Petition for Writ of Certiorari — Snyder v. United States

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(\) 94 514 SE 19 1994

me OFFICE OF THE CLERK

Un we Supreme Court of the Wnited States

OCTOBER TERM, 1994

UNITED STATES OF AMERICA, PETITIONER

MICHAEL E. GAUDIN

PETITION FOR A WRIT OF CERTIORARI

TO THE UNITED STATES COURT OF APPEALS

FOR THE NINTH CIRCUIT

Drew S. DAys, Ill

Solicitor General

JO ANN HARRIS

Assisiant Attorney General

WILLIAM C. BRYSON

Deputy Solicitor General

MICHAEL R. DREEBEN

Assistant to the Solicitor General {

KATHLEEN A. FELTON

Attorney

Department of Justice

Washingion, D.C. 20530

(202) 514-2217

-BEST AVAILABLE COPY"

QUESTION PRESENTED

Whether, in a prosecution under 18 U.S.C. 1001 for

making false statements in a matter within the jurisdiction

of a federal agency, the materiality of those statements is

an issue to be resolved by the court rather than the jury.

TABLE OF CONTENTS

Page

Opinions below .................................. l

enn ook ooo ence. l

Statutory provision involved ....................... 2

I 2

Reasons for granting the petition ................... 7

ee a bb nck kav vee ceccccencca, 13

ee ke oc bce vn cnc ueceeeccecee.,. la

i ov vine bab neneeecccecce.. Sla

TABLE OF AUTHORITIES

Cases:

Braden v. United States, 365 U.S. 43] (1961) ..... 10

Bryson v. United States, 396 U.S. 64 ( SyOe) ...... 12

Cabana v. Bullock, 474 U.S. 376 an 5

Freidus v. United States, 223 F.3d 598 (D.C. Cir.

ee gas ok eek ccccceee.. 8

Kungys v. United States, 485 U.S. 759 (1988) ..... 6, 8, 11

Russell v. United States, 369 U.S. 749 ( . 10

Sinclair v. United States, 279 U.S. 263 (1929) .... 5, 10, II

Sullivan v. Louisiana, 113 S. Ct. 2078 (1993) ..... 5, 12

United States v. Abadi, 706 F.2d 178 (6th Cir.),

cert. denied, 464 U.S. 821 (1983) .............. 9, 11

United States v. Arch Trading Co., 987 F.2d 1087

PD oo ee ccc ccc cnc ccccccee... Y

United States v. Bramblett, 348 U.S. 503 t,o) ii 12

United States v. Corsino, 812 F.2d 26 (Ist Cir.

EE 8,9

United States v. Daily, 921 F.2d 994 (10th Cir.

1990), cert. denied, 112 S. Ct. 405 | an 9, 11

United States v. Elkin, 731 F.2d 1005 (2d Cir.),

cert. denied, 469 U.S. 822 (1984) ............ ; 8

United States v. Gilliland, 312 U.S. 86(1941)..... 12

(111)

Cases — Continued: Page

United States v. Greber, 760 F.2d 68 (3d Cir.),

cert. denied, 474 U.S. 988 (1985) .............. 9, il

United States v. Gribben, 984 F.2d 47 (2d Cir.

PES 5 aa 50764 a Cok Ota eta aid bee 9, 10-11

United States v. Hansen, 772 F.2d 940 (D.C. Cir.

1985), cert. denied, 475 U.S. 1045 (1986) ....... 9

United States v. Hausmann, 711 F.2d 615 (Sth

Re We G 60S eho s ey oe oe ahed ace bn 9

United States v. Irwin, 654 F.2d 671 (10th Cir.

1981), cert. denied, 455 U.S. 1016 (1982) ....... 9

United States v. Johnson, 937 F.2d 392 (8th Cir.

RAIS eae CA a Pee ig Deny a re 9

United States v. Jones, 933 F.2d 807 (10th Cir.

GN SSeS ees ca ek ea A kes 9

United States v. Lichenstein, 610 F.2d 1272 (Sth

Cir.), cert. denied, 447 U.S. 907 (1980) ........ 8

United States v. Lopez, 728 F.2d 1359 (11th Cir.),

cert. denied, 469 U.S. 828 (1984) .............. )

United States v. Rodgers, 466 U.S. 475 (1984) .... 13

United States v. Martel, 792 F.2d 630 (7th Cir.

DE. Ub ie Cav oueee tear e ier er ee Crk eat 9

United States v. Silver, 235 F.2d 375 (2d Ctr.),

cert. denied, 352 U.S. 880 (1956) .............. 8

United States v. Valdez, 594 F.2d 725 (9th Cir.

Se cs ene Cae Leak er eee ee 5,9

United States v. Yermian, 468 U.S. 63 (1984) ..... 13

Winship, In re, 397 U.S. 358 (1970) ............. 5, iz

Constitution and statutes:

U.S. Const.:

Amend. V (Due Process Clause) .......... 12

Re ME oon oh aa bc A ae eee es 6, 12

ts es EE gu" os ns va bah ae ea eee elasare. 10

eB Fe See enor eee ee ren vor 10

Statutes —Continued: Page

Memes WOON 5c ed us ord ehadcvncciccr.. 1]

BEE OS Se 2

18 U.S.C. 1001

Pete ees Coates ees eeessccces « SMSSIM

In the Supreme Court of the United States

OCTOBER TERM, 1994

No.

UNITED STATES OF AMERICA, PETITIONER

MICHAEL E. GAUDIN

PETITION FOR A WRIT OF CERTIORARI

TO THE UNITED STATES COURT OF APPEALS

FOR THE NINTH CIRCUIT

The Solicitor General, on behalf of the United States,

respectfully petitions for a writ of certiorari to review the

judgment of the United States Court of Appeals for the

Ninth Circuit in this case.

OPINIONS BELOW

The opinion of the court of appeals sitting en banc

(App., infra, 1a-50a) is reported at 28 F.3d 943. The panel

opinion of the court of appeals (App., infra, 5la-62a) is

reported at 997 F.2d 1267.

JURISDICTION

The judgment of the court of appeals was entered on

June 21, 1994. The jurisdiction of this Court is invoked

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

(1)

STATUTORY PROVISION INVOLVED

Section 1001, Title 18 of the United States Code, pro-

vides:

Whoever, in any matter within the jurisdiction of

any department or agency of the United States know-

ingly and wiilfully falsifies, conceals or covers up by

any trick, scheme, or device a material fact, or makes

any false, fictitious or fraudulent statements or repre-

sentations, or makes or uses any false writing or

document knowing the same to contain any false, fic-

titious or fraudulent statement or entry, shall be fined

not more than $10,000 or imprisoned not more than

five years, or both.

STATEMENT

After a jury trial in the United States District Court for

the District of Montana, respondent was convicted on one

count of equity skimming, in violation of 12 U.S.C.

1709-2, and 43 counts of making false statements, in viola-

tion of 18 U.S.C. 1001.' He was sentenced to 36 months’

imprisonment on the equity skimming count and to con-

current ten-month terms of imprisonment on each of the

43 false statement counts, to be followed by three years’

supervised release. He was also fined $2,200. A panel of

the court of appeals affirmed respondent’s conviction on

the equity skimming count, but reversed his convictions on

the false statement counts. App., infra, S5la-62a. On en

banc review, the court once again affirmed the conviction

on the equity skimming count and reversed the convictions

on the false statement counts. /d. at la-50a.

' Of the 45 counts in the indictment charging respondent with false

statements under 18 U.S.C. 1001, one was dismissed before the case

went to the jury, and another was dismissed at sentencing because of

insufficient evidence.

1. Respondent, a real estate broker and developer,

purchased and renovated rental housing, and purported to

sell that housing to buyers who took out loans insured by

the Federal Housing Administration (FHA), an entity

within the Department of Housing and Urban Develop-

ment (HUD). Two aspects of respondent’s transactions

were fraudulent. First, the appraisals on the housing were

inflated, in order to increase the loans obtained from the

lending institutions. Second, the buyers had no intention

of actually owning the properties. Instead, they were

“strawbuyers”: friends and relatives of respondent who

were recruited to give the appearance of real buyers. Re-

spondent agreed to repurchase the properties from the

strawbuyers at a $1,000 profit to them. In addition, he

routinely refused the down payments they made. See

App., infra, 3a. After reacquiring the properties, respond-

ent defaulted on 29 federally insured loans. Respondent

made a profit of $982,003 from his scheme. /d. at 54a.

The false statements charged in counts 44-46 of the in-

dictment were made on HUD/FHA form 92800-5, which

required respondent to certify the appraised value of the

property securing the loan. The government’s theory was

that the statements were false because the appraisals were

inflated. The false statements charged in counts 2-17 and

19-42 were made on HUD/FHA form HUD-1, the settle-

ment statement used in closing the sale of the homes from

respondent to the strawbuyer.2 The purpose of form

HUD-1I is to show the source and recipient of the funds

changing hands at settlement. The HUD-1 form thus re-

quires a statement of the purchase price, the loan amount,

and the closing costs to be paid or received by the seller

and the buyer (called the “borrower” on the form). At the

? An example of that form is reproduced as an appendix to the

court of appeals’ en banc opinion. App., infra, 24a-25a.

bottom of the first page of the HUD-1 form, under a cap-

tion that says “cash at settlement from or to borrower,”

line 303 provides boxes to be checked indicating whether

the borrower is to pay or receive money and a blank space

to indicate how much. App., infra, 3a-4a, 24a.

In three of respondent’s transactions, the box “to” the

borrower was checked; in one transaction, no box was

checked; and in the remainder, the box “from” the bor-

rower was checked. Respondent signed a certification that

“to the best of my knowledge and belief [the HUD-1 form]

is a true and accurate statement of all receipts and disburse-

ments made on my account or by me in this transaction.”

In all cases, however, the HUD-1 forms were false, be-

cause respondent rather than the borrower actually paid or

received the cash balances reflected on line 303. Those

balances ranged from relatively insignificant amounts to

several thousand dollars. App., infra, 4a-5a, 25a.

2. The district court instructed the jury that to convict

respondent on the false statement counts, the government

was required to prove six elements: (1) respondent made or

caused to be made a writing that contained a statement

concerning a matter within HUD’s jurisdiction; (2) the

writing contained false, fictitious, and fraudulent state-

ments; (3) respondent knew or should have known that the

statement fell within HUD’s jurisdiction; (4) respondent

knew the writing contained false, fictitious, and

fraudulent statements; (5) respondent acted with the intent

to influence HUD; and (6) the statements were material to

the activities or decisions of HUD. Tr. 2392-2393, 2395,

2399-2400, 2402. With respect to the sixth element, the

court instructed the jury that the statements charged in the

indictment were material as a matter of law. App., infra,

Sa, 58a. Respondent did not object to that instruction. /d.

at 19a. The jury convicted him of the Section 1001

charges. /d. at 2a.

3. A panel of the court of appeals reversed the false

statement convictions. App., infra, 5la-62a. The court

held that, under its prior decision in United States v.

Valdez, 594 F.2d 725, 729 (1979), the issue of materiality

in a Section 1001 prosecution must be determined by the

jury. App., infra, 57a-58a. The court further held that the

plain error doctrine did not bar respondent from raising

the issue for the first time on appeal, and that the failure

to submit the issue of materiality to the jury was not harm-

less error. Id. at 58a-62a.

4. In response to the government’s Suggestion, the

court of appeals granted rehearing en banc. 5 F.3d 374

(1993). In a 6-5 ruling, the en banc court reaffirmed its

holding that materiality under Section 1001 is an issue to

be decided by the jury. App., infra, la-2Sa.

a. The majority noted that most courts have ruled that

materiality under perjury and false statement Statutes is a

question of law for determination by the judge. App., in-

fra, 5a. In so holding, the court observed, those courts

have generally relied on Sinclair v. United States, 279 U.S.

263 (1929), which held that, in a prosecution for failing to

answer a question “pertinent to the question under inquiry

[by Congress],” the issue of pertinency is analogous to the

issue of relevancy and is therefore a legal issue for deter-

mination by the court. The court of appeals concluded,

however, that Sinclair does not compel the view that

materiality in a Section 1001 prosecution is an issue for the

court, because more recent decisions establish that the

Constitution entitles a defendant to a jury determination,

beyond a reasonable doubt, of the facts required to estab-

lish the elements of a crime. App., infra, 6a-9a, citing, in-

fer alia, In re Winship, 397 U.S. 358, 364 (1970); Cabana

v. Bullock, 474 U.S. 376 (1986); and Sullivan v. Loui-

siana, 113S. Ct. 2078 (1993). The court concluded that the

proper decisionmaker on the issue of materiality must be

determined in light of those constitutional considerations.

App., infra, 9a-14a.

The court held that materiality is “an essential element

of the offense prohibited by 18 U.S.C. § 1001,” because

the statute itself makes materiality an element of the

crime. App., infra, 1la. The court further held that, under

the prevailing test for materiality— whether a statement

“has a natural tendency to influence, or was capable of in-

fluencing, the decision of the decisionmaking body to

which it was addressed” (Kungys v. United States, 485

U.S. 759, 770 (1988)) —“[i]t would seem that a factual in-

quiry would nearly always be necessary to determine what

makes a difference to the decisionmaking body.” App., in-

fra, \2a.

While statutes or regulations could define what is

material, the court believed that in the usual case,

materiality is a “mixed question of law and fact.” App., in-

fra, 12a. The court stated for example, that there were fac-

tual issues as to the materiality to the FHA of the misstate-

ments on respondent’s setthkement forms. The court also

suggested that there would be factual issues about the

materiality of a statement in a typical perjury case based

on false testimony in a court proceeding or grand jury in-

vestigation. Jd. at 12a-14a. The court concluded that if

materiality is a mixed question of law and fact under Sec-

tion 1001, the Sixth Amendment requires that it “be sub-

mitted to the jury.” /d. at 13a-l14a. The court added that,

“fajlthough we are confronted in this case with only the

issue of whether materiality must be submitted to the jury

in section 1001 cases, it seems to be courting constitutional

error to withdraw the materiality question from the jury in

other perjury and false statement cases.” Jd. at 14a.

The court of appeals recognized that this Court held in

Kungys that materiality is a question of law to be resolved

by the court, and that Kungys had relied on Section 1001

oe la

cases in so holding. But the court distinguished Kungys as

a denaturalization case, not a criminal case. According to

the court of appeals, Kungys therefore did not have to ad-

dress the constitutional problem raised under Winship of

allowing a court to determine an element of the crime as a

matter of law. App., infra, 14a-17a.

Finally, the court concluded that the error of failing to

submit the issue of materiality to the jury is neither harm-

less nor barred from appellate review in this case by the

plain error doctrine. App., infra, 18a-22a.

b. Judge Kozinski, writing for himself and four other

judges, dissented. App., infra, 26a-50a. He noted that by

holding that materiality is an issue for the jury in a pros-

ecution under Section 1001, the court had “provoke[d] a

conflict with every other regional circuit.” /d. at 26a. He

also criticized the majority for departing from the Court’s

holdings in Sinclair and Kungys, and suggested that the

majority’s holding unsettles Ninth Circuit law under per-

jury and other false statement statutes. Jd. at 27a-39a.

Finally, he explained that the majority had misinterpreted

Section 1001 in holding that the issue of materiality

depends on what facts actually would be considered by a

decisionmaking body. Jd. at 40a-53a.

REASONS FOR GRANTING THE PETITION

The Ninth Circuit’s holding — that the issue of materiali-

ty in a prosecution under 18 U.S.C. 1001 must be resolved

by the jury, rather than by the court —conflicts with the

decision of every other court of appeals that has addressed

the issue. In addition, the court of appeals’ conclusion is in

considerable tension with this Court’s holdings, under

* Judge Kozinski also disagreed with the majority that the error in

this case met the requirements of the plain error doctrine. App., infra,

26a-50a.

analogous statutes, that the question whether a false state-

ment is material is an issue to be resolved by the court as a

matter of law. Because the allocation of responsibility for

determining materiality has significant practical conse-

quences for prosecutions under an important federal

statute, this Court’s review is warranted.

1. Section 1001 prohibits knowingly and willfully con-

cealing or covering up a material fact or making a false

statement in any matter within the jurisdiction of a federal

agency. 18 U.S.C. 1001. As this Court has observed, the

“most common formulation” for expressing the concept of

materiality is that a “concealinent or misrepresentation is

material if it has a natural tendency to influence, or was

capable of influencing, the decision of the decisionmaking

body to which it was addressed.” Kungys v. United States,

485 U.S. 759, 770 (1988). The Ninth Circuit’s rule that the

issue Of materiality in a Section 1001 case must be sub-

mitted to the jury is unique among the circuits.

* Section 1001 has an express materiality requirement in its first

clause, the cover-up clause. “While materiality is not an explicit re-

quirement of the second, false statement, clause of § 1001, courts

have inferred” a materiality requirement in that clause as well. United

States v. Corsino, 812 F.2d 26, 30 (Ist Cir. 1987), quoting United

States v. Lichenstein, 610 F.2d 1272, 1278 (Sth Cir.), cert. denied, 447

U.S. 907 (1980); Freidus v. United States, 223 F.2d 598, 601 (D.C.

Cir. 1955) (“The legislative purpose strongly implies that only material

false statements were contemplated, /.e., statements that could affect

or influence the exercise of a governmental function.”); App., infra,

lla-12a. The Second Circuit, in contrast to other circuits, does not

consider materiality to be an element of the false-statement offense

created by the second clause of Section 1001, see United States v.

Elkin, 731 F.2d 1005, 1009, cert. denied, 469 U.S. 822 (1984); United

States v. Silver, 235 F.2d 375, 377-378, cert. denied, 352 U.S. 880

(1956), but it has held that the materiality of a fact under the cover-up

clause of Section 1001 is determined by the court. Elkin, 731 F.2d at

1009.

———eEeEeEE—E——— EE

The court of appeals acknowledged that “most other cir-

cuits have held that the determination of materiality in

criminal perjury and false statement statutes is a question

of law for determination by the judge.” App., infra, Sa. In

fact, every other regional court of appeals has treated

materiality in a Section 1001 case as an issue of law to be

determined by the court, not the jury. See United States v.

Corsino, 812 F.2d 26, 31 n.3 (1st Cir. 1987); United States

v. Gribben, 984 F.2d 47, 50-51 (2d Cir. 1993); United States

v. Greber, 760 F.2d 68, 73 (3d Cir.), cert. denied, 474 U.S.

988 (1985); United States v. Arch Trading Co., 987 F.2d

1087, 1095 (4th Cir. 1993); United States v. Hausmann, 711

F.2d 615, 616 (Sth Cir. 1983); United States v. Abadi, 706

F.2d 178, 180 (6th Cir.), cert. denied, 464 U.S. 821 (1983);

United States v. Martel, 792 F.2d 630, 637 (7th Cir. 1986);

United States v. Johnson, 937 F.2d 392, 396 (8th Cir.

1991); United States v. Jones, 933 F.2d 807, 811-812 (10th

Cir. 1991); United States v. Lopez, 728 F.2d 1359, 1362 n.4

(11th Cir.), cert. denied, 469 U.S. 828 (1984); United States

v. Hansen, 772 F.2d 940, 950-951 (D.C. Cir. 1985) (Scalia,

J.), cert. denied, 475 U.S. 1045 (1986).

There is no likelihood that further consideration of the

issue in the lower courts will eliminate the conflict. The

Ninth Circuit first announced its rule that the jury must de-

termine the issue of materiality in a Section 1001 prosecu-

tion in United States v. Valdez, 594 F.2d 725, 729 (1979). In

the ensuing years, other circuits have not been persuaded by

that approach. The Tenth Circuit, which at one time took

the same position as the Ninth Circuit, see United States v.

Irwin, 654 F.2d 671, 677 n.8 (1981), cert. denied, 455 U.S.

1016 (1982), has since rejected that view and has squarely

held that “materiality under § 1001 is a question of law for

the court.” United States v. Daily, 921 F.2d 994, 1004 (10th

Cir. 1990), cert. denied, 112 S. Ct. 405 (1997). In light of

the Ninth Circuit’s adherence to its aberrant position in an

en banc decision, this Court’s intervention is required to

furnish a uniform national rule.

2. It is not surprising that the overwhelming majority

of the courts of appeals have concluded that materiality

under Section 1001 is an issue for resolution by the court.

The principles requiring that result stem directly from this

Court’s decision in Sinclair v. United States, 279 U.S. 263

(1929).

In Sinclair, the defendant was charged under Rev. Stat.

§ 102 (2 U.S.C. 192) for refusing to answer “any question

pertinent to the question under inquiry” by a congressional

committee. 279 U.S. at 284-285. This Court held that

“(tlhe question of pertinency under § 102 was rightly

decided by the court as one of law.” /d. at 298. The Court

noted that pertinency “may be likened to [questions] con-

cerning relevancy,” which are resolved as a matter of law.

Ibid. The Court also noted that the issue of pertinency “is

not essentially different from the question as to materiality

of false testimony charged as perjury,” and that “the

materiality of what is falsely sworn, when an element in

the crime of perjury, is one for the court.” /bid. The Court

therefore concluded that it “would be incongruous and

contrary to well-established principles to leave the deter-

mination of * * * [pertinency] to a jury.” /d. at 299.° As

many courts have held, the same principles apply to the

issue Of materiality under Section 1001. See, e.g., United

> In two later cases involving prosecutions under the same statute,

the Court reaffirmed Sinclair's rule that “the question of pertinency is

one for determination by the court as a matter of law.” Russell v.

United States, 369 U.S. 749, 755-756 (1962); see Braden v. United

States, 365 U.S. 431, 436 (1961) (“At the trial the district judge deter-

mined as a matter of law that the questions were pertinent to a matter

under inquiry by the subcommittee, leaving to the jury the question

whether the pertinence of the questions had been brought home to the

petitioner.”).

States v. Gribben, 984 F.2d at 50; United States v. Greber,

760 F.2d at 73; United States v. Daily, 921 F.2d at 1006.

In Kungys v. United States, 485 U.S. 759 (1988), this

Court reaffirmed that materiality is a legal issue to be

decided by the court. That case involved 8 U.S.C. 1451(a),

which provides for the denaturalization of persons who

conceal “material facts” from the government in applying

for citizenship. In addressing the question “whether

materiality under § 1451(a) is an issue of law, which we

may decide for ourselves, or one of fact, which must be

decided by the trial court,” the Court relied on interpreta-

tions of “the materiality requirement under other statutes

dealing with misrepresentations to public officers.” 485

U.S. at 772. “[SJee[ing] no reason not to follow what has

been done” under those statutes, the Court concluded that

materiality under Section 1451(a) is a question of law.

Ibid.

In so holding, the Court quoted with approval Sinclair's

statement that “[t]he materiality of what is falsely sworn,

when an element in the crime of perjury, is one for the

court.” Kungys, 485 U.S. at 772 (quoting Sinclair, 279

U.S. at 298). The Court also quoted the Sixth Circuit’s

reasoning “in a case involving 18 U.S.C. § 1001”:

[A]lthough the materiality of a statement rests upon a

factual evidentiary showing, the ultimate finding of

materiality turns on an interpretation of substantive

law. Since it is the court’s responsibility to interpret

the substantive law, we believe [it is proper to treat]

the issue of materiality as a legal question.

bid. (brackets added by Court) (quoting United States v.

Abadi, 706 F.2d at 180). The analysis in Kungys makes

clear that the materiality of a concealed or misrepresented

fact under Section 1001 is an issue of law for the court.

The court of appeals reasoned that Sinclair is not dis-

positive, because it preceded more recent decisions that

construe the Sixth Amendment’s jury trial guarantee and

the Due Process Clause to “require that the facts essential

to establish the elements of a crime must be decided by a

jury” beyond a reasonable doubt. App., infra, 6a. See In

re Winship, 397 U.S. 358, 363-364 (1970); Sullivan v.

Louisiana, 113 S. Ct. 2078 (1993). The court of appeals

also found Kungys inapplicable because it involved a civil

denaturalization proceeding, in which those constitutional

requirements do not apply. App., infra, 14a-17a. As the

dissenting Opinion pointed out, however, the conclusion

that materiality is an issue of law does not turn on the civil

or criminal form of the proceeding.

Something is either a question of law or a question of

fact; it can’t be both. Once it is held to be a question

of law —as materiality was in Kungys —certain conse-

quences follow. One is that the standard of review is

de novo rather than for substantial evidence. Another

is that, in a criminal case, it need not be decided by a

jury.

Id. at 28a-29a (Kozinski, J., dissenting). Accordingly, the

holdings in cases such as Winship and Sullivan are inap-

plicable here; those cases do not suggest that questions of

law, such as the issue of materiality, are to be determined

by the jury.

3. Section 1001 is an important provision of federal

criminal law, which is broadly applicable to false state-

ments and concealments within the government’s jurisdic-

tion. See, e.g., United States v. Gilliland, 312 U.S. 86

(1941) (false statements to an executive department);

United States v. Bramblett, 348 U.S. 503 (1955) (false

representations to congressional disbursement official);

Bryson v. United States, 396 U.S. 64 (1969) (false state-

ee Nee

ment to an independent agency). The determination of

whether the judge or the jury should resolve the question

of materiality affects every prosecution under Section

1001. In addition, as the dissent in the court of appeals

noted, a wide variety of other federal criminal provisions

contain materiality requirements, and the reasoning of the

opinion below may well extend to those provisions. See

App., infra, 35a-39a & nn.3-4 (Kozinski, J., dissenting)

(listing 43 statutes having express materiality requirements

and 54 that apparently have implied materiality require-

ments).

This Court has previously granted review to resolve con-

flicts in the courts of appeals over the interpretation of

Section 1001. United States v. Yermian, 468 U.S. 63,

67-68 (1984) (whether defendant must know of federal

agency jurisdiction); United States v. Rodgers, 466 U.S.

475, 478-479 (1984) (scope of federal agency “jurisdiction”).

The same course is warranted here.

CONCLUSION

The petition for a writ of certiorari should be granted.

Respectfully submitted.

DREW S. DAys, III

Solicitor General

JO ANN HARRIS

Assistant Attorney General

WILLIAM C. BRYSON

Deputy Solicitor General

MICHAEL R. DREEBEN

Assistant to the Solicitor General

KATHLEEN A. FELTON

Attorney

SEPTEMBER 1994

APPENDIX A

UNITED STATES COURT OF APPEALS

NINTH CIRCUIT

No. 90-30334

D.C. No. CR-89-0034-PGH- |

UNITED STATES OF AMERICA, PLAINTIFF-APPELLEE

MICHAEL. E. GAUDIN, DEFENDANT-APPELLANT

Appeal from the United States District Court

for the District of Montana

Paul G. Hatfield, District Judge, Presiding

Argued and Submitted November 18, 1993

San Francisco, California

Filed June 21, 1994

OPINION

Before: WALLACE, Chief Judge, HUG, TANG,

FLETCHER, REINHARDT, BEEZER, KOZINSKI, LEAVY,

RYMER, T.G. NELSON, and KLEINFELD, Circuit Judges.

Opinion by Judge HuG; Dissent by Judge Kozinsk1

(la)

Hua, Circuit Judge:

We granted rehearing en banc in United States v.

Gaudin, 997 F.2d 1267 (9th Cir.), rehearing granted, 5

F.3d 374 (1993), to decide whether the element of

materiality in 18 U.S.C. § 1001 is a question of fact that

must be determined by the jury. We hold that it is.

Michael E. Gaudin was convicted of one count of equity

skimming in violation of 12 U.S.C. § 1709-2 for failing to

pay United States Housing & Urban Development/Federal

Housing Administration (“HUD/FHA”) insured loans,

and 43 counts of making false statements on loan docu-

ments in violation of 18 U.S.C. § 1001. A panel of this

court affirmed the equity skimming conviction but re-

versed the false statements convictions because the district

court failed to submit the element of materiality to the

jury. United States v. Gaudin, 997 F.2d 1267, 1273 (9th

Cir. 1993).

The Government’s petition for rehearing requested that

we reconsider our circuit precedent holding that materiali-

ty is an element of the offenses charged under 18 U.S.C.

§ 1001 that must be submitted to the jury. We affirm the

opinion of the panel for the reasons therein stated. In this

opinion, we discuss in more detail the reasons why we

adhere to our authority that the element of materiality

must be submitted to the jury.

A more comprehensive statement of the facts of this

case concerning all charges is set forth in the panel opin-

ion. The facts relevant to the issue discussed in this opin-

ion are set forth as follows.

Gaudin became involved in purchasing and renovating

rental housing during the recession of 1981-82 when de-

mand for real estate diminished. He purchased many

government repossessions, which he held in his or his

company’s name, and renovated them to rent or resell.

Gaudin solicited friends and relatives to buy the houses

from him on terms he arranged using FHA-secured loans.

He guaranteed he would repurchase the house at a $1,000

profit, if they chose to sell it. In most instances, they did

sell the house back to Gaudin for the $1,000 profit. In

some instances, the buyer put up a cash down payment,

but in most instances, the buyer deeded a percentage in-

terest in the equity in his or her own home as the down

payment.

Gaudin made all the necessary arrangements for each

loan, including obtaining an appraisal of the refurbished

house. Each loan was designed with the lender as an FHA-

insured loan. Thus, HUD/FHA forms were utilized in the

sales and loan transactions.

The Government contended that Gaudin misled the

FHA because the buyers of these houses were not

legitimate buyers, but rather “strawbuyers” who only

served as a conduit for Gaudin to obtain the houses for

himself with FHA loans. Gaudin was not charged with any

crime of fraud or substantive statutory violation for ob-

taining the FHA loans through “strawbuyers;” instead, he

was charged with making material false statements on cer-

tain FHA forms that caused the FHA to insure the loans.

Gaudin was convicted on Counts 2-17, 19-42, and 44-46.

Counts 44-46 charged that the false statements were made

on HUD/FHA form 92800-5, certifying an appraised

value of the property securing the loan. The charge in

these counts is not complex —it is simply that the amounts

of the appraisals were knowingly inflated. Counts 2-17

and 19-42 involved HUD/FHA form HUD-1, which is the

final setthkement statement for the closure of the sales

transaction. The nature of the charged false statement is

more complex in these counts. A copy of the HUD-1 form

involved in one of the transactions is shown in Appendix

A, and is representative of the HUD-1 forms involved in

all of these counts.

The HUD-1! settlement form is the type of form general-

ly used in closing real estate sales transactions. It shows

the sales price, the down payment, the loan amount, and

the closing costs charged either to the buyer or the seller.

The amounts due to and from the buyer and seller are

tallied, and a balance is either due to or from the buyer.

On these HUD/FHA forms, the buyer is designated as the

“borrower” and the balance is shown on line 303 of the

borrower’s side of the form with a block to check showing

that cash is either due “to” or “from” the borrower. In

three of the transactions, this balance was due “to” the

borrower and the appropriate block was checked. In

another, neither block was checked. In the remaining

transactions, the balance was due “from” the buyer. It is

significant that the only possible blocks to be checked are

cash “to” or “from” the “borrower.” This is mirrored on

the seller’s side of the form with a block to be checked as

to whether the cash was “to” or “from” the “seller.”

These balances generally were fairly small—ranging

from $31 to several hundred dollars. In a few cases, where

no equity transfer or cash down payment was made, the

amounts were several thousand dollars. The certification

that the buyer and seller signed at the bottom of the sec-

ond page of the form states, “I have carefully reviewed the

HUD-1 Settlement Statement and to the best of my

knowledge and belief it is a true and accurate statement of

all receipts and disbursements made on my account or by

me in this transaction.” (Emphasis added.)

Se Sa A stteemcatioiad

It is true that Gaudin, not the buyer, either paid or

received these cash balances, but a genuine factual ques-

tion arises as to how significant who paid or received the

balance could be to the FHA. It appears quite doubtful

from the format of the form and the certification on the

form that it was designed to ferret out situations where the

buyer might be serving as a stand-in for the seller or

another person and did not intend to keep the house. If so,

the form and the certification are very poorly designed to

do so. This surely leads to a legitimate factual inquiry as to

whether FHA officials pay any attention at all to line 303

of the HUD-1 form in their determination to insure the

loan. Obviously, testimony or other evidence would be

necessary to show that the block checked on line 303 was

of any significance. Testimony was, indeed, taken from

FHA officials to establish that factual contention.

The question then becomes whether the judge deter-

mines this factual component of the materiality issue or

whether this is a factual matter that must be determined by

the jury.

We recognize that most other circuits have held that the

determination of materiality in criminal perjury and false

statement statutes is a question of law for determination

by the judge. In our circuit, we have held that the issue of

materiality in most of these statutes is a question of law

for the judge. The exception has been section 1001 cases,

in which we have held that it is an element of the crime

that must be determined by the jury. United States v.

Valdez, 594 F.2d 725, 728-29 (9th Cir. 1979). On the basis

of Valdez, we reversed Gaudin’s convictions on Counts

2-17, 19-42, and 44-46 because the district court removed

the issue from the jury, instructing that the Government

had established materiality as a matter of law.

The -opinions holding that the issue of materiality in

these criminal cases is a matter of law for the court to

decide have relied on the 1929 Supreme Court case of

Sinclair v. United States, 279 U.S. 263 (1929), which in-

volved a congressional investigation into the Teapot Dome

Scandal. The defendant was charged with a violation of 18

U.S.C. § 192 for failing to answer a question that was

“pertinent to the question under inquiry.” The Court held

that the issue of pertinency was akin to determining

relevance in the admission of evidence in a trial and

therefore was a matter of law reserved for the court. /d. at

298.

The essential issue before us is whether the opinions

relying on Sinclair survive the more recent holdings of the

Supreme Court that the Sixth Amendment and the Due

Process Clause require that the facts essential to establish

the elements of a crime must be decided by a jury.

In the oft-quoted opinion of Jn re Winship, 397 U.S.

358, 364 (1970), the Supreme Court stated:

Lest there remain any doubt about the constitutional

stature of the reasonable-doubt standard, we explicit-

ly hold that the Due Process Clause protects the ac-

cused against conviction except upon proof [to a

proper factfinder] beyond a reasonable doubt of

every fact necessary to constitute the crime with

which he is charged.

The application of this imperative has been developed in

later Supreme Court opinions. See, e.g., Sandstrom vy.

Montana, 442 U.S. 510, 520-21 (1979); Cabana v.

Bullock, 474 U.S. 376, 384-85 (1986); Carella v. Califor-

nia, 491 U.S. 263, 268-69 (1989) (Scalia, J., concurring);

Yates v. Evatt, 500 U.S. p , 111 S. Ct. 1884, 1891

(1991); Sullivan v. Louisiana, 113 S. Ct. 2078, 2082

(1993). It is clear from this authority that under the Sixth

Amendment the proper factfinder in serious criminal of-

fenses is the jury. The Court in Cabana stated:

A defendant charged with a serious crime has the

right to have a jury determine his guilt or innocence,

and a jury’s verdict cannot stand if the instructions

provided the jury do not require it to find each ele-

ment of the crime under the proper standard of

proof, Sandstrom v. Montana, 442 U.S. 510 (1979).

Findings made by a judge cannot cure deficiencies in

the jury’s finding as to the guilt or innocence of a

defendant resulting from the court’s failure to instruct

it to find an element of the crime.

Cabana, 474 U.S. at 384-85 (citation omitted).

In Sullivan, the Court summarized its prior holdings

concerning the Sixth Amendment and Due Process re-

quirements of what must be decided by a jury in criminal

cases. The Court stated:

The Sixth Amendment provides that “[iJn all

criminal prosecutions, the accused shall enjoy the

right to a speedy and public trial, by an impartial jury

.... In Duncan v. Louisiana, 391 U.S. 145, 149

(1968), we found this right to trial by jury in serious

criminal cases to be “fundamental to the American

scheme of justice,” and therefore applicable in state

proceedings. The right includes, of course, as its most

important element, the right to have the jury, rather

than the judge, reach the requisite finding of “guilty.”

Thus, although a judge may direct a verdict for the

defendant if the evidence is leglly insufficient to

establish guilt, he may not direct a verdict for the

State, no matter how overwhelming the evidence.

What the factfinder must determine to return a ver-

dict of guilty is prescribed by the Due Process Clause.

The prosecution bears the burden of proving all

elements of the offense charged, and must persuade .

the factfinder “beyond a reasonable doubt” of the

facts necessary to establish each of those elements.

Sullivan, 113 S. Ct. at 2080-81 (citations omitted). !

With the quoted summary in the recent Sullivan case, it

is .'ear that the jury must decide “the facts necessary to

e.fablish each [element of the crime].” As Justice Scalia

has noted in his concurrence in Carella, the jury’s fact-

finding function is a structural matter that the Constitu-

tion guarantees.

The constitutional right to a jury trial embodies “a

profound judgment about the way in which law

should be enforced and justice administered.” It is a

structural guarantee that “reflect[s] a fundamental

decision about the exercise of official power—a reluc-

tance to entrust plenary powers over the life and liber-

ty of the citizen to one judge or to a group of judges.”

A defendant may assuredly insist upon observance of

this guarantee even when the evidence against him is

so overwhelming as to establish guilt beyond a

reasonable doubt. That is why the Court has found it

constitutionally impermissible for a judge to direct a

verdict for the State.

' We note in the above quotations that there ts a difference in ex-

pressing the point in Cabana and Sullivan. The Court in Cabana

speaks of the necessity of the jury deciding a// elements of the crime,

whereas the Court in Sullivan speaks of the necessity of the jury

deciding the facts necessary to establish all elements of the crime.

Cabana relied on Sandstrom, which in quoting Winship emphasized

that it was “every fact necessary to constitute the crime” that must be

decided by the jury. Winship, 397 U.S. at 364; Cabana, 474 U.S. at

384. It is apparent no difference in meaning is intended. Cabana uses a

shorthand way of referring to the Winship quotation.

Carella, 491 U.S. at 268 (citations omitted).

Most of the recent circuit opinions continue to hold that

the issue of materiality in these cases is a question of law

for the court, relying on Sinclair, without discussing the

impact of the more recent line of authority following Win-

ship. In a very thorough and thoughtful opinion, United

States v. Taylor, 693 F. Supp. 828, 830-47 (N.D. Cal.

1988), Judge Lynch questioned the continued vitality of

this authority. He noted that the courts after Sinclair have

accepted as a matter of rote that materiality is a question

of law, without considering the effect of the Winship line

of authority.

In the Seventh Circuit case of United States y.

Staniforth, 971 F.2d 1355, 1358 (7th Cir. 1992), Judge

Posner noted that the holding that materiality is a question

of law “is more than a little puzzling,” because a criminal

defendant is entitled to require the prosecutor to prove to

the jury’s satisfaction every element of the offense. The

opinion went on to note that a factual basis is required to

prove the element. The court did not decide the issue,

however, because it was not raised on appeal.

Several state court decisions have reached the conclu-

sion that the issue of materiality is for the jury to decide.

The Supreme Courts of Massachusetts, New Jersey, and

California have so held. See Commonwealth v. McDuffee,

398 N.E.2d 463, 469-70 (Mass. 1979); New Jersey vy.

Anderson, 603 A.2d 928 (N.J. 1992); and People v.

Hedgecock, 795 P.2d 1260 (Cal. 1990).?

? The dissent speculates at length on the prospect that this decision

could have serious effects on the finality of prior convictions. Initial-

ly, one must question whether this is an appropriate consideration at

all. It would be hard to justify continuing to deprive defendants of

their Fourth and Sixth Amendment rights on the ground that to do

10a

The Government argues that this question has now been

put to rest by the Supreme Court in Kungys v. United

States, 485 U.S. 759 (1988), which the Government con-

tends confirms that the issue of materiality is a matter of

law in criminal false statement cases. We disagree. We

find it difficult to believe that the Supreme Court sought

to resolve this significant constitutional issue in criminal

cases by statements concerning its standard of review of a

judge’s decision in a civil case, without mention of the con-

stitutional implications. We discuss the matter further in

Part VI.

IV.

We now turn to consider whether materiality is an ele-

ment of the crime charged in this case. The false statement

charges were brought under 18 U.S.C. § 1001, which pro-

vides:

otherwise would cast doubt on prior convictions. However, even ad-

dressing this consideration, we note that this decision only affirms our

prior authority that materiality is a question of fact for the jury in

prosecutions under 18 U.S.C. § 1001, which has been the law in this

circuit for 15 years. Thus, this opinion could have no effect on prior

convictions under section 1001.

The application of this opinion to future prosecutions under other

Statutes is a matter to be considered as those cases arise. It is sheer

speculation to forecast dire consequences from petitions for collateral

relief that conceivably could upset prior convictions under other

statutes. This requires an assumption as to how this holding will be ap-

plied to other statutes, that such holdings will be applied retroactively

for collateral relief, and that limitations on collateral relief, such as

procedural bar and Teague v. Lane, 489 U.S. 288 (1989), could be

overcome. This speculation about collateral consequences, built on

multiple assumptions, obscures the real point — whether a defendant is

entitled under the Fourth and Sixth Amendments to have a jury decide

the facts necessary to establish an element of the crime with which he

is charged.

lla

Whoever, in any matter within the jurisdiction of

any department or agency of the United States know-

ingly and willfully falsifies, conceals or covers up by

any trick, scheme, or device a material fact, or makes

any false, fictitious or fraudulent statements or

representations, or makes or uses any false writing or

document knowing the same to contain any false, fic-

titious 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. § 1001 (emphasis added).

We first held that materiality is an essential element of

the offense prohibited by 18 U.S.C. § 1001 in Paritem

Singh Poonian v. United States, 294 F.2d 74, 75 (9th Cir.

1961). See also United States v. Talkington, 589 F.2d 415,

416 (9th Cir. 1978); United States v. Deep, 497 F.2d 1316,

1321 (9th Cir. 1974). In Valdez, we clarified that the

materiality element is a question of fact to be determined

by the jury. Valdez, 594 F.2d at 729. There appears to be

scant authority to the contrary.

When a Statute expressly provides for materiality as an

element of the crime, it can hardly be said that it is not an

element. McMillan v. Pennsylvania, 477 U.S. 79, 85

(1986) (holding that the legislature’s definition of an of-

fense is usually dispositive). If, in construing the intent of

Congress, the courts determine that materiality was in-

tended by Congress to be an element of the crime, a

similar result would seem apparent.

The first clause of section 1001 expressly states that the

falsification or concealment must be of a material fact.

The second and third clauses do not contain the express

reference to a material fact. Our circuit and most other cir-

cuits have construed the intent of Congress to be that the

element of materiality applies to all three clauses. It can be

12a

seen that the clauses are so closely related that this is the

only reasonable construction of congressional intent. The

means by which a person “falsifies, conceals or covers up”

a material fact would be by “false fictitious or fraudulent

statements” or by a “false writing or document.” It is dif-

ficult to conceive of a “trick, scheme or device” to ac-

complish the falsification or concealment that would not

involve such a statement or document. We thus conclude

that our prior construction of the statute is sound and that

materiality is an element of the crime of aH charges under

section 1001.

¥.

Because materiality is an element of the crime, can it be

determined as a matter of law? Conceivably, this could be

justified if the determination had no factual component at

all. The Supreme Court in the Kungys opinion states that

the customary common law test of materiality in false

Statement statutes is whether the statement “ ‘has a natural

tendency to influence, or was capable of influencing, the

decision’ of the decisionmaking body to which it was ad-

dressed.” Kungys, 485 U.S. at 770. It would seem that a

factual inquiry would nearly always be necessary to deter-

mine what makes a difference to the decisionmaking body.

Perhaps if what is material is spelled out in the statutes or

in regulations, it would be a pure question of law.

However, in most situations, it is a mixed question of law

and fact.

Certainly in the section 1001 cases this is true, as is well

illustrated in this case. There is no way of knowing the

significance to HUD of line 303 of the setthement form

without agency testimony.

Even in the perjury cases, it is difficult to say there is no

factual component. There is a difference between

a a a ee

l3a

relevance from an evidentiary standpoint and materiality

as an element of a crime. Where a defendant is prosecuted

for perjury committed in a former trial, relevance deter-

mines what evidence the jury could have considered, while

materiality determines what would have tended to in-

fluence its verdict. If the court in the perjury trial con-

cludes that a statement properly was admitted as relevant

in the former trial, that is not necessarily equivalent to

finding that it would tend to influence the jury. Much evi-

dence may be admitted as relevant, and yet have no in-

fluence on the jury’s findings regarding the essential

elements of the charged crime. The jury in the perjury trial

might well find that the relevant evidence could have made

no difference to the former jury. Would it not be more

faithful to Sixth Amendment requirements to instruct the

jury that the statement in question was admissible

evidence in the former trial and leave the question to the

jury as to whether it could have tended to influence the

prior jury?

In any event, the argument that materiality is a pure

question of law becomes more attenuated as we move to

other circumstances. For example, when the statement is

made to a grand jury, there is a necessary factual inquiry

as to the nature of the investigation being conducted. Cer-

tainly, when the statement is to an agency (as in this case)

there is, of necessity, a factual inquiry as to what tends to

or is capable of influencing the agency’s decision. Justice

Scalia in Kungys describes such an inquiry as “fact-

bound.” /d. at 773 n.6.

Only if it can be said that there is no factual component

to the determination of materiality and, thus, that it is a

pure question of law, would the Sixth Amendment con-

straint not apply. However, if it is a mixed question of law

and fact, then it must be submitted to the jury. It would

not be faithful to the Sixth Amendment for the judge to

l4a

decide the factual component of the element necessary to

constitute the crime. In section 1001 cases, it is clear that

materiality is a mixed question of law and fact and, thus,

must be submitted to the jury.

Although we are confronted in this case with only the

issue of whether materiality must be submitted to the jury

in section 1001 cases, it seems to be courting constitutional

error to withdraw the materiality question from the jury in

other perjury and false statement cases because of the dif-

ficulty in concluding that there is no factual component

for jury determination. Juries are perfectly capable of

deciding the question of materiality under appropriate in-

structions. We frequently submit far more complex ques-

tions to juries and have found through the centuries that

they do quite well. The Sixth Amendment reflects a con-

scious judgment of the Framers to interpose a jury be-

tween the judge and the accused to determine the facts

necessary to find the accused guilty. This is why a judge

may not direct a verdict against a defendant no matter

how clear the evidence, nor may an appellate court con-

clude under a harmless error doctrine that a jury “would

have” found an essential element of the crime if the jury

did not do so under appropriate instructions. Sullivan, 113

S.Ct. at 2080, 2082.

Vi.

The Supreme Court’s decision in Kungys does not

foreclose the foregoing analysis.

Kungys involved the denaturalization of a citizen, in a

civil, non-jury proceeding. The Government charged that

there were several material false statements on Kungys’

visa application, including his date and place of birth, and

sought denaturalization of Kungys on those grounds. The

district court held that the false statements on the visa ap-

plication were not material to the naturalization process

——————E

1Sa

and, thus, could not constitute a basis for denaturalization

under 8 U.S.C. § 1451l(a). The circuit court of appeals

reversed, holding that the false statements concerning date

and place of birth were material. The Supreme Court

reversed the court of appeals on that issue, but remanded

for determination of other issues.

In the process of reviewing the materiality decision, the

Court stated that it must first decide whether the deter-

mination of the materiality of the false statement of the

date and place of birth should be reviewed as a question of

law or a question of fact. Kungys, 485 U.S. at 772. In ef-

fect, the Court was determining the appropriate standard

of review of the district court’s decision in this civil case.

In making this determination, the Court stated:

[W]e see no reason not to follow what has been done

with the materiality requirement under other statutes

dealing with misrepresentations to public officers.

“(T]he materiality of what is falsely sworn, when an

element of the crime of perjury, is one for the court.”

Sinclair v. United States, 279 U.S. 263, 298 (1929). As

the Sixth Circuit has said in a case involving 18

U.S.C. § 1001:

[A]lthough the materiality of a statement rests

upon a factual evidentiary showing, the ultimate

finding of materiality turns on an interpretation

of substantive law. Since it is the court’s respon-

sibility to interpret the substantive law, we

believe [it is proper to treat] the issue of

materiality as a legal question. United States v.

Abadi, 706 F.2d 178, 180, cert. denied, 464 U.S.

821 (1983).

Id. This has been determined by some courts to constitute

a conclusion that the 1929 Sinclair ruling on materiality in

criminal cases survives the analysis of the more recent line

l6a

of cases from Winship to Sullivan. That issue was not

before the court in that civil case. We find it inconceivable

that the Supreme Court intended to resolve that constitu-

tional question reconciling the Sinclair holding with the

later pronouncements in Winship through Sullivan in a

civil non-jury case without ever mentioning the Winship

line of cases.

The Court’s very quote from the Abadi opinion ac-

knowledges that the materiality of a statement rests upon

“a factual evidentiary showing.” The Abadi opinion offers

no explanation of why the judge, rather than the jury, can

constitutionally decide this question of fact in a criminal

case. The Abadi decision mentions Winship in a footnote

but avoids its implications on the ground that materiality

is not an element of the crime defined by 18 U.S.C.

§ 1001. For the reasons we have explained, we consider

this conclusion to be unsound. We note that the Supreme

Court did not mention or endorse that conclusion in the

footnote.

The Court’s opinion in stating the test for determining

materiality, that the false statement be one that “has a

natural tendency to influence or was capable of influenc-

ing, the decision of the decisionmaking body,” noted that

this involves a factual determination. The opinion states,

“{t]his test must be met, of course, by evidence that is

clear, unequivocal, and convincing.” Kungys, 485 U.S. at

772 (emphasis added). The judge may be free to evaluate

this evidence in order to make that determination in a civil

case, but this is not true in a criminal case. Furthermore,

in a criminal case, the test must be met by evidence that

establishes materiality beyond a reasonable doubt. Justice

Scalia also explains the reason for remanding certain of

the alleged misrepresentations stating, “it is not our nor-

mal practice to consider fact-bound legal consequences of

contested district court findings not yet reviewed by the

17a

court of appeals.” /d. at 773 n.6 (emphasis added). In a

criminal case, Sullivan would require that these findings of

fact be made by a jury.

Vil.

The case before us is an excellent illustration of why

materiality under a section 1001 charge is a “fact-bound”

inquiry. One cannot look at a particular law or a par-

ticular statute or regulation to determine what would af-

fect the decision of the HUD to insure an FHA loan. False

statements of age, address, gaps in employment history, or

inaccuracies in a financial statement may be of no import-

ance to some agency determinations but crucial to others.

In Gaudin’s case, the charges in Counts 2-17 and 19-42

involve merely checking a block on line 303 of a settlement

statement that indicated that the borrower, rather than

Gaudin, was paying or receiving the balance of the charges

on settlement. Some of the amounts written on line 303

were trivial. For example: Count 11, $94.11; Count 12,

$122.61; Count 13, $31.07; Count 28, $129.93; Count 31,

$91.83. It was necessary to take testimony of department

officials in order to determine whether the block checked

on line 303 of the settlement statement would tend to in-

fluence the agency’s decision to insure the loan.

The jury .. the finder of fact and is entitled to believe or |

disbelieve the testimony of the department officials. A

persuasive factual argument could be made that there was

a reasonable doubt as to whether the particular block

checked on line 303 would have tended to influence the

agency’s decision. That line on the form serves the purpose

of tallying the two sides of the settlement form and arriv-

ing at a balance. It is not a certification that either party

actually paid or received the funds. The actual certifica-

tion by the parties above their signatures states, “I have

18a

carefuily reviewed the HUD-1 Settlement Statement and

to the best of my knowledge and belief it is a true and ac-

curate statement of all receipts and disbursements made

on my account or by me in this transaction.” (Emphasis

added.) With the certification itself not distinguishing

whether the receipts and disbursements were made “by

me” or “on my account,” this adds credence to an argu-.

ment that the particular block checked on line 303 would

not have any tendency to influence the agency’s decision.

This is a factual question and the Sixth Amendment anu

the Due Process Clause require that it be put to a jury to

determine this factual issue beyond a reasonable doubt. It

is apparent that the argument for materiality is stronger in

Counts 44-46 where the statements concern appraisals of

market value. The point, however, is that no matter how

clear evidence may be, the Sixth Amendment requires that

the jury, not the judge, must find the facts necessary to

decide this element of the crime beyond a reasonable

doubt.

Of course, a judge may rule that a false statement ts not —

material as a matter of law, that is, that the evidence is in-

sufficient for the jury to find that the statement is

material. However, when the judge rules that a false state-

ment 1s material, and withdraws the element of materiality

from the jury, the judge deprives the jury of its fact-

finding duty and violates the defendant’s Due Process and

Sixth Amendment rights.

VIII.

We conclude that when the element of materiality re-

quires a factual finding, as it does in section 1001 prosecu-

tions, that element must be submitted to the jury. The

district court erred when it instructed the jury that the

statements were material as a matter of law. As we dis-

19a

cussed in the panel opinion, Gaudin, 997 F.2d at 1271-72,

such an error cannot be harmless. See Sullivan, 113 S.Ct.

at 2081-82; see also Yates v. Evatt, 500 U.S. » 359

S. Ct. 1884, 1894 (1991); Martinez v. Borg, 937 F.2d 422,

424 (9th Cir. 1991). Harmless error analysis focuses on

“the basis on which ‘the jury actually rested its verdict.’ ”

Sullivan, 113 S. Ct. at 2081; Yates, 111 S. Ct. at 1893.

Under the guidance of Yates, we may no longer consider

the strength of evidence and determine whether it was so

clear that the jury would have found the element of a

crime to exist, had it been properly instructed, but, in-

stead, we must determine whether the jury was actually

able to consider that evidence under the instructions given

by the court. When proof of an element has been com-

pletely removed from the jury’s determination, there can

be no inquiry into what evidence the jury considered to

establish that element because the jury was precluded from

considering whether the element existed at all.

Because Gaudin did not object to the instruction that

removed the question of materiality from the jury, we

must also determine whether this error was “plain error.”

In the panel decision, we discussed the relationship be-

tween harmless error and plain error, noting that the latter

is the more restrictive standard. See Gaudin, 997 F.2d at

1271. In discussing plain error, we applied the standard set

forth in United States v. Young, 470 U.S. 1 (1985), in

determining that withdrawing the issue of materiality from

the jury was plain error and reversing the convictions on

that basis.

The dissent asserts that the more recent case of United

States v. Olano, 123 L.Ed. 2d 508 requires a different con-

clusion. We disagree. Olano concerned the presence of

alternate jurors in the jury room during the jury’s delibera-

tions. This was in violation of Federal Rule of Criminal

Procedure 24(c). The error was not objected to at the trial

20a

level and was not raised by the defendant on appeal. The

court of appeals took notice of the error on its own in-

itiative and reversed. The Supreme Court reversed the

decision of the court of appeals on the basis that the error

did not affect substantial rights of the defendant because

there was no showing that the presence of the alternates

affected the verdict and, there was, thus, no showing of

prejudice.

In the course of its decision, the Court quoted Federal

Rule of Civil Procedure 52(b) and the appropriate stand-

ards in applying the Rule as set forth in Young. Rule 52(b)

provides:

PLAIN ERROR. Plain errors or defects affecting

substantial rights may be noticed although they were

not brought to the attention of the court.

The Court, in analyzing the application of Rule 52(b),

stated:

Although a rigid and undeviating judicially

declared practice under which courts of review would

invariably and under all circumstances decline to con-

sider all questions which had not previously been

specifically urged would be out of harmony with. . .

the rules of fundamental justice, the authority created

by Rule 52(b) is circumscribed. There must be an er-

ror that is plain and that affects substantial righis.

Moreover, Rule 52(b) leaves the decision to correct

the forfeited error within the sound discretion of the

Court of Appeals, and the court should not exercise

that discretion unless the error seriously affects the

fairness, integrity, or public reputation of judicial

proceedings. United States v. Young, 470 U.S. 1, 15,

84 L. Ed. 2d 1, 105 S.Ct. 1038 (1985) (quoting United

States v. Atkinson, 297 U.S. 157, 160, 80 L. Ed. 555,

56 S.Ct. 391 (1936)).

2la

Olano, 123 L. Ed. 2d at 518 (internal citations and quota-

tion marks omitted).

There is no doubt in the present case that the error was

“plain.” It violated clear circuit precedent that had been in

existence for 15 years. It also affected Gaudin’s substantial

constitutional right to have a jury, not a judge, decide the

facts necessary to establish the existence of an element of

the crime. In Olano, the Court was concerned with the

possible prejudice from the presence of alternate jurors

during deliberations. In this case, we are concerned with a

fundamental structural error where the jury was not per-

mitted to render a verdict as to the existence of an element

of the crime. Here, our concern is not with a posssible un-

fair prejudicial impact on the jury’s deliberations, but with

the failure to allow the jury to deliberate on the issue at all.

Gaudin has met his burden to show that error affected

substantial rights.

As we have noted, the Court in Olano also stated that

Rule 52(b) leaves the decision to correct the error within

the sound discretion of the court of appeals, to be exer-

cised only when “the error seriously affects the fairness,

integrity or public reputation of judicial proceedings.”

Olano, 123 L. Ed. 2d at 518. When a defendant has not

been accorded his Fourth and Sixth Amendment rights to

a jury determination of the existence of an essential ele-

ment of the crime, we conclude that the error meets that

standard. Furthermore, in this case, as we have pointed

out elsewhere, there was a serious factual question for the

jury as to whether a block checked on line 303 of the

HUD-1 Settlement Statement could have a tendency to in-

fluence the agency’s decision to secure the loan.

Even more importantly, if we were to engage in this

fact-finding, as the dissent suggests, we would be

substituting our conclusion of what a jury would have

22a

found, not what it did find. This is the very inquiry

deemed inappropriate in Su/livan. We conclude that there

is a sound basis for the exercise of our discretion to correct

the plain error raised cn appeal.

In conclusion, we confirm our prior authority that the

issue Of materiality in charges under 18 U.S.C. § 1001

must be submitted to the jury under appropriate instruc-

tions. Therefore, in conformity with the panel opinion,

the conviction on Count 1, equity skimming, is AF-

FIRMED. The convictions on Counts 2-17, 19-42, and

44-46 are REVERSED and REMANDED for further pro-

ceedings in accordance with the opinions of this court.

23a

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26a

KOZINSKI, Circuit Judge, with whom WALLACE, Chief

Judge, and LEAvy, RYMER and T.G. NELSON, Circuit

Judges, join, dissenting:

Court of appeals opinions, particularly en banc opin-

ions, frequently raise waves on the waters of the law. To-

day’s opinion is more akin to a tsunami. It’s not every day,

after all, that we provoke a conflict with every other

regional circuit, defy Supreme Court authority, implicitly

overrule several lines of our own case law—thereby

creating a spiderweb of secondary circuit conflicts — and

pave the way for successful habeas petitions for scores,

perhaps hundreds, of prisoners convicted of a broad range

of federal crimes.

This upheaval might be justified if we were facing a

problem not addressed or understood by other courts. In

fact, though, whether the materiality of false statements to

the government is a question of fact or of law has been

kicking around for some time, and every other regional

circuit has concluded that it is a question of law to be

decided by the district judge. It seems imprudent for us to

mount an assault on this donjon of federal court authori-

ty. To also defy the Supreme Court because we can’t

believe the Court meant what it said, Majority op. at 6651,

only underscores the boldness of our foray.

That Gaudin never objected to the error below further

complicates the matter. The majority, like the three judge

panel, holds that all Winship error is perforce plain error.

See Majority op. at 6661; see also United States v. Gaudin,

997 F.2d 1265, 1272-73 (9th Cir. 1993). This is not only

very bad policy; it misapplies the Supreme Court’s most

recent pronouncement and precipitates further circuit con-

flicts. Finally, as happened in the wake of McNally v.

United States, 483 U.S. 350 (1987), today’s opinion will

cause a large number of criminal convictions to be vacated

on both direct appeal and habeas, haunting the law of our

circuit for years to come.

27a

A. Conflicts with Other Circuits

Every other circuit to have considered whether

materiality under 18 U.S.C. § 1001 isa question of fact or

a question of law—which means every circuit except the

Federal —has held that it’s a question of law: See United

States v. Corsino, 812 F.2d 26, 31 n.3 (Ist Cir. 1987)

(disagreeing with United States y. Valdez, 594 F.2d 725,

729 (9th Cir. 1979), and ruling that materiality is a ques-

tion of law); United States v. Bernard, 384 F.2d 915, 916

(2d Cir. 1967); United States v. Elkin, 731 F.2d 1005, 1009

(2d Cir. 1984);! United States vy. Greber, 760 F.2d 68, 73

(3d Cir. 1985); Nilson Van & Storage Co. v. Marsh, 755

F.2d 362, 367 (4th Cir. 1985); United States y. Hausmann,

711 F.2d 615, 616-17 (Sth Cir. 1983); United States y.

Chandler, 752 F.2d 1148, 1150-51 (6th Cir. 1985); United

States v. Brantley, 786 F.2d 1322, 1327 & n.2 (7th Cir.

1986); United States v. Hicks, 619 F.2d 752, 758 (8th Cir.

1980); United States v. Daily, 921 F.2d 994, 1004 (10th

Cir. 1990); United States y. Lopez, 728 F.2d 1359, 1362

n.4 (11th Cir. 1984); United States y. Hansen, 772 F.2d

940, 950 (D.C. Cir. 1985).

All these courts considered (or reconsidered) this issue

after our contrary holding in Valdez and remained unper-

suaded. What more can one possibly Say except that the

maverick spirit is alive and well here in the West?

B. Conflict with the Supreme Court

Given the diversity of views normally displayed by court

of appeals judges, there must be a pretty good reason for

' The Second Circuit is somewhat atypical because it holds that

materiality is not an element of the second clause of 18 U.S.C. § 1001.

Elkin, 731 F.2d at 1009.

28a

such monolithic uniformity. And there is: The Supreme

Court has cases directly on point. Over six decades ago,

the Court held in Sinclair v. United States, 279 U.S. 263,

298-99 (1929), that materiality —or at least pertinency —is

a legal issue in false statement prosecutions. When

charged with failing to answer “any question pertinent to

the question under inquiry” by Congress, id. at 285,

Sinclair argued that pertinency was a factual ques-

tion—the same claim Gaudin makes about materiality

under section 1001. The Court disagreed: “That question

may be likened to those concerning relevancy at the trial of

issues in court, and it is not essentially different from the

question as to materiality of false testimony charged as

perjury in prosecutions for that crime.... [T]he

materiality of what is falsely sworn, when an element in

the crime of.perjury, is one for the court.” Jd. at 298.

The continued vitality of Sinclair is subject to legitimate

question because it antedated the Court’s Winship line of

cases. Majority op. at 6647-48. But Sinclair was given new

life in Kungys v. United States, 485 U.S. 759 (1988), where

the Court held that materiality, as that term is used in 8

U.S.C. § 1451, is a question of law. In reaching that con-

clusion, the Court expressly reaffirmed Sinclair and relied

heavily on the Sixth Circuit’s analysis ir ited States v.

Abadi, 706 F.2d 178 (6th Cir. 1983), a criminal case in-

volving 18 U.S.C. § 1001. Kungys, 485 U.S. at 772.

The majority does not find itself bound by Kungys

because Kungys was not a criminal case and so did not

raise a Winship issue. Majority op. at 6655-57. But

Kungys cannot be so easily cast aside. Something is either

a question of law or a question of fact; it can’t be both.

Once it is held to be a question of law —as materiality was

in Kungys—certain consequences follow. One is that the

standard of review is de novo rather than for substantial

evidence. Another is that, in a criminal case, it need not be

29a

decided by a jury. The majority confuses these conse-

quences with the initial determination by conjecturing that

the Court would have reached a different conclusion in

Kungys had it but focused on Winship. Id. In fact, there is

no tension between Kungys and Winship: Once materiality

is deemed to be a question of law, Winship poses no im-

pediment to having it determined by the court in a criminal

case. By refusing to accept Kungys’s clear ruling on that

point, the majority is placed in the awkward position of

holding that something is a question of fact for purposes

of Winship even though it is a question of law for pur-

poses of appellate review.

The determination in Kungys that materiality is a ques-

tion of law was not dicta, but a considered aspect of the

Court’s holding. We need not agree with the Court and

are surely entitled to point out that its ruling may have

unintended consequences. The Court can reconsider its

case law in light of experience or new information; we

must apply it as written.

_ This is the conclusion reached by the Tenth Circuit.

Before Kungys, that court, like our own, had held that

materiality under section 1001 was a question for the jury.

See United States v. Irwin, 654 F.2d 671, 677 n.8 (10th

Cir. 1981); United States v. Radetsky, 535 F.2d 556, 571

(10th Cir. 1976). But Kungys caused it to change its rule:

Upon consideration of ... Kungys, we conclude

that materiality under § 1001 is a question of law for

the court and, accordingly, the trial court’s refusal to

* Even if it were dicta, we could not lightly ignore it: “(Federal ap-

pellate courts are bound by the Supreme Court’s considered dicta

almost as firmly as by the Court’s outright holdings, particularly

when, as here, a dictum is of recent vintage and not enfeebled by any

subsequent statement.” McCoy v. Massachusetts Inst. of Technology,

950 F.2d 13, 19 (Ist Cir. 1991); see also United States v. Underwood,

717 F.2d 482, 486 (9th Cir. 1983).

30a

submit the materiality issue under § 1001 to the jury

was not error. The court now disavows our prior

holdings to the contrary. We are mindful that our

panel is bound by prior decisions of this court, but we

are authorized by all the active judges of this court to

state that the court endorsses this overruling of our

prior cases on the materiality issue under § 1001 in

light of the Supreme Court’s guidance in Kungys.

United States v. Daily, 921 F.2d 994, 1004 (10th Cir. 1990)

(citations and footnote omitted). Confronted with the

compelling authority of Aungys, the Tenth Circuit

recognized its duty and, effectively, went en banc to bring

its case law in line with the Supreme Court. We should be

doing the same.

C. Implicit Overruling of Our Case Law in Other Areas

Although the majority only interprets 18 U.S.C. § 1001,

its rationale sweeps much farther. If materiality is a ques-

tion of fact for the jury in section 1001 prosecutions, it’s a

question of fact in other contexts as well. The majority

recognizes the clear implications of its holding by noting

that “it seems to be courting constitutional error to

withdraw the materiality question from the jury in other

perjury and false statement cases because of the difficulty

in concluding that there is no factual component for jury

determination.” Majority op. at 6655.

We have a substantial body of case law holding that

materiality is a question of law under a variety of statutes.

Thus judges, not juries, decide the materiality of false

statements in tax returns. United States v. Flake, 746 F.2d

535, 537-38 (9th Cir. 1984) (construing 26 U.S.C. § 7206);

see id. (confining Valdez to section 1001). Ditto for false

statements to grand juries, United States v. Prantil, 764

F.2d 548, 557 (9th Cir. 1985) (construing 18 U.S.C.

§ 1623), United States v. Dipp, 581 F.2d 1323, 1328 (9th

3la

Cir. 1978) (discussing information judge needs to make

materiality determination under section 1623), United

States v. Sisack, 527 F.2d 917, 920 n.2 (9th Cir. 1975)

(judge must decide materiality under section 1623), United

States v. Percell, 526 F.2d 189, 190 (9th Cir. 1975) (same);

for false statements in applications for payments in

federally-approved plans for medical assistance, United

States v. Larm, 824 F.2d 780, 783-84 (9th Cir. 1987) (con-

struing predecessor to 42 U.S.C. § 1320a-7b); see id. at 783

(noting Voldez has been limited to section 1001); and for

perjury, United States v. Clark, 918 F.2d 843, 845-46 (9th

Cir. 1990) (construing 18 U.S.C. § 1621), see id. (confin-

ing Valdez to section 1001 because circuit had done so

twice before), Vitello v. United States, 425 F.2d 416, 423

(9th Cir. 1970) (construing section 1621).

Without mentioning these cases, the majority cuts the

ground out from under them:

In our circuit, we have held that the issue of materiali-

ty in most of these statutes is a question of law for the

judge. The exception has been section 1001 cases. . .

The opinions holding that the issue of materiality in

these criminal cases is a matter of law for the court to

decide have relied on the 1929 Supreme Court case of

Sinclair... The essential issue before us is whether the

opinions relying on Sinclair survive . . .

Majority op. at 6646-47 (emphasis added). The majority

takes particular aim at our cases involving perjury and

false statements to the grand jury. /d. at 6653-54.

The majority tries to hedge its bets by suggesting that

the effect of its ruling on “future prosecutions under other

Statutes” is somehow an open question. Majority op. at

6651 n.2. This is difficult to square with the majority’s

ominous language about “courting constitutional error” if

the question of materiality is withdrawn from the jury

32a

“in other perjury and false statement cases.” /d. at 6655.

As a practical matter, this warning may be sufficient to

prevent district courts from following our earlier case law,

particularly since the aggrieved party—the govern-

ment —can’t appeal.

It’s fair to say, therefore, that we have effectively

(though tacitly) laid these cases to rest. In so doing, we

unleash a series of further conflicts with our sister circuits.

Take, for example, false statements in tax returns. By

abandoning Flake, we create a conflict with six other cir-

cuits — all of which have assigned the materiality inquiry to

the judge. See United States v. Romanow, 509 F.2d 26, 28

(Ist Cir. 1975) (materiality of false statements in tax return

under 18 U.S.C. § 7206 decided by judge); United States

v. Greenberg, 735 F.2d 29, 31 (2d Cir. 1984) (same);

United States v. Taylor, 574 F.2d 232, 235 (Sth Cir. 1978)

(same); United States v. Haynes, 573 F.2d 236, 240 (Sth

Cir. 1978) (same); Hoover v. United States, 358 F.2d 87,

89 (Sth Cir. 1966) (same); United States v. Whyte, 699

F.2d 375, 379 (7th Cir.1983) (same); United States v.

Strand, 617 F.2d 571, 573 (10th Cir. 1980) (same); United

States v. Gaines, 690 F.2d 849, 858 (llth Cir. 1982)

(same). But see United States v. Null, 415 F.2d 1178, 1181

(4th Cir. 1969) (submitting issue to jury).

Or, take our cases holding that judges should decide the

materiality of false statements made to a grand jury. See

Prantil, 764 F.2d at 557 (construing 18 U.S.C. § 1623);

Dipp, 581 F.2d at 1328 (same); Sisack, 527 F.2d at 920 n.2

(same); Percell, 526 F.2d at 190 (same). In sweeping aside

these cases, the majority creaies a conflict with fifty-one

cases and —not surprisingly —every other regional circuit.

See United States v. Paxson, 861 F.2d 730, 731 (D.C. Cir.

1988); United States v. Bridges, 717 F.2d 1444, 1448 (D.C.

Cir. 1983); United States v. Glantz, 847 F.2d 1, 10 ([st Cir.

1988); United States v. Stackpole, 811 F.2d 689, 695 (Ist

33a

Cir. 1987); United States v. Collatos, 798 F.2d 18, 19 (1st

Cir. 1986); United States v. Scivola, 766 F.2d 37, 44 (Ist

Cir. 1985); United States v. Kehoe, 562 F.2d 65, 68 (Ist

Cir. 1977); United States v. Doherty, 867 F.2d 47, 69 (Ist

Cir. 1989); United States vy. Kiszewski, 877 F.2d 210, 218

(2d Cir. 1989); United States v. Lighte, 782 F.2d 367, 372

(2d Cir. 1986); United States v. Weiss, 752 F.2d 777, 786

(2d Cir. 1985); United States v. Cunningham, 723 F.2d

217, 226 (2d Cir. 1983); United States v. Moon, 718 F.2d

1210, 1237 (2d Cir. 1983); United States y. Berardi, 629

F.2d 723, 728 (2d Cir. 1980); United States vy. Mulligan,

573 F.2d 775, 779 (2d Cir. 1978); United States v. Man-

cuso, 485 F.2d 275, 280 (2d Cir. 1973); United States v.

Slawik, 548 F.2d 75, 79 (3d Cir. 1977) (in dicta); United

States v. Weiler, 143 F.2d 204, 204 (3d Cir. 1944) (involv-

ing predecessor statute), rev’d on other grounds, 323 U.S.

606 (1945); United States v. Flowers, 813 F.2d 1320, 1325

(4th Cir. 1987); United States vy. Farnham, 791 F.2d 203,

203 (4th Cir. 1985); United States v. Paolicelli, 505 F.2d

971, 973 (4th Cir. 1974); United States v. Holley, 942 F.2d

916, 923 (Sth Cir. 1991); United States vy. Abroms, 947

F.2d 1241, 1246 (Sth Cir. 1991); United States v. Nixon,

816 F.2d 1022, 1029 (Sth Cir. 1987); United States vy.

Thompson, 637 F.2d 267, 268 (Sth Cir. 1981); United

States v. Bell, 623 F.2d 1132, 1134 (Sth Cir. 1980); United

States v. Forrest, 623 F.2d 1107, 1113 (Sth Cir. 1980);

United States v. Damato, 554 F.2d 1371 (Sth Cir. 1977);

United States v. Parr, 516 F.2d 458, 470 (Sth Cir. 1975);

Brooks v. United States, 253 F.2d 362, 364 (Sth Cir. 1958);

United States v. Giacalone, 587 F.2d 5, 6 (6th Cir. 1978);

United States v. Bullock, 857 F.2d 367, 371 (7th Cir.

1988); United States v. Watson, 623 F.2d 1198, 1201 (7th

Cir. 1980); United States v. Smith, 538 F.2d 159, 163 (7th

Cir. 1976); United States v. Demopoulos, 506 F.2d 1171,

1176 (7th Cir. 1974); United States v. Brimberry, 779 F.2d

34a

1339, 1349 (8th Cir. 1985); United States v. Bednar, 728

F.2d 1043, 1047 (8th Cir. 1984); United States v. Armillo,

705 F.2d 939, 942 (8th Cir. 1983); United States v. Oster-

tag, 671 F.2d 262, 265 (8th Cir. 1982); United States v.

Jackson, 640 F.2d 614, 616 n.2 (8th Cir. 1981); United

States v. Beitling, 545 F.2d 1106 (8th Cir. 1976); United

States v. Phillips, 540 F.2d 319, 328 (8th Cir. 1976); Tasby

v. United States, 504 F.2d 332, 337 (8th Cir. 1974); United

States v. Koonce, 485 F.2d 374, 380 (8th Cir. 1973);

United States v. Larranaga, 787 F.2d 489, 494 n.1 (10th

Cir. 1986); United States v. Girdner, 773 F.2d 257, 259

(10th Cir. 1985); United States v. Masters, 484 F.2d 1251,

1254 (10th Cir. 1973); Travis v. United States, 123 F.2d

268, 270 (10th Cir. 1941) (involving predecessor statute);

United States v. Dekle, 768 F.2d 1257, 1262 (11th Cir.

1985); United States v. Molinares, 700 F.2d 647, 653 (11th

Cir. 1983).

In quietly burying our rule that a judge decides the

materiality of perjured statements under 18 U.S.C.

§ 1621, see United States v. Clark, 918 F.2d 843, 845-46

(9th Cir. 1990); Vitello v. United States, 425 F.2d 416, 423

(9th Cir. 1970), the majority generates yet another conflict

—this time with six other circuits. See United States v.

Alu, 246 F.2d 29, 32 (2d Cir. 1957); Forrest, 623 F.2d at

1113; United States v. Gremillion, 464 F.2d 901, 904 (Sth

Cir. 1972); United States v. Edmondson, 410 F.2d 670,

674 n.3 (Sth Cir. 1969); Barnes v. United States, 378 F.2d

646, 650 (Sth Cir. 1967); Giacalone, 587 F.2d at 6; United

States v. Rivera, 448 F.2d 757, 758 (7th Cir. 1971); United

States v. Parker, 447 F.2d 826, 830 (7th Cir. 1971); United

States v. Parker, 244 F.2d 943, 950 (7th Cir. 1957);

Masinia v. United States, 296 F.2d 871, 874 (8th Cir.

1961); Dolan v. United States, 218 F.2d 454, 457 (8th Cir.

1955); Masters, 484 F.2d at 1254.

35a

The disruption is greater still. I’ve only mentioned five

Statutes—ones where our circuit has already held who

decides materiality. But the majority’s theory easily covers

all statutes that contain a similar materiality requirement.

How many other criminal statutes punish those who make

material false statements to a government agency? My

research discloses forty-three that have explicit materiality

requirements? and another fifty-four where such a re-

> See 7 U.S.C. § 13(a)(3) (felony to knowingly make statement that

“was false or misleading with respect to any material fact” in report re-

quired by statute or futures association); 8 U.S.C. § 1160(b)(7)

(penalizing knowing and willful false statement of material fact in ap-

plication for status of special agricultural worker); 8 U.S.C.

§ 1225a(c)\(6) (penalizing knowing and willful false statement of

material fact in application for special status by virtue of entering

U.S. before Jan. 1, 1982); 8 U.S.C. § 1325(a) (penalizing improper en-

try into U.S. by virtue of willful false statement of material fact); 10

U.S.C. § 931 (perjury in military proceeding); 18 U.S.C. § 152 (max-

imum five year sentence for knowing and fraudulent receipt of

material amount of property with intent to defeat bankruptcy code);

18 U.S.C. § 542 (maximum prison term of two years for entry of

goods by means of material false Statement); 18 U.S.C. § 1919 (max-

imum one year prison term for false statement of material fact know-

ingly made to obtain unemployment compensation for federal

service); 19 U.S.C. § 1629(f)(2) (maximum five year prison term

for any person who knowingly and willfully covers up a material fact

from customs official); 19 U.S.C. § 1919 (maximum two year prison

term for knowingly making false statement of material fact with intent

to influence tariff adjustment); 19 U.S.C. § 2316 (maximum one year

prison term for knowingly making false statement of material fact

when seeking relief from injury under section 231 1); 19 U.S.C. § 2349

(maximum two year prison term for making false statement of

material fact for purposes of obtaining relief from injury under Trade

Act of 1974); 20 U.S.C. § 1097(b) (maximum one year prison term for

knowingly and willfully concealing material information in connec-

tion with assignment of federally insured student loan); 20 U.S.C.

§ 4442(c)(1) (maximum one year prison term for knowingly making

false statement of material fact in seeking cultural and art develop-

ment grants); 22 U.S.C. § 618(a)(2) (maximum six month prison term

36a

for willfully making false statement of material fact in registering to

distribute political propaganda); 22 U.S.C. § 2778(c) (maximum 10

year prison term for willfully making untrue statement of material

fact in report required for control of arms exports and imports); 26

U.S.C. § 7206(1) (maximum three year prison term for willfully mak-

ing false declaration as to material matter regarding income taxes

when under penalty of perjury); 26 U.S.C. § 9012(d) (maximum five

year prison term for knowingly and willfully making misrepresenta-

tion of material fact during examination of campaign’s matching pay-

ment account); 29 U.S.C. § 439(b) (maximum one year prison term

for person who knowingly makes false statement of material fact in

report required under section 431); 29 U.S.C. § 462(d) (maximum one

year prison term for knowing misrepresentation of material fact in

report labor organization must file once it assumes trusteeship over

subordinate organization); 31 U.S.C. § 5324(b)(2) (prohibiting

material omission or misstatement of fact in report on monetary

instruments transactions); 42 U.S.C. § 290cc-32 (maximum five year

prison term for knowingly making false statement of material fact in

sale to state for items or services funded by federal government under

Medicare); 42 U.S.C. § 300d-20 (same); 42 U.S.C. § 300e-17(h) (max-

imum five year prison term for knowingly and willfully making false

statement of material fact in an HMO’s financial disclosure); 42

U.S.C. § 300w-8(1) (maximum five year prison term for knowingly

and willfully making false statement of material fact in sale to state of

items* or services subsidized by federal government); 42 U.S.C.

§ 300x-56(b) (same); 42 U.S.C. § 300dd-9 (same—under formula

grants to states for care of AIDS patients); 42 U.S.C. § 300ee-19(b)

(same—under funds -.for AIDS prevention); 42 U.S.C. § 707(a)(1)

(same —under funds for social security); 42 U.S.C. § 1320a-7b(a)(1)

(maximum five year prison term for knowingly and willfully making

false statement of material fact in application for payments in

federally-approved plans for medical assistance); 42 U.S.C.

§ 1383a(a)(1) (maximum one year prison term for knowingly and

_ willfully making false statement of material fact in application for

Supplemental Security Income benefits); 42 U.S.C. § 19731 (penaliz-

ing knowingly false information for purpose of establishing eligibility

to vote); 42 U.S.C. § 3795a (penalizing knowing and willful misstate-

ment or concealment of material fact in any application or record re-

quired under chapter); 42 U.S.C. § 6928(d)(3) (maximum two year

prison term for knowingly making false material statement in com-

pliance documents); 42 U.S.C. § 6992(b)(2) (maximum two year

37a

quirement is probably implied.4 And, of course, Other

courts have already held that materiality in a number of

prison term for knowingly making material statement in compliance

documents); 42 U.S.C. § 7413(c)(2) (maximum two year prison term

for knowingly making false material statement in documents required

under chapter); 46 U.S.C. § 1171(b) (any person who, in application

for financial aid under merchant marine act, willfully makes untrue

Statement of material fact is guilty of misdemeanor); 46 U.S.C.

§ 31306(d) (maximum five year prison sentence for knowingly making

false statement of material fact in declaration of citizenship under

Shipping Act); 46 U.S.C. App. § 839 (maximum five year prison term

for knowingly making false statement of material fact to secure re-

quired approval of Secretary of Transportation); 49 U.S.C. App.

§ 1472 (maximum three year prison term for knowingly and willfully

falsifying or concealing a material fact to obtain FAA certificate); 50

U.S.C. § 855 (maximum five year prison term for willfully making

false statement of material fact in registration statement); 50 U.S.C.

App. § 1193(h) (maximum two year prison term for knowingly fur-

nishing information that is false or misleading in any material respect

regarding renegotiation of airplane contracts).

* See 7 U.S.C. § 614(b-3)(3) (penalizing those who make false state-

ment in application for tax-payment warrant); 7 U.S.C. § 2028(d)

(punishing those who obtain funds from a Puerto Rico block grant

“by ... false statement”); 7 U.S.C. § 6407(e) (barring “false or un-

warranted statements” regarding fluid milk products); 12 U.S.C.

§ 1782(a)(3) (penalizing false statement in administration of insurance

fund); 13 U.S.C. § 213 (penalties for perjury); 12 U.S.C. § 1847

(penalizing false entries in book, report, or statement of bank holding

company); 15 U.S.C. § 50 (penalizing false statement to FTC); 15

U.S.C. § 645 (offenses and penalties for certain crimes related to com-

merce and trade); 15 U.S.C. § 714m (punishing knowingly false state-

ment to Commodity Credit Corporation); 15 U.S.C. § 1825(a)(2)(B)

(penalizing false statement in report required by Horse Protection

Act); 16 U.S.C. § 813t(b) (penalizing false statement to or on behalf

of the Tennessee Valley Authority); 18 U.S.C. § 287 (penalizing false

claims against U.S. government); 18 U.S.C. § 288; (penalizing false

claims for postal losses); 18 U.S.C. § 289 (penalizing false claims for

pensions); 18 U.S.C. § 924 (penalizing knowing false statement in in-

38a

formation gun dealers must provide); 18 U.S.C. § 1011 (penalizing

knowing false statement in sale of mortgage to federal land bank); 18

U.S.C. § 1012 (penalizing intentional false entry in book of Depart-

ment of Housing and Urban Development); 18 U.S.C. § 1014

(penalizing false statement to influence federal loan or credit agency);

18 U.S.C. § 1015 (penalizing false statement in naturalization pro-

ceeding); 18 U.S.C. § 1018 (penalizing public official who knowingly

falsifies official certificate or writing); 18 U.S.C. § 1020 (penalizing

false statement regarding highway projects); 18 U.S.C. § 1026

(penalizing false statement regarding farm indebtedness for purpose

of influencing Secretary of Agriculture); 18 U.S.C. § 1027 (penalizing

false statement in documents required by ERISA); 18 U.S.C. § 1158

(penalizing false statement to secure Indian Arts & Crafts Board

trademark); 18 U.S.C. § 1542 (penalizing willful and knowing false

statement in passport application); 18 U.S.C. § 1546 (penalizing false

statement in immigration documents); 18 U.S.C. § 1712 (penalizing

falsification of postal returns to increase compensation); 18 U.S.C.

§ 1920 (penalizing false statement to obtain Federal employees’ com-

pensation); 18 U.S.C. § 2386 (penalizing willful false statement when

registering certain organizations); 18 U.S.C. § 2388(a) (penalizing

willful false statement with intent to interfere with armed forces dur-

ing war); 18 U.S.C. § 2424 (penalizing knowing and willful false state-

ment about alien procured or maintained for immoral purposes); 22

U.S.C. § 1980(g) (penalizing false statement in seeking compensation

for loss or destruction of commercial fishing vessel or gear); 22 U.S.C.

§ 2197(n) (penalizing false statement regarding federal insurance of

investment in foreign nations); 26 U.S.C. § 7232 (penalizing false

Statement regarding registration as manufacturer or dealer in

gasoline); 29 U.S.C. § 666(g) (penalezing false statement in health and

safety report required under this chapter); 30 U.S.C. § 820 (penalizing

false statement in document required under subchapter governing

mine safety and health); 30 U.S.C. § 941 (penalizing false statement

or representation in seeking benefits under subchapter governing mine

safety and health); 30 U.S.C. § 1232(d)(1) (penalizing false statement

in report submitted with reclamation fee); 30 U.S.C. § 1268(g)

(penalizing false statement in documents required by Federal program

or Federal Lands program regarding surface mining); 31 U.S.C.

§ 5322 (penalizing willful violations of subchapter); 33 U.S.C. § 931

(penalizing false statement for purpose of obtaining workers’ compen-

sation benefit); 33 U.S.C. § 990(b) (penalizing false statement to cor-

39a

these statutes should be decided by the judge,° and will no

doubt interpret the others consistent with their prevailing

case law.

poration governing Saint Lawrence Seaway); 33 U.S.C. § 1319(c)(2)

(penalizing knowing false statement in record required by chapter on

navigation and navigable waters); 38 U.S.C. § 1987 (penalizing know-

ing false statement in application, waiver of premium, or claim for

benefits, for National Service Life Insurance or U.S. Government life

insurance); 40 U.S.C. § 883(b) (penalizing false statement to Penn-

sylvania Avenue Development Corp.); 42 U.S.C. § 408 (penalizing

false statement to obtain social security benefits); 42 U.S.C. § 1761(0)

(penalizing false statement in connection with summer food service

programs for children at service institutions); 42 U.S.C. § 1973i(c)

(penalizing knowing false information for purpose of establishing

eligibility to vote); 42 U.S.C. § 3220 (penalizing knowing false state-

ment to obtain financial assistance or defraud Secretary of Depart-

ment of Health and Human Services); 42 U.S.C. § 4912(c) (penalizing

false statement in documents filed pursuant to chapter’s noise control

requirements); 43 U.S.C. § 1350(c) (penalizing knowing false state-

ment in application required under subchapter on submerged public

lands); 45 U.S.C. § 231(I)(a) (penalizing knowing false statement in

report required by subchapter on Rail Road Retirement Accounts); 45

U.S.C. § 359(a) (penalizing knowing false statement to obtain

unemployment insurance); 49 U.S.C. Appx. § 2216 (penalizing U.S.

officials who knowingly make false statement regarding projects sub-

mitted for approval of Secretary of Transportation).

* For cases assigning materiality to the judge in statutes with express

materiality requirements, see United States v. Key, 859 F.2d 1257 (7th

Cir. 1988) (construing 18 U.S.C. § 152); United States v.

Marachowsky, 201 F.2d 5 (7th Cir. 1953) (same); United States v.

Brown, 763 F.2d 984 (8th Cir. 1985) (construing predecessor to 42

U.S.C. § 1320a-7b).

For cases assigning materiality to the judge in statutes with an im-

plied miateriality requirement, see United States v. Elkin, 731 F.2d

1005 (2d Cir. 1984) (construing 18 U.S.C. §§ 287, 1001); United States

v. Cleary, 565 F.2d 43 (2d Cir. 1977) (construing 18 U.S.C. § 1014);

United States v. Whaley, 786 F.2d 1229 (4th Cir. 1986) (construing 18

U.S.C. § 1014); United States v. Lueben, 838 F.2d 751 (Sth Cir. 1988)

(construing 18 U.S.C. §§ 1014, 1001); United States v. Thompson,

40a

D. Misinterpretation of 18 U.S.C. § 1001

The majority paints itself into a solitary corner within

the federal judiciary by adopting a peculiarly narrow and

fact-bound interpretation of 18 U.S.C. § 1001’s materiali-

ty requirement. According to the majority, “It would seem

that a factual inquiry would nearly always be necessary to

determine what makes a difference to the decisionmaking

body.” Majority op. at 6653. Thus, the majority would re-

quire “testimony of department officials in order to deter-

mine whether the block checked on line 303 of the settle-

ment statement would tend to influence the agency’s deci-

sion to insure the loan.” Jd. at 6658.

Every legal principle must, of course, be factually an-

chored to the case where it is applied. But the question

under section 1001 is not whether a particular statement in

a specific case actually influenced (or could have influ-

enced) the agency’s decision, but whether the statement in

question had the “intrinsic capability of influencing or af-

fecting the agency’s or department’s decision.” Valdez, 594

F.2d at 728 (emphasis added). Thus, the Sixth Circuit has

held, “The fact that the misstated amounts are relatively

small when compared with total [sums in question] is not

particularly relevant to the issue of materiality. Instead,

the relevant inquiry is whether the false information is of

the type that is capable of influencing a decision of an _

agency, aS Opposed to an examination of the magni-

811 F.2d 841 (Sth Cir. 1987) (same); United States v. Shriver, 842 F.2d

968 (7th Cir. 1988) (construing 18 U.S.C. § 1014); United States v.

Kalagian, 957 F.2d 527 (8th Cir. 1992) (construing 42 U.S.C. § 408);

United States v. Pruitt, 702 F.2d 152 (8th Cir. 1983) (construing

§ 287); Johnson v. United States, 410 F.2d 38 (8th Cir. 1969) (constru-

ing § 287); United States v. Haddock, 956 F.2d 1534 (10th Cir. 1992)

(construing 18 U.S.C. § 1014).

4la

tude of the falsehood.” Hughes v. United States, 899 F.2d

1495, 1499 (6th Cir. 1990). And the Eleventh Circuit has

framed the question as whether the agency “routinely

utilizes the information” in Carrying Out its function.

United States v. Gafyczk, 847 F.2d 685, 691 (11th Cir.

1988). The Fifth Circuit has noted that “a statement may

be material even though the Government does not actually

rely on it” if “disclosure of the truth could have provoked —

the agency to action.” United States v. McIntosh, 655 F.2d

80, 83 (Sth Cir. 1981); see also United States v. Keefer, 799

F.2d 1115, 1127 (6th Cir. 1986) (“[T]he test for materiality

is not whether the agency actually relied on the false state-

ment, but whether the statement was capable of influenc-

ing, or had a natural tendency to influence, the agency’s

decision.”); United States v. Jones, 464 F.2d 1118, 1123

(8th Cir. 1972) (test is “[t]he potential for an adverse effect

upon the exercise of a government function”). Most

notably, the Supreme Court told us in Kungys that

materiality turns on “whether the misrepresentation or

concealment was predictably capable of affecting, i.e.,

had a natural tendency to affect, the official decision.” 485

U.S. at 771 (emphasis added).

In contrast to this body of authority, the majority

focuses narrowly on the particular circumstances of this

case, noting, for example, that “[s]Jome of the amounts

written on line 303 were trivial.” Majority op. at 6658.

Under the majority’s tight focus, materiality must be

determined form by form, transaction by transaction,

count by count.

This is too fact-specific an inquiry. The proper question

is whether false entries on a key line of a government-

approved loan application have “a natural tendency to af-

fect” the agency’s decision, regardless of the amount in

question. Plainly, the answer is yes. While the majority

opines that “the form and the certification are very poorly

designed” to “ferret out situations where the buyer might

42a

be serving as a stand-in for the seller or another person

and did not intend to keep the house,” Majority op. at

6646, the form serves precisely this purpose. Whether the

amount in question is $31 or $31,000, to make line 303 ac-

curate, Gaudin would have had to strike out the word

“BORROWER,” which follows the boxes marked “TO”

and “FROM,” and write in “SELLER.” The form can be

truthfully signed without such an interlineation only when

there is a bona fide buyer and seller. By engineering a

series of sham transactions, Gaudin was boxed into an un-

palatable choice: He could either sign the form as printed

and thereby tell a lie, or make telltale modifications to the

form that “could have provoked the agency to action.”

McIntosh, 655 F.2d at 83.°

Whether the misstatements were material, then, calls for

a generalized determination about whether claiming a par-

iy will pay or receive a sum (large or small) — when in fact

it won’t—is the type of representation where “a truthful

answer could help the inquiry, or a false response hinder

it.” United States v. Berardi, 629 F.2d 723, 728 (2d Cir.

1980) (noting also that “these effects are weighed in terms

of potentiality rather than probability”). Like relevance

and pertinency, cf. Sinclair v. United States, 279 U.S. 263,

298-99 (1929), this is the sort of preliminary determination

6 The majority finds it “significant that the only possible blocks to

be checked are cash ‘to’ or ‘from’ the ‘borrower.’ ” Majority op. at

6645. I don’t see why. After all, by signing a government form, a party

verifies the truth not merely of the information it writes or types in,

but also of the printed matter the party adopts by placing a check

mark or an amount in a relevant blank. Thus, for example, by filling

in “$2000” on line 24a of Treasury Form i040 (1993), a taxpayer is not

merely verifying that he paid exactly $2000 into an account. He is also

verifying that the account is one he reasonably believes qualifies as an

IRA. Similarly, line 303, in our case, makes a liar of anyone who

swears that any amount is coming to or from him, unless he is in fact

the borrower.

43a

that does not vary significantly with the facts of each in-

dividual transaction and therefore does not require a jury

finding under Winship.

As the Sixth Circuit has noted, “[although the materiali-

ty of a statement rests upon a factual evidentiary showing,

the ultimate finding of materiality turns on an interpreta-

tion of substantive law.” Abadi, 706 F.2d at 180. To make

this determination, the district court must understand the

workings of the federal agency and the role the false state-

ment plays (or could play) in its decisionmaking process.

This is not a pro forma inquiry, to be sure. For example, if

the agency requests information about the borrower’s

ethnic background, the district court would have to con-

sider whether this would be relevant to the agency’s mis-

sion. Where the loan program provides a preference for

certain ethnic or other groups (e.g., Native Americans,

veterans), the misinformation would be material because it

could well influence the agency’s decision. But if the infor-

mation is being collected for statistical purposes or as a

courtesy to another agency (e.g., the Civil Rights Commis-

sion), a court might well conclude that the information is

not material because the misstatement does not affect the

agency’s mission in any meaningful way. In either event,

however, the inquiry calls for the kind of parsing of an

agency’s statutory delegation of authority that is not nor-

mally subject to proof before a jury.

Even if the majority were right that materiality is a ques-

tion of fact, Gaudin’s conviction would nevertheless have

to be affirmed because he never objected to the judge’s

materiality instruction.’ Consequently, we cannot disturb

’ | do not disagree that if there was error, it was harmful. See Ma-

jority op. at 6659-60.

44a

the conviction without finding plain error — something the

majority finds far too readily.

In United States v. Olano, 113 S. Ct. 1770 (1993), the

Court interpreted Fed. R. Crim. P. 52(b) as imposing a

three-prong test. First, there must have been a violation of

a rule that was either not waived or not waivable; second,

the error must have been “plain”; and third, it must have

affected “substantial rights.” Jd. at 1777-78.

Assuming there was error at all here, I agree it was not

waived, but merely “forfeited.” Jd. I also agree that, in

light of our earlier ruling on Valdez, the error was “plain.”

Id. Thus my disagreement with the majority turns on the

third requirement —that “substantial rights” have been af-

fected.

Olano holds that a defendant, in showing an error af-

fected “substantial rights,” generally bears the burden of

establishing that the error affected the outcome of the

case. 113 S. Ct. at 1778. “[F]ederal courts have consistent-

ly interpreted the plain-error doctrine as requiring an ap-

pellate court to find that the claimed error...had [a] pre-

judicial impact on the jury’s deliberations.” Jd. (quoting

United States v. Young, 470 U.S. 1, 17 n.14 (1985) ).

Under Olano, where the error consists of withdrawing

an element from jury deliberation, the defendant has the

burden of proving that the verdict would have been dif-

ferent if the element in question had been submitted to the

jury. To show this, defendant must prove, at the very least,

that a rational jury could have acquitted him by finding a

reasonable doubt as to materiality.* In most cases, that

* Quite possibly, defendant must show more, namely that a rational

jury would have acquitted him based on the missing,element. The dif-

ference between could and would is substantial. To show that a ra-

tional jury could have acquitted, defendant must only show that, if it

had considered all the evidence presented as to materiality, the jury

might rationally have found against the prosecution on that score. To

45a

burden will not be difficult to meet, for defendant need

only show that a rational jury could have come out the

other way. Defendant, however, cannot meet that burden

where the evidence on the issue is so clear-cut that a ra-

tional jury could only have decided the issue in favor of

the prosecution.’

There can be no rational doubt about how a jury would

have come out here, at least as to some of the counts.

Clearest perhaps are counts 44-46 “where the statements

concern appraisals of market value.” Majority op. at

6658-59. No rational jury could have concluded that false

Statements as to market value did not have “a natural

tendency to affect[ ] the official decision” whether to in-

sure a loan. Kungys, 485 U.S. at 771. Equally clear-cut,

even under the majority’s doubtful analysis, are counts

where the amounts entered on line 303 involved thousands

of dollars.'° Finally, under the prevailing interpreta-

tion of section 1001, pursuant to which it doesn’t matter

what dollar amount was entered on line 303, see pp.

6679-82 supra, no rational jury could conclude that a

signed form indicating that the money in question what-

ever its amount) goes to or comes from the borrower

show the jury would have acquitted, defendant has to show that, more

likely than not, the jury would have ruled in his favor. The argument

for the more stringent standard is that it is defendant who must carry

the burden of showing that the error made a difference in his case. |

would adopt the more lenient standard largely out of deference to our

sister circuits which seem to hold that error in these circumstances will

be deemed plain in most cases. See p. 6685 infra.

* | am aware of the jury’s de facto power of nullification. However,

1 don’t believe the defendant may rely on the possibility of such

lawless action in establishing that the error in question affected his

substantial rights.

'0 That would pertain to counts two ($7,022.64), three ($6,860.19),

six ($7,229.90), ten ($7,708.81) and twenty-seven ($3,300.07).

46a

(when in fact it went to or came from Mr. Gaudin) was not

a material misstatement.

The majority avoids a case-specific inquiry into pre-

judice by doing precisely what Olano said we should not

do—creating a per se rule for a vague new category it

describes as “fundamental structural error.”'! Majority

op. at 6661. It’s unclear, however, why the error here is

any more fundamental or structural than that in Olano.

After all, the error here affected only one of several

elements of the offense while the error in Olano (the in-

troduction of two additional persons into the jury room)

affected every single aspect of the jury’s deliberations. One

could say with just as much conviction that what hap-

pened in Olano amounts to “fundamental structural

error.” We undermine Olano severely when we create such

a nebulous exception to the requirement that we weight the

relevant facts and circumstances before invoking the plain

error doctrine.

The majority’s reliance on Sullivan v. Louisiana, 113 S.

Ct. 2078 (1993), is entirely misplaced because Sullivan

deals with harmless error, not plain error. As the majority

recognizes, it is more difficult to find that an error is plain

rather than merely harmful. Majority op. at 6659-60.

''! In rejecting a per se approach, the Supreme Court was no doubt

sensitive to the perverse incentives such a rule would create. Whenever

we reverse for an error not raised below, we tempt defense counsei not

to raise the issue before the district court, hoping to get a reversal on

appeal and a second shot at an acquittal on retrial. A per se approach

exacerbates this problem because it makes reversal on appeal auto-

matic. The incentive to ambush the district judge becomes very great

because defendant will be certain fo get a new trial.

[his may well have happened here. Despite our clearly-established

law on this subject, as announced 15 years ago in Valdez, defense

counsel did not raise the issue in time for the district court to fix the

problem.

47a

Sullivan thus provides no authority for the majority’s

undercutting of Olano.

By effectively holding that Winship error is always

plain, the majority creates a conflict with six other cir-

cuits, which have held that Winship error justifies reversal

in most — but not all—circumstances. See United States v.

Golomb, 811 F.2d 787, 793 (2d Cir. 1987) (“In general,

failure to instruct the jury on an essential element of the

offense constitutes plain error.”) (emphasis added);

United States v. Kerley, 838 F.2d 932, 939 (7th Cir. 1988)

(same); Government of Virgin Islands v. Brown, 685 F.2d

834, 839 (3d Cir. 1982) (“The omission of an essential ele-

ment...ordinarily constitutes reversible error.” (emphasis

added); United States v. Brown, 616 F.2d 844, 846 (Sth

Cir. 1980) (denying that there is a “rule that failure

specifically to instruct on any single essential element of a

crime per se constitutes plain error”); United States v.

Baker, 693 F.2d 183, 187 (D.C. Cir. 1982) (finding that if

there was Winship error, it was not plain); United States v.

Polowichak, 783 F.2d 410, 417 (4th Cir. 1986)

(distinguishing error here from finding of no plain error in

Baker). Once again, the majority’s ruling is out of step

with the collected wisdom of most of the circuits that have

ruled on this issue. !?

'2 The panel may also be stepping on the Supreme Court’s toes in

another way. The Court has suggested Winship error is not harmful

per se: In Carella v. California, 491 U.S. 263 (1989), after finding a

Winship error, the Court remanded for the district court to do a

harmless error analysis—an unnecessary step if the Court believed

Winship error was harmful per se. And since the test for plain error is

tougher than that for harmless error—as the majority itself

acknowledged, Majority op. at 6660—we know an error that’s not

harmful per se a fortiori can’t be plain per se

48a

It is difficult to estimate the full impact of today’s opi-

nion, but it will not be trivial. First, the effect on this

defendant. The majority remands for further proceedings

without explaining what they will be. Presumably the ma-

jority is relying on a small portion of the panel opinion

which concludes that Gaudin may be retried because there

was sufficient evidence of materiality on ali counts. 997

F.2d at 1273.

More serious is the effect on others already convicted

under 18 U.S.C. § 1001 and the four other statutes where

we had deemed materiality a question of law. See pp.

6670-74 supra. Any defendants whose convictions are now

on appeal — whether for violating section 1001 or for per-

jury, false statements in tax returns, false statements to

grand juries or false statements in applications for

payments in federally-approved plans for medical

assistance — will obviously get the benefit of today’s rul-

ing. See Griffith v. Kentucky, 479 U.S. 314, 322 (1987)

(“failure to apply a newly declared constitutional rule to

criminal cases pending on direct review violates basic

norms of constitutional adjudication”); see also Powell v.

Nevada, 62 U.S.L.W. 4203, 4204 (U.S. Mar. 30, 1994).

This is true even if the defendants didn’t object below,

since the majority has deemed this type of error both

harmful and plain.

The same is true of the many defendants whose convic-

tions have become final but who are still incarcerated

under these statutes. Winship error, after all, implicates

fundamental principles of due process and casts doubt on

the fairness of the proceedings. A conviction resting on

such an error was probably “imposed in violation of the

Constitution or laws of the United States,” and thus is

subject to collateral attack under 28 U.S.C. § 2255. As

49a

happened after McNally v. United States, 483 U.S. 350

(1987), a host of convictions will be routinely vacated for

what will come to be known as Gaudin error. See e.g.,

United States v. Mitchell, 867 F.2d 1232 (9th Cir. 1989)

(deeming McNally fully retroactive and applying it on col-

lateral review to vacate final convictions); see also

Chambers v. United States, No. 93-55780, slip op. 4045

(9th Cir. Apr. 25, 1994) (giving habeas petitioner benefit

of retroactive application of United States v. X-Citement

Video, Inc., 982 F.2d 1285 (9th Cir. 1992), which struck

down 18 U.S.C. § 2252 as unconstitutional).

Then there are those defendants who've finished serving

sentences for false statement offenses but remain under a

legal disability. If they’re still on probation, they meet the

in custody requirement and can challenge the conviction

under section 2255. See Jones v. Cunningham, 371 U.S.

236 (1963). Even if they’re no longer in custody for the

false statement offense, they may have other grounds to

attack that conviction: For instance, if a defendant’s

sentence for a subsequent offense is enhanced because he

was previously convicted of a false statement crime, he

may be able to attack the prior conviction once he is in

custody for the subsequent crime. See Maleng v. Cook,

490 U.S. 488, 493 (1989); Feldman v. Perrill, 902 F.2d

1445, 1447-49 (9th Cir. 1990).'3

Finally, there are those defendants who, though no

longer in custody for a false statement or related offense,

may still suffer collateral consequences from their convic-

'* An exception to this rule, recently articulated by the Supreme

Court, is that defendants in federal sentencing proceedings generaly

may not collaterally attack prior state convictions used to enhance

their sentence under the Armed Career Criminal Act, 18 U.S.C.

§ 924(e), unless the challenge is based on the Sixth Amendment rignt

to counsel. See Custis v. United States, 1994 WL. 197074 (U.S. May

23, 1994).

50a

tions—such as not being able to engage in certain

businesses, vote, hold public office or serve as jurors.

Maleng, 490 U.S. at 491-92 (1989). Even these defendants

may find their way to court. They might, for example, file

a writ coram nobis, which “is available to challenge the

validity of a conviction, even though the sentence has been

fully served.” Hirabayashi v. United States, 828 F.2d 591,

604 (9th Cir. 1987).'4 Because this writ is normally used to

correct errors of fact, United States v. Mayer, 235 U.S. 55,

69 (1914), these claimants may well rely on the majority’s

ruling that materiality is an issue of fact that was never

resolved against them by a jury.

Conclusion

The majority opinion wreaks havoc with the administra-

tion of the federal criminal laws in this circuit. It refuses to

be bound by Supreme Court authority and shrugs off the

wisdom of every other federal court of appeals. Its effect

will be felt for many years. Because the reasons advanced

by the majority don’t justify this major disruption, I

respectfully dissent.

'* Though Fed. R. Civ. P. 60(b) abolished this writ in civil cases,

the writ is still available in criminal cases. United States v. Morgan,

346 U.S. 502, 505 n.4 (1954); Hirabayashi, 828 F.2d at 604.

Sla

APPENDIX B

UNITED STATES COURT OF APPEALS

NINTH CIRCUIT

No. 90-30334

UNITED STATES OF AMERICA, PLAINTIFF-APPELLEE

MICHAEL E. GAUDIN, DEFENDANT-APPELLAN1

Argued and Submitted Oct. 7, 1991

Submission Withdrawn Oct. 25, 1991

Resubmitted June 19, 1992

Opinion Filed Feb. 18, 1993

Opinion Withdrawn June 22, 1993

Decided June 22, 1993

Appeal from the United States District Court for the

District of Montana

ORDER

Before: WALLACE, Chief Judge, HUG, and RyMer, Cir-

cuit Judges.

S2a

The opinion filed February 18, 1993, 986 F.2d 1267, is

withdrawn.

Hua, Circuit Judge:

This case involves an alleged scheme in which Gaudin

purchased houses, then entered into sham sales trans-

actions at inflated appraised prices, obtained loans on the

basis of the inflated prices, reacquired the property, rented

it, failed to make the mortgage payments, and applied the

rents to his own use. He was convicted of equity skim-

ming, a violation of 12 U.S.C. § 1709-2, for his failure to

pay the HUD/FHA insured mortgages while retaining the

rents on the secured properties and applying them to his

own use. He was also convicted of 43 counts of violations

of 18 U.S.C. § 1001 for false statements made on the loan

documents submitted.

The issue on the equity skimming charge is whether suf-

ficient evidence was adduced to sustain the conviction.

The principal issue on the false statement counts is

whether the district court erred in instructing the jury that

one of the elements of the crime, the materiality of the

statements, was established as a matter of law. Because we

reverse these 43 counts on this issue, we need not address

the other claimed evidentiary and instructional errors in-

volving those counts. We find sufficient evidence to sus-

tain the equity skimming charge and affirm the conviction

on that count.

l. Facts

Michael Gaudin, a real estate broker and developer, and

two real estate appraisers were charged in a multi-count in-

dictment on October 19, 1989, based on a series of real

estate transactions involving loans insured by the United

53a

States Department of Housing and Urban Development

(“HUD”) through the Federal Housing Administration

(“FHA”). Count | charged Gaudin with equity skimming

in violation of 12 U.S.C. § 1709-2. Counts 2-42 charged

him with making or causing to be made false entries on

HUD settlement statements in violation of 18 U;S.C.

§ 1001. Counts 43-46 charged Gaudin and the appraisers

with making false statement on HUD appraisal forms.

The appraisers were tried separately. Count 18 was

dismissed, and Gaudin was convicted by a jury on all re-

maining counts. Count 43 was dismissed at sentencing for

insufficient evidence. Gaudin’s motion for a new trial was

denied; he was sentenced to 36 months in prison on Count

1, and 10 months in prison on each of the other counts, all

sentences to run concurrently.

The charges arose from a series of transactions from

December 31, 1985 through December 1, 1988. Gaudin

purchased 29 single family homes with loans secured by

deeds of trust and mortgages insured through FHA.

Within one year of the dates of purchase, the loans went

into default.

Gaudin did business as Hallmark Properties, Montana

Regency, Inc., and North West Housing, Inc. He

renovated and resold rental housing. He presented bor-

rowers with complete loan packages to United Western

Mortgage Company, which participated in FHA’s direct

endorsement program. The loan packages contained pur-

chase and sale agreements, appraisal reports, promissory

notes, trust indentures, settlement statements, and letters

from each borrower certifying that no portion of any equi-

ty payment would be refunded. Sixty-two such transac-

tions occurred.

Gaudin, or one of his companies, was the original

owner of the real estate involved in each transaction. The

54a

Government’s case was based on evidence that Gaudin was

in effect selling property to himself at an artificially in-

flated price based on inflated appraisals. These sales and

appraisals were then used to obtain loans that exceeded the

real value of the property. Gaudin solicited friends and

relatives to act as buyers, to whom he paid $1,000 each to

buy a house from him or from one of his companies. In

most of the transactions, the buyers made the necessary

down payments by making an equity transfer of a frac-

tional interest in the buyer’s own home, by deeding the in-

terest to Gaudin, who promptly deeded it back to the

buyer. Several buyers made cash down payments but were

assured that the cash would be returned immediately.

Gaudin paid all costs of loan origination and closing. The

mortgage company funded the loan based upon the

representations made on the settlement sheets, which were

forwarded to FHA/HUD, who insured the loans.

No loan payments were made by the buyers. The equity

payments were refunded, and Gaudin assumed the loans,

took title in a name other than the name under which he

originally owned the property, rented the houses, collected

rent, and subsequently defaulted on 29 loans insured by

HUD/FHA. The total gross sale price of the properties

sold by Gaudin and then assumed back was $2,003,700.

Gaudin netted $982,003, according to the Government,

and retained title to the properties.

At trial, Gaudin claimed that the $1,000 payments were

for the right to repurchase the properties and to assume

the FHA loans. Not all of the loans made were assumed by

Gaudin. When the mortgage company discovered in April

1987, that Gaudin had assumed many of the loans, it ter-

minated all of Gaudin’s financing. Gaudin then defaulted

on the loans. Although he continued to collect between

$6000 and $8000 per month in rent from 29 of the proper-

5Sa

ties until December 31, 1988, he made no payments on the

loans.

The false statements charges in Counts 2-42 were based

upon the representations made on line 303 of the HUD-1

settlement statements prepared in each transaction. Line

303 shows the amount of cash paid “to” or “from” the bor-

rower to close the loan. The Government contended that

the amount represented as being paid “from” the borrower

affected the mortgage company’s determination of the

amount of the loan, and the decision of HUD/FHA to in-

sure the loan. It concealed the true nature of the transac-

tion and Gaudin’s part in it.

Counts 44-46 were based upon evidence that Gaudin

and an appraiser made false statements on HUD Forms

92800, Appraisal Report Forms, by overstating the fair

market value of properties, in violation of 18 U.S.C.

§ 1001.

Il. Equity Skimming

The only error alleged in connection with the equity

skimming count was that there was insufficient evidence to

support the verdict of the jury.' The crime charged is a

violation of 12 U.S.C. § 1709-2 (1988). That statute pro-

vides in pertinent part as follows:

' The appellant also raised two issues on appeal that he contends

relate to ail charges: (1) the failure to give a requested instruction that

good faith reliance on Government regulations constituted a defense,

and (2) that the admission of some expert testimony and the reference

to appellant’s activities as “straw buyer” transactions was error. These

issues actually pertain only to the false statement charges discussed in

part III. There is no evidence that Gaudin relied on Government

regulations in violating the equity skimming statute. The expert opin-

ion testimony and the “straw buyer” reference only concerned the false

statement charges. We do not reach these issues because we reverse the

false statement charges on other grounds.

S6a

Whoever, with intent to defraud, willfully engages

in a pattern or practice of —

(1) purchasing one- to four-family dwellings. . .

which are subject to a loan in default at time of

purchase or in default within one year subse-

quent to the purchase and the loan is secured by a

mortgage or deed of trust insured or held by the

Secretary of Housing and Urban Development or

guaranteed by the Department of Veterans’ Af-

fairs, or the loan is made by the Department of

Veterans’ Affairs,

(2) failing to make payments under the mortgage

or deed of trust as the payments become due,

regardless of whether the purchaser is obligated

on the loan, and

(3) applying or authorizing the application of

rents from such dwellings for his own use,

shall be fined not more than $250,000 or imprisoned

not more than 5 years, or both.

There is evidence that shows that Gaudin collected be-

tween $6,000 and $8,000 per month in rent from April

1987 until December 1988. Although there is evidence he

continued to make payments on some of his mortgages, it

is undisputed he made no payments after April 1987 on the

29 mortgages here in issue The Government presented

evidence that the rent proceeds from those 29 properties

were used to pay for repairs and improvements, taxes, and

mortgage payments on other loans. Some “surplus funds”

were also identified.

Gaudin claims that the Government failed to prove that

he applied the rent receipts to his own use. He asserts that

his financial records show that none of the money was

S7a

spent on anything other than expenses directly related to

the mortgage property. He argues that because his records

show that he used all the rents for upkeep and to make

mortgage payments until his financing was terminated in

April 1987, he is not guilty of equity skimming. Applying

the rent proceeds to payments on other mortgages, to

taxes, and to capital improvements on these and other

houses, while making no mortgage payments from April

1987 to December 1988, is strong evidence of equity skim-

ming. This evidence, viewed in the light most favorable to

the Government, is sufficient to uphold the conviction.

Ill. False Statements

We next turn to the charges involving the false

statements, in violation of 18 U.S.C. § 1001 (1988). 18

U.S.C. § 1001 provides:

Whoever, in any matter within the jurisdiction of

any department or agency of the United States know-

ingly and willfully falsifies, conceals or covers up by

any trick, scheme, or device a material fact, or makes

any false, fictitious or fraudulent statements or

representations, or makes or uses any false writing or

document knowing the same to contain any false, fic-

titious or fraudulent statement or entry, shall be fined

not more than $10,000 or imprisoned not more than

five years, or both.

An element of the false statements statute, 18 U.S.C.

§ 1001, is materiality. United States v. Oren, 893 F.2d

1057, 1063 (9th Cir.1990); United States v. Facchini, 874

F.2d 638, 641 (9th Cir.1989) (en banc). Materiality is

defined as the “propensity to influence agency action.”

United Stats v. Vaughn, 797 F.2d 1485, 1490 (9th

Cir.1986) (citation omitted). The false statement must

have “the intrinsic capability of influencing or affecting

58a

the agency’s or department’s decision.” Facchini, 874 F.2d

at 643 (citation omitted). The materiality of a section 1001

false statements must be determined by the jury. United

States v. Valdez, 594 F.2d 725, 729 (9th Cir.1979).

The district court instructed the jury that the statements

charged in the indictments were material as a matter of

law. This was error.? The defendant, however, did not ob-

ject to the instruction at the time of trial. When a defend-

ant has failed to object to an instruction, we review for

plain error. United States v. Kessi, 868 F.2d 1097, 1102

(9th Cir.1989). “Plain error is highly prejudicial error af-

fecting substantial rights, and is found only in exceptional

circumstances. it must be highly probable that the error

materially affected the verdict,” /d. at 1102-03 (citations

omitted).

Although the plain error requirement has been charac-

terized in some cases as a procedural threshold to deter-

mine reviewability, in actuality it is a substantive standard

to determine the significance of the error. It is an error

that is so significant to the fairness of the trial that we will

reverse, despite the fact that no adequate objection was

made at trial. In United States of America v. Hoac and

Chan, 990 F.2d 1099 (1993), we discussed the relationship

of plain error to harmless error and noted that if an error

is plain error it cannot be harmless. 990 F.2d at 1109. The

plain error rule is the more restrictive standard. This

logically follows from the requirements of orderly trial

procedure. If an error occurs and it is properly objected

to, the trial court has an opportunity to correct it. A

failure to do so is then reviewed on appeal under the

> The Government contends that we should depart from our

holding in Valdez that materality is a question of fact. This panel, of

course, ts bound by the holding of Valdez.

59a

harmless error standard. If no objection is made, and the

trial court has no opportunity to correct the error, more is

required before the error will justify reversal.

The Government argues that even if the failure to sub-

mit the materiality question to the jury was error it was

harmless error, as we held in Valdez, 594 F.2d at 729.

With this prior precedent it is logical to discuss the harm-

fulness of the error first. The plain error determination

overlaps the harmless error determination. The harm-

fulness of an error must necessarily be considered in order

to determine if the error is plain error justifying reversal,

because if an error is harmless, it cannot be plain error.

Hoac and Chan, 990 F.2d at 1109.

In Valdez, in determining harmless error, we viewed the

overwhelming nature of the evidence of whether the

materiality of the statements was so clearly established

that the failure to submit the issue to the jury was harmless

beyond a reasonable doubt. 594 F.2d at 729. Recent

Supreme Court opinions have caused us to reexamine the

basis for this harmless error analysis. In Martinez v. Borg,

937 F.2d 422, 424-25 (9th Cir.1991), we adopted the

analysis set forth by Justice Scalia in his concurring opin-

ion in Carella v. California, 491 U.S. 263, 271, 109 S.Ct.

2419, 2423, 105 L.Ed.2d 218 (1989). As we noted in Mar-

finez, this analysis was later refined in Yates v. Evatt,

U.S. ___, 111 S.Ct. 1884, 114 L.Ed.2d 432 (1991). The

Yates case is, of course, somewhat different from the case

at hand, in that it dealt with the application of a man-

datory rebuttable presumption. However, it is apparent

from that decision that the reviewing court must identify

which facts the jury considered under the instructions of

the court on the pertinent issue in reaching its verdict. The

opinion holds that the reviewing court must look to the

evidence available to the jury “and presumably considered

by the jury in accordance with the instructions” on that

60a

issue to determine if it is so overwhelming as to leave no

reasonable doubt. /d., ___ U.S. at ___, 111 S.Ct. at

1893.3 Under Yates, in determining harmless error, we

may not consider all of the record evidence; we are con-

fined to the evidence that a reasonable juror would have

considered under the instructions that were given in arriv-

ing at a determination that an essential element of the

crime had been proved beyond a reasonable doubt. ____

U.S. at ___, 111 S.Ct. at 1894. Under the guidance of

Yates, we may no longer consider the strength of the

evidence and determine whether it is so clear that the jury

would have found the element to exist had it been properly

instructed, but we must determine whether the jury was

actually able to consider that evidence under the instruc-

tions of the court.

Therefore, it is apparent that when an element of the

crime has been completely removed from the jury’s deter-

mination, there can be no inquiry into what evidence the

jury considered to establish that element, because the jury

3 Justice Souter noted that when the issue involves an unconstitu-

tional presumption that is necessary to establish the element of the

crime, the appellate court must look to the facts considered in deter-

mining whether to apply the presumption. If the presumption is not

itself necessary to establish the element of the crime, but only one of a

variety of facts sufficient to prove the necessary element, then the

other evidence sufficient to prove the element should be identified.

Id.,_____ U.S.. at___n.9, 111 S.Ct. at 1893 n. 9. If the evidence thus

identified under either alternative, and “presumably considered by the

jury in accordance with the instructions,” is “so overwhelming as to

leave it beyond a reasonable doubt that the verdict resting on that

evidence would have been the same in the absence of the

presumption,” then the error could be held to be harmless beyond a

reasonable doubt. /d., __ —U.S. at _ , Ill S.Ct. at

1893-94. In either case, it is necessary to demonstrate that the jury

could have actually considered that evidence in its determination that

the element of the crime was established.

6la

was precluded from considering the element at all. The

fact that evidence existed, which the jury could have con-

sidered on the issue of materiality, had the issue been sub-

mitted to the jury under an appropriate instruction, is of

no moment, because the jury was instructed not to con-

sider the evidence as to materiality. Thus, simply stated

under Yates, when an element of the crime that must be

found by the jury is removed from jury consideration, that

error cannot be harmless.‘

Since the error is not harmless, we must then determine

if it rises to the level of plain error. The Supreme Court

has stated that in order to constitute plain error, the error

must not only affect substantial rights, but also must have

had “an unfair prejudicial impact on the jury’s delibera-

tions.” United States v. Young, 470 U.S. 1, 16-17 n. 14,

105 S.Ct. 1038, 1047 n. 14, 84 L.Ed.2d 1 (1985). In this

case an essential element of the crime was completely

removed from the consideration of the jury and thus the

jury had no opportunity to deliberate on that issue.

The state has the burden of proving every element of a

crime beyond a reasonable doubt. Jn re Winship, 397 U.S.

358, 364, 90 S.Ct. 1068, 1072, 25 L.Ed.2d 368 (1970).

When a trial judge deprives the jury of its fact-finding

duty, this violates the defendant’s due process rights.

Carella, 491 U.S. at 265, 109 S.Ct. at 2420; Sandstrom v.

Montana, 442 U.S. 510, 99 S.Ct. 2450, 61 L.Ed.2d 39

(1979). We found it to be constitutional error when an ele-

ment of the offense charged was omitted from the jury in-

* The Government argues that the jury’s verdict indicated that

Gaudin acted with the intention of influencing the agency and that the

facts necessary to establish intent also necessarily established

materiality. First, we observe that facts bearing on intent would not

necessarily bear on the materiality issue. Even more important, the

jury did not, as required by Yates, consider those facts under an ap-

propriate instruction in determining the element of materiality,

because that issue was removed from the jury’s consideration.

62a

structions in Martinez, 937 F.2d at 423. As in the Martinez

case, the jury in this case was deprived of its fact-finding

duty because the trial judge withdrew the element of

materiality from the jury and stated that it existed as a

matter of law. For the same reasons expressed in Mar-

tinez, this violated the defendant’s due process rights. This

error “seriously affected the fairness” of the proceedings,

see Young, 470 U.S. at 15, 105 S.Ct. at 1046, and con-

stitutes plain error.

IV. Conclusion

Because the element of materiality was removed from

jury consideration for the crimes charged in Counts 2-17,

19-42, and 44-46, the convictions on these counts must be

reversed. Because of the reversal on this ground, we need

not address the other issues raised as to those counts. In

the appellant’s brief on appeal, sufficiency of the evidence

was identified as an issue only in the equity skimming

charge. In the body of the brief, however, some discussion

exists with regard to the sufficiency of the evidence con-

cerning these counts under section 1001. Our review of the

evidence indicates that the evidence was clearly sufficient

for a conviction on these counts, had the jury been proper-

ly instructed on the issue of materiality.

The conviction on Count 1, equity skimming, is AF-

FIRMED. The convictions on Counts 2-17, 19-42, and

44-46 are REVERSED and REMANDED for further pro-

ceedings in accordance with this opinion.

US. GOVERNMENT PRINTING OFFICE 1994— 301. 157/86200

This is a copy of a public record, reproduced as it was published. It is not legal advice, and it may not be the version a court would rely on. Check the official source before you cite it.