Petition for Writ of Certiorari — Peter M. Hoffman, et al., Petitioners v. United States

No. 18-____

IN THE

Supreme Court of the United States

____________________

PETER M. HOFFMAN, MICHAEL P. ARATA,

and SUSAN HOFFMAN

v.

Petitioners,

UNITED STATES OF AMERICA,

Respondent.

____________________

On Petition for a Writ of Certiorari

to the United States Court of Appeals

for the Fifth Circuit

____________________

PETITION FOR A WRIT OF CERTIORARI

____________________

Anton Metlitsky

O’MELVENY & MYERS LLP

Times Square Tower

7 Times Square

New York, N.Y. 10036

(212) 326-2000

Kendall Turner

O’MELVENY & MYERS LLP

1625 Eye Street, N.W.

Washington, D.C. 20006

(202) 383-5300

Jeffrey L. Fisher

Counsel of Record

O’MELVENY & MYERS LLP

2765 Sand Hill Road

Menlo Park, Cal. 94025

(650) 473-2633

jlfisher@omm.com

i

QUESTIONS PRESENTED

1. Whether a federal court must grant a motion for

judgment of acquittal when, construing the evidence

in the light most favorable to the government, evidence of guilt and innocence is evenly balanced.

2. Whether a conviction for mail or wire fraud

must be vacated where it is based on claims for benefits under an ambiguous regulatory scheme and the

defendant acted consistently with an objectively reasonable interpretation of that scheme.

ii

TABLE OF CONTENTS

Page

PETITION FOR A WRIT OF CERTIORARI ........... 1

OPINIONS BELOW.................................................. 1

JURISDICTION ........................................................ 1

RELEVANT CONSTITUTIONAL AND

STATUTORY PROVISIONS .................................... 1

INTRODUCTION ..................................................... 1

STATEMENT OF THE CASE .................................. 3

REASONS FOR GRANTING THE WRIT.............. 15

A.

B.

The Equipoise Issue........................... 17

1.

The Courts Of Appeals Are

Divided Over The Validity

Of The Equipoise Rule ............ 17

2.

The Issue Is Exceptionally

Important ................................ 19

3.

This Case Presents An

Ideal Vehicle To Resolve

The Issue ................................. 21

4.

The Decision Below Is

Incorrect .................................. 22

The Ambiguity Issue ......................... 26

1.

The Courts of Appeals Are

Divided On The

Permissibility Of A Fraud

Conviction In This Setting...... 26

iii

TABLE OF CONTENTS

(continued)

Page

2.

The Issue Is Exceptionally

Important ................................ 30

3.

This Is An Ideal Vehicle To

Address The Issue ................... 32

4.

The Decision Below Is

Incorrect .................................. 33

CONCLUSION ........................................................ 36

iv

TABLE OF CONTENTS

(continued)

Page

APPENDIX A:

Court of Appeals Opinion

(5th Cir. Aug. 24, 2018)........................... 1a

APPENDIX B:

District Court Judgment

(E.D. La. Dec. 9, 2015) .......................... 84a

APPENDIX C:

Transcript of Sentencing Proceedings

(E.D. La. Jan. 27, 2016) .......................221a

APPENDIX D:

Court of Appeals Order Denying Rehearing

(5th Cir. Oct. 10, 2018) ........................237a

APPENDIX E:

Relevant Statutory Provisions.............................240a

v

TABLE OF AUTHORITIES

(continued)

Page(s)

CASES

Bond v. United States,

572 U.S. 844 (2014)............................................ 31

Bouie v. City of Columbia,

378 U.S. 347 (1964).........................................2, 30

Brinegar v. United States,

338 U.S. 160 (1949)............................................ 19

Carlisle v. United States,

517 U.S. 416 (1996)............................................ 19

Cleveland v. United States,

531 U.S. 12 (2000).............................................. 31

Coates v. City of Cincinnati,

402 U.S. 611 (1971)............................................ 30

Commonwealth v. Croft,

345 Mass. 143 (1962) ......................................... 19

Commonwealth v. Goss,

428 S.W.3d 619 (Ky. 2014) ................................ 19

Cosby v. Jones,

682 F.2d 1373 (11th Cir. 1982).......................... 18

Cotton v. State,

144 So.3d 137 (Miss. 2014) ................................ 19

Curley v. United States,

160 F.2d 229 (D.C. Cir. 1947) .......................18, 23

Davis v. United States,

160 U.S. 469 (1895), superseded on other

grounds by statute as stated in Dixon v.

United States, 548 U.S. 1 (2006) ....................... 21

Day v. State,

303 P.3d 291 (Ok. Crim. App. 2013) ................. 19

vi

TABLE OF AUTHORITIES

(continued)

Page(s)

Fasulo v. United States,

272 U.S. 620 (1926)............................................ 31

Handakas v. United States,

286 F.3d 92 (2d Cir. 2002), overruled on

other grounds by United States v. Rybicki,

354 F.3d 124 (2d Cir. 2003) ..........................28, 31

Harris v. United States,

125 A.3d 704 (D.C. 2015) ................................... 19

Haskins v. Commonwealth,

44 Va. App. 1 (2004)........................................... 19

In re J.B.,

189 A.3d 390 (Pa. 2018) ..................................... 19

In re Winship,

397 U.S. 358 (1970)...................................2, 22, 24

Jackson v. Virginia,

443 U.S. 307 (1979)..................................... passim

Johnson v. United States,

135 S. Ct. 2551 (2015)........................................ 30

Johnson v. United States,

529 U.S. 694 (2000)............................................ 21

Lanzetta v. New Jersey,

306 U.S. 451 (1939)............................................ 31

Mackey v. State,

2002 WL 31521379 (Tex. App. Nov. 14,

2002) ................................................................... 19

McDonnell v. United States,

136 S. Ct. 2355 (2016)........................................ 30

McNally v. United States,

483 U.S. 350 (1987), superseded by statute

as recognized in Skilling v. United States,

561 U.S. 358 (2010)............................................ 31

vii

TABLE OF AUTHORITIES

(continued)

Page(s)

Morrison v. California,

291 U.S. 82 (1934).............................................. 21

Neder v. United States,

527 U.S. 1 (1999)................................................ 29

O’Neal v. McAninch,

513 U.S. 432 (1995)............................................ 20

Reid v. State,

212 Ga. App. 787 (1994), overruled on

other grounds by Maddox v. State, 322

Ga. App. 811 (2013) ........................................... 19

Schmuck v. United States,

489 U.S. 705 (1989)............................................ 33

Sessions v. Dimaya,

138 S. Ct. 1204 (2018)........................................ 30

Skilling v. United States,

561 U.S. 358 (2010)................................. 30-31, 36

State v. May,

689 S.W.2d 732 (Mo. Ct. App. 1985) ................. 19

State v. Ruiz,

1998 WL 436557 (Ariz. Ct. App. Aug. 4,

1998) ................................................................... 19

State v. Schweitzer,

18 A. 787 (Conn. 1889)....................................... 19

State v. Sutphin,

107 N.M. 126 (1988)........................................... 19

Tatum v. State,

63 Ala. 147 (1879) .............................................. 19

Taylor v. State,

346 Md. 452 (1997) ............................................ 19

viii

TABLE OF AUTHORITIES

(continued)

Page(s)

Thompson v. City of Louisville,

362 U.S. 199 (1960)............................................ 22

United States v. Anderson,

579 F.2d 455 (8th Cir. 1978).........................26, 27

United States v. Andujar,

49 F.3d 16 (1st Cir. 1995) .................................. 17

United States v. Bass,

404 U.S. 336 (1971)............................................ 36

United States v. Caraballo-Rodriguez,

726 F.3d 418 (3d Cir. 2013) ............................... 18

United States v. Caseer,

399 F.3d 828 (6th Cir. 2005).........................17, 24

United States v. Farinella,

558 F.3d 695 (7th Cir. 2009).............26, 27, 30, 34

United States v. Johnson,

592 F.3d 749 (7th Cir. 2010).............................. 18

United States v. Lopez-Diaz,

794 F.3d 106 (1st Cir. 2015) .........................17, 25

United States v. Lovern,

590 F.3d 1095 (10th Cir. 2009).......................... 18

United States v. Martin Linen Supply Co.,

430 U.S. 564 (1977)............................................ 19

United States v. Migliaccio,

34 F.3d 1517 (10th Cir. 1994)..................... passim

United States v. Prigmore,

243 F.3d 1 (1st Cir. 2001) .......................26, 27, 28

United States v. Pungitore,

910 F.2d 1084 (3d Cir. 1990) ............................. 18

United States v. Sanjar,

876 F.3d 725 (5th Cir. 2017).............................. 14

ix

TABLE OF AUTHORITIES

(continued)

Page(s)

United States v. Vallone,

698 F.3d 416 (7th Cir. 2012), vacated on

other grounds by Dunn v. United States,

570 U.S. 901 (2013)............................................ 27

United States v. Vargas-Ocampo,

747 F.3d 299 (5th Cir. 2014)...................12, 18, 25

United States v. Whiteside,

285 F.3d 1345 (11th Cir. 2002).....................26, 27

United States v. Wiltberger,

18 U.S. (5 Wheat.) 76 (1820) ............................. 36

United States v. Wright,

835 F.2d 1245 (8th Cir. 1987)............................ 18

United States v. Young,

470 U.S. 1 ........................................................... 35

STATUTES

18 U.S.C. § 1001 ...................................................... 10

18 U.S.C. § 1341 ...................................................... 10

18 U.S.C. § 1343 ...................................................... 10

18 U.S.C. § 371 ........................................................ 10

28 U.S.C. § 1254(1).................................................... 1

47 La. Rev. Stat. § 6007 ............................................ 3

47 La. Rev. Stat. § 6007(A) ....................................... 3

47 La. Rev. Stat. § 6007(B) (2007) ......................... 4-5

47 La. Rev. Stat. § 6007(B)(3) (2009) ....................... 5

RULES

Fed. R. Crim. Proc. 29 ...................................... passim

x

TABLE OF AUTHORITIES

(continued)

Page(s)

CONSTITUTIONAL PROVISIONS

U.S. Const. amend. V ................................................ 1

PETITION FOR A WRIT OF CERTIORARI

Petitioners Peter M. Hoffman, Michael P. Arata,

and Susan Hoffman respectfully request a writ of certiorari to review the judgment of the United States

Court of Appeals for the Fifth Circuit.

OPINIONS BELOW

The decision of the court of appeals is reported at

901 F.3d 523 and reprinted in the Appendix to the Petition (“App.”) at 1a-83a. The judgment of the district

court is unpublished but reprinted at App. 84a-220a,

and the transcript of the district court’s oral sentencing ruling is reprinted at App. 221a-236a.

JURISDICTION

The court of appeals issued its decision on August

24, 2018, App. 1a, and denied rehearing on October

10, 2018, id. 237a-239a. This Court has jurisdiction

under 28 U.S.C. § 1254(1).

RELEVANT CONSTITUTIONAL AND STATUTORY PROVISIONS

The Due Process Clause provides: “No person shall

. . . be deprived of life, liberty, or property, without

due process of law.” U.S. Const. amend. V.

The pertinent provisions of the U.S. Code, the Federal Rules of Criminal Procedure, and Louisiana law

are reprinted at App. 240a-284a.

INTRODUCTION

Petitioners were convicted of mail and wire fraud

in connection with their applications for Louisiana

2

tax credits. The government’s theory was that petitioners knew they were entitled to tax credits only for

expenses paid in cash or cash equivalents, and that

they falsely represented that they had made such payments when they had not. Yet it is undisputed that

no preexisting law, regulation, or judicial decision established the impermissibility of applying for tax

credits for non-cash commitments.

The district court also found that the evidence,

considered in the light most favorable to the government, was in equipoise as to petitioners’ guilt or innocence. Fifth Circuit precedent nevertheless required

acceptance of the jury’s guilty verdict. This result violates fundamental due process and federalism principles and implicates two questions on which the

courts of appeals are deeply divided.

First, only the Fifth and Third Circuits require affirmance of guilty verdicts where the evidence is

evenly balanced. The First, Sixth, Seventh, Eighth,

Tenth, Eleventh, and D.C. Circuits hold that, where

evidence of guilt and innocence is in equipoise, a conviction cannot stand. Only this later, majority approach is consistent with Federal Rule of Criminal

Procedure 29 and the constitutionally required reasonable doubt standard, which allows a conviction

only when evidence of guilt exceeds evidence of innocence. See In re Winship, 397 U.S. 358 (1970).

Second, this Court has long made clear that due

process precludes holding someone “criminally responsible for conduct which he could not reasonably

understand to be proscribed.” Bouie v. City of Columbia, 378 U.S. 347, 351 (1964) (quotation omitted).

3

Consistent with this basic principle, most courts of appeals that have considered the issue have held that a

defendant cannot be guilty of fraud in seeking benefits under an ambiguous regulatory scheme if his actions were consistent with an objectively reasonable

interpretation of that scheme. The Fifth Circuit here,

however, sustained the defendants’ convictions, notwithstanding the district court’s undisputed finding

that the rules about permissible tax credit submissions were “confusing,” “not so clear,” and had many

“gray areas.” App. 92a. Other courts of appeals would

have applied this Court’s fair-notice jurisprudence to

resolve this case differently.

This Court should grant certiorari to provide much

needed clarity and uniformity for criminal defendants, prosecutors, and courts alike.

STATEMENT OF THE CASE

1. In 2007, Louisiana enacted the Motion Picture

Incentive Act, 47 La. Rev. Stat. § 6007. “The primary

objective” of the statute was “to encourage development in Louisiana of a strong capital and infrastructure base for motion picture film.” Id. § 6007(A). To

this end, the statute allowed investors to obtain 40

cents of tax credits for every qualifying dollar “expenditure” on film infrastructure in Louisiana. App.

90a.

Two Louisiana agencies reviewed—and, if appropriate, approved—applications for film infrastructure

credits. The administrative review process began

with an applicant seeking an initial certification letter approving a project as a State-certified infrastruc-

4

ture project. The pre-certification letter set forth conditions, such as deadlines and minimum spending requirements, for the earning and disbursement of credits. It also set forth a schedule for the “structured release” of tax credits for use prior to completion of the

project. App. 90a-91a, 97a-102a.

If a pre-certification letter issued, and the applicant accepted it, the applicant was then required to

submit to the State an audited and certified cost report of infrastructure expenditures. Based on these

submissions, the agencies determined whether the

expenditures met the conditions imposed by the law

and the pre-certification letter. If so, the agencies certified the qualifying expenditures. No credits could be

applied to offset the Louisiana taxpayer’s income tax

liability or transferred to other Louisiana taxpayers

for cash, unless the State released them pursuant to

the “structured release” scheme outlined in the precertification letter. App. 91a.

No guidance on the implementation of the tax

credit program (other than the statute itself) existed

until 2010. As a result, the contours of what constituted permissible tax credit submissions were “confusing,” “not so clear,” had a lot of “gray areas,” and

were “complicated enough to where it required an applicant to get an audit by a Louisiana CPA firm.” Applicants, auditors, and administrators alike “struggled” with the law. App. 91a-92a

The statute was revised in 2009. As relevant here,

the revisions provided—for the first time—that funds

were “expend[ed]” for purposes of qualifying for tax

credits only if “cash or cash equivalent[s were] exchanged for goods or services.” La. Rev. Stat.

5

§ 6007(B)(3) (2009). By contrast, the 2007 version of

the statute—which applied to all petitioners’ applications—contained no such limitation. See La. Rev.

Stat. § 6007(B) (2007).

Throughout this period, State administrators

were, as a matter of practice, flexible in allowing various types of expenditures so as to attract more infrastructure projects. These administrators routinely

worked with applicants to allow changes or substitutions of expenditures, or requested more information

from applicants to support submissions. Applicants

for infrastructure tax credits sometimes relied on the

give-and-take of the State administrators to glean an

understanding of what the State might accept as a

qualifying expenditure. App. 91a-94a.

2. Despite controversy surrounding the tax credit

program, Louisiana’s statute worked: It attracted

film infrastructure projects from numerous investors,

including petitioners. App. 3a. From 2007 to 2012,

petitioners refurbished a dilapidated mansion in New

Orleans, transforming it into a state-of-the-art postproduction film studio. Id. 95a, 12a. Upon the studio’s completion, Louisiana promoted it on the State’s

film production website.

DE636:1490-1491;

DE637:1716-1717.

Petitioners obtained funding for their studio project—called

Seven Arts

Pictures

Louisiana

(SAPLA)—from a variety of sources, including their

applications for film infrastructure credits. App. 95a96a. In 2008, Petitioners obtained the required precertification letter for SAPLA, and petitioner Michael

Arata accepted the letter as SAPLA’s agent. Id. 97a102a.

6

Ultimately, petitioners submitted three applications for tax credits. These applications were based

in part on SAPLA’s payments to Damon Martin and

Leo Duvernay. Martin is a film post-production engineer who owned a business that rented post-production equipment. Duvernay was SAPLA’s general contractor. App. 102a.

Martin had agreed to provide equipment worth

$1,027,090 in exchange for a 25% share in SAPLA. To

document this agreement, SAPLA wired $1,027,090

to Martin, and Martin wired that money back to

SAPLA. App. 102a-103a, 162a.

As for Duvernay, he had a binding construction

contract with SAPLA for $2 million, funded into an

escrow account. Although Duvernay had not yet performed the agreed-upon construction work when

SAPLA submitted its first tax credit application,

SAPLA wired funds to Duvernay to commemorate

their agreement, and Duvernay wired the funds back

to SAPLA.

SAPLA later paid Duvernay these

amounts (and nearly $2,000,000 more). App. 103a,

158a-160a.

In other words, the transactions with Martin and

Duvernay documented real commitments and contributions that were necessary to complete the facility.

Petitioners made no representations regarding final

payment to Duvernay or Martin in their tax credit

submissions because—as noted above—no such representation was required by the relevant, 2007 Louisiana law. See App. 93a n.8 (quoting government witness “admi[ssion] that the film office ‘accepted expenditures in forms other than cash,’” “that the law

never defined expenditure,” and that “the words ‘cash’

7

or ‘spend’ . . . were nowhere in the pre-certification

form” sent to petitioners).

Before including these expenses in SAPLA’s tax

credit application, Mr. Arata determined (and numerous trial witnesses confirmed) that Louisiana had

previously granted tax credits in similar situations.

App. 160a-161a; see id. 164a (“[T]here is no dispute

that circular bank transactions are not intrinsically

unlawful.”). Indeed, the State’s representative testified at trial that so-called “circular” cash transfers

were approved for tax credits “all the time,” and that

the State “didn’t care” whether the funds were sent

back to the originator after receipt by the vendor.

DE637:1582. The State did not even require tax

credit applicants to provide documentation of both

sides of a transaction, even though such documentation is necessary to determine whether any particular

transaction is “circular.” Id. at 1606.

On February 26, 2009, Mr. Arata sent the first application to the State with the audited cost report.

The audit listed $1,027,090 in equipment expenditures to Martin and $1,749,257 in construction expenditures to Duvernay. The report also listed $3.7

million for the building, which was purchased for $1.7

million. On June 19, 2009, the State paid out

$1,132,480.80 in tax credits. App. 104a-105a.

In summer 2009, Mr. Arata terminated his relationship with Mr. Hoffman in connection with SAPLA

and other projects. App. 10a. On January 20, 2010,

Mr. Hoffman submitted a second audited cost report

to the State, seeking additional tax infrastructure

credits for its financial commitments to SAPLA’s developer and its legal and overhead expenses. App.

8

87a, 196a. All were documented via circular transfers, and all were fully disclosed to SAPLA’s auditors.

DE637:1643-51, 1824, 1843-44.

In late 2009 or early 2010, the State’s forensic accountant audited petitioners’ submissions. In the process, he asked Mr. Hoffman for additional documentation. The accountant identified irregularities in the

claimed expenditures, which led the auditors of the

first two tax credit submissions to withdraw their audit reports. SAPLA then retained a new auditor to

review all expenditures originally claimed in the first

and second audit reports and to support additional

tax credits earned by the project. App. 106a.

After the new audit issued in July 2012, the State

reinstated the previously-issued tax credits. App.

107a-108a. The State wrote to Mr. Hoffman that,

based on the replacement audit, “tax credits previously disallowed for this project are hereby reinstated

[and] are no longer subject to . . . recapture.” Id. 108a.

The State never attempted to recapture, rescind, or

otherwise invalidate the project’s tax credits.

DE636:1495. Nor could it: It remains legally bound

by its 2012 decision that issuance of the tax credits in

2009 was proper. Id. at 1500.

The post-production film studio was completed

and began to operate in June 2012. App. 109a. There

is no dispute that the tax credits released to the project were earned. Id. 85a n.1. It is also undisputed

that the State “got what it bargained for,” an up-andrunning post-production film studio, and that it suffered no loss from the tax credits it issued. Id. 77a78a. As the district court said: “Any attempt by the

government . . . to downplay or overlook this fact or to

9

suggest that the project’s completion is merely anecdotal is frivolous and a patent overreach.” DE673:25

n.18.

3. The federal government nevertheless charged

petitioners with participating in a tax credit fraud

scheme. It charged each petitioner with wire fraud,

mail fraud, conspiracy, and aiding and abetting. It

also charged Mr. Arata with making false statements

to federal agents. Each charge stemmed from petitioners’ tax credit applications. App. 109a-110a.

The core dispute at trial was whether petitioners’

submissions to the State complied with state law.

See, e.g., DE673:31 (district court order noting the

prosecution’s “singular focus on State law requirements” in prosecuting petitioners for federal fraud).

The government focused on petitioners’ documentation of its financial commitments to Martin and Duvernay. The government’s theory was that petitioners’ tax-credit applications were fraudulent because

petitioners represented that they had expended all

funds before they applied for tax credits, and that this

representation was false because Louisiana law authorized tax credits only for final cash payments. See,

e.g., App. 87a-88a; DE634:2380 (“[Louisiana] want[s]

you to show that you’re spending the money, that

you’re spending the money in the state. And not the

Michael Arata/Peter Hoffman definition of ‘spend.’

The definition of ‘spend’ that everybody knows and

understands.”).

But the government’s theory was based on an incorrect statement of the law. As noted above, the

2007 version of the law—the law that all agree applied to petitioners’ applications—did not contain a

10

requirement that funds be expended before a taxcredit application would be granted; the Legislature

amended the law in 2009 to add that requirement.

To this end, petitioners presented uncontroverted

evidence that they believed the project’s applications

complied with the custom and practice of what the

State accepted from other applicants and, at the very

least, reasonable people could debate whether their

submissions were permissible expenditures. App.

88a-90a. Petitioners emphasized that so-called “circular” cash transfers were not intended to deceive and

did not deceive anyone but rather established an audit trail for the date of non-cash qualifying expenditures and that they were made in Louisiana. See id.

157a-165a; DE637:1574-84. They also introduced evidence, and the district court found, that the 2007 film

infrastructure tax law “was implemented haphazardly and in a manner rife with disorder.” App. 89a.

At the conclusion of an 11-day trial, the jury found

Mr. Hoffman guilty of all 21 charges against him: conspiracy to commit mail and wire fraud, in violation of

18 U.S.C. § 371; wire fraud, in violation of 18 U.S.C.

§ 1343; and mail fraud, in violation of 18 U.S.C.

§ 1341. Mr. Arata was acquitted of 12 wire fraud

charges, but convicted of a total of 13 charges: conspiracy to commit mail and wire fraud; seven substantive wire fraud counts; mail fraud; and false statements, in violation of 18 U.S.C. § 1001. Finally, Susan Hoffman was convicted of conspiracy, wire fraud,

and mail fraud, but she was acquitted of 14 wire fraud

charges. App. 110a.

11

4. Petitioners moved for judgment of acquittal under Federal Rule of Criminal Procedure 29, 1 and the

district court reversed most of the counts of conviction. App. 110a-111a, 219a-220a.

The district court observed that petitioners’ fraud

convictions rested on “a troubling feature of this federal criminal case, the fact of an inconsistently managed State program where applicants are given piecemeal information and left with little guidance to determine for themselves what the State might accept

as qualified expenditures.” App. 157a. Moreover,

“Mr. Arata reviewed past projects in an effort to learn

what the State had previously accepted.” Id. The

court further acknowledged that “there is no dispute

that circular bank transactions are not intrinsically

unlawful so long as they are properly documented and

disclosed,” which occurred here. Id. 164a.

The district court nevertheless denied the motion

for judgment of acquittal as to the fraud relating to

the transactions with Martin and Duvernay, as well

as the later claims for interest and overhead for which

no credits were ever certified or released. It explained

that, for the government to prove its case, it had to

show beyond a reasonable doubt that (1) the defendants knowingly devised a scheme to defraud; (2) the

scheme employed false material representations; (3)

the defendants transmitted information by wire for

the purpose of executing the scheme; and (4) the defendants acted with specific intent to defraud. App.

1 As relevant here, Rule 29 provides: “A defendant may move for

a judgment of acquittal . . . within 14 days after a guilty verdict

or after the court discharges the jury, whichever is later.” Fed.

R. Crim. Proc. 29(c)(1).

12

117a-120a. It further recognized that evidence in the

record “supported a jury finding that the defendants

lacked the specific intent to defraud the State when

they submitted the Duvernay and [Martin] documents in accordance with their claim of a good faith

understanding of the custom and practice of the indisputably murky film tax credit regime.” Id. 165a-166a.

But the trial court held that there was “a critical

fact issue” on petitioners’ “specific intent to defraud”

that would have allowed the jury to conclude that petitioners submitted documents in support of their tax

credit applications “as part of a scheme to defraud.”

App. 165a-166a. In other words, applying “bind[ing]”

Fifth Circuit case law, the district court found “that a

rational jury could have rejected [petitioners’] good

faith defenses and, instead, accepted the government’s evidence that the transactions as styled were

misleading and intended to mislead in order to obtain

tax credits.” Id. 166a.

The Fifth Circuit opinion that “constrained” the

district court from acquitting was United States v.

Vargas-Ocampo, 747 F.3d 299 (5th Cir. 2014) (en

banc). App. 166a, 112a-113a & n.18. Vargas-Ocampo

“abandoned” the so-called equipoise rule, i.e., the rule

“that the Court must reverse a conviction if the evidence construed in favor of the verdict gives equal or

nearly equal circumstantial support to a theory of

guilt and a theory of innocence to the crime charged.”

Id. 113a n.18. As the district court explained: “That

the equipoise formula was abandoned is of some consequence in this case, where the evidence on the defendants’ intent as to certain fraud charges gives

13

equal or nearly equal circumstantial support to a theory of guilt and a theory of innocence.” Id.

While sentencing each petitioner to a term of probation, the district court expressed concern about the

equipoise rule. It stated that the defendants “remain[ed] convicted” only “[b]ecause of the oddity of

this Court’s oversight of the jury verdict under Rule

29 of the Federal Rules of Civil Procedure,” i.e., because Vargas-Ocampo had rejected the equipoise rule.

App. 232a-233a.

Also during sentencing, the district court reiterated that the law animating petitioners’ fraud convictions was ambiguous. The judge stated: “this case

presents a classic example of bewilderment resulting

from confusion caused by inconsistent applications of

the law.” App. 231a. It stressed that the relevant

“statutory environment” “was bungled,” and “lacked

leadership” and “coherence.” Id. Finally, the district

judge cautioned that such “unchecked prosecutorial

zeal deals a vicious body blow to the Constitution.” Id.

232a.

5. Petitioners appealed their judgments of conviction, while the government appealed the sentence.

The Fifth Circuit affirmed in part and reversed in

part, reinstating some of petitioners’ fraud convictions relating to their applications for film industry

tax credits. App. 51a.

As relevant here, petitioner Arata argued that if,

after all inferences are granted the government, there

is equal evidence of guilt and innocence, that “necessarily means that the government has not proven its

case beyond a ‘reasonable doubt.’” Arata Br., United

14

States v. Hoffman, No. 16-30104, 2016 WL 6822138,

at *31, *32 (5th Cir. Nov. 15, 2016) (hereinafter

“Arata Br.”). In response, the Fifth Circuit acknowledged that guilty verdicts must be overturned if “no

rational juror could have found guilt beyond a reasonable doubt.” App. 27a-28a (quoting United States v.

Sanjar, 876 F.3d 725, 744 (5th Cir. 2017)). But, consistent with its unanimous 2014 en banc decision in

Vargas-Ocampo, the court of appeals did not apply the

equipoise rule.

The Fifth Circuit also rejected petitioners’ argument that ambiguity in Louisiana’s tax credit scheme

deprived them of fair notice that the statements that

they made in connection with that scheme could be

considered intentionally false or fraudulent. See Hoffman Br., United States v. Hoffman, No. 16-30104,

2016 WL 7046238, at *19, *59, *65 (Nov. 30, 2016);

Arata Br., 2016 WL 6822138, at *2, *26. The Fifth

Circuit concluded that this lack of clarity was irrelevant because the elements of the mail and wire fraud

statutes themselves “provide[d] sufficient notice,” and

“[t]he government did not have to prove violations of

state law.” App. 26a (emphasis added).

The court also ruled on three related challenges to

the district court’s jury charge, each of which was targeted to ensure that petitioners could not be convicted

for failing to comply with an ambiguous state regulatory scheme. First, the court ignored petitioners’ argument that the district court should have charged

that petitioners’ good faith interpretation of state law

was a complete defense to a charge of mail and wire

fraud, as both crimes require proof of a specific intent

15

to defraud. Second, the court also ignored the argument that the jury should have been charged that the

government was required to prove beyond a reasonable doubt that each petitioner participated in the alleged scheme willfully. Third, the court rejected petitioners’ challenge to the district court’s charge that

the government did not need to prove that the petitioners violated Louisiana law, concluding that the

federal law charges did not turn on violations of state

law. App. 54a-55a. Petitioners filed a petition for rehearing, but the court of appeals denied it. Id. 237a239a.

REASONS FOR GRANTING THE WRIT

This petition presents two questions that have divided the courts of appeals and that warrant this

Court’s review.

First, the federal courts of appeals are deeply divided over whether a district court should direct a

judgment of acquittal when evidence of guilt and evidence of innocence is in equipoise. As the district

court here recognized, petitioners’ convictions depend

entirely on the Fifth Circuit’s view that an acquittal

is not required in that setting. But in most circuits,

the district court would have granted petitioners’ motion for a judgment of acquittal. Only this Court can

resolve the conflict over this recurring and important

question, and this case presents an ideal vehicle

through which to do so.

Second, and relatedly, the federal courts of appeals

are divided over whether a federal conviction for

fraud must be vacated where it is based on claims for

benefits under an ambiguous regulatory scheme and

16

the defendant acted consistently with an objectively

reasonable interpretation of that scheme. As the district court recognized here, Louisiana’s film industry

tax credit regime was rife with ambiguity, and petitioners acted consistently with an objectively reasonable view of it. The Fifth Circuit nevertheless affirmed (and reinstated) petitioners’ various fraud convictions stemming from their violations of the State’s

tax credit scheme.

This Court’s intervention is especially appropriate

because the Fifth Circuit’s views on both questions

presented are patently incorrect. That court’s refusal

to allow district courts to enter an acquittal where the

evidence is in equipoise is inconsistent with fundamental due process principles, including the presumption of innocence. And the Fifth Circuit’s tolerance for convictions where the defendants acted consistently with an objectively reasonable interpretation of an ambiguous state regulatory scheme flouts

fair notice requirements, disregards the intent element of mail and wire fraud, and conflicts with the

nation’s careful balance of state and federal powers.

The federal fraud statutes should not be construed as

a tool for overzealous federal prosecutors to convert

(at most) a failure to comply with an ambiguous state

civil regulatory scheme into a federal felony.

The petition should be granted, and the decision

below reversed.

17

A. The Equipoise Issue

1.

The Courts Of Appeals Are Divided Over

The Validity Of The Equipoise Rule

a. The First, Sixth, Seventh, Eighth, Tenth, Eleventh, and D.C. Circuits hold that, where evidence of

guilt and innocence is in equipoise, a conviction cannot stand.

The First Circuit adopted the equipoise rule in

United States v. Andujar, 49 F.3d 16, 20 (1st Cir.

1995). As it explained in one of its many cases reaffirming its approach, that rule is essential to satisfy

due process:

If the evidence viewed in the light most

favorable to the verdict gives equal or

nearly equal circumstantial support to a

theory of guilt or a theory of innocence

. . . a reasonable jury must necessarily

entertain a reasonable doubt.

United States v. Lopez-Diaz, 794 F.3d 106, 111-12 (1st

Cir. 2015) (quotation omitted).

The Sixth Circuit adopted the equipoise rule in

United States v. Caseer, 399 F.3d 828 (6th Cir. 2005),

likewise explaining: “If the evidence . . . gives equal or

nearly equal circumstantial support to a theory of

guilt and a theory of innocence, we must reverse the

conviction, as under these circumstances a reasonable

jury must necessarily entertain a reasonable doubt.”

Id. at 840 (internal citation and quotation marks

omitted).

The Seventh, Eighth, Tenth, Eleventh, and D.C.

Circuits have endorsed the rule for the same reasons.

18

See, e.g., United States v. Johnson, 592 F.3d 749, 755

(7th Cir. 2010) (“In this situation, the evidence is essentially in equipoise; the plausibility of each inference is about the same, so the jury necessarily would

have to entertain a reasonable doubt.”); United States

v. Wright, 835 F.2d 1245, 1249 n.1 (8th Cir. 1987);

United States v. Lovern, 590 F.3d 1095, 1107 (10th

Cir. 2009); Cosby v. Jones, 682 F.2d 1373, 1383 (11th

Cir. 1982); Curley v. United States, 160 F.2d 229, 233

(D.C. Cir. 1947).

b. Although the Fifth Circuit initially followed the

equipoise rule too, that court, sitting en banc, unanimously rejected the rule in United States v. VargasOcampo, 747 F.3d 299 (5th Cir. 2014) (en banc). In

the Fifth Circuit’s view, the equipoise rule “usurp[s]

the jury’s function” because it encourages appellate

courts to engage in “‘the type of fine-grained factual

parsing’ necessary to determine that the evidence presented to the factfinder was in ‘equipoise.’” Id. at 301

(quotations omitted). In the Fifth Circuit, therefore,

an appellate court considering an appeal of a denial of

a Rule 29 motion may consider only “whether the inferences drawn by a jury were rational” and “whether

the evidence is sufficient to establish every element of

the crime.” Id. at 302.

The Third Circuit, like the Fifth, rejects the equipoise rule. United States v. Caraballo-Rodriguez, 726

F.3d 418, 431-32 (3d Cir. 2013) (en banc); United

States v. Pungitore, 910 F.2d 1084, 1129 (3d Cir.

1990).

c. State courts likewise disagree about the proper

approach to sufficiency-of-the-evidence challenges

when the evidence, viewed in the light most favorable

19

to the government, is equally balanced as to guilt and

innocence. Most state courts have adopted the equipoise rule. 2 But courts in Texas and New Mexico have

rejected it. 3

2.

The Issue Is Exceptionally Important

a. Federal Rule of Criminal Procedure 29 effectuates the reasonable-doubt standard by allowing the

trial court to enter a judgment of acquittal after the

jury verdict when the evidence is insufficient to sustain a conviction. See Jackson v. Virginia, 443 U.S.

307, 318-19 (1979). Because of the importance of the

constitutional guarantees embodied in the reasonable

doubt standard, this Court has not hesitated to intervene to ensure uniform interpretation and application

of Rule 29. See, e.g., Carlisle v. United States, 517

U.S. 416 (1996); United States v. Martin Linen Supply

Co., 430 U.S. 564 (1977); see also, e.g., Brinegar v.

United States, 338 U.S. 160, 174 (1949) (explaining

that government’s burden of proof in criminal cases

was “developed to safeguard men from dubious and

2 Tatum v. State, 63 Ala. 147, 150 (1879); State v. Ruiz, 1998 WL

436557, at *3 (Ariz. Ct. App. Aug. 4, 1998); State v. Schweitzer,

18 A. 787, 788-89 (Conn. 1889); Harris v. United States, 125 A.3d

704, 709 (D.C. 2015); Reid v. State, 212 Ga. App. 787, 789 (1994),

overruled on other grounds by Maddox v. State, 322 Ga. App. 811

(2013); Commonwealth v. Goss, 428 S.W.3d 619, 626 (Ky. 2014);

Taylor v. State, 346 Md. 452, 458 (1997); Commonwealth v. Croft,

345 Mass. 143, 145 (1962); Cotton v. State, 144 So.3d 137, 14546 (Miss. 2014); State v. May, 689 S.W.2d 732, 736 (Mo. Ct. App.

1985); Day v. State, 303 P.3d 291, 298 (Ok. Crim. App. 2013); In

re J.B., 189 A.3d 390, 409 (Pa. 2018); Haskins v. Commonwealth,

44 Va. App. 1, 9 (2004).

3 Mackey v. State, 2002 WL 31521379, at *3 (Tex. App. Nov. 14,

2002) (citing cases); State v. Sutphin, 107 N.M. 126 (1988).

20

unjust convictions, with resulting forfeitures of life,

liberty and property”).

Review is warranted here for the same reasons. As

the district court made clear, petitioners’ convictions

would have been reversed in most courts of appeals.

But the Fifth Circuit affirmed their convictions, as the

Third Circuit would have done, too. This stark disparity in the criminal procedure is intolerable.

b. The government has argued previously that

“[d]isagreement about the utility of the equipoise notion is not an issue of sufficient significance to warrant this Court’s intervention” because it does not

“produce[] different outcomes on materially indistinguishable facts,” Br. in Opposition, Vargas-Ocampo v.

United States, No. 13-10737, at 15 (U.S. Aug. 27,

2014). But the difference between the equipoise rule

and the approach to Rule 29 adopted by the Fifth Circuit is no mere academic distinction. Nor is the equipoise rule simply a rearticulation of Jackson’s reasonable doubt standard. As this case shows, the equipoise rule can (and often does) mean the difference between a guilty verdict and an acquittal, as the district

court held was true here.

Indeed, this Court itself has recognized that crystalizing the concept of evidentiary equipoise can make

a decisive difference in outcomes. In O’Neal v.

McAninch, 513 U.S. 432 (1995), the Court considered

whether a federal habeas court should deem a trial

error harmless when “the matter is so evenly balanced that [the judge] feels himself in virtual equipoise.” Id. at 435. It held that, in that situation, the

reviewing court should “treat the error, not as if it

were harmless, but as if it affected the verdict (i.e., as

21

if it had a ‘substantial and injurious effect of influence

in determining the jury’s verdict’).” Id.

In other words, this Court has already recognized

that, when evidence is at or near equipoise, the party

not bearing the burden of persuasion should prevail—

and that the treatment of evidence in equipoise has

outcome-determinative results in a meaningful number of cases. See also Johnson v. United States, 529

U.S. 694, 713 n.13 (2000) (when interpretations of a

criminal statute are in equipoise, the rule of lenity resolves the interpretation in defendant’s favor); Morrison v. California, 291 U.S. 82, 94-96 (1934) (where evidence is in equipoise, the government has not carried

its burden of proof); Davis v. United States, 160 U.S.

469, 492-93 (1895) (where evidence of a defendant’s

sanity is in equipoise, the defendant is entitled to an

acquittal), superseded on other grounds by statute as

stated in Dixon v. United States, 548 U.S. 1, 12 (2006).

This Court would not have repeatedly adopted this articulation if it were redundant or otherwise meaningless.

3.

This Case Presents An Ideal Vehicle To Resolve The Issue

This case presents an ideal vehicle to resolve the

question whether the Fifth Circuit erred in failing to

apply the equipoise rule. The district court explicitly

noted that it would have entered a judgment of acquittal were it not “constrained” by the Fifth Circuit’s

rejection of that rule. App. 166a. It reiterated this

point during sentencing. Id. 232a-233a. The Fifth

Circuit did not dispute that determination. Accord-

22

ingly, if the Court grants certiorari and adopts the equipoise rule, the decision below would have to be reversed.

4.

The Decision Below Is Incorrect

Contrary to the Fifth Circuit’s position, the equipoise rule properly implements Rule 29 and is essential to satisfy the constitutional requirement that

criminal convictions rest on evidence proving guilt beyond a reasonable doubt.

a. This Court has repeatedly recognized that the

reasonable doubt standard is constitutionally required. See, e.g., In re Winship, 397 U.S. 358, 368

(1970). It serves to safeguard the presumption of innocence that protects all citizens from unwarranted

criminal punishment.

Thus, when it comes to judicial review of criminal

convictions under Federal Rule of Criminal Procedure

29, this Court has explained that “the critical inquiry”

is “whether the record evidence could reasonable support a finding of guilt beyond a reasonable doubt.”

Jackson, 443 U.S. at 318. The court must “view[] the

evidence in the light most favorable to the prosecution,” and then determine whether “any rational trier

of fact could have found the essential elements of the

crime beyond a reasonable doubt.” Id. at 319.

The Court has specifically rejected the view that a

conviction should be reversed only when there is “no

evidence whatever in the record to support” it.

Thompson v. City of Louisville, 362 U.S. 199, 206

(1960); see Jackson, 443 U.S. at 320 (rejecting the “no

evidence” rule). As this Court explained, the “‘no evidence’ rule is simply inadequate to protect against

23

misapplications of the constitutional standard of reasonable doubt.” Jackson, 443 U.S. at 320. That is because a “mere modicum of evidence may satisfy a ‘no

evidence’ standard.” Id. (quotation omitted). “Any evidence that is relevant—that has any tendency to

make the existence of an element of a crime slightly

more probably than it would be without the evidence—could be deemed a ‘mere modicum.’” Id. (internal citation omitted). But this Court has already

made clear that it can “not seriously be argued that

such a ‘modicum’ of evidence could by itself rationally

support a conviction beyond a reasonable doubt.” Id.

b. This approach to Rule 29 balances the primacy

of juries in criminal prosecutions with courts’ fundamental responsibility to safeguard the reasonable

doubt standard and due process. To protect against

overzealous, biased, or eccentric juries, Rule 29 requires the trial judge to acquit when the government

has not proven guilt beyond a reasonable doubt, so as

to “guarantee the fundamental protection of due process of law.” Jackson, 443 U.S. at 319. In other words,

Rule 29 is designed to protect against overreaching

prosecutions by allowing for judicial enforcement of

the reasonable doubt standard, as the trial court

noted in this case, see App. 231a-232a.

The equipoise rule is consistent with this Court’s

instructions regarding Rule 29. Indeed, Jackson specifically (and approvingly) cited a D.C. Circuit decision adopting the equipoise rule. See Jackson, 443

U.S. at 317, 319 n.11 (citing Curley, 160 F.2d at 23233). That makes sense: the rule allows the jury, and

then (separately) the judge to evaluate whether the

evidence is sufficient to sustain a criminal conviction.

24

The jury may acquit if it is not. And even if the jury

convicts, the judge is nonetheless obliged to acquit if

the defendant’s guilt was not proven beyond a reasonable doubt.

The equipoise rule also gives life to the “beyond a

reasonable doubt” standard itself. That standard is

obviously greater than the civil standard preponderance-of-the-evidence standard. See, e.g., Winship, 397

U.S. at 367-68. This means, as the Sixth Circuit put

it, that “[i]f the evidence . . . gives equal or nearly

equal circumstantial support to a theory of guilt and

a theory of innocence, we must reverse the conviction,

as under these circumstances a reasonable jury must

necessarily entertain a reasonable doubt.” Caseer, 399

F.3d at 840 (citation and quotations omitted).

c. The Fifth Circuit’s contrary approach to Rule 29

is inconsistent with this Court’s decisions, constitutional principles, and logic. It compresses the two distinct safeguards—the jury and the judge—into one,

eviscerating the very purpose of Rule 29 as explicated

in Jackson.

In the Fifth Circuit, district courts must uphold a

jury verdict unless “the inferences drawn by a jury

were . . . speculative or insupportable,” or where there

was insufficient evidence “to establish every element

of the crime”—even if the evidence, viewed in the light

most favorable to the verdict, is evenly balanced. Vargas-Ocampo, 747 F.3d at 302. That approach cannot

be reconciled with the beyond-a-reasonable-doubt

standard, which precludes a conviction where a reasonable doubt of guilt exists, even if evidence of guilt

also exists.

25

In other words, the Fifth Circuit’s rejection of the

equipoise rule limits a district court’s power to grant

a Rule 29 motion to situations where “no evidence” of

guilt exists, which is the rule this Court rejected in

Jackson. The Court rejected that rule precisely because it does not sufficiently protect those accused of

crimes. See Jackson, 443 U.S. at 420.

There is no merit to the Fifth Circuit’s position

that the equipoise rule must be rejected because it undermines Jackson’s instructions to view the evidence

in the light most favorable to the prosecution. Contra

Vargas-Ocampo, 747 F.3d at 301. As the First Circuit

has explained, it is entirely logically consistent to,

first, construe the evidence in the light most favorable

to the prosecution, and second, reverse the conviction

if the evidence so viewed is in equipoise. See LopezDiaz, 794 F.3d at 111-12 (holding that acquittal under

Rule 29 is appropriate where “the evidence viewed in

the light most favorable to the verdict gives equal or

nearly equal circumstantial support to a theory of

guilt or a theory of innocence”) (quotations omitted).

That means that in some cases—for example,

when the case turns on witness credibility—the equipoise rule will never be triggered, because once all inferences are granted the government, the evidence

necessarily will be sufficient. But in cases (such as

this one) that turn entirely on circumstantial evidence of the defendants’ state of mind, the equipoise

rule gives effect to the standard this Court has already established under Rule 29 and the Due Process

Clause—a criminal conviction cannot be sustained

when no reasonable juror could conclude that the

26

crime’s elements have been proved beyond a reasonable doubt.

B. The Ambiguity Issue

1. The Courts of Appeals Are Divided On The

Permissibility Of A Fraud Conviction In

This Setting

a. The First, Seventh, Eighth, Tenth, and Eleventh Circuits all recognize that a conviction for federal criminal fraud cannot be sustained where, as

here, the defendants acted consistently with an objectively reasonable interpretation of an ambiguous law.

See United States v. Farinella, 558 F.3d 695 (7th Cir.

2009); United States v. Whiteside, 285 F.3d 1345 (11th

Cir. 2002); United States v. Prigmore, 243 F.3d 1 (1st

Cir. 2001); United States v. Migliaccio, 34 F.3d 1517

(10th Cir. 1994); United States v. Anderson, 579 F.2d

455 (8th Cir. 1978).

In each case, the defendants were charged with

committing fraud by making statements that were

materially false based on the government’s reading of

a complex regulatory scheme. Prigmore, 243 F.3d at

13-14 (FDA regulations regarding testing and marketing devices); Farinella, 558 F.3d at 696-97 (wire

fraud and misbranding food with intent to defraud);

Anderson, 579 F.2d at 459 (making false statements

to the government by falsely certifying requests for

reimbursement); Migliaccio, 34 F.3d at 1520 (conspiracy to defraud the government and mail fraud by filing false health care claims); Whiteside, 285 F.3d at

1345 (making false statements in government-sponsored healthcare reimbursement cost reports).

27

In each case, the defendants argued that their actions were not fraudulent because, even if they misunderstood the law, their interpretation was objectively reasonable and thus incompatible with a fraud

prosecution based on a stricter reading of the law.

See, e.g., Prigmore, 243 F.3d at 13-14. In each case,

the court of appeals agreed: “It is a denial of due process of law to convict a person of a crime because he

violated some bureaucrat’s secret understanding of

the law.” Farinella, 558 F.3d at 699; see Migliaccio,

34 F.3d at 1525; Anderson, 579 F.2d at 460; Whiteside,

285 F.3d at 1351-52. Because “the government bears

the burden to negate any reasonable interpretations

that would make a defendant’s statement factually

correct where reporting requirements are ambiguous,” Migliaccio, 34 F.3d at 1525, and because the government failed to bear that burden, the courts reversed the defendants’ convictions. See also United

States v. Vallone, 698 F.3d 416, 454 (7th Cir. 2012)

(“[I]f the court were to find the law objectively ambiguous, that finding would require dismissal of the indictment, as the defendants would not have had appropriate notice that their conduct was illegal.”), vacated on other grounds by Dunn v. United States, 570

U.S. 901 (2013). 4

4 Vallone arose in the tax fraud context. Tax fraud requires proof

of, among other things, willfulness. 698 F.3d at 483. The district

court and Fifth Circuit did not, however, require the government

to prove willfulness here to secure petitions’ mail and wire fraud

convictions (though it did require willfulness for the conspiracy

and false statement charges). App. 37a, 115a-123a. That approach creates a loophole that allows tax fraud cases to be prosecuted under the mail and wire fraud statutes—i.e., without

28

Moreover, these courts of appeals agreed (when

the argument was raised) that the district court was

required to instruct the jury to assess the defendants’

criminal culpability under their reasonable view of

the law. See Prigmore, 243 F.3d at 17; Migliaccio, 34

F.3d at 1523-25; see also Vallone, 698 F.3d at 451.

This approach is “rooted in the due process-based ‘fair

warning requirement,’” which “recognizes that, in a

prosecution based on the theory that a defendant has

defrauded the government by making false statements . . . , there has been no crime if the statements

were not false (or if there was no duty to divulge) under an objectively reasonable interpretation of the

law.” Prigmore, 243 F.3d at 17-18 (quotations omitted).

b. The Fifth Circuit’s approach squarely conflicts

with these decisions.

Petitioners’ case shares the key features of the

cases just described: (1) an essential element of the

alleged fraud was that petitioners made materially

false statements as part of a scheme to defraud, and

(2) the government’s theory that petitioners made

false representations depended on a particular understanding of the underlying regulatory scheme. In the

First, Seventh, Eighth, Tenth, and Eleventh Circuits,

proof of willfulness—whenever the tax fraud involves tax credits, exclusions from income or deductions. See also Handakas v.

United States, 286 F.3d 92, 100 (2d Cir. 2002), overruled on other

grounds by United States v. Rybicki, 354 F.3d 124 (2d Cir. 2003)

(en banc) (explaining that using the federal wire fraud statute to

prosecute claims of tax fraud “would effect a breathtaking expansion of mail fraud. Every false . . . state tax return sent by

mail [or e-filed] would be punishable as a felony in federal

court.”).

29

an acquittal would have been entered because petitioners’ statements could only have been found materially false by accepting the highly contested view

that tax credits were not allowed absent actual expenditure of cash. At the very least, these circuits

would have required a jury charge explaining that acquittal was required so long as petitioners’ were acting under a reasonable, good faith understanding of

the law. 5

But the Fifth Circuit concluded that defendants’

criminal convictions presented no due process problem because the mail fraud statute itself was not confusing. App. 24a-26a. That decision cannot be reconciled with the decisions from other circuits described

above. The Fifth Circuit’s approach is inconsistent

with other circuits’ because in those circuits, there

could be no specific intent to defraud (at least not beyond a reasonable doubt) if petitioners were acting

consistent with a reasonable interpretation of Louisiana’s tax-credit scheme. Again, the government’s theory of fraud here was that petitioners made statements in their tax-credit applications that could be

5 The government failed to prove its case for the additional rea-

son that the evidence as to the materiality of petitioners’ false

statements was (at best) in equipoise. See Neder v. United

States, 527 U.S. 1, 21 (1999) (holding that proof of materiality is

required in mail and wire fraud cases). A misrepresentation is

“material if it has ‘a natural tendency to influence, or [is] capable

of influencing, the decision of the decisionmaking body to which

it was addressed.” Id. at 16 (quotations omitted). Here, because

the law did not clearly prohibit tax credit applications like petitioners’, and because both the State and auditors testified that

“circular” cash transfers were routinely approved for tax credits,

evidence of the materiality of defendants’ allegedly false statements is in equipoise, at most.

30

construed as false only because they were allegedly improper under Louisiana law. DE673:31 (district court

order noting the prosecution’s “singular focus on State

law requirements” in prosecuting petitioners for federal fraud). If Louisiana’s law was ambiguous and the

defendants acted consistent with a reasonable construction of that law—as the district court expressly

found and the Fifth Circuit refused to consider—then

petitioners would be acquitted in First, Seventh,

Eighth, Tenth, and Eleventh Circuits. Here, in contrast, petitioners were convicted precisely because

they “violated some bureaucrat’s secret understanding of the law.” Farinella, 558 F.3d at 699.

2. The Issue Is Exceptionally Important

a. This Court has not hesitated to intervene to protect defendants from convictions where (as here) they

lacked fair notice their conduct was criminal. See,

e.g., Coates v. City of Cincinnati, 402 U.S. 611 (1971).

That is because it is a bedrock due process principle

“that no man shall be held criminally responsible for

conduct which he could not reasonably understand to

be proscribed.” Bouie v. City of Columbia, 378 U.S.

347, 351 (1964) (quotation omitted); see also Lanzetta

v. New Jersey, 306 U.S. 451, 453 (1939) (“No one may

be required at the peril of life, liberty, or property to

speculate as to the meaning of penal statutes. All are

entitled to be informed as to what the State commands or forbids.”).

The Court has demonstrated heightened concern

about fair notice recently. See, e.g., Sessions v. Dimaya, 138 S. Ct. 1204 (2018); McDonnell v. United

States, 136 S. Ct. 2355 (2016); Johnson v. United

States, 135 S. Ct. 2551 (2015); Skilling v. United

31

States, 561 U.S. 358 (2010). And it has long demonstrated concern about notice in the context of the mail

and wire fraud statutes in particular. See McNally v.

United States, 483 U.S. 350 (1987), superseded by

statute as recognized in Skilling, 561 U.S. 358; Fasulo

v. United States, 272 U.S. 620 (1926). As the Court

put it in Fasulo when considering a notice challenge

to a charge of conspiracy to commit mail fraud: “There

are no constructive offenses; and, before one can be

punished, it must be shown that his case is plainly

within the statute.” 272 U.S. at 629.

b. Moreover, the absence of discernable standards

for petitioners’ alleged crimes implicates principles of

federalism. See McNally, 483 U.S. at 360. “Prosecutorial discretion has been exercised here to sharpen

the penalty for the violation of certain state laws that,

in the estimation of a federal prosecutor, are insufficiently policed or punished by the state itself.” United

States v. Handakas, 286 F.3d 92, 110 (2d Cir. 2002),

overruled on other grounds by United States v. Rybicki, 354 F.3d 124 (2d Cir. 2003).

For this reason, this Court has specifically warned

against the federalization of local and state laws. See,

e.g., Bond v. United States, 572 U.S. 844, 854-66

(2014); Cleveland v. United States, 531 U.S. 12, 24-45

(2000). As this Court has recognized, this trend upsets the traditional constitutional balance between

the national government and the states, and thus “the

very structure of the Constitution.” Bond, 572 U.S. at

862. Although “maintaining that constitutional balance is not . . . an end unto itself,” “denying any one

government complete jurisdiction over all the concerns of public life” allows “federalism [to] protect[]

32

the liberty of the individual from arbitrary power. Id.

at 863.

This case exemplifies the continuing problem of

the government’s efforts to federalize state laws. Under the guise of the mail and wire fraud statutes, federal prosecutors pursued and secured convictions of

petitioners for their alleged misrepresentations in

their Louisiana tax credit submissions. But whether

those statements were fraudulent turns entirely on

what is deemed permissible under Louisiana’s tax

credit regulatory scheme—that is, after all, why the

government initially relied on the later-enacted Louisiana statute to argue that tax credits were not allowed absent actual expenditure of cash funds, only to

excise that citation from the case after petitioners

pointed out that the government was citing the wrong

law. This Court’s review is warranted to ensure that

the federal fraud statutes do not enable federal prosecutors to criminalize arguable violations of state civil

regulatory schemes.

3. This Is An Ideal Vehicle To Address The Issue

This case is an ideal vehicle to determine whether

a fraud conviction can stand where the defendants act

consistently with an objectively reasonable interpretation of an ambiguous regulatory scheme. Petitioners here were charged with falsely representing that

they were entitled to tax credits under Louisiana law.

The truth or falsity of their representations turned on

what submissions were permissible under the State’s

tax credit regulatory regime. The district court expressly found that the “statutory environment” “was

bungled,” and “lacked leadership” and “coherence.”

33

App. 231a. And it specifically flagged that, because of

this lack of clarity, this case threatened to allow “unchecked prosecutorial zeal [that] deals a vicious body

blow to the Constitution.” Id. 232a. In other words,

petitioners lacked fair notice of what was permitted

or prohibited in tax credit applications. The Fifth Circuit did not disagree with the district court on the ambiguity of the tax-credit regulatory regime. Instead,

it concluded that the state-law scheme’s ambiguity

was irrelevant as a matter of law. If this Court were

to reverse that legal determination, the decision below would have to be reversed.

4. The Decision Below Is Incorrect

Contrary to the Fifth Circuit’s holding, a fraud

conviction cannot stand where a defendant has acted

consistently with an objectively reasonable interpretation of an ambiguous regulatory regime.

The mail and wire fraud statutes criminalize

schemes to defraud executed by mail or wire with a

specific intent to defraud. App. 37a; see also Schmuck

v. United States, 489 U.S. 705, 718 n.10 (1989). Petitioners had no notice that they could not include the

challenged transactions in their Louisiana tax credit

applications (much less that doing so was a federal

crime). Accordingly, they simply could not have acted

with the requisite specific intent to defraud required

by the mail and wire fraud statutes. To allow petitioners’ convictions to stand nevertheless would

stretch the scienter requirement beyond recognition

and violate fair notice principles. But that is precisely

what the Fifth Circuit allowed when it rejected petitioners’ requested willfulness and good faith instructions, along with their fair notice arguments.

34

a. The law was (at best) ambiguous insofar as

whether it prohibited petitioners’ applications for tax

credits for the Martin and Duvernay transactions, as

well as the later applications claiming overhead and

interest expenses. The district court found, and the

federal government never disputed, that so-called

“circular” transactions (which reflected payments

that were ultimately made) are not illegal. And the

uncontroverted testimony of government and defense

witnesses established that these transactions “happened all the time” in the Louisiana film tax credit

industry. DE637:1582. Moreover, neither the Fifth

Circuit nor the government ever identified any preexisting regulations or a judicial decision establishing

that Louisiana tax credit submissions based on “circular” transactions was fraudulent. This lack of notice that petitioners’ actions were criminal alone warrants reversal of their convictions. See, e.g., Farinella, 558 F.3d at 699 (reversing conviction because it

was based on “some bureaucrat’s secret understanding of the law”); Migliaccio, 34 F.3d at 1525 (reversing

conviction because “the government bears the burden

to negate any reasonable interpretations that would

make a defendant’s statement factually correct where

reporting requirements are ambiguous”).

Nor is the Fifth Circuit’s cursory assertion that the

“government did not have to prove violations of state

law,” App 26a, an answer to petitioners’ notice arguments. It is undisputed that the government had to

show a specific intent to defraud to sustain the mail

and wire fraud convictions. The only bases for these

convictions were petitioners’ tax credit submissions to

Louisiana. Thus, the government did have to show

35

that petitioners had sufficient notice that their state

tax credit submissions were unlawful. If petitioners’

applications were lawful under state law—i.e., if tax

credits were allowable without final expenditure of

funds—then their representations in their tax credit

submissions could not be false.

b. Relatedly, because petitioners did not know this

action was unlawful, they could not have engaged in

these transactions with the requisite intent. To prove

the fraud offenses for which petitioners were indicted,

the government had to show (among other things) a

specific intent to defraud. See App. 37a. That is, the

government had to show that the petitioners specifically intended to defraud Louisiana when they submitted their tax credit applications. The lack of clarity about what tax credit applications were permissible means that the government cannot have shown

beyond a reasonable doubt that petitioners acted with

the requisite specific intent to defraud. At the very

least, petitioners’ good faith basis for their actions

should have been a complete defense to the charges.

See, e.g., United States v. Young, 470 U.S. 1, 31 (Brennan, J., concurring in part and dissenting in part) (explaining that good faith is a complete defense to mail

and wire fraud charges). And the jury should have

been instructed accordingly. See, e.g., Migliaccio, 34

F.3d at 1523-25 (where the defendant is accused of

committing mail fraud by making false statements,

the jury should be instructed that “the government

bears the burden to negate any reasonable interpretations that would make a defendant’s statement factually correct where reporting requirements are am-

36

biguous”). The Fifth Circuit’s conclusion that the ambiguity of Louisiana’s scheme is irrelevant cannot be

reconciled with these established principles.

c. To the extent there is any doubt about whether

the relevant fraud statutes cover petitioners’ conduct,

the rule of lenity resolves the doubt in favor of acquittal. That principle should operate with special force

here, where the guidelines for tax credit submissions

did not even exist at the time of petitioners’ allegedly

unlawful actions. As this Court has cautioned, judicially-created liability rules should not be expanded

beyond their existing contours without congressional

authorization, see, e.g., Skilling, 561 U.S. at 409-11,

consistent with the principle that “legislatures and

not courts should define criminal activity.” United

States v. Bass, 404 U.S. 336, 348 (1971); see also

United States v. Wiltberger, 18 U.S. (5 Wheat.) 76, 95

(1820) (holding that “penal laws are to be construed

strictly” because “[i]t is the legislature, not the Court,

which is to define a crime, and ordain its punishment”).

CONCLUSION

For the foregoing reasons, the petition for a writ of

certiorari should be granted.

37

Respectfully submitted,

Anton Metlitsky

O’MELVENY & MYERS LLP

Times Square Tower

7 Times Square

New York, N.Y. 10036

(212) 326-2000

Kendall Turner

O’MELVENY & MYERS LLP

1625 Eye Street, N.W.

Washington, D.C. 20006

(202) 383-5300

February 7, 2019

Jeffrey L. Fisher

Counsel of Record

O’MELVENY & MYERS LLP

2765 Sand Hill Road

Menlo Park, Cal. 94025

(650) 473-2633

jlfisher@omm.com