Federal law, at 18 U.S.C. § 1341 prohibits the use of the U.S. Mail in furtherance of “any scheme or artifice to defraud.” This statute was enacted in 1872. In 1999, Congress added the words, “or for obtaining money or property by means of false or fraudulent pretenses, representations or promises.” Later, a further amendment was added called an “honest services” component, making it a crime “to deprive individuals, the people, or the government of intangible rights, such as the right to have public officials perform their duties honestly.”
About This Article Briefly: The federal mail fraud statute, at 18 U.S.C. § 1341, includes an obligation by government subcontractors to provide “honest services” to the government, as the following case summary exemplifies. While the case summarized herein is from Washington state, it applies to California, as federal law covers all states.
Defendants Aleksander Djordjevic, Elvedin Bilanovic, Muhamed Kovacic, Tony Lamb, Ismail Hot and Brano Milovanovic were charged with conspiracy in devising a scheme to defraud the State of Washington Department of Licensing (DOL) by soliciting bribes to cause the State of Washington to issue commercial truck driver’s licenses to unqualified non-residents. The scheme was sophisticated and preyed upon Bosnian-speaking individuals in particular.
The State of Washington outsources its testing of applicants for commercial truck driver’s licenses. Some of the Defendants contracted with the State of Washington to act as translators for non-English speaking applicants taking the written portion of the test. Other Defendants administered the driving skills portion of such tests. Defendants allegedly conspired to falsify test results for certain non-English speaking, non-Washington State residents and used an address in Spokane, Washington for the non-resident applicants.
At the indictment, Defendants moved to have all charges dismissed by arguing that they, as state subcontractors, owed no formal fiduciary duty to the State because they were independent contractors and there was no defined economic harm to the State of Washington, i.e. some quantifiable harm. The trial court surprisingly agreed and dismissed the case. The United States appealed.
The U.S. Court of Appeals for the Ninth Circuit, in United States v. Brano Milovanovic, et al. (9th Cir. 2012) 678 F.3d 713 (slip opinion at 2012 DJDAR 5162), then reversed the trial court. The analysis began with the understanding that since the grand jury indicated Defendants, the Court of Appeals would evaluate the sufficiency of the complaint while drawing all reasonable inferences in favor of the government.
Turning to the allegations at issue, the Court of Appeals noted that Defendant Milovanovic contacted Bosnian-speaking individuals residing outside the State of Washington and offered to provide them a commercial drivers’ license for $2,500. If the individual was interested, he or she would come to Spokane, where Milovanovic would act as a “translator” during the written exam. Milovanovic, however, would do more than just translate. He would tell the applicant in his native tongue the correct answer or use hand signals to help indicate how to answer. The individual taking the exam with Milovanovic always “passed” the exam.
Milovanovic would then contact Defendant Lamb, who would be paid $200 to $500, to pass the applicant on the skills portion of the licensing test, which was the driving examination. The scheme was eventually discovered.
The Court of Appeals then applied a more relaxed standard then the trial court, finding that Defendants did owe the State, as a state subcontractor and thus an agent of the state, a duty of loyalty, trust and confidence under the “honest services” amendment to the Mail Fraud Act. The Court of Appeal found that each Defendant breached this duty by accepting bribes and helping applicants cheat on tests so that individuals who otherwise might not be licensed were licensed, causing a public safety issue and thus violating the trust owed by them to the State of Washington.
Therefore, the Court of Appeals reversed the trial court. Consequently, the indictment was sustained and the case was ordered to proceed.
For more information about cases involving fraud, click on the following articles:
- What Is Unemployment Insurance Fraud?
- What Is Embezzlement (Penal Code § 503)?
- Multiple Convictions for Embezzlement (Grand Theft) from Employer Proper When Takings Distinguishable
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