U.S. v. Krilich

Page 1020

159 F.3d 1020

UNITED STATES of America, Plaintiff-Appellee, Cross-Appellant, v. Robert R. KRILICH, Defendant-Appellant, Cross-Appellee.

Nos. 97-2721, 97-2977.

United States Court of Appeals Seventh Circuit.

Argued April 7, 1998.

Decided Oct. 27, 1998.

Rehearing and Suggestion for Rehearing En Banc Denied Jan.

26, 1999. ^*

Joel D. Bertocchi (argued), Stephen Heinze, Office of the United States Attorney, Chicago, IL, for Plaintiff-Appellee.

Thomas D. Decker, Decker & Associates, Dennis A. Berkson, Lawrence C. Marshall (argued), Northwestern University Legal Clinic, Marc W. Martin, Chicago, IL, Herbert J. Miller, Jr., Nathan Lewin (argued), Stephen L. Braga, Paul F. Enzinna, Miller, Cassidy, Larroca & Lewin, Washington, DC, for Robert R. Krilich.

Jeffrey Urdangen, Chicago, IL, for Amicus Curiae Illinois Attorneys for Criminal Justice.

Carol A. Brook, Office of the Federal Defender Program, Chicago, IL, for Amicus Curiae Federal Defenders of the Northern, Central and Southern Districts of Illinois.

Before EASTERBROOK, RIPPLE, and EVANS, Circuit Judges.

EASTERBROOK, Circuit Judge.

A golfer's dream came true for Andy Sarallo. On June 19, 1985, Andy lined up at the ninth tee at Country Lakes Country Club and struck the ball; an observer on the ninth green pulled Andy's ball out of the hole. Andy's foursome jumped up and down and shouted for joy. Because the ninth hole at Country Lakes was the subject of a hole-in-one contest that day, Andy had just won his choice of a 1931 Cadillac or a check for $40,000!

A hole-in-one is quite a thrill because it happens so infrequently--perhaps one chance in 40,000, rarer than a 300 game in bowling. But Andy's chances were close to 100%, because his father was mayor of Oakbrook Terrace, Illinois, and the mayor's support was needed for a bond offering to finance an apartment complex to be built by Robert Krilich--who sponsored the contest, pulled the ball out of the hole, and became the defendant in this criminal case. Krilich and Mayor Sarallo agreed to use the golf tournament as the vehicle for a payoff. Krilich palmed one of Andy's golf balls, put his hand into the cup, and displayed the ball. Delivering the bribe in this way enabled Krilich to shift the cost to the National Hole-In-One Association, which provided insurance. Thus fraud and bribery were coupled. Krilich admitted this scheme in a proffer to the United States Attorney, and he also conceded bribing the mayor to alter the zoning of some land and orchestrating the extraction of funds from municipal bond offerings. The bonds--Industrial Revenue Bonds, interest on which is not taxable to the investors--were sold to finance Krilich's developments. Because the bonds were limited to specific projects (tax exemption depended on that link), the funds were placed in trust, and the trustee banks were to release the money only to reimburse expenses associated with the projects. Preferring to use the money elsewhere, such as for payments on his yacht, Krilich instructed vendors to falsify their invoices and had those bogus invoices sent to the banks for payment out of the trust accounts.

Krilich was convicted of conspiracy to violate the Racketeer Influenced and Corrupt Organizations statute, 18 U.S.C § 1962(d) (RICO), and a fraud statute, 18 U.S.C. § 1014. Krilich maintains on appeal that the district court erred by permitting the prosecutor to use some of the proffer's contents at his trial, that 18 U.S.C. § 1014 does not apply to his conduct, that the instructions improperly removed some issues from the jury's consideration, and that he is not criminally liable for other reasons. The United States argues in a cross-appeal that Krilich's 64-month prison sentence is too low.

I

Statements made during plea negotiations are inadmissible, Fed.R.Evid. 410; Fed.R.Crim.P. 11(e)(6), but a defendant may waive the right to prevent their use. United States v. Mezzanatto, 513 U.S. 196, 115 S.Ct. 797, 130 L.Ed.2d 697 (1995). The agreement Krilich signed contains a conditional waiver:

[S]hould [Krilich] subsequently testify contrary to the substance of the proffer or otherwise present a position inconsistent with the proffer, nothing shall prevent the government from using the substance of the proffer at sentencing for any purpose, at trial for impeachment or in rebuttal testimony, or in a prosecution for perjury.

By authorizing the prosecutor to use his statements if he should contradict himself, Krilich made his representations more credible and thus strengthened his hand in negotiations. See Mezzanatto, 513 U.S. at 207, 115 S.Ct. 797; Eric Rasmusen, Mezzanatto and the Economics of Self-Incrimination, 19 Cardozo L. Rev. 1541 (1998). A prosecutor may be reluctant to negotiate; what has the defendant to offer? A statement that shows how the defendant's aid could assist the prosecutor in other cases (or lead to the appropriate sentence in this one) may get negotiations under way and set the stage for a favorable bargain. But a prosecutor needs assurance that the defendant is being candid. A conditional waiver of the kind Krilich signed tends to keep the defendant honest, which makes the proffer device more useful to the both sides. For this strategy to work the conditional waiver must be enforceable; its effect depends on making deceit costly. We therefore reject the argument that waivers should be construed against prosecutors; that might help Krilich today but would hinder bargaining for other defendants tomorrow. We give this waiver neither a stingy reading nor a generous one, but a natural reading, which leaves the parties in control through their choice of language.

This agreement allowed the prosecutor to use the proffer as evidence if Krilich were to "testify contrary to the substance of the proffer or otherwise present a position inconsistent with the proffer". Introduction of the statements thus was proper if either his testimony, see United States v. Goodapple, 958 F.2d 1402, 1409 (7th Cir.1992), or evidence that he presented through the testimony of others, see United States v. Richardson, 130 F.3d 765, 778 (7th Cir.1997); United States v. Dortch, 5 F.3d 1056, 1068 (7th Cir.1993), contradicted the proffer. Because Krilich did not testify, only the second clause is at issue. Krilich wants us to limit this clause to evidence presented through his own witnesses; evidence obtained by cross-examination of the prosecution's witnesses does not count, he insists. But that would be an unnatural reading of the language. Evidence is evidence, whether it comes out on direct or cross-examination. One can "otherwise present" a position through arguments of counsel alone, so it is easy to see how a position can be "presented" by evidence developed on cross-examination and elaborated by counsel. When the prosecution's witnesses are inclined to accommodate the defense, as many were in this case, developing one's position through cross-examination is especially attractive.

The prosecutor's position about the effect of the language is as unrealistic as Krilich's. According to the prosecutor, putting on any defense permits the United States to introduce the statements. A plea of not guilty followed by passivity at trial is about all the defense can do, the prosecutor contends--though, when pressed at oral argument, the prosecutor allowed that Krilich could have avoided introduction of the statements if he had limited his cross-examination to "the credibility, weight and sufficiency of the government's evidence in ways that were extrinsic to the facts of the case". On this understanding, asking a witness on cross-examination whether he had been convicted of perjury would be "extrinsic to the facts of the case", but asking the witness whether he had been in a position to see what happened at the ninth green on June 19 would open the door to the use of the proffer. Such a distinction makes sense of neither the language in the contract nor the reason why the waiver was conditional. The prosecutor wanted to give Krilich an incentive to tell the truth; Krilich wanted assurance that he could defend himself at trial if bargaining collapsed (for otherwise he was delivering himself into the prosecutor's hands); conditioning the use of the proffer statements on the presentation of a position "inconsistent with the proffer" does both of those things only if the judge must find genuine inconsistency before allowing use of the statements.

Impeachment of a witness need not be "contrary to" or "inconsistent with" a defendant's admission of guilt in a bargaining proffer. To take a simple example, the statements "I faked the hole-in-one on the ninth hole" (Krilich, in the proffer) and "I did not see Krilich palm a golf ball at the ninth hole on June 19" (a witness, on cross-examination) are not inconsistent. Investigation via cross-examination of witnesses' ability (or willingness) to observe and recount the facts they claim to have observed therefore could not have justified introduction of the proffer statements. Millions of people who live in Illinois did not see what happened at the ninth green on June 19; others who did see what happened may have had reasons to misrepresent what they saw; proof that a given person who took the stand at trial was in the set of non-observers (or liars) is not "inconsistent" with the proffer. Statements are inconsistent only if the truth of one implies the falsity of the other. The statements "Krilich pulled a palmed ball from the cup at the ninth hole" and "Krilich wasn't at the ninth hole when Andy hit his shot" are inconsistent because the former statement cannot be true if the latter is. This appeal turns on whether Krilich elicited such inconsistent testimony. The district judge concluded that he had, and that assessment is not clearly erroneous.

Several witnesses testified, in response to questions from Krilich's attorney, that the ninth hole at Country Lakes Country Club is close to the...