U.S. v. Elkin, s. 525

• Decision Date: 15 March 1984
• Docket Number: Nos. 525,D,526,s. 525
• Citation: 731 F.2d 1005
• Parties: UNITED STATES of America, Appellee, v. Bernard P. ELKIN, a/k/a "Bob Elkin," and Boston Pneumatics, Inc., Defendants-Appellants. ockets 83-1243, 83-1244.
• Court: U.S. Court of Appeals — Second Circuit

Page 1005

731 F.2d 1005

UNITED STATES of America, Appellee, v. Bernard P. ELKIN, a/k/a "Bob Elkin," and Boston Pneumatics Inc., Defendants-Appellants.

Nos. 525, 526, Dockets 83-1243, 83-1244.

United States Court of Appeals Second Circuit.

Argued Dec. 12, 1983.

Decided March 15, 1984.

Peter Chavkin, Asst. U.S. Atty., Brooklyn, N.Y. (Raymond J. Dearie, U.S. Atty., E.D.N.Y., L. Kevin Sheridan, Asst. U.S. Atty., Brooklyn, N.Y., on brief), for appellee.

Richard A. Kerner, New York City, for defendant-appellant Elkin.

Walter J. Kenney, New York City, for defendant-appellant Boston Pneumatics, Inc.

Before MESKILL, KEARSE and CARDAMONE, Circuit Judges.

KEARSE, Circuit Judge:

Defendants Bernard P. Elkin and Boston Pneumatics, Inc. ("BPI"), appeal from judgments entered after a jury trial in the United States District Court for the Eastern District of New York, Henry Bramwell, Judge, convicting them of submitting a false claim for reimbursement to the United States Department of Defense on a government contract ("Contract"), in violation of 18 U.S.C. Sec. 287 (1982); submitting false statements in connection with that claim, in violation of id. Sec. 1001; and mail fraud, in violation of id. Sec. 1341. Elkin also appeals from his conviction of obstruction of justice, in violation of id. Sec. 1503, for having impeded the grand jury's investigation of the false claim. The court sentenced Elkin to probation for five years and ordered as a special condition of probation that he make restitution to the government in the amount of $119,534, and restitution to two subcontractors in the amounts of $69,785 and $29,840, respectively. The court also ordered BPI to make such restitution. On appeal, defendants challenge the validity of their convictions principally on the grounds that there was no evidence of a mailing sufficient to sustain the mail fraud count and that the court improperly failed to submit to the jury the question whether the falsities in defendants' false claim and false statements were material. Defendants also contend that the court had no authority to order them to make restitution to the subcontractors, or to make restitution to the government in an amount in excess of $65,142, the amount of the fraudulently procured payment charged in the indictment. For the reasons below, we affirm the convictions, but vacate the judgments and remand for resentencing.

I. BACKGROUND

A. The Events

The evidence presented at trial, viewed in the light most favorable to the government, revealed the following events. In August 1978, the United States Department of Defense awarded BPI a fixed-price contract for the production of globe stop valves. Elkin, BPI's president and principal shareholder, signed the Contract on behalf of BPI. The Contract provided that BPI could request progress payments from the government as reimbursement for its costs before the Contract was completed, provided that defendants could certify that BPI had purchased parts to perform the On June 27, 1979, BPI submitted its first progress payment request ("June 1979 Request"), signed by Elkin, requesting reimbursement in the amount of $112,179.60 for four of the parts needed for the assembly of the globe stop valves. Elkin certified that BPI had paid, or intended in the ordinary course of business to pay, Etoile Machine and Tool Co., Inc. ("Etoile"), approximately $131,000 for these parts. The request was accompanied by a copy of an invoice purporting to show that Etoile had charged BPI $131,000 for the parts. The evidence showed that this claim was false in several respects.

Contract, had obtained title to the parts, and had fully paid for the parts or would pay for them as payments came due in the ordinary course of business.

To begin with, Etoile was a sham company, incorporated by Elkin's attorney at Elkin's request. Etoile did not produce the parts in question; its business existence consisted solely of a telephone located in the home of Robert Dohn, a former BPI employee. The testimony revealed that Elkin had instructed Dohn to answer the telephone in the name "Etoile," to inform government inspectors who called that the globe stop valve parts had been shipped to R & H Manufacturing Company ("R & H") for finishing, and to refer all inquiries to Elkin. In fact, BPI had engaged Excelsior Brass Company ("Excelsior") to produce these and other parts and R & H to finish them. The testimony revealed that BPI was eventually charged approximately $45,000 for these unfinished parts, rather than the $131,000 claimed in the progress payment request. ¹ Further, BPI did not have title to the parts at the time it requested the progress payments, since production of the parts was not actually completed by Excelsior until several months after BPI submitted its request. Finally, the evidence showed that BPI has yet to make any payments to Excelsior and R & H for their work.

As a result of the June 1979 Request, defendants received a check from the Department of Defense in August 1979 in the amount of $65,142. Several months later, defendants defaulted on the Contract, and the Department of Defense has never received any of the globe stop valves, nor any of the parts for which it issued the progress payment.

In the course of investigating BPI's performance to determine whether BPI was entitled to keep the progress payment, the Department of Defense asked Elkin's attorney to supply proof that Etoile had made the parts and had been paid for them. In response, Elkin provided his attorney with a letter of verification (the "Verification Letter") purportedly signed by Elkin's accountant, which the attorney mailed to the Department of Defense in December 1981. In fact, however, the letter was false and had not been written, signed, or authorized by the accountant. The attorney's mailing of the Verification Letter was the mailing charged in the mail fraud count of the indictment.

Despite defendants' efforts to conceal their fraud, they became the subject of a grand jury investigation. Dohn, the former BPI employee who had maintained and answered the Etoile telephone, testified before the grand jury that Elkin had instructed him to lie to the grand jury by stating that Elkin had nothing to do with Etoile or the telephone in Dohn's home and that Etoile was the tool of Elkin's former attorney, who had incorporated the company at Elkin's request. Elkin also instructed his accountant to testify falsely to the grand jury that all records relating to the Contract had been destroyed during a burglary.

Eventually, both defendants were indicted for mail fraud in connection with the mailing of the Verification Letter to cover up the fraudulent June 1979 Request, in violation of Sec. 1341; for making false statements in connection with the June 1979 Request, in violation of Sec. 1001; and for submitting the false June 1979 claim for payment from the government, in violation

of Sec. 287. In addition, Elkin was indicted for obstruction of justice, in violation of Sec. 1503.

B. The Sentencing

Defendants were convicted on all counts. Invoking 18 U.S.C. Sec. 3651, the court suspended the imposition of sentence on both defendants and placed Elkin on probation for a period of five years. As a condition of that probation, the court ordered that Elkin make restitution (1) to the government in the amount of $119,534, (2) to Excelsior in the amount of $69,785, and (3) to R & H in the amount of $29,840. The court did not place BPI on probation but ordered it to make the same restitution. In setting the amount of restitution to be made to the government at $119,534, the court noted that the presentence report on the defendants disclosed that in addition to the $65,142 defendants had received in August 1979, which formed the basis for the present indictment and trial, defendants had received two additional progress payments from the government totaling $54,392.

C. The Issues on Appeal

On appeal, defendants raise a number of challenges to the validity of their convictions and their sentences. Primarily, they contend (1) that the mailing of the Verification Letter was insufficient to satisfy the mailing requirement of Sec. 1341, (2) that the trial court erred in not submitting to the jury the question whether the falsities in defendants' false claim and false statements were material, and (3) that the sentences impermissibly require them to make restitution of amounts not charged in the indictment. We have considered all of defendants' contentions and find those challenging the convictions to be without merit. We conclude, however, that the trial judge erred in suspending sentence on BPI without placing it on probation, and we agree that he exceeded his authority in ordering restitution as to amounts of money that were allegedly owed by defendants but were not charged in the indictment and proven at trial. Accordingly, we vacate the judgments and remand for resentencing.

II. VALIDITY OF THE CONVICTIONS

A. Mailing

Defendants contend that the mail fraud count of the indictment must be dismissed because the government, by relying only on the mailing by Elkin's attorney of the Verification Letter more than two years after defendants received the first progress payment, failed to produce evidence of a mailing "for the purpose of executing [any] scheme or artifice [to defraud]" within the meaning of Sec. 1341. ² Defendants contend that the fraud came to fruition with the receipt of the progress payment in August 1979 and that, therefore, the mailing of the Verification Letter in December 1981 was not sufficiently related to the scheme to bring defendants within the reach of the mail fraud statute.

We disagree. The government established at trial both that the Verification Letter was false and that it was "a necessary step in executing the scheme[ ] because it was designed to lull" the Department of Defense into believing that the progress payment had been properly made. United...