United States v. Sheldon I. Matzkin
1994 WL 26351, 14 F.3d 1014, 1994 U.S. App. LEXIS 2493 (1994)
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Rule of Law:
Confidential information, such as a competitor's bid proposal submitted to a government agency, qualifies as a 'thing of value of the United States' under 18 U.S.C. § 641. The government's temporary possession, custody, and control over the information are sufficient to establish a property interest for the purposes of the statute, even if the government does not hold sole ownership.
Facts:
- Sheldon I. Matzkin was an attorney and consultant whose clients included defense contractors Gould, Inc. and the Sierra Research Division of LTV Corporation.
- Stuart Berlin was a supervisory engineer and branch head at the Department of the Navy, giving him access to confidential information regarding major government procurements.
- Beginning in late 1978 or early 1979, Matzkin began paying Berlin $200 per month in exchange for non-public information about Navy contracts, which gave Matzkin's clients a competitive advantage.
- The monthly payments to Berlin increased to $1,000 in 1986.
- Berlin provided Matzkin with confidential bid information submitted by Hazeltine Corporation, a competitor of Matzkin's client, Gould, Inc.
- Specifically, Berlin informed Matzkin that Gould's bid on the UPM procurement was approximately $50 million lower than Hazeltine's bid.
- Berlin also sat on the Contract Award Review Panel (CARP), which made recommendations on large Navy contracts, and provided Matzkin valuable information related to various other projects.
Procedural Posture:
- The United States indicted Sheldon I. Matzkin in a federal district court on four counts, including conspiracy to defraud the United States under 18 U.S.C. § 371.
- A jury convicted Matzkin on the conspiracy count but acquitted him on the remaining three counts of bribery and conversion.
- Matzkin filed a motion for a new trial, arguing the trial court erred by not providing a statute of limitations instruction and that his counsel was ineffective; the district court denied the motion.
- At sentencing, the district court increased Matzkin's offense level under the U.S. Sentencing Guidelines, finding that the bribed official, Stuart Berlin, held a high-level sensitive position.
- Matzkin, as appellant, appealed his conviction and sentence to the United States Court of Appeals for the Fourth Circuit.
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Issue:
Does confidential pricing information, submitted by a private contractor to a government agency as part of a competitive bidding process, constitute a 'thing of value of the United States' under 18 U.S.C. § 641, even if the government only has temporary custody and does not hold title to the information?
Opinions:
Majority - Chapman, Senior Circuit Judge
Yes. Confidential pricing information submitted by a contractor during a competitive bidding process is a 'thing of value of the United States' for the purposes of 18 U.S.C. § 641. The court reasoned that § 641 is not a codification of common-law larceny but a much broader statute covering the unauthorized conversion or use of both tangible and intangible property. The government's possession, custody, and control over the confidential bid information—which it is required by regulation to protect—is a sufficient property interest to bring it within the statute's scope. The information is inherently a 'thing of value' because its unauthorized disclosure would undermine the integrity of the procurement process and could allow a bidder with inside knowledge to unfairly inflate its price, thereby defrauding the government.
Analysis:
This decision broadens the scope of 18 U.S.C. § 641 by establishing that intangible, confidential information in the government's temporary custody qualifies as government property for purposes of criminal liability. It clarifies that the government does not need a traditional ownership or title interest; mere control and a protective interest are sufficient. This precedent makes it easier to prosecute individuals who misappropriate sensitive data, such as trade secrets or proprietary bids, held by government agencies. The ruling is significant for cases involving government corruption and the protection of confidential business information submitted to federal entities.
