U.S. v. Holmes
| Decision Date | 18 April 1997 |
| Docket Number | No. 95-2184,95-2184 |
| Citation | 111 F.3d 463 |
| Parties | 46 Fed. R. Evid. Serv. 1455, Unempl.Ins.Rep. (CCH) P 22,181 UNITED STATES of America, Plaintiff-Appellee, v. David HOLMES, Defendant-Appellant. |
| Court | U.S. Court of Appeals — Sixth Circuit |
Stephen T. Robinson, Asst. U.S. Attorney, Kelvin W. Scott, U.S. Attorney (argued and briefed), Office of the U.S. Attorney, Detroit, MI, for Plaintiff-Appellee.
Stacey M. Studnicki (briefed), Federal Public Defenders Office, David C. Tholen (argued), Detroit, MI, for Defendant-Appellant.
Before: CONTIE, BOGGS, and NORRIS, Circuit Judges.
Defendant, David Holmes, appeals his jury convictions resulting from a thirty-nine count indictment arising out of a scheme to defraud the Michigan unemployment insurance program. Defendant argues that the convictions must be reversed because (1) the indictment failed to state a federal claim as to eighteen of the counts, (2) the court improperly instructed the jury that it had determined that false statements made by defendant were material, (3) his criminal prosecution violated the Double Jeopardy Clause, (4) the court failed to exclude certain testimony under Rule 404(b) of the Federal Rules of Evidence , and (5) the evidence is insufficient to support the convictions.
From October 1993 to April 1994, defendant was the owner of a construction and landscaping company. During that time, he filed a false claim for unemployment benefits with the Michigan Employment Security Commission ("MESC"). He also induced eight of his employees to file similar claims, helping them to prepare their applications for benefits and falsely certifying the dates of their employment with his company. When the MESC initiated an investigation into these claims, defendant instructed at least three of the employees to lie to any officials who might question them in order to prevent discovery of the fraud. A subsequent action brought by the MESC against defendant in state court under § 54 of the Michigan Employment Security Act, M.C.L.A. § 421.54, which provides that the MESC may recover amounts illegally obtained from the unemployment insurance program, plus additional damages equal to three times that amount, resulted in a judgment against defendant amounting to $30,472 in actual and treble damages.
On October 19, 1994, defendant was indicted in federal court on thirty-nine counts related to this scheme. Counts 1 through 13 alleged mail fraud in violation of 18 U.S.C. § 1341, based upon defendant's receipt of thirteen separate benefit checks delivered via United States mail; Count 14 alleged that defendant made false statements in violation of 18 U.S.C. § 1001, based upon his own application for benefits; Counts 15 through 21 alleged aiding and abetting mail fraud in violation of 18 U.S.C. §§ 2 and 1341, based upon defendant's role in his employees' receipt of benefit checks delivered via United States mail; Counts 22 through 29 alleged aiding and abetting false statements in violation of 18 U.S.C. §§ 2 and 1001, based upon defendant's encouragement of his employees to file false benefit applications; Counts 30 through 38 alleged false statements in violation of 18 U.S.C. § 1001, based upon forms defendant filed falsely indicating that the employees had worked for him previously; and Count 39 alleged witness tampering in violation of 18 U.S.C. § 1512. Defendant was convicted on all thirty-nine counts.
On appeal, defendant contends that the eighteen counts of the indictment that allege false statements in violation of 18 U.S.C. § 1001 fail to state a federal claim. At the time of the indictment, 18 U.S.C. § 1001 provided that
[w]hoever, in any matter within the jurisdiction of any department or agency of the United States knowingly and willfully falsifies, conceals or covers up by any trick, scheme, or device a material fact, or makes any false, fictitious or fraudulent statements or representations, or makes or uses any false writing or document knowing the same to contain any false, fictitious or fraudulent statement or entry, shall be fined not more than $10,000 or imprisoned not more than five years, or both.
Defendant contends that the counts fail to state a federal claim because the false statements were made to the MESC, a state agency, and thus this matter was not "within the jurisdiction of any department or agency of the United States," as required by § 1001. Resolving this claim is a matter of statutory interpretation, and therefore is a question of law reviewed de novo by this court. United States v. Moore, 73 F.3d 666, 668 (6th Cir.), cert. denied, 517 U.S. 1228, 116 S.Ct. 1866, 134 L.Ed.2d 964 (1996). For the reasons set out below, we agree that defendant's convictions under 18 U.S.C. § 1001 cannot stand.
Michigan's unemployment system disburses benefits that are funded entirely by the state. While the federal Department of Labor subsidizes the administrative expenses of the MESC, including salaries, office space, and supplies, it does not pay for any of the actual benefits. The Secretary of Labor has authority to approve or disapprove the state's unemployment compensation program, and the Department of Labor conducts audits and investigations to ensure that the state program is being administered effectively and in compliance with the plan approved by the Secretary. In addition, the Department of Labor may take action against a state that refuses to pay otherwise valid claims. However, the Department has no authority to take any action against a state or an individual when the individual obtains benefits to which he or she is not entitled.
Two courts of appeals for other circuits have considered whether 18 U.S.C. § 1001 supports federal prosecution of individuals who fraudulently obtain unemployment benefits funded wholly by the state, and they have reached contrary results. See United States v. Herring, 916 F.2d 1543 (11th Cir.1990) (); United States v. Facchini, 874 F.2d 638 (9th Cir.1989) (en banc) (). We find the Ninth Circuit's reasoning in Facchini more persuasive.
In Facchini, the court noted that to meet the jurisdiction requirement of § 1001, the false statement at issue must relate to the " 'authorized functions of an agency or department' rather than 'matters peripheral to the business of that body.' " Facchini, 874 F.2d at 641 (quoting United States v. Rodgers, 466 U.S. 475, 479, 104 S.Ct. 1942, 1946, 80 L.Ed.2d 492 (1984)). Consequently, courts have refused to find jurisdiction absent a "direct relationship ... between the false statement and an authorized function of a federal agency or department." Id. Given the relationship that existed between the Oregon agency disbursing benefits and the Department of Labor--which mirrors the relationship between MESC and the Department of Labor--the court held that the jurisdiction element of § 1001 was not satisfied where the false statements were made on forms submitted to the Oregon unemployment insurance program. Id. at 643.
The Facchini court recognized that the funding provided by the Department of Labor to Oregon's unemployment insurance program comes with certain strings attached. For instance, the Secretary is authorized to monitor the administrative structure of the state program, and the state must make information about benefit claimants available to the Department of Labor. However, the heart of the matter for the court was the lack of federal enforcement consequences in the event of fraud upon the state.
Mere access to information is not enough to establish jurisdiction. To establish jurisdiction, the information received must be directly related to an authorized function of the federal agency. Otherwise, the scope of section 1001 jurisdiction would be virtually limitless.
In this case, the federal government does have statutory access to information contained in the appellants' false statements. Under 42 U.S.C. § 503(a)(7), the Secretary is precluded from certifying any state unemployment insurance program unless state law makes information about benefit claimants available to the federal government. Such statements, however, are peripheral to the Secretary's monitoring function because, as we noted, the Secretary is not authorized to act in response to false statements made to a state unemployment insurance program. See 20 C.F.R. § 601.5(a) () The federal interest in such statements is, therefore, indirect and de minimis.
We agree with the Ninth Circuit's reasoning and likewise conclude that the jurisdictional requirement of § 1001 is not satisfied in this case. Where, as here, the federal government neither funds the fraudulently obtained state benefit payments, nor has any authority to act upon discovering that the state program has been defrauded, false statements made to the state agency cannot be said to come "within the jurisdiction of any department or agency of the United States." Accordingly, defendant's convictions on charges of false statements, Counts 14 and 22 through 38 of the indictment, must be reversed. 1
Defendant further argues that the mail fraud and false statements charges against him (Counts 1 through 38) violate the Double Jeopardy Clause of the Fifth Amendment, because the Michigan Employment Commission already obtained a civil judgment against him in state court, recovering actual damages plus treble damages. This court reviews the question of double jeopardy de novo. United States v. WRW Corp., 986 F.2d 138, 140 (6th Cir.1993).
Defendant argues that the criminal charges against...
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