21 Cal.App.5th 1205
Cal. Ct. App.2018Background
- Dillard (executive director) and Daniels (grants manager) worked at ACAP, a joint-powers anti-poverty agency that received a $500,000 Assets for Independence (AFI) federal grant administered by HHS.
- AFI grantees must maintain nonfederal "matching" funds in a reserve account and submit a bank letter confirming matching funds before HHS will draw down federal funds; ACAP’s reserve account was at Citibank.
- On June 10, 2010 Daniels emailed a draft letter claiming ACAP had $426,874.44 in nonfederal match funds; a Citibank manager (Rahwanji) signed and sent the letter to HHS, which released federal AFI funds to ACAP.
- Much of the drawn federal AFI money was later used for ACAP payroll and operations; HHS disallowed funds and demanded repayment; ACAP repaid part and faced a remaining federal liability.
- Dillard and Daniels were tried: convicted of theft by false pretenses (count 2) and making a false account of public moneys (count 3); Dillard also convicted for preparing false/ante-dated documents (count 6); several counts were preempted or challenged on other grounds.
- The Court of Appeal reversed convictions on counts 2 and 3 as preempted by federal law, affirmed Dillard’s count 6 conviction, and rejected other defense arguments (conflict of interest, vindictive prosecution, evidentiary rulings).
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether state criminal prosecutions for grantees’ representations to HHS under the AFI Act are preempted by federal law | State may prosecute fraud against federal funds; no congressional intent to bar state enforcement | Federal AFI statutory/regulatory scheme vests HHS with supervisory/sanction authority; state prosecutions would obstruct federal objectives and deter grantees | Preempted: prosecutions based solely on grantee representations to HHS under the AFI Act (counts 2 and 3) reversed |
| Whether defendants forfeited preemption challenge to count 3 by not raising it at trial | People: defendants raised preemption only as to other counts; forfeiture applies | Defendants: preemption is legal and not forfeitable; even if forfeited court should excuse it | Court exercised discretion to excuse any forfeiture and reached preemption on the merits for count 3 |
| Whether nondisclosure of County/AIG insurance letter required dismissal for conflict of interest (motion to dismiss/recuse DA) | nondisclosure did not show a disqualifying conflict or prejudice; DA’s office had no direct pecuniary interest | Defendants: late disclosure prevented timely §1424 recusal motion; insurance claim created financial conflict making fair trial unlikely | Denial affirmed: no substantial evidence of a conflict likely to render trial unfair; no prejudice shown justifying dismissal |
| Whether defendants could present evidence/argument to show vindictive/retributive prosecution or prosecute motive to jury | People: motive evidence irrelevant and inadmissible beyond witness bias; vindictive-prosecution claims are for the court | Defendants: county’s settlement and insurance claim show retaliatory motive and bias; should be presented to jury | Court did not abuse discretion excluding motive evidence from jury and limiting argument; vindictive prosecution claims addressed to court, not jury |
| Sufficiency of evidence for Dillard’s §134 (preparing false or ante-dated documents) conviction | Prosecution: ante-dating, placement in files, timing after leave, and statements about preparing a defense support intent to produce in proceedings authorized by law | Dillard: documents were recreations, not prepared to defraud or for authorized proceedings | Affirmed: substantial evidence supports intent to produce documents in an authorized proceeding and to deceive (count 6) |
Key Cases Cited
- Buckman Co. v. Plaintiffs’ Legal Comm., 531 U.S. 341 (2001) (state-law fraud-on-federal-agency claims preempted where federal scheme empowers agency to police fraud and state suits would disrupt federal objectives)
- Quesada v. Herb Thyme Farms, Inc., 62 Cal.4th 298 (2015) (presumption against preemption applies where states historically regulate the field; state consumer fraud suits can complement federal scheme)
- Commonwealth’s Motion to Appoint Counsel, 790 F.3d 457 (3d Cir. 2015) (state action challenging use of federal grant funds preempted where relationship with federal grantor is inherently federal and federal agency has supervisory authority)
- Wisconsin Dept. of Indus. v. Gould Inc., 475 U.S. 282 (1986) (state laws that function as supplemental sanctions for federally regulated labor relations can conflict with federal regulatory scheme and be preempted)
- Arizona v. United States, 567 U.S. 387 (2012) (field preemption analysis where federal law occupies an area and bars state intrusion)