Opinion ID: 204040
Heading Depth: 4
Heading Rank: 3

Heading: legal principles instruction

Text: The Defendants challenge a legal principles instruction that the district court provided sua sponte. The district court instructed the jury that: When persons hold money in trust for other persons, or for particular purposes, they have a fiduciary duty to use the trusted funds in good faith and in a scrupulous manner, acting always in the best interests of the beneficiaries. Duties general to any fiduciary relationship arise when the trust in question is, as here, a health care benefit program. You, the jury, may consider in your evaluation of the evidence whether and to what extent the government has proven beyond a reasonable doubt in this case that these fiduciary rules were or were not followed. And there are some rules I'm going to give you as guidelines. These may not be the only rules. You may think of other rules or principles that are so obvious that I may not even put in here to give you some aid in figuring this out. The court then provided a non-exclusive list of fiduciary principles that the jury could consider in determining whether the government had prove[n] beyond a reasonable doubt that a particular defendant acted knowingly and willfully [with] the intent to embezzle. The court stated, in full: There are some rules that you may consider in determining whether any of the charged conduct was willfully, knowingly and intentionally made for the purpose of violating the law, or whether the charged conduct was entered into by mistake, bad management or other innocent reasons. Remember that bad management, careless or innocent reasons by themselves do not constitute a crime. Repeating myself a second: The government must prove beyond a reasonable doubt that the conduct charged in the indictment was knowingly and willfully performed, that is to say, the intent to embezzle or misapply as contemplated in 18 U.S.Code, Section 669. The first rule that may assist you in figuring out whether criminal intent exists or does not exist is what can be defined as the solely-in-the-interest rule. This rule requires that management of health plan contributions be solely in the interests of the participants and the beneficiaries. The second rule that may assist you in figuring out whether criminal intent existed or not is the exclusive person rule. This rule requires that the management of the health plan contributions, or the health plan contributions be for the exclusive purpose of proving benefits to the participants and their beneficiaries; and also for the defraying reasonable expense of administering plan. The third rule that you can use in the process of assessing whether criminal intent or noncriminal reasons were behind the charged conduct is the prudent person rule. Members of the board of directors of the health plan must be prudent persons, executing their fiduciary duties with care, skill, prudence, under the circumstances then prevailing. The prudent person rule requires the trustees to be familiar with the matters of the enterprise for which they act. The fourth rule that may assist you in figuring out whether criminal intent exists, or whether there was no criminal intent in the charged actions, is what I refer to as the plan documents rule. Plan documents include managerial organization charts, written descriptions of authorized positions, written descriptions of duties for each position, employment contracts, and any scope that these employment contracts may contain, Board of Directors' decisions and minutes under the legal structure of the plan under its corporate bylaws, and any other contemporaneous document that confirms or denies that the management decisions were made and contemplated as the exclusive purpose, providing benefits to the participants and their beneficiaries and defraying reasonable expenses of administration. The fiduciary must act in accordance with the documents and instruments governing the health plan insofar as such documents and instruments are consistent with the provisions of law. To evaluate and enforce these duties in the context of a criminal statute you may focus not only on the merits of the transaction, but also on the thoroughness of the investigation made by the fiduciaries into the merits of such. As I have already advanced, I also instruct you that a good faith or a negligent breach of fiduciary duties, standing alone, does not create a criminal liability, but can be instructed along with other factors mentioned as to whether criminal intent is or is not present. The Defendants primarily contend that the district court's instruction as to fiduciary principles were lengthy, legally incorrect, and complex, such that the district court engrafted civil ERISA law onto Section 669 and thereby relieved the prosecution's evidentiary burden to prove all elements beyond a reasonable doubt. They also argue that the Defendants' actions were authorized and that they owed no fiduciary duty, so the instructions were misplaced. We agree that the instruction is certainly lengthy and complex. Indeed, it is difficult to characterize the instruction as anything but confusing, and we do not sanction it in any way. Nevertheless, instructions must be evaluated not in isolation but in the context of the entire charge, Jones, 527 U.S. at 391, 119 S.Ct. 2090 (citations omitted), and based upon our review of the instruction as a whole, we conclude that the instruction was harmless. First, although the district court borrowed principles from the ERISA context, the court stated that the jurors may consider the rules. Second, the district court repeated twice within this instruction that [t]he government must prove beyond a reasonable doubt that the conduct charged in the indictment was knowingly and willfully performed, and further instructed on this requirement four other times in the jury charge. Third, the district court instructed the jury at the beginning of its instruction that bad management, careless or innocent reasons by themselves do not constitute a crime and at the end that a good faith or a negligent breach of fiduciary duties, standing alone, does not create a criminal liability. Thus, read as a whole, the instruction did not result in an error warranting reversal. Cf. United States v. Snyder, 668 F.2d 686, 691 (2d Cir.1982) (We agree with appellant that he should not be convicted of a crime merely because he breached his civil fiduciary duties. But [the court] was careful to make that point, and we have no doubt that the jury grasped it.).