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Professor Green

White Collar Crime


Fall 2015
White Collar Crime - Green Fall 2015
Basic Principles
Class #1: What is White Collar Crime and Who Commits It?
I.

Defining White Collar Crime


A. Its a class term white collar
B. Sutherland: White Collar Criminality
1. Crime isnt just petty crime on the street. Theres a whole area that can be studied.
Criminologists focused too narrowly on crime in the streets, and they should also be looking at
crime in the suites.
2. The financial cost of white collar crime
a) Several times a great of all the crimes regarded as the crime problem.
3. Sutherland is saying that its not just that people who are of higher economic standing are
committing crimes. The behavior that they are engaging in is not treated as a crime.
C. Green: The Concept of White Collar Crime in Law and Legal Theory
1. Criminal law is the product of our class system. People who work in big corporations and
powerful institutions are going to be treated more leniently. In the cases where they get caught,
theyll have the best lawyers to represent them and then theyll go to high-security prisons. The
whole system is rigged who are part of the higher social economic standing.
2. The most interesting thing about white collar crime is that theres a certain moral ambiguity in
white collar crime. The line between criminal behavior and merely aggressive business behavior
is very fine. The same kinds of behavior that we reward (aggressive business practices, people
who are savvy investors, wall street titans), make a fine line between what is legal and whats not
legal.
3. There is a difficulty in identifying the victim and the harm
4. There is a difficulty in identifying the perpetrator
5. The problem of codifying white collar crime
a) Putting all the federal crimes in a single codified body of law. Never enacted, and no interest in
trying to do it.
Class #2: Corporate Criminal Liability

I.

Why have Corporate Criminal Liability?


A. Corporations can be so complex in their structure that identifying let alone proving the mens rea
of the agents responsible for its unlawful conduct may be well-nigh impossible. By making the

entity itself criminally liable, each level of the corporate hierarchy is deterred from being
willfully blind to the unlawful but beneficial acts of those for whom they are responsible.
Corporate Criminal Liability
II.
A.
1.
2.

B.
1.

C.
1.
D.
1.
E.
1.

2.

III.

New York Central & Hudson River Railroad v. United States


General Rule
A corporation can be held criminally liable for the acts of an agent within the scope of
employment.
Corporations may be held criminally liable for the unlawful conduct of their agents acting within
the scope of their designated authority. New York Central & Hudson River Railroad. If the
unlawful conduct is done for the corporation (to wit, for its benefit), then criminal liability
should attach no different than tort liability would (provided that positive law so prescribes that
liability).
Facts
The Defendant corporation, New York Central & Hudson River Railroad Co. (Defendant),
together with a managing agent within the corporation, were convicted of violating a federal law
prohibiting the payment of rebates. Specifically, the corporation was prosecuted for the payment
of rebates to the American Sugar Refining Company arising out of shipments of sugar from New
York to Detroit. The Defendant was prosecuted under the Elkins Act, 32 Stat. 847, which held
a corporation criminally liable for unlawful acts of its agents.
Issue
Is a corporation criminally responsible for the unlawful acts of its agent acting within the scope
of authority conferred upon them by the corporation?
Holding
Yes.
Reasoning
We see no reason why a corporation cannot be imputed with the knowledge of unlawful conduct
by its agents acting within the scope of their designated authority, which actions accrue to the
profit of the corporation. It is well established that corporations may, as a corporate entity, be
held responsible for damages in a torts action. In these cases, liability is not imputed to the
corporation because it itself participated in the tortuous conduct, but because the tortuous
conduct was done for the benefit of the corporation. Neither, then, can the criminal law close its
eyes to the way business is conducted today. If corporations are permitted to continue with
prosecutorial immunity for their actions, it would undermine virtually the only way the
government can control and correct its abuses.
This important case took away the immunity from criminal prosecution that corporations
previously enjoyed. The courts reasoning was that insomuch as the corporation could be
imputed with the knowledge of the actions its employees were taking in the course of their
employment, any criminal culpability for those actions should they be in violation of law
could also be imputed to the corporation.
United States Attorneys Manual: Title 9 Principles

A. Pages 12 - 15 of the book list factors that are considered when wanting to federally prosecute a
business (general considerations, pervasiveness of wrongdoing, corporations past history, etc.).
The Respondeat Superior Rule
IV. Criminal Acts
A. A considerable body of case law allows imposition of corporate liability for criminal acts
performed by officers and agents in the course of their employment, without regard to their status
in the corporate hierarchy.
B. The only general limitation on corporate liability under the respondeat superior rule is that the
agent who commits the crime must be acting within the scope of his or her authority and on
behalf of the corporation.
C. Respondeat superior liability is not limited to when the unlawful conduct of an organization is
done by its managerial agentsit applies just the same for non-managerial agents, so long as
they are acting within the scope of their designated authority. Beneficial Finance. This is just
criminal respondeat superior liability.
V. Commonwealth v. Beneficial Finance Co.
A. Facts
1. Beneficial Finance Company (Beneficial) (defendant), and several other corporations, were
convicted of bribing, and conspiring to bribe, state banking officials with the intent of obtaining
favorable treatment from the states Small Loans Regulatory Board. Beneficials conviction was
based on the actions of employees who were neither officers nor directors of the corporation.
One of the employees, Farrell, was an officer and director of a wholly-owned subsidiary of
Beneficial. Another employee, Glynn, reported to Farrell but was paid by a separate whollyowned Beneficial subsidiary. Beneficial appealed the conviction, arguing that the court applied
an improper standard for determining the criminal responsibility of a corporation. Corporation
argues that a corporation should not be held criminally liable for the conduct of its servants or
agents unless such conduct was performed, authorized, ratified, adopted or tolerated by the
corporations directors, officers or other high managerial agents. [Defendant wants MPC
2.07 standard]
2. Who is a high Managerial Agent: Having a title is not enough . . . must prove that the individual
was placed in a position by the corporation where he had enough power, duty, responsibility and
authority to act for and in behalf of the corporation to handle the particular business.
B. Issue
1. Is a corporation criminally liable for the unlawful actions of its employees acting within the
scope of authority delegated to them by the corporation?
C. Holding
1. Yes.
D. Reasoning
1. Where a corporation has placed an employee in a position where he has authority to act for the
corporation in the particular corporate business that is the subject of criminal prosecution, the
corporation is itself liable for the violation of law. The title of an individual within a corporation
should not be determinative of criminal responsibility. In fact, many low-level employees are

2.

E.
1.

VI.
A.
1.

B.
1.

2.

3.
C.
1.
D.
1.

E.
1.

entrusted with the responsibility of the everyday operations of the corporation. In this particular
case, the disbursal of funds from the corporation to a state banking officials can be presumed to
be a corporate act, as the individuals employees themselves could not be expected to bribe the
officials out of their own pocket.
This case broadens the ambit of criminal responsibility for corporations to include liability for
actions taken by non-managerial agents within the corporation. It recognizes the reality that
many low-level employees have broad responsibilities to act on behalf of the corporation on a
daily basis, while officers and directors are frequently less engaged in the corporations day-today activities.
Rule
The quantum of proof necessary to sustain the conviction of a corporation for the acts of its
agents is sufficiently met if it is shown that the corporation has placed the agent in a position
where he has enough authority and responsibility to act for and in behalf of the corporation in
handling the particular corporate business, operation or project in which he was engaged at the
time he committed a criminal act.
People v. Lessoff & Berger
General Rule
Organizational criminal liability extends to entities other than corporations, including law
partnerships. Lessoff & Berger. If other partners stood to benefit from rogue partners unlawful
conduct, the entity may be held liable as a whole. Justification is to compel self- policing
amongst partners.
Facts
Lessoff, a lawyer, referred clients in personal-injury accident cases to a radiologist in Brooklyn
for examination and report. Lessoff instructed the radiologist to change MRI reports to delete
references to nontrautmatic damage and to abnormalities or injuries predating the accident.
At the time of the crimes charged in the indictment, the doctor was working undercover with the
DAs office during the Grand Jury investigation and was secretly recording his telephone
conversations with Lessoff.
The co-defendant in this case is the law partnership in which the defendant Lessoff is a partner.
Issue
Whether a law partnership may be indicted for crimes of fraud, and if so, whether a partnership
may be indicted if only one partner is involved in the alleged crimes.
Holding
Criminal liability for ones partners fraud is particularly appropriate in the case of a law
partnership. Not only do law partners benefit financially from the fruits of one partners
fraudulent conduct committed in the name of the firm, but there is a strong public interest in
regulating the ethics of the legal profession.
Reasoning
The Penal Law applies to a law firm, whether it be a partnership or a professional corporation,
and the law firm may be charged if one partner has committed a crime in the name of the law
firm. The plain language of Penal Law Section 10.00(7) authorizes an indictment of the
partnership on such facts. It provides that a person -- which includes a person charged with a
crime -- means, where appropriate, a partnership. Similarly, the section defining the crime of

VII.
A.
1.

2.

B.
1.

C.
1.
D.
1.
E.
1.

insurance fraud, section 176.00, provides that a person chargeable with the crime of insurance
fraud includes any firm, association or corporation; under the Partnership Law, a partnership is
an association of two or more persons to carry as co-owners of a business for profit. Section
10(1).
United States v. Hilton Hotels Corp.
General Holding/Rule
A corporation is liable under the Sherman Act for the acts of its agents in the scope of their
employment, even though contrary to general corporate policy and express instructions to the
agent.
Criminal liability may extend to a corporation even where its agent acts contrary to an express
policy of the corporation, as long as he does so within the scope of the authority delegated to him
by the corporation and the corporation stands to benefit from his act(s). Hilton Hotels.
Corporations may not insulate themselves from criminal liability by having a bullshit written
policy while encouraging or being willfully blind to their agents to contrary conduct.
Facts
In Portland, Oregon, hotels, restaurants, hotel and restaurant supply companies and other
businesses organized an association to attract conventions to the city. To finance the association,
association members were asked to make predetermined monetary contributions. To aid the
collections, Hilton Hotels Corp. (Hilton) (defendant) agreed to give preferential treatment to
suppliers who paid their contributions and boycotted those suppliers who did not. Hilton was
charged with violating 1 of the Sherman Antitrust Act which prohibits actions in restraint of
trade. Hiltons President testified that it was against corporate policy for a specific hotel to
condition purchases of supplies upon payment of a contribution to an association. Further,
Hiltons Portland hotel and his assistant testified that it was the hotels policy to purchase
supplies solely on the basis of price, quality, and service. Although the Portland Hiltons
purchasing agent was instructed not to take part in the boycott, the purchasing agent ignored the
order and threatened a supplier with loss of the hotels business unless the supplier financially
contributed to the association. The district judge instructed the jury that a corporation is
responsible for the acts and statements of its agents within the scope of their employment even if
the employees disregard official instructions or the corporations policies. Hilton was found
guilty and it appealed.
Issue
Is a corporation criminally liable under the Sherman Act, 15 U.S.C. Section:1 (the Act), for
actions taken by its agents in the scope of their authority, but counter to corporate policy?
Holding
Yes. Judgement Affirmed.
Reasoning
It is appropriate to hold the corporation liable for the acts of the individual agent because
insomuch as the Act violations are commercial offenses, it is the corporation that will profit from
the illegal activity and not the agent himself. Violation of the Act are in fact typically the result of
pressure to maximize profits, leading individual agents to go against a general corporate policy
for the sake of enhancing the profits of the corporation.

2. Corporate liability for violation of the Act is appropriate on account of the generally complex
business structures through which a violation occurs, making it difficult to identify the particular
agents that were involved in the unlawful activity. Even where the agents are identified and
prosecuted, it is ineffective as a deterrent as no consequences would befall the corporation itself.
3. This case represents a further step taken in law to hold corporations accountable for their
unlawful actions, even when done by an agent acting against corporate policy and procedures. It
attempts to maximize the deterrent effect by encouraging corporations to be more diligent in
supervising the business activities of its agents done on behalf of the corporation.
Criminal Intent Under Respondeat Superior
VIII.

IX.
A.
1.

2.

3.

4.
a)

5.

B.
1.
C.
1.
D.
1.

Note that common law jurisdictions have various theories of criminal respondeat superior
liability: some require a positive act/authorization of a managerial officer (clear demonstration of
intent), some where the act committed within the scope of the actors employment (imputable
intent), some where the unlawful act done benefits the corporation (implied intent).
United States v. Bank of New England, N.A.
Facts
Department of Treasury regulations promulgated by the Currency Transaction Reporting Act
require banks to file Currency Transaction Reports (CTRs) within fifteen days of customer
currency transactions exceeding $10,000 dollars. The Act imposes felony liability when a bank
willfully fails to file such reports as part of a pattern of illegal activity involving transactions of
more than $100,000 in a twelve-month period
On thirty-one separate occasions, McDonough withdrew from the Prudential Branch of the Bank
of New England more than $10,000 in cash by using multiple checks-- each one individually
under $10,000-- presented simultaneously to a single bank teller.
There is evidence that a bank auditor discussed the reporting requirements with the banks
tellers, there is support to the conclusion that the bank was well aware that McDonoughs
transactions should have been reported.
The Head teller Patricia Murphy knew that McDonoughs transactions were reportable, but on
one occasion, deliberately chose not to file a CTR on him because he was a good customer.
The Jury heard testimony that the bank employees regarded McDonoughs transactions as
unusual, speculated that he was a bookie, and suspected that he was structuring his transactions
to avoid the ACts reporting requirements.
Bank argues that the evidence did not suffice to show that it willfully failed to file CTRs on
McDonoughs transactions and that the trial courts instructions on knowledge and specific intent
effectively relieved the governments responsibility of proving that the bank acted wilfully.
Issue
Whether the trial courts instructions on knowledge and specific intent effectively relieved the
government of its responsibility of proving that the bank acting willfully?
Holding
No.
Reasoning
Willfulness is defined as a voluntary, intentional, and bad purpose to disobey the law.

2. The trial court properly instructed that the jury could infer knowledge if the Bank consciously
avoided learning about the reporting requirements; individual employees acting within the scope
of their employment is imputed to the Bank; and if any employee knew that multiple checks
would require the filing of reports, the bank knew it, provided that the employee knew it within
the scope of his employment.
3. A corporation cannot plead innocence by asserting that the information obtained by several
employees was not acquired by any one individual who then would have comprehended its full
import. Rather the corporation is considered to have acquired the collective knowledge of its
employees and is held responsible for their failure to act accordingly.
a) Since the Bank had the compartmentalized structure common to all large corporations, the
courts collective knowledge instruction was not only proper but necessary.
4. Given the fact that many employees knew about McDonoughs transactions, the jury could have
concluded that the failure by Bank personnel to, at least inquire about the reportability of
McDonoughs transactions constituted flagrant indifference to the obligations by the act.
Therefore, the evidence was sufficient for a finding of willfulness.
The Model Penal Code Rule
X.

XI.
A.
1.

B.
1.
2.

3.
a)

4.

C.

Important Note: Like in Beneficial Finance, modern corporate liability permits the acts and
intent of low-level operatives to be imputed to the corporation. HOWEVER, the MPC requires
the participation or approval of a high managerial agent as a prerequisite to corporate liability for
non-regulatory crimes.
Model Penal Code Section 2.07: Liability of Corporate Officers and Agents (pg. 27 in supp).
Generally
Section 2.07 creates a trifurcated scheme of corporate liability that draws intersecting lines
between acts and omissions, between true crimes and regulatory offenses, and between the
operatives who are the hands of the corporation and the policy makers who constitute its
mind.
Section 2.07(1)(a)
Adopts a broad respondeat superior theory of liability.
A corporation may incur liability for minor infractions and for non-Code penal offenses when a
legislative purpose to impose liability on corporations plainly appears, provided that the
conduct constituting the offense is performed by a corporate agent acting within the scope of his
employment and on behalf of the corporation.
The potential reach of (1)(a) liability rule is limited by the availability of a due diligence defense.
Proof that the high managerial agent having supervisory responsibility over the subject matter
of the offense employed due diligence to prevent its commission exonerates the corporation
from criminal liability.
Subsection (1)(a) seeks to limit respondeat superior liability to instances in which the high
managerial agent having supervisory authority has not done due diligence to prevent the
commission of the unlawful act(s).
Section 2.07(1)(b)

1. Pertains to omissions as opposed to acts. Subsection (1)(b) allows for criminal liability for
omissions of corporate duties imposed by law.
2. Provides that a corporation is accountable for failure to discharge specific duties imposed on
corporations by law.
3. Neither the text of this provision nor the comments address the question of whose omission may
lead to liability.
D. Section 2.07(1)(c)
1. By far the most restrictive.
2. A corporation will incur liability for true crimes -- that is, for an offense defined in the Penal
Code -- only if the conduct constituting the offense is authorized, commanded, solicited,
performed, or recklessly tolerated by the board of directors or a high managerial agent whose
acquiescence to the wrongdoing -- by virtue of his position of authority -- may fairly be regarded
as reflecting corporate policy.
a) The MPC defines high managerial agent as an officer of a corporation or an unincorporated
association, or, in case of a partnership, a partner, or any other agent of a corporation or
association having duties of such responsibility that his conduct may fairly be assumed to
represent the policy of the corporation or association.
3. Subsection (1)(c) prescribes criminal liability for offenses defined in the MPC (true crimes) if
that conduct is authorized, commanded, solicited, performed, or recklessly tolerated by the board
of directors of a high managerial agent whose acquiescence may be regarded as reflecting
corporate policy.
XII.
State v. Chapman Dodge Center, Inc.
A. General Holding/Rule
1. Where evidence other than a written policy suggests that the corporations intent (i.e., the intent
of its officer(s)) is contrary the unlawful act(s) committed by its agent acting within the scope of
his employment, the theories of respondeat superior liability are inapposite and therefore
criminal liability should not attach. Chapman Dodge Center.
B. Facts
1. In this case, car dealership owned by close corp owned by one person. General manager
committed license fraud not known to the owner. Court held that general manager was not a
high managerial agent.
2. Dealership and owner were charged with 20 counts of theft related to the dealerships failure to
pay sales tax on more than 100 cars.
3. Defendant owner only went to dealership about twice a month, the daily operations were done by
general manager. GM and accountant made decisions about payments of bills.
4. Owner told General Manager to pay all the taxes, and General Manager said that he did.
C. Issue
1. What criminal liability should a corporation bear for the unauthorized acts of its officers and
managers? Should a corporation be criminally responsible in the absence of a specific statute
which defines and describes the corporate act, prohibits that act, and establishes a specific
punishment therfor?
D. Holding

1. Court held that owner did not have the necessary intent and the actions of the manager was not
enough for corporate liability
a) Manager was not on board of directors or president or officer of corporation (not high managerial
officer) so it wasnt enough for corporate liability
E. Reasoning
1. When a corporation is accused of committing a crime which requires intent, it must be
determined who within the corporate structure had the intent to commit the crime. If the crime
was the product of a board of directors resolution authorizing its employees to commit specific
criminal acts, then the intent on the part of the corporation is manifest. However, holding a
corporation criminally responsible for the acts of an employee that is not authorized to perform
such an act may be inconsistent with basic notions of criminal intent, since such a posture would
render a corporate entity responsible for actions which it theoretically had no intention of
committing.
Class #3: Personal Liability in an Organizational Setting
Direct Participants
Absent a clear legislative intent to exclude corporate agents from personal responsibility for
crimes they commit, they cannot use the corporate entity as a shield against liability for [their]
own misdeeds.

I.

Responsible Corporate Officers


II.
III.
A.
1.

2.
IV.
A.

The recent convictions of Enrons top officials make it abundantly clear that corporate officers
are personally liable for crimes they commit during the course of their employment.
United States v. Dotterweich (Case discussed briefly in textbook)
Summary
Defendant Dotterweich was the president and general manager of a company that purchased
drugs from a manufacturer, repackaged them, and shipped them with a new label. Dotterweich
was convicted of a misdemeanor under the Food and Drugs Act of 1906, which prohibited the
shipment of adulterated and misbranded drugs in interstate commerce. The Supreme Court
upheld Dotterweich's conviction even though he did not directly participate in the proscribed
shipments. The Court reasoned that this was a public welfare offense where strict, vicarious
liability was appropriate because the president of a company ought to be aware of the regulations
associated with their business, and that the president was in a much better position than
members of the public to protect against the possible dangers of the product.
As long as he shared responsibility in the business process resulting in unlawful distribution, he
would be personally liable.
United States v. Park (case happened shortly after Dotterweich).
General Holding/Rule

1. A CEO is liable as the responsible corporate officer for violations of law committed by the
corporation, which he either had the ability to prevent before the fact, or the opportunity to
promptly correct after the fact.
2. Corporate officers may be held strictly liable for their corporations public welfare offenses
unless the conduct/circumstance giving rise to the offense was impossible to fix, even when their
individual wrongdoing at most amounted to an omission. Park. Public welfare offenses are by
definition deterrent measures deliberately taken by the legislature (or, as it were, regulatory
agency) that enacted them. Strict liability allows for maximum deterrence.
B. Facts
1. The defendant CEO of food corporation contested his conviction for violating federal regulations
regarding unsanitary conditions in which the corporation warehoused its goods. After inspecting
the corporations warehouses, federal inspectors notified the defendant CEO by letter of the
rodent infestation at the warehouses. Two years later, they returned and noticed that the
warehouses continued to be occupied by rodents.
C. Issue
1. Is CEO of corporation criminally responsible for unlawful actions of the corporation?
D. Holding
1. Yes. Reversed.
E. Reasoning
1. The Government established a prima facie case against the defendant CEO with evidence that the
defendant was put on notice of a violation of law committed by the corporation and that he both
failed to prevent the violation of law in the first place and subsequently failed to promptly correct
the unlawful activity. The defendant could only have avoided liability by demonstrating that he
was powerless to prevent or correct the violation of law, but he failed to do so.
2. The theory of liability announced by the majority in this case is known as the responsible
corporate officer doctrine. Under the doctrine, there must be evidence that defendant had, by
virtue of his position in the corporation, the responsibility and authority to prevent a corporate
violation of law, or to promptly correct a violation.
F. Dissent
1. The standard for conviction articulated by the majority is that of negligence that defendant had
a duty to maintain the sanitary quality of the food warehoused by the corporation and that, in
light of evidence that the food was in unsanitary conditions, the duty was breached and defendant
was criminally responsible. However, the instructions to the jury were much broader and
permitted a verdict of guilty upon a finding that defendant was responsible for the condition of
the food insomuch as he was the CEO of the corporation, while cautioning that that fact alone
did not require a finding of guilt. In the end, the instructions failed to counsel jurors with respect
to negligence, but instead left it to them to determine under what rationale defendant might be
responsible.
V. United States v. Jorgensen
A. General Holding/Rule

1. Where a corporation is guilty of a specific intent offense (e.g., fraud), that intent may be imputed
to the corporations officers in their individual capacities forat leastsuborning the criminal
conduct. Jorgensen.
B. Facts
1. Beef case. Raised their own cows until supply was too much, and then bought beef trim to mix in
with their meat (but did not disclose this and falsely advertised it as their pure brief).
2. Gregory Jorgensen knew about the mixing and gave the final order to purchase outside beef trim.
He told workers that this info was not to leave the plant.
C. Issue
1. Was there an intent to defraud?
D. Holding
1. Yes
E. Reasoning
1. The defendants believed the jury instructions should have said that a person is not responsible
for the acts performed by other people on behalf of a corporation, even if those persons are
officers, employees or other agents of the corporation.
2. The court says here that a corporate officer who is in a responsible relationship to an activity
within a company that violates provisions of federal food laws, such as meat misbranding, can
be held criminally responsible even if those persons are officers, employees or other agents of
the corporation.
F. Rule
1. A defendant can be held criminally responsible for the acts of other people who are officers,
employees or other agents of the company if the defendant is in a responsible relationship.
VI. United States v. Iverson
A. Facts
1. Defendant was a founder of CH2O, Inc., a company which blends chemicals to create numerous
products, including acid cleaners and heavy-duty alkaline compounds.
2. He personally discharged wastewater and ordered employees of CH20 to discharge the
wastewater in three places: (1) on the plants property (2) through a sewer drain at an apartment
complex that defendant owned, and (3) through a sewer drain at defendants home.
3. The District Court instructed the jury that it could find defendant liable under the CWA as a
responsible corporate officer if it found, beyond a reasonable doubt: (1) That defendant had
knowledge of the fact that pollutants were being discharged to the sewer system by employees,
(2) That defendant had the authority and capacity to prevent the discharge, and (3) that defendant
failed to prevent the on-going discharge of pollutants to the sewer system.
4. Defendant argues that the district court misinterpreted the scope of responsible corporate
officer liability.
B. Issue
1. Was the scope of responsible corporate officer liability misinterpreted by District Court?
C. Holding
1. No.
D. Reasoning
1. The question for the jury is whether the corporate officer had authority with respect to the
conditions that formed the basis of the alleged violations.

2. Under the CWA, a person is responsible corporate officer if the person has authority to
exercise control over the corporations activity that is causing the discharges. There is no
requirement that the officer in fact exercise such authority or that the corporation expressly vest a
duty in the officer to oversee the activity.

Conspiracy
Class 4: Plurality Requirement, Overt Act, and Knowing Participation
I.

18 U.S.C. 371. Conspiracy to Commit Offense or to Defraud United States


A. If two or more persons conspire either to commit any offense against the United States, or to
defraud the United States, or any agency thereof in any manner or for any purpose, and one or
more of such persons do any act to effect the object of the conspiracy, each shall be fined under
this title or imprisoned not more than 5 years, or both.
B. If, however, the offense, the commission of which is the object of the conspiracy, is a
misdemeanor only, the punishment for such conspiracy shall not exceed the maximum
punishment provided for such misdemeanor.
C. If two or more persons conspire, either to commit any offense against the United States or to
defraud the united states (it doesnt have to be one or the other, it can be both)...
D. Overt act doesnt have to be an illegal act, it just has to be an assent into the agreement
(conspiracy is an agreement).
E. Punishment is not more than five years (doesnt matter if one offense is more serious than
another, the maximum is five years). If the conspiracy is a misdemeanor, then the punishment
will not exceed the maximum amount for that misdemeanor.
F. Hearsay exception: can use a statement used by a conspirator against another. Its admissible.
The Plurality Requirement

I.

The theory of separately criminalizing conspiracy to commit a crime is that the creation of a
criminal group makes it more likely that crimes will be committed, and so the creation of that
group is itself a harm.
II.
Because conspiracy liability is predicated on a group danger rationale, a plurality of parties is
required. Thus, at least two actors must participate in the unlawful scheme.
III.
The government may prosecute only one member of the conspiracy, provided that the evidence
otherwise establishes a plurality of parties acting in concert.
IV. United States v. Stevens
A. General Holding/Rule
1. Where there is complete identity between a corporate officer and a corporation (i.e., he is the sole
officer and its his corporation), there is no conspiracy because theres only a single human actor.
Stevens. Makes sense: there must be two or more autonomous human minds for their to be a
conspiracy.

2. To establish that a conspiracy exists, the government must prove that a plurality of actors acted in
concert.
B. Facts
1. Stevens formed four separate corporations for the purpose of performing government contract
work. The corporations entered into a government contract with the U.S. Navy to build an
automated storage and retrieval system. The contract provided for periodic progress payments
from the Government as designated aspects of the project were completed.
2. Stevens misrepresented that certain work had been performed in sever requests for progress
payments.
3. The Jury focused on the issue concerning the alleged conspiracy between Stevens and his
corporations.
a) Can a person conspire with his own corporation, realizing that he is the primary (only) agent of
his own corporation?
b) Can we have a definition of conspiracy as it applies to a wholly owned corporation.
C. Issue
1. Can a person conspire with his own corporation, realizing that he is the primary (only) agent of
his own corporation?
2. Can we have a definition of conspiracy as it applies to a wholly owned corporation?
D. Holding
1. No
2. No
E. Reasoning
1. United States v. Hartley makes two important holdings:
a) A group of conspirators cannot escape conspiracy responsibility merely because they all act on
behalf of a corporation.
b) Liability for a conspiracy may be imputed to the corporation itself on a respondeat superior
theory.
2. In this case there is only one human actor, acting for himself and for the corporate entity which
he controls. The argument that a single human actor can be convicted of conspiracy under
Section 371 under the circumstances of this case flies in the face of the traditional justification of
criminal conspiracies.
3. This case lacks any interaction between multiple autonomous actors.
a) The threat posed to society by in a conspiracy charge arises from the creative interaction of two
autonomous minds. The societal threat is of a different quality when one human simply uses the
corporate mechanism to carry out his crime. The danger from agreement does not arise.
The Object Offense
I.

II.

Section 371 defines two categories of conspiracies that are distinguished by their criminal
objectives: (1) conspiracy to commit an offense against the United States (e.g. to violate a federal
criminal statute); and (2) conspiracy to defraud the United States in any manner or for any
purpose (e.g. to cheat or trick a government agency).
United States v. Arch Trading Co.

A. General Holding/Rule
1. The defraud clause: To conspire to defraud the United States means to cheat the government
out of property or money, but it also means to interfere with or obstruct one of its lawful
functions by deceit, craft or trickery, or at least by means that are dishonest. It is not
necessary that the government shall be subjected to property or pecuniary loss by the fraud,
but only that its legitimate official actions and purpose shall be defeated by misrepresentation,
chicane, or the overreaching of those charged with carrying out the governmental intention.
Hammerschmidt.
2. The offense and defraud clauses are not mutually exclusive and the government is not required to
choose only one theory on which to prosecute. In fact, even if the indictment only charges one
the government remains free to prosecute for the other. Arch Trading.
B. Facts
1. Arch Trading entered into a contract with Iraq to ship equipment purportedly for veterinary use.
2. In August, President Bush invoked the emergency powers provided to him by Congress, and
issued executive orders prohibiting US persons from traveling to Iraq and dealing with the
government of Iraq and its agents, in response to Iraq invading Kuwait.
3. Arch trading immediately attempted to enter Iraq to install the labroatory equipment that had
already been delivered. The Installation was accomplished.
4. Arch Trading was convicted of conspiracy to commit an offense against the US in violation of 18
USC 371; of disobeying the emergency executive orders, and of lying to the Department of
treasury's Office of Foreign Assets Control.
5. Arch Trading contends that (1) the indictment charging it with conspiracy to commit an offense
under Section 371 was defective because in the circumstances the company could only have been
charged with conspiracy to defraud.
C. Issue
1. Does this fall within Section 371?
D. Holding
1. Yes
E. Reasoning
1. When Congress provides criminal sanctions for violations of executive orders that it empowers
the President to issue, such violation constitutes an offense for the purposes of Section 371.
2. The two prongs of 371 are not mutually exclusive: To conspire to defraud the US means to cheat
the government out of property or money, but it also means to interfere with or obstruct one of its
lawful functions by deceit, craft or trickery, or at least by means that are dishonest. It is not
necessary that the government shall be subjected to property or pecuniary loss by the fraud.
Hammerschmidt v. United States.
3. Because of this overlap, given conduct may be proscribed by both of the section clauses. The fact
that a particular course of conduct is chargeable under one clause does not render it immune
from prosecution under the other.
III.
United States v. Licciardi (Mens Rea)
A. General Holding/Rule
1. Mere association is insufficient to prove participation in a conspiracy. The defendant must know
the conspiracy exists, must know its general scope and purpose, and must voluntarily join in the

2.

B.
1.
2.
C.
1.
D.
1.
E.
1.
2.

scheme. But knowledge alone is insufficient. The defendant must (1) intend to agree and (2)
must possess the mental state required to commit the object offense.
United States or an agency thereof is insufficient to warrant prosecution under 371 because it
isnt necessarily so that the conspirators intended to commit an offense against or defraud the
United States. Licciardi. This is especially so whenunder the offense clausethe underlying
offense is a low-level regulatory violation that carries less significant penalties. Note, however,
that the applicability of the defraud clause acts as a limit to this mens rea requirementif the
conspirators know that their conspiracy will result in false statements being made to the
government, even when done so unwittingly by third persons, then it might be fair to say that
there is a conspiracy [that defrauds] the United States. Id. (concurring opinion).
Facts
Licciardi and several wine growers hatched a scheme to misrepresent the variety and origin of
grapes they sold so they could charge prices that greatly exceeded the actual value of the grapes.
Licciardi argues that there was no evidence that he had an intention to defraud the United States
(the BATF).
Issue
Did the government prove that Licciardi had an intent to defraud the US by impairing the
functions of BATF?
Holdng
No
Reasoning
The incidental effects of Licciardis actions would have been to impiar the functions of the BATF
does not confer upon him the mens rea of accomplishing that object.
A regulatory scheme, which does not have criminal penalties attached to it, has been converted
by the governments theory into a system whose violation by commercial cheating is subject to
the severe felony penalties of the conspiracy law.
Vicarious Liability

I.
A.
1.

B.
1.

C.
1.

D.

Pinkerton v. United States


General Holding/Rule
All conspirators may be held vicariously liable for the overt acts of a co-conspirator done in
furtherance of that conspiracy, so long as they are still part of the conspiracy themselves.
Pinkerton. Note that the overt act need not be unlawful in and of itself, it just needs to
demonstrate that the wheel is in motion.
Facts
The Defendant challenged his conviction for substantive offenses pertaining to Internal Revenue
Code (IRC) violations on the ground that there was no evidence that he had participated in
anything other than the conspiracy to commit those offenses.
Issue
Are the substantive offenses of a conspirator, done in furtherance of the conspiracy, attributable
to his co-conspirators, even where the co-conspirator has not participated in the substantive
offense?
Holding

1. Yes. Affirmed.
2. There is no evidence that the Defendant took affirmative action to renounce his participation in
the conspiracy. Therefore, the conspiracy is continuous and covers the substantive offenses
committed by the co-conspirator alone.
E. Reasoning
1. Involvement in the conspiracy to commit a substantive offense is sufficient to impute liability of
the commission of the substantive offense by any one co-conspirator to all other co-conspirators.
The criminal intent to do the unlawful act is established in the formation of the conspiracy itself.
If the requisite overt act in a conspiracy can be accomplished by a single conspirator, the court
did not see why that act is not imputable to all co-conspirators for the purpose of holding them
responsible for the substantive offense.
2. The rule of the majority in this case is very straightforward. Simply put, the overt acts of one
conspirator, done in furtherance of the conspiracy, are imputable to co-conspirators,
notwithstanding the fact that they themselves may have taken no action, beyond entering into the
conspiracy, toward committing the substantive offense.
F. Dissent
1. The evidence only showed that, at some previous time, the Defendant had conspired with his
brother to commit the substantive offenses. This alone is not sufficient to hold the Defendant
criminally responsible for those offenses. By doing so, the majority creates a vicarious criminal
liability broader than the civil liability of a partner in a business who is liable for the acts done by
a co-partner.
Withdrawal and Termination
I.
II.

III.
A.
1.

B.
1.

Conspiracy is ordinarily a continuing offense. Its natural termination point is when the
conspiratorial objective is achieved or all of the conspirators have disavowed its purpose.
Individual members may terminate their own participation in an ongoing conspiracy by
withdrawing from it -- i.e., by taking affirmative steps to disassociate themselves from the
conspiracy and its criminal objectives.
United States v. Jimenez Recio
General Holding/Rule
A conspiracy does not end by virtue of the fact that the government has defeated its purpose by,
e.g., apprehending a conspirator and instructing him to continue acting in accordance with the
conspiracys design so as to apprehend the remaining conspirators. Jimenez Recio. Makes sense
because the harm of the conspiracy is the groupthink, which has not abated merely because one
was apprehended unbeknownst to the rest. The intent to commit a crime remained, ergo so did
conspiracy liability.
Facts
The police seized a large amount of drugs from a truck. The truck drivers cooperated with the
police and agreed to continue on to the trucks destination and meet Francisco Jimenez Recio and
Adrian Lopez-Meza (defendants) so they could pick up the drugs as planned. The truck drivers
did so and transferred the drugs the defendants, who were subsequently pulled over and arrested.

C.
1.
D.
1.
E.
1.
2.

The defendants were charged with conspiracy to possess and distribute drugs. A jury convicted
the defendants, the trial judge ordered a new trial, and the second jury convicted the defendants
as well. The United States Court of Appeals for the Ninth Circuit affirmed, holding that a
conspiracy terminates when the government intervenes, defeating the conspiracys objective. The
prosecution appealed.
Issue
Does the conspiracy terminate when the government intervenes?
Holding
No.
Reasoning
United States v. Cruz (Cruz Rule): A conspiracy terminates when there is affirmative evidence
of abandonment, withdrawal, disavowal or defeat of the object of the conspiracy.
A conspiracy does not automatically terminate simply because the Government, unbeknownst to
some of the conspirators, has defeated the conspiracy object.

Mail Fraud and Securities Fraud


Class 5: Schemes to Defraud, Intent to Defraud, Intangible Rights
I.

18 U.S.C. Section 1341: Mail Fraud Statute (Fraud and Swindles)


A. 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.
B. The gist of the offense is the use of the mails to further fraudulent activity.
C. Congress can forbid using the mails to execute a fraudulent scheme whether it can forbid the
scheme or not (e.g. even if congress lacks jurisdiction over a certain matter, it can use the fraud
statute to prevent fraud concerning that matter.
D. Whoever, having devised or intending to devise any scheme or artifice (1) to defraud; (2) or for
obtaining money or property by means of false or fraudulent pretenses, representation, or
promises; (3) or to sell, dispose of, loan, exchange, alter, give away, distribute, supply, or furnish
or procure for unlawful use any counterfeit or spurious coin, obligation, security, or other article,
or anything represented to be or intimated or held out to be such counterfeit or spurious article;
for the purpose of executing such scheme or artifice or attempting so to do, [uses the mails], shall
be fined under this title or imprisoned not more than 20 years, or both. [*numbers and
semicolons inserted for clarity; prolix description of uses the mails omitted*]
1. If the violation occurs in relation to . . . a presidentially declared major disaster or emergency . . .
, or affects a financial institution, such person shall not be fined more than $1,000,000 or
imprisoned not more than 30 years, or both.
2. Note that (de)fraud is not defineddefining it would simply reward the ingenuity of
sophisticated criminals.
II.
18 U.S.C. Section 1343: Wire Fraud Statute
A. Patterned after the mail fraud statute.

B. Because both statutes are in pari materia (of the same subject matter), they are subject to the rule
that they should be given parallel construction. Thus, principles developed in the mail fraud
cases apply with equal force to wire fraud prosecutions, and vice versa.
C. Whoever, having devised or intending to devise any scheme or artifice (1) to defraud; (2) or for
obtaining money or property by means of false or fraudulent pretenses, representations, or
promises; [uses the wires] for the purpose of executing such scheme, shall be fined under this
title or imprisoned not more than 20 years, or both. [*numbers and semicolons inserted for
clarity; prolix description of uses the wires omitted*]
1. [ditto up to $1M and 30 years if major disaster/emergency or financial institution].
Schemes to Defraud
III.
A.
1.

B.
1.

2.

a)

b)
3.
a)

b)
C.
1.
a)

United States v. Hawkey (intent to defraud)


General Rule/Holding
No requirement of actual financial loss. Hawkey. Persons have an intangible right not to be
deceived as to what their monies will be put towards; in effect, advertisement that monies will go
to charities makes that part of the consideration for which something is purchased. The
premise of charitable events is generally that overpriced admission is justified by the ultimate use
of the monies.
Facts
Hawkey was a sheriff in Minnehaha County, SD, and was charged in a forty-one count
indictment for misusing funds belonging to the Minnehaha Sheriffs department (MSD) and The
county Sheriff and Deputies Association (MCSDA). A jury convicted him on all but two counts.
On behalf of MSD and MCSDA, Hawkey entered into an agreement with Wildwood Productions
(a benefit promoter) to conduct annual benefit concerts each April. Proceeds were to go to aid
local youth programs.
The promoters solicited money through telemarketing from individuals and businesses in SD and
neighboring states for ticket purchases, donations, and/or advertising space purchases (which
would be included in the concert program book).
By mail, wildwood sent invoices to those who agreed to purchase tickets or ads, and those
individuals and business also sent their checks to MSD or MCSDA via US mail.
Commingling of personal/concert funds
Hawkey began using the concert accounts for a variety of personal and business expenses. He
made some contributions to youth programs and charities, but he also spent a significant portion
of the benefit concert proceeds for personal items. He also made deposits of business and
personal funds to the concert account to replace depleted funds.
Defendant (Hawkey) argues that there was no property loss and no intent to defraud.
Holding/Reasoning
Government must prove, under Section 1341, (1) the existence of a scheme to defraud, and (2)
the use of the mails for purposes of executing the scheme.
The fraud need not be fraudulent on its face, but must involve some sort of fraudulent
misrepresentations or omissions reasonably calculated to deceive persons of ordinary prudence
and comprehension.

2. Defendant argues that because the businesses received their ads in the program, and they were
able to attend the concert, that they were not deprived of money or property because they
received what they paid for.
a) Court disagrees. Court says that the businesses and concert-goers intended that part of their
payment be sent as contribution to a charitable organization.
3. Defendant also argues that there is insufficient evidence of a scheme to defraud because he did
not control the telemarketers solicitations, and the telemarketers did not represent to consumers
that all of the concert proceeds would go to charity.
a) Court rules that a reasonable jury could have found that Hawkey intentionally engaged in a
scheme by which money intended and solicited for charitable purposes was diverted from its
designated charitable purpose to his personal benefit through false representations.
IV. Difference between Fraud and False Pretenses
A. False Pretenses
1. Committed when the actor, intending to defraud knowingly makes a false representation of a past
or present fact to induce another to part with title to property.
2. Promises made as to the future do not qualify under most false pretense statutes.
3. False promises also dont fall within the category of false pretenses, even though the promisor
may be viewed as misrepresenting a fact.
4. False pretenses is fraught with technicalities.
B. Fraud
1. Fluid concept: courts have been unwilling to confine the term to a single, definite meaning.
2. Fraud consists of an effort to gain an undue advantage or to bring about some harm through
misrepresentations or breach of duty.
V. Materiality
A. Although mail and wire fraud statutes contain no express materiality requirements, courts have
traditionally assumed that false or fraudulent representations must be material.
B. This is because courts infer that congress meant to incorporate the established meaning of those
terms.
C. Restatement (second) of torts: A statement is material if
1. A reasonable man would attach importance to its existence or nonexistence in determining his
choice of action in the transaction in question; or
2. The maker of the representation knows or has reason to know that its recipient regards or is
likely to regard the matter as important in determining his choice of action, although a reasonable
man would not so regard it.
VI. Lustiger v. United States
A. General Holding/Rule
1. Though discrete averments may be true or at the very least not lies (i.e., half-truths) in a
vacuum, they may be used with the intent to deceive/defraud and therefore run afoul of the mail
fraud statute (when mailed). Lustiger.
B. Facts
1. Lustiger formed the Lake Mead Land and Water Co. which bought or acquired options to buy
approximately 64 sections of land in Mohave County, Arizona. The company then subdivided the
sections and offered them for sale to the public, calling the subdivision Lake Mead City.

2. Between September 1960 to May 1962, the company advertised the land in news papers and
other publications across the country. Individuals who responded received an Investors Kit
that contained a 32-page color brochure (which formed the basis for Lustigers mail fraud
indictment).
3. The Brochure
a) The brochure contained numerous statements describing the asserted advantages of Lake Mead
City, including photographs purporting to depict scenes in the area. By March, three thousand
lots were sold.
b) Charges against Lustiger state that advertising materials contained misleading deceptive, false
and fraudulent pretenses, representations and promises concerning the property. These
paragraphs further charge that these alleged misleading, deceptive, false, and fraudulent
pretenses were part of a scheme by Lustiger to defraud land purchasers...
c) One of the misleadings was as it relates to the availability of water. The brochure contained
photographs which depict water scenes on or around Lake Mead.
(1) The favorite swimming hole
4. Defendant argues that the courts presumptive finding that the representations were misleading,
deceptive and false was not supported by the requisite degree of proof.
a) Court says that the statements, photographs, and maps unaccompanied by true statements
concerning the lack of available water, could reasonably have lead a person of average
intelligence and experience to believe that all parcels offered for sale had reasonable access to a
water supply. While the statements in the advertising materials may not have been literally false,
taken as a whole, they were fraudulently misleading and deceptive.
C. Holding
1. If a scheme is devised with the intent to defraud, and the mails are used in executing the scheme,
the fact that there is no misrepresentation of a single existing fact is immaterial.
a) It is only necessary to prove that it is a scheme reasonably calculated to deceive, and that the
mail service of the US was used and intended to be used in the execution of the scheme.
2. Deceitful statements of half truths or the concealment of material facts is actual fraud violative of
the mail fraud statute.
3. Only a few buyers saw the property before signing a purchase contract, and they relied almost
entirely on the advertising materials in making their purchase.
Protected Interests
VII.

United States v. George (Intangible Rights Theory)


A. General Holding/Rule
1. Even where there is literally no loss, a deprivation of honest services amounts to fraud. George.
E.g., a purchasing agent purchases goods at an objectively fair an uninflated price but receives
kickbacks for assurances of future purchaseseven where it is impossible for him to do so
unilaterallythere has been a fraud because the employees impartiality in performing his
functions has been bought, depriving the employer of the service theyre paying him for. See

2.

B.
1.

2.
a)
3.
a)

4.

5.

6.

a)
7.

8.

C.
1.

D.
1.

also 18 U.S.C. 1346 (defining scheme or artifice to fraud to include deprivations of the
intangible right of honest services).
The mail fraud statute is limited in scope to the protection of private property rights. McNally.
Congress enacted 1346 one year after McNally to ensure the intangible right of honest services
remained covered by the statute.
Facts
Three defendants: Greensphan, George, and Yonan. Greensphan, who was a cabinet supplier and
owner of Accurate Box Corporation, paid Yonan, Zeniths purchasing agent, kickbacks to ensure
that Zenith would continue to purchase Greensphans cabinets.
Yonan was in charge of negotiating with cabinet vendors:
His responsibility was to send out the blueprints and gather quotes, and where the prices were
too high, to try to negotiate it down to a proper level.
Yonan was given responsibility for finding a supplier of cainets for Zentihs newly conceived
Circle of Sound product.
Greensphan, owner of Accurate Box, was the sole bidder on the supplier of these cabinets.
Theirfore Yonans supervisor thought accurates prices to be fair and reasonable, but was unsure
if it was competitive in the absence of other bidders.
Greensphan agreed to pay Yonan $1 per cabinet kickback on the model 565 Circle of Sound unit
and later per cabinet kickbacks on other models because he was afraid he was otherwise going to
lose Zeniths business.
When Greensphan asked Yonan how the kickbacks were to be paid, Greensphan was told to pay
A & G woodworking Co.s commission invoices (through George). Greensphan never related
these events to anyone at Zenith.
In December 1967, Accurate received commission invoices from Georges A & G Woodworking
Co. even though neither George nor A&G provided any services to Accurate. Accurate paid these
invoices on the basis of a commission per unit on the types of models it shipped to Zenith.
Greensphan also gave George a $3,000 accurate check payable to himself, which he cashed and
gave to George because he was fearful of losing Zeniths business.
Government believed that the kickbacks to Yonan were accomplished by Greensphans payment
of Georges companys ficticious commission invoices, with George then acting as a kickback
conduit to Yonan.
Zenith had a conflict-of-interest policy providing that no gratuities of any nature were to be
bestowed on its Purchasing Department employees by suppliers. Apparently Greensphan knew
about this because he received the letters that were sent out to the suppliers.
Issue
The statute requires the existence of a scheme to perpetrate this fraud, and the question of
evidentiary sufficiency boils down to whether the Government has proven that the
defendants contemplated that Zenith suffer the loss of Yonans honest and loyal services.
Holding/Reasoning
Defendant argued that there was no fraud because (1) the kickbacks were never shown to come
out of Zeniths pockets, as opposed to Greensphans, (2) because Yonan was never shown to
provide or secure any special services for Greensphan and his company, and (3) because Zenith
was never shown to be dissatisfied with Accurates cabinets or prices.

2. Court rules that it is unnecessary for the government to prove that anyone actually be defrauded.
3. Not every breach of fiduciary duty (where an agent secretly profits from his agency) is criminal
fraud. However Yonans duty was to negotiate the best price possible for Zenith or at least to
inform Zenith that Greensphan was willing to sell his cabinets for substantially less money. Not
only did Yonan secretly earn a profit from his agency, but also he deprived Zenith of material
knowledge that Greensphan would accept less profit.
4. Yonans fraud: Yonans holding himself out to be a loyal employee, acting in Zeniths best
interests, but actually not giving his honest and faithful services, to Zeniths detriment (G would
have accepted less profit).
5. Court rules that the critical element is fraudulent intent, and there undoubtedly evidence of a
scheme. Court concludes that there is sufficient evidence to find that each defendant had the
intent to defraud Zenith of Yonans loyalty and honesty.
VIII.
Carpenter v. United States (Money or Property Requirement)
A. General Holding/Rule
1. Deprivation of an intangible property right is also sufficient for 1341. Carpenter. E.g.,
divulging the contents of not-yet-published materials to others is a violation of the materials
owners property right in them, as the owner has an interest in their confidentiality prepublication. It doesnt matter how minute the discrete loss in business may be.
2. The mail fraud statute is limited in scope to the protection of private property rights. McNally.
Congress enacted 1346 one year after McNally to ensure the intangible right of honest services
remained covered by the statute.
B. Facts
1. Winans became a reporter for the WSJ, and then became one of two writers of a daily column
Heard on the Street
2. Heard on the street discussed selected stocks or group of stocks, giving positive and negative
information about those stocks and taking a point of view with respect to investment in the
stocks and its reviews.
a) Winans regularly interviewed corporate executives to put together perspectives on stocks that
would be highlighted in upcoming columns, but for the columns at issue here, none contained
corporate inside information.
3. The District Court found that the heard column does have an impact on the market, and
affected the rice of the stocks which it examined.
4. The policy of the journal was to not to share information before the column was published; it
was considered confidential. However, Winans entered into a scheme with Brant and Felis, both
a part of Kidder Peabody brokerage, to give them advance info as to the timing and contents of
the heard column. They, and one more conspirator named david clark, bought or sold stock
based on the probable impact of the column on the market. The profits were to be shared.
5. Over a four month period, the brokers used information given by Winans on about 27 heard
columns, and the net profits from these trades were about $690,000.
6. In November 1983, correlations between the heard articles and trading in the Clark and Felis
accounts were noted, and inquiries began. Soon, the SEC began an investigation. At first all
parties denied the allegations, but after a quarrel, Winans and Carpenter went to the SEC and

C.
1.

2.

3.
D.
1.

2.

3.

4.

5.
a)
b)

c)
6.

IX.
A.
1.

revealed the entire scheme. Brant plead guilty under a plea agreement and became a witness for
the government.
Issue
Defendants assert that (1) their activities were not a scheme to defraud the Journal within the
meanings of the mail and wire fraud statutes, and (2) They did not obtain any money or property
from the Journal, which is a necessary element of the crime under a prior case in McNally v.
United States. The confidential info was intangible property outside the reach of section 1341.
In Mcnally, the court held that the mail fraud statute does not reach schemes to defraud citizens
of their intangible rights to honest and impartial government, and that the statute is limited in
scope to the protection of property rights. Defendants argue, therefore, that the journals
prepublication confidentiality for the column was no more than intangible consideration outside
the reach of section 1341, and that the law protect against injury to reputation.
Defendants also argued that Winans conduct was a violation of workplace rules, and not
fraudulent activity that is proscribed by the mail fraud statute.
Holding
Court says this case is not like Mcnally. Confidential business information has long been
recognized as property. And the Journal had the property right in keeping confidential and
making exclusive use, prior to publication, of the schedule and contents of the Heard columns.
The Journal, as Winans employer, was defrauded of much more than its contractual right to his
honest and faithful service, an interest to ethereal in itself to fall within the protection of the mail
fraud statute.
Here, the object of the scheme was to take the Journals confidential business information, the
publication schedule and contents of the heard column, and its intangible nature does not make it
any less property protected by the mail and wire fraud statues.
The court says that there neednt be shown a monetary loss to the journal, and that it is sufficient
that the Journal has been deprived of its right to exclusive use of the information, because
exclusivity is an important aspect of confidential business information and most private property.
Court deny defendants second argument
Sections 1341 and 1343 reach any scheme to deprive another of money or property by means of
false or fraudulent pretenses, representations or promises.
The term to defraud has an understanding of wrongdoing one in his property rights by
dishonest methods or schemes, and usually signify the deprivation of something for value by
trick and deceit.
Court says, here, that Winans had a fiduciary relationship with the Journal to keep the special
knowledge free from exploitation from his own personal benefit, or any one elses benefits.
Court says that this does fall under mail and wire fraud statues because the journals business
information that it intended to be kept confidential was its property; the declaration to that effect
in the employee manual merely removed any doubts on that score and made the finding of
specific intent to defraud that much easier.
Cleveland v. United States
General Holding/Rule
In order to reach the level of fraud contemplated by the statutes, the object of the fraud must be
property in the victims hands. Cleveland. Falsifying a license application does not reach the

level of mail fraud because a license is not property of the licensor, even though it may be to the
licensee and money may be made with that license. The purpose of the licensing scheme was
regulatory and not economic.
B. Facts
1. Louisiana law allows certain business to operate video poker machines. However, the
prospective owners would have to apply for a license from the state.
2. The license must meet suitability requirements designed to ensure that licensees have good
character and fiscal integrity.
3. Gred Goodson and his family formed a limited partnership, Truch Stop Gaming (TSG), in order
to participate in the video poker business at their truck stop in Slidell Louisiana.
4. Cleveland was a New Orleans attorney who assisted Goodson in preparing TSGs application for
a video poker license.
5. The application required TSG to identify its partners and to submit financial statements for all
partners. It also required TSG to affirm that the listed partners were the sole beneficial owners of
the business and no partner held an interest in the partnership merely as an agent or nominee, or
intended to transfer the interest in the future.
6. Goodson put his two adult children as the sole beneficial owners of the partnership. The
application also showed that Goodson and Clevelands law firm had loaned the children all initial
capital for the partnership and that Goodson was TSGs general manager.
7. They received the license and renewed it for three years.
8. In 1996 FBI investigated Goodson and Cleveland for scheming to bribe state legislatures to vote
in a favorable manner toward the video poker industry.
9. In terms of the mail fraud, the indictment alleged that Cleveland and Goodson violated Section
1341 by fraudulently concealing that they were the true owners of TSG in the initial license
application and three renewal applications mailed to the State.
10. Apparently they concealed their ownership interests, according to the Government, because they
had tax and financial problems that could have undermined their suitability to receive the license.
11. Defendants arguments
a) Cleveland moved to dismiss the mail fraud counts on the ground that the alleged fraud did not
deprive the state of property under 1341.
b) On appeal Cleveland moved to dismiss again by arguing that LA had no property interest in
video poker licenses, relying on several court of appeals decisions holding that the government
does not relinquish property for purposes of 1341 when it issues a permit or license. Court of
appeals still affirmed conviction bound by US v. Salvatore, which held that Louisiana video
poker licenses constitute property in the hands of the State.
C. Issue
1. Whether false statements made in an application for a state license fall within the federal mail
fraud statute (1341).
D. Holding
1. According to McNally and Congress, section 1341 can be used to protect property rights and the
intangible right of honest services.
2. Court says that The licensing application and scheme is not an intangible right of honest services.
The question is whether the government regulator parts with property when it issues a license.

3. Court holds that 1341 does not reach fraud in obtaining a state or municipal license of the kind
here involved, for such a license is not property in the government regulators hands.
E. Reasoning
1. The statute establishes a typical regulatory program. It licenses, subject to certain conditions,
engagement in pursuits that private actors may not undertake without official authorization. It
resembles other licensing schemes long characterized by the Court as exercise of state police
powers.
2. State provided two reasons to why theres a proprietary interest:
a) The state receives a substantial sum of money in exchange for each license and continues to
receive payments from the license as long as it remains in effect.
b) The state has significant control over the issuance, renewal, suspension, and revocation of
licenses.
3. Court responds by saying that it cant be property because the state receives all that money not
while the licenses remain in its own hands, but only after they have been issued to licensees.
4. If they said states have a property interest in this license, they could say the state has a property
interest in any license which are purely regulatory and not economic.
5. Government also doesnt allege that Cleveland defrauded the State of any money to which it was
entitled by law. The government responds by saying that Cleveland frustrated the States right to
control the issuance, renewal, and revocation of video poker licenses: The right to chose the
persons to whom it issues video poker licenses
a) Court says these intangible rights of allocation, exclusion, and control amount to no more than
Louisianas sovereign power to regulate.
X. Pasquantino v. United States
A. General Holding/Rule
1. A plot to defraud a foreign government of tax revenue is covered by the fraud statutes because
tax revenue is property. Pasquantino. The difference between this case and Cleveland lies in the
object of the fraudhere, the whole point of the fraud was not paying taxes, which is plainly
economic; in Cleveland, though the defendants motives were economic, the only thing lost to
the government was its ability to safely rely on the information contained in an application for
the license. Ginsburg dissents on the premise that our fraud statutes shouldnt reach extrajurisdictional victims (i.e., foreign governments).
B. Facts
1. Smuggling in liquor to Canada to avoid the large tax at the border.
C. Wire Fraud Issue
1. Two elements
a) The defendant engage in a scheme or artifice to defraud
b) The object of the fraud be money or property in the victims hands
2. Court says for the latter, the property was the tax that was owed to Canada. The object of the
scheme was to deprive Canada of money legally due, and their scheme thereby had as its object
the deprivation of Canadas property.
3. For the first element, government says that this was a scheme because the evidence showed that
petitioners routinely concealed imported liquor from Canadian officials and failed to declare
those goods on customs forms. This was a scheme designed to defraud by representations.

D. Dissent
1. The court has ascribed an exorbitant scope to the wire fraud statute, in disregard of our repeated
recognition that congress legislates the backdrop of the presumption against extraterritoriality
2. Defendants can be extradited to stand trial in Canada; those courts are in the best position to
decide whether, and to what extent, the defendants have defrauded the governments of Canada
and Ontario.

Class #6: Fraud- Honest services, use of the mails


Honest Services Theory
-

The enactment of 18 U.S.C 1346


Provides that for the purposes of the mail, wire, and bank fraud statutes, the term scheme or
artifice to defraud includes a scheme or artifice to deprive another of the intangible rights of
honest services
Congress did not define honest services so this caused conflicting interpretations
Skilling v United States
Facts:
Skilling, former CEO of Enron, was indicted for engaging in a wide-ranging scheme to deceive
the investing public about the true performance of Enrons business by manipulating publicly
reported financial results and making public statements that were false and misleading
Skilling was alleged to have sought to deprive Enron and its shareholders of the intangible right
of honest services by engaging in this scheme
A jury found him guilty of 19 counts, including the honest services fraud conspiracy charge, and
Skilling appealed arguing that he was denied a fair trial due to his pre-trial publicity and that the
government applied an incorrect honest services theory to his case, and if not, then the
governments theory rendered 1346 unconstitutionally vague.
Issue:
Is 1346 unconstitutionally vague and did Skillings conduct fall within the statutes compass?
Holding:
In order to avoid vagueness concerns, the Court held that 1346 criminalized only schemes to
defraud involving bribery or kickbacks, which were the core applications of the honestservices doctrine that predated the statute.
Because defendant was not alleged to have solicited or accepted side payments from a third party
in exchange for making the alleged misrepresentations, he did not commit honest services fraud.
Whether the error was harmless or whether it affected any of defendant's other convictions was a
matter for remand.
Use of the Mails
Even though the use of the mails is the heart of 1341, the mailings do not need to be central to
the scheme to defraud. Use of the mails need only be incidental to an essential part of the
scheme

Schmuck v United States


Facts:
Schmuck, a used-car distributor, was indicted on 12 counts of mail fraud, in violation of 1341.
He purchased used cars, rolled back their odometers, and sold the cars to retail dealers for prices
artificially inflated because of the low-mileage readings.
To complete the resale, the dealers who purchased from Schmuck would submit a titleapplication to the Wisconsin Department of Transportation on behalf of the customers. The
receipt of a Wisconsin title was a prereq for completing the sale, otherwise the dealer could not
transfer the title to the customer and the customer couldnt obtain Wisconsin tags.
Issue:
Does 1341 reach Schmucks scheme?
Holding:
Yes. The use of the mails need not be an essential element of the scheme.
Further, his scheme was an ongoing fraudulent venture that depended upon his continuous
harmonious relations and a good reputation with the retail dealers.
The title-registration mailings were part of the execution of the scheme since the scheme would
have failed if the dealers either lost faith in Schmuck or were not able to resell the cars they got
from him. These resales and Schmucks relationship with the dealers naturally depended on the
passage of title.
United States v Sampson
Defendants were convicted of mail fraud for making representations about business services they
would supply, collecting advance fees from customers, mailing lulling letters to the customers,
and then making no effort to perform the services. The assurances in the letters were part of the
scheme b/c they lulled the victims into a sense of complacency that allowed the Defendants to
obtain money from other victims.
The letters were found to be for the purpose of executing a scheme within the meaning of the
mail fraud statute.
Computer Fraud

18 U.S.C 1030
defines 7 categories of crimes that targets harms resulting from accessing protected computers
without authorization or in excess of ones authorization

United States v Middleton


Facts:
Defendant, disgruntled ex-employee, sabotaged his former employers computer system and was
held liable for computer fraud under 1030(a)(5)(A).
After quitting, Defendant logged onto the companys computer system and changed all the
administrative passwords, deleted the entire billing system, and deleted two internal databases.
Companys president and two other employees spent a lot of time to repair the damage.

Defendant argues that the jury instructions on the damage element of the offense were
incorrect
Issue:
Does 1030s language of one or more individuals apply to corporations and what sort of
damage does 1030 include?
Holding:
The statute covers damage to one or more individuals, which includes corporations. Nothing in
the statute or legislative history shows that Congress wanted to exclude corporations from the
statute.
In the calculation of damages, its okay to consider what measures were reasonably necessary to
restore and resecure the data, program, system, or info that was damaged. The court looked at
direct expenditures (e.g., new software) as well as the value of the time of the employees who
had to work on fixing the damage.

United States v Czubinski


Facts:
The Defendant was employed as a contact service representative with the Boston office of the
IRS. In his official duties, the Defendant would routinely answer taxpayer questions over the
telephone. To perform those duties, the Defendant had access to the IRS computer database
known as IDRS. That database contained personal income tax information regarding virtually
every taxpayer.
In 1992, the Defendant carried out numerous unauthorized searches of IDRS files. A
government witness testified that the Defendant had told him at a social gathering that the
Defendant intended to use the personal information obtained to build a database regarding local
KKK members. The Defendant did not perform any unauthorized searches of the IDRS system
after 1992. He was employed by the agency until his indictment in June of 1995.
Issue:
Can the Defendants jury convictions on charges of wire and computer fraud stand?
Holding:
The jury convictions on counts of wire and computer fraud cannot stand.
The government failed to prove beyond a reasonable doubt that the Defendant willfully
participated in a scheme to defraud within the meaning of the wire fraud statute. Without
evidence that the Defendant used or intended to use the taxpayer information, beyond mere
browsing, an intent to deprive cannot be proven and, as a result, a scheme to defraud is not
shown. Further, although the Defendant clearly committed wrongdoing, his conviction cannot
stand because his conduct did not deprive the public of its rights to the employees honest
services.
The Defendant also did not violate the Act because his searches of taxpayer return information
did not satisfy the statutory requirement that he obtain anything of value.
D was not held liable for computer fraud under 1030(a)(4) b/c the prosecution couldnt prove
that he intended to defraud or that he obtained something of value when he performed

unauthorized searches in the IRS database. Note that the unless clause in 1030(a)(4) is meant
to distinguish computer fraud from computer trespass.
Class #7: Securities Fraud
Willfullness
Violations of the Securities Exchange Act constitute crimes only if they are committed
willfully.

United States v Tarallo


Facts:
Tarallo and co-defendants devised a fraudulent telemarketing scheme through which they
solicited investments in 3 fictitious businesses
Defendants falsely represented to potential investors that their business operated weight loss
clinics around the country and had a 1997 projected revenue of $8.2 billion.
Defendant and co-defendants made several false statements and representations about the
revenues and used the funds they received for the benefit of themselves.
Defendant argues there is insufficient evidence that he knew that the statements he made were
false and that the jury instructions as to willfullness were incorrect.
Issue:
Did the lower court err in equating knowingly with willingly?
Holding:
Yes, but the error was harmless since the court required the jury to find that the Defendant
undertook acts that he knew at the time to be wrongful, meeting the standard for defining
willingly for the court
the lower court equated willfully with knowingly but the definition the court provided satisfied
the statutory definition for willingly.
Willfully does not require that a person knows specifically that the conduct was unlawful, just
that he knew the conduct was wrongful at the time. Here, Defendant knew his statements were
false and undertook acts that he knew was wrongful at the time.

Insider Trading
-

Insider Trading
prosecuted under the general antifraud provision, 10b of the Securities Exchange Act and SEC
rule 10b-5
Securities Exchange Act 10b:
prohibits use of manipulative or deceptive devices in connection with the purchase or sale of
securities in violation of SEC rules and regulations
SEC Rule 10b-5:
cannot employ a device, scheme, or artifice to defraud,

to make any untrue statement of a material fact or omit any such fact necessary to make the
statement not misleading; or
engage in a transaction, practice or course of business that would operate as a fraud or deceit

Classical Theory:
Chiarella v United States
Facts:
Petitioner worked for a financial printing company, Pandick Press, as a markup man. Petitioner
handled documents announcing corporate takeover bids. The names of the acquiring and
takeover corporations were disguised, but Petitioner was able to deduce the companies by other
information on the documents. Petitioner purchased stock in the target companies and sold the
shares immediately after the takeover attempts were announced to the public, making $30,000 in
profit over a 14 month period.
In May 1977, Petitioner entered into a consent decree with the Securities Exchange Commission
(SEC) to return his profits to the sellers of the shares. In January 1978, he was indicted and later
convicted on 17 counts of violating Section: 10b and SEC Rule 10b-5.
Issue:
Did defendant violate section 10b by failing to disclose the impending takeover before trading in
the target companys securities?
Holding:
No. Silence does not amount to fraud under Section:10(b) if there is not a duty to disclose based
on a confidential relationship between the transacting parties.
There could be no fraud absent a duty to speak. Here, defendant was not an agent or fiduciary or
a person in whom the sellers place their trust and confidence in. He was not a corporate insider
and did not have a duty to disclose by merely having possession of nonpublic market
information.
Misappropriation Theory:
United States v OHagan
Facts:
Respondent was a partner in a law firm, Dorsey & Whitney, which was representing a company
that was potentially tendering an offer for common stock of the Pillsbury Company.
Respondent was not personally involved in the representation, but he was aware of the
transaction enough to know that if he purchased Pillsbury securities now that they would
increase in value once the offer went through. Respondent was going to use the profits from this
transaction to replace money that he embezzled from the firm and its clients.

After the offer went through, he made a $4.3 million profit. The SEC investigated Respondents
transactions and claimed he violated Section:10(b) and Section:14(e) for misappropriating
confidential information.
Issue:
whether Respondent violated Section:10(b) and Rule 10b-5 when he misappropriated nonpublic
information to personally benefit through the trading of securities.
Holding:
Respondent did violate Section:10(b) and Rule 10b-5 because all of the element of the rule were
met. Respondent did use deceit in connection with the purchase of securities. He did not disclose
to the firm or the client that he was using the nonpublic information, and his use of it was at the
expense of the client. He did not necessarily have to deceive the seller in order to violate the
Rule. As a matter of public policy, it would not make sense to limit the scope of the Act to only
prohibit certain kinds of activities that endanger a fair market.
D committed fraud in connection with a securities transaction, and thereby violated 10b and
Rule 10b-5, when he misappropriated confidential info for securities trading purposes, in breach
of a duty owed to the source of the info, his employer. The fraud was consummated when,
without disclosure to his firm, he used the info to trade.

Classical Theory vs Misappropriation Theory


Classical theory targets insiders breach of duty to shareholders w/ whom he/she acts.
Misappropriation theory: designed to protect markets against outsiders to a corporation who
have access to confidential info, but who owe no fiduciary or other duty to share

Tipper/Tippee Theory
Dirks v Securities and Exchange Commission
Facts:
Dirks worked at a broker-dealer firm that specialized in providing investment analysis of
insurance company securities to investors. Dirks received info from an insider that Equity
Funding of America was vastly overstated as a result of fraudulent corporate practices.
Dirks investigated the allegation and interviewed other employees who corroborated the
fraudulent allegations.
He contacted a bureau chief at The Wall Street Journal and offered his findings for the purpose of
exposing the fraud. The bureau chief, fearing a libel suit, declined to pursue it. During this time,
Dirks told investors and clients about the fraud, and they reacted by selling their stake in the
company. When the stock was being heavily traded and dipped from $26 to $15, the New York
Stock Exchange halted trading and the Securities and Exchange Commission, investigated and
found fraud. Respondents then filed suit against Dirks for violations of Section:10(b) of the
Securities and Exchange Act of 1934 for using the insider information and perhaps receive
commissions from those clients. The trial court and appellate court agreed with Respondent,
reasoning that anytime a tippee knowingly has inside information that they should publicly
disclose it or refrain from acting upon it.

Issue:
whether Dirks violated Section:10(b) when he disclosed material nonpublic information to
clients and investors.
Holding:
The United States Supreme Court held that Section:10(b) should not be read so broadly as to
hold tippees liable when they use inside information received by insiders who were not
breaching their fiduciary duties in their disclosure. The Court held that the insider must first
breach a fiduciary duty and then the tippees conduct will be examined to see if they breached a
duty.
A tippee is only liable if (1) tipper had duty (& economic motive for disclosing) (2) tipper has
breached a duty, and (3) tippee knows or should have known that the tipper passed the info on to
him improperly.

False Statements, Perjury, False Declarations

Class #8: False Statements


18 U.S.C 1001
punishes making or using a false statement in any matter within the jurisdiction of any
department or agency of the United States
does not contain an oath requirement; instead it punishes unsworn falsifications relating to any
matter within the jurisdiction of a federal department or agency
purpose is to prevent the use of fraud or trickery to subvert governmental processes
prosecutions under 1001 typically involve using false information:
(1) to obtain a monetary or proprietary benefit
(2) to obtain a privilege from the government
(3) to resist monetary claims by the government
(4) to frustrate a lawful regulation
United States v Rodgers
Facts:
Rodgers was charged with making false, fictitious statements to the FBI and Secret Service, in
violation of 18 USC 1001
Rodgers allegedly lied in telling the FBI that his wife had been kidnapped and in telling the
Secret Service that his wife was involved in a plot to kill the President
Rodgers confessed that he made those false reports to induce the federal agencies to locate his
wife, who ran away to get away from him.
Rodgers moved to dismiss the charges, arguing that the agencies did not have jurisdiction under
1001
Issue:
what are the jurisdictional limitations of 1001
Holding:
Court makes a broad interpretation of term jurisdiction.

1001 expressly states false statements made in any matter within the jurisdiction of any
department or agency of the United States
a criminal investigation falls within any matter and the FBI and Secret Service qualify as any
department or agency
Jurisdiction was established by the FBIs authority to investigate since the FBI is authorized to
detect and prosecute crimes, under federal statute. and the Secret Service is authorized to protect
the president

United States v Wright


Facts:
Wright was the manager of a water treatment plant. Part of his job duties were to prepare and file
operating reports with the Sequoyah County Health Department containing data on the turbidity
of the water at his plant
Wright gave reports that were false about the turbidity of water samples, when actually there
were no samples taken or analyzed.
These reports were required by the EPA and the regulations required daily monitoring of
turbidity and submission to the state of monthly reports of the daily values.
Wright was indicted for 7 counts of violating 1001 by making false statements in a matter
within the jurisdiction of the EPA
Issue:
Do the false reports fall within the jurisdiction of the EPA?
Holding:
Yes. the false statements need not be made directly to the federal agency to be within its
jurisdiction
Wright was trying to argue that he submitted the reports to the state, not the EPA so there was no
direct relationship btwn the false writing and the federal agency
Court says the data was within the jurisdiction of the EPA and the EPA has the authority to
regulate water levels and has the authority to discharge its duty to enforce its regulations. The
EPA is actively involved in ensuring state compliance with the water standards and its a mission
of the agency
United States v Steiner Plastics Manufacturing
Facts:
the defendant corporation produced plexiglass cockpit canopies for Grumman Aircraft, which
was producing jet planes for the Navy.
The contract provided that all canopies produced by Steiner would be subject to inspection by
Grumman and the Navy
Steiner engaged in a scheme where it switched inspection approval stamps so that their defective
canopies would pass inspection.
Steiner argues that there was no violation of 1001 since the switching of the approval stamps
was not a matter within the jurisdiction of any department or agency of the United States
Issue:

Was the conduct within the jurisdiction of a department or agency of the US?
Holding:
Yes. the subcontract clearly stated that the canopies would be subject to inspection by the Navy
and the canopies were shipped directly to the Navy
the scheme was intended to deceive both Grumman and the Navy and thus is within the
jurisdiction of an agency of the US within the meaning of 1001

United States v McNeil


Facts:
McNeil was indicted on one count of possessing false documents and he requested that the court
appoint counsel to represent him and submitted a CJA-23 financial affidavit to support his
request
the form requires the defendant to list his assets to determine if he qualifies for a court-appointed
attorney
McNeil omitted reference to real estate and several financial accounts that he owned at the time
Jury convicted him for making false statements on the affidavit, in violation of 18 USC 1001 and
he appealed arguing that his statements were made in a judicial proceeding and are therefore not
subject to prosecution under 1001.
Issue:
Does the 1001b exemption apply to the defendant?
Holding:
Yes
1001(b) creates an exemption for judicial proceedings for statements, representations, writings or
documents submitted by a party to a judicial proceeding or that partys counsel to a judge or
magistrate in that proceeding
To qualify, McNeil had to show that (1) he was a party to a judicial proceeding, (2) his
statements were submitted to a judge or magistrate, and (3) his statements were made in that
proceeding
he was a party to a judicial proceeding from the other charge, his affidavit was presented to the
judge to determine if he was eligible for a court-approved counsel and his statements were made
after the proceeding officially began so he meets all the requirements to be exempt from 1001a

United States v Pickett


Facts:
Capitol Building security police officer left a handwritten note and a small pile of white powder
at a desk, playing off of the recent anthrax investigations
it was found to be sugar, defendant says it was supposed to be a joke on the other officers
Issue:
Does the conduct fall under the 1001 specifications of making a false statement in a matter
within the jurisdiction of the legislative branch of the government ?
Holding:

No. while a false statement made to the legislative branch in the course of investigation would
qualify under the statute, this statement was not made specifically as a part of an investigation.
Rather, this event TRIGGERED an investigation (would be different if the investigation was
ongoing when the alleged violation occurred)
False Promises

United States v Shah


Facts:
Shah submitted a bid to a government buyer that contained a promise that he would not disclose
his bid or discuss terms with any competitors.
Afterwards, he contacted a competitor in an effort to rig the bidding and split the award
Shah was charged with knowingly and willfully making a false, fictitious and fraudulent
statement to a government agency
Issue:
Can a promise of future performance constitute a violation of 1001?
Holding
Yes. A promise that one does not intend to keep is a false statement under 1001
Its not the breaking of the promise that constitutes the crime, otherwise every breach of contract
would be a federal crime. its that he made a promise with the intent to break it, which makes it
false at the time it was made.
the government was able to show his intent because Shah called the other guy soliciting the
collusion before he even mailed the bid with its promises and then further communicated trying
to collude.

Class #9: Exculpatory no, false claims

Exculpatory No Doctrine
Brogan v United States
Facts:
Brogan, a union officer, was convicted of accepting unlawful cash payments from an employer
and making a false statement within the jurisdiction of a federal agency in violation of 18
U.S.C.S. 1001.
He argued on appeal that his answer of "no" to agents' questions during initial investigation was
an "exculpatory no," the central doctrine being that a simple denial of guilt did not come within
1001.
Holding:
The court affirmed the conviction and held that 1001 covered "any" false statement, and the
word "no" in response to a question assuredly made a "statement."
The court held that the plain language of 1001 admitted of no exception for an "exculpatory
no."

The court held that neither the text nor the spirit of the Fifth Amendment, U.S. Constitutional
Amendment V, conferred a privilege to lie.
Proper invocation of the Fifth Amendment privilege against compulsory self-incrimination
allowed a witness to remain silent, but not to swear falsely.
Materiality
1001 includes a materiality requirement
Test for materiality:
whether the statement has a natural tendency to influence or is capable of influencing any
governmental action or decision
focus is on the intrinsic capacity to influence, not its actual effect
neither actual influence nor reliance need be shown

Culpable Mental State


United States v Yermian
Facts:
Yermian lied on a security clearance questionnaire that he filled out for a defense contractor for
employment
he was required to obtain a Department of Defense Security clearance and required to fill out the
questionnaire for this check
Yermian lied in order to be consistent with the lies he told his employer in his application
Yermian was charged with 3 counts in violation of 1001 and argues that he had no actual
knowledge that his false statements would be transmitted to a federal agency.
Issue:
does the government need to prove that the false statement was made with actual knowledge of
federal agency jurisdiction (and not just that he knowingly made a false statement?)
Holding:
Nope.
knowingly and willfully modifies the false statement portion of the statute. it does not modify
the jurisdiction element
United States v Green
Facts:
Green was a quality assurance director at Con-Chem and falsified safety test reports and lied
about tests of coatings
the safety tests were required by the Nuclear Regulatory Commission
after an employee informed the FBI of Greens falsifications, he was convicted for making a
false statement
Green appeals, arguing that the lower court erred on not instructing the jury on jurisdictional
knowledge
Issue:

Is there a mental state requirement for jurisdictional knowledge?


Holding:
No. the court refers to Yermian decision and agrees that there is no mental state required with
respect to federal involvement in order to establish a violation of 1001
Green then argues that without a state of mind requirement, 1001 is a trap for the unwary but
the court doesnt buy it because you have to knowingly and willingly make a false statement to
violate 1001. A person that knowingly and willingly makes a false statement cannot be deemed
to have engaged in entirely innocent conduct

Multiple Punishment
Double Jeopardy Clause prohibits:
1. prosecution for the same offense following conviction
2. prosecution for the same offense following acquittal
3. imposition of multiple punishments for the same offense
- Offense are not the same for double jeopardy purposes if each requires proof of an element that
the other does not.
-If each offense requires proof of a fact that is not required by the other, multiple punishments
are permitted, even though the evidence required to establish each crime may substantially
overlap.

United States v Ramos


Facts:
Ramos gave a false name, place and date of birth and used false papers in applying for a passport
and was charged with 2 different offenses: false statement with the intent to secure a passport
(1542) and false statement to a federal agency (1001)
Ramos argues that since the same act and same evidence constitute both offenses, its double
jeopardy
Issue:
Is this double jeopardy?
Holding:
No.
Court uses Blockburger test. One act can be basis for 2 convictions if the requirements(elements)
of the crimes are different. Here, both statutes required a false statement but 1001 requires
material falsehood, 1542 does not, and they also have different intent requirements (1542intent/purpose to secure a passport, 1001 does not have any purpose to secure any benefit from
the government required)
one act can satisfy convictions under 2 statutes as long as each statute requires proof of a fact
that the other does not.
Procurement Fraud
Procurement Fraud: 18 U.S.C. 1031

Major Fraud Act of 1988 prohibits:


(1) knowingly
(2) executing or attempting to execute a scheme
(3) to defraud the U.S. or to obtain money or property by making false or fraudulent
representations
(4) where the value of the prime contract, subcontract, or any constituent part is worth at least
$1million.

United States v Brooks


Facts:
B&D, a subcontractor for a company that was supplying electrical parts to the Navy. committed
fraud on contracts worth $51,000 and $1470.
The primary contracts for the company using the parts for refitting ships for the Navy were worth
$5mil and $9mil.
Defendants argue that their convictions for fraud do not fall under 1031 because their two
subcontracts did not satisfy the $1million value prescribed by the statute
Holding:
as long as the prime contract with the US is greater than $1mil, the statute has jurisdiction over
any subcontracts beneath that contract
Court explains that small and inexpensive parts/ contracts can still have a huge impact on larger
contracts and safety, equipment, etc
United States v Sain
Facts:
Sain and his company was in a contract with the Army to construct and operate a waste-water
treatment plant.
Sain submitted inflated claims for reimbursement of costs on contract. He substantiated the false
claims with bogus checks and purchase orders
Sain was convicted of 46 counts of fraud under the Major Fraud Act and argues that he was
improperly charged with committing a separate violation of the Act for each false claim he
submitted
Holding:
Separate executions of fraud over a longer period of time can each be punished as separate
fraudulent schemes
each execution was independent from the others and sought to obtain a separate amount of
money from the government
there wasnt a set amount as the goal for the fraud, the goal was to keep perpetuating the acts as
long as possible so its a series of fraud with the intent to keep committing more frauds until
stopped.
False Claims

False claims statute: 18 U.S.C 287


punishes knowingly making false, fictitious, or fraudulent claims against the government for
money or property
requires that a claim for money or property be physically presented to the government
United States v Maher
Facts:
Maher falsified hourly billings so that the government would be paying the correct amount
government was on a time and materials contracts but Maher instructed time sheets to be
changed for extra hours since he needed extra funding and didnt want to cause delays
Maher argues there was no fraudulent intent since he shifted the billings later in the month to
make them come out even
Issue:
Did the lower court properly instruct the jury that under 287 the criminal intent is not limited to
a specific intent to defraud?

Holding:
The statute does not specify an intent to defraud as an element to be proved
the statute is silent as to motive and criminal intent and only specifies the claims be submitted
with a knowledge that they are false, fictitious or fraudulent
main purpose of 287 is to assure the integrity of claims and vouchers submitted to the
government
Perjury and False Declarations
18 USC 1621 perjury statute
o Must be under oath, not just to any government official
o Statement must be material and false, and D knows it to be false (willfulness required)
o Perjury statute applies to a broader range of proceedings
o Perjury statute contains more rigorous proof requirements on the issue of falsity
18 USC 1623 false declaration statute
o Applies in proceedings before or ancillary to any grand jury proceedings (including
depositions per Dunn note case)
o Narrower range of proceedings than 1621
Also allows for recantation defense before perjury is discovered
o Broader in that you do not need 2 witnesses, which you do need in 1621
Both 1621 & 1623 punish making false statements under oath
Difference in the statutes:
o False declarations statute allows a limited defense of recantation
o False declarations statute does not require the 2 witness rule
18 USC 1622 is subordinating another to commit perjury
o Whoever procured another to commit any perjury is guilty of subordination of perjury
Can you be liable for I dont remember?

o Need to somehow prove that his claim to not remembering is a lie, difficult burden of
proof for prosecution
Making Material False Statements
Similar to 1001, must be a false statement on a material matter and does not necessarily have
to have any actual effect, if it has the tendency or capacity to have an effect on the proceedings
If prosecutor did not know witness was perjuring himself, then D must show that the jury
probably would have acquitted D if the witness testified truthfully
o If prosecutor knew or should have known of the perjury, D must show a reasonable
likelihood that the perjured testimony could have influenced the jury
Two-Witness Rule
Evidentiary rule that prohibits basing a perjury conviction solely on an oath against an oath
o Equally honest witnesses may have different recollections of an event
o Something more than one persons word against another is required
Meant to protect a truthful witness from unfounded charges raised by someone aggrieved by
the witness testimony
However, the false declarations statute 1623(e) expressly abandons the 2 witness rule
o Proof beyond a reasonable doubt is enough, regardless of the number of witnesses or
other type of evidence
o Further, if D makes 2 statements under oath making it so that 1 must be false, that is
sufficient to prove perjury even if it is unclear which statement is false
Both must be material to the point in question and irreconcilably inconsistent
1621
o Traditional common law perjury where there are 2 witnesses demonstrating that a
statement is false
o Modified 2 witness rule in Davis allows for witness own statement as the second
witness
1623
o 2 inconsistent statements are actionable for prosecution, without proving which one is
false
Perverse disincentive to come forward with the truth after having already lied once, because then
his contradiction will make him liable under 1623
The Recantation Defense
The crime of perjury 1621 is complete as soon as the false statement is made under oath,
giving no defense of recantation or retraction
However, the false declarations statute 1623(d) departs from this rule and allows a limited
recantation defense if there is an admission of falsity before the perjury is discovered
o Only applies where the recantation occurs in the same proceedings
Bronston v. United States (1973)
Perjury statute, 1621, whether a witness may be convicted for perjury for an answer, under
oath, that is literally true but not responsive to the question asked and arguably misleading by
negative implication
o Do you have any Swiss bank accounts?
-No, the company doesn't. (but he himself does). Perjury?

unresponsive in that D here did not answer the question of whether he had bank accounts, he
answered whether the company had a bank account, a different question
Willful falsity requires D to know that the statements are false and say them anyway
o If D did not understand the question, cannot be convicted for perjury
o But he can be convicted for an answer that is not literally false but when considered in
the context in which it was given nevertheless constituted a false statement
Court finds that there are not adequate grounds for a perjury conviction based on Ds answers,
D must willfully state any material matter that he does not believe to be true
o It was not Congress intent to reach unresponsive answers, which can easily be mended
by asking more in-depth questions
o It was merely a testimonial mishap, under the pressure sometimes a witness gives an
unresponsive answer
Don't want to discourage witnessing from testifying
o State of mind of the witness is only pertinent to whether he knew it was true or not, not
regarding whether he meant to deceive the questioner
As long as the witness speaks the literal truth they are fine, and the burden is on the questioner
to pin the witness down to the specific object of their inquiry if they receive an evasive answer
o Creating a higher bar for the prosecution, based on the notion of it being an adversarial
system
o More stringent than the falsehoods are treated in the preceding statutes such as 1001

United States v. Walser (1993)


Can one who intentionally causes an unwitting innocent party to commit perjury be held liable
as a principal under 18 USC 1623? making false and fraudulent statements to government
agency
o Court affirms conviction
D farmers submitted fraudulent crop insurance claims
o Ds gave the fraudulent insurance documents to a third party, causing them to present
false information under oath in violation of 1623
D aided and abetted the commission of perjury and Gov. wants him liable as a principal under
2(b)
o 2 merely states that one who aids and abets the commission of a crime against the US
to be punished as principal, even where the actor himself is innocent and has no criminal
intent
D was not under oath, did not give testimony nor did she sit in the witness box, however, she
is liable as a principle to the agents perjury
o Likely also culpable for obstruction of justice (may have been a stronger case)
1622 subordination of perjury would have required the agent to be aware of the perjury and
simply convincing the agent to perjure themselves
United States v. Davis (1977)
FBI investigating robbery on a military base, Gustafson was the target of the investigation
o D Davis was also stationed there, and questioned about his knowledge of the burglary.
However, in subsequent Grand Jury proceedings, Davis said a completely different story
from what was written in the statement

Because of the discrepancies D was charged with and convicted of perjury in the lower court
under 1621
Court follows the two witness rule, which requires that the falsity of Ds statements must be
proved by the testimony of 2 witnesses or the testimony of 1 witness + corroborative evidence
o Corroborative evidence need not be strong nor independently sufficient to establish Ds
guilt, and may be circumstantial
o Corroborative evidence suffices if it tends to confirm the truth of the witnesss
testimony in material respects and thereby induces belief in his testimony
Detectives statement that D stated, while making his written statement, that he had
knowledge of a robbery constituted 1 witness + corroborative evidence of the written statement
itself = 2 witnesses to establish that D perjured himself in the grand jury proceedings when he
lied
o Once the rule is satisfied, it is up to a jury to determine the validity of the evidence and
the trustworthiness of the witness
o Furthered by the fact that both testimonies are irreconcilable/contradictory, so one
must be false
Makes sense under 1623(c) which specifically allows for a violation where 2 statements are
irreconcilable, but Green finds that problematic under 1621
Is this bootstrapping? Using Davis own testimony as a second witness against him
United States v. Sherman (1998)
D perjured himself as an expert witness in a medical case regarding the validity of his licenses
in various states
o Charged under 1621 general perjury statute, not 1623 false declaration
o D moved to dismiss because government did not give him his due process defense of
recantation available under 1623 but not 1621
1623 does not require that the prosecution employ the 2 witness rule for proving perjury
o 1623 has a reduced mens rea requiring knowingly rather than the 1621 willingly
o 1623 is restricted to testimony before grand juries and courts and is therefore more
limited in reach than 1621
Both statutes were violated here, so government has prosecutorial discretion in which one is
charged, and it is not the choice of the D
o However, prosecutions choice cannot be solely motivated on getting a tactical
advantage in the proceedings (as D contends)
1623(d) defense of recantation available
o If at the time of the admission, the declaration has not substantially affected the
proceedings
o Or, it has not become manifest that such falsity has been or will be exposed
Court here holds that the or in 1623(d) is actually an and, and prosecutor has discretion to
use either 1621 or 1623
D would have lost in 1623 anyway, even with the recantation defense but it is not as if he was
entitled to be charged under 1623
Would D have been entitled to recantation defense under 1623, if his recantation came after
the perjury was discovered?

o D contends that it is allowable due to the or, but court finds that, that runs afoul of
Congress intent and allows perjury with impunity, to continue to lie until your perjury is
about to be exposed, and then recant
D says that under this rationale, he would have been given the defense because the falsity has not
substantially affected the proceeding (even though the second prong would not have been
satisfied since the falsity was exposed already)
o Court holds there must be a conjunctive, not disjunctive, reading of the statute, both
statutory conditions must exist when recantation occurs or is really an and
Court sides with government, both prongs were not met when recantation occurred and Ds
construction of the statute was literally correct but against congressional intent
o Strange, since rule of lenity provides that there should be a common sense, plain
language reading of the statute where it is unambiguous
United States v. Apfelbaum (1980)
D was thought to be involved in a staged robbery and extortion incident
o At grand jury proceedings D invoked his 5th Amendment right, but was granted
immunity and compelled to testify
In the grand jury testimony D made false statements, charged with perjury
o Convicted in district court, but court of appeals reversed stating that his immunized
testimony should not have been admitted into evidence against him since it did not
constitute the corpus delicti or core of a Ds false swearing indictment
Did Congress intend the federal immunity statute to limit the use of witness immunized grand
jury testimony in a subsequent prosecution of the witness for false statements made at the grand
jury proceedings?
o Court says no, it is at odds with purpose of statute, to prohibit the use of truthful
immunized testimony in perjury prosecutions (to prove falsity)
o Statute clearly states that immunized testimony is excluded from prosecution except in
the case of perjury/false declarations, making no distinction between truthful and
untruthful testimony in such proceedings it is a blanket exemption for immunity for
false statements
D also contends that 5th Amendment (self-incrimination) bars introduction of the truthful
statements, only permitting the core of the false swearing indictment
o Court disagrees, immunity is not a license to commit perjury, perjury is the narrow
exception to the immunity statute and does not protect from false statements
Obstruction of Justice
Obstruction statutes are meant to preserve the integrity of judicial proceedings, and
protect the individuals engaged in the judicial proceedings from coercion or intimidation
18 USC 1503: Applies to participants in civil and criminal judicial proceedings,
imposing sanctions for corruptly...influencing, obstructing or impeding, or endeavoring
to influence, obstruct, or impede the due administration of justice
o Forbids specific acts such as threatening jurors or officers of the court
o Omnibus clause prohibits corruptly endeavoring to influence, obstruct, or
impede the due administration of justice
o Meant to protect the legitimacy of proceedings, ensuring the arrival at an
appropriate judgment

18 USC 1505: Applies to participants in administrative agency or congressional


proceedings
18 USC 1510: Applies to participants in federal criminal investigations
18 USC 1512: New statute dealing specifically with tampering with witnesses, Vs
and informants
18 USC 1513: Retaliating against witnesses, Vs and informants
Pending Judicial Proceedings
United States v. Simmons (1979)
Whether a grand jury investigation is pending for purposes of the obstruction statute 1503
when a subpoena to produce records and testify has been issued upon application of an AUSA
(not by order of the grand jury) but when at the time of the obstruction the grand jury itself had
no knowledge of the subpoena or the matters under investigation
D was involved in a scheme of changing dates on writs being sent out to satisfy the SOL
o Subpoenas were issued to him and others in his office to appear and produce docs
In response to subpoena, D destroyed requested documents and coached his employees on what
to say to investigators
o There is a prerequisite in the statute for there to be a judicial proceeding that qualifies
as an administration of justice per 1503
Obstructing an FBI investigation is not a violation because these agencies are not judicial arms
of the government, like a grand jury proceeding is, but when does an investigation turn into a
pending grand jury proceeding to be actionable under the statute?
A formal act by the grand jury need not lead to the subpoena for the grand jury proceedings to
be pending
o As long as D had the specific intent of impeding the administration of justice, need not
look at technicalities
o Court holds that an investigation by law enforcement ripens into a pending grand jury
proceeding for purposes of 1503 when officials of the agency apply for and issue
subpoenas to testify before the sitting grand jury
When conspirators have the intent to obstruct justice for a proceeding that they know will occur
in the future, it satisfies the statute
United States v. Lundwall (1998)
Ds claim that 1503 does not apply to civil discovery matters
D was deposed and told to produce documents regarding racial discrimination of employees,
ended up destroying the documents
o Court disagrees, statute extends to willful destruction of documents during civil
litigation, conduct fits squarely into the statutes text
Statute meant to extend to both civil and criminal right to non-prejudiced legal proceedings,
with the omnibus statute extending to all corrupt practices meant to impede or obstruct justice
o Willful destruction of documents for grand jury proceedings is a violation of 1503
for the pending...due administration of justice part of the statute
Neither a subpoena nor a court order directing the production of documents must be issued or
served as a prerequisite to a 1503 prosecution

o Concealment or destruction of documents likely to be sought is enough, with the


intention of hindering the investigation
Sometimes civil remedies are not enough and you may need both civil and criminal remedies
Endeavoring to Influence or Impede
Rather than attempt, 1503 includes endeavors to influence the administration of justice
Conduct must have at least a reasonable tendency to corrupt a legal proceeding (may even be
conduct that falls short of an attempt)
United States v. Collis (1997)
Obstruction of justice charge for presenting forged letters to judge on companys letterhead
o Letter is supposed to be from his employer talking about how great he is, contained a
lot of false statements while D was on trial for violation of his parole
o To satisfy 1503, need:
(1) judicial proceeding, (2) D had knowledge of the proceeding, (3) D acted corruptly with the
intent of influencing, obstructing, or impeding the proceeding in the due administration of justice
o Gov. need not show that the false statements actually succeeded in obstructing justice
nor changed how the judge was going to rule
Need not have a natural and probable effect of impeding justice to constitute a statutory violation
United States v. Griffin (1979)
Plane crashed, bag with money found in wreckage and some individuals were wire tapped in
connection with investigating loan shark practices associated with the money bag
o D was heard talking on the phone with one of the wire tapped people, and was called
to testify before a grand jury
o D claimed that he either could not remember, or did not know anything about the
money and the plane crash, but later asserted that the statements were correct and the
phone conversations were fabricated
D urges the court to recognize a distinction between one who induces a witness to commit
perjury (forbidden by 1503) and one who perjures himself
o Obstruction of justice statute was not meant to only cover inducing another to commit
perjury or destroying evidence, it can also include false statements as long with the
specific intent to obstruct justice
D also contends that since he withheld the truth, that is different from an outright lie
o Court disagrees, more concerned with whether the conduct has the purpose of
impeding the fair administration of justice
o No I dont know I cannot recall is a false statement according to the court, an
evasive answer of falsely denying knowledge of events
Government must prove that the statement had the effect of impeding justice, where Ds
contention that he had no knowledge hindered the loan shark investigation more than had he
merely invoked his 5th Amendment right
o Ds denial of knowledge had the effect of closing off all avenues of inquiry into sorting
through contradictory evidence
o Also it was material because it dissuaded the grand jury from investigating the loan
sharking by those individuals

Need not be related to the primary subject of investigation, it is material if it is relevant to any
subsidiary issue or is capable of supplying a link to the main issue

United States v. Aguilar (1995)


D was a judge and knew a Teamster through the grapevine, was asked to discuss the case with
another judge and disclosed that there was a wiretap up concerning the case
o Grand jury proceeding followed and D lied about participation in the case or
knowledge of the wiretap, convicted of obstruction of justice
The actions taken must have the intent of influencing judicial or grand jury proceedings, it is
not enough for them to influence some ancillary proceedings
o There must be a time component, a nexus with the proceedings, with the natural
and probable effect of interfering with the due administration of justice
o Need not be successful, an endeavor suffices
Court finds that making a false statement to an investigating agent who may or may not testify
is not sufficient to violate 1503
o There was no indication that the investigators were acting as an arm of the grand jury
o The fact that there is some grand jury proceeding going on is not enough, otherwise it
would criminalize too much conduct
Must be some narrow interpretation of who 1503 applies to, not just any acts that have the
intent of impeding due administration of justice
o D must have knowledge that his statements are going to the grand jury not just that
they could
United States v. Cintolo (1987)
Court affirms a conviction for conspiracy to obstruct justice
o D is a defense lawyer representing a witness and another client (who is the target of the
grand jury proceedings)
Client Angiulo was concerned about the witness LaFreneres testimony after LaFrenere was
granted immunity in grand jury
o D told LaFrenere to invoke his 5th Amendment right because if he kept refusing to
testify the worst he would get is 18 months for contempt
There was a clear conflict of interest, where he was representing the big fish and the small fry,
and was looking into the interest of the big fish when he gave that advice to the small fry
Is this zealous advocacy or a 1503 conspiracy to obstruct justice?
o D contends he should just prove a facially legitimate explanation for why he did it
while representing his clients interests
o Court rejects this, a lawyer has no right to act criminally and have ill motives, and be
shielded from liability
o 5th Amendment is a necessary tool for the fair administration of justice, so by corruptly
influencing an individual to invoke it you are obstructing justice
Even though the actions were technically lawful, they had improper motives, criminalizing the
conduct
o Lawyer would have to have acted in good faith belief that he was helping his clients
best interests
Safe Harbor Provision - 18 USC 1515(c)

Congress attempted to reconcile the problem that defense counsel faced between zealous
advocacy and obstruction of justice
o Protects the providing of lawful, bona fide, legal representation services in connection
with or anticipation of official proceedings
Kloess established that 1515 serves as an affirmative defense for counsel, who will have the
burden of showing some legitimate bona fide reasoning (therefore negating mens rea), and Gov.
must disprove that beyond a reasonable doubt
1512(b)(3) D must knowingly act with specific intent to hinder or delay the communication to
the court of the commission of a federal offense or probation violation
o Gov. must prove improper purpose
o Can be rebutted by lawyer proving that he is legitimate appointed counsel who was
looking into clients best interest in good faith
The Victim and Witness Protection Act
New obstruction statute, 1512, prohibiting tampering with a witness, V or informant
o Whoever knowingly uses intimidation or physical force, threatens or corruptly
persuades another (added in 1988 after Lester) person or attempts to do so, or engages in
misleading conduct towards another person with intent to influence, delay or prevent the
testimony of any person in an official proceeding
o 1512(a): Killing, (a)(2): Physical force
o 1512(b): Intimidation or threats, corruptly persuading or misleading conduct: Willard
Has more of a coercive element to it than harassment does
o 1512(c): Destroy, mutilate docs
o 1512(d): Harassment: Wilson
Close to intimidation or threats, but less coercive
o 1512(e): Affirmative defense that the conduct was lawful with intention to encourage
induce or cause testifying truthfully
o 1512(f): Official proceedings need not be pending
Unlike 1503 (Simmons)
Non-Coercive Witness Tampering
United States v. Lester (1984)
Mitchells attorney (Lester) approached Brigham (who was arrested for murder and
cooperating against Mitchell), and advised him not to cooperate
o D moved Brigham to a hotel to hide him, charged with obstruction of justice
1503
o D contends that by enacting the Victim and Witness Protection Act, Congress intended
to remove witness tampering from purview of 1503, and 1512 is more appropriate
( 1512 supersedes 1503, but Ds conduct here would not be culpable under 1512)
Gov. says that omnibus clause is catchall, reaching witness tampering
Court agrees with Gov., conduct is in line with 1503
1512 reserved for specific egregious conduct, non-coercive measures are within the omnibus
clause of 1503

o Problem with 1512 is that D would have to have used certain conduct (intimidation,
physical force, threats, harassment, misleading conduct) and if he did not, without use of
1503 there would be no redress
1512 is subsequently changed to include corruptly persuade by Congress so that it is broad
enough to include this conduct too
1512: Corrupt Persuasion
Arthur Andersen LLP v. United States (2005)
D filed financial statements and did an internal audit of Enron
o Amid beginning of accounting scandal D company hired in-house counsel
o D stated that if they destroy a document in the ordinary course of business its fine, and
they will be saved if an investigation asks for something the next day, a document
retention policy
o When SEC opened its investigation documents were requested but documents had
been continuously destroyed in the interim
D charged with 1512(b)(2)(A) and (B) for knowingly and intentionally and corruptly
persuading other persons (employees) with intent to cause them to withhold documents from and
alter documents for use in regulatory and criminal proceedings/investigations
o Persuading another to withhold information can be benign, such as by telling someone
to invoke their 5th Amendment right, or an attorney withholding privileged documents.
Similarly, a document retention policy may also be benign
There must be consciousness of wrongdoing, and here the jury instruction was wrong
regarding knowingly
o Although the proceedings need not have begun nor pending, proceeding has to be at
least foreseen or likely per 1512(f)
o In Aguilar 1503 required a nexus, something more, between the obstructive act and
the proceedings
1512: Misleading Conduct
Covers misleading conduct that is intended to affect anothers participation in official
proceedings, impair availability of evidence or impede the reporting of information relating to
the commission of a federal crime to law enforcement or a judge
o Misleading conduct includes making false or misleading statements or inviting reliance on
false or misleading evidence
United States v. Gabriel (1997)
D was an executive for a jet engine company under investigation by FAA for
misrepresentations related to repairs
o Took a K from Quantas for a jet engine casing, and misrepresented that it would be
repaired by them when really it was repaired elsewhere
o The Florida facility certified that that it was serviceable when in reality it was not
D sent a fax to Quantas representative in order to support his false story that he disclosed that
the part was not serviceable
o D charged with witness tampering, because it was an attempt to mislead Mealing, and
Mealing would then repeat that lie to the grand jury

1512(b)(1) making it a crime to corruptly persuade another person, or attempt or do so, or


engage in misleading conduct toward another person, with intent to influence the testimony of
that person in official proceedings
o D says on appeal that Gov. must show that his actions were likely to affect the
testimony, and since the guy was in Australia, it was not even likely that there would be a
grand jury proceeding, so he was unlikely to actually impede the hearing
Court agrees, no need to show likely to affect testimony, only that the endeavor was corruptly to
persuade or mislead with intent of influencing testimony
D admits he wanted to interfere with the investigation, but not any grand jury proceedings
unlikely since he knew grant jury was about to happen and that Mealing would be a damaging
witness
At odds with Aguilar requiring likely to affect, there is no need to incorporate that here, because
that was for the purposing of narrowing the 1503 omnibus clause
Would not even be satisfied here since there is no proceeding and he may not even testify
(Aguilar there was a proceeding but did not know if he would testify and that was too attenuated)
1512 does not need proceedings to have been instituted already
1512 is different in that it already has requirements giving fair notice of wrongdoing: D must
engage in misleading conduct or corruptly persuade, and D must have intent to influence
testimony at official proceedings
1512: Harassment
United States v. Wilson (1986)
D was a Gov. witness and in the hallway made threatening remarks to the other witnesses
o D charged under 1512(b)(1) for intentionally harassing the witnesses to attempt to
hinder, delay, and dissuade them from testifying in official proceedings
o Court says that, since there was an effect on the witnesses, there is no reason to prove
that the statements actually dissuaded them from testifying, attempt is an endeavor
o Can infer specific intent from Ds actions
o If it had been retaliation against the witness, covered under 1513 (not applicable here)
Threats and Intimidation
United States v. Willard (2000)
Ds daughter was being sexually abused by her father and she was going to testify against him
o D mother tried to convince her not to testify by saying that god would not like it and
she would claim that the daughter was perjuring herself if she testified
Court affirmed 1512(b)(1) conviction
o No need to show actual obstruction of justice or prevention of the witness from
testifying, just concerned with the endeavor, inchoate character of these provisions
United States v. Miller (2008)
D charged with 1512(b)(3) witness tampering
o D sold nonexistent fraudulent debt portfolios
o Wire transfer payments for fraud portfolios was converted to cash through bank

o D went to bank manager and said that if she spoke to FBI he would sue her for
defamation
Is threat to sue actionable threat under 1512?
o Court says yes, he had no right to file frivolous litigation so his protected right was not
being infringed on
o Instituting baseless legal proceedings for purposes of harassment is not permitted

Bribery of Public Officials


Public officials include members of Congress, government officers and employees, or anyone
acting for or on the behalf of the federal government in any official function under or by
authority of a federal department or agency, and jurors
18 USC 201 deals with bribery and gratuity, giving or receiving something of value in
connection with an official act
o Bribery is corruptly attempting to influence a public official in the performance of
official acts by giving valuable consideration, quid pro quo, it is inchoate in that you need
to have the requisite intent without any result actually happening, and still be culpable
201(b)(1) pertains to the giver, 201(b)(2) to the receiver
Requires a showing that something of value was corruptly given, promised to a public official
(giver)
Or corruptly demanded, sought, received, accepted, or agreed to be received by a public official
(receiver) with intent to influence an official act or in return for being influenced
o Gratuity is regarding a public official on account of an official act even with benign
intent, off the book compensation for an official act, no need for a quid pro quo and can
come after the official act occurred
201(c)(1)(A) pertains to giver and 201(c)(1)(B) to receiver
Requires a showing that something of value was given, offered, or promised to a public official
(giver)
Or demanded, sought, received, accepted or agreed to be received by a public official (recipient)
for or because of any official act performed or to be performed by such public official
Official Acts
Official act: Any decision or action on any question, matter, cause, suit proceeding or
controversy, which may at any time be pending, or which may by law be brought before any
public official, in his official capacity, or in his place of trust or honor
United States v. Parker (1998)
Court affirms conviction for conspiracy to commit public bribery and public bribery
o D worked for SSA (clerical role) and approached Simmons, whose son had his SSI
benefits cut off, and said that she can help reinstate them. D reinstated then demanded
money, Simmons refused
D says that 201(b)(2)(C) conspiracy to commit public bribery unfounded since she did not
have the actual authority to reinstate SSI benefits herself
o D says that official acts would only be those within the scope of her employment, but
she broke the rules and did things she was not authorized to do (forged the judges
signature)

o Statute forbids public officials from being induced to do or omit any act in violation of
their official duty
Meant to be broad and encompass any decision made in official capacity even if they are not
within the rules
The people who were appealing denial had their appeals in her place of trust or profit within
the statute
Would garbage man he culpable or only someone who has some official responsibility?
Krichmen later says that a baggage porter for a federal RR does not fit into the statute unless he
is involved in some decision-making
United States v. Arroyo (1978)
D was a small business administration loan officer who reviewed loan applications for
creditworthiness
o Loan was approved, but D told the applicant Fernandez that he would have to pay to
have the loan approved. Charged with conspiracy to solicit a bride and soliciting and
receiving a bribe
Jury instruction issue, where court said that D did not have to actually have the power to make
the change in order for him to still be charged, needs to be under the representation
o D preferred one that recognized that if the bribery happened after D no longer had
control over the outcome (he had already committed his official act) he is not guilty
Court disagrees with D, congress did not intend for public officials to be able to exhaust their
duties and then go after someone for a bribe under the false impression that the bribe was in
exchange for their performance
o The point of the statute is to punish any public official who corruptly solicits anything
of value in return for being influenced in official acts, where official acts refer to
anything pending at any time (including in the past) in official capacity (broad language)
o The bribe is punishable based on what the person paying believes, even if the official act is
already done he is under the impression that he is giving a quid pro quo in order to influence it,
the offense is in the corrupt solicitation
Motive and Intent
United States v. Sun Diamond Growers of California (1999)
D is a trade association engaged in marketing and lobbying on behalf of a cooperative of
growers
D charged with giving illegal gifts to Secretary of Agriculture in violation of 201(c)(1)(A)
o D had an interest in the Secretarys favorable treatment regarding grants and the use of
some pesticide, but no actual connection was evidenced (no nexus)
Trial court instructed jury that giving gifts because of Secretarys official position was enough to
violate the statute
Court of appeals reversed conviction, however on remand the Gov. need not prove that the
gratuity was for any particular act, but rather requires the requisite intent to reward past favorable
acts or to make future ones more likely
While bribery requires intent to influence an official act or to be influenced in an official act,
gratuity statute requires that the gratuity be given or accepted for or because of an official act
o Therefore a gratuity can be in relation to a future act or something that has already
occurred, but there need to be some nexus

o Only a bribe requires proof of a quid pro quo


Court does not agree with lower court jury charge that Gov. need only prove that the gratuity
required the recipient to at any time be in a position to act favorably for D
o There must be a link between the thing of value conferred upon a public official and a specific
official act for or because it was given
Gov.s construction would criminalize any gift to any official if the person had before him, or
could prospectively have before him, matters that deal with the giver of the gift just by way of
the persons position
o If Congress intended this they would have written it into the statute
United States v. Anderson (1974)
D was a lobbyist for company Spiegel that had an interest in postage rates, and allegedly
bribed US Senator Brewster who was in the postal committee
o D convicted for giving monies in order to influence his postage policy
o D was talking to Senator in a meeting with a witness (who later testified) that after
discussing postage rates, D gave the Senator an envelope with $5K and Senator said he
would do all that he possibly could to be of assistance
Later made 2 more payments when a bill was introduced to up postage rates
Jury instruction
o Lower court (properly) rejected Ds interpretation of jury instruction, that said that a
lobbyist is meant to influence an elected officials actions, and there is nothing inherently
corrupt in influencing an elected official or being influenced
A gift or promise with intent to influence is the definition of bribery, requested instructions
would have been misleading for a jury
D was convicted of bribery but the Senator was only charged with receiving a gratuity,
different intent requires is that inconsistency with evidentiary overlap ok?
o Court says that the inconsistencies are ok because the two parties may have different
intents
o D gave the monies in order to influence (bribery), while the senator was not affected
by the money in his decision-making, he accepted the monies with knowledge that it was
a gratuity for his vote
Thing of Value
United States v. Williams (1983)
D is former US Senator appealing trial conviction for bribery, gratuity related to helping
obtain Gov. Ks for the purchase of titanium from a mining venture that D held an interest in
o Promises were made in connection with 2 transactions, first a proposed $100M loan
financed by a fictitious entity (FBI sting) and the other valued at $70M
o In exchange for his promise to help the Arab sheikhs get the Gov. Ks, D received stock
in 3 corporations related to the mining venture (turned out to be worthless)
Need the thing of value have actual value, per the bribery and gratuity statute?
o Trial judge instructed jury that the thing need not have actual value, as long as D
thinks that it has value
o Based on congressional intent of curbing corruption, court agrees that it does not
matter the actual value, if D believed there was value (subjective test)

Appointed Officials
Dixson v. United States (1984)
Whether officers of a private nonprofit administering and expending federal community
development block grants are public officials for the purposes of 201(a) federal bribery statute
o City of Peoria given federal block grants, made Ds company (UNI) the subgrantee in
charge of administration of the grant
o D was hired as the executive director, and had sought bribes in return for being influenced for
awarding housing rehabilitation Ks, took bribes from contractors seeking to work on UNIs
rehabilitation projects
Under Housing and Community Development Act, there are heightened requirements for use
of HUD funds including financial accountability and other uniform audit procedures
o D says that they were nonprofit executives, not public officials
o But Gov. says that they were acting for or on behalf of US in an official function under
HUD authority (by administering federally funded programs)
Court agrees, it does not matter if you do not have a contractual relationship with the US, if you
occupy a position of public trust with official federal responsibilities you are a public official for
purposes of the statute
Ds here fulfill criteria for public officials
o D had administrative duties related to federal program, charged with abiding by federal
guidelines, administering a social service program established by Congress
Not all federal assistance program roles bring about this designation, you must possess some
degree of responsibility for carrying out a federal program or policy that would make you act for
or on behalf of the US
o You must assume duties of an official nature
Elected Officials
United States v. Brewster (1972)
Senator who received bribes related to his postage legislation
o District court dismissed the indictment based on immunity per the Speech and Debate
Clause, where speech or debate in either house of Congress cannot be questioned
elsewhere, to protect the legislative process
Johnson holds that a member of Congress may be prosecuted under a criminal statute
provided that the Gov.s case does not rely on legislative acts or the motivation for legislative
acts (things that are generally done in Congress in relation to the business before it)
The illegal act was committed when D solicited or took the bribe for a promise to act in a
certain way, not whether he fulfilled the illegal bargain
o So it is unnecessary to look at how he voted, as long as D knew that the money was in
exchange for certain performance by him in an official act
o Taking a bribe is not a legislative act nor part of the legislative process
Cooperating Witness
201 also criminalizes bribing witnesses before federal tribunals to influence their testimony
or paying gratuity for or because of testimony

United States v. Ware (1998)


D was arrested with co-Ds for cocaine distribution
o Co-Ds given a lesser charge for cooperation, D says that this was a violation of
201(c) by the Gov., Gov. cannot give something of value to a cooperating witness for
testifying (Singleton)
Courts have rejected Singleton, so does this court, Whoever in statute does not also refer to
the Gov.
o Canon of construction that a statute does not also refer to Gov. unless explicitly says so
Denies sovereign of a recognized prerogative or interest
Plea bargaining falls into this category
Various Congressional Acts and statutes permit leniency in exchange for
testimony or to give immunity, ruling in Ds favor would lead to an absurd
result an AUSA involved in a plea agreement should not be charged, that is
absurd
United States v. Ihnatenko (2007)
D contending that Gov. violated 201(c)(2) in providing compensation in exchange for
cooperation of a witness District court rejected, affirmed here
Courts have previously permitted allowing immigration benefits for a cooperating witness
o Witness here also given over $200k to housing providers over 15 months, immunity
from prosecution to him and his daughter, as well as resident alien cards
Are the cash benefits and paid housing outside of the bounds of what the Gov. is permitted to
give to a cooperating witness?
o Due to higher-ups tending to insulate themselves, informants are necessary to
dismantle organized crime, etc.
o Congress has also passed statutes permitting assistance and relocation to witnesses to
assure their safety
Court holds that 201(c)(2) does not prohibit Gov. from paying fees, housing, expenses and
cash rewards to a cooperating witness as long as they do not recompense corruption of the truth
of testimony
Salinas v. United States (1997)
County agreed to take federal prisoners in exchange for a federal grant to improve facilities
(far in excess of $10k floor of 666)
o A prisoner paid a sheriff to get a conjugal visit with his wife and gf
o On certain occasions D (deputy) did it, and got watches and a pickup truck in exchange
D contends that Gov. must prove that the bribe in some way affected federal funds (ex:
diverting or misappropriating funds)
o Court says that the broad language of the statute does not support such an
interpretation, no need for the bribe to affect the funds
o ...to be influenced or rewarded in connection with any business, transaction, or series
of transactions of the defined organization, government or agency
o Meant to apply to all cases in which an organization, government or agency receives
the statutory amount of benefits under a federal program

666 was preceded by the general bribery statute in 201, where public officials did not
necessarily include state and local officials, the point of thereafter enacting 666 to extend to
state and local officials
o Narrowing the scope of the statute as D contends would be incongruous with the
congressional intent in enacting the statute
United States v. DeLaurentis (2000)
District court dismissed 666 charge against supervisor of detectives for a police dept.
because of a lack of a nexus between the federal funds and the bribery
o Court here reverses
o D is a state/local official, town has received greater than $10k in federal funds, so D is
guilty so long as he accepted bribes to influence or reward him in the performance of his
police duties
Although it is not necessary to show that the bribery activities of D actually impacted the
federal funds, or had any direct bearing on expenditure, there must be some connection between
the bribery and a federal interest
o Here, the federal funds came from DOJ to pay for an additional police officer on patrol
o D accepted bribes for interceding with the town council to permit license renewal for a
bar that was under investigation by his division (meant to enforce alcohol laws)
The evidence would permit a rational jury to conclude that Ds actions allowed the problem
establishment to stay open leading to an impact on police allocation of manpower, to a
detriment to overall police activities
o Plus, the officer being paid by the federal funds was sent to calls at this bar
o Court parallels this case with Salinas, dismissal reversed and cause remanded
Sabri v. United States (2004)
D was a real estate developer and offered bribes to councilman
o The councilman was a member of a community development agency set up by the city
council, which was receiving federal funding ($23M)
District court dismissed under theory that the law was invalid for not requiring a nexus
between the bribe and the federal funds
o Reversed in court of appeals, constitutional per N&P Clause fro serving the objects of
congressional spending power
666 is supported by the N&P Clause, by protecting Congress powers under the Spending
Clause to ensure the proper spending of federal funds
o Corruption need not be so limited (requiring a nexus) for it to nonetheless affect the
federal interest and impact the integrity of federal funds
Court holds statute to be constitutional
United States v. Copeland (1998)
Conviction for bribery under 666 vacated
o D was a manager at Lockheed Martin, and referred work to his friend Winders
whereby Lockheed would pay abnormally high commissions and in return D received
$15k (as well as with various others)
Lockheed is a prime contractor for the US DOD, but Ds state that it is not within the scope of
the statute

o Must be a federal assistance k, not just any commercial contractual relationship