Court Opinion

ID: 194543
Source: CourtListenerOpinion
Date Created: 2011-02-07 02:19:30+00
Date Added: 2024-06-11T09:42:59.079009
License: Public Domain

February 19, 1993
                UNITED STATES COURT OF APPEALS
                    FOR THE FIRST CIRCUIT

                                         

No. 92-1536
                        UNITED STATES,

                          Appellant,

                              v.

                 BARKER STEEL CO., INC., AND
                       ROBERT B. BRACK,

                    Defendants, Appellees.

                                         

         APPEAL FROM THE UNITED STATES DISTRICT COURT

              FOR THE DISTRICT OF MASSACHUSETTS

         [Hon. Joseph L. Tauro, U.S. District Judge]
                                                   
                                         

                            Before

                      Cyr, Circuit Judge,
                                        
                Bownes, Senior Circuit Judge,
                                            
                 and Fuste,* District Judge.
                                           
                                         

   Peter A. Mullin, Assistant United States Attorney, with whom
                  
A.  John  Pappalardo,  United  States  Attorney,  and  Andrew  E.
                                                               
Lauterback,  Special Assistant  United  States Attorney  were  on
        
brief, for appellant.
   Paul  F. Ware,  Jr.,  with whom  John  C. Englander,  Jeremy
                                                               
Sternberg,  and  Goodwin, Procter  & Hoar,  Earle C.  Cooley, and
                                                          
Cooley,  Manion, Moore  &  Jones were  on brief,  for defendants,
                              
appellees. 

                                         

                      February 19, 1993
                                         

                  

*of the District Court of Puerto Rico, sitting by designation.

        BOWNES, Senior Circuit Judge.  The government appeals
                                    

the dismissal of an Information which charged the defendants,

Barker  Steel Co., Inc. and Robert B. Brack, with engaging in

a  conspiracy to defraud the United States in violation of 18

U.S.C.   371.    The Information alleged that  the defendants

fraudulently  obtained  Minority   Business  Enterprise   and

Disadvantaged   Business   Enterprise   (MBE)   "set   aside"

contracts.  The district court found that the Information was

insufficient to sustain the  charges and dismissed it.1   For

the reasons that follow, we reverse and remand for trial.

                              I.

                      Standard of Review
                                        

        On appeal  from the  dismissal of an  information, we

take  the factual allegations in the information as true, and

we must reverse the dismissal if we find that, as a matter of

law, the information sufficiently  sets forth the elements of

the offense charged.   United States v.  Torkington, 812 F.2d
                                                   

1347, 1354   (11th Cir. 1987).   We read an  information as a

whole  and we construe the  allegations in a practical sense,

with   all  necessary   implications.2    United   States  v.
                                                         

                    

1 United States v. Barker Steel Co., Inc., 774 F. Supp. 65
                                         
(D. Mass. 1991).

2  Prior to 1971, 18 U.S.C.   3731 limited government appeals
from dismissed informations or  indictments to issues of law.
On  appeal, the court was  bound to accept  the lower court's

                             -2-

nom.,  Zero v.  United States,  459  U.S. 991  (1982); United
                                                             
Cincotta,  689  F.2d 238,  242 (1st  Cir.), cert.  denied sub
                                                             

law, including the lower court's interpretation of a statute,
(5th  Cir.), cert. denied, 427 U.S. 903 (1978).  Questions of
                         
States v.  Cadillac Overall Supply  Co., 568 F.2d  1078, 1082
                                       

are reviewed de  novo.    United States  v. M.I.M., 932  F.2d
                                                  

construction by lower court).

                             -3-
States  v. Besmajian,  910  F.2d 1153,  1154  (3d Cir.  1990)
                    
and  removed  the restrictions  on  appeal.   But  see United
                                                             

(following former rule and  limiting review of allegations to
        An  information  should  be  "a  plain,  concise  and

 An  information is  sufficient  if it  "first, contains  the
constituting the offense charged."  Fed. R. Crim. P. 7(c)(1).

elements  of  the  offense   charged  and  fairly  informs  a
definite   written   statement   of   the   essential   facts

second, enables  him to plead  an acquittal or  conviction in
defendant of the  charge against which  he must defend,  and,
1016, 1019 (1st Cir. 1991).   

bar of future prosecutions for the same offense."  Hamling v.
                                                          

United States, 369 U.S. 749, 763-64 (1962);  United States v.
                                                          

language  of the statute  as long  as the  core facts  of the
information is  sufficient when  allegations are made  in the

criminality charged are  also included.  Russell  369 U.S. at
                                                
Penagaricano-Soler, 911  F.2d 833, 839  (1st Cir. 1990).   An
                  

                    
764; Penagaricano-Soler, 911 F.2d at 839-40; United States v.
                                                             
United States,  418 U.S.  87, 117  (1974); accord Russell  v.
                                                         

construction of allegations.  Congress amended   3731 in 1971
Allard,  864 F.2d  248, 250  (1st Cir.  1989) ("The  test for
      

sufficiency, therefore  is  not whether,  in  hindsight,  the

indictment or information could have  been more complete, . .

.   but rather whether it fairly identifies and describes the

offense." (citations  omitted)).  Therefore, we   examine the

Information as  a whole to determine  whether it sufficiently

charges the offense proscribed by the conspiracy statute.

                             II.

                       The Information
                                      

        To  begin, we  summarize the  key allegations  of the

Information.    The government's  allegations  concerning the

defendants' conspiracy to defraud  the United States focus on

the  MBE  programs  of  several federal  agencies,  the  U.S.

Department   of  Transportation  (DOT),    the  Environmental

Protection   Agency   (EPA),   and   the   General   Services

Administration (GSA).    These federal  agencies intended the

MBE   programs   to     "support[]   the   fullest   possible

participation of firms owned and controlled by certain racial

minorities and women in  the construction programs funded and

assisted by these departments  and agencies."  Information at

  6.   To that end, the MBE programs required that recipients

of funds from federal agencies establish goals or set aside a

percentage  of  federal  funds   received  for  contracts  to

certified MBE businesses.  Information at   7.  

                             -4-

        Federal agencies with  MBE programs  rely upon  state

and local  governments  to certify  applicants  as  qualified

minority businesses.  Information at   9.  To qualify for MBE

certification, at least fifty-one percent of the ownership of

the enterprise  must be by  certain minority groups,  and the

minority owners must also control the daily operations of the

business.   Information at   6. To implement the MBE program,

the  entity  receiving federal  agency funding  hires general

contractors  to   perform  the   work,  who  in   turn  award

subcontracts to  certified MBEs  to meet the  percentage goal

for the project.   For  subcontract work to  qualify for  MBE

goals or  set aside  contracts, the  MBE certified  firm must

perform a  "commercially useful function in  the execution of

the project by actually  performing, managing and supervising

the work involved."  Information at   10.  For  materials and

supplies  to qualify,  the  MBE certified  firm must  "either

produce the  goods from raw materials  or substantially alter

the goods before reselling them."  Information at   10.

        The  Information alleges  that  from  about  October,

1982,  until  at  least  July,  1986,  Barker  Steel  Company

(Barker)   and   its   president,   director   and   majority

stockholder, Robert B.  Brack (Brack), conspired with  others

to use Rusco Steel Company (Rusco) as a front  company to win

MBE set aside  contracts for  Barker.  Information  at    13.

Barker   was  a  Massachusetts  corporation  which  furnished

                             -5-

fabricated  steel  reinforcing   bars  (re-bars)  and   other

products to the construction industry throughout New England.

Barker was never  a certified MBE.  Information at     1, 11.

Rusco,  located in Rhode Island, had been certified as an MBE

in  several  states before  the  scheme  with the  defendants

began.  Information at    3, 15.

        The  steel  re-bar  industry  includes  two  distinct

functions:  fabricators and erectors.  Firms which operate as

fabricators   "cut  and   bend  the   re-bars  to   meet  the

specifications of a particular construction project and  then

deliver the  re-bars to the construction  site."  Information

at   5.   The industry term for the  work done by fabricators

is "furnish" work.  Id.   Firms known as erectors  "place the
                       

fabricated re-bars within  the forms, at the  job site, prior

to  the  pouring  of the  concrete."    Information  at    5.

Erector firms do "erection" work.  Id. 
                                      

        In  October,  1982,  Barker  agreed  with  Rusco that

Barker  would finance  a new  division of Rusco  for erecting

steel re-bar, "erection" work.   Information at    5, 16.  In

exchange,  Rusco  would  allow  Barker to  market  its  steel

products through Rusco for re-bar "furnish" contracts to take

advantage of  Rusco's MBE  certification.  Information  at   

13,  16.  Prior  to 1982, Rusco  had operated as  a broker of

steel re-bar but had not fabricated re-bar or erected re-bar.

Information at    15.   Beginning  in 1982, Barker  employees

                             -6-

managed all aspects of the fabrication, sales and shipping of

steel  re-bar and  other  products in  its  own name  and  in

Rusco's  name  when  contracts  required  MBE  certification.

Information at     16, 19,  20.  Barker  employees and  Brack

exercised  substantial  control  over  Rusco  throughout this

period.  Information at     22, 25.  In 1985,  the defendants

merged a subsidiary  company into Rusco, to deceive state MBE

certifying   agencies  about  Rusco's   eligibility  for  MBE

certification.  Information at    25, 43.

        As part of the scheme, Rusco submitted  documentation

to  various  state and  local  agencies  for  the purpose  of

obtaining   or   maintaining   certification   as   an   MBE.

Information at    32, 26, 41, 47.  The documents submitted by

Rusco  contained false, misleading  and fraudulent statements

as well as material omissions. Id.  The Information concludes
                                  

that as a result of the  conspiracy, more than $5 million  in

federally   funded   and   federally  assisted   construction

contracts were improperly credited  toward MBE goals when the

contracts actually  benefitted Barker,  which was not  an MBE

firm.  Information at   15.  The conspiracy, according to the

Information, impeded,  impaired, obstructed and  defeated the

implementation,  execution  and  administration  of  the  MBE

programs of DOT, EPA and GSA.  Information at   12.

                             III.

                          Discussion
                                    

                             -7-

        The district court  dismissed the Information on  the

grounds  that:   (1) it failed  to allege a  violation by the

defendants  of any  MBE  program statute;    (2) it  did  not

clearly state a violation by the defendants of a duty owed to

the federal  government, and (3)  it failed to  allege direct

contact with  federal agencies.  The  defendants contend that

because the MBE program does not impose criminal penalties or

any obligations upon them, they  were not fairly warned  that

the  conduct alleged  in the  Information could give  rise to

criminal charges.  In further support of the dismissal of the

Information,  the defendants  add that their  alleged conduct

was  not  fraud  because  it  did  not  deprive  the  federal

government of any money or property.  The government counters

that the  Information properly and sufficiently  alleged that

the defendants conspired to defraud the federal government in

violation of 18 U.S.C.   371.

           A.  Legal Sufficiency of the Information
                                                   

        The Information charges that the defendants conspired

with others to defraud  the United States in violation  of 18

U.S.C.   371.   The pertinent  language of   371  provides as

follows:

            If two or  more persons conspire either
          to commit any offense against  the United
          States,  or to defraud the United States,
          or any  agency thereof in  any manner  or
          for any purpose, and  one or more of such
          persons do any  act to effect  the object
          of the conspiracy each shall be fined not

                             -8-

          more  than $10,000 or imprisoned not more
          than five years, or both.

18  U.S.C.    371.   To sufficiently  charge a  conspiracy to

defraud,  the Information  must  allege  the three  essential

elements  of  section  371:    "an  agreement,  the  unlawful

objective of the agreement,  and an overt act  in furtherance

of the  agreement."  United  States v. Hurley, 957  F.2d 1, 4
                                             

(1st Cir. 1992), cert. denied, 61 U.S.L.W. 3256 (U.S. Oct. 5,
                             

1992).  The  objective of the agreement is unlawful  if it is

"'for the purpose of  impairing, obstructing or defeating the

lawful function of any department of Government.'"  Dennis v.
                                                             

United States,  384 U.S.  855, 861  (1966); (quoting Haas  v.
                                                         

Henkel, 216 U.S. 462, 479 (1910)). 
      

        In this case, the government alleged the  defendants'

conspiracy  to  defraud in  the  language of  the  statute as

follows:

          the defendants herein, BARKER  STEEL CO.,
          INC. and ROBERT B. BRACK,  did knowingly,
          willfully    and    unlawfully   combine,
          conspire,  confederate   and  agree  with
          others, known and unknown, to defraud the
          United  States  by  impeding,  impairing,
          obstructing  and   defeating  the  lawful
          governmental    function    of    various
          departments  and  agencies of  the United
          States, including particularly USDOT, EPA
          and GSA, in the implementation, execution
          and  administration  of their  respective
          MBE programs.
                            . . .

          (All  in  violation  of Title  18  United
          States Code, Section 371.)

                             -9-

Information at    12, and  final statement at  page 13.   The

Information also  includes  detailed factual  allegations  to

substantiate   the  cursory   statutory  allegations.     The

defendants conspired with Rusco and others to establish Rusco

as  a front company which  the defendants used  to obtain MBE

set   aside  contracts   for  furnishing   steel  re-bar   on

construction  projects funded  in part  by federal  agencies.

The  defendant corporation, Barker,  was not an  MBE and was,

therefore, not entitled to MBE contracts.  Although Rusco may

have  been a properly certified  MBE at one  time, during the

relevant period of the  defendants' scheme, they financed and

controlled Rusco,  thereby destroying  its eligibility as  an

MBE.   Rusco  maintained its  MBE certification  by supplying

false  and misleading  documentation to  certifying agencies.

We  continue   our  analysis   of  the  sufficiency   of  the

Information to determine whether    371 provided fair warning

to the  defendants that  their conduct, as  alleged, violated

the statute.

       B.  Sufficiency of the Allegations of Conspiracy
                                                       

        The defendants  do not contend  that the  Information

failed  to allege a conspiracy, nor did the district court so

find, and we find no deficiency.   "The gist of conspiracy is

an agreement to  disobey or  to disregard the  law."   United
                                                             

States v. Drougas,  748 F.2d  8, 15 (1st  Cir. 1984);  accord
                                                             

United States v.  Batista-Polanco, 927 F.2d 14,  19 (1st Cir.
                                 

                             -10-

1991);  Penagaricano-Soler, 911 F.2d at 840.  The Information
                          

alleges that the defendants  conspired with others, known and

unknown,  to defraud  the government  and goes  on to  allege

conduct by the defendants, their employees, Rusco, and others

in furtherance of the conspiracy.    Information at   12  and

passim.
      

        The defendants argue, however, that because Rusco was

not named or charged as a co-conspirator  in the Information,

actions  by Rusco  cannot be  alleged to support  the charges

against the defendants.   There  is no  requirement that  co-

conspirators  be identified in an information, nor is there a

requirement  that co-conspirators  be charged  with  the same

offense  to sustain  the  conviction  of one  co-conspirator.

Penagaricano-Soler,  911 F.2d  at 840  n.5; United  States v.
                                                          

Sachs, 801 F.2d 839, 845 (6th Cir. 1986).  Although  Rusco is
     

not  charged or  named as  a co-conspirator,  the Information

alleges action which includes Rusco as a participant with the

defendants  in  the scheme  to defraud  the  MBE programs.   

Information  at     13,  16.   The reasonable  inference from

those  allegations  is that  Rusco  was  operating  as a  co-

conspirator.   Further, the Bill of  Particulars specifically

identifies Rusco as  a co-conspirator.3   It is well  settled

                    

3  While  a  bill  of particulars  cannot  cure  a  defective
indictment, it can provide  notice of detail missing  from an
information.     See  Fed.  R. Crim.  P.  7(e); 1  Charles A.
                    
Wright,  Federal Practice  and  Procedure Criminal 2d     129
(1982);   United States v.  Prince, 868 F.2d  1379, 1384 (5th
                                  

                             -11-

that members of a conspiracy are  legally responsible for the

actions  of  a co-conspirator  taken  in  furtherance of  the

scheme.   Pinkerton v.  United States,  328 U.S.  640, 646-47
                                     

(1945);  United States v. Baines,  812 F.2d 41,  42 (1st Cir.
                                

1987); United States  v. Fusaro,  708 F.2d 17,  21 (1st  Cir.
                               

1983).  Therefore, actions by Rusco to obtain or maintain MBE

certification  are  properly  alleged   as  elements  of  the

conspiracy.  

         C.  Sufficiency of the Allegations of Fraud
                                                    

        The  conspiracy  statute  proscribes   two  different

conspiracies:  one to commit a specific offense, the "offense

clause," and the other  to defraud the United States  "in any

manner or  for any purpose,"  the "defraud clause."   Hurley,
                                                            

957  F.2d  at  3.   The  defendants  were  charged under  the

"defraud clause" of   371.  

        At the start of our analysis, we acknowledge that the

defraud clause of    371 has been criticized for  its general

language  and  potentially broad  sweep.    Dennis v.  United
                                                             

States, 384 U.S. 855, 860 (1966).  Further, because there are
      

no  common law  crimes  against the  United  States, we  must

determine   whether  the   defendants'  alleged   conduct  is

"'plainly  and unmistakably' within  the province of [ 371]."

                    

Cir.  1989)   (observing  that  an  information,   unlike  an
indictment,  may  be  easily  amended  absent  prejudice   to
defendants).

                             -12-

United States v.  Gradwell, 243  U.S. 476, 485  (1917).   We,
                          

therefore, scrutinize the Information carefully  to determine

whether it sufficiently and properly alleges criminal conduct

in violation of   371.  

        The defendants  contend that they lacked fair warning

that the conduct alleged in the Information would violate the

defraud clause of    371.  The fair warning  doctrine invokes

due  process rights  under the  Fifth Amendment  and requires

that the  criminal statute at issue  be sufficiently definite

to  notify   persons  of reasonable  intelligence that  their

planned conduct is  criminal.  United States v.  Harriss, 347
                                                        

U.S.  612,  617  (1953) ("The  constitutional  requirement of

definiteness is violated by a criminal statute that fails  to

give a person  of ordinary intelligence fair  notice that his

contemplated conduct is  forbidden by the statute.");  United
                                                             

States  v.  National Dairy  Corp.,  372 U.S.  29,  31 (1963);
                                 

United States v. Anzalone, 766 F.2d 676, 678 (1st Cir. 1985).
                         

We  examine the statute,  as we must,  in the context  of the

facts of this case.   United States v. Mazurie, 419 U.S. 544,
                                              

550 (1975);  United States  v. Angiulo, 897  F.2d 1169,  1179
                                      

(1st Cir. 1990).  

        The defendants assert that   371 did not provide fair

warning that their alleged actions defrauded the MBE programs

of federal  government agencies because the  MBE programs did

not impose any duties on them.  The district court found that

                             -13-

the  MBE  programs  did  not  impose  criminal  sanctions  or

penalties, or any obligations  on subcontractors, such as the

defendants,  and held  that  because the  defendants had  not

violated any duty imposed upon them by the MBE programs, they

could not have violated   371.  The defendants primarily rely

on  United States v. Murphy,  809 F.2d 1427  (9th Cir. 1987);
                           

United  States v. Anzalone, 766 F.2d 676 (1st Cir. 1985), and
                          

United  States v. Porter, 591 F.2d 1048  (5th Cir. 1979).  We
                        

find them inapposite to this case.  

        In United States v. Anzalone, 766  F.2d 676 (1st Cir.
                                    

1985), we addressed the problem of criminal prosecution of an

individual for alleged violations  of the currency  reporting

requirements before  the applicable statutes were  amended to

include such transactions.  Anzalone  did not involve   371.4
                                    

The government  claimed that  the defendant failed  to notify

the bank that  his deposits were part  of the same  event and

should have been reported as a "structured" transaction.  The

essence of the government's charges was "that the appellant's

failure  to inform the Bank of the 'structured' nature of his

transfers constituted an illegal scheme to avoid detection of

these payments by causing     the Bank to fail in its duty to

report them."  Id. at 679.  We held that  the defendant could
                  

                    

4 The defendant was not charged under   371 and   371 was not
discussed  in  the  case.    The  defendant  was charged  and
convicted  of violating 18 U.S.C.    2, 1001 and 31 U.S.C.   
5313, 5322.

                             -14-

not be held  criminally liable under  the crimes charged  for

failing  to report the transaction when the Reporting Act did

not impose a duty on him to do so.

               Our   analysis   in    Anzalone   is    easily
                                              

distinguishable from this case.  In addition to the fact that

Anzalone does  not address    371, the defendant  was charged
        

with a crime  for failure to  act.  As  we held in  Anzalone,
                                                            

omission can only  constitute a  crime if the  accused had  a

duty  to  act.   In this  case,  however, the  defendants are

charged with defrauding the  government by their actions, not

by failure to act, and therefore, the analysis in Anzalone is
                                                          

inapplicable. 

          Similarly, in  United  States  v. Murphy,  809 F.2d
                                                  

1427 (9th  Cir. 1987),  the defendants' alleged  crimes arose

from  their failure to act.  The defendants were charged with

violating   371 because they failed to disclose the source of

the  funds  they  deposited  which  the  government   alleged

constituted  a  conspiracy  to  impair the  function  of  the

Internal Revenue Service  in the  collection of  taxes.   The

court found  that the defendants had  honestly and accurately

completed  the  currency   transactions  reports  which  were

required, had no  duty to inform anyone of the  source of the

deposited money, and therefore  had not committed any illegal

activity.   The court, in dicta, suggested that violations of

  371 require violation  of other criminal statutes.   Id. at
                                                          

                             -15-

1432.  Moreover, the Ninth Circuit  has explained and limited

its decision in Murphy:
                      

          Dicta  in  Murphy  can  be  construed  to
                           
          require  that  a conspiracy  charge under
          section  371 be  based upon  conduct that
          has   "been    proscribed   by   criminal
          statute."   Id.  Any such construction is
                        
          incorrect  in light of  Dennis.   We read
                                        
          Murphy  and  Varbel  [United   States  v.
                                               
          Varbel, 780  F.2d  758 (9th  Cir.  1986)]
                
          only   to   mean  that   a   section  371
          conviction  may  not   be  based  upon  a
          failure to volunteer information  that is
          not   required  to  be  provided  to  the
          government,  or  upon  the furnishing  of
          correct  information;  such  acts do  not
          sufficiently  impair  the functioning  of
          the  government  to  support  a  criminal
          conviction.

United States v. Tuohey,  867 F.2d 534, 538 (9th  Cir. 1989).
                       

In Tuohey, the  court held that  the government had  properly
         

charged the defendants under   371 because the defendants had

failed to report currency  transactions as they were required

to do by statute.

          In   United States  v. Porter,  591 F.2d  1048 (5th
                                       

Cir. 1979), the government  charged a group of doctors  and a

laboratory  operator with  Medicare fraud  and  conspiracy to

defraud the government  under    371.  On  appeal, the  court

reversed  the  convictions   and  dismissed  the  indictments

finding  that  the government  had  not  properly charged  or

proved a conspiracy to defraud the government under  371.  In

summary, the  government alleged that  the doctor  defendants

had  sent lab  work  to the  laboratory operator  defendant's

                             -16-

manual laboratories because they received a payment for doing

so, rather  than to  automated laboratories which  might have

processed the work  more quickly and more  cheaply.  Although

the  facts relating  to the  practice which  provided payment

back to the doctors are  complex, the effect was obvious--the

doctors  sent  their  lab  work  to  the  laboratories  which

provided the payments and  not to the automated laboratories.

The charges to Medicare, however,  were not increased by  the

practice and were within  the guidelines for lab work  in the

area, and the quality of the work was not an issue.  Further,

the  defendants   did  not   violate   any  Medicare   rules,

regulations   or   other   requirements   by   using   manual

laboratories.   The  government  charged  that the  practice,

nevertheless,  violated     371   because  it  defrauded  the

government's "right to  have the  Medicare program  conducted

honestly  and  fairly."   Id.  at  1056.    The  government's
                             

allegations established that the defendants failed to use the

most cost effective laboratories, the automated laboratories,

but did not show  that the defendants were required to do so,

and the allegations also  showed that the defendants complied

with the applicable  rules and regulations of  Medicare.  The

court  found that  the  government  did  not prove  that  the

defendants  had  interfered  with  lawful  functions  of  the

Medicare program  as required for criminal  liability under  

371.

                             -17-

          None  of the  cases relied  upon by  the defendants

involve  the  situation  before  us:    affirmative  acts  of

misrepresentation  and deceit  to  thwart the  operation  and

purpose of a  government program.   Conspiracy to thwart  the

operation and purpose of  a government program through deceit

and trickery is prohibited by   371.  Hammerschmidt v. United
                                                             

States, 265 U.S. 182, 188 (1924); United States v. Bucey, 876
                                                        

F.2d  1297, 1312-13 (7th  Cir.), cert. denied,  493 U.S. 1004
                                             

(1989).  

        As noted earlier,   371 proscribes two distinct types

of  conspiracies:   (1)  conspiracies  to  commit a  specific

offense against the United  States, included elsewhere in the

criminal  code, and  (2) conspiracies  to defraud  the United

States.  The essence of the  defendants' theory is that if no

other federal law  or regulation proscribes alleged  conduct,

then the  defendants  cannot be  held criminally  responsible

pursuant to   371  because they  owe no duty  to the  federal

government.5       The   defendants'   theory    reflects   a

                    

5  This  theory  is  distinguishable from  United  States  v.
                                                         
Minarik, 875 F.2d 1186 (6th Cir. 1989),  where the defendants
       
were  charged and convicted under the defraud clause of   371
although  a specific  provision  of the  Tax Code  proscribed
their  conduct.     In  Minarik  the   court  overturned  the
                               
convictions on the  grounds that  the case  should have  been
brought  under the offense clause of   371 to avoid confusion
to  the defendants  concerning  what conduct  was  considered
illegal.

                             -18-

misunderstanding  of  the function  of the  two clauses  of  

371.6     If the  second clause  were interpreted  to require

commission  of a  specific offense,  it would  have the  same

meaning as the first clause thus rendering the second  clause

redundant.    Whenever  possible,  we will  not  interpret  a

statute in such  a way  as to  cause redundancy.   Breest  v.
                                                         

Cunningham, 752 F.2d 8, 10 (1st Cir. 1985).  
          

        Recently we examined the defraud  clause of   371  in

the context  of an appeal  from conviction for  conspiracy to

impair the function of  the IRS in United States  v.  Hurley,
                                                            

957 F.2d 1 (1st Cir. 1992),  and held that the defraud clause

does not depend on allegations of other offenses.  In Hurley,
                                                            

the defendants  helped a  drug  smuggler hide  and invest  $5

million of his illegal  earnings thereby thwarting the lawful

function of the  IRS to levy  and collect income taxes.   The

defendants in  Hurley argued that the  indictment was invalid
                     

for failing to charge them under the  offense clause of   371

with  specific  tax code  violations.    The defendants  also

argued  that because  there  were no  laws prohibiting  their

particular money  laundering activities, they had  no duty to

the government under   371 not to engage in money laundering.

We found  that the defendants had engaged  in a long-standing

                    

6  The defendants'  theory   does not  raise the  due process
problems presented in  United States v.  Haga, 821 F.2d  1036
                                             
(5th Cir. 1987), where the defendants were charged  under the
offense clause of   371 but were convicted, apparently, under
the defraud clause.

                             -19-

and  complex  conspiracy to  deceive  the IRS  rather  than a

limited  scheme proscribed  by a  single  section of  the tax

code.  We held  that the defraud clause was  properly charged

because it can best address a conspiracy which encompasses  a

broad range of conduct for  the unlawful purpose of impairing

the function of the  IRS.  See also Dennis v.  United States,
                                                            

384 U.S. at 860  (holding that the  true nature of the  crime

was the entire conspiracy to falsely obtain benefits from the

N.L.R.B., in violation  of    371, and not  merely the  false

statements  made in  furtherance  of the  conspiracy); United
                                                             

States v. Bucey, 876  F.2d at 1312-13  (holding  that actions
               

which  are  themselves  legal   may  constitute  a   criminal

conspiracy in  violation of     371 if  they  are part  of  a

conspiracy  to  obstruct by  deceit,  craft  or trickery  the

lawful function of a government agency).

        In the present case,  the government alleges that the

defendants concocted  an elaborate  scheme with Rusco  to use

Rusco as a front  company to procure MBE set  aside contracts

for steel re-bar furnish  work  which would actually  be done

by the defendants.  The scheme, as alleged, began in 1982 and

continued into  1986.   Although Rusco  was indicted  for the

specific offense  of filing false statements  in violation of

18  U.S.C.    1001,  the defendants'  conspiracy  aimed at  a

broader goal,  impeding the purpose  and function of  the MBE

programs.   The  defendants' scheme  is the  kind  of complex

                             -20-

conspiracy which the defraud clause is intended to proscribe,

and which  might not  be prosecuted adequately  by addressing

separate occurrences of illegal conduct.7  

        The defendants  in Hurley fared no  better with their
                                 

second  argument.     They argued  that  because their  money

laundering  activities   were  not  prohibited   by  specific

statutes,   they  lacked  fair warning  that  they  could  be

prosecuted  under the defraud clause  of   371.   We rejected

their  argument and  held that  if the  "defendants knowingly

participated   in   laundering   drug  proceeds,   inevitably

hindering the  IRS in  its ability  to collect  . .  . taxes,

their   convictions   under    371's   defraud   clause   are

unassailable."  Id.  at 4; accord  United States v.  Cambara,
                                                            

902 F.2d  144, 147 (1st  Cir. 1990) ("The  conspiracy statute

does not require that  unlawful means be used to  achieve the

unlawful goal of the conspiracy.").  

                    

7 In  Dennis, 384  U.S. 855, the defendants argued that  they
            
should have been charged, if at all, under the offense clause
of     371  for  the  substantive  offense  of  making  false
statements  but   for  the  time   bar  of  the   statute  of
limitations.   The Court  held, however, that  the charge  of
conspiracy  to defraud  the  government  properly stated  the
nature  of the defendants' offense and was not "an attempt by
prosecutorial sleight of hand  to overcome a time bar."   Id.
                                                             
at 863.  In this  case, we also reject the  defendants' claim
that  the government  resorted  to    371  to circumvent  the
statute of limitations barring a charge pursuant to 18 U.S.C.
   1001.  As in Dennis, while  it is true that the defendants
                      
may  have violated   1001 in  perpetration of the conspiracy,
the gravamen of the  charge is the scheme to  defraud the MBE
program and not merely the making of false statements.

                             -21-

        Taken as  a whole,  the Information charges  that the

MBE re-bar "furnish" contracts  obtained in Rusco's name were

merely passing through  Rusco, as  a front, to  Barker.   The

defendants used  Rusco to win MBE contracts  to "furnish" re-

bar  because the  defendants  could not  have obtained  those

contracts  directly.  The result  was that a  non-MBE got the

benefit  of  contracts which  the  MBE  program intended  for

minority businesses.   Both  the defendants and  the district

court below rely on the  fact that Rusco was a certified  MBE

during  the  existence  of  the  conspiracy,  implying   that

contracts  which went to Rusco were proper under the affected

MBE programs.  

        A  scheme to  use  a  minority  business as  a  front

company was addressed in United  States v. Anderson, 879 F.2d
                                                   

369  (8th  Cir. 1989).   The  court  found that  the minority

business  certification  requirements of  the  Small Business

Administration were  intended to insure  that front companies

did not usurp program benefits:

            To  become  certified   for  the   [SBA
          minority  business]  program, a  business
          must establish  that  it is  socially  or
          economically disadvantaged, is owned by a
          minority person and not  a mere front for
          a  non-[minority certified]  business, is
          actually controlled by a minority person,
          and  will  be   performing  at  least  15
          percent of the government contract.

Id.  at  372.    The  Anderson  defendants  used a  certified
                              

minority  business  as  a  front  to  obtain  SBA  set  aside

                             -22-

contracts when the  contract work was actually  subcontracted

to other, non-minority, businesses.  Compare United States v.
                                                          

Porter, 591 F.2d 1948 (5th Cir. 1979) (affirming dismissal of
      

an indictment  which charged doctors and  a laboratory worker

with  a kickback scheme to defraud Medicare in violation of  

371 because there was no Medicare policy or  regulation which

prohibited  doctors from  taking such  payments and  Medicare

costs were not increased).

        It is reasonable to  infer that the MBE certification

requirements  for  the  agencies  alleged in  this  case  are

intended to prevent non-MBEs from taking advantage of MBE set

aside contracts.8   The MBE certification requirements impose

duties upon  the defendants  and  others not  to subvert  the

system established  to benefit minority businesses.   Because

Rusco did not do  the re-bar "furnish" work specified  in the

contracts, Rusco was  operating as a  front for Barker  which

                    

8  The  Information  summarized,   rather  than  citing,  the
regulations which control  the MBE programs  of the DOT,  EPA
and  GSA  which  provides  sufficient  understanding  of  the
function  of  the  programs.    Nevertheless,  the  pertinent
language of the regulation for MBE  certification for the DOT
is instructive:

          To  ensure that  this part  benefits only
          MBEs  which are  owned and  controlled in
          both form  and substance  by one  or more
          minorities or women, DOT recipients shall
          use Schedules  A and B  . . .  to certify
          firms who  wish to participate as MBEs in
          DOT under this part.
49 C.F.R.   23.51.

                             -23-

did the  "furnish" work  and received the  contract payments.

As  the government alleges, MBE contracts can only be awarded

to  MBEs  who  actually  do  the  work,  and  therefore,  the

defendants' use of  Rusco was  a fraud on  the MBE  programs.

Just because the  defendants used Rusco, a  certified MBE, to

subvert the MBE requirements does not make their actions less

reprehensible.

        The Information also alleges that  Rusco fraudulently

maintained its MBE certification  after 1982.  The defendants

counter that the Information cannot properly charge them with

defrauding  the  government  based  upon  false documentation

submitted by Rusco to various MBE certifying agencies because

there is  no allegation  that  the agencies  relied upon  the

false documentation to certify  Rusco.  In  Dennis,  384 U.S.
                                                  

855, the Supreme Court found that an indictment which charged

members  of  a  mine   workers'  union  who  submitted  false

affidavits, stating  that they were not  Communists, in order

to  procure  the services  of  the  National Labor  Relations

Board,     properly  stated  a  conspiracy   to  defraud  the

government pursuant to    371.  The defendants  objected that

the affidavits did not  defraud the Board because it  did not

rely  on the  veracity of  the non-Communist  affidavits, but

instead relied  only on the fact  that they were filed.    In

response, the Court held as follows:

            The   facts   are,  according   to  the
          indictment,  that  petitioners and  their

                             -24-

          co-conspirators  could not  have obtained
          the   Board's  services   and  facilities
          without filing  non-Communist affidavits;
          that  the  affidavits  were submitted  as
          part of  a scheme to induce  the Board to
          act; that  the  Board acted  in  reliance
          upon the fact that affidavits were filed;
          and  that  these  affidavits were  false.
          Within the  meaning of   371, this was  a
          conspiracy to defraud  the United  States
          or an agency thereof.

Dennis at 862.   The effect of  the conspiracy and the  false
      

affidavits was  that the  defendants' trade union  gained the

benefit of  the Board's  services and facilities  despite the

fact that the  union was  not qualified because  some of  its

officers were Communists.  The Court held that the conspiracy

defrauded  the government  by  impeding the  function of  the

Board  to  implement  its   policy  to  exclude  unions  with

Communist officers.      Similarly, in this case, Rusco could

not  have  maintained its  certification  as  an MBE  without

filing  the required documentation.   Because  the defendants

had taken control of Rusco, the documentation  filed by Rusco

contained  false  and  misleading  information  and  material

omissions which directly affected  Rusco's eligibility as  an

MBE.   Unless  Rusco  maintained its  MBE certification,  the

defendants' scheme  to obtain  MBE set aside  contracts would

have failed.  The state and local MBE certification  agencies

granted  MBE certification  to Rusco  in response  to Rusco's

fraudulent documentation.  Therefore, Rusco's filings for MBE

certification were at the  core of the defendants' conspiracy

                             -25-

and may be considered as a part of the fraudulent activity in

furtherance  of the  conspiracy.   Even if  Rusco had  been a

properly certified MBE, however,   "[a] method that makes use

of innocent  individuals or  businesses to reach  and defraud

the United States  is not for that reason beyond the scope of

  371."  Tanner v. United States, 483 U.S. 107, 129 (1986).  
                                

        This court has considered  the meaning of the defraud

clause in    371 and its  substantially similar predecessors,

and  found  actions which  defrauded the  United States  in a

variety of circumstances.  Curley v. United States, 130 F. 1,
                                                  

11-12 (1st Cir. 1904), cert. denied, 195 U.S. 628  (affirming
                                   

the  sufficiency  of  an indictment  charging  conspiracy  to

defraud  the  government by  a  defendant  who took  a  civil

service exam for another man to help him gain a position as a

letter carrier  and  defining defrauding  the government  as:

"'any act committed with a view of evading the legislation of

Congress passed in the execution of any of its powers, or  of

fraudulently securing  the benefit  of such legislation,  may

properly be  made an  offense against the  United States.'");

Harney v. United States, 306 F.2d. 523 (1st Cir. 1962), cert.
                                                             

denied sub  nom. O'Connell  v.  United States,  371 U.S.  911
                                             

(affirming  indictment for hampering  the lawful operation of

the Bureau of Public  Roads of the Department of  Commerce in

the administration  of  the  Federal  Aid  Highway  program);

                             -26-

United  States  v.  Pappas,  611  F.2d 399  (1st  Cir.  1979)
                          

(affirming conviction  of  conspiracy to  defraud  government

based  on  a scheme  to misuse  funds  intended for  the CETA

program).

        Finally,  dishonest conduct  is at  the heart  of the

crime  of  defrauding  the  government.   The  Supreme  Court

defined  "defraud" in  a  substantially  similar  predecessor

statute to   371 as follows:

            To  conspire  to  defraud   the  United
          States  means  primarily  to   cheat  the
          government  out of property or money, but
          it  also  means   to  interfere  with  or
          obstruct one of  its lawful  governmental
          functions by deceit,  craft or  trickery,
          or at  least by means that are dishonest.
          It  is not necessary  that the government
          shall   be   subjected  to   property  or
          pecuniary  loss by  the  fraud, but  only
          that its legitimate  official action  and
          purpose    shall     be    defeated    by
          misrepresentation,   chicane,    or   the
          overreaching   of   those  charged   with
          carrying out the governmental intention.

Hammerschmidt  v. United  States, 265  U.S. 182,  188 (1924).
                                

The   defendants   in   Hammerschmidt   were   indicted   for
                                     

distributing leaflets and  other materials urging  resistance

to the  draft  during World  War  I.   The  Court  held  that

although the  defendants' conduct was aimed  at impairing the

function  of  the  Selective  Service,  a  lawful  government

function, it  was open  defiance and  not a  scheme involving

deceit  or  trickery, and  therefore,  could  not be  charged

within the meaning of defrauding the government.

                             -27-

        The  allegations  in  this  case  do  not  present  a

situation  where defendants conspired  to do something which,

in itself, was innocent, but  which had the unintended effect

of  thwarting  the MBE  programs.   Nor  were  the defendants

engaging  in  open  defiance   or  protest  against  the  MBE

programs.   The  defendants'  actions,  as alleged,  involved

deceit and trickery  to benefit the defendants by hampering a

lawful  government function.   A conspiracy of  this kind has

long been recognized to defraud the government.    

        The  Information alleges  that  "[p]ursuant  to  this

unlawful  conspiracy in excess  of $5 million  in federal and

federally  assisted  construction  contracts were  improperly

credited towards the MBE goals of the various departments and

agencies  of  the United  States."9    Information at     14.

While this allegation could be more forcefully stated, taking

the   Information  as   a  whole   and  with   all  necessary

implications, the meaning is clear:  the defendants conspired

with others to defraud the DOT, EPA and GSA, agencies of  the

United States, in the implementation of their MBE programs by

using  Rusco  to  win  MBE  set  aside  contracts  which  the

defendants would not otherwise have been eligible to receive.

                    

9 The defendants  do not  challenge the validity  of the  MBE
program. It is  uncontroverted, in  this case,  that the  MBE
program  is  a  lawful  function  of  government.    And  see
                                                             
Fullilove  v.  Klutznick,  448  U.S.  448  (1980)  (upholding
                        
constitutionality of an MBE program).

                             -28-

As a result, the scheme diverted $5 million in contracts from

MBEs to Barker.

        In thirteen pages containing  forty-eight paragraphs,

the  Information  details actions  by  which the  defendants,

Rusco and  others accomplished their objective  to obtain MBE

contracts for the benefit of the defendants.  The allegations

show  that the defendants were  well aware of  the purpose of

the MBE programs,  certification requirements, goals and  set

aside  contracts, and that  any reasonably intelligent person

in  the defendants'  situation should  have known  that their

conspiracy  could have  criminal  consequences.   Taken as  a

whole,  the  Information   sufficiently  alleges   fraudulent

conduct  by  the  defendants  and  their  co-conspirators  to

impair, defeat, or obstruct the  function of the MBE programs

involved in this  case.  We  move on to consider  whether the

fraud was perpetrated against the United States.

 D.  Sufficiency of Allegations of Contact with United States
                                                             

        The defendants assert,  and the district court  held,

that  the Information  fails  to allege  that the  defendants

conspired  to defraud the United  States or an  agency of the

United  States.   In Tanner  v. United  States, 483  U.S. 107
                                              

(1987),  the Supreme  Court  considered  whether  a  kickback

conspiracy to procure and  keep a construction contract  on a

project  which  was  funded  by  federally  guaranteed  loans

constituted defrauding the  United States within the  meaning

                             -29-

of   371.  In Tanner, 483 U.S. 107, the Rural Electrification
                    

Administration (REA) guaranteed loans for the construction of

a  power  plant for  an  electric  cooperative (Seminole)  in

Florida.  The procurement manager for Seminole conspired with

his friend  to get  contracts for  the project  with kickback

payments to the manager.   

        The defendants argued on  appeal that the evidence at

trial showed that the target  of the conspiracy was  Seminole

and  not the  federal government.   The  government responded

that,  because  Seminole's   construction  project   received

federal  financial assistance and some federal supervision, a

conspiracy to defraud  Seminole was the same  as a conspiracy

to  defraud   the  government.     The  Court   rejected  the

government's explanation and held:

          The  conspiracies  criminalized by    371
          are defined not only by the nature of the
          injury  intended  by the  conspiracy, and
          the   method   used  to   effectuate  the
          conspiracy,     but     also and     most
          importantly by   the    target   of   the
                                        
          conspiracy.

Tanner  at  130.      The  Court  also  held,  however,  that
      

conspiracies  to  defraud  the   federal  government  may  be

accomplished through intermediaries, innocent  third parties,

and the  Court remanded  the  case to  determine whether  the

defendants    conspired   to    cause   Seminole    to   make

misrepresentations to the REA.  Tanner at 132.  
                                      

                             -30-

        In  this case,  the government  alleged that  the MBE

programs  of the involved federal agencies were the target of

the defendants' conspiracy to defraud.   Information at   12.

The  Information supports the general allegation in statutory

language  with detail of the workings of the MBE programs and

the actions by the defendants which harmed the  MBE programs.

The Information  alleges that  the defendants'  scheme caused

"in  excess of $5  million in federal  and federally assisted

construction  contracts [to  be] improperly  credited towards

the  MBE goals of the various departments and agencies of the

United  States."  Because the purpose of the MBE programs, as

alleged,  is to insure that  at least ten  percent of federal

and  federally assisted  construction  project  contracts  be

awarded to  MBE companies,  the defendants' scheme  to divert

MBE contracts through Rusco to  benefit themselves obstructed

the proper  function of  the MBE  programs.  The  Information

taken  as  a whole  clearly alleges  that  the target  of the

defendants' conspiracy was  $5 million worth of MBE set aside

contracts  which  should  have   been  awarded  to   minority

businesses. 

        The  Information  does  not allege  that  either  the

general contractors or  the state  agencies implementing  MBE

certification were  operating  as federal  agencies based  on

their  receipt of federal and federally  assisted funds.  The

misrepresentations and fraud  to general contractors  and MBE

                             -31-

certifying  agencies  by the  defendants  and co-conspirators

were  the means to the  end, using innocent  third parties to

effect their scheme.   The Information sufficiently alleges a

conspiracy   which  targeted  a  federal  function,  the  MBE

programs of  the DOT,  EPA and  GSA, and  therefore, properly

charges a conspiracy to defraud the United States.

 E.  Sufficiency of Allegations of Harm to the United States
                                                            

        The  defendants argue that  the Information  fails to

allege  a crime under    371 because it  does not allege that

the defendants  defrauded the federal government  of money or

property.   There is no  basis for the  defendants' argument.

The language of the statute itself is broad:  "If two or more

persons conspire .  . . to defraud the United  States, or any

agency thereof  in any manner  or for any  purpose. . ."   18
                                                  

U.S.C.    371 (emphasis  added).    At  least  since Haas  v.
                                                         

Henkel, 216 U.S. 462 (1910), the Supreme Court has recognized
      

that   371 (and  its substantially similar predecessors) were

not limited  to conspiracies which defraud  the government of

money  or property: "The statute is broad enough in its terms

to  include  any conspiracy  for  the  purpose of  impairing,

obstructing  or  defeating   the  lawful   function  of   any

department of Government."  Id. at 479.   
                               

        Although the  Supreme Court has limited  the scope of

mail fraud, 18 U.S.C.    1341, to the protection  of property

                             -32-

rights,  that  limitation is  restricted  to  the mail  fraud

statute.  McNally v. United States, 483 U.S. 350, 360 (1987);
                                  

and id.  at 368 (Stevens,  J., dissenting); United  States v.
                                                          

Smith, 891 F.2d 703,  713 (9th Cir. 1989), modified  on other
                                                             

grounds,  906  F.2d 385,  cert.  denied  111 S.Ct  47  (1990)
                                       

(McNally's narrow definition of  "defraud" does not extend to
          

  371.).  We  decline to extend  the McNally limitation to   
                                            

371. 

                             IV.

                          Conclusion
                                    

        We hold that the  Information sufficiently alleges  a

conspiracy  to defraud  the government pursuant  to    371 in

the language  of the  statute and with  sufficient supporting

detail  to adequately  notify the  defendants of  the charges

against  them.   The  history  of  interpretation  of     371

demonstrates  that the statute  proscribes conspiracies, such

as  the defendants' conspiracy, which target federal programs

and which intend to  deceitfully secure the benefit  of those

programs.   In other words, the defendants had a duty imposed

pursuant  to    371  not to  divert  the benefit  of  the MBE

programs   from  their  intended  recipients,  qualified  and

certified  minority businesses, to  themselves.   The statute

itself  provides fair  warning  that the  defendants' alleged

conspiracy  may   be  charged   as  criminal  under      371.

                             -33-

Therefore, we reverse  the decision  of the  lower court  and

remand for trial.

                             -34-