U.S. v. Haga, 86-1646

• Decision Date: 01 July 1987
• Docket Number: No. 86-1646,86-1646
• Citation: 821 F.2d 1036
• Parties: UNITED STATES of America, Plaintiff-Appellee, v. James R. HAGA, Jr., Defendant-Appellant.
• Court: U.S. Court of Appeals — Fifth Circuit

Page 1036

821 F.2d 1036

UNITED STATES of America, Plaintiff-Appellee, v. James R. HAGA, Jr., Defendant-Appellant.

No. 86-1646.

United States Court of Appeals,

Fifth Circuit.

July 1, 1987.

Lawrence J. Praeger, Vincent W. Perini, Dallas, Tex., for defendant-appellant.

Jacqueline H. Eagle, Washington, D.C., Marvin Collins, U.S. Atty., Dallas, Tex., for plaintiff-appellee.

Appeal from the United States District Court for the Northern District of Texas.

Before RANDALL, GARWOOD and DAVIS, Circuit Judges.

GARWOOD, Circuit Judge:

Appellant James R. Haga, Jr. ("Haga"), was indicted on charges that he conspired "to commit offenses against the United States," in violation of 18 U.S.C. Sec. 371, by participating in the sale of anabolic steroids and androgenic hormones without prescriptions in contravention of the Federal Food, Drug, and Cosmetic Act, 21 U.S.C. Secs. 301-392 (the Act), and on three charges of substantive violations of the Act. Tried before the bench, he was convicted of three misdemeanor substantive offenses and of a felony conspiracy offense.

In his appeal, appellant challenges only the conspiracy conviction, contending that he was convicted of conspiring to defraud the United States rather than of conspiring to commit offenses against the United States and, because he was not indicted or tried for conspiring to defraud the federal government, that his conviction must be reversed. We determine that the indictment did not allege the section 371 offense of which appellant was convicted, and, accordingly, we reverse his conspiracy conviction.

I.

From 1982 until mid-1984, two licensed pharmacists, Cecil C. Kennedy, Jr. ("Kennedy"), and Albert N. Helsley, Jr. ("Helsley"), operated an illegal mail-order business from the Dallas, Texas area. The two ordered prescription drugs for delivery to a legitimate pharmacy but then sold drugs through the mail without requiring customers to have prescriptions. The prescription drugs they sold--primarily anabolic steroids and androgenic hormones--typically were purchased by body builders and weight lifters who sought to increase their muscle mass.

During the summer of 1984, the pharmacists hired appellant to take orders and to package and mail drugs, paying Haga a fixed weekly salary. Kennedy terminated his involvement in October 1984, and Helsley died in January 1985. Thereafter, on his own, Haga continued to operate the mail-order business until his arrest in December 1985.

During the existence of the conspiracy, customers would contact the suppliers, specifying the types and quantities of drugs they wanted. They were sent drugs in the same form as the manufacturer had packaged them, billed for the drugs, and asked to send a cashier's check made out in the name of a nonexistent company to a post office box. The record contains nothing to indicate that any buyer was misled by or claimed to have been defrauded by the conspirators. However, the pharmaceuticals sold were drugs that could not be lawfully dispensed except by a prescription or on a doctor's orders, and one drug sold was a veterinary prescription medicine approved for use only on horses.

A grand jury indicted appellant and Kennedy for conspiring "to commit offenses against the United States, to wit, violations ... of Title 21, United States Code, Sections 301-392," in violation of 18 U.S.C. Sec. 371 (count I). The indictment also charged appellant with three counts of having distributed prescription drugs in violation of 21 U.S.C. Secs. 331(a) and 333(b) (counts XVI, XVII, and XVIII). ¹

Haga was convicted of three substantive offense violations of section 331, misdemeanors under section 333(a). These three convictions have not been challenged on appeal. Appellant challenges his section 371 felony conspiracy conviction under Count I on the ground, among others, that the indictment failed to allege a conspiracy to defraud the United States, the offense of which appellant was convicted. ² We agree, and accordingly reverse his conviction on this count.

II.

The central question presented requires an analysis of the relevant statutes, the language in the conspiracy count of the indictment, and the district court's findings and conclusions.

A. The statutes

We note at the outset that our determination of the reach of a criminal offense statute is governed by "the traditional canon of construction which calls for the strict interpretation of criminal statutes and rules in favor of defendants where substantial rights are involved." Smith v. United States, 360 U.S. 1, 79 S.Ct. 991, 997, 3 L.Ed.2d 1041 (1959). Furthermore, to the extent that an offense statute is ambiguous, we are guided by the rule of lenity: " 'When Congress leaves to the Judiciary the task of imputing to Congress an undeclared will, the ambiguity should be resolved in favor of lenity.' " Ladner v. United States, 358 U.S. 169, 79 S.Ct. 209, 214, 3 L.Ed.2d 199 (1958) (citations omitted).

1. The conspiracy offense statute

Under these canons of statutory construction, conduct can be prosecuted under the general conspiracy offense statute, 18 U.S.C. Sec. 371, only if "the defendant's conduct 'plainly and unmistakably' falls within the proscription" of the statute. United States v. Porter, 591 F.2d 1048, 1055 (5th Cir.1979) (quoting United States v. Gradwell, 243 U.S. 476, 37 S.Ct. 407, 410-11, 61 L.Ed. 857 (1917) ("[Because] there are no common-law offenses against the United States, ... before a man can be punished as a criminal under the Federal law his case must be 'plainly and unmistakably' within the provisions of some statute....") (citations omitted)). ³

Section 371 provides (emphasis added):

"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 more than $10,000 or imprisoned not more than five years, or both.

"If, however, the offense, the commission of which is the object of the conspiracy, is a misdemeanor only, the punishment for such conspiracy shall not exceed the maximum punishment provided for such misdemeanor."

Cases construing section 371 have made it plain that the "commit any offense" clause and the "defraud the United States" clause describe different criminal offenses, and that, although an indictment brought under section 371 may allege either or both offenses, a defendant may be convicted only under the particular criminal offense clause or clauses framed in the indictment. E.g., United States v. Rosenblatt, 554 F.2d 36 (2d Cir.1977); see also United States v. Dennis, 384 U.S. 855, 86 S.Ct. 1840, 1846, 16 L.Ed.2d 973 (1966) (describing the "conspiracy to defraud" clause and the "conspiracy to commit the substantive offense" clause as alternative clauses); id. at 1845-46, 1845 n. 5 (noting that the conduct involved in a conspiracy to defraud the United States may include actions that could also be charged as offenses against the United States).

The Supreme Court has also cautioned that "indictments under the broad language of the general conspiracy statute [18 U.S.C. Sec. 371] must be scrutinized carefully....," id. at 1843, ⁴ and has indicated that a central question is whether "the allegation as to conspiracy to defraud ... properly reflects the essence of the alleged offense," id. at 1845.

In Hammerschmidt v. United States, 265 U.S. 182, 44 S.Ct. 511, 68 L.Ed. 968 (1924), the Court circumscribed the reach of the predecessor to section 371, in the context of an indictment charging "a conspiracy [to defraud based on actions intended] to defeat the selective draft by inducing the persons required to register under it to defeat its purpose by refusing to register." Id. at 511. Holding that the indictment should have been quashed and explaining some limits of the "conspiracy to defraud" clause, the Court wrote:

"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. It is true that the words 'to defraud' as used in some statutes have been given a wide meaning wider than their ordinary scope.... [However, the construction of 'defraud' in Horman v. United States, 53 C.C.A. 570, 116 F. 350 (6th Cir.1902) ] cannot be used as authority to include within the legal definition of a conspiracy to defraud the United States a mere open defiance of the governmental purpose to enforce a law by urging persons subject to it to disobey it." Id. at 512. ⁵

Hammerschmidt did not involve the participation of a federal official in a conspiracy or some fraudulent claim on the public fisc or for governmental benefits; the opinion instructs that--at least absent such factors--even concerted conduct encouraging violations of federal law is not of itself a conspiracy to defraud the government. Hammerschmidt also suggests that, even if a conspiracy to violate a specific federal law may be prosecuted under the "commit any offense" clause of section 371, a criminal prosecution under the "conspiracy to defraud" clause requires a showing of more than completely external interference with the working of a governmental program or disregard for federal laws.

Post-Hammerschmidt cases based on section 371 "conspiracy to defraud" indictments involving intangible governmental rights ordinarily have described clear interference and active contact with governmental agency functions. ⁶ Analogously, section 371 "conspiracy...