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DONALD C. SMALTZ
INDEPENDENT COUNSEL

THEODORE GREENBERG
Deputy Independent Counsel

103 Oronoco Street, #200
Alexandria, VA 22314
(703) 706-0010

Attorneys for the
UNITED STATES OF AMERICA

 

IN THE UNITED STATES DISTRICT COURT

FOR THE NORTHERN DISTRICT OF CALIFORNIA


UNITED STATES OF AMERICA

 

 

v.

 

RICHARD DOUGLAS,

      Defendent


No. Cr. 96-00348

(SAN FRANCISCO VENUE)
Violations: 18 U.S.C. 201(c)(1)(A)
(Gratuities to Public Official)
18 U.S.C. 1001
(False Statements)
18 U.S.C. 1341, 1346
(Mail Fraud)
18 U.S.C. 1343
(Wire Fraud)
2 U.S.C. 441b(a), 437g(d)(1)(A)
(Corporate Campaign Contribution)
2 U.S.C. 441f, 437g(d)(1)(A)
(Conduit Campaign Contribution)
18 U.S.C. 2
(Aiding and Abetting)

 

INDICTMENT

   The Grand Jury charges that:

 

COUNT ONE

I. INTRODUCTION

At times material to this Indictment:

   1. Defendant RICHARD DOUGLAS was the Senior Vice President for Corporate Affairs for Sun-Diamond Growers of California, a California agricultural cooperative corporation. Sun-Diamond was owned by five member cooperatives (collectively referred to hereinafter as "Sun-Diamond") which, in turn, were owned by a total of approximately 4,500 growers. Sun-Diamond's offices were in California. The five member cooperatives were:

  1. Sun-Maid Growers of California;
  2. Diamond Walnut Growers, Inc.;
  3. Sunsweet Growers, Inc.;
  4. Valley Fig Growers; and
  5. Hazelnut Growers of Oregon.

   2. Sun-Diamond and its member cooperatives grew, processed, packaged, marketed and sold, among other products, raisins, walnuts, prunes, figs, and hazelnuts. Each member cooperative was the largest producer of commodities in its respective industry.

   3. Sun-Diamond assisted the member cooperatives primarily by handling their marketing and dealing with federal agencies in Washington, D.C., such as the United States Department of Agriculture (USDA). Sun-Diamond pursued matters of importance to Sun-Diamond and to its member cooperatives with the Department of Agriculture and Secretary of Agriculture Michael Espy, not named as a defendant herein.

   4. Defendant RICHARD DOUGLAS was, on behalf of Sun-Diamond and the member cooperatives, in charge of and responsible for, among other things:

  1. Communicating with the Secretary of Agriculture and decision makers at the Department of Agriculture; and
  2. Directing Sun-Diamond's federal government lobbying activities and representatives, which included James H. Lake, not named as a defendant herein.

   5. In his capacity as Senior Vice-President for Corporate Affairs, the defendant:

  1. had a budget of approximately $900,000;
  2. had signature authority for corporate expenses up to $30,000; and
  3. reported to the President of Sun-Diamond, its Board of Directors and the Boards of the other cooperatives.

   6. USDA was and is a department of the United States Government. The duties of the USDA were and are, among other things, to improve and promote agricultural development and production in the United States and the promotion of United States agricultural products in other countries. The Secretary of Agriculture was and is in charge of the USDA.

   7. In or about December 1992, President-Elect Clinton advised Michael Espy that he would nominate him to be the Secretary of Agriculture. From that time forward, Michael Espy became subject to the provisions of federal law which, in part and among other things, made it unlawful for companies such as Sun-Diamond to give things of value to Michael Espy for and because of official acts performed or to be performed by him.

   8. On or about January 14, 1993, the United States Senate Committee on Agriculture, Nutrition and Forestry considered the nomination of Michael Espy to become Secretary of Agriculture. Michael Espy was confirmed by the United States Senate on January 21, 1993. Michael Espy served as the Secretary of Agriculture from January 22, 1993 through October 3, 1994 when he announced his resignation, effective December 31, 1994.

SUN-DIAMOND ISSUES INVOLVING
THE DEPARTMENT OF AGRICULTURE

   9. In 1993 and 1994, Sun-Diamond and its member cooperatives had issues, questions, and matters pending with the Department of Agriculture and Secretary of Agriculture Michael Espy. In part and among other issues these included:

METHYL BROMIDE

   10. Methyl bromide was a chemical that was used to kill pests and other insects when planting orchards and fields. It was also used to kill pests after a commodity was harvested. Certain of Sun-Diamond's member cooperatives used methyl bromide for, among other uses, post-harvest fumigation of walnuts, prunes, and figs. Methyl bromide was a cost-effective pesticide.

   11. In 1992, the Environmental Protection Agency had announced plans to promulgate a rule which would phase out and ultimately ban the use of methyl bromide in the United States because it was found to be a carcinogen and an ozone depleter. This proposed rule included a prohibition of the use of methyl bromide as a fumigant on commodities that were exported by Sun-Diamond's member cooperatives to other countries.

   12. In 1993 and 1994, Sun-Diamond, and particularly member cooperative Diamond Walnut, were concerned that the loss of methyl bromide and lack of a viable alternative for methyl bromide would hurt their ability, among other things, to sell their products.

   13. Defendant RICHARD DOUGLAS, on behalf of Sun-Diamond, sought the assistance of the Department of Agriculture, in part and among other things, to:

  1. have the Department of Agriculture increase its funding for research for alternatives to methyl bromide in the event that use of methyl bromide was restricted or prohibited; and
  2. persuade the Environmental Protection Agency to delay promulgating the regulation, to phase out and eliminate the use of methyl bromide, and to mitigate the adverse effects of any such regulation.

MARKET PROMOTION PROGRAM

   14. The Department of Agriculture administered a grant program designed to increase export sales of certain U.S. agricultural commodities abroad, including prunes, raisins, and walnuts. This program was and is known as the Market Promotion Program ("MPP").

   15. In part and among other things, under the MPP, the Department of Agriculture, by and through the Secretary of Agriculture, was authorized to award government funds to trade organizations if the Secretary of Agriculture determined that such organizations would significantly contribute to the sale of United States farm commodities in foreign countries.

   16. MPP was an issue that was a matter for consideration by the Secretary of Agriculture, and in particular it was a matter considered by Secretary of Agriculture Espy.

   17. To receive money to market their commodities in foreign countries, 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.

   18. The ability and capability to sell raisins, prunes, and walnuts abroad was of substantial importance to defendant RICHARD DOUGLAS, his employer, Sun-Diamond, and its cooperatives.

   19. Since the inception of the MPP program, the major Sun-Diamond member cooperatives applied for and obtained MPP money from trade organizations in which they participated. Each of the Sun-Diamond member cooperatives was the largest member of its respective trade organization.

   20. In 1993 and 1994 there was less money available for the MPP and more trade organizations were competing for the reduced amount of MPP funds then available.

1994 MPP Allocations

   21. The ability and capability to sell raisins, prunes, and walnuts abroad was of substantial importance to defendant RICHARD DOUGLAS, his employer, Sun-Diamond, and its cooperatives.

   22. During May 1994, Secretary of Agriculture Espy authorized the disbursement of MPP funds to trade organizations. Sun-Diamond cooperatives participated in three of these trade organizations.

   23. During May 1994, the Department of Agriculture allocated $2,180,000 to the California Prune Board, the trade organization that administered MPP funds for prunes, $3,520,000 to the Raisin Administrative Committee, the trade organization that administered MPP funds for raisins, and $2,890,000 to the California Walnut Commission, the trade organization that administered MPP funds for walnuts. A portion of MPP funds allocated to each trade organization was dedicated to the sale of brand name commodities such as Sun-Maid raisins, or Sunsweet prunes, and the remainder was dedicated to advertising such commodities generally.

   24. During 1994: 1) Diamond Walnut Growers received 100% of the funds dedicated for brand name walnuts; 2) Sunsweet Growers received 52% of the funds dedicated for brand name prunes; and 3) Sun-Maid Growers received 32% of the funds dedicated for brand name raisins. The remainder of all such MPP funds was spent on advertising raisins, prunes, and walnuts generally in selected foreign countries, which also benefitted Sun-Maid, Sunsweet, and Diamond Walnut Growers as they sold their products in such countries.

Sun-Diamond Cooperatives and the
Definition of Small-Sized Entities

   25. Congress had imposed new requirements regarding eligibility for the funds. 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. The Department of Agriculture was considering whether to include cooperatives in the definition of a small-sized entity. If the Department of Agriculture did not consider cooperatives to be small-sized entities, this would result in some Sun-Diamond member cooperatives losing or receiving less MPP money.

   26. Defendant RICHARD DOUGLAS wanted Secretary of Agriculture Michael Espy in part, and among other things, to: (a) cause the Department of Agriculture to promulgate MPP regulations that would allow Sun-Diamond member cooperatives to receive the preferences provided for small-sized entities, and (b) continue to study the issue with a view to giving cooperatives the preferences due small-sized entities.

SUN-DIAMOND GRATUITIES TO
SECRETARY OF AGRICULTURE MICHAEL ESPY

   27. From in or about January 1993, through in or about June 1994, the defendant RICHARD DOUGLAS, acting on behalf of Sun-Diamond Growers, spent approximately $7,680 of Sun-Diamond funds on, or for the benefit of, Secretary Espy.

   28. The defendant RICHARD DOUGLAS as Sun-Diamond's Senior Vice President for Corporate Affairs used a personal credit card or caused Sun-Diamond to pay the seller directly to purchase the things of value for Secretary of Agriculture Michael Espy that are referenced in this Count of the Indictment. RICHARD DOUGLAS submitted, in the Northern District of California, reimbursement requests to Sun-Diamond for the cost of the things of value that he provided to Secretary of Agriculture Michael Espy.

   29. Sun-Diamond, in the Northern District of California and elsewhere, reimbursed Senior Vice President for Corporate Affairs RICHARD DOUGLAS for all of the money he spent for things of value provided to Secretary of Agriculture Michael Espy in this Count of the Indictment in accordance with Sun-Diamond's Policy Statement Number P-3, Expense Control and Reporting, which stated in pertinent part:

    "Entertainment expenses which are reimbursed are those ordinary and necessary costs that employees are required to incur for hospitality extended to individuals in sales promotion and in establishing or maintaining business relationships. These expenditures associated with the active conduct of business are reimbursed only if the entertainment precedes or follows a bona fide business discussion." (Emphasis added.)

LUGGAGE

   30. On or about January 20, 1993, defendant RICHARD DOUGLAS, purchased Secretary Espy five pieces of Hartmann luggage at a total cost of $2,427 and gave that luggage to Secretary of Agriculture Espy thereafter.

TICKETS, MEALS AND LIMOUSINES FOR THE
UNITED STATES OPEN TENNIS TOURNAMENT

   31. On or about September 10, 1993, defendant RICHARD DOUGLAS, Secretary of Agriculture Michael Espy, and their girlfriends traveled from the District of Columbia to New York City to attend the U.S. Open Tennis Tournament. On or about September 11 and September 12, 1993, defendant RICHARD DOUGLAS, on behalf of Sun-Diamond, purchased tickets, limousine services, and meals in the approximate amount of $9,183 for Secretary of Agriculture Michael Espy and the Secretary's girlfriend, and for himself and his girlfriend to attend two tennis matches at the U.S. Open Tennis Tournament in New York.

   32. Defendant RICHARD DOUGLAS, on behalf of Sun-Diamond, spent approximately $4,590 of the $9,183 for tournament tickets, meals, and limousine services directly and indirectly for Secretary of Agriculture Michael Espy and for his benefit including his girlfriend attending the tennis matches and meals:

NEW YORK TENNIS WEEKEND
September 11 & 12, 1993

Costs Paid By
Sun-Diamond for
Douglas, Espy,
and their
girlfriends
Costs Paid By
Sun-Diamond for
Secretary of
Agriculture Espy
Costs Paid by
Sun-Diamond for
Secretary Espy's
Girlfriend
SATURDAY
Tennis Tickets $5,200.00 $1,300.00 $1,300.00
Dinner 237.50 59.37 59.37
Carey Limousine 271.90* 67.97 67.97
SUNDAY
Tennis Tickets 3200.00 800.00 800.00
Lunch 49.71 12.42 12.42
Carey Limousine 226.00* 56.50 56.50
TOTAL $9,185.11 $2,296.26 $2,296.26

*Actual costs $497.90; vouchered by Douglas to Sun-Diamond for $495.90

   33. From on or about January 5, 1993, through in or about May, 1993 defendant RICHARD DOUGLAS, on behalf of Sun-Diamond, spent approximately $2,152 to provide meals and entertainment to Secretary of Agriculture Michael Espy and others at restaurants and at a barbecue. The amount of money defendant RICHARD DOUGLAS spent for food directly served to Secretary of Agriculture Michael Espy was approximately $665.

   34. From in or about January, 1993 to in or about May, 1994, in the Northern District of California and elsewhere, defendant RICHARD DOUGLAS, on behalf of Sun-Diamond, did knowingly, directly and indirectly, give, offer and promise things of value and the benefit thereof, that is approximately $7,680, as set forth above, to a public official, Secretary of Agriculture Michael Espy, and to Michael Espy, a person selected to be a public official, namely: the Secretary of Agriculture, for and because of official acts performed and to be performed by Secretary of Agriculture Michael Espy, otherwise than as provided by law for the proper discharge of official duties.

(In violation of Title 18, U.S.C. 201(c)(1)(A) and 2)

THE GRAND JURY FURTHER CHARGES:

COUNT TWO

   1. Paragraphs 1 through 33 of Count One of this Indictment are hereby realleged and incorporated by reference as though set forth in full.

   2. Beginning on or about April 19, 1994, the Federal Bureau of Investigation ("FBI"), at the request of the Department of Justice, conducted an investigation into possible violations of criminal law by Secretary of Agriculture Michael Espy, including whether individuals or companies, regulated by USDA, doing business with and having matters pending before USDA gave, offered or promised Secretary Espy things of value because he was the Secretary of Agriculture.

   3. In this regard, it was material to the FBI to learn about anything of value that the defendant, RICHARD DOUGLAS, gave to Secretary Espy for his benefit, individually or on behalf of his employer Sun-Diamond.

   4. On or about June 6, 1994, in the Northern District of California, in a matter within the jurisdiction of the FBI, an agency of the United States, defendant RICHARD DOUGLAS knowingly and willfully did make false material statements and representations by stating to a Special Agent of the FBI that:

  1. The only time Sun-Diamond ever paid any expenses for Secretary Espy was when they brought him out to California to speak at a convention, but he was a Congressman at the time, not Secretary of Agriculture;
  2. Sun-Diamond had no issues pending before the Department of Agriculture since Michael Espy became the Secretary of Agriculture; and
  3. the Market Promotion Program is never an issue that would get to the level of the Secretary of Agriculture;

when, in truth and in fact, as defendant RICHARD DOUGLAS well knew, as set forth below:

  1. DOUGLAS had, on behalf of Sun-Diamond, paid expenses for Secretary of Agriculture Espy;
  2. Sun-Diamond had a number of issues which had been or were pending before the Department of Agriculture since Michael Espy became Secretary of Agriculture, including:

    1. Methyl Bromide

       The phase out and eventual elimination of methyl bromide was going to have a substantial adverse impact on Sun-Diamond member cooperatives and they needed USDA's assistance in a number of areas.

    2. Market Promotion Program

       Congress was allocating less money each year, there were more cooperatives applying for money from the program and there were new regulations regarding "small entities" which resulted in Sun-Diamond member cooperatives receiving less MPP money. Member cooperatives Sun-Maid and Sunsweet had been identified as examples of why the whole program should be abolished.

    3. Pesticide Issues

    4. School Lunch Program

    5. Teamsters Strike of Member Cooperative Diamond Walnut

    On October 6, 1993 the General President of the International Brotherhood of Teamsters wrote to Secretary of Agriculture Espy to seek his assistance to get Diamond Walnut to negotiate with the Teamsters over a strike which had already lasted two years. Secretary Espy responded in writing to the Union's General President on December 27, 1993, in part and among other things by stating:

      Thank you for your letter urging that the Department of Agriculture (USDA) not provide funding to Diamond Walnut Growers, Inc. because of an unsettled labor dispute.

      *** In the case of walnuts, USDA has been working with the California Walnut Commission (CWC), which in turn has invited applications and allocated its MPP funding to other organizations. One of the recipients selected by CWC is Diamond, which is a cooperative of walnut growers. The MPP is intended to benefit U.S. agricultural producers.

      ***

      While we appreciate your concerns in this matter, USDA is not in a position to make judgments regarding the merits of a labor dispute between a company and its employees.

  3. The Market Promotion Program was an issue that got to the level of the Secretary of Agriculture.

    (In violation of Title 18, U.S.C. 1001)

THE GRAND JURY FURTHER CHARGES:

COUNT THREE

   1. Paragraphs 1 and 8 of Count One of this Indictment are realleged and incorporated by reference as though set forth in full.

   2. Corporation Z was a large manufacturer and processor of food products ("Corporation Z"). Corporation Z was, in part, regulated by the United States Department of Agriculture. Corporation Z, a Delaware corporation, had its principal place of business in Chicago, Illinois.

   3. In or about June 1993, Secretary of Agriculture Michael Espy instructed a member of his staff to contact the Chief Executive Officer of Corporation Z to solicit and obtain two tickets for an NBA championship playoff game between the Chicago Bulls and the Phoenix Suns to be held in Chicago, Illinois.

   4. In or about June 1993, in response to a telephone call from Secretary of Agriculture Michael Espy's staff, the Chief Executive Officer of Corporation Z made two tickets available to Secretary Espy for his personal use.

   5. On or about June 18, 1993, defendant RICHARD DOUGLAS and Secretary of Agriculture Michael Espy attended a Chicago Bulls/Phoenix Suns NBA championship playoff in Chicago, Illinois with tickets obtained from the Chief Executive Officer of Corporation Z.

   6. Beginning on or about April 19, 1994, the FBI, at the request of the Department of Justice, conducted an investigation into possible violations of criminal law by Agriculture Secretary Michael Espy, including whether individuals or companies, regulated by USDA, doing business with and having matters pending before USDA gave, offered or promised Secretary Espy things of value because he was the Secretary of Agriculture.

   7. In this regard, it was material to the FBI to learn about anything of value that the defendant, RICHARD DOUGLAS, gave to Secretary Espy or for his benefit individually or on behalf of his employer Sun-Diamond, or any other companies or individuals.

   8. On or about June 6, 1994 when he was interviewed by FBI Special Agents, Secretary of Agriculture Michael Espy falsely stated that the defendant RICHARD DOUGLAS provided the Chicago Bulls-Phoenix Suns championship tickets.

   9. On or about June 6, 1994, in the Northern District of California, in a matter within the jurisdiction of the FBI, an agency of the United States, defendant RICHARD DOUGLAS knowingly and willfully did make a material false statement and representation by stating to a Special Agent of the FBI that he had obtained tickets to the June 1993 Chicago Bulls-Phoenix Suns championship game in Chicago for himself and Secretary of Agriculture Espy at no cost from a friend of his who was a professional basketball player, when, in truth and in fact, as defendant RICHARD DOUGLAS well knew, Secretary of Agriculture Michael Espy had obtained the tickets from the Chief Executive Officer of Corporation Z. (In violation of Title 18, U.S.C. 1001)

THE GRAND JURY FURTHER CHARGES:

COUNT FOUR

   1. Paragraphs 1 through 26 of Count One of this Indictment are realleged and incorporated by reference as though set forth in full.

   2. The International Nut Council ("INC") was and is composed of growers, handlers, brokers, agents, exporters and others from approximately forty-five counties, who are interested in increasing the worldwide consumption of tree nuts and obtaining information about trade issues. It was beneficial to the INC to have Secretary of Agriculture Michael Espy speak to its members at their IX World Tree Nut Congress which was to be held May 22-24, 1993 in Athens, Greece.

   3. Diamond Walnut Growers, Inc. of California ("Diamond Walnut"), a member cooperative of Sun-Diamond, was a member of the International Nut Council. The President of Diamond Walnut was a member of the International Nut Council Executive Committee.

   4. In or about January 1993, the President of INC, Donald Soetaert, not a defendant herein, had a conversation with the President of Diamond Walnut and with defendant RICHARD DOUGLAS, and asked them to help arrange for Secretary of Agriculture Michael Espy to attend and speak at the Athens World Tree Nut Congress ("World Nut Congress").

   5. As a result of these discussions, on or about February 9, 1993, the INC, acting through defendant RICHARD DOUGLAS, as Sun-Diamond's Senior Vice President, invited Secretary of Agriculture Michael Espy to speak at the World Nut Congress in Athens.

   6. On or about March 26, 1993, in the Northern District of California, defendant RICHARD DOUGLAS, on behalf of Sun-Diamond and member cooperative Diamond Walnut, caused to be sent by facsimile from Pleasanton, California to Secretary Espy's office in Washington, D.C., a copy of the letter inviting Secretary Espy to speak at the World Nut Congress.

   7. On or about April 7, 1993, Secretary of Agriculture Michael Espy wrote to INC President Donald Soetaert, in care of defendant RICHARD DOUGLAS, as the Senior Vice President of Sun-Diamond, to advise that defendant RICHARD DOUGLAS would be involved in working out the details of Secretary Espy's appearance at the World Nut Congress.

   8. In or about April 1993, in one or more telephone discussions regarding whether Secretary of Agriculture Michael Espy would attend the World Nut Congress, defendant RICHARD DOUGLAS suggested to Soetaert that the INC provide an airline ticket costing approximately $7,000 so that the Secretary could take his girlfriend to Athens for the INC meeting. INC President Soetaert refused to pay that amount, but agreed to pay the cost of a business class airplane ticket, approximately $3,100, for Secretary of Agriculture Michael Espy's girlfriend.

   9. Defendant RICHARD DOUGLAS stated to INC President Soetaert that he would pay for the airline ticket and that the INC should reimburse him at a later time.

   10. On or about May 13, 1993, the defendant RICHARD DOUGLAS caused to be transported a Sun-Diamond paycheck made out to him, from the Northern District of California to Washington, D.C. RICHARD DOUGLAS cashed his Sun-Diamond paycheck in Washington, D.C. and, on the same day, gave Secretary of Agriculture Michael Espy's girlfriend approximately $3,100 in cash for her and Secretary Espy's use so that she could accompany Secretary Espy to the World Nut Congress. The girlfriend's ticket was charged to Secretary Espy's American Express account.

   11. On May 21, 1993, Secretary of Agriculture Michael Espy and his girlfriend flew to Athens, where they attended the World Nut Congress. Defendant RICHARD DOUGLAS, in his capacity as Sun Diamond Senior Vice President, and his girlfriend were also at the World Nut Congress, as well as representatives from Diamond Walnut.

   12. In Athens, the defendant RICHARD DOUGLAS, paid and was reimbursed by Sun-Diamond approximately $1,011 for the cost of entertaining Secretary of Agriculture Michael Espy and his girlfriend, and an Espy aide at two restaurants in Athens.

   13. On or about July 30, 1993, INC President Soetaert, at the request of defendant RICHARD DOUGLAS, caused a wire transfer in the amount of $3,140 to be sent from the International Nut Council's bank in Spain to defendant RICHARD DOUGLAS' bank account in California. These funds constitute reimbursement for the cash RICHARD DOUGLAS had given to Secretary Espy's girlfriend to pay for her airplane ticket.

   14. In or about May 1993, in the Northern District of California and elsewhere, defendant RICHARD DOUGLAS, did knowingly, directly and indirectly, give, offer and promise a thing of value, namely: approximately $3,100 and the benefit thereof, to a public official: Secretary of Agriculture Michael Espy, for and because of official acts performed and to be performed by Secretary Espy, otherwise than as provided by law for the proper discharge of official duties.

(In violation of Title 18, U.S.C. 201(c)(1)(A) and 2)

THE GRAND JURY FURTHER CHARGES:

COUNT FIVE

INTRODUCTION

   1. Paragraphs 1 through 26 of Count One of this Indictment are realleged and incorporated by reference herein as though set forth in full.

THE HENRY ESPY CAMPAIGN

   2. On or before January 5, 1993, Henry Espy, not named as a defendant in this Indictment, publicly announced his candidacy for the Democratic Party nomination for the United States Congress from the State of Mississippi in a special primary election.

   3. Henry Espy sought election to become the Democratic nominee for the Mississippi Congressional District seat being vacated by his brother, Michael Espy, when he resigned his Congressional seat to accept the position of Secretary of Agriculture.

   4. On or about March 30, 1993, Henry Espy lost the special primary election for Congress. As a result of Henry Espy's unsuccessful campaign for the Democratic Party nomination, campaign debts were incurred. By in or about March 1994, the campaign debt was approximately $120,000.

   5. On or about April 1, 1994, defendant RICHARD DOUGLAS opened a bank account at a District of Columbia bank in the name of: "Henry Espy for Congress." Defendant RICHARD DOUGLAS had sole signature authority over this bank account.

FEDERAL ELECTION CAMPAIGN ACT

   6. The Federal Election Commission (hereinafter "FEC") was the agency of the United States Government entrusted with responsibility for enforcement of the reporting requirements of the Federal Election Campaign Act, 2 U.S.C. 431-455 (hereinafter "FECA"), and for the detection, investigation, and institution of enforcement actions arising from violations of FECA. The FEC was also responsible for collecting and making available to the public specific and accurate information concerning the identity of contributors to federal candidates such as Henry Espy.

   7. The Henry Espy for Congress Committee was registered as the principal campaign committee for Henry Espy and was designated and authorized by Henry Espy, pursuant to FECA, to receive contributions in connection with his 1993 candidacy for the United States Congress. The Henry Espy for Congress Committee was required to file reports which reflected the true identities of all individuals and entities who contributed in excess of $200 to support the candidacy of Henry Espy.

   8. Federal law prohibited entirely, and rendered unlawful, contributions by corporations, whether directly or indirectly, to the campaign of a candidate for the United States Congress.

   9. Federal law prohibited entirely, and rendered unlawful, the making of a contribution in the name of another person, including contributions made by individuals who are reimbursed for such contributions, to the campaign of a candidate for the United States Congress.

   10. The violations of FECA alleged herein related to the making of contributions that aggregated more than $2,000 during the calendar year 1994.

ROBINSON LAKE SAWYER MILLER

   11. James H. Lake, not named as a defendant in this Indictment, was a founding partner of Robinson, Lake, Lerer & Montgomery, Inc., d/b/a "Robinson Lake Sawyer Miller" (hereinafter "RLSM").

   12. In addition to its New York operation, RLSM conducted business at several locations including an office in the District of Columbia.

   13. James H. Lake was in charge of the District of Columbia office and held the position of chairman of the board of directors of RLSM.

   14. RLSM was owned and controlled by, and was a wholly-owned subsidiary of Bozell Worldwide, Inc. (hereinafter "Bozell, Inc."), which in turn was and is owned and controlled by Bozell, Jacobs, Kenyon & Eckhardt, Inc., a Delaware corporation, with its principal place of business in New York, New York.

   15. A principal part of RLSM's business was lobbying and public relations, including business related to the Department of Agriculture.

   16. Sun-Diamond was one of the most important and oldest agricultural clients of RLSM.

   17. In part and among other things, defendant RICHARD DOUGLAS supervised Sun-Diamond's relationship with RLSM and the activities of James H. Lake. Defendant RICHARD DOUGLAS used an office at RLSM in the District of Columbia to conduct business for Sun-Diamond and other clients.

   18. RLSM handled, in part, Sun-Diamond's public relations and lobbying activities, including representing Sun-Diamond's interests before the Department of Agriculture. Sun-Diamond paid RLSM a $20,000 per month retainer, plus expenses.

THE SCHEME TO DEFRAUD

   19. From in or about March 1994 through in or about June 1994, in the Northern District of California and elsewhere, defendant RICHARD DOUGLAS, on behalf of Sun-Diamond, together with James H. Lake, did devise, and intend to devise, a scheme and artifice to defraud and to deprive another, namely, Bozell, Inc. and RLSM, of the intangible right of honest services of James H. Lake, and for obtaining money and property by means of false and fraudulent pretenses, representations and promises from Bozell, Inc. by, among other things:

  1. creating and causing the creation of a false expense report seeking reimbursement from Bozell, Inc. of money purportedly expended by James H. Lake for the benefit, and on behalf of Sun-Diamond;
  2. falsifying and causing the falsification of the financial books and records of Bozell, Inc.; and
  3. causing Bozell, Inc. to advance funds for the purpose of concealing an illegal corporate campaign contribution by Sun-Diamond to help retire the campaign debt of Henry Espy;

all by means of false and fictitious pretenses, representations, and promises, well-knowing at the time that the pretenses, representations, and promises, when they were made to Bozell, Inc., would be and were false and fictitious.

   20. It was a part of the scheme and artifice to defraud that in or about March 1994, during several conversations:

  1. Defendant RICHARD DOUGLAS told James H. Lake that Secretary of Agriculture Michael Espy wanted help from defendant RICHARD DOUGLAS in raising money to retire Henry Espy's campaign debt. Defendant RICHARD DOUGLAS solicited James H. Lake's assistance in a scheme to raise approximately $5,000 to help retire the campaign debt of Henry Espy.
  2. Defendant RICHARD DOUGLAS stated that he would use $5,000 of Sun-Diamond's corporate funds to contribute to the campaign of Henry Espy for Congress, in violation of FECA.
  3. James H. Lake agreed to enlist the assistance of four other officers and employees of RLSM in the District of Columbia office to make personal contributions, each in the amount of $1,000.
  4. James H. Lake agreed with defendant RICHARD DOUGLAS that Sun-Diamond's corporate funds would be used to reimburse the contributions made in the names of the RLSM employees.
  5. After on or about March 1, 1994, James H. Lake agreed with defendant RICHARD DOUGLAS that the reimbursement of the campaign contributors would be accomplished by having RLSM bill Sun-Diamond for a false and fictitious expense to conceal the contribution by Sun-Diamond and the reimbursement to the five campaign contributors, including James H. Lake.
  6. James H. Lake and defendant RICHARD DOUGLAS agreed that RLSM would bill Sun-Diamond for a false and fictitious expense for the purported purchase of a table for Sun-Diamond at an annual fund-raising dinner (the "Dinner") held by a Washington D.C.-based not-for-profit organization.
  7. On or about March 10, 1994, James H. Lake, by virtue of his position and authority at RLSM, created a false and fictitious expense for the Dinner and requested reimbursement from Bozell, Inc. in the amount of $5,000, thereby creating false and fictitious entries on Bozell, Inc.'s books and records.
  8. On or about March 14, 1994, James H. Lake caused Bozell, Inc. to issue a check in the amount of $5,000 as reimbursement to James H. Lake for funds purportedly expended for the Dinner on behalf of RLSM's client, Sun-Diamond.
  9. From on or about March 3, 1994, until on or about March 18, 1994, James H. Lake solicited four other officers and employees of the Washington, D.C. office of RLSM to each contribute $1,000 to the Henry Espy for Congress Committee. James H. Lake promised each of these officers and employees that their campaign contributions would be reimbursed. Three of these individuals did as James H. Lake requested; the fourth individual refused.
  10. From on or about March 3, 1994, until on or about March 24, 1994, James H. Lake, on behalf of Sun-Diamond, reimbursed himself and three officers and employees of the Washington, D.C. office of RLSM, each in the amount of $1,000, for their campaign contributions to the Henry Espy campaign.
  11. In or about March 1994, James H. Lake provided to defendant RICHARD DOUGLAS four checks — one from James H. Lake, and three others from officers and employees of the Washington, D.C. office of RLSM — each in the amount of $1,000 payable to the Henry Espy for Congress Committee.
  12. James H. Lake retained approximately $1,000 of the $5,000 amount reimbursed to him from Bozell, Inc. as a consequence of the submission of a false and fictitious billable expense report.
  13. On or about April 26, 1994, James H. Lake, by virtue of his position and authority at RLSM, caused RLSM to generate a monthly invoice in the amount of $26,162.66 to Sun-Diamond billing Sun-Diamond, among other things, for the $5,000 expense for the fundraising dinner and requesting that payment be made to RLSM at a Post Office box located in Atlanta, Georgia.
  14. On or about April 27, 1994, defendant RICHARD DOUGLAS, in his capacity as an officer of Sun-Diamond, approved for payment RLSM's invoice of $26,162.66 which contained the $5,000 expense for the Dinner.
  15. On or about June 2, 1994 Sun-Diamond issued a check in the amount of $26,162.66 and sent its payment to RLSM by regular United States mail to a post office box located in Atlanta, Georgia.
  16. On or about June 7, 1994, RLSM received Sun-Diamond's check in the amount of $26,162.66 at its Atlanta post office box.

   21. On or about April 1, 1994, in the District of Columbia, defendant SUN-DIAMOND's Senior Vice President RICHARD DOUGLAS opened a bank account at a District of Columbia bank in the name of: "Henry Espy for Congress." Defendant RICHARD DOUGLAS had sole signature authority over this bank account. Defendant RICHARD DOUGLAS deposited and caused to be deposited the four $1,000 checks referenced above to the Henry Espy for Congress account.

   22. From on or about June 2, 1994, until in or about June 7, 1994, in the Northern District of California and elsewhere, defendant RICHARD DOUGLAS, on behalf of Sun-Diamond, having devised and intending to devise a scheme and artifice to defraud and to deprive another, namely, Bozell, Inc. and RLSM, of the intangible right of honest services of James H. Lake, and for obtaining money and property from Bozell, Inc. by means of false and fraudulent pretenses, representations, and promises, and for the purpose of executing such scheme and artifice to defraud, and attempting to do so, did place and cause to be placed in an authorized depository for mail matter, a Sun-Diamond check in the amount of $26,162.66, representing, in part, Sun-Diamond's payment of the $5,000 fictitious expense, addressed to Robinson Lake Lerer and Montgomery/Sawyer Miller Group, P.O. Box 198261, Nations Bank, Atlanta, GA 30384, from Sun-Diamond to be sent and delivered by the Postal Service.

(In violation of Title 18, U.S.C. 1341, 1346 and 2)

THE GRAND JURY FURTHER CHARGES:

COUNT SIX

   1. Paragraphs 1 through 22 of Count Five of this Indictment are realleged and incorporated by reference as though set forth in full.

   2. From in or about March 1994, up to and including in or about June 1994, in the Northern District of California and elsewhere, defendant RICHARD DOUGLAS, on behalf of Sun-Diamond, knowingly and willfully made and caused to be made a contribution and expenditure aggregating $2,000 and more in calendar year 1994, in violation of the prohibition against corporate contributions contained in the Federal Election Campaign Act, namely: a contribution and expenditure totaling $4,000 of corporate assets belonging to Sun-Diamond, a California corporation, to the Henry Espy for Congress Committee, a federal political committee, in connection with a primary election held to select a candidate for Representative in Congress.

(In violation of Title 2, U.S.C. 441b(a) and 437g(d)(1)(A), and Title 18, U.S.C. 2)

THE GRAND JURY FURTHER CHARGES:

COUNT SEVEN

   1. Paragraphs 1 through 22 of Count Five of this Indictment are realleged and incorporated by reference as though set forth in full.

   2. From in or about March 1994, up to and including in or about June 1994, in the Northern District of California and elsewhere, defendant RICHARD DOUGLAS, on behalf of Sun-Diamond, knowingly and willfully made and caused to be made a contribution in the name of another person in violation of the Federal Election Campaign Act, namely: a contribution in the amount of $1,000 of corporate assets belonging to Sun-Diamond, a California corporation, in the name of James H. Lake, to the Henry Espy for Congress Committee, a federal political committee, in connection with a primary election held to select a candidate for Representative in Congress.

(In violation of Title 2, U.S.C. 441f and 437g(d)(1)(A), and Title 18, U.S.C. 2)

THE GRAND JURY FURTHER CHARGES:

COUNT EIGHT

   1. Paragraphs 1 through 22 of Count Five of this Indictment are realleged and incorporated by reference as though set forth in full.

   2. From in or about March 1994, up to and including in or about June 1994, in the Northern District of California and elsewhere, defendant RICHARD DOUGLAS, on behalf of Sun-Diamond, knowingly and willfully made and caused to be made a contribution in the name of another person in violation of the Federal Election Campaign Act, namely: a contribution in the amount of $1,000 of corporate assets belonging to Sun-Diamond, a California corporation, in the name of James C. Lake, not named as a defendant in this Indictment, who was an officer of RLSM, to the Henry Espy for Congress Committee, a federal political committee, in connection with a primary election held to select a candidate for Representative in Congress.

(In violation of Title 2, U.S.C. 441f and 437g(d)(1)(A), and Title 18, U.S.C. 2)

THE GRAND JURY FURTHER CHARGES:

COUNT NINE

   1. Paragraphs 1 through 22 of Count Five of this Indictment are realleged and incorporated by reference as though set forth in full.

   2. From in or about March 1994, up to and including in or about June 1994, in the Northern District of California and elsewhere, defendant RICHARD DOUGLAS, on behalf of Sun-Diamond, knowingly and willfully made and caused to be made a contribution in the name of another person in violation of the Federal Election Campaign Act, namely: a contribution in the amount of $1,000 of corporate assets belonging to Sun-Diamond, a California corporation, in the name of Michael B. Lake, not named as a defendant in this Indictment, who was an officer of RLSM, to the Henry Espy for Congress Committee, a federal political committee, in connection with a primary election held to select a candidate for Representative in Congress.

(In violation of Title 2, U.S.C. 441f and 437g(d)(1)(A), and Title 18, U.S.C. 2)

THE GRAND JURY FURTHER CHARGES:

COUNT TEN

   1. Paragraphs 1 through 22 of Count Five of this Indictment are realleged and incorporated by reference as though set forth in full.

   2. From in or about March 1994, up to and including in or about June 1994, in the Northern District of California and elsewhere, defendant RICHARD DOUGLAS, on behalf of Sun-Diamond, knowingly and willfully made and caused to be made a contribution in the name of another person in violation of the Federal Election Campaign Act, namely: a contribution in the amount of $1,000 of corporate assets belonging to Sun-Diamond, a California corporation, in the name of Mark Helmke, not named as a defendant in this Indictment, who was an officer of RLSM, to the Henry Espy for Congress Committee, a federal political committee, in connection with a primary election held to select a candidate for Representative in Congress.

(In violation of Title 2, U.S.C. 441f and 437g(d)(1)(A), and Title 18, U.S.C. 2)

THE GRAND JURY FURTHER CHARGES:

COUNTS ELEVEN THROUGH NINETEEN

   1. Defendant RICHARD DOUGLAS resided in Oakland, California, and also owned homes at 5047 Loughboro Road, N.W., Washington, D.C.; a house at 4704 Brava Court, Fort Washington, Maryland; and a house at 5103 Navahoe Street, College Park, Maryland.

   2. As the Senior Vice President for Corporate Affairs, defendant RICHARD DOUGLAS was responsible for, among other things, Sun-Diamond's public relations and lobbying activities, including representing Sun-Diamond's interests before the United States Department of Agriculture. In 1993, defendant RICHARD DOUGLAS earned $256,000 in salary and bonus from Sun-Diamond. In 1994 defendant Richard Douglas earned $282,000 in salary and bonus from Sun-Diamond.

THE SCHEME TO DEFRAUD

   3. Beginning in or about March, 1993, and continuing thereafter up to and including in or about April, 1993, in the Northern District of California and elsewhere, defendant RICHARD DOUGLAS did devise, and intend to devise, a scheme and artifice to defraud and to obtain money and property by means of false and fraudulent pretenses, representations and promises, from Union Trust Mortgage Services of San Francisco ("Union Trust") and PHH U.S. Mortgage Company of New Jersey ("PHH"), by making false statements and submitting false documents in support of a mortgage loan application as follows:

  1. falsely claiming rental income from two houses on a loan application;
  2. falsely stating that he rented out a house he owned in Washington, D.C.;
  3. providing a false explanation of why he rented a house he owned in Washington, D.C.;
  4. falsely stating that he rented out a house he owned in Fort Washington, Maryland;
  5. providing two false and fictitious leases to the lender which purported to document rental income from two houses;
  6. falsely representing his ownership of a brokerage account worth approximately $109,000;
  7. misrepresenting the source of part of the funds used for the down payment; and
  8. failing to disclose a liability of $10,000 in the form of a loan.

A. Richard Douglas Applies For a Loan

   4. Union Trust was a mortgage broker who submitted loan applications to, among other potential lenders, PHH.

   5. Union Trust had offices in San Francisco, California and in Oakland, California.

   6. PHH was in the business of lending money to individuals to finance purchases of homes. PHH did business in Denver, Colorado.

   7. On or about March 16, 1993, defendant RICHARD DOUGLAS submitted a handwritten loan application and certain supporting documents to Union Trust to obtain a loan to purchase a house at 13506 Campus Drive, Oakland, California, 94619 (Campus Drive). The purchase price of the house was $520,000. The loan application was for $416,000.

   8. On or about March 16, 1993, defendant RICHARD DOUGLAS represented in the loan application that he had, among other things, rental income from two residential properties, one on Loughboro Road in northwest Washington, D.C. and one on Brava Court in Fort Washington, Maryland.

   9. On or about March 16, 1993, Douglas provided to Union Trust an account statement of Dain Bosworth stockbrokers, stating that, as of February 26, 1993, the value of account number 1193-7347, held jointly by defendant RICHARD DOUGLAS and a friend, not named as a defendant in this Indictment, was approximately $109,598. In the March 16, 1993 application, Douglas correctly stated that his interest in the jointly held account was worth $54,799.

   10. When signing the March 16, 1993 loan application, defendant Richard Douglas agreed in relevant part:

    The undersigned specifically acknowledge(s) and agree(s) that: ... (3) all statements made in this application are made for the purpose of obtaining the loan indicated herein; ... (6) the Lender, its agents, successors and assigns will rely on the information contained in the application and I ... have a continuing obligation to amend and/or supplement the information provided in this application if any of the material facts which I ... have represented herein should change prior to closing....

and certified in relevant part:

    Certification: I certify that the information provided in this application is true and correct as of the date set forth opposite my ... signature ... on this application and acknowledge my ... understanding that any intentional or negligent misrepresentation(s) of the information contained in this application may result in civil liability and/or criminal penalties including, but not limited to, fine or imprisonment or both under the provisions of Title 18, United States Code, Section 1001....

   11. On or about March 22, 1993, upon receiving the loan application and certain supporting documents, an employee of Union Trust began to verify the assets and income claimed on defendant RICHARD DOUGLAS' application.

   12. On or about March 30, 1993, based upon the information provided by defendant RICHARD DOUGLAS, at his direction, Union Trust prepared a typed, final version of defendant RICHARD DOUGLAS' loan application. The typed final loan application represented that defendant RICHARD DOUGLAS had, among other things, the following assets and income:

  1. A securities account at Dain Bosworth in Nevada, worth approximately $109,598; and
  2. Annual rental incomes of $30,000 from a house at 5047 Loughboro Road, N.W., Washington, D.C. and $9,600 from a house at 4707 Brava Court, Fort Washington, Maryland.

   13. On or about March 30, 1993, Union Trust sent the loan application package consisting of the application and certain supporting documents to PHH Denver for its review and processing.

   14. On or about April 1, 1993, a PHH underwriter began to review the loan application for the purpose of approving or disapproving the loan. Part of the process included, among other things, a review of defendant RICHARD DOUGLAS' 1990 and 1991 tax returns, which were supporting documents supplied by defendant RICHARD DOUGLAS.

   15. On April 1, 1993, the underwriter did not approve the loan, as the Loughboro Road and Brava Court properties, from which defendant RICHARD DOUGLAS claimed rental income, were not listed on defendant RICHARD DOUGLAS' 1990 or 1991 tax return and because there were no leases supporting the claimed rental incomes from such properties in the application package. The underwriter informed Union Trust of these loan application deficiencies. Union Trust in turn told defendant RICHARD DOUGLAS that in order to process the loan, they needed an explanation of why the Brava Court and Loughboro rental properties were not on Schedule E of defendant RICHARD DOUGLAS' 1990 and 1991 tax returns and requested copies of the leases supporting the claimed rental income.

   16. In response, defendant RICHARD DOUGLAS delivered to Union Trust as follows:

  1. A written explanation dated April 2, 1993 why the two houses were not shown in his 1990 and 1991 tax returns and two false and fictitious leases. In the written explanation, defendant RICHARD DOUGLAS falsely represented that he had used the Loughboro house during the previous four years because he worked for President Bush on a volunteer basis, and that he "moved back to California full-time, I signed a rental agreement to lease the house out because with the Democrates (sic) in the White House there is no need for me to be in Washington during the next four years."
  2. A false lease for the house at 5047 Loughboro Road in Washington, D.C. which purported to be executed on March 2, 1993 by person X showing monthly rental income of $2,500 for the term May 1, 1993 to May 1, 1995, and representing that a security deposit of $2,500 had been paid to RICHARD DOUGLAS on or about March 2, 1993;
  3. A false lease for the house at 4707 Brava Court, Fort Washington, Maryland, which purported to be executed on January 15, 1993 by couple Y showing monthly rental income of $800 for the term January 15, 1993 to January 15, 1995, and representing that a security deposit of $800 had been paid to RICHARD DOUGLAS on or about January 15, 1993;

   17. On or about April 5, 1993 and April 6, 1993, Union Trust San Francisco faxed the fabricated lease agreements and the false written explanation to PHH Denver. B. Raising Money for the Down Payment

   18. As of April 18, 1993, defendant RICHARD DOUGLAS did not have enough funds in his bank account to make the required payment of approximately $105,800 which was scheduled to be delivered at the loan closing the next day, April 19, 1993.

False Representation Relating To The Brokerage Account

   19. In February and March, 1993 an investment account at Dain Bosworth in Las Vegas, Nevada, account number 1193-7347, was held jointly in the names of defendant RICHARD DOUGLAS and a friend. As of February 26, 1993, each held a 50 percent ownership interest in account 1193-7347 which had a value of $109,598.

   20. In or about early April, 1993, defendant RICHARD DOUGLAS told his friend and joint owner that he needed to sell his entire 50% share of their Dain Bosworth account. The friend agreed to buy defendant RICHARD DOUGLAS' share of the account at its then current value. Defendant RICHARD DOUGLAS and his friend accomplished this by transferring the cash and securities in their joint Dain Bosworth account to a new account solely in the name of the friend and having the friend pay defendant RICHARD DOUGLAS for DOUGLAS' 50 percent interest.

   21. On or around April 9, 1993, the friend caused a wire transfer of $57,990, representing defendant RICHARD DOUGLAS' 50 percent share, to be made from the friend's bank in New York City into the account of defendant RICHARD DOUGLAS at the Bank of America, Stockton, California, checking account no. 11391-05987, from which funds were to be used for the down payment on the house.

   22. As a result of the April 9, 1993 wire transfer of $57,990 into his bank account, defendant RICHARD DOUGLAS had been paid for his interest in Dain Bosworth account number 1193-7347 and he no longer had any beneficial or legal interest in the securities or funds in that account.

   23. On or about April 19, 1993, at the loan closing, defendant RICHARD DOUGLAS signed and certified on the final typed loan application, in part and among other things, that his Dain Bosworth account number 1193-7347 had a value of $109,598.

   24. By his signature, defendant RICHARD DOUGLAS certified that he did have an asset worth $109,998 at Dain Bosworth and omitted to inform Union Trust, PHH or the closing agent that, in truth and in fact: 1) he no longer had a $109,998 asset at Dain Bosworth or any beneficial or legal interest in Dain Bosworth account number 1193-7347; and 2) that he had received $57,990 on April 9, 1993 in full payment for his share of the Dain Bosworth account.

Cash Infusion From Defendant Douglas' Girlfriend

   25. As of April 18, 1993, defendant RICHARD DOUGLAS had insufficient funds in his bank accounts to make the required payment of approximately $105,800 at the loan closing the next day, April 19, 1993.

   26. On or about April 19, 1993 defendant RICHARD DOUGLAS' girlfriend, at his request, redeemed a certificate of deposit, incurring a penalty, in order to wire-transfer, as a loan, $10,000 to defendant RICHARD DOUGLAS.

   27. On or about April 19, 1993, defendant RICHARD DOUGLAS caused his girlfriend to redeem a $10,000 certificate of deposit and to wire transfer $10,000 to his Bank of America checking account from her bank in Washington, D.C. This $10,000 transfer of funds gave defendant RICHARD DOUGLAS the funds necessary to make the down payment of approximately $105,800.

   28. On or about April 19, 1993, defendant RICHARD DOUGLAS falsely stated in the loan application that the source of funds for the down payment was "savings & gift," when in truth and in fact, as defendant RICHARD DOUGLAS well knew, a portion of the funds for the down payment were obtained as a loan from his girlfriend.

   29. Defendant RICHARD DOUGLAS failed to inform either Union Trust, PHH, or the closing agent that he had incurred a $10,000 loan from his girlfriend which was to be used for the down payment.

C. The False Residential Leases

   30. As set forth above, on or about April 1, 1993, PHH did not approve the loan in part because the properties from which defendant RICHARD DOUGLAS claimed monthly rental income of $2,500 (which amounts to $30,000 per year), and $800 (which amounts to $9,600 per year), were not shown as rental properties on his 1990 and 1991 income tax returns. PHH therefore requested an explanation and the lease agreements for both rental properties from defendant RICHARD DOUGLAS.

   31. On or about April 2, 1993, defendant RICHARD DOUGLAS submitted to Union Trust copies of two false leases and a handwritten note of explanation as set forth above, when in truth and in fact, as defendant RICHARD DOUGLAS well knew:

  1. he continued to work for Sun-Diamond both in California and Washington, D.C.;
  2. his job required that he frequently travel to Washington, D.C.;
  3. he stayed in the Loughboro house when he was in Washington, D.C.;
  4. he had submitted a false lease for the Loughboro house;
  5. The named lessees, person X and his girlfriend and couple Y (family members),
    1) did not enter into or sign the leases with defendant RICHARD DOUGLAS;
    2) did not have any agreement to pay rent to Douglas; and
    3) did not pay the security deposits as represented.
  6. Defendant RICHARD DOUGLAS never received rental payments from the purported lease with couple Y, which rent was purportedly due January 15, February 15, March 15, and April 15, 1993.
  7. Douglas understated his monthly payments by $3,300 per month reporting the monthly payments to be $4,898 when in truth and in fact the monthly payments were $8,198.

   32. On or about April 5, 1993 and April 6, 1993, Union Trust San Francisco faxed the falsified lease agreements and the handwritten letter from defendant RICHARD DOUGLAS to PHH Denver.

C. The Loan Closing

   33. On or about April 6, 1993, based in substantial part on the claimed income from the two houses, PHH approved the loan to defendant RICHARD DOUGLAS, pending the final signing of documents and his fulfilling certain conditions.

   34. On or about April 19, 1993, defendant RICHARD DOUGLAS -- at a meeting where the house purchase was to be completed and the loan funds released provided that RICHARD DOUGLAS met the PHH/Union Trust requirements -- the defendant signed and certified the accuracy of the typed loan application as follows:

  1. [I] specifically acknowledge and agree that . . . the Lender, its agents, successors and assigns will rely on the information contained in the application and I have a continuing obligation to amend and/or supplement the information provided in this application if any of the material facts which I have represented herein should change prior to closing . . . . and;
  2. I certify that the information provided in this application is true and correct as of the date set forth opposite my signature on this application and acknowledge my understanding that any intentional or negligent misrepresentation(s) of the information contained in this application may result in civil liability and/or criminal penalties including, but not limited to, fine or imprisonment or both under the provisions of Title 18, United States Code, 1001....

   35. On or about April 19, 1993, defendant RICHARD DOUGLAS wrote a check dated April 20, 1993 in the amount of $105,843.48 from account number 11391-05987 at Bank of America as part payment for the Campus Drive property. This account contained the $57,990 buying him out of his Dain Bosworth securities account and the $10,000 loan from DOUGLAS' girlfriend.

   36. On or about April 21, 1993, PHH, in reliance on defendant RICHARD DOUGLAS' signing the loan application on April 19, 1993 certifying that the information in the application as of that date was true and correct and the leases and handwritten note previously provided, caused a wire transfer to be made and funds credited to Fidelity National Title Insurance Company in the Northern District of California in the approximate amount of $416,000 (escrow no. 205752) for the benefit of defendant RICHARD DOUGLAS to be used for the purchase of the Campus Drive house.

THE WIRE COMMUNICATIONS

   37. On or about the dates set forth below, in the Northern District of California and elsewhere, defendant RICHARD DOUGLAS, for the purpose of executing the aforesaid scheme and artifice to defraud, and for obtaining money and property by means of false and fraudulent pretenses, representations, and promises, and attempting to do so, knowingly and willfully transmitted and caused the senders named below to transmit to the recipients named below by means of wire communications in interstate commerce, writings, signs, signals, pictures and sounds, to wit, as follows:

COUNT DATE SENDER RECIPIENT ITEM(S) TRANS- MITTED
BY WIRE COMMUNICATION
11 4/2/93
11:19am
PHH Denver Union Trust
San Francisco
PHH underwriting worksheet
with loan "incomplete"
12 4/5/93--
2:14pm
Union Trust
San Francisco
PHH
Denver
DOUGLAS' leases on Loughboro
and Brava Court
13 4/6/93--8:48am PHH
Denver
Union Trust
San Francisco
PHH underwriting worksheet
with loan "incomplete"
14 4/6/93--
9:43am
Union Trust
San Francisco
PHH
Denver
DOUGLAS' letter
explaining leases
15 4/6/93--
3:01pm
PHH
Denver
Union Trust
San Francisco
PHH underwriting worksheet
with loan "approved"
16 4/7/93 Union Trust
San Francisco
PHH
Denver
DOUGLAS' Bank of America
account balance verification
17 4/9/93 Union Bank
of Switzerland
New York City
Bank of America
San Francisco
$57,900 wire transfer of
payment for interest in
securities account to
DOUGLAS' bank account
18 4/19/93 American
Security Bank
Washington, D.C.
Bank of America
San Francisco
$10,000 wire transfer from
DOUGLAS' girlfriend to
DOUGLAS' bank account
19 4/21/93 PHH
Denver
Wells Fargo Bank
/Fidelity National
San Francisco
$416,000 loan for
purchase of house

(All in violation of Title 18, U.S.C. 1343 and 2)

 

A TRUE BILL:

 

 



FOREPERSON
October 15, 1996

 



DONALD C. SMALTZ
Independent Counsel

Theodore S. Greenberg
Deputy Independent Counsel

 

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