UNITED STATES COURT OF APPEALS FOR THE DISTRICT OF COLUMBIA CIRCUIT
Appeals from the United States District Court for the District of Columbia, D.C. Criminal Nos. 85-0255-01, 02, & 03.
Bork. and Buckley, Circuit Judges, and Edward D. Re,.. Chief Judge, U.S. Court of International Trade.
A jury convicted appellants Perholtz and Jackson of one count of racketeering and thirteen counts of mail fraud in connection with Postal Service and Small Business Administration procurements. The jury convicted appellant Fletcher of ten counts of mail fraud in connection with the same SBA procurement. The jury also found forfeit certain property of Perholtz and Jackson related to their racketeering. Appellants challenge their convictions and the forfeitures on numerous grounds. We affirm in all respects. I. BACKGROUND
In an appeal from a jury's criminal conviction, we recite the evidence presented at trial, as we must ourselves view it, in the light most favorable to the government. See, e.g., United States v. Huber, 603 F.2d 387, 391, 395 (2d Cir. 1979), cert. denied, 445 U.S. 927, 63 L. Ed. 2d 759, 100 S. Ct. 1312 (1980).
As a result of litigation, in 1978 the United States Postal Service initiated procurements to calculate the back pay due some ninety thousand of its workers (a task known as the FLSA Accounting Project) and also to introduce a new payroll system prospectively (the Payroll Redesign Project). At this time, John Gentile, who later testified for the government and repaid $40,000 received as bribes in exchange for immunity from prosecution, was Assistant Postmaster General for Finance. Appellant Perholtz was General Manager for Accounting for the Postal Service until December 1977, when he resigned and formed his own computer systems development firm, ATL, Inc. Appellant Jackson was Manager of the Postal Service's Systems Redesign Branch during this time.
According to Gentile, he and Perholtz had agreed that Perholtz upon his departure from the Postal Service would enter into a consulting contract with a computer company to prepare a proposal for the as-yet unannounced FLSA Accounting Project procurement. Gentile would favor selection of that company's proposal inside the Postal Service in exchange for ten percent of the profits Perholtz would receive upon the proposal's acceptance. At Perholtz's request, Gentile introduced Perholtz to an acquaintance at Systems Development Corporation, with which ATL, Perholtz's corporation, thereafter contracted to prepare the FLSA proposal. Gentile also sent a memorandum, under his signature but written in fact by Perholtz (who was then no longer a Postal Service employee), to senior management urging the need for an FLSA procurement. When the Postal Service subsequently initiated the procurement, Gentile "pushed for" the Systems Development proposal, as Perholtz by telephone frequently urged him to do. Jackson, who according to Gentile was largely a message-carrier between Perholtz and Gentile on the FLSA procurement, also exhorted Gentile to "push it." But because certain costs in the Systems Development proposal were too high, the Postal Service awarded the contract to another firm. Although Perholtz received $10,000 from Systems Development for his bid preparation work, he received no profits under his consulting contract since the proposal was rejected.
In its first phase, the Postal Service's Payroll Redesign Project was to develop a prototype computerized payroll system, the Automated Time and Attendance Procedures project . Gentile testified that in early 1978 Perholtz suggested to Gentile and Jackson that the three of them "wire" the ATAP procurement. Perholtz would join with a computer hardware firm to submit an ATAP proposal, for which he would prepare software responsive to the needs of ATAP in exchange for a share of the profits to be generated by the proposal. Jackson, as manager of the Payroll Redesign Project within the Postal Service, would prepare technical aspects of the procurement and require a short response time from bidders. At the same time, Gentile would inform Perholtz in advance of the project's technical requirements. Gentile also agreed to support the Perholtz proposal before senior Postal Service management. If the Postal Service accepted the proposal, the three would share Perholtz's contractual royalties.
Perholtz contacted John Cox of General Scientific Corporation, a manufacturer's representative for Essex Engineering, to propose a consulting agreement with Essex, in which Essex would provide the hardware and Perholtz the software for a bid on ATAP. At a meeting with Essex representatives, Perholtz stated that he had "contacts" at the Postal Service whom he referred to as "my people." ATL (Perholtz's corporation) entered into a consulting agreement with Essex in May 1978 for software to be used in its ATAP proposal. Perholtz had essentially completed preparation of this software by August 25, 1978, when the Postal Service first requested proposals for the ATAP project. The Postal Service stated that this initial, informal request would be followed by a formal solicitation of bids and, if the government desired, by demonstrations of competitive proposals. The Postal Service also stated that it would not award a contract on the basis of the initial request. Jackson oversaw preparation of the request's technical specifications, which represented a "close fit" with the system of hardware and software already completed by Essex and Perholtz.
In subsequent demonstrations by seven vendors, the Essex submission met ninety-five percent of the requirements. Moreover, it was the only one to provide a demonstration of software as well as hardware. Jackson, who had headed the panel before whom the submissions were demonstrated, thereafter prepared an evaluation of the demonstrations, concurred in by the panel, recommending that Essex receive a sole-source (noncompetitive) contract for ATAP, a result not previously contemplated and one inconsistent with the wholly informational purpose of an informal request. Upon Perholtz's suggestion, Jackson also prepared a study to illustrate the urgency of quickly going forward with ATAP. This study was a key element hastening the contract's award.
When, in January 1979, the Postal Service's procurement department recommended that ATAP be awarded through a competitive procurement, Perholtz, Jackson, and Gentile met and drafted a responsive memorandum, ultimately sent under Gentile's signature, that recommended a sole-source award to Essex. The Postal Service entered into a letter contract with Essex in March 1979 on a sole-source basis. *fn1
Postal Service employees required training to operate the new ATAP system. Perholtz asked Gentile if he knew of a firm that could provide this training; Gentile referred him to the Metropolitan Education and Training Corporation ("Metcor"), owned by James Muldoon. According to Gentile, Perholtz said that he, Gentile, and Jackson would share equally in the commission Perholtz obtained from Metcor. Perholtz then told Muldoon that he, Perholtz, could obtain the ATAP training work from Essex in return for a ten percent commission. In March 1979, Muldoon signed a marketing agreement with ATL, backdated at Perholtz's request to November 1978. Muldoon, employees of Essex, and employees of the Postal Service, including Jackson, attended a meeting to decide whether the Postal Service or an outside contractor should handle the ATAP training. According to Muldoon, Jackson's statement favoring an outside contractor turned the meeting decisively in Muldoon's favor. Metcor, Muldoon's company, with the approval of the Postal Service, thereafter received a subcontract from Essex for the ATAP training.
Perholtz received more than $187,000 under his contract with Essex, and $9,500 under the agreement with Metcor. Jackson and Gentile each received $27,000, and Jackson also received an interest in a Florida condominium, for their participation in the ATAP arrangements.
To monitor the loans and grants it had made nation-wide, the Small Business Administration decided to link its many local offices in a data communications system with the central computer in its main office. In November 1979, SBA awarded a one-year sole-source contract for development and implementation of such a system to International Business Services, Inc. . Appellant Fletcher had joined IBS as vice president for operations in April 1979. Upon Fletcher's recommendation, IBS hired Jackson in May 1979. Jackson subsequently became project manager for development of the SBA data communications system, reporting directly to Fletcher, who retained ultimate responsibility for the project. IBS also retained Perholtz as a consultant on the SBA project. IBS had the authority to enter into subcontracts with other firms,
The first subcontract, for a free-standing printer in each SBA local office, was between IBS and Printer Systems Corporation ("Printer Systems"). Perholtz told Printer Systems' president, Ashby Reid, that he had had a relationship with IBS in the past, that he had learned that IBS was the SBA contractor, and that he could obtain for Printer Systems
the stand-alone printer subcontract from IBS. Printer Systems thereafter submitted a proposal to IBS, and in meetings with SBA officials on the proposal, Perholtz acted as Printer Systems' sales representative. IBS and Printer Systems formed a subcontract for the printers in November 1979.
According to Gentile and Muldoon, in meetings attended by Muldoon, Jackson, and Fletcher, Perholtz proposed to use the proceeds of the Printer Systems subcontract to pay Gentile and Jackson the amounts owed them for their roles in the ATAP scheme. In accord with this plan, Gentile used his wife's fabric company to enter into a marketing agreement with Printer Systems. Printer Systems would pay the company (and ultimately charge SBA) unearned commissions on its sales of printers to IBS. Gentile would then split the payments with Jackson. *fn2 Neither Gentile, his wife, nor his wife's company did anything to further the sales from Printer Systems to IBS.
The second subcontract involved cathode ray tube terminals ("CRTs") and printers joined to the terminals. To obtain these items, Perholtz again turned to John Cox of General Scientific Corporation. Perholtz told Cox that he and Conley Dillon, a long-time acquaintance, were forming a marketing corporation, and that General Scientific should pay Dillon any commissions from printer sales to IBS. Thereafter, Perholtz asked Dillon, a full-time employee of the Department of Labor, to sign a marketing agreement and receive commission payments from General Scientific, in return for which Dillon would retain six percent of the commissions and Perholtz would receive the rest. (Perholtz said that a conflict of interest prevented him from taking the commissions directly.) Dillon then signed a marketing agreement with General Scientific, backdated before General Scientific's first contact with the SBA; Cox signed this agreement without ever meeting Dillon.
Although IBS did purchase one demonstrator printer, the SBA ultimately rejected the printer, while General Scientific decided not to pursue the CRT sales. Therefore, in December 1979, Perholtz told Dillon that the General Scientific deal was off. He proposed instead an arrangement with Printer Systems Leasing Corporation ("Printer Leasing"), an affiliate of Printer Systems, the firm Perholtz had previously used in the procurement of stand-alone printers. Dillon then signed a marketing agreement with Printer Leasing parallel to the General Scientific agreement; again, Dillon never made any effort to market the equipment.
When Perholtz presented the marketing agreement to Printer Leasing, its counsel objected since Dillon had never done anything for Printer Leasing and indeed had never even met anyone at Printer Leasing. Perholtz replied that he owed Dillon a debt that the commissions from Printer Leasing would satisfy. Perholtz stated further that he controlled whether Printer Leasing received business from IBS, and that the only way it would receive the business was to execute the marketing agreement with Dillon. Counsel also requested of Perholtz, but never received, a waiver from IBS of any objection to Perholtz's receipt of commissions from Printer Leasing. Ashby Reid, Printer Leasing's president, nonetheless signed the agreement. *fn3
Printer Leasing ultimately leased the CRTs and sold the associated printers to IBS for the SBA data communications system; Dillon received unearned commissions on these sales of about $137,000. *fn4
The third subcontract required by the SBA system was a front-end processor in each local office to control its data communications with the central office. In late 1979, Ecotran-Chi agreed to lease such processors to IBS. But CHI, finding that it could not finance a leasing arrangement, sought in February 1980 to sell its processors to a third party that would lease them to IBS. Upon Perholtz's suggestion, Printer Systems bought the processors and leased them to IBS. As the sale was moving toward completion, Printer Systems entered into joint venture and profit distribution agreements with ATL, Perholtz's company. The agreements granted ATL (which had put up no capital) half ownership of the CHI processors and half the profits from their lease in exchange for ATL's promise not to compete with Printer Systems for the SBA leases and its assistance negotiating the lease agreements between SBA and Printer Systems. Printer Systems paid ATL approximately $300,000 in profits derived from the leases. *fn5
The fourth subcontract required by the SBA's data communications system concerned installation and maintenance. On the recommendation of Printer Systems' Reid, Perholtz contacted Lloyd Root, the owner of Computer Systems Support Corporation , which had previously maintained Printer Systems' equipment. In a meeting to discuss the subcontract, Perholtz said that he could make sure that CSSC would receive the contract, and in January 1980 it did. Soon after the SBA approved the installation and maintenance contract between CSSC and IBS, CSSC assigned the contract to Remote Computer Services, Inc., a corporation formed for the purpose and owned in equal shares by Reid, Roots, and Perholtz (while he was still an IBS consultant). The assignment was effected without notice to SBA, and despite the assignment CSSC did all maintenance and installation work. SBA paid CSSC $809,000, and CSSC transferred $347,000 to Remote. Remote in turn disbursed approximately $151,000 to Perholtz, $143,000 to Reid, and $9,500 to Root (the owner of CSSC). *fn6
Computer Consultants International, Inc. ("Computer Consultants") was the conduit through which bogus commissions arising from the SBA's data communications project reached Jackson and Fletcher via Dillon. *fn7 According to Dillon, Perholtz told him to turn Computer Consultants over to Fletcher and Jackson to pay them for their roles in the SBA project. *fn8 At a subsequent meeting, Fletcher told Dillon to convert Computer Consultants' funds into cash or gold. Dillon complied and gave Fletcher and Jackson about $83,000. *fn9
In September 1980, Jackson left IBS and returned to the Postal Service, where he resumed management of the Payroll Redesign Project, now in a phase called "STARS." Fletcher subsequently left IBS as well and formed a corporation called Computer Contemporaries, Inc. ("Compucon"), which entered into a consulting arrangement with Stanford Research Institute, a bidder on the STARS project. Perholtz had a contractual relationship with Honeywell, a competing bidder on the project. The STARS project was ultimately cancelled without award.
Fletcher also participated in a bid by Booz, Allen and Hamilton for a Postal Service contract in a project called "PRISM," of which Jackson was co-director. Fletcher persuaded Dillon to execute a backdated "service agreement" between Compucon and Computer Consultants. *fn10 Dillon again did nothing pursuant to the agreement, but received $135,000 from Compucon. *fn11
In 1983, after the government had subpoenaed the records of Computer Contemporaries, Perholtz wrote a long document called "Issues," subsequently referred to as the "script," and told Dillon to absorb its contents. This document discusses extensively everything that Dillon was supposed to have done under the various agreements he had signed. Dillon knew little of what was in the document; prior to his plea agreement, he attempted to memorize it.
The fifteen-count indictment under which this case went to trial was returned in August 1985. Count I charged Perholtz and Jackson, under the Racketeer Influenced and Corrupt Organizations Act , 18 U.S.C. 1962(d) (1982), with conspiracy to enrich an "enterprise," as defined in RICO, id. § 1961(4), through bribery, kickbacks, and mail fraud spanning all the Postal Service and SBA procurements discussed above. *fn12 The government moved to dismiss this count at the close of its case.
Count II charged Perholtz and Jackson with participation in the affairs of the same enterprise alleged in count I, through a pattern of racketeering comprised of thirty-seven racketeering acts. Racketeering act one charged Perholtz and Jackson with agreement to commit bribery in the Postal Service's FLSA project. Racketeering act two charged them with bribery in the ATAP project. Acts three through thirty-six charged various instances of mail fraud in ATAP. Act thirty-seven charged mail fraud through multiple mailings in the SBA data communications procurement. Count II sought forfeiture from Perholtz and Jackson of assets related to their racketeering under 18 U.S.C. § 1963(a) (1982).
Counts III, IV, and V charged Perholtz and Jackson with mail fraud in connection with the ATAP procurement. Counts VI through XV charged Perholtz, Jackson, Fletcher, Root, and Dillon with mail fraud in connection with the SBA's data communications procurement. *fn13
In a pretrial hearing before Judge Gerhard A. Gesell, Perholtz requested a separate evidentiary proceeding for the forfeiture count, to be convened before the jury only if the jury found Perholtz guilty under RICO. *fn14 The court denied the motion. *fn15
During trial, the government questioned an official of Printer Systems concerning statements by Perholtz about the desirability of incorporating an entity in the Cayman Islands, and cross-examined defendant Jackson as to whether he or Fletcher had established a bank account there. In the government's rebuttal at closing argument, the prosecutor suggested that ill-gotten gains from the SBA scheme had ended up in the Caymans.
The jury found Perholtz, Jackson, and Fletcher guilty on all counts but acquitted Root. On count II, the jury found racketeering acts two through thirty-seven as charged, but exonerated Perholtz and Jackson of act number one, bribery in the FLSA procurement. The jury also declared forfeit most of the items named in the indictment, including all of Perholtz's stock in ATL and all bank accounts in ATL's name. Perholtz, Jackson, and Fletcher received prison terms of ten, seven, and four years, respectively. II. ARGUMENT
Many of appellants' claims of error were raised for the first time on appeal. Ordinarily, a party waives his right to appeal a trial court's ruling if he fails to object below. Federal Rule of Criminal Procedure 52(b), however, provides: "Plain errors or defects affecting substantial rights may be noticed although they were not brought to ...