Court: District Court, S.D. Texas; January 13, 2013; Federal District Court
Defendant Ray Roman Marchan filed a Motion for Acquittal, Arrest of Judgment, or alternatively a Motion for New Trial, which was amended subsequently. The Government responded, and Marchan supplemented his motions with a reply. The Court previously addressed the legal issues on December 3, 2012, and this amended opinion aims to clarify any remaining arguments.
Marchan faced a seven-count indictment from June 2011, including substantive and conspiracy RICO counts, multiple extortion counts linked to payments to State District Judge Abel Limas, and two counts of honest services mail fraud connected to payments to avoid sanctions and for ad litem appointments. After several trial continuances, Marchan was found guilty on all counts by a jury in April 2012, based on the evidence presented.
In his arguments for acquittal, Marchan contends that he cannot be considered an aider and abettor of Hobbs Act extortion while simultaneously being a victim of the extortion scheme. The Hobbs Act defines extortion as obtaining property through wrongful means, including under official right. Marchan, as the payee in the relevant counts, argues that this status absolves him of criminal responsibility. The Court notes that the Fifth Circuit has previously raised this issue but has not definitively ruled on it, indicating that further legal analysis is required.
A private individual is generally not liable for extortion committed under the guise of official authority, as established in United States v. Tomblin. However, liability can arise if the private individual assists a public official in receiving unentitled funds, as seen in cases like United States v. Collins and United States v. Box. The Hobbs Act is not merely a bribery statute; significant legal discourse revolves around the "Nelson Rule," stemming from United States v. Nelson, which involved a state senator accepting a bribe. The court ruled that a person who pays extorted money may be charged with aiding and abetting the crime under certain conditions. This is rooted in the understanding that while extortion victims are generally protected from prosecution, individuals who initiate extortion schemes do not fall into this protected category. The case illustrates that the defendant, MacLellan, is not merely a victim but an initiator of extortion, justifying the indictment against him. The legislative intent behind the Hobbs Act clearly aims to safeguard those coerced into paying, but it does not extend this protection to those who instigate extortion.
MacLellan's involvement in Nelson's alleged extortion is examined under the premise that it goes beyond mere financial transactions, suggesting he actively solicited and encouraged Nelson's illegal actions. The applicability of Gebardi v. United States is challenged; if MacLellan's actions were more than mere agreement, then Gebardi does not apply. The core inquiry is whether Congress, through the Hobbs Act, intended to include individuals who pay extorted money when those payors actively instigated the extortion. The document asserts that Congress did intend to hold such payors liable, as evidenced by the Hobbs Act's purpose to prevent any interference with interstate commerce via extortion or robbery. Supreme Court precedents affirm the Act's broad language and intent to utilize full constitutional powers against such interferences. Furthermore, it is noted that Congress likely did not consider excluding payors of extorted money from liability. The Fifth Circuit's interpretation in a similar case supports this view, indicating no legislative intent for an exemption from accessory liability. Despite MacLellan's claims that the Hobbs Act's language is ambiguous, the court argues that the lack of clarity does not invalidate Congress's intentions. The document cites Nelson for its comprehensive legal analysis, leading to the "Nelson Rule," which states that a bribe payor can be considered an aider and abettor under the Hobbs Act if they actively induced the extortion.
The Fifth Circuit found that Wright's arguments regarding his alleged victimhood in Armstrong's extortion failed for two primary reasons. Firstly, evidence showed that Wright actively aided and abetted Armstrong's extortion by soliciting and inducing payments to Armstrong, including informing Jack Wright about Armstrong's fee and convincing Armstrong to accept a lesser amount. Secondly, the court rejected Wright's claim to victim status, asserting that he conspired with Armstrong to extort funds from his law firm, which was the actual payor of the extorted money. Consequently, Wright's conviction on Count VI was upheld.
The court noted that even without adopting the Nelson Rule, which Wright proposed, a payor of extorted funds could still face prosecution under existing legal precedents. Other courts have similarly held that individuals who actively participate in extortion can be found guilty of aiding and abetting. Citing multiple cases, the court emphasized that a victim who engages beyond mere acquiescence in the extortion may be convicted. The text also acknowledged some inconsistency among circuits, particularly referencing a Sixth Circuit case, United States v. Brock, where the court clarified that the defendants did not engage in a substantive Hobbs Act violation because they did not obtain property from another under official right, focusing instead on the conspiracy aspect of their actions.
The court ruled that the Brocks, along with the bribed official, could not have formed a conspiracy under the Hobbs Act because the funds for the bribe originated from the Brocks themselves, thus failing the requirement of obtaining property from an outside party. While acknowledging that bribery could constitute a Hobbs Act violation under certain circumstances, the court found it did not apply in this case. The government retains the ability to charge individuals with Hobbs Act violations when they collaborate with public officials, provided they meet the criteria of obtaining property from another with consent.
The excerpt distinguishes between conspiracy, as addressed in the Brock case under 18 U.S.C. § 1951, and aiding and abetting, as seen in the Marchan case under 18 U.S.C. § 2. Aiding and abetting is not a separate offense; it allows for conviction based on evidence of assisting in the crime. To be liable as a co-conspirator, one must first be guilty of conspiracy. Aiding and abetting only requires a shared unlawful intent, differing from the necessity of an explicit conspiratorial agreement. The Sixth Circuit emphasized that for the Brocks to be convicted of conspiracy, they needed to agree to extort property from an external party, which was not the case. This distinction between conspiracy and aiding and abetting is particularly relevant in this context.
Aiding and abetting requires an individual to associate with the offense, participate in the venture, and seek its successful completion. In this case, Judge Limas received money from another party related to the Mancillas case, establishing that he could be liable under 18 U.S.C. § 2 if he knowingly aided and abetted the process. The statute does not create a separate crime but provides a method for convicting someone of the underlying offense. The ruling in Brock suggested that the aiding and abetting statute could extend beyond conspiracy liability under the Hobbs Act. It clarified that while extortion "under color of official right" applies to public officials accepting bribes, it does not extend to private individuals who offer bribes. The court indicated that the Hobbs Act distinguishes among perpetrators, acquiescers, and victims, but ultimately stated that it does not cover them all, leaving it to Congress to criminalize bribery of public officials.
In United States v. Gray, the court upheld convictions for Hobbs Act conspiracy and aiding and abetting related to a bribery scheme for government contracts. The defendants argued their actions did not constitute extortion since no third party was coerced for payment. The court affirmed the jury’s verdict on most counts, indicating that evidence was sufficient to show conspiracy and aiding and abetting of extortion. However, it reversed some convictions, highlighting that evidence must demonstrate that illicit payments originated from a source other than the defendants. This case interpreted the "property from another" requirement in the context of aiding and abetting liability, leading to a broader application of the principles established in Brock.
Gray confirmed that, in the Sixth Circuit, a private citizen can face Hobbs Act charges if they conspire with or assist a public official in extortion. The Brock case's implications are not universally accepted outside this circuit. The Kott ruling emphasized that the government only needs to demonstrate a public official received a payment that was not rightfully theirs, linked to official acts. The Sixth Circuit’s Brock ruling, which states that a bribe payor cannot conspire with an official to extort from themselves, is inconsistent with the Supreme Court’s interpretation, which allows for a public official to conspire with a payor to extort property when the official knows the payment is for official acts. Marchan's defense, which argues that payments made to Judge Limas from his own earnings do not constitute extortion under the Hobbs Act, lacks merit since the Act is not merely a bribery statute.
The court rejected motions for acquittal related to Hobbs Act convictions, defining extortion as obtaining property from another with consent, through wrongful means. Evidence indicated a clear agreement between Limas and Marchan to share ad litem fees, showing Marchan was an active participant, not a victim. Audio evidence substantiated that Marchan’s payments to Limas were voluntary and part of their scheme. The court concluded: 1) Marchan was not a victim of extortion; 2) the payments met the Hobbs Act's definition; and 3) Marchan acted as an aider and abettor in funneling funds to Limas. Regarding the "property obtained from another" aspect, the statute does not mandate that the property be the bribe money itself, allowing for funds to be transferred through other parties, affirming that all involved in collecting extorted payments bear guilt under the law.
The scheme alleged in Counts 3 and 4 aimed to illicitly obtain funds from third parties, specifically through the involvement of parties in the Mancillas v. American General Financial Group case. Evidence indicated that the funds received by Limas originated from these parties, not from Marchan’s account, and there was urgency in contacting defense counsel for the ad litem check, which was promptly divided between Limas and Marchan. The Court affirmed that the jury's verdict on Counts 3 and 4 was justified, despite arguments related to the Brock case concerning the Hobbs Act. The Court clarified that the Hobbs Act does not require the funds to come from outside participants of the scheme, and applying Brock broadly is unsupported by law, as it could lead to unintended consequences contrary to Congress's intent.
Regarding Count 6, the Court evaluated whether the mailing involved constituted a violation of the federal mail fraud statute. The indictment charged Marchan with causing a letter related to a sanctions motion to be mailed to Judge Limas, which the jury found sufficient to support a conviction for aiding and abetting Limas in a bribery scheme that deprived citizens of their right to honest services. Ultimately, the Court upheld the jury's verdicts for Counts 3, 4, and 5, and found the evidence insufficient to support the mail fraud charge in Count 6.
Count 6 of the mail fraud charge is deemed unsustainable by the Court despite jury findings. For a defendant to be guilty of mail fraud, three elements must be satisfied: 1) intent to devise a scheme to defraud; 2) use of the mail to execute that scheme; and 3) close relation of the mailings to the scheme. The mail fraud statute has evolved over a century, with significant Supreme Court rulings clarifying its application.
Key cases include United States v. Young, where the Court established that the use of mail must be part of the fraudulent scheme; Kann v. United States, which determined that mere mailing of checks is insufficient unless it serves to execute the fraud; and Pereira v. United States, which clarified that a defendant may be held liable if the use of mail can be reasonably foreseen as part of the scheme. Lastly, in Parr et al. v. United States, it was emphasized that mailings must be integral to executing the fraud to fall under the statute's prohibition.
In United States v. Maze, the Court examined the connection required between mailings and a defendant's fraudulent scheme under the federal mail fraud statute. The defendant, who used a stolen credit card to make purchases across states, was indicted for mail fraud based on the premise that merchants would mail sales slips back to the bank. The Court ruled that these mailings were not executed to further the scheme, noting the defendant would have preferred the invoices not be mailed at all.
In Schmuck v. United States, the Court differentiated this case by asserting that the mailing of title-registration forms was a crucial step in the fraud involving rolling back odometer readings to inflate car values, contrasting with the mere post-fraud accounting seen in Maze.
Carter v. United States reaffirmed the requirement of two elements for mail fraud: devising a scheme to defraud and using the mail to execute that scheme, though it did not introduce a new standard.
The Fifth Circuit's decision in United States v. Green clarified the law, stating that a mailing suffices to bring conduct under the statute if it is a step in the scheme. The Green Court noted that the defendants' use of multiple credit cards and aliases was facilitated by mailings, which were essential to the scheme, while drawing a comparison to Maze, where the mailings were not integral to executing the scheme.
Randall Crane's letter to Judge Limas, which reminded him to rule on Crane's motion to sanction Marchan or his clients, does not establish a basis for mail fraud under Count 6. Although the evidence supports the existence of a fraudulent scheme and the letter's significance in the timeline, it fails to meet the legal requirement that the mail be used in executing that fraud. Crane was unaware of the scheme, and neither Limas nor Marchan anticipated the letter's arrival, rendering it irrelevant to the execution of the fraud. The case parallels Pereira, where the mailing was not expected, and supports a finding similar to Maze, where the mailing was counterproductive to the sender's interests. Consequently, the Court grants the Amended Motion for Acquittal, finding Marchan not guilty of Count 6 and not needing to address other objections regarding that count.
Count 7 charges Marchan with mail fraud linked to a $12,000 cashier’s check sent via Federal Express from American General’s Bank to Caldwell and then to Willette's law firm, which subsequently facilitated its delivery to Marchan and Limas. The primary issue is whether this mailing falls under the federal mail fraud statute. The Court concludes that the check was integral to the fraudulent scheme, as Marchan and Limas actively solicited its prompt delivery, thus satisfying the statute's requirements. This finding aligns with Fifth Circuit precedents indicating that mailings containing proceeds of fraud are essential to establishing jurisdiction under the mail fraud statute.
Mailings that distribute proceeds from a fraudulent scheme are considered essential to the scheme itself. The Court emphasized that the defendant's receipt of funds was a critical aspect of the fraud, corroborated by case law, including United States v. Green, which indicated that mailings executed to further a fraudulent scheme satisfy the federal mail fraud statute. In this instance, defendants Limas and Marchan actively sought to expedite a check via Federal Express, indicating their direct involvement in the fraudulent scheme. The check in question was tied to a kickback arrangement between Limas and Marchan, representing proceeds from the fraud necessary for the scheme's operation.
The check met the criteria for mail fraud by demonstrating both a scheme to defraud and a mailing executed for that purpose. Previous rulings in Rico Industries and United States v. Hatch affirm this type of mailing falls under the statute. The defendant also contended he could not be guilty of aiding and abetting honest services mail fraud since he earned the ad litem fee and was therefore entitled to use the funds as he wished, including potentially bribing Judge Limas. However, this argument lacks legal support; historical precedent, such as Shushan v. United States, illustrates that public officials can be held liable for fraud even when their actions inadvertently save public funds, as the underlying bribery still defrauded the public. This interpretation of honest services fraud has been widely accepted across circuits, despite a shift in 1987 with the Supreme Court's decision in McNally v. United States, which limited the scope of mail fraud related to intangible rights.
The prosecutor employed an honest services theory to argue that the defendant deprived citizens of their right to honest state affairs, rather than claiming he deprived them of money through kickbacks. The Court overturned the conviction, determining that the mail fraud statute only addressed physical property or money deprivation. In response to the McNally decision, Congress enacted 18 U.S.C. § 1346 to reinstate the honest services doctrine. The Court later clarified in Skilling that bribery and kickback schemes were central to this doctrine, affirming that Congress intended § 1346 to encompass such misconduct.
In this case, the jury's determination of Marchan's guilt was justified by clear evidence of a kickback scheme, making the question of whether he earned his ad litem fee irrelevant. The jury could reasonably conclude that Marchan aided a scheme to defraud based solely on the existence of the kickback, regardless of his performance in his duties. Consequently, Marchan's Amended Motion for Acquittal related to Count 7 was denied.
Marchan also contended that the jury lacked sufficient evidence for its verdict and that certain evidence was prejudicial. These claims were overruled, as the jury had adequate evidence for its conclusions. The Court found no evidence that unduly prejudiced the jury, and Marchan's argument about his desire to testify regarding Count 7, stemming from concerns about cross-examination on other counts, was not raised during the trial. Marchan and his counsel had previously indicated he would not testify, and the Court had documented his voluntary decision not to take the stand.
Marchan, a lawyer, acknowledged under oath his understanding of the risks associated with testifying and chose not to do so, which does not invalidate the trial despite his desire to testify on certain charges while avoiding cross-examination on others. He raises a new claim regarding the Government's alleged withholding of exculpatory evidence related to the case Dolgencorp of Texas v. Lerma, arguing it should have been disclosed per Brady v. Maryland. However, his Brady argument is ineffective for several reasons: he failed to demonstrate that the Government possessed this evidence before the trial; the case had been publicly accessible for years, negating the need for government assistance; and Dolgencorp is not directly comparable to his situation since Judge Limas was reversed for not granting a continuance, which does not imply that Limas lacked authority to sanction him for causing unnecessary costs. The evidence Marchan claims was hidden is only marginally relevant and does not qualify as exculpatory. Furthermore, evidence presented in this case demonstrates that Judge Limas did impose sanctions on other attorneys, contradicting Marchan's assertion that he would not face sanctions. Ultimately, the jury had sufficient evidence to support its finding regarding the financial transactions at issue, even if the specifics of Marchan’s potential sanctioning remain uncertain.
Marchan raises claims suggesting that the evidence presented for certain counts may have unfairly influenced the jury's decisions on other counts, particularly Counts 1-5 in relation to Counts 6-7. The Court addresses these claims, noting that they were not raised during the trial and finding them to be unfounded. The evidence for Count 7 is similar to that for Counts 3 and 4, while evidence for Count 6 is relevant to Count 5, negating the claim of improper spillover. Marchan also asserts that the evidence for Counts 3, 4, and 5 prejudiced the jury's verdict regarding RICO allegations in Counts 1 and 2, but the Court finds this argument without merit, stating that the convictions for Counts 3, 4, and 5 actually support the RICO verdict in Count 1 as they serve as predicate acts. Additionally, the Court acknowledges that a legal question concerning the application of the Brock doctrine to Count 5 has not yet been decided by the Fifth Circuit, but this does not impact the RICO counts. Citing precedent from United States v. Peacock, the Court explains that only two predicate acts are necessary to establish a RICO conviction, and the existence of at least two acts supports the upholding of the RICO convictions in this case, as the defendants’ claims regarding the need for all predicate acts to be proven were rejected.
The Court referenced a Second Circuit ruling affirming that a RICO conviction can be upheld based on the jury's findings of two valid predicate acts, even if other predicate acts are invalidated. In the case of Edwards, the jury confirmed multiple predicate acts, leading to the affirmation of the defendants' RICO convictions. Consequently, even if the Fifth Circuit were to adopt the Brock rule affecting Count 5, the RICO conviction remains valid due to the jury's findings in Counts 3 and 4. Count 5, even if not a Hobbs Act violation, could still be considered a predicate act for a RICO pattern based on bribery under Texas state law.
The Court granted a Motion for Acquittal regarding Count 6, determining that the alleged conduct did not meet the legal requirement of a close nexus to the use of the United States mail. Other objections, particularly those lacking clarity, were overruled. The Court noted the longstanding debate over the distinction between bribery and extortion, highlighting that the two concepts are not mutually exclusive, as affirmed by the U.S. Supreme Court. For the purposes of this ruling, the Court occasionally referred to the "payor of the money" as the "victim," acknowledging that the true victims might be the taxpayers or the government. The opinion also clarified its terminology regarding "bribe," "briber," and "bribee," using them generically unless specified otherwise.
Marchan contends that the payments in question originated from his earnings, but the ad litem fees, which were the source of kickbacks to Judge Limas as detailed in Counts 3 and 4, were actually paid by the parties, attorneys, or their insurers in the Mancillas case. The court highlighted the necessity for the funds to come from a third party outside the conspiracy and to have been provided with that party's consent, emphasizing that failure to meet this consent requirement could blur the lines between robbery and extortion. The Government asserts that the Hobbs Act encompasses both perpetrators and those who aid and abet extortion, but not mere bystanders or victims. Decisions in Kelley and Collins clarify that a private citizen can be held liable for Hobbs Act extortion “under color of official right” if they aided the extortion. The funds in Counts 3 and 4 were sourced from American General and Garcia Martinez, respectively, while Count 5 involved Marchan himself. The Supreme Court's discussion in Evans on the Hobbs Act indicated Congress's intention to broadly criminalize extortion-related interference with commerce, with no legislative history suggesting a narrowing of this scope. The Sixth Circuit's ruling in Gray upheld a guilty verdict for Hobbs Act conspiracy even when the original payors were considered co-conspirators. Marchan was found guilty of aiding and abetting Judge Limas in a scheme that deprived the citizens of Cameron County of honest services through bribery, specifically through the splitting of court-ordered ad litem fees sent via Federal Express. A 1994 amendment to the mail fraud statute expanded its application to include private carriers like Federal Express, broadening the scope of the statute beyond the United States Postal Service.
