In The Courts

The Tenth Circuit Holds that Offenses Under the Major Fraud Act Are Not “Continuing” for Statute of Limitations Purposes

In United States v. Reitmeyer, 2004 WL 206319 (10th Cir. Feb. 4, 2004), the Tenth Circuit considered whether charges filed against a well driller had been timely filed under the Major Fraud Act. 18 U.S.C. ' 1031(a). The defendants had filed a claim against the United States for cost overruns, purportedly incurred because the Army Corps of Engineers had misrepresented the geological conditions the company would face. The government subsequently charged that defendants had been on full notice of the conditions and intentionally withheld a report to that effect when it filed the claim for compensation.

The district court dismissed the charges on the ground that the 7-year statute of limitations had run, and the court of appeals affirmed. The Tenth Circuit held that upon filing the claim for $4 million, the defendants had executed its scheme, and under the statute, 18 U.S.C. ' 1031(a), criminal liability attaches upon “execution” or “attempted execution” of a scheme to defraud the United States. The court of appeals rejected two main theories the government put forth to show that the statute of limitations had not run.

First, the court explained that contrary to the government's argument, it was not necessary for the defendants to have actually received the money from the government for the crime to be “executed.” Instead, the court explained that an execution was complete as soon as the United States' money was put at risk by the scheme. Second, the court rejected the argument that the fraud had been “continuing” simply because the defendants had made additional statements to the government, within the statute of limitations, in support of its initial fraudulent statements about the cost overruns. The Tenth Circuit rejected the reasoning of a Ninth Circuit case, United States v. Najjor, 255 F.3d 979 (9th Cir. 2001), that had interpreted a similar bank fraud statute as creating a continuing offense. The Reitmeyer court articulated a presumption against finding offenses to be continuing in nature, and found no congressional intent to rebut this presumption for charges filed under the Major Fraud Act.

In a Circuit Split, Eighth Circuit Holds that Government Investigation Must Have Already Commenced for Obstruction of Justice Guideline to Apply

In United States v. Stolba, 2004 WL 235206 (8th Cir. Feb. 10, 2004), the Eighth Circuit considered the question of whether a government investigation must have been actually pending for the obstruction of justice sentencing guideline, U.S.S.G. ' 3C1.1(A), to apply. In Stolba, the defendant allegedly told an employee that he was in “big trouble,” and directed her to delete electronic records only a few days before an investigation commenced.

Section 3C1.1(A) provides that a two-level adjustment shall be imposed where “the defendant willfully obstructed or impeded, or attempted to obstruct or impede, the administration of justice during the course of the investigation, prosecution, or sentencing of the instant offense or conviction” (emphasis added). However, comment 4(d) to this section includes, as one example in a non-exhaustive list of types of conduct to which ' 3C1.1(A) applies: “destroying or concealing or directing or procuring another person to destroy or conceal [material] evidence (eg, shredding a document … upon learning that an official investigation has commenced or is about to commence) … ” (emphasis added).

The court of appeals concluded that notwithstanding the confusion introduced by the language in comment 4(d), the text of the guideline is unambiguously limited to those situations in which an investigation is already underway. In so holding, the court declined to follow contrary authority from the D.C. Circuit and Tenth Circuit, and inconsistent dicta from a previous Eighth Circuit decision.

Seventh Circuit Limits District Court Discretion to Reject Agreed Guidelines Applications

In United States v. Sienkowski, 2004 WL 316538 (7th Cir. Feb. 20, 2004), the Seventh Circuit interpreted U.S.S.G. ' 6A1.3, which provides that when the applicability of a guideline or factor is in dispute, the parties must have an adequate opportunity to present relevant information to the court. In Sienkowski, the government and the defendant had reached an agreement that the defendant's proposed sentence should include a three-level aggravating role increase under guidelines. This recommendation was in keeping with facts provided in the pre-sentence report (PSR), but at the sentencing hearing the district court rejected the enhancement with no prior notice, and did not afford the government an opportunity to supplement the record in support of the enhancement.

The Seventh Circuit held that the district court should have provided advance notice to the government that it planned to reject the enhancement that the parties had agreed to in the plea agreement, and which was supported by the PSR. The court of appeals distinguished a previous case from the Seventh Circuit, United States v. Saunders, 973 F.2d 1354 (7th Cir. 1992), which held that a defendant was not entitled to advance notice from the court that it planned to reject a PSR recommendation when the defendant had no agreement with the government in favor of the reduction. In contrast, in Sienkowski, the combination of: 1) an agreement between the parties; 2) a consistent recommendation by the PSR; 3) the fact that the facts in the record were capable of supporting the enhancement; and 4) the government's proffer of additional evidence when the district court announced its intention to reject the enhancement, led the court of appeals to hold that the district court had abused its discretion. The Seventh Circuit also noted that it would reach the same conclusion if it had been the defendant, and not the government, who had been disadvantaged by the district court's sua sponte questioning of an agreed application of the guidelines.

The Tenth Circuit Holds that Offenses Under the Major Fraud Act Are Not “Continuing” for Statute of Limitations Purposes

In United States v. Reitmeyer, 2004 WL 206319 (10th Cir. Feb. 4, 2004), the Tenth Circuit considered whether charges filed against a well driller had been timely filed under the Major Fraud Act. 18 U.S.C. ' 1031(a). The defendants had filed a claim against the United States for cost overruns, purportedly incurred because the Army Corps of Engineers had misrepresented the geological conditions the company would face. The government subsequently charged that defendants had been on full notice of the conditions and intentionally withheld a report to that effect when it filed the claim for compensation.

The district court dismissed the charges on the ground that the 7-year statute of limitations had run, and the court of appeals affirmed. The Tenth Circuit held that upon filing the claim for $4 million, the defendants had executed its scheme, and under the statute, 18 U.S.C. ' 1031(a), criminal liability attaches upon “execution” or “attempted execution” of a scheme to defraud the United States. The court of appeals rejected two main theories the government put forth to show that the statute of limitations had not run.

First, the court explained that contrary to the government's argument, it was not necessary for the defendants to have actually received the money from the government for the crime to be “executed.” Instead, the court explained that an execution was complete as soon as the United States' money was put at risk by the scheme. Second, the court rejected the argument that the fraud had been “continuing” simply because the defendants had made additional statements to the government, within the statute of limitations, in support of its initial fraudulent statements about the cost overruns. The Tenth Circuit rejected the reasoning of a Ninth Circuit case, United States v. Najjor , 255 F.3d 979 (9th Cir. 2001), that had interpreted a similar bank fraud statute as creating a continuing offense. The Reitmeyer court articulated a presumption against finding offenses to be continuing in nature, and found no congressional intent to rebut this presumption for charges filed under the Major Fraud Act.

In a Circuit Split, Eighth Circuit Holds that Government Investigation Must Have Already Commenced for Obstruction of Justice Guideline to Apply

In United States v. Stolba, 2004 WL 235206 (8th Cir. Feb. 10, 2004), the Eighth Circuit considered the question of whether a government investigation must have been actually pending for the obstruction of justice sentencing guideline, U.S.S.G. ' 3C1.1(A), to apply. In Stolba, the defendant allegedly told an employee that he was in “big trouble,” and directed her to delete electronic records only a few days before an investigation commenced.

Section 3C1.1(A) provides that a two-level adjustment shall be imposed where “the defendant willfully obstructed or impeded, or attempted to obstruct or impede, the administration of justice during the course of the investigation, prosecution, or sentencing of the instant offense or conviction” (emphasis added). However, comment 4(d) to this section includes, as one example in a non-exhaustive list of types of conduct to which ' 3C1.1(A) applies: “destroying or concealing or directing or procuring another person to destroy or conceal [material] evidence (eg, shredding a document … upon learning that an official investigation has commenced or is about to commence) … ” (emphasis added).

The court of appeals concluded that notwithstanding the confusion introduced by the language in comment 4(d), the text of the guideline is unambiguously limited to those situations in which an investigation is already underway. In so holding, the court declined to follow contrary authority from the D.C. Circuit and Tenth Circuit, and inconsistent dicta from a previous Eighth Circuit decision.

Seventh Circuit Limits District Court Discretion to Reject Agreed Guidelines Applications

In United States v. Sienkowski, 2004 WL 316538 (7th Cir. Feb. 20, 2004), the Seventh Circuit interpreted U.S.S.G. ' 6A1.3, which provides that when the applicability of a guideline or factor is in dispute, the parties must have an adequate opportunity to present relevant information to the court. In Sienkowski, the government and the defendant had reached an agreement that the defendant's proposed sentence should include a three-level aggravating role increase under guidelines. This recommendation was in keeping with facts provided in the pre-sentence report (PSR), but at the sentencing hearing the district court rejected the enhancement with no prior notice, and did not afford the government an opportunity to supplement the record in support of the enhancement.

The Seventh Circuit held that the district court should have provided advance notice to the government that it planned to reject the enhancement that the parties had agreed to in the plea agreement, and which was supported by the PSR. The court of appeals distinguished a previous case from the Seventh Circuit, United States v. Saunders , 973 F.2d 1354 (7th Cir. 1992), which held that a defendant was not entitled to advance notice from the court that it planned to reject a PSR recommendation when the defendant had no agreement with the government in favor of the reduction. In contrast, in Sienkowski, the combination of: 1) an agreement between the parties; 2) a consistent recommendation by the PSR; 3) the fact that the facts in the record were capable of supporting the enhancement; and 4) the government's proffer of additional evidence when the district court announced its intention to reject the enhancement, led the court of appeals to hold that the district court had abused its discretion. The Seventh Circuit also noted that it would reach the same conclusion if it had been the defendant, and not the government, who had been disadvantaged by the district court's sua sponte questioning of an agreed application of the guidelines.