Court Opinion

ID: 9466439
Source: CourtListenerOpinion
Date Created: 2023-08-05 01:15:28.098979+00
Date Added: 2024-06-11T17:39:43.665482
License: Public Domain

LEVENTHAL, Circuit Judge
(dissenting in part):
I dissent from the disposition ordered by the court. Congressman Diggs was indicted for having devised a scheme to defraud the United States and to obtain money by false pretenses and fraudulent representations by inflating the salaries of congressional employees in order to receive salary kickbacks. There was convincing evidence that he did receive kickbacks which were then applied to his personal debts and the business expenses of his Detroit funeral home (the House of Diggs). If the case had been tried on that basis alone, there would have been no problem on appeal.
But there is a problem, one traceable to the government’s theory in this prosecution. The government alleged that there were also kickbacks which appellant used to defray his congressional office expenses. For purposes of the charged offenses, these uses were to stand on an equal footing as those involving his personal uses. Thirteen of the twenty-nine counts of the indictment relate to kickbacks which in whole or in part reimbursed employees for congressional office *1005expenses.1 In the six counts pertaining to the inflated salary of Felix R. Matlock, one of appellant’s congressional employees, appellant is said to have used the overpayments, with one trivial exception, for the expenses of the congressional office in his district. It is the government’s theory, in two of those counts, that appellant violated the false official statements act, 18 U.S.C. § 1001, when he submitted payroll authorization forms to the House Finance Office which represented that the full amount of money set forth as salary for Matlock was compensation for service as a House employee, when in fact appellant had inflated that salary to “pay his expenses.”
The trial judge shared the government’s theory and also merged these two quite different situations. In the process the court virtually obliterated appellant’s good faith defense as to salary increases expended for official purposes. Appellant sought a good faith instruction that if appellant acted with a good faith belief in his right to compensate his employees for paying official congressional expenses, he should be acquitted of the pertinent counts. The court declined to give such an instruction unless it included a statement to the effect that the Congressman could not have acted in good faith unless he believed that the salary described in the employee’s payroll authorization forms would be solely for the personal use of the employee, and not compensation for a personal or congressional expense. Defendant declined the giving of the instruction with such an addendum. The trial judge then instructed the jury:
Good faith is a defense to an offense such as mail fraud, one of the elements of which is fraudulent intent. The question is whether the defendant at the time he approved the payroll authorizations representing that certain employees would be paid specific salaries intended that those employees would actually receive and have the complete use of those salaries, or did he intend that a portion of the salary would be remitted by the employee for the payment of his [the Congressman’s] obligations.
The court thereby precluded the taking of any distinction between personal and official expenses in the consideration of appellant’s good faith defense. Thus, although appellant had freely admitted during the trial that he had used some of the salary increases to reimburse employees for official expenses,2 a position consistent with his good faith defense as to the propriety of such practices, the jury was directed to treat alike his good faith intent as to the use of salary funds for his personal obligations and for his congressional office expenses.
This is a court that is instructed by Congress to discharge its appellate functions with due regard for the interest of justice, 28 U.S.C. § 2106. Justice is a victim when courts proceed on the basis of form, without due regard to realities. The majority today joins the trial judge and the prosecution in stressing form over reality.
Turning first to form, it is plain that, as the majority concluded, no statute, rule, regulation, or order expressly authorizes the practice in which appellant was engaged. By the same token the applicable law is not explicit in defining the permissible use of clerk-hire funds. The statutory provisions concerning clerk-hire allowance have been little changed since first enacted in 1893. Their language states merely that clerk-hire funds are: “[f]or staff employed by each Member in the discharge of his official and representative duties” (emphasis added).3 The majority concedes in note 37 that “official and representative duties” was not defined in the legislative history to the appropriations acts, or in the applicable House regulations. The regulations of the House Administration Committee state only that:
No person shall be paid from any clerk-hire allowance if such person does not perform the services for which he re*1006ceives such compensation in the offices of the Member in Washington, D.C., or in the State or the district which such Member represents.4
The question is whether the “duties” and “services” of a staff member may include incurring official expenses in order to assist the Congressman in the discharge of his congressional functions.
In facing up to reality, we must confront the underlying question, whether it was widely understood on Capitol Hill that there was an ambiguity in the rules governing use of clerk-hire funds which permitted Congressmen to use the mechanism of inflated allowances to cover congressional expenses. While such use was not explicitly authorized at the time, if it was in some vogue, however uneasy, we must seriously question whether the broad fraud-false statement laws are fairly applicable .to reach a practice that is not specifically covered by House rules. There is a fundamental difference between breach of ethics and criminal violations. What is shenanigans, bad taste, and borderline is not the same as what is criminal.
One of the main witnesses for the government at appellant’s trial was John Lawler, Chief of the House Finance Office. The government sought to identify the materiality of appellant’s statements (materiality being a key element of the false statements offense), and in that endeavor repeatedly inquired into the nature of the clerk-hire allowance restrictions. Appellant argues that Mr. Lawler’s testimony demonstrates the uncertain nature of the use of clerk-hire funds for official purposes. The majority, however, concludes that Mr. Lawler’s testimony gives no support to appellant’s contention. In my view, the jury would have been well within its province in concluding, under an appropriate instruction as to the law, that Mr. Lawler’s testimony overall gave support to appellant on this issue. It is not without significance that the government’s witness gave testimony that was carefully circumscribed. Mr. Lawler’s testimony ran as follows:
Q. What is the Clerk-hire allowance?
A. The Clerk-hire allowance is a description of a set of funds that each member of Congress has available to pay his employees in the discharge of their official duties.5
A few minutes later the government returned to the same subject matter:
Q. Mr. Lawler, let me repeat the question: Regarding the salary amounts listed on the Payroll Authorization Form what allowable purpose would that be for the amount listed on the Payroll Authorization Form?
A. It was payment for compensation to employees for their performance of official duties.6
Later in the questioning:
Q. I will repeat the question. During the period 1973 through 1976, based on the regulations of the Committee on Administration in the House of Representatives, for what purpose could the Clerk-hire allowance be used?
A. The regulations stated that it was for the disbursement to employees for the performances of official duties.7
Note how studiously Mr. Lawler merely reiterated the wording of the appropriations legislation and the regulations of the House Administration Committee, and carefully sidestepped the issue of the definition of the “official duties” of a Congressional employee. And now turn to the significant later testimony, when Mr. Lawler was called by the government as a rebuttal witness:
Q. The clerk hire allowance, would you again repeat exactly what the clerk hire allowance is for?
*1007A. It’s used to pay compensation of employees in the performance of official duties.
Q. My question was the compensation for the performance of official duties, did that include any expenses which were incidental to the employment?
A. The regulations in that time period didn’t have any specific definition as far as official duties. It’s silent on the question of what it might include.8
Do not let a hasty reading blur the significance of this last answer. On direct, the government asked Mr. Lawler three times, and three times he answered “performance of official duties.” The government avoided probing what that phrase meant as applied to this issue of expenses, the issue of this case. Then the government did put the question to Mr. Lawler on rebuttal, and asked whether clerk-hire funds could be used for official expenses. He did not say “No” — as the majority would categorically declare. Instead, he said only that the regulations are silent as to such use.
For its opinion that use of clerk-hire finds for official expenses was patently illegal, the majority finds support — astutely phrased as a strong suggestion — in Committee Order No. 30 (Transfer Among Allowance), published by the House Administration Committee effective January 3, 1977. Order No. 30 is described by the majority as permitting the transfer of up to $15,000 from the clerk-hire allowance to two other funds, from which allocation then may be made to cover other expenditures, including official expenses incurred outside the District of Columbia. The majority glances at Order No. 30 and says, simply: “The order has no retroactive effect.” It reasons that promulgation with retroactive application “strongly suggests” that the practice it now sanctions was not permitted prior to the effective date of the order.
If realism is added to the analysis, another explanation emerges. What is equally plausible, I submit more plausible, is the House Administration Committee’s awareness that some members were using clerk-hire allowance for congressional expenses, because the particularized expense allowance was patently inadequate, and were finding a predicate for this use of clerk-hire funds in the ambiguity of “official duties” of clerks. What Order No. 30 does is to acknowledge the justification for what had been an uncertain practice, coupled with an attempt to cope with the problem of abuse by putting a limitation as to amount. Of course the limitation on amount could not be retroactive, and the bounds on the practice set by Order No. 30 are prospective.
This view is fortified when Order No. 30 is viewed within the entire context of prior practice. As the majority notes, during the period relevant to the indictment, funds for district office expenses came from a meager fixed allowance of $500 per quarter. If it was as obvious as the majority says that clerk-hire funds simply could not be used for district office expenses, since there was a separate and distinct appropriation for that purpose, it is strange that Order No. 30 sought to remedy the funding deficiency by providing for the indirect use of clerk-hire funds for those costs rather than by directly increasing the district office allotment. It seems likely that Congress was indirectly acknowledging the not uncommon past practice.9
To provide a note of realism, the appellant called Victor Fischer, who was em*1008ployed by Congress during 1977 as Director of Survey Research for the so-called Obey Commission. That study commission, the Commission of Administrative Reviews of the House of Representatives, investigated various elements of financial ethics among Congressmen. Outside the hearing of the jury, Mr. Fischer testified to responses of congressmen concerning inadequacy of the allowance system. He stated that in the course of administering his survey, the senior staff of the Commission became aware of a number of practices related to allowances, including the increasing of clerk-hire salaries to compensate employees for paying expenses related to the congressman’s discharge of his official and representational duties.10 The Commission concluded that the allowance system was not adequate to cover official expenses. The trial court disposed of this testimony by agreeing with the government that Order No. 30 was not retroactive, and that it would confuse the issues to make this testimony available to the jury because if other congressmen committed violations of the law this did not excuse appellant.11 Apart from the fact that this position was something of a turnabout for the government, which had in its bill of particulars emphasized that it was identifying that appellant’s activities were contrary to the “common understanding” of congressmen, it did not grapple with the point that the inquiry of the Obey Commission, and the emergence of Order No. 30, revealed that previously there was at least significant ambiguity as to what the law provided. The importance of ambiguity to a good faith defense is plain enough. But the judge put blinders on the' jury as to practice, and then reined them in with his instruction.
The vitality of a^ distinction between use of clerk-hire funds for personal and congressional obligations is strongly confirmed by the way in which the House of Representatives handled the internal disciplinary actions against Congressman Diggs.12 This is not strictly part of the record, but is in the public domain. The Diggs matter was referred to the House Committee on Standards of Official Conduct. That committee received from its Special Counsel a summary of the evidence against the congressman and unanimously adopted a Statement of Alleged Violations containing 18 counts relevant to his alleged misconduct. The Committee’s charges against Diggs involved “essentially the same conduct which led to Representative Diggs’ indictment and conviction.” 13 Yet the Committee without exception kept entirely separate counts for using salary increases for personal expenses from counts concerning such use for “congressional expenses.”14
Upon receipt of a letter from Diggs in which he admitted to having personally benefitted from the use of clerk-hire allowances for his personal expenses, the Committee withdrew the 18 counts and generally found the congressman to have violated two broad House rules 15 with respect to his misuse of funds for personal purposes. Its recommendation of formal censure was ultimately adopted by the full House. The Committee did not pursue the charges that Diggs violated those House rules by using funds for congressional expenses. In its final report the Committee on Standards of Official Conduct did not contest this practice, but stated simply that in connection with inflation of staff salaries for “office *1009related expenses, Representative Diggs maintains that his use of clerk-hire funds for such purposes was not in violation of any House rules.”16 I do not place great emphasis on this development, in part because it is not in the record and must be considered if at all on the basis of judicial notice, and in part because it materialized after the trial and various explanations may be considered. Nevertheless, at the very least it indicates that the idea of a different treatment for congressional expenses did not seem unrealistic to the congressmen, the persons most likely to be familiar with the nuances of the problem.
In light of what was at best a showing of uncertainty as to what the law provided, plus evidence that others may have understood use of clerk-hire funds for office expenses to have been permitted, the jury should have been allowed to separately consider whether or not appellant acted with fraudulent intent in using the clerk-hire funds for congressional expenses. The trial court’s instruction should have permitted the jury to consider the defense that appellant acted in good faith when he certified the payment of compensation to clerks notwithstanding the understanding that they would be using the funds for office expenses.
I do not say the jury was required to find, or would have found, that appellant in fact acted in good faith with respect to inflated salaries which were used for his office expenses. But appellant was entitled to put this defense four square.
The issue before us is not whether we would draw a distinction between personal and office expenses if we were filing the forms, but whether appellant was entitled to put to the jury a good faith defense on the basis of distinction he claims to have perceived.' I would vacate the conviction on the thirteen counts identified above,17 remand for retrial if the government be so advised, and in any event would remand as to the other counts for resentencing uncontaminated by the convictions I believe should be vacated.

. Counts 1-4 and 12-20.

. Record (Oct. 4, 1978) at 118.

. See, e. g., Legislative Branch Appropriation Act, 1978, Pub. L. No. 95-94, 91 Stat. 653, 667 (1977).

. Committee on House Administration, Regulations on Allowances and Expenses for Committees, Members, and Employees of the U.S. House of Representatives, 94th Cong. (May 1976) at 20.

. Record (Sept. 27, 1978) at 12.

. Id. at 29-30.

. Id. at 113-14.

. Record (Oct. 3, 1978) at 66.

. Advisory Opinion No. 2 of the House Committee on Standards of Official Conduct similarly cannot be read as a congressional standard prohibiting appellant from using clerk-hire allowances for official purposes. Not only does it lack the status of an official House rule, more significantly the opinion is ambiguous as to the propriety of using clerk-hire funds to reimburse an employee for voluntarily assuming obligations related to congressional expenses. To be sure, Opinion No. 2, which was introduced into evidence and read to the jury, is arguably relevant to the issue of appellant’s intent, but this fact only reinforces my feeling that the jury should have been permitted to determine on its own whether appellant acted in good faith with respect to salary increases for official — as opposed to personal — obligations.

. Record (Oct. 4, 1978) at 39-40.

. Id. at 45.

. See generally H.R. Rep. No. 96-351, 96th Cong., 1st Sess. (1979).

. Id. at 1.

. See id. at 28-37.

. Paragraphs 1 and 8, Rule XLIII, Rules of the House of Representatives. Paragraph 1 of the Rule XLIII (the Code of Official Conduct) provides:
A Member, officer, or employee of the House of Representatives shall conduct himself at all times in a manner which shall reflect creditably on the House of Representatives.
Paragraph 8 states:
A Member of the House of Representatives shall retain no one from his clerk hire allowance who does not perform duties commensurate with the compensation he receives.

. H.R. Rep. No. 96-351, 96th Cong., 1st Sess. (1979) at 19.

. See note 1, supra.