Court Opinion

ID: 9473966
Source: CourtListenerOpinion
Date Created: 2023-08-05 04:44:43.495886+00
Date Added: 2024-06-11T17:43:50.466835
License: Public Domain

JAMES C. HILL, Circuit Judge,
specially concurring:
Although I do not believe 18 U.S.C. § 371 should be construed to penalize the conspiracy proved in this case, I concur in the judgment of the court because this panel is bound by the decision of the Fifth Circuit in United States v. Burgin, 621 F.2d 1352 (5th Cir.), cert. denied, 449 U.S. 1015, 101 S.Ct. 574, 66 L.Ed.2d 474 (1980), which is inconsistent with the views I express below.
*773Section 371 criminalizes conspiracies “to defraud the United States, or any agency thereof in any manner or for any purpose.” It does not criminalize a conspiracy to defraud a private party. The evidence in this case was sufficient to prove that the defendants conspired to defraud Seminole Electric. In my view, however, the prosecution did not prove a conspiracy to defraud the government of the United States.
It has long been the case that the prosecution need not show any monetary or property loss to the federal government to sustain a conviction for conspiracy to defraud the United States under section 371. Haas v. Henkel, 216 U.S. 462, 479, 30 S.Ct. 249, 253, 54 L.Ed. 569 (1910). In Hammer-schmidt v. United States, 265 U.S. 182, 44 S.Ct. 511, 68 L.Ed. 968 (1924), the Supreme Court announced that to prove a violation of section 371, “[i]t 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.” 265 U.S. at 188, 44 S.Ct. at 512. More recently, the Court reiterated that the statutory language reaches “any conspiracy 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, 86 S.Ct. 1840, 16 L.Ed.2d 973 (1966) (quoting Haas v. Henkel, 216 U.S. at 479, 30 S.Ct. at 254). No Supreme Court decision has upheld a conviction under section 371, however, where the defendants neither defrauded the federal government of its funds or property nor interfered with United States government officials or their agents performing an official function of the federal government.
As the court’s opinion in this case notes, Seminole Electric was the recipient of a loan made by one federal government agency and guaranteed by another. Moreover, as would be expected in any such lending arrangement, the federal government was entitled to exercise a significant degree of control over the means by which the funds it was providing would be utilized. Intellectual honesty compels me to find those facts sufficient to bring the fraud committed in this case within the ambit of section 371, as that statute was construed by the Fifth Circuit in Burgin v. United States, 621 F.2d 1352. In Burgin the government proved that the defendants, who included a state senator, conspired to use the senator’s position in state government to exert undue influence upon officials of the state agency responsible for administering a Head Start training program in that state. The court quite aptly described the scheme designed and executed by the defendants as “influence peddling of the rankest kind.” The federal government provided 75% of the funding for the state contracts that were improperly sought and retained by the defendants in that case, and the United States Department of Health, Education and Welfare apparently was entitled to approve the proposals that were later reduced to contracts between the state and the company the conspirators were seeking to benefit. Although the defendants did not conspire to exert any influence whatsoever, undue or otherwise, upon the federal government, and no pecuniary loss to the government was shown, the court nonetheless upheld their conviction under section 371 for conspiracy to defraud the United States.
According to the court’s opinion in Bur-gin, “[t]he indictment in this case charged overreaching of an agent of the United States by a public official having a financial quid pro quo interest in a federally financed contract.” 621 F.2d at 1357. Of course, where a state or private party is simply acting as an agent of the United States government in the implementation of a truly federal program, a fraud upon the agent may constitute a fraud upon the United States. But in my view, the courts should not generally find such an agency relationship in the absence of compelling evidence that the state or private party was in fact defrauded while acting as a mere agent of the federal government performing a constitutionally legitimate and duly *774authorized function of the federal government, rather than as a non-federal entity-receiving some form of federal assistance. Complete ownership or control of a nominally private entity by the federal government might serve as evidence of such a relationship. See United States v. Walter, 263 U.S. 15, 18, 44 S.Ct. 10, 11, 68 L.Ed. 137 (1923) (holding statute reached conspiracy to defraud the United States Emergency Fleet Corp., of which the United States owned 100% of the stock, where “the contemplated fraud upon the corporation if successful would have resulted directly in a pecuniary loss to the United States, and even more immediately would have impaired the efficiency of its very important instrument”). Extensive federal regulation of the state or private entity’s activities on behalf of the federal government would also tend to support a conviction under section 371 for committing a fraud most directly upon a private party, but indirectly upon the federal government as well. See United States v. Gold, 743 F.2d 800 (11th Cir.1984), cert. denied, — U.S.-, 105 S.Ct. 1196, 84 L.Ed.2d 341 (1985), (upholding conviction for defrauding the United States in violation of section 371 by conspiring to file false Medicare claims with private intermediary that received, adjudicated and paid such claims under contract with federal government agency). Federal government assistance, however, accompanied by only a modicum of federal supervision of the non-federal entity’s activities, seems patently insufficient to render a fraud upon that entity a fraud upon the United States.
By artful lawyering, one might easily blur the distinction between the United States government and those receiving its support beyond clear recognition. Courts must always remain mindful, however, of the admonition that penal statutes are to be strictly construed, a rule that is “perhaps not much less old than construction itself.” United States v. Wiltberger, 18 U.S. (5 Wheat.) 76, 95, 5 L.Ed. 37 (1820) (Marshall, C.J.). That well-known rule of construction is but a corollary to the comparably venerable “void for vagueness” doctrine of constitutional law. “[A] statute which either forbids or requires the doing of an act in terms so vague that men of common intelligence must necessarily guess at its meaning and differ as to its application, violates the first essential of due process of law.” Connally v. General Construction Co., 269 U.S. 385, 391, 46 S.Ct. 126, 127, 70 L.Ed. 322 (1926). See generally Goldstein, Conspiracy to Defraud the United States, 68 Yale L.J. 405, 441-48 (1959). Thus it is essential that section 371 “plainly and unmistakably” proscribe the conduct of defendants before they are punished for its violation. See United States v. Gradwell, 243 U.S. 476, 485, 37 S.Ct. 407, 410, 61 L.Ed. 857 (1917); United States v. Porter, 591 F.2d 1048, 1055 (5th Cir.1979). Courts may necessarily find it difficult to formulate and apply a definition of “defraud,” as that term is used in section 371, that men and women “of common intelligence” will easily understand. See Goldstein, supra, at 443. “The United States,” however, is a term that need not be so broadly and mysteriously defined.
Appellants have defrauded Seminole Electric. Seminole Electric is neither an agency of the federal government nor its representative performing a duly authorized federal governmental function. Rather, under the Rural Electrification Act Congress has deliberately avoided undertaking the construction of rural power plants as a federal government enterprise. I have little doubt that Congress has an interest in “seeing that the entire project [receiving its aid] is administered honestly and efficiently and without corruption and waste.” United States v. Hay, 527 F.2d 990, 998 (10th Cir.1975), cert. denied, 425 U.S. 935, 96 S.Ct. 1666, 48 L.Ed.2d 176 (1976). But in section 371 Congress obviously did not criminalize every conspiracy with the intent or effect of thwarting that objective. Congress has demonstrated well its ability to utilize the criminal law to protect its far-flung financial and other interests in non-*775federal programs or entities.1 Because it has not done so here, section 371 should not be construed to reach appellants’ acts.

. Chapter 47 of Title 18 of the United States Code, concerning fraud and false statements, provides a wide variety of examples. A general provision penalizes the knowing and willful making or use of false, fictitious or otherwise fraudulent statements "in any matter within the jurisdiction of any department or agency of the United States.” 18 U.S.C. § 1001 (1982). Other federal statutes are more specific. It is a federal crime for any person to make "any false entry in any book, report, or statement of [any Federal Reserve bank, member bank, national bank or Federal Deposit Insurance Corporation (F.D. I.C.) insured bank] with intent to injure or defraud such bank, or any other company, body politic or corporate, or any individual person.” 18 U.S.C. § 1005 (1982). Another section criminalizes the making or passing of statements known to be false "for the purpose of obtaining any loan or advance of credit from any person, partnership, association, or corporation with the intent that such loan or advance of credit shall be offered to or accepted by the Department of Housing and Urban Development for insurance, or for the purpose of obtaining any extension or renewal of any loan, advance of credit, or mortgage insured by such Department.” 18 U.S.C. § 1010 (1982). Federal law prescribes criminal penalties for knowingly making false statements for the purpose of influencing various actions of F.D.I.C. or Federal Savings and Loan Insurance Corporation insured institutions, 18 U.S.C. § 1014 (1982), and for knowingly making false statements "with respect to the character, quality, quantity, or cost of any work performed or to be performed, or materials furnished or to be furnished, in connection with the construction of any highway or related project approved by the Secretary of Transportation.” 18 U.S.C. § 1020 (1982).