## Facts

- B & D Electric Supply, Inc., owned and operated by Edwin Hawley Brooks, Jr. and his sons John Russell Brooks and Stephen Kent Brooks, supplied electrical components for U.S. Navy ship-refitting projects through subcontracts with prime contractors.
- Two subcontracts were central: motor controllers (about $51,500) and rotary switches (about $1,500).
- The related prime contracts between the Navy and the prime contractors exceeded $9,000,000 and $5,000,000.
- For the motor-controller subcontract, B & D assembled controllers and affixed trademarks of an approved military supplier, representing the goods as coming from an authorized source.
- For the rotary-switch subcontract, B & D represented switches as new though they were assembled or rebuilt from used or nonconforming components.
- A jury convicted all defendants of conspiracy (18 U.S.C. § 371) and trafficking in counterfeit goods (18 U.S.C. § 2320(a)).
- Edwin Brooks, John Brooks, and B & D Electric were also convicted of major fraud against the United States (18 U.S.C. § 1031(a)).
- Edwin Brooks, John Brooks, and B & D Electric appealed the § 1031 convictions, arguing the $1,000,000 statutory threshold was not met because their subcontracts were far below $1,000,000; the government cross-appealed aspects of sentencing.

## Issues

1. Whether 18 U.S.C. § 1031(a)’s $1,000,000 value requirement is satisfied when the fraudulent conduct concerns subcontracts worth less than $1,000,000 but those subcontracts are constituent parts of prime contracts with the United States exceeding $1,000,000.

## Decision

- The Fourth Circuit held the § 1031(a) $1,000,000 threshold was satisfied because the subcontracts were constituent parts of prime Navy contracts exceeding $1,000,000.
- The court affirmed the major-fraud convictions of Edwin Brooks, John Brooks, and B & D Electric on that jurisdictional/value issue.
- The court’s overall disposition was affirmed in part, reversed in part, and remanded on other issues not affecting the § 1031(a) threshold ruling.

## Legal Principles

- Under 18 U.S.C. § 1031(a), the $1,000,000 value requirement may be met by the value of the prime contract with the United States when the charged fraud involves a subcontract that is a constituent part of that prime contract.
- The phrase “contract, subcontract, or any constituent part thereof” permits measuring the statutory threshold by the overall procurement transaction, not solely by the face value of the specific subcontract where the misrepresentation occurred.
- A supplier or subcontractor may be liable for major fraud against the United States even when the subcontract price is under $1,000,000, if the subcontract is tied to a U.S. prime contract valued at $1,000,000 or more.

## Conclusion

The Fourth Circuit interpreted § 1031(a) to allow the $1,000,000 threshold to be satisfied by the value of the prime U.S. contract when a fraudulent subcontract is part of that larger procurement, and it upheld the defendants’ major-fraud convictions on that basis.


United States v. Brooks, 111 F.3d 365 (4th Cir. 1997)