3:22-cr-00282
M.D. Tenn.Jul 25, 2023Background
- Defendant Cade Cothren (and co-defendant Glen Casada) indicted alleging a scheme involving Phoenix Solutions, Company 1, and Company 2 to provide constituent mailers; indictment charges include conspiracy, 18 U.S.C. § 666 (program theft/bribery), honest-services wire fraud (18 U.S.C. §§ 1343, 1346), fictitious-name use, money-laundering and related counts.
- Government alleges payments totaling $51,947 were made from Tennessee House members’ Postage and Printing Allowances to the three entities and that ownership/roles were concealed to obtain those payments.
- The Tennessee Postage and Printing Allowance is a $3,000 annual district allowance per House member, administered under House Administrative Policies and Procedures; Guidelines permit use of private-sector vendors and do not require vendor-ownership disclosure.
- Cothren’s motion to dismiss (the document summarized) argues the indictment fails as a matter of law: § 666 jurisdictional defects, failure to allege loss or contemplated loss, absence of bribery/quid pro quo for honest-services fraud, and that all derivative counts (conspiracy, money laundering, fictitious-name) fail if the core charges fail.
- Key factual predicates emphasized by defense: (1) no separate "Mailer Program" exists; (2) allowance funds are district/member property once allocated; (3) services were allegedly performed and paid (no allegation of nondelivery or subpar work); and (4) Guidelines permit private vendors and do not require disclosure of ownership or conflicts.
Issues
| Issue | Gov't Argument | Cothren's Argument | Held (in document) |
|---|---|---|---|
| Whether § 666 jurisdiction exists because the House allowance involves federal funds/benefits | Counts rely on § 666 because Tennessee receives federal benefits > $10,000 and the allowance is characterized as a federal "Mailer Program" benefit | The allowance is a state/legislative district/local member allocation (no federal program), no federal interest or conditions attach; § 666 therefore lacks jurisdiction | Motion argues dismissal for lack of § 666 jurisdiction; memorandum contains no court ruling (motion pending) |
| Whether § 666 transactional/$5,000 element applies given § 666(c) exception for bona fide compensation | Gov't treats the aggregate payments as implicated transactions exceeding $5,000 | Payments were bona fide compensation/expenses in ordinary course for mailer services and thus fall within § 666(c) exception; even aggregated, jurisdictional hurdle not met | Motion argues dismissal under § 666(c); no court decision in document |
| Whether program-theft wire/mail fraud requires actual or contemplated loss (vs. a right-to-control theory) | Gov't alleges concealment of ownership deprived state of information and thus funds | Defense: Supreme Court’s Ciminelli and other precedent reject right-to-control as property; indictment contains no allegation of actual or contemplated monetary/property loss—victims received the mailers | Motion seeks dismissal for failure to allege loss/contemplated loss; no court ruling in document |
| Whether honest-services wire fraud (§§ 1343, 1346) is supported (material misrepresentation, public-official status, quid pro quo/official act) | Gov't alleges scheme deprived Tennessee of honest services via bribery/kickbacks and material misrepresentations to secure vendor approval and member use | Defense: (a) statements/omissions not pleaded as material to any decision-maker, (b) member activities were private/business not official acts, (c) no quid pro quo alleged, (d) Skilling/McDonnell/Ciminelli limit scope; statute vague as applied | Motion argues Counts 5–10 must be dismissed; memorandum contains no court ruling |
| Whether the conspiracy, fictitious-name, and money-laundering counts survive absent a predicate offense | Gov't charges are derivative: conspiracy, 18 U.S.C. § 1342 (fictitious name), and § 1956 (money laundering) tied to alleged fraud/bribery | If core substantive counts fail, derivative counts necessarily fail because they require an underlying unlawful scheme or proceeds of unlawful activity | Motion contends all derivative counts must be dismissed; no court ruling in document |
| Whether nondisclosure/self-dealing alone can create federal criminal liability | Gov't treats nondisclosure of ownership/conflict as central to scheme | Defense relies on Kelly and related precedents: nondisclosure/conflict without bribery or loss does not create federal crime; criminalizing nondisclosure would unconstitutionally expand federal reach and be unconstitutionally vague | Motion urges dismissal; memorandum contains no court ruling |
Key Cases Cited
- Fischer v. United States, 529 U.S. 667 (fact-intensive test to determine whether recipient organization receives federal "benefits" for § 666 jurisdiction)
- Mills v. United States, 140 F.3d 630 (6th Cir.) (statutory exception for bona fide compensation bars § 666 application where services and salaries were legitimately earned)
- Skilling v. United States, 561 U.S. 358 (honest-services fraud limited to bribery/kickback schemes; undisclosed self-dealing insufficient)
- Ciminelli v. United States, 143 S. Ct. 1121 (Supreme Court rejected the right-to-control theory for wire fraud)
- McDonnell v. United States, 579 U.S. 550 (definition of "official act" for corruption prosecutions; limits on what constitutes an official decision or action)
- Kelly v. United States, 140 S. Ct. 1565 (federal statutes do not broadly criminalize state/local nondisclosure or impose federal standards of disclosure)
- Takhalov v. United States, 827 F.3d 1307 (11th Cir.) (no fraud where victims received what they bargained for absent intent to cause tangible harm)
- Riley v. United States, 621 F.3d 312 (3d Cir.) (distinguishing schemes that deprive of money/property from mere deception inducing a transaction)
- Foley v. United States, 73 F.3d 484 (2d Cir.) (examining § 666 reach against legislative-history limits; federal interest must be tied to program objectives)
- Doran v. United States, 854 F.3d 1312 (11th Cir.) (vacating § 666 conviction where government did not show recipient organization received federal benefits as required)