In Re Samuel R. PIERCE, Jr. (Seligman Fee Application)

United States Court of Appeals

FOR THE DISTRICT OF COLUMBIA CIRCUIT

Filed January 18, 2000

Division No. 89-5

In re: Samuel R. Pierce, Jr.
(Seligman Fee Application)

Division for the Purpose of
Appointing Independent Counsels
Ethics in Government Act of 1978, as Amended

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Before: Sentelle, Presiding, Fay and Cudahy, Senior
Circuit Judges.

O R D E R

This matter coming to be heard and being heard before the
Special Division of the Court upon the petition of Irving R.
Seligman for reimbursement of attorneys' fees and costs
pursuant to section 593(f) of the Ethics in Government Act of
1978, as amended, 28 U.S.C. s 591 et seq. (1994), and it
appearing to the court for the reasons set forth more fully in
the opinion filed contemporaneously herewith that the peti-
tion is not well taken, it is hereby

 ORDERED, ADJUDGED, and DECREED that the peti-
tion of Irving R. Seligman for attorneys' fees he incurred
during the investigation by Independent Counsels Arlin M.
Adams and Larry D. Thompson be denied.

Per curiam

For the Court:

Mark J. Langer, Clerk

by

Marilyn R. Sargent

Chief Deputy Clerk

United States Court of Appeals

FOR THE DISTRICT OF COLUMBIA CIRCUIT

Filed January 18, 2000

Division No. 89-5

In re: Samuel R. Pierce, Jr.
(Seligman Fee Application)

Division for the Purpose of
Appointing Independent Counsels
Ethics in Government Act of 1978, as Amended

---------

Before: Sentelle, Presiding, Fay and Cudahy, Senior
Circuit Judges.

ON APPLICATION FOR ATTORNEYS' FEES

Opinion for the Special Court filed PER CURIAM.

PER CURIAM: Irving R. Seligman petitions this court
under section 593(f) of the Ethics in Government Act of 1978,
as amended, 28 U.S.C. s 591 et seq. (1994) (the "Act"), for
reimbursement of attorneys' fees in the amount of $745,116.25
that he incurred during and as a result of the investigation
conducted by Independent Counsels ("IC") Arlin M. Adams
and Larry D. Thompson. Because we conclude that Seligman
has not carried his burden of showing that the fees would not
have been incurred but for the requirements of the Act, we
deny the petition in its entirety.

Background1

In 1978 Congress established the moderate rehabilitation
("mod rehab") program within the U.S. Department of Hous-

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1 We have had recent occasion to review the facts of this matter
in In re Pierce (Olivas Fee Application), 178 F.3d 1350 (D.C. Cir.,

ing and Urban Development ("HUD"). This program encour-
aged developers to upgrade moderately substandard housing
units for occupation by low income families. In 1988 HUD's
Inspector General ("IG") conducted an audit of the mod rehab
program as administered from 1984 through 1988 and found
that the program was not being administered efficiently,
effectively, or economically. The Inspector General's audit
report triggered congressional investigations into abuses, fa-
voritism, and mismanagement at HUD during the 1980s
under the tenure of HUD Secretary Samuel R. Pierce, Jr.
Irving R. Seligman, the fee petitioner here, owned and oper-
ated HUD properties that received substantial HUD funding.

Based on information elicited during the congressional
investigations, the House Judiciary Committee wrote to At-
torney General Richard Thornburgh seeking the appointment
of an independent counsel to investigate the matter. Follow-
ing a preliminary investigation, Attorney General Thornburgh
applied to this court for appointment of an independent
counsel. On March 1, 1990, we appointed former United
States Circuit Judge Arlin Adams2 as independent counsel "to
investigate ... whether Samuel R. Pierce, Jr., and other
[HUD] officials may have committed the crime of conspiracy
to defraud the United States or any other Federal crimes ...
relating to the administration of the selection process of the
Department's Moderate Rehabilitation Program from 1984
through 1988." Order Appointing Independent Counsel,
March 1, 1990.

The IC conducted a comprehensive investigation ultimately
confirming a widespread pattern of corruption at HUD dur-
ing Pierce's tenure. Although the IC announced on January
11, 1995, that he would not seek indictment of Pierce, during

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Spec. Div., 1999) (per curiam). Rather than re-plow recently tilled
ground, we have adopted much of the language in the background
portion of this opinion, and, where applicable, a portion of the
analysis from that decision.

2 Independent Counsel Adams resigned in May of 1995. This
court appointed his deputy, Larry D. Thompson of the Atlanta bar,
to succeed him.

the course of the investigation seventeen (17) other persons
were charged with and convicted of federal crimes as a result
of the IC's investigation. That investigation and the indict-
ments ranged well beyond the core facts of the original
application for appointment of independent counsel. Of par-
ticular reference to the petitioner before us, the IC investi-
gated a $100,000 loan given by Seligman to HUD Assistant
Secretary Thomas T. Demery.

The IC's investigation is now complete. Pursuant to the
statute, the IC submitted a final report to this court on
March 30, 1998. See 28 U.S.C. s 594(h)(1)(B). We ordered
the report made public by order of October 27, 1998. There-
after, Seligman, pursuant to section 593(f)(1) of the Act,
petitioned this court for reimbursement of his attorneys' fees.
As directed by section 593(f)(2) of the Act, we forwarded
copies of Seligman's fee petition to the Attorney General and
the IC and requested written evaluations of the petition. The
court expresses its appreciation to the IC and the Attorney
General for submitting these evaluations, which we have
given due consideration in arriving at the decision announced
herein.

Analysis

Unique in the criminal law structure of the United States,
the Ethics in Government Act provides for reimbursement of
attorneys' fees expended by subjects in defense against an
investigation under the Act. Specifically, 28 U.S.C.
s 593(f)(1) states:

Upon the request of an individual who is the subject of
an investigation conducted by an independent counsel
pursuant to this chapter, the division of the court may, if
no indictment is brought against such individual pursuant
to that investigation, award reimbursement for those
reasonable attorneys' fees incurred by that individual
during that investigation which would not have been
incurred but for the requirements of this chapter.

Because the Act "constitutes a waiver of sovereign immuni-
ty it is to be strictly construed." In re Nofziger, 925 F.2d

428, 438 (D.C. Cir., Spec. Div., 1991) (per curiam). Therefore,
the Act provides only reimbursement for attorneys' fees that
survive an elemental analysis determining whether the peti-
tioner is the "subject" of the independent counsel's investiga-
tion, incurred the fees "during" that investigation, and would
not have incurred them "but for" the requirements of the Act.
The petitioner "bears the burden of establishing all elements
of his entitlement." In re North (Reagan Fee Application),
94 F.3d 685, 690 (D.C. Cir., Spec. Div., 1996) (per curiam).
We conclude that Seligman has not met the "but for" require-
ment.

As we have held, "[a]ll requests for attorneys' fees under
the Act must satisfy the 'but for' requirement of" the Act. In
re Sealed Case, 890 F.2d 451, 452 (D.C. Cir., Spec. Div., 1989)
(per curiam). The purpose of awarding only fees that would
not have been incurred "but for" the Act is to ensure that
"officials [and here derivative 'subjects'] who are investigated
by independent counsels will be subject only to paying those
attorneys' fees that would normally be paid by private citi-
zens being investigated for the same offense by" federal
executive officials such as the United States Attorney. Id. at
452-53 (citing S. Rep. No. 97-496, 97th Cong., 2d Sess. 18
(1982), reprinted in 1982 U.S.C.C.A.N. 3537, 3554 (referring
to "fees [that] would not have been incurred in the absence of
the special prosecutor [independent counsel] law")).

As we have stated "[t]he most difficult element for a fee
applicant to establish under the Act is that the fees 'would not
have been incurred but for the requirements of [the Act].' "
In re North (Bush Fee Application), 59 F.3d 184, 188 (D.C.
Cir., Spec. Div., 1995) (per curiam) (quoting In re North
(Dutton Fee Application), 11 F.3d 1075, 1079 (D.C. Cir., Spec.
Div., 1993) (per curiam)). In part this is so because the
element requires a petitioner to prove a negative and one
with a high component of speculation. In part, though, it is
difficult because the law contemplates that it should be diffi-
cult, that such fees will not be a common thing. As we stated
above, the contemplation of the legislation is not that subjects
of independent counsel investigations will be reimbursed for
all legal fees, but only that they will be reimbursed for those

legal fees that would not have been incurred by a similarly-
situated subject investigated in the absence of the Act.

Nonetheless, we have found that petitioners qualify for an
award of fees in the face of the but-for test in at least four (4)
circumstances:

(1) When the independent counsel's investigation sub-
stantially constituted duplication of the preliminary in-
vestigation conducted by the Department of Justice
("DOJ"). See In re Olson, 884 F.2d 1415, 1420 (D.C.
Cir., Spec. Div., 1989) (per curiam); Dutton, 11 F.3d at
1080.

(2) When the petitioning subject has been "prejudiced by
the Department of Justice's failure to comply with the
substantial protective features of the Act." In re Nofzig-
er, 925 F.2d at 438 (citing In re Meese, 907 F.2d 1192
(D.C. Cir., Spec. Div., 1990) (per curiam)).

(3) When in the absence of the requirements of the Act
" 'the case could have been disposed of at an early stage
of the investigation,' " without subjecting the petitioning
subject to the conditions that led to his incurring the fees
sought. In re Segal (Sagawa Fee Application), 151 F.3d
1085, 1089 (D.C. Cir., Spec. Div., 1998) (per curiam)
(quoting In re Nofziger, 925 F.2d at 438).

(4) Not wholly distinct from No. 3, supra, when "high
public officials [or derivative subjects] were investigated
under the Act in circumstances where private citizens
would not [have been] investigated." In re Nofziger, 925
F.2d at 442; see also Dutton, 11 F.3d at 1080.

Seligman argues that he satisfies the "but for" requirement
under categories (1), (3), and (4). As to category (1), Selig-
man claims that he was subjected to "duplicative" prosecu-
tions because "both the DOJ and the OIC examined the
possibility of prosecuting Mr. Seligman, and both obtained a
great deal of evidence for the purpose of doing so."3 Reply to

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3 We note that two paragraphs before, in claiming that his case
fits the "but for" category because the DOJ elected not to prosecute
him, Seligman states that "DOJ did not ... commit any act

DOJ and OIC Evaluations at 21. He is, in effect, arguing
that category (1) is satisfied here because the DOJ, to which
his case was transferred at the end of the IC's investigation,
duplicated the IC's investigation of him. However, as we
held in In re Pierce (Sanders Fee Application), 1999 WL
1215303 (D.C. Cir., Spec. Div., Dec. 21, 1999) (per curiam), the
Act and its legislative history lead us to conclude that catego-
ry (1) can only be satisfied when the IC duplicates the
preliminary investigation of the DOJ. Seligman has put forth
no evidence that such duplication occurred in this investiga-
tion, and thus does not fit into category (1).

As to category (3), Seligman claims that the Attorney
General was reluctant to have an independent counsel ap-
pointed but that the Act compelled the Attorney General to
do so. Seligman points out that after his case was trans-
ferred to the DOJ at the completion of the IC's investigation,
the DOJ took no prosecutorial action against him, eventually
closing his case. He argues that this shows that if there had
been no IC Act then the DOJ would not have "pursued" him
when initially presented with the matter.

Seligman compares his case to In re Segal (Segal Fee
Application), 145 F.3d 1348 (D.C. Cir., Spec. Div., 1998) (per
curiam), in which we held that the "but for" requirement was
satisfied because the Attorney General in her application to
the court seeking appointment of an independent counsel
stated that she was compelled to apply for an independent
counsel even though "the Department of Justice would in all
likelihood exercise its discretion to decline to prosecute this
case as a criminal matter." Id. at 1352. Ultimately, the IC
in the Segal matter closed the investigation without any
indictments. But here, as we noted in Sanders, "we can
discern nothing in the Attorney General's Application that
would lead us to believe that he was in any way hesitant to
have an independent counsel appointed based on the sub-
stance of the evidence available to him." Sanders, 1999 WL
1215303 at * 6. Indeed, the Attorney General made specific

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whatsoever that Mr. Seligman is aware of to further any prosecu-
tion." Reply to DOJ and OIC Evaluations at 20.

reference to the "breadth of the allegations" in the matter,
Application for Appointment of Independent Counsel at 5,
which as we noted above led ultimately to numerous indict-
ments. Additionally, one of the main figures in the HUD
investigation was Assistant Secretary Thomas Demery, who
was investigated for, and eventually pled guilty to, receiving
an illegal gratuity. The gratuity was paid by Seligman. In
sum, we conclude that if the IC had not investigated this
matter then, as we stated in In re Pierce (Kisner Fee
Application), 178 F.3d 1356 (D.C. Cir., Spec. Div., 1999) (per
curiam), "the Attorney General or other investigative authori-
ty would have pursued allegations of corruption as deep and
widespread as those occasioning the Independent Counsel's
investigation." Id. at 1360; see also Olivas, 178 F.3d at 1355.

In a further reference to the DOJ's decision not to prose-
cute him, Seligman claims that he satisfies category (4).
Citing to this court's Boland Amendment cases, see, e.g.,
Dutton, 11 F.3d at 1080; In re North (Gadd Fee Applica-
tion), 12 F.3d 252, 252 (D.C. Cir., Spec. Div., 1994) (per
curiam), in which we held that the "but for" requirement was
satisfied where the IC treated as criminal conduct that had
never before been considered as such, Seligman states that
since the DOJ declined prosecution in his case, then "[i]t is
clear ... that this matter would not have been treated
'criminally' but for the Independent Counsel's investigation."
Seligman Application at 9. We disagree. After conducting
an investigation, a prosecutor's decision not to prosecute in
the matter does not in any way imply that the conduct
investigated was not considered criminal. Prosecutors de-
cline to prosecute for many reasons, including cost, manpow-
er, sufficiency of evidence, and so forth. We are not privy to
the DOJ's reasons for declining prosecution in this matter.
However, as we stated above, we know that a public official
was investigated for, and pled guilty to, accepting an illegal
gratuity, and that Seligman paid the gratuity. Under these
circumstances we are persuaded that the DOJ would have
investigated the Seligman case as a criminal matter if the IC
had not done so, resulting in a comparable incurrence of
attorneys' fees by Seligman.

 Seligman argues that he further satisfies category (4) be-
cause his conduct which was investigated by the IC, that is,
his provision of a gratuity to Demery, is not illegal. He
states that "[t]he DOJ has traditionally not pursued such
prosecutions" because of their "attenuated nature." Reply to
DOJ and OIC Evaluations at 25. Citing to United States v.
Sun-Diamond Growers of California, 119 S. Ct. 1402 (1999),
in which the Court held that a violation of the illegal gratuity
statute only occurs when there is a link between the gratuity
and a specific act for or because of which the gratuity was
given, Seligman argues that his situation is governed by that
case because "there was no tie between the loan provided to
Demery by Mr. Seligman ... and the actions taken by
Demery at HUD." Reply to DOJ and OIC Evaluations at 23.
We do not find this argument persuasive. The IC in his
Final Report stated that the gratuity given by Seligman to
Demery occurred at the same time that Demery was acting to
fund certain projects owned and developed by Seligman. See
2 Arlin M. Adams & Larry D. Thompson, Final Report of the
Independent Counsel In Re: Samuel R. Pierce, Jr. 71 (1998).
Under these circumstances we feel confident that the DOJ
would have looked into the matter if it had been within its
jurisdiction. We are even more convinced, however, that this
would be the outcome in light of the DOJ's own words on the
matter: in its evaluation of Seligman's Application, after
noting Seligman's conduct as described in the IC's Final
Report, the DOJ stated that Seligman "could not argue that
this kind of conduct would not have been investigated in the
absence of an Independent Counsel law." DOJ Evaluation at
9.

Conclusion

The petition of Irving R. Seligman for reimbursement of
attorneys' fees is denied for failure to comply with the "but
for" requirement of 28 U.S.C. s 593(f)(1).