United States v. Turoff
1988 U.S. Dist. LEXIS 14678, 701 F. Supp. 981, 1988 WL 137384 (1988)
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Rule of Law:
A government's interest in physical licenses it possesses and controls (such as taxi medallions), as well as its right to collect mandatory license fees, constitutes a "property" interest for the purposes of the federal mail fraud statute.
Facts:
- The New York City Taxi and Limousine Commission (TLC) authorized 100 temporary taxi medallions for a diesel engine test program run by a corporation to be formed by defendant Donald Sherman.
- Jay Turoff, the TLC's chairman, allegedly caused an additional 23 unauthorized physical medallions to be diverted to his co-defendants, Donald and Ronald Sherman.
- These 23 unauthorized medallions were placed on taxicabs and operated for several years, generating proceeds exceeding $500,000 for the Shermans.
- The defendants never paid the TLC the required annual license renewal fees for these 23 unauthorized medallions.
- To conceal the scheme, Turoff allegedly provided false information to city officials and destroyed TLC records related to the medallions.
Procedural Posture:
- The United States government secured a superseding indictment against defendants Turoff and Sherman in the U.S. District Court for the Eastern District of New York.
- The indictment charged the defendants with conspiracy to commit mail fraud in violation of 18 U.S.C. § 1341.
- The defendants filed a motion to dismiss the indictment in the district court.
- The defendants argued that under the Supreme Court's recent holding in McNally v. United States, the indictment failed to allege a deprivation of 'money or property' and thus did not state a violation of the mail fraud statute.
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Issue:
Does a scheme to fraudulently obtain physical taxi medallions and evade annual license fees from a city agency constitute a scheme to deprive the city of 'money or property' under the federal mail fraud statute, as interpreted by McNally v. United States?
Opinions:
Majority - Glasser, District Judge
Yes, such a scheme is one to deprive the city of 'money or property' under the mail fraud statute. The court denied the motion to dismiss the indictment, holding that both the unpaid license fees and the physical medallions themselves qualify as 'money or property.' The court reasoned that the unpaid license fees are a direct deprivation of money, which is the most tangible form of property. More significantly, the physical medallions are tangible personal property in which the City has a possessory interest, distinguishing this case from those involving purely regulatory interests or intangible rights. Unlike the government's right to control arms transfers in United States v. Evans, the TLC physically possessed the medallions, had title to them, they were valuable marketable commodities, and their theft would support a common law action for conversion. The court compared the scheme to embezzlement, where a public official misappropriates tangible property, which is a clear deprivation of property, not merely of honest services.
Analysis:
This decision is a significant early interpretation of the Supreme Court's landmark ruling in McNally, which limited the mail fraud statute to frauds involving 'money or property.' The court carefully distinguished between the 'intangible right to good government' (which McNally excluded) and the government's role as a holder of tangible property and receiver of revenue. By focusing on the city's possessory interest in the physical medallions and its direct financial loss from the unpaid fees, the court established that schemes targeting government assets and revenues remain prosecutable under the mail fraud statute. This analysis helped define the post-McNally landscape, clarifying that official corruption involving the misappropriation of tangible or financial assets is distinct from a mere deprivation of honest services.
