Eleventh Circuit Affirms Acquittal of Defendant in Federal Program Bribery Case

In United States v. McLean, the Eleventh Circuit narrowed the government’s ability to convict defendants who are accused of public bribery under 18 U.S.C. § 666. This statute covers bribery related to programs that receive federal funds.

After his conviction at trial under § 666, defendant David McLean filed a motion for judgment of acquittal on the basis that the government failed to prove that the entity for which Mr. McLean was an agent received the necessary federal benefits. The district court granted the motion, and the Eleventh Circuit affirmed.

In short, the court of appeals held that there must be some nexus between the federal funds received and their ultimate use to satisfy this statute. It is not enough simply to find some indirect federal funding.

Section 666

Section 666 was enacted by Congress, not by the devil (just checking to see if you were paying attention), to “protect the integrity of the vast sums of money distributed through Federal programs.” It is

designed to facilitate the prosecution of persons who steal money or otherwise divert property or services from state and local governments or private organizations that receive large amounts of Federal funds.

United States Attorney’s Manual section 9-46.000. The USAM has a lengthy section on this type of prosecution that is worth reading.

The statute itself reads (in part):

(a) Whoever, if the circumstance described in subsection (b) of this section exists—

(1) being an agent of an organization, or of a State, local, or Indian tribal government, or any agency thereof—

(A) embezzles, steals, obtains by fraud, or otherwise without authority knowingly converts to the use of any person other than the rightful owner or intentionally misapplies, property that—

(i) is valued at $5,000 or more, and

(ii) is owned by, or is under the care, custody, or control of such organization, government, or agency; or

(B) corruptly solicits or demands for the benefit of any person, or accepts or agrees to accept, anything of value from any person, intending to be influenced or rewarded in connection with any business, transaction, or series of transactions of such organization, government, or agency involving anything of value of $5,000 or more; or

(2) corruptly gives, offers, or agrees to give anything of value to any person, with intent to influence or reward an agent of an organization or of a State, local or Indian tribal government, or any agency thereof, in connection with any business, transaction, or series of transactions of such organization, government, or agency involving anything of value of $5,000 or more;

shall be fined under this title, imprisoned not more than 10 years, or both.

(b) The circumstance referred to in subsection (a) of this section is that the organization, government, or agency receives, in any one year period, benefits in excess of $10,000 under a Federal program involving a grant, contract, subsidy, loan, guarantee, insurance, or other form of Federal assistance.

The Alleged Bribery Scheme

Mr. McLean was a City Commissioner in Margate, Florida, and sat on the Margate Community Redevelopment Agency. It’s important to note that the MCRA is a legally-separate entity from the City of Margate, even though the city’s Commission served as MCRA’s Board of Commissioners. MCRA’s role was to use city funds for community rehabilitation and revitalization projects.

Mr. McLean owned a tiki bar in a shopping center and was late on his rent. His landlord, Mr. Singh, didn’t go after Mr. McLean for the money because he was fearful that Mr. McLean would use his position to harm his own businesses. Mr. Singh got the FBI involved, and the FBI recorded various conversations between the two men.

During their first recorded conversation in January 2012, Mr. McLean agreed to “make the process smoother” for Mr. Singh to get a license for his auto repair shop from the City of Margate in exchange for forgiveness of $8000 of back rent Mr. McLean owed on the bar, as well as $1000 cash.

During that meeting, the two men also discussed the possibility of filing a fraudulent grant application for a construction project with MCRA. The plan was to overstate the anticipated costs of the project, use a contractor that would do the work for cheap, and split the remaining cash from the grant. The grant was ultimately approved by MCRA.

Mr. McLean subsequently met up with Singh to collect his portion of the deal, receiving $3000 in November 2012 and $2000 in January 2013.

After receiving the last $2000, Mr. McLean was arrested and charged with three counts of public bribery under § 666. The first count was for accepting the cash and rent forgiveness in exchange for the occupational license, the other two counts were for the separate acceptances of the cash in exchange for the MCRA grant.

He was acquitted by the jury on the first count and convicted by the jury on the other two counts. However, the district court granted his renewed motion for judgment of acquittal for the two counts of conviction. In short, the lower court held that althought the MCRA had received benefits from a federal program, the government did not establish that those benefits were within the time-frame in the indictment.

The government appealed the grant of the MJOA to the Eleventh Circuit. The primary question on appeal was whether MCRA had received federal “benefits . . . under a Federal program” sufficient to satisfy the statute.

Relevant Precedent Regarding § 666

The Eleventh Circuit spent some time describing Supreme Court precedent regarding § 666.

Salinas v. United States (1997): The Court held that the government need not show that the bribe that the defendant received affected the federal funds. This case did not answer an important question from the present case, whether the statute required “some other kind of connection between the bribe and the expenditure of federal funds.”

Fischer v. United States (2000): Here again, the Court ruled for the government, but cautioned that the statute should not be read “without boundaries.” As the Eleventh Circuit described the case:

The Fischer decision makes clear, that under some circumstances, indirect receipt of a benefit is sufficient. The question that Fischer leaves open is how closely the scheme authorizing the disbursement of federal funds and their ultimate use at the agency must share a common purpose.

Sabri v. United States (2004): In this case, the Court held that the government is not required to prove a nexus between the defendant’s criminal activity and federal funds.

The Eleventh Circuit also consider its own precedent in United States v. Edgar (2002), which held that  the government must prove beyond a reasonable doubt that a corrupt defendant worked for a state entity

which receive[d] (1) more than $10,000 in federal funds [and] (2) in connection with programs defined by a sufficiently comprehensive ‘structure, operation, and purpose’ to merit characterization of the funds as benefits under § 666(b).

In other words, the mere fact that a local government entity receives $10,000 in federal funds is not enough to satisfy the statute’s requirement that the entity receive “benefits in excess of $10,000 under a Federal program involving a grant, contract, subsidy, loan, guarantee, insurance, or other form of Federal assistance.” 18 U.S.C. § 666(b) (emphasis added).

After discussing § 666 precedent from other circuits, the Eleventh Circuit concluded,

Regardless of whether an agency receives federal funds directly or indirectly, there must be a nexus between the funds and their ultimate use to satisfy § 666. In other words, to constitutionally cabin § 666 courts must evaluate a federal program’s “structure, operation, and purpose” to determine if the federal receipts qualify as benefits.

Why the Government Lost

The government argued that it had shown at trial that  the City of Margate gave to the MCRA over $10,000 in funds for use in redeveloping blighted and economically depressed areas of the city. Plus, according to the government, the MCRA received six bus shelters from the county — built with federal stimulus funds — which qualified as “benefits” under § 666(b).

Mr. McLean countered that the government failed at trial to show that MCRA received federal benefits, either directly or indirectly, that exceeded $10,000 in Fiscal Year 2012-13.

The Eleventh Circuit decided that, even in viewing the evidence in a light most favorable to the government, the government had only proven at trial that the city received federal funds and that the city then transferred some of those funds to MCRA during FY 2012-13. The county had provided the bus shelters to MCRA and the MCRA agreed to maintain them.

The court concluded that

[d]espite the deferential standard of review, the government’s evidence failed to establish a connection to any identifiable federal program so that its “structure, operation, and purpose” could be reviewed to permit a determination that the funds qualified as a federal benefit under the jurisdictional element of § 666(b).

It went on to explain:

In this case, the government presented insufficient evidence of a relationship between whatever federal program authorized the distribution of funds to Broward County and their ultimate use for bus shelters that were transferred to the MCRA. Here, there was no evidence as to the “structure, operation, and purpose” of the federal program that expended money to Broward County.

The court also explained, without deciding, that the question of whether the federal assistance is a “benefit” was properly submitted to the jury as a question of fact.

The Right Outcome

The court was rightfully concerned here with the “over-federalization” of crime, remaining particularly mindful that the federal government should not prosecute acts of state bribery. Plus, it held the line that simply indirect receipt of $10,000 in federal funds–even if not connected to a comprehensive federal program–is not enough to sustain a conviction.

 

This entry was posted in Bribery, Federal program fraud, Uncategorized. Bookmark the permalink.

One Response to Eleventh Circuit Affirms Acquittal of Defendant in Federal Program Bribery Case

  1. Pingback: There’s a New Sheriff in Town: Eleventh Circuit Wrestles with Public Bribery Statute—Again | Grand Jury Target

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