United States v. Oaks

          MEMORANDUM OPINION

          Richard D. Bennett United States District Judge.

         On May 31, 2017, the Grand Jury returned a nine-count Indictment (ECF No. 16) charging the Defendant Nathaniel T. Oaks ("Defendant" or "Senator Oaks"), at the time in question a Delegate in the Maryland General Assembly representing a portion of Baltimore City, with the corrupt use of his office in a bribery scheme. This initial Indictment charged three counts of wire fraud under 18 U.S.C. § 1343, one count of honest services wire fraud under 18 U.S.C. §§ 1343 and 1346, and five counts of Travel Act violations under 18 U.S.C. § 1952. (ECF No. 16) It is specifically alleged that Oaks, now a Senator in the General Assembly, accepted bribes during the time in question from "Mike, " a confidential source of the Federal Bureau of Investigation (TBI") posing as a businessman from Texas seeking business opportunities in a U.S. Department of Housing and Urban Development project in Baltimore.

         On November 15, 2017, the Grand Jury returned a Superseding Indictment (ECF No. 31) adding a tenth count for obstruction of justice under 18 U.S.C. § 1512(c)(2). On January 19, 2018, this Court ordered that Count Ten be severed from Counts One through Nine. (ECF No. 55.) The Superseding Indictment, like the initial Indictment, includes a forfeiture count in which the Government seeks forfeiture of at least $15, 300 allegedly paid to Defendant Oaks over the course of the briber}' scheme.

         Pending now are (a) the Defendant's Motion to Dismiss Count Four (Honest Services Wire Fraud) (ECF No. 58) and (b) the Defendant's Motion to Dismiss Counts Five through Nine (Travel Act Counts) (ECF No. 57). The underlying premise in both motions is that Oaks' filing of a request with the Maryland Department of Legislative Services for the drafting of legislation in the form of a bond bill in September of 2016 was not an official act within the meaning of honest sendees wire fraud, as charged in Count Four, or the Travel Act violations, as charged in Counts Five through Nine.

         After reviewing the parties' submissions, this Court conducted a hearing on March 16, 2018. The Defendant's arguments are without merit, as the submission of such a request by a member of the Maryland General Assembly is an official act. That act is within the ambit of honest services wire fraud, the Travel Act, the Maryland bribery statute, and the Supreme Court's recent opinion in McDonnell v. United States, 136 S.Ct. 2355 (2016). For the reasons set forth below, Defendant's Motion to Dismiss Count Four (ECF No. 58) is DENIED, and Defendant's Motion to Dismiss Counts Five through Nine (ECF No. 57) is also DENIED.

         BACKGROUND

         The Defendant is charged in a ten-count Superseding Indictment that was returned by the Grand Jury on November 15, 2017. (ECF No. 31.)^[1] Counts One through Nine stem from an alleged scheme in which the Defendant agreed to assist a purported real estate developer identified as "Mike, " who was actually an undercover FBI agent, in pursuing a housing development project in Baltimore. Counts One through Three charge wire fraud, in violation of 18 U.S.C. §1343. These first three counts allege that the Defendant made oral and written communications-which allegedly contained falsehoods-expressing support for Mike's project to a representative Oaks believed worked at the United States Department of Housing and Urban Development ("HUD").

         Count Four charges honest services wire fraud, in violation of 18 U.S.C. §§ 1343 and 1346. The Superseding Indictment alleges that "[i]t was the purpose of the scheme for Oaks to secretly use his official position to enrich himself by accepting cash bribe payments from Mike in exchange for favorable official action." (ECF No. 31 at 7.) Specifically, the Superseding Indictment alleges that "Oaks agreed to use his official position ... to file a request for bond bill legislation with [the Maryland Department of Legislative Services ] in exchange for a cash bribe payment from Mike." (Id.) The Superseding Indictment further alleges that on September 22, 2016, in exchange for a $5, 000 cash payment from Mike, the Defendant "submitted a request, in person, to DLS for the drafting of legislation in the form of a bond bill for the 2017 Maryland General Assembly Session that would authorize the issuance of state funds to a company associated with Mike in the amount of $250, 000 for the 'Multi-Family Housing Development at Druid Park Lake." (Id.) The Defendant allegedly received a completed draft bond bill from the Maryland Department of Legislative Services and forwarded the draft by email to Mike. (Id. at 7-8.)

         The Superseding Indictment provides additional factual context regarding the legislative process in question. A bond bill "was legislation filed by a member of the General Assembly to obtain State of Maryland funding for local capital projects. ... [F]or such funding to be considered by the General Assembly, it had to be introduced by both a member of the House of Delegates and a member of the Senate." (Id. at 6.) The Maryland Department of Legislative Services ("DLS") is described as "a Maryland governmental entity . . ., which provided legal, fiscal, committee, research, reference, auditing, administrative, and technological support to the members of the Maryland General Assembly .... These services included the drafting of legislation for legislators." (Id.)

         Counts Five through Nine charge violations of the Travel Act based on the Defendant's participation in five mobile phone calls with the intent to carry on briber}', in violation of Maryland state law, Md. Code, Criminal Law § 9-201, and in violation of 18 U.S.C. § 1952(a)(3) and (b)(2). These Counts incorporate by reference the relevant paragraphs of the prior counts - e.g., that the Defendant requested, received, and emailed a draft bond bill - and add that "Oaks engaged in an arrangement with Mike pursuant to which Oaks would receive and agreed to receive cash bribe payments in order to influence the performance of his official duties." (Id. at 9.)

         On January 26, 2017, the Defendant submitted three pretrial motions: (1) Defendant's Motion to Dismiss Count 4 (Honest Services Wire Fraud) (ECF No. 58); (2) Defendant's Motion to Dismiss Counts 5-9 (Travel Act Counts) (ECF No. 57); and (3) Defendant's Motion to Charge the Jury on Entrapment (ECF No. 59). On March 7, 2018, this Court determined that no witness testimony would be necessary to consider these three motions. (ECF No. 88.)^[2] On March 14, 2018 the Defendant withdrew his Motion to Charge the Jury on Entrapment. (See ECF Nos. 89, 90.) On March 16, 2018, this Court heard oral argument on the Defendant's pending motions to dismiss (ECF Nos. 57, 58).

         STANDARD OF REVIEW

         Rule 7(c)(1) of the Federal Rules of Criminal Procedure requires that an indictment "be a plain, concise and definite written statement of the essential facts constituting the offense charged." Under Rule 12(b)(3)(B)(v), a Defendant may file a motion to dismiss challenging an indictment for failure to state an offense. The United States Court of Appeals for the Fourth Circuit has instructed that '[a]n indictment must contain the elements of the offense charged, fairly inform a defendant of the charge, and enable the defendant to plead double jeopardy as a defense in a future prosecution for the same offense.'" United States v. Loayza, 107 F.3d 257, 260 (4th Cir. 1997) (quoting United States v. Daniels, 973 F.2d 272, 274 (4th Cir. 1992)); see also United States v. Pa/in, 874 F.3d 418, 424 (4th Ck. 2017); United States v. Hooker, 841 F.2d 1225, 1231 (4th Cir. 1988).

         In reviewing a motion to dismiss an indictment for failure to state an offense, a district court must accept all factual allegations in the indictment as true. See Boyce Motor Lines v. United States, 342 U.S. 337, 343 n.16 (1952), and the Court should construe the indictment in a "practical, " rather than "purely technical, " manner. United States v. Matzkin, 14 F.3d 1014, 1019 (4th Cir. 1994); see United States v. Terry, 257 F.3d 366, 371 (4th Cir. 2001) (King, J., concurring) ("It is elementary that a motion to dismiss [a count of the] indictment implicates only the legal sufficiency of its allegations, not the proof offered by the Government.").

         ANALYSIS

         I. Introduction

         "The basic compact underlying representative government assumes that public officials will hear from their constituents and act appropriately on their concerns." McDonnell v. United States, 136 S.Ct. 2355, 2372 (2016); see also United States v. Mandel, 672 F.Supp. 864, 878 (D. Md. 1987), affd, 862 F.2d 1067 (4th Cir. 1988) ("The people of Maryland, as a matter of natural law, have and have always had an inalienable right to good government."). While the compact itself may be "basic, " the criminal laws aimed at enforcing it have evolved over the last few decades. Through both judicial interpretation - often based on constitutional concerns, see e.g., Id. at 2372-73; McNally v. United States, 483 U.S. 350, 360 (1987) - and statutory amendment, the scope of bribery laws has waxed and waned twice over.

         While several targeted statutes specifically outlaw various forms of "bribery" by federal officials, see 18 U.S.C. §§ 201-227, 665, the federal mail and wire fraud statutes, 18 U.S.C. §§ 1341 (mail), 1343 (wire), also criminalize bribery schemes by state and local officials. In 1909, the mail fraud statute, the predecessor to today's mail and wire fraud statutes, proscribed the use of mails to advance "any scheme or artifice to defraud, or for obtaining money or property by means of false or fraudulent pretenses, representations, or promises." § 1341; see Shilling v. United States, 561 U.S. 358, 399 (2010) (emphasis added). With the identification of two alternative illicit uses of the mails, the term "scheme or artifice to defraud" was interpreted by the Circuit Courts of Appeals to include deprivations of intangible rights, giving rise to the "intangible rights" or "honest services" doctrine that reached both public and private sector officials. Id. at 400-401 (citing Sbushan v. United States, 117 F.2d 110 (5th Cir. 1941); see also United States v. Bohonus, 628 F.2d 1167, 1171 (9th Cir. 1980); United States v. Procter & Gamble Co., 47 F.Supp. 676, 678 (D. Mass. 1942)). By 1982, every Circuit had validated the honest services doctrine. Shilling, 561 U.S.. at 401 (citing Hurson, Limiting the Federal Mail Fraud Statute-A Legislative Approach, 20 Am. Crim. L. Rev. 423, 456 (1983)^[3]). Despite the consensus among the circuits, the honest-services decisions during this time "were not models of clarity or consistency." Shilling, 561 U.S. at 405.

         The breadth of the mail and wire fraud statutes, enhanced by the honest services doctrine, armed federal prosecutors with incredible discretion. In 1974, Chief Justice Berger commented that the mail fraud statute "has traditionally been used against fraudulent activity as a first line of defense." United States v. Maze, 414 U.S. 395, 405-06 (1974) (Burger, C.J., dissenting) ("When a 'new' fraud develops-as constantly happens-the mail fraud statute becomes a stopgap device . . . until particularized legislation can be developed and passed to deal directly with the evil."). One commentator described the mail fraud statute as follows:

To federal prosecutors of white collar crime, the mail fraud statute is our Stradivarius, our Colt 45, our Louisville Slugger, our Cuisinart-and our true love. We may flirt with RICO, show off with 10b-5, and call the conspiracy law 'darling, ' but we always come home to the virtues of 18 U.S.C. § 1341, with its simplicity, adaptability, and comfortable familiarity.

Rakoff, The Federal Mail Fraud Statute (Part I), 18 Duq. L. Rev. 771, 771 (1980).^[4] This article responded in part to the emerging opposition to the "extension" of the mail and wire fraud statutes to prosecute "official corruption/' specifically noting the high-profile prosecutions of former Maryland Governor Marvin Mandel^[5] and United States Seventh Circuit Judge Otto Kerner, the former the Governor of Illinois. Id. at 772. It noted that the "crime of conspiracy 'to defraud' the United States, promulgated a few years before the mail fraud statute, was intended from the start to include bribery within its ambit and has been uniformly so interpreted by the Supreme Court." Id. at 780 n.46 (citing United States v. Johnson, 383 U.S. 169, 172 (1966); Haas v. Henkel, 216 U.S. 462, 479-80 (1910)).

         In 1987, the Supreme Court "stopped the development of the intangible-rights doctrine in its tracks." Shilling, at 401 (discussing McNally v. United States, 483 U.S. 350 (1987)). In McNally v. United States, 483 U.S. 350 (1987), the Supreme Court held that the federal mail fraud statute did not proscribe schemes to defraud citizens of their intangible rights to the honest services of their representatives. 483 U.S. at 356-361. "Rather than constru[ing] the statute in a manner that leaves its outer boundaries ambiguous and involves the Federal Government in setting standards of disclosure and good government for local and state officials, " the Supreme Court read the statute "as limited in scope to the protection of property rights." Id. at 360 (emphasis added). "If Congress desires to go further, it must speak more clearly." Id.

         With that invitation, Congress quickly responded by enacting 18 U.S.C. § 1346 to provide that a "scheme or artifice to defraud" under § 1341 may include "a scheme or artifice to deprive another of the intangible right of honest services." Anti-Drug Abuse Act of 1988 § 7603(a), Pub. L. No. 100-690 (HR 5210), 102 Stat 4181 (codified at 18 U.S.C. § 1346). This provision became known as the "McNally Amendment" as it was "intended merely to overturn the McNally decision. No. other change in the law [was] intended." 134 Cong. Rec. H11108-01 (daily ed. Oct. 21, 1988) (statement of Rep. ...