United States v. Silver

864 F.3d 102

UNITED STATES of America, Appellee,

v.Sheldon SILVER, Defendant-Appellant.

No. 16-1615-cr

August Term 2016

United States Court of Appeals, Second Circuit.

Argued: March 16, 2017

Decided: July 13, 2017

Steven F. Molo , MoloLamken LLP (Robert K. Kry, Justin V. Shur, MoloLamken LLP; Joel Cohen, Stroock & Stroock & Lavan LLP, on the brief), New York, NY, for Defendant-Appellant.

Andrew D. Goldstein (Howard S. Master, James McDonald, Karl Metzner, on the brief), for Joon H. Kim, Acting United States Attorney for the Southern District of New York, New York, NY, for Appellee.

Before: CABRANES, WESLEY, Circuit Judges, and SESSIONS, Judge.^*

JOSÉ A. CABRANES, Circuit Judge:

In 2015, the United States Government indicted Sheldon Silver, the former Speaker of the New York State Assembly, on charges of honest services fraud, Hobbs Act extortion, and money laundering. The Government alleged that Silver abused his public position by engaging in two quid pro quo schemes in which he performed official acts in exchange for bribes and kickbacks, and that he laundered the proceeds of his schemes into private investment vehicles. After a jury trial of nearly one month in the United States District Court for the Southern District of New York (Valerie E. Caproni, Judge ), a jury found him guilty on all counts. He was sentenced to twelve years of imprisonment, to be followed by three years of supervised release.

After Silver had been convicted and sentenced, the Supreme Court issued its decision in McDonnell v. United States ,¹ which clarified the definition of an "official act" in honest services fraud and extortion charges. The Supreme Court, vacating the conviction of former Governor Robert McDonnell of Virginia, held that "an 'official act' is a decision or action on a 'question, matter, cause, suit, proceeding or controversy' " involving "a formal exercise of governmental power."²

Silver now appeals from his judgment of conviction and argues, primarily, that the District Court's jury instructions defining an official act as "any action taken or to be taken under color of official authority" was erroneous under McDonnell .³ He additionally challenges the sufficiency of the evidence on all counts of conviction, arguing, among other things, that his money laundering conviction under 18 U.S.C. § 1957 required the Government to trace "dirty" funds comingled with "clean" funds.

Though we reject Silver's sufficiency challenges, we hold that the District Court's instructions on honest services fraud and extortion do not comport with McDonnell and are therefore in error. We further hold that this error was not harmless because it is not clear beyond a reasonable doubt that a rational jury would have reached the same conclusion if properly instructed, as is required by law for a verdict to stand.

Accordingly, we VACATE the District Court's judgment of conviction on all counts and REMAND the cause to the District Court for such further proceedings as may be appropriate in the circumstances and consistent with this opinion.

BACKGROUND

I. Offense Conduct⁴

Silver was elected to the New York State Assembly (the "Assembly") in 1976, representing an Assembly District comprising much of lower Manhattan. In 1994, he was elected Speaker of the Assembly ("Speaker")—a position he would hold for more than twenty years until his resignation in 2015. As Speaker, Silver was one of the most powerful public officials in the State of New York, exercising significant control over the Assembly and state legislative matters.

The Government's charges against Silver involve his part-time work as a practicing lawyer.⁵ The Government sought to prove that Silver orchestrated two criminal schemes that abused his official positions for unlawful personal gain. Each of these alleged schemes had the same premise: in exchange for official actions, Silver received bribes and kickbacks in the form of referral fees from third-party law firms. In one scheme, Silver performed favors for a doctor in exchange for the doctor's referral of mesothelioma patients to Silver's law firm (the "Mesothelioma Scheme"). In the other, Silver performed favors for two real estate developers who had hired, at Silver's request, a law firm that was paying referral fees to Silver (the "Real Estate Scheme"). Jointly, these alleged schemes produced roughly $4 million in referral fees for Silver. The Government also charged that Silver engaged in money laundering by investing the proceeds of the Mesothelioma and Real Estate Schemes into various private investment vehicles (the "Money Laundering Scheme"). We describe the key aspects of each scheme in turn.

A. The Mesothelioma Scheme⁶

In the fall of 2002, Silver became "of counsel" to the law firm Weitz & Luxenberg ("W&L"), which maintained an active personal injury practice. Lawsuits for mesothelioma, a rare form of cancer caused by exposure to asbestos, were particularly lucrative for W&L.

While he was not expected to and did not perform any legal work for W&L's clients, Silver received a fixed salary for lending his name to W&L, as well as referral fees for any case he brought into the firm. Silver's referral fee was a set percentage of the fees earned by W&L on any case that he referred to the firm.

Dr. Robert Taub, an acquaintance of Silver, was a physician and researcher at Columbia-Presbyterian Hospital who specialized in mesothelioma. In the fall of 2003, Dr. Taub encountered Silver at an event and asked him to encourage W&L to donate money to mesothelioma research.⁷ Silver, without consulting anyone at the firm, responded that he could not get W&L to do so.

Within two weeks, however, Silver asked Dr. Taub to refer mesothelioma cases to W&L through him.⁸ Responding to that request in November of 2003, Dr. Taub started referring mesothelioma patients to Silver for legal representation. He also provided Silver with names and contact information of unrepresented mesothelioma patients seeking counsel. Dr. Taub sought to develop a relationship with Silver that would help him receive research funding, much of which came from state and federal appropriations. Although unaware of the specifics of the financial arrangement between Silver and W&L, Dr. Taub testified that he believed Silver would benefit personally from the mesothelioma leads. And indeed, Silver conveyed to Dr. Taub that he was "pleased with the referrals that he was getting."⁹

Dr. Taub was soon informed that Silver was considering providing him with state funding for his mesothelioma research. Shortly thereafter, in early January 2004, Dr. Taub sent a letter to Silver requesting state funding. While this grant was under consideration, Dr. Taub continued to send Silver mesothelioma leads. And over a year later, in March of 2005, Silver received his first referral fee check from W&L in the amount of $176,048.02.

Silver soon secured two $250,000 state grants for Columbia University to support Dr. Taub's research. These grants originated from the New York Health-Care Reform Act ("HCRA") Assembly Pool, a pool of discretionary funds that Silver alone controlled as Speaker. Silver approved the first grant in July of 2005, a few months after receiving his first referral check.¹⁰ Silver approved the second grant more than a year later, in August of 2006.¹¹ Silver did not publicly disclose the grants or his interactions with Dr. Taub, nor did he ever inquire about the progress of Dr. Taub's research. Dr. Taub assumed that his mesothelioma referrals were a factor in Silver's decision to approve the grants, and sought to receive additional grant money on an annual basis.

In 2007, New York law changed to require public disclosure of HCRA grants, and disclosure of any potential conflicts of interest between legislators and recipients of legislative grants.¹² Responding to this change, Silver informed Dr. Taub that any further requests for state grants would not be approved.¹³ Nevertheless, Dr. Taub continued to send mesothelioma client leads to Silver to maintain their relationship and keep Silver "incentivized."¹⁴

Silver continued to help Dr. Taub during this time with two other actions:

• In January of 2007, Silver had his office staff call a state trial judge to ask him to hire Dr. Taub's daughter, a student at Fordham University Law School, as an unpaid intern.

• In May of 2008, Silver awarded $25,000 in state grant funding to the Shalom Task Force, a non-profit entity devoted to helping victims of domestic violence, of which Dr. Taub's wife was a board member.

In 2010, Dr. Taub started sending mesothelioma leads to another law firm that had started funding his research. In response, on May 25, 2010, Silver went to Dr. Taub's office to complain that he was receiving fewer referrals. Their conversation prompted Dr. Taub to continue to send referrals to Silver in order to maintain a relationship with him that would possibly lead to future funding for his mesothelioma research. As he noted in an e-mail to a colleague on the day of his meeting with Silver, "I will keep giving cases to Shelly [Silver] because I may need him in the future—he is the most powerful man in New York State."¹⁵

In fact, Silver would not approve any more grants for Dr. Taub (and he had not done so since August of 2006). Silver did do three additional favors for Dr. Taub, however.

• In May of 2011, Silver had his staff prepare an Assembly resolution with an official proclamation commending Dr. Taub. Silver sponsored the resolution on the floor of the Assembly and presented it to Dr. Taub at a public event.

• In the fall of 2011, Silver agreed to help Dr. Taub "navigate" the process of securing permits for a proposed New York City charity race in Silver's district to benefit mesothelioma research. Dr. Taub thought at the time that Silver would likely want referrals in return for his help. Ultimately, the law firm working with Dr. Taub to organize the race decided not to pursue the event, and the race never took place.

• In 2012, at

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