    United States Court of Appeals
                  For the Seventh Circuit
                  Chicago, Illinois 60604

                           July 1, 2008

                             Before1

       FRANK H. EASTERBROOK, Chief Judge
       RICHARD A. POSNER, Circuit Judge
       KENNETH F. RIPPLE, Circuit Judge
       DANIEL A. MANION, Circuit Judge
       MICHAEL S. KANNE, Circuit Judge
       DIANE P. WOOD, Circuit Judge
       TERENCE T. EVANS, Circuit Judge
       ANN CLAIRE WILLIAMS, Circuit Judge
       DIANE S. SYKES, Circuit Judge
       JOHN DANIEL TINDER, Circuit Judge

Nos. 06-4251, 06-4252 & 06-4254
UNITED STATES OF AMERICA,
                                                   Plaintiff-Appellee,
                                 v.

ROBERT SORICH, TIMOTHY MCCARTHY,
and PATRICK SLATTERY,
                                 Defendants-Appellants.
                    ____________

           Appeals from the United States District Court
       for the Northern District of Illinois, Eastern Division.
               No. 05 CR 644—David H. Coar, Judge.
                         ____________


1
  Judge Flaum and Judge Rovner did not participate in the
consideration of the petition.
2                          Nos. 06-4251, 06-4252 & 06-4254

                        ORDER

     On April 22, 2008, defendants-appellants filed a joint
petition for panel rehearing with suggestion for re-
hearing en banc, and on May 15, 2008, plaintiff-appellee
filed an answer to the petition. All members of the orig-
inal panel have voted to DENY the petition for rehearing.
A vote was requested on the petition for rehearing
en banc, and a majority of the judges voting did not favor
rehearing en banc. The petition for rehearing en banc,
accordingly, is also DENIED.
  Judge Kanne’s opinion dissenting from the denial of
rehearing en banc, which Judge Posner has joined, is
appended.




  KANNE, Circuit Judge, joined by POSNER, Circuit Judge,
dissenting from the denial of rehearing en banc. Without
explicitly saying so, we have left the impression that the
use of political patronage in personnel hiring by the City
of Chicago is a crime. Although no legislatively defined
criminal offense outlaws patronage hiring by govern-
ment entities in Illinois, such hiring is now seen as a
crime because it violates the Shakman decrees—never mind
that Shakman is simply a series of civil consent decrees
subject only to civil penalties, and imposition of con-
tempt if wilfully violated. Now, by judicial fiat, the
Shakman decrees can operate to create a fiduciary duty,
which, if violated, deprives the public of “honest services,”
Nos. 06-4251, 06-4252 & 06-4254                             3

and thus is a basis for a federal crime under the mail-
fraud statute, 18 U.S.C. § 1346.
  We have recognized that the honest-services mail-fraud
statute, construed broadly, would sweep within its reach a
host of violations of state-law fiduciary duties simply
because the mails are used in the process. See United States
v. Bloom, 149 F.3d 649, 653 (7th Cir. 1998). But because all
deceits are not criminal frauds, we have decided to limit
the language of § 1346 to criminalize only frauds that
result in a private gain. Id. at 655. “Misuse of office (more
broadly, misuse of position) for private gain is the line that
separates run of the mill violations of state-law fiduciary
duty . . . from federal crime.” Id.
  Among the questions with which the panel grappled
in this case (and which this court has faced in numerous
recent cases) are: Where we should draw that line? What
exactly constitutes a private gain? Who must receive the
private gain in order for it to “count” for purposes of
the mail-fraud statute? Initially, it seemed that our
answer to these questions was that a private gain had to
be personal to the alleged perpetrator of the fraudulent
scheme. See United States v. Hausmann, 345 F.3d 952, 956
(7th Cir. 2003); Bloom, 149 F.3d at 657. But that is no longer
the case, for we have noted that “[a] participant in a
scheme to defraud is guilty even if he is an altruist and all
the benefits of the fraud accrue to other participants.”
United States v. Spano, 421 F.3d 599, 603 (7th Cir. 2005). The
debate seems to be whether the private gain must accrue
to a participant in the fraudulent scheme or, alterna-
tively, whether it is enough that some sort of private
gain accrues to some person somewhere. The panel deci-
sion, relying on Spano, concludes that gain appreciated
by any individual—even an individual unaware of the
4                            Nos. 06-4251, 06-4252 & 06-4254

fraud—suffices for the private gain limiting principle of
the honest-services mail-fraud statute that we have fash-
ioned in our circuit. See United States v. Sorich, 523 F.3d 702,
710 (7th Cir. 2008).
  In my view, the panel decision greatly expands the
scope of honest-services mail fraud. In United States v.
Thompson, we noted that “an increase in official salary, or
a psychic benefit such as basking in a superior’s approba-
tion (and thinking one’s job more secure), is not the sort
of ‘private gain’ that makes an act criminal under § 1341
and § 1346.” 484 F.3d 877, 885 (7th Cir. 2007). In light of
that rule, and in light of the lack of proof of personal gain
by the defendants in this case, the panel explicitly held
that private gain to unrelated third parties (i.e., the gain
that recipients of the city jobs received) brought the
defendants’ conduct within § 1346. See Sorich, 523 F.3d at
709-11. The examples cited by the panel decision about a
defendant funneling benefits to charities or to “an es-
tranged brother” highlight the expansion I am concerned
about. See id. at 709-10. The panel opinion will allow
the federal government to prosecute honest-services
cases by invoking a benefit received by unrelated,
unaware-of-the-fraud third parties who received con-
tracts or benefits as “private gain”—the actions that we
cautioned against making federal crimes in Bloom and
Thompson seem to now come within the statute.
  In this sense, I believe that the petition for rehearing
en banc raised very real concerns about our misuse-of-
position-for-private-gain limitation on § 1346. And this
limitation has grown increasingly important given the
number of high profile cases that this court has faced or
will face that involve the honest-services statute.
Nos. 06-4251, 06-4252 & 06-4254                             5

   I also believe that en banc review is appropriate given the
panel’s conclusion that, in lieu of state law, the Shakman
decrees can be a source of fiduciary duty that predicates
prosecutions of public officials for their alleged depriva-
tion of honest services to the public. The panel supports
its conclusion by stating that we have determined that
“other sources” can give rise to a fiduciary duty, and that,
in any event, we have never adopted the “state-law limit-
ing principle” (as have the Third Circuit, United States v.
Murphy, 323 F.3d 102, 116-17 (3d Cir. 2003), and Fifth
Circuit, United States v. Brumley, 116 F.3d 728, 734-35 (5th
Cir. 1997)), to hold that a public official’s fiduciary duty
must stem from state law. See Sorich, 523 F.3d at 712.
  I have reservations about the panel’s treatment of this
issue. The panel’s conclusion that the fiduciary duty
under § 1346 can arise from “other sources” than state
law is based on two cases in which the defendant was
actually employed as a fiduciary. United States v. Williams,
441 F.3d 716, 723-24 (9th Cir. 2006); United States v. George,
477 F.2d 508, 541 n.7 (7th Cir. 1973). The duty arising
in those cases did not stem from sources “other” than
state law, as suggested in the panel opinion, but rather
from the nature of the defendants’ employment. The panel
also suggests, without actually deciding, that merely
holding public office gives rise to fiduciary duties. But
finding that an individual may be prosecuted under § 1346
for breaching a fiduciary duty stemming from the nature
of his employment is vastly different from finding that a
prosecution under § 1346 can be maintained for vio-
lating federal, civil-action consent decrees entered against
unrelated parties.
 I am also troubled by the panel’s refusal to consider
whether we should adopt the state-law limiting principle.
6                          Nos. 06-4251, 06-4252 & 06-4254

Although the panel was correct that we have never
held that a fiduciary duty must stem from state law, we
did leave that question open in United States v. Martin,
195 F.3d 961, 967 (7th Cir. 1999), and have not since re-
solved the issue definitively. Sorich raised the issue,
discussed both the Third and Fifth Circuits’ positions, and
asked us to “reexamine” our position regarding the
adoption of the state-law limiting principle. Given the
obvious federalism concerns that the “other sources”
position implicates (i.e., potentially allowing federal
prosecutors to usurp the role of state authorities to redress
state crimes just because the federal mails are used), it
would have been prudent for us to accept the appellants’
invitation now, and revisit en banc whether we should
follow the Third and Fifth Circuits and adopt the state-law
limiting principle.
  In sum, this case presented an appropriate vehicle to
consider, as an entire court, both our position regarding
the misuse-of-position-for-private-gain limitation and
the state-law limiting principle. I have substantial con-
cern about taking the position—absent en banc review—
that a person can be prosecuted under § 1346 where
(1) neither the defendant nor his co-schemers benefitted
from the fraud, and (2) the source of the fiduciary duty
is a federal civil consent decree between two unrelated
parties, which does not carry the force of state law.
  For the foregoing reasons, I respectfully dissent from
the denial of the petition for rehearing en banc.




                    USCA-02-C-0072—7-1-08
