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I.
entity itself criminally liable, each level of the corporate hierarchy is deterred from being
willfully blind to the unlawful but beneficial acts of those for whom they are responsible.
Corporate Criminal Liability
II.
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2.
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C.
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III.
A. Pages 12 - 15 of the book list factors that are considered when wanting to federally prosecute a
business (general considerations, pervasiveness of wrongdoing, corporations past history, etc.).
The Respondeat Superior Rule
IV. Criminal Acts
A. A considerable body of case law allows imposition of corporate liability for criminal acts
performed by officers and agents in the course of their employment, without regard to their status
in the corporate hierarchy.
B. The only general limitation on corporate liability under the respondeat superior rule is that the
agent who commits the crime must be acting within the scope of his or her authority and on
behalf of the corporation.
C. Respondeat superior liability is not limited to when the unlawful conduct of an organization is
done by its managerial agentsit applies just the same for non-managerial agents, so long as
they are acting within the scope of their designated authority. Beneficial Finance. This is just
criminal respondeat superior liability.
V. Commonwealth v. Beneficial Finance Co.
A. Facts
1. Beneficial Finance Company (Beneficial) (defendant), and several other corporations, were
convicted of bribing, and conspiring to bribe, state banking officials with the intent of obtaining
favorable treatment from the states Small Loans Regulatory Board. Beneficials conviction was
based on the actions of employees who were neither officers nor directors of the corporation.
One of the employees, Farrell, was an officer and director of a wholly-owned subsidiary of
Beneficial. Another employee, Glynn, reported to Farrell but was paid by a separate whollyowned Beneficial subsidiary. Beneficial appealed the conviction, arguing that the court applied
an improper standard for determining the criminal responsibility of a corporation. Corporation
argues that a corporation should not be held criminally liable for the conduct of its servants or
agents unless such conduct was performed, authorized, ratified, adopted or tolerated by the
corporations directors, officers or other high managerial agents. [Defendant wants MPC
2.07 standard]
2. Who is a high Managerial Agent: Having a title is not enough . . . must prove that the individual
was placed in a position by the corporation where he had enough power, duty, responsibility and
authority to act for and in behalf of the corporation to handle the particular business.
B. Issue
1. Is a corporation criminally liable for the unlawful actions of its employees acting within the
scope of authority delegated to them by the corporation?
C. Holding
1. Yes.
D. Reasoning
1. Where a corporation has placed an employee in a position where he has authority to act for the
corporation in the particular corporate business that is the subject of criminal prosecution, the
corporation is itself liable for the violation of law. The title of an individual within a corporation
should not be determinative of criminal responsibility. In fact, many low-level employees are
2.
E.
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VI.
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B.
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entrusted with the responsibility of the everyday operations of the corporation. In this particular
case, the disbursal of funds from the corporation to a state banking officials can be presumed to
be a corporate act, as the individuals employees themselves could not be expected to bribe the
officials out of their own pocket.
This case broadens the ambit of criminal responsibility for corporations to include liability for
actions taken by non-managerial agents within the corporation. It recognizes the reality that
many low-level employees have broad responsibilities to act on behalf of the corporation on a
daily basis, while officers and directors are frequently less engaged in the corporations day-today activities.
Rule
The quantum of proof necessary to sustain the conviction of a corporation for the acts of its
agents is sufficiently met if it is shown that the corporation has placed the agent in a position
where he has enough authority and responsibility to act for and in behalf of the corporation in
handling the particular corporate business, operation or project in which he was engaged at the
time he committed a criminal act.
People v. Lessoff & Berger
General Rule
Organizational criminal liability extends to entities other than corporations, including law
partnerships. Lessoff & Berger. If other partners stood to benefit from rogue partners unlawful
conduct, the entity may be held liable as a whole. Justification is to compel self- policing
amongst partners.
Facts
Lessoff, a lawyer, referred clients in personal-injury accident cases to a radiologist in Brooklyn
for examination and report. Lessoff instructed the radiologist to change MRI reports to delete
references to nontrautmatic damage and to abnormalities or injuries predating the accident.
At the time of the crimes charged in the indictment, the doctor was working undercover with the
DAs office during the Grand Jury investigation and was secretly recording his telephone
conversations with Lessoff.
The co-defendant in this case is the law partnership in which the defendant Lessoff is a partner.
Issue
Whether a law partnership may be indicted for crimes of fraud, and if so, whether a partnership
may be indicted if only one partner is involved in the alleged crimes.
Holding
Criminal liability for ones partners fraud is particularly appropriate in the case of a law
partnership. Not only do law partners benefit financially from the fruits of one partners
fraudulent conduct committed in the name of the firm, but there is a strong public interest in
regulating the ethics of the legal profession.
Reasoning
The Penal Law applies to a law firm, whether it be a partnership or a professional corporation,
and the law firm may be charged if one partner has committed a crime in the name of the law
firm. The plain language of Penal Law Section 10.00(7) authorizes an indictment of the
partnership on such facts. It provides that a person -- which includes a person charged with a
crime -- means, where appropriate, a partnership. Similarly, the section defining the crime of
VII.
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B.
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insurance fraud, section 176.00, provides that a person chargeable with the crime of insurance
fraud includes any firm, association or corporation; under the Partnership Law, a partnership is
an association of two or more persons to carry as co-owners of a business for profit. Section
10(1).
United States v. Hilton Hotels Corp.
General Holding/Rule
A corporation is liable under the Sherman Act for the acts of its agents in the scope of their
employment, even though contrary to general corporate policy and express instructions to the
agent.
Criminal liability may extend to a corporation even where its agent acts contrary to an express
policy of the corporation, as long as he does so within the scope of the authority delegated to him
by the corporation and the corporation stands to benefit from his act(s). Hilton Hotels.
Corporations may not insulate themselves from criminal liability by having a bullshit written
policy while encouraging or being willfully blind to their agents to contrary conduct.
Facts
In Portland, Oregon, hotels, restaurants, hotel and restaurant supply companies and other
businesses organized an association to attract conventions to the city. To finance the association,
association members were asked to make predetermined monetary contributions. To aid the
collections, Hilton Hotels Corp. (Hilton) (defendant) agreed to give preferential treatment to
suppliers who paid their contributions and boycotted those suppliers who did not. Hilton was
charged with violating 1 of the Sherman Antitrust Act which prohibits actions in restraint of
trade. Hiltons President testified that it was against corporate policy for a specific hotel to
condition purchases of supplies upon payment of a contribution to an association. Further,
Hiltons Portland hotel and his assistant testified that it was the hotels policy to purchase
supplies solely on the basis of price, quality, and service. Although the Portland Hiltons
purchasing agent was instructed not to take part in the boycott, the purchasing agent ignored the
order and threatened a supplier with loss of the hotels business unless the supplier financially
contributed to the association. The district judge instructed the jury that a corporation is
responsible for the acts and statements of its agents within the scope of their employment even if
the employees disregard official instructions or the corporations policies. Hilton was found
guilty and it appealed.
Issue
Is a corporation criminally liable under the Sherman Act, 15 U.S.C. Section:1 (the Act), for
actions taken by its agents in the scope of their authority, but counter to corporate policy?
Holding
Yes. Judgement Affirmed.
Reasoning
It is appropriate to hold the corporation liable for the acts of the individual agent because
insomuch as the Act violations are commercial offenses, it is the corporation that will profit from
the illegal activity and not the agent himself. Violation of the Act are in fact typically the result of
pressure to maximize profits, leading individual agents to go against a general corporate policy
for the sake of enhancing the profits of the corporation.
2. Corporate liability for violation of the Act is appropriate on account of the generally complex
business structures through which a violation occurs, making it difficult to identify the particular
agents that were involved in the unlawful activity. Even where the agents are identified and
prosecuted, it is ineffective as a deterrent as no consequences would befall the corporation itself.
3. This case represents a further step taken in law to hold corporations accountable for their
unlawful actions, even when done by an agent acting against corporate policy and procedures. It
attempts to maximize the deterrent effect by encouraging corporations to be more diligent in
supervising the business activities of its agents done on behalf of the corporation.
Criminal Intent Under Respondeat Superior
VIII.
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Note that common law jurisdictions have various theories of criminal respondeat superior
liability: some require a positive act/authorization of a managerial officer (clear demonstration of
intent), some where the act committed within the scope of the actors employment (imputable
intent), some where the unlawful act done benefits the corporation (implied intent).
United States v. Bank of New England, N.A.
Facts
Department of Treasury regulations promulgated by the Currency Transaction Reporting Act
require banks to file Currency Transaction Reports (CTRs) within fifteen days of customer
currency transactions exceeding $10,000 dollars. The Act imposes felony liability when a bank
willfully fails to file such reports as part of a pattern of illegal activity involving transactions of
more than $100,000 in a twelve-month period
On thirty-one separate occasions, McDonough withdrew from the Prudential Branch of the Bank
of New England more than $10,000 in cash by using multiple checks-- each one individually
under $10,000-- presented simultaneously to a single bank teller.
There is evidence that a bank auditor discussed the reporting requirements with the banks
tellers, there is support to the conclusion that the bank was well aware that McDonoughs
transactions should have been reported.
The Head teller Patricia Murphy knew that McDonoughs transactions were reportable, but on
one occasion, deliberately chose not to file a CTR on him because he was a good customer.
The Jury heard testimony that the bank employees regarded McDonoughs transactions as
unusual, speculated that he was a bookie, and suspected that he was structuring his transactions
to avoid the ACts reporting requirements.
Bank argues that the evidence did not suffice to show that it willfully failed to file CTRs on
McDonoughs transactions and that the trial courts instructions on knowledge and specific intent
effectively relieved the governments responsibility of proving that the bank acted wilfully.
Issue
Whether the trial courts instructions on knowledge and specific intent effectively relieved the
government of its responsibility of proving that the bank acting willfully?
Holding
No.
Reasoning
Willfulness is defined as a voluntary, intentional, and bad purpose to disobey the law.
2. The trial court properly instructed that the jury could infer knowledge if the Bank consciously
avoided learning about the reporting requirements; individual employees acting within the scope
of their employment is imputed to the Bank; and if any employee knew that multiple checks
would require the filing of reports, the bank knew it, provided that the employee knew it within
the scope of his employment.
3. A corporation cannot plead innocence by asserting that the information obtained by several
employees was not acquired by any one individual who then would have comprehended its full
import. Rather the corporation is considered to have acquired the collective knowledge of its
employees and is held responsible for their failure to act accordingly.
a) Since the Bank had the compartmentalized structure common to all large corporations, the
courts collective knowledge instruction was not only proper but necessary.
4. Given the fact that many employees knew about McDonoughs transactions, the jury could have
concluded that the failure by Bank personnel to, at least inquire about the reportability of
McDonoughs transactions constituted flagrant indifference to the obligations by the act.
Therefore, the evidence was sufficient for a finding of willfulness.
The Model Penal Code Rule
X.
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Important Note: Like in Beneficial Finance, modern corporate liability permits the acts and
intent of low-level operatives to be imputed to the corporation. HOWEVER, the MPC requires
the participation or approval of a high managerial agent as a prerequisite to corporate liability for
non-regulatory crimes.
Model Penal Code Section 2.07: Liability of Corporate Officers and Agents (pg. 27 in supp).
Generally
Section 2.07 creates a trifurcated scheme of corporate liability that draws intersecting lines
between acts and omissions, between true crimes and regulatory offenses, and between the
operatives who are the hands of the corporation and the policy makers who constitute its
mind.
Section 2.07(1)(a)
Adopts a broad respondeat superior theory of liability.
A corporation may incur liability for minor infractions and for non-Code penal offenses when a
legislative purpose to impose liability on corporations plainly appears, provided that the
conduct constituting the offense is performed by a corporate agent acting within the scope of his
employment and on behalf of the corporation.
The potential reach of (1)(a) liability rule is limited by the availability of a due diligence defense.
Proof that the high managerial agent having supervisory responsibility over the subject matter
of the offense employed due diligence to prevent its commission exonerates the corporation
from criminal liability.
Subsection (1)(a) seeks to limit respondeat superior liability to instances in which the high
managerial agent having supervisory authority has not done due diligence to prevent the
commission of the unlawful act(s).
Section 2.07(1)(b)
1. Pertains to omissions as opposed to acts. Subsection (1)(b) allows for criminal liability for
omissions of corporate duties imposed by law.
2. Provides that a corporation is accountable for failure to discharge specific duties imposed on
corporations by law.
3. Neither the text of this provision nor the comments address the question of whose omission may
lead to liability.
D. Section 2.07(1)(c)
1. By far the most restrictive.
2. A corporation will incur liability for true crimes -- that is, for an offense defined in the Penal
Code -- only if the conduct constituting the offense is authorized, commanded, solicited,
performed, or recklessly tolerated by the board of directors or a high managerial agent whose
acquiescence to the wrongdoing -- by virtue of his position of authority -- may fairly be regarded
as reflecting corporate policy.
a) The MPC defines high managerial agent as an officer of a corporation or an unincorporated
association, or, in case of a partnership, a partner, or any other agent of a corporation or
association having duties of such responsibility that his conduct may fairly be assumed to
represent the policy of the corporation or association.
3. Subsection (1)(c) prescribes criminal liability for offenses defined in the MPC (true crimes) if
that conduct is authorized, commanded, solicited, performed, or recklessly tolerated by the board
of directors of a high managerial agent whose acquiescence may be regarded as reflecting
corporate policy.
XII.
State v. Chapman Dodge Center, Inc.
A. General Holding/Rule
1. Where evidence other than a written policy suggests that the corporations intent (i.e., the intent
of its officer(s)) is contrary the unlawful act(s) committed by its agent acting within the scope of
his employment, the theories of respondeat superior liability are inapposite and therefore
criminal liability should not attach. Chapman Dodge Center.
B. Facts
1. In this case, car dealership owned by close corp owned by one person. General manager
committed license fraud not known to the owner. Court held that general manager was not a
high managerial agent.
2. Dealership and owner were charged with 20 counts of theft related to the dealerships failure to
pay sales tax on more than 100 cars.
3. Defendant owner only went to dealership about twice a month, the daily operations were done by
general manager. GM and accountant made decisions about payments of bills.
4. Owner told General Manager to pay all the taxes, and General Manager said that he did.
C. Issue
1. What criminal liability should a corporation bear for the unauthorized acts of its officers and
managers? Should a corporation be criminally responsible in the absence of a specific statute
which defines and describes the corporate act, prohibits that act, and establishes a specific
punishment therfor?
D. Holding
1. Court held that owner did not have the necessary intent and the actions of the manager was not
enough for corporate liability
a) Manager was not on board of directors or president or officer of corporation (not high managerial
officer) so it wasnt enough for corporate liability
E. Reasoning
1. When a corporation is accused of committing a crime which requires intent, it must be
determined who within the corporate structure had the intent to commit the crime. If the crime
was the product of a board of directors resolution authorizing its employees to commit specific
criminal acts, then the intent on the part of the corporation is manifest. However, holding a
corporation criminally responsible for the acts of an employee that is not authorized to perform
such an act may be inconsistent with basic notions of criminal intent, since such a posture would
render a corporate entity responsible for actions which it theoretically had no intention of
committing.
Class #3: Personal Liability in an Organizational Setting
Direct Participants
Absent a clear legislative intent to exclude corporate agents from personal responsibility for
crimes they commit, they cannot use the corporate entity as a shield against liability for [their]
own misdeeds.
I.
2.
IV.
A.
The recent convictions of Enrons top officials make it abundantly clear that corporate officers
are personally liable for crimes they commit during the course of their employment.
United States v. Dotterweich (Case discussed briefly in textbook)
Summary
Defendant Dotterweich was the president and general manager of a company that purchased
drugs from a manufacturer, repackaged them, and shipped them with a new label. Dotterweich
was convicted of a misdemeanor under the Food and Drugs Act of 1906, which prohibited the
shipment of adulterated and misbranded drugs in interstate commerce. The Supreme Court
upheld Dotterweich's conviction even though he did not directly participate in the proscribed
shipments. The Court reasoned that this was a public welfare offense where strict, vicarious
liability was appropriate because the president of a company ought to be aware of the regulations
associated with their business, and that the president was in a much better position than
members of the public to protect against the possible dangers of the product.
As long as he shared responsibility in the business process resulting in unlawful distribution, he
would be personally liable.
United States v. Park (case happened shortly after Dotterweich).
General Holding/Rule
1. A CEO is liable as the responsible corporate officer for violations of law committed by the
corporation, which he either had the ability to prevent before the fact, or the opportunity to
promptly correct after the fact.
2. Corporate officers may be held strictly liable for their corporations public welfare offenses
unless the conduct/circumstance giving rise to the offense was impossible to fix, even when their
individual wrongdoing at most amounted to an omission. Park. Public welfare offenses are by
definition deterrent measures deliberately taken by the legislature (or, as it were, regulatory
agency) that enacted them. Strict liability allows for maximum deterrence.
B. Facts
1. The defendant CEO of food corporation contested his conviction for violating federal regulations
regarding unsanitary conditions in which the corporation warehoused its goods. After inspecting
the corporations warehouses, federal inspectors notified the defendant CEO by letter of the
rodent infestation at the warehouses. Two years later, they returned and noticed that the
warehouses continued to be occupied by rodents.
C. Issue
1. Is CEO of corporation criminally responsible for unlawful actions of the corporation?
D. Holding
1. Yes. Reversed.
E. Reasoning
1. The Government established a prima facie case against the defendant CEO with evidence that the
defendant was put on notice of a violation of law committed by the corporation and that he both
failed to prevent the violation of law in the first place and subsequently failed to promptly correct
the unlawful activity. The defendant could only have avoided liability by demonstrating that he
was powerless to prevent or correct the violation of law, but he failed to do so.
2. The theory of liability announced by the majority in this case is known as the responsible
corporate officer doctrine. Under the doctrine, there must be evidence that defendant had, by
virtue of his position in the corporation, the responsibility and authority to prevent a corporate
violation of law, or to promptly correct a violation.
F. Dissent
1. The standard for conviction articulated by the majority is that of negligence that defendant had
a duty to maintain the sanitary quality of the food warehoused by the corporation and that, in
light of evidence that the food was in unsanitary conditions, the duty was breached and defendant
was criminally responsible. However, the instructions to the jury were much broader and
permitted a verdict of guilty upon a finding that defendant was responsible for the condition of
the food insomuch as he was the CEO of the corporation, while cautioning that that fact alone
did not require a finding of guilt. In the end, the instructions failed to counsel jurors with respect
to negligence, but instead left it to them to determine under what rationale defendant might be
responsible.
V. United States v. Jorgensen
A. General Holding/Rule
1. Where a corporation is guilty of a specific intent offense (e.g., fraud), that intent may be imputed
to the corporations officers in their individual capacities forat leastsuborning the criminal
conduct. Jorgensen.
B. Facts
1. Beef case. Raised their own cows until supply was too much, and then bought beef trim to mix in
with their meat (but did not disclose this and falsely advertised it as their pure brief).
2. Gregory Jorgensen knew about the mixing and gave the final order to purchase outside beef trim.
He told workers that this info was not to leave the plant.
C. Issue
1. Was there an intent to defraud?
D. Holding
1. Yes
E. Reasoning
1. The defendants believed the jury instructions should have said that a person is not responsible
for the acts performed by other people on behalf of a corporation, even if those persons are
officers, employees or other agents of the corporation.
2. The court says here that a corporate officer who is in a responsible relationship to an activity
within a company that violates provisions of federal food laws, such as meat misbranding, can
be held criminally responsible even if those persons are officers, employees or other agents of
the corporation.
F. Rule
1. A defendant can be held criminally responsible for the acts of other people who are officers,
employees or other agents of the company if the defendant is in a responsible relationship.
VI. United States v. Iverson
A. Facts
1. Defendant was a founder of CH2O, Inc., a company which blends chemicals to create numerous
products, including acid cleaners and heavy-duty alkaline compounds.
2. He personally discharged wastewater and ordered employees of CH20 to discharge the
wastewater in three places: (1) on the plants property (2) through a sewer drain at an apartment
complex that defendant owned, and (3) through a sewer drain at defendants home.
3. The District Court instructed the jury that it could find defendant liable under the CWA as a
responsible corporate officer if it found, beyond a reasonable doubt: (1) That defendant had
knowledge of the fact that pollutants were being discharged to the sewer system by employees,
(2) That defendant had the authority and capacity to prevent the discharge, and (3) that defendant
failed to prevent the on-going discharge of pollutants to the sewer system.
4. Defendant argues that the district court misinterpreted the scope of responsible corporate
officer liability.
B. Issue
1. Was the scope of responsible corporate officer liability misinterpreted by District Court?
C. Holding
1. No.
D. Reasoning
1. The question for the jury is whether the corporate officer had authority with respect to the
conditions that formed the basis of the alleged violations.
2. Under the CWA, a person is responsible corporate officer if the person has authority to
exercise control over the corporations activity that is causing the discharges. There is no
requirement that the officer in fact exercise such authority or that the corporation expressly vest a
duty in the officer to oversee the activity.
Conspiracy
Class 4: Plurality Requirement, Overt Act, and Knowing Participation
I.
I.
The theory of separately criminalizing conspiracy to commit a crime is that the creation of a
criminal group makes it more likely that crimes will be committed, and so the creation of that
group is itself a harm.
II.
Because conspiracy liability is predicated on a group danger rationale, a plurality of parties is
required. Thus, at least two actors must participate in the unlawful scheme.
III.
The government may prosecute only one member of the conspiracy, provided that the evidence
otherwise establishes a plurality of parties acting in concert.
IV. United States v. Stevens
A. General Holding/Rule
1. Where there is complete identity between a corporate officer and a corporation (i.e., he is the sole
officer and its his corporation), there is no conspiracy because theres only a single human actor.
Stevens. Makes sense: there must be two or more autonomous human minds for their to be a
conspiracy.
2. To establish that a conspiracy exists, the government must prove that a plurality of actors acted in
concert.
B. Facts
1. Stevens formed four separate corporations for the purpose of performing government contract
work. The corporations entered into a government contract with the U.S. Navy to build an
automated storage and retrieval system. The contract provided for periodic progress payments
from the Government as designated aspects of the project were completed.
2. Stevens misrepresented that certain work had been performed in sever requests for progress
payments.
3. The Jury focused on the issue concerning the alleged conspiracy between Stevens and his
corporations.
a) Can a person conspire with his own corporation, realizing that he is the primary (only) agent of
his own corporation?
b) Can we have a definition of conspiracy as it applies to a wholly owned corporation.
C. Issue
1. Can a person conspire with his own corporation, realizing that he is the primary (only) agent of
his own corporation?
2. Can we have a definition of conspiracy as it applies to a wholly owned corporation?
D. Holding
1. No
2. No
E. Reasoning
1. United States v. Hartley makes two important holdings:
a) A group of conspirators cannot escape conspiracy responsibility merely because they all act on
behalf of a corporation.
b) Liability for a conspiracy may be imputed to the corporation itself on a respondeat superior
theory.
2. In this case there is only one human actor, acting for himself and for the corporate entity which
he controls. The argument that a single human actor can be convicted of conspiracy under
Section 371 under the circumstances of this case flies in the face of the traditional justification of
criminal conspiracies.
3. This case lacks any interaction between multiple autonomous actors.
a) The threat posed to society by in a conspiracy charge arises from the creative interaction of two
autonomous minds. The societal threat is of a different quality when one human simply uses the
corporate mechanism to carry out his crime. The danger from agreement does not arise.
The Object Offense
I.
II.
Section 371 defines two categories of conspiracies that are distinguished by their criminal
objectives: (1) conspiracy to commit an offense against the United States (e.g. to violate a federal
criminal statute); and (2) conspiracy to defraud the United States in any manner or for any
purpose (e.g. to cheat or trick a government agency).
United States v. Arch Trading Co.
A. General Holding/Rule
1. The defraud clause: To conspire to defraud the United States means to cheat the government
out of property or money, but it also means to interfere with or obstruct one of its lawful
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 actions and purpose shall be defeated by misrepresentation,
chicane, or the overreaching of those charged with carrying out the governmental intention.
Hammerschmidt.
2. The offense and defraud clauses are not mutually exclusive and the government is not required to
choose only one theory on which to prosecute. In fact, even if the indictment only charges one
the government remains free to prosecute for the other. Arch Trading.
B. Facts
1. Arch Trading entered into a contract with Iraq to ship equipment purportedly for veterinary use.
2. In August, President Bush invoked the emergency powers provided to him by Congress, and
issued executive orders prohibiting US persons from traveling to Iraq and dealing with the
government of Iraq and its agents, in response to Iraq invading Kuwait.
3. Arch trading immediately attempted to enter Iraq to install the labroatory equipment that had
already been delivered. The Installation was accomplished.
4. Arch Trading was convicted of conspiracy to commit an offense against the US in violation of 18
USC 371; of disobeying the emergency executive orders, and of lying to the Department of
treasury's Office of Foreign Assets Control.
5. Arch Trading contends that (1) the indictment charging it with conspiracy to commit an offense
under Section 371 was defective because in the circumstances the company could only have been
charged with conspiracy to defraud.
C. Issue
1. Does this fall within Section 371?
D. Holding
1. Yes
E. Reasoning
1. When Congress provides criminal sanctions for violations of executive orders that it empowers
the President to issue, such violation constitutes an offense for the purposes of Section 371.
2. The two prongs of 371 are not mutually exclusive: To conspire to defraud the US means to cheat
the government out of property or money, but it also means to interfere with or obstruct one of its
lawful 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.
Hammerschmidt v. United States.
3. Because of this overlap, given conduct may be proscribed by both of the section clauses. The fact
that a particular course of conduct is chargeable under one clause does not render it immune
from prosecution under the other.
III.
United States v. Licciardi (Mens Rea)
A. General Holding/Rule
1. Mere association is insufficient to prove participation in a conspiracy. The defendant must know
the conspiracy exists, must know its general scope and purpose, and must voluntarily join in the
2.
B.
1.
2.
C.
1.
D.
1.
E.
1.
2.
scheme. But knowledge alone is insufficient. The defendant must (1) intend to agree and (2)
must possess the mental state required to commit the object offense.
United States or an agency thereof is insufficient to warrant prosecution under 371 because it
isnt necessarily so that the conspirators intended to commit an offense against or defraud the
United States. Licciardi. This is especially so whenunder the offense clausethe underlying
offense is a low-level regulatory violation that carries less significant penalties. Note, however,
that the applicability of the defraud clause acts as a limit to this mens rea requirementif the
conspirators know that their conspiracy will result in false statements being made to the
government, even when done so unwittingly by third persons, then it might be fair to say that
there is a conspiracy [that defrauds] the United States. Id. (concurring opinion).
Facts
Licciardi and several wine growers hatched a scheme to misrepresent the variety and origin of
grapes they sold so they could charge prices that greatly exceeded the actual value of the grapes.
Licciardi argues that there was no evidence that he had an intention to defraud the United States
(the BATF).
Issue
Did the government prove that Licciardi had an intent to defraud the US by impairing the
functions of BATF?
Holdng
No
Reasoning
The incidental effects of Licciardis actions would have been to impiar the functions of the BATF
does not confer upon him the mens rea of accomplishing that object.
A regulatory scheme, which does not have criminal penalties attached to it, has been converted
by the governments theory into a system whose violation by commercial cheating is subject to
the severe felony penalties of the conspiracy law.
Vicarious Liability
I.
A.
1.
B.
1.
C.
1.
D.
1. Yes. Affirmed.
2. There is no evidence that the Defendant took affirmative action to renounce his participation in
the conspiracy. Therefore, the conspiracy is continuous and covers the substantive offenses
committed by the co-conspirator alone.
E. Reasoning
1. Involvement in the conspiracy to commit a substantive offense is sufficient to impute liability of
the commission of the substantive offense by any one co-conspirator to all other co-conspirators.
The criminal intent to do the unlawful act is established in the formation of the conspiracy itself.
If the requisite overt act in a conspiracy can be accomplished by a single conspirator, the court
did not see why that act is not imputable to all co-conspirators for the purpose of holding them
responsible for the substantive offense.
2. The rule of the majority in this case is very straightforward. Simply put, the overt acts of one
conspirator, done in furtherance of the conspiracy, are imputable to co-conspirators,
notwithstanding the fact that they themselves may have taken no action, beyond entering into the
conspiracy, toward committing the substantive offense.
F. Dissent
1. The evidence only showed that, at some previous time, the Defendant had conspired with his
brother to commit the substantive offenses. This alone is not sufficient to hold the Defendant
criminally responsible for those offenses. By doing so, the majority creates a vicarious criminal
liability broader than the civil liability of a partner in a business who is liable for the acts done by
a co-partner.
Withdrawal and Termination
I.
II.
III.
A.
1.
B.
1.
Conspiracy is ordinarily a continuing offense. Its natural termination point is when the
conspiratorial objective is achieved or all of the conspirators have disavowed its purpose.
Individual members may terminate their own participation in an ongoing conspiracy by
withdrawing from it -- i.e., by taking affirmative steps to disassociate themselves from the
conspiracy and its criminal objectives.
United States v. Jimenez Recio
General Holding/Rule
A conspiracy does not end by virtue of the fact that the government has defeated its purpose by,
e.g., apprehending a conspirator and instructing him to continue acting in accordance with the
conspiracys design so as to apprehend the remaining conspirators. Jimenez Recio. Makes sense
because the harm of the conspiracy is the groupthink, which has not abated merely because one
was apprehended unbeknownst to the rest. The intent to commit a crime remained, ergo so did
conspiracy liability.
Facts
The police seized a large amount of drugs from a truck. The truck drivers cooperated with the
police and agreed to continue on to the trucks destination and meet Francisco Jimenez Recio and
Adrian Lopez-Meza (defendants) so they could pick up the drugs as planned. The truck drivers
did so and transferred the drugs the defendants, who were subsequently pulled over and arrested.
C.
1.
D.
1.
E.
1.
2.
The defendants were charged with conspiracy to possess and distribute drugs. A jury convicted
the defendants, the trial judge ordered a new trial, and the second jury convicted the defendants
as well. The United States Court of Appeals for the Ninth Circuit affirmed, holding that a
conspiracy terminates when the government intervenes, defeating the conspiracys objective. The
prosecution appealed.
Issue
Does the conspiracy terminate when the government intervenes?
Holding
No.
Reasoning
United States v. Cruz (Cruz Rule): A conspiracy terminates when there is affirmative evidence
of abandonment, withdrawal, disavowal or defeat of the object of the conspiracy.
A conspiracy does not automatically terminate simply because the Government, unbeknownst to
some of the conspirators, has defeated the conspiracy object.
B. Because both statutes are in pari materia (of the same subject matter), they are subject to the rule
that they should be given parallel construction. Thus, principles developed in the mail fraud
cases apply with equal force to wire fraud prosecutions, and vice versa.
C. Whoever, having devised or intending to devise any scheme or artifice (1) to defraud; (2) or for
obtaining money or property by means of false or fraudulent pretenses, representations, or
promises; [uses the wires] for the purpose of executing such scheme, shall be fined under this
title or imprisoned not more than 20 years, or both. [*numbers and semicolons inserted for
clarity; prolix description of uses the wires omitted*]
1. [ditto up to $1M and 30 years if major disaster/emergency or financial institution].
Schemes to Defraud
III.
A.
1.
B.
1.
2.
a)
b)
3.
a)
b)
C.
1.
a)
2. Defendant argues that because the businesses received their ads in the program, and they were
able to attend the concert, that they were not deprived of money or property because they
received what they paid for.
a) Court disagrees. Court says that the businesses and concert-goers intended that part of their
payment be sent as contribution to a charitable organization.
3. Defendant also argues that there is insufficient evidence of a scheme to defraud because he did
not control the telemarketers solicitations, and the telemarketers did not represent to consumers
that all of the concert proceeds would go to charity.
a) Court rules that a reasonable jury could have found that Hawkey intentionally engaged in a
scheme by which money intended and solicited for charitable purposes was diverted from its
designated charitable purpose to his personal benefit through false representations.
IV. Difference between Fraud and False Pretenses
A. False Pretenses
1. Committed when the actor, intending to defraud knowingly makes a false representation of a past
or present fact to induce another to part with title to property.
2. Promises made as to the future do not qualify under most false pretense statutes.
3. False promises also dont fall within the category of false pretenses, even though the promisor
may be viewed as misrepresenting a fact.
4. False pretenses is fraught with technicalities.
B. Fraud
1. Fluid concept: courts have been unwilling to confine the term to a single, definite meaning.
2. Fraud consists of an effort to gain an undue advantage or to bring about some harm through
misrepresentations or breach of duty.
V. Materiality
A. Although mail and wire fraud statutes contain no express materiality requirements, courts have
traditionally assumed that false or fraudulent representations must be material.
B. This is because courts infer that congress meant to incorporate the established meaning of those
terms.
C. Restatement (second) of torts: A statement is material if
1. A reasonable man would attach importance to its existence or nonexistence in determining his
choice of action in the transaction in question; or
2. The maker of the representation knows or has reason to know that its recipient regards or is
likely to regard the matter as important in determining his choice of action, although a reasonable
man would not so regard it.
VI. Lustiger v. United States
A. General Holding/Rule
1. Though discrete averments may be true or at the very least not lies (i.e., half-truths) in a
vacuum, they may be used with the intent to deceive/defraud and therefore run afoul of the mail
fraud statute (when mailed). Lustiger.
B. Facts
1. Lustiger formed the Lake Mead Land and Water Co. which bought or acquired options to buy
approximately 64 sections of land in Mohave County, Arizona. The company then subdivided the
sections and offered them for sale to the public, calling the subdivision Lake Mead City.
2. Between September 1960 to May 1962, the company advertised the land in news papers and
other publications across the country. Individuals who responded received an Investors Kit
that contained a 32-page color brochure (which formed the basis for Lustigers mail fraud
indictment).
3. The Brochure
a) The brochure contained numerous statements describing the asserted advantages of Lake Mead
City, including photographs purporting to depict scenes in the area. By March, three thousand
lots were sold.
b) Charges against Lustiger state that advertising materials contained misleading deceptive, false
and fraudulent pretenses, representations and promises concerning the property. These
paragraphs further charge that these alleged misleading, deceptive, false, and fraudulent
pretenses were part of a scheme by Lustiger to defraud land purchasers...
c) One of the misleadings was as it relates to the availability of water. The brochure contained
photographs which depict water scenes on or around Lake Mead.
(1) The favorite swimming hole
4. Defendant argues that the courts presumptive finding that the representations were misleading,
deceptive and false was not supported by the requisite degree of proof.
a) Court says that the statements, photographs, and maps unaccompanied by true statements
concerning the lack of available water, could reasonably have lead a person of average
intelligence and experience to believe that all parcels offered for sale had reasonable access to a
water supply. While the statements in the advertising materials may not have been literally false,
taken as a whole, they were fraudulently misleading and deceptive.
C. Holding
1. If a scheme is devised with the intent to defraud, and the mails are used in executing the scheme,
the fact that there is no misrepresentation of a single existing fact is immaterial.
a) It is only necessary to prove that it is a scheme reasonably calculated to deceive, and that the
mail service of the US was used and intended to be used in the execution of the scheme.
2. Deceitful statements of half truths or the concealment of material facts is actual fraud violative of
the mail fraud statute.
3. Only a few buyers saw the property before signing a purchase contract, and they relied almost
entirely on the advertising materials in making their purchase.
Protected Interests
VII.
2.
B.
1.
2.
a)
3.
a)
4.
5.
6.
a)
7.
8.
C.
1.
D.
1.
also 18 U.S.C. 1346 (defining scheme or artifice to fraud to include deprivations of the
intangible right of honest services).
The mail fraud statute is limited in scope to the protection of private property rights. McNally.
Congress enacted 1346 one year after McNally to ensure the intangible right of honest services
remained covered by the statute.
Facts
Three defendants: Greensphan, George, and Yonan. Greensphan, who was a cabinet supplier and
owner of Accurate Box Corporation, paid Yonan, Zeniths purchasing agent, kickbacks to ensure
that Zenith would continue to purchase Greensphans cabinets.
Yonan was in charge of negotiating with cabinet vendors:
His responsibility was to send out the blueprints and gather quotes, and where the prices were
too high, to try to negotiate it down to a proper level.
Yonan was given responsibility for finding a supplier of cainets for Zentihs newly conceived
Circle of Sound product.
Greensphan, owner of Accurate Box, was the sole bidder on the supplier of these cabinets.
Theirfore Yonans supervisor thought accurates prices to be fair and reasonable, but was unsure
if it was competitive in the absence of other bidders.
Greensphan agreed to pay Yonan $1 per cabinet kickback on the model 565 Circle of Sound unit
and later per cabinet kickbacks on other models because he was afraid he was otherwise going to
lose Zeniths business.
When Greensphan asked Yonan how the kickbacks were to be paid, Greensphan was told to pay
A & G woodworking Co.s commission invoices (through George). Greensphan never related
these events to anyone at Zenith.
In December 1967, Accurate received commission invoices from Georges A & G Woodworking
Co. even though neither George nor A&G provided any services to Accurate. Accurate paid these
invoices on the basis of a commission per unit on the types of models it shipped to Zenith.
Greensphan also gave George a $3,000 accurate check payable to himself, which he cashed and
gave to George because he was fearful of losing Zeniths business.
Government believed that the kickbacks to Yonan were accomplished by Greensphans payment
of Georges companys ficticious commission invoices, with George then acting as a kickback
conduit to Yonan.
Zenith had a conflict-of-interest policy providing that no gratuities of any nature were to be
bestowed on its Purchasing Department employees by suppliers. Apparently Greensphan knew
about this because he received the letters that were sent out to the suppliers.
Issue
The statute requires the existence of a scheme to perpetrate this fraud, and the question of
evidentiary sufficiency boils down to whether the Government has proven that the
defendants contemplated that Zenith suffer the loss of Yonans honest and loyal services.
Holding/Reasoning
Defendant argued that there was no fraud because (1) the kickbacks were never shown to come
out of Zeniths pockets, as opposed to Greensphans, (2) because Yonan was never shown to
provide or secure any special services for Greensphan and his company, and (3) because Zenith
was never shown to be dissatisfied with Accurates cabinets or prices.
2. Court rules that it is unnecessary for the government to prove that anyone actually be defrauded.
3. Not every breach of fiduciary duty (where an agent secretly profits from his agency) is criminal
fraud. However Yonans duty was to negotiate the best price possible for Zenith or at least to
inform Zenith that Greensphan was willing to sell his cabinets for substantially less money. Not
only did Yonan secretly earn a profit from his agency, but also he deprived Zenith of material
knowledge that Greensphan would accept less profit.
4. Yonans fraud: Yonans holding himself out to be a loyal employee, acting in Zeniths best
interests, but actually not giving his honest and faithful services, to Zeniths detriment (G would
have accepted less profit).
5. Court rules that the critical element is fraudulent intent, and there undoubtedly evidence of a
scheme. Court concludes that there is sufficient evidence to find that each defendant had the
intent to defraud Zenith of Yonans loyalty and honesty.
VIII.
Carpenter v. United States (Money or Property Requirement)
A. General Holding/Rule
1. Deprivation of an intangible property right is also sufficient for 1341. Carpenter. E.g.,
divulging the contents of not-yet-published materials to others is a violation of the materials
owners property right in them, as the owner has an interest in their confidentiality prepublication. It doesnt matter how minute the discrete loss in business may be.
2. The mail fraud statute is limited in scope to the protection of private property rights. McNally.
Congress enacted 1346 one year after McNally to ensure the intangible right of honest services
remained covered by the statute.
B. Facts
1. Winans became a reporter for the WSJ, and then became one of two writers of a daily column
Heard on the Street
2. Heard on the street discussed selected stocks or group of stocks, giving positive and negative
information about those stocks and taking a point of view with respect to investment in the
stocks and its reviews.
a) Winans regularly interviewed corporate executives to put together perspectives on stocks that
would be highlighted in upcoming columns, but for the columns at issue here, none contained
corporate inside information.
3. The District Court found that the heard column does have an impact on the market, and
affected the rice of the stocks which it examined.
4. The policy of the journal was to not to share information before the column was published; it
was considered confidential. However, Winans entered into a scheme with Brant and Felis, both
a part of Kidder Peabody brokerage, to give them advance info as to the timing and contents of
the heard column. They, and one more conspirator named david clark, bought or sold stock
based on the probable impact of the column on the market. The profits were to be shared.
5. Over a four month period, the brokers used information given by Winans on about 27 heard
columns, and the net profits from these trades were about $690,000.
6. In November 1983, correlations between the heard articles and trading in the Clark and Felis
accounts were noted, and inquiries began. Soon, the SEC began an investigation. At first all
parties denied the allegations, but after a quarrel, Winans and Carpenter went to the SEC and
C.
1.
2.
3.
D.
1.
2.
3.
4.
5.
a)
b)
c)
6.
IX.
A.
1.
revealed the entire scheme. Brant plead guilty under a plea agreement and became a witness for
the government.
Issue
Defendants assert that (1) their activities were not a scheme to defraud the Journal within the
meanings of the mail and wire fraud statutes, and (2) They did not obtain any money or property
from the Journal, which is a necessary element of the crime under a prior case in McNally v.
United States. The confidential info was intangible property outside the reach of section 1341.
In Mcnally, the court held that the mail fraud statute does not reach schemes to defraud citizens
of their intangible rights to honest and impartial government, and that the statute is limited in
scope to the protection of property rights. Defendants argue, therefore, that the journals
prepublication confidentiality for the column was no more than intangible consideration outside
the reach of section 1341, and that the law protect against injury to reputation.
Defendants also argued that Winans conduct was a violation of workplace rules, and not
fraudulent activity that is proscribed by the mail fraud statute.
Holding
Court says this case is not like Mcnally. Confidential business information has long been
recognized as property. And the Journal had the property right in keeping confidential and
making exclusive use, prior to publication, of the schedule and contents of the Heard columns.
The Journal, as Winans employer, was defrauded of much more than its contractual right to his
honest and faithful service, an interest to ethereal in itself to fall within the protection of the mail
fraud statute.
Here, the object of the scheme was to take the Journals confidential business information, the
publication schedule and contents of the heard column, and its intangible nature does not make it
any less property protected by the mail and wire fraud statues.
The court says that there neednt be shown a monetary loss to the journal, and that it is sufficient
that the Journal has been deprived of its right to exclusive use of the information, because
exclusivity is an important aspect of confidential business information and most private property.
Court deny defendants second argument
Sections 1341 and 1343 reach any scheme to deprive another of money or property by means of
false or fraudulent pretenses, representations or promises.
The term to defraud has an understanding of wrongdoing one in his property rights by
dishonest methods or schemes, and usually signify the deprivation of something for value by
trick and deceit.
Court says, here, that Winans had a fiduciary relationship with the Journal to keep the special
knowledge free from exploitation from his own personal benefit, or any one elses benefits.
Court says that this does fall under mail and wire fraud statues because the journals business
information that it intended to be kept confidential was its property; the declaration to that effect
in the employee manual merely removed any doubts on that score and made the finding of
specific intent to defraud that much easier.
Cleveland v. United States
General Holding/Rule
In order to reach the level of fraud contemplated by the statutes, the object of the fraud must be
property in the victims hands. Cleveland. Falsifying a license application does not reach the
level of mail fraud because a license is not property of the licensor, even though it may be to the
licensee and money may be made with that license. The purpose of the licensing scheme was
regulatory and not economic.
B. Facts
1. Louisiana law allows certain business to operate video poker machines. However, the
prospective owners would have to apply for a license from the state.
2. The license must meet suitability requirements designed to ensure that licensees have good
character and fiscal integrity.
3. Gred Goodson and his family formed a limited partnership, Truch Stop Gaming (TSG), in order
to participate in the video poker business at their truck stop in Slidell Louisiana.
4. Cleveland was a New Orleans attorney who assisted Goodson in preparing TSGs application for
a video poker license.
5. The application required TSG to identify its partners and to submit financial statements for all
partners. It also required TSG to affirm that the listed partners were the sole beneficial owners of
the business and no partner held an interest in the partnership merely as an agent or nominee, or
intended to transfer the interest in the future.
6. Goodson put his two adult children as the sole beneficial owners of the partnership. The
application also showed that Goodson and Clevelands law firm had loaned the children all initial
capital for the partnership and that Goodson was TSGs general manager.
7. They received the license and renewed it for three years.
8. In 1996 FBI investigated Goodson and Cleveland for scheming to bribe state legislatures to vote
in a favorable manner toward the video poker industry.
9. In terms of the mail fraud, the indictment alleged that Cleveland and Goodson violated Section
1341 by fraudulently concealing that they were the true owners of TSG in the initial license
application and three renewal applications mailed to the State.
10. Apparently they concealed their ownership interests, according to the Government, because they
had tax and financial problems that could have undermined their suitability to receive the license.
11. Defendants arguments
a) Cleveland moved to dismiss the mail fraud counts on the ground that the alleged fraud did not
deprive the state of property under 1341.
b) On appeal Cleveland moved to dismiss again by arguing that LA had no property interest in
video poker licenses, relying on several court of appeals decisions holding that the government
does not relinquish property for purposes of 1341 when it issues a permit or license. Court of
appeals still affirmed conviction bound by US v. Salvatore, which held that Louisiana video
poker licenses constitute property in the hands of the State.
C. Issue
1. Whether false statements made in an application for a state license fall within the federal mail
fraud statute (1341).
D. Holding
1. According to McNally and Congress, section 1341 can be used to protect property rights and the
intangible right of honest services.
2. Court says that The licensing application and scheme is not an intangible right of honest services.
The question is whether the government regulator parts with property when it issues a license.
3. Court holds that 1341 does not reach fraud in obtaining a state or municipal license of the kind
here involved, for such a license is not property in the government regulators hands.
E. Reasoning
1. The statute establishes a typical regulatory program. It licenses, subject to certain conditions,
engagement in pursuits that private actors may not undertake without official authorization. It
resembles other licensing schemes long characterized by the Court as exercise of state police
powers.
2. State provided two reasons to why theres a proprietary interest:
a) The state receives a substantial sum of money in exchange for each license and continues to
receive payments from the license as long as it remains in effect.
b) The state has significant control over the issuance, renewal, suspension, and revocation of
licenses.
3. Court responds by saying that it cant be property because the state receives all that money not
while the licenses remain in its own hands, but only after they have been issued to licensees.
4. If they said states have a property interest in this license, they could say the state has a property
interest in any license which are purely regulatory and not economic.
5. Government also doesnt allege that Cleveland defrauded the State of any money to which it was
entitled by law. The government responds by saying that Cleveland frustrated the States right to
control the issuance, renewal, and revocation of video poker licenses: The right to chose the
persons to whom it issues video poker licenses
a) Court says these intangible rights of allocation, exclusion, and control amount to no more than
Louisianas sovereign power to regulate.
X. Pasquantino v. United States
A. General Holding/Rule
1. A plot to defraud a foreign government of tax revenue is covered by the fraud statutes because
tax revenue is property. Pasquantino. The difference between this case and Cleveland lies in the
object of the fraudhere, the whole point of the fraud was not paying taxes, which is plainly
economic; in Cleveland, though the defendants motives were economic, the only thing lost to
the government was its ability to safely rely on the information contained in an application for
the license. Ginsburg dissents on the premise that our fraud statutes shouldnt reach extrajurisdictional victims (i.e., foreign governments).
B. Facts
1. Smuggling in liquor to Canada to avoid the large tax at the border.
C. Wire Fraud Issue
1. Two elements
a) The defendant engage in a scheme or artifice to defraud
b) The object of the fraud be money or property in the victims hands
2. Court says for the latter, the property was the tax that was owed to Canada. The object of the
scheme was to deprive Canada of money legally due, and their scheme thereby had as its object
the deprivation of Canadas property.
3. For the first element, government says that this was a scheme because the evidence showed that
petitioners routinely concealed imported liquor from Canadian officials and failed to declare
those goods on customs forms. This was a scheme designed to defraud by representations.
D. Dissent
1. The court has ascribed an exorbitant scope to the wire fraud statute, in disregard of our repeated
recognition that congress legislates the backdrop of the presumption against extraterritoriality
2. Defendants can be extradited to stand trial in Canada; those courts are in the best position to
decide whether, and to what extent, the defendants have defrauded the governments of Canada
and Ontario.
18 U.S.C 1030
defines 7 categories of crimes that targets harms resulting from accessing protected computers
without authorization or in excess of ones authorization
Defendant argues that the jury instructions on the damage element of the offense were
incorrect
Issue:
Does 1030s language of one or more individuals apply to corporations and what sort of
damage does 1030 include?
Holding:
The statute covers damage to one or more individuals, which includes corporations. Nothing in
the statute or legislative history shows that Congress wanted to exclude corporations from the
statute.
In the calculation of damages, its okay to consider what measures were reasonably necessary to
restore and resecure the data, program, system, or info that was damaged. The court looked at
direct expenditures (e.g., new software) as well as the value of the time of the employees who
had to work on fixing the damage.
unauthorized searches in the IRS database. Note that the unless clause in 1030(a)(4) is meant
to distinguish computer fraud from computer trespass.
Class #7: Securities Fraud
Willfullness
Violations of the Securities Exchange Act constitute crimes only if they are committed
willfully.
Insider Trading
-
Insider Trading
prosecuted under the general antifraud provision, 10b of the Securities Exchange Act and SEC
rule 10b-5
Securities Exchange Act 10b:
prohibits use of manipulative or deceptive devices in connection with the purchase or sale of
securities in violation of SEC rules and regulations
SEC Rule 10b-5:
cannot employ a device, scheme, or artifice to defraud,
to make any untrue statement of a material fact or omit any such fact necessary to make the
statement not misleading; or
engage in a transaction, practice or course of business that would operate as a fraud or deceit
Classical Theory:
Chiarella v United States
Facts:
Petitioner worked for a financial printing company, Pandick Press, as a markup man. Petitioner
handled documents announcing corporate takeover bids. The names of the acquiring and
takeover corporations were disguised, but Petitioner was able to deduce the companies by other
information on the documents. Petitioner purchased stock in the target companies and sold the
shares immediately after the takeover attempts were announced to the public, making $30,000 in
profit over a 14 month period.
In May 1977, Petitioner entered into a consent decree with the Securities Exchange Commission
(SEC) to return his profits to the sellers of the shares. In January 1978, he was indicted and later
convicted on 17 counts of violating Section: 10b and SEC Rule 10b-5.
Issue:
Did defendant violate section 10b by failing to disclose the impending takeover before trading in
the target companys securities?
Holding:
No. Silence does not amount to fraud under Section:10(b) if there is not a duty to disclose based
on a confidential relationship between the transacting parties.
There could be no fraud absent a duty to speak. Here, defendant was not an agent or fiduciary or
a person in whom the sellers place their trust and confidence in. He was not a corporate insider
and did not have a duty to disclose by merely having possession of nonpublic market
information.
Misappropriation Theory:
United States v OHagan
Facts:
Respondent was a partner in a law firm, Dorsey & Whitney, which was representing a company
that was potentially tendering an offer for common stock of the Pillsbury Company.
Respondent was not personally involved in the representation, but he was aware of the
transaction enough to know that if he purchased Pillsbury securities now that they would
increase in value once the offer went through. Respondent was going to use the profits from this
transaction to replace money that he embezzled from the firm and its clients.
After the offer went through, he made a $4.3 million profit. The SEC investigated Respondents
transactions and claimed he violated Section:10(b) and Section:14(e) for misappropriating
confidential information.
Issue:
whether Respondent violated Section:10(b) and Rule 10b-5 when he misappropriated nonpublic
information to personally benefit through the trading of securities.
Holding:
Respondent did violate Section:10(b) and Rule 10b-5 because all of the element of the rule were
met. Respondent did use deceit in connection with the purchase of securities. He did not disclose
to the firm or the client that he was using the nonpublic information, and his use of it was at the
expense of the client. He did not necessarily have to deceive the seller in order to violate the
Rule. As a matter of public policy, it would not make sense to limit the scope of the Act to only
prohibit certain kinds of activities that endanger a fair market.
D committed fraud in connection with a securities transaction, and thereby violated 10b and
Rule 10b-5, when he misappropriated confidential info for securities trading purposes, in breach
of a duty owed to the source of the info, his employer. The fraud was consummated when,
without disclosure to his firm, he used the info to trade.
Tipper/Tippee Theory
Dirks v Securities and Exchange Commission
Facts:
Dirks worked at a broker-dealer firm that specialized in providing investment analysis of
insurance company securities to investors. Dirks received info from an insider that Equity
Funding of America was vastly overstated as a result of fraudulent corporate practices.
Dirks investigated the allegation and interviewed other employees who corroborated the
fraudulent allegations.
He contacted a bureau chief at The Wall Street Journal and offered his findings for the purpose of
exposing the fraud. The bureau chief, fearing a libel suit, declined to pursue it. During this time,
Dirks told investors and clients about the fraud, and they reacted by selling their stake in the
company. When the stock was being heavily traded and dipped from $26 to $15, the New York
Stock Exchange halted trading and the Securities and Exchange Commission, investigated and
found fraud. Respondents then filed suit against Dirks for violations of Section:10(b) of the
Securities and Exchange Act of 1934 for using the insider information and perhaps receive
commissions from those clients. The trial court and appellate court agreed with Respondent,
reasoning that anytime a tippee knowingly has inside information that they should publicly
disclose it or refrain from acting upon it.
Issue:
whether Dirks violated Section:10(b) when he disclosed material nonpublic information to
clients and investors.
Holding:
The United States Supreme Court held that Section:10(b) should not be read so broadly as to
hold tippees liable when they use inside information received by insiders who were not
breaching their fiduciary duties in their disclosure. The Court held that the insider must first
breach a fiduciary duty and then the tippees conduct will be examined to see if they breached a
duty.
A tippee is only liable if (1) tipper had duty (& economic motive for disclosing) (2) tipper has
breached a duty, and (3) tippee knows or should have known that the tipper passed the info on to
him improperly.
1001 expressly states false statements made in any matter within the jurisdiction of any
department or agency of the United States
a criminal investigation falls within any matter and the FBI and Secret Service qualify as any
department or agency
Jurisdiction was established by the FBIs authority to investigate since the FBI is authorized to
detect and prosecute crimes, under federal statute. and the Secret Service is authorized to protect
the president
Was the conduct within the jurisdiction of a department or agency of the US?
Holding:
Yes. the subcontract clearly stated that the canopies would be subject to inspection by the Navy
and the canopies were shipped directly to the Navy
the scheme was intended to deceive both Grumman and the Navy and thus is within the
jurisdiction of an agency of the US within the meaning of 1001
No. while a false statement made to the legislative branch in the course of investigation would
qualify under the statute, this statement was not made specifically as a part of an investigation.
Rather, this event TRIGGERED an investigation (would be different if the investigation was
ongoing when the alleged violation occurred)
False Promises
Exculpatory No Doctrine
Brogan v United States
Facts:
Brogan, a union officer, was convicted of accepting unlawful cash payments from an employer
and making a false statement within the jurisdiction of a federal agency in violation of 18
U.S.C.S. 1001.
He argued on appeal that his answer of "no" to agents' questions during initial investigation was
an "exculpatory no," the central doctrine being that a simple denial of guilt did not come within
1001.
Holding:
The court affirmed the conviction and held that 1001 covered "any" false statement, and the
word "no" in response to a question assuredly made a "statement."
The court held that the plain language of 1001 admitted of no exception for an "exculpatory
no."
The court held that neither the text nor the spirit of the Fifth Amendment, U.S. Constitutional
Amendment V, conferred a privilege to lie.
Proper invocation of the Fifth Amendment privilege against compulsory self-incrimination
allowed a witness to remain silent, but not to swear falsely.
Materiality
1001 includes a materiality requirement
Test for materiality:
whether the statement has a natural tendency to influence or is capable of influencing any
governmental action or decision
focus is on the intrinsic capacity to influence, not its actual effect
neither actual influence nor reliance need be shown
Multiple Punishment
Double Jeopardy Clause prohibits:
1. prosecution for the same offense following conviction
2. prosecution for the same offense following acquittal
3. imposition of multiple punishments for the same offense
- Offense are not the same for double jeopardy purposes if each requires proof of an element that
the other does not.
-If each offense requires proof of a fact that is not required by the other, multiple punishments
are permitted, even though the evidence required to establish each crime may substantially
overlap.
Holding:
The statute does not specify an intent to defraud as an element to be proved
the statute is silent as to motive and criminal intent and only specifies the claims be submitted
with a knowledge that they are false, fictitious or fraudulent
main purpose of 287 is to assure the integrity of claims and vouchers submitted to the
government
Perjury and False Declarations
18 USC 1621 perjury statute
o Must be under oath, not just to any government official
o Statement must be material and false, and D knows it to be false (willfulness required)
o Perjury statute applies to a broader range of proceedings
o Perjury statute contains more rigorous proof requirements on the issue of falsity
18 USC 1623 false declaration statute
o Applies in proceedings before or ancillary to any grand jury proceedings (including
depositions per Dunn note case)
o Narrower range of proceedings than 1621
Also allows for recantation defense before perjury is discovered
o Broader in that you do not need 2 witnesses, which you do need in 1621
Both 1621 & 1623 punish making false statements under oath
Difference in the statutes:
o False declarations statute allows a limited defense of recantation
o False declarations statute does not require the 2 witness rule
18 USC 1622 is subordinating another to commit perjury
o Whoever procured another to commit any perjury is guilty of subordination of perjury
Can you be liable for I dont remember?
o Need to somehow prove that his claim to not remembering is a lie, difficult burden of
proof for prosecution
Making Material False Statements
Similar to 1001, must be a false statement on a material matter and does not necessarily have
to have any actual effect, if it has the tendency or capacity to have an effect on the proceedings
If prosecutor did not know witness was perjuring himself, then D must show that the jury
probably would have acquitted D if the witness testified truthfully
o If prosecutor knew or should have known of the perjury, D must show a reasonable
likelihood that the perjured testimony could have influenced the jury
Two-Witness Rule
Evidentiary rule that prohibits basing a perjury conviction solely on an oath against an oath
o Equally honest witnesses may have different recollections of an event
o Something more than one persons word against another is required
Meant to protect a truthful witness from unfounded charges raised by someone aggrieved by
the witness testimony
However, the false declarations statute 1623(e) expressly abandons the 2 witness rule
o Proof beyond a reasonable doubt is enough, regardless of the number of witnesses or
other type of evidence
o Further, if D makes 2 statements under oath making it so that 1 must be false, that is
sufficient to prove perjury even if it is unclear which statement is false
Both must be material to the point in question and irreconcilably inconsistent
1621
o Traditional common law perjury where there are 2 witnesses demonstrating that a
statement is false
o Modified 2 witness rule in Davis allows for witness own statement as the second
witness
1623
o 2 inconsistent statements are actionable for prosecution, without proving which one is
false
Perverse disincentive to come forward with the truth after having already lied once, because then
his contradiction will make him liable under 1623
The Recantation Defense
The crime of perjury 1621 is complete as soon as the false statement is made under oath,
giving no defense of recantation or retraction
However, the false declarations statute 1623(d) departs from this rule and allows a limited
recantation defense if there is an admission of falsity before the perjury is discovered
o Only applies where the recantation occurs in the same proceedings
Bronston v. United States (1973)
Perjury statute, 1621, whether a witness may be convicted for perjury for an answer, under
oath, that is literally true but not responsive to the question asked and arguably misleading by
negative implication
o Do you have any Swiss bank accounts?
-No, the company doesn't. (but he himself does). Perjury?
unresponsive in that D here did not answer the question of whether he had bank accounts, he
answered whether the company had a bank account, a different question
Willful falsity requires D to know that the statements are false and say them anyway
o If D did not understand the question, cannot be convicted for perjury
o But he can be convicted for an answer that is not literally false but when considered in
the context in which it was given nevertheless constituted a false statement
Court finds that there are not adequate grounds for a perjury conviction based on Ds answers,
D must willfully state any material matter that he does not believe to be true
o It was not Congress intent to reach unresponsive answers, which can easily be mended
by asking more in-depth questions
o It was merely a testimonial mishap, under the pressure sometimes a witness gives an
unresponsive answer
Don't want to discourage witnessing from testifying
o State of mind of the witness is only pertinent to whether he knew it was true or not, not
regarding whether he meant to deceive the questioner
As long as the witness speaks the literal truth they are fine, and the burden is on the questioner
to pin the witness down to the specific object of their inquiry if they receive an evasive answer
o Creating a higher bar for the prosecution, based on the notion of it being an adversarial
system
o More stringent than the falsehoods are treated in the preceding statutes such as 1001
Because of the discrepancies D was charged with and convicted of perjury in the lower court
under 1621
Court follows the two witness rule, which requires that the falsity of Ds statements must be
proved by the testimony of 2 witnesses or the testimony of 1 witness + corroborative evidence
o Corroborative evidence need not be strong nor independently sufficient to establish Ds
guilt, and may be circumstantial
o Corroborative evidence suffices if it tends to confirm the truth of the witnesss
testimony in material respects and thereby induces belief in his testimony
Detectives statement that D stated, while making his written statement, that he had
knowledge of a robbery constituted 1 witness + corroborative evidence of the written statement
itself = 2 witnesses to establish that D perjured himself in the grand jury proceedings when he
lied
o Once the rule is satisfied, it is up to a jury to determine the validity of the evidence and
the trustworthiness of the witness
o Furthered by the fact that both testimonies are irreconcilable/contradictory, so one
must be false
Makes sense under 1623(c) which specifically allows for a violation where 2 statements are
irreconcilable, but Green finds that problematic under 1621
Is this bootstrapping? Using Davis own testimony as a second witness against him
United States v. Sherman (1998)
D perjured himself as an expert witness in a medical case regarding the validity of his licenses
in various states
o Charged under 1621 general perjury statute, not 1623 false declaration
o D moved to dismiss because government did not give him his due process defense of
recantation available under 1623 but not 1621
1623 does not require that the prosecution employ the 2 witness rule for proving perjury
o 1623 has a reduced mens rea requiring knowingly rather than the 1621 willingly
o 1623 is restricted to testimony before grand juries and courts and is therefore more
limited in reach than 1621
Both statutes were violated here, so government has prosecutorial discretion in which one is
charged, and it is not the choice of the D
o However, prosecutions choice cannot be solely motivated on getting a tactical
advantage in the proceedings (as D contends)
1623(d) defense of recantation available
o If at the time of the admission, the declaration has not substantially affected the
proceedings
o Or, it has not become manifest that such falsity has been or will be exposed
Court here holds that the or in 1623(d) is actually an and, and prosecutor has discretion to
use either 1621 or 1623
D would have lost in 1623 anyway, even with the recantation defense but it is not as if he was
entitled to be charged under 1623
Would D have been entitled to recantation defense under 1623, if his recantation came after
the perjury was discovered?
o D contends that it is allowable due to the or, but court finds that, that runs afoul of
Congress intent and allows perjury with impunity, to continue to lie until your perjury is
about to be exposed, and then recant
D says that under this rationale, he would have been given the defense because the falsity has not
substantially affected the proceeding (even though the second prong would not have been
satisfied since the falsity was exposed already)
o Court holds there must be a conjunctive, not disjunctive, reading of the statute, both
statutory conditions must exist when recantation occurs or is really an and
Court sides with government, both prongs were not met when recantation occurred and Ds
construction of the statute was literally correct but against congressional intent
o Strange, since rule of lenity provides that there should be a common sense, plain
language reading of the statute where it is unambiguous
United States v. Apfelbaum (1980)
D was thought to be involved in a staged robbery and extortion incident
o At grand jury proceedings D invoked his 5th Amendment right, but was granted
immunity and compelled to testify
In the grand jury testimony D made false statements, charged with perjury
o Convicted in district court, but court of appeals reversed stating that his immunized
testimony should not have been admitted into evidence against him since it did not
constitute the corpus delicti or core of a Ds false swearing indictment
Did Congress intend the federal immunity statute to limit the use of witness immunized grand
jury testimony in a subsequent prosecution of the witness for false statements made at the grand
jury proceedings?
o Court says no, it is at odds with purpose of statute, to prohibit the use of truthful
immunized testimony in perjury prosecutions (to prove falsity)
o Statute clearly states that immunized testimony is excluded from prosecution except in
the case of perjury/false declarations, making no distinction between truthful and
untruthful testimony in such proceedings it is a blanket exemption for immunity for
false statements
D also contends that 5th Amendment (self-incrimination) bars introduction of the truthful
statements, only permitting the core of the false swearing indictment
o Court disagrees, immunity is not a license to commit perjury, perjury is the narrow
exception to the immunity statute and does not protect from false statements
Obstruction of Justice
Obstruction statutes are meant to preserve the integrity of judicial proceedings, and
protect the individuals engaged in the judicial proceedings from coercion or intimidation
18 USC 1503: Applies to participants in civil and criminal judicial proceedings,
imposing sanctions for corruptly...influencing, obstructing or impeding, or endeavoring
to influence, obstruct, or impede the due administration of justice
o Forbids specific acts such as threatening jurors or officers of the court
o Omnibus clause prohibits corruptly endeavoring to influence, obstruct, or
impede the due administration of justice
o Meant to protect the legitimacy of proceedings, ensuring the arrival at an
appropriate judgment
Need not be related to the primary subject of investigation, it is material if it is relevant to any
subsidiary issue or is capable of supplying a link to the main issue
Congress attempted to reconcile the problem that defense counsel faced between zealous
advocacy and obstruction of justice
o Protects the providing of lawful, bona fide, legal representation services in connection
with or anticipation of official proceedings
Kloess established that 1515 serves as an affirmative defense for counsel, who will have the
burden of showing some legitimate bona fide reasoning (therefore negating mens rea), and Gov.
must disprove that beyond a reasonable doubt
1512(b)(3) D must knowingly act with specific intent to hinder or delay the communication to
the court of the commission of a federal offense or probation violation
o Gov. must prove improper purpose
o Can be rebutted by lawyer proving that he is legitimate appointed counsel who was
looking into clients best interest in good faith
The Victim and Witness Protection Act
New obstruction statute, 1512, prohibiting tampering with a witness, V or informant
o Whoever knowingly uses intimidation or physical force, threatens or corruptly
persuades another (added in 1988 after Lester) person or attempts to do so, or engages in
misleading conduct towards another person with intent to influence, delay or prevent the
testimony of any person in an official proceeding
o 1512(a): Killing, (a)(2): Physical force
o 1512(b): Intimidation or threats, corruptly persuading or misleading conduct: Willard
Has more of a coercive element to it than harassment does
o 1512(c): Destroy, mutilate docs
o 1512(d): Harassment: Wilson
Close to intimidation or threats, but less coercive
o 1512(e): Affirmative defense that the conduct was lawful with intention to encourage
induce or cause testifying truthfully
o 1512(f): Official proceedings need not be pending
Unlike 1503 (Simmons)
Non-Coercive Witness Tampering
United States v. Lester (1984)
Mitchells attorney (Lester) approached Brigham (who was arrested for murder and
cooperating against Mitchell), and advised him not to cooperate
o D moved Brigham to a hotel to hide him, charged with obstruction of justice
1503
o D contends that by enacting the Victim and Witness Protection Act, Congress intended
to remove witness tampering from purview of 1503, and 1512 is more appropriate
( 1512 supersedes 1503, but Ds conduct here would not be culpable under 1512)
Gov. says that omnibus clause is catchall, reaching witness tampering
Court agrees with Gov., conduct is in line with 1503
1512 reserved for specific egregious conduct, non-coercive measures are within the omnibus
clause of 1503
o Problem with 1512 is that D would have to have used certain conduct (intimidation,
physical force, threats, harassment, misleading conduct) and if he did not, without use of
1503 there would be no redress
1512 is subsequently changed to include corruptly persuade by Congress so that it is broad
enough to include this conduct too
1512: Corrupt Persuasion
Arthur Andersen LLP v. United States (2005)
D filed financial statements and did an internal audit of Enron
o Amid beginning of accounting scandal D company hired in-house counsel
o D stated that if they destroy a document in the ordinary course of business its fine, and
they will be saved if an investigation asks for something the next day, a document
retention policy
o When SEC opened its investigation documents were requested but documents had
been continuously destroyed in the interim
D charged with 1512(b)(2)(A) and (B) for knowingly and intentionally and corruptly
persuading other persons (employees) with intent to cause them to withhold documents from and
alter documents for use in regulatory and criminal proceedings/investigations
o Persuading another to withhold information can be benign, such as by telling someone
to invoke their 5th Amendment right, or an attorney withholding privileged documents.
Similarly, a document retention policy may also be benign
There must be consciousness of wrongdoing, and here the jury instruction was wrong
regarding knowingly
o Although the proceedings need not have begun nor pending, proceeding has to be at
least foreseen or likely per 1512(f)
o In Aguilar 1503 required a nexus, something more, between the obstructive act and
the proceedings
1512: Misleading Conduct
Covers misleading conduct that is intended to affect anothers participation in official
proceedings, impair availability of evidence or impede the reporting of information relating to
the commission of a federal crime to law enforcement or a judge
o Misleading conduct includes making false or misleading statements or inviting reliance on
false or misleading evidence
United States v. Gabriel (1997)
D was an executive for a jet engine company under investigation by FAA for
misrepresentations related to repairs
o Took a K from Quantas for a jet engine casing, and misrepresented that it would be
repaired by them when really it was repaired elsewhere
o The Florida facility certified that that it was serviceable when in reality it was not
D sent a fax to Quantas representative in order to support his false story that he disclosed that
the part was not serviceable
o D charged with witness tampering, because it was an attempt to mislead Mealing, and
Mealing would then repeat that lie to the grand jury
o D went to bank manager and said that if she spoke to FBI he would sue her for
defamation
Is threat to sue actionable threat under 1512?
o Court says yes, he had no right to file frivolous litigation so his protected right was not
being infringed on
o Instituting baseless legal proceedings for purposes of harassment is not permitted
o Statute forbids public officials from being induced to do or omit any act in violation of
their official duty
Meant to be broad and encompass any decision made in official capacity even if they are not
within the rules
The people who were appealing denial had their appeals in her place of trust or profit within
the statute
Would garbage man he culpable or only someone who has some official responsibility?
Krichmen later says that a baggage porter for a federal RR does not fit into the statute unless he
is involved in some decision-making
United States v. Arroyo (1978)
D was a small business administration loan officer who reviewed loan applications for
creditworthiness
o Loan was approved, but D told the applicant Fernandez that he would have to pay to
have the loan approved. Charged with conspiracy to solicit a bride and soliciting and
receiving a bribe
Jury instruction issue, where court said that D did not have to actually have the power to make
the change in order for him to still be charged, needs to be under the representation
o D preferred one that recognized that if the bribery happened after D no longer had
control over the outcome (he had already committed his official act) he is not guilty
Court disagrees with D, congress did not intend for public officials to be able to exhaust their
duties and then go after someone for a bribe under the false impression that the bribe was in
exchange for their performance
o The point of the statute is to punish any public official who corruptly solicits anything
of value in return for being influenced in official acts, where official acts refer to
anything pending at any time (including in the past) in official capacity (broad language)
o The bribe is punishable based on what the person paying believes, even if the official act is
already done he is under the impression that he is giving a quid pro quo in order to influence it,
the offense is in the corrupt solicitation
Motive and Intent
United States v. Sun Diamond Growers of California (1999)
D is a trade association engaged in marketing and lobbying on behalf of a cooperative of
growers
D charged with giving illegal gifts to Secretary of Agriculture in violation of 201(c)(1)(A)
o D had an interest in the Secretarys favorable treatment regarding grants and the use of
some pesticide, but no actual connection was evidenced (no nexus)
Trial court instructed jury that giving gifts because of Secretarys official position was enough to
violate the statute
Court of appeals reversed conviction, however on remand the Gov. need not prove that the
gratuity was for any particular act, but rather requires the requisite intent to reward past favorable
acts or to make future ones more likely
While bribery requires intent to influence an official act or to be influenced in an official act,
gratuity statute requires that the gratuity be given or accepted for or because of an official act
o Therefore a gratuity can be in relation to a future act or something that has already
occurred, but there need to be some nexus
Appointed Officials
Dixson v. United States (1984)
Whether officers of a private nonprofit administering and expending federal community
development block grants are public officials for the purposes of 201(a) federal bribery statute
o City of Peoria given federal block grants, made Ds company (UNI) the subgrantee in
charge of administration of the grant
o D was hired as the executive director, and had sought bribes in return for being influenced for
awarding housing rehabilitation Ks, took bribes from contractors seeking to work on UNIs
rehabilitation projects
Under Housing and Community Development Act, there are heightened requirements for use
of HUD funds including financial accountability and other uniform audit procedures
o D says that they were nonprofit executives, not public officials
o But Gov. says that they were acting for or on behalf of US in an official function under
HUD authority (by administering federally funded programs)
Court agrees, it does not matter if you do not have a contractual relationship with the US, if you
occupy a position of public trust with official federal responsibilities you are a public official for
purposes of the statute
Ds here fulfill criteria for public officials
o D had administrative duties related to federal program, charged with abiding by federal
guidelines, administering a social service program established by Congress
Not all federal assistance program roles bring about this designation, you must possess some
degree of responsibility for carrying out a federal program or policy that would make you act for
or on behalf of the US
o You must assume duties of an official nature
Elected Officials
United States v. Brewster (1972)
Senator who received bribes related to his postage legislation
o District court dismissed the indictment based on immunity per the Speech and Debate
Clause, where speech or debate in either house of Congress cannot be questioned
elsewhere, to protect the legislative process
Johnson holds that a member of Congress may be prosecuted under a criminal statute
provided that the Gov.s case does not rely on legislative acts or the motivation for legislative
acts (things that are generally done in Congress in relation to the business before it)
The illegal act was committed when D solicited or took the bribe for a promise to act in a
certain way, not whether he fulfilled the illegal bargain
o So it is unnecessary to look at how he voted, as long as D knew that the money was in
exchange for certain performance by him in an official act
o Taking a bribe is not a legislative act nor part of the legislative process
Cooperating Witness
201 also criminalizes bribing witnesses before federal tribunals to influence their testimony
or paying gratuity for or because of testimony
666 was preceded by the general bribery statute in 201, where public officials did not
necessarily include state and local officials, the point of thereafter enacting 666 to extend to
state and local officials
o Narrowing the scope of the statute as D contends would be incongruous with the
congressional intent in enacting the statute
United States v. DeLaurentis (2000)
District court dismissed 666 charge against supervisor of detectives for a police dept.
because of a lack of a nexus between the federal funds and the bribery
o Court here reverses
o D is a state/local official, town has received greater than $10k in federal funds, so D is
guilty so long as he accepted bribes to influence or reward him in the performance of his
police duties
Although it is not necessary to show that the bribery activities of D actually impacted the
federal funds, or had any direct bearing on expenditure, there must be some connection between
the bribery and a federal interest
o Here, the federal funds came from DOJ to pay for an additional police officer on patrol
o D accepted bribes for interceding with the town council to permit license renewal for a
bar that was under investigation by his division (meant to enforce alcohol laws)
The evidence would permit a rational jury to conclude that Ds actions allowed the problem
establishment to stay open leading to an impact on police allocation of manpower, to a
detriment to overall police activities
o Plus, the officer being paid by the federal funds was sent to calls at this bar
o Court parallels this case with Salinas, dismissal reversed and cause remanded
Sabri v. United States (2004)
D was a real estate developer and offered bribes to councilman
o The councilman was a member of a community development agency set up by the city
council, which was receiving federal funding ($23M)
District court dismissed under theory that the law was invalid for not requiring a nexus
between the bribe and the federal funds
o Reversed in court of appeals, constitutional per N&P Clause fro serving the objects of
congressional spending power
666 is supported by the N&P Clause, by protecting Congress powers under the Spending
Clause to ensure the proper spending of federal funds
o Corruption need not be so limited (requiring a nexus) for it to nonetheless affect the
federal interest and impact the integrity of federal funds
Court holds statute to be constitutional
United States v. Copeland (1998)
Conviction for bribery under 666 vacated
o D was a manager at Lockheed Martin, and referred work to his friend Winders
whereby Lockheed would pay abnormally high commissions and in return D received
$15k (as well as with various others)
Lockheed is a prime contractor for the US DOD, but Ds state that it is not within the scope of
the statute