offense is an inseparable element of the crime of conspiring to defraud the United States. In other words one guilty of conspiracy to defraud the United States must have intended to commit an act or acts which in the context of all the surrounding circumstances constitute a fraud against the United States and necessarily give rise to the inference that the conspirator intended to commit that fraud. The authorities are legion that conspiracy, which as indicated above encompasses specific intent, is seldom capable of direct proof, but must be proved by circumstantial evidence. Wellman v. United States, 6 Cir., 1955, 227 F.2d 757; Van Huss v. United States, 10 Cir., 1952, 197 F.2d 120. I feel that there was ample circumstantial proof of a conspiracy or plan in this case. But that is not to say that the object or design of this plan was the criminal one of defrauding the United States.
There appears in the record ample evidence that a plan (conspiracy) existed among the defendant and the unindicted co-conspirators, Masurat and Dick, to have private work done by Philco employees on Philco time. But under the circumstances of this case, was this a deliberate fraud against the United States? It clearly was not. In fact it is difficult to perceive how it could have been a deliberate fraud even against Philco.
The defendant, Charles Woll, the only witness called by the defense, gave an uncontradicted account of the genesis of the 'conspiracy'. While the jury must have chosen to disbelieve this testimony, at least in part, such disbelief cannot substitute for contrary proof. United States v. Pechenik, 3 Cir., 1956, 236 F.2d 844. According to Woll, his recently widowed sister, mother of two children, was desperately in need of living quarters. She had only $ 5,000 with which to buy a home. Woll discussed his problem with several friends among whom were Masurat and Dick. A lot was purchased and Dick undertook on his own time to help Woll (who was travelling extensively on Philco business) make arrangements with various subcontractors to get the home completed for Mrs. Bailey as soon as possible. By the end of 1952 the house was substantially completed. Certain jobs such as shingling, finishing the floors, and construction of a drainage ditch were undertaken by Woll, Dick, Masurat and other friends of Woll at Philco. The men would work on week-ends and evenings. Gradually they began to encroach somewhat on company time. Six of these men, called as Government witnesses testified substantially the same about the amount and kind of work and when it was done. Counsel stipulated that the testimony of six other men, should they be called, would be the same.
Masurat said that he left the plant a couple of nights at 4:00, but most of the roofing was done on his own time and over the week-end. Over a two-year period, 1953-1954, Masurat knew specifically of seven instances when work was done on company time involving approximately seven or eight people.
Dick testified that he contacted contractors 'a lot on my own time' during 1952, that he helped put in pine panelling over a week-end beginning on a Friday afternoon. He estimated that he was at either Woll's or his sister's home maybe nine times during 1953-1954 on company time, but never a full day.
The gist of the testimony of the other four Philco employees was that they did work at either home five or six times over the two-year period, likewise never a full day, and that much of the work was done on their own time.
Masurat, it appears, was Woll's second in command, and it was he who at Woll's instance would send the men off to work on the two homes. He testified, and the other witnesses corroborated this, that supervisory personnel only were involved. This was done because he 'didn't want to jeopardize (Philco work) by sending out (men working directly on division projects.)' According to three of the witnesses, their work at Philco was finished and its progress was in no way impeded by their absence.
It is uncontroverted that all the men involved were salaried employees, that is, whether they worked or not they received their regular or base pay. It is also uncontroverted that their time was never charged directly to any specific contract. As supervisors their time, unlike that of the men under them working on a specific contract, was charged to a divisional burden or overhead account. Philco then allocated this charge pro rata to the various contracts in progress in the division. And this charge would have been so allocated even if these men had been out sick for a month. It will thus be seen that the United States, despite the cost redetermination clauses in its contracts with Philco, was not out of pocket as a result of Woll's conspiracy. And while the Government need not show actual pecuniary loss to successfully maintain a prosecution for fraud, Wallenstein v. United States, 3 Cir., 1928, 25 F.2d 708, certiorari denied 278 U.S. 608, 49 S. Ct. 13, 73 L. Ed. 534, it must show that some legitimate government activity has been hampered. United States v. Belisle, D.C.W.D.Wash.1952, 107 F.Supp. 283. It is obvious that the small amount of outside work done by these employees of Philco on company time did not hamper any activity of the United States. It is even more obvious that Woll and his helpers had no intent to hamper government activity by their conduct, and that such an intent cannot be inferred beyond a reasonable doubt from any or all of the circumstances of their conduct as established at the trial.
This decision is by no means an attempt to limit the broad scope of the conspiracy statute, or an expression of disagreement with the numerous cases decided under it. It holds only that this record is not sufficient as a matter of law for a jury to find beyond a reasonable doubt that a conspiracy to defraud the United States ever existed or that the defendant had any intention of defrauding the United States. The extreme reluctance this Court has to disturb a jury's verdict has been overcome only after a thorough search of the notes of testimony. I am convinced that to permit this verdict to stand would be utterly unconscionable.
Wherefore, it is ordered that the defendant's motion for new trial be denied and his motion for judgment of acquittal be granted.
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