U.S. v. Hope, 88-5443

• Decision Date: 27 December 1988
• Docket Number: No. 88-5443,88-5443
• Parties: UNITED STATES of America, Plaintiff-Appellant, v. Alga HOPE, Jr., Defendant-Appellee.
• Court: U.S. Court of Appeals — Eleventh Circuit

Page 1574

861 F.2d 1574

UNITED STATES of America, Plaintiff-Appellant, v. Alga HOPE, Jr., Defendant-Appellee.

No. 88-5443.

United States Court of Appeals,

Eleventh Circuit.

Dec. 27, 1988.

Dexter W. Lehtinen, U.S. Atty., Richard Scruggs, Linda Collins Hertz, Harriet R. Galvin, Asst. U.S. Attys., Miami, Fla., for plaintiff-appellant.

Joseph Paglino, Miami, Fla., for defendant-appellee.

Appeal from the United States District Court for the Southern District of Florida

Before TJOFLAT and FAY, Circuit Judges, and FAWSETT ^*, District Judge.

FAY, Circuit Judge:

This is an interlocutory appeal brought by the United States from an order in the district court granting the motion of defendant-appellee Alga Hope, Jr. to dismiss Count I of a five-count indictment. Count I charges the defendant with conspiracy to defraud the United States and to conceal and cover up material facts in a matter within the jurisdiction of an agency or department of the United States, in violation of 18 U.S.C. Sec. 371. ¹ The Government contends that Count I contains the elements of the offense charged and that the sufficiency of the Government's evidence is a matter of proof to be determined at trial. We find that under Tanner v. United States, 483 U.S. 107, 107 S.Ct. 2739, 97 L.Ed.2d 90 (1987), Count I of the indictment fails to state a violation of Sec. 371 because it alleges neither a direct nor indirect fraud on the United States. We therefore affirm the order of the district court.

I. BACKGROUND

The facts as alleged by the Grand Jury are as follows: Alga Hope, Jr. was the President and Executive Director of the Economic Development Corporation of Dade County, Inc. (EDCO), a nonprofit Florida corporation, which was organized in the aftermath of the 1980 riots in Miami to receive and distribute federal funds in the form of loans to minority owned businesses in Dade County, Florida. The funds were provided to Metropolitan Dade County as "Community Development Block Grants," which EDCO would request from the Dade County Office of Community and Economic Development (OCED). Throughout Hope's tenure with EDCO, he and Hilario James were the principals of three Florida corporations, among them, Sunbelt Recycled Rubber Collection Centers, Inc. (Sunbelt). Hope and James conspired to obtain through EDCO a federally funded loan of $75,000 for Sunbelt.

The indictment charges that in furtherance of the conspiracy, Hilario James resigned his position as business analyst and finance specialist with EDCO in order to apply to EDCO for the Sunbelt loan. Hope then used his position at EDCO to vote in favor of the loan to Sunbelt at a loan committee meeting, without disclosing his part ownership of the company. Also in furtherance of the conspiracy, Hope recommended to OCED officials that the Sunbelt loan be approved and that federal funds be drawn down to pay the loan. Hope allegedly submitted false documents to OCED in support of the loan application.

Hope and James were indicted on November 20, 1986 in a five-count indictment for violations of 18 U.S.C. Sec. 371 (conspiracy to defraud the government and to cover The defendant filed a motion to dismiss the indictment on March 15, 1988, claiming that under Tanner v. United States, supra, the indictment failed to allege the elements of a Sec. 371 conspiracy. The court held a hearing on April 14, 1988 on the motion to dismiss and heard reargument on the motion on May 12, 1988. The court ruled that Tanner mandated a dismissal of the conspiracy count, but that the case would go to trial on the remaining counts. Before selection of a jury, the Government filed with our court a notice of appeal and a motion for an emergency stay of the trial proceedings. A hearing was held by telephone before the Honorable James C. Hill, Circuit Judge, on the Government's motion for emergency stay. This motion was denied as moot once the district court granted a motion to continue pending the outcome of this appeal.

                up material facts within the jurisdiction of the Department of Housing and Urban Development (HUD) (Count I);  18 U.S.C. Sec. 1001 2 (making false statements to HUD) (Count II);  and 18 U.S.C. Sec. 1951 (extortion) (Counts III-IV). 3   Count I sets out seventeen overt acts committed by Hope or James in furtherance of the conspiracy.  (Appendix A)  None of the alleged overt acts mentions any communication or transaction between either of the defendants and any agency or department of the United States
                

II. THE TANNER CASE AND Sec. 371

In Tanner, the Supreme Court held that in a Sec. 371 conspiracy, the target of the conspiracy must be the United States or one of its agencies or departments, either directly or through a third party. Defendants Tanner and Conover were indicted and convicted of inter alia, conspiring to defraud the United States by impairing, impeding, obstructing and defeating the lawful functions of the Rural Electrification Administration (REA), a credit agency of the United States Department of Agriculture, in violation of 18 U.S.C. Sec. 371. ⁴ Defendant Conover, the procurement manager for Seminole Electric Cooperative, Inc., a Florida corporation, improperly aided codefendant Tanner with respect to a contract bid on a construction project for Seminole. The construction contract was paid with loan money guaranteed by REA. Conover also made material misrepresentations to a bonding company regarding the project's state of completion.

On appeal to our court, United States v. Conover, 772 F.2d 765 (11th Cir.1985) the conviction was affirmed. Before the Supreme Court, the defendants argued that at most, the evidence showed that Seminole, a private corporation, was defrauded, and that absent a direct fraud on the REA a conviction for conspiracy to defraud the United States could not stand. The Government made two arguments: (1) that a conspiracy to defraud the United States may be effected by third parties; and (2) that Seminole, as the recipient of federal financial assistance and supervision could be treated as the United States under Sec. 371. The Supreme Court rejected the latter argument:

The conspiracies criminalized by Sec. 371 are defined not only by the nature of the injury intended by the conspiracy, and the method used to effectuate the conspiracy, but also--and most importantly--by the target of the conspiracy.... [T]he Government, in arguing that Sec. 371 The Court did not, however, reverse the convictions. The Court accepted the Government's first argument, that a Sec. 371 conviction could be based upon a conspiracy to cause some third party to defraud the United States unwittingly. The case was thus remanded to our court to determine if there was sufficient evidence to show that the defendants conspired to cause Seminole to make false statements to REA. ⁵

covers conspiracies to defraud those acting on behalf of the United States, asks this Court to expand the reach of a criminal provision by reading new language into it. This we cannot do. Tanner, supra, 107 S.Ct. at 2752-53.

III. APPLICATION OF TANNER

Under Tanner, Count I of the indictment in this case can survive only if it alleges that an object of the conspiracy was to defraud HUD, either directly or by causing EDCO to perpetrate the fraud. A close examination of Count I reveals that it alleges no such thing. The Government contends that the dismissal of Count I was error because the facts as alleged are sufficient to charge a Sec. 371 conspiracy. However, Count I of the indictment states quite specifically that Hope's conduct was aimed directly and exclusively at agencies and officials of Dade County. (Appendix A). The accusatory language in Count I closely tracks the language of the statute, but it does not allege any object of the conspiracy or overt act which is directed at the United States. Since under Tanner EDCO may not itself be treated as the United States, Count I fails to allege a conspiracy to defraud the United States directly.

It is a closer question whether Count I permits the Government to prove at trial that Hope conspired to manipulate EDCO in order that HUD and the United States be defrauded indirectly. The Court noted in Tanner that Sec. 371, covering conspiracies to defraud "in any manner or for any purpose" does not limit the method which may be used to defraud the United States: "A method that makes uses of innocent individuals or businesses to reach and defraud the United States is not for that reason beyond the scope of Sec. 371." Tanner at 2752; see also United States v. Bornstein, 423 U.S. 303, 309, 96 S.Ct. 523, 528, 46 L.Ed.2d 514 (1976); United States ex rel. Marcus v. Hess, 317 U.S. 537, 63 S.Ct. 379, 87 L.Ed. 443 (1943) (fact that a false claim passes through a third party on its way to the government does not preclude liability under the False Claims Act).

We agree, as a general matter, with the Government's contention that it need not have specified in a separate clause of the indictment that the conspiracy contemplated an indirect fraud on the United States in order for the Government to introduce evidence in support of that theory. ⁶ In this case, however, the indictment as framed fails to allege a conspiracy to defraud the United States either directly or indirectly. By explicitly naming county agencies as the sole and ultimate targets of the conspiracy in Count I, the Government precludes itself from claiming that it "fully intended to present sufficient proof" that HUD was either directly or indirectly defrauded by the defendant. (Brief for appellant at 10)

The former Fifth Circuit has held "that if an indictment enumerates the particular facts alleged to constitute the element of a charged crime and the proof makes out the elements in a different manner, a fatal variance results." United States v. Guthartz, 573 F.2d 225, 228 (5th Cir.), cert. denied, 439 U.S. 864, 99 S.Ct. 187, 58 L.Ed.2d

                173 (1987). 7   Under Tanner, the particular facts alleged in the indictment in

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