Section 666 in the Territories: Third Circuit Affirms that Commissioners of Statutorily “Independent” Agencies Are Government Agents and Federal Block Grants Are “Benefits”

Case: United States v. Stephanie Barnes, No. 24-1002 (3d Cir. Sept. 12, 2025) (not precedential)

Court: United States Court of Appeals for the Third Circuit

Panel: Restrepo, Freeman, and McKee, Circuit Judges (Opinion by Judge Restrepo)

Introduction

This appeal from the District Court of the Virgin Islands arises out of a public corruption prosecution tied to the Virgin Islands Casino Control Commission (VICCC). Stephanie Barnes, a contractor retained by then-VICCC Chair Violet Anne Golden, was convicted of (1) conspiracy to defraud the United States, 18 U.S.C. § 371 (with the object offense being federal program theft, 18 U.S.C. § 666); (2) receipt of stolen government property, 14 V.I.C. § 895(b); and (3) filing a false tax return, 33 V.I.C. § 1525(1).

On appeal, Barnes mounted three principal challenges: (1) evidentiary sufficiency as to the § 371 conspiracy predicated on § 666, arguing that § 666 did not reach her conduct because (a) Golden was only an agent of the VICCC (not the Virgin Islands Government), (b) the funds at issue were VICCC funds rather than Virgin Islands Government funds, and (c) the government failed to prove the “federal benefits” requirement of § 666(b); (2) instructional error, claiming the jury should have received a unanimity instruction linking the $5,000 misapplication threshold to the same one-year period during which the territorial government received more than $10,000 in federal benefits; and (3) procedural unreasonableness at sentencing based on the loss calculation’s failure to credit legitimate services and the bona fide compensation carveout.

The Third Circuit rejected each contention and affirmed. While not precedential, the opinion offers clear guidance on three recurring § 666 questions in the territorial context: who qualifies as an “agent” of the government, when funds held by a statutorily independent commission are still “government” funds, and what counts as “federal benefits” under § 666(b). It also addresses, under plain error review, a proposed unanimity instruction linking § 666’s thresholds to a single one-year period, and it endorses a careful loss calculation that excludes bona fide compensation.

Summary of the Opinion

Agency under § 666: Evidence that the VICCC commissioner participated in the Government Employees’ Retirement System and had statutory authority to act “in the name of the [Virgin Islands Government]” sufficed for a rational jury to find she was an “agent” of the Virgin Islands Government as defined in § 666(d)(1), not merely an agent of the VICCC.
Government funds: Although the VICCC is an “independent agency,” statutory budgetary approval by the Legislature, oversight by the Department of Finance and Legislature, and a revolving fund shared with the Department of Justice (Division of Gaming Enforcement) supported the conclusion that the stolen funds were “owned by, or under the care, custody, or control” of the Virgin Islands Government, satisfying § 666(a)(1)(A)(ii).
Federal benefits under § 666(b): Annual federal block grants in the millions and proof that the territorial government received >$10,000 in federal grants in each relevant year were classic “benefits” within the meaning of § 666(b), comfortably within Fischer v. United States’s framework distinguishing federal “assistance” from mere compensation/reimbursement.
Unanimity instruction: Even assuming arguendo that jurors must unanimously find that the $5,000 misapplication occurred in the same one-year period as the >$10,000 in federal benefits, any failure to instruct was not plain error because overwhelming evidence showed both thresholds were met in 2016.
Sentencing/loss: The district court rejected a higher PSR loss recommendation, adopted a $282,315.68 loss (triggering a 12-level enhancement), and expressly excluded training-related payments as bona fide services. No procedural error occurred.

Detailed Analysis

Precedents Cited and Their Influence

United States v. Fountain, 792 F.3d 310 (3d Cir. 2015): The panel relied on Fountain for the sufficiency-of-the-evidence standard: reviewing the record in the light most favorable to the government and drawing all reasonable inferences in favor of the verdict. This standard underpinned the court’s decision to uphold the jury’s findings on agency, ownership/control of funds, and the existence of federal benefits, without needing to resolve a preservation dispute (plenary vs. plain-error review).
Fischer v. United States, 529 U.S. 667 (2000): Fischer cautions against treating every federal dollar as a § 666 “benefit,” emphasizing program structure, operation, and purpose, and noting that mere compensation or reimbursement does not qualify. The panel cited Fischer but concluded that the evidence here—recurrent federal block grants and annual grant receipts exceeding $10,000—plainly fell within § 666(b)’s “benefits” rubric, requiring no granular structural analysis because block grants are paradigmatic federal assistance.
United States v. Olano, 507 U.S. 725 (1993): Applied to the jury-instruction claim, Olano’s plain-error framework requires showing that an error affected the outcome. Given proof that Barnes overbilled by $29,500 in FY 2016 and that the Virgin Islands Government received more than $10,000 in federal grants that year, the panel found no outcome-affecting error in the omission of the proffered unanimity instruction.

Legal Reasoning

1) “Agent” of the Virgin Islands Government under § 666(d)(1)

Section 666 reaches theft, embezzlement, and fraud by “an agent” of a qualifying entity. “Agent” includes a “servant or employee,” and also a “partner, director, officer, manager, and representative.” The defense argued that Golden’s agency ran only to the VICCC, not to the Virgin Islands Government. The panel held a rational jury could find Golden was an agent of the territorial government because:

Golden’s participation in the Government Employees’ Retirement System supports that she was an employee/servant of the government.
As commissioner, she had statutory authority to act “in the name of [the Virgin Islands Government]” to enforce the Casino Control Act, evidencing representative authority to act on behalf of the government itself.

These facts align with § 666(d)(1)’s expansive definition and with the statute’s purpose: protecting the integrity of federal funds administered by state, local, or territorial government entities and their agents.

2) Funds “owned by, or under the care, custody, or control” of the Virgin Islands Government

Barnes argued the funds were exclusively VICCC’s because the Commission is “administratively and financially independent.” The court held otherwise, based on statutory interlinkages:

VICCC is “an independent agency of the executive branch of the Government of the Virgin Islands” whose budget is approved annually by the Legislature (32 V.I.C. § 404).
The Casino Control Revolving Fund is disbursed jointly by the Commission and the Attorney General’s Division of Gaming Enforcement, with 20% allocated to the Division (32 V.I.C. § 514), evidencing shared governmental financial structures.
VICCC’s finances remain subject to Department of Finance and Legislature oversight, including reporting and auditing requirements.

Given these statutory ties and oversight mechanisms, a rational jury could find the funds in question were owned by or under the care, custody, or control of the Virgin Islands Government, satisfying § 666(a)(1)(A)(ii).

3) “Benefits” under § 666(b)

Fischer instructs courts to avoid a boundless conception of “benefits” and to analyze the nature of the federal program. The record reflected:

The Virgin Islands Government receives approximately $6 million in federal block grants annually through its Department of Human Services.
From 2016 to 2019, the federal government provided more than $10,000 in grants to the Virgin Islands Government each year.

The panel characterized these as classic forms of federal assistance—direct grants—well within § 666(b)’s ambit, unlike mere purchase contracts or reimbursements. Thus, the federal benefits threshold was established.

4) Unanimity instruction on temporal linkage between § 666(b) and § 666(a)

Barnes argued plain error because the jury was not instructed that it must unanimously find the $5,000 theft/misapplication threshold was met in the same year the government received >$10,000 in federal benefits. Without deciding whether such an instruction is legally required, the panel held any omission did not affect the outcome given:

Evidence of $29,500 in overbilling in fiscal year 2016; and
Evidence that in 2016 the territorial government received >$10,000 in federal grants.

Because the jury necessarily found the overbilling and the record indisputably showed the government received qualifying federal benefits in that same year, no plain error was shown under Olano.

5) Sentencing: Loss calculation and the bona fide compensation carveout

Barnes argued the district court erroneously counted all payments as loss and failed to credit legitimate services, contrary to § 666’s exclusion of bona fide compensation “paid in the usual course of business.” The PSR proposed a $635,554 loss and a 14-level enhancement under U.S.S.G. § 2B1.1(b)(1)(H). The district court, however:

Rejected the PSR’s figure, adopting a $282,315.68 loss (corresponding to a 12-level enhancement for losses between $250,000 and $550,000); and
Expressly excluded training payments as bona fide compensation for services rendered.

Because the court did exactly what Barnes argued it should—exclude legitimate compensation and include only fraudulent overbilling and personal misuse—no procedural error occurred. In short, the sentence was procedurally reasonable.

Impact and Practical Implications

Territorial reach of § 666: The opinion reinforces that § 666’s protections apply robustly in territorial settings. A statutorily “independent” commission can still be part of government for § 666 purposes when statutes show budgetary oversight, shared funds, and authority to act on the government’s behalf.
Who is an agent? The decision embraces § 666(d)(1)’s broad agent definition. Evidence of participation in government employment systems and authority to litigate in the government’s name can be dispositive.
What are federal “benefits”? Regular federal block grants and grant programs are squarely within § 666(b). Prosecutors need not present an encyclopedic structural analysis when the assistance is plainly a grant (as opposed to a procurement contract or reimbursement).
Jury instructions on timing: While the panel did not resolve whether unanimity is required on the “same one-year period” linkage, its outcome-focused approach signals that any error will be harmless if the record clearly shows both thresholds (>$10,000 benefits and >$5,000 misapplication) coincide within a single year.
Sentencing/loss discipline: District courts should, and do, exclude bona fide compensation from loss. Careful parsing between legitimate services and fraudulent overbilling or personal use will be affirmed on appeal.
Persuasive, not binding: Although not precedential, the reasoning is likely to be cited persuasively in Virgin Islands and Third Circuit district courts confronting § 666 challenges involving territorial agencies and block grant funding.

Complex Concepts Simplified

18 U.S.C. § 666 (federal program theft): Criminalizes theft, embezzlement, or fraud by an agent of a government or organization that receives more than $10,000 in federal assistance in a one-year period, if the value of the property involved is at least $5,000.
“Agent” (18 U.S.C. § 666(d)(1)): Broadly includes anyone authorized to act on behalf of the government/organization, including officers, employees, managers, or representatives.
“Benefits” (18 U.S.C. § 666(b)): Federal assistance such as grants, subsidies, loans, guarantees, or insurance. Per Fischer, not every federal payment qualifies; mere compensation for goods/services or reimbursements generally do not.
Bona fide compensation carveout: Section 666 excludes “bona fide salary, wages, fees, or other compensation paid, or expenses paid or reimbursed, in the usual course of business” from its reach. At sentencing, related amounts are typically excluded from “loss.”
Conspiracy to defraud the United States (18 U.S.C. § 371): Requires an agreement to commit an offense against the United States (here, § 666), intent to achieve the unlawful objective, and an overt act. Proof often focuses on the substantive offense’s feasibility and the defendant’s knowing participation.
Sufficiency of the evidence (Fountain standard): On appeal, the evidence is viewed in the government’s favor, and the verdict stands if any rational juror could find guilt beyond a reasonable doubt.
Plain error (Olano): To reverse unpreserved errors, a defendant must show an (1) error, (2) that is clear/obvious, (3) affecting substantial rights (typically outcome), and sometimes (4) seriously affecting the fairness, integrity, or public reputation of judicial proceedings.
Unanimity instruction: A direction that the jury must unanimously agree on a particular element or factual predicate. Here, the claimed need to tie the $5,000 misapplication to the same one-year period as the >$10,000 federal benefits was assumed arguendo but found non-prejudicial given the record.
Loss under U.S.S.G. § 2B1.1: Drives offense level increases based on the monetary loss amount. Courts must exclude legitimate compensation and include only the pecuniary harm from fraud or theft.

Conclusion

The Third Circuit’s affirmance in United States v. Barnes crystallizes several practical lessons in applying § 666 within territorial governance:

Commissioners of an “independent” territorial agency can be agents of the territorial government within § 666(d)(1), especially when statutes empower them to act on the government’s behalf and tie their employment to government systems.
Funds administered by such agencies may still qualify as government funds when legislative oversight, budgetary approval, and shared funding mechanisms exist, satisfying § 666(a)’s “care, custody, or control” requirement.
Federal block grants and ordinary grant funding are classic § 666(b) “benefits,” comfortably within Fischer’s conception of federal assistance.
On jury instructions, even if a temporal unanimity link were required, failure to instruct will not warrant reversal absent a realistic prospect of prejudice—particularly where the evidence ties both statutory thresholds to the same fiscal year.
At sentencing, district courts should segregate bona fide compensation from fraudulent gains when calculating loss; careful, conservative loss findings will be upheld.

Although not precedential, this opinion provides persuasive guidance for future public-corruption prosecutions involving territorial agencies, clarifies the breadth of § 666’s agency and benefits requirements, and underscores the Third Circuit’s outcome-focused approach to instructional error and disciplined loss calculations at sentencing.