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UNITED STATES v. ESPY

December 22, 1997

UNITED STATES OF AMERICA,
v.
ALPHONSO MICHAEL ESPY, Defendant.



The opinion of the court was delivered by: URBINA

 Upon consideration of the parties' submissions and the relevant law, the court rules on the 13 pending motions as follows:

 Part A1

 I. Motion to Dismiss Counts 1-7 and 9-12: Denied.

 II. Motion to Dismiss Counts 9-12: Denied.

 III. Motion to Dismiss Counts 13-25: Denied.

 IV. Motion to Dismiss Counts 14, 20, 23: Denied.

 V. Motion to Dismiss Counts 29-33: Denied.

 Part B

 VI. Motion to Dismiss all Counts of the Indictment as Duplicitous: Denied.

 VII. Motion to Dismiss the Indictment for Defects in the Institution of the Prosecution: Denied.

 VIII. Motion for a Bill of Particulars: Granted in Part; Denied in Part.

 IX. Motion to Strike Surplusage: Granted in Part; Denied in Part.

 X. Motion to Dismiss Count 35: Denied.

 Part C

 XI. Motion to Dismiss Counts 26-28: Granted.

 XII. Motion to Dismiss Count 39: Granted.

 PART A

 Independent counsel, appointed to investigate the defendant's alleged violations of federal criminal laws, brought various charges based on the defendant's acceptance of improper gifts from organizations or individuals regulated by the Department of Agriculture while he was Secretary of Agriculture. The indictment, in part, charges the defendant with several crimes related to alleged gratuities violations including: Gratuity to Public Official, 18 U.S.C. § 201(c)(1)(B), Mail and Wire Fraud, 18 U.S.C. §§ 1341, 1343, 1346, and the Travel Act, 18 U.S.C. § 1952. This matter comes before the court upon the defendant's motions to dismiss several counts of the indictment relating to the above-mentioned charges for failure to state an offense pursuant to Federal Rule of Criminal Procedure 12(b)(2). Upon consideration of the parties' submissions and the relevant law the court denies these motions.

 Introduction

 Procedural Background

 On September 9, 1994, the Special Division of the Court of Appeals for the District of Columbia Circuit ordered the appointment of Donald C. Smaltz as Independent Counsel ("IC") to investigate whether the then-Secretary of Agriculture, Alphonso Michael Espy, had committed a violation of any criminal law, other than a Class B or C misdemeanor or infraction, relating in any way to the acceptance of gifts by him from organizations or individuals with business pending before the Department of Agriculture. In re Espy, Special Div. No. 94-2 (D.C. Cir. Sp. Div. Sept. 9, 1994). On August 27, 1997, a grand jury indicted the defendant on 39 counts alleging unlawful activities occurring during his tenure as Secretary of Agriculture.

 Counts 1 through 7 of the indictment *fn2" charge the defendant with Wire Fraud, 18 U.S.C. §§ 1434, 1346, based on activities arising from the defendant's alleged receipt of illegal gratuities from certain sources. Specifically, the indictment alleges in Counts 1 and 2 that the defendant effected telephone communications on May 4 and 12, 1993 between Washington, D.C., and Springdale, Arkansas, to accept an invitation to a weekend birthday party hosted by Tyson Foods, Inc. ("Tyson"); in Count 3 effected telephone communications on June 17, 1993 from Washington, D.C., to Chicago, Illinois, to solicit 1993 NBA Championship tickets from the Quaker Oats Company ("Quaker Oats"); in Count 4 sent facsimile communications on January 18, 1994 from Dallas, Texas, to Temple, Texas, and Washington, D.C., to report results of a meeting with a Department of Agriculture Inspector General in Dallas, Texas; in Count 5 received facsimile communications on January 27, 1994 from the President of Oglethorpe Power Company ("Oglethrope") in Tucker, Georgia, confirming a meeting at Oglethorpe headquarters; in Count 6 effected telephone communications on January 27, 1994 in Washington, D.C., and Atlanta, Georgia, to request 1994 Super Bowl tickets from the Fernbank Museum ("Fernbank") and; in Count 7 received facsimile communications from the President of Oglethorpe in Tucker, Georgia, requesting that the defendant elevate to other government officials Oglethorpe's proposal to prepay REA bonds after the proposal was rejected by the administering federal bank.

 Counts 8 through 12 of the indictment charge the defendant with Mail Fraud, 18 U.S.C. §§ 1341, 1346, based on (i) the defendant's scheme to obtain money and property by means of fraudulent pretenses and representations, and (ii) his reimbursement of certain sources to cover up earlier acceptance of illegal gratuities. Specifically, the indictment alleges the defendant in Count 8 mailed a $ 6,204 Purchase Order from Washington, D.C. to Ridgeland, Mississippi, on April 6, 1993 as payment for the lease of a 1993 Jeep Grand Cherokee; in Count 9 mailed a $ 68 check to Tyson from Washington, D.C., to Springdale, Arkansas, on March 18, 1994, as payment for the Dallas Cowboys - Green Bay Packers NFL Playoff game; in Count 10 mailed a $ 69 check to Tyson from Washington, D.C., to Little Rock, Arkansas, on June 2, 1994, as payment for his expenses at the Tyson's weekend birthday party; in Count 11 mailed a $ 90 check to Quaker Oats in Chicago, Illinois, on August 25, 1994 for tickets to the Chicago Bulls - Phoenix Suns NBA Playoff game and; in Count 12 mailed a $ 700 check to the Fernbank Museum in Atlanta, Georgia, on September 14, 1994 for tickets to the 1994 Super Bowl.

 Counts 13 through 25 of the indictment charge the defendant with violating the gratuities provision, 18 U.S.C. § 201 (c)(1)(B), of the Bribery Statute, 18 U.S.C. § 201, based on the defendant's receipt of things of value from certain sources. Specifically, the indictment alleges that the defendant received the following things of value: luggage on March 14, 1993 valued at $ 2427 (Count 13); $ 3200 cash to his girlfriend on May 13, 1993 (Count 14); tickets and limousine service on September 11 and 12 to the U.S. Open Tennis tournament valued at $ 4446 (Count 15); tickets valued at $ 222 on November 10, 1993 to a Washington Bullets - New York Knicks NBA game (Count 16); a Waterford crystal bowl on January 17, 1994 valued at $ 173 (Count 17); four tickets valued at $ 6000 on January 18, 1993 for seats at the Presidential Inaugural Dinner (Count 18); travel and lodging expenses valued at $ 2556 for a Russellville birthday party held between May 14-16, 1993 (Count 19); a $ 1200 check given to his girlfriend on January 4, 1994 (Count 20); travel and entertainment expenses valued at $ 2,087 for January 15-16, 1994 while attending a Dallas Cowboys - Green Bay Packers NFL Playoff game (Count 21); a January 30, 1994 Super Bowl Ticket valued at $ 2200 (Count 22); employment for his girlfriend from EOP Group, Inc. ("EOP") (Count 23); tickets valued at $ 90 on June 18, 1993 to a Chicago Bulls - Phoenix Suns NBA Championship game (Count 24) and; a 1994 Super Bowl tickets valued at $ 857 (Count 25).

 Counts 26 through 28 of the indictment charge the defendant with violating the gratuities provision of the Meat Inspection Act, 21 U.S.C. § 622, based on the defendant's receipt of illegal gratuities. Specifically, the indictment alleges the following illegal gratuities in violation of 21 U.S.C. § 622: lodging, entertainment, and airfare valued at $ 2044 for a trip to Russellville, Arkansas between May 15-16, 1993 (Count 26); expenses valued at $ 2087 for a weekend trip to Dallas, Texas to attend the Dallas Cowboys - Green Bay Packers NFL Playoff game on January 15-16, 1994 (Count 27) and; tickets valued at $ 90 on June 18, 1993 to a Chicago Bulls - Phoenix Suns NBA Championship game (Count 28).

 Counts 29 through 33 of the indictment charge the defendant for violating the Travel Act, 18 U.S.C. § 1952, based on the defendant's unlawful activity under the gratuities statute, 18 U.S.C. § 201(c), when traveling in interstate commerce. Specifically, the indictment alleges in Count 29 that the defendant received lodging, entertainment, and airfare when traveling from Washington, D.C., to Russellville, Arkansas, in Count 30 Chicago Bulls - Phoenix Suns NBA Championship game tickets when traveling from Washington, D.C. to Chicago, Illinois; in Count 31 U.S. Open Tennis tickets and limousine service when traveling from Washington, D.C. to New York, New York; in Count 32 Dallas Cowboys - Green Bay Packers NFL Playoff tickets and limousine service and; in Count 33 Super Bowl tickets when traveling from Washington, D.C. to Atlanta, Georgia.

 Count 34 of the indictment charges the defendant with violating 18 U.S.C. § 1001 by making false statements and representations to the United States Department of Agriculture ("USDA") Office of the Inspector General to conceal his unlawful receipt of things of values from certain sources. The defendant is alleged to have submitted to the USDA Inspector General Special Agents altered and false trip itineraries for official travel he undertook in May 1993 to January 1994 after the USDA began an investigation regarding potential violations of federal laws by the defendant.

 Count 35 of the indictment charges the defendant with violating 18 U.S.C. §§ 1512(b)(2)(A) and (B); and 1512(b)(3) by tampering with witnesses who were employees of the USDA. The defendant is alleged to have engaged in misleading conduct towards these employees with the intent to withhold records from the USDA Inspector General's investigation, cause objects to be impaired for use in official proceedings, and hinder the communication of information to the Special Agents of the USDA Inspector General relating to the defendant's possible federal criminal violations.

 Counts 36 through 39 of the indictment charge the defendant with violating 18 U.S.C. § 1001 by making numerous false statements and representations to certain departments, and officials of the Executive Office of the United States. Specifically, Count 36 alleges that the defendant made false statements and representations to Special Agents of the Federal Bureau of Investigation ("FBI") concerning his alleged solicitation and receipt things of value; Count 37 alleges that the defendant violated the Ethics in Government Act, 5 U.S.C. App. 6 §§ 101 et seq., by not reporting receipt of things of value totaling approximately $ 9,561 on his Public Disclosure Report, SF-278 for the calender year 1993; Count 38 alleges the defendant failed to disclose receipt of things of value approximately $ 3,191 on Public Disclosure Report, SF-278 for the calender year 1994; and Count 39 alleges that the defendant made false statements and representations on September 30, 1994 to the President's Chief of Staff and Counsel concerning his receipt and solicitation of thing of value from certain sources.

 Factual Background

 On December 24, 1992, the President-Elect of the United States selected the defendant to the Cabinet position of Secretary of the United States Department of Agriculture. The defendant served as the Secretary of the USDA from January 22, 1993 until December 31, 1994. Beginning on January 5, 1993 through February 16, 1995, it is alleged that the defendant sought to defraud the United States and its citizens of (i) their right to honest services and (ii) money and property.

 The indictment alleges the following allegations to support charges brought against the defendant for violations of several federal laws:

 Operative Facts:

 The defendant concealed receipt of such items through the use of fraudulent means and material misrepresentations. The defendant in 1993 made false representations to the USDA to attend three separate events in his official capacity. The first was a birthday party in Russellville, Arkansas, sponsored by Tyson on May 14, 1993. The second was in Dallas, Texas, to attend a playoff football game as a guest of Tyson on January, 14, 1994. The last was in Atlanta, Georgia to attend the Super Bowl during the weekend of January 29 through 30, 1994. In June 1994, the defendant did not report these items of value received in 1993 on his Public Financial Disclosure Report, SF-278, as required by the Ethics in Government Act.

 In March 1994, after the press publicly questioned to what extent the defendant received gratuities from sources regulated by the USDA an internal investigation began. On April 1, 1994, Special Agents of the USDA Office of the Inspector General interviewed the defendant regarding his acceptance of things of value from Tyson. The defendant told them that he attended the Tyson sponsored birthday party to speak in his official capacity and not as a guest of Tyson. He also stated that he returned to Washington, D.C., in a Tyson jet because no commercial flights were available. On April 8, 1994, in response to request to produce a copy of his travel itinerary for the weekend he went to Dallas, Texas, the defendant deleted all references to his girlfriend and the limousine service provided by Tyson.

 Likewise, on two separate occasions, June 1, 1994 and September 30, 1994, the defendant was questioned by other government agencies and officials. The first occurred when Special Agents of the FBI questioned the defendant about the source of certain gifts. The defendant answered that he could not recall at any time receiving things of value from entities other than Tyson. Subsequently, when questioned by the President's Chief of Staff regarding his solicitation and receipt of illegal gratuities the defendant stated in substance, "there's nothing else out there."

 As questions arose to what extent the defendant accepted illegal gratuities, he began to issue and mail reimbursement checks to sources that had provided him with things of value. The payments included checks to (i) Tyson for lodging while attending a party in Russellville, Arkansas, and for a NFL Playoff ticket, (ii) the Chairman of Quaker Oats for a NBA Championship ticket, (iii) Fernbank Museum for tickets to the 1994 Super Bowl, and (iv) the USDA for assuming lease payments on a Jeep Cherokee. In February 1995, the defendant did not report these items of value and others items received in 1994 on his Public Financial Disclosure Report, SF-278.

 Additionally, the defendant used government assets and expended public funds for his personal benefit. As Secretary of the Agriculture, the defendant was entitled to a USDA leased limousine and driver for official use. Rather than having the USDA provide him with a car and driver, the defendant represented to the USDA that he would use the Jeep as his official car in Washington, D.C. In return, the USDA assumed the lease payments of the defendant's car for the period of February 1993 - September 1993. The defendant did not use the Jeep as his official car in Washington, D.C., but kept it in Mississippi for his personal use until November 1993. Without an official car in Washington, D.C., from April 5, 1993 through December 31, 1994 the defendant used a USDA provided limousine and driver in Washington, D.C. On September 15, 1994, the defendant issued a check, to the USDA as reimbursement for the lease payments it assumed for the Jeep.

 Discussion

 I. Denying Defendant's Motion to Dismiss Counts 1 through 7 and Counts 9 through 12 of the Indictment for Failure to State an Offense - (Mail and Wire Fraud)

 Defendant moves pursuant to Federal Rule Criminal of Procedure 12(b)(2) to dismiss Counts 1 through 7 and Counts 9 through 12 of the indictment for failure to state an offense for wire or mail fraud. Defendant asserts that the "counts are fatally defective because the indictment fails to allege that Mr. Espy engaged in any official act whatsoever in exchange for the alleged gratuities or otherwise failed to render honest services as Secretary of Agriculture, or that he had any specific intent to do so," under 18 U.S.C. §§ 1341, 1343, 1346. *fn9" As fully set forth below, after viewing all the allegations of the indictment in its entirety, there are sufficient grounds for sustaining the charges for Wire and Mail Fraud, 18 U.S.C. §§ 1341, 1343, 1346. Thus, Counts 1 through 7 and 9 through 12 shall not be dismissed.

 Counts 1 through 7 allege that the defendant violated the Wire Fraud statute, 18 U.S.C. §§ 1343, 1346. Counts 9 through 12 allege the defendant violated Mail Fraud statute, 18 U.S.C. §§ 1341, 1346. The relevant language in both the Wire and Mail Fraud ("Wire Fraud") statutes is the same, and therefore, both offenses will be examined together for the purposes of this analysis. See United States v. Sawyer, 85 F.3d 713, 723 (1st Cir. 1996) (citing United States v. Boots, 80 F.3d 580, 586 n.11 (1st Cir. 1996)). Section 1343 provides in pertinent part:

 
Whoever, having devised or intending to devise any scheme or artifice to defraud, or for obtaining money or property by means of false or fraudulent pretenses, representations, or promises ... [uses the mails or wires, or causes their use] for the purpose of executing such scheme or artifice ... [shall be punished].

 Thus, the elements of wire fraud are (1) a scheme to defraud, and (2) use of interstate wire communication to further that scheme. United States v. Lemire, 232 U.S. App. D.C. 100, 720 F.2d 1327, 1334-35 (D.C. Cir. 1983) (citations omitted). Section 1346 defines the term "scheme or artifice" to include a scheme or artifice to deprive another of their intangible right to honest services. *fn10"

 The meaning of honest services has not received even interpretation from the courts. See United States v. Brumley, 116 F.3d 728, 733 (5th Cir. 1997) (citing United States v. Holzer, 816 F.2d 304, 307-310 (7th Cir. 1987)). Generally, honest services fraud contemplates instances where the defendant in rendering services was aware that his actions were less than in the best interests of the employer. Brumley, 116 F.3d at 734. It also encompasses instances when a public decisionmaker fails to disclose a conflict of interest resulting in personal gain. Sawyer, 85 F.3d at 724; see United States v. Mandel, 591 F.2d 1347 (4th Cir. 1979) (Public officials failure to disclose existence of a direct interest in a matter that he is passing on is actionable under Mail Fraud statute). Although, not every dishonest or disloyal act by an employee violates the wire fraud statute, a breach of fiduciary duty to disclose material information to an employer falls within the strictures of the statute. United States v. Silvano, 812 F.2d 754, 759 (1st Cir. 1987); see Sawyer, 85 F.3d at 724 (Public officials have an affirmative duty to disclose material information to the public employer). A public official's fraud on the public may clearly fall within the meaning of honest services fraud where dishonest conduct by the public official directly implicates the functions and duties of that official's public office. Rabbitt, 583 F.2d 1014 at 1024. Moreover, public officials may be held to a higher standard of public trust due to concerns that conflicts of interest may harm the public merely by giving the illusion of unfairness. Lemire, 720 F.2d at 1337 n.11. Thus, undisclosed, biased decision making for personal gain, whether or not tangible loss to the public is shown, constitutes a deprivation of honest services. Sawyer, 85 F.3d at 724.

 The defendant's first argument that the indictment should be dismissed because it failed to state that he "engaged in any official act for the alleged gratuity or otherwise failed to render honest services as Secretary of Agriculture" is misplaced. *fn11" The D.C. Circuit in Lemire concluded that to constitute a deprivation of honest services, the breach of fiduciary duty must have some element of dishonesty. United States v. Defries, 310 U.S. App. D.C. 56, 43 F.3d 707, 1997 WL 737753, *12 (D.C. Cir. 1997). The law in this Circuit does not require allegations that a quid pro quo or selling of office is necessary for the indictment to support charges for honest services fraud. *fn12" See id. (A public official's breach of fiduciary duty is criminally fraudulent only accompanied by a misrepresentation or non-disclosure that is intended to deprive the person whom the duty is owed some legally significant benefit) (citing Lemire, 720 F.2d at 1335). In this case, the allegations that the defendant solicited and received illegal gratuities, intentionally violated a criminal gratuities statute and later committed acts to conceal this illegal activity are sufficient to support an indictable offense for honest services. See Holzer, 816 F.2d at 304 (Public official's systematic and long-continued receipt of bribes coupled with active efforts to conceal cognizable as honest services fraud); see also United States v. Bush, 522 F.2d 641 (7th Cir. 1975) (Breach of fiduciary duty, failure of public official to disclose his ownership interest in corporation recommended to the city, and active concealment of the fraud cognizable as honest services fraud); Silvano, 812 F.2d at 754 (Concealment of material information by an employee under an affirmative duty to disclose to his employer cognizable as honest services fraud) (citations omitted); Mandel, 591 F.2d at 1363 ("Non-disclosure or concealment, or both, of material information may constitute actionable fraud under Mail Fraud statute); cf. Rabbit, 583 F.2d at 1014 (Reversed mail fraud conviction because no applicable standard of conduct clearly imposed an affirmative duty on state legislator to disclose his interest in a contract). It is not disputed that the existence of an apparent conflict of interest is sufficient to constitute a violation of a government agent's fiduciary duty. See United States v. York, 890 F. Supp. 1117, 1126 (D.D.C. 1995). It is also not contested that misrepresentation or intentional non-disclosure are inherently dishonest acts. Defries, 310 U.S. App. D.C. 56, 43 F.3d 707, 1997 WL at 737753 *12. Therefore, since the defendant's alleged breach of fiduciary duty includes elements of dishonesty, the indictment sufficiently states an offense honest services fraud.

 Federal Rule of Criminal Procedure 7(c) requires that the indictment state the essential facts constituting the charged offense. The indictment sets forth the essential facts to establish a charge for deprivation of "honest services" under the Wire Fraud statute. It alleges that as a Federal Executive official, the defendant had a statutory duty to prepare and file a Public Financial Disclosure Report, SF-278 under Title I of the Ethics in Government Act. See Indictment at P 10. Therefore, he had to truthfully disclose, among other things, gifts aggregating $ 250 or more in value from any one source he received during his tenure as Secretary of Agriculture. Id. The government contends that the defendant's failure to comply with this disclosure requirement was not an isolated incident but part of a pattern of related events. *fn13" These related events include, among others, allegations that (1) the defendant illegally solicited and received gratuities from individuals and business entities with matters pending before his office, (2) submitted false public disclosure reports in 1994 and 1995 that concealed receipt of those gratuities, and (3) concealing his activities concerning receipt of the ...


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