Court Opinion

ID: 9490391
Source: CourtListenerOpinion
Date Created: 2023-08-05 13:42:17.172335+00
Date Added: 2024-06-11T17:54:04.418520
License: Public Domain

PATRICK E. HIGGINBOTHAM, Circuit Judge:
Michael Bryant Brumley was convicted in a bench trial of conspiring to defraud the citizens of the State of Texas of honest services by use of interstate wire communications and the United States mail in violation of 18 U.S.C. § 371, three counts of wire fraud in violation of 18 U.S.C. § 1343, three counts of money laundering in violation of 18 U.S.C. § 1956, and two counts of making a false statement to a financial institution in violation of 18 U.S.C. § 1014. Brumley does not appeal his conviction on the last two counts of defrauding a financial institution, and they are not before us.
As we will explain, Brumley’s primary contention is that the government has misused federal criminal statutes to prosecute a state employee for ethical lapses. Along the way to review by the en banc court the issues on appeal have narrowed to four. First, Brum-ley urges that neither the plain language of § 1346 nor its legislative history expands the types of victims protected by the statute to include a state employer. Second, he insists that an ethical lapse, or at worst a state misdemeanor, is not a deprivation of honest services. Third, he argues that the Commerce Clause does not support § 1346. Finally, he contends that the money laundering statute does not reach his conduct. Brumley also challenged the statute and the indictment on vagueness grounds in the district court, but he did not pursue these contentions on appeal.
We reject each of these contentions and affirm the convictions. In doing so we reject the argument that Congress failed in its 1988 effort to expand the statute to cover the deprivation of honest services which the McNally and Carpenter decisions found were outside the statute’s reach. See Carpenter v. United States, 484 U.S. 19, 25, 108 S.Ct. 316, 320, 98 L.Ed.2d 275 (1987); McNally v. United States, 483 U.S. 350, 359-60, 107 S.Ct. 2875, 2881-82, 97 L.Ed.2d 292 (1987). This argument has gathered strength from the Supreme Court’s recent Commerce Clause decisions, but we ultimately conclude that it cannot escape the plain language of § 1346.
I
A panel of this court first reversed the convictions for wire and mail fraud, as well as money laundering and conspiracy. United States v. Brumley, 59 F.3d 517 (5th Cir.1995), withdrawn, 79 F.3d 1430 (5th Cir.1996). The panel reversed for lack of evidence that Brumley could foresee the interstate character of the wire transmission relied upon by the government. After withdrawing this opinion, the panel, with one judge dissenting, held that the term “another” as used in 18 U.S.C. § 1346 does not reach citizens of a state or political subdivision who have been deprived of the honest services of their public officials. United States v. Brumley, 79 F.3d 1430, 1441-42 (5th Cir.1996). We granted the government’s petition for rehearing en banc on July 17, 1996. United States v. Brumley, 91 F.3d 676 (5th Cir.1996).
II
Texas’ workers’ compensation law was long administered by the Texas Industrial Accident Board. Under this regime the Board dealt with three groups: claimants, their lawyers, and insurance carriers insuring the employers. Brumley worked for the Board and resided in Beaumont, Texas. In 1990 the Texas legislature changed the process for resolving workers’ compensation claims. The Board became the Texas Workers’ Compensation Commission, and Brumley was promoted to Regional Associate Director of *731the new commission and moved to the new commission’s Houston office. Brumley’s duties included the handling of claims arising under the old law and, according to the indictment, responsibility for “identifying attorneys and insurance carriers who failed to follow TWCC or IAB rules and regulations.” Brumley’s work gave him knowledge of the conduct of lawyers, the identity of unrepresented claimants, and the details of the process itself.
Brumley never seemed to be able to live within his income. As early as 1982, he began to solicit loans from lawyers representing claimants and their assistance in obtaining loans from lending institutions. In 1985 and 1986, while he was conducting pre-hearing conferences in cases in Lufkin, Texas, he charged and never repaid several hundred dollars to the account of a claimant’s counsel at the local country club. By 1988 Brumley had borrowed money from at least eight lawyers and struck up a relationship with John M. Cely, a Lufkin attorney with a substantial workers’ compensation practice. Cely and persons employed by his law firm made frequent appearances before Brumley in prehearing conferences. They began a process whereby Cely would cause wire transfers to be made from the Western Union office in Lufkin to Brumley at various locations in Texas. These wire transfers were accomplished electronically through a Western Union facility located outside of Texas. From 1987 to May of 1992, Cely made some seventy wire transfers to Brum-ley totaling approximately $86,730. In all, Brumley “borrowed” some $112,156 from eleven lawyers, including Cely. None of this sum was ever repaid.
The indictment charged a scheme to defraud “the citizens of the State of Texas, including the members of the Texas Industrial Accident Board ..., an agency of the State of Texas, from receiving the intangible right to honest services.”
Ill
Brumley contends that Congress did not intend to reach schemes to deprive an entity of state government of the intangible right of honest services in its 1988 enactment of § 1346. That statute provides:
For the purposes of this Chapter, the term “scheme or artifice to defraud” includes a scheme or artifice to deprive another of the intangible right of honest services.
Reading § 1346 with § 1343 we have the following prohibition:
Whoever, having devised or intending to devise any [scheme or artifice to deprive another of the intangible right of honest services], ... transmits or causes to be transmitted by means of [interstate wires] for the purpose of executing such scheme or artifice, shall be fined under this title or imprisoned not more than five years, or both.
Brumley’s present argument, taking a cue from the second panel opinion, takes two related cuts at the application of the statute to his conduct. First, he contends that “another” has the same meaning as the term “whoever” for purposes of the fraud chapter of the criminal code, specifically Chapter 63 of Title 18. And “another” cannot include his state employer or the citizens of the State of Texas. Second, invoking federalism, Brum-ley contends that Congress failed to state its purpose with the clarity demanded for federal incursions into state matters, at least those traveling on the commerce power.
We are persuaded that a governmental entity qualifies as “another” within the meaning of § 1346, and that “honest services” can include “honest and impartial government.” The panel opinion notes that Section 1 of Title I of the U.S.Code provides that “ ‘person’ and ‘whoever’ include corporations, companies, associations, firms, partnerships, and societies, and joint stock companies, as well as individuals.” 79 F.3d at 1435. It “note[s] that among the meanings of the word “whoever’ in Section 1, Title I, there is nothing that could even remotely be interpreted or construed to mean ‘a state,’ ‘a political. subdivision of a state,’ ‘a government,’ ‘a governmental agency,’ or ‘the citizens of a state as a body politic.’” Id.
Brumley is himself an “individual,” and we think he must qualify as a “whoever” within the meaning of the statute, in which case he *732can be prosecuted for depriving “another” of his intangible right of honest services. This case does not involve a prosecution of a state, state subdivision, government, or agency. Rather, it is a prosecution of an individual who abused his position as an employee of a state commission. That the mail fraud statute reaches Brumley’s conduct is consistent with the proposition that the statute does not allow prosecution of a state or state agency.
Moreover, Section 1 of Title I provides that “person” and “whoever” include the listed terms. We read this to mean that “person” and “whoever” include the listed terms without deciding whether other non-mentioned entities may qualify as a “person” or a “whoever.” Otherwise, Congress would have said something other than “include,” such as “person” and “whoever” mean the listed terms (or consist of, or perhaps include only). In this criminal statute, “another” defines the range of victims while “whoever” defines the perpetrator; we do not think it makes sense to define the victims by reference to the definition of the perpetrator. See United States v. Castro, 89 F.3d 1443, 1456 (11th Cir.1996) (concluding that the plain language and legislative history of § 1346 do not limit its application to governmental victims of fraud), cert. denied, - U.S. -, 117 S.Ct. 965, 136 L.Ed.2d 850 (1997).
IV
Brumley argues that even if “another” does not modify “whoever,” it does not include “citizens as the body politic.” The exact thrust of this contention is uncertain, given the fact that the defendant is not a political entity but a person charged with fraudulent activity while employed by a state entity. We understand the argument to be that “another” should not be read to reach such abuses of state office. The contention is that § 1343 is at least sufficiently uncertain that it need not be so read, and traditional principles of lenity and the doctrine of clear statement counsel that it should not be. The argument points to McNally itself, specifically the Court’s observation that:
Rather than construe the statute in a manner that leaves its outer boundaries ambiguous and involves the Federal Government in setting standards of disclosure and good government for local and state officials, we read [the statute] as limited in scope to the protection of property rights. If Congress desires to go further, it must speak more clearly than it has.
483 U.S. at 360,107 S.Ct. at 2881-82.
The argument fails because Congress accepted the Court’s invitation and was clear in its purpose. First, we think the statutory language plainly reaches state officials such as Brumley, and thus it is unnecessary to repair to legislative history. That history is recounted by the dissent and by the panel majority, see 79 F.3d at 1435-40, and we will not rehearse it again. There is nothing to suggest that Congress did not intend by § 1346 to overturn the Supreme Court’s McNally decision and to insist that the fraud statutes cover deprivations of intangible rights such as those charged in the counts for which Brumley was convicted. We join the First, Fourth, and Eleventh Circuits in rejecting similar attacks on § 1343 convictions. United States v. Sawyer, 85 F.3d 713, 723-24 (1st Cir.1996); United States v. Bryan, 58 F.3d 933, 939-43 (4th Cir.1995); United States v. Waymer, 55 F.3d 564, 568 n. 3 (11th Cir.1995), cert. denied, -U.S.-, 116 S.Ct. 1350, 134 L.Ed.2d 519 (1996).
The dissent, worried that the text of § 1346 fails to give citizens adequate notice, accuses the majority of illicitly re-drafting a criminal statute. But we are hardly announcing a common-law crime. As the Supreme Court has recently explained, “the touchstone is whether the statute, either standing alone or as construed, made it reasonably clear at the relevant time that the defendant’s conduct was criminal.” United States v. Lanier, - U.S. -, -, 117 S.Ct. 1219, 1225, 137 L.Ed.2d 432 (1997). Gauging fair notice requires an inquiry into the state of the law as a whole, not merely into the words printed on a single page of the United States Code. Constructions of a statute announced by the Supreme Court or lower courts can give citizens fair warning, even if the cases are not “fundamentally similar.” Id. at-, 117 S.Ct. at 1226-28.
*733Here Brumley had notice that Congress had repudiated the Supreme Court’s interpretation in McNally. Congress, in other words, announced that it wanted the courts to enforce the honest-services doctrine developed in the years leading up to McNally. Because Congress was not faced with a uniform formulation of the precise contours of the doctrine, some defendants on the outer reaches of the statute might be able to complain that they were not on notice that Congress criminalized their conduct when it revived the honest-services doctrine. But even if there are such defendants, Brumley is not among them. As we will explain, his conduct was inconsistent with his duties under Texas law. The boundaries of “intangible rights” may be difficult to discern, but that does not mean that it is difficult to determine whether Brumley in particular violated them. See Village of Hoffman Estates v. Flipside, Hoffman Estates, Inc., 455 U.S. 489, 505, 102 S.Ct. 1186, 1196, 71 L.Ed.2d 362 (1982) (rejecting a vagueness challenge to a quasi-criminal ordinance regulating the sale of drug paraphernalia because the ordinance was “reasonably clear in its application to the complainant”).
V
We must next find the meaning of honest services as used in this federal statute.1 As we have explained, Congress has insisted that the fraud statutes cover the deprivation of intangible rights. In doing so, it reestablished the honest services doctrine. It bears emphasis that before McNally the doctrine of honest services was not a unified set of rules. And Congress could not have intended to bless each and every pre-McNally lower court “honest services” opinion. Many of these opinions have expressions far broader than their holdings. See United States v. Curry, 681 F.2d 406, 419 n. 1 (5th Cir.1982) (Garwood, J., concurring). Congress, then, has set us back on a course of defining “honest services,” and we turn to that task.
Before McNally, the meaning of “honest services”, was uneven. See, e.g., United States v. Holzer, 816 F.2d 304, 307-10 (7th Cir.) (affirming the conviction of a county judge who accepted “loans” from attorneys who practiced before him, even though the government never showed that the judge ruled differently in a ease because of any lawyer’s willingness to make a “loan”), vacated, 484 U.S. 807, 108 S.Ct. 53, 98 L.Ed.2d 18 (1987) (remanded for reconsideration in light of McNally); United States v. Silvano, 812 F.2d 754 (1st Cir.1987) (affirming the conviction of a city budget director who did not disclose his secret plan to enrich a friend with an expensive and unnecessary project bid); United States v. Lovett, 811 F.2d 979 (7th Cir.1987) (affirming the conviction of a mayor who accepted an undisclosed 5% interest in a local cable company attempting to bid on a city franchise); United States v. Bruno, 809 F.2d 1097, 1104-06 & n. 1 (5th Cir.) (affirming convictions under § 1343 based on a scheme to bribe), cert. denied, 481 U.S. 1057, 107 S.Ct. 2198, 95 L.Ed.2d 853 (1987); United States v. Barber, 668 F.2d 778 (4th Cir.) (affirming the conviction of an Alcoholic Beverage Control Commission official who “withdrew” liquor from a state warehouse with subsequent “authorization” from liquor companies so that the companies would be billed), cert. denied, 459 U.S. 829, 103 S.Ct. 66, 74 L.Ed.2d 67 (1982); Bradford v. United States, 129 F.2d 274, 276 (5th Cir.) (grounding a § 1343 conviction on a scheme to use city officials’ positions to sell buses to the city at exorbitant prices for unearned profits), cert. denied, 317 U.S. 683, 63 S.Ct. 205, 87 L.Ed. 547 (1942); Shushan v. United States, 117 F.2d 110, 115 (5th Cir.) (“No trustee has more sacred duties than a public official and any scheme to obtain an unfair advantage by corrupting such a one must in the federal law be considered a scheme to defraud.”), cert. denied, 313 U.S. 574, 61 S.Ct. 1085, 85 L.Ed. 1531 (1941).
A close look at these cases uncovers two uncertainties regarding the draw by this federal statute upon state law, specifically in defining the statutory element of honest ser*734vices. First, must the services be owed under state law? Second, must the breach of a duty to provide services rooted in state law violate the criminal law of the state? We decide today that services must be owed under state law and that the government must prove in a federal prosecution that they were in fact not delivered. We do not reach the question of whether a breach- of a duty to perform must violate the criminal law of the state.
We begin with the plain language of the statute. There are two words — “honest” and “services.” We will not lightly infer that Congress intended to leave to courts and prosecutors, in the first instance, the power to define the range and quality of services a state employer may choose to demand of its employees. We find nothing to suggest that Congress was attempting in § 1346 to garner to the federal government the right to impose upon states a federal vision of áppropriate services — to establish, in other words, an ethical regime for state employees. Such a taking of power would sorely tax separation of powers and erode our federalist structure. Under the most natural reading of the statute, a federal prosecutor must prove that conduct of a state official breached a duty respecting the provision of services owed to the official’s employer under state law. Stated directly, the official must act or fail to act contrary to the requirements of his job under state law. This means that if the official does all that is required under state law, alleging that the services were not otherwise done “honestly” does not charge a violation of the mail fraud statute. The statute contemplates that there must first be a breach of a state-owed duty. It follows that a violation of state law that prohibits only appearances of corruption will not alone support a violation of §§ 1343 and 1346. See United States v. Sawyer, 85 F.3d 713, 728-29 (1st Cir.1996). As the Ninth Circuit put it, “[t]o hold otherwise that illegal conduct alone [would suffice] would have the potential of bringing almost any illegal act within the province of the mail fraud statute.” United States v. Dowling, 739 F.2d 1445, 1450 (9th Cir.1984), rev’d on other grounds, 473 U.S. 207, 105 S.Ct. 3127, 87 L.Ed.2d 152 (1985).
Stated another way, “honest services” contemplates that in rendering some particular service or services, the defendant was conscious of the fact that his actions were something less than in the best interests of the employer — or that he consciously contemplated or intended such actions. For example, something close to bribery. If the employee renders all the services his position calls for, and if these and all other services rendered by him are just the services which would be rendered by a totally faithful employee, and if the scheme does not contemplate otherwise, there has been no deprivation of honest services. See, e.g., United States v. Czubinski, 106 F.3d 1069, 1077 (1st Cir.1997) (reversing convictions under §§ 1343 and 1346 because although unauthorized browsing of taxpayer files by an IRS employee constitutes a breach of personnel policies, “there [was] no suggestion that he failed to carry out his official tasks adequately, or intended to do so”); United States v. Rabbitt, 583 F.2d 1014, 1026 (8th Cir.1978), cert. denied, 439 U.S. 1116, 99 S.Ct. 1022, 59 L.Ed.2d 75 (1979); United States v. McNeive,. 536 F.2d 1245, 1246 (8th Cir.1976). Thus, the mere violation of a gratuity statute, even one closer to bribery than the Texas statute, will not suffice. Sawyer, 85 F.3d at 729-30.
Finally, the statute proscribes an actual scheme or artifice to defraud. There is nothing in the informing principles of federalism or legislative history to suggest that the scheme or artifice to defraud elements are drawn from state law. Rather, they are familiar terms of federal criminal law generating and drawing their sustenance from federal common law. These wholly federal elements, read with the jurisdictional elements of mail usage and coupled with the draw upon state law for the definition of service, allow the statute to serve federal interests without supplanting rights of core state governance. The indictment charged that Brumley used his position to assist Cely in exchange for money. Thus, the federal component of the crime was properly charged, and, as we will explain, was proved.
We pause to put aside the frequent invocations of a deprivation of citizens’ rights to *735honest services. See Bruno, 809 F.2d at 1105-06; Shushan, 117 F.2d at 115. The reference to such “rights” of citizens has little relevant meaning beyond a shorthand statement of a duty rooted in state law and owed to the state employer. Despite its rhetorical ring, the rights of citizens to honest government have no purchase independent of rights and duties locatable in state law. To hold otherwise would offer § 1346 as an enforcer of federal preferences of “good government” with attendant potential for large federal inroads into state matters and genuine difficulties of vagueness. Congress did- not use those words, and we will not supply them.
The federalism arguments that inform the definition of “honest services” under federal criminal law are powerful, and we acknowledge them in our holdings today. A sitting state official with adjudicatory authority who accepts payments from lawyers practicing in front of him and simultaneously acts for those lawyers in his official capacity contrary to his state-law duty has provided dishonest services to his employer, here the Texas Industrial Accident Board and its successor, the TWCC. As it turns out, Texas condemns such conduct by making it a criminal offense punishable by imprisonment for up to one year and a fine as large as $4,000, and this violation was part of a fraudulent scheme and conspiracy under § 1346, as found by the district court. The tension inherent in federal criminalization of conduct by state officials innocent under state law is absent here.
We have held that services under § 1346 are those an employee must provide the employer under state law. Using his office to pursue his own account and not that of his employer, Brumley violated a Texas criminal statute. This case does not then require us to decide whether the amended federal statute criminalizes conduct no part of which is criminal under state law. Cf United States v. Cochran, 109 F.3d 660, 667 (10th Cir.1997) (“[I]t would give us great pause if a right to honest services is violated by every breach of contract or every misstatement made in the course of dealing.”).
Our previous cases have not made clear the use of state law we emphasize today. To the extent our prior cases are contrary, they are overruled.
VI
Having concluded that § 1343 applies to deprivations of honest services by state employees and that such services must be owed under state law, we now address Brumby’s contention that his own actions did not do so. At trial, the government stipulated that it would not try to prove that any LAB award was enhanced by Brumley or that any claimant was awarded more money by Brumley or that Brumley referred any unrepresented claimant to an attorney in return for cash. Rather, the government’s “position [was] that the quid pro quo [was] intangible, such as favoritism or other types of intangible matters.” The government points out that Cely admitted to the trial court that the $86,780 in payments to Brumley were not “bans.” And during the time period that Brumley was receiving these payments from Cely, Brumley vouched for Cely’s good character when Cely was investigated by LAB and interceded to try to stop the investigation altogether. Brumley also advised Cely on the alteration of documents subpoenaed by the IAB, so as to make easy detection of wrongdoing difficult. The relationship between Cely and Brumley was so tight that when one of Cely’s employees inquired into Cely’s unconcerned confidence about an impending TWCC/IAB investigation of Cely, he replied: “We have Brumley.” Brumley also helped Cely’s attempt to lease property in Lufkin to the TWCC by advising Cely how to conceal his efforts and by aggressively discouraging the TWCC from leasing from another bidder.
The district court found “ample and convincing” evidence to support each of the counts of the indictment. According to the district court, Brumley and Cely engaged in a conspiracy in which Cely would give Brum-ley money and Brumley would use his position with the LAB and TWCC to assist Cely’s dealings with the agency. Although the district court found clear evidence of ethical violations, it did not rely on them to make its decision. Instead, the district court found a scheme to defraud that included conduct that *736violated Texas penal law. See Tex. Penal Code Ann. § 36.08(e) (making it a Class A misdemeanor for a public servant with judicial authority to “solicit[ ], accept[ ], or agree[ ] to accept any benefit from a person the public servant knows is interested in or likely to become interested in any matter before the public servant or [his] tribunal”).
Brumley’s other contentions are without merit, and we affirm the judgment of convictions.
AFFIRMED.

. The statute continues to draw much cogent and scholarly commentary. See, e.g., George D. Brown, Should Federalism Shield Corruption?— Mail Fraud, State Law and Post-Lopez Analysis, 82 Cornell L.Rev. 225 (1997).