United States v. Morosco

• Decision Date: 12 May 2016
• Docket Number: 15–1809.,Nos. 15–1802,s. 15–1802
• Citation: 822 F.3d 1
• Parties: UNITED STATES of America, Appellee, v. Bernard J. MOROSCO ; James H. Fitzpatrick, Defendants, Appellants.
• Court: U.S. Court of Appeals — First Circuit

822 F.3d 1

UNITED STATES of America, Appellee

v.Bernard J. MOROSCO ; James H. Fitzpatrick, Defendants, Appellants.

Nos. 15–1802

15–1809.

United States Court of Appeals, First Circuit.

May 12, 2016.

Janice Bassil, with whom John Oh and Bassil, Klovee & Budreau, LLP, were on brief, for appellant Bernard J. Morosco.

Kerry A. Haberlin, with whom Rankin & Sultan was on brief, for appellant James H. Fitzpatrick.

Elizabeth D. Collery, Attorney, Criminal Division, Appellate Section, U.S. Department of Justice, with whom Leslie R. Caldwell, Assistant Attorney General, Sung–Hee Suh, Deputy Assistant Attorney General, Carmen M. Ortiz, United States Attorney, S. Theodore Merritt, Assistant United States Attorney, and Brian A. Pérez–Daple, Assistant United States Attorney, were on brief, for appellee.

Before THOMPSON, Circuit Judge, SOUTER, Associate Justice,^* and KAYATTA, Circuit Judge.

THOMPSON, Circuit Judge.

Stage–Setting

Years back, Michael McLaughlin, James Fitzpatrick, and Bernard Morosco worked for the Chelsea Housing Authority (“CHA”), a public agency principally responsible for providing low-income housing in Chelsea, Massachusetts. McLaughlin served as CHA's executive director, Fitzpatrick as CHA's director of modernization, and Morosco as CHA's paid consultant.

The federal Department of Housing and Urban Development (“HUD”) funds three of CHA's properties—properties that have a combined total of about 350 housing units. As required by regulation, HUD periodically inspects a randomly-selected, “statistically valid sample of [ ] units” to help ensure that CHA's federally-funded housing is “decent, safe, sanitary ... and in good repair.” See 24 C.F.R. §§ 902.22(e), 902.20(a). The Real Estate Assessment Center (“REAC”)—an agency within HUD—performs these evaluations, though it usually has REAC-trained independent contractors do the inspecting. Getting a high inspection score (90 or above) meant CHA would be considered a “high performer,” which meant fewer inspections (every two years rather than every year), less oversight, and more capital funding (a 3% annual increase). And CHA got designated a “high performer” in three consecutive inspections—in 2007, 2009, and 2011.

But not all was right at CHA, it turns out. McLaughlin abruptly resigned his post in 2011 after a newspaper reported that he made about $360,000 a year, even though he told state officials that he made $160,000. As he left, McLaughlin wrote himself checks from CHA's account for $200,000, supposedly for unused leave—talk about throwing gasoline on a fire!

McLaughlin's salary scandal sparked a criminal investigation that led agents to Vitus Shum, CHA's finance director. Shum copped to helping McLaughlin with the salary scheme. Receiving immunity, Shum also later told agents about how he and others at CHA had rigged the HUD inspections. And his revelations helped a grand jury indict McLaughlin, Fitzpatrick, and Morosco for “knowingly and unlawfully” conspiring to defraud the United States and its agency, HUD—a violation of 18 U.S.C. § 371, which makes it a crime for “two or more persons [to] 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.” As for the indictment's allegations, all you need to know is this: Morosco was a REAC-inspection consultant—though he principally advised housing authorities on how to handle the REAC-inspection process. And using his REAC-inspector status, he (the indictment added) accessed the REAC database and software, figured out the sample of CHA units to be inspected, and passed the information on to Fitzpatrick, McLaughlin, or both—allowing CHA employees to get those units up to snuff before the inspectors came a-calling.

McLaughlin pleaded guilty and got a 12–month prison sentence and a $3,000 fine, on top of the 36 months he previously got for pleading guilty to charges stemming from his salary chicanery. He did not testify at Fitzpatrick and Morosco's seven-day trial—Fitzpatrick did, but Morosco did not. A jury found them guilty as charged. And a judge later sentenced Fitzpatrick to 3 months in prison, plus 1 year of supervised release, and Morosco to 6 months in prison, followed by 1 year of supervised release.

Fitzpatrick and Morosco now appeal. Between them, they raise a battery of arguments—though not every one requires a lot of analysis. To make the opinion easier to follow, we organize our discussion thematically, issue-by-issue, providing more background as needed. And—spoiler alert—after working through their claims, we affirm.

Void–for–Vagueness Claim

Fitzpatrick and Morosco complain that section 371's defraud clause—criminalizing any conspiracy “to defraud the United States, or any agency thereof in any manner or for any purpose”—is unconstitutionally vague as applied to them. For those not in the know, a law is unconstitutionally vague if it fails to give ordinary people fair notice of what is forbidden, or if it fails to give the designated enforcers (police, prosecutors, judges, and juries) explicit standards (thus creating a risk of arbitrary enforcement). See Welch v. United States, ––– U.S. ––––, 136 S.Ct. 1257, ––––, 194 L.Ed.2d 387, at *3 (2016). Of course the requisite fair warning can come from judicial decisions construing the law. See, e.g., United States v. Lanier, 520 U.S. 259, 266, 117 S.Ct. 1219, 137 L.Ed.2d 432 (1997). And judges have no business junking a statute simply because we could have written it “with greater precision.” Rose v. Locke, 423 U.S. 48, 49, 96 S.Ct. 243, 46 L.Ed.2d 185 (1975).

Helpfully, both sides agree—rightly—that Fitzpatrick and Morosco preserved their vagueness claim below (via a motion to dismiss the indictment) and that our review is de novo. See, e.g., United States v. Hussein, 351 F.3d 9, 14 (1st Cir.2003). Also helpfully, both sides concede that binding precedent squarely forecloses this claim.¹ And we second that assessment.

Start with Fitzpatrick's and Morosco's most loudly trumpeted point. As they tell it, section 371's “defraud” clause only bans conspiracies to deprive the government of property and money by dishonest schemes, a reading (they add) that jibes with the common-law understanding of “defraud.” And such a reading would help them (they continue) because they never scammed the government out of property or money. Unhappily for them, years' worth of Supreme Court precedent holds that section 371 “is not confined to fraud as that term has been defined in the common law,” see Dennis v. United States, 384 U.S. 855, 861, 86 S.Ct. 1840, 16 L.Ed.2d 973 (1966) ; that defrauding the government under section 371 means obstructing the operation of any government agency by any “deceit, craft or trickery, or at least by means that are dishonest,” see Hammerschmidt v. United States, 265 U.S. 182, 188, 44 S.Ct. 511, 68 L.Ed. 968 (1924) ; and that the conspiracies need not aim to deprive the government of property or money, see id., because the act is written “broad enough ... to include any conspiracy for the purpose of impairing, obstructing, or defeating the lawful function of any” government “department,” see Haas v. Henkel, 216 U.S. 462, 479, 30 S.Ct. 249, 54 L.Ed. 569 (1910). Ever faithful to high-Court holding, our caselaw rejects the idea that section 371 only bars conspiracies to defraud the government out of property or money. See United States v. Barker Steel Co., 985 F.2d 1123, 1136 (1st Cir.1993) (relying on Supreme–Court cases interpreting section 371 and its basically “similar predecessors”); Curley v. United States, 130 F. 1, 6–10 (1st Cir.1904) (explaining that “defraud” in section 371's forerunner has a broader meaning than the common-law definition—and justifiably so because the statute's aim is to protect the government, and deceit can impair the workings of government even if the conspiracy does not take the government's property or money). Obviously then, this facet of Fitzpatrick's and Morosco's vagueness thesis goes nowhere.

Undaunted, Fitzpatrick and Morosco also suggest that because no statute or regulation criminalizes receiving a list of sample units before any HUD inspection, the government could not prosecute them under section 371. But our cases take all the wind out of their sails, holding as they do “that lawful activity may furnish the basis for a” section–371 conspiracy conviction. See United States v. Hurley, 957 F.2d 1, 4 (1st Cir.1992) (finding unconvincing “defendants' asserted lack of ‘fair warning’ that their ‘legal’ conduct could be the basis for a criminal prosecution,” noting that “[t]he statutory prohibition against defrauding the government adequately put defendants on notice that a scheme designed to frustrate tax collection was prohibited”); accord Barker Steel Co., 985 F.2d at 1131 (emphasizing that section 371 bans both “(1) conspiracies to commit a specific offense against the United States, included elsewhere in the criminal code, and (2) conspiracies to defraud the United States,” and rejecting defendants' argument “that if no other federal law or regulation proscribes alleged conduct, then [they] cannot be held criminally responsible pursuant to § 371 ”—“[i]f the second clause were interpreted to require commission of a specific offense, it would have the same meaning as the first clause thus rendering the second clause redundant”); United States v. Tarvers, 833 F.2d 1068, 1075 (1st Cir.1987) (stressing that section 371 “does not require that the means used to achieve the unlawful goal of the conspiracy be unlawful”). So this aspect of Fitzpatrick's and Morosco's vagueness theory also goes nowhere.

In what is basically a Hail Mary pass, Morosco argues that two fairly recent cases signal a new willingness on the high Court's part to entertain vagueness challenges—a willingness (the argument goes) that we must emulate. The two cases are (1) Skilling v. United States, 561 U.S. 358, 130 S.Ct. 2896, 177 L.Ed.2d 619 (20...