879 F.3d 550
5th Cir.2018Background
- Sean Hager, a longtime salesperson at Velocity Electronics, used Velocity’s proprietary VIS database to learn client orders and pricing, then routed purchases through a company (Echt) he controlled to sell parts back to Velocity at prices that preserved Velocity’s 20% markup, netting about $1.16 million (2008–2012).
- Velocity treated VIS data (client orders, pricing, pricing trends, profit margins) as confidential; employees signed confidentiality agreements and the system enforced pricing “fail points.”
- Hager concealed his scheme through lies about Echt; discovery occurred in 2012 when a co-worker found Echt’s registration linked to Hager’s wife; Hager left Velocity.
- Indicted on mail fraud (18 U.S.C. § 1341), wire fraud (18 U.S.C. § 1343), money laundering, and three counts of aiding/assisting preparation of false tax returns; convicted on all counts after an eight-day trial and sentenced to concurrent prison terms.
- On appeal Hager challenged (1) whether mail/wire fraud statutes still cover confidential business information post-Skilling; (2) whether they cover only state-law trade secrets; and raised several procedural/evidentiary challenges (immunity for wife, exclusion of prior civil-suit evidence, severance of tax counts).
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether confidential business information is "property" protected by §§ 1341 and 1343 | Gov’t: Carpenter controls; confidential business info is property and falls within mail/wire fraud statutes | Hager: Skilling narrowed fraud statutes and excludes intangible business info; at most only state-law trade secrets are protected | Court: Carpenter remains good law; confidential business information is a protected property interest under §§ 1341/1343; Skilling addressed honest-services, not property rights; conviction affirmed |
| Whether §§ 1341/1343 protection is limited to state-law trade secrets | Gov’t: Federal law and precedent (Carpenter, Ruckelshaus) recognize confidential business info as property independent of state trade-secret labels | Hager: Statutes should be limited to trade secrets as defined by state law | Court: Rejected; state law may inform but is not exclusive; non-trade-secret confidential info can be protected |
| Whether district court should have ordered government to grant immunity to Hager’s wife | Gov’t: Witness may have been involved; not appropriate for immunity | Hager: Wife had exculpatory evidence necessary to defense | Court: Denial affirmed; district courts lack power to grant immunity absent extraordinary circumstances; no plain-error shown |
| Whether district court erred in excluding evidence about a prior civil suit and denying severance of tax counts | Gov’t: Evidentiary exclusions proper and counts intertwined; severance not required | Hager: Prior suit showed owners denied confidentiality; severance would allow him to testify on tax counts without opening fraud counts | Court: Exclusion not reversible (relevance/hearsay); any error harmless; severance denial not an abuse—prejudice not compelling given intertwined offenses |
Key Cases Cited
- Carpenter v. United States, 484 U.S. 19 (1987) (confidential business information qualifies as property protected by mail and wire fraud statutes)
- Skilling v. United States, 561 U.S. 358 (2010) (§ 1346 must be read narrowly to cover only bribery and kickback honest-services schemes)
- McNally v. United States, 483 U.S. 350 (1987) (mail fraud statute limited to protection of property rights)
- Ruckelshaus v. Monsanto Co., 467 U.S. 986 (1984) (confidential business information recognized as property)
- Jackson v. Virginia, 443 U.S. 307 (1979) (standard for sufficiency of evidence review)