UNITED STATES COURT OF APPEALS FOR THE D.C. CIRCUIT


IN RE: SAMUEL R. PIERCE, JR. (SANDERS FEE APPLICATION)


89-0005e

D.C. Cir. 1999


*	*	*


Opinion for the Special Court filed Per curiam.


Per curiam: R. Carter Sanders petitions this court under  Section
593(f) of the Ethics in Government Act of 1978, as  amended, 28 U.S.C.
s 591 et seq. (1994) (the "Act"), for  reimbursement of attorneys'
fees in the amount of $17,500.00  that he incurred during and as a
result of the investigation  conducted by Independent Counsels ("IC")
Arlin M. Adams  and Larry D. Thompson. Because we conclude that
Sanders  has not carried his burden of showing that he was a subject
of  the investigation and that the fees would not have been  incurred
but for the requirements of the Act, we deny the  petition in its


Background1


In 1978 Congress established the moderate rehabilitation  ("mod rehab")
program within the U.S. Department of Hous-




__________

n 1 We have had recent occasion to review the facts of this matter  in
In re Samuel R. Pierce, Jr. (Olivas Fee Application), 178 F.3d 


ing and Urban Development ("HUD"). This program encour- aged developers
to upgrade moderately substandard housing  units for occupation by low
income families. In 1988 HUD's  Inspector General ("IG") conducted an
audit of the mod rehab  program as administered from 1984 through 1988
and found  that the program was not being administered efficiently, 
effectively, or economically. The Inspector General's audit  report
triggered congressional investigations into abuses, fa- voritism, and
mismanagement at HUD during the 1980s  under the tenure of HUD
Secretary Samuel R. Pierce, Jr. R.  Carter Sanders, the fee petitioner
here, was Associate Gener- al Deputy Assistant Secretary of
Housing/Deputy Federal  Housing Commissioner during a portion of the
time that  Pierce was Secretary. Subsequently, Sanders returned to 
the private sector as a consultant, assisting local housing 
authorities to obtain mod rehab funding from HUD. Sanders  Application


Based on information elicited during the congressional  investigations,
the House Judiciary Committee wrote to At- torney General Richard
Thornburgh seeking the appointment  of an independent counsel to
investigate the matter. Follow- ing a preliminary investigation,
Attorney General Thornburgh  applied to this court for appointment of
an independent  counsel. On March 1, 1990, we appointed former United 
States Circuit Judge Arlin Adams2 as independent counsel "to 
investigate ... whether Samuel R. Pierce, Jr., and other  [HUD]
officials may have committed the crime of conspiracy  to defraud the
United States or any other Federal crimes ...  relating to the
administration of the selection process of the  Department's Moderate




__________

n 1350 (D.C. Cir., Spec. Div., 1999) (per curiam). Rather than re- plow
recently tilled ground, we have adopted much of the language  in the
background portion of this opinion, and, where applicable, a  portion
of the analysis from that decision.


2 Independent Counsel Adams resigned in May of 1995. This  court
appointed his deputy, Larry D. Thompson of the Atlanta bar,  to
succeed him.


through 1988." Order Appointing Independent Counsel,  March 1, 1990.


The IC conducted a comprehensive investigation ultimately  confirming a
widespread pattern of corruption at HUD dur- ing Pierce's tenure.
Although the IC announced on January  11, 1995, that he would not seek
indictment of Pierce, during  the course of the investigation
seventeen (17) other persons  were charged with and convicted of
federal crimes as a result  of the IC's investigation. That
investigation and the indict- ments ranged well beyond the core facts
of the original  application for appointment of independent counsel.
Of par- ticular reference to the petitioner before us, in May of 1990 
the IC served a subpoena on Sanders seeking documents  related to
Sanders' work while he was an official at HUD as  well as his work on
mod rehab projects after he left HUD.  Sanders Application at 6. He
later voluntarily appeared for  an interview at the IC's office. IC's


The IC's investigation is now complete. Pursuant to the  statute, the
IC submitted a final report to this court on  March 30, 1998. See 28
U.S.C. s 594(h)(1)(B). We ordered  the report made public by order of
October 27, 1998. There- after, Sanders, pursuant to Section 593(f)(1)
of the Act,  petitioned this court for reimbursement of his attorneys'
fees.  As directed by Section 593(f)(2) of the Act, we forwarded 
copies of Sanders' fee petition to the Attorney General and  the IC
and requested written evaluations of the petition. The  court
expresses its appreciation to the IC and the Attorney  General for
submitting these evaluations, which we have  given due consideration
in arriving at the decision announced  herein.


Analysis


Unique in the criminal law structure of the United States,  the Ethics
in Government Act provides for reimbursement of  attorneys' fees
expended by subjects in defense against an  investigation under the
Act. Specifically, 28 U.S.C.  s 593(f)(1) states:


Upon the request of an individual who is the subject of  an
investigation conducted by an independent counsel  pursuant to this
chapter, the division of the court may, if  no indictment is brought
against such individual pursuant  to that investigation, award
reimbursement for those  reasonable attorneys' fees incurred by that
individual  during that investigation which would not have been 
incurred but for the requirements of this chapter.


Because the Act "constitutes a waiver of sovereign immuni- ty it is to
be strictly construed." In re Nofziger, 925 F.2d  428, 438 (D.C. Cir.,
Spec. Div., 1991) (per curiam). Therefore,  the Act provides only
reimbursement for attorneys' fees that  survive an elemental analysis
determining whether the peti- tioner is the "subject" of the
independent counsel's investiga- tion, incurred the fees "during" that
investigation, and would  not have incurred them "but for" the
requirements of the Act.  The petitioner "bears the burden of
establishing all elements  of his entitlement." In re North (Reagan
Fee Application),  94 F.3d 685, 690 (D.C. Cir., Spec. Div., 1996) (per
curiam).  We conclude that Sanders has not met either the "subject" or
 the "but for" requirement.


A. "Subject" Status


We have previously defined the term "subject" as a person  whose
conduct is within the scope of the independent coun- sel's
investigation in such fashion that "the Independent  Counsel might
reasonably be expected to point the finger of  accusation" at him. In
re North (Dutton Fee Application),  11 F.3d 1075, 1078 (D.C. Cir.,
Spec. Div., 1993) (per curiam);  see also In re North (Shultz Fee
Application), 8 F.3d 847, 850  (D.C. Cir., Spec. Div., 1993) (per
curiam). Although Sanders  argues forcefully that he fits within this
definition, we con- clude that he has not carried his burden of
establishing that  he was in fact a subject of the IC's


Sanders' main argument, in essence, is that because the IC 
investigated the mod rehab program, and because he was  involved with
the mod rehab program, he was a subject of the  IC's investigation.
Reply at 3. We are not persuaded,  however, that the IC was focused on
any possible criminal 


culpability by Sanders during the IC's investigation. Sand- ers'
involvement with the IC's investigation appears to have  been minimal:
he was served one subpoena for documents at  the beginning of the IC's
investigation, and three years later  was interviewed by the IC's
staff. He had no other contacts  with the IC's office. See, e.g., In
re North (Gregg Fee  Application), 57 F.3d 1115, 1116 (D.C. Cir.,
Spec. Div., 1995)  (per curiam). He was never informed by the IC that
he was  a subject of the investigation. See, e.g., In re North
(Haskell  Fee Application), 74 F.3d 277, 280 (D.C. Cir., Spec. Div., 
1996) (per curiam). There is no evidence before us that  anyone he was
associated with was targeted by the IC. See,  e.g., In re North
(Teicher Fee Application), 48 F.3d 1267,  1268-69 (D.C. Cir., Spec.
Div., 1995) (per curiam). And there  is no mention of him in the IC's
Final Report. See, e.g., In re  North (Adkins Fee Application), 33
F.3d 76, 76-77 (D.C. Cir.,  Spec. Div., 1994) (per curiam).


Sanders also argues that it was "plainly evident from the  inception of
the [IC's] investigation that [he] faced 'a realistic  possibility ...
[that he] would become a defendant' " because  that investigation was
based on the congressional and HUD  IG investigations which, according
to Sanders, "already had  inquired extensively into Mr. Sanders'
involvement with cer- tain MRP [mod rehab] projects." Sanders
Application at 8  (internal citation omitted). It appears, however,
that the only  contact Sanders had with these previous investigations
was an  administrative subpoena seeking documents that was served  on
him by the HUD IG. In sum, we conclude that Sanders  could not
consider himself to be under a "reasonable appre- hension of
prosecution" by the IC during his investigation.  In re North (Gadd
Fee Application), 12 F.3d 252, 256 (D.C.  Cir., Spec. Div., 1994) (per


B. Fees Not Incurred "But For" the Requirements of the  Act


As we have held, "[a]ll requests for attorneys' fees under  the Act
must satisfy the 'but for' requirement of" the Act. In  re Sealed
Case, 890 F.2d 451, 452 (D.C. Cir., Spec. Div., 1989)  (per curiam).
The purpose of awarding only fees that would 


not have been incurred "but for" the Act is to ensure that  "officials
[and here derivative 'subjects'] who are investigated  by independent
counsels will be subject only to paying those  attorneys' fees that
would normally be paid by private citi- zens being investigated for
the same offense by" federal  executive officials such as the United
States Attorney. Id. at  452-53 (citing S. Rep. No. 97-496, 97th
Cong., 2d Sess. 18  (1982), reprinted in 1982 U.S.C.C.A.N. 3537, 3554
(referring  to "fees [that] would not have been incurred in the
absence of  the special prosecutor [independent counsel] law")).


As we have stated "[t]he most difficult element for a fee  applicant to
establish under the Act is that the fees 'would not  have been
incurred but for the requirements of [the Act].' "  In re North (Bush
Fee Application), 59 F.3d 184, 188 (D.C.  Cir., Spec. Div., 1995) (per
curiam) (quoting Dutton, 11 F.3d  at 1079). In part this is so because
the element requires a  petitioner to prove a negative and one with a
high component  of speculation. In part, though, it is difficult
because the law  contemplates that it should be difficult, that such
fees will not  be a common thing. As we stated above, the
contemplation  of the legislation is not that subjects of independent
counsel  investigations will be reimbursed for all legal fees, but
only  that they will be reimbursed for those legal fees that would 
not have been incurred by a similarly-situated subject investi- gated


Nonetheless, we have found that petitioners qualify for an  award of
fees in the face of the but-for test in at least four (4) 
circumstances:


1. When the independent counsel's investigation sub- stantially
constituted duplication of the preliminary in- vestigation conducted
by the Department of Justice. See  In re Olson, 884 F.2d 1415, 1420
(D.C. Cir., Spec. Div.,  1989) (per curiam); Dutton Fee Application,
11 F.3d at  1080.


2. When the petitioning subject has been "prejudiced  by the Department
of Justice's failure to comply with the  substantial protective
features of the Act." In re Nofzig-


er, 925 F.2d at 438 (citing In re Meese, 907 F.2d 1192  (D.C. Cir.,
Spec. Div., 1990) (per curiam)).


3. When in the absence of the requirements of the Act  " 'the case
could have been disposed of at an early stage  of the investigation,'
" without subjecting the petitioning  subject to the conditions that
led to his incurring the fees  sought. In re Segal (Sagawa Fee
Application), 151 F.3d  1085, 1089 (D.C. Cir., Spec. Div., 1998) (per
curiam)  (quoting In re Nofziger, 925 F.2d at 438).


4. Not wholly distinct from No. 3, supra, when "high  public officials
[or derivative subjects] were investigated  under the Act in
circumstances where private citizens  would not [have been]
investigated." In re Nofziger, 925  F.2d at 442; see also Dutton, 11


Sanders argues that his case falls into categories (1) and  (3). As to
(1), Sanders claims that the IC duplicated the  investigations of
Congress and the HUD IG, and that such  duplication is sufficient to
satisfy the "but for" element. For  authority on his position Sanders
cites to In re Olson (Perry  Fee Application), 892 F.2d 1073 (D.C.
Cir., Spec. Div., 1990)  (per curiam), and In re Olson. In Perry we
held that the  IC's investigation of Perry was duplicative because the
inves- tigation by the Public Integrity Section of the DOJ had 
recommended against prosecution in the matter. See 892  F.2d at 1074.
Similarly, in In re Olson, we found that the  Independent Counsel's
investigation was duplicative because  it covered the same ground
"that had been covered by the  preliminary investigation of the
Department of Justice." 884  F.2d at 1420. In both those cases, then,
it was duplication of  the preliminary investigation that satisfied
the "but for"  element, not duplication of any other investigation,
and we  conclude that this is what the Congress intended when it first
 passed the attorneys' fees provision in 1982. We find support  for


First, s 593(f)(1) of the Act states that fees may be award- ed to
individuals who would not have incurred the fees "but  for the
requirements of [the Act]." (emphasis added) Conse- quently, as we
noted in Olivas,


attorneys' fees are to be awarded to those who have  incurred the fees
not because of the Act itself (and  therefore the appointment of the
independent counsel per  se), but because of the requirements of the
Act. In re  Nofziger, 925 F.2d at 445. And requirements "refers to 
the special limitations and procedures established by the  Act," e.g.,
the two-step investigatory procedure by the  Attorney General and the
restrictions on the Attorney  General in complying with that
procedure, id. ...


178 F.3d at 1355 (emphasis in original). Included in this  "two-step
investigatory procedure" is the preliminary investi- gation. See 28
U.S.C. s 592.


Second, the 1982 Senate Committee Report on the Ethics  in Government
Act, referring to attorneys' fees, stated that  "[r]eimbursement may
be warranted ... in instances where  the [independent counsel]
duplicates actions which have been  taken by the Attorney General
during the preliminary inves- tigation." S. Rep. No. 97-496, 97th
Cong., 2d Sess. 19 (1982),  reprinted in 1982 U.S.C.C.A.N. 3537, 3555
(emphasis added).  As Sanders has put forth no evidence that the IC's
investiga- tion duplicated the preliminary investigation conducted by
the  Attorney General, he does not fit into category (1).


As to category (3), Sanders claims that the Attorney Gener- al was
reluctant to have an independent counsel appointed  but that the Act
compelled the Attorney General to do so.  For evidence of this
reluctance, Sanders first points to the  Attorney General's
Application for Appointment of Indepen- dent Counsel ("Application for
Appointment"), in which the  Attorney General stated that he was
encumbered in his  preliminary investigation by the constraints
imposed by 28  U.S.C. s 592 on using grand juries, subpoenas, and
grants of  immunity. Sanders likens this case to In re Donovan, 877 
F.2d 982 (D.C. Cir., Spec. Div., 1989) (per curiam), in which  we held
that the "but for" requirement was satisfied where  the Attorney
General, because of the strictures of the Act,  could not convene a
grand jury, plea bargain, or issue subpoe- nas and as a result was
required to refer the matter to an  independent counsel. In that case,


prevented the Attorney General from properly evaluating the  single
witness who was of extremely questionable credibility,  and upon whom
the single allegation of alleged wrongdoing  was based. See In re
Donovan, 877 F.2d at 990. Here, in  contrast, the Attorney General in
his Application for Appoint- ment, after citing the strictures placed
upon him by the Act,  went on to state that any further "determination
at this time  is made especially difficult by the breadth of the
allegations  and the fact that a number of the figures central to the 
alleged conspiracy, including Secretary Pierce ... have de- clined to
be interviewed ...." Application for Appointment  at 5 (emphasis
added). Consequently, as we noted in In re  Pierce (Kisner Fee
Application), 178 F.3d 1356 (D.C. Cir.,  Spec. Div., 1999) (per
curiam), "[t]he convoluted nature of the  corruption involved and the
high profile identity of the sus- pects and defendants would no doubt
have resulted in a  complex and lengthy investigation with or without
the ap- pointment of an independent counsel." Id. at 1361.


In a further attempt to show the Attorney General's reluc- tance in
having an independent counsel appointed, Sanders  references a
newspaper article which quotes an anonymous  source stating that
prosecutors in the DOJ allegedly recom- mended to the Attorney General
that the investigation be  shut down for lack of evidence. Even if it
were accurate,  which is highly questionable considering the not-for-
attribution source, the information is, as the IC points out, 
irrelevant. Although certain prosecutors may recommend  against
investigating a certain matter, this fact gives us little  guidance in
trying to determine what an Attorney General  will ultimately decide
to do in the matter. This is not a  situation similar to Perry, 892
F.2d at 1074, where the Public  Integrity Section definitively
recommended against prosecu- tion; nor is it similar to Sagawa, 151
F.3d at 1089; and In re  Segal (Segal Fee Application), 145 F.3d 1348,
1352 (D.C. Cir.,  Spec. Div., 1998) (per curiam), in which the
Attorney General  stated in her Application to the Court requesting
the appoint- ment of an independent counsel that "the Department of 
Justice would in all likelihood exercise its discretion to decline  to
prosecute this case as a criminal matter." Here, we can 


discern nothing in the Attorney General's Application for  Appointment
that would lead us to believe that he was in any  way hesitant to have
an independent counsel appointed based  on the substance of the
evidence available to him.


In sum, we cannot agree with Sanders' statement that "had  the
Independent Counsel Act not restricted the Attorney  General's ability
to conduct a thorough preliminary investiga- tion, it is possible,
given Attorney General Thornburgh's  obvious reluctance, that no
independent counsel would have  been appointed." Sanders Application
at 12. Indeed, as we  stated in Kisner, if the IC had not investigated
this matter  then "the Attorney General or other investigative
authority  would have pursued allegations of corruption as deep and 
widespread as those occasioning the Independent Counsel's 
investigation." 178 F.3d at 1360; see also Olivas, 178 F.3d at 


Conclusion


The petition of R. Carter Sanders for reimbursement of  attorneys' fees
is denied for failure to comply with the  "subject" and "but for"
requirements of 28 U.S.C. s 593(f)(1).