United States v. Phillips

IN THE UNITED STATES COURT OF APPEALS

FOR THE FIFTH CIRCUIT

_____________________

No. 98-30968
_____________________

UNITED STATES OF AMERICA,

Plaintiff-Appellee,

versus

CHANEY L. PHILLIPS; EMERSON C. NEWMAN,

Defendants-Appellants.
_________________________________________________________________

Appeals from the United States District Court for the
Middle District of Louisiana
_________________________________________________________________
July 13, 2000
Before JOLLY, EMILIO M. GARZA, and BENAVIDES, Circuit Judges.

E. GRADY JOLLY, Circuit Judge:

This appeal presents evidence of several discrete schemes of

local corruption involving ghost employees, payment of salary

kickbacks, and misuse of state government funds. Based on this

evidence and other related illegal conduct, a federal jury

convicted the appellants, Chaney Phillips, the tax assessor for

St. Helena Parish, Louisiana, and Emerson C. Newman, a political

ally, on all counts of a twenty-count indictment, charging

conspiracy, mail fraud, engaging in an illegal monetary

transaction, theft involving a federally funded program, money
laundering, and perjury.1 The district court sentenced Phillips to

serve sixty months concurrently on each of counts 1, 2, and 16-20,

and ninety-seven months concurrently on each of counts 3, 4, and

5-14. The district court also ordered Phillips to pay restitution

in the sum of $225,587.56. The district court sentenced Newman to

fifty-one months for counts 1 through 15, with restitution in the

amount of $224,404.56.

We reverse their convictions with respect to theft involving

a federally funded program, 18 U.S.C. § 666, because we find no

adequate relationship between the tax assessor’s office and the

federal funds. As the money laundering convictions under counts

1
The individual counts of the indictment are addressed to
particular schemes. No count pertains to the full range of alleged
malfeasance. Specifically, the twenty-count indictment charged
Phillips and Newman jointly with (count 1) conspiracy to commit
mail fraud in violation of 18 U.S.C. § 1341 and to engage in an
illegal monetary transaction in violation of 18 U.S.C. § 371
(related to Newman’s first appearance on the payroll in 1990 and
Jean Newman’s alleged pseudo-employment 1990-92), and to violate 18
U.S.C. § 666; (count 2) mail fraud in violation of 18 U.S.C. § 1341
(involving negotiation of a $15,000 life insurance check after
Jean’s death); (count 3) an illegal monetary transaction in
violation of 18 U.S.C. § 1957 (related to the same $15,000 check);
(count 4) theft concerning a federally funded program in violation
of 18 U.S.C. § 666 (concerning Newman’s 1995 alleged pseudo-
employment only); and (counts 5-14) money laundering in violation
of 18 U.S.C. § 1956 (involving financial transactions with respect
to the employment checks from Newman’s 1995 alleged pseudo-
employment). Count fifteen charged Newman alone with perjury
before the Grand Jury in violation of 18 U.S.C. § 1623 (related to
false sale of a horse to Phillips and Phillips’s hardware account).
Finally, counts sixteen through twenty charged Phillips with five
additional counts of mail fraud in violation of 18 U.S.C. § 1341
(related to Phillips’s clothing store scheme).

2
five through fourteen are tied wholly to the § 666 charge, the

convictions under counts five through fourteen also are reversed.

We affirm the convictions, however, on all the indictment’s

remaining counts.

I

Phillips served as the elected Tax Assessor for St. Helena

Parish, Louisiana, from 1981 to 1997. In 1997, Phillips was

elected sheriff for St. Helena Parish and served in that capacity

until his conviction. Newman, a friend and political supporter,

owned and operated a hardware store in Greensburg, St. Helena

Parish, with his first wife, Jean. After a long illness, Jean died

of cancer in July of 1992.

The evidence focused on several different schemes involving

Phillips and Newman. From a monetary perspective, the most

significant of these was an insurance scheme that ran from 1990-92.

Triggering the scheme was the Newmans’ loss of health insurance

sometime in late 1989 or early 1990. Starting in 1990, Phillips

placed Newman and his wife Jean on the assessor’s payroll so that

they would be eligible for health insurance benefits. The Newmans

purportedly were hired to assist in bringing the assessment

district in compliance with state property assessment regulations

and/or to act as “spotters” for the assessor’s office. Their

ownership and management of Greensburg’s largest hardware store

3
supposedly allowed them to look for signs of new construction or

property improvement that would affect a property’s assessed value.

According to the defendants, the parish’s lack of a building code

or permit system necessitated that someone fill this role.2

Phillips employed Newman for three months. Thereafter, Newman

resigned the position, only to be replaced by Jean on the

assessor’s payroll. She remained there through June 1992, one

month prior to her death. The government contended that the

Newmans either did no work for their $800 per month paychecks or

they did insufficient work for this salary. The evidence at trial,

especially when viewed most favorably from the point of view of the

government as the prevailing party, allowed the jury reasonably to

conclude that the Newmans did little or no work for these benefits,

and that the Newmans kickbacked their salaries to Phillips.

While on the payroll in this period, the Newmans received a

gross salary totaling $23,200. They also received $177,538.19 in

health insurance benefits through the Louisiana Assessors’

Insurance Fund (“LAIF”). Additionally, as part of the benefits

conferred by the insurance plan, Newman received a one-time $15,000

payment as beneficiary of Jean’s LAIF life insurance policy.

2
The testimony showed that Phillips also paid two other
individuals--Laura Bankston and Patricia Easley--relatively small
amounts, $150 per month over a ten- to fifteen-year period, to
perform this role.

4
 There were other schemes. The “hardware scheme” relates to a

later period of employment, starting approximately two and one-half

years later in February 1995, when Newman again appeared on the

payroll of the assessor’s office. He remained there for ten

months. During this period, Newman received paychecks amounting to

$8,000, or $4,758 after taxes. Newman credited this entire amount

to Phillips’s account at Newman’s hardware store. Phillips and

Newman contended that the credits to Phillips’s account stemmed

from the sale of a horse that Phillips allegedly sold to Newman.

The “clothing scheme” involved Phillips only. On three

occasions Phillips charged personal items of clothing from a men’s

store to the assessor’s office. The store billed these charges to

the assessor’s office as employee uniforms. Upon learning of the

investigation into the activities of the assessor’s office,

Phillips paid cash to the store owner and received in return a

refund check with which to reimburse the assessor’s office. The

store’s proprietor, David Albin, testified at trial to these

transactions.

Still another scheme was introduced at trial, although not

alleged in the indictment: a vote-buying scheme. The government

introduced this evidence to show intent and motive under Fed. R.

Evid. 404(b). As we noted, in 1997, Phillips ran for sheriff in a

special election and won. During this election, Newman paid two

5
individuals to vote for Phillips. An individual brought potential

voters to Newman’s hardware store, where they checked in with

Newman. They next went to the courthouse and voted; then they

returned to the store where Newman paid each of them twenty dollars

for voting for Phillips. The individuals receiving money for their

votes, as well as the go-between and Newman, were arrested and

charged in conjunction with these crimes by state officials.

Phillips was never charged in this matter. Indeed, an effort to

implicate Phillips in this scheme failed when he rebuffed an

approach by the government’s informer.

II

We first set out the various standards of review that will be

applied in our review of these convictions. First, we review the

conviction “viewing the evidence in the light most favorable to the

government, [to determine whether] a rational trier of fact could

have found the essential elements of the offense beyond a

reasonable doubt.” United States v. Greer, 137 F.3d 247, 249 (5th

Cir. 1998). We review questions of law and application of statutes

de novo. See Voest-Alpine Trading USA Corp. v. Bank of China, 142

F.3d 887, 891 (5th Cir. 1998); United States v. Westmoreland, 841

F.2d 572, 576 (5th Cir. 1988). We review the district court’s

admission of evidence for an abuse of discretion. See United

States v. Pace, 10 F.3d 1106, 1113 (5th Cir. 1993). If we find an

6
abuse of discretion, the harmless error doctrine is applied. See

United States v. Skipper, 74 F.3d 608, 612 (5th Cir. 1996). We

thus affirm evidentiary rulings unless the district court abused

its discretion and a substantial right of the complaining party was

affected. See United States v. Asibor, 109 F.3d 1023, 1032 (5th

Cir. 1997).

III

We first consider the 18 U.S.C. § 666 convictions, convictions

that stem only from Newman’s 1995 employment.3 Section 666, is

3
We need not address the conspiracy count (count 1), or the
mail fraud counts (counts 2 and 16-20). With respect to the
conspiracy count (count 1), the appellants were charged with
engaging in a conspiracy to violate three laws of the United
States; that is, the mail fraud statutes (§ 1346), the money
laundering statutes (for negotiating the $15,000 check) (§ 1957),
and theft from a federally funded program (§ 666). In reversing
the theft from a federally funded program conviction (count 4), and
the money laundering convictions (counts 5 through 14), effectively
we have held, by concluding that the record here does not support
the essential elements of the crimes, that the illegal conspiracy
did not encompass these criminal statutes. Nevertheless, we find
nothing in the briefs that challenges the conspiracy conviction
based on the mail fraud statute, and, to be sure, the evidence
clearly is sufficient to support such a conspiracy; consequently,
the convictions of each of the defendants under count 1 are
affirmed.
Count 2 of the indictment, alleging mail fraud, relates only
to the 1990-92 scheme, and charges that Phillips and Newman devised
a scheme, and in order to effectuate the scheme, knowingly caused
a check payment to Newman in the amount of $15,000 to be sent and
delivered by the United States Postal Service. This check was paid
under the insurance policy to Newman, as beneficiary, upon the
death of his wife, Jean. Counts 16-20 relate to the “clothing
scheme” involving Phillips alone. These counts charge that
Phillips devised a scheme to defraud the assessor’s office for his
personal benefit, by instructing, on two occasions, a clothing

7
entitled “Theft or bribery concerning programs receiving Federal

funds.”4 The elements of the crime as presented by the

store proprietor to bill the assessor’s office for sums labeled as
ladies uniform purchases, which were, in fact, personal purchases
of clothing for himself. The invoices were sent by the mails, and
the assessor’s office paid these invoices through the mails. Each
of these uses constitutes a count of the indictment. The last
count goes to Phillips’s attempt to coverup his scheme by
requesting that the store refund money to the assessor’s office,
again through the mails. On appeal, they are not contesting that
the government’s evidence failed to establish the crime of mail
fraud, either with respect to the life insurance check or the
clothing store scheme. In any event, the evidence is clearly
sufficient to sustain these convictions under this count and the
convictions on counts 2 and 16-20 are affirmed.
Count 3 charges that Phillips and Newman engaged in an illegal
money transaction involving property derived from mail fraud when
Newman negotiated the $15,000 death benefit check, in violation of
18 U.S.C. § 1957. With respect to count 3, only Phillips
challenges his conviction, arguing that he cannot be held to have
aided and abetted Newman in this crime. This is an issue we
discuss later and in which we find no merit. The convictions of
each of the defendants on count 3 are affirmed.
4
The statute states in relevant part:

(a) Whoever, if the circumstance described in subsection
(b) of this section exists-
(1) being an agent of an organization, or of a
State, local, or Indian tribal government, or any agency
thereof-
(A) embezzles, steals, obtains by fraud, or
otherwise without authority knowingly converts to the use
of any person other than the rightful owners or
intentionally misapplies, property that-
(i) is valued at $5,000 or more and
(ii) is owned by, or is under the care,
custody, or control of such organization, government, or
agency; or
(B) corruptly solicits or demands for the
benefit of any person, or accepts or agrees to accept,
anything of value from any person, intending to be
influenced or rewarded in connection with any business,

8
prosecution under the facts in this case and as set forth by the

district court in its jury charge are: (1) the defendant is an

agent of the relevant state or local government or agency; (2)

which received in excess of $10,000 under a federal program

involving a federal grant, etc.; (3) the defendant committed the

statutorily proscribed acts with respect to property that was owned

by, or under the care, custody, or control of the state or local

government or agency; and (4) the property at issue had a value in

excess of $5,000. The defendants focus their argument only the

first element, i.e., that Phillips had an agency relationship with

transaction, or series of transactions of such
organization, government, or agency involving anything of
value of $5,000 or more; . . .
(b) The circumstance referred to in subsection (a) of
this section is that the organization, government, or
agency receives, in any one year period, benefits in
excess of $10,000 under a Federal program involving a
grant, contract, subsidy, loan, guarantee, insurance, or
other form of Federal assistance.
. . .
(d) As used in this section-
(1) the term “agent” means a person authorized to
act on behalf of another person or a government and, in
the case of an organization or government, includes a
servant or employee, and a partner, director, officer,
manager, and representative.
(2) the term “government agency” means a subdivision
of the executive, legislative, judicial, or other branch
of government, including a department, independent
establishment, commission, administration, authority,
board, and bureau, and a corporation or other legal
entity established, and subject to control, by a
government or governments for the execution of a
governmental or intergovernmental program . . . .

9
a recipient of federal monies. Indeed, given the evidence that was

admitted into the trial record (some of which is challenged on

admissibility grounds), the jury reasonably found on the evidence

before it that Phillips wrongly converted funds of the assessor’s

office in placing Newman on the payroll in 1995, and that Phillips

corruptly accepted something of value from someone who expected to

be rewarded in a transaction with the assessor’s office, when

Philips accepted kickbacks from Newman.5 We should make clear that

the count charging a § 666 violation did not allege the conduct

occurring with respect to the 1990-92 insurance scam.

The federal funds in question were food stamps provided to

parish residents. The program was administered, and the food

stamps issued, by an agency that was part of the parish

government.6 Thus, the question is whether, for purposes of § 666,

Phillips as tax assessor was an agent of the parish.

5
Newman was convicted under § 666 as an aider and abettor.
6
We make specific note that the food stamps that constitute
the basis of this prosecution are a federal individual entitlement.
There could be some question whether individual entitlement
benefits can constitute the benefits referred to in subsection (b).
The language of this subsection appears to refer to federal
benefits provided to state and local governments qua governments.
This reading would not be inconsistent with the legislative
history. Cf. Fischer v. United States, __ U.S. __, 120 S.Ct. 1780,
2000 WL 574360, *6-8 (majority opinion), *9 (Thomas, J.,
dissenting) (May 15, 2000). This point, however, has not been
raised on appeal.

10
 Consistent with the broad terms of the statute, the district

court instructed the jury that Phillips and Newman could be

convicted under the Act if it found Phillips to be authorized to

act on behalf a government or agency receiving federal funds. The

district court instructed the jury that “[u]nder Louisiana law, tax

assessors are parish officers.” The government argued to the jury

and it now argues before us on appeal that, for purposes of § 666,

St. Helena Parish is a local governmental body and the tax assessor

is a parish agent. Thus, the agency question in this appeal turns

entirely on whether Phillips was an agent of St. Helena Parish for

purposes of § 666. For the reasons provided below, we conclude

that Phillips was not an agent of St. Helena Parish under § 666.

1

In determining the proper meaning of “agent” as applied in

this case we start with its statutory language. Under § 666(a)(1)

and (b), the defendant must “an agent of an organization,

government, or agency” that receives in excess of $10,000 in a one-

year period. See also United States v. Moeller, 987 F.2d 1134,

1137 n.9 (5th Cir. 1993)(“The defendant must be an ‘agent’ of a

‘government agency’ that receives in excess of $10,000 from the

federal government within a one-year period.”). Subsection (d)(1)

broadly defines “agent” as “a person authorized to act on behalf of

another person or a government and, in the case of an organization

11
or government, includes a servant or employee, and a partner,

director, officer, manager, and representative.” The question is

whether this definition–-conceding the elasticity of its general

wording–-properly can be read to make the tax assessor’s office an

agent of the parish for purposes of this § 666 prosecution. As

part of § 666, subsection (d)(1) must be read in the context of

that statute whose purpose is to protect the integrity of federal

funds.7 We know from the Supreme Court’s decision in Salinas v.

United States, 522 U.S. 52, 118 S.Ct. 469, 473-74 (1997), that the

funds in question need not be purely federal, nor must the conduct

in question have a direct effect on federal funds. The statute

7
Our application of agency principles fully comports with the
statute’s legislative history. That history reveals Congress’
concern with a defendant’s ability to administer or control the
federal funds provided to a particular agency. In Westmoreland, in
interpreting the legislative history, we stated that “Congress has
cast a broad net to encompass local officials who may administer
federal funds, regardless of whether they do.” 841 F.2d at 577.
See also id. at 578 (“Although the extent of the federal
government’s assistance programs will bring many organizations and
agencies within the statute’s scope, the statute limits its reach
to entities that receive a substantial amount of federal funds and
to agents who have the authority to effect significant
transactions.”). See also United States v. Marmolejo, 89 F.3d
1185, 1192-93 (5th Cir. 1996), aff’d sub nom. Salinas v. United
States, 522 U.S. 52, 118 S.Ct. 469 (1997); United States v.
Jennings, 160 F.3d 1006, 1012 (4th Cir. 1998) (“This
subsection . . . prohibits payoffs to state and local officials who
influence the distribution of federal funds.”); United States v.
Rooney, 37 F.3d 847, 851 (2d Cir. 1994) (interpreting § 666's
“manifest purpose” as “to safeguard finite federal resources from
corruption and to police those with control of federal funds.”)
(emphasis added; citation omitted).

12
possibly can reach misuse of virtually all funds of an agency that

administers the federal program in question. Id. It is a

different matter altogether, however, to suggest that the statute

can reach any government employee who misappropriates purely local

funds, without regard to how organizationally removed the employee

is from the particular agency that administers the federal

program.8 Thus, we think that, in the context of the facts of this

appeal and in the light of decided cases, the question of whether

Phillips was an agent of St. Helena Parish within the meaning of

§ 666, turns on whether Phillips, as tax assessor, was authorized

to act on behalf of the parish with respect to its funds.9 10

8
After all, the statute’s title--“[t]heft or bribery
concerning programs receiving Federal funds”–-is some evidence that
Congress intended to address only illegal acts that concern
federally-funded programs.
9
We have stated the question perhaps more broadly than
necessary. See Salinas, 118 S.Ct. at 474 (suggesting statute might
require some minimum degree of connection between the illegal
conduct and the federal program funds) (“We need not consider
whether the statute requires some other kind of connection between
a bribe and the expenditure of federal funds, for in this case the
bribe was related to the housing of a prisoner in facilities paid
for in significant part by federal funds themselves. And that
relationship is close enough to satisfy whatever connection the
statute might require.”). Because of the absence of evidence that
connects the assessor’s office to control or expenditure of any
funds of the parish, we need not consider whether there is yet some
remoteness of connection to federal funds that § 666 will not
reach.
10
The dissent seems to suggest that we impose a requirement
under the statute that a defendant be authorized to act with
respect to the agency’s funds. If this is the suggestion of the

13
 2

The answer to this question first requires an understanding of

the relationship between an assessor and a parish under Louisiana

law. The Louisiana Constitution, as well as statute, establishes

assessment districts as independent of parish government and

therefore, although Phillips was the tax assessor for property in

the parish, the parish has no power, authority, or control over the

assessor’s duties or job. See La. Const. art. VI, §§ 5(G) and

7(B), and art. VII, § 24 (“Tax Assessors”). An assessor’s duties

are set forth by state, not parish, law. See, e.g., La. R.S.

§§ 47:1324, 1903, 1956-57, 1993.11 Phillips was not an officer of

the parish as a matter of law.

dissent, the dissent completely miscomprehends the thrust of the
majority’s opinion. We simply apply the statute to the facts of
this case in trying to determine whether Phillips was an “agent”
within the meaning of the statute. The statute also covers various
conduct based on a defendant’s status as an employee, partner,
director, officer, manager or representative of the organization
receiving federal funds, which may or may not require some
relationship to the organization’s funds. In the case before us,
however, as we have noted above, the question of agency status
under § 666 ultimately becomes whether there was any relationship
between the tax assessor’s office and the parish funds. In sum,
our opinion does not address the various forms of conduct that can
affect the integrity of federal funds.
11
We are aware that Phillips declared himself a parish officer,
but his personal declaration cannot override state constitutional
and statutory authority to the contrary. Furthermore, whether he
personally declared himself an officer of the parish is
insignificant because a self-declared title has no bearing on his
ability to control parish funds or to bind the parish in any way.

14
 Moreover, the activities of the assessor are supervised by the

Louisiana Tax Commission, a state board controlled by state

officials. See La. R.S. § 47:1831-37. Indeed, the cover story

for hiring Newman was the supposed need for extra help in

complying with state law and regulations governing property

reassessment. The prosecution never challenged that the assessor’s

duties are driven by state law and the state tax commission, and

that the parish has no control over the assessor.12

We further note that the assessor’s salary is not set by the

parish, the salary is not paid for by the parish, and the assessor

receives no employee benefits from the parish. The assessor’s

office has a separate retirement system and health and life

insurance benefits. See La. R.S. §§ 11:401-83. The tax assessor’s

office receives no federal funds, and, in fact, is almost wholly

self-funded by a tax millage.13

12
We note that under standard agency principles, the ability
to control an individual is a necessary element in any agency
relationship. See Restatement of Agency (2d), § 1. The dissent
regards agency principles as “irrelevant” because it is possible to
construe Phillips as an individual “authorized [by the state] to
act on behalf of the parish.” We do not disagree, given the
unlimited breadth of the statute, that this reading is possible.
Such a reading, however, is contrary to the legislative history,
our precedent, and the case law from the Supreme Court and our
sister circuits. A reasonable application of the statute precludes
the senseless conclusion that an individual can be an agent of one
who exercises no control, direct or indirect, over that individual.
13
It is true that tax assessor geographical districts, with one
exception, are coterminous with the territory of each parish and

15
 As the assessor’s office is statutorily and practically

removed from the parish government, so too is the reverse true.

There is nothing in the record to indicate that Phillips had any

ability to control or administer employees or programs or funds of

the parish. He had no legal authority to bind the parish. There

that the assessor is voted into office by the electors of the
parish. It is also true that the taxes raised from the assessment
district go to the parish. These connections, however, do not make
Phillips an agent of the parish for purposes of § 666 when he has
no connection with any funds of the parish and when the parish has
no control over him, either directly or indirectly. Moreover,
state law requiring the parish to provide office space, furniture,
and utilities illustrates the independence of the assessor as this
provision would be unnecessary if the assessor’s officer were a
part of the parish government. See La. R.S. § 33:4713.
In an effort to meet the “nexus” requirement, the dissent
leans heavily on the hypothetical possibility that Phillips’s
fraudulent payments to Newman put the parish at risk of making up
any shortfall resulting from the malfeasance of the assessor’s
office. The government, however, never suggested or established at
trial that this was a possibility. More importantly, the fraud
must have the potential to affect the identified federal funds or
program. See, e.g., Fischer, 2000 WL 57430, *9 (“The Government
has a legitimate and significant interest in prohibiting financial
fraud or acts of a bribery being perpetrated upon Medicare
providers. Fraudulent acts threaten the program’s integrity. They
raise the risk participating organizations will lack the resources
requisite to provide the level and quality of care envisioned by
the program.”). There is nothing here that even remotely
approaches the threat identified in Fischer. Even if the parish
had needed to assist the assessor’s office financially, there is
nothing in this record to show that this could have affected the
integrity of the food stamp program. Furthermore, the record
utterly fails to establish that the funds fraudulently paid to
Newman were “owned by, or . . . under the care, custody, or control
of [the parish],” as required in subsection (a)(1)(A)(ii) of the
Act. Finally, the dissent admits that we have extended § 666
liability no further than to those “who may administer federal
funds.” Marmolejo, 89 F.3d at 1192.

16
is a complete absence of any relationship between the food stamp

issuing office and the assessor’s office. In sum, because

Phillips, as a matter of law, was not an employee or officer of the

parish and because he was not authorized to act on behalf of the

parish with respect to its funds, Phillips’s actions did not and

could not have threatened the integrity of federal funds or

programs.14 Without an agency relationship to the recipient of

14
In close parallel to our analysis, § 666 has been construed
to require that the recipient organization must be affected by the
fraud. See, e.g., United States v. Fischer, 168 F.3d 1273, 1276
(11th Cir. 1999) (“The statutory prerequisite for a conviction
under 18 U.S.C. § 666 is that the organization or agency affected
by the fraud . . . ‘receives . . . benefits in excess of
$10,000 . . . .’”) (emphasis added); United States v. LaHue, 998
F.Supp. 1182, 1190 (D. Kansas 1998) (“[S]ection 666 jurisdiction
does not reach beyond the target recipient of the pertinent federal
program.”).
This requirement squares with the legislative history and the
plain language of the statute. See e.g., United States v. Zwick,
199 F.3d 672, 1999 WL 1201443, *9 (3d Cir. Dec. 15, 1999) (“The
legislative history of § 666 explains that the statute was enacted
to correct deficiencies in existing law by ‘creat[ing] new offenses
to augment the ability of the United States to vindicate
significant acts of theft, fraud, and bribery involving Federal
monies . . . .’”) (citing S.Rep. No. 98-225, 369-70) (alteration in
original); United States v. Coyne, 4 F.3d 100, 110 n.1 (2d Cir.
1993) (“With regard to theft, the Committee Report states that it
must be ‘from a [federally funded] program.’ With regard to
bribery, the Committee Report states that the conduct of the
recipient of the bribe must be ‘related to the administration of [a
federally funded] program. It also states that the conduct sought
to be influenced by the bribe must be ‘related to the
administration of the [federally funded] program.’”) (citations
omitted; alterations in original). Again, the government never
contended that the funds of St. Helena Parish were affected by
Phillips’s and Newman’s fraud. This is not to say, however, that
the illegal conduct must affect the federal funds directly. It
need not. See Salinas, 118 S.Ct. at 475; Westmoreland, 841 F.2d at

17
federal funds, § 666 does not reach the misconduct of local

officials.

3

Our analysis and holding today is consistent with our previous

observation that “[a]lthough the conduct prohibited by section 666

need not actually affect the federal funds received by the agency,

there must be some nexus between the criminal conduct and the

agency receiving federal assistance.” Moeller, 987 F.2d at 1137

(emphasis added).15 Although we have not elaborated on this

statement, the Supreme Court has suggested, as we have observed

576-78.
15
The dissent asserts that the relationship in Moeller cannot
be distinguished from the relationship here, arguing that the Texas
Federal Inspection Service (“TFIS”) is a stand-in in this case for
the tax assessor’s office and the Texas Department of Agriculture
(“TDA”) is a stand-in for the parish. We disagree that the
relationships are indistinguishable. The relationship between TFIS
and TDA included joint supervision over employees, the enforcement
of TDA regulations by TFIS employees, and a cooperative agreement
between the two entities. Here, the tax assessor’s office was
independent of the parish. The parish exercised no control or
supervision over the tax assessor’s office or its employees. The
tax assessor’s office enforced state law, not parish law.
Furthermore, the service that the tax assessor’s office provided
the parish resulted from the mandate of state law, not from an
agreement between the parish and the assessor’s office.
Consequently, the factors that allowed the court to find an agency
relationship in Moeller cannot be found in this record. Nor is
there any comparable relationship to the facts in Westmoreland or
Marmolejo. Thus, the dissent’s conclusion that “we have already
decided the statutory question before us contrary to the majority
opinion” is incorrect.

18
earlier, that the statute might require just such a nexus or

connection between a bribe or kickback and the expenditure of

federal funds. Salinas, 118 S.Ct. at 474. In a similar vein, the

Second Circuit had held that “the assessment of the thing’s value

must be connected, even if only indirectly, to the integrity of

federal program funds.” United States v. Foley, 73 F.3d 484, 490

(2d Cir. 1996).16 So too has the Third Circuit required this

connection. See Zwick, supra, 1999 WL 1201443, *11. But see

United States v. Dakota, 188 F.3d 663 (6th Cir. 1999) (dismissing

nexus requirement argument without discussion). The absence of

this “nexus” or “connection” thus reinforces our conclusion that

Phillips was not an agent of a recipient of federal funds for

purposes of § 666.

4

Finally, we should observe that our construction of the

statutory term “agent” is an appropriate method for deciding this

case because the convictions on these facts raise troubling

constitutional issues, which we would otherwise have to address.

16
The Second Circuit has reaffirmed the post-Salinas validity
of Foley. See United States v. Santopietro, 166 F.3d 88, 93 (2d
Cir. 1999) (“[T]o the extent that Foley requires at least some
connection between the bribe and a risk to the integrity of the
federal funded program, nothing in Salinas disturbs such a
requirement. . . . Thus, even after Salinas, Foley would not permit
the Government to use section 666(a)(1)(B) to prosecute a bribe
paid to a city’s meat inspector just because the city’s parks
department had received a federal grant of $10,000.”).

19
 Congress’ authority to enact § 666 rests on the Spending

Clause of the Constitution. See U.S. Const., art. I, § 8. Though

broad, the power of Congress to impose duties on non-federal

entities under the Spending Clause is not without limits. See

South Dakota v. Dole, 483 U.S. 203, 207 (1987) (citation omitted).

The Court has stated: “[C]onditions on federal grants might be

illegitimate if they are unrelated ‘to the federal interest in

particular national projects or programs.’” Id. (citations

omitted). This § 666 prosecution of local government corruption

advances no federal interest in safeguarding a particular federal

program because the assessor’s office has absolutely no connection

with the administration of the food stamp program administered by

St. Helena Parish.17 Our approach is thus consistent with the

principle of statutory construction that favors the avoidance of

constitutional questions.18

17
See, e.g., Zwick, 1999 WL 1201443, *8 (“The most literal
interpretation-–that the statute lacks a federal connection
requirement--is troubling from an interpretative standpoint in that
it broadens the range of activity criminalized by the statute and
alters the existing balance of federal and state powers by
encompassing acts already addressed under state law in which the
federal government may have little interest.”). See also George D.
Brown, Stealth Statute–Corruption, the Spending Power, and the Rise
of 18 U.S.C. § 666, 73 Notre Dame L.Rev. 247, 257, 266, 312 (1998).
18
See, e.g., Jones v. United States, 526 U.S. 227, 119 S.Ct.
1215, 1222 (1999) ("[W]here a statute is susceptible of two
constructions, by one of which grave and doubtful constitutional
questions arise and by the other of which such questions are
avoided, our duty is to adopt the latter.")(citations omitted);

20
 In sum, the absence of any federal interest in this

prosecution militates in favor of our analysis that the statutory

term “agent” should not be given the broadest possible meaning, as

urged by the government, but instead should be construed in the

context of § 666 to tie the agency relationship to the authority

that a defendant has with respect to control and expenditure of the

funds of an entity that receives federal monies. For the reasons

we have stated, the convictions of count four of the indictment,

charging a violation of 18 U.S.C. § 666 with respect to Newman’s

employment by Phillips, are reversed and vacated.

IV

We now must consider the impact of our reversal of the § 666

convictions on counts 5 through 14 of the indictment, which charge

both Phillips and Newman with money laundering in violation of 18

U.S.C. § 1956(a)(1)(B)(i). This section makes it a crime for one

who

knowing that the property involved in a financial
transaction represents the proceeds of some form of
unlawful activity, conducts or attempts to conduct such

United States v. Castillo, 179 F.3d 321, 328 n.10 (5th Cir. 1999),
cert. granted, 120 S.Ct. 865 (U.S. Jan 14, 2000) (“[W]here an
otherwise acceptable construction of a statute would raise serious
constitutional problems, [a court] . . . will construe the statute
to avoid such problems unless such construction is plainly contrary
to the intent of Congress.”) (alteration in original)(citing New
York v. United States, 505 U.S. 144, 170 (1992)). We do not think
that this federalism concern can be dismissed, as would the
dissent, as a mere “policy matter.”

21
 a financial transaction which in fact involved the
proceeds of a specified unlawful activity . . . knowing
that the transaction is designed in whole or in part to
conceal or disguise the nature, the location, the source,
the ownership, or the control of the proceeds of
specified unlawful activity.

(Emphasis added.)

Counts 5 through 14 of the indictment charge Phillips and

Newman with conducting financial transactions on each occasion that

Philips issued Newman a payroll check from the assessor’s office in

the 1995 scam; that is, each check constitutes a separate count.

Specifically, with respect to each of the ten checks the indictment

charged that Phillips and Newman

knowingly conducted . . . financial transactions . . .
namely, issuance and transfer to defendant Newman . . .
checks drawn on the Assessor’s Office account at the Bank
of Greensburg, which financial transactions involved the
proceeds of specified unlawful activity, namely, theft in
connection with a federally funded program in violation
of Title 18, United States Code, Section 666, knowing the
transactions were designed . . . to conceal the
nature . . . of the proceeds of said specified unlawful
activity and knowing that the property involved in the
financial transactions represented the proceeds of some
form of unlawful activity.

(Emphasis added.) Each of the ten checks constituted a separate

count of the indictment.

Thus, because it has failed to prove that the financial

transactions involved proceeds in violation of § 666, the

government clearly has not proved every allegation of these money

laundering counts. The question, however, is whether the

22
government has proved every essential element of these counts so

that the convictions under these counts survive our holding that

these funds had no connection with a federally funded program in

violation of Section 666. See, e.g., United States v. Gabel, 85

F.3d 1217 (7th Cir. 1996) (holding that there is no requirement

that the government link the money laundered to a specific criminal

act).

Our circuit does not seem to have decided the express question

of whether the government must prove the precise corrupt source of

the funds as alleged in the indictment, see, e.g., United States v.

Alford, 999 F.2d 818 (5th Cir. 1993), and we find it unnecessary to

decide the question today. We will assume that it was not

necessary for the government to prove, as alleged in the

indictment, that the funds resulted specifically from the specified

unlawful activity of theft in connection with a federally funded

program in violation of § 666.

In a prosecution under § 1956(a)(1)(B)(i), the government must

prove that the defendant knew only that the property represented

proceeds derived from “some form of unlawful activity.” It is

clear that the government proved this characteristic of the

proceeds and the defendant’s knowledge of the same. At the same

time, however, it is clear that the statute requires that the

government also must prove that the funds “in fact” involve “the

23
proceeds of specified unlawful activity.” This term is not to be

applied as it might be generically defined. Section 1956 appears

in the racketeering chapter of the criminal code and the statute is

aimed, not at all illegally obtained property, but only at property

that Congress concluded served the purpose of the racketeering

statutes. It is, therefore, not surprising that § 1956(c)(7)

specifically defines, and gives restricted meaning to, the term

“specified unlawful activity.” As relevant to this case, Section

7(D) defines “specified unlawful activity” to include, among many

other federal crimes, theft concerning programs receiving federal

funds in violation of § 666. Among the other federal crimes

defined as “specified unlawful activity,” the only other enumerated

crime that could possibly relate to the funds in this case is mail

fraud.

In sum, the convictions under counts 5 through 14 could only

survive if the government proved that the financial transactions

alleged and charged in these counts were proceeds from either theft

in connection with a federally funded program or proceeds in

connection with mail fraud. The government has proved neither.

First, we have held in the preceding section of this opinion that

no funds in this case involve proceeds in connection with a

federally funded program. Second, there is no evidence before us

that the checks alleged in counts 5 through 14 were ever

24
transmitted in the mail. To the extent that the record indicates

the method of delivery of these checks, it was hand-delivery. And,

finally, the government makes no argument that the proceeds

involved in the transactions alleged in counts 5 through 14 had any

connection with mail fraud. Therefore, each of the convictions

under counts 5 through 14 are reversed for failure to prove an

essential element of those alleged money laundering offenses, to

wit, that the transactions involved funds from a “specified

unlawful activity.”19

V

19
Because we reverse these convictions on the grounds stated
above, we do not reach the merits of the appellants’ argument that
the district court erred in admitting a tape made by Newman’s
second wife, Katie. This tape contained an admission by Newman--
deemed by the government as significant--that his 1995 employment
was a fraud. On appeal, Newman argues that the tape should have
been excluded from evidence based on the spousal communications
privilege, and that the error in admitting it was not harmless.
The district court admitted the tape on the grounds that the
Newmans, at the time the tape was made, were separated and in the
process of becoming divorced, and that under these circumstances,
the marital relationship had ended and Newman was not entitled to
claim the spousal communication privilege. The record here,
however, shows that there was no permanent irreconcilable
separation at the time Katie made the tape; indeed, there was a
reconciliation that lasted several months after the tape was made.
The relationship, therefore, was not “moribund” or “as a social
fact had expired.” United States v. Cameron, 556 F.2d 752, 756
(5th Cir. 1977). Although we have not clearly spoken on the
impact of a marital separation on this privilege, it does seem that
the better rule requires the district court to inquire into the
nature of the separation before deciding whether to apply the
privilege. See, e.g., United States v. Roberson, 859 F.2d 1376,
1381 (9th Cir. 1988); In re Grand Jury Witness, 791 F.2d 234, 238-
39 (2d Cir. 1986).

25
 We next turn to consider count three of the indictment, which

charges both Newman and Phillips with engaging in an illegal

monetary transaction under 18 U.S.C. § 1957 with respect to the

negotiation of the $15,000 life insurance check received by Newman

upon the death of his first wife, Jean. Here, the indictment

charges that specified unlawful activity from this check was

derived was the mail fraud charged in count two, a count on which

we uphold the convictions.

Phillips argues that the evidence at trial was insufficient to

support his conviction. This count relates to the 1992 scheme. We

find no merit here. Although Phillips personally may not have

cashed Newman’s $15,000 life insurance check, he underwrote each

step necessary to Newman’s ability to obtain that check. Phillips

provided and certified the documentation necessary to obtaining

this benefit. Moreover, Phillips placed Jean on the payroll and

thus made Newman eligible for this benefit. Thus, he aided and

abetted the fraudulent payment of this money. See United States v.

Anderson, 174 F.3d 515, 523 (5th Cir. 1999). Under our case law,

Phillips has more than sufficient connection to the illegal

transaction. See United States v. Hemmingson, 157 F.3d 347, 355

(5th Cir. 1998) (citing United States v. Willey, 57 F.3d 1374, 1383

(5th Cir. 1995)). Alternatively, Phillips is guilty under the

“Pinkerton” liability theory, in that Newman’s actions were a

26
reasonably foreseeable consequence of their scheme even if as a co-

conspirator he did not participate in the substantive crime. See

Pinkerton v. United States, 328 U.S. 640, 645 (1946); United States

v. Dean, 59 F.3d 1479, 1490 n.20 (5th Cir. 1995). Given reasonable

foreseeability, Pinkerton liability requires only that the

substantive crime be “committed by a coconspirator in furtherance

of a conspiracy.” United States v. Jensen, 41 F.3d 946, 955-56

(5th Cir. 1994) (citation omitted). That standard is met here.

VI

Newman alone was charged with and convicted for perjury (count

fifteen). He challenges for insufficiency of evidence. The

perjury charge stemmed from Newman’s testimony to the grand jury

concerning Phillips’s account at his hardware store. Specifically,

Newman was asked whether he brought to the grand jury “any records

showing payments by Mr. Phillips on his account, or payments by the

Assessor’s Office on any account?” Newman responded by describing

how he would credit Phillips’s account at the hardware store with

the amount of the paychecks he received from Newman because he owed

Phillips about $4000 for a horse he purchased from Phillips. When

asked “[s]o you paid on his account in payment of the horse?”,

Newman responded “[u]m-hm, part of it, not all of it.” Newman now

claims, in essence, that the government failed to prove beyond a

27
reasonable doubt that his story concerning the purchase of the

horse was false.

As the government argues, the lack of any supporting evidence

that the sale of a horse occurred allows the jury to discredit

Newman’s story and conclude that the testimony explaining the

reason why Newman credited Phillips’s account was false. Phillips

never transferred the horse’s title papers to Newman’s name; Newman

never took over caring for the horse; Newman did not name the

horse; Phillips failed to report income from the sale of the horse

until after the investigation began; and Phillips never reported to

his partner the sale of the horse to Newman. Given our standard of

review, this evidence is amply sufficient to support the verdict.

VII

We find no merit to the remaining issues on appeal.20

A

First, we consider whether the trial court abused its

discretion in admitting, under the co-conspirator exception, the

hearsay testimony of Mala Schott relating to statements made by

20
It is not necessary to discuss Phillips’s argument that the
district court erred in denying his motion to sever. His point
regarding the introduction of the Katie Newman tape, his principal
argument, is moot. Evidence of the horse sale and Schott’s
testimony would have been admissible in a separate trial.

28
Jean Newman regarding her employment with the assessor’s office.21

This evidence relates only to the 1992 insurance scam.

Schott is the eldest daughter of Emerson and Jean Newman. She

testified at trial that her mother indicated to her directly and

indirectly, on several occasions, that neither she nor her father

performed any work for the assessor’s office, and that they were,

in fact, cheating the government. Again, these statements all

pertained to the 1992 and earlier “employment.” Schott testified

that she heard her father term the arrangement “his best scam” (an

admission against interest of the defendant) and that her mother

had admitted to her that the only reason she was on the payroll of

the assessor’s office was to receive insurance benefits. Schott

witnessed her father making a cash payment to Phillips when

Phillips delivered Jean’s paycheck. Schott asked her mother what

the payment was all about. Upon this questioning from her

21
“[T]his court reviews admission of hearsay evidence under the
non-hearsay definition of Rule 801(d)(2)(E) for abuse of
discretion.” United States v. Cornett, 195 F.3d 776, 1999 WL
1021232 (5th Cir. 1999) (citing United States v. Narviz-Guerra, 148
F.3d 530 (5th Cir. 1998)). The proponent of admittance under Rule
801(d)(2)(e) must prove by a preponderance of the evidence (1) the
existence of a conspiracy, (2) the statement was made by a co-
conspirator of the party, (3) the statement was made during the
course of the conspiracy, and (4) the statement was made in
furtherance of the conspiracy. See United States v. Broussard, 80
F.3d 1025, 1038 (5th Cir. 1996) (citing Bourjaily v. United States,
483 U.S. 171, 175 (1987)).

29
daughter, Jean explained the scheme and asked that Schott help keep

the secret. Specifically, Schott stated:

She told me again to keep it secret because she didn’t
want me to blow the lid on the situation. . . . And she
didn’t want me getting in a confrontation in front of
[Newman] or in front of a customer, and someone finding
out about the deal, and subsequently, her losing her
health insurance.

Based on this conversation, and her mother’s references to

Phillips as her “guardian angel,” Schott testified she knew this

was a kickback scheme. She additionally testified that she said to

her mother that “it looked like [her father] knew exactly what he

was doing” in giving Phillips cash when he came to deliver Jean’s

paycheck. Schott then testified: “And [Jean] told me that daddy

had already figured it out, that whatever the amount of the

[Jean’s] check was, he wouldn’t give Chaney the complete amount

back. He withheld some of the check back so that at the end of the

year he wouldn’t have to pay taxes on that money.” Again, this

statement implicated Jean in the scheme and was confided in Schott

in an effort to keep her from disclosing its operation.

The government offered proof of the existence of a conspiracy

of which Jean was a member, and the statements were made during the

course of the conspiracy. The “in furtherance” of a conspriracy

standard is well established. This Court has “consistently held

that the ‘in furtherance’ requirement is not to be construed too

strictly lest the purpose of the exception be defeated.” Cornett,

30
1999 WL 1021232 at *4. Generally, however, “a statement is not in

furtherance of the conspiracy unless it advances the ultimate

objects of the conspiracy.” Id.

Efforts to conceal an ongoing conspiracy obviously can further

the conspiracy by assuring that the conspirators will not be

revealed and the conspiracy brought to an end. See Forman v.

United States, 361 U.S. 416 (1960); United States v. Diez, 515 F.2d

892, 897-98 (5th Cir. 1975). Because Jean attempted to explain to

her daughter the nature of the conspiracy in an effort to exact

sympathy so that the scheme could remain a secret, the statements

were undoubtedly made “in furtherance” of the conspiracy, and as

such were properly admitted.

B

The trial court did not abuse its discretion in refusing to

apply the residual exception to the hearsay rule, Fed. R. Evid.

807,22 to admit exculpatory statements made by Jean Newman to her

friend Margaret Carter that she was working for the assessor’s

22
In relevant part, Rule 807 states: “A statement not
specifically covered by Rule 803 or 804 but having equivalent
circumstantial guarantees of trustworthiness, is not excluded by
the hearsay rule, if the court determines that (A) the statement is
offered as evidence of a material fact; (B) the statement is more
probative on the point for which it is offered than any other
evidence which the proponent can procure through reasonable
efforts; and (C) the general purposes of these rules and the
interests of justice will best be served by admission of the
statement into evidence.”

31
office.23 If allowed to testify, Phillips and Newman contend that

Carter would have testified that one day, while in the hardware

store, she noticed Jean working with several pieces of paper. When

Carter inquired about the nature of the paperwork, Jean allegedly

responded that she was working on a project for Phillips that had

something to do with land.

The passing comment made by Jean concerning her employment is

arguably vague. It may be correct that Jean would have no reason

to lie in making a passing comment to a casual acquaintance

concerning the nature of any paperwork she was doing. It may also

be correct, however, that Jean’s motivation to lie--her desire to

maintain the favorable status of her pseudo-employment for the

purpose of receiving health coverage–-was so strong that any

23
The exception is to be “used only rarely, in truly
exceptional cases.” United States v. Thevis, 665 F.2d 616, 629
(5th Cir. 1982). “[T]he proponent of the statement bears a heavy
burden to come forward with indicia of both trustworthiness and
probative force.” United States v. Washington, 106 F.3d 983, 1001-
02 (D.C. Cir. 1997). “[I]n order to find a statement trustworthy,
a court must find that the declarant of the . . . statement ‘was
particularly likely to be telling the truth when the statement was
made.’” Id. (citing United States v. Tome, 61 F.3d 1446, 1453
(10th Cir. 1995)). Given this high hurdle, in the decision as to
whether to apply the residual exception “district courts are given
‘considerable discretion,’ and a court of appeals will not disturb
the district court’s application of the exception ‘absent a
definite and firm conviction that the court made a clear error of
judgment in the conclusion it reached based upon a weighing of the
relevant factors.’” United States v. Loalza-Vasquez, 735 F.2d 153,
157 (5th Cir. 1984) (quoting Page v. Barko Hydraulics, 673 F.2d
134, 140 (5th Cir. 1982)).

32
statements made concerning her supposed employment with the

assessor’s office cannot be trusted. Regardless of which option

seems more persuasive, neither presents a “definite and firm

conviction the [district] court made a clear error of judgment in

the conclusion it reached.” Id. As such, this ruling should not

be disturbed.

C

Furthermore, the trial court did not abuse its discretion in

allowing testimony concerning the vote-buying scheme under Rule

404(b).24 Evidence of extraneous acts under Rule 404(b) is

admissible only if: (1) it is relevant to an issue other than the

defendant's character, and (2) the evidence's probative value is

not substantially outweighed by its undue prejudice. See United

States v. Leahy, 82 F.3d 624, 636 (5th Cir. 1996).

The district court admitted this evidence because it showed

both an intent on the part of Phillips and Newman to defraud the

public and because it established another motive for Phillips to

assist Newman in obtaining health insurance even though the vote

24
Rule 404(b) provides:

Evidence of other crimes, wrongs, or acts is not
admissible to prove the character of a person in order to
show action in conformity therewith. It may, however, be
admissible for other purposes, such as proof of motive,
opportunity, intent, preparation, plan, knowledge,
identity, or absence of mistake or accident[.]

33
buying occurred later. As Phillips denied accepting kickbacks in

the insurance scheme, the reason why Phillips would place the

Newmans on the assessor’s payroll had to be explained. The

district court found that the relationship between the parties was

a critical issue, and this extrinsic evidence was relevant in

establishing the motives behind their interactions over time.

Thus, Phillips’s ability to obtain Newman’s assistance in

Phillips’s political activities helped to explain why Phillips

would place Newman on the payroll–-even though the mutual favors

may not have been associated in the same time frame. These rulings

do not constitute an abuse of discretion.

Nor does admission of this evidence seem to violate the second

requirement, that the evidence be more probative than prejudicial.

In United States v. Beechum, 582 F.2d 898, 915 n.20 (5th Cir.

1987), we stated that exclusion is warranted “only in those

instances where the trial judge believes that there is a genuine

risk that the emotions of the jury will be excited to irrational

behavior, and that this risk is disproportionate to the probative

value of the offered evidence.” On these facts, the exclusion

does not apply.25

25
Finally, we note that Newman argues that the district court
erred in revoking Newman’s indigency status and requiring him to
pay funds into the registry of the court to cover the costs of his
representation. Newman’s claim is presented cursorily at best. We
bear no responsibility to review claims presented summarily without

34
 VIII

We now turn to the sentencing issues. Because we have vacated

a substantial number of the appellants’ convictions and sentences,

and because the sentences were confected in groupings based on

fraud or money laundering, and in the light of the convictions as

a whole, we vacate the entire sentence on each of the defendants

and remand for resentencing on the counts that remain.

We should, however, make it clear that we have reviewed

Phillips’s argument that the district court erred when it gave a

four-point upward departure on grounds that Phillips was an

organizer or leader of a criminal activity under USSG § 3B1.1(a).

On the “fraud convictions” that remain (counts one, two, and

sixteen through twenty), we can find no error in the district

court’s finding that Phillips organized a fraud involving five or

more participants. The district court found, we think correctly as

both a matter of law and fact, that those participants included

Phillips, Newman, Jean Newman, Patricia Easley, Laura Bankston,

Kari Carter, and David Albin.

We hold, however, that the upward departure on the remaining

“money laundering” conviction, count three, the 18 U.S.C. § 1957

conviction for engaging in an illegal monetary transaction, was in

argument. Without explanation, argument, or authority, nothing is
presented for review. See Nichols v. Scott, 69 F.3d 1255, 1287
n.67 (5th Cir. 1995).

35
error. To reach five participants, the district court had to count

Katie Newman as one of the five. Katie Newman, alleged to have

deposited one of Newman’s 1995 paychecks had no role in this

offense occurring in 1992, and thus may not be counted as one of

the five participants. Eliminating her leaves only four

participants, and thus necessitates a reversal of the four-level

upward departure on this count.

IX

In sum, we REVERSE and VACATE the convictions of Phillips and

Newman on the 18 U.S.C. § 666 count (count four) because Phillips

was not an agent of St. Helena Parish for purposes of § 666. The

money laundering counts (counts five through fourteen), charged

under 18 U.S.C. § 1956, are reversed because the government has

failed to prove that any of the transactions involved proceeds from

any “specified unlawful activity.” We AFFIRM the convictions of

Phillips and Newman for conspiracy to violate the mail fraud

statute, for committing mail fraud and for illegal monetary

transactions (counts one through three). We AFFIRM the conviction

of Newman for perjury (count fifteen). We affirm Phillips’s

convictions for mail fraud with respect to the “clothing” scheme

(counts sixteen through twenty). We VACATE the sentences as to all

convictions to allow the district court to resentence in the light

of this opinion. Accordingly, we

36
 AFFIRM in part, REVERSE in part, and REMAND for
resentencing in the light of this opinion.ENDRECORD

37
EMILIO M. GARZA, Circuit Judge, concurring in part and dissenting
in part.

I agree with the majority opinion insofar as it upholds

appellants’ convictions and sentences. However, the majority

vacates several convictions premised on violations of 18 U.S.C. §

666 because, in its view, Chaney Phillips, St. Helena Parish’s Tax

Assessor, was not an “agent” of St. Helena Parish (“the Parish”).

Because the statutory definition of “agent” clearly encompasses the

position of Tax Assessor, and because our precedent dictates an

outcome contrary to the majority opinion, I disagree. Accordingly,

I dissent in part.

Section 666 provides, in relevant part, that:

Whoever . . . being an agent of an organization, or of a
state, local, or Indian tribal government, or any agency
thereof [which receives benefits in excess of $10,000
under a federal program]))

(A) embezzles, steals, obtains by fraud, or
otherwise without authority knowingly converts to
the use of any person other than the rightful owner
or intentionally misapplies, property that))

(I) is valued at $5,000 or more, and
(ii) is owned by, or is under the care . . .
or control of such . . . agency

shall be fined under this title, imprisoned not more than
ten years, or both.

18 U.S.C. § 666. As this language makes clear, all that is

relevant in determining whether a defendant has violated § 666 is:

(1) whether a local body receives more than $10,000 under a federal

38
program, (2) whether the defendant is an “agent” of the body, and

(3) whether the defendant “embezzles, steals, [or] obtains by

fraud” funds of the body. See United States v. Moeller, 987 F.2d

1134, 1137 (5th Cir. 1993) (“There are only two requirements

necessary to bring a defendant within section 666. First, the

defendant must be an agent of a government agency which receives in

excess of $10,000 from the federal government within a one year

period. Second, the defendant must engage in conduct proscribed by

section 666(a)(1)(A) or (B).”).

It is undisputed that St. Helena Parish received more than

$10,000 in federal benefits—funds from the federal food stamp

program—and the jury found that Phillips embezzled, stole, or

obtained by fraud thousands of dollars “belonging to and under the

care, custody and control of the Parish.”26 Phillips is thus guilty

of violating § 666 if he is an “agent” of the Parish, which the

statute defines as “a person authorized to act on behalf of [the

Parish] . . . includ[ing] a servant or employee, [or] a partner,

26
Though the majority contends that the record “utterly
fails to establish” that the funds fraudulently paid to Newman were
owned by, or under the care, custody, or control of the Parish,
neither appellant challenges this finding on appeal. Nor, as the
majority admits, does either appellant challenge whether the
federal food stamp funds received by the Parish are the type of
“benefits” intended by the statute. See Fischer v. United States,
–U.S.–, 120 S. Ct. 1780, __ L. Ed. 2d __ (2000) (holding that
medicare reimbursements given to health care providers constitute
“benefits” as defined by § 666).

39
director, officer, manager, [or] representative.” 18 U.S.C. §

666(d)(1).27

Phillips clearly falls within this definition in at least two

ways. First, there is no doubt that, at least in some respects,

Phillips is “authorized to act on behalf of” the Parish. The

district court held that “[t]he assessor’s primary function is to

assess the value of real property within the parish for the parish

ad valorem property tax. In performing those duties, he is clearly

acting as an agent of the parish.” United States v. Phillips, 17

F. Supp. 2d 1016, 1017-18 (M.D. La. 1998). The majority does not

challenge this finding; rather, it asserts that “the question is

whether Phillips was authorized to act on behalf of the Parish with

respect to its [federal] funds.” However, as described below, this

specific nexus—between Phillips and the federal funds inside Parish

27
Because § 666 specifically defines the term “agent” for
purposes of the statute, the “standard agency principles” noted by
the majority are simply irrelevant. We must interpret § 666(d) as
written, and cannot use hornbook agency principles to restrict the
broad definition of “agent” that Congress provided. Even if we did
so, furthermore, the results would be unavailing. The majority’s
description of Louisiana law combined with its use of “standard
agency principles” appears to make the tax assessor an “agent” of
the state. Appellants do not make this argument, however, as it is
virtually certain that the state receives far more than the
requisite $10,000 in federal funding. Appellants sole possibility
for avoiding § 666 liability is if the assessor is an agent of the
St. Helena Parish Tax Assessment District only and no other body of
local government. As described below, the statute and our
precedent preclude this limiting definition.

40
coffers—is not required. There is no dispute that, to fulfill his

duties in ascertaining the proper amount of property taxes

residents must pay to the Parish, Tax Assessor Phillips is

“authorized to act on behalf of” the Parish. Under a plain reading

of the statute, our inquiry should end there. See United States v.

Westmoreland, 841 F.2d 572, 576 (5th Cir. 1988) (“Courts in applying

criminal laws generally must follow the plain and unambiguous

meaning of the statutory language. Only the most extraordinary

showing of contrary intentions in the legislative history will

justify departure from that language.”) (citations omitted).

Phillips also falls within the § 666 definition of “agent”

because he is an “officer” of the Parish as defined by Louisiana

law.28 See 18 U.S.C. § 666(d)(1) (defining “agent” as, inter alia,

an “officer” of the governmental body). The Louisiana Constitution

itself includes tax assessors in a provision defining “Parish

28
Section 666 does not define the term “officer.” However,
the expansive statutory definition of “agent”))including, inter
alia, an “employee, partner, manager, officer, [or] representative”
of the agency))recognizes that an individual can affect agency
funds despite a lack of power to authorize their direct
disbursement. Therefore, to broadly protect the integrity of
federal funds given to an agency, § 666 applies to any individual
who represents the agency in any way, as representing or acting on
behalf of an agency can affect its funds even if the action does
not directly involve financial disbursement. There is no authority
in the text of § 666, legislative history, or caselaw to support
the majority’s holding that the tax assessor cannot be an officer
of the Parish because his duties and responsibilities are defined
by state law.

41
Officials.” See LA. CONST., art. 6, § 5(G) (“Parish Officials and

School Boards Not Affected. No home rule charter or plan of

government shall contain any provision affecting a school board or

the offices of district attorney, sheriff, assessor, clerk of a

district court, or coroner, which is inconsistent with this

constitution or law.”) (emphasis added). Various Louisiana

statutes reach the same conclusion. For example, LA. R.S. §

13:5108 provides that the state will indemnify “officials,

officers, and employees of the state,” exempting from this

provision “parish officials set forth and named in Article VI,

Sections 5(G) and 7(B) of the Constitution.” LA. R.S. §

13:5108.2A(2). As § 5(G) of the Louisiana Constitution includes

parish tax assessors, the statute unambiguously identifies tax

assessors as officers of the Parish, and thus “agents” of the

parish for § 666 purposes.

In applying the broad definition of “agent” provided in §

666(d) to avoid constitutional problems, our precedents require

“some nexus between the criminal conduct and the agency receiving

federal assistance.” Moeller, 987 F.2d at 1137. We do not require

the criminal conduct to necessarily, or even potentially, affect

the particular funds within the coffers of local government which

have been provided by a federal source. Nor do we require the

government to prove a distinct federal interest in protecting the

42
particular funds stolen by a defendant.29 Rather, for § 666

liability to attach, it is sufficient that the criminal conduct

affect the agency receiving federal assistance; in essence, we have

determined that there is an inherent federal interest in insuring

29
As the majority notes, several of our sister circuits
have required the government to prove that a federal interest is
implicated by the defendant’s conduct to constitutionally allow a
conviction under § 666. See United States v. Zwick, 199 F.3d 672,
687 (3d Cir. 1999) (“[W]e hold that 666 requires that the
government prove a federal interest is implicated by the
defendant’s offense conduct.”); United States v. Santopietro, 166
F.3d 88, 93 (2d Cir. 1999) (noting that it “would not permit the
Government to use section 666(a)(1)(B) to prosecute a bribe paid to
a city’s meat inspector in connection with a substantial
transaction just because the city’s parks department had received
a federal grant of $10,000"). However, as described above, “[t]he
Fifth Circuit [has] contrasted its own position, expressed in
Westmoreland, that the statute does not require any relation
between the $5,000 thing of value and the federal funds received by
the local agency.” Santopietro, 166 F.3d at 91. Admittedly, the
Supreme Court’s decision in Salinas v. United States, 118 S.Ct. 469
(1997) “may be read to indicate that the threat to the integrity
and proper operation of a federal program created by the corrupt
activity is necessary to assure that the statute is not
unconstitutionally applied.” Santopietro, 166 F.3d at 91.
However, as the Second Circuit noted in Santopietro, Salinas did
not dispute our decisions in Westmoreland and Marmolejo; rather, it
expressly reserved the question of whether “the statute requires
some other kind of connection between a bribe and the expenditure
of federal funds.” See Santopietro, 166 F.3d at 91 (citing
Salinas, 118 S.Ct. at 474). We are thus bound, at least as a panel
of three judges, to our analysis in Westmoreland and its progeny.
See Burge v. Parish of St. Tammany, 187 F.3d 452, 466 (5th Cir.
1999) (“It is a firm rule of this circuit that in the absence of an
intervening contrary or superseding decision by this court sitting
en banc or by the United States Supreme Court, a panel cannot
overrule a prior panel's decision.”). Circumventing those
decisions, which the majority opinion essentially does, is a matter
for this court to accomplish en banc if at all.

43
that agencies receiving significant amounts of federal funding are

not corrupt. See Westmoreland, 841 F.2d at 577-78 (“It is

sufficient that Congress seeks to preserve the integrity of federal

funds by assuring the integrity of the organizations or agencies

that receive them.”); United States v. Marmolejo, 89 F.3d 1185,

1193 (5th Cir. 1996) (“Any reference to federal funds is

conspicuously absent from the operative provisions, allowing

Congress to ensure the integrity of federal funds by protecting the

integrity of the organizations that receive them.”); cf. Fischer,

120 S. Ct. at 1787 (describing how § 666 “reveals Congress’

expansive, unambiguous intent to ensure the integrity of

organizations participating in federal assistance programs”).

The minimal nexus required—between Phillips’s misconduct and

the Parish itself—plainly exists here. Despite the fact that the

assessor’s office has created an “Assessment District” and is to

some degree self-funded, Louisiana law provides that each Parish

must provide “offices, furniture, and equipment” as well as

utilities for the tax assessor’s office and mandates that the “cost

of such furniture and equipment . . . as may be needed by the tax

collector and assessors of each parish shall be borne

proportionately by all tax recipient bodies in the parish.” LA.

44
R.S. § 33:4713.30 Therefore, despite the existence of an assessment

district, the tax assessor’s office is to some extent funded by the

Parish; as the district court noted, “testimony at trial indicated

that the St. Helena Police Jury provided funding to the assessor’s

office.” Phillips, 17 F. Supp. 2d at 1018. Our previous cases

have extended § 666 liability to all those “who may administer

federal funds, regardless of whether they actually do,” United

30
One commentator describes how the expenses of the
Assessor’s Office are provided for as follows:

The cost of furniture, maps, and supplies needed by
the tax assessors are borne proportionately by all taxing
bodies in the parish under the traditional modus operandi
of Louisiana parish government. These items are
purchased by the parish governing body and billed to the
other taxing bodies.
The salaries and expense allowances of parish
assessors are enumerated in state statutes. Each taxing
body in a parish contributes a pro-rata share to payment
of the assessor’s salary and expenses in proportion to
their percentage of the total ad valorem tax collection
of the parish. The sheriff remits the amounts due
directly to the assessor from the first taxes collected
each year.
Some relief from payment of the assessor’s office
expenses is afforded to the parish governing body in
those parishes where the assessor has availed himself of
the prerogative to finance his office by means of a
millage levied on the assessed valuation of all property
on the tax rolls of a statutorily created ‘Assessment
District.’

I. Jackson Burson, Jr., Not Endowed By Their Creator: State
Mandated Expenses of Louisiana Parish Governing Bodies, 50 L A. L.
REV. 635, 647 (1990) (emphasis added) (citations to various
provisions of the Louisiana code omitted).

45
States v. Marmolejo, 89 F.3d 1185, 1192 (5th Cir. 1996). Here,

because the St. Helena Parish Tax Assessor “may” administer funds

given to the Parish and provided by the Parish to the Assessor’s

Office, the connection between Phillips and the Parish is legally

sufficient.

As a result, the majority overreaches when it claims that the

conduct for which Phillips and Newman were convicted could not

possibly affect the integrity of the federal funds contained within

Parish coffers. Phillips paid Newman $800 per month from the tax

assessor’s office treasury for doing little or no work; in

exchange, Phillips received a substantial credit against his

account at Newman’s hardware store. Because Phillips’s criminal

activity diminished the assessor’s office coffers by $800 per

month, and because the Parish was responsible by law to pay any

deficit in the assessor’s office budget, see LA. R.S. § 33:4713,

Phillips’s misconduct made it substantially more likely that Parish

funds (including those received from the federal food stamp

program) would be unnecessarily expended. In this respect, there

was “some nexus between the criminal conduct and the agency

receiving federal assistance.” Moeller, 987 F.2d at 1137.

Phillips’s theft, by increasing the possibility that Parish funds

would be unnecessarily used to fund the assessor’s office, could

have affected the integrity of the federal funds in Parish coffers.

46
Under our precedent, it is irrelevant that the program from which

the Parish receives federal funding))the federal food stamp

program))was not actually compromised. See id. (“The particular

program involved in the theft of bribery scheme need not be the

recipient of federal funds.”).

The majority limits the definition of “agent” for § 666

purposes only to those “authorized to act on behalf of the Parish

with respect to its [federal] funds” and exaggerates the separation

between the Parish government and the tax assessor’s office in part

to avoid the “troubling constitutional questions” that the clear

meaning of the statute raises. However, while the desire to avoid

troubling constitutional problems with a statute is laudable, see

Jones v. United States, –U.S.–,120 S.Ct. 1904, 1911, __ L.Ed.2d __,

(2000) (“[W]here a statute is susceptible of two constructions, by

one of which grave and doubtful constitutional questions arise and

by the other of which such questions are avoided, our duty is to

adopt the latter.”), it is impossible to fulfill in this case

because we have already decided the statutory question before

us—whether the separation of federal food stamp funds from other

funding in Parish coffers renders insufficient the connection

between those federal funds and the Parish Tax Assessor’s

Office—contrary to the majority opinion. Our cases firmly

establish (as a statutory and constitutional matter) that so long

47
as a defendant has the requisite agency relationship with the body

of local government receiving the federal funds, § 666 covers his

misconduct regardless of whether his particular conduct affected

those funds in particular.31

A brief examination of Westmoreland and Moeller makes this

clear. In Westmoreland, a county supervisor took bribes in

connection with her purchase of road and bridge-building materials

for the county. Federal jurisdiction under § 666 was premised on

the county’s receiving general revenue sharing funds from the

federal government. Westmoreland argued that because the federal

funds received by the county “were segregated and not expended for

the types of purchases she made,” Westmoreland, 841 F.2d at 574,

her conduct could not affect the integrity of the federal funds.

We rejected that argument, reasoning that even if Westmoreland’s

authority did not extend to purchases using federal funds, “an

agent violates subsection (b) when he engages in the prohibited

conduct in any transaction or matter or series of transactions or

31
The majority argues that “the fraud must have the
potential to affect the identified federal program” and that the
government failed to prove that theft from Parish funds would
necessarily implicate the funds from the food stamp program. The
government’s failure to introduce such proof, however, is
understandable because under our precedent, the fact that
appellants’ conduct could effect the funds of the Parish—regardless
of its potential effect on the federal funds contained therein—is
sufficient to meet the required nexus.

48
matters involving $5,000 or more concerning the affairs of the

local government agency.” Id. at 567 (emphasis added) (citation

omitted). Under Westmoreland, conduct effecting the agency

receiving federal assistance, irrespective of whether such conduct

could effect that federal assistance, is sufficient to meet the

nexus requirement.

Likewise, in Moeller, we considered whether employees of the

Texas Federal Inspection Service (TFIS)—a joint federal-state

agency without any federal funding—were “agents” of the Texas

Department of Agriculture (TDA)—a Texas state agency with over

$10,000 in federal funding—for § 666 purposes. While the majority

points out several distinctions between the relationship we

considered in Moeller and the connection between the Parish and the

Parish Tax Assessor’s Office, the relevant facts are virtually

identical. There, TFIS employees merely enforced state produce

regulations, and the money gathered as a result of those functions

went directly into the state treasury. Id. at 1138. Here,

Assessor’s Office employees assess the value of real property

within the Parish and, hence, determine how much money Parish

residents will pay the Parish in the form of ad valorem property

taxes. Employees of the tax assessor’s office perform their jobs

on behalf of the Parish, and such labor leads directly to the

filling of Parish coffers. Cf. Moeller, 987 F.2d at 1138 (“TFIS

49
enforced regulations promulgated by TDA and the funds collected by

those regulatory functions were remitted directly to the state

treasury.”). The distinguishing facts identified by the

majority—that the powers and duties of the assessor’s office are

defined by state, rather than Parish, law—are of no consequence.

Phillips’s crime, basically payroll fraud of a local

government agency, may not be))as a policy matter))best prosecuted

by the federal government in the federal courts.32 However, as

described above, the text of § 666 and the precedents of this court

allow the federal government to prosecute this crime. While

Salinas and its progeny potentially forecast that our literal

application of the expansive “agent” definition provided by § 666

may some day be overruled, our precedent remains unaffected and

clearly binds this Court to reject the analysis offered by the

majority. Accordingly, I believe that the district court correctly

applied Westmoreland, Moeller, and Marmolejo in upholding

appellants’ § 666 convictions. I dissent in part.33

32
Contrary to the majority’s remark, I do not dismiss the
federalism concerns inherent in the interpretation of § 666 as a
mere “policy matter.” Simply, while important, federalism does not
allow us to strictly construe this statute which, by its clear
language, is “expansive both as to the conduct forbidden and the
entities covered.” Fischer, 120 S. Ct. at 1787 (citing Salinas,
522 U.S. at 56, 118 S. Ct. 469).
33
As I would uphold the § 666 convictions, I would also
uphold the money laundering convictions under 18 U.S.C. §

50
1956(a)(1) which are based in part on them. Further, as Katie
Newman was indeed a participant in this illegal activity,
Phillips’s sentencing enhancement for being the leader or organizer
of a criminal enterprise of five or more participants was not
clearly erroneous. See United States v. Boutte, 13 F.3d 855, 860
(5th Cir. 1994) (holding that to count as part of the enterprise for
purposes of the enhancement, individuals “need only have
participated knowingly in some part of the criminal enterprise”).
In short, I would uphold the district court in full.

51