Unpublished Disposition, 907 F.2d 155 (9th Cir. 1990)Annotate this Case
United States Court of Appeals, Ninth Circuit.
Before WALLACE and NELSON, Circuit Judges, and STEPHEN V. WILSON1 , District Judge:
This is an appeal from a final judgment of conviction in a criminal case. Appellant, a purchasing agent for an electronics firm, was convicted of the filing of false statements, 18 U.S.C. §§ 1001, 1002, and of conspiracy to defraud the government by submitting fraudulent claims, 18 U.S.C. § 371. The imposition of sentence was suspended, and appellant was placed on probation for a term of five years. Appellant was also fined $10,000 and ordered to perform 600 hours of community service. He now appeals on several grounds. This Court has jurisdiction pursuant to 28 U.S.C. § 1291.
I. REFERRAL TO THE BOARD OF CONTRACT APPEALS
Appellant contends that this case should have been referred to the Board of Contract Appeals as it is a matter that primarily involved the interpretation of government contracts and the application of defense procurement law. Appellant argues that the Board of Contract Appeals has the appropriate expertise and competence to make a determination concerning government contracts, and that Congress intended that the Board of Contract Appeals hear matters of this type.
The Ninth Circuit recently addressed this exact issue in United States v. General Dynamics Corp., 828 F.2d 1356 (9th Cir. 1987). In a matter involving criminal allegations of fraud and conspiracy against a defense contractor and several of its officers, the district court stayed the matter pending a referral to the Board of Contract Appeals concerning the interpretation of the contract. The Ninth Circuit reversed, holding that the district court exceeded its jurisdiction in making the referral and halting the criminal proceedings. The court based its decision on the theory that the doctrine of primary jurisdiction did not warrant referral to a body that did not have quasi-legislative powers, id. at 1365, and that requiring the government to litigate issues central to a criminal prosecution in collateral agency proceedings was at odds with the general rule of prosecutorial discretion over the bringing of criminal indictments. Id. at 1366.
The present case, like the General Dynamics case, involves criminal allegations for fraud and conspiracy. Accordingly, under the law as established in General Dynamics, the district court below was correct in not referring this matter to the Board of Contract Appeals.
II. SUFFICIENCY OF THE EVIDENCE AND MOTION FOR ACQUITTAL
A criminal conviction is supported by sufficient evidence if, "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." Jackson v. Virginia, 443 U.S. 307, 319 (1979) (emphasis in original); U.S. v Whitworth, 856 F.2d 1268, 1286 (9th Cir. 1988), cert. denied, 109 S. Ct. 1541 (1989).
1. Count I--Conspiracy to Defraud the Government by
Submitting Fraudulent Claims
Count I alleges that the defendant "did knowingly, wilfully, and intentionally combine, conspire, confederate, and agree to defraud the United States by submitting and causing to be submitted, false, fictitious, and fraudulent claims for money to the United States Government." The General Allegations of Count I list the relevant government contracts, including the forms submitted for payment which served the dual role of warranting that the products had been manufactured to specifications.
"Three elements establish a conspiracy under section 371: An agreement to achieve an unlawful objective, an overt act in furtherance of the illegal purpose, and the requisite intent to defraud the United States." United States v. Tuohey, 867 F.2d 534, 537 (9th Cir. 1989) (citations omitted). Viewing the evidence in a light most favorable to the government, we find that sufficient evidence did exist to permit a rational trier of fact to find the essential elements of the conspiracy count beyond a reasonable doubt.
Appellant first contended that he was not in an agreement to achieve an unlawful objective because he had nothing to do with engineering decisions and requests made to the government. We disagree. While the evidence established that Jubb Sr. was in charge of the management team at Spectrum and that he made most of the major decisions with regards to engineering decisions and statements filed with the government, it also established that appellant, as head of purchasing for Spectrum, was involved in purchasing non-conforming parts for use in government contracts. The evidence further showed that appellant was a member of the management team, that he was familiar with the contract requirements and applicable military standards, and that he was directly involved in determining the costs of components. Finally, the evidence showed that appellant and his father conferred on many matters, including purchasing of parts required by contracts. There was also evidence that the appellant attempted to conceal the fact that General Electric batteries were not being used. A rational jury could have inferred that an agreement had been willingly entered into for the purpose of submitting false claims to the government.
Adequate evidence also existed as to the other elements of section 371. A statement is "fraudulent," if known to be untrue, when it was made or caused to be made with the intent to deceive the government agency. United States v. Milton, 602 F.2d 231, 233 (9th Cir. 1979). Thus, setting aside materiality for the moment, the government only needs to show that the appellant intended to deceive the government to establish the underlying substantive fraudulent claim charge.
One of the overt acts alleged in the conspiracy count involved the substitution of General Electric batteries with SAFT batteries. Testimony at trial revealed that the appellant had been present when the SAFT batteries were transferred from the boxes in which they were delivered to other cardboard boxes. A rational trier of fact could have found that the transferral of the batteries was an attempt to hide the fact that the batteries had been purchased from SAFT, and not from General Electric as required by the contract. Furthermore, testimony also revealed that the appellant instructed an employee to replace the purchase order made payable to SAFT with a purchase order showing payment to General Electric. A rational trier of fact could have concluded that the instruction to switch purchase orders demonstrated that the appellant intended to deceive the government as to the source of the batteries. Thus, if the contract required General Electric batteries, and the evidence demonstrated that appellant attempted to deceive the government as to the source of the batteries, then a rational trier of fact could have found that a request for payment to the government warranting that the contract specifications had been met was a fraudulent claim.
We review a district court's decision regarding materiality de novo. United States v. Myers, 878 F.2d 1142, 1143 (9th Cir. 1989). Since the statements presented to the government concerned the function of manufactured products to be used in defense systems, the statements were clearly material in that the government used those statements to make payment for those products.
Thus, viewing the evidence in a light most favorable to the government, a rational trier of fact could have found the essential elements of conspiracy to make fraudulent statements beyond a reasonable doubt.
2. Count XX--False Statement to Government Agency
The analysis of the false statement claim is nearly identical to that of the underlying substantive charge to the conspiracy count, discussed above. However, the allegedly fraudulent statement is different than that used in the conspiracy count and is identified in the indictment:
[D]efendants, in a matter within the jurisdiction of the Department of Defense of the United States, did wilfully and knowingly use a false, fictitious and fraudulent statement knowing the same to contain such a statement, in that in the document, a "Request for Deviation/Waiver," it was stated that "General Electric Co. will not warrant that their cell meets the drawing requirements whereas SAFT America has warranted a "D" cell to comply with the drawing," when in truth and fact as they then well knew General Electric Co. would make such a warranty, all in violation of 18 U.S.C. § 1001 and Sec. 2.
As in the above analysis, the government would have to prove that the statement (1) was a matter within the jurisdiction of a government agency; (2) was fraudulent in some material particular; and (3) that the statement was made knowingly. In addition, the government must also show that the appellant knew the statement was false.
At trial, Michael Mahan, an employee of General Electric, was read the allegedly false statement and asked "Is that statement true in reference to whether or not General Electric will warrant that their product meets the requirements?" Mahan replied "No." Mahan based his statement on the distinction that General Electric would warrant the "D" cell they manufactured, but not an entire battery assembly. According to Mahan's testimony, "cell" and "battery" are terms of art in the industry. Thus, Mahan provided the basis to show that General Electric would indeed warrant their cells, thereby making Spectrum's statement to the government false. In addition, there is evidence that appellant attempted to cover-up the fact that the batteries had been purchased from SAFT. Based on the evidence of the cover-up and Mahan's testimony that General Electric would indeed warrant their cells, a rational juror could have found that appellant knowingly made false statements to the government.
At the close of trial, appellant requested that the district judge instruct the jury that a false statement made with good faith in its accuracy is not a crime. The district judge rejected this instruction and appellant charges that this rejection is reversible error.
When reviewing a claim of error relating to jury instructions, this court views the instructions in the context of the overall charge. U.S. v. Alcantar, 832 F.2d 1175, 1178 (9th Cir. 1987) (citing United States v. Parks, 95 S. Ct. 1903, 1912 (1975)). A "defendant is not entitled to a separate good faith instruction when the court adequately instructs on specific intent." United States v. Bonanno, 852 F.2d 434, 440 (9th Cir. 1988), cert. denied, 109 S. Ct. 812 (1989); United States v. Dorotich, No. 88-1441, slip op. at 3389 (9th Cir. Apr. 3, 1990).
In this case the district judge adequately instructed the jury that the government had to prove specific intent beyond a reasonable doubt: that appellant knew that the statements submitted to the government were false and that he willfully became a member of the conspiracy to defraud the government.3 Appellant's theory of defense--that he lacked specific intent because he believed he was following the contract and defense regulations in good faith--was adequately presented to the jury by way of the specific intent instruction.
At trial, several witnesses testified as to the proper method of interpreting government contracts and the correct way of executing those contracts. Colonel Barnes was the government's primary expert witness testifying as to proper procurement procedures. He testified, on both direct and cross-examination, as to any rules about substitution of parts and the order of precedence that prevail when the drawings for a product may be in conflict with the specifications. Barnes testified that a contractor does not have to file a request for waiver or deviation if the part to be substituted is on an authorized substitution list referenced by the contract. Barnes also testified, in response to cross-examination, that Military Standards apply only if they are referenced in the contract. Several other witnesses for the government also testified regarding these subjects.
The defendant also had several witnesses who testified concerning interpretation of the specific contracts at issue as well as general government contract interpretation. One defense witness however, a government contract lawyer, Joseph Wager, was not allowed to testify as to the law governing government contracts. Wager was offered as an expert in defense contract law and it appears from the record that he would have testified as to the applicable law for the contracts at issue and his interpretation of the defendant's actions under the contracts. The district judge ruled that it was not proper for a witness to instruct the jury as to what the law was; that was the court's duty. Wager, however, was allowed to testify along the same lines as Colonel Barnes did, as long as he did not testify as to the law.
The trial judge was within his discretion in rejecting this testimony. It is for the jury to evaluate the facts in the light of the applicable rules of law, and it is therefore erroneous for a witness to state his opinion on the law of the forum. United States v. Unruh, 855 F.2d 1363, 1376 (9th Cir. 1987), cert. denied sub nom. Forde v. United States, 109 S. Ct. 513 (1988). Moreover, Federal Rule of Evidence 403 allows a trial judge great latitude in determining whether or not to admit evidence. Accordingly, the trial judge did not err in rejecting certain aspects of the defendant's expert testimony.
V. RELEVANCY OF THE DEFENSE PROCUREMENT REGULATIONS AND JURY INSTRUCTIONS
At the end of the trial, the appellant offered jury instructions on the applicability of defense procurement regulations. The district judge rejected the instructions without comment.
In reviewing jury instructions, the trial judge is given "substantial latitude" so long as the instructions "fairly and adequately cover the issues presented." United States v. Bordallo, 857 F.2d 519, 527 (9th Cir. 1988), as amended, 872 F.2d 334 (9th Cir.), cert. denied, 110 S.Ct 71 (1989). "A single instruction to a jury may not be judged in artificial isolation, but must be viewed in the context of the overall charge." Id. (quoting United States v. Park, 95 S. Ct. 1903, 1912 (1975). "Jury instructions, even if imperfect, are not a basis for overturning a conviction absent a showing they constitute abuse of the trial court's discretion." United States v. Green, 745 F.2d 1205, 1209 (9th Cir. 1984), cert. denied, 474 U.S. 925 (1985).
The appellant contends that to make a proper evaluation of his actions and intent in this case, a trier of fact must be instructed as to the appropriate regulations that govern the construction of government contracts. In effect, appellant is really arguing that much of this criminal case turns on the interpretation of the contracts at issue, because if appellant complied with government contract law, then this would belie any criminal intent he had.
This case involved the crimes of conspiracy and making false statements to the government, not breach of contract. The trial judge instructed the jury as to the specific criminal intent that was required for the jury to find appellant guilty. The defendant had ample opportunity to argue that even if the regulations did not allow substitutions, he believed that the substitutions were allowed, thereby negating specific intent. Moreover, the judge specifically instructed the jury that they could not find appellant guilty merely for breach of the contract or mistake in the performance of the contract. Accordingly, we find that the trial judge's instructions adequately covered the issues presented.
The Honorable Stephen V. Wilson, United States District Judge for the Central District of California, sitting by designation
This disposition is not appropriate for publication and may not be cited to or by courts of this circuit except as provided by Ninth Cir.R. 36-3
The district court instructed the jury on specific intent under 18 U.S.C. § 371 as follows:
[T]hat the defendant in question willfully became a member of that conspiracy during the time alleged;
[T]hat one of the conspirators knowingly committed an overt--that is, an open--act, with all of you agreeing on the overt act, if any, that was committed....
What the evidence must show beyond a reasonable doubt, in order to establish proof that a conspiracy existed, is that the members in some way or manner, or through some contrivance, positively or tacitly came to a mutual understanding to try to accomplish a common and unlawful plan. You must find beyond a reasonable doubt that there was a joint plan to defraud the United States by submitting false claims for money.
With regard to 18 U.S.C. §§ 1001, 1002, the court instructed:
[In reference to Count XX, the false statement count, the government must prove, among other things] that the defendant knew that the document was untrue;
[T]he defendant acted with the intention of influencing the Department of Defense....
The court also gave the following instructions pertaining to both counts:
You are instructed that an act is done "knowingly" if the defendant realized what he was doing and did not act through ignorance, mistake or accident.
You are further instructed that an act is done "willfully" if done voluntarily, intentionally, purposefully and deliberately, as opposed to accidentally, inadvertently or negligently. Mere negligence, even gross negligence, is not sufficient to constitute willfulness under the criminal law.
You are instructed that a breach of a contract or mistake in performance of a portion of the contract, or use of non-conforming parts, standing alone, is not a sufficient basis in and of itself upon which the defendants can be found guilty.