Although this language is very broad, cases rely heavily on the
definition of "defraud" provided by the Supreme Court in two early cases,
Hass
v. Henkel, 216 U.S. 462 (1910), and Hammerschmidt v. United
States,
265 U.S. 182 (1924). In Hass the Court stated:
The statute is broad enough in its terms to include any
conspiracy for the purpose of impairing, obstructing or defeating the lawful
function of any department of government . . . (A)ny conspiracy which is
calculated to obstruct or impair its efficiency and destroy the value of its
operation and reports as fair, impartial and reasonably accurate, would be
to
defraud the United States by depriving it of its lawful right and duty of
promulgating or diffusing the information so officially acquired in the way
and
at the time required by law or departmental regulation.
Hass, 216 U.S. at 479-480. In Hammerschmidt, Chief Justice
Taft,
defined "defraud" as follows:
To conspire to defraud the United States means primarily to
cheat
the Government out of property or money, but it also means to interfere with
or
obstruct one of its lawful governmental functions by deceit, craft or
trickery,
or at least by means that are dishonest. It is not necessary that the
Government shall be subjected to property or pecuniary loss by the fraud,
but
only that its legitimate official action and purpose shall be defeated by
misrepresentation, chicane or the overreaching of those charged with
carrying
out the governmental intention.
Hammerschmidt, 265 U.S. at 188.
The general purpose of this part of the statute is to protect
governmental functions from frustration and distortion through deceptive
practices. Section 371 reaches "any conspiracy for the purpose of
impairing,
obstructing or defeating the lawful function of any department of
Government."
Tanner v. United States, 483 U.S. 107, 128 (1987); see
Dennis
v. United States, 384 U.S. 855 (1966). The "defraud part of section 371
criminalizes any willful impairment of a legitimate function of government,
whether or not the improper acts or objective are criminal under another
statute." United States v. Tuohey, 867 F.2d 534, 537 (9th Cir.
1989).
The word "defraud" in Section 371 not only reaches financial or
property loss through use of a scheme or artifice to defraud but also is
designed
and intended to protect the integrity of the United States and its agencies,
programs and policies. United States v. Burgin, 621 F.2d 1352, 1356
(5th
Cir.), cert. denied, 449 U.S. 1015 (1980); see United
States v.
Herron, 825 F.2d 50, 57-58 (5th Cir.); United States v. Winkle,
587
F.2d 705, 708 (5th Cir. 1979), cert. denied, 444 U.S. 827 (1979).
Thus,
proof that the United States has been defrauded under this statute does not
require any showing of monetary or proprietary loss. United States v.
Conover, 772 F.2d 765 (11th Cir. 1985), aff'd, sub.
nom.
Tanner v. United States, 483 U.S. 107 (1987); United States v. Del
Toro, 513 F.2d 656 (2d Cir.), cert. denied, 423 U.S. 826 (1975);
United States v. Jacobs, 475 F.2d 270 (2d Cir.), cert.
denied, 414 U.S. 821 (1973).
Thus, if the defendant and others have engaged in dishonest
practices
in connection with a program administered by an agency of the Government, it
constitutes a fraud on the United States under Section 371. United
States v.
Gallup, 812 F.2d 1271, 1276 (10th Cir. 1987); Conover, 772 F.2d
at
771. In United States v. Hopkins, 916 F.2d 207 (5th Cir. 1990), the
defendants' actions in disguising contributions were designed to evade the
Federal Election Commission's reporting requirements and constituted fraud
on the
agency under Section 371.
The intent required for a conspiracy to defraud the government is
that
the defendant possessed the intent (a) to defraud, (b) to make false
statements
or representations to the government or its agencies in order to obtain
property
of the government, or that the defendant performed acts or made statements
that
he/she knew to be false, fraudulent or deceitful to a government agency,
which
disrupted the functions of the agency or of the government. It is
sufficient for
the government to prove that the defendant knew the statements were false or
fraudulent when made. The government is not required to prove the
statements
ultimately resulted in any actual loss to the government of any property or
funds, only that the defendant's activities impeded or interfered with
legitimate
governmental functions. See United States v. Puerto, 730 F.2d
627
(11th Cir.), cert. denied, 469 U.S. 847 (1984); United States v.
Tuohey, 867 F.2d 534 (9th Cir. 1989); United States v. Sprecher,
783
F. Supp. 133, 156 (S.D.N.Y. 1992)(þit is sufficient that the defendant
engaged
in acts that interfered with or obstructed a lawful governmental function by
deceit, craft, trickery or by means that were dishonest"), modified on
other
grounds, 988 F.2d 318 (2d Cir. 1993).
In United States v. Madeoy, 912 F.2d 1486 (D.C. Cir. 1990),
cert. denied, 498 U.S. 1105 (1991), the defendants were convicted of
conspiracy to defraud the government and other offenses in connection with a
scheme to fraudulently obtain loan commitments from the Federal Housing
Administration (FHA) or Veterans Administration (VA). The court held that
the
district court had properly instructed the jury that:
the Government must prove beyond a reasonable doubt the
existence
of a scheme or artifice to defraud, with the objective either of defrauding
the
FHA or the VA of their lawful right to conduct their business and affairs
free
from deceit, fraud or misrepresentation, or of obtaining money and property
from
the FHA by means of false and fraudulent representations and promises which
the
defendant knew to be false.
Madeoy, 912 F.2d at 1492.
Prosecutors considering charges under the defraud prong of Section
371,
and the offense prong of Section 371 should be aware of United States v.
Minarik, 875 F.2d 1186 (6th Cir. 1989) holding limited, 985 F.2d 962
(1993),
and related cases. See United States v. Arch Trading Company,
987
F.2d 1087 (4th Cir. 1993). In Minarik, the prosecution was found to
have
"used the defraud clause in a way that created great confusion about the
conduct
claimed to be illegal," and the conviction was reversed. 875 F.2d at 1196.
After Minarik, defendants have frequently challenged indictments
charging
violations of both clauses, although many United States Courts of Appeals
have
found it permissible to invoke both clauses of Section 371. Arch Trading
Company, 987 F.2d at 1092 (collecting cases); see also United
States v. Licciardi, 30 F.3d 1127, 1132-33 (9th Cir. 1994)(even though
the
defendant may have impaired a government agency's functions, as part of a
scheme
to defraud another party, the government offered no evidence that the
defendant
intended to defraud the United States and a conspiracy to violate an agency
regulatory scheme could not lie on such facts).
In summary, those activities which courts have held defraud the
United
States under 18 U.S.C. § 371 affect the government in at least one of
three
ways:
-
They cheat the government out of money or property;
- They interfere or obstruct legitimate Government activity; or
- They make wrongful use of a governmental instrumentality.
| October 1997
| Criminal Resource Manual 923
|