United States of America, Plaintiff-appellee, v. Eugene R. Sullivan, Defendant-appellant.united States of America, Plaintiff-appellee, v. George H. Kaub, Defendant-appellant, 905 F.2d 1532 (4th Cir. 1990)

Following a trial by jury, the appellants, Eugene R. Sullivan and George H. Kaub, were convicted on one count of conspiracy to defraud the United States (18 U.S.C. § 371) and several counts of wire fraud (18 U.S.C. § 1343). These convictions were the result of their unlawful efforts to secure a lucrative government contract for their employer, Teledyne Electronics, Inc. Kaub was also convicted of making false statements to the United States (18 U.S.C. § 1001). Both appellants were acquitted of bribery. A motion for a judgment of acquittal or, in the alternative, for a new trial was filed on behalf of both appellants. The motion was denied and sentence was passed. We affirm.

The appellants were both high-ranking executives at Teledyne Electronics, Inc., a company involved inter alia in the design, manufacture, and sale of highly technical equipment to various branches of the federal government. One such piece of equipment was a hand-held transponder test set, known as the AN/APM 424 (APM), used by the military to determine the origin of incoming aircraft. Teledyne developed the APM, and in 1982 was awarded a procurement contract to sell the APM to three branches of the Armed Services. The contract was administered by the Air Force at Kelly AFB in San Antonio, Texas. As this contract neared its 1985 date of expiration, Teledyne, through its executives, renewed efforts to sell the APM to the Armed Forces to the exclusion of other companies that had developed similar technology.

Due to a shift in policy favoring small businesses over major manufacturing conglomerates, the Air Force expressed a reluctance in renewing the Teledyne APM contract. Because Teledyne had already experienced a major decline in successful government contract bids, company executives, including the appellants, resolved to use all available resources to secure the renewal of the APM contract. With such a goal in mind, the appellants met with William Parkin, a defense industry consultant and former Department of Defense employee, in November of 1985. At that meeting, attended by the appellants and William Rosen, Teledyne's vice-president for marketing, Parkin asserted that if he were hired, Teledyne would be awarded the APM contract, although he gave no details as to his strategy to substantiate his confidence. Parkin did tell the Teledyne executives, however, that he was the front man for a consortium that had unusual ties with the Navy.¹ 

The appellants were understandably interested in the services of Parkin, and the focus of the meeting then turned to the payment of Parkin's fee. Parkin boldly suggested that Teledyne pay him a monthly retainer--a suggestion that was not accepted by the appellants. Parkin then proposed that the parties "bet on the come" and pay him only after Teledyne was awarded the APM contract. The appellants agreed on a fee of $150,000, to be paid upon the award of the contract. Parkin also asked for $10,000 to cover his expenses, which was paid by Teledyne in four monthly installments.

In a memorandum agreement drafted to memorialize the deal struck between the parties, it was represented that Teledyne had hired Parkin to work to prevent the Air Force from setting aside the APM contract for small businesses. The memorandum stated that if Parkin were successful, Teledyne would then negotiate a $150,000 subcontract with him, but further details as to the substance of that contract were excluded. The memorandum did not mention the $10,000 cash advance, nor did it require any regular progress report of Parkin, an unusual practice at Teledyne.² 

As required by federal regulations, Teledyne filed an annual certification in February of 1987 with the San Antonio Air Logistics Command, representing that it had not paid any person to solicit the APM contract and that no person was to be paid a fee contingent upon the award of the contract. This certification was filed by John Leslie, a subordinate of appellant Kaub. Apparently, Kaub had not informed Leslie about the Parkin arrangement, yet he allowed Leslie to file the false certification, without which Teledyne would have been excluded as a potential supplier of the APM.

Parkin and his associate, Fred Lackner, were successful in securing the APM contract for Teledyne. Several events preceded that award of the contract. In May of 1986, the Air Force reversed its decision to set aside the APM procurement contract for small businesses. Shortly thereafter, Tel Instruments Corporation, the only concern competing with Teledyne for the contract, was eliminated from the bidding process because its sample unit failed to meet necessary specifications. Parkin brashly accepted responsibility for the occurrence of these events.

The appellants were understandably elated, as not only were they awarded the APM contract, they were to remain as the sole supplier of the device, insuring that both their selling price and profit margin would remain high. Sullivan then asked Parkin to use his sources to obtain information about the potential size of the APM procurement. Parkin, relying on the information given by an unknown Navy source, then informed Sullivan that 185 units would be purchased, with options for an additional 1,200, and that over $4 million would be spent by the Armed Services during the first year of the procurement.

After successfully securing the procurement contract and an estimate of its value to Teledyne, the appellants were faced with the thorny problem of how to pay Parkin and his group. Contingency fees based on government contract procurement are illegal. Further, Kaub had allowed Teledyne to assure the government that no such arrangement existed with respect to the APM procurement. The parties agreed to represent Parkin's work as legitimate by relying on a "plagiarized report" complied by Parkin that could "withstand scrutiny" by Teledyne officials. Although Teledyne did ultimately pay Parkin a portion of the fee he was guaranteed, further payments stopped when it was publicly disclosed that a government investigation into the Teledyne-Parkin association had begun.

The appellants' principal contention is that the evidence presented at trial was insufficient to support a conviction for either conspiracy to defraud the government or wire fraud. We disagree. The verdict of a jury must be upheld if there is substantial evidence, taking the view most favorable to the government, to support a finding of guilt. United States v. Jackson, 863 F.2d 1163 (4th Cir. 1989); United States v. Garcia, 868 F.2d 114 (4th Cir. 1989). " [T]he relevant question is not whether the appellate court is convinced of guilt beyond a reasonable doubt, but rather whether, viewing the evidence in the light most favorable to the Government, any rational trier of facts could have found the defendant guilty beyond a reasonable doubt." United States v. MacDougall, 790 F.2d 1135, 1151 (4th Cir. 1986) (citations omitted). We are satisfied that the government introduced sufficient evidence to sustain these convictions.

The appellants here argue that the record is devoid of evidence that they either instructed Parkin to secure the contract through nefarious means, suggested that he do so, or were aware that he might. Our reading of the record satisfies us that there is ample evidence to support the conspiracy convictions. For example, the appellants clearly arranged an illegal payment scheme with Parkin, advanced him $10,000 to "grease the skids to get this kind of thing done," and then devised an elaborate and fraudulent scheme to make Parkin's work for Teledyne appear legitimate, inferring, as the district court noted, that they were trying to cover the tracks of their illegal activity. Further, through appellant Kaub's office, Teledyne represented to the government that they had not paid anyone on a contingency basis for work done in support of the APM contract. The natural presumption is that the appellants knew to do so was illegal, and, when asked, were forced to deny it flatly. Finally, the appellants were aware that Parkin did not work alone and was relying on contracts within the government to wield his influence and secure otherwise classified information. The appellants never inquired as to the legality of Parkin's activity, even though, by paying him money, they readily accepted him as an employee of Teledyne. We believe that the jury here could reasonably conclude that the implicit agreement between the parties was that Parkin use any means, legal or not, to ensure that the contract be awarded to Teledyne.

The appellants next argue that the evidence was both legally and factually insufficient to support their convictions for violation of the wire fraud statute, 18 U.S.C. § 1343.³  Specifically, the appellants argue that the evidence failed to show that they were involved in an unlawful scheme to defraud the United States, and even if the evidence showed such a scheme, there was no proof that they intended to deprive the government of money or other tangible property. Therefore, according to the appellants, the government failed to prove an offense under McNally v. United States, 483 U.S. 350 (1987).

We begin first by clarifying a common misconception about the holding in McNally. In that case, the Supreme Court noted that Section 1343 applies to the deprivation of all property rights with equal force and does not limit the scope of that section to tangible as distinguished from intangible property. See Carpenter v. United States, 484 U.S. 19, 25 (1987). Therefore, the holding of McNally is much broader than that advocated by the appellants here.

For the reasons set forth in Part II.A. of this opinion, we find ample evidence that the appellants entered into an unlawful scheme to obtain the APM contract. The issue is whether such a scheme was devised in violation of Section 1343. We find that there was sufficient evidence to warrant the submission of the issue to the jury. The appellants argue that without evidence that Teledyne would not have been granted the APM contract had it not employed Parkin, there can be no violation of Section 1343, as the government was deprived of nothing, and that they were entitled to a directed verdict of not guilty. We find such a contention to be one of no merit.

There is little doubt that Parkin was hired because of Teledyne's fear that it would be locked out of the competitive bidding for the APM contract. Parkin not only gave Teledyne the chance to bid on the contract, he also insured that Teledyne would be the exclusive supplier of the APM. The result was that the price of the APM, as supplied by Teledyne, would remain higher than it would have in a competitive supply environment. Accordingly, at the very least, the government was deprived of the monies expended in purchasing the instrument at the inflated price. We find this alone to be sufficient grounds to support a Section 1343 conviction.

Appellant Kaub contends that his conviction on the false statement counts must be reversed because, as a matter of law, venue in the Eastern District of Virginia was improper. The sixth amendment unequivocally mandates trial in the "State and district" wherein the crime shall have been committed. See United States v. Blecker, 657 F.2d 629, 632 (4th Cir.), cert. denied, 454 U.S. 1150 (1982). In determining venue in Section 1001 cases, courts look to the provisions of the general venue statute, 18 U.S.C. § 3237(a), which provides that venue is proper in any district in which the offense is "begun, continued, or completed." United States v. Hernando Ospina, 798 F.2d 1570, 1577 (11th Cir. 1986). Kaub argues that because the contract for the sale of the APM was approved in Dayton, Ohio, the crime of making false statements to the government was committed there, and, therefore, venue for trial would be proper only in the Southern District of Ohio. The government, on the other hand, argues that the offense was not complete upon final approval of the contract because the Navy implicitly relied on the false certifications in purchasing the APM from Teledyne under the contract. Purchasing decisions were made in Arlington, Virginia. False statement prosecutions may be brought in districts in which an affected federal agency receives and also acts upon the statement in question. United States v. Candella, 487 F.2d 1223, 1228 (2d Cir.), cert. denied, 415 U.S. 977 (1974). The false statements in question were certifications and representations made by John Leslie, a subordinate of appellant Kaub, in California, and sent to San Antonio, Texas, where the contract was originally approved. The contract was then sent to Dayton and ultimately Virginia, so that purchasing orders could be filled.

The false statements were intended to misguide the government about the legality of Teledyne's efforts to secure the contract. The statements continued to be false throughout the life of the contract and were acted upon each time a purchase of the APM was made. We find that the government acted upon such statements when making purchasing decisions in Arlington, and accordingly venue properly lay in the Eastern District of Virginia.

We find any further arguments made by the appellants to be without merit. Accordingly, the judgment of the district court is hereby

AFFIRMED.