JOSÉ A. CABRANES, Circuit Judge:
In 2015, the United States Government indicted Sheldon Silver, the former Speaker of the New York State Assembly, on charges of honest services fraud, Hobbs Act extortion, and money laundering. The Government alleged that Silver abused his public position by engaging in two quid pro quo schemes in which he performed official acts in exchange for bribes and kickbacks, and that he laundered the proceeds of his schemes into private investment vehicles. After a jury trial of nearly one month in the United States District Court for the Southern District of New York (Valarie E. Caproni, Judge), a jury found him guilty on all counts. He was sentenced to twelve years of imprisonment, to be followed by three years of supervised release.
After Silver had been convicted and sentenced, the Supreme Court issued its decision in McDonnell v. United States,
Though we reject Silver's sufficiency challenges, we hold that the District Court's instructions on honest services fraud and extortion do not comport with McDonnell and are therefore in error. We further hold that this error was not harmless because it is not clear beyond a reasonable doubt that a rational jury would have reached the same conclusion if properly instructed, as is required by law for a verdict to stand.
I. Offense Conduct
Silver was elected to the New York State Assembly (the "Assembly") in 1976, representing an Assembly District comprising much of lower Manhattan. In 1994, he was elected Speaker of the Assembly ("Speaker") — a position he would hold for more than twenty years until his resignation in 2015. As Speaker, Silver was one of the most powerful public officials in the State of New York, exercising significant control over the Assembly and state legislative matters.
The Government's charges against Silver involve his part-time work as a practicing lawyer.
A. The Mesothelioma Scheme
In the fall of 2002, Silver became "of counsel" to the law firm Weitz & Luxenberg
While he was not expected to and did not perform any legal work for W&L's clients, Silver received a fixed salary for lending his name to W&L, as well as referral fees for any case he brought into the firm. Silver's referral fee was a set percentage of the fees earned by W&L on any case that he referred to the firm.
Dr. Robert Taub, an acquaintance of Silver, was a physician and researcher at Columbia-Presbyterian Hospital who specialized in mesothelioma. In the fall of 2003, Dr. Taub encountered Silver at an event and asked him to encourage W&L to donate money to mesothelioma research.
Within two weeks, however, Silver asked Dr. Taub to refer mesothelioma cases to W&L through him.
Dr. Taub was soon informed that Silver was considering providing him with state funding for his mesothelioma research. Shortly thereafter, in early January 2004, Dr. Taub sent a letter to Silver requesting state funding. While this grant was under consideration, Dr. Taub continued to send Silver mesothelioma leads. And over a year later, in March of 2005, Silver received his first referral fee check from W&L in the amount of $176,048.02.
Silver soon secured two $250,000 state grants for Columbia University to support Dr. Taub's research. These grants originated from the New York Health-Care Reform Act ("HCRA") Assembly Pool, a pool of discretionary funds that Silver alone controlled as Speaker. Silver approved the first grant in July of 2005, a few months after receiving his first referral check.
In 2007, New York law changed to require public disclosure of HCRA grants, and disclosure of any potential conflicts of interest between legislators and recipients of legislative grants.
Silver continued to help Dr. Taub during this time with two other actions:
In 2010, Dr. Taub started sending mesothelioma leads to another law firm that had started funding his research. In response, on May 25, 2010, Silver went to Dr. Taub's office to complain that he was receiving fewer referrals. Their conversation prompted Dr. Taub to continue to send referrals to Silver in order to maintain a relationship with him that would possibly lead to future funding for his mesothelioma research. As he noted in an e-mail to a colleague on the day of his meeting with Silver, "I will keep giving cases to Shelly [Silver] because I may need him in the future — he is the most powerful man in New York State."
In fact, Silver would not approve any more grants for Dr. Taub (and he had not done so since August of 2006). Silver did do three additional favors for Dr. Taub, however.
Dr. Taub continued to provide mesothelioma leads to Silver through at least 2013. In total, over the course of ten years, Silver received roughly $3 million in referral fees for cases referred to W&L by Dr. Taub.
B. The Real Estate Scheme
Silver's second alleged scheme involved two major New York real estate developers: Glenwood Management ("Glenwood") and the Witkoff Group ("Witkoff") (jointly, the "Developers"). Of course, like other real estate interests, both companies depended heavily on favorable state legislation, including rent regulation and tax abatement legislation. The Developers also depended on tax-exempt financing, which must be approved by the Public Authorities Control Board ("PACB").
Silver held considerable control over legislation covering these issues and over PACB approvals. As Speaker, he had de facto veto power over all legislation since he could prevent any legislation that he opposed from coming to a vote. Also, as a voting member on the PACB, Silver had the power to unilaterally prevent the PACB from approving applications for state financing.
As with the Mesothelioma Scheme, Silver allegedly sought to enrich himself through referral fees from a law firm. In this scheme, however, that law firm was Goldberg & Iryami ("G&I"), the firm of Jay Arthur Goldberg, a former staffer and friend of Silver. Goldberg specialized in tax certiorari work, which involves challenges to property owners' real estate tax assessments. The Developers pursued tax certiorari cases to reduce the property taxes of their buildings.
To enrich himself, Silver allegedly induced the Developers to hire Goldberg, who had agreed to pay Silver a percentage of the resulting legal fees. In 1997, at a time when important real estate legislation was due for renewal, Silver referred Glenwood to Goldberg. In 2005, Silver did the same for Witkoff, stating that his friend Goldberg needed business. In response, Glenwood and Witkoff moved some of their tax certiorari work from other law firms to G&I, which they continued to do over time. Of the fees G&I earned from its Glenwood and Witkoff matters, Silver received a referral fee — twenty-five percent of what G&I earned from Glenwood matters and fifteen percent of what G&I earned from Witkoff matters.
The Developers did not know of Silver's financial arrangement with Goldberg at the time. Neither company, however, wanted to alienate Silver, given their need for Silver's approval of favorable legislation. Both testified that they gave tax certiorari work to Goldberg to influence Silver's legislative work concerning real estate. Witkoff also wanted access to Silver to discuss pending legislation that affected its business.
In return for these alleged kickbacks, Silver took a number of actions to benefit the Developers:
In a late 2011 phone call, Silver informed a Glenwood lobbyist of his fee-sharing arrangement with Goldberg. This disclosure was prompted by G&I's decision to send new retainer agreements to Glenwood that referenced Silver. Silver told the Glenwood lobbyist that he wanted his fee-sharing arrangement with Goldberg to continue, and that the arrangement was not problematic since the fees came from a Glenwood limited liability company. Glenwood, despite its reservations, executed a confidential "side letter" agreement with G&I — separate from the firm's retainer agreement — consenting to the fee arrangement. This letter was kept secret from the public and from Glenwood's own chief financial officer.
In total, over a period of about 18 years, Silver received approximately $835,000 in fees from G&I for his referral of the Developers.
C. The Money Laundering Scheme
Silver allegedly laundered the proceeds of the Mesothelioma and Real Estate Schemes by investing them in high-yield, private investment vehicles with the help of Jordan Levy, a private investor.
II. Procedural History
In February of 2015, Silver was indicted for engaging in schemes "to deprive the citizens of [New York State] of his honest services as an elected legislator and as Speaker of the Assembly by using the power and influence of his official position to obtain for himself millions of dollars in bribes and kickbacks...."
B. Trial and Jury Instructions
Before trial, Silver and the Government presented proposed jury instructions to the District Court on how to define an "official act." Silver's initial proposed instructions sought to define "official act" by quoting 18 U.S.C. § 201(a)(3), the federal bribery statute: "[a]n `official act' means any decision or action on any question, matter, cause, suit, proceeding or controversy, which may at any time be pending, or which may by law be brought before any public official, in such official's official capacity."
Silver's trial began on November 2, 2015, and lasted nearly a month. At the charge conference on November 19, 2015, the parties once again addressed the definition of an "official act" in the jury instructions. This time, Silver proposed a new "official act" instruction: "To prove an `official act,' the government must prove the exercise of actual governmental power, the threat to exercise such power, or pressure imposed on others to exercise actual government power."
The District Court declined to include Silver's proposed instructions and ultimately adopted the Government's official act language in its final jury charge.
In its Hobbs Act extortion instructions, the District Court also instructed that the Government must prove a quid pro quo — specifically, that "property was sought or received by Mr. Silver, directly or indirectly, in exchange for the promise or performance of official action."
The District Court also provided the following charge regarding the five-year statute of limitations for honest services fraud and Hobbs Act extortion:
After three days of deliberation, on November 30, 2015, the jury found Silver guilty on all seven counts. Silver timely moved for a judgment of acquittal or, in the alternative, a new trial pursuant to Rules 29 and 33 of the Federal Rules of Criminal procedure.
C. Sentencing and Post-Sentencing Motions
On May 4, 2016, the District Court sentenced Silver to twelve years of imprisonment, to be followed by three years of
On May 13, 2016, Silver moved to continue bail and stay the financial penalties pending appeal. Silver relied largely on arguments raised in McDonnell, which was then pending before the Supreme Court and would address the definition of an "official act" for honest services fraud and Hobbs Act extortion violations.
On appeal, in addition to various arguments challenging the sufficiency of the evidence against him, Silver primarily argues that the District Court's jury instructions on the definition of an "official act" in its honest service fraud and extortion charges were erroneous under McDonnell.
I. Sufficiency of the Evidence
"We review de novo challenges to the sufficiency of evidence, but must uphold the conviction if any rational trier of fact could have found the essential elements of the crime beyond a reasonable doubt."
A. Hobbs Act Extortion
First, Silver claims that the Government failed to prove Hobbs Act extortion because there was no evidence that that he deprived anyone of property. This argument is belied by the record.
The Hobbs Act defines extortion, as applicable here, as "obtaining ... property from another, with his consent, induced
B. Honest Services Fraud
Second, Silver argues that he engaged in mere "undisclosed self-dealing," and that, accordingly, the Government failed to prove a "paradigmatic bribe or kickback" for its honest services fraud charges, as required by Skilling v. United States.
In Skilling, the Supreme Court in 2010 clarified that honest services fraud "does not encompass conduct more wide-ranging than the paradigmatic cases of bribes and kickbacks," and includes instances where a defendant "solicited or accepted side payments from a third party."
C. Money Laundering
Lastly, Silver argues that the Government failed to prove its money laundering count because the proceeds of his two schemes had been commingled into an account with untainted funds. To convict Silver of money laundering under 18 U.S.C. § 1957, the Government was required to prove that Silver "knowingly engage[d] or attempt[ed] to engage in a monetary transaction in criminally derived property of a value greater than $10,000," and that the property was "derived from specified unlawful activity."
We have not yet addressed whether the Government must trace "dirty" funds comingled with "clean" funds in order to prove money laundering under Section 1957. Silver relies on the view of the Fifth and Ninth Circuits, which both require the
We, on the other hand, adopt the majority view of our sister Circuits — that the Government is not required to trace criminal funds that are comingled with legitimate funds to prove a violation of Section 1957. Because money is fungible, once funds obtained from illegal activity are combined with funds from lawful activity in a single account, the "dirty" and "clean" funds cannot be distinguished from each other.
McDonnell v. United States
Having determined that the evidence was sufficient to prove the counts of conviction against Silver, we now turn to Silver's challenge to the District Court's jury instructions under McDonnell.
The Supreme Court in McDonnell addressed what qualifies as an "official act" in an honest services fraud or Hobbs Act extortion quid pro quo. Robert McDonnell, the former Governor of Virginia, was charged with, among other things, honest services fraud and Hobbs Act extortion.
The parties in McDonnell agreed that the jury charge should define an "official act" by quoting the federal bribery statute, 18 U.S.C § 201(a)(3), which defines an official act as "any decision or action on any question, matter, cause, suit, proceeding or controversy, which may at any time be pending, or which may by law be brought before any public official, in such official's official capacity, or in such official's place of trust or profit."
The Supreme Court, however, unanimously vacated the Fourth Circuit's judgment and remanded the case.
Relying on the federal bribery statute's definition of "official act," the Court held that "an `official act' is a decision or action on a `question, matter, cause, suit, proceeding or controversy.'"
First, "[t]he `question, matter, cause, suit, proceeding or controversy' must involve a formal exercise of governmental power that is similar in nature to a lawsuit before a court, a determination before an agency, or a hearing before a committee."
The Supreme Court emphasized that the Government's "expansive interpretation of `official act' would raise significant constitutional concerns."
Applying these principles to McDonnell's case, the Supreme Court found that the district court's jury charge did not include three instructions that should have been given. Specifically, the Court held that the district court should have instructed the jury:
III. Honest Services Fraud and Hobbs Act Extortion Counts under
Based on McDonnell, Silver now challenges the District Court's jury instructions on the definition of "official act" in its honest services fraud and Hobbs Act extortion charges. Where a defendant has timely objected, as Silver did below, "we review a district court's jury charge de novo, and will vacate a conviction for an erroneous charge unless the error was harmless."
We first consider whether the instructions were indeed in error, before turning to whether the Government met its burden of proving beyond a reasonable doubt that any such error was harmless.
A. The Jury Instruction under McDonnell
We consider a jury instruction erroneous "if it misleads the jury as to the correct legal standard or does not adequately inform the jury on the law."
Upon review of the jury charge in this case, we conclude that the District Court's jury instruction defining an official action in its honest services fraud and Hobbs Act extortion charges was erroneous under McDonnell. The District Court's charge, encompassing "any action taken or to be taken under color of official authority,"
It bears recalling that the purpose of a proper charge is to give the jury guideposts as to what would qualify as criminal wrongdoing under the law. Here, the instructions did not convey to the jury that an official action must be a decision or action on a matter involving the formal exercise of government power akin to a lawsuit, hearing, or agency determination. Nor did the instructions prevent the jury from concluding that meetings or events with a public official to discuss a given matter were official acts by that public official. The Government's own summation confirms that the jury instructions conveyed an erroneous understanding of the law as clarified by McDonnell. The Government expressly urged the jury to convict because an official act "is not limited to voting on a bill, making a speech, passing legislation, it is not limited to that," but rather, includes "any action taken or to be taken under color of official authority."
The Government argues that the District Court's charge, taken as a whole, was consistent with Silver's proposed additional instructions and with McDonnell. To salvage the District Court's instructions, the Government points to language requiring that Silver "intend[ed] to be influenced in
Though we conclude that the jury instructions at Silver's trial were erroneous, we do not ascribe fault to the District Court or to the Government. The instructions at the trial, given prior to the Supreme Court's decision in McDonnell, were consistent with our precedent at the time.
The Government contends that even if the jury instructions were in error under McDonnell, the error was harmless. We will find an erroneous jury instruction harmless "only if it is `clear beyond a reasonable doubt that a rational jury would have found the defendant guilty absent the error.'"
As explained below, we cannot conclude, beyond a reasonable doubt, that a rational jury would have found Silver guilty if it had been properly instructed on the definition of an official act. While the Government presented evidence of acts that remain "official" under McDonnell, the jury may have convicted Silver for conduct that is not unlawful, and a properly instructed jury might have reached a different conclusion.
1. Mesothelioma Scheme
With a McDonnell instruction, it is possible that a rational jury would not find that Silver engaged in a quid pro quo to exchange official acts for Dr. Taub's referrals.
In this case, the statute of limitations is critical to our analysis. As previously noted, both honest services fraud and Hobbs Act extortion charges have a five-year
First, a rational jury might have concluded that Silver did not engage in an official act when he agreed to help Dr. Taub with permits for his charity race. The Government's evidence showed that Dr. Taub, along with others, met with Silver at Silver's New York City office regarding the race. Silver then sent Dr. Taub a letter on Assembly letterhead offering to "help navigate the process if needed."
Similarly, a rational jury with a proper McDonnell instruction might find that Silver's letter to OHEL on behalf of Dr. Taub's son did not rise to the level of an "official act." In its summation, the Government emphasized that Silver recommended Dr. Taub's son "on official Assembly letterhead."
The only proven act remaining within the statute of limitations is thus the resolution and proclamation honoring Dr. Taub. The Government argues, and Silver concedes, that the resolution is an "official act" under McDonnell.
The Government, citing the District Court's statute of limitations instruction,
We agree that the Government need not prove that an official act occurred within the statute of limitations period. The Government need only prove that some aspect of the particular quid pro quo scheme continued into the statute of limitations period.
2. Real Estate Scheme
For the Real Estate Scheme, the Government at trial contended that the following acts by Silver were "official": his PACB proxy votes for bond approvals; his meeting with Glenwood lobbyists prior to the passage of the Rent Act of 2011; his approval of real estate legislation benefiting the Developers, including the Rent Act of 2011; and his opposition to a methadone clinic near a Glenwood property. It is not clear, beyond a reasonable doubt, that a properly instructed rational jury would have found an official act quid pro quo based on these acts.
Assuming the jury was properly instructed, it is possible that it would not have considered Silver's opposition to the methadone clinic an official act. The only action Silver took regarding the clinic was to draft a letter to be distributed publicly that expressed his strong opposition to the clinic. Taking a public position on an issue, by itself, is not a formal exercise of governmental power, and is therefore not an "official act" under McDonnell. The record does not establish that Silver formally used his power as Speaker of the Assembly to oppose the clinic and, accordingly, a
Similarly, because the District Court's charge did not specifically instruct the jury that a meeting on its own is not official action, it is possible that the jury improperly concluded that the meeting between Silver and Glenwood lobbyists was an official act. This possibility is certainly "reasonable," if not probable, in light of the Government's argument during its summation that this meeting, by itself, was an official action.
The remaining acts proved by the Government — Silver's PACB proxy votes — may not have been enough for a rational, properly instructed jury to conclude that there was a quid pro quo. Assuming, arguendo, that Silver's PACB and housing legislation votes qualify as "official acts" under McDonnell,
First, a properly instructed rational jury might not have concluded that Silver's legislative votes were part of a quid pro quo scheme. There is little else linking Silver's passage of real estate legislation to the Developers' referral fees other than the 2011 meeting between Glenwood lobbyists and Silver. As the District Court rightly noted, the Glenwood meeting was "the most compelling evidence on which a rational jury could have relied to conclude that Silver understood and intended there to be a quid pro quo."
Further, a juror could reasonably conclude that the PACB approvals were too perfunctory to be regarded as a quo — that is, not part of any fraudulent scheme. There was no evidence adduced that any of the PACB financing approvals were particularly controversial, and one Government witness even stated that, in his experience, the PACB approved every financing request.
Accordingly, a rational jury with proper instructions could conclude that Silver's PACB and real estate legislation votes were not part of any quid pro quo "scheme." The Government characterizes this conclusion — that a rational jury could have concluded that the official acts proven were not part of a quid pro quo arrangement — as one necessarily based on sufficiency of the evidence. We disagree. The issue of whether the Government adduced sufficient evidence to support the convictions is distinct from whether it is clear
IV. Money Laundering Count
Silver also argues that, were we to vacate his honest services fraud and extortion counts for a new trial, we would necessarily need to vacate his money laundering count as well. As noted above, 18 U.S.C. § 1957 prohibits engaging in monetary transactions in property "derived from specified unlawful activity."
We recognize that many would view the facts adduced at Silver's trial with distaste. The question presented to us, however, is not how a jury would likely view the evidence presented by the Government. Rather, it is whether it is clear, beyond a reasonable doubt, that a rational jury, properly instructed, would have found Silver guilty. Given the teachings of the Supreme Court in McDonnell, and the particular circumstances of this case, we simply cannot reach that conclusion. Accordingly, we are required to vacate the honest services fraud and extortion counts against Silver, as well as the money laundering count.
To summarize, we hold as follows:
ADDENDUM A: Mesothelioma Scheme Timeline
Date Event Official Act or Not, as Argued by the Government 2Fall 2002 Silver, Speaker of the New York Not Official Assembly since 1994, becomes "of counsel" at W&L. Fall 2003 Dr. Taub, at an event, asks Silver to Not Official encourage W&L to donate money to mesothelioma research. Silver responds that he could not get them to do so. Within two weeks, Silver asks Dr. Taub to refer mesothelioma cases to W&L through him. Nov. 2003 Dr. Taub starts providing referrals to Not Official W&L through Silver. Jan. 2004 Dr. Taub sends a letter to Silver Not Official requesting state funding for his research after learning that Silver wanted him to apply.
Jan. 2005 Silver invites Dr. Taub to attend the State Not Official of the State ceremony at the New York State Capitol. He then puts Dr. Taub in touch with one of his staffers to discuss the status of Dr. Taub's grant request. Mar. 2005 Silver receives first referral fee check from Not Official W&L for $176,048.02. July 2005 Silver approves a $250,000 state grant to Official Columbia University to support Dr. Taub's research, funded out of the HRCA Assembly Pool.Aug. 2006 Silver approves a second $250,000 state Official grant to Columbia for Dr. Taub's research out of the HCRA pool.Jan. 2007 Silver has his Assembly staff call a state Official trial judge to ask him to hire Dr. Taub's daughter as an unpaid intern.Oct. 2007 Dr. Taub sends Silver a letter requesting a Not Official third HRCA grant. Responding to a state law change requiring disclosure of HRCA grants and disclosures of any conflicts of interest, Silver tells Dr. Taub that he cannot approve any more state grants. Dr. Taub nonetheless continues referring patients to Silver. May 2008 Silver awards $25,000 in state grant Official funding to the Shalom Task Force, a non-profit of which Dr. Taub's wife was a board member.Feb. 19, 2010 Statute of limitations date (5 years from indictment)
May 25, 2010 Silver appears in Dr. Taub's office to Not Official complain he had been receiving fewer referrals. Following this conversation, Dr. Taub continues to provide leads to Silver to maintain the relationship. May 2011 Silver has staff prepare an Assembly Official resolution and official proclamation honoring Dr. Taub, which he later presents to Dr. Taub at a public event.Fall 2011 Silver meets with Dr. Taub and others to Official discuss a "Miles for Meso" charity race that Dr. Taub was trying to organize in Silver's district. Silver then sends Dr. Taub a letter offering to help him navigate the permitting process. The race ultimately does not occur.Winter 2012 Silver makes two calls and sends a letter Official to help Dr. Taub's son get a job with OHEL, a non-profit organization receiving millions in state funding controlled by Silver.Feb. 19, 2015 Indictment
ADDENDUM B: Real Estate Scheme Timeline
Date Event Official Act or Not, as Argued by the Government 21994 Silver is elected Speaker of the Assembly Not Official and in that capacity, he becomes one of three voting members of the PACB. 1997 Silver refers real estate developer Not Official Glenwood to his friend Jay Arthur Goldberg for tax certiorari work. Glenwood hires Goldberg's firm, G&I. 2005 Silver tells real estate developer Witkoff Not Official that his friend Goldberg needed business. Both Glenwood and Witkoff start to move their tax certiorari work to G&I over time. Feb. 19, 2010 Statute of limitations date (5 years before indictment)
June 2011 Silver meets with Glenwood lobbyists Official to discuss pending real estate legislation to ensure that Glenwood is satisfied with the legislation. Later that month, Silver votes for the Rent Act of 2011 and tax abatement renewal legislation, both benefiting Glenwood.Dec. 2011 Silver publicly opposes relocation of a Official methadone clinic proposed to be located near a Glenwood building in Silver's district.Dec. 2011 Silver informs a Glenwood lobbyist of his Not Official fee-sharing arrangement with Goldberg since proposed retainer agreements referencing Silver were sent to Glenwood. Jan. 2012 Glenwood executes secret fee-sharing Not Official side letter with Silver. June 2014 Witkoff learns about Silver's fee-sharing Not Official during a call with Goldberg, who had received a grand jury subpoena in connection with the Government's investigation of Silver. Feb. 19, 2015 Indictment
Two Real Estate Scheme events occurred repeatedly both before and during the period of time captured by the statute of limitations period. The Government argues both are "official acts."