This is a long one and for that I apologize. But I want to have the basics of the U.S. Attorney’s case against former Governor George Ryan on McHenry County Blog and this seemed a good way to put it up. For newcomers to McHenry County, Don Udstuen lived in Crystal Lake and was appointed by the McHenry County Board to the Metra Board.
GOVERNMENT’S RESPONSE TO
DEFENDANT’S MOTION TO VACATE, SET ASIDE, OR
CORRECT SENTENCE PURSUANT TO 28 U.S.C. § 2255
The UNITED STATES OF AMERICA, by its attorney, PATRICK J. FITZGERALD, United States Attorney for the Northern District of Illinois, respectfully submits this response in opposition to defendant’s Motion to Vacate, Set Aside, or Correct Sentence pursuant to 28 U.S.C. § 2255.
Defendant George Ryan challenges his convictions on one count of racketeering and seven counts of mail fraud based on the Supreme Court’s recent decision in Skilling v. United States, 561 U.S. __, 130 S.Ct. 2896 (2010). Contrary to Ryan’s contentions, nothing in Skilling undermines Ryan’s convictions. The instructions in this case permitted the jury to convict Ryan of honest services fraud only if the jury concluded that Ryan took bribes and kickbacks, the very conduct Skilling held is prohibited under the honest services statute. Because there was no instructional error, there was no error at all.
Even if the Court were to conclude that the instructions permitted the jury to convict Ryan for conduct that fell short of taking bribes and kickbacks, any error would be harmless for three reasons.
First, even if a jury could have convicted Ryan without finding that he took bribes and kickbacks, no reasonable jury actually would have. Any jury that was properly instructed on honest services fraud would have convicted Ryan of taking bribes and kickbacks because the evidence that Case he did so was overwhelming.
The evidence showed that over the course of many years, Ryan accepted a stream of benefits from benefactors, and that Ryan awarded state contracts and leases to those benefactors in return.
In other words, Ryan took bribes and kickbacks, and any properly instructed jury would have reached that finding.
Second, even if the jury could have convicted Ryan of honest services fraud for conduct that fell short of taking bribes and kickbacks, any reasonable jury that would have convicted Ryan of honest services fraud also would have convicted him of money-property fraud, which the government properly charged.
The government alleged a single fraud scheme in which Ryan not only deprived the state of its right to his honest services, but also obtained state money under false pretenses, by steering state money to his benefactors through lucrative state contracts and leases, while actively concealing and lying about the substantial personal and financial benefits his benefactors were giving him in return.
In many cases, Ryan’s awarding of state money through fraud resulted in a significant loss to the state.
This is money-property fraud, and it was so inseparable from Ryan’s honest services fraud that no reasonable jury would have convicted on the latter ground without convicting on the former, making any error in the honest services instructions harmless.
Finally, any reasonable jury that was properly instructed only on the money-property fraud theory would have convicted Ryan. The evidence that Ryan committed money-property fraud was overwhelming, and so any error in the honest services instructions could not have prejudiced Ryan.
Because there was no error, and any potential errors were harmless, this Court should deny Ryan’s § 2255 motion.
I. Second Superseding Indictment
In December 2003, a federal grand jury returned a 22-count second superseding indictment (“indictment”) against defendant George Ryan and his co-schemer, Larry Warner. The indictment alleged that over the course of many years as Secretary of State (SOS), and then as Governor of Illinois, Ryan awarded to Warner and others lucrative state property in the form of state contracts and leases in exchange for substantial personal and financial benefits, and that he and his coschemers concealed these exchanges from the people of Illinois.
- Count One of the indictment charged Ryan and Warner with racketeering conspiracy in violation of 18 U.S.C. § 1962(d), alleging that Ryan and Warner conspired to conduct the affairs of the State of Illinois through a pattern of racketeering activity involving multiple acts of mail fraud, money laundering, extortion, obstruction of justice, state-law bribery, and related offenses. R110:1-16.1 [FN 1]
- Counts Two through Ten charged that Ryan, in violation of 18 U.S.C. § 1341 and 1346, devised and carried out a scheme to defraud the State of Illinois of money, property, and the right to the honest services of Ryan and other state officials and employees, and used the United States mails and other interstate carriers in furtherance of the scheme. R110:17-67.2 [FN2]
- Counts Eleven through Thirteen charged Ryan with making false statements to the FBI, in violation of 18 U.S.C.§ 1001(a)(2). R110:68-71.
- Counts Eighteen through Twenty-Two charged Ryan with tax crimes. R110:76-88.
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FN1 Citations to Ryan’s § 2255 motion are to“Mot__.” Citations to record documents and trial transcripts are to “R__” and “Tr__,” respectively. Citations to the government’s trial exhibits are to “Gx__.”
FN2 Warner was also charged in Counts Two through Five, and Seven through Ten. R110.
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II. The Evidence Presented at Trial
The evidence established that, throughout Ryan’s tenure in statewide public office, Ryan, his friends, and his family received financial benefits from benefactors, including
- Larry Warner and other key figures,
- Harry Klein,
- Arthur (“Ron”) Swanson, and
- Donald Udstuen,
in exchange for state contracts and leases worth millions of dollars, and that Ryan concealed the benefits he received.
A. Official Actions Taken by Ryan in Return for
Personal Benefits Provided by Warner and Udstuen
1. The ADM Contract (Count Two)
Shortly after Ryan was elected SOS, Warner told Udstuen, another Ryan friend and political supporter, that Warner was going to capitalize on his relationship with Ryan by entering the lobbying business. Tr11620.
Warner said Udstuen “should be part of it” because no one had done more for Ryan than Udstuen, and Udstuen, therefore, “deserved some of this.” Id. [FN3] Warner explained that he had talked to Ryan about this plan, and Ryan was “fine” with it. Tr11620-21.
“I will take care of George.” Tr11622.
One of Warner’s first clients was ADM, a manufacturer of validation stickers for license plates. Tr11637. Before Ryan became SOS, ADM had won the annual stickers contract, which had specifications calling for a “metallic security mark,” which only ADM could provide. Tr8032-33,8064,8067-68,8112-13. From 1991 through 1998, to keep the contract, ADM paid Warner a monthly fee ranging from $2,000 to $5,000. Gx02-004,02-005,02-015,02-500,02-501.
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FN3 In addition to giving political support to Ryan and assisting on Ryan’s political
campaigns as a part of a group of supporters providing advice on such things as strategy and fundraising, Tr.11604-10, Udstuen also provided a valuable personal benefit to Ryan in the mid-1980s when, at Ryan’s request, he gave a job to Ryan’s daughter, who was recuperating from a very serious car accident. The daughter’s employment at the Illinois State Medical Society, where Udstuen worked as a lobbyist and administrator for many years, continued through the period in which Ryan was SOS and governor. Tr11593,11600-01,11612-13.
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In early 1993, an official in the SOS office decided to change the contract’s specifications by eliminating the metallic security mark. Tr8120-26,8135-36. An upset Warner told the SOS official that Warner would “take care of it,” and a day or two later, Ryan sternly told the official to quietly retract the revised specifications. Tr8140-45. The official did so, even though he believed the new specifications were in the State’s best interests. Tr8146. As a result, ADM continued to be awarded the contract, and from 1991 to 1999, ADM paid Warner $399,000. Tr2801,8146-47.
Warner funneled $122,000 of this money to Udstuen, who did nothing to assist ADM. Tr16905,16916;Gx02-500,02-501.
Neither Warner nor Udstuen were ever registered as lobbyists for ADM. Tr13755-56;Gx02-093.
2. The IBM Mainframe Computer Contract (Counts Four and Five)
Ryan chose Warner and Udstuen to search for a director of the SOS department that dealt with mainframe computer issues, and then hired Warner and Udstuen’s hand-picked candidate for the job. Tr12526. Warner and Udstuen chose the candidate because he said he would support a transition to IBM, one of Warner’s clients. Tr12528-29. In 1996, as planned, the SOS office awarded IBM a $26 million mainframe computer contract. Tr3125,12541;Gx04–043. Warner
received lobbying fees calculated as 3.5 percent of SOS revenues received by IBM. Tr12931.
In total, Warner received almost $1 million from IBM, most of which came as a result of the award of the mainframe contract. Tr12981-87; GX04-014,04-021.
Warner funneled $298,371 of this money to Udstuen, although Udstuen’s interest was never disclosed to IBM or to the public through lobbyist disclosure documents. Tr16918,16923;Gx04-500,04-501.
3. The Viisage Digital Licensing Contract (Count Seven)
In July 1996, when the SOS office was considering switching to digital driver’s licenses, several companies, including a company called Viisage, made presentations to Ryan. Tr3091-94.
Shortly after the presentations, Warner entered into an arrangement with Viisage which provided that he would receive 5 percent of Viisage’s revenues on the licensing contract in return for his help in landing it. Gx03-015,03-016. A businessman named Irwin Jann served as a front man in this arrangement. Jann’s name was on the original lobbying agreement with Viisage, and Jann was registered as Viisage’s lobbyist, even though Jann did no actual work for Viisage. Tr13178,13188-206;Gx03-020, 03-023, 04-045.
In December 1996, months before the bidding process for the contract began, Ryan directed Warner to cut another Ryan friend and supporter, Swanson, in on the Viisage deal, and Warner did so, guaranteeing Swanson $36,000 for his non-existent “lobbying efforts.” Tr3102-04;Gx03-009.
After the State awarded the $20 million contract to Viisage in June 1997, Tr13195, Warner removed Jann as the front man and had the Viisage lobbying arrangement transferred to Warner’s company. Tr13202-05; Gx03-028. Warner never registered as Viisage’s lobbyist, and only in 2001 did Viisage file a record showing that the lobbying arrangement had been transferred to Warner’s company in 1997. Tr13756-63. Warner received fees totaling $834,000 on the Viisage contract, of which he provided Swanson $36,000, as Ryan had directed, even though Swanson did no work for Viisage, and Swanson never registered as Viisage’s lobbyist. Tr3103-04,16923-25;Gx03-023,03-500,03-501.
Five days after landing the Viisage contract, Warner wrote Ryan a blank check, which Ryan used to pay over $3,000 to a band for playing at his daughter’s wedding. Gx23-003.
4. The Bellwood and Joliet Leases (Counts Three and Eight)
Ryan steered two SOS leases to Warner, costing the state hundreds of thousands of dollars.
In 1992, Warner told Ryan that Warner had found a building in Bellwood to house the SOS Police.
When Ryan’s chief of staff, Scott Fawell, expressed concern that the press might discover Warner’s involvement, Warner told Ryan and Fawell not to worry because Warner’s ownership interest in the building was “buried in the paperwork.” Tr2774. Indeed, before the lease was signed, Warner’s interest in the property was hidden behind front men, whose names were put on the real estate trust documents. Tr16939-40; Gx07-500. Ryan approved the Bellwood lease, and after the lease was signed, Warner’s ownership interest in the property surfaced through a series of transactions, and Warner went on to receive about $171,000 in profits. Tr16950-51, 16954;Gx07–011,07-501,07-502. The state overpaid on the Bellwood property by about $246,583 for the first five years. Tr11045,11399.
In about 1994, Warner told Ryan that Warner was looking for property in Joliet for the SOS Office to lease, and Ryan directed an SOS official to deal with Warner on the lease. Tr. 7822-24, 2804-05,10463. Warner bought property in Joliet for $200,000, but as with the Bellwood lease, Warner used front men to hide his ownership interest. Tr16954-58; Gx06-500. Warner again told Fawell that Warner’s ownership in the property was buried in paperwork. Tr2812,3005. After Ryan personally signed a four-year SOS lease, Warner’s 90% ownership interest in the property emerged through various transactions, and Warner ultimately received about $854,258 in rental payments. Tr16959-62; Gx06-016,06-028,06-501,06-502. [FN4]
The state overpaid for the lease by $296,485. Tr11021.
When Warner’s role in the lease came to light publicly, Warner told Udstuen that he never should have done the Joliet lease because it was “too good a deal.” Tr11727.
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FN4 It was unusual for Ryan to personally sign a lease. The evidence showed he signed only two as SOS: the Joliet lease (for Warner) and the South Holland lease (for Klein). Tr6289-91.
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5. Financial Benefits Provided by Udstuen and Warner
In return for the state contracts and leases Ryan steered to Warner, Warner gave Ryan a stream of benefits to Ryan and to Ryan’s family members and associates. Warner provided over $400,000 in payments to Udstuen relating to the ADM and IBM contracts; $145,000 in loans and financial support to Comguard, a financially distressed company partly owned by Ryan’s brother, Gx09-001,09-002,09-020,09-500; $36,000 to Swanson relating to the Viisage contract; and provided Ryan and Ryan’s family members with approximately $25,000 in loans, gifts, insurance services,
investments and payments. E.g.,Gx08-087,08-088,08-089,22-004. Udstuen, in addition to getting Ryan’s daughter a job at the Illinois State Medical Society, also arranged, at Ryan’s request, for Ryan’s son-in-law to work for the Medical Society beginning in 1994. Tr11678-83. When, in early 1997, Udstuen told Ryan’s son-in-law that the Medical Society was contemplating terminating his
services, Ryan called Udstuen and insisted that the Medical Society retain the son-in-law and also give him a raise. Tr11690-91. Ryan told Udstuen,
“John needs the help, and you should continue to help. And he could use a little more help.”
T11691. Ryan added,
“Look, this is important.” Id.
Udstuen gave in to Ryan, and the Medical Society not only did not terminate Ryan’s son-in-law, but also gave him a raise, as Ryan had asked. Tr11691-96.
B. Official Actions Taken by Ryan in Return for Personal Benefits Provided by Harry Klein (Count Six)
Beginning in the 1990s, Ryan and Fawell made trips to a Jamaican villa owned by Harry Klein, an Illinois currency exchange owner. Tr2832-34,9421-23;Gx01-044. On Fawell’s first trip, Ryan said that because Klein’s business was regulated by SOS, they should each give Klein a check for the $1,000 lodging fee, and have Klein return to them the same amount in cash. Tr2838-42. In this way, they would create a false paper trail giving the appearance that Ryan and Fawell were paying for their lodging, whereas, in truth, the transaction was actually a “wash”; in other words, Klein was actually providing free lodging. See id.
This is what happened every year from 1993 to 2001. Tr2844,9432-33;Gx10-001-10-009. Ryan later falsely represented to FBI agents that he paid his own way at Klein’s villa, and went so far as to produce negotiated checks reflecting annual lodging payments, while concealing the cash-back arrangement. Tr18143-49;Gx10-013.
Throughout Ryan’s first SOS term, currency exchanges repeatedly requested a fee increase, but Ryan opposed it. Tr. 2843-44.
In January 1995, however, during one of Ryan’s and Fawell’s complimentary stays at Klein’s villa in Jamaica, Klein asked Ryan to approve a fee increase.
Tr2851. Having been treated to lodging at Klein’s Jamaica for several years, Ryan subsequently agreed, and the increase was implemented. Tr. 2852-53.
In late 1996 or early 1997, while Ryan, Fawell and Klein were relaxing around a picnic table during another free stay at Klein’s Jamaican villa, Klein said that he wanted to lease his building in South Holland to the SOS. Tr2858-59.
Upon returning from his free Jamaican vacation, Ryan ordered an SOS director to work out a lease for the Klein property. Tr6552.
Without reviewing other sites, the director cancelled a less-expensive lease in order to move an SOS office to Klein’s property, even though, according to the head of SOS’s property management division, the building was not in an ideal location. Tr3010-11, 6263, 6266-67, 6557-6560;Gx01-062. When the SOS
director asked Ryan’s view about certain disputed lease terms, Ryan responded,
“What does Harry want?”
and then approved Klein’s terms, telling Fawell he wanted “Harry to be happy.” Tr 2870, 6578-80;Gx01-006. In June 1997, Ryan personally signed the South Holland lease, authorizing $600,000 in payments to Klein over five years. Tr6289-91; Gx11-001.
Over a two-and-a-half year period, the state paid significantly more for the South Holland lease than it had for the previous lease, for a total difference of over $170,000. Tr11036.
C. Official Actions Taken by Ryan In Return for Personal Benefits Provided by Arthur Swanson
Swanson gave many benefits to Ryan and his family, including a trip to Cancun and a trip to Lake Tahoe in 1995, Tr15262-77,15333, as well as a figurine worth over $1200, which he gave the Ryans for their anniversary in 1996. Tr15275-77;Gx16-045.
In early 1995, around the time Swanson gave Ryan a free vacation at a timeshare in Mexico, Ryan steered an SOS lease to Swanson (the Lincoln Towers lease). Tr15261-71, 2910-20;Gx34-004. Ryan told Fawell to work out the Lincoln Towers lease, even after Swanson proposed a rental figure well above market rate. Tr2914-16.
By including non-useable space in the cost figures, Fawell manipulated the cost per square foot to make it appear lower than it actually was. Tr2919;Gx01-036. The Lincoln Towers lease cost $97,000 more than the SOS office paid at its former location, and Swanson made over $21,000 on the deal. Tr15345;Gx15-027, 15-029, 16-002,01-036.
In about August 1999, Swanson paid $2,200 for Ryan’s daughter to take a family trip to Disney World. Tr1665-66, 16880-81;Gx28-009.
Shortly thereafter, Ryan told Fawell to hire Swanson as a lobbyist for the Metropolitan Pier & Exposition Authority (MPEA). Tr2929-30(JA791). When, after several weeks, Fawell had not yet hired Swanson, an agitated Ryan repeated his directive, adding that Swanson should receive $5,000 per month. Tr2934. Fawell then hired Swanson on Ryan’s terms. Tr2937-38. As a result, Swanson’s firm was paid $180,000 in state money over three years, even though it did virtually no meaningful work. Tr17238;Gx16-503.
D. False Statements of Economic Interest
Every year from 1991 to 2002, Ryan, as SOS and then governor, filed statement of economic interest forms, as state law required. Gx28-012. The forms required Ryan to list the source of all gifts over $500 that he received during the previous calendar year. Id. Ryan’s forms for 1991 through 2002 listed none of the payments or other benefits he and his family received from Warner, Klein, or Swanson. Id. Ryan signed each form, declaring it to be “a true, correct, and complete statement of my economic interests,” and filed or caused the forms to be filed with the SOS. Id.
III. Conviction, Sentencing, and Appeal
After a seven-month trial, on April 17, 2006, the jury convicted Ryan and Warner on all counts. R770,771. This Court granted Ryan’s motions for acquittal on Counts Nine and Ten (mail fraud counts relating to one of Warner’s leases and one of Swanson’s lobbying deals). R867:20-23.
The Court otherwise denied Ryan’s motions for acquittal and a new trial. R867.
On September 6, 2006, this Court sentenced Ryan to the low end of the guideline range, 78 months’ imprisonment on Count One, the racketeering conspiracy. The Court ordered this sentence to be served concurrently with sentences of 60 months on each mail fraud and false statement count, and 36 months on each of the tax counts. R888. Ryan appealed, and the Seventh Circuit affirmed his conviction and sentence on direct appeal. United States v. Warner, 498 F.3d 666 (7th Cir. 2007).
IV. Section 2255 Motion
On August 31, 2010, Ryan filed the instant motion pursuant to 28 U.S.C. § 2255, arguing that the Supreme Court’s decision in Skilling invalidated his convictions and sentences on Counts One through Eight, the racketeering and mail fraud counts.[FN5] Ryan does not challenge his convictions and sentences on the remaining counts, but asks the Court to re-sentence him on those counts if the Court vacates his racketeering and mail fraud convictions.[FN6]
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FN5 Skilling applies retroactively because it “narrow[s] the scope of a criminal statute by interpreting its terms,” and therefore announces a new substantive rule of criminal law. Schriro v. Summerlin, 542 U.S. 348, 351-52 (2004).
FN6 The government disagrees with Ryan’s analysis of this Court’s reasoning in imposing sentence on the false statement and tax counts. Since the Court will not need to reach the issue if it denies Ryan’s motion, the government has deferred any discussion of re-sentencing at this time.
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THE SUPREME COURT’S DECISION IN SKILLING DOES NOT UNDERMINE THE VALIDITY OF RYAN’S CONVICTIONS ON COUNTS ONE THROUGH EIGHT.
As the Seventh Circuit stated in the direct appeal of this case,“[a]lthough the intangible rights theory of federal mail fraud may have its problems when applied to other fact settings, it is not unconstitutionally vague as applied here,” and “the evidence supporting the jury’s verdict was overwhelming.” Warner, 498 F.3d at 698-99, 675. Nothing in the Supreme Court’s decision in Skilling changes that analysis. The mail fraud offenses of which Ryan was convicted involved
bribes and kickbacks, and therefore fell squarely within the definition of “core” honest services fraud under the Supreme Court’s decision in Skilling. Even before Skilling, the Seventh Circuit described Ryan’s convictions as arising from his “channel[ing of] state contracts and leases to a friend in return for paid vacations.” United States v. Sorich, 523 F.3d 702, 707 (7th Cir. 2008) (emphasis added).
Moreover, the jury’s verdict may be supported by the alternative valid theory of guilt—money-property fraud—which was properly presented to the jury and is unaffected by Skilling. For both of these reasons, the Skilling decision does not undermine the validity of Ryan’s convictions on Counts One through Eight, and Ryan’s motion should be denied.
I. Standard of Review
A prisoner is entitled to relief pursuant to 28 U.S.C. § 2255 only if his “sentence was imposed in violation of the Constitution or laws of the United States,” the Court lacked jurisdiction, the sentence exceeded the maximum authorized by law, or the sentence is otherwise subject to collateral attack. 28 U.S.C. § 2255(a). In considering a motion under § 2255, the Court must
“review evidence and draw all reasonable inferences from it in a light most favorable to the government.” Carnine v. United States, 974 F.2d 924, 928 (7th Cir.1992). This standard requires that the Court uphold the jury’s verdict unless “the record contains no evidence, regardless of how it is weighed, from which the jury could find guilt beyond a reasonable doubt.” United States v. Blanchard, 542 F.3d 1133, 1154 (7th Cir. 2008) (quotations omitted).
This Court reviews de novo the legal correctness of the instructions provided to the jury. United States v. Cote, 504 F.3d 682, 687 (7th Cir. 2007). The Court reviews the instructions as a whole, and finds error “only if the instructions, viewed as a whole, misguide the jury to the litigant’s prejudice . . . .” Id. (quoting United States v. Palivos, 486 F.3d 250, 257 (7th Cir. 2007).
Where an instructional error has occurred, this Court reviews for harmless error. Neder v. United States, 527 U.S. 1, 19 (1999). As the Supreme Court made clear in Skilling, harmless error review applies where, although the jury has rendered a general verdict after having been instructed on a legally invalid theory of guilt, the verdict may be supported by an alternative, valid legal theory. Skilling, 130 S. Ct. at 2934 (citing Hedgpeth v. Pulido, 129 S. Ct. 530, 532 (2008) (per curiam) (citing Neder, 527 U.S. at 19)). On collateral review, an instructional error will result in reversal only if the error had a “substantial and injurious effect or influence in determining the jury’s verdict.” Brecht v. Abrahamson, 507 U.S. 619, 637 (1993) (quoting Kotteakos v. United States, 328 U.S.750, 776 (1946)); Carter v. DeTella, 36 F.3d 1385, 1392 n.14 (7th Cir. 1994).[FN7]
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FN7 Ryan argues that Brecht may not apply because it was decided in the context of a postconviction challenge to a state conviction under 28 U.S.C. § 2254. Mot26-27. Most Circuits have held that the Brecht standard applies to a post-conviction challenge to a federal conviction under 28 U.S.C. § 2255. See, e.g., United States v. Dago, 441 F.3d 1238, 1246 (10th Cir. 2006); United States v. Montalvo, 331 F.3d 1052, 1057-58 (9th Cir. 2003); Ross v. United States, 289 F.3d 677, 682 (11th Cir. 2002); Murr v. United States, 200 F.3d 895, 906 (6th Cir. 2000). United States v. Montalvo, 331 F.3d 1052, 1057-58 (9th Cir. 2003); Ross v. United States, 289 F.3d 677, 682 (11th Cir. 2002); Murr v. United States, 200 F.3d 895, 906 (6th Cir. 2000).
The Seventh Circuit has not specifically addressed the issue. In Lanier v. United States, 220 F.3d 833 (7th Cir. 2000), the Seventh Circuit applied a more stringent standard on collateral review, requiring the government to show the error was harmless beyond a reasonable doubt. Lanier applied the heightened standard without analysis, however, and the issue does not appear to have been raised by the parties. Accordingly, Lanier is not controlling. See, e.g., United States v. L.A. Tucker Truck Lines, Inc., 344 U.S. 33, 37-38 (1952). No Circuit that has specifically considered the issue has concluded that the heightened standard applies to § 2255 motions.
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The Brecht standard requires more than “a reasonable possibility” that the error contributed to the verdict. Brecht, 507 U.S. at 637; Carter, 36 F.3d at 1392 (quotations omitted). Instead, on habeas review, a court may reverse a conviction only if after looking at the record as a whole, the court concludes—or has a “grave doubt” about whether—the error resulted in “actual prejudice.” Brecht, 507 U.S. at 637-38; O’Neal v. McAninich, 513 U.S. 432, 435 (1995); Carter, 36 F.3d at 1392.
II. The Supreme Court’s Decision in Skilling
In Skilling v. United States, the Supreme Court held that the honest services statute, 18 U.S.C. § 1346, is constitutional when limited to mail fraud schemes involving bribes and kickbacks. Skilling, 130 S. Ct. at 2905. Skilling noted that after the Supreme Court invalidated the honest services theory in McNally v. United States, 483 U.S. 550 (1987), Congress passed § 1346 “to reinstate the body of pre-McNally honest-services law,” which “dominantly and consistently applied the fraud statute to bribery and kickback schemes,and the Court declined to extend the reach of the honest services statute to schemes involving “undisclosed self-dealing” in the absence of a bribe or kickback, that is, to the mere “taking of official action by the employee that furthers his own undisclosed financial interests while purporting to act in the interests of those to whom he owes a fiduciary duty.” Id. at 2932 (quotations omitted).
Although the Court in Skilling confined honest services fraud to bribes and kickbacks, it did nothing to change the elements of proof required to establish a mail fraud violation based on moneyproperty fraud. Id. at 2933-34.
III. Because the Jury Instructions on Honest Services Fraud Required the Jury to Find that Ryan Took Bribes or Kickbacks, There Was No Instructional Error.
A. Bribes and Kickbacks as Described in Skilling
Skilling did not redefine bribes and kickbacks, but rather explained that those terms draw content from pre-McNally case law involving bribe and kickback schemes, as well as from federal statutes prohibiting bribes and kickbacks. Skilling, 130 S. Ct. 2933-34.8
Cases cited as examples in Skilling , as well as recent federal bribery and kickback cases, reveal three essential points.
- First, to take a bribe, a public official must receive a benefit and perform or promise to perform official acts in return. See United States v. Whitfield, 590 F.3d 325, 353 (5th Cir. 2009), cert. denied, ___S. Ct. ___ (Oct. 4, 2010); United States v. Kincaid-Chauncey, 556 F.3d 923, 943 (9th Cir. 2009); United States v. Ganim, 510 F.3d 134, 141 (2d Cir. 2007) (Sotomayor, J.); United States v. Kemp, 500 F.3d 257, 282 (3d Cir. 2007); United States v. Giles, 246 F.3d 966, 972 (7th Cir. 2001); United States v. Jennings, 160 F.3d 1006, 1014 (4th Cir. 1998). This requirement ensures that the bribe payer must get more for his money than mere access or general goodwill; he must get the promise of an official act or acts. See Kemp, 500 F.3d at 281.
- Second, it is not necessary that the bribe payer and the official express their agreement to exchange benefits for official acts in so many words. “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.” United States v. Evans, 504 U.S. 255, 274 (1992) (Kennedy, J., concurring); accord Giles, 246 F.3d at 972; Kemp, 500 F.3d at 284. Instead, an agreement may be “implied from [the official’s] words and actions.” Evans, 504 U.S. at 274; Giles, 246 F.3d at 972.
- Third, one form of bribery occurs when an official accepts a benefit and agrees in exchange to take official actions to benefit the bribe payer in the future, and in such cases the official does not need to specify those future acts at the time he takes the bribe. See, e.g., Whitfield, 590 F.3d at 349-50; Ganim, 510 F.3d at 147; Kemp, 500 F.3d at 281. In other words, there is bribery as long as there is “a course of conduct of favors and gifts flowing to a public official in exchange for a pattern of official actions favorable to the donor.” Jennings, 160 F.3d at 1014 (quotations omitted); accord Whitfield, 590 F.3d at 352-53; Ganim, 510 F.3d 147, 149; Kincaid-Chauncey, 556 F.3d at 943; Kemp, 500 F.3d at 282.9 Indeed, such schemes have been described as “some of the most pervasive and entrenched corruption in existence.” See, e.g., Ganim, 510 F.3d at 147. This “stream of benefits” theory is what the government charged and proved in Ryan’s case.
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FN8 Skilling cited two federal bribery statutes, 18 U.S.C. § 201(b) and 666(a)(2), and one kickback statute, 41 U.S.C. § 52(2). Skilling also singled out three post-McNally decisions about bribes and kickbacks. United States v. Ganim, 519 F.3d 134 (2d Cir. 2007), United States v. Whitfield, 590 F.3d 325 (5th Cir. 2009), cert. denied, ___ S. Ct. ___ (Oct. 4, 2010), and United States v. Kemp, 500 F.3d 257, 282 (3d Cir. 2007). See Skilling, 130 S. Ct. at 2934.
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Ryan’s motion devotes much attention to the argument that bribery requires a “quid pro quo.” [Emphasis added.] The case law on this issue depends on how courts define that term. In United States v. McNair, 605 F.3d 1152, 1187-88 (11th Cir. 2010), for instance, the Eleventh Circuit defined “quid pro quo” narrowly to mean “a specific payment given . . . in exchange for a specific official act,” id. at 1187, and held that because bribery does not require that each specific payment be linked to a specific official act, it does not require a “quid pro quo.” See also United States v. Gee, 432 F.3d 713, 714-15 (7th Cir. 2005) (bribery under § 666 does not require a specific “quid pro quo”); United States v. Agostino, 132 F.3d 1183, 1190 (7th Cir. 1997) (same). Similarly in Ganim, the Second Circuit held that each specific payment need not be linked to a specific official act, so long as there is an exchange of benefits for official action. Ganim, 510 F.3d at 147. However, because Ganim defined “quid pro quo” more broadly to include “an ongoing course of conduct” where “favors and gifts flow[ ] to a public official . . . in exchange for a pattern of official actions . . . ,” id. at 149, the court said that bribery requires a “quid pro quo.” The point is that, regardless of the label, bribery simply requires an exchange of benefits for official action. [Emphasis added.]
In the present case, the evidence showed that Ryan agreed to exchange benefits for official action, and such conduct clearly constitutes bribery, as that term is used in Skilling.[FN10]
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FN9 Skilling cites Whitfield, Ganim and Kemp approvingly, including the specific portions of those decisions cited here. Skilling, 130 S. Ct. at 2934.
FN10 Ryan’s motion says little about kickbacks, but the Supreme Court used the term broadly in Skilling, citing a federal statute that defines a kickback as “any money, fee, commission, credit, gift, gratuity, thing of value, or compensation of any kind which is provided, directly or indirectly, to [enumerated persons] for the purpose of improperly obtaining or rewarding favorable treatment in connection with [enumerated circumstances].” Skilling, 130 S. Ct. at 2933-34 (quoting 41 U.S.C. § 52(2)). This definition—focusing on payments made to get favorable treatment from a person who controls a source of income—is consistent with the way the Seventh Circuit has defined kickbacks. See United States v. Hickok, 77 F.3d 992, 1005 n.12 (7th Cir. 1996); United States v. Hancock, 604 F.2d 999, 1002 (7th Cir. 1979). If anything, the definition of kickbacks is broader than that of bribes.
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B. The Jury Instructions on Honest Services Fraud Required That the Jury Find Bribes or Kickbacks.
In the context of this case, the instructions provided to the jury permitted a conviction ofhonest services fraud only if the jury found that Ryan took bribes or kickbacks. The first relevant instruction stated:
A public official or employee has a duty to disclose material information to a public employer. If an official or employee conceals or knowingly fails to disclose a material personal or financial interest (also known as a conflict of interest) in a matter over which he has decision-making power, then that official or employee deprives the public of its right to the official’s or employee’s honest services, if the other elements of the mail fraud offense are met. Tr23905.
On the facts of this case, this instruction is consistent with Skilling because it permitted the jury to convict Ryan for failing to disclose a conflict of interest only if the conflict took the form of a “material personal or financial interest . . . in a matter over which [the official] has decision-making power”—which in this case, included only a bribe or kickback. For purposes of the mail fraud counts of which Ryan was convicted, the matters over which Ryan had decisionmaking power were the state contracts and leases he awarded to Warner, Klein, and Swanson.
And the only “material personal or financial interest” the jury heard that Ryan had in those matters was the stream of benefits he received in return for awarding Warner, Klein, and Swanson those contracts and leases.
Ryan did not own or have any other interest in buildings leased by the state or the companies that received state contracts, nor did he steer state business directly to himself or his own family.
Instead, the only conflict of interest a reasonable jury could have found that Ryan failed to disclose was his agreement to receive personal and financial benefits in exchange for official action—in other words, his receipt of bribes and kickbacks—and not the type of conflicts of interest that Skilling excluded from the ambit of the honest services fraud statute.
Just as importantly, the Court’s instructions to the jury required that to convict Ryan for undisclosed conflicts of interest, the jury had to find that all of the other elements of the mail fraud statute were met. The Seventh Circuit emphasized this point on direct appeal when it rejected Ryan’s attack on the portion of the instructions that related to conflicts of interest, explaining that:
The portion of the jury instructions quoted by the defendants about “conflict of interest” is taken out of context, as the jury instructions explicitly stated that a conflict of interest violated the statute only “if the other elements of the mail fraud statute are met.” The district court explained that the government must also show that the public official allowed or accepted the conflict of interest with the understanding or intent that she would perform acts within her official capacity in return. Warner, 498 F.3d at 698.
Accepting a conflict of interest or benefit with the understanding or intent to perform official acts in return constitutes taking a bribe. See supra at 15-17. Thus, in context, the conflict of interest instruction permitted the jury to find honest services fraud only if it found that Ryan took a bribe or kickback. There was no error under Skilling.
The three instructions that followed [FN11] properly defined bribes and kickbacks and, as the Seventh Circuit made clear on direct review, correctly informed the jury about the “exchange” element at the heart of a bribe and kickback scheme. Ryan waived or forfeited his right to challenge any of these instructions,12 however, even if he had not, there would be no error because individually and collectively they correctly emphasized the need to find that the scheme involved the performance of official acts in return for personal benefits. First, in an instruction that Ryan proposed, the Court instructed the jury:
The law does not require that the government identify a specific official act given in exchange for personal and financial benefits received by the public official so long as the government proves beyond a reasonable doubt that the public official accepted the personal and financial benefits with the understanding that the public official would perform or not perform acts in his official capacity in return. Tr23905-06 (quoted in part by the Seventh Circuit, Warner, 498 F.3d at 698.).
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FN 11 There was a fourth instruction that addressed bribery in the context of campaign contributions, but it is not relevant to this discussion. Tr23907-08.
FN12 Of the three instructions discussed below, Ryan proposed the first and third
instructions, them.R703:6; R703:5 (modified in court), and thus waived any challenge to them. E.g., United States v. Yu Tian Li, 615 F.3d 752 (7th Cir. 2010). Ryan failed to challenge the second instruction on direct appeal, and so any challenge is procedurally defaulted. E.g., United States v. Podhorn, 549 F.3d 552, 558 (7th Cir. 2008).
= = = = =
This instruction was accurate, and numerous courts, including three cited in Skilling, have approved similar language. See, e.g., Whitfield, 590 F.3d at 353; Ganim, 510 F.3d at 144; Kemp, 500 F.3d at 281-82. Ryan’s only quibble with the instruction is that it focuses on the understanding of the public official, not on “whether two parties had agreed to an exchange.” Mot23. But his § 2255 motion omits the second half of the instruction, which requires the same understanding on the part of the bribe-payer. See Tr23906.13 More importantly, the law is clear that a public official’s “intent to perform an act in exchange for a benefit” is sufficient to show the official took a bribe. Ganim, 510 F.3d at 147. For example, the solicitation of a bribe from an unwilling payer or from an undercover agent, neither of whom “agreed” to the exchange, would constitute a bribery scheme.
The next instruction stated:
A benefit or benefits received by a defendant or given by a defendant with the intent that such benefit or benefits would ensure favorable official action when necessary can be sufficient to establish the defendant’s intent to defraud the public of its right to honest services. You need not find that such a benefit was conferred or received in exchange for a specific official action. Tr23906. This instruction also accurately states the law—before and after Skilling. Ryan asserts, without authority, that “[a]n intent to ensure favorable action when necessary is not enough.” Mot24n.15.
For decades, courts, including courts cited as paradigmatic bribery and kickback cases in Skilling, have held otherwise. See United States v. Isaacs, 493 F.2d 1124, 1145 (7th Cir. 1974) (“There is bribery if the offer is made with intent that the offeree act favorably to the offeror when necessary.”); accord United States v. Abbey, 560 F.3d 513, 518 (6th Cir. 2009); Kinkaid-Chauncey, 556 F.3d at 943 & n.943; Kemp, 500 F.3d at 282; Jennings, 160 F.3d at 1014; United States v. Arthur, 544 F.2d 730 (4th Cir. 1976).
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[FN13] The second half of the instruction provided: “Likewise, the law does not require that the government identify a specific official act given in exchange for personal and financial benefits received by the public official so long as the government proves beyond a reasonable doubt that the personal and financial benefits were given with the understanding that the public official would perform or not perform acts in his official capacity in return.”
= = = = =
The third instruction—another of Ryan’s proposals—stated that to prove a mail fraud violation, it is not enough that a public official received benefits from a person who has business with the state and that, instead, “that receipt violates the law only if the benefit was received with the public official’s understanding that it was given to influence his decision-making.” Tr23906-07.
Ryan does not explain why this instruction is incorrect, especially when read in light of the instruction cited above requiring that the “public official accepted the personal and financial benefits with the understanding that the public official would perform or not perform acts in his official capacity in return.” Tr23906. Contrary to Ryan’s contentions, this instruction passes muster under Skilling.
Finally, the Court instructed the jury about certain provisions of Illinois law. Tr23908-11.
Ryan claims a violation of state law can never form the basis for an honest services fraud conviction, Mot25, but Skilling did not so hold. Skilling acknowledged a circuit conflict on the issue, and did not resolve the conflict. 130 S. Ct. at 2928 n.37. In any event, this is a non-issue for several reasons. First, as the Seventh Circuit noted on direct appeal, the instructions made clear that
“[n]ot every instance of misconduct or violation of a state statute by a public official or employee constitutes a mail fraud violation,”
Tr23908, 23911, and that, to the contrary, an official or employee defrauds the public of his honest services only “[w]here a public official or employee misuses his official position . . . for private gain for himself or another,” “and the other elements of the mail fraud offense have been met,” Tr23911 (emphasis added). And, in discussing the conflict-of-interest provision, the Seventh Circuit explained, the required showing that “the other elements of the mail fraud statute have been met” meant that the official must accept a benefit for private gain “with the understanding or intent that [he will] perform acts within [his] official capacity in return.” Warner, 498 F.3d at 698.
In other words, the instructions required a bribe, particularly in the context of the evidence, which established that the private gain at issue was limited to benefits given to Ryan in exchange for Ryan’s steering of valuable contracts and leases. Moreover, as the Seventh Circuit noted:
[m]any of the state law provisions in the instructions explained what kinds of
financial transactions are not prohibited for state officials. This explanation was
more likely to undermine than to assist the prosecution in showing the defendants’ intent to deprive Illinois citizens of Ryan’s honest services.
Warner, 498 F.3d at 698.
Thus, the instructions emphatically did not permit the jury to convict based
on something other than a bribe or kickback scheme.
Accordingly, in order to find that Ryan committed honest services fraud in this case, the instructions, read as a whole and in the context of the evidence, required the jury to find that Ryan took bribes and kickbacks. There is no instructional error here, and therefore no error at all.
IV. Even if There Were Instructional Error Here, a Properly Instructed Jury Would Have Reached the Same Result, In Light of the Overwhelming Evidence Showing that Ryan Took Bribes and Kickbacks.
Even if this Court were to conclude that the honest services instructions permitted the jury to convict Ryan for actions that did not involve the taking of bribes and kickbacks, the instructional error would be harmless. In light of the evidence, a properly instructed jury would have found that Ryan took bribes and kickbacks because the evidence that he did so was overwhelming. Thus, Ryan suffered no actual prejudice. See Brecht, 507 U.S. at 637-38.
A. The Evidence Established Bribes and Kickbacks.
The indictment charged, and the evidence proved, that Ryan took bribes in the form of a stream of benefits from Warner, Klein and Swanson with respect to each count of honest services mail fraud of which Ryan was convicted. In the face of this evidence, Ryan attempts to define bribes and kickbacks so narrowly that little more than an express agreement to trade a particular sum of cash for a particular official action would ever qualify. The law provides no support for Ryan’s cramped definition of bribery.
1. The Currency Exchange and South Holland Bribes
For years, Ryan enjoyed free lodging at Klein’s Jamaican villa, gifts Ryan lied about on his disclosure forms and actively concealed through the secret cash-back arrangement. In 1995, while Klein and Ryan were relaxing at Klein’s villa in Jamaica, Klein asked Ryan for favorable official action in the form of a fee increase for currency exchanges.
Ryan later agreed, even though he had opposed a fee increase for years. As the government reminded the jury in its rebuttal argument, Ryan’s change of heart occurred “right after a trip to Jamaica.” Tr23714.
During a later vacation at Klein’s villa in Jamaica, Klein told Ryan that Klein wanted to lease his building in South Holland to the SOS, and when Ryan returned from the trip, he made that happen. Ryan caused the SOS to cancel a less-expensive lease and move to Klein’s ill-suited property without considering other locations, directed his subordinate to agree to Klein’s lease terms, and told his chief of staff he wanted to make Klein “happy.”
Ryan personally signed the lease, giving Klein $600,000 in lease payments over five years. As the government argued to the jury, the $13,000 in cash-back that Klein paid Ryan in Jamaica over the years was a striking example of the “corrupt payments” that Ryan took in return for state action. Tr23085; see also Tr23708.
Ryan’s motion argues there was no bribe because four years passed between Ryan’s first vacation in Jamaica and the lease signing, Mot18, but Klein’s benefits to Ryan were ongoing—Ryan vacationed in Jamaica for free every year, including the year he awarded Klein the lease.
And contrary to Ryan’s assertion, there is nothing “extraordinary” about years passing between a bribe and the payoff. In Whitfield, a case the Supreme Court cited favorably in Skilling, an attorney secured a state court judge a favorable loan, which the judge did not list on his disclosure forms. Whitfield, 590 F.3d at 336. After the attorney arranged the loan, he filed a personal injury lawsuit, and over a year later, the judge assigned the case to himself. Id. Nearly a year and a half after that, the judge ruled for the lawyer’s client, awarding him millions of dollars in damages. Id.
The Fifth Circuit affirmed the honest-services bribery convictions of both defendants without hesitation, despite the passage of time, and even though the lawyer and the judge never expressly agreed to trade the loan for the legal ruling at the time the loan was made. Id. at 373. See also Abbey, 560 F.3d at 515-16 (affirming bribery conviction of developer who gave city administrator a free subdivision lot in exchange for favorable consideration in the future; one year later the administrator pushed for developer to receive funding through municipal bonds, resulting in hundreds of thousands of dollars in payments).
2. The Warner Bribes and Kickbacks
Ryan awarded Warner contracts and leases in return for the many times Warner “took care” of Ryan through financial favors to Ryan, his family, and friends. Warner’s relationship with Ryan epitomizes a stream of benefits given in exchange for a serious of favorable official acts. Warner usually was not buying any one specific action; the benefits Warner gave Ryan, his family, and friends, served to keep Ryan on “retainer,” so that when opportunities arose, Ryan used his influence to favor Warner. See Kincaid-Chauncey, 556 F.3d at 943& n.15; Abbey, 560 F.3d at 518.
In this respect, Ryan’s relationship with Warner was similar to that between the defendants in Kemp, a case Skilling cited with approval. In Kemp, the Third Circuit affirmed the defendants’ convictions of honest services fraud based on bribery, concluding that bank executives gave a city treasurer benefits such as loans to the treasurer’s friends and family members who had “shaky credit.” Kemp, 500 F.3d at 284-85. This was similar to the way Warner, among other benefits,
- loaned $145,000 to Ryan’s brother’s financially unstable company, Comguard, and
- invested $6,000 to Ryan’s son’s company. Gx08-087-89,09-001,09-002,09-020,09-500. In Kemp, the city treasurer,
in exchange for the loans, rigged bids to ensure that the executives’ bank got a lucrative government contract, Kemp, 500 F.3d at 269, much as Ryan overruled his subordinate to make sure Warner’s client ADM kept the lucrative sticker contract, Tr8140-46, steered a state contract to Viisage because Warner was its lobbyist (though Warner concealed that fact), Tr13206, Tr3102-04; Gx03-020, 03-023, 03-009, and caused the SOS to relocate to buildings Warner owned in order to benefit Warner. Tr16954, 7822-24, 2804-05, 10463; Gx07-011, 07-500, 07-501, 07-502.
The court in Kemp had no difficulty finding that the city treasurer took bribes, relying on the
same stream of benefits theory the government pursued at Ryan’s trial. 500 F.3d at 281-82. Among other things, the court noted that on one occasion when a bank executive agreed to waive an appraisal fee for a loan the treasurer wanted approved, the treasurer told the executive, “you are my f–king guy. . . . So you get special treatment.” Id. at 286.
Similarly, when Warner recruited Ryan’s friend Udstuen to join Warner’s effort to make money from their relationship with Ryan by entering the lobbying business, Warner told Udstuen that no one had done more for Ryan than Udstuen, and that Warner would “take care of George,” Tr11620-22, thereby drawing a direct link between the benefits Warner and Udstuen gave Ryan, and the money Warner and Udstuen would make after Ryan steered them state business.14 The court in Kemp emphasized that the bank executives, like Warner, did in fact get special treatment, with the treasurer rigging bids for a city contract to ensure the bank got it. Id. at 286. From this “course of conduct,” the court held, the jury could conclude that the treasurer, like Ryan, agreed to take official action in exchange for the benefits he received. Id.
In addition to bribes, Warner’s Viisage contract also involved at least two instances of kickbacks. Months before the bidding process began, Ryan told Warner to cut Ryan’s friend Swanson in on the deal, and Warner eventually paid Swanson $36,000 for no work. The government highlighted this as another example of Ryan’s “corrupt payments,” telling the jury,
“When George Ryan directed Warner to give a piece of the Viisage lobbying fee to [Ryan’s] good friend Ron Swanson, that was the equivalent of him claiming a piece of those fees for himself.” Tr23085.
In addition, five days after landing the Viisage contract, which earned him over $800,000, Warner wrote Ryan a blank check, which Ryan used to pay the band at his daughter’s wedding.
The proximity between the award of the contract and Warner’s payment to Ryan is evidence the two were linked, see Giles, 246 F.3d at 973; Jennings, 160 F.3d at 1018, as is Warner’s use of a front man to conceal that he was the one getting paid as Viisage’s lobbyist. See Jennings, 160 F.3d at 1018.
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FN14 To take another example, when Ryan was asked about disputed terms in the lease with Klein, he replied, “What does Harry want?” and told Fawell he wanted “Harry to be happy.” Tr2870,6578-80.
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The ADM and IBM contracts also involved kickbacks—this time to Ryan’s friend Udstuen.
With Ryan’s approval, Warner gave Udsteun a cut of Warner’s fees on the contracts, totaling about a third of the money Warner made, even though Udsteun did little or no work. These kickbacks to Ryan’s friend are no different than kickbacks to Ryan himself. Cf. Ganim, 510 F.3d at 138-39 (affirming honest services conviction of mayor who agreed to kickback of one-third of fees earned on city contracts he awarded).
3. The Swanson Bribes
Swanson’s bribes were similar—Ryan awarded Swanson lucrative leases and contracts soon after Swanson paid for vacations for Ryan and his daughter. The $2,200 Swanson paid so Ryan’s daughter could go to Disney World netted Swanson a lobbying contract worth $180,000 for no work, showing, as the government explained to the jury, that “Ryan is willing to sell his office in order to give a government benefit to the friend who buys that vacation.” Tr23805, 23807-08. After Swanson paid for Ryan’s vacation in Cancun, Ryan ordered his subordinates to give Swanson the Lincoln Towers lease for which the state paid well above market rate. As the government told the jury, the state paid Swanson
“for one reason: Because Ron Swanson got in George Ryan’s office, and George Ryan just got back from Cancun with Ron Swanson.” Tr23783.
Ryan does not dispute that over the course of many years, his benefactors gave him a stream of benefits, or that Ryan gave a stream of state business to his benefactors. Nevertheless, Ryan argues
he did not take bribes and kickbacks because, he claims, he and his benefactors never agreed that the benefits were in exchange for state business.
The jury heard ample evidence permitting it to reject this claim. Viewing the evidence in a light most favorable to the government, as is required, the evidence clearly showed that Ryan’s relationship with Warner, Klein, and Swanson was a classic arrangement of “I’ll scratch your back if you scratch mine,” see Jennings, 160 F.3d at 1014, in which people “with continuing and long-term interests” in matters under Ryan’s control, gave Ryan numerous benefits “to coax ongoing favorable official action.” United States v. Sawyer, 85 F.3d 713, 730 (1st Cir. 1996). See also United States v. Woodward, 149 F.3d 46, 55 (1st Cir. 1998)
(affirming honest services bribery conviction of state representative who took years worth of undisclosed free meals, rounds of golf, and other payments from a lobbyist and friend, and in return repeatedly ruled in the lobbyists’s favor).
The Seventh Circuit has joined many others in calling conduct like Ryan’s bribery. In United States v. Martin, 195 F.3d 961 (7th Cir. 1999), for example, a contractor, mimicking the actions of Warner, Klein, and Swanson, “showered” a state official with gifts worth thousands of dollars, including upgraded airline tickets, trips, and money to spend at casinos. Id. at 964-65.
The official, like Ryan, failed to disclose any of the gifts, as he was required to do by department regulations. Id. What the official did do was make recommendations and prepare misleading cost estimates that allowed the contractor to be awarded a lucrative contract on favorable terms, costing
the state money and lining the contractor’s pockets. Id. at 964-65.
The Seventh Circuit held that the official’s “guilt of receiving bribes is not open to serious doubt,” and that he accepted the gifts intending to be influenced in connection with his official acts, in violation of 18 U.S.C. § 666—one
of the statutes Skilling cites as helpful in defining bribery in the honest services context. See Martin, 195 F.3d at 965.
In United States v. Gorny, 732 F.2d 597 (7th Cir. 1984), a pre-McNally bribery case, the Seventh Circuit affirmed the mail fraud conviction of a deputy commissioner on the Cook County board of tax appeals who took cash payments from lawyers who appeared before him, and failed to disclose those payments on his statements of economic interest. Gorny, 732 F.2d at 599-600. Even
though none of the cash payments were “linked directly to any action on a particular real estate assessment file,” the people who paid bribes “enjoyed an unusually high rate of success in their practice before the Board.” Id. at 600.
In light of this circumstantial evidence of a stream-of-benefits agreement, and the testimony of several bribe payers who said they paid the money intending to receive some favorable treatment in exchange, the Court concluded that sufficient
evidence had been presented to establish that the defendant accepted the payments intending to be influenced by them. Id. at 601.
Just so here.
B. The Government Argued to the Jury that Ryan Took Bribes and Kickbacks.
As outlined above, the government argued that Ryan exchanged official action for the benefits he received from Warner, Klein, and Swanson—in the government’s words, that Ryan “sold his office” in return for “corrupt payments.” Tr23084-85, 23817-18, 23809, 23826. The government explained Ryan’s bribes and kickbacks using the stream-of-benefits theory courts repeatedly have approved. As the government argued, “the flow of benefits, when Ryan received, referred, and advocated for these financial benefits and then took some action to benefit those who had provided the benefits to him or his family, he was, in essence, selling his office brick by brick.” Tr22971; see also Tr22836.
The government told the jury:
C “George Ryan actively perverted the decision-making process to tilt the gain in favor of his friends who were taking care of him and his family. And that is not politics, ladies and gentlemen. That’s a crime.” Tr23100.
C Ryan “decided that the benefits of his public office were his to give out like candy to Larry Warner and to other friends of his who at the same time were giving him and his family financial benefits and gifts.” Tr23140.
C “Warner hit the jackpot during George Ryan’s terms as secretary of state and as governor . . . $3 million in total benefits,” and Warner, in turn, “did a very nice job of taking care of George Ryan.” Tr22835.
Ryan’s motion notes correctly that more than once, the government told the jury it did not have to find a “quid pro quo.” Tr22956-58, 23083-84, 23763-64, 23817-18. But, as is clear from the context of those statements, the government was simply arguing, correctly, that in order to convict Ryan, the jury did not have to find that Ryan had a conversation in which he expressly agreed to accept a specific benefit in exchange for a specific official act.
Instead, the government emphasized that Ryan received benefits from Warner, Klein, and Swanson over many years, and in return, Ryan took official action for these benefactors as opportunities arose. The government made this point several times, perhaps most clearly in its initial closing argument:
[Ryan] did not make announcements or press releases when Warner, Swanson, or Klein gave him or his family something in order to influence his decision-making.
The loans, the vacations, the other benefits did not come in packages with bright red lettering that said, “This is to influence you.”
Most importantly, keep in mind that this is not a case in which a public official had a specific price for each official act that he did, like a menu in a restaurant where you pick an item and it has a particular price. The type of corruption here—that type of corruption where you give me this, I will give you that, is often referred to as a quid pro quo.
The corruption here was more like a meal plan in which you don’t pay for each item on the menu. Rather, there is a cost that you pay, an ongoing cost, and you get your meals. Tr22852-53.
This, in a nutshell, is the stream of benefits theory of bribes and kickbacks, one that courts—including courts cited favorably in Skilling—repeatedly have approved. See supra at 16-17.
C. In Light of the Evidence and the Government’s Arguments, a Reasonable Jury, Properly Instructed, Would Have Found that Ryan Took Bribes and Kickbacks.
Three features of Ryan’s scheme, as alleged in the indictment and proved by the evidence, make it particularly clear that a properly instructed jury would have convicted Ryan of taking bribes.
First, Ryan, Warner, Swanson, and Klein carefully concealed what they were doing. These “elaborate efforts at concealment provide powerful evidence” of Ryan’s consciousness of guilt, see United States v. Dial, 757 F.2d 163, 170 (7th Cir. 1985), and powerful evidence that Ryan hid his transactions precisely because he was awarding friends in exchange for the benefits they gave him.
Second, as the government emphasized to the jury during rebuttal, Ryan was not the type of friend who did favors for Warner, Klein, and Swanson other than giving them state business. Ryan did not pay for Warner, Klein, and Swanson to go on vacations, invest in their relatives’ companies, or write checks to their families. Tr23763-64. These men did not do favors for Ryan because he
reciprocated in kind; they did favors for him because Ryan awarded them state contracts and leases worth millions of dollars. See Woodward, 149 F.3d at 58. Finally, Warner, Klein, and Swanson did not seek mere general goodwill, they sought specific official actions—leases, contracts, currency exchange rates—and it was in exchange for these things that they “took care” of Ryan.
In light of the evidence presented by the government at trial, there is no basis for “grave doubt” concerning whether the jury convicted Ryan only of conduct that does not constitute a crime after Skilling. See O’Neal, 513 U.S. at 435. If properly instructed, any reasonable jury would have convicted Ryan of taking bribes and kickbacks.
V. The Jury Necessarily Concluded that Ryan Committed Money-Property Fraud.
The Court should deny Ryan’s motion for a third reason. Even if the jury convicted Ryan of honest services fraud based on undisclosed conflicts of interest that did not involve taking bribes and kickbacks, the jury must have also concluded that Ryan committed money-property fraud, and so any error resulting from the honest services instructions is harmless. [FN15] [FN13]
On direct appeal, Ryan raised no claims relating to money-property fraud, and any such claims are procedurally defaulted. Ryan’s § 2255 motion likewise fails to raise such a claim.
A. Post-McNally Money-Property Cases
After the Supreme Court invalidated the honest services theory in McNally, numerous appellate court decisions affirmed mail fraud convictions and found that erroneous jury instructions on the honest services theory were harmless because the government proved a valid money-property theory. See, e.g., Moore v. United States, 865 F.2d 149, 153-54 (7th Cir. 1989); United States v. Asher, 854 F.2d 1483, 1496 (3d Cir. 1988); United States v. Perholtz, 836 F.2d 554, 558-59 (D.C. Cir. 1987). While courts generally overturned convictions that were “based entirely on the intangible rights theory,” courts affirmed convictions, such as Ryan’s, where the “bottom line of the scheme or artifice to defraud had the inevitable result of effecting monetary or property losses to the . . . state.” Asher, 854 F.2d at 1490, 1494; see also Messinger v. United States, 872 F.2d 217, 222 (7th Cir. 1989); United States v. Saks, 964 F.2d 1514, 1521 (5th Cir. 1992). In judging whether an error was harmless, courts looked to the trial as a whole, including the indictment, the evidence, the arguments, and the jury instructions. See Messinger, 872 F.2d at 221; Perholtz, 836 F.2d at 559.
The same harmless error analysis applies here.
B. The Indictment Charged a Single Scheme that Included Money-Property Fraud.
The indictment alleged that Ryan devised and participated in one scheme “to defraud the people of the State of Illinois, and the State of Illinois, of money, property, and the intangible right to honest services. . . .” R110:19. Counts Two through Eight alleged specific mailings of state money, or money derived from state contracts, in furtherance of the single scheme. Id. at 59-65.
That the scheme involved money and property is central to the indictment’s allegations: the indictment describes numerous state contracts and leases that were the objects of the fraud. See, e.g., R110:19-21 (referring to “contracts” and “real property lease[s]”).
C. The Evidence Established a Single Scheme that Included Money-Property Fraud.
The elements of mail fraud are a scheme to defraud, intent to defraud, and use of the mail. United States v. Sorich, 523 F.3d 702, 708 (7th Cir. 2008). “A scheme to defraud requires the making of a false statement or material isrepresentation, or the concealment of [a] material fact.” United States v. Powell, 576 F.3d 482, 490 (7th Cir. 2009) (quotations omitted). “A failure to disclose information may constitute fraud if the omission [is] accompanied by acts of concealment.” Id. at 491.
For money-property fraud, the scheme must also have “a substantial potential” to deprive someone of money or property, which includes state contract and leases. United States v. Barber, 881 F.2d 345, 349 (7th Cir. 1989); Sorich, 523 F.3d at 713; United States v. Leahy, 464 F.3d 773, 788 (7th Cir. 2006). At trial, the same evidence that supported the honest services fraud theory based on undisclosed conflicts of interest also established the elements of money-property fraud.
1. South Holland Lease Steered to Klein
The South Holland lease resulted in $600,000 of state money going into Klein’s pockets over five years. Tr.6289-91; Gx11-001. At the same time Ryan obtained state money for Klein, Ryan used the false paper trail from the cash-back arrangement to hide the free lodging Klein gave him. In its closing argument, the government correctly called this a “sham transaction.” Tr22906.
As the government also pointed out during closing, during this same period, Ryan lied on his annual statements of economic interest by failing to disclose these gifts from Klein, as Illinois law required. Gx28-012; Tr22918-20. Later, Ryan lied to the FBI, claiming he paid his own way in Jamaica, and producing the bogus checks as proof. Tr18143-49; Gx10-013.
Ryan did not just obtain state money for Klein through fraud, he caused actual loss to the state. Ryan let Klein decide disputed lease terms, telling Fawell he wanted “Harry to be happy.” Tr2870, 6578-80; Gx01-006. Making Harry happy meant the state lost money, paying $173,000 more for Klein’s lease than it had for the previous lease. Tr.6289-9111036; Gx11-001.
2. Contracts and Leases Steered to Warner
a. Bellwood and Joliet Leases
Warner pocketed hundreds of thousands of dollars of state money on the Bellwood and Joliet leases, and both leases were accompanied by acts of concealment and misrepresentations. On the Bellwood lease, Warner assured Ryan and Fawell that the press would never find out about Warner’s interest, because Warner’s name was “buried in paperwork.” Tr2772-73, 2774. Warner concealed his interest in the property until after Ryan signed the lease in the spring of 1993, and then allowed his interest to surface through various transactions. Tr16950-51, 16954; Gx07-011, 07-501, 07-502. Warner did the same for the Joliet lease, again telling Fawell that his interest was buried in paperwork, and again hiding his interest until after Ryan awarded the lease. Tr2812, 3005, Gx06-500. In its closing argument, the government told the jury these leases were filled with “concealment and deceit.” Tr22922.
Both leases resulted in a loss to the state. The state paid above market rate for the Bellwood property, for a total of about $246,583 for the first five years. Tr11045,11399 For the Joliet property, the state overpaid by about $296,485. Tr11021. When Warner’s role in the Joliet lease ultimately became public, Warner told Udstuen he never should have done the lease because it was “too good a deal.” Tr11727.
b. Viisage Contract
In 1996, Ryan awarded Viisage, one of Warner’s clients, a contract for $20 million in state money, again using concealment and misrepresentations. As the government’s closing argument pointed out to the jury, Warner actively concealed his role as a lobbyist for Viisage by failing to register as a lobbyist, and by using a front man whose name went on the paperwork. Tr23009, 13206; Gx03-015, 03-016, 03-020, 03-023, 04-045. It was only after Viisage won the contract that Warner removed the front man and had the lobbying arrangement transferred to his company, raking in $834,000 in fees. Tr3103-04, 16923-25; Gx03-500, 03-501. Ryan knew Warner had an interest in the contract from the start.
Indeed, before the bidding process even began, Ryan told Warner to cut Swanson in on the Viisage deal, and Warner promised Swanson $36,000 on a contract Viisage hadn’t been awarded yet. Tr3102-04; Gx03-009. Five days after Ryan steered the contract to Warner, Warner wrote Ryan a blank check, which Ryan made out for over $3,000 to pay the band at his daughter’s wedding. Gx23-003. Ryan lied on his statements of economic interest by not disclosing this benefit, as well as other benefits Warner gave to Ryan and his family. Gx28-012.
c. ADM and IBM Contracts
In 1991, Warner leveraged his access to Ryan and convinced ADM to hire him as a lobbyist to ensure that ADM would keep a lucrative contract for license plate stickers. Tr8032-33, 8064, 8067-68, 8112-13, 11637. ADM paid Warner between $2,000 and $5,000 every month to keep the contract. Gx02-004, 02-005, 02-015, 02-500, 02-501. In 1993, an official at SOS decided it was in the state’s best interest to eliminate ADM’s security mark, which may have cost ADM the
contract, but an angry Warner told the official Warner would “take care of it.” Tr8140-44. A few days later, Ryan told the official to quietly retract his proposal, and asserted—falsely—that the security mark was necessary for public safety. Tr8140-44, 9143-46. The official retracted his proposal, even though he believed doing so was against the state’s best interests, and in this way, ADM continued to receive state money from 1991 to 1999, and Warner continued to be enriched as ADM’s lobbyist. Tr8143-47, 2801.
In 1996, Ryan allowed Warner and Udstuen to rig the bidding on a computer mainframe contract by allowing them to choose the director of the SOS department who dealt with mainframe issues. Tr12526. Warner and Udstuen specifically picked a director who had expressed support for giving the contract to IBM, a Warner client. Tr12528-29
The official did, in fact, award IBM the $26 million mainframe contract, and Warner received $1 million in fees from IBM, most of which was contingent on IBM landing the contract. Tr3125,12541,12931,12981-87;Gx04-043,04-014,04-021.
Warner gave about one-third of these fees to Udstuen, who never registered as IBM’s lobbyist and was, in fact, unknown to IBM.
During the same time period the state paid money to ADM and IBM on these contracts, Warner gave a number of financial benefits to Ryan and Ryan’s family. In 1994 and again in 1997, Warner loaned a total of $145,000 to Comguard, Ryan’s brother’s financially unstable company. Tr10677, 17243-49; Gx09-020, 09-008, 09-500, 09-501.
Also in 1997, Warner provided a slew of benefits, including waiving a $1,000 insurance adjustment fee Ryan owed, waiving an insurance adjustment fee for Ryan’s son-in-law, giving the same son-in-law a $5000 loan, and making a $6,000 investment in Ryan’s son’s company. Tr15515-19,17092-118,15157-63, 17088-91; Gx32-001,32-004,22-004,22-005,08-087-89. Ryan reported none of these benefits on his disclosure statements. Gx28-012.
The actions of Ryan and his co-schemers, summarized above, were part of a scheme to defraud the state of money and property. The government proved that Ryan and his co-schemers did not merely fail to disclose a conflict, they actively concealed and misrepresented material facts about the benefits he received and the benefits he provided. Each misrepresentation arose in a single context:
Ryan awarding a state contract or lease to one of his benefactors. In that context, Ryan “directly targeted [the state’s] coffers and its position as a contracting party.” Leahy, 464 F3d at 788.
Ryan and his co-schemers obtained this state money under false pretenses, by lying or concealing material information.
In some cases, such as the Bellwood and Joliet leases and the Viisage contract, Ryan or his co-schemer Warner took active steps to conceal that Warner was the person receiving state money, by “burying Warner’s name in paperwork” and using front men to appear on documents—the type of “acts of concealment” that constitute fraud. See Powell, 576 F.3d at 491 (involving failure to disclose information plus active concealment in the form of forged signatures).
In other cases, such as the ADM contract, Ryan made misrepresentations by lying to state officials about why he was acting to preserve ADM’s contract, claiming that it was for security reasons, when in fact it was to ensure that Warner could keep getting rich on a state contract.
For the South Holland lease and the Viisage deal, Ryan lied on his disclosure statements by failing to report Klein’s free Jamaican vacations and Warner’s blank check for the wedding band. And for all of Warner’s contracts and leases, Ryan lied on his disclosure statements by failing to report any of the benefits Warner gave Ryan and his family, benefits the government argued, and the jury was entitled to conclude, were in fact benefits to Ryan himself. Tr22967-69.
The acts of concealment and misrepresentations by Ryan, Warner, and Klein were material because the state would have wanted to know, and was entitled to know, who was receiving state money, why they were receiving it, and whether the recipient had showered Ryan with personal and financial benefits. See United States v. Bush, 522 F.2d 641, 647 (7th Cir. 1975).
If Ryan had truthfully disclosed this information, it would have been capable of influencing the state when the state decided whether to award the contracts and leases to Warner and Klein in the first place, and whether to continue the contracts and leases over the course of several years.
Indeed, it is precisely because such information is capable of influencing the state that Illinois requires its public officials to file annual statements of economic interests. See Bush, 522 F.2d at 645, 647-48 (false statements of economic interests are material misrepresentations).
The state might have decided it did not want to award a contract or lease to someone who had benefitted Ryan, or that the state wanted different terms for the contracts and leases than the terms Ryan permitted.
By depriving the state of this information, Ryan obtained state money “through false pretenses,” that is, active concealment and material misrepresentations, and engaged in a scheme to defraud the state of money. See Leahy, 464 F.3d at 788; United States v. Lack, 129 F.3d 403, 406 (7th Cir. 1997).
Ryan’s fraud cost the state hundreds of thousands of dollars on the South Holland, Bellwood, and Joliet leases.
On the ADM stickers contract, Ryan caused the state to continue to pay ADM for a contract based on specifications that the relevant state official no longer believed were in the state’s best interest.
The Viisage and IBM contracts were essentially no-bid contracts in which Ryan picked, or allowed Warner to pick, one of Warner’s clients to receive the contract. Whether or not Ryan caused the state actual loss on these contracts, he exposed the state to a substantial risk of loss, which is all the mail fraud statute requires. Barber, 881 F.2d at 349; see also United States v. Riley, No. 08-3758, 08-3759, 2010 WL 3584066, at *10 (3d Cir. Sept. 16, 2010); United States v. Welch, 327 F.3d. 1081, 1108 (10th Cir. 2003).
Here, the risk of loss was inherent in the scheme. Ryan awarded the contracts to Warner’s clients because they were Warner’s clients—as the ADM example makes clear, Ryan was less interested in whether the deal was in the state’s best interests.
Even if by chance the contracts were favorable to Illinois, Ryan deprived the state of the chance to make a better deal, or the best deal possible, because he awarded state business based on what was best for Warner and himself, by making misrepresentations and actively concealing information. See Bush, 522 F.2d at 648; see also Riley, 2010 WL 3584066, at *10.
D. The Government Argued, and the Court Properly Instructed the Jury, Concerning Money-Property Fraud.
The government argued the money-property fraud scheme to the jury, explaining,
“When you are given – when you are stealing from the state, people’s resources, that’s property. That’s money. You can’t do that and lie about it, and there is a mailing in furtherance of it. That’s money or property.” Tr23771.
The prosecution used various formulations, but the argument was the same:
Ryan and his co-schemers obtained state money by awarding contracts and leases, while concealing or misrepresenting various facts about the transactions.
The government marshaled the same evidence to argue that Ryan both failed to disclose conflicts of interest, and defrauded the state of money and property.
For example, the government’s initial closing argument described
“the core of the case” as Ryan violating his duty to provide honest services by “giving state benefits, like contracts and leases to his friends . . . while at the same time they were providing various undisclosed financial benefits to him. . . .” Tr22836.
Later, the government explained that
Ryan’s friends gave him things of value “at the same time that Ryan was giving them government money in the form of leases.” Tr22851-52.
And whether discussing Ryan’s failure to disclose conflicts of interest or Ryan’s fraud involving state money, the
prosecutors zeroed in on the concealment and
misrepresentations of Ryan, Warner, and Klein, arguing that Ryan concealed benefits on his disclosure forms, Tr22958, 22967, and that “concealing is fraud.” Tr 23757.
The government also made clear the scheme was not just about an intangible right to honest services, but that the state was defrauded of “tangible things,” such as the South Holland, Joliet, and Bellwood leases, and the ADM sticker contract for which there was no competition. Tr23099.
The government emphasized the loss to the state, explaining that the state was “ripped off” for $173,000 for the South Holland lease, Tr22914, and that “Warner, Swanson, Klein take in thousands and thousands of dollars on these leases. The state was a loser . . . where the state moved out of one location, where they were paying less, moved into another Ryan-picked location, where they end up paying more, costing the taxpayers money.” Tr22892-93.
Finally, unlike in some cases where courts have found harmless error even when the judge gave no instruction on money-property fraud, see Moore, 865 F.2d at 153-54; United States v. Doherty, 867 F.2d 47 (1st Cir. 1989) (Breyer, J.), this Court properly instructed the jury on the money-property theory. Tr23902-03. The Court also informed the jury that the money-property fraud was part of “a single scheme to defraud.” Tr23903.
E. The Jury Must Have Convicted Ryan of Money-Property Fraud.
This case was not “based entirely on the intangible rights theory,” but is one where the “bottom line of the scheme or artifice to defraud had the inevitable result of effecting monetary or property losses to the . . . state.” Asher, 854 F.2d at 1490, 1494.
As described above, the evidence and arguments that Ryan failed to disclose conflicts of interest and that Ryan and his co-schemers defrauded the state of money were identical. Any reasonable jury that convicted on the former basis must also have convicted on the latter.
The Seventh Circuit has found harmless error in similar cases where money-property fraud was inherent in the scheme, even where the jury was only instructed on an intangible rights theory.
In Moore, for example, the Seventh Circuit found the failure to give a money-property instruction was harmless, concluding that, as here, the government “plainly lost money or property as a result of the proven bid-rigging scheme,” and the jury “could not have found a scheme to defraud [the government] of its intangible rights separate from a criminal scheme to obtain money or property by the bid rigging charged and shown.” 865 F.2d at 153-54.
See also Asher, 854 F.2d at 1495-96 (finding harmless error where scheme involved award of no-bid contract in exchange for a bribe, resulting in “a substantially greater cost to the Commonwealth than a contract obtained through traditional competitive bidding.”); Perholz, 836 F.2d at 558 (finding harmless error where kickback scheme caused the government to overpay for a subcontract).
Since, on the facts presented, if the jury found Ryan guilty of honest services fraud they necessarily found him guilty of money-property fraud, Ryan suffered no prejudice.
VI. A Properly Instructed Jury Would Have Convicted Ryan of Money-Property Fraud.
Even if the Court finds that the honest services and money-property frauds were not so closely intertwined, there is a final basis to deny Ryan’s motion. Any jury that was instructed solely on the valid theory of money-property fraud would have convicted Ryan of that crime because the evidence that Ryan committed money-property fraud was overwhelming. Therefore, any errors in the honest services instructions could not possibly have prejudiced Ryan The South Holland lease provides the clearest example.
There is no question that Ryan
- obtained state money through false pretenses,
- by awarding the lease to Klein,
- actively concealing the free vacations Klein had given Ryan through the cash-back arrangement, and
- lying on his disclosure forms by not listing those free vacations,
resulting in a state lease for a property with serious drawbacks that cost the state $173,000 more than the previous location. These actions deprived the state of money through fraud.
Because of this evidence, and the evidence related to the other contracts and leases, any
reasonable jury properly instructed solely on money-property fraud would have convicted Ryan.
Therefore, the honest services instructions did not affect the verdict, and Ryan’s convictions and sentence should stand.
VII. Skilling Provides No Basis for Finding Prejudice Based on the Evidence Admitted at Trial.
Finally, Ryan complains about several pieces of evidence he claims are inadmissible in light
of Skilling. Mot15-16. Because all of the evidence was admissible even without a mail fraud theory based on undisclosed conflicts of interest, Skilling has no effect on the admissibility of this evidence. See Riley, 2010 WL 3584066, at *7; United States v. Prosperi, 201 F.3d 1335, 1345 (11th Cir. 2000).
For example, the following evidence was admissible both before and after Skilling.
- C That Ryan accepted gifts in excess of the $50 limit imposed by SOS regulations and
Ryan’s personal policy was admissible to show Ryan’s intent to defraud and his
credibility, the latter of which was at issue because of the false statements counts.
- C The consulting fee Ryan took from the Gramm campaign was specifically charged
in the tax counts. See R110:80-81.
- C The evidence of Ryan’s dismantling of the SOS Inspector General’s Office was
admissible to show Ryan’s intent to protect the ability of Citizens for Ryan to make
money. Ryan used this money for personal use, but, as charged in the tax counts, did
not pay taxes on it. See R110:76-84.
- C Warner’s access to low-digit plates was admissible to show how Ryan gave Warner
complete access to SOS operations, which was relevant to the government’s mail
fraud theories based on both money-property and bribes and kickbacks. As the
government argued to the jury, that Ryan’s secretary kept a kitty at her desk so
Warner could order low-digit plates for his friends showed the types of governmental
favors Ryan did for Warner, and made it more believable that SOS employees
recognized Warner’s clout and acceded to his demands about state contracts and
leases. Tr22975; see also Tr23047.
- C The evidence that Ryan told Swanson the location of the Grayville prison was admissible to show how Ryan showered Swanson with government benefits, including confidential information. Although the Court later vacated Ryan’s conviction on Count Ten related to this episode, the evidence was admissible to prove the flow of benefits between Ryan and Swanson. In any event, Ryan waived his right to challenge this evidence by failing to do so on direct appeal.
- C Ryan’s conversion of state property, such as using state employees and state resources on his campaigns, was admissible as evidence of how Ryan used false pretenses, including false time sheets, to obtain state money and property.
Even if the Court were to conclude that some of this evidence was inadmissible, any error
was harmless because its admission did not affect Ryan’s “substantial rights.” See United States v. Jones, 389 F.3d 753, 758 (7th Cir. 2004). In light of what the Seventh Circuit called the “overwhelming” evidence of Ryan’s guilt, Warner, 498 F.3d at 675, a reasonable juror’s view of the case would not have changed had this evidence been excluded. See United States v. Owens, 424 F.3d 649, 656 (7th Cir.2005).
For the reasons set forth above, the Court should deny Ryan’s motion.
Dated: October 7, 2010 Respectfully submitted,
PATRICK J. FITZGERALD
United States Attorney
By: /s/ Marc Krickbaum
DEBRA RIGGS BONAMICI
Assistant United States Attorneys
United States Attorney’s Office
219 South Dearborn Street
Chicago, Illinois 60604