Document ID: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-caDC-97-03072/USCOURTS-caDC-97-03072-0/pdf.json

Parties Involved:
American League of Lobbyists
Amicus Curiae for Appellant
Sun-Diamond Growers of California
Appellant
United States of America
Appellee

Document Text:

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United States Court of Appeals

FOR THE DISTRICT OF COLUMBIA CIRCUIT

Argued December 11, 1997 Decided 

March 20, 1998

No. 97-3072

United States of America,

Appellee

v.

Sun-Diamond Growers of California,

Appellant

Appeal from the United States District Court

for the District of Columbia

(No. 96cr00193-01)

Eric W. Bloom argued the cause for appellant. With him

on the briefs were Richard A. Hibey, Michael K. Atkinson

and Charles B. Klein.

Theodore S. Greenberg, Deputy Independent Counsel, argued the cause for appellee. With him on the briefs were

Donald C. Smaltz, Independent Counsel, and Charles M.

Kagay, Chief Appellate Counsel.

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Carter G. Phillips and Griffith L. Green were on the brief

for amicus curiae American League of Lobbyists.

Before: Williams, Henderson and Tatel, Circuit Judges.

Opinion for the Court filed by Circuit Judge Williams.

Williams, Circuit Judge: Sun-Diamond is a large agricultural cooperative owned by individual member cooperatives

including Diamond Walnut Growers, Sun-Maid Growers of

California, Sunsweet Growers, Valley Fig Growers, and Hazelnut Growers of Oregon. It came within the sights of an

independent counsel, Donald C. Smaltz, who was responsible

for investigating allegations of unlawful activity by former

Secretary of Agriculture Mike Espy. The independent counsel

charged Sun-Diamond with making illegal gifts to Espy,

committing wire fraud, and making illegal campaign contributions.

Linking Sun-Diamond and Espy was the figure of Richard

Douglas. As Sun-Diamond's vice president for corporate

affairs, Douglas was responsible for (among other things)

representing the interests of the corporation and its member

cooperatives in Washington. Given Sun-Diamond's business,

the Department of Agriculture ("USDA") was naturally part

of his bailiwick. According to performance evaluations signed

by Sun-Diamond's president, Douglas was a diligent and able

representative. He once described his approach to lobbying

by paraphrasing Lord Palmerston: "We have no permanent

friends or permanent enemies, only a permanent interest in

Sun-Diamond Growers of California." Permanent friends

aside, he had a long-time friend in Mike Espy--the two had

gone to college together at Howard University and had

stayed close in the years since.

The crimes charged to Sun-Diamond grow out of two

largely independent stories. One involves illegal gratuities

given to Espy while he was Secretary of Agriculture, the

other wire fraud and illegal contributions to the congressional

campaign of the Secretary's brother, Henry Espy. We save

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the recitation of facts for the discussion of the distinct legal

issues raised by each story.

Sun-Diamond argues that under the facts alleged and

proven it could not properly be found guilty of any of the

offenses, and, as to the illegal gratuities, that the trial court's

charge allowed the jury to convict on a theory precluded by

the statute. We disagree with Sun-Diamond's claims of

entitlement to dismissal of the indictment and to acquittal,

but we agree that the jury charge on the gratuity counts was

error and requires a remand for a new trial. Sun-Diamond

also attacks the sentence, saying that the trial judge, having

increased the offense level by eight for Espy's high-level

status as required by the Guidelines, wrongly bumped it up

another two levels on the theory that the Guidelines inadequately took that status into account. It also objects to the

trial court's imposition of probationary conditions on SunDiamond's member cooperatives, who were neither defendants nor agents of the defendant. We agree with SunDiamond on both sentencing points.

* * *

IllegalGratuities

The key dispute here is over how close a link the government must show between Sun-Diamond's gifts and official

acts that the Secretary of Agriculture performed or might

perform. The indictment detailed two specific issues on

which Sun-Diamond had a clear interest in favorable action

by the Secretary. The first was the market promotion program ("MPP"), a grant fund administered by USDA and

designed to prop up U.S. agricultural exports. See 7 U.S.C.

s 5623. The Secretary of Agriculture was authorized to

allocate MPP money to trade organizations like SunDiamond, who would in turn use it to defray overseas marketing expenses. According to the independent counsel, between 1990 and 1995 the Sun-Diamond member cooperatives

received $23.9 million from MPP. In August 1993 Congress

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enacted budget legislation requiring the Secretary to give

preference to "small-sized entities" in disbursing MPP funds.

Omnibus Budget Reconciliation Act of 1993, Pub. L. No. 103-

66, s 1302(b)(2)(A), 107 Stat. 312, 331 (1993). Sun-Diamond

and its members were hardly mom-and-pop organizations--

they reported net sales of $648 million for fiscal year 1993--

but many of their constituent growers were quite modest in

size. Sun-Diamond therefore wanted the Secretary to adopt

a regulatory definition of "small-sized entities" that would

include cooperatives such as its members.

Sun-Diamond also took an interest in federal regulation of

methyl bromide, a pesticide used by some of the growers who

belonged to its member cooperatives. In late 1992 the Environmental Protection Agency began review of a proposal to

phase out the use of the chemical in the United States

because of its potential to contribute to ozone depletion.

Although the methyl bromide issue was not technically before

USDA, a rational jury could conclude from the trial evidence

that Sun-Diamond wanted Espy to help persuade EPA to

delay or reject the proposed phase-out.

Count I of the indictment charged the company with giving

Espy (via Douglas) around $5,900 in illegal gratuities: tickets

to the 1993 U.S. Open Tennis Tournament worth $2,295,

luggage worth $2,427, meals worth $665, and a framed print

and crystal bowl worth $524.1 The indictment further alleged

that Sun-Diamond reimbursed Douglas for these outlays,

treating them as business expenses.

Sun-Diamond challenges Count I, asserting that the gratuity statute, 18 U.S.C. s 201(c)(1)(A), requires the government

to prove a nexus between each unauthorized gift and some

specifically identified official act--performed or hoped to be

performed--for which the gift was given. Because the indict-

__________

1 Count II charged Sun-Diamond with paying $3,100 for Espy's

girlfriend to accompany him to the International Nut Conference in

Athens. The jury acquitted on this count.

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ment failed to allege any such one-to-one relationship, contends Sun-Diamond, the district court erred in denying its

motion to dismiss Count I. See United States v. SunDiamond Growers of California, 941 F. Supp. 1262 (D.D.C.

1996) (denying motion to dismiss); United States v. SunDiamond Growers of California, 964 F. Supp. 486 (D.D.C.

1997) (denying renewed motion for acquittal). In a narrower

variation on this argument, Sun-Diamond also challenges the

jury instructions, saying that they impermissibly allowed the

jury to convict if it found that Sun-Diamond gave Secretary

Espy things of value merely in recognition of his official

position, regardless of official acts that might have supplied

the motivation. We reject Sun-Diamond's broader argument

but agree with its challenge to the jury instructions, and it is

with that challenge that we begin.

The gratuity statute provides:

Whoever ... otherwise than as provided by law for the

proper discharge of official duty ... directly or indirectly

gives, offers, or promises anything of value to any public

official, former public official, or person selected to be a

public official, for or because of any official act performed or to be performed by such public official, former

public official, or person selected to be a public official

... shall be fined under this title or imprisoned for not

more than two years, or both.

18 U.S.C. s 201(c)(1)(A) (emphasis added).

The statute defines an "official act" as "any decision or

action on any question, matter, cause, suit, proceeding or

controversy, which may at any time be pending, or which may

by law be brought before any public official, in such official's

official capacity, or in such official's place of trust or profit."

18 U.S.C. s 201(a)(3).

The trial court charged the jury in full accord with the

independent counsel's theory that gifts motivated by an official's status or position run afoul of the statute, regardless of

whether the donor had any intent to affect or reward official

conduct. Indeed, time and again the jury instructions hammered home that theme:

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The gratuity statute makes it a crime for a person or

company to knowingly and willingly give a public official

a thing of value because of his official position whether

or not the giver or receiver intended that particular

official's acts be influenced. * * *

The essence of the crime is the official's position of [sic]

as the receiver of the payment not whether the official

agrees to do anything in particular, that is, not whether

the official agrees to do any particular official act in

return. Therefore ... to prove that a gratuity offense

has been committed, it is not necessary to show that the

payment is intended for a particular matter then pending

before the official. It is sufficient if the motivating

factor for the payment is just to keep the official happy

or to create a better relationship in general with the

official. * * *

It is sufficient if Sun-Diamond provided Espy with unauthorized compensation simply because he held public

office. * * *

In order for you to convict Sun-Diamond of violating the

gratuity statute, you must find beyond a reasonable

doubt that Sun-Diamond gave the gifts to Mr. Espy for

or because of Mr. Espy's official government position

and not solely for reasons of friendship or social purpose.

* * *

[T]he government must prove that Sun-Diamond Growers of California, acting through its senior vice president

for corporate affairs, Richard Douglas, and knowingly

and willingly gave the gratuities, at least in part, because

of the Secretary's position in appreciation of Sun-Diamond Growers of California's relationship with him as a

public official or in anticipation of the continuation of

its relationship with him as a public official. The

government need not prove that the alleged gratuity was

linked to a specific or identifiable official act or any act

at all.

(Emphases added.)

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The language of the charge is far broader than that of the

statute. To satisfy the criminal intent requirement embodied

in the phrase "for or because of any official act," the giver

must intend either to reward some past concrete official act

or acts, or to enhance the likelihood of some future act or

acts. This is the meaning we found in our most extensive

discussion of the gratuity statute, United States v. Brewster,

506 F.2d 62 (D.C. Cir. 1974). In addressing the claim that a

violation of the gratuity statute is a lesser included offense

subsumed within a violation of the bribery statute, now

codified at s 201(b)(1)(A),2 we necessarily compared the two

provisions, explaining that the bribery provision required a

more exacting showing of intent. Id. at 71-74. We characterized one aspect of the difference as follows:

The bribery section makes necessary an explicit quid pro

quo which need not exist if only an illegal gratuity is

involved; the briber is the mover or producer of the

official act, but the official act for which the gratuity is

given might have been done without the gratuity, although the gratuity was produced because of the official

act.

Id. at 72 (emphasis added). As this passage makes tolerably

clear, to say that the gratuity provision lacks a quid pro quo

__________

2 Section 201(b)(1)(A) imposes criminal penalties upon:

Whoever ... directly or indirectly, corruptly gives, offers or

promises anything of value to any public official or person who

has been selected to be a public official, or offers or promises

any public official or any person who has been selected to be a

public official to give anything of value to any other person or

entity, with intent ... to influence any official act.

Because Brewster involved the acceptance rather than the giving of

gratuities and bribes, the court in fact focused on 18 U.S.C.

s 201(c)(1) (1969) (covering receipt of bribes, now codified with

minor differences in language at s 201(b)(2)(A)), and 18 U.S.C.

s 201(g) (1969) (covering receipt of gratuities, now codified with

minor differences in language at s 201(c)(1)(B)). The elements of

the offense at issue here are the same, however, regardless of

whether the defendant is the donor or donee, so Brewster stands as

a controlling precedent for our case.

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requirement is not to read the "official act" language out of

the statute. It is only to say that, in contrast to bribery, the

gratuity and the official act need not each motivate the other.

But the gratuity statute by its terms does still require at least

a unidirectional relationship--the gift must be "for or because

of" the act.

The relation may be simply one of reward. "As the word

'gratuity' implies, the intent most often associated with the

offense is the intent to 'reward' an official for an act taken in

the past or to be taken in the future." United States v.

Sawyer, 85 F.3d 713, 730 (1st Cir. 1996) (construing virtually

identical Massachusetts gratuity statute). Even in such a

case, the giver presumably hopes that his gratuity will affect

the recipient's future conduct--and this was undoubtedly the

concern that motivated Congress to bring rewards for past

acts within the coverage of the statute. But, in contrast to

bribery, it is enough under the gratuity statute if the defendant gives an unpromised benefit for a past governmental

favor. And, whatever degree of intent to influence may be

necessary for a bribe, a gift looking to future acts can be an

unlawful gratuity where the giver is motivated simply by the

desire to increase the likelihood of one or more specific,

favorable acts. In summary, as we explained in Brewster,

"under the gratuity section, 'otherwise than as provided by

law ... for or because of any official act' carries the concept

of the official act being done anyway, but the payment only

being made because of a specifically identified act." 506

F.2d at 82 (emphasis added).

The independent counsel appears to accept this analysis of

Brewster, but claims that in that decision we restricted application of the official act requirement to cases involving elected officials or candidates for elective office. Indeed, Brewster was a senator, and we noted that in cases involving

elected officials the official act requirement served the important function of distinguishing illegal gratuities from ordinary

campaign contributions. See id. at 73 n.26, 81. But in a

footnote we postponed the question of non-elected officials to

another day, distinguishing and declining to express ultimate

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disagreement with United States v. Umans, 368 F.2d 725 (2d

Cir. 1966), a decision that dispensed altogether with the

intent requirement in a case involving gratuities offered to

I.R.S. agents. Brewster, 506 at 73 n.26.

Even assuming the footnote could be read as suggesting a

readiness to jettison the intent requirement in cases involving

appointed officials, we disappointed any such expectation

eight years later by reaffirming the official act requirement in

United States v. Campbell, 684 F.2d 141 (D.C. Cir. 1982).

Campbell concerned a Superior Court judge who received

free moving services from a trucking firm that he had treated

remarkably lightly, issuing nominal or suspended sentences

on over 1,000 traffic tickets. We approved a jury charge

requiring "that the alleged gratuities be given and received

'knowingly and willingly,' and 'for or because of an official

act.' " Id. at 150 (emphasis added). To be sure, the attack in

Campbell came from the defendants, who claimed a right to

an even more restrictive charge. But Campbell cannot possibly be said to have stripped the statute of its "for or because

of" requirement.

A detail from that case underscores how we have refused to

allow the official act requirement to be satisfied by some

vague hope of inducing warm feelings toward the donor.

Campbell had served as Assistant Corporation Counsel for

the District of Columbia before becoming a judge in 1973, and

was reputed to have been "sympathetic to trucking interests"

during that time. Id. at 149 n.13. Yet, responding to a

somewhat unclear claim that the jury might have convicted

for uncharged prior acts, we noted that "[i]t is not even clear

which 'acts' of Robert Campbell could have been the basis for

[the trucking company's] gratuities prior to 1973, because

'sympathy to trucking interests' does not constitute an official

act." Id. at 149 n.14.3 Here, too, if Douglas furnished Espy

with gifts merely to win his generalized sympathy for Sun-

__________

3 The independent counsel claims that these passages in Campbell

turn on the notion that an Assistant Corporation Counsel is not in a

position to perform official acts. The notion is false--under District

law an Assistant Corporation Counsel may, for example, choose to

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Diamond, those gifts would not be illegal gratuities, unless

the jury could find that Douglas sought this generalized

sympathy to influence Espy to perform one or more official

acts sometime in the future.

At oral argument we questioned the representative of the

independent counsel on the application of his theory to instances where an old friend of some newly appointed officeholder took him to a meal or sports event while his firm had

matters pending before the officeholder. Counsel appeared

to assert that this scenario fell within his view of the statute.4

Indeed, it would have been squarely within the district court's

charge to the jury. But we trust that, should Congress

__________

prosecute (or not prosecute) traffic violations, D.C. Code ss 23-101,

40-622. Perhaps because of its falsity, the notion is never mentioned by the Campbell court. Had the government charged Campbell with a pre-1973 decision not to prosecute the trucking company, rather than alleging mere "sympathy," such a decision might

well have constituted an official act sufficient to support a gratuity

charge.

4 The colloquy at oral argument was as follows:

THE COURT: So if an old friend of mine from law school

who's a partner in a firm that has a pending case before this

Court takes me to a baseball game, as we've done for years,

that's an illegal gratuity?

COUNSEL: It may well be, yes.

THE COURT: You're serious?

COUNSEL: If you have a case, if [counsel for Sun-Diamond]

takes you to the game tomorrow, takes you to the Redskins

game on Sunday while you have this case pending before you,

that's a gratuity.

Oral Arg. Tr. at 30-31. The independent counsel's theory here

seems truly sweeping: if this hypothetical baseball arrangement

has been in place "for years," stretching back to before the judge's

investiture, it is difficult to see how it could be motivated by the

judge's position. Even if the baseball invitation represented an

increment in the donor's hospitality to his friend since the latter's

appointment, under this circuit's reading of the statute it would

violate s 201(c)(1)(A) only if offered, as the statute says, "for or

because of any official act."

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someday decide to criminalize such conduct, it will not require

that the gifts be given "for or because of any official act."

The independent counsel points to United States v. Secord,

726 F. Supp. 845, 847 (D.D.C. 1989), as well as several

decisions by other courts of appeals apparently holding that

gifts motivated solely by the recipient's official position may

be illegal gratuities. See United States v. Evans, 572 F.2d

455, 480 (5th Cir. 1978); United States v. Standefer, 610 F.2d

1076, 1080 (3d Cir. 1979) (en banc);5 Umans, 368 F.2d at 730;

United States v. Bustamante, 45 F.3d 933, 940 (5th Cir. 1995);

cf. United States v. Alessio, 528 F.2d 1079, 1082 (9th Cir.

1976) (suggesting that donee's ability to use his position for

donor's benefit was enough to satisfy the official act requirement). These decisions appear to leap from the gratuity

statute's lack of a reciprocal quid pro quo requirement to an

assumption that it has dispensed with any need to show intent

focused on an official act or acts. Thus, the court in Bustamante says, "Generally, no proof of a quid pro quo is

required; it is sufficient for the government to show that the

defendant was given the gratuity simply because he held

public office." 45 F.3d at 940. Any such leap disregards the

explicit language of the statute and contradicts Brewster and

Campbell. Other out-of-circuit cases seem to take the official

act requirement more seriously. See, e.g., United States v.

Muldoon, 931 F.2d 282, 287 (4th Cir. 1991) ("an illegal

gratuity is a payment made for an act by the recipient that

might have been done without any payment") (citing Brewster ); cf. Sawyer, 85 F.3d at 735-36 (construing virtually

identical Massachusetts gratuity statute).

Finally, the independent counsel asserts that in United

States v. Baird, 29 F.3d 647 (D.C. Cir. 1994), we embraced his

broad interpretation of the gratuity statute. The question in

Baird was whether the conflict of interest statute, 18 U.S.C.

s 203(a), requires the government to prove that a defendant

knew the statute covered him. We held that the clause

"otherwise than as provided by law," which appears both in

_____________

5The independent counsel's brief made no mention of Standefer, but in a 

petition for reharing he notes that the Supreme

Court, in affirming the judgment on other grounds, Standefer v. United 

States, 447 U.S. 10 (1980), said in a footnote that "the

instructions to the jury on criminal intent" were "correct." Id. at 14 n. 8. 

Standefer's briefs in the Supreme Court and the Third

Circuit's unpublished panel opinion, United States v. Standefer, 1979 WL 4863 

(3d Cir. 1979), however, make clear the defendant's

challenge was to the absence of a quid pro quo requirement, and to the trial 

court's refusal to instruct the jury that the defendant's

gifts to an I.R.S. agent had not in fact resulted in the favorable audit 

sought by the donor. Id.at *4-8. In any event, tahe instructions

in Standefer, reprinted in relevant part in the Third Circuit's panel 

opinion, id. at *5, *6, were far narrower than the charge in this

case, repeatedly emphasizing the requirement that the gifts be given for or 

because of tax audits performed by the donee.

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s 203(a) and in s 201(c) (then codified at ss 201(f) and (g)),

did not embody such a scienter requirement; rather, it

merely required a showing that the public official received

money to which he was not lawfully entitled. Id. at 652.

Although the Baird opinion cited approvingly to both Evans

and Standefer, see id., it did not address directly the "for or

because of any official act" language--doubtless because the

conflict of interest statute at issue contained no such language.

Given that the "for or because of any official act" language

in s 201(c)(1)(A) means what it says, the jury instructions

invited the jury to convict on materially less evidence than

the statute demands--evidence of gifts driven simply by

Espy's official position. The difference may not seem very

great, for whenever a donor has matters actually or potentially pending before his donee, gifts motivated by the latter's

position will usually also be motivated by a desire to reward

or elicit favorable official action. But the terms of the statute

require a finding that the gifts were motivated by more than

merely the giver's desire to ingratiate himself with the official

generally, or to celebrate the latter's status.

In his effort to salvage the instructions, the independent

counsel points to other portions of the charge in which the

judge simply repeated the terms of the statute or the indictment verbatim, e.g., by reciting the words "for or because of

an official act." These recitations could not possibly, however, have overcome the broader message. Thus the charge

failed to give the jury an adequate understanding of the

issues, see United States v. DeFries, 129 F.3d 1293, 1304

(D.C. Cir. 1997), and the error cannot be called technical or

harmless, see United States v. Lemire, 720 F.2d 1327, 1339

(D.C. Cir. 1983). We reverse and remand for a new trial on

Count I.6

__________

6 We reject Sun-Diamond's contention that the gratuity statute is

unconstitutionally vague as applied to its conduct. United States v.

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At the same time, we reject Sun-Diamond's broad attack

on the indictment. Again Campbell controls. Campbell argued, much as Sun-Diamond does here, that the jury should

have been required "to find that the gratuity was conferred

with 'specific knowledge' of 'a definite official action for which

compensation was intended.' " 684 F.2d at 149. We rejected

that argument, holding that it was sufficient for the jury to

find that the trucking company had provided free services to

Campbell because it believed the judge had been, or would

later be, "generally lenient" in dealing with the company's

voluminous traffic citations. Id. at 149-50. The government,

we held, was not required to show that any particular free

service provided to Campbell was earmarked for any particular ticket or tickets; leniency in a multitude of specific acts

was enough. That an official has an abundance of relevant

matters on his plate should not insulate him or his benefactors from the gratuity statute--as long as the jury is required

to find the requisite intent to reward past favorable acts or to

make future ones more likely.

The Fraudulent Scheme

Sun-Diamond was found guilty on Counts III and IV of

committing wire fraud in violation of 18 U.S.C. ss 1343 &

1346, and on Counts V through IX of violating the Federal

Election Campaign Act, 2 U.S.C. ss 441b(a) & 441f

("FECA"). Both sets of convictions flow from a scheme of

Richard Douglas and James H. Lake to help repay the debts

of the failed congressional campaign of Mike Espy's brother

Henry. The following facts about the scheme come from the

testimony of Lake, who was granted immunity by prosecutors

in exchange for his cooperation.

Lake was one of the founding partners of a Washingtonbased firm, Robinson Lake Sawyer & Miller ("RLSM"), which

handled communications and public relations matters for

__________

Campbell, 684 F.2d 141, 150 n.17 (D.C. Cir. 1982); cf. United States

v. Brewster, 506 F.2d 62, 76-78 (D.C. Cir. 1974).

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Sun-Diamond.7 Sun-Diamond retained RLSM for a fee of

$20,000 a month; Douglas oversaw Sun-Diamond's dealings

with RLSM and maintained his own office there. RLSM was

a wholly-owned subsidiary of Bozell Worldwide, Inc. ("Bozell").

After Mike Espy became Secretary of Agriculture, Henry

Espy unsuccessfully pursued election to his brother's vacant

seat in Congress, building up a sizable campaign debt in the

process. In February 1994 Douglas left a telephone message

at Lake's office--a crucial act for jurisdiction over one of the

wire fraud counts. When Lake contacted Douglas, he

learned that Secretary Espy had asked Douglas for help in

retiring his brother's campaign debt. Lake immediately offered to donate $1,000, the maximum permissible individual

contribution. Douglas replied that he had to raise at least

$5,000 fast, and that he needed Lake's help. He then proposed a way around the campaign finance restrictions. If

Lake would get five RLSM employees (including Lake himself) to write a check for $1,000 each, Douglas would find a

way for Sun-Diamond to reimburse them all. Lake knew the

scheme was illegal--corporations are forbidden to make contributions "in connection with any election" for Congress, 2

U.S.C. s 441b(a), and no one may make a campaign contribution in the name of another person, 2 U.S.C. s 441f--but

agreed to participate anyway. Lake testified that no one else

at RLSM or Bozell knew about the plan.

Lake wrote a $1,000 check in his own name and then

approached the four RLSM employees identified by Douglas.

Three of them agreed to pay up. (A fourth--presumably

suspicious about the notion of a reimbursable campaign contribution--declined.) Lake then passed the checks worth

__________

7 At certain points in the record this firm is referred to by

somewhat different names, such as "RLLM/SMG" (Robinson, Lake,

Lerer, Montgomery/Sawyer, Miller Group). For simplicity we will

refer to Lake's partnership as RLSM throughout.

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$4,000 to Douglas, who deposited them in a "Henry Espy for

Congress" account he had opened.

As the vehicle for reimbursement, Douglas settled on the

Joint Center Dinner, an annual benefit for which RLSM and

Lake had in the past routinely bought tickets on SunDiamond's behalf. Lake's staff prepared an internal RLSM

document authorizing reimbursement to Lake for his supposed purchase of tickets to the dinner in the amount of

$5,000 (even though he had raised only $4,000 for Henry

Espy). The same document became part of the monthly

invoice sent to Sun-Diamond, billing the client $5,000 for the

fictitious dinner attendance on top of its $20,000 monthly

retainer and other expenses. Lake received a $5,000 reimbursement check from Bozell, which he cashed and used to

pay back the three other individual contributors (apparently

pocketing the extra $1,000 for himself). Douglas, as part of

his normal duties at Sun-Diamond, approved the payment to

RLSM, which eventually went through. The net result: a

$5,000 expenditure by Sun-Diamond, $4,000 of which went

into Henry Espy's campaign coffers and $1,000 into James H.

Lake's pocket.8 The independent counsel charged that the

scheme worked a fraud on Bozell and RLSM, depriving the

former (albeit temporarily) of $5,000, and depriving the latter

of the "honest services" of its agent Lake under 18 U.S.C.

s 1346. The jury convicted, evidently convinced that at least

one such deprivation occurred. The jury also found SunDiamond guilty of making illegal campaign contributions in

violation of FECA, 2 U.S.C. ss 441b(a) & 441f.

As a threshold matter, Sun-Diamond raises a challenge

which it says goes equally to the wire fraud and FECA

counts. Richard Douglas's campaign contribution scheme

cannot be attributed to it, Sun-Diamond argues, because

Douglas was not acting with an intent to benefit the corpora-

__________

8 In October 1995 RLSM terminated its relationship with SunDiamond and returned the $5,000 payment.

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tion. It is true, as the district court instructed the jury in

this case, that an agent's acts will not be imputed to the

principal in a criminal case unless the agent acts with the

intent to benefit the principal.9 Here, Sun-Diamond says,

Douglas's scheme was designed to--and did in fact--defraud

his employer, not benefit it. In this circumstance, it strenuously argues, there can be no imputation: "[T]o establish

precedent holding a principal criminally liable for the acts of

an agent who defrauds and deceives the principal while

pursuing matters within his self-interest merely because the

agent's conduct may provide some incidental benefit to the

principal serves to punish innocent principals with no countervailing policy justifications." Appellant's Reply Br. at 16 n.9.

This argument has considerable intuitive appeal--SunDiamond does look more like a victim than a perpetrator, at

least on the fraud charges. The facts in the record, however--that Douglas hid the illegal contribution scheme from

others at the company and used company funds to accomplish

it--do not preclude a valid finding that he undertook the

scheme to benefit Sun-Diamond. Part of Douglas's job was

to cultivate his, and Sun-Diamond's, relationship with Secretary Espy. By responding to the Secretary's request to help

his brother, Douglas may have been acting out of pure

friendship, but the jury was entitled to conclude that he was

acting instead, or also, with an intent (however befuddled) to

further the interests of his employer. The scheme came at

some cost to Sun-Diamond but it also promised some benefit.

See, e.g., United States v. Automated Medical Laboratories,

Inc., 770 F.2d 399, 406-07 (4th Cir. 1985) (agent's conduct

which is actually or potentially detrimental to corporation

may nonetheless be imputed to corporation in criminal case if

__________

9 In a civil case, there may be no need to show that the agent

acted to further the principal's interests--a showing of "apparent

authority" is often enough. See American Society of Mechanical

Engineers v. Hydrolevel Corp., 456 U.S. 556, 573-74 (1982) (private

antitrust action).

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motivated at least in part by intent to benefit it); cf. Local

1814, International Longshoremen's Association, AFL-CIO

v. NLRB, 735 F.2d 1384, 1395 (D.C. Cir. 1984) ("[T]he acts of

an agent motivated partly by self-interest--even where selfinterest is the predominant motive--lie within the scope of

employment so long as the agent is actuated by the principal's business purposes 'to any appreciable extent.' ") (quoting

Restatement (Second) of Agency s 236 & comment b (1957)).

Where there is adequate evidence for imputation (as here),

the only thing that keeps deceived corporations from being

indicted for the acts of their employee-deceivers is not some

fixed rule of law or logic but simply the sound exercise of

prosecutorial discretion.

And the answer to Sun-Diamond's claim of the absence of

any "countervailing policy justification" is simply the justification usually offered in support of holding corporate principals

liable for the illegal acts of their agents: to increase incentives for corporations to monitor and prevent illegal employee

conduct. See Kevin B. Huff, Note, The Role of Corporate

Compliance Programs in Determining Corporate Criminal

Liability: A Suggested Approach, 96 Colum. L. Rev. 1252,

1263 & n.49 (1996). One might well question this justification--and scholars have. See, e.g., Daniel R. Fischel and

Alan O. Sykes, Corporate Crime, 25 J. Legal Stud. 319 (1996)

(arguing that corporate criminal liability spurs excessive monitoring and litigation costs and should be discarded in favor of

civil liability); Jennifer Arlen, The Potentially Perverse Effects of Corporate Criminal Liability, 23 J. Legal Stud. 833

(1994) (arguing that strict corporate liability may deter corporate monitoring by making criminal exposure more likely, so

that its imposition may increase the likelihood of crime).

Moreover, the justification may be at its weakest in cases like

this one, where the offending employee breaches a duty of

honesty to the very corporation whose goals he aims to

advance. In any event, Sun-Diamond's argument here, whatever its merit as an issue of policy, has no real grounding in

the relevant statutes. And Sun-Diamond does not invoke the

Constitution, which in any event would require either an

overruling of the Supreme Court's rejection of a due process

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attack on corporate liability, New York Cent. & Hudson River

R.R. Co. v. United States, 212 U.S. 481 (1909), or the development of some new theory.

Sun-Diamond also raises a narrower objection concerning

imputation, one which goes only to the fraud counts. To the

extent Douglas's conduct is to be imputed to his employer,

argues Sun-Diamond, then so must Lake's be imputed to his

employers (RLSM and Bozell). Both men occupied high-level

management positions in their respective firms, and both

men's firms sought to establish and maintain good relations

with Secretary Espy. If Douglas's knowledge can be imputed to Sun-Diamond to hold it responsible for Douglas's acts,

then Lake's must be imputed to his employers, RLSM and

Bozell, and they cannot be victims.

Even assuming the evidence showed the balance of private

and corporate purpose in Douglas's and Lake's motivation to

be identical, Sun-Diamond's argument rests on a faulty assumption--that the imputation rules must be the same on

both the perpetrator and victim sides. They need not be, and

indeed are not. Imputation is a legal fiction designed to

assist in the allocation of liability, not a literal description of

the state of a principal's knowledge. The law imputes the

wrongdoer's conduct to the corporation in order to encourage

monitoring, but it is not at all clear that imputation on the

other side of the equation would be useful in eliciting additional caution on the part of would-be fraud victims. A rule

that makes victim wariness a condition of criminally punishing the perpetrator--unlike, say, a rule of contributory negligence in tort--might not inspire much extra precaution in

potential victims. However much they may benefit from the

criminalization of fraud generally, potential victims (who have

many incentives to avoid being gulled, independent of the

criminal law) seem unlikely to step up their precautions just

to increase the ex ante chances that their deceivers will face

criminal sanctions--or so Congress could reasonably conclude. Thus, when an individual is swindled, the offender

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does not escape mail or wire fraud liability just because the

victim was unwary, or even "gullible." See United States v.

Brien, 617 F.2d 299, 311 (1st Cir. 1980). Indeed, Congress's

adoption of 18 U.S.C. s 1346, specifying that the term

"scheme or artifice to defraud," as used in various federal

criminal fraud statutes, should include schemes to deprive a

principal "of the intangible right of honest services," is hard

to square with an imputation rule on the victim side as broad

as the one governing corporate criminal responsibility.

We pause briefly over a final threshold issue before addressing the core of Sun-Diamond's challenge to the fraud

convictions. The wire fraud statute forbids the use of the

interstate telephone system "for the purpose of executing" a

scheme or artifice to defraud. 18 U.S.C. s 1343. SunDiamond says the telephone message left by Douglas for

Lake preceded their joint concoction of the campaign contribution scheme and thus could not, as a matter of law, have

furthered the scheme.10 There was, however, ample evidence

from which the jury could find that Douglas already had some

sort of fraudulent plan in mind when he placed the initial call

and left the message. In other words, the jury could have

found that Douglas used the telephone system "prior to, and

as one step toward, the receipt of the fruits of the fraud,"

Kann v. United States, 323 U.S. 88, 94 (1944), placing the

case within the coverage of s 1343.

Sun-Diamond's core challenge to the wire fraud counts

raises more serious concerns. The district court charged the

jury on two alternative routes to fraud liability. It could

convict, said the court, if it found "that Sun-Diamond Growers of California devised a scheme or artifice to defraud with

one or both [of] the two following objectives. One, to obtain

even temporarily $5,000 from Bozell, Inc. by means of false

pretense and representations in order to make an illegal

corporate campaign contribution to Henry Espy for Congress

Committee. Two, to deprive Bozell, Inc. and [RLSM] of the

honest, conscientious, faithful, loyal, disinterested and unbi-

__________

10 This challenge goes only to Count III. The wire communication

underlying Count IV was the electronic transmission of the $5,000

billable expense report from RLSM to Bozell.

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ased services of its employee, James Lake." Because the

jury charge was phrased in the disjunctive we must examine

the legal sufficiency of each basis for liability, to ensure that

the jury did not convict on a legally impermissible ground.

See Griffin v. United States, 502 U.S. 46, 59 (1991) (general

verdict based on alternative grounds of liability will be upheld

as long as both grounds are legally adequate, even if one is

factually inadequate).

As for the first possible objective, we admit that it is not

immediately obvious how the contribution scheme could have

been designed to deprive Bozell even temporarily of its

money or property. Sun-Diamond, through Douglas, caused

Bozell to make a routine advance of $5,000 with every expectation that Sun-Diamond would provide prompt reimbursement, and in fact it reimbursed the expense promptly and in

full. As the district court correctly noted in the sentencing

phase, Bozell was deprived only of the time value of the sum

advanced, a deprivation it surely considered negligible judging from the routine and informal nature of the transaction.

In a case involving fraudulently obtained consumer credit,

however, we held that where a defendant makes "material

misrepresentations designed to induce an extension of credit

that would not otherwise be made, the jury [may] reasonably

infer intent to defraud," even if the borrower intended in

good faith to repay the loan. United States v. Alston, 609

F.2d 531, 538 (D.C. Cir. 1979). Moreover, other courts have

held that actual repayment is no defense to a charge of

fraudulently obtaining a loan, presumably because a loan

obtained by fraud subjects the lender to a greater risk of loss

than it would have voluntarily borne were it fully informed.

United States v. Scott, 701 F.2d 1340, 1346-48 (11th Cir.

1983); United States v. Sindona, 636 F.2d 792, 800 (2d Cir.

1980); see also United States v. Hollis, 971 F.2d 1441, 1452-

53 (10th Cir. 1992) (repayment not a defense to bank fraud

under 18 U.S.C. s 1344); United States v. Allen, 76 F.3d

1348, 1358-59 (5th Cir. 1996) (bank was defrauded, at least

temporarily, when cashier's checks were fraudulently drawn

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on bank's account, even though bank was reimbursed in full

by holding company at end of month). Notably, to the extent

repayment in those cases included interest they did not even

feature the time-value deprivation that is present here.

Moreover, although the misrepresentation here did not go to

the likelihood of the advance being repaid, it was nonetheless

material: had Bozell known that the $5,000 was being used to

launder an illegal campaign contribution rather than to reserve a table at a charitable dinner, it would not have

authorized the advance. Just as deceitful assurances of legality in a conventional loan expose the lender to costly legal

entanglements (quite apart from risks of non-repayment), so

too did the concealment here.11

The second alternative ground of liability was that SunDiamond defrauded RLSM of the honest services of its agent,

James H. Lake, in violation of 18 U.S.C. s 1346. Congress

enacted that provision in response to the Supreme Court's

decision in McNally v. United States, 483 U.S. 350 (1987),

which held that the mail fraud statute's coverage was limited

to deprivations of property.12 Section 1346 says simply that

"[f]or the purposes of this chapter, the term 'scheme or

__________

11 Sun-Diamond also offers another reason why Douglas could not

have intended to defraud Bozell. According to Sun-Diamond,

Douglas anticipated that Sun-Diamond would reimburse Lake directly, or at least that Lake's employer would await payment from

Sun-Diamond before reimbursing Lake, thus avoiding even a temporary deprivation. (In fact Sun-Diamond contends, implausibly,

that there was no evidence from which a jury could infer that

Douglas even knew of Bozell's existence.) Given Douglas's experience with Sun-Diamond/RLSM billing practices, however, he could

reasonably have foreseen the possibility that Lake would seek an

advance from his employer or its parent company at the time he

hatched the scheme.

12 The elements required for conviction under s 1341 (mail fraud)

and s 1343 (wire fraud) are identical except for the means of

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artifice to defraud' includes a scheme or artifice to deprive

another of the intangible right of honest services." 18 U.S.C.

s 1346. The "honest services" theory has typically been

used, both in cases up to McNally and again under s 1346, as

a tool for prosecuting corrupt public officials who have deprived citizens of their right to honest representation. See

United States v. Paradies, 98 F.3d 1266, 1283 n.30 (11th Cir.

1996) (collecting cases). But it has also been used, as here, to

prosecute private citizens who defraud private entities. See,

e.g., United States v. Lemire, 720 F.2d 1327 (D.C. Cir. 1983);

United States v. DeFries, 129 F.3d 1293, 1305-06 (D.C. Cir.

1997); United States v. Jain, 93 F.3d 436 (8th Cir. 1996);

United States v. Frost, 125 F.3d 346 (6th Cir. 1997); United

States v. D'Amato, 39 F.3d 1249 (2d Cir. 1994); United States

v. Cochran, 109 F.3d 660 (10th Cir. 1997); United States v.

Gray, 96 F.3d 769 (5th Cir. 1996).

In the private sector context, s 1346 poses special risks.

Every material act of dishonesty by an employee deprives the

employer of that worker's "honest services," yet not every

such act is converted into a federal crime by the mere use of

the mails or interstate phone system. Aware of the risk that

federal criminal liability could metastasize, we held in Lemire

that "not every breach of a fiduciary duty works a criminal

fraud." Lemire, 720 F.2d at 1335, quoting United States v.

George, 477 F.2d 508, 512 (7th Cir. 1973). Rather, "[t]here

must be a failure to disclose something which in the knowledge or contemplation of the employee poses an independent

business risk to the employer." Id. at 1337.13 Absent reasonably foreseeable economic harm, "[p]roof that the employer simply suffered only the loss of the loyalty and fidelity of

__________

communication. United States v. Lemire, 720 F.2d 1327, 1334-35

n.6 (D.C. Cir. 1983).

13 Lemire was a pre-s 1346 decision, but Congress's evident

intent in enacting that provision was to revive pre-McNally caselaw,

at least with respect to the deprivation of honest services. See, e.g.,

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the [employee] is insufficient to convict." Frost, 125 F.3d at

368.

The independent counsel says that Douglas and Lake's

fraudulent scheme threatened serious economic harm to

RLSM, because disclosure of a name partner's fraudulent use

of RLSM's offices to funnel illegal contributions to a political

candidate would severely damage the firm's reputation. The

district court agreed, 964 F. Supp. at 493-94. As Lake

testified, the chief assets of a public relations firm are its

legitimacy and credibility in the eyes of current and potential

clients. Both stood to be undermined by Douglas and Lake's

actions. There is no doubt that Douglas and Lake could have

foreseen that their actions would cause substantial economic

harm to RLSM once word of the scheme got out.

Sun-Diamond, however, says this is not enough. It contends that in the private sector context s 1346 and Lemire

demand a showing that the defendant intended to cause

economic harm to his victim, not merely that he could have

reasonably foreseen such harm. Since the economic harm

identified by the independent counsel flows exclusively from

disclosure of the contribution scheme, and since Douglas

surely did not intend for his scheme to be revealed (except

possibly to Mike Espy, so that the Secretary's gratitude could

be properly directed), Sun-Diamond reasons that it is free

from liability under s 1346. In response to this argument, it

will not do to cite "the presumption, common to the criminal

and civil law, that a person intends the natural and foreseeable consequences of his voluntary actions." Personnel Administrator of Mass. v. Feeney, 442 U.S. 256, 278 (1979).

Applying the presumption to the actual detection and revelation of an illegal scheme would threaten to turn the word

__________

Frost, 125 F.3d at 364 ("We therefore hold that s 1346 has restored

the mail fraud statute to its pre-McNally scope, according to

previous opinions interpreting the intangible right to honest services.").

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"intent" inside out. Is a criminal who foresees his own

capture thereby said to intend it? If so, are especially elusive

criminals, whose apprehension is ex ante relatively unlikely,

in a better legal position than clumsy ones?

We need not address these questions, because we disagree

with Sun-Diamond's contention that s 1346 and Lemire require the government to show that the defendant intended to

cause economic harm to his victim. Sun-Diamond appears to

confuse the requirement of an intent to defraud (amply met

here, since the crux of the scheme was the submission of a

fictitious expense report to RLSM) with a requirement of

intent to cause economic harm. But Lemire did not go so far

as to say that economic harm must be part of the defendant's

intent in a private-sector "honest services" case--only that

economic harm be within the defendant's reasonable contemplation. Although Lemire dealt with failure to disclose a

conflict of interest rather than with an active scheme to

defraud, its treatment of the foreseeability issue governs this

case:

So long as the jury finds the non-disclosure furthers a

scheme to abuse the trust of an employer in a manner

that makes an identifiable harm to him, apart from the

breach itself, reasonably foreseeable, it may convict the

employee of wire fraud. The crucial determination must

be whether the jury could infer that the defendant might

reasonably have contemplated some concrete business

harm to his employer ...

Lemire, 720 F.2d at 1337 (emphasis added); see also United

States v. Barta, 635 F.2d 999, 1005-06 n.14 (2d Cir. 1980)

(relied on in Lemire). As we reaffirmed recently, "Lemire

held that breaches of fiduciary duty are criminally fraudulent

only when 'accompanied by a misrepresentation or nondisclosure that is intended or is contemplated to deprive the

person to whom the duty is owed of some legally significant

benefit.' " DeFries, 129 F.3d at 1306, quoting Lemire, 720

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F.2d at 1335 (emphasis added). See also Frost, 125 F.3d at

368 (holding that, in cases where employee is charged with

defrauding private employer of his own honest services, "[t]he

prosecution must prove that the employee intended to breach

a fiduciary duty, and that the employee foresaw or reasonably

should have foreseen that his employer might suffer an

economic harm as a result of the breach.") (emphasis added);

D'Amato, 39 F.3d at 1257 (pre-s 1346 case holding that

misrepresentations amounting only to a deceit "must be

coupled with a contemplated harm to the victim").

We therefore affirm the convictions for wire fraud on

Counts III and IV.14

SentencingIssues

Sun-Diamond challenges two aspects of its sentence: the

district court's upward departure based on Espy's position as

Secretary of Agriculture, and the imposition of reporting

requirements on the member cooperatives. We agree with

Sun-Diamond and reverse on both points.

District courts may make upward departures from the

Sentencing Guidelines only if "there exists an aggravating ...

circumstance of a kind, or to a degree, not adequately taken

into consideration by the Sentencing Commission in formulating the guidelines." 18 U.S.C. s 3553(b); U.S. Sentencing

Guidelines Manual ("U.S.S.G.") s 5K2.0. We review district

court determinations that a given factor is present in a

particular case to a degree not adequately considered by the

Commission only for abuse of discretion, because "[d]istrict

courts have an institutional advantage over appellate courts in

making these sorts of determinations, especially as they see

so many more Guidelines cases than appellate courts do."

Koon v. United States, 116 S. Ct. 2035, 2047 (1996). But

whether a given factor could ever be a permissible basis for

departure is a question of law which we address de novo. Id.

Here, the issue is in a sense one of degree--how much

authority and status might elevate a position above even the

__________

14 Sun-Diamond does not challenge the adequacy of the jury

charge on the "honest services" theory of liability under ss 1343 &

1346.

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rank for which the Guidelines prescribe an eight-level hike--

but it also poses the onetime issue of whether cabinet-level

officers enjoy such lofty status, hardly the sort of factintensive issue calling for extreme deference.

The guideline applicable to violations of the gratuity statute

prescribes a base offense level of 7. U.S.S.G. s 2C1.2. It

calls for a two-level increase if the offense involved more than

one gratuity, and an eight-level increase

[i]f the gratuity was given, or to be given, to an elected

official or any official holding a high-level decisionmaking or sensitive position.

Id. The district court imposed both the two-level and the

eight-level increase, bringing the offense level to 17. It then

appended an additional two-level increase, finding that the

Guidelines did not adequately take into account Espy's position as a cabinet-level official. This increase in offense level

from 17 to 19 doubled Sun-Diamond's base fine from $250,000

to $500,000. U.S.S.G. s 8C2.4. The court then assigned

Sun-Diamond a "culpability score" of 9 out of a possible 10,

see id. s 8C2.5, a determination Sun-Diamond does not

challenge here. This culpability score dictated a minimum

multiplier of 1.8 and a maximum of 3.6, id. s 8C2.6, leading

to an applicable fine range of $900,000 to $1,800,000, from

which the court chose a figure in the "upper range"--

$1,500,000.

In support of departing upward on account of the high level

of the donee's position, the district court reasoned:

The President has but one cabinet with select members

who the court deems to be on a higher level with regard

to the type of responsibility which is otherwise contemplated by the guidelines, and the Secretary of Agriculture, in fact, is tenth in the order of succession to the

Office of the Presidency. That is not an insignificant

fact, and as unlikely as it may be that the Secretary of

Agriculture would assume the Presidency of the United

States because circumstances would not normally present

that opportunity, nevertheless, there is a reason for

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creating a pecking order to the position which many

believe is the position of the most powerful person on the

face of the earth.

In any event, the court [notes] for example that Secretary Espy administered a budget of $65 and one half

billion, this figure represents 4.3 percent of the total

federal budget. He's responsible for a great work force

and makes decisions frequently that have a significant

and broad and wide-ranging effect on the American

population, and some might believe on the population of

... other parts of the world.

As the Secretary of Agriculture obviously holds a "high-level

decision-making or sensitive position," it is clear that the

district court rested its departure not on a finding that

cabinet-level status was the kind of factor the Sentencing

Commission failed to consider in formulating s 2C1.2, but on

a belief that his position is so high-level that it represents an

aggravating circumstance present to a degree not taken into

account by the Commission.

This conclusion is at odds with the Sentencing Commission's explanation of s 2C1.2.15 The Application Notes explain that " 'Official holding a high-level decision-making or

sensitive position' includes, for example, prosecuting attorneys, judges, agency administrators, supervisory law enforcement officers, and other governmental officials with similar

levels of responsibility." U.S.S.G. s 2C1.2, App. Note 1. We

do not think the Secretary of Agriculture holds a position that

in level or sensitivity differs in any material degree from

persons the Application Note explicitly says were within the

Commission's contemplation.

Since the Secretary administers an agency, a straightforward reading of the Application Note strongly suggests that

he falls within the "agency administrator" category. The

independent counsel says that this term was meant to refer to

lower-level program administrators, of which it says there are

__________

15 "In determining whether a circumstance was adequately taken

into consideration the court shall consider only the sentencing

guidelines, policy statements, and official commentary of the Sentencing Commission." 18 U.S.C. s 3553(b).

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85 or so within USDA alone, Appellee's Br. at 43 n.15, but

never explains why we should assume the Sentencing Commission had such a limited category in mind. The Application

Note expressly lists judges as the sort of high-level officials

for which the eight-level departure is appropriate. Perhaps

our perspective is skewed, but offering a gratuity to a lifetenured federal judge seems to us at least as culpable as

offering one to a cabinet secretary--indeed, we suspect most

citizens would consider the former a more troubling breach of

public trust than the latter. To permit a two-level departure

for the latter, when such a departure is specifically precluded

for the former, appears illogical.

Nor is the district court's decision rescued by its observations about presidential succession. The Guideline includes

elected officials without apparent regard to the loftiness or

sensitivity of their positions, and the Application Note says

nothing to suggest variation within the elected-official category. Thus it appears to sweep in officials ranging in rank from

Representative to President. Even assuming that a case

involving the President might present a sui generis situation

warranting departure, Sun-Diamond points out that the

Speaker of the House is second in line to the presidency after

the Vice President, 3 U.S.C. s 19, and yet is also presumably

taken into account by s 2C1.2 as an "elected official." The

independent counsel responds that "perhaps the Sentencing

Commission did not take into consideration the position and

power of the Speaker of the House when it drafted the

bribery and gratuity guidelines." Appellee's Br. at 45 n.16.

Conceivably, but more likely the Commission meant, as it

said, to lump all federal elected officials together, in contrast

with other officials whose rank was seen to vary enough to

require consideration of levels of responsibility. Similarly,

the Attorney General--seventh in line to the presidency--

seems to fit within the Application Note's "supervisory law

enforcement officers" category. Though we need not, and do

not, decide today the status of these officials with respect to

s 2C1.2, their seeming inclusion argues strongly against the

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ly into account the degree of responsibility of an official

further down the line of presidential succession.

Moreover, the district court's approach makes one wonder

how far one must go down the line of succession before one

finally reaches the heartland of s 2C1.2. The Secretary of

Agriculture is in fact ninth in the line of succession, 3 U.S.C.

s 19, not tenth as the district court stated.16 This makes his

connection to ultimate power just as attenuated as that of the

anti-hero of "Kind Hearts and Coronets," who had to murder

eight Alec Guinnesses to become Duke of Chalfont. What of

the Secretary of Health and Human Services, at number

twelve in the queue, id., or the Secretary of Veterans Affairs,

at seventeen, id.? Of course, questions of line-drawing are

often difficult, and in the sentencing arena such questions are

normally best resolved by the district courts on a case-bycase basis. Here, however, the factor invoked in support of

departure--cabinet-level status--is not one that the district

courts enjoy any comparative advantage in assessing, unlike

such fine-grained, fact-bound circumstances as extreme psychological injury, see U.S.S.G. s 5K2.3, or victim misconduct,

see id. s 5K2.10. We conclude that the two-level upward

departure was impermissible.

Sun-Diamond also challenges the imposition of reporting

requirements on its member cooperatives. The district court

declared, as a condition of probation, that "Sun-Diamond and

its members [sic] cooperatives shall provide quarterly submissions to the probation officer reporting all of the organization's expenditures related to all federal employees, office

holders or candidates for federal office [including] any expenditure related [to] the procurement of any federal government contract, creation of a federal law or regulation, or the

__________

16 The current Secretary of Agriculture, however, is in practical

effect eighth in line, since Secretary of State Madeleine Albright,

having been born abroad, is ineligible. See U.S. Const. art. II, s 1,

cl. 5.

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development of any federal policy." These requirements

were to continue in force for five years.

We recognize that the sentencing judge has broad discretion to establish conditions of probation. Lemire, 720 F.2d at

1352. But we know of no precedent for the imposition of

probationary conditions on entities who are not defendants,

nor even agents of defendants--the latter category problematic in its own right, but much more plausibly legitimate

than the present case. Although the independent counsel

paints Sun-Diamond as a mere alter ego of the cooperatives

that own it, we are not persuaded. The member cooperatives

have their own corporate identities, boards of directors, employees, assets and liabilities, as does Sun-Diamond. Their

power to control Sun-Diamond seems no greater than the

power of ordinary shareholders to control a corporation.

As the Ninth Circuit has explained, imposition of a condition on a third party exposes the defendant to revocation of

probation for "violations" by persons not under his control.

United States v. Sweeney, 914 F.2d 1260, 1263 (9th Cir. 1990).

Cf. Fiore v. United States, 696 F.2d 205, 208-09 (2d Cir. 1982)

(reversing condition of probation imposed on defendant who

was president, secretary, sole stockholder and only full-time

employee of corporate co-defendant, which had required him

to pay fine imposed on corporation). And 18 U.S.C. s 3563,

which enumerates mandatory and discretionary conditions of

probation, specifies in every one of them the "defendant" as

the person to be burdened. See Sweeney, 914 F.2d at 1263.

As the member cooperatives were not made defendants and

given an opportunity to be heard, they may not now be

subjected to probation.

* * *

We reverse and remand for new trial on Count I; we

affirm the convictions on Counts III through IX; and we

vacate Sun-Diamond's sentence and remand for further proceedings consistent with this opinion.

So ordered.

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