In United States v. Clark, 14-1251, the Court confirmed that, like Madonna, it is “living in a material world” when it comes to prosecutions under 18 U.S.C. §1001, reversing a §1001 conviction based on lack of materiality of the false statement. Clark was a trucking contractor that performed work for the State of Missouri based on a state contract that was partially funded by federal dollars. As part of that contract, Clark agreed to and represented that he had paid his drivers the prevailing wage of approximately $35 / hour, when in fact he only paid approximately $15 / hour. Despite this disparity, Clark submitted reports to the State of Missouri falsely stating that he had paid drivers the higher wage-rate. Clark’s business model resulted in a federal indictment, charging him with 10 counts of violating §1001 (false statement).
The issue raised on appeal was whether the false statements were material to the federal government. Materiality in this context means that the statement “must have a natural tendency to influence, or [be] capable of influencing, the decision of the decision making body to which it was addressed.” The false statement does not have to actually influence the decision making body, but rather, simply have the ability to influence. And, the false statement does not need to be directed to a federal agency. Rather, the false statement can be made only to a local government entity as long as there is a connection between the false statement and the federal government’s control over the distribution and/or expenditure of funds. In Clark, the Court had no issue with 9 of the 10 counts that covered Clark’s wage certification statement (stating that drivers were being paid the $35 / hour wage). Even though the 9 false statements were made to the general contractor on the project (and not a component of the federal government), the Court found that these statements were material to the U.S. Department of Labor, and therefore upheld the convictions under §1001. The Court’s reasoning on this issue is relatively uninstructive, primarily because Clark’s argument was, in the Court’s assessment, “wholly unpersuasive” and convoluted.
However, as to Count 10, premised on an affidavit presented to the State of Missouri after the project was complete, the Court found the materiality requirement had not been met. While Clark admittedly falsely certified his compensation rate to drivers in the affidavit, the affidavit was directed only to the State of Missouri, and there was no evidence at trial that any federal agency was aware that the State of Missouri required such an affidavit, or a federal agency could have relied on that State’s affidavit for any purpose related to payment, performance, or anything else. This lack of evidence was fatal to the government’s case as the “materiality” element of offense was completely lacking from an evidentiary standpoint.
Clark is definitely worth considering in any §1001 prosecution where the false statements are not sent directly to a federal agency. As to why a Missouri construction project was prosecuted in the Seventh Circuit, take a look at United States v. Clark, 728 F.3d 622 (7th Cir. 2013), which found venue proper in both Missouri (where the false forms were filed), and Illinois (where the false statements were created).