Source: https://law.justia.com/cases/federal/appellate-courts/F3/219/404/532106/
Timestamp: 2019-04-22 20:05:50
Document Index: 308034666

Matched Legal Cases: ['§ 666', '§ 666', '§ 666', '§ 666', '§ 666', '§ 666', '§ 666', '§ 666', '§ 666', '§ 8', '§ 666', '§ 666', '§ 1956', '§ 1956', '§ 1956', '§ 666', '§ 666', '§ 666', '§ 666', '§ 666', '§ 666', '§ 666', 'art. 6', '§ 5', '§ 13', '§ 13', '§ 5', '§ 666', '§ 666', '§ 666', '§ 666', '§ 666', '§ 666', '§ 666', '§ 666', '§ 666', '§ 666', '§ 666', '§ 1956']

United States of America, Plaintiff-appellee, v. Chaney L. Phillips; Emerson C. Newman, Defendants-appellants, 219 F.3d 404 (5th Cir. 2000) :: Justia
Justia › US Law › Case Law › Federal Courts › Courts of Appeals › Fifth Circuit › 2000 › United States of America, Plaintiff-appellee, v. Chaney L. Phillips; Emerson C. Newman, Defendants-a...
United States of America, Plaintiff-appellee, v. Chaney L. Phillips; Emerson C. Newman, Defendants-appellants, 219 F.3d 404 (5th Cir. 2000)
US Court of Appeals for the Fifth Circuit - 219 F.3d 404 (5th Cir. 2000)
Consistent with the broad terms of the statute, the district court instructed the jury that Phillips and Newman could be convicted under the Act if it found Phillips to be authorized to act on behalf a government or agency receiving federal funds. The district court instructed the jury that " [u]nder Louisiana law, tax assessors are parish officers." The government argued to the jury and it now argues before us on appeal that, for purposes of § 666, St. Helena Parish is a local governmental body and the tax assessor is a parish agent. Thus, the agency question in this appeal turns entirely on whether Phillips was an agent of St. Helena Parish for purposes of § 666. For the reasons provided below, we conclude that Phillips was not an agent of St. Helena Parish under § 666.
* In determining the proper meaning of "agent" as applied in this case we start with its statutory language. Under § 666(a) (1) and (b), the defendant must "an agent of an organization, government, or agency" that receives in excess of $10,000 in a one-year period. See also United States v. Moeller, 987 F.2d 1134, 1137 n.9 (5th Cir. 1993) ("The defendant must be an 'agent' of a 'government agency' that receives in excess of $10,000 from the federal government within a one-year period."). Subsection (d) (1) broadly defines "agent" as "a person authorized to act on behalf of another person or a government and, in the case of an organization or government, includes a servant or employee, and a partner, director, officer, manager, and representative." The question is whether this definition--conceding the elasticity of its general wording--properly can be read to make the tax assessor's office an agent of the parish for purposes of this § 666 prosecution. As part of § 666, subsection (d) (1) must be read in the context of that statute whose purpose is to protect the integrity of federal funds.7 We know from the Supreme Court's decision in Salinas v. United States, 522 U.S. 52, 118 S. Ct. 469, 473-74 (1997), that the funds in question need not be purely federal, nor must the conduct in question have a direct effect on federal funds. The statute possibly can reach misuse of virtually all funds of an agency that administers the federal program in question. Id. It is a different matter altogether, however, to suggest that the statute can reach any government employee who misappropriates purely local funds, without regard to how organizationally removed the employee is from the particular agency that administers the federal program.8 Thus, we think that, in the context of the facts of this appeal and in the light of decided cases, the question of whether Phillips was an agent of St. Helena Parish within the meaning of § 666, turns on whether Phillips, as tax assessor, was authorized to act on behalf of the parish with respect to its funds.9 10
Our analysis and holding today is consistent with our previous observation that " [a]lthough the conduct prohibited by section 666 need not actually affect the federal funds received by the agency, there must be some nexus between the criminal conduct and the agency receiving federal assistance." Moeller, 987 F.2d at 1137 (emphasis added).15 Although we have not elaborated on this statement, the Supreme Court has suggested, as we have observed earlier, that the statute might require just such a nexus or connection between a bribe or kickback and the expenditure of federal funds. Salinas, 118 S. Ct. at 474. In a similar vein, the Second Circuit had held that "the assessment of the thing's value must be connected, even if only indirectly, to the integrity of federal program funds." United States v. Foley, 73 F.3d 484, 490 (2d Cir. 1996).16 So too has the Third Circuit required this connection. See Zwick, supra, 199 F.3d at 686-87. But see United States v. Dakota, 188 F.3d 663 (6th Cir. 1999) (dismissing nexus requirement argument without discussion). The absence of this "nexus" or "connection" thus reinforces our conclusion that Phillips was not an agent of a recipient of federal funds for purposes of § 666.
Congress' authority to enact § 666 rests on the Spending Clause of the Constitution. See U.S. Const., art. I, § 8. Though broad, the power of Congress to impose duties on non-federal entities under the Spending Clause is not without limits. See South Dakota v. Dole, 483 U.S. 203, 207 (1987) (citation omitted). The Court has stated: " [C]onditions on federal grants might be illegitimate if they are unrelated 'to the federal interest in particular national projects or programs.'" Id. (citations omitted). This § 666 prosecution of local government corruption advances no federal interest in safeguarding a particular federal program because the assessor's office has absolutely no connection with the administration of the food stamp program administered by St. Helena Parish.17 Our approach is thus consistent with the principle of statutory construction that favors the avoidance of constitutional questions.18
We now must consider the impact of our reversal of the § 666 convictions on counts 5 through 14 of the indictment, which charge both Phillips and Newman with money laundering in violation of 18 U.S.C. § 1956(a) (1) (B) (i). This section makes it a crime for one who
In a prosecution under § 1956(a) (1) (B) (i), the government must prove that the defendant knew only that the property represented proceeds derived from "some form of unlawful activity." It is clear that the government proved this characteristic of the proceeds and the defendant's knowledge of the same. At the same time, however, it is clear that the statute requires that the government also must prove that the funds "in fact" involve "the proceeds of specified unlawful activity." This term is not to be applied as it might be generically defined. Section 1956 appears in the racketeering chapter of the criminal code and the statute is aimed, not at all illegally obtained property, but only at property that Congress concluded served the purpose of the racketeering statutes. It is, therefore, not surprising that § 1956(c) (7) specifically defines, and gives restricted meaning to, the term "specified unlawful activity." As relevant to this case, Section 7(D) defines "specified unlawful activity" to include, among many other federal crimes, theft concerning programs receiving federal funds in violation of § 666. Among the other federal crimes defined as "specified unlawful activity," the only other enumerated crime that could possibly relate to the funds in this case is mail fraud.
Newman alone was charged with and convicted for perjury (count fifteen). He challenges for insufficiency of evidence. The perjury charge stemmed from Newman's testimony to the grand jury concerning Phillips's account at his hardware store. Specifically, Newman was asked whether he brought to the grand jury "any records showing payments by Mr. Phillips on his account, or payments by the Assessor's Office on any account?" Newman responded by describing how he would credit Phillips's account at the hardware store with the amount of the paychecks he received from Newman because he owed Phillips about $4000 for a horse he purchased from Phillips. When asked " [s]o you paid on his account in payment of the horse?", Newman responded " [u]m-hm, part of it, not all of it." Newman now claims, in essence, that the government failed to prove beyond a reasonable doubt that his story concerning the purchase of the horse was false.
18 U.S.C. § 666. As this language makes clear, all that is relevant in determining whether a defendant has violated § 666 is: (1) whether a local body receives more than $10,000 under a federal program, (2) whether the defendant is an "agent" of the body, and (3) whether the defendant "embezzles, steals, [or] obtains by fraud" funds of the body. See United States v. Moeller, 987 F.2d 1134, 1137 (5th Cir. 1993) ("There are only two requirements necessary to bring a defendant within section 666. First, the defendant must be an agent of a government agency which receives in excess of $10,000 from the federal government within a one year period. Second, the defendant must engage in conduct proscribed by section 666(a) (1) (A) or (B).").
It is undisputed that St. Helena Parish received more than $10,000 in federal benefits--funds from the federal food stamp program--and the jury found that Phillips embezzled, stole, or obtained by fraud thousands of dollars "belonging to and under the care, custody and control of the Parish."1 Phillips is thus guilty of violating § 666 if he is an "agent" of the Parish, which the statute defines as "a person authorized to act on behalf of [the Parish] . . . includ [ing] a servant or employee, [or] a partner, director, officer, manager, [or] representative." 18 U.S.C. § 666(d) (1).2
Phillips clearly falls within this definition in at least two ways. First, there is no doubt that, at least in some respects, Phillips is "authorized to act on behalf of" the Parish. The district court held that " [t]he assessor's primary function is to assess the value of real property within the parish for the parish ad valorem property tax. In performing those duties, he is clearly acting as an agent of the parish." United States v. Phillips, 17 F. Supp. 2d 1016, 1017-18 (M.D. La. 1998). The majority does not challenge this finding; rather, it asserts that "the question is whether Phillips was authorized to act on behalf of the Parish with respect to its [federal] funds." However, as described below, this specific nexus--between Phillips and the federal funds inside Parish coffers--is not required. There is no dispute that, to fulfill his duties in ascertaining the proper amount of property taxes residents must pay to the Parish, Tax Assessor Phillips is "authorized to act on behalf of" the Parish. Under a plain reading of the statute, our inquiry should end there. See United States v. Westmoreland, 841 F.2d 572, 576 (5th Cir. 1988) ("Courts in applying criminal laws generally must follow the plain and unambiguous meaning of the statutory language. Only the most extraordinary showing of contrary intentions in the legislative history will justify departure from that language.") (citations omitted).
Phillips also falls within the § 666 definition of "agent" because he is an "officer" of the Parish as defined by Louisiana law.3 See 18 U.S.C. § 666(d) (1) (defining "agent" as, inter alia, an "officer" of the governmental body). The Louisiana Constitution itself includes tax assessors in a provision defining "Parish Officials." See La. Const., art. 6, § 5(G) ("Parish Officials and School Boards Not Affected. No home rule charter or plan of government shall contain any provision affecting a school board or the offices of district attorney, sheriff, assessor, clerk of a district court, or coroner, which is inconsistent with this constitution or law.") (emphasis added). Various Louisiana statutes reach the same conclusion. For example, La. R.S. § 13:5108 provides that the state will indemnify "officials, officers, and employees of the state," exempting from this provision "parish officials set forth and named in Article VI, Sections 5(G) and 7(B) of the Constitution." La. R.S. § 13:5108.2A(2). As § 5(G) of the Louisiana Constitution includes parish tax assessors, the statute unambiguously identifies tax assessors as officers of the Parish, and thus "agents" of the parish for § 666 purposes.
The majority limits the definition of "agent" for § 666 purposes only to those "authorized to act on behalf of the Parish with respect to its [federal] funds" and exaggerates the separation between the Parish government and the tax assessor's office in part to avoid the "troubling constitutional questions" that the clear meaning of the statute raises. However, while the desire to avoid troubling constitutional problems with a statute is laudable, see Jones v. United States, ___ U.S. ___,120 S. Ct. 1904, 1911, 146 L. Ed. 2d 902, (2000) (" [W]here a statute is susceptible of two constructions, by one of which grave and doubtful constitutional questions arise and by the other of which such questions are avoided, our duty is to adopt the latter."), it is impossible to fulfill in this case because we have already decided the statutory question before us--whether the separation of federal food stamp funds from other funding in Parish coffers renders insufficient the connection between those federal funds and the Parish Tax Assessor's Office--contrary to the majority opinion. Our cases firmly establish (as a statutory and constitutional matter) that so long as a defendant has the requisite agency relationship with the body of local government receiving the federal funds, § 666 covers his misconduct regardless of whether his particular conduct affected those funds in particular.6
We make specific note that the food stamps that constitute the basis of this prosecution are a federal individual entitlement. There could be some question whether individual entitlement benefits can constitute the benefits referred to in subsection (b). The language of this subsection appears to refer to federal benefits provided to state and local governments qua governments. This reading would not be inconsistent with the legislative history. Cf. Fischer v. United States, __ U.S. __, 120 S. Ct. 1780, 1786-89, 146 L. Ed. 2d 707 (2000) (majority opinion) 120 S. Ct. at 1789 (Thomas, J., dissenting) (May 15, 2000). This point, however, has not been raised on appeal.
Our application of agency principles fully comports with the statute's legislative history. That history reveals Congress' concern with a defendant's ability to administer or control the federal funds provided to a particular agency. In Westmoreland, in interpreting the legislative history, we stated that "Congress has cast a broad net to encompass local officials who may administer federal funds, regardless of whether they do." 841 F.2d at 577. See also id. at 578 ("Although the extent of the federal government's assistance programs will bring many organizations and agencies within the statute's scope, the statute limits its reach to entities that receive a substantial amount of federal funds and to agents who have the authority to effect significant transactions."). See also United States v. Marmolejo, 89 F.3d 1185, 1192-93 (5th Cir. 1996), aff'd sub nom. Salinas v. United States, 522 U.S. 52, 118 S. Ct. 469 (1997); United States v. Jennings, 160 F.3d 1006, 1012 (4th Cir. 1998) ("This subsection . .. prohibits payoffs to state and local officials who influence the distribution of federal funds."); United States v. Rooney, 37 F.3d 847, 851 (2d Cir. 1994) (interpreting § 666's "manifest purpose" as "to safeguard finite federal resources from corruption and to police those with control of federal funds.") (emphasis added; citation omitted).
After all, the statute's title--" [t]heft or bribery concerning programs receiving Federal funds"--is some evidence that Congress intended to address only illegal acts that concern federally-funded programs.
We have stated the question perhaps more broadly than necessary. See Salinas, 118 S. Ct. at 474 (suggesting statute might require some minimum degree of connection between the illegal conduct and the federal program funds) ("We need not consider whether the statute requires some other kind of connection between a bribe and the expenditure of federal funds, for in this case the bribe was related to the housing of a prisoner in facilities paid for in significant part by federal funds themselves. And that relationship is close enough to satisfy whatever connection the statute might require."). Because of the absence of evidence that connects the assessor's office to control or expenditure of any funds of the parish, we need not consider whether there is yet some remoteness of connection to federal funds that § 666 will not reach.
In an effort to meet the "nexus" requirement, the dissent leans heavily on the hypothetical possibility that Phillips's fraudulent payments to Newman put the parish at risk of making up any shortfall resulting from the malfeasance of the assessor's office. The government, however, never suggested or established at trial that this was a possibility. More importantly, the fraud must have the potential to affect the identified federal funds or program. See, e.g., Fischer, 120 S.Ct at 1789 ("The Government has a legitimate and significant interest in prohibiting financial fraud or acts of a bribery being perpetrated upon Medicare providers. Fraudulent acts threaten the program's integrity. They raise the risk participating organizations will lack the resources requisite to provide the level and quality of care envisioned by the program."). There is nothing here that even remotely approaches the threat identified in Fischer. Even if the parish had needed to assist the assessor's office financially, there is nothing in this record to show that this could have affected the integrity of the food stamp program. Furthermore, the record utterly fails to establish that the funds fraudulently paid to Newman were "owned by, or . . . under the care, custody, or control of [the parish]," as required in subsection (a) (1) (A) (ii) of the Act. Finally, the dissent admits that we have extended § 666 liability no further than to those "who may administer federal funds." Marmolejo, 89 F.3d at 1192.
In close parallel to our analysis, § 666 has been construed to require that the recipient organization must be affected by the fraud. See, e.g., United States v. Fischer, 168 F.3d 1273, 1276 (11th Cir. 1999) ("The statutory prerequisite for a conviction under 18 U.S.C. § 666 is that the organization or agency affected by the fraud . . . 'receives . . . benefits in excess of $10,000 . . . .'") (emphasis added); United States v. LaHue, 998 F. Supp. 1182, 1190 (D. Kansas 1998) (" [S]ection 666 jurisdiction does not reach beyond the target recipient of the pertinent federal program.").
This requirement squares with the legislative history and the plain language of the statute. See e.g., United States v. Zwick, 199 F.3d 672, (3d Cir. Dec. 15, 1999) ("The legislative history of § 666 explains that the statute was enacted to correct deficiencies in existing law by 'creat [ing] new offenses to augment the ability of the United States to vindicate significant acts of theft, fraud, and bribery involving Federal monies . . . .'") (citing S.Rep. No. 98-225, 369-70) (alteration in original); United States v. Coyne, 4 F.3d 100, 110 n.1 (2d Cir. 1993) ("With regard to theft, the Committee Report states that it must be 'from a [federally funded] program.' With regard to bribery, the Committee Report states that the conduct of the recipient of the bribe must be 'related to the administration of [a federally funded] program. It also states that the conduct sought to be influenced by the bribe must be 'related to the administration of the [federally funded] program.'") (citations omitted; alterations in original). Again, the government never contended that the funds of St. Helena Parish were affected by Phillips's and Newman's fraud. This is not to say, however, that the illegal conduct must affect the federal funds directly. It need not. See Salinas, 118 S. Ct. at 475; Westmoreland, 841 F.2d at 576-78.
The Second Circuit has reaffirmed the post-Salinas validity of Foley. See United States v. Santopietro, 166 F.3d 88, 93 (2d Cir. 1999) (" [T]o the extent that Foley requires at least some connection between the bribe and a risk to the integrity of the federal funded program, nothing in Salinas disturbs such a requirement. . . . Thus, even after Salinas, Foley would not permit the Government to use section 666(a) (1) (B) to prosecute a bribe paid to a city's meat inspector just because the city's parks department had received a federal grant of $10,000.").
See, e.g., Jones v. United States, 526 U.S. 227, 119 S. Ct. 1215, 1222 (1999) (" [W]here a statute is susceptible of two constructions, by one of which grave and doubtful constitutional questions arise and by the other of which such questions are avoided, our duty is to adopt the latter.") (citations omitted); United States v. Castillo, 179 F.3d 321, 328 n.10 (5th Cir. 1999), cert. granted, 120 S. Ct. 865 (U.S. Jan 14, 2000) (" [W]here an otherwise acceptable construction of a statute would raise serious constitutional problems, [a court] . . . will construe the statute to avoid such problems unless such construction is plainly contrary to the intent of Congress.") (alteration in original) (citing New York v. United States, 505 U.S. 144, 170 (1992)). We do not think that this federalism concern can be dismissed, as would the dissent, as a mere "policy matter."
" [T]his court reviews admission of hearsay evidence under the non-hearsay definition of Rule 801(d) (2) (E) for abuse of discretion." United States v. Cornett, 195 F.3d 776, (5th Cir. 1999) (citing United States v. Narviz-Guerra, 148 F.3d 530 (5th Cir. 1998)). The proponent of admittance under Rule 801(d) (2) (e) must prove by a preponderance of the evidence (1) the existence of a conspiracy, (2) the statement was made by a co-conspirator of the party, (3) the statement was made during the course of the conspiracy, and (4) the statement was made in furtherance of the conspiracy. See United States v. Broussard, 80 F.3d 1025, 1038 (5th Cir. 1996) (citing Bourjaily v. United States, 483 U.S. 171, 175 (1987)).
The exception is to be "used only rarely, in truly exceptional cases." United States v. Thevis, 665 F.2d 616, 629 (5th Cir. 1982). " [T]he proponent of the statement bears a heavy burden to come forward with indicia of both trustworthiness and probative force." United States v. Washington, 106 F.3d 983, 1001-02 (D.C. Cir. 1997). " [I]n order to find a statement trustworthy, a court must find that the declarant of the . . . statement 'was particularly likely to be telling the truth when the statement was made.'" Id. (citing United States v. Tome, 61 F.3d 1446, 1453 (10th Cir. 1995)). Given this high hurdle, in the decision as to whether to apply the residual exception "district courts are given 'considerable discretion,' and a court of appeals will not disturb the district court's application of the exception 'absent a definite and firm conviction that the court made a clear error of judgment in the conclusion it reached based upon a weighing of the relevant factors.'" United States v. Loalza-Vasquez, 735 F.2d 153, 157 (5th Cir. 1984) (quoting Page v. Barko Hydraulics, 673 F.2d 134, 140 (5th Cir. 1982)).
Evidence of other crimes, wrongs, or acts is not admissible to prove the character of a person in order to show action in conformity therewith. It may, however, be admissible for other purposes, such as proof of motive, opportunity, intent, preparation, plan, knowledge, identity, or absence of mistake or accident [.]
As the majority notes, several of our sister circuits have required the government to prove that a federal interest is implicated by the defendant's conduct to constitutionally allow a conviction under § 666. See United States v. Zwick, 199 F.3d 672, 687 (3d Cir. 1999) (" [W]e hold that 666 requires that the government prove a federal interest is implicated by the defendant's offense conduct."); United States v. Santopietro, 166 F.3d 88, 93 (2d Cir. 1999) (noting that it "would not permit the Government to use section 666(a) (1) (B) to prosecute a bribe paid to a city's meat inspector in connection with a substantial transaction just because the city's parks department had received a federal grant of $10,000"). However, as described above, " [t]he Fifth Circuit [has] contrasted its own position, expressed in Westmoreland, that the statute does not require any relation between the $5,000 thing of value and the federal funds received by the local agency." Santopietro, 166 F.3d at 91. Admittedly, the Supreme Court's decision in Salinas v. United States, 118 S. Ct. 469 (1997) "may be read to indicate that the threat to the integrity and proper operation of a federal program created by the corrupt activity is necessary to assure that the statute is not unconstitutionally applied." Santopietro, 166 F.3d at 91. However, as the Second Circuit noted in Santopietro, Salinas did not dispute our decisions in Westmoreland and Marmolejo; rather, it expressly reserved the question of whether "the statute requires some other kind of connection between a bribe and the expenditure of federal funds." See Santopietro, 166 F.3d at 91 (citing Salinas, 118 S. Ct. at 474). We are thus bound, at least as a panel of three judges, to our analysis in Westmoreland and its progeny. See Burge v. Parish of St. Tammany, 187 F.3d 452, 466 (5th Cir. 1999) ("It is a firm rule of this circuit that in the absence of an intervening contrary or superseding decision by this court sitting en banc or by the United States Supreme Court, a panel cannot overrule a prior panel's decision."). Circumventing those decisions, which the majority opinion essentially does, is a matter for this court to accomplish en banc if at all.
As I would uphold the § 666 convictions, I would also uphold the money laundering convictions under 18 U.S.C. § 1956(a) (1) which are based in part on them. Further, as Katie Newman was indeed a participant in this illegal activity, Phillips's sentencing enhancement for being the leader or organizer of a criminal enterprise of five or more participants was not clearly erroneous. See United States v. Boutte, 13 F.3d 855, 860 (5th Cir. 1994) (holding that to count as part of the enterprise for purposes of the enhancement, individuals "need only have participated knowingly in some part of the criminal enterprise"). In short, I would uphold the district court in full.