08-5287-cr

United States Court of Appeals

for the
Second Circuit
UNITED STATES OF AMERICA,

Appellee,

-against-

DANIEL B. KARRON

Defendant-Appellant.

ON APPEAL FROM THE UNITED STATES DISTRICT COURT

FOR THE SOUTHERN DISTRICT OF NEW YORK

BRIEF FOR DEFENDANT-APPELLANT

MINTZ & OPPENHEIM LLP

260 Madison Avenue - 18th Floor
New York, New York 10016
(212) 447-1800

RUBINSTEIN & COROZZO, LLP

260 Madison Avenue, 22nd Floor
New York, New York 10016
(212) 545-8777

- On the Brief - Attorneys for Appellant

Marshall A. Mintz

Laura A. Oppenheim
 TABLE OF CONTENTS

TABLE OF CONTENTS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . i

TABLE OF AUTHORITIES.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . iii

STATEMENT OF SUBJECT MATTER

AND APPELLATE JURISDICTION. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1

STATEMENT OF THE ISSUES. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1

PRELIMINARY STATEMENT AND INTRODUCTION. . . . . . . . . . . . . . . . . . . 1

STATEMENT OF THE FACTS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3

ARGUMENT.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13

POINT I

APPELLANT’S CONVICTION MUST BE REVERSED

BECAUSE THE COURT’S CHARGE TO THE JURY
OMITTED AN ELEMENT OF THE CRIME CHARGED. . . . . . . . . . . . . . . . . 13

A. 18 U.S.C. § 666 and the District Court’s Charge to the Jury. . . . . . . . . . . 15

B. This Court’s Prior Analysis of the Statute. . . . . . . . . . . . . . . . . . . . . . . . . . 16

C. A Historical Analysis Makes Clear That a Conviction for

“Misapplication” of Funds Requires an Intent to Defraud. . . . . . . . . . . . . 18

1. The Enactment of 18 U.S.C. § 666. . . . . . . . . . . . . . . . . . . . . . . . . . . 18

2. The Definition of “Misapply” in Related Statutes. . . . . . . . . . . . . . . 20

3. In Order to Apply the Term Consistently, an Intent to Defraud

Must Be an Element of Misapplication under 18 U.S.C. § 666. . . . . 23

i
D. Appellant Was Prejudiced by the Erroneous Charge Because it
Instructed the Jury to Convict Absent a Finding of Fraudulent Intent.. . . 25

1. The Government Argued That Appellant Acted

With an Intent to Defraud the United States. . . . . . . . . . . . . . . . . . . 26

2. Reversal is Appropriate Because the Charged

Omitted A Defense to an Element of the Crime. . . . . . . . . . . . . . . . 29

POINT II

THE STATUTE IS VOID-FOR-VAGUENESS.. . . . . . . . . . . . . . . . . . . . . . . . . . 32

CONCLUSION. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37

ii
 TABLE OF AUTHORITIES

Cases

Bailey v. United States, 516 U.S. 137 (1995). . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23

Brown v. Gardner, 513 U.S. 115 (1994).. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23

City of Chicago v. Morales, 527 U.S. 41 (1999). . . . . . . . . . . . . . . . . . . . . . . . . . 36

Crane v. Kentucky, 476 U.S. 683(1986). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25, 26

Dowling v. United States, 473 U.S. 207 (1985). . . . . . . . . . . . . . . . . . . . . . . . . . . 23

Hoffman Estates v. Flipside, Hoffman Estates, Inc.,

455 U.S. 489 (1982). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34

In re Winship, 397 U.S. 358 (1970). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13

Jones v. United States, 526 U.S. 227 (1999).. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13

Kolender v. Lawson, 461 U.S. 352 (1983). . . . . . . . . . . . . . . . . . . . . . . . . 32-33, 36

McBoyle v. United States, 283 U.S. 25 (1931). . . . . . . . . . . . . . . . . . . . . . . . . . . . 32

United Sav. Assn. of Tex. v. Timbers of Inwood Forest Associates, Ltd,

484 U.S. 365 (1988). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23

United States v. Abcasis, 45 F.3d 39 (2d Cir. 1995).. . . . . . . . . . . . . . . . . . . . . . . 26

United States v. Aina-Marshall, 336 F.3d 167 (2d Cir. 2003). . . . . . . . . . . . . . . . 14

United States v. Alferahin, 433 F.3d 1148 (9th Cir. 2006). . . . . . . . . . . . . . . . 30, 31

United States v. Amuso, 21 F.3d 1251 (2d Cir. 1994) . . . . . . . . . . . . . . . . . . . . . 14

United States v. Almonte, 956 F.2d 27 (2d Cir. 1992). . . . . . . . . . . . . . . . . . . . . . 26

iii
United States v. Castigila, 894 F.2d 533 (2d Cir. 1990) . . . . . . . . . . . . . . . . . 21-22

United States v. Cicco, 938 F.2d 441 (3d Cir. 1991). . . . . . . . . . . . . . . . . . . . . . 20

United States v. Clark. 765 F.2d 297 (2d Cir. 1985). . . . . . . . . . . . . . . . . . . . . . . 22

United States v. Coonan, 938 F.2d 1553 (2d Cir. 1991). . . . . . . . . . . . . . . . . . . . 33

United States v. Del Toro, 513 F.2d 656 (2d Cir. 1975).. . . . . . . . . . . . . . . . . . . . 20

United States v. Docherty, 468 F.2d 989 (2d Cir. 1972). . . . . . . . . . . . . . . . . . . . 22

United States v. Ford, 435 F.3d 204 (2d Cir. 2006). . . . . . . . . . . . . . . . . . . . . . . 14

United States v. Fortunato, 402 F2d 79 (2d Cir. 1968). . . . . . . . . . . . . . . . . . 17, 21

United States v. Garcia, 751 F.2d 1033 (9th Cir. 1985). . . . . . . . . . . . . . . . . . . . . 22

United States v. Gaudin, 515 U.S. 506 (1995). . . . . . . . . . . . . . . . . . . . . . . . . 13-14

United States v. Goldstein, 442 F.3d 777(2d Cir. 2006).. . . . . . . . . . . . . . . . . . . . 14

United States v. Hinton, 683 F.2d 195 (7th Cir. 1982). . . . . . . . . . . . . . . . . . . . . . 20

United States v. Jackson, 968 F.2d 158, 161 (2d Cir. 1992). . . . . . . . . . . . . . . . . 33

United States v. Karron, 2009 WL 54886 (Jan. 8, 2009 S.D.N.Y.). . . . . . . . . . . . 35

United States v. McElroy, 910 F.2d 1016 (2d Cir. 1990). . . . . . . . . . . 17, 21, 33-34

United States v. Mosley, 659 F.2d 812 (7th Cir. 1981). . . . . . . . . . . . . . . . . . . . . . 20

United States v. Nadi, 996 F.2d 548 (2d Cir. 1993). . . . . . . . . . . . . . . . . . . . . 33, 34

United States v. Quattrone, 441 F.3d 153 (2d Cir. 2006).. . . . . . . . . . . . . . . . . . . 14

iv
United States v. Quinones, 511 F.3d 289 (2d Cir. 2007). . . . . . . . . . . . . . . . . . . . 14

United States v. Ruiz, 59 F.3d 1151 (8th Cir. 1995) . . . . . . . . . . . . . . . . . . . . . 29, 30

United States v. Scarpa, 913 F.2d 993 (2d Cir. 1990). . . . . . . . . . . . . . . . . . . . . . 14

United States v. Tamarago, 637 F.2d 346 (5th Cir. 1981).. . . . . . . . . . . . . . . . . . . 22

United States v. Thompson, 484 F.3d 877 (7th Cir. 2007).. . . . . . . . . . . . . . . . . . . 24

United States v. Urlacher, 979 F.2d 935 (2d Cir. 1992).. . . . . . . . . . 16-18 , 20, 21

United States v. Whittaker, 999 F.2d 38 (2d Cir. 1993). . . . . . . . . . . . . . . . . . . . . 33

Federal Statutes

18 U.S.C. § 201. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20

18 U.S.C. § 641. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20

18 U.S.C. § 656. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20-22

18 U.S.C. § 665. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35

18 U.S.C. § 666. . . . . . . . . . . . . . . . . . . . . . . . . . . . 13, 15, 18, 20, 23, 24-25, 34-35

18 U.S.C. §3231. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1

18 U.S.C. §3742(a). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1

28 U.S.C. §1291 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1

v
 Other Authorities

Pub.L. 98-473, Title II, § 1104(a), Oct. 12, 1984, 98 Stat. 2143. . . . . . . . . . . . . . 19

Pub.L. 99-646, § 59(a), Nov. 10, 1986, 100 Stat. 3612. . . . . . . . . . . . . . . . . . . . . 19

United States Attorney’s Manual, Criminal Resource Manual. . . . . . . . . . . . 35-36

vi
 STATEMENT OF SUBJECT MATTER
AND APPELLATE JURISDICTION

The District Court’s jurisdiction is based on 18 U.S.C. §3231. The bases of

this Court’s jurisdiction are 28 U.S.C. §1291 and 18 U.S.C. §3742(a). This appeal

is from an order of Judgment Including Sentence entered October 25, 2008, by the

Honorable Robert P. Patterson, Jr., United States District Judge for the Eastern

District of New York, following Daniel B. Karron’s conviction after trial on the

only count of Indictment S3 07 Cr. 541 (RPP) and subsequent sentencing.

A timely Notice of Appeal was filed on October 29, 2008. J.A. 92.1

STATEMENT OF THE ISSUES

1. Whether an intent to defraud is an element of the offense of

misapplication of funds under 18 U.S.C. § 666(a)(1)(A); and

2. Whether 18 U.S.C. § 666 is unconstitutionally vague.

PRELIMINARY STATEMENT AND INTRODUCTION

This Brief on Appeal is submitted on behalf of Defendant-Appellant Daniel

B. Karron (“Appellant” or “Dr. Karron”),2 the President and Chief Technical

1
“J.A.” denotes the Joint Appendix filed herewith.
2
Throughout the trial, Dr. Karron was referred to as “he.” However,
Appellant is a post-operative transsexual who underwent gender
reassignment surgery in 2003 and as such, is referred to as female
throughout this brief.
1
Officer of Computer Aided Surgery, Inc. (“CASI”), who was convicted after a jury

trial on the only count of Indictment S2 07 Cr. 541 (RPP), which charged her with

knowingly misapplying more than $5,000 of funds under the custody and control

of CASI, which received more than $10,000 in federal funds during a one-year

period from the Advanced Technology Program administered by the National

Institute of Standards and Technology, in violation of 18 U.S.C. § 666.

As set forth below, an intent to defraud is an essential element of the crime

of misapplication of funds under 18 U.S.C. § 666, and the failure of the District

Court erred in failing to include that element in its charge to the jury. Further, it is

submitted that 18 U.S.C. § 666 is unconstitutionally vague in that it does not offer

a definition of ‘misapplication’ and neither courts nor prosecutors are clear as to

its meaning.

As such, it is respectfully submitted that the judgment of conviction must be

vacated, and the matter remanded for a new trial.

2
 STATEMENT OF THE FACTS

Indictment S2 Cr. 541 (RPP) was filed on or about May 21, 2008, and

charged Daniel B. Karron, the President and Chief Technical Officer of Computer

Aided Surgery, Inc. (“CASI”), with intentionally misapplying more than $5,000 of

funds under the care of CASI, in violation of Title 18 U.S.C. § 666. J.A. 19. Trial

began on June 2, 2008, and ended on June 11, 2008. The jury returned a verdict of

guilty that same afternoon.

The National Institute for Standards of Technology (“NIST”) is a non-

regulatory agency within the United States Department of Commerce. NIST’s

mission is to promote United States innovation and industrial competitiveness by

advancing measurement science, standards, and technology in ways that enhance

economic security and improve quality of life. From 2000 to 2007, NIST managed

the Advanced Technology Program (“ATP”), which funded high risk scientific

research projects. PSR at ¶ 6.

On July 6, 2001, Dr. Karron applied for, and in October 2001 received, a

two million dollar federal financial assistance award from ATP. Prior to receiving

the grant, Dr. Karron was provided with an ATP proposal kit; Tr. 85; and

participated in writing the grant proposal with Lee Gurfein using the ATP

3
proposal kit.3 Tr. 627. That proposal kit specifies that a single for profit company

such as CASI could apply for ATP funding “to play only for direct costs of

approved Research and Development activities” and that “single company

recipients are responsible for funding all of their overhead/indirect costs.” GX 1

at p. 4.

Dr. Karron was also supplied with a copy of the General Terms and

Conditions of the ATP program; GX 2; which specified that recipients of the grant

“must adhere to the budget” as approved by NIST; Tr. 87, 265; and that a fixed

dollar amount would be allocated to each category in the approved budget, with

each category further broken down in a detailed budget narrative that spells out

exactly how the money is to be spent. GX 10B. NIST did recognize that changes

to the approved budget may become necessary and directed that prior written

approval would be required before grant funds could be used in a way that

diverged from the approved budget. GX 2 at p. 3, GX 4 at p. 7, Tr. 87, 94, 108-09,

265, 267. Further, ATP-specific rules would trump the less restrictive regulations

contained in the Code of Federal Regulations. GX 2 at p. 3 (“In addition to the

requirements specified in 15 C.F.R. 14.25, Recipients shall obtain prior written

3
Mr. Gurfein was hired to help draft the proposal and then to act as
CASI’s business manager should the ATP grant be awarded. T. 623-
24.
4
approval from the NIST Grants Office for . . . [t]he transfer of funds among direct

cost categories . . . if the transfer exceeds 10% of the approved annual budget. . . .

Recipients are not authorized to create new budget categories without prior

approval.”); Tr. 232 , 299.

CASI submitted a revised application on August 6, 2001, which stated that

CASI’s facilities and equipment consisted of fully networked office space with a

website that had been running for five years. GX 10 at p. 14. That application

also contained a proposed federally-financed budget with fixed dollar amounts for

NIST-approved categories and no indirect costs. GX 10 at p. 3, GX 10B.

The ATP award to CASI dated October 4, 2001; GX 1 at p. 11-12; was

accompanied by Special Award Conditions; GX 13; and the approved budget for

the research to be conducted. GX 14. In addition to the general terms and

Conditions specified in 15 C.F.R. 14.25, the Special Award Conditions provided

that for the first year of the award the NIST share of direct costs for the proposed

research as set forth in the grant was $800,000, and recipient’s contribution would

be 3.61% ($30,000).

According to Bettijoyce Lide, the ATP program manager responsible for the

grant that had been awarded to CASI, Dr. Karron was provided with the ATP

Proposal Preparation Kit; GX 1, Tr. 85; the Financial Assistance Standard Terms

5
and Conditions; GX 3, Tr. 86-88; and the General Terms and Conditions of the

ATP Grants. GX 2, Tr. 85-86. Dr. Karron accepted the Financial Assistance

Award to CASI on October 5, 2001, and agreed to comply with the Award’s

provisions, including the Financial Assistance Standard Terms and Conditions;

GX 3; Special Award Conditions; GX 13, Tr. 117; the Line Item Budget; GX 14,

15 C.F.R. Part 14, 48 C.F.R. Part 31; the General Terms and Conditions of the

ATP program; GX 2; and Program Specific Audit Guidelines for ATP Cooperative

Agreements with Single Companies. In addition, Dr. Karron was notified of the

requirement of prior written approval of budget or personnel changes and the

prohibition against using grant funds for indirect expenses, such as rent and

utilities, or ‘sunk costs.’ Tr. 88-89, 108-09, 263.4

It became apparent soon after the grant was approved that Dr. Karron was a

poor administrator. Upon receiving the initial ATP disbursement of $150,000, Dr.

Karron directed Gurfein to transfer $75,000 into Karron’s personal account as

either an advance on salary or as a loan. Tr. 637-38. On October 11, 2001, Dr.

Karron rescinded Gurfein’s check writing authority – although no reason was

4
‘Sunk costs’ would be any costs incurred prior to the start of the ATP
grant period. Tr. 88, 298. Because ATP budget submissions are
prospective and relate to projected costs for upcoming years, pre-
grant costs are necessarily excluded and cannot be paid for with ATP
funds. GX 14, GX 22 at p. 3, Tr. 298.
6
given. Tr. 639. On November 8, 2001, after authorizing the $75,000 loan, Dr.

Karron and Gurfein attended a “kick-off” meeting atwhich Hope Snowden, the

NIST coordinator, showed them a slide presentation. Tr. 629-32. At that meeting,

CASI was informed that “spending outside the budget could be allowed, but it

would have to be approved.” Tr. 633.

Subsequently, Dr. Karron sought to have NIST approve a number of

expenses, including “indirect costs,” that were outside CASI’s original budget.

Ordinarily, NIST would not pay for indirect costs such as rent, utilities and general

administrative costs; Tr. 88, 122-23, 256-57; but CASI operated out of Dr.

Karron’s apartment, which required her to convert it into a computer lab. Tr. 676,

680-81. As such, Karron and Gurfein repeatedly contacted Snowden and her

supervisor seeking NIST’s approval to pay for CASI’s rent – in large part because

the ATP grant was CASI’s sole project. Tr. 258-259, 636. While Snowden

remained consistent in her denial of those requests; Dr. Karron continued to pay

CASI’s rent and requesting that NIST approve the expenditure.5 Tr. 303-04.

Notably, at no time did Dr. Karron try and conceal that she was making rent

payments out of CASI’s account, and went so far as to include a notation in the

5
In total, approximately $60,000 in rent payments by CASI to
Appellant were disallowed by the U.S. Department of Commerce’s
audit.
7
memo line of the checks specifying what the monies were for. Tr. 748, 755-57. In

addition, Dr. Karron sought to amend CASI’s budget several times without

success. Tr. 970-72.

Throughout the course of the grant period (which was suspended in June

2003) Dr. Karron retained almost exclusive control over CASI’s books; Tr. 976;

although various CASI employees – including Frank Spring, a bookkeeper hired

in July 2002, and Bob Benedict, hired to replace Gurfein as business manager in

December 2002 – questioned her categorization of expenses and spending in

general. Tr. 840-41, 976-77. Dr. Karron was generally dismissive in response to

their concerns, expressing her sincere belief that she could work out the

differences with NIST and that her focus should be on the “science.” Tr. 843

In addition to the rent and utilities dispute, CASI did not adhere to its

budget in a number of other ways: including spending $201,443 for equipment

above the budgeted amount of $119,000 and $24,011 for supplies beyond the

budgeted amount of $ 11,000. GX 62, Appendix 1, p.1. At the same time, CASI

vastly underspend in other categories. For example, although ‘personnel’ was

budgeted at $700,000, CASI claimed only $569,911 in costs. While fringe

benefits were budgeted at $238,000, CASI claimed only $158,576 in those

benefits. Finally, of the $360,000 budgeted for subcontracts, CASI spent only

8
$163,653. Id.

Sometime in the spring of 2003, the United States Department of

Commerce, Office of the Inspector General, initiated a audit of CASI. On July 23,

2003, the OIG issued a “limited scope audit report” which determined that CASI

“had not contributed any of its required $54,084 cost share and had drawn down

$205,126 in excess of the federal share of ATP project costs.” Id. at p.1.

Ultimately, a final audit report was issued finding that CASI had improperly

claimed $547,426 in award costs during the 21-month project period. Id. at p. 4.

At trial, the defense vigorously challenged that report during cross-

examination of Belinda Riley, the auditor. For example, under the terms of the

budget approved by NIST, Dr. Karron was entitled to a salary of $175,000 per

annum. While Riley claimed Karron had been paid in excess of $200,000, when

confronted copies of Dr. Karron’s salary checks for the first year – which totaled

$35,000 – and that fact that fringe benefits were separately computed, Riley was

unable to defend her audit numbers. Tr. 801-807.

During their summation, that government began by arguing to the jury that

[f]or a year and a half, Daniel B. Karron, the defendant, cheated the government

for over half a million dollars. He cheated a program that supported him and his

company, ATP, the Advanced Technology Program that supports high risk

9
scientific research. . . . He treated the grant like his own personal piggy bank.” Tr.

1258-59, J.A. 79-80. Turning to the central issue in dispute, the government

observed that “[i]t all comes down to this: Whether the defendant intentionally

misapplied $5,000 or more of funds under CASI’s control to pay for unauthorized

expenses.” Tr. 1261; J.A. 82. After discussing the other elements of the offense,

the government noted that it could

stop right here and meet the $5,000 threshold required by

statute, but we didn’t stop there because the crime
defendant committed got worse, much worse. Once the
defendant decided to cheat, he decided to go all out.
After all, why limit yourself to rent. Utilities are sort of
like rent, right. You can’t work or live in a place without
electricity or air conditioning, right. So let’s use grant
money to pay for that too. And that’s exactly what he
did, over $16,000 in utilities in one year alone. But wait.
Why limit to represent [sic] and utilities? After all, you
can’t live or work in a place that’s too messy right, so
let’s hire a cleaning lady and to do some dusting and
wiping and have taxpayers pay for that too. And that’s
exactly what he did, cleaning over $5,000 in year one.
Why stop there? After all, you can’t work if you’re
hungry, right. So, let’s throw in means for good
measure, and have Uncle Sam pay for that too. Close to
$2,000 in year one alone.

Tr. 1267-68; J.A. 88-89. In arguing how those expenditures came about, the

government told the jury that the defendant had taken signing authority away from

Gurfein “because [the] defendant was already planning to use money for his own

10
benefit. One week into the program, and the defendant was already thinking

ahead.” Tr. 1271; J.A. 92.

Finally, the government summed up it’s position, stating that “this isn’t a

case about a misunderstanding. This isn’t a case about someone getting caught up

in some compact grant rules and forgot to dot the I’s or cross the T’s. This is a

simple case about the defendant, a Ph.D. scientist, wilfully cheating the

government with his eyes wide open.” Tr. 1274; J.A. 95. (Emphasis added).

In direct response to those allegations, defense counsel argued to the jury

that all of the expenditures were made with a sincere belief that they benefitted

CASI, explaining that the government had not proved that “anything was unrelated

to the grant except for speculation and smiles[.]” Tr. 1281; J.A. 101. Rather, the

defense argued, “[h]e didn’t sell anything that he bought so that he could stick

money in his pocket. He had no intention of doing anything wrong.” Tr. 1288;

J.A. 109.

In support of that theory, defense counsel explained that “[w]e are talking

about Dr. Karron, a man who goes to a meeting, an ATP meeting where he is

eventually going to get a grant, and he stands up and says is there anybody here

that can help me? Because I am bad with finances and I don’t know how to do

this stuff.” Tr. 1289; J.A. 110. Counsel also pointed out that

11
 [e]very check [the jury] saw had a memo on it. You
heard Dr. Karron wouldn’t sign a check unless he had
backup to it, there was an invoice. All of that was in the
computer. Is this a guy looking to do something wrong?
. . . This man hid nothing. How do you steal when you
don’t hide anything and you make a note of everything
you do, and you never ask anybody else to do anything
wrong or hide anything because it’s all out there?

Tr. 1290-91; J.A. 111-12.

Relevant to the issue raised in this appeal, with respect to the level of intent

required to sustain a conviction under the statute, the District Court instructed the

jury that, “[t]o intentionally misapply money means to use money under the

control of CASI knowing that such use is unauthorized or unjustifiable or

wrongful. Intentional misapplication includes the wrongful use of money for a

purpose the defendant knew was unauthorized, even if such use benefitted CASI in

some way.” Tr. 1351; J.A. 172. Dr. Karron objected to the inclusion of that

language, arguing that a criminal intent to defraud should be required under the

language of the statute. Tr. 1199-1201; J.A. 29-31.

On June 11, 2008, the jury returned a verdict of guilty as to the sole count of

the Indictment. A timely notice of appeal was filed and this appeal follows.

12
 ARGUMENT

POINT I

APPELLANT’S CONVICTION MUST BE REVERSED

BECAUSE THE COURT’S CHARGE TO THE JURY
OMITTED AN ELEMENT OF THE CRIME CHARGED

As set forth below, it is submitted that a conviction for misapplication of

funds under 18 U.S.C. § 666(a)(1)(A) requires that the defendant act with an intent

to defraud the United States. Because the District Court’s charge to the jury

omitted that element, it is submitted that the charge was erroneous. Further,

because the defense was precluded from arguing that Dr. Karron did not act with

any fraudulent intent, it is submitted that she was prejudiced by the erroneous

instruction.

It is indisputable that Due Process “protects the accused against conviction

except upon proof beyond a reasonable doubt of every fact necessary to constitute

the crime with which he is charged.” In re Winship, 397 U.S. 358, 364 (1970)

(emphasis added). Equally clear, as the Supreme court has repeatedly held, is the

constitutional mandate that the jury, and not the Court, is the ultimate arbiter of

whether the government has met its burden of proof beyond a reasonable doubt.

Jones v. United States, 526 U.S. 227, 232 (1999) (“elements must be charged in

the indictment, submitted to a jury, and proven by the Government beyond a

13
reasonable doubt”); United States v. Gaudin, 515 U.S. 506, 522-523 (1995)

(“[t]he Constitution gives a criminal defendant the right to have a jury determine,

beyond a reasonable doubt, his guilt of every element of the crime with which he

is charged”).

This Court has held that “[t]o secure reversal based on a flawed jury

instruction, a defendant must demonstrate both error and ensuing prejudice.”

United States v. Quinones, 511 F.3d 289, 313-314 (2d Cir. 2007); see also United

States v. Aina-Marshall, 336 F.3d 167, 170 (2d Cir. 2003); United States v.

Amuso, 21 F.3d 1251, 1260-61 (2d Cir. 1994) (concluding that harmless error in

jury instruction did not warrant reversal). While the Court reviews a claim of error

in jury instructions de novo, see United States v. Quattrone, 441 F.3d 153, 177 (2d

Cir. 2006), reversal is appropriate when the charge, viewed as a whole, “either

failed to inform the jury adequately of the law or misled the jury about the correct

legal rule,” United States v. Ford, 435 F.3d 204, 209-10 (2d Cir. 2006); see United

States v. Goldstein, 442 F.3d 777, 781 (2d Cir. 2006); United States v. Scarpa, 913

F.2d 993, 1018 (2d Cir. 1990) (“Often isolated statements taken from the charge,

seemingly prejudicial on their face, are not so when viewed in the context of the

entire record of the trial.” (internal quotation marks omitted)).

14
A. 18 U.S.C. § 666 and the District Court’s Charge to the Jury

18 U.S.C. § 666. Theft or bribery concerning programs receiving Federal

funds, provides, in relevant part that

(a) Whoever, if the circumstance described in subsection

(b) of this section exists--

(1) being an agent of an organization, or of a State,

local, or Indian tribal government, or any agency
thereof--

(A) embezzles, steals, obtains by fraud, or

otherwise without authority knowingly
converts to the use of any person other than
the rightful owner or intentionally
misapplies, property that--

(i) is valued at $5,000 or more, and

(ii) is owned by, or is under the care,

custody, or control of such
organization, government, or agency;
or

***

shall be fined under this title, imprisoned not more than

10 years, or both.

(b) The circumstance referred to in subsection (a) of this

section is that the organization, government, or agency
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.

15
Id. (Emphasis added).

At trial, the Court instructed the jury as to the meaning of the term

“misapply,” by explaining that:

[t]he third element the government must prove beyond a

reasonable doubt is that the defendant without authority
intentionally misapplied money. To intentionally
misapply money means to use money under the control
of CASI knowing that such use is unauthorized or
unjustifiable or wrongful. Intentional misapplication
includes the wrongful use of money for a purpose the
defendant knew was unauthorized, even if such use
benefitted CASI in some way.

***

As I said, the government must prove beyond a

reasonable doubt that the defendant acted intentionally in
misapplying grant money. To find that the defendant
acted intentionally, you must be satisfied beyond a
reasonable doubt that the defendant acted deliberately
and purposefully. That is, the defendant’s
misapplication must have been the product of the
defendant’s conscious objective to spend the money for
an unauthorized purpose, rather than the product of a
mistake or accident or some other innocent reason.

Tr. 1351-52. (Emphasis added).

B. This Court’s Prior Analysis of the Statute

In United States v. Urlacher, 979 F.2d 935 (2d Cir. 1992), the defendant,

who was Police Chief of the Rochester Police Department, was arrested following

16
an investigation that showed that he diverted more than $300,000 from the

Rochester Police Department, and the engaged in a course of conduct to conceal

the misappropriation. Urlacher was subsequently convicted of three counts of

misapplying and embezzling federal funds, in violation of 18 U.S.C. §

666(a)(1)(A) and one count of conspiracy. On appeal, Urlacher argued, in relevant

part, that § 666 exempts from criminal liability misappropriation of funds if used

for legitimate purposes and that the term “intentionally misapply” was

unconstitutionally vague.

In rejecting those arguments, this Court held that, as used in 18 U.S.C. §

666(a)(1)(A), “[i]ntentional misapplication, in order to avoid redundancy, must

mean intentional misapplication for otherwise legitimate purposes; if it were for

illegitimate purposes, it would be covered by the prohibitions against

embezzlement, stealing, obtaining by fraud, or conversion.” Id. at 938. Further, in

dicta, the Court stated that “[t]he term ‘intentionally misapply,’ as it is used in §

666, is not unconstitutionally vague,” id. at 39, because this Court had previously

upheld the constitutionality of the term ‘misapplied’ in United States v. Fortunato,

402 F2d 79 (2d Cir. 1968) and United States v. McElroy, 910 F.2d 1016 (2d Cir.

17
1990).6

As such, in affirming the conviction, this Court noted that “Urlacher spent

police funds for unauthorized purposes; he failed to prove that these funds were

spent for legitimate purposes.” However, the Court then went one step further and

noted that “the jury found that he intended to defraud the city.” United States v.

Urlacher, 979 F.2d at 939.

C. A Historical Analysis Makes Clear That a Conviction for

“Misapplication” of Funds Requires an Intent to Defraud

As set forth below, it is submitted that an examination of the legislative

intent in enacting 18 U.S.C. § 666 and the way that the term “misapply” has been

defined by the Courts in other statues makes clear that an intent to defraud the

United States is an essential element of the offense, and that this Court’s decision

in Urlacher cannot stand.

1. The Enactment of 18 U.S.C. § 666

Title 18 U.S.C. § 666 was added in 1984 as part of the 1985 continuing

appropriations for the Comprehensive Crime Control Act of 1984. As initially

6
That statement is logically flawed, because, as set forth at pp. 20-22,
the cases relied upon by the Court in explaining why the term
“misapplied” had already been defined for purposes of 18 U.S.C. §
666 held that an intent to defraud was required to support a
conviction for misapplication of funds.
18
enacted, the statute read, in relevant part, that

(a) Whoever, being an agent of an organization, or of a

State or local government agency, that receives benefits
in excess of $10,000 in any one year period pursuant to a
Federal program involving a grant, a contract, a subsidy,
a loan, a guarantee, insurance, or another form of Federal
assistance, embezzles, steals, purloins, willfully
misapplies, obtains by fraud, or otherwise knowingly
without authority converts to his own use or to the use of
another, property having a value of $5,000 or more
owned by or under the care, custody, or control of such
organization or State or local government agency, shall
be imprisoned for not more than ten years and fined not
more than $100,000 or an amount equal to twice that
which was obtained in violation of this subsection,
whichever is greater, or both so imprisoned and fined.

Pub.L. 98-473, Title II, § 1104(a), Oct. 12, 1984, 98 Stat. 2143. (Emphasis

added).

However, that statute was later amended to its current form, which

addresses one who “embezzles, steals, obtains by fraud, or otherwise without

authority knowingly converts to the use of any person other than the rightful

owner or intentionally misapplies” property within reach of the statute. Pub.L.

99-646, § 59(a), Nov. 10, 1986, 100 Stat. 3612. (Emphasis added).

In enacting that section, the Congressional committee explained that it was

trying “to protect the integrity of the vast sums of money distributed through

Federal programs from theft, fraud, and undue influence by bribery.” Id.

19
Specifically, Congress intended to close the loopholes left by 18 U.S.C. § 641 and

18 U.S.C. § 201, which prohibit theft of federal government property and the

bribing of federal public officials and the Senate Report notes that the statute is

intended to cover three cases: United States v. Hinton, 683 F.2d 195 (7th Cir.

1982), United States v. Del Toro, 513 F.2d 656 (2d Cir. 1975), and United States

v. Mosley, 659 F.2d 812 (7th Cir. 1981). Notably, each of those cases involved

non-federal employees who corruptly administered federal funds.

In addition, § 666 was intended, “in part, to augment 18 U.S.C. § 665" and

“[t]he goal was to protect federal funds by authorizing federal prosecution of thefts

and embezzlement from programs receiving substantial federal support even if the

property involved no longer belonged to the federal government.” United States v.

Cicco, 938 F.2d 441, 445 (3d Cir. 1991) (noting that “the legislative history

reveals only one other purpose for § 666: Congress intended to enlarge and clarify

the class of persons subject to the federal bribery laws.”)

2. The Definition of the “Misapply” in Related Statutes

While 18 U.S.C. § 666 does not offer a definition of the term,

“misapplication” is defined within the context of other federal criminal statutes.

Relevant to this case, in United States v. Urlacher, supra, in explaining that there

could be no vagueness challenge to the term “misapplies” as used in § 666, this

20
Court explained that it had already upheld the use of the term in cases applying 18

U.S.C. § 656. However, those cases actually use a different, and much narrower,

definition of the term.

18 U.S.C. § 656 provides, in part, that an officer of a federally-insured bank

who “embezzles, abstracts, purloins or willfully misapplies any of the money,

funds or credits” of the bank is guilty of a crime. In United States v. Fortunato,

402 F.2d 79 (2d Cir. 1968), referred to in Urlacher, the defendant was charged

with six counts of willful misapplication of bank funds, in violation of 18 U.S.C. §

656. In affirming the conviction, this Court noted that “[t]he key issue counsel put

to the jury in their summations was whether the government had proved

[defendant’s] intent to injure or defraud the bank, which the judge correctly

charged was a basic element of the crime.” Fortunato, 402 F.2d at 80. The other

case cited by the Urlacher Court to show that “misapply” was a defined term was

United States v. McElroy, 910 F.2d 1016 (2d Cir. 1990). In that case, the Court

again rejected a challenge to the definition of “misapply,” referring to its decision

in Fortunato.

As such, this Court has made clear that, although not explicit within the text

of the statute, the intent to defraud, injure or deceive the bank is an essential

element of a § 656 “criminal misapplication” prosecution. See United States v.

21
Castigila, 894 F.2d 533, 537-38 (2d Cir. 1990)(“an intent to injure, defraud, or

deceive the bank [is] the requisite mens rea under Section 656.”); see also United

States v. Clark. 765 F.2d 297, 303 (2d Cir. 1985) (“it is evident that to constitute

‘misapplication’ within the meaning of [§ 656] the bank officer’s conduct must

involve some risk of pecuniary loss to the bank”); United States v. Docherty, 468

F.2d 989 (2d Cir. 1972)

The term “willfully misapplies” also appears in 18 U.S.C. § 665, and the

Fifth Circuit has stated plainly that, in a prosecution under that statute, “to

misapply money or property means a willful conversion or taking of such money

or property to one’s use and benefit or the use and benefit for another, with intent

to defraud.” United States v. Tamarago, 637 F.2d 346, 350 (5th Cir. 1981) (noting

that the Court had earlier defined the term “misapply” under 18 U.S.C. § 656 so it

was not “unconstitutionally vague” when used in 18 U.S.C. § 665).

Further, in United States v. Garcia, 751 F.2d 1033 (9th Cir. 1985), the Ninth

Circuit affirmed the District Court’s dismissal of an indictment under 18 U.S.C. §

665 because the government conceded that it could not prove that the defendant

intended to defraud the United States government. In so doing, the Court noted

that the District Court had determined that § 665 required a specific intent to

defraud by referring bank to the bank fraud statute, 18 U.S.C. § 656.

22
 3. In Order to Apply the Term Consistently, an Intent to Defraud
Must Be an Element of Misapplication under 18 U.S.C. § 666

In analyzing a term used in a statute, courts shall “consider not only the bare

meaning of the word but also its placement and purpose in the statutory scheme.

‘[T]he meaning of statutory language, plain or not, depends on context.’” Bailey

v. United States, 516 U.S. 137, 145 (1995), citing Brown v. Gardner, 513 U.S.

115, 118 (1994). In addition, courts “must pay close heed to the language,

legislative history, and purpose in order strictly to determine the scope” of the

prohibited conduct.” Dowling v. United States, 473 U.S. 207, 213 (1985).

As such, it is submitted that the inclusion of an element of an intent to

defraud in all of the closely related statutes – the same statutes relied upon by this

Court and others to explain why “misapply” was a clearly defined term – compels

this Court to hold that an intent to defraud is an essential element of

misapplication under 18 U.S.C. § 666 as well. See Bailey v. United States, 516

U.S. 137, 146 (1995) (using a firearm should not have a different meaning in §

924(c)(1) than it does in § 924(d)) (citation omitted); See also United Sav. Assn. of

Tex. v. Timbers of Inwood Forest Associates, Ltd., 484 U.S. 365, 371 (1988) (“A

provision that may seem ambiguous in isolation is often clarified by the remainder

of the statutory scheme”)

23
 An example of the result from such a consistent application of the term is

found in United States v. Thompson, 484 F.3d 877 (7th Cir. 2007). There, Seventh

Circuit analyzed the conviction of a state employee for (1) intentional

misapplication in violation of 18 U.S.C. § 666 and (2) honest services fraud in

violation of 18 U.S.C. §§ 1341, 1346; based upon the allegation that she engaged

in bid rigging. While not directly on point factually, the Court’s reasoning in

reversing her convictions is instructive. In Thompson, the government argued that

Thompson’s actions of steering a bid to a particular contractor, arguably in

violation of state procurement rules, constituted “intentional misapplication” of

state funds. Id. at 880-881. However, neither Thompson nor any other state

employee was accused of taking a bribe or receiving a kickback. Id. at 881.

Ultimately, the Court reasoned that the statute’s failure to define “misapply”

rendered it too “open-ended” and ambiguous to enforce in that case. Id. at 884.

Rather, the Court chose to limit the reach of § 666 “to theft, extortion, bribery, and

similar corrupt acts.” Id at 881. As Court explained, “[a] violation of regulations

and perhaps of some statutes has occurred, but is the error a crime? As we read §

666, the answer is no unless the public employee is on the take or the applicant is

a relative (for indirect benefits are another form of payoff).” Id.

Therefore, based on the foregoing, when viewed in light of the specified

24
intent of Congress in enacting 18 U.S.C. § 666: to increase the reach of other theft

and bribery statutes – all of which included some element of fraud or theft – and

coupled with this Court’s definition of the term “misapplied” in the bank fraud

statutes, it is clear that misapplication under 18 U.S.C. § 666 requires an intent to

injure or deceive the government. As such, the District Court’s charge to the jury

was erroneous because it omitted an essential element of the crime charged.

D. Appellant Was Prejudiced by the Erroneous Charge Because it

Instructed the Jury to Convict Absent a Finding of Fraudulent Intent

As set forth above, the intent to defraud is an essential element of the crime

of misapplication, to be found by a jury beyond a reasonable doubt. In the instant

case, by failing to instruct the jury that the government was required to prove that

Appellant acted with the any intent to defraud the United States, Appellant was

denied the right to present a defense in violation of the Fifth and Sixth

Amendments.

It is well-settled that the right to present a defense is a core guarantee of the

Fifth and Sixth Amendments. As the Supreme Court has stated:

[w]hether rooted direct in the Due Process Clause of the

Fourteenth Amendment, or in the Compulsory Clause of
the Sixth Amendment, the Constitution guarantees
criminal defendants a ‘meaningful opportunity to present
a complete defense.’

25
Crane v. Kentucky, 476 U.S. 683, 690 (1986). See also, United States v. Almonte,

956 F.2d 27, 30 (2d Cir. 1992) (per curiam) (“The [D]ue [P]rocess [C]lause of the

Fifth Amendment and the compulsory process clause of the Sixth Amendment

guarantee each criminal defendant the right to present a defense”). Specifically

relevant to this case, courts have construed “a meaningful opportunity to present a

complete defense” to include the right to a jury instruction which reflects the

defense theory. United States v. Abcasis, 45 F.3d 39, 42-43 (2d Cir. 1995) (“the

district court’s failure to instruct the jury on entrapment by estoppel deprived the

[defendant] of ‘a meaningful opportunity to present a complete defense’”), quoting

Crane v. Kentucky, 476 U.S. 683 (1986).

1. The Government Argued That Appellant Acted

with an Intent to Defraud the United States

The prejudicial impact of the court’s failure to charge “intent to defraud”

and the limitations that failure placed on Appellant’s right to present a defense is

illustrated by the parties summations, which made the question of whether

Appellant possessed the requisite criminal intent to misapply the ATP funds a core

issue of the trial. Although Appellant was charged with intentionally misapplying

federal funds – and the Court’s jury instruction reflected as much – the

government actually argued during its summation that Appellant converted federal

26
funds for her own personal benefit. Tr. 1267, 1271-1274; J.A. 88, 92-95. In other

words, the government alleged that Appellant intended to defraud the government

by “cheating” and stealing the money for her own use.

During its summation, when addressing the elements of the offense, the

government argued that it

could stop right here and meet the $5,000 threshold

required by the statute, but we didn’t stop there because
the crime the defendant committed was much worse.
Once the defendant decided to cheat, he decided to go all
out. After all, why limit yourself to rent. Utilities are
sort of like rent, right. You can’t work or live in a place
without electricity or air conditioning, right. So let’s use
grant money to pay for that too. And that is exactly what
he did, over $16,000 in utilities in year one alone. But
wait. Why limit to represent [sic] and utilities? After all,
you can’t live or work in a place that’s too messy, right,
so let’s hire a cleaning lady to do so dusting and wiping
and have taxpayers pay for that too. And that’s exactly
what he did, cleaning over $5,000 in year one. Why stop
there? After all, you can’t work if you’re hungry right.
So let’s throw in meals for good measure, and have
Uncle Sam pay for that too.

Tr. 1268; J.A. 89.

In addition, the government alleged that Appellant had actually planned to

steal the grant money from the very start, arguing that “[o]ne week into the

program, and the defendant was already thinking ahead.” Tr. 1271; J.A. 92.

Finally, the government reinforced its view of the offense conduct, explaining that

27
 this isn’t a case about misunderstanding. This isn’t a
case about someone getting caught up in some compact
grant rules and forgot to dot the I’s or cross the T.’s.
This is a simple case about the defendant, a PH.D
scientist, willfully cheating the government with [her]
eyes wide open.

Tr. 1274; J.A. 95.

In response to the government’s summation, Appellant argued that she

“spent money with the intent that the ATP project that [she] was working on

would succeed and [she] would be successful; Tr. 1280, J.A. 101; and, in direct

response to the government’s claims of conversion, that the monies were spent for

the benefit of CASI and the ATP grant. Tr. 1280-82, J.A. 101-03. Specifically,

Appellant argued that the GPS system was purchased for trips to Washington, DC

as related to the grant; Tr. 1280, J.A. 101; that the computers and projectors were

directly related to the grant and the work done to the apartment was for CASI’s

benefit (and lowered the value of Appellant’s apartment); Tr. 1288-89, J.A. 109-

10; and, that Appellant originally believed that the rent payments were allowable

because the ATP grant was the only project CASI was performing. Tr. 1310, J.A.

131.

However, the defense simply could not effectively rebut the government’s

28
arguments regarding her intent to defraud the United States because the Court’s

charge would negate any such efforts. To that end, the Court would later instruct

the jury, with respect to the third element of the offense, that “[t]o intentionally

misapply money means to use money under the control of CASI knowing that such

use is unauthorized or unjustifiable or wrongful. Intentional misapplication

includes the wrongful use of money for a purpose the defendant knew was

unauthorized, even if such use benefitted CASI in some way.” Tr. 1351; J.A. 172

(Emphasis added).

As such, Appellant was foreclosed from arguing that the expenditures

highlighted by the government as proof of her intent to defraud were expenditures

made for the legitimate benefit of CASI and the grant CASI was performing and

that she was not acting with any intent to defraud. Moreover, even if the jury

accepted the defense theory, they would have been obligated to convict.

2. Reversal Is Appropriate Because the Charge

Omitted A Defense to an Element of the Crime

In United States v. Ruiz, 59 F.3d 1151 (8th Cir. 1995), the Eight Circuit

addressed the issue of whether the trial court’s failure to charge a mistake of fact

defense in a drug prosecution was reversible error. In determining that it was, the

Court focused, in part, on whether the trial court’s failure to deliver the requested

29
charge “deal[t] with some point in the trial so ‘vital’ that the failure to give the

requested charge seriously impaired the defendant’s ability to defend.” 59 F.3d at

1145. There, the defendant testified that she engaged in the unlawful conduct

because she believed that a co-conspirator was a government informant who she

was helping to assist the government and that her conduct could help a relative

resolve separate federal charges. Id. at 1153.

The Ruiz Court found that the failure to charge did impair the defense

because the jury was “allowed to reach a verdict without the ability to acquit Ruiz,

even if they believed her testimony, because she admitted to willfully participating

in the drug deal” and the pattern jury instruction delivered by the court “did not

focus on the contention that the criminal conduct was negated by the defendant’s

honest but mistaken belief” that “the government had authorized the drug

transaction.” Id. at 1154-55.

Similarly, in United States v. Alferahin, 433 F.3d 1148 (9th Cir. 2006), the

Ninth Circuit reversed the defendant’s conviction for knowingly procuring

naturalization contrary to law, upon its finding that the failure to charge the

element of materiality was plain error. In Alferahin, the charges arose out of the

defendant’s failure to disclose a prior marriage in his application for naturalization

based upon his second marriage to an American citizen. Id. at 1152. The jury

30
instructions drafted by the trial court did not include a materiality element.

However, during closing arguments both the prosecution and defense argued the

significance of the omitted information. Id. In response, the court raised, sua

sponte, the issue of whether he should include materiality of the statement as an

element of 18 U.S.C. § 1425(a). Defense counsel opposed inclusion of a

materiality element.

The Ninth Circuit explained why the failure to charge this particular

element substantially affected the defendant’s rights, noting that

[u]nquestionably, a materiality instruction would have

buttressed the defense strategy of downplaying the
importance of Alferahin’s misrepresentations.
Obviously, if the district court had directed the jury to
consider the materiality of Alferahin’s
misrepresentations and explained the meaning of
‘materiality’ in the context of a denaturalization
proceeding, the defense would have had more traction.
Indeed, the defense’s approach to the case was quixotic;
without the materiality instruction, the jury properly
would have disregarded Alferahin’s immateriality
argument if it had followed the instructions submitted by
the district court.

Id. at 1558. (emphasis added).

Here, Appellant was foreclosed from arguing that she did not defraud the

government – as the government repeatedly claimed during summation as proof of

her intent to intentionally misapply federal funds – because the jury charge did not

31
permit her to argue that the funds were spent legitimately. And to the extent that

she did so – the jury was instructed by the court to disregard her defense because

“intentional misapplication includes the wrongful use of money for a purpose the

defendant knew was unauthorized, even if such use benefitted CASI in some way.

Tr. 1351; J.A. 172.

Therefore, based upon the foregoing, it is clear that the court’s failure to

charge an element of the offense – the intent to defraud the government – and

simultaneous instruction to the jury that even if it found the “misapplied” monies

were spent for CASI’s benefit a conviction was still appropriate, operated to deny

Appellant her right to present a defense as guaranteed by the Fifth and Sixth

Amendments.

POINT II

THE STATUTE IS VOID-FOR-VAGUENESS

As the Supreme Court teaches, even if it is unlikely that a person planning

to violate a law will search out its text before acting, “fair warning should be given

to the world in language that the common world will understand, of what the law

intends to do if a certain line is passed.” McBoyle v. United States, 283 U.S. 25,

27 (1931) (Holmes, J.). In that regard, “[a]s generally stated, the

void-for-vagueness doctrine requires that a penal statute define the criminal

32
offense with sufficient definiteness that ordinary people can understand what

conduct is prohibited and in a manner that does not encourage arbitrary and

discriminatory enforcement.” Kolender v. Lawson, 461 U.S. 352, 357 (1983).

This Court has repeatedly held that when the interpretation of a statute does

not implicate First Amendment rights, it is assessed for vagueness only “as

applied,” i.e., “in light of the specific facts of the case at hand and not with regard

to the statute's facial validity.” United States v. Nadi, 996 F.2d 548, 550 (2d Cir.

1993). “[O]ne whose conduct is clearly proscribed by the statute cannot

successfully challenge it for vagueness.” Id.; United States v. Whittaker, 999 F.2d

38, 42 (2d Cir. 1993) (“Other than in the First Amendment context, vagueness

challenges also must be examined in light of the facts of the case, on an as-applied

basis.”) (citation and internal quotation marks omitted); United States v. Jackson,

968 F.2d 158, 161 (2d Cir. 1992) (“Vagueness challenges to statutes that do not

involve First Amendment interests are examined in light of the facts of the case at

hand.”); United States v. Coonan, 938 F.2d 1553, 1562 (2d Cir. 1991) (“In the

absence of first amendment considerations, vagueness challenges must be

evaluated based on the particular application of the statute and not on the ground

that the statute may conceivably be applied unconstitutionally to others in

situations not before the Court.”) (citation, internal quotation marks, and brackets

33
omitted); United States v. McElroy, 910 F.2d 1016, 1021 (2d Cir. 1990)

(“Vagueness challenges outside the context of the First Amendment are to be

examined in light of the facts of the case, on an as-applied basis.”).

As this Court held in United States v. Nadi, 996 F.2d 548, 550 (2d Cir.

1993): “[w]hen the challenge is vagueness ‘as-applied’, there is a two-part test: a

court must first determine whether the statute gives the person of ordinary

intelligence a reasonable opportunity to know what is prohibited and then consider

whether the law provides explicit standards for those who apply it.” (internal

citations and quotation marks omitted).

As set forth above at pp. 16-25, the definition that has been afforded to the

term misapply when analyzing 18 U.S.C. § 666 is different than the definition of

that same term when used in other closely related statutes. As such, it is submitted

that reasonable people would differ as to their understanding of what the term

prohibits. While such ambiguity might be permissible if the government sought

only civil remedies – such as return of the grant monies – more specificity is

required where a statute provides for criminal penalties. See Hoffman Estates v.

Flipside, Hoffman Estates, Inc., 455 U.S. 489, 498 (1982) (“The degree of

vagueness that the Constitution tolerates ... depends in part on the nature of the

enactment.... Thus, the Court has ... expressed greater tolerance of enactments with

34
civil rather than criminal penalties because the consequences of imprecision are

less severe....”).

It is also clear that the statute does not provide explicit standards for those

who apply it. That failure is illustrated by the District Court’s opinion denying Dr.

Karron’s application to remain free on bail pending her appeal. In that opinion,

the District Court stated that “based on the charge, the jury had to find that

Defendant acted with intent to, and did, defraud the government of its right to

have its grant funds used for the research and development purposes for which

they were intended, the equivalent of a violation of 18 U.S.C. § 656.” United

States v. Karron, 2009 WL 54886 at *2 (Jan. 8, 2009 S.D.N.Y.).

But that statement is absolutely untrue. As set forth at pp. 20-22, 18 U.S.C.

§ 656 has been interpreted to include an element of an intend to defraud.

However, under this Court’s opinion in Urlacher, and reflected in the charge

given to the jury in this case, there is no such requirement under § 666. As such, it

is submitted that the District Court, even as late as the post-trial motions, was still

operating without a clear understanding of the elements of the statute.

But it is not only the courts that lack a clear understanding of the elements

of the offense. The Department of Justice also seems confused as to what is

required to bring a prosecution under the statute, as the United States Attorney’s

35
Manual explains that “[i]ntentional misapplication . . . is not materially different

from the offense of willful misapplication found in 18 U.S.C. § 665" and goes on

to instruct that:

[t]o prove a willful misapplication violation of 18 U.S.C.

§ 666(a)(1)(A) the United States must establish the
general elements and the following specific elements:

1. that the defendant, with the intent to defraud,

willfully converted or took for his/her own use or
benefit or the use or benefit of another, property;
and

2. that property was owned by or under the care,

custody, or control of an organization or state or
local government agency protected by the statute.

See United States Attorney’s Manual, Criminal Resource Manual at 1009.7

As such, it is submitted that because of the lack of a consistent definition

creates a situation where neither the prosecutor nor the courts are clear as to what

conduct is proscribed, and the standard for its application is unconstitutionally

vague. See City of Chicago v. Morales, 527 U.S. 41, 56 (1999) (“A statute may

also be unconstitutionally vague if it “authorize [s] and even encourage[s]

arbitrary and discriminatory enforcement.”); see also Kolender, 461 U.S. at 357.

7
A copy can be found at
http://www.usdoj.gov/usao/eousa/foia_reading_room/usam/title9/crm01009.htm
36
 CONCLUSION

For all the reasons set forth above, it is respectfully submitted that the Court

should vacate the judgement of the District Court and remand the matter for a new

trial, and for any further relief as the Court deems just and proper.

Dated: March 23, 2009

New York, New York

Respectfully submitted,

Marshall A. Mintz, Esq.

MINTZ & OPPENHEIM LLP

260 Madison Avenue - 18th Floor
New York, New York 10016
(212) 447-1800

RUBINSTEIN & COROZZO, LLP

260 Madison Avenue, 22nd Floor
New York, New York 10016
(212) 545-8777

Attorneys for Appellant

Daniel B. Karron

-On the brief-

Marshall A. Mintz

Laura A. Oppenheim

37
UNITED STATES COURT OF APPEALS
FOR THE SECOND CIRCUIT

UNITED STATES,

Plaintiff/Appellant, 08-5287-cr

v.

KARRON,

Defendant/Appellee.

STATEMENT PURSUANT TO FRAP RULE 32 (a) (7)

The undersigned hereby certifies that this Brief, exclusive of the table of
contents and table of authorities, uses a proportional typeface and is 8, 211 words.

Dated: March 23, 2009

New York, New York

___________________________
MARSHALL A. MINTZ, ESQ.

38
UNITED STATES COURT OF APPEALS
FOR THE SECOND CIRCUIT

UNITED STATES,

Plaintiff/Appellant, 08-5287-cr

v.

KARRON

Defendant/Appellee.

Marshall A. Mintz, Esq., an attorney duly admitted to practice law before

the Courts of the State of New York, located at Mintz & Oppenheim LLP, 260
Madison Avenue - 18th Floor, New York, New York, affirms as follows:

On this day I served true and accurate copies of the accompanying Brief and
Appendix by First Class United States mail to the parties listed below:

Steve Kwok
Assistant United States Attorney
One St. Andrew’s Plaza
New York, New York 10007

Dated: March 23, 2009

New York, New York

___________________________
MARSHALL A. MINTZ, ESQ.

39
UNITED STATES COURT OF APPEALS
FOR THE SECOND CIRCUIT

UNITED STATES,

Plaintiff/Appellant, 08-5287-cr

v.

KARRON,

Defendant/Appellee.

The undersigned hereby certifies that the PDF copy of the Brief filed
with the Court was scanned for viruses using Symantec AntiVirus, verison
9.0.0.338 and emailed to criminalcases@ca2.uscourts.gov>.

Dated: March 23, 2009

New York, New York

___________________________
MARSHALL A. MINTZ, ESQ.

40