SAN JUAN, P.R. – Zoraida Velázquez-Bracero plead guilty to an information charging her with theft concerning programs receiving federal funds, announced Rosa Emilia Rodríguez-Vélez, United States Attorney for the District of Puerto Rico. The U.S. Department of Education, Office of Inspector General was in charge of the investigation.
From June 2005 until July, 2015, Velázquez-Bracero was the Purchasing Director at Pontifical Catholic University of Puerto Rico, an entity that receives in excess of $10,000.00 in federal funding in a one year period. In this position, Defendant was issued a University corporate credit card for purchasing goods and supplies for the University as well as arranging official travel for University professors. However, in 2008 Defendant started using this corporate credit card for personal expenses not authorized by the University.
Through direct charges and cash advances, Velázquez-Bracero used this corporate credit card to pay for school tuition, household utility bills and other items, and vacations to Disney World, New York City, Atlanta, Indianapolis, Canada, and France. Defendant concealed the use of this corporate credit card by altering and/or creating fictitious credit card statements wherein she hid the charges by increasing the amounts of other legitimate charges to the card, or by deleting the charges altogether before submitting the statement to the finance department for payment.
Although the original limit on this corporate credit card was $80,000.00, Velázquez-Bracero obtained numerous credit limit increases by forging her supervisor’s signature on letters to the credit card company requesting said increases. Defendant knew that she was affecting federal grants when she illegally used this corporate credit card. The total amount of unauthorized charges by Velázquez-Bracero was $655,432.00.
“The defendant misappropriated funds intended to aid University students, for her illegal personal gain,” said US Attorney Rosa Emilia Rodríguez-Vélez. “At the U.S. Attorney’s Office we will continue to aggressively investigate and prosecute financial crimes. This arrest should discourage those who get involved in these types of schemes before it’s too late, because we will continue investigating and prosecuting these offenses.”
“Federal education funds exist to provide students with educational opportunities and help students make their dreams of higher education a reality, it’s not a personal slush fund,” said Yessyka Santana, Special Agent in Charge of the U.S. Department of Education Office of Inspector General Southeast Regional Office. “I’m proud of the work of OIG special agents, our law enforcement partners, and the PCUPR staff for holding Ms. Velázquez accountable for her alleged criminal actions.”
As a result of the guilty plea, the defendant may be sentenced to a term of eight to fourteen months in prison, a fine not to exceed two hundred fifty thousand dollars ($250,000.00), and/or a term of supervised release of not more than three (3) years. Assistant United States Attorney Scott H. Anderson is in charge of the prosecution of the case.
If you get lost, sometimes you must go back and start again from the beginning. I’ve been a bit lost on whether the Sherman Act is unconstitutional as a criminal statute. It is well accepted that per se violations of the Sherman Act can be prosecuted criminally. An individual can be sentenced to up to ten years in prison. But, is the accepted learning on this issue wrong? I think I’ve found my way to the Sherman Act being unconstitutional as a criminal statute.[1]
Forget everything you know about Supreme Court jurisprudence involving the criminal application of the Sherman Act (that was easy for me). Take a look at the statute:
Every contract, combination in the form of trust or otherwise, or conspiracy, in restraint of trade or commerce among the several States, or with foreign nations, is declared to be illegal.
Can you advise your client what exactly is declared to be illegal? And watch his face show even more alarm when you explain that whatever it is that he can’t do, if he does do it, the penalty is up to 10 years in prison.[2] The Sherman Act is void for vagueness. Justice Sutherland explained the void for vagueness doctrine in Connally v. General Construction Co, 269 U.S. 385, 391 (1926):
The terms of a penal statute…must be sufficiently explicit to inform those who are subject to it what conduct on their part will render them liable to its penalties….and a statue which either forbids or requires the doing of an act so vague that men of common intelligence must necessarily guess at its meaning and differ as to its application violates the first essential of due process of law.
The Sherman Act does not sufficiently inform business people (including foreigners) what conduct can land them in jail or on a Red Notice. This must be true because even the Supreme Court has said the Sherman Act cannot possibly mean what it says because every contract is in restraint of trade, and every contract cannot be illegal. Thus, the first Supreme Court triage on the Sherman Act was that only “unreasonable restraints” of trade were prohibited.[3] But, that doesn’t clear things up too much—What is an unreasonable restraint of trade? Under the Rule of Reason, a restraint is unlawful only, if after an inquiry to balance the pro-competitive benefits of the agreement versus its anticompetitive effects, the agreement is found to unreasonably restrain trade. But can you find someone guilty of a crime after weighing the pro-competitive and anticompetitive effects of the agreement? That doesn’t seem like the notice required by due process either. Further Supreme Court surgery on the Sherman Act separated out per se violations–restraints of trade that are so highly unlikely to have any redeeming competitive benefits, that the restraints (price-fixing, bid rigging and customer/market allocation) are per se illegal. As a result, juries are charged in a criminal antitrust case that they do not need to find that the restraint was unreasonable, but simply that the defendant(s) entered into an agreement to fix prices, which, by judicial fiat, is per se unreasonable.
Does the per se rule solve the void for vagueness problem? The conventional wisdom is that it has. But changed circumstances sometimes compel a “fresh look” at accepted wisdom. It is time for that fresh look. The changed circumstance that comes to mind is that the Sherman Act is no longer a misdemeanor. It is not a “gentlemen’s crime” meriting a slap on the wrist with a mild scolding from the judge.[4] The Sherman Act, as a criminal statute, provides for an individual to be sentenced to up to 10 years in jail. And the ten years is not just theoretical; the Antitrust Division sought a 10-year prison sentence for the CEO of AU Optronics after his conviction. While the ten-year sentence was not achieved, the record prison sentence for a criminal antitrust violation is now 5 years. [5]
I am not a constitutional scholar, but I do have a blog so I’ll opine what I think is wrong with the Sherman Act as a criminal statute.[6] First, the Supreme Court cannot save a criminal statute by grafting on elements such as condemning only “unreasonable” restraints of trade, and further holding that only certain types of agreements are per se unreasonable. But even if the Supreme Court could address the void for vagueness doctrine by holding that only certain restraints are per se illegal, this violates another constitutional tenet; the Supreme Court takes away the issue from the jury with an unrebuttable presumption. Charles D. Heller has written on this subject and argued that the current practice of instructing the jury that price-fixing is per se illegal, i.e., presumptively unreasonable, is unconstitutional. The jury should be the fact-finder of whether a restraint is unreasonable.[7] Finally, the definition of a per se offense is that the restraint (price-fixing for e.g.) is so highly likely to be anticompetitive that there is no inquiry as to whether the actual restraint the defendant is charged with was anticompetitive. This may be fine for a civil case, but in a criminal case the defendant must be allowed to argue that the charged restraint was the exception to the rule. Instead, in a criminal case the jury may be charged:
It is not a defense that the parties may have acted with good motives, or may have thought that what they were doing was legal, or that the conspiracy may have had some good results.
This seems like a very odd jury instruction for a crime that carries a ten-year maximum prison sentence, especially when one considers that many of the defendants in criminal antitrust indictments are foreigners.[8]
In short, the Sherman Act is void for vagueness. But, if the Act does pass the void for vagueness hurdle by grafting on the per se rule, juries should decide whether the restraint in question is unreasonable, and that inquiry should not be contained by a presumption the restraint was per se unreasonable if it was price-fixing, bid rigging or market allocation. If these standards were applied, however, the Sherman Act would be unworkable. If juries decided, in an after the fact deliberation, whether a restraint was unreasonable, the void for vagueness doctrine would trump a conviction. Sad. Very sad.
My solution to the problem, if there really is a problem, will come as soon as I figure it out—but no later than next week– in Part II.
Thanks for reading. Comments would be much appreciated, but maybe hold your fire until after Part II?
[1] I am not the first to reach this conclusion. The work of several other authors who find likewise is mentioned in the post.
[2] Maybe this language that is in Sherman Act indictments will clear things up: “For the purpose of forming and carrying out the charged combination and conspiracy, the defendant and his co-conspirators did those things that they combined and conspired to do.” To be fair, the indictments then “bullet point” a list of acts the defendant(s) engaged in to carry out the conspiracy.
[3] Standard Oil Co. of New Jersey v. United States, 221 U.S. 1 (1911).
[4] I was a brand new Antitrust Division attorney in one trial where we obtained convictions not too long after Sherman Act had been made a felony. At sentencing, the first convicted defendant got a wicked tongue lashing, but the judge said that, due to his youth and relative inexperience, he would not be sentenced to prison. The next defendant—ditto on the tongue lashing—but the judge found he should not be sentenced to prison because he was elderly and now retired.
On June 3, 2015, a federal grand jury in the District of Puerto Rico returned a five count indictment charging Jose A. Rosa-Colon, his brother and business partner, Ivan Rosa-Colon and Louis Enrique Torres with a multi-million dollar Service-Disabled Veteran-Owned Small Business (SDVOSB) scheme to defraud the U.S. Department of Veteran Affairs. The charges include major fraud against the United States and wire fraud. This investigation was conducted by Special Agents from the U.S. Department of Veteran Affairs, Office of Inspector General, Criminal Investigations Division.
The indictment unsealed in federal court today alleges that from on or about 2007 to 2014, Ivan Rosa-Colon, Jose Rosa-Colon and Torres conspired to use Jose Rosa-Colon’s service-disabled veteran status to create BELKRO General Contractors, which was a pass- through or front company for Ivan Rosa-Colon’s other business, IRC Air Contractors.
The indictment alleges that Ivan Rosa-Colon and Louis Torres used Jose Rosa-Colon’s service-disabled veteran status to certify and register BELKRO General Contractors in various government databases as a SDVOSB after Ivan Rosa- Colon learned that President George W. Bush would be signing a government stimulus package encouraging the use of SDVOSB. The stimulus package would allow for government agencies to award non-competitive, set-aside or sole-source government contracts to SDVOSB like BELKRO General Contractors.
The indictment further alleges that Jose Rosa-Colon, owner of BELKRO General Contractors, was employed as a full-time U.S. Postal Service Carrier; he was not in charge of the day to day operations of BELKRO General Contractors. Jose Rosa-Colon was simply a figurehead or “rent-a-vet”, who was being used for his service-disabled veteran status to obtain contracts for his brother Ivan Rosa-Colon’s company. As a result of the scheme, BELKRO General Contractors unlawfully received set-aside and/or sole-source SDVOSB contracts from the U.S. Department of Veterans Affairs, including contracts involving American Recovery and Reinvestment Act (ARRA) funds.
If convicted, they face a term of 20 years in prison as to each wire fraud charge and up to ten years in prison for the charges of major fraud against the United States. Additionally, they face fines of up to $250,000 and up to three years of supervised release as to each count.
This indictment was announced today by U.S. Attorney Rosa Emilia Rodríguez-Vélez for the District of Puerto Rico, Special Agent in Charge Monty Stokes for the Southeast Field Office, Department of Veterans Affairs, Office of Inspector General, Criminal Investigations Division and Acting Special Agent in Charge Sharon Johnson for the Eastern Regional Office, Small Business Administration, Office of Inspector General. The government is represented by Assistant U.S. Attorney Julia Diaz-Rex.
Members of the public are reminded that an indictment constitutes only charges and that every person is presumed innocent until their guilt has been proven beyond a reasonable doubt.
