GILBERTO MARTINEZ, PETITIONER V. UNITED STATES OF AMERICA No. 90-5753 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 Ninth Circuit Brief For The United States In Opposition OPINIONS BELOW The opinion of the court of appeals (Pet. App. 1a-15a) is reported at 905 F.2d 709. The opinion of the district court (Pet. App. 16a-23a) is not reported. JURISDICTION The judgment of the court of appeals was entered on June 19, 1990. The petition for a writ of certiorari was filed on September 17, 1990. The jurisdiction of this Court is invoked under 28 U.S.C. 1254(1). QUESTION PRESENTED Whether a license to practice medicine constitutes property within the meaning of the mail fraud statute, 18 U.S.C. 1341. STATEMENT In 1984, petitioner was convicted in the United States District Court for the Middle District of Pennsylvania of conspiracy to commit mail fraud, in violation of 18 U.S.C. 371 and 1341. He was sentenced to two years' probation and 400 hours (later reduced to 200 hours) of community service. The court of appeals affirmed his conviction. In 1989, after this Court held in McNally v. United States, 483 U.S. 350 (1987), that the mail fraud statute did not apply to certain schemes involving the deprivation of intangible rights, petitioner applied for a writ of error coram nobis to vacate his conviction. The district court granted the application. Pet. App. 16a-23a. The court of appeals reversed. Id. at 1a-15a. 1. The evidence at petitioner's trial showed that he and codefendant Brian Murach fraudulently engaged in a scheme to obtain from the Commonwealth of Pennsylvania a license for Murach to practice medicine. Murach, a medical student in Mexico, paid Pedro de Mesones to assist him in obtaining a fraudulent medical degree from a private medical school in the Dominican Republic. Petitioner participated in the scheme by obtaining forged medical school transcripts representing that Murach had attended the Universidad Valle Del Bravo in Reynosa, Mexico, for four semesters. In fact, Murach had never attended that University, but instead had attended a different medical school in Mexico for only two semesters. Petitioner sent the forged transcripts to de Mesones through the mails in August 1983. Murach subsequently included the forged transcripts in his application for a permanent license to practice medicine in Pennsylvania. Pet. App. 2a-4a. The indictment described the scheme in detail and charged that petitioner and Murach had defrauded the Commonwealth of Pennsylvania and its citizens by obtaining a license to practice medicine by means of false representations to the State Board of Medical Education and Licensure. It specifically charged petitioner with the overt act of "sending through the United States Mail an envelope containing original transcripts from Valle de Bravo in Brian Murach's name to Pedro Mesones." Pet. App. 4a. The court's charge instructed the jury that it need not find that the object of the scheme was money or any form of tangible property. Rather, it was sufficient under the charge that the jury find a "scheme to defraud the citizens of a governmental unit or deprive public officials of information material to a decision which they are required to make in their official capacity." Id. at 13a. 2. In McNally, this Court held that mail fraud convictions could not be based on the theory that public officials' conduct had deprived the citizens of their intangible right to honest and impartial government, which the Court concluded was not a property interest protected by the statute. Subsequently, in Carpenter v. United States, 484 U.S. 19 (1987), this Court made clear that the property protected by the mail fraud statute includes intangible as well as tangible property, and upheld the wire fraud conviction of the writer of a column for the Wall Street Journal who traded on his knowledge of what the column would say. Petitioner applied for a writ of error coram nobis to vacate his mail fraud conviction on the ground that the medical license that was the object of the scheme to defraud was not a property interest within the meaning of McNally and Carpenter. The district court granted the application. Pet. App. 16a-23a. Relying on United States v. Kato, 878 F.2d 267 (9th Cir. 1989), and United States v. Murphy, 836 F.2d 248 (6th Cir.), cert. denied, 109 S. Ct. 3190 (1988), the court concluded that "(a) license is not property until issued and therefore a scheme to defraud (the) government of licenses is not covered by the mail fraud statute." Pet. App. 22a. "Because (petitioner) was convicted of a scheme which should not have been recognized as criminal under the mail fraud statute, and because the conviction still affects (petitioner)," the court found that it was appropriate to issue a writ of error coram nobis vacating petitioner's conviction. Id. at 23a. 3. The court of appeals reversed. Pet. App. 1a-15a. Using the Carpenter decision to guide its analysis, the court held that the scheme to obtain the medical license was within the reach of the mail fraud statute. It began by noting that a license is recognized as a valuable and constitutionally protected form of property in the hands of the licensee, since "'(o)nce licenses are issued * * * their continued possession may become essential in the pursuit of a livelihood.'" Id. at 7a-8a (quoting Bell v. Burson, 402 U.S. 535, 539 (1971)). It also noted that this Court in Carpenter had found it significant that traditional property law recognized the right of a corporation to enjoin the unauthorized use of its information in holding that the Wall Street Journal had a property interest in its confidential business information. The court had "no doubt that the Commonwealth could enjoin the unauthorized use of a medical license by one not entitled thereto or indeed could replevy the actual license to prohibit its further display." Pet. App. 8a. The court therefore concluded that the scheme to acquire a medical license was a scheme to obtain property within the scope of the mail fraud statute. The court rejected petitioner's contention that his conviction was invalid because the State had not been deprived of money or property as a result of the scheme. First, the court found nothing in the language of the mail fraud statute to support "the questionable statutory construction that someone who fraudulently acquires property that has great value once acquired has not violated the mail fraud statute if the item has no, or negligible, value in the hands of the victim." Pet. App. 8a. Rather, the court explained, "(t)he statute, which proscribes 'obtaining money or property,' is broad enough to cover a scheme to defraud a victim of something that takes on value only in the hands of the acquirer as well as a scheme to defraud a victim of property valuable to the victim but valueless to the acquirer." Ibid. The court found support for that conclusion in Carpenter, since this Court upheld the wire fraud convictions in that case on the ground that the Wall Street Journal had been deprived of its right to exclusive use of its confidential business information, even though the defendants had neither interfered with the Journal's use of that information nor deprived the Journal of the first public use of it. Id. at 9a. Alternatively, the court concluded that the Commonwealth had a property interest in its medical licenses. Pet. App. 9a-12a. It found "unpersuasive the theory (petitioner) espouses that a medical license is without value to the state before it is issued, obtaining property status only when it is in the hands of the licensee." Id. at 9a. The court stressed that "McNally only requires that the 'government's interest as a property holder'" be implicated for a scheme to fall within the mail fraud statue. Id. at 11a (quoting McNally, 483 U.S. at 359 n.8). It noted that "a license is essentially one manifestation of the government 'largess' of the modern state which 'is originally public property, comes from the state, and may be withheld completely.'" Ibid. (quoting Reich, The New Property, 73 Yale L.J. 733, 778 (1964)). It also noted that in Carpenter the Wall Street Journal "did not lose any 'thing' -- what it lost was the intangible right to keep to itself its information and the exclusive right to use it when and how it pleased." Pet. App. 11a. In this case, the court explained, "what the Commonwealth (and derivatively its people) lost was the right to keep its medical licenses to itself and to bestow them on persons who had fairly earned them." Ibid. It found that "(t)he deprivations, although different in character, are in each instance 'of something of value.'" Ibid. (quoting Carpenter, 484 U.S. at 27, and McNally, 483 U.S. at 358). The court therefore held that the scheme to acquire a medical license was a scheme to deprive the Commonwealth of property as well as a scheme to obtain property. Finally, the court rejected petitioner's contention that his conviction should be overturned because he was indicted, tried, and convicted solely on an "intangible rights" theory. Pet. App. 13a-15a. The court explained that "the mere presence of intangible rights language does not in and of itself require the overturning of a previous conviction." Id. at 13a. Rather, the court noted, "the decisive factor in these circumstances is whether 'the scheme or artifice had the inevitable result of effecting monetary or property losses to the employer or state.'" Id. at 13a-14a (quoting United States v. Asher, 854 F.2d 1483, 1494 (3d Cir. 1988), cert. denied, 109 S. Ct. 836 (1989)). Based on its determination "that the property interests of the Commonwealth were, of necessity, implicated by the fraudulent licensing scheme," the court found that "the scheme 'had the inevitable result of effecting' a property loss to the Commonwealth." Pet. App. 15a (quoting Asher, 854 F.2d at 1494). It accordingly concluded that "the misstatement of law included in the charge is insufficient to void (petitioner's) conviction of mail fraud." Pet. App. 15a. ARGUMENT Petitioner renews his contention that the Commonwealth did not have a property interest in the medical license that was the object of the scheme to defraud. There is no warrant for review of this contention. The court of appeals' contary holding is correct and, in any event, is of no prospective importance in light of the recent amendment of the mail fraud statute. As an initial matter, the court of appeals correctly rejected petitioner's contentions. The Court in Carpenter made clear that the intangible nature of the misappropriated confidential business information did not make that information any less a form of "property" within the meaning of the mail fraud statute. In this case, the court of appeals correctly concluded that the Commonwealth had a property interest in its unissued license similar to the Wall Street Journal's interest in maintaining the confidentiality of its business information. Petitioner does not dispute that a license constitutes valuable and constitutionally protected property in the hands of the licensee. As the court of appeals observed (Pet. App. 11a), there is "no reason to make the esoteric distinction between an unissued and issued license" in light of Carpenter. Moreover, whatever the merits of petitioner's claim, he presents an issue that is not of sufficient continuing importance to warrant this Court's review. Following this Court's decision in McNally, Congress amended the mail and wire fraud statutes to provide that a "'scheme or artifice to defraud' includes a scheme or artifice to deprive another of the intangible right of honest services." 18 U.S.C. 1346, added by the Anti-Drug Abuse Act of 1988, Pub. L. No. 100-690, Section 7603 (Nov. 18, 1988). The legislative history confirms what the language of the statute makes clear: "This section overturns the decision in McNally v. United States * * *. The intent is to reinstate all of the pre-McNally caselaw pertaining to the mail and wire fraud statutes without change." 134 Cong. Rec. S17,375 (daily ed. Nov. 10, 1988) (statement of Sen. Biden); see also 134 Cong. Rec. H11,251 (daily ed. Oct. 21, 1990) ("it is no longer necessary to determine whether or not the scheme or artifice to defraud involved money or property") (statement of Rep. Conyers). In light of the amendment, review of this case is not needed to settle the disagreement in the courts of appeals as to whether, under McNally, an unissued license is property in the hands of the State. There is no doubt that a fraudulent scheme to acquire a medical license like that in which petitioner engaged would violate the new provision. In any scheme involving the acquisition of a medical license, the licensee's employer and his patients would plainly be deprived of "honest services" as a result of the scheme, so that the scheme would constitute fraud under Section 1346. A deprivation of "honest services" would necessarily result from the scheme since neither employers nor patients would choose to engage the services of a doctor who had obtained a medical license by fraud. Thus, whether a medical license is property under McNally is of no prospective importance. Furthermore, petitioner overstates the extent of the conflict under the statute prior to its amendment. As a practical matter, whether licenses are property in the hands of the State did not matter in cases like this even before the statute was amended. In the most similar case, United States v. Allard, 864 F.2d 248 (2d Cir. 1989), the court of appeals upheld the conviction of a participant in a scheme to obtain a medical license fraudulently. It noted that McNally "raise(d) questions concerning whether a medical license is property to the Commonwealth." Id. at 250. However, the court held that whether or not that was so, the defendant had engaged in a scheme to defraud: "The license may have no 'value' as such in the hands of the Commonwealth, as Allard argued, but it also had no value in the hands of the defendant absent his internship at Worcester City Hospital. Reading the Information broadly and with the common sense required by law, it clearly describes a scheme to defraud the Hospital." Id. at 251. Similarly, in United States v. Granberry, 908 F.2d 278, 280 (8th Cir. 1990), the court upheld a conviction even though it concluded that "licensing authorities have no property interest in licenses." In that case, which involved a bus driver's license that had been obtained fraudulently, the court concluded that the school district that hired the driver had been defrauded of the money it paid as wages: "What the School District wanted was a competent school-bus driver who was truthful and had not been convicted of a felony, and this is not what it got. The School District has been deprived of money in the very elementary sense that its money has gone to a person who would not have received it if all of the facts had been known." Ibid. Convictions have been reversed under McNally in cases involving different kinds of licenses. United States v. Kato, 878 F.2d 267 (9th Cir. 1989) (private pilot's license); United States v. Dadanian, 856 F.2d 1391 (9th Cir. 1988) (gambling license); United States v. Murphy, 836 F.2d 248 (6th Cir.), cert. denied, 488 U.S. 924 (1988) (bingo license). Those cases may be distinguishable from cases such as this in that it is arguable that neither an employer nor a client is defrauded by, for example, a person who operates a bingo game pursuant to a fraudulently obtained license. If those cases are distinguishable on that ground, whether a license is properly viewed as property in the hands of the State is relevant in those cases. But in cases such as this, it is clear that the only reason to obtain the license was to defraud prospective employers and clients. Thus, there is no question under the amended statute that a scheme to obtain a medical license fraudulently is a proscribed scheme "to deprive another of the intangible right to honest services." 18 U.S.C. 1346. Nor is there any real question that the scheme was proscribed under McNally, whether or not a license is property in the hands of the State, since the purpose of the scheme was to defraud employers and clients as well as the Commonwealth. 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 JOSEPH C. WYDERKO Attorney NOVEMBER 1990