Opposition Brief — Wohlfarth v. United States

No. 92-1710 ee 3O 1993

In the Supreme Court of the | Beinte

OCTOBER TERM, 19938

ROBERT M. WOHLFARTH, PETITIONER

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

DREw S. DAYs, III

Solicitor General

JOHN C. KEENEY

Acting Assistant Attorney General

LOUIS M. FISCHER

Attorney

Department of Justice

Washington, D.C. 20530

(202) 514-2217

/BEST AVAILABLE COPY”

QUESTIONS PRESENTED

1. Whether 18 U.S.C. 641 prohibits the unauthorized

disclosure of confidential government information

generated in connection with a competitive defense

procurement.

2. Whether wiretap evidence involving conversations

between petitioner and his wife should have been

suppressed when the conversations did not contain

privileged communications.

Opinion bel

Jurisdictio

Statement

Argument

Conclusion

Cases:

Bell vy.

Carpenter v. United States, 484 U.S. 19 (1987)

TABLE OF CONTENTS

Ow

n

TABLE OF AUTHORITIES

United States, 462 U.S. 356 (1983)

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

1959) .

Lovell V

Morisset

Niemotk

Scott v.

. City of Griffin, 303 U.S. 444 (1988) ....

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

0 Vv. Maryland, 340 U.S. 268 (1951)

United States, 436 U.S. 128 (1978)

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

United States v. Cor, 462 U.S. 1298 (8th Cir.. 1972),

cert. d

enied, 417 U.S. 918 (1974)

United States v. DePalma, 461 F. Supp. 800 (S.D.N-Y.

1978)

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

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

denied,

444 U.S. 871 (1979)

United States v. Hoffman, 882 F.2d 1299 (1st Cir.

United States v. Hulberg, 9538 F.2d 1389 (9th Cir

1992)

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

cert. de

nied, 475 U.S. 1142 (1986)

Linited State - © McAus land. 979 Ke 2d 970 { Ith (‘ir

1992),

cert. denied, 113 S. Ct. 1642 (1993)

(ITT)

IV

Cases—Continued: Page

United States v. McGuinness, 764 F. Supp. 888

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United States v. Shakur, 560 Ff. Supp. 318 (S.D.N-Y.

RAI DIN sinh SNe SURE ie, Mt Nec tles Rake 11, 12

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

I, Fe rs CD edness ccundo els dues cacsatadecuacs ~

United States v. Zolin, 491 U.S. 554 (1989) ..0.0... 1]

Constitution, statutes, regulations and rule:

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Office of Federal Procurement Policy Act Amendments,

Pub. L. No. 100-679, § 6, 102 Stat. 4063 2.0.0.0... 9

Procurement Integrity Act, 41 U.S.C. 423 (Supp. III

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48 C.F.R. (Federal Acquisition Regulations):

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es

Jn the Supreme Court of the United States

OCTOBER TERM, 1993

No. 92-1710

{OBERT M. WOHLFARTH, PETITIONER

,.

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. 1-16) is

not reported, but the judgment is noted at 985 F.2d 554

(Table).

JURISDICTION

The judgment of the court of appeals was entered on

January 26, 1993. The petition for a writ of certiorari

was filed on April 26, 1998. The jurisdiction of this Court

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

2

STATEMENT

After a jury trial in the United States District Court

for the Eastern District of Virginia, petitioner was

convicted of theft of government property, in violation of

18 U.S.C. 641." He was sentenced to two years’

imprisonment, all but four months of which were

suspended in favor of probation, and was fined $10,000.

The court of appeals affirmed. Pet. App. 1-16.

1. The evidence at trial showed that petitioner, a

patent attorney for the United States Navy’s Strategic

Systems Program Office (SSP), revealed confidential

information on bids for a Navy procurement contract to

the Northrop Corporation. Two Federal Acquisition

tegulations (FARs), 48 C.F.R. 5.401 and 15.413-1,

prohibit government employees from releasing price

information during the procurement process. SSP also

has a standard practice not to release the price of any bid

before award of a contract. Once a contract is awarded,

procurement officers may inform a losing bidder about

the weak points in the company’s bid, but procurement

officers may not tell a losing bidder the prices proposed

by other losing companies or the evaluation scores and

rankings assigned to the competing proposals by a

Technical Proposal Evaluation Panel. Pet. App. 3-4.

In 1986 SSP was purchasing Pendulous Integrated

Gyroscopic Accelerometers, known as 10-PIGAs, for

Trident submarines from Honeywell. The Navy decided

to obtain a second source for those items through a

competitive procurement. Petitioner was responsible for

determining the patent clauses to be used in the contract

expected to result from the bidding competition. Pet.

App. 3.

' He was acquitted of conspiring to defraud the United States

(18 U.S.C. 371) and two counts of receiving bribes (18 U.S.C. 201).

Pet. App. 2.

In August 1986, SSP issued a request for proposals to

the industry. In November 1986, Northrop and three

competitors submitted proposals. The government’s

Technical Proposal Evaluation Panel reviewed the

technical portions of the bids, while the contracting

officer and his negotiator reviewed the cost or price

portions of the proposals. Pet. App. 3-4; Gov’t C.A. Br.

5-4,

After the 10-PIGA procurement process had begun,

but before any proposals were submitted, petitioner con-

tacted Robert Ziernicki, Northrop’s vice-president for

business development, and suggested that Ziernicki hire

William Parkin to assist in the procurement. Parkin, a

former Navy procurement officer, was a private consul-

tant who advised defense contractors on how to obtain

Navy contracts. Petitioner’s wife was also Parkin’s

secretary. Northrop hired Parkin to obtain procurement

information. Pet. App. 3-4. Parkin informed petitioner

that Northrop had hired him. Gov’t C.A. Br. 6,

Shortly before the 10-PIGA contract was awarded,

Parkin contacted Mark Sigurski, Northrop’s. vice-

president for business development, and provided him

with information that Parkin had obtained from

petitioner, Parkin reported that Northrop was about to

lose the bid to Litton. Parkin also provided Northrop’s

bid price and the prices submitted by its competitors.

Sigurski and Ziernicki later testified that in their 25 and

1) years’ experience, respectively, of seeking pro-

t ntracts, they had never before received

es during the procurement competition.

yt C.A. Br. 6.

irop declined Parkin’s suggestion to

in order to get back into the

rop asked Parkin for a written report

* procedure. Parkin in turn asked

essary information for that report.

4

Petitioner provided not only the price figures for each

competitor, but also the technical evaluation rankings

and scores and other source selection information. Par-

kin finalized the report and gave it to Northrop. He

received $12,500 from Northrop for his work for the

company. Pet. App. 5.

2. On appeal, petitioner argued that 18 U.S.C. 641 does

not apply to the disclosure of government information

unless the disclosure is prohibited by statute or

regulation. The court of appeals held that the FARs

clearly prohibited disclosure, as did the longstanding

government practice of keeping price information

confidential. The court also noted that petitioner had

acknowledged that he was not authorized te disclose the

information before the contract’s award. Accordingly,

the court held that the information disclosed by

petitioner “was clearly within the reach of 18 U.S.C. §

641.” Pet. App. & The court also held that the

competitive bid information had “considerable value to

the United States and to competing companies.” /bid.

The court of appeals also rejected petitioner’s

challenge to the admission of certain wiretap evidence.

Although petitioner did not contend that any con-

versation played at trial involved privileged com-

munications, he argued that the government’s failure to

minimize conversations between him and his wife

required suppression of all the wiretaps. The court of

appeals held that the district court did not abuse its

discretion in finding that the government had taken

adequate steps to minimize the interception of privileged

conversations. In any event, the court of appeals noted

that the conversations played at trial involved peti-

tioner’s wife in her role as Parkin’s secretary and thus

5

did not involve privileged marital communications.” Pet.

App. 14-15.

ARGUMENT

1. Petitioner contends (Pet. 12-23) that Section 641

does not apply to intangible information because it is not

a “thing of value” that can be converted within the

meaning of the statute. He also argues that the courts of

appeals are divided on this question. Those contentions

lack merit and do not warrant review.”

a. Section 641 punishes the knowing conversion of

any “thing of value” of the United States. 18 U.S.C. 641.

The phrase “thing of value” readily encompasses

intangible property, such as confidential information.

That interpretation 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 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, 842 U.S. 246,

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

396, 360 (1983) (the phrase “thing of value” in 18 U.S.C.

“ The court of appeals also rejected petitioner's arguments that

the evidence was insufficient to support his conviction, that the

trial court’s instructions to the jury were flawed, and that certain

testimony was improperly admitted. Pet. App. 9-15. Petitioner

does not renew those claims in this Court.

* The Court recently denied certiorari in a case raising the

same claims, l/nited States v. McAusland, 979 F.2d 970 (4th Cir.

1992), cert. denied, 113 S. Ct. 1642 (1993), and there is no reason

for a different result here.

6

2113(b) encompasses intangible property and “is thus

broader than common law larceny”).'

There is no merit to petitioner's claim (Pet. 20-23) that

the court of appeals’ decision impermissibly delegates to

individual Executive Branch officials the determination

of when information has been conveyed “without

authority.” Petitioner relies on cases in which the

Court determined that a government official was given

too much discretion in determining whether conduct was

criminal. See, e.g., Lovell v. City of Griffin, 303 U.S. 444,

451-452 (1938) (stating that making the distribution of

literature a nuisance unless approved by the city

manager violates the First Amendment); Niemotko v.

Maryland, 340 U.S. 268, 271-272 (1951) (absence of

standards in ordinance that allows city officials to deny

park permits violates the First Amendment). In this

‘ase, however, petitioner’s liability rests on violations of

published regulations and established agency practice,

not on a single official’s discretionary decision. Con-

r

e

' Petitioner contends (Pet. 16-20) that the court of appeals

extended Section 641 to encompass procurement information in

which the government lacks a property interest. The court of ap-

peals did not so hold. To the contrary, it stated, in reliance on

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

641 applies to government information because “information is a

species of property and a thing of value.” Pet. App. 8. There is

no doubt that the government has a property interest in confiden-

tial pricing information relating to an ongoing procurement. /bid.;

see Carpenter v. United States, 484 U.S. 19, 26 (1987) (“[clon-

fidential business information has long been recognized as

property”). Accordingly, this case presents no conflict with the

decisions that petitioner characterizes (Pet. 18) as holding that

“only the property of the United States may constitute a ‘thing of

value.’” And, in any event, petitioner did not argue in the court

of appeals that confidential information is not a “thing of value”

under Section 641, and he is prechided from raising that claim

here for the first time. See Pet. CA. Br. 16-32.

7

trary to petitioner’s suggestion (Pet. 22), the court of

appeals did not hold that individual officials possess

unguided discretion to determine “which disclosures are

wrongful and which disclosures should be prosecuted.”

Rather, the court specifically noted (Pet. App. 8) that the

proof of petitioner’s lack of authority to release the

information rested on the FARs that specifically pro-

hibited disclosure, on the SSP’s longstanding practice to

forbid such disclosure prior to the award of a contract,

and on petitioner’s own acknowledgement that he was

prohibited from disclosing price information before a

contract was awarded.°

b. The courts of appeals have repeatedly upheld

convictions under Section 641 for the wrongful

acquisition or dissemination 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 information 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; “[cllearly, the value

of the * * * manual is in the information contained

»* For example, 48 C.F.R. 5.401(b) provides that “[clontracting

officers may make available maximum information to the public,

except information—* * * (2) [rleceived in confidence from an of-

feror” (emphasis added). Subsection (c) of that regulation states

that it applies to “all Government personnel who participate di-

rectly or indirectly in any stage of the acquisition cycle.”

Similarly, FAR 15.413-1(a) prohibits release of the information

contained in a proposal after its receipt by the government. 48

C.F.R. 15.413-1(a). Moreover, Litton’s contract proposal was

marked “Source Selection Sensitive for Official Use Only,” and pe-

Litioner therefore knew that it was not to be released. Pet. App. 6.

eer rere crear

\

8

therein” and that is “enough to meet the property or

‘thing of value’ element of the statute”); United States v.

Jeter, 775 F 2d 670, 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 conviction of a former DEA agent

who obtained and distributed confidential law en-

forcement records; “[a]lthough the content of a writing

is intangible, it is nonetheless a thing of value”), cert.

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

Petitioner argues (Pet. 13-14) that the Ninth Circuit

has rejected the application of Section 641 to government

information. The cases cited by petitioner, however, did -

not require the Ninth Circuit squarely 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 in

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

452. Accordingly, Chappell and Tobias did not deal with

9

claimed appropriations of government information and do

not conflict with the court of appeals’ decision in this

case.°

In any event, the application of Section 641 to the

conduct involved in this case does not present an issue 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. III 1991).

That Act specifically prohibits an officer or employee of

a federal agency involved in a procurement application

from disclosing “directly or indirectly, to any competing

contractor or any officer, employee, representative,

agent or consultant of a competing contractor any

proprietary or source selection information” regarding a

procurement. 41 U.S.C. 423(j)(2) (Supp. III 1991). 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 in future cases government em-

ployees like petitioner can be prosecuted under the

Procurement Integrity Act for revealing information to

a bidder about its competitors’ bids and the government’s

° Petitioner also relies (Pet. 14) on United States v. Hulberg,

953 F.2d 1389 (9th Cir. 1992) (Table). Quite apart from the fact

that that decision is not published and does not constitute

precedent in the Ninth Circuit, see 9th Cir. Local R. 36-3, it is

distinguishable. Hulberg upheld a conviction under Section 641 for

appropriating stolen government photocopies; it did not to involve

a conviction for appropriating information.

10

internal procurement processes, there is no need for this

Court to consider the question whether the same

conduct would independently violate Section 641.

2. Petitioner also contends (Pet. 23-28) that

wiretapped conversations between himself and his wife,

intercepted over Parkin’s telephone, should not have’

been introduced into evidence. Petitioner asserts that,

before the interceptions were made, the government had

no good faith basis to suspect him and his wife of

complicity in criminal activity. The courts below

correctly rejected that factbound claim, and further

review is not warranted.

When petitioner moved to suppress the wiretap

evidence prior to trial, the district court reviewed the

intercepted conversations and found that the government

had not engaged in a pattern of intercepting privileged

calls. Gov’t C.A. Br. 32. That finding rested in part on

an FBI agent’s affidavit that before any conversations

between petitioner and his wife were intercepted,

petitioner had been identified as a Navy employee who

was passing procurement information to Parkin and that

petitioner’s wife worked as Parkin’s secretary. /d. at

35. The agent also advised the court that monitoring

agents were directed to minimize privileged spousal

communications, but that when petitioner’s wife was

acting as Parkin’s secretary, her conversations were not

privileged.’ /bid.

* The agent further summarized the monitoring and, where

applicable, the efforts at minimization of the intercepted

conversations between petitioner and his wife. Gov’t C.A. Br. 34.

The agent’s affidavit showed that 160 calls were intercepted

between petitioner and his wife in the 14 months that the wiretaps

were in place. Of those calls, 59 were minimized within the first 30

seconds, and another 20 within the first minute. Of the calls that

were not minimized, 26 were less than 30 seconds in length, and 16

were concluded in less than a minute. [bid.

11

Contrary to petitioner’s claim, the government had a

good faith basis for intercepting the conversations

between petitioner and his wife when she was working at

Parkin’s office. First, the government had reason to

believe that petitioner was passing confidential

procurement information to Parkin. Second, since

petitioner’s wife was working as Parkin’s secretary, she

was functioning in that role, rather than in the role of

petitioner’s spouse, when she took his calls at Parkin’s

office. Pet. App. 15. Petitioner’s reliance on United

States v. DePalma, 461 F. Supp. 800, 821 (S.D.N.Y. 1978),

and United States v. Shakur, 560 F. Supp. 318, 326 (S.D.

N.Y. 1983), is misplaced. Those cases state only that the

government should terminate its interception of

privileged communications once it realizes that the

parties are engaged in such communications. Nothing in

those cases suggests that the government may not con-

tinue to listen to conversations that do not implicate the

privilege or that involve criminal activity.

Petitioner is not helped by his reliance (Pet. 23-24) on

United States v. Zolin, 491 U.S. 554 (1989). In that case,

the Court stated that, when the government requests a

trial court to review allegedly privileged materials in

camera to determine the applicability of the crime-fraud

exception to the attorney-client privilege, the govern-

ment must make “a showing of a factual basis adequate

to support a good faith belief by a reasonable person” that

the review may disclose evidence indicating that the

exception applies. Jd. at 572. The Court noted that trial

courts have flexibility in determining whether to con-

duct an in camera review and that the “threshold” for

doing so “need not be a stringent one.” Jbid. Zolin did

not concern the threshold showing for engaging in

electronic surveillance of arguably privileged com-

munications. Even if its “good faith belief’ standard

were applicable in this context, however, the facts

12

support the legitimacy of the government’s actions, as

discussed above.

In any event, none of the conversations introduced into

evidence involved any arguably privileged communica-

tions. Pet. App. 14. Instead, in the conversations intro-

duced at trial petitioner periodically asked his wife

whether Northrop had paid Parkin, and petitioner com-

plained that he wanted his money from Parkin. Gov’t

C.A. Br. 36 n.11. As such, petitioner has no grounds for

complaint about the wiretap evidence that was in-

troduced at trial.”

CONCLUSION

The petition for a writ of certiorari should be denied.

Respectfully submitted.

DREW S. DAYS III

Solicitor General

JOHN C. KEENEY

Acting Assistant Attorney General

LOUIS M. FISCHER

Attorney

JUNE 1993

® See United States v. Cox, 462 F.2d 1293, 1301 (8th Cir. 1972),

cert. denied, 417 U.S. 918 (1974); see also United States v. Hoff-

man, 832 F.2d 1299, 1309 (1st Cir. 1987); United States v. McGuin-

ness, 764 F. Supp. 888, 900-901 (S.D.N.Y. 1991); United States v.

Shakur, 560 F. Supp. at 326. Cf. Scott v. United States, 436 U.S.

128, 135 n.10 (1978) (noting, but not reaching, the argument that

the wiretap statute “requires suppression of only those conversa-

tions which were illegally intercepted, not suppression of all the

intercepted conversations”).