A consultant assisting local schools in obtaining federally-distributed funds intended to facilitate Internet connectivity at the schools was charged with defrauding the program, even though the funding applications which she prepared did not violate any of the regulations of the program. The jury rejected this defense and so, on appeal, did the Ninth Circuit. United States v. Green, 592 F.3d 1057 (9th Cir. 2010).
Judy Green, a long-time teacher, retired to form a consulting business to guide local schools in applying for, and obtaining, grants under a Federal Communications Commission program which distributed funds to wire schools for the Internet. The schools were obliged to bear a small portion of the cost themselves and to secure through other means the computers and fax machines to be connected thereby. Green aggressively approached interested contractors to secure their agreement both to absorb the schools’ portion of the cost and to provide “bonus” computers and equipment. Once an application -- which apparently was not required to disclose such side arrangements -- was approved, the projects were put out for bid and the schools were permitted to select the winning, but not necessarily the lowest, bidder. As a result of her energetic efforts, the government paid more than would have been the case if contractors had not bid up their quotes to account for the extras.
Convicted of various conspiracy, fraud, and bid-rigging charges, Green argued on appeal that the government’s failure to prove that her actions were explicitly prohibited meant that no fraud had been proven. The court of appeals was unable to locate any case in which actions not expressly violative of law nonetheless were sufficient to constitute a violation of the fraud statutes. However, drawing upon cases which had rejected the defense that actions in compliance with state law could not form the basis of a federal fraud conviction, the Ninth Circuit held that the government need only prove a scheme to defraud, not that the scheme or its components actually violated any federal regulation or rules.
To be sure, this case did not present the most appealing circumstances for a defense of technical compliance with regulations. With better facts, there may be a more compelling argument than Green could muster in light of her wheeling and dealing and the resulting overcharges to the government.