VALERIE CAPRONI, United States District Judge:
On November 30, 2015, Sheldon Silver, former Speaker of the New York State Assembly, was convicted on two counts of honest services mail fraud, 18 U.S.C. §§ 1341, 1346, two counts of honest services wire fraud, 18 U.S.C. §§ 1343, 1346, two counts of extortion under color of official right, 18 U.S.C. § 1951, and one count of money laundering, 18 U.S.C. § 1957. On May 3, 2016, Silver was sentenced to imprisonment and to pay a financial penalty and ordered to forfeit the proceeds of the crimes. Dkt. 297. Silver moves to continue bail and to stay the fine and forfeiture orders pending appeal. For the following reasons, Silver's motion is granted in part.
Silver orchestrated two criminal schemes in which he abused his position as the Speaker of the New York State Assembly and as an elected Assemblyman for unlawful personal gain. The two schemes follow the same basic model: Silver received bribes and kickbacks in the form of referral fees from third party law firms in exchange for actual and promised official actions. Silver also engaged in money laundering pursuant to which he invested the proceeds of his unlawful schemes into private, exclusive investment vehicles.
The first scheme is the "Mesothelioma Scheme." Silver was "of counsel" to the personal injury law firm Weitz & Luxenberg, and he received a referral fee for any case he brought into the firm. Tr. 180-81, 184, 1015-17. Lawsuits for mesothelioma, a rare form of cancer caused by exposure to asbestos, were particularly lucrative for the firm. Tr. 176-77, 262, 273, 1149, 1206-09.
Dr. Robert Taub, a physician-researcher at Columbia-Presbyterian Hospital who specialized in mesothelioma, approached Silver in 2003 to ask him to encourage Weitz & Luxenberg to donate to mesothelioma research. Tr. 249-51, 265, 267-68. Silver declined to do so but within one to two weeks made it known to Dr. Taub through a mutual friend that he wanted Dr. Taub to refer mesothelioma cases to Weitz & Luxenberg through him. Tr. 269-70, 273. In order to develop a relationship
Several months after Dr. Taub began making the referrals, Silver made it known to Dr. Taub that he should request state funding for his mesothelioma research through Silver. Tr. 274-75. In response, in early January 2004, Dr. Taub sent a letter to Silver requesting state funding. Tr. 275, 289-92; GX 302. Over a year later and just a few months after Silver received his first referral fees from Weitz & Luxenberg for a Taub-referred mesothelioma client, Silver approved — with no public disclosure — the first of two $250,000 New York State grants to Columbia University to support Dr. Taub's research ("Taub Grants"). Tr. 275, 661-62, 674-76, 1028-33; GX 115, 284, 514-1.
Silver never provided additional funding for Dr. Taub's research, but he did take other actions on behalf of Dr. Taub. In 2007, Silver had his Assembly office staff call Martin Schoenfeld, a Justice on the New York Supreme Court, to ask him to hire Dr. Taub's daughter, who was in law school, as an unpaid intern. Tr. 1323. Judy Rapfogel, Silver's chief of staff, emailed Dr. Taub's daughter's resume to the judge, and the judge hired Dr. Taub's daughter for the internship after an interview. Tr. 277, 1323-26; GX 440. In May 2008, Silver awarded $25,000 in state grant funding to the Shalom Task Force, on the board of which sat Dr. Taub's wife. Tr. 342-346; GX. 389-1, 389-2. In May 2011, Silver rushed his staff to prepare a New York Assembly resolution and official proclamation commending Dr. Taub so that Silver could present it to Dr. Taub at a charity event. Tr. 388-93, 1260-63, 1265-66; GX 314. In August 2011, Silver agreed to help Dr. Taub secure the necessary New York City permits for a charity run to benefit mesothelioma research. Tr. 401-410; GX 525-21. Dr. Taub indicated at the time that Silver would likely want something — probably referrals — in return for his help, which Dr. Taub described as a "pattern" when dealing with Silver. Tr. 401-02, 407. Finally, in February 2012, at Dr. Taub's request, Silver helped Dr. Taub's son get a job with
Silver concealed his arrangement with Dr. Taub from virtually everyone — from Weitz & Luxenberg, his press officer, other New York State government officials, the press, the public, and even the mutual friend who initially acted as the intermediary between Silver and Dr. Taub. Tr. 100, 189, 202-03, 288-89, 933-35, 965, 1020, 1154-56, 1183-84, 1186, 2115, 2188-89, 2193-94, 2206, 2224-27; GX 1-3, 913-924, 2009.
The second scheme is the "Real Estate Scheme." Glenwood Management and the Witkoff Group are two major residential real estate developers in New York. Both companies depend heavily on the New York State government for favorable rent regulation, 421-a tax abatement legislation, and tax-exempt financing that must be approved by the Public Authorities Control Board ("PACB").
At Silver's prompting, both Glenwood and Witkoff — in 1997 and 2005, respectively — began referring some of their tax certiorari work to Silver's friend Jay Arthur Goldberg at the law firm Goldberg & Iryami. Tr. 1427, 1747, 2021-27. When Glenwood began sending some of its tax certiorari work to Goldberg & Iryami, important real estate legislation was up for renewal. Tr. 1635. Witkoff began transferring some of its tax certiorari work to Goldberg & Iryami because it wanted access to Silver, did not want to "alienate" him, wanted to do him a "favor," and sought to generate goodwill. Tr. 2025-27.
Silver took a number of official actions that benefited Glenwood and Witkoff. Silver, through a proxy, voted as one of three members of the PACB to approve Glenwood's request for billions of dollars in tax-exempt financing. Tr. 1700-05, 1932-43; GX 1522. Silver officially opposed the relocation of a methadone clinic that was proposed to be located close to one of Glenwood's rental buildings in Silver's district. Tr. 1602-1605, 1749-53, 1783-86. Silver personally
Just as in the Mesothelioma Scheme, Silver concealed his arrangement with Golberg & Iryami, Glenwood, and Witkoff from virtually everyone; even Glenwood and Witkoff did not initially know that Silver was receiving referral fees from Golberg & Iryami for their tax certiorari work. Tr. 81-82, 1391-1402, 1747, 1788, 1793, 1961-63, 2036-39, 2043, 2115; GX 1-4, 913-24, 2009. When Glenwood was informed that Silver was receiving referral fees based on its business, it and Silver concocted a scheme to limit the number of Glenwood employees who were aware of the financial arrangements. Tr. 1392-1402, 1456-61, 1608-09, 1616-17, 1787-93, 1800-07, 1898, 1905, 1914; GX 700. When Steven Witkoff, who owns eighty-five percent of the Witkoff Group, discovered that Silver was receiving referral fees, he was furious because he believed the arrangement could be illegal. Tr. 2038-40; GX 737, 834.
Silver was also convicted of money laundering. The evidence showed that he invested the proceeds of the Mesothelioma and Real Estate Schemes into high-yield, private, and exclusive investment vehicles. Tr. 2465-66, 2524-38; GX S-5, 1511-13. At one point, Silver placed half of an investment in his wife's name so that he would not be required to publically disclose the full amount of his investment. Tr. 2429-30.
Silver was convicted on all counts on November 30, 2015. On May 3, 2016, he was sentenced to twelve years of imprisonment on counts one through six (the honest services and extortion counts) and to ten years of imprisonment on count seven (the money laundering count), all to run concurrently. The Court also ordered Silver to pay a fine of $1,750,000 and to forfeit $5,393,976.63. The Court ordered Silver to self-surrender to the Bureau of Prisons on July 1, 2016, and to pay $1,500,00 of the financial penalty no later than June 14, 2016, the balance ($250,000) due in monthly installments of no less than $5,846, starting July 14, 2016. On May 13, 2016, Silver moved to continue bail and to stay the financial penalties pending appeal, relying largely on McDonnell v. United States, No. 15-474, which was then pending before the Supreme Court. Dkt. 299. On May 18, 2016, the Court adjourned: Silver's deadline to begin to pay the fine and forfeiture to August 15, 2016; Silver's self-surrender date to August 31, 2016; and briefing on Silver's motion to continue bail to after the Supreme Court decided McDonnell. Dkt. 304. On June 27, 2016, the Supreme Court decided McDonnell, and on July 11, 2016, Silver made an amended motion to continue bail and to stay financial penalties, Dkt. 312, which the Government opposed, Dkt. 313.
In support of his motion to continue bail, Silver primarily argues that the scope of "official action" in a quid pro quo — an element of both honest services fraud and extortion under color of official right — has changed dramatically due to the Supreme
A convicted defendant who has been sentenced to imprisonment must be detained unless the Court finds "by clear and convincing evidence that the person is not likely to flee or pose a danger to the safety of any other person or the community if released" and "that the appeal is not for the purpose of delay and raises a substantial question of law or fact likely to result in ... reversal [or] ... an order for a new trial." 18 U.S.C. § 3143(b)(1)-(2). It is the defendant's burden to rebut the presumption in favor of detention by clear and convincing evidence. See United States v. Abuhamra, 389 F.3d 309, 319 (2d Cir. 2004) (in the post-verdict, pre-sentencing context). If a defendant meets this substantial burden, bail pending appeal is mandatory. See id. (quoting 18 U.S.C. § 3143(a) for the post-verdict, pre-sentencing context, but the mandatory language in 18 U.S.C. § 3143(b) for the post-sentencing context is identical). For all the reasons stated in Silver's motion, the Court finds by clear and convincing evidence that Silver is unlikely to flee or pose a danger to the community. Def. Mem. 2-3. The Court also finds that delay is not the purpose of the appeal. Accordingly, only the second requirement for bail pending appeal is at issue.
The second requirement — that the appeal raises a substantial question of law or fact likely to result in a reversal or order for a new trial — does not mean that the district court must "`predict the probability
Silver argues that there is a substantial question whether, in light of McDonnell, the jury charge was erroneous, and if the Court of Appeals finds that it was, Silver asserts that the conviction will likely be reversed and a new trial ordered. A charge is in error if the "charge either fails to adequately inform the jury of the law, or misleads the jury as to a correct legal standard." United States v. Quattrone, 441 F.3d 153, 177 (2d Cir.2006) (internal quotation marks and citation omitted). A court must look to the charge as a whole to determine whether a defendant was prejudiced and "to determine whether it adequately reflected the law and would have conveyed to a reasonable juror the relevant law." United States v. Mulder, 273 F.3d 91, 105 (2d Cir.2001) (internal quotation marks and citation omitted). "An erroneous instruction, unless harmless, requires a new trial." United States v. Bah, 574 F.3d 106, 114 (2d Cir. 2009) (internal quotation marks and citation omitted). An error is harmless if it is clear beyond a reasonable doubt that a rational jury would have convicted if it had been properly charged. Id. Thus, Silver must demonstrate both that there is a substantial question whether the charge was erroneous and, if so, that there is a substantial question whether the error was harmless.
Honest services fraud and extortion under color of official right require a quid pro quo — an exchange of official action for something of value or property not due to the public official by his public office. The Supreme Court in McDonnell addressed what qualifies as an "official act." In that case, Robert McDonnell, the former Governor of Virginia, was charged, inter alia, with honest services fraud and extortion under color of official right. While McDonnell was in office, he and his wife accepted $175,000 in loans, gifts, and other benefits from businessman Jonnie Williams, who was the chief executive officer of Star Scientific, a Virginia-based company that developed a nutritional supplement made from antabine, a compound found in tobacco. McDonnell v. United States, ___ U.S. ___, 136 S.Ct. 2355, 2361, 195 L.Ed.2d 639 (2016). Williams wanted Virginia's public universities to conduct research studies on the nutritional supplement and sought McDonnell's help in obtaining the studies. Id. The Government alleged in the indictment and argued at trial and on appeal that McDonnell committed the following official acts to assist Williams in exchange for the loans and gifts: (1) arranging meetings for Williams with subordinate officials to discuss Star Scientific's product; (2)
The parties had agreed that the jury charge should define the official action element of Hobbs Act extortion and honest services fraud by quoting the federal bribery statute, 18 U.S.C § 201(a)(3), and the district court defined official action accordingly. Id. at 2365, 2366. The district court also instructed that official acts "encompassed `acts that a public official customarily performs,' including acts `in furtherance of longer-term goals' or `in a series of steps to exercise influence or achieve an end.'" Id. at 2366 (citation omitted). The district court, however, refused to instruct the jury, as requested by McDonnell, that "merely arranging a meeting, attending an event, hosting a reception, or making a speech are not, standing alone, `official acts,' even if they are settled practices of the official, because they are not decisions on matters pending before the government." Id. (internal quotation marks and citation omitted). The district court also rejected McDonnell's requested instruction that "an `official act' must intend to or `in fact influence a specific official decision the government actually makes — such as awarding a contract, hiring a government employee, issuing a license, passing a law, or implementing a regulation.'" Id. (citation omitted). The jury convicted McDonnell of honest services fraud and extortion, and the Fourth Circuit affirmed. Id. at 2366, 2367.
The Supreme Court vacated the Court of Appeals' judgment and remanded the case because the jury was incorrectly instructed on the meaning of official act and may have convicted McDonnell for conduct that was not unlawful. Id. at 2375. To reach that conclusion, the Supreme Court relied on section 201(a)(3) of the federal bribery statute, which defines official act as "any decision or action on any question, matter, cause, suit, proceeding or controversy, which may at any time be pending, or which may by law be brought before any public official, in such official's official capacity, or in such official's place of trust or profit." Id. at 2367 (quoting 18 U.S.C. § 201(a)(3)).
Id. at 2371-72.
Both the Government and Silver submitted proposed jury instructions in advance of the trial. The Government's proposed instruction defined official action as "any act taken under color of official authority." Dkt. 68, at 11. Silver's proposed instruction defining "official act" was an exact quote of section 201(a)(3) from the federal bribery statute. Dkt. 66, at 30. During the charge conference, Silver submitted another proposed instruction for official action, stating that "the government must prove the exercise of actual governmental power, the threat to exercise such power, or pressure imposed on others to exercise actual governmental power." Dkt. 298, Ex. A; Tr. 2784-85. The Court declined to include Silver's additional instruction on the basis that it essentially repeated what the Court's proposed instructions already said. Tr. 2786.
This Court provided the same definition of official action in both the honest services fraud and extortion under color of official right jury instructions. The Court told the jury that to prove honest services fraud, among other things, the Government had to prove that Silver received bribes or kickbacks as part of a scheme to defraud. Jury Charge 17 (Dkt. 135). The Court explained that to satisfy this element, the Government must prove there was a quid pro quo, i.e., "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." Id. The Court continued, "[o]fficial action includes any action taken or to be taken under color of official authority." Id. In its extortion charge, the Court also instructed that the Government must prove a quid pro quo, i.e., that "property was sought or received by Mr. Silver, directly or indirectly, in exchange for the promise or performance of official action." Id. at 23. The Court did not redefine official action in its extortion charge but did explicitly reference the honest services fraud charge when setting forth the quid pro quo requirement as an element of extortion. Id.
Other provisions in the charge provided some — albeit limited — additional context as to the scope of official action. In defining a bribe for honest services fraud, the Court instructed that the Government had to prove that in exchange for payments Silver "intend[ed] to be influenced in the performance of his public duties" and understood that he was "expected to exercise official influence or make official decisions for the benefit of the payor." Id. at 17, 18. In defining a quid pro quo for extortion, the Court added that Silver must have been aware that the extorted party "was motivated, at least in part, by the expectation that as a result of the payment, Mr. Silver would exercise official influence or decision making for the benefit of the extorted party." Id. at 23-24. In addition, the Court charged the following regarding the statute of limitations:
Id. at 32.
The charge given to the jury did not contradict McDonnell. The Court did not charge the jury that merely arranging a meeting, attending an event, hosting a reception, or making a speech are, standing alone, official acts. Nevertheless, the jury charge did not include key language from McDonnell's definition of official action. The charge did not include the three instructions that the Supreme Court in McDonnell held should have been given to the jury in that case. Specifically, this Court did not instruct the jury that (1) it "must identify a `question, matter, cause, suit, proceeding or controversy' involving the formal exercise of governmental power;" (2) "the pertinent `question, matter, cause, suit, proceeding or controversy' must be something specific and focused that is `pending' or `may by law be brought before any public official;'" and (3) that it "had to find that [Silver] made a decision or took an action — or agreed to do so — on the identified `question, matter, cause, suit, proceeding or controversy,'" which excludes "merely arranging a meeting or hosting an event to discuss a matter." McDonnell, 136 S.Ct. at 2374-75 (emphasis in original).
It is also a close question whether the potentially erroneous charge was harmless, i.e., it is a close question whether it is clear beyond a reasonable doubt that a rational jury would have found Silver guilty absent the error. As stated previously, this case differs from McDonnell because most of the official acts presented to the jury — the provision of state grants, approval of tax-exempt state financing, and voting on legislation — are undoubtedly official acts under McDonnell. Thus, the harmless error analysis in this case presents a much closer call than in McDonnell. The Government, however, also introduced evidence of actions taken by Silver in exchange for money that may not qualify as
In the Mesothelioma Scheme, three of the acts proven by the Government — the provision of the Taub Grants, a call to get an internship for Dr. Taub's daughter, and the provision of the grant to the Shalom Task Force — occurred outside the statute of limitations. While it is clear beyond a reasonable doubt that the provision of the Taub Grants and the Shalom Task Force grant were exercises of official power, an effort to get Dr. Taub's daughter an internship is less obviously an official act.
Because resolutions and proclamations are passed by the Assembly, Tr. 1259, the resolution and proclamation brought to the Assembly floor by Silver was a formal exercise of governmental power on a specific matter brought by law, in accordance with McDonnell. But, given the evidence of the pro forma, rubber stamp nature of these honorary resolutions and proclamations, see Tr. 1278-79, 1282-85, 1287, 1289-90; DX 90, there is a substantial question whether a rational jury would have found Silver guilty, absent the error in the charge, based solely on the resolution and proclamation.
As to the permits, a rational jury could have interpreted Silver's offer to help as an offer to advise Dr. Taub as to the steps Dr. Taub would need to take to secure the permits, which would not be official action under McDonnell. This Court believes the evidence shows that Silver agreed to help Dr. Taub by having his own office assist in securing the permits, which might have entailed exerting pressure on another official to perform an official act under McDonnell, but the Court believes that a rational fact finder could reasonably decide this issue the other way.
Of the three acts within the statute of limitations, Silver's pressure on Ohel to hire Dr. Taub's son presents the most interesting post-McDonnell issue. As observed in note 9, it is not clear whether the Court in McDonnell intended to exclude from the realm of "official acts" the use of official power to pressure a non-governmental entity or person to take action. McDonnell holds that exerting pressure on or advising another official to act is official
The Government argues that any error in the charge was harmless because no rational jury could find that the Taub Grants were not official action and that the Mesothelioma scheme did not continue into the statute of limitation period. Gov't Opp. 22-23 (Dkt. 313). The Court instructed the jury that the crime fell within the statute of limitations if "any aspect of the crime you are considering continued on or after February 19, 2010." Jury Charge 32. The Government undoubtedly presented evidence that Silver continued to receive referrals from Dr. Taub and payments from the referrals and that there were wires and mailings in furtherance of the scheme after February 2010. GX 1509, 1520. Although the Court tends to agree with the Government that any error was harmless, because the Court did not instruct the jury what "any aspect of the crime" included — whether receipt of a single payment or a single mailing within the statute of limitations sufficed — it is conceivable that a rational jury would not have convicted if it had received complete instructions on both what constitutes an official act and what specifically it must have found to have occurred within the statute of limitations.
Any error in the charge as it relates to the Real Estate Scheme is almost certain to be harmless error. Silver argues that the Government improperly urged the jury to convict Silver because in exchange for tax certiorari referrals he took a private meeting with Glenwood and its lobbyist in advance of the Assembly vote on the Rent Act of 2011, which is not official action under McDonnell. Def. Mem. 13-14. The Government did argue to the jury that the meeting itself was an official act given in exchange for tax certiorari referrals. Tr. 2892 ("That meeting, ladies and gentlemen, that is official action."). But, the Government also argued that the significance of the meeting, which took place on the eve of the Rent Act vote and during which Silver confirmed that Glenwood was satisfied with the various compromises made in the bill, was that it tended to demonstrate
Silver moves to stay the fine and forfeiture order pending appeal pursuant to Federal Rule of Criminal Procedure 38(c). Silver represents that to pay the fine, he and his wife would be forced to sell their two residences, depriving Mrs. Silver of the homes she has occupied for decades, and to liquidate retirement accounts, incurring
Similarly, "[i]f a defendant appeals from a conviction or an order of forfeiture, the court may stay the order of forfeiture on terms appropriate to ensure that the property remains available pending appellate review." Fed. R. Crim. P. 32.2(d). According to the Advisory Committee Notes, the purpose of Rule 32.2(d) "is to ensure that the property remains intact and unencumbered so that it may be returned to the defendant in the event the appeal is successful." Id. "[T]he law governing when a district court should exercise its discretion to stay a forfeiture order has not been extensively developed." United States v. Davis, No. CRIM.A. 07-CR-11 (JCH), 2009 WL 2475340, at *2 (D.Conn. June 15, 2009). District courts in this Circuit typically consider four factors when considering a motion to stay a forfeiture order: "1) the likelihood of success on appeal; 2) whether the forfeited asset is likely to depreciate over time; 3) the forfeited asset's intrinsic value to defendant (i.e., the availability of substitutes); and 4) the expense of maintaining the forfeited property." See, e.g., United States v. Young, No. 12-CR-210, 2014 WL 1671507, at *2 (W.D.N.Y. Apr. 24, 2014); United States v. Quinones, No. 06-CR-845(S-2)(FB), 2009 WL 4249588, at *2 (E.D.N.Y. Nov. 25, 2009); Davis, 2009 WL 2475340, at *2.
As to the financial penalty, as discussed, Silver has articulated a possibly meritorious legal basis for his appeal, and he has also shown that he would suffer irreparable harm should the stay be denied because to pay the fine he would be forced to sell his two residences and to incur substantial tax liability associated with liquidating his retirement account
Accordingly, the fine and forfeiture orders are stayed in part pending Silver's appeal: Silver must promptly begin making monthly payments on the fine equal to $5,846 per month (the first payment is due September 1, 2016). Silver also may not transfer or encumber his assets (such as by taking out loans) and must refrain from dissipating his assets.
For the foregoing reasons, Silver's motion to continue bail pending appeal and to stay the fine and forfeiture orders pending appeal is GRANTED in part and DENIED in part. The Clerk of Court is respectfully requested to terminate the open motions at docket entries 299 and 312.
Silver also maintains that his conduct with respect to the methadone clinic was not official action because he did not make a decision or act on the methadone clinic but merely expressed opposition without intending to pressure another official or to provide advice that would form the basis for an official act. Def. Reply 15. The Court disagrees; there was evidence in the record that Silver sought to take credit for causing the clinic to be relocated, implying that he did take some action to oppose the location of the clinic. Tr. 1602-05, 1752-53. These facts are not like McDonnell, where the Governor expressed support for the research study at a meeting; in contrast, the evidence showed that Silver's intended goal was to use his official power to influence the decision-makers to relocate the clinic. Moreover, Silver merely had to agree to perform an official act — and not actually perform the act — in order for there to have been a quid pro quo. See McDonnell, 136 S.Ct. at 2371.
Although the relocation of the methadone clinic and the PACB votes were unquestionably official acts, there is nevertheless a substantial issue for appeal whether, had a rational jury been correctly charged that a meeting alone is not official action and based on that charge it rejected the meeting on the Rent Act as an "official act," it would have convicted based on the remaining official acts: the PACB votes and the relocation of the methadone clinic. As to the PACB votes, there was no evidence adduced that any of the bond issues was particularly controversial, which could have led the jury to conclude that those votes were not a quo exchanged for Glenwood's tax certiorari business. Although the methadone clinic was controversial, the evidence demonstrated that Silver was already opposing the location of the clinic before anyone from Glenwood spoke to him about it.
