United States v. Canel, Crim. No. 82-72.

• Decision Date: 17 November 1982
• Docket Number: Crim. No. 82-72.
• Citation: 569 F. Supp. 926
• Parties: UNITED STATES of America, Plaintiff, v. Orlando CANEL and Jose (Tony) Figueroa, Defendants.
• Court: U.S. District Court — Virgin Islands

569 F. Supp. 926

UNITED STATES of America, Plaintiff, v. Orlando CANEL and Jose (Tony) Figueroa, Defendants.

Crim. No. 82-72.

District Court, Virgin Islands, D. St. Thomas and St. John.

November 17, 1982.

James A. Plaisted, Sp. Asst. U.S. Atty., Charlotte Amalie, St. Thomas, V.I., for plaintiff.

Maria T. Hodge, Charlotte Amalie, St. Thomas, V.I., Joaquin Monserrate Matienzo, Hato Rey, P.R., for defendant Jose Figueroa.

Michael A. Joseph, Federal Public Defender, Christiansted, St. Croix, V.I., for defendant Orlando Canel.

MEMORANDUM OPINION AND ORDER

O'BRIEN, District Judge.

The defendants in this case were originally charged with one conspiracy count and twelve other federal "white collar crimes" arising out of two separate sets of circumstances. The first set of circumstances involved the alleged unauthorized use of work crews and equipment of the Virgin Islands Department of Public Works on property owned by one of the defendants for his personal benefit. The second set of circumstances involved government purchases by defendant Canel, in his capacity as a division head within the Department of Public Works, of three trucks from defendant Figueroa, who falsely represented himself as an administrator of a bankrupt estate in Puerto Rico. Specific acts alleged in the conspiracy count included the use of the telephone for the numerous telephone calls made from the Department of Public Works to Puerto Rico, preparation of various documents to cover-up the fraud, and interstate travel.

All the counts involving the unauthorized use of the government work crews and equipment were dismissed by the Court on defendants' motion for acquittal at the end of the prosecution's case. The jury was left to consider seven of the original thirteen counts dealing with the truck purchases. At the close of all the evidence defendants renewed their motion of acquittal and it was denied.

Defendant Canel was convicted on all seven counts. Defendant Figueroa was convicted on five of the seven counts. Each was convicted of conspiracy, obtaining money by fraud, use of interstate telephone wires, and making and using false documents. Defendant Canel was also convicted of two additional counts of making and using false documents.

Both defendants filed motions for judgment notwithstanding the verdict or in the alternative for a new trial. The motions will be denied for the reasons stated herein.

I. JURISDICTION UNDER 18 U.S.C. §§ 1001, 371

Defense counsel separately raise and join in each other's motion the question as to whether the defendants could be found guilty under the federal statutes 18 U.S.C. §§ 1001, and 371 when, they allege, the acts were committed against the Virgin Islands Government. Basically, counsel argue that the transactions the defendants were found guilty of are all against the territory and are not "within the jurisdiction of any department or agency of the United States" nor was the conspiracy committed against the United States, or an agency thereof," as required by those statutes.

This Court does not dispute the fact that the defendants could have been found to have defrauded the Virgin Islands Government under Virgin Islands law. See 14 V.I.C. §§ 551, 843. The Court does not dispute in this case the fact that the Virgin Islands Government, particularly the Department of Public Works, is not the United States Government of a federal agency or department. See Harris v. Boreham, 233 F.2d 110, 114-16 (3d Cir.1956) (V.I. municipality not a federal government department or agency); Dudley v. Commissioner of Internal Revenue, 258 F.2d 182 (3d Cir.1958) (U.S. Tax Court lacked jurisdiction to hear tax deficiency appeal because notice issued by territorial officer). The Court finds, however, that a violation has been committed against a federal department, the U.S. Department of Interior, as well.

A. Section 1001 — Counts 10, 11, 12 and 13

Counts 10, 11, 12 and 13 alleged that the defendants made and used false and fraudulent statements to procure a Disbursement Voucher for $35,000; to justify the "open market" purchase of the dump truck in a letter to the Governor written by defendant Canel; to certify that defendant Figueroa was the vendor of the dump truck in a requisition; and to procure a Government Transportation Request to Puerto Rico. The transactions were all done in violation of 18 U.S.C. § 1001 and 2. Section 1001 provides

Whoever, 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.

The issue, as phrased by counsel for defendant Figueroa, and paraphrased here, is whether the fact that the U.S. Department of Interior has lawful authority to audit the financial affairs of the Virgin Islands Government renders a fraud basically against the Virgin Islands Government an offense against the U.S. Government or one of its agencies or departments. The prosecution, responding in the affirmative, argues that because the fraudulent statements found their way to the federal government comptroller, an agent of the U.S. Department of Interior, as a part of his statutory auditing functions, the documents and statements made constituted a fraud against the U.S. Department of Interior. The auditing of these records, it is further argued, is a matter "within the jurisdiction" of a federal department, citing to United States v. Cartwright, 632 F.2d 1290 (5th Cir.1980). We agree with the prosecution.

Under section 17 of the Revised Organic Act of 1954 (hereafter the "Act"), 48 U.S.C. § 1599, the financial affairs of the Virgin Islands Government are monitored by a government comptroller who is appointed by the Secretary of the U.S. Department of Interior (hereafter the "Secretary") and is under his general supervision. Section 17(a) specifically provides that the government comptroller is not part of any executive department of the Virgin Islands Government (hereafter the "Government"). He is mandated to audit all expenditures of funds pertaining to the Government which includes bringing to the attention of the Secretary of the Interior and the Governor of the Virgin Islands all irregular expenditures of funds. The office and activities of the government comptroller are subject to review by the Comptroller General of the United States. While the government comptroller may perform some territorial functions,¹ he is a federal employee or agent of the U.S. Department of Interior. See Harris v. United States, 125 F.Supp. 536, 541 (D.V.I.1954) (Superintendent of Public Works for the municipality of St. Thomas and St. John, appointed and paid by the Secretary, was a "federal employee" under the Federal Tort Claims Act although he performed both territorial and federal functions).

Cartwright involves a case where defendant was convicted under § 1001 for submitting false statements to a lending institution which was a wholly-owned subsidiary of a federally-insured savings and loan association. The federal agency had statutory authority to "make examinations" into the institutions it insured "for its protection and the protection of other insured institutions," which authority was extended, in that case, to the wholly-owned subsidiary. Fraudulent statements submitted by defendant to the subsidiary were considered "within the jurisdiction" of the federal agency. The U.S. Supreme Court, in discussing the amendment to 18 U.S.C. § 80, later renumbered 18 U.S.C. § 1001, which added the phrase "within the jurisdiction of any department or agency of the United States," stated:

The amendment indicated the congressional intent to protect the authorized functions of governmental departments and agencies from the perversion which might result from the deceptive practices described.

United States v. Gilliland, 312 U.S. 86, 93, 61 S.Ct. 518, 522, 85 L.Ed. 598 (1940).

In the present case, the government comptroller has statutory authority to audit the Government's expenditures. The purposes of the government comptroller's auditing activities are to:

improve the efficiency and economy of programs of the government of the Virgin Islands, and ... discharge the responsibility incumbent upon the Congress to insure that the substantial Federal revenues which are covered into the treasury of the government of the Virgin Islands are properly accounted for and audited.

48 U.S.C. § 1599(c). The submission of fraudulent documents would and does interfere with the lawful functions of the government comptroller, which includes accounting for and auditing the federal revenues as well as the territorial revenues. The submission of these documents, therefore, does involve matters "within the jurisdiction" of the U.S. Department of Interior.

The defendants cite to Ebeling v. United States, 248 F.2d 429 (8th Cir.), cert. denied, sub nom., Emerling v. United States, 355 U.S. 907, 78 S.Ct. 334, 2 L.Ed.2d 261 (1957), a case which the Third Circuit cited as controlling in United States v. Waters, 457 F.2d 805 (3d Cir.1972), as controlling in the present case. They argue that the prosecution was required to prove that the defendants knew of the federal involvement with the Department of Public Works. We disagree. Ebeling may very well stand for the proposition that where a federal agency is peripherally involved, proof is required that the defendants had actual knowledge of federal involvement. The present case is more akin, however, to cases where a federal agency has an interest in protecting its authorized functions and proof of knowledge of federal involvement is not necessary. Cartwright, supra, United States v....