United States v. Giles, Percy Z. ( 2001 )

In the
United States Court of Appeals
For the Seventh Circuit
No. 00-2448
UNITED STATES OF AMERICA,
Plaintiff-Appellee,
v.
PERCY Z. GILES,
Defendant-Appellant.
Appeal from the United States District Court
for the Northern District of Illinois, Eastern Division.
No. 99 CR 69--Elaine E. Bucklo, Judge.
Argued February 13, 2001--Decided April 9, 2001
Before MANION, KANNE, and EVANS, Circuit Judges.
EVANS, Circuit Judge. Percy Z. Giles, a Chicago
alderman for 15 years, appeals his conviction,
after a 2-week jury trial, on 13 counts of
racketeering, mail fraud, extortion, and
understating the income on his federal tax
returns.
In essence, the indictment charged that Giles,
in addition to some minor shenanigans involving
his official expense account, pocketed $10,000 in
cash bribes from a government mole and extorted
an additional $81,000 from a company operating an
illegal dump in his aldermanic ward. The tax
counts, naturally, involve not highlighting this
illegal activity on his tax returns. Giles, who
is serving a 39-month sentence, appeals, raising
questions regarding an important element of
extortion under the Hobbs Act, the sufficiency of
the evidence on some counts, and whether certain
alleged evidentiary errors and instruction
shortcomings require that a new trial be ordered.
Giles was born to a very poor family in rural
Arkansas. To his credit, he got an education,
graduating from the University of Arkansas in
1974. The degree took him to Chicago and into the
management training program at Walgreens.
Eventually he became involved in civic affairs,
including either organizing or joining the "West
Side Business Improvement Association" in
Chicago’s 37th aldermanic ward, a group he became
the paid executive director of in 1983. That led
to politics, and Giles won a special election to
the post of 37th ward alderman in 1986. He won
reelection to 4-year terms in 1987, 1991, 1995,
and 1999, the last despite the fact that he was
under the dark cloud of the indictment in this
case./1
We first turn to the facts, which we must view
in the light most favorable to the jury’s
verdict. We may reverse Giles’ conviction, absent
some compelling, prejudicial legal error, only if
there is no evidence, regardless of how it is
weighed, from which a rational jury could have
found the elements of the charged offenses proven
beyond a reasonable doubt. United States v. Bond,
231 F.3d 1075 (7th Cir. 2000).
An industrial section of the 37th ward at
Division Street and Cicero Avenue contained a 15-
acre site belonging to Belt Railway Company. In
1992 Belt began negotiating for the sale of the
site to the Niagra Group. While Niagra’s offer to
purchase was being considered, Giles wrote to
Belt, on his official stationary, congratulating
the company on the sale because Niagra’s proposed
development would be beneficial to the citizens
of the ward. But, instead of developing the site,
Niagra used it as a dump for construction debris,
causing complaints from other businesses,
especially Helene Curtis (now Unilever), a
neighboring company located next door. Complaints
about the situation fell on Giles’ deaf ears even
when dumping eventually caused the grade of the
site to be 40 feet above the Helene Curtis
parking lot, compelling Helene Curtis to spend
$290,000 for a drainage system. Neighborhood
meetings were held regarding the site at which
Peter Valessares, a long-time friend of Giles,
continued to assert that Niagra planned to
develop the site into an industrial park. This
dumping-and-false-promises routine went on for a
number of years.
In 1992 Niagra was ticketed by an inspector for
Chicago’s Department of the Environment for
operating a dump without a permit. Giles
prevailed upon the commissioner of the
environment to drop the ticket. He did. The
dumping continued. The Department of Zoning
issued a notice of violation because the site was
zoned for manufacturing, not dumping. Giles
intervened in these matters as well. At a May
1994 meeting attended by Giles, representatives
of Niagra, of businesses neighboring the site,
and of several city departments, Giles stated
that Niagra would get the site cleaned up and was
on the verge of getting its proposed development
started. The head of the building department was
skeptical, saying that Niagra had done nothing it
had promised to do so far to clean up the site.
By September 1994 the planning department
recommended denying a special use permit for
Niagra because the debris at the site exceeded 30
feet above grade, the limit for a landfill. But,
with Giles’ help, the site remained unchanged as
late as 1999.
James Blassingame was a political consultant who
worked on Giles’ campaigns and served as
president of the 37th Ward Regular Democratic
Organization. He also served on an organization
Giles founded--the 37th Ward Trust Fund. Another
organization formed for "charitable" purposes was
the 37th Ward Improvement Fund.
In 1992, shortly after the Belt sale to Niagra,
Blassingame talked with Giles about Niagra. Giles
said Niagra was going to contribute $5,000 to the
ward’s Trust Fund and that his son, who was in
college, had a summer job with Niagra that paid
$3,470 for June through August. All in all, from
May 1992 through October 1994, various Niagra-
related entities wrote checks totaling $81,200 to
the two 37th ward organizations under Giles’
control.
Giles also had dealings with John Christopher,
a corrupt contractor and paid informant to the
Federal Bureau of Investigation, who taped a
number of meetings with Giles and Blassingame.
And a word about Christopher is appropriate. As
Giles’ very capable counsel, Walter Jones, put
it, he’s a scoundrel. We might add that he
appears to be a notorious con man and a
professional manipulator. But he’s the person the
FBI used to get to alderman Giles, and we’ll have
to leave the judgment on whether that’s kosher to
others. At any rate, Giles did business with
Christopher, and as the trial judge said at
sentencing, "If you lie down with dogs, you will
get fleas."
Christopher, wired and working undercover with
the FBI, professed to Giles an interest in
getting a contract for his construction company,
Teka, to work on a shopping mall to be built in
the 37th ward. During the taped conversation,
Giles said that he had honored his deal with
Niagra: "I have put my ass out on the chopping
block for them."
As the election of 1995 approached, Giles
talked to Blassingame about raising $10,000 for
the campaign. Giles told him to call Christopher
about raising the money. Christopher said he
could do it. In turn, he wanted help getting work
for Teka on the proposed shopping mall. After
making sure that Teka could not be traced to
Christopher because it was in someone else’s name
and appeared to be a minority-owned business,
Giles agreed to help for "ten." But, he said,
there should be no check that would show "on the
sheets" as a campaign contribution. Later, in a
rear, private area of Edna’s restaurant, a soul
food diner on Chicago’s west side, Christopher
handed Giles an envelope containing $5,000 in
cash. When interviewed by the FBI, Giles denied
ever receiving cash of any kind from Christopher
and, in fact, said that the largest cash
contribution he received was $500. To the State
Board of Elections, Giles said that neither he
nor his organizations had raised more than $1,000
in a 12-month period.
The indictment also contained certain aldermanic
voucher allegations involving the expense account
provided to aldermen. The account, which was over
$20,000 per year, was to be used for expenses
incurred in the performance of official duties,
including parking fees, gasoline, insurance,
repair and maintenance of a motor vehicle, but
not for personal, political, or campaign-related
expenses. To access the account, an alderman
submits a direct payment voucher to the city
comptroller’s office. It describes the expense
and identifies the vendor to whom payment should
be made. Giles submitted vouchers for expenses
for his own car, which he used on city business,
but also expenses for his wife’s Volvo. In
November 1995 he submitted vouchers for $1,440 in
parking tickets going back to 1988, issued to
three different cars, including his wife’s.
In 1993 Giles submitted a $1,500 voucher for
"public service paid by an alderman’s office."
The actual vendor was the Patrick Media Group, a
billboard company. The billboards were to
announce the opening of a new store in the ward.
Giles rented two billboards at a public service
discount rate of $750 each. He paid the $1,500
with a check drawn on the 37th Ward Trust Fund
account and was reimbursed by Goldblatt’s with a
check to the 37th Ward Improvement Fund. Despite
the Goldblatt’s payment, Giles submitted a
voucher to the city for the billboards, listing
the 37th Ward Regular Democratic Organization as
the vendor.
Giles also submitted a voucher for $4,977 for
catering expenses for needy families. The vendor
was Mac’s Plus, which was not, in fact, a caterer
but a record store, owned by a friend of his who
had loaned Giles $2,600 to sponsor a Thanksgiving
turkey giveaway. Giles repaid Mac’s Plus with a
money order. Three days after the $4,977 voucher
was submitted for Mac’s Plus, the FBI came
calling, and the next day after that, the voucher
was cancelled, but it was too late as the check
had already been cut. Giles’ administrative
assistant went to the comptroller’s office and
retrieved the supporting documents which had been
attached to the voucher.
The tax counts, as we mentioned, charged Giles
with making false statements about his income in
1994 and 1995--not claiming as income the expense
account money used for personal expenses and not
claiming money contributed to ward organizations
that went to personal use (his son’s college
tuition, a home improvement loan, etc.).
The racketeering count in the indictment
involves the Division Street site operated by
Niagra; the allegations include extortion and
bribery. The core of Giles’ contentions is that
to prove extortion the government must show that
Niagra made payments in exchange for a quid pro
quo--a specific promise to perform or not perform
an official act. It is the alleged failure to
prove a quid pro quo that Giles claims requires
a judgment of acquittal on the Rule 29 motion he
filed after the trial. He also claims that the
jury was not properly instructed regarding the
necessity of a quid pro quo.
Extortion is defined in the Hobbs Act, 18
U.S.C. sec. 1951, as the "obtaining of property
from another, with his consent, induced by
wrongful use of actual or threatened force,
violence, or fear, or under color of official
right," and this is an "under color of official
right" case. In such a case, it is well-
established after McCormick v. United States, 500
U.S. 257 (1991), that in order to obtain a Hobbs
Act conviction based on an official’s acceptance
of campaign contributions, the government must
show that the "payments are made in return for an
explicit promise or undertaking by the official
to perform or not to perform an official act."
Id. at 273. See also United States v. Allen, 10
F.3d 405 (7th Cir. 1993). The Court explicitly
stated that its holding in McCormick did not
apply to payments made to nonelected officials or
payments made to elected officials but which are
determined not to be campaign contributions.
Because the bulk of the payments Niagra made to
Giles were not campaign contributions, the issue
before us is whether an extortion conviction
under the Hobbs Act requires that payments which
are made "under color of official right" but
which are not campaign contributions must also be
shown to have been paid in exchange for a
specific promise to perform an official act.
Giles argues that the district judge mistakenly
interpreted Evans v. United States, 504 U.S. 255(1992), when she concluded that the quid pro quo
requirement applies only to cases where the
suspect funds are campaign contributions. Giles
says that Evans extends the requirement for a
quid pro quo to cases which do not involve
campaign contributions. On the other hand, the
government contends that it doesn’t matter in
Giles’ case because there was evidence to support
the existence of a quid pro quo. Furthermore,
according to the government, the instructions, in
fact, informed the jury that a quid pro quo was
required.
Evans involved both campaign contributions and
other payments. The issue was whether a public
official must have taken an affirmative act of
inducing the payment-- whether he must have taken
the initiative. The Court decided that the
official need not have been the initiator:
We hold today that the Government need only show
that a public official has obtained a payment to
which he was not entitled, knowing that the
payment was made in return for official acts.
At 268. The statement can be read to imply that
all illegal payments must involve a promise that
the official will take a specific action. Justice
Kennedy read the majority opinion as a clear
indication that the quid pro quo requirement set
out in McCormick applied to all Hobbs Act
prosecutions:
Readers of today’s opinion should have little
difficulty in understanding that the rationale
underlying the Court’s holding applies not only
in campaign contribution cases, but in all sec.
1951 prosecutions. That is as it should be, for,
given a corrupt motive, the quid pro quo, as I
have said, is the essence of the offense.
At 278. The dissenters, Justice Thomas joined by
Chief Justice Rehnquist and Justice Scalia, also
read the opinion as requiring a quid pro quo in
all cases, but they were somewhat less happy
about the requirement, saying "[t]his quid pro
quo requirement is simply made up." At 286.
Although not all courts of appeals that have
considered the issue have found the Evans holding
entirely clear, see United States v. Blandford,
33 F.3d 685 (6th Cir. 1994), several have
determined that the quid pro quo requirement
does, in fact, apply to all Hobbs Act extortion
prosecutions. See, e.g., United States v.
Collins, 78 F.3d 1021 (6th Cir. 1996); United
States v. Hairston, 46 F.3d 361 (4th Cir. 1995);
United States v. Martinez, 14 F.3d 543 (11th Cir.
1994); United States v. Garcia, 992 F.2d 409 (2nd
Cir. 1993). The Court of Appeals for the Ninth
Circuit deftly sidestepped the issue by not quite
actually saying that a quid pro quo is required
but finding that
even applying the quid pro quo requirement to
non-campaign contributions, and viewing the
evidence in the light most favorable to the
government, there is more than sufficient
evidence of a quid pro quo to support the
extortion convictions here.
United States v. Tucker, 133 F.3d 1208, 1215
(1998).
We are not convinced that Evans clearly settles
the question. And we recognize a policy concern
which might justify distinguishing campaign
contributions from other payments. After all,
campaign contributions often are made with the
hope that the recipient, if elected, will further
interests with which the contributor agrees;
there is nothing illegal about such
contributions. To distinguish legal from illegal
campaign contributions, it makes sense to require
the government to prove that a particular
contribution was made in exchange for an explicit
promise or undertaking by the official. Other
payments to officials are not clothed with the
same degree of respectability as ordinary
campaign contributions. For that reason, perhaps
it should be easier to prove that those payments
are in violation of the law.
However, it is our view that this policy
concern is outweighed by language in Evans,
which, although not entirely clear, can easily be
read to lend support to an inference that the
quid pro quo requirement applies in all extortion
prosecutions under the Hobbs Act--not to mention
that four of the Justices read the language to
include the requirement. We therefore join the
circuits that require a quid pro quo showing in
all cases. That said, we also agree with the
Ninth Circuit in Tucker that the government need
not show an explicit agreement, but only that the
payment was made in return for official acts--
that the public official understood that as a
result of the payment he was expected to exercise
particular kinds of influence on behalf of the
payor. The Court stated in Evans:
The official and the payor need not state the
quid pro quo in express terms, for otherwise the
law’s effect could be frustrated by knowing winks
and nods. The inducement from the official is
criminal if it is express or if it is implied
from his words and actions, so long as he intends
it to be so and the payor so interprets it.
At 274.
Unfortunately for Giles, he wins the battle but
loses the war. His case was actually tried, we
think, as a quid pro quo case. The district judge
found that the evidence supported a finding that
a quid pro quo existed. She said that Giles
argues that evidence of extortion was
circumstantial and no witness testified that Mr.
Giles expressly agreed to do Niagra favors in
exchange for money. But a reasonable jury might
have concluded that he did from the
circumstantial evidence presented. This included
his taking more that $81,000 from Niagra while
intervening with the city to help its Division
Street dump, and his taped statements that he had
a "deal’ with Niagra, as well as Niagra’s hiring
his son.
Giles began promoting Niagra’s interests with his
May 5, 1992, letter to Belt Railway; 2 weeks
later, on May 19, 1992, a Niagra division wrote
a $5,000 check to the Trust Fund. In July 1992
Giles met with the commissioner of the
environment to persuade him not to enforce a
ticket issued to Niagra; on July 7, 1992, a
$6,000 check was paid to the Regular Democratic
Organization. On December 18, 1992, Niagra was
issued another ticket, and the same day a $4,000
check went to the Improvement Fund. In 1993 and
1994 Giles pushed for the zoning variance and
stalled enforcement of the environmental and
zoning ordinances. During that time Niagra’s
payments totaled $47,500. Giles repeatedly told
city regulators that Niagra intended to clean up
the site and build an industrial park on it--even
displaying an artist’s rendering of what the
development would look like. But nothing
happened. Also, the tapes confirm what was going
on. A rational jury could determine that payments
were made in return for official acts.
Giles objects to the extortion jury instructions
as not informing the jury of the quid pro quo
requirement and, of course, he’s right as those
words of art were not mentioned. But although the
magic words quid pro quo were not uttered, a
simplified version of the concept, the idea that
"you get something and you give something," was.
The instructions stated that an official commits
extortion when he
obtains money or property to which he is not
entitled, knowing or believing that the money or
property is being, or would be given, to him in
return for the taking, withholding or other
influencing of official action.
Extortion requires a "specific exercise of his
official power." Another instruction says,
if a public official conspires to obtain, or
attempts to obtain, or obtains money or property,
knowing or believing that it is or would be given
in exchange for a specific requested exercise of
his official power, he has committed extortion .
. . .
These instructions, we find, sufficiently inform
the jury that the payments must be made with the
expectation that a specific official act will be
taken. And so, the concept of quid pro quo was
adequately presented to the jury.
Next, Giles contends that the evidence is not
sufficient to support the mail fraud convictions.
To obtain a conviction for mail fraud, the
government must show that the defendant acted
with intent to defraud. He must act with the
specific intent to deceive or cheat the victim,
either for financial gain or to cause financial
loss. The scheme must be reasonably calculated to
deceive persons of ordinary prudence. United
States v. Paneras, 222 F.3d 406 (7th Cir. 2000).
Giles argues that his vouchers were not
fraudulent. He could have been using his wife’s
car on official business. He might not have
intended to deceive. However, the government
notes that he submitted vouchers for 3 years for
insurance on his wife’s car; and also submitted
vouchers on lease payments, insurance, and
maintenance for his Chrysler. The payment for the
Goldblatt’s billboards involved submitting a
voucher for an expense Giles had already been
compensated for. The route the payments took--
paying $1,500 out of the Trust Fund to Patrick
Media, getting $1,500 back to the Improvement
Fund from Goldblatt’s, and naming the RDO as the
vendor on the voucher--allows an inference that
the conduct was intentional. In addition, the
Mac’s Plus payment, even though it was not
charged in the indictment, also supports the
verdict.
Giles’ final contention is that the district
court committed evidentiary errors which require
a retrial. We review evidentiary decisions for an
abuse of discretion. United States v. Wesela, 223
F.3d 656 (7th Cir. 2000); cert. denied, ___ S.
Ct. ___ (February 20, 2001). Although at first
glance it is easy to see why Giles thinks the
rulings unfair, we find that they comply with the
Rules of Evidence and do not constitute an abuse
of discretion.
A number of taped conversations between Giles
and informant Christopher were admitted to
support the government’s case. However, a tape
from February 11, 1995, which Giles said was
exculpatory, was excluded. Giles argues that it
should have been admissible under Rule 803(3) of
the Federal Rules of Evidence to show his then-
existing mental state. He also says that it was
admissible under Rule 106, the rule of
completeness. The judge disagreed and ruled that
the tape was hearsay and not admissible to show
his mental state because the crime was complete
when Giles took the first payment on January 20.
The 3-week interval between the two taped
conversations, said the judge, left too much time
for reflection and fabrication by Giles. The
completeness argument was rejected for much the
same reason, and also the statements were seen as
self-serving and lacking in circumstantial
guarantees of trustworthiness under the catch-all
provision in Rule 807.
We think the February 11 tape should have been
admitted, especially in this case where Giles was
going to (and did) testify. The government’s
argument that the tape was a product of Giles’
reflection--an attempt to cover his tracks in
case he got caught--should have been made to the
jury, not the judge. On a close evidentiary call
like this, we think it’s best to err on the side
of inclusion rather than exclusion if an error at
all is to be made. But all that said, we can’t
say the decision to keep the tape out was so
outside the zone of reasonableness so as to be an
abuse of discretion by the trial judge. And even
if it were, unfortunately for Giles, given the
strong evidence of his guilt, the error would be
viewed as harmless.
In a related issue, Giles wanted to call
Christopher, who is in the federal witness
protection program, as a trial witness (the
government didn’t put him on, as the taped
conversations came in through Blassingame) and
question him about whether the government
scripted his conversations with Giles. But it
seems clear here that the true defense reason
(and we can understand the desire to do it) for
wanting to put Christopher on the stand was to
expose his warts to the jury and float the
inference that the FBI should not play footsie
with a sleazeball. But because it’s clear that a
party may not call a witness for the sole purpose
of impeaching him, United States v. Webster, 734
F.2d 1191 (7th Cir. 1984), and further because no
offer of proof was presented as to the substance
of the testimony Giles believed in good faith
Christopher would give, we again can find no
clear abuse of the trial judge’s discretion to
prevent the defense from putting Christopher on
the stand.
For these reasons, the judgment of the district
court is AFFIRMED.
/1 In the old days, an indictment charging 13
felonies would have been the kiss of death for a
politician. Apparently that is no longer the
case.