U.S. v. FROST Nos. 95-6004, 95-6005, 95-6006, 95-6011, 95-6012, 96-5722, 96-5725, 96-5726 and 96-5785.
125 F.3d 346 (1997)
UNITED STATES of America, Plaintiff-Appellee, v. Walter FROST (95-6011; 96-5722); Robert Eugene Turner (95-6005; 96-5725); Richard Thomas Congo (95-6004); Peggy Young Potter (95-6012; 96-5726); Dennis Allen Faulkner (95-6006; 96-5785), Defendants-Appellants.
United States Court of Appeals, Sixth Circuit.
Decided September 12, 1997.
Gary Humble (argued and briefed), Office of the U.S. Attorney, Chattanooga, TN, for Appellee.
W. Thomas Dillard (argued and briefed), Wade V. Davies (briefed), Ritchie, Fels, & Dillard, Knoxville, TN for Walter Frost.
Sam D. Elliott (briefed), Charles J. Gearhiser (argued and briefed), Gearhiser, Peters, Lockaby & Tallant, Chattanooga, TN for Robert Eugene Turner.
William P. Burgess, Jr., (briefed), Patrick M. Tuten (argued and briefed), Huntsville, AL for Richard Thomas Congo.
Bobby Lee Cook (briefed), Cook & Palmour, Summerville, GA, Jake Arbes (argued and briefed), Atlanta, GA for Peggy Y. Potter.
Stuart E. Smith (briefed), Bell, Richardson, Huntsville, AL, and Dennis Allen Faulkner, pro se.
Before: KEITH, KENNEDY, and MOORE, Circuit Judges.
KENNEDY, Circuit Judge.
These five criminal defendants raise numerous issues attacking their convictions and sentences for committing mail fraud against the federal government and the University of Tennessee. One defendant also appeals his conviction for knowingly making a false material declaration before a grand jury. For the following reasons, we AFFIRM in part, REVERSE in part, and REMAND for proceedings consistent with this opinion.
During the time period at issue, defendant Dr. Walter Frost was a full-time professor and Chairman of the Department of Engineering Science and Mechanics at the University of Tennessee Space Institute ("UTSI") in Tullahoma, Tennessee. UTSI is a graduate school within the Tennessee school system which offers master's and Ph.D degrees in science and engineering disciplines. Its students are primarily military and other government personnel.
Frost also is the owner and President of FWG Associates, Inc. ("FWG"), a private atmospheric science research firm based in Tullahoma. As it grew, FWG opened another office in Huntsville, Alabama. FWG relies primarily upon contracts with government agencies such as the National Aeronautics and Space Administration ("NASA") and the United States Department of Defense.
Defendant Dr. Robert Turner, who obtained his Ph.D in 1976 under Frost, was a part-time professor at UTSI. Turner is a former NASA engineer, and his role at UTSI included the recruitment of NASA employees for the school. In 1989, he became a vicepresident of FWG and ran the FWG office in Huntsville. Turner also is the uncle of defendants Faulkner's and Congo's wives, who are sisters.
Defendants Dr. Richard Congo, Dr. Dennis Faulkner, and Peggy Potter all were students at UTSI between 1987 and 1990, pursuing either a master's or Ph.D degree. The primary component of the degree was the completion of either a thesis (for a master's degree) or a dissertation (for a doctoral degree). Frost served as the major professor and advisor for each student; he also selected the professors who would sit on the committee before which each student defended orally his or her thesis or dissertation. Frost and Turner served on the committee for each student defendant.
During his studies at UTSI, Faulkner worked for the Department of the Army. Congo and Potter worked for NASA while at UTSI.
For reasons explained in detail infra, a grand jury issued a thirty-one count Superseding Indictment on March 10, 1995 against defendants. Counts One through Sixteen charged defendants with scheming to defraud the United States of money or property, in violation of the Mail Fraud Act, 18 U.S.C. § 1341. Counts Seventeen through Twenty charged a scheme to defraud the University of Tennessee of its intangible right to the honest services of its employees, Frost and Turner. See 18 U.S.C. §§ 1341, 1346. The indictment charged Frost and Turner as principals under each of these
Counts Twenty-One through Twenty-Nine charged a scheme to defraud the federal government, in violation of the mail fraud statute, through the submission of false billing claims. Counts Twenty-One and Twenty-Two applied only to Frost and Turner; Counts Twenty-Three through Twenty-Nine applied only to Frost.
Count Thirty charged Frost with attempted obstruction of justice during the investigation resulting in these prosecutions, in violation of 18 U.S.C. § 1503. Finally, Count Thirty-One charged Congo with making a false material declaration to the grand jury during these proceedings, in violation of 18 U.S.C. § 1623.
After unsuccessfully moving to dismiss the indictment, defendants were tried before a jury beginning on March 28, 1995. On April 28, 1995, the jury convicted each defendant of each count with which he or she had been charged, except that it acquitted Frost and Turner of Count Eighteen, and acquitted Frost of Count Thirty, the obstruction of justice count.
Defendants filed motions for acquittals and new trials, which the District Court denied. Defendants thereafter filed these appeals, and we turn now to the arguments which they have raised.
II. Claims Regarding Mail Fraud Act
A. Scheme to Defraud Federal Government of Contracts
The main theory of the prosecution is that the professor defendants provided each student defendant with written materials and help from FWG employees so that the student could complete his or her thesis or dissertation, and therefore receive an advanced degree, through significant plagiarism and with a minimum of effort. In return for this benefit, the student defendant would abuse his or her position with the government in order to secure for FWG, and through it the professor defendants, lucrative government research contracts, or modifications of contracts. By pursuing this scheme, the professor defendants obtained property from the federal government which they otherwise would not have received, and the student defendants obtained advanced degrees from the University of Tennessee without having done the necessary work.
The government argues that defendants repeatedly violated 18 U.S.C. § 1341, the mail fraud statute, by pursuing this "degrees-for-contracts" scheme. Section 1341 provides:
18 U.S.C. § 1341.
Counts Two through Seven, Nine through Twelve, Thirteen, Fourteen, and Sixteen in the Superseding Indictment rested on the degrees-for-contracts scheme. Although the indictment charged Frost and Turner with all of these counts, it charged Congo only with Counts Two through Seven, Potter with Counts Nine through Twelve, and Faulkner with Counts Thirteen, Fourteen, and Sixteen.
The government contends that, several years later, the student defendants, who were both students at UTSI and government employees, cheated with the help of Frost and Turner on their thesis or dissertation. Further, each student defendant had an alleged role in the award or modification of a government contract to FWG. Accordingly, the government argues, we may infer that defendants entered into the same kind of agreement which Turner unsuccessfully proposed to Berlinrut, acting with the intent to defraud the government of its property.
Every defendant attacks the sufficiency of the evidence supporting these convictions. When determining whether sufficient evidence supports a conviction, we decide "whether, after viewing the evidence in the light most favorable to the prosecution, any rational trier of fact could have found the essential elements of the crime beyond a reasonable doubt." United States v. Ellerbee,
A conviction for mail fraud requires proof of the following three elements:
Id. at 400. A defendant does not commit mail fraud unless he possesses the specific intent to deceive or defraud, see, e.g., United States v. Smith,
A defendant may commit mail fraud even if he personally has not used the mails. See United States v. Griffith,
We agree with defendants that there is insufficient evidence to uphold the counts that rest upon an alleged scheme to defraud the federal government of property in the form of contract awards. These convictions
In 1986, Faulkner began to work as a civilian electronics engineer at CROSSBOW, an office within the Department of the Army and located at Redstone Arsenal, Alabama. His responsibilities included acting as a Contracting Officer's Technical Representative ("COTR") for various government contracts. As a COTR, Faulkner helped to identify the need for contractor assistance, select a qualified contractor, review estimates, monitor performance quality and timeliness, and review progress in relation to expenditures. As a COTR with the Army, he did not control contract money.
Faulkner enrolled in UTSI in the spring of 1987 and selected Frost as his major professor. In the middle of 1987, he began the process of writing a dissertation of the topic of "False Targeting Effects of Turbulent Eddies in Millimeter Frequencies." After almost two years of effort, Faulkner completed an initial draft of the dissertation. In August or September of 1989, however, he discovered that his dissertation was relying upon classified data. After consultations with Frost and a government official, Faulkner later learned that, because the University of Tennessee had a policy prohibiting classified projects for advanced degrees, he had to select a new topic and begin working on another dissertation.
On November 30, 1987, Joe Durham, the immediate supervisor of Faulkner at CROSSBOW, responded to a proposal from FWG by issuing a letter indicating that CROSSBOW intended to "contract with FWG to analyze classified threat simulator radar systems." This proposed contract eventually would become the Miscellaneous Defense Activities ("MDA") contract. Although Faulkner did not select FWG for the contract or participate in the negotiations process, he did prepare sometime in 1988 a memorandum which justified the granting of a sole-source, as opposed to a bid or competitive, contract to FWG. Within the memorandum, Faulkner referred to an informal market survey which he had conducted earlier that year. Faulkner stated in the memorandum that defense contractors other than FWG were unsuitable to perform the MDA contract because they would not sign a hardware waiver. It is undisputed that formal or written market surveys were not required for government contracts worth under a million dollars, such as the MDA contract. Further, Durham testified that competitive defense contracts may pose security risks because they involve the exposure of classified information, and that CROSSBOW did not maintain a single competitive contract during his tenure as a supervisor from 1985 to 1993.
On January 31, 1989, CROSSBOW issued a sole-source letter contract providing that FWG would perform the MDA contract from the date of the letter until July, 1990 in return for $937,248. Faulkner acted as the COTR for the MDA contract during this time.
In the fall of 1989, and shortly after Faulkner learned that he could not complete his first dissertation topic, Frost gave Faulkner three unpublished reports completed by FWG in the mid-1980s and instructed him to produce a new dissertation by combining them. Faulkner completed a rough draft of his new dissertation in early 1990, and a final draft in mid-March of 1990. Faulkner sent copies of the final draft to Frost and the other four members of the academic
The government introduced evidence that at least ninety-two percent of Faulkner's second dissertation was plagiarized from the three FWG reports given to him by Frost, and from a conference paper presented by Frost. Although many pages, including the conclusion, represented verbatim excerpts from the FWG reports, they did not contain quotation marks or any citations to the reports.
Frost gave the dissertation to his secretary at FWG, Martha Craddock, to type. Craddock, who spent about three months working occasionally on the project, testified that "part of [typing the dissertation] was cut and paste and pages from other documents that were cut and rearranged and reworded," and that she recognized some of the dissertation as reports she previously had typed.
As noted, the prosecution alleges that Faulkner committed mail fraud by participating in a scheme to defraud the government by helping to procure the MDA contract for FWG in return for a "free" dissertation. The mailings upon which the degree-for-contract convictions of Faulkner are based are vouchers for the MDA contract mailed from FWG to the government on January 15, February 12, and March 15, 1990. The prosecution cites the testimony of David Baker, an Army policeman, who stated that Faulkner told him during the investigation of these matters that Faulkner never had contacted any companies when conducting his market survey in 1988, but instead had concluded on the basis of his personal knowledge of the industry that contractors other than FWG would be unwilling to sign a hardware waiver. Baker therefore concluded that the 1988 memorandum compiled by Faulkner was false, because "when you say a company will not sign [a waiver], that means that you have ... talked to somebody that can speak for that company. You can't just, you know, make that decision for the company." Contrary to the opinion of Baker, however, significant evidence indicates that CROSSBOW frequently did not contact other companies directly when conducting informal market surveys for contracts worth less than one million dollars if the contracts involved classified material.
Regardless of whether it was improper not to contact other companies directly, or whether Faulkner falsely suggested that he had done otherwise, these convictions lack an evidentiary basis simply because Faulkner performed and memorialized the market survey in 1988. From 1987 until 1989, however, he was working on his first dissertation, and there is no dispute that he was the only person to work on that dissertation, or that the scheme to concoct a second plagiarized dissertation did not arise until the fall of 1989. The record therefore fails to contain sufficient proof that Faulkner, with the intent to defraud the government, performed and relied upon an improper market survey in order to reward Frost and Turner for bestowing an illegitimate dissertation.
The prosecution presents an alternative argument. The MDA contract was extended twice: it received an initial extension from July, 1990 to September, 1990, and then again was extended until September, 1991. These extensions raised the total value of the contract to $1,896,501.29. The prosecution asserts that documents entitled "program identification documents" submitted by CROSSBOW employees on March 16 and April 3, 1990 led to these extensions. The prosecution attempts to link Faulkner with the first of these documents, arguing that "even as Faulkner was cutting and pasting Frost's reports together for his dissertation, he was recommending in March 1990 that FWG get an extension on the contract."
Examination of this exchange and the testimony preceding it reveals that Duncan reaffirmed that Faulkner was the COTR for the MDA contract when an extension was requested. The only material in the record suggesting that Faulkner "got the ball rolling" on the extension was the question posed by the prosecution. The fact that the prosecution attempts to rely solely upon "evidence" created through the phrasing of its own question is highlighted by the fact that Duncan testified during cross-examination that three specific individuals other than Faulkner prepared and signed the March, 1990 program identification document. Duncan further testified that another COTR, Ken McCormick, performed the technical evaluation for the proposed extension, and that the contracting officer who replaced Duncan on the MDA contract, Michael Corbis, "proceeded to do the work on the major contract extension, which was issued by him on the 28th of September of 1990." The record does not support the assertion that the status of Faulkner as a COTR, standing alone, allows for the inference that he recommended an extension.
Because the record provides insufficient evidence for Faulkner's convictions for Counts Thirteen, Fourteen, and Sixteen, we do not address the claim by Faulkner that we must reverse these convictions because the prosecution failed to disclose that a government officer who oversaw the MDA contract informed the prosecution that Faulkner had no role in extending the contract. See infra Section IV.A, discussing Brady claim raised by Frost. Because the prosecution's case against Frost and Turner on these counts is based solely upon the acts of Faulkner, there is insufficient evidence to support their convictions of Counts Thirteen, Fourteen, and Sixteen.
Potter worked at the Marshall Space Flight Center ("MSFC") of NASA in Huntsville, Alabama for more than twenty-five years. In 1987, she became a manager in the MSFC Small Business Innovative Research ("SBIR") program, which sought to identify opportunities in NASA in which small companies and minority firms could participate. Although her bachelor's degree was in business management, she entered a master's degree program at UTSI in engineering science under Frost in 1988.
After Potter had informed Frost that she was having difficulty deciding upon a topic for her thesis, he had Turner deliver to Potter a FWG report on a cancelled project concerning a tower and wind study. Either Frost or Turner then gave a diskette containing a copy of the report to Craddock, Frost's secretary at FWG, who then spent about two days retyping it into a more presentable format. Evidence at trial indicated that Potter's thesis and the tower and wind study report were ninety-five percent identical.
Before orally defending her thesis before a committee, Potter studied the document which she was submitting in order to be able to express a degree of understanding during her defense. The committee consisted of Frost, Turner, and a Dr. Kenneth Kimble. Although Potter told the committee that she
In early 1990, Potter retained control over about $55,000 of an original grant of $110,000 in government funds for an SBIR workshop project. Potter claims that she had difficulty finding individuals or firms willing to perform any workshops for only $55,000, and that, under NASA rules, any funds which had not been committed by September, 1990 would expire and no longer be available to NASA. Accordingly, Potter asserts that she was interested when Frost approached her after she had graduated and informed her that FWG was interested in submitting a proposal to perform such workshops for as little as $50,000. Due to procedural difficulties with obtaining or accessing government funds, however, Potter decided to accept a suggestion made by either Frost or Turner: merely attempt to transfer the $55,000 in remaining funds to the "winds measurement" contract, an existing contract between FWG and NASA, in order to avoid the unwanted process of lengthy negotiations over a new contract, as well as termination of the funds before approval of the workshop proposal submitted by FWG. Kelly Hill, who had been a defendant in these prosecutions but who died before trial, was the COTR for the winds measurement contract.
On April 18, 1990, Potter submitted a procurement request designed to transfer the $55,000 in SBIR funds to the winds measurement contract. On May 9, 1990, Hill submitted a technical evaluation which approved of the proposed addition of funds. The evaluation indicated that the funds were targeted for workshops, and that the initial date of the procurement process had been January 2, 1990. Potter's superiors in the SBIR program never approved the proposal by FWG to perform the workshops, and the added $55,000 was withdrawn from the winds measurement contract.
The prosecution alleges that Potter committed mail fraud by helping to increase the value of the winds measurement contract by $55,000 in return for her thesis. The prosecution apparently claims that the effort to transfer the funds was a fraudulent scheme because the documentation submitted by Hill in May, 1990 deceptively implied that the additional funding was related specifically to the research being performed under the contract (which would have been a proper contract modification), rather than to a business program (which was an improper modification).
The mailings upon which these convictions are based are vouchers for the winds measurement contract mailed from FWG to the government on January 15, February 13, March 15, and April 12, 1990 for work done on the original contract. Potter claims that these vouchers cannot support her convictions because they were unrelated to, and therefore did not further, the fraudulent scheme charged. Even assuming that the jury could infer that Potter intended to defraud the government on the basis of the documentation submitted by Hill, we agree with her that these vouchers were unrelated to the scheme at issue.
The prosecution argues that the vouchers may support the convictions of Potter because 1) the object of the scheme at issue was to enrich Frost and Turner through government contract money; 2) money received as a result of the vouchers at issue did enrich Frost and Turner; 3) therefore, these vouchers furthered the scheme. This argument, however, cannot withstand scrutiny.
"The federal mail fraud statute does not purport to reach all frauds, but only those limited instances in which the use of the mails is a part of the execution of the fraud...." United States v. Altman,
In this case, the vouchers relied upon by the prosecution charged only for work performed by FWG up until March, 1990 on the unmodified winds measurement contract. The jury, however, did not convict Potter of fraudulently procuring the unmodified winds measurement contract; Potter had no role in procuring the original winds measurement contract. Regardless of whether Hill or Potter initiated the attempted modification of the contract in January or April, 1990, the vouchers have no relationship to the $55,000 associated with the SBIR program or to the modification, and therefore no relationship to the specific scheme of which Potter was convicted. Although the prosecution argues that because defendants "selected [the winds measurement] contract as the vehicle to get Frost the $55,000, mailings furthering this contract were necessary to the scheme," the winds measurement contract would continue to exist, and therefore remain a viable vehicle for future fraud, regardless of whether FWG had sent the vouchers. Although the vouchers did allow FWG to receive payments for work already done under the original contract, the payments had nothing to do with extending the contract. They simply did not advance the accomplishment of any scheme to increase the value of the contract. Accordingly, there is insufficient evidence for the convictions of Potter of Counts Nine through Twelve. Because Frost's and Turner's convictions of these counts depend upon the same mailings, they also must be vacated.
In the spring of 1987, Turner convinced Congo, a NASA chemist and Ph.D student, to transfer from Auburn to UTSI. During his diagnostic exam, at which UTSI faculty assessed his competency for the doctoral program, Congo explained that his work at NASA involved the assessment of risks posed by incompatible chemicals on the space station project of NASA. That summer, Frost requested Congo to review an informal research project proposal regarding a computer modeling program designed to assess the hazards posed by incompatible chemicals on the space station project of NASA. Shortly thereafter, Frost, on behalf of FWG, submitted to Congo a formal unsolicited proposal for such a research project with NASA. In November of 1987, Congo initiated the procurement process for the proposed project, documented the justification for awarding FWG a sole-source contract, and submitted a favorable technical evaluation summary of the proposal. On March 10, 1988, Congo submitted a formal procurement request for the project, and submitted a procurement request for additional funding on June 23, 1988. By August, 1988, NASA had approved the proposal and awarded FWG a $300,000 contract, for which Congo served as the COTR.
Congo claims that he began to work on his dissertation in August, 1988. Frost was his major professor. The topic of his dissertation was extremely similar to the topic of the chemical hazards contract between NASA and FWG. The government introduced evidence that Turner told Karen Seiser, an FWG employee, to help Congo with his dissertation. Seiser testified that she spent over two eighty-hour weeks in February, 1990 writing about two-thirds of the dissertation, and that Congo treated her like an employee. After she worked on the dissertation, Seiser prepared a report for FWG on the progress of the chemical hazards contract, using many of the sections which she had written for the dissertation. Congo admitted that, as COTR for the contract, he rejected the report because it looked too much like his dissertation. Two other FWG employees also worked on the dissertation, one of whom implemented changes during a period of several days at the direction of Congo.
The prosecution argues that Congo committed mail fraud by participating in a scheme to defraud the government by helping to procure the chemical hazards contract for FWG in return for his dissertation. The mailings upon which the degree-for-contract convictions of Congo are based are vouchers for the chemical hazards contract mailed from FWG to NASA on April 2, May 8, June 11, July 11, August 10, and September 11, 1990.
Viewing the evidence in the light most favorable to the prosecution, the similarities between the circumstances of Congo and Berlinrut, the student whom Turner unsuccessfully requested to provide a contract in exchange for a dissertation, would allow a rational jury to find that Frost, Turner, and Congo agreed in 1987 that Congo would help procure a contract for FWG in exchange for Frost and Turner eventually providing him with a dissertation. Like Berlinrut, Congo informed Frost and Turner of his specific area of interest. As with Berlinrut, Frost and Turner sought to submit through the student a contract proposal on that very topic to the government agency for which the student worked. Congo also took the same action requested of Berlinrut: helping to provide FWG with a contract involving the topic of his future dissertation. Finally, just as they had offered to do for Berlinrut, Frost and Turner took the very unusual step of having much of Congo's dissertation written for him. Although there is no direct evidence that Frost and Turner propositioned Congo as they had Berlinrut, the jury still could have inferred from these facts that defendants entered into an arrangement similar to that which Berlinrut had refused.
Nonetheless, the evidence cannot support the convictions for Counts Two through Seven. A mail fraud conviction must rest upon proof of some fraudulent scheme or act. The only deception with which Congo is charged in relation to the government, however, is a failure to disclose his relationship with FWG to his superiors and colleagues at NASA.
Accordingly, the convictions can rest only upon a failure by Congo to disclose his conflict of interest. Many opinions repeat the maxim that "a breach of fiduciary duty alone, without the `something more' of fraudulent intent, cannot constitute mail fraud." E.g., Morda v. Klein,
Id. at 1217 (citations and emphasis omitted); see also Emery v. American Gen. Fin., Inc.,
In order for the jury to convict Congo, the evidence at trial therefore must have permitted a reasonable jury to conclude that Congo intended to inflict a tangible injury upon NASA. We hold that it did not. The sole witness relied upon by the prosecution, Salvadore Caruso, the direct supervisor of Congo at NASA, testified that FWG performed necessary and needed work under the chemical hazards contract, and that NASA was very concerned about the issue of incompatible materials on the space station project. Caruso also testified that he had no reason to believe that FWG had not performed the terms of the contract, or that there had been any complaints regarding the ability of FWG to fulfill the project requirements. There is no evidence in this case that NASA would have had to pay less money or would have received more services if Congo had disclosed his conflict of interest. Cf. United States v. Dandy,
We therefore hold that, even though the evidence allows a finding that Congo agreed to trade a contract for a dissertation, there was insufficient evidence that he intended to defraud NASA by not disclosing his conflict of interest. Although Congo intended the government to transfer money to FWG, there is no evidence that he intended that the government would not receive in return a necessary service, performed adequately and for a fair price. Because the evidence showed that FWG, and therefore Frost and Turner, fairly and adequately performed a necessary contract not secured through any misrepresentations, we likewise vacate the convictions of Frost and Turner of Counts Two through Seven.
The holding in United States v. Fischl,
The Fischl court rejected the claim of the defendant that he had not committed mail fraud because the lack of an injury to the victim revealed that he never had intended to harm the State. See id. at 311. Unlike this case, however, the evidence in Fischl was not that the defendant merely had failed to disclose a conflict of interest, but that he had made several false statements to further his scheme. See id. Further, the Fischl court often invoked the intangible rights of the public when justifying its holding. See id. at 311-12; see also United States v. Murphy,
B. Scheme to Defraud Federal Government of Tuition
The government helped to pay for the advanced degrees of its employees, the student defendants, by paying to UTSI their fees. No student, however, wrote his or her own thesis or dissertation, the primary component of the advanced degree program. Counts One, Eight, and Fifteen in the Superseding Indictment therefore charge defendants with violating § 1341 by defrauding the government of the tuition money. Count One rests upon a September 20, 1989 invoice from UTSI to NASA for the fees of Congo; Count Eight rests upon a July 21, 1989 invoice from UTSI to NASA for the fees of Potter; and Count Fifteen rests upon a February 15, 1990 invoice from UTSI to the Department of the Army for the fees of Faulkner. The indictment charged Frost and Turner with all of these counts, and each student with the count relating to his or her own fees. The jury convicted each defendant of each charged count.
The student defendants urge that the invoices cannot support their convictions because they did not cause or intend the mailings to be sent. This claim is without merit. As explained, a mailing may support a mail fraud conviction as long as the defendant knew that use of the mails would follow in the ordinary course of business, or that a reasonable person would have foreseen use of the mails. See, e.g., Oldfield, 859 F.2d at 400. A reasonable jury certainly could have found that defendants reasonably should have foreseen that use of the mails would occur when UTSI obtained their tuition money
The conviction of Potter rests upon an invoice dated July 21, 1989. She argues that this mailing cannot support her conviction because the mailing preceded any plan to plagiarize her thesis. The record, however, reveals that Frost told Potter in December, 1989 or January, 1990 that she should begin working on her thesis, and that Potter received from Frost or Turner only several months later the FWG report which would be her thesis. Accordingly, a reasonable jury could have concluded that defendants had agreed before the mailing of the invoice that Potter would obtain her degree through plagiarism, and that the invoice therefore furthered the scheme to defraud the government of its payment for her degree.
Potter also argues that the government was not defrauded of any tuition money because, even though she did not write her thesis, she underwent a "legitimate learning experience" by studying the FWG report which she passed off as her thesis. She also insists that NASA frequently pays for its employees merely to take classes, and that she could have taken a non-thesis option when pursuing her master's degree. Potter, however, ignores the fact that the record easily yields the conclusion that NASA was relieving Potter of her obligation to pay UTSI because it was expecting her to obtain a master's degree by writing a legitimate thesis. Further, there was evidence that the non-thesis option was not available to Potter, who lacked significant professional engineering experience. NASA did not get what it was paying for simply because Potter attended classes and examined the FWG report.
C. Scheme to Defraud University of Tennessee of Intangible Right to Honest Services of Frost and Turner
Counts Seventeen through Twenty of the Superseding Indictment charged defendants with violating the mail fraud statute by scheming to defraud the University of Tennessee of the "honest services" of Frost and Turner. Specifically, these counts charged that Frost and Turner abused their positions with the University in order to aid the other defendants, who could benefit FWG through their government positions. Essentially, the scheme alleged is that Turner and Frost defrauded the University by allowing each student defendant to pass off material written by others as their own thesis or dissertation, and likewise concealed from the other members of the oral examination committees that the thesis or dissertation under review was not the student's own work.
The mailings upon which Counts Seventeen through Twenty were based were four memoranda of certification, mailed from UTSI to the University of Tennessee at Knoxville, that the student defendants had passed their oral examinations and were eligible to receive their degrees. The Superseding Indictment charged Frost and Turner as principals under all of these counts and charged each student defendant as an aider and abettor under the count pertaining to the particular memorandum of certification for that student.
1. Existence of Doctrine
In McNally v. United States,
In 1988, the year following the decision in McNally, Congress enacted 18 U.S.C. § 1346. That section provides the following:
Defendants argue that § 1346 failed to express any clear intent to override the holding in McNally and protect intangible rights to honest services under the mail fraud statute. Defendants have relied upon United States v. Brumley,
The timing and the explicit terms of § 1346 make clear that Congress intended the provision to reinstate the doctrine of intangible rights to honest services. Every court to address the effect of § 1346 has held that it has overruled the holding in McNally. See United States v. Czubinski,
2. Application of Doctrine to Non-Public Officials
Frost and Turner next argue that § 1346 does not apply to them because they are not public servants. We reject this argument.
The classic application of the intangible right to honest services doctrine has been to a corrupt public servant who has deprived the public of his honest services. Cf. United States v. Paradies,
The wording of § 1346 is very broad: it defines "scheme or artifice to defraud" as including "a scheme or artifice to deprive another of the intangible right of honest services." 18 U.S.C. § 1346 (italics added). Commenting upon this breadth, the Eighth Circuit has stated that "[i]t is certainly true that the literal language of § 1346 extends to private sector schemes to defraud another of the right to `honest services.'" United States v. Jain,
The Jain court declined to answer the questions which it had raised regarding the scope of the intangible right to honest services and instead reversed the mail fraud convictions at issue on other grounds. See id. The Sixth Circuit does not appear to have defined the scope of the intangible right to honest services since the passage of § 1346. Accordingly, we must review Sixth Circuit precedent issued before McNally in order to discover the precise contours of the right in this circuit.
In United States v. Gray,
Id. at 1295. The Gray court then adopted the flexible test enunciated in United States v. Margiotta,
Subsequent to Gray and the decision by the Supreme Court in McNally, however, a three-judge panel of the Sixth Circuit decided United States v. Runnels,
The Sixth Circuit later vacated the opinion in Runnels I for a rehearing en banc and eventually reversed. See United States v. Runnels,
We therefore hold that private individuals, such as Frost and Turner, may commit mail fraud by breaching a fiduciary duty and thereby depriving the person or entity to which the duty is owed of the intangible right to the honest services of that individual.
3. Whether Frost and Turner were Fiduciaries of the University
Federal law governs the existence of fiduciary duty under the mail fraud statute. See Morda v. Klein,
Frost and Turner had considerable influence, although not complete control, over whether one of their students received an advanced degree from UTSI. The department of engineering, of which Frost was the Chairman, has only a limited number of graduate students. Further, the major professor of a student has tremendous influence over the direction and ultimate success of that student's dissertation or thesis, the completion of which is integral to the attainment of an advanced degree. Indeed, Berlinrut testified that he did not graduate from UTSI because Frost gave him a "no progress" for his dissertation research during his last quarter, and because he failed his comprehensive final examination, which Frost prepared by taking the unusual step of not telling Berlinrut beforehand that the exam would include an additional math problem.
Accordingly, Frost and Turner owed a fiduciary duty to the University when determining whether a student would graduate if the University has a property right in a degree which it has not issued yet. In general, the concept of "property" refers to a "bundle of rights" which includes the rights to possess, use, exclude, profit, and dispose. See Brotherton v. Cleveland,
4. When Breach by Private Fiduciary Violates Mail Fraud Act
The District Court instructed the jury that they could find that Frost and Turner deprived the University of the intangible right to their honest services under the following circumstances:
We believe that the above instructions captured the proper standard for determining whether an employee has committed mail fraud by depriving his employer of honest services. The prosecution must prove that the employee intended to breach a fiduciary duty, and that the employee foresaw or reasonably should have foreseen that his employer might suffer an economic harm as a result of the breach. We therefore adopt the standard employed by the District of Columbia Circuit, which holds that an employee deprives his employer of honest services when "the defendant might reasonably have contemplated some concrete business harm to his employer stemming from his failure to disclose the conflict along with any other information relevant to the transaction." United States v. Lemire,
We recognize that the literal terms of the "intangible right to honest services" doctrine do not indicate that the prosecution must prove that a fiduciary breach has created a risk of economic harm to the employer. Rather, the literal terms suggest that dishonesty by an employee, standing alone, is a crime. Courts, however, have refused to interpret the doctrine so broadly. For example, the Tenth Circuit has commented that, "[a]ssuming without deciding that § 1346 has application where a private actor or quasi-private actor is deprived of honest services in the context of a commercial transaction, it would give us great pause if a right to honest services is violated by every breach of contract or every misstatement made in the course of dealing." United States v. Cochran,
Some courts have attempted to define the reach of the intangible right to honest services doctrine by stating that the misrepresentation or omission at issue must be "material." See, e.g., Cochran, 109 F.3d at 667; United States v. Gray,
Despite the literal terms of § 1346, we therefore have construed the intangible right to honest services in the private sector as ultimately dependent upon the property rights of the victim. Nonetheless, the right to honest services doctrine still applies to a broad range of private conduct. Unlike a defendant accused of scheming to defraud another of money or property, see infra Section II.A, a defendant accused of scheming to deprive another of honest services does not have to intend to inflict an economic harm upon the victim. Rather, the prosecution must prove only that the defendant intended to breach his fiduciary duty, and reasonably should have foreseen that the breach would create an identifiable economic risk to the victim. We do not believe that this standard imposes an especially rigorous evidentiary burden upon the prosecution. Further, we stress that we are not reviewing the standard applicable to defendants accused of depriving the public of the honest services of public officials. See Lemire, 720 F.2d at 1337 n. 13 (noting that court was addressing only private fiduciaries, and suggesting that "[p]ublic officials may be held to a higher standard of public trust; and conflicts of interest may harm the public merely by giving the illusion of unfairness").
5. Sufficiency of the Evidence
Potter and Congo declare that, even if they plagiarized, they never intended to deprive the University of the honest services of Frost and Turner. As previously explained, however, the record contains considerable evidence that Frost and Turner entered into an intentional scheme with each student defendant in which the professors enabled the student to submit a thesis or dissertation secretly based on plagiarism. Further, the scheme required its participants to deceive the members of the academic committee during the oral defense of the illegitimate paper. The inescapable conclusion is that defendants intended for Frost and Turner to breach the trust which the University had placed in them. Further, the evidence indicates that all defendants intended, much less reasonably contemplated, that the University would suffer a concrete business harm by unwittingly conferring an undeserved advanced degree on each student defendant. Although defendants may not have known that the legal description of their activity would be "scheming to deprive the University of its intangible right to the honest services of its employees," there is sufficient evidence that all defendants committed or aided and abetted in that crime.
D. Constitutional Claims
Congo has mounted a facial challenge to the constitutionality of both § 1341 and § 1346 on the ground of vagueness. In contrast to a claim that a statute is unconstitutional "as applied," in which a party asserts that application of the statute to his particular circumstances would be unconstitutional, a facial challenge seeks to secure a declaration that a statute is utterly inoperative. See Ada v. Guam Soc'y of Obstetricians and Gynecologists, 506 U.S. 1011, 1012, 113 S.Ct. 633, 634, 121 L.Ed.2d 564 (1992)(Scalia, J., dissenting), denying cert. to
Congo asserts that the phrase "scheme to defraud" in § 1341 is meaningless and renders the Mail Fraud Act impossible to apply intelligently under any circumstances. Although several opinions have addressed and rejected claims that Act was impermissibly vague as applied,
Margiotta, 688 F.2d at 129 (citation omitted). Indeed, the law traditionally has conceived of "fraud" in general as a necessarily fluid concept; as one court has observed, fraud "is as old as falsehood and as versable as human ingenuity." Weiss v. United States,
Congo also argues that § 1346 is facially unconstitutional due to vagueness. He stresses that, in Carpenter, 484 U.S. at 25, 108 S.Ct. at 320, the Supreme Court described the previous opinion in McNally as holding that the right to honest and faithful services was too "ethereal" to fall within the scope of the mail fraud statute. Both the Carpenter and the McNally Courts, however, found the intangible right to honest services too "ethereal" only when compared to the perceived intent of Congress — "the desire to protect individual property rights." Carpenter, 484 U.S. at 25, 108 S.Ct. at 320 (quoting McNally, 483 U.S. at 359 n. 8, 107 S.Ct. at
We already have explained that the enactment of § 1346 intended to restore opinions predating McNally and interpreting the intangible right to honest services. These opinions explain that this right is the right to the honest services of a public or private fiduciary, and that private fiduciaries deprive another of honest services when they, during a scheme of intentional deception, breach their fiduciary duties and reasonably do or should foresee that this breach will inflict an identifiable economic harm upon the person or entity to whom they owe their duty. The contours of § 1346 therefore are sufficiently clear for us to conclude that the statute is not unconstitutionally vague on its face. See United States v. Sawyer,
Congo, joined by his codefendants, also argues that an instruction delivered in this case allowed the jury to convict on the basis of an unconstitutionally vague definition of mail fraud.
We reject this claim. The jury instructions provided in part:
Focusing on the highlighted sentence, Congo argues that the instructions allowed the
E. Failure to Instruct on Theory of Potter's Defense
Potter requested the following jury instruction regarding her theory of the defense:
Although the District Court declined to give the above charge, it did instruct the jury in detail that a defendant must possess the intent to defraud in order to violate the mail fraud statute, and that good faith on the part of a defendant is inconsistent with an intent to defraud. Further, the court properly instructed the jury that the government must prove that the mails furthered the alleged scheme, and that the use of the mails by someone was reasonably foreseeable, but not that a defendant actually intended to use the mails or actually mailed something herself. See, e.g., Oldfield, 859 F.2d at 400. The court also instructed the jury that "[p]lagiarism, and having someone else write your thesis or dissertation for you, are not, standing alone, mail fraud."
"We review jury instructions as a whole to determine whether they fairly and adequately submitted the issues and applicable law to the jury." United States v. Williams,
The ultimate weakness of the instructions requested by Potter is that they consist primarily of factual arguments. Rather than articulating a distinct legal theory, they merely assert that Potter did not violate the intent and mailing requirements already described by the District Court.
III. Claims Concerning Deliberative Process of Jury
Because the jury had indicated that it was having difficulty reaching a verdict on some of the counts, the District Court delivered a supplemental instruction designed to encourage the jury to reach a verdict by requesting each juror to reconsider his or her respective position during continued deliberations. Such a charge is often referred to as an Allen charge, named after Allen v. United States,
We review a decision to give an Allen charge only for abuse of discretion, see United States v. Tines,
The District Court gave the Allen charge under the following circumstances. The trial began on March 28, 1995, and continued for approximately one month. On April 24, 1995, a Monday, counsel delivered their closing arguments and the District Court gave final instructions to the jury. The jury deliberated for one hour on April 24 and resumed its deliberations on April 26, a Wednesday. At 3:30 p.m. on April 26, the jury sent a note to the District Court which asked, "What if we cannot reach a unanimous decision on all counts concerning one defendant?" The District Court responded with a written note which stated, "Please continue to deliberate and attempt to reach a unanimous verdict on all counts."
The jury continued to deliberate on April 27. At 2:45 p.m. on April 27, it sent another written communication to the District Court, stating "Two defendants — Reach verdicts on some counts. Two counts per defendant. Deadlock on other counts concerning them. Please advise." The District Court again responded in writing, stating: "If you have done everything you can do with respect to two defendants, please consider the cases against the other defendants." At 4:45 p.m., the jury indicated to the District Court that it wished to resume deliberating the next day.
Accordingly, the jury returned on April 28, a Friday. That morning, the jury notified the District Court that a juror named Shelby had brought a newspaper article and some personal notes from her home into the jury room. After advising counsel of this fact, the District Court interviewed Shelby in camera in the presence of a court reporter; although it is unclear whether all counsel also were present during the interview, at least counsel for Frost and the government were present. The transcript of the interview reveals that the District Court tactfully reminded Shelby
At about 2:15 p.m. on April 28, the jury sent another written message to the judge, stating that "we have reached a verdict on some counts but cannot seem to on the others. Please advise." At that point, the District Court, over the objections of defendants, decided to give Sixth Circuit Pattern Criminal Jury Instruction 9.04, an instruction intended for deadlocked juries which tracks but does not duplicate the instruction in Allen.
At 4:15 p.m. that day, the jury returned a unanimous verdict; the jury found all defendants guilty of every count with which he or she had been charged, except that it found Frost and Turner not guilty of Count Eighteen, and found Turner not guilty of Count Thirty. When the District Court polled the jury, every juror responded that he or she concurred in the verdict.
Appropriately, defendants do not contest the wording of the Allen charge given by the District Court. The pattern instruction delivered in this case contained language which
We find that, under all of the circumstances, the District Court did not abuse its discretion by delivering an Allen charge. Defendants emphasize that the District Court knew at the time of the charge that juror Shelby was favoring the defense and was in the minority. They further stress that Shelby knew that the District Court knew of her position. Defendants rely upon United States v. Sae-Chua,
United States v. Lash,
Another factor indicating a lack of coercion is that Shelby volunteered the information that she was in the minority and was leaning towards the defense. "Where the jury has disclosed the split voluntarily and the instruction has not focussed on the minority, courts have generally upheld [an Allen charge]." Lash, 937 F.2d at 1086. In Lash, we found that the trial court did not abuse its discretion by giving an Allen charge in part because it had learned of the numerical split of the jury only inadvertently. See id. Although Lash differs from this case to the extent that the Lash jury did not reveal the particular position of the minority or the identity of any minority juror, see id., Lash also contains evidence of coercion not present here: a juror in Lash sent a note to the trial court asking to be excused. See id.
Stressing that lengthy jury service may render a jury minority particularly susceptible to coercion, see Williams, 741 F.2d at 850-51, defendants note that the jury had been deliberating for approximately three days after a month-long trial. The length of the deliberations in this case, however, is not particularly significant, given the fact that the jury had a tremendous amount of information to process (witness the length of this opinion) in order to decide thirty-one counts in a complicated case involving five defendants. Further, the jury notes sent on April 27 and 28, which revealed that the jury was unanimous as to some counts for some defendants, showed that the jury, including Shelby, had reached agreement on at least part of the case by working together during deliberations, not remaining in deadlocked stasis. Although we have observed that "an Allen charge coming relatively early is arguably less coercive than one coming after a jury has worn itself out after several days of deadlocked deliberations," Sawyers, 902 F.2d at 1220, the circumstances of this case do not compel the conclusion that a tired minority finally acceded to the majority opinion in the face of an Allen charge delivered after days of emotionally difficult deadlock.
Finally, defendants invoke United States v. Ford (In re Ford),
After the jury rendered its verdicts on April 28, a juror approached the mother of Congo in the courthouse parking lot and informed her that juror Shelby had left the jury room during the afternoon of that day with the assistance of an unidentified deputy court clerk in order to lie down for about twenty minutes in the Clerk's office because she had been feeling ill from chest pains. Defendants subsequently moved for an evidentiary hearing on whether Shelby had been exposed to prejudicial external influences during her absence from the jury room; Congo attached to his motion the affidavit of his mother, in which she related the
In Remmer v. United States,
In the instant case, the District Court did not abuse its discretion by refusing to hold a Remmer hearing because defendants presented no basis upon which to believe that Shelby even had experienced an external contact or communication regarding matters pending before the jury during her absence from the deliberations. The need for a Remmer hearing necessarily does not arise absent the existence of an outside influence on a juror, see Rigsby, 45 F.3d at 125; Griffith, 17 F.3d at 880, and the record here suggests only that Shelby retired to a couch in the Clerk's office to lie down for about twenty minutes, not that she ever encountered any external influence pertaining to this case during that period.
Defendants, however, argue that the District Court improperly denied them any opportunity to discover exactly what Shelby did during her absence. Defendants cite United States v. Shackelford,
During oral argument, counsel argued that reversal is required because the District Court did not instruct the jury to stop deliberating during the absence of Shelby. Defendants, however, have not submitted any evidence from nonjuror sources regarding the absence of Shelby, but instead rely upon the affidavit of Congo's mother, not included in the joint appendix, in which the only information regarding the absence of Shelby is a reiteration of a statement about her absence made by another juror.
Defendants have confined themselves in their briefs to arguing that the absence of Shelby is an issue only because external forces may have prejudiced her. Defendants apparently have recognized that the Congo affidavit provides only a limited basis upon which to attack the verdicts because it is based upon a juror statement.
Federal Rule of Evidence 606(b) states:
FED.R.EVID. 606(b). The Advisory Committee Notes to Rule 606(b) reveal that Congress rejected a proposed deletion which would have allowed challenges to verdicts "on the basis of what happened during the jury's internal deliberations, for example, where a juror alleged that the jury refused to follow the trial judge's instruction or that some of the jurors did not take part in deliberations." FED.R.EVID. 606(b) advisory committee's note.
Rule 606(b) therefore prohibits an inquiry based upon evidence provided by a juror into the effect of the absence of Shelby upon the deliberative process, unless that evidence concerns an external prejudicial influence. See Tanner v. United States,
C. Juror Bias
Turner asserts that the District Court erred by not declaring a mistrial or excusing a juror when she became a witness to his credibility. The other defendants argue that the District Court should have severed Turner from the trial once the juror at issue became biased. We reject these claims for the following reasons.
After Turner finished testifying on April 20, 1995, juror Golson reported to the District Court that Turner had stated "you all take care of me" to the jury as he left the witness stand. When defense counsel later asked Turner what had happened, Turner responded that he instead had stated, "I hope I don't trip again," thereby referring
The next day, the District Court interviewed Golson alone in chambers. The following exchange occurred:
Golson informed the District Court that she had reported what Turner said because she had been instructed to report any communications from parties or witnesses. She further assured the court that nothing Turner had said would affect her ability to make a fair decision in the case, and that she understood that what Turner had said was not evidence. Finally, Golson told the District Court that four other jurors had heard her report what she thought Turner had said.
The District Court thereafter interviewed individually the other four jurors identified by Golson, and determined that none of these four jurors heard what Turner had said, although they did hear him mumble something. Three of the jurors, however, did hear Golson say what she thought Turner had said. The District Court denied a motion by Turner for mistrial or to disqualify Golson. The other defendants did not want Golson removed, but instead moved without success to sever Turner from the case and continue the trial with the jury constituted as is, but without Turner.
Under the Sixth Amendment, a defendant has the right to be tried by impartial and unbiased jurors. See, e.g., Ross v. Oklahoma,
Neither we nor the parties have located precedent similar to this case. Turner stresses that Federal Rule of Evidence 606(a) bars a juror from testifying before the jury in the trial in which the juror is sitting. Strictly speaking, however, Rule 606(a) does not apply here simply because Golson was not called as a witness. Rule 606(a) nonetheless underscores the importance of the general principle at issue here, the right to an impartial jury.
Turner argues that we must infer the existence of juror bias under these circumstances. The doctrine of presumed or implied, as opposed to actual, bias provides that, in certain "extreme" or "exceptional" cases, courts should employ a conclusive presumption that a juror is biased. See McDonough Power Equip., Inc. v. Greenwood,
The Supreme Court has never held explicitly that courts may infer or presume bias. See Dyer v. Calderon,
Having found that the doctrine of implied bias does not apply, we review the finding of impartiality by the District Court for abuse of discretion, bearing in mind that Turner bears the burden of proving bias. See Howard, 752 F.2d at 225; cf. Clemmons v. Sowders,
IV. Remaining Issues
Frost contests the sufficiency of the evidence for Counts Twenty-Five through Twenty-Nine, which allege that he fraudulently charged the government for employee bonuses by billing the bonuses as "direct" expenses under FWG contracts, when in fact Frost either should have billed them as "indirect" expenses or not billed them at all. Alternatively, Frost argues that these convictions must be reversed because the government violated its obligation under Brady v. Maryland,
The government alleges in Counts Twenty-Five through Twenty-Nine that Frost submitted five vouchers charging the government for about $65,000 in bonuses awarded to himself and four other FWG employees under different FWG contracts. The government claims that these vouchers were fraudulent because Frost knowingly failed to comply with applicable federal regulations which required him to have a bonus plan in place before billing the government for any bonuses, and to provide notice that he was charging for bonuses. The government also argues that, even if Frost could have charged for bonuses, he falsely labelled the vouchers as billing for "direct" labor, i.e., hours of work whose expenditure directly accomplished the demands of the contract, rather than "indirect" labor. The government asserts that this labelling enabled Frost to recoup more money than he deserved by receiving additional payments for the fringe and overhead charges which accompany direct labor.
Before the trial, the government sent a letter to defense counsel which stated that the government would call a Chester Dailey as an expert witness to testify about the bonuses at issue. Dailey is a Contract Administrating Officer with the United States Defense Logistics Agency who oversaw the MDA contract between the Army and FWG during his employment.
Counsel for Faulkner contacted Dailey both before and after receiving this letter, but Dailey, upon the advice of his agency's counsel, declined to be interviewed. The government did not call Dailey as a witness. Although defendants initially had intended to call Dailey as a witness, they ultimately decided not to, due to the contents of the letter and his refusal to be interviewed.
After the trial, defendants learned that Dailey had told the government something other than precisely what the government had represented in its letter. Based upon this discovery, Frost filed a motion for a new trial or evidentiary hearing, arguing that the prosecution had failed to disclose exculpatory evidence provided by Dailey. In an affidavit attached to this motion, Dailey stated that he came to know Frost while overseeing the MDA contract, and that, contrary to the representations of the letter sent by the government,
The District Court denied the motion for a new trial or hearing. We will not reverse a refusal by a trial court to grant either a new trial or a hearing on a motion for new trial unless the court has abused its discretion. See, e.g., United States v. O'Dell,
Id. at 640. However, when the defendant asserts that the new evidence at issue is exculpatory evidence which the government failed to turn over in violation of Brady, he "should not have to satisfy the severe burden of demonstrating that newly discovered evidence probably would have resulted in acquittal." Id. at 641 (quoting United States v. Agurs,
The Supreme Court recently has described in detail the analysis applicable to a Brady claim. See Kyles v. Whitley,
The doctrine of harmless error does not apply once a court has found a Brady violation, because a Brady analysis necessarily includes a determination of whether the evidence at issue might have affected the verdict. See id. at 435, 115 S.Ct. at 1566. Finally, courts should evaluate the material effect of exculpatory evidence by examining the evidence collectively, not item-by-item. See id. at 436, 115 S.Ct. at 1566-67.
The District Court rejected the motion for new trial because it believed that FED. R.EVID. 704(b) would have barred Dailey from testifying that Frost lacked the requisite intent to deceive. The District Court also found that Dailey could not have testified that small businesses like FWG often bill the federal government in ways which they believe are correct but which technically are not allowable because, "[i]n the absence of a proper foundation showing personal knowledge, Dailey would not be permitted to testify about his mere opinion as to the intent and motives of other government contractors and their billing practices." Further, the District Court found that the proposed testimony that Frost knew that the billings at issue would be audited "does not necessarily prove that Frost lacked the requisite intent to defraud;" the District Court also stated that "[t]here is nothing in Dailey's affidavit which indicates that he had personal knowledge of what Frost knew or was thinking on the subject of an audit." Finally, the District Court stressed that the proposed testimony by Dailey favored the prosecution to the extent that it confirmed the basic claim that Frost could not have billed the bonuses as direct labor costs.
We find that the District Court abused its discretion by not holding an evidentiary hearing on the motion for new trial. As noted, the court relied in part upon Federal Rule of Evidence 704(b), which states:
See FED.R.EVID. 704(b). The District Court is correct that Rule 704(b) would bar Dailey from testifying that Frost lacked an intent to defraud. However, the affidavit by Dailey stated that there was no evidence that Frost billed the bonuses in a deceptive manner. Although it is unclear precisely what Dailey meant by this statement, he presumably was asserting that Frost used a billing method which made it obvious what he was doing. If so, this is a fact which would have allowed the jury to infer a lack of intent to defraud. Given the lack of strong evidence supporting the convictions, see infra, as well as the fact that Dailey would have been an effective defense witness as the government official who oversaw the MDA contract, the contract in issue, the District Court should have permitted an evidentiary hearing to develop Dailey's testimony as to why the bonuses had not been billed in a "deceptive manner."
Similarly, Rule 704(b) does not prohibit the proposed evidence that small businesses like FWG often bill costs in ways that they believe are correct but which technically are not allowable:
United States v. Lipscomb,
We believe that Frost may be able to show a reasonable probability that the verdicts would have been different with Dailey's testimony, and therefore show entitlement to a new trial on Counts Twenty-Five through Twenty-Nine. Crucial to our holding is the fact that the evidence supporting the convictions for these counts is not strong. Ultimately, the government relies upon three transcript pages of testimony by a government auditor who, after describing the difference between direct and indirect labor, answered "no" when the prosecution asked whether the government would have allowed Frost to "double his money" if Frost first had asked the government whether he could bill the bonuses as direct labor.
We do not hold that there is insufficient evidence to support a verdict of guilty. It remains unclear from the record, including the direct and cross-examination testimony of Frost and his experts, whether Frost in fact complied with regulations by establishing an informal bonus plan. Further, and after viewing the record in the light most favorable to the prosecution, there is substantial evidence which would allow a jury to infer that Frost had the intent to defraud the government. See United States v. DeCastris,
Frost and Turner vaguely suggest that the new testimony of Dailey requires a new trial or hearing for every count related to improper billing, including Counts Twenty-One through Twenty-Four. The new testimony, however, is related only to Counts Twenty-Five through Twenty-Nine, the counts based upon the billing of bonuses as direct costs. It is unrelated to Frost's convictions of Counts Twenty-Three and Twenty-Four, which are based upon his billing the government for trips to Las Vegas and Reno, Nevada. Likewise, the testimony is unrelated to Frost's and Turner's convictions of Counts Twenty-One and Twenty-Two, which are based upon their billing the work of an FWG employee not according to which government contract he actually worked on, but according to which contract would enable Frost and Turner to request the most money. Although Potter moved to adopt the assertion by Frost on appeal that the undisclosed testimony by Dailey requires a new hearing or trial, the testimony of Dailey is similarly unrelated to any of the counts for which Potter stands convicted.
Faulkner appeals the denial of his motion for a new trial, which also was based on exculpatory evidence contained in the Dailey affidavit regarding the role of Faulkner in the extension of the MDA contract. We do not address this claim, however, because we already have vacated the convictions of Faulkner which rest upon his alleged act of modifying the MDA contract on behalf of Frost.
We further note that additional motions for new trials, which allege that the government suppressed an internal investigative report which concluded that FWG did not receive
B. False Declaration to Grand Jury
The jury convicted Congo of Count Thirty-One, which alleged that he violated 18 U.S.C. § 1623 by knowingly making a false material declaration when testifying before the grand jury that was investigating whether the schemes at issue in these prosecutions constituted mail fraud. The Superseding Indictment asserted that Congo testified as to the following before the grand jury:
Count Thirty-One alleged that the above testimony was false and in violation of § 1623 because Congo knew "that individual FWG employees did not offer to aid him in the preparation of his dissertation out of friendship, but were directed to do so and did work on his dissertation because of his position with NASA." The Superseding Indictment therefore did not base this count upon a claim that Congo lied about the amount of help which he received on his dissertation, but rather on a claim that he lied about the motives of those who helped him. The indictment further stated that "[i]t was material to the investigation that the grand jury ascertain whether [Congo] had abused or misused his position as COTR on a contract between NASA and FWG Associates, Inc."
Congo asserts that his § 1623 conviction cannot stand because there is insufficient evidence that he lied to the grand jury. Specifically, he argues that his statements that Karen Seiser and Jimmy Steele offered to work on his dissertation as colleagues and friends are literally true. The falsity of the statements at issue is necessarily an element under § 1623. See, e.g., 18 U.S.C. § 1623; United States v. Gulley,
Congo is correct that the government failed to introduce any evidence regarding the motives of Jimmy Steele. He also is correct that Seiser, who consistently testified that she worked on his dissertation only because Turner had instructed her to, testified during cross-examination that it probably was she who approached Congo regarding her working on his thesis, and that she never explicitly informed him while working on the thesis that she was acting only according to the instructions of Turner. Nonetheless, Seiser also testified that, during a lunch initiated by Congo in the summer of 1990, before the grand jury proceedings but during the investigation by the government, Congo stated to Seiser that he saw her help in writing his dissertation as though she was helping him out as a personal friend and colleague. Seiser testified, however, that she responded to Congo by explaining that "I didn't necessarily see it that way, that I was being paid by FWG, and I didn't, I didn't necessarily do it as a friend, I did it as a paid employee." This testimony provides sufficient support for the conclusion by the jury that Congo lied when he claimed that he believed that FWG employees offered to work on his thesis out of friendship.
Moreover, the record contains circumstantial evidence that Congo knew that his statement that Seiser had offered to work on his dissertation as a colleague and a friend was false, including evidence that 1) Seiser perhaps had met Congo for thirty seconds before working at FWG and was not a friend of his; 2) Seiser began working on his dissertation shortly after she began to work at FWG; 3) Congo ordered Seiser about as if she were an employee; 4) Congo wrote a memo to the secretary of Frost in which he directed the secretary "to have Karen Siser [sic] redo table 18;" and 5) Congo admitted that he thought that Seiser had spent the equivalent of a full work week on his dissertation, a significant sacrifice for one motivated solely by friendship and collegiality. Sufficient evidence therefore supports the finding that Congo lied about his beliefs concerning the motives of Seiser.
Congo also argues that his § 1623 conviction must be reversed because the District Court, rather than the jury, decided the issue of whether his false statements to the grand jury were "material." Materiality is an element of perjury under § 1623. See Johnson v. United States, ___ U.S. ___, ___, 117 S.Ct. 1544, 1548, 137 L.Ed.2d 718 (1997). Further, the jury, not the court, must decide the issue of materiality under § 1623. See id.; see also United States v. Gaudin,
Congo concedes that he did not object when the District Court decided the materiality of his statements. He nonetheless insists that the failure of the District Court to allow the jury to decide materiality necessarily requires reversal because such an error is "structural." The Johnson Court, however, explicitly rejected this argument and held that Rule 52(b) applies when a defendant during a direct criminal appeal did not object before the trial court, regardless of whether the error claimed is structural. See id. at ___, 117 S.Ct. at 1548; see also United States v. Sassanelli,
Before an appellate court may correct an error not raised at trial, the defendant must satisfy a four-part test imposed by Rule 52(b). He must demonstrate that "(1) that the instruction was error; (2) that the error was plain; (3) that the plain error affected the defendant's substantial rights; and (4) that the court should exercise its discretion to correct the error because the error `seriously affected the fairness, integrity, or public reputation of judicial proceedings.'" Sassanelli, 118 F.3d at 499 (quoting Olano, 507 U.S. at 732, 113 S.Ct. at 1776-77).
In this case, the failure of the District Court to submit the issue of materiality to the jury was "error." See Johnson, ___ U.S. at ___, 117 S.Ct. at 1549.
Congo, however, cannot satisfy the fourth requirement, that the error "seriously affected the fairness, integrity or public reputation of judicial proceedings." In Johnson, the defendant was unable to satisfy this final requirement because the evidence of materiality was "overwhelming;" the Court found that the defendant "presented no plausible argument" that her lying about the source of tens of thousands of dollars which she had used to improve her home was not material to the grand jury investigation, which in part concerned whether the defendant's boyfriend had concealed his drug proceeds as real estate investments. See id. at ___, 117 S.Ct. at 1550. Likewise, we believe that the evidence of materiality in this case was overwhelming. A statement is material under § 1623 "if it has `a natural tendency to influence, or be capable of influencing, the decision of the decisionmaking body to which it is addressed.'" Sassanelli, 118 F.3d at 499 (quoting Gaudin, 515 U.S. at 509, 115 S.Ct. at 2313 (quoting Kungys v. United States,
This conclusion does not contradict our prior finding that insufficient evidence supports the mail fraud convictions of Congo based upon the degrees-for-contracts theory. See supra Section II.A. "[M]aterially false grand jury testimony is a criminal offense, regardless of whether the grand jury's investigation ultimately leads to a valid indictment for a federal offense." Callanan v. United States,
C. Suppression of Seized Evidence
Frost asserts that all of the evidence seized by the federal agents who searched the offices of FWG pursuant to a search warrant must be suppressed. He argues that probable cause did not support the warrant, that the warrant was overly broad, and that the agents flagrantly disregarded the scope of the warrant when conducting the search. Frost relies mainly upon his pleadings filed below, and the government relies exclusively upon the order and memorandum of the District Court refusing to suppress all evidence, but reserving until trial the issue of whether particular documents sought to be introduced should be suppressed.
Having reviewed the pleadings and exhibits filed by Frost, including the search warrant and its supporting affidavit, as well as the rulings of the District Court, we find no error. Frost relies primarily upon United States v. Medlin,
D. Motions to Sever
Potter and Frost claim that the District Court erred by not granting their motions to sever. Although the arguments raised by Frost are very brief, he appears not to contest the joinder of his case with those of the other defendants, but argues only that not every count should have been joined against him. Potter primarily argues
Defendants argue that this case should have been tried as several cases, with separate prosecutions for Counts 1) One through Sixteen; 2) Seventeen through Twenty; 3) Twenty-One through Twenty-Nine; 4) Thirty; and 5) Thirty-One. They suggest that we should apply Federal Rule of Criminal Procedure 8(a), rather than Rule 8(b), when deciding the precise question of whether the indictment properly combined all counts into a single prosecution.
Rule 8 requires a trial court to examine the allegations of the indictment in order to determine whether the joining of the offenses and/or defendants has been proper. See, e.g., United States v. Lloyd,
Traditionally, courts have held that Rule 8(a) applies only to a prosecution of a single defendant, and that Rule 8(b) applies exclusively whenever multiple defendants are involved, even if a defendant is contesting only the joinder of counts against himself. See 1 CHARLES ALAN WRIGHT, FEDERAL PRACTICE AND PROCEDURE: FEDERAL RULES OF CRIMINAL PROCEDURE § 143 p. 479, § 144 p. 494 (2d ed.1982). The primary difference between the two sections is that it is easier to justify joinder under Rule 8(a) because, unlike Rule 8(b), it also permits joinder of offenses which are merely of "the same or similar character." See id. at § 144 pp. 495; see also United States v. Eufrasio,
Like the Eufrasio court, however, we ultimately will not decide whether Rule 8(a) has any application in this case, see id. at 570, because reversal is not warranted even under Rule 8(b).
"The joinder of multiple defendants is proper under Rule 8(b) only if each of the counts of the indictment arises out of the same act or transaction or series of acts or transactions, even if all counts of the indictment include a common defendant." Lloyd, 10 F.3d at 1215 (quoting United States v. Hatcher,
Although the question of whether joinder was proper under Rule 8(b) is a question of law, see, e.g., Hatcher, 680 F.2d at 441, misjoinder does not require reversal per se. Rather, we review for harmless error, and will reverse only if joinder has "result[ed] in `actual prejudice' because it had a `substantial and injurious effect or influence' on the jury's verdict." Lloyd, 10 F.3d at
The District Court denied defendants' motions to sever because it found that every allegation related to an overall scheme to enrich Frost and FWG by defrauding the government, and that every charge concerned various, and sometimes identical, contracts between FWG and NASA or the Department of Defense. The District Court also stated that there was substantial overlap of proof, and that the actions underlying Counts One through Twenty-Nine all occurred during the same period of time. Finally, the District Court found that Counts Thirty and Thirty-One directly related to the other counts because the mail fraud charged in the preceding counts motivated the attempts to cover up the alleged mail fraud.
The joining of Counts One through Twenty, as well as Counts Thirty and Thirty-One, was proper. Counts One through Twenty all concerned an alleged uniform scheme to defraud the government and the University of Tennessee out of either money or degrees, and the collective effort to fabricate a plagiarized dissertation or thesis was integral to every count. As we have observed, the "predominant consideration" of a decision regarding joinder under Rule 8(b) is "whether joinder would serve the goals of trial economy and convenience; the primary purpose of this kind of joinder is to insure that a given transaction need only be proved once." United States v. Moreno,
Depending upon how broadly one defines "the same series of acts or transactions" under Rule 8(b), the District Court also may have been correct that Counts Twenty-One through Twenty-Nine, which concerned fraudulent billing of the government under FWG contracts, were joined properly with the remaining counts. Even if these counts were misjoined, however, any possible error was harmless. See, e.g., Holloway, 971 F.2d at 679 (declining to decide whether joinder was improper under Rule 8(b) when any error was harmless). The only defendant who has identified on appeal any specific prejudice arising from the joinder of these counts is Potter, and even she confines herself to noting that the government introduced evidence that Frost lived an "extravagant lifestyle," improperly billed time, sought improper expense reimbursements, tried to destroy evidence, and generally had bad character. She also complains that one witness alleged that Turner offered to give exam questions to the parent of a student.
We initially note that the evidence of Frost's "extravagant lifestyle" and Turner's invitation to cheat was applicable to Counts One through Twenty, for which joinder was clearly proper.
The District Court further minimized any prejudice by instructing the jury to consider only the evidence against each defendant on each charge, and to return separate verdicts, without regard to the other charges or defendants. See Southwest Bus Sales, 20 F.3d at 1454 (even if joinder was improper, error was harmless partly due to limiting instructions); Stillo, 57 F.3d at 557 (under FED.R.CRIM.P. 14, instructions to consider evidence only in relation to person against whom it was admitted reduces risk of prejudice). Although Potter insists that the fraudulent billing counts are unrelated to the academic impropriety counts, she thereby also highlights the fact that it would not have been difficult for the jury to compartmentalize and distinguish the evidence concerning the allegedly different schemes. See United States v. Elder,
We therefore find that any initial misjoinder under Rule 8(b) did not result in "actual prejudice" by exerting a "substantial and injurious effect or influence" on the verdicts. Potter also has invoked Federal Rule of Criminal Procedure 14, which "comes into play only if joinder was initially proper under Rule 8 but a joint trial would prejudice one or more defendants." Lloyd, 10 F.3d at 1215. We review a denial of severance under Rule 14 for abuse of discretion only. See id. Because we already have examined the potential sources of prejudice when deciding whether any misjoinder under Rule 8(b) was harmless, we find that, at least under the circumstances of this case, the Rule 14 claim necessarily fails.
E. Sentencing Issues
Because we have vacated some convictions for every defendant, we remand in order for the District Court to review each sentence in light of the vacated counts. We will address briefly two particular arguments raised by Potter and Frost regarding their sentences because these issues will arise on resentencing.
Frost claims that the District Court erred when calculating the loss attributable to the scheme to bill bonuses as direct expenses by including in the amount of loss the full value of the bonuses, in addition to the overhead costs attributable to the bonuses having been identified as direct, not indirect, expenses. We note only that, if the District Court determines that the convictions based upon the bonus billing scheme should not be reversed because of a Brady violation, see supra Section IV.A, the District Court should make a specific factual finding at sentencing as to whether Frost and FWG had an informal bonus plan in existence that would have allowed the payment of some form of bonuses.
Potter claims that the District Court erred when calculating the loss attributable under Count Eight, which charged her with defrauding the government of her tuition money. We review the factual findings underlying a sentencing decision for clear error. See, e.g., United States v. Hill,
Potter complains that NASA lost only about $750 because she educated herself by working hard to understand the FWG report which she would pass off as her thesis, and because she did not engage in the fraudulent scheme at issue until her last semester, when she submitted her thesis. It was not clearly erroneous, however, for the District Court to find that NASA was not paying for Potter to gain some minimal understanding of a topic in order to pass her oral defense, but to get a degree based upon a legitimate thesis.
Accordingly, we VACATE the convictions of each defendant convicted of Counts Two through Seven, Nine through Fourteen, and Sixteen. We AFFIRM the convictions of each defendant convicted of Counts One, Eight, Fifteen, Seventeen, and Nineteen through Twenty-Four, as well as the conviction of Congo of Count Thirty-One. We REMAND for a hearing as to whether Frost should receive a new trial for his convictions of Counts Twenty-Five through Twenty-Nine on the basis of a Brady violation. Finally, we REMAND all sentences for review in light of this opinion, but AFFIRM the valuation by the District Court of the loss caused by the offense of which Potter was convicted under Count Eight.
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