United States v. Pimental

United States Court of Appeals
For the First Circuit

Nos. 03-1098
03-1153

UNITED STATES OF AMERICA,

Appellant/Cross-Appellee,

v.

ARTHUR L. PIMENTAL,

Defendant, Appellee/Cross-Appellant.

APPEALS FROM THE UNITED STATES DISTRICT COURT

FOR THE DISTRICT OF MASSACHUSETTS

[Hon. Nancy Gertner, U.S. District Judge]

Before

Lynch, Circuit Judge,
Rosenn, Senior Circuit Judge,* and
Lipez, Circuit Judge.

Mark J. Balthazard, Assistant U.S. Attorney, with whom Michael
J. Sullivan, U.S. Attorney, was on brief, for appellant.
James C. Rehnquist, with whom Sarah E. Walters, Miriam Kim,
and Goodwin Procter LLP were on brief, for appellee.

August 30, 2004

*
Of the Third Circuit Court of Appeals, sitting by
designation.
 LYNCH, Circuit Judge. This workers' compensation

insurance fraud criminal case produced an appeal from both sides.

The government appeals the district court's dismissal of two counts

on which a jury had convicted, while the defendant cross-appeals on

the ground that the entire case should have been dismissed because

of an alleged violation of the grand jury secrecy rule, embodied in

Fed. R. Crim. P. 6(e). We conclude, despite the able

representation of Pimental, that (1) the district court erred in

dismissing the two counts and we reinstate the jury convictions and

conclude that (2) there was no violation by the prosecution here of

Rule 6(e) at all. This second point is a matter of first

impression.

After a jury convicted Arthur Pimental of two counts of

mail fraud, the district court dismissed the convictions because it

found that the two underlying mailings were not "in furtherance" of

Pimental's fraudulent scheme. United States v. Pimental, 236 F.

Supp. 2d 99 (D. Mass. 2002). Pimental's scheme involved lying to

various workers' compensation insurance company representatives

about the nature and scope of his company's work; his false

statements tended to reduce the premium payments he owed for

workers' compensation insurance. The government appeals the

district court's decision, arguing that the two mailings furthered

Pimental's scheme by helping to ensure that the insurance company

did not discover his earlier misrepresentations.

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 Pimental cross-appeals, arguing that his indictment

should be dismissed because the prosecuting attorney disclosed

secret grand jury materials to an investigator for the

Massachusetts Insurance Fraud Bureau (IFB). Pimental argues that

the rule allowing disclosure of grand jury materials to "government

personnel" in certain circumstances, Fed. R. Crim. P.

6(e)(3)(a)(ii), was inapplicable because the IFB investigator was

a private actor. The IFB, which investigates potential cases of

insurance fraud, is authorized and structured by Massachusetts

statute, but partially run and entirely funded by insurers.

We reverse the district court's dismissal of Pimental's

convictions, finding that the mailings by insurance company

representatives that formed the basis of the two counts of

conviction were indeed in furtherance of Pimental's fraudulent

scheme. Additionally, we reject Pimental's cross-appeal because we

conclude that the first district court (not the trial court) did

not err when it found the IFB investigators here are "government

personnel" within the meaning of Fed. R. Crim. P. 6(e)(3)(A)(ii)

and so authorized the prosecutor to reveal grand jury materials to

them.

I. Factual Background

The facts are described in the light most favorable to

the jury's guilty verdict.

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 Arthur Pimental and his wife, Loretta Pimental (for ease

of reference we refer to her as Loretta and to Arthur as Pimental),

owned and operated Pimental Steel Erectors ("Pimental Steel")

starting sometime in the early 1980's. In late 1989, Pimental

Steel allowed its workers' compensation insurance to lapse; this

violated Massachusetts law. Massachusetts requires all employers

to maintain workers' compensation insurance which covers their

employees in the case of an on-the-job injury or job-related

illness. Mass. Gen. L. ch. 152, § 25A. Over three years later, in

April 1993, Arthur Pimental mailed a written application to the

Massachusetts Workers' Compensation Rating and Inspection Bureau

(MWCRIB) to resume Pimental Steel's workers' compensation coverage.

MWCRIB, a private non-profit association of insurers that is

licensed under Massachusetts law, Mass. Gen. L. ch. 152. § 52C,

uses a risk pool to assign insurance companies to provide workers'

compensation insurance on pre-set terms to applicant-employers.

The fraud charges started here.

On the MWCRIB application form, Pimental described the

operations of his business as involving "concrete construction

incl[uding] foundations" and added that it "puts in foundations."

Concrete foundation work involves laying concrete and reinforcing

it with steel rods and is also known as "rebar." MWCRIB processed

the application, assigned it to the Hartford Fire Insurance Company

("Hartford Insurance"), and notified Pimental via the mail that the

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estimated premium for the year, based on his application, was

$12,425.

Despite what was said in the MWCRIB application, Pimental

Steel had never at any point been involved in concrete foundation

work. Rather, throughout the relevant period, its business

performed mainly steel erection and related work, such as welding

and decking. Steel erection involves the placement of girders,

columns, and joints to support a structure, then laying corrugated-

metal decking for the ceiling and floors of the building and

welding it into place. Steel erection work carries a

significantly higher risk of injury than does concrete foundation

work.

Because workers' compensation premiums are set based upon

the kind of work performed and the amount of a business's payroll,

Pimental's incorrect description on the MWCRIB application affected

the premium payments Pimental Steel owed. In 1993, the premium

payment for steel erection of structures over two stories was

$99.35 per every hundred dollars of payroll1 (reduced to $69.22 for

structures under two stories), while the rate was $41.22 for

concrete foundation work. Some of the work that Pimental Steel

actually performed, however, had lower premium rates than concrete

foundation work: the rate for decking was $24.66 or $19.82,

1
All subsequent references to premium rates are per hundred
dollars of payroll.

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depending on the type of metal used, while the rate for welding was

$23.56. Where, as in the case of Pimental Steel, employees perform

tasks that have different premium rates, the total premium cost can

be calculated by parsing out the hours that employees spent on each

different task, so long as appropriate documentation is maintained.

One witness testified that 80% of the work Pimental Steel did for

him was steel erection and decking and that the remaining 20% was

"miscellaneous."

In September of 1993, Joseph F. Brugman, an auditor for

Hartford Insurance, met with Loretta Pimental to perform an initial

audit on Pimental Steel's insurance application. In addition to

such initial audits, which are conducted at the start of an

insurer's relationship with an insured, insurers normally perform

audits once a year at the conclusion of each annual policy period.

The auditors determine the insurance classification for the work

that the insured's employees performed and the total amount of

salary paid to them. Using this information, the insurance

companies calculate the final amount that the employer owes for the

year.

During the initial audit meeting, Loretta told Brugman

that Pimental Steel was, as the MWCRIB application had represented,

involved in concrete foundation work. She did not tell Brugman

that Pimental Steel was involved in any way in steel erection,

welding, or decking, even though Brugman explained to her that

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Pimental Steel's operations could be split into different

classifications for insurance purposes. At the later year-end

audit in July 1994, also conducted by Brugman, Loretta repeated

this description of Pimental Steel's business operations.

Several months after Brugman conducted his year-end

audit, William Brooks, a loss-control inspector for Hartford

Insurance, met with Arthur Pimental. In contrast to auditors, the

purpose of loss-control inspectors is not to verify the accuracy of

the information given by policyholders, but instead to "assist[]

policyholders in their efforts to control costly accidents and/or

injuries." During that meeting Pimental once again represented,

wrongly, that his business involved rebar. Pimental also told

Brooks that he did not currently have any employees and that there

were not any ongoing projects that Brooks could observe. This was

also not true: Pimental paid an employee wages three days after his

meeting with Brugman.

On October 5, 1994, Brooks mailed an "Account Data

Report" to Hartford Insurance that summarized his meeting with

Pimental. The letter began by stating that "[t]he insured

describes his business []as that of the installation of reenforcing

bars and rods for floors and walls." Brooks's standard practice is

to inform insureds that he will turn over a copy of his loss-

control report to the insurance company, and that the company will

inform the employer of any recommendations to improve worker

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safety. However, Brooks testified that he had no specific

recollection of whether he had informed Pimental of this procedure

during their meeting.

The Pimentals renewed their workers' compensation

insurance coverage with Hartford Insurance in May 1995. Hartford

sent them a letter detailing the terms of coverage; under the

heading "Business of Named Insured," the letter read "concrete

construction." In July 1995, Hartford auditor Mark Lawrence met

with Loretta Pimental to conduct an audit of the May 1994 to May

1995 policy period. During that meeting, Lawrence asked Loretta if

the company did any steel erection work, given that the company's

name is "Pimental Steel Erectors." Loretta responded that the

company only did concrete rebar work, and did not work on steel

erection, despite its name.

Lawrence also asked Loretta for documentation of Pimental

Steel's wage payments to employees. Loretta told Lawrence that

there was no single record detailing payroll. Instead, she

provided him with a checkbook that had been used to make payroll

payments, along with a written summary of that checkbook, and told

him that there were no additional records. From these documents,

Lawrence calculated that Pimental Steel had paid $28,885 in salary

to its employees for the year from May 1994 to May 1995, resulting

in a total premium of $13,586. In fact, Pimental Steel's actual

payroll during that period was $85,499, a figure which would have

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led to a larger premium. The Pimentals used non-sequentially

numbered checks in their business and it appears that the single

checkbook given to Lawrence contained only a fraction of all the

checks written on behalf of Pimental Steel from the previous year.

In July 1995, Hartford Insurance attempted to arrange

another loss-control meeting with Arthur Pimental. After Pimental

did not respond to three separate inquiries, Timothy Bergeron, a

Senior Loss-Control Consultant for Hartford Insurance, sent him a

final letter stating that "failure to allow reasonable access for

the purpose of loss-control consultation is a violation of the good

faith provisions in the Workers' Compensation Insurance Plan and

can subject your policy to cancellation." Under that threat of

cancellation, Pimental finally met with Bergeron on September 21,

1995.

During the meeting, Pimental told Bergeron that Pimental

Steel continued to perform rebar work; he falsely said the company

did not perform any structural steel erection or metal deck work.

He also falsely told Bergeron that there were currently no jobs in

progress that could be inspected. His bank records reveal,

however, that three employees were paid their wages that same day.

During the meeting, Bergeron told Pimental that he was going to

prepare a report summarizing their meeting and would mail it to

Hartford Insurance. Bergeron testified that he told Pimental that

he would send the loss-control report to Hartford Insurance, and

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Brooks indicated that it was his standard practice to tell the

insured that the loss-control report would be forwarded to the

insurance company. Bergeron kept a copy of the report in Hartford

Insurance's Boston branch (where he was stationed) and sent a copy

to the company's branch in San Antonio, Texas "that issues the

policy and distributes all the policies regarding the assigned risk

pool." On October 5, 1995, Bergeron also mailed a letter to

Pimental summarizing their meeting and stating that "[y]our company

continues to bid work as a subcontractor installing reinforcement

bar."

Pimental again renewed the company's workers'

compensation insurance in May 1996, and Hartford Insurance again

mailed a letter to Pimental detailing the coverage and repeating

that the nature of the company's business was "concrete

construction." Later that summer, Lawrence wrote a letter to the

Pimentals requesting certain documents that were needed to perform

a year-end audit for the May 1995-to-May 1996 coverage period. The

Pimentals never provided Lawrence with any of the requested

documentation.

When Lawrence met with Loretta Pimental for the annual

audit on August 9, 1996, the only documentation that she provided

was Pimental Steel's checkbook; she claimed to have been unaware of

the records Lawrence had requested and to have lost the letter he

had sent to her. As a result, Lawrence determined that Pimental

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Steel's account was "unauditable" and his report to Hartford

Insurance simply estimated a payroll of $31,500 based on the

checkbook that Loretta had provided. This estimate was less than

20% of Pimental Steel's actual payroll of $158,653 for that time

period. Consequently, the $19,374 in premiums that the Pimentals

were charged was also less than 20% of what they actually owed.

In November 1996, Arthur Pimental, perhaps concerned that

Hartford Insurance might cancel Pimental Steel's policy for failure

to provide requested documentation, submitted a second application

for workers' compensation insurance to MWCRIB. This application

contained a new name for the company; it was now called A.P.S.

Products, Inc., rather than Pimental Steel Erectors. (We continue

to refer to Pimental's company as "Pimental Steel" despite this

name change). The application once again described the company's

operations as "[i]nstall steel for concrete reinforcement," and

stated that its total payroll was $65,000 per year and that it

employed only two workers. During the previous six months, the

Pimentals' company actually paid salary to between four and seven

employees on a weekly basis, and the company's payroll for those

six months totaled approximately $83,000.

MWCRIB assigned the insurance application to Employers

Insurance of Wausau (Wausau Insurance) and sent a letter to

Pimental informing him of the assignment and stating that the

estimated premium was $37,600. The Pimentals then began a pattern

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of deception with Wausau Insurance similar to that employed with

Hartford Insurance. Arthur told auditors for Wausau Insurance that

A.P.S. Products did concrete rebar construction rather than the

steel erection, welding, or decking work that it actually

performed. Loretta, in turn, initially provided Wausau Insurance

with incomplete records that significantly underrepresented the

company's payroll.

As part of a block transfer of policies, MWCRIB

reassigned the Pimentals' insurance coverage from Wausau Insurance

to Savers Property & Casualty Insurance Company ("Savers

Insurance") in October of 1997. Using the 1996 MWCRIB application

as well as Wausau's most recent policy, Savers Insurance initially

calculated a $33,671 yearly premium based on a $65,000 payroll in

concrete rebar. Once again, the Pimentals misrepresented the

nature of their business to Savers Insurance. Arthur Pimental told

a loss-control inspector for Savers Insurance that his company only

worked on concrete rebar. Further, the Pimentals failed to respond

to several inquiries from Savers Insurance auditors, resulting in

Savers Insurance using a 50% increased payroll figure of $97,500

for the 1997-to-1998 coverage period. This was still substantially

smaller than the actual payroll figure of $168,162.

In total, from October 1993 to August 1998, the Pimentals

paid their employees approximately $738,000 in salary. The

insurance premiums they paid during this period were based on a

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payroll of less than half that amount -- about $340,000.

Throughout the time period, the Pimentals paid premium rates for

concrete rebar even though their work consisted almost entirely of

steel erection, welding, and decking. Because different premium

rates apply to each of these three activities and there was little

evidence concerning how many employee hours were dedicated to each

separate activity, the extent of the monetary benefit the Pimentals

received from misrepresenting their business is unclear.2 A jury

could easily infer that the premiums would have been higher if

Pimental had been honest in what he told his insurers.

II. Procedural History

On September 29, 1999, Arthur and Loretta Pimental were

each indicted on one conspiracy count, 18 U.S.C. § 371, and

fourteen counts of mail fraud, 18 U.S.C. § 1341. Before trial, the

Pimentals moved to dismiss the indictment, claiming that the

government had violated Fed. R. Crim. P. 6(e) when it disclosed,

after earlier receiving permission from another judge on the court

to do so, grand jury materials to an investigator for the Insurance

Fraud Bureau of Massachusetts. Pimental, 236 F. Supp. 2d at 103.

In a trio of pretrial opinions, the district court held that there

had been a Rule 6(e) violation (despite the prior approval of a

2
Indeed, Pimental stresses on appeal that it is possible that
he actually lost money from misrepresenting the type of operations
his company performed, because some of those operations were
cheaper to insure than was concrete rebar.

-13-
different judge of the court), but held that the violation was

harmless because the grand jury testimony that resulted from the

transmittal of information to the IFB investigator was not crucial

to the grand jury's decision to indict. United States v. Pimental,

204 F.R.D. 223 (D. Mass. 2001); United States v. Pimental, 201

F.R.D. 24 (D. Mass. 2001); United States v. Pimental, 199 F.R.D. 28

(D. Mass. 2001).

The government voluntarily dismissed three of the mail

fraud counts on September 16, 2002, and the case proceeded to trial

the next day. Pimental, 236 F. Supp. 2d at 104. After six days of

testimony, a jury acquitted Loretta Pimental on all counts and

acquitted Arthur Pimental on the conspiracy count and nine of the

eleven mail fraud counts. The two mail fraud counts on which the

jury convicted Arthur Pimental were both based on mailings sent by

loss-control inspectors. The first count was premised on the

October 5, 1994 mailing from William Brooks to Hartford Insurance,

in which Brooks reported that Arthur Pimental had said that

Pimental Steel Erectors only performed concrete rebar work. The

second count was based on the letter from Timothy Bergeron to

Arthur Pimental summarizing their meeting and noting that Pimental

Steel was, according to Pimental, involved only in concrete rebar

work.

After the jury returned its verdict, Arthur Pimental

moved for a judgment of acquittal pursuant to Federal Rule of

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Criminal Procedure 29(c). He also renewed his motion for a

dismissal of the indictment, arguing that evidence presented at

trial provided a previously unavailable basis for believing that

the information disclosed to the IFB investigator had substantially

influenced the grand jury's decision to indict.

The district court held that there was sufficient

evidence for the jury to find the existence of a scheme to defraud

and that the mailings were reasonably foreseeable. Id. at 109,

110. But it nonetheless granted Pimental's Rule 29 motion because

it concluded that there was not sufficient evidence that either

mailing was in furtherance of the fraudulent scheme. Id. It also

declined to rule on Pimental's renewed motion for dismissal of the

indictment based on the Rule 6(e) violation, finding that this

issue was mooted by its grant of the Rule 29 motion. Id. at 112.

The government appeals the district court's grant of the

Rule 29 motion. Arthur Pimental, in turn, cross-appeals the denial

of his motion to dismiss the indictment for the Rule 6(e)

violation.

III. The Rule 29 Motion

Our review of the district court's Rule 29 determinations

is de novo. United States v. Moran, 312 F.3d 480, 487 (1st Cir.

2002). A judgment of acquittal should only be granted when the

evidence and all reasonable inferences to be drawn from the

evidence, both taken in the light most favorable to the government,

-15-
are insufficient for a rational factfinder to conclude that the

prosecution has proven, beyond a reasonable doubt, each of the

elements of the offense. Id.; United States v. Campbell, 268 F.3d

1, 6 (1st Cir. 2001). "Under this formulation, a court considers

all the evidence, direct and circumstantial, and resolves all

evidentiary conflicts in favor of the verdict." Moran, 312 F.3d at

487.

To demonstrate a violation of the mail fraud statute, 18

U.S.C. § 1341, the prosecution must prove "(1) the devising or

attempting to devise a scheme or artifice to defraud; (2) the

knowing and willing participation in the scheme with the specific

intent to defraud; and (3) the use of the mails in furtherance of

the scheme." United States v. McCann, 366 F.3d 46, 51 (1st Cir.

2004) (quoting United States v. Montminy, 936 F.2d 626, 627 (1st

Cir. 1991)). The government must also demonstrate, in order to

prove causation, that the defendant knew, or could have reasonably

foreseen, that "the use of the mails [would] follow in the ordinary

course of business." Pereira v. United States, 347 U.S. 1, 9

(1954); cf. United States v. Fermin Castillo, 829 F.2d 1194, 1198-

99 (1st Cir. 1987) (interpreting wire fraud statute). "It is not

necessary to prove that the defendant personally executed the

mailings, but merely that the defendant 'caused the mailing by

doing some act from which it is reasonably foreseeable that the

mails will be used.'" United States v. Bruckman, 874 F.2d 57, 60

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(1st Cir. 1989) (quoting United States v. Gonzalez-Sanchez, 825

F.2d 572, 588 (1st Cir. 1987)).

There was easily sufficient evidence for the jury to find

the existence of a scheme to defraud and that the use of the mails

was reasonably foreseeable, as discussed below. As to the "in

furtherance of" requirement, the district court erred in holding

that there was not sufficient evidence for the jury to find that

the two loss-control inspectors' mailings were in furtherance of

the fraudulent scheme. Accordingly, we reverse the grant of the

Rule 29 motion and reinstate the convictions.

A. The Existence of a Scheme to Defraud

Pimental challenges the district court's conclusion that

there was sufficient evidence of a scheme to defraud, hoping to

knock out the convictions on grounds other than those relied upon

by the district court.3 First, he argues that the evidence at

trial did not establish that Pimental Steel's employees were

3
As recounted in Part I, there was significant evidence that,
in addition to lying about the nature of Pimental Steel's
operations, Pimental also lied about the size of the company's
payroll. Pimental says that this evidence "only established that
in workers' compensation insurance applications, [he] made
estimates of the payroll, which often vary widely from the actual
payroll, particularly in the construction industry." Not so.
There was more than sufficient evidence for the jury to find that
Pimental did indeed misrepresent the size of Pimental Steel's
payroll in an effort to defraud the insurance companies.
Nonetheless, in order to simplify the analysis of whether Count
Four was in furtherance of the fraudulent scheme, see infra Part
III.B.ii., we focus on Pimental's misrepresentations concerning the
nature of Pimental Steel's operations.

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actually covered by workers' compensation insurance when they were

performing steel erection. Pimental says the jury had no way of

eliminating the possibility that if he had submitted a claim on

behalf of an injured employee, the insurance company would have

discovered the incorrect premium payments and thus refused to pay

the employee. Pimental does not contest the district court's

conclusion that, as a matter of Massachusetts law, the insurance

company would be obliged to cover Pimental Steel's employees under

such circumstances.4 Pimental, 236 F. Supp. 2d at 106 (relying on

Employers Mutual Liability Insurance Co. of Wisconsin v. Merrimac

Mills Co., 325 Mass. 676, 681 (1950)). But he says that there was

no evidentiary basis for the jury to reach this conclusion. From

this premise, Pimental argues that the jury could not have found

that the insurers suffered any loss as a result of Pimental's

actions. And that, concludes Pimental, means that there was

insufficient evidence for the jury to conclude that there existed

a "scheme to defraud."

Pimental's argument goes too far. In order to find a

"scheme to defraud," the jury simply had to determine that Pimental

was attempting to "wrong[] one in his property rights by dishonest

methods or schemes." McNally v. United States, 483 U.S. 350, 358

(1987) (quoting Hammerschmidt v. United States, 265 U.S. 182, 188

(1924)). Here, there was more than sufficient evidence for the

4
As Pimental does not raise this issue, we do not address it.

-18-
jury to conclude that Pimental lied about the nature of his

company's work in order to pay cheaper premiums on his workers'

compensation insurance. The jury easily could have concluded that

Pimental was attempting to dishonestly minimize the insurance

premiums to the company that he should have been paying under

Massachusetts law. The speculative possibility that if an employee

had filed a claim with Hartford Insurance, it would have discovered

Pimental's lies and refused to pay the employee is irrelevant. To

convict, the jury need not have drawn any additional conclusion.

Pimental also argues that there was insufficient evidence

of a scheme to defraud because the evidence was inconclusive as to

whether he ultimately paid premiums that were less than what he

actually owed, for the reasons discussed earlier. But whether

Pimental actually paid more or less in premiums than he actually

owed goes only to the success of his fraudulent scheme, not to its

existence. See United States v. Martin, 228 F.3d 1, 16 (1st Cir.

2000) (success in scheme is not needed to support mail fraud

conviction). In addition, the argument fails on its own terms. A

rational jury could have found that Pimental, because of his own

actions, did not in fact have the option of making variable premium

payments according to the amount of time that his workers spent

performing different job tasks. The evidence at trial established

only that:

The payroll of an individual employee may be divided and
allocated to more than one classification, provided the

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 entries in the original records of the insured disclose
an allocation of each such individual employee's payroll.
Any such operation for which separate payroll records are
not maintained shall be assigned to the highest rated
classification which applies to the job or location where
the operation is performed.

(emphasis added). There was extensive testimony that the Pimentals

specifically chose not to keep records documenting the breakdown of

their employees' work and that they repeatedly misled the insurance

company concerning their payroll in order to pay lower rates. A

reasonable jury could have easily found that the Pimentals did not

maintain "separate payroll records" and hence that the rate they

should have paid, for all payroll hours, was the rate for steel

erection. This would have been significantly more than the amount

they actually paid.

B. The "In Furtherance Of" Requirement

In order for a mailing to be "in furtherance" of a

fraudulent scheme, it "must be for the purpose of executing the

scheme," United States v. Maze, 414 U.S. 395, 399-400 (1974)

(quoting Kann v. United States, 323 U.S. 88, 94 (1944)), or "part

of the execution of the scheme as conceived by the perpetrator at

the time," Schmuck v. United States, 489 U.S. 705, 715 (1989). The

mailing "need not be an essential element of the scheme"; it can be

merely "incident to an essential part of the scheme," id. at 710-11

(quoting Pereira, 347 U.S. at 8), or "a step in [the] plot," id. at

711 (quoting Badders v. United States, 240 U.S. 391, 394 (1916));

see also McCann, 366 F.3d at 52.

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(i) Count Two Conviction -- Brooks's Account Data Report

The mailing that formed the basis of Count Two, on which

the jury convicted Pimental, was Brooks's October 5, 1994 "Account

Data Report" to Hartford Insurance, which recounted the substance

of his loss-control interview with Pimental. In that report,

Brooks wrote that Pimental had said that his business involved only

rebar construction.

In Schmuck, the Supreme Court addressed the "in

furtherance of" requirement with respect to a mailing of some

similarity to Brooks's loss-control report. The defendant in

Schmuck purchased used cars, rolled back their odometers, and then

resold them to retail dealerships, who, in turn, sold them to

consumers. 489 U.S. at 707. The Court held that the mailing of a

title-application form from the dealership that purchased Schmuck's

vehicle to a state agency, at the time of the dealership's sale of

the car to the end-consumer, met the "in furtherance of" element of

the mail fraud statute. Id. at 710-12. In cases of "ongoing

fraudulent venture[s]," reasoned the Court, mailings that help

maintain a harmonious relationship between the perpetrator and the

victim further the fraudulent scheme by helping to ensure its

continued success in the future. Id. at 711-12. Even though such

mailings were not absolutely necessary for the scheme to succeed in

the short term, they allowed the dealerships who purchased the cars

from Schmuck to sell them to the ultimate consumer and thus helped

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guarantee that the dealerships would continue to purchase cars from

Schmuck in the future. Id.

Likewise, the mailing from Brooks to Hartford Insurance

helped Pimental maintain his ongoing fraudulent venture by ensuring

that he continued to receive insurance coverage. The jury was

entitled to conclude that had Brooks never mailed his loss-control

report, Hartford Insurance would have terminated its insurance

coverage and Pimental's scheme would have, at least temporarily,

come to a halt. Indeed, Pimental's policy with Hartford Insurance

was threatened with cancellation when he attempted to avoid a loss-

control interview in the summer of 1995 by ignoring repeated

inquiries from Bergeron. If Hartford Insurance were not to receive

a completed loss-control report, Bergeron's letter warned,

Pimental's insurance coverage would be "subject . . . to

cancellation." A rational jury could have readily found that the

loss-control report from Brooks to Hartford Insurance furthered

Pimental's fraudulent scheme because it was a necessary step in the

continued relationship between Pimental and his victim, Hartford

Insurance. Cf. United States v. Woodward, 149 F.3d 46, 64-65 (1st

Cir. 1998) (in ongoing scheme in which lobbyist made illegal

purchases for a public official, the mailing of a credit card bill

to the lobbyist satisfied the "in furtherance of" requirement

because if the lobbyist "did not pay [the] bills, his credit line

-22-
would have been terminated and the gratuities could not have

continued").

The district court reached the opposite conclusion by

relying on a statement in a post-Schmuck First Circuit case, United

States v. Pacheco-Ortiz, 889 F.2d 301, 305 (1st Cir. 1989), that

the perpetration of the fraud or its subsequent cover-up must have

"depended in some way on" the mailing. Pimental, 236 F. Supp. 2d

at 108. The court interpreted this formulation to impose a "but

for" test for the "in furtherance of" element of mail fraud -- i.e.

that a fraudulent scheme "depends on" a mailing only when but for

that mailing, the scheme could not have succeeded or would have

been discovered.5 The district court concluded that Pacheco-

Ortiz's use of "depends on" meant "but-for" despite language in

Pacheco-Ortiz that also said that it was not necessary that each

mailing guarantee the success of the scheme or even significantly

advance it -- that it only need be closely related to the scheme.

889 F.2d at 305.

5
The flexibility of the English language is one of its
wonders; that flexibility can lead to misunderstandings. Pacheco-
Ortiz simply said that "for the mailings to be considered in
furtherance of the scheme, the scheme's completion or the
prevention of its detection must have depended in some way on the
mailings." 889 F.3d at 305 (internal quotations omitted) (emphasis
added). It did not say there was a "but-for" requirement. The
dictionary does say that the word "depend" can mean that something
is "a necessary condition," but the word can also mean "to have a
connection or relationship as a subordinate part or appurtenance."
Webster's Third New International Dictionary 604 (1993).

-23-
 Applying its approach, the district court found that

there was no evidence that, absent the mailing of the loss-control

report, Hartford would necessarily have uncovered the scheme and

terminated Pimental's coverage. Although the court noted that it

was possible that a loss-control report describing the Pimentals'

business as steel erection "might have raised an eyebrow" at the

insurance company, it concluded that the government did not present

sufficient evidence on this point; the evidence did not demonstrate

that "the jig would have been up" had Brooks's loss-control report

stated that the Pimentals' business was steel erection. Id.

The district court's search for a direct, but-for, link

between Brooks's mailing and the fraudulent element of Pimental's

scheme -- the claim that his business involved concrete rebar and

not steel erection -- misapprehended the law in two ways. First,

a mail fraud conviction does not require the existence of a "but-

for" link between the mailing and the fraud, or its cover-up. Such

a rule would harken back to the oft-rejected notion that the

mailing needs to be connected with the essence of the fraud. It

need not be, so long as it is "incident to an essential element of

the fraud." See Schmuck at 710-11. For instance, in Schmuck

itself there was no but-for relationship between the success of the

scheme and the mailing of the title-application form. Schmuck

could have continued selling cars that had been tampered with even

if the dealerships that bought those cars did not mail the title-

-24-
application forms. The mailings were nonetheless "in furtherance"

of the scheme because they contributed to its overall success by

making it more likely that dealerships would come back to Schmuck

to purchase more cars.

Similarly, mailings that are designed to "lull the

victims into a false sense of security, postpone their ultimate

complaint to the authorities, and therefore make the apprehension

of the defendant[] less likely than if no mailings had taken place"

are sufficient under the statute. United States v. Lane, 474 U.S.

438, 451-52 (1986) (quoting Maze, 414 U.S. at 403) (emphasis

added); United States v. Lopez, 71 F.3d 954, 961-62 (1st Cir.

1995). Preventing the detection of an ongoing or a completed

fraudulent scheme is not contingent on lulling the victim into a

false sense of security. Instead, lulling the victim into a false

sense of security contributes to the prevention of the scheme's

detection by making detection of the scheme less likely. This is

sufficient to satisfy the "in furtherance of" requirement of the

mail fraud statute. See, e.g., McCann, 366 F.3d at 53 (letter sent

after the culmination of the fraud was in furtherance of fraud

because it "served the important purpose of decreasing the risk of

detection"); Lopez, 71 F.3d at 956-57, 961 (fax sent two years

after culmination of fraud that attempted to explain certain

documents that were submitted to cover-up the illegal withdrawal

was in furtherance of fraudulent scheme in wire fraud conviction

-25-
because it made defendant's apprehension less likely); United

States v. Young, 955 F.2d 99, 108 (1st Cir. 1992) (Breyer, J.)

(mailings that misrepresented disposition of embezzled funds helped

conceal the fraud and were thus sufficient to meet the "in

furtherance of" requirement).

A second, independent, problem with the district court's

analysis is that it focused exclusively on Pimental's

misrepresentations in determining whether the mailings furthered

his overall scheme. In fact, even under the district court's

overly stringent and incorrect but-for test, the jury would have

been entitled to conclude that Pimental's scheme depended on

Brooks's mailing. The reason is that the success of the scheme did

not simply depend on Pimental lying about the nature of his

business's operations -- it also depended, among other things, on

the mailing and processing of loss-control reports. Were those

reports not mailed, there was significant evidence that Hartford

Insurance would have cancelled the Pimentals' coverage. One of the

central points of Schmuck is that a mailing that is itself innocent

and that seems to accomplish an innocent end can nonetheless be in

furtherance of a fraudulent scheme.

ii. Count Four Conviction -- Bergeron's Mailing to
Pimental

The second Count on which Pimental was convicted is

premised on Bergeron's mailing to Pimental himself of a summary of

the loss-control interview. In this mailing, Bergeron states,

-26-
based on what Pimental said in the interview, that Pimental's

business continued to be the installation of concrete reinforcement

bar.

Pimental argues that whether he received a summary of his

meeting with Bergeron was immaterial to whether Hartford Insurance

would continue to provide the Pimentals with insurance for their

employees at the incorrect rate. Pimental also argues that lying

to loss-control inspectors as opposed to lying to auditors was not

an essential part of the scheme. This was particularly so, says

Pimental, because the evidence was that the loss-control division

of Hartford Insurance was entirely separate from the division that

set premiums and investigated fraud. Indeed, Brooks was not even

an employee of Hartford Insurance, but was instead an independent

contractor.

A reasonable jury easily could have concluded that

Pimental needed to be or thought he needed to be consistent in his

lies to representatives of the insurer, regardless of who the

representative was. It is not hard to infer that an inconsistent

report from a loss-control inspector could somehow trigger alarms

in the premium setting group. The harder question is why a letter

to Pimental, recounting his fraudulent statements, was in

furtherance of the fraud. There are several responses. One is

that Pimental now knew that his deception of the inspector was

successful -- his copy showed that his lies were being sent to the

-27-
company records. This could only encourage him in the scheme.

Further, there was an obvious purpose to Bergeron sending a summary

of his report to Pimental -- it allowed Pimental to correct any

inaccurate information on the report. Pimental chose not to

correct the misinformation, thus perpetuating the fraud and

demonstrating further his fraudulent intent. See United States v.

Morrow, 39 F.3d 1228, 1236-37 (1st Cir. 1994) (in insurance fraud

scheme, the insurance company's mailing to the insured

acknowledging that it had received the fraudulent claim was, under

the Schmuck formulation, "'incidental' to an essential element in

the scheme").

C. Causation: Were the Mailings Reasonably Foreseeable?

Pimental argues that there was insufficient evidence for

the jury to conclude that he "caused" either of the mailings at

issue because neither of them was reasonably foreseeable. See

Pereira, 347 U.S. at 8-9. There was no evidence, according to

Pimental, of a "course of business" between himself and his

insurers that would have led a reasonable person to have

anticipated either of the mailings that formed the basis for his

convictions. He points to evidence that Brooks could not recall

ever telling Pimental that the loss-control report would be mailed

to Hartford Insurance. Similarly, Bergeron testified only that he

told Pimental that he would send the loss-control report to

Hartford, not that he would send it to Pimental himself. All of

-28-
this, concludes Pimental, means there was no way that he could

reasonably foresee that either Brooks's or Bergeron's letters would

ever be written or mailed.

Pimental's arguments are premised on an incorrect

understanding of the law. As the district court correctly held, it

is simply the "use of the mails" in the course of the scheme rather

than the particular mailing at issue that must be reasonably

foreseeable for the causation element of a mail fraud offense to be

satisfied.6 See Morrow, 39 F.3d at 1237 (all that is required to

show causation is that the defendant "participated in a crime in

which it was foreseeable . . . that the mails would be used" and

that was satisfied where defendant "admitted at trial that he knew

that automobile insurance claims are processed in part through the

6
The facts of Bruckman clearly illustrate this principle. The
defendant in that case submitted a fraudulent financial statement
to a bankruptcy court in connection with the attempted purchase of
a corporation under that court's protection. 874 F.2d at 59-60.
The bankruptcy court's subsequent mailings of the statement to the
corporation's creditors formed the basis for the defendant's
convictions. Id. at 60. In responding to Bruckman's causation
argument, the court held that it was not necessary for the
bankruptcy court's mailings to the company's creditors to have been
reasonably foreseeable. Rather, it was sufficient that there "was
ample evidence from which the jury could conclude both that
Bruckman participated in the scheme to defraud, and that some use
of the mails was to be anticipated in the course of such scheme."
Id. (emphasis added). Because the "jury could reasonably infer
that mailings would be foreseeable in the course of the bankruptcy
reorganization proceedings related to the intended acquisition of
[the corporation] by Bruckman and others," there was sufficient
evidence for the jury to conclude "that Bruckman knowingly caused
the mailings" at issue. Id.

-29-
use of the mails"); Bruckman, 874 F.2d at 60 ("[T]he causation

element is met as long as some use of the mails was reasonably to

be anticipated in the course of the scheme."); Fermin-Castillo, 829

F.2d at 1198 ("As long as some use of the instrumentality in the

course of the endeavor was reasonably to be anticipated, the

causation requirement is met."); see also United States v.

Bortnovsky, 879 F.2d 30, 38-39 (2d Cir. 1989) (noting that the

causation element of mail fraud "has been so liberally construed as

to suggest that it requires only that the use of the mail itself,

rather than a particular mailing, be reasonably foreseeable" and

endorsing that view).

The principle that it is the use of the mails (rather

than the specific mailing that is charged) that must be reasonably

foreseeable as a result of the scheme is affirmed by one of the

primary cases upon which Pimental relies.7 In United States v.

7
Pimental also relies on United States v. Smith, 934 F.2d 270
(11th Cir. 1991), which is indeed in tension with our analysis.
That case involved an insurance fraud in which the defendant faked
an injury from a staged automobile accident. Id. at 271. The
defendant received a claims draft, which is similar to a check, in
person from the insurance agent, but a copy of the draft was sent
to the insurance company. Id. The court found that there was
insufficient evidence that the use of the mails was reasonably
foreseeable because it was not common knowledge that insurance
companies mail accounting copies of drafts. See id. at 273. In so
holding, the court agreed "that it is foreseeable that
communications involving the policy, the details of the claim, or
requests for the payment of the claim would be mailed." Id. But
the court found this to be irrelevant because "the substantive
counts of [the defendant's] indictment did not allege such
mailings." Id.
To the extent that Smith is inconsistent with our analysis, we

-30-
Walters, 997 F.2d 1219 (7th Cir. 1993), the court held that there

was insufficient evidence on the causation element of a mail fraud

offense because the evidence did not establish "that [the

defendant] conceived a scheme in which mailings played a role."

Id. at 1222. Rather than focus on the predictability of specific

mailings in the indictment, the Walters court thus premised its

analysis on the question of whether the use of the mails, as a

general matter, was a foreseeable component of the scheme to

defraud. See id. at 1223-24. Indeed, in the course of its

analysis, the court noted that insurance fraud is the "paradigm"

case in which the use of the mails is reasonably foreseeable

because the payment and submission of insurance claims typically

involves mailings between the insurance company's agents and the

insured. See id. at 1223. So here.

IV. Pimental's Cross-Appeal

During its preliminary investigations in this case, the

U.S. Attorney's office filed an ex parte motion with the district

court seeking permission, on the basis of the exception to grand

jury secrecy, to disclose grand jury materials to investigators and

analysts of the IFB. The exception allows disclosure of grand jury

materials to "any government personnel -- including those of a

state or state subdivision" when such disclosure is necessary to

prosecute a criminal case. Fed. R. Crim. P. 6(e)(3)(A)(ii). The

reject its approach.

-31-
district court motion judge, who was not the trial judge, granted

the motion without opinion. No disclosure was made by the

prosecutor without court permission.

Subsequently, during pretrial discovery, Pimental moved

to dismiss the indictment, arguing that the government had violated

Rule 6(e) when it disclosed to Scott Faragi, an IFB investigator

who later testified before the grand jury, Pimental's bank records

and other material that had been obtained through the grand jury's

subpoena powers. Pimental argued that IFB agents such as Faragi

were not "government personnel" within the meaning of Rule

6(e)(3)(A)(ii), and thus the exception to grand jury secrecy was

not applicable and the earlier district court order was wrong.

In response, the trial court held that IFB investigators

can not be "government personnel" within the meaning of Rule 6(e),

and thus that the earlier ruling allowing the prosecutor to

disclose grand jury materials to IFB investigators was in error.

Pimental, 199 F.R.D. at 33-37 (D. Mass. 2001); Pimental, 201 F.R.D.

at 25-26. It did not hold that because the disclosure had been

authorized by the court, there could be no dismissal of the

indictment. Rather, the district court refused to dismiss

Pimental's indictment because the "error" did not substantially

affect the grand jury's decision to indict, and thus it was

harmless. Pimental, 204 F.R.D. at 227-28.

-32-
 Pimental now challenges this pre-trial denial of his

motion to dismiss the indictment. He also asks this court to

consider his post-trial renewal of that motion, which the district

court found to be moot due to its grant of Pimental's Rule 29

motion.

We conclude that the first district court's implicit

conclusion that IFB agents are "government personnel -- including

those of a state or state subdivision" within the meaning of Rule

6(e)(3)(A)(ii) was, on these facts, not error. We do not hold that

all IFB employees, regardless of the circumstances, are government

personnel, but only that here that decision was correct. We thus

affirm on alternate grounds the denial of Pimental's motion to

dismiss the indictment, which disposes of his post-trial renewal of

the motion.8 See Bonano v. E. Caribbean Airline Corp., 365 F.3d

81, 86 (1st Cir. 2004) ("We are not confined to the lower court's

rationale, but may affirm a judgment on any independent ground made

manifest by the record.").

(A) Grand Jury Secrecy and the Limited Exception for Government
Personnel.

Federal grand juries are responsible for investigating

criminal allegations while simultaneously shielding innocent

citizens from unfounded accusations of criminal conduct. See

8
The government assumed arguendo for purposes of this appeal
that Rule 6(e) was violated. We think it better to address the
issue directly.

-33-
Branzburg v. Hayes, 408 U.S. 665, 686-87 & n.23 (1972). These

sometimes competing roles "underlie[] the 'long-established policy

that maintains the secrecy of the grand jury proceedings in the

federal courts.'" United States v. Sells Eng'g, Inc., 463 U.S.

418, 424 (1983) (quoting United States v. Procter & Gamble Co., 356

U.S. 677, 681 (1958)). Grand jury secrecy facilitates the

investigation of criminal charges by assuring potential witnesses

that their testimony will not become public knowledge, thus

encouraging them to testify freely and limiting the potential that

they will be improperly influenced by those under investigation.

See id. At the same time, it ensures "that persons who are accused

but exonerated by the grand jury will not be held up to public

ridicule." Id. (quoting Douglas Oil Co. v. Petrol Stops Northwest,

441 U.S. 211, 219 (1979)).

The specific dimensions of the grand jury secrecy

requirements are codified in Fed. R. Crim. P. 6(e). That Rule

prohibits certain people -- including grand jurors, interpreters,

and, of particular relevance here, "attorney[s] for the government"

-- from disclosing "a matter occurring before the grand jury."

Fed. R. Crim. P. 6(e)(2)(b). Rule 6(e) also contains certain

exceptions to the general secrecy requirement. The first pertinent

exception at issue in this case, under subpart (3)(A)(ii), allows

"[d]isclosure of a grand-jury matter" to "any government personnel

-- including those of a state or state subdivision or of an Indian

-34-
tribe -- that an attorney for the government considers necessary to

assist in performing that attorney's duty to enforce federal

criminal law." Fed. R. Crim. P. 6(e)(3)(A)(ii). The second, under

6(e)(3)(E), empowers a district court to authorize disclosure in

certain situations. We think it implicit that a district court may

also act in a motion to authorize disclosure under subpart 3(A).

(B) The IFB and the "Plain Meaning" of "Government Personnel."

The IFB is a "quasi-governmental entity," In re Justices

of the Superior Court, 218 F.3d 11, 13 (1st Cir. 2000), that

investigates allegations of fraudulent insurance transactions.

Commonwealth v. Ellis, 429 Mass. 362, 365 (1999). Its creation was

authorized by Massachusetts statute, St. 1996, c. 427, § 13,9 and

carried out by two voluntary associations of Massachusetts

insurance carriers, the MWCRIB and the Automobile Insurance Bureau

(AIB), which are themselves licensed under Massachusetts law. See

id. at 13; Mass. Gen. Laws ch. 175A § 8 (licensing AIB); Mass. Gen.

Laws ch. 152 § 52C (licensing MWCRIB). See generally Ellis, 429

Mass. at 365. The authorizing statute requires that the MWCRIB and

AIB each fund half of the IFB's budget, § 13(c), and each provide

the IFB with five of its fifteen Board members, § 13(a). The

remaining five IFB Board members are Massachusetts public

9
This Act is codified in the notes to Mass. Gen. L. ch. 266,
§ 111B, rather than in the section itself. This confusing choice
of codification has resulted in the incorrect referencing of the
Act as codified as "Mass. Gen. Laws ch. 427, § 11." See, e.g., In
re Justices, 218 F.3d at 13.

-35-
officials. § 13(a). Under the statutory scheme, every insurer

"having reason to believe that an insurance transaction is

fraudulent" must advise the IFB of its suspicions. § 13(e). The

IFB, in turn, is required to review those cases and investigate

further when necessary. § 13(f). Where the IFB's executive

director "is satisfied that a material fraud, deceit, or

intentional misrepresentation has been committed in an insurance

transaction," he must "refer the matter to the attorney general,

the appropriate district attorney or the United States attorney."

§ 13(h) (emphasis added).

The trial court rejected the motion court's implicit

holding, concluding that IFB employees can not be "government

personnel," based primarily on a "plain meaning" reading of the

term. Emphasizing that the IFB's funding comes entirely from two

private associations of insurance companies and that the majority

of its Board are not public officials, the court concluded that

"the IFB inhabits a region of the private/public spectrum that is

much closer to a purely private agency." See Pimental, 199 F.R.D.

at 33.

As an initial matter, there may well be instances in

which an entity (or at least some of its employees) is considered

governmental for a particular purpose despite the fact that it is

both controlled and financed by private individuals. Even

assuming that the IFB is completely controlled and financed by

-36-
private insurance companies, that does not necessarily mean that

its employees cannot be government personnel for purposes of Rule

6(e).

Here, the district court's characterization of the IFB as

entirely funded and controlled by private entities was incorrect.

While it is true that the IFB's funding comes entirely from MWCRIB

and AIB, two private associations of insurance companies, both of

those associations are required by Massachusetts law to provide

that funding. See st. 1996, c. 427, § 13(c); see also Ellis, 429

Mass. at 373 n. 16. This is not an instance in which private

entities have voluntarily chosen to spend their resources on

investigative personnel. Cf. United States v. Tager, 638 F.2d 167,

168 (10th Cir. 1980) (where insurance companies voluntarily chose

to fund an entity to investigate insurance fraud and completely

controlled the scope of its actions, employees of the entity were

not "government personnel" within the meaning of Rule

6(e)(3)(A)(ii)).10 If anything, the IFB's funding is more akin to

10
In Tager, the government disclosed grand jury material to Mr.
House, an employee of the Insurance Crime Prevention Institute
(ICPI), an organization funded by insurance companies for the
purpose of investigating possible frauds against them. 638 F.2d at
168. Unlike in this case, though, there was no doubt that
"[n]either the ICPI nor Mr. House was in any official position
whatsoever." Id. The opinion does not indicate that any statute
existed that established or authorized the ICPI, provided for its
funding or structure, or gave it special responsibilities or
privileges. See id. The court briefly noted that Rule
6(e)(3)(A)(ii) did not apply because Mr. House was not "government
personnel," and spent the bulk of the opinion considering an
entirely separate exception to grand jury secrecy that is not at

-37-
a state-mandated tax on insurance companies than a voluntary

expenditure by private entities. Cf. Keller v. State Bar of Cal.,

496 U.S. 1, 9-11 (the mandatory charging of dues by the California

Bar Association was state action that implicated First Amendment

concerns). Indeed, the Supreme Judicial Court, the final arbiter

on Massachusetts law, has explicitly found that "insurance

companies [cannot] control the [IFB] by withdrawing financial

support" even were they to attempt to forego the benefits of

membership in the MWCRIB and AIB. If insurers withdrew from these

organizations, "the Legislature could easily amend the statute to

base assessments on premiums written or on some other standard."

Ellis, 429 Mass. at 373.

The trial court's analysis also underestimates the full

extent of the control that the Commonwealth exercises over the IFB.

Although only a third of the IFB's board members are public

officials, the IFB's purpose, organizational scheme, and basic

operations are all dictated by statute. And while the IFB's day-

to-day administration within the framework is, in large part,

controlled by individuals who are not public officials, it is also

subject to the constant oversight of the Massachusetts legislature,

to which the IFB must submit a report every six months. § 13(j).

In addition, the IFB was conceived of and authorized by

statute as part of a larger scheme to curb insurance fraud, a

issue here. See id. at 168-69.

-38-
matter of significant public concern, both at the state level, see

Ellis, 429 Mass. at 365, and nationally, see United States v. Hurn,

368 F.3d 1359 (11th Cir. 2004) (affirming federal conviction for

workers' compensation fraud); United States v. Fore, 169 F.3d 104

(2d Cir. 1999) (same). The IFB was also given significant powers

to achieve this goal, including access to various state records

that are not normally available to private entities and the right

to review all suspicions of fraud within the insurance companies.

See st. 1996, c. 427, §§ 13(d) & (e). It also has the affirmative

obligation to report suspicions of fraud when they are sufficiently

corroborated. § 13(h). Massachusetts chose to specify that those

suspicions may be reported to federal prosecutors.

The IFB straddles the line between a government and a

private entity, having attributes of each. As such, the text of

the Rule 6(e)(3)(A)(ii) itself provides little guidance on whether

IFB employees can be characterized as "government personnel" within

the meaning of the Rule. Neither this Court nor any other federal

circuit court11 has previously addressed whether IFB employees, or

similar quasi-state-government employees, fall within the term

"government personnel" in Rule 6(e)(3)(A)(ii).12 Given the lack of

11
Several district court decisions have addressed the issue.
See, e.g., In re Grand Jury Proceedings, 158 F. Supp. 2d 96 (D.
Mass. 2001).
12
The district court saw things differently, saying that Tager,
638 F.2d 167, involved a "finding [that] the government violated
Rule 6(e)(3)(A)(ii) under circumstances materially

-39-
either a clear textual resolution or of controlling authority, we

turn to the history of the Rule and its purpose in allowing

disclosure only to "government personnel" but not others.

(C) History and Purpose of the Exception to Grand Jury Secrecy in
Rule 6(e)(3)(A)(ii).

Before 1977, Rule 6(e) did not permit the disclosure of

grand jury materials to government employees who were not

attorneys. Sells Eng'g, 463 U.S. at 436. Over time, the lack of

such a provision became "something of a problem in practice,

because Justice Department attorneys found that they often needed

active assistance from outside personnel -- not only investigators

from the FBI, IRS, and other law enforcement agencies, but also

accountants, handwriting experts, and other persons with special

skills." Id. In response to this concern, the Advisory Committee

on Rules suggested amending Rule 6(e) to allow disclosure to non-

attorney government personnel. See id. at 436-37. Although

Congress heatedly debated the proposed amendment and initially

voted to disapprove it, concern focused principally on the prospect

that grand jury materials would be used to pursue civil, rather

than criminal, matters. See id. at 437. The principle of grand

jury secrecy would be severely compromised, the objection went, if

government agencies such as the IRS could indirectly use materials

indistinguishable from those here." Pimental, 199 F.R.D. at 35.
Tager has very little to do with this case, where there is no
immediately obvious answer to the question of whether the person to
whom the disclosure was made was government personnel.

-40-
collected by the grand jury to help prosecute a civil case against

an accused. See id. Most law-makers, it appears, agreed with the

basic principle that grand jury materials "should be available to

'every legitimate member of [the] team' conducting the criminal

investigation." Id. at 439 (quoting the testimony of Acting Deputy

Attorney General Richard Thornburgh, testifying before the House on

behalf of the Justice Department).

Precisely who was a "legitimate member" of the

prosecution team was also a subject of some discussion:

[Rep. James Mann:] Along the same line, the rule seems to
restrict to other Government personnel the experts -- and
I will use that term loosely -- that the attorney for the
Government may call upon. We have a pretty big
Government with a lot of experts, but on certain matters
there may not be a governmental employee who is expert in
that field. Is it your intention not to permit the
prosecutor to call in an astrologer or astronomer, for
example?

Professor LaFave [Reporter, Advisory Committee on
Criminal Rules]: Yes; that is correct. Apparently
representatives of the Justice department whom we talked
to about this particular problem did not seem to think
that was a problem, in other words, that there was an
occasion when they would need an expert and couldn't find
the astrologer some place in the Federal Government.

Proposed Amendments to the Federal Rules of Criminal Procedure:

Hearing Before the House Subcomm. on Criminal Justice of the House

Comm. on the Judiciary, 95th Cong. 92 (Feb. 24, 1977). The Rule's

limitation of disclosure to "government personnel" thus reflected

the basic belief that any needed expertise on a particular criminal

-41-
matter could be found within the confines of the federal

government.

As it turned out, federal prosecutors could not always

find the necessary expertise within the federal government to

prosecute a case. In some instances, federal prosecutors

temporarily hired outside experts to assist in the prosecution of

a case. Recognizing the import of sharing grand jury materials

with such temporary employees, two circuit courts held that such

temporary employees were indeed "government personnel" within the

meaning of the Rule 6(e)(3)(A)(ii). United States v. Anderson, 778

F.2d 602, 605 (10th Cir. 1985) (an expert witness on trust law);

United States v. Lartey, 716 F.2d 955, 963-64 (2d Cir. 1983) (a

retired I.R.S. agent). Federal prosecutors also occasionally

sought the assistance of state and local employees, attempting to

share secret grand jury materials with them. The district courts'

responses to such efforts were more mixed. Compare In re Grand

Jury Proceedings, 445 F. Supp. 349, 350 (D.R.I. 1978) (state and

local personnel are not within the exception for government

personnel in the Rule); with In re 1979 Grand Jury Proceedings, 479

F. Supp. 93, 95-96 (E.D.N.Y. 1979) (state and local personnel

included).

Partially in response, Rule 6(e)(3)(A)(ii) was amended in

1985 to include expressly personnel "of a state or state

subdivision" within the term "government personnel." See Fed. R.

-42-
Crim. P. Rule 6, advisory committee's notes on 1985 amendments.

"It is clearly desirable," the Committee wrote, "that federal and

state authorities cooperate, as they often do" in complex cases

such as "major fraud cases" and that federal prosecutors have

access to "the assistance of state law enforcement personnel, which

could be uniquely beneficial." Id. Although increased disclosure

was obviously in tension with the general rule of grand jury

secrecy, the Committee "emphasized that the disclosure permitted is

limited": it is permissible only "in connection with the attorney

for the government's 'duty to enforce criminal law' and only to

those personnel 'deemed necessary . . . to assist' in the

performance of that duty." Id.

Two important themes, for our purposes, can be discerned

from this legislative history. First, a key purpose of Rule

6(e)(3)(A)(ii) is to facilitate cooperation between federal

prosecutors and state personnel, who often are uniquely situated to

assist in the investigation and prosecution of federal criminal

cases. When court decisions tended to limit the potential for such

cooperation because of concerns that state officials, who are not

under the control of the federal government, could not be entrusted

with grand jury materials, they were explicitly overruled by

Congress. Thus, Congress made a conscious decision to entrust

certain state, as well as federal, personnel with information

concerning matters before a grand jury under certain conditions.

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Second, a primary safeguard for protecting the countervailing

interest in the secrecy of grand jury proceedings is the

requirement that such disclosure must be necessary for the

enforcement of criminal law. Although the Rule's limitation to

"government personnel" also helps to assure the secrecy of grand

jury proceedings, that limit was not contemplated by either

Congress in 1977 or the Advisory Committee in 1985 as the primary

mechanism for doing so.

These themes convince us that the exception in Rule

6(e)(3)(A)(ii) may cover the unique quasi-governmental

investigators of the IFB, depending on the facts of the situation.

In many instances of insurance fraud in Massachusetts,

IFB investigators, rather than members of a more classic state law

enforcement agency, will be the individuals who will have the most

in-depth knowledge of that fraud. This is a direct result of the

way in which Massachusetts has chosen to structure its

investigations into such matters. Congress clearly desired that

Rule 6(e)(3)(A)(ii) would allow federal prosecutors to take

advantage of the state's investigative processes when such

cooperation was necessary to prosecute federal crimes such as mail

fraud.

Additionally, by specifically including state personnel

in Rule 6(e)(3)(A)(ii), Congress chose to trust state officials

that the state itself had entrusted with the investigation of

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criminal matters. Here, Massachusetts has given the hybrid

private/public IFB significant powers and responsibilities. In the

course of their initial investigations, IFB investigators have

access to non-public information that is not normally available to

private investigators. § 13(d). If that investigation leads the

IFB executive director to refer the case to the Attorney General's

Office, the IFB investigator initially assigned to the case

provides significant support to the prosecuting attorney. See

Commonwealth v. Harwood, 432 Mass. 290, 299 (2000) ("[I]t has been

customary for principal investigators from the IFB to provide

ongoing investigatory support for the Attorney General's subsequent

inquiries."). Moreover, in state criminal prosecutions the state

considers IFB agents to be assistants to prosecutors: "for the

purposes of preserving potentially exculpatory evidence," the IFB

is "under the general supervisory umbrella of the office of the

prosecutor." Id. at 300. Consequently, exculpatory evidence that

IFB investigators lose can be attributed to the prosecution. Id.

We do not know the many factual variations that could be

presented by use of IFB personnel on federal criminal investigative

teams; we do not hold that all IFB personnel are qualified as a

matter of status. Because the interest in the secrecy of grand

jury proceedings is intense, this is not an area for categorical

approvals tied to labels. The mere fact that a person works for

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 the IFB does not mean that he or she fits the definition for

government personnel within Rule 6(e)(3)(A)(ii).

For this reason, we do not consider that the prosecution

has self-executing powers under Rule 6(e)(3)(A)(ii) simply to

designate IFB personnel as recipients of grand jury material.

Rather, the prosecutor must seek court authorization where quasi-

governmental agencies such as the IFB are involved and make a

functional showing that the individual involved is within the Rule.

In the past, the Office of the U.S. Attorney for Massachusetts has

chosen to seek court authorization first, on a case-by-case basis

whenever it wishes IFB personnel to be involved. It should

continue to do so.

V.

The district court's grant of the Rule 29 motion is

reversed. The denial of the motion to dismiss the indictment is

affirmed and the renewal of that motion is denied. The case is

remanded to the district court for sentencing.

1

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