APPEAL FROM THE UNITED STATES DISTRICT COURT FOR THE EASTERN DISTRICT OF PENNSYLVANIA
Before Aldisert, Weis and Sloviter, Circuit Judges. Argued June 10, 1981 Reargued In Banc Nov. 23, 1981 Before Seitz, Chief Judge, and Aldisert, Adams, Gibbons, Hunter, Weis, Garth, Higginbotham and Sloviter, Circuit Judges.
On September 16, 1980, after a six-day trial, a jury found defendants Harry P. Jannotti and George X. Schwartz guilty of conspiring to obstruct interstate commerce, in violation of the Hobbs Act, 18 U.S.C. § 1951(a), and found Schwartz guilty of conspiracy in violation of the Racketeer Influenced and Corrupt Organizations Act, 18 U.S.C. § 1962(d). At the time of the events charged in the indictment, Schwartz was president of the Philadelphia City Council and Jannotti was the Council's majority leader. Following the entry of the guilty verdicts, defendants renewed their requests for judgments of acquittal and dismissal of the indictment, on which the trial court had previously reserved decision. On November 26, 1980, the district court entered an order setting aside the verdict of the jury in its entirety, dismissing Count III of the indictment (the Hobbs Act count) for lack of jurisdiction, and granting the motions of defendants for judgment of acquittal. The Government appeals.*fn1
In his opinion accompanying the order, the trial judge gave four reasons for entry of the judgment of acquittal and dismissal of Count III of the indictment. United States v. Jannotti, 501 F. Supp. 1182 (E.D.Pa.1980). He concluded:
1. The evidence at trial did not establish the actual or potential impact upon interstate commerce necessary to sustain federal jurisdiction under the Hobbs Act;
2. The evidence at trial established entrapment as a matter of law;
3. Governmental overreaching amounted to a violation of due process of law;
4. The circumstances relied upon to establish federal jurisdiction were artificially created. Id. at 1205.
Our review of the record and applicable law convinces us that in reaching these conclusions the district court erred in its legal analysis and usurped the function of the jury to decide contested issues of fact. We reverse the district court's order and direct reinstatement of the jury's verdict.
An understanding and appreciation of the evidence presented to the jury is essential to consideration of the issues facing us on this appeal. We have therefore undertaken an exposition of some of the highlights of that evidence. The government operation, which has come to be known as ABSCAM, began some time in 1978. The basic nature of the plan was that F.B.I. agents posed as employees of Abdul Enterprises, a fictional multinational corporation whose principal, a fictional Arab Sheik, Yassir Habib of the Arab nation of Abu Dhabi, was represented as interested in investing large amounts of money in this country and in emigrating here. According to the government, the plan was "conceived to create opportunities for illicit conduct by public officials predisposed to political corruption." Brief for Appellant at 6. From the very beginning the government utilized the services of Melvin Weinberg, accurately characterized by the district court as a "career swindler," 501 F. Supp. at 1193,*fn2 who, with F.B.I. agents, "spread the word" that the Sheik was interested in meeting public officials who could facilitate his planned investments.
This basic plan evolved into various subparts, each with its own cast of participants, which were ultimately the subject of a series of indictments returned by grand juries sitting in various federal districts of the country. Thereafter, a number of local and federal public officials were tried on offenses arising out of their participation. We focus on the facts material to the prosecution of Jannotti and Schwartz in the Eastern District of Pennsylvania.*fn3
The Philadelphia phase began on January 11, 1980 when Weinberg called Howard Criden, a Philadelphia attorney, and told him that the Sheik was "looking to build a hotel" in Philadelphia. Criden, who had previously received money from the F.B.I. agents for arranging introductions to congressmen in connection with another phase of the ABSCAM operation,*fn4 was told that two representatives of the Sheik would be coming to Philadelphia to begin discussions. Weinberg suggested that they be introduced to Congressman Myers or Lederer, and asked Criden which one would be better.
CRIDEN: Well, I got to hear what you want to do first, and ... you know.
WEINBERG: I think they're looking to build a hotel there. I'm not sure. That's only what I heard.
CRIDEN: Okay. Why don't you tell him to find out more particulars because I don't know that either one would help you in that department. We may be able to give you more help to them.
WEINBERG: Who do you know there?
WEINBERG: All right. I'll ... I'll.
CRIDEN: Remember. I got a partner who's a city councilman.
A week later, on January 18, 1980, Criden met with F.B.I. agents Michael Wald and Ernest Haridopolos at the Barclay Hotel in Philadelphia. Wald and Haridopolos used the names Michael Cohen and Ernie Polos in their dealings with defendants throughout these events. That meeting was among the group of meetings at the Barclay recorded on videotape by the F.B.I. Wald told Criden that the Sheik was interested in building a hotel in South Philadelphia, that Wald's role was to address himself to possible problems such as zoning, condemnations, and variances. A351. Criden stated, "You don't have any problem. You got you two of the strongest guys" (referring to Myers and Lederer). Wald responded, "He (Sheik) wants to be assured that municipal government and he can coexist." Criden asked, "How do you want me to satisfy you," to which Wald responded, "I'm sure the easiest way for me to deal with someone in municipal government and I can go back ... Titles impress the man, as you know, from past experience .... If he receives those assurances from someone with a title sounds appropriate, eh, I buy it, he buys it." A351-53.
Wald asked Criden about the municipal setup, including city council. Criden explained that Philadelphia City Council is composed of 12 district councilmen and five at-large councilmen, that his "partner (Johanson is) a district councilman", and that the president of city council, Schwartz, "is a powerful guy" who had been "president of city council for maybe now ten, twelve years, already now. Has got power." Wald responded, "He's the man." A354-55. Wald later asked:
WALD: Can we deal with Mr. Schwartz.
WALD: He seems like the type of person we ...
WALD: Can I deal with him while I'm here in town?
CRIDEN: I don't know. I gotta get hold of my partner.
WALD: Can I deal with your partner?
A357. After some discussion of timing and the proper "tariff," Wald asked if he could talk candidly with Johanson. Criden responded that "As far as Johanson is concerned, you can talk as candidly as you want." With regard to Schwartz, he stated, "He may want to handle it indirectly." A367. Wald expressed some concern, stating that under no circumstances would he want to disappoint his employer.
CRIDEN: Listen, Mike, I, I read you loud and clear and if I was sitting in that chair, I would feel exactly the same way ok. You have no problems with me.
WALD: Ok. How do you want to work this? Eh, do you wantta call me back here concerning ...
CRIDEN: I'll get back to you in the next couple hours.
CRIDEN: If I can serve him up.
A368-69. Wald then asked what the "tariff" would be for Johanson and Schwartz, and Criden replied "twenty-five" for Johanson, A375, and "(a) nother fifty" for Schwartz. A376. Wald demurred at the latter figure, and Criden asked, "You wanta go thirty on this guy?" Wald asked, "will he bite at thirty? ... I mean does that take care of him?" and Criden replied, "Let me try it .... I'll run it up the flagpole." A376-77. Finally Criden raised the subject of his fee and asked for and was promised "ten for both of them." A377.
Several hours later, Criden returned with Johanson to the Barclay suite where Wald and Haridopolos waited. Wald again discussed the proposed hotel construction, explained that he wanted to avoid delays due to the need for a variance or a building permit, and received Johanson's assurances that the inspectors from Licenses and Inspections, the building inspectors, the plumbing inspectors, and the electrical inspectors are "not gonna monkey with you, for a minute because they're gonna be told not to ... because the words gonna come down, that this is a vital project." A421. In discussing the political situation in Philadelphia, and City Council in particular, Johanson boasted that of the 17 councilmen, he and Schwartz was each a "very bright fella", and "after that there ain't a brain in the closet." A415. He spoke of his and Schwartz' importance, and stated that Schwartz, Jannotti and he "run the City Council." A450. Wald then asked about Jannotti:
WALD: Would he be interested in doing business with us.
JOHANSON: I don't know that it's necessary but if you want to we can.
WALD: I don't know-if it is-you're the best judge of that.
JOHANSON: I think George is ah-
CRIDEN: Well, it might not be a bad idea to bring Harry up.
JOHANSON: We can bring Harry up. Harry's the Majority Leader. He's the-ya know, second in command.
JOHANSON: He's got seniority.
A453-54. After some additional discussion, the following exchange took place:
HARIDOPOLOS: Are you acquainted with how much ah, ya know, ah for the favor and for all these assur-assurances, right.
HARIDOPOLOS: You know how much it is?
HARIDOPOLOS: How much is it?
HARIDOPOLOS: Okay, ah but, of course, ah, we have to have these proper assurances. You do us a favor, we're doin you a favor.
A471. Johanson gave his assurances and received $25,000. A480. The following exchange took place:
WALD: And for 25 we've got a friend.
A477. The conversation turned to Schwartz:
WALD: Can I talk to Mr. Schwartz as I have spoken-
CRIDEN: If you can't have the same discussion with George, ... you won't have the meeting.
A485. Wald asked the same question about Jannotti. Criden promised to let him know whether he could have the same kind of conversation with Jannotti. A490. After Johanson left, Haridopolos gave Criden $5,000 and promised another "five for the next delivery." A501.
Criden, who did not know Schwartz personally, arranged for Schwartz to meet the F.B.I. agents through an intermediary, Judge Thomas Shiomos of the Court of Common Pleas of Philadelphia County, who lived in the same apartment hotel as Schwartz. Shiomos testified at trial that at a meeting on January 21, 1980 between him, Criden and their mutual friend, Mr. Kattleman, Criden told him of the proposed hotel construction, asked him if Schwartz would be interested in talking to "these people ... for the purpose of giving them his advice with regard to building this complex in Philadelphia," and indicated that the investors were willing to "pay for (Schwartz') advice." A639-40. Shiomos thereafter met with Schwartz, advised him that Criden had wealthy Arab clients who wanted to invest $150 million to build a hotel in Philadelphia, and indicated to Schwartz that Criden had said there "would be a fee for Mr. Schwartz for his advice" and "that Mr. Criden expected part of that fee." A643. Schwartz stated that he "would be interested in anyone who is willing to invest $150 million." Shiomos stated when he left that he didn't think there was anything "improper" but that if Schwartz "thought there was anything improper or fishy (Shiomos was) sure if (Schwartz) met with Mr. Criden that (Schwartz) could determine that." A644.*fn5 Thereafter Criden spoke with Schwartz. That discussion was not taped or recorded, and there was no trial evidence as to the contents of the conversation.*fn6
On January 23, 1980, Criden and Schwartz visited Wald at the Barclay suite. This conversation was videotaped. Criden stated that he and Schwartz had "spoken at length" and that Schwartz knew that those persons whom Wald represented were "interested in building a hotel facility in Philadelphia that may amount to some 30 or 40 million dollars." A689. Wald explained his purpose:
WALD: Well, what I have been instructed to do and the purpose for ah my visits to to Philadelphia is to firm up uh, what we consider to be a major investment here and uh the gentleman cares to make a major investment here because he seems to like Philadelphia, and he has been told that it would uh be in his best interest to have an investment, uh, in an area where he, uh, would like to take up rather permanent residence and Philadelphia is it.
SCHWARTZ: Philadelphia is a nice city. Philadelphia has been on the move since 1952. And, uh, business climate in Philadelphia is good.
WALD: Uh, and we want to put one up. Now we know that there are problems inherent in any major construction, uh, in this city and any other city. What I am trying to do is take care of any potential problems long before they exist. We're not breaking ground tomorrow morning. We can forsee certain problems such as, uh, uh, zoning and variances and this type of thing ... municipal government, how it effects those various things, but we don't want to be faced with problems down the road.
A691-92. Schwartz responded to this overture with a soliloquy on his own political power and importance. After explaining how close he was to the mayor*fn7 and that he was "sort of a protege" of the mayor's deceased father, who had been Chairman of the (Democratic) party, Schwartz stated:
SCHWARTZ: ... Unfortunately then he died in "63. And I have been close to every chairman since. I am a member of the Democratic National Committee. I am a member of the State Committee. I am a member of the City Committee. A Ward Leader. I, uh, I have a ward-if you know what that means in politics.
A693. A few minutes later, Wald asked:
WALD: Is it fair to say that by doing business with you, uh ... my zoning problems become ...
CRIDEN: You, you don't have any.
WALD: Okay. Now. There are what, 17 members, as, as you say ... and also what uh I read here ...
WALD: Uh, do we have a uh controlling vote ...
WALD: Can you control ...
WALD: ... those types of factions?
WALD: You can control them?
SCHWARTZ: The proof was today. The proof was the election of myself as president again.
SCHWARTZ: In other words, we got uh five or six now (sic) members that came in. Uh, you tell me your birth date. I'll give them to you for your birthday.
A695-6. The essence of Schwartz' representations of control was repeated shortly thereafter:
WALD: All right. You're controlling the council at this point.
WALD: As far as I'm concerned.
CRIDEN: Right. And has been for ...
WALD: Should we have anything that comes up to a vote, that has to be done on a vote basis, the council is with you.
WALD: You control them at this point.
A709. Schwartz stated that although he could not promise that the hotel project would not have problems, those problems would not be "insurmountable" as long as the project "is a proper project." A698. Wald stated, "I am not putting up a cathouse", Criden interjected, "It's going to be legitimate", and Schwartz responded, "That I take for granted, or I wouldn't be here." A710. Wald then asked Schwartz for assurances of his support if the project "violates some minor ... type statute or ordinance or ... something", and Schwartz replied:
SCHWARTZ: There is a Board of Building Standards. There, there is built-in relief every stage of the way. There's a Zoning Board of Adjustment for variances.
WALD: Okay. Can you control that?
A711. Immediately thereafter he explained, "if it isn't something that is outlandish, if it is something that should and can be handled, and I can, I can't think of anything that couldn't be handled ... through a variance procedure of some kind." A712. Wald stated:
WALD: Okay. Meaning that, if City Council has to vote on it, we don't have a problem at this point?
SCHWARTZ: Well, I'm going further. There are other boards and agencies, uh, depending upon what your client, how idiosyncrant he wants to be and how eccentric he wants to be.
WALD: (Laughter) ... They can become rather eccentric.
SCHWARTZ: All right. All right. It may be necessary to go to these various boards and commissions. Now, they are part of the organization. They are part and parcel and ...
WALD: Appointed, appointed officials?
SCHWARTZ: Yes, they are appointed officials. Uh, but uh, as I say, uh, I always do my homework. And, uh, the mayor is a very strong mayor. We have a strong mayor form of government. And all these people are his appointees. My understanding with him is that I go to him-period. I don't even have to go to one of the flunkies, one of the functionaries. I go to him ....
A712-13. After additional discussion which concerned local law firms that could be employed by the hotel project, the economic climate in Philadelphia, and the encouragement received by business from the city, Wald referred to Schwartz' compensation:
WALD: Our time frame is growing short, but we don't have those type of problems. We don't have that built-in resentment. Ah ... We've talked to Howard, you know, the figures, the dollars we're talking are in the right ballpark. We're ...
SCHWARTZ: That's not my prime concern. I'm interested in the City of Philadelphia. I'm interested in a good project. I'm interested in tax rateables. I want to see Center City develop. Especially Center City. There are a few parcels left. Well anything else that's going to add to the tax rateables of the city that's going to create jobs.
WALD: I am again quick to say that I'm not really interested in the City of Philadelphia to be candid.
SCHWARTZ: Well I have to be. I have to be.
WALD: Perhaps, oh sure ... (inaudible) ...
CRIDEN: Your primary concern is to see that if your employer decides to move, you have a minimum amount of problems.
WALD: Exactly .... Problems are to be handled before they arise. Right. Should any minor problems come up. Should any problems that are councilmatic in scope ...
WALD: You could take care of them. Those are the type of things ...
WALD: That he asks I make an unequivocal, yes, it's been handled, it's been ...