Opinions of the United
2003 Decisions States Court of Appeals
for the Third Circuit
3-19-2003
USA v. Murphy
Precedential or Non-Precedential: Precedential
Docket 01-3757
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PRECEDENTIAL
Filed March 19, 2003
UNITED STATES COURT OF APPEALS
FOR THE THIRD CIRCUIT
No. 01-3757
UNITED STATES OF AMERICA
v.
PETER A. MURPHY, Appellant
On Appeal From the United States District Court
For the District of New Jersey
(D.C. Crim. No. 00-cr-00778)
District Judge: Honorable Garrett E. Brown, Jr.
Argued: September 18, 2002
Before: BECKER, Chief Judge, SCIRICA and
MCKEE, Circuit Judges.
(Filed: March 19, 2003)
LAWRENCE S. LUSTBERG,
ESQUIRE (ARGUED)
KEVIN MCNULTY, ESQUIRE
Gibbons, Del Deo, Dolan, Griffinger
& Vecchione
One Riverfront Plaza
Newark, NJ 07102
Counsel for Appellant
2
CHRISTOPHER J. CHRISTIE,
ESQUIRE
United States Attorney
GEORGE S. LEONE, ESQUIRE
(ARGUED)
Chief, Appeals Division
Office of the United States Attorney
970 Broad Street, Room 700
Newark, NJ 07102
Counsel for Appellee
OPINION OF THE COURT
BECKER, Chief Judge:
This is an appeal by Peter A. Murphy following a jury
trial in which he was convicted on three counts of violating
the Travel Act, 18 U.S.C. § 1952 (the predicate offense being
bribery under New Jersey law, N.J.S.A. 2C:27-2), and three
counts of mail fraud, 18 U.S.C. §§ 1341 and 1346. Murphy
is the former Chairman of the Republican Party in Passaic
County, New Jersey (“the County”). The charged conduct
concerned a contracts-for-payments scheme that Murphy
allegedly organized by using his considerable influence over
Passaic County officials to procure contracts for Central
Medical Services, Inc. (“CMSI”). According to the
Government’s case, CMSI would then siphon off a certain
amount of funds received from the County contracts to a
panel of four individuals chosen by Murphy who performed
no useful services in return for the payment.
In its prosecution of the mail fraud charge, the
Government pursued three alternative theories of criminal
liability. The first theory alleged that Murphy defrauded
Passaic County of money and property. The second theory
accused him of participating in a scheme to defraud the
County of the honest services of its County Administrator,
who was involved in the bribery scheme. The Government’s
third theory charged Murphy with depriving the County of
its right to Murphy’s own honest services in the affairs of
the County.
3
This last theory relied on the decision of the Court of
Appeals for the Second Circuit in United States v. Margiotta,
688 F.2d 108 (2d Cir. 1982), which sustained the
conviction of a county chairman under similar
circumstances. Margiotta was decided over a strong dissent
by Judge Ralph K. Winter, who opined that the Court had
impermissibly allowed the jury to determine whether a
private party official involved himself so much in the
government that he acquired a fiduciary duty to its citizens,
and that such an inquiry was not based on any legal duties
articulated in federal or state law. The Government’s
Margiotta theory was that Murphy had attained such a
dominant role in the political system of Passaic County that
he could be considered the equivalent of a publicly elected
official, and that Murphy had a fiduciary duty to the
County and its citizens to provide honest services which he
breached by not informing County officials about the
fraudulent nature of the contracts-for-payments scheme.
The District Court permitted the Government to proceed
under Margiotta, and charged the jury accordingly. Murphy
contends that this court should not endorse the Margiotta
rationale because it is an overreaching interpretation of the
mail fraud statute. We agree and conclude, in accord with
Judge Winter, that Margiotta extends the mail fraud statute
beyond any reasonable bounds. In our recent decisions
interpreting honest services fraud, we emphasized the need
to establish a violation of state law in such cases to serve
as a limiting principle on the federal prosecution of local
political actors. See United States v. Panarella, 277 F.3d
678, 693 (3d Cir. 2002); United States v. Antico, 275 F.3d
245, 262 n.18 (3d Cir. 2001). Although the Government
suggests that Murphy’s violation of the New Jersey Bribery
Act, N.J.S.A. 2C:27-2, which was the predicate offense in
the Travel Act charges, could serve as the state law source
of a fiduciary obligation, we are not persuaded by this
argument. The Bribery Act does not create a fiduciary
relationship between Murphy and the public, just as no
other criminal statute creates such a relationship between
a defendant and the public. Without the anchor of a
fiduciary relationship established by state or federal law, it
was improper for the District Court to allow the jury to
create one. We will therefore reverse Murphy’s mail fraud
4
conviction and remand for a new trial in which the
Margiotta theory of mail fraud will not be submitted.
Because we find reversible error in the mail fraud counts,
we must consider whether the evidence the Government
presented to support its invalid Margiotta theory tainted the
jury’s verdict on the Travel Act counts as well. The key step
in this analysis is the identification of evidence admitted to
prove the mail fraud counts that would not be admissible
with respect to the charge of bribery under the Travel Act.
If such evidence exists that prejudiced the verdict on the
Travel Act, we must reverse the entire conviction. According
to our decision in United States v. Pelullo, 14 F.3d 881,
898-99 (3d Cir. 1994), our investigation into prejudice
requires an inquiry into whether: (1) the charges are
“intertwined with each other”; (2) the evidence supporting
the remaining counts is “sufficiently distinct to support the
verdict” on these counts; (3) the elimination of the invalid
count “significantly changed the strategy of the trial”; and
(4) the prosecution used language “of the sort to arouse a
jury.”
Murphy contends that under Margiotta, the Government
was entitled to present evidence about his role in Passaic
County government that was prejudicial and not admissible
to prove bribery under the Travel Act. We agree. At trial, the
Government often justified its admission of evidence
regarding Murphy’s activities in the County that were
unrelated to the specific contracts-for-payments scheme
with CMSI by claiming that such evidence supported its
Margiotta theory of mail fraud. The jury evidently viewed
this evidence as concerning the mail fraud and Travel Act
counts because in a query to the District Court during its
deliberations, the jury asked how evidence of Murphy’s
political activities, which mostly included evidence to prove
the Margiotta theory, affected the elements of both criminal
offenses. Further, much of the evidence that related only to
the Margiotta theory was highly damaging because it
suggested that Murphy had the propensity to engage in
corrupt activities.
Finally, because Murphy wanted to limit the evidence of
his involvement in Passaic County politics in order to
lessen the appearance that he acquired a fiduciary duty to
5
the County under the Margiotta theory, it appears that he
might have employed a different defense strategy absent
this impermissible theory to counter the charge in the
Travel Act counts that he had the intent to engage in a
corrupt quid pro quo rather than ordinary and legal
patronage. We must therefore set aside the conviction on
Travel Act counts as well as the mail fraud counts, and
remand to the District Court for a new trial.
I.
The charged conduct arose out of a “contracts-for-
payments” scheme that involved the award of $1,207,199 of
Passaic County contracts in exchange for $72,879.25 in
payments to four individuals designated by Murphy. We
construe the facts on which Murphy’s conviction is based
“in the light most favorable to the Government, as we must
following the jury’s guilty verdict.” United States v. Perez,
280 F.3d 318, 323 (3d Cir. 2002) (citing Glasser v. United
States, 315 U.S. 60, 80 (1942)).
A. Murphy’s Influence in Passaic County Politics
The Government adduced extensive evidence at trial
about Murphy’s dominance of numerous aspects of Passaic
County’s politics. To understand this evidence, some
background on the County’s political system is necessary.
The County is managed by a seven-member Board of
Freeholders elected by the voters. The Freeholders have
ultimate legislative and administrative responsibility for the
County, which includes the approval of County contracts.
Because the Freeholders serve part-time and meet only
biweekly, an unelected County Administrator conducts the
day-to-day operations of the County and serves at the
pleasure of the Freeholders. The County Administrator is
charged with the responsibility to negotiate contracts on
behalf of the County, review and recommend contract bids
to the Freeholders, monitor the operations of contractors,
and approve payments on contracts.
During the relevant period, all seven Freeholders were
members of the Republican Party. As Republican Party
County Chairman, Murphy strongly influenced who in his
6
party ran for Freeholder, which Freeholders could run for
re-election, who would receive campaign funds, and how
the Board of Freeholders operated. Testimony by the
County Administrator, Nicola DiDonna, indicated that
Murphy hand-picked the membership of the Freeholder
committees in order to maintain control over the
Freeholders’ decision-making process.1 Murphy also took
an active role in determining the agenda of Freeholder
meetings, including making suggestions about how to vote
on resolutions, the selection of contract vendors, and the
employment of County personnel.
County Administrator DiDonna apparently owed his job
security to Murphy as well. Although DiDonna had been
appointed several years before Murphy assumed the
Chairmanship of the Republican Party, DiDonna testified as
to his belief that his continued enjoyment of his job
depended on a positive relationship with Murphy. He also
explained how Murphy communicated with the heads of the
various County agencies in order to influence their
selection of vendors for County contracts and applicants for
public employment positions. Although the Freeholders
approved the selection of contractors and County
personnel, Murphy directed the entire process. Murphy’s
role was not a secret, and potential contractors knew that
they needed his approval before presenting bids to DiDonna
or the Freeholders.
B. The Contracts-for-Payments Scheme
In early 1994, CMSI, a company seeking to provide
various services to Passaic County, hired Angelo Joseph
“Buddy” Fortunato, a former State Assemblyman who had
known Murphy’s father, to assist in obtaining County
contracts.2 Prior to that time, CMSI held no contracts with
1. Prior to the commencement of Murphy’s trial, DiDonna pleaded guilty
to two counts of conspiracy to commit mail fraud. In return for his
testimony against Murphy, DiDonna received a reduced sentence of 4
months incarceration.
2. Fortunato pleaded guilty to one count of conspiracy to commit mail
fraud. Like DiDonna, in return for testifying against Murphy, Fortunato
received a reduced sentence of 3 years of probation.
7
the County. Fortunato organized a meeting in February
1994 at Anthony’s, a restaurant owned by Murphy in
Totowa, New Jersey, at which Fortunato informed Murphy
of CMSI’s interest in doing business with the County, and
Murphy expressed interest in the idea. Murphy arranged a
follow-up meeting at his restaurant among the principals of
CMSI, Robert Jorgensen and Matthew Burstine, Fortunato,
Albert C. Lisbona (a mutual friend of Murphy and
Fortunato), County Administrator DiDonna, and himself to
see what types of contracts the County could award CMSI.
At that meeting, Jorgensen and Burstine proposed that
CMSI manage the County’s workers’ compensation claims,
and stated that they could save the County about a million
dollars from a reduction in abuse of the system.
Approximately a week later, Murphy spoke again with
Fortunato, Jorgensen, and Burstine when they were dining
at his restaurant. In response to Murphy’s complaint that
people were always pestering him for jobs, Burstine
suggested that he could help Murphy by creating a four
person “Panel” to advise CMSI. Murphy responded favorably
and proposed that the Panel be funded with a portion of the
proceeds from any contracts CMSI entered into with the
County. In order to pay the Panel the desired sum of
$100,000, Burstine and Murphy determined that about
$1,000,000 in County contracts would be necessary, which
Murphy would help to procure.
Shortly thereafter, Murphy provided Fortunato with a list
of four persons to serve as Panel members and the
amounts that each should be paid, which Fortunato relayed
to Burstine at CMSI. Murphy chose Curt Masklee, his best
friend and business partner; John Bonazzi, an undersheriff
in the Passaic County Sheriff ’s Department; Joseph
DiDonna, County Administrator DiDonna’s father; and
Joseph DiPasquale, a member of the State Waterfront
Commission to whom Murphy owed a political favor, to
serve as Panel members. There was circumstantial evidence
presented at trial that Murphy received a portion of
Masklee’s payments as a kick-back, and that DiDonna took
a piece of his father’s proceeds.
Murphy then began to put pressure on DiDonna to award
CMSI a County contract. When it became apparent that a
8
workers’ compensation contract would not be available,
Murphy pressed DiDonna to aid CMSI in bidding for a third
party administration (“TPA”) contract at the County jail,
regardless of CMSI’s lack of experience in this field.
DiDonna aided CMSI throughout the bidding process and,
notably, allowed it secretly to resubmit a bid after the
submission period expired because CMSI had previously
filed a bid that was considerably higher than those of its
competitors. DiDonna then recommended the CMSI bid to
the Board of Freeholders, while Murphy talked to several of
the Freeholders about the contract. On July 20, 1994, the
Board of Freeholders awarded the TPA contract to CMSI at
its revised bid of $165,000.
A short time after the contract was awarded to CMSI, the
Panel members had not yet received any payment. This
upset Murphy, who relayed his concern to Fortunato.
Fortunato explained that CMSI could not fulfill its
obligation under the scheme unless it received advance
payment on the TPA contract. Murphy contacted DiDonna,
who made three months’ worth of advance payment on the
contract even though it had been in effect for only two
weeks. In September 1994, the Panel met for the sole
purpose of receiving their checks according to the amounts
specified by Murphy. In order to conceal the operation, the
Panel members were paid by a shell corporation established
by Jorgensen and Burstine, called Physician’s Management,
and were instructed to pay taxes on the payments so that
the Panel appeared legitimate. This pattern continued:
Murphy would pressure DiDonna to ensure that CMSI was
paid by the County, and Murphy would press Jorgensen
and Burstine at CMSI to call another Panel meeting to
distribute payments. No actual work was ever done by the
Panel members, who did not have relevant expertise and
provided no business advice or guidance to CMSI. Murphy
was aware that the Panel members were being paid despite
the fact that they did no work.
In order to continue the operation, Murphy, Jorgensen,
and Burstine worked with DiDonna to find more County
contracts that could be awarded to CMSI. Over the next
year, DiDonna helped CMSI receive three more County
contracts: $39,625 for arranging drug and alcohol testing
9
for operators of large trucks and heavy machinery;
$173,250 to renew the TPA contract; and $624,000 to
provide nursing services at the Passaic County Jail.
The scheme began to unravel in May 1996 when
DiDonna became nervous about being pressured to find
even more contracts for CMSI and the possibility that his
father could be harmed if the scheme were exposed. Shortly
thereafter, two of the Panel members, Joseph DiDonna and
Curt Masklee, wrote letters of resignation. In June and July
of 1996, the United States Attorney’s Office approached
Burstine and Jorgensen and let them know that the
scheme had been uncovered. Although they both agreed to
cooperate with the Government’s investigation, Burstine
tipped off Fortunato, Lisbona, DiDonna, and Murphy about
the federal investigation and the possibility that CMSI’s
phones might be tapped. Nevertheless, the Government
managed to record Jorgensen and Burstine’s telephone
conversations and tape meetings during the next two years
in order to develop evidence presented at trial, including a
conversation between Fortunato and Jorgensen in which
Fortunato described the entire history of the scheme.
No further payments were made to the Panel nor
contracts awarded to CMSI after the Government’s
investigation was exposed in July 1996. In total, the Panel
members shared $72,879.25, which was derived from
$1,207,199 in County contracts awarded to CMSI.
C. Procedural History
Murphy was indicted by a grand jury. Counts One
through Four of the indictment charged Murphy with
violations of the Travel Act, 18 U.S.C. § 1952, the
underlying predicate offense being bribery under the New
Jersey bribery statute, N.J.S.A. 2C:27-2(a). The required
interstate commerce element on these counts was four uses
of the mails: two mailings of payments to the Panel, one
mailing of an invoice with respect to the TPA contract, and
one mailing of the nursing services contract. Counts Five
through Eight charged violations under the mail fraud
statute, 18 U.S.C. §§ 1341 and 1346, and were based upon
the same mailings cited in the Travel Act counts. The mail
10
fraud counts were predicated on three theories of liability:
first, that Murphy defrauded the County of “money and
property”; second, that Murphy caused County
Administrator DiDonna to breach his duty of honest
services to the County by failing to disclose material
information regarding the contracts awarded to CMSI; and
third, that Murphy defrauded the County of its right to
Murphy’s “honest services in the affairs of the County.”
The jury returned its verdict on May 14, 2001, convicting
Murphy on Counts One through Three (all Travel Act), and
Five through Seven (all mail fraud) but acquitting him on
Counts Four (Travel Act) and Eight (mail fraud). The jury’s
verdict was general, and did not specify which theory or
theories of mail fraud it believed Murphy had violated. At
the sentencing hearing, the District Court increased
Murphy’s offense level by eight levels since the convictions
involved a payment intended to influence an elected official
or any official holding a high-level decision-making or
sensitive position, pursuant to U.S.S.G. § 2C1.1(b)(2)(B).
The Court also imposed a four level increase under
U.S.S.G. § 3B1.1(a) because Murphy had organized criminal
activity involving five or more participants. On September
18, 2001, the District Court sentenced Murphy to 43
months of incarceration, 3 years of supervised release, a
fine of $20,000, restitution of $72,879.25 to Passaic
County, and a special assessment of $600.
Judgment was entered on September 24, 2001 and
Murphy filed a notice of appeal on the same day. The
District Court had jurisdiction over the case pursuant to 18
U.S.C. § 3231. We have appellate jurisdiction under 28
U.S.C. § 1291 and 18 U.S.C. § 3742.
II. The Margiotta Mail Fraud Theory
The indictment charged Murphy with four counts of mail
fraud pursuant to 18 U.S.C. §§ 1341 and 1346. To
recapitulate, each count alleged three theories of how
Murphy defrauded Passaic County: Theory One charged
him with defrauding the County of money and property;
Theory Two alleged a scheme to defraud the County of the
honest services of its County Administrator; and Theory
11
Three accused Murphy of violating his duty to provide the
County with his own honest services. As we have already
noted, Murphy contends that Theory Three stretched the
mail fraud statute beyond its reasonable bounds and
improperly relied on the oft-criticized holding of United
States v. Margiotta, 688 F.2d 108 (2d Cir. 1982), which
sustained the conviction of a county chairman under
similar facts. Murphy does not dispute the legal viability of
the Government’s other two theories, which we find legally
sufficient for the reasons discussed infra.
A. Review of General Verdicts
The Government contended at oral argument, and in
supplemental briefing, that according to United States v.
Asher, 854 F.2d 1483 (3d Cir. 1988), we should affirm the
mail fraud convictions even if we determine that Theory
Three, which relied on Margiotta, was not legally viable.
In Asher, the jury returned a general verdict convicting the
defendant of mail fraud, and thus did not specify whether
it followed the prosecutor’s monetary-loss or deprivation of
honest services theory. After the conviction, the Supreme
Court ruled in McNally v. United States, 483 U.S. 350
(1987), that honest services fraud was not a legally viable
theory of prosecution under § 1341. Despite not knowing
whether the jury relied on the now-impermissible honest
services fraud theory, we sustained the defendant’s
conviction in Asher because we were “unable to hypothesize
a set of circumstances under which this jury . . . could not
have found a fraudulent scheme that consisted solely of
depriving the citizens of their right to honest government
that did not also involve tangible losses. . . .” 854 F.2d at
1495-96.
The jury in this case also returned a general verdict, and
thus did not specify which of the Government’s theories of
mail fraud the jury believed Murphy had violated. In the
Government’s submission, even if we find the Margiotta
theory of mail fraud not legally viable, we must sustain
Murphy’s mail fraud conviction because, as in Asher, there
is no way that the jury could have found that Murphy
deprived Passaic County of its right to his honest services
without also finding that he devised a fraudulent scheme to
12
deprive the County of money, i.e., the payments to the
Panel. We need not evaluate the merits of the Government’s
contention, however, because the Supreme Court’s opinion
in Griffin v. United States, 502 U.S. 46 (1991), and our
interpretation of Griffin in United States v. Syme, 276 F.3d
131 (3d Cir. 2002), undermine Asher.
In Griffin, the Court articulated a “clear line”
distinguishing general verdicts that could have relied on a
factually insufficient theory from those that might have
been based on a legally invalid theory. 502 U.S. at 59. The
former would be sustained, but the latter would merit
reversal as the Court explained:
Jurors are not generally equipped to determine
whether a particular theory of conviction submitted to
them is contrary to law — whether, for example, the
action in question is protected by the Constitution, is
time barred, or fails to come within the statutory
definition of the crime. When, therefore, jurors have
been left the option of relying upon a legally inadequate
theory, there is no reason to think that their own
intelligence and expertise will save them from error.
Quite the opposite is true, however, when they have
been left the option of relying upon a factually
inadequate theory, since jurors are well equipped to
analyze the evidence.
Id.
In Syme, we examined Griffin and the Court’s prior
decisions concerning whether general verdicts consisting of
an unconstitutional, legally invalid, or factually inadequate
theory could be sustained. We concluded that “under
Griffin, if one of two or more alternative theories supporting
a count of conviction is either (1) unconstitutional, or (2)
legally invalid, then the reviewing court should vacate the
jury verdict and remand for a new trial without the invalid
or unconstitutional theory.” 276 F.3d at 144. We are
therefore satisfied that current precedent dictates that,
should we find one of the Government’s theories of mail
fraud legally invalid, we must reverse Murphy’s conviction
on the mail fraud counts and remand for a new trial
because the jury returned a general verdict.
13
B. The Margiotta Opinion; The District Court’s
Charge
We turn to the merits of Murphy’s contention that the
Government’s third theory of mail fraud, relying on
Margiotta, is legally invalid. The mail fraud statute, 18
U.S.C. §§ 1341 and 1346, provides in relevant part:
§ 1341: Whoever, having devised or intending to
devise any scheme or artifice to defraud . . .
places in any post office or authorized
depository for mail matter, any matter or
thing whatever to be sent or delivered by the
Postal Service . . . shall be fined under this
title or imprisoned not more than 20 years, or
both.
§ 1346: For the purposes of [18 U.S.C. § 1341, et
seq.], the term “scheme or artifice to defraud”
includes a scheme or artifice to deprive
another of the intangible right of honest
services.
We have interpreted this statute so that to prove mail
fraud, “the evidence must establish beyond a reasonable
doubt (1) the defendant’s knowing and willful participation
in a scheme or artifice to defraud, (2) with the specific
intent to defraud, and (3) the use of the mails . . . in
furtherance of the scheme.” United States v. Antico, 275
F.3d 245, 261 (3d Cir. 2001).
In Antico, we reviewed the history of the mail fraud
statute and its application to “honest services” fraud, which
is also sometimes referred to as the “intangible rights”
doctrine. Id. at 262 n.16. Until 1987, many courts applied
“scheme or artifice to defraud” in 18 U.S.C. § 1341 broadly
and extended it to schemes that defrauded citizens of their
right to honest government services. The Supreme Court
rejected this construction in McNally, supra, when it held
that the mail and wire fraud acts did not prohibit conduct
that defrauded citizens of their intangible right to honest
services, but only of money or property. 483 U.S. at 359.
That decision was informed by the Court’s application of
the rule of statutory construction that “when there are two
rational readings of a criminal statute, one harsher than
14
the other, we are to choose the harsher only when Congress
has spoken in clear and definite language.” Id. at 359-60.
Unhappy with this holding and in response to the Court’s
desire for a clear legislative voice, Congress enacted 18
U.S.C. § 1346, which sought to restore the mail fraud
jurisprudence to its status pre-McNally. Antico, 275 F.3d at
262 n.18; see also Cleveland v. United States, 531 U.S. 12,
20 (stating that “Congress amended the law specifically to
cover one of the ‘intangible rights’ that lower courts had
protected under § 1341 prior to McNally: ‘the intangible
right of honest services’ ”). Recognizing “Congress’ clear
intent in enacting § 1346,” this court held in Antico that
§ 1346 “includes the prosecution of state and local officials
and public employees for depriving the citizens they serve
of their right to honest services.” 275 F.3d at 262.
The prosecution of a private party official is, however, a
horse of another color. The only case cited by either party
that applied such an interpretation of the mail fraud
statute is Margiotta.3 In that case, the Court of Appeals for
the Second Circuit upheld the conviction of Joseph
Margiotta, the Chairman of the Republican Committee of
Nassau County and the Town of Hempstead, New York.
Like Murphy, Margiotta wielded significant political
influence and used this power to construct a contracts-for-
payments scheme far more extensive than that with which
Murphy was charged. 688 F.2d at 113-14. Margiotta was
indicted for, inter alia, one count of mail fraud, alleging that
he defrauded the citizens of either (1) the right to the
honest services of their government officials or (2) “the right
3. Aside from Margiotta, the Government can only muster a citation to
the Supreme Court’s opinion in McNally for the general proposition that
a county chairman may act like a public official and owe a fiduciary duty
to the government. This citation to McNally is unhelpful, however, since
the Court only assumed the facts as the government presented them for
the purposes of that case, and then went on to reverse the conviction
anyway. 483 U.S. at 352, 361. No other court has expressly followed
Margiotta, thus it remains the Government’s sole direct authority.
Indeed, it is questionable whether Margiotta is even good law any longer
in the Second Circuit since that Court has expressly foreclosed the use
of pre-McNally cases when construing the meaning of § 1346. See United
States v. Sancho, 157 F.3d 918, 921-22 (2d Cir. 1998).
15
to Margiotta’s honest and faithful participation in the
governmental affairs of the Town, County, and State.” Id. at
114.
On appeal, a divided panel of the Second Circuit rejected
Margiotta’s argument that an alleged deprivation of an
intangible right to one’s honest services under the mail
fraud statute could exist only when the defendant owed a
fiduciary duty to the victim based on a formal legal
relationship. 688 F.2d at 121-22. In the political context,
Margiotta had contended that the statute should only reach
public officials, who owe a fiduciary duty to their
constituents, and not party officials, who only owe a
fiduciary duty to their employer, the political party. Initially,
the panel recognized the pitfall in finding a private actor
equivalent to a public official for the purposes of criminal
liability and noted:
On the one hand, it is essential to avoid the Scylla of
a rule which permits a finding of fiduciary duty on the
basis of mere influence or minimum participation in
the processes of government. Such a rule would
threaten to criminalize a wide range of conduct, from
lobbying to political party activities, as to which the
public has no right to disinterested service. On the
other hand, the harm to the public arising from the
sale of public office and other fraudulent schemes
leads us to steer a course away from the Charybdis of
a rule which bars on all occasions, as a matter of law,
a holding that one who does not hold office owes a
fiduciary duty to the general citizenry even if he in fact
is conducting the business of government.
Id. at 122.
Despite these concerns, the panel approved a gestalt
approach that allowed the jury to derive a fiduciary duty on
the part of Margiotta based on (1) a general reliance test,
which looked at whether others relied on Margiotta
“because of a special relationship in the government,” and
(2) a de-facto control test that examined whether Margiotta
was “in fact mak[ing] governmental decisions.” Id. at 122.
The Court defended these tests by claiming that they
“recognize the important distinction between party business
16
and government affairs, permitting a public official to act in
accordance with partisan preferences or even whim, up to
the point at which he dominates government.” Id.
Although the panel recognized that there might be
federalism problems in using a federal criminal statute to
prosecute local political actors, it girded its holding by
citing New York state cases that supported the broad
proposition that political party officials might owe a
fiduciary duty to the citizenry under state law. Id. at 124-
25. Even so, the panel abjured a narrow holding that
“absent a showing of a violation of New York statute or a
duty imposed by New York law, a defendant may not be
found guilty” of mail fraud because the statute was enacted
to “prohibit the use of mails for promoting schemes
contrary to federal public policy.” Id. at 125. In other words,
although it found some state law that supported the
holding, the panel clearly rejected the contention that the
prosecution must prove that the defendant violated a state
law in order to sustain his mail fraud conviction. Id.
After approving this mail fraud theory, the Second Circuit
panel looked at the sufficiency of the evidence. It found that
the district court had correctly instructed the jury that “in
order to decide that Margiotta had breached his fiduciary
duty, it had to find that Margiotta had concealed from those
in Government who rely on his participation material
information concerning his entry into a corrupt agreement
to influence him in the performance of his governmental
functions.” Id. at 127 (quotations omitted). Further, the
panel noted that “an affirmative duty to disclose could
reasonably be inferred from the de facto employer-employee
relationship Margiotta enjoyed with the municipal
government.” Id. at 128. Finding ample evidence that the
jury could infer both a fiduciary duty and a breach thereof,
the Court affirmed the conviction of Margiotta on the mail
fraud count. Id.
The District Court in the case at bar relied extensively
and exclusively on Margiotta in its charge to the jury on the
Government’s Theory Three of mail fraud. The Court’s
reliance is evidenced, for example, in the charge to the jury,
which read in relevant part:
17
In order to find the defendant guilty of defrauding
Passaic County and its citizens of their right to his own
honest services you must find that the defendant
Murphy had a fiduciary duty and that he violated that
duty by failing to disclose material information. An
individual may have such a fiduciary duty even if he is
technically not an employee of the particular local
government—here, Passaic County. An individual who
knowingly undertakes the business of governing a
particular jurisdiction owes a duty of loyalty to the
citizens just as does one who formally holds public
office. An affirmative duty to disclose can reasonably be
inferred from what is essentially an employer-employee
relationship. Thus, you may find that the defendant
Murphy had a fiduciary duty to Passaic County and its
citizens, if you find that the work done by [the]
defendant was in substantial part the business of
Passaic-County [sic] government, rather than being
solely party business, and that the performance of that
work was intended by him and relied on by others in
Passaic County government as part of the business of
government in order to carry forward its affairs as a
whole. In determining whether the defendant had a
fiduciary duty, among other things, you should
consider whether the defendant regularly participated
in the selection of persons for public positions,
regularly participated in the selection of vendors for
Passaic County business, or otherwise regularly
participated in running Passaic County business. If
you find that defendant Murphy essentially served as a
fiduciary for Passaic County, then he had a duty to
disclose material information to those in Passaic
County government who relied on him.
Essentially, the charge stated that if Murphy knowingly
undertook governmental functions and others relied on
him, then he could have a fiduciary duty that he breached
by not notifying Passaic County of the arrangement to
award contracts to CMSI in return for payments to the
Panel.
18
C. Is Margiotta’s Honest Services Fraud Theory
Legally Viable?
1. The Parties’ Contentions; Judge Winter’s Dissent
Murphy urges us not to follow Margiotta for several
reasons. First, he points out that our recent decision in
United States v. Panarella, 277 F.3d 678 (3d Cir. 2002),
precludes a broad reading of Margiotta’s holding that a jury
may find that a party official has a fiduciary duty absent
any reference to a breach of fiduciary duty found in state
law. In Panarella, we held that “the existence of a violation
of state law . . . is sufficient to establish honest services
wire fraud,” though we did not resolve the issue of whether
a state law duty was necessary. Id. at 699 n.9. Second,
Murphy argues that the indictment and charge in this case
did not allege that Murphy had a fiduciary duty based on
New Jersey state law to disclose material information to
Passaic County. Finally, he contends that reading § 1346 as
imposing a fiduciary duty on local party officials without
reference to state law would violate the “clear statement”
rule, the principle of lenity, and that of federalism, which
we noted in United States v. Antico, supra, and Panarella,
were significant concerns regarding the application of the
statute. In support of his position, Murphy invokes Judge
Winter’s forceful Margiotta dissent, which illustrated the
numerous problems with allowing a jury to find a fiduciary
duty without any reference to established law.
Judge Winter opined that although the majority’s opinion
in Margiotta was based on precedents that pushed honest
services mail fraud to its logical limit in reaching public
officials, it was an unacceptable leap to allow “a jury [to]
find that a politically active person has sufficient influence
and power over the acts of elective officials to be subject to
the same duty as those officials so far as those acts are
concerned.” 688 F.2d at 142 (Winter, J., dissenting). In
Judge Winter’s view, the source of this “impermissible
result” was “an erroneous analogy between fiduciary
relationships involving private parties . . . and relationships
between politically active persons and the general citizenry
in a pluralistic, partisan, political system.” Id. Noting the
varying requirements of fiduciary duties in different
19
contexts (e.g., employer-employee, trustee-beneficiary,
director-shareholders, etc.), Judge Winter faulted the
majority for allowing a jury to find that a party official could
have a fiduciary duty absent some guidance. Id. Such a
result, Judge Winter reasoned, leaves juries the freedom “to
apply a legal standard which amounts to little more than
the rhetoric of sixth grade civics classes.” Id.
The Government asks us not to follow Judge Winter’s
dissent because it contends that it pertained to the
problems of “honest services” fraud generally, and Congress
has since resolved this concern by enacting § 1346 to allow
for these types of prosecutions. The Government also points
to this court’s decisions in Antico and Panarella, which held
that § 1346 was a sufficiently clear statement to permit the
prosecutions of public officials. Murphy finds the
Government’s citations to Antico and Panarella
unpersuasive; he notes that Judge Winter reasoned that for
private party officials “there is no description” of “a line
between legitimate patronage and mail fraud.” Id. at 115,
117. Murphy argues that we must draw such a bright line.
He claims that while government officials are bound by
their office to act in the public interest, a party official is an
entirely different creature. He further contends in his brief
that party officials “are expected to pursue their self-
interest. Far from impartial, they are entitled to be
partisan. In the rough-and-tumble of politics, they will
bring pressure upon public officials to favor their interests
above others’. . . .”
Murphy also cites our own precedent expressly rejecting
an analogy between county chairmen and government
officials in a one-person, one-vote case. Lynch v. Torquato,
343 F.2d 370, 372 (3d Cir. 1965). In Lynch, we determined
that “the normal role of party leaders in conducting internal
affairs of their party, other than primary or general
elections, does not make their party offices governmental
offices . . . .” Id. Rather, local party leaders “may be
responsible for raising and spending money in the party
interest”; “may plan and direct” campaigns, issue advocacy,
and voter registration drives; and “may administer political
patronage.” Id. While that case noted that there may be
some situations in which a party official’s activities could
20
be considered state action (e.g., when making emergency
nominations for public office), we squarely rejected the idea
of viewing county chairmen and government officials
equivalently. Id.
2. Is the Government’s Theory that a County
Chairman May Act Like a Public Official and Acquire a
Fiduciary Duty to the Local Government Viable?
We turn to an analysis of the Government’s Margiotta
theory. While the idea of allowing a jury to determine
whether a party official acted enough like a government
official is itself enough to give us pause, the Government
recognized belatedly in this appeal the apparent need for a
state law source to buttress its theory of honest services
fraud. As noted above, the Margiotta court skirted the issue
of whether state law is relevant to a mail fraud conviction.
688 F.2d at 105 n.2. Both parties here have recognized,
however, that in our decisions in Panarella and Antico we
noted that a violation of state law serves as an important
limiting principle on the scope of § 1346 honest services
fraud, which might be necessary to avoid lenity and
federalism concerns in federal prosecutions of state or local
political officials. Panarella, 277 F.3d at 693; Antico, 275
F.3d at 262 n.18.
Before determining whether a state law predicate is
indeed necessary, we need to see if the Government asserts
a valid predicate. The first time the Government actually
articulated a state law predicate, a violation of the New
Jersey Bribery Act, N.J.S.A. 2C:27-2, was in its brief on
appeal. Neither the indictment nor the charge informed the
jury that they needed to find that Murphy violated a state
law in order to determine whether he had a fiduciary duty
to Passaic County. Although the jury convicted Murphy of
violating the New Jersey Bribery Act, that served as the
predicate of the Travel Act counts and was not advanced in
connection with mail fraud. At all events, despite the
Government’s new appellate argument, we are not
persuaded that the New Jersey Bribery Act provides a
fiduciary duty on the part of Murphy as a party official to
disclose material information to Passaic County for several
reasons.
21
First, as noted above, the jury was never asked to
determine whether a fiduciary duty could be inferred from
the New Jersey Bribery Act. Theory Three of the charge
asked the jury to consider generally “whether the defendant
regularly participated in running Passaic county business,”
but it did not allege that Murphy was involved in a scheme
that violated the New Jersey Bribery Act, but rather that he
breached “a duty to disclose material information to those
in Passaic County government who relied on him.” While
the Government is correct in noting that N.J.S.A. 2C-27-2
applies to party officers as well as public officials, it cannot
point to anything in the statute that creates a fiduciary
duty on the part of party officials to disclose information to
the government. Rather, the statute only proscribes “the
solicit[ation], accept[ance], or agree[ment] to accept from
another . . . [a]ny benefit as consideration for a decision,
opinion, recommendation . . . .” Id. Moreover, while bribery
may often accompany breaches of a duty to disclose, see
Panarella, 277 F.3d at 695, and may even be the paradigm
case of honest services fraud committed by public officials,
see United States v. DeVegter, 198 F.3d 1324, 1327 (11th
Cir. 1999), the Government points to no case that found
that a bribery statute can create an obligation to provide
honest services without any preexisting legal duty.
This final point is the crux of the issue, and it presents
a slightly different question from that which we addressed
in Antico and Panarella. In those cases we assumed, based
on extensive pre-McNally case law, that public officials have
a duty to provide honest services to the public. We then
looked to state law to ascertain what standards of fiduciary
care the public officials were required to meet in order to
determine whether the officials defrauded the citizens of
their right to honest services.4 For example, in Antico, we
4. In Antico, the defendant was himself a public official. In Panarella, the
defendant was a private businessman who bribed a Pennsylvania State
Senator, but the Government’s theory was that the defendant was guilty
of being an accessory after the fact under 18 U.S.C. § 3 to a wire fraud
scheme to deprive the public of the State Senator’s honest services in
violation of 18 U.S.C. §§ 1343, 1346. 277 F.3d at 689. Thus, the central
inquiry was whether the State Senator had committed honest services
wire fraud—not whether the defendant had done so.
22
referred generally to state and local conflict of interest laws
to identify what fiduciary duties the defendant owed to the
public. 275 F.3d at 264. And, in Panarella, we found “that
the clarity of [the state’s] disclosure statute criminalizing a
public official’s nondisclosure of his sources of income
addresses rule of lenity concerns . . . more effectively than
does [a general prohibition against] ‘misuse of office for
personal gain.’ ” 277 F.3d at 693. These cases best support
Theory Two of the Government—that Murphy participated
in a scheme to defraud Passaic County of County
Administrator DiDonna’s honest services—since the bribery
statute clearly relates to services that DiDonna, as a public
official and fiduciary, owed to the citizenry.
These cases do not, however, answer the question
whether the New Jersey Bribery Act alone can create a
fiduciary relationship that could then serve as the predicate
for determining that Murphy himself owed honest services
to Passaic County and its citizens. Murphy submits that
McNally stands for the general proposition that absent a
“clear statement” from Congress, a court should not
“construe the [federal mail fraud] 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.” 483 U.S. at
350. We agree. Although we have held that § 1346 was a
clear statement by Congress that it wished to criminalize
honest services fraud, see Antico, 275 F.3d at 261, we
recognized in Panarella the need for a “limiting principle
defining the scope of honest services fraud.” 277 F.3d at
694.
More specifically, this is because the plain language of
§ 1346 provides little guidance as to the conduct it
prohibits. We explained:
Deprivation of honest services is perforce an imprecise
standard, and rule of lenity concerns are particularly
weighty in the context of prosecutions of political
officials, since such prosecution may chill
constitutionally protected political activity. Moreover,
decisions of our own Court stating that “fraud is a
broad concept that ‘is measured in a particular case by
determining whether the scheme demonstrated a
23
departure from fundamental honesty, moral
uprightness, or fair play and candid dealings in the
general life of the community,’ ” [citations omitted] do
little to allay fears that the federal fraud statutes give
inadequate notice of criminality and delegate to the
judiciary impermissibly broad authority to delineate
the contours of criminal liability.
Id. at 698; see also Crandon v. United States, 494 U.S. 152,
158 (1990) (stating that the rule of lenity “serves to ensure
that there is fair warning of the boundaries of criminal
conduct and that legislatures, not courts, define criminal
liability”). We thus endorse (and are supported by) the
decisions of other Courts of Appeals that have interpreted
§ 1346 more stringently and required a state law limiting
principle for honest services fraud, as set forth in the margin.5
Murphy urges us to address the issue we reserved in a
footnote in Panarella: Whether a violation of a state-law
created fiduciary duty is required to sustain an honest
services fraud conviction. Id. at 699 n.9. Although
5. In United States v. Brumley, 116 F.3d 728 (5th Cir. 1997), for
example, the Court of Appeals for the Fifth Circuit held en banc that
state law must provide the specific honest services owed by the
defendant in a fiduciary relationship. Id. at 734. Looking at the plain
language of the statute, the Court found nothing “to suggest that
Congress was attempting in § 1346 to garner to the federal government
the right to impose upon states a federal vision of . . . an ethical regime.”
Id. Rather, “[u]nder the most natural reading of the statute, a federal
prosecutor must prove that conduct of a state official breached a duty
respecting the provision of services owed to the official’s employer under
state law.” Id.
Similarly, the Court of Appeals for the Second Circuit concluded that
§ 1346 stands “for the proposition that a scheme to harm another by
breach of a duty enforceable by an action in tort may support a
conviction for a scheme to defraud another of ‘honest services,’ ” United
States v. Handakas, 286 F.3d 92, 106 (2d Cir. 2002), but it then found
§ 1346 unconstitutionally vague as applied to a conviction of honest
services mail fraud based on the violation of duties to report material
information as mandated by state labor and constitutional law. Id. This
holding is much broader than this court’s in Panarella in that the
Hanadakas Court concluded that wrongs covered by state criminal and
contract law could not form the basis of a definition of “honest services.”
24
federalism concerns are paramount in federal prosecutions
of local political party officials, we do not think that this
case requires us to resolve that question. This is because
Panarella and Antico address the different issue of what
types of fiduciary duties are required, within the meaning
of honest services, when either state or federal law already
clearly establishes a fiduciary relationship. Here, in
contrast, the Government cannot identify any clearly
established fiduciary relationship or legal duty in either
federal or state law between Murphy and Passaic County or
its citizens. In other words, it cannot point to an
established “right” of honest services that Murphy owed to
the County or its citizens beyond a criminal statute, which
we do not believe can create a fiduciary relationship. The
Government’s use of the Margiotta theory of honest services
fraud therefore falls far outside the classical definition of
fraud. See Panarella, 277 F.3d at 695 (“Fraud in its
elementary common law sense of deceit . . . includes the
deliberate concealment of material information in a setting
of fiduciary obligation.”) (quoting United States v. Holzer,
816 F.2d 304, 307 (7th Cir. 1987)).
Reading the New Jersey Bribery Act as the Government
does would require us to find not merely a duty owed in
that statute, but also the predicate for a fiduciary
relationship between a county political chairman and the
public. We cannot endorse this methodology because all
criminal activity would breach a duty to the public not to
break the law that could then form the basis of a mail
fraud conviction. This outcome would, of course, run
counter to the federalism concerns we expressed
in Panarella about the potentially limitless application of
§ 1346. While we recognize that the New Jersey Bribery Act
properly restricts the conduct of party officials, probably in
recognition of their influential political position, we cannot
read it as creating a fiduciary or other legal relationship to
the public.
Without any legal basis for determining whether Passaic
County or its citizens had a right to Murphy’s honest
services, we conclude that it was improper for the District
Court to allow the jury to conjure such a duty out of a fog
of assumptions. In Panarella we warned about the “parade
25
of horribles envisioned by those who fear overly broad
application of the federal mail and wire fraud statutes.” 277
F.3d at 699. One example of such an overly broad
application we cited was from Judge Winter’s dissent in
Margiotta, in which he posited that under the Margiotta
theory, “[a] partisan political leader who throws decisive
support behind a candidate known to the leader to be less
qualified than his or her opponent because that candidate
is more cooperative with the party organization, is guilty of
mail fraud unless that motive is disclosed to the public.”
688 F.2d at 140 (Winter, J., dissenting). While Murphy’s
actions certainly were not the same as in this hypothetical,
we note that there is nothing in Margiotta that would
prevent an over-zealous prosecutor from pursuing this
scenario.
Further, we agree with Judge Winter that Margiotta fails
to provide any logical rationale for treating private party
officials in the same manner as public officials since such
a loose interpretation of the mail fraud statute creates “a
catch-all political crime which has no use but misuse.” Id.
at 144; see also John C. Coffee, Jr., Modern Mail Fraud:
The Restoration of the Public/Private Distinction, 35 Am.
Crim. L. Rev. 427, (Spring 1998) (“The overreach in
[Margiotta’s] theory is obvious and invades even the sphere
of the First Amendment.”).
Because Margiotta is in direct contravention of the
principles of honest services fraud we articulated in Antico
and Panarella, and the jury did not specify which theory of
mail fraud it believed Murphy violated, we will reverse
Murphy’s conviction on the mail fraud counts and remand
to the District Court for a new trial absent this legally
invalid theory.
III. Did Spillover of Margiotta Evidence “Taint” the
Entire Conviction?
Murphy contends that should we reverse on the mail
fraud counts, we must also vacate the entire conviction
because the evidence presented by the Government to
support its invalid Margiotta theory of mail fraud “tainted”
the jury’s verdict on the Travel Act counts as well. When we
26
find reversible error on one or more counts, we consider
“whether the presence of the [invalidated] count[s] had any
spillover effect sufficiently prejudicial to call for reversal” of
the remaining counts. United States v. Pelullo, 14 F.3d 881,
897-98 (3d Cir. 1994) (citation omitted).
The critical factor in any claim of “taint” is the existence
of evidence admitted to support the invalid counts that
would not be admissible to prove the remaining counts.
United States v. Cross, 308 F.3d 308, 318 (3d Cir. 2002).
Only if we find such evidence must we “consider whether
the verdict on the remaining count was affected adversely
by the evidence that would have been inadmissible at trial
limited to that count.” Id. This requires an inquiry into
whether (1) the charges are “intertwined with each other”;
(2) the evidence for the remaining counts is “sufficiently
distinct to support the verdict” on these counts; (3) the
elimination of the invalid count “significantly changed the
strategy of the trial”; and (4) the prosecution used language
“of the sort to arouse a jury.” Pellulo, 14 F.3d at 898-99.
Murphy claims that the Government was allowed to put
on a considerable amount of evidence to support its
Margiotta theory that would otherwise have been
inadmissible solely to prove bribery under the Travel Act.
As explained in Section II of this opinion supra, the
cornerstone of the Margiotta theory as applied in this case
was that Murphy acquired a fiduciary duty to Passaic
County and its citizens by virtue of his extensive influence
over the County’s governance. Because the jury would be
charged with determining whether this fiduciary duty
existed based on how Murphy participated in County
governance, the Government was entitled to present
evidence detailing all aspects of Murphy’s involvement in
County politics.
As Murphy points out, much of this evidence was not
directly related to the bribery charges under the Travel Act.
Murphy specifically identifies testimony by Passaic County
Administrator DiDonna and Panel member Curt Masklee
concerning the power Murphy wielded in the County and
statements that Murphy handpicked and controlled the
County Freeholders, ran County business at his restaurant,
and boasted that he had the jobs of 2,000 people in his
27
hands. [A132-38, 152-304.] Some of this evidence gave the
impression of Murphy as a back-slapping, corrupt party
boss.
More specifically, in testimony recorded in over 160 pages
of transcript, Masklee and DiDonna explicate Murphy’s role
in and control over Passaic County government as
exemplified by the following statements: Murphy would
“hold court” at his restaurant where he would discuss
County business; Murphy had an interest in who handles
County bonds; Murphy cooperated with the County Sheriff
to prevent State Senator Joe Bubba from countering
Murphy’s control of the County; there was an alliance
between Murphy and the County Sheriff since 1991 to
assert dominance over County affairs; Murphy allegedly
stated, “I hold the careers of people in my hand, 2,000
people, I hold their jobs in my hands”; Murphy
demonstrated to the vendors the power he had in the
County; Murphy determined on which committees the
Freeholders would serve so that he could have “ultimate
control”; Murphy got his friend appointed as County
Adjuster; Murphy’s orders to the Freeholders to confirm his
recommended appointments are more than a “mere
recommendation”; Murphy arranged for a part-time job for
an associate at the Office of Aging; Murphy aided a
subcontractor in his attempt to get paid by a contractor by
providing the contractor with an emergency County
contract in return; Murphy helped the son of a County
official get transferred to another government job; he helped
the same official’s campaign worker get a government
position; Murphy got a labor lawyer hired who was meant
to do work at the County hospital but instead spent his
time trying to get a bill passed in the State legislature that
would have provided the undersheriff with job protection;
Murphy ensured that there was always enough County
work for another lawyer, who would clear settlements of
County matters with Murphy before going to the
Freeholders; Murphy helped the State Democratic Party
chairman obtain consulting work in the County, including
as part of various construction contracts; Murphy
occasionally received flow charts of the County departments
from DiDonna so that he would know where he could place
individuals in County jobs; he also received the vender list,
28
which Murphy would use to solicit venders for political
fundraising; Murphy placed the wife of his friend Curt
Masklee on the Welfare Board, an autonomous County
agency; Murphy ordered a letter drafted to the State
Medical Examiner so that an individual who ran a local
funeral home could continue doing business with the
County Medical Examiner; at the request of the Sheriff,
Murphy had an individual appointed to handle security for
the Vo-Tech school; the Sheriff and Murphy also cooperated
to choose the appointment for Emergency Management
Coordinator, and Murphy pressed DiDonna to put this
choice before the Freeholders even after he did not appear
on the first selection list, which the Freeholders did
because he was “Murphy’s guy”; Murphy successfully urged
the County payroll supervisor to reduce the salary of the
newly elected County Clerk compared to the prior Clerk
because she sent a flier saying that the Sheriff endorsed
her without the Sheriff ’s approval; Murphy also told the
new Clerk whom he wanted her to hire as Deputy Clerk
and what that person’s salary should be, orders she should
follow if she would want a raise in the future; Murphy
would get people appointed to County jobs by disregarding
the Civil Service list; Murphy intervened to assist a relative
who worked for the County Utilities Authority in settling his
disability claim; Murphy helped a construction company
that built the County Administration Building get paid
when it was having problems with the County; Murphy
helped a fellow resident from Totowa get a raise and a job
title change; the Sheriff and Murphy collaborated in getting
the former police chief of Prospect Park appointed part time
director of the police academy; Murphy played a role in
arranging for raises for County attorneys by lobbying the
Freeholders; Murphy intervened to prevent a groundskeeper
at the hospital from getting fired; he also got the cook at his
restaurant a second job at the hospital, which posed
problems with the union because only this cook got the
weekend off (to work at Murphy’s restaurant); Murphy
created a legal instructor job in the County Counsel’s Office
to help an individual who needed health benefits; he also
got a lawyer who worked for a political rival a County job
so as to make that lawyer loyal to him and weaken his
rival; Murphy ordered the appointment of an insurance
29
agent on record for the County and a secretary in the
Public Works Department to similarly gain the loyalty of
these individuals who were associated with a political rival;
the president of the County College came to Murphy at his
restaurant asking for help in his reappointment, which
Murphy successfully did; Murphy urged the creation of a
job in the Department of Human Services for a lawyer who
needed a job, but this individual did no real work; Murphy
promoted the hiring of an individual for a post at the
County-run camp; Murphy helped Albert Lisbona, a Panel
member and friend of Murphy, in securing legal work for
the County on its bond issues in exchange for a monetary
kickback to Murphy;6 Murphy also arranged for the
provision of a piece of the bond issues work to an
accountant of his choosing; Murphy ordered the
Freeholders to set a certain salary for the County’s
Registrar of Deeds and his deputy; Murphy placed a lawyer
on the County high school’s payroll; Murphy helped a
political protege who lost an election to get a job in the
Community College; Murphy met with the head of the
County Parks Department at his restaurant and notified
the official that he supported him continuing in that
position; Murphy interceded to prevent the hospital from
laying-off its finance manager; Murphy determined who
would get the host benefit payments from the revenues
generated by the County’s waste transfer station; Murphy
got involved in negotiations to expand the size of the waste
transfer station and ostensibly represented the County in
this transaction; Murphy also negotiated a settlement with
the developer on a failed project to build an incinerator;
Murphy bailed out someone who purchased land for
development but was prevented from doing so because of
environmental reasons by having the County purchase the
land and turn it into a park; Murphy orchestrated a plan to
get a former Freeholder appointed as director of the County
6. It is particularly instructive that in response to Murphy’s objection to
DiDonna’s testimony on this unrelated kickback scheme, the
Government claimed that there was no issue of inadmissible character
evidence under Fed. R. Evid. 404 because the testimony related to
Murphy’s “give and take with respect to vendors,” which suggests
Murphy’s role in influencing County governance under Margiotta, but
does not imply any relevance to the bribery charge under the Travel Act.
30
Utilities Authority, and then negotiated a generous
severance package when the County sought to have the
newly-hired director fired from the job; and Murphy took
care of the County chairman for the Democratic Party by
supporting him on the Welfare Board.
The Government counters that this evidence would have
been admissible to prove bribery under the Travel Act in
order to show that Murphy had the opportunity and ability
to orchestrate the contracts-for-payments scheme. We do
not gainsay that some of this evidence might also have been
admissible under the Government’s first two theories of
mail fraud, and thus did not only go to the impermissible
Margiotta theory. However, we think that the proper method
for evaluating “taint” is to look at whether any “evidence
introduced to support the reversed count,” in this case, the
mail fraud counts, “would have been inadmissible at a trial
on the remaining count.” Cross, 308 F.3d at 317. “We deal
here with the three remaining counts — the Travel Act
counts incorporating the New Jersey Bribery Act. While we
agree that portions of this Margiotta evidence might still
have been admissible to prove the bribery or Travel Act
violations, we do not find this argument sufficient to avoid
Murphy’s charge of “taint” for several reasons. First, the
Government admitted before the District Court that its
reason for presenting much of this evidence was to prove its
Margiotta theory of mail fraud. For example, in response to
an objection by Murphy as to some testimony by Curt
Masklee, the Government stated that “there is going to be
hours of testimony from Mr. DiDonna, about Mr. Murphy’s
involvement on the Margiotta issues” and that “[t]he
evidence will show on a broader level that Mr. Murphy had
direct involvement in the operations of Passaic County
Government, and picking vendors, and picking employees
to work in the county, and then that goes directly to the
central issue in this case of Mr. Murphy’s involvement under
the Margiotta issues.” [A132, 133 (emphasis added).] This
enabled the Government to admit practically any evidence
on Murphy’s political activities without having to show its
relevance to the Travel Act counts.
Moreover, when the jury posed a question to the District
Court regarding the interpretation of evidence of Murphy’s
31
patronage activities, which substantially included evidence
designed to prove the Margiotta theory, the jury clearly
indicated that this evidence was central to its deliberations
on both the mail fraud and Travel Act counts. It is therefore
highly probable that the charges were “intertwined” in the
mind of the jury, and that the jury relied on the evidence
of Murphy’s political activities in its deliberations on the
Travel Act counts.
Murphy also argues convincingly that the absence of the
Margiotta theory of mail fraud would have greatly changed
his strategy at trial. Because evidence of Murphy’s political
involvement could be construed by the jury under this
theory as creating a fiduciary relationship, Murphy wanted
to minimize a discussion of his involvement in Passaic
County governance. On the other hand, such evidence
would have been useful to his defense to the Travel Act
charge that he did not have the requisite criminal intent to
turn the contracts-for-payments scheme into a corrupt quid
pro quo because he routinely engaged in such patronage,
which is legal. Absent the impermissible Margiotta theory,
it is likely that Murphy would have employed a different
defense strategy that would have allowed him free reign to
present his role in the County in order to rebut the
inferences that his participation in the scheme was
anything more than ordinary and legal patronage.
Finally, as discussed above, some evidence of Murphy’s
influence over the Passaic County government may be
relevant under the Travel Act counts in order to illustrate
Murphy’s role in the bribery scheme. But the quantum of
evidence introduced to show Murphy in effect acted as a
government official would not be necessary absent the
Margiotta theory. The Court specifically instructed the jury
that “[i]t is no defense to the charge of bribery that the
person receiving or soliciting the bribe . . . was not qualified
to act in the desired way whether because he had not yet
assumed office, or lacked jurisdiction, or for any other
reason.” Thus, any evidence of favor-trading or
inappropriate acts that did not have any relevance to the
elements of bribery or to Murphy’s opportunity to instigate
this particular contracts-for-payments scheme would be
irrelevant. The cumulative effect of unrelated evidence likely
32
left an impression with the jury that Murphy routinely
engaged in corrupt political activities and thus might have
had the propensity to engage in the charged contracts-for-
payments scheme.
We also note that “[w]hen evaluating taint or spillover
effect, courts have applied a test somewhat favorable to the
defendant.” Pellulo, 14 F.3d at 898. For the foregoing
reasons, we are satisfied that “the jury was likely to be
confused or relied upon improper evidence,” id., in its
deliberations on the remaining counts, and that there was
spillover of evidence from the improper Margiotta theory
that tainted those convictions as well. We will therefore
reverse the judgment and remand this case to the District
Court for a new trial on all counts in which the
Government may not use the Margiotta theory of honest
services fraud liability.7
A True Copy:
Teste:
Clerk of the United States Court of Appeals
for the Third Circuit
7. Because we will reverse the entire conviction and remand for a new
trial, we do not need to address Murphy’s arguments concerning
allegedly insufficient supplemental instructions in response to the jury’s
queries during its deliberations, and allegedly erroneous evidentiary and
sentencing rulings.