Court: Court of Appeals for the Seventh Circuit; September 30, 1999; Federal Appellate Court
Melvin C. Reynolds, a former Congressman, faced significant legal challenges due to multiple violations of federal election laws and other crimes. After a successful political career, including a Rhodes Scholarship and degrees from prestigious universities, Reynolds engaged in various illegal activities during his election campaigns in 1988, 1990, and 1992. These included soliciting illegal campaign contributions, initiating fraudulent real estate transactions, and obtaining personal loans through fraudulent means. Notably, he was also convicted for criminal sexual abuse involving an underage campaign worker.
Following state prosecution, Reynolds was indicted by a federal grand jury on multiple charges, including bank fraud, election law violations, and obstruction of justice. A jury found him guilty on 15 out of 16 counts, leading to a 78-month prison sentence and five years of supervised release.
Reynolds’ election fraud scheme involved laundering campaign contributions from a union, which is prohibited under federal law. Specifically, he circumvented the law by establishing and controlling several Ward Organizations and solicited illegal contributions from the Hotel Employees and Restaurant Employees International Union (HEREIU) through its PAC, which was funded by mandatory union dues. This resulted in an $85,000 contribution to his campaigns without proper disclosure to the Federal Election Commission.
Reynolds utilized employees as fronts for various political action committees (PACs) to facilitate money transfers. Joseph Barton, a part-time congressional staffer, was instructed by Reynolds to establish the '17th Ward Independent Democratic Organization' (17th WIDO), with Willie Tines listed as president without his consent. Reynolds directed Barton to create a bank account for the PAC, where over $50,000 was deposited, primarily from the hotel union, with $5,000 from Reynolds' personal funds. Approximately 80% of this money was spent on Reynolds' campaign expenses, which included phone banks, campaign posters, and advertising. Barton also wired money to campaign employees and withdrew cash for campaign costs, all under Reynolds' direction.
James Matz similarly managed the 9th WIDO, depositing HEREIU checks for Reynolds' campaign. Matz testified that Reynolds forged his signature on several checks. Tines confirmed cashing a HEREIU check for the 21st WIDO and delivering the funds to Reynolds.
Following his election to Congress in 1992, Reynolds engaged in bank fraud by misrepresenting his financial status while applying for a $279,000 mortgage from various federally insured banks. He falsely listed his debts significantly lower than they actually were, with discrepancies ranging from $73,500 to $325,319. Additionally, he misrepresented the source of his downpayment, claiming it was not borrowed when it actually included funds from campaign workers and the 17th WIDO. Reynolds also forged documents regarding his wife's employment and the campaign's finances.
On appeal, Reynolds argued that the government failed to prove the materiality of his misrepresentations concerning bank fraud and claimed errors in jury instructions and trial handling. He contended that the district court wrongly determined the existence of a conspiracy involving five or more participants. The court found no merit in these arguments and upheld Reynolds' conviction and sentence.
Count One of the Indictment accuses Reynolds of defrauding four banks by obtaining loans through false pretenses under 18 U.S.C. sec. 1344. Reynolds contends that the government is required to prove the materiality of his representations, defined legally as having the capacity to influence the decision-making body. The district court clarified that materiality is indeed a requirement and noted specific examples indicating potential material misrepresentation. Reynolds' claim that the court prevented his attorney from examining witnesses on materiality is dismissed; the court barred evidence related to the banks' reliance on his statements, emphasizing that reliance is not a necessary element of a sec. 1344 violation. The court deemed irrelevant any testimony suggesting the bank would have approved his loan regardless of his misrepresentations. Additionally, the judge excluded evidence regarding the bank's policies on unsecured loans, labeling it as potentially confusing and irrelevant to the materiality of Reynolds' statements. The court emphasized that materiality concerns whether the statements could influence the bank's decision, not whether they did influence it, reiterating that actual deception is not required for a sec. 1344 violation. Thus, Reynolds’ arguments regarding materiality are rejected, as his false statements about his financial condition could influence a bank's loan approval decision.
Reynolds contends that the jury instructions incorrectly stated that federal candidates cannot accept campaign funds from labor organizations. According to Section 441b of Title 2, it is illegal for labor organizations to contribute to federal election campaigns. The court’s jury instructions aligned with this statute, undermining Reynolds' argument. He highlights that candidates may receive funds from a PAC that only solicits voluntary contributions from union members, and he did receive such funds. However, labeling these funds as "union money" is misleading, as they originate from individual members and not the union's treasury. This distinction, supported by testimony from Lois G. Lerner of the Federal Election Commission, emphasizes that mandatory union dues cannot be used for federal campaigns, while voluntary PAC contributions can. Although the jury instructions could have reinforced this distinction, they did not misstate the law, and the issue was sufficiently conveyed to the jury.
Additionally, Reynolds raised other concerns including the district court's denial of a continuance, refusal to question a juror about Minister Farrakhan, and alleged bias in favor of the prosecution. His request for a continuance followed a series of attorney changes after his indictment, starting with Halprin and Steinback in November 1996, who withdrew on December 30, leading to a trial initially set for March 4, 1997. New attorneys later informed the court they were unprepared, prompting a two-week postponement. After further attorney withdrawals, the court appointed Robert Loeb as defense counsel. Loeb's motions for a longer delay were denied. Three days before trial, Reynolds expressed a desire to represent himself, resulting in Loeb serving as standby counsel. Reynolds' own motion for a continuance and a writ of mandamus were also denied. On the trial date, Reynolds appeared with new attorneys, but they were unprepared, leading to Loeb being reappointed. The jury selection process commenced shortly thereafter, and trial proceeded on March 24, 1997, with Hooks allowed to appear on the condition he would not request a continuance.
A trial date is generally expected to be adhered to unless compelling reasons justify a continuance. In this case, the district court granted a two-week continuance but denied requests for longer delays, determining that the reasons provided by Reynolds were insufficiently compelling. Although Reynolds briefly represented himself, attorney Richard Loeb was appointed well in advance of the trial, and even during Reynolds' self-representation, Loeb remained as standby counsel. The court had previously allowed adequate time for new counsel to prepare after the withdrawal of earlier counsel. The government also facilitated Loeb's access to evidence before trial, affording him over five weeks to prepare. Therefore, the court's denial of the longer continuance requests was not an abuse of discretion.
Regarding the presence of Louis Farrakhan in the courtroom, a juror expressed concern that Farrakhan's presence could be distracting or prejudicial. Reynolds requested voir dire to assess potential juror bias due to Farrakhan's attendance, but the district court refused, believing that questioning the juror would further highlight the issue and possibly exacerbate any distraction. Instead, the judge issued a curative instruction, reminding the jury to base their decision solely on the evidence presented. There was no indication that Farrakhan interacted with jurors, and the court concluded that the refusal to conduct voir dire was appropriate, maintaining that such questioning could distract the jury without evidence of bias. The district court acted within its discretion in both matters.
Reynolds claims judicial bias from the district court, citing over twenty instances, primarily involving the judge interrupting witness examinations to clarify testimony or to ensure proper foundational support for questions. For example, during Reynolds' testimony regarding his wife's involvement in his 1988 campaign, the judge interjected for clarity, prompting counsel to establish a time frame for her participation. A similar interruption occurred when discussing James Worthington's role in the campaign.
A notable incident involved a sidebar exchange where Reynolds' counsel sought to question the district court about its knowledge of a witness. The judge requested a proffer, but the counsel did not provide one, leading to a miscommunication that did not constitute judicial error due to its private nature and the unusual context.
Reynolds' argument of bias is further contradicted by an instance regarding a juror's employment. When the government objected to a question posed by Reynolds' counsel that could relate to a juror's occupation, the district court denied the motion to exclude the juror after counsel explained the context of the question. The judge initially expressed skepticism about the counsel's awareness of the juror's occupation but ultimately accepted the explanation, indicating evenhandedness that likely did not affect the jury's decision.
Reynolds' claims of judicial bias or improper demeanor were thoroughly reviewed and found insufficient to support such inferences. District courts are permitted to facilitate effective interrogation and truth ascertainment, as stated in Fed. R. Evid. 611 and reinforced by case law. The district court instructed the jury to disregard any potential inferences from the judge's comments or rulings, emphasizing that the jury was the sole trier of facts, a directive that juries are presumed to follow. Although this instruction may not remedy egregious judicial conduct, it was deemed adequate to mitigate potential prejudice in this case.
Regarding sentencing, Reynolds contested the district court's application of a four-level increase under the Federal Sentencing Guidelines, asserting he was a leader and organizer of extensive criminal activity involving five or more participants (U.S.S.G. sec. 3B1.1(a)). The court identified four accomplices: his wife Marisol Reynolds, Terry Bernstein, Earl Worthington, and Sophia Green, all of whom were campaign workers involved in his illegal activities. The scheme, which lasted over five years and involved millions of dollars, included sham ward organizations for laundering union funds and required deception of federal entities and the public. The court's assessment of the conspiracy's extensiveness justified the four-level enhancement, even if the number of participants was disputed.
Reynolds' conviction and sentence are affirmed. Reynolds did not provide bank records to verify his downpayment source. Testimony from Countrywide Funding's executive, Rick Cossano, revealed that Reynolds claimed he should be treated differently due to his race, suggesting that African-Americans tend not to trust banks or maintain records. Despite this, Cossano waived the condition instead of denying the loan. The Supreme Court case Neder v. United States established that materiality is a necessary element under 18 U.S.C. § 1344, but the district court failed to include it in the jury instructions. Since Reynolds did not object to this omission at trial or on appeal, the review is conducted for plain error. The jury instructions were similar to those in a previous case, Pribble, where it was determined that the concept of fraud encompasses materiality, thus adequately presenting it to the jury. No plain error was found, but future jury instructions for § 1344 should explicitly include materiality. Additionally, the jury was informed that accepting contributions from labor organizations is unlawful under the Federal Election Campaign Act. The trial was postponed twice due to scheduling conflicts, and a witness, David Stewart, was cross-examined regarding his marriage to Judge Ann C. Williams of the Northern District of Illinois.
