Nos. 99-804 and 99-939 

In the Supreme Court of the United States 

CARL W. CLEVELAND, PETITIONER 

v. 

UNITED STATES OF AMERICA 

FRED H. GOODSON, PETITIONER 

v. 

UNITED STATES OF AMERICA 

ON PETITIONS FOR A WRIT OF CERTIORARI 
TO THE UNITED STATES COURT OF APPEALS 
FOR THE FIFTH CIRCUIT 

BRIEF FOR THE UNITED STATES IN OPPOSITION 

SETH P. WAXMAN 

Solicitor General 

Counsel of Record 

JAMES K. ROBINSON 

Assistant Attorney General 

JOEL M. GERSHOWITZ 

Attorney 

Department of Justice 
Washington, D.C. 20530-0001 
(202) 514-2217 

QUESTIONS PRESENTED 

1. Whether video poker licenses issued by the State 
of Louisiana constitute “property” within the meaning 
of the mail fraud statute, 18 U.S.C. 1341. 

2. Whether the district court committed plain error 
in failing to instruct the jury on the materiality element 
of a mail fraud offense. 

(I) 

TABLE OF CONTENTS 

Page 

Opinions below ............................................................................... 
1 

Jurisdiction ...................................................................................... 2 

Statement ........................................................................................ 2 

Argument ........................................................................................ 6 

Conclusion ....................................................................................... 11 

TABLE OF AUTHORITIES 

Cases: 

Carpenter v. United States, 484 U.S. 19 (1987) ................ 

4, 6, 7 

Dunham v. Kisak, 192 F.3d 1104 (7th Cir. 1999) ............. 

10 

McNally v. United States, 483 U.S. 350 (1987) ................ 

4 

Neder v. United States, 527 U.S. 1 (1999) ......................... 

5, 9 

Orsini v. Wallace, 913 F.2d 474 (8th Cir. 1990), 

cert. denied, 498 U.S. 1128 (1991) ....................................... 

10 

Toulabi v. United States, 875 F.2d 122 (7th Cir. 

1989) ......................................................................................... 

8, 9 

United States v. Cochran, 109 F.3d 660 (10th Cir. 

1997) ......................................................................................... 10 

United States v. Dadanian, 856 F.2d 1391 (9th Cir. 

1988) ......................................................................................... 

8, 9 

United States v. DeSantis, 134 F.3d 760 (6th Cir. 

1998) ......................................................................................... 10 

United States v. Granberry, 908 F.2d 278 (8th Cir. 

1990), cert. denied, 500 U.S. 921 (1991) ............................. 

8, 9 

United States v. Kato, 878 F.2d 267 (9th Cir. 1989) ........ 

8, 9 

United States v. Martinez, 905 F.2d 709 (3d Cir.), 

cert. denied, 498 U.S. 1017 (1990) ....................................... 

7 

United States v. Moser, 123 F.3d 813 (5th Cir.), 

cert. denied, 522 U.S. 1035 (1997) ....................................... 

10 

United States v. Murphy, 836 F.2d 248 (6th Cir.), 

cert. denied, 488 U.S. 924 (1988) ......................................... 

8, 9 

United States v. Paccione, 949 F.2d 1183 (2d Cir. 

1991), cert. denied, 505 U.S. 1220 (1992) ........................... 9 

(III) 

IV 

Cases—Continued: Page 

United States v. Rodriguez, 140 F.3d 163 (2d Cir. 

1998) ......................................................................................... 10 

United States v. Salvatore, 110 F.3d 1131 (5th Cir.), 

cert. denied, 522 U.S. 981 (1997) ............................... 

4, 5, 7, 8, 9 

United States v. Schwartz, 924 F.2d 410 (2d Cir. 

1991) ......................................................................................... 8 

United States v. Shotts, 145 F.3d 1289 (11th Cir. 

1998), cert. denied, 119 S. Ct. 1111 (1999) ......................... 

9 

United States v. Slaughter, 128 F.3d 623 (8th Cir. 

1997) ......................................................................................... 10 

United States v. Universal Mgmt. Servs., Inc., 

191 F.3d 750 (6th Cir. 1999) ................................................. 

10 

Statutes and rule: 

18 U.S.C. 371 ............................................................................. 

2 

18 U.S.C. 1341 ........................................................................... 
2, 3, 6 

18 U.S.C. 1952 ........................................................................... 
2 

18 U.S.C. 1956 ........................................................................... 
2 

18 U.S.C. 1962(c) ...................................................................... 
2 

18 U.S.C. 1962(d) ...................................................................... 
2 

26 U.S.C. 7206(2) ...................................................................... 
2 

La. Rev. Stat. Ann. § 27:301(D) (West Supp. 1997) ............ 
5 

Fed. R. App. P. 28(i) ................................................................. 6 

In the Supreme Court of the United States 

No. 99-804 

CARL W. CLEVELAND, PETITIONER 

v. 

UNITED STATES OF AMERICA 

No. 99-939 

FRED H. GOODSON, PETITIONER 

v. 

UNITED STATES OF AMERICA 

ON PETITIONS FOR A WRIT OF CERTIORARI 
TO THE UNITED STATES COURT OF APPEALS 
FOR THE FIFTH CIRCUIT 

BRIEF FOR THE UNITED STATES IN OPPOSITION 
OPINIONS BELOW 

The opinion of the court of appeals (Pet. App. 1a-44a1) 
is reported at 182 F.3d 296. The opinion of the district 
court (Pet. App. 52a-86a) is reported at 951 F. Supp. 
1249. 

1 References to “Pet.” and “Pet. App.” are to No. 99-804 unless 
otherwise specified. 

(1) 

2 

JURISDICTION 

The judgment of the court of appeals was entered on 
July 21, 1999. The petition for rehearing was denied on 
September 2, 1999. The petition for a writ of certiorari 
in No. 99-804 was filed on November 9, 1999. The 
petition for a writ of certiorari in No. 99-939 was filed 
on December 1, 1999. The jurisdiction of this Court is 
invoked under 28 U.S.C. 1254(1). 

STATEMENT 

After a jury trial in the United States District Court 
for the Eastern District of Louisiana, petitioners Cleve- 
land and Goodson were convicted of conducting the 
affairs of an enterprise through a pattern of racketeer- 
ing activity, in violation of the Racketeer Influenced 
and Corrupt Organizations Act (RICO), 18 U.S.C. 
1962(c); conspiring to commit that offense, in violation 
of 18 U.S.C. 1962(d); and two counts of mail fraud, in 
violation of 18 U.S.C. 1341. In addition, petitioner 
Cleveland was convicted of four counts of money 
laundering, in violation of 18 U.S.C. 1956; tax 
conspiracy, in violation of 18 U.S.C. 371; and filing a 
false tax return, in violation of 26 U.S.C. 7206(2). 
Petitioner Goodson was convicted of five counts of 
money laundering and three counts of the use of 
interstate communications in aid of state bribery, in 
violation of 18 U.S.C. 1952. Each petitioner was 
sentenced to 121 months’ imprisonment. In addition, 
the district court ordered the forfeiture of their 
interests in two business entities. The court of appeals 
affirmed. Pet. App. 1a-44a. 

1. The evidence at trial showed that, in early 1992, 
petitioner Fred Goodson and his family formed TSG, 
Ltd., and its corporate partner, TSG, Inc., in order to 
participate in the video poker business at their truck 

3 

stop in Slidell, Louisiana. With the assistance of peti- 
tioner Carl Cleveland and petitioner Goodson’s law 
firm, Cleveland, Barrios, Kingsdorf & Casteix, the 
Goodsons prepared and submitted to the Louisiana 
State Police applications for a gaming license for TSG, 
Ltd. The applications required partnerships seeking 
gaming licenses to identify their partners; to submit 
personal financial statements for all partners; to affirm 
that the listed partners were the sole beneficial owners; 
and to affirm that no partner had an arrangement to 
hold his interest as “an agent, nominee or otherwise,” 
or a present intention to transfer any interest in the 
partnership at a future time. Pet. App. 2a-3a. 

The initial application submitted on behalf of TSG, 
Ltd., identified Maria and Alex Goodson, Fred Good- 
son’s adult children, as the limited partners and TSG, 
Inc., as the general partner. The application listed no 
other persons or entities as having any ownership 
interest in TSG, Ltd. TSG, Ltd. submitted renewal 
applications in 1993, 1994, and 1995 that also listed no 
additional ownership interests. In fact, at all times the 
true owners of the company were petitioners Goodson 
and Cleveland. The two concealed their ownership 
interest from state regulators in order to avoid the 
probing inquiry of the State’s suitability assessment. 
Pet. App. 5a-6a. 

2. The mail fraud statute, 18 U.S.C. 1341, makes it a 
crime to use the mail in connection with “any scheme or 
artifice to defraud, or for obtaining money or property 
by means of false or fraudulent pretenses, repre- 
sentations, or promises.” The mail fraud counts of 
the indictment charged that the defendants had devised 
a scheme to deprive the State of Louisiana and its 
citizens of “property” by “fraudulently obtaining and 
renewing, through the submission of false and in- 

4 

complete information, state licenses to operate video 
poker sites.” Pet. App. 74a. 

Before trial, petitioner Cleveland adopted a motion 
filed by his co-defendant, petitioner Goodson, to dismiss 
the mail fraud counts on the ground that state licenses 
to operate video poker sites do not constitute “pro- 
perty” within the meaning of Section 1341. Petitioners 
argued, among other things, that such licenses do not 
become property until they are issued, because they 
have no value to the State. Accordingly, in petitioners’ 
view, an attempt to acquire a state license through false 
representations does not implicate any state property 
interest. The district court rejected that contention. 
Pet. App. 73a-86a. 

3. On appeal, petitioners renewed their contention 
that state licenses do not constitute property for pur- 
poses of the mail fraud statute. Relying on United 
States v. Salvatore, 110 F.3d 1131 (5th Cir.), cert. denied, 
522 U.S. 981 (1997), the court of appeals affirmed the 
ruling of the district court. See Pet. App. 19a. In 
Salvatore, the court, applying McNally v. United States, 
483 U.S. 350 (1987), and Carpenter v. United States, 484 
U.S. 19 (1987), reasoned that “in considering whether 
video poker licenses constitute property under the mail 
fraud statute, we must determine whether Louisiana 
has an interest in the licenses as a property holder.” 
110 F.3d at 1139. The court held that Louisiana had 
more than just a regulatory interest in the video poker 
licenses, thereby justifying application of the mail fraud 
statute. Ibid. 

The Salvatore court first reasoned that the concept of 
property involves a legal “bundle of rights,” including 
the rights to “possess, use, and dispose” of a particular 
article. 110 F.3d at 1140. As applied to licenses, the 
court found that that “bundle” includes the right to 

5 

control their issuance. The court also concluded that 
Louisiana had “zealously sought to protect its right to 
control the [video poker] licenses” at issue here. Ibid. 
The court went on to reject a distinction between 
issued and unissued licenses, finding that unissued 
video poker licenses had value to the State. Id. at 1141. 
The court further determined that the State has a 
property, and not merely a regulatory, interest in the 
video poker licenses, because the State had “a direct 
and significant [continuing] financial stake * * * as 
issuer of the licenses” in the video poker industry. Id. 
at 1142. 

The court of appeals concluded that the Louisiana 
statutory scheme, by expressly stating a limitation on 
the property interests of licensees, evinces an intent 
that the State is to maintain its control and ownership 
of video poker licenses. 110 F.3d at 1142 (discussing 
La. Rev. Stat. Ann § 27:301(D) (West Supp. 1997)). 
Similarly, after applying traditional property law 
concepts, the court found that the licenses constituted 
property. Id. at 1142-1143. 

4. Following oral argument on petitioners’ appeal, 
petitioners sought leave to file a supplemental brief in 
light of this Court’s intervening decision in Neder v. 
United States, 119 S. Ct. 1827 (1999), which held that 
the materiality of the falsehoods used in a scheme to 
defraud is an element of a mail fraud offense, id. at 
1841. Petitioners argued that the district court com- 
mitted plain error in failing to give a materiality 
instruction. The government opposed petitioners’ mo- 
tion, arguing that supplemental briefing was unneces- 
sary because the issue had been waived, the district 
court had in any event included materiality language in 
the jury charge, and the defendants in fact had argued 
materiality to the jury. The court of appeals denied the 

6 

motion and did not address the issue in its opinion 
issued eight days later. 

ARGUMENT 

1. Petitioner Cleveland contends (Pet. 9-21) that the 
video poker licenses do not constitute “property” within 
the meaning of the mail fraud statute, 18 U.S.C. 1341. 
Petitioner Goodson (99-939 Pet. 11) adopts petitioner 
Cleveland’s argument.2 The courts below correctly 
rejected that contention, and it does not warrant 
further review. 

a. In Carpenter v. United States, 484 U.S. 19 (1987), 
the court affirmed the wire fraud conviction of a Wall 
Street Journal columnist who had traded stock before 
publication of his newspaper column based on his 
knowledge of what the column would say. The Court 
made clear that the intangible nature of the mis- 
appropriated confidential information did not make the 
information any less a form of “property” within the 
mail fraud statute. Id. at 25-27. The Court explained 

2 The court of appeals stated that “Maria Goodson and 
Attorney Cleveland assert that a Louisiana video poker license is 
not ‘property’ for purposes of the mail fraud statute.” Pet. App. 
19a. Petitioner Fred Goodson unsuccessfully requested that the 
court of appeals modify its decision to reflect that he too had raised 
the property/license issue on appeal from the district court 
judgment. The government opposed that motion on the ground 
that petitioner Goodson had not properly developed that argument 
under Federal Rule of Appellate Procedure 28(i) and had improp- 
erly attempted to adopt petitioner Cleveland’s argument. The 
court of appeals denied petitioner Goodson’s motion and did not 
modify its decision. Thus, in the court below, petitioner Goodson 
waived his opportunity to contend that the district court had erred 
in rejecting petitioner Cleveland’s argument that Louisiana video 
poker licenses are not “property” within the ambit of the mail 
fraud offense. 

7 

that the Journal had been deprived of its property 
right to make exclusive use of its confidential informa- 
tion, even though the defendants had not totally 
deprived the Journal of its possession of the informa- 
tion or its ability to publish it. Id. at 26-27. 

Here, the State of Louisiana had a property interest 
in the unissued video poker licenses similar to the Wall 
Street Journal’s interest in maintaining the confi- 
dentiality of its business information. In Carpenter, the 
Court held that the Journal’s exclusive right to control 
its confidential information was a property interest. 
484 U.S. at 26. By the same token, in this case, “what 
the [State] (and derivatively its people) lost was the 
right to keep its [video poker] licenses to itself and to 
bestow them on persons who had fairly earned them.” 
United States v. Martinez, 905 F.2d 709, 714 (3d Cir.), 
cert. denied, 498 U.S. 1017 (1990). The State also lost 
the right to control who handled a substantial, 
continuing source of earnings under the licenses. The 
court of appeals thus correctly found that the licenses 
had continuing value to the State. 

b. Petitioner Cleveland contends (Pet. 10-13) that 
the instant decision conflicts with holdings of other 
courts of appeals that particular licenses, especially 
unissued licenses, did not constitute property under the 
mail fraud statute. Although the Fifth Circuit in 
Salvatore criticized reasoning in some of those cases 
that an unissued license cannot be property even 
though an issued license can be, 110 F.3d at 1140-1141, 
it ultimately explained that “video poker licenses are 
different than other types of licenses,” id. at 1142 n.2, 
because of the “character of the licenses themselves,” 
id. at 1141. Because of the distinct characteristics of 
Louisiana’s video poker license, the holding here is 
distinguishable from decisions of other courts of appeals 

8 

that have reversed mail fraud convictions on the ground 
that various types of licenses were not property. See, 

e.g., United States v. Schwartz, 924 F.2d 410, 417-418 
(2d Cir. 1991) (arms export license); United States v. 
Granberry, 908 F.2d 278, 280 (8th Cir. 1990) (school bus 
operator’s permit), cert. denied, 500 U.S. 921 (1991); 
United States v. Kato, 878 F.2d 267, 268-269 (9th Cir. 
1989) (private pilot’s license); Toulabi v. United States, 
875 F.2d 122, 125 (7th Cir. 1989) (taxi driver’s license); 
United States v. Dadanian, 856 F.2d 1391, 1392 (9th 
Cir. 1988) (gambling license); United States v. Murphy, 
836 F.2d 248, 254 (6th Cir.) (bingo license), cert. denied, 
488 U.S. 924 (1988). 

As the Salvatore court explained, those cases rest on 
the theory that, in the manner in which particular 
licenses operated in the States that had issued them, 
the licenses did not represent property to the issuing 
governments. Rather, under the reasoning of those 
cases, “the issuance of a license is nothing more than a 
physical manifestation of the government’s intent to 
regulate.” 110 F.3d at 1141. The Salvatore court 
“agree[d], as an initial matter, that the right to regulate 
a particular industry does not a fortiori give the 
regulator a property interest in licenses signifying the 
government’s regulation.” Ibid. With respect to video 
poker licenses, however, the State “has a direct and 
significant financial stake in its role as issuer of the 
licenses” because it receives an “up-front fee” for the 
license and a significant percentage of net revenues as a 
franchise fee. Id. at 1142. The Salvatore court noted 
that Louisiana fully expected to receive continuing 
funds from the video poker license (22.5% of the 
licensee’s net revenues), such that the license “evinces 
the State’s intent to participate in the industry.” Ibid. 
The entitlement to control the sources of future re- 

9 

venue gave the State a continuing property interest in 
the license. 

The cases on which petitioner Cleveland (Pet. 11-13) 
relies involve licenses that lack that revenue-producing 
feature. See United States v. Shotts, 145 F.3d 1289, 
1294-1295 (11th Cir. 1998) (no indication of continuing 
government financial stake in bail bond license), cert. 
denied, 119 S. Ct. 1111 (1999); United States v. Pac- 
cione, 949 F.2d 1183, 1186-1187 (2d Cir. 1991) (same for 
medical waste dumping permit), cert. denied, 505 U.S. 
1220 (1992); Granberry, 908 F.2d at 280 (same for bus 
license); Kato, 879 F.2d at 269 (same for pilot’s license); 
Toulabi, 875 F.2d at 126 (same for taxi driver license); 
Dadanian, 856 F.2d at 1392 (same for poker club 
license); Murphy, 836 F.2d at 250-254 (same for bingo 
license). Accordingly, none of those cases conflicts with 
the holding that Louisiana video poker licenses repre- 
sent a government property right protected by the mail 
fraud statute.3 

2. Relying on Neder v. United States, 119 S. Ct. 1827 
(1999), petitioners contend (Pet. 21-25; 99-939 Pet. 10- 

11) that the district court committed plain error in 
failing to instruct the jury that a falsehood charged in a 
mail fraud offense must be found to be material.4 

The 
court of appeals correctly declined to address that 

3 We note that the petition for a writ of certiorari in Salvatore, 
which this Court denied, 522 U.S. 981 (1997), raised precisely the 
same claim that petitioners raise here. The only decision cited by 
petitioners that was decided since this Court denied certiorari in 
Salvatore is United States v. Shotts, 145 F.3d 1289 (11th Cir. 1998), 
cert. denied, 119 S. Ct. 1111 (1999), and that case is readily distin- 
guishable for the reasons given in the text. 

4 Petitioners invoke the plain error standard of review in light 
of their failure to request a materiality instruction at trial. See 
Pet. 25 n.20; 99-939 Pet. 10 n.5. 

10 

claim, since petitioners sought to raise it for the first 
time in a supplemental brief filed eight days before the 
court issued its decision. It is well settled that a 
defendant waives appellate consideration of an issue 
raised for the first time in a reply or later supplemental 
brief. See, e.g., Dunham v. Kisak, 192 F.3d 1104, 1110 
(7th Cir. 1999); United States v. Universal Mgmt. 
Servs., Inc., 191 F.3d 750, 759 (6th Cir. 1999); Orsini v. 
Wallace, 913 F.2d 474, 476 n.2 (8th Cir. 1990), cert. 
denied, 498 U.S. 1128 (1991). Petitioners are not 
relieved from their waiver because Neder was decided 
after oral argument in the court of appeals. At the time 
the petitioners filed their initial brief on appeal, there 
was a clear-cut conflict in the circuits on whether 
the materiality of a charged falsehood is an element of 
mail or wire fraud. Compare, e.g., United States v. 
Slaughter, 128 F.3d 623, 629 (8th Cir. 1997); United 
States v. Cochran, 109 F.3d 660, 667 n.3 (10th Cir. 1997) 
(materiality not an element), with United States v. 
Rodriguez, 140 F.3d 163, 167 (2d Cir. 1998); United 
States v. DeSantis, 134 F.3d 760, 764 (6th Cir. 1998) 
(materiality is an element). Indeed, contrary to 
petitioner Cleveland’s contention (Pet. 21), the issue 
was an open one in the Fifth Circuit. See United States 

v. Moser, 123 F.3d 813, 825-827 (5th Cir.), cert. denied, 
522 U.S. 1035 (1997). In light of that waiver, petitioners 
have not properly preserved that issue for 
consideration by this Court.5 

5 Petitioner Cleveland cites (Pet. 22) several cases in which this 
Court has granted the petition for certiorari, vacated the decision 
below, and remanded for further consideration in light of inter- 
vening authority. In each of those cases, however, the intervening 
authority had a crucial bearing on an issue timely raised on direct 
appeal and addressed by the appellate court. 

11 

In any event, petitioners’ claim is without merit be- 
cause the district court did give an adequate materiality 
instruction in connection with the mail fraud counts. 
The theory of the government’s case was that, in docu- 
ments filed with the State, petitioners concealed their 
ownership interests in TSG, Ltd., and other information 
to avoid the State’s suitability assessment. The court 
instructed the jury that, in order to constitute a scheme 
to defraud, an omission must be “reasonably calculated 
to deceive persons of ordinary prudence and 
comprehension” and that it must “conceal[] a material 
fact.” R. App. 4407 (emphasis added). The jury was 
thus instructed that it could find petitioners guilty of 
mail fraud based only on concealment of material 
information. 

CONCLUSION 

The petitions for a writ of certiorari should be denied. 

Respectfully submitted. 

SETH P. WAXMAN 

Solicitor General 

JAMES K. ROBINSON 

Assistant Attorney General 

JOEL M. GERSHOWITZ 

Attorney 

FEBRUARY 2000