Opinion ID: 746455
Heading Depth: 4
Heading Rank: 3

Heading: Congo

Text: 53 In the spring of 1987, Turner convinced Congo, a NASA chemist and Ph.D student, to transfer from Auburn to UTSI. During his diagnostic exam, at which UTSI faculty assessed his competency for the doctoral program, Congo explained that his work at NASA involved the assessment of risks posed by incompatible chemicals on the space station project of NASA. That summer, Frost requested Congo to review an informal research project proposal regarding a computer modeling program designed to assess the hazards posed by incompatible chemicals on the space station project of NASA. Shortly thereafter, Frost, on behalf of FWG, submitted to Congo a formal unsolicited proposal for such a research project with NASA. In November of 1987, Congo initiated the procurement process for the proposed project, documented the justification for awarding FWG a sole-source contract, and submitted a favorable technical evaluation summary of the proposal. On March 10, 1988, Congo submitted a formal procurement request for the project, and submitted a procurement request for additional funding on June 23, 1988. By August, 1988, NASA had approved the proposal and awarded FWG a $300,000 contract, for which Congo served as the COTR. 54 Congo claims that he began to work on his dissertation in August, 1988. Frost was his major professor. The topic of his dissertation was extremely similar to the topic of the chemical hazards contract between NASA and FWG. The government introduced evidence that Turner told Karen Seiser, an FWG employee, to help Congo with his dissertation. Seiser testified that she spent over two eighty-hour weeks in February, 1990 writing about two-thirds of the dissertation, and that Congo treated her like an employee. After she worked on the dissertation, Seiser prepared a report for FWG on the progress of the chemical hazards contract, using many of the sections which she had written for the dissertation. Congo admitted that, as COTR for the contract, he rejected the report because it looked too much like his dissertation. Two other FWG employees also worked on the dissertation, one of whom implemented changes during a period of several days at the direction of Congo. 55 Congo submitted his dissertation on February 26, 1990. Frost, Turner, and three other professors sat on the committee before which Congo orally defended his dissertation. Neither Congo nor Frost nor Turner disclosed the work done by Seiser on the paper. The committee approved the dissertation and Congo graduated. 56 The prosecution argues that Congo committed mail fraud by participating in a scheme to defraud the government by helping to procure the chemical hazards contract for FWG in return for his dissertation. The mailings upon which the degree-for-contract convictions of Congo are based are vouchers for the chemical hazards contract mailed from FWG to NASA on April 2, May 8, June 11, July 11, August 10, and September 11, 1990. 57 Viewing the evidence in the light most favorable to the prosecution, the similarities between the circumstances of Congo and Berlinrut, the student whom Turner unsuccessfully requested to provide a contract in exchange for a dissertation, would allow a rational jury to find that Frost, Turner, and Congo agreed in 1987 that Congo would help procure a contract for FWG in exchange for Frost and Turner eventually providing him with a dissertation. Like Berlinrut, Congo informed Frost and Turner of his specific area of interest. As with Berlinrut, Frost and Turner sought to submit through the student a contract proposal on that very topic to the government agency for which the student worked. Congo also took the same action requested of Berlinrut: helping to provide FWG with a contract involving the topic of his future dissertation. Finally, just as they had offered to do for Berlinrut, Frost and Turner took the very unusual step of having much of Congo's dissertation written for him. Although there is no direct evidence that Frost and Turner propositioned Congo as they had Berlinrut, the jury still could have inferred from these facts that defendants entered into an arrangement similar to that which Berlinrut had refused. 58 Nonetheless, the evidence cannot support the convictions for Counts Two through Seven. A mail fraud conviction must rest upon proof of some fraudulent scheme or act. The only deception with which Congo is charged in relation to the government, however, is a failure to disclose his relationship with FWG to his superiors and colleagues at NASA. 2 The circumstances relating to Congo therefore differ from those of Potter and Faulkner because the record does not suggest that he committed any deception when helping to secure the chemical hazards contract, other than not disclosing a conflict of interest. Although Congo deceived the University by submitting a dissertation written primarily by other people, the prosecution cannot rely upon this deception in order to convict Congo of a scheme to defraud the government of property. We note that the federal circuits are split as to whether a defendant may be convicted of mail fraud for deceiving only persons other than the intended victims of a scheme. Compare United States v. Blumeyer, 114 F.3d 758, 767-68 (8th Cir.1997)(noting split and following United States v. Cosentino, 869 F.2d 301, 307 (7th Cir.1989), to hold that defendant commits mail fraud by deceiving regulatory agency in order to forestall regulatory action which would impede scheme to obtain property from others) with United States v. Sawyer, 85 F.3d 713, 734 n. 18 (1st Cir.1996)(intended victims of scheme must be the ones defrauded); McEvoy Travel Bureau, Inc. v. Heritage Travel, Inc., 904 F.2d 786, 794 (1st Cir.1990)(scheme to defraud cannot rest upon deception of one party which causes deprivation to another); United States v. Utz, 886 F.2d 1148, 1151 (9th Cir.1989)(defendant must intend to obtain money or property from victim of deceit). We do not have to resolve this split, however, because even the cases which have held that convictions may rest upon the deceit of a person other than the ultimate victim contemplated that the deception was causally related to the scheme to obtain property from the victim. See Blumeyer, 114 F.3d at 767-68; Cosentino, 869 F.2d at 307. In this case, the fact that the benefit received by Congo from Frost and Turner involved academic deception is a fortuity. The acts of plagiarism were irrelevant to the success of the scheme to obtain a government contract; whether Congo received from FWG a bogus dissertation or something as mundane as money did not affect, and was not intended to affect, his ability to help FWG obtain the chemical hazards contract. 59 Accordingly, the convictions can rest only upon a failure by Congo to disclose his conflict of interest. Many opinions repeat the maxim that a breach of fiduciary duty alone, without the 'something more' of fraudulent intent, cannot constitute mail fraud. E.g., Morda v. Klein, 865 F.2d 782, 785 (6th Cir.1989). In United States v. Mittelstaedt, 31 F.3d 1208 (2d Cir.1994), the Second Circuit helped to define what this something more is. Rejecting the claim of the prosecution that the defendant had violated § 1341 merely because his failure to disclose a conflict of interest had prevented the victim from making a fully informed economic decision, 3 the Mittelstaedt court explained: 60 Where an individual standing in a fiduciary relation to another conceals material information that the fiduciary is legally obliged to disclose, that non-disclosure does not give rise to mail fraud liability unless the omission can or does result in some tangible harm. However, lack of information that might have an impact on the decision regarding where [the victim's] money is spent, without more, is not a tangible harm and therefore does not constitute a deprivation of section 1341 property. 61 To be material, the information withheld either must be of some independent value or must bear on the ultimate value of the transaction. To convict, the government had to establish that the omission caused (or was intended to cause) actual harm to the [victim] of a pecuniary nature or that the [victim] could have negotiated a better deal for itself if it had not been deceived. 62 Id. at 1217 (citations and emphasis omitted); see also Emery v. American Gen. Fin., Inc., 71 F.3d 1343, 1348 (7th Cir.1995)(fiduciary commits mail fraud through misleading omission intended to induce action to disadvantage of misled); United States v. Starr, 816 F.2d 94, 98 (2d Cir.1987)(deceit must be accompanied by contemplation of harm to victim which affects very nature of alleged bargain between defendant and victim). The Mittelstaedt court further indicated that proof that a victim, acting solely on the basis of general principles, would have refused to contract if the defendant had disclosed his conflict does not demonstrate a mail fraud violation under § 1341. See Mittelstaedt, 31 F.3d at 1218. We agree with this analysis and note that it accords with old precedent existing in this circuit. See Epstein v. United States, 174 F.2d 754 (6th Cir.1949). The Epstein court, although recognizing that actual loss to the victim is unnecessary, held that fiduciaries who had not disclosed a conflict of interest did not have the intent to defraud when the evidence showed only that the contracts induced by the defendants were entirely beneficial and fair to the entity denied the disclosures. See id. at 764-69. 63 In order for the jury to convict Congo, the evidence at trial therefore must have permitted a reasonable jury to conclude that Congo intended to inflict a tangible injury upon NASA. We hold that it did not. The sole witness relied upon by the prosecution, Salvadore Caruso, the direct supervisor of Congo at NASA, testified that FWG performed necessary and needed work under the chemical hazards contract, and that NASA was very concerned about the issue of incompatible materials on the space station project. Caruso also testified that he had no reason to believe that FWG had not performed the terms of the contract, or that there had been any complaints regarding the ability of FWG to fulfill the project requirements. There is no evidence in this case that NASA would have had to pay less money or would have received more services if Congo had disclosed his conflict of interest. Cf. United States v. Dandy, 998 F.2d 1344, 1358 (6th Cir.1993)(upholding mail fraud conviction because, although defendant did not commit mail fraud simply by profiting from breach of fiduciary duty to victim, evidence showed that victim had to pay higher prices for goods received under contract because provider of goods was paying kickbacks to defendant). Finally, Caruso testified that nothing about the documentation submitted by Congo was misleading. The record contains no evidence to the contrary of the above. 64 We therefore hold that, even though the evidence allows a finding that Congo agreed to trade a contract for a dissertation, there was insufficient evidence that he intended to defraud NASA by not disclosing his conflict of interest. Although Congo intended the government to transfer money to FWG, there is no evidence that he intended that the government would not receive in return a necessary service, performed adequately and for a fair price. Because the evidence showed that FWG, and therefore Frost and Turner, fairly and adequately performed a necessary contract not secured through any misrepresentations, we likewise vacate the convictions of Frost and Turner of Counts Two through Seven. 65 The holding in United States v. Fischl, 797 F.2d 306 (6th Cir.1986), does not compel a different result. The defendant in Fischl, who contracted with the State of Michigan to procure a tug boat, received a kickback from the manufacturer of the engine of the boat. See id. at 308. Although the kickback did not injure the State monetarily because the defendant was performing the contract for a fixed price, the State would have cancelled the contract if it had known about the scheme. See id. at 309-11. Further, the defendant submitted deceptive accounting documents to the State and lied when a State senator asked him about a possible kickback scheme, which, if true, would have jeopardized continued funding of the tug boat project by the State. See id. 66 The Fischl court rejected the claim of the defendant that he had not committed mail fraud because the lack of an injury to the victim revealed that he never had intended to harm the State. See id. at 311. Unlike this case, however, the evidence in Fischl was not that the defendant merely had failed to disclose a conflict of interest, but that he had made several false statements to further his scheme. See id. Further, the Fischl court often invoked the intangible rights of the public when justifying its holding. See id. at 311-12; see also United States v. Murphy, 836 F.2d 248, 252-53 (6th Cir.1988)(distinguishing Fischl by describing the right of the State of Michigan to complete information as an intangible right). As previously explained, however, the convictions now at issue rest upon the specific claim that defendants intended to deprive the government, acting as a business, of its property. 67