June 11, 1990 Number 6

June 11, 1990 Number 6 Robert Q. Crane Treasurer & Receiver-General Chairman, State Board of Retirement One Ashburton Place, Room 1219 Boston, Massachusetts 02108 Dear Chairman Crane: You have asked on behalf of the State Board of Retirement (Board) for an opinion concerning the apphcation of G.L. c. 32, § 15(3) to former Metropohtan District Commission (MDC) police officer Gerald Clemente. Your specific ques- tion is whether Gerald Clemente has been convicted of an offense involving the fundsor property of a governmental unit within the meaning of subsection 15(3). In addition, you ask for guidance in determining what constitutes "restitution" under subsection 15(3). As I discuss in the course of this opinion, your request presents difficulties because the guidance it seeks requires factual determinations which are within the jurisdiction of the Board rather than the Attorney General to make. Never- theless, I proceed to review the law concerning subsection 15(3), and, within the limits of the facts you have stated in your request, to provide you with legal advice designed to assist the Board in proceeding in this matter. I begin with the factual background you have provided in your letter and its accompanying materials. In 1987, a judgment of conviction was entered in the Federal District Court of Massachusetts against Gerald Clemente based on his plea of guilty to count 1 1 of a multi-count federal indictment. Count 1 1 charged Clemente with participating in an enterprise through a pattern of racketeering activity in violation of the Racketeer Influenced and Corrupt Organizations Act. 18 U.S.C. § 1962c. As described in count 11, the criminal enterprise generally consisted of a scheme to defraud whereby Clemente and others stole advance copies of police promotional examinations of the Massachusetts Department of Personnel Administration (MDPA) and distributed them to relatives, friends, associates, and purchasers so that others would be promoted within various police departments of the Commonwealth, including the MDC police.' The objectives of the scheme as stated in count 1 1 were to illegally assist those provided the exams in obtaining promotions within police departments so that they could enjoy the increased salary and other benefits related to the promotions. With this background, I turn to the statute in question. Subsection 15(3) of chapter 32 of the General Laws provides for the forfeiture of the pension rights of a member of a retirement system and his or her beneficiarie.. after a final conviction of the member of "an off'ense involving the funds of a governmental unit or system referred to in subdivision (1) of this section." The forfeiture of pension rights applies "unless and until full restitution for any such misappropri- ation has been made."^ You point out that "the governmental unit . . . referred to in subdivision (1) of this section" is in Clemente's case the MDC.^ You ask, therefore, whether the crime for which Clemente was convicted is an offense "involving the funds or 36 PD- 12 property" of the MDC and whether, based on this involvement of funds or property, the Board may discontinue Clemente's pension."* In posing this question, you note that the crime to which Clemente pleaded guiltv involved the theft of police promotional exams from the MDPA and their sale or provision by Clemente and others to MDC police officers, among others, for use in obtaining police promotions. You recognize that the police promotional exams of the MDPA cannot properly be characterized as property of the MDC. You propose, however, that "funds or property" of the MDC were nevertheless involved in the form of any increased salary and benefits paid out of MDC funds to police officers who received promotions as a result of their use of the stolen exams. I limit the discussion which follows to an analysis of the potential theory of the involvement of the funds of the MDC which you have proposed and express no views concerning other possible theories of involvement which you have not proposed or which might be based on facts which are unknown to me or which might emerge during proceedings before the Board. See 1986/87 Op. Att y Gen., Rep. A.G., Pub. Doc. No. 12 at 58, 60 (1986) (Attorney General does not answer hypothetical or abstract questions)."" I conclude, for the reasons that I now set forth, that a crime such as Clemente's, if it achieved the improper promotion of MDC police officers who, as a result, obtained increased salary or other benefits, would be "an offense involving the funds or property" of the MDC within the meaning of G.L. c. 32, § 15(3).^ To begin, I note two apparent features of Clemente's crime which raise ques- tions whether it could "involv[e] the funds or property" of the MDC within the meaning of subsection 15(3). First, any benefits paid to MDC police officers as a result of their improper promotions using the stolen exams would not have gone to Clemente but to the promoted officers. Second, any funds or property given to officers who obtained promotions would presumably not have been funds or property that had in any way been entrusted to Clemente's care. While it may be that the crime resulting in forfeiture of pension rights pursuant to subsection 15(3) is often one in which an employee steals, for his or her own benefit, funds with which the employee has been entrusted in the course of his or her work, nothing in the language of subsection 15(3) limits its effects to such a crime. Indeed, it is difficult to imagine a broader formulation than the phrase "involving the funds or property." In the sense in which it is employed within subsection 15(3), the word "involve" has been defined to mean "to have an effect on [or to] concern directly." Webster's Third New International Dictionary 1191 (1964). Its synonym is "to affect." Id. A criminal enterprise, the purpose of which was to improperly obtain police promotions with all of their attendant benefits, would clearly affect the funds of the MDC if the scheme succeeded, and that is all the phrase "involving the funds or property" would in its ordinary sense require. Nothing in this broad formulation suggests any additional requirement that the involved funds or property have been placed within the employee's care or that the employee himself or herself have been the direct recipient of those benefits. My conclusion is reinforced by the fact that the "offense involving the funds or property" terminology is used interchangeably in subsection 15(3) with the term "misappropriation."^ That term, as it is used G.L. c. 32, § 15, has recently received the attention of the Appeals Court in Amida v. Contributory Retirement Appeal Board, 28 Mass. App. Ct. 366, further appellate review denied, 407 Mass. 1102 (1990).*^ The Court mArruda, looking to the ordinary dictionary definitions of the term "misappropriation," rejected any narrow construction of the term and P.D. 12 37 concluded that it required nothing more than that funds be "wrongly appropri- ated and misapplied."' /lrn<^fl, 28 Mass. App. Ct. at 369.*^ Based on this broad definition, the Court concluded that the term "misappro- priate" in subsection 15(1) "clearly cover[ed]" the actions of an employee in approving excess payments from his employer (i.e., a "governmental unit" within chapter 32) to a contractor in order to provide kickbacks from the contractor to himself and others. The Court rejected the argument that an employee's "par- ticipation in a scheme of bribery and kickbacks from a contractor is not covered by the term 'misappropriate,' because [the employee] did not take money from [the employer] and apply that money to an illegal purpose or appropriate it to his own use." Arrnda, 28 Mass. App. Ct. at 368 (emphasis in original). The causing of excess payments to be made by the employer to the contractor in furtherance of the bribery and kickback scheme was a "misappropriation" of those funds and it was irrelevant that those funds went to the contractor and not to the employee. The plain meaning of "misappropriation" as set forth in the Amida case leads me with little difficulty to the conclusion that the obtaining of benefits attending promotion within the MDC by an unlawful scheme to steal and distribute ad- vance copies of police promotional exams constitutes a "misappropriation." /Ir- ruda, 28 Mass. App. Ct. 366. Such benefits are "wrongly appropriated and mis- applied", id. at 369, and, asArrnda establishes, it is simply irrelevant that those benefits were not themselves appropriated for Clemente's own use. Similarly, although the question does not appear to have been directly raised in Anvda whether the funds misappropriated by the employee had been entrusted to his care, the broad view taken of the term misappropriate in that case clearly encom- passes wrongly appropriated and misapplied funds without regard to whether they were funds entrusted to the employee's care. See ante at n. 9 (noting that misappropriation need not involve peculation).'" In sum, a criminal enterprise which used stolen police exams to gain the increased pay or other benefits attending police promotions is in my view an otTense "involving . . . funds or property" or a "misappropriation" according to the plain meaning of those terms. My literal reading of those terms, moreover, is fully consistent with the plain purpose of subsection 15(3). See Board of Educa- tion V. Assessors of Worcester, 368 Mass. 511,513(1 975 ) (statute to be interpreted according to the intent of the Legislature ascertained from words of the statute considered in connection with purposes for which statute was enacted). The forfeiture of pension rights under subsection 15(3) occurs only "unless and until full restitution is made." G.L. c. 32, § 15(3). The purpose of subsection 15(3) is therefore according to its express terms restitutionary. Reading the language of subsection 15(3) in accordance with its plain meaning to include any crime which affects the funds of the employee's governmental unit is in keeping with this purpose since this reading permits restitution for all of a governmental unit's losses attributable to crimes of its employees. Accordingly, if Clemente's criminal scheme as alleged in count 1 1 succeeded in gaining increased pay or other benefits from the MDC for wrongfully promoted police officers, his conviction on count 1 1 would subject Clemente to the forfei- ture of his pension benefits pursuant to subsection 15(3). 1 am unable, however, to determine, based on the facts which you have given me, to what extent the criminal scheme in fact succeeded in gaining increased pay or benefits from the , MDC. Based on a reading of the allegations in count 11 to which Clemente pleaded guilty, it is plain that Clemente was convicted of participation in a JS criminal enterprise which involved the theft of police promotional exams, and the sale of those exams to persons who were police officers in the MDC. It is equally plain that the purpose of this enterprise was to bring about the promotion of those police officers so that they could reap the benefits attending such promotion, including increased pay and benefits. Count 11, however, contains no allegation — and hence Clemente's plea imports no admission — that the criminal enter- prise actually achieved its stated purpose. In other words, there is no allegation in the indictment that any MDC police officer who obtained an advance copy of the MDPA promotional exam actually received a promotion and increased pay or benefits. You have, moreover, provided me with no facts concerning this question. I therefore cannot answer in any definitive way whether Clemente's pension may be forfeited. It is, moreover, within the jurisdiction of the Board rather than the Attorney General to make any factual determinations relating to whether a particular crime falls within subsection 15(3), and it is, therefore, for the Board to conduct any further investigation and proceedings which may be necessary to determine whether and to what extent Clemente's crime in fact involved the funds of the MDC or otherwise comes within subsection 15(3) {see ante al n.4.)." I note, however, that the absence in count 1 1 of any allegation that funds of the MDC were actually affected by Clemente's crime does raise a purely legal ques- tion which is appropriate for me to address, namely, whether a crime which has as its purpose a misappropriation of funds but does not require as a requisite of a conviction that the purpose be achieved is an offense "involving . . . funds or property" within the meaning of subsection 15(3). In my view, the plain language of subsection 15(3) requires the answer to be yes. A criminal enterprise the purpose of which is to misappropriate funds and which in fact results in such a misappropriation plainly "invoive[s]" those funds regardless of whether it is alleged in the indictment or required as an element of the oflFense that the criminal enterprise actually succeed. This conclusion is also fully consistent with the restitutionary purpose of subsection 15(3). The loss of funds attributable to a crime is no less real where proof of the loss is not required for a conviction. The statutory purpose of restoring to a governmental unit losses caused by the crimes of its employees is best served by reading subsection 15(3) according to its plain language to include any crime which actually caused a loss whether or not proof of the loss was a requisite of conviction. Accordingly, should the Board determine that Clemente has been convicted of such a crime, the Board should suspend all further pension payments to Clemente unless and until full restitution is made. You have asked, as a final matter, what would constitute such "full restitution" in this case. It should be apparent from the foregoing discussion that your ques- tion as posed could only be answered in the abstract since I do not know precisely what losses may have been caused by Clemente's crime and that question can only be determined through proceedings before the Board. It has been long- established policy of the Attorney General not to answer abstract questions. 1986/87 Op. Att'y Gen., Rep. A.G., Pub. Doc. No. 12 at 58, 60 (1986). You have specifically proposed as a measure of restitution the increase in salaries and benefits realized by officers who obtained promotions as a result of Clemente's crime. This, in my view, would not be an unreasonable measure of restitution.'- do not however, suggest that this is the only appropriate measure of restitution or that other compensable losses may not have occurred. I believe that this question P.D. 12 39 is largely within your province to determine after appropriate proceedings pur- suant to G.L. c. 32, § 15(2). I recognize that your task in this regard may not bean easy one because of the unusual nature of the crime and the difficulty in calcu- lating the losses resulting from it. Cf. United States v. Halper, 109 S. Ct. 1892, 1900- 1902 (1989) (noting difficulty often attending calculation of damages caused by frauds against the government and sanctioning reasonable approximation as a means of calculating restitution). For this reason, "the process of affixing a sanction that compensates the Government for all its costs inevitably involves an element of rough justice." Id. at 1902. It is my view, therefore, that losses of the MDC or the State Employee Retirement System (see ante at n. 4) which you can identify and reasonably approximate and which can be reasonably related to Clemente's crime would be countable in determining the appropriate amount of restitution. To sum up, I conclude that a crime such as Clemente's, the purpose of which was to obtain promotions for MDC police officers together with the increased pay and benefits attending such promotions, is a crime involving the funds or property of the MDC within the meaning of G.L. c. 32, § 15(3), to the extent that the crime actually achieved its purpose. Whether Clemente's crime actually involved the funds or property of the MDC or is otherwise covered by subsection 15(3) and the extent of restitution which would entitle Clemente to the restoration of his pension rights should the Board revoke them remain to be determined by the Board in general accordance with the guidance provided in this opinion. Sincerely yours. JAMES M. SHANNON ATTORNEY GENERAL ' The scheme was in part implemented through the use of the United States mails thereby constituting mail fraud, a "racketeering activity" under the Racketeer Influ- enced and Corrupt Organizations Act. See 18 U.S.C. § 1961. Count 1 1, after generally describing the criminal enterprise and alleging the required "pattern" of racketeering activity, also alleges twelve specific instances of racketeering activity, six of which involve schemes to promote MDC police officers. - G.L. c. 32, § 15(3), provides in full as follows: Forfeiture of Rights upon Conviction. In no event shall any member after final conviction of an offense involving the funds or property of a governmental unit or system referred to in subdivision (1) of this section, be entitled to receive a retirement allowance or a return of his accumulated total deductions under the provisions of sections one to twenty-eight inclusive, nor shall any beneficiary be entitled to receive any benefits under such provisions on account of such member, unless and until full restitution for any such misappropriation has been made. 40 t'lJ. 12 ^ The governmental unit referred to in subdivision (1) is "any governmental unit in which or by which [a member] is employed or was employed at the time of his retirementorterminationof service. 'G.L.c. 32, § 15(1). You inform me that, prior to his indictment, Clemente was granted an accidental disability retirement allowance, and I infer from your letter that, at the time of his retirement, he was employed as an MDC police officer. The MDC is defined as a governmental unit for purposes of the pension laws. See G.L. c. 32, § 1. defining "governmental unit" to include "the commonwealth or any political subdivision thereof" and defining "political subdivision" to include "the metropolitan district commission." It appears, therefore, that the relevant governmental unit for purposes of subsection 15(3) is in this case the MDC. "* You have not sought to focus my attention on the additional phrase in subsection 15(3) which imposes a forfeiture of pension rights to the extent that the offense for which a member is convicted involves the funds or property of a "system referred to in subdivision (1) of this section." The retirement system referred to in subsection 15(1) is "any system of which [the person convicted] is a member." In the case of an MDC employee such as Clemente, that system is, as you know, the State Employees Retire- ment System. See G.L. c. 32, § 2. Although the remainder of this opinion focu.ses on the involvement of the funds or property of the relevant "governmental unit," that is, the MDC, I do not mean to suggest that Clemente's crime may not also have involved the funds or property of the State Employee's Retirement System. Indeed, count 1 specifically states that one of the objectives of the criminal enterprise was to assist others in realizing "whatever pension benefits would accrue by reason of the appoint- ment to or promotion within the police department." To the extent that any such benefits have been paid out of the funds of the State Employee's Retirement System, they could be considered in calculating restitution. See discussion, infra, at 12-13. '' I note for example that portions of count 11 broadly allege that Clemente deprived the Commonwealth of his own services as an MDC police officer. I do not know what facts might underlie this allegation or whether the funds or property of the MDC are implicated. Count 1 1 also refers to instances where test scores were altered in order to advance the positions of certain police officers. The indictment, however, does not indicate whether this part of the scheme involved MDC police officers. *' As this conclusion suggest, I take the funds or property of the MDC to include any funds appropriated by the Legislature for the use of the MDC or property purchased with those funds. Since the MDC is an agency of the Commonwealth, it conducts its activities and meets its payroll not with funds of its own but w ith Commonwealth funds made available to it from the State treasury by periodic appropriations. See Gallagher V. Metropolitan District Commission. 371 Mass. 691, 698 ( 1977). See, e.g., G.L. c. 29, §§ 9A, 12, 13, 14, 26, 27. For the phrase "funds or property" in section 15 to have any meaning when the "governmental unit" to which the term applies is the MDC. it must, therefore, include Commonwealth funds appropriated for the use of the MDC. ' Subsection 15(3) provides that pension rights be forfeited "unless and until full restitution for any such misappropriation has been made." See ante at n. 2. The term "such misappropriation" plainly refers to the "offense involving the funds or property." ^ The Court in this case was interpreting the word "misappropriation" as it was used, not in subsection 15(3), but in subsection 15(1), which provides a method for the P.D. 12 41 forfeiture of pension rights of those who have been "charged," as opposed to con- victed, of the misappropriation of funds or property of a governmental unit or retire- ment system. It can be readily inferred, however, that the Legislature, which enacted the two subsections simultaneously, see St. 1945, c. 658. § 1, intended the word "misappropriation" to have the same meaning in both subsections. See Randall's Case, 331 Mass. 383, 386 ( 1954). " As the Court sets forth in its opinion, at 368, the American Heritage Dictionary 838 (1976) defines "misappropriate" as follows: "l.a. To appropriate wrongly, b. To ap- propriate dishonestly for one's own use; embezzle. 2. To use for illegal purposes." In Webster's Third New International Dictionary 1442 (1971), the word is defined as: "la: to apply to illegal purposes ... b: to appropriate dishonestly for one's own use: embezzle ... 2: to appropriate wrongly or misapply in use . . . ." The Court also notes, at 368-369 and n. 4, that a restricted construction of "misappropriate" is specifically rejected in Black's Law Dictionary 901 (5th ed. 1979), which defines misappropriation as: "The act of misappropriating or turning to a wrong purpose; wrong appropriation; a term which does not necessarily mean peculation, although it may mean that . . . ." "Peculation," the Court notes, is defined in Black's Law Dictionary 1017-1018 (5th ed. 1979) as: "The unlawful appropriation, by a depository of public funds, of the property of the government intrusted to his care, to his own use, or that of others. The fraud- ulent misappropriation by one to his own use of money or goods intrusted to his care." '" I add that while the Black's Law Dictionary definition of "misappropriation" sug- gests that misappropriation may sometimes mean peculation, that is, misappropria- tion of entrusted funds, see ante at n. 9. 1 see no basis to infer such a restriction in the way "misappropriation" is used in section 15. The use of the word "misappropriation" interchangeably with the extremely broad expression "offense involving . . . funds or property" strongly suggests that the word "misappropriation" was used in its usual, broad sense. Moreover, as noted ante at n. 4, the term "misappropriation" in subsec- tion 15(3) refersnot only toacrime involving the funds of the employee's governmen- tal unit but also to the retirement system of which the employee is a member. A crime "involving the funds or property" of an employee's retirement system would virtually never involve peculation except in the singular circumstance where the convicted retire- ment system member was also an employee of the retirement system. If "misappropria- tion" is to have any meaning in this context, then, it must include more than peculation. " G.L. c. 32, § 15(2) sets forth the procedures for proceedings under section 15, and specifically provides that the Board itself may initiate such proceedings. '- I do not, for example, believe it would be necessary for the Board to attempt to discount the amount of restitution by the value of any increased services improperly promoted officers may have provided to the MDC as a result of their promotions. While an improperly promoted MDC police officer may have adequately performed the duties required of his or her enhanced rank, the officer's promotion as a result of a criminal enterprise such as the one at issue here severely damages the reputation and integrity of the MDC. While you might plausibly determine that such damage is in whole or in part too intangible to quantify for purposes of restitution, the existence of such damage would militate strongly against requiring you to consider any services of improperly promoted police officers as a benefit bestowed on the MDC. 42 P.D. 12