July 22, 1992 ____________________
July 22, 1992 ____________________
No. 90-2180
No. 90-2180
UNITED STATES OF AMERICA,
UNITED STATES OF AMERICA,
Appellee,
Appellee,
v.
v.
GEORGE M. BUCUVALAS,
GEORGE M. BUCUVALAS,
Defendant, Appellant.
Defendant, Appellant.
_____________________
_____________________
No. 90-2181
No. 90-2181
UNITED STATES OF AMERICA,
UNITED STATES OF AMERICA,
Appellee,
Appellee,
v.
v.
ARISTEDES C. PORAVAS,
ARISTEDES C. PORAVAS,
Defendant, Appellant.
Defendant, Appellant.
_____________________
_____________________
No. 91-1018
No. 91-1018
UNITED STATES OF AMERICA,
UNITED STATES OF AMERICA,
Appellee,
Appellee,
v.
v.
ARTHUR L. VENIOS,
ARTHUR L. VENIOS,
Defendant, Appellant.
Defendant, Appellant.
_____________________
_____________________
No. 91-2042
No. 91-2042
UNITED STATES OF AMERICA,
UNITED STATES OF AMERICA,
Appellee,
Appellee,
v.
v.
BEL-ART REALTY, INC.,
BEL-ART REALTY, INC.,
Defendant, Appellant.
Defendant, Appellant.
____________________
____________________
APPEALS FROM THE UNITED STATES DISTRICT COURT
APPEALS FROM THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF MASSACHUSETTS
FOR THE DISTRICT OF MASSACHUSETTS
[Hon. Douglas P. Woodlock, U.S. District Judge]
[Hon. Douglas P. Woodlock, U.S. District Judge]
___________________
____________________
____________________
Before
Before
Cyr, Circuit Judge,
Cyr, Circuit Judge,
_____________
and Coffin and Campbell,
and Coffin and Campbell,
Senior Circuit Judges.
Senior Circuit Judges.
_____________________
____________________
____________________
Morris M. Goldings with whom David R. Kerrigan, Mahoney, Hawkes &
Morris M. Goldings with whom David R. Kerrigan, Mahoney, Hawkes &
__________________ __________________ _________________
Goldings, Terry Philip Segal, Segal & Feinberg, and Kevin O'Dea were
Goldings, Terry Philip Segal, Segal & Feinberg, and Kevin O'Dea were
________ __________________ ________________ ____________
on brief for appellants.
on brief for appellants.
Carole S. Schwartz, Special Assistant United States Attorney,
Carole S. Schwartz, Special Assistant United States Attorney,
____________________
with whom Wayne A. Budd, United States Attorney, and Stephen P.
with whom Wayne A. Budd, United States Attorney, and Stephen P.
_______________ ___________
Heymann, Assistant United States Attorney, were on brief for appel-
Heymann, Assistant United States Attorney, were on brief for appel-
_______
lee.
lee.
____________________
____________________
____________________
____________________
2
2
CYR, Circuit Judge. Defendants George M. Bucuvalas, Aristides C.
CYR, Circuit Judge.
_____________
Poravas, and Bel-Art Realty, Inc., appeal their convictions on two
counts of engaging, and conspiring to engage, in a pattern of racke-
teering activity, 18 U.S.C. 1962(c)-(d), multiple counts of mail
fraud, 18 U.S.C. 1341 and 2, and one count of conspiring to commit
mail fraud, 18 U.S.C. 371. Arthur L. Venios appeals his convictions
for mail fraud and conspiracy to commit mail fraud. We affirm the
convictions.
I
I
BACKGROUND
BACKGROUND
__________
From 1980 to 1987, Bucuvalas, Poravas, and Venios [hereinafter
"defendants"] owned and operated a number of nightclubs, peep shows,
movie theaters, and adult bookstores in Boston's Combat Zone (adult
entertainment district), which were managed from offices owned by
defendant Bel-Art Realty, Inc. [hereinafter "Bel-Art"] at 671 Washing-
ton Street. In order to be allowed to operate many of these estab-
lishments, it was necessary to obtain alcoholic beverage licenses, see
___
Mass. Gen. L. ch. 138, 1-78 (1991), and entertainment licenses, see
___
Mass. Gen. L. ch. 140, 181-185G, from municipal licensing boards to
which the applicants were obligated to disclose the identity and
background of all owners and managers of the premises to be licensed.1
____________________
1Chapter 138, section 15A, requires applicants to include "a sworn
statement . . . giving the names and addresses of all persons who have
a direct or indirect beneficial interest in said license." The
3
3
In an attempt to conceal their prior criminal records, as well as
their interests in the various enterprises, defendants paid "straw"
persons and created sham corporations to "front" as record owners and
operators and, through the use of the United States mails, utilized
the names of these straw owners on license applications submitted to
the municipal licensing boards. Bel-Art, which was controlled by one
of defendants' coconspirators, aided the fraudulent scheme by execut-
ing several mock real estate "leases" to the straw owners. Unaware of
these misrepresentations, the municipal boards issued licenses to the
ostensibly independent and legitimate business establishments, and
subsequently renewed their licenses on an annual basis. The scheme
served a secondary purpose as well. When the municipality would
threaten to revoke a license for violation of its conditions, or the
Commonwealth of Massachusetts would attempt to collect back taxes,
defendants merely arranged a sham sale of the establishment to a new
straw owner. For good measure, between 1980 and 1986 Bucuvalas and
his coconspirators bribed licensing board members and police officers
to avoid accountability for infractions which might otherwise have
resulted in license suspensions or revocations.
____________________
chairman of the alcoholic beverage licensing board testified that the
board also "require[d] a criminal record affidavit to be filed."
Chapter 140, section 181, authorizes the Mayor's Office of Consumer
Affairs and Licensing to obtain all "reasonable information concerning
the conditions of the premises and actions to be taken to prevent
danger to the public safety, health, or order." The commissioner
testified that applicants were expected to complete "criminal record
information forms" on all principals of the licensed premises.
4
4
In February 1989, the defendants were indicted on two RICO counts
and multiple counts of mail fraud2 and conspiracy to commit mail
fraud. The RICO counts alleged nine predicate acts of mail fraud and
six acts of bribery. The government sought criminal forfeiture of
several parcels of Bel-Art's real property which allegedly "afforded
the defendant . . . a source of influence over the [RICO] Enterprise."
See 18 U.S.C. 1963(a)(2). Following a fourteen-day trial, the jury
___
returned guilty verdicts on all counts against all defendants, as well
as an in personam criminal forfeiture verdict against certain Bel-Art
__ ________
properties.
II
II
DISCUSSION
DISCUSSION
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A. Motion to Suppress
A. Motion to Suppress
__________________
On September 25, 1987, FBI Special Agent Robert Jordan obtained a
warrant to search Bel-Art's second-floor offices at 671 Washington
Street, the reputed headquarters of the individual defendants' illegal
enterprise. The search warrant authorized seizure of "records,
____________________
2The mail fraud counts charged that the fraudulent scheme had two
purposes:
a .
defrauding the City of Boston in order to obtain money and
property by means of false and fraudulent pretenses, repre-
sentations and promises; and
b .
defrauding the United States and the Commonwealth of
Massachusetts of taxes.
5
5
documents, notes and physical objects evidencing [defendants'] owner-
ship or control" of various businesses. Bel-Art moved to suppress the
seized evidence on the grounds that the warrant was not supported by
probable cause and did not describe with sufficient particularity the
items to be seized. See U.S. Const. amend. IV. The district court
___
denied the motion.
1. Probable Cause
1. Probable Cause
______________
Bel-Art contends that the affidavit accompanying the search
warrant application did not establish probable cause to believe that
documentary evidence of the alleged fraudulent scheme would be found
at the search premises. Bel-Art characterizes most of the information
in the affidavit as "stale," insofar as it related to events (the
employment of straw owners and the bribery of board members and police
officers by defendants or their coconspirators) which took place
between 1960 and 1983, none less than four years prior to the search
warrant application.3
The probable cause determination is to be upheld if, "given all
the circumstances set forth in the affidavit . . ., including the
'veracity' and 'basis of knowledge' of persons supplying hearsay
____________________
3Bel-Art challenges the affidavit on the ground that neither the
affiant, Special Agent Jordan, nor his sources, directly observed any
incriminating evidence at the Bel-Art premises prior to the warrant
application. However, since circumstantial evidence alone may estab-
lish probable cause, the affidavit would not have been rendered
fatally defective for this reason alone. See United States v. Rahn,
___ _____________ ____
511 F.2d 290, 293 (10th Cir.) (lack of direct observation of weapon
not fatal to "probable cause" showing where "individuals [normally]
keep weapons in their homes."), cert. denied, 423 U.S. 825 (1975).
____ ______
6
6
information, there is a fair probability that contraband or evidence
____ ___________
of a crime will be found in a particular place." Illinois v. Gates,
________ _____
462 U.S. 213, 238 (1983) (emphasis added); see United States v. White,
___ _____________ _____
766 F.2d 22, 25 (1st Cir. 1985); Rahn, 511 F.2d at 293 (affidavit need
____
not demonstrate "certainty" that items will be found). Moreover, the
supporting affidavit must be viewed in a practical, "common sense"
fashion, and we accord considerable deference to reasonable inferences
the judicial officer may have drawn from the attested facts. See
___
United States v. Falon, 959 F. 2d 1143, 1147 (1st Cir. 1992) (citing
_____________ _____
United States v. Ventresca, 380 U.S. 102, 108 (1965)); United States
_____________ _________ _____________
v. Tabares, 951 F.2d 405, 408 (1st Cir. 1991).
_______
Staleness does not undermine the probable cause determination if
the affidavit contains information that updates, substantiates, or
corroborates the stale material. See Emery v. Holmes, 824 F.2d 143,
___ _____ ______
149 (1st Cir. 1987); United States v. Ciampa, 793 F.2d 19, 24 (1st
______________ ______
Cir. 1986); United States v. Moscatiello, 771 F.2d 589, 597 (1st Cir.
_____________ ___________
1985); United States v. Viegas, 639 F.2d 42 (1st Cir.), cert. denied,
_____________ ______ ____ ______
451 U.S. 970 (1981). Moreover, whether "averments in an affidavit are
sufficiently timely to establish probable cause depends on the partic-
ular circumstances of the case." United States v. Hershenow, 680 F.2d
_____________ _________
847, 853 (1st Cir. 1982); see also United States v. Di Muro, 540 F.2d
___ ____ _____________ ________
503, 516 (1st Cir. 1976), cert. denied, 429 U.S. 1038 (1977), and
____ ______
cert. denied, 429 U.S. 1038 (1977). Staleness is not measured merely
____ ______
on the basis of the maturity of the information but in relation to (1)
the nature of the suspected criminal activity (discrete crime or
7
7
"regenerating conspiracy"), (2) the habits of the suspected criminal
("nomadic" or "entrenched"), (3) the character of the items to be
seized ("perishable" or "of enduring utility"), and (4) the nature and
function of the premises to be searched ("mere criminal forum" or
"secure operational base"). Moscatiello, 771 F.2d at 597 (quoting
___________
Andresen v. State, 331 A.2d 78 (Md. App. 1975)), aff'd, 427 U.S. 463
________ _____ _____
(1976)); see also Rivera v. United States, 928 F.2d 592, 602 (2d Cir.
___ ____ ______ _____________
1991); Rahn, 511 F.2d at 293. The evidence detailed in Agent Jordan's
____
supporting affidavit defines an "entrenched," "regenerating" criminal
conspiracy which was sustained and perpetuated through an extensive
web of fraudulent license applications, renewals, "straw" ownerships,
and a pattern of bribes extending over a period of at least seven
years. Although most events described in the affidavit occurred
before 1983, a reliable informant reported that he saw one of the
defendants' coconspirators bribe a Boston police officer as recently
as August 1987, just one month before the search warrant. In addi-
tion, through licensing board records Agent Jordan verified that a
person identified to an informant in 1980 as a straw owner was still
designated a record owner on license renewal applications filed in
behalf of one of the defendants' business establishments as late as
1986.
The affidavit presented enough circumstantial evidence from which
a judicial officer reasonably could have inferred that documentary and
physical evidence of the alleged ongoing conspiracy would be located
in the second-floor Bel-Art offices at the time of the search. From
8
8
1980 through September 1987, the suite of offices at 671 Washington
Street served as the apparent hub of directive activity for defend-
ants' illegal enterprise and the central repository for important
records relating to the ownership and operation of their various
businesses.4 It would be reasonable to infer that licensing informa-
tion, documentary evidence, and important records relating to the
ownership and operational control of an enterprise conducted at
numerous, dispersed locations probably would be kept at some secure,
centralized location, especially records of "enduring utility." The
likelihood that Bel-Art's second-floor office suite at 671 Washington
Street was the central repository for the business records of the
criminal enterprise was corroborated on September 18, 1987, just days
before the search warrant issued, when police officers conducted a
license inspection at one of defendants' establishments, observed an
illegal amusement device, and asked the manager to produce a license.
The manager referred the inspecting officers to the second-floor
offices at 671 Washington Street, where the officers observed defen-
dant Poravas placing papers in one of four filing cabinets. While on
the premises, the officers noticed video monitors which afforded the
____________________
4We recite some of the information in the affidavit. The offices were
the site of meetings in 1981, at which were discussed plans for
bribing licensing board members. A coconspirator's employee reported
that, as of 1982, the daily income and receipts generated at defend-
ants' various establishments were routinely delivered to these offic-
es. In January 1987, another employee told a police officer that
entertainment licenses were kept at these second-floor offices.
Shortly after delivering a notice of a licensing board hearing to
defendant Poravas on September 12, 1987, a police officer saw Poravas
enter the second-floor offices.
9
9
occupants of the second-floor offices a clear view of the entrance to
the office suite at all times, indicating the likelihood of a "secure
operational base."
We think the net "common sense" import of the information pre-
sented in the search warrant affidavit was sufficient to establish a
"fair probability" that the premises at 671 Washington Street were a
"secure operational base" and the centralized repository for the
records of the suspected criminal enterprise.
2. Particularity of Search Warrant
2. Particularity of Search Warrant
_______________________________
Bel-Art contends that the breadth of the search warrant descrip-
tion of the evidence to be seized left too much to the discretion of
the search party, inviting the sort of "general rummaging" for evi-
dence forbidden by the Fourth Amendment. See United States v. Abrams,
___ _____________ ______
615 F.2d 541, 543 (1st Cir. 1980).5 Ignoring the transitional phrase
____________________
5The evidence was described as follows:
[R]ecords, documents, notes and physical objects which con-
stitute evidence of and instrumentalities of violations of 18
U.S.C. 1961(c) and (d) (i.e., conducting and participating
in the affairs of an enterprise, and agreeing to do so,
through a pattern of racketeering activity consisting of
multiple acts of bribery and mail fraud), Title 18, U.S.C.
1341, and Title 18 U.S.C. 371, and, in particular, re-
___ __ __________
cords, documents, notes and physical objects evidencing the
ownership or control of businesses in the Combat Zone in
Boston, as described in 10 of the Affidavit of Special
Agent Robert J. Jordan, which are licensed by the Boston
Licensing Board and/or the Mayor's Office of Consumer Affairs
and Licensing Division . . . and the payment of bribes to
public officials with regulatory authority over such licensed
premises; said records, documents, notes and physical objects
to include licenses or copies thereof, personnel records and
payroll records, a list of employees, checkbooks and check
10
10
("and, in particular") between the first and second clauses of the
warrant description, Bel-Art asks us to read the first clause (identi-
fying the suspected criminal offenses) independently of the particu-
larized list of items which follows. Accordingly, Bel-Art contends
that the first clause authorized the searching officers to engage in a
generalized rummaging for any item discovered on the search premises,
whether or not of the type particularly described in the second
clause. We do not agree.
The warrant authorized a search for the types of documentary
evidence particularly described in the second clause of the warrant,
the first clause serving the broader, yet defining, purpose of identi-
fying the criminal offenses the target evidence was expected to
establish.6 Thus, but for the search constraints in the second
clause we might agree that the particularity requirement of the Fourth
Amendment would not have been met. In light of the specific types of
____________________
stubs, accounting books and ledgers, invoices, corporate
books and records, including stock ledgers, documents bearing
the names and/or telephone numbers of police officers or
other municipal officials, citations, incident reports,
correspondence, and supplies and objects used in the opera-
tion of the listed businesses, including peep show tokens and
automatic amusement devices. (Emphasis added.)
6Bel-Art likewise challenges the last clause in the warrant descrip-
tion ("including peep show tokens and automatic amusement devices") on
the ground that "this general phrase is not sufficiently limited by
preceding language to evidence of a specific crime." By this argu-
ment, Bel-Art would have us ignore the first clause in the warrant
description, while contending elsewhere that the first clause con-
trolled the second to the point that it gave the executing officers
carte blanche authority to rummage. Of course, the scope of the last
_____ _______
clause in the warrant description is similarly informed by the first
and second clauses.
11
11
items described in the second clause, however, the warrant met the
Fourth Amendment particularity requirement. Cf. Abrams, 615 F.2d at
___ ______
547 (general "tail" clauses will not negate earlier particularity in
main body of description) (citing Andresen v. Maryland, 427 U.S. 463
________ ________
(1976)). Unlike cases in which we have held that the breadth of the
search authorization exceeded the scope of the "probable cause"
showing, see, e.g., id. at 543 (warrant authorizing search for all
___ ____ ___
medical records overly broad where criminal conduct related to Medi-
care and Medicaid fraud); Application of Lafayette Academy, Inc., 610
______________________________________
F.2d 1, 3-4 (1st Cir. 1979) (authorization to search for all books and
papers held overly broad in FISLP-related fraud case), the second
clause of the description in the instant warrant tracked the allega-
tions of clandestine ownership for which probable cause was estab-
lished in the accompanying affidavit, see, e.g., Tabares, 951 F.2d at
___ ____ _______
408 (description of records of ownership and control sufficiently
particular), as well as the allegations of ongoing license infractions
at satellite establishments.7
____________________
7Bel-Art argues that the warrant description should have been limited
to documents prepared after 1980, the alleged date of the commencement
of the conspiracy. See Abrams, 615 F.2d at 543. However, we have
___ ______
never required such arbitrary limitations in warrant descriptions.
Id. ("[T]here is no limitation as to time and there is no description
___ __ ___
as to what specific records are to be seized.") (emphasis added); see
___
also Lafayette, 610 F.2d at 4 n.4 ("[E]fforts may also be required to
____ _________
narrow the documents by category, time periods, and the like.")
___ ___ ____
(emphasis added). Temporal delineations are but one method of tailor-
ing a warrant description to suit the scope of the probable cause
showing.
12
12
B. Mail Fraud
B. Mail Fraud
__________
A general verdict which may have been based on an impermissible
alternative ground must be vacated. United States v. Kattar, 840 F.2d
_____________ ______
118, 123 (1st Cir. 1988) (citing Zant v. Stephens, 462 U.S. 359, 367-
____ ________
370 (1931)).8 Although the defendants could have been convicted of
mail fraud on the independent ground that they deprived the Common-
wealth of Massachusetts of tax revenues, they argue that McNally v.
_______
United States, 483 U.S. 350 (1987),9 precluded their convictions for
_____________
fraudulently depriving the City of Boston of its unissued liquor and
________
entertainment licenses, since the city held no cognizable "property"
interest in the unissued licenses.
________
McNally rejected the "intangible rights" theory as a basis for
_______
mail fraud prosecutions brought by the federal government against
corrupt state and local officials.10 The McNally defendants alleged-
_______
____________________
8The district court instructed the jury to decide whether the unissued
licenses were "property" in the hands of the city. We need not
consider whether the "property" issue determination was for the jury,
as defendants contend that McNally, as a matter of law, compels the
_______ __ _ ______ __ ___
conclusion that unissued licenses are not "property."
9Congress subsequently amended the mail fraud statute to nullify the
McNally rule. See 18 U.S.C. 1346 ("the term 'scheme or artifice to
_______ ___
defraud' includes a scheme or artifice to deprive another of the
intangible right of honest services."). The government does not
advocate retroactive application of the amended statute. See United
___ ______
States v. Bush, 888 F.2d 1145, 1145-46 (7th Cir. 1989) (ex post facto
______ ____ __ ____ _____
concerns bar retroactive application of 1346 to pre-1988 criminal
conduct).
10Section 1341 provides:
Whoever, having devised or intending to devise any scheme
or artifice to defraud, or for obtaining money or property by
means of false or fraudulent pretenses, representations, or
13
13
ly used political office and influence, and their control over the
selection of insurers from which the State would obtain insurance
coverage, to funnel excess commission payments to insurance agencies
either owned or controlled by the defendants. Id. at 352-54. Since
___
comparably priced insurance coverage would have been required in any
event, the government neither contended that the alleged scheme
violated state law, id. at 361 n.9, nor that it resulted in ascertain-
___
able pecuniary loss to the State. Id. at 360. Rather, the prosecu-
___
tion depended entirely on the theory that defendants' breach of their
fiduciary duty as state officials defrauded citizens of their intangi-
ble right to honest state government. Id. at 354 n.4, 356.
___
In reversing defendants' convictions, the Supreme Court acknowl-
edged that section 1341 seemingly permitted conviction either for a
______
"scheme to defraud" or for a "scheme [to] obtain[] money or property
__
by means of false or fraudulent pretenses, representations, or promis-
____________________
promises, or to sell, dispose of, loan, exchange, alter, give
away, distribute, supply, or furnish or procure for unlawful
use any counterfeit or spurious coin, obligation, security,
or other article, or anything represented to be or intimated
or held out to be such counterfeit or spurious article, for
the purpose of executing such scheme or artifice or attempt-
ing so to do, places in any post office or authorized deposi-
tory for mail matter, any matter or thing whatever to be sent
or delivered by the Postal Service, or takes or receives
therefrom, any such matter or thing, or knowingly causes to
be delivered by mail according to the direction thereon, or
at the place at which it is directed to be delivered by the
person to whom it is addressed, any such matter or thing,
shall be fined not more than $1,000 or imprisoned not more
than five years, or both. If the violation affects a finan-
cial institution, such person shall be fined not more than
$1,000,000 or imprisoned not more than 30 years, or both.
14
14
es." Id. at 358. The Court nevertheless rejected the government's
___
contention that the more general phrase "scheme to defraud"
permitted prosecutions for deprivation of the intangible right to
honest government involving no property loss to the defrauded party.
Consulting the "sparse" legislative history of section 1341, id. at
___
356-57, the Court held that the traditional meaning of the term
"defraud" is limited to a deprivation of property rights. Id. at 358-
___
59. Accordingly, where the government is the defrauded party, "any
__________
benefit which the Government derives from [section 1341] must be
limited to the Government's interests as property holder." Id. at
___
358-59 n.8.
McNally held that the intangible right to good government is not
_______ ___
"property," but offered no insight as to the types of interests which
might be deemed "property" in the hands of the government for purposes
of the mail fraud statute. Shortly thereafter, however, the Court
seemed to reaffirm the view that the term "property" is subject to
expansive interpretation. See Carpenter v. United States, 484 U.S. 19
___ _________ _____________
(1987); cf. United States v. Santa-Manzano, 842 F.2d 1, 3 (1st Cir.
___ _____________ _____________
1988) (a personal release might constitute property for purposes of
1341; "mail fraud statute's coverage 'is to be interpreted broadly
insofar as property rights are concerned.'") (quoting McNally, 483
_______
U.S. at 356).11 Carpenter was convicted of wire fraud, for divulg-
____________________
11Unlike McNally, Carpenter dealt with convictions under both the mail
_______ _________
fraud statute and the wire fraud statute, see 18 U.S.C. 1343. Given
___
their similar language, the Court held the McNally rationale applica-
_______
ble to both statutes. Carpenter, 484 U.S. at 25 n.6.
_________
15
15
ing confidential information belonging to his employer, the Wall
Street Journal, in advance of scheduled publication dates. Carpenter,
_________
484 U.S. at 23. Carpenter held that, besides being deprived of its
_________
intangible right to "honest and faithful service," which McNally had
_______
held "too ethereal" an interest to come within the mail fraud statute,
the Journal had been deprived of "something of value." Id. at 25, 27.
___
The Court pointed out that notwithstanding its "intangible nature"
confidential business information traditionally has been treated under
state law as a "species of [intangible] property to which the corpora-
tion has the exclusive right and benefit." Id. at 26. Although the
___
Journal may have sustained no demonstrated monetary loss from the
premature disclosures,12 the Court decided that the newspaper had
"been deprived of its right to exclusive use of the information," an
"important aspect" of most property rights. Id. at 26-27.
___
The ramifications of McNally and Carpenter remain unclear. Some
_______ _________
courts of appeals have concluded that the government holds a "property
right" in unissued licenses and permits for purposes of the mail and
wire fraud statutes. See, e.g., Borre v. United States, 940 F.2d 215,
___ ____ _____ _____________
222 (7th Cir. 1991) (cable television franchise); Frank v. United
_____ ______
States, 914 F.2d 828, 833 (7th Cir. 1990) (surrendered driver's
______
license); United States v. Martinez, 905 F.2d 709, 715 (3d Cir.)
______________ ________
(medical license), cert. denied, 111 S. Ct. 591 (1990); see also
____ ______ ___ ____
____________________
12Presumably, the newspaper suffered no pecuniary loss as a result of
the premature disclosures since Carpenter did not supply the informa-
tion to Journal competitors, but directly to investors.
16
16
United States v. Turoff, 701 F. Supp. 981, 991 (E.D.N.Y. 1988) (taxi-
_____________ ______
cab medallions); cf. United States v. Sacco, 923 F.2d 970, 973 (2d
___ _____________ _____
Cir.) (two members of three-judge panel express disagreement with
controlling circuit precedent that unissued waste dumpsite permit is
not "property"), reh'g granted on related grounds, 927 F.2d 726 (2d
_________________________________
Cir.), cert. denied, 111 S. Ct. 2018 (1991). Other courts of appeals
____ ______
have concluded that unissued licenses and permits are mere regulatory
manifestations of the police power which cannot be characterized as
property interests under McNally. See, e.g., United States v. Sch-
_______ ___ ____ ______________ ____
wartz, 924 F.2d 410, 418 (2d Cir. 1991) (arms export licenses); United
_____ ______
States v. Granberry, 908 F.2d 278, 281 (8th Cir. 1990) (school bus
______ _________
operating permits); United States v. Kato, 878 F.2d 267, 269 (9th Cir.
_____________ ____
1989) (FAA pilot licenses); Toulabi v. United States, 875 F.2d 122,
_______ _____________
126 (7th Cir. 1989) (taxi licenses); United States v. Dadanian, 856
_____________ ________
F.2d 1391, 1392 (9th Cir. 1988) (gambling license); United States v.
______________
Evans, 844 F.2d 36, 42 (2d Cir. 1988) (arms export permit); United
_____ ______
States v. Murphy, 836 F.2d 248, 254 (6th Cir.) (bingo permits), cert.
______ ______ ____
denied, 488 U.S. 924 (1988). Even though the issue is one of first
______
impression in this circuit,13 our analysis does not persuade us that
____________________
13Although McEvoy Travel Bureau, Inc. v. Heritage Travel, Inc., 904
___________________________ _____________________
F.2d 786, 791 (1st Cir.), cert. denied, 111 S. Ct. 536 (1990), sug-
____ ______
gested that the defendants' alleged scheme the obtaining of federal
agency approval to issue domestic and international airline tickets
did not deprive the government of "property," the "property" issue was
collateral to the disposition of the case. Appellant conceded the
issue on appeal, arguing instead that he had been defrauded by the
__
defendants' scheme, which resulted in the unilateral termination of
his exclusive contract with one of the defendants, the Norton Company.
McEvoy held that the complaint failed to allege a sufficient causal
______
17
17
McNally precluded these convictions.
_______
First, the Court narrowly restricted the McNally holding to the
_______
intangible right to honest government. The Court specifically direct-
______ __________
ed its disapproval at a string of federal prosecutions which had
utilized section 1341 to prosecute corrupt state officials for abusing
their positions for purposes of self-dealing, even though the State
had refrained from criminalizing their conduct. But cf. Mass. Gen. L.
___ ___
ch. 138, 62 (violation of alcoholic beverage licensing statute
punishable by fine or imprisonment). Alluding to the rule of lenity
and to serious federalism concerns, the Court refused to "construe the
__________
statute in a manner that leaves its outer boundaries ambiguous and
involves the Federal Government in setting standards of disclosure and
good government for state and local officials." McNally, 483 U.S. at
_______
360. We think the Court's language counsels against extending McNally
_______
to cases in which the defendants are not government officials, the
core conduct has been criminalized under state law, and there are no
significant comity concerns about force-feeding federal ethical
standards to state and local governments.
In addition, given the Court's expansive interpretation of the
____________________
connection between defendants' racketeering activities and the injury
to plaintiff's business, since defendants' fraudulent application to
the federal agencies came one month after Norton terminated its
___ _____ _____
contract with McEvoy. Thus, whether the federal agencies were de-
frauded of their "property" was irrelevant to our conclusion that
McEvoy's complaint failed to state a civil RICO claim. See, e.g.,
___ ____
Arzuaga-Collazo v. Oriental Fed. Sav. Bank, 913 F.2d 5, 7 (1st Cir.
_______________ ________________________
1990) (RICO complaint insufficient to state "cause-in-fact" link, as
plaintiff's injury came before alleged predicate acts of bankruptcy
______
fraud).
18
18
term "property" in Carpenter, and its consistent resort to state
_________ _____
common law and statutory law defining "property," we believe the
municipal government's interest in these alcoholic beverage and
entertainment licenses was in the nature of a "property" interest
within the meaning of McNally and Carpenter. In its broadest sense, a
_______ _________
"property" interest resides in the holder of any of the elements
comprising the "bundle of rights" essential to the use or disposition
of tangible property or to the exercise or alienation of an intangible
right. See, e.g., Brotherton v. Cleveland, 923 F.2d 477, 481 (6th
___ ____ __________ _________
Cir. 1991) ("The concept of 'property' in the law is extremely broad
and abstract. The legal definition of 'property' most often refers
not to a particular physical object, but rather to the . . . bundle of
rights recognized in that object . . . [including] the rights to
possess, to use, to exclude, to profit, and to dispose."). For
instance, in Carpenter the defendant held a possessory interest in the
_________
wrongfully-disclosed confidential information, while the Wall Street
Journal retained the right to control the manner of its use, dissemi-
_______
nation, and alienation. Similarly, the City of Boston had the right
to control the issuance of these licenses, in order to assure their
issuance to deserving licensees only.
Even if these licenses did not become "property" until their
issuance, see Konstantopoulos v. Town of Whately, 424 N.E.2d 210, 217
___ _______________ _______________
(Mass. 1981) (holder of entertainment license has protectable due
process interest), the city retained the right to control their
alienation by the licensees, a property right analogous to those
19
19
recognized at common law (fee simple determinable with a possibility
of reverter). The licenses were renewable on an annual basis, and
defeasible on the occurrence of prescribed contingencies. Under Mass.
Gen. L. ch. 138, 23, "upon the expiration, suspension, revocation,
cancellation or forfeiture of such a license or permit [, the Common-
wealth] shall be entitled upon demand to the immediate possession
thereof." Furthermore, the issued licenses could not be transferred
to third parties without the prior approval of the appropriate licens-
ing board. See Mass. Gen. L. ch. 138, 15A; cf. Evans, 844 F.2d at
___ ___ _____
40 ("under some circumstances, the right to control the future alien-
ation and use of a thing is a property right."). Thus, at the very
least, defendants repeatedly deprived the City of Boston of its
reversionary interest in the fraudulently obtained licenses by renew-
ing and transferring the licenses in the names of straw owners.
Absent any of the serious federalism concerns involved in Mc-
___
Nally, we are disinclined to extend its sway where a defendant fraudu-
_____
lently deprives a local government of its right effectively to control
the issuance of local operating licenses and of its reversionary
interests in previously issued licenses.
C. Cruel and Unusual Punishment
C. Cruel and Unusual Punishment
____________________________
Bel-Art contends that the judgment of criminal forfeiture relat-
ing to property valued at approximately $2.3 million was so "grossly
disproportionate" to the seriousness of Bel-Art's criminal involvement
in the racketeering enterprise as to amount to "cruel and unusual
20
20
punishment," or an "excessive fine," in violation of the Eighth
Amendment.14 See United States v. Busher, 817 F.2d 1409, 1415 (9th
___ _____________ ______
Cir. 1987) (prior to judgment of criminal forfeiture under RICO,
Eighth Amendment requires explicit proportionality findings). The
district court rejected Bel-Art's motion to delimit the criminal
forfeiture in monetary terms.
We bypass the unresolved question whether a corporation may
assert an Eighth Amendment claim. See Browning-Ferris Indus., Inc. v.
___ ____________________________
Kelco Disposal, Inc., 492 U.S. 257 n.22 (1989); United States v.
______________________ ______________
Pilgrim Market Corp., 944 F.2d 14, 22 (1st Cir. 1991); see also
_____________________ ___ ____
Johnson v. Robison, 415 U.S. 361, 366-67 (1974) (in construing stat-
_______ _______
ute, court shall avoid constitutional issues where possible). The
required threshold comparison between the gravity of Bel-Art's crimi-
nal conduct and the severity of the forfeiture penalty does not
support the "initial inference of gross disproportionality" needed for
a successful Eighth Amendment challenge. See Tart v. Commonwealth of
___ ____ _______________
Mass., 949 F.2d 490, 503 & n.16 (1st Cir. 1991).15 Without attempt-
_____
____________________
14The Eighth Amendment provides: "Excessive bail shall not be re-
quired nor excessive fines imposed, nor cruel and unusual punishment
inflicted." U.S. Const. amend. VIII.
15Bel-Art further contends that the defendants were selectively
prosecuted from among the many miscreants who defrauded the City of
Boston of licenses. Bel-Art relies on Busher, 817 F.2d 1409 (9th Cir.
______
1987), which was premised on the three-part test set out in Solem v.
_____
Helm, 463 U.S. 277, 290-92 (1983). In addition to a gross dispropor-
____
tionality determination, Solem would require a comparison of the
_____
forfeitures imposed for comparable offenses in Massachusetts and in
___
other jurisdictions. Recently, however, in a significant curtailment
of Solem, a majority of the Court favored either dispensing with the
_____
Solem test in all non-capital cases, or reaching Solem's inter- and
_____ _____
21
21
ing to estimate the actual loss to its victims, Bel-Art bases its
entire disproportionality assessment on the bare contention that the
value of its forfeited property grossly exceeded the value of the
licenses and back taxes of which it deprived the City of Boston and
the Commonwealth of Massachusetts. See United States v. Pryba, 900
___ _____________ _____
F.2d 748, 757 (4th Cir.) ("Even if we thought a proportional analysis
was required, appellants have failed to proffer the information that
would be required for such an undertaking."), cert. denied, 111 S. Ct.
____ ______
305 (1990). The Busher court itself recognized that bald assertions
______
of this nature are insufficient, noting that such pecuniary discrepan-
cies naturally result from the congressional intendment that criminal
forfeitures under RICO are to serve punitive rather than compensatory
________
purposes. Busher, 817 F.2d at 1415.
______
Unlike forfeitures effected under section 1963(a)(1), which
target properties derived from the RICO enterprise, the Bel-Art
_______
forfeiture, relating to property "affording a source of influence over
a criminal enterprise," 18 U.S.C. 1963(a)(2)(D), would be warranted
only to the extent the jury determined the property to have been
__ ___ ______
tainted by the racketeering activity. See United States v. Angiulo,
___ _____________ _______
897 F.2d 1169, 1212 (1st Cir.) (explaining proportionality rule in
forfeiture proceedings), cert. denied 111 S. Ct. 130 (1990). The jury
____ ______
had ample evidence, none of which was challenged on appeal, from which
____________________
intra-jurisdictional analyses only "in the rare case in which the
____
threshold comparison of the crime committed and the sentence imposed
leads to an inference of gross disproportionality." Harmelin v.
________
Michigan, 111 S. Ct. 2680, 2707 (1991) (emphasis added).
________
22
22
to infer that the forfeited Bel-Art properties were an indispensable
component of defendants' longstanding scheme to deprive the City of
Boston of licenses and the Commonwealth of Massachusetts of back
taxes. Moreover, the level of taint attaching to Bel-Art's property
necessarily depended largely on factual issues resolved adversely to
the defendants at their jury trial. Therefore, we conclude that Bel-
Art cannot succeed on the showing required to support the "initial
inference of gross disproportionality" needed for a successful Eighth
Amendment challenge.
D. Interest on Forfeiture Proceeds
D. Interest on Forfeiture Proceeds
_______________________________
Prior to its indictment, Bel-Art entered into a contract to sell
the real property which was subject to forfeiture. The government
obtained a pretrial order restraining the sale. Later, Bel-Art and
the government agreed to permit these properties to be sold pending
trial, and the sale proceeds ($3.1 million) were placed in interest-
bearing escrow accounts. The jury returned a proportional verdict of
forfeiture pursuant to section 1963(a)(2), and the bulk of the princi-
pal and accrued interest remaining in escrow was forfeited to the
United States.16 Bel-Art contends that the government is not entitled
to the accrued interest because (1) section 1963(a) fixes the amount
____________________
16Prior to the forfeiture verdict, the government released its claim
to one parcel of real property, and Bel-Art withdrew the sale proceeds
and the accrued interest attributable to the sale of the released
parcel. With the exception of the proceeds attributable to two
"untainted" apartment properties, the remaining principal and interest
in the escrow accounts ($2.3 million) was declared forfeit.
23
23
of the forfeiture as of the commission of the criminal offense, and
(2) the government waived its right to the accrued interest.
1. Scope of Section 1963
1. Scope of Section 1963
_____________________
Section 1963(a)(2)(D) declares forfeitable "any property or
contractual right of any kind affording a source of influence over any
enterprise . . . in violation of section 1962." Bel-Art argues that
the interest on the escrowed funds is not forfeitable, as it accrued
on the lawfully invested sale proceeds. Where a criminal statute is
ambiguous, Bel-Art argues, the court should invoke the rule of lenity.
See United States v. Enmons, 410 U.S. 396, 411 (1973).
___ _____________ ______
Bel-Art's contention is foreclosed by section 1963(c), which
provides that title to forfeitable property "vests in the United
States upon the commission of the act giving rise to forfeiture."17
____________________
17The cases relied on by Bel-Art do not aid its argument. For in-
stance, Bel-Art cites United States v. Regan, 699 F. Supp. 36, 38
______________ _____
(S.D.N.Y. 1988), for the proposition that "the penalty imposed by the
RICO statute on a defendant's untainted property [is] in the nature of
a fine that is fixed and final as of the time of the crime." (Empha-
_____ ___ _____
sis added). There is no indication that the post-offense "accretions"
discussed in Regan were in the nature of accrued interest. More
_____
importantly, the court propounded its view as to the "fixed" nature of
the RICO forfeiture penalty largely without explanation, cited neither
the language nor the legislative history of section 1963, and relied
on no caselaw. Bel-Art also cites United States v. Conner, 752 F.2d
_____________ ______
566, 576 (11th Cir.), cert. denied, 474 U.S. 821 (1985), for the
____ ______
proposition that a section 1963 forfeiture penalty is "a money judg-
ment against the defendant for the same amount of money which came
____ ______
into his hands illegally in violation of [the statute]." (Emphasis
added). Taken in context, however, the quoted language clearly
relates to the narrower question whether the government is under an
obligation to trace specific funds in order to determine where the
_____
defendant secreted the tainted monies. The Conner court was not
______
confronted with the accrued interest question presented here.
24
24
Addressing the broader question whether the district court may impose
prejudgment interest on the value of forfeitable property retained by
___________
the defendant during the period between its wrongful acquisition and
the judgment of forfeiture, this court stated that
the RICO forfeiture statute does not expressly provide for
the imposition of interest. RICO's provisions, however, were
intended to be liberally construed to accomplish the stat-
_________ _________
ute's objectives. . . . The forfeiture provision, in par-
ticular, constitutes one of the crucial weapons in the RICO
arsenal and should be liberally construed to accomplish its
purpose of attacking the economic power of illegal enterpris-
es. . . .
. . . If interest had not been imposed, the defendants
effectively would have been allowed to pocket three years
worth of interest earned on a real estate investment that, in
large part, was acquired with the proceeds of an extortionate
loan.
Angiulo, 897 F.2d at 1216 (emphasis added) (citations omitted).
_______
Applying the Angiulo rationale in the instant context, it is obvious
_______
that interest could not have accrued but for the deposit of the
proceeds from the sale of the forfeitable properties. No less clear-
ly, title to the forfeitable properties "vest[ed] in the United States
upon the commission of the act giving rise to forfeiture," 18 U.S.C.
1963(c), and, absent an express agreement to the contrary, interest
earned on the sale proceeds belongs to the entity entitled to the
escrowed principal.18
____________________
18Bel-Art would distinguish Angiulo on the ground that it involved a
_______
forfeiture under 1963(a)(1), not 1963(a)(2), but cites no authori-
ty for the attempted distinction. Cf. Angiulo, 897 at 1210 (de-
___ _______
fendant's proposition, that 1963 treats (a)(1) forfeitures as in
__
personam actions and (a)(2) forfeitures as in rem actions, unsupported
________ __ ___
by authority). The unqualified language of the "relation back"
provision in 1963(c) intimates no such distinction.
25
25
2. Escrow Agreement
2. Escrow Agreement
________________
Finally, Bel-Art argues that the government waived its "relation
back" rights.19 Our review of the written agreement authorizing the
sale discloses no waiver. In return for the government's agreement to
permit the pending sale, Bel-Art agreed that "the proceeds of the sale
. . . shall be treated as the property from which they were derived
_____ __ _______ __ ___ ________ ____ _____ ____ ____ _______
for all purposes under [section 1963]." (Emphasis added). Bel-Art's
___ ___ ________
waiver contention depends entirely on the premise that the agreement
is silent on the issue of accrued interest.20 Given the presumptive
______
rights of the United States under section 1963(c), as well as the
express terms of the agreement permitting the sale, Bel-Art's conten-
tion fails.
Affirmed.
Affirmed.
________
____________________
19Bel-Art relies on United States v. Kingsley, 851 F.2d 16, 21 (1st
_____________ ________
Cir. 1988) (defendant entitled to interest earned on assets previously
subject to forfeiture where government breached implied promise to
place funds in interest-bearing account). Kingsley is readily distin-
________
guishable. There the government was estopped from invoking its
"relation back" rights because it deliberately disregarded a court
order to invest forfeitable assets during the period prior to forfei-
ture and the defendant reasonably relied on the government's implied
representation in entering into a plea agreement. See id. There was
___ ___
no such representation by the government in the present case.
20For example, Bel-Art cites paragraph (e) of the agreement, which
provides for Bel-Art's transfer of the "proceeds of the sale," not the
proceeds plus interest, in the event the co-escrowee is unavailable
____ ________
following a verdict of forfeiture. Since we are required to interpret
the agreement as a whole, however, giving weight where possible to all
of its provisions, see Spartans Indus., Inc. v. John Pilling Shoe Co.,
___ _____________________ _____________________
385 F.2d 495, 499 (1st Cir. 1967), Bel-Art cannot avoid the purport of
the broad language of paragraph (c) ("proceeds of the sale . . . shall
be treated as the property from which they were derived . . . .").
26
26