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United States v. Lowell

decided: May 8, 1981.

UNITED STATES OF AMERICA
v.
ARTHUR S. LOWELL, APPELLANT



ON APPEAL FROM THE UNITED STATES DISTRICT COURT FOR THE DISTRICT OF NEW JERSEY (D.C. Crim. No. 79-00241-01)

Before Seitz, Chief Judge, and Rosenn and Sloviter, Circuit Judges.

Author: Rosenn

Opinion OF THE COURT

This appeal centers on the conviction of the appellant, Arthur S. Lowell, for participation in a bribery conspiracy in violation of 18 U.S.C. § 371 (1976) involving a government contractor, Atlas Paint and Varnish Company, and the General Services Administration (GSA). Lowell was tried to a jury and convicted, along with his codefendant, Anthony Pionzio, in the United States District Court for the District of New Jersey; the codefendant was also convicted on several counts of violating the Travel Act, 18 U.S.C. § 1952(a)(3) (1976). Lowell alone appeals from his conviction and presents a two- pronged attack on the weight and probative value of the evidence upon which the jury found him a conspirator before and after the statute of limitations "cutoff" point, July 12, 1974. We affirm.

I.

Atlas Paint and Varnish Company (Atlas), a small manufacturer of paint owned and operated by the Tepperman family, sold its product almost exclusively to the federal government. Dennis Tepperman, who had worked at Atlas since 1962, became president in 1969 upon the death of his father, Meyer Tepperman. At that time, Dennis's mother Bunnie became the sole stockholder. About a year before, government dissatisfaction with Atlas contract compliance both as to time of delivery and quality of product had prompted Meyer to engage Arthur Lowell, a lawyer experienced in representing government contractors before GSA, to represent Atlas in its dealings with GSA. When Meyer died, Lowell remained in Atlas's employ. Aside from handling administrative litigation and negotiation with GSA, Lowell devoted one night per week to directing Atlas staff meetings. At these weekly meetings, Atlas's substantial production and quality problems were exposed and remedial measures directed. Lowell also recruited or helped to recruit Michael Foncellino and Thomas Accamondo, the two employees who, next to Dennis Tepperman, ultimately exercised the most responsibility for running Atlas. Foncellino, new to the paint business, joined Atlas in early 1970; Accamondo, a paint chemist, joined in July 1971.

Lowell, disappointed in his efforts to secure an equity interest in Atlas following Meyer Tepperman's death, severed his connections with Atlas toward the end of 1971. Finding Dennis Tepperman unable to convince his mother to allow Lowell to become a part owner of Atlas, Lowell delivered an ultimatum, in effect, in October of 1971. Either Bunnie would cut Lowell in for a share of equity participation in Atlas, or Foncellino, the newly-hired Accamondo, and her son would have to operate the company without him. The three officers, upset about Atlas's diminished prospects for success without Lowell's participation, pleaded for his retention. Bunnie, however, was adamant. In early 1972 Lowell received his last check from Atlas and terminated his employment. Dennis Tepperman, Foncellino, and Accamondo took charge.

Having described Lowell's relationship to Atlas, we turn to certain details of Atlas's operation that explain the motivation for bribery in this case. Although Atlas dealt with government offices located throughout the country, monitoring the quality of its product was the special responsibility of the New York City offices of GSA's vast bureaucracy. The Quality Control Division of the Federal Supply Service, Region II, performed this monitoring function together with GSA's New York laboratory. A related quality control bureaucracy existed in the Federal Supply Service's central office in Arlington, Virginia.

Quality monitoring of each Atlas shipment could be performed by GSA's New York laboratory, or, at GSA's option, by Atlas itself. The latter alternative, also known as the "Quality Assurance Manufacturers Program" (QAMP) afforded Atlas significant advantages in meeting delivery obligations to the procuring agencies. New York employees of the GSA had a certain input into the decision whether to permit Atlas into QAMP or to reject it. As might be expected, the legitimate criteria for participation had a great deal to do with Atlas's record on self-monitoring. Discrepancies between Atlas paint and government paint specifications could be discovered by the recipients of the paint or by the New York offices themselves in periodic inspections and laboratory tests of Atlas paint.

Early in 1972 Tepperman told Foncellino and Accamondo they were to make monthly payments to two of the GSA employees with responsibility for monitoring Atlas's continued eligibility for QAMP participation. Further, he advised them that such a scheme met with (the then-retired) Lowell's approval. For the next five years, Foncellino made monthly payments of $250 to Tony Pionzio, a supervisor and later a "branch chief" in the Region II Quality Control Division. Accamondo made monthly payments of $100 to Joe Montalbano, a chemist in the paint section of GSA's New York laboratory. Pionzio and Montalbano also received Christmas gifts, including gifts of money, during this same period. In spring of 1977, fears of detection caused by rumored investigations within GSA, and involving Pionzio himself, caused the three Atlas officers to terminate the series of payoffs at issue in this case.

In early 1979, federal investigators interrogated Tepperman, Foncellino and Accamondo. The three were granted use immunity in exchange for their complete cooperation with the Government in its pending investigation and prospective prosecution "involving employees of General Services Administration and Arthur S. Lowell." Subsequently, on July 12, 1979, Lowell, Pionzio and Montalbano were indicted for conspiracy to defraud the United States, violations of the Travel Act, and obstruction of justice.*fn1 The indictment described a conspiracy beginning in November 1969 and lasting until March 1977 in which Lowell, Pionzio and Montalbano conspired with each other, with Dennis Tepperman, Foncellino and Accamondo, and with other unknown persons to defraud the United States.*fn2 Because the statute of limitations for the conspiracy charge was five years, it was crucial that the conspiracy charged existed after July 12, 1974, and (for purposes of this appeal) that Lowell's part in the conspiracy had not been completely terminated by withdrawal prior to that date. With respect to the timing of Lowell's participation, the indictment alleged that: (1) Lowell "was employed by Atlas Paint and Varnish Company from April 1968, until December, 1971"; and (2) "In furtherance of the conspiracy in and around March, 1977, (Lowell) spoke on the telephone with Foncellino."

Although Lowell and Pionzio were tried before Judge Whipple on the conspiracy and Travel Act counts,*fn3 Montalbano pleaded guilty and was sentenced in separate proceedings by District Judge Stern. Upon conviction, Lowell and Pionzio filed post-trial motions for acquittal and for a new trial which were denied. 490 F. Supp. 897 (D.N.J.1980). Only Lowell appeals.

II.

The focal point of this appeal is the statutory "cutoff" point, July 12, 1974. The jury's sole ground for linking Lowell to the conspiracy in the pre-cutoff period came from the lips of Dennis Tepperman, whose testimony could be suspect for a number of reasons. Tepperman, professing ignorance of the existence of any bribery prior to his succession to the presidency of Atlas, described his first day at work after his father's (Meyer's) death in November 1969. He testified that Lowell told him then, for the first time, that Meyer and Lowell had been making payoffs to two GSA employees and "that would have to continue." The two recipients were said to be Roger Carroll, an official in the central office of the Federal Supply Service (ultimately serving as Assistant Commissioner for Standards and Quality Control), and Sidney Friedman, the Region II employee ("quality control representative" or "quality assurance specialist," also referred to at trial as inspector), whose job it had been, almost until the time of Meyer's death, to visit the Atlas plant at least once a week. According to Dennis Tepperman, the Friedman payoff was made in one lump sum to cover several monthly payments that had been owed him since prior to Meyer's death. Tepperman testified that he overheard Lowell attempting to persuade Friedman to accept the money and was later told by Lowell that Friedman had accepted it. Tepperman further testified that the Carroll payoffs were given to Lowell at the rate of $500 per month.

Tepperman also testified that in either 1970 or 1971, Lowell told him that Pionzio and Montalbano would have to be paid off.*fn4 Thereafter, according to Tepperman, Lowell received the Pionzio payoffs from Tepperman at the rate of $250 per month, with a $500 bonus for Christmas, and the Montalbano payoffs at $100 per month, with a $100 Christmas bonus. It is undisputed that Lowell made no payments to Carroll, Pionzio or Montalbano beginning soon after the impasse in 1971 between Lowell and Bunnie. However, Dennis Tepperman testified that after Lowell's announcement of his intention to leave Atlas, the two had a conversation in which Lowell stated "that in order to stay in this business, I (Tepperman) would have to continue these payoffs. That is the way you do business in GSA He (Lowell) said that in order to help me out, he would take the money and help me out until the end of the year including, you know, Christmas." Tepperman testified that he accepted Lowell's offer and gave him money to pay Carroll, Pionzio and Montalbano through the end of 1971. Later, said Tepperman, he decided to keep on paying Pionzio and Montalbano, but not Carroll.

Thus ends the testimony all relating to pre-1974 acts linking Lowell directly with the operation of the payoff scheme. Other evidence, insufficient in itself to tie Lowell to the conspiracy, was introduced to show Lowell's post-1974 involvement with the conspirators and his consciousness of guilt. Foncellino testified that Lowell told him in March 1977 "that I (Foncellino) have to be very careful, there are a lot of investigations going on Tony Pionzio is being investigated." Foncellino, believing from conversations with Tepperman that the payoff scheme was Lowell's brainchild, "went up to Dennis and told him that I (Foncellino) think Arthur is telling me that we better stop the payments."

Tepperman also testified that Lowell called him in February 1979, asking whether government agents had contacted Tepperman in connection with an investigation of Lowell, and volunteering advice on whether or not Tepperman could, if he wished, invoke the attorney-client privilege with respect to conversations between him and Lowell.*fn5 Tepperman's notes of these conversations with Lowell were also introduced.

As the trial court recognized, Lowell's 1977 phone conversation with Foncellino was, by itself, insufficient as a matter of law to support a conspiracy conviction. See Roberts v. United States, 416 F.2d 1216 (5th Cir. 1969). Thus it was impossible for the jury to place Lowell within the conspiracy at any time unless it believed Tepperman's testimony beyond a reasonable doubt. Secondly, the Government did not contend that prosecution for a conspiracy to bribe Roger Carroll from 1968 to 1971, if it existed, was not barred by the statute of limitations. Therefore, the jury was obliged to believe Tepperman's testimony that Lowell participated in a conspiracy that included a scheme to pay off either Pionzio or Montalbano or both.

Prior to the trial, however, Montalbano had told both the FBI and Judge Stern (the latter in connection with his guilty plea), that he received payoffs from Accamondo, and Accamondo alone. Lowell sought to elicit this same testimony from Montalbano in his own behalf. Montalbano, having pleaded guilty but awaiting sentencing, refused to testify for fear of self-incrimination. His counsel noted that notwithstanding his guilty plea, Montalbano was still liable to be prosecuted for tax evasion and for substantive acts in the Southern District of New York. Judge Whipple upheld Montalbano's claim of privilege and rejected the use of his prior testimony in any form. The court also refused to order the Government to give Montalbano use immunity and thus allow him to testify without fear of self-incrimination.

Given the crucial importance of Tepperman's testimony concerning Lowell's pre-1972 relationship with Montalbano and Pionzio, Lowell argues that he is entitled to a new trial at which a jury may be exposed to the testimony of Montalbano and Pionzio*fn6 to rebut Tepperman's testimony. Lowell also argues that the evidence discloses that he withdrew from the conspiracy, if indeed he was ever a participant, prior to 1974, and that his conviction was thus barred by the statute of limitations.

We believe that Montalbano's refusal to testify was privileged and did not, on the basis of the trial record, entitle Lowell to compel the use of Montalbano's testimony, either through immunity or otherwise. Nor can we sustain Lowell's argument that the only permissible conclusion to be drawn from the evidence is that he withdrew from the conspiracy before July 1974. For these reasons we affirm.

III.

It is sometimes possible, by means of established formulae, to determine that an alleged conspirator has failed to present a sufficient case warranting a factual finding of withdrawal. "Mere cessation of activity is not enough to start the running of the statute "*fn7 On the other hand, where fraud constitutes the "standard operating procedure" of a business enterprise, "affirmative action" sufficient to show withdrawal as a matter of law from the conspiracy embodied in the business association may be demonstrated by the retirement*fn8 of a coconspirator from the business, severance of all ties to the business, and consequent deprivation to the remaining conspirator group of the services that constituted the retiree's contribution to the fraud. See Glazerman v. United States, 421 F.2d 547 (10th Cir.), cert. denied, 398 U.S. 928, 90 S. Ct. 1817, 26 L. Ed. 2d 90 (1970); United States v. Goldberg, 401 F.2d 644 (2d Cir. 1968), cert. denied, 393 U.S. 1099, 89 S. Ct. 895, 21 L. Ed. 2d 790; cert. denied, 394 U.S. 932, 89 S. Ct. 1202, 22 L. Ed. 2d 461 (1969). Between these polar situations, in which the question of withdrawal can be resolved as a matter of law, there resides an assortment of factual matrices in which the question of withdrawal is for the finder of fact. Because of the similarity that this case bears to Hyde v. United States, 225 U.S. 347, 32 S. Ct. 793, 56 L. Ed. 1114 (1912), we believe that this case presents such a matrix.

The conspiracy in Hyde was a scheme, contrived by Hyde and Benson, to fraudulently manipulate the land-grant programs of California, Oregon and the United States. The two States were willing to sell isolated state-owned tracts ("school sections") amid federally owned lands. The tracts were evidently bargains, but they were not available, either directly or indirectly, to speculators or out-of-staters. The federal government, in turn, was engaged in turning many of its lands into forest reservations, and it gave the owners of such isolated tracts, surrounded by federal reservations, the option of swapping their isolated tracts for other, federally owned tracts of equal size.

Hyde and Benson concocted a plan to make money by purchasing many "school sections" from the States and then buying enough influence in the federal General Land Office to engineer profitable swaps of the school sections under the federal forest reservation program. To accomplish this objective, however, they had not only to bribe Land Office employees, but also to swindle the States of California and Oregon into selling them the school sections. They hired Dimond, a lawyer, to handle the federal government (much as, the Government suggests, Lowell was hired by Atlas). They also hired ...


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