ALGA HOPE, JR., PETITIONER V. UNITED STATES OF AMERICA No. 90-5872 In The Supreme Court Of The United States October Term, 1990 On Petition For A Writ Of Certiorari To The United States Court Of Appeals For The Eleventh Circuit Brief For The United States In Opposition OPINION BELOW The opinion of the court of appeals (Pet. App. 2838-2848) is reported at 901 F.2d 1013. JURISDICTION The judgment of the court of appeals was entered on May 22, 1990. A petition for rehearing was denied on September 21, 1990. The petition for a writ of certiorari was filed on October 2, 1990. The jurisdiction of this Court is invoked under 28 U.S.C. 1254(1). QUESTIONS PRESENTED 1. Whether petitioner's conviction for conspiring to embezzle or steal funds of the United States comported with the requirements of Tanner v. United States, 483 U.S. 107 (1987). 2. Whether the district court abused its discretion in failing to appoint an accountant as an expert witness for petitioner. STATEMENT In November 1986 petitioner was indicted on one count of conspiring to defraud the United States (18 U.S.C. 371), one count of making false statements to the Department of Housing and Urban Development (18 U.S.C. 1001), and three counts of extortion, in violation of the Hobbs Act (18 U.S.C. 1951). Prior to trial, the district court dismissed the conspiracy count; trial on the substantive counts was stayed pending appeal. Following an appeal by the government, the court of appeals affirmed the district court's ruling. United States v. Hope, 861 F.2d 1574 (11th Cir. 1988). A new indictment was then returned against petitioner. After a jury trial in the United States District Court for the Southern District of Florida, petitioner was convicted of conspiring to embezzle or steal money of the United States, in violation of 18 U.S.C. 371 and 641. /1/ He was sentenced to four months' imprisonment, to be followed by four years' probation, and was ordered to pay $10,000 in restitution. The court of appeals affirmed. Pet. App. 2838-2848. 1. The evidence at trial showed that between March and July 1984, petitioner conspired with co-defendant Adrian Marin to divert to their own use federal funds intended for loans to minority businesses. /2/ Petitioner founded the Economic Development Corporation of Dade County, Inc. (EDCO), a non-profit Florida corporation, to administer community development block grant funds provided to Dade County through the Department of Housing and Urban Development (HUD). Pursuant to statutory and regulatory directives, Dade County submitted an annual proposal to HUD requesting federal funds. After approving the proposals, HUD made the funds available to the county through a line of credit with the Department of the Treasury. Pet. App. 2840. Interested persons and organizations applied to EDCO -- as administrator of the program -- for those funds. Because the Department of the Treasury required that funds withdrawn against the line of credit be disbursed to grantees within three days of the date withdrawn, and because unforeseeable delays made this process cumbersome, Dade County chose to disburse funds to EDCO from the county's general account. After doing so, the county obtained reimbursement from the federal government. Pet. App. 2841. In early 1984, EDCO approved a $38,000 loan to The Learning Center, a Miami-area day care facility. EDCO submitted a loan package and a check request to the Dade County government, and in April 1984 the County issued a $38,000 check, payable to EDCO and The Learning Center. After issuing the check, the county government applied for and received reimbursement from the Department of the Treasury. Pet. App. 2841. Although the Dade County check was made payable to both EDCO and The Learning Center, the check was endorsed by EDCO only and was deposited into EDCO's revolving loan account at Tropical Federal Savings and Loan on May 4, 1984. Only $5,000 of the $38,000 ever reached The Learning Center. On June 7, EDCO applied the remaining $33,000 toward purchase of a $101,000 certificate of deposit from Tropical Federal. That same day, EDCO used the certificate of deposit to collateralize a $101,000 line of credit at Tropical. On July 5, EDCO drew on the Tropical Federal line of credit to buy a $60,000 certificate of deposit at the Trust Bank. Two weeks later, EDCO used that certificate of deposit as security for a $60,000 line of credit at Trust Bank. Ibid. In mid-July EDCO received a statement from Tropical for its revolving loan account, showing the withdrawal in June of the $38,000 that came from HUD through the county government. Petitioner met with certain EDCO employees and expressed concern that the County's auditors, who were conducting an audit of EDCO, would discover his diversion of the funds. Petitioner asked EDCO's chief accountant to restructure the bank statement so as to eliminate the withdrawal, but she did not comply with that directive. Id. at 2841-2842. On July 27 petitioner met with co-defendant Marin at the offices of the Trust Bank. There Marin solicited a loan for his corporation, ATJ Industries, Inc. Although another EDCO employee who was present at the meeting objected to the lack of loan documents, petitioner drew on the Trust Bank line of credit to write a $30,000 EDCO check to ATJ Industries; thus, the funds that eventually reached ATJ can be traced back to the misappropriated grant funds designated for The Learning Center. Pet. App. 2842, 2845. When other EDCO employees discovered this transaction, they demanded loan documentation from petitioner. In August, at Marin's request a lawyer prepared documents for a loan to ATJ Industries. Some time after August 11, petitioner took those documents to EDCO's offices and directed an EDCO employee who was a notary public to notarize the signatures of petitioner and Marin, who was not present. Petitioner also directed that the notarization be backdated to July 27, the day petitioner issued the EDCO check to ATJ Industries. Id. at 2842. Eventually, EDCO's lines of credit at Tropical and the Trust Bank came due, but EDCO was unable to meet its obligations. As a result, the certificates of deposit were forfeited, and petitioner and Marin eventually were indicted. Ibid. 2. Petitioner's first indictment charged him and co-defendant Hilario James with conspiring to defraud Dade County by submitting false loan documents in order to obtain minority business loans. The district court dismissed that charge, reasoning that it ran afoul of this Court's ruling in Tanner v. United States, 483 U.S. 107 (1987), which held that an 18 U.S.C. 371 conspiracy to defraud the government states a crime only if the federal government is named as the victim of the conspiracy. The court of appeals affirmed the district court's ruling. The court explained that petitioner's first indictment was deficient under Section 371, because the indictment did not allege that any federal agency was the target of the conspiracy or of any overt act. The court also believed that the indictment's charge that the county was defrauded precluded the government from proving at trial that the United States was either the direct or indirect target of the conspiracy. United States v. Hope, 861 F.2d 1574, 1577-1578 (1988). 3. A new indictment was returned against petitioner and Marin, which charged that in violation of 18 U.S.C. 371 and 641 the defendants conspired to embezzle, steal, or convert to their own use funds belonging to the United States. The indictment alleged that petitioner diverted federal funds from HUD, that he made an unauthorized loan to ATJ Industries, and that petitioner and Marin shared the proceeds of that unauthorized loan. Pet. App. 2843. Petitioner unsuccessfully challenged the new indictment in both the district court and the court of appeals. The court below held that the indictment adequately charged a crime under Section 371, because the indictment "specifically allege(d) that the object of the section 371 conspiracy was to commit the offense proscribed by section 641, the embezzlement or theft of federal funds, and the indictment specifically identifie(d) the source of those funds as HUD and therefore as federal funds." Pet. App. 2843-2844. The court below also rejected petitioner's claim that the funds advanced to EDCO and The Learning Center, and later diverted by petitioner, should not be deemed to be "federal funds." The court held that because identifiable federal funds were channeled through Dade County and EDCO to bona fide applicants, the funds did not lose their federal character because Dade County chose to advance the funds before receiving reimbursement from the federal government. Id. at 2844-2845. Finally, the court of appeals held that petitioner was not entitled to a new trial on the ground that the district court had failed to appoint a certified public accountant as an expert witness under 18 U.S.C. 3006A. Pet. App. 2847 n.13. The court noted both that petitioner had "failed to establish a violation of the (statute's) procedural requirements" and that he had failed to meet his burden of establishing "by clear and convincing evidence that the denial of his motion was prejudicial to his defense. /3/ ARGUMENT 1. Petitioner renews his contention (Pet. 8-12) that the decision below conflicts with Tanner v. United States, supra. Contrary to his claim, the court below correctly concluded that petitioner's indictment and the evidence at trial fully comported with Tanner's requirements. In Tanner, the defendants were charged with conspiring to defraud the United States by impeding the lawful functions of the Rural Electrification Administration's loan program, in violation of 18 U.S.C. 371. The defendants argued that if anyone was defrauded in that case, it was a private corporation that received federal assistance, and not the government itself. The Court acknowledged that a conspiracy to defraud the United States can be effected through the use of third parties, but the Court rejected the argument that a private intermediary could function as "the United States" for purposes of Section 371. 483 U.S. at 129. In language with particular relevance to this case, the Court observed that "conspiracies (to defraud) criminalized by Section 371 are defined not only by the nature of the injury intended by the conspiracy, * * * but also -- and most importantly -- by the target of the conspiracy." 483 U.S. at 130 (emphasis in original). The Court also rejected the suggestion that a "substantial supervision" test could show when a private party stood in the shoes of the government. Id. at 131-132. However, the Court said that if the evidence at trial showed that the defendants conspired to cause the third party to make misrepresentations to the REA, as alleged in the indictment, then the defendants' convictions could stand. Id. at 132. a. Tanner dealt with conspiracies to defraud the United States, not with conspiracies to commit "any offense" against the United States. /4/ United States v. Gibson, 881 F.2d 318, 321 (6th Cir. 1989). It is settled that the "offense" clause of Section 371 encompasses all offenses against the laws of the United States, "not just offenses directed at the United States as target or victim." Ibid. (citations omitted); see also United States v. Minarik, 875 F.2d 1186, 1193 (6th Cir. 1989) (offenses under the two clauses are disjunctive, setting out a crime that may be committed in one of two ways). Consequently, Tanner does not require that an indictment brought under the "offense" clause of Section 371 must charge that the United States was a victim of the conspiracy. Because the indictment in this case specifically charged a violation of the "offense" clause of Section 371, petitioner's argument that there was a violation of Tanner in this case is mistaken. Even if Tanner were read to require that an indictment under the "offense" clause of Secton 371 allege that the federal government was the victim of the crime, petitioner's argument would still fail. The specific offense alleged as the object of petitioner's scheme -- 18 U.S.C. 641 -- is the embezzlement or theft of federal government property. Thus, as the court of appeals recognized (Pet. App. 2844) the object of the conspiracy was the commission of an offense of which the government is the victim. The indictment therefore charges a violation of Section 371 under any possible reading of Tanner. b. Petitioner also argues that the court below used the wrong standard in finding that the funds in question were sufficiently "federal" in nature to fall within the scope of Section 641. The court of appeals relied on United States v. Smith, 596 F.2d 662 (5th Cir. 1979), which held that federal funds still in transit between their federal source and the intended recipient, and still subject to "substantial federal controls," are federal funds within the meaning of Section 641. Petitioner claims that this reasoning conflicts with Tanner. But Tanner simply held that, in order to state a crime under the defraud clause of Section 371, there has to be proof that a governmental agency was the target of the fraud. Nowhere did the Court address the definition of federal funds under Section 641. Moreover, since Tanner, several courts have applied a test like that used by the court below in making similar determinations of a federal nexus under Section 641. E.g., United States v. Prince, 868 F.2d 1379, 1384 (5th Cir.) (expressly following Smith), cert. denied, 110 S.Ct. 321 (1989); United States v. Littriello, 866 F.2d 713, 713-717 (4th Cir. 1989); Hayle v. United States, 815 F.2d 879, 882 (2d Cir. 1987); see also United States v. Wheadon, 794 F.2d 1277, 1283-1284 (7th Cir. 1986), cert. denied, 479 U.S. 1093 (1987); United States v. Largo, 775 F.2d 1099, 1101 (10th Cir. 1985), cert. denied, 474 U.S. 1105 (1986); United States v. Von Stephens, 774 F.2d 1411, 1413 (9th Cir. 1985) (decided prior to Tanner but setting out the same test). 2. Petitioner also argues (Pet. 12-14) that the district court abused its discretion under 18 U.S.C. 3006A(e) in failing to appoint an accountant as an expert witness for him. Petitioner claims that he needed the assistance of an accountant in order to rebut the government's claims that the funds he diverted were "federal" in nature. Both courts below found otherwise, and petitioner has not shown why those determinations were incorrect. The decision whether to appoint an expert to assist a defendant lies in a district court's discretion (United States v. Valverde, 846 F.2d 513, 516-517 (8th Cir. 1988)), and a defendant can demonstrate abuse of discretion only by showing that he was prejudiced by the failure to appoint the desired witness. Id. at 517; United States v. Perrera, 842 F.2d 73, 77 (4th Cir.), cert. denied, 488 U.S. 837 (1988); United States v. Brewer, 783 F.2d 841, 843 (9th Cir.) cert. denied, 479 U.S. 831 (1986). Here petitioner does not even suggest how an accountant could have aided him in demonstrating that the funds in question were not "federal" within the meaning of Section 641. That is particularly true in light of the fact that the transaction at issue was a relatively simple linear movement of funds through several accounts. Hence, as the court below found (Pet. App. 2847 n.13), petitioner has failed to demonstrate that he was prejudiced by the trial court's failure to appoint an accountant. CONCLUSION The petition for a writ of certiorari should be denied. Respectfully submitted. KENNETH W. STARR Solicitor General ROBERT S. MUELLER, III Assistant Attorney General LOUIS M. FISCHER Attorney DECEMBER 1990 /1/ He was acquitted on a substantive count (18 U.S.C. 641). /2/ Co-defendant Marin was a fugitive at the time of petitioner's trial. /3/ The court of appeals also rejected petitioner's challenges to the sufficiency of the evidence and the adequacy of the trial court's instructions, his various evidentiary claims, and his claims of grand jury improprieties. Petitioner does not renew those arguments here. /4/ Section 371 provides in pertinent part: If two or more persons conspire either to commit any offense against the United States, or to defraud the United States, or any agency thereof in any manner or for any purpose, and one or more of such persons do any act to effect the object of the conspiracy, each shall be (guilty of a crime).