
USCA1 Opinion

	




          February 19, 1993                            UNITED STATES COURT OF APPEALS                            UNITED STATES COURT OF APPEALS                                FOR THE FIRST CIRCUIT                                FOR THE FIRST CIRCUIT                                 ____________________          No. 92-1536                                    UNITED STATES,                                      Appellant,                                          v.                             BARKER STEEL CO., INC., AND                                   ROBERT B. BRACK,                                Defendants, Appellees.                                 ____________________                     APPEAL FROM THE UNITED STATES DISTRICT COURT                          FOR THE DISTRICT OF MASSACHUSETTS                     [Hon. Joseph L. Tauro, U.S. District Judge]                                            ___________________                                 ____________________                                        Before                                  Cyr, Circuit Judge,                                       _____________                            Bownes, Senior Circuit Judge,                                    ____________________                             and Fuste,* District Judge.                                         ______________                                 ____________________               Peter A. Mullin, Assistant United States Attorney, with whom               _______________          A.  John  Pappalardo,  United  States  Attorney,  and  Andrew  E.          ____________________                                   __________          Lauterback,  Special Assistant  United  States Attorney  were  on          __________          brief, for appellant.               Paul  F. Ware,  Jr.,  with whom  John  C. Englander,  Jeremy               ___________________              __________________   ______          Sternberg,  and  Goodwin, Procter  & Hoar,  Earle C.  Cooley, and          _________        ________________________   ________________          Cooley,  Manion, Moore  &  Jones were  on brief,  for defendants,          ________________________________          appellees.                                  ____________________                                  February 19, 1993                                 ____________________          ____________________          *of the District Court of Puerto Rico, sitting by designation.                    BOWNES, Senior Circuit Judge.  The government appeals                            ____________________            the dismissal of an Information which charged the defendants,            Barker  Steel Co., Inc. and Robert B. Brack, with engaging in            a  conspiracy to defraud the United States in violation of 18            U.S.C.   371.    The Information alleged that  the defendants            fraudulently  obtained  Minority   Business  Enterprise   and            Disadvantaged   Business   Enterprise   (MBE)   "set   aside"            contracts.  The district court found that the Information was            insufficient to sustain the  charges and dismissed it.1   For            the reasons that follow, we reverse and remand for trial.                                          I.                                          I.                                  Standard of Review                                  Standard of Review                                  __________________                    On appeal  from the  dismissal of an  information, we            take  the factual allegations in the information as true, and            we must reverse the dismissal if we find that, as a matter of            law, the information sufficiently  sets forth the elements of            the offense charged.   United States v.  Torkington, 812 F.2d                                   _____________     __________            1347, 1354   (11th Cir. 1987).   We read an  information as a            whole  and we construe the  allegations in a practical sense,            with   all  necessary   implications.2    United   States  v.                                                      _______________                                            ____________________            1 United States v. Barker Steel Co., Inc., 774 F. Supp. 65              _____________    ______________________            (D. Mass. 1991).            2  Prior to 1971, 18 U.S.C.   3731 limited government appeals            from dismissed informations or  indictments to issues of law.            On  appeal, the court was  bound to accept  the lower court's                                         -2-            nom.,  Zero v.  United States,  459  U.S. 991  (1982); United            ____   ____     _____________                          ______            Cincotta,  689  F.2d 238,  242 (1st  Cir.), cert.  denied sub            ________                                    _____  ______ ___            law, including the lower court's interpretation of a statute,            (5th  Cir.), cert. denied, 427 U.S. 903 (1978).  Questions of                         _____ ______            States v.  Cadillac Overall Supply  Co., 568 F.2d  1078, 1082            ______     ____________________________            are reviewed de  novo.    United States  v. M.I.M., 932  F.2d                         __  ____     _____________     ______            construction by lower court).                                         -3-            States  v. Besmajian,  910  F.2d 1153,  1154  (3d Cir.  1990)            ______     _________            and  removed  the restrictions  on  appeal.   But  see United                                                          ___  ___ ______            (following former rule and  limiting review of allegations to                    An  information  should  be  "a  plain,  concise  and             An  information is  sufficient  if it  "first, contains  the            constituting the offense charged."  Fed. R. Crim. P. 7(c)(1).            elements  of  the  offense   charged  and  fairly  informs  a            definite   written   statement   of   the   essential   facts            second, enables  him to plead  an acquittal or  conviction in            defendant of the  charge against which  he must defend,  and,            1016, 1019 (1st Cir. 1991).               bar of future prosecutions for the same offense."  Hamling v.                                                               _______            United States, 369 U.S. 749, 763-64 (1962);  United States v.            _____________                                _____________            language  of the statute  as long  as the  core facts  of the            information is  sufficient when  allegations are made  in the            criminality charged are  also included.  Russell  369 U.S. at                                                     _______            Penagaricano-Soler, 911  F.2d 833, 839  (1st Cir. 1990).   An            __________________                                            ____________________            764; Penagaricano-Soler, 911 F.2d at 839-40; United States v.                 __________________                      ________________            United States,  418 U.S.  87, 117  (1974); accord Russell  v.            _____________                              ______ _______            construction of allegations.  Congress amended   3731 in 1971            Allard,  864 F.2d  248, 250  (1st Cir.  1989) ("The  test for            ______            sufficiency, therefore  is  not whether,  in  hindsight,  the            indictment or information could have  been more complete, . .            .   but rather whether it fairly identifies and describes the            offense." (citations  omitted)).  Therefore, we   examine the            Information as  a whole to determine  whether it sufficiently            charges the offense proscribed by the conspiracy statute.                                         II.                                         II.                                   The Information                                   The Information                                   _______________                    To  begin, we  summarize the  key allegations  of the            Information.    The government's  allegations  concerning the            defendants' conspiracy to defraud  the United States focus on            the  MBE  programs  of  several federal  agencies,  the  U.S.            Department   of  Transportation  (DOT),    the  Environmental            Protection   Agency   (EPA),   and   the   General   Services            Administration (GSA).    These federal  agencies intended the            MBE   programs   to     "support[]   the   fullest   possible            participation of firms owned and controlled by certain racial            minorities and women in  the construction programs funded and            assisted by these departments  and agencies."  Information at              6.   To that end, the MBE programs required that recipients            of funds from federal agencies establish goals or set aside a            percentage  of  federal  funds   received  for  contracts  to            certified MBE businesses.  Information at   7.                                           -4-                    Federal agencies with  MBE programs  rely upon  state            and local  governments  to certify  applicants  as  qualified            minority businesses.  Information at   9.  To qualify for MBE            certification, at least fifty-one percent of the ownership of            the enterprise  must be by  certain minority groups,  and the            minority owners must also control the daily operations of the            business.   Information at   6. To implement the MBE program,            the  entity  receiving federal  agency funding  hires general            contractors  to   perform  the   work,  who  in   turn  award            subcontracts to  certified MBEs  to meet the  percentage goal            for the project.   For  subcontract work to  qualify for  MBE            goals or  set aside  contracts, the  MBE certified  firm must            perform a  "commercially useful function in  the execution of            the project by actually  performing, managing and supervising            the work involved."  Information at   10.  For  materials and            supplies  to qualify,  the  MBE certified  firm must  "either            produce the  goods from raw materials  or substantially alter            the goods before reselling them."  Information at   10.                    The  Information alleges  that  from  about  October,            1982,  until  at  least  July,  1986,  Barker  Steel  Company            (Barker)   and   its   president,   director   and   majority            stockholder, Robert B.  Brack (Brack), conspired with  others            to use Rusco Steel Company (Rusco) as a front  company to win            MBE set aside  contracts for  Barker.  Information  at    13.            Barker   was  a  Massachusetts  corporation  which  furnished                                         -5-            fabricated  steel  reinforcing   bars  (re-bars)  and   other            products to the construction industry throughout New England.            Barker was never  a certified MBE.  Information at     1, 11.            Rusco,  located in Rhode Island, had been certified as an MBE            in  several  states before  the  scheme  with the  defendants            began.  Information at    3, 15.                    The  steel  re-bar  industry  includes  two  distinct            functions:  fabricators and erectors.  Firms which operate as            fabricators   "cut  and   bend  the   re-bars  to   meet  the            specifications of a particular construction project and  then            deliver the  re-bars to the construction  site."  Information            at   5.   The industry term for the  work done by fabricators            is "furnish" work.  Id.   Firms known as erectors  "place the                                ___            fabricated re-bars within  the forms, at the  job site, prior            to  the  pouring  of the  concrete."    Information  at    5.            Erector firms do "erection" work.  Id.                                                ___                    In  October,  1982,  Barker  agreed  with  Rusco that            Barker  would finance  a new  division of Rusco  for erecting            steel re-bar, "erection" work.   Information at    5, 16.  In            exchange,  Rusco  would  allow  Barker to  market  its  steel            products through Rusco for re-bar "furnish" contracts to take            advantage of  Rusco's MBE  certification.  Information  at               13,  16.  Prior  to 1982, Rusco  had operated as  a broker of            steel re-bar but had not fabricated re-bar or erected re-bar.            Information at    15.   Beginning  in 1982, Barker  employees                                         -6-            managed all aspects of the fabrication, sales and shipping of            steel  re-bar and  other  products in  its  own name  and  in            Rusco's  name  when  contracts  required  MBE  certification.            Information at     16, 19,  20.  Barker  employees and  Brack            exercised  substantial  control  over  Rusco  throughout this            period.  Information at     22, 25.  In 1985,  the defendants            merged a subsidiary  company into Rusco, to deceive state MBE            certifying   agencies  about  Rusco's   eligibility  for  MBE            certification.  Information at    25, 43.                    As part of the scheme, Rusco submitted  documentation            to  various  state and  local  agencies  for  the purpose  of            obtaining   or   maintaining   certification   as   an   MBE.            Information at    32, 26, 41, 47.  The documents submitted by            Rusco  contained false, misleading  and fraudulent statements            as well as material omissions. Id.  The Information concludes                                           ___            that as a result of the  conspiracy, more than $5 million  in            federally   funded   and   federally  assisted   construction            contracts were improperly credited  toward MBE goals when the            contracts actually  benefitted Barker,  which was not  an MBE            firm.  Information at   15.  The conspiracy, according to the            Information, impeded,  impaired, obstructed and  defeated the            implementation,  execution  and  administration  of  the  MBE            programs of DOT, EPA and GSA.  Information at   12.                                         III.                                         III.                                      Discussion                                      Discussion                                      __________                                         -7-                    The district court  dismissed the Information on  the            grounds  that:   (1) it failed  to allege a  violation by the            defendants  of any  MBE  program statute;    (2) it  did  not            clearly state a violation by the defendants of a duty owed to            the federal  government, and (3)  it failed to  allege direct            contact with  federal agencies.  The  defendants contend that            because the MBE program does not impose criminal penalties or            any obligations upon them, they  were not fairly warned  that            the  conduct alleged  in the  Information could give  rise to            criminal charges.  In further support of the dismissal of the            Information,  the defendants  add that their  alleged conduct            was  not  fraud  because  it  did  not  deprive  the  federal            government of any money or property.  The government counters            that the  Information properly and sufficiently  alleged that            the defendants conspired to defraud the federal government in            violation of 18 U.S.C.   371.                       A.  Legal Sufficiency of the Information                       A.  Legal Sufficiency of the Information                           ____________________________________                    The Information charges that the defendants conspired            with others to defraud  the United States in violation  of 18            U.S.C.   371.   The pertinent  language of   371  provides as            follows:                        If two or  more persons conspire either                      to commit any offense against  the United                      States,  or to defraud the United States,                      or any  agency thereof in  any manner  or                      for any purpose, and  one or more of such                      persons do any  act to effect  the object                      of the conspiracy each shall be fined not                                         -8-                      more  than $10,000 or imprisoned not more                      than five years, or both.            18  U.S.C.    371.   To sufficiently  charge a  conspiracy to            defraud,  the Information  must  allege  the three  essential            elements  of  section  371:    "an  agreement,  the  unlawful            objective of the agreement,  and an overt act  in furtherance            of the  agreement."  United  States v. Hurley, 957  F.2d 1, 4                                 ______________    ______            (1st Cir. 1992), cert. denied, 61 U.S.L.W. 3256 (U.S. Oct. 5,                             _____ ______            1992).  The  objective of the agreement is unlawful  if it is            "'for the purpose of  impairing, obstructing or defeating the            lawful function of any department of Government.'"  Dennis v.                                                                _________            United States,  384 U.S.  855, 861  (1966); (quoting Haas  v.            _____________                                        ____            Henkel, 216 U.S. 462, 479 (1910)).             ______                    In this case, the government alleged the  defendants'            conspiracy  to  defraud in  the  language of  the  statute as            follows:                      the defendants herein, BARKER  STEEL CO.,                      INC. and ROBERT B. BRACK,  did knowingly,                      willfully    and    unlawfully   combine,                      conspire,  confederate   and  agree  with                      others, known and unknown, to defraud the                      United  States  by  impeding,  impairing,                      obstructing  and   defeating  the  lawful                      governmental    function    of    various                      departments  and  agencies of  the United                      States, including particularly USDOT, EPA                      and GSA, in the implementation, execution                      and  administration  of their  respective                      MBE programs.                                        . . .                      (All  in  violation  of Title  18  United                      States Code, Section 371.)                                         -9-            Information at    12, and  final statement at  page 13.   The            Information also  includes  detailed factual  allegations  to            substantiate   the  cursory   statutory  allegations.     The            defendants conspired with Rusco and others to establish Rusco            as  a front company which  the defendants used  to obtain MBE            set   aside  contracts   for  furnishing   steel  re-bar   on            construction  projects funded  in part  by federal  agencies.            The  defendant corporation, Barker,  was not an  MBE and was,            therefore, not entitled to MBE contracts.  Although Rusco may            have  been a properly certified  MBE at one  time, during the            relevant period of the  defendants' scheme, they financed and            controlled Rusco,  thereby destroying  its eligibility as  an            MBE.   Rusco  maintained its  MBE certification  by supplying            false  and misleading  documentation to  certifying agencies.            We  continue   our  analysis   of  the  sufficiency   of  the            Information to determine whether    371 provided fair warning            to the  defendants that  their conduct, as  alleged, violated            the statute.                   B.  Sufficiency of the Allegations of Conspiracy                   B.  Sufficiency of the Allegations of Conspiracy                       ____________________________________________                    The defendants  do not contend  that the  Information            failed  to allege a conspiracy, nor did the district court so            find, and we find no deficiency.   "The gist of conspiracy is            an agreement to  disobey or  to disregard the  law."   United                                                                   ______            States v. Drougas,  748 F.2d  8, 15 (1st  Cir. 1984);  accord            ______    _______                                      ______            United States v.  Batista-Polanco, 927 F.2d 14,  19 (1st Cir.            _____________     _______________                                         -10-            1991);  Penagaricano-Soler, 911 F.2d at 840.  The Information                    __________________            alleges that the defendants  conspired with others, known and            unknown,  to defraud  the government  and goes  on to  allege            conduct by the defendants, their employees, Rusco, and others            in furtherance of the conspiracy.    Information at   12  and            passim.            ______                    The defendants argue, however, that because Rusco was            not named or charged as a co-conspirator  in the Information,            actions  by Rusco  cannot be  alleged to support  the charges            against the defendants.   There  is no  requirement that  co-            conspirators  be identified in an information, nor is there a            requirement  that co-conspirators  be charged  with  the same            offense  to sustain  the  conviction  of one  co-conspirator.            Penagaricano-Soler,  911 F.2d  at 840  n.5; United  States v.            __________________                          ______________            Sachs, 801 F.2d 839, 845 (6th Cir. 1986).  Although  Rusco is            _____            not  charged or  named as  a co-conspirator,  the Information            alleges action which includes Rusco as a participant with the            defendants  in  the scheme  to defraud  the  MBE programs.               Information  at     13,  16.   The reasonable  inference from            those  allegations  is that  Rusco  was  operating  as a  co-            conspirator.   Further, the Bill of  Particulars specifically            identifies Rusco as  a co-conspirator.3   It is well  settled                                            ____________________            3  While  a  bill  of particulars  cannot  cure  a  defective            indictment, it can provide  notice of detail missing  from an            information.     See  Fed.  R. Crim.  P.  7(e); 1  Charles A.                             ___            Wright,  Federal Practice  and  Procedure Criminal 2d     129            (1982);   United States v.  Prince, 868 F.2d  1379, 1384 (5th                      _____________     ______                                         -11-            that members of a conspiracy are  legally responsible for the            actions  of  a co-conspirator  taken  in  furtherance of  the            scheme.   Pinkerton v.  United States,  328 U.S.  640, 646-47                      _________     _____________            (1945);  United States v. Baines,  812 F.2d 41,  42 (1st Cir.                     _____________    ______            1987); United States  v. Fusaro,  708 F.2d 17,  21 (1st  Cir.                   _____________     ______            1983).  Therefore, actions by Rusco to obtain or maintain MBE            certification  are  properly  alleged   as  elements  of  the            conspiracy.                       C.  Sufficiency of the Allegations of Fraud                     C.  Sufficiency of the Allegations of Fraud                         _______________________________________                    The  conspiracy  statute  proscribes   two  different            conspiracies:  one to commit a specific offense, the "offense            clause," and the other  to defraud the United States  "in any            manner or  for any purpose,"  the "defraud clause."   Hurley,                                                                  ______            957  F.2d  at  3.   The  defendants  were  charged under  the            "defraud clause" of   371.                      At the start of our analysis, we acknowledge that the            defraud clause of    371 has been criticized for  its general            language  and  potentially broad  sweep.    Dennis v.  United                                                        ______     ______            States, 384 U.S. 855, 860 (1966).  Further, because there are            ______            no  common law  crimes  against the  United  States, we  must            determine   whether  the   defendants'  alleged   conduct  is            "'plainly  and unmistakably' within  the province of [ 371]."                                            ____________________            Cir.  1989)   (observing  that  an  information,   unlike  an            indictment,  may  be  easily  amended  absent  prejudice   to            defendants).                                         -12-            United States v.  Gradwell, 243  U.S. 476, 485  (1917).   We,            _____________     ________            therefore, scrutinize the Information carefully  to determine            whether it sufficiently and properly alleges criminal conduct            in violation of   371.                      The defendants  contend that they lacked fair warning            that the conduct alleged in the Information would violate the            defraud clause of    371.  The fair warning  doctrine invokes            due  process rights  under the  Fifth Amendment  and requires            that the  criminal statute at issue  be sufficiently definite            to  notify   persons  of reasonable  intelligence that  their            planned conduct is  criminal.  United States v.  Harriss, 347                                           _____________     _______            U.S.  612,  617  (1953) ("The  constitutional  requirement of            definiteness is violated by a criminal statute that fails  to            give a person  of ordinary intelligence fair  notice that his            contemplated conduct is  forbidden by the statute.");  United                                                                   ______            States  v.  National Dairy  Corp.,  372 U.S.  29,  31 (1963);            ______      _____________________            United States v. Anzalone, 766 F.2d 676, 678 (1st Cir. 1985).            _____________    ________            We  examine the statute,  as we must,  in the context  of the            facts of this case.   United States v. Mazurie, 419 U.S. 544,                                  _____________    _______            550 (1975);  United States  v. Angiulo, 897  F.2d 1169,  1179                         _____________     _______            (1st Cir. 1990).                      The defendants assert that   371 did not provide fair            warning that their alleged actions defrauded the MBE programs            of federal  government agencies because the  MBE programs did            not impose any duties on them.  The district court found that                                         -13-            the  MBE  programs  did  not  impose  criminal  sanctions  or            penalties, or any obligations  on subcontractors, such as the            defendants,  and held  that  because the  defendants had  not            violated any duty imposed upon them by the MBE programs, they            could not have violated   371.  The defendants primarily rely            on  United States v. Murphy,  809 F.2d 1427  (9th Cir. 1987);                _____________    ______            United  States v. Anzalone, 766 F.2d 676 (1st Cir. 1985), and            ______________    ________            United  States v. Porter, 591 F.2d 1048  (5th Cir. 1979).  We            ______________    ______            find them inapposite to this case.                      In United States v. Anzalone, 766  F.2d 676 (1st Cir.                       _____________    ________            1985), we addressed the problem of criminal prosecution of an            individual for alleged violations  of the currency  reporting            requirements before  the applicable statutes were  amended to            include such transactions.  Anzalone  did not involve   371.4                                        ________            The government  claimed that  the defendant failed  to notify            the bank that  his deposits were part  of the same  event and            should have been reported as a "structured" transaction.  The            essence of the government's charges was "that the appellant's            failure  to inform the Bank of the 'structured' nature of his            transfers constituted an illegal scheme to avoid detection of            these payments by causing     the Bank to fail in its duty to            report them."  Id. at 679.  We held that  the defendant could                           ___                                            ____________________            4 The defendant was not charged under   371 and   371 was not            discussed  in  the  case.    The  defendant  was charged  and            convicted  of violating 18 U.S.C.    2, 1001 and 31 U.S.C.               5313, 5322.                                         -14-            not be held  criminally liable under  the crimes charged  for            failing  to report the transaction when the Reporting Act did            not impose a duty on him to do so.                           Our   analysis   in    Anzalone   is    easily                                                  ________            distinguishable from this case.  In addition to the fact that            Anzalone does  not address    371, the defendant  was charged            ________            with a crime  for failure to  act.  As  we held in  Anzalone,                              _______                           ________            omission can only  constitute a  crime if the  accused had  a            duty  to  act.   In this  case,  however, the  defendants are            charged with defrauding the  government by their actions, not            by failure to act, and therefore, the analysis in Anzalone is                                                              ________            inapplicable.                       Similarly, in  United  States  v. Murphy,  809 F.2d                                     ______________     ______            1427 (9th  Cir. 1987),  the defendants' alleged  crimes arose            from  their failure to act.  The defendants were charged with            violating   371 because they failed to disclose the source of            the  funds  they  deposited  which  the  government   alleged            constituted  a  conspiracy  to  impair the  function  of  the            Internal Revenue Service  in the  collection of  taxes.   The            court found  that the defendants had  honestly and accurately            completed  the  currency   transactions  reports  which  were            required, had no  duty to inform anyone of the  source of the            deposited money, and therefore  had not committed any illegal            activity.   The court, in dicta, suggested that violations of              371 require violation  of other criminal statutes.   Id. at                                                                   ___                                         -15-            1432.  Moreover, the Ninth Circuit  has explained and limited            its decision in Murphy:                            ______                      Dicta  in  Murphy  can  be  construed  to                                 ______                      require  that  a conspiracy  charge under                      section  371 be  based upon  conduct that                      has   "been    proscribed   by   criminal                      statute."   Id.  Any such construction is                                  __                      incorrect  in light of  Dennis.   We read                                              ______                      Murphy  and  Varbel  [United   States  v.                      ______       ______   _______________                      Varbel, 780  F.2d  758 (9th  Cir.  1986)]                      ______                      only   to   mean  that   a   section  371                      conviction  may  not   be  based  upon  a                      failure to volunteer information  that is                      not   required  to  be  provided  to  the                      government,  or  upon  the furnishing  of                      correct  information;  such  acts do  not                      sufficiently  impair  the functioning  of                      the  government  to  support  a  criminal                      conviction.            United States v. Tuohey,  867 F.2d 534, 538 (9th  Cir. 1989).            _____________    ______            In Tuohey, the  court held that  the government had  properly               ______            charged the defendants under   371 because the defendants had            failed to report currency  transactions as they were required            to do by statute.                      In   United States  v. Porter,  591 F.2d  1048 (5th                           _____________     ______            Cir. 1979), the government  charged a group of doctors  and a            laboratory  operator with  Medicare fraud  and  conspiracy to            defraud the government  under    371.  On  appeal, the  court            reversed  the  convictions   and  dismissed  the  indictments            finding  that  the government  had  not  properly charged  or            proved a conspiracy to defraud the government under  371.  In            summary, the  government alleged that  the doctor  defendants            had  sent lab  work  to the  laboratory operator  defendant's                                         -16-            manual laboratories because they received a payment for doing            so, rather  than to  automated laboratories which  might have            processed the work  more quickly and more  cheaply.  Although            the  facts relating  to the  practice which  provided payment            back to the doctors are  complex, the effect was obvious--the            doctors  sent  their  lab  work  to  the  laboratories  which            provided the payments and  not to the automated laboratories.            The charges to Medicare, however,  were not increased by  the            practice and were within  the guidelines for lab work  in the            area, and the quality of the work was not an issue.  Further,            the  defendants   did  not   violate   any  Medicare   rules,            regulations   or   other   requirements   by   using   manual            laboratories.   The  government  charged  that the  practice,            nevertheless,  violated     371   because  it  defrauded  the            government's "right to  have the  Medicare program  conducted            honestly  and  fairly."   Id.  at  1056.    The  government's                                      ___            allegations established that the defendants failed to use the            most cost effective laboratories, the automated laboratories,            but did not show  that the defendants were required to do so,            and the allegations also  showed that the defendants complied            with the applicable  rules and regulations of  Medicare.  The            court  found that  the  government  did  not prove  that  the            defendants  had  interfered  with  lawful  functions  of  the            Medicare program  as required for criminal  liability under              371.                                         -17-                      None  of the  cases relied  upon by  the defendants            involve  the  situation  before  us:    affirmative  acts  of            misrepresentation  and deceit  to  thwart the  operation  and            purpose of a  government program.   Conspiracy to thwart  the            operation and purpose of  a government program through deceit            and trickery is prohibited by   371.  Hammerschmidt v. United                                                  _____________    ______            States, 265 U.S. 182, 188 (1924); United States v. Bucey, 876            ______                            _____________    _____            F.2d  1297, 1312-13 (7th  Cir.), cert. denied,  493 U.S. 1004                                             _____ ______            (1989).                      As noted earlier,   371 proscribes two distinct types            of  conspiracies:   (1)  conspiracies  to  commit a  specific            offense against the United  States, included elsewhere in the            criminal  code, and  (2) conspiracies  to defraud  the United            States.  The essence of the  defendants' theory is that if no            other federal law  or regulation proscribes alleged  conduct,            then the  defendants  cannot be  held criminally  responsible            pursuant to   371  because they  owe no duty  to the  federal            government.5       The   defendants'   theory    reflects   a                                            ____________________            5  This  theory  is  distinguishable from  United  States  v.                                                       ______________            Minarik, 875 F.2d 1186 (6th Cir. 1989),  where the defendants            _______            were  charged and convicted under the defraud clause of   371            although  a specific  provision  of the  Tax Code  proscribed            their  conduct.     In  Minarik  the   court  overturned  the                                    _______            convictions on the  grounds that  the case  should have  been            brought  under the offense clause of   371 to avoid confusion            to  the defendants  concerning  what conduct  was  considered            illegal.                                         -18-            misunderstanding  of  the function  of the  two clauses  of              371.6     If the  second clause  were interpreted  to require            commission  of a  specific offense,  it would  have the  same            meaning as the first clause thus rendering the second  clause            redundant.    Whenever  possible,  we will  not  interpret  a            statute in such  a way  as to  cause redundancy.   Breest  v.                                                               ______            Cunningham, 752 F.2d 8, 10 (1st Cir. 1985).              __________                    Recently we examined the defraud  clause of   371  in            the context  of an appeal  from conviction for  conspiracy to            impair the function of  the IRS in United States  v.  Hurley,                                               _____________      ______            957 F.2d 1 (1st Cir. 1992),  and held that the defraud clause            does not depend on allegations of other offenses.  In Hurley,                                                                  ______            the defendants  helped a  drug  smuggler hide  and invest  $5            million of his illegal  earnings thereby thwarting the lawful            function of the  IRS to levy  and collect income taxes.   The            defendants in  Hurley argued that the  indictment was invalid                           ______            for failing to charge them under the  offense clause of   371            with  specific  tax code  violations.    The defendants  also            argued  that because  there  were no  laws prohibiting  their            particular money  laundering activities, they had  no duty to            the government under   371 not to engage in money laundering.            We found  that the defendants had engaged  in a long-standing                                            ____________________            6  The defendants'  theory   does not  raise the  due process            problems presented in  United States v.  Haga, 821 F.2d  1036                                   _____________     ____            (5th Cir. 1987), where the defendants were charged  under the            offense clause of   371 but were convicted, apparently, under            the defraud clause.                                         -19-            and  complex  conspiracy to  deceive  the IRS  rather  than a            limited  scheme proscribed  by a  single  section of  the tax            code.  We held  that the defraud clause was  properly charged            because it can best address a conspiracy which encompasses  a            broad range of conduct for  the unlawful purpose of impairing            the function of the  IRS.  See also Dennis v.  United States,                                       ___ ____ ______     _____________            384 U.S. at 860  (holding that the  true nature of the  crime            was the entire conspiracy to falsely obtain benefits from the            N.L.R.B., in violation  of    371, and not  merely the  false            statements  made in  furtherance  of the  conspiracy); United                                                                   ______            States v. Bucey, 876  F.2d at 1312-13  (holding  that actions            ______    _____            which  are  themselves  legal   may  constitute  a   criminal            conspiracy in  violation of     371 if  they  are part  of  a            conspiracy  to  obstruct by  deceit,  craft  or trickery  the            lawful function of a government agency).                    In the present case,  the government alleges that the            defendants concocted  an elaborate  scheme with Rusco  to use            Rusco as a front  company to procure MBE set  aside contracts            for steel re-bar furnish  work  which would actually  be done            by the defendants.  The scheme, as alleged, began in 1982 and            continued into  1986.   Although Rusco  was indicted  for the            specific offense  of filing false statements  in violation of            18  U.S.C.    1001,  the defendants'  conspiracy  aimed at  a            broader goal,  impeding the purpose  and function of  the MBE            programs.   The  defendants' scheme  is the  kind  of complex                                         -20-            conspiracy which the defraud clause is intended to proscribe,            and which  might not  be prosecuted adequately  by addressing            separate occurrences of illegal conduct.7                      The defendants  in Hurley fared no  better with their                                       ______            second  argument.     They argued  that  because their  money            laundering  activities   were  not  prohibited   by  specific            statutes,   they  lacked  fair warning  that  they  could  be            prosecuted  under the defraud clause  of   371.   We rejected            their  argument and  held that  if the  "defendants knowingly            participated   in   laundering   drug  proceeds,   inevitably            hindering the  IRS in  its ability  to collect  . .  . taxes,            their   convictions   under    371's   defraud   clause   are            unassailable."  Id.  at 4; accord  United States v.  Cambara,                            ___        ______  _____________     _______            902 F.2d  144, 147 (1st  Cir. 1990) ("The  conspiracy statute            does not require that  unlawful means be used to  achieve the            unlawful goal of the conspiracy.").                                              ____________________            7 In  Dennis, 384  U.S. 855, the defendants argued that  they                  ______            should have been charged, if at all, under the offense clause            of     371  for  the  substantive  offense  of  making  false            statements  but   for  the  time   bar  of  the   statute  of            limitations.   The Court  held, however, that  the charge  of            conspiracy  to defraud  the  government  properly stated  the            nature  of the defendants' offense and was not "an attempt by            prosecutorial sleight of hand  to overcome a time bar."   Id.                                                                      ___            at 863.  In this  case, we also reject the  defendants' claim            that  the government  resorted  to    371  to circumvent  the            statute of limitations barring a charge pursuant to 18 U.S.C.               1001.  As in Dennis, while  it is true that the defendants                            ______            may  have violated   1001 in  perpetration of the conspiracy,            the gravamen of the  charge is the scheme to  defraud the MBE            program and not merely the making of false statements.                                         -21-                    Taken as  a whole,  the Information charges  that the            MBE re-bar "furnish" contracts  obtained in Rusco's name were            merely passing through  Rusco, as  a front, to  Barker.   The            defendants used  Rusco to win MBE contracts  to "furnish" re-            bar  because the  defendants  could not  have obtained  those            contracts  directly.  The result  was that a  non-MBE got the            benefit  of  contracts which  the  MBE  program intended  for            minority businesses.   Both  the defendants and  the district            court below rely on the  fact that Rusco was a certified  MBE            during  the  existence  of  the  conspiracy,  implying   that            contracts  which went to Rusco were proper under the affected            MBE programs.                      A  scheme to  use  a  minority  business as  a  front            company was addressed in United  States v. Anderson, 879 F.2d                                     ______________    ________            369  (8th  Cir. 1989).   The  court  found that  the minority            business  certification  requirements of  the  Small Business            Administration were  intended to insure  that front companies            did not usurp program benefits:                        To  become  certified   for  the   [SBA                      minority  business]  program, a  business                      must establish  that  it is  socially  or                      economically disadvantaged, is owned by a                      minority person and not  a mere front for                      a  non-[minority certified]  business, is                      actually controlled by a minority person,                      and  will  be   performing  at  least  15                      percent of the government contract.            Id.  at  372.    The  Anderson  defendants  used a  certified            ___                   ________            minority  business  as  a  front  to  obtain  SBA  set  aside                                         -22-            contracts when the  contract work was actually  subcontracted            to other, non-minority, businesses.  Compare United States v.                                                 _______ _____________            Porter, 591 F.2d 1948 (5th Cir. 1979) (affirming dismissal of            ______            an indictment  which charged doctors and  a laboratory worker            with  a kickback scheme to defraud Medicare in violation of              371 because there was no Medicare policy or  regulation which            prohibited  doctors from  taking such  payments and  Medicare            costs were not increased).                    It is reasonable to  infer that the MBE certification            requirements  for  the  agencies  alleged in  this  case  are            intended to prevent non-MBEs from taking advantage of MBE set            aside contracts.8   The MBE certification requirements impose            duties upon  the defendants  and  others not  to subvert  the            system established  to benefit minority businesses.   Because            Rusco did not do  the re-bar "furnish" work specified  in the            contracts, Rusco was  operating as a  front for Barker  which                                            ____________________            8  The  Information  summarized,   rather  than  citing,  the            regulations which control  the MBE programs  of the DOT,  EPA            and  GSA  which  provides  sufficient  understanding  of  the            function  of  the  programs.    Nevertheless,  the  pertinent            language of the regulation for MBE  certification for the DOT            is instructive:                                   To  ensure that  this part  benefits only                      MBEs  which are  owned and  controlled in                      both form  and substance  by one  or more                      minorities or women, DOT recipients shall                      use Schedules  A and B  . . .  to certify                      firms who  wish to participate as MBEs in                      DOT under this part.            49 C.F.R.   23.51.                                         -23-            did the  "furnish" work  and received the  contract payments.            As  the government alleges, MBE contracts can only be awarded            to  MBEs  who  actually  do  the  work,  and  therefore,  the            defendants' use of  Rusco was  a fraud on  the MBE  programs.            Just because the  defendants used Rusco, a  certified MBE, to            subvert the MBE requirements does not make their actions less            reprehensible.                    The Information also alleges that  Rusco fraudulently            maintained its MBE certification  after 1982.  The defendants            counter that the Information cannot properly charge them with            defrauding  the  government  based  upon  false documentation            submitted by Rusco to various MBE certifying agencies because            there is  no allegation  that  the agencies  relied upon  the            false documentation to certify  Rusco.  In  Dennis,  384 U.S.                                                        ______            855, the Supreme Court found that an indictment which charged            members  of  a  mine   workers'  union  who  submitted  false            affidavits, stating  that they were not  Communists, in order            to  procure  the services  of  the  National Labor  Relations            Board,     properly  stated  a  conspiracy   to  defraud  the            government pursuant to    371.  The defendants  objected that            the affidavits did not  defraud the Board because it  did not            rely  on the  veracity of  the non-Communist  affidavits, but            instead relied  only on the fact  that they were filed.    In            response, the Court held as follows:                        The   facts   are,  according   to  the                      indictment,  that  petitioners and  their                                         -24-                      co-conspirators  could not  have obtained                      the   Board's  services   and  facilities                      without filing  non-Communist affidavits;                      that  the  affidavits  were submitted  as                      part of  a scheme to induce  the Board to                      act; that  the  Board acted  in  reliance                      upon the fact that affidavits were filed;                      and  that  these  affidavits were  false.                      Within the  meaning of   371, this was  a                      conspiracy to defraud  the United  States                      or an agency thereof.            Dennis at 862.   The effect of  the conspiracy and the  false            ______            affidavits was  that the  defendants' trade union  gained the            benefit of  the Board's  services and facilities  despite the            fact that the  union was  not qualified because  some of  its            officers were Communists.  The Court held that the conspiracy            defrauded  the government  by  impeding the  function of  the            Board  to  implement  its   policy  to  exclude  unions  with            Communist officers.      Similarly, in this case, Rusco could            not  have  maintained its  certification  as  an MBE  without            filing  the required documentation.   Because  the defendants            had taken control of Rusco, the documentation  filed by Rusco            contained  false  and  misleading  information  and  material            omissions which directly affected  Rusco's eligibility as  an            MBE.   Unless  Rusco  maintained its  MBE certification,  the            defendants' scheme  to obtain  MBE set aside  contracts would            have failed.  The state and local MBE certification  agencies            granted  MBE certification  to Rusco  in response  to Rusco's            fraudulent documentation.  Therefore, Rusco's filings for MBE            certification were at the  core of the defendants' conspiracy                                         -25-            and may be considered as a part of the fraudulent activity in            furtherance  of the  conspiracy.   Even if  Rusco had  been a            properly certified MBE, however,   "[a] method that makes use            of innocent  individuals or  businesses to reach  and defraud            the United States  is not for that reason beyond the scope of              371."  Tanner v. United States, 483 U.S. 107, 129 (1986).                       ______    _____________                                 This court has considered  the meaning of the defraud            clause in    371 and its  substantially similar predecessors,            and  found  actions which  defrauded the  United States  in a            variety of circumstances.  Curley v. United States, 130 F. 1,                                       ______    _____________            11-12 (1st Cir. 1904), cert. denied, 195 U.S. 628  (affirming                                   _____ ______            the  sufficiency  of  an indictment  charging  conspiracy  to            defraud  the  government by  a  defendant  who took  a  civil            service exam for another man to help him gain a position as a            letter carrier  and  defining defrauding  the government  as:            "'any act committed with a view of evading the legislation of            Congress passed in the execution of any of its powers, or  of            fraudulently securing  the benefit  of such legislation,  may            properly be  made an  offense against the  United States.'");            Harney v. United States, 306 F.2d. 523 (1st Cir. 1962), cert.            ______    _____________                                 _____            denied sub  nom. O'Connell  v.  United States,  371 U.S.  911            ______ ___  ____ _________      _____________            (affirming  indictment for hampering  the lawful operation of            the Bureau of Public  Roads of the Department of  Commerce in            the administration  of  the  Federal  Aid  Highway  program);                                         -26-            United  States  v.  Pappas,  611  F.2d 399  (1st  Cir.  1979)            ______________      ______            (affirming conviction  of  conspiracy to  defraud  government            based  on  a scheme  to misuse  funds  intended for  the CETA            program).                    Finally,  dishonest conduct  is at  the heart  of the            crime  of  defrauding  the  government.   The  Supreme  Court            defined  "defraud" in  a  substantially  similar  predecessor            statute to   371 as follows:                        To  conspire  to  defraud   the  United                      States  means  primarily  to   cheat  the                      government  out of property or money, but                      it  also  means   to  interfere  with  or                      obstruct one of  its lawful  governmental                      functions by deceit,  craft or  trickery,                      or at  least by means that are dishonest.                      It  is not necessary  that the government                      shall   be   subjected  to   property  or                      pecuniary  loss by  the  fraud, but  only                      that its legitimate  official action  and                      purpose    shall     be    defeated    by                      misrepresentation,   chicane,    or   the                      overreaching   of   those  charged   with                      carrying out the governmental intention.            Hammerschmidt  v. United  States, 265  U.S. 182,  188 (1924).            _____________     ______________            The   defendants   in   Hammerschmidt   were   indicted   for                                    _____________            distributing leaflets and  other materials urging  resistance            to the  draft  during World  War  I.   The  Court  held  that            although the  defendants' conduct was aimed  at impairing the            function  of  the  Selective  Service,  a  lawful  government            function, it  was open  defiance and  not a  scheme involving            deceit  or  trickery, and  therefore,  could  not be  charged            within the meaning of defrauding the government.                                         -27-                    The  allegations  in  this  case  do  not  present  a            situation  where defendants conspired  to do something which,            in itself, was innocent, but  which had the unintended effect            of  thwarting  the MBE  programs.   Nor  were  the defendants            engaging  in  open  defiance   or  protest  against  the  MBE            programs.   The  defendants'  actions,  as alleged,  involved            deceit and trickery  to benefit the defendants by hampering a            lawful  government function.   A conspiracy of  this kind has            long been recognized to defraud the government.                        The  Information alleges  that  "[p]ursuant  to  this            unlawful  conspiracy in excess  of $5 million  in federal and            federally  assisted  construction  contracts were  improperly            credited towards the MBE goals of the various departments and            agencies  of  the United  States."9    Information at     14.            While this allegation could be more forcefully stated, taking            the   Information  as   a  whole   and  with   all  necessary            implications, the meaning is clear:  the defendants conspired            with others to defraud the DOT, EPA and GSA, agencies of  the            United States, in the implementation of their MBE programs by            using  Rusco  to  win  MBE  set  aside  contracts  which  the            defendants would not otherwise have been eligible to receive.                                            ____________________            9 The defendants  do not  challenge the validity  of the  MBE            program. It is  uncontroverted, in  this case,  that the  MBE            program  is  a  lawful  function  of  government.    And  see                                                                 ___  ___            Fullilove  v.  Klutznick,  448  U.S.  448  (1980)  (upholding            _________      _________            constitutionality of an MBE program).                                         -28-            As a result, the scheme diverted $5 million in contracts from            MBEs to Barker.                    In thirteen pages containing  forty-eight paragraphs,            the  Information  details actions  by  which the  defendants,            Rusco and  others accomplished their objective  to obtain MBE            contracts for the benefit of the defendants.  The allegations            show  that the defendants were  well aware of  the purpose of            the MBE programs,  certification requirements, goals and  set            aside  contracts, and that  any reasonably intelligent person            in  the defendants'  situation should  have known  that their            conspiracy  could have  criminal  consequences.   Taken as  a            whole,  the  Information   sufficiently  alleges   fraudulent            conduct  by  the  defendants  and  their  co-conspirators  to            impair, defeat, or obstruct the  function of the MBE programs            involved in this  case.  We  move on to consider  whether the            fraud was perpetrated against the United States.             D.  Sufficiency of Allegations of Contact with United States             D.  Sufficiency of Allegations of Contact with United States                 ________________________________________________________                    The defendants assert,  and the district court  held,            that  the Information  fails  to allege  that the  defendants            conspired  to defraud the United  States or an  agency of the            United  States.   In Tanner  v. United  States, 483  U.S. 107                                 ______     ______________            (1987),  the Supreme  Court  considered  whether  a  kickback            conspiracy to procure and  keep a construction contract  on a            project  which  was  funded  by  federally  guaranteed  loans            constituted defrauding the  United States within the  meaning                                         -29-            of   371.  In Tanner, 483 U.S. 107, the Rural Electrification                          ______            Administration (REA) guaranteed loans for the construction of            a  power  plant for  an  electric  cooperative (Seminole)  in            Florida.  The procurement manager for Seminole conspired with            his friend  to get  contracts for  the project  with kickback            payments to the manager.                       The defendants argued on  appeal that the evidence at            trial showed that the target  of the conspiracy was  Seminole            and  not the  federal government.   The  government responded            that,  because  Seminole's   construction  project   received            federal  financial assistance and some federal supervision, a            conspiracy to defraud  Seminole was the same  as a conspiracy            to  defraud   the  government.     The  Court   rejected  the            government's explanation and held:                      The  conspiracies  criminalized by    371                      are defined not only by the nature of the                      injury  intended  by the  conspiracy, and                      the   method   used  to   effectuate  the                      conspiracy,     but     also and     most                      importantly by   the    target   of   the                                              ______                      conspiracy.            Tanner  at  130.      The  Court  also  held,  however,  that            ______            conspiracies  to  defraud  the   federal  government  may  be            accomplished through intermediaries, innocent  third parties,            and the  Court remanded  the  case to  determine whether  the            defendants    conspired   to    cause   Seminole    to   make            misrepresentations to the REA.  Tanner at 132.                                              ______                                         -30-                    In  this case,  the government  alleged that  the MBE            programs  of the involved federal agencies were the target of            the defendants' conspiracy to defraud.   Information at   12.            The  Information supports the general allegation in statutory            language  with detail of the workings of the MBE programs and            the actions by the defendants which harmed the  MBE programs.            The Information  alleges that  the defendants'  scheme caused            "in  excess of $5  million in federal  and federally assisted            construction  contracts [to  be] improperly  credited towards            the  MBE goals of the various departments and agencies of the            United  States."  Because the purpose of the MBE programs, as            alleged,  is to insure that  at least ten  percent of federal            and  federally assisted  construction  project  contracts  be            awarded to  MBE companies,  the defendants' scheme  to divert            MBE contracts through Rusco to  benefit themselves obstructed            the proper  function of  the MBE  programs.  The  Information            taken  as  a whole  clearly alleges  that  the target  of the            defendants' conspiracy was  $5 million worth of MBE set aside            contracts  which  should  have   been  awarded  to   minority            businesses.                     The  Information  does  not allege  that  either  the            general contractors or  the state  agencies implementing  MBE            certification were  operating  as federal  agencies based  on            their  receipt of federal and federally  assisted funds.  The            misrepresentations and fraud  to general contractors  and MBE                                         -31-            certifying  agencies  by the  defendants  and co-conspirators            were  the means to the  end, using innocent  third parties to            effect their scheme.   The Information sufficiently alleges a            conspiracy   which  targeted  a  federal  function,  the  MBE            programs of  the DOT,  EPA and  GSA, and  therefore, properly            charges a conspiracy to defraud the United States.             E.  Sufficiency of Allegations of Harm to the United States             E.  Sufficiency of Allegations of Harm to the United States                 _______________________________________________________                    The  defendants argue that  the Information  fails to            allege  a crime under    371 because it  does not allege that            the defendants  defrauded the federal government  of money or            property.   There is no  basis for the  defendants' argument.            The language of the statute itself is broad:  "If two or more            persons conspire .  . . to defraud the United  States, or any            agency thereof  in any manner  or for any  purpose. . ."   18                               _______________________________            U.S.C.    371 (emphasis  added).    At  least  since Haas  v.                                                                 ____            Henkel, 216 U.S. 462 (1910), the Supreme Court has recognized            ______            that   371 (and  its substantially similar predecessors) were            not limited  to conspiracies which defraud  the government of            money  or property: "The statute is broad enough in its terms            to  include  any conspiracy  for  the  purpose of  impairing,            obstructing  or  defeating   the  lawful   function  of   any            department of Government."  Id. at 479.                                           ___                    Although the  Supreme Court has limited  the scope of            mail fraud, 18 U.S.C.    1341, to the protection  of property                                         -32-            rights,  that  limitation is  restricted  to  the mail  fraud            statute.  McNally v. United States, 483 U.S. 350, 360 (1987);                      _______    _____________            and id.  at 368 (Stevens,  J., dissenting); United  States v.            ___ ___                                     ______________            Smith, 891 F.2d 703,  713 (9th Cir. 1989), modified  on other            _____                                      ________  __ _____            grounds,  906  F.2d 385,  cert.  denied  111 S.Ct  47  (1990)            _______                   _____  ______            (McNally's narrow definition of  "defraud" does not extend to             _________              371.).  We  decline to extend  the McNally limitation to                                                    _______            371.                                          IV.                                         IV.                                      Conclusion                                      Conclusion                                      __________                    We hold that the  Information sufficiently alleges  a            conspiracy  to defraud  the government pursuant  to    371 in            the language  of the  statute and with  sufficient supporting            detail  to adequately  notify the  defendants of  the charges            against  them.   The  history  of  interpretation  of     371            demonstrates  that the statute  proscribes conspiracies, such            as  the defendants' conspiracy, which target federal programs            and which intend to  deceitfully secure the benefit  of those            programs.   In other words, the defendants had a duty imposed            pursuant  to    371  not to  divert  the benefit  of  the MBE            programs   from  their  intended  recipients,  qualified  and            certified  minority businesses, to  themselves.   The statute            itself  provides fair  warning  that the  defendants' alleged            conspiracy  may   be  charged   as  criminal  under      371.                                         -33-            Therefore, we reverse  the decision  of the  lower court  and            remand for trial.                                         -34-
