Opinion ID: 1233543
Heading Depth: 3
Heading Rank: 3

Heading: According to Section 286:

Text: Whoever enters into any agreement, combination, or conspiracy to defraud the United States, or any department or agency thereof, by obtaining or aiding to obtain the payment or allowance of any false, fictitious or fraudulent claim, shall be fined under this title or imprisoned not more than ten years, or both. The Appellants argue that since Section 286 expressly provides that the conspiracy must be to defraud, proof of materiality is required to establish a Section 286 violation. [4] Clearly, Section 286 does not require proof that any material falsehoods were actually made or presented. [T]he common law understanding of conspiracy `does not make the doing of any act other than the act of conspiring a condition of liability.' United States v. Shabani, 513 U.S. 10, 13-14, 115 S.Ct. 382, 130 L.Ed.2d 225 (1994) (quoting Nash v. United States, 229 U.S. 373, 378, 33 S.Ct. 780, 57 L.Ed. 1232 (1913)). Nor does Section 286's text require any proof of overt acts. Accordingly, Section 286 does not require proof that the participants actually made or presented any falsehoods, let alone any material ones. Id. at 13, 115 S.Ct. 382 ([A]bsent contrary indications, Congress intends to adopt the common law definition of statutory terms.). Nonetheless, Section 286 specifies that only conspiracies with a particular purpose are criminal under the statute: the conspiracy must be to defraud. Following Neder and Wells, we must presume that Congress incorporated a materiality requirement when it used the term defraud. But the Government argues that no such materiality element is necessary because Section 286 describes the means through which the conspiracy to defraud must be accomplished. According to the Government, since the intended fraud can be accomplished through the use of any false, fictitious or fraudulent claim, materiality cannot be a required element. The Government asserts that if materiality were required, false and fictitious would be rendered surplusage. We disagree. The Government is correct that subsequent terms used in the statute can unmoor defraud from its settled common law meaning. Indeed, we infer the incorporation of established common law meanings unless the statute otherwise dictates. Neder, 527 U.S. at 21, 119 S.Ct. 1827 (internal quotations and citation omitted). The Supreme Court's interpretation of 18 U.S.C. § 371 is instructive. Section 371 criminalizes conspir[acies] ... to defraud the United States ... in any manner or for any purpose.... 18 U.S.C. § 371. Although it uses the term defraud, the Court has held that the statute is not confined to fraud as that term has been defined in the common law. Dennis v. United States, 384 U.S. 855, 861, 86 S.Ct. 1840, 16 L.Ed.2d 973 (1966). Instead, [i]t reaches `any conspiracy for the purpose of impairing, obstructing, or defeating the lawful function of any department of government[.]' Id. (quoting Haas v. Henkel, 216 U.S. 462, 479, 30 S.Ct. 249, 54 L.Ed. 569 (1910)). Thus, the meaning of `defraud' must be interpreted in the context of the particular statute that uses the term. United States v. Menon, 24 F.3d 550, 556 (3d Cir.1994). Nevertheless, the Government's focus on the phrase false, fictitious or fraudulent claims is incomplete; it ignores that a Section 286 conspiracy to defraud must be to obtain[] or aid[] to obtain the payment or allowance of such claims. Because the purpose of a Section 286 conspiracy must be to obtain payment of a claim, the conspirators must understand, at least implicitly, that the agreed-upon methods of accomplishing the fraud are capable of causing the payment of a claim. [5] Where, as here, the alleged conspiracy involves the making of false statements or representations, the conspirators must have agreed to make statements or representations that would influence the Government's decision on whether to pay a claim. Such statements or representations are, by definition, material. See Wells, 519 U.S. at 489, 117 S.Ct. 921 (understanding materiality to mean `hav[ing] a natural tendency to influence, or [being] capable of influencing, the decision of the decisionmaking body to which it was addressed' (quoting Kungys v. United States, 485 U.S. 759, 770, 108 S.Ct. 1537, 99 L.Ed.2d 839 (1988))); see also Restatement (Second) of Torts § 538(2) (1977). [6] Accordingly, where the Government alleges that the conspirators agreed to make false statements and representations as part of the conspiracy to defraud, Section 286 requires proof that the conspirators agreed that those statements or representations would have a material effect on the Government's decision to pay a false, fictitious, or fraudulent claim. [7] Our reading is consistent with the Supreme Court's interpretation of a similarly worded statute that was at issue in Allison Engine Company, Inc. v. United States ex rel. Sanders, ___ U.S. ___, 128 S.Ct. 2123, 170 L.Ed.2d 1030 (2008). There, the Court reviewed a provision in the False Claims Act that imposed civil liability on any person who conspires to defraud the Government by getting a false or fraudulent claim allowed or paid. 31 U.S.C. § 3729(a)(3) (2006), amended by Fraud Enforcement and Recovery Act of 2009, Pub.L. No. 111-21, § 4(a), 123 Stat. 1621 (2009). The Court pointed out that where it was alleged that the conspirators agreed to make a false record or statement, it must be shown that the conspirators had the purpose of `getting' the false record or statement to bring about the Government's payment of a false or fraudulent claim. 128 S.Ct. at 2130. This meant that it must be established that [the conspirators] agreed that the false record or statement would have a material effect on the Government's decision to pay the false or fraudulent claim. Id. at 2130-31. Here, Section 286's language concerning the purpose of the prohibited conspiracy to defraud closely resembles that of the statute analyzed in Allison Engine. Compare 18 U.S.C. § 286 ([B]y obtaining or aiding to obtain the payment or allowance of any false, fictitious or fraudulent claim ....), with 31 U.S.C. § 3729(a)(3) (2006) ([B]y getting a false or fraudulent claim allowed or paid.). The term obtain is synonymous with get, Webster's Third New Int'l Dictionary 953 (1966); see also id. at 1559 (listing get as a synonym of obtain), so we see no substantive difference between the phrases obtaining ... payment or allowance of any false, fictitious or fraudulent claim and getting a false or fraudulent claim allowed or paid. Thus, we read Section 286 in a manner consistent with Allison Engine: where it is alleged that the conspirators agreed to make false statements or representations as part of the conspiracy to defraud, it must be established that the conspirators agreed that those statements or representations would have a material effect on the decision to pay a false, fictitious, or fraudulent claim. Contrary to the Government's suggestion, our reading of Section 286 does not render the terms false and fictitious surplusage. Aside from materiality, common law fraud also requires proof of scienter. See Restatement (Second) of Torts § 526. Therefore, conspirators could agree to make materially false statements or representations in order to obtain payment of claims that were merely false or fictitious. For example, the conspirators could agree to make materially false statements or representations to an innocent third party, who would then file claims based on that materially false information. Since the innocent third party lacks the necessary scienter, the claims filed would be merely false or fictitious, but not fraudulent. Our reading of Section 286, however, would still subject the conspirators to criminal liability. We emphasize that our holding is limited to cases containing allegations that the conspirators agreed to make false statements or representations as part of the conspiracy to defraud. Section 286's language leaves open the possibility that other conspiracies to defraud may be actionable under the statute; it does not explicitly specify that the conspiracy must involve an agreement to make false statements or representations. Accordingly, we express no view on whether materiality is a required element of any alleged conspiracies that do not involve an agreement to make false statements or representations. In sum, Section 286 does not require proof that material falsehoods were actually made. But where, as here, it is alleged that the conspirators agreed to make false statements or representations as part of the conspiracy, we read Section 286 to require proof that the conspirators agreed that these statements or representations would have a material effect on the decision to pay a false, fictitious, or fraudulent claim.