Searching over 5,500,000 cases.


searching
Buy This Entire Record For $7.95

Download the entire decision to receive the complete text, official citation,
docket number, dissents and concurrences, and footnotes for this case.

Learn more about what you receive with purchase of this case.

United States v. Silver

United States Court of Appeals, Second Circuit

July 13, 2017

United States of America, Appellee,
v.
Sheldon Silver, Defendant-Appellant.

          Argued: March 16, 2017

         On Appeal from the United States District Court for the Southern District of New York

         In 2015, the United States Government indicted Sheldon Silver, the former Speaker of the New York State Assembly, on charges of honest services fraud, Hobbs Act extortion, and money laundering. The Government alleged that Silver abused his public position by engaging in two quid pro quo schemes in which he performed official acts in exchange for bribes and kickbacks, and that he laundered the proceeds of his schemes into private investment vehicles. After a jury trial of nearly one month in the United States District Court for the Southern District of New York (Valarie E. Caproni, Judge), a jury found him guilty on all counts. He was sentenced to twelve years of imprisonment, to be followed by three years of supervised release.

         After Silver had been convicted and sentenced, the Supreme Court issued its decision in McDonnell v. United States, 136 S.Ct. 2355 (2016), which clarified the definition of an "official act" in honest services fraud and extortion charges. The Supreme Court, vacating the conviction of former Governor Robert McDonnell of Virginia, held that "an 'official act' is a decision or action on a 'question, matter, cause, suit, proceeding or controversy'" involving "a formal exercise of governmental power." Id. at 2371-72.

         Silver now appeals from his judgment of conviction and argues, primarily, that the District Court's jury instructions defining an official act as "any action taken or to be taken under color of official authority" was erroneous under McDonnell. He additionally challenges the sufficiency of the evidence on all counts of conviction, arguing, among other things, that his money laundering conviction under 18 U.S.C. § 1957 required the Government to trace "dirty" funds comingled with "clean" funds.

         Though we reject Silver's sufficiency challenges, we hold that the District Court's instructions on honest services fraud and extortion do not comport with McDonnell and are therefore in error. We further hold that this error was not harmless because it is not clear beyond a reasonable doubt that a rational jury would have reached the same conclusion if properly instructed, as is required by law for the verdict to stand.

         Accordingly, we VACATE the District Court's judgment of conviction on all counts and REMAND the cause to the District Court for such further proceedings as may be appropriate in the circumstances and consistent with this opinion.

          Steven F. Molo, MoloLamken LLP (Robert K. Kry, Justin V. Shur, MoloLamken LLP; Joel Cohen, Stroock & Stroock & Lavan LLP, on the brief), New York, NY, for Defendant-Appellant.

          Andrew D. Goldstein (Howard S. Master, James McDonald, Karl Metzner, on the brief), for Joon H. Kim, Acting United States Attorney for the Southern District of New York, New York, NY, for Appellee. JOSÉ A.

          Before: CABRANES, WESLEY, Circuit Judges and SESSIONS, Judge. [*]

          CABRANES, Circuit Judge.

         In 2015, the United States Government indicted Sheldon Silver, the former Speaker of the New York State Assembly, on charges of honest services fraud, Hobbs Act extortion, and money laundering. The Government alleged that Silver abused his public position by engaging in two quid pro quo schemes in which he performed official acts in exchange for bribes and kickbacks, and that he laundered the proceeds of his schemes into private investment vehicles. After a jury trial of nearly one month in the United States District Court for the Southern District of New York (Valarie E. Caproni, Judge), a jury found him guilty on all counts. He was sentenced to twelve years of imprisonment, to be followed by three years of supervised release.

         After Silver had been convicted and sentenced, the Supreme Court issued its decision in McDonnell v. United States, [1] which clarified the definition of an "official act" in honest services fraud and extortion charges. The Supreme Court, vacating the conviction of former Governor Robert McDonnell of Virginia, held that "an 'official act' is a decision or action on a 'question, matter, cause, suit, proceeding or controversy'" involving "a formal exercise of governmental power."[2]

         Silver now appeals from his judgment of conviction and argues, primarily, that the District Court's jury instructions defining an official act as "any action taken or to be taken under color of official authority" was erroneous under McDonnell.[3] He additionally challenges the sufficiency of the evidence on all counts of conviction, arguing, among other things, that his money laundering conviction under 18 U.S.C. § 1957 required the Government to trace "dirty" funds comingled with "clean" funds.

         Though we reject Silver's sufficiency challenges, we hold that the District Court's instructions on honest services fraud and extortion do not comport with McDonnell and are therefore in error. We further hold that this error was not harmless because it is not clear beyond a reasonable doubt that a rational jury would have reached the same conclusion if properly instructed, as is required by law for a verdict to stand.

         Accordingly, we VACATE the District Court's judgment of conviction on all counts and REMAND the cause to the District Court for such further proceedings as may be appropriate in the circumstances and consistent with this opinion.

         BACKGROUND

         I. Offense Conduct [4]

         Silver was elected to the New York State Assembly (the "Assembly") in 1976, representing an Assembly District comprising much of lower Manhattan. In 1994, he was elected Speaker of the Assembly ("Speaker")-a position he would hold for more than twenty years until his resignation in 2015. As Speaker, Silver was one of the most powerful public officials in the State of New York, exercising significant control over the Assembly and state legislative matters.

         The Government's charges against Silver involve his part-time work as a practicing lawyer.[5] The Government sought to prove that Silver orchestrated two criminal schemes that abused his official positions for unlawful personal gain. Each of these alleged schemes had the same premise: in exchange for official actions, Silver received bribes and kickbacks in the form of referral fees from third- party law firms. In one scheme, Silver performed favors for a doctor in exchange for the doctor's referral of mesothelioma patients to Silver's law firm (the "Mesothelioma Scheme"). In the other, Silver performed favors for two real estate developers who had hired, at Silver's request, a law firm that was paying referral fees to Silver (the "Real Estate Scheme"). Jointly, these alleged schemes produced roughly $4 million in referral fees for Silver. The Government also charged that Silver engaged in money laundering by investing the proceeds of the Mesothelioma and Real Estate Schemes into various private investment vehicles (the "Money Laundering Scheme"). We describe the key aspects of each scheme in turn.

         A. The Mesothelioma Scheme [6]

         In the fall of 2002, Silver became "of counsel" to the law firm Weitz & Luxenberg ("W&L"), which maintained an active personal injury practice. Lawsuits for mesothelioma, a rare form of cancer caused by exposure to asbestos, were particularly lucrative for W&L.

         While he was not expected to and did not perform any legal work for W&L's clients, Silver received a fixed salary for lending his name to W&L, as well as referral fees for any case he brought into the firm. Silver's referral fee was a set percentage of the fees earned by W&L on any case that he referred to the firm.

         Dr. Robert Taub, an acquaintance of Silver, was a physician and researcher at Columbia-Presbyterian Hospital who specialized in mesothelioma. In the fall of 2003, Dr. Taub encountered Silver at an event and asked him to encourage W&L to donate money to mesothelioma research.[7] Silver, without consulting anyone at the firm, responded that he could not get W&L to do so.

         Within two weeks, however, Silver asked Dr. Taub to refer mesothelioma cases to W&L through him.[8] Responding to that request in November of 2003, Dr. Taub started referring mesothelioma patients to Silver for legal representation. He also provided Silver with names and contact information of unrepresented mesothelioma patients seeking counsel. Dr. Taub sought to develop a relationship with Silver that would help him receive research funding, much of which came from state and federal appropriations. Although unaware of the specifics of the financial arrangement between Silver and W&L, Dr. Taub testified that he believed Silver would benefit personally from the mesothelioma leads. And indeed, Silver conveyed to Dr. Taub that he was "pleased with the referrals that he was getting."[9]

         Dr. Taub was soon informed that Silver was considering providing him with state funding for his mesothelioma research. Shortly thereafter, in early January 2004, Dr. Taub sent a letter to Silver requesting state funding. While this grant was under consideration, Dr. Taub continued to send Silver mesothelioma leads. And over a year later, in March of 2005, Silver received his first referral fee check from W&L in the amount of $176, 048.02.

         Silver soon secured two $250, 000 state grants for Columbia University to support Dr. Taub's research. These grants originated from the New York Health-Care Reform Act ("HCRA") Assembly Pool, a pool of discretionary funds that Silver alone controlled as Speaker. Silver approved the first grant in July of 2005, a few months after receiving his first referral check.[10] Silver approved the second grant more than a year later, in August of 2006.[11] Silver did not publicly disclose the grants or his interactions with Dr. Taub, nor did he ever inquire about the progress of Dr. Taub's research. Dr. Taub assumed that his mesothelioma referrals were a factor in Silver's decision to approve the grants, and sought to receive additional grant money on an annual basis.

         In 2007, New York law changed to require public disclosure of HCRA grants, and disclosure of any potential conflicts of interest between legislators and recipients of legislative grants [12] Responding to this change, Silver informed Dr. Taub that any further requests for state grants would not be approved.[13] Nevertheless, Dr. Taub continued to send mesothelioma client leads to Silver to maintain their relationship and keep Silver "incentivized."[14]

         Silver continued to help Dr. Taub during this time with two other actions:

. In January of 2007, Silver had his office staff call a state trial judge to ask him to hire Dr. Taub's daughter, a student at Fordham University Law School, as an unpaid intern.
. In May of 2008, Silver awarded $25, 000 in state grant funding to the Shalom Task Force, a non-profit entity devoted to helping victims of domestic violence, of which Dr. Taub's wife was a board member.

         In 2010, Dr. Taub started sending mesothelioma leads to another law firm that had started funding his research. In response, on May 25, 2010, Silver went to Dr. Taub's office to complain that he was receiving fewer referrals. Their conversation prompted Dr. Taub to continue to send referrals to Silver in order to maintain a relationship with him that would possibly lead to future funding for his mesothelioma research. As he noted in an e-mail to a colleague on the day of his meeting with Silver, "I will keep giving cases to Shelly [Silver] because I may need him in the future-he is the most powerful man in New York State."[15]

         In fact, Silver would not approve any more grants for Dr. Taub (and he had not done so since August of 2006). Silver did do three additional favors for Dr. Taub, however.

. In May of 2011, Silver had his staff prepare an Assembly resolution with an official proclamation commending Dr. Taub. Silver sponsored the resolution on the floor of the Assembly and presented it to Dr. Taub at a public event.
. In the fall of 2011, Silver agreed to help Dr. Taub "navigate" the process of securing permits for a proposed New York City charity race in Silver's district to benefit mesothelioma research. Dr. Taub thought at the time that Silver would likely want referrals in return for his help. Ultimately, the law firm working with Dr. Taub to organize the race decided not to pursue the event, and the race never took place.
. In 2012, at the request of Dr. Taub, Silver helped Dr. Taub's son obtain a job with OHEL Children's Home & Family Services ("OHEL"), a non-profit organization devoted primarily to providing social services to Jewish populations, [16] that received millions in discretionary state funding controlled solely by Silver. To help Dr. Taub's son, Silver called OHEL's chief executive officer twice and sent him a letter on Assembly letterhead. Silver had not previously asked, nor did he subsequently ask, OHEL to hire anyone else.

         Dr. Taub continued to provide mesothelioma leads to Silver through at least 2013. In total, over the course of ten years, Silver received roughly $3 million in referral fees for cases referred to W&L by Dr. Taub.

         B. The Real Estate Scheme [17]

         Silver's second alleged scheme involved two major New York real estate developers: Glenwood Management ("Glenwood") and the Witkoff Group ("Witkoff") (jointly, the "Developers"). Of course, like other real estate interests, both companies depended heavily on favorable state legislation, including rent regulation and tax abatement legislation. The Developers also depended on tax-exempt financing, which must be approved by the Public Authorities Control Board ("PACB").

         Silver held considerable control over legislation covering these issues and over PACB approvals. As Speaker, he had de facto veto power over all legislation since he could prevent any legislation that he opposed from coming to a vote. Also, as a voting member on the PACB, Silver had the power to unilaterally prevent the PACB from approving applications for state financing.[18]

         As with the Mesothelioma Scheme, Silver allegedly sought to enrich himself through referral fees from a law firm. In this scheme, however, that law firm was Goldberg & Iryami ("G&I"), the firm of Jay Arthur Goldberg, a former staffer and friend of Silver. Goldberg specialized in tax certiorari work, which involves challenges to property owners' real estate tax assessments. The Developers pursued tax certiorari cases to reduce the property taxes of their buildings.

         To enrich himself, Silver allegedly induced the Developers to hire Goldberg, who had agreed to pay Silver a percentage of the resulting legal fees. In 1997, at a time when important real estate legislation was due for renewal, Silver referred Glenwood to Goldberg. In 2005, Silver did the same for Witkoff, stating that his friend Goldberg needed business. In response, Glenwood and Witkoff moved some of their tax certiorari work from other law firms to G&I, which they continued to do over time. Of the fees G&I earned from its Glenwood and Witkoff matters, Silver received a referral fee-twenty-five percent of what G&I earned from Glenwood matters and fifteen percent of what G&I earned from Witkoff matters.

         The Developers did not know of Silver's financial arrangement with Goldberg at the time. Neither company, however, wanted to alienate Silver, given their need for Silver's approval of favorable legislation. Both testified that they gave tax certiorari work to Goldberg to influence Silver's legislative work concerning real estate. Witkoff also wanted access to Silver to discuss pending legislation that affected its business.

         In return for these alleged kickbacks, Silver took a number of actions to benefit the Developers:

. Through a proxy, Silver repeatedly voted as one of three members of the PACB to approve Glenwood's requests for tax-exempt financing for many of its projects. These votes occurred repeatedly over the course of Silver's tenure as Speaker.
. Silver regularly approved and voted for rent and tax abatement legislation sought by Glenwood. In particular, in June of 2011, Silver met with Glenwood lobbyists in advance of negotiating pending real estate legislation to ensure that Glenwood was satisfied with the terms of the legislation. He then supported and voted in favor of the Rent Act of 2011 and tax abatement renewal legislation later that month, both of which benefited Glenwood.
. Later in 2011, Silver publicly opposed the relocation of a methadone clinic that was to be located near one of Glenwood's rental buildings in Silver's district.

         In a late 2011 phone call, Silver informed a Glenwood lobbyist of his fee-sharing arrangement with Goldberg. This disclosure was prompted by G&I's decision to send new retainer agreements to Glenwood that referenced Silver. Silver told the Glenwood lobbyist that he wanted his fee-sharing arrangement with Goldberg to continue, and that the arrangement was not problematic since the fees came from a Glenwood limited liability company. Glenwood, despite its reservations, executed a confidential "side letter" agreement with G&I-separate from the firm's retainer agreement- consenting to the fee arrangement. This letter was kept secret from the public and from Glenwood's own chief financial officer.[19]Witkoff learned of the fee-sharing arrangement in June of 2014 on a call with Goldberg, who had received a grand jury subpoena in connection with the Government's investigation of Silver.

         In total, over a period of about 18 years, Silver received approximately $835, 000 in fees from G&I for his referral of the Developers.

         C. The Money Laundering Scheme

         Silver allegedly laundered the proceeds of the Mesothelioma and Real Estate Schemes by investing them in high-yield, private investment vehicles with the help of Jordan Levy, a private investor.[20] At one point, Silver instructed Levy to place one half of an investment in his wife's name to avoid publicly disclosing the full amount of the investment.

         II. Procedural History

         A. Indictment

         In February of 2015, Silver was indicted for engaging in schemes "to deprive the citizens of [New York State] of his honest services as an elected legislator and as Speaker of the Assembly by using the power and influence of his official position to obtain for himself millions of dollars in bribes and kickbacks . . . ."[21] The charges against him consisted of four counts of honest service fraud, two counts of Hobbs Act extortion, and one count of money laundering.[22]

         The Government's theory underlying its honest services fraud and Hobbs Act extortion charges was that Silver had accepted bribes and kickbacks in exchange for official acts.[23] To succeed on a bribery theory of honest services fraud and Hobbs Act extortion, the Government had to prove, beyond a reasonable doubt, the existence of a quid pro quo agreement-that the defendant received, or intended to receive, something of value in exchange for an official act.[24]

         B. Trial and Jury Instructions

         Before trial, Silver and the Government presented proposed jury instructions to the District Court on how to define an "official act." Silver's initial proposed instructions sought to define "official act" by quoting 18 U.S.C. § 201(a)(3), the federal bribery statute: "[a]n 'official act' means any decision or action on any question, matter, cause, suit, proceeding or controversy, which may at any time be pending, or which may by law be brought before any public official, in such official's official capacity."[25] The Government's proposed instruction, in contrast, sought to define an official act more broadly as "any act taken under color of official authority."[26]

         Silver's trial began on November 2, 2015, and lasted nearly a month. At the charge conference on November 19, 2015, the parties once again addressed the definition of an "official act" in the jury instructions. This time, Silver proposed a new "official act" instruction: "To prove an 'official act, ' the government must prove the exercise of actual governmental power, the threat to exercise such power, or pressure imposed on others to exercise actual government power."[27] The Government urged a broader instruction-that "[o]fficial action includes any action taken or to be taken under color of official authority."[28]

         The District Court declined to include Silver's proposed instructions and ultimately adopted the Government's official act language in its final jury charge.[29] The District Court instructed the jury that to prove honest services fraud, the Government must "prove, beyond a reasonable doubt, . . . that Silver received bribes or kickbacks as part of a scheme to defraud."[30] The District Court explained:

To satisfy this element, the Government must prove that there was a quid pro quo. Quid pro quo is Latin, and it means "this for that" or "these for those." The Government must prove that a bribe or kickback was sought or received by Mr. Silver, directly or indirectly, in exchange for the promise or performance of official action. Official action includes any action taken or to be taken under color of official authority.[31]

         In its Hobbs Act extortion instructions, the District Court also instructed that the Government must prove a quid pro quo- specifically, that "property was sought or received by Mr. Silver, directly or indirectly, in exchange for the promise or performance of official action."[32] The District Court did not redefine official action in its extortion charge, but did explicitly reference the earlier honest services fraud charge when setting forth the quid pro quo requirement as an element of extortion.[33]

         The District Court also provided the following charge regarding the five-year statute of limitations for honest services fraud and Hobbs Act extortion:[34]

The statute of limitations for each of the charged crimes is five years. If you find that Mr. Silver engaged in a scheme to commit honest services fraud, extortion or money laundering, but no aspect of the particular scheme occurred after February 19, 2010, then you must acquit on that charge because it is barred by the statute of limitations. If, on the other hand, you find that any aspect of the crime you are considering continued on or after February 19, 2010, then the statute of limitations as to that charge has been complied with.[35]

         After three days of deliberation, on November 30, 2015, the jury found Silver guilty on all seven counts. Silver timely moved for a judgment of acquittal or, in the alternative, a new trial pursuant to Rules 29 and 33 of the Federal Rules of Criminal procedure.[36] The District Court denied those motions in a written opinion on May 3, 2016.[37]

         C. Sentencing and Post-Sentencing Motions

         On May 4, 2016, the District Court sentenced Silver to twelve years of imprisonment, to be followed by three years of supervised release. It also imposed $5.4 million in forfeiture, and a $1.75 million fine. The court entered its final judgment on May 10, 2016.

         On May 13, 2016, Silver moved to continue bail and stay the financial penalties pending appeal. Silver relied largely on arguments raised in McDonnell, which was then pending before the Supreme Court and would address the definition of an "official act" for honest services fraud and Hobbs Act extortion violations.[38] On June 27, 2016, the Supreme Court decided McDonnell. Soon thereafter, on August 25, 2016, the District Court granted Silver's motion for bail pending appeal.[39] In a thoughtful opinion, the District Court concluded that while Silver's case is "factually almost nothing like McDonnell[, ] . . . there is a substantial question whether, in light of McDonnell, the [jury] charge was in error and, if so, whether the error was harmless."[40]

         DISCUSSION

         On appeal, in addition to various arguments challenging the sufficiency of the evidence against him, Silver primarily argues that the District Court's jury instructions on the definition of an "official act" in its honest service fraud and extortion charges were erroneous under McDonnell.[41] He thus contends that we should vacate and remand the honest services fraud and extortion counts against him for a new trial. Silver also argues that if we vacate those counts, we necessarily must vacate the money laundering count against him.[42]

         I. Sufficiency of the Evidence

         "We review de novo challenges to the sufficiency of evidence, but must uphold the conviction if any rational trier of fact could have found the essential elements of the crime beyond a reasonable doubt."[43] To conduct this review, "we view the evidence in the light most favorable to the government, crediting every inference that could have been drawn in the government's favor, and deferring to the jury's assessment of witness credibility and its assessment of the weight of the evidence."[44] Silver raises three challenges to the sufficiency of the evidence against him, none of which have merit.

         A. Hobbs Act Extortion

         First, Silver claims that the Government failed to prove Hobbs Act extortion because there was no evidence that that he deprived anyone of property. This argument is belied by the record.

         The Hobbs Act defines extortion, as applicable here, as "obtaining . . . property from another, with his consent, induced . . . under color of official right."[45] The "property" at issue in a Hobbs Act extortion violation must be "something of value from the victim that can be exercised, transferred, or sold."[46] Here, the evidence supports a deprivation of property as to both schemes.[47] Specifically, both the mesothelioma leads and the tax certiorari business from which Silver profited were valuable and transferable property (albeit intangible property). By engaging in the alleged schemes, Silver is said to have deprived Dr. Taub, the Developers, and other law firms of property.

         B. Honest Services Fraud

         Second, Silver argues that he engaged in mere "undisclosed self-dealing, " and that, accordingly, the Government failed to prove a "paradigmatic bribe or kickback" for its honest services fraud charges, as required by Skilling v. United States.[48] This argument is likewise contradicted by the record.

         In Skilling, the Supreme Court in 2010 clarified that honest services fraud "does not encompass conduct more wide-ranging than the paradigmatic cases of bribes and kickbacks, " and includes instances where a defendant "solicited or accepted side payments from a third party."[49] Here, both the mesothelioma leads and tax certiorari business indisputably came from Dr. Taub and the Developers, which resulted in payments to Silver from other third parties, W&L and G&I. These payments, solicited by Silver, were thus bribes or kickbacks within the meaning of Skilling, not mere "undisclosed self-dealing by a public official" as Silver argues.[50]

         C. Money Laundering

         Lastly, Silver argues that the Government failed to prove its money laundering count because the proceeds of his two schemes had been commingled into an account with untainted funds. To convict Silver of money laundering under 18 U.S.C. § 1957, the Government was required to prove that Silver "knowingly engage[d] or attempt[ed] to engage in a monetary transaction in criminally derived property of a value greater than $10, 000, " and that the property was "derived from specified unlawful activity."[51]Silver thus argues that because he deposited the ...


Buy This Entire Record For $7.95

Download the entire decision to receive the complete text, official citation,
docket number, dissents and concurrences, and footnotes for this case.

Learn more about what you receive with purchase of this case.