USA v. Warren Hoeffner

Filing

REVISED PUBLISHED OPINION FILED. [6677144-2] [09-20781]

USA v. Warren Hoeffner e: 09-20781 Cas

Document: 00511320457 Page: 1 Date Filed: 12/14/2010

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REVISED DECEMBER 14, 2010 IN THE UNITED STATES COURT OF APPEALS FOR THE FIFTH CIRCUIT
United States Court of Appeals Fifth Circuit

FILED
November 18, 2010 N o . 09-20781 Lyle W. Cayce Clerk U N IT E D STATES OF AMERICA P la in t if f -A p p e lle e v. W A R R E N TODD HOEFFNER D e fe n d a n t -A p p e lla n t

A p p e a l from the United States District Court for the Southern District of Texas

B e fo r e KING, HIGGINBOTHAM and GARZA, Circuit Judges. P E R CURIAM: T h e defendant appeals from the district court's order denying his motion t o dismiss on double jeopardy grounds. The defendant, an attorney, represented c li e n t s bringing silicosis claims against insureds of The Hartford Financial S e r v ic e s Group. He was indicted for wire fraud and mail fraud after he made s e v e r a l payments to employees of The Hartford out of the proceeds from s e t t le m e n t s with The Hartford. During the course of a six-week trial, the

g o v e r n m e n t abandoned an honest services fraud allegation in the indictment, in s t e a d focusing on a money and property fraud allegation. The jury failed to r e a c h a verdict, and the district court granted a mistrial. In this interlocutory

Dockets.Justia.com

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No. 09-20781 a p p e a l, we consider whether the government's abandonment of the honest s e r v ic e s fraud theory precludes retrial on the money and property fraud theory. For the following reasons, we hold that retrial is not precluded on the money and p r o p e r t y fraud theory. I . FACTUAL AND PROCEDURAL BACKGROUND A. Factual Background W a r r e n Todd Hoeffner, an attorney, represented over 900 individuals who b r o u g h t silicosis and other silica-related claims against manufacturers and s e lle r s of silica-containing products and related protective equipment. Among t h e insurers of these companies was The Hartford Financial Services Group (" T h e Hartford"). Rachel Marie Rossow was a claims supervisor working for one o f The Hartford's subsidiaries and was responsible for settling claims and rec o m m e n d in g appropriate settlement amounts for claims against The Hartford. John Prestage was a claims handler, and his supervisor was Rossow. Both R o s s o w and Prestage worked on the silica claims Hoeffner brought against The H a r t fo r d 's insureds. I n 2002, Hoeffner began contacting the insurers for the silicosis d e fe n d a n t s , including The Hartford, and offering to settle his clients' claims. In t h e following months, Hoeffner successfully settled his clients' claims with most o f the defendants and received nearly $56 million in settlement payments, $34 m illio n of which came from The Hartford. Hoeffner received a contingency fee o f 40% of the settlement amounts. D u r in g the settlement discussions, Hoeffner met with Rossow and P r e s t a g e several times. He funded trips for Rossow and Prestage to Laguna B e a c h , California, New York City, and Palm Beach, Florida. Also, unbeknownst t o The Hartford, Hoeffner paid Rossow approximately $2.6 million and Prestage a p p r o x im a t e ly $760,000 out of the funds that he received from the settlements w it h The Hartford. Among the payments that Hoeffner made to Rossow and 2

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No. 09-20781 P r e s t a g e were several checks drawn from Hoeffner's IOLTA trust account which w e r e mailed to Rossow and Prestage, a wire transfer from Hoeffner's IOLTA t r u s t account to an account owned by Rossow, and a wire transfer to New C o u n tr y Motors in Hartford, Connecticut for the purchase of two BMW a u t o m o b ile s , one each for Rossow and Prestage. B. T h e Indictment I n a superceding indictment dated March 8, 2008,1 Hoeffner, Rossow, and P r e s t a g e were charged with one count of conspiracy to commit mail and wire fr a u d , one count of conspiracy to commit money laundering, two counts of wire fr a u d , five counts of mail fraud, and six counts of money laundering.2 T h e conspiracy to commit wire and mail fraud count alleged that the d e fe n d a n t s did "knowingly devise and intend to devise a scheme and artifice to d e f r a u d and to obtain money and property by means of false and fraudulent p r e t e n s e s , representations and promises . . . ." The indictment also alleged the " m a n n e r and means" of the conspiracy, alleging "[i]t was part of the conspiracy th a t": 1 7 . Defendant Hoeffner would and did make payments to d e fe n d a n t s Rossow and Prestage, through bribes and kickbacks, for r e c o m m e n d in g that subsidiaries of The Hartford pay certain a m o u n t s to settle the claims of his clients against The Hartford, its s u b s id ia r ie s and its Insureds. 1 8 . Defendants Hoeffner, Rossow and Prestage would and did fa ls e ly promise, pretend and represent to subsidiaries of The H a r t fo r d . . . that the settlement amounts of the claims against The H a r t fo r d . . . were appropriate amounts to settle the claims and in t h e best interests of The Hartford . . . , well knowing that the

The original indictment was filed on June 25, 2007. The superseding indictment is substantially similar to the original indictment except that it adds an additional count of money laundering. All references to the indictment refer to the superseding indictment. See 18 U.S.C. § 371 (conspiracy); 18 U.S.C. § 1343 (wire fraud); 18 U.S.C. § 1341 (mail fraud); 18 U.S.C. § 1957 (money laundering).
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No. 09-20781 d e fe n d a n t s intended that some of that money (the "Settlement F u n d s " ) would instead be funneled by and through Hoeffner to R o s s o w and Prestage. 19. D e fe n d a n t s would and did cause subsidiaries of The H a r t fo r d to pay more than $34,000,000.00 in Settlement Funds, k n o w in g that more than $3,000,000.00 of those funds would be used t o pay bribes and kickbacks to Rossow and Prestage. T h e indictment then alleged various wires and mailings as part of the e x e c u t io n of the scheme. In each of the substantive wire and mail fraud counts, t h e indictment alleged, under the heading "The Scheme and Artifice to Defraud," the defendants . . . did knowingly devise and intend to devise a s c h e m e and artifice to defraud The Hartford and its subsidiaries . . . of their right to the honest services of Prestage and Rossow, and to o b ta in money and property from The Hartford and its subsidiaries . . . by means of false and fraudulent pretenses, representations and p r o m is e s , . . . including the concealment of material facts. T h e substantive counts each contained a "manner and means" section with a lle g a t io n s identical to those in Paragraphs 17, 18, and 19 of the conspiracy cou n t. C. T h e Trial T h e district court severed the proceedings against Hoeffner from those a g a in s t Rossow and Prestage, and Hoeffner was tried before a jury from August 2 0 , 2009 through October 2, 2009. In support of the honest services fraud a lle g a t io n , the government initially presented evidence that Hoeffner had made p a y m e n ts to Rossow and Prestage from the settlement funds in the form of b r ib e s and kickbacks.3 In support of the money and property fraud allegation,

We note that the defendant and the government seemed to have conflicting ideas of what, exactly, Hoeffner may have been bribing Rossow and Prestage to do. The defendant took the position that the indictment alleged that the bribes were given to Rossow and Prestage in exchange for their recommending inflated or overvalued settlement amounts. The government, on the other hand, initially presented evidence that Hoeffner bribed Rossow and Prestage to expedite the settlement approval process because he was concerned about possible impending tort reforms that would make settlement more unlikely.

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No. 09-20781 t h e government presented evidence that The Hartford would not have engaged i n settlement discussions with Hoeffner had it known that its employees were g o in g to receive a portion of the settlements. H o e ffn e r conceded at trial that he made the payments to Rossow and P r e s t a g e , but he offered several theories of defense. He offered evidence that the s e t t le m e n t amounts were fair--i.e., the settlement amounts were not inflated or o v e r v a lu e d , so Hoeffner could not have bribed Rossow and Prestage because he h a d not received any gain in return. In relation to that theory, Hoeffner

p r e s e n t e d evidence that Rossow and Prestage were too low in The Hartford h ie r a r c h y to exert any influence over the settlement amounts. Hoeffner also t e s t ifie d that he had been extorted into making the payments when Rossow and P r e s t a g e threatened to stall the settlement approvals indefinitely.4 A s the trial progressed, the government retreated from its theory that H o e ffn e r committed honest services fraud by paying bribes and kickbacks to R o s s o w and Prestage. Instead, the government took the position that the mere fa c t of the concealed payments to employees of The Hartford constituted a s c h e m e to obtain money and property from The Hartford. The government also r e n o u n c e d the honest services fraud allegation during closing argument, asking t h e jury to focus instead on the money and property fraud allegation in the in d ic tm e n t. During the jury charge conference, the government informed the district c o u r t that it wished to withdraw the honest services fraud theory from the jury's c o n s id e r a t io n completely.5 As a result, the district court, over the defendant's

As part of this defense, Hoeffner presented evidence that Rossow was having an affair with David Cain, a high-level executive at The Hartford, and Hoeffner testified that he believed the extortion was done at Cain's direction or at least with his approval. The government attempted to redact all references to bribes and kickbacks and honest services fraud from the indictment. The defendant objected to the redactions, and the district court sent the unaltered indictment to the jury.
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No. 09-20781 o b je c t io n , removed all references to honest services fraud, as well as bribes and k ic k b a c k s , from the jury instructions for the substantive fraud counts,6 though t h e instruction for the conspiracy count still contained a reference to bribes and k ic k b a c k s .7 A fte r three days of deliberation, the jury informed the district court that it was unable to reach a unanimous verdict. The district court then granted the d e fe n d a n t 's request for a mistrial. Following the mistrial, the government im m e d ia t e ly sought to retry the defendant on the same indictment. On October 1 9 , 2009, the defendant filed a motion to dismiss the indictment on double je o p a r d y grounds. The defendant argued below, as he does here, that the

The judge instructed the jury as follows with regard to the substantive wire and mail fraud counts: For you to find the defendant guilty of this crime, you must be convinced that the government has proved each of the following beyond a reasonable doubt: First: That the defendant knowingly created a scheme and artifice to obtain money and property from The Hartford and its subsidiaries, by means of false and fraudulent pretenses, representations and promises, including the concealment of material facts by falsely promising, pretending and representing that the settlement amounts of the claims against The Hartford, its subsidiaries and its insureds were appropriate amounts to settle the claims in the best interest of The Hartford, its subsidiaries and its insureds, well knowing that the defendant and Rachel Rossow and John Prestage intended that some of the settlement money would instead be funneled through the defendant to Rossow and Prestage. ... A "scheme to defraud" includes any scheme to deprive another of money or property by false and fraudulent pretenses, representations or promises.
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The instruction for the conspiracy count was substantially the same as the instruction for the substantive fraud counts, except that it required the jury to find that the defendant engaged in a "scheme and artifice to defraud The Hartford and its subsidiaries by paying bribes and kickbacks to Rachel Rossow and John Prestage . . . for their recommending that The Hartford pay settlement amounts or to obtain money and property from The Hartford . . ." (emphasis added).

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No. 09-20781 g o v e r n m e n t abandoned the entire indictment when it abandoned the honest s e r v ic e s fraud theory at trial. This abandonment, according to the defendant, h a d the effect of a dismissal and precludes retrial on the money and property fr a u d theory. On November 18, 2009, before the district court ruled on the defendant's m o t io n to dismiss, the government obtained a second superseding indictment, w h ic h contained no reference to the honest services fraud theory or to bribes and k ic k b a c k s . On November 19, 2009, the district court denied, without

e x p la n a t io n , the defendant's motion to dismiss. The defendant filed his notice o f appeal the next day. II. A. S ta n d a r d of Review W e review de novo the district court's order denying the defendant's m o t io n to dismiss the indictment on double jeopardy grounds, but we accept as t r u e the district court's underlying factual findings unless clearly erroneous. United States v. Mauskar, 557 F.3d 219, 227 (5th Cir. 2009) (quoting United S t a t e s v. Gonzalez, 76 F.3d 1339, 1342 (5th Cir. 1996)). In this interlocutory a p p e a l, we are concerned only with the defendant's claim of double jeopardy, and w e do not address the sufficiency of any of the allegations in the indictment. See A b n e y v. United States, 431 U.S. 651, 663 (1977). B. T h e o r i e s of Liability in the Indictment W e first decide whether the indictment alleged one theory of mail and wire fr a u d or two. The gravamen of the defendant's appeal is that the indictment c o n t a in s only an honest services fraud theory of liability, which he calls the " b r ib e s for lies" theory. According to the defendant, when the government a b a n d o n e d the honest services fraud theory at trial, the government in effect a b a n d o n e d the indictment completely, constructively dismissing the charges a g a in s t him and terminating jeopardy with regard to all of the mail and wire 7 DISCUSSION

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No. 09-20781 fr a u d counts. The government, on the other hand, contends that the indictment a ls o alleged a scheme to obtain money and property, independent of the honest s e r v ic e s fraud theory, and that it did not abandon the entire indictment when it abandoned the honest services fraud theory. "The [Supreme] Court has long recognized that an indictment may charge . . . the commission of any one offense in several ways." United States v. Miller, 4 7 1 U.S. 130, 136 (1985). Indeed, "[i]t is well-established in this Circuit that a d is ju n c t iv e statute may be pleaded conjunctively and proved disjunctively." United States v. Haymes, 610 F.2d 309, 310 (5th Cir. 1980). T h e mail and wire fraud statutes are drafted in the disjunctive. They provide that "[w]hoever, having devised or intending to devise any scheme or a r t ific e to defraud, or for obtaining money or property by means of false or fr a u d u le n t pretenses, representations or promises," uses the mail or wires is g u ilt y of mail or wire fraud. 18 U.S.C. §§ 1341, 1343 (emphasis added).

Section 1346 further defines the scope of punishable offenses, providing that a " `s c h e m e or artifice to defraud' includes a scheme or artifice to deprive another o f the intangible right of honest services." 18 U.S.C. § 1346. Though the

s t a t u t e s criminalize the use of the mails and wires for "a variety of schemes," U n ite d States v. McMillan, 600 F.3d 434, 447 (5th Cir. 2010), they provide at le a s t two means of committing mail or wire fraud: (1) a scheme or artifice to d e p r iv e another of his intangible right to honest services; and (2) a scheme or a r t ific e to obtain money or property, see United States v. Ratcliff, 488 F.3d 639, 6 4 4 (5th Cir. 2007) (noting at least three different schemes punishable by the m a il and wire fraud statutes). T h e indictment at issue in this case tracks the language of the statute e x a c t ly except that the honest services fraud and the money and property fraud a r e charged in the conjunctive. In Paragraph 15 of the conspiracy count, the in d ic t m e n t alleges that the defendant conspired with Rossow and Prestage "[t]o 8

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No. 09-20781 k n o w in g ly devise and intend to devise a scheme and artifice to defraud and to o b ta in money by means of false and fraudulent pretenses" (emphasis added). Similarly, in each of the substantive mail and wire fraud counts, the indictment a lle g e s that the defendant, along with Rossow and Prestage, "did knowingly d e v is e and intend to devise a scheme and artifice to defraud The Hartford and it s subsidiaries. . . of their right to the honest services of Prestage and Rossow, a n d to obtain money and property from The Hartford and its subsidiaries . . . by m e a n s of false and fraudulent pretenses . . . , including the concealment of m a t e r ia l facts" (emphasis added). We do not agree with the defendant that the in d ic t m e n t alleges only one theory of liability. The indictment tracks the

la n g u a g e of the mail and wire fraud statutes, which provide for at least two m e a n s of committing mail and wire fraud, and thus alleges at least two means o f violating the statutes. See United States v. Gordon, 780 F.2d 1165, 1171 (5th C ir . 1986) ("[A]n indictment which tracks the statutory language is sufficient to c h a r g e mail fraud [or] wire fraud.") (internal citations omitted). Our conclusion is bolstered by our recent decision in United States v. B r o w n (Brown II), 571 F.3d 492 (5th Cir. 2009). In that case, several former M e r r ill Lynch executives were indicted and convicted, along with two Enron e x e c u t iv e s , for wire fraud in connection with a scheme to artificially enhance E n r o n 's 1999 earnings. Id. at 494. We vacated their original convictions,

h o ld in g that the indictment did not allege a viable honest services fraud theory.8 S e e United States v. Brown (Brown I), 459 F.3d 509, 517 (5th Cir. 2006). When t h e government sought to retry the defendants for wire fraud, they appealed, a r g u in g that a retrial would violate the Double Jeopardy Clause. Brown II, 571 F .3 d at 496. We held that retrial would not violate the Double Jeopardy Clause,

"The panel reasoned that while honest services fraud generally involves bribery, kickbacks, or self-dealing, the defendants' conduct was disassociated from such actions." Brown II, 571 F.3d at 496.

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No. 09-20781 b e c a u s e , even though the government was precluded from retrying the d e f e n d a n t s on the honest services theory, the money and property theory had s u r v iv e d . Id. at 498. The language in the Brown indictment mirrors the language of the in d ic t m e n t in this case. The Brown indictment's conspiracy count alleged that " [t h e defendants] conspired to . . . knowingly and intentionally devise a scheme a n d artifice to defraud Enron and its shareholders, including to deprive them of t h e intangible right of honest services of its employees, and to obtain money and p r o p e r t y by means of materially false and fraudulent pretenses . . . ." Id. at 495 n .6 (emphasis added). The substantive wire fraud counts similarly alleged that t h e defendants had "devised a scheme and artifice to defraud Enron and its s h a r e h o ld e r s , including to deprive them of the intangible right of honest services o f its employees, and to obtain money and property by means of materially false a n d fraudulent pretenses . . . ." Id. (emphasis added). Based on this language, t h e defendants in Brown argued, as Hoeffner does here, that the "indictment c h a r g e d as the object of the wire fraud only the deprivation of the intangible r ig h t of honest services." Id. at 496­97. We rejected that argument, holding t h a t the defendants could be retried on the money and property fraud theory, w h ic h survived after the government redacted the indictment to remove the r e fe r e n c e s to the honest services fraud theory. Id. at 498. D e s p ite the clear language of the indictment, Hoeffner argues that the in d ic t m e n t, taken in its entirety, alleges only honest services fraud. In support o f his assertion, the defendant points to Paragraphs 17 through 19 in the m a n n e r and means section of the conspiracy count, which are repeated verbatim in the substantive fraud counts. Paragraph 17 alleges that the defendant made p a y m e n t s to Rossow and Hoeffner "through bribes and kickbacks" for r e c o m m e n d in g settlement amounts to The Hartford. Paragraph 18 alleges that t h e defendant, Rossow, and Prestage falsely represented that the settlement 10

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No. 09-20781 a m o u n t s were in The Hartford's best interests, "well knowing that the d e fe n d a n t s intended that some of that money would instead be funneled by and t h r o u g h Hoeffner to Rossow and Prestage." Finally, Paragraph 19 states that m o r e than $3 million of the funds that the defendant received were "used to pay b r ib e s and kickbacks to Rossow and Prestage." These paragraphs taken

t o g e t h e r , the defendant argues, signal that the indictment alleges a single s c h e m e involving bribes and kickbacks, and therefore a single theory of liability b a s e d on honest services fraud. W e are unpersuaded by the defendant's argument. The defendant fixates o n the "bribes and kickbacks" language in the manner and means sections of the in d ic t m e n t, but disregards the allegation, contained in every count, that he e n g a g e d in a scheme to obtain money and property from The Hartford through fa l s e and fraudulent pretenses when he, Rossow, and Prestage concealed the p a y m e n t s from The Hartford. The core of the defendant's argument is that the in d ic t m e n t did not allege a money and property fraud theory because the only s c h e m e to defraud was premised on bribes and kickbacks. That argument is not a double jeopardy claim, and it is not properly before us on interlocutory review b e c a u s e it goes to the sufficiency of the money and property fraud theory and not t o its existence in the indictment.9 See Brown II, 571 F.3d at 498; Abney, 431 U .S . at 663. N o r are we persuaded by the defendant's argument that the indictment, t o the extent it alleges two theories of liability, alleges two theories of honest s e r v ic e s fraud--one based on bribery and the other for undisclosed self-dealing.

The defendant also asserts that the indictment does not state an offense for money and property fraud absent the honest services fraud allegation and the bribes and kickbacks language. He contends that a scheme involving mere "payments" that were not disclosed, as opposed to bribes and kickbacks that were not disclosed, would render the indictment unconstitutionally vague. This argument also goes to the sufficiency of the complaint, which we are not permitted to review at this point.

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No. 09-20781 A t oral argument, the defendant's counsel urged us to consider the history of h o n e s t services fraud in this circuit in order to convince us that the reference to "con cea lm en t" in the indictment refers to undisclosed self-dealing, a now-defunct s p e c ie s of honest services fraud, and not concealment for the purpose of o b ta in in g money and property. To understand the defendant's argument, we must consider the state of the law before Skilling v. United States, -- U.S. --, 130 S. Ct. 2896 (2010). In S k il l in g , an Enron executive was indicted for honest services fraud for his u n d is c lo s e d self-dealing related to Enron's spiral into bankruptcy. Id. at 2908. The government argued that the honest services fraud statute permitted p r o s e c u t i o n for two species of fraud related to intangible rights: bribery and u n d is c lo s e d self-dealing. Id. at 2931­32. The Court rejected that argument, h o ld in g that honest services fraud is actionable only for schemes involving bribes a n d kickbacks. Id. at 2933. The defendant argues that the references to concealment in the indictment m u s t have been based on the government's pre-Skilling attempts to indict d e fe n d a n t s for honest services fraud based on undisclosed self-dealing. As e v id e n c e , the defendant notes that § 1346, which defines scheme to defraud as i n c l u d i n g deprivation of the right to honest services, is cited only in the s u b s t a n t iv e fraud counts, which is also where the word "concealment" appears in the indictment. The defendant believes that this juxtaposition is not

c o in c id e n t a l, and that the "concealment" alleged in the indictment must be that R o s s o w and Prestage concealed their self-dealing from their employer. T h is argument is not persuasive. Counts 3 through 9 of the indictment, t h e substantive fraud counts, allege that the defendant engaged in a scheme and a r t ific e "to obtain money and property from The Hartford . . . by means of false a n d fraudulent pretenses . . . , including the concealment of material facts." The in d i c t m e n t uses the term "concealment" to explain that one of the "false and 12

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No. 09-20781 fr a u d u le n t pretenses" employed by the defendant to obtain money and property w a s the concealment of material facts. The reference to § 1346 does not appear u n t il the last sentence of each count, whereby the indictment alleges that the a c t s described in the count were "[i]n violation of Title 18, United States Code, S e c t io n s [1341 and 1343], 1346, and 2." As the government concedes, the

in d ic t m e n t does contain an honest services fraud allegation in addition to the m o n e y and property fraud allegation. We do not connect the word "concealment" w it h honest services fraud based on undisclosed self dealing because it is clear fr o m the indictment that concealment appears in connection with the money and p r o p e r t y fraud allegation. To the extent that the indictment may have alleged h o n e s t services fraud with regard to undisclosed self-dealing, we find that the a lle g a t io n was separate and apart from the money and property fraud a l l e g a t i o n .1 0 C. G o v e r n m e n t Abandonment of a Theory H a v in g decided that the indictment does, in fact, allege two theories of l i a b i l i ty , we next must determine the consequence of the government's a b a n d o n m e n t of one of those theories. The Double Jeopardy Clause provides: " [N ]o r shall any person be subject for the same offense to be twice put in je o p a r d y of life or limb." U.S. Const. amend V. "As traditionally understood, the D o u b le Jeopardy Clause precludes multiple prosecutions and multiple p u n is h m e n t s for the same offense." Brown II, 571 F.3d at 497 (internal quotation o m it t e d ); see also Brown v. Ohio, 432 U.S. 161, 165 (1977). T h e Double

J e o p a r d y Clause is not implicated, however, "when[] the State seeks a second t r ia l after its first attempt to obtain a conviction results in a mistrial because the ju r y has failed to reach a verdict. . . . [T]he second trial does not put the
We note that the indictment in Skilling alleged, along with the invalid honest services fraud theory, a money and property fraud theory. See Skilling, 130 S. Ct. at 2934 ("[T]he indictment alleged three objects of the conspiracy--honest-services wire fraud, money-or-property wire fraud, and securities fraud.").
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No. 09-20781 d e fe n d a n t in jeopardy `twice.'" Yeager v. United States, -- U.S. --, 129 S. Ct. 2 3 6 0 , 2366 (2009). "Instead, a jury's inability to reach a decision is the kind of `m a n ife s t necessity' that permits the declaration of a mistrial and the c o n t in u a t io n of the initial jeopardy that commenced when the jury was first im p a n e le d ." Id. T h e Double Jeopardy Clause operates to "preclude[] the Government from r e litig a t in g any issue that was necessarily decided by a jury's acquittal in a prior t r ia l." Id. This is because "`[w]hen an issue of ultimate fact has once been d e t e r m in e d by a valid and final judgment' of acquittal, it `cannot be litigated' in a second trial for a separate offense." Id. at 2367 (quoting Ashe v. Swenson, 397 U .S . 436, 443 (1970)). We have held that when a prosecutor opts to voluntarily d is c o n t in u e a trial after jeopardy has attached, the dismissal functions as an a c q u it t a l on the charge, and issues implicated by the dismissed counts are d e e m e d to be resolved in the defendant's favor. Humphries v. Wainwright, 584 F .2 d 702, 705­06 (5th Cir. 1978). T o determine which issues, if any, were necessarily decided in the d e fe n d a n t 's favor during a previous trial, we must "`examine the record of [the] p r io r proceeding, taking into account the pleadings, evidence, charge, and other r e le v a n t matter.'" Yeager, 129 S. Ct. at 2367 (quoting Ashe, 397 U.S. at 444). "[T]he inquiry `must be set in a practical frame and viewed with an eye to all the c ir c u m s t a n c e s of the proceedings.'" Id. (quoting Ashe, 397 U.S. at 444). "[A] d e fe n d a n t invoking Ashe has `the burden . . . to demonstrate that the issue w h o s e relitigation he seeks to foreclose was actually decided in the first p r o c e e d in g .'" United States v. Whitfield, 590 F.3d 325, 371 (5th Cir. 2009) (q u o tin g Dowling v. United States, 493 U.S. 342, 350 (1990)). H e r e , we do not have the benefit of a jury verdict on the honest services fr a u d theory. Both the government and the defendant agree that the

g o v e r n m e n t abandoned the honest services fraud allegation during trial. The 14

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No. 09-20781 p a r tie s also agree that this abandonment of the honest services fraud theory had t h e effect of acquitting the defendant with regard to that theory. See

H u m p h r ie s , 584 F.2d at 705­06. We therefore assume, without deciding, that t h e abandonment functioned as an acquittal of the defendant with regard to the h o n e s t services fraud theory only. Assuming that the government's abandonment of the honest services fraud t h e o r y functioned as an acquittal on that theory only, and assuming that, as a r e s u lt , the acquittal necessarily decided certain issues in the defendant's favor, w e must determine which issues, if any, were decided in the defendant's favor s u c h that the government is now precluded from litigating them in a subsequent t r ia l. The relevant inquiry is whether the issue "was a critical issue of ultimate fa c t " in the previous proceeding. Yeager, 129 S. Ct. at 2368; see also Humphries, 5 8 4 F.2d at 705­06. In Humphries, the prosecutor voluntarily dismissed a c h a r g e , after jeopardy had attached, that the defendant had been driving while in t o x ic a t e d . 584 F.2d at 704. We held that the dismissal, which functioned as a n acquittal, had decided in the defendant's favor one of two possible critical fa c t s : either that he was not driving or that he was not intoxicated. Id. at 705­06. We accepted the district court's finding, which was based on an

e x a m in a t io n of the record and circumstances of the prior proceeding, that the d is m is s a l had decided that the defendant was not intoxicated. Id. Thus, any fu r t h e r prosecution for vehicular manslaughter by intoxication was barred b e c a u s e the element of intoxication had already been decided by the previous d is m is s a l. Id. at 706. W e look to the record of the proceedings in this case to determine whether a n y issues have been decided in the defendant's favor. The elements of honest s e r v ic e s fraud include (1) a scheme to deprive another of the right to honest s e r v ic e s ; (2) use of the mails and/or wires to execute the scheme; and (3) m a t e r ia l i t y of the falsehoods employed in the scheme. Ratcliff, 488 F.3d at 15

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No. 09-20781 6 4 3 ­ 4 4 . We conclude that the only issue decided in the defendant's favor by the g o v e r n m e n t 's abandonment of the honest services fraud theory was based on the fir s t element--the defendant did not engage in a scheme to deprive The Hartford o f its right to honest services. Based on the government's attempts to redact the w o r d s "bribes and kickbacks" from the indictment, its failure to present evidence t h a t the payments were bribes, and its failure to argue that the payments were b r ib e s , we find that the government's abandonment decided, at most, that the p a y m e n t s Hoeffner made to Rossow and Prestage cannot be characterized as b r ib e s or kickbacks. Because the defendant did not contest the fact of the p a y m e n t s , we conclude that this fact was not decided in the defendant's favor. R e t r ia l on the money and property fraud theory is not precluded because t h e government need not prove that the defendant deprived The Hartford of its r ig h t s to the honest services of its employees or that the payments must be c h a r a c t e r iz e d as bribes or kickbacks. Indeed, in a mail or wire fraud case p r e m is e d on a scheme to obtain money or property, "[t]he issue is whether the v ic t im s ' property rights were affected by the misrepresentations." McMillan, 6 0 0 F.3d at 449. T h e defendant argues that, even if the indictment alleged two theories of lia b ilit y , both theories were predicated on the same scheme to defraud The H a r t fo r d -- t h e payment of bribes and kickbacks to Rossow and Prestage--which t h e government abandoned. In support of this argument, he again points us to t h e manner and means sections of the indictment. In each count, after the in d ic t m e n t alleges both a scheme to deprive The Hartford of the honest services o f its employees and a scheme to obtain money and property from The Hartford, t h e indictment goes on to state "It was part of the scheme and artifice to defraud t h a t [Hoeffner paid bribes and kickbacks to Rossow and Prestage]." According t o the defendant, the government abandoned the entire manner and means s e c t io n when it abandoned the honest services fraud theory and admitted that 16

Case: 09-20781 Document: 00511320457 Page: 17 Date Filed: 12/14/2010

No. 09-20781 t h e payments were not bribes or kickbacks, leaving no manner and means of c o m m it t in g money and property fraud. A g a in , we believe the defendant's real complaint is that the indictment fa ile d to allege a separate scheme to obtain money and property.1 1 As we noted a b o v e , the indictment does in fact allege that the defendant engaged in a scheme t o obtain money and property from The Hartford by means of false and fr a u d u le n t pretenses. Furthermore, it is not clear that the entire manner and m e a n s section refers to the honest services fraud theory and not the money and p r o p e r t y fraud theory. For instance, Paragraph 18 contains no reference to b r ib e s or kickbacks. But even if the entire manner and means section of the in d ic t m e n t related only to the honest services fraud theory, the defendant's c o m p la in t about the indictment's failure to allege a manner and means of c o m m it t in g money and property fraud goes to the sufficiency of the indictment, a matter which we cannot review on this interlocutory appeal. See Brown II, 571 F .3 d at 498; Abney, 431 U.S. at 663. I n arguing that the government is precluded from retrying him on a money a n d property fraud theory, the defendant relies heavily on United States v. Gray, 7 0 5 F. Supp. 1224 (E.D. Ky. 1988), and United States v. Slay, 717 F. Supp. 689 (E .D . Mo. 1989). In Gray, the government indicted the defendants for mail fr a u d , alleging four distinct theories, including two intangible rights theories

Early in the trial the defendant brought an emergency motion to disclose the grand jury materials, arguing that the government had constructively amended the indictment. He was concerned that the government was presenting only evidence that Hoeffner, Rossow, and Prestage had concealed the payments and not presenting any evidence that the payments were bribes or kickbacks. The district court denied the motion, stating "I believe that the defense was appraised from the very first status conference as to what the government's theory of this case was. The defense disagreed with it, but they knew about it." Even assuming the government's proof at trial varied from the indictment such that the indictment was constructively amended, retrial would not be precluded on double jeopardy grounds. See United States v. Mize, 820 F.2d 118, 119­20 (5th Cir. 1987) (reversal based on a constructive amendment of the indictment does not bar conviction based on retrial of an indictment containing proper allegations).

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Case: 09-20781 Document: 00511320457 Page: 18 Date Filed: 12/14/2010

No. 09-20781 (s im ila r to the honest services theory allowed by § 1346). 705 F. Supp. at 1226. After the defendants were convicted of mail fraud, the Supreme Court reversed t h e ir convictions, holding that the mail fraud statute in force did not support the in t a n g ib le rights theory of prosecution. See McNally v. United States, 483 U.S. 3 5 0 , 359­60 (1987).1 2 On remand, the government sought to retry the

d e fe n d a n t s on the remaining theories of mail fraud, which included a money and p r o p e r t y fraud theory. Gray, 705 F. Supp. at 1231. The court held that retrial w a s precluded because, although it was alleged in the indictment and technically in s t r u c t e d to the jury, the government had abandoned the money and property fr a u d theory at trial by failing to present any evidence or argument to support t h a t theory. Id. at 1231­32. S im ila r ly , in Slay, the indictment alleged multiple theories of mail fraud, in c lu d in g honest services fraud and money and property fraud theories. 717 F. S u p p . at 690. The jury convicted the defendant of mail fraud, but the Supreme C o u r t released its decision in McNally before the defendant was sentenced. Id. a t 691. The government sought to retry the defendant on the money and

p r o p e r t y fraud theory, but the district court dismissed the indictment on double je o p a r d y grounds. Id. at 696. The court found that, while the indictment alleged a money and property fraud theory and the jury was technically instructed on t h e theory, the government had abandoned the money and property theory d u r in g trial by failing to present any evidence or argument related to that t h e o r y . Id. at 695­96. T h e defendant's reliance on these cases is misplaced. We agree with the d e fe n d a n t that the holdings of these cases demonstrate that once the g o v e r n m e n t abandons a theory by failing to present any evidence related to the t h e o r y , the government cannot seek to retry a defendant on the abandoned

In response to McNally, Congress quickly enacted 18 U.S.C. § 1346, which specifically allows prosecution under the mail fraud statute for a scheme to deprive honest services.

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Case: 09-20781 Document: 00511320457 Page: 19 Date Filed: 12/14/2010

No. 09-20781 t h e o r y . But this case is factually distinct from Slay and Gray. Whereas in those ca ses the government failed to present any evidence of money and property fraud and focused its attention on honest services fraud, in this case the government fo c u s e d its attention on the money and property fraud theory, paying little a t t e n tio n to the honest services fraud theory. Therefore, retrial is not precluded o n the government's unabandoned money and property fraud theory. The defendant also relies heavily on Saylor v. Cornelius, 845 F.2d 1401 (6 t h Cir. 1988) and United States v. Cavanaugh, 948 F.2d 405 (8th Cir. 1991). We find the defendant's reliance on these cases equally unconvincing. In both c a s e s , the defendant was indicted on two theories of liability. See Saylor, 845 F .2 d at 1402 (murder by conspiracy and murder as an accomplice); Cavanaugh, 9 4 8 F.2d at 412 (murder and assault resulting in serious bodily injury). In each c a s e , the jury convicted the defendant on one theory but failed to return any v e r d ic t with regard to the other theory. Saylor, 845 F.2d at 1404; Cavanaugh, 9 4 8 F.2d at 412, 414. The defendants' convictions were reversed for insufficient e v id e n c e with regard to the convicted theory, and the government sought to retry t h e defendants on the other theory. Saylor, 845 F.2d at 1404; Cavanaugh, 948 F .2 d at 411­12. Both the Sixth Circuit and the Eighth Circuit held that retrial w a s precluded because jeopardy had terminated with regard to the second theory w h e n the jury failed to return a verdict. Saylor, 845 F.2d at 1404, 1408;

C a v a n a u g h , 948 F.2d at 414, 417. In this case, however, jeopardy has not t e r m in a t e d with regard to the money and property fraud theory because the ju r y 's failure to reach a verdict was the result of a mistrial, not a product of the g o v e r n m e n t 's failure to obtain a verdict on the theory. W e hold that the Double Jeopardy Clause bars retrial on the honest s e r v ic e s fraud theory in the indictment. Retrial is not precluded, however, on t h e money and property fraud theory. Therefore, it was not error for the district c o u r t to deny the defendant's motion to dismiss the indictment. 19

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No. 09-20781 C O N C L U S IO N F o r the foregoing reasons, the order of the district court is AFFIRMED.

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