it doesn't harm the victim whereas fraud does this is a case where we can see that there were new numerous material deceptions that the scientists engaged in and had absconded with the loot they strongly would have committed wire fraud unique part of this appeal is the scientists fully performed and always intended to fully import in fully perform so they delivered their deliverables timely they were accepted by the agencies they were paid they were rated as highly satisfactory they survive the mortems and a lot of their work was published and in fact the prosecutor in this case did not charge or you remove the charges about full performance and he didn't argue performance or the lack of performance to the jury and said to the district court and to the jury he said performance was just irrelevant because as soon as you obtained the money through deception you have committed wire fraud so the first two questions that i think you need to ask yourselves when when considering a wire fraud or number one who is the victim and number two what money or property was obtained here the prosecutor conceded that the only victim or victims were of the wire fraud rather where the agencies themselves and not other researchers so we know the answer to that question the second question is what money or property was obtained and here we have a general verdict we don't have a special verdict form so there are two possible theories that could have been established by the evidence one is the right to control spending theory if that were property and the other is whether the grants themselves these contracts to perform research was the money or property obtained my obligation the question of course you say the government conceded that there were no other victims but agencies why wouldn't the other research scientists who were eligible for these on and applying did not receive the general matter  t i i can't i mean i remember that transcript and it's it's addressed in the brief but it's outside of the scope of this appeal because i'm sorry so there's a circuit split over this right to control spending theory there's and it's it's a little bit hard to categorize each time i read these wire fraud cases seems like i could almost put them in one column or the other but the way that categorize it in the brief is that there was a six three circuit split where six circuits have said that the right to control spending can be considered a form of property and three of them have said it's not and i'm asking you to adopt the minority rule here because i think the majority rule is unsound and it's unsound because the supreme court has repeatedly narrowed the scope of fraud statutes both wire fraud and mail fraud  in a series of cases which i'm sure you're extremely familiar mcnally carpenter cleveland the car and in each of those cases we said well it's got to be property it's got to be even intangible property counts but it got to be property in the victim's hands it can't be merely a regulatory interest it's got to be transferable and here the right to control spending is really best understood as a sovereign right the regulatory so it's just agencies deciding where they're going to spend their money and that's not something that could be obtained by a private individual because here the scientists couldn't say oh we're actually grabbing this right from you agency about who to decide to fund with these research grants so it's not property and there's some additional reasons why it's not property normally with property it's a bundle of sticks there that's right or like a bundle of sticks and you can do all sorts of things with and here the right to control spending has none of those attributes  agencies couldn't exclude her and join other researchers from performing the same research if they if they want to do it on their own they couldn't prevent those researchers from getting their own intellectual property and you  can't agencies couldn't transfer their sovereign right to a private individual or other entity to to fund these researchers so it's not property and even if you were to think this is ambiguous you'd have to apply the rule of lenity and you would say no you know you could go either way on this and we're going to say that's not property so i think you should adopt a minority rule as to the right to control spending but my job isn't done at that point i still have to show you that the grants themselves were not money or property obtained in here that turns on what is the nature of the bargain that was struck between the agencies and the scientists are all researchers and here i think this is in a lot of senses and the meat of the appeals are going to have to look very closely about how these programs are set up and what the contracts say and what the what the researchers were doing but speaking generally the f b i are nasty t r programs are designed to fund small companies doing research and very important lots of great developments have happened because of funding small companies doing this this research it isn't the desired end result commercialisation it's yes that that that very important part of these programs that it's not just funding research for the sake of research it's to to have a vibrant research community and if you have a vibrant research community you're going to have these incredible breakthroughs that are so important for  so with that purpose in mind it seems to me that what the government bargained for was a kind of research performed in a lab with the proper equipment with specific staff members and the support of universities are well known professors why is that the bargain the the bargain has to do with the ultimate output not not how you get there and here that's something that the prosecutor could have charge and could have tried to prove but instead what they did it's sort of like a marie antoinette argument where they're on the one hand saying well don't we we don't want to have this evidence you're a burden of proof proving beyond a reasonable doubt that you didn't perform but we want the benefit of you concluding that they didn't perform and we also want to deprive the defendants of notice that that's what they must defend at the trial and here that's i don't think that's the right question the government failed to charge performance and our position was that we did fully perform and had that been charged we would have  know proven that need even at the trial i think we did prove that we perform that has to do with the deliverables really doesn't really go to performance ok it goes to what the government the way in which contract whole series of material deceptions and we absolutely concede those certainly took place right and all of those things make commercialisation more likely and the government didn't get that here i would i would disagree with that but it is something that you have to decide for yourself obviously that the ultimate deliverable is what we think matters and because we delivered and fully performed it had no impact on commercialization and to the extent the government says it did have an impact on commercialisation that speculation because we don't have no impact commercialization when if somebody wanted to and go try to commercialize his product being using fraudulent research so they'd have to disclose that there was no outside lab there was no comments institution there was nobody but the two people so why didn't they have a direct impact on the opportunity for commercial it's almost like it couldn't possibly have been commercialized using it wants the truth came it could have been if that had been a theory that was charged in the indictment and then what we have is kind of a disconnect between the indictment the theory that the prosecutor repeatedly stated he was prosecuting under and then the evidence at trial so had the government charge in the indictment we think you guys didn't perform properly and then the evidence says that the trial are the evidence is what the evidence was it at trial and then when we come to the general verdict and we get this general verdict i'd be in a in a very difficult position making making the argument my reply brief so there's a disconnect between what's been charged and what's been proven at trial and because of that that affects the way that you read the verdict and what the jury actually found and that's part of i position that that's that's how the case law has developed in this area so i are siri it's it's a variance and then that we didn't undermine the nature of the bargain by delivering them what they know defrauding of the accepted it and it was timely and all all of those things so because you got the benefit of the it's like a no harm no foul kind of argument but you do like judge prior you said you do have to look at you know how all this was done but i think that's an appropriate consideration one of the other things that i want to talk about very briefly is the maxwell tate let me ask you this over given a sports analogies so bear with me honor of judge joe flat to address so you show up and you perform you strike out every batter you face during the season everything goes well except i have to later admit that i have a thirteen year old pitching for my team and all the other you're pitching against twelve year olds why wouldn't why wouldn't that be kind of what's going on here you're saying look we performed we misrepresented that we had the facilities and the and the credentials  at least from a physical facility standpoint to do all these things but we actually did the job and that's a great question it's why i think maxwells are correct to say that decision but it's distinguishable and that is because that misrepresentation goes to the core purpose of that program or that white wine commercialization or alternate commercialization the core purpose of this program similarly and and so max one volves a socially more laudable goal wasn't performance wasn't charged properly it was it was it was just the disruption it is regardless of whether performance was perfect there are still problems that would have to later be disclosed about the performance and the  and the problems with the research to begin with therefore the government's deprived of its bargain of its side of the bargain ok i thought about that mostly in terms of eligibility for it which is kind of the hypo that you would put forward and here these companies were eligible because their small business all our victories of into the season could be vacated because yet we had a thirteen year old pitching just the same way the research here could be later either at least called into question if not invalidated because there were misrepresentations made about what was going to be used in terms of the research i don't think that would invalidate the research  parts that might cause problems or the stuff about the the the tools that were used but the fact that different people didn't do that i don't think would would call that it's just producing data and they're reporting that data and then a lot of times they were i place a court reporter partner for the united states the agencies did not get the benefits they bargained for the corps points out the point of these programs is commercialization the things that these defendants lied about were all things that went to the heart of that goal the involvement of industry professionals and university professors the involvement of he people within those few years people who aren't well known as the leading voices in water purification or battery technology all of those things were considered by the agency decision makers because in this very competitive program those were key components of whether or not what the defendants proposed could meet the commercialization goal of the we did not get any of that with this end report that they turned in we didn't get the benefit of our bargain i don't think that the other businesses who presented proposals could be considered victims for purposes of restitution and i think that's the context that they're not being victims came up in but when it comes to whether or not the goals of this program were met that there were other companies out there with worthy proposals that were not said were not selected is absolutely key to understanding how these agencies were defrauded because there were people out there we could have funded and we were deprived of that benefit i don't think the court has to go any further than that to call it a case to resolve this sufficiency issue here right to control theory has nothing whatsoever to do with this case that's a theory that comes up in an honest services fraud cases in the kickback and bribery scheme cases that's not what this is this is a simple misrepresentation and i say simple it was clearly a misrepresentation but they were a very lot of them and they were important we relied on those misrepresentations and we did not get the benefit of our bargain now i'd like to talk for a minute about this notion that we didn't charge anything to do with performance that is not true we charge defraud under the wire fraud statute the scheme went from the formation of these companies on through to the creation of these forged documents the submission of those documents in the proposals an award based on those proposals and the money which after all was the point to the defendants getting the money and you only get the money if you turn in a report an interim report or a final report they got that money and the scheme went all the way down to the obstruction of justice going to craig johnson and getting a letter that says oh yeah they had access to our lab to do their research the research here was integral with the fraud and the submission of these reports and the supposed product that they produced the creation of this research was just and that in furtherance of the fraud the performance itself was grounded in fraud so it's absolutely incorrect to say that they're not guilty because they performed and turned into turned in a word processing document with data and it now there is a separate question of their eligibility they were ineligible because they were employed by other entities eldest he was employed by by the university in france komarow was employed by neither of them could have served as p i's on any of the proposals during those time periods each defendant listed the other in their proposals as employees of the two companies they couldn't be full time employees of two companies at the same time so all of the proposals that they submitted they were ineligible and then they weren't eligible because they were out of the country while they were doing the research both of them at least for some of these and they were ineligible because they were not the intended type of researchers yes they were small businesses but that's not as far as the program go they didn't have any of the ingredients for commercialization that they said they had so from that perspective they were unintended recipients to these programs are intended to fund small businesses that can produce the next qualcomm chip a business that can produce the next laser eye surgery that's the point and that's not what we got the defendants bring up this material variance notion by the way in a footnote that's not an argument fairly raised and it's certainly not an argument that was ever presented to the district court and made their objections to anything that had to do with performance at trial jackson's arguing that arguments to the viability of the research were not relevant based on the charges there's never been a court ruling about whether this was a variance and they certainly didn't present that there is lots of testimony that the agencies do not have a a budget to go and investigate the support letters that that researchers put in with their proposals and they don't have the ability to go back and replicate the science to make sure that it's being done correctly or anything like that the high tech high for high tech corridor program is a matching funds program that the defendants early on at one point had participated in as funders i guess that's how they found out about it it was never the kind of program that provided access to facilities that they represented it to be it just sounded good it just sounded good just like having a drug in the braddock from maxwell technologies as a supporter sounded great even though he was not at maxwell anymore when they used that letter  just like using the picture of the photo reactor that didn't even exist anymore sounded great and they have for their business address their home address they certainly did and nobody even confirmed there was a actually agent say because it would have shown i mean go on google maps and say it's a house well that's actually how we found out about what tipped us eventually someone thought that the address looked wrong and someone started asking questions and that's when the defendant created the false documents with respect to the mean they didn't they recognize the names and that's why they didn't they recognize the names they knew that david may sick was the leading person in water water photochemistry he was the nasa guru everyone went oh david mazing this must be good and in fact that aspect of the science let a lot of these proposals go through there was a witness who testified from northrop grumman about a proposal for coating technology on airplanes and he testified that northrop grumman would never have anything to do with an idea like the defendants were proposing because it would interrupt the stealth technology coating on the airplanes that northrop grumman participates in building yet the reviewers get a proposal and they see oh northrop grumman they've got terry holland volved it must be good science and what we didn't do at trial we did not try to replicate twenty four ten point six million dollars worth of research and science and for the most part except for things like terry hall testifying that this was not technology that nor heard graham and would ever support we didn't for the most part to tack the underlying science because there's no practical way for us to do that but we never ever suggested that the research they submitted in their final product in order to get paid was actual performance we said from the beginning that that performance didn't matter because it was grounded in fraud and we also argued in the same breath that in any event we did not get what we bargained for because we bargained for eligible principal investigators we bargained for industry individuals involved in the research who would help take the the research from the laboratory to the marketplace we bargained for these experts who were going to add their knowledge to the proposal and help to make the product and you know if a reviewer thought that terry hall had blessed the research well then maybe it looked like something that they the battery technology proposals said that the the point difference between the defendants who got the proposal awarded and the next person down was only two points and i want to say something like ten points had to do with facilities alone had they known they didn't have facilities somebody else would have gotten up so yes there was a wealth of testimony that these fraudulent misrepresentations were to make it work and they were the difference between these defendants getting ten point six now and he's considered all along they're all most of all material represent misrepresentation yes that that's not been the issue here you know their defense was great as a wealth of fraud the whole thing was a sham fraud yes yes they now are trying to say there's no harm to my states and i want to ask about jury instruction number twelve wants that gives you the elements of the crime and and i think there's a response to it but i want to make sure i understand what the government's position is and the charges the intent to defraud is a specific intent to deceive or cheat united states usually proper personal financial gain that would be the defendants financial gain or loss to the united states ok so we know law or loss to the united states for their own defraud for their own personal financial crime is that again is that enough of our fraud statute it is in or does it have to have a victim who lost something are you following mike i am and i think that the confusion here is that we're mixing up two in two concepts the to call of case which came out after this trial was about whether material represent misrepresentations went to the circumstances of the deal whether it changed the deal the defendants have argued factually that we got the benefit of our bargain because we gave you this word processing document with data and it that is a different question than what they tried to address with their jury instruction which was they argued that the united states had to prove that we had had a financial loss and the court understands how these programs work this is an accounting program for the united states yes the united states would have funded somebody else this wasn't a financial loss we were deprived of being able to spend this research money on a worthy program so there's the disconnect but the instructions that the court ga accurately explained that a scheme to defraud requires misrepresentations with the specific intent to deceive or cheat the united states out of money or property there was no difficulty with the jury understanding from that instruction also sufficient if this scheme is just not so much to sheep the united states a national loss because as you said this is not right out of pocket loss because they don't spend the money anyway well i'm saying that maxwell addresses that and maxwell says that financial loss to the united states is not at the heart of the program and that in maxwell it involves a different small business program but heart financial harm is not at the heart of the financial of the the wire fraud statutes it does have to be property we understand that but this was property this was a very lot of money it's just that whether or not there was a fraud doesn't depend on the united states balance sheet at the end what the district court found with the district court applied the guidelines manual straight out of the book and said that loss is the greater of intended loss or actual loss the intended loss was the twenty four million dollars in proposals they had submitted since hundred nine and the basis for that in the record is this folder of letters governments exhibit fifty two i think it is in the court has that in the exhibits in our appendix those go back to  nine they were faking letters since then so that was the basis for the court to say it's a reasonable estimate that the amount of the intended loss was everything that they asked for since they started supplying fake letters and then you know the court went from there and there was no off that for the research that was performed because it wasn't the research we paid for that's not what we thought thank you i asked a quarter  from just a couple of things i want to run through very quickly the commercialization part it's important member that these are phase one and phase two contracts not phase three so just consider that as part of your analysis the government as mentioned the key people w sensing it did not it had to do with who the victims of the wire fraud were and that sounded doc three seventy eight point fifteen page sixty eight the performance charges what i'm specifically talking about is page one our site doc one page thirteen paragraph i am those are withdrawn from the superseding indictment and that's why we're saying that there's no performance charges here the government said that the we didn't raise the variance argument they're mistaken it's a footnote that's nine lines long cites a case there are two record citations in there and then i am pleased by that in the reply brief and under this court's case law that counts so you need to consider the variance argument whether it prevails or not and then the the really two central things you've got to look at  in this appeal i think the two most important cases are tackle of and maxwell and the government and i like i think we generally agree that those are the most important cases you need to look at them interpret them and apply them to the facts of our of our case and we were to agree with the government's argument that the scheme was grounded in fraud from the beginning in terms of the work to be done the performance itself in law to tackle off and maxwell would that not require firm and at least that issue if if they had properly charged you failed to deliver and we failed to deliver then yes that wire fraud count should not just fail to deliver but that the  misrepresentations went to the research that was to be performed not just whether they were eligible but to the research itself so like the quality of performance for example  saying a cardboard box is a dark room saying that a residential address is a business facility in which the research will be conducted at least in part ok i my answer is i disagree with that reading of the indictment properly in the case but if that were part of the case then yes i think that that is wire fraud because that would go to not just the fact of delivering the performance but the quality of the performance so it's really about what is the nature of the bargain that was struck and how did you perform government taking the position that that harm to the victim is not a consideration that's at the heart of the wire fraud statute the tackle of case says that when the maxwell case says it's not it's it's in a different context one is talking about a different set aside program and they're saying well the fact that you delivered doesn't mean anything because you undermined this particular set aside program because that was set aside for small business for minority owned businesses and you weren't that so that that's wire fraud so that's how i harmonize those two cases the final point is the twenty four million dollar loss i haven't seen that evidence and i was there at the sentencing and the government i think is speculating that all of those proposals were materially deceptive and i don't know that they were so i think there needs to be fact finding about that particular issue well are there proposals on the face of them that they may get  proposals but there was no showing that they were materially deceptive that's what the that's what the if you were to vacate in remand for that we would want an evidentiary hearing about deceptiveness do they have any documents of those proposals put in any evidence or just i don't remember i saw their calls and so i talked over the that there was a summary witness i believe it said there's twenty four million dollars of proposals but it didn't establish that they were deceptive so it's just the additional calculation but the enhancement is what i mean yes i would how would the enhancement be affected by the fifty percent variance from the mid range i don't i don't remember the exact calculation but it was a big number that they ended up with in fac