Opposition Brief — McAusland v. United States

No. 92-960 MAR 4

i OFFICE ib

j . P

— = — —s

Jn the Supreme Court of the Gnited States

OCTOBER TERM, 1992

THOMAS ID). MCAUSLAND AND CHRISTOPHER

M. PAFORT, PETITIONERS

Vv.

UNITED STATES OF AMERICA

ON PETITION FOR A WRIT OF CERTIORARI

TO THE UNITED STATES COURT OF APPEALS

FOR THE FOURTH CIRCUIT

BRIEF FOR THE UNITED STATES IN OPPOSITION

WILLIAM C. BRYSON

Acting Solicitor General

JOHN ©. KEENEY

Acting Assistant Attorney General

LOUIS M. FISCHER

Attorney

Department of Justice

Washington, D.C. 20530

(202) 514-2217

wd

QUESTION PRESENTED

Whether petitioners’ acquisition of confidential gov-

ernment information generated in connection with

competitively bid defense procurements constituted theft

of government property, in violation of 18 U.S.C. 641, and

the fraudulent obtaining of government property by the

use of interstate wire communications, in violation of 18

U.S.C. 1348.

(I)

TABLE OF CONTENTS

Page

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RR 5 act FENG ING ee BY MORNE OEE RO aR OEE an EAR 24

TABLE OF AUTHORITIES

Cases:

Bell v. United States, 462 U.S. 356 (1983) ..............0ec0eeee 13

Board of Trade v. Christie Grain & Stock Co., 198 U.S.

aN No dha nlasdsasinigesaeingsanen 11

Boyce Motor Lines, Inc. v. United States, 342 U.S. 337

Sal A RIES 59 CURRIE Ri OF a ee 20

Carpenter v. United Staies, 484 U.S. 19 (1987) ............... 11, 20

Chappell v. United States, 270 F.2d 274 (9th Cir. 1959) .. 15

Dowling v. United States, 473 U.S. 207 (1985) .........00.... 13

Fort Stewart Schools v. FLRA, 495 U.S. 641 (1990) ....... 23

Gorin v. United States, 312 U.S. 19 (1941) ..................... 20

John Doe Agency v. John Doe Corp., 493 U.S. 146 (1989).. 12

McNally v. United States, 483 U.S. 350 (1987) ........00.... 16

Morissette v. United States, 342 U.S. 246 (1952) ............. 13

Moskal v. United States, 111 S. Ct. 461 (1990) ................ 13

Screws v. United States, 352 U.S. 91 (1945) ....... 20

United States v. Barger, 931 F.2d 359 (6th Cir. 1991) ..... 14, 22

United States v. Conover, 845 F.2d 266 (11th Cir. 1988) .. 17

United States v. DiGilio, 5388 F.2d 972 (8d Cir. 1976), cert.

SE A OE CRED 6 ccsvasnescascnsssatondsincinasasccnsense 15

United States v. Fowler, 932 F.2d 306 (4th Cir. 1991) ..... 9, 14

United States v. Friedman, 445 F.2d 1076 (9th Cir.), cert.

NT MN I, CE CIO ED so cscccascnsscsvencscusobcbiacsssnsssecesans 16

United States v. Girard, 601 F.2d 69 (2d Cir.), cert.

SE UE GEuI, MEE CRIPEUD sccsesinceonisdcnvccasncecnnsess 8, 14-15, 20, 21

(III)

IV

Cases—Continued: Page

United States v. Jeter, 775 F.2d 670 (6th Cir. 1985), cert.

I I Sid BEOUE CRUIID cccrcnnesnenixensccsnnsnansannnvonsasne 14, 22, 24

United States v. Jones, 677 F. Supp. 238 (S.D.N.Y.

SEER RR) Fria 2a ER a ae Ae ne ear ne aa a 21

United States v. Kato, 878 F.2d 267 (9th Cir. 1989) ........ 16-17

United States v. Lambert, 446 F. Supp. 890 (D. Conn.

a oi acaaninenebnisnusertesas 21

United States v. May, 625 F.2d 186 (8th Cir. 1980) ......... 15

United States v. Mazurie, 419 U.S. 544 (1975) ................ 10

United States v. Morison, 844 F.2d 1057 (4th Cir.), cert.

Ns Se BI Se COD seecisicncnsentcaseneneccscincuscessenseves 8-9

United States v. Perholtz, 842 F.2d 343 (D.C. Cir.), cert.

I I Se IE COED shscireiienccnnsepensstesncnsnssoavesebnee 12, 16

United States v. Ragen, 314 U.S. 513 (1942) oe. 20

United States v. Reynolds, 345 U.S. 1 (1958) «0... 12

United States v. Schwartz, 785 F.2d 673 (9th Cir.), cert.

a, SOW UF Ses TI CIEE oxteknacsievenckexenndcssecnencixexacevarss 16

United States v. Slay, 858 F.2d 1310 (8th Cir. 1988) ....... 17

United States v. Tobias, 836 F.2d 449 (9th Cir.), cert.

II, SD TEA Be CUED cdcitesvecenncctnscnecsnnssnsnsriasconsicnes 15, 16

Constitution, statutes and regulations:

U.S. Const.:

III Ui deck bskchacuneidc aside bankas dadvinddnneeasipaceiasubdeviaeia 13, 14

Amend. V (Due Process Clause) ................c.cseeeeeeeeees 9-10

Office of Federal Procurement Policy Act Amendments

of 1988 (Procurement Integrity Act), Pub. L. No. 100-

Re ee ie I pci acc enccahcsenenenacadaccskietnwcdnesectouss 23

0D: TFs. Se BE BOE ivesactstnensnerssiriarsxercesecys 23

41 U.S.C. 423(j)(1) (Supp. IT 1990) .................ccscceeeee 23

41 U.S.C. 423(p)(6) (Supp. II 1990) ................ccccssseees 23

41 U.S.C. 423(pX7) (Supp. IT 1990) ............0000:..220..... 23

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ae a eS OE eee SE 11

Be Rc I olccces esta ee a oe 2, 7, 8, 9, 11, 12, 20

V

Statutes and regulations—Continued:

Be Uy a: MID achccsciicnucsasovcbusaslsnisinsusasaxeecuasieeatenann

Be OAs I ai icdinndstnindncsvasiccsdse baie

48 C.F.R. (1987):

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SOND FR ID ences ssmnnextesicqenianiasiminn pineistenammueaaelinnn

NEE DRIED Siisnciniyoscscesntiancexectineateieduaatanids

SERRE DUI? kasenvknsescensentecsniarsssuaaeiieaaucnaee

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SOI GOED encninsssionrcstsaskvseseossusaiacenanaesssnueutiainee

CEI BINEIIIIIEE Ds cenesiknccnnsevavastuicisntiunsiadammecemacdauenas

Miscellaneous:

DoD Directive 4105.62(E)(3)(c) (Sept. 9, 1985)...

Department of the Navy, Naval Electronic Systems

Command, NAVELEX INST. 4200.6D (Jan. 29, 1982) .

Department of the Navy, Naval Electronic Systems

Command, NAVELEX INST. 4200.12C Change Trans-

8 OS El, OS Seen Lae

In the Supreme Court of the Giited States

OCTOBER TERM, 1992

No. 92-960

THOMAS D. MCAUSLAND AND CHRISTOPHER

M. PAFORT, PETITIONERS

Vv.

UNITED STATES OF AMERICA

ON PETITION FOR A WRIT OF CERTIORARI

TO THE UNITED STATES COURT OF APPEALS

FOR THE FOURTH CIRCUIT

BRIEF FOR THE UNITED STATES IN OPPOSITION

OPINION BELOW

The opinion of the court of appeals (Pet. App. la-

15a) is reported at 979 F.2d 970.

JURISDICTION

The judgment of the court of appeals was entered on

August 14, 1992. A petition for rehearing was denied

on October 1, 1992. Pet. App. 16a. The petition for a

writ of certiorari was filed on December 4, 1992. The

jurisdiction of this Court is invoked under 28 U.S.C.

1254(1).

(1)

2

STATEMENT

After a jury trial in the United States District

Court for the Eastern District of Virginia, peti-

tioners were convicted on one count of conversion of

government property, in violation of 18 U.S.C. 641;

four counts of wire fraud, in violation of 18 U.S.C.

1343; and one count of conspiring to commit the above

offenses and to defraud the United States, in violation

of 18 U.S.C. 371. They were each sentenced to 12

months’ imprisonment. The court of appeals affirmed.

Pet. App. la-15a.

1. Between March 1987 and June 1988 petitioners

conspired with Thomas Muldoon to obtain sensitive

government procurement information from the

Department of Defense concerning three contracts

on which petitioners’ employer, Litton Data Systems,

had made or was considering making bids. Petitioner

McAusland was vice-president of marketing or

business development, and petitioner Pafort was a

director of business development for Litton. Muldoon

was an independent consultant hired by petitioners.

Petitioners used Muldoon to obtain from Navy em-

ployees documents and information on Navy procure-

ments that the employees were not authorized to

disclose to petitioners or others outside the govern-

ment. Pet. App. 3a-9a.

The procurement process takes place within the

framework of the Federal Acquisition Regulations

(FARs). A procurement begins when an agency

formulates a program to meet national defense needs

and then issues a request for proposals. After the

proposals are submitted, the agency performs an

initial evaluation, separately analyzing the cost and

3

technical components of the proposals. The contract-

ing officer or advisory team then combines the two

components and evaluates them to determine the

“competitive range” for the procurement. The range

consists of proposals that “have a reasonable chance

of being selected for award.” 48 C.F.R. 15.609(a)

(1987). Proposals falling outside that range are not

further considered. After the initial evaluation, the

agency can enter into formal discussions with the

remaining competitors and may invite the competi-

tors to submit their “best and final offers” (BAFOs).

The source selection authority then decides to whom

to award the contract based on the recommendations

of the contracting officer or advisory team. Pet. App.

3a-4a.

Muldoon provided petitioners with information on

three procurements: (1) the Advanced Tactical Air

Command Central (ATACC), a procurement for a

radar command and control system by the Space and

Naval Warfare Systems Command (SPAWAR); (2)

UYQ-21, a procurement for a radar display system

conducted by Naval Sea Systems Command

(NAVSEA); and (8) Fiber Optics Cable System

(FOCS), a procurement by SPAWAR for a Marine

Corps fiber optic communications system. Pet. App.

4a.

a. ATACC procurement. In April 1987, SPAWAR

issued a request for proposals (RFP) for the ATACC

procurement. The RFP stated that proposals would

be evaluated in four areas, but it did not give the

4

weights the government evaluators assigned to each

area.’ Pet. App. 5a.

Pafort asked Muldoon to obtain information about

the ATACC procurement, and Muldoon eventually

succeeded in obtaining the evaluation weights the

government would use in assessing the bids. Muidoon

paid another consultant, Mark Saunders, for ‘hat

information; Saunders obtained the information from

George Stone, the SPAWAR official responsible for

conducting the ATACC procurement. Pet. App. 5a.

When Litton was ready to submit its ATACC bid,

McAusland and Muldoon agreed that Muldoon should

not attempt to get copies of their competitors’

technical proposals because to do so would be “playing

with fire.” Pet. App. 5a. On August 21, 1987, Pafort

' A Department of Defense regulation prohibits disclosure

of the numerical weights for evaluation criteria. The regula-

tion states that such weights “will not be disclosed either to

offerors or to evaluators other than the [Source Selection

Advisory Counsel], to preclude intentional or unintentional bias

in proposals or evaluations.” DoD Directive 4105.62(e)(3)(c)

(Sept. 9, 1985), reproduced at C.A. App. 253 and quoted at Pet.

App. 12a n.4. The relevant component of the Department of

the Navy similarly hae in place a directive prohibiting release

of proposal evaluation weights. Department of the Navy,

Naval Electronic Systems Command, NAVELEX INST.

4200.12C Change Transmittal No. 1 (Feb. 5, 1973), reproduced

at C.A. App. 247.

2 A FAR rule prohibited the disclosure of information in

proposals outside the government: “After receipt of proposals,

none of the information contained in them or concerning the

number or identity of offerors shall be made available to the

public or to anyone in the Government not having a legitimate

interest.” 48 C.F.R. 15.413-1(a) (1987). Another FAR rule

prohibited “[tjechnical transfusion,” 7.e., disclosure of “tech-

5

asked Muldoon when he would be able to obtain the

“numbers” (competitors’ bid figures). Wiretap Tr.

No. 17. In late September 1987, Muldoon told Pafort

he had asked his source to find out where Litton stood

in comparison with the other bidders. Muldoon said

that if he obtained that information, Pafort should

come to Washington rather than discuss the infor-

mation over the telephone. Pet. App. 6a. On Septem-

ber 29, Muldoon learned from Stone through Saunders

the amount each competitor had bid, that Litton’s bid

was highest and that Litton’s bid, most likely, would

not be in the competitive range. Muldoon gave that

information to McAusland, who agreed not to with-

draw Litton’s bid, because Litton was not supposed to

know that it would be eliminated.* /bid.

In February 1988, Pafort asked Muldoon for in-

formation on the ranking of the competitors. Muldoon

had received that information from Saunders, who in

nical information” from one competitor to another. 48 C.F.R.

15.610(d)(2) (1987).

* A FAR rule, 48 C.F.R. 15.610(d)(3) (1987), prohibited

government officials from engaging in “[aJuction techniques,”

including “{a]dvising an offeror of its price standing relative to

another offeror.” The FAR rule on source selection, which

covered rankings, ratings, and evaluation comments prepared

by evaluation and advisory groups, 48 C.F.R. 15.612(d) (1987),

required that agencies “exercise particular care to protect

source selection information on a strict need-to-know basis,”

and prevent release absent “approval by the source selection

authority.” 48 C.F.R. 15.612(e) and (e)(1) (1987). Source selec-

tion authorities, in accordance with standard practice in

competitive procurements, did not release information regard-

ing rankings, ratings, or evaluations to other competitors. C.A.

App. 359, 396, 433, 436.

6

turn had obtained it from Stone. In March 1988,

SPAWAR officials informed Litton that it was

eliminated from the competition. Pet. App. 7a.

b. UYQ-21 procurement. In June 1987, Litton and

two competitors submitted bids to NAVSEA on the

UYQ-21 contract. Petitioners spoke to Muldoon about

the procurement on several occasions. On July 29,

Muldoon told McAusland that he had copies of the

government’s evaluation of the price proposals. Pet.

App. 7a. Two days later, Muldoon left a document for

McAusland at Litton’s Virginia office that contained

information corresponding to the government’s

source selection plan for the UYQ-21 procurement.

Muldoon had obtained the information from a member

of the government’s cost review team that was

reviewing the proposals.‘ /d. at Ta-8a.

In August, Muldoon told petitioners that the Navy

would likely award the contract without requesting

BAFOs. Based on information obtained from the

government official who was on the UYQ-21 cost

review team, Muldoon also advised petitioners that

Litton was second behind Raytheon in the bidding.

Pet. App. 8a. Also during July and August, Muldoon

told McAusland that he knew a government official

who could ensure a request for BAFOs if Litton

provided some money. After Muldoon advised

McAusland that he could not obtain the technical

evaluations before Litton would have to submit its

* The confidentiality of the source selection plan was

covered by 48 C.F.R. 15.612(c) and (e) (1987). See note 3,

supra. Source selection plans were never to be released outside

the government. C.A. App. 361, 430, 443.

LL

7

BAFO, McAusland said he did not want to pursue that

course of action. bid.

ec. FOCS procurement. In December 1987, Mul-

doon provided a copy of the government’s draft

acquisition plan for the FOCS procurement to

McAusland.® In early 1988, Pafort told Muldoon that

Litton was interested in the program and asked

Muldoon to check on a proposed date in the plan.

Ultimately, Litton did not submit a bid. Pet. App. 9a.

2. The indictment charged petitioners with con-

spiring to defraud the United States by (1) depriving

the Navy of the honest services of its employees and

impairing and impeding government functions in

competitive procurements, and (2) converting gov-

ernment property (procurement sensitive informa-

tion) in violation of 18 U.S.C. 641 and engaging in

wire fraud in violation of 18 U.S.C. 1343.6 The

° A SPAWAR regulation specifically prohibited release of

the plan: “Because of the planning nature of acquisition plans,

those which do not contain classified information shall be

marked ‘FOR OFFICIAL USE ONLY’ in accordance with the

guidelines of SECNAVINST 5570.2B. The content of an

Acquisition Plan is privileged information and shall be

prepared internally. Neither information contained therein

nor copies thereof shall be released to contractors.” Depart-

ment of the Navy, Naval Electronic Systems Command,

NAVELEX INST. 4200.6D (Jan. 29, 1982), reproduced at C.A.

App. 251.

® 18 U.S.C. 641 makes it a crime when a person “embezzles,

steals, purloins, or knowingly converts to his use or the use of

another, or without authority, sells, conveys or disposes of any

record, voucher, money, or thing of value of the United States

or of any department or agency thereof.”

18 U.S.C. 13848 makes it a crime when a person, “having

devised or intending to devise any scheme or artifice to

8

indictment also charged petitioners with the

substantive offenses of violating Section 641 by

converting procurement sensitive information in

connection with the ATACC procurement, and

violating Section 1343 by scheming to deprive the

government of its exclusive use of such information.

C.A. App. 17-38.

Before trial, the district court rejected claims that

information was not a “thing of value” under Section

641 and that the provision was unduly vague. Pet.

App. 20a-22a. After the jury found petitioners guilty,

the court rejected petitioners’ post-verdict motion for

a judgment of acquittal. The court found that the

jury had sufficient evidence to find that petitioners

“sought and received procurement sensitive informa-

tion from Mr. Muldoon, and that procurement sensi-

tive information was not authorized to be released.”

Id. at 24a. The court also found that “[t]here was also

evidence from which the jury could find that

[petitioners] knew it was not authorized to be

released.” bid.

3. The court of appeals affirmed. Pet. App. la-15a.

Petitioners argued that 18 U.S.C. 641 does not bar the

theft of government information unless published

regulations clearly prohibit disclosure of the infor-

mation. Relying on United States v. Girard, 601 F.2d

69 (2d Cir.), cert. denied, 444 U.S. 871 (1979), and

United States v. Morison, 844 F.2d 1057 (4th Cir.),

defraud, or for obtaining money or property by means of false

or fraudulent pretenses, representations, or promises, trans-

mits * * * by means of wire * * * communication in interstate

** * commerce, any * * * sounds for the purpose of executing

such scheme or artifice.”

I aeeeaienimaeiamummaaaael

9

cert. denied, 488 U.S. 908 (1988), petitioners claimed

that Section 641 mandates resort to statutes or regu-

lations in order to give meaning to the prohibition

against conveyance of government information

“without authority.” Absent such external standards

barring disclosure, petitioners argued that Section

641 is unconstitutionally vague. Petitioners made the

same argument with respect to their convictions

under 18 U.S.C. 371 and 1343.7. Pet. App. 9a-10a.

The court of appeals rejected petitioners’ claims. It

found that neither Girard nor Morison held that

there must be published regulations specifically

prohibiting the disclosure of information to support a

prosecution under Section 641. Rather, the court

stated that, in those cases, vagueness concerns were

eliminated through the existence of published

regulations prohibiting disclosure. Such regulations,

the court concluded, are not “the exclusive method of

preventing vagueness,” and the absence of FARs

covering all of the information converted by peti-

tioners therefore did not immunize petitioners from

prosecution under Section 641. Pet. App. 11a.

The court of appeals also rejected petitioners’

contention that applying Section 641 to their conduct

violates vagueness principles under the Due Process

” Petitioners also argued that information should not be

considered a “thing of value” under 18 U.S.C. 641. Pet. C.A.

Y Br. 28 n.10. The court of appeals noted that it had previously

held that information constitutes a “thing of value” under

Section 641 in United States v. Fowler, 932 F.2d 306 (4th Cir.

1991). Pet. App. 9a n.2. Petitioners did not argue that

information should not be considered “property” under 18

U.S.C. 371 or 1343. See Pet. C.A. Br. 30-32.

10

Clause. Pet. App. 12a. Examining the vagueness

claim “in the light of the facts of the case at hand,”

ibid., quoting United States v. Mazurie, 419 U.S. 544,

550 (1975), the court found that the evidence estab-

lished that the “disclosure was without authority and

that [petitioners] knew as much.” Pet. App. 12a. The

court referred to (1) the published FARs that prohib-

ited disclosure; (2) other Department of Defense

regulations that prohibited disclosure; and (3) legends

on many of the documents obtained by petitioners

specifically restricting disclosure of those docu-

ments. Jd. at 12a-13a.

The court of appeals further noted that petitioners’

conduct indicated their awareness that the “dis-

closure was without authority.” Pet. App. 13a. The

court observed that McAusland had agreed that he

should not withdraw Litton’s ATACC bid, because he

was not supposed to know where Litton stood in the

competition. McAusland had also agreed with Mul-

doon that having Muldoon obtain competitors’ bids

would be “playing with fire.” Similarly, Pafort

agreed to meet with Muldoon in person to avoid

discussing information over the telephone. And at

trial Pafort conceded that it “was not the correct

thing to do” to ask for the rankings and technical

evaluations of competitors. /bid. Finally, the court of

appeals noted that the two government employees who

had furnished tiie information testified that they were

not authorized to make the disclosures, and other

procurement officials testified that petitioners, given

their experience and positions, would have known that

the information was not subject to disclosure. Jbid.

In view of those factors, the court concluded that the

11

statute was not vague as applied to petitioners’

conduct. Jd. at 13a-14a.°

ARGUMENT

1. Petitioners contend (Pet. 12-17) that gov-

ernment information is not a “thing of value” that can

be converted under 18 U.S.C. 641 or “property” that

can be obtained by fraud under 18 U.S.C. 1343. They

further argue that the courts of appeals are divided on

those issues. Petitioners’ claims are incorrect and do

not warrant this Court’s review.

a. Section 641 punishes the knowing conversion of

any “thing of value” of the United States. 18 U.S.C.

641. Section 1343 punishes any “scheme or artifice to

defraud” executed through wire communications. 18

U.S.C. 1343. Improperly obtaining government

information with respect to internal methods,

deliberations, and determinations in a competitive

procurement falls within the scope of those

prohibitions.

In Carpenter v. United States, 484 U.S. 19, 25

(1987), this Court held that the misappropriation of

confidential business information violates “property”

rights protected by the mail and wire fraud statutes,

18 U.S.C. 1341 and 1343. The Court observed that

“{cjonfidential business information has long been

recognized as property.” 484 U.S. at 26, citing, inter

alia, Board of Trade v. Christie Grain & Stock Co.,

198 U.S. 236, 250-251 (1905). Under Carpenter, a

* The court of appeals also rejected petitioners’ claims based

on the jury instructions, allegedly prejudicial publicity, and the

admission of evidence of the procurement officials’ guilty pleas.

Pet. App. 14a-15a. They do not renew those arguments here.

12

fraudulent scheme to obtain confidential government

procurement information is covered by Section 1343.

See United States v. Perholtz, 842 F.2d 343, 367 (D.C.

Cir.) (“appropriating the confidential information

concerning the [procurement] specifications and then

leaking it to [a bidder] * * * skewed the bidding

process and directly impinged upon the government’s

economic interests”), cert. denied, 488 U.S. 821

(1988).?

The same principle applies to Section 641. The

phrase “thing of value” in Section 641 readily

encompasses intangible property, such as confidential

information. That construction accords with the

statute’s purpose to provide comprehensive protection

to the government’s property rights. As this Court

has noted, “[t]he history of § 641 demonstrates that it

was to apply to acts which constituted larceny or

9 Petitioners argue (Pet. 17 n.19) that Carpenter protects

only private business information and that its holding is

inapplicable to “government information, which is presump-

tively non-secret.” There is no presumption of nonsecrecy

about government procurement information, however, when

the government enters the private market to purchase goods

or services. In that context, the government acts in a

proprietary capacity and has just as much interest in ensuring

the integrity and confidentiality of its competitive bidding

procedures as any private entity. Nor is the government’s

interest in protecting the confidentiality of information limited

to the procurement context. See, e.g., John Doe Agency v.

John Doe Corp., 493 U.S. 146 (1989) (information compiled for

law enforcement purposes); United States v. Reynolds, 345

U.S. 1, 7-8 (1953) (military and state secrets). We note that

petitioners did not claim in the court of appeals that Section

1343 is inapplicable to government information. See note 7,

supra.

13

embezzlement at common law and also acts which

shade into those crimes but which, most strictly

considered, might not be found to fit their fixed

definitions.” Morissette v. United States, 342 U.S.

246, 269 n.28 (1952); see also Bell v. United States, 462

U.S. 356, 360 (1983) (the phrase “thing of value” in 18

U.S.C. 2113(b) encompasses intangible property and

“is thus broader than common law larceny”).'® Section

641’s application to information is therefore clear;

there is no ambiguity (Pet. 15) calling for application

of the rule of lenity. Moskal v. United States, 111 S.

Ct. 461, 465 (1990) (refusing “to deem a statute

‘ambiguous’ for purposes of lenity merely because it

[is] possible to articulate a construction more narrow

than that urged by the Government”)."!

© Petitioners err in relying (Pet. 14-15) on Dowling v.

United States, 473 U.S. 207 (1985). That case held that the

interstate transportation of records containing copyright-

infringing performances did not constitute interstate trans-

portation of “goods, wares, [or] merchandise” with knowledge

that they were stolen or converted, in violation of 18 U.S.C.

2314. That holding responded to Section 2314’s specific

language, its narrow focus on the protection of physical goods,

and concerns to avoid undermining Congress’s scheme for

protecting copyrights. 473 U.S. at 214-227. None of those

considerations applies here.

1! Petitioners argue that if Section 641 is construed to bar

the misappropriation of confidential government information,

it would give rise to difficult First Amendment questions. Pet.

15. There is, however, no First Amendment issue raised by

punishing those who appropriate confidential procurement

information in order to subvert the government’s competitive

bidding process. And, because “Section 641 applies only to

those conveyances of government property made ‘without

authority’ * * * many officials may routinely pass on

14

b. The courts of appeals have repeatedly upheld

convictions under Section 641 for the wrongful

acquisition of government information. See United

States v. Fowler, 932 F.2d 306, 309-310 (4th Cir. 1991)

(upholding Section 641 conviction of a defendant who

misused information obtained from copies of classified

. documents; court rejected the argument that in-

formation in a document is not a “thing of value”

under Section 641); United States v. Barger, 931 F.2d

359, 368-369 (6th Cir. 1991) (upholding Section 641

conviction of a defendant who obtained a DEA manual

relating to a rival motorcycle gang; “[cJlearly, the

value of the *** manual is in the information

contained therein” and that is “enough to meet the

property or ‘thing of value’ element of the statute”);

United States v. Jeter, 775 F.2d 679, 679-682 (6th Cir.

1985) (upholding Section 641 conviction of defendant

who illegally obtained and distributed carbon copies of

secret grand jury documents and proceedings; court

noted that “Congress’ very use of the more expansive

‘thing of value’ rather than ‘property’ strongly

implies coverage beyond mere tangible entities”),

cert. denied, 475 U.S. 1142 (1986); United States v.

Girard, 601 F.2d 69, 70-71 (2d Cir.) (upholding convic-

tion of a former DEA agent who obtained and

distributed confidential law enforcement records;

government information without running afoul of the statute.”

United States v. Jeter, 775 F.2d 670, 681 (6th Cir. 1985), cert.

denied, 475 U.S. 1142 (1986). As the Second Circuit has stated,

“{iJn view of the statute’s plainly legitimate sweep,” any First

Amendment issues at the margins can “be cured on a case by

case basis.” United States v. Girard, 601 F.2d 69, 72, cert.

denied, 444 U.S. 871 (1979).

15

“{ajlthough the content of a writing is intangible, it is

nonetheless a thing of value”), cert. denied, 444 U.S.

871 (1979).”

Petitioners argue (Pet. 12-13) that the Ninth

Circuit has rejected the application of Section 641 to

government information. The cases cited by petition-

ers, however, did not require the Ninth Circuit to

consider whether Section 641 covers the conversion

of government information. In Chappell v. United

States, 270 F.2d 274 (9th Cir. 1959), an Air Force

sergeant was prosecuted for converting to his own

use the services and labor of an airman who was

ordered to paint private apartments that the sergeant

owned. Based on its analysis of the common law tort

of conversion, the court of appeals concluded that the

airman’s “services and labor” were not a “thing of

value” under Section 641. 270 F.2d at 276-278. In

United States v. Tobias, 836 F.2d 449, 451 (9th Cir.),

cert. denied, 485 U.S. 991 (1988), the court indicated

that Section 641 does not apply to “intangible goods”

such as “classified information.” That statement,

however, was dictum, because the court held that the

cryptographic cards that the defendant had converted

12 See also United States v. May, 625 F.2d 186, 191-192 (8th

Cir. 1980) (intangible property is covered by Section 641;

holding that evidence of salaries of personnel involved in

unauthorized flights on government aircraft was properly

admitted); cf. United States v. DiGilio, 588 F.2d 972, 976-978

(8d Cir. 1976) (affirming Section 641 conviction of defendant

who obtained confidential information and documents from

FBI files, because the copies were made with government

resources, equipment, and supplies; reserving question

whether information alone is protected by Section 641), cert.

denied, 429 U.S. 1038 (1977).

16

in that case constituted “tangible property.” 836 F.2d

at 452. Accordingly, Chappell and Tubias did not deal

with claimed appropriations of government informa-

tion and do not conflict with the court of appeals’

decision in this case."

Nor is there a conflict concerning the application of

the wire fraud statute to schemes to obtain

government information. The only circuit that has

addressed the issue squarely has held that such

schemes violate the counterpart mail fraud statute.

United States v. Perholtz, 842 F.2d at 367."

'8 Moreover, despite the statement in Tobias that the Ninth

Circuit recognizes an “ ‘intangible goods’ or ‘classified

information’ ” exception to Section 641, 836 F.2d at 451, the

Ninth Circuit has never applied such an exception to

government information, and it has affirmed a conviction

under Section 641 for converting the “information contained”

in grand jury transcripts. United States v. Friedman, 445

F.2d 1076, 1087, cert. denied, 404 U.S. 958 (1971). A different

panel of that court has also noted that the continued validity of

Chappell’s narrow construction of Section 641 has been

“seriously undermined.” United States v. Schwartz, 785 F.2d

673, 681 n.4, cert. denied, 479 U.S. 890 (1986). Tobias’s

expression (836 F.2d at 451 n.2) of disagreement with

Schwartz indicates that the issue may well warrant further

consideration by the Ninth Circuit in a case that squarely

presents the issue; it does not suggest that there is a circuit

conflict ripe for this Court’s review.

4 The mail fraud cases cited by petitioners (Pet. 17 n.19)

have no relevance to this case. Those cases applied the rule of

McNally v. United States, 483 U.S. 350 (1987), that the mail

fraud statute does not cover schemes to deprive governments

or employers of “intangible rights,” such as the right to loyal

service or the right to receive accurate information. None of

those cases involved a private party’s fraudulent acquisition of

government procurement information. See United States v.

17

2. Petitioners further contend (Pet. 18-24) that,

even if government information constitutes “prop-

erty,” the unauthorized acquisition of such infor-

mation violates the theft and wire fraud statutes only

when disclosure of the information is specifically

prohibited by a statute or a published regulation.

That contention lacks merit.

a. Section 641 does not require the existence of a

published regulation prohibiting disclosure in order

to render the converted use of government informa-

tion unlawful, or the conveyance of the information to

be “without authority,” 18 U.S.C. 641. There is no

legal requirement that the conversion of personal

property be prohibited by statute or published

regulation to come with Section 641, and there is no

basis for creating a different rule for informational

property. The issue is whether the release and

conversion of the information in question was

unauthorized; here, the evidence was sufficient to

establish that the procurement information at issue

was not to be released to persons such as peti-

tioners.®

Kato, 878 F.2d 267, 269 (9th Cir. 1989) (“government’s right to

accurate information [from an applicant for a pilot’s license]

constitutes an intangible right”); United States v. Slay, 858

F.2d 1310, 1316 (8th Cir. 1988) (“{wJithholding valuable

information from the City is not the same thing as depriving

the City of its property”); United States v. Conover, 845 F.2d

266, 271 (11th Cir. 1988) (no showing that employee who

breached his fiduciary duty “maintained confidential business

information”).

1° The jury was properly instructed on that issue. With

respect to Section 641, the jury was instructed that conversion

includes the use of someone else’s property in an unauthorized

18

First, both published and unpublished government

regulations specifically prohibited Navy officials from

releasing the procurement-sensitive information that

petitioners surreptitiously acquired. The FARs,

which are published, covered nondisclosure of (1) the

contents of competitors’ proposals; (2) the evaluators’

rankings, scores, and comments; and (3) the UYQ-21

Source Selection Plan. Internal Navy directives

prohibited release of the ATACC weights and the

FOCS acquisition plan.'’® Gov’t C.A. Br. 31 n.18; see

notes 1, 2, 3, 4, and 5, supra. Moreover, government

procurement officials testified to an unbroken

practice against release of such information.'’ C.A.

App. 359, 361-363, 396, 430, 433, 436, 443-446.

manner, and “it would be a misuse of procurement sensitive

information if confidential procurement information was

released and if the defendant knowingly and willfully sought

release of the information while knowing that such release was

not authorized.” C.A. App. 188. The jury was also instructed

that to convey information “ ‘without authority’ means that the

conveyance was made to someone other than an authorized

person and was made without the permission and consent of a

Government official who is actually authorized to give that

permission.” /d. at 188-189.

'6 Those formal written directives, although not published,

were available to the public. See C.A. App. 584-585. Petitioners

suggest (Pet. 19, 21) that, absent published regulations, officials

would have the power to impose arbitrary and abusive

restrictions on the release of government information. The

existence of written nondisclosure regulations, whether or not

published, removes concerns about arbitrary enforcement.

7 The courts below properly allowed government officials to

testify that they did not release to bidders the procurement-

sensitive information that petitioners obtained. A comprehen-

sive system for protecting confidential information is likely to

19

The evidence also indicated that marketing execu-

tives with the level of experience possessed by

petitioners would have known of those prohibitions.

Many of the documents contained legends restricting

disclosure, and petitioners’ own conduct attests to

their knowledge that they were seeking information

that was not authorized to be released. Petitioners

did not directly ask the government for information

about the relative standing of bidders in their

competitive procurements or about the government’s

internal selection process; rather, they had Litton

pay a consultant, Muldoon, to use indirect means to

obtain that information. Later, when Muldoon pro-

vided information about Litton’s poor prospects in the

ATACC procurement, McAusland did not withdraw

Litton’s bid, because he knew that Litton was not

supposed to know that information and withdrawing

the bid might reveal that Litton had obtained

information it was not authorized to have. McAusland

later stated that getting his competitors’ bids would

be “playing with fire.” Similarly, Pafort arranged a

personal meeting with Muldoon to avoid discussing

information by phone, and he acknowledged at trial

that asking for competitors’ rankings and technical

evaluations would be incorrect. Pet. App. 18a.

Petitioners suggest (Pet. 21, 23 n.28) that the

absence of published regulations subjected them to

“an intolerable risk of unfair surprise.” The jury was

leave at least some room for discretionary exceptions; the

testimony here simply established that, to the extent there was

residual discretion to release the information, government

officials had a consistent practice not to do so with respect to

the information obtained by petitioners.

20

required to find, however, that petitioners specifically

intended to obtain information whose release was

unauthorized and that petitioners knew they were

doing so. The jury was instructed that, in order to

convict, it had to find that (1) petitioners acted

knowingly and with “the specific intent to do

something the law forbids, that is to say, with bad

purpose, either to disobey or to disregard the law,”

C.A. App. 183; (2) petitioners “knew that the release of

the material they sought was unauthorized,” C.A.

App. 185; and (3) petitioners “knowingly and willfully

sought release of the information while knowing that

such release was not authorized,” C.A. App. 188.

These requirements “relieve the statute of the

objection that it punishes without warning an offense

of which the accused was unaware.” Screws v. United

States, 325 U.S. 91, 102 (1945); Boyce Motor Lines,

Inc. v. United States, 342 U.S. 337, 342 (1952); United

States v. Ragen, 314 U.S. 513, 524 (1942); Gorin v.

United States, 312 U.S. 19, 26-28 (1941)."*

b. Petitioners contend (Pet. 19-20 & n.23) that the

court of appeals’ decision conflicts with United States

v. Girard, supra. That claim is unfounded. In

Girard, a DEA agent and a former DEA agent were

convicted under Section 641 for selling information

'8 Petitioners argue in passing (Pet. 23-24) that a published-

regulation requirement should exist for Section 1343. In

Carpenter v. United States, however, the Court indicated that

private business information is protected “property” without

regard to written rules; “the declaration to that effect in the

employee manual merely removed any doubts on that score and

made the finding of specific intent to defraud that much

easier.” 484 U.S. at 28. The same principle applies to schemes

to appropriate confidential government information.

21

from DEA computer files to a third party. In

rejecting the defendants’ vagueness challenge to

Section 641, the court of appeals stated that the

defendants “must have known that the sale of DEA

confidential law enforcement records was prohibited.”

601 F.2d at 71. The court added that “(t]he DEA’s own

rules and regulations forbidding such disclosure may

be considered as both a delimitation and a clarification

of the conduct proscribed by the statute.” Jbid. The

relevant “rules and regulations,” which were de-

scribed in the district court’s opinion, consisted of

published regulations of the Justice Department and

an unpublished DEA Agents’ Manual that “further

particularizes when a disclosure of information is

improper.” United States v. Lambert, 446 F. Supp.

890, 900 (D. Conn. 1978).'° Girard therefore does not

impose a publication requirement; it holds only that

the defendants must have adequate notice that

disclosure is forbidden, whatever the source of that

notice.”

'? The Lambert court also stated that, to alleviate vagueness

concerns, Section 641 should be interpreted to bar “only

transfers of information affirmatively prohibited by other

federal statutes, administrative rules and regulations, or,

perhaps, longstanding government practices.” 446 F. Supp. at

899 (emphasis added). Nothing in the Second Circuit’s opinion

rejects that approach; rather, the court of appeals affirmed on

the facts before it and characterized the district court’s opinion

as “well-reasoned.” 601 F.2d at 70.

*” That is the way the decision has been read in the Second

Circuit. See United States v. Jones, 677 F. Supp. 238, 241

(S.D.N.Y. 1988) (visitor to prosecutor’s office could be charged

under Section 641 for attempting to sell information he

overhead about an ongoing criminal investigation; “[g]iven the

ih

22

Nor does the decision below conflict with the Sixth

Circuit’s ruling in United States v. Jeter, supra. The

passage in the Jeter opinion cited by petitioners (Pet.

20) simply “follow[ed] the lead of Girard in deeming

the instant application of Section 641 inappropriate

for First Amendment overbreadth (or Fifth Amend-

ment vagueness) scrutiny.” 775 F.2d at 682. The

court of appeals made no mention of petitioners’

contention that a rule of nondisclosure must be based

on published regulations. More recently, in United

States v. Barger, 931 F.2d at 368-369, the Sixth

Circuit upheld a conviction for a private party’s

wrongful acquisition of a DEA manual containing

information about an ongoing investigation, relying

explicitly on the agency’s practice (not a published

rule) to restrict disclosure of the manual.”!

In any event, even if the circuits were in conflict on

the issue presented by petitioners, the conflict would

not warrant this Court’s review, because the

application of Section 641 to conduct of the sort

government’s long standing practice of maintaining the

confidentiality of information relevant to on-going criminal

investigations, * * * the defendant could reasonably know the

proscribed nature of his alleged actions”) (emphasis added).

21 In rejecting the claim that the government had failed to

prove that the defendant’s possession was “without authority,”

the court of appeals in Barger cited the defendant’s admission

that he was not supposed to have the DEA manual; the DEA’s

practice to distribute the manual only to law enforcement

personnel with “a special need to know”; and the legend in the

manual stating that “only certain people with certain needs are

authorized to possess it.” United States v. Barger, 931 F.2d at

368-369. Petitioners’ implication (Pet. 20 n.24) that the court

relied on a published regulation is incorrect.

23

involved in this case is not of continuing importance.

In 1988, Congress enacted the Office of Federal

Procurement Policy Act Amendments, Pub. L. No.

100-679, § 6, 102 Stat. 4063 (Procurement Integrity

Act), codified at 41 U.S.C. 423 (Supp. II 1990). That

Act specifically prohibits employees of a company

involved in a federal agency procurement application

from obtaining “directly or indirectly, from any

officer or employee of such agency any proprietary or

source selection information” regarding a procure-

ment. 41 U.S.C. 4239)(1) (Supp. II 1990). Section

423(p)(6) defines “proprietary information” to include

both “information contained in a bid or proposal” and

“cost or pricing data.” Section 423(p)(7) defines

“source selection information” as, inter alia,

“information determined by the head of the agency or

the contracting officer to be information * * * the

disclosure of which to a competing contractor would

jeopardize the integrity or successful completion of

the procurement concerned” and that is required to

be kept secure in order to prevent disclosure.”

Because the Procurement Integrity Act specifi-

cally prohibits employees of bidders (like petitioners)

from obtaining information about their competitors’

bids and the government’s internal procurement

etitioners refer (Pet. 27 & n.38) to congressional

statements indicating that some legislators believed that the

Procurement Integrity Act filled a gap in existing law. Those

statements are not probative of the scope of laws, such as

Section 641, enacted by prior Congresses. See Fort Stewart

Schools v. FLRA, 495 U.S. 641, 650 (1999) (“There is no

conceivable persuasive effect in legislative history that may

reflect nothing more than the speakers’ incomplete under-

standing of the world upon which the statute will operate.”).

2p

24

processes, future prosecutions similar to this case

can be brought under the Procurement Integrity Act.

The availability of that Act diminishes the signifi-

cance of the question whether the same conduct

would independently violate Section 641. Accordingly,

there is no need for the Court to consider the issues

raised by petitioners concerning the application of

Section 641 to the information that they obtained.”

CONCLUSION

The petition for a writ of certiorari should be

denied.

Respectfully submitted.

WILLIAM C. BRYSON

Acting Solicitor General

JOHN C. KEENEY

Acting Assistant Attorney General

LOUIS M. FISCHER

Attorney

MARCH 1993

3 Petitioners suggest (Pet. 25-30) that the Court should

grant review because of the possible chilling effect on

information-gathering efforts by journalists and others. The

prospect that Section 641 might chill legitimate efforts to

obtain information from the government is remote and

speculative. Petitioners cite no instance in which Section 641

has been applied to such a case, and, in light of the stringent

knowledge and willfulness requirements applicable to Section

641, it is difficult to imagine how the provision could be a trap

for the innocent. The procurement fraud involved in this case

raises no such far-reaching concerns. Cf. United States v.

Jeter, 775 F.2d at 682 (reserving issue of “the constitutionality

of Section 641 in a ‘Pentagon Papers’ kind of situation”).