Nos. 96-7768 & 96-7967 IN THE SUPREME COURT OF THE UNITED STATES OCTOBER TERM, 1996 PATRICIA M. WHITEHEAD, PETITIONER v. UNITED STATES OF AMERICA WILLIAM W. PRETTY, PETITIONER v. UNITED STATES OF AMERICA ON PETITIONS FOR A WRIT OF CERTIORARI TO THE UNITED STATES COURT OF APPEALS FOR THE TENTH CIRCUIT BRIEF FOR THE UNITED STATES IN OPPOSITION WALTER DELLINGER Acting Solicitor General JOHN C. KEENEY Acting Assistant Attorney General JOSEPH C. WYDERKO Attorney Department of Justice Washington, D.C. 20530-0001 (202) 514-2217 ---------------------------------------- Page Break ---------------------------------------- QUESTIONS PRESENTED 1. Whether petitioner Whitehead, as Deputy State Treasurer of the State of Oklahoma, was "an agent of an organization, State, local, or Indian tribal government, or any agency thereof" that received benefits in excess of $10,000 under a federal program within the meaning of 18 U.S.C. 666. 2. Whether the evidence at trial was sufficient to sustain petitioners ` convictions for conspiracy to commit bribery, in violation of 18 U.S.C. 371. 3. Whether the financial transactions that formed the basis for petitioner Whitehead's convictions for money laundering under 18 U.S.C. 1956(a) (1) (A) and (B) were temporally distinct from the underlying bribery offenses. (I) ---------------------------------------- Page Break ---------------------------------------- IN THE SUPREME COURT OF THE UNITED STATES OCTOBER TERM, 1996 No. 96-7768 PATRICIA M. WHITEHEAD, PETITIONER v. UNITED STATES OF AMERICA No. 96-7967 WILLIAM W. PRETTY, PETITIONER v. UNITED STATES OF AMERICA ON PETITIONS FOR A WRIT OF CERTIORARI TO THE UNITED STATES COURT OF APPEALS FOR THE TENTH CIRCUIT BRIEF FOR THE UNITED STATES IN OPPOSITION OPINION BELOW The opinion of the court of appeals (Pet. App. 1-25) is reported at 98 F.3d 1213. 1_/ ___________________(footnotes) 1_/ "Pet. App." refers to the appendix to the petition in No. 96-7768. ---------------------------------------- Page Break ---------------------------------------- 2 JURISDICTION The judgment of the court of appeals was entered on October 4, 1996. A petition for rehearing was denied on November 22, 1996. The petition for a writ of certiorari in No. 96-7768 was filed on February 5, 1997, and the petition in No. 96-7967 was filed on February 19, 1997. The jurisdiction of this Court is invoked under 28 U.S.C. 1254(1). STATEMENT Following a jury trial in the United States District Court for the Western District of Oklahoma, petitioners were convicted of conspiracy to engage in a bribery scheme (Count 1) , in violation of 18 U.S.C. 371; and on three counts of money laundering (Counts 24- 26), in violation of 18 U.S.C. 1956(a) (l). Petitioner Whitehead was also convicted on 12 counts of accepting bribes (Counts 3, 5, 7-12, 15 & 17-19), in violation of 18 U.S.C. 666(a) (1). In addition, petitioner Pretty was convicted on two counts of paying bribes (Counts 2 & 4), in violation of 18 U.S.C. 666(a) (2) ; and four counts of engaging in monetary transactions in property derived from an unlawful activity (Counts 20, 22, 28 & 29), in violation of 18 U.S.C. 1957(a). Petitioner Whitehead was sentenced to 108 months' imprisonment and three years of supervised release, and was ordered to forfeit $220,000. Petitioner Pretty was sentenced to 97 months' imprisonment and three years' supervised release, and was ordered to forfeit $473,471.50. 1. The evidence at trial showed that petitioners and co- defendant Patrick Kuhse engaged in a scheme to take advantage of ---------------------------------------- Page Break ---------------------------------------- 3 petitioner Whitehead's position in the Office of the Oklahoma State Treasurer by arranging various securities transactions and sharing the commissions earned on those transactions. In January 1991, petitioner Whitehead was appointed Deputy State Treasurer and "chief trader" for the State of Oklahoma by Claudette Henry, who had been elected Oklahoma State Treasurer in November 1990. In that position, petitioner Whitehead was in charge of investing the State's funds that were not needed for current expenditures in low- risk securities pursuant to investment policies established by Henry. Those policies required each transaction to be the result of a competitive bidding process among approved brokers; each approved broker to have an in-state representative; and no brokerage firm to receive more than 25 percent of the Treasurer's business within any quarter. Pet. App. 2-3; Gov't C.A. Br. 3-5. After the time that Henry had been elected and had asked petitioner Whitehead to become Deputy State Treasurer, Whitehead called co-defendant Kuhse to arrange for Planner's Independent Management (PIM), a brokerage firm headquartered in San Diego California, to do business with the Oklahoma State Treasurer. In 1990, Whitehead had worked at PIM selling securities and insurance and Kuhse had been her supervisor. To qualify as a broker with the State, PIM needed an in-state representative. Petitioner Pretty, an Oklahoma resident, had met Kuhse in 1989. Pretty was also a former business associate of Whitehead. In 1990 they had formed a corporation, the Professional Business Education Association ( PBEA ) , through which they had conducted seminars to train ---------------------------------------- Page Break ---------------------------------------- 4 insurance agents. After Whitehead knew that she would become Deputy State Treasurer, she assisted Pretty in his attempt to obtain a license to sell securities and to become affiliated with PIM. Pretty, however, failed the licensing test. In January 1991, Kuhse registered as PIM's representative. He listed PBEA's Oklahoma address as the address of PIM's local representative on the forms submitted to the Treasurer's office, even though Pretty served merely as a conduit to Kuhse. Pet. App. 2-4; Gov't C.A. Br. 3-5. In March 1991, PIM began conducting trades for the Oklahoma State Treasurer's office using Mabon-Nugent, a New York brokerage firm, as its clearing firm. When the Treasurer's office called PIM to purchase a security, PIM would call Mabon-Nugent for a quote and relay the information to the Treasurer's office. Mabon-Nugent collected a clearing fee for executing each transaction. Mabon - Nugent would then pay PIM a markup, which was the difference between what the Treasurer's office paid for the security and what the security cost Mabon-Nugent. Kuhse received in commissions approximately 90 percent of the markups paid to PIM. Between March 1991 and July 1993, Kuhse received 96 percent of his income, which amounted to more than $3.5 million, from commissions on trades for the Treasurer's office. Pet. App. 3-4; Gov't C.A. Br. 5-7, 12. In June 1991, petitioners and Kuhse met at a resort in Arizona. Shortly thereafter, the level of trading by the Treasurer's office through PIM increased considerably, and Kuhse's commissions increased dramatically. When Kuhse received a commis- ---------------------------------------- Page Break ---------------------------------------- 5 sion check for $50,000 in July 1991, he wrote a check to petitioner Pretty for $29,250. Pretty, in turn, wrote a check for $8,000 to petitioner Whitehead. In addition, Pretty wrote a $5,000 check to Milton Pearson, who had demanded that Whitehead and Pretty pay back an earlier investment of $50,000 in PBEA. Using funds obtained from Kuhse, Pretty continued to make monthly $5,000 payments to Pearson until his investment in PBEA was repaid in May 1992. Between March 1991 and July 1993, Pretty received 94 percent of his income, which amounted to more than $1 million, from Kuhse. Pet. App . 4-5; Gov't C.A. Br. 6-7. In January 1992, petitioners and Kuhse met again at the resort in Arizona. Shortly thereafter, Kuhse opened a new account, with Pretty as the co-holder, at North County Bank in San Diego. Kuhse initially deposited $25,000 in the account. In July and October 1992, Kuhse made three additional deposits of $9,350, $14,366 and $27,500. Between January and October 1992, petitioner Whitehead withdrew $42,900 from the account by making daily $300 withdrawals at ATM locations in Oklahoma City. Gov't C.A. Br. 9-10, 12, 13. On March 25, 1992, Whitehead and her husband contracted to purchase a new house. Less than a week later, on March 31, 1992, Whitehead and her husband sold their old house to Pretty and his wife. Pretty wrote a check for $23,340 to Liberty Mortgage and a check for $33,158 to Whitehead to buy the house. He also wrote a third check for $18,502 to pay off another mortgage. One week later, Kuhse wrote a check for $75,000 to Pretty. Pet. App. 5, 13; Gov't C.A. Br. 10-11. ---------------------------------------- Page Break ---------------------------------------- 6 On April 1, 1992, Kuhse established the Westwood Trust and designated Pretty as the beneficiary. Two weeks later, on April 14, Whitehead requested a loan and first mortgage on her new house from the trustee of the Westwood Trust, Basey and Oppenheimer. The request was approved one week later. On April 29, 1992, Kuhse deposited a check for $100,000 in the Westwood Trust bank account and obtained a cashier's check for $97,948 payable to the closing company on Whitehead's loan. The next day, on April 30, Kuhse created the Spartan Land Trust to hold the mortgage on Whitehead's new house, with Basey and Oppenheimer as the trustee and the Westwood Trust as the beneficiary. The closing for Whitehead's new house occurred that same day. Pet. App. 5, 13; Gov't C.A. Br. 11. The following day, on May 1, 1992, Whitehead requested a loan and second mortgage on her new house from Basey and Oppenheimer. The request was approved one week later. On May 16, a check for $45,000 was written on the Westwood Trust account. On May 29, Kuhse deposited a $45,000 check in the Westwood Trust account, and Whitehead deposited her check into her account three days later on June 1, 1992. Pretty had directed Basey and Oppenheimer to approve both mortgages. Pet. App. 5, 13; Gov't C.A. Br. 12. In 1991 and 1992, the State of Oklahoma received more than $10,000 annually in assistance from federal agencies for federal programs that were administered by state agencies. The federal funds were deposited into a general account in the Treasurer's office from "which they were withdrawn at the state agencies' ---------------------------------------- Page Break ---------------------------------------- 7 discretion. Pet. App. 10-11; 96-7768 Pet. 10-11; 96-7967 Pet. 8; Gov't C.A. Br. 22-23. 2. The court of appeals affirmed petitioners' convictions. Pet. App. 1-25. It rejected petitioners' claim's that the evidence at trial was insufficient to sustain their convictions. Id. at 6- 9. The court found that "the sufficiency question * * * turns in large part on whether it was reasonable for the jury to believe that Whitehead, Pretty, and Kuhse entered into the alleged scheme." Id. at 6. It observed that "[t]he government ha[d] no direct evidence to prove that [petitioners] plotted to defraud the Treasurer, but it argue[d] [to the jury] that the circumstantial evidence was enough to show that the superficially legal trans- actions that occurred among the three acquaintances constituted an illegal kickback scheme." Id. at 7. The court further observed that petitioners "focused on the apparent legality of their transactions, asking the jury to accept * * * [that] [a]ll the money that flowed back to Whitehead could be traced to previous debts and arms'-length real estate transactions. " Id. at 8. The court noted that " [t]he jury believed the government's version of the story" and held that "there was more than sufficient evidence I to support this conclusion. " Ibid "Having found sufficient evidence to support the finding that the scheme existed, " the court had "no trouble finding that the evidence supports the conspiracy charge." Id. at 9. The court rejected petitioner Whitehead's claim that the evidence failed to show that she was a participant in the conspiracy "because pretty and Kuhse could not have had a ---------------------------------------- Page Break ---------------------------------------- 8 scheme without Whitehead's willful participation Pretty and Kuhse would not have funneled money to Whitehead if Whitehead had not been involved in the scheme." Ibid. The court of appeals also rejected petitioners' claims that their bribery convictions under 18 U.S.C. 666 were invalid because the government failed to prove that the Treasurer's office annually received and benefited from more than $10,000 in federal assistance. Pet. App . 9-11. The court explained that "[i]f Whitehead was an agent of the state, rather than only of the Treasurer, then 666 applies to her even if the Treasurer did not benefit from the federal funds, because the state itself received more than $10,000 in federal funds." Id. at 11. "Because Whitehead was in charge of investing the state's funds, not merely the Treasurer's funds, " the court found that "she was indeed an agent of the state. " Ibid The court of appeals likewise rejected petitioner Whitehead's argument that her money laundering convictions under 18 U.S.C. 1956(a) (1) were invalid because the real estate transactions under- lying Counts 25 and 26 were themselves kickbacks rather than conduct that followed in time the criminal activity. Pet. App. 13- 17. The court "[did] not read [its prior] cases as holding that laundering can occur only after the underlying crime is complete * * * *." Id. at 15. The court concluded: "A direct payment from Kuhse to Whitehead would have violated 666 without constituting money laundering. The effort to disguise the source of the money was an additional act that is separately punishable under ---------------------------------------- Page Break ---------------------------------------- 9 1956(a) (1) (B) (i), notwithstanding the simultaneity of the two crimes." Id. at 15-16. Alternatively, the court concluded that "the money laundering `followed in time' the underlying crime." Ibid. It noted that " [t]he laundering transactions relevant to Counts 25 and 26 began to unfold in March 1992." Ibid "At that time," the court pointed out, "Whitehead had already completed the conduct charged in counts 3, 5, 7 and 8, all in violation of 666. " Ibid. ARGUMENT 1. Petitioners contend (96-7768 Pet. 12-19; 96-7967 Pet. 11- 14) that their bribery scheme did not fall within the reach of 18 U.S.C. 666 because the office of the Oklahoma State Treasurer did not receive federal assistance exceeding $10,000 in a year- That contention is without merit. Section 666 applies to the payment of bribes to, as well as the acceptance of bribes by, an agent of an organization, govern- ment, or agency that receives more than $10,000 per year in federal assistance. Section 666(a) (1) prohibits "an agent of an organization, or of a State, local, or Indian tribal government, or any agency thereof" from engaging in various acts of embezzlement, theft, or bribery. Section 666(a) (2) prohibits any person from offering or paying bribes 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 * * *." Both sets of prohibitions under Section 666(a) apply only "if the circum- stance described in subsection (b) of this section exists." ---------------------------------------- Page Break ---------------------------------------- 10 Section 666(b) provides that "[t]he 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." Thus, Section 666 requires only that the government or agency on whose behalf the agent is authorized to act receive $10,000 in federal funding, regardless of where and how the money is spent. See United States v. Westmoreland, 841 F.2d 572, 576-577 (5th Cir.), cert. denied, 488 U.S. 820 (1988). In this case, it was undisputed that in 1991 and 1992 the State of Oklahoma received more than $10,000 in federal funds, which were deposited into the State's general account to be withdrawn at the state agencies' discretion 2_/ It was likewise undisputed in this case that petitioner Whitehead, as the Deputy State Treasurer and Chief Trader in the Treasurer's office, had authority to invest the State's funds that were not needed for current expenditures. As the court of appeals noted, Section 666(d) (1) broadly defines the term "agent" to include "a person authorized to act on behalf of another person or a government * * *." Pet. App. 11. The court of appeals, therefore, correctly concluded that petitioner Whitehead was not only an agent of the Treasurer's office but also an agent of the State "[b]ecause ___________________(footnotes) 2_/ Petitioners did not argue in this case that the State of Oklahoma as an entity distinct from its agencies did not receive more than $10,000 per year in federal funding. Rather, petitioners merely argued that the Treasurer's office as a state agency did not receive more than $10,000 per year in federal funding. ---------------------------------------- Page Break ---------------------------------------- 11 Whitehead was in charge of investing the state's funds, not merely the Treasurer's funds * * *. " Ibid Consequently, petitioners' bribery scheme fell within the reach of Section 666(a). Contrary to petitioners' claims, the decision of the court of appeals in this case does not conflict with the decision of any other court of appeals. In United States v. Peery, 977 F.2d 1230 (8th Cir. 1992), cert. denied, 507 U.S. 946 (1993), the defendant was charged with theft from a five-state compact commission that was authorized by a federal statute for the purpose of siting, constructing, and operating a disposal facility for low-level radioactive waste. Under the federal statute, 25 percent of such facilities' surcharges were paid to the Department of Energy, which distributed the money to the compact commissions when they had achieved certain goals. Id. at 1231. The Eighth Circuit held in Peery that the compact commission' s "receipt of the rebate constituted `Federal assistance' as part of a `Federal program'" within the meaning of Section 666. Id. at 1233. 3_/ In United States v. Wyncoop, 11 F.3d 119 (9th Cir. 1993), the defendant was charged with embezzling money from a college, which received no federal funds directly but admitted students who received federally guaranteed student loans. The Ninth Circuit concluded in Wyncoop that the indirect benefit to the college from increased enrollment of students receiving federally guaranteed private loans was not a "benefit[] in excess of $10,000 under a ___________________(footnotes) 3_/ Notwithstanding the language from Peery quoted by petitioner (96-7768 Pet. 14), the result in Peery does not conflict in any way with the decision by the court below. ---------------------------------------- Page Break ---------------------------------------- 12 Federal program" within the meaning of Section 666(b). Id. at 121. The decision in Wyncoop is thus inapposite here, in light of the uncontested evidence that Oklahoma received more than $10,000 per year in federal funds and the court's finding that petitioner Whitehead was an "agent" of the State. The other cases upon which petitioners appear to rely simply confirm that Section 666(a) does not require that the federal funds be traced to the "business, transaction, or series of transactions' in connection with which the defendant pays or accepts a bribe. See United States v. Coyne, 4 F.3d 100, 108-109 (2d Cir. 1993) , cert. denied, 510 U.S. 1095 (1994); United States v. Little, 889 F.2d 1367, 1369 (5th Cir.), cert. denied, 495 U.S. 933 (1990); United States v. Simas, 937 F.2d 459, 463 (9th Cir. 1991); cf. United States v. Valentine, 63 F.3d 459, 464 (6th Cir. 1995) (no I requirement that theft of money under Section 666(a) be traced to federal funds). Accordingly, petitioners' claim merits no further review. In Salinas v. United States, No. 96-738 (cert. granted Feb. 24, 1997), one of the questions presented is whether, under Section 666, the transaction of the federal-fund recipient that was influenced by the bribe must have involved or affected federal funds. The question in Salinas differs from the question raised by the petitioners here: whether an employee of a sub-governmental unit of a State is subject to prosecution under Section 666 for receiving bribes to influence official action of the sub-governmen- tal unit, when the State, but not the subgovernmental unit, ---------------------------------------- Page Break ---------------------------------------- 13 receives more than $10,000 in a year of federal program funds. Petitioners do not claim that bribery is exempt from prosecution under Section 666 absent a showing of an effect on federal funds; rather, they argue that the federal aid must flow directly to the governmental unit that employed the particular agent. As the court of appeals explained, on the facts of this case petitioners claim is not squarely presented, because petitioner Whitehead had authority to invest the State's money and was thus an agent of the State. Accordingly, the Court need not hold this case pending the decision in Salinas. 2. Petitioners next contend (96-7768 Pet. 24-25; 96-7967 Pet. 14-16) that the evidence at trial was insufficient to sustain their convictions for conspiracy to commit bribery. For the most part, petitioners merely renew their claims that the money that flowed to petitioner Whitehead through petitioner Pretty and Kuhse can be traced to previous lawful debts and arms-length transactions among the parties. As the court of appeals pointed out, however, "[t]he jury believed the government's version of the story" rather than petitioners' version. Pet. App. 8. Moreover, this Court has made clear that circumstantial evidence "is intrinsically no different from testimonial evidence." Holland v. United States, 348 U.S. 121, 140 (1954). The court of appeals correctly concluded that the evidence, viewed in the light most favorable to the government, was sufficient to allow a rational jury to have found the essential elements of the offenses beyond a reasonable doubt. See Jackson v. Virginia, 443 U.S. 307, 319 (1979) ; Glassier v. United states, 315 ---------------------------------------- Page Break ---------------------------------------- 14 U.S. 60, 80 (1942). Petitioners' fact-bound claims to the contrary do not warrant this Court's review. 3. Petitioner Whitehead separately contends (96-7768 Pet. 19- 24) that her money laundering convictions were invalid because the real estate transactions underlying Counts 24, 25, and 26 were themselves bribes. That contention is without merit. Petitioner Whitehead's contention rests on the flawed premise (Pet. 23) that the financial transactions that formed the basis for the money laundering counts were not temporally distinct from the bribes themselves because the transactions charged in Counts 24, 25, and 26 were alleged as overt acts in furtherance of the conspiracy to commit bribery alleged Count 1 of the indictment. The transactions alleged in Counts 24, 25 and 26, however, were not separately charged as bribery offenses under Section 666(a) in the indictment. Moreover, the money laundering offense under 18 U.S.C. 1956(a) (1) (A) charged in Count 24 was based on a financial trans- action involving "the proceeds of a specified unlawful activity, that is, commissions received from trades conducted with the State of Oklahoma, after" paying bribes to Whitehead, with the intent to promote the carrying on of the specified unlawful activity. Indictment 109. Similarly, the money laundering offenses under 18 U.S.C. 1956(a) (1) (B) (i) charged in Counts 25 and 26 were based on financial transactions involving "the proceeds of a specified unlawful activity, that is, commissions received from trades conducted with the State of Oklahoma, after" paying bribes to Whitehead, knowing that the financial transaction was designed to ---------------------------------------- Page Break ---------------------------------------- 15 conceal and disguise the source, ownership, and control of the proceeds. Indictment 120, 127. Thus , the government's theory behind the money laundering counts was not that those funds constituted bribes to Whitehead. Rather, those transaction were attempts by Kuhse to launder his ill-gotten commissions that he had obtained because of previous bribes paid to Whitehead. Consequently, there is no merit to petitioner Whitehead's claim that the money laundering did not follow in time the underlying bribery offenses. Petitioner Whitehead does not contend that the court of appeals' decision in this case conflicts with the decision of any other court of appeals. Rather, she merely argues (Pet. 21) that the decision conflicts with the decisions of the same court of appeals in United States v. Kennedy, 64 F.3d 1465 (10th Cir. 1995); United States v. Johnson, 971 F.2d 562 (lOth Cir. 1992); and United States v. Edgmon, 952 F.2d 1206 (l0th Cir. 1991), cert. denied, 505 U.S. 1223 (1992). The court of appeals, however, "[did] not read [its earlier] cases as holding that laundering can occur only after the underlying crime is complete * * *." Pet. App. 15. In any event, a conflict between cases within the same circuit is a matter for the court of appeals, rather than this Court, to resolve. See Wisniewski v. United States , 353 U.S. 901, 902 (1957) (per curiam). Accordingly, petitioner's claim warrants no further review by this Court. CONCLUSION The petitions for a writ of certiorari should be denied. ---------------------------------------- Page Break ---------------------------------------- 16 Respectfully submitted. WALTER DELLINGER Acting Solicitor General JOHN C. KEENEY Acting Assistant Attorney General JOSEPH C. WYDERKO Attorney MAY 1997