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United States v. Philpot

United States Court of Appeals, Seventh Circuit

October 22, 2013

UNITED STATES of America, Plaintiff-Appellee,
Thomas R. PHILPOT, Defendant-Appellant.

Argued Sept. 13, 2013.

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David E. Hollar, Attorney, Office of the United States Attorney, Hammond, IN, Plaintiff-Appellee.

Leonard Goodman, Chicago, IL, for Defendant-Appellant.

Before BAUER, FLAUM, and ROVNER, Circuit Judges.

FLAUM, Circuit Judge.

Thomas Philpot, the former Clerk of Lake County, Indiana, took approximately $25,000 in incentive payments from a federally funded child-support fund without the required approval of the county fiscal body. He was charged with three counts of mail fraud and two counts of theft from a federally funded program. A jury convicted Philpot on all counts— although the district court later acquitted him on two of them— and the court sentenced Philpot to eighteen months in prison. Philpot now appeals his conviction and his sentence, arguing that he should be acquitted on the remaining counts. In the alternative, he argues that he is entitled to a new trial, and that the district court improperly assessed the loss amount in his sentencing. We affirm the district court on all grounds.

I. Background

Title IV-D of the Social Security Act regulates certain aspects of child-support systems. One provision orders the federal government to " make an incentive payment to each State for each fiscal year" based on how effectively their individual child-support systems are functioning. 42 U.S.C. § 658a(a). The federal government disburses Indiana's incentive payment to the Indiana Department of Child Services, which disburses the federal funds to the counties (a portion of the money goes to a county incentive fund, another to the operating fund of the county prosecutor, and the rest to the operating fund of the county clerk). Ind.Code § 31-25-4-23(a). Indiana chooses to give its counties a relatively free hand in directing their Title IV-D money once the payments have been distributed, with one important caveat: " amounts received as incentive payments may not, without the approval of the county fiscal body, be used to increase or supplement the salary of an elected official." Id. § 31-25-4-23(c).

Thomas Philpot, a licensed attorney, was elected Lake County Clerk in 2004, and served until the end of 2009. During many of these years, he and two of his subordinates in the Clerk's Office received thousand-dollar incentive payments from the Clerk's share of the IV-D funds. (Personnel who worked on child-support matters full-time also received IV-D bonuses, although in much smaller amounts.) Philpot learned of the IV-D incentive fund— and the possibility that it might be used to pay bonuses to heads of the Clerk's Office— from a 2004 conversation with Rochelle Vandenburgh, the Director of Child Support for Lake County.[1]

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In 2004, Philpot received a $3,101 bonus; in 2005, he received $3,146; in 2006, $4,249. The Lake County Council never approved these payments. Thus, in each of these years Philpot's bonuses violated the Indiana statute.

In March 2007 a government official suggested that some recipients of bonus money might not be eligible because it was not clear that they consistently spent time on child-support matters. This inquiry did not appear to be connected to Indiana's approval requirement for elected officials, however, since it concerned Philpot's non-elected subordinates, too. In any event, Philpot did not take a bonus in 2007— although he was scheduled to receive one, his deputy directed the Clerk's financial manager to strike the request— nor in 2008. His bonuses resumed in 2009. He received $9,101 in January and another $5,105 in October— both times without Council approval. Shortly thereafter, he resigned as Clerk to take up a new post.

Word of Philpot's IV-D bonuses got out to the media in 2010, and after consulting with an attorney, he ultimately decided to return the payments (with interest) to Lake County. He was later charged with three counts of mail fraud in violation of 18 U.S.C. § 1341 and two counts of theft from a federally funded program in violation of 18 U.S.C. § 666(a)(1)(A). Philpot filed a pretrial motion to transfer venue to the Northern District of Illinois, arguing that pretrial publicity prevented him from receiving a fair trial in Indiana, but it was denied. He also filed a motion to dismiss the indictment, alleging that the government submitted false and misleading evidence to the grand jury. The district court postponed consideration of the motion until the close of trial, at which time the court denied it as well.

Both mail fraud and theft from a federally funded program contain a mens rea requirement of knowledge and intent to defraud. Thus, while Philpot conceded at trial that his bonuses did not comply with Ind.Code § 31-25-4-23, he argued that he had acted in good faith in taking them.

A key issue at trial was the significance of a legal opinion Philpot requested from his longtime acquaintance, David Saks, who Philpot had hired as the Clerk's contract attorney. Saks testified that Philpot approached him in November 2008 about a situation that " fell through the cracks" the previous year. Philpot asked if it was " too late to act on this situation," handed Saks a scrap of paper with a citation to Ind.Code § 31-25-4-23, and asked Saks to analyze the statute and get back to him as quickly as possible. Saks testified that he was unclear on the precise scope of the assignment and that this was a tighter timeline than he was used to.

After looking at the statute, Saks said he determined that Philpot was asking him " whether or not you had to take [the IV-D money] in the year ... the federal money was received, whether or not it could be encumbered and taken in a subsequent year." On November 19, he wrote to Philpot that he was in " complete compliance" with § 31-25-4-23.[2] At trial, Philpot introduced

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this conclusion to show his good faith in continuing to take bonuses from the IV-D fund. The jury disagreed, though, and it convicted him on all five counts.

Following his conviction, Philpot filed a number of posttrial motions. The district court granted his motion for acquittal on Counts 1 and 4, which dealt with the bonuses he took prior to consulting with Saks, because it found there was no evidence that Philpot knew of § 31-25-4-23 before 2008. However, it sustained the convictions on the post-2008 counts (Counts 2, 3, and 5). The district court also denied Philpot's motion for a new trial, which was based on the court's supposedly erroneous jury instructions, its refusal to reopen the evidence to permit Philpot to call an additional witness, and the government's closing argument.

The district court sentenced Philpot to 18 months in prison followed by two years of supervised release and a $10,000 fine. Philpot objected that the court had miscalculated his loss amount, since he returned the bonus money to the County before the loss was detected, but the objection was overruled.

II. Discussion

Philpot has appealed numerous issues, which we will address in turn, describing additional facts as necessary. We begin with his pretrial motions, proceed to issues relating to the trial, and conclude with his sentencing argument.

A. The pretrial motions

1. Motion to transfer venue

Philpot moved to transfer venue to the Northern District of Illinois pursuant to Federal Rule of Criminal Procedure 21, arguing that local media coverage was so inflammatory and pervasive that he could not receive a fair trial in north-west Indiana. The magistrate judge reviewed the motion and concluded that the press coverage in the case had not been so pervasive as to compromise Philpot's fair trial rights. He noted that many of the articles Philpot complained of were factual in nature, and many preceded the trial by over a year. The magistrate judge also did not believe that ...

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