DAN ALEXANDER, PETITIONER V. UNITED STATES OF AMERICA No. 88-5611 In the Supreme Court of the United States October Term, 1988 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 OPINION BELOW The opinion of the court of appeals (Pet. App. 1a-7a) is reported at 850 F.2d 1500. JURISDICTION The judgment of the court of appeals was entered on August 2, 1988. The petition for a writ of certiorari was filed on September 30, 1988. The jurisdiction of this Court is invoked under 28 U.S.C. 1254(1). QUESTIONS PRESENTED 1. Whether the evidence was sufficient to prove that petitioner committed extortion that affected commerce, in violation of the Hobbs Act, 18 U.S.C. 1951(a). 2. Whether the evidence was sufficient to prove that petitioner engaged in a "pattern of racketeering activity" under the Racketeer Influenced and Corrupt Organizations Act (RICO), 18 U.S.C. (& Supp. IV) 1961-1968. 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 (Count 1), in violation of the RICO statute, 18 U.S.C. 1962(c); conspiracy to commit extortion (Count 2), in violation of the Hobbs Act, 18 U.S.C. 1951(a); and mail fraud (Counts 3-11), 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 his mail fraud convictions but affirmed his 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. In 1977, Gulf South Engineers was interested in obtaining a contract with the school board to conduct an efficiency study of the school system. Harrison Ford, a representative of the engineering firm, met with petitioner that summer to inquire about the possibility of obtaining the contract. Through Ford, the firm agreed to pay petitioner 10 percent of the contract in order to get the business. Petitioner explained that he needed some extra money because he was not being paid well enough in his position on the school board. Petitioner informed Ford that he could obtain the contract for Gulf South Engineers. Thereafter, the engineering firm 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. /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. Co-defendant Norman Grider, an architect who was associated with petitioner, 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" or kickback 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. 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, Bowie Hamilton, one of the architects who was selected, was suffering financially at the time he was hired 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. 5a; 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 sought to show that the school board, one of the victims of the extortionate scheme, 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 "hundreds of 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 the government had proved a sufficient link between the extortionate conduct and interstate commerce in this case. Pet. App. 4a-5a. 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 curtailing the school board's potential as a purchaser of out-of-state goods. Id. at 5a. 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." Pet. App. 5a. 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, "establishes the minimal effect on interstate commerce required under the Hobbs Act." Ibid. Although the court of appeals reversed petitioner's conviction on the mail fraud counts, it upheld his 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. 7a. ARGUMENT 1. Petitioner contends (Pet. 7-13) that the evidence was insufficient to prove the jurisdictional basis for the Hobbs Act offense. Contrary to petitioner's claim, there is no conflict on this issue between the court below and the Seventh Circuit. Further review of this fact-bound claim 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 that 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, 380 (1978). In light of Congress's intention to invoke the full breadth of its commerce power, the courts of appeals in Hobbs Act cases have uniformly held that the magnitude of the effect on commerce is immaterial and that even a de minimis or potential impact on commerce is sufficient. See, e.g., United States v. Hocking, No. 88-1087 (7th Cir. Oct. 14, 1988), slip op. 13-17; 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). As both courts below found, the evidence in this case was sufficient to satisfy the jurisdictional element. There were two victims of petitioner's extortionate conduct: the architects, whose profits were reduced by the kickbacks they paid to petitioner and his cohorts; and the school board, which received less valuable services because petitioner and his co-conspirators selected the architects on the basis of their willingness to pay kickbacks rather than on the basis of merit. The government proved, and petitioner does not dispute, that the latter victim, the school board, was engaged in interstate commerce in that it purchased supplies and buses from outside the state. /3/ The extortionate scheme caused the school board to hire incompetent or inexperienced architects, like Bowie Hamilton, who would not have been hired but for his willingness to pay kickbacks. Hamilton was responsible for repeated and extensive delays in completing the work that he was hired to perform. At minimum, because of the delays that Hamilton caused in the construction of the school, his selection "delayed" commerce. See 18 U.S.C. 1951(a). In addition, Hamilton's ineptitude cause the school board staff to divert substantial resources of the school board, an entity that petitioner does not dispute is engaged in interstate commerce. Accordingly, the evidence was sufficient to show the required nexus between the extortion and commerce. Contrary to petitioner's contention (Pet. 8-12), the decision below does not conflict with the decision of the Seventh Circuit in United States v. Mattson, 671 F.2d 1020 (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 make a total of $5000 in payments in order to obtain the license. Anderson paid $3000 of that sum but did not pay the additional $2000 and did not receive a license. Playboy Enterprises did not reimburse Anderson for the $3000 payoff he made. 671 F.2d at 1021-1023. The government argued that the requisite effect on interstate commerce was shown even though Anderson, the victim of the scheme, was not engaged in interstate commerce. The government argued that if Anderson had made the additional payoff and had received a license as a result, Playboy Enterprises, which was engaged in interstate commerce, would have saved money and its outside electrical contractor, which was also engaged in interstate commerce, would have lost some of Playboy's business. The court of appeals rejected that argument. It was not enough, the court concluded, to show that if the extortion had been successful, the transaction that would have been facilitated by the extortion would have had some effect, at some point, on interstate commerce. Instead, the court held, the government was required 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 Mattson court noted that Anderson "was not conducting a business engaged in, or purchasing items from, interstate commerce" and that Playboy Enterprises, which was engaged in interstate commerce, never reimbursed him for the extorted payments he made to the defendant (id. at 1025). Because Anderson, the sole victim of the extortion, was not engaged in interstate commerce, the extortion did not have the requisite nexus with interstate commerce, either by directly affecting commerce or by depleting the assets of an entity that was engaged in commerce. In this case, by contrast, the evidence showed that one of the victims of the extortion -- the school board -- was engaged in interstate commerce because it purchased many items from outside the state. The depletion of the school board's assets, which the court of appeals found to have been established in this case, followed directly from petitioner's extortionate scheme. Because, in Mattson, Playboy Enterprises was not reimbursing Anderson for the extorted sum, Playboy was not a victim of the scheme, and the effect of the extortion on Playboy was therefore not cognizable under the well established "depletion of assets" theory of Hobbs Act jurisdiction. In this case, unlike in Mattson, the school board suffered a loss as a result of the extortion. Because of the injury that the extortion caused to the board's school construction program, the loss was in effect "passed on" to the school board and resulted in a depletion of its assets. 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, the Mattson court noted, "(w)e would have a different case" (671 F.2d 1024). Petitioner argues (Pet. 12 n.12) that Playboy Enterprises (in Mattson) and the school board (in this case) were affected by the extortion in similar ways, since Anderson's failure to obtain a license had the effect of increasing Playboy's costs for electrical renovations. In fact, however, Playboy's costs were not increased in any way by the extortion. Anderson alone absorbed the $3000 extortionate payment, and when Anderson failed to obtain a license Playboy was left in exactly the same position it had been in before the extortionate demand: its electrician did not have a license, and it still had to obtain electrical services from its outside contractor. In this case, by contrast, the evidence showed that the extortion scheme had a direct effect on the school board. Although petitioner contends (Pet. 10-11) that the evidence did not show, and the court of appeals did not find, that the school board suffered a loss as a result of the extortion, the record is to the contrary. As we have noted (page 3, supra), the evidence showed that the architects who were hired as part of the extortion scheme provided less valuable services, their work was late, one of them had to be given expedited payments to keep him afloat, and school board staff had to be used to complete some of the work. All of those difficulties readily translate into dollar and cents costs to the school board. For example, the fact that the board had to have some of its own staff do some of the work that the architects failed to perform imposed costs on the board just as much as if the board had had to hire outside help to complete the work. And the fact that the board accelerated some of the payments to architect Bowie Hamilton at petitioner's behest obviously imposed financial costs on the school board by diverting those funds from other uses. The court of appeals noted each of these several burdens that the extortion scheme imposed on the school board and concluded that, as a result, the school board was a "victim() of the extortion," and that the extortion caused a "depletion of the school board's assets." Pet. App. 5a. Petitioner is therefore wrong in asserting that the school board was not shown to be a victim of the extortion, or that the court of appeals did not base its opinion on the theory we have argued here. 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 case is not in conflict with Mattson, as petitioner contends. Since Mattson, the Seventh Circuit has repeatedly limited that decision to its unusual facts and has upheld Hobbs Act convictions 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 there was no actual effect on commerce because the FBI paid the kickback); United States v. Frasch, 818 F.2d 631, 634-635 (7th Cir. 1987) (jurisdictional element satisfied where FBI-operated betting service, which made protection payments to the defendants, purchased goods in interstate commerce); United States v. Anderson, 809 F.2d 1281 (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) (payments left attorneys with less money to purchase envelopes, stationery, and law books from outside the state), cert. denied, 475 U.S. 1012 (1986); United States v. Tuchow, 768 F.2d 855, 870-871 (7th Cir. 1985) (extortion payments were made by contractor whose company was no longer viable); United States v. Boulahanis, 677 F.2d 586, 589 (7th Cir.) (social club's extortion payments left it with less money from which to spend its customary $68 per month on coffee from out of state), cert. denied, 459 U.S. 1016 (1982). In light of those decisions giving a broad construction to the commerce element of the Hobbs Act, there is no reason to believe that the Seventh Circuit would have reversed the conviction in this case, where one of the victims that was directly injured by the extortionate scheme -- the school board -- was unquestionably engaged in interstate commerce. 2. Relying on two Eighth Circuit decisions, Terre Du Lac Ass'n, Inc. v. Terre Du Lac, Inc., 834 F.2d 148 (1987), and Superior Oil Co. v. Fulmer, 785 F.2d 252 (1986), petitioner contends (Pet. 14-17) that his RICO conviction must be vacated because the two Hobbs Act violations that formed the "pattern of racketeering activity" were part of a single scheme. The question whether two or more predicate acts can establish a "pattern of racketeering activity" under the RICO statutes where they are part of a single scheme is currently before the Court in H.J., Inc. v. Northwestern Bell, Inc., No. 87-1252. There is no need to hold this case pending the resolution of H.J., Inc., because the two predicate offenses in this case would not be regarded as part of the "same scheme" even under the Eighth Circuit's test. One of the predicate acts involved a scheme to extort funds from Gulf South Engineers in connection with a contract to conduct an efficiency study. The other predicate act involved a scheme to extort kickbacks from architects in connection with school board construction projects. The two schemes differed in time, in victims, in the nature of the contracts, and in the participants. Consequently, it is clear that, even in the Eighth Circuit, petitioner's RICO conviction would have been affirmed. See United States v. Kragness, 830 F.2d 842, 858 (8th Cir. 1987) (pattern established by separate drug importation schemes). Compare H.J. Inc. v. Northwestern Bell, Inc., 829 F.2d 648, 649-650 (8th Cir. 1987) (multiple briberies of members of the Minnesota Public Utility Commission for the purpose of influencing their performance as regulators was a single scheme), cert. granted, No. 87-1252; Terre Du Lac Ass'n, Inc. v. Terre Du Lac, Inc., 834 F.2d 148, 149 (8th Cir. 1987) (alleging a single scheme by property owners' association for failure to fulfill its maintenance obligations); Superior Oil Co. v. Fulmer, 785 F.2d 252, 257 (8th Cir. 1986) (one continuing scheme to convert gas from Superior Oil's pipeline; a pattern of racketeering activity would have been proved if the defendants had converted gas in the past). /4/ CONCLUSION The petition for a writ of certiorari should be denied. Respectfully submitted. CHARLES FRIED Solicitor General EDWARD S.G. DENNIS, JR. Assistant Attorney General PATTY MERKAMP STEMLER Attorney DECEMBER 1988 /1/ The extortion of Gulf South Engineering was not separately charged as a substantive Hobbs Act violation, but it was one of the two predicate acts used to establish a pattern of racketeering activity for the RICO charge. /2/ Grider and petitioner recommended Richard Templeton to be selected as the architect for one of the schools. Templeton was a one-man firm, and co-defendant Hiram Bosarge, another member of the school board, told Templeton that he would need to associate with another architect in order to do the work. Bosarge recommended that Templeton select Grider as his "partner" on the project. Templeton ended up paying a total of 37 percent of his fee to Grider -- 15 percent in the form of a kickback, and the rest for subcontract work done by Grider. Gov't C.A. Br. 35-36. The architect and structural engineer who were selected for another one of the schools were told by Grider that they should make a kickback payment of 15 percent of their fee. They refused to pay, however. Petitioner subsequently complained that the architect and structural engineer had "reneged on their deal," and he told a school board employee that "if I have anything to do with it, they will never get another job as long as I am on the school board." Gov't C.A. Br. 29-31; Tr. 1122. The conspiracy to extort kickbacks from the architects was the basis of petitioner's Hobbs Act conviction on Count 2. It also served as one of the two predicate offesnes establishing a pattern of racketeering activity for the RICO charge. /3/ As the court of appeals noted (Pet. App. 4a-5a), the government undoubtedly could have shown that the architects purhased goods from outside the state and that the kickbacks depleted their purchasing power, but it did not do so. Petitioner's suggestion that such an effect on commerce could not be proved is mere conjecture. In any case, it is irrelevant because the government proceeded on a different theory and sought to establish the effect on interstate commerce by focusing on the effect of the extortion on the other victim -- the school board. /4/ The question presented in H.J., Inc. would have been presented in this case if, for example, each of the payments made by Gulf South Engineering had been charged as a separate predicate act of extortion. The payments were not separately charged that way in the indictment, however. Instead, all of the payments from Gulf South Engineering were charged as part of a single predicate offense, and that offense was only one of two predicate offenses charged in the RICO count.