Dixson v. United States – Oral Argument – October 12, 1983

Media for Dixson v. United States

Audio Transcription for Opinion Announcement – February 22, 1984 in Dixson v. United States

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Warren E. Burger:

We will hear arguments first this morning in Dixson against the United States and the consolidated case.

Mr. Morano, you may proceed whenever you are ready.

Donald V. Morano:

Mr. Chief Justice Burger, and may it please the Court, the issue before the Court is whether petitioners as employees of a community-based, non-profit corporation, United Neighborhoods, Incorporated, UNI, constituted public officials according to the bribery statute.

Since petitioners in their employment with United Neighborhood, Incorporated, were not federal employees, the only provision under which they could be subject to the bribery statute would be as

“persons acting for or on behalf of the United States or any department, agency, or branch of government thereof, in any official function, under or by the authority of any department or agency or branch of the government. “

The legislative history establishes, however, that petitioners cannot be subject to the bribery statute under this provision.

First, as employees of United Neighborhoods, Incorporated, they were not officers or persons acting on behalf of a corporation controlled by a department, agency, or branch of the federal government.

Second, petitioners did not have contracts with a department, agency, or branch of the federal government, and therefore could not serve as agents in performing the terms.

Warren E. Burger:

Did their agency, the local agency have a contract with the United States government?

Donald V. Morano:

The contract was between the city of Peoria and the United States government.

The contract was a community block grant, which was issued in 1978 to the city of Peoria, and petitioners were employees of a subgrantee, this non-profit corporation, United Neighborhoods, Incorporated.

Third and last, petitioners were not federal inspectors licensed or authorized by some department, agency, or branch of the federal government to certify or enforce standards established by law.

In looking at the legislative history of the bribery statute, in 1962, the last time the bribery statute was revised, Congress said that it was not making any substantive changes in the statute in regard to classes of persons subject to it, but merely was consolidating under one statute what had heretofore been 13 different statutes.

But Congress also declared that it was continuing to give the same broad interpretation of public official and public act as found in case law.

Congress, however, had been prodded by the Court in this Court’s 1920 decision, United States versus Strang, to make the bribery statute applicable in piecemeal fashion to employees of government owned and controlled corporations, such as, for instance, the Homeowners Loan Corporation and the Federal Deposit Insurance Corporation.

And then, in the year 1948, Congress revised the statute and inserted

“or any department or agency thereof. “

to embrace offices or persons acting on behalf of any independent agencies or government owned or controlled corporation.

I think two good examples of government owned or controlled corporations would be the Federal Reserve Banks which are depositories for currencies held in the United States Treasury, and also fiscal and monetary agents of the United States, and another example would be the European Exchange System, which served as an instrumentality of the United States government and the Department of the Army in operating exchanges at European military posts.

Thus, what we can infer from these examples is that a necessary condition of such a government controlled corporation is that a department, agency, or branch of the federal government exercise an ongoing control, supervision, and direction of the operation of the corporation.

There is a symbiotic relationship between the corporation which is controlled and the federal government.

One of the definitions given in Webster’s Third International Dictionary of the noun “control”, I think, specifies rather aptly the kind of control which I am talking about:

“Application of policies and procedures for directing, regulating, and coordinating production, administration, and other business activities in a way to achieve the objectives of the enterprise. “

Accordingly, United Neighborhoods, Incorporated, was not a corporation controlled by the federal government.

Indeed, the program manager of the Department of Housing and Urban Development for western Illinois in charge of the dispersal of the community development block grants to the city of Peoria during the period of the indictment testified that he neither knew or was required to know the existence of United Neighborhoods, Incorporated, nor, for that matter, any other subgrantee.

William H. Rehnquist:

Mr. Morano, is this argument directed to the phrase in the statute

“a person acting for or on behalf of the United States? “

Donald V. Morano:

Yes.

What I have argued, Justice Rehnquist, is that in effect there really are three rubrics under which someone could be deemed to act for and on behalf of the United States in terms of legislative history and case law which was given approbation by the Congress in its 1962 statement.

And the three rubrics are that you have an officer or employee of a government controlled corporation, or–

William H. Rehnquist:

But not… Let’s take them one at a time.

Right after the phrase

“acting for or on behalf of the United States. “

comes

“or any department, agency, or branch of government. “

Now, wouldn’t that really include the first example you have just given?

Donald V. Morano:

–But, see, these are… we are talking about actual government bodies in government or any agency or branch of the government thereof, but these are–

William H. Rehnquist:

But–

Donald V. Morano:

–This one is acting on behalf of these, you see.

William H. Rehnquist:

–But are we talking about them?

The statute is in the disjunctive, and you are right, in the latter part it says,

“or on behalf of any department, agency, or branch of government thereof. “

but before that it says,

“or on behalf of the United States. “

which suggests to me that that phrase must mean something over and above

“any department, agency, or branch of government. “

Do you see what I mean?

Donald V. Morano:

Yes, I understand what you are saying.

I think I would put it in the… perhaps in the… I should perhaps state it in the disjunctive then, that… I can’t think offhand of an example in which a person would be acting on behalf of the government unless they were some department, agency, or branch of the government involved.

I mean, it is–

Sandra Day O’Connor:

Well, I suppose the grain inspectors are an example.

They are covered by a separate statute, but that is an example, is it not, of someone acting for and on behalf of the government?

Are there other examples like the grain inspectors where some state or local agency or employee is designated by law to be an agent of the federal government?

Donald V. Morano:

–But I think that the grain inspector, wouldn’t the grain inspector be acting for the Agriculture Department?

I think the grain inspector is authorized or licensed by the Agriculture Department.

Anyway, I would concede that it could be understood in the disjunctive, certainly, that it could be acting on the behalf of the United States or any department, agency, or branch of the government, but still, the three rubrics would be covered by that, whether you understood it as in the disjunctive or merely suplisage.

Sandra Day O’Connor:

Mr. Morano, did the UNI do any of the work itself in any occasion, or was it always a mere conduit for the federal funds?

Donald V. Morano:

It had no relationship whatsoever with the federal government save for the federal source of the funds.

Sandra Day O’Connor:

Did it ever do any of the rehabilitation work itself?

Donald V. Morano:

It did all of the rehabilitation work.

Donald V. Morano:

Yes, Justice O’Connor.

It did all of the rehabilitation work for that area of the city.

UNI had been established in 1975 with these independent objectives as a community-based organization to improve the situation.

When the Nixon Administration in 1974 passed the community block grant in response to the turmoil and the lack of decent housing and the lack of other sources of finances to improve this condition, the UNI… they received more than $1 million, the city of Peoria received more than $1 million in grants specifically earmarked to work in that area, and then they subcontracted the work out.

All the objectives and goals were general goals of the city, but UNI was to use its own ingenuity in accomplishing them.

John Paul Stevens:

Mr. Morano, may I just make sure I understand?

You said that UNI did all the rehabilitation work itself.

By that I take it you mean they let the contracts to private contractors who did the work.

They didn’t do–

Donald V. Morano:

Oh, I see what you mean.

I misunderstood the question.

Yes.

John Paul Stevens:

–They didn’t actually do any of the–

Donald V. Morano:

They did have volunteers, though.

They did… in other words, a community-based organization, and so that they did have housing contracts–

John Paul Stevens:

–I see.

Donald V. Morano:

–but this wasn’t… you see, there were volunteers, community-based volunteers, and there were other things which–

John Paul Stevens:

I see.

Donald V. Morano:

–UNI continued to carry on all kinds of activities.

John Paul Stevens:

So they did actually some physical rehabilitation work–

Donald V. Morano:

Yes.

John Paul Stevens:

–with their own personnel as well as contracting work out?

I see.

Donald V. Morano:

Thank you, Justice Stevens.

I didn’t understand Justice O’Connor’s question.

Granted the city of Peoria was required to submit annual reports to HUD, and the Secretary of HUD had the right to audit such community block grants and to adjust, reduce, or withdraw such funds if the city did not substantially comply with the terms of the application of the requirements of the Act.

But according to the Act, once the city of Peoria had received this community block grant, the entire administration of the grant was left to it, and HUD had absolutely no control over or right to interfere with its administration.

So therefore what is decisive is that the federal government had relinquished all control over the operation and administration of these community block grants once it had dispersed them to the city.

A fortiori, the city of Peoria in the five contracts it entered into in the year 1978 with UNI gave to UNI full control over the administration of this one… of these more than $1 million it had received in community block grants to rehabilitate an area of the city in which UNI had been carrying on its activities.

It retained only the right to terminate the agreements, and to seek other relief if UNI failed to comply with the municipal code, the city fair employment practices, and the terms of the contracts.

Donald V. Morano:

Consequently, UNI was twice removed from being a corporation controlled by the United States government or by any department, agency, or branch of the government thereof.

In all but two cases in which persons who were not federal employees or employees of a government owned or controlled corporation were still adjudged public officials under the statute, either they had a contractual relationship with some… with the United States and, I would say, with some department, agency, or branch of the federal government, in which they served as federal agents, or they served as federal inspectors.

The only exceptions are the decisions of the Seventh Circuit in the instant case and in United States versus Mosley.

Petitioners in their employment with United Neighborhoods, Incorporated, had no contract with any department, agency, or branch of the federal government or the United States of America, nor were they agents of the federal government inasmuch as they had no direct dealings with the city of Peoria, let alone with the federal government.

Warren E. Burger:

Do you think the Congress could have authorized the federal agency itself in Washington to go out and do all this community rehabilitation, awarding the contracts directly through federal employees?

Could they have done it that way if Congress wanted them to?

Any constitutional objection to it?

Donald V. Morano:

There might be a problem of… I mean, the… I haven’t thought that through, but my guess might be that there might be a problem between of the… a dispute between the legislative and executive branches of the government that this is… this sounds a little bit maybe too socialistic for the usual way in which Congress operates.

Warren E. Burger:

Well, in this instance, Congress created an agency which was authorized by Congress to make grants in the communities and allow the grantee of that community to carry out the rehabilitation of housing.

Is that correct?

Donald V. Morano:

Yes.

Warren E. Burger:

Well, then, wasn’t everything that was being done being done on behalf of the United States?

Donald V. Morano:

I think that the history of the Act shows that this would be giving too broad a scope to acting on behalf of the United States.

Certainly the United States had an interest, the United States had given funds, but if we look at the Community Development Act of 1974, which was a continuation of the federal revenue sharing programs for better communities that Nixon had initiated and the Congress had gone along with him on, Congress found critical problems facing the cities which it hoped to alleviate by enlisting the support of the local groups.

The emphasis was upon the initiative of the community to tailor a program which was suitable for it in its unique situation.

Warren E. Burger:

The initiative began with the local community asking the federal government for some money, and then the federal government gave the money, so that it was entirely paid for by the federal government, was it not?

Donald V. Morano:

Yes, Justice, it was entirely paid for by the federal government.

Warren E. Burger:

Then on the second… on the disjunctive aspect of what Justice Rehnquist read to you, isn’t all this conduct by these people being done on behalf of the United States?

Donald V. Morano:

I don’t think, Justice Burger, in terms of the legislative history of these words, that we should give such a broad construction–

Warren E. Burger:

Well, let’s forget about the legislative history and see whether the language of the statute is clear.

If it is clear, we don’t need to look at the history, do we?

Donald V. Morano:

–That’s true, Justice.

I do not think that the… that use of language on behalf of someone suggests… is suggested by the fact that someone has an interest in the results, and that someone is paying for what is being done.

The statute says clearly that what is anticipated is the consolidated efforts of city, state, and local governmental bodies, the continuation of business investments, et cetera, so that the

“on behalf of the United States. “

if we gave this strong interpretation, any time we had federal funds… excuse me?

Thurgood Marshall:

Mr. Morano, suppose the UNI just took the money and bought a yacht with it?

Would there be any federal problem?

Donald V. Morano:

Yes, there would, Justice Marshall.

Thurgood Marshall:

There would be?

Thurgood Marshall:

Well, how would that be?

How would that come about?

Donald V. Morano:

As I have tried to delineate with these government controlled corporations, UNI does not qualify as a government controlled corporation; however, audits were regularly allowed by the Secretary of HUD, and if there is a misuse of the funds, then funds can be adjusted, withdrawn, or reduced in terms of this information.

Thurgood Marshall:

Can anybody be put in jail for taking federal money?

Donald V. Morano:

Not unless there is a criminal statute.

Thurgood Marshall:

Well, my hypothetical is, they took the federal money and bought a yacht with it, and I am asking you, is that legal or illegal under the federal law?

Donald V. Morano:

They couldn’t be prosecuted under the bribery statute, because the bribery statute doesn’t cover them, because–

Thurgood Marshall:

Well, I didn’t think the bribery statute covered buying a yacht.

That is embezzlement, isn’t it?

Donald V. Morano:

–I don’t know what law it would or would not be covered under.

Thurgood Marshall:

But don’t you know that it’s a crime?

I mean, you say UNI is free to do whatever it wants to do.

Then it can buy a yacht.

Donald V. Morano:

No, within the scope of the… they have a contract with the city of Peoria, and they were subject to an audit by the city of Peoria–

Thurgood Marshall:

And the federal government.

Donald V. Morano:

–and if they didn’t conform, they were subject to prosecution under any existing law.

The only contention–

Thurgood Marshall:

Weren’t they subject to an audit by the federal government?

Didn’t you say five minutes ago that HUD did audit it?

Donald V. Morano:

–They had the right to–

Thurgood Marshall:

They had the right to.

Donald V. Morano:

–Yes.

Thurgood Marshall:

Well, how did they get that right?

Donald V. Morano:

It was given by the statute, the community block grant.

Thurgood Marshall:

Well, does anybody have the right who doesn’t have the money?

Isn’t the right tied to the money?

And isn’t the money tied to the federal government?

Donald V. Morano:

I think that we can analogize with income tax.

I mean, it seems to me that there are–

Thurgood Marshall:

Are you going to answer my question?

Thurgood Marshall:

Do you agree with me?

Donald V. Morano:

–I think I do.

Would you please repeat it?

I am sorry.

Thurgood Marshall:

I have forgotten it.

0 [Generallaughter.]

I mean, you forgot it, so I forgot it.

Donald V. Morano:

Well, I think that certainly… I think the emphasis has been too much upon the federal source of the community block grants and the perduring interests of Congress in these, but when it comes to a criminal statute, if there is any ambiguity, and I maintain that there is ambiguity in what it means to act on behalf of someone else, that if we were to say that any time one handles funds that have been derived from someone else, that one is acting on behalf of that government body, well, then it seems to me that we would have an almost limited jurisdiction, and it doesn’t seem to me that that would be a reasonable interpretation of what Congress had intended.

So that I think that in view of the fact that we… to understand a plain meaning, we not only have to construe the words

“acting for or on behalf of the United States in any official function. “

but we also have to look to a further restriction, and the further restriction is under or by authority of some department, agency, or branch of the government thereof.

And it seems to me that there is… it would be rather far-fetched to say that these employees who were doing day to day tasks assigned to them by their superiors in United Neighborhoods, Incorporated, are acting under or by the authority of HUD, or under or by authority of the city of Peoria, let alone HUD.

The Congress, when it drafted the statute, didn’t predicate the statute in terms of the source of the funds.

In the government brief, they–

William H. Rehnquist:

Mr. Morano, you are now referring to the section of the statute that speaks of under or by authority of any such department, agency, or branch of government, and then you go back… if you go back earlier in the statute, within the same subparagraph, the language there,

“any department, agency, or branch of government. “

is separate from the language,

“a person acting for or on behalf of the United States. “

It is at the bottom of Page 1 of your blue brief.

I think one could make the argument that the language you are now relying on,

“under or by authority, modifies only the phrase. “

any department, agency, or branch of government, “and not” a person acting on behalf of the United States.

“Do you disagree with that”?

Donald V. Morano:

–I would think so, but I wonder if it makes any difference in this case, because obviously if these people were acting on behalf of… if they were public officials, they would be so because of the connection through HUD, and so therefore it is a department of the federal government, and therefore, if they are going to be public officials, it would be under or by authority of the Department of HUD.

And this is not, it seems to me, what is the case here.

I think that the government in its brief says that it is hard to imagine how Congress could have expressed more vividly its intention to cover persons administering federal programs, and I think in the very posing of the question it answers itself, for if Congress had intended that there be federal jurisdiction under the bribery statute for all cases of alleged fraud by persons administering federally funded programs, all it would have had to have done would have been to have drafted a statute stating just that.

But it didn’t do such.

It seems that the principle of lenity and the principle of federalism adds strength to this position.

The principle of lenity that in a criminal statute, if there is any ambiguity whatsoever, if there is genuine ambiguity… I shouldn’t say any ambiguity whatsoever… but if there is a genuine ambiguity, the narrower construction is mandated, and it seems to me that the most one can say is that there is some doubt about Congressional intent about the language.

And therefore the narrower construction seems mandated.

Donald V. Morano:

In addition, since we have here not merely a criminal statute but a federal criminal statute, we also have problems of comity and federalism, that the area of criminal law is generally, absent a national or constitutional issue, left to the jurisdiction of the states.

William H. Rehnquist:

Have you looked at 18 United States Code recently to see all the federal criminal statutes there are?

I think you would have some hesitancy in making that statement.

You may answer if you wish.

Donald V. Morano:

I am sorry.

Is my time off?

William H. Rehnquist:

No, you may respond to my comment.

You may respond to the question if you wish.

Donald V. Morano:

Have I looked at the statute?

William H. Rehnquist:

I was just making the point that there are a great number of federal criminal statutes certainly.

Donald V. Morano:

Yes.

Thank you.

Warren E. Burger:

Mr. Wilkins?

Richard G. Wilkins:

Mr. Chief Justice, and may it please the Court, the United States has just a few brief points to make.

The statutory construction question presented by this case is indeed readily resolved.

The plain language of 18 USC Section 201 as well as its legislative history and the broad public policies underlying the federal bribery statute clearly demonstrate the petitioners are public officials within the meaning of the federal bribery statute.

At the outset a few facts, I believe, are necessary to put this question in its proper perspective.

Petitioners were the executive director and housing rehabilitation coordinator of United Neighborhoods, Incorporated, a public or a non-profit public corporation that was designed to perform various functions.

One of these was the distribution of federal housing funds obtained from the federal government through the city of Peoria under the Housing and Community Development Act of 1974.

As detailed in our brief, United Neighborhoods’ use of these funds and petitioners’ administration of these funds was subject to a whole host of federal substantive and procedural regulations.

The federal government designed the program, set forth what activities UNI could undertake, set forth how the funds were to be managed and administered.

Indeed, although the petitioners say the federal government relinquished control over these funds, the legislative reports on the ’72… on the ’74 legislation state unequivocally that Congress provided extensive executive oversight

“to ensure that federal funds are being used efficiently to achieve national objectives. “

Therefore, this was not a mere local project, but rather, as UNI itself stated in its application for federal housing funds, it proposed to undertake

“a joint effort with the city of Peoria to achieve the common goals as set forth in the Housing and Community Development Act. “

Sandra Day O’Connor:

Mr. Wilkins, can you give other examples of federal grant programs that you believe should be treated like the community development program for purposes of this statute?

It is somewhat of a concern to think that any potential recipient of federal money might be subject to the statute.

Richard G. Wilkins:

Certainly, it is a subject of some concern, but I think the plain terms of the statute handle that concern, Justice O’Connor.

The statute applies only to a person acting for or on behalf of the United States in an official function, so it isn’t just anyone who receives some sort of federal fund or some sort of federal subsidy.

It is someone who performs an official function on behalf of the government.

Richard G. Wilkins:

For example, the Seventh Circuit case noted by petitioners in Mosley, there the defendant was charged with administering the Comprehensive Education and Training Act, CETA funds, and he had the control.

He could determine who would receive the benefit of those federal funds.

In this case, the power to determine who receives a federal housing rehabilitation contract is surely an important official function.

This isn’t a case where just anyone who receives funds falls within the reach of the statute.

Sandra Day O’Connor:

Certainly in the Fortune versus Harris case, where we have to deal with the Freedom of Information Act question, the Court took a different approach and said that grants of federal funds generally don’t create a partnership or joint venture with the recipient, and they don’t convert the acts of the recipient from private acts to governmental acts, and so forth, and took a different approach.

Richard G. Wilkins:

Certainly, that… perhaps, though… you have to look at the underlying goals of the different statutes involved also.

I think when you understand or when you consider that the underlying goal of federal bribery law is to protect the public from the evils of corruption in public service, the statute must be broad enough, must be construed broadly enough to deal with that concern, and the legislative history of this statute, as I hope to detail in a few moments–

Sandra Day O’Connor:

One last question while I have you interrupted.

Richard G. Wilkins:

–Sure.

Sandra Day O’Connor:

Would Congress have needed to even pass a statute expressly covering, for example, the grain inspectors under your interpretation of this statute?

Richard G. Wilkins:

No, indeed they don’t.

In fact, the case involving the grain inspectors cited in our brief, the Kirby case, does not involve the statute that specifically makes grain inspectors public officials.

There are two statutes that govern grain inspectors, the Warehousemen’s Act and the Grain Inspectors’ Act.

The inspectors involved in Kirby were licensed under the Warehousemen Act.

That statute doesn’t make them public officials.

There is no express statute.

The Court there therefore just had to analogize, or had to look at the case in terms of the statute and say, were these people acting for or on behalf of the United States.

They concluded, yes, they were.

So that case is an example clearly where someone was acting for or on behalf of the United States without any specific statute.

William H. Rehnquist:

Mr. Wilkins, is your argument, in a nutshell, as to why these people are acting for or on behalf of the United States that they were… they had control over who got so-called “federal funds”?

Richard G. Wilkins:

They had substantial control over who would receive the benefits of a federal housing rehabilitation program.

William H. Rehnquist:

Well, okay.

Now, you say the benefits of a federal housing rehabilitation program.

I take it then it is a good deal less than direct control over federal funds.

Richard G. Wilkins:

Well, Justice Rehnquist, they did indeed have direct control over federal funds.

They were the persons who were administering funds that were provided by the federal government.

William H. Rehnquist:

Yes, but how many concentric circles had the funds gone through before they got to them?

Richard G. Wilkins:

Well, the funds went directly to the… the program is set up… the Housing and Community Development Act is set up in this fashion.

Funds are given directly to local governmental entities.

William H. Rehnquist:

Like the city of Peoria in this case?

Richard G. Wilkins:

Like the city of Peoria.

Regulations… the statute then allows the city to turn to a subgrantee and allow a subgrantee to administer those funds.

Regulations promulgated by the Department of Housing and Urban Development closely circumscribed who can be a subgrantee.

It wasn’t as if the city of Peoria could choose any old group it wanted to to administer these federal housing funds.

UNI had to meet specific and strict eligibility regulations and guidelines to be able to administer these funds.

William H. Rehnquist:

If there had been a block grant in this case, not any sort of a categorical grant, but just that the United States decided to give $500,000 to every city over $100,000, and let’s assume Peoria qualified as such a city, and then Peoria in turn contracted with UNI to develop the same things UNI was doing, and some of the money that Peoria used came from the federal government in this uncategorical block grant.

Is the person working for UNI still subject to the statute?

Richard G. Wilkins:

In that circumstance, it might be more questionable.

Indeed, that was the original proposal here.

In 1974, the Nixon Administration proposed just giving block grants with no strings attached, no substantial federal oversight.

Congress balked and in fact flatly rejected that.

If you look at the legislative history, they said, we want to impose these sorts of controls, regulations, we want to closely circumscribe the activities that the local governments can undertake.

We are going to closely circumscribe what activities subgrantees can undertake.

We are going to provide for audits.

We are going to provide for review.

We are going to keep our fingers in there to ensure that these funds are being used for national objectives.

John Paul Stevens:

But aren’t you then saying that the less authority that the person has to act independently, the more readily you would conclude that he is acting on behalf of the federal government?

Richard G. Wilkins:

Exactly.

John Paul Stevens:

I see, so if there were a blanket authority to make all the decisions, he would not be acting on behalf of the authority, but if there is a limited authority to make decisions, he is.

It seems–

Richard G. Wilkins:

That is right, because if the federal government has limited your authority and said you can do A, B, and C, but not D, when you do A, B, and C, then you are acting on behalf of the United States.

John Paul Stevens:

–But if you said, you may do A, B, C, or D, then even… it is not on behalf of–

Richard G. Wilkins:

I don’t know whether I follow that analogy.

John Paul Stevens:

–Let me just put it a little differently.

Were the people employed by the city of Peoria acting on behalf of the United States, who let the contract to UNI?

Richard G. Wilkins:

In their function as–

John Paul Stevens:

In letting the contract.

Richard G. Wilkins:

–determining who was going to receive the funds, they probably were acting on behalf, yes.

John Paul Stevens:

So it applies to them.

And the people who acted on behalf of UNI in letting the contract to a building contractor, these people, you say, were–

Richard G. Wilkins:

Yes.

John Paul Stevens:

–Now, what about the building contractor letting a subcontract to an electrician?

Richard G. Wilkins:

Now, that, in certain circumstances, that circumstance could be followed.

There is a case cited in our brief, the Raff case… it is rather old, I think, 20 years old… where you had an architect that was hired to build an Air Force base, and as part of his… he was bribed to hand out or to not inspect certain work by subcontractors, et cetera, and he was held liable under the bribery statute.

John Paul Stevens:

But your submission to us today is that not only the employees of UNI but the employees of the general contractors with whom UNI contracted are also within the federal bribery statute?

Richard G. Wilkins:

Yes.

An important thing to remember–

John Paul Stevens:

And may I just ask one other question?

Richard G. Wilkins:

–Yes.

John Paul Stevens:

At what point in the history of this much amended statute did the language on which you rely become a part of the statute?

This was in the 19th century, I believe, wasn’t it?

Richard G. Wilkins:

The… Yes, it was.

I will digress for a minute and handle the legislative history at this point, because it does seem of some concern.

This statute was amended for perhaps… well, several times, but one time in 1948 Congress expressly amended the statute and kind of broadened the language even further in response to this Court’s decision in United States versus Strang, which had held on the basis of familiar agency principles that an employee of a government controlled corporation did not come within the conflict of interest statute because he wasn’t an agent of the United States.

Congress at that point, when it adopted this language in 1948, in the legislative report said, we mean to overcome the holding in Strang.

The growth of the federal government has been phenomenal.

We are delegating all kinds of responsibilities and governmental powers to private entities, et cetera, that wasn’t foreseen in the past.

We mean to cover all persons who perform official functions on behalf of the government.

In 1962, congress looked at this again, and indeed there were proposals made to restrict the statute as petitioners would restrict it.

There were bills introduced that would have defined public official as officer, agent, or employee.

They were debated, and they were rejected.

The Committee reports state that the reason this narrow language was rejected was because they intended to include within statutory coverage all person who perform activities on behalf of the United States.

This legislative history does not in any way evidence any sort of an intent to narrow the reach of this statute.

An important fact to remember in this case, although we can hypothesize circumstances where people might… where there might be less federal control or less federal involvement, in this case, petitioners were paid 100 percent of their salaries by the federal government.

They could not perform any activity–

John Paul Stevens:

May I just interrupt you right there?

Richard G. Wilkins:

–Yes.

John Paul Stevens:

You, I thought, acknowledged that if there had been an unrestricted block grant from which all of the salaries were paid with federal money, that would not be enough.

Richard G. Wilkins:

No, that’s–

John Paul Stevens:

Nevertheless, you continue to rely heavily on the fact that federal money–

Richard G. Wilkins:

–Well, it is one of the facts in this case.

It was all federal money, and it was heavily restricted.

John Paul Stevens:

–I think the key fact under your submission is the extent of the government regulation of the distribution of the money.

Richard G. Wilkins:

Exactly, but the fact–

John Paul Stevens:

Now, let me ask you on that, was there a violation of any federal regulation pertaining to the distribution of this money?

Richard G. Wilkins:

–There are federal regulations.

There are regulations of HUD that would proscribe the kinds of activities that were undertaken here.

The remedy provided by the regulations is withdrawal of funds or recoupment of the funds.

John Paul Stevens:

Well, I am not sure you have answered me.

Was there a violation of any federal regulation controlling the distribution of this money?

Richard G. Wilkins:

Yes, because there are… as I said, there are regulations that prohibit the–

John Paul Stevens:

Prohibit subgrantees from taking bribes?

Richard G. Wilkins:

–From taking bribes and kickbacks, but the remedy for that as provided by the regulations is recoupment of the funds or taking away of grant funds in the future.

William H. Rehnquist:

Mr. Wilkins, you said a moment ago that this defendant had his… these defendants had their salary paid by the federal government.

Am I to take that to mean that their salary came the same way your salary and mine does–

Richard G. Wilkins:

No.

William H. Rehnquist:

–out of a United States Treasury check?

Richard G. Wilkins:

No, it didn’t.

It came through the grant… the moneys came through the funding process set up and established by the housing community development program.

William H. Rehnquist:

What was that chain of distribution?

Richard G. Wilkins:

As I explained earlier, it went directly to the city of Peoria, and then according to federal regulations to the subgrantee.

William H. Rehnquist:

So the government check went to Peoria, there was a check drawn by the city of Peoria to UNI–

Richard G. Wilkins:

Right.

William H. Rehnquist:

–and then UNI wrote these salary checks, and you say that is federal funds.

Richard G. Wilkins:

But the funds were always subject to federal control and audit.

Indeed, there was an audit of these funds that was performed not according to standards set up by the city of Peoria.

The audit was performed according to the Department of Housing and Urban Development’s audit standards.

The argument of how the funds arrived has been rejected by this Court in fact in the past, the old United States ex rel. Marcus v. Hess case.

It was a false claims case, but the argument was made that since the funds or the false claim was really made against a city or a municipal government, that it wasn’t a claim against the United States, and this Court said the fact that moneys were channeled through a municipal–

William H. Rehnquist:

But how far back… or how far out in the stream of things can you go with that argument?

William H. Rehnquist:

I mean, these people probably paid their checks for groceries and so forth.

Now, are you going to say that the grocer got federal funds?

Richard G. Wilkins:

–No.

At the point federal control… federal control over these funds dissipates at the point that the money is properly paid, perhaps, to a contractor.

I mean, at the point where federal regulation of the program ceases, of course, federal control over the funds would cease.

In a vain attempt to avoid the plain language of this statute, petitioners, although it is undisputed that in the course of their administration of these funds they solicited and accepted $42,000 in return for their awarding particular contractors federal housing contracts, they argue that they were not acting in an official function or acting under or by authority of a branch of the government.

This argument, as I have already detailed to some extent, is unavailing, because in performing the function of awarding federally funded housing rehabilitation contracts for purposes contemplated by federal law, they were clearly performing an important official function.

They could only do so according to the regulations promulgated by HUD, and they were therefore acting under or by direction of that agency.

The legislative history, moreover, supports this construction.

As I went through a few moments ago, the legislative history of the statute demonstrates unequivocally that Congress intended to reach out broadly to include all persons who perform official functions on behalf of the United States.

And finally, and perhaps most importantly, the federal policies underlying federal bribery law clearly demonstrate the petitioners should fall within the definition of public official.

The purpose of a federal bribery law is, of course, to protect the public against the corruption… or the evils of corruption in public service.

The power that was used corruptly by petitioners in this case is an important governmental power.

It is critical to the success of the Housing and Community Development Act programs that the authority to determine who receives federal contracts not be corrupted by bribery.

John Paul Stevens:

Mr. Wilkins, may I turn to another area that keeps running through my mind?

There are a lot of federal grant programs where money goes to state agencies and cities, and the states and the cities administer the funds themselves pursuant to federal regulations and the like.

Are the various state and local officials who administer those programs subject to federal bribery statutes?

Richard G. Wilkins:

They may well indeed be subject to federal bribery statutes.

There was a case in district court out… it is a district court case out of New Mexico as cited in our brief, the Gallegos case, where the state of New Mexico hired a state employee to administer an assistance program set up by the FHA Administration to assist farmers.

He was a state employee, but his only function was to assist the implementation of this federal program, and he was held to be within the reach.

Now, again, I don’t believe this raises any substantial concerns regarding an undue broad sweep for this statute because in any–

John Paul Stevens:

Well, I am thinking of situations, and we recently had this Panhurst case reargued in which there was a state program for care of the mentally ill, which is partially financed by federal funds, and the grant is subject to all sorts of regulation, and the state officials were doing their normal state duties but are also carrying out a federal function.

I gather under your theory it would still be subject to this statute.

Richard G. Wilkins:

–Yes.

John Paul Stevens:

And it may well be correct, but I am just trying to think of–

Richard G. Wilkins:

Right, if they were performing an official function, as I said.

John Paul Stevens:

–Well, it’s their official state function–

Richard G. Wilkins:

Right.

John Paul Stevens:

–just as these people are doing their UNI duties–

Richard G. Wilkins:

Exactly.

John Paul Stevens:

–but you say it is a kind of a mixed function, both federal and otherwise at the same time.

Richard G. Wilkins:

In fiscal year 1983, the federal government has appropriated over $4 billion into the housing program that was administered by petitioners.

It is essential to the proper administration of this undeniably federal program that the federal government be able to take the steps necessary, including criminal prosecutions for bribery–

John Paul Stevens:

Mr. Wilkins?

Richard G. Wilkins:

–to ensure… Yes?

Thurgood Marshall:

Let’s back up a minute.

We talked about a subcontractor–

Richard G. Wilkins:

Yes.

Thurgood Marshall:

–like an electrician.

Richard G. Wilkins:

Yes.

Thurgood Marshall:

Well, suppose the ABC Electric Wire Company bribes the electrician subcontractor.

Is that covered?

Richard G. Wilkins:

It would–

Thurgood Marshall:

I mean, where does the line cut off?

Richard G. Wilkins:

–The line cuts off, Justice Marshall–

Thurgood Marshall:

It cuts off some place before the grocery.

Richard G. Wilkins:

–Yes.

It cuts off at any point that someone ceases to do an official function on behalf of the United States.

Thurgood Marshall:

Well, this man is furnishing electric wire to the subcontractor who is working for the contractor who you say is directly under the federal government.

Well, is he covered or not?

Richard G. Wilkins:

In… if there–

Thurgood Marshall:

Where do you draw the line?

Richard G. Wilkins:

–It would depend on some attendant facts.

For example, the Raff case cited in our brief, that involved the architect for building a large military base.

He was bribed by subcontractors not to look carefully at his work or inspect carefully his work.

That contractor was bribed.

Now, as you move further down the steps, I guess it would depend whether or not, at any given step, whether the subcontractor could be said to exercise some sort of official authority that would fall back on the federal fisc.

If the federal subcontractor, for example, could chose wire from one distributor or another, and the cost of that wire would go directly to the federal government, and he had the authority to make that determination, and he was being bribed to choose inferior wire, he may indeed fall within the reach of the contract.

Sandra Day O’Connor:

How about in Medicaid and Medicare programs?

How far do you take it there?

Richard G. Wilkins:

In the Medicaid and Medicare, I am not terribly familiar with the legislative scheme or statutory scheme for those programs.

I would believe i would be handled similarly to the CETA case, the Mosely case.

If the person has direct control for the authorization or the expenditure or the distribution of federal funds, and he had the ability to make that sort of controlling decision, and the impact of that decision fell back on the federal government, on the federal taxpayers, I think you would say in that circumstance that he was exercising an official function.

Again–

Sandra Day O’Connor:

So the doctors and pharmacists and so forth are all covered?

Richard G. Wilkins:

–I am not sure whether you would go clear down to the pharmacists and all sorts of lower level echelons.

In this circumstance, we are aware, or at least if you read the newspapers, you are aware that there is substantial graft and corruption in the administration of those programs.

The federal statute we, the government, submits should be interpreted broadly enough to reach anyone who has… exercises any sort of official function in the administration of that program and does so corruptly.

The language of Section 201(a), its legislative history, and the important policies underlying federal bribery law unequivocally demonstrate that the statute should not be given the restrictive reading that has been urged upon this Court by petitioners.

The United States respectfully submits that the decision of the Seventh Circuit Court of Appeals should be affirmed.

John Paul Stevens:

Let me ask you just one more question, if I may, or perhaps two more.

In the civil side of this, and following… if there had been audits, and I guess there really wasn’t as close supervision as this… of this particular operation as HUD might well have had, but if there were, and they wanted to get the money back, would they have a right of recovery from either the city or UNI, or is their only remedy against the individuals who were bribed?

Richard G. Wilkins:

I think that the remedy is against the entity.

I am not 100 percent clear on that, but I think the remedy is against–

John Paul Stevens:

And there was at all times some kind of a right to audit the operation?

Richard G. Wilkins:

–Yes–

John Paul Stevens:

But they just didn’t happen to do it in time.

Richard G. Wilkins:

–They did.

They did do this.

John Paul Stevens:

I see.

Richard G. Wilkins:

I mean, that… it is a misstatement in the briefs.

Oh.

Richard G. Wilkins:

As we stated in our brief, there was an audit performed here on these funds, and the audit was performed according to audit standards developed by the Department of Housing and Urban Development.

John Paul Stevens:

One final question.

Perhaps I shouldn’t ask, but you do have time here.

Judge Powell often sends me to the dictionary, and I notice you quoted his hypogulia.

Richard G. Wilkins:

Hypogulia.

John Paul Stevens:

What is–

Richard G. Wilkins:

I went to the unabridged dictionary yesterday, in case someone would ask me that.

John Paul Stevens:

–You quote it in your brief, so you must know what the word means.

Richard G. Wilkins:

It means inability to act or decide.

John Paul Stevens:

Inability to act or–

Richard G. Wilkins:

They displayed no evidence of inability to act or decide.

John Paul Stevens:

–I see.

And therefore they had authority to make decisions.

Richard G. Wilkins:

And therefore they had authority.

John Paul Stevens:

Thank you.

Richard G. Wilkins:

Thank you.

Warren E. Burger:

Thank you, gentlemen.

The case is submitted.