United States v. Kranovich ( 2005 )

FOR PUBLICATION
UNITED STATES COURT OF APPEALS
FOR THE NINTH CIRCUIT
UNITED STATES OF AMERICA,  No. 03-10226
Plaintiff-Appellee,
v.  D.C. No.
CR-02-00138-ECR
MICHAEL KRANOVICH,
OPINION
Defendant-Appellant.

Appeal from the United States District Court
for the District of Nevada
Edward C. Reed, Jr., District Judge, Presiding
Argued and Submitted
January 16, 2004—San Francisco, California
Filed March 23, 2005
Before: J. Clifford Wallace and M. Margaret McKeown,
Circuit Judges, and Barry Ted Moskowitz, District Judge.*
Opinion by Judge Wallace
*The Honorable Barry Ted Moskowitz, District Judge for the Southern
District of California, sitting by designation.
3553
UNITED STATES v. KRANOVICH 3555
COUNSEL
Fred Atcheson, Reno, Nevada, for the defendant-appellant.
Ronald C. Rachow, Assistant United States Attorney, Reno,
Nevada, for the plaintiff-appellee.
3556 UNITED STATES v. KRANOVICH
OPINION
WALLACE, Circuit Judge:
Former Lander County Sheriff Kranovich appeals from his
judgment of conviction and sentence for theft involving a fed-
erally funded program, in violation of 18 U.S.C. § 666(a)(1),
and theft of government property, in violation of 18 U.S.C.
§ 641. He attacks his section 666 conviction by arguing that
there was insufficient evidence that there was a connection
between the wrongfully expended funds and either the expen-
diture of federal funds or the integrity of federal programs,
and that Lander County received a federal benefit in excess of
$10,000. He challenges his section 641 conviction by con-
tending there was insufficient evidence that the embezzled
funds were property of the United States. The district court
had jurisdiction pursuant to 18 U.S.C. § 3231. We have juris-
diction over this timely appeal pursuant to 18 U.S.C. §§ 1291
and 3742, and we affirm the judgment of conviction.1
I.
While Kranovich was the elected Sheriff of Lander County
(County), Nevada, the Sheriff’s Department entered into a
Federal Equitable Sharing Agreement (Agreement) with the
federal government. The Agreement enrolled the Sheriff’s
Department in a federal equitable sharing program (Program)
— a venture between local law enforcement agencies and the
federal Departments of Justice and Treasury that provided for
the equitable sharing of cash, property, and other forfeited
assets. In order to receive Program funds, the Sheriff’s
Department had to abide by numerous restrictions set forth in
the Agreement, including the following:
1
Kranovich also contests the district court’s application of a sentence
enhancement, pursuant to U.S.S.G. § 3C1.1, for obstruction of justice. We
will address his sentencing challenge in a separate memorandum disposi-
tion.
UNITED STATES v. KRANOVICH 3557
Uses. Any shared asset shall be used for law
enforcement purposes in accordance with the statutes
and guidelines that govern equitable sharing . . . .
Any and all requests for a change in the use of cash,
property, or proceeds . . . must be submitted in writ-
ing to [the relevant agencies of the Departments of
Justice and the Treasury].
....
Internal controls. The parties agree to account sep-
arately for federal equitable sharing funds received
from the Department of Justice and the Department
of the Treasury. Funds from state and local forfei-
tures and other sources must not be deposited or oth-
erwise commingled with equitable sharing funds. . . .
. . . [S]uch accounting will be subject to the standard
accounting requirements and practices employed for
other such public monies as supplemented by
requirements set forth in the current edition of
[guides published by the Departments of Justice and
the Treasury]. . . .
The misuse or misapplication of shared resources or
the supplantation of existing resources with shared
assets is prohibited. Failure to comply with any pro-
vision of this agreement shall subject the recipient
agency to . . . sanctions stipulated in the current [Jus-
tice or Treasury guides] . . . .
Federal Annual Certification Report. The recipient
agency shall submit an Annual Certification Report
to the Department of Justice and the Department of
the Treasury . . . . Receipt of the certification report
is a prerequisite to receiving any equitably shared
cash, property, or proceeds.
3558 UNITED STATES v. KRANOVICH
Audit Report. Audits will be conducted as pro-
vided by [certain federal provisions].
As required by the Agreement, Kranovich filed annual
accountings of these funds with the United States govern-
ment. Lander County Undersheriff Lutzow testified that the
funds were to be used “generally towards narcotics enforce-
ment or prevention [and] could not be used to augment a
county or local budget.” He also testified that the funds were
to be returned to the federal government if they could not be
utilized for appropriate purposes.
From approximately July 2001 to January 2002, Kranovich
used checks requiring dual signatures to withdraw funds from
the Program account. He cashed the checks and kept the funds
in a locked box to which only he had access. Trial testimony
established that during that six-month period, the account was
drawn down from approximately $20,600 to about $5,000. An
audit by the County finance director in January 2002 revealed
there was only about $400 in the cash box and more than
$15,000 was missing from the account.
On July 24, 2002, following an investigation by the Federal
Bureau of Investigation, Kranovich was indicted and charged
with theft concerning programs receiving federal funds, in
violation of 18 U.S.C. § 666, and theft of government prop-
erty, in violation of 18 U.S.C. § 641.
Section 666, however, was applicable only if the Sheriff’s
Department or the County had received, in any one year
period, benefits in excess of $10,000 under a federal program
involving some form of federal assistance. To satisfy this
requirement, the government introduced evidence that during
the year of July of 2001 to July of 2002, the County was
approved for a federal grant of $12,775. This grant was not
connected to the Program. The grant funds were to be used to
reimburse fifty percent of the amount spent by law enforce-
ment officers to purchase bulletproof vests. Kranovich alleges
UNITED STATES v. KRANOVICH 3559
that the grant was conditioned on the availability of funds, but
Patrol Sergeant Quick — the author of the grant application
— testified that the grant amount was guaranteed and could
be spent at any time after the funds became available on June
2, 2002, provided they were spent within four years. Quick
also testified that approximately $1,200 of the total grant
amount was actually claimed and received by the County.
After a jury found Kranovich guilty of both offenses, he
filed a motion for judgment of acquittal pursuant to Federal
Rule of Criminal Procedure 29(c), which the district court
denied. United States v. Kranovich, 244 F. Supp. 2d 1109 (D.
Nev. 2003).
II.
Kranovich argues that a connection between the embezzled
money and either an expenditure of federal funds or the integ-
rity of a federal program is required for a conviction under 18
U.S.C. § 666. We review de novo the construction or interpre-
tation of a statute, United States v. Cabaccang, 332 F.3d 622,
624-25 (9th Cir. 2003) (en banc), as well as questions regard-
ing the constitutionality of a statute. United States v. Bynum,
327 F.3d 986, 990 (9th Cir. 2003).
[1] Section 666(a) provides for the imposition of criminal
penalties against any agent of a state government who embez-
zles property “valued at $5,000 or more” that “is owned by,
or under the care, custody, or control of” that government,
provided that the requirements of section 666(b) are satisfied.
18 U.S.C. § 666(a)(1)(A). Section 666(b) requires that such
government have received, in any one year period, federal
benefits in excess of $10,000. Id. § 666(b). Although the
express language of section 666 does not require any other
connection between the embezzled funds and a federal inter-
est or program, Kranovich contends such a nexus is a consti-
tutionally required element of this offense. He argues that
without a nexus, the “nature of the crime is inherently local
3560 UNITED STATES v. KRANOVICH
and the application of federal jurisdiction violates the spend-
ing clause of the constitution.”
[2] This argument is foreclosed by recent precedent, as
Kranovich properly concedes in his supplemental brief. In
Sabri v. United States, 541 U.S. 600, 124 S. Ct. 1941 (2004),
the Supreme Court rejected a facial challenge to 18 U.S.C.
§ 666, stating:
We can readily dispose of this position that, to qual-
ify as a valid exercise of Article I power, the statute
must require proof of connection with federal money
as an element of the offense. We simply do not pre-
sume the unconstitutionality of federal criminal stat-
utes lacking explicit provision of a jurisdictional
hook, and there is no occasion even to consider the
need for such a requirement where there is no reason
to suspect that enforcement of a criminal statute
would extend beyond a legitimate interest cognizable
under Article I, § 8. . . . It is certainly enough that the
statutes condition the offense on a threshold amount
of federal dollars defining the federal interest, such
as that provided here . . . .
Id. at 1945-46. In United States v. Mirikitani, 380 F.3d 1223,
1225 (9th Cir. 2004), we stated that “the Supreme Court [in
Sabri] not only held that a federal nexus was not an element
of the crime, but it held that no federal nexus must be shown
at all.” We rejected Mirikitani’s claim that the existence of a
nexus was required to be proven to a jury: “Because the gov-
ernment is not required to establish a federal nexus, the dis-
trict court did not err by not submitting to the jury the
question of whether a federal nexus existed.” Id. Sabri and
Mirikitani are controlling here, and we therefore hold the gov-
ernment was not required to establish any connection between
the embezzled funds and a federal interest, apart from the
express requirement in section 666(b) that the County
received federal benefits in excess of $10,000.
UNITED STATES v. KRANOVICH 3561
III.
Thus, we turn to Kranovich’s next section 666 argument
that the government introduced insufficient evidence that the
County received a federal benefit in excess of $10,000. We
review claims of insufficient evidence de novo. United States
v. Odom, 329 F.3d 1032, 1034 (9th Cir. 2003). “Evidence is
sufficient if, viewed in a light most favorable to the prosecu-
tion, any rational trier of fact could have found the essential
elements of the crime beyond a reasonable doubt.” Id.
Section 666(a) makes it a federal offense to embezzle funds
from an organization which, as set forth in section 666(b),
“receives, in any one year period, benefits in excess of
$10,000 under a Federal program involving a grant . . . or
other form of Federal assistance.” 18 U.S.C. § 666(a)-(b). To
satisfy this requirement, the government relied on evidence
that in May of 2002, the County had been approved for, and
therefore “received,” a $12,775 grant to be used to reimburse
officers who purchased bulletproof vests. Sergeant Quick tes-
tified that he submitted the papers necessary for the grant,
received an e-mail response that the County had been
approved for a grant of $12,775, and that this amount was
guaranteed. He also stated that the funds became available
after June 2, 2002 and could be spent at any time within a four
year period, although the County had not yet spent more than
about $1,200.
Kranovich makes two arguments as to why the govern-
ment’s evidence was insufficient. First, he asserts that the
total grant amount was not “received” by the County because
less than $1,300 was actually transferred from the federal
government. He suggests the County did not “receive” the
remaining funds because they were “always in the federal
government’s possession and [were] never placed into a bank
account controlled by Lander County.”
[3] However, there is no reason to distinguish between
access to funds in a County bank account and access to guar-
3562 UNITED STATES v. KRANOVICH
anteed grant funds that are available upon request. As a result
of the grant, the County essentially had access to a $12,775
line of credit. The statute simply requires that the “benefits”
be “received.” In fact, once the grant was awarded, the
County “received” the “benefits” of the grant. At most, the
government was simply holding the funds for the benefit of
the County.
In addition, the Supreme Court has recognized that section
666(b) should be interpreted broadly because its “language
indicates that Congress viewed many federal assistance pro-
grams as providing benefits to participating organizations.
Coupled with the broad substantive prohibitions of subsection
(a), the language of subsection (b) reveals Congress’ expan-
sive, unambiguous intent to ensure the integrity of organiza-
tions participating in federal assistance programs.” Fischer v.
United States, 529 U.S. 667, 678 (2000).
Second, Kranovich asserts that Sergeant Quick’s testimony
that the grant amount was guaranteed conflicts with (1) a gov-
ernment exhibit that indicated the $12,775 amount was based
on an estimation, and (2) a memorandum written by Quick
which stated, “based upon availability of funds, these smaller
jurisdictions will receive the full 50% of requested funds in
approved applications.” He contends that Quick “failed to
provide any explanation or other evidence giving credence to
this unfounded belief” that the funds were guaranteed.
[4] However, “we must respect the exclusive province of
the jury to determine the credibility of witnesses, resolve evi-
dentiary conflicts, and draw reasonable inferences from
proven facts, by assuming that the jury resolved all such mat-
ters in a manner which supports the verdict.” United States v.
Sherwood, 98 F.3d 402, 408 (9th Cir. 1996) (internal quota-
tions and alterations omitted), quoting United States v. Gil-
lock, 886 F.2d 220, 222 (9th Cir. 1989). Viewing this
evidence in the light most favorable to the government, we
conclude that a rational trier of fact could have relied on
UNITED STATES v. KRANOVICH 3563
Quick’s testimony to find beyond a reasonable doubt that the
County received benefits in excess of $10,000. See Odom,
329 F.3d at 1034. We therefore hold the County “received”
the total grant amount when it was guaranteed access upon
request to those funds.
IV.
Kranovich challenges his conviction pursuant to 18 U.S.C.
§ 641 by contending there was insufficient evidence that the
Program funds he embezzled were the property of the United
States. We review de novo whether property is “of the United
States” for purposes of section 641. United States v. Lawson,
925 F.2d 1207, 1209 (9th Cir. 1991).
[5] Pursuant to section 641, the stolen property must be a
“record, voucher, money, or thing of value of the United
States or of any department or agency thereof.” 18 U.S.C.
§ 641 (emphasis added). To satisfy this requirement, the
United States “must have ‘title to, possession of, or control
over’ the funds involved.” United States v. Faust, 850 F.2d
575, 579 (9th Cir. 1988), quoting United States v. Johnson,
596 F.2d 842, 846 (9th Cir. 1979). In United States v. Von
Stephens, 774 F.2d 1411, 1413 (9th Cir. 1985) (per curiam),
we held that the federal government “has sufficient interest in
its funds, even if commingled [with state and county funds],
where it exercises supervision and control over the funds and
their ultimate use.” We concluded that the United States exer-
cised sufficient control over stolen funds for purposes of sec-
tion 641 — despite the fact that only forty-nine percent of the
stolen funds were federal monies — because the federal gov-
ernment required state audits and quarterly reports, conducted
on-site reviews, interviewed recipients of the funds, and
examined bank accounts and employer rolls. Id.; see also
Faust, 850 F.2d at 579 (holding that the federal government
had substantial control over tugboats that were being built
with federal funds where the financing, construction, and
operation of the tugboats was governed by a security agree-
3564 UNITED STATES v. KRANOVICH
ment between the defendant and the federal government);
Johnson, 596 F.2d at 844-46 (holding that the federal govern-
ment “retain[ed] substantial supervision and control over the
funds” distributed to a local agency in light of regulations on,
among other things, maintaining detailed financial records,
filing annual reports, and government-prescribed financial
management systems).
Kranovich contends “there was no federal oversight of the
funds after they were transferred to Lander County.” How-
ever, the Agreement expressly provided that Program assets
must be used “in accordance with [relevant] statutes and
guidelines,” and all requests for changes in use were to be
submitted in writing to the appropriate federal agencies. Fur-
thermore, the Sheriff’s Department was required to keep the
Program funds in a separate account to prevent commingling
with other funds, and this account was “subject to the stan-
dard accounting requirements and practices employed for
other such public monies,” as well as requirements set forth
in guides published by the Departments of Justice and the
Treasury. Additionally, the Sheriff’s Department was required
to submit an Annual Certification Report, and audits were to
be conducted pursuant to certain federal regulations. Failure
to comply with the Agreement would subject the Sheriff’s
Department to sanctions.
[6] Thus, the nature and extent of the federal government’s
control over the Program funds was commensurate with con-
trols we have previously deemed sufficient for section 641.
We therefore hold there was ample evidence for a rational
trier of fact to find beyond a reasonable doubt that the stolen
funds were property of the United States.
V.
We affirm the judgment of conviction. We hold the man-
date, however, pending our filing of a separate memorandum
disposition addressing Kranovich’s challenge to his sentence.
UNITED STATES v. KRANOVICH 3565
CONVICTION AFFIRMED; MANDATE HELD.