discussion with other members of his investigative team and that no one outside of the seven investigators working under his direction participated in or in any way influenced the decision to refer the case to the United States Attorney.
The Government has also presented an affidavit of Robert A. Scherr, Assistant General Counsel, Transportation Division, Law Department, United States Postal Service. Mr. Scherr's affidavit sets forth a summary of contract disputes between the Postal Service and LaBar and appeals taken by LaBar. The affidavit also states that the Postal Service has since 1970 a Postal Service Board of Contract Appeals and that the Postal Service's dispute resolution procedures are similar to those of other Government agencies. The affidavit also discloses that disputes with contractors and appeals by contractors from adverse decisions by the Transportation Office are routine.
Finally, Government Exhibit 15 in opposition to the motion is the affidavit of Jack R. Stedman, Senior Postal Inspector for Contract Audits. The affidavit discloses that beginning in 1976 comprehensive investigations were undertaken of major highway mail contractors. The Inspection Service's policy was to devote primary attention to large contractors who received major expenditures of postal funds. The LaBar companies first came to Mr. Stedman's attention in 1977 when a Regional Postmaster General requested a review to determine the reasonableness of cost increases for insurance claimed by Mr. LaBar. As a result of that audit, a decision was made to continue the inquiry into Mr. LaBar's cost claims. This work was underway when Mr. Jellison wrote his memoranda to the Postal Inspection Service in March, 1978 concerning possible fraud relating to increased costs for fuel.
Although Defendants maintain in their reply brief that a hearing is needed to question the handling of the investigation, they have produced no evidence to contradict the affidavits detailing the lack of involvement by the Mail Processing Department in the investigation. The Defendants have failed to present any credible evidence to show that the decision to investigate the Defendants by the Postal Service or more importantly that the decision by the United States Attorney to seek an indictment was motivated by any impermissible considerations. The evidence of record discloses only a routine investigation handled in the usual manner. Because the Defendants have failed to "adduce credible evidence" in support of their claim of selective prosecution, the motion to dismiss for that reason will be denied without a hearing.
The Defendants' second claim is that the conduct described in the indictment is legal and that, consequently, the indictment fails to allege an offense. This contention is without merit. The Defendants would have the Court believe that the indictment alleges only that the Defendants purchased fuel from a controlled fuel supply company and passed along the increased cost to the Government. The indictment clearly charges that the fuel prices passed along were fraudulently inflated and that that fraudulent conduct was engaged in knowingly by the Defendants for the purpose of defrauding the Government, that the Defendants knowingly filed false statements with the Government, and the Defendants used the mails to execute this scheme to defraud and that the Defendants conspired to do the aforementioned crimes. These allegations allege offenses against the United States and are not subject to dismissal.
The Defendants' third contention is similarly devoid of merit. The Defendants contend that the indictment violates due process because the Defendants relied upon the advice of postal officials that the conduct they engaged in was legal. None of the exhibits presented to the Court in support of the motion demonstrates that the Postal Service told the Defendants that they could submit fraudulently inflated fuel invoices and could knowingly conceal the relationship between LaBar Transportation and Petroleum Suppliers, Inc. The assurances relied on by the Defendants were from private individuals and a former employee of the Postal Service and related only to buying fuel from a subsidiary. These facts are clearly distinguishable from those in Raley v. Ohio, 360 U.S. 423, 79 S. Ct. 1257, 3 L. Ed. 2d 1344 (1959), in which a person was found in contempt for failing to respond to a question posed by a public commission when he asserted his Fifth Amendment privilege against self-incrimination as he had been advised by that commission he was able to do and Cox v. Louisiana, 379 U.S. 559, 85 S. Ct. 476, 13 L. Ed. 2d 487 (1965), in which a conviction for demonstrating near a courthouse was reversed because the sheriff told the defendant he could stand across the street and then arrested him. As indicated above, the indictment alleges fraud; it does not seek to make purchases of fuel from a company allegedly controlled by the Defendants a crime.
The Defendants' fourth argument is that the indictment violates due process because Postal Service regulations mentioned in the indictment and promulgated under 39 U.S.C. § 5005(b)(1) are unconstitutionally vague and are contradictory. One pronouncement by the Postal Service, § 19-316.21 of the Postal Contracting Manual, limits cost adjustments to circumstances over which the contractor has "little if any control" while another, Regional Instructions, Filing No. 523, Part II(B) and Part VIII (G) uses the phrase "little or no control". The Court does not perceive any significant difference in the formulations used nor does the Court view the two pronouncements to be unconstitutionally vague as expressions of Postal Service policy concerning the basis under which it acts on requests for cost increases. The Defendants' argument rests on the false premise that they are being charged with violating Postal Service regulations or that those regulations are instrumental in defining their alleged fraudulent scheme. To the contrary, the Defendants are being charged with conspiracy, mail fraud and making false statements in connection with their allegedly fraudulent procurement of contract adjustments and their concealment of an alleged relationship between LaBar Transportation Corporation and Petroleum Suppliers, Inc. The alleged vagueness or contradictory nature of official pronouncements relied on by the Defendants may be an issue in determining whether the Defendants had an intent to defraud but they do not affect the legality of the indictment.
Relying primarily on United States v. Henderson, 386 F. Supp. 1048 (S.D.N.Y.1974), the Defendants argue that counts 2 through 22 must be dismissed because the mail fraud statute, 18 U.S.C. § 1341, cannot properly be used to prosecute a scheme to defraud the United States. The district court's decision in Henderson has never been adopted by the Second Circuit and has been rejected in two Circuits. United States v. Weatherspoon, 581 F.2d 595 (7th Cir. 1978); United States v. Miller, 545 F.2d 1204, 1216 n. 17 (9th Cir. 1976). In addition, Henderson was based in large part on the court's determination that special anti-fraud provisions of the Internal Revenue Code pre-empted § 1341. The Seventh Circuit in Weatherspoon specifically held that § 1001 did not have that effect. The Third Circuit has cited the Henderson decision but has not adopted it. United States v. Tarnopol, 561 F.2d 466 (1977).
The Defendants' argument and their citation to the legislative history of the mail fraud statute do not convince the Court that it may not be used to prosecute frauds against the Government even though the same acts may be subject to prosecution under 18 U.S.C. § 1001. To obtain a conviction under the mail fraud statute, the Government must prove elements not required under 18 U.S.C. § 1001. The Court sees no reason to restrict the plain language of § 1341 to preclude its use in this case. See United States v. Weatherspoon, 581 F.2d 595 (7th Cir. 1978).
The Defendants' sixth contention is that Counts 2, 3, 5, 6, 7 and 9 fail to state an offense under 18 U.S.C. § 1341 because each document referred to in each of those counts contained a notation at the bottom as follows:
U. S. Code Title 18 (Crimes and Criminal Procedures) Section 1001 makes it a criminal offense to make a willfully false statement or representation herein.