Record and brief — Crude Co. v. United States

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once Supreme Court, U.S. |

8 FILED

1-828 Now a 1981

Ne. ALEXANDER L. STEVAS,

IN THE

Supreme Court of the United States

OCTOBER TERM, 1981

THE CRUDE COMPANY and JOHN ALLEN MASEK,

Petitioners,

UNITED STATES of AMERICA,

Respondent.

PETITION FOR A WRIT OF CERTIORARI TO THE

UNITED STATES COURT OF APPEALS

FOR THE FIFTH CIRCUIT

VINCENT J. FULLER

Counsel of Record

ROBERT L. WEINBERG

KENDRA E. HEYMANN

WILLIAMS & CONNOLLY

839 17th Street, N.W.

Washington, D.C. 20006

(202) 331-5000

Attorneys for Petitioners

WILSON - Eres PRINTING Co., Inc. - 789-0096 - WASHINGTON. D.C. 20001

QUESTIONS PRESENTED FOR REVIEW

1. Whether the Temporary Emergency Court of Ap-

peals’ exclusive jurisdiction of appeals from the district

courts in cases and controversies “arising under” the

Emergency Petroleum Allocation Act encompasses an

appeal from a dismisyal of an indictment on the grounds

that

(a) the criminal provisions of the Act preempt appli-

cation of the federal false statement, mail fraud,

and RICO statutes to alleged violations of a reg-

ulation promulgated under the Act; and

(b) the regulation that the defendants are alleged to

have violated does not give fair notice and there-

fore cannot constitutionally be the basis of a crim-

inal prosecution.

2. Whether the regulation promulgated under the

Emergency Petroleum Allocation Act requiring certifi-

cation of “old” and “new” oil gives fair notice of the

conduct it requires.

3. Whether the criminal provisions of the Emergency

Petroleum Allocation Act preempt the application of the

federal false statement, mail fraud, and RICO statutes

to alleged violations of a regulation promulgated under

the Act.

4. Whether a statement made by one private party

to another is brought within the ambit of the federal

false statement statute because the party to whom the

statement is made relies on it in a report filed with the

federal government.

(i)

LIST OF PARTIES

Parties to the proceeding in the court of appeals are: *

(1) The Crude Company, Defendant-Petitioner

(2) John Allen Masek, Defendant-Petitioner

(3) Uni Oil, Inc., Defendant

(4) Thomas M. Hajecate, Defendant

(5) Thomas H. Hajecate, Defendant

(6) Charles R. Akin, Defendant

(7) R. Stanley Corbitt, Defendant

(8) United States of America, P'xintiff-Respondent

Pursuant to Rule 28.1, Petitioner The Crude Company

states that it is a Wyoming corporation with no parent

companies, subsidiaries, or affiliates.

* Although named in the indictment, Mid-Atlantic Petroleum

Co., Ltd. and H.C. Iran, Ltd. did not appear.

TABLE OF CONTENTS

QUESTIONS PRESENTED FOR REVIEW ..............

TABLE OF AUTHORITIES .

6 — ͤ ͤ

JURISDICTION ...................

CONSTITUTIONAL, STATUTORY, AND REGULA-

TORY PROVISIONS INVOLVED PB

STATEMENT OF THE CASE

REASONS WHY THE WRIT SHOULD BE

1. The court of appeals’ decision that the TECA

lacks exclusive appellate jurisdiction where a

district court holds that the EPAA preempts

another statute and that an EPAA regulation is

unconstitutionally vague is in conflict with the

decisions of other court

(a) The court of appeals’ decision that the ques-

tion whether the EPAA preempts another

statute is not an EPAA issue conflicts with

decisions of the Second Circuit, the Tenth

Circuit, and the ECA

(b) The court of appeals’ decision that the con-

stitutional issue adjudicated by the district

court is not an EPAA issue also conflicts

with the decisions of other courts ................

2. The EPAA regulations are unconstitutionally

vague and fail to provide fair warning of what

obligations they imposs

TABLE OF CONTENTS—Continued

Page

3. The criminal provisions of the EPAA preempt

the application of the federal false statement,

mail fraud, and RICO statutes to conduct involv-

ing alleged miscertification of the regulatory

category of oil 21

4. A statement made by one private party to an-

other does not become punishable under the fed-

eral false statement statute merely because the

party to whom the statement is made relies on

it in a report filed with the federal government.. 24

CONCLUSION 29

TABLE OF AUTHORITIES

Cases: Page

American Federation of Labor v. Watson, 327 U.S.

11 —T—- — 8 14

Bray v. United States, 423 U.S. 73 (1975) 7, 13, 14, 18

Busic v. United States, 446 U.S. 398 (1980) 21

Citronelle-Mobile Gathering, Inc. v. Gulf Oil Corp.,

591 F.2d 711 (Temp. Emer. Ct. App.), cert. de-

nied, 444 U.S. 879 (19799 7, 9, 12, 18-19

Coastal States Marketing, Inc. v. New England

Petroleum Corp., 604 F.2d 179 (2d Cir. 1979).. 7, 8, 9,

Connally v. General Construction Co., 269 U.S. 385

—— 8 17

Consolidated Rail Corp. v. State of Illinois, 423

F. Supp. 941, (Spec. Ct. 1976), cert. denied, 429

, ͥ 8

Friedman v. United States, 374 F.2d 363 (8th Cir.

— v ASSES MEE Sl ew 28

Hagans v. Lavine, 415 U.S. 528 (1974) .................... 12

Hines v. Davidowitz, 312 U.S. 52 (194177 21

M. Kraus & Bros., Inc. v. United States, 327 U.S.

r 17, 20

Lanzetta v. New Jersey, 306 U.S. 451 (1939) 19

Louisville and Nashville Railroad Co. v. Mottley,

rr, 7-8, 14

Mobil Oil Corp. v. Dubno, 639 F. 2d 919 (2nd Cir.),

cert, denied, 101 S. Ct. 3122 (1981777 9

Mobil Oil Corp. v. Tully, 499 F. Supp. 888 (N. D.

1 — nero 10

Mobil Oil Corp. v. Tully, 639 F.2d 912 (2nd Cir.),

cert, denied, 101 S. Ct. 3123 (198177 9-10, 12, 18

Mountain Fuel Supply Co. v. Johnson, 586 F.2d

1375 (10th Cir. 1978), cert. denied, 441 U.S.

952 (1979) 1 7, 9, 13, 18

National Petroleum Refiners Association v. Fed-

eral Trade Commission, 482 F.2d 672 (D.C.

Cir. 1973), cert. denied, 415 U.S. 951 (1974) 27

TABLE OF AUTHORITIES—Continued

Page

Newell v. Federal Energy Administration, 591 F.2d

704 (Temp. Emer, Ct. App. 197999 7,9,18

New York Telephone Co. v. New York State Dept.

of Labor, 440 U.S. 519 (19799 14

Panama Refining Co. v. Ryan, 293 U.S. 388 (1935) 26

Perez v. Campbell, 402 U.S. 637 (19717 21

St. Mary’s Hospital of East St. Louis, Inc. v. Ogil-

vie, 496 F.2d 1324 (7th Cir. 1974) -.................... 8

Simpson v. United States, 435 U.S. 6 (1978) .......... 21

Smith v. Goguen, 415 U.S. 566 (1974) —.................. 20

M. Spiegel & Sons Oil Corp. v. B. P. Oil Corp., 531

e 18

Swift & Co. v. Wickham, 382 U.S. 111 (1965) 21

United States v. Baker, 626 F.2d 512 (5th Cir.

ISS EER CO ae Ce 27

United States v. Bedore, 455 F.2d 1109 (9th Cir.

% — Ä ͤ SO OO 28

United States v. Beer, 518 F.2d 168 (5th Cir.

. 21

United States v. Bramblett, 348 U.S. 503 ( 1955) 25-26,

United States v. L. Cohen Grocery Co., 255 U.S.

la alla crete 20

United States v. Cohn, 270 U. S. 339 (1926) 25

United States v. Cooper, 482 F.2d 1393 (Temp.

Emer. Ct. App. 1973) — —„V 11

United States v. Gilliland, 312 US. 86 (1941) ........ 26

United States v. Harriss, 347 U.S. 612 (1954) 17

United States v. Hooper, 596 F.2d 219 (7th Cir.

. 27-28

United States v. Powell, 423 U.S. 87 (1975) .......... 20

United States v. Wickland, 619 F.2d 75 (Temp.

e 12,19

United States v. Zang, 645 F.2d 999 (Temp. Emer.

.. 11-12, 23-24

United States v. Zang, 653 F.2d 493 (Temp. Emer.

Ct. App. 1981), cert. denied, 50 U.S.L.W. 3248

r 11

vii

TABLE OF AUTHORITIES—Continued

Statutes: Page

Act of October 23, 1918, Ch. 194, § 35, 40 Stat.

1015 rc 25

Act of June 18, 1934. Cn. 587, § 35, 48 Stat. 996 25

Act of April 4, 1938, Pub. L. No. 75-465, 52 Stat.

1 ͤ a? Ee cee 27

Act of June 25, 1948, Pub. L. No. 80-772, Ch. 645,

./ x 27

Connally Hot Oil Act, Pub. 12 No. 74-14, 49 Stat.

30 (1935) 26

Economie Stabilization Act of 1970, Section 211

(b) (2), 12 U.S.C. § 1904, Note passim

r a Sec 27

...r passim

2 >) — passim

.... passim

Emergency Petroleum Allocation Act, 15 U.S.C.

6 RL EE ee ee Cee Meee passim

Energy Policy and Conservation Act of 1975, Pub.

r ae ee 22

National Industrial Recovery Act, Pub. L. No. 73-

nn 26

E 2

e ...... a 7

Z 14

r ..... ee EE 14

Code of Federal Regulations:

Sk ; 3, 18, 19

r . 3, 22-23

Miscellaneous:

Brief for Appellant, No. 79-2488, United States v.

Uni Oil, Inc., 646 F.2d 946 (5th Cir. 1981)........ 15

The Federal Energy Administration: Enforcement

of Petroleum Price Regulations, Report of the

Subcommittee on Administrative Practice and

Procedure of the Senate Committee on the Judici-

ary, 94th Cong., Ist Sess. (1975) 22

viii

TABLE OF AUTHORITIES = Continued

Hart, The Relations Between State and Federal

Law, 54 Colum. L. Rev. 489 (1954) .......................

Hearing of the House Committee on Energy and

Commerce, Subcommittee on Oversight and In-

Letter from the Secretary of the Interior to the

Chairman of the Senate Judiciary Committee,

Note, The Appellate Jurisdiction of the Temporary

Emergency Court of Appeals, 64 Minn. L. Rev.

ETERS RSET ee Nn A

Note, Criminal Liability ‘for False Statements to

Federal Law Enforcement Officials, 63 Va. L.

Rev. 451 (1977)

Reply Brief of Appellant W. Darrell Zang, United

States v. Zang, 645 F.2d 999 (Temp. Emer. Ct.

App. 1981)

Report of the Senat Committee on Banking, Hous-

ing, and Urban Affairs, S. Rep. No. 92-507, 91st

Cong., Ist Sess., reprinted in 1971 U.S. Code

eee

S. Rep. No. 1202, 73d Cong., 2d Sess. (1934)

S. Rep. No. 94-516, 94th Cong., Ist Sess., reprinted

in 1975 U.S. Code Cong. & Ad. News 20414

C. Wright, A. Miller, & E. Cooper, 17 Federal Prac-

tice and Procedure § 4105 (1980 Supp.) )

20-21

7-8

11-12

IN THE

Supreme Court of the United States

OCTOBER PERM, 1981

No.

THE CRUDE COMPANY and JOHN ALLEN MASEK,

v. Petitioners,

UNITED STATES of AMERICA,

Respondent.

PETITION FOR A WRIT OF CERTIORARI TO THE

UNITED STATES COURT OF APPEALS

FOR THE FIFTH CIRCUIT

Petitioners, The Crude Company (“TCC”) and John

Allen Masek (“Masek”), pray that a writ of certiorari

issue to review the judgment of the United States Court

of Appeals for the Fifth Circuit,’ which reversed the

District Court’s judgment dismissing an indictment

brought against TCC, Masek, and others.“

OPINIONS BELOW

The opinion of the court of appeals, dated May 19,

1981, and reported at 646 F.2d 946, and the opinion

denying rehearing and rehearing en banc, rendered Sep-

tember 4, 1981, and reported at 655 F.2d 85, aré printed

in the Appendix to this Petition. (A. la-19a). The oral

and written opinions of the District Court, rendered on

1 (A. la). References to the Appendix to this Petition, which is

separately bound, will be cited as “A. ——-.” References to the Rec-

ord on Appeal will be to the Appendix in the court of appeals and

will be cited as “CA App. ——.”

2 Insofar as other parties to the consolidated proceedings in the

Fifth Circuit raise questions for certiorari which are pertinept to

these petitioners, we hereby respectfully adopt such questions by

reference.

July 24 and July 25, 1979, are also printed in the Ap-

pendix to this Petition. (A. 20a, 23a).

JURISDICTION

The court of appeals filed its opinion and entered its

judgment on May 19, 1981. (A. la). Timely petitions

for rehearing and for rehearing en banc were denied in

a per curiam opinion on September 4, 1981. (A. 18a).

The court of appeals granted a stay of the mandate until

October 3, 1981, and thereafter by order of October 8,

1981, extended the stay of mandate to November 4, 1981,

pending the filing of this Petition. Copies of these orders

staying the mandate are printed in the Appendix to this

Petition. (A. 28a; 3la). The jurisdiction of this Court

is invoked under 28 U.S.C. § 1254(1) (1976).

CONSTITUTIONAL, STATUTORY, AND

REGULATORY PROVISIONS INVOLVED

Relevant portions of the following constitutional, statu-

tory, and regulatory provisions are set forth in the Ap-

pendix to this Petition (A. 32a-43a) :

Constitution:

Fifth Amendment to the United States Constitution

Statutes:

12 U.S.C. § 1904, Note (1976) (provision that gave

the Temporary Emergency Court of Appeals juris-

diction of all appeals in cases and controversies aris-

ing under the Economic Stabilization Act)

15 U.S.C. § 754 (1976) (provision of the Emergency

Petroleum Allocation Act prescribing criminal penal-

ties for violation of regulations promulgated there-

under, and incorporating the jurisdictional provisions

of the Economic Stabilization Act)

18 U.S.C. § 1001 (1976) (false statement statute)

18 U.S.C. § 1341 (1976) (mail fraud statute)

18 U.S.C. § 1962 (1976) (RICO statute)

Regulations:

10 C.F.R. § 212.131 (regulation under the Emer-

gency Petroleum Allocation Act requiring the cer-

tification of “old” and “new” oil)

10 C.F.R. § 205.202 (regulation under the Emergency

Petroleum Allocation Act making any practice that

circumvents regulations under the Act a violation

of the regulations)

STATEMENT OF THE CASE

Pursuant to its authority under the Emergency Petro-

leum Allocation Act (EPAA), 15 U.S.C. § 751 et seq.

(1976), the Federal Energy Administration (FEA)

promulgated a regulation classifying domestically pro-

duced oil as either “old” oil or “new” oil. “Old” oil was

subject to a lower price ceiling than “new” oil. 10 C.F.R.

§ 212.131. The distinction does not derive from any

physical difference between “old” oil and “new” oil;

rather, the distinction was created by the regulations

and depends upon base-year production levels. When a

reseller transacts a sale to a purchaser, the regulation

requires that the reseller certify to the purchaser the

quantities of old“ and new“ oil included in the transac-

tion. 10 C.F.R. § 212.131 (b) (1). The certification re-

quirement ostensibly served to tag the oil as it moved

into the marketplace, allowing purchasers to distinguish

the high-priced “new” oil from the low-priced “old” oil.

On April 30, 1979, a federal grand jury in Houston,

Texas, returned a 29-count indictment against two

domestic companies involved in the reselling of crude oil

(including TCC), several individuals associated with

them (including Masek), and two foreign corporations.

(A. 44a). In essence the indictment charged that the

defendants participated in a fraudulent scheme to “mis-

certify” “old” oil as “new” oil and that they made false

certifications in furtherance of that scheme. Petitioners

TCC and Masek were both accused of 21 counts of mail

fraud, 18 U.S.C. $1341 (1976), based on 21 invoices

alleged to contain miscertifications of the amounts of

“old” and “new” oil being sold. In addition, petitioners

TCC and Masek were both charged with six counts of

making false statements in a matter within the jurisdic-

tion of the FEA, 18 U.S.C. § 1001 (1976), based on six

alleged miscertifications submitted to purchasers in con-

nection with the sale of crude oil. Masek was also

charged with participating in a pattern of racketeering

activity in violation of 18 U.S.C. §1962(c) (1976), the

predicate offenses being the alleged violations of the mail

fraud statute, and with conspiring to violate 18 U.S.C.

§ 1962(c) (1976), in violation of 18 U.S.C. § 1962(d)

(1976). (A. 44a-77a). Although each count of the in-

dictment charged a violation of a section of Title 18,

each count depended upon an alleged violation of the

certification regulation promulgated under the EPAA.

On June 22, 1979, TCC and Masek moved to dismiss

the indictment, arguing, inter alia: (1) that the EPAA

preempts application of 18 U.S.C. §§ 1001, 1341, and

1962 to the conduct alleged in the indictment; and (2)

that the certification regulation does not give fair notice

and therefore cannot be the predicate for a criminal

prosecution. (CA App. 58-89). With respect to the

six counts based on 18 U.S.C. § 1001, defendants also

sought dismissal on the further ground that the statute

does not apply to statements, such as EPAA certifica-

tions, which are not submitted to the government and

do not provide the basis for the procurement of govern-

ment funds. (CA App. 56).

On July 24, 1979, the trial court, in an oral ruling

from the bench, dismissed the indictment “for the reasons

stated in the briefs of the defendants.” (A. 23a). The

trial judge stated that “[m]y main concern, the reason

why I am going to grant the motion, is [that] I think

the way the Government should proceed in this matter

is under the Energy Act.” Jd. On July 25, 1979, a

written order was entered, dismissing all counts of the

indictment “for the reasons set out in Defendants’

briefs.” (A. 20a). The government noted an appeal

from the order of dismissal to the United States Court

of Appeals for the Fifth Circuit. (CA App. 152).* The

government did not note an appeal to the Temporary

Emergency Court of Appeals (“TECA”).

On appeal, TCC and Masek argued that the Fifth

Circuit lacked jurisdiction because the TECA has ex-

clusive jurisdiction over appeals from district court de-

cisions in cases and controversies arising under the

EPAA. See 15 U.S.C. § 754. Petitioners contend that

the TECA has exclusive appellate jurisdiction whenever

a district court adjudicates an EPPA issue (i.e, an

issue involving the applicability or effect of the EPAA),

including issues raised by way of defense. Petitioners

contended that the question whether the EPAA preempts

application of the federal criminal statutes relied upon

in the indictment is an EPAA issue, and that the ques-

tion whether the EPAA regulation whose violation was

charged in the indictment is unconstitutionally vague is

also an EPAA issue. Petitioners further maintained

that the trial court decision was correct on the merits.

The Fifth Circuit held that it had jurisdiction over

the appeal and that the district court had erred in dis-

missing the indictment. Although the district court had

sustained the defendants’ contentions that the EPAA pre-

empts application of 18 U.S.C. §§ 1001, 1341, and 1962

to miscertification of “old” oil as “new” oil, and that the

EPAA certification regulation does not give fair notice

of the conduct it requires, the Fifth Circuit concluded

that no EPAA issue had been raised or adjudicated.

Having staked out its jurisdiction, the Fifth Circuit pro-

ceeded to reverse the District Court’s conclusion on the

merits, holding that “the question presented here is not

properly cast as one of preemption” (A. 13a n.5),

and that the vagueness of the certification requirements

is irrelevant because the defendants were charged under

The instant case was consolidated for argument and decision

below with United States v. Uni Oil Co., Inc., No. 79-2488, in which

the government also appealed from the dismissal of an indictment

concerning an alleged scheme to miscertify oil.

Title 18 and the government would not prevail at trial

unless it proved that the defendants knew that the cer-

tifications were false. (A. 7a)

Defendants timely filed petitions for rehearing and

rehearing en banc. On September 4, 1981, the Fifth

Circuit issued a per curiam opinion in which it denied

the petitions for rehearing but modified the portion of

its original opinion concerning the federal false state-

ment statute. The panel revised its discussion of § 1001

to take account of the absence of any evidence in the

record to support the statement in the original opinion

that the statements reached or influenced the FEA.

(A. 18a-19a).

REASONS WHY THE WRIT SHOULD BE GRANTED

1. The court of appeals’ decision that the TECA lacks

exclusive appellate jurisdiction where a district court

holds that the EPAA preempts another statute and

that an EPAA regulation is unconstitutionally vague

is in conflict with the decisions of other courts.

When Congress enacted the EPAA, 15 U.S.C. § 751

et seq. (1976), it gave the TECA, rather than the cir-

cuit courts, jurisdiction to review decisions by district

courts in cases and controversies arising under the Act.

The EPAA incorporates Section 211 (b) (2) of the Eco-

nomic Stabilization Act of 1970 (ESA), as amended, see

12 U.S.C. § 1904, Note, incorporated by reference in 15

U.S.C. S 754(a) (1), which stated as follows:

“The Temporary Emergency Court of Appeals shall

have exclusive jurisdiction of all appeals from the

district courts of the United States in cases and

controveries arising under this title or under regula-

— or orders issued thereunder.“ (Emphasis sup-

plied.)

Congress thus created an “exception to the broad juris-

diction of the courts of appeals over ‘appeals from all

* Although the ESA itself is no longer in effect, this jurisdictional

provision remains in force as incorporated in the EPAA.

final decisions of the district courts of the United

States.“ Bray v. United States, 423 U.S. 73, 74 (1975)

(quoting 28 U.S.C. § 1291 (1976) ).

Since the indictment here did not purport to plead

criminal offenses under the EPAA, the threshhold ques-

tion addressed by the opinion below was whether the

words “arising under” in the TECA’s exclusive jurisdic-

tional statute limit its jurisdiction to cases in which the

indictment or complaint is itself based upon the EPAA.

Cf. Louisville and Nashville Railroad Co. v. Mottley, 211

U..S 149, 152 (1908) (“a suit arises under the Consti-

tution or laws of the United States only when the plain-

tiff’s statement of his own cause of action shows that it

is based upon those laws or that Constitution”). This

question is obviously of great importance in the division

of jurisdiction between the TECA and the circuit courts.

Most courts considering the matter have held that the

TECA’s “arising under” jurisdiction, in contrast to the

federal question jurisdiction of the district courts, is not

determined solely by the allegations of the indictment or

complaint, but instead includes EPAA issues raised by

way of counterclaim or defense.“

Applying the Mottley rule in determining the TECA’s

jurisdiction would be inconsistent with the congressional

purpose “to funnel into one court all the appeals arising

out of District Courts and thus gain in consistency of

decision.” * See Citronelle-Mobile Gathering, Inc. v. Gulf

Oil Corp., 591 F.2d at 716; Note, Th Appellate Juris-

diction of the Temporary Emergency Court of Appeals,

5 See Mountain Fuel Supply Co. v. Johnson, 586 F.2d 1375, 1383-

84 (10th Cir. 1978), cert. denied, 441 U.S. 952 (1979); Citronelle-

Mobile Gathering, Inc. v. Gulf Oil Corp., 591 F.2d 711, 715-16

(Temp. Emer. Ct. App.), cert. denied, 444 U.S. 879 (1979); Newell

v. Federal Energy Administration, 591 F.2d 704, 710-11 (Temp.

Emer. Ct. App. 1979); Coastal States Marketing Inc. v. New

England Petroleum Corp., 604 F.2d 179, 187 (2d Cir. 1979).

Report of the Senate Committee on Banking, Housing and

Urban Affairs, S. Rep. No. 92-507, 91st Cong., Ist Sess. 10, re-

printed in 1971 U.S. Code Cong. & Ad. News 2283, 2292.

64 Minn. L. Rev. 1247, 1264 (1980). Furthermore, the

rationale for the Mottley rule does not apply to the

determination of the TECA’s jurisdiction. The rule

allows a federal district court to determine jurisdiction

“at the outset of the proceeding rather than making it

dependent upon the unpredictable contingencies of the

defenses or replications which may be made.” Hart, The

Relations Between State and Federal Law, 54 Colum.

L. Rev. 489, 520 n.108 (1954). But as Judge Newman

observed in Coastal States Marketing, Inc. v. New Eng-

land Petroleum Corp., 604 F.2d at 186, “[w]hatever the

hazards might be in forecasting whether a federal ques-

tion will really be in controversy when pleaded in an

answer, no similar risks are encountered in routing to

a specialized federal appellate court all issues within its

special competence that have actually been adjudicated

in a district court.” *

One circuit has held that the Mottley rule does apply

to the determination of the TECA’s exclusive appellate

jurisdiction. St. Mary's Hospital of East St. Louis, Inc.

v. Ogilvie, 496 F.2d 1324 (7th Cir. 1974). In its opinion

in St. Mary’s Hospital, however, the Seventh Circuit did

not discuss either the rationale of the well-pleaded com-

plaint rule or the legislative purpose underlying the

vesting of exclusive jurisdiction in a single appellate

court.“

Notwithstanding the decision in St. Mary's Hospital,

the trend of authority suggests that the TECA has ex-

Cf. Consolidated Rail Corp. v. State of Illinois, 423 F. Supp.

941, 947 (Spec. Ct. 1976), cert. denied, 429 U.S. 1095 (1977)

(“{t]here is no apparent reason, apart from considerations of

symmetry,” to apply the well-pleaded complaint rule in delineating

the exclusive jurisdiction of the Special Court under the Regional

Rail Reorganization Act).

Review on certiorari in this case would thus afford an oppor-

tunity to resolve the conflict among the circuits on the threshhold

question whether EPAA issues not raised in the complaint or

indictment can bring a case within the TECA’s “arising under”

jurisdiction.

clusive appellate jurisdiction not only where the com-

plaint or indictment is based upon the EPAA, but also

where a district court decides an EPAA issue raised by

a counterclaim * or by a defense.“ The court below thus

joined the majority of courts in holding that the TECA

“is vested with jurisdiction over any EPAA issue ad-

judicated by a district court.” (A. 10a).

(a) The court of appeals’ decision that the question

whether the EPAA preempts another statute is

not an EPAA issue conflicts with decisions of the

Second Circuit, the Tenth Circuit, and the TECA.

In holding that the TECA does not have exclusive ap-

pellate jurisdiction where a district court determines

that the EPAA preempts the application of another

statute, the court of appeals reached a conclusion in con-

flict with decisions of the Second Circuit, the Tenth Cir-

cuit, and the TECA. This precedent, if allowed to stand,

could severely disrupt the congressional plan for proper

allocation of jurisdiction between the TECA and the

circuit courts.

The decision below is directly contrary to the decision

of the Second Circuit in Mobil Oil Corp. v. Tully, 639

F.2d 912 (2nd Cir.), cert. denied, 101 S. Ct. 3123

(1981). In Tully the Second Circuit recognized that

it had no jurisdiction to hear an appeal from a district

court decision holding that the EPAA preempts a state

statute taxing the gross receipts of oil companies and

prohibiting the companies from passing the tax through

® See Mountain Fuel Supply Co. v. Johnson, 586 F.2d at 1383-

84; Citronelle-Mobile Gathering, Inc. v. Gulf Oil Corp., 591 F.2d

at 715-16.

10 See Newell v. Federal Energy Administration, 591 F.2d at

710-11; Coastal States Marketing, Inc. v. New England Petroleum

Corp., 604 F.2d at 197. See generally C. Wright, A. Miller, & E.

Cooper, 17 Federal Practice and Procedure § 4105 (1980 Supp.).

11 See also Mobile Oil Corp. v. Dubno, 639 F.2d 919 (2nd Cir.),

cert. denied, 101 S. Ct. 3122 (1981) (companion case reaching

same conclusion as to jurisdiction) .

to consumers in the form of a price increase. The

Second Circuit held that “[t]he preemption issue

does present an EPAA question” because “the deter-

mination that the state law conflicted with the federal

regulations. . necessitates ‘a careful examination of

the Federal EPAA and the Mandatory Price Regulations

promulgated thereunder.” 639 F.2d at 915 (quoting

Mobil Oil Corp. v. Tully, 499 F. Supp. 888, 892

(N.D.N.Y. 1980)) (emphasis supplied). The opinion in

Tully emphasized that “[w]hether [the district court’s]

analysis was correct is not properly before this court

since in making the analysis the District Court was

clearly construing and interpreting the EPAA and its

regulations.” 639 F.2d at 915.

The court of appeals here lacked jurisdiction for the

same reason that the Second Circuit lacked jurisdiction

in Tull. The district court expressly stated that “[m]y

main concern, the reason why I am going to grant the

motion [tv dismiss the indictment], is [that] I think

the way the Government should proceed in this matter

is under the Energy Act.” (A. 23a) (emphasis supplied).

In holding that the EPAA preempts application of 18

U.S.C. §$ 1001, 1342, and 1962 (1976) to the alleged

miscertification of oil in violation of a regulation promul-

gated under the EPAA, the district court adjudicated an

EPAA issue. Only the TECA has jurisdiction to hear an

appeal from such an adjudication.

Whether the EPAA preempts application of another

statute constitutes an EPAA issue, since resolution of

that issue requires a determination of the effect of the

EPAA. Where application of a general statute would

impede achievement of the objectives of a subsequently

12 It is of no moment that in Tully the question was whether

EPAA preempted a state statute, whereas here the district court

held that the EPAA preempts another federal statute. The district

court decisions in both cases required a construction of the EPAA,

and both decisions should therefore be appealable only to the

TECA.

enacted statute specifically addressing certain conduct,

the specific statute preempts the general statute. See

point 3 infra. The defendants relied on this principle

in their motion to dismiss the indictment. (CA App. 77-

85). In holding that the EPAA does preempt 18 U.S.C.

§§ 1001, 1341, and 1962, the district court necessarily

concluded that application of those general federal crimi-

nal statutes would interfere with the fulfillment of the

congressional objectives underlying the EPAA. What the

Second Circuit said in Tully is equally applicable here:

“[(I]n making the analysis the District Court was clearly

construing and interpreting the EPAA and its regula-

tions.” 639 F.2d at 915. The preemption issue was there-

fore an EPAA issue.“

1 The court of appeals erred in relying on United States v.

Cooper, 482 F.2d 1393 (Temp. Emer. Ct. App. 1973). (A. 7a-8a).

The defendant in Cooper was accused of making false statements

concerning a matter within the jurisdiction of a federal agency,

in violation of 18 U.S.C. § 1001, in that he made false representa-

tions to the IRS in an attempt to demonstrate that the rents he

was charging his tenants did not contravene rent control regula-

tions promulgated under the ESA. Following conviction and appeal

to the TECA, that court held that the charge did not arise under

the ESA and that jurisdiction over the appeal therefore lay with

the Ninth Circuit. 482 F.2d at 1397-98. Cooper is plainly dis-

tinguishable from the instant case, however, because there no

claim based on the ESA or the EPAA was raised as a defense to

the indictment.

The jurisdictional posture of this case is also significantly differ-

ent from that of United States v. Zang, where the TECA dismissed,

for lack of jurisdiction, an appeal from the denial of a motion to

dismiss an indictment, 645 F.2d 999 (1981), and thereafter dis-

missed, again for lack of jurisdiction, a subsequent appeal from

the denial of a motion for judgment of acquittal, a motion for new

trial, and a motion in arrest of judgment, 653 F.2d 493 (1981),

cert. denied, 50 U.S.L.W. 3248 (Oct. 5, 1981). Although the de-

fendants in Zang contended that the EPAA preempted application

of Title 18 to alleged miscertification of oil, they did not maintain

that the district court’s adjudication of that defense brought the

case within the TECA’s appellate jurisdiction. Instead, they main-

tained that the indictment arose under the EPAA. See Reply

Brief of Appellant W. Darrell Zang at 4, 645 F.2d 999 (“It is clear

The court of appeals’ decision not only conflicts with

the Second Circuit’s decision in Tully concerning the

precise question whether the TECA has exclusive ap-

pellate jurisdiction where a district court has adjudicated

a claim that the EPAA preempts another statute. It

also conflicts with decisions of the Tenth Circuit and

the TECA holding that any dispositive issue requiring

a determination of the applicability or effect of the

EPAA is an EPAA issue, and that an appeal from such

an adjudication can be heard only by the TECA. In

Citronelle-Mobile Gathering, Inc. v. Gulf Oil Corp., 591

F.2d at 716, for example, the TECA held that it had

exclusive jurisdiction because the district court had ad-

judicated a counterclaim that “depend[ed] on the retro-

active application vel non of the EPAA amendments.”

Significantly, the TECA and the Tenth Circuit have held,

in contrast to the decision below, that an issue involving

the construction of the EPAA is an EPAA issue even

if its resolution also entai!s consideration of other sources

of law.

Thus, in United States v. Wickiand, 619 F.2d 75

(Temp. Emer. Ct. App. 1980), the TECA concluded

that it had jurisdiction to hear an appeal from a district

court decision that the Department of Energy (DOE)

was not estopped from enforcing a subpoena issued under

a provision of the EPAA authorizing the issuance of

subpoenas in DOE investigations. The TECA explicitly

rejected the oil company’s contention that “this case

presents only ‘general legal issues’ of estoppel and sub-

poena enforcement which the court of appeals can con-

front without addressing ESA or EPAA questions.” Id.

from. . the material which the Government has presented that

this Indictment is a case or controversy arising under the EPAA.”).

The TECA thus was not required to decide whether, quite apart

from the indictment, the defendants’ preemption defense raised

an EPAA issue. Cf. Hagans v. Lavine, 415 U.S. 528, 532 n.5

(1974) (when a question of jurisdiction is passed on sub silentio,

the Court is not bound in a later case that squarely presents the

question).

at 78. Although the court acknowledged the relevance of

general principles of administrative law, it held that

an EPAA issue was presented because “[a]ny general

questions of administrative law’ are clearly interwoven

with provisions of the ESA and EPAA and invoke policy

questions directly affecting the EPAA and its enforce-

ment.” Id. at 79.

The Tenth Circuit reached a similar conclusion in

Mountain Fuel Supply Co. v. Johnson, 586 F.2d 1375.

There the plaintiff brought an action for breach of a

contract in which it had agreed to sell crude oil to the

defendant. The defendant filed a counterclaim for breach

of contract, alleging that plaintiff had disregarded and

wrongfully terminated the contract by certain action

alleged to violate the EPAA. While the Tenth Circuit

noted that the counterclaim implicated principles of con-

tract law, it held that the TECA had exclusive jurisdic-

tion because “these ‘contract law’ allegations are not

separable from the federal acts and regulations.” Id. at

1384.

Finally, the Fifth Circuit’s decision here is incon-

sistent with the standard implicit in this Court’s deci-

sion in Bray v. United States, 423 U.S. 73 (1975) (per

curiam). In Bray the defendant was convicted of crimi-

nal contempt for refusal to comply with an IRS subpoena

issued in the course of an investigation into possible

violations of the ESA. The Court of Appeals for the

Tenth Circuit dismissed the defendant’s appeal, holding

that TECA had exclusive jurisdiction. This Court granted

the defendant’s petition for certiorari and vacated the

Tenth Circuit’s decision, stating that [rleview in the

TECA of criminal contempt convictions relating to com-

pliance investigations or enforcement efforts is not nec-

essary to assure uniform interpretation of the substan-

tive provisions of the stabilization scheme.” Id. at 75

(emphasis supplied).

This Court has also recognized in other jurisdictional con-

texts that a claim that one law preempts another arises under the

Just as the TECA has not been given exclusive juris-

diction where such jurisdiction is “not necessary to as-

sure uniform interpretation of the substantive provisions”

of the ESA or the EPAA, the TECA should have exclusive

jurisdiction where such jurisdiction is necessary to assure

a uniform interpretation. But the opinion below mis-

applied the teaching of Bray, holding that “[b]ecause

the preemption issue concerns only the EPAA’s effect

on an unrelated criminal statute, [rleview in the

TECA .. is not necessary to assure uniform inter-

pretation of the substantive provisions’” of the EPAA.

(A. 12a-18a) (quoting Bray v. United States, 423 U.S.

at 75; emphasis supplied by Fifth Circuit). This con-

clusion, for which the opinion below offered no support-

ing reasons, cannot withstand scrutiny.

The legislative history of the ESA demonstrates that

the creation of a special appellate court to hear all ap-

peals in cases arising under the statute reflected a fear

that inconsistent appellate decisions would lead to “breaks

or stays in the operation of the Stabilization Program.“

S. Rep., supra, at 10. The incorporation in the EPAA

of the ESA’s provisions concerning the TECA obviously

law that assertedly occupies the field. For example, when an in-

junction is sought against enforcement of a state statute on the

ground that it conflicts with federal law, the case arises under

federal law and jurisdiction therefore lies under 28 U.S.C. § 1331

(1976), the general federal question statute. See, e.g., New York

Tel. Co. v. New York State Dept. of Labor, 440 U.S. 519 (1979). If

the particular federal law relied upon is a statute regulating com-

merce, the controversy arises under an “Act of Congress regulat-

ing commerce” and the federal courts consequently have jurisdiction

under 28 U.S.C. § 1837 (1976). See, e.g., American Federation of

Labor v. Watson, 327 U.S. 582, 591 (1946) (construing predecessor

of § 1337). In these situations, to be sure, the preemption issue

is raised by the initial pleading, rather than by defense. But that

distinction goes to the separate question whether the Mottley

rule should limit the TECA’s exclusive appellate jurisdiction. Once

it is established that the Mottley rule should not be applied in

determining the TECA’s jurisdiction, this Court’s decisions in

such cases as New York Tel. Co. and Watson suggest that tiie

preemption issue raised here is indeed an EPAA issue.

reflected a similar concern with respect to the regulatory

scheme imposed by the EPAA. The important question

is thus whether that regulatory scheme would be threat-

ened by inconsistent appellate decisions concerning the

effect of the EPAA’s criminal provisions on prosecutions

brought under general criminal statutes on the basis of

conduct proscribed by regulations promulgated under the

F?AA.

This question must be answered in the affirmative.

The government itself argued to the court below that a

decision concerning the preemption issue has à major

impact on its oil pricing enforcement scheme:

“The action of the district court in Houston

confuses the entire oil pricing criminal enforcement

program.

5 * * *

The present shortage of petroleum produets, and

the prospects that this condition will be chronie,

necessitates an effective enforcement program at

the earliest possible moment.”

Brief for Appellant, No. 79-2488, at II-III. It is ob-

viously of great importance to both the government and

the regulated industry to have the TECA decide once

and for all, subject only to review by this Court, whether

parties accused of violating regulations issued under the

EPAA may be prosecuted for the general criminal

offenses proscribed by Title 18 of the United States

Code—which are punishable by substantial prison sen-

tences—or whether the EPAA’s less severe criminal

penalties and its unique requirement of notice, see 15

U.S.C. § 754 (a) (4),"° were meant to be exclusive. In-

consistent decisions by different circuits would leave

individuals in some jurisdictions subject to substantial

criminal penalties without prior notice of the violation,

while individuals in other jurisdictions would receive

the protection of the EPAA’s specific notice provisions.

1 The requirement that a defendant have formal notice of a

probable violation as a prerequisite to commission of a jailable

offense is discussed in point 3 infra.

(b) The court of appeals’ decision that the constitu-

tional issue adjudicated by the district court is

not an EPAA issue also conflicts with the decisions

of other courts.

The court of appeals’ decision that the constitutional

issue adjudicated by the district court is not an EPAA

issue is also worthy of review by this Court.“

An EPAA issue was squarely presented by the de-

fendants’ contention that the EPAA certification regula-

tions do not give fair notice of what conduct they

require and therefore cannot support a criminal prosecu-

tion.“ When the district court dismissed the indictment

“for the reasons set out in Defendants’ briefs” (A. 20a),

it necessarily adjudicated that issue. Since the TECA

has exclusive appellate jurisdiction over EPAA issues

adjudicated by a district court, the Fifth Circuit had no

jurisdiction to hear the government’s appeal from this

ruling.

The opinion below emphasized that the defendants’

constitutional challenge to the indictment “was not an

attack on [the] constitutionality of the regulations per se,

but on the constitutionality of prosecuting a person for

conduct that was made criminal without fair notice.”

(A. 6a-7a). The court held that since the challenge was

directed at indictments brought under 18 U.S.C. §§ 1001,

1342, and 1962, “[t]hat issue does not require resolution

16 Since both the preemption defense and the constitutional de-

fense apply to the entire indictment, this Court should vacate the

judgment below if it concludes that either issue should have been

reviewed by the TECA.

7 In this motion to dismiss the indictment, the defendants

argued as follows:

“FEA’s Crude Oil Certification Regulations Do Not Give ‘Fair

Notice’ of What Conduct They Require and Under the Due

Process Clause Cannot Be the Basis For Criminal Prosecu-

tion[.]” (CA App. 62).

The merits of this challenge to the indictment are discussed in

point 2 infra.

of the constitutionality or even the interpretation of the

regulations; only whether the criminal statutes clearly

prescribed the conduct charged.” (A. 7a) (emphasis

supplied).

This holding is clear error. The court of appeals

ignored the teaching of M. Kraus & Bros., Inc. v. United

States, 327 U.S. 614 (1946). In Kraus this Court un-

equivocally held that when a prosecution for violation

of a eriminal statute ultimately rests upon an alleged

violation of an administrative regulation, due process

forbids conviction unless the regulation gives fair notice

of the conduct it requires. Id. at 621-22. Since the indict-

ment here depends upon alleged violations of the EPAA

regulation governing the certification of “old” and “new”

oil, it is not sufficient to consider simply the criminal

statutes relied upon in the indictment. The indictment

cannot stand unless the regulation itself gives fair notice,

for the defendants are charged with violating the criminal

statutes by violating the regulation.

To decide whether a regulation is sufficiently clear

to support a criminal prosecution, a court plainly has

to interpret the regulation. The court must determine

what conduct “men of common intelligence,” Connally v.

General Construction Co., 269 U.S. 385, 391 (1926),

would “reasonably understand to be proscribed.” United

States v. Harriss, 347 U.S. 612, 617 (1954). In making

this determination, the court obviously must scrutinize

the language of the regulation. In Kraus, for example,

this Court was called upon to construe a regulation in

order to decide whether the defendant could be subject

to criminal punishment for violating it.“

18 The court concluded as follows:

[Wie interpret [the regulation] as prohibiting only those

tying agreements involving secondary products that are worth-

less or that are sold at artificial prices. It follows that the

conviction below cannot stand.

327 U.S. at 626 (emphasis supplied).

Here the district court had to construe 10 C.F.R.

212.131 (b) (1) to decide whether, as the cefendants

contended, it failed to provide an adequate standard to

guide resellers seliing oil from their inventory. It simply

is not possible to resolve that issue without interpreting

the regulation. When the district court resolved the issue

in the defendants’ favor, it therefore adjudicated an

EPAA issue.

The court of appeals’ decision denying the TECA

jurisdiction conflicts with decisions by other circuits

and by the TECA establishing that issues requiring the

interpretation of the EPAA are EPAA issues. As noted

at pages 7-13, supra, this principle has been embraced

by the Second Circuit,’* by the Tenth Circuit,” and by

the TECA itself.“ The court of appeals’ decision is also

inconsistent with the standard suggested by this Court’s

opinion in Bray v. United States, 423 U.S. at 75 (“Re-

view in the TECA of criminal contempt convictions re-

lating to compliance investigations or enforcement efforts

is not necessary to assure uniform interpretation of the

substantive provisions of the stabilization scheme.”).

19 See M. Spiegel & Sons Oil Corp. v. B. P. Oil Corp., 531 F.2d

669, 671 (1976) (per curiam) (the TECA has exclusive jurisdic-

tion because “construction of the EPAA . . . will control the litiga-

tion.”) ; Coastal States Marketing, Inc. v. New England Petroleum

Corp., 604 F.2d at 187 (EPAA issue adjudicated where district

court rejected contention that certain sales violated the EPAA) ;

Mobil Oil Corp. v. Tully, 689 F.2d at 915 (EPAA issue adjudicated

where “the District Court was clearly construing and interpreting

the EPAA and its regulations.“

See Mountain Fuel Supply Co. v. Johnson, 586 F.2d at 1384

(1978) (EPAA issue adjudicated where district court entered a

judgment in favor of defendant on counterclaim that turned upon

“the language of the price and relationship freeze imposed by

the federal government“).

21 See Newell v. Federal Energy Administration, 591 at 710

(1979) (EPAA issue adjudicated where the ‘applicability’ of

. . . Section 5(a)(1)(B) of the EPAA was argued by the parties

and . . the district court made findings on such issue“); Citronelle-

Mobile, Gathering, Inc. v. Gulf Oil Corp., 591 F.2d at 716 (the

2. The EPAA regulations are unconstitutionally vague

and fail to provide fair warning of what obligations

they impose.

The merits of defendants’ challenge to the constitu-

tionality of the EPAA certification regulation is also a

significant issue warranting certiorari.” The EPAA

regulation fails to provide fair warning of the obliga-

tions it imposes. Due process therefore precludes crimi-

nal prosecution for an alleged violation of the regulation.

See Lanzetta v. New Jersey, 306 U.S. 451, 453 (1939).

Viewed in the light of industry practice and agency

action, the regulation fails to give adequate warning.

The seemingly simple certification requirement, when

applied not to producers but to resellers,“ such as the

defendants, would be clear only if it were assumed that

resellers have no inventory.“ Given a “no inventory”

assumption, the regulation would indicate that when a

reseller buys a particular barrel of oil from a producer

and sells that same barrel of oil to a refiner, he should

make the same certification to the refiner that the pro-

ducer made to him—since it is the same oil.

TECA has exclusive jurisdiction because issue raised by counter-

claim “requires application and interpretation of the EPAA”);

United States v. Wickland, 619 F.2d at 79 (the TECA has exclusive

jurisdiction because district court adjudicated issue “interwoven

with provisions of the ESA and EPAA and invok[ing] policy

questions directly affecting the EPAA and its enforcement.”’).

Although the Ninth Circuit has not had occasion to address the

subject in a published opinion, it is noteworthy that in Wickland

that Court held that it iacked jurisdiction and transferred the case

to the TECA. See id. at 77.

22 The merits will be reviewed if, contrary to Petitioners’ con-

tention, the Fifth Circuit’s jurisdiction is sustained.

23 The regulations were apparently written with producers rather

than resellers primarily in mind.

The term “inventory,” as used in the crude oil reselling in-

dustry, does not necessarily refer to a physical inventory. It may

also denote a book inventory kept for accounting purposes.

But the regulations did not inform a reseller what

certifications were required when, as is normally the

case, a reseller sells a barrel of oil from inventory. The

regulations do not indicate how the proper certification

is then to be determined; since the “old” and “new” oil

that the reseller previously purchased for his inventory

are physically indistinguishable, it is not clear how the

reseller is to certify a barrel of oil that he subsequently

sells. To make this clear, the regulations would have

had to indicate what accounting system a reseller should

use (e.g., FIFO or LIFO). Unfortunately, the regulations

were silent on this score.

Thus the regulations are unconstitutionally vague. See

United States v. Powell, 423 U.S. 87, 92 (1975) ; Smith

v. Goguen, 415 U.S. 566, 577-78 (1974) ; United States v.

L. Cohen Grocery, 255 U.S. 81 (1921). When a prosecu-

tion under a criminal statute depends upon an alleged

violation of an administrative regulation, both the statute

and the regulation must give fair notice. See M. Kraus

& Bros., Inc. v. United States, 327 U.S. at 621.

The Fifth Circuit reversed the dismissal of the in-

dictment by adopting the rationale that an allegation of

knowing and willful violation will cure the defect of

unconstitutional vagueness. (A. 7a). But this Court has

held that unclear regulations cannot be saved by a clear

indictment, or even by a jury finding of willfulness.

United States v. L. Cohen Grocery Co., 225 U.S. 81;

M. Kraus & Bros., Inc. v. United States, 327 U.S. 614.

The Fifth Cireuit's ruling should be reversed, as in con-

flict with controlling decisions of this Court.

25 While the EPAA regulation requiring the certification of

“old” and “new” oil was removed earlier this year, 46 Fed. Reg.

36099, and the President’s regulatory authority under the EPAA

expired on September 30, 1981, see 15 U.S.C. § 760(g), the EPAA

has an explicit savings clause providing that the expiration of the

regulatory program shall not affect liability for conduct while

the regulations were in force, whether or not a civil or criminal

proceeding is pending at the time the program expired. See id.

DOE has identified approximately $15 billion in apparent viola-

3. The criminal provisions of the EPAA preempt the

application of the relevant provisions of Title 18 to

conduct involving alleged miscertification of the regu-

latory category of oil.

In their motion to dismiss the indictment, Masek and

TCC argued that to the extent 18 U.S.C. §§ 1001, 1341,

and 1962 might have otherwise applied to the allegations

made in the indictment, they were preempted by the

specific penalty provisions of the EPAA, 15 U.S.C. § 754

(a) (3) (B). (CA App. 77-86).

The evaluation of a preemption question is. . . in-

evitably one of comparing two statutes.“ Swift & Co. v.

Wickham, 382 U.S. 111, 120 (1965). The governing rule

of construction is that, when a general statute (here the

provisions of Title 18) interferes with the purposes and

goals of a specific statute (here the EPAA), the general

statute is preempted. Simpson v. United States, 435 U.S.

6, 15 (1978); Busic v. United States, 446 U.S. 398

(1980) ; United States v. Beer, 518 F.2d 168, 172 (5th

Cir. 1975). In determining whether two overlapping

statutes are consistent, the issue is whether one “stands

as an obstacle to he accomplishment and execution of

the full purposes aru objectives of Congress” in enact-

ing the second statute. Hines v. Davidowitz, 312 U.S.

52, 67 (1941); Perez v. Campbell, 402 U.S. 637, 649

(1971).

Thus, in this case the EPAA and its legislative history

must be scrutinized to determine whether its objectives

would be thwarted by the application of Title 18 to the

type of conduct charged herein, involving alleged mis-

certification of the regulatory category of oil. On this

analysis, the EPAA and Title 18 provisions are clearly

inconsistent.

tions that have not yet been prosecuted, and Secretary of Energy

Edwards has stated his intention to “bring all cases to justice.”

Hearing of the House Committee on Energy and Commerce, Sub-

committee on Oversight and Investigation, April 3, 1981, at 33, 79

(unpublished transcript).

Under the EPAA, criminal fines may be imposed for

any willful violation of a regulation. 15 U.S.C. § 754(a)

(3) (B). But no officer or agent of a corporation may

be imprisoned unless he has received prior notice of a

regulatory violation. 15 U.S.C. § 754(a) (4). This notice

requirement is completely absent from Title 18.

The prior notice provision is central to the penalty

provisions of the EPAA. The legislative history demon-

strates that in 1975, after hearings on enforcement of

EPAA regulations, Congress amended the penalty provi-

sions of the EPAA. Energy Policy and Conservation

Act of 1975, Pub. L. No. 94-163, 89 Stat. 871. The

amendment increased the maximum. punishment for

breaches of EPAA provisions and regulations.“ Signifi-

cantly, however, this modification was accompanied by

the recognition that it would be unfair to punish individ-

uals for violating regulations that Congress viewed as

extremely difficult to comprehend.” Thus, the prior notice

provision was added, to ensure that no one would be in

jeopardy of imprisonment without having been clearly

put on notice that he was violating a regulation.

Here, the EPAA and its regulations cover precisely

the conduct which is charged under various sections of

Title 18 in the indictment. The government argued below

that the EPAA regulations did not cover all the conduct

punishable under Title 18 in the indictment. But the

government overlooked a crucial provision in the EPAA

regulations. That regulation provides as follows:

Halny practice that circumvents or contravenes or

results in a circumvention or contravention of the

requirements of any provision of this chapter or any

2 The amended penalty provisions are codified at 15 U.S.C.

§ 754(3) (B) and (4).

27 The Federal Energy Administration: Enforcement of Petro-

leum Price Regulations, Report of the Subcommittee on Administra-

tive Practice and Procedure of the Senate Committee on the Judi-

ciary, 94th Cong., Ist Sess. at 17, 26, 38 (1975).

order issued pursuant thereto is a violation of the

.. regulations stated in this chapter.”

10 C.F.R. § 205.202.

The EPAA operates as the specific statute which

reaches all elements of the conduct alleged to be wrongful

under provisions of Title 18. There is no behavior al-

leged in the indictment that can be punished under the

relevant Title 18 provisions which does not also entail

a violation of the EPAA. And the relevant provisions

of Title 18 contain no notice requirement.

There is another critical difference between the pen-

alties provided by Title 18 and those provided by the

EPAA. The EPAA, unlike Title 18, provides for a

specifically graduated schedule of fines—some of them

higher than the Title 18 provisions would allow—depend-

ing on the violator’s position in the chain of distribu-

tion. 15 U.S.C. § 754(3) (B).

The EPAA provisions regarding prior notice and fines

are unique—and the legislative history establishes that

they are as important to the statutory scheme as the

delegation of rulemaking authority itself.“ The statutes

do not simply differ in penalties; they are repugnant to

one another. For the same activity, with the same in-

tent, the EPAA forbids imposition of a prison sentence

without prior notice. Yet if the conduct is prosecuted as

a mail fraud, false statement, or RICO violation under

Title 18, a person can be sentenced to years in prison.”

28 See note 27 supra; S. Rep. No. 94-516, 94th Cong., Ist Sess.

at 200, reprinted in 1975 U.S. Code Cong. & Ad. News at 2041.

2° United States v. Zang, 645 F.2d 999 (Temp. Emer. Ct. App.

1981) does not support the Fifth Circuit’s rejection of the de-

fendants’ preemption defense. The indictment here differs from

the indictment in Zang in one critical respect. According to the

indictment in Zang, the defendants had contracted to sell crude

oil to a purchaser at the same price that they paid for the oil,

plus “gathering and handling charges.” Id. at 1008. The gravamen

of the charges in the indictment was that defendants defrauded

their purchaser by lying about the price they paid, artificially

In sum, the application of Title 18 to conduct encom-

passed by the EPAA and its regulations critically inter-

feres with the policies underlying the EPAA.

4. A statement made by one private party to another

does not become punishable under 18 U.S.C. § 1001

merely because the party to whom the statement is

made relies on it in a report filed with the federal

» overnment.

The decision below reached the unprecedented and

unjustified conclusion that 18 U.S.C. § 1001 applies to

any false statement made by one private party to an-

other, whenever the party receiving the statement relies

on it in a report filed with the federal government.

(A. 18a-19a). The legislative history demonstrates that

Congress did not intend the substantial criminal penalties

provided by the statute to have such a sweeping applica-

tion.

The defendants were not charged with making false

statements to any department or agency of the United

States. Rather, the indictment charged that “Defendants,

inflating it by some seven million dollars. Jd. In short, the indict-

ment charged a garden variety fraud. The only connection between

the fraud and the EPAA was that the defendants lied about the

purchase price by telling their customer that the oil they pur-

chased was “new” oil, when they knew it was “old” oil. The critical

point is that, apart from any miscertification, the defendanta were

charged with committing fraud by lying about their original pur-

chase price and by creating fictitious entries in their books and

records to conceal the fraud.

In contrast, the indictment here does not accuse TCC and Masek

of price gouging. It charges them with no criminal conduct apart

from the alleged miscertification of “old” oi! as “new” oil. Unlike

the indictment in Zang, the indictment in this case depends upon

the alleged violations of a regulation promulgated under the EPAA.

For the reasons set forth above, ar indictment that rests on

alleged violations of an EPAA regulation must be brought under

the criminal provisions of the EPAA, or it cannot be brought at

all. The merits of this proposition simply were not before the

Court in Zang, because the indictment there alleged a fraud in-

dependent of the certification requirements.

in connection with the sale of crude oil to the oil companies

listed below, submitted. . writings . . . [falsely] certi-

fying certain barrels of crude oil.” (A. 75a). These

certifications to private purchasers are the basis of the

alleged violations of § 1001.

The court of appeals held that the indictment “suffi-

ciently charges that the allegedly false certificates of

defendants were relied on by refiners who prepared

records which ultimately influenced FEA calculations.”

(A. 19 a).“ We submit that nothing in the indictment

does allege that the certifications were relied on by

refiners or that they influenced FEA calculations. But

we do not ask this Court to grant certiorari simply to

review error in construing the language of the indict-

ment. The critical point is that, even accepting the

court of appeals’ construction of the indictment, it still

fails to state an offense under § 1001, for the certifica-

tions were not made to the government.

The legislative history of § 1001 contains no indication

that Congress intended the statute to apply to state-

ments made to private parties. Until 1934, the federal

false statement statute was limited to the presentation

of false or fraudulent monetary claims against the

United States. See Act of October 23, 1918, ch. 194,

§ 35, 40 Stat. 1015; United States v. Cohn, 270 U.S. 339

(1926). In 1934, the statute was amended to encompass

“any false or fraudulent statements or representations

.. in any matter within the jurisdiction of any depart-

ment or agency of the United States.” Act of June 18,

1934, ch. 587, § 35, 48 Stat. 996.

As this Court noted in United States v. Bramblett, 348

U.S. 503, 507 (1955), “[t]he 1934 revision was largely

* The panel revised the portion of its original opinion concern-

ing § 1001 after defendants pointed out in their petition for re-

hearing that there is nothing in the record to support the state-

ment in the original opinion that “[t)he allegedly false certifications

of defendants were relied on by refiners who prepared records

which were ultimately submitted to the FEA.” (A. 17a).

the product of the urging of the Secretary of the In-

terior.” In a letter to the Chairman of the Senate Judi-

ciary Committee, Secretary Ickes explained the reasons

for the expansion of the statute:

“This proposed bill is intended to reach the large

number of cases involving the shipment of ‘hot’ oil,

where false papers are presented in connection

therewith, and also those cases within the Public

Works Administration where contractors are per-

forming work payable from the Public Works Ad-

ministration appropriation, and false certificates are

made as to the actual wages paid.”

(A. 78a). The Senate report accompanying the bill re-

stated the objectives set forth in this letter. S. Rep. No.

1202, 73d Cong., 2d Sess. (1934).

Significantly, the “hot oil” regulatory scheme required

producers, purchasers, shippers, and refiners dealing in

oil shipped in interstate or foreign commerce to file cer-

tain affidavits with the Department of the Interior. See

Panama Refining Co. v. Ryan, 293 U.S. 388, 405-08

(1935). As one commentator has noted, “[t]he Secre-

tary of the Interior sought the amendments to the false

statement statute so that false reports filed under the

Act would be subject to criminal liability.” Note, Crim-

inal Liability for False Statements to Federal Law En-

forcement Officials, 63 Va. L. Rev. 451, 452 n.5

(1977) * There is no indication that the amendment

was intended to apply to statements not made to the

government.

n In 1934 the shipment of “hot oil” was governed by regulations

promulgated under § 9(c) of the National Industrial Recovery Act,

Pub. L. No. 73-67, 48 Stat. 195, 200 (1933). In January of

1935, the Supreme Court held that provision unconstitutional,

Panama Refining Co. v. Ryan, 293 U.S. 388, and shortly thereafter

Congress enacted the so-called Connally Hot Oil Act, Pub. L. No.

74-14, 49 Stat. 30 (1935) (current version at 15 U.S.C. §§ 715-715d

(1976) ). Regulations promulgated under this enactment similarly

required the filing of reports with the government. See United

States v. Gilliland, 312 U.S. 86, 90 (1941).

To be sure, the amendment adopted in 1934 was

framed in general terms and therefore is not limited to

the particular situations that it was originally designed

to address. Nevertheless, the potentially limitless lan-

guage of 18 U.S.C. § 1001—which is virtually identical

to the language added in 1934 *—must be construed in

light of the concerns of its framers.” As this Court

said in United States v. Bramblett, 348 U.S. at 506-08,

the words “in any matter within the jurisdiction of any

department or agency of the United States” were appar-

ently intended “to indicate that not all falsifications but

only those made to government organs were reached.”

Despite this dictum in Bramblett, lower court decisions

have established that § 1001 applies to false statements

that reach the government only indirectly but that pro-

vide the basis for the procurement of funds from the

government. The two cases relied upon in the decision

below (A. 19a) are examples of this line of cases. See

United States v. Baker, 626 F.2d 512, 514 (5th Cir.

1980) (“the false statement need not be made directlv

to a federal agency to sustain a § 1001 conviciion as

long as federal funds are involved”); United States v.

Hooper, 596 F.2d 219 (7th Cir. 1979) (employee super-

= The statute was divided into parts in 1938, with the false

statement provision remaining unchanged, Act of April 4, 1938,

Pub L. No. 75-465, 52 Stat. 197. In 1948 the faise claims provision

was codified as 18 U.S.C. § 287 (current version at 18 U.S.C. § 287

(1976) ), and the false statement provision codified as 18 U.S.C.

§ 1001. Act of June 25, 1948, Pub. L. No. 80-772, ch. 645, 62 Stat.

683. The “in any matter within the jurisdiction” clause was moved

to the beginning of the latter provision, but no changes of sub-

stance were made.

33 See, e. g., National Petroleum Refiners Association v. Federal

Trade Commission, 482 F. 2d 672, 690 (D.C. Cir. 1973), cert. denied,

415 U.S. 951 (1974) (Wright, J.) (“where a statute is said to be

susceptible of more than one meaning, we must not only consult

its language; we must also relate the interpretation we provide to

the felt and openly articulated concerns motivating the law’s

framers”).

vising student aid program made false statements to

university in order to obtain monetary reimbursement

from university account funded by HEW). Protecting

the federal treasury has historically been the primary

focus of the false statement statute, and it is proper to

give the statute a construction that will fulfill this objec-

tive. Moreover, application of § 1001 to this particular

category of statements made to private parties does not

threaten to enlarge the statute beyond reasonable bounds,

for the false statement must relate to a pecuniary claim

against the federal government.

It is quite another thing, however, to extend § 1001 to

any false statement made by one private party to an-

other that finds its way into a report or record submit-

ted by the latter to the government. In a day when

records must be submitted to the government on such a

wide variety of subjects, this interpretation could result

in an enormous expansion of the statute. As Judge Huf-

stedler has observed in another context, “[e]xtension of

section 1001 to its literal breadth . . . cannot be justi-

fied by its legislative history.” United States v. Bedore,

455 F.2d 1109, 1110, (9th Cir. 1972) (statute does not

apply to giving of false name to FBI agent). That his-

tory shows that the 1934 amendments were intended to

cover documents submitted to the federal government,

whether or not a claim for federal funds is involved.

There was no intention to reach statements made to pri-

vate parties.™

*The court of appeals’ extension of § 1001 is not only unjustified

by the legislative history; it would also create an anomaly in the

penalties prescribed by the federal criminal law. If the interpreta-

tion adopted below were good law, many statements between private

parties would be subject to penalties as severe as those provided

for perjurious testimony under oath in a court of law. See Fried-

man V. United States, 374 F.2d 363, °66 & n.1 (8th Cir. 1967).

CONCLUSION

For the foregoing reasons, the petition for a writ of

certiorari should be granted.“

Respectfully submitted,

VINCENT J. FULLER

Counsel of Record

ROBERT L. WEINBERG

KENDRA E. HEYMANN

WILLIAMS & CONNOLLY

839 17th Street, N.W.

Washington, D.C. 20006

(202) 331-5000

Attorneys for Petitioners

Four days ago an event occurred that dramatized the con-

tinuing importance of the question whether the government can

use Title 18 to prosecute the miscertification of “old” oil as “new”

oil. On October 29th, Attorney General William French Smith

announced that a federal grand jury in Tulsa, Oklahoma, returned

a 17-count indictment charging one Robert B. Sutton, owner of

BPM, Ltd. and Scurry Oil Company, of making false certifications

resulting in overcharges of two to four billion dollars. The indict-

ment alleges violations of various provisions of Title 18; as in this

case, the government chose not to proceed under the criminal provi-

sions of the EPAA. See Indictment, United States v. Sutton (N.D.

Okla., Oct. 29, 1981); Department of Justice, Press Release, Octo-

ber 29, 1981. See also note 25 supra.

81-828

No. |

ALE Air

IN THE

Supreme Cuurt of the United States

OcTOBER TERM, 1981

THE CRUDE COMPANY AND JOHN ALLEN MASEK,

Petitioners,

UNITED STATES OF AMERICA,

Respondent.

APPENDIX TO

PETITION FOR A WRIT OF CERTIORARI TO THE

UNITED STATES COURT OF APPEALS

FOR THE FIFTH CIRCUIT

VINCENT J. FULLER

Counsel of Record

RohERT L. WEINBERG

KENDRA E. HEYMANN

WILLIAMS & CONNOLLY

839 17th Street, N.W.

Washington, D.C. 20006

(202) 331-5000

Attorneys for Petitioners

A. LT —— — — ener

WILSON - Eres PRINTING CO. INC. - 789-0096 - WASHINGTON. D.C. 20001

APPENDIX

TABLE OF CONTENTS

Opinion of the Court of Appeals, May 19, 1981 ............ la

Opinion of the Court of Appeals on Petitions for Re-

hearing and Rehearing en banc, September 4,1981... 18a

Order of the District Court, July 25, 1979 20a

Transcript of Proceedings in the District Court, July

„„ 21a

Order of the Court of Appeals, September 22, 19811 28a

Order of the Court of Appeals, Oct. 8, 1911 30a

Constitution:

United States Constitution, Fifth Amendment 32a

Statutes:

ee inemcntnnienipiobenenios 33a

r ce eT ae 33a

r 35a

- ericlicagcenlatinandi 3

Dv 37a

Regulations:

r - eT 38a

r 43a

r = 1 44a

Letter of the Secretary of the Interior . Ta

APPENDIX

[OPINION OF THE COURT OF APPEALS,

MAY 19, 1981]

UNITED STATES COURT OF APPEALS

FIFTH CIRCUIT

May 19, 1981

Nos. 79-2488, 79-3082

UNITED STATES OF AMERICA,

Plaintiff-Appellant,

UNI On,, INC., THOMAS M. “Mick” HAJECATE, THOMAS

H. “Tom” HAJECATE, JAMES E. FISHER, CHARLES R.

AKIN, CHARLES Goss and BALL MARKETING ENTER-

* Defendants-Appellees.

UNITED STATES OF AMERICA,

Plaintiff-Appellant,

MID-ATLANTIC PETROLEUM COMPANY, Lb., et al.,

Defendants-Appellees.

Appeals from the United States Distriet Court

for the Southern Distriet of Texas

Before HILL, RUBIN and ANDERSON, Circuit

Judges

JAMES C. HILL, Circuit Judge:

Under regulations adopted by the Department of En-

ergy, see 10 C.F.R. §§ 212.1-212.188(1980),' vendors

of domestic crude oil operate subject to various price

controls. This appeal is a consolidation of two cases in

which appellee oil dealers were indicted for various fraud-

ulent schemes and practices which allegedly enabled them

to sell domestic crude oil for prices in excess of legal

maxima. See 10 C.F.R. § 212.131 (1980).

Although the indictments exclusively charge Title 18

offenses, both the indictments and the defenses thereto

make use of the Emergency Petroleum Allocation Act

(EPAA) 15 U.S.C. § 751 et seg. and its regulations. The

tension between Title 18 and the EPAA poses difficult

questions regarding our jurisdiction and the sufficiency

of the indictments. The district court dismissed both

indictments. For the reasons set out below, we conclude

that we have jurisdiction to consider this appeal and

that both indictments are sufficient. Therefore, we reverse

and remand to the district court.

I. The Indictments

On March 7, 1979, a grand jury in Houston, Texas re-

turned an eighty-four count indictment against Uni Oil,

Ball Marketing Enterprise and five named individual de-

fendants, Thomas “Mick” Hajecate, Thomas Tom“

Hajecate, James Fisher, Charles Akin, and Charlie Goss.

1 For convenience, we cite the applicable regulations that were

in effect until January 28, 1981. See 46 Fed.Reg. 9909 (1981).

The instant case actually involves ancestor provisions, since

amended.

2 The price at which domestic crude oil may lawfully be sold

depends inter alia on its origin. As resellers, appellees were obliged

to “certify” that the oil they traded came from “old” or “new” wells

since different ceiling prices applied to each. The gravamen of the

Government’s charge is that appellees purchased “old” oil and

resold it as “new,” willfully using fraudulent means to miscertify

it in the process.

United States v. Uni Oil, Inc., No. 79-2488 (hereinafter

Uni Oil). The indictment charged that the defendants

conspired to violate the Racketeer Influenced and Cor-

rupt Organizations (RICO) statute in order to mis-

certify and sell oil that was properly considered “old”

oil as “new” oil, 18 U.S.C. § 1962 (d) [Count 1], con-

ducted the affairs of an enterprise, Uni Oil, through a

pattern of racketeering activity which included mail

fraud and commercial bribery, 18 U.S.C. § 1962(c)

[Count 2], furthered a scheme and artifice to defraud

the United States and its agencies through mailings

which fraudulently certified “old” oil as “new” oil, 18

U.S.C. § 1341 [Counts 3-34], engaged in wire fraud to

further the same scheme and artifice, 18 U.S.C. § 1343

[Counts 35-59], and made false and fraudulent repre-

sentations regarding the origin of oil in records caused

to be prepared and submitted pursuant to government

regulation. 18 U.S.C. § 1001 [Counts 60-84].

The appellees challenged the indictment on numerous

grounds. After extensive briefing, a hearing was held

before the Honorable Ross N. Sterling of the United

States District Court for the Southern District of Texas

on May 29, 1979. At the close of argument, Judge Ster-

ling announced that the appellees’ motions to dismiss

were granted. One week later the judge issue a one

sentence order dismissing the indictment. Despite the

complexity of the issues, the order was not accompanied

by a memorandum or by any other anaylsis by the dis-

trict judge.

On April 30, 1979 a grand jury in Houston, Texas

returned a twenty-nine count indictment against the Mid-

Atlantic Petroleum Company, Ltd., The Crude Company,

Uni Oil, Inc., H.C. Iran, Ltd. and five named individuals,

John Allen Masek, Thomas “Tom” Hajecate, Thomas

“Mick” Hajecate, Charles R. Akin, and R. Stanley Corbitt.

United States v. Mid Atlantic Petroleum Co., Ltd., No.

79-3082 (herinafter Mapco). The indictment charged

that the defendants conspired to conduct the affairs of an

enterprise, Uni Oil, through a pattern of racketeering

activity in order to disguise oil that was properly to be

considered “old” oil as “new” oil, 18 U.S.C. § 1962(d)

[Count 1], conducted the affairs of Uni Oil through a

pattern of racketeering activity, 18 U.S.C. § 1962(c)

[Count 2], caused false and fraudulent invoices and cer-

tificates to be placed in the mail 18 U.S.C. § 1341 [Counts

3-23], and knowingly made false and fraudulent repre-

sentations in a matter within the jurisdiction of the Fed-

eral Energy Administration, i. e., falsely certifying do-

mestic crude oil, 18 U.S.C. § 1001 [Counts 24-29].

As in Uni Oil, the appellees challenged the indictment

on numerous grounds. After extensive briefing, oral

argument was held before the Honorable Ross N. Ster-

ling of the United States District Court for the Southern

District of Texas. From the bench, Judge Sterling

ordered dismissal of the indictment for “the reasons

stated in the Defendants’ briefs.” On July 25, 1979,

Judge Sterling issued a written order granting the mo-

tions to dismiss “for the reasons set out in the Defend-

ants’ briefs.”

II. Discussion

A. Jurisdiction

The threshold question is whether we have jurisdiction

to consider this appeal. Section 211 (b) (2) of the Eco

nomic Stabilization Act of 1970 provides that the Tempo-

rary Emergency Court of Appeals shall have “exclusive

jurisdiction of all appeals from the district courts of the

United States in cases and controversies arising under

this title or under regulations or orders issued there-

under.” 12 U.S.C. § 1904 note (West Supp. 1977) Sec-

tion 5(a)(1) of the Emergency Petroleum Allocation

Act, as amended, 15 U.S.C. § 754, incorporates and

carries forward this grant of special jurisdiction. Ac-

cordingly, if the district court adjudicated an EPAA issue

we lack jurisdiction. Coastal States Marketing, Inc. v.

New England Petroleum Corp., 604 F.2d 179, 187 (2d

Cir. 1979).

We begin by noting that an EPAA issue is not raised

simply because the indictments “included an explana-

tion of the EPAA regulations proscribing miscertifica-

tion and that such regulations provided a convenient for-

mat for defendants’ [alleged] scheme of fraud and crim-

inal enterprise,” United States v. Zang, 645 F.2d 999 at

1003 (Em.App. 1981). However, the thrust of appellees’

argument is not that the indictment arose under the

EPAA. Rather, they contend that two EPAA issues were

raised in defense to the indictment. See Coastal States

Marketing, Inc. v. New England Petroleum Corp., 604

F.2d 179 (2d Cir. 1979). First, they argue that the

EPAA regulations “upon which the charges were predi-

cated” are unconstitutionally vague. Second, they argue

that the EPAA preempted certain Title 18 provisions as

they might have otherwise applied to the allegations in

the indictment. See Post Argument Brief of Appellees

The Crude Company and Masek at 2. Appellees urge that

the above issues require a constitutional construction of

the EPAA; hence, both the letter and spirit of § 211(b)

(2) are served by transferring this case to TECA. See

United States v. Wickland, 619 F.2d 75 (Em.App. 1980).

Appellees excellent briefs present a forceful argument.

Nonetheless, a close examination of the character of the

issues presented reveals that none of them arise under

the EPAA.

B. Jurisdiction and Vagueness

An analysis of the appellees’ defenses can not be con-

ducted without reference to the indictments. Considering

the indictments themselves, not the ones the defend-

ants seek for us to image in their stead, there is no

charge of a violation of EPAA regulations. The crimes

charged vary with each count, but Count 3 of No. 79-

2488 will serve as an example. The issue under Count

3 is whether Invoice # 147, mailed to Mid-Atlantic Pe-

troleum Company from one of the co-defendants, Uni

Oil, on July 22, 1976, contained untrue representations,

made knowingly and with intent to defraud, as part of

the scheme alleged in the indictment. In the absence of

the existence of the EPA or of any EPAA regulations,

it would presumably be a criminal act to use the mails as

part of a scheme to defraud by falsely certifying facts

relating to the provenance of oil knowingly and with in-

tent to defraud. What makes the act criminal is not the

regulation, but the use of the mails to carry an untrue

document fabricated with fraudulent purpose.

If the description of “old” and “new” oil, wherever

set forth, whether in regulations or technical literature,

is so vague that no one can tell one from the other (or

if, as put by the defendants, they do not provide “fair

notice” of that difference between “old” and “new” oil),

evidence to that effect and the arguments of counsel

might persuade a jury that the defendants did not

knowingly make a false statement or lacked intent to de-

fraud or otherwise did not violate the statute upon which

the indictment is based. On appeal, the defendants phrase

this issue as “whether the regulations are uncontitution-

ally vague.” Thus, they assert, the constitutionality of

the regulations is at issue and only TECA has jurisdiction.

This contention is subtly different from their conten-

tion in the district court. Below they contended that

“FEA’s Crude Oil Certification Regulations Cannot be

the Basis for Criminal Prosecution Unless they Provided

‘Fair Notice’ of What Conduct was Required.” “Because

of this lack of fair notice, the Due Process Clause pro-

hibits criminal prosecution of the defendants for violat-

ing the certification regulations.” This was not an at-

tack on constitutionality of the regulations per se but on

the constitutionality of prosecuting a person for conduct

that was made eriminal without fair notice. That issue

does not require resolution of the constitutionality or

even the interpretation of the regulations; only whether

the criminal statutes clearly prescribed the conduct

charged.

In United States v. Weatherspoon, 581 F.2d 595 (7th

Cir. 1978), the defendant was convicted under the RICO,

mail fraud, and false statements statutes (the same

statutes involved here). She claimed that the certifica-

tion she was alleged to have falsely made were too am-

biguous to support a false statements prosecution be-

cause they did not adequately set out what information

she was required to supply. The Seventh Circuit rejected

that conclusion, but rested in part on a construction of

the certification requirement. “Moreover, even if we

agreed with Weatherspoon that the language is not a

model of clarity, we note that the ‘vagueness’ argument

was open to Weatherspoon at trial, for the Government

was required under 18 U.S.C. § 1001 to establish not only

that the certification was false, but also that Weather-

spoon had made the certification knowing it to be false.”

581 F.2d at 601 (emphasis in original).

Although the TECA has defined its “arising under”

jurisdiction broadly, to include all EPAA issues, it has

drawn a distinction between an issue “arising under”

the EPAA and one that only peripherally involves a

regulation.

In United States v. Cooper, 482 F.2d 1393 (Em.App.

1973), the defendant was charged with violations of rent

control regulations and with violations of the false state-

ment statute, 18 U.S.C. § 1001 (one of the statutes in-

voked against the present defendants). He appealed to

the Ninth Circuit and that court transferred the case to

TECA. TECA took jurisdiction over the charges of

violation of regulations, but treated the transfer as an

untimely notice of appeal and dismissed the appeal. It

concluded, however, that the false statement charge did

not arise under the statute and was not within the ap-

pellate jurisdiction of TECA, even though it involved

false statements on forms required by ESA regulations.

“We start with the premise that a conviction under 18

U.S.C. § 1001 would be appealable only to a court of ap-

peals, under 28 U.S.C. § 1291, unless the Stabilization

Act provides otherwise. We do not think that

Count 1 being based on 18 U.S.C. § 1001, was a con-

troversy “arising under any title of the Stabilization Act

or under regulations or orders issued therunder.” Id.

at 1397.

Thus, the mere fact that a criminal conviction may

rest on a false statement made while engaging in a busi-

ness regulated by EPAA or ESA, does not of itself place

the action within TECA’s jurisdiction. The case or con-

troversy itself must arise under the statute or regulations;

the resolution of the issue must turn on proper inter-

pretation of EPAA or ESA. Moreover, some initial de-

termination of the scope of the EPAA or ESA regula-

tions is necessary to determine who has jurisdiction. In

Cooper, TECA had to determine that 18 U.S.C. § 1001

stated an offense separate and exclusive of ESA issues

before it could determine that it lacked jurisdiction.

The ruling in Bray v. United States, 423 U.S. 73, 96

S.Ct. 307, 46 L.Ed.2d 215 (1975) was based on similar

logic. In Bray the defendant was convicted of criminal

contempt for failure to comply with a district court order

to respond to an IRS subpoena issued pursuant to ESA.

He appealed to the circuit court and it dismissed, holding

that the appeal should be to TECA. The Supreme Court

reversed :

The Act does not contain any provision prohibiting

the violation of a district court’s enforcement order

or establishing penalties for such a violation

Review in the TECA of criminal contempt convic-

tions relating to compliance investigations or en-

forcement efforts is not necessary to assure uniform

interpretation of the substantive provisions of the

stabilization scheme.

423 U.S. at 75, 96 S.Ct. at 309.

Bray cited and expanded upon the holding in Cooper.

The mere fact that a prosecution involves duties created

by the ESA or EPAA is not decisive concerning who

has jurisdiction. The crucial question is whether the

case involves issues that must be decided by TECA in

order that “uniform interpretation of the substantive pro-

visions of the” statute may be achieved. Bray involved

no such issues because the validity of the contempt charge

“was not dependent on the existence of [ESA] viola-

tions or even the continuation of the [ESA] investiga-

tion.” Id. See also United States v. Vixie, 532 F.2d 1277

(9th Cir. 1976).

This line of reasoning was further strengthened by the

TECA’s recent decision in United States v. Zang, 645

F.2d 999 (Em.App. 1981). The indictment in Zang was

substantially similar to the one here. The defendants

were charged under certain general criminal statutes

for allegedly devising a fraudulent scheme through the

use of their companies and the mail and wire communi-

cations, whereby they could resell “old” crude oil at

“new” or “exempt” oil prices.

The defendants’ motions to dismiss contended, inter

alia, that 15 U.S.C. § 754 preempted the general crim-

inal statutes of Title 18 and that the government was

engaging in selective prosecution. The district court de-

nied the defendants’ motions. Defendants then sought

a writ of mandamus from TECA ordering the trial court

to sustain their motions to dismiss the indictment.

Relying extensively on Cooper and Bray, TECA con-

cluded that the EPAA, as amended, does not “provide for

or mention any of these grave (Title 18) felony offenses,

10a

and this Court has no jurisdiction of this appeal.” At

1003. TECA’s conclusion, quoted from Bray, has equal

force here:

This judicial-review provision was designed to pro-

vide speedy resolution of cases brought under the

Act and ‘to funnel in to one court all the appeals

arising out of the District Courts and thus gain in

consistency of decision.’ S.Rep. No. 92-507, p. 10

(1971), U.S. Code Cong. & Admin. News 1971, pp.

2283, 2292.

Nothing in the Act or in its legislative history in-

dicates that Congress intended ‘to include existing

offenses, already covered under Title 18, under the

umbrella of the Stabilization Act.’ United States v.

Cooper, 482 F.2d 1393, 1398 (TECA 1973). Review

in the TECA of criminal contempt convictions relat-

ing to compliance investigations or enforcement ef-

forts is not necessary to assure uniform interpreta-

tion of the substantive provisions of the stabiliza-

tion scheme. Indeed, a requirement of such review

would only serve to undermine the prompt resolution

of Stabilization Act questions by burdening the

TECA with additional appeals.

423 U.S. at 74-75, 96 S.Ct. at 308-309.

Appellees correctly point out that Zang did not decide

the identical issues presented by this case. The focus in

Zang was on “the felony offenses charged in the indict-

ment,” at 1003, rather than the defenses raised by the

defendant. But this difference is irrelevant here. The

appellees’ defenses, like the charges in Cooper, Bray and

Zang, simply do not require interpretation of the substan-

tive provisions of the EPAA.

We do not take a constricted view of TECA jurisdic-

tion. TECA is vested with jurisdiction over any EPAA

issue adjudicated by a district court whether or not the

action can be said to arise under EPAA in the constitu-

lla

tional sense. However, not every case that in some man-

ner involves the EPAA necessarily raises EPAA issues.“

In sum the defenses raised by the appellees do not in-

volve “interpretation of the substantive provisions” of

the EPAA. They involve interpretation of the proper

scope of the criminal code statutes under which the de-

fendants were charged.*

C. Jurisdiction and “Preemption”

The defendants contend also that the EPAA preempts

application of the general criminal statutes to conduct

regulated by EPAA. This claim is also within our

jurisdiction.

* Relying heavily on United States v. Wickland, 619 F.2d 75

(Em. App. 1980), appellees urge us to characterize any issue inter-

woven with” an analysis of the EPAA as an EPAA issue. Close

examination shows, however, that Wickland supports a more

stringent standard in order to find an EPAA issue. In Wickland,

the government sought to enforce a subpoena issued pursuant to

the EPAA. The defendant urged that the government should be

equitably estopped from enforcing the subpoena. The court char-

acterized the issue as “a federal agency’s attempt to fulfill its duty

under statutes and regulations over which this court (TECA) has

exclusive jurisdiction.” Jd. at 78. It found that “[a]ny ‘general

questions of administrative law’ are clearly interwoven with pro-

visions of the ESA and EPAA and involve policy questions directly

affecting the EPAA and its enforcement.” Id. at 79 (emphasis

added). Wickland stands in sharp contrast to this case. Here,

there are no “policy questions directly affecting the EPAA.” Nor

is a federal agency acting pursuant to statute and regulations over

which TECA has exclusive jurisdiction. Rather, the United States

Attorney has indicted the defendant for criminal offenses under

Title 18.

* Appellees’ arrument that an individual director, officer, or agent

cannot be imprisoned for more than a year “unless he also has

knowledge or reasonably should have known of notice of noncom-

pliance received by the corporation from the President” 15 U.S.C.

§ 754 is inapplicable since defendants are charged with Title 18

offenses, not violations of the EPAA.

12a

In United States v. Vixie, 532 F.2d 1277 (9th Cir.

1976), the defendant contended that his false state-

ment conviction was invalid because he should have been

charged under the provisions of ESA dealing with com-

pelling compliance with subpoenas. The circuit court,

rather than submitting that question of preemption to

TECA, concluded that nothing in ESA suggested that

its compliance provisions were the exclusive remedy for

failure to comply and that the defendant did not simply

fail to comply, she falsely complied; the court therefore

concluded that there were no preemption.

In United States v. Gilliland, 312 U.S. 86, 61 S.Ct.

518, 85 L.Ed. 598 (1941), the Supreme Court considered

whether provisions of the Hot Oil Act, 15 U.S.C. §§ 715-

715(d), (requiring affidavits concerning the amount of

oil shipped from wells) preempted prosecutions under the

predecessor of 18 U.S.C. § 1001 for false statements on

affidavits even though the regulations may have been

violated as well. The question was not phrased as an

issue involving the interpretation of the regulations, but

as an issue involving the interpretation of the scope of

the criminal statute. The court held that the provisions

of the general false statements statute were not limited

to the enforcement of the “hot oil” regulations and that

the later “hot oil” act did not repeal the earlier general

statute so far as the latter applied to “hot oil” documents.

The statutes were complimentary, not exclusive. See

also United States v. Carter, 526 F.2d 1276 (5th Cir.

1976) (determining that the false statement provisions

of 15 U.S.C. § 645 (a) do not preempt 18 U.S.C. § 1001,

even though they may both reach false statements on

SBA forms. 18 U.S.C. § 1001 requires proof of elements

not required by the other statute).

Because the preemption issue concerns only the EPAA’s

effect on an unrelated criminal statute, “[r]eview in the

TECA . .. is not necessary to assure uniform interpre-

13a

tation of the substantive provisions of the stabilization

scheme.” Bray v. United States, 423 U.S. at 75, 96 S.Ct.

at 309 (emphasis added). Bray also cautions us to avoid

burdening the TECA with additional appeals, so that the

TECA will not be prevented from promptly deciding ap-

peals involving substantive provisions of the regulatory

schemes. Id. Accordingly, we should not construe a

peripheral issue as arising under“ the EPAA.“

D. Further Challenges to the Indictments

Appellees’ remaining points, which should have been

disposed of by the district court, require little discussion.

Appellees challenge the government’s use of the Rack-

eteer Influenced and Corrupt Organizations statute, 18

U.S.C. § 1961 et seg. on essentially two grounds. First,

they contend that RICO’s language is unconstitutionally

vague. See Grayned v. City of Rockford, 408 U.S. 104,

92 S.Ct. 2294, 33 L.Ed.2d 222 (1972). Second, they ar-

gue that the indictments fail to state an offense because

they, the defendants, are not members of organized

crime, the explicit target of RICO.

Appellees vagueness argument focuses on the definition

of “racketeering activity.” 18 U.S.C. § 1961. We must

cut short appellees proposed tour of the RICO statute

because they lack standing to undertake it. See Associa-

tion of Data Processing Service Organizations v. Camp,

397 U.S. 150, 152-153, 90 S.Ct. 827, 829-830, 25 L.Ed.2d

184 (1970). The “racketeering activity” for which the

5 Although we have found that the question presented here is not

properly cast as one of preemption, we note that TECA has held

that the Title 18 offenses in the instant indictments are not pre-

empted by 15 U.S.C. § 754. United States v. Zang, 645 F.2d 999

(Em. App. 1981). See Mobile Oil Corp. v. Tully, 639 F.2d 912 (2d

Cir. 1981) (resolution of whether New York state tax on gross

receipts of oil companies doing business in New York was pre-

empted by EPAA transferred to TECA because a thorough and

careful examination of the EPAA was required).

14a

Uni Oil defendants were indicted consisted of conspiracy

and substantive “violations of the Mail Fraud Statute as

charged in Counts Three through Thirty-four . . . and

violation of the State of Texas Commercial Bribery

Statute.” Contrary to appellees professed bafflement, both

the language of the indictment charging racketeering and

the sections of the statute from which it is drawn are

composed of easily understood terms. The language is

more than sufficient “to give a person of ordinary in-

telligence fair notice that his contemplated conduct is

forbidden by the statute.” United States v. Harriss, 347

U.S. 612, 617, 74 S.Ct. 808, 811, 98 L.Ed. 989 (1954).

In order to dismiss an indictment for failure to state

an offense we must find that the indictment does not

“contain[] the elements of the offense intended to be

” Russell v. United States, 369 U.S. 749, 763,

82 S.Ct. 1038, 1046, 8 L.Ed.2d 240 (1962), United States

v. Meacham, 626 F.2d 503, 507 (5th Cir. 1980). Al-

though the legislative history of RICO vividly demon-

strates that it was primarily enacted to combat organized

crime, nothing in that history, or in the language of the

statute itself, expressly limits RICO’s use to members

of organized crime. Stated differently, membership in

organized crime is not a necessary element of a RICO

conviction. Accordingly, appellees’ argument on this point

fails.

Appellees also allege that the government has engaged

in selective prosecution.

To support a defense of selective or disc[r]imina-

tory prosecution, a defendant bears the heavy bur-

den of establishing, at least prima facie, (1) that,

while others similarly situated have not generally

been proceeded against because of conduct of the type

forming the basis of the charge against him, he has

been singled out for prosecution, and (2) that the

government’s discriminatory selection of him for

15a

prosecution has been invidious or in bad faith, i. e.,

based upon such impermissible considerations as race,

religion, or the desire to prevent his exercise of con-

stitutional rights. These two essential elements are

sometimes referred to as ‘intentional and purposeful

discrimination.’

United States v. Johnson, 577 F.2d 1304, 1308 (5th Cir.

1978). In a sentence, this “heavy burden” has not been

carried by the defendants. Of course, our conclusion does

not prohibit them from further developing the record to

support their contentions.

The Uni Oil appellees also contend that count 1 is de-

fective for failing to delineate the elements of com-

mercial bribery. An indictment is sufficient if it clearly

informs the defendant of the precise offense of which he

is accused so that he may prepare his defense and if it

states facts adequate to permit the defendant to plead

former jeopardy in a subsequent prosecution. Russel v.

United States, 369 U.S. 749, 763-64, 82 S.Ct. 1038, 1046-

47, 8 L.Ed.2d 240 (1962). Futhermore, as the Supreme

Court has explained, the sufficiency of an indictment “is

not a question of whether it could have been more definite

and certain.” United States v. Debrow, 346 U.S. 374,

78, 74 S.Ct. 113, 115, 98 L.Ed. 92 (1953) (emphasis

added). Although we do not condone the government’s

sloppiness, we find the indictment passes the test outlined

above. Despite the government’s failure to allege each

element of commercial bribery separately, the indict-

ment contains copious facts which adequately apprise the

defendants of the nature of the charge against them.

Therefore, the indictment’s deficiency is not material.

See United States v. FIda, 643 F.2d 348 at 352 (5th Cir.

1981).

The Mapco appellees also urge that counts 1 through

23 are duplicitous because in addition to charging RICO

and mail fraud violations, each count also charges the ad-

16a

ditional offense of conspiracy to defraud the United

States, 18 U.S.C. § 371. A duplicitous indictment charges

two or more distinct offenses in a single count. Bins v.

United States, 331 F.2d 390 (5th Cir.), cert. denied, 397

U.S. 880, 85 S.Ct. 149, 13 L.Ed.2d 87 (1964), Fed. R.

Crim.P. 8(a).

A straightforward reading of the indictment rebuts

appellees’ effort to interject § 371 conspiracies into counts

1-23 through a hypertechnical reading of selected parts

of the various counts. Counts must be read as a whole

to determine their meaning. See United States v. Mark-

ham, 537 F.2d 187, 192 (5th Cir. 1976), cert. denied, 429

U.S. 1041, 97 S.Ct. 739, 50 L.Ed.2d 752 (1977). The

dangers of duplicity, that it will be impossible to deter-

mine what the jury has found and that the defendants

may be subject to double jeopardy in the event of a sub-

sequent prosecution, are not present in this case. Bins

v. United States, 331 F.2d 390, 393 (5th Cir.), cert.

denied, 397 U.S. 880, 85 S.Ct. 149, 13 L.Ed 87 (1964).

Unlike Bins in which the defendant was charged with

two separate acts of false uttering in the same count,

only one violation is charged in each count here. Count

1 charges a RICO conspiracy, count 2 a substantive

RICO violation, and counts 3-24 each rely on a separate

mailing in charging mail fraud.

Next, Mapco appellees contend that the mailings in

counts 3-18 were simply routine, regularly employed

mailings and hence cannot form the basis for mail fraud

See United States v. Tarnopol, 561 F.2d 466,

472 (3d Cir. 1977). The record, as developed to date, does

not support this view of the mailings. Rather, the in-

dictment clearly charges that the mailings were used

“for the purpose of executing” a scheme or artifice to de-

fraud. See Parr v. United States, 363 U.S. 370, 80

S. Ct. 1171, 4 L.Ed.2d 1277 (1960). If the appellees

17a

develop this argument at trial they may have valid

grounds for a motion for judgment of acquittal.

Finally, Mapco appellees contend that counts 24-29 fail

to state an offense under 18 U.S.C. § 1001 because they

refer only to statements made to a private purchaser.

Section 1001 requires that the false statement be made

in a “matter within the jurisdiction of any department

or agency of the United States.” 18 U.S.C. § 1001 (West

1976). This jurisdictional requisite has been satisfied.

The allegedly false certifications of defendants were

relied on by refiners who prepared records which were

ultimately submitted to the FEA. 18 U.S.C. § 1001 is de-

signed to protect federal funds and functions from fraud-

ulent interference. In order to achieve this objective, it

is well settled that a false statement need not be made

directly to a federal agency in order to sustain a § 1001

conviction. United States v. Baker, 626 F.2d 512, 514

(5th Cir. 1980), United States v. Hooper, 596 F.2d 219

(7th Cir. 1979). Here, the defendants’ certifications

ultimately made their way to the FEA and thus, if fraud-

ulent, caused the precise harm § 1001 was enacted to

abolish.

We find no merit in appellees’ remaining arguments.

Accordingly, the judgment of the district court is re-

versed and remanded for proceedings consistent with this

opinion.

REVERSED and REMANDED.

18a

[OPINION OF THE COURT OF APPEALS,

SEPTEMBER 4, 1981]

UNITED STATES COURT OF APPEALS

FIFTH CIRCUIT

Sept. 4, 1981

Nos. 79-2488, 79-3082

UNITED STATES OF AMERICA,

Plaintiff-Appellant,

UNI Om, INC., THOMAS M. Mick“ HAJECATE, THOMAS

H. “Tom” HAJECATE, JAMES E. FISHER, CHARLES R.

AKIN, CHARLES Goss and BALL MARKETING ENTER-

PRISE,

Defendants-Appellees.

UNITED STATES OF AMERICA,

Plaintiff-Appellant,

MID-ATLANTIC PETROLEUM COMPANY, LTD., et al.,

Defendants-Appellees.

Appeals from the United States District Court

for the Southern District of Texas

ON PETITIONS FOR REHEARING AND

PETITIONS FOR REHEARING EN BANC

(5th Cir. 1981, 646 F.2d 946)

19a

Before HILL, RUBIN and ANDERSON, Circuit

Judges

PER CURIAM.

Pursuant to a review of the Appellee’s briefs we strike

the penultimate paragraph and replace it with the fol-

lowing.

The indictment sufficiently charges that the allegedly

false certificates of defendants were relied on by re-

finers who prepared records which ultimately influenced

FEA calculations. 18 U.S.C. § 1001 is designed to pro-

tect federal funds and functions from fraudulent inter-

ference. In order to achieve this objective, it is well

settled that a false statement need not be made directly

to a federal agency in order to sustain a § 1001 con-

viction. United States v. Baker, 626 F.2d 512, 514 (5th

Cir. 1980) ; United States v. Hooper, 596 F.2d 219 (7th

Cir. 1979). If, however, subsequently developed evidence

shows that the certification in question did not influence

FEA calculations, either directly or indirectly, the Ap-

pellees may have valid grounds for a motion for judg-

ment of acquittal on these grounds.

With the above observations, the Petitions for Re-

hearing are DENIED and no member of this panel nor

Judge in regular active service on the Court having re-

quested that the Court be polled on rehearing en banc

(Rule 35 Federal Rules of Appellate Procedure; Local

Fifth Circuit Rule 16) the Petitions for Rehearing En

Banc are DENIED.

20a

[640]

UNITED STATES DISTRICT COURT

FOR THE SOUTHERN DISTRICT OF TEXAS

HOUSTON DIVISION

Criminal Case No. H-79-62

UNITED STATES OF AMERICA,

Plaintiff,

Mw-ArLANTIC PETROLEUM COMPANY, LTD., et al.,

Defendants.

(Filed July 25, 1979)

ORDER

Came on for hearing Defendants’ motion to dismiss the

indictment and the Court having considered said motion

and the Government’s response hereby

ORDERS that Defendants’ motion to dismiss the in-

dictment shall be GRANTED for the reasons set out in

Defendants’ briefs.

DONE at Houston, Texas, this 25th day of July, 1979.

Ross N. STERLING

United States District Judge

21a

[1]

UNITED STATES DISTRICT COURT

FOR THE SOUTHERN DISTRICT OF TEXAS

HOUSTON DIVISION

Criminal Case No. H-79-62

UNITED STATES OF AMERICA,

Plaintiff,

Vv.

MID-ATLANTIC PETROLEUM COMPANY, LTD., et al.,

Defendants.

(Filed August 1, 1979)

TRANSCRIPT OF PROCEEDINGS

Before: Honorable Ross N. Sterling, District Judge

Houston, Texas

July 24, 1979

Appearing for the Government:

Jim Ezer, AUSA

Richard Sauber, Justice Dept.

Appearing for Uni Oil, Inc.:

Charles Wooten, Esq.

Thano Dameris, Esq.

Appearing for The Crude Co.:

Vincent Fuller

Edward McDonough

Judith Miller

22a

121

PROCEEDINGS

July 24, 1979

The Court: We will take up Criminal Action H-79-62,

United States of America versus Mid-Atlantic Petroleum

Company, Ltd. and others.

Mr. McDonough: Your Honor, may I take this op-

portunity to introduce out-of-state counsel, Mr. Vincent

Fuller and Ms. Judith Miller from the Washington law

firm of Williams and Connolly. They will be appearing

on behalf of Mr. Masek and The Crude Company.

Mr. Dameris: Your Honor, since this case is virtually

identical to H-79-41 which was heard by this Court on

May 20, 1979, and since we have incorporated the

motions and briefs previously filed in H-79-41 plus sup-

plements, and since none of the defendants requested oral

arguments in this matter, we will waive our right to

argument and defer to the Government and respond to

their arguments, if necessary.

The Court: All right. I have, of course, ruled in the

other case, and read the briefs that were filed by all

parties in this case, and I am prepared to rule on the

various motions at this time unless somebody has some-

thing, if the Government wants to add something that

is not in the briefs, I will hear from them.

[3]

Mr. Sauber: Your Honor, the Government would like

to respond to whatever concerns that Your Honor may

have about the validity of the Indictment that is presently

before you. Unfortunately, we are at somewhat of a loss

to know your areas of question, what areas you think

the Indictment on its face is deficient, and we stand ready

to respond to any specific concerns you have.

23a

The Court: I think the Indictment is deficient on its

face for the reasons stated in the briefs of the defendants.

Mr. Sauber: All of them?

The Court: Not all of them.

Mr. Sauber: If there are any that the Court would

like to hear from the Government on, or where the Gov-

ernment has made a mistake on where it is deficient, but

a number of reasons have been cited in all of the briefs

filed by the defense and we are at a loss as to know

where to start.

The Court: You responded to all of them. My main

concern, the reason why I am going to grant the motion,

is I think the way the Government should proceed in this

matter is under the Energy Act.

Mr. Sauber: So your Honor thinks the EPAA pre-

empts the general criminal statute.

The Court: Generally, yes.

141

Mr. Sauber: Are there other reasons

The Court: I don't have to give you my reasons.

Mr. Sauber: I understand, Your Honor, but in an

attempt to present the Government's case and to prepare

ourselves for future cases, it would be instruetive to us

to know what areas we have gone beyond the bounds

of our legal limits.

The Court: Well, I am going to leave the ruling of the

Court that I am granting the Motions to Dismiss for the

reasons stated in the Defendants’ Briefs.

Mr. Dameris: Your Honor, one other thing, we would

like to have a stipulation entered into by and between

the Defendant Uni Oil, Mr. Thomas M. “Mick” Hajecate,

Mr. Thomas H. “Tom” Hajecate, Charles R. Akin, The

Crude Company and Mr. John Allen Masek in regard to

the notice provisions of the Act. The stipulation has been

signed and it is presently in the possession of the Gov-

ernment, and it is identical, the same language as the

24a

previous stipulation, and we would respectfully ask the

Court to admit it in evidence.

Mr. Sauber: May I be permitted to finish? We will be

happy to do that in a moment.

In response to Your Honor’s concern as to whether

the EPAA pre-empts the general criminal statutes, we

would cite the unanimous Supreme Court decision

151

Batchelder last month, and apparently Your Honor finds

that unavailing.

The Court: I understand your position, and the ruling

of the Court is the same. The stipulation as to the lack

of notice will be admitted in evidence.

Mr. Ezer: May I address the Court? There is one

matter I would like to bring to the Court’s attention.

I understand that the Court intends to grant—

The Court: I didn’t indicate that, I granted the Mo-

tion to Dismiss.

Mr. Ezer: What I would like to point out currently,

the case that was heard before this Court on May 29th

is currently before the Fifth Circuit for their review and

determination if in fact the Government is correct in

proceeding under the RICO Statute. We would offer to

the Court for its consideration to hold this case in abey-

ance. We have asked for an expedited appeal. It is my

understanding that perhaps we would receive some word

from the Fifth Circuit tomorrow whether the expedited

appeal will be granted, or our request for expedited

appeal. It is possible that we could have our decision

by late fall or early in the year.

We would ask the Court to consider our request at

this time and give serious thought to holding this case

in abeyance, the Defendants’ Motion in Abeyance until

we see what the Fifth Circuit does.

25a

[6]

Mr. Fuller: For the defendants Masek and The Crude

Company, none of those defendants was in the first

case, and to stay this case here, both of those defendants

would have no voice in the pending appellate proceeding

and we would like to be able to argue the case in the

Fifth Circuit.

The Court: I will not stay the case, I will dismiss

the indictment.

Mr. Fuller: I would like to ask the Court to accept

this affidavit as a pleading—

Mr. Sauber: If Your Honor please, if the indictment

has been dismissed, we see no reason why any additional

papers out to be submitted that the Government has not

had a chance to respond to.

The Court: Well, I am not finding any facts, so I

don’t need any affidavits, so I am not going to accept

that.

Mr. Sauber: Just one further point as a matter of

information. Does Your Honor anticipate entering a

written order?

The Court: I am going to enter an order saying for

the reasons stated in the defendants’ Motions the Indict-

ment is dismissed.

Mr. Sauber: That will be a written order?

The Court: Yes.

171

Mr. Dameris: May we have the Government please

execute the Stipulation.

The Court: Have you all any objection to the stipu-

lation that there has been no notice?

Mr. Ezer: No, Your Honor. The only objection we

have with regard to the stipulation, there is an addi-

tional two parties named, that being Mid-Atlantie Petro-

leum and H. C. Iran. On the stipulation that the gov-

26a

ernment proposes and gave to the defense, we had spaces

for H. C. Iran and Mid-Atlantic to sign, and we also

included spaces for the additional defendants to sign. It

is my understanding from Mr. Dameris he does not wish

to sign that because our stipulation contains Mid-Atlan-

tic and H. C. Iran. It is their agreement, I understand,

that we can ink in the bottom both H. C. Iran and Mid-

Atlantic.

Mr. Dameris: I believe I said I could not execute for

and on behalf of Mid-Atlantic and H. C. Iran. We do

not represent H. C. Iran. The stipulation has been signed

by the defendants, signed by the defendant attorneys,

and if they would like to ink in H. C. Iran and Mid-

Atlantic and leave it blank, fine. The government is

saying that no notice was given to them, but we cannot

speak for them.

Mr. Ezer: We are not asking Mr. Dameris to speak

to those, but only asking that the names are in the cap-

tion and there should be space for them to sign.

18]

Mr. Dameris: We have no objection.

Mr. Ezer: I would just like to cite several cases,

state them for the purpose of the Record, or I can give

them to the Court Reporter after court has adjourned.

The Court: Are they something that you have not

included in your brief?

Mr. Ezer: They are not in the brief and they speak

to the fact that Rico has been given a very broad inter-

pretation. First is U.S. versus Cohen, 444 F.Supp. 1314

where a School Board attorney and School Board member

were indicted under Rico.

We would cite to the Court U.S. versus Culbert, 435

U.S. 371 where the Court in that case specifically held

that Rico was given a very broad interpretation.

“ We would also cite to the Court the case of United

States versus Campanale, 518 F.2d 352. That speaks also

27a

to the issue that the Rico Statute is given a very broad

interpretation. In that case the same argument was

made, that the Rico only referred to organized crime and

the syndicate and the Mafia, and the Court specifically

held that it did not.

The Court: The stipulation is accepted by the Court.

The Motions to Dismiss the indictment are granted, and

Court is adjourned.

[9}

REPORTER’S CERTIFICATE (Omitted)

28a

IN THE UNITED STATES COURT OF APPEALS

FOR THE FIFTH CIRCUIT

UNIT A

No. 79-2488 &

79-3082

UNITED STATES OF AMERICA,

Plaintiff-Appellant,

versus

UNI Om, INC., THOMAS M. Mick“ HAJECATE, THOMAS

H. “Tom” HAJECATE, JAMES E. FISHER, CHARLES R.

AKIN, CHARLES Goss and BALL MARKETING ENTER-

PRISE,

Defendants-A ppellees.

(Filed Sept. 22, 1981)

Appeal from the United States District Court

for the Southern District of Texas

ORDER

The motions of appellees’ JAMES E. FISHER, JOHN

ALLEN MASEK & CRUDE CO. for stay of the is-

suance of the mandate pending petition for writ of

certiorari is DENIED. See Fifth Circuit Local Rule

17, as amended January 22, 1979.

The motions of appellees’ FISHER, MASEK and THE

CRUDE COMPANY for stay of the issuance of the

mandate pending petition for writ of certiorari is

GRANTED to and including October 4, 1981, the stay

to continue in force until the final disposition of the

case by the Supreme Court, provided that within the

period above mentioned there shall be filed with the

Clerk of this Court the certificate of the Clerk of the

Supreme Court that the certiorari petition has been

filed. The Clerk shall issue the mandate upon the

filing of a copy of an order of the Supreme Court

denying the writ, or upon the expiration of the stay

granted herein, unless the above mentioned certificate

shall be filed with the Clerk of this Court within that

time.

for a further stay of the issuance of the mandate is

GRANTED to and including

under the same conditions as set forth in the preced-

ing paragraph.

IT IS ORDERED that the motion of

for a further stay of the is-

suance of the mandate is DENIED.

/s/ James C. Hill

United States Circuit Judge

IN THE UNITED STATES COURT OF APPEALS

FOR THE FIFTH CIRCUIT

No. 79-2488 and

79-3082

UNITED STATES OF AMERICA,

Plaintiff-Appellant,

versus

UNI OIL, INC., et al.,

Defendants-A ppellees.

(Filed Oct. 8, 1981)

Appeal from the United States District Court for the

Southern District of Texas

ORDER

O The motion of

for stay of the issuance of the mandate pending peti-

tion for writ of certiorari is DENIED. See Fifth

Circuit Local Rule 17, as amended January 22, 1979.

The motion

for stay of the issuance of the mandate pending peti-

tion for writ of certiorari is GRANTED to and in-

cluding , the

stay to continue in force until the final disposition of

the case by the Supreme Court, provided that within

the period above mentioned there shall be filed with

the Clerk of this Court the certificate of the Clerk of

the Supreme Court that the certiorari petition has

been filed. The Clerk shall issue the mandate upon

the filing of a copy of an order of the Supreme Court

denying the writ, or upon the expiration of the stay

granted herein, unless the above mentioned certificate

shall be filed with the Clerk of this Court within that

time.

The motion of appellees John Allen Masek and The

Crude Company for a further stay of the issuance of

the mandate is GRANTED to and including Novem-

ber 4, 1981, under the same conditions as set forth in

the preceding paragraph.

IT IS ORDERED that the motion of appellees John

A. Masek & The Crude Company for a further stay

of the issuance of the mandate is DENIED.

/s/ James C. Hill

United States Circuit Judge

32a

UNITED STATES CONSTITUTION,

FIFTH AMENDMENT

The Fifth Amendment to the Constitution provides in

relevant part as follows:

“No person. .. shall be compelled in any criminal

case to be a witness against himself; nor be deprived

of life, liberty, or property, without due process of

33a

STATUTES

12 U.S.C. § 1904 note:

Section 211 (b) (2) of the Economie Stabilization Act

of 1970, see 12 U.S.C. § 1904 note (1976), provided in

relevant part:

“The Temporary Emergency Court of Appeals shall

have exclusive jurisdiction of all appeals from the

district courts of the United States in cases and

controversies arising under this title or under reg-

ulations or orders issued thereunder.”

15 U.S.C. § 754:

Section 5, Emergency Petroleum Allocation Act, As

Amended, 15 U.S.C. § 754 (1976), provides:

§ 754. Administration and enforcement; delegation

of authority; civil and criminal penalties

(a) (1) Except as provided in paragraph (2),

(A) sections 205 through 207 and sections 209

through 211 of the Economic Stabilization Act of 1970

(as in effect on November 27, 1973) shall appy to

the regulation promulgated under section 753(a) of

this title, to any order under this chapter, and to

any action taken by the President (or his delegate)

under this chapter, as if such regulation had been

promulgated, such order had been issued, or such

action had been taken under the Economic Stabiliza-

tion Act of 1970; and (B) section 212 (other than

212 (b)) and 213 of such Act shall apply to func-

tions under this chapter to the same exten’ such

sections apply to functions under the Economic

Stabilization Act of 1970.

(2) The expiration of authority to issue and en-

force order and regulations under section 218 of

34a

such Act shall not affect any authority to amend

and enforce the regulation or to issue and enforce

any order under this chapter, and shall not affect

any authority under sections 212 and 213 insofar

as such authority is made applicable to functions

under this chapter.

(3) (A) Whoever violates any provision of the

regulation under section 753(a) of this title, or any

order under this chapter shall be subject to a civil

penalty—

(i) with respect to activities relating to the

production, distribution, or refining of crude

oil, of not more than $20,000 for each violation;

(ii) with respect to activities relating to the

distribution of residual fuel oil or any refined

petroleum product (other than activities en-

tirely at the retail level), of not more than

$10,000 for each violation; and

(iii) with respect to activities—

(I) entirely relating to the distribution

of residual fuel oil or any refined petro-

leum product at the retail level, or

(II) activities not referred to in clause

(i) or (ii) of subclause (I) of this clause,

or not more than $2,500 for each violation.

(B) Whoever willfully violates any provisions of

such regulation, or any such order shall be impris-

oned not more than 1 year, or—

(i) with respect to activities relating to the

production or refining of crude oil, shall be fined

not more than $40,000 for each violation;

(ii) with respect to activities relating to the

distribution of residual fuel oil or any refined

35a

petroleum product (other than at the retail

level), shall be fined not more than $20,000 for

each violation ;

(ii) with respect to activities relating to the

distribution of residual fuel oil or any refined

petroleum product at the retail level or any

other person shall be fined not more than

$10,000 for each violation;

or both.

(4) Any individual director, officer, or agent of a

corporation who knowingly and willfully authorizes,

orders, or performs any of the acts or practices con-

stituting in whole or in part a violation of para-

graph (3), shall be subject to penalties under this

subsection without regard to any penalties to which

that corporation may be subject under paragraph

(3) except that no such individual director, officer,

or agent shall be subject to imprisonment under

paragraph (3), unless he also has knowledge, or

reasonably should have known, of notice of noncom-

pliance received by the corporation from the Presi-

dent.

(b) The President may delegate all or any portion

of the authority granted to him under this chapter

to such officers, departments, or agencies of the

United States, or to any State (or officer thereof),

as he deems appropriate.

18 U.S.C. § 1001:

§ 1001. Statements or entries generally

Whoever, in any matter within the jurisdiction

of any department or agency of the United States

knowingly and willfully falsifies, conceals or covers

up by any trick, scheme, or device a material fact,

or makes any false, fictitious or fraudulent state-

36a

ments or representations, or makes or uses any false

writing or document knowing the same to contain

any false, fictitious or fraudulent statement or entry,

shall be fined not more than $10,000 or imprisoned

not more than five years, or both.

18 U.S.C. § 1341:

§ 13841. Frauds and swindles.

Whoever, having devised or intending to devise

any scheme or artifice to defraud, or for obtaining

money or property by means of false or fraudulent

pretenses, representations, or promises, or to sell,

dispose of, loan, exchange, alter, give away, distrib-

ute, supply, or furnish or procure for unlawful use

any counterfeit or spurious coin, obligation, security,

or other article, or anything represented to be in-

timated or held out to be such counterfeit or spurious

article, for the purpose of executing any scheme or

artifice or attempting to do so, places any post office

or authorized depository for mail matter, any matter

or thing whatever to be sent or delivered by the

Postal Service, or takes or receives therefrom, any

such matter of thing, or knowingly causes to be

delivered thereon, or at the place at which it is

directed to be delivered by the person to whom it is

addressed, any such matter or thing, shall be fined

not more than $1,000 or imprisoned not more than

five years, or both.

18 U.S.C. § 1962:

1962. Prohibited activities.

(a) It shall be unlawful for any person who has

received any income derived, directly or indirectly

from a pattern of racketeering activity or through

collection of an unlawful debt in which such person

has participated as a principal within the meaning

of section 2, title 18, United States Code, to use or

87a

invest, directly or indirectly, any part of such in-

come, or the proceeds of such income, in acquisition

of any interest in, or the establishment or operation

of any enterprise which is engaged in, or the ac-

tivity of which affect, interstate or foreign commerce.

A purchase of securities on the open market for

purposes of investment, and without the intention

of controlling or participating in the control of the

issuer, or of assisting another to do so, shall not

be unlawful under this subsection if the securities

of the issuer held by the purchaser, the members of

his immediate family, and his or their accomplices

in any pattern or racketeering activity or the collec-

tion of any unlawful debt after such purchase do

not amount in the aggregate to one person of the

outstanding securities of any one class, and do not

infer, either in law or in fact, the power to elect

not one or more directors of the issuer.

(b) It shall be unlawful for any person through a

pattern of racketeering or through collection of an

unlawful debt to acquire or maintain, directly or

indirectly, any interest in or control of any enter-

prise which is engaged in, or the activities of which

affect, interstate or foreign commerce.

(e) It shall be unlawful for any person employed

by or associated with any enterprise engaged in,

or the activities of which affect, interstate or for-

eign commerce, to conduct or participate, directly or

indirectly, in the conduct of such enterprise’s affairs

through a pattern of racketeering activity or collec-

tion or unlawful debt.

(d) It shall be unlawful for any person to conspire

to violate any of the provisions of subsections (a),

(b), or (e) of this section.

(Added Pub. L. 91-452, Title IX, § 901(a), Oct. 15,

1970, 84.

38a

REGULATIONS

10 C. F. R. § 212.131:

212.131. Certification of domestic crude oil sales.

(a) (1) Stripper well properties. With respect to

each stripper well property, the producer shall certify

in writing to each purchaser of crude oil produced

from that property:

(i) That the property concerned has qualified as

a stripper well property; and

(ii) The average daily production per well for

the 12 month period during which the property quali-

fied as a stripper well property.

The certification required under this paragraph

(a)(1) of this section shall be made (i) within

the consecutive two-month period immediately suc-

ceeding the month of September 1976, with respect

to any property which qualified as a stripper well

property during or before the month of September

1976; and (ii) with respect to any property which

qualifies as a stripper well property during or after

the month of October 1976, within the two month

period immediately succeeding the first month that

such property qualifies as a stripper well property.

(2) Non-stripper well properties. (i) With re-

spect to each sale of crude oil from a property which

has not qualified as a stripper well property, the

producer shall certify in writing to the purchaser

the number of barrels of new crude oil and the

number of barrels of old crude oil. With respect to

any property which has not qualified as a stripper

well property, and from which crude oil is only

sold to one purchaser, the requirements of this para-

graph (a)(2)(i) of this section may be complied

with by a one-time certification to the purchaser of

the property’s monthly base production control level

89a

determined pursuant to 10 CFR 212.72, whether

based upon production and sale of crude oil in 1972

or upon production and sale of old crude oil in 1975,

and, if applicable, either the property’s adjusted base

production control level determined pursuant to 10

CFR 212.76 or the information necessary to compute

such adjusted base production control level pursuant

to 10 CFR 212.76.

(ii) With respect to each property which has not

qualified as a stripper well property, the producer

shall certify in writing once to each purchaser of

crude oil produced and sold from that property:

(A) The highest posted price at 6 a.m., local time,

May 15, 1973, for transactions in that grade of

crude oil in that field, or if there was no posted

price in that field for that grade of domestic crude

oil, the related price for that grade of domestic

crude oil which is most similar in kind and quality

in the nearest field for which prices were posted;

and

(B) The highest posted price on September 30,

1975 for transactions in the particular grade of

crude oil in that field in September 1975, or if there

was no posted price in that field for that grade of

domestic crude oil, the related price for that grade

of domestic crude oil which is most similar in kind

and quality in the nearest field for which prices

were posted.

(iii) The certification required under this para-

graph (a) (2) of this section shall be made within

the consecutive two-month period immediately follow-

ing the month of September 1976 or, with respect

to any property from which crude oil has not been

produced and sold prior to September 30, 1976, the

certification required under this paragraph (a) (2)

40a

of this section shall be made within the two-month

period immediately following the first month in

which crude oil is produced and sold.

(3) Unitized properties. (i) With respect to each

sale of crude oil from a unitized property for which

the producer has determined a unit base production

control level, the producer shall certify in writing

to the purchaser the number of barrels of new

crude oil (if any, and whether “actual new crude

oil” or “imputed new crude oil” determined pur-

suant to 10 CFR 212.75(b)), the number of barrels

of old crude oil, and the number of barrels of im-

puted stripper well crude oil (if any) determined

pursuant to 10 CFR 212.75(b). With respect to

any unitized property for which the producer has

determined a unit base production control level, and

from which crude oil is only sold to one purchaser,

the requirements of this paragraph (a) (3) (i) of

this section may be complied with by a one-time

written certification to the purchaser of (A) the

monthly unit base production control level deter-

mined pursuant to 10 CFR 212.75(b); (B) the

amount of imputed new crude oil (if any, determined

pursuant to 10 CFR 212.75(b)); and (C) the

amount of imputed stripper well crude oil (if any,

determined pursuant to 10 CFR 212.75(b)).

(ii) With respect to each unitized property for

which the producer has determined a unit base pro-

duction control level, the producer shall certify in

writing once to each purchaser of crude oil produced

from the property:

(A) The highest posted price at 6 a.m., local time,

May 15, 1973, for transactions in that grade of

crude oil in that field, or if there was no posted

price in that field for that grade of domestic crude

oil, the related price for that grade of domestic

crude oil which is most similar in kind and quality

4la

in the nearest field for which prices were posted;

and

(B) The highest posted price on September 30,

1975, for transactions in that particular grade of

crude oil in that field in September 1975, or if there

was no posted price in that field for that grade of

domestic crude oil, the related price for that grade

of domestic crude oil which is most similar in kind

and quality in the nearest field for which prices were

(iii) The certification required under this para-

graph (a) (3) of this section shall be made within

the consecutive two-month period immediately follow-

ing the month of September 1976, or, with respect

to any unitized property for which a unit base pro-

duction control level has not been established prior

to September 30, 1976, the certification required

under this paragraph (a) (3) of this section shall

be made within the consecutive two-month period

immediately following the first month in which such

unit base production control level is established.

(4) Other domestic crude oils the first sale of

which is exempt from this part. (i) With respect

to each sale of crude oil exempt from the provisions

of this part, other than crude oil produced from a

stripper well property, the producer shall certify

in writing once to each purchaser of crude oil pro-

duced and sold from that property that the first sale

of crude oil produced and sold from that property

is exempt from the provisions of this part.

(ii) For purposes of this paragraph (a) (4), do-

mestie crude oil the first sale of which is exempt

from the provisions of this part includes U.S.-owned

petroleum sold by the Secretary of the Navy under

the Naval Petroleum Reserves Production Act of

1976 (Pub. L. 94-258).

42a

(5) New purchasers. With respect to any pur-

chaser which has not purchased crude oil from the

property (or the unitized property) concerned prior

to September 30, 1976, the certifications required

under paragraphs (a) (1), (a) (2) and (a) (3) of

this section shall be made within the consecutive

two-month period immediately following the first

month in which such purchaser purchases crude oil

from that property or unitized property.

(b) (1) Each seller of domestic crude oil, other

than a producer of domestic crude oil covered by

paragraph (a) of this section, shall, with respect to

each sale of domestic crude oil other than (i) an al-

location sale pursuant to § 211.65 of Part 211, or

(ii) a sale in which no volumes of domestic crude oil

are deemed to have been transferred pursuant to

§ 211.67(g) of Part 211, certify in writing to the

purchaser the respective volumes of and respective

per barrel prices for the old crude oil, new crude

oil, stripper well crude oil, and other domestic crude

oils the first sale of which is exempt from the pro-

visions of this part included in the volume of do-

mestic crude oil so sold. The certification shall also

contain a statement that the price charged for the

domestic crude oil is no greater than the maximum

price permitted pursuant to this part.

(2) Each seller of domestic crude oil, other than a

producer of domestic crude oil, shall make the certi-

fication required by this paragraph as soon as prac-

ticable after receipt of the required certifications

from its sellers, buc in no event later than 30 days

following such receipt, However, if the domestic

crude oil is not sold until after the expiration of the

thirty-day period, the certification required by this

paragraph shall be made within ten days following

the sale of the domestic crude oil.

43a

§ 211.65 of Part 211, the seller shall certify in writ-

ing to the purchaser the amount of old crude oil

deemed (under the provisions of § 211.67 (f) of

Part 211) to be included in the volume of crude oil

so sold. Such written certification shall be made

within 25 days following the month in which the

crude oil so sold is delivered to or for the account of

the purchaser.

(d) No firm may sell domestic crude oil unless it

provides the certification required by this section.

No firm may knowingly purchase domestic crude oil

for which there is no certification as required by this

section; provided, however, that the provisions of this

paragraph do not apply to the sale of domestic crude

oil to a firm under circumstances of economic or

other coercion in which the buyer, because of its need

for crude oil, had no reasonable alternative but to

purchase the domestic crude oil for which there is

no certification, and such firm promptly reports the

purchase to the Federal Energy Administration for

investigation.

(e) All certifications required by this section

shall be in writing, either upon an invoice or billing

or by separate instrument, and shall be effective only

when delivered to and received by the purchaser of

domestic crude oil.

10 C.F.R. § 205.202:

“Any practice that circumvents or contravenes or

results in a circumvention or contravention of the

requirements of any provision of this chapter or any

order issued pursuant thereto is a violation of the

FEA regulations stated in this chapter.”

44a

UNITED STATES DISTRICT COURT

FOR THE SOUTHERN DISTRICT OF TEXAS

HOUSTON DIVISION

Criminal Case No. H-79-62

UNITED STATES OF AMERICA,

Plaintiff,

Mw- ATLANTIC PETROLEUM Co., LTD., et al.,

Defendants.

(Filed April 30, 1979)

INDICTMENT

THE GRAND JURY CHARGES:

COUNT ONE

1. At all times material to this Indictment and spe-

cifically from on or about January 1, 1976, continuing

to on or about January 1, 1977:

a. There was in existence the Emergency Petroleum

Allocation Act (EPAA) of 1973, Title 15, United States

Code, Section 751, et seqg., which provided for manda-

tory allocation of all crude petroleum produced in or im-

ported into the United States.

b. There was also in existence the Domestic Crude

Oil Allocation (Entitlements) Program which was pro-

mulgated by the Federal Energy Administration, now

known as the United States Department of Energy, pur-

suant to the EPAA of 1973:

45a

c. The objective of the Entitlements Program was to

effectuate the equitable distribution of low priced “old”

crude oil among all sectors of the petroleum industry and

assure that domestically refined petroleum products were

sold at equitable prices in all regions of the United

States.

[2]

d. In order to achieve the equitable distribution of

low priced “old” crude oil and to achieve cost equaliza-

tion, the Entitlements Program required an exchange of

funds between domestic refiners through the purchase

or sale of entitlements.

e. There was also in existence a reporting requirement,

pursuant to Federal Energy Administration regulations,

which provided that refiners report to the Federal

Energy Administration the volumes of “old” and “new”

crude oil received by the refiner. The reports received

by the Federal Energy Administration from the refiners

enabled the Federal Energy Administration to calculate

which refiners were required to buy entitlements and

which were required to sell entitlements.

f. The refiners’ reports to the Federal Energy Ad-

ministration were based on the certification provided to

the refiners by the suppliers of crude oil. The refiners

were prohibited from purchasing crude oil without a cer-

tification of the volumes of “old” oil and new“ oil.

g. There was also in existence a certification program

with regard to the purchase and sale of domestic crude

petroleum, pursuant to the Emergency Petroleum Alloca-

tion Act of 1973, Title 15, United States Code, Section

751, et seg., and regulations set forth by the Federal

Energy Administration, now known as the United States

Department of Energy. Those regulations provided in

pertinent part:

Each seller of domestic crude petroleum, . . shall

with respect to each sale of domestic crude petro-

46a

leum . . certify in writing to the purchaser the

amount of old crude petroleum included in the vol-

ume of domestic crude petroleum so sold. The certi-

fication shall also contain a statement that the price

charged for the domestic crude petroleum is no

greater than the maximum price permitted pursuant

to this part. Title 10, Code of Federal Regulations,

Section 212.131 (a) (2).

[3]

This section was amended, effective September 1, 1976,

as follows:

Each seller of domestic crude oil, . . . shall, with

respect to each sale of domestic crude oil . . . certify

in writing to the purchaser the respective volumes

of and respective per barrel prices for the old crude

oil, new crude oil, . . . included in the volume of

domestic crude oil so sold. The certification shall also

contain a statement that the price charged for the

domestic crude oil is no greater than the maximum

price permitted pursuant to this part. Title 10,

Code of Federal Regulations, Section 212.131 (b) (1).

h. There was also in existence a regulation requir-

ing firms subject to the Mandatory Petroleum Allocation

Program to maintain records to demonstrate that prices

charged and the amount sold by firms were in compli-

ance with the Mandatory Petroleum Allocation Pro-

gram and its regulations and a further requirement that

their records be made available upon request to the Fed-

eral Energy Administration. Title 10, Code of Federal

Regulations, Section 210.92 (a) (b).

i. There was also in existence a regulation requiring

firms who exchanged crude oil to retail the original

regulatory category (i.e., old, new) of the crude oil trans-

ferred, thereby preventing the conversion of crude oil

from one tier to another via an exchange or series of

47a

exchanges. Title 10, Code of Federal Regulations, Sec-

tion 211.67(g).

j. As set forth in this indictment, “domestic crude

petroleum” also means “domestic crude oil”; “old” crude

petroleum means “old oil” or “lower tier” oil; “new”

crude petroleum is the same as “upper tier” oil and in-

cludes “released oil.” The terms “oil” and “petroleum”

are used synonymously and have the same meaning.

[4]

2. a. Mid-Atlantic Petroleum Company, Ltd., here-

inafter referred to as Mapco, was a Grand Cayman,

British West Indies, entity utilized and controlled by

THOMAS M. “MICK” HAJECATE and THOMAS H.

“TOM” HAJECATE, and was an affiliate of Uni Oil, Inc.

b. H. C. Iran, Ltd., was a Grand Cayman, British

West Indies, entity utilized and controlled by THOMAS

M. “MICK” HAJECATE and THOMAS H. “TOM”

HAJECATE.

e. Uni Oil, Inc., Houston, Texas, was a Texas

Corporation engaged in reselling crude oil, end owned

by THOMAS M. “MICK” HAJECATE and THOMAS

H. “TOM” HAJECATE, and constituted an “enterprise”

as defined by Title 18, United States Code, Section 1961

(4), which enterprise was engaged in, and the activities

of which affected interstate and foreign commerce.

d. Defendant THOMAS M. “MICK” HAJECATE

was President and a Dircetor of Uni Oil, Inc., and an

officer, agent and employee of H. C. Iran, Ltd., and Mapco.

e. Defendant THOMAS H. “TOM” HAJECATE was

Secretary-Treasurer and a Director of Uni Oil, Ine.,

and an officer, agent, and employee of H. C. Iran, Ltd.,

and Mapco.

f. Defendant CRARLES R. AKIN was Vice-President

of Uni Oil, Inc. and also negotiated and transacted busi-

ness on behalf of H. C. Iran, Ltd., and Mapco.

48a

g. Defendant R. STANLEY CORBITT, was an agent

and employee of International Petroleum Trading Com-

pany, SDAD, LTDA, Houston, Texas, hereinafter re-

ferred to as Ipteo, which purchased crude oil from

Mapco.

h. The Crude Company was a Wyoming corporation

with headquarters in Casper, Wyoming, engaged in the

purchase and sale of crude oil with Mapco.

151

i. Defendant JOHN ALLEN MASEK was an officer

and stockholder of The Crude Company.

3. From on or about January 1, 1976, the exact date

being unknown to the grand jurors, and continuing

through on or about January 1, 1977, in the Houston

Division of the Southern District of Texas, and elsewhere,

and within the jurisdiction of this Court, Defendants

THOMAS M. “MICK” HAJECATE, THOMAS H.

“TOM” HAJECATE, CHARLES R. AKIN, R. STAN-

LEY CORBITT, and JOHN ALLEN MASEK, did

knowingly, and willfully combine, conspire, confederate

and agree together and each with the other, and with

other person to the grand jurors known and unknown, to

violate Title 18, United States Code, Section 1962(c) of

the Racketeer Influenced and Corrupt Organizations

Statute.

4. It wae a part of the conspiracy that defendants,

being employed by and associated with UNI OIL, INC.,

an enterprise engaged in, and the activities of which

affected interstate commerce, agreed to conduct and

participate directly and indirectly in the affairs of the

said enterprise, through a pattern of racketeering activ-

ity, to wit: Racketeering acts as charged in Counts Three

through Twenty-Three of this indictment, which are al-

leged and incorporated in this Count by reference as if

49a

fully set forth herein, in violation of Title 18, United

States Code, Section 1962(c).

5. Further, as a part of the conspiracy, defendants

devised a scheme and artifice to defraud the United

States and agencies thereof, to wit: The Federal Energy

Administration, now known as the Department of En-

ergy, of its right to have its programs and regulations

pertaining to the allocation of crude oil and certification

of domestic crude petroleum sales administered honestly,

fairly, impartially and free from deceit, craft, trickery,

corruption, dishonesty and fraud. That for the purpose

[6]

of executing such scheme and artifice to defraud it was

contemplated by defendants that matters or things would

be and were placed in the United States Post Office or

authorized depository for mail matter, to be sent and de-

livered by the United States Postal Service, in violation

of the Mail Fraud Statute, Title 18, United States Code,

Section 1341.

6. It was part of the conspiracy that Defendants

THOMAS M. “MICK” HAJECATE, THOMAS H.

“TOM” HAJECATE and CHARLES R. AKIN would

use their interest in and control over UNI OIL, INC. to

create foreign offshore entities in The Grand Cayman,

British West Indies, and causing said foreign entities to

enter into agreements for the sale and purchase of crude

oil with THE CRUDE COMPANY. Further, as part of

the conspiracy, the defendant JOHN MASEK would

utilize his interest and control over THE CRUDE COM-

PANY to contract with the foreign entities MAPCO and

H. C. IRAN, LTD., for the purchase and sale of crude

oil. The defendant R. STANLEY CORBITT would

cause his employer International Petroleum Trading Com-

pany, SDAD, LTDA, hereinafter referred to as IPTCO

to Contract and purchase crude oil from H. C. IRAN,

LTD.

50a

7. It was a further part of the conspiracy that the De-

fendants THOMAS M. “MICK” HAJECATE, THOMAS

H. “TOM” HAJECATE, CHARLES R. AKIN, R.

STANLEY CORBITT, and JOHN ALLEN MASEK

would use the foreign entities known as MAPCO and

H. C. IRAN, LTD., to facilitate and conceal the par-

ticipation of Uni Oil, Inc., and The Crude Company

in a fraudulent scheme to convert volumes of “old”

domestic crude oil into “new” domestic crude oil or into

“foreign” oil by means of false and misleading certifica-

tions.

8. It was a further part of the conspiracy that the De-

fendants would obtain the services of officers of the

Canadian Imperial Bank of Commerce, Georgetown,

Grand Cayman, British West Indies, as agents and di-

rectors of Mapco and H. C. Iran, Ltd., affiliates of the

enterprise, Uni Oil, Inc. Acting on the specific instruc-

tions of the Defendants, these bank officials, in their

capacity as directors of Mapco and H. C. Iran, Ltd., re-

ceived and disbursed funds, and also received and mailed

invoices. Acting upon specific instructions of the Defend-

ants, these bank officials signed and certified invoices and

other documents reflecting the volume and classification

of crude oil.

171

9. It was a further part of the conspiracy that the

Defendants would cause Uni Oil, Inc. to sell to Mapco

volumes of domestic crude oil which was certified as

100% “old” oil at $10.95 per barrel, a price substan-

tially higher than the market price for “old” oil. The

Defendants would then cause Mapco to sell this same

oil to The Crude Company falsely certified as 100%

“new” oil.

10. It was a further part of the conspiracy that the

Defendants would cause The Crude Company to sell

5la

volumes of crude oil to Mapco and H. C. Iran, Ltd.,

certified as approximately one-half “old” oil and one-half

“new” oil as a composite price of approximately $10.52

a barrel. The Defendants would then cause Mapco and

H. C. Iran, Ltd., to sell the same crude oil to Interna-

tional Petroleum Trading Company, SDAD, LTDA,

falsely certified as 100% “new” or “foreign.”

11. It was a further part of the conspiracy that the

Defendants THOMAS M. “MICK” HAJECATE, THOM-

AS H. “TOM” HAJECATE, and CHARLES R. AKIN

would pay Defendant R. STANLEY CORBITT com-

missions to facilitate and arrange the purchase of the

miscertified crude oil by International Petroleum Trading

Company, SDAD, LTDA, from Mapco and H. C. Iran,

Ltd. These commissions were paid directly to Defendant

R. STANLEY CORBITT and were concealed from his

employer.

In furtherance of the conspiracy and to effect the ob-

jects thereof, the Defendants performed the following

overt acts in the Southern District and elsewhere:

OVERT ACTS

1. On or about June 28, 1976, CHARLES R. AKIN

sent a letter to an officer of the Canadian Imperial Bank

of Commerce, acting in behalf of Mapco, Grand Cayman

Islands, confirming an agreement for Mapco to buy ap-

proximately 210,000 barrels of crude oil per month from

Uni Oil, Inc. at a price of $10.95 per barrel.

181

2. On or about Au 17, 1976, THOMAS H.

“TOM” HAJECATE, OMAS M. “MICK” HAJE-

CATE, and CHARLES R. AKIN, caused Uni Oil, Inc.

to invoice Mapco fir June 1976, delivery of 17,692 bar-

rels of crude oil at a unit price of $10.95 a barrel for

52a

a total amount of $193,727.40 certified at 100% lower

tier.

3. On or about August 19, 1976, THOMAS M.

“MICK” HAJECATE caused Mapco to invoice The

Crude Company for 17,692 barrels delivered in June

1976, at $12.05 a barrel for a total amount of $213,188.60

certified as 100% upper tier.

4. On or about July 26, 1976, THOMAS H. “TOM”

HAJECATE, CHARLES R. AKIN, R. STANLEY COR-

BITT, THOMAS M. “MICK” HAJECATE, and JOHN

A. MASEK travelled from Houston, Texas, to Grand

Cayman, British West Indies.

5. On or about September 28, 1976, THOMAS M.

“MICK” HAJECATE, THOMAS H. “TOM” HAJE-

CATE, and CHARLES R. AKIN, caused Uni Oil, Inc.

to invoice Mapco for barrels delivered in September 1976,

at a unit price of $10.95 for 105,000 barrels for a total

amount of $1,149,750.00 certified at 100% lower tier.

6. On or about October 4, 1976, THOMAS M.

“MICK” HAJECATE and THOMAS H. “TOM” HAJE-

CATE caused Mapco to invoice The Crude Company

for 105,000 barrels delivered in September 1976, at a

unit price of $11.97 a barrel fur a total amount of

$1,256,850.00, certified as 100% upper tier.

7. On or about October 27, 1976, THOMAS M.

“MICK” HAJECATE and THOMAS H. “TOM” HAJE-

CATE, and CHARLES R. AKIN, caused Uni Oil, Inc.

to invoice Mapco for barrels delivered in October 1976,

at a unit price of $10.95 a barrel for 105,462 barrels

for a total amount of $1,154,808.90, certified as 100%

lower tier.

8. On or about November 3, 1976, THOMAS M.

“MICK” HAJECATE and THOMAS H. “TOM” HAJE-

CATE caused Mapeo to invoice The Crude Company

for 105,462 barrels delivered in October

53a

191

1976, at a unit price of $11.97 a barrel for a total amount

of $1,262,380.14, certified as 100% upper tier.

9. On or about November 30, 1976, THOMAS M.

“MICK” HAJECATE, THOMAS H. “TOM” HAJE-

CATE, and CHARLES R. AKIN, caused Uni Oil, Inc.

to invoice Mapco for 63,000 barrels delivered in No-

vember 1976, at a unit price of $10.95 for a total amount

of $689,850.00, certified at 100% lower tier.

10. On or about December 1, 1976, THOMAS M.

“MICK” HAJECATE and THOMAS H. “TOM” HAJE-

CATE caused Mapco to invoice The Crude Company

for 63,000 barrels at $11.97 per barrel for a total of

$754,110.00, certified as 100% upper tier.

11. On or about July 26, 1976, R. STANLEY COR-

BITT, in behalf of International Petroleum Trading Com-

pany, SDAD, LTDA, signed a crude oil sales agreement

with International Petroleum Trading Company, SDAD,

LTDA, as purchaser and Mapco as seller.

12. On or about September 10, 1976, JOHN ALLEN

MASEK caused The Crude Company to invoice Mapco

for 269,074.81 barrels at $10.52 per barrel for a total

amount of $2,830,667.00, certified as 130,366.75 barrels

lower tier and 138,708.06 barrels upper tier.

13. On or about September 27, 1976; JOHN MASEK

caused The Crude Company to amend the invoice dated

September 10, 1976, to read lower tier: 129,957.31;

upper tier: 139,117.50.

14. On or about September 1, 1976, THOMAS M.

“MICK” HAJECATE and THOMAS H. “TOM” HAJE-

CATE caused Mapco to invoice Internationa! Petroleum

Trading Company, SDAD, LTDA, for 100.000 barrels

certified as foreign imported crude oil at $12.65 per bar-

rel and for 169,074.81 barrels certified as upper tier at

54a

$11.30 per barrel for a total amount of 269,074.81 bar-

rels at $3,175,545.30.

15. On or about September 19, 1976, CHARLES R.

AKIN, THOMAS H. “TOM” HAJECATE, JOHN AL-

LEN MASEK, and R. STANLEY CORBITT, travelled

by a private jet owned by Uni Oil, Inc. from Houston,

Texas, to Grand Cayman, British West Indies.

[10]

16. On or about October 18, 1976, JOHN ALLEN

MASEK caused The Crude Company to invoice Mapco

for 301,218.94 barrels of crude oil delivered in October

1976, at $10.52 per barrel for a total amount of $3,168,-

823.25, certified as 139,020.33 barrels lower tier, 153,-

571.75 barrels upper tier and 8,626.86 “stripper” crude.

17. On or about November 15, 1976, THOMAS M.

“MICK” HAJECATE and JOHN ALLEN MASEK

caused Mapco to invoice International Petroleum Trading

Company, SDAD, LTDA, for 301,219 barrels delivered

in October 1976, at $11.30 per barrel for a total amount

of $3,403,774.70, certified as all upper tier.

18. On or about March 16, 1976, R. STANLEY

CORBITT, in behalf of International Petroleum Trad-

ing Company, SDAD, LTDA, and THOMAS M. “MICK”

HAJECATE, in behalf of H. C. IRAN, LTD., executed

an agreement whereby International Petroleum Trading

Company, SDAD, LTDA, was to be the exclusive mar-

keting agent for H. C. Iran, Ltd., for the sale of crude

oil.

19. On or about April 28, 1976, JOHN ALLEN

MASEK, in behalf of The Crude Company, and an officer

of the Canadian Imperial Bank of Commerce, Grand

Cayman, British West Indies, acting in behalf of H. C.

Iran, Ltd., executed a contract for the purchase and sale

of crude oil.

55a

20. On or about April 21, 1976, THOMAS M.

“MICK” HAJECATE wrote a letter in behalf of H. C.

Iran, Ltd., to R. STANLEY CORBITT in behalf of

International Petroleum Trading Company, SDAD,

LTDA.

21. On or about July 16, 1976, JOHN ALLEN

MASEK, caused The Crude Company to invoice H. C.

Iran, Ltd., for crude oil delivered in July 1976, for

325,336.68 barrels at $10.52 per barrel for a total amount

of $3,422,341.89, and certified this crude as 148,974.44

barrels lower tier and 176,362.24 barrels upper tier.

[11]

22. On or about July 20, 1976, THOMAS M. “MICK”

HAJECATE caused H. C. Iran, Ltd. to invoice Interna-

tional Petroleum Trading Company, SDAD, LTDA for

crude oil delivered on July 8, 1976, for 325,366.68 bar-

rels at $11.30 per barrel for a total amount of $3,676,-

643.40, certified as new, released or stripper crude.

23. From the month of January 1976, to January 1,

1977, THOMAS M. “MICK” HAJECATE, THOMAS

H. “TOM” HAJECATE and CHARLES R. AKIN,

through Uni Oil, Inc., purchased approximately 774,397

barrels of crude oil containing volumes certified as “old

oil” and “new oil” per Federal Energy Administration

regulations at a price ranging from $5.28 to $11.91 per

barrel.

24. From the month of January 1976, to January 1,

1977, THOMAS M. “MICK” HAJECATE, THOMAS

H. “TOM” HAJECATE and CHARLES R. AKIN,

through Uni Oil, Inc., sold to Mapco, approximately 774,-

397 barrels of crude oil certified as “old” oil per Federal

Energy Administration regulations at a price of $10.95

a barrel for a total of approximately $8,479,647.75.

25. From the month of January 1976, to January 1,

1977, Mapco sold to JOHN MASEK and The Crude

56a

Company approximately 774,497 barrels certified:

“new” crude oil at prices ranging approximately fro

$11.85 to $11.97 per barrel for a total of approximate

$9,245,914.25.

26. From the month of April, 1976, to January

1977, JOHN MASEK and The Crude Company sold

Mapco and H. C. Iran, Ltd., approximately 4,116,0%

barrels of erude oil certified as approximately one-ha

“old” and one-half “new” per Federal Energy Admi

istration regulations at a price of $10.52 a barrel f

a total of approximately $43,520,964.20.

27. From the month of April, 1976, to January

1977, Mapco and H. C. Iran, Ltd., sold to R. STANLE

CORBITT and International Petroleum Trading Cor

pany, SDAD, LTDA, approximately 4,116,081 barrels |

crude oil certified as “new” or “foreign” oil at a pri

ranging from $11.30 to $12.65 a barrel for a tot

of approximately $47,868,845.52. (Violation: Title 1

United States Code, Section 1962(d)).

[12]

COUNT TWO

1. The Grand Jury alleges and incorporates by refe

ence herein paragraphs one and two of Count One of tl

Indictment, and all subparagraphs thereof, and made

part of this Count as if fully set forth and describe

herein.

2. From on or about January 1, 1976, the exact da

being unknown to the grand jurors, continuing to on

about January 1, 1977, within the Houston Division

the Southern District of Texas, and elsewhere, and withi

the jurisdiction of this Court, Defendants THOMAS!

“MICK” HAJECATE, THOMAS H. “TOM” HAI

CATE, CHARLES R. AKIN, R. STANLEY CORBIT’

and JOHN ALLEN MASEK, being persons employ:

by and associated with an enterprise, Uni Oil, Inc., t

57a

gether with its affiliates, including Mapco and H. C.

Iran, Ltd., which was engaged in and the activities of

which affected interstate commerce, did knowingly, will-

fully and unlawfully conduct and participate directly and

indirectly, in the conduct of such enterprise’s affairs

through a pattern of racketeering activity, consisting of

violations of the Federal Mail Fraud Statute (Title 18,

United States Code, Section 1341) as charged in Counts

Three through Twenty-Three of this Indictment, which

are alleged and incorporated in this count by reference

as if fully set forth herein.

[13]

8. In connection with the aforesaid pattern of rack-

eteering activity, as defined by Title 18, United States

Code, Sections 1961(1)(B), and 1961(5), Defendants

THOMAS M. “MICK” HAJECATE, THOMAS H.

“TOM” HAJECATE, CHARLES R. AKIN, JOHN AL-

LEN MASEK, and R. STANLEY CORBITT, devised

and intended to devise a scheme and artifice to defraud

the United States, various oil companies, and members

of the general public by means of false and fraudulent

pretenses, representations, and promises.

4. It was part of the scheme and artifice to defraud

that Defendants, THOMAS M. “MICK” HAJECATE,

THOMAS H. “TOM” HAJECATE, JOHN ALLEN

MASEK, R. STANLEY CORBITT, and CHARLES R.

AKIN, defraud an agency of the United States, to wit,

the Federal Energy Administration, now known as the

United States Department of Energy, of its right to

have its program of regulations providing for the certi-

fication of domestic crude petroleum sales, codified as

Title 10, C.F.R. § 212.131 et seqg., conducted honestly,

fairly, impartially, and free from deceit, craft, trickery,

corruption, dishonesty and fraud.

58a

5. It was a part of the scheme and artifice to defraud

that THOMAS M. “MICK” HAJECATE, THOMAS H.

“TOM” HAJECATE, JOHN ALLEN MASEK, R.

STANLEY CORBITT, and CHARLES R. AKIN, would

and did utilize Mapco and H. C. Iran, Ltd., both off-

shore entities in Grand Cayman, British West Indies,

as vehicles for the miscertification of oil contrary to

United States Department of Energy Regulations, 10

C.F.R. 212.131.

[14]

6. It was a further part of the scheme and artifice to

defraud that Defendants THOMAS M. “MICK” HAJE-

CATE, THOMAS H. “TOM” HAJECATE, CHARLES

R. AKIN, JOHN ALLEN MASEK, and R. STANLEY

CORBITT, and others to the grand jurors known and

unknown, would deliver and cause to be delivered to vari-

ous oil companies and individuals falsely and fraud-

ulently prepared invoices and certifications by placing in

the United States Post Office, an authorized depository for

mail matter, the said invoices and certifications, to be

sent or delivered by the United States Postal Service, in

violation of the Mail Fraud Statute, Title 18, United

States Code, Section 1341.

7. Through the aforesaid pattern of racketeering ac-

tivity, Defendants THOMAS M. “MICK” HAJECATE,

and THOMAS H. “TOM” HAJECATE did directly and

indirectly utilize their ownership interests in Uni Oil,

Inc., its subsidiaries and affiliates, both foreign and do-

mestic, including Mapco and H. C. Iran, Ltd., in further-

ance of the unlawful conduct of the affairs of the enter-

prise, thereby making such interests subject to forfeiture

to the United States pursuant to Title 18, United States

Code, Section 1963 (a).

(Violation: Title 18, United States Code, Sections 1962

(e) and 2)

59a

COUNT THREE

1. The Grand Jury alleges and incorporates by refer-

ence herein paragraphs one and

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