In re: Samuel R. Pierce, Jr. (Sanders Fee Application)

United States Court of Appeals

FOR THE DISTRICT OF COLUMBIA CIRCUIT

Filed December 21, 1999

Division No. 89-5

In re: Samuel R. Pierce, Jr.

(Sanders Fee Application)

Division for the Purpose of

Appointing Independent Counsels

Ethics in Government Act of 1978, as Amended

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Before: Sentelle, Presiding, Fay and Cudahy, Senior

Circuit Judges.

O R D E R

This matter coming to be heard and being heard before the

Special Division of the Court upon the petition of R. Carter

Sanders for reimbursement of attorneys' fees and costs pur-

suant to section 593(f) of the Ethics in Government Act of

1978, as amended, 28 U.S.C. s 591 et seq. (1994), and it

appearing to the court for the reasons set forth more fully in

the opinion filed contemporaneously herewith that the peti-

tion is not well taken, it is hereby

ORDERED, ADJUDGED, and DECREED that the peti-

tion of R. Carter Sanders for attorneys' fees he incurred

during the investigation by Independent Counsels Arlin M.

Adams and Larry D. Thompson be denied.

Per curiam

For the Court:

Mark J. Langer, Clerk

by

Marilyn R. Sargent

Chief Deputy Clerk

United States Court of Appeals

FOR THE DISTRICT OF COLUMBIA CIRCUIT

Filed December 21, 1999

Division No. 89-5

In re: Samuel R. Pierce, Jr.

(Sanders Fee Application)

Division for the Purpose of

Appointing Independent Counsels

Ethics in Government Act of 1978, as Amended

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Before: Sentelle, Presiding, Fay and Cudahy, Senior

Circuit Judges.

ON APPLICATION FOR ATTORNEYS' FEES

Opinion for the Special Court filed Per curiam.

Per curiam: R. Carter Sanders petitions this court under

Section 593(f) of the Ethics in Government Act of 1978, as

amended, 28 U.S.C. s 591 et seq. (1994) (the "Act"), for

reimbursement of attorneys' fees in the amount of $17,500.00

that he incurred during and as a result of the investigation

conducted by Independent Counsels ("IC") Arlin M. Adams

and Larry D. Thompson. Because we conclude that Sanders

has not carried his burden of showing that he was a subject of

the investigation and that the fees would not have been

incurred but for the requirements of the Act, we deny the

petition in its entirety.

Background1

In 1978 Congress established the moderate rehabilitation

("mod rehab") program within the U.S. Department of Hous-

__________

1 We have had recent occasion to review the facts of this matter

in In re Samuel R. Pierce, Jr. (Olivas Fee Application), 178 F.3d

ing and Urban Development ("HUD"). This program encour-

aged developers to upgrade moderately substandard housing

units for occupation by low income families. In 1988 HUD's

Inspector General ("IG") conducted an audit of the mod rehab

program as administered from 1984 through 1988 and found

that the program was not being administered efficiently,

effectively, or economically. The Inspector General's audit

report triggered congressional investigations into abuses, fa-

voritism, and mismanagement at HUD during the 1980s

under the tenure of HUD Secretary Samuel R. Pierce, Jr. R.

Carter Sanders, the fee petitioner here, was Associate Gener-

al Deputy Assistant Secretary of Housing/Deputy Federal

Housing Commissioner during a portion of the time that

Pierce was Secretary. Subsequently, Sanders returned to

the private sector as a consultant, assisting local housing

authorities to obtain mod rehab funding from HUD. Sanders

Application at 1.

Based on information elicited during the congressional

investigations, the House Judiciary Committee wrote to At-

torney General Richard Thornburgh seeking the appointment

of an independent counsel to investigate the matter. Follow-

ing a preliminary investigation, Attorney General Thornburgh

applied to this court for appointment of an independent

counsel. On March 1, 1990, we appointed former United

States Circuit Judge Arlin Adams2 as independent counsel "to

investigate ... whether Samuel R. Pierce, Jr., and other

[HUD] officials may have committed the crime of conspiracy

to defraud the United States or any other Federal crimes ...

relating to the administration of the selection process of the

Department's Moderate Rehabilitation Program from 1984

__________

1350 (D.C. Cir., Spec. Div., 1999) (per curiam). Rather than re-

plow recently tilled ground, we have adopted much of the language

in the background portion of this opinion, and, where applicable, a

portion of the analysis from that decision.

2 Independent Counsel Adams resigned in May of 1995. This

court appointed his deputy, Larry D. Thompson of the Atlanta bar,

to succeed him.

through 1988." Order Appointing Independent Counsel,

March 1, 1990.

The IC conducted a comprehensive investigation ultimately

confirming a widespread pattern of corruption at HUD dur-

ing Pierce's tenure. Although the IC announced on January

11, 1995, that he would not seek indictment of Pierce, during

the course of the investigation seventeen (17) other persons

were charged with and convicted of federal crimes as a result

of the IC's investigation. That investigation and the indict-

ments ranged well beyond the core facts of the original

application for appointment of independent counsel. Of par-

ticular reference to the petitioner before us, in May of 1990

the IC served a subpoena on Sanders seeking documents

related to Sanders' work while he was an official at HUD as

well as his work on mod rehab projects after he left HUD.

Sanders Application at 6. He later voluntarily appeared for

an interview at the IC's office. IC's Evaluation at 3.

The IC's investigation is now complete. Pursuant to the

statute, the IC submitted a final report to this court on

March 30, 1998. See 28 U.S.C. s 594(h)(1)(B). We ordered

the report made public by order of October 27, 1998. There-

after, Sanders, pursuant to Section 593(f)(1) of the Act,

petitioned this court for reimbursement of his attorneys' fees.

As directed by Section 593(f)(2) of the Act, we forwarded

copies of Sanders' fee petition to the Attorney General and

the IC and requested written evaluations of the petition. The

court expresses its appreciation to the IC and the Attorney

General for submitting these evaluations, which we have

given due consideration in arriving at the decision announced

herein.

Analysis

Unique in the criminal law structure of the United States,

the Ethics in Government Act provides for reimbursement of

attorneys' fees expended by subjects in defense against an

investigation under the Act. Specifically, 28 U.S.C.

s 593(f)(1) states:

Upon the request of an individual who is the subject of

an investigation conducted by an independent counsel

pursuant to this chapter, the division of the court may, if

no indictment is brought against such individual pursuant

to that investigation, award reimbursement for those

reasonable attorneys' fees incurred by that individual

during that investigation which would not have been

incurred but for the requirements of this chapter.

Because the Act "constitutes a waiver of sovereign immuni-

ty it is to be strictly construed." In re Nofziger, 925 F.2d

428, 438 (D.C. Cir., Spec. Div., 1991) (per curiam). Therefore,

the Act provides only reimbursement for attorneys' fees that

survive an elemental analysis determining whether the peti-

tioner is the "subject" of the independent counsel's investiga-

tion, incurred the fees "during" that investigation, and would

not have incurred them "but for" the requirements of the Act.

The petitioner "bears the burden of establishing all elements

of his entitlement." In re North (Reagan Fee Application),

94 F.3d 685, 690 (D.C. Cir., Spec. Div., 1996) (per curiam).

We conclude that Sanders has not met either the "subject" or

the "but for" requirement.

A. "Subject" Status

We have previously defined the term "subject" as a person

whose conduct is within the scope of the independent coun-

sel's investigation in such fashion that "the Independent

Counsel might reasonably be expected to point the finger of

accusation" at him. In re North (Dutton Fee Application),

11 F.3d 1075, 1078 (D.C. Cir., Spec. Div., 1993) (per curiam);

see also In re North (Shultz Fee Application), 8 F.3d 847, 850

(D.C. Cir., Spec. Div., 1993) (per curiam). Although Sanders

argues forcefully that he fits within this definition, we con-

clude that he has not carried his burden of establishing that

he was in fact a subject of the IC's investigation.

Sanders' main argument, in essence, is that because the IC

investigated the mod rehab program, and because he was

involved with the mod rehab program, he was a subject of the

IC's investigation. Reply at 3. We are not persuaded,

however, that the IC was focused on any possible criminal

culpability by Sanders during the IC's investigation. Sand-

ers' involvement with the IC's investigation appears to have

been minimal: he was served one subpoena for documents at

the beginning of the IC's investigation, and three years later

was interviewed by the IC's staff. He had no other contacts

with the IC's office. See, e.g., In re North (Gregg Fee

Application), 57 F.3d 1115, 1116 (D.C. Cir., Spec. Div., 1995)

(per curiam). He was never informed by the IC that he was

a subject of the investigation. See, e.g., In re North (Haskell

Fee Application), 74 F.3d 277, 280 (D.C. Cir., Spec. Div.,

1996) (per curiam). There is no evidence before us that

anyone he was associated with was targeted by the IC. See,

e.g., In re North (Teicher Fee Application), 48 F.3d 1267,

1268-69 (D.C. Cir., Spec. Div., 1995) (per curiam). And there

is no mention of him in the IC's Final Report. See, e.g., In re

North (Adkins Fee Application), 33 F.3d 76, 76-77 (D.C. Cir.,

Spec. Div., 1994) (per curiam).

Sanders also argues that it was "plainly evident from the

inception of the [IC's] investigation that [he] faced 'a realistic

possibility ... [that he] would become a defendant' " because

that investigation was based on the congressional and HUD

IG investigations which, according to Sanders, "already had

inquired extensively into Mr. Sanders' involvement with cer-

tain MRP [mod rehab] projects." Sanders Application at 8

(internal citation omitted). It appears, however, that the only

contact Sanders had with these previous investigations was an

administrative subpoena seeking documents that was served

on him by the HUD IG. In sum, we conclude that Sanders

could not consider himself to be under a "reasonable appre-

hension of prosecution" by the IC during his investigation.

In re North (Gadd Fee Application), 12 F.3d 252, 256 (D.C.

Cir., Spec. Div., 1994) (per curiam).

B. Fees Not Incurred "But For" the Requirements of the

Act

As we have held, "[a]ll requests for attorneys' fees under

the Act must satisfy the 'but for' requirement of" the Act. In

re Sealed Case, 890 F.2d 451, 452 (D.C. Cir., Spec. Div., 1989)

(per curiam). The purpose of awarding only fees that would

not have been incurred "but for" the Act is to ensure that

"officials [and here derivative 'subjects'] who are investigated

by independent counsels will be subject only to paying those

attorneys' fees that would normally be paid by private citi-

zens being investigated for the same offense by" federal

executive officials such as the United States Attorney. Id. at

452-53 (citing S. Rep. No. 97-496, 97th Cong., 2d Sess. 18

(1982), reprinted in 1982 U.S.C.C.A.N. 3537, 3554 (referring

to "fees [that] would not have been incurred in the absence of

the special prosecutor [independent counsel] law")).

As we have stated "[t]he most difficult element for a fee

applicant to establish under the Act is that the fees 'would not

have been incurred but for the requirements of [the Act].' "

In re North (Bush Fee Application), 59 F.3d 184, 188 (D.C.

Cir., Spec. Div., 1995) (per curiam) (quoting Dutton, 11 F.3d

at 1079). In part this is so because the element requires a

petitioner to prove a negative and one with a high component

of speculation. In part, though, it is difficult because the law

contemplates that it should be difficult, that such fees will not

be a common thing. As we stated above, the contemplation

of the legislation is not that subjects of independent counsel

investigations will be reimbursed for all legal fees, but only

that they will be reimbursed for those legal fees that would

not have been incurred by a similarly-situated subject investi-

gated in the absence of the Act.

Nonetheless, we have found that petitioners qualify for an

award of fees in the face of the but-for test in at least four (4)

circumstances:

1. When the independent counsel's investigation sub-

stantially constituted duplication of the preliminary in-

vestigation conducted by the Department of Justice. See

In re Olson, 884 F.2d 1415, 1420 (D.C. Cir., Spec. Div.,

1989) (per curiam); Dutton Fee Application, 11 F.3d at

1080.

2. When the petitioning subject has been "prejudiced

by the Department of Justice's failure to comply with the

substantial protective features of the Act." In re Nofzig-

er, 925 F.2d at 438 (citing In re Meese, 907 F.2d 1192

(D.C. Cir., Spec. Div., 1990) (per curiam)).

3. When in the absence of the requirements of the Act

" 'the case could have been disposed of at an early stage

of the investigation,' " without subjecting the petitioning

subject to the conditions that led to his incurring the fees

sought. In re Segal (Sagawa Fee Application), 151 F.3d

1085, 1089 (D.C. Cir., Spec. Div., 1998) (per curiam)

(quoting In re Nofziger, 925 F.2d at 438).

4. Not wholly distinct from No. 3, supra, when "high

public officials [or derivative subjects] were investigated

under the Act in circumstances where private citizens

would not [have been] investigated." In re Nofziger, 925

F.2d at 442; see also Dutton, 11 F.3d at 1080.

Sanders argues that his case falls into categories (1) and

(3). As to (1), Sanders claims that the IC duplicated the

investigations of Congress and the HUD IG, and that such

duplication is sufficient to satisfy the "but for" element. For

authority on his position Sanders cites to In re Olson (Perry

Fee Application), 892 F.2d 1073 (D.C. Cir., Spec. Div., 1990)

(per curiam), and In re Olson. In Perry we held that the

IC's investigation of Perry was duplicative because the inves-

tigation by the Public Integrity Section of the DOJ had

recommended against prosecution in the matter. See 892

F.2d at 1074. Similarly, in In re Olson, we found that the

Independent Counsel's investigation was duplicative because

it covered the same ground "that had been covered by the

preliminary investigation of the Department of Justice." 884

F.2d at 1420. In both those cases, then, it was duplication of

the preliminary investigation that satisfied the "but for"

element, not duplication of any other investigation, and we

conclude that this is what the Congress intended when it first

passed the attorneys' fees provision in 1982. We find support

for this conclusion in two areas.

First, s 593(f)(1) of the Act states that fees may be award-

ed to individuals who would not have incurred the fees "but

for the requirements of [the Act]." (emphasis added) Conse-

quently, as we noted in Olivas,

attorneys' fees are to be awarded to those who have

incurred the fees not because of the Act itself (and

therefore the appointment of the independent counsel per

se), but because of the requirements of the Act. In re

Nofziger, 925 F.2d at 445. And requirements "refers to

the special limitations and procedures established by the

Act," e.g., the two-step investigatory procedure by the

Attorney General and the restrictions on the Attorney

General in complying with that procedure, id. ...

178 F.3d at 1355 (emphasis in original). Included in this

"two-step investigatory procedure" is the preliminary investi-

gation. See 28 U.S.C. s 592.

Second, the 1982 Senate Committee Report on the Ethics

in Government Act, referring to attorneys' fees, stated that

"[r]eimbursement may be warranted ... in instances where

the [independent counsel] duplicates actions which have been

taken by the Attorney General during the preliminary inves-

tigation." S. Rep. No. 97-496, 97th Cong., 2d Sess. 19 (1982),

reprinted in 1982 U.S.C.C.A.N. 3537, 3555 (emphasis added).

As Sanders has put forth no evidence that the IC's investiga-

tion duplicated the preliminary investigation conducted by the

Attorney General, he does not fit into category (1).

As to category (3), Sanders claims that the Attorney Gener-

al was reluctant to have an independent counsel appointed

but that the Act compelled the Attorney General to do so.

For evidence of this reluctance, Sanders first points to the

Attorney General's Application for Appointment of Indepen-

dent Counsel ("Application for Appointment"), in which the

Attorney General stated that he was encumbered in his

preliminary investigation by the constraints imposed by 28

U.S.C. s 592 on using grand juries, subpoenas, and grants of

immunity. Sanders likens this case to In re Donovan, 877

F.2d 982 (D.C. Cir., Spec. Div., 1989) (per curiam), in which

we held that the "but for" requirement was satisfied where

the Attorney General, because of the strictures of the Act,

could not convene a grand jury, plea bargain, or issue subpoe-

nas and as a result was required to refer the matter to an

independent counsel. In that case, however, these strictures

prevented the Attorney General from properly evaluating the

single witness who was of extremely questionable credibility,

and upon whom the single allegation of alleged wrongdoing

was based. See In re Donovan, 877 F.2d at 990. Here, in

contrast, the Attorney General in his Application for Appoint-

ment, after citing the strictures placed upon him by the Act,

went on to state that any further "determination at this time

is made especially difficult by the breadth of the allegations

and the fact that a number of the figures central to the

alleged conspiracy, including Secretary Pierce ... have de-

clined to be interviewed ...." Application for Appointment

at 5 (emphasis added). Consequently, as we noted in In re

Pierce (Kisner Fee Application), 178 F.3d 1356 (D.C. Cir.,

Spec. Div., 1999) (per curiam), "[t]he convoluted nature of the

corruption involved and the high profile identity of the sus-

pects and defendants would no doubt have resulted in a

complex and lengthy investigation with or without the ap-

pointment of an independent counsel." Id. at 1361.

In a further attempt to show the Attorney General's reluc-

tance in having an independent counsel appointed, Sanders

references a newspaper article which quotes an anonymous

source stating that prosecutors in the DOJ allegedly recom-

mended to the Attorney General that the investigation be

shut down for lack of evidence. Even if it were accurate,

which is highly questionable considering the not-for-

attribution source, the information is, as the IC points out,

irrelevant. Although certain prosecutors may recommend

against investigating a certain matter, this fact gives us little

guidance in trying to determine what an Attorney General

will ultimately decide to do in the matter. This is not a

situation similar to Perry, 892 F.2d at 1074, where the Public

Integrity Section definitively recommended against prosecu-

tion; nor is it similar to Sagawa, 151 F.3d at 1089; and In re

Segal (Segal Fee Application), 145 F.3d 1348, 1352 (D.C. Cir.,

Spec. Div., 1998) (per curiam), in which the Attorney General

stated in her Application to the Court requesting the appoint-

ment of an independent counsel that "the Department of

Justice would in all likelihood exercise its discretion to decline

to prosecute this case as a criminal matter." Here, we can

discern nothing in the Attorney General's Application for

Appointment that would lead us to believe that he was in any

way hesitant to have an independent counsel appointed based

on the substance of the evidence available to him.

In sum, we cannot agree with Sanders' statement that "had

the Independent Counsel Act not restricted the Attorney

General's ability to conduct a thorough preliminary investiga-

tion, it is possible, given Attorney General Thornburgh's

obvious reluctance, that no independent counsel would have

been appointed." Sanders Application at 12. Indeed, as we

stated in Kisner, if the IC had not investigated this matter

then "the Attorney General or other investigative authority

would have pursued allegations of corruption as deep and

widespread as those occasioning the Independent Counsel's

investigation." 178 F.3d at 1360; see also Olivas, 178 F.3d at

1355.

Conclusion

The petition of R. Carter Sanders for reimbursement of

attorneys' fees is denied for failure to comply with the

"subject" and "but for" requirements of 28 U.S.C. s 593(f)(1).