Full opinion text
MEMORANDUM HERBERT F. MURRAY, District Judge. On November 24, 1975, the defendants in this case were indicted under 18 U.S.C. § 1341 on twenty counts of mail fraud and under 18 U.S.C. § 1961 et seq., on four counts of prohibited patterns of racketeering activity. The defendants have now moved to dismiss the indictment, arguing, inter alia, that the indictment fails to allege a cognizable scheme to defraud, that it is vague and fatally defective, that it is premised on erroneous and unconstitutional assumptions concerning the duties of the Governor of the State of Maryland, that the racketeering counts are inapplicable on the facts alleged in the indictment, and that the indictment transgresses fundamental constitutional principles concerning the separation of powers and the relationship of the states to the federal government. Defendants have also filed alternative motions to strike certain portions of the indictment, and to certify unresolved questions of state law to the Maryland Court of Appeals. The Court heard oral argument on these motions on March 4, 1976. I. THE MAIL FRAUD COUNTS A. The Indictment The indictment in this case charges that, beginning at some point between January 7,1969, and the spring of 1971, and continuing thereafter until the date of the filing of the indictment, the defendants devised and intended to devise a scheme and artifice: (a) To defraud the citizens of the State of Maryland, and its governmental departments, agencies, officials and employees, both executive and legislative, of their right to the conscientious, loyal, faithful, disinterested and unbiased services, actions and performance of official duties by MARVIN MANDEL, in his official capacities as Governor of the State of Maryland, free from bribery, corruption, partiality, willful omission, bias, dishonesty, deceit, official misconduct and fraud; (b) To defraud the citizens of the State of Maryland, and its governmental departments, agencies, officials and employees, both executive and legislative, of their right to have the state’s business and its affairs conducted honestly, impartially, free from bribery, corruption, bias, dishonesty, deceit, official misconduct and fraud, and in accordance with the laws and Code of Ethics of the State of Maryland; (c) To defraud the citizens of the State of Maryland, and its governmental departments, agencies, officials and employees, both executive and legislative, of their right to have available and to be made aware of all relevant and pertinent facts and circumstances when: (1) drafting, considering and deliberating upon proposed legislation for the State of Maryland with respect to the Maryland horse racing industry and to other matters; (2) administering the laws of the State of Maryland with respect to the Maryland horse racing industry and to other matters; and (3) transacting business for and on behalf of the State of Maryland; (d) To obtain, directly and indirectly, money, property and other things of value, by means of false and fraudulent pretenses, representations, and promises, and the concealment of material facts, relating to the Marlboro Race Track, the Bowie Race Track, the Security Investment Company, Ray’s Point, Inc., and to other matters, The indictment goes on to allege that the defendants, as a further part of the scheme and artifice to defraud, entered into a “corrupt relationship” with one another in which each of them “would and did act with intent illegally to benefit, directly and indirectly, and through the use of fraud and deception, himself and other defendants.” Count 1, paragraph 14.\ The allegations of the indictment focus primarily on the actions of the defendants with regard to certain transactions and legislation concerning Marlboro Race Track (“Marlboro”) and on certain transactions, leasés and contracts awarded by the State of Maryland to various enterprises in which the defendants are alleged to have held financial interests/' • With regard to Marlboro, the indictment charges that defendants Hess, Kovens, Cory and William A. and Harry W. Rodgers, acquired financial interests in Marlboro in 1971 in a manner designed to conceal their acquisition of such interests. The indictment further charges that those defendants, through the use of a nominee, concealed the fact that defendant Kovens was a true beneficial owner of a financial interest in Marlboro, and that they arranged for another individual falsely to represent himself as the owner of the track. The charge continues that during the 1972 legislative session of the Maryland General Assembly, all of the defendants “would and did fraudulently conceal” from the legislature the “true identities of the owners” of Marlboro, causing the legislators to make decisions on legislative matters financially beneficial to the owners of Marlboro and, later, of Bowie Race Track (“Bowie”), without having the benefit of “complete and accurate information” regarding the identities of those owners. (The indictment charges that defendant Mandel “would and did, both personally and through agents, in return for certain financial and other benefits ... act with intent to aid and assist certain legislation and legislative matters financially beneficial” to Marlboro’s owners. The indictment further charges that all of the defendants similarly “fraudulently concealed]” from the Maryland Racing Commission the identities of Marlboro’s owners, partially through the submission of a list of owners which is alleged to be substantially false. These actions, like those with respect to the Maryland General Assembly, are alleged to have been designed to cause the Commission to make decisions with respect to racing dates and other matters financially beneficial to the owners of Marlboro and later, Bowie, without the benefit of complete and accurate information regarding the true identities of the ownersT^As a further part of the scheme and artifice, the indictment charges, the defendants Hess, Kovens, Cory and Harry W. and' William A. Rodgers caused to be merged the ownerships of Marlboro and Bowie in 1972, thereby acquiring for themselves financial benefits. /The indictment also charges that it was further a part of the scheme and artifice to defraud that defendant Mandel, as governor, would and did, directly and indirectly, permit and approve the awarding of “various contracts, leases and other benefits to business entities in which” defendants Hess, William A. and Harry W. Rodgers. held financial interests, without revealing to the citizens or to the governmental bodies of the-state “the full extent and true nature” of his business involvements with those defendants. Those involvements apparently include the “financial and other benefits” which defendant Mandel allegedly received as bribes for the purpose of influencing him in the course of his official duties and for his aid and assistance with regard to the legislative matters concerning Marlboro. In particular, the indictment charges that defendant Hess transferred to defendant Mandel % of Hess’ interest in the Security Investment Company (“Security”), and concealed that transfer as well as subsequent payments made to defendant Mandel as a consequence of his financial interest in Security, through such means as falsification of tax returns and other documents. In addition, the indictment alleges that defendants Hess, Harry W. and William A. Rodgers “would and did allow” defendant Mandel to acquire a fifteen percent interest in “certain assets of substantial value”, later formally owned by Ray’s Point, Inc. (“Ray’s Point”), and that such interest was concealed through the alteration of a certain record and by other means. The indictment charges further that defendant Mandel, for the purpose of concealing all of the activities noted above, deliberately deceived and misled the citizens._o'f the state in a number of public statements}. While the factual allegations in the indictment make the scheme appear to be a complex and subtle one, the thrust of the charges is simple. In essence, the indictment charges that the defendants devised a scheme to defraud the citizens and the state of Maryland by bribing the Governor to assist legislation which would be financially beneficial to the owners of Marlboro (and later Bowie), the identities of such owners being deliberately concealed from the public, the legislature and the Racing Commission by all of the defendants. The indictment also charges that it was further a part of the scheme that defendant Mandel use his powers as Governor to channel state business to business entities in which defendants Hess, William A. and Harry W. Rodgers had financial interests, without revealing to the public or the governmental bodies involved his own business involvement with those defendants, including those interests in Security and Ray’s Point which he had received from those defendants as bribes, and the existence of which was actively concealed by defendants Mandel, Hess and William A. and Harry W. Rodgers. B. Does the indictment allege a cognizable scheme to defraud 1 Title 18 U.S.C. § 1341 provides, in relevant part: Whoever, having devised or intending to devise any scheme or artifice to defraud, or for obtaining money or property by means of false or fraudulent pretenses, representations, or promises for the purpose of executing such scheme or artifice or attempting to do so, places in any post office or authorized depository for mail matter, any matter or thing whatever to be sent or delivered by the Postal Service, or takes or receives therefrom, any such matter or thing, or knowingly causes to be delivered by mail according to the direction thereon . shall be fined not more than $1,000 or imprisoned not more than five years, or both. The elements of the offense of mail fraud are (1) the intentional devising of a scheme to defraud, and (2) a use of the mails in its furtherance. Linden v. United States, 254 F.2d 560, 567 (4th Cir. 1958); Pereira v. United States, 347 U.S. 1, 74 S.Ct. 358, 98 L.Ed. 435 (1953). A “scheme to defraud" within the meaning of the statute may be defined as the intentional use of false or fraudulent representations for the purpose of gaining a valuable undue advantage or working some injury to something of value held by another. Cf. Blachly v. United States, 380 F.2d 665 (5th Cir. 1967); United States v. Proctor & Gamble Co., 47 F.Supp. 676, 678 (D.Mass.1942). The initial question posed by the defendants is whether the indictment alleges a scheme to defraud within the meaning of the mail fraud statute. They argue that the indictment fails to allege a scheme to defraud because (1) the facts alleged in the indictment reveal no intentional use of false or fraudulent representations by any of the defendants and (2) the intangible rights allegedly defrauded by the scheme do not constitute “something of value” whose deprivation can be punished under the mail fraud statute. The Court will address these two arguments in order. 1. Does the indictment allege intentional use of fraudulent representations by the defendants'! The defendants contend that the allegations of the indictment charging them with fraudulent representations and conduct are premised on. assumptions concerning the duties of the defendants as private citizens and those of the Governor as a state official which are either incorrect as a matter of law or unconstitutional as applied. The defendants argue that the alleged failure of the Governor to comply with the state Code of Ethics cannot constitute fraud because the Code is inapplicable to the Governor as an elected constitutional officer of the state; that the concealment of various interests in business entities and of the identities of the owners of Marlboro from the public, the General Assembly, and the Racing Commission, cannot constitute fraudulent behavior on the part of private citizens because there is no affirmative duty to disclose such, information; that the Governor’s failure to reveal his business involvements with certain of the other defendants cannot be fraudulent because he is under no duty imposed by state law to reveal such information to the public and the state, and for the further reason that such a claimed conflict of interest amounts at best only to a “constructive fraud” which is not sufficient to sustain a prosecution under the federal mail fraud statute. In essence, the defendants argue that since none of the conduct alleged in the indictment was in violation of any duty imposed by state law on any of the defendants, the indictment has failed to allege that the defendants engaged in the intentional use of false or fraudulent representations. ■ Since the existence of intent to use fraudulent representations is a question for the jury to decide, an alternative way of phrasing the challenge posed by the defendants is to ask if the indictment alleges any conduct from which, in light of the considerations urged by the defendants, a jury could properly infer the existence of intent to deceive. A jury may find a representation to be false or fraudulent if it finds that the representation was known to be untrue when made, or if made with reckless indifference as to its truth or falsity, and made or caused to be made with the intent to deceive. United States v. New South Farm & Home Co., 241 U.S. 64, 71, 36 S.Ct. 505, 507-08, 60 L.Ed. 890, 896 (1916); United States v. Andreadis, 366 F.2d 423, 430 (2d Cir. 1966), cert. denied, 385 U.S. 1001, 87 S.Ct. 703, 17 L.Ed.2d 541 (1967). A representation is deceptive if the reasonably probable effect of the representation would be to deceive or mislead a person of ordinary prudence. A jury may consider actions and omissions as well as affirmative statements, for it is well-settled that false or fraudulent representations may also be made by statements of half truths or the concealment of material facts, Durland v. United States, 161 U.S. 306, 313, 16 S.Ct. 508, 511, 40 L.Ed. 709, 711-12 (1896). As the Supreme Court noted in Smith v. Richards, 38 U.S. (13 Pet.) 26, 10 L.Ed. 42, 47 (1839), quoting from 1 Story’s Equity 201, 202: [W]here the party intentionally, or by design misrepresents a material fact, or produces a false impression, in order to mislead another, or to entrap him or cheat him, or to obtain an undue advantage of him, in every such case there is a positive fraud in the truest sense of the terms . . . And the misrepresentation may be as well by deeds or acts, as by words—by artifices to mislead, as by positive assertions. Quoted in United States v. Proctor & Gamble, supra, at 678. In considering what representations or conduct a jury may properly consider in determining whether defendants acted in good faith or with intent to deceive, the Court notes that the indictment alleges instances of positive and active misrepresentation. For example, paragraph 19 of Count 1 charges that several defendants arranged for another individual falsely to represent himself as the new owner of Marlboro. The indictment also charges that defendants Mandel and Hess made fraudulent representations on their income tax returns. Paragraph 29 of Count 1 charges that defendant Cory submitted to the Racing Commission a list of purported Marlboro owners which was in substantial part false. Defendant Mandel is accused of making various public statements with the intent to deceive and mislead the citizens of Maryland. The defendants apparently argue that such representations, which are alleged to be part of a scheme to “conceal” from the public and the state information regarding the ownership of Marlboro and defendant Mandel’s business involvements with other defendants, cannot be fraudulent because the public and the state had no right in the first instance to any such information. Such an argument is not persuasive. Even in the absence of any affirmative duty to disclose such facts, these statements would be made fraudulently if made with knowledge of their falsity and their likelihood to mislead and deceive. Whether or not the particular representations are false, and made with such knowledge, is of course a question that the jury must determine from competent evidence produced at trial. Similarly, the acts of concealment which the indictment alleges are themselves capable of being fraudulent misrepresentations, if the acts are done with the intention of misleading or deceiving. Thus, if the defendants acted to conceal the identities of the owners of Marlboro, with the intent of causing the Legislature to believe that certain persons were owners when in reality they were not, such acts of concealment would constitute fraudulent representations, even in the absence of any duty to disclose the “true” identity of the owners. Thus the defendants’ argument which seeks to take refuge in the fact that there is no “affirmative duty to disclose” such matters as a matter of state law is misplaced. As a matter of federal criminal law, in fact, a jury may also infer intent to deceive from actions which the actor knows, or should know, are contrary to generally accepted principles of honesty and fair play. This could include a “failure to disclose” information if, in the context of the factual situation, a defendant knew or should have known that commonly accepted standards of morality would demand that such disclosure be made. As the Fifth Circuit noted in Blachly v. United States, supra, at 671: The fraudulent aspect of the scheme to ‘defraud’ is measured by a nontechnical standard. Gregory v. United States, [253 F.2d 104, 109 (5th Cir. 1958)]. Law puts its imprimatur on the accepted moral standards and condemns conduct which fails to match the ‘reflection of moral uprightness, of fundamental honesty, fair play and right dealing in the general and business life of members of society.’ Ibid. This is indeed broad. For as Judge Holmes once observed, ‘[t]he law does not define fraud; it needs no definition; it is as old as falsehood and as versable as human ingenuity.’ [citations omitted] It is this aspect of the statute that has been “broadly construed” in numerous mail fraud cases. See, e.g., Durland v. United States, supra; United States v. McKay, 45 F.Supp. 1007 (E.D.Mich.1942). In Shushan v. United States, 117 F.2d 110 (5th Cir.), cert. denied, 313 U.S. 574, 61 S.Ct. 1085, 85 L.Ed. 1531 (1941), for example, the defendant was a public official who received bribes in exchange for his influence in securing contracts for certain brokers on more favorable terms than they otherwise would have received. The failure of the defendant to disclose his personal interest in the contracts which he approved along with other members of the government was “so irreconcilable with public duty and private morality that neither he nor anyone privy to it could intend fairness and honesty.” Shushan v. United States, supra, at 120. Under such circumstances, a failure to disclose constitutes a fraudulent representation because others, operating under common standards of honesty that would require disclosure, are led to assume from silence that there exists no conflict of interest. While the series of inferences that must be drawn from a failure to disclose are difficult — the jury must be convinced that the failure to disclose was an intentional omission, and made with the intent to deceive and mislead — a jury may properly consider generally accepted standards of honesty to determine if the actor did know or should have known that he had a moral obligation to reveal, and conclude from the failure to do so that the actor acted with intent to deceive and mislead. When an actor also takes steps to conceal the facts which he fails to disclose, the inference that he acts with intent to deceive is easier to make. Since commonly accepted standards of honesty and fairness operate independently of any duties imposed by statutes, regulations, or codes, it is no argument to say that a failure to disclose or active concealment of facts made with the intent to deceive is not fraudulent because not specifically prohibited by an express provision in the law. In considering whether someone acted with intent to deceive, a jury must of course consider the totality of the circumstances. United States v. Keane, 522 F.2d 534, 544 (7th Cir. 1975), pet. for cert. filed, 44 USLW 3379 (U.S. Dec. 19, 1975). Even acts which are innocent in and of themselves may be fraudulent in combination if part of an overall scheme to deceive or mislead. Holmes v. United States, 134 F.2d 125 (8th Cir. 1943), cert. denied, 319 U.S. 776, 63 S.Ct. 1434, 87 L.Ed. 1722. A jury may also infer from the violation of a known positive duty an intent to deceive. Such positive duties arise from laws, regulations, and codes, as well as from principles “long settled by the courts in civil and criminal cases alike.” Foshay v. United States, 68 F.2d 205, 211 (8th Cir. 1933), quoted in Epstein v. United States, 174 F.2d 754, 767 (6th Cir. 1949). In determining whether an act or omission was done with intent to deceive, a jury may properly consider whether the act or omission violated any law, regulation or code which establishes standards of conduct reasonably related to the discharge of specific duties and modes of conduct which are related to the issues of the ease. See United States v. Morlang, 531 F.2d 183, at 191, No. 74-2071 (4th Cir., 1975); United States v. Keane, supra, 522 F.2d at 553; United States v. George, 477 F.2d 508, 515 (7th Cir. 1973), cert. denied, 414 U.S. 827, 94 S.Ct. 49, 38 L.Ed.2d 61 (1973). Whether or not the violation could be punished as a matter of state law is beside the point in a mail fraud prosecution, as the only relevance which such a regulation, law, or code has in a mail fraud prosecution is in determining the question whether the act or omission was done with intent to deceive. That is to say, if an actor commits an act which he knows to be in violation of a duty imposed upon him by the code, law, or regulation, a jury may draw the inference that the act was done willfully and wrongfully, and, depending on the nature of the violation, with intent to deceive. In the present case, the indictment charges that defendant Mandel’s alleged receipt of bribes, and failure to reveal his-personal interest in the business affairs of other defendants who were beneficiaries of state action, violated the Code of Ethics of the state of Maryland, found at Md.Ann. Code, cum.supp. to Vol. 9A, pp. 151 et seq. (1975). Defendants strongly urge that the Code was never meant to apply to the Governor, since as a matter of state constitutional law, the duties of the office of Governor can be altered only by constitutional amendment. In support of this argument, defendants have referred the Court to the Report of Committee to Submit a Code of Ethics which suggests that the drafters of the Code intended to exempt constitutionally elected officers from its provisions. The defendants have requested that the Court, in the event it does not dismiss the indictment, should either strike all references to the Code from the indictment or, in the alternative, certify the question as an unresolved question of state law to the Maryland Court of Appeals. What the defendants overlook in making this argument is the fact that even were the Maryland Court of Appeals to find that the provisions of the Code do not apply to Governor Mandel, this prosecution would go forward, since the question of whether or not a certain course of conduct is punishable under state laws or regulations is en-' tirely beside the point and immaterial to a mail fraud prosecution. See, e.g., United States v. Keane, supra, 522 F.2d 554 n. 38 and 556. The much narrower question is whether the defendant’s alleged violation of the Code has any relevance to show the defendant’s intent to deceive or to injure something of value held by another (see note 3), and that is a question which largely depends on the evidence to be shown at trial. If the Code sets out a standard of conduct reasonably related to the discharge of specific duties and modes of conduct relevant to the actions of the defendants in this case, an intentional violation of the Code may be admissible as evidence of the defendant’s dishonest or fraudulent intent, regardless of whether, as a matter of state law, the violation could be punished. In this sense, the Code operates no differently from commonly accepted standards of honesty and fairness, discussed supra. For these reasons, the Court finds that it need not reach the issue of whether, as a matter of state law, the Code applies to the Governor of the State. As the indictment presently stands, however, it contains the clear implication that the Code of Ethics is applicable to defendant Mandel and that its violation, in and of itself, constitutes a fraud on the citizens and state of Maryland. See Count 1, ¶ ¶ 12 and 13(b). As stated before, whether or not the act which violated the Code is fraudulent depends on whether it was done with intent to defraud, and the only relevance of the Code is to the issue of intent. Since it is possible that the evidence at trial would fail to demonstrate the relevancy of the Code on this issue, and since the indictment as presently written has a prejudicial potential for confusing jurors as to the law, the references in the indictment to the Code of Ethics are sur-plusage and the Court will order them stricken. Rule 7(d), F.R.Crim.P. Intent may also be inferred from acts which violate known positive duties imposed by principles established by case law, such as obligations imposed on fiduciaries. Those obligations are relevant here because, as the Fifth Circuit noted in Shushan v. United States, supra, “No trustee has more sacred duties than a public official.” 117 F.2d at 115. The Governor of Maryland, as a matter well-settled both in federal and state law, exercises fiduciary duties as a trustee for the citizens and state of Maryland. If a fiduciary represents to his trust, through words or conduct, that he is faithfully fulfilling his duties as a fiduciary, when in fact he is not doing so, a jury may properly consider such representations as fraudulent and made with intent to deceive. Thus, for example, if a fiduciary has a personal conflict of interest with his duties as a fiduciary to a trust, but fails to disclose that conflict or acts to conceal that conflict from the trust, such actions are fraudulent if made with the intent to deceive. United States v. Buckner, 108 F.2d 921 (2d Cir. 1940); United States v. Hoffa, 205 F.Supp. 710 (S.D.Fla.1972). Whether such fraudulent representations constitute “active fraud” or “constructive fraud” depends on the further showing that they were made for the purpose of gaining some valuable undue advantage or injuring something of value to the trust. Epstein v. United States, supra; see discussion at p. 1013, infra. From the above discussion, it should be evident that the indictment does allege the intentional use of fraudulent representations by the defendants. It alleges positive and active misrepresentations; acts of willful concealment; acts possibly contrary to accepted principles of honesty and fairness; and acts in violation of positive duties. These are all acts which a jury may consider in determining whether defendants acted in good faith, or with intent to deceive. None of the acts above depend on an independent violation of a duty imposed by state law for a finding that they constituted fraudulent representations for the purposes of the mail fraud statute. Consequently, defendants’ argument that the actions did not violate duties imposed by state law is beside the point, and does not require that the indictment be dismissed. 2. Does the indictment allege that the defendants acted with the purpose of gaining a valuable undue advantage or injuring something of value held by another ? The defendants also contend that the indictment fails to allege a scheme to defraud, arguing that a scheme, to be within the provisions of the statute, must be one that contemplates an injury to something of value which can be defined in terms of economic harm or pecuniary loss. They argue the scheme alleged here, to defraud the citizens and the state of such intangible rights as the right to honest government, the right to faithful and loyal services of a public official, and the right to have available and be aware of relevant facts and circumstances when considering legislation and transacting business for the state, does not constitute a scheme to defraud within the meaning of the statute because a scheme to deprive citizens and the state of such intangible rights could not, even if successful, result in any definable economic harm to the citizens or the state of Maryland. The mail fraud statute makes unlawful the use of the mails in execution of “any scheme or artifice to defraud, or for obtaining money or property by means of false or fraudulent pretenses, representations, or promises.” 18 U.S.C. § 1341 (emphasis added). A logical interpretation of that language is that Congress, by expressly limiting the second clause to money or property, did not limit “any scheme or artifice to defraud” to those which contemplated the gaining of money or property, and courts have so construed it. See, e.g., United States v. States, 488 F.2d 761, 764 (8th Cir. 1973), cert. denied, 417 U.S. 909, 94 S.Ct. 2605, 41 L.Ed.2d 212 (1974). Undaunted, the defendants suggest that a close reading of representative mail fraud cases indicates that courts have limited the reach of the statute to those schemes which contemplate an injury definable in terms of economic harm or pecuniary loss, citing, inter alia, Hammerschmidt v. Únited States, 265 U.S, 182, 44 S.Ct. 511, 68 L.Ed. 968 (1924); United States v. Randle, 39 F.Supp. 759 (W.D.La.1941); Epstein v. United States, supra; United States v. Regent Office Supply Co., 421 F.2d 1174 (2d Cir. 1970), and United States v. Koenig, 388 F.Supp. 670 (S.D.N.Y.1974). The government counters with a number of recent cases expressly considering the question in circumstances similar to those here, i.e., involving mail fraud prosecutions of public officials engaged in bribery and other misconduct. United States v. Faser, 303 F.Supp. 380 (E.D.La.1969); United States v. Isaacs, 493 F.2d 1124 (7th Cir. 1974), cert. denied, 417 U.S. 976, 94 S.Ct. 3184, 41 L.Ed.2d 1146 (1974); United States v. Barrett, 505 F.2d 1091, 1109 n. 3 (7th Cir. 1974) (Stevens, J., dissenting); United States v. Keane, supra, 522 F.2d 534, 547-549; United States v. Rauhoff, 525 F.2d 1170 (7th Cir. 1975); but see United States v. Bush, 522 F.2d 641, 648 (7th Cir. 1975). See also United States v. States, supra. The government contends that these cases represent no novel and radical application of the statute, but rather depend on principles well-established in mail fraud prosecutions, and should be followed here. The ease of Hammerschmidt, supra, on which the defendants heavily rely, simply does not support the conclusion that the reach of the statute is confined to schemes to defraud which contemplate economic harm or pecuniary loss. The Supreme Court in that case was faced with the question whether the act of distributing handbills urging resistance to the draft could be considered “fraudulent” for the purposes of a prosecution for the crime of conspiracy to defraud the United States. In support of the argument that acts urging disobedience to laws were “fraudulent”, the government cited the case of Horman v. United States, 116 F. 350 (6th Cir. 1902), a mail fraud ease, which had held that a “scheme to defraud” included simple blackmail letters which involved no element of trickery or deception. The Circuit Court in Horman had reasoned that a scheme was fraudulent, even in the absence of an element of deceit and trickery, if there was merely a “wrongful purpose in injuring one in his property rights.” In other words, the Circuit Court had concluded in Horman that the showing of a dishonest intent was the equivalent of a showing of fraudulent intent to deceive. The Supreme Court in Hammerschmidt, noting that the effect of such a holding would be to make every dishonest taking a federal crime, sharply criticized the Hor-man decision, stating that it went to the verge and should be confined to pecuniary or property injury inflicted by a scheme to use the mails for the purpose. 265 U.S. 182, 188-89, 44 S.Ct. 511, 512, 68 L.Ed. 968, 970. The Court went on to deny the applicability of the Horman definition of fraud to the case before it, and held that the act of urging disobedience to a law was not “fraudulent” because it involved no acts of deception or trickery. As subsequently clarified by Fasulo v. United States, 272 U.S. 620, 47 S.Ct. 200, 71 L.Ed. 443 (1926), Hammerschmidt was concerned only with limiting the application of the definition of “scheme to defraud” used in Horman to fact situations similar to those involved in Horman. The Court’s admonition to limit the Horman rule to cases of pecuniary or property injury was thus not addressed to mail fraud cases in general, but to the limits of the application of the Horman decision. The Court in Hammer-schmidt simply does not address the issue whether the scope of the mail fraud statute was limited to schemes contemplating economic or pecuniary harm; indeed, in discussing the meaning of the words “to defraud”, the Court indicates that they usually “signify the deprivation of something of value by trick, deceit, chicane or overreaching.” 265 U.S. at 188, 44 S.Ct. at 512, 68 L.Ed. at 970 (emphasis added). United States v. Randle, supra, is the only case cited by the defendants which explicitly considers the question whether the scope of the statute is limited to schemes contemplating economic harm. In concluding that a scheme to rig an election by making false election returns did not contemplate economic harm to the state or the candidates and consequently did not constitute a scheme to defraud within the meaning of the statute, the Court in Randle relied on an erroneous interpretation of Hammerschmidt and on cases construing other statutes. The case has been strongly criticized. See United States v. States, supra, 488 F.2d at 765. Further, the Court in Randle had simply ignored at least two prior decisions to the contrary. United States v. Aczel, 219 F. 917 (D.Ind.1915); United States v. Classic, 35 F.Supp. 457 (E.D.La.1940). None of the. other cases cited by defendants explicitly discuss the scope of the statute in terms of definable “economic harm”. In the majority of those cases, economic harm existed along with harm to intangible rights, and consequently the courts never had occasion to discuss the question. On the other hand, the cases cited by the government, which do explicitly consider the question, have held that the scope of the statute is not limited to schemes contemplating economic harm. See, e.g., United States v. States, supra; United States v. Faser, supra; and the string of Seventh Circuit cases noted supra. Although these cases are recent, they rely on older cases which have condemned schemes to defraud which contemplated injuries to intangible rights as well as to property. For example, a number of courts have noted that a scheme to deprive an employer of the “faithful and loyal services” of an employee constitutes a scheme to defraud within the meaning of the mail fraud statute. United States v. Proctor & Gamble Co., 47 F.Supp. 676 (D.Mass.1942); Abbott v. United States, 239 F.2d 310 (5th Cir. 1956); United States v. George, 477 F.2d 508 (7th Cir. 1973); United States v. Faser, 303 F.Supp. 380 (E.D.La.1969); United States v. Bryza, 522 F.2d 414 (7th Cir. 1975). While the defendants argue that in each of these cases there was also economic injury to the employer in the sense that the employee was either diverting secret profits to himself which rightfully belonged to the employer, or preventing the employer from having relevant knowledge of a material fact which could have altered his bargaining position so that he could have made a better bargain, the language of the cases is broad and is addressed, not to the economic harm, but to the deprivation of the employee’s faithful services. In reviewing the Proctor & Gamble case, the Seventh Circuit noted recently, The faithful services rationale is applicable to the instant case and has found support in a variety of different factual situations. For example, in United States v. Proctor & Gamble Co., 47 F.Supp. 676 (D.Mass.1942), defendant companies were charged with obtaining confidential information from employees of a competitor. Upholding the viability of a mail fraud prosecution, the court focused not upon the property right represented by the information, but upon the deprivation of the employees’ loyal services: ‘When one tampers with [the employer-employee] relationship for the purpose of causing the employee to breach his duty he in effect is defrauding the employer of a lawful right. The actual deception that is practiced is in the continued representation of the employee to the employer that he is honest and loyal to the employer’s interests.’ United States v. Bryza, 522 F.2d 414, 421. The “loyal and faithful services” analysis was recently applied as an alternative rationale for the holding in United States v. Faser, supra, that public officials accepting a bribe to deposit public funds in a certain bank violated the mail fraud statute even though there was no allegation in the indictment that the actions defrauded anyone of something tangible that could be defined in pecuniary terms. The Court held, It is thus the opinion of this Court that the indictment does, in fact, and by necessary inference, charge the defendant with defrauding the State of Louisiana out of actual cash money. But even if that were not so, it is further the opinion of this Court that the thing out of which it is charged the State was defrauded need not necessarily be that which can be measured in terms of money or property. It is the opinion of this Court that it is a violation of the statute in question if a person defrauds the State out of the ‘loyal and faithful services of an employee.’ 303 F.Supp. at 384. A number of cases have also recognized that a citizen’s intangible right to have his government conducted honestly is “something of value” whose deprivation may fall within the meaning of “scheme to defraud” in the mail fraud statute. Shushan v. United States, 117 F.2d 110 (5th Cir. 1941), cert. denied, 313 U.S. 574, 61 S.Ct. 1085, 85 L.Ed. 1531; Bradford v. United States, 129 F.2d 274 (5th Cir. 1942); United States v. Isaacs, 493 F.2d 1124 (7th Cir. 1974), cert. denied, 417 U.S. 976, 94 S.Ct. 3184, 41 L.Ed.2d 1146 (1974); United States v. Keane, 522 F.2d 534 (7th Cir. 1975); United States v. Rauhoff, 525 F.2d 1170 (7th Cir. 1975). These cases, involving misconduct by public officials, indicate that schemes to corrupt the honest administration of government are harmful for at least two reasons: (1) because they deprive the public of the faithful performance of the fiduciary duties of the public official, and (2) because they deprive the citizens and the state of the “loyal and faithful services” of an employee. The Shushan case, supra, relied on the former analysis: No trustee has more sacred duties than a public official and any scheme to corrupt such an [sic] one must in the federal law be considered a scheme to defraud. 117 F.2d 110, 115. The Court went on to cite various cases, civil and criminal, involving other statutes and principles of fiduciary duty under common law, to illustrate the “essential immorality” of such schemes. The Eighth Circuit, in reviewing Shushan, noted recently that In Shushan there is the implication that a scheme to gain personal favors from public officials is a scheme to defraud the public, although the interest lost by the public can be described no more concretely than as an intangible right to the proper and honest administration of government. United States v. States, supra, 488 F.2d at 766. The cases have also recognized that there is a scheme to defraud where the misrepresentation or concealment of a fact material to a bargain deprives a purchaser of the opportunity to make the best bargain, even where the bargain he has struck is a reasonable or even excellent one. United States v. Rowe, 56 F.2d 747 (2d Cir. 1932); United States v. George, supra; United States v. Barrett, supra. As Judge Learned Hand noted in the Rowe case, A man is none the less cheated out of his property, when he is induced to part with it by fraud, because he gets a quid pro quo of equal value. It may be impossible to measure his loss by the gross scales available to a court, but he has suffered a wrong; he has lost his chance to bargain with the facts before him. That is the evil against which the statute is directed. 56 F.2d 747, 749. The defendants urge that cases involving wrongs caused by a lost chance to bargain with relevant and material facts, and those caused by breaches of fiduciary duties, require a showing of economic harm to elevate them from mere “constructive frauds” which cannot be punished under the mail fraud statute to “actual frauds” which can be so punished, citing United States v. Regent Office Supply Co., supra; Epstein v. United States, supra; and United States v. Koenig, 388 F.Supp. 670 (S.D.N.Y.1974). Defendants are correct that constructive frauds cannot be punished under the mail fraud statute, but seem to misconstrue the difference between constructive and actual frauds. Constructive frauds are created in the law by operation of principles of equity, without regard to the actual existence of any wrongful intent to defraud. The same set of circumstances which gives rise to a finding of “constructive fraud” may also support a finding of “actual fraud” if the fraudulent representations were made with intent to gain some valuable undue advantage or work some injury to something of value. See, e.g., Epstein v. United States, supra, 174 F.2d at 766; United States v. Lichota, 351 F.2d 81, 89 (6th Cir. 1965); Shushan v. United States, supra, at 115. Constructive frauds have no place in criminal law because the burden is upon the government to show beyond a reasonable doubt every element of the offense charged, including, in mail fraud cases, the existence of the criminal intent to defraud. But whether or not the defendants so acted with intent in the present case is a question for the jury. A question of intent usually resolves itself into one of fact. We arrive at one’s intention by taking hold of certain circumstances, extraneous though they may be, and reasoning out the purpose in doing the act. It is a mental process, but a man’s intention is really a question of fact to be arrived at by the trier of the facts in the exercise of reasonable discretion, after considering all the circumstances connected with the act charged. Stone v. United States, 113 F.2d 70, 74-75 (6th Cir. 1940), quoted in United States v. Lichota, supra, at 89-90. The cases cited by the defendants do not hold otherwise. In the Regent Office Supply Co. case, salesmen deliberately employed false representations in order to gain access to purchasers of office supplies. They misrepresented their identities, the reasons for which the supplies were available, and the means by which they had come to prospective purchasers. There was no misrepresentation as to the quality, adequacy or the identity of the office supplies offered. The government argued that the purchasers had been defrauded of their right to give their patronage based on honest information and that the competitors of the defendants who did not use such fraudulent tactics were also harmed. The Court rejected that argument and reversed the defendants’ convictions, holding that the government had failed to prove that the fraudulent representations had been made for the purpose of injuring something of value held by the purchasers: Although proof that the injury was accomplished is not required to convict under 1341, we believe that the statute does require evidence from which it may be inferred that some actual injury to the victim, however slight, is a reasonably probable result of the deceitful representations if they a^e successful. 421 F.2d at 1182. What the court held was that the nature of the scheme itself was not such as to support an inference that the actors intended to work some injury as a consequence of the scheme, absent other evidence establishing that intent. The fact that there was proof of intent to deceive did not establish proof of intent to employ deceit for wrongful purposes. Similarly, in Epstein v. United States, supra, the court found that the failure of the defendants who were directors of a corporation, to disclose to the corporation that they had an interest in a company from which the corporation bought supplies, amounted, on the proof offered at trial, only to a breach of their fiduciary duties, and a constructive fraud. The government failed to show that the defendants intended by the hondisclosure to work any harm to the corporation. It was this intent to injure that the Court was referring to when it commented: [A] mere disclosure of interest could not convert an actual fraud with a wrongful purpose to injure or deceive, into an honest, moral transaction with a purpose to benefit. 174 F.2d at 768. At most, the court said, the government proved a failure to disclose an interest in breach of fiduciary duties; without an intent to do harm by that nondisclosure, it constituted only a constructive fraud which could not be punished under the mail fraud statute. The case of United States v. Koenig, 388 F.Supp. 670 (S.D.N.Y.1974), cited by defendants, is similar. The court there held that the government had again failed to prove that the defendants intended harm by their nondisclosure of certain details of a stock transaction. Not only did the court find the challenged materials non-deceptive, but it found that the transaction was meant to benefit the shareholders, which intent negated the existence of an intent to harm. In none of these cases do the courts say that the harm must be measurable in terms of money. All they say is that “some actual injury, however slight” must either be intended by the actors or be a reasonably probable result of the deceitful representations if successful. Again, whether or not the actors so intended is a question for a jury to determine. In some circumstances, the nature of the scheme may be such that a jury could infer from the scheme itself an intent to harm. See note 3, supra. Certainly that inference is easier to make where the scheme’s object is to obtain money or property from someone else. But the fact that the government may be less likely to convince a jury beyond a reasonable doubt that there is an intent to harm where the object harmed is less tangible than property does not require that an indictment alleging harm to intangible rights should be dismissed. The Court is convinced from its review of the cases that the indictment alleges a scheme to defraud within the meaning of the mail fraud statute. C. Sufficiency of the Indictment The defendants also challenge the sufficiency of the indictment under Hamling v. United States, 418 U.S. 87, 117, 94 S.Ct. 2887, 2907, 41 L.Ed.2d 590, 620 (1974), where the Supreme Court noted: [A]n indictment is sufficient if it, first, contains the elements of the offense charged and fairly informs a defendant of the charge against which he must defend, and, second, enables him to plead an acquittal or conviction in bar of future prosecutions for the same offense. The questions presented by the defendants are whether the elements of the offense of mail fraud are set out in the indictment, and if so, whether they are set out in specific enough detail to give them fair notice of the charges against them, and to preclude future prosecutions for the same offense. From the discussion in Part IB of this Memorandum, it should be clear that the indictment does allege a “scheme to defraud”, which is one of the elements of the offense of mail fraud. The other element, a use of the mails in furtherance of the scheme to defraud, is clearly alleged and set out in Counts one through twenty. The major criticism leveled by the defendants is that the indictment sets out the “scheme to defraud” in such a vague and indefinite manner that it fails to give them fair notice of the charges and to afford them double jeopardy protection. The defendants point to Rule 7 of the Federal Rules of Criminal Procedure, which states that an indictment should contain a “plain, concise and definite written statement of the essential facts constituting the offense charged” and Form 3 in the Appendix of Forms to those Rules, as setting forth the proper standards of specificity. It is, of course, not necessary that an indictment set forth detailed evidential facts. United States v. Curtis, 506 F.2d 985, 989 (10th Cir. 1974), and cases cited therein. It has also been held that since the gist of the offense of mail fraud is the use of the mails, the “scheme to defraud” need not be set forth with the same precision as the use of the mails. United States v. Hoffa, 205 F.Supp. 710, 716 (S.D.Fla.1962); Leche v. United States, 118 F.2d 246, 247 (5th Cir. 1941), cert. denied, 314 U.S. 617, 62 S.Ct. 73, 86 L.Ed. 496, reh. denied, 314 U.S. 712, 62 S.Ct. 295, 86 L.Ed. 567 (1941). But the scheme to defraud must be set out with sufficient specificity to ensure fair notice and double jeopardy protection. The nature of the scheme cannot be left so much to speculation that a prosecutor could proceed at trial to demonstrate a scheme essentially different from that relied upon by the government before the Grand Jury. United States v. Curtis, supra; Russell v. United States, 369 U.S. 749, 767-68, 82 S.Ct. 1038, 1049, 8 L.Ed.2d 240, 252-53 (1962). The Court has carefully considered the arguments made and the cases cited by the defendants, but it is of the opinion that the indictment sets out in sufficient detail the nature of the scheme to defraud so as to inform the defendants of the charges against which they must defend and to prevent future prosecution for the same offense. The indictment conforms to the degree of specificity required by Rule 7 and is in substantial conformity with Form 3. Paragraphs 15 through 32 of Count One of the indictment sufficiently set out the false and fraudulent representations relied upon and sufficiently identify the victims of the scheme to defraud-the citizens and the governmental bodies of the state of Maryland. While a bill of particulars cannot remedy an invalid indictment, Russell v. United States, supra, at 770, 82 S.Ct. at 1050-51, 8 L.Ed.2d at 254-55, where an indictment adequately states an offense but fails to give the defendant sufficient notice to avoid surprise at trial, a court, in its discretion, may order a bill of particulars to supplement the indictment. United States v. Addonizio, 451 F.2d 49, 64 (3d Cir. 1972); United States v. Anderson, 368 F.Supp. 1253, 1263-64 (D.Md.1973). Whatever doubts the Court entertained about the vagueness of certain phrases in the indictment was resolved in the defendants’ favor when the Court ordered the government to provide a bill of particulars on March 11, 1976. The Court is of the opinion that the indictment, particularly when supplemented by the particulars and in light of the extensive pretrial discovery in this case, sufficiently gives notice of the charges so as to prevent surprise at trial and affords defendants double jeopardy protection. See, e.g., United States v. Missler, 414 F.2d 1293, 1297 (4th Cir. 1969); United States v. Chunn, 347 F.2d 717, 720 (4th Cir. 1965). Defendant Cory has raised two additional issues relating to the foregoing discussion. Defendant Cory argues that the allegations of the indictment are insufficient to charge him with a violation of the mail fraud statute. As an alternative to dismissal of the indictment as to him on this ground, Defendant Cory urges that the indictment should be dismissed as to him for “prejudicial misjoinder”. While Defendant Cory’s participation in the alleged scheme appears to be less than that of other defendants, if he was a willful party to the scheme to defraud, as he is alleged to have been, he may be convicted for a mail fraud violation. United States v. Wilson, 506 F.2d 1252, 1257 (7th Cir. 1974). The fact that the acts with which defendant Cory has been charged are not, in and of themselves, illegal as a matter of state law, is not determinative of whether those acts may constitute part of a scheme which is fraudulent in its totality and in violation of the mail fraud statute. See discussion at p. 1007, supra. Defendant Cory’s second suggestion that the indictment should be dismissed for “prejudicial misjoinder” is inappropriate. Relief from prejudicial misjoinder is severance, not dismissal of the indictment. Rule 14, Federal Rules of Criminal Procedure. Defendant Cory has moved for severance, and his claim of misjoinder will be considered at a later time with other motions. D. The claim that application of the Seventh Circuit cases to this case would operate as an ex post facto law in violation of the Constitution Defendants also argue that the application of the mail fraud statute to the facts charged in this indictment would constitute, in effect, an ex post facto application of the construction of the statute “first offered” in 1974 by the Seventh Circuit in United States v. Isaacs, supra, and reaffirmed in a number of other recent Seventh Circuit cases, including United States v. Barrett, supra; United States v. Keane, supra, and United States v. Rauhoff, supra. Where a judicial construction of a statute is “unexpected and indefensible by reference to the law which had been expressed prior to the conduct in issue”, application of that construction to acts done prior to that time would constitute an ex post facto application, and retroactive application would be barred. Bouie v. City of Columbia, 378 U.S. 347, 354, 84 S.Ct. 1697, 1702-03, 12 L.Ed.2d 894, 900 (1964). While defendants have sought to so characterize the application of the mail fraud statute to the facts in Isaacs, the Court is of the opinion, based on the review of the cases set out in Part IB of this memorandum, that the Seventh Circuit’s construction of the statute is correct and in line with principles announced in numerous mail fraud cases decided throughout the statute’s history. The Court is aware of no authority, either past or present, which is contrary to the construction of the mail fraud statute given in Isaacs. It cannot be said, in light of the principles long settled in mail fraud cases and relied upon in Isaacs, that the defendants could not have been aware of their conduct’s coming within the statute’s proscriptions. E. The mailings alleged in the indictment were made after the termination of the scheme to defraud The defendants contend that the majority of mailings alleged to have been made in execution of the scheme contained in Counts one through twenty appear, on their face, to have occurred after the termination of the scheme. Defendant Mandel argues that the indictment charges that the final receipt of money envisioned by the alleged scheme was received by defendant Mandel no later than January 1, 1972, and that all mailings thereafter could not therefore be in execution of the scheme, citing United States v. Maze, 414 U.S. 395, 94 S.Ct. 645, 38 L.Ed.2d 603 (1974). The Court notes that the indictment alleges that defendant Mandel continued to receive payments as a consequence of his interest in Security until June, 1973. The Court further notes that the allegations in the indictment indicate that a part of the scheme was the concealment of the alleged bribes, and that mailings in furtherance of that concealment, under such circumstances, could be part of the scheme itself or could constitute a “lulling letter” exception. United States v. Sampson, 371 U.S. 75, 83 S.Ct. 173, 9 L.Ed.2d 136 (1962). In any event, defendants’ argument in this respect is simply premature. Whether or not such mailings were in execution of the scheme depends on their relationship to the scheme, which will turn on evidence to be introduced at trial. The government has alleged that all of the mailings were in furtherance of a scheme to defraud, and they should be given the' opportunity to prove that allegation at trial. United States v. Hoffa, supra, at 716. Whether they will be able to do so is of course a different matter; if at the end of the government’s evidence, there is inadequate evidence to support any of the mailings, the Court will of course entertain a motion to dismiss these counts on that basis. II. THE RACKETEERING ACTIVITY COUNTS A. The Indictment Counts 21 through 24 of the indictment charge various defendants with engaging in patterns of racketeering activity prohibited by 18 U.S.C. § 1961 et seq. Section 1962 provides in relevant part, (b) It shall be unlawful for any person through a pattern of racketeering activity ... to acquire or maintain, directly or indirectly, any interest in or control of any enterprise which is engaged in, or the activities of which affect, interstate or foreign commerce. (c) It shall be unlawful for any person employed by or associated with any enterprise engaged in, or the activities of which affect, interstate or foreign commerce, to conduct or participate, directly or indirectly, in the conduct of such enterprises affairs through a pattern of racketeering activity. “Racketeering activity”, insofar as is here relevant, is defined in § 1961 as including “any act of or threat involving . bribery . . . which is chargeable under State law and punishable by imprisonment for more than one year” and “any act which is indictable under . . . title 18, United States Code, . . . section 1341 (relating to mail fraud).” Count 21 charges that defendant Mandel “acquired and maintained an interest in” Security, which is alleged to be an enterprise within the meaning of the statute, “through a(pattern of racketeering activity” including'the preceding twenty counts of mail fraud and two violations of the Maryland bribery statute, Art. 27, § 23 Maryland Annotated Code. Defendant Mandel is charged in Count 22 with conducting and participating in the affairs of the State of Maryland, which is alleged to be an enterprise within the meaning of the statute, through the same pattern of racketeering activity^ Count 23 charges defendants Hess, William A. and Harry W. Rodgers with conducting and participating in the conduct of the affairs of Security through the same pattern of racketeering activity. Defendants Hess, Harry W. and William A. Rodgers, Kovens and Cory are named in Count 24 as violating the statute for conducting and participating in the conduct of the affairs of Marlboro through a pattern of racketeering activity, i.e., the twenty counts of mail fraud. B. Does the racketeering statute apply only to members of organized crime ? The defendants argue that Congress intended the statute to apply only to situations where members of organized crime attempt through criminal methods to obtain and subvert interests in legitimate business organizations. There being no allegation in the indictment that the defendants are in any way connected with “organized crime”, the defendants suggest that the four counts should be dismissed. Clt is undisputed that Congress’ primary concern in enacting Title IX of the Organized Crime Act of 1970 was to curb the threatening activities of members of organized crime. See, e.g., Congressional Statement of Findings and Purpose, § 1 of Act Oct. 15, 1970, P.L. 91-452, Title IX, § 90