United States v. Henry

Opinions of the United
1994 Decisions States Court of Appeals
for the Third Circuit

7-12-1994

United States of America v. Henry
Precedential or Non-Precedential:

Docket 93-7267

Follow this and additional works at: http://digitalcommons.law.villanova.edu/thirdcircuit_1994

Recommended Citation
"United States of America v. Henry" (1994). 1994 Decisions. Paper 80.
http://digitalcommons.law.villanova.edu/thirdcircuit_1994/80

This decision is brought to you for free and open access by the Opinions of the United States Court of Appeals for the Third Circuit at Villanova
University School of Law Digital Repository. It has been accepted for inclusion in 1994 Decisions by an authorized administrator of Villanova
University School of Law Digital Repository. For more information, please contact Benjamin.Carlson@law.villanova.edu.
 UNITED STATES COURT OF APPEALS
FOR THE THIRD CIRCUIT

No. 93-7267

UNITED STATES OF AMERICA,
Appellant

V.

THOMAS HENRY; MOWRY MIKE

ON APPEAL FROM THE UNITED STATES DISTRICT COURT
FOR THE MIDDLE DISTRICT OF PENNSYLVANIA
(D.C. Criminal No. 92-00308)

Argued December 7, 1993

Before: BECKER and NYGAARD, Circuit Judges and
WEIS, Senior Circuit Judge

(Opinion Filed July 12, l994 )

WAYNE P. SAMUELSON, ESQUIRE
United States Attorney
MARTIN C. CARLSON, ESQUIRE (Argued)
Assistant United States Attorney
Federal Building
228 Walnut Street
P.O. Box 11754
Harrisburg, PA 17108
Attorneys for Appellant

PAUL J. KILLION, ESQUIRE
Killion & Metz
214 Pine Street
P.O. Box 11670
Harrisburg, PA 17101
Attorney for Appellee Thomas Henry

JAMES J. ROSS, ESQUIRE (Argued)
Bowers & Ross
820 Kennedy Drive
P.O. Box 280
Ambridge, PA 15003
Attorney for Appellee Mowry Mike

1
 OPINION OF THE COURT

NYGAARD, Circuit Judge.
The government appeals the district court's dismissal

of a twenty-one count indictment charging Thomas Henry and Mowry

Mike with conspiracy, bank fraud, and wire fraud in connection

with an alleged bid-rigging scheme. For the following reasons,

we will affirm the dismissal of the indictment.

I.

Between 1986 and 1988, Thomas Henry was the Comptroller

of the Delaware River Joint Toll Bridge Commission (the

"Commission"). The Commission, a bi-state agency, operates and

maintains twenty-one bridges spanning the Delaware River between

New Jersey and Pennsylvania. Among these bridges are seven toll

bridges that generate more than ten million dollars in revenue

annually.

The Commission is governed by ten Commissioners, five

of whom are appointed by the Governor of New Jersey and confirmed

by the New Jersey Senate and five of whom represent Pennsyl-

vania's Governor, Treasurer, Auditor General and Transportation

Secretary. Mowry Mike, Pennsylvania's Executive Deputy Auditor

General, served as Auditor General Donald Bailey's representative

on the Commission between 1986 and 1988. Mike also was a

political operative and campaign fund-raiser for Bailey during

his unsuccessful runs in 1986 for the Democratic nomination for

2
the United States Senate and in 1988 for re-election as Auditor

General.

The charges in the indictment were based on Henry's and

Mike's alleged corruption of the process by which banks were

chosen to be the depositories of the Commission's toll bridge

revenues. The Commission invested the money in short-term

certificates of deposit at banks selected through competitive

bidding. As the Commission's Comptroller, Henry was responsible

for this process and, according to the indictment, had "a

fiduciary obligation to deal with Commission funds and other

public money in a forthright and honest fashion." He would

notify interested banks that the Commission had money it wished

to deposit and that they could submit confidential bids to him in

writing or by telephone by a certain deadline. After the

deadline passed, the funds would be deposited with the bank

meeting the Commission's financial requirements that offered the

highest interest rate on the certificates of deposit.

According to the indictment, on ten occasions Henry

disclosed bid information to Mike and another individual in the

Auditor General's office, who in turn disclosed it to a

representative of one bank, Bank A. Bank A was thus allegedly

able to narrowly outbid the other banks by offering a slightly

higher rate of interest and, as a result, received deposits of

$34,278,000 in Commission funds. In return, representatives of

Bank A allegedly afforded Mike expedited handling on a $50,000

car loan and contributed more than $10,000 to various political

3
campaigns, including Auditor General Bailey's Senate campaign, in

which Mike was involved.

Count one of the indictment charged Henry and Mike with

conspiracy to violate the federal mail, wire and bank fraud

statutes, in violation of 18 U.S.C. § 371. Counts two through

twenty-one charged ten counts of bank fraud in violation of 18

U.S.C. § 1344, and ten counts of wire fraud in violation of 18

U.S.C. § 1343, for each occasion on which the bidding information

allegedly was compromised.1 The indictment asserted that in

rigging the bids, "Henry violate[d] his fiduciary duty and

Commission custom, practices and policies" and "Henry, Mike and

their [unindicted] co-conspirators defrauded the other banks

bidding for these public funds of money and property, in that

[they] denied these other bidding banks a fair and honest

opportunity to receive this public money" or "a fair and honest

opportunity to bid on" it.

The district court dismissed all of these counts,

finding that the scheme alleged in the indictment, although
unethical, did not involve a deprivation of property as required

by McNally v. United States, 483 U.S. 350, 107 S. Ct. 2875

(1987), and therefore could not constitute mail, wire or bank

fraud. The district court had jurisdiction under 18 U.S.C.

§3231, and we have jurisdiction under 28 U.S.C. § 1291 and 18

1
The indictment also contained a twenty-second count charging
Mike alone with obstructing justice during the investigation into
the scheme, but this count was dismissed without prejudice
pending this appeal.

4
U.S.C. § 3731. Our review of the district court's dismissal of

the indictment on the grounds of legal insufficiency is plenary.

II.

In McNally v. United States, 483 U.S. 350, 107 S. Ct.

2875 (1987), the Supreme Court held that the federal mail fraud

statute did not prohibit a scheme to defraud a state and its

citizens of the intangible right to honest government, but rather

only proscribed schemes to defraud their victims of money or

property. Shortly thereafter, in Carpenter v. United States, 484

U.S. 19, 25, 108 S. Ct. 316, 320 (1987), the Court indicated that

the mail and wire fraud statutes likewise do not reach schemes to

defraud an employer of its intangible right to its employee's

honest services. Carpenter made clear, however, that although a

property right is required under McNally, it need not be a

tangible one. The statutes cover schemes to defraud another of

intangible property, such as confidential business information.

Id. at 25-26, 108 S. Ct. at 320-21.

In response to McNally, Congress extended the fraud

statutes' sweep to schemes to defraud the intangible right of

honest services, see 18 U.S.C. § 1364, but that extension does
not apply to this case. It did not become effective until

November 18, 1988, well after the bid-rigging alleged in the

indictment ceased, and it is not retroactive. See Kehr Packages,

Inc. v. Fidelcor, Inc., 926 F.2d 1406, 1417 n.4 (3d Cir.), cert.

denied, 501 U.S. 1222, 111 S. Ct. 2839 (1991). Therefore, to

state an offense under the federal fraud statutes, the indictment

5
against Henry and Mike must allege a scheme that meets McNally's

standards.2

Initially, we see an intangible rights problem with the

indictment's allegations involving Henry's derelictions of his

duties to the public and the Commission. Under McNally and

Carpenter, a government official's breach of his or her

obligations to the public or an employee's breach of his or her

obligations to an employer cannot violate the fraud statutes. See

Carpenter, 484 U.S. at 25, 108 S. Ct. at 320; McNally, 483 U.S.

at 355, 107 S. Ct. at 2879. These theories, however, were not

the only ones relied upon in the indictment. Indeed, the

indictment's focus was not on the Commission or the public, but

on the competing banks: its fraud claims were grounded on the

allegation that Henry's and Mike's scheme defrauded these banks

of a fair opportunity to bid to receive the Commission's funds.3

The government now argues that Henry's and Mike's scheme also

defrauded the Commission of its confidential business information

2
McNally and Carpenter involved the mail and wire fraud statutes,
but their principles apply equally to the bank fraud statute
because the operative language of all three is the same. See 18
U.S.C. §§ 1341, 1343, 1344.
3
The focus on the competing banks as the scheme's victims is
obviously necessary in the bank fraud counts, see United States
v. Goldblatt, 813 F.2d 619, 623-24 (3d Cir. 1987) (noting that 18
U.S.C. § 1344 is aimed at losses to banks), and it is
understandable in the other counts because of the unusual nature
of this particular scheme. Bid-rigging by public officials
typically results in a government entity paying more than it
otherwise would have for goods or services, see, e.g., United
States v. Osser, 864 F.2d 1056, 1062-63 (3d Cir. 1988), United
States v. Asher, 854 F.2d 1483, 1495-96 (3d Cir. 1988), cert.
denied, 488 U.S. 1029, 109 S. Ct. 836 (1989), but the Commission
allegedly made money here, receiving a higher interest rate on
its deposits as a result of the scheme.

6
and the right to control how its money was invested, but these

theories were not advanced in the indictment and cannot save it

on appeal.4 See United States v. Zauber, 857 F.2d 137, 143 (3d

Cir. 1988), cert. denied, 489 U.S. 1066, 109 S. Ct. 1340 (1989).

The question, then, is whether a fair bidding opportunity is a

property right of the competing banks. If it is, the presence of

any intangible rights allegations will not invalidate the

indictment. See United States v. Asher, 854 F.2d 1483, 1494 (3d

Cir. 1988), cert. denied, 488 U.S. 1029, 109 S. Ct. 836 (1989).

We note that once the Commission's deposits actually

were awarded to one of the bidding banks, they legally would be

considered the property of that bank. It is a fundamental

principle of banking law that money deposited with a bank becomes

the bank's property, and the bank may use it as its own. In re

Erie Forge & Steel Corp., 456 F.2d 801, 804 (3d Cir. 1972)

(citing Prudential Trust Company's Assignment, 223 Pa. 409, 413,

72 A. 798, 799 (1909)); Lebanon Iron Co. v. Donnelly & Co., 29

F.2d 411, 412 (E.D. Pa. 1928). Here, however, the money had not

yet been deposited, and there is no way of knowing to which, if

any, of the bidding banks it would have gone. Even in a fair

process, Bank A might still have won the deposits. The issue,
4
Because the loss of control theory was not alleged, we need not
decide whether such a deprivation satisfies McNally. See United
States v. Zauber, 857 F.2d 137, 147 (3d Cir. 1988) (questioning
whether McNally supports the argument that the right to control
money constitutes property), cert. denied, 489 U.S. 1066, 109 S.
Ct. 1340 (1989). But see United States v. Martinez, 905 F.2d
709, 714-15 (3d Cir.) (holding that state's "right to keep its
medical licenses to itself and to bestow them on persons who had
fairly earned them" is property), cert. denied, 498 U.S. 1017,
111 S. Ct. 591 (1990).

7
therefore, is whether the competing banks' interest in having a

fair opportunity to bid for something that would become their

property if and when it were received is in itself property. We

conclude that it is not.

In holding that the Wall Street Journal was deprived of

property in violation of the mail and wire fraud statutes when

one of its reporters disclosed the timing and contents of his

column before it was published, the Carpenter Court emphasized

that the law had long treated confidential business information

as "'a species of property to which the corporation has the

exclusive right and benefit, and which a court of equity will

protect through the injunctive process or other appropriate

remedy.'" See Carpenter, 484 U.S. at 26, 108 S. Ct. at 320-21.

Thus, to determine whether a particular interest is property for

purposes of the fraud statutes, we look to whether the law

traditionally has recognized and enforced it as a property right.

See United States v. Evans, 844 F.2d 36, 41 (2d Cir. 1988) ("That

the right at issue . . . has not been treated as a property right

in other contexts and that there are many basic differences

between it and common-law property are relevant considerations in

determining whether the right is property under the federal fraud

statutes.").

The competing banks' interest in a fair bidding

opportunity does not meet this test. Clearly, each bidding

bank's chance of receiving property -- the deposits if its bid

were accepted -- was, at least in part, dependent on the

condition that the bidding process would be fair. This

8
condition, which is all that the bidding banks allegedly lost,

was thus valuable to them, but it is not a traditionally

recognized, enforceable property right. At most, the condition

is a promise to the bidding banks from those in charge of the

process that they would not interfere with it. It is not a grant

of a right of exclusion, which is an important aspect of

traditional property. See Carpenter, 484 U.S. at 26-27, 108 S.

Ct. at 321. Violation of this condition may have affected each

bidding bank's possible future receipt of property, but that does

not make the condition property.
The government bases its argument that the banks'
interest in a fair bidding opportunity is property on a Seventh
Circuit decision, United States v. Ashman, 979 F.2d 469 (7th Cir.
1992), cert. denied, ___ U.S. ___, 114 S. Ct. 62 (1993). We
believe, however, that Ashman does not support the government's
contention. In Ashman, a number of traders of commodities
futures contracts at the Chicago Board of Trade ("CBOT") were
convicted of mail and wire fraud, among other things, for
manipulating trades. The defendants were all either "locals"
(who traded on their own accounts) or "brokers" (who executed
orders from customers). Trading at the CBOT took place in pits
on the trading floor through "open outcry:" traders seeking to
buy or sell, either for themselves or for customers, openly and
audibly bid on or offered each contract so that all other traders
in the pit could accept the bid or offer. Id. at 475. However,
[i]n a "match" (the most recurrent type of fraud charged in the
indictment), a broker traded buy and sell orders in equal
quantities with a cooperating local. The two traders simply
agreed on the price of the trade rather than bidding or offering
the customer order in the open market and securing the best price
available. The broker thereby filled the customers' orders by
selection and not on the market.

Id. at 477. Most of the matches involved "market on close"
orders directing the broker to execute just before the close of
trading at the best possible price. Id. at 476-77. The
defendants filled these orders after the day's legitimate trading
had ended at a selected price within that day's closing range
(the span between the highest and lowest prices actually traded
in the market during the period immediately before the close of
trading). Id. These matches resulted in profits for the local:

9
The broker sold a customer's sell order to the local at a lower
price than the price at which he bought a different customer's
buy order from the same local. The local thereby would buy low
and sell high with the customer orders from the broker,
guaranteeing that the local made money.

Id. at 477.

The defendants mounted a McNally challenge, arguing
that matching trades did not involve the deprivation of property

since the customers received just what they asked for when their

orders were filled at a price within the closing range. Id. at

477. The Seventh Circuit disagreed insofar as matching denied

the customers the opportunity to obtain a better price, but

concluded that where the customers had no such opportunity,

matching did not violate the fraud statutes. Id. at 477-79. The

court thus invalidated the convictions for matching trades on

"limit days" when the commodity's price was fixed and no other

price was being traded in the pit, because "[m]erely denying a

customer the opportunity to obtain the limit price by open outcry

rather than by arranged trades [is] the kind of intangible

deprivation that McNally held could not constitute mail fraud."

Id. The government attempted to save the limit day convictions

by arguing that the matching deprived other traders in the pits

of the opportunity to profit on the trades, but the court

rejected this claim as nothing more than the untenable "assertion

that open outcry trading by itself constitutes a property right

protected under the mail and wire fraud statutes[.]" Id. We

see no difference between the other traders' interest in open

outcry trading, which the Seventh Circuit held not to be property

10
in Ashman, and the competing banks' interest in a fair bidding

process, which we hold not to be property here. Thus, Ashman

supports our conclusion, not the government's position.

Our determination that the fair opportunity to bid is

not a property right of the competing banks seals the fate of

this indictment. It is irrelevant that, as the government points

out, the scheme allegedly afforded its participants tangible

benefits -- over $34,000,000 in deposits for Bank A, and

favorable loan treatment and campaign contributions to his

political allies for Mike. The same was true in McNally, but did

not save the convictions there. McNally involved a self-dealing

patronage scheme in which the Kentucky Democratic Party Chairman,

a cabinet official, and a private individual arranged with the

company securing the Commonwealth's workers compensation

insurance that, in exchange for a continuing relationship, it

would share the commissions it received from insurers with

companies the defendants controlled. McNally, 483 U.S. at 352-

53, 107 S. Ct. at 2877-78. In reversing mail fraud convictions

obtained under the theory that the scheme defrauded Kentucky's

citizens and government of the intangible right to have the

Commonwealth's affairs conducted honestly, the Supreme Court

stated:
there was no charge and the jury was not
required to find that the Commonwealth itself
was defrauded of any money or property. It
was not alleged that in the absence of the
alleged scheme the Commonwealth would have
paid a lower premium or secured better
insurance. [The defendants] received part of
the commissions but those commissions were
not the Commonwealth's money. . . .

11
Id. at 360, 107 S. Ct. at 2882 (emphasis added). Just as the

insurance commissions in McNally were not from the Commonwealth,

the benefits Bank A and Mike received were not from the competing

banks, and therefore those benefits cannot save the indictment

here.

III.

In sum, we conclude that the indictment against Henry

and Mike does not allege a scheme to defraud its victims of a

property right and therefore does not state offenses under the

federal fraud statutes. We therefore will affirm the district

court's dismissal of the indictment.5

USA v. Henry 93-7267

WEIS, Circuit Judge, dissenting.

The case before us is not based on an "ethereal" right,

but rather presents a far more substantial property right -- the

ability of the other bidding banks to profit from a fund of more

than $34 million, a not insignificant amount even in these days.

That conclusion is not contrary to McNally v. United States, 483
U.S. 350 (1987), a case that was quite narrow in its actual

holding. The Court concluded that although property rights are

5
In light of our disposition of the government's appeal, we
dismiss Mike's cross-appeal from the district court's denial of
his motions for discovery and suppression as moot.

12
"clearly" within the protection of the mail fraud statute, "the

intangible right of the citizenry to good government" is not. Id.

at 356. That the Court had not intended to drastically narrow

the scope of the statute became evident in Carpenter v. United

States, 484 U.S. 19 (1987), a case decided in the following Term.

In Carpenter, the Court decided that confidential

business information is a property right and that a scheme to

disclose such information was within the proscription of the mail

and wire fraud statutes even though the owner sustained no

monetary loss. Id. at 25. In categorizing confidential business

information, the Court explained: "[I]ts intangible nature does

not make it any less `property' . . . . McNally did not limit

the scope of § 1341 to tangible as distinguished from intangible

property rights." Id. Reiterating the broad scope of the

statute, the Court commented: "As we observed last Term in

McNally, the words `to defraud' in the mail fraud statute have

the `common understanding' of `wronging one in his property

rights by dishonest methods or schemes, and usually signify the

deprivation of something of value by trick, deceit, chicane or

overreaching.'" Id. at 27 (quoting McNally, 483 U.S. at 358
(internal quotations omitted)).

In a post-McNally case, United States v. Asher, 854

F.2d 1483, 1494 (3d Cir. 1988), we concluded that the test for

determining whether a deprivation is cognizable under the mail

fraud statute is:

"[W]here rights are involved whose violation

would lead to no concrete economic harm, and

13
 where those rights are the only rights

involved in the case, McNally's proscriptions

would prevent upholding conviction on appeal.

Where, on the other hand, a violation of the

rights involved would result in depriving

another of something of value, and the

indictment . . . [is] based on that fact,

then the presence of intangible rights

language will not prove fatal . . . ."

See also United States v. Piccolo, 835 F.2d 517 (3d Cir. 1987).

We returned to the property concept in United States v.

Martinez, 905 F.2d 709 (3d Cir. 1990), where the defendant had

been convicted of fraudulently obtaining a medical license from

the state by the use of forged school transcripts. The defendant

argued that an unissued license was not property under McNally's

reasoning and was without value to the state. Id. at 713. We

rejected this argument, finding "nothing in the Supreme Court's

jurisprudence on the mail fraud statute that requires or supports

this theory of incipient or embryonic property." Id. In

declining to follow decisions in other circuits that

distinguished between issued and unissued licenses, we concluded

that Congress had not intended the reach of the mail fraud

statute "to be dependent on artificial constructs and fleeting

distinctions." Id. at 715. Rather, we read the statute as

"broadly protecting property interests." Id.

The deprivation of property rights in conjunction with

the federal fraud statutes has been addressed in the bid-rigging

14
context. For example, in Ranke v. United States, 873 F.2d 1033,

1039-40 (7th Cir. 1989), the Court upheld a conviction even

though the purchaser of services actually suffered no loss

because the successful bidder absorbed the bribes for

confidential information out of its own profits. See also Belt

v. United States, 868 F.2d 1208, 1214 (11th Cir. 1989)

(confidential bidding information as a result of bribery was a

violation of the wire fraud statute). The thrust of these cases,

however, was on the loss of property by persons soliciting bids

rather than those submitting the bids.

The indictment here focuses on the loss of property by

the competing bidders and not by the Commission. The indictment

charges that defendants executed "a scheme and artifice to

defraud federal chartered and insured financial institutions of

money and property by depriving these financial institutions of a

fair and honest opportunity to bid on public money . . . ."6 No

loss, either of pecuniary interest or of confidential

information, on the part of the Commission is mentioned in the

indictment, and thus, a Carpenter-type fraud is not asserted.

The indictment is somewhat unartfully worded in

asserting that the other banks were denied the opportunity to

bid. As a recitation of the facts in the indictment makes clear,

6
Although the majority notes that the Commission allegedly made
money because it received a higher interest rate on this deposit
as a result of the fraud, it is possible that without the
confidential information and the necessity for making political
campaign contributions in return, Bank A would have made higher
bids. The situation, therefore, is the same as in Ranke where
the successful low bidder absorbed the costs of the bribes in its
price.

15
however, the loss incurred by the competing bidders was actually

the opportunity to have a legitimate bid accepted, not merely

submitted. See Ginsburg v. United States, 909 F.2d 982, 984 (7th

Cir. 1990) (court is to look at specific conduct alleged and not

at the legal characterization of facts set forth in the

indictment).

Unlike the majority, I believe that the unsuccessful

banks had a sufficient property interest in a legitimate bidding

process to support the fraud charges here. The wire fraud

statute is not to be given a narrow construction, but is instead

to be interpreted to guard the public (including banks) against

the many fraudulent schemes that the fertile minds of the

criminally inclined may devise.

Transferring property concepts from one area of the law

to another must be done cautiously with an appreciation of the

differing circumstances and aims of the law that are implicated.

With due recognition of the limitations that must be placed on

transpositions of this nature, however, it seems to me that the

tort of interference with prospective contractual relationships

is a legitimate reference point.

The conduct of defendants as detailed in the indictment

was palpably dishonest and was specifically intended to deprive

the other banks of profitable contracts with the Commission. The

competing bank submitting the highest legitimate bid had an

enforceable proprietary interest that was harmed. This is

demonstrated by the fact that the unsuccessful bidder would have

had a civil remedy against these defendants and Bank A for the

16
tortious interference with prospective contractual relationships.

Restatement (Second) of Torts § 766B provides that one

who intentionally and improperly interferes with another's

prospective contractual relations is subject to liability for any

resultant pecuniary harm if the improper conduct caused a third

person not to enter into an agreement. See Leonard Duckworth,

Inc. v. Michael L. Field & Co., 516 F.2d 952, 955 (5th Cir. 1975)

("[T]he common law has long held that the reasonable expectancy

of a prospective contract is a property right to be protected

from wrongful interference in the same sense as an existing

contract is protected."); see also Small v. United States, 333

F.2d 702, 704 (3d Cir. 1964); Dupree v. United States, 264 F.2d

140, 143 (3d Cir. 1959).

The same philosophy was expressed in a different

context, almost a century ago. "[T]he notion is intolerable that

a man should be protected by the law in the enjoyment of

property, once it is acquired, but left unprotected by the law in

his efforts to acquire it. The cup of Tantalus would be a

fitting symbol for such a mockery." Brennan v. United Hatters of
North America, Local No. 17, 65 A. 165, 171 (N.J. 1906). For an

even earlier holding, see Keeble v. Hickeringill, 103 Eng. Rep.

1127 (Q.B. 1707) (defendant's actions in frightening away ducks

from plaintiff's pond supported a claim for damages even though

plaintiff had never taken possession of the fowl).

In Bruce Lincoln-Mercury, Inc. v. Universal C.I.T.
Credit Corp., 325 F.2d 2, 13 (3d Cir. 1963), we observed that the

law extends its protection further in the case of interference

17
with existing contracts than in precontractual interference, but

does draw a line beyond which no one may go in deliberately

intermeddling with the business affairs of others. "The interest

protected is [a] reasonable expectation of economic advantage."

Id. (footnote omitted). See W. Page Keeton et al., Prosser and

Keeton on the Law of Torts § 130 (5th ed. 1984).

The victims' loss in this case is not theoretical like

the deprivation of faithful government service excluded by

McNally, but is instead concrete and measurable. The allegations

in the indictment make it clear that in each instance the bank

that submitted the highest legitimate bid would have received the

Commission's money, but for the defendants' fraud. Thus, the

indictment establishes an actual, not an illusory or speculative

loss to that bank in each of the instances when defendants

disclosed the confidential information.

The indictment in United States v. Castor, 558 F.2d 379

(7th Cir. 1977) charged the defendant with fraudulently obtaining

a quite limited supply of liquor store permits to the detriment

of those who were thus unable to obtain one. The Court concluded

that the "diminished opportunity to obtain permits reduced the

other applicants' chances to make profits through the operation

of package liquor stores . . . [and was] a type of potential

pecuniary injury . . . [previously recognized as] the diminished

opportunity to obtain a financially favorable contract." Id. at
384; see also Johnson v. United States, 82 F.2d 500, 503 (6th

Cir. 1936) (unsuccessful bidder in bid-rigging scheme was

defrauded for purposes of mail fraud statute).

18
 A somewhat similar set of circumstances supported a

conviction in Gregory v. United States, 253 F.2d 104 (5th Cir.

1958). There, the defendant, through the fraudulent use of pre-

dated postal cancellations, was able to send the actual results,

rather than predictions, of football games as his entries in a

contest that awarded a new automobile as a prize. The defendant

argued that "so far as other contestants were concerned, until

the bird was in the hand, the Cadillac did not belong to them

either singularly or in a group." Id. at 109. The Court

rejected that contention and pointed out that the defendant's

conduct "was to cheat and deceive, to pretend and misrepresent.

As such, it was to defraud . . . ." Id.

All three cases are pre-McNally, but nothing there or

in Carpenter would weaken the reasoning or holdings in the three

Courts of Appeals decisions.7 The fraudulent deprivation of a

reasonable expectation to secure an economic advantage falls

within the proscriptions of the federal fraud statutes.

Unlike the majority, I am not persuaded that this case

falls within the rationale of United States v. Ashman, 979 F.2d

469 (7th Cir. 1992). There were actually two holdings in that

case. In the first, the Court of Appeals affirmed the

convictions where the defendants removed their customers from the

7
See Craig M. Bradley, Foreword: Mail Fraud After McNally and
Carpenter: The Essence of Fraud, 79 J. Crim. L. & Criminology
573 (1988). "[T]he question of what is `property,' after the
Court's seemingly inconsistent signals in McNally and Carpenter,
answers itself: Property is . . . anything that can provide
economic loss to the victim and gain to the defendant including
information, reputation and anything else on which a dollar value
can be placed." Id. at 597.

19
competitive market place, thus denying them the opportunity to

obtain a better price. Id. at 477-78. Only where a price limit

had been set and the customer could not benefit from bidding did

the Court find that the "open outcry" system did not constitute a

deprivation of money or property. Id. at 479. Significantly, it

does not appear that the indictment in Ashman charged the

defendants with interfering with the property interest of other

brokers or anyone other than the customers.

Several statements in the Ashman opinion, however, tend

to support my position here. In reviewing its precedents, the

Court of Appeals commented: "In previous cases, we have held

that shifting or altering of economic risk or opportunity to

affect a person's financial position adversely deprives that

person of money or property." Id. at 478. "[Our prior

decisions] demonstrate that the deliberate deprivation of a clear

financial opportunity violate[s] the mail fraud statute." Id.

In my view, the activities of defendants in this case

constituted a "deliberate deprivation of a clear financial

opportunity" and are thus punishable under the wire and bank

fraud statutes. Accordingly, I would reverse the judgment of the

district court and would uphold the indictment.

20