United States v. Fattah

902 F.3d 197

UNITED STATES of America, Appellant in 17-1346

v.Chaka FATTAH, Sr., Appellant in 16-4397

Karen Nicholas, Appellant in 16-4410

Robert Brand, Appellant in 16-4411

Herbert Vederman, Appellant in 16-4427

Nos. 16-4397

16-4410

16-4411

16-4427

17-1346

United States Court of Appeals, Third Circuit.

Argued January 18, 2018

Filed: August 9, 2018

OPINION

SMITH, Chief Judge.

Table of Contents

I. Introduction....211

II. Background....212

A. The Fattah for Mayor Scheme ....212

1. The Lord Loan and Its Repayment....212

2. ....219

3. The NOAA Grant and the Phantom Conference....219

B. The Blue Guardians Scheme....221

C. The Fattah-Vederman Bribery Scheme....221

D. The Indictment and Trial....224

III. Juror Misconduct and Dismissal of Juror 12....231

A. Investigation of Alleged Juror Misconduct....232

B. Dismissal of Juror 12....234

IV. The District Court's Instructions Under McDonnell....236

A. The McDonnell Framework....237

B. The Kirk Meeting....239

C. Fattah's Efforts to Secure Vederman an Ambassadorship....240

D. The Zionts Hiring....241

E. Vederman's Sufficiency Challenge to Counts 16-18 and 22-23....244

F. Blue Guardians....245

V. Sufficiency of the Evidence for the RICO Conspiracy Conviction....246

VI. Variance from the Indictment and Sufficiency of the Evidence for Count 2....252

VII. The District Court's Instruction to the Jury on the Meaning of Intent....256

VIII. Sending the Indictment to the Jury....258

IX. The District Court's Evidentiary Rulings....259

A. The District Court's Application of Rule 404(b)....259

B. Evidentiary Rulings Regarding Nicholas's Defense....261

1. The EAA Board Minutes....261

2. Jones' Memory Regarding Other Contracts....262

3. Exclusion of NOAA Evidence....263

C. The Cooperating Witness's Mental Health Records....263

1. The District Court's Denial of Access to the Mental Health Records....264

2. The District Court's Grant of the Motion in Limine....265

X. The Government's Cross-Appeal....267

A. CUMA is a Mortgage Lending Business....267

B. Sufficiency of the Evidence....270

XI. Prejudicial Spillover....271

A. Fattah's Claim of Prejudicial Spillover....272

B. Vederman's Assertion of Prejudicial Spillover....272

XII. Conclusion....274

I. Introduction

Chaka Fattah, Sr., a powerful and prominent fixture in Philadelphia politics, financially overextended himself in both his personal life and his professional career during an ultimately unsuccessful run for mayor. Fattah received a substantial illicit loan to his mayoral campaign and used his political influence and personal connections to engage friends, employees, and others in an elaborate series of schemes aimed at preserving his political status by hiding the source of the illicit loan and its repayment.

In so doing, Fattah and his allies engaged in shady and, at times, illegal behavior, including the misuse of federal grant money and federal appropriations, the siphoning of money from nonprofit organizations to pay campaign debts, and the misappropriation of campaign funds to pay personal obligations.

Based upon their actions, Fattah and four of his associates — Herbert Vederman, Robert Brand, Bonnie Bowser, and Karen Nicholas — were charged with numerous criminal acts in a twenty-nine count indictment. After a jury trial, each was convicted on multiple counts. All but Bowser appealed. As we explain below, the District Court's judgment will be affirmed in part and reversed in part.

II. Background¹

During the 1980s and '90s, Fattah served in both houses of the Pennsylvania General Assembly, first as a member of the House of Representatives and later as a Senator. In 1995, Fattah was elected to the United States House of Representatives for Pennsylvania's Second Congressional District. In 2006, Fattah launched an unsuccessful run for Mayor of Philadelphia, setting in motion the events that would lead to his criminal conviction and resignation from Congress ten years later.

A. The Fattah for Mayor Scheme

Fattah declared his candidacy for mayor in November of 2006. Thomas Lindenfeld, a political consultant on Fattah's exploratory committee, believed that "[a]t the beginning of the campaign, [Fattah] was a considerable ... candidate and somebody who had a very likely chance of success." JA1618. But Fattah's campaign soon began to experience difficulties, particularly with fundraising. Philadelphia had adopted its first-ever campaign contribution limits, which limited contributions to $2,500 from individuals and $10,000 from political action committees and certain types of business organizations. Fattah's fundraising difficulties led him to seek a substantial loan, far in excess of the new contribution limits.

1. The Lord Loan and Its Repayment

While serving in Congress, Fattah became acquainted with Albert Lord, II. The two first met around 1998, when Lord was a member of the Board of Directors of Sallie Mae.

As the May 15, 2007 primary date for the Philadelphia mayoral race approached, Fattah met Lord to ask for assistance, telling Lord that the Fattah for Mayor (FFM) campaign was running low on funds. Fattah asked Lord to meet with Thomas Lindenfeld, a political consultant in Washington, D.C., and part-owner of LSG Strategies, Inc. (Strategies), a company that was working with the FFM campaign and that specialized in direct voter contact initiatives. Lindenfeld had been part of the exploratory group that initially considered Fattah's viability as a candidate for mayor. Lindenfeld had known Fattah since 1999, when Fattah endorsed Philadelphia Mayor John Street. Through Fattah, Lindenfeld had also gotten to know several of Fattah's associates, including Herbert Vederman, Robert Brand, and Bonnie Bowser. Herbert Vederman, a businessman and former state official, was the finance director for the FFM campaign. Robert Brand owned Solutions for Progress (Solutions), a "Philadelphia-based public policy technology company, whose mission [was] to deliver technology that directly assists low and middle income families [in obtaining] public benefits." JA6551. Bowser was Fattah's Chief of Staff and campaign treasurer, and served in his district office in Philadelphia.

Lord's assistant contacted Lindenfeld to arrange a meeting, and Lindenfeld informed Fattah that he would be meeting with Lord. Lindenfeld, along with his partner, Michael Matthews, met with Lord and discussed Fattah's need for funds to mount an intensive media campaign. After that meeting, Lindenfeld reported to Fattah that Lord wanted to help, but that they had not discussed a specific dollar amount. Approximately a week later, Fattah instructed Lindenfeld to meet with Lord a second time. Lord "wanted to know if he could give a substantial amount of money, a million dollars" to Fattah's campaign. JA1630. That prompted Lindenfeld to reply that the amount "would be beyond the campaign finance limits." Id.

Lord proposed a solution: he offered to instead give a million dollars to Strategies in the form of a loan. To that end, Lindenfeld had a promissory note drafted which specified that Lord was lending Strategies $1 million, and that Strategies promised to repay the $1 million at 9.25% interest, with repayment to commence January 31, 2008. Lindenfeld later acknowledged that the promissory note would make it appear as though Lord's $1 million was not a contribution directly to the Congressman, although he knew that it was actually a loan to the FFM campaign. Indeed, Lindenfeld confirmed with Fattah that neither Lindenfeld nor Strategies would be responsible for repayment. With that understanding, Lindenfeld executed both the note and a security agreement purporting to encumber Strategies' accounts receivable and all its assets.

On May 1, shortly before the primary election, Lord wired $1 million to Lindenfeld. Lindenfeld held the money in Strategies' operating account until Fattah told him how it was to be spent. Some of the money was eventually used for print materials mailed directly to voters. And, at Fattah's direction, Lindenfeld wired a substantial sum to Sydney Lei and Associates (SLA), a company owned by Gregory Naylor which specialized in "get out the vote" efforts.

Naylor had known Fattah for more than 30 years.² During the campaign, Naylor worked as the field director and was in charge of getting out the vote on election day. On the final day of the campaign, Naylor worked with Vederman, who allowed Naylor to use his credit card to rent vans that would transport Fattah voters to the polls.

As the primary date neared, Fattah and Naylor knew the campaign was running out of money. The campaign was unable to finance "media buys," and Naylor needed money for field operations to cover Philadelphia's more than one thousand polling places. In early May, Lindenfeld called Naylor to say that Lindenfeld "would be sending some money [Naylor's] way." JA3057. Within days, SLA received a six-figure sum for Naylor to use in the campaign and on election day. Naylor used the money to pay some outstanding bills, including salaries for FFM employees, and allocated $200,000 to field operations for election day.

Fattah lost the mayoral primary on May 15, 2007. Afterward, Lindenfeld spoke with Fattah, Naylor and Bowser about accounting for the FFM campaign money from Lord that had been spent. They decided that the amounts should not appear in the FFM campaign finance reports, and Fattah instructed Naylor to have his firm, SLA, create an invoice. Naylor did so, creating an invoice dated June 1, 2007 from SLA to FFM, seeking payment of $193,580.19. Naylor later acknowledged that the FFM campaign did not actually owe money to SLA, and that the false invoice was created to "hide the transaction that took place earlier" and "make it look like [SLA] was owed money." JA3075-76. Although FFM did not owe SLA anything for the election day expenses, the FFM campaign finance reports from 2009 through 2013 listed a $20,000 in-kind contribution from SLA for each year, thereby lowering FFM's alleged...