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Conversion in Connection With Programs Receiving Federal Funds

The law stipulates that it is illegal for an agent of an organization or of a state to “knowingly convert to the use of any person other than the rightful owner or intentionally misapply property that is valued at $ 5,000 or more and that is owned by, or is under the care, custody, or control of such organization, government, or agency[i].”

Thus, any agent of a local government organization who embezzles, steals, obtains by fraud or otherwise without authority knowingly converts property valued at $ 5,000 or more, which is under the government’s ownership or control may be prosecuted for violation of 18 U.S.C.S. § 666(a)(1)(A)[ii].

18 U.S.C.S. § 666 applies to an organization, government, or agency that receives, in any one year period, benefits in excess of $ 10,000 under a Federal program involving a “grant, contract, subsidy, loan, guarantee, insurance, or other form of Federal assistance[iii].”

18 U.S.C.S. § 666(b) does not require the government to prove that federal funds were directly involved in a bribery transaction or that the federal monies funded the corrupt transaction[iv].  Also, the section does not specifically require that the payor or the payee of the bribe value the transaction at $ 5,000.  If there are a series of conversions as part of a single scheme with malafides to misappropriate property valued at $ 5,000 or more, “the government may aggregate the value of the property stolen in order to reach the $ 5,000 minimum required for prosecution[v].”  To decide whether a transaction involving intangibles has a value of $ 5,000 or more, courts generally employ traditional valuation methods[vi].  In order to determine the jurisdictional amount under 18 USCS § 666, proof should be shown that the federal financial assistance to the county was at all pertinent times of excess of $ 10,000 and the fact that federal assistance was earmarked for any of projects at issue is immaterial[vii].

Courts have held that government loans may constitute “benefits” under 18 USCS § 666 for purposes of meeting the jurisdictional requirement of $ 10,000, since “common sense suggests that benefit from program which involves loan would be loan itself, and further, statute equates “benefits” with “Federal assistance”, and loans are common vehicle for distributing such assistance.”  The inquiry is not whether there is quid pro quo, but rather, whether funds disbursed can be considered “Federal assistance” within the meaning of the statute[viii].  Further, 18 U.S.C.S. § 666 requires an organization to receive $ 10,000 in Federal benefits within a 12 month period[ix].

The scope of the section is quite wide.  Courts have also construed that the plain meaning of 18 USCS § 666(a)(1)(B) suggests that “anything of value” includes transactions involving intangible items such as conjugal visits which an inmate was willing to pay for[x].

[i] 18 U.S.C.A. § 666(a)(1)(a)

[ii] United States v. Sanderson, 966 F.2d 184 (6th Cir. Tenn. 1992)

[iii] 18 U.S.C.S. § 666(b)

[iv] United States v. Westmoreland, 841 F.2d 572 (5th Cir. Miss. 1988)

[v] Id.

[vi] United States v. Marmolejo, 89 F.3d 1185, 1191 (5th Cir. Tex. 1996)

[vii] United States v. Coyne, 4 F.3d 100 (2d Cir. N.Y. 1993)

[viii] United States v. Rooney, 986 F.2d 31 (2d Cir. N.Y. 1993)

[ix] Id.

[x] United States v. Marmolejo, 89 F.3d 1185 (5th Cir. Tex. 1996)

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