U.S. v. Arlen

• Decision Date: 31 October 1991
• Docket Number: No. 90-2746,90-2746
• Citation: 947 F.2d 139
• Parties: UNITED STATES of America, Plaintiff-Appellee, v. Billy Lee ARLEN, Defendant-Appellant.
• Court: U.S. Court of Appeals — Fifth Circuit

Page 139

947 F.2d 139

UNITED STATES of America, Plaintiff-Appellee, v. Billy Lee ARLEN, Defendant-Appellant.

No. 90-2746.

United States Court of Appeals, Fifth Circuit.

Oct. 31, 1991.

George McCall Secrest, Jr., Houston, Tex., for defendant-appellant.

Andrew Clark, Atty., Dept. of Justice, Washington, D.C., Paula Offenhauser, Asst. U.S. Atty., Houston, Tex., for plaintiff-appellee.

Appeal from the United States District Court For the Southern District of Texas.

Before BROWN, DAVIS, and BARKSDALE, Circuit Judges.

W. EUGENE DAVIS, Circuit Judge:

Billy Lee Arlen pled guilty to charges that he conspired to sell and actually sold steroids in violation of 18 U.S.C. § 371 and 21 U.S.C. §§ 331(a), 333(b). Arlen conditioned his plea, however, on his ability to appeal the district court's interpretation of § 333(b) and the constitutional sufficiency of his indictment. In this appeal Arlen complains primarily that the district court erred in holding that the government could establish § 333(b)'s requirement of "intent to defraud or mislead" by showing that he misled a government agency rather than the purchaser of the drugs. We affirm.

I.

Arlen is a competitive body builder who for years used anabolic steroids. From 1985 through April 1988 Arlen maintained a part-time business of buying, selling, and trading steroids through the mail. The district court found that Arlen's sales to users and other dealers totalled $120,000.

Arlen was careful to avoid having his name associated with the sale of steroids. Arlen conducted all sales and purchases of steroids in cash or blank money orders; he maintained no records of his steroid dealings; he rented a private postal box under a fictitious name to receive steroids and steroid orders; and he used fictitious names and return addresses when sending steroids to customers and suppliers.

In March 1988, agents of the U.S. Food and Drug Administration (FDA) made a controlled purchase, through a cooperating witness, of six different steroids from Arlen. The government executed search warrants in April 1988 and seized additional evidence. Arlen then consented to an interview with government agents, during which he made numerous admissions concerning his illegal steroid business.

In November 1989, a federal grand jury returned an eight-count indictment against Arlen. The indictment alleged that Arlen had conspired to commit offenses against the United States, in violation of 18 U.S.C. § 371 (Count 1); ¹ used a fictitious name to conduct an unlawful business by means of the postal service, in violation of 18 U.S.C. § 1342 (Counts 2-3); and distributed in interstate commerce, "with the intent to defraud and mislead," misbranded prescription drugs, in violation of 21 U.S.C. §§ 331(a) ² and 333(b) ³ (Counts 4-8). In May 1990, the district court ruled that the government could satisfy the specific intent required by § 333(b) by proof that defendant had purposefully evaded the regulatory requirements of the FDA. Arlen pled guilty to Counts 1 and 8 the next day. He conditioned his plea, however, on his right to appeal the district court's pretrial ruling on the proof necessary to satisfy § 333(b)'s "intent to defraud or mislead" requirement. Relatedly, he also reserved the right to appeal the district court's conclusion that the indictment passed constitutional muster.

At sentencing in August 1990, the district court announced an upward departure from the Sentencing Guidelines and on each count sentenced Arlen to twelve months imprisonment and three years of supervised release, to run concurrently, and a fine of $25,000. Arlen timely appealed.

II.

Arlen argues first that the district court erred in concluding that the government could establish § 333(b)'s "intent to defraud or mislead" requirement by showing Arlen's intent to mislead a government agency. Because the issue is one of statutory interpretation, we review the district court's ruling de novo. In re Exquisito Services, Inc., 823 F.2d 151, 152 (5th Cir.1987).

Section 333 of the Federal Food, Drug, and Cosmetic Act (the Act), provides the penalties for all violations of section 331. Section 333(a) provides a misdemeanor penalty for those who violate § 331 without an intent to "defraud or mislead":

(a) Any person who violates a provision of section 331 of this title shall be imprisoned for not more than one year or fined not more than $1,000, or both.

Section 333(b), on the other hand, provides a more severe felony penalty for persons who violate § 331 with intent to "defraud or mislead":

(b) Notwithstanding the provisions of subsection (a) of this section, if any person commits such a violation after a conviction of him under this section has become final, or commits such a violation with the intent to defraud or mislead, such person shall be imprisoned for not more than three years or fined not more than $10,000, or both.

21 U.S.C. § 333 (1982) (emphasis added). ⁴ Critically, however, the statute does not specify who must be defrauded or misled to trigger the felony provisions of § 333(b). The district court held that the government could satisfy this requirement of § 333(b) by establishing that Arlen had the intent to defraud or mislead a government regulatory agency. Arlen argues that this interpretation is incorrect because the felony provisions of § 333(b) are triggered only if a defendant defrauds or misleads his purchaser.

Although we have not previously decided this question, three other circuits have, and all three have agreed with the government's position here. See United States v. Bradshaw, 840 F.2d 871 (11th Cir.), cert. denied, 488 U.S. 924, 109 S.Ct. 305, 102 L.Ed.2d 324 (1988); United States v. Mitcheltree, 940 F.2d 1329 (10th Cir.1991); United States v. Cambra, 933 F.2d 752 (9th Cir.1991). In Bradshaw, the defendant conducted a wholesale steroid drug business. He took careful steps to avoid detection, including moving from state to state, using mail drops, using false names, and mislabeling packages. At Bradshaw's trial, the trial judge instructed the jury that it could convict Bradshaw of a § 333(b) violation if it found that he intended to defraud or mislead a government agency. On appeal, the Eleventh Circuit examined the section's language, legislative history, and the Act's overall purpose, and upheld the instruction. It concluded that "Congress meant to encompass conduct intended to defraud government enforcement agencies." Id. at 874. We find the Bradshaw court's reasoning persuasive.

The government's interpretation of § 333(b) is consistent with the structure of the statute. As previously discussed, section 333(a) provides that anyone who violates a provision of § 331 commits a misdemeanor. Section 333(b) provides that anyone who does so with "intent to defraud or mislead" commits a felony. Several of the twenty acts § 331 proscribes concern only the government. See 21 U.S.C. § 331(e) (failure to permit FDA access to records and failure to make reports to the FDA); § 331(f) (refusal to permit FDA inspection); § 331(p) (failure to register with the FDA). As the Bradshaw court noted, "[a]fter reading these sections with § 333, it is clear that the FDA is the entity most likely to be defrauded under these provisions." Bradshaw, 840 F.2d at 874. Arlen's interpretation of § 333(b), that the government cannot be a defrauded or misled victim, would lead to the conclusion that there could never be a felonious violation of §§ 331(e), (f), or (p). Such a result would be contrary to the plain inclusive language of § 333(b), which contemplates both misdemeanor and felony violations for all § 331 offenses.

Arlen relies on our previous decision in United States v. Haga, 821 F.2d 1036 (5th Cir.1987). In Haga, however, we did not confront whether the felony provision of § 333(b) is triggered when a defendant defrauds a government agency rather than a purchaser of drugs, and said so explicitly. Id. at 1044 n. 17. Rather, Haga was a "variance" case and we held only that the district court committed reversible error by convicting the defendant of a prong of the federal conspiracy statute for which he had not been indicted. Id. at 1044-46. No such variance occurred here. ⁵

In dicta, however, the Haga court did question whether the government could establish a § 333(b) violation by showing that the defendant defrauded or misled a government agency. The Haga court noted:

we observe that the theory would as a practical matter have the effect of rendering the "defraud and mislead" language of section 333(b) mere surplusage in the prosecution of any defendant charged with a conscious (and not publicly proclaimed) violation of section 331--only inadvertent (or publicly announced) violations of section 331 would be misdemeanors, because all conscious (and not publicly confessed) violations would necessarily involve a deliberate evasion of established regulatory systems.

Haga, 821 F.2d at 1044 n. 17. The concern is that Congress did not intend to punish all willful violations of § 331 as felonies.

We agree with the government that this result will not follow. While every conscious or willful violation of § 331 will carry a misdemeanor penalty, it will not always subject the violator to a felony sentence. To subject the defendant to a felony sentence requires the government to establish not only that the violation was willful but that it was committed with the specific intent to defraud or mislead an identifiable government agency. See United States v. Mitcheltree, 940 F.2d 1329, 1349 (10th Cir.1991).

For example, an operator of a drug storage facility must permit inspection of his premises when FDA personnel present him with proper credentials and written notice of inspection. If the operator refuses to permit the inspection of his facility because he feels it is an inconvenient time for an inspection, he has committed a willful violation of § 331(f) (failure to permit inspection by FDA), even if his facility...