DAN ALEXANDER, PETITIONER V. UNITED STATES OF AMERICA No. 89-6986 In The Supreme Court Of The United States October Term, 1989 On Petition For A Writ Of Certiorari To The United States Court Of Appeals For The Eleventh Circuit Brief For The United States In Opposition OPINIONS BELOW The opinion of the court of appeals on remand from this Court (Pet. App. 1-2) is reported at 888 F.2d 777. The opinion of the court of appeals affirming petitioner's conviction on direct appeal (Pet. App. 5-11) is reported at 850 F.2d 1500. JURISDICTION The judgment of the court of appeals was entered on November 16, 1989. A petition for rehearing was denied on December 20, 1989. Pet. App. 3. The petition for a writ of certiorari was filed on March 20, 1990. The jurisdiction of this Court is invoked under 28 U.S.C. 1254(1). QUESTIONS PRESENTED 1. Whether there was sufficient evidence that petitioner's extortionate activity affected commerce, in violation of the Hobbs Act, 18 U.S.C. 1951(a). 2. Whether there was sufficient evidence that petitioner engaged in a "pattern of racketerring activity" in violation of the Racketeer Influenced and Corrupt Organizations Act (RICO), 18 U.S.C. 1961-1968. 3. Whether petitioner's conviction for engaging in a pattern of racketeering violates the Due Process Clause of the Fifth Amendment. STATEMENT Following a jury trial in the United States District Court for the Southern District of Alabama, petitioner was convicted of conducting an enterprise through a pattern of racketeering activity in violation of the RICO statute, 18 U.S.C. 1962(c); conspiracy to commit extortion in violation of the Hobbs Act, 18 U.S.C. 1951(a)(1); and nine counts of mail fraud in violation of 18 U.S.C. 1341. He was sentenced to concurrent terms of 12 years' imprisonment on the RICO and Hobbs Act counts and five years' imprisonment on each of the mail fraud counts. The court of appeals vacated the mail fraud convictions on the basis of this Court's decision in McNally v. United States, 483 U.S. 350 (1987), but affirmed the convictions on the RICO and Hobbs Act counts. Thereafter, this Court granted certiorari, vacated the judgment, and remanded to the court of appeals for further consideration in the light of H.J. Inc. v. Northwestern Bell Telephone Co., 109 S.Ct. 2893 (1989). On remand, the court of appeals reinstated its judgment affirming petitioner's convictions on the RICO and Hobbs Act counts. 1. The evidence at trial showed that petitioner was a member of the Mobile County School Board between 1974 and 1983. During that period, petitioner and his co-conspirators extorted kickbacks from architects and engineers who were seeking lucrative contracts with the school board. Harrison Ford, a representative of Gulf South Engineers, met with petitioner in 1977 to discuss the possibility of obtaining a contract with the school board to conduct an efficiency study of the school system. Petitioner informed Ford that he could obtain the contract for Gulf South, and stated that he needed extra money because he was not being paid well enough in his position on the school board. The engineering firm, through Ford, agreed to pay petitioner a kickback of ten percent of Gulf South's fee for the study. Thereafter, Gulf South was awarded the contract. From 1977 through 1979, petitioner received five payments from the firm totalling $9,500. Gov't C.A. Br. 12-15; Tr. 77, 89, 91. /1/ From 1980 to 1984, the school board approved the building of four new schools in Mobile County. The board directed that a different architect be chosen for each school. Petitioner's associate and co-defendant, architect Norman Grider, approached several architects who had never before been awarded contracts with the school board. Grider informed the architects that he could get school board contracts for them in exchange for a "finder's fee" of 10 to 15 percent of their fees. Grider and petitioner shared the money that the architects paid as kickbacks, and petitioner in turn arranged for the contracts with those architects to be approved by the school board. Gov't C.A. Br. 27-38, 50-51; Tr. 1090, 1417, 1622, 1785-1786. By awarding contracts to architects on the basis of their willingness to pay kickbacks rather than their qualifications, the school board sometimes hired architects who were not capable of performing effectively. For example, the choice of Bowie Hamilton as one of the architects turned out to be a disaster. Hamilton was suffering financially and had no staff. He would not have been awarded a contract but for his willingness to pay 10 percent of the contract price as a kickback to Grider and petitioner. The evidence showed that Hamilton was so disorganized and late with his plans that the board had to use the staff of the school board administration to complete the work. School Board Superintendent Pete Landrum had more problems with Hamilton than with any other architect. Landrum sometimes could not find Hamilton for weeks. Nevertheless, petitioner instructed Landrum to accelerate the board's payments to Hamilton, because Hamilton was going into debt and needed money. Hamilton paid approximately $18,000 in kickbacks from the $194,000 that he received from the school board. Pet. App. 5; Gov't C.A. Br. 33; Tr. 1144-1146, 1620, 1625, 1644-1645, 1655-1656. /2/ In order to establish that commerce was "obstruct(ed), delay(ed) or affect(ed)" (18 U.S.C. 1951), the government presented evidence that the school board was actively involved in interstate commerce and that the board's interstate commerce activities were affected by the extortion. The evidence introduced for that purpose showed that the board purchased "a hundred items" from out of state, including school buses from Arkansas and various supplies from California. Tr. 1033-1034. 2. The court of appeals affirmed petitioner's convictions on the Hobbs Act count and the RICO count. Noting that the government need only prove a minimal effect on interstate commerce in order to sustain Hobbs Act jurisdiction, the court held that there was evidence of a sufficient link between the extortionate conduct and the interstate commerce in this case. Pet. App. 8-9. The court observed that the government had introduced evidence that the school board purchased items from outside the State of Alabama. The government further proved that the school board's assets were depleted by the extortion, thereby affecting the school board's ability to purchase out-of-state goods. Id. at 9. The depletion of assets occurred, the court held, because the school board "received less valuable services for its money because the architects were selected based upon their willingness to pay kickbacks rather than based upon their professional abilities." Ibid. (footnote omitted). The court further noted (ibid.) that (t)here was evidence that Grider selected architects who were struggling financially and who were thus more susceptible to his pressure. At one point, (petitioner) asked Landrum to expedite payment to one of the architects because the architect was going into debt and needed money. There was testimony by two of the architects indicating that they were indeed struggling. Landrum also testified that one of the architects was constantly behind schedule and that other architects had to be called in to help with the work. After reviewing the evidence in the record, the court of appeals concluded that the government offered sufficient proof to support a finding "that the school board received less than it otherwise would have as a result of the (extortion) scheme." Id. at 9. Because the school board was one of the victims of the scheme, the court found that the depletion of the school board's assets, together with the school board's activity in interstate commerce, "establishe(d) the minimal effect on interstate commerce required under the Hobbs Act." Ibid. The court of appeals also affirmed petitioner's conviction on the RICO count. The court observed that in order to prove a "pattern of racketeering activity" under the RICO statute, 18 U.S.C. 1962(c), the government was required to prove that petitioner "participated in two or more predicate acts or crimes." After eliminating the mail fraud offenses as predicate acts, the court noted that there nevertheless remained two distinct Hobbs Act violations -- the scheme to extort kickbacks from the architectural firms for construction work, and the scheme to extort kickbacks from Gulf South Engineering for the efficiency study of the school system. The court therefore ruled that the evidence was sufficient to support petitioner's RICO conviction. Pet. App. 11. The court reversed petitioner's convictions on the mail fraud counts on the basis of McNally v. United States, supra. 3. In a petition for a writ of certiorari, petitioner challenged both his RICO conviction and his Hobbs Act conviction. This Court granted the petition, vacated the judgment, and remanded for further consideration in light of H.J. Inc. v. Northwestern Bell Telephone Co., 109 S.Ct. 2893 (1989). In H.J. Inc. the Court held that proof of a "pattern of racketeering activity" for purposes of the RICO statute, 18 U.S.C. 1962(c), requires at least two related predicate acts that amount to, or threaten the likelihood of, continued criminal activity. Id. at 2900. 4. On remand, the court of appeals once again affirmed petitioner's convictions on both counts after finding that the evidence established a pattern of racketeering activity, as that phrase was interpreted in H.J. Inc. The court found that the predicate acts threatened continued racketeering activity because petitioner "extorted, or conspired to extort, money each year that he held office from 1977 to 1984." Pet. App. 2. The court further found "sufficient likelihood that had (petitioner) continued as a board member, he would have also continued these sorts of activities." Ibid. The court held that the predicate acts were sufficiently related because they had a "similar purpose: to enrich (petitioner)," and a "similar result: the selection of contractors and architects who enriched (petitioner)." Ibid. In addition, the court noted, petitioner used a consistent method of committing the predicate acts: "he designated others to explain his wishes to those from whom he desired compensation." Ibid. ARGUMENT 1. Petitioner contends (Pet. 9-19) that the government's evidence was insufficient to prove that the extortion affected interstate commerce. The Court recently denied a petition for certiorari from petitioner's co-defendant raising precisely this issue. Grider v. United States, 109 S.Ct. 1346 (1989). The court of appeals' decision is reasonable and, contrary to petitioner's assertions, does not conflict with any decision of any other court of appeals. Further review is thus unwarranted. The Hobbs Act, 18 U.S.C. 1951, reaches anyone who "in any way or degree obstructs, delays, or affects commerce" by extortion or conspiracy to commit extortion. In construing this broad language, the Court has held that Congress intended to "use all the constitutional power Congress has to punish interference with interstate commerce by extortion, robbery, or physical violence." Stirone v. United States, 361 U.S. 212, 215 (1960); see also United States v. Culbert, 435 U.S. 371, 373 (1978). The courts of appeals uniformly hold that, in a prosecution under the Hobbs Act, even a de minimis or potential impact on commerce is sufficient. See United States v. Hocking, 860 F.2d 769, 776-777 (7th Cir. 1988); United States v. Billups, 692 F.2d 320, 331 n.7 (4th Cir. 1982), cert. denied, 464 U.S. 820 (1983); United States v. Angelilli, 660 F.2d 23, 35 (2d Cir. 1981), cert. denied, 455 U.S. 910 (1982); United States v. Zemek, 634 F.2d 1159, 1173 n.20 (9th Cir. 1980), cert. denied, 450 U.S. 985 (1981); United States v. Rabbitt, 583 F.2d 1014, 1023 (8th Cir. 1978), cert. denied, 439 U.S. 1116 (1979); United States v. Harding, 563 F.2d 299, 302 (6th Cir. 1977), cert. denied, 434 U.S. 1062 (1978); United States v. Starks, 515 F.2d 112, 124 (3d Cir. 1975). The courts below correctly held that the evidence of an effect on interstate commerce in this case was sufficient to satisfy the government's minimal burden. The government proved, and petitioner does not dispute, that the school board engages in interstate commerce. Petitioner's argument therefore hinges on his assertion that the school board was not a victim of the extortionate scheme. See Pet. 11-12, 15. /3/ The contention that a government agency is not victimized by a scheme to extort kickback payments from its contractors is, to say the least, contrary to any common-sense view of extortion. The school board was victimized by petitioner's scheme to siphon off a substantial percentage of school board funds earmarked for architectural services. In effect, school board funds were funneled through the architects into petitioner's pocket. Petitioner makes much of the fact that the architectural fees were set by state law, and so could not have been increased as a means of "passing through" the cost of the extortion payments to the school board. Pet. 12. But the fact that the fees could not be increased did not insulate the school board from victimization. On the contrary, a contractor who is forced to pay a substantial kickback of 10 or 15 percent, and is not permitted to increase its fee to reflect this added cost of doing business, naturally responds by cutting back on the quality or timeliness of its performance. That is precisely what occurred in this case. The court of appeals concluded that "the school board received less than it otherwise would have as a result of the appellants' scheme." Pet. App. 9. For example, there was testimony that architect Hamilton created more problems than any other architect hired by the school board, and was constantly behind schedule. At a minimum, therefore, Hamilton's selection "delayed" commerce. See 18 U.S.C. 1951(a). There was also evidence that the extortion scheme resulted in acceleration of payments by the school board to the architects, and so depleted the assets of the board. In addition, Hamilton's ineptitude caused the school board staff to divert resources of the school board to complete work that should have been performed by the contractor. In sum, the evidence was sufficient to show that the school board's assets were depleted by the extortion scheme. /4/ Contrary to petitioner's contention (Pet. 13-16), the decision below does not conflict with United States v. Mattson, 671 F.2d 1020 (7th Cir. 1982). In Mattson, Playboy Enterprises asked Donald Anderson, its chief electrician, to obtain a supervising electrician's license, so that Playboy could save money by using its own electrician to do electrical maintenance work rather than hiring an outside electrical contractor. When Anderson applied for the license, the defendants told him he would have to pay a total of $5,000 in order to obtain the license. Anderson paid only $3,000 and did not receive a license. The government conceded that Anderson was not engaged in interstate commerce, and Playboy Enterprises did not reimburse Anderson for the $3,000 bribe. 671 F.2d at 1021-1023. The court of appeals concluded that the government had failed to show that "the natural consequences of the acts alleged in the indictment would delay, interrupt, or otherwise affect interstate commerce." 671 F.2d at 1025. The decision in Mattson turned on the court's recognition that Anderson, whose assets were depleted, "was not conducting a business engaged in * * * interstate commerce," while Playboy Enterprises, which was engaged in interstate commerce, suffered no depletion of its assets. Id. at 1025. In this case, by contrast, the school board was both engaged in commerce and a victim of the extortion. The school board, unlike Playboy Enterprises, paid over monies for architectural services and suffered a real loss when the extortion scheme resulted in sub-standard services. This case is therefore similar to the case that would have been presented in Mattson if Playboy had reimbursed Anderson for the extortionate payment. In that event, as the Mattson court itself noted, "(w)e would have a different case." 671 F.2d at 1024. Petitioner nevertheless argues (Pet. 14 n.8) that Playboy Enterprises (in Mattson) and the school board (in this case) were affected in similar ways, because Anderson's failure to obtain a license had the effect of preventing Playboy from reducing its electrical renovation costs. In fact, however, Playboy was left in precisely the position it would have occupied absent the extortion: its electrician did not have a license, and it still had to obtain electrical services from its outside contractor. /5/ Mattson involved only "Playboy's potentially increased assets," 671 F.2d at 1025, while this case involves the school board's actually decreased assets. Because the court of appeals found that the school board, unlike Playboy Enterprises in the Mattson case, was victimized by the extortion and that its assets were depleted as a result of the extortion, the decision in this case is not in conflict with Mattson. /6/ The other two cases cited by petitioner (Pet. 16-18) are inapposite. In both United States v. DiCarlantonio, 870 F.2d 1058 (6th Cir.), cert. denied, 110 S.Ct. 323 (1989), and United States v. Brantley, 777 F.2d 159 (4th Cir. 1985), cert. denied, 479 U.S. 822 (1986), the FBI supplied the money paid to the defendants as kickbacks. In DiCarlantonio, two corrupt city officials offered to permit a firm to sell propane gas in violation of a local ordinance in return for kickbacks. The court of appeals vacated the substantive Hobbs Act conviction because it concluded that the FBI, which supplied the funds to pay the officials, was not engaged in commerce. But the court affirmed the Hobbs Act conspiracy conviction, holding that proof of an actual effect on interstate commerce was unnecessary on the latter charge. 870 F.2d at 1061-1062. In Brantley, the FBI set up a gambling club and paid the local sheriff for protection. Because the gambling club was a sham rather than a true commercial establishment, and because the kickbacks were paid out of FBI funds, the extortion did not affect interstate commerce. 777 F.2d at 162-163. As in DiCarlantonio, the court of appeals reversed the substantive Hobbs Act convictions, but affirmed the conspiracy conviction, which did not require proof of an actual effect on interstate commerce. Ibid. In this case, unlike Brantley and DiCarlantonio, there were real kickback payments that actually affected interstate commerce. The school board paid the architects, who then handed over a portion of their fees to petitioner and his co-defendant. The diversion of school board funds to illegal kickback payments depleted school board assets that otherwise would have been available for interstate business. Plainly then, these decisions do not conflict with the decision in this case. Indeed, Brantley and DiCarlantonio actually support the result reached here. In both cases, the courts of appeals affirmed the Hobbs Act conspiracy convictions; only the substantive Hobbs Act convictions were reversed. In this case, petitioner was convicted of conspiracy to violate the Hobbs Act. 2. Petitioner also contends (Pet. 19-24) that the government failed to prove that he conducted an enterprise through a "pattern of racketeering activity," in violation of the RICO statute, 18 U.S.C. 1962(c), and that the court of appeals misapplied this Court's recent decision in H.J. Inc. v. Northwestern Bell, Inc., 109 S.Ct. 2893 (1989). The factbound holding of the court of appeals is correct and does not warrant the attention of this Court. To establish a "pattern of racketeering activity," the government must prove that the defendant committed two predicate racketeering acts that occurred within 10 years of each other. 18 U.S.C. 1961(5). In construing the statute last Term, the Court explained that the acts must be related, and must amount to, or otherwise constitute a threat of, continuing racketeering activity. H.J. Inc., 109 S.Ct. at 2901. Applying these principles to the facts of this case, the court of appeals correctly held that the requirements of relatedness and continuity were satisfied here. The two predicate violations clearly satisfy the "relatedness" requirement. As petitioner himself stated in his prior petition for certiorari in this case, "the purposes, results, participants and methods of commission of the alleged violations are closely similar, if not identical." 88-5611 Pet. 16. One of the two predicate acts involved a scheme to extort funds from Gulf South Engineers in connection with a school board contract to conduct an efficiency study that resulted in payments to petitioner from 1977 through 1979. The other predicate act involved a scheme to extort kickbacks from several architects in connection with school board construction projects from 1980 through 1984. In each, petitioner abused his position on the school board to demand kickbacks from businesses seeking lucrative contracts with the board. Although there were multiple victims in addition to the school board, the purpose and result of each extortionate demand were the same: petitioner misused his influence on the school board as a means of corruptly lining his own pockets. See H.J. Inc., 109 S.Ct. at 2901, quoting 18 U.S.C. 3575(e) ("criminal conduct forms a pattern if it embraces criminal acts that have the same or similar purposes, results, participants, victims, or methods of commission, or otherwise are interrelated by distinguishing characteristics and are not isolated events"). /7/ Petitioner's abuse of his position on the school board was also continuous during the years 1977 through 1984. During the first three years, he received kickbacks from Gulf South Engineering, which held a school board contract. During the next four years, he conspired to extort kickbacks from several different architects who sought school board contracts. Consequently, petitioner's attempt to portray the predicate acts as unrelated, isolated incidents lacks any support in the record. Petitioner's assertion (Pet. 27) that the courts of appeals continue to disagree on what constitutes a "pattern of racketeering activity" is baseless. In each case cited by petitioner, the court applied the H.J. Inc. test of relatedness and continuity. See, e.g., Combs v. Bakker, 886 F.2d 673, 677 (4th Cir. 1989) (predicate acts must be related and continuous but need not be separate "types" of racketeering activity); Management Computer Serv. v. Hawkins, Ash, Baptie & Co., 883 F.2d 48, 51 (7th Cir. 1989) (unauthorized copying of software not long-term criminal activity that could be called a pattern of racketeering); Sutherland v. O'Malley, 882 F.2d 1196, 1203-1204 (7th Cir. 1989) (one-time scheme completed within a five-month period does not constitute continuous criminal conduct). These cases do not conflict with the decision here, and they provide no basis for revisiting issues addressed so recently in H.J. Inc. 3. Petitioner's constitutional challenge fares no better. No federal appellate court has upheld a due process challenge to the RICO statute. Indeed, many courts have rejected vagueness challenges to the RICO statute. See, e.g., United States v. Morelli, 643 F.2d 402, 412 (6th Cir.) (collecting cases), cert. denied, 453 U.S. 912 (1981). In any event, the statute plainly is not unconstitutionally vague as applied to petitioner. Continuously over a seven-year period, petitioner operated the affairs of the school board by extorting kickbacks from persons seeking board contracts. These facts fit squarely within the scope of the RICO's prohibition of a pattern of racketeering activity. CONCLUSION The petition for a writ of certiorari should be denied. Respectfully submitted. KENNETH W. STARR Solicitor General EDWARD S.G. DENNIS, JR. Assistant Attorney General PATTY MERKAMP STEMLER Attorney MAY 1990 /1/ The extortion of Gulf South Engineering was not separately charged as a substantive Hobbs Act violation, but is one of the two predicate acts underlying the RICO conviction. /2/ The conspiracy to extort kickbacks from the architects was the basis of petitioner's Hobbs Act conviction. It also served as one of the two predicate offenses establishing a pattern of racketeering activity for the RICO charge. The government also presented evidence that petitioner and Grider encouraged the school board to award a contract to Energy Research Group, Inc. (ERG) for the installation of an energy management system without disclosing that petitioner had a financial interest in the matter. This scheme was the basis of the mail fraud counts of the indictment, and also was alleged as predicate act three of the RICO count. /3/ Petitioner concedes that the architects were victims of the extortion, but points out that the government failed to introduce evidence that the architects engaged in or affected interstate commerce. Pet. 11. As the court of appeals noted (Pet. App. 9), the government undoubtedly could have shown that the architects purchased goods from outside the State and that the kickbacks depleted their purchasing power. Petitioner's suggestion that professional architects in Alabama make no interstate purchases (Pet. 11 n.6) is far-fetched. /4/ Petitioner is flatly wrong in asserting that the court of appeals' conclusion that the extortion scheme resulted in the hiring of less competent architects is "wholly unsupported" by the record. Pet. 12 n.7. There was testimony that architect Hamilton's whereabouts were unknown for weeks at a time, and that he was so late and disorganized that school board staff had to intervene and complete the work for him. Indeed, a school board official testified that he had more problems with Hamilton than with any other architect. Tr. 1145-1146. /5/ There is no suggestion in Mattson that Anderson would have obtained a license but for the extortion. On the contrary, Anderson "feared * * * that his application would not be successful" and concluded that he "needed an 'edge.'" 671 F.2d at 1022. /6/ Petitioner is wrong in asserting (Pet. 16) that this case would have been decided differently by the Seventh Circuit. Aside from the factual distinctions between Mattson and this case, subsequent decisions of the Seventh Circuit repeatedly have upheld Hobbs Act convictions and declined to apply Mattson where only a de minimis or potential impact on commerce was proved. See, e.g., United States v. Hocking, supra (sustaining Hobbs Act jurisdiction on a depletion of assets theory even though the FBI paid the kickback); United States v. Frasch, 818 F.2d 631, 634-635 (7th Cir. 1987) (FBI-operated betting service, which made protection payments to the defendants, purchased goods in interstate commerce); United States v. Anderson, 809 F.2d 1281, 1286 (7th Cir. 1987) (payments by truck drivers to fix tickets for driving while intoxicated affected commerce because of the increased likelihood that the drivers would be on the roads in the future); United States v. Murphy, 768 F.2d 1518, 1530-1531 (7th Cir. 1985), cert. denied, 475 U.S. 1012 (1986); United States v. Turchow, 768 F.2d 855, 870-871 (7th Cir. 1985); United States v. Boulahanis, 677 F.2d 586, 589 (7th Cir.), cert. denied, 459 U.S. 1016 (1982). /7/ Petitioner argues (Pet. 24) that the extortionate acts are unrelated because petitioner acted alone when he extorted kickbacks from Gulf South Engineers, while acting in concert with Norman Grider when he extorted kickbacks from the architects. But neither H.J. Inc. nor any decision of a court of appeals holds that the participants in each scheme must be identical.