F I L E D

United States Court of Appeals

Tenth Circuit

APR 4 2000

PATRICK FISHER

Clerk

PUBLISH

UNITED STATES COURT OF APPEALS

TENTH CIRCUIT

UNITED STATES OF AMERICA,

Plaintiff-Appellee,

 v.

MICHAEL S. KOVACH,

Defendant-Appellant.

No. 99-4112

APPEAL FROM UNITED STATES DISTRICT COURT

FOR THE DISTRICT OF UTAH

(D.C. No. 98-CR-558-C)

Dixon D. Hindley, of Salt Lake City, Utah, for the appellant.

Mark Vincent, Assistant United States Attorney (Paul M. Warner, United States

Attorney, and Leshia M. Lee-Dixon, Assistant United States Attorney, on the

brief), of Salt Lake City, Utah, for the appellee.

Before BRISCOE, ANDERSON, and LUCERO, Circuit Judges.

BRISCOE, Circuit Judge.

Defendant Michael Kovach appeals his conviction for uttering and

possessing counterfeit securities in violation of 18 U.S.C. § 513(a). We exercise
2

jurisdiction pursuant to 28 U.S.C. § 1291 and affirm.

I.

In September 1998, the United States Postal Inspection Service (USPIS)

began investigating the break-in of residential and business mailboxes in the

south end of the Salt Lake Valley. A representative from a doctor’s office in

Murray, Utah, contacted USPIS and reported that a check in the amount of

$1,611.96 sent to the doctor’s office by the IHC Health Plan had been stolen and

negotiated at a local bank. The check was issued out of the Salt Lake City IHC

office. The USPIS determined that four counterfeit copies of the check had been

presented at separate Key Bank branches. In each instance, the check was made

payable to Michael S. Kovach and negotiated with a Utah identification number

belonging to Kovach. The USPIS also determined that Kovach’s fingerprints

were on three of the four counterfeit checks.

A criminal complaint was filed in federal district court charging Kovach in

one count with knowingly uttering and possessing four counterfeit securities of

an organization, IHC Health Plan, with intent to deceive another person and an

organization in violation of 18 U.S.C. § 513(a). Kovach was subsequently

indicted on the same charge.

Kovach moved to dismiss the indictment for lack of jurisdiction, arguing

“[t]he indictment fail[ed] to show that the alleged prohibited conduct had a
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sufficient connection with or effect on interstate commerce to invoke federal

jurisdiction.” ROA, Vol. I, Doc. 22. After a hearing, the district court denied

the motion and scheduled the case for trial. Kovach entered a conditional plea of

guilty to the single count charged in the indictment, specifically reserving the

right to appeal the “issues raised in his motion to dismiss.” Id., Doc. 45, at 4. In

the written plea agreement, the parties stipulated that (1) Kovach negotiated the

four counterfeit checks from IHC Health Plan; (2) IHC Health Plan was a “nonprofit corporation which handle[d] the insurance aspects of medical services

offered to those individuals who carr[ied] IHC Health Plan Insurance”; (3)

“[p]hysicians who participate[d] in the IHC plan [we]re in Idaho and Utah”; and

(4) Key Bank was a national banking organization with offices throughout the

United States. Id. at 4-5. Kovach was sentenced to a term of imprisonment of 16

months, followed by a 36-month period of supervised release.

II.

Constitutionality of 18 U.S.C. § 513(a)

Kovach argues that 18 U.S.C. § 513(a) is unconstitutional in light of 

United States v. Lopez, 514 U.S. 549 (1995), because it fails to prohibit conduct

affecting interstate commerce. The district court rejected Kovach’s argument. 

Because the question is a purely legal one, we apply a de novo standard of review. 

See United States v. Boyd, 149 F.3d 1062, 1065 (10th Cir. 1998), cert. denied,
4

119 S. Ct. 2024 (1999).

In Lopez, the Supreme Court struck down as unconstitutional the Gun Free

School Zones Act (GFSZA), 18 U.S.C. § 922(q)(1)(a), a statute which forbade

“‘any individual knowingly to possess a firearm at a place [he] kn[ew] . . . [wa]s a

school zone.’” 514 U.S. at 551 (quoting 18 U.S.C. § 922(q)(1)(A)). In reaching

this conclusion, the Court emphasized that Congress’ authority under the

Commerce Clause extended to only three categories of activity: (1) “the use of the

channels of interstate commerce”; (2) “the instrumentalities of interstate

commerce, or persons or things in interstate commerce”; and (3) “those activities

having a substantial relation to interstate commerce, i.e., those activities that

substantially affect interstate commerce.” Id. at 558-59. Because the GFSZA did

not require proof of any of these three interstate jurisdictional nexuses, the Court

held that the statute was an unconstitutional exercise of Congress’ Commerce

Clause authority. Id. at 559.

The question here is whether the statute under which Kovach was charged,

18 U.S.C. § 513(a), requires proof of at least one of the three interstate

jurisdictional nexuses identified in Lopez. The statute provides in pertinent part:

Whoever makes, utters or possesses a counterfeited security of . . . an

organization, or whoever makes, utters or possesses a forged security

of . . . an organization, with intent to deceive another person,

organization, or government shall be fined under this title or

imprisoned for not more than ten years, or both.
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18 U.S.C. § 513(a). Further, 18 U.S.C. § 513(c) provides:

For purposes of this section--

. . .

(4) the term “organization” means a legal entity, other than a

government, established or organized for any purpose, and includes a

corporation, company, association, firm, partnership, joint stock company,

foundation, institution, society, union, or any other association of persons

which operates in or the activities of which affect interstate or foreign

commerce.

In light of this definition, we have little trouble concluding that § 513(a)

falls within the third category of activity outlined in Lopez, i.e., “those activities

that substantially affect interstate commerce.” To prove a violation of section

513(a), the government must demonstrate that a defendant uttered or possessed a

counterfeited or forged security of a legal entity “which operates in or the

activities of which affect interstate or foreign commerce.” In other words, the

statute contains a jurisdictional element which ensures, through a case-by-case

inquiry, that the crime in question involves the forging or counterfeiting of

securities of an economic enterprise engaged in interstate commerce. See Lopez,

514 U.S. at 561. Because such securities are closely linked to the operation of

such “organizations,” criminal activity involving those securities necessarily

affects interstate commerce. 

Although we believe the amount at issue in this case (approximately

$6,400) was significant, our conclusion would be the same even if the amount

were considered de minimis. The point is that criminal activity violating § 513(a),
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when considered in the aggregate, clearly has a substantial effect on interstate

commerce. See United States v. Ables, 167 F.3d 1021, 1029 (6th Cir.)

(concluding that, even after Lopez, government need prove only that particular

transaction at issue had a de minimis effect on interstate commerce), cert. denied,

119 S. Ct. 2378 (1999); United States v. Ripinsky, 109 F.3d 1436, 1444 (9th Cir.

1997) (holding that jurisdictional element of 18 U.S.C. § 1957 was satisfied if

each individual financial transaction “ha[d] a minimal effect on interstate

commerce that, through repetition by others similarly situated, could have a

substantial effect on interstate commerce”); United States v. Leslie, 103 F.3d

1093, 1100 (2d Cir. 1997) (concluding that federal statute prohibiting laundering

of monetary instruments regulated activities which, in the aggregate, had a

substantial effect on interstate commerce); United States v. Bolton, 68 F.3d 396,

399 (10th Cir. 1995) (concluding that, even after Lopez, the government need

show only a de minimis effect on interstate commerce to support a Hobbs Act

conviction). Indeed, Congress concluded as much when it enacted § 513 in 1984. 

See S. Rep. No. 98-225, at 653 (1983) (noting that the purpose of § 513 was to

“combat widespread fraud schemes involving the use of counterfeit . . . corporate

securities” that have “a serious detrimental effect on interstate commerce”).

For these reasons, we conclude the statute represents a valid exercise of
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 The statute also criminalizes the possession or utterance of a

counterfeited or forged security of a State or political subdivision thereof. 

Because Kovach was not charged under this portion of the statute, we have not

analyzed whether that portion represents a constitutional exercise of Congress’

Commerce Clause authority.

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Congress’ Commerce Clause authority.1 Thus, the fact that the statute may impact

an area traditionally reserved to the states is irrelevant. See Gregory v. Ashcroft,

501 U.S. 452, 460 (1991) (“As long as it is acting within the powers granted it

under the Constitution, Congress may impose its will on the States. Congress

may legislate in areas traditionally regulated by the States.”).

Sufficiency of indictment

Kovach contends the indictment filed against him was insufficient and

should have been dismissed because it failed to adequately allege an interstate

commerce nexus. Questions regarding the sufficiency of an indictment are

reviewed by this court de novo. United States v. Dashney, 117 F.3d 1197, 1205

(10th Cir. 1997).

To pass constitutional muster, an indictment must contain all the essential

elements of the charged offense. See United States v. Brown, 995 F.2d 1493,

1505 (10th Cir. 1993). This rule derives from both the Fifth and Sixth

Amendments. See United States v. Fern, 155 F.3d 1318, 1325 (11th Cir. 1998);

United States v. Schramm, 75 F.3d 156, 163 (3d Cir. 1996). In particular, the rule
8

ensures that a grand jury has found probable cause to support all the necessary

elements of the crime. Fern, 155 F.3d at 1325. Further, the rule enables a

defendant “to plead an acquittal or conviction in bar of future prosecutions for the

same offense.” Hamling v. United States, 418 U.S. 87, 117 (1974). Finally, the

rule helps ensure that a defendant receives fair notice of the charges against

which he must defend. Id. “It is generally sufficient that an indictment set forth

the offense in the words of the statute itself, as long as ‘those words of

themselves fully, directly, and expressly, without any uncertainty or ambiguity,

set forth all the elements necessary to constitute the offence intended to be

punished.’” Id. (quoting United States v. Carll, 105 U.S. 611, 612 (1882)).

The indictment against Kovach charged as follows:

On or about September 22, 1998, in the Central Division of the

District of Utah, MICHAEL S. KOVACH, the defendant herein, did

knowingly utter and possess four (4) counterfeit securities of an

organization, to wit: IHC Health Plan account no. 124000737, check

no. 860632, with the intent to deceive another person and an

organization; all in violation of 18 U.S.C. § 513(a).

ROA, Vol. I, Doc. 10. Because the indictment did not directly allege a

connection between IHC Health Plan and interstate commerce, the critical

question is whether its use of the statutory term “organization,” and its

description of IHC Health Plan as an “organization,” are sufficient to satisfy the

necessary jurisdictional nexus.

In United States v. Wicks, 187 F.3d 426 (4th Cir. 1999), a case involving
2

 The defendant in Wicks was indicted on two counts of possessing forged

securities in violation of § 513(a). Like the indictment at issue here, the

indictment in Wicks simply alleged that the defendant, “with intent to deceive

another person, did possess a forged security of an organization, that is, a check

purporting to be a genuine check of Comdata Network, Inc., in the amount of

$3,000.00.” 187 F.3d at 428.

9

strikingly similar facts and arguments2, the Fourth Circuit held that the term

“organization,” as used in § 513(a), is a term of art defined to refer only to

entities that operate in or affect interstate or foreign commerce. Id. at 428. Thus,

the Fourth Circuit held, the use of this term of art in an indictment charging a

violation of § 513(a) is adequate, without more, to charge the interstate commerce

element. Id. In other words, the court held, an indictment need not also include

the component parts of this term of art (i.e., that the organization is one operating

in or affecting interstate or foreign commerce). Id.

We agree with the holding in Wicks. Section 513 defines the term

“organization” to mean “a legal entity, other than a government, established or

organized for any purpose, . . . which operates in or the activities of which affect

interstate or foreign commerce.” 18 U.S.C. § 513(c)(4). This definition, which is

narrower than the common definition of the word “organization,” “is not merely a

generic or descriptive term, but a legal term of art” which expressly incorporates

the interstate commerce element of the statute. Hamling, 418 U.S. at 118. 

Because this definition is applicable to all indictments charging a violation of §
10

513(a), its use is “sufficiently definite in legal meaning to give a defendant notice

of the charge against him,” id., even if the “various component parts of the

[statutory] definition of” organization are not specifically alleged in the

indictment. Id. at 119.

We conclude the indictment filed against Kovach was constitutionally

sufficient. By describing IHC Health Plan as an “organization,” the indictment

effectively alleged the interstate commerce element, even though it did not parrot

the component parts of the statutory definition. In other words, the indictment

placed Kovach on notice that he uttered and possessed counterfeit securities of a

specifically named entity that operated in or affected interstate or foreign

commerce. The indictment fairly informed Kovach of the charge against which

he had to defend and enabled him to assert a double jeopardy defense to any

future prosecution for the same offense.

Effect on interstate commerce

Finally, Kovach argues that his conviction must be reversed because his

conduct did not affect interstate commerce. In particular, Kovach points out that

“[a]ll of [his] conduct was purely local and occurred wholly within the state of

Utah,” and “[a]ll persons, things and organizations involved were at all times

located within the state of Utah.” Kovach’s Opening Brief, at 5. 
11

The initial problem with Kovach’s argument is that it was never ruled upon

by the district court. Although Kovach attempted to argue at the hearing on his

motion to dismiss that the government could not prove his conduct affected

interstate commerce, the district court specifically refused to reach the issue,

indicating it was a matter of proof for trial. ROA, Vol. II, at 2 (“What I don’t

want you to argue because it’s just something I don’t think I can think about is

that they couldn’t show it, because I have to wait until trial.”); id. at 3 (“It’s

just–what I don’t think–I don’t think you’d be spending your time wisely doing,

. . . would be arguing that the government can’t show an interstate nexus, because

it seems to me that’s something that we’ll see at trial.”); id. at 12 (“As far as

whether the government can establish the necessary interstate nexus, that’s a

matter of proof. And I can tell you, Mr. Hindley, I know you’ll be watching for it

if we go to trial, and I will too.”). Absent extraordinary circumstances, this court

will not consider an issue on appeal that was not decided first in the district court. 

Pell v. Azar Nut Co., 711 F.2d 949, 950 (10th Cir. 1983) (citing Singleton v.

Wulff, 428 U.S. 106, 120 (1976)).

Even assuming, arguendo, that Kovach has demonstrated extraordinary

circumstances justifying appellate review of the issue, it is apparent, under the

stipulated facts, that Kovach’s conduct satisfied the necessary interstate nexus. In

particular, Kovach stipulated that IHC Health Plan, the “organization” whose
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check was counterfeited, regularly made payments to Plan physicians in both Utah

and Idaho. Thus, Kovach effectively conceded that IHC Health Plan was an

entity that operated in interstate commerce by making payments to physicians in

Utah and Idaho for health care services performed in those states.

III.

The judgment of the district court is AFFIRMED.