TABLE OF AUTHORITIES

CASES                                                                                                                                                       Page No.

McNally v. United States, 483 U.S. 350, 107 S.Ct. 2875 (1987)      21

*United Sates v. Barber, 668 F.2d 778 (4th Cir. 1982)    18, 19

United States v. Bohonus, 628 F.2d 1167 (9th Cir. 1980)                33

United States v. Brown, 540 F.2d 364 (8th Cir. 1976)      32

United States v. Brumley, 116 F.3d 728 (5th Cir. 1997), petition for cert. filed,    66 U.S.L.W. 3204 (U.S. Sept. 15, 1997) (No. 97-486).               25

United States v. Bush, 522 F.2d 641 (7th Cir. 1975)         32

United States v. Conlon, 628 F.2d 150 (D.C. Cir. 1980)  12, 13

United States v. Czubinski, 106 F.3d 1069 (1st Cir. 1997)              26, 30, 31

United States v. Diggs, 613 F.2d 988 (D.C. Cir. 1979)     17

United States v. Feldman, 711 F.2d 758 (7th Cir. 1983)  15

United States v. Gorman, 807 F.2d 1299 (6th Cir. 1986) 21

United States v. Gray, 790 F.2d 1290 (6th Cir. 1986), rev'd sub nom. McNally      v. United States, 483 U.S. 350, 107 S.Ct. 2875 (1987)   32

*United States v. Holzer, 816 F.2d 304 (7th Cir. 1987), vacated in light of  McNally, 484 U.S. 807, 108 S.Ct. 53 (1987)     1, 21-23, 25, 34

United States v. Keane, 522 F.2d 534 (7th Cir. 1975)      15, 17, 19

United States v. Lemire, 720 F.2d 1327 (D.C. Cir. 1983) 13, 17

United States v. Lovett, 811 F.2 979 (7th Cir. 1987)         17

United States v. Mandel, 591 F.2d 1347 (4th Cir.), aff'd, 602 F.2d 653 (1979)      (en banc)       17

United States v. McNeive, 536 F.2d 1245 (8th Cir. 1976)                26, 31, 32

United States v. Mississippi Valley Generating Co., 364 U.S. 520, 81 S.Ct. 294 (1961)           21

United States v. Newman, 664 F.2d 12 (2d Cir. 1981)     17

United States v. Rabbit, 583 F.2d 1014 (8th Cir. 1978)   24

United States v. ReBrook, 58 F.3d 961 (4th Cir. 1995)    19

United States v. Sawyer, 85 F.3d 713 (1st Cir. 1996)       16, 21, 26-30

*United States v. Silvano, 812 F.2d 754 (1st Cir. 1987)  1, 16, 17

United States v. Sun-Diamond Growers of California, CR 96-0193 (RMU) (D.D.C. 1997) (Transcript of Sentence)                3

United States v. Sun-Diamond Growers, 964 F.Supp. 486 (D.D.C. 1997)   13

STATUTES

18 U.S.C. § 1001    2, 20

18 U.S.C. § 1346    1, passim

18 U.S.C. § 1512    2

18 U.S.C. § 201      2, 5, 24

21 U.S.C. § 622      2, 5, 24

5 U.S.C. § 7353      2, 5, 25

OTHER MATERIALS

134 Cong. Rec. S17,360-02 (daily ed. Nov. 10, 1988)       21

George D. Brown, Should Federalism Shield Corruption? -- Mail Fraud, State Law and Post-Lopez Analysis, 82 Cornell L. Rev. 225          31

I.

INTRODUCTION

                Defendant's contention that eleven of the twelve honest services fraud counts should be dismissed because the indictment "fails to charge that [defendant] Espy engaged in any conduct with specific intent to alter his official acts as a result of the alleged gratuities,"^[1]("Def.'s Mem.") at 9. reveals not only a fundamental misunderstanding about the pleading and proof requirements for a § 1346 prosecution, but also a contrived reading of selected portions of the charging allegations of the indictment. 

                Contrary to defendant’s assertion, honest services fraud -- for pleading or proof purposes -- is not limited to cases involving a quid pro quo.  Rather, honest services fraud also includes the intentional failure of a public official to disclose material information, United States v. Silvano, 812 F.2d 754, 759 (1st Cir. 1987) as well as the acceptance of numerous gratuities coupled with diverse active efforts of concealment, United States v. Holzer, 816 F.2d 304 (7th Cir. 1987), vacated in light of McNally, 484 U.S. 807, 108 S.Ct. 53 (1987).  Defendant attempts to disconnect and disregard various of the seven component elements of the scheme alleged.  However, the indictment, when read as a whole (as it must be), charges defendant, a senior federal public official, with honest services fraud -- however defined.  The defendant’s fraud in the case at bar, according to the indictment, has seven component parts: (i) engaging in a pattern of soliciting and accepting gratuities from persons and entities who were regulated by and/or had matters pending before his office; (ii) concealing his receipt of things of value by not reporting them on the required public Financial Disclosure Reports; (iii) making false pretenses for the purpose of justifying official travel to obtain the gratuities; (iv) concealing his activities concerning the receipt of gratuities by lying to federal investigators and providing them with a false and altered document; (v) mailing "reimbursements" of certain gratuities uncovered by the press to make his actions appear benign and disguise his intent in soliciting and accepting the gratuities; (vi) lying to the Office of the President about the extent of gratuities received; and (vii) misusing government assets and causing the expenditure of public funds for his personal benefit.  The indictment alleges that each of these seven component parts of the scheme was in express derogation and in violation of a host of criminal statutes, including, inter alia, 18 U.S.C. §§ 201(c)(1)(B), 1001, 1512(b)(2)(A) and (B), 21 U.S.C. § 622, and civil statute 5 U.S.C. § 7353. 

                The indictment, for the reasons explained below, sufficiently charges an honest services scheme under 18 U.S.C. § 1346.

II.

ALLEGATIONS OF INDICTMENT: HONEST SERVICES FRAUD

                The indictment charges defendant with honest services fraud counts 1 through 12 in the following particulars:  On or about December 24, 1992, the President-Elect of the United States announced defendant Alphonso Michael Espy (hereinafter "defendant") as his selection for Secretary of the United States Department of Agriculture (hereinafter "USDA").   (Indictment ¶ 2).  Confirmed by the United States Senate, defendant served in this position from January 22, 1993 until December 31, 1994.  (Id.)  While serving as USDA Secretary, defendant wielded an extraordinary amount of discretionary power over those persons, firms, and entities who did business with or were regulated by USDA.^[2]

A.            DEFENDANT’S FIDUCIARY OBLIGATIONS

                Upon selection as Secretary of Agriculture, defendant took on fiduciary obligations to the United States, its citizens, the President and the USDA.  This obligation imposed upon defendant the duty to perform his job free from deceit, fraud, dishonesty and self-enrichment, the duty to obey criminal and civil laws and regulations, the duty to neither solicit nor accept things of value from persons or entities with business pending before or regulated by the USDA, and the duty to disclose to the government and the public material information as required.  (Id. at ¶ 4).

B.            THE FIDUCIARY OBLIGATIONS BREACHED BY DEFENDANT

                The rights of the United States, its citizens, the officials of the Executive Office of the President, and the USDA that were contravened by this scheme included, among others, (i) their right to defendant's conscientious, loyal, faithful, disinterested services, actions, and performance of his official duties free from dishonesty, deceit, official misconduct, willful omission and fraud; (ii) their right to have defendant conduct his official duties in accordance with the relevant laws and regulations, free from his receipt of gifts and gratuities from persons and entities doing business with, regulated by, or having interests that could be substantially affected by, the USDA; (iii) their right to not have the defendant use government assets and expend public funds for his personal benefit; (iv) their right to accurate and complete personal financial information disclosed by defendant as required by law and regulation; and (v) their right to truthful and complete responses from defendant when inquiries were made by federal investigators and representatives of the Office of the President. (Id. ¶6).          

                1.             Solicitation And Acceptance Of Things Of Value

                                From Regulated Entities

                Within weeks of being selected as the President-Elect's choice for Secretary of Agriculture, defendant Espy began soliciting and accepting things of value from individuals and entities with business before, regulated by and seeking official action by the USDA in violation of numerous federal statutes including 5 U.S.C. § 7353, 18 U.S.C. § 201, and 21 U.S.C. § 622.  (Id. at ¶ 7-9).  The gratuities solicited and accepted by defendant included, inter alia, an all expenses paid weekend party in Russellville, Arkansas on May 14-16, 1993 from Tyson Foods, Inc.; round trip air transportation for his girlfriend and two tickets to Tyson Foods’ skybox for the January 15, 1994 NFL National Conference Championship in Dallas, Texas from Tyson Foods, Inc.; two tickets to the June 16, 1993 NBA Championship game in Chicago from Quaker Oats; two tickets to the September 11-12, 1993 U.S. Open Tennis Tournament in New York from Sun-Diamond Growers of California and Richard Douglas; five tickets to the January 30, 1994 NFL Super Bowl in Atlanta, Georgia -- one from Oglethorpe Power Corp. and its agents, and four from Fernbank, Inc.; and, in addition, numerous other items including luggage, a crystal bowl, four seats at the 1993 Presidential Inaugural Dinner, other sporting event tickets, employment for his girlfriend, limousine services, cash and contributions to his brother's failed congressional campaign.  (Id. ¶ 9).  Over the course of a fifteen month period, defendant solicited and accepted 18 gratuities from six entities and/or their agents totaling an approximate value in excess of $35,000.  (Id.).  Each of these gratuities was solicited and received by defendant in violation of the laws and regulations of the United States and in detriment to the interests of the American public. 

                2.             Defendant’s Concealment Of Gratuities From The Public

                Defendant hid his receipt of gratuities from public scrutiny by not identifying those he was obligated by law to disclose on a public financial report.  As a high-ranking Executive Branch official, defendant was required by law and regulation to fully and accurately publicly disclose his personal financial interests through a Public Financial Disclosure Report SF-278.  (Id. ¶10).  This report specifically required disclosure of, among other things, all gifts aggregating $250 or more in value from any one source. (Id.)  Despite this obligation to disclose, defendant omitted from his financial disclosure report for the 1993 calendar year $9,561 in gratuities, gifts and things of value and from his financial disclosure report for the 1994 calendar year $3,191 in gratuities, gifts and things of value.  (Id.)

                3.             Defendant’s False Pretenses Regarding The

                                Purposes Of Certain Travel

                Defendant's efforts to conceal his receipt of gratuities were not simply limited to non-disclosure on reports, but included his making false representations and pretenses to USDA personnel regarding the purpose of his travel and the necessity of his attendance in his official capacity at certain functions.  (Id. ¶11).  Thus, to justify his travel to and presence at the Tyson complex in Russellville, defendant accepted an invitation to speak in his official capacity to the Arkansas Poultry Federation, while in truth defendant went to Russellville to attend the weekend party as a guest of Tyson Foods. (Id.)  To justify his presence in Dallas where he attended the 1994 NFL National Conference Championship, defendant arranged to meet with a local agent of the USDA Office of Inspector General.  (Id.)  And after being advised that there was no official USDA events scheduled for the 1994 Super Bowl in Atlanta, defendant caused his staff to schedule and attempt to schedule various official USDA meetings in Atlanta the weekend of the game so as to justify his travel to Atlanta and his attendance at the Super Bowl. (Id.)

                4.             Defendant’s False Denials To Investigators

                After the press publicly reported some of defendant’s criminal acts in March 1994, defendant’s efforts at further concealment included lying to federal investigators on multiple occasions and to officials of the Executive Office of the President.  (Id. ¶12).  Defendant, on April 1, 1994, in response to questioning by Special Agents of the USDA Office of Inspector General, concealed the fact that he and his girlfriend were, in May 1993, at the Tyson complex as guests of Tyson Foods for a weekend birthday party, complete with lodging, food, drink and professional musical entertainment, and lied about why he returned to Washington, D.C. on a Tyson Foods' jet.  (Id.).  During this interview, the agents asked defendant to provide a copy of his itinerary for the weekend of January 15-16, 1994 to Dallas, Texas.  (Id.).  Defendant, in response, produced an altered travel itinerary which deleted all references to defendant's girlfriend, the Chairman of Tyson Foods, limousine service provided by Tyson Foods, and the NFL National Conference Championship game which defendant and his girlfriend attended as guests of Tyson Foods. (Id.) 

                About eight weeks later, on June 1, 1994, defendant falsely stated to FBI Agents that he attended the 1993 NBA Championship playoffs in Chicago with a ticket provided by Richard Douglas when defendant had solicited and obtained the two tickets from the Chairman of Quaker Oats Co., an entity regulated by USDA.  (Id.)  Defendant further lied to the Agents when he stated that he could not recall any time when he accepted favors, benefits or other gifts from any organizations or companies other than Tyson Foods, when in fact he had received things of value from Sun-Diamond Growers and Richard Douglas totaling approximately $20,400; Smith Barney totaling $2,200; Quaker Oats Co. totaling $90; Fernbank Mississippi totaling $850; and from EOP.  (Id.).

                5.             Defendant’s Efforts To Disguise His Intent In

                                Receiving Gratuities

                As the acceptance of particular gifts and gratuities became known to the public and the authorities, defendant attempted to conceal the true extent of his scheme and the true nature of his activity by attempting to make his intent appear benign.  (Id. ¶ 13).  In an effort to disguise his intent to accept illegal gratuities and conceal his prior concealment efforts, defendant issued and mailed "reimbursement" checks to individuals who had provided him with gifts and gratuities. (Id).  Thus, on March 18, 1994, the day after the Wall Street Journal published an article revealing, inter alia, defendant's acceptance of tickets to the January 16, 1994 NFL National Conference Championship game from Tyson Foods, defendant issued a $68 check to the Chairman of Tyson Foods. (Id.).  On June 2, 1994, the day after FBI agents questioned defendant about his travel to Russellville as a guest of Tyson Foods, defendant issued a $69 check to the Arkansas Poultry Federation for lodging at the Tyson complex on May 15, 1993. (Id.).  On August 25, 1994, defendant issued a $90 check to the Chairman of Quaker Oats for the two tickets to the June 18, 1993 NBA Championship game in Chicago after press reports on August 7, 1994 stated that Quaker Oats provided the tickets used by defendant and Douglas.  (Id.).  Shortly after the appointment of the Independent Counsel on September 9, 1994 to investigate, inter alia, whether defendant accepted gratuities and gifts including tickets to sporting events, defendant on September 14, 1994 made payment of $700 to a Trustee of Fernbank for four tickets to the January 30, 1994 Super Bowl.

                6.             Defendant’s Lies To Office Of The President Of

                                The United States

                On September 30, 1994, in response to questions by the Chief of Staff of the President of the United States concerning whether Espy had told the Office of the President about all gratuities he received, defendant stated in substance “there’s nothing else out there," (Id. ¶ 12) when in fact he knew he had received and not disclosed to the Chief of Staff gratuities and things of value from Sun-Diamond and Richard Douglas totaling approximately $20,400; tickets to a Presidential Inaugural Dinner totaling approximately $6,000 from Tyson Foods, Inc.; and lodging, meals, and entertainment at Tyson Management Center totaling approximately $1,726; an airplane ticket for his girlfriend so she could meet him at the Dallas Cowboys / Green Bay Packers playoff game totaling approximately $1,000 from Jack Williams, a lobbyist for Tyson Foods, Inc.; and a Superbowl ticket valued at $2,200 from Smith Barney.  (Id.)

                7.             Defendant’s Use Of Government Funds For Personal Benefit

                Additionally, as part of the “honest services fraud,” defendant, as Secretary of Agriculture, diverted and misused government assets for his personal use rather than in the best interests of the public.  On or about January 22, 1993, defendant requested that the USDA assume the lease payments on a Jeep Cherokee he had leased before becoming Secretary of Agriculture.  (Id. ¶14).  Entitled to a USDA-leased limousine and a USDA driver for official uses as Secretary, defendant falsely represented to USDA officials that he would use the Jeep Cherokee in the Washington, D.C. area as his official automobile, eliminating the necessity for the USDA to supply him with a limousine and driver. (Id.).  Relying on these representations, the USDA agreed and assumed the lease payments for the period of February 1993 - September 1993. (Id.).  However, contrary to these representations,  (1) defendant kept the vehicle in his home state of Mississippi through in or about November 1993 where he used it for his personal use, and (2) on or about April 5, 1993 and continuing through on or about December 31, 1994, defendant requested and used a USDA limousine and driver in Washington, D.C. (Id.).  By check dated September 15, 1994, seven days after appointment of Independent Counsel, defendant made payment of $6,204 to the USDA for his personal use of this Jeep Cherokee leased by the USDA. (Id.).

III.

ARGUMENT

A.            THE LEGAL STANDARD FOR TESTING ALLEGATIONS

                OF INDICTMENT

                An indictment is sufficient if it clearly informs the defendant of the precise offense for which he is accused so that he may prepare his defense.  United States v. Conlon, 628 F.2d 150, 155 (D.C. Cir. 1980) (citing Russell v. United States, 369 U.S. 749, 763-64, 82 S.Ct. 1038, 1046-47 (1962) and United States v. Debrow, 346 U.S. 374, 377-78, 74 S.Ct. 113, 115-16 (1953)).  The general rule is that the indictment must state the essential elements of the offense and be supplemented with enough detail to apprise the accused of the particular offense with which he is charged.  Id.

                The elements of a violation of the mail or wire fraud statute are (1) a scheme to defraud,  and (2) use of a wire or the mails to further that scheme.  United States v. Lemire, 720 F.2d 1327, 1334-35 (D.C. Cir. 1983) (citing cases).  The government need neither prove nor allege that the scheme was ultimately successful or that the intended victim actually suffered an injury.  United States v. Sun-Diamond Growers of California, 964 F.Supp. 486, 492 (D.D.C. 1997) (citing United States v. Pollack, 534 F.2d 964, 971 (D.C. Cir. 1976)).

B.            THE INDICTMENT SUFFICIENTLY ALLEGES AN HONEST SERVICES SCHEME TO DEFRAUD

                The indictment fails to allege an honest services scheme to defraud recognizable under 18 U.S.C. § 1346, according to defendant, because “the indictment fails to allege that Mr. Espy engaged in any official act . . . in exchange for the . . . gratuities or otherwise failed to render ‘honest services’ as Secretary of Agriculture or that he had any specific intent to do so.”  (Def.'s Mem. at 1) (emphasis added).  Although these three assertions are written in the disjunctive, the argument’s ultimate conclusion is that, since the indictment does not allege a quid pro quo for the gratuities, it “fails to allege ‘honest services’ fraud.”  (Def’s Mem. at 9).

                Defendant's argument reveals a fundamental misunderstanding of the scheme alleged in the indictment and of the factual and legal requirements of a scheme to defraud the citizens of their right to honest governmental services, and is without merit.

                1.             The Allegations Of The Indictment Must Be Viewed

                                As A Whole                                                                

                As an initial matter, defendant, for the purposes of his motions, segments the scheme charged (and doesn’t even acknowledge -- let alone mention -- five of the 7 component elements of the scheme).  Defendant addresses only "the mere violation of a gratuity statute" (Id. at 5), and the “cover up . . . through reimbursement” in Counts 9-12, (Id. at 6), asserting that these acts, standing alone, are not actionable under the mail fraud statute.  He does not, however, even attempt to argue that his other actions involved in the scheme -- his pattern of soliciting and receiving gratuities, his failure to disclose these gratuities on his public financial disclosure form in direct contravention of law, his other acts of concealment including lying to investigators and representatives of the President, or his misuse of government funds -- do not constitute an honest services scheme.  Yet these items that defendant omits to address are essential components of the scheme alleged.

                Defendant’s crabbed and myopic reading violates the well-settled rule that a scheme is not to be reviewed by its component parts but rather as a whole.  United States v. Feldman, 711 F.2d 758, 764 (7th Cir. 1983) ("Not all aspects of a scheme need be illegal if considered separately; rather, it is sufficient that the scheme as a whole involves fraudulent conduct."); United States v. Keane, 522 F.2d 534, 544 (7th Cir. 1975) (same).  Thus, whether or not an act of nondisclosure by itself or acceptance of a single gratuity by itself can amount to honest services fraud is irrelevant.  The question before this Court is whether the scheme charged in this indictment, when viewed in its entirety, alleges a scheme to defraud under § 1346.

                The indictment alleges that defendant engaged in a pattern of: (i) illegally soliciting and accepting gratuities from persons and entities who were regulated by and had matters pending before his office; (ii) concealing his receipt of the gratuities and not reporting them on the required public financial disclosure reports; (iii) making false pretenses for the purpose of his travel to accept certain gratuities; (iv) concealing his activities concerning the receipt of gratuities by lying to investigators regarding his actions; (v) mailing “reimbursements” of certain gratuities to disguise his intent and make his acceptance appear benign; (vi)  lying to the Office of the President about the extent of gratuities he received; and (vii) misusing government property for personal benefit -- all in violation of the laws and regulations of the United States and in detriment to the interests of the public.^[3]  Viewing the scheme as the whole of its seven component parts, an analysis of the case law cited by defendant, in fact, supports the legal sufficiency and the validity of the scheme, as charged in the indictment. 

                2.             There Is No Requirement That A Quid Pro Quo Be Alleged

                Defendant's argument that a quid pro quo or selling of office must be alleged in the indictment is simply wrong and has no case support whatsoever.  A "scheme to defraud" as used in the mail fraud statute is a plan to deprive another of money, property, or the right to honest services through the use of deceit.  United States v. Sawyer, 85 F.3d 713, 732 (1st Cir. 1996).  Public officials act as "‘trustee[s] for the citizens and the State . . . and thus owe[] the normal fiduciary duties of a trustee, e.g., honesty and loyalty’ to them."  Silvano, 812 at 759 (quoting United States v. Mandel, 591 F.2d 1347, 1363 (4th Cir.), aff'd in relevant part, 602 F.2d 653 (1979) (en banc)).  Out of this fiduciary relationship flows an affirmative duty on the part of government officials to disclose material information of which they have knowledge.  Id.  While, as defendant points out, not every breach of fiduciary duty or every instance of dishonest or disloyal conduct by a government official violates the mail fraud statute, an official's breach of a fiduciary duty is actionable under that statute when it encompasses an intentional breach of a duty to disclose material information.  Id;^[4] cf. United States v. Lemire, 702 F.2d 1327, 1337 & n.13 (D.C. Cir. 1983) (holding in the private sector, failure to disclose material information not actionable under mail fraud statute without proof that such failure poses an identifiable harm, apart from the breach itself, to employer but noting without deciding that in public sector, mere failure to disclose may be enough).   While many cases finding an honest services fraud often involve government officials accepting bribes or voting on matters in which they have a personal interest, these cases neither establish a bright line test for, nor create an exhaustive list of actions that constitute the fraudulent deprivation of honest government services -- nor could they.  Cf. United States v. Diggs, 613 F.2d 988, 997, n.48 (D.C. Cir. 1979) ("The law does not define fraud; it needs no definition; it is as old as falsehood and as versable [sic] as human ingenuity.") (quoting Weiss v. United States, 122 F.2d 675 (5th Cir. 1941)). 

                In United Sates v. Barber, 668 F.2d 778 (4th Cir. 1982), the defendant was the Commissioner of a state Alcoholic Beverage Control Commission, which held a monopoly on alcoholic beverage sales in that state.  Id. at 780-81.  Through his position, defendant (1) manipulated a "withdrawal system" and a "breakage system" to obtain free liquor for himself and others at the knowing expense of the liquor companies (not the state) by submitting to them false documentation and (2) solicited and accepted cash payments from certain of these liquor companies.^[5]  Id. at 781, 783.  The evidence presented at trial revealed that the defendant did not provide official favors to the liquor companies in exchange for these items.^[6]  Id. at 783.  Affirming the defendant's mail fraud conviction based, in part, on an honest government services theory, the court noted that "[t]he public, with a strong interest in upstanding conduct in the affairs of state enterprise, and frustrated of opportunities to monitor those affairs because of the falsity employed, was also deceived by the utilization of forms disguising the true nature of the ‘breakage’ and the ‘withdrawals.’"  Id. at 785.  Thus, the defendant defrauded the state and its citizens of their right to honest and faithful government.  Id.

                 As the cases cited above demonstrate, there is no legal requirement that an indictment include the allegation that an official sold his office, and it certainly is not a requirement to properly state a § 1346 offense.^[7]

                3.             A Public Official Who Conceals Material

                                Information Commits Honest Services Fraud -- Holzer

                Federal Executive officials who receive things of value during their time in office have a statutory obligation to truthfully disclose them pursuant to the requirements of the Executive Branch Personnel Public Financial Disclosure Report (“Disclosure Report”), which provides on its face:

Title I of the Ethics in Government Act of 1978 . . . requires the reporting of this information [on form SF 278].  This information [is] reviewed by

Government officials to determine compliance with applicable Federal laws and regulations . . . 

The rationale for the official’s obligation to report things of value received is, in part, to report possible conflicts of interest violations and allow the supervising agency to take appropriate action.  According to the Disclosure Report:

A basic premise of the statutory financial disclosure requirements is that those having responsibility for review of reports . . . must be given sufficient information by reporting individuals concerning the nature of their outside interests and activities so that an informed judgment can be made with respect to compliance with applicable conflict of interest laws and standards of conduct regulations. . . .  This report . . . provides a mechanism for determining actual or potential conflicts between [the official’s] public responsibilities and [their] private interests and activities and allows [the] agency to fashion appropriate protections against such conflicts when they first appear.

                After having taken things of value from a regulated entity, when an official refuses to supply the information required and/or lies to federal investigative agencies about the nature and extent of what he receives, he not only conceals the fact of the receipt and value of his felonious goodies in plain violation of 18 U.S.C. § 1001 -- he also conceals the fact of a conflict and precludes his agency from fashioning appropriate remedies.  The resulting conflicts of interest are destructive to public confidence in government.  As the Supreme Court observed concerning a sister conflict of interest statute:

The [conflict of interest] statute is directed at an end which endangers the very fabric of a democratic society, for a democracy is effective only if the people have faith in those who govern, and that faith is bound to be shattered where high officials and their appointees engage in activities which arouse suspicion of malfeasance and corruption.

United States v. Mississippi Valley Generating Co., 364 U.S. 520, 562, 81 S.Ct. 294, 315 (1961).  And, the same suspicions of malfeasance and corruption are equally applicable to the gratuities statute, since “[t]he purpose of Section 201[(c)] is to reach all situations in which a government agent’s judgment concerning his official duties may be clouded by the receipt of an item of value given to him by reason of his position.”  United States v. Gorman, 807 F.2d 1299, 1304 (6th Cir. 1986) (emphasis added).

                A factually-analogous case to the one at bar is United States v. Holzer, 816 F.2d 304 (7th Cir. 1987), vacated in light of McNally, 484 U.S. 807, 108 S.Ct. 53

(1987).^[8]  In Holzer, a county judge repeatedly solicited and accepted money from attorneys who had matters pending before him.  Id. at 305-07.  The advances although disguised as "loans," were not repaid by the defendant.  Id.  An Illinois state rule required each circuit judge to file an annual ethics statement listing creditors to whom the filing judge owed over $1,000 and disclosing any potential conflicts of interest.  Id. at 307. Until defendant became aware that he was under investigation for his acts, he disclosed none of the attorneys from whom he had "borrowed" money.  Id.  Furthermore, in response to questionnaires submitted by a citizens' group when Holzer was running for election on two occasions, defendant stated that he had accepted "no gifts at all" and "absolutely no contributions, gifts, or favors of any kind at any time."  Id.  Judge Posner writing for the Circuit affirmed the defendant's conviction for mail fraud explaining:

to one party, and not telling the opposing counsel (let alone the public), he is concealing material information in violation of his fiduciary obligations.

                                                •               •               •               •               •

                Second, the systematic and long-continued receipt of bribes by a public official, coupled with active efforts to conceal the bribe-taking from the public and the authorities (as in Holzer’s [financial disclosure] filings and his response to voter questionnaires) is fraud (again in its elementary sense of deceit, and quite possibly in other senses as well), even if it is the public rather than counsel that is being kept in the dark.  It is irrelevant that, so far as appears, Holzer never ruled differently in a case because of a lawyer's willingness or unwillingness to make him a loan, so that his conduct caused no demonstrable loss either to a litigant or to the public at large.  See, e.g., United States v. Keane, 522 F.2d 534, 541, 546 (7th Cir. 1975); United States v. Lovett, 811 F.2d 979, 985 (7th Cir. 1987); United States v. Manton, 107 F.2d 834, 846 (2d Cir. 1939).  How can anyone prove how a judge would have ruled if he had not been bribed?

                Viewed in its entirety this complex scheme was intended to, and did, deprive the United States, its citizens, the Officials of the Executive Office of the President and the USDA of their right to defendant's honest services.  As such, and as the indictment alleges each of the elements required for a conviction (1) a scheme to defraud and (2) the use of the mails and/or wire to further the scheme, defendant's motion to dismiss Counts 1-7 and 9-12 of the Indictment should be denied.

Date: November 20, 1997                    Respectfully submitted,

                                                                                                OFFICE OF INDEPENDENT COUNSEL

                                                                                                In Re Alphonso Michael (Mike) Espy

                                                                                                __________________________________

                                                                                                Donald C. Smaltz, Independent Counsel

                                                                                                Theodore S. Greenberg

                                                                                                William F. Fahey

                                                                                                Roscoe C. Howard

                                                                                                Joseph P. Guichet

                                                                                                103 Oronoco Street, Suite 200

                                                                                                Alexandria, Virginia  22314

                                                                                                Phone:  (703) 706-0010

                                                                                                Fax:      (703) 706-0076