FEINBERG, Circuit Judge:
Karl R. Huber appeals from a judgment of conviction following a lengthy jury trial on a multi-count indictment before Judge Charles H. Tenney in the United States District Court for the Southern District of New York. Appellant was charged in Count One with conspiring, among other things, to defraud the United States in connection with its administration of the Medicaid, Medicare and Hill-Burton programs, to make and cause to be made false statements to a government agency in a matter within its jurisdiction, and to use the mails in furtherance of a scheme to defraud in violation of 18 U.S.C. § 371. Counts Two through 24 charged appellant with making, and causing to be made, false, fictitious and fraudulent statements to the United States Department of Health, Education and Welfare in violation of 18 U.S.C. §§ 1001, 2. Counts 25-33 charged using the mails in furtherance of a scheme to defraud certain insurance companies, hospitals, the United States, and the States of New York and New Jersey in violation of 18 U.S.C. §§ 1341, 2. In addition, appellant was charged with six counts of transporting stolen money in interstate commerce, in violation of 18 U.S.C. §§ 2314, 2 (Counts 34-39), one count of making false material declarations before a grand jury in violation of 18 U.S.C. § 1623 (Count 40), and one count of conducting the affairs of an enterprise through a pattern of racketeering activity in violation of 18 U.S.C. §§ 1961, 1962(c), 1963, 2 (Count 42).
During the course of the trial, the district court entered judgments of acquittal on Counts 14-16, 20, 27, and 34-39. The jury convicted appellant on all of the remaining counts, and returned a special verdict in which it found that the enterprise concerned in Count 42 consisted of the following entities also found to be wholly owned by appellant: Tudor, Inc. (Tudor), Boden, Inc. (Boden), Atlantic Medical Corporation (Atlantic), Hospital Equipment Company (HEC), Debs Hospital Supplies, Inc. (Debs), Medical Facilities, and Hospital Furniture/Medical Facilities (HF/MF). Judge Tenney sentenced appellant to a three-year prison term on the conspiracy and false statement counts and a two-year term on the mail fraud counts to run concurrently with each other, and to a one-year term on the perjury count to be consecutive to the other prison terms, a total of four consecutive
Appellant makes numerous arguments to us, variously seeking either a new trial or the striking of some of the counts and a resentencing. For the reasons set forth below, we affirm the judgment of conviction in all respects.
A number of appellant's arguments concern the legal sufficiency of the evidence. At this juncture, we briefly summarize the activities for which appellant was convicted viewing the evidence most favorably to the government. Detailed review of the evidence will be added later where necessary.
Appellant Karl R. Huber, an honors graduate of Princeton University, a 1965 graduate of Harvard Law School and a member of the New Jersey bar, joined his father, Karl Huber, in the latter's allegedly troubled business ventures instead of working for a law firm in Newark as planned. In October 1971, appellant and his father obtained control of HEC, an established New Jersey hospital supply house. HEC, through its contract division, Medical Facilities, and a series of corporate successors, entered into a number of cost-plus contracts with hospitals in New York and New Jersey for the sale of hospital and surgical supplies, furniture and equipment. The price consisted of the manufacturers' invoiced costs to HEC plus a specified mark-up (usually between five and eight percent) and the net cost of any freight. The evidence showed that the Hubers knew about and understood the nature of the cost-plus contracts from the time they took over HEC, were involved in and managed the hospital supply business on a day-to-day basis, and were kept apprised in detail about new contracts as they were made.
Shortly after the Hubers acquired HEC, and at their specific direction, HEC employees Conroy and Eckert, see note 1 supra, began to inflate the manufacturers' costs quoted to the hospitals. At appellant's suggestion, invoices were falsified where necessary. The hospitals were also charged for freight not actually incurred. The term "phantom freight," apparently coined by appellant's father, was in general usage at the office. As a result of these fraudulent practices, HEC and Medical Facilities received an effective mark-up of roughly between 18 percent and 29 percent rather than the five to eight percent specified in the contracts. There was evidence that the mails were used in connection with the scheme to defraud the hospitals. The fraudulent overcharges totalled nearly $471,000, most of which was subject to reimbursement by either the federal or state government.
In July 1977, appellant appeared before a grand jury that was investigating whether fraud had been committed by HEC or its successors. Appellant denied to the grand jury that he exercised close control over the hospital business and that he knew of the cost-plus nature of the contracts or the meaning of the term "phantom freight." The proof at trial overwhelmingly showed otherwise.
In defense, appellant contended that he and his father had been cheated by Conroy and Eckert and that if appellant was directly involved in the fraudulent scheme, because of the peculiar relationship between him and his domineering father, appellant lacked the independence of will necessary to form the intent needed to sustain the convictions. Numerous witnesses, expert and otherwise, testified on this latter point. Appellant also testified in his own defense.
Appellant makes several challenges to his conviction on Count 42 of the indictment, which charged that he conducted the affairs of an enterprise through a pattern of racketeering activity in violation of 18 U.S.C. § 1962(c), and which resulted in the forfeiture of the enterprise pursuant to 18 U.S.C. § 1963. Those provisions are part of Title IX of the Organized Crime Control Act of 1970 (Act), Pub.L. No. 91-452, 84 Stat. 922, reprinted in  U.S.Code Cong. & Admin.News p. 1073, which was enacted in response to what Congress perceived as the threat to the American economy from the unchecked growth of organized crime. United States v. Parness, 503 F.2d 430, 439 (2d Cir. 1974), cert. denied, 419 U.S. 1105, 95 S.Ct. 775, 42 L.Ed.2d 801 (1975). The Act was intended in part to remedy
Title IX of the Act added a new Chapter 96 to Title 18 of the United States Code, entitled "Racketeer Influenced and Corrupt Organizations" (RICO). The purpose of RICO is to enable law enforcement authorities not only to punish individual criminals, but to separate the corrupt interstate enterprises in which they were involved from their criminal organizations so that prosecutions will do more than merely impose a "compulsory retirement and promotion system as new people step forward to take the place of those convicted." S.Rep. 91-617, 91st Cong., 1st Sess. 78 (1969) (Senate Report). Thus, in order to "deal not only with individuals, but also with the economic base through which those individuals constitute such a serious threat to the economic well-being of the Nation," id. at 79, RICO, in 18 U.S.C. § 1963, imposes the sanction of forfeiture of an "enterprise" involved in violations of 18 U.S.C. § 1962.
That section specifies the kinds of corrupt infiltration into interstate commerce that Congress sought to prevent. The section provides:
A "pattern of racketeering activity" is defined in 18 U.S.C. § 1961(5) as consisting of at least two acts of racketeering activity within ten years of one another. "Racketeering activity" is defined in 18 U.S.C. § 1961(1) as any of a wide variety of serious criminal acts under state and federal law, including mail fraud in violation of 18 U.S.C. § 1341, which was the racketeering activity charged in the indictment here.
Pointing to what he claims are inconsistent judicial interpretations of RICO, appellant urges this court to reconsider its holding that RICO is not unconstitutionally vague. See United States v. Parness, supra, 503 F.2d at 440-42. We decline the invitation, noting that each circuit court faced with the issue has reached the same result. See United States v. Hawes, 529 F.2d 472, 479 (5th Cir. 1976); United States v. Campanale, 518 F.2d 352, 364 (9th Cir. 1975), cert. denied, 423 U.S. 1050, 96 S.Ct. 777, 46 L.Ed.2d 638 (1976); United States v. Cappetto, 502 F.2d 1351, 1357-58 (7th Cir. 1974), cert. denied, 420 U.S. 925, 95 S.Ct. 1121, 43 L.Ed.2d 395 (1975). See also Atkinson, Criminal Law, "Racketeer Influenced and Corrupt Organizations," 18 U.S.C. §§ 1961-68: Broadest of the Federal Criminal Statutes, 69 J.Crim.Law 1, 4 n. 26 (1978).
In a number of loosely related arguments concerning the composition to the enterprise to be forfeited, appellant claims that a group of corporations cannot be an "enterprise" within the meaning of RICO, that the government's theory of the composition of the enterprise varied in the indictment and at trial, that the indictment was duplicitous in the RICO count, that the judge's charge concerning the degree of connection that the government had to show between each corporation and appellant's racketeering activity was erroneous, that the evidence was insufficient to support the inclusion of certain of the corporations in the enterprise, and that the use of a special verdict to determine the composition of the enterprise was error, prejudiced the defense, and in any event did not cure any of the other problems just itemized.
Appellant's argument that a group of corporations cannot be an enterprise within the meaning of the statute stems from an overly rigid reading of the definitions contained in section 1961. Subsection (4) provides
The argument runs that since the term "corporation" is in the singular, the only way a group of corporations may be an "enterprise" within the meaning of the statute is if they come within the language, "group of individuals associated in fact."
Appellant claims that the government's theory of the case never crystallized, that it never decided whether the prosecution was based on a single enterprise composed of one or more of the seven entities listed in the indictment, or a seven-enterprise theory. We disagree. Although there were occasions when the word "enterprises" was used in the indictment and during the trial, it seems clear that it was used as a synonym for "entities" rather than in the technical sense of a RICO enterprise. While the government might be faulted for imprecise language on occasion, it is clear that the indictment was predicated on a one-enterprise theory, and that that was the basis on which proof was offered and on which the jury was charged.
Appellant also claims that the indictment was duplicitous in that Count 42, the RICO count, charged a series of acts through a number of entities, and that the jury was therefore not required to agree unanimously on any particular fact to reach a guilty verdict. Appellant's failure to raise this claim prior to trial "may be deemed" a waiver. Fed.R.Crim.P. 12(b)(2); United States v. Kelley, 395 F.2d 727, 729 (2d Cir.), cert. denied, 393 U.S. 963, 89 S.Ct. 391, 21 L.Ed.2d 376 (1968). Further, the convictions on all the mail fraud counts submitted to the jury coupled with the special verdict specifying that all the entities were members of the enterprise show that the jury was obviously not divided on the theory underlying its verdict of guilt.
Appellant argues that Judge Tenney's charge permitted the jury to find that the various entities were part of the enterprise if it found that defendant owned them all even if he conducted the affairs of only one of them through a pattern of racketeering activity. The government properly concedes that such a connection alone would not support application of RICO's forfeiture sanction to enterprises whose affairs were not conducted through a pattern of racketeering activity. However, so long as the jury is correctly apprised of the elements of a RICO violation and is instructed that it may find an entity owned by a defendant to
Appellant contends that, even if the jury was properly instructed, the evidence was insufficient to link a number of the enterprises to the pattern of racketeering activity. The evidence at trial, however, viewed most favorably to the government, established that Tudor, Boden, Atlantic, HEC, Debs, Medical Facilities and HF/MF were involved in the racketeering activity as follows. First, appellant virtually concedes that the evidence was sufficient to show that the affairs of Medical Facilities and HF/MF were conducted through a pattern of racketeering activity. The focus of the argument is really on the five other entities. Medical Facilities was the contract division of HEC when the Hubers acquired HEC in October 1971 through Tudor, a Huber controlled corporation. In 1972, HEC became the wholly owned subsidiary of Atlantic, another corporation controlled by the Hubers. During the operation of the fraud, checks totalling $871,000 were drawn on HEC by the Hubers in favor of Independent Management Company (IMC), a division of Tudor. This was during a period when Huber made large transfers of funds among various company checking accounts. The jury could infer that checks drawn on HEC to IMC represented funds derived from the scheme to defraud the hospitals on the cost-plus contracts serviced by Medical Facilities. In 1973, Tudor acquired Debs. Huber then had Tudor trade its Debs stock for Atlantic's HEC stock. In 1973, HEC was wound down, and its business was transferred to Debs. Debs's name was pasted over HEC's name on the invoices. HF/MF was then formed and became the successor to the hospital design and interior business of HEC and Debs. The latter ceased operations in March 1974, and HF/MF ceased in May 1975. Shortly before this last event, Huber shifted to Boden all of Tudor's assets, subject to its liabilities. Thus, these companies were not merely unrelated businesses owned by the same person. They were all involved in the hospital supply operation, which could be fairly characterized as a single business operated under various names and forms chosen by appellant to suit his own purposes and convenience.
Appellant relies heavily on United States v. Nerone, 563 F.2d 836 (7th Cir. 1977), cert. denied, 435 U.S. 951, 98 S.Ct. 1577, 55 L.Ed.2d 801 (1978), in arguing that not all of the seven entities were conducted "through a pattern of racketeering activity." There, the Seventh Circuit reversed a RICO conviction where the defendants had been charged with conducting the affairs of Mapel Manor, Inc., a trailer park corporation, through a pattern of racketeering activity. The defendants apparently conducted an illegal gambling operation in one of the mobile homes at their trailer park. But the gambling operation had nothing to do with the affairs of the trailer park. There was no "endeavor to show that gambling revenues were used by or in any way channeled into the corporation or that persons were paid out of gambling revenues to perform services for Mapel Manor, Inc." Id. at 851. Thus, the government's RICO case failed there "because of a total want of proof of the connection between the racketeering activities and the affairs of Mapel Manor, Inc." Id. at 852. Moreover, the trailer park was not in the gambling business. In contrast to that case, the seven entities here were all in the hospital supply business, and that business was conducted through a series of mail frauds.
We thus find there was sufficient evidence to sustain the charge that the affairs of the seven entities were conducted by appellant through a pattern of racketeering activity. We note, however, that the potentially broad reach of RICO poses a danger of abuse where a prosecutor attempts
Appellant also challenges the use of the special verdict. Fed.R.Crim.P. 31(e) provides:
This provision, along with Fed.R.Crim.P. 7(c)(2) governing indictments, was specifically added to the rules in 1972 "to provide procedural implementation of the recently enacted criminal forfeiture provision of [RICO]." Notes of Advisory Committee on Rules, Rule 7(c)(2). Appellant claims that the Rule authorizes the use of a special verdict only to the extent necessary to determine a defendant's interest in an enterprise, but not for the purpose of identifying membership in the enterprise. Here the special verdict called for both inquiries. The jury was required to specify which corporations were part of the enterprise and the percentage of appellant's interest in each. Appellant argues that since the former was unauthorized by Rule 31(e), the special verdict runs afoul of the asserted general proposition that special verdicts are anathema to federal criminal procedure. However, we believe this special verdict to be wholly within the confines of Rule 31(e). Given the nature of the enterprise alleged, it was obviously necessary for the jury to say which entities were part of it, as well as appellant's interest in each, in order to determine the "extent of the . . . property subject to forfeiture."
Finally, appellant argues that the forfeiture sanction violates the Eighth Amendment's proscription on cruel and unusual punishments.
Senate Report at 80. However, what is innovative about RICO is not that it imposes forfeiture as a consequence of criminal activity, but rather that it imposes it directly on an individual as part of a criminal prosecution rather than in a separate proceeding in rem against the property subject to forfeiture. Statutes providing for in rem forfeiture of property related to criminal activity are relatively common. See, e. g., 49 U.S.C. §§ 781-83 (relating to narcotics violations); Legislative Note, Organized Crime Control Act of 1970, 4 U.Mich.J. of Law Reform 546, 624 & n. 13 (1971). Such statutes have been upheld even where, unlike here, the effect is to deprive an owner of property where that owner is not the person guilty of using the property for criminal purposes. See Goldsmith-Grant
We do not say that no forfeiture sanction may ever be so harsh as to violate the Eighth Amendment. But at least where the provision for forfeiture is keyed to the magnitude of a defendant's criminal enterprise, as it is in RICO, the punishment is at least in some rough way proportional to the crime. We further note that where the forfeiture threatens disproportionately to reach untainted property of a defendant, for example, if the criminal and legitimate aspects of the "enterprise" have been commingled over time, section 1963 permits the district court a certain amount of discretion in avoiding draconian (and perhaps potentially unconstitutional) applications of the forfeiture provision. Section 1963(c) provides:
In this case, Judge Tenney provided in his sentence that the seizure
We certainly cannot say that the forfeiture provision is unconstitutional as applied to these circumstances, even if there were some doubt about its application to others.
Having determined that appellant's conviction under the RICO count is entirely proper, we turn to the other points raised.
Huber raises several points with respect to his false statement convictions under 18 U.S.C. §§ 1001, 2. Section 1001 provides:
Section 2 provides:
Huber was convicted on 19 counts for having caused six hospitals with which he dealt to submit claims to the government, through fiscal intermediaries, for reimbursement for depreciation costs that were inflated due to fraud. The 19 convictions represented each hospital's annual claims over three, and in one case four, years.
Appellant first argues that the statements made to the government were not literally false, since the figures reported as the basis on which depreciation was calculated reflected the hospitals' actual original
Appellant next argues that the evidence was insufficient as a matter of law to establish that he "willfully cause[d]" the submission of the false statements to the government within the meaning of section 2(b). He argues that his purpose, if any, was only to defraud the hospitals, not the government. Appellant claims that he did not care about the hospitals' cost reports because they "played no role in the amount of money paid by the hospitals to the defendants . . . and even their filing vel non was a matter of total irrelevance and indifference to the defendants." Thus, he argues, in the absence of a criminal purpose or objective to cause a false statement to be made to the government, his convictions cannot stand, citing United States v. Peoni, 100 F.2d 401, 402-03 (2d Cir. 1938) (L. Hand). However, there was sufficient evidence from which the jury could infer that the filing of the false statements was a criminal purpose of appellant and that their filing was not a matter of indifference to him. There was plenty of evidence that from the outset Huber was familiar with the government hospital funding programs, which he knew would stimulate hospital activity and encourage expansion. The jury was entitled to infer that such funding, and the paper work that went with it, was essential to the prosperity of appellant's ongoing fraudulent business activities. This was not a one-time fraud that ended prior to the filing of any papers with the government by the hospitals.
Appellant's last objection to his false statement convictions is to the number of them. He was convicted on 19 counts, whereas, he argues, the activities alleged comprised at most six counts, i. e., one count for each of the six hospitals submitting depreciation claims to the government. Appellant's point is that since the historic cost figure reported to the government as the basis for each hospital's annual claim for depreciation was the same each year, there was, in effect, only one false statement for each hospital, which was merely repeated a number of times. In other words, appellant claims the convictions were multiplicitous, in that a single act was alleged to constitute several violations of
Appellant next complains of the district judge's refusal to allow a defense witness to testify as an expert in the field of psychoanalysis, and that such refusal seriously interfered with appellant's ability to present his defense that because of his relationship with his father he was incapable of forming the mental state necessary to sustain the convictions. The witness did testify as a business expert. He is a professor of economics at Harvard Business School. He has also studied psychoanalysis at the Boston Psychoanalytic Institute, and, though he has had no medical training, is certified as a psychoanalyst by the American Psychoanalytic Institute. He has treated people regularly without supervision for a number of years. Judge Tenney heard the proffered testimony in the absence of the jury, and ruled the witness unqualified to testify as an expert concerning appellant's mental state. While we do not say that all of us would have ruled the same way, we hold that the district judge did not abuse his broad discretion in deciding that this witness was not qualified in this case. See, e. g., Hamling v. United States, 418 U.S. 87, 108, 94 S.Ct. 2887, 41 L.Ed.2d 590 (1974); United States v. Bermudez, 526 F.2d 89, 98 (2d Cir. 1975), cert. denied, 425 U.S. 970, 96 S.Ct. 2166, 48 L.Ed.2d 793 (1976). This is particularly so in light of the fact that two psychiatrists did testify as experts concerning appellant's mental state, and thus the defense based on appellant's asserted lack of free will was presented to the jury.
Appellant challenges the sufficiency of the evidence on four of the mail fraud counts. These challenges are aimed at more than simply reversal of those convictions. Relying on a case in the Third Circuit for the proposition, appellant argues that if any of the mail fraud counts are reversed, the RICO count must be reversed as well, because it is impossible to know which mail fraud counts the jury relied on in finding the requisite "pattern of racketeering activity." United States v. Brown, 583 F.2d 659, 669 (3d Cir. 1978). We need not decide whether this circuit would agree with that analysis, cf. United States v. Parness, supra, 503 F.2d at 438 ("Convictions on any two of these [travel fraud] counts were sufficient under § 1961(5) to establish the `pattern of racketeering activity' necessary for a conviction under § 1962(b)."), because the evidence was sufficient to sustain all the mail fraud counts submitted to the jury.
Appellant argues that as to two of the counts, 25 and 26, there was insufficient evidence of use of the mails. Those counts concerned checks paid by two of the hospitals to Medical Facilities. Officials from both hospitals testified that checks were typically mailed in the ordinary course of business. Although there was testimony that some checks were picked up by hand, they were identified as checks other than those specified in Counts 25 and 26. Witnesses could not recall whether any checks other than those identified were picked up by hand. This testimony of an alternative mode of delivery is simply too scanty, compare United States v. Baker, 50 F.2d 122, 123 (2d Cir. 1931) (testimony by lawyer that "a great many letters delivered by his office were not mailed"), to prevent the use of customary business practices as proof of mailing. See United States v. Toliver, 541 F.2d 958, 966 (2d Cir. 1976); United States v. Fassoulis, 445 F.2d 13, 17 (2d Cir.), cert. denied, 404 U.S. 858, 92 S.Ct. 110, 30 L.Ed.2d 100 (1971).
Finally, appellant argues that his request for an order withdrawing several of the 18 specifications of perjury set forth in Count 40 should have been granted.
For the reasons set forth above, we affirm the judgment of conviction in all respects.