APPEAL FROM THE UNITED STATES DISTRICT COURT FOR THE WESTERN DISTRICT OF PENNSYLVANIA (Crim. No. 74-319 - W.D. of Pa.).
Seitz, Chief Judge, Van Dusen, Aldisert, Adams, Gibbons, Rosenn, Hunter, Weis and Garth, Circuit Judges. Gibbons, Circuit Judge, dissenting, with Judge Aldisert joining.
Defendant Frank Mazzei appeals from his conviction after a jury trial of two counts alleging extortion in violation of the Hobbs Act, 18 U.S.C. § 1951 (1970). His challenge raises questions regarding the jurisdictional reach of the Hobbs Act and the substantive content of the crime of extortion which it defines.
The parties are in basic agreement on the facts. B.M.I., Inc., a Pennsylvania corporation and the victim of the alleged extortion, is the holding company of sixteen subsidiaries which engage in interstate businesses largely relating to the manufacture and installation of bulk refractory materials used in blast furnaces. B.M.I. is headquartered in a building at 700 Bingham Street, Pittsburgh, Pennsylvania, title to which is in the name of a wholly-owned subsidiary, Pneumatic Concrete Corporation. Accounting services for B.M.I. and all its subsidiaries are centered in the building and services such as billing and payments of accounts receivable are carried out by B.M.I. for all its subsidiaries from the office.
Prior to 1971, only one-half of the second floor of the Bingham Street building was occupied. Apart from B.M.I.'s offices on this floor, the remainder of the second floor and the whole first and third floors were vacant. Leo Kelly ("Kelly"), secretary-treasurer of B.M.I. and all its subsidiaries, was anxious to lease the unused space to reduce overhead costs. Kelly spoke with Gerald R. Creehan, a director of a local bank, about the possibility of securing tenants. Mr. Creehan had learned that the defendant, a Pennsylvania state senator, was seeking office space on the Southside of Pittsburgh. Defendant was reportedly seeking a location in his district for the Pittsburgh regional office of the new Bureau of State Lotteries, even though as a legislator he had no statutory power with respect to the Bureau's leasing practices. Kelly asked Mr. Creehan to set up a meeting with the defendant.
A meeting was held in November 1971 between defendant and Kelly at which leases were mentioned but not discussed in detail. The defendant later visited the premises, and at Kelly's invitation, a dinner meeting was held on January 8, 1972, where leases were again discussed generally. At approximately the same time, the premises were inspected by a representative of the Department of Property and Supplies, the state authority responsible for securing office space for state agencies, to determine their suitability for occupancy as a lottery office.
Without prior notice, defendant visited Kelly at the B.M.I. office on January 11, 1972, to suggest the rental which B.M.I. should submit in its proposal to the state. Kelly testified that at this meeting defendant informed him that "it was the practice on all state leases that a ten per cent of the gross amount of the rentals would be paid to a senate finance re-election committee. . . ." The payment was to be in cash at the beginning of the lease. Defendant then proceeded to compute the gross rental and the ten per cent payment on a pad in Kelly's office. The page on which defendant had made his calculations was received into evidence at trial.
On January 13, 1972, Kelly submitted a proposal to the Department of Property and Supplies for lease of a portion of the first floor of the Bingham Street building to the Bureau of Lotteries. The executed lease was received from the state on March 23 or 24, 1972, and shortly thereafter defendant inquired of Mr. Creehan whether Kelly had left an envelope for defendant at Creehan's bank. At defendant's request, Mr. Creehan relayed the message to Kelly, who authorized the withdrawal and delivery to defendant of $8,755, which Kelly computed to be ten per cent of the gross rental B.M.I. would receive under the lease. The money was delivered personally to defendant in late March 1972.
In November or December 1972, defendant stopped in at the B.M.I. offices to ask Kelly if he was interested in leasing space to the Department of Labor and Industry, again an executive agency with which defendant had no statutory connection. On December 27, 1972, defendant brought officials from the Departments of Property and Supplies and Labor and Industry to view the premises. Other state officials visited during the spring of 1973. Sometime shortly before April 14, 1973, Kelly and defendant discussed B.M.I.'s proposal for the Labor and Industry lease. Defendant again suggested the rental B.M.I. should propose and informed Kelly that the same ten per cent arrangement would be in effect. B.M.I. submitted a proposal, later revised at defendant's behest, that led to receipt of an executed lease from the state on July 20, 1973. After defendant indicated that he had to have his cash payment that same day, Kelly delivered $11,300 (10% of the gross rental) to defendant's secretary at his nearby office. Defendant acknowledged receipt of the money by telephone.
On appeal, defendant challenges his conviction on two grounds: (1) the transactions from which the charges arose lacked sufficient impact on interstate commerce to give rise to federal jurisdiction over them and (2) his receipt of money did not amount to extortion within the meaning of the Hobbs Act. Defendant also challenges a portion of his sentence which ordered his removal from state office as beyond the power of the district court.
Effect on Interstate Commerce
Defendant acknowledges that in enacting the Hobbs Act, Congress intended to "use all the constitutional power [it] has to punish interference with interstate commerce. . . ." Stirone v. United States, 361 U.S. 212, 215, 4 L. Ed. 2d 252, 80 S. Ct. 270 (1960). He contends, however, that the transactions involved here did not touch upon interstate commerce and that, therefore, the Hobbs Act cannot constitutionally be construed to embrace his conduct.
Defendant has admitted that although B.M.I. does no interstate business itself, it is "legitimate" to identify B.M.I. with its wholly controlled subsidiaries that are engaged in substantial interstate operations. Conceding the interstate character of the B.M.I. enterprise, defendant still contends that federal jurisdiction is lacking because the lease transactions in which B.M.I. were engaged here are "local" in nature. He urges that only if we can find that the lease transactions themselves affected interstate commerce may we assess the impact of the alleged extortion on interstate commerce.
The government, on the other hand, urges us to find both federal jurisdiction and Hobbs Act coverage on the theory that the some $20,000 in payments to defendant depleted the assets of B.M.I. and thereby affected its power to operate in interstate commerce. This position accords with our previous holdings that where the resources of an interstate business are depleted or diminished "in any manner" by extortionate payments, the consequent impairment of ability to conduct an interstate business is sufficient to bring the extortion within the play of the Hobbs Act. United States v. Addonizio, 451 F.2d 49 (3rd Cir. 1971), cert. denied, 405 U.S. 936, 30 L. Ed. 2d 812, 92 S. Ct. 949 (1972); United States v. Provenzano, 334 F.2d 678 (3rd Cir.), cert. denied, 379 U.S. 947, 13 L. Ed. 2d 544, 85 S. Ct. 440 (1964). Defendant would distinguish these cases on the ground that in each there was a direct and immediate effect on interstate commerce that is wholly lacking here.
Despite the local character of the lease transactions giving rise to the alleged extortion in this case, we are of the opinion that the depletion of B.M.I.'s assets provides a jurisdictional basis under the Hobbs Act for the maintenance of this action. B.M.I. owns subsidiaries which purchase materials in a number of states for use in manufacturing products sold in almost every state. As a result of defendant's actions, funds available to B.M.I. for use in such interstate activities have been diminished and its interstate business must to this extent be curtailed. Because of this effect on interstate commerce, the fact that the alleged extortion arose from a local lease to a state agency is not dispositive, for "if it is interstate commerce that feels the pinch, it does not matter how local the operation which applies the squeeze." United States v. Women's Sportswear Mfrs. Ass'n, 336 U.S. 460, 464, 93 L. Ed. 805, 69 S. Ct. 714 (1949). Although enunciated in an antitrust context, the principle stated in the quoted language has broad application to questions regarding congressional power under the commerce clause. See, e.g., Heart of Atlanta Motel v. United States, 379 U.S. 241, 13 L. Ed. 2d 258, 85 S. Ct. 348 (1964).
We therefore conclude that the Hobbs Act may constitutionally be construed to reach the indirect burdens placed on interstate commerce by the extortionate activities alleged in this case and that such a construction of the statute accords with Congressional intent to proscribe extortion which "in any way or degree obstructs, delays, or affects commerce." 18 U.S.C. § 1951(a).*fn1 United States v. De Met, 486 F.2d 816 (7th Cir. 1973), cert. denied, 416 U.S. 969, 94 S. Ct. 1991, 40 L. Ed. 2d 558 (1974); United States v. Augello, 451 F.2d 1167 (2d Cir. 1971), cert. denied, 405 U.S. 1070, 31 L. Ed. 2d 802, 92 S. Ct. 1518 (1972); cf. United States v. Staszcuk, 517 F.2d 53 (7th Cir., 1975); (in banc) cert. denied, 423 U.S. 837, 96 S. Ct. 65, 46 L. Ed. 2d 56 (1975) (jurisdiction under the Hobbs Act may be satisfied by showing a "realistic possibility that an extortionate transaction will have some effect on interstate commerce.")
Extortionate Nature of Defendant's Conduct
Defendant also contends that his conduct, whatever other laws it might violate, does not constitute extortion within the meaning of the Hobbs Act. The statute defines extortion as
The obtaining of property from another, with his consent, induced by wrongful use of actual or threatened force, violence, or fear, or under color of official right.
Defendant characterizes the payments made to him as B.M.I.'s voluntary purchase of his influence in an area in which he had no official power and in which he never pretended to have any official power. He further contends that there was no element of coercion present, and that therefore he could not be guilty of extortion even if he had been acting "under color of official right."
It is clear, of course, that defendant had no statutory power as a state senator to control the granting of leases by state executive agencies. But in order to find that defendant acted "under color of official right," the jury need not have concluded that he had actual de jure power to secure grant of the lease so long as it found that Kelly held, and defendant exploited, a reasonable belief that the state system so operated that the power in fact of defendant's office included the effective authority to determine recipients of the state leases here involved. See United States v. Price, 507 F.2d 1349 (4th Cir. 1974) (per curiam); United States v. Staszcuk, supra (adopting by reference the panel opinion at 502 F.2d 875 (7th Cir. 1974) on this point). Such an exploitation involves the wrongful use of official power that has long been punished at common law as extortion "under color of public office." See, e.g., Commonwealth v. Wilson, 30 Pa. Super. 26 (1906). The issue of Kelly's belief and its reasonableness was a jury question which was submitted under appropriate instructions.*fn2
Kelly's belief in defendant's power over state leases in his district is amply established by the record. In his most succinct statement in this respect, Kelly testified:
I thought that was the method that state leases were handled. I just accepted it as gospel.
I don't know how it works in Harrisburg. . . . There has to be that influence and power, and they were letting the senator do it.
Furthermore, we find after a careful review of the record in the light most favorable to the government, Glasser v. United States, 315 U.S. 60, 80, 86 L. Ed. 680, 62 S. Ct. 457 (1942), that the evidence permitted the jury to find that Kelly's belief in defendant's power was reasonable. With respect to the first lease, we note that there were rumors that defendant was looking for space for the lottery office. Kelly's meetings with defendant in December 1971 and January 1972 produced an inspection by an official of the Department of Property and Supplies even though no one from B.M.I. had contacted anyone other than defendant. Also, defendant suggested that B.M.I. propose to the state a rental of $4.25 per square foot, which he said was the rate at which a recent state lease in Philadelphia had been awarded and the highest that the state would approve. These representations by the defendant himself suggest an intimate awareness of state leasing practices.
When defendant opened negotiations with respect to the second lease and brought officials to inspect the premises, other officials from the Department of Labor and Industry appeared without any request from B.M.I. personnel. As with the lottery lease, defendant suggested a proposed rental for submission to the state, this time at $4.90 per foot because parking spaces would be provided. When B.M.I. did not follow his recommendation and submitted to the state a proposal of $4.35 per foot that excluded janitorial services, defendant quickly called Kelly to advise him that the proposal should be at the higher rate he suggested and must cover janitorial services. Kelly told defendant to "put it in at $4.90," and without the submission of a revised proposal by B.M.I., the state returned a lease with a rate of $4.90 which required B.M.I. to provide the additional services. Furthermore, on two occasions in July 1973, defendant assured Kelly that B.M.I. would secure the Labor and Industry lease. One such assurance was given in a meeting on July 18, 1973, where defendant calculated the five year gross rental figure, on which the ten per cent payment would be based, on a paper introduced into evidence at trial. In these computations, defendant used a yearly rental of $22,569.40, the rental computed at the $4.90 rate and the exact rental stated in the lease received by B.M.I. from the state two days later.
Thus, defendant had the ability to initiate state inspection of the premises, to specify rental rates that would be and were acceptable to the state, and to alter B.M.I.'s proposal on the second lease. Also, throughout the lease negotiations, defendant displayed to Kelly intimate knowledge of the decision making process involved in the granting of state leases. This, in our view, constituted sufficient evidence to justify a finding by the jury that Kelly could reasonably have believed that as a concomitant of his official position defendant possessed not mere influence over state leases but in fact had effective power to determine to whom these leases were awarded even though his office gave him no such de jure power.
Defendant urges, however, that even if he did have some power to influence the awarding of state leases, he still did not commit extortion in his receipt of payments of some $20,000 from B.M.I. He acknowledges that in United States v. Kenny, 462 F.2d 1205 (3rd Cir.), cert. denied, 409 U.S. 914, 93 S. Ct. 233, 34 L. Ed. 2d 176 (1972), we held that the Hobbs Act is to be read disjunctively and approved an instruction that extortion could be established either when property is obtained through the use of fear or by one acting under color of official right. 462 F.2d at 1229. He contends, however, that a coercive use of office must be established even when the prosecution is based on the alternate ground of "color of official right," and relies on the statement of this court in Addonizio that "while the essence of bribery is voluntariness, the essence of extortion is duress." 451 F.2d at 72. We do not ...