good morning judge joe pryor and i are delighted to have had with us this week judge mike malloy who serves on the eighth circuit and he has a distinguished history in the federal judicia and it's really been marvelous to be with you thank you thank you enjoy being here and with that you know our system it's a traffic light system and so when the red light comes on we would appreciate you winding up what we're delighted to hear from you in proceed may please the court my name is collin garrett and i represent appellate craig near there for arguments that i would like to address this morning the prejudicial testimony of government witness montgomery fisher the constructive amendment of the indictment the insufficiency of the evidence on the wire fraud counts and the insufficiency of evidence on the false claims counts the testimony and slides of montgomery fisher lowered the government's burden of proof by equating simple lying and stealing with guilt he said basically i mean n s f lawyer my office investigates these cases and if you lie and steal quote d o j will prosecute you can send you to jail now this testimony was irrelevant to mr near state of mind because this was communicated to him at a presentation given after the award of the n grants so the scheme alleged in the indictment to fraudulent only obtained grants and contracts as to that n s f graham was over and done with and that really there was no other relevant purpose for the testimony as well but the prosecution designed its case in argument on exactly this incorrect watered down theory of guilt they made alleged lies in fact by mr near a central theme of their case that occurred over and over again there was extensive testimony they presented from agents and other witnesses about so called faffed by mr neo this is not an element of any charged crime the district court judge only admitted this evidence under rule four zero four b but agents testified for hours on the personal expenses of that mr new year made with the money that james ego earned under the grants and contracts that issue here what about what about the court's instruction that it's not a charged nor an element of any charge crime to use money derived from federal grants or contracts for personal expenses doesn't that cure the problem the given the extent and the forceful nature with which the government argued that the jury only had to find that mr niro lied and still i don't believe that that did cure the problem in opening the government said dr fisher told mr near and the other attendees that lying to obtain an f grant or lying about what you did under a grant is a crime period in closing they accuse mr near thirteen times of pocketing or taking or keeping agency payments and then said quote if you focus on the money in on the lines it's obvious that mr near engine zico are guilty and i don't believe that the instruction from the court could possibly cure the immense reiteration of this basic watered down standard of proof that the prosecution pushed throughout its case the hardest part about this argument from my standpoint and your standpoint is the standard of review that makes it really tough i think to prevail in that argument you want to adjust the this was objected to and i think that you know i'm talking about the well let me let me instead of skip and from the so as i understand the government's argument it because you didn't object during opening statement you waive the argument is that the way you understand  has advanced in the in the briefs that's correct and what i recall from spending time at the russell building was that it was kind of a matter of custom that you just kind of didn't inter rupt the other side's oral argument am i mis remembering that i think that's a correct statement both of practice and as as as a strategic matter i don't know whether the government is going to introduce evidence to back that up if there is a really inflammatory statement opening that is not then backed up with evidence and i might argue that there's been so much prejudice that there has to be a mistrial but i would generally wait and see because i don't know for sure what they're going to present so i agree that it's  only custom but better practice to wait and see what they present so for all those reasons that's correct i didn't object in opening when they highlighted that testimony as soon as we got to the testimony of mr fischer i certainly did object constructive amendment issues the government has alleged that this is invited error and there are two reasons that that is wrong first of all generally i don't think that invited the air applies and they cited no cases where invited there was held to apply in a constructive amendment case where it's clear and i think it's clear the amendment the indictment was constructively amended we have a major procedural defect in the proceedings here right where we're saying we're arguing about whether the court is going to correct that or not but there is there's no denying that there was a jury applied the wrong standard and they haven't cited any cases in a constructive amendment case where both sides act for asked for a simple pattern instruction and the judge gave that that that was held to be invited to error and i think the rationale is that a defendant who doesn't request a pattern instruction but simply fails to object and obviously is reviewed under plain error is really in no different situation than one where you could as here where we did join the prosecution in asking for the pattern instruction there's no tactical advantage gained by the defense in that situation it would be one thing if we asked for a custom instruction that benefitted the defense in some material way at these of the pattern instruction but otherwise this is just kind of put a gotcha doctrine to block review of a very serious procedural problem so i thought that the government had actually requested an instruction that included the term willfully that's not right i don't recall that and i don't believe that's correct and they would have a good point for them to bring up in the briefing if they had and i'm sure it wasn't mentioned there so i i would have to check but every speculate think that is that's incorrect the second reason that i wanted to point out that invited there doesn't apply here is because we know from this court castro case that constructive amendment can occur both from incorrect jury instructions but also incorrect prosecutorial argument and we had both here and the defense obviously did not invite the incorrect government argument in closing that they could convict without finding that missing the acted willfully as to the wire fraud contains or that he knew that the misrepresentations in the certifications war material to the agencies as to the false claims so for that independent reason  invited error doesn't bar review and the court should review under plain error here and i think i'm playing here obviously is in its own right sometimes a challenging hurdle to clear but i think we clearly have and therefore the court and the government was on notice here that that that was effectively constructive that without that there would be a constructive amendment the third prong of plain error is also satisfied because th clearly affected mr near substantial rights if you look at the record there is no evidence that mr near acted willfully that is with a bad purpose to disobeyed the law as to the false claims there was no evidence that he knew that the the very minor misrepresentations made in the certifications that underlay the false claims act and accounts were material to the agencies and in fact there was testimony from the defense expert witness that the agencies did not consider these things material  affected substantial rights and the court essentially said that convicting a defendant of an unindicted crime affects the fairness integrity and public reputation of the judicial proceedings and that's from the madding case and that fulfills the fourth prong of the player standard on the constructive amendment issues and your red lights on well we'll hear from you again thank you good morning good morning may it please the court lindsey baron for the united states the defendants lied to get almost eight hundred thousand dollars in public money set aside for innovative small businesses and they convinced n s f and ego was a thriving business concern with deep operational and managerial depth with a history of successful business ventures and with access to top notch facilities when in fact g insolvent one man show that had never successfully brought anything to market and their fraud frustrated the purpose of the f b i our program and of private the government of the opportunity of investing in an honest deserving and legitimate small business that the government got everything they bargained for in this case a finding that we have to respect and this record judge drash found that gin zico provided the reports that it gave the deliverables the things that were required under the awards but that doesn't solve the case and that is true gin zico turned in a war attorney in reports and it provided the prototype that was required under the nasa program but that is not that doesn't tell us how you calculate loss the first error that the district court made was deciding that the government benefits rule doesn't apply at all and that's where you are like raising them weren't you now your honor we did not object i mean we did this was not an objection as we stated in our record it was a difference between a clarification and an objection the p s r found that the last amount was ever twelve million dollars and we didn't disagree with that but we thought that was right we knew that the defendant gets the twelve million so there's about eight hundred thousand dollars in s p i are wards that were actually granted and there was a total of almost twelve million in awards that were applied for but were not granted and so the  intended loss we argued was twelve million dollars it seems like this was a case where the judge should weigh overreaching interesting for twelve million dollars i can't disagree that you probably saw some sticker shock there w intended last figure but so what are you asking for now eight hundred we have abandoned our argument that actual loss should have been included were only i mean i'm sorry that intended law should have been included were only x asking for lost based on the actual value of the awards that were granted but the reason why it's not waived so first of all think about what is an objection to the p s r we agreed with the loss amount but we knew that the defend it was going to ask for an offset and so we wanted to front that issue for the court this is not subject to lawsuit to offset the p s r is right this is the last amount and think if we had never issued that clarification letter at all with the defendant is suggesting is that we would have been prevented from arguing at sentencing that application  three which is the credits against loss provision can can apply to the government business rule that the government business rule is not subject to offset and the interesting thing about that argument to me is on the one hand you're saying they did opening so they were barred from rising objection linderman i doesn't seem like you're applying the same rules to yourself that you're applying to the defendant well and i'll admit your honor i have no case saying that you have to object in opening but another issue we raised in our brief on that point is that the objection that they raised to the fisher testimony was that it was prejudicial they did not say objection your honor this lowers the burden of proof and here's why that's important and here's why that argument is actually waived on appeal under wolf one of three when you raise an objection below you have to articulate the basis so that the district court can correct an error so saying that it's prejudicial it's a four of three issue and then arguing on appeal that you've lowered the burden of proof are two different things and that waved but that's because the objection articulated below is different than the one raised on appeal and you know the defense as well the judge is opposed speaking objections but you still have to explain why it's error so that the court can correct that  but even still the thing that's interesting about this fisher testimony is that the reason why they objected is because and this is cited in footnote two of our brief the defense counsel said there is no heightened mens rea in this case there's no willfulness requirement and now on appeal they ask this court to find that it was error for the district court to agree with that and give the pattern jury instruction on wire fraud and so your honor the defendant consistently maintained the position that there was no hei and he said it in objecting to the fisher testimony he asked for the pattern instruction and invited that error the district court went along and gave that instruction and the government's arguments in closing were based on the element that everybody agreed were going to apply so as to the prosecutorial argument your honor we were all arguing the same elements because that's what we agreed to at the charge conference that's the error that they invited but even under plain error of you your honor they cannot show that the error was plain or that it affected substantial rights for two reasons cancel year is different from this case in an important respect in that case this court was concerned about the issue of sandbagging the defendant created a defense based on lack of willfulness and then the court found that the prosecutor pulled the rug out from under them by amending the indictment after it after the close of the case that's not true here what the defendant argued at trial was that he performed under the contracts that the lies were material that he didn't have the intent to defraud his defense was not based on willfulness so it's distinguishable from the cancel year and that way and here's why that's important the minute you can distinguish that case from this case error is not plain it's not obvious and clear which is the standard of the circuit but second you cannot prove substantial prejudice remember it is not the government's burden to prove that he would still have been convicted if the willfulness instruction had been given he has the burden of showing that he would not have been convicted and this you cannot do there was a good faith instruction and we presume in this circuit that juries follow the instructions that they are given the jury also had to find intent to defraud and that's what the fisher testimony really got to there were lies and stealing throughout but can i ask you both of them reason for for that testimony i mean you used argue that it was material but you know the fact that look at where that where that those slides that came from a presentation that he attended you have to look at after he had already submitted the proposal and i had been accepted right and so you have to look at where that occurred throughout the scheme that we charged all these proposals so that occurred after the first n s f proposal was granted so he said this proposal and it contains these lies he goes to the conference and he's told you cannot do this he does not ever change his behavior so when he applies for the grants i mean i'm sorry for the awards with the nasa the proposals contain the same lies and from that the jury could could infer that the errors and the lies and the misrepresentations in the initial proposal and in every proposal since because they didn't change was done willfully was done with intent to defraud was done to trick the agencies into choosing him for an award and so that is strong evidence of willfulness and this is why we wanted to include at the evidence of monte fisher  showed an intent to defraud it showed that he was more and that you you were under a legal obligation to tell the truth and to spend this money the way that you promised you and even after that warning he didn't alter his behavior but further evidence of willfulness were all of these certifications he had to sign under penalty of perjury he is told on these certifications that misrepresentations are prosecutable that this is a an offense and you can be prosecuted for line that is evidence of willfulness and for that reason he can never show that he would have been acquitted if the willfulness instruction had been given and if there are no further questions on that your honor i'd like to turn to the government's cross appeal to the f b i our program is a federal financial assistance program and the goal is to benefit a public purpose that purpose being strengthening the role of innovative small businesses and the research and development arena of government awards so why did the district court here the district court never answered the initial question of is this even a government program the governor the district court found that the government business rule doesn't apply because the defendants performed but those are separate and you know inquiries entirely whether they performed what we do with that later on offset should they get an offset but first you've got to find out is this the kind of program that even triggers this will the district court never made a finding on that he does if he did make a finding though that he was an attendant written fishery didn't he did your honor and you reach that question after you first find out if the government business benefits will complied and the district court never even considered whether the f b i or program as a program triggers this rule in the first place he said conclusively i don't think that rule applies here but he did make a fight i did make a factual finally there was an attendant recipient write well so he made a factual finding that john ziegler was a small business and therefore eligible to apply and he then drew the legal conclusion that being eligible to apply is the same as being an unintended beneficiary so we still think it's didn't have a review because it's an interpretation of the guidelines an application of those guidelines to a finding that gene's ego was a small business which it is that's not disputed they were eligible to apply but that doesn't make eligible to receive an award is that they seem to me that this falls more into the i'm intended use category clause not the an attendant recipient clause well and so the food stamps example is describing that diversion of  money to unintended uses and even on that the defendant concedes in his reply brief that the district court made no findings on whether there was a diversion and that if that's where this court ins up that remained as appropriate we still believe that there are no unintended beneficiary because the evidence  trial showed that they were selected because and remember the purpose of the s p r program is not just to fund the research but it's commercialization commercialization is the linchpin of this program and so what the agencies look for is the capacity of a business to be able to commercialize whatever research the government is investing in and so going back to what are the program goals the statutory language this fifteen year se i think six seventy eight we  our brief and urged the court to look at that citation in our brief the declaration of policy and that statute makes clear that the purpose of this program is to invest in small businesses so that they can do research and development that they otherwise can't afford because it's expensive and they're small businesses so that then they can compete in the technology sector and hopefully someday be able to compete for government procurements but it's not a procurement yet and that's another mistake that the defendant makes what this program is is it's an assistance program to these businesses to be able to do the work and we believe your honor that the result is is compelled by this court's prior opinion and maxwell so in maxwell what this court found is that when you've got a program and even in that case it's a procurement program so we believe the rule applies even more clear here where you're not dealing with a government procurement but in maxwell where you've got a government set aside program that is designed to further a public policy where there's a purpose the government isn't just buying widgets it's buying something intangible that it finds to be of value investing in small businesses giving opportunities to disadvantaged disadvantaged businesses or here investing in innovative small businesses technology technology research if that's the purpose of the program then you're under the government benefits role now whether they're intended beneficiary that's a separate question the court found that there are small business eligible to apply absolutely there's no dispute there that they were not intended beneficiaries because the consistent testimony was that they lacked this commercialisation appeal that's what they lied about that's why they were selected for funding and they diverted that money to unintended uses so even if you find that they were  ineligible they were qualified beneficiary remand is still appropriate so that we can figure out how much was diverted none of that is subject to offset under application three the application to be i'm sorry three f two which is the government benefits rule speaks pretty clearly that loss shall be considered no less than either the full battle value of the contract or the amount diverted that's the floor to apply no three eat of that basically renders the government benefits rule superfluous because you're really just calculating loss the way that you'd would under three a how much did they get what was the value and what's our son and so if we follow the defendant's perspective here that there's no point to the government the benefits will and again the language is pretty clear in that rule your honor so stepping back these agencies in the s p r program they rely on the honesty and the integrity of applicants which is why they put the onus on the applicant to affirm under penalty of perjury that what they're saying is true so when fraud is detected and prosecuted your honour's it is important to send a message that there will be serious consequences these agencies don't have the resources to ferret out fraud they don't have the resources of the f b i or the i r s and so they require they rely on cases like this to send a message that that there are consequences and so because you said you said the government benefits who would be surprised if if if what was intended to be received or the difference between what's intended to be received and what was actually received is that as the amount of loss right well argument is that the rule tells us how to how to calculate an offset if there was an amount let's say that they received it lawfully but they diverted then that's how you do to offset the offset is if they got one hundred fifty thousand and fifty of that was legitimate that's i'd like to address the sentencing issues in the government's cross appeal you know the outset i want to say that the government in its briefs suggested that mr near by the court correctly finding there was no peculiar area harming no loss that mr near some got a pass nothing could be further from the truth he's paid a heavy price he severed nine felony convictions he spent four months in custody and a year supervised release which he's now successfully completed and he was also blacklisted from participating in any projects with government grants or contracts for five years which is essentially rendered him unemployable in his field because any company that would need his skills has government grants or contracts so you know this is not a free pass he's already part price but the court correctly found there was no peculiarity harm and thus no loss the court correctly did not apply the government benefits rule and three f two to apply that would have to the court would have to find that these grants and contracts were government benefits within the meaning of that application note and that either mr near or jen's ico were unintended recipients or they diverted the benefits to unintended uses we've all agreed the court made no finding either way on diversion to unintended uses the court did not plainly error in finding these particular f b i our programs were not government benefits s p i are is not an affirmative action set aside the case that the government relies so heavily on maxwell involved these disadvantaged business enterprise set aside programs and this court in that decision specifically described them as affirmative action programs intended to be a disadvantage whereas i mean they use food stamps as a specific example so right i think the gap location not broader than what you're trying to cap it to i think that the application note started with programs that were clearly unilateral transfers like food stamps the government gets nothing in return and offered little other guidance and as the courts have exploded explored what government benefits mean for the purpose of this  found that an expanded variety of programs maybe should qualify but so far they have said that as programs like disadvantaged business enterprise set aside contract programs that are designed to advantage much we could say there are analogous even though they're not such unilateral grants but analogous to food stamps because they are intended to benefit a specific category of person that needs help in s p r part of why our programs are not like that and i don't believe circuit court has found that they are because congress has a policy aim it's absolutely correct they want to foster innovation in the high tech arena but small businesses are a vehicle for doing that they want them to be included because they can add something valuable to that sector of our economy and they do have some disadvantages but they haven't suffered any historical discrimination it's not that we want the congress wants to benefit small businesses per se it's because it would be useful for these aims to do that and that makes it different from food stamps or affirmative action programs i also know that maxwell held that the district court didn't clearly error because this court had not previously held that those d b e programs are government benefits and since no court at this level in this court certainly has not held that s p i our programs fall under the government benefits definition i certainly think the court didn't plainly or clearly error in deciding not to apply the government benefits rule the district court here should benefit from that same lack of precedent or lack of clarity here where do you think we are if we say the government benefits or should have  i believe that it's clear that unintended beneficiary has to be measured by the criteria for application in this case that you're a small business or in those d b e programs that you're a minority or women owned business because to suggest that the to be an intended beneficiary you have to have the capacity for commercialisation how is any court going to judge that that's an unworkable factual standard here the testimony was clear in the district court judge found that there a unintended beneficiary because they were a qualifying small business because they had less than five hundred employees we also i'm out of time but the next part of the answer to your question would be that you have to find you have to apply offset under three one even if the government benefits rule did apply even if those other things have been found thank you thank you