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A.
____________________
__________
Lauterback, Special Assistant United States Attorney were on
__________
brief, for appellant.
Paul F. Ware, Jr., with whom John C. Englander, Jeremy
___________________
__________________
______
Sternberg, and Goodwin, Procter & Hoar, Earle C. Cooley, and
_________
________________________
________________
Cooley, Manion, Moore & Jones were on brief, for defendants,
________________________________
appellees.
____________________
February 19, 1993
____________________
____________________
*of the District Court of Puerto Rico, sitting by designation.
U.S.C.
371.
fraudulently
Disadvantaged
Minority
Business
Enterprise
(MBE)
the defendants
Enterprise
"set
and
aside"
contracts.
For
from the
dismissal of an
information, we
United States v.
_____________
whole
with
all
necessary
We read an
information as a
implications.2
United
States
_______________
v.
____________________
1 United States v. Barker Steel Co., Inc., 774 F. Supp. 65
_____________
______________________
(D. Mass. 1991).
2 Prior to 1971, 18 U.S.C.
3731 limited government appeals
from dismissed informations or indictments to issues of law.
On appeal, the court was bound to accept the lower court's
-2-
nom., Zero v.
____
____
Cincotta, 689
________
U.S. 991
(1982); United
______
Cir.), cert. denied sub
_____ ______ ___
are reviewed de
__
novo.
____
United States
_____________
v. M.I.M., 932
______
F.2d
(3d Cir.
But
___
1990)
see United
___ ______
elements
definite
of the offense
charged
written
statement
of
and
the
fairly informs a
essential
facts
Hamling v.
_______
United States v.
_____________
also included.
Penagaricano-Soler, 911
__________________
of the
in the
____________________
764; Penagaricano-Soler, 911 F.2d at 839-40; United States v.
__________________
________________
United States, 418 U.S. 87, 117 (1974); accord Russell v.
_____________
______ _______
is
not whether,
in
hindsight,
the
offense." (citations
Information as
omitted)).
Therefore, we
a whole to determine
examine the
whether it sufficiently
begin, we
Information.
summarize the
The government's
MBE
Department
programs
of
of
key allegations
allegations
concerning the
several federal
Transportation
of the
(DOT),
agencies,
the
the
U.S.
Environmental
Protection
Agency
(EPA),
Administration (GSA).
MBE
programs
and
the
These federal
to
"support[]
General
Services
the
fullest
possible
and agencies."
Information at
of
federal
funds
received
for
Information at
7.
contracts
to
-4-
governments
minority businesses.
MBE programs
to certify
Information at
rely upon
applicants
9.
as
state
qualified
must be by
and the
Information at
the
entity
receiving federal
contractors
to
perform
subcontracts to
For
set aside
perform a
work,
subcontract work to
produce the
the
(Barker)
10.
MBE certified
until
at
and
least
its
stockholder, Robert B.
Barker
was
July,
MBE
firm must
the execution of
For
materials and
firm must
1986,
"either
or substantially alter
Information at
that
president,
from
Barker
director
10.
about
October,
Steel
Company
and
majority
contracts for
a
percentage goal
qualify for
award
The
turn
MBE certified
Information at
to qualify,
hires general
in
1982,
who
to meet the
contracts, the
supplies
the
certified MBEs
agency funding
Barker.
Massachusetts
-5-
company to win
Information
corporation
others
which
at
13.
furnished
fabricated
steel
reinforcing
bars
(re-bars)
and
other
Information at
1, 11.
several
began.
a certified MBE.
states before
Information at
The
steel
functions:
the
scheme
re-bar
"cut
defendants
3, 15.
industry
includes
fabricators
with the
and
bend
two
distinct
the
re-bars
to
meet
the
5.
is "furnish" work.
Id.
___
the
pouring
of the
Barker
October,
concrete."
1982,
would finance
a new
Rusco
would
Information
agreed
with
division of Rusco
allow
"place the
at
5.
Id.
___
Barker
Information
site."
then
Rusco that
for erecting
Information at
Barker to
market
5, 16.
its
In
steel
16.
Rusco's MBE
Prior
certification.
to 1982, Rusco
Information
had operated as
at
a broker of
15.
Beginning
in 1982, Barker
employees
-6-
re-bar and
Rusco's
name
other
when
Information at
exercised
period.
products in
contracts
16, 19,
substantial
merged a subsidiary
certifying
MBE
Barker
control
over
22, 25.
own name
various
obtaining
about
Rusco
local
maintaining
Information at
Brack
Rusco
throughout this
In 1985,
the defendants
Rusco's
Information at
state and
or
in
certification.
employees and
eligibility
for
MBE
25, 43.
and
agencies
certification.
required
20.
Information at
its
agencies
for
certification
documentation
the purpose
as
an
of
MBE.
funded
and
assisted
in
construction
benefitted Barker,
an MBE
firm.
Information at
15.
Information, impeded,
implementation,
execution
and
the
MBE
the
administration
defeated the
Information at
of
12.
III.
III.
Discussion
Discussion
__________
-7-
that:
defendants
(1) it failed
of any
MBE
to allege a
program statute;
violation by the
(2) it
did
not
contact with
federal agencies.
it failed to
The
allege direct
conduct alleged
criminal charges.
in the
that
rise to
Information,
was
not
the defendants
fraud
because
it
not
alleged conduct
deprive
the
federal
alleged that
371.
371.
The pertinent
language of
371
of 18
provides as
follows:
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 fined not
-8-
U.S.C.
371.
To sufficiently
charge a
conspiracy to
defraud,
the Information
elements
of
section
must
371:
agreement."
allege
"an
the three
agreement,
essential
the
unlawful
in furtherance
F.2d 1, 4
The
if it is
384 U.S.
855, 861
Dennis v.
_________
v.
to
defraud in
the
language of
defendants'
the
follows:
the defendants herein, BARKER STEEL CO.,
INC. and ROBERT B. BRACK, did knowingly,
willfully
and
unlawfully
combine,
conspire, confederate
and agree with
others, known and unknown, to defraud the
United States by impeding, impairing,
obstructing and
defeating the lawful
governmental
function
of
various
departments and agencies of the United
States, including particularly USDOT, EPA
and GSA, in the implementation, execution
and administration of their respective
MBE programs.
. . .
(All in violation of Title
States Code, Section 371.)
-9-
18
United
statute as
Information at
12, and
final statement at
page 13.
The
Information also
includes
detailed factual
allegations
to
substantiate
the
cursory
statutory
allegations.
The
set
aside
contracts
construction
The
furnishing
steel
in part
by federal
projects funded
was not an
false
and misleading
We
continue
documentation to
analysis
defendants that
agencies.
its eligibility as
MBE certification
of
the
an
by supplying
certifying agencies.
sufficiency
of
the
their conduct, as
alleged, violated
the statute.
B.
B.
on
maintained its
our
re-bar
MBE at one
thereby destroying
MBE.
to obtain MBE
____________________________________________
The defendants
failed
do not contend
that the
Information
disobey or
States v. Drougas,
______
_______
United States v.
_____________
748 F.2d
to disregard the
8, 15 (1st
law."
Cir. 1984);
United
______
accord
______
19 (1st Cir.
-10-
1991);
to defraud
The Information
the government
and goes
on to
allege
Information at
12
and
passim.
______
The defendants argue, however, that because Rusco was
not named or charged as a co-conspirator
actions
by Rusco
cannot be
in the Information,
alleged to support
the charges
There
is no
requirement that
to sustain
Penagaricano-Soler,
__________________
the
be charged
conviction
911 F.2d
of one
at 840
charged or
named as
with
the same
co-conspirator.
co-
Although
a co-conspirator,
Rusco is
the Information
in
the scheme
at
13,
allegations
conspirator.
16.
is that
to defraud
The reasonable
Rusco
identifies Rusco as
the
was
MBE programs.
inference from
operating
as a
co-
Particulars specifically
a co-conspirator.3
It is well
settled
____________________
3 While a bill of particulars cannot cure a defective
indictment, it can provide notice of detail missing from an
information.
See Fed. R. Crim. P. 7(e); 1 Charles A.
___
Wright, Federal Practice and Procedure Criminal 2d
129
(1982);
United States v. Prince, 868 F.2d 1379, 1384 (5th
_____________
______
-11-
of
scheme.
a co-conspirator
Pinkerton v.
_________
(1945);
taken
in
United States,
_____________
v. Fusaro,
______
furtherance of
328 U.S.
the
640, 646-47
42 (1st Cir.
21 (1st
Cir.
certification
are
properly
alleged
as
elements
of
the
conspiracy.
C.
C.
The
conspiracy
conspiracies:
statute
two
different
manner or
957
at
F.2d
proscribes
3.
The
"defraud clause" of
defendants
were
"in any
Hurley,
______
charged under
the
371.
and
potentially broad
sweep.
common law
determine
"'plainly
crimes
whether
the
against the
Dennis v.
______
United
______
defendants'
its general
States, we
alleged
conduct
must
is
____________________
Cir. 1989)
(observing that an information,
unlike
indictment, may be easily amended absent prejudice
defendants).
an
to
-12-
United States v.
_____________
Gradwell, 243
________
(1917).
We,
to determine
371.
The defendants
371.
due
under the
process rights
that the
to
notify
persons
612,
617
of reasonable
criminal.
(1953) ("The
doctrine invokes
Fifth Amendment
planned conduct is
U.S.
and requires
be sufficiently definite
intelligence that
United States v.
_____________
constitutional
their
Harriss, 347
_______
requirement of
to
contemplated conduct is
States
______
v.
372 U.S.
29,
United
______
31 (1963);
United States v. Anzalone, 766 F.2d 676, 678 (1st Cir. 1985).
_____________
________
We
as we must,
in the context
of the
United States
_____________
v. Angiulo, 897
_______
F.2d 1169,
1179
-13-
the
MBE
programs
did
not
impose
and held
that
criminal
sanctions
or
defendants had
not
violated any duty imposed upon them by the MBE programs, they
could not have violated
371.
on
United States v. Anzalone, 766 F.2d 676 (1st Cir. 1985), and
______________
________
United States v. Porter, 591 F.2d 1048
______________
______
We
of the currency
claimed that
Anzalone
________
amended to
reporting
of the same
371.4
to notify
event and
The
Id. at 679.
___
____________________
4 The defendant was not charged under
371 and
371 was not
discussed in the case.
The defendant was charged and
convicted of violating 18 U.S.C.
2, 1001 and 31 U.S.C.
5313, 5322.
-14-
not be held
failing
for
analysis
in
not address
with a crime
for failure to
_______
to
act.
is
act.
case,
easily
constitute a
In this
Anzalone
________
As
was charged
we held in
Anzalone,
________
crime if the
accused had
however, the
defendants are
Cir. 1987),
United States
______________
v. Murphy,
______
809 F.2d
crimes arose
violating
the
they
funds
constituted
deposited
conspiracy
which
to
in the
the
government
impair the
function
collection of
alleged
of
taxes.
the
The
court found
completed
required, had no
currency
transactions
reports
were
source of the
Id. at
___
-15-
1432.
in
Cir. 1989).
properly
to do by statute.
In
United States
_____________
operator with
the
finding
that
v. Porter,
______
591 F.2d
1048 (5th
under
convictions
the government
371.
and
had
and
On
not
conspiracy to
appeal, the
dismissed
the
had
sent lab
to the
properly charged
the doctor
laboratory operator
-16-
court
indictments
and a
371.
or
In
defendants
defendant's
than to
facts relating
to the
sent
their
might have
cheaply.
practice which
provided payment
lab
work
to
the
laboratories
regulations
did
or
laboratories.
nevertheless,
not
and
violated
fairly."
any
requirements
government
government's "right to
honestly
violate
other
The
which
the
Although
371
have the
Id.
___
at
using
manual
it
The
practice,
defrauded
Medicare program
1056.
Further,
rules,
that the
because
in the
Medicare
by
charged
the
the
conducted
government's
found that
defendants
had
Medicare program
371.
government
interfered
with
did
Medicare.
not prove
lawful
functions
The
that
the
of
the
liability under
-17-
None
involve
the
of the
situation
misrepresentation
purpose of a
cases relied
before
and deceit
us:
to
the defendants
affirmative
thwart the
government program.
upon by
acts
of
operation
and
Conspiracy to thwart
the
371.
Hammerschmidt v. United
_____________
______
States, 265 U.S. 182, 188 (1924); United States v. Bucey, 876
______
_____________
_____
F.2d
(1989).
As noted earlier,
of
conspiracies:
(1)
code, and
government.5
371
specific
to defraud
the United
defendants
pursuant to
commit a
(2) conspiracies
to
cannot be
because they
The
held criminally
owe no duty
defendants'
theory
conduct,
responsible
to the
federal
reflects
____________________
5
This
theory
is
distinguishable from
United States v.
______________
where the defendants
misunderstanding
of
371.6
second clause
If the
commission
of a
the function
of the
two clauses
were interpreted
specific offense,
it would
to require
have the
Whenever
statute in such
a way
possible,
as to
we will
of
not
same
clause
interpret
Breest
______
v.
371
in
cause redundancy.
clause of
the context
of an appeal
conspiracy to
helped a
drug
smuggler hide
IRS to levy
argued
tax code
that because
particular money
$5
offense clause of
371
The defendants
also
violations.
there
were no
The
laws prohibiting
and invest
specific
In Hurley,
______
Hurley,
______
v.
their
no duty to
in a long-standing
____________________
6 The defendants' theory
does not raise the due process
problems presented in United States v. Haga, 821 F.2d 1036
_____________
____
(5th Cir. 1987), where the defendants were charged under the
offense clause of
371 but were convicted, apparently, under
the defraud clause.
-19-
and
complex
limited
code.
conspiracy to
deceive
scheme proscribed
We held
by a
the IRS
single
rather
than a
section of
the tax
properly charged
IRS.
United States,
_____________
crime
made in
are
conspiracy
legal
may
violation of
to
of the
F.2d at 1312-13
themselves
conspiracy in
furtherance
of
obstruct by
merely the
conspiracy); United
______
(holding
constitute
371 if
deceit,
false
they
craft
that actions
a
criminal
are part
of
or trickery
a
the
an elaborate
by the defendants.
18
U.S.C.
broader goal,
work
to use
aside contracts
be done
1986.
specific offense
continued into
Although Rusco
was indicted
1001,
the defendants'
for the
in violation of
conspiracy
aimed at
and function of
the MBE
programs.
The
defendants' scheme
is the
kind
of complex
-20-
might not
be prosecuted adequately
by addressing
argument.
in Hurley fared no
______
They argued
laundering
activities
statutes,
they
prosecuted
their
lacked
argument and
convictions
Id.
___
its ability
under
by
they
371.
specific
could
be
We rejected
proceeds,
defraud
inevitably
. .
. taxes,
clause
United States v.
_____________
are
Cambara,
_______
conspiracy statute
money
"defendants knowingly
to collect
371's
at 4; accord
______
that
of
drug
IRS in
902 F.2d
fair warning
laundering
hindering the
because their
prohibited
if the
in
unassailable."
not
held that
participated
their
were
that
achieve the
____________________
7 In
Taken as
a whole,
because the
contracts
benefit
a front, to
directly.
of
Rusco, as
defendants
could not
The result
contracts which
that the
the
The
to "furnish" re-
have obtained
was that a
MBE
Barker.
those
program intended
for
minority businesses.
Both
the
contracts
existence
the district
the
conspiracy,
implying
MBE
that
MBE programs.
A
scheme to
use
minority
business as
front
(8th
business
Cir. 1989).
The
certification
Administration were
court
found that
requirements of
intended to insure
the
the minority
Small Business
at
minority
372.
The
business
Anderson
________
as
defendants
front
-22-
to
obtain
used a
SBA
certified
set
aside
subcontracted
a laboratory worker
doctors from
taking such
regulation which
payments and
Medicare
for
the
agencies
alleged in
this
case
are
the defendants
system established
Rusco did not do
and
others not
to subvert
the
Because
in the
operating as a
which
____________________
8 The Information summarized,
rather than citing, the
regulations which control the MBE programs of the DOT, EPA
and GSA which provides sufficient understanding of the
function of the programs.
Nevertheless, the pertinent
language of the regulation for MBE certification for the DOT
is instructive:
To ensure that this part benefits only
MBEs which are owned and controlled in
both form and substance by one or more
minorities or women, DOT recipients shall
use Schedules A and B . . . to certify
firms who wish to participate as MBEs in
DOT under this part.
49 C.F.R.
23.51.
-23-
did the
"furnish" work
contract payments.
As
to
MBEs
who
actually
defendants' use of
Just because the
do
the
Rusco was
work,
and
a fraud on
therefore,
the MBE
the
programs.
certified MBE, to
subvert the MBE requirements does not make their actions less
reprehensible.
The Information also alleges that
maintained its MBE certification
Rusco fraudulently
after 1982.
The defendants
the
government
based
upon
false documentation
no allegation
that
the agencies
Rusco.
In
relied upon
Dennis,
______
the
384 U.S.
of
mine
affidavits, stating
workers'
union
who
submitted
false
Communists, in order
to
procure
Board,
the services
properly
stated
government pursuant to
the affidavits did not
rely
on the
the
a
371.
National Labor
conspiracy
to
The defendants
Relations
defraud
the non-Communist
the
objected that
veracity of
instead relied
of
did not
affidavits, but
In
The effect of
that the
the Board's
false
gained the
despite the
union was
some of
its
defrauded
the government
by
Board
implement
to
its
Communist officers.
not
have
filing
impeding the
policy
to
function of
exclude
unions
the
with
maintained its
certification
as
an MBE
without
Because
the defendants
filed by Rusco
contained
false
and
misleading
Unless
Rusco
defendants' scheme
have failed.
granted
information
material
Rusco's eligibility as
maintained its
to obtain
and
MBE certification,
to Rusco
the
contracts would
MBE certification
an
in response
agencies
to Rusco's
fraudulent documentation.
-25-
of the
conspiracy.
Even if
Rusco had
been a
individuals or
businesses to reach
and defraud
found
actions which
variety of circumstances.
defrauded the
United States
sufficiency
defraud
the
of
an indictment
government by
in a
charging
defendant
(affirming
conspiracy
who took
to
civil
and
defining defrauding
the government
as:
made an
the benefit
of such legislation,
of
may
United States.'");
Harney v. United States, 306 F.2d. 523 (1st Cir. 1962), cert.
______
_____________
_____
denied sub
______ ___
nom. O'Connell
____ _________
(affirming
v.
United States,
_____________
371 U.S.
the
Federal
-26-
911
Aid
Highway
Commerce in
program);
United States
______________
v.
Pappas,
______
(affirming conviction
based
on
a scheme
of
611
F.2d 399
conspiracy to
to misuse
funds
(1st
Cir.
defraud
1979)
government
intended for
the CETA
program).
Finally,
crime
of
defined
dishonest conduct
defrauding
"defraud" in
statute to
the
a
is at
government.
substantially
the heart
The
Supreme
similar
of the
Court
predecessor
371 as follows:
To conspire to defraud
the United
States means primarily to
cheat the
government out of property or money, but
it also means
to interfere with or
obstruct one of its lawful governmental
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 action and
purpose
shall
be
defeated
by
misrepresentation,
chicane,
or
the
overreaching
of
those charged
with
carrying out the governmental intention.
Hammerschmidt
_____________
The
defendants
in
Hammerschmidt
_____________
U.S. 182,
were
188 (1924).
indicted
for
draft
during World
War
I.
The
Court
although the
function
the
of
function, it
deceit
or
Selective
was open
Service,
defiance and
trickery, and
held
that
at impairing the
lawful
not a
therefore,
resistance
government
scheme involving
could
not be
charged
-27-
The
situation
allegations
in
thwarting
engaging
in
programs.
the MBE
open
The
defiance
do
not
present
to do something which,
programs.
defendants'
case
this
or
Nor
were
protest
actions,
the defendants
against
as alleged,
the
MBE
involved
government function.
A conspiracy of
Information alleges
conspiracy in excess
that
"[p]ursuant
of $5 million
to
this
in federal and
federally
assisted
construction
contracts were
improperly
of
the United
States."9
Information at
14.
Information
as
whole
and
with
all
necessary
the
Rusco
to
win
MBE
set
aside
contracts
which
the
____________________
9 The defendants do not challenge the validity of the MBE
program. It is uncontroverted, in this case, that the MBE
program is a lawful function of government.
And see
___ ___
Fullilove v. Klutznick, 448 U.S. 448 (1980) (upholding
_________
_________
constitutionality of an MBE program).
-28-
forty-eight paragraphs,
the
Information
Rusco and
details actions
by
which the
the defendants'
whole,
the
conduct
by
the purpose of
have known
consequences.
sufficiently
defendants
and
set
criminal
Information
involved in this
The allegations
well aware of
situation should
could have
the
to obtain MBE
conspiracy
defendants,
We
that their
Taken as
alleges
their
fraudulent
co-conspirators
to
move on to consider
whether the
that
the Information
conspired
United
(1987),
fails
to allege
States.
In Tanner
______
the Supreme
Court
which
was
funded
that the
States or an
held,
defendants
agency of the
U.S. 107
considered
kickback
whether
federally
guaranteed
on a
loans
meaning
of
371.
power
plant for
Florida.
an
electric
cooperative (Seminole)
in
his friend
to get
contracts for
the project
with kickback
not the
that,
federal
federal government.
because
Seminole's
The
Seminole
government responded
construction
project
received
conspiracy to defraud
to
defraud
the
government.
The
Court
as a conspiracy
rejected
the
at
conspiracies
130.
The
to
defraud
Court
the
also
federal
held,
however,
government
may
that
be
Court remanded
defendants
conspired
the
case to
to
cause
third parties,
determine whether
Seminole
to
the
make
Tanner at 132.
______
-30-
In
programs
this case,
the government
alleged that
the MBE
Information at
12.
language
MBE programs.
The Information
scheme caused
"in
excess of $5
construction
the
alleges that
the defendants'
million in federal
contracts [to
be] improperly
credited towards
United
alleged,
States."
is to insure that
at least ten
percent of federal
and
federally assisted
awarded to
construction
MBE companies,
taken
as
function of
a whole
which
be
to divert
the MBE
programs.
clearly alleges
contracts
project
that
The
Information
the target
of the
should
have
Information
does
been
awarded
to
minority
businesses.
The
general contractors or
certification were
their
not allege
the state
operating
that
either
the
agencies implementing
MBE
as federal
agencies based
assisted funds.
to general contractors
on
The
and MBE
-31-
certifying
were
agencies
by the
defendants
and co-conspirators
third parties to
conspiracy
which
targeted
programs of
the DOT,
EPA and
federal
GSA, and
function,
the
MBE
therefore, properly
E.
E.
allege
a crime under
the defendants
property.
the Information
371 because it
There is no
agency thereof
U.S.C.
of money or
defendants' argument.
fails to
States, or any
371 (emphasis
added).
At
least
since Haas
____
18
v.
Henkel, 216 U.S. 462 (1910), the Supreme Court has recognized
______
that
371 (and
not limited
money
to
the government of
include
obstructing
any conspiracy
for
the
or
the
lawful
defeating
department of Government."
Although the
mail fraud, 18 U.S.C.
purpose of
impairing,
function
of
any
Id. at 479.
___
-32-
the scope of
of property
rights,
that
statute.
and id.
___ ___
limitation is
restricted
to
the mail
fraud
906
F.2d 385,
cert.
_____
denied
______
We
111 S.Ct
on other
__ _____
47
(1990)
decline to extend
371.
IV.
IV.
Conclusion
Conclusion
__________
We hold that the
conspiracy
to defraud
the language
detail
against
to adequately
them.
demonstrates
as
of the
The
of
to
371 in
sufficient supporting
defendants of
interpretation
the charges
of
371
371
not to
their
divert
programs
from
certified
minority businesses, to
itself
provides fair
conspiracy
of those
may
be
intended
warning
charged
the benefit
recipients,
as
the MBE
qualified
themselves.
that the
of
and
The statute
defendants' alleged
criminal
under
371.
-33-
Therefore, we reverse
remand for trial.
the decision
of the
lower court
and
-34-