Opinion ID: 590887
Heading Depth: 2
Heading Rank: 7

Heading: McNally Intangible Rights Claim

Text: 60 Dischner and Mathisen challenge their convictions for mail and wire fraud on the grounds that the indictment impermissibly made intangible rights allegations, and that the instructions permitted the jury to convict upon finding that the defendants deprived the Borough and its citizens only of their right to honest government, without finding that they defrauded the Borough of money or property. In particular, they argue that the indictment and instructions run afoul of McNally v. United States, 483 U.S. 350, 107 S.Ct. 2875, 97 L.Ed.2d 292 (1987). 16 61 In McNally, the Court held that the mail fraud statute then in effect did not protect the intangible right of the citizenry to good government, 483 U.S. at 356, 107 S.Ct. at 2879, but was limited in scope to the protection of property rights. Id. at 360, 107 S.Ct. at 2882. As a result, the Court reversed mail fraud convictions based on a Kentucky official's participation in a scheme to direct commissions on insurance purchased by the state to an insurance agency in which the official had a financial stake. The indictment alleged, and the jury was instructed, that the scheme defrauded the citizens of their right to have the Commonwealth's business and its affairs conducted honestly, impartially, free from corruption, bias, dishonesty, deceit, official misconduct, and fraud, but not money or property. Id. at 354 n. 4, 107 S.Ct. at 2884 n. 4. Because there was no charge and the jury was not required to find that the Commonwealth itself was defrauded of any money or property[,] ... the jury instruction on the substantive mail fraud count permitted a conviction for conduct not within the reach of § 1341. Id. at 360-61, 107 S.Ct. at 2882.
62 Dischner and Mathisen contend that the indictment includes intangible rights allegations found deficient in McNally. The sufficiency of an indictment is reviewed de novo. United States v. Soriano, 880 F.2d 192, 195 (9th Cir.1989). The indictment also must be read as a whole and construed according to common sense. United States v. Buckley, 689 F.2d 893, 899 (9th Cir.1982), cert. denied, 460 U.S. 1086, 103 S.Ct. 1778, 76 L.Ed.2d 349 (1983). 63 In McNally, the indictment charged that the defendants devised a scheme to defraud the citizens and government of Kentucky of their right to have the Commonwealth's affairs conducted honestly. The indictment here, by contrast, makes no mention of any impairment of the right to honest government or any other non-property right. Rather, it charges that Dischner and Mathisen devised a scheme to defraud the government of the North Slope Borough of millions of dollars, through corruption, bribery, misrepresentation, fraud, conflict of interest and undue influence, and to obtain ... money, objects of value, and property by means of false and fraudulent pretenses and concealment of facts; caused the Borough to issue contracts and change orders to business entities paying commercial bribes, kickbacks and payments ... at prices above what the services would have cost absent the influence ... causing the government of the North Slope Borough to be defrauded out of public monies; and 64 provide[d] advice to North Slope Borough public servants that was for the benefit of the private financial interests of the defendants, and contrary to the best interest of the North Slope Borough, thereby causing the government of the North Slope Borough to be defrauded out of monies paid to the defendants pursuant to their consulting and professional services contracts. 65 Dischner focuses on other paragraphs of the indictment that describe the scheme of corruption and influence peddling in terms which do not at the same time charge that the scheme was to defraud the Borough of money. 17 However, the presence of a few paragraphs that are descriptive of the background and context of the alleged scheme to defraud do not make an otherwise sufficient indictment vulnerable to a McNally challenge. Read as a whole, the indictment is not permeated with the impermissible pre-McNally right to honest services theory. This case is therefore unlike those in which we have held indictments defective. See Telink, 910 F.2d at 600 (indictment silent on how County defrauded of any property rights; dismissal proper because it charged mail fraud based on scheme to defraud government of honest services of employees, agents, and consultants); Soriano, 880 F.2d at 197 (indictment permeated with right to honest services theory); United States v. Mitchell, 867 F.2d 1232, 1233 (9th Cir.1989) (pertinent portions of the indictment are nearly identical to those in McNally).
66 Dischner and Mathisen also contend that the mail and wire fraud instructions erroneously permitted the jury to convict on a finding that they made false or fraudulent statements to North Slope Borough officials, thereby depriving the Borough of its intangible right to honest government, coupled with a finding that they had received money in the form of commission payments from companies doing business with the North Slope Borough. Dischner and Mathisen argue that this is contrary to McNally and to United States v. Lew, 875 F.2d 219 (9th Cir.1989), and that the indictment, instructions, and proof do not assure that the scheme had the result of effecting monetary or property losses as required by United States v. Hilling, 891 F.2d 205, 207-08 (9th Cir.1988). 67 We review a claim of error in a jury instruction by looking to 'the adequacy of the entire charge ... in the context of the whole trial.'  United States v. Mundi, 892 F.2d 817, 818 (9th Cir.1989) (quoting United States v. Marabelles, 724 F.2d 1374, 1382 (9th Cir.1984)), cert. denied, --- U.S. ----, 111 S.Ct. 1072, 112 L.Ed.2d 1178 (1991). Whether the instructions correctly explained the law and the elements of fraud is reviewed de novo. Id. However, we may look beyond the instructions themselves and examine the indictment and the entire trial in context. Id. at 819. 68 Echoing the statute, the jury instructions explained that Mathisen and Dischner could be guilty of mail or wire fraud if they (1) devised a scheme or artifice to defraud another of money or property; or (2) obtained money or property by means of false pretenses, representations, or promises. The first prong poses no intangible rights problem. When describing the elements of a scheme to defraud, the court instructed the jury that it must find that the particular defendant made up a plan or scheme which was reasonably calculated to defraud the North Slope Borough of money. 69 With regard to the second prong, the court instructed that the jury must find 70 First, that the particular defendant made up a plan or scheme to obtain money or property by means of false pretenses or fraudulent statements or representations; 71 ... and, 72 Fourth, that the particular defendant acted with the intention of obtaining money or property by means of false statements or representations. 73 Even though on this prong the court did not add from [or to] North Slope Borough, we are satisfied that the indictment, the proof presented at trial, and the instructions assured that money or property interests were implicated. Hilling, 891 F.2d at 207. First, the jury was not specifically instructed that the defendants could defraud the Borough without intending to obtain money or property from it. In Lew, by contrast, the jury was instructed that the scheme was to make false statements to the United States for the purpose of obtaining money from defendant's clients. 875 F.2d at 221 (emphasis added). This explicitly permitted the jury to convict without finding that the defendant acted to obtain money or property from the government. No similar McNally error infects the court's instructions in this case. 74 Second, the indictment and proof point entirely toward defrauding the Borough of money or property. Lew is distinguishable in this respect as well. There, an immigration attorney made false statements in connection with applications for alien employment certificates he submitted to the Department of Labor (DOL). The attorney's clients, aliens seeking DOL certification to facilitate obtaining permanent resident status, paid the defendant for getting the certificates. There was no evidence that Lew deceived his clients. Even though Lew ultimately received money, his conviction could not stand under McNally because he had no intent to defraud the government of any money or property; he only deprived the government of intangible rights, a deprivation not within the reach of the mail fraud statute. 75 Unlike Lew, in this case the indictment charged, and evidence showed, that Dischner and Mathisen concealed their ownership interests in companies to which they awarded contracts; they obtained money from the Borough indirectly via companies that added Dischner's and Mathisen's fee on to the price they charged the Borough; and they obtained money directly from the Borough in the form of salaries for consulting services when they did not counsel the Borough in its best interests. Given the way the case was charged and tried, the jury could not have been confused as to the victim of the fraud. The contractors were not deceived because they knew exactly what was going on; they paid Dischner and Mathisen in order to get contracts for their companies. It was the Borough who got snookered and no other theory was presented to the jury. 76 Finally, Mathisen argues that the government failed to show that the Borough was a victim in the sense that it lost money. We have repeatedly stated, however, that the fraud need not succeed and that no requirement exists that the victim of the fraud suffer actual loss. That the defendant acted with the intent to defraud is sufficient. See Telink, 910 F.2d at 600 (Dismissal of the indictment cannot be grounded on failure to allege an actual loss of property.); United States v. Oren, 893 F.2d 1057, 1061 (9th Cir.1990) (rejecting argument that wire fraud requires a government showing that the defendant caused an actual loss of money or property); United States v. Utz, 886 F.2d 1148, 1151 (9th Cir.1989) (It is enough after McNally, as before, that the government charge and the jury find either that the victim was actually deprived of money or property or that the defendant intended to defraud the victim of the same.), cert. denied, --- U.S. ----, 110 S.Ct. 3242, 111 L.Ed.2d 753 (1990). The government therefore did not have to prove, nor did the jury have to find, that the Borough actually lost money.