UNITED STATES of America, Appellee,
SUN-DIAMOND GROWERS OF CALIFORNIA, Appellant.
United States Court of Appeals,District of Columbia Circuit.
Argued Dec. 11, 1997.
Decided March 20, 1998.
Appeal from the United States District Court for the District of Columbia (No. 96cr00193-01).
Eric W. Bloom, Washington, DC, argued the cause for appellant. With him on the briefs were Richard A. Hibey, Michael K. Atkinson and Charles B. Klein.
Theodore S. Greenberg, Deputy Independent Counsel, Alexandria, VA, argued the cause for appellee. With him on the briefs were Donald C. Smaltz, Independent Counsel, Los Angeles, CA, and Charles M. Kagay, Chief Appellate Counsel, San Francisco, CA.
Carter G. Phillips and Griffith L. Green, Washington, DC, were on the brief for amicus curiae American League of Lobbyists.
Before: WILLIAMS, HENDERSON and TATEL, Circuit Judges.
STEPHEN F. WILLIAMS, Circuit Judge:
Sun-Diamond is a large agricultural cooperative owned by individual member cooperatives including Diamond Walnut Growers, Sun-Maid Growers of California, Sunsweet Growers, Valley Fig Growers, and Hazelnut Growers of Oregon. It came within the sights of an independent counsel, Donald C. Smaltz, who was responsible for investigating allegations of unlawful activity by former Secretary of Agriculture Mike Espy. The independent counsel charged Sun-Diamond with making illegal gifts to Espy, committing wire fraud, and making illegal campaign contributions.
Linking Sun-Diamond and Espy was the figure of Richard Douglas. As Sun-Diamonds vice president for corporate affairs, Douglas was responsible for (among other things) representing the interests of the corporation and its member cooperatives in Washington. Given Sun-Diamonds business, the Department of Agriculture ("USDA") was naturally part of his bailiwick. According to performance evaluations signed by Sun-Diamonds president, Douglas was a diligent and able representative. He once described his approach to lobbying by paraphrasing Lord Palmerston: "We have no permanent friends or permanent enemies, only a permanent interest in Sun-Diamond Growers of California." Permanent friends aside, he had a long-time friend in Mike Espy-- the two had gone to college together at Howard University and had stayed close in the years since.
The crimes charged to Sun-Diamond grow out of two largely independent stories. One involves illegal gratuities given to Espy while he was Secretary of Agriculture, the other wire fraud and illegal contributions to the congressional campaign of the Secretarys brother, Henry Espy. We save the recitation of facts for the discussion of the distinct legal issues raised by each story.
Sun-Diamond argues that under the facts alleged and proven it could not properly be found guilty of any of the offenses, and, as to the illegal gratuities, that the trial courts charge allowed the jury to convict on a theory precluded by the statute. We disagree with Sun-Diamonds claims of entitlement to dismissal of the indictment and to acquittal, but we agree that the jury charge on the gratuity counts was error and requires a remand for a new trial. Sun-Diamond also attacks the sentence, saying that the trial judge, having increased the offense level by eight for Espys high-level status as required by the Guidelines, wrongly bumped it up another two levels on the theory that the Guidelines inadequately took that status into account. It also objects to the trial courts imposition of probationary conditions on Sun- Diamonds member cooperatives, who were neither defendants nor agents of the defendant. We agree with Sun-Diamond on both sentencing points.
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The key dispute here is over how close a link the government must show between Sun-Diamonds gifts and official acts that the Secretary of Agriculture performed or might perform. The indictment detailed two specific issues on which Sun-Diamond had a clear interest in favorable action by the Secretary. The first was the market promotion program ("MPP"), a grant fund administered by USDA and designed to prop up U.S. agricultural exports. See 7 U.S.C. §5623. The Secretary of Agriculture was authorized to allocate MPP money to trade organizations like Sun-Diamond, who would in turn use it to defray overseas marketing expenses. According to the independent counsel, between 1990 and 1995 the Sun-Diamond member cooperatives received $23.9 million from MPP. In August 1993 Congress enacted budget legislation requiring the Secretary to give preference to "small-sized entities" in disbursing MPP funds. Omnibus Budget Reconciliation Act of 1993, Pub.L. No. 103-66, ' 1302(b)(2)(A), 107 Stat. 312, 331 (1993). Sun-Diamond and its members were hardly mom-and-pop organizations--they reported net sales of $648 million for fiscal year 1993--but many of their constituent growers were quite modest in size. Sun-Diamond therefore wanted the Secretary to adopt a regulatory definition of "small-sized entities" that would include cooperatives such as its members.
Sun-Diamond also took an interest in federal regulation of methyl bromide, a pesticide used by some of the growers who belonged to its member cooperatives. In late 1992 the Environmental Protection Agency began review of a proposal to phase out the use of the chemical in the United States because of its potential to contribute to ozone depletion. Although the methyl bromide issue was not technically before USDA, a rational jury could conclude from the trial evidence that Sun-Diamond wanted Espy to help persuade EPA to delay or reject the proposed phase-out.
Count I of the indictment charged the company with giving Espy (via Douglas) around $5,900 in illegal gratuities: tickets to the 1993 U.S. Open Tennis Tournament worth $2,295, luggage worth $2,427, meals worth $665, and a framed print and crystal bowl worth $524. The indictment further alleged that Sun-Diamond reimbursed Douglas for these outlays, treating them as business expenses.
Sun-Diamond challenges Count I, asserting that the gratuity statute, 18 U.S.C. § 201(c)(1)(A), requires the government to prove a nexus between each unauthorized gift and some specifically identified official act--performed or hoped to be performed--for which the gift was given. Because the indictment failed to allege any such one-to-one relationship, contends Sun-Diamond, the district court erred in denying its motion to dismiss Count I. See United States v. Sun-Diamond Growers of California, 941 F.Supp. 1262 (D.D.C.1996) (denying motion to dismiss); United States v. Sun-Diamond Growers of California, 964 F.Supp. 486 (D.D.C.1997) (denying renewed motion for acquittal). In a narrower variation on this argument, Sun-Diamond also challenges the jury instructions, saying that they impermissibly allowed the jury to convict if it found that Sun-Diamond gave Secretary Espy things of value merely in recognition of his official position, regardless of official acts that might have supplied the motivation. We reject Sun-Diamonds broader argument but agree with its challenge to the jury instructions, and it is with that challenge that we begin.
The gratuity statute provides:
18 U.S.C. § 201(c)(1)(A) (emphasis added).
The statute defines an "official act" as "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 such officials official capacity, or in such officials place of trust or profit." 18 U.S.C. § 201(a)(3).
The trial court charged the jury in full accord with the independent counsels theory that gifts motivated by an officials status or position run afoul of the statute, regardless of whether the donor had any intent to affect or reward official conduct. Indeed, time and again the jury instructions hammered home that theme:
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The language of the charge is far broader than that of the statute. To satisfy the criminal intent requirement embodied in the phrase "for or because of any official act," the giver must intend either to reward some past concrete official act or acts, or to enhance the likelihood of some future act or acts. This is the meaning we found in our most extensive sdiscussion of the gratuity statute, United States v. Brewster, 506 F.2d 62 (D.C.Cir.1974). In addressing the claim that a violation of the gratuity statute is a lesser included offense subsumed within a violation of the bribery statute, now codified at § 201(b)(1)(A), we necessarily compared the two provisions, explaining that the bribery provision required a more exacting showing of intent. Id. at 71-74. We characterized one aspect of the difference as follows:
Id. at 72 (emphasis added). As this passage makes tolerably clear, to say that the gratuity provision lacks a quid pro quo requirement is not to read the "official act" language out of the statute. It is only to say that, in contrast to bribery, the gratuity and the official act need not each motivate the other. But the gratuity statute by its terms does still require at least a unidirectional relationship--the gift must be "for or because of" the act.
The relation may be simply one of reward. "As the word gratuity implies, the intent most often associated with the offense is the intent to reward an official for an act taken in the past or to be taken in the future." United States v. Sawyer, 85 F.3d 713, 730 (1st Cir.1996) (construing virtually identical Massachusetts gratuity statute). Even in such a case, the giver presumably hopes that his gratuity will affect the recipients future conduct--and this was undoubtedly the concern that motivated Congress to bring rewards for past acts within the coverage of the statute. But, in contrast to bribery, it is enough under the gratuity statute if the defendant gives an unpromised benefit for a past governmental favor. And, whatever degree of intent to influence may be necessary for a bribe, a gift looking to future acts can be an unlawful gratuity where the giver is motivated simply by the desire to increase the likelihood of one or more specific, favorable acts. In summary, as we explained in Brewster, "under the gratuity section, otherwise than as provided by law . . . for or because of any official act carries the concept of the official act being done anyway, but the payment only being made because of a specifically identified act." 506 F.2d at 82 (emphasis added).
The independent counsel appears to accept this analysis of Brewster, but claims that in that decision we restricted application of the official act requirement to cases involving elected officials or candidates for elective office. Indeed, Brewster was a senator, and we noted that in cases involving elected officials the official act requirement served the important function of distinguishing illegal gratuities from ordinary campaign contributions. See id. at 73 n. 26, 81. But in a footnote we postponed the question of non-elected officials to another day, distinguishing and declining to express ultimate disagreement with United States v. Umans, 368 F.2d 725 (2d Cir.1966), a decision that dispensed altogether with the intent requirement in a case involving gratuities offered to I.R.S. agents. Brewster, 506 at 73 n. 26.
Even assuming the footnote could be read as suggesting a readiness to jettison the intent requirement in cases involving appointed officials, we disappointed any such expectation eight years later by reaffirming the official act requirement in United States v. Campbell, 684 F.2d 141 (D.C.Cir.1982). Campbell concerned a Superior Court judge who received free moving services from a trucking firm that he had treated remarkably lightly, issuing nominal or suspended sentences on over 1,000 traffic tickets. We approved a jury charge requiring "that the alleged gratuities be given and received knowingly and willingly, and for or because of an official act." Id. at 150 (emphasis added). To be sure, the attack in Campbell came from the defendants, who claimed a right to an even more restrictive charge. But Campbell cannot possibly be said to have stripped the statute of its "for or because of" requirement.
A detail from that case underscores how we have refused to allow the official act requirement to be satisfied by some vague hope of inducing warm feelings toward the donor. Campbell had served as Assistant Corporation Counsel for the District of Columbia before becoming a judge in 1973, and was reputed to have been "sympathetic to trucking interests" during that time. Id. at 149 n.13. Yet, responding to a somewhat unclear claim that the jury might have convicted for uncharged prior acts, we noted that "[i]t is not even clear which acts of Robert Campbell could have been the basis for [the trucking companys] gratuities prior to 1973, because sympathy to trucking interests does not constitute an official act." Id. at 149 n.14. Here, too, if Douglas furnished Espy with gifts merely to win his generalized sympathy for Sun-Diamond, those gifts would not be illegal gratuities, unless the jury could find that Douglas sought this generalized sympathy to influence Espy to perform one or more official acts sometime in the future.
At oral argument we questioned the representative of the independent counsel on the application of his theory to instances where an old friend of some newly appointed officeholder took him to a meal or sports event while his firm had matters pending before the officeholder. Counsel appeared to assert that this scenario fell within his view of the statute. Indeed, it would have been squarely within the district courts charge to the jury. But we trust that, should Congress someday decide to criminalize such conduct, it will not require that the gifts be given "for or because of any official act."
The independent counsel points to United States v. Secord, 726 F.Supp. 845, 847 (D.D.C.1989), as well as several decisions by other courts of appeals apparently holding that gifts motivated solely by the recipients official position may be illegal gratuities. See United States v. Evans, 572 F.2d 455, 480 (5th Cir.1978); United States v. Standefer, 610 F.2d 1076, 1080 (3d Cir.1979) (en banc); Umans, 368 F.2d at 730; United States v. Bustamante, 45 F.3d 933, 940 (5th Cir.1995); cf. United States v. Alessio, 528 F.2d 1079, 1082 (9th Cir.1976) (suggesting that donees ability to use his position for donors benefit was enough to satisfy the official act requirement). These decisions appear to leap from the gratuity statutes lack of a reciprocal quid pro quo requirement to an assumption that it has dispensed with any need to show intent focused on an official act or acts. Thus, the court in Bustamante says, "Generally, no proof of a quid pro quo is required; it is sufficient for the government to show that the defendant was given the gratuity simply because he held public office." 45 F.3d at 940. Any such leap disregards the explicit language of the statute and contradicts Brewster and Campbell. Other out-of-circuit cases seem to take the official act requirement more seriously. See, e.g., United States v. Muldoon, 931 F.2d 282, 287 (4th Cir.1991) ("an illegal gratuity is a payment made for an act by the recipient that might have been done without any payment") (citing Brewster); cf. Sawyer, 85 F.3d at 735-36 (construing virtually identical Massachusetts gratuity statute).
Finally, the independent counsel asserts that in United States v. Baird, 29 F.3d 647 (D.C.Cir.1994), we embraced his broad interpretation of the gratuity statute. The question in Baird was whether the conflict of interest statute, 18 U.S.C. § 203(a), requires the government to prove that a defendant knew the statute covered him. We held that the clause "otherwise than as provided by law," which appears both in § 203(a) and in § 201(c) (then codified at §§ 201(f) and (g)), did not embody such a scienter requirement; rather, it merely required a showing that the public official received money to which he was not lawfully entitled. Id. at 652. Although the Baird opinion cited approvingly to both Evans and Standefer, see id., it did not address directly the "for or because of any official act" language--doubtless because the conflict of interest statute at issue contained no such language.
Given that the "for or because of any official act" language in § 201(c)(1)(A) means what it says, the jury instructions invited the jury to convict on materially less evidence than the statute demands--evidence of gifts driven simply by Espys official position. The difference may not seem very great, for whenever a donor has matters actually or potentially pending before his donee, gifts motivated by the latters position will usually also be motivated by a desire to reward or elicit favorable official action. But the terms of the statute require a finding that the gifts were motivated by more than merely the givers desire to ingratiate himself with the official generally, or to celebrate the latters status.
In his effort to salvage the instructions, the independent counsel points to other portions of the charge in which the judge simply repeated the terms of the statute or the indictment verbatim, e.g., by reciting the words "for or because of an official act." These recitations could not possibly, however, have overcome the broader message. Thus the charge failed to give the jury an adequate understanding of the issues, see United States v. DeFries, 129 F.3d 1293, 1304 (D.C.Cir.1997), and the error cannot be called technical or harmless, see United States v. Lemire, 720 F.2d 1327, 1339 (D.C.Cir.1983). We reverse and remand for a new trial on Count I.
At the same time, we reject Sun-Diamonds broad attack on the indictment. Again Campbell controls. Campbell argued, much as Sun-Diamond does here, that the jury should have been required "to find that the gratuity was conferred with specific knowledge of a definite official action for which compensation was intended." 684 F.2d at 149. We rejected that argument, holding that it was sufficient for the jury to find that the trucking company had provided free services to Campbell because it believed the judge had been, or would later be, "generally lenient" in dealing with the companys voluminous traffic citations. Id. at 149-50. The government, we held, was not required to show that any particular free service provided to Campbell was earmarked for any particular ticket or tickets; leniency in a multitude of specific acts was enough. That an official has an abundance of relevant matters on his plate should not insulate him or his benefactors from the gratuity statute--as long as the jury is required to find the requisite intent to reward past favorable acts or to make future ones more likely.
Sun-Diamond was found guilty on Counts III and IV of committing wire fraud in violation of 18 U.S.C. §§ 1343 & 1346, and on Counts V through IX of violating the Federal Election Campaign Act, 2 U.S.C. §§ 441b(a) & 441f ("FECA"). Both sets of convictions flow from a scheme of Richard Douglas and James H. Lake to help repay the debts of the failed congressional campaign of Mike Espys brother Henry. The following facts about the scheme come from the testimony of Lake, who was granted immunity by prosecutors in exchange for his cooperation.
Lake was one of the founding partners of a Washington based firm, Robinson Lake Sawyer & Miller ("RLSM"), which handled communications and public relations matters for Sun-Diamond. Sun-Diamond retained RLSM for a fee of $20,000 a month; Douglas oversaw Sun-Diamonds dealings with RLSM and maintained his own office there. RLSM was a wholly-owned subsidiary of Bozell Worldwide, Inc. ("Bozell").
After Mike Espy became Secretary of Agriculture, Henry Espy unsuccessfully pursued election to his brothers vacant seat in Congress, building up a sizable campaign debt in the process. In February 1994 Douglas left a telephone message at Lakes office--a crucial act for jurisdiction over one of the wire fraud counts. When Lake contacted Douglas, he learned that Secretary Espy had asked Douglas for help in retiring his brothers campaign debt. Lake immediately offered to donate $1,000, the maximum permissible individual contribution. Douglas replied that he had to raise at least $5,000 fast, and that he needed Lakes help. He then proposed a way around the campaign finance restrictions. If Lake would get five RLSM employees (including Lake himself) to write a check for $1,000 each, Douglas would find a way for Sun-Diamond to reimburse them all. Lake knew the scheme was illegal--corporations are forbidden to make contributions "in connection with any election" for Congress, 2 U.S.C. § 441b(a), and no one may make a campaign contribution in the name of another person, 2 U.S.C. § 441f--but agreed to participate anyway. Lake testified that no one else at RLSM or Bozell knew about the plan.
Lake wrote a $1,000 check in his own name and then approached the four RLSM employees identified by Douglas. Three of them agreed to pay up. (A fourth-- presumably suspicious about the notion of a reimbursable campaign contribution--declined.) Lake then passed the checks worth $4,000 to Douglas, who deposited them in a "Henry Espy for Congress" account he had opened.
As the vehicle for reimbursement, Douglas settled on the Joint Center Dinner, an annual benefit for which RLSM and Lake had in the past routinely bought tickets on Sun-Diamonds behalf. Lakes staff prepared an internal RLSM document authorizing reimbursement to Lake for his supposed purchase of tickets to the dinner in the amount of $5,000 (even though he had raised only $4,000 for Henry Espy). The same document became part of the monthly invoice sent to Sun-Diamond, billing the client $5,000 for the fictitious dinner attendance on top of its $20,000 monthly retainer and other expenses. Lake received a $5,000 reimbursement check from Bozell, which he cashed and used to pay back the three other individual contributors (apparently pocketing the extra $1,000 for himself). Douglas, as part of his normal duties at Sun-Diamond, approved the payment to RLSM, which eventually went through. The net result: a $5,000 expenditure by Sun-Diamond, $4,000 of which went into Henry Espys campaign coffers and $1,000 into James H. Lakes pocket. The independent counsel charged that the scheme worked a fraud on Bozell and RLSM, depriving the former (albeit temporarily) of $5,000, and depriving the latter of the "honest services" of its agent Lake under 18 U.S.C. § 1346. The jury convicted, evidently convinced that at least one such deprivation occurred. The jury also found Sun-Diamond guilty of making illegal campaign contributions in violation of FECA, 2 U.S.C. §§ 441b(a) & 441f.
As a threshold matter, Sun-Diamond raises a challenge which it says goes equally to the wire fraud and FECA counts. Richard Douglass campaign contribution scheme cannot be attributed to it, Sun-Diamond argues, because Douglas was not acting with an intent to benefit the corporation. It is true, as the district court instructed the jury in this case, that an agents acts will not be imputed to the principal in a criminal case unless the agent acts with the intent to benefit the principal. Here, Sun-Diamond says, Douglass scheme was designed to--and did in fact--defraud his employer, not benefit it. In this circumstance, it strenuously argues, there can be no imputation: "[T]o establish precedent holding a principal criminally liable for the acts of an agent who defrauds and deceives the principal while pursuing matters within his self-interest merely because the agents conduct may provide some incidental benefit to the principal serves to punish innocent principals with no countervailing policy justifications." Appellants Reply Br. at 16 n.9.
This argument has considerable intuitive appeal--Sun-Diamond does look more like a victim than a perpetrator, at least on the fraud charges. The facts in the record, however--that Douglas hid the illegal contribution scheme from others at the company and used company funds to accomplish it--do not preclude a valid finding that he undertook the scheme to benefit Sun-Diamond. Part of Douglass job was to cultivate his, and Sun-Diamonds, relationship with Secretary Espy. By responding to the Secretarys request to help his brother, Douglas may have been acting out of pure friendship, but the jury was entitled to conclude that he was acting instead, or also, with an intent (however befuddled) to further the interests of his employer. The scheme came at some cost to Sun-Diamond but it also promised some benefit. See, e.g., United States v. Automated Medical Laboratories, Inc., 770 F.2d 399, 406-07 (4th Cir.1985) (agents conduct which is actually or potentially detrimental to corporation may nonetheless be imputed to corporation in criminal case if motivated at least in part by intent to benefit it); cf. Local 1814, International Longshoremens Association, AFL-CIO v. NLRB, 735 F.2d 1384, 1395 (D.C.Cir.1984) ("[T]he acts of an agent motivated partly by self-interest--even where self-interest is the predominant motive--lie within the scope of employment so long as the agent is actuated by the principals business purposes to any appreciable extent.") (quoting Restatement (Second) of Agency § 236 & comment b (1957)). Where there is adequate evidence for imputation (as here), the only thing that keeps deceived corporations from being indicted for the acts of their employee-deceivers is not some fixed rule of law or logic but simply the sound exercise of prosecutorial discretion.
And the answer to Sun-Diamonds claim of the absence of any "countervailing policy justification" is simply the justification usually offered in support of holding corporate principals liable for the illegal acts of their agents: to increase incentives for corporations to monitor and prevent illegal employee conduct. See Kevin B. Huff, Note, The Role of Corporate Compliance Programs in Determining Corporate Criminal Liability: A Suggested Approach, 96 Colum. L.Rev. 1252, 1263 & n.49 (1996). One might well question this justification--and scholars have. See, e.g., Daniel R. Fischel and Alan O. Sykes, Corporate Crime, 25 J. Legal Stud. 319 (1996) (arguing that corporate criminal liability spurs excessive monitoring and litigation costs and should be discarded in favor of civil liability); Jennifer Arlen, The Potentially Perverse Effects of Corporate Criminal Liability, 23 J. Legal Stud. 833 (1994) (arguing that strict corporate liability may deter corporate monitoring by making criminal exposure more likely, so that its imposition may increase the likelihood of crime). Moreover, the justification may be at its weakest in cases like this one, where the offending employee breaches a duty of honesty to the very corporation whose goals he aims to advance. In any event, Sun-Diamonds argument here, whatever its merit as an issue of policy, has no real grounding in the relevant statutes. And Sun-Diamond does not invoke the Constitution, which in any event would require either an overruling of the Supreme Courts rejection of a due process attack on corporate liability, New York Cent. & Hudson River R.R. Co. v. United States, 212 U.S. 481, 29 S.Ct. 304, 53 L.Ed. 613 (1909), or the development of some new theory.
Sun-Diamond also raises a narrower objection concerning imputation, one which goes only to the fraud counts. To the extent Douglass conduct is to be imputed to his employer, argues Sun-Diamond, then so must Lakes be imputed to his employers (RLSM and Bozell). Both men occupied high-level management positions in their respective firms, and both mens firms sought to establish and maintain good relations with Secretary Espy. If Douglass knowledge can be imputed to Sun-Diamond to hold it responsible for Douglass acts, then Lakes must be imputed to his employers, RLSM and Bozell, and they cannot be victims.
Even assuming the evidence showed the balance of private and corporate purpose in Douglass and Lakes motivation to be identical, Sun-Diamonds argument rests on a faulty assumption--that the imputation rules must be the same on both the perpetrator and victim sides. They need not be, and indeed are not. Imputation is a legal fiction designed to assist in the allocation of liability, not a literal description of the state of a principals knowledge. The law imputes the wrongdoers conduct to the corporation in order to encourage monitoring, but it is not at all clear that imputation on the other side of the equation would be useful in eliciting additional caution on the part of would-be fraud victims. A rule that makes victim wariness a condition of criminally punishing the perpetrator--unlike, say, a rule of contributory negligence in tort--might not inspire much extra precaution in potential victims. However much they may benefit from the criminalization of fraud generally, potential victims (who have many incentives to avoid being gulled, independent of the criminal law) seem unlikely to step up their precautions just to increase the ex ante chances that their deceivers will face criminal sanctions--or so Congress could reasonably conclude. Thus, when an individual is swindled, the offender does not escape mail or wire fraud liability just because the victim was unwary, or even "gullible." See United States v. Brien, 617 F.2d 299, 311 (1st Cir.1980). Indeed, Congresss adoption of 18 U.S.C. § 1346, specifying that the term "scheme or artifice to defraud," as used in various federal criminal fraud statutes, should include schemes to deprive a principal "of the intangible right of honest services," is hard to square with an imputation rule on the victim side as broad as the one governing corporate criminal responsibility.
We pause briefly over a final threshold issue before addressing the core of Sun-Diamonds challenge to the fraud convictions. The wire fraud statute forbids the use of the interstate telephone system "for the purpose of executing" a scheme or artifice to defraud. 18 U.S.C. § 1343. Sun-Diamond says the telephone message left by Douglas for Lake preceded their joint concoction of the campaign contribution scheme and thus could not, as a matter of law, have furthered the scheme. There was, however, ample evidence from which the jury could find that Douglas already had some sort of fraudulent plan in mind when he placed the initial call and left the message. In other words, the jury could have found that Douglas used the telephone system "prior to, and as one step toward, the receipt of the fruits of the fraud," Kann v. United States, 323 U.S. 88, 94, 65 S.Ct. 148, 151, 89 L.Ed. 88 (1944), placing the case within the coverage of § 1343.
Sun-Diamonds core challenge to the wire fraud counts raises more serious concerns. The district court charged the jury on two alternative routes to fraud liability. It could convict, said the court, if it found "that Sun-Diamond Growers of California devised a scheme or artifice to defraud with one or both [of] the two following objectives. One, to obtain even temporarily $5,000 from Bozell, Inc. by means of false pretense and representations in order to make an illegal corporate campaign contribution to Henry Espy for Congress Committee. Two, to deprive Bozell, Inc. and [RLSM] of the honest, conscientious, faithful, loyal, disinterested and unbiased services of its employee, James Lake." Because the jury charge was phrased in the disjunctive we must examine the legal sufficiency of each basis for liability, to ensure that the jury did not convict on a legally impermissible ground. See Griffin v. United States, 502 U.S. 46, 59, 112 S.Ct. 466, 474, 116 L.Ed.2d 371 (1991) (general verdict based on alternative grounds of liability will be upheld as long as both grounds are legally adequate, even if one is factually inadequate).
As for the first possible objective, we admit that it is not immediately obvious how the contribution scheme could have been designed to deprive Bozell even temporarily of its money or property. Sun-Diamond, through Douglas, caused Bozell to make a routine advance of $5,000 with every expectation that Sun-Diamond would provide prompt reimbursement, and in fact it reimbursed the expense promptly and in full. As the district court correctly noted in the sentencing phase, Bozell was deprived only of the time value of the sum advanced, a deprivation it surely considered negligible judging from the routine and informal nature of the transaction.
In a case involving fraudulently obtained consumer credit, however, we held that where a defendant makes "material misrepresentations designed to induce an extension of credit that would not otherwise be made, the jury [may] reasonably infer intent to defraud," even if the borrower intended in good faith to repay the loan. United States v. Alston, 609 F.2d 531, 538 (D.C.Cir.1979). Moreover, other courts have held that actual repayment is no defense to a charge of fraudulently obtaining a loan, presumably because a loan obtained by fraud subjects the lender to a greater risk of loss than it would have voluntarily borne were it fully informed. United States v. Scott, 701 F.2d 1340, 1346-48 (11th Cir.1983); United States v. Sindona, 636 F.2d 792, 800 (2d Cir.1980); see also United States v. Hollis, 971 F.2d 1441, 1452-53 (10th Cir.1992) (repayment not a defense to bank fraud under 18 U.S.C. § 1344); United States v. Allen, 76 F.3d 1348, 1358-59 (5th Cir.1996) (bank was defrauded, at least temporarily, when cashiers checks were fraudulently drawn on banks account, even though bank was reimbursed in full by holding company at end of month). Notably, to the extent repayment in those cases included interest they did not even feature the time-value deprivation that is present here. Moreover, although the misrepresentation here did not go to the likelihood of the advance being repaid, it was nonetheless material: had Bozell known that the $5,000 was being used to launder an illegal campaign contribution rather than to reserve a table at a charitable dinner, it would not have authorized the advance. Just as deceitful assurances of legality in a conventional loan expose the lender to costly legal entanglements (quite apart from risks of non-repayment), so too did the concealment here.
The second alternative ground of liability was that Sun-Diamond defrauded RLSM of the honest services of its agent, James H. Lake, in violation of 18 U.S.C. § 1346. Congress enacted that provision in response to the Supreme Courts decision in McNally v. United States, 483 U.S. 350, 107 S.Ct. 2875, 97 L.Ed.2d 292 (1987), which held that the mail fraud statutes coverage was limited to deprivations of property. Section 1346 says simply that "[f]or the purposes of this chapter, the term scheme or artifice to defraud includes a scheme or artifice to deprive another of the intangible right of honest services." 18 U.S.C. § 1346. The "honest services" theory has typically been used, both in cases up to McNally and again under § 1346, as a tool for prosecuting corrupt public officials who have deprived citizens of their right to honest representation. See United States v. Paradies, 98 F.3d 1266, 1283 n. 30 (11th Cir.1996) (collecting cases). But it has also been used, as here, to prosecute private citizens who defraud private entities. See, e.g., United States v. Lemire, 720 F.2d 1327 (D.C.Cir.1983); United States v. DeFries, 129 F.3d 1293, 1305-06 (D.C.Cir.1997); United States v. Jain, 93 F.3d 436 (8th Cir.1996); United States v. Frost, 125 F.3d 346 (6th Cir.1997); United States v. DAmato, 39 F.3d 1249 (2d Cir.1994); United States v. Cochran, 109 F.3d 660 (10th Cir.1997); United States v. Gray, 96 F.3d 769 (5th Cir.1996).
In the private sector context, § 1346 poses special risks. Every material act of dishonesty by an employee deprives the employer of that workers "honest services," yet not every such act is converted into a federal crime by the mere use of the mails or interstate phone system. Aware of the risk that federal criminal liability could metastasize, we held in Lemire that "not every breach of a fiduciary duty works a criminal fraud." Lemire, 720 F.2d at 1335, quoting United States v. George, 477 F.2d 508, 512 (7th Cir.1973). Rather, "[t]here must be a failure to disclose something which in the knowledge or contemplation of the employee poses an independent business risk to the employer." Id. at 1337. Absent reasonably foreseeable economic harm, "[p]roof that the employer simply suffered only the loss of the loyalty and fidelity of the [employee] is insufficient to convict." Frost, 125 F.3d at 368.
The independent counsel says that Douglas and Lakes fraudulent scheme threatened serious economic harm to RLSM, because disclosure of a name partners fraudulent use of RLSMs offices to funnel illegal contributions to a political candidate would severely damage the firms reputation. The district court agreed, 964 F.Supp. at 493-94. As Lake testified, the chief assets of a public relations firm are its legitimacy and credibility in the eyes of current and potential clients. Both stood to be undermined by Douglas and Lakes actions. There is no doubt that Douglas and Lake could have foreseen that their actions would cause substantial economic harm to RLSM once word of the scheme got out.
Sun-Diamond, however, says this is not enough. It contends that in the private sector context § 1346 and Lemire demand a showing that the defendant intended to cause economic harm to his victim, not merely that he could have reasonably foreseen such harm. Since the economic harm identified by the independent counsel flows exclusively from disclosure of the contribution scheme, and since Douglas surely did not intend for his scheme to be revealed (except possibly to Mike Espy, so that the Secretarys gratitude could be properly directed), Sun-Diamond reasons that it is free from liability under § 1346. In response to this argument, it will not do to cite "the presumption, common to the criminal and civil law, that a person intends the natural and foreseeable consequences of his voluntary actions." Personnel Administrator of Mass. v. Feeney, 442 U.S. 256, 278, 99 S.Ct. 2282, 2295, 60 L.Ed.2d 870 (1979). Applying the presumption to the actual detection and revelation of an illegal scheme would threaten to turn the word "intent" inside out. Is a criminal who foresees his own capture thereby said to intend it? If so, are especially elusive criminals, whose apprehension is ex ante relatively unlikely, in a better legal position than clumsy ones?
We need not address these questions, because we disagree with Sun-Diamonds contention that § 1346 and Lemire require the government to show that the defendant intended to cause economic harm to his victim. Sun-Diamond appears to confuse the requirement of an intent to defraud (amply met here, since the crux of the scheme was the submission of a fictitious expense report to RLSM) with a requirement of intent to cause economic harm. But Lemire did not go so far as to say that economic harm must be part of the defendants intent in a private-sector "honest services" case--only that economic harm be within the defendants reasonable contemplation. Although Lemire dealt with failure to disclose a conflict of interest rather than with an active scheme to defraud, its treatment of the foreseeability issue governs this case:
Lemire, 720 F.2d at 1337 (emphasis added); see also United States v. Von Barta, 635 F.2d 999, 1005-06 n. 14 (2d Cir.1980) (relied on in Lemire). As we reaffirmed recently, "Lemire held that breaches of fiduciary duty are criminally fraudulent only when accompanied by a misrepresentation or nondisclosure that is intended or is contemplated to deprive the person to whom the duty is owed of some legally significant benefit. " DeFries, 129 F.3d at 1306, quoting Lemire, 720 F.2d at 1335 (emphasis added). See also Frost, 125 F.3d at 368 (holding that, in cases where employee is charged with defrauding private employer of his own honest services, "[t]he prosecution must prove that the employee intended to breach a fiduciary duty, and that the employee foresaw or reasonably should have foreseen that his employer might suffer an economic harm as a result of the breach.") (emphasis added); DAmato, 39 F.3d at 1257 (pre-§ 1346 case holding that misrepresentations amounting only to a deceit "must be coupled with a contemplated harm to the victim").
We therefore affirm the convictions for wire fraud on Counts III and IV.
Sun-Diamond challenges two aspects of its sentence: the district courts upward departure based on Espys position as Secretary of Agriculture, and the imposition of reporting requirements on the member cooperatives. We agree with Sun-Diamond and reverse on both points.
District courts may make upward departures from the Sentencing Guidelines only if "there exists an aggravating . . . circumstance of a kind, or to a degree, not adequately taken into consideration by the Sentencing Commission in formulating the guidelines." 18 U.S.C. § 3553(b); U.S. Sentencing Guidelines Manual ("U.S.S.G.") § 5K2.0. We review district court determinations that a given factor is present in a particular case to a degree not adequately considered by the Commission only for abuse of discretion, because "[d]istrict courts have an institutional advantage over appellate courts in making these sorts of determinations, especially as they see so many more Guidelines cases than appellate courts do." Koon v. United States, 518 U.S. 81, 98, 116 S.Ct. 2035, 2047, 135 L.Ed.2d 392 (1996). But whether a given factor could ever be a permissible basis for departure is a question of law which we address de novo. Id. Here, the issue is in a sense one of degree--how much authority and status might elevate a position above even the rank for which the Guidelines prescribe an eight-level hike--but it also poses the onetime issue of whether cabinet-level officers enjoy such lofty status, hardly the sort of fact-intensive issue calling for extreme deference.
The guideline applicable to violations of the gratuity statute prescribes a base offense level of 7. U.S.S.G. § 2C1.2. It calls for a two-level increase if the offense involved more than one gratuity, and an eight-level increase
Id. The district court imposed both the two-level and the eight-level increase, bringing the offense level to 17. It then appended an additional two-level increase, finding that the Guidelines did not adequately take into account Espys position as a cabinet-level official. This increase in offense level from 17 to 19 doubled Sun-Diamonds base fine from $250,000 to $500,000. U.S.S.G. § 8C2.4. The court then assigned Sun-Diamond a "culpability score" of 9 out of a possible 10, see id. § 8C2.5, a determination Sun-Diamond does not challenge here. This culpability score dictated a minimum multiplier of 1.8 and a maximum of 3.6, id. § 8C2.6, leading to an applicable fine range of $900,000 to $1,800,000, from which the court chose a figure in the "upper range"--$1,500,000.
In support of departing upward on account of the high level of the donees position, the district court reasoned:
As the Secretary of Agriculture obviously holds a "high-level decision-making or sensitive position," it is clear that the district court rested its departure not on a finding that cabinet-level status was the kind of factor the Sentencing Commission failed to consider in formulating § 2C1.2, but on a belief that his position is so high-level that it represents an aggravating circumstance present to a degree not taken into account by the Commission.
This conclusion is at odds with the Sentencing Commissions explanation of § 2C1.2. The Application Notes explain that "Official holding a high-level decision-making or sensitive position includes, for example, prosecuting attorneys, judges, agency administrators, supervisory law enforcement officers, and other governmental officials with similar levels of responsibility." U.S.S.G. § 2C1.2, App. Note 1. We do not think the Secretary of Agriculture holds a position that in level or sensitivity differs in any material degree from persons the Application Note explicitly says were within the Commissions contemplation.
Since the Secretary administers an agency, a straightforward reading of the Application Note strongly suggests that he falls within the "agency administrator" category. The independent counsel says that this term was meant to refer to lower-level program administrators, of which it says there are 85 or so within USDA alone, Appellees Br. at 43 n.15, but never explains why we should assume the Sentencing Commission had such a limited category in mind. The Application Note expressly lists judges as the sort of high-level officials for which the eight-level departure is appropriate. Perhaps our perspective is skewed, but offering a gratuity to a life-tenured federal judge seems to us at least as culpable as offering one to a cabinet secretary--indeed, we suspect most citizens would consider the former a more troubling breach of public trust than the latter. To permit a two-level departure for the latter, when such a departure is specifically precluded for the former, appears illogical.
Nor is the district courts decision rescued by its observations about presidential succession. The Guideline includes elected officials without apparent regard to the loftiness or sensitivity of their positions, and the Application Note says nothing to suggest variation within the elected-official category. Thus it appears to sweep in officials ranging in rank from Representative to President. Even assuming that a case involving the President might present a sui generis situation warranting departure, Sun-Diamond points out that the Speaker of the House is second in line to the presidency after the Vice President, 3 U.S.C. § 19, and yet is also presumably taken into account by § 2C1.2 as an "elected official." The independent counsel responds that "perhaps the Sentencing Commission did not take into consideration the position and power of the Speaker of the House when it drafted the bribery and gratuity guidelines." Appellees Br. at 45 n.16. Conceivably, but more likely the Commission meant, as it said, to lump all federal elected officials together, in contrast with other officials whose rank was seen to vary enough to require consideration of levels of responsibility. Similarly, the Attorney General--seventh in line to the presidency--seems to fit within the Application Notes "supervisory law enforcement officers" category. Though we need not, and do not, decide today the status of these officials with respect to § 2C1.2, their seeming inclusion argues strongly against the idea that the Sentencing Commission failed to take adequately into account the degree of responsibility of an official further down the line of presidential succession.
Moreover, the district courts approach makes one wonder how far one must go down the line of succession before one finally reaches the heartland of § 2C1.2. The Secretary of Agriculture is in fact ninth in the line of succession, 3 U.S.C. § 19, not tenth as the district court stated. This makes his connection to ultimate power just as attenuated as that of the anti-hero of "Kind Hearts and Coronets," who had to murder eight Alec Guinnesses to become Duke of Chalfont. What of the Secretary of Health and Human Services, at number twelve in the queue, id., or the Secretary of Veterans Affairs, at seventeen, id.? Of course, questions of line-drawing are often difficult, and in the sentencing arena such questions are normally best resolved by the district courts on a case-by-case basis. Here, however, the factor invoked in support of departure--cabinet-level status--is not one that the district courts enjoy any comparative advantage in assessing, unlike such fine-grained, fact-bound circumstances as extreme psychological injury, see U.S.S.G. § 5K2.3, or victim misconduct, see id. § 5K2.10. We conclude that the two-level upward departure was impermissible.
Sun-Diamond also challenges the imposition of reporting requirements on its member cooperatives. The district court declared, as a condition of probation, that "Sun-Diamond and its members [sic] cooperatives shall provide quarterly submissions to the probation officer reporting all of the organizations expenditures related to all federal employees, office holders or candidates for federal office [including] any expenditure related [to] the procurement of any federal government contract, creation of a federal law or regulation, or the development of any federal policy." These requirements were to continue in force for five years.
We recognize that the sentencing judge has broad discretion to establish conditions of probation. Lemire, 720 F.2d at 1352. But we know of no precedent for the imposition of probationary conditions on entities who are not defendants, nor even agents of defendants--the latter category problematic in its own right, but much more plausibly legitimate than the present case. Although the independent counsel paints Sun-Diamond as a mere alter ego of the cooperatives that own it, we are not persuaded. The member cooperatives have their own corporate identities, boards of directors, employees, assets and liabilities, as does Sun-Diamond. Their power to control Sun-Diamond seems no greater than the power of ordinary shareholders to control a corporation.
As the Ninth Circuit has explained, imposition of a condition on a third party exposes the defendant to revocation of probation for "violations" by persons not under his control. United States v. Sweeney, 914 F.2d 1260, 1263 (9th Cir.1990). Cf. Fiore v. United States, 696 F.2d 205, 208-09 (2d Cir.1982) (reversing condition of probation imposed on defendant who was president, secretary, sole stockholder and only full-time employee of corporate co-defendant, which had required him to pay fine imposed on corporation). And 18 U.S.C. § 3563, which enumerates mandatory and discretionary conditions of probation, specifies in every one of them the "defendant" as the person to be burdened. See Sweeney, 914 F.2d at 1263. As the member cooperatives were not made defendants and given an opportunity to be heard, they may not now be subjected to probation.
* * *
We reverse and remand for new trial on Count I; we affirm the convictions on Counts III through IX; and we vacate Sun-Diamonds sentence and remand for further proceedings consistent with this opinion.
United States Court of Appeals
For The District of Columbia Circuit
No. 97-3072 September Term, 1997 96cr00193-01
United States of America,Appellee
Sun-Diamond Growers of California,Appellant
BEFORE: Williams, Henderson, and Tatel, Circuit Judges
Upon consideration of the petitions for rehearing of appellant and appellee, filed May 4, 1998, it is
ORDERED that the petitions be denied.
United States Court of Appeals
For The District of Columbia Circuit
No. 97-3072 September Term, 1997 96cr00193-01
United States of America,Appellee
Sun-Diamond Growers of California,Appellant
BEFORE: Edwards, Chief Judge; Wald, Silberman, Williams, Ginsburg, Sentelle, Henderson, Randolph, Rogers, Tatel and Garland, Circuit Judges
Upon consideration of appellees Suggestion for Rehearing In Banc, and the absence of a request by any member of the court for a vote, it is
ORDERED that the suggestion be denied.
A statement of Circuit Judge Wald concurring in the denial of rehearing in banc is attached.
Circuit Judges Sentelle and Garland did not participate in this matter.
Wald, Circuit Judge, concurring in the denial of rehearing en banc:
I find the interpretation of 18 U.S.C. § 201(c)(1)(A) (1994) so as not to cover any gifts or gratuities made by a regulated company to high officials of the regulating agency troubling. Given the choice, I would have construed the statutory prohibition as the Fifth Circuit has done. See United States v. Bustamante, 45 F.3d 933, 940 (5th Cir. 1995); United States v. Evans, 572 F.2d 455, 480 (5th Cir. 1978). However, I have concluded that calling for a vote on the en banc petition would be futile in this case. The current circuit split calls for Supreme Court attention. The ephemeral distinction between bestowing gifts and gratuities on a high government official who has regulatory jurisdiction over the giver solely because of that officials "position," rather than in the hopes of obtaining a favorable attitude in any future regulatory act, may commend itself to lawyers and judges, but I suspect it would not pass the "snicker test" with laymen. I read the panel decision as requiring only that the gifts be tied to some future acts by the official, even if those acts are neither specified nor even known at the time of the gift; this case does not hold that the prosecutor must establish that particular gratuities were given to influence particular official acts. Nonetheless, I admit that the main distinction the panel draws between gifts motivated by an officials "position" and gifts motivated by an officials "acts" eludes me altogether. I suppose it is conceivable that someone might give gifts to a high official simply to create the impression that he is a "big shot" or "insider," without regard to how the official wields his power. But this hardly seems likely in the case of a regulated entity. Much more likely is the assumption that inherent in an officials "position" is his capacity to perform regulatory acts which will affect the gift-giver.
UNITED STATES of America
SUN-DIAMOND GROWERS OF CALIFORNIA, Defendant.
Crim. Action No. 96-193 RMU.
United States District Court,District of Columbia.
Sept. 9, 1996.
Donald C. Smaltz, Theodore S. Greenberg, Kathleen M. Nicolaides, Barry Coburn, Office of Independent Counsel, Alexandria, VA, for Plaintiff.
Richard A. Hibey, Eric W. Bloom, Winston & Strawn, Washington, DC, for Defendant.
MEMORANDUM OPINION AND ORDER
URBINA, District Judge.
Denying Sun-Diamonds Motion to Dismiss the Indictment
On September 9, 1994, pursuant to 28 U.S.C. Section 593(b), the United States Court of Appeals for the District of Columbia Circuit, Special Division for the Appointment of Independent Counsels (Special Division), appointed Donald C. Smaltz Independent Counsel to investigate whether former Secretary of Agriculture Alphonse Michael (Mike) Espy (Secretary Espy) violated federal criminal law by accepting improper gifts from organizations or individuals with business matters pending before the Department of Agriculture while he was Secretary of Agriculture.
Sun-Diamond, a large agricultural cooperative based in California, had business matters pending before the Department of Agriculture during Secretary Espys tenure. Sun-Diamond is owned by five member cooperatives: Diamond Walnut Growers, Sun-Maid Growers of California, Sunsweet Growers, Inc., Valley Fig Growers, and Hazelnut Growers of Oregon. In December 1994, the Office of Independent Counsel (OIC) began its investigation of Sun-Diamond using a grand jury convened by this court. The grand jury returned an indictment against Sun-Diamond alleging that the defendant had unlawfully provided $9,000 worth of gifts, directly or indirectly, to Secretary Espy, in violation of the federal gratuity statute, 18 U.S.C. § 201(c)(1)(A). The indictment further alleges that Sun-Diamond devised and executed a scheme to make an unlawful corporate contribution, in the name of another, in the amount of $4,000 to a federal candidate for office, in violation of 2 U.S.C. § 441b(a) and 441f.
Specifically, count I alleges that Sun-Diamond, through its former Senior Vice President, Richard Douglas (Mr. Douglas), expended on Secretary Espys behalf, over a 14 month period, approximately $2,295 for tickets to the 1993 U.S. Open Tennis Tournament, approximately $2,427 for luggage, approximately $665 for meals, and approximately $524 for a framed print, packing for the print, and a crystal bowl. Count I also charges that all of the expenses associated with the gratuities given by Mr. Douglas to Secretary Espy were reimbursed by Sun-Diamond as company business expenses. Count II alleges that Mr. Douglas advanced $3,100 to Secretary Espys girlfriend, Patricia Dempsey, to pay for the cost of an airplane ticket so that she could accompany Secretary Espy to a trade association conference in Greece. The indictment further alleges that the trade association that sponsored the conference reimbursed Mr. Douglas.
Counts III through IX allege the following: Mr. Douglas and James H. Lake (Mr. Lake), a principal of Robinson, Lake, Sawyer and Miller (Robinson-Lake), a public relations firm in Washington, D.C., together devised a scheme to enable Sun-Diamond to make an unlawful corporate contribution in the name of another. To effect this contribution, Mr. Douglas and Mr. Lake allegedly agreed that Mr. Lake would obtain $1,000 contribution checks from several Robinson-Lake employees. Robinson-Lake then invoiced Sun-Diamond for a false and fictitious expense sufficient to cover these contributions. Finally, Sun-Diamonds payment of the expense to Robinson-Lake was used to reimburse the individuals that advanced the campaign contributions.
This matter comes before the court upon Sun-Diamonds motion to dismiss the indictment in this case. Sun-Diamond raises six arguments in support of its motion. Each argument addresses one or more counts contained in the indictment. First, Sun-Diamond argues that count I, which charges a violation of the gratuity statute, should be dismissed because it fails to allege that Sun-Diamond provided things of value to Secretary Espy to reward him for an act he had already performed or had committed himself to perform. Second, Sun- Diamond posits that count II, which also alleges a violation of the gratuity statute, should be dismissed because it fails to allege that Sun-Diamond provided a "thing of value" to Secretary Espy. Third, Sun-Diamond moves to dismiss counts I and II because the allegations set forth therein do not distinguish between innocent gift giving and illegal gratuities. Fourth, Sun-Diamond requests that the court dismiss counts III through IX of the indictment because the violations alleged in those counts are outside the scope of the independent counsels jurisdiction. Fifth, Sun-Diamond moves to dismiss count III, which alleges wire fraud, because the alleged wire communication at issue did not further the execution of the alleged scheme. Lastly, Sun-Diamond moves to dismiss, or in the alternative strike, the part of counts III and IV that allege that Mr. Douglas and Mr. Lake sought to defraud two entities, Robinson-Lake and its parent company, Bozell Worldwide, Inc., of the intangible right to Mr. Lakes honest services. The court will address each argument seriatim.
A. Gratuity Statute
Sun-Diamond moves to dismiss count I of the indictment on the basis that the indictment fails to allege that Sun-Diamond provided things of value to Secretary Espy for an improper purpose. More particularly, Sun-Diamond claims that the indictment does not allege that Sun-Diamond provided things of value to reward Secretary Espy for a specific act he had already performed or was already committed to perform. Sun-Diamond contends that the indictment must allege and the OIC must demonstrate a nexus between the alleged gratuity and "a definite official act for which [Sun-Diamond] intend[ed] to compensate[,]" Secretary Espy in order for its conduct to be in violation of 18 U.S.C. § 201(c), the gratuity statute. Given this required nexus, Sun-Diamond argues, the indictment must allege that it "intended to reward [Secretary Espy] for past action or action [the Secretary] was already committed to take." As fully discussed infra, to sustain a charge under the gratuity statute, it is not necessary for the indictment to allege a direct nexus between the value conferred to Secretary Espy by Sun-Diamond and an official act performed or to be performed by Secretary Espy. It is sufficient for the indictment to allege that Sun-Diamond provided things of value to Secretary Espy because of his position. Accordingly, the court denies Sun-Diamonds motion to dismiss count I.
The indictment alleges that there were two matters pending before the Department of Agriculture and Secretary Espy, in which Sun-Diamond had a significant economic stake. They were the market promotion program (MPP) and the issue of whether the fumigant methyl bromide would be banned by the Environment Protection Agency (EPA). During 1993 and 1994, the Department of Agriculture administered a grant program, MPP, designed to increase export sales of certain U.S. agricultural commodities abroad. Under the MPP, the Secretary of Agriculture was authorized to award government funds to trade organizations, if the Secretary determined that such organizations would significantly contribute to the sale of U.S. farm commodities abroad. To receive money to market their products abroad, trade organizations submitted marketing plan applications to the Department of Agriculture. By law, the Secretary of Agriculture had to approve the award of MPP money to each trade organization. The trade organizations would in turn award money to companies, like the member cooperatives of Sun-Diamond, to pay for part of their marketing campaigns in foreign countries.
Beginning in or about August 1993, the Department of Agriculture was required by law to develop regulations which gave small-sized entities preference in obtaining certain MPP funds. During that time, the Department of Agriculture entertained the issue of whether to include cooperatives in the definition of a small-sized entity. The indictment alleges that Sun-Diamond wanted the Secretary of Agriculture to direct the Department of Agriculture to promulgate MPP regulations that would allow Sun-Diamond member cooperatives to receive the preferences provided for small entities. In addition, Sun-Diamond wanted the Department of Agriculture to continue to study the issue with a view towards giving cooperatives the same preference given to small-sized entities.
The other matter pending before the Department of Agriculture in which Sun-Diamond had an economic stake involved methyl bromide. Methyl bromide was a chemical used to kill pests and other insects when planting orchards and fields, as well as after a commodity was harvested. Certain Sun-Diamond member cooperatives used the chemical for post-harvest fumigation of walnuts, prunes, and figs.
In 1992, the EPA announced plans to promulgate a rule which would phase out and ultimately bar the use of the chemical in the U.S. In 1993 and 1994, Sun-Diamond, and more particularly Diamond Walnut Growers, Inc., was concerned that the loss of methyl bromide and a lack of a viable alternative thereto, would hurt their ability to sell their products. Consequently, Sun-Diamond sought the assistance of the Department of Agriculture to persuade the EPA to delay promulgating the rule that would phase out and eliminate the use of methyl bromide. Sun-Diamond also sought to have the Department of Agriculture increase its funding for research for alternatives to methyl bromide in the event that the use of the chemical became restricted or prohibited.
Count I alleges that Sun-Diamond violated Section 201(c)(1)(A) by providing Secretary Espy with improper gratuities. Section 201(c)(1)(A), provides, in pertinent part,
Sun-Diamond concedes that Secretary Espy was a public official during the relevant time period of the indictment, namely, January 5, 1993 through March 11, 1994. Additionally, Sun-Diamond acknowledges that count I sufficiently identifies things "of value" that Sun-Diamond allegedly gave to Secretary Espy, e.g., tickets, meals and limousines for the U.S. Open Tennis Tournament, luggage, and meals at restaurants. Sun-Diamond, however, maintains that it did not give these items of value to Secretary Espy "for or because of any official act performed or to be performed by" Secretary Espy. The pertinent official acts relate to the MPP and methyl bromide, the two matters pending before the Department of Agriculture in which Sun-Diamond had a significant economic stake.
The issue before the court is whether, with respect to appointed officials, the gratuity statute requires the indictment to allege a nexus between the provision of things of value and a specific official act performed or committed to be performed by the appointed official. This District Court and the various federal courts of appeal that have addressed this precise issue have concluded that the gratuity statute does not require such nexus to be alleged by an indictment. Rather, it is sufficient for the indictment to allege that the provider of the gratuity has matters within the purview of the official receiving the gratuity, and that the gratuity be provided "simply because of . . . [the] official[s] position, in appreciation of th[e] relationship, or in anticipation of its continuation." United States v. Secord, 726 F.Supp. 845, 847 (D.D.C. 1989) (emphasis in the original). "The Government need not prove that the gratuity was given in exchange for any specific official act; there need be no quid pro quo . . . " Id. "[T]he Government must [only] show that Defendant acted simply because of [the individuals] official position . . . " Id.
Sun-Diamonds reliance on United States v. Brewster, 506 F.2d 62 (D.C. Cir.1974), is unavailing. In Brewster, a former United States Senator was charged with bribery and with accepting illegal gratuities. He was acquitted of the bribery charges. He was, however, convicted of accepting illegal gratuities in the form of campaign contributions that he received from a mail-order company that had an interest in defeating enactment of pending legislation to increase postal rates. Id. at 67. The Senator appealed his convictions and the U.S. Court of Appeals for the District of Columbia Circuit reversed on the basis that the jury instructions did not distinguish "with indisputable clarity" between the elements of bribery and gratuity. Id.
The Brewster court, in distinguishing between the elements constituting the crimes of accepting a bribe and accepting an illegal gratuity, explicitly stated: "The bribery section makes necessary an explicit quid pro quo which need not exist if only an illegal gratuity is involved; the briber is the mover or producer of the official act, but the official act for which the gratuity is given might have been done without the gratuity[.]" Id. at 72 (emphasis added). This statement weakens Sun-Diamonds argument that this Circuit requires the indictment to allege that a nexus between the gratuity and a specific official act exists. Under the bribery statute, the focus is on the briber who instigates an official act. However, as Brewster makes clear, under the gratuity statute, the emphasis is not on the act, which the official might have done with or without the provision of an improper gratuity. Rather, the definition of "official act" denotes that the official need not have undertaken or committed himself to undertake a specific act. An official act is one which involves "any decision or action on any question, matter, cause, suit, proceeding, or controversy, which may at the time be pending[.]" 18 U.S.C. § 201(a)(3) (emphasis supplied). Presently, the indictment alleges that there were two matters pending before Secretary Espy in which Sun-Diamond had a significant interest. There is no indication that the gratuity statute or the definition of the term "official act" require the indictment to allege that Sun-Diamond intended to reward Secretary Espy for an act that he had done or committed himself to do.
In Brewster, the courts concern centered on an elected officials potential criminal liability under the gratuity statute. In the context of a politician receiving an illegal gratuity the court stated,
Id. at 81. The difficult question in Brewster therefore involved the ability of the jury to distinguish between illegal gratuities and legal campaign contributions. The court found that the trial judge had not made the distinction intelligible to the jury and, as a consequence, implicitly required a heightened nexus standard between the illegal gratuity and the official act. The court required such a standard because of the Senators status as an elected, rather than an appointed official. As the court recognized, "[e]very campaign contribution is given to an elected public official probably because the giver supports the acts done or to be done by the elected official." Id. at 72 n.26. In the case of elected officials, a nexus was required, otherwise, ". . . there is no distinction in the case of an elected public official between an illegal gratuity and a perfectly legitimate, honest campaign contribution." Id.
This concern is, however, inapplicable with respect to appointed officials. As the court subsequently explained, "the requisite [criminal] intent must be more clearly shown when the case involves a campaign contribution to an elected public official than when the recipient is an . . . appointed official." United States v. Campbell, 684 F.2d 141, 150 n.16 (D.C. Cir. 1982) (quoting Brewster, 506 F.2d at 73 n.26). Consequently, in cases involving appointed officials, such as the present matter, it is sufficient for the indictment to allege that Secretary Espy received things of value because of his status as Secretary of the Department of Agriculture.
Courts of appeal from other jurisdictions have similarly given Section 201(c) a broad interpretation. The Sixth Circuit has held that the "purpose of the [gratuity statute] is to reach all situations in which a government agents 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), cert. denied, 484 U.S. 815, 108 S.Ct. 68, 98 L.Ed.2d 32 (1987). In United States v. Evans, 572 F.2d 455 (5th Cir.), cert. denied, 439 U.S. 870, 99 S.Ct. 200, 58 L.Ed.2d 182 (1978), the Fifth Circuit stated:
Id. at 480-481 (internal citations omitted). Importantly, our court of appeals has quoted with approval Evans, upon which the court in Secord relied. "The gravamen of [the offense of taking an illegal gratuity] is not an intent to be corrupted or influenced, but simply the acceptance of an unauthorized compensation." United States v. Baird, 29 F.3d 647, 652 (D.C. Cir. 1994) (quoting Evans, 572 F.2d at 481). The court also cited with approval United States v. Standefer, 610 F.2d 1076, 1079 (3d. Cir.) (en banc), affd on other grounds, 447 U.S. 10, 100 S.Ct. 1999, 64 L.Ed.2d 689 (1980), which concluded that all that the jury needs to find under the gratuity statute is that the defendant received a gratuity because of his official position.
Finally, in United States v. Bustamante, 45 F.3d 933 (5th Cir.), cert. denied, --- U.S. ----, 116 S.Ct. 473, 133 L.Ed.2d 402 (1995), the court held,
Id. at 940 (internal citations omitted). Thus, the government need not prove that the gratuity was given in exchange for a specific official act. Bustamante, 45 F.3d at 941. Consequently, the indictment need not allege that Secretary Espy took or committed to take any action beneficial to Sun-Diamond with respect to the MPP and/or methyl bromide because, "[e]ven if corruption is not intended by the donor or the donee, there is still a tendency in such a situation to provide conscious or unconscious preferential treatment of the donor by the donee . . . " Evans, 572 F.2d at 480. The court therefore denies Sun-Diamonds motion to dismiss Count I of the indictment.
B. Thing of Value
Sun-Diamond moves this court to dismiss count II of the indictment because it fails to allege that Sun-Diamond provided a "thing of value" to Secretary Espy. Rather, Sun-Diamond states that count II alleges that Sun-Diamond provided money to Secretary Espys girlfriend. According to Sun-Diamond, the gratuity statute does not criminalize its conduct because the "thing of value" was not given directly to Secretary Espy. Sun-Diamonds construction of the term "thing of value," is, however, too narrow. A "thing of value" can constitute both tangible benefits, such as money, and intangible benefits, such as companionship. Because Secretary Espy received an intangible benefit from Sun-Diamonds gift to his girlfriend, Sun-Diamonds motion to dismiss count II on this basis shall be denied.
Count II of the indictment alleges that Sun-Diamond Senior Vice President Richard Douglas arranged for Secretary Espys girlfriend, Patricia Dempsey, to accompany them to Athens, Greece for a meeting of the International Nut Council (Council), whose members include Diamond Walnut, a member cooperative of Sun-Diamond. According to the indictment, the Council worked to expand the worldwide consumption of tree nuts. The indictment states that the Council thought it important to have Secretary Espy speak to its members at the IX World Tree Nut Congress held in Athens, Greece. The indictment alleges that Diamond Walnut wanted to use the Council to increase its exports. Count II alleges that Mr. Douglas, acting on behalf of Sun-Diamond, provided $3,100 in cash to Ms. Dempsey to cover the cost of her business class airplane ticket to Greece, and as such provided a benefit to Secretary Espy. The International Nut Council, the indictment alleges, reimbursed Mr. Douglas for these expenditures.
Secretary Espy received a benefit, albeit an intangible one, as a result of the actions allegedly taken by Mr. Douglas on behalf of Sun-Diamond. The term "thing of value" is a term of art which courts have interpreted broadly. It has been repeatedly used by Congress in many criminal statutes. United States v. Girard, 601 F.2d 69, 71 (2d Cir.), cert. denied, 444 U.S. 871, 100 S.Ct. 148, 62 L.Ed.2d 96 (1979). Since the term is not defined in the gratuity statute, the court must assume that the ordinary meaning of the words express the legislative purpose behind them. Russello v. United States, 464 U.S. 16, 17, 104 S.Ct. 296, 297, 78 L.Ed.2d 17 (1983).
The purpose of the gratuity statute is to cover all instances in which a public official may be improperly influenced by the receipt of an object of value because of his or her status. Evans, 572 F.2d at 480. Pursuant to the statute, Congress sought to punish the misuse of public office. United States v. Williams, 705 F.2d 603, 623 (2d Cir.), cert. denied, 464 U.S. 1007, 104 S.Ct. 524, 525, 78 L.Ed.2d 708 (1983). To fully implement Congress policy judgment, the term "thing of value" must be broadly construed. Gorman, 807 F.2d at 1305. In analyzing whether an official received a thing of value, the focus should be on the value the official "subjectively attaches to the items received." Id. at 1305 (citing Williams, 705 F.2d at 623).
Courts have found the term to encompasses tangible, as well as intangible benefits. Id. For instance, under the gambling statute, amusement has been judicially interpreted to constitute a thing of value. Girard, 601 F.2d at 71 (citing Giomi v. Chase, 47 N.M. 22, 132 P.2d 715, 716-17 (1942)); Hightower v. State, 156 S.W.2d 327, 328 (Tex. Civ. App. 1942). Courts have also found the testimony of an important government witness to be a "thing of value." United States v. Zouras, 497 F.2d 1115, 1121 (7th Cir.1974). Information can also be a thing of value. "For instance, state secrets might trade hands without cash consideration. Information obtained for political advantage might have value apart from its worth in dollars. In each case the information sought would have value to others, in addition to the seeker." United States v. Sheker, 618 F.2d 607, 609 (9th Cir.1980) (emphasis supplied). In Sheker, the defendant was convicted of impersonating a federal officer in order to obtain a thing of value: The whereabouts of a witness against the defendant. Id. at 608-609. The court, in interpreting the term "thing of value" noted that the witness would also see a thing of value implicated--maintaining his whereabouts unknown to the defendant. Id. at 609. In addition, "[t]he criminal justice system, concerned with the safety of witnesses, has a similar interest." Id. Contrary to Sun-Diamonds implication, a thing of value does not necessarily require a direct benefit to the recipient but also includes a potential benefit to third parties.
In sum, an expansive construction of the term is necessary because "monetary worth is not the sole measure of value." United States v. Nilsen, 967 F.2d 539, 543 (11th Cir.1992), cert. denied, 507 U.S. 1034, 113 S.Ct. 1856, 123 L.Ed.2d 478 (1993) (citing United States v. Schwartz, 785 F.2d 673, 679 (9th Cir.1986)). The fact that the alleged gratuity benefited someone other than the public official is not dispositive. As a result, count II sufficiently alleges that Sun-Diamond improperly provided a thing of value to Secretary Espy. Specifically, the indictment alleges that Sun-Diamond thing provided money to Ms. Dempsey so that she could accompany Secretary Espy on his trip to Greece. In addition, the OIC contends that at trial it will establish, inter alia, that a portion of the $3,100 was used by Secretary Espy to pay his credit card bill which included the charge for Ms. Dempseys airline ticket. This alleged benefit, coupled with any other intangible benefit that Secretary Espy may have received, including Ms. Dempseys companionship, warrants the submission of this matter for the jury to determine whether in fact Secretary Espy received a benefit. See United States v. McDade, 827 F.Supp. 1153, 1175 (E.D.Pa.1993), affd, 28 F.3d 283 (3d Cir.), cert. denied, --- U.S. ----, 115 S.Ct. 1312, 131 L.Ed.2d 194 (1995) (holding that the question of whether a member of Congress benefited personally from scholarship payments to his son is one which should be resolved by the jury; not the court in a pretrial motion). Accordingly, count II properly alleges that Sun-Diamond provided something of value to Secretary Espy.
Sun-Diamond also contends that the conduct alleged in count II and engaged in by Mr. Douglas cannot be imputed to Sun-Diamond because Mr. Douglas provided payment to Ms. Dempsey and the International Nut Congress reimbursed Mr. Douglas. Sun-Diamond therefore argues that it is not implicated in the allegations set forth in count II. The indictment, however, need not be so explicit. There is no need for the government to set out in full, its "theory of proof" in the indictment. United States v. Edmond, 924 F.2d 261, 269 (D.C. Cir. 1991). The indictment must only state "the essential facts constituting the offense, not how the government plans to go about proving them." Id. (citing Fed.R.Crim.P. 7(c)(1)). Rule 7(c)(1) states, in pertinent part, "the indictment . . . shall be a plain, concise and definite written statement of the essential facts constituting the offense charged." In this case, count II of the indictment sufficiently alleges that Mr. Douglas, an officer of Sun-Diamond, provided Ms. Dempsey $3,100 to defray the cost of her airline ticket to Greece. The fact that Mr. Douglas was reimbursed by the Council and not Sun-Diamond does not mean that Mr. Douglas conduct cannot be imputed to Sun-Diamond, as Sun-Diamond maintains. Diamond Walnut, one of the owners of Sun-Diamond, and its President were members of the Councils Executive Committee. Mr. Douglas, a Sun-Diamond Vice President, undertook actions which arguably benefited Diamond Walnut, and as a result, Sun-Diamond.
Sun-Diamond moves this court to dismiss counts I and II because the allegations set forth in those counts do not distinguish between innocent gift giving and legitimate business related conduct on the one hand, and illegal gratuities on the other. Sun-Diamond thus argues that the gratuity statute is void for vagueness as applied to Sun-Diamonds conduct. Sun-Diamond contends that under the gratuity statute, the offender must give the thing of value in order to reward the official, in this case, Secretary Espy, for actions he had taken or was committed to take. Sun-Diamond avers that since the facts, as set forth in counts I and II, do not contain such allegations, the gratuity statute cannot be read by the court as reaching Sun-Diamonds conduct. Sun-Diamond argues that absent this intent to reward a public official, the gratuity statute, as applied to Sun-Diamonds conduct, would be transformed from a general intent criminal statute to a strict liability one by punishing the mere provision of things of value to public officials.
The question of whether Sun-Diamonds reason for providing the gratuities to Secretary Espy was an innocent one and not motivated because of his official position is one that should be entertained by the jury. The gratuity statute does not require the government to prove specific intent, nor does it require proof of a quid pro quo. See Baird, 29 F.3d at 652 (citing Brewster, 506 F.2d at 72-74 n.26). As previously discussed by the court, the OIC is not required to show that Sun-Diamond intended to reward Secretary Espy for actions he had undertaken or had committed himself to undertake.
The gratuity statute requires that the gratuities be given to an appointed official "for or because of official acts" performed or to be performed by the appointed official. Consequently, to find Sun-Diamond guilty under the gratuity statute, the jury needs only to conclude that Sun-Diamond provided the gratuities to Secretary Espy because of his status as an appointed official; and not merely for innocent reasons, such as friendship. In other words, the OIC must demonstrate that Sun-Diamond knew that it was providing the gifts to Secretary Espy not solely for the sake of friendship, or some other innocent reason, but instead, because of Secretary Espys position. The language of the statute and the cases that interpret it provided Sun-Diamond with sufficient notice of the prohibited conduct. As a result, the statute is not void for vagueness as it relates to Sun-Diamonds purported conduct. Accordingly, Sun-Diamonds motion to dismiss counts I and II based on this ground is denied.
D. The Independent Counsels Jurisdiction
Sun-Diamond moves this court to dismiss counts III through IX of the indictment on the basis that the violations alleged therein are outside the scope of the Independent Counsels jurisdiction. Sun-Diamond maintains that the allegations in counts III through IX do not pertain to the subject matter of the Independent Counsels investigation, namely, the alleged acceptance of improper gratuities by Secretary Espy. Sun-Diamond argues that because counts III through IX do not specifically relate to the subject of gratuities, the Independent Counsel exceeded his jurisdiction. Sun-Diamond contends that the Independent Counsel could only have referred the allegations set forth in counts III through IX to the Department of Justice for its consideration, or in the alternative, sought a referral from the Attorney General or Special Division over the allegations of wrongdoing contained in those counts. According to Sun-Diamond, since the OIC did not pursue either of these options, it exceeded its jurisdiction. The court, however, concludes that the Independent Counsel did not exceed its jurisdiction because the allegations set forth in counts III through IX are related to the core subject matter of the OICs investigation and thus fall properly within the Independent Counsels jurisdiction.
Counts III through IX of the indictment allege that Sun-Diamond made illegal campaign contributions to the congressional election campaign of Secretary Espys brother, Henry Espy. Specifically, the indictment alleges that as a result of Henry Espys unsuccessful campaign for the Democratic Party nomination to the seat vacated by his brother when he became Agriculture Secretary, Henry Espy incurred campaign debts. To help retire these debts, the indictment alleges that Mr. Douglas, at the time a Senior Vice-president of Sun-Diamond and James H. Lake, a principal of the D.C. public relations firm of Robinson-Lake, together devised a scheme to enable Sun-Diamond to make unlawful corporate contributions in the name of another. To effectuate this contribution, the indictment alleges that Mr. Douglas and Mr. Lake agreed that Mr. Lake would obtain $1,000 contribution checks from several Robinson-Lake employees. Robinson-Lake then invoiced Sun-Diamond for a false and fictitious expense sufficient to cover the contributions. Sun-Diamonds payment of the false expense was purportedly used to reimburse the individuals making the campaign contributions.
The Ethics in Government Act, 28 U.S.C. § 591, et. seq., authorizes the Attorney General to investigate high-ranking federal executive officials, national campaign committee officials, or persons who present a personal, financial, or political conflict of interest to the Executive Branch. Id. at §§ 591(b) and (c). These persons are referred to as "covered persons," because they are explicitly covered by the Act. See United States v. Tucker, 78 F.3d 1313, 1322 (8th Cir.1996). Under the Act, the Attorney General, "upon completion of a preliminary investigation," may apply to the Special Division for the appointment of an independent counsel. 28 U.S.C. § 591(c)(1)(A). In the application, the Attorney General is to provide "sufficient information to assist the division of the court . . . in defining [the] independent counsels prosecutorial jurisdiction so that the independent counsel has adequate authority to fully investigate and prosecute the subject matter and all matters related to that subject matter." Id. at § 592(c).
The Special Division, in delineating the independent counsels prosecutorial jurisdiction, must "assure that the independent counsel has adequate authority to fully investigate and prosecute the subject matter with respect to which the Attorney General has requested the appointment of counsel, and all matters related to that subject matter." Id. at § 593(b)(3). The independent counsel is also to have the jurisdiction to investigate and prosecute crimes that "may arise out of the investigation or prosecution of the matter with respect to which the Attorney Generals request was made . . . " Id.
On August 8, 1994, the Attorney General submitted an application to the Special Division for the appointment of an independent counsel, "to investigate whether any violations of federal criminal law were committed by Secretary of Agriculture" Espy. In re Alphonso Michael (Mike) Espy, Application for Appointment of an Independent Counsel, No. 94-2, at 1 (Aug. 8, 1994). The Attorney Generals preliminary investigation developed evidence that Secretary Espy had received gifts from Tysons Foods, a major poultry processing corporation headquartered in Arkansas, with a number of pending regulatory issues before the Department of Agriculture. Id. at 2. In addition, the Attorney General concluded that Secretary Espy allegedly received gifts from other organizations and individuals with business matters pending before the Department of Agriculture. Id.
On September 9, 1994, the Special Division, pursuant to 28 U.S.C. § 593(b), appointed Donald C. Smaltz Independent Counsel to investigate
In re Alphonso Michael (Mike) Espy, Div. 94-2, Order at 1-2 (D.C. Cir. Sp. Div. Sept. 9, 1994).
The Special Division further vested the Independent Counsel with authority to investigate
Id. at 2. The Independent Counsel was also given the authority
Id. Finally, the Independent Counsel was to
Id. at 3.
On September 14, 1994, after the appointment of the Independent Counsel, the Attorney General referred to him a related matter under 28 U.S.C. § 594(e). The referred matter was the allegation that "Secretary Espy hosted a fundraising dinner, attended by agricultural lobbyists, the purpose of which was to retire the campaign debt of his brother." Notice of Prosecutorial Jurisdiction, at 2.
The issue before the court is whether the allegations set forth in counts III through IX are related to the subject matter originally identified by the Attorney General in its application for the appointment of an independent counsel or in the subsequent referral. Preliminarily, the court notes that the OIC is not limited in its investigation to those persons that are explicitly covered by the Act. Tucker, 78 F.3d at 1322. The important issue is whether the persons or organizations and the matters being pursued by the OIC are related to the original subject matter of the OICs investigation. "To demonstrate that one occurrence is related to another, [the OIC] need only show that there is a reasonable causal or logical connection between the two, some tenable correlation between events." Secord, 725 F.Supp. at 566.
The court concludes that the Independent Counsel has not exceeded his jurisdictional mandate because the counts in question are related to the original subject matter of the investigation. In essence, counts III through IX charge that Sun-Diamond sought to gain improper influence with Secretary Espy by providing money to help retire Henry Espys campaign debt. This factual predicate is intertwined with the original core subject matter of the Attorney Generals investigation, as well as the subsequent related referral dealing with the allegations that Secretary Espy hosted a fundraising dinner to help retire his brothers campaign debt. The Attorney Generals original investigation and request for appointment sought to determine whether certain individuals or organizations with business matters pending before the Agriculture Department improperly influenced Secretary Espy. "Obviously, the concern motivating such an investigation is that a cabinet Secretary may have been influenced improperly to favor or intervene in the gift-givers causes pending before his or her Department." In re Espy, 80 F.3d 501, 508 (D.C. Cir.1996). Similarly, the allegations of counts III through IX present the alleged scenario that Secretary Espy was improperly influenced because of his status by individuals or organizations with matters before the Department of Agriculture. The courts conclusion is supported by In re Espy and United States v. Tucker, 78 F.3d 1313 (8th Cir.1996).
In re Espy, the independent counsel, Donald C. Smaltz, sought a referral of a related matter under section 594(e) of the Ethics in Government Act. He sought a referral over alleged "violations of federal criminal law by associates of Secretary Espy in matters related to the original grant of jurisdiction wherein the persons involved, patterns of conduct, witnesses, underlying facts, and applicable law overlap with" his original investigation. Id. at 503-504. The court granted the application for referral, noting that the independent counsel had
Id. at 509. Similarly, counts III through IX allege that Sun-Diamond engaged in a pattern of unlawful conduct that sought to benefit one of Secretary Espys closest associates, his brother. In addition, the OIC has presented evidence that Secretary Espy was actively involved in soliciting contributions to retire his brothers campaign debt.
In United States v. Tucker, the court also recognized the broad nature of an independent counsels jurisdiction. In that case, the Independent Counsel was originally vested with jurisdiction to investigate the relationship of the President of the United States and the First Lady to a savings and loan association and a land development corporation. The issue before the court was to determine the propriety of a referral to the Independent Counsel. The referral sought to grant the Independent Counsel with jurisdiction to investigate another separate, corporation. As a result of the referral, the governor of Arkansas, his attorney, and the governors business partner were indicted. The indictment was the subject of the appeal. The court concluded that the referral was appropriate because it was sufficiently related to the Independent Counsels original jurisdiction. The court so concluded because there was an overlap in the defendants and in the witnesses between the original prosecutorial jurisdiction and the referral jurisdiction. Id. at 1321. In addition, there was a defined relationship between the defendants. Id.
The Tucker courts reasoning is particularly applicable to this case. In this case, the connection between the allegations set forth in counts III through IX and the subject matter of the independent counsels original grant of jurisdiction is at a minimum as strong as the connection found by the court in Tucker. Counts I and II, which Sun-Diamond concedes fall within the OICs original jurisdiction, involve perhaps the most important individual in the case, Mr. Douglas, the same individual that counts III through IX implicate. Moreover, there is a clearly defined relationship between Mr. Douglas and Secretary Espy alleged by all counts. Consequently, the court concludes that counts III through IX fall within the purview of the OICs jurisdiction. Sun-Diamonds motion to dismiss counts III through IX of the indictment is therefore denied.
E. Wire Fraud
Sun-Diamond moves the court to dismiss count III of the indictment (wire fraud) because the alleged wire communication at issue did not further the execution of the alleged scheme that Mr. Douglas and Mr. Lake pursued. Count III alleges, in pertinent part, that:
The court must determine the sufficiency of a criminal indictment by examining the indictment on its face. United States v. Critzer, 951 F.2d 306, 307 (11th Cir.1992). "The indictment is sufficient if it charges in the language of the [applicable] statute." Id. The indictment must, however, set forth the essential elements of the alleged crime. United States v. Cole, 755 F.2d 748, 759 (11th Cir.1985). Presently, wire fraud requires proof of a scheme to defraud and the use of an interstate wire communication to further this scheme. United States v. Maxwell, 920 F.2d 1028, 1035 (D.C. Cir.1990).
In count III of the indictment, the OIC has sufficiently identified the elements of the charged offense. The sufficiency of the evidence is a matter to be left for the trial. See Critzer, 951 F.2d at 307. At trial, the OIC will have to establish that the use of the wire advanced or was integral to the execution of the fraud. United States v. Vontsteen, 872 F.2d 626, 629 (5th Cir.1989), cert. denied, 498 U.S. 1074, 111 S.Ct. 801, 112 L.Ed.2d 862 (1991). The government will have to establish that the wire communication was at a minimum "incident[al] to an essential part of the scheme." Pereira v. United States, 347 U.S. 1, 8, 74 S.Ct. 358, 363, 98 L.Ed. 435 (1954) (elements of mail fraud). The indictment, however, only need inform the defendant of the charge against him/her and enable the defendant to plead double jeopardy in any subsequent prosecution for the same offense. Critzer, 951 F.2d at 307. Count III of the indictment identifies the essential elements of the charged offense and provides Sun-Diamond with the requisite notice. Accordingly, Sun-Diamonds motion to dismiss count III is denied.
F. Intangible Right to Honest Services
Lastly, Sun-Diamond moves the court to dismiss, or in the alternative strike, the part of counts III and IV of the indictment that allege that Mr. Douglas and Mr. Lake sought to defraud both Robinson-Lake and Bozell Worldwide, Inc. of the intangible right to Mr. Lakes honest services. Sun-Diamond maintains that count III and IV fail to allege that Mr. Douglas and Mr. Lake intended to cause Robinson-Lake and Bozell Worldwide, Inc. a concrete economic business injury.
The wire fraud statute requires the indictment to allege that the defendant engaged in a "scheme or artifice to defraud . . . " 18 U.S.C. § 1343. A "scheme or artifice to defraud" is a "scheme or artifice to deprive another of the intangible right of honest services." 18 U.S.C. § 1346. Sun-Diamond argues that section 1343 requires that the alleged deprivation threaten or cause harm to the victims pecuniary interests. In support of this proposition, Sun-Diamond principally relies on United States v. Lemire, 720 F.2d 1327 (D.C. Cir. 1983), cert. denied, 467 U.S. 1226, 104 S.Ct. 2678, 81 L.Ed.2d 874 (1984). In Lemire, the court held that "an intentional failure to disclose a conflict of interest, without more, is not sufficient evidence of the intent to defraud an employer necessary under the wire fraud statute." Id. at 1337. The court found that to deprive another of the intangible right of honest services, the defendants conduct must carry "a significant risk of identifiable harm to the employer apart from the loss of his employees loyalty and fidelity." Id.
Lemire was decided prior to the enactment of section 1346. The court there noted that "Congress had not defined scheme or artifice to defraud when it first coined that phrase." Id. at 1335. Congress, however, has since defined the term and the indictment tracks the statutory language with sufficient factual specificity. In addition, Lemire dealt with what the jury had to find in order to sustain a conviction under Section 1343; not with what an indictment must allege on its face. The court was concerned that disloyalty alone would become an indictable crime. Id. at 1336. In the present case, however, the government has not indicated any intention to make such an argument.
The government has, however, indicated that it will prove at trial, consistent with Lemire, that both Robinson-Lake and Bozell, Inc. suffered identifiable harm. Specifically, counts III and IV allege a risk to the reputation of both entities and as a result, a risk to their continued business prosperity. The OIC also intends to prove at trial that this risk was foreseeable to Mr. Douglas and Mr. Lake. Counts III and IV adequately allege violations of Sections 1343 and 1346. Consequently, Sun-Diamonds motion to dismiss, or in the alternative to strike portions of counts III and IV, is denied.
For the foregoing reasons, it is this 7th day of September 1996,
ORDERED that Sun-Diamonds motion to dismiss be and is hereby denied.
UNITED STATES DISTRICT COURTFOR THE DISTRICT OF COLUMBIA
United States of America
Sun-Diamond Growers of California, Defendant
Docket No. CR 96-0193 RMUWashington, D.C.Wednesday, September 18, 1996 9:21 a.m.
Volume 8Transcript of TrialBefore the Honorable Ricardo M. UrbinaUnited States District Judge, and a jury
THE COURT: Ladies and Gentlemen, the time has now come when all of the evidence in the case is in and you will soon be hearing the closing arguments of counsel. It is now my responsibility to instruct you on the law that should control your deliberations in this case.
Let me begin by defining the functions of the various participants in this trial, but let me mention first, that you as jurors are the judges of the facts in this case, but in determining in what actually happened, that is, in reaching your decision as to the facts, it is your sworn duty to follow all of the instructions of law as I explain them to you.
You have no right to disregard or give special attention to any one instruction or to question the wisdom or the correctness of any rule I may state to you. You must not substitute or follow your own notions or opinions as to what the law is or ought to be. It is your duty to apply the law as I explain it to you regardless of the consequences.
Now, it is also your duty to base your verdicts solely upon the evidence without prejudice, without bias and without sympathy. That was the promise that you made and the oath that you took before being accepted by the parties as jurors and they have the right to expect nothing less.
Thus, under your oath as jurors, you are not to be swayed by prejudice or bias or sympathy. You are to be guided solely by the evidence in this case. It is for you alone to decide whether the government has proved that the defendant is guilty of the crimes charged solely on the basis of the evidence and subject to the law as I charge you now. It must be clear to you that once you let prejudice, bias or sympathy interfere with your thinking, there is a risk that you will not arrive at a true and just verdict.
The parties in an action such as this are the government and the defendant. Every defendant in a criminal case is presumed to be innocent. This presumption of innocence remains with the defendant throughout the trial unless and until the defendant is proven guilty beyond a reasonable doubt.
The burden is on the government to prove the defendant guilty beyond a reasonable doubt. The burden of proof never shifts throughout the trial. This burden of proof requires that you look at the evidence carefully and thoughtfully and deliberately and the law does not require a defendant to prove his innocence or to produce any evidence in the case.
If you find that the government has proved beyond a reasonable doubt every element of an offense with which the defendant is charged, it is your duty to find the defendant guilty. On the other hand, if you find the government has failed to prove any element of an offense with which a defendant is charged, beyond a reasonable doubt, you must find the defendant not guilty.
Reasonable doubt as the name implies is a doubt based on reason. A doubt for which you can give a reason. It is such a doubt as would cause a juror after careful and candid and impartial consideration of all of the evidence to be so undecided that he or she could not say that he or she has an abiding conviction of the defendants guilt.
It is such a doubt as would cause a reasonable person to pause or hesitate in the graver or more important transactions of life. However, it is not a fanciful doubt nor is it a whimsical doubt nor a doubt based on conjecture. It is a doubt based on reason.
The government is not required to establish guilt beyond all doubt or to a mathematical certainty or to a scientific certainty. Its burden is to establish guilt beyond a reasonable doubt.
The parties, the government and the defendant, are represented by lawyers. The function of counsel is to shape the presentation of evidence for his or her respective client and to monitor the evidence as it comes into the case so that the lawyer can protect the legal rights of his or her client.
The statements and arguments of lawyers are not evidence. They are intended to assist you in understanding the evidence. If any reference by attorneys to evidence does not coincide with your recollection of the evidence, it is your memory, not the recollection of counsel, that will control during your deliberations.
Moreover, occasionally during arguments a lawyer for one side or the other may appear to be stating his or her beliefs or personal opinions concerning the facts in the case or the credibility of the witness or witnesses. Of course, this would be improper. Lawyers personal beliefs or opinions have no place in the trial. They are not proper argument.
Rather counsel are permitted only to argue to you based upon what the evidence in the case has shown. If you think a lawyer comes to express his or her personal beliefs during an argument, you should disregard such expressions and judge the case only on the evidence.
Now, in the course of monitoring the evidence, the lawyers in the case may sometimes object when the other side has asked a question or made an argument or offered evidence which the objecting lawyer believes is not properly admissible.
You must not be prejudiced in any way against a lawyer who makes such objections. It is the lawyers responsibility to make a judgment about when to make objections, and when counsel makes objections, he or she is doing so pursuant to the function that he or she performs.
Now, if such an objection has been made and I have sustained the objection made by counsel, that means that you disregard the question and you must not speculate as to what the answer might have been.
After a witness answer a lawyers question, I have ruled that the answer should be stricken, you should disregard both the question and the answer in your deliberations. Likewise, as to exhibits, if I have sustained an objection or if Ive ordered an exhibit stricken, then that means that it is not evidence in the case and you must not consider it as evidence in the case during your deliberations.
Now, the function of the court is to conduct the trial of the case in an orderly, fair and efficient manner. To rule on the questions of law that arise during the course of the trial and then to instruct you on the law which applies in the particular case.
The actions which I have taken during the trial in ruling on motions or objections by counsel, or in comments to the lawyers or in questions or comments to witnesses or even in setting forth the law in these or any other instructions I have given you, are not to be taken by you as any indication of my opinion as to the credibility of the witness or witnesses or how you should decide any particular fact or facts.
As I told you at the beginning of the trial, you may not take anything I might have said or done as indicating how I think you should decide this case. If you believe that I have expressed or indicated any opinion about the facts, you should ignore it. It is your sole and exclusive function to decide the verdict in this case.
Like the lawyers, if any reference I have made to the evidence does not coincide with your memory of the evidence, it will be your memory, not mine that controls during your deliberations.
Now, your function, ladies and gentlemen, is to be the judges of the facts. You are to determine what the facts are in this case. You are the sole judges of the facts and in performing that function, you alone, will decide what weight to give to the evidence presented during this trial. You will decide the value of the evidence and the believability of every single witness who has appeared before you.
You should determine the facts in this case without prejudice, without fear, without sympathy or favoritism. You should not be improperly influenced by anyones race, ethnic origin or gender. You will decide this case solely from a fair consideration of the evidence.
In the course of your deliberations on the facts, it is your duty to accept the law as I have stated it to you. You may not ignore any instruction or question the wisdom of any rule of law.
Now, the reason the parties, the lawyers, the judge and the jury come together in a trial is to consider the evidence in making a decision. Now, during their deliberations you may consider only the evidence properly admitted in this trial. The evidence in this case has consisted of sworn testimony of witnesses and exhibits which have been admitted into evidence. If during the trial I have sustained an objection to an exhibit as I indicated earlier, that exhibit is not evidence in the case.
Now, during your deliberations you may consider only the evidence which has been properly admitted in the trial and that evidence, as Ive indicated, has come in a number of forms in this case. One of the forms that evidence has been presented to you in is something called testimony stipulated to by the parties.
Now, during the trial you were that the parties had stipulated, that is, had agreed to certain facts. Any stipulation of fact is undisputed evidence, and you may consider it undisputed evidence.
Now, during the trial you were told as well that the parties had stipulated, that is agreed to, what testimony a particular witness would have given had that witness testified in the case. Now, you are to consider this stipulated testimony as exactly what this witness would have said had the witness actually testified.
When you consider the evidence, you are permitted to draw, from the facts, which you find have been proved, such reasonable inferences as you feel are justified in light of your own human experience.
There are two types of evidence from which you may find the facts of this case. There is direct evidence and there is circumstantial evidence.
Now, when a witness asserts actual knowledge of a fact such as an eye witness, that testimony is considered to be direct evidence of whatever it is the witness has observed. On the other hand, when theres been a chain of facts and circumstances which indicate the guilty or the innocence of the defendant that is called circumstantial evidence and the law makes no distinction between the weight you should give to either kind of evidence in this case.
For example, if you go home one evening and it is dry and cool and you go to bed and you wake up in the middle of the night and you look at the window and as you glance out the window and you see that its raining, well, the next day that would be direct evidence of the fact that during the night hours, it rained. You saw it rain.
On the other hand, suppose you sleep through the night. You dont wake up and you wake up the next morning and it is not raining, but the streets are all wet, well, that may very well be circumstantial evidence of the fact that during the night hours while you slept, it rained, even though you did not see it rain. That would be circumstantial evidence.
Charts or summaries have been prepared by counsel and by the parties and shown to you during the trial of this case for the purpose of explaining facts that are allegedly contained, for example, in books and records and other documents which are in evidence in the case. Such charts or summaries are not evidence in this trial or proof of any fact.
If you find that these charts or summaries do not correctly reflect facts or figure shown by the evidence in the case, the jury should disregard the charts or summaries. In other words, such charts or summaries are used only as a matter of convenience for you and to the extent that you find they are not in truth summaries or facts or figures shown by the evidence itself in the case, you can disregard them entirely.
Now, on the other had there have been some charts or summaries prepared by the parties in this case and by counsel that have been admitted into evidence and have been shown to you during the course of the trial for the purpose of explaining facts that are allegedly contained in books, records, other documents which are in evidence.
You may consider charts and summaries that have been admitted into evidence as you would any other evidence in the case. You may consider the charts and summaries as you would any other evidence admitted during the trial and give these charts and summaries such weight or importance, if any, as you feel they deserve.
Now the rules of evidence ordinarily do not permit witnesses to testify as to their own opinions or their own conclusions about issues in the case. Sometimes witnesses are permitted to give their own opinions about matters and one of the exceptions is the exception that applies to the testimony of a person who is presented as an expert witness in the case.
Now an expert witness is someone who, by education or by experience, may have become knowledgeable in some technical, scientific or very specialized area. If such knowledge or experience may be of assistance to you in determining some of the evidence or in determining a fact, an expert witness in that area may state an opinion as to relevant and material matter in which that expert witness claims that he or she is an expert.
Now, you are not bound by the opinion of an expert. You should consider each expert opinion received in evidence in this case and give it such weight as you may think it deserves. You should consider the testimony of expert witnesses just as you consider the evidence in this case.
If you should decide that the opinion of an expert witness is not based upon sufficient education or experience or if you should conclude that the reasons given in support of the opinion are not sound, or if you should conclude that the opinion is outweighed by other evidence, you may disregard the opinion in part or in its entirety. As I have mentioned repeatedly, you the jury, ladies and gentlemen, are the sole judges of the facts in this case.
Now in determining whether the government has established the charges against the defendant beyond a reasonable doubt, you must consider and weigh the testimony of all of the witnesses who have appeared before you including whatever representatives or persons claimed to be representatives of the defendant.
Now, you are the sole judge of the credibility of the witnesses in this case. In other words, you alone are to determine whether to believe any witness and the extent to which any witness should be believed. In reaching a conclusion as to the credibility of any witness, you may consider any matter that may have a bearing on the subject. You may consider, for example, the demeanor and the behavior of the witness on the witness stand; the witness manner of testifying; whether the witness impresses you as a truthful person; whether the witness impresses you as having an accurate memory and recollection; whether the witness has any motive for not telling the truth; whether the witness had a full opportunity to observe the matters about which he or she has testified; whether the witness has any interest in the outcome of the case, or friendship or animosity toward other persons concerned with the case.
Now, inconsistencies -- well, let me mention before I get into inconsistences, that you have heard the evidence that Mr. James H. Lake has made a plea agreement with the government. His testimony was received in evidence and may be considered by you. You may give his testimony such weight as you think it deserves, whether or not his testimony may have been influenced by the plea agreement is for you to determine. The witness guilty plea cannot be considered by you as evidence of the defendants guilty. The witness guilty plea can be considered by you only for the purpose of determining how much, if at all, to rely upon the witness testimony.
Persons characterized as accomplices in the commission of a crime are competent witnesses and the government has a right to use them as witnesses. An accomplice is anyone who knowingly and voluntarily cooperates with, aids, assists, advises or encourages another person in the commission of a crime regardless of his or her degree of participation.
The testimony of an alleged accomplice should be received with caution and scrutinize with care. You should give it such weight as in your judgment it is fairly and entitled to receive. You may convict the defendant upon the uncorroborated testimony of an alleged accomplice only if you believe that the testimony of the accomplice proves the guilt of the defendant beyond a reasonable doubt.
You also heard that witnesses or a witness in this case has received immunity. What this means that the testimony of a witness may not be used against that witness who has testified in a criminal case.
Now, you should consider whether testimony may be colored in such a way as to further the witness own interests or a witness who realizes that he or she may obtain his or her own freedom by incriminating another has a motive to lie.
However, you may also consider that the witness is under the same obligation to tell the truth as is any other witness because the grant of immunity does not protect that witness against a prosecution for perjury or false statement he or she may make under oath.
Now, the testimony of a witness as to whom immunity has been granted should be received with caution and scrutinized with care. You should give the testimony such weight as in your judgment it is fairly entitled to receive.
Now, false or inconsistent statements that a defendant makes in explanation or defense, after a crime has been committed, do not create a presumption of guilt. You may consider evidence of such false or inconsistent statement, however, as tending to prove the defendants consciousness of guilt, but you are not required to do so.
You should consider and weight evidence of the defendants false or inconsistent statements, if any exists, with all of the other evidence in the case and then give it such weight as you believe it is fairly and entitled to receive.
A false and inconsistent statement must have been made by a Sun-Diamond officer, employee or agent acting in his or her capacity as such an officer, employee or agent.
Now, inconsistencies or discrepancies in the testimony of any witness or between the testimony of different witnesses may or may not cause you to discredit such testimony. Two or more persons witnessing an incident or transaction may see or hear it differently. An innocent misrecollection, like a failure to recall, is not an uncommon experience. In weighing the effect of the inconsistency or the discrepancy, always consider whether it pertains to a matter of important or unimportant detail and whether the inconsistency or discrepancy results from innocent error or intentional falsehood.
In your consideration of the evidence, you are not limited solely to what you saw and heard as the witnesses testified or as exhibits were admitted into evidence. You may consider the reasonableness or unreasonableness, the probability or improbability, of the testimony of a witness in determining whether to accept it as true and accurate. You may consider whether the witness has been contradicted or corroborated by other credible evidence in the case.
Now, if you believe that any witness has shown him or herself to be biased for or prejudiced against either side in this trial, you may consider and determine whether such bias or prejudice has colored the testimony of such witness so as to affect the desire and capability of that witness to tell the truth. Now, you should give the testimony of each witness such weight as in your judgment it is fairly entitled to receive.
Now, the weight of the evidence, ladies and gentlemen, is not necessarily determined by the number of witnesses testifying for either side. Rather, you should consider all of the facts and circumstances in evidence to determine which of the witnesses you believe. You may find the testimony of a smaller number of witnesses on one side is more believable than the testimony of a greater number of witnesses on the other side or you may find to the contrary.
Turning now to the charges and a few general remarks. First, ladies and gentlemen, the indictment is merely a formal way of accusing a person of a crime so that that person may be brought to trial. You must not consider the indictment as evidence of any kind. You may not consider it as evidence of the defendants guilt or draw any inferences of guilt simply because the defendant has been indicted.
Second, you must not allow the nature of the charge or charges to affect your verdict. You must consider only the evidence that has been presented in this case in rendering a fair and impartial verdict.
Now, as to the charges in the case, ladies and gentlemen, the defendant is charged in an indictment which I will discuss shortly. In order to prove the defendant guilty, the government must prove beyond a reasonable doubt all of the elements of the particular charge or charges that are contained within the indictment.
Im going to now briefly summarize the counts in the indictment rather read the entire indictment to you and I will give you some general information and then some specific information. As you know, the indictment charges nine separate offenses called counts.
Now, a separate offense is charged in each count of the indictment which you will consider. Each offense and the evidence which applies to it should be considered separately and you should return separate verdicts as to each count, unless I otherwise instruct you.
The fact that you may find a defendant guilty or not guilty on any one count of the indictment should not control or influence your verdict with respect to any other count or counts in the indictment.
You will note when and if you review the indictment that the indictment charges offenses that were committed "on or about" January the 5th, 1993 through "on or about" June of 1994. The proof need not establish with certainty the exact date of the alleged offenses. It is sufficient if the evidence in the case establishes beyond a reasonable doubt that the offense were committed on a date reasonably near the date alleged.
You may consider, ladies and gentlemen, this case as I have instructed you and you may find the defendant guilty of the crime charged in a particular count or counts in the indictment without finding that it personally, it, meaning the defendant, it personally committed each of the acts that make up the crime or that its officers, employees or agents were present while the crime was being committed.
Any person or company who, in some way, intentionally participates in the commission of a crime, aids and abets the principal offender. It, therefore, is as guilty of the crime as if it would be if its officers, employees or agents had personally committed each of the acts that make up the crime.
To find the defendant aided and abetted in committing the crime, you must find that the defendant knowingly associated itself with persons who committed the crime, that it participated the crime as something it wished to bring about and that it intended by its actions to make it succeed.
Some affirmative conduct by the defendant to help in the planning or carrying out the crime is necessary. The government is not required to prove that anyone discussed or agreed upon a specific time or method of committing the crime, nor need the government prove that the principal offender and the person or company alleged to be the aid or an abetter directly communicated with each other.
It is not necessary that the defendant have had the same intent that the principal offender had when the crime was committed or that it have intended to commit the particular crime committed by the principal offender.
An aider and abetter is legally responsible for the acts of other persons that are the natural and probable consequence of the crime in which it intentionally participates.
It is sufficient if you find beyond a reasonable doubt that the crime was committed by someone and that the defendant knowingly and intentionally aided and abetted the principal offender in committing the crime.
You may not draw any inference favorable or unfavorable towards the government or the defendant from the fact that any person was not named as a defendant in this case or is not on trial before you at this time. Any such matter has no bearing upon our function as jurors.
Ladies and gentlemen, a corporation is a legal entity that may act only through its agents. The agents of a corporation are its officers, directors, employees and certain others who are authorized by the corporation to act for it.
A corporate defendant is entitled to the same individual and impartial consideration of the evidence that the jury gives to a personal defendant. A corporation may be found guilty of the offense charged or be found not guilty of the offense charged under the same instructions that apply to a personal defendant.
In order to sustain its burden of proof for the crime as charged in the indictment against the defendant, the government must prove to you beyond a reasonable doubt that each of the essential elements of the offense as given to you shortly was committed by an officer, director, employee or agent of the corporation.
In addition to the above, the government must also establish the following two elements beyond a reasonable doubt in order to sustain its burden of proof as to the defendant.
First, that each of the acts committed by the officer, director, employee or agent were within the course and scope of employment or agency given to the officer, director, employee or agent by the defendant.
And two, that the officer, director, employee or agent committed each of the essential elements or the offense with the intent to benefit the defendant.
Now, in order to establish that an act was committed or omitted within the course and scope of employment, the evidence must show that the act or omission related directly to the general duties that the officer, director, employee or agent was expected to perform by the defendant corporation. It is not necessary for the government to prove that the act was authorized by the corporation formally or in writing.
An officer, director, employee or agent is not acting within the course and scope of his employment, however, if that person performs an act which the defendant has in good faith forbidden its officers, directors, employees or agents to perform. A corporate defendant like an individual defendant may not avoid responsibility for its action by meaningless or purely self-serving pronouncements. Similarly, a corporate defendant like an individual defendant may not be held responsible for acts which it tries to prevent.
Now, someones intent and knowledge ordinarily cannot be proved directly because there is no way of directly looking into the workings of the human mind. But, you may infer the defendants intent or knowledge from the surrounding circumstances. You may consider any statement made, or act done or omitted by the defendant, and all other facts and circumstances received in evidence which indicate the defendants intent or knowledge. The defendant in this case is a corporation. Because corporations act through their agents, officers and employees, the knowledge of the corporation is considered to be collective knowledge of its agents, employees and officers formed in the pursuant of their corporate responsibilities.
In this case, if you determine beyond a reasonable doubt that Richard Douglas, Sun-Diamonds senior vice president for corporate affairs at the time, had the necessary knowledge and intent to commit a charged offense, that the intent may be attributed to Sun-Diamond Growers.
The defendant may also be to have harbored the knowledge and intent necessary to commit a crime, that is, to commit a criminal offense, if you determine beyond a reasonable doubt that Richard Douglas knowledge and intent plus the knowledge and intent of other Sun-Diamond officers, directors, employees or agents considered as a whole had the knowledge and intent to commit a crime.
Finally, you may find that the defendant had the knowledge and intent to commit a crime, a criminal offense, if you find beyond a reasonable doubt that Sun-Diamond officers, directors, employees and agents other than Richard Douglas, individually or collectively, had the necessary knowledge and intent to commit the crime.
You may infer, but are not required to infer, that the person intends the natural and the probable consequences of acts done or knowingly omitted. It is entirely up to you, however, to decide what facts to find from the evidence received during the trial.
You should consider all of the circumstances in evidence that you think are relevant in determining whether the government has proved beyond a reasonable doubt that the defendant acted with the necessary state of mind.
Now, let me tell you what the statutes say regarding the various offenses alleged by the government in this case and then Ill break them down into the counts that you will be considering in connection with this case.
Now, youve heard the term gratuity and illegal gratuity used throughout this trial. An illegal gratuity is a shorthand term for the conduct prohibited by the following statute.
In relevant part, the statute provides, "Whoever, otherwise than as provided by law for the proper discharge of official duties directly or indirectly, give, offers or promises anything of value to any public official for or because of any official act performed or to be performed by such public official or persons selected to be a public official shall be guilty of an offense against the United States."
Let me read that selection to you again. The language of the statute you are to consider is, ""Whoever offers or promises anything of value to any public official for or because of any official act performed or to be performed by such public official or persons selected to be a public official shall be guilty of an offense against the United States."
That is the statute that describes the offense generally termed illegal gratuity for a public official.
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Now, thats the general language, thats the language of the statute which has application to various counts in this case, but Ill be more specific now and give you some more direct guidance on the counts and the elements of the offenses embraced by those counts.
Count One of the indictment charges that from on or about January the 5th, 1993 through on or about March the 11th, 1994, the defendant, Sun-Diamond Growers of California acting through Richard Douglas, its senior vice president for corporate affairs, gave, offered or promised things of value including tennis tickets, meals, limousine services, luggage, a print and a crystal bowl to the Secretary of Agriculture, Michael Espy, for or because of official acts performed or to be performed by the Secretary of Agriculture, Michael Espy.
In Count Two of the indictment, the charge is that in or about May, 1993, Sun-Diamond Growers of California acting through Richard Douglas its senior vice president for public affairs, gave, offered or promised a thing of value, mainly approximately $3,100 and the benefit thereof, the companionship of his girlfriend, Patricia Dempsey, to Secretary of Agriculture, Michael Espy, for or because of official acts performed or to be performed by the Secretary of Agriculture, Michael Espy.
Now, to prove the offense of illegal gratuity, the government must prove that the defendant Sun-Diamond knowingly and willingly gave, offered or promised a thing of value to Secretary of Agriculture, Mike Espy, for or because of his official position.
A gratuity is not the same thing as a bribe. The offense of illegal gratuity does not require the element of a quid pro quo, the giving of one thing for another which is required to prove the offense of bribery, for example.
The crime does not require any exchange of promises between the public official and those alleged to have given him things of value. Nor, does it require that the gratuity be given or accepted in exchange for any specific official act. It is required, however, that the government prove that the gratuity was given because of the public officials position. The gratuity may be given in appreciation for their relationship or in anticipation of its continuation.
In addition, the government need not prove that the defendant gave, promised or offered the gratuity with intent to influence the public official. The gratuity statute makes it a crime for a person or company to knowingly and willingly give a public official a thing of value because of his official position whether or not the giver or receiver intended that particular officials acts be influenced.
The fact that there might be dual purposes for the gift or payment or a valid purpose which partially motivates the transaction is not a defense to accepting or receiving any illegal gratuity.
The essence of the crime is the officials position of as the receiver of the payment not whether the official agrees to do anything in particular, that is, not whether the official agrees to do any particular official act in return. Therefore the government, to prove that a gratuity offense has been committed, it is not necessary to show that the payment is intended for a particular matter then pending before the official. It is sufficient if the motivating factor for the payment is just to keep the official happy or to create a better relationship in general with the official.
In order to sustain its burden of proof for the crime of giving, offering or promising anything of value to the Secretary of Agriculture as charged in Counts One and Two of the indictment, the government must prove each of the following three elements beyond a reasonable doubt:
First, at the time the gratuity was offered or promised, Michael Espy was a public official or selected to be a public official.
Second, that the defendant, Sun-Diamond Growers of California, acting through Richard Douglas, its then senior vice president for corporate affairs, knowingly and willingly gave, offered or promised something of value to Michael Espy otherwise than as provided by law for the proper discharge of official duty.
Third, the defendant Sun-Diamond Growers of California acting through Richard Douglas, its senior vice president for corporate affairs, did so for or because of an official act performed or be performed by Michael Espy. I will define the term, official act separately.
Now, this statute does not require that Sun-Diamond gave the gratuities with the intent to influence Secretary Espy. It is sufficient if Sun-Diamond provided Espy with unauthorized compensation simply because he held public office.
Ladies and gentlemen, the term public official means an officer or employee or person acting for or on behalf of the United States or any department agency or branch of government in any official function. The term "selected to be a public official" includes any person who has been officially informed that he or she will be so nominated or appointed.
The parties have stipulated, and therefore I instruct you, that during the time periods alleged in Counts One and Two specifically between January the 5th, 1993 and March the 11th, 1994, Michael Espy was a public official or selected to be a public official, that is, Secretary of Agriculture.
The term "official act" means 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 such officials official capacity on such officials place of trust or profit.
In considering the charges in Counts One and Two, it is not a defense that the actions taken, if any, by Secretary Michael Espy with respect to matters of concern to Sun-Diamond Growers of California were actually lawful, desirable or even beneficial to the public.
It is not a defense to the crime of providing an illegal gratuity to a public official for or because of an official act as charged in Counts I and Two of the indictment that Secretary Espy may not have had the authority, power or ability to affect matters that Sun-Diamond Growers had pending at USDA.
In other words, the government need not prove that the Secretary Espy or the Department of Agriculture was actually capable of providing some official act at the time the thing of value was given. Even if it would have been impossible for the Secretary of Agriculture Espy to have affected or influenced the outcome of matters that Sun-Diamond Growers of California had an interest in, a gratuity offense may still be committed if the government proves each of the necessary three elements of the offense beyond a reasonable doubt.
In order for you to convict Sun-Diamond of violating the gratuity statute, you must find beyond a reasonable doubt that Sun-Diamond gave the gifts to Mr. Espy for or because of Mr. Espys official government position and not solely for reasons of friendship or social purpose.
It is not a defense to providing an illegal gratuity to Michael Espy that Sun-Diamond Growers of California did not intend to influence Michael Espy at the Department of Agriculture to take any particular official action regarding, for example, methyl bromide or market promotion programs fund. It is, however, a defense to the charges contained in Counts One and Two that Sun-Diamond Growers of California did not provide a gratuity to Michael Espy for or because of his official position.
It is not a defense to the crime of providing an illegal gratuity to a public official as charged in Counts One and Two of the indictment that Secretary Espy might have performed his duties in the same manner if he had not received the gratuity.
The term "for or because of an official act performed or to be performed" -- would you like for us to take a little break, maam?
THE COURT: Would you like us to take a little break?
THE COURT: We will stop for a few minutes and let you all get a drink of water, if you would like and well reconvene in five minutes. Please dont discuss the case. You can leave your pads and pencil in the chair.
We will take five minutes.
(Jury out at 10:36 a.m.]
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(Jury in at 10:57 a.m.]
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Now, the government must prove that the gratuity was knowingly and willing given for or because of an official act performed or to be performed by the Secretary of Agriculture, Michael Espy. That means that the government must prove that Sun-Diamond Growers of California, acting through its senior vice president for corporate affairs, Richard Douglas, and knowingly and willingly gave the gratuities, at least in part, because of the Secretarys position in appreciation of Sun-Diamond Growers of Californias relationship with him as a public official or in anticipation of the continuation of its relationship with him as a public official.
The government need not prove that the alleged gratuity was linked to a specific or identifiable official act or any act at all. In other words, the government need not prove that the gratuity was given as a quid pro quo, that is, in exchange for any one specific action performed or to be performed by the Secretary. For example, the government need not prove that when Sun-Diamond gave Secretary Espy a thing of value on a particular date, that Secretary Espy took any particular official action or changed any particular official action with respect to matters pending before the USDA in which the defendant had an interest because of Espys receipt of the thing of value.
The government also does not have to prove that there was any agreement between Sun-Diamond Growers of California and Secretary Espy regarding the giving or receiving of gratuities in exchange for the performance of any particular official act.
With respect to official acts, the government has to prove that Sun-Diamond Growers of California gave knowingly and willingly Secretary Espy things of value while it had issues before the United States Department of Agriculture.
The phrase, anything of value, means any item, whether tangible or intangible that the person giving or offering or the person demanding or receiving considers to be worth something. I instruct you that you may consider airplane tickets, tennis tickets, transportation, luggage, meals and intangible items such as the companionship of a friend as things of value.
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All right, ladies and gentlemen, so what Ive given you so far as far as the offenses are concerned, is that I talked to about generally about Counts One and Two. Ive defined for you an illegal gratuity and Ive given you certain facts that the government must prove in order to secure a conviction and Ive given you those facts as they relate to the particular counts.
Then, I have given you the general and overall description of what the elements of the offenses are and how those elements are defined and how the terms within those elements are defined. And that concludes more or less what you need to know about Counts Three and Four.
Now, Im going to speak about Counts Five through Nine and that will conclude my description of the counts in the indictment, the elements that relate to them and the general information that you must have in order to listen intelligently to the arguments that are going to be made and then I will conclude before Mr. Greenberg begins his opening statement by being specific about what the theory of the defendants case is.
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Ladies and gentlemen, Im going to speak to you now about the theory of the defendants case and I will remind you, as I go through this recitation, that these statements represent the position that the defendant has taken. These statements represent the theory that the defendants case takes and among the theories that the defendant through counsel will argue during closing arguments.
Now, the defendant maintains, with respect to Count One that the first, that is the first gratuity count, that the evidence establishes that Richard Douglas and Mike Espy were first and foremost friends who supported and cared about each other and trusted each other. That Richard Douglas and Sun-Diamond did not need to provide any gift to Mr. Espy in order to cultivate or to develop a relationship. The theory is that the relationship was already there.
The defendant claims with respect to these gifts that have been mentioned in the evidence such as the luggage and the other items, that the luggage was given, for example, to Mr. Espy as an honorarium for his speaking. It was not given to him as a gratuity as otherwise alleged.
The defendant asserts further that Sun-Diamond did not have any knowledge that Mr. Douglas purchased the tickets for the U.S. Open which in any event was, according to the defense, a purely social event among friends and their girlfriends.
And the defendant further asserts as part of its theory that the picture frame was never given to Mr. Espy.
With respect to Count Two, the theory of the defendants case is essentially that the gratuity relating to the trip to Greece, that is the trip to the conference, the International Nut Council or Congress, paid for the air fare for Secretary Espys girlfriend to Greece, that no Sun-Diamond funds were used in this transaction and Mr. Douglas was contacted by the INC because he was Mr. Espys close friend and not in order to exert any type of gratuity upon him or to impose any type of gratuity or to offer him any type of gratuity as the government alleges because of his official position.
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THE COURT: Yes.
Ladies and gentlemen, that concludes the initial reading of the instructions. There will be a short block of instruction I will be giving you at the end. Mr. Greenberg and Mr. Hibey will be giving their closing arguments now.