Federal Prosecutors Observe "No Touch" Ruling on Possible Retrial of San Diego Councilman for Alleged Honest Services Fraud; Former Alaska Chief of Staff to Have Honest Services Conviction Dismissed

Last week was a good one for public officials charged with Federal crimes. First, the U.S. Attorney's Office for the Southern District of California announced that it would not seek a second trial of former San Diego Councilman Michael Zucchet on alleged honest services fraud charges pursuant to 18 U.S.C. 1346, relating to political contributions from the owner of a strip club, as reported by the Los Angeles Times. Mr. Zucchet was indicted with two other City Council members and an aide in 2003. The government alleged that the Council members had a meeting with a lobbyist for the strip club owner for the alleged purpose of changing the City's "no touch" ordinances relating to strip clubs. The Council members, however, argued that they reported the contributions on their financial disclosure forms. The government's decision was prompted by the U.S. Supreme Court's recent decision in U.S. v. Skilling, No. 08-2349, in which, as we have noted,  the Court held that the "honest services" mail fraud statute, 18 U.S.C. §1346, applies to bribery and kickback schemes, and not to mere "undisclosed self-dealing by a public official or private employee," alone.

Councilman Charles Lewis died before trial. Mr. Zucchet and Councilman Ralph Inzunza were convicted by a jury following trial in July of 2005. However, U.S. District Judge Jeffrey Miller dismissed the jury's guilty verdict on seven counts against Mr. Zucchet. The Judge permitted the government to retry Mr. Zucchet on the two remaining counts. The Ninth Circuit Court of Appeals upheld the district court's ruling on appeal. Mr. Inzunza has also appealed his convictions. Mr. Zucchet resigned from the Council soon after his conviction, and is currently General Manager of the San Diego Municipal Employees Association.

Then, according to the Achorage Daily News, the U.S. Attorney's Office for the District of Alaska announced that it would agree to the dismissal of the honest services fraud conviction of Jim Clark. Mr. Clark was the former Chief of Staff to Alaska Governor Frank Murkowski, a lobbyist and attorney, and was once viewed as the most powerful unelected official in Alaska. The U.S. Attorney's Office announced that Mr. Clark's 2008 guilty plea was to a felony that no longer exists, pursuant to the Supreme Court's Skilling decision. Mr. Clark pled guilty to alleged conspiring with former officials of the defunct oil-field services company Veco Corp. to channel $68,550 in illegal contributions to Governor Murkowski's political campaign -- without the Governor's knowledge. He is expected to be a witness for the government in a possible upcoming trial of State Representative Bruce Weyhrauch on bribery, extortion and conspiracy charges. Mr. Clark's law license, which was suspended following his guilty plea, is expected to be reinstated by the Alaska Supreme Court.

In-House Counsel to the Mob? Court Denies Government's Motion to Disqualify Attorney Joseph Corozzo, Jr.

As reported by the New York Law Journal, Michael Scarpaci is current charged as an alleged associate of the Gambino crime organization in the Southern District of New York in an indictment charging racketeering violations, including murder, witness tampering, murder of a witness, extortion, narcotics and sex trafficking a minor. In a twist, however, Scarpaci's lawyer, Joseph R. Corozzo, Jr., is also alleged to have connections to the Gambino family, and the prosecution sought to disqualify Corozzo from the case for alleged conflicts of interest. Specifically, Corozzo's father, Joseph Corozzo Sr., is a consigliere of the Gambino family. His uncle, Nicholas Corozzo, is a capo. And Corozzo himself is alleged to serve as the organization's "in house counsel."

Prosecutors moved to disqualify Corozzo from representing Scarpaci, citing Corozzo's disqualification in April from representing Gaetano Napoli, Sr., on the ground that Corozzo had been present at two meetings with his client in 2009 in which they discussed what to do if Napoli was ever approached by law enforcement. Corozzo had advised Napoli to say nothing and give investigators the number for his attorney. Sound advice from a criminal defense attorney--which the government of course alleged constituted obstruction of justice.

Prosecutors also cited a 2006 recorded conversation in which Scarpaci's co-defendant, Daniel Marino, and an alleged Gambino associate, Lewis Kasman, discussed the possibility of Corozzo being arrested and disbarred, arguing that the conversation implicated Corozzo in the racketeering conspiracy charged in the indictment. Finally, the government contended that Corozzo had previously represented a witness for the government in the case.

District Judge Lewis Kaplan denied the government's motion, holding that the government had not identified any actual conflict from Corozzo's representation of Scarpaci, and noted that Scarpaci could make a knowing and intelligent waiver of any potential conflicts. The Judge found that the alleged conflict in the Napoli case was not related to the case against Scarpaci, and that the Court in that case never made any finding that Corozzo's alleged conduct obstructed justice. Judge Kaplan also observed that the conversation between Marino and Kasman did not suggest that Corozzo had engaged in any criminal conduct. The Court further noted that the subject matter of Corozzo's representation of the government witness, and was only "tangentially related" to the subject matter of the case. Finally, regarding Corozzo's family connections with the Gambino family, the Court held that there was no evidence that Corozzo's father or uncle had had in any way supervised any of the RICO acts allegedly committed by Scarpaci.

Blagojevich Trial "Halftime" Recap (Part I)

 Since the prosecution of former Illinois Governor Milorad R. “Rod” Blagojevich has rested its case, we take the opportunity to recap the testimony and evidence in the first 23 days of the trial, drawing upon the excellent coverage of the Chicago Tribune’s “Blagojevich on Trial” Blog, and also WGN-TV Team 9's Trial Coverage. For the serious follower of the trial, the U.S. District Court for the Northern District of Georgia has also made available virtually all the pleadings, exhibits and recordings from the trial to the public, which may be perused here.

 Thursday, June 3, 2010: The trial of Blagojevich and his brother and co-defendant, Robert Blagojevich, begins in the U.S. District Court for the Northern District of Illinois in Chicago, U.S. District Judge James Zagel presiding. Blagojevich’s attorney, Sheldon Sorosky confirms that the defense has subpoenaed numerous individuals, including U.S. Senator and Senate Majority Leader Harry Reid, U.S. Senator Dick Durbin, U.S. Representative Jesse Jackson, Jr., White House Chief of Staff Rahm Emanuel and Presidential advisor Valerie Jarrett. Judge Zagel denies petitions from the media to disclose the identities of jurors. Jury selection begins.

Friday, June 4, 2010: Jury selection continues. Blagojevich speaks to media and states that he has been falsely accused, and will be vindicated.

Monday, June 7, 2010: Jury selection continues.

Tuesday, June 8, 2010: A jury of 11 women and seven men—12 jurors and six alternates—is selected. The defense files motion alleging that Blagojevich’s First Amendment right to free speech was “criminalized.” Judge Zagel rules that no “twittering” is allowed in the courtroom. Assistant U.S. Attorney Carrie Hamilton give opening statement for prosecution. Hamilton argues that Blagojevich had more than $200,000 in debt and viewed the election of former U.S. Senator for Illinois Barack Obama as President of the United States as a financial opportunity. The prosecution alleges that Blagojevich sought to be appointed Secretary of the U.S. Department of Health and Human Services (HHS) and for millions of dollars in donations to a charitable organization which Blagojevich would control in exchange for appointing Valerie Jarrett to Obama’s vacant Senate seat. Hamilton argues that Blagojevich later sought $1 million from Jesse Jackson, Jr., in exchange for the appointment. Blagojevich viewed the vacancy as a “golden ticket.” The prosecution also argues that Blagojevich, convicted real estate developer Antoin “Tony” Rezko, Christopher Kelly and Blagojevich’s former Chief of Staff, Alonzo “Lon” Monk, conspired to extort kickbacks from companies seeking business from the state. Rezko allegedly made payments of $12,000 per month to Blagojevich’s wife, Patti Blagojevich. Blagojevich is also alleged to have extorted tens of thousands of dollars from Children’s Memorial Hospital in Chicago in exchange for obtaining reimbursements for the hospital, and to have attempted to extract campaign contributions from then-U.S. Representative Rahm Emanuel in exchange for a $2 million grant to a school in Emanuel’s district. Blagojevich attorney, Sam Adam, Jr., argues that Blagojevich didn’t receive a dime from the alleged scheme. Adam argues that Blagojevich was naïve in trusting others, including Rezko.

Wednesday, June 9, 2010: FBI agent Daniel Cain testifies regarding the investigations of Rezko and Blagojevich. Lon Monk, Blagojevich’s former campaign manager, who pled guilty to conspiring to solicit a bribe and is cooperating with the government, testifies to Blagojevich’s fundraising in the 2002 campaign. Monk testifies that Blagojevich, Rezko, Chris Kelly and Monk had a meeting in 2003 to discuss how to profit from action by the state. Rezko listed nine money-making ideas and the participants agreed to divide the profits equally. Kelly, who owned a roofing company, committed suicide in 2009, and the Court prohibited any mention of him to the jury. Monk testifies that he and Rezko also gave their opinions on who should receive senior positions in Blagojevich’s administration. He testifies that Blagojevich and Rezko obtained a $500,000 kickback from lobbyist Robert Kjellander in exchange for selecting Bear Stearns to sell a $10 billion pension bond deal in 2003. Monk testifies that Rezko tried to start an insurance company using his connections, the profits from which would be divided with Blagojevich and Monk.

Thursday, June 10, 2010: Lon Monk testifies regarding Blagojevich’s appointments of donors donating $25,000 or more to State boards and commissions. He states that Rezko allegedly “hired” Patti Blagojevich and paid her a $150,000 retainer, despite the fact that Ms. Blagojevich performed no work. Monk testifies that Blagojevich entered an agreement with Illinois State Senator and Senate President Emil Jones to not override Blagojevich’s veto of a bill which would have limited fundraising in campaigns for governor. The prosecution plays a recording of a telephone conversation between Blagojevich and Monk about getting $4 million in campaign fundraising, with Blagojevich yelling at Monk to contact prior donors to send $5,000 or whatever they can send. Prosecutors play recordings of telephone conversations, including a conversation in which Blagojevich and Monk discuss Jesse Jackson, Jr. Monk testifies that Blagojevich instructed him to attempt to obtain a $500,000 donation from Jerry Krozel, head of a road construction association, in exchange for announcing $5 billion in toll road funding, before a new ethics law banning such large donations took effect.

Photo from Cleveland.com

Monday, June 14, 2010: Monk testifies that he felt pressure to bring in campaign funds. He testifies that Blagojevich met with him in 2008 and said that he wanted to meet with race track owner John Johnston and obtain a $100,000 donation, allegedly in exchange for signing legislation which would save money for Illinois race tracks. The defense cross-examines Monk. Michael Ettinger, attorney for Robert Blagojevich, gets Monk to admit that Rod kept his brother out of the political end of things, including the meeting concerning Johnston. Sam Adam asked Monk whether it was a crime for a politician to accept a campaign contribution for state action if there was no quid pro quo, or something offered in exchange. Monk subsequently responded that it was not. Adam questioned Monk regarding whether Blagojevich had ever indicated that he would not sign the race track legislation if Johnston did not make a campaign contribution.

Tuesday, June 15, 2010: Blagojevich’s counsel continue their cross-examination of Monk. Monk admits that he occasionally lied to Blagojevich in order to stop Blagojevich from bothering him about fundraising. Monk repeatedly admits that he does not remember specifics of meetings with Blagojevich, Rezko and Kelly. The defense points out that Monk accepted several $10,000 cash gifts from Rezko allegedly in exchange for his involvement in the scheme, however Monk had signed a statement for the prosecution stating that the amounts were gifts with no quid pro quo attached. Monk admits that he lied to the FBI in an earlier interview. The defense tries to suggest that Blagojevich knew nothing about the cash or illegal acts involving Monk and Rezko. Monk admits that Blagojevich never told him he would withhold the funding for the toll roads if he did not receive a contribution. David Abel, a public finance quantitative technician, testifies regarding a meeting with Blagojevich, Kelly and staffers regarding the $10 billion pension bond issue. Abel admits on cross-examination that Bear Stearns was rated as highly qualified to do the deal. Vincent Mazzaro, a member of Bear Stearns’ municipal bond department, testifies that the manager of the department would have hired Robert Kjellander, who allegedly paid a $500,000 kickback to Rezko to ensure that Bear Stearns was selected as elite manager for the sale of the bonds. Kjellander would receive a “success fee,” in this case $809,000. Joseph Aramanda, a friend of Rezko’s, testifies that Kjellander loaned him hundreds of thousands of dollars at Rezko’s direction to support Papa John’s pizza franchises which Aramanda had purchased from Rezko. Aramanda testifies that Kjellander did not ask for any documentation for the loan. He testifies that Rezko contacted him following his receipt of the loan proceeds and asked him to pay various individuals and entities whom Rezko owed money to. Aramanda also testifies that Rezko told him he was involved in appointments for cabinet positions in Blagojevich’s administration, and offered Aramanda a position in the Illinois Department of Aging. Rezko also approached Aramanda about being a middleman between the Illinois Teachers Retirement System (TRS) and investment firms seeking to invest TRS monies. Aramanda testified that Rezko introduced him to Sheldon Perkin, another middle man, and that he and Perkin received $375,000 each from a $50 million investment deal between TRS and Glencoe Capital.

Wednesday, June 16, 2010: Joseph Aramanda testifies that Sheldon Perkin paid him $375,000, in three installments, on the TRS/Glencoe Capital, deal despite the fact that he did no work on the deal. Rezko asked Aramanda to divert $50,000 from the first installment to the sister of one of Rezko’s business associates. Aramanda testifies that Rezko told him that he could earn at least $1 million a year in finder’s fees for securing state pension monies for investment firms. Rezko told Aramanda that he would take a cut of the fees paid to Aramanda and would share them with Blagojevich, Lon Monk and Chris Kelly. Armanda stated that when Rezko told him about the arrangement, he became uncomfortable and withdrew from the agreement. Blagojevich attorney Michael Gillespie questions Aramanda about making a $10,000 contribution in 2004 to Barack Obama’s campaign for the U.S. Senate. The prosecution plays audio recordings of telephone conversations in which Blagojevich discusses the interest Illinois businessman Blair Hull, who donated $467,000 to Blagojevich’s 2002 campaign, in the vacant U.S. Senate seat. Blagojevich calls Hull “an idiot.” IRS agent Shari Schindler testifies that, in investigating Rezko, the government found monies going to Chris Kelly and River Realty, a company affiliated with Patti Blagojevich. Joseph Cari, a former national Democratic fundraiser, testifies that he had a conversation with Blagojevich in 2003 regarding Blagojevich running for president, in which Blagojevich told him he would approach businesses for contributions in exchange for awarding state business. The prosecution requests a gag order for Blagojevich and his counsel to prevent them from making public comments and influencing the jury. Judge Zagel states that he will take up the request later.


Woman Indicted in Pitino Extortion Attempt

The bizarre extortion attempt of University of Louisville basketball coach, Rick Pitino, has resulted in an indictment reports the Louisville Courier-Journal. Karen Sypher, the estranged wife of the University of Louisville equipment manager, was the lone defendant indicted yesterday by a grand jury in the Western District of Kentucky for trying to extort money from Pitino. This case came into the news last month when Pitino in a statement released by the university said that he intended to “vigorously defend my reputation and the character of my family.”

Sypher was arrested on a criminal complaint, here, last month filed by the FBI, charging her with attempted extortion of Pitino and making false statements to the FBI. The complaint alleges:

  •  that Pitino received 3 phone messages in February by a then unknown caller, which made personal allegations against Pitino that “could harm Mr. Pitino’s reputation . . . in that they characterized an interaction between Mr. Pitino and an unnamed woman as criminal in nature.”
  • Pitino told the FBI that after the first two phone messages he met with Karen Sypher and her husband and asked what she wanted.
  • In early March Sypher’s husband delivered to Pitino a list of demands written by Sypher that included college for her children, 2 cars, a house paid off, $3,000 per month and a single payment of $75,000.
  • On March 22, 2009 an attorney for Sypher demanded $10,000,000 through a letter sent to Pitino.
  • On April 17, 2009 FBI agents interviewed the individual who made the threatening phone calls to Pitino at Sypher’s request.

Sypher was released following her arrest on an unsecured bond last month and she is to be arraigned today on the charges in the indictment.