21:32. Theft or bribery concerning programs receiving..., 3 White Collar Crime...

3 White Collar Crime 21:32 (2d ed.)

White Collar Crime
Database updated June 2011
Joel Androphy
Chapter 21. Substantive Crimes: Fraud Against the Government
V. Major Fraud Against the Government
References

21:32. Theft or bribery concerning programs receiving federal funds (18 U.S.C.A. 666)

Wests Key Number Digest

Wests Key Number Digest, Fraud

68.10(1)

The federal program fraud statute, 18 U.S.C.A. 666,1 prohibits the unlawful acceptance of anything of value of
$5,000 or more if the party taking the bribe is an agent of an organization that receives benefits in excess of
$10,000 under a Federal program within one year. The purpose of this statute is to enhance the ability of the
United States to vindicate significant acts of theft, fraud, and bribery involving federal monies and to protect
the integrity of the vast sums of money distributed through Federal programs.2 The effects of this statute are
potentially far reaching, considering that virtually every organization in one way or another receives remote
benefits in excess of $10,000 under a federal program.3
The Supreme Court upheld the 666 conviction of a deputy county sheriff of Hidalgo County, Texas who
accepted bribes in exchange for allowing women to have contact visits with a federal prisoner located in the
county jail.4 The Court held that the statute prohibits bribes relating to any transactions of organizations
benefitting from federal funds, not merely the transactions that involve or affect the federal funds.5 The Court
also held that the statute was constitutional as applied to the facts in Salinas, because it did not extend federal
power beyond its proper bounds and the preferential treatment accorded to the federal prisoner was a threat to
the integrity and proper operation of the federal program.6
The Tenth Circuit held that the statute does not cover a situation where two doctors whose medical group received
funds from the Medicare program as bribes from hospitals for referring patients, because the patients, rather than
the physicians, are the intended recipients of the funds and the intended beneficiaries of Medicare.7 The Court
pointed out ambiguity in the plain meaning of 666,8 and rejected the governments construction of the statute
because it would create an almost limitless statutory reach beyond a plain common sense interpretation of the
statute.9
In United States v. Thompson, a 2007 opinion, the Seventh Circuit held that a state official and employee of the
states Bureau of Procurement did not violate 666 in selecting the official state travel agency.10 The defendant
was convicted for improperly steering a state travel contract to a particular company allegedly based on political
factors.11 The government argued that the defendant selected a particular travel agency based political
motivation.
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 21:32. Theft or bribery concerning programs receiving..., 3 White Collar Crime...

As support, the government advanced three theories: (1) that the defendant wanted to make her boss happy by
rewarding the travel agencys financial support of the governor; (2) the defendant was supporting her boss
political platform of cutting costs; or (3) the defendant sought to favor a local agency over one from another
state.12 The court, however, reversed the conviction, noting that the evidence of record would not permit a jury to
determine which of these three reasons were the defendants boss motivations much less whether the defendants
reason was the same as her boss reason.
The court determined that the prosecutions theory was that the defendant intentionally misapplied money by
diverting it from one travel agency to another.13 The court narrowly interpreted this wording, along with the
statutes caption Theft or bribery concerning programs receiving Federal funds, to mean a disbursement in
exchange for services not rendered or to suppliers that would not have received any contract but for bribes, or
for services that were overpriced , or for shoddy goods at the price prevailing for high-quality goods.14 The
court pointed out that hiring the lowest bidder does not sound like misapplication of funds, especially in light
of the fact that the state got what it contracted for at the market price.15
The Supreme Court however, affirmed the Eleventh Circuits holding in Fischer, which disagreed with the
analysis in LaHue and held that Medicare payments received by providers, specifically municipal hospitals and
their governing agency, were benefits under a federal assistance program for 666 purposes.16 The facts from
Fischer are a little different from LaHue. The defendant in Fischer was the owner of an auditing firm that
negotiated a loan, which the defendant fraudulently used to repay creditors and raise salaries of the five
owner-employees, from the municipal agency that operates the two hospitals.17
The Eleventh Circuit has construed 666 to require that the benefits an organization or agency receives from
the federal government must be linked to some form of federal assistance.18 Furthermore, the Court recognized
that organizations engaging in contractual relationships with the federal government would fall within the scope
of the statute if those contractual relationships constitute[d] some form of federal assistance.19 The Court then
concluded that organizations engaged in purely commercial transaction with the government were excluded
from the scope of 666 because those organizations were not in relationships involving some form of federal
assistance.20
In 2004, the Supreme Court rejected the argument that 18 U.S.C.A. 666 was unconstitutional because it did not
require a nexus between the bribe and some federal monies or program. In Sabri v. United States, the Court noted
that the enactment of Section 666(a)(2) was an instance of necessary and proper legislation to execute
Congress spending power, especially in light of the fact that other legislation had failed to protect federal
interests.21
Westlaw. 2011 Thomson Reuters. No Claim to Orig. U.S. Govt. Works.
Footnotes
1
18 U.S.C.A. 666 (a) and (b) state:
(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,
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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.
2

S. Rep. No. 225, 98 Cong. 369-70 (1984), reprinted in 1984 U.S.C.C.A.N. 3182, 3510.

U.S. v. LaHue, 998 F. Supp. 1182, 1192 (D. Kan. 1998), affd, 170 F.3d 1026 (10th Cir. 1999).

Salinas v. U.S., 522 U.S. 52, 118 S. Ct. 469, 139 L. Ed. 2d 352, R.I.C.O. Bus. Disp. Guide (CCH) P 9382
(1997).

Salinas v. U.S., 522 U.S. 52, 5455, 118 S. Ct. 469, 139 L. Ed. 2d 352, R.I.C.O. Bus. Disp. Guide (CCH) P
9382 (1997). The language of 666(a)(1)(B) does not require the Government to prove the bribe affected
federal funds. Salinas, 522 U.S. at 61.

Salinas v. U.S., 522 U.S. 52, 61, 118 S. Ct. 469, 139 L. Ed. 2d 352, R.I.C.O. Bus. Disp. Guide (CCH) P
9382 (1997). This holding was recently affirmed by the Supreme Court in Fischer v. U.S., 529 U.S. 667,
120 S. Ct. 1780, 146 L. Ed. 2d 707 (2000). In Fischer, the term benefits was given a broad reading by
encompassing The Court held that application of 666to Fischer was correct because Fischers acts had
threatened Medicares integrity. Fischer v. U.S., 529 U.S. 667, 681, 120 S. Ct. 1780, 146 L. Ed. 2d 707
(2000).

See, U.S. v. LaHue, 170 F.3d 1026 (10th Cir. 1999); but see, U.S. v. Fischer, 168 F.3d 1273, 60 Soc. Sec.
Rep. Serv. 38 (11th Cir. 1999), judgment affd, 529 U.S. 667, 120 S. Ct. 1780, 146 L. Ed. 2d 707 (2000)
(refusing to adopt the rationale of LaHue and affirming conviction under section 666).

U.S. v. LaHue, 170 F.3d 1026, 1029 (10th Cir. 1999).

U.S. v. LaHue, 170 F.3d 1026, 1029 (10th Cir. 1999).

10

U.S. v. Thompson, 484 F.3d 877, 881 (7th Cir. 2007).

11

U.S. v. Thompson, 484 F.3d 877, 878 (7th Cir. 2007).

12

U.S. v. Thompson, 484 F.3d 877, 879 (7th Cir. 2007).

13

U.S. v. Thompson, 484 F.3d 877, 880 (7th Cir. 2007).

14

U.S. v. Thompson, 484 F.3d 877, 881 (7th Cir. 2007).

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15

U.S. v. Thompson, 484 F.3d 877, 880881 (7th Cir. 2007).

16

Fischer v. U.S., 529 U.S. 667, 67071, 120 S. Ct. 1780, 146 L. Ed. 2d 707 (2000). Justices Thomas and
Scalia dissented, specifically stating that hospitals do not receive benefits from the federal government
within the meaning of the term, but merely receive payments pursuant to a market transaction. Fischer v.
U.S., 529 U.S. 667, 683, 120 S. Ct. 1780, 146 L. Ed. 2d 707 (2000).

17

Fischer v. U.S., 529 U.S. 667, 66970, 120 S. Ct. 1780, 146 L. Ed. 2d 707 (2000).

18

See, U.S. v. Copeland, 143 F.3d 1439, 1441 (11th Cir. 1998).

19

U.S. v. Copeland, 143 F.3d 1439, 1441 (11th Cir. 1998).

20

U.S. v. Copeland, 143 F.3d 1439, 1441 (11th Cir. 1998).

21

Sabri v. U.S., 541 U.S. 600, 606-607, 124 S.Ct. 1941 (2004) (abrogating Santopietro & Zwick).

End of Document

2012 Thomson Reuters. No claim to original U.S.

Government Works.

2012 Thomson Reuters. No claim to original U.S. Government Works.