Thursday, September 06, 2007

Kemp Convictions for Honest Services Fraud Upheld - Court Did Not Abuse Discretion in Dismissing Juror

In US v. Kemp, (Nos. 05-3477/05-3561/05-4623/05-4717/05-4846) (August 27, 2007), the Third Circuit affirmed the convictions of all defendants, finding (1) sufficient evidence to support conviction for honest services fraud; (2) jury instructions on honest services fraud, bribery and aiding and abetting were proper; (3) a variance between conspiracy charge in the indictment and government’s case at trail did not substantially prejudice defendants; (4) other act evidence and co-conspirator statements were properly admitted; and (5) district court acted within its discretion in dismissing juror.

Kemp, (former Treasurer of Philadelphia) and others were charged in a 63 count indictment surrounding a charged conspiracy to commit honest services fraud in which payments and gifts were given to Kemp in exchange for preferential treatment in decision-making. In brief, the Third Circuit found as follows.

First, the Circuit found that Kemp’s use of his office to provide lists of bondholders and contact banks to facilitate repayment to the holders was his only role in an “asset locator” business in which he held a stake and received money from, thus he accepted money (from the business) in exchange for his official actions; amounting to honest service fraud.

Next, the Circuit upheld a “Stream of Benefits” instruction on bribery in the honest services fraud context. The court recognized that bribery in this context requires “a specific intent to give or receive something of value in exchange for an official act,”and found that the court’s instructions conveyed the quid pro quo requirement. The court likewise upheld use of a “failure to disclose” theory of honest services, in which the court correctly instructed that concealing a financial interest while taking discretionary action benefiting the giver of the benefit (rather than the public official) amounts to honest services fraud.

With respect to the bribery conviction, the providing of otherwise unavailable loans to a public official is consideration which may constitute the “quid”.

A variance between the indictment, charging a single conspiracy, and the proof at trial, showing separate conspiracies, did not substantially prejudice the defendants as evidence concerning relationships of other co-defendants would have been admissible and the limited number of defendants and conspiracies did not create a danger of prejudice.

Finally, several days into deliberations, the court received two notes from jurors, one indicating a certain juror was refusing to consider evidence and the other that this juror was biased. After re-instructing on deliberation, the court received two similar notes the following day. The court then questioned each juror individually and was satisfied the jury could continue to deliberate. About a week later, the court received another note, signed by nine jurors, that deliberations had stopped. Following a second individual voir dire and another note from the jury, the jury was instructed yet again on deliberation. After the court received additional notes, a third individual voir dire was conducted and the general consensus was that juror 11 was biased and/or refused to look at the evidence. Juror 11 denied the allegations of bias and refusal to deliberate. The court granted the government’s motion to discharge juror 11.

The Circuit held that the district court had “substantial evidence of misconduct” and acted within its discretion to individually question the jurors, taking care to limit questions to appropriate matters. The district court also acted within its discretion dismissing juror 11. Adopting a “no reasonable possibility that the allegations were based on the juror’s view of the evidence” test, the Circuit found the evidence supporting dismissal “overwhelming.”

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