Would Otto Kerner's Conviction Actually Have Been Expunged?

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Anton Kerner believes his father, the late goveror Otto Kerner, should be remembered as a good and decent man. Anton holds as an article of faith that if his father had lived long enough to file the petition himself, the mail fraud conviction that stains his legacy would have been expunged more than two decades ago.

But it’s likely that Anton Kerner is wrong.

And that I have been wrong. Last month I wrote in Hot Type about Anton Kerner’s long quest to restore his father’s good name, which he lost in 1973 when a jury concluded that he’d violated the federal mail fraud statute by secretly acquiring stock from a racetrack owner regulated by the state, thereby violating the public’s intangible right to his honest services. The legal theory that honest services fraud is embedded in the mail fraud statute was rejected by the U.S. Supreme Court in 1987 in deciding a case called McNally v. United States; but Otto Kerner, released early from prison because of ill health, had died 11 years earlier. Tony himself asked the Seventh Circuit Court of Appeals to clear his father’s name, and the court replied that this was a request no one but Otto Kerner could make. If he’d lived long enough to do so, would the Seventh Circuit have reversed his conviction? “It almost certainly would have,” I wrote.

It seemed self-evident to Anton Kerner and to myself that a conviction based on a nonexistent crime cannot stand. Anton Kerner cites the obvious parallel — the 1977 honest services conviction of Governor Marvin Mandel of Maryland, who was accused of taking favors from racetrack investors. After McNally, Mandell's conviction was vacated. Surely Kerner's would have been too.

But then I got a call from Jim Genden, a Chicago attorney with a long memory. He said we were making the wrong comparison. Mandel’s petition was heard by the Fourth Circuit Court of Appeals. The nation’s appellate courts went their separate ways interpreting McNally, and the Seventh Circuit here in Chicago took a much harder line than the Fourth. Some 20 years ago, Genden was part of the legal team that represented Tom Keane, the former Finance Committee chairman of the Chicago City Council, and Genden told me what happened to Keane.

In the early 70s there were two people in City Hall with significant power. Mayor Richard J. Daley was one, and Keane was the other. When Keane was indicted in 1974, not one person in a thousand could understand the charge, but everyone agreed it was a prime example of his self-serving brilliance. What his actions boiled down to, the U.S. attorney’s office told the jury, was this: he’d defrauded the people of Chicago out of their intangible right to his honest services. Keane was convicted in federal court, spent a couple of years in prison, and got his law license back in 1984; when McNally was announced in 1987, Keane, old and legally blind, asked the district court to vacate his conviction. U.S. District Judge Bernard Decker said no, on the grounds that Keane had defrauded the public out of more than an intangible right — “Keane schemed to deceive the citizenry and to deprive it of what is unquestionably property: money and/or confidential government information.”

So Keane appealed to the Seventh Circuit.

And writing for the three-judge panel that rejected Keane’s appeal, Judge Frank Easterbrook said to Keane, in so many words, Up yours! In a perfect world, said Easterbrook, where the courts have all the time and money that perfect justice requires, Keane might get what he wants. But we live in a world of finite resources, and as Keane is out of prison and able to practice law again, the only harm he continues to suffer from his tainted conviction is to his dignity, and that's not the court's concern. So he will have to live with the insult. Here, slightly abbreviated, is the conclusion of Easterbrook’s opinion:

“No one can accept without unease the thought that the legal system tolerates erroneous convictions. Yet we live in a world of scarcity, one in which that most inflexible commodity, time itself, sets a limit on our ability to prevent and correct mistakes. Every legal system tolerates a risk of error. It tries to find procedures that will hold error to a minimum, but then it must move on. Bygones are beyond recall. Nothing can give Keane back the time he spent in prison, where perhaps he did not belong. The reopening of closed cases, though, means attention to bygones at the expense of others in need of initial adjudication. Poring over the records of old mail fraud cases—not only Keane's but also the many thousands of other cases decided under the intangible rights approach prior to McNally —would divert untold judicial hours from pressing business. At some point the judicial system must close old files and turn to the future, regretfully accepting the risk of error lest the quest for perfect justice become the enemy of adequate justice. That time has come for Mr. Keane.”

In short, Keane doesn't deserve any more justice than he already got. Says Genden today, “I wouldn’t mind losing on the merits, but that left a very bad taste.”

Keane asked the Supreme Court to hear his appeal, but that court turned him down.

About a year and a half later, another honest services case that began in Chicago’s City Hall came to Easterbrook. This time the convicted petitioner was Earl Bush, who’d been Mayor Daley’s press secretary until 1973, when — as Easterbrook put it in his opinion — “his tenure came to an unhappy end when reporters discovered that Bush was a principal in the firm that had the display advertising concession at O’Hare Airport.” Bush had kept that role to himself.

By this time the confusion among the appellate circuits in dealing with McNally was so apparent that Easterbrook paused to marvel at it. The Tenth and Third circuits had followed Keane, the Fourth had produced a writ in Mandel “expressly rejecting our decision.” The Sixth and Ninth had vacated mail fraud convictions “without discussing our approach to the subject.” And the Supreme Court had no interest in playing referee. “Evidently,” Easterbrook wrote, “the Supreme Court thinks this conflict tolerable for the time being.”

(The time being turned out to be 20 more years. As my Hot Type explains, the Supreme Court, led by Justice Antonin Scalia, who thinks the 1988 law is fatally vague, has finally decided to bring order to honest services fraud.)

Since the Supreme Court didn't seem to care what Easterbrook did, he did to Bush as he'd done to Keane. Like Keane, Bush was out of prison (in fact, he hadn’t been sent to prison), and if he had anything to complain about in the way of enduring punishment, it was that he couldn’t land the kind of high-powered PR job he felt his talents deserved. But said Easterbrook about that, “Difficulty in obtaining a desirable job is not a legal disability….No judgment of a federal court can give Bush entrée to the plum positions in his profession.”

And so, with a briefer version of the same lecture to which Keane had been treated, Easterbrook dismissed Bush’s petition. “Although in the best of all worlds every judgment would be subject to correction as new facts came to light and legal principles were refined,” he wrote, “in a costly legal system correction is a luxury. Judicial time devoted to reexamining the decisions of 1975 subtracts from the time available to deal with the festering grievances of 1989.”

Would the Seventh Circuit have afforded Otto Kerner the "judicial time" it denied Keane and Bush? Perhaps it would have cared more about restoring Kerner's reputation because Kerner, after all, had sat on the Seventh Circuit bench when he was indicted. Or would that connection have worked against Kerner? Or would the Seventh Circuit have felt obliged to pass along Kerner's petition to another circuit?

Reading Easterbrook, I find it hard to shake the feeling that his concern for judicial time was not actually uppermost in his mind when he rebuffed Keane and Bush. Before we get to what I think was, I want to extract from Easterbrook’s opinion his description of the scheme Keane was convicted of. Don’t worry — you won’t be quizzed when you’re done. Easterbrook wrote:

“The indictment charged, and the evidence showed, see United States v. Keane, 522 F.2d 534, 539-44 (7th Cir.1975), cert. denied, 424 U.S. 976, 96 S.Ct. 1481, 47 L.Ed.2d 746 (1976), that Keane—one of Chicago's most influential political figures—and two of his friends formed a partnership that acquired more than 1,800 parcels of land. The partnership acquired the land from the City at property-tax-delinquency auctions; it held the land through an Illinois land trust, a device that permits beneficial owners of land to conceal their interests. Armed with knowledge about the City's (and other governmental bodies') plans, Keane told his partners what parcels to bid on. The original owners had two years to redeem their land by paying the taxes; after this redemption period passed, Keane used his position as Chairman of the Finance Committee to help the partnership obtain clear title to the parcels. The tax sale left in place any 'special assessments': charges for neighborhood sewers, roads, and the like. Payments of these assessments flowed to a special assessment fund—which financed public improvements by issuing bonds, and to which the bondholders looked for repayment. If the landowners did not pay the full assessments (as Keane's partnership did not) the City Council would authorize sale of the land at auction with the proceeds applied to the special assessments. The Finance Committee would recommend a minimum price, usually 30% of the assessment due; the Council regularly approved the Finance Committee's recommendations. Keane induced the Finance Committee to set a reserve bid of 10% of the amount of the special assessments outstanding on the parcels his partnership owned; the City Council approved; its members did not know of Keane's interest in the parcels receiving this special treatment.

"After the auctions the partnership held fee simple title to more than 1,000 of the original 1,800 parcels. Keane then induced his friends in public agencies to buy these parcels. Some went to the Chicago Housing Authority, some to the Metropolitan Sanitary District, some to smaller instrumentalities. The indictment charged and evidence showed that the prices for some parcels were inflated and that the partnership made more than $160,000 in profits; Keane contended, and a state court later concluded, Chicago ex rel. Cohen v. Keane, 105 Ill.App.3d 298, 61 Ill.Dec. 172, 434 N.E.2d 325 (1st Dist.1982), that the partnership lost money on the whole shebang. The jury was told that it need not find that Keane made a profit in order to convict him; it was enough, the instructions said, if Keane acted in an official capacity without telling anyone about his private interest, depriving the City and its residents of the candor and faithfulness required of a fiduciary.”

In the end, I guess the joke was on Keane — Easterbrook notes that apparently “the partnership lost money on the whole shebang.” But it was some shebang! I doubt that Easterbrook, as he considered Keane's petition, believed for a second that there'd been a geniune miscarriage of justice, or that Keane’s indictment accusing him of depriving Chicagoans of their intangible right to his honest services was anything much more than a verbal expedient reducing impossible complexity to language the jurors had a prayer of getting their minds around.

Had the Supreme Court eventually rejected the crime of intangible rights fraud? Yes. Because it was abhorrent to the justices? No. Because they couldn't find it expressed in the text of the federal mail fraud statute. And how had Congress reacted? It had promptly passed a bill adding new language to the text. By the time the Bush petition came along, intangible rights fraud was again a crime. In other words, Keane and Bush had been convicted under a legal theory nobody objected to then or now, but which briefly lapsed until federal law could catch up with the theory.

Easterbrook doesn't sound a bit sorry for either of the two petitioners.

On December 20 John Kass published a column in the Tribune on honest services fraud. Kass noted that the Supreme Court had just heard arguments on the issue. "Prosecutors like it because it wins convictions in a time when corruption has evolved far beyond stuffing an envelope with cash. Opponents argue it is too vague. Both sides made compelling cases."

And then Kass recalled that 40 years ago, as a lawyer in Chicago, Justice John Paul Stevens had served as chief legal counsel to a committee investigating corruption in the Illinois Supreme Court. So Stevens understood that "sophisticated, high-level corruption" such as thrived in Illinois is "not merely about the theft of money or property, but about something more valuable: The people's belief that the system isn't completely rigged."

Kass recalled that in 1987, when McNally was decided, Stevens dissented. Stevens wrote, "The possibilities that the decision's impact will be mitigated (by Congress) do not moderate my conviction that the Court has made a serious mistake. Nor do they erase my lingering questions about why a Court that has not been particularly receptive to the rights of criminal defendants in recent years has acted so dramatically to protect the elite class of powerful individuals who will benefit from this decision."

In Kass's view, Stevens, being from Chicago, got it. And Kass might be right. When Jim Genden read to me over the phone the last paragraph of Easterbrook's opinion against Tom Keane, I was appalled. This to me was the voice of a powerful elitist proclaiming from on high that justice is a nice enough thing when it's not too much trouble. But perhaps it's actually the voice of another Chicago jurist a year after McNally letting it be known he gets it too.

There's no way of knowing how the Seventh Circuit (or another circuit) would have responded to a petition from Otto Kerner himself. Easterbrook might not even have been one of the judges it would have gone to. But if Keane had already existed as a precedent, we can suppose Kerner's request would have gone badly in the Seventh Circuit. Even if it had been heard before Keane, it might have been received with as much cynicism as compassion.

I asked Anton Kerner what he thought of his father's chances in light of Keane and Bush, and he made an interesting point. He observed that his father's case was "more precisely mirrored" by Marvin Mandel's case in the Fourth Circuit than by Keane's or Bush's or any other honest-services case; and therefore, if one former governor's conviction was reversed and the other's wasn't, the conflict "would have uniquely warranted resolution by the U.S. Supreme Court." After McNally, the Supreme Court stayed above the battle until last year, but if Otto Kerner had lived to file his own petition, that aloofness might not have been possible.

Anton Kerner just wishes the high court had gotten involved years before McNally. His father's "personal Supreme Court petition for certiorari on argument identical to McNally’s was denied in 1974," Anton recalls. "To the day he died in 1976, Otto Kerner maintained that he was convicted of conduct that was not criminal." It took another 13 years before "McNally proved that he was right."

Anton went on to make a claim that's hard to argue with. It's that "if the May 28, 1971 Nixon tape was then public, no grand jury would have voted Otto Kerner’s indictment, and no subsequent jury or judge would have condoned his prosecution, conviction or imprisonment." This is the tape on which we hear Richard Nixon call Kerner a "son of a bitch," Attorney General John Mitchell complain that Kerner is "out talking about his Kerner Commission report . . . when he should be keeping his damn mouth shut as a judge," and Nixon tell Mitchell, "I'd like to see you get him."

Seven months later, Otto Kerner was indicted.

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