United States Court of Appeals
For the First Circuit
Nos. 03-1098
03-1153
UNITED STATES OF AMERICA,
Appellant/Cross-Appellee,
v.
ARTHUR L. PIMENTAL,
Defendant, Appellee/Cross-Appellant.
APPEALS FROM THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF MASSACHUSETTS
[Hon. Nancy Gertner, U.S. District Judge]
Before
Lynch, Circuit Judge,
Rosenn, Senior Circuit Judge,* and
Lipez, Circuit Judge.
Mark J. Balthazard, Assistant U.S. Attorney, with whom Michael
J. Sullivan, U.S. Attorney, was on brief, for appellant.
James C. Rehnquist, with whom Sarah E. Walters, Miriam Kim,
and Goodwin Procter LLP were on brief, for appellee.
August 30, 2004
*
Of the Third Circuit Court of Appeals, sitting by
designation.
LYNCH, Circuit Judge. This workers' compensation
insurance fraud criminal case produced an appeal from both sides.
The government appeals the district court's dismissal of two counts
on which a jury had convicted, while the defendant cross-appeals on
the ground that the entire case should have been dismissed because
of an alleged violation of the grand jury secrecy rule, embodied in
Fed. R. Crim. P. 6(e). We conclude, despite the able
representation of Pimental, that (1) the district court erred in
dismissing the two counts and we reinstate the jury convictions and
conclude that (2) there was no violation by the prosecution here of
Rule 6(e) at all. This second point is a matter of first
impression.
After a jury convicted Arthur Pimental of two counts of
mail fraud, the district court dismissed the convictions because it
found that the two underlying mailings were not "in furtherance" of
Pimental's fraudulent scheme. United States v. Pimental, 236 F.
Supp. 2d 99 (D. Mass. 2002). Pimental's scheme involved lying to
various workers' compensation insurance company representatives
about the nature and scope of his company's work; his false
statements tended to reduce the premium payments he owed for
workers' compensation insurance. The government appeals the
district court's decision, arguing that the two mailings furthered
Pimental's scheme by helping to ensure that the insurance company
did not discover his earlier misrepresentations.
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Pimental cross-appeals, arguing that his indictment
should be dismissed because the prosecuting attorney disclosed
secret grand jury materials to an investigator for the
Massachusetts Insurance Fraud Bureau (IFB). Pimental argues that
the rule allowing disclosure of grand jury materials to "government
personnel" in certain circumstances, Fed. R. Crim. P.
6(e)(3)(a)(ii), was inapplicable because the IFB investigator was
a private actor. The IFB, which investigates potential cases of
insurance fraud, is authorized and structured by Massachusetts
statute, but partially run and entirely funded by insurers.
We reverse the district court's dismissal of Pimental's
convictions, finding that the mailings by insurance company
representatives that formed the basis of the two counts of
conviction were indeed in furtherance of Pimental's fraudulent
scheme. Additionally, we reject Pimental's cross-appeal because we
conclude that the first district court (not the trial court) did
not err when it found the IFB investigators here are "government
personnel" within the meaning of Fed. R. Crim. P. 6(e)(3)(A)(ii)
and so authorized the prosecutor to reveal grand jury materials to
them.
I. Factual Background
The facts are described in the light most favorable to
the jury's guilty verdict.
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Arthur Pimental and his wife, Loretta Pimental (for ease
of reference we refer to her as Loretta and to Arthur as Pimental),
owned and operated Pimental Steel Erectors ("Pimental Steel")
starting sometime in the early 1980's. In late 1989, Pimental
Steel allowed its workers' compensation insurance to lapse; this
violated Massachusetts law. Massachusetts requires all employers
to maintain workers' compensation insurance which covers their
employees in the case of an on-the-job injury or job-related
illness. Mass. Gen. L. ch. 152, § 25A. Over three years later, in
April 1993, Arthur Pimental mailed a written application to the
Massachusetts Workers' Compensation Rating and Inspection Bureau
(MWCRIB) to resume Pimental Steel's workers' compensation coverage.
MWCRIB, a private non-profit association of insurers that is
licensed under Massachusetts law, Mass. Gen. L. ch. 152. § 52C,
uses a risk pool to assign insurance companies to provide workers'
compensation insurance on pre-set terms to applicant-employers.
The fraud charges started here.
On the MWCRIB application form, Pimental described the
operations of his business as involving "concrete construction
incl[uding] foundations" and added that it "puts in foundations."
Concrete foundation work involves laying concrete and reinforcing
it with steel rods and is also known as "rebar." MWCRIB processed
the application, assigned it to the Hartford Fire Insurance Company
("Hartford Insurance"), and notified Pimental via the mail that the
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estimated premium for the year, based on his application, was
$12,425.
Despite what was said in the MWCRIB application, Pimental
Steel had never at any point been involved in concrete foundation
work. Rather, throughout the relevant period, its business
performed mainly steel erection and related work, such as welding
and decking. Steel erection involves the placement of girders,
columns, and joints to support a structure, then laying corrugated-
metal decking for the ceiling and floors of the building and
welding it into place. Steel erection work carries a
significantly higher risk of injury than does concrete foundation
work.
Because workers' compensation premiums are set based upon
the kind of work performed and the amount of a business's payroll,
Pimental's incorrect description on the MWCRIB application affected
the premium payments Pimental Steel owed. In 1993, the premium
payment for steel erection of structures over two stories was
$99.35 per every hundred dollars of payroll1 (reduced to $69.22 for
structures under two stories), while the rate was $41.22 for
concrete foundation work. Some of the work that Pimental Steel
actually performed, however, had lower premium rates than concrete
foundation work: the rate for decking was $24.66 or $19.82,
1
All subsequent references to premium rates are per hundred
dollars of payroll.
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depending on the type of metal used, while the rate for welding was
$23.56. Where, as in the case of Pimental Steel, employees perform
tasks that have different premium rates, the total premium cost can
be calculated by parsing out the hours that employees spent on each
different task, so long as appropriate documentation is maintained.
One witness testified that 80% of the work Pimental Steel did for
him was steel erection and decking and that the remaining 20% was
"miscellaneous."
In September of 1993, Joseph F. Brugman, an auditor for
Hartford Insurance, met with Loretta Pimental to perform an initial
audit on Pimental Steel's insurance application. In addition to
such initial audits, which are conducted at the start of an
insurer's relationship with an insured, insurers normally perform
audits once a year at the conclusion of each annual policy period.
The auditors determine the insurance classification for the work
that the insured's employees performed and the total amount of
salary paid to them. Using this information, the insurance
companies calculate the final amount that the employer owes for the
year.
During the initial audit meeting, Loretta told Brugman
that Pimental Steel was, as the MWCRIB application had represented,
involved in concrete foundation work. She did not tell Brugman
that Pimental Steel was involved in any way in steel erection,
welding, or decking, even though Brugman explained to her that
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Pimental Steel's operations could be split into different
classifications for insurance purposes. At the later year-end
audit in July 1994, also conducted by Brugman, Loretta repeated
this description of Pimental Steel's business operations.
Several months after Brugman conducted his year-end
audit, William Brooks, a loss-control inspector for Hartford
Insurance, met with Arthur Pimental. In contrast to auditors, the
purpose of loss-control inspectors is not to verify the accuracy of
the information given by policyholders, but instead to "assist[]
policyholders in their efforts to control costly accidents and/or
injuries." During that meeting Pimental once again represented,
wrongly, that his business involved rebar. Pimental also told
Brooks that he did not currently have any employees and that there
were not any ongoing projects that Brooks could observe. This was
also not true: Pimental paid an employee wages three days after his
meeting with Brugman.
On October 5, 1994, Brooks mailed an "Account Data
Report" to Hartford Insurance that summarized his meeting with
Pimental. The letter began by stating that "[t]he insured
describes his business []as that of the installation of reenforcing
bars and rods for floors and walls." Brooks's standard practice is
to inform insureds that he will turn over a copy of his loss-
control report to the insurance company, and that the company will
inform the employer of any recommendations to improve worker
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safety. However, Brooks testified that he had no specific
recollection of whether he had informed Pimental of this procedure
during their meeting.
The Pimentals renewed their workers' compensation
insurance coverage with Hartford Insurance in May 1995. Hartford
sent them a letter detailing the terms of coverage; under the
heading "Business of Named Insured," the letter read "concrete
construction." In July 1995, Hartford auditor Mark Lawrence met
with Loretta Pimental to conduct an audit of the May 1994 to May
1995 policy period. During that meeting, Lawrence asked Loretta if
the company did any steel erection work, given that the company's
name is "Pimental Steel Erectors." Loretta responded that the
company only did concrete rebar work, and did not work on steel
erection, despite its name.
Lawrence also asked Loretta for documentation of Pimental
Steel's wage payments to employees. Loretta told Lawrence that
there was no single record detailing payroll. Instead, she
provided him with a checkbook that had been used to make payroll
payments, along with a written summary of that checkbook, and told
him that there were no additional records. From these documents,
Lawrence calculated that Pimental Steel had paid $28,885 in salary
to its employees for the year from May 1994 to May 1995, resulting
in a total premium of $13,586. In fact, Pimental Steel's actual
payroll during that period was $85,499, a figure which would have
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led to a larger premium. The Pimentals used non-sequentially
numbered checks in their business and it appears that the single
checkbook given to Lawrence contained only a fraction of all the
checks written on behalf of Pimental Steel from the previous year.
In July 1995, Hartford Insurance attempted to arrange
another loss-control meeting with Arthur Pimental. After Pimental
did not respond to three separate inquiries, Timothy Bergeron, a
Senior Loss-Control Consultant for Hartford Insurance, sent him a
final letter stating that "failure to allow reasonable access for
the purpose of loss-control consultation is a violation of the good
faith provisions in the Workers' Compensation Insurance Plan and
can subject your policy to cancellation." Under that threat of
cancellation, Pimental finally met with Bergeron on September 21,
1995.
During the meeting, Pimental told Bergeron that Pimental
Steel continued to perform rebar work; he falsely said the company
did not perform any structural steel erection or metal deck work.
He also falsely told Bergeron that there were currently no jobs in
progress that could be inspected. His bank records reveal,
however, that three employees were paid their wages that same day.
During the meeting, Bergeron told Pimental that he was going to
prepare a report summarizing their meeting and would mail it to
Hartford Insurance. Bergeron testified that he told Pimental that
he would send the loss-control report to Hartford Insurance, and
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Brooks indicated that it was his standard practice to tell the
insured that the loss-control report would be forwarded to the
insurance company. Bergeron kept a copy of the report in Hartford
Insurance's Boston branch (where he was stationed) and sent a copy
to the company's branch in San Antonio, Texas "that issues the
policy and distributes all the policies regarding the assigned risk
pool." On October 5, 1995, Bergeron also mailed a letter to
Pimental summarizing their meeting and stating that "[y]our company
continues to bid work as a subcontractor installing reinforcement
bar."
Pimental again renewed the company's workers'
compensation insurance in May 1996, and Hartford Insurance again
mailed a letter to Pimental detailing the coverage and repeating
that the nature of the company's business was "concrete
construction." Later that summer, Lawrence wrote a letter to the
Pimentals requesting certain documents that were needed to perform
a year-end audit for the May 1995-to-May 1996 coverage period. The
Pimentals never provided Lawrence with any of the requested
documentation.
When Lawrence met with Loretta Pimental for the annual
audit on August 9, 1996, the only documentation that she provided
was Pimental Steel's checkbook; she claimed to have been unaware of
the records Lawrence had requested and to have lost the letter he
had sent to her. As a result, Lawrence determined that Pimental
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Steel's account was "unauditable" and his report to Hartford
Insurance simply estimated a payroll of $31,500 based on the
checkbook that Loretta had provided. This estimate was less than
20% of Pimental Steel's actual payroll of $158,653 for that time
period. Consequently, the $19,374 in premiums that the Pimentals
were charged was also less than 20% of what they actually owed.
In November 1996, Arthur Pimental, perhaps concerned that
Hartford Insurance might cancel Pimental Steel's policy for failure
to provide requested documentation, submitted a second application
for workers' compensation insurance to MWCRIB. This application
contained a new name for the company; it was now called A.P.S.
Products, Inc., rather than Pimental Steel Erectors. (We continue
to refer to Pimental's company as "Pimental Steel" despite this
name change). The application once again described the company's
operations as "[i]nstall steel for concrete reinforcement," and
stated that its total payroll was $65,000 per year and that it
employed only two workers. During the previous six months, the
Pimentals' company actually paid salary to between four and seven
employees on a weekly basis, and the company's payroll for those
six months totaled approximately $83,000.
MWCRIB assigned the insurance application to Employers
Insurance of Wausau (Wausau Insurance) and sent a letter to
Pimental informing him of the assignment and stating that the
estimated premium was $37,600. The Pimentals then began a pattern
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of deception with Wausau Insurance similar to that employed with
Hartford Insurance. Arthur told auditors for Wausau Insurance that
A.P.S. Products did concrete rebar construction rather than the
steel erection, welding, or decking work that it actually
performed. Loretta, in turn, initially provided Wausau Insurance
with incomplete records that significantly underrepresented the
company's payroll.
As part of a block transfer of policies, MWCRIB
reassigned the Pimentals' insurance coverage from Wausau Insurance
to Savers Property & Casualty Insurance Company ("Savers
Insurance") in October of 1997. Using the 1996 MWCRIB application
as well as Wausau's most recent policy, Savers Insurance initially
calculated a $33,671 yearly premium based on a $65,000 payroll in
concrete rebar. Once again, the Pimentals misrepresented the
nature of their business to Savers Insurance. Arthur Pimental told
a loss-control inspector for Savers Insurance that his company only
worked on concrete rebar. Further, the Pimentals failed to respond
to several inquiries from Savers Insurance auditors, resulting in
Savers Insurance using a 50% increased payroll figure of $97,500
for the 1997-to-1998 coverage period. This was still substantially
smaller than the actual payroll figure of $168,162.
In total, from October 1993 to August 1998, the Pimentals
paid their employees approximately $738,000 in salary. The
insurance premiums they paid during this period were based on a
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payroll of less than half that amount -- about $340,000.
Throughout the time period, the Pimentals paid premium rates for
concrete rebar even though their work consisted almost entirely of
steel erection, welding, and decking. Because different premium
rates apply to each of these three activities and there was little
evidence concerning how many employee hours were dedicated to each
separate activity, the extent of the monetary benefit the Pimentals
received from misrepresenting their business is unclear.2 A jury
could easily infer that the premiums would have been higher if
Pimental had been honest in what he told his insurers.
II. Procedural History
On September 29, 1999, Arthur and Loretta Pimental were
each indicted on one conspiracy count, 18 U.S.C. § 371, and
fourteen counts of mail fraud, 18 U.S.C. § 1341. Before trial, the
Pimentals moved to dismiss the indictment, claiming that the
government had violated Fed. R. Crim. P. 6(e) when it disclosed,
after earlier receiving permission from another judge on the court
to do so, grand jury materials to an investigator for the Insurance
Fraud Bureau of Massachusetts. Pimental, 236 F. Supp. 2d at 103.
In a trio of pretrial opinions, the district court held that there
had been a Rule 6(e) violation (despite the prior approval of a
2
Indeed, Pimental stresses on appeal that it is possible that
he actually lost money from misrepresenting the type of operations
his company performed, because some of those operations were
cheaper to insure than was concrete rebar.
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different judge of the court), but held that the violation was
harmless because the grand jury testimony that resulted from the
transmittal of information to the IFB investigator was not crucial
to the grand jury's decision to indict. United States v. Pimental,
204 F.R.D. 223 (D. Mass. 2001); United States v. Pimental, 201
F.R.D. 24 (D. Mass. 2001); United States v. Pimental, 199 F.R.D. 28
(D. Mass. 2001).
The government voluntarily dismissed three of the mail
fraud counts on September 16, 2002, and the case proceeded to trial
the next day. Pimental, 236 F. Supp. 2d at 104. After six days of
testimony, a jury acquitted Loretta Pimental on all counts and
acquitted Arthur Pimental on the conspiracy count and nine of the
eleven mail fraud counts. The two mail fraud counts on which the
jury convicted Arthur Pimental were both based on mailings sent by
loss-control inspectors. The first count was premised on the
October 5, 1994 mailing from William Brooks to Hartford Insurance,
in which Brooks reported that Arthur Pimental had said that
Pimental Steel Erectors only performed concrete rebar work. The
second count was based on the letter from Timothy Bergeron to
Arthur Pimental summarizing their meeting and noting that Pimental
Steel was, according to Pimental, involved only in concrete rebar
work.
After the jury returned its verdict, Arthur Pimental
moved for a judgment of acquittal pursuant to Federal Rule of
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Criminal Procedure 29(c). He also renewed his motion for a
dismissal of the indictment, arguing that evidence presented at
trial provided a previously unavailable basis for believing that
the information disclosed to the IFB investigator had substantially
influenced the grand jury's decision to indict.
The district court held that there was sufficient
evidence for the jury to find the existence of a scheme to defraud
and that the mailings were reasonably foreseeable. Id. at 109,
110. But it nonetheless granted Pimental's Rule 29 motion because
it concluded that there was not sufficient evidence that either
mailing was in furtherance of the fraudulent scheme. Id. It also
declined to rule on Pimental's renewed motion for dismissal of the
indictment based on the Rule 6(e) violation, finding that this
issue was mooted by its grant of the Rule 29 motion. Id. at 112.
The government appeals the district court's grant of the
Rule 29 motion. Arthur Pimental, in turn, cross-appeals the denial
of his motion to dismiss the indictment for the Rule 6(e)
violation.
III. The Rule 29 Motion
Our review of the district court's Rule 29 determinations
is de novo. United States v. Moran, 312 F.3d 480, 487 (1st Cir.
2002). A judgment of acquittal should only be granted when the
evidence and all reasonable inferences to be drawn from the
evidence, both taken in the light most favorable to the government,
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are insufficient for a rational factfinder to conclude that the
prosecution has proven, beyond a reasonable doubt, each of the
elements of the offense. Id.; United States v. Campbell, 268 F.3d
1, 6 (1st Cir. 2001). "Under this formulation, a court considers
all the evidence, direct and circumstantial, and resolves all
evidentiary conflicts in favor of the verdict." Moran, 312 F.3d at
487.
To demonstrate a violation of the mail fraud statute, 18
U.S.C. § 1341, the prosecution must prove "(1) the devising or
attempting to devise a scheme or artifice to defraud; (2) the
knowing and willing participation in the scheme with the specific
intent to defraud; and (3) the use of the mails in furtherance of
the scheme." United States v. McCann, 366 F.3d 46, 51 (1st Cir.
2004) (quoting United States v. Montminy, 936 F.2d 626, 627 (1st
Cir. 1991)). The government must also demonstrate, in order to
prove causation, that the defendant knew, or could have reasonably
foreseen, that "the use of the mails [would] follow in the ordinary
course of business." Pereira v. United States, 347 U.S. 1, 9
(1954); cf. United States v. Fermin Castillo, 829 F.2d 1194, 1198-
99 (1st Cir. 1987) (interpreting wire fraud statute). "It is not
necessary to prove that the defendant personally executed the
mailings, but merely that the defendant 'caused the mailing by
doing some act from which it is reasonably foreseeable that the
mails will be used.'" United States v. Bruckman, 874 F.2d 57, 60
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(1st Cir. 1989) (quoting United States v. Gonzalez-Sanchez, 825
F.2d 572, 588 (1st Cir. 1987)).
There was easily sufficient evidence for the jury to find
the existence of a scheme to defraud and that the use of the mails
was reasonably foreseeable, as discussed below. As to the "in
furtherance of" requirement, the district court erred in holding
that there was not sufficient evidence for the jury to find that
the two loss-control inspectors' mailings were in furtherance of
the fraudulent scheme. Accordingly, we reverse the grant of the
Rule 29 motion and reinstate the convictions.
A. The Existence of a Scheme to Defraud
Pimental challenges the district court's conclusion that
there was sufficient evidence of a scheme to defraud, hoping to
knock out the convictions on grounds other than those relied upon
by the district court.3 First, he argues that the evidence at
trial did not establish that Pimental Steel's employees were
3
As recounted in Part I, there was significant evidence that,
in addition to lying about the nature of Pimental Steel's
operations, Pimental also lied about the size of the company's
payroll. Pimental says that this evidence "only established that
in workers' compensation insurance applications, [he] made
estimates of the payroll, which often vary widely from the actual
payroll, particularly in the construction industry." Not so.
There was more than sufficient evidence for the jury to find that
Pimental did indeed misrepresent the size of Pimental Steel's
payroll in an effort to defraud the insurance companies.
Nonetheless, in order to simplify the analysis of whether Count
Four was in furtherance of the fraudulent scheme, see infra Part
III.B.ii., we focus on Pimental's misrepresentations concerning the
nature of Pimental Steel's operations.
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actually covered by workers' compensation insurance when they were
performing steel erection. Pimental says the jury had no way of
eliminating the possibility that if he had submitted a claim on
behalf of an injured employee, the insurance company would have
discovered the incorrect premium payments and thus refused to pay
the employee. Pimental does not contest the district court's
conclusion that, as a matter of Massachusetts law, the insurance
company would be obliged to cover Pimental Steel's employees under
such circumstances.4 Pimental, 236 F. Supp. 2d at 106 (relying on
Employers Mutual Liability Insurance Co. of Wisconsin v. Merrimac
Mills Co., 325 Mass. 676, 681 (1950)). But he says that there was
no evidentiary basis for the jury to reach this conclusion. From
this premise, Pimental argues that the jury could not have found
that the insurers suffered any loss as a result of Pimental's
actions. And that, concludes Pimental, means that there was
insufficient evidence for the jury to conclude that there existed
a "scheme to defraud."
Pimental's argument goes too far. In order to find a
"scheme to defraud," the jury simply had to determine that Pimental
was attempting to "wrong[] one in his property rights by dishonest
methods or schemes." McNally v. United States, 483 U.S. 350, 358
(1987) (quoting Hammerschmidt v. United States, 265 U.S. 182, 188
(1924)). Here, there was more than sufficient evidence for the
4
As Pimental does not raise this issue, we do not address it.
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jury to conclude that Pimental lied about the nature of his
company's work in order to pay cheaper premiums on his workers'
compensation insurance. The jury easily could have concluded that
Pimental was attempting to dishonestly minimize the insurance
premiums to the company that he should have been paying under
Massachusetts law. The speculative possibility that if an employee
had filed a claim with Hartford Insurance, it would have discovered
Pimental's lies and refused to pay the employee is irrelevant. To
convict, the jury need not have drawn any additional conclusion.
Pimental also argues that there was insufficient evidence
of a scheme to defraud because the evidence was inconclusive as to
whether he ultimately paid premiums that were less than what he
actually owed, for the reasons discussed earlier. But whether
Pimental actually paid more or less in premiums than he actually
owed goes only to the success of his fraudulent scheme, not to its
existence. See United States v. Martin, 228 F.3d 1, 16 (1st Cir.
2000) (success in scheme is not needed to support mail fraud
conviction). In addition, the argument fails on its own terms. A
rational jury could have found that Pimental, because of his own
actions, did not in fact have the option of making variable premium
payments according to the amount of time that his workers spent
performing different job tasks. The evidence at trial established
only that:
The payroll of an individual employee may be divided and
allocated to more than one classification, provided the
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entries in the original records of the insured disclose
an allocation of each such individual employee's payroll.
Any such operation for which separate payroll records are
not maintained shall be assigned to the highest rated
classification which applies to the job or location where
the operation is performed.
(emphasis added). There was extensive testimony that the Pimentals
specifically chose not to keep records documenting the breakdown of
their employees' work and that they repeatedly misled the insurance
company concerning their payroll in order to pay lower rates. A
reasonable jury could have easily found that the Pimentals did not
maintain "separate payroll records" and hence that the rate they
should have paid, for all payroll hours, was the rate for steel
erection. This would have been significantly more than the amount
they actually paid.
B. The "In Furtherance Of" Requirement
In order for a mailing to be "in furtherance" of a
fraudulent scheme, it "must be for the purpose of executing the
scheme," United States v. Maze, 414 U.S. 395, 399-400 (1974)
(quoting Kann v. United States, 323 U.S. 88, 94 (1944)), or "part
of the execution of the scheme as conceived by the perpetrator at
the time," Schmuck v. United States, 489 U.S. 705, 715 (1989). The
mailing "need not be an essential element of the scheme"; it can be
merely "incident to an essential part of the scheme," id. at 710-11
(quoting Pereira, 347 U.S. at 8), or "a step in [the] plot," id. at
711 (quoting Badders v. United States, 240 U.S. 391, 394 (1916));
see also McCann, 366 F.3d at 52.
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(i) Count Two Conviction -- Brooks's Account Data Report
The mailing that formed the basis of Count Two, on which
the jury convicted Pimental, was Brooks's October 5, 1994 "Account
Data Report" to Hartford Insurance, which recounted the substance
of his loss-control interview with Pimental. In that report,
Brooks wrote that Pimental had said that his business involved only
rebar construction.
In Schmuck, the Supreme Court addressed the "in
furtherance of" requirement with respect to a mailing of some
similarity to Brooks's loss-control report. The defendant in
Schmuck purchased used cars, rolled back their odometers, and then
resold them to retail dealerships, who, in turn, sold them to
consumers. 489 U.S. at 707. The Court held that the mailing of a
title-application form from the dealership that purchased Schmuck's
vehicle to a state agency, at the time of the dealership's sale of
the car to the end-consumer, met the "in furtherance of" element of
the mail fraud statute. Id. at 710-12. In cases of "ongoing
fraudulent venture[s]," reasoned the Court, mailings that help
maintain a harmonious relationship between the perpetrator and the
victim further the fraudulent scheme by helping to ensure its
continued success in the future. Id. at 711-12. Even though such
mailings were not absolutely necessary for the scheme to succeed in
the short term, they allowed the dealerships who purchased the cars
from Schmuck to sell them to the ultimate consumer and thus helped
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guarantee that the dealerships would continue to purchase cars from
Schmuck in the future. Id.
Likewise, the mailing from Brooks to Hartford Insurance
helped Pimental maintain his ongoing fraudulent venture by ensuring
that he continued to receive insurance coverage. The jury was
entitled to conclude that had Brooks never mailed his loss-control
report, Hartford Insurance would have terminated its insurance
coverage and Pimental's scheme would have, at least temporarily,
come to a halt. Indeed, Pimental's policy with Hartford Insurance
was threatened with cancellation when he attempted to avoid a loss-
control interview in the summer of 1995 by ignoring repeated
inquiries from Bergeron. If Hartford Insurance were not to receive
a completed loss-control report, Bergeron's letter warned,
Pimental's insurance coverage would be "subject . . . to
cancellation." A rational jury could have readily found that the
loss-control report from Brooks to Hartford Insurance furthered
Pimental's fraudulent scheme because it was a necessary step in the
continued relationship between Pimental and his victim, Hartford
Insurance. Cf. United States v. Woodward, 149 F.3d 46, 64-65 (1st
Cir. 1998) (in ongoing scheme in which lobbyist made illegal
purchases for a public official, the mailing of a credit card bill
to the lobbyist satisfied the "in furtherance of" requirement
because if the lobbyist "did not pay [the] bills, his credit line
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would have been terminated and the gratuities could not have
continued").
The district court reached the opposite conclusion by
relying on a statement in a post-Schmuck First Circuit case, United
States v. Pacheco-Ortiz, 889 F.2d 301, 305 (1st Cir. 1989), that
the perpetration of the fraud or its subsequent cover-up must have
"depended in some way on" the mailing. Pimental, 236 F. Supp. 2d
at 108. The court interpreted this formulation to impose a "but
for" test for the "in furtherance of" element of mail fraud -- i.e.
that a fraudulent scheme "depends on" a mailing only when but for
that mailing, the scheme could not have succeeded or would have
been discovered.5 The district court concluded that Pacheco-
Ortiz's use of "depends on" meant "but-for" despite language in
Pacheco-Ortiz that also said that it was not necessary that each
mailing guarantee the success of the scheme or even significantly
advance it -- that it only need be closely related to the scheme.
889 F.2d at 305.
5
The flexibility of the English language is one of its
wonders; that flexibility can lead to misunderstandings. Pacheco-
Ortiz simply said that "for the mailings to be considered in
furtherance of the scheme, the scheme's completion or the
prevention of its detection must have depended in some way on the
mailings." 889 F.3d at 305 (internal quotations omitted) (emphasis
added). It did not say there was a "but-for" requirement. The
dictionary does say that the word "depend" can mean that something
is "a necessary condition," but the word can also mean "to have a
connection or relationship as a subordinate part or appurtenance."
Webster's Third New International Dictionary 604 (1993).
-23-
Applying its approach, the district court found that
there was no evidence that, absent the mailing of the loss-control
report, Hartford would necessarily have uncovered the scheme and
terminated Pimental's coverage. Although the court noted that it
was possible that a loss-control report describing the Pimentals'
business as steel erection "might have raised an eyebrow" at the
insurance company, it concluded that the government did not present
sufficient evidence on this point; the evidence did not demonstrate
that "the jig would have been up" had Brooks's loss-control report
stated that the Pimentals' business was steel erection. Id.
The district court's search for a direct, but-for, link
between Brooks's mailing and the fraudulent element of Pimental's
scheme -- the claim that his business involved concrete rebar and
not steel erection -- misapprehended the law in two ways. First,
a mail fraud conviction does not require the existence of a "but-
for" link between the mailing and the fraud, or its cover-up. Such
a rule would harken back to the oft-rejected notion that the
mailing needs to be connected with the essence of the fraud. It
need not be, so long as it is "incident to an essential element of
the fraud." See Schmuck at 710-11. For instance, in Schmuck
itself there was no but-for relationship between the success of the
scheme and the mailing of the title-application form. Schmuck
could have continued selling cars that had been tampered with even
if the dealerships that bought those cars did not mail the title-
-24-
application forms. The mailings were nonetheless "in furtherance"
of the scheme because they contributed to its overall success by
making it more likely that dealerships would come back to Schmuck
to purchase more cars.
Similarly, mailings that are designed to "lull the
victims into a false sense of security, postpone their ultimate
complaint to the authorities, and therefore make the apprehension
of the defendant[] less likely than if no mailings had taken place"
are sufficient under the statute. United States v. Lane, 474 U.S.
438, 451-52 (1986) (quoting Maze, 414 U.S. at 403) (emphasis
added); United States v. Lopez, 71 F.3d 954, 961-62 (1st Cir.
1995). Preventing the detection of an ongoing or a completed
fraudulent scheme is not contingent on lulling the victim into a
false sense of security. Instead, lulling the victim into a false
sense of security contributes to the prevention of the scheme's
detection by making detection of the scheme less likely. This is
sufficient to satisfy the "in furtherance of" requirement of the
mail fraud statute. See, e.g., McCann, 366 F.3d at 53 (letter sent
after the culmination of the fraud was in furtherance of fraud
because it "served the important purpose of decreasing the risk of
detection"); Lopez, 71 F.3d at 956-57, 961 (fax sent two years
after culmination of fraud that attempted to explain certain
documents that were submitted to cover-up the illegal withdrawal
was in furtherance of fraudulent scheme in wire fraud conviction
-25-
because it made defendant's apprehension less likely); United
States v. Young, 955 F.2d 99, 108 (1st Cir. 1992) (Breyer, J.)
(mailings that misrepresented disposition of embezzled funds helped
conceal the fraud and were thus sufficient to meet the "in
furtherance of" requirement).
A second, independent, problem with the district court's
analysis is that it focused exclusively on Pimental's
misrepresentations in determining whether the mailings furthered
his overall scheme. In fact, even under the district court's
overly stringent and incorrect but-for test, the jury would have
been entitled to conclude that Pimental's scheme depended on
Brooks's mailing. The reason is that the success of the scheme did
not simply depend on Pimental lying about the nature of his
business's operations -- it also depended, among other things, on
the mailing and processing of loss-control reports. Were those
reports not mailed, there was significant evidence that Hartford
Insurance would have cancelled the Pimentals' coverage. One of the
central points of Schmuck is that a mailing that is itself innocent
and that seems to accomplish an innocent end can nonetheless be in
furtherance of a fraudulent scheme.
ii. Count Four Conviction -- Bergeron's Mailing to
Pimental
The second Count on which Pimental was convicted is
premised on Bergeron's mailing to Pimental himself of a summary of
the loss-control interview. In this mailing, Bergeron states,
-26-
based on what Pimental said in the interview, that Pimental's
business continued to be the installation of concrete reinforcement
bar.
Pimental argues that whether he received a summary of his
meeting with Bergeron was immaterial to whether Hartford Insurance
would continue to provide the Pimentals with insurance for their
employees at the incorrect rate. Pimental also argues that lying
to loss-control inspectors as opposed to lying to auditors was not
an essential part of the scheme. This was particularly so, says
Pimental, because the evidence was that the loss-control division
of Hartford Insurance was entirely separate from the division that
set premiums and investigated fraud. Indeed, Brooks was not even
an employee of Hartford Insurance, but was instead an independent
contractor.
A reasonable jury easily could have concluded that
Pimental needed to be or thought he needed to be consistent in his
lies to representatives of the insurer, regardless of who the
representative was. It is not hard to infer that an inconsistent
report from a loss-control inspector could somehow trigger alarms
in the premium setting group. The harder question is why a letter
to Pimental, recounting his fraudulent statements, was in
furtherance of the fraud. There are several responses. One is
that Pimental now knew that his deception of the inspector was
successful -- his copy showed that his lies were being sent to the
-27-
company records. This could only encourage him in the scheme.
Further, there was an obvious purpose to Bergeron sending a summary
of his report to Pimental -- it allowed Pimental to correct any
inaccurate information on the report. Pimental chose not to
correct the misinformation, thus perpetuating the fraud and
demonstrating further his fraudulent intent. See United States v.
Morrow, 39 F.3d 1228, 1236-37 (1st Cir. 1994) (in insurance fraud
scheme, the insurance company's mailing to the insured
acknowledging that it had received the fraudulent claim was, under
the Schmuck formulation, "'incidental' to an essential element in
the scheme").
C. Causation: Were the Mailings Reasonably Foreseeable?
Pimental argues that there was insufficient evidence for
the jury to conclude that he "caused" either of the mailings at
issue because neither of them was reasonably foreseeable. See
Pereira, 347 U.S. at 8-9. There was no evidence, according to
Pimental, of a "course of business" between himself and his
insurers that would have led a reasonable person to have
anticipated either of the mailings that formed the basis for his
convictions. He points to evidence that Brooks could not recall
ever telling Pimental that the loss-control report would be mailed
to Hartford Insurance. Similarly, Bergeron testified only that he
told Pimental that he would send the loss-control report to
Hartford, not that he would send it to Pimental himself. All of
-28-
this, concludes Pimental, means there was no way that he could
reasonably foresee that either Brooks's or Bergeron's letters would
ever be written or mailed.
Pimental's arguments are premised on an incorrect
understanding of the law. As the district court correctly held, it
is simply the "use of the mails" in the course of the scheme rather
than the particular mailing at issue that must be reasonably
foreseeable for the causation element of a mail fraud offense to be
satisfied.6 See Morrow, 39 F.3d at 1237 (all that is required to
show causation is that the defendant "participated in a crime in
which it was foreseeable . . . that the mails would be used" and
that was satisfied where defendant "admitted at trial that he knew
that automobile insurance claims are processed in part through the
6
The facts of Bruckman clearly illustrate this principle. The
defendant in that case submitted a fraudulent financial statement
to a bankruptcy court in connection with the attempted purchase of
a corporation under that court's protection. 874 F.2d at 59-60.
The bankruptcy court's subsequent mailings of the statement to the
corporation's creditors formed the basis for the defendant's
convictions. Id. at 60. In responding to Bruckman's causation
argument, the court held that it was not necessary for the
bankruptcy court's mailings to the company's creditors to have been
reasonably foreseeable. Rather, it was sufficient that there "was
ample evidence from which the jury could conclude both that
Bruckman participated in the scheme to defraud, and that some use
of the mails was to be anticipated in the course of such scheme."
Id. (emphasis added). Because the "jury could reasonably infer
that mailings would be foreseeable in the course of the bankruptcy
reorganization proceedings related to the intended acquisition of
[the corporation] by Bruckman and others," there was sufficient
evidence for the jury to conclude "that Bruckman knowingly caused
the mailings" at issue. Id.
-29-
use of the mails"); Bruckman, 874 F.2d at 60 ("[T]he causation
element is met as long as some use of the mails was reasonably to
be anticipated in the course of the scheme."); Fermin-Castillo, 829
F.2d at 1198 ("As long as some use of the instrumentality in the
course of the endeavor was reasonably to be anticipated, the
causation requirement is met."); see also United States v.
Bortnovsky, 879 F.2d 30, 38-39 (2d Cir. 1989) (noting that the
causation element of mail fraud "has been so liberally construed as
to suggest that it requires only that the use of the mail itself,
rather than a particular mailing, be reasonably foreseeable" and
endorsing that view).
The principle that it is the use of the mails (rather
than the specific mailing that is charged) that must be reasonably
foreseeable as a result of the scheme is affirmed by one of the
primary cases upon which Pimental relies.7 In United States v.
7
Pimental also relies on United States v. Smith, 934 F.2d 270
(11th Cir. 1991), which is indeed in tension with our analysis.
That case involved an insurance fraud in which the defendant faked
an injury from a staged automobile accident. Id. at 271. The
defendant received a claims draft, which is similar to a check, in
person from the insurance agent, but a copy of the draft was sent
to the insurance company. Id. The court found that there was
insufficient evidence that the use of the mails was reasonably
foreseeable because it was not common knowledge that insurance
companies mail accounting copies of drafts. See id. at 273. In so
holding, the court agreed "that it is foreseeable that
communications involving the policy, the details of the claim, or
requests for the payment of the claim would be mailed." Id. But
the court found this to be irrelevant because "the substantive
counts of [the defendant's] indictment did not allege such
mailings." Id.
To the extent that Smith is inconsistent with our analysis, we
-30-
Walters, 997 F.2d 1219 (7th Cir. 1993), the court held that there
was insufficient evidence on the causation element of a mail fraud
offense because the evidence did not establish "that [the
defendant] conceived a scheme in which mailings played a role."
Id. at 1222. Rather than focus on the predictability of specific
mailings in the indictment, the Walters court thus premised its
analysis on the question of whether the use of the mails, as a
general matter, was a foreseeable component of the scheme to
defraud. See id. at 1223-24. Indeed, in the course of its
analysis, the court noted that insurance fraud is the "paradigm"
case in which the use of the mails is reasonably foreseeable
because the payment and submission of insurance claims typically
involves mailings between the insurance company's agents and the
insured. See id. at 1223. So here.
IV. Pimental's Cross-Appeal
During its preliminary investigations in this case, the
U.S. Attorney's office filed an ex parte motion with the district
court seeking permission, on the basis of the exception to grand
jury secrecy, to disclose grand jury materials to investigators and
analysts of the IFB. The exception allows disclosure of grand jury
materials to "any government personnel -- including those of a
state or state subdivision" when such disclosure is necessary to
prosecute a criminal case. Fed. R. Crim. P. 6(e)(3)(A)(ii). The
reject its approach.
-31-
district court motion judge, who was not the trial judge, granted
the motion without opinion. No disclosure was made by the
prosecutor without court permission.
Subsequently, during pretrial discovery, Pimental moved
to dismiss the indictment, arguing that the government had violated
Rule 6(e) when it disclosed to Scott Faragi, an IFB investigator
who later testified before the grand jury, Pimental's bank records
and other material that had been obtained through the grand jury's
subpoena powers. Pimental argued that IFB agents such as Faragi
were not "government personnel" within the meaning of Rule
6(e)(3)(A)(ii), and thus the exception to grand jury secrecy was
not applicable and the earlier district court order was wrong.
In response, the trial court held that IFB investigators
can not be "government personnel" within the meaning of Rule 6(e),
and thus that the earlier ruling allowing the prosecutor to
disclose grand jury materials to IFB investigators was in error.
Pimental, 199 F.R.D. at 33-37 (D. Mass. 2001); Pimental, 201 F.R.D.
at 25-26. It did not hold that because the disclosure had been
authorized by the court, there could be no dismissal of the
indictment. Rather, the district court refused to dismiss
Pimental's indictment because the "error" did not substantially
affect the grand jury's decision to indict, and thus it was
harmless. Pimental, 204 F.R.D. at 227-28.
-32-
Pimental now challenges this pre-trial denial of his
motion to dismiss the indictment. He also asks this court to
consider his post-trial renewal of that motion, which the district
court found to be moot due to its grant of Pimental's Rule 29
motion.
We conclude that the first district court's implicit
conclusion that IFB agents are "government personnel -- including
those of a state or state subdivision" within the meaning of Rule
6(e)(3)(A)(ii) was, on these facts, not error. We do not hold that
all IFB employees, regardless of the circumstances, are government
personnel, but only that here that decision was correct. We thus
affirm on alternate grounds the denial of Pimental's motion to
dismiss the indictment, which disposes of his post-trial renewal of
the motion.8 See Bonano v. E. Caribbean Airline Corp., 365 F.3d
81, 86 (1st Cir. 2004) ("We are not confined to the lower court's
rationale, but may affirm a judgment on any independent ground made
manifest by the record.").
(A) Grand Jury Secrecy and the Limited Exception for Government
Personnel.
Federal grand juries are responsible for investigating
criminal allegations while simultaneously shielding innocent
citizens from unfounded accusations of criminal conduct. See
8
The government assumed arguendo for purposes of this appeal
that Rule 6(e) was violated. We think it better to address the
issue directly.
-33-
Branzburg v. Hayes, 408 U.S. 665, 686-87 & n.23 (1972). These
sometimes competing roles "underlie[] the 'long-established policy
that maintains the secrecy of the grand jury proceedings in the
federal courts.'" United States v. Sells Eng'g, Inc., 463 U.S.
418, 424 (1983) (quoting United States v. Procter & Gamble Co., 356
U.S. 677, 681 (1958)). Grand jury secrecy facilitates the
investigation of criminal charges by assuring potential witnesses
that their testimony will not become public knowledge, thus
encouraging them to testify freely and limiting the potential that
they will be improperly influenced by those under investigation.
See id. At the same time, it ensures "that persons who are accused
but exonerated by the grand jury will not be held up to public
ridicule." Id. (quoting Douglas Oil Co. v. Petrol Stops Northwest,
441 U.S. 211, 219 (1979)).
The specific dimensions of the grand jury secrecy
requirements are codified in Fed. R. Crim. P. 6(e). That Rule
prohibits certain people -- including grand jurors, interpreters,
and, of particular relevance here, "attorney[s] for the government"
-- from disclosing "a matter occurring before the grand jury."
Fed. R. Crim. P. 6(e)(2)(b). Rule 6(e) also contains certain
exceptions to the general secrecy requirement. The first pertinent
exception at issue in this case, under subpart (3)(A)(ii), allows
"[d]isclosure of a grand-jury matter" to "any government personnel
-- including those of a state or state subdivision or of an Indian
-34-
tribe -- that an attorney for the government considers necessary to
assist in performing that attorney's duty to enforce federal
criminal law." Fed. R. Crim. P. 6(e)(3)(A)(ii). The second, under
6(e)(3)(E), empowers a district court to authorize disclosure in
certain situations. We think it implicit that a district court may
also act in a motion to authorize disclosure under subpart 3(A).
(B) The IFB and the "Plain Meaning" of "Government Personnel."
The IFB is a "quasi-governmental entity," In re Justices
of the Superior Court, 218 F.3d 11, 13 (1st Cir. 2000), that
investigates allegations of fraudulent insurance transactions.
Commonwealth v. Ellis, 429 Mass. 362, 365 (1999). Its creation was
authorized by Massachusetts statute, St. 1996, c. 427, § 13,9 and
carried out by two voluntary associations of Massachusetts
insurance carriers, the MWCRIB and the Automobile Insurance Bureau
(AIB), which are themselves licensed under Massachusetts law. See
id. at 13; Mass. Gen. Laws ch. 175A § 8 (licensing AIB); Mass. Gen.
Laws ch. 152 § 52C (licensing MWCRIB). See generally Ellis, 429
Mass. at 365. The authorizing statute requires that the MWCRIB and
AIB each fund half of the IFB's budget, § 13(c), and each provide
the IFB with five of its fifteen Board members, § 13(a). The
remaining five IFB Board members are Massachusetts public
9
This Act is codified in the notes to Mass. Gen. L. ch. 266,
§ 111B, rather than in the section itself. This confusing choice
of codification has resulted in the incorrect referencing of the
Act as codified as "Mass. Gen. Laws ch. 427, § 11." See, e.g., In
re Justices, 218 F.3d at 13.
-35-
officials. § 13(a). Under the statutory scheme, every insurer
"having reason to believe that an insurance transaction is
fraudulent" must advise the IFB of its suspicions. § 13(e). The
IFB, in turn, is required to review those cases and investigate
further when necessary. § 13(f). Where the IFB's executive
director "is satisfied that a material fraud, deceit, or
intentional misrepresentation has been committed in an insurance
transaction," he must "refer the matter to the attorney general,
the appropriate district attorney or the United States attorney."
§ 13(h) (emphasis added).
The trial court rejected the motion court's implicit
holding, concluding that IFB employees can not be "government
personnel," based primarily on a "plain meaning" reading of the
term. Emphasizing that the IFB's funding comes entirely from two
private associations of insurance companies and that the majority
of its Board are not public officials, the court concluded that
"the IFB inhabits a region of the private/public spectrum that is
much closer to a purely private agency." See Pimental, 199 F.R.D.
at 33.
As an initial matter, there may well be instances in
which an entity (or at least some of its employees) is considered
governmental for a particular purpose despite the fact that it is
both controlled and financed by private individuals. Even
assuming that the IFB is completely controlled and financed by
-36-
private insurance companies, that does not necessarily mean that
its employees cannot be government personnel for purposes of Rule
6(e).
Here, the district court's characterization of the IFB as
entirely funded and controlled by private entities was incorrect.
While it is true that the IFB's funding comes entirely from MWCRIB
and AIB, two private associations of insurance companies, both of
those associations are required by Massachusetts law to provide
that funding. See st. 1996, c. 427, § 13(c); see also Ellis, 429
Mass. at 373 n. 16. This is not an instance in which private
entities have voluntarily chosen to spend their resources on
investigative personnel. Cf. United States v. Tager, 638 F.2d 167,
168 (10th Cir. 1980) (where insurance companies voluntarily chose
to fund an entity to investigate insurance fraud and completely
controlled the scope of its actions, employees of the entity were
not "government personnel" within the meaning of Rule
6(e)(3)(A)(ii)).10 If anything, the IFB's funding is more akin to
10
In Tager, the government disclosed grand jury material to Mr.
House, an employee of the Insurance Crime Prevention Institute
(ICPI), an organization funded by insurance companies for the
purpose of investigating possible frauds against them. 638 F.2d at
168. Unlike in this case, though, there was no doubt that
"[n]either the ICPI nor Mr. House was in any official position
whatsoever." Id. The opinion does not indicate that any statute
existed that established or authorized the ICPI, provided for its
funding or structure, or gave it special responsibilities or
privileges. See id. The court briefly noted that Rule
6(e)(3)(A)(ii) did not apply because Mr. House was not "government
personnel," and spent the bulk of the opinion considering an
entirely separate exception to grand jury secrecy that is not at
-37-
a state-mandated tax on insurance companies than a voluntary
expenditure by private entities. Cf. Keller v. State Bar of Cal.,
496 U.S. 1, 9-11 (the mandatory charging of dues by the California
Bar Association was state action that implicated First Amendment
concerns). Indeed, the Supreme Judicial Court, the final arbiter
on Massachusetts law, has explicitly found that "insurance
companies [cannot] control the [IFB] by withdrawing financial
support" even were they to attempt to forego the benefits of
membership in the MWCRIB and AIB. If insurers withdrew from these
organizations, "the Legislature could easily amend the statute to
base assessments on premiums written or on some other standard."
Ellis, 429 Mass. at 373.
The trial court's analysis also underestimates the full
extent of the control that the Commonwealth exercises over the IFB.
Although only a third of the IFB's board members are public
officials, the IFB's purpose, organizational scheme, and basic
operations are all dictated by statute. And while the IFB's day-
to-day administration within the framework is, in large part,
controlled by individuals who are not public officials, it is also
subject to the constant oversight of the Massachusetts legislature,
to which the IFB must submit a report every six months. § 13(j).
In addition, the IFB was conceived of and authorized by
statute as part of a larger scheme to curb insurance fraud, a
issue here. See id. at 168-69.
-38-
matter of significant public concern, both at the state level, see
Ellis, 429 Mass. at 365, and nationally, see United States v. Hurn,
368 F.3d 1359 (11th Cir. 2004) (affirming federal conviction for
workers' compensation fraud); United States v. Fore, 169 F.3d 104
(2d Cir. 1999) (same). The IFB was also given significant powers
to achieve this goal, including access to various state records
that are not normally available to private entities and the right
to review all suspicions of fraud within the insurance companies.
See st. 1996, c. 427, §§ 13(d) & (e). It also has the affirmative
obligation to report suspicions of fraud when they are sufficiently
corroborated. § 13(h). Massachusetts chose to specify that those
suspicions may be reported to federal prosecutors.
The IFB straddles the line between a government and a
private entity, having attributes of each. As such, the text of
the Rule 6(e)(3)(A)(ii) itself provides little guidance on whether
IFB employees can be characterized as "government personnel" within
the meaning of the Rule. Neither this Court nor any other federal
circuit court11 has previously addressed whether IFB employees, or
similar quasi-state-government employees, fall within the term
"government personnel" in Rule 6(e)(3)(A)(ii).12 Given the lack of
11
Several district court decisions have addressed the issue.
See, e.g., In re Grand Jury Proceedings, 158 F. Supp. 2d 96 (D.
Mass. 2001).
12
The district court saw things differently, saying that Tager,
638 F.2d 167, involved a "finding [that] the government violated
Rule 6(e)(3)(A)(ii) under circumstances materially
-39-
either a clear textual resolution or of controlling authority, we
turn to the history of the Rule and its purpose in allowing
disclosure only to "government personnel" but not others.
(C) History and Purpose of the Exception to Grand Jury Secrecy in
Rule 6(e)(3)(A)(ii).
Before 1977, Rule 6(e) did not permit the disclosure of
grand jury materials to government employees who were not
attorneys. Sells Eng'g, 463 U.S. at 436. Over time, the lack of
such a provision became "something of a problem in practice,
because Justice Department attorneys found that they often needed
active assistance from outside personnel -- not only investigators
from the FBI, IRS, and other law enforcement agencies, but also
accountants, handwriting experts, and other persons with special
skills." Id. In response to this concern, the Advisory Committee
on Rules suggested amending Rule 6(e) to allow disclosure to non-
attorney government personnel. See id. at 436-37. Although
Congress heatedly debated the proposed amendment and initially
voted to disapprove it, concern focused principally on the prospect
that grand jury materials would be used to pursue civil, rather
than criminal, matters. See id. at 437. The principle of grand
jury secrecy would be severely compromised, the objection went, if
government agencies such as the IRS could indirectly use materials
indistinguishable from those here." Pimental, 199 F.R.D. at 35.
Tager has very little to do with this case, where there is no
immediately obvious answer to the question of whether the person to
whom the disclosure was made was government personnel.
-40-
collected by the grand jury to help prosecute a civil case against
an accused. See id. Most law-makers, it appears, agreed with the
basic principle that grand jury materials "should be available to
'every legitimate member of [the] team' conducting the criminal
investigation." Id. at 439 (quoting the testimony of Acting Deputy
Attorney General Richard Thornburgh, testifying before the House on
behalf of the Justice Department).
Precisely who was a "legitimate member" of the
prosecution team was also a subject of some discussion:
[Rep. James Mann:] Along the same line, the rule seems to
restrict to other Government personnel the experts -- and
I will use that term loosely -- that the attorney for the
Government may call upon. We have a pretty big
Government with a lot of experts, but on certain matters
there may not be a governmental employee who is expert in
that field. Is it your intention not to permit the
prosecutor to call in an astrologer or astronomer, for
example?
Professor LaFave [Reporter, Advisory Committee on
Criminal Rules]: Yes; that is correct. Apparently
representatives of the Justice department whom we talked
to about this particular problem did not seem to think
that was a problem, in other words, that there was an
occasion when they would need an expert and couldn't find
the astrologer some place in the Federal Government.
Proposed Amendments to the Federal Rules of Criminal Procedure:
Hearing Before the House Subcomm. on Criminal Justice of the House
Comm. on the Judiciary, 95th Cong. 92 (Feb. 24, 1977). The Rule's
limitation of disclosure to "government personnel" thus reflected
the basic belief that any needed expertise on a particular criminal
-41-
matter could be found within the confines of the federal
government.
As it turned out, federal prosecutors could not always
find the necessary expertise within the federal government to
prosecute a case. In some instances, federal prosecutors
temporarily hired outside experts to assist in the prosecution of
a case. Recognizing the import of sharing grand jury materials
with such temporary employees, two circuit courts held that such
temporary employees were indeed "government personnel" within the
meaning of the Rule 6(e)(3)(A)(ii). United States v. Anderson, 778
F.2d 602, 605 (10th Cir. 1985) (an expert witness on trust law);
United States v. Lartey, 716 F.2d 955, 963-64 (2d Cir. 1983) (a
retired I.R.S. agent). Federal prosecutors also occasionally
sought the assistance of state and local employees, attempting to
share secret grand jury materials with them. The district courts'
responses to such efforts were more mixed. Compare In re Grand
Jury Proceedings, 445 F. Supp. 349, 350 (D.R.I. 1978) (state and
local personnel are not within the exception for government
personnel in the Rule); with In re 1979 Grand Jury Proceedings, 479
F. Supp. 93, 95-96 (E.D.N.Y. 1979) (state and local personnel
included).
Partially in response, Rule 6(e)(3)(A)(ii) was amended in
1985 to include expressly personnel "of a state or state
subdivision" within the term "government personnel." See Fed. R.
-42-
Crim. P. Rule 6, advisory committee's notes on 1985 amendments.
"It is clearly desirable," the Committee wrote, "that federal and
state authorities cooperate, as they often do" in complex cases
such as "major fraud cases" and that federal prosecutors have
access to "the assistance of state law enforcement personnel, which
could be uniquely beneficial." Id. Although increased disclosure
was obviously in tension with the general rule of grand jury
secrecy, the Committee "emphasized that the disclosure permitted is
limited": it is permissible only "in connection with the attorney
for the government's 'duty to enforce criminal law' and only to
those personnel 'deemed necessary . . . to assist' in the
performance of that duty." Id.
Two important themes, for our purposes, can be discerned
from this legislative history. First, a key purpose of Rule
6(e)(3)(A)(ii) is to facilitate cooperation between federal
prosecutors and state personnel, who often are uniquely situated to
assist in the investigation and prosecution of federal criminal
cases. When court decisions tended to limit the potential for such
cooperation because of concerns that state officials, who are not
under the control of the federal government, could not be entrusted
with grand jury materials, they were explicitly overruled by
Congress. Thus, Congress made a conscious decision to entrust
certain state, as well as federal, personnel with information
concerning matters before a grand jury under certain conditions.
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Second, a primary safeguard for protecting the countervailing
interest in the secrecy of grand jury proceedings is the
requirement that such disclosure must be necessary for the
enforcement of criminal law. Although the Rule's limitation to
"government personnel" also helps to assure the secrecy of grand
jury proceedings, that limit was not contemplated by either
Congress in 1977 or the Advisory Committee in 1985 as the primary
mechanism for doing so.
These themes convince us that the exception in Rule
6(e)(3)(A)(ii) may cover the unique quasi-governmental
investigators of the IFB, depending on the facts of the situation.
In many instances of insurance fraud in Massachusetts,
IFB investigators, rather than members of a more classic state law
enforcement agency, will be the individuals who will have the most
in-depth knowledge of that fraud. This is a direct result of the
way in which Massachusetts has chosen to structure its
investigations into such matters. Congress clearly desired that
Rule 6(e)(3)(A)(ii) would allow federal prosecutors to take
advantage of the state's investigative processes when such
cooperation was necessary to prosecute federal crimes such as mail
fraud.
Additionally, by specifically including state personnel
in Rule 6(e)(3)(A)(ii), Congress chose to trust state officials
that the state itself had entrusted with the investigation of
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criminal matters. Here, Massachusetts has given the hybrid
private/public IFB significant powers and responsibilities. In the
course of their initial investigations, IFB investigators have
access to non-public information that is not normally available to
private investigators. § 13(d). If that investigation leads the
IFB executive director to refer the case to the Attorney General's
Office, the IFB investigator initially assigned to the case
provides significant support to the prosecuting attorney. See
Commonwealth v. Harwood, 432 Mass. 290, 299 (2000) ("[I]t has been
customary for principal investigators from the IFB to provide
ongoing investigatory support for the Attorney General's subsequent
inquiries."). Moreover, in state criminal prosecutions the state
considers IFB agents to be assistants to prosecutors: "for the
purposes of preserving potentially exculpatory evidence," the IFB
is "under the general supervisory umbrella of the office of the
prosecutor." Id. at 300. Consequently, exculpatory evidence that
IFB investigators lose can be attributed to the prosecution. Id.
We do not know the many factual variations that could be
presented by use of IFB personnel on federal criminal investigative
teams; we do not hold that all IFB personnel are qualified as a
matter of status. Because the interest in the secrecy of grand
jury proceedings is intense, this is not an area for categorical
approvals tied to labels. The mere fact that a person works for
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the IFB does not mean that he or she fits the definition for
government personnel within Rule 6(e)(3)(A)(ii).
For this reason, we do not consider that the prosecution
has self-executing powers under Rule 6(e)(3)(A)(ii) simply to
designate IFB personnel as recipients of grand jury material.
Rather, the prosecutor must seek court authorization where quasi-
governmental agencies such as the IFB are involved and make a
functional showing that the individual involved is within the Rule.
In the past, the Office of the U.S. Attorney for Massachusetts has
chosen to seek court authorization first, on a case-by-case basis
whenever it wishes IFB personnel to be involved. It should
continue to do so.
V.
The district court's grant of the Rule 29 motion is
reversed. The denial of the motion to dismiss the indictment is
affirmed and the renewal of that motion is denied. The case is
remanded to the district court for sentencing.
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