No. 98-419
In the Supreme Court of the United States
OCTOBER TERM, 1998
CHARLES SIMPSON CHRISTOPHER, PETITIONER
v.
UNITED STATES OF AMERICA
ON PETITION FOR A WRIT OF CERTIORARI
TO THE UNITED STATES COURT OF APPEALS
FOR THE FIRST CIRCUIT
BRIEF FOR THE UNITED STATES IN OPPOSITION
SETH P. WAXMAN
Solicitor General
Counsel of Record
JAMES K. ROBINSON
Assistant Attorney General
LISA SIMOTAS
Attorney
Department of Justice
Washington, D.C. 20530-0001
(202) 514-2217
QUESTIONS PRESENTED
1. Whether the wire fraud statute requires that a defendant's misrepresentations
be made to the same party from whom money or property is obtained.
2. Whether petitioner's scheme to acquire two insurance companies by means
of false representations and promises, in order to enable petitioner to
loot the companies' assets, constituted a scheme to defraud the companies
of money or property within the meaning of McNally v. United States, 483
U.S. 350 (1987).
3. Whether, in addition to instructing the jury that it must find that petitioner
acted knowingly and with specific intent to defraud in order to return a
guilty verdict, the district court was required to give petitioner's requested
instruction that good-faith reliance on the advice of counsel is a defense
to the charges against him.
In the Supreme Court of the United States
OCTOBER TERM, 1998
No. 98-419
CHARLES SIMPSON CHRISTOPHER, PETITIONER
v.
UNITED STATES OF AMERICA
ON PETITION FOR A WRIT OF CERTIORARI
TO THE UNITED STATES COURT OF APPEALS
FOR THE FIRST CIRCUIT
BRIEF FOR THE UNITED STATES IN OPPOSITION
OPINIONS BELOW
The opinion of the court of appeals (Pet. App. 1a-25a) is reported at 142
F.3d 46. The memorandum opinion of the district court (Pet. App. 26a-37a)
is unreported.
JURISDICTION
The judgment of the court of appeals was entered on April 27, 1998. A petition
for rehearing was denied on June 11, 1998. Pet. App. 38a. The petition for
a writ of certiorari was filed on September 9, 1998. The jurisdiction of
this Court is invoked under 28 U.S.C. 1254(1).
STATEMENT
Following a jury trial in the United States District Court for the District
of Rhode Island, petitioner was convicted on eleven counts of wire fraud,
in violation of 18 U.S.C. 1343 and 2; and ten counts of interstate transportation
of stolen goods, in violation of 18 U.S.C. 2314 and 2. The district court
sentenced petitioner to a total of 121 months' imprisonment, to be followed
by three years' supervised release, and it ordered petitioner to make all
reasonable efforts to pay restitution in the amount of $26,700,000. The
court of appeals affirmed petitioner's convictions, but modified the restitution
order. Pet. App. 1a-25a.
1. The evidence at trial showed that petitioner carried out a fraudulent
scheme to acquire two insurance companies-American Universal Insurance Co.
(American) and Diamond Benefits Life Insurance Co. (Diamond)-by affirmatively
misleading and deceiving state regulators in Rhode Island, Arizona, and
California, whose approval was statutorily required for the acquisitions.
Petitioner then used approximately $27 million of the companies' monies
both to advance his own purposes and then to conceal that misuse of the
companies' funds.
a. Petitioner was Vice President of Resolute Holdings, Inc. (Resolute).
Resolute had no assets other than $250,000 working capital and was formed
solely for the purpose of acquiring insurance companies. In 1987, Resolute
sought to acquire American, an insurer headquartered in Rhode Island, and
Diamond, an insurer licensed in Arizona and headquartered in California.
Gov't C.A. Br. 2. By statute, insurance regulators in each of those States
had to approve the acquisitions of the respective companies. Id. at 3. Resolute
submitted an application, known as a Form A statement, to each State which
set out, inter alia, Resolute's business plan for the target company and
the financial means by which the company would be acquired. Petitioner supplied
his attorney with all the information needed to complete the Forms A, and
he personally signed all of the documents submitted to the regulators. Ibid.
Petitioner agreed to make much-needed capital contributions to both American
and Diamond in the form of promissory notes backed by real estate collateral.
For American, petitioner agreed to contribute a $50 million promissory note
from Hilltop Developers (Hilltop) secured by Heritage Ranch and Indian Palms,
two properties owned by George Reeder.1 Gov't C.A. Br. 4. For Diamond, petitioner
agreed that Hilltop would contribute a $12 million note secured by another
Reeder property, Indian Springs. Mydar Business Group, Inc. (Mydar) would
also supply a $3 million note to Diamond, which would be secured by a parcel
of petitioner's own land known as Big Springs.2 Ibid.
In addition, petitioner arranged for Diamond to receive capital through
a transaction with Life Assurance Company of Pennsylvania (LACOP). Gov't
C.A. Br. 4. Diamond would receive approximately $29.4 million in cash from
LACOP in consideration for assuming approximately $31 million of LACOP's
annuity obligations. LACOP would deliver $18 million of the capital at closing,
with the remainder to follow several months later. Ibid.
At the time Resolute submitted its Forms A, the four properties securing
the promissory notes-Heritage Ranch, Indian Palms, Indian Springs, and Big
Springs-were encumbered by liens totaling well over $25 million. Gov't C.A.
Br. 5. Petitioner and Resolute repeatedly represented to the insurance regulators
in Rhode Island and Arizona that all liens would be fully paid off by the
time Resolute closed its acquisitions of American and Diamond. Id. at 5-8.
The Rhode Island and Arizona regulators testified that those representations
were critical to their approval of the transactions. Id. at 7. The concerns
regarding the liens also led Rhode Island's regulators to give only conditional
approval to Resolute's acquisition of American. The order provided that
transfer of ownership would not become final until Resolute issued title
insurance policies for Heritage Ranch and Indian Palms indicating full payment
of all liens effective as of the closing date. Id. at 6-7. It was uncontroverted
at trial that the extensive liens on Heritage Ranch, Indian Palms, Indian
Springs, and Big Springs were not paid off by May 27, 1988, when the American
purchase closed, or by June 14, 1988, when the Diamond purchase closed.
Id. at 8.
California's regulators initially denied approval of Resolute's acquisition
of Diamond, objecting specifically to Resolute's proposal to use part of
the LACOP capital to pay Diamond's purchase price. Gov't C.A. Br. 8-9. Accordingly,
to secure the approval of the California regulators, petitioner agreed in
writing that (1) Resolute would not use any of Diamond's own assets to meet
the purchase price, and (2) Resolute would provide Diamond with about $1.3
million in cash to raise the company's capital and surplus. Id. at 9. California
then issued an order that approved the acquisition of Diamond, but that
also set forth petitioner's foregoing promises as conditions precedent to
such approval. Ibid. The testimony at trial demonstrated that those requirements
were material to California's approval of the acquisition. Id. at 9-10.
b. After closing on the Diamond and American acquisitions, petitioner proceeded
to use the insurance companies' own funds both to pay off the pre-existing
liens on the four properties securing the promissory notes and to pay Diamond's
purchase price. First, petitioner caused Diamond to "loan" to
Hilltop the $18 million it received from LACOP at closing. Reeder's Windbrook
Country Club, which was worth only $5 million, was pledged as collateral
for the loan. Gov't C.A. Br. 10. Petitioner also had $3 million transferred
out of one of American's accounts. Id. at 12-13. Using the newly acquired
money, petitioner ordered wire transfers in the amount of $3.8 million to
pay Diamond's sellers, in direct violation of California's prohibition on
using Diamond's own assets for that purpose. Id. at 11. Petitioner also
ordered wire transfers of $440,000, $8.7 million, and $5.9 million, respectively,
to clear liens on Big Springs, Heritage Ranch, and Indian Palms-all in violation
of his representations that the liens would be cleared before closing. Id.
at 11-13. Finally, petitioner ordered wire transfers of $465,000, $825,000,
and $459,000 to Hilltop and to accounts controlled by Reeder. Id. at 12.
Within ten days of the Diamond closing, petitioner had spent all $18 million
received from LACOP, and all $3 million transferred out of American's account
as well. Petitioner then lied to Arizona regulators, saying that the $18
million was largely intact and that he was looking for ways to invest it.
Id. at 12-13.
Petitioner next engaged in two more unauthorized, fraudulent uses of the
insurance companies' money. First, petitioner caused American to "loan"
$5.4 million to Mydar, providing virtually no collateral in return. Gov't
C.A. Br. 14-15. Petitioner used part of that money to clear additional liens
on Big Springs and to boost Diamond's capital, as he had promised the California
regulators. Id. at 15-16. Mydar never repaid any of the American loan. Id.
at 16. Second, petitioner arranged for American to purchase certain notes
and property. Although the purchase price for those assets was $11.75 million,
petitioner directed his attorney to prepare documents setting a falsely
inflated price of more than $15 million. Id. at 16-17. As a result, petitioner
gained access to $3.3 million from American, which he used to pay off remaining
liens on Heritage Ranch, Indian Palms, and Indian Springs. Id. at 17. Once
all the liens on the collateral properties were finally cleared, petitioner
submitted to the regulators title insurance policies which had been back-dated
to the dates of the American and Diamond closings. Id. at 18.
2. a. At trial, petitioner argued, inter alia, that all of Resolute's actions
were undertaken in reliance upon the advice of competent counsel. Pet. 5.
Accordingly, petitioner requested a jury instruction that good-faith reliance
upon the advice of counsel is a defense to wire fraud. The district court
denied petitioner's request on the ground that petitioner failed to show
he apprised counsel of his specific plans for the insurance companies' funds.
Pet. 15. The district court instructed the jury that to be found guilty
of wire fraud, petitioner must have "knowingly devised or knowingly
participated in a scheme or artifice to defraud." 7/18/95 Tr. 169.
The court explained to the jury that "[a]n act is done knowingly if
done voluntarily and intentionally and not because of mistake or accident
or other innocent reason. The purpose of adding the word 'knowingly' is
to insure that no one will be convicted for an act done because of mistake
or accident or other innocent reason." Id. at 170. The court then instructed
the jury regarding specific intent:
The offense [of] wire fraud requires proof of specific intent before the
[petitioner] can be found guilty. Specific intent as the term implies means
more than the general intent to commit the act. To establish specific intent
the Government must prove beyond a reasonable doubt that the [petitioner]
intended to defraud, that is, to deceive for the purpose of causing gain
to oneself and loss to another.
Id. at 171. The court also instructed the jury on the knowledge element
with respect to the interstate transportation of stolen goods counts:
Knowledge is an essential element * * *. Thus the Government must prove
beyond a reasonable doubt that at the time [petitioner] caused the money
or security to be transported in interstate commerce he knew they had been
stolen, converted or acquired by fraud. The purpose of adding the requirement
of knowledge is to insure that no one will be convicted for an act done
because of mistake, accident or other innocent reason. Thus [petitioner's]
good faith belief that the money was not stolen, converted or acquired by
fraud is a complete defense to these charges.
Id. at 175. The jury found petitioner guilty on all counts. Pet. App. 26a.
b. Pursuant to Rule 33 of the Federal Rules of Criminal Procedure, petitioner
moved for a new trial. Petitioner contended, inter alia, that his wire fraud
convictions were legally erroneous and that sufficient evidence existed
to warrant a jury instruction concerning the defense of good-faith reliance
on advice of counsel. The district court denied petitioner's motion. Pet.
App. 26a-37a. With respect to petitioner's legal sufficiency challenge,
the court found that First Circuit precedent, see United States v. Bucuvalas,
970 F.2d 937 (1992), cert. denied, 507 U.S. 959 (1993), permitted conviction
for wire fraud when a defendant defrauds the government of its right effectively
to control the granting of licenses or approvals. Pet. App. 29a-32a. The
district court also dismissed petitioner's claim that the deceived party
must be the same as the party deprived of a property interest, finding that
"there appears to be no 'convergence' doctrine firmly established in
the First Circuit." Id. at 33a. Finally, the district court held that
petitioner was not entitled to a jury instruction on the good-faith defense,
finding that "the record does not reflect the assertion that [petitioner]
told counsel of his intention to utilize the insurance companies' assets
to pay off pre-existing loans." Id. at 36a.
3. The court of appeals affirmed. Pet. App. 1a-25a. The court first held
that the evidence was sufficient to support petitioner's wire fraud convictions.
Id. at 9a-13a. It found that petitioner had knowingly violated the promises
he made to the insurance regulators both to provide lien-free collateral
by the closings and not to use Diamond's own assets to pay its purchase
price. The court found that the jury could have concluded that petitioner's
conduct "was an obvious subterfuge designed to evade" the regulatory
requirements (id. at 11a), and it deemed petitioner's innocent explanation
for the financial transactions "merely part of a shell game [petitioner]
devised to hide the nature of the [monetary] transfers." Id. at 12a.
The court of appeals also rejected petitioner's two challenges to the legal
sufficiency of his wire fraud convictions. Pet. App. 13a-18a. Petitioner
had contended, first, that the wire fraud statute requires convergence-the
fraudulent scheme must deceive the same person who is deprived of money
or property. The court held that its previous decisions had not espoused
a convergence requirement, and that nothing in the broad language of the
mail and wire fraud statutes or in this Court's decision in McNally v. United
States, 483 U.S. 350 (1987), required that limitation. Pet. App. 14a-16a.
The court next rejected petitioner's contention that his deceptive scheme
did not deprive the state regulators of property within the meaning of McNally,
which held that 18 U.S.C. 1341 is "limited in scope to the protection
of property rights." Pet. App. 13a (quoting McNally, 483 U.S. at 360).
The court noted that petitioner "intentionally subvert[ed] requirements
imposed by state insurance regulators designed to protect the financial
health of two insurance companies," and that "[b]y his deceptive
representations * * *, [petitioner] siphoned over $26 million from the coffers
of the two companies, diverting to his own purposes funds the regulators
sought to protect." Id. at 17a. "The purpose and result of the
fraud," the court held, "plainly related to money." Ibid.
Finally, the court held that the district court did not err in refusing
to instruct the jury that good-faith reliance on the advice of counsel is
a defense to wire fraud. Pet. App. 18a-19a. The court expressed doubt that
petitioner made a sufficient showing to justify a good-faith instruction,
but held that a separate instruction was unnecessary in any event because
the trial court adequately instructed the jury on intent to defraud. Id.
at 19a.
ARGUMENT
Petitioner argues (Pet. 8-17) that this Court should grant certiorari to
resolve conflicts of authority on three separate issues. Those claims are
without merit.
1. Petitioner urges (Pet. 11-13) this Court to grant review to resolve the
question whether the mail and wire fraud statutes require that the party
deceived also be the party deprived of money or property. Petitioner claims
(Pet. 11) that two courts of appeals have adopted such a requirement, which
he labels the convergence doctrine. See United States v. Lew, 875 F.2d 219
(9th Cir. 1989); United States v. Shelton, 848 F.2d 1485 (10th Cir. 1988)
(en banc). Further review of that issue is not warranted.
The court of appeals in this case correctly held, as have several other
courts, that the wire fraud statute does not require convergence. Pet. App.
16a; see also United States v. Blumeyer, 114 F.3d 758, 767-768 (8th Cir.),
cert. denied, 118 S. Ct. 350 (1997); United States v. Cosentino, 869 F.2d
301, 307 (7th Cir.), cert. denied, 492 U.S. 908 (1989).3 As the court below
reasoned, "[n]othing in the mail and wire fraud statutes requires that
the party deprived of money or property be the same party who is actually
deceived." Pet. App. 16a. The statute requires only that the "scheme
or artifice" be "to defraud, or for obtaining money or property
by means of false or fraudulent pretenses, representations, or promises."
18 U.S.C. 1343.
The decisions claimed by petitioner to apply a convergence requirement rely
only on this Court's decision in McNally as support. See Lew, 875 F.2d at
221; Shelton, 848 F.2d at 1495-1496. In McNally, this Court reversed mail
fraud convictions because the relevant indictment alleged only a fraudulent
scheme to deprive Kentucky citizens of their intangible right to honest
government, and not a scheme to deprive them of money or property. The Court
simply "did not focus on whether the person deceived also had to lose
money or property." United States v. Evans, 844 F.2d 36, 39 (2d Cir.
1988).4
Petitioner also errs in contending (Pet. 11) that the decision in this case
conflicts with decisions of the Ninth and Tenth Circuits. Despite language
in those cases that appears to support a convergence requirement, it is
anything but clear that either circuit has in fact adopted such a requirement
as a general matter.5 Both cases can instead be read only as establishing
a causation requirement under the federal fraud statutes.
United States v. Lew, 875 F.2d 219 (9th Cir. 1989), involved an attorney
who filed false statements with the Department of Labor in order to obtain
permanent resident status for his immigrant clients. The government charged
that by filing false forms the defendant defrauded his clients of their
attorney's fees. The court of appeals reversed because it found no evidence
that the defendant had deceived his clients, and the jury was not required
to make such a finding. Id. at 221. Although the Ninth Circuit opined that
this Court's decision in McNally required proof of an intent "to obtain
money or property from the one who is deceived," Lew, 875 F.2d at 221,
that statement cannot necessarily be read as a general endorsement of a
universal convergence requirement. Rather, the court may only have meant
to express in the case's factual context the uncontroversial point-made
explicit earlier in its decision- that "mail fraud requires a relationship
between the falsity and the collection of the money." Ibid. Accordingly,
because the false statements made to the Department of Labor did not cause
the defendant's clients to part with their money-and because the jury was
not required alternatively to find that the defendant deceived his clients
directly-the defendant's clients could not have been victims of a "scheme
or artifice to defraud."6
The holding of the Tenth Circuit in United States v. Shelton, 848 F.2d 1485
(1988) (en banc), is even less clear. In Shelton, an elected official received
kickbacks from county suppliers and was charged (before McNally) with scheming
to defraud the citizens of their right to honest government. The indictment
also contained allegations suggesting that the county had lost money as
a result of the defendant's conduct. See id. at 1495. The Tenth Circuit
reversed the convictions, however, because the instructions did not require
the jury "to find that the victim suffered pecuniary loss"; the
instructions defined a scheme to defraud as "a plan to acquire money
or property[,] but [did] not require that this money or property come from
the victim." Id. at 1496 (emphasis omitted). Again, the court may have
intended to convey only that the mail fraud statute requires a connection
between the fraud and the obtaining of money. The instructions in Shelton
were faulty because they permitted the jury to convict on the sole ground
that the defendant obtained money from suppliers who were themselves perpetrators
of the fraudulent scheme. The suppliers' money-the only money received in
the scheme-thus could not have been obtained as a result of the deceptive
scheme.
Significantly, the courts in Lew and Shelton-to the extent they disagreed
with the decisions of other circuits-differed only with respect to their
reading of this Court's decision in McNally. As numerous circuits have now
recognized, Congress supplanted the McNally decision one year later by enacting
18 U.S.C. 1346, which defines a scheme to defraud to include the deprivation
of honest services. See Frost, 125 F.3d at 364 (listing cases); United States
v. Brumley, 116 F.3d 728, 732 (5th Cir.) (en banc) (same), cert. denied,
118 S. Ct. 625 (1997). It is questionable whether the Ninth and Tenth Circuits
would continue to apply the rules announced in Lew and Shelton with respect
to post-18 U.S.C. 1346 conduct. Moreover, the enactment of Section 1346
significantly decreases the importance of any purported circuit conflict
regarding a convergence requirement. As the extremely limited number of
recent cases addressing convergence demonstrates, it is the rare case in
which a defendant's allegedly fraudulent conduct fails to satisfy the convergence
requirement both with respect to money or property and with respect to the
broadly defined "intangible right of honest services." 18 U.S.C.
1346.
2. This Court held in McNally that the mail fraud statute is "limited
in scope to the protection of property rights" and does not reach "schemes
to defraud citizens of their intangible rights to honest and impartial government."
483 U.S. at 355, 360. Petitioner argued unsuccessfully below that McNally
required reversal of his wire fraud convictions.7 He now contends (Pet.
8-10) that this Court should grant review to resolve a circuit conflict
on the question of whether a government approval or license to conduct a
business constitutes property within the meaning of McNally. That issue
is not squarely presented in this case.
The First Circuit affirmed petitioner's wire fraud convictions because it
found that "[t]he purpose and result of [petitioner's] fraud plainly
related to money." Pet. App. 17a. It noted that "[b]y his deceptive
representations and by making a deliberate end run around" the requirements
imposed by the insurance regulators designed to protect the financial health
of American and Diamond, petitioner "siphoned over $26 million from
the coffers of the two companies, diverting to his own purposes funds the
regulators sought to protect." Ibid. The court further held that "the
jury could reasonably have concluded that the scheme was designed to deprive
and did in fact deprive the insurance companies of property, placing the
policyholders in ultimate jeopardy," and that, "[b]ased on the
indictment and instructions, the jury could not have convicted [petitioner]
had it not found that his fraudulent representations were a means to take
money from American and Diamond and to use those funds for improper purposes
concealed from the regulators." Id. at 18a. "Such a finding,"
the court correctly concluded, "places [petitioner's] conduct well
within the reach of § 1341." Ibid.
Thus, although the issue was briefed below, the First Circuit's decision
does not hold that the insurance regulators' approval of the acquisitions
itself constituted a property interest within the meaning of McNally. Accordingly,
even assuming that a genuine conflict of authority exists on that question,8
this would be an inappropriate case in which to resolve it.
3. Finally, petitioner contends (Pet. 13-17) that the district court erred
in refusing to give the jury a separate instruction on petitioner's good-faith
reliance on advice of counsel, and that this Court should grant review to
resolve a split of authority concerning when such an instruction must be
given. The court of appeals correctly held that a separate instruction was
not required in this case, and further review is unwarranted because petitioner
was not entitled to a good-faith instruction under the rule followed in
any court of appeals.
A defendant generally is entitled to an instruction on his theory of defense
if he makes a timely request for the instruction, the evidence supports
the instruction, and the instruction correctly states the law. See Mathews
v. United States, 485 U.S. 58, 63 (1988). But a defendant is not entitled
to have the jury instructed in his particular words; it is sufficient if
the given instructions adequately and correctly cover the substance of the
requested instruction. It is thus well settled that the adequacy of the
instructions must be evaluated in the context of the charge as a whole.
See Estelle v. McGuire, 502 U.S. 62, 72 (1991); United States v. Park, 421
U.S. 658, 674 (1975); Cupp v. Naughten, 414 U.S. 141, 146-147 (1973).
This case is controlled by United States v. Pomponio, 429 U.S. 10 (1976)
(per curiam). In Pomponio, the defendants were charged with willfully filing
false income tax returns, in violation of 26 U.S.C. 7206(1). The court of
appeals found that the trial court gave "full and complete" instructions
that the jury should convict only if it found that the defendants signed
their tax returns knowing them to be false, but it nevertheless held that
"[s]ince a good faith belief would tend to negate the elements of willfulness
and knowledge, [the defendants] were entitled to [such] an instruction."
United States v. Pomponio, 528 F.2d 247, 249, 250 (4th Cir. 1975).
This Court reversed the judgment of the court of appeals. It held that,
because the trial judge had "adequately instructed the jury on willfulness[,
a]n additional instruction on good faith was unnecessary." Pomponio,
429 U.S. at 13; see also Cheek v. United States, 498 U.S. 192, 201 (1991)
(noting the Court's holding in Pomponio that "after instructing the
jury on willfulness, an additional instruction on good faith was unnecessary")
(internal quotation marks omitted).9 The same conclusion applies here.
The court of appeals in this case correctly concluded, using reasoning analogous
to that in Pomponio, that the jury was adequately instructed. On the wire
fraud counts, the district court instructed that the jury must find that
petitioner knowingly devised or knowingly participated in a scheme to defraud,
and that he acted with a specific intent to defraud. 7/18/95 Tr. 169-170.
"To establish specific intent," the court instructed, "the
Government must prove beyond a reasonable doubt that [petitioner] intended
to defraud, that is, to deceive for the purpose of causing gain to oneself
and loss to another." Id. at 171. The court also instructed the jury
that "[a]n act is done knowingly if done voluntarily and intentionally
and not because of mistake or accident or other innocent reason." Id.
at 170. The court then instructed the jury in similar language with respect
to the counts charging interstate transportation of stolen goods: "Knowledge
is an essential element * * *. Thus the Government must prove beyond a reasonable
doubt that at the time [petitioner] caused the money or security to be transported
in interstate commerce he knew they had been stolen, converted or acquired
by fraud. * * * Thus [petitioner's] good faith belief that the money was
not stolen, converted or acquired by fraud is a complete defense to these
charges." Id. at 175.
The court of appeals correctly found that those instructions sufficiently
conveyed petitioner's theory, because the jury could not have returned a
guilty verdict on any counts if it had found that petitioner had acted with
a good-faith belief in the legality of his conduct. Pet. App. 19a. That
holding accords with decisions of the majority of the courts of appeals
that have addressed the question. See United States v. Dockray, 943 F.2d
152, 155 (1st Cir. 1991) (intent to defraud is "essentially the opposite
of good faith"); United States v. McElroy, 910 F.2d 1016, 1026 (2d
Cir. 1990); United States v. Gross, 961 F.2d 1097, 1102-1103 (3d Cir.),
cert. denied, 506 U.S. 965 (1992); United States v. Fowler, 932 F.2d 306,
317 (4th Cir. 1991); United States v. Rochester, 898 F.2d 971, 979 (5th
Cir. 1990) ("[A] finding of specific intent to deceive categorically
excludes a finding of good faith."); United States v. Sassak, 881 F.2d
276, 280 (6th Cir. 1989); United States v. Brimberry, 961 F.2d 1286, 1291
(7th Cir. 1992); United States v. Sanders, 834 F.2d 717, 719 (8th Cir. 1987);
United States v. Dorotich, 900 F.2d 192, 194 (9th Cir. 1990) (holding that
where court adequately instructs on specific intent in tax fraud case, failure
to give additional instruction on good-faith reliance upon expert advice
is not reversible error); United States v. Walker, 26 F.3d 108, 109-110
(11th Cir. 1994) (per curiam); United States v. Gambler, 662 F.2d 834, 837
(D.C. Cir. 1981).
Petitioner contends (Pet. App. 13-17) that review is warranted because five
circuits have held that, even if the jury is instructed on willfulness and
specific intent, an additional good-faith instruction is required in cases
in which the evidence supports the instruction. No such conflict exists
with respect to four of the five circuits named by petitioner. Petitioner
points (Pet. 17) to the Sixth Circuit's holding in United States v. Duncan,
850 F.2d 1104, 1117 (1988), in which the court reversed false tax return
convictions because the district court failed to give a good-faith reliance
on advice of counsel instruction. The continued validity of that holding
as circuit precedent has been put into considerable doubt by the Sixth Circuit's
subsequent holding in United States v. Sassak, 881 F.2d 276 (1989). In Sassak,
a defendant convicted of aiding and abetting the preparation of false or
fraudulent tax returns requested a jury instruction regarding his good-faith
defense. The court first found that the district court's willfulness charge
complied with this Court's holding in Pomponio. Sassak, 881 F.2d at 280.
The court then rejected the defendant's claim with respect to the failure
to give the requested good-faith instruction, noting that "the Pomponio
Court found an additional instruction on good faith belief to be unnecessary."
Ibid.
Petitioner also claims (Pet. 15, 17) that the decision below is in conflict
with the Seventh Circuit's decision in United States v. Walters, 913 F.2d
388, 391 (1990). The Walters decision appears to be, at best, an aberration
in the law of that circuit. That court's prior decision in United States
v. Kelley, 864 F.2d 569 (7th Cir.), cert. denied, 493 U.S. 811 (1989), held-relying
upon this Court's decision in Pomponio-that no additional good-faith instruction
was necessary there because "instructions on willfulness necessarily
encompass[] [the] theory of good faith reliance on counsel's advice."
Id. at 573. The Seventh Circuit's decision in Kelley-and not its decision
in Walters-has been followed as the law of that circuit. See, e.g., United
States v. Mankarious, 151 F.3d 694, 708 (7th Cir. 1998) (citing Kelley and
relying on government's argument that "because the offenses involved
willfulness, a good faith instruction was unnecessary"); United States
v. Cheek, 3 F.3d 1057, 1062-1063 (7th Cir. 1993) (relying on Kelley), cert.
denied, 510 U.S. 1112 (1994); United States v. Brimberry, 961 F.2d 1286,
1291 (7th Cir. 1992) (same).
Petitioner also claims (Pet. 14 n.8) that the Eighth Circuit's decision
in United States v. Casperson, 773 F.2d 216, 223-224 (1985), is in conflict
with the decision below. The continued validity of Casperson as circuit
precedent is questionable in light of that court's subsequent decision in
United States v. Sanders, 834 F.2d 717, 719 (8th Cir. 1987). The court in
Sanders rejected the defendant's appeal regarding the district court's failure
to give a good-faith instruction because "[it] is sufficient that the
jury was given instructions regarding the need to find specific intent to
defraud in order to find the defendant guilty of criminal conversion."
Id. at 719.
Petitioner also claims (Pet. 15, 17) that the decision below is in conflict
with the D.C. Circuit's decision in United States v. DeFries, 129 F.3d 1293,
1308 (1997) (per curiam). The D.C. Circuit is in fact in agreement with
the decision below. In a previous case, United States v. Gambler, 662 F.2d
834, 837 (D.C. Cir. 1981), that court held clearly that it is unnecessary
for a district court to give a good-faith instruction when it has already
instructed the jury on the nature of the specific intent required for conviction.
The DeFries decision did nothing to alter this long-standing rule. The court
found the failure to give the good-faith instruction reversible because
of the "prosecutor's conduct in closing argument to the jury."
DeFries, 129 F.3d at 1309. After objecting to a good-faith instruction,
the prosecutor informed the jury expressly that the defendant's reliance
on his counsel's advice "is not a defense" and also told the jurors
that the court would not read any instruction regarding the defendant's
reliance on that advice. Ibid. The D.C. Circuit, only after "viewing
[the jury instructions] in light of the prosecutor's comments," found
the failure to give a specific good-faith instruction reversible error.
Id. at 1309-1310. The court never questioned the validity of its prior decision
in Gambler.
The one decision which is in conflict with the decision below is that of
the Tenth Circuit in United States v. Hopkins, 744 F.2d 716, 718 (1984)
(en banc). The brief opinion fails to discuss-or even note-this Court's
decision in Pomponio. In light of the trend in the other circuits away from
requiring a separate good-faith instruction when the jury is already charged
on the meaning of specific intent, it is possible that the Tenth Circuit
will review its fourteen-year-old decision. In any event, although we believe
that Hopkins was wrongly decided, there is no need for this Court to grant
review, because petitioner did not proffer "evidence sufficient for
a reasonable jury to find in his favor," Mathews, 485 U.S. at 63, and
would therefore not be entitled to a good-faith instruction even under Hopkins.
As petitioner himself recognized at trial (see Pet. App. 40a-41a), an advice
of counsel instruction is warranted only when there is evidence that:
(1) before taking action, (2) [the defendant] in good faith sought the advice
of an attorney whom he considered competent, (3) for the purpose of securing
advice on the lawfulness of his possible future conduct, (4) and made a
full and accurate report to his attorney of all material facts which the
defendant knew, (5) and acted strictly in accordance with the advice of
his attorney who had been given a full report.
Liss v. United States, 915 F.2d 287, 291 (7th Cir. 1990); see 2 Josephine
R. Potuto et al., Federal Criminal Jury Instructions § 24.08 (2d ed.
1985 & Supp. 1993).
The district court expressly found that the trial evidence failed to support
an instruction concerning good-faith reliance on advice of counsel. To the
contrary, that court reasoned, the evidence showed only that petitioner's
"attorneys were acting in good faith at the direction of the client,"
rather than the other way around.10 7/18/95 Tr. 17. On appeal, the government
carefully detailed petitioner's numerous misrepresentations to his attorneys,
his failure to make complete disclosure of the relevant facts to any attorney,
and his failure to seek legal advice in advance of taking unilateral action.
See Gov't C.A. Br. 48-56. Although the court of appeals declined to reach
the issue in light of its conclusion that the instructions given were adequate,
the court expressed "doubt that [petitioner] made a sufficient showing
of good faith reliance on counsel to justify a finding in his favor on that
basis." Pet. App. 19a.
Thus, because petitioner would not have been entitled to a good-faith instruction
under the rule applied in any court of appeals, the conflict he alleges
does not warrant this Court's review.
CONCLUSION
The petition for a writ of certiorari should be denied.
Respectfully submitted.
SETH P. WAXMAN
Solicitor General
JAMES K. ROBINSON
Assistant Attorney General
LISA SIMOTAS
Attorney
NOVEMBER 1998
1 George Reeder, a wealthy real estate developer, was the President of Resolute
and the sole shareholder of Hilltop. Pet. App. 3a. Reeder was tried separately
on similar charges following petitioner's trial.
2 Mydar was a shell company owned in name by petitioner's brother. The evidence
at trial showed, however, that petitioner had a silent 50 percent interest
in the company and directed its activities. Gov't C.A. Br. 4.
3 Because the relevant language in the mail and wire fraud statutes is identical,
courts apply the same analysis to each provision. See Carpenter v. United
States, 484 U.S. 19, 25 n.6 (1987); United States v. Sawyer, 85 F.3d 713,
723 (1st Cir. 1996).
4 The Court did observe that "there was no charge and the jury was
not required to find that the Commonwealth itself was defrauded of any money
or property." McNally, 483 U.S. at 360. Read in context, that simply
reflected the Court's conclusion that the jury instructions erroneously
permitted a conviction based only on a finding that the defendants had defrauded
the citizens of their intangible right to honest government.
5 Contrary to petitioner's suggestion (Pet. 11-13), the Second Circuit's
holdings in Corcoran v. American Plan Corp., 886 F.2d 16, 20 (1989), and
United States v. Evans, 844 F.2d 36, 39 (1988), lend no support to his position.
The Corcoran court expressly found it "unnecessary to answer the general
question whether the mail fraud statute requires that the party deceived
also be the party injured." 886 F.2d at 20. Similarly, the court in
Evans concluded that "the case before us today does not require us
to decide this general question [whether the person deceived also has to
lose money or property]." 844 F.2d at 40; see also United States v.
Eisen, 974 F.2d 246, 252-253 (2d Cir. 1992) (same), cert. denied, 507 U.S.
998 (1993). The Sixth Circuit has also expressly declined to decide this
issue. See United States v. Frost, 125 F.3d 346, 360 (1997), cert. denied,
No. 97-1549 (Oct. 5, 1998).
6 Indeed, the First Circuit in this case employed the same reasoning to
explain why language in its previous decisions could not be construed as
adopting a convergence requirement:
In the scheme urged by the McEvoy Travel plaintiff, the deception actually
followed the loss. When we reasoned that no mail or wire fraud had occurred
because "the only parties deceived-[the regulators]-were not deprived
of money or property," we were simply making the point that the deception
must in fact cause the loss.
* * * * *
As in McEvoy Travel, the Sawyer panel simply rejected a fraud claim based
on misrepresentations that did not cause relevant harm; neither decision
required a convergence theory.
Pet. App. 14a-16a (citations omitted).
7 Because petitioner's wire fraud scheme was completed before the effective
date of 18 U.S.C. 1346, that provision is inapplicable to petitioner's conduct.
See Pet. App. 13a n.3.
8 As petitioner notes (Pet. 9-10 & nn.5, 6), the Eleventh Circuit recently
canvassed the law on this issue and observed that the circuits have reached
different conclusions as to whether certain types of business licenses constitute
property within the meaning of McNally. United States v. Shotts, 145 F.3d
1289, 1293-1294 (1998). The Eleventh Circuit also observed that most circuits
have relied on state law in determining whether a particular type of license
constitutes property. Id. at 1293-1295. Given that approach, it is "not
surprising[]" that the courts of appeals have reached different results.
Id. at 1294. To the extent, therefore, that any divergent results in the
circuits simply reflect the application of different States' laws, there
is no genuine conflict of authority that warrants this Court's review.
9 In Cheek, this Court held that, in a tax evasion case, it is error to
say that "a claimed good-faith belief must be objectively reasonable
if it is to be considered as possibly negating the Government's evidence
purporting to show a defendant's awareness of the legal duty at issue."
498 U.S. at 203. Cheek's holding that a jury should not be instructed that
a defendant's belief must be objectively reasonable does not undercut or
diminish the holding of Pomponio that the standard instructions on knowledge
and willfulness are adequate to present the good-faith defense to the jury.
10 In denying petitioner's motion for a new trial, the district court elaborated
as follows:
According to the evidence presented at trial, [petitioner] never made full
disclosure to his counsel. While the record reflects that counsel prepared
much of the paperwork, the record does not reflect the assertion that the
defendant told counsel of his intention to utilize the insurance companies'
assets to pay off pre-existing loans. Moreover the record shows that [petitioner]
alone instructed Fleet Bank to disburse the money according to his direction,
and thereby completed the fraudulent scheme on his own accord and not in
good faith reliance on the advice of counsel.
Pet. App. 36a-37a.