Third Circuit Clarifies Mental State Required for Hobbs Act Extortion Conviction

Jul 23, 2015   

July 23rd, 2015

The United States Court of Appeals for the Third Circuit (“Third Circuit”) in United States v. Fountain, clarified the mental states required of the payor and payee to uphold a conviction for extortion under the Hobbs Act. In its decision, the Third Circuit affirmed the conviction and sentences handed down by the United States District Court for the Eastern District of Pennsylvania. In doing so, the Third Circuit synthesized prior extortion case law and articulated that the evidence must indicate that the payor had a reasonable belief that the payee would perform official acts in return for the money, and the payee knew the payor made the payment because of that belief. In order to fully understand the implications of United States v. Fountain, a brief primer on the classic official right extortion jurisprudence is necessary.

Elements of Hobbs Act Extortion Under Color of Official Right 

Coercion

The Hobbs Act, found at 18 U.S.C. § 1951 et. seq., a federal statute penalizing extortion – often used in cases involving corrupt government officials – provides that “[w]hoever in any way . . . affects commerce or the movement of any article or commodity in commerce, by robbery or extortion . . . shall be fined under this title or imprisoned not more than twenty years, or both.” 18 U.S.C. § 1951.

“Extortion,” in turn, is defined as “the obtaining of property from another, with his consent, induced by wrongful use of actual or threated force, violence, or fear, or under color of official right.” As explained in United States v. Manzo, 636 F.3d 56, 65 (3d Cir. 2011), “a person can only commit extortion in one of two ways: (1) through threatened force, violence or fear or (2) under color of official right. Both of these types of extortion are inherently coercive.”

Generally, “when proceeding under a color of official right theory, the misuse of public office is said to supply the element of coercion.” Id. The “importance of a defendant’s public office or official act to a Hobbs Act charge is its coercive effect on the payor.” United States v. Fountain at 7; see also Evans v. United States, 504 U.S. 255, 268 (1992). The Supreme Court in Evans stated, “the Government need only show that a public official has obtained a payment to which he was not entitled, knowing that the payment was made in return for official acts.”  504 U.S. 268. In other words, it is payee’s position as a government official that is “the coercive effect on the payor.” Fountain, at 7.

The Third Circuit interpreted Evans in United States v. Antico, 275 F.3d 245, 257 (3d Cir. 2001), and found “no official act . . . need be proved to convict under the Hobbs Act.” Further, a Hobbs Act conviction was upheld where jury instructions were given that told to jury to decide “whether the giver gave the payments . . . because he believed the defendant would use his office for acts not properly related to his official duty.” Antico, at 259.

Additionally in United States v. Urban, 404 F.3d 754 (3d Cir. 2005), the Third Circuit expanded the foundation laid in Antico by ruling the following:

a Hobbs Act conviction [is upheld] where the government adduced substantial evidence that (1) the payors made payments to the defendants knowing they were public officials exercising governmental authority; (2) the payors made payments in order to assure advantageous exercise of that government authority; and (3) the defendants knew that the [payors’] payments were made for an improper purpose, i.e., the influencing of their governmental authority.

Urban, 404 F.3d at 769 (internal quotations omitted).

Reasonable Belief 

The payor’s belief must be considered when determining a Hobbs Act conviction under official right. As articulated in United States v. Mazzei, 521 F.2d 639, 643 (3d Cir. 1975) (en banc), the Third Circuit established that no actual power needed to be had by the payee, only that “a reasonable belief that the state system so operated that the power in fact of defendant’s office included the effective authority.” In other words, the payee need not have statutory power, or actual power, as long as the evidence indicates that the payor reasonably believed that the power existed.

This notion was extended in United States v. Bencivengo, 749 F.3d 205 (3d Cir. 2014), where the Third Circuit ruled that so long as “a payor reasonably believed the defendant possessed ‘influence,’ if not ‘effective power,’” the Hobbs convictions will stand. Fountain at 9 (quotingBencivengo, 749 F.3d. at 212-13). The Third Circuit further wrote:

a public official has, and agrees to wield, influence over a governmental decision in exchange for financial gain, or where the official’s position could permit such influence, and the victim of an extortion plan reasonably believes that the public official wields such influence, that is sufficient to sustain a conviction under the Hobbs Act, regardless of whether the official holds any [actual] power over the decision.

Bencivengo, 749 F.3d at 212-13.

Collectively, these cases are known as the “classic” official right extortion cases, with reasonableness underlying each decision. While the classic official right extortion cases previously discussed help shape the parameters of the Hobbs Act, the Third Circuit in United States v. Fountain applied the facts before them to clarify the mental states required of the payor and payee to uphold a conviction for Hobbs extortion.

United States v. Fountain

A Factual Overview

Between 2007 and 2012, an IRS employee, Patricia Fountain (“Fountain”), “orchestrated several schemes to fraudulently obtain cash refunds from the IRS.” Fountain, at 3. As an employee for the IRS, Fountain used “her knowledge of the IRS’s fraud detection procedures to avoid suspicion . . . including [the knowledge that] claims below $1,500 would not be flagged for review.” Id. During the five year scheme, Fountain employed various personnel including her significant other, friends, and hairdresser to recruit individuals to provide their personal information to file a claim, and then retain a portion of the refund. Fountain’s hairdresser recruited Deborah Alexander who “provid[ed] personal information so that Fountain could file fraudulent tax returns in [her] name.” Id. at 5.

At Fountain’s trial, “a jury convicted Fountain [and the other defendant’s] on multiple counts of conspiracy and filing false claims to the IRS in violation of 18 U.S.C. §§ 286 and 287. Fountain was also convicted on one count of Hobbs Act Extortion . . . .” Id. at 4. The “extortion count against Fountain alleged that she obtained and attempted to obtain money from Alexander under color of official right as an IRS employee.”Id. at 5.

Fountain filed a motion for a judgement of acquittal on the Hobbs Act charges, claiming the evidence was insufficient “to support a conviction for extortion under color of official right.” Id. at 5. However, when appealing the sufficiency of the evidence, evidence is reviewed “in the light most favorable to the Government, afford[s] deference to a jury’s findings, and draw[s] all reasonable inferences in favor of the jury verdict.”Id. (internal quotations omitted).

The Hobbs Act count rested on the jury finding that Fountain received a $400 payment from Alexander, so that Fountain would not “red flag” the claim. However, Fountain contended that this evidence was not sufficient, and Alexander “only knew Fountain worked for the IRS,” but “never directly dealt with Fountain.” Id.

The Court’s Rationale

The Third Circuit ruled that the Hobbs extortion conviction must stand because “the evidence adduced at trial was sufficient to support Fountain’s Hobbs Act Conviction.” Id. at 6. This case combined the precedent previously discussed and applied the facts of his case to the precedent, “while emphasizing different aspects of the payor’s motivation are consistent in accounting for the payor’s reasonable belief as a reflection of the coercive effect of the defendant’s official acts.” Id. at 9.

The Third Circuit further stated:

Thus, our case law articulates a unified standard for official right extortion cases: We will uphold a conviction for Hobbs Act extortion where the evidence indicates (1) that the payor made a payment to the defendant because the payor held a reasonable belief that the defendant would perform official acts in return, and (2) that the defendant knew the payor made the payment because of that belief.

Id. at 10.

Therefore, the Third Circuit “agree[ed] with the District Court that a rational juror could conclude that Alexander paid Fountain $400 with the understanding that Fountain would use her position at the IRS to help her obtain a cash refund, and that Fountain knew that Alexander paid her for that reason.” Id. at 11.

It is important to note that it was not necessary for the Third Circuit to “find that Fountain actually used her position or performed an official act in furtherance of the scheme to uphold her conviction.” Id. Rather, the Court’s focus was on Alexander’s state of mind.

The Third Circuit concluded that it would be easy for the jury to find “that Alexander reasonably believed Fountain would help her obtain the refund” and the jury “could have found that Alexander reasonably feared reprisal.” Id.

Fountain’s Rebuttal

Fountain attempted to argue that “[t]he evidence in support of the Hobbs Act charge was insufficient because the Government failed to prove that she used the power of her employment at the IRS to induce Alexander to pay her in exchange for filing a false claim with the IRS.” Id. at 13. However, as made clear by the Third Circuit, “inducement is not an element of Hobbs Act extortion under color of official right.” Id.

The Third Circuit’s ruling is simple: a conviction under the Hobbs Act will be sustained where the payor made a payment to a defendant with the reasonable belief that the defendant would perform official acts and the defendant knew the payor made the payments because of this reasonable belief.

The attorneys at Fuerst Ittleman David & Joseph have extensive experience in the areas of white color criminal defense, criminal tax defense, and criminal appellate practice. Should you have any questions or need further assistance, please contact us by email atcontact@fidjlaw.com or telephone at 305.350.5690.