Public entities buy insurance to protect themselves against various liabilities and property damage. The politicians who run these entities know almost nothing about insurance and insurance pricing. As a result they are at the mercy of professional insurance agents and brokers who can profit greatly from the sale of insurance to a public entity. If the agent or broker placing the business is immoral and can influence the purchase by bribery or extortion the profits available are enormous and can be used to tempt an otherwise honest politician.
In US v. Bencivengo, [enhanced version available to lexis.com subscribers], Court of Appeals, 3rd Circuit, No. 13-1836, http://scholar.google.com/scholar_case?case=9407519479898704185&q=BENCIVENGO&hl=en&as_sdt=2006 (April 23, 2014) the Third Circuit Court of Appeal was asked to overturn the conviction of a local mayor who succumbed to the temptation to take a bribe.
John Bencivengo, the former Mayor of Hamilton Township, New Jersey, was convicted of violating the Hobbs Act and other federal criminal statutes for accepting money from Marliese Ljuba in exchange for agreeing to influence members of the Hamilton Township School Board to refrain from putting the School District’s insurance contract up for competitive bidding.
Bencivengo was elected Mayor of Hamilton Township, New Jersey in 2007. Prior to his election, Bencivengo served on the Hamilton Township School Board and was a prominent Hamilton Township politician, serving as Chairman of the local Republican Party. Bencivengo was reelected as Mayor in 2011.
Bencivengo was close friends with Marliese Ljuba, whom he had known since 2004. Ms. Ljuba was the insurance broker for the Hamilton Township School District. She personally earned between $600,000 and $700,000 in commissions from insurance contracts with the School District in 2011 alone. In 2011, the School District’s insurance contracts were up for renewal. One School Board member, Stephanie Pratico, urged the School Board to place the contract up for competitive bidding, rather than to simply renew the existing contract held by Ms. Ljuba’s firm.
In March of 2011, Bencivengo, who was facing financial difficulties, asked the Township’s Director of Community Planning and Compliance, Robert Warney, to approach Ms. Ljuba about providing him some financial assistance. In May 2011, the two met, and ultimately Ms. Ljuba agreed to provide Bencivengo with $5,000. There was some discussion of the money taking the form of a loan; however, Ms. Ljuba suggested that, instead, Bencivengo convince Ms. Pratico not to put the School Board’s insurance contract up for bid and the “loan” need not be repaid.
On June 29, 2011, Bencivengo approached Ms. Ljuba (not a true friend) again, asking for her assistance in helping him pay his property taxes. By this time, Ms. Ljuba was cooperating with the FBI and was recording her conversations with Bencivengo. On July 11, 2011, Ms. Ljuba and Bencivengo had lunch in Hamilton. Ms. Ljuba told Bencivengo that she wanted to select the next person to fill a vacant seat on the School Board, and had a particular woman in mind-the sister of an insurance company representative who was a political unknown in Hamilton Township. The two also discussed Ms. Ljuba’s planned payment to Bencivengo. The two agreed that the money would be exchanged during their upcoming trip to Atlantic City, because they could make it seem as though Bencivengo had won the money gambling.
On July 28, 2011, Bencivengo met Ms. Ljuba in her hotel room in Atlantic City, and she gave him $5,000 in $100 bills. Bencivengo informed Ms. Ljuba that he had already talked to Ms. Pratico, and had urged Ms. Pratico that “you have to support those who support you,” reminding her that he had backed her when she wanted to run for School Board.
It is undisputed that, as Mayor, Bencivengo had no statutory power or authority over the School Board. He had no vote on the Board, nor any official role in choosing members of the School Board.
On November 20, 2012, after a trial, the jury returned a verdict of guilty on each count of the Indictment.
On appeal, Bencivengo argues that the District Court erred by failing to grant his motion for judgment of acquittal. With respect to his conviction under the Hobbs Act, he urges that the Government failed to identify any official act that was involved. He argues that, as Mayor, he had no official authority over actions of the School Board, and therefore, had no actual power to replace Ms. Pratico or to otherwise ensure that Ms. Ljuba retained the insurance contract with the School District.
The Hobbs Act makes it a crime to “obstruct . . . delay. . . or affect . . . commerce or the movement of any article or commodity in commerce, by robbery or extortion.” “Extortion” is defined as “the obtaining of property from another, with his consent, induced by wrongful use of actual or threatened force, violence, or fear, or under color of official right.” He urges that, in the instant case, the Government does not contend that Ms. Ljuba believed Bencivengo to have “effective power” over the School Board’s decision regarding whether to put the insurance contract up for bid-indeed, Ms. Ljuba testified to that effect. Instead, the Government rests its case on Ms. Ljuba’s purchase of, and belief in, Bencivengo’s influence over the members of the School Board by virtue of his position as Mayor.
For the first time the appellate court was asked to determine whether the power to influence by virtue of one’s office satisfies the “under color of official right” requirement. Looking to other courts the Third Circuit noted that they have explicitly held that the mere agreement to exercise influence is sufficient to sustain a conviction for extortion under the Hobbs Act. The defendant, through his official position, had influence and authority over a means to the end that the extortion was successful. Since a reasonable jury could have found that Bencivengo had the power, through his official position and the connections and contacts it gave him, to influence the actions of the school board. There is no doubt that Bencivengo had no actual de jure or de facto power over the award of School Board insurance contracts; nor is there evidence that Ms. Ljuba believed he had such power. However, the record is sufficient for a reasonable jury to find that Bencivengo’s position as Mayor of Hamilton Township gave him influence over members of the School Board, and that Ms. Ljuba believed that he had such influence and that is sufficient to sustain a conviction under the Hobbs Act, regardless of whether the official holds any de jure or de facto power over the decision.
The District Judge, at most, admonished defense counsel on several occasions to clarify questions that perhaps did not need to be clarified, as they were clearly understood by Ms. Ljuba. His argument that the judge influenced the jury against him had no basis in fact.
One can only wonder why a successful politician would throw away his office, power, and the honor of his position for a mere $5,000 bribe but that was the downfall of Mr. Bencivengo. One can only assume he took money from more people than Ms. Ljuba as a general course of conduct and was only caught in his criminal conduct when Ms. Ljuba contacted the FBI.
For $5,000 the people who paid taxes to allow the school board to buy insurance were cheated out of a bidding process that would have earned the broker, Ljuba less commission. For a small investment of $5,000 Ljuba earned between $600,000 and $700,000 in commissions. Had insurers been allowed to compete the premium and commissions would have been less.
Not only Mr. Bencivengo should have learned a lesson from his arrest and conviction. The members of the school board should have learned to not simply renew their insurance program but should, as should every insurance buyer, shop the market. Electing Mr. Bencivengo was a costly mistake for the people of New Jersey who elected him to the school board and then as mayor.
By Barry Zalma, Attorney and Consultant
Reprinted with Permission from Zalma on Insurance, (c) 2013, Barry Zalma.
Barry Zalma, Esq., CFE, is a California attorney who limits his practice to consultation regarding insurance coverage, insurance claims handling, insurance bad faith and fraud and acting as a mediator or arbitrator on insurance disputes. Mr. Zalma serves as a consultant and expert almost equally for insurers and policyholders. He founded Zalma Insurance Consultants in 2001 and serves as its only consultant. He recently published the e-books, "Zalma on Rescission in California - 2013"; "Random Thoughts on Insurance" containing posts from this blog; "Zalma on Insurance;" "Murder and Insurance Don't Mix;" “Heads I Win, Tails You Lose — 2011,” “Zalma on Diminution in Value Damages,” “Arson for Profit” and “Zalma on California Claims Regulations,” and others that are available at Zalma Books.
Mr. Zalma can be contacted at Barry Zalma or email@example.com, and you can access his free "Zalma on Insurance Fraud" newsletter at Zalma’s Insurance Fraud Letter.
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