Samuel R. Pierce

United States Court of Appeals

FOR THE DISTRICT OF COLUMBIA CIRCUIT

Filed June 22, 1999

Division No. 89-5

In re: Samuel R. Pierce, Jr.
(Olivas 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.

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 Ernest
Olivas, Jr. 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 Ernest Olivas, Jr. 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 June 22, 1999

Division No. 89-5

In re: Samuel R. Pierce, Jr.
(Olivas 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: Ernest Olivas, Jr. 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 34Act34), for
reimbursement of attorneys' fees in the amount of $14,555.76,
which he incurred during and as a result of the investigation
conducted by Indepedent Counsels (34IC34) Arlin M. Adams
and Larry D. Thompson. Because we conclude that Olivas
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.

Background
In 1978 Congress established the moderate rehabilitation
(34mod rehab34) program within the U.S. Department of Hous-
ing and Urban Development (34HUD34). This program encour-
aged developers to upgrade moderately substandard housing
units for occupation by low income families. In 1988 HUD's
Inspector General 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-
voratism, and mismangement at HUD during the 1980's
under the tenure of HUD Secretary Samuel R. Pierce, Jr.
Based on information elicited during these congressional in-
vestigations, the House Judiciary Committee wrote to Attor-
ney General Richard Thornburgh seeking the appointment of
an independent counsel to investigate the matter. Following
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 Adams1 as independent counsel 34to
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 1988.34 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

__________
1 Independent Counsel Adams resigned in May of 1995. This
Court appointed his deputy, Mr. 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, in 1992 the IC
began an investigation of HUD funding of two subsidiaries of
Communications International Inc. ("CII"), whose former
senior vice president was then-Treasurer of the United
States, Catalina Villalpando. Ernest Olivas, the fee petitioner
here, was assistant to Villalpando when she was at CII. In
furtherance of this investigation, the IC served a subpoena on
Villalpando for documents relating to the CII subsidiaries.
After receiving the subpoena, Villalpando contacted Olivas,
who was by then the local office manager at CII, and directed
him to destroy and/or conceal certain documents responsive
to the subpoena. Villalpando eventually pled guilty to an
obstruction of justice charge for directing Olivas to destroy
the documents.

Contemporaneous with the IC's investigation of Villalpando
was a separate U.S. Department of Justice ("DOJ") investiga-
tion of her for irregularities in her receipt of financial benefits
from CII while she was Treasurer. During this investigation,
the DOJ had placed a wiretap on Villalpando's phone and
picked up the conversation between her and Olivas concern-
ing destruction of the documents. The DOJ notified the IC,
who began an investigation of Olivas for destroying and/or
concealing the documents and thus interfering with an on-
going grand jury investigation. However, the IC subsequent-
ly "decided, on the basis of considerations such as time,
resources and the other matters under investigation, not to
bring charges against Mr. Olivas." Independent Counsel's
Evaluation of Olivas Fee Application ("IC Eval.") at 6.

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, Olivas, pursuant to Section 593(f)(1) of the Act, peti-
tioned this court for reimbursement of his attorneys' fees.

As directed by Section 593(f)(2) of the Act, we forwarded
copies of Olivas'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). In
their analysis of Olivas's application, both the IC and the DOJ
conclude that Olivas has met the "subject" and "during"
requirements. We agree. However, we also agree with both
evaluations that Olivas has not carried his burden of estab-

lishing that he would not have incurred the fees "but for" the
requirements of the Ethics in Government Act.

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 "the 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) (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 compo-
nent of speculation. In part, though, it is difficult because the
law contemplates that it should be difficult, that such fees will
not be a common thing. As we stated above, the contempla-
tion 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. In

 re Olson, 884 F.2d 1415, 1420 (D.C. Cir., Spec. Div.,
1989); In re North (Dutton Fee Application), 11 F.3d at
1080 (per curiam).

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) (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; In re North (Dutton Fee Application), 11
F.3d at 1080.

Olivas fits none of the four categories. Granted, these
categories are not exhaustive, and probably could not be,
given the "fact-specific nature of each independent counsel's
undertakings." In re North (Dutton Fee Application), 11
F.3d at 1080. Nonetheless, if Olivas is to establish his
entitlement under the Act he must establish some sort of
"unique special factual features that but for the requirement
of the Act would have permitted a quick termination" of the
investigation or otherwise not have subjected him to the fees
for which he petitions. In re Nofziger, 925 F.2d at 439.
Though striving mightily, he falls short.

There can be no serious argument that Olivas's claim fits in
either of the first two categories previously identified by the
Court. As to the first, the Independent Counsel's investiga-
tion ranged far beyond the preliminary investigation not only
in depth but breadth. The matters investigated as to Olivas
are far beyond anything in the preliminary investigation. He
cannot fit category one. As to category two there is neither

allegation nor evidence of the Department's failure to comply
with substantial protective features and thereby pretermit the
investigation that cost Olivas his counsel fees. He cannot fit
this category either. Therefore, in order to establish eligibili-
ty for counsel fees under the "but for" test, Olivas must either
put his facts within category three or four or otherwise
establish the necessary unique special features. This he has
not done.

In his submissions to the Court, Olivas has repeatedly
advanced a post hoc ergo propter hoc rationalization, claiming
that he is entitled to an award of attorneys' fees because had
there been no IC investigation of Villalpando, then his activi-
ties allegedly obstructing it would not have been an issue for
investigation; in other words, that the IC investigation itself
led to the incurrence of Olivas's attorneys' fees. But as the
Independent Counsel points out, if we were to allow reim-
bursement under this line of reasoning then "virtually every
person investigated by the Independent Counsel for potential-
ly criminal conduct would satisfy the 'but for' requirement of
the Act." IC Eval. at 10. We have repeatedly held that
subjects of an independent counsel investigation do not auto-
matically meet the "but for" test simply because the investi-
gation was conducted by an independent counsel under the
Act. If the investigative act generating the defensive costs
would, in the absence of the Act, have been pursued by other
authorities--"had the case been handled by the Department
of Justice or other executive authorities rather than the
Independent Counsel"--then Congress did not contemplate
the award of counsel fees. In Re North (Dutton Fee Appli-
cation), 11 F.3d at 1080. We have found this requirement to
be met where, as in Dutton, among other cases, the indepen-
dent counsel has treated as criminal acts that would not have
been investigated by a political or professional attorney in the
Department of Justice. Similarly, in Segal, we awarded fees
where the investigation would have been terminated by a
political or professional Department of Justice attorney with-
out the incurrence of the fees sought. 151 F.3d at 1089.
Olivas's fees reflect no such unique claim. We cannot hold
that the Attorney General and other investigative authorities
would not have pursued allegations of corruption as deep and

widespread as those revealed by the Independent Counsel's
investigation had there been no such Act. Nor is it in any
way apparent that such an Executive Branch investigation
would not have raised just as much occasion for obstruction
by Villalpando and Olivas as did the IC's.

Indeed, as we have formulated previously, attorneys' fees
are to be awarded to those who have incurred the fees not
because of the Act itself (and therefore the appointment of
the independent counsel per se), but because of the require-
ments of the Act. In re Nofziger, 925 F.2d at 445. And
requirements "refers to the special limitations and procedures
established by the Act," e.g., the two-step investigatory proce-
dure by the Attorney General and the restrictions on the
Attorney General in complying with that procedure, id., which
we discern as having no bearing on Olivas's situation here.
Investigation and potential prosecution of Olivas by the IC for
destruction and/or concealment of documents responsive to a
grand jury subpoena "does not satisfy the 'but for' require-
ment since it is a type of prosecution that is not uniquely
related to the Act." In re North (Corr Fee Application), 56
F.3d 261, 264 (D.C. Cir., Spec. Div., 1995) (per curiam).
Therefore, absent some showing not made by Olivas, we
cannot say that the fees would pass the "but for" test.

Olivas also advances the slightly more sophisticated argu-
ment that the IC's investigation generated the subpoenas that
were the foundation for the acts of obstruction by Ms. Villal-
pando which he in turn was investigated for having aided and
abetted or having participated in a conspiracy to commit.
Again, given the allocation of the burden, see In Re North
(Reagan Fee Application), 94 F.3d at 690, we cannot say that
this rather convoluted reasoning takes Olivas's claim outside
the category of those fees that would have been incurred
defending against investigation by an executive agency even
in the absence of the Act.

Conclusion

The petition of Ernest Olivas, Jr. 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).