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Court Revives Claims of Driver’s Licensing Ring

(CN) - The full 9th Circuit reinstated fraud charges Tuesday against men accused of running an illegal mill for commercial driver's licenses in Washington state.

Spokane federal prosecutors say Washington was deprived of honest services by a bribery scheme that snared commercial driver's licenses for out-of-state Bosnian speakers.

Washington requires drivers to obtain commercial driver's licenses to operate 18-wheelers and other big rigs on public roadways.

Brano Milovanovic, an independent contractor for Spokane International Translation, allegedly helped Bosnian speakers cheat on the state's written licensing exam when he was supposed to be translating the test for them.

Milovanovic also provided test-takers with fake addresses so they would appear to be Washington residents, according to the indictment. For his services, Milovanovic allegedly charged each applicant $2,500.

Tony Lamb, a third-party tester for the licensing department, faces charges that he falsified the applicants' results on the skills test for a 10 to 20 percent cut of the bribe.

Prosecutors also indicted four clients who allegedly paid the bribes to get their licenses.

U.S. District Judge Edward Shea dismissed the charges, however, after finding that prosecutors had failed to show the existence of a fiduciary duty and economic harm. Since both Milovanovic and Lamb were independent contractors, Shea said they had no formal fiduciary duty to the state and thus could not deprive it of honest services.

He also found the case wanting because it lacked "identifiable economic harm."

A three-judge panel of the 9th Circuit revived the charges on appeal, then vacated its order in favor of a rehearing en banc.

The full, 11-judge court ruled from San Francisco on Tuesday that the case should go to trial.

"We see no reason why Milovanovic and Lamb should be treated differently simply because the terms of their contracts label them independent contractors," Judge Richard Tallman wrote for the court. "Because allegations in the indictment, which we must take as true for the purposes of this appeal, assert that the state, through outsourcing the work to private contractors, reposed a special trust in Lamb and Milovanovic to ensure the integrity of the testing of CDL applicants, and thus relied on the provision of their honest services in administering the tests and certifying the results, we hold that a jury could find that Milovanovic's and Lamb's conduct falls within the ambit of §§ 1341 and 1346," sections of the federal statute on honest services mail fraud.

Even though the word "fiduciary" does not appear in the superseding indictment, it properly "alleges that Milovanovic and Lamb breached an implicit fiduciary duty of trust as test administrators and interpreters," the unanimous decision states.

A fiduciary relationship as it relates to honest services fraud "need not be a formal, or classic, fiduciary relationship," Tallman wrote. "Rather, §§ 1341 and 1346 similarly reach those who assume a comparable duty of loyalty, trust, and confidence, the material breach of which, with the intent to defraud, deprives the victim of the intangible right to honest services."

"Similarly, the indictment alleges that Milovanovic solicited and accepted bribes, split them with Lamb, and helped applicants to cheat by supplying the answers to the test questions during the exam by either telling them the correct answers or using hand signals," he added. "The fact that Milovanovic contracted with a translation services company and not directly with the state is not determinative. The independent contractor relationship with the government in situations such as here, where the independent contractor provides services to ensure public safety well knowing the state is relying upon his faithful service, necessitates a higher level of trust that weighs in favor of finding a fiduciary duty."

The judges further found that "foreseeable risk of economic harm is not a necessary element when evaluating whether a party breached a fiduciary duty in violation of the honest services fraud statute."

Robert Fisher, Milovanovic's public defender in Spokane, did not immediately respond to a request for comment.

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