United States v. Lawrence S. Bloom

149 F.3d 649, 1998 WL 386133
CourtCourt of Appeals for the Seventh Circuit
DecidedAugust 13, 1998
Docket98-1361
StatusPublished
Cited by111 cases

This text of 149 F.3d 649 (United States v. Lawrence S. Bloom) is published on Counsel Stack Legal Research, covering Court of Appeals for the Seventh Circuit primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
United States v. Lawrence S. Bloom, 149 F.3d 649, 1998 WL 386133 (7th Cir. 1998).

Opinions

EASTERBROOK, Circuit Judge.

An indictment charges Lawrence Bloom— between 1979 and 1995 the Alderman for Chicago’s Fifth Ward — with corruption in office. The question presented by the prosecutor’s interlocutory appeal under 18 U.S.C. § 3731 is whether a portion of Count I, which accuses Bloom of mail fraud, charges a pub-lie-capacity or only a private-capacity offense. The district court dismissed Count I to the extent it alleges that Bloom schemed to deprive Chicago of the intangible right to his honest services, holding that the charge properly claims only that Bloom schemed to deprive the City of tax revenues.

Aldermanic positions in Chicago are part-time jobs. In his private life, Bloom is a lawyer. Count I charges that Bloom counseled one of his clients to use a proxy bidder at a tax scavenger sale. (We recount the allegations, whose truth remains to be determined.) Komed Health Center, the client, [651]*651owned real property on which it owed more than $283,000 in real estate taxes. Property taxes, although levied by Cook County, flow through to the City’s coffers. Counties in Illinois sell properties with tax delinquencies at auction; the high bidder receives a certificate, which becomes a tax deed if the owner does not redeem the property by paying all back taxes plus interest. 35 ILCS 200/21-260. Another section of the statute requires each bidder to certify that “the person has not bid upon or applied to purchase any property at the sale for a person who is the party or agent of the party who owns the property or is responsible for the payment of the delinquent taxes”. 35 ILCS 200/21-265(a)(1). Illinois permits the winning bidder at a tax scavenger sale to sell his rights to the original owner, even though that-wipes out the owner’s incentive to redeem by paying delinquent taxes to the county. The state apparently believes, however, that these transactions would occur too frequently if bidders were agents-or nominees of the owners. Bloom advised Komed that it could avoid paying taxes, yet retain control of the property, by sending to the auction a person who had agreed to sell the certificate or tax deed to Komed. Bloom told Komed that thé maneuver was illegal but added that people did it all the time. Komed’s agent later made the winning bid and, after the redemption period expired, conveyed the property back to Komed, which thus avoided most of its taxes. (The County recovered only the amount bid at the auction; Komed paid this, plus a premium to its agent, and saved the balance of the tax bill.) •

The prosecutor has identified two theories under which the scheme was mail fraud (use of the mails being integral to tax scavenger sales) in violation of 18 U.S.C. § 1341: first, the arrangement finagled the City and County out of revenues they might have received had they known the truth about the proxy’s allegiance and disqualified him from participating in the auction; second, the arrangement deprived the City of Bloom’s honest services. According to the prosecutor, Bloom was a fiduciary who owed the City a duty of loyalty and therefore was required, when practicing law, to refrain from participating in or giving advice.about any transaction that could reduce the City’s revenues. In re Vrdolyak, 137 Ill.2d 407, 148 Ill.Dec. 243, 560 N.E.2d 840 (1990), holds that another lawyer-alderman violated his ethical duties when he represented persons who had legal claims against the City, because any increase in his clients’ recoveries necessarily would reduce the City’s assets. Although vigorous representation of the same clients by a lawyer without ties to the City could have produced the same or greater outlays, the Supreme Court of Illinois thought that it conveys the .wrong appearance for a fiduciary of the City to be the advocate of the City’s adversary, especially in light of the, possibility that the lawyer representing the City will find it prudent to accommodate an alderman who sits on the opposite side of the table. Similar reasoning, according to the prosecutor, shows that lawyer-alderman Bloom violated his duty to give Chicago his undivided loyalty. Of course Vrdolyak was about ethics rather than fraud, and few violations of ethical duties are .federal crimes. What the prosecutor needs is a way to equate unethical conduct with a “scheme or artifice to defraud”, the key language of § 1341. Although McNally v. United States, 483 U.S. 350, 107 S.Ct. 2875, 97 L.Ed.2d 292 (1987), scotched the “intangible rights” doctrine that treats some violations of fiduciary duty as fraud, Congress enacted in 1988 a statute providing: “For the purposes of this chapter, the term ‘scheme or artifice to defraud’ includes a scheme or artifice to deprive another of the intangible right of honest services.” 18 U.S.C. § 1346. The Komed scavenger sale occurred in 1991, so Bloom’s acts are covered by § 1346. But the district judge dismissed Count I, to the extent it rests on the intangible rights doctrine; because he thought that the Vrdolyak ruling deemed unethical only participation in litigation against the City and did not condemn all activities (such as tax-planning advice) that might indirectly affect the City’s revenues.

I

Our first question is whether the prosecutor is entitled to interlocutory review of this order. Section 3731, the Criminal Appeals Act, authorizes appeal from an order [652]*652“dismissing an indictment or information ... as to any one or more counts, except that no appeal shall lie where the double jeopardy clause of the United States Constitution prohibits further prosecution.” The district court did not dismiss Count I; it just excised the intangible rights theory. Relying on the text of § 3731, Bloom argues that we lack jurisdiction. If the text of the statute were the last word, we would be inclined to agree. See United States v. Spilotro, 884 F.2d 1003, 1005 (7th Cir.1989); United States v. Horak, 833 F.2d 1235 (7th Cir.1987). But it is not. In United States v. Wilson, 420 U.S. 332, 337, 95 S.Ct. 1013, 43 L.Ed.2d 232 (1975), and United States v. Martin Linen Supply Co., 430 U.S. 564, 568, 97 S.Ct. 1349, 51 L.Ed.2d 642 (1977), the Court wrote that § 3731 is “intended to remove all statutory barriers” to appeals from orders terminating prosecutions. Neither of these cases involved an appeal from an order paring down a single count, but Sanabria v. United States, 437 U.S. 54, 98 S.Ct. 2170, 57 L.Ed.2d 43 (1978), did, and stated:

We agree with the Court of Appeals ... that there is no statutory barrier tq an appeal from an order dismissing only a portion of a count. One express purpose of 18 U.S.C. § 3731

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Cite This Page — Counsel Stack

Bluebook (online)
149 F.3d 649, 1998 WL 386133, Counsel Stack Legal Research, https://law.counselstack.com/opinion/united-states-v-lawrence-s-bloom-ca7-1998.