U.S. v. Klingler, 94-1211

• Decision Date: 19 July 1995
• Docket Number: No. 94-1211,94-1211
• Parties: UNITED STATES of America, Plaintiff-Appellee, v. Kathy KLINGLER, Defendant-Appellant.
• Court: U.S. Court of Appeals — Sixth Circuit

Page 1234

61 F.3d 1234

UNITED STATES of America, Plaintiff-Appellee, v. Kathy KLINGLER, Defendant-Appellant.

No. 94-1211.

United States Court of Appeals Sixth Circuit.

Argued Nov. 15, 1994.

Decided July 19, 1995.

David Debold (argued), Stephen L. Hiyama, Asst. U.S. Atty. (briefed), Office of the U.S. Atty., Detroit, MI, for plaintiff-appellee.

Jill Leslie Price (argued and briefed), Federal Public Defenders Office, Detroit, MI, for defendant-appellant.

Before: MARTIN and BOGGS, Circuit Judges; and BELL, District Judge. ^*

BOGGS, Circuit Judge.

Kathy Klingler appeals her conviction for converting money of the United States pursuant to a conditional guilty plea, claiming that the district court erred in denying her motion to dismiss the indictment. We reverse the district court's decision because the misappropriated funds never became "money of the United States" or a "thing of value of the United States," as required by 18 U.S.C. Sec. 641 and 649.

I

Kathy Klingler was a customs broker, licensed by the United States Customs Service to facilitate the entry of goods into this country. The Customs Service detains goods when they arrive at domestic ports, and an "entry summary" must be filed, describing the items being imported and estimating the taxes and duties owed. The importer must pay these customs duties, fees, and taxes before the goods can be released. Although she filed the proper entry documents for her clients, Klingler failed to remit $159,985.01 in estimated customs fees and duties for fifty-seven transactions, and instead used these funds, received from her clients, for personal expenses. Klingler's clients remained liable for the duties, and they have paid the Customs Service in full. Several civil actions against Klingler are currently pending.

Klingler was indicted under 18 U.S.C. Sec. 641 ¹ for theft, conversion, or embezzlement of "money, or thing of value of the United States," and under 18 U.S.C. Sec. 649 ² for failing to make a timely deposit of "money of the United States." Klingler pled guilty to the conversion charge under a conditional plea agreement that allowed her to appeal the district court's denial of her motion to dismiss the indictment; the failure to deposit government monies charge was dropped pursuant to the agreement. She was granted bond, and her sentence of fifteen months in prison and restitution of $159,985.01 was stayed pending the resolution of this appeal.

The district court denied Klingler's motion to dismiss for a lack of federal jurisdiction. United States v. Klingler, 827 F.Supp. 1287 (E.D.Mich.1993). As the district court correctly noted, "[i]t is now well established that the statutory requirement that the stolen property belong[ ] to the government ... furnishes the basis for federal jurisdiction...." Id. at 1291 (quoting United States v. Baker, 693 F.2d 183, 186 (D.C.Cir.1982)). Klingler argued that the funds belonged to her clients, not the United States, thus divesting the court of jurisdiction. The district court disagreed, holding that the degree of federal interest in and control over the funds were the critical factors in applying the statutes. Ibid. Because the federal government extensively regulates the licensing of brokers and the payment of import duties, the court concluded that the estimated duties were "money of the United States." Id. at 1292.

The district court also rejected Klingler's contention that the determining factor in cases under 18 U.S.C. Sec. 641 and 649 is the government's status as the source of the stolen property. Instead, the court declared "the key factor to be evaluated in making a determination of whether the Government has a sufficient interest in certain funds or items is the degree of its control over and interest in the 'thing of value' at issue." Id. at 1291. To support its interpretation, the court noted that "[a]lthough these funds were not federal grant monies ... they were of a federal character and the federal Government exercised control over these funds through the regulations regarding the licensing of customs brokers and the regulations governing the payment of import duties." Id. at 1292.

Instead, the district court agreed with the Fourth Circuit's conclusion in United States v. Jackson, 759 F.2d 342 (4th Cir.), cert. denied, 474 U.S. 924, 106 S.Ct. 259, 88 L.Ed.2d 265 (1985), that checks payable to the United States constitute "money of the United States" because such an interpretation "offers more protection to the Government's funds than does the Tenth Circuit's narrower reading which could be used to insulate more strategic conversion of Government money from prosecution ... [and] more fully preserves the legislative intent of the statute by making it applicable to more forms of Government property...." Klingler, 827 F.Supp. at 1294 (rejecting the holding in United States v. Fernando, 745 F.2d 1328 (10th Cir.1984), that Sec. 649 applies only to cash and currency, not checks). ³ Finally, the court was unswayed by Klingler's assertions that she had only a debtor-creditor relationship with the Government or that the government held only a security interest rather than a property interest in the purloined funds. Id. at 1294-96.

Klingler contends that the district court lacked jurisdiction because the funds belonged to her clients, not the United States. She notes that customs regulations make the importer, not the broker, solely responsible to the government for all duties. Customs regulations also specify that brokers are agents of the importer, not of the United States. Klingler argues that she had, at most, a debtor/creditor relationship with the government.

II

Since the facts are undisputed, this case presents a pure question of law concerning the interpretation of 18 U.S.C. Sec. 641 and Sec. 649. A district court's conclusions of law are subject to de novo review on appeal. United States v. Braggs, 23 F.3d 1047, 1049 (6th Cir.), cert. denied, --- U.S. ----, 115 S.Ct. 274, 130 L.Ed.2d 191 (1994); Whitney v. Brown, 882 F.2d 1068, 1071 (6th Cir.1989).

In interpreting a statute, the first step is always to look at its language. Penal statutes are to be construed narrowly, and a penalty should be imposed only where the language of the statute plainly mandates it. United States v. Campos-Serrano, 404 U.S. 293, 297, 92 S.Ct. 471, 474, 30 L.Ed.2d 457 (1971). "[A]mbiguity concerning the ambit of criminal statutes should be resolved in favor of lenity." Rewis v. United States, 401 U.S. 808, 812, 91 S.Ct. 1056, 1059, 28 L.Ed.2d 493 (1971). See also Bifulco v. United States, 447 U.S. 381, 387, 100 S.Ct. 2247, 2252, 65 L.Ed.2d 205 (1980); Ladner v. United States, 358 U.S. 169, 177-78, 79 S.Ct. 209, 213-14, 3 L.Ed.2d 199 (1958). However, a strict construction does not allow a court to disregard the purpose of Congress. Moskal v. United States, 498 U.S. 103, 113, 111 S.Ct. 461, 467-68, 112 L.Ed.2d 449 (1990). Where a literal reading of a statute is inconsistent with its clear legislative purpose, a less mechanical interpretation may be warranted. Id. Neither party cites to pertinent legislative history that facilitates gauging Congressional intent, and none has been found.

Supreme Court authority interpreting 18 U.S.C. Secs. 641 & 649 is sparse and old. ⁴ In United States v. Mason, 218 U.S. 517, 31 S.Ct. 28, 54 L.Ed. 1133 (1910), the Court held that "fees and emoluments" collected by a clerk of a federal district court were not "money or property of the United States" within the meaning of the predecessor of 18 U.S.C. Sec. 641. Id. at 529, 31 S.Ct. at 33. Clerks originally had been allowed to retain whatever surplus remained above their court expenses as their salary, but Congress later set a maximum of $3,500. The Court stressed that clerks were not required to keep separate accounts or render an account of the fees to the government, although they were subject to a half-yearly audit. Id. at 520-29, 31 S.Ct. at 29-33. But "even the duty to pay the surplus shown by the return or audit is not governed by the statutes relating to embezzlement ... [because] [t]he amount with which the clerk is chargeable upon his accounting is not the 'public money' or 'the money or property of the United States.' " Id. at 531, 31 S.Ct. at 34. This is because the "fees and emoluments are not received by the clerk as moneys or property belonging to the United States, but as the amount allowed to him for his compensation and office expenses ... and with respect to the amount payable when the return is made, the clerk is not trustee, but debtor." Ibid.

The Court again reversed a conviction on the basis that the defendant was a debtor in United States v. Johnston, 268 U.S. 220, 45 S.Ct. 496, 69 L.Ed. 925 (1925). Johnston was prosecuted for embezzling government funds after he failed to pay taxes on admission fees collected at boxing matches. The Court held that Johnston was not a bailee, but instead a debtor, because the tax was paid within the price of the ticket, which was property of the promoter. Id. at 226-27, 45 S.Ct. at 496. The Court saw no reason "for requiring the ticket office of a theatre to create a separate fund by laying aside the amount of the tax on each ticket," and inferred from the government's requirement of monthly tax reports that "[it] does not look as if the Government were dealing with these people otherwise than with others answerable for a tax." Id. at 227, 45 S.Ct. at 496.

III

In general, the pertinent cases can be classified as belonging to one of four types. First, there are cases where the stolen property clearly belongs to the government and federal jurisdiction is undisputed. Next, there are instances where the federal government or one of its agents acts as a custodian or bailee of property, so the transitory possession makes the property "of the United States." See, e.g., Arbuckle v. United States, 146 F.2d 657, 659 (D.C.Cir.1944) (affirming the conviction of the Senate Restaurant's...