U.S. v. Newell

• Decision Date: 11 July 2011
• Docket Number: Nos. 09–1590,09–1614.,s. 09–1590
• Parties: UNITED STATES of America, Appellee,v.Robert L. NEWELL and James J. Parisi, Jr., Defendants, Appellants.
• Court: U.S. Court of Appeals — First Circuit

658 F.3d 1

UNITED STATES of America, Appellee,

v.Robert L. NEWELL and James J. Parisi, Jr., Defendants, Appellants.

Nos. 09–1590

09–1614.

United States Court of Appeals, First Circuit.

Heard Sept. 16, 2010.Decided July 11, 2011.

Mary A. Davis, with whom Tisdale & Davis, P.A. was on brief, for appellant Newell.George T. Dilworth, with whom David M. Kallin and Drummond Woodsum & MacMahon were on brief, for appellant Parisi, Jr.Margaret D. McGaughey, Appellate Chief, with whom Paula D. Silsby, United States Attorney, was on brief, for appellee.Before TORRUELLA, RIPPLE,^* and LIPEZ, Circuit Judges.TORRUELLA, Circuit Judge.

This case stems from extensive financial mismanagement at the Passamaquoddy Tribe Indian Township Reservation (the “Tribe”) in Down East Maine. Defendants Robert Newell, the former governor of the Tribe, and James Parisi, Jr., the Tribe's former finance director, were convicted for conspiracy to defraud the United States under 18 U.S.C. § 371, as well as violations of 18 U.S.C. §§ 287, 666 and 669, involving the misuse of federal grant and tribal monies. On appeal, Newell and Parisi raise a host of issues related to the federal court's jurisdiction over “internal tribal matters,” the sufficiency of the evidence, the lower court's jury instructions, sentencing, and the restitution order entered against them. For the reasons explained below, we vacate Parisi's conviction on count five and remand for clarification of certain issues related to the restitution order, but otherwise affirm.

I.

The following facts are drawn from the parties' filings supplemented by the record as necessary, and are presented in the light most favorable to the verdict. See United States v. Poulin, 631 F.3d 17, 18 (1st Cir.2011).

A. Background

The Passamaquoddy Tribe is a federally recognized Indian tribe located in northern Maine.¹ The Tribe is relatively small, with fewer than seven hundred residents. It relies in large part on federal grant and contract money for its financial survival. During the period of time at issue—roughly, September 2002 to September 2006, i.e., Newell's tenure as tribal governor—the Tribe received between five and eight million dollars annually in federal grants and contracts.

The Tribe's political leadership consists of a governor and tribal council. In addition, the Tribe shares a 12–member joint tribal council with its sister reservation in Princeton, Maine. Council members receive no official salary, but many are employed by the tribal government in other capacities, are reimbursed for travel expenses, and receive “honoraria” that approximate a salaried employee's vacation pay. The tribal government provides administrative services to the tribal programs, including bookkeeping and accounting services.

The Tribe receives funding from the Bureau of Indian Affairs (“BIA”) and the Department of Health and Human Services (“HHS”) through the Indian Self–Determination and Education Assistance Act. These grants are used to fund myriad tribal services, including the police, fire, child welfare and wildlife and parks departments, the housing authority, the Tribe's courts and schools, and the Indian health center. The Tribe additionally receives funding from HHS's Substance Abuse and Mental Health Services Administration (“SAMHSA”) for an HIV awareness and substance abuse prevention program. The Tribe received a Department of Justice (“DOJ”) COPS program grant for police equipment and training, as well as funding from the Environmental Protection Agency (“EPA”) for its environmental department and from the Department of Housing and Urban Development (“HUD”) for its housing authority. Each of the federal contracts and grants included terms and conditions specifying how they were to be used. Generally, the contracts required the Tribe to use the funds to pay for allowable direct costs of the identified programs, as well as specified amounts of the indirect costs incurred by the tribal government for administrative services. The awarded funds generally could not be diverted for non-contract or grant purposes without a contract amendment or agency approval.²

In addition to the federal grants and contracts, the Tribe had income from its ownership interests “in three companies [Dragon Cement, Creative Apparel and Northeast Blueberry Company] that it purchased with money it received under the Indian Claims Settlement Act.” This income was on the order of “several million dollars ... annually.”

Newell served as the Tribe's governor from 1986 to 1993, and again from 2002 to 2006. Newell served as his own finance director for the first year of his most recent term, but in the fall of 2003 he hired Parisi to fill the position. Parisi had worked as a banker but did not have experience with federal contracts. In addition to Parisi, the finance department was composed of several bookkeepers and a federal grant compliance officer, Linda Lewey. Despite his official job title, Parisi appeared to have had little actual authority, and would refer most questions to Newell. There is also evidence that Parisi may have been somewhat ostracized by at least some of his co-workers as he was not a member of the Tribe.

During his tenure as governor, Newell exercised extensive control over tribal governance in general, and the Tribe's finances in particular. Newell would transfer funds between the various accounts to pay for unauthorized expenses, including salaries for individuals who did not actually work for the programs that were funding them. Newell also caused the Tribe's various programs to “loan” hundreds of thousands of dollars each year to the Tribe which he then disbursed in the form of “general assistance” to Tribe members, including friends, family and political supporters.³ These loans were by and large never repaid.

We now sketch briefly the details of the transactions relevant to the current appeals, leaving aside those uncontested on appeal. Our discussion is somewhat condensed in light of the large multitude of transactions, which were spread over a number of years, involved a large cast of supporting characters, several distinct funding sources, and the arcana of accounting practices for federal grants and contracts.

B. The financial mismanagement

In 2003, the Tribe received a three-year, $350,000–per–year grant from SAMHSA to fund its HIV and substance abuse program, known as the Wonahkik program. The Wonahkik program ramped up slowly. Roger Paul, the Wonahkik program coordinator, testified at trial that the program did not “get a staff to start getting things actually done” until January of 2004. As of October of 2003, the program had only spent $86,354 of the $350,000 grant. In September, Newell and Elizabeth Neptune, the director of the health center, wrote to SAMHSA requesting permission to carry over the remainder into the next fiscal year. In October, Faye Socobasin, the Tribe's SAMHSA bookkeeper, filed a “269” form with SAMHSA showing that the Tribe had $236,645 in unspent grant funds. Lewey, the Tribe's federal grant compliance officer, signed off on the form. Parisi was hired at around this time.

In February 2004, before SAMHSA had responded to the request, Newell directed that the unspent funds be used to reimburse the Tribe for salaries it had paid to three tribal councilors despite the fact that they did not actually work for the Wonahkik program.⁴ Newell insisted that the grant money “had to be spent,” and that if the Wonahkik program wasn't going to spend it, “the Tribe would.” Socobasin, at Lewey's instruction, then prepared a journal entry form for the Tribe's records indicating that the three individuals had been paid out of the SAMHSA grant on or before September 30, 2003, the last day of the fiscal year. Parisi signed the journal entry.

When SAMHSA notified the Tribe in April 2004 that it would not permit the unused funds to be rolled over, Newell wrote back, stating, among other things, that the Tribe's initial 269 report had been in error, and that the Tribe had spent an additional $129,044 of the SAMHSA grant in salary expenditures in FY 2003. Subsequently, Socobasin prepared a revised 269 form reflecting the additional $129,044 expenditures, again dated to appear as if they had occurred in September of 2003. Socobasin refused to backdate the charges unless either Parisi or Newell approved it. Parisi, rather than Lewey, subsequently signed the revised 269 form. Newell told Socobasin that Parisi should sign the revised 269 “so we can blame it all on him.” In June 2004, SAMHSA relented, and approved the Tribe's request to roll over the unused grant funds.

It was during this time that the tribal council learned that the Tribe's budget had been overspent to the tune of $1.6 million. At a contentious council meeting, Newell admitted he had been using SAMHSA funds to pay council members, but insisted he had the authority to do so. The council voted to strip Newell of administrative authority, but backtracked when it came out that this meant they would no longer receive general assistance payments. The council insisted that subsequent checks, with the exception of payroll and housing authority checks, be signed by two council members. Undeterred and largely unimpeded, Newell was able to secure the cooperation of sympathetic council members or, in other cases, circumvent the council entirely by transferring funds through online or wire transfers.

The Tribe continued to pay the salaries of council members and other non-health center “ghost” employees with the health center's funds throughout FY 2004. Wonahkik was not the only program that saw its budget raided. Funds were “loaned” to the tribal government from the Indian Health Services (“IHS”) contract, state Medicaid payments, and EPA and BIA grants. Several of the tribal health services administrators objected, but Newell and Parisi continued to authorize the payments. Parisi promised that the non-employees would be taken...