Poverty Point fraud trial to await Supreme Court decision

By Johnny Gunter • • July 8, 2009

Trial for three prominent northeastern Louisiana residents charged in U.S. District Court with conspiracy and mail fraud in a case involving land they purchased at Poverty Point Reservoir in Delhi has been reset to April 12 so the U.S. Supreme Court can hear a similar case.

It was set for Jan. 11.

Defense attorney Mike Small of Alexandria, who represents Billy Coenen, district attorney of the 5th Judicial District, Monroe-based engineer Terry Denmon and Delhi businessman Mike Thompson, said another of his clients, former state Sen. Charles Jones, will be tried Jan 11.

Jones was indicted in February 2008 on two federal counts of making and subscribing a false tax return and one count of tax evasion. The indictment alleges Jones intentionally claimed much lower amounts for his gross receipts or sales in 2000 and his earned income in 1999. He is accused of tax evasion for converting payments for his services as a lawyer into cashier’s checks and cash, then purchasing property and a certificate of deposit to avoid paying income tax.

Small said Wednesday the trial dates were flipped because the U.S. Supreme Court has agreed to hear a similar case involving a legal issue that he and other attorneys have filed in the Coenen, Denmon and Thompson case. He said motions have been filed stating the indictments should be dismissed because the charges are alleged state ethics violations, which shouldn’t be used as a basis for a federal mail fraud indictment.

He said all parties, including the U.S. Attorney’s Office, agreed to put off the trial until the Supreme Court rules in the case from the Ninth Circuit Court of Appeals. He said that could possibly be a year away.

“If the Supreme Court rules as we hope, it would result in the dismissal of the Coenen case and those of the co-defendants,” Small said.

No one with the U.S. Attorney’s Office responded to an inquiry for comment.
Coenen, Denmon and Thompson pleaded innocent Aug. 8 to charges of conspiracy and mail fraud.

The charges stem from a land deal at Poverty Point Reservoir, where Thompson was reservoir district executive director and Denmon was lake project engineer. Coenen represented the district as its attorney.

A federal grand jury in Shreveport indicted Thompson and the other two on June 26, 2008, for conspiring to secretly purchase land along what would become Poverty Point Reservoir and selling it at substantial profit.

The three are each charged with one count of conspiracy and eight counts of mail fraud.

According to the indictment, the three men bought a five-acre tract of land for $16,800. It would later form the shores of the reservoir.

They reportedly used a nominee purchaser to hide their interest.

Thompson and Denmon, whose engineering firm was contracted to work for the district, had the adjacent property excavated, the indictment states.
The tract was subdivided, and six of the eight lots have sold for a total of $250,000.

State law forbids public servants from engaging in business with a governmental entity in which there is a substantial personal interest.

Coenen had been hired to represent the district in addition to his position as district attorney.

The mail fraud allegations stem from specific instances in which the men exchanged checks and letters about the transactions.

Poverty Point Reservoir, a 3,000-acre lake north of Delhi, was completed in 2001.

It’s now a state park. Thompson’s brother, state Sen. Francis Thompson, D-Delhi, spent more than 25 years securing state funding for it.

Because of Small’s involvement in a long southern Louisiana trial, Mike Thompson will be tried on a separate case on Nov. 9 instead of the original date of June 22.

Thompson was indicted by a federal grand jury June 12, 2007, for allegedly using district employees to work on his home in Delhi and charging the district for the labor, in violation of the Hobbs Act. The indictment claims the offense took place between Sept. 26, 1997, and June 20, 2002.

The Hobbs Act prohibits actual or attempted robbery or extortion affecting interstate or foreign commerce. It was created to combat racketeering in labor-management disputes but is frequently used in connection with cases involving public corruption, commercial disputes and corruption directed at members of labor unions.

The Court also granted certiorari in several cases.
One of the issues knocking about in federal bribery prosecutions is whether the Government has to prove violation of a duty imposed by state law.  The Fifth Circuit has held that the Government does have this burden.  The Ninth Circuit recently held it does not, and now the United States Supreme Court has granted cert on the Ninth Circuit case to answer this question.  Because the Fifth Circuit is on the narrower side of the line, this will not effect the pending Mississippi federal bribery cases (the Minor case involves whether the federal money that provides the jurisdictional basis for federal involvement has to connect to the decisions on which “honest services” were denied).
Here’s the court’s order granting cert:
The petition for a writ of certiorari is granted limited to the following question: Whether, to convict a state official for depriving the public of its right to the defendant’s honest services through the non-disclosure of material information, in violation of the mailfraud statute ( 18 U.S.C. §§1341 and 1346), the government must prove that the defendant violated a disclosure duty imposed by state law.
Here is a blog entry about the case when the 9th Circuit had it; it involved an Alaska state legislator (there’s a bad link in the blog post to the 9th Circuit opinion.  It’s found here).
Issue(s): “This is an interlocutory appeal by the government of the district court’s pretrial order excluding evidence from a mail fraud prosecution. It presents a matter of first impression in this circuit – whether a federal honest services mail fraud prosecution under 18 U.S.C. §§ 1341 and 1346 requires proof that the conduct at issue also violated an applicable state law.” Id. at *1.Held: “[W]e disagree with the district court that a state law violation is required, and thus reverse the court’s order excluding certain evidence from trial.” Id. at *1.

Of Note: How many bites of the apple does the government get to properly certify an interlocutory appeal? Four, in this case! Id. at *2. Must be a big apple.

Sure would be nice to get four Mulligans in defense appeals, or four habeas petitions in the post-AEDPA world. The government better shape up, though: the Ninth “shall not be so forgiving in the future.” Id. at *4. The feds may only get three chances to make it right, next time . . . .

How to Use: Weyhrauch creates a new Ninth Circuit rule and deepens a circuit split. Judge Fisher starts by tracing the history of the “intangible rights” theory of honest services fraud. Id. at *5. The Third and Fifth Circuits have adopted rules that require a showing that the public official violated an independent state (or, in the Third, federal) law for an “honest services” conviction. Id. at *5. The First, Fourth, Seventh and Eleventh Circuits, however, have all held that there’s a uniform federal standard for “honest services” (although they haven’t agreed with what that standard is). Id. at *6. In these circuits, there’s no need for an independent state law violation. Although Judge Fisher concedes the policy considerations supporting the Fifth Circuit’s rule, he ultimately rejects the “state law limiting principal.” Id. at *7-*8.

While a disappointing holding, this is a well-written and balanced decision: it seems like an issue the Supremes should take up again, given the controversy over this important new rule.