allegations
in the indictment make it clear that in each instance the bank
that submitted the highest legitimate bid would have received the
Commission's money, but for the defendants' fraud. Thus, the
indictment establishes an actual, not an illusory or speculative
loss to that bank in each of the instances when defendants
disclosed the confidential information.
The indictment in United States v. Castor, 558 F.2d 379
(7th Cir. 1977) charged the defendant with fraudulently obtaining
a quite limited supply of liquor store permits to the detriment
of those who were thus unable to obtain one. The Court concluded
that the "diminished opportunity to obtain permits reduced the
other applicants' chances to make profits through the operation
of package liquor stores . . . [and was] a type of potential
pecuniary injury . . . [previously recognized as] the diminished
opportunity to obtain a financially favorable contract." Id. at 384; see also Johnson v. United States, 82 F.2d 500, 503 (6th
Cir. 1936) (unsuccessful bidder in bid-rigging scheme was
defrauded for purposes of mail fraud statute).
18 A somewhat similar set of circumstances supported a
conviction in Gregory v. United States, 253 F.2d 104 (5th Cir.
1958). There, the defendant, through the fraudulent use of pre-
dated postal cancellations, was able to send the actual results,
rather than predictions, of football games as his entries in a
contest that awarded a new automobile as a prize. The defendant
argued that "so far as other contestants were concerned, until
the bird was in the hand, the Cadillac did not belong to them
either singularly or in a group." Id. at 109. The Court
rejected that contention and pointed out that the defendant's
conduct "was to cheat and deceive, to pretend and misrepresent.
As such, it was to defraud . . . ." Id.
All three cases are pre-McNally, but nothing there or
in Carpenter would weaken the reasoning or holdings in the three
Courts of Appeals decisions.7 The fraudulent deprivation of a
reasonable expectation to secure an economic advantage falls
within the proscriptions of the federal fraud statutes.
Unlike the majority, I am not persuaded that this case
falls within the rationale of United States v. Ashman, 979 F.2d
469 (7th Cir. 1992). There were actually two holdings in that
case. In the first, the Court of Appeals affirmed the
convictions where the defendants removed their customers from the
7 See Craig M. Bradley, Foreword: Mail Fraud After McNally and Carpenter: The Essence of Fraud, 79 J. Crim. L. & Criminology 573 (1988). "[T]he question of what is `property,' after the Court's seemingly inconsistent signals in McNally and Carpenter, answers itself: Property is . . . anything that can provide economic loss to the victim and gain to the defendant including information, reputation and anything else on which a dollar value can be placed." Id. at 597.
19 competitive market place, thus denying them the opportunity to
obtain a better price. Id. at 477-78. Only where a price limit
had been set and the customer could not benefit from bidding did
the Court find that the "open outcry" system did not constitute a
deprivation of money or property. Id. at 479. Significantly, it
does not appear that the indictment in Ashman charged the
defendants with interfering with the property interest of other
brokers or anyone other than the customers.
Several statements in the Ashman opinion, however, tend
to support my position here. In reviewing its precedents, the
Court of Appeals commented: "In previous cases, we have held
that shifting or altering of economic risk or opportunity to
affect a person's financial position adversely deprives that
person of money or property." Id. at 478. "[Our prior
decisions] demonstrate that the deliberate deprivation of a clear
financial opportunity violate[s] the mail fraud statute." Id.
In my view, the activities of defendants in this case
constituted a "deliberate deprivation of a clear financial
opportunity" and are thus punishable under the wire and bank
fraud statutes. Accordingly, I would reverse the judgment of the
district court and would uphold the indictment.