U.S. v. Ackal, 82-3243

Decision Date23 May 1983
Docket NumberNo. 82-3243,82-3243
Citation706 F.2d 523
Parties13 Fed. R. Evid. Serv. 409 UNITED STATES of America, Plaintiff-Appellee, v. Edward G. ACKAL, Henry L. Smith and C.E. "Ed" Thompson, Defendants-Appellants.
CourtU.S. Court of Appeals — Fifth Circuit

William H. Jeffress, Jr., Washington, D.C., for Ackal.

James Boren, Baton Rouge, La., for Smith.

Lewis O. Unglesby, Baton Rouge, La., for Thompson.

Stanford O. Bardwell, Jr., U.S. Atty., James Stanley Lemelle, Asst. U.S. Atty., Baton Rouge, La., for plaintiff-appellee.

Appeals from the United States District Court for the Middle District of Louisiana.

Before GEE, GARZA and WILLIAMS, Circuit Judges.

GARZA, Circuit Judge:

On July 30, 1981, the defendants, Edward Ackal, Ed Thompson and Henry Smith, were charged in a ten-count indictment with violations of 18 U.S.C. Secs. 371, 372, 1341, 1342, 1343, 1951 and 1952. Count 9 of the indictment, charging violations of 1951 and 1952, was severed prior to trial. The remaining counts were tried before a jury, and the jury returned guilty verdicts against all defendants on all counts.

Two of the defendants claim the evidence was not sufficient to support the jury's verdict. A thorough examination of the facts is, therefore, warranted.

An understanding of the identity of the various agencies, companies and individuals is essential to a comprehension of the scheme perpetuated by the defendants.

The United States Department of Health, Education and Welfare (hereinafter HEW) was responsible for administering provisions of the Education of the Handicapped Act, under which HEW would provide funds to various State Departments of Education to further the purpose of the Act. When the Department of Education succeeded HEW, the Department of Education took over the administration of the Act.

The Louisiana State Department of Education (hereinafter LSDE) was a department of the State of Louisiana, charged with the administration and disbursement of funds received pursuant to the Education of the Handicapped Act.

The State Board of Elementary and Secondary Education (hereinafter BESE Board) was empowered to supervise and control the public elementary and secondary schools of the State and had final budgetary responsibility for all funds appropriated or allocated.

J. Kelly Nix was the Superintendent of Education in Louisiana. Defendant, Ed Thompson, was employed by LSDE as the Deputy Superintendent of Education and was responsible only to the Superintendent of Education.

Defendant, Henry L. Smith, was the Assistant Superintendent of Education for Special Education Services. He was responsible for properly administering state and federal special education programs and for properly expending state and federal funds within the budgetary controls.

Educational Products Corporation (hereinafter EPC) was a Louisiana corporation engaged in the business of selling educational products and services and representing various vendors of educational supplies and services in the state. The defendant, Edward G. Ackal, was the owner and incorporator of EPC.

International Management Systems, Inc. (hereinafter IMS) was a Missouri Corporation licensed to do business in Louisiana. IMS was attempting to market a screening test to the State of Louisiana.

Harold J. Kunzelman was president and part owner of IMS.

Doctor Carl Koenig was the part owner and an employee of IMS.

Wayne Spence had a continuing arrangement with IMS, whereby he would receive ten percent of the profits earned by IMS as a finder's fee commission for leads and contacts that resulted in a contract for IMS.

The first relevant contact between the parties in this case was in May 1978, at a national convention when Kunzelman demonstrated IMS's screening test to Smith. During the summer of 1978 Kunzelman traveled to Baton Rouge to demonstrate the test to Smith's staff. On October 16, 1978, at a reception at a convention in New Orleans, Smith told Kunzelman that he was trying to arrange a meeting between Kunzelman and Thompson and that he would be in touch. On October 17, 1978, while the convention guests were loading a bus for a tour, Smith took Kunzelman aside and told him the meeting with Thompson was set for the next morning at ten o'clock. Furthermore, Smith said, "He wants to talk to you about the screening and don't forget to mention the kitty."

On October 18, 1978, Kunzelman, Koenig and Spence went to Baton Rouge to meet with Thompson. The content, administration and results of the screening test were discussed. Towards the end of the meeting, Kunzelman stated that they had been around state offices before and knew that there had to be cooperation, but they needed direction. Thompson responded, "That is important to know; it makes a difference." Thompson then requested a list of screening firms that could contribute to making a bid process and informed them he would be in touch.

On November 21, 1978, Koenig, Kunzelman and Spence, at the invitation of Thompson, attended a meeting where screening was discussed at LSDE chaired by Thompson. After the meeting, Koenig, Kunzelman and Spence had lunch with Smith, and the amount of money the legislature was going to make available for screening was discussed.

On August 19, 1979, Kunzelman received a telephone call from Smith. Smith stated there would be a $700,000 contract for the screening of 45,000 children. Smith then asked, "What is in the kitty?" Kunzelman replied, "Ten percent." About ten minutes later, Smith called Kunzelman back. Smith inquired, "Could that be fifteen percent." Kunzelman responded, "Fifteen percent of the profits," and Smith said, "No, of the total." Kunzelman stated that he was not sure and that he would have to get back with Smith.

A few days later Ackal called Kunzelman and said he understood IMS was thinking about trying to do screening in Louisiana and that they should get together "about how that was going to happen." Ackal and Kunzelman agreed to meet at the Hyatt Hotel in Washington, D.C. the next week.

Since Kunzelman had never heard of Ackal, he contacted Smith and asked Smith if he should meet with Ackal. At Kunzelman's request Smith described Ackal's physical appearance, and then Smith said, "You won't miss him."

As previously arranged, Kunzelman went to the bar at the Hyatt Hotel in Washington at 3 p.m. To his surprise Kunzelman saw Thompson with another man. Kunzelman walked over to Thompson, said hello, shook hands and Thompson said, "This is Eddie Ackal, Mr. Direction." Thompson told Kunzelman that he was in Washington to make sure he (Kunzelman) met Mr. Ackal and to visit someone at the capitol. Kunzelman told Thompson he was confused because he thought Ackal was from the Louisiana Educational Association. Ackal treated this as a joke and said that was just the term used. After a drink Ackal suggested that he and Kunzelman meet in Ackal's room.

Before they got on the elevator, Ackal told Kunzelman, "There is not going to be any talk about ten or fifteen percent; it is going to be a lot more than that, and it is not even worth going upstairs if we are going to be talking ten or fifteen percent." Kunzelman informed Ackal that if they were going to screen 45,000 students for $700,000 the figure could not be any higher. Ackal stated he wanted a $350,000 cash payment, and Kunzelman replied that labor costs prohibited such a figure. When Kunzelman asked Ackal what would happen to the $350,000, Ackal replied that he would not give an answer because he did not want Kunzelman to know in case someone asked. Ackal said he would see what he could do about the labor costs and called Smith. Kunzelman then talked to Smith about labor costs and alternatives, but nothing was resolved. Ackal then told Kunzelman that payments would be made through EPC which would function as IMS's agent.

Ackal and Kunzelman then returned to the bar to meet with Thompson. The three men toasted to everything being all right, and Thompson said that if everything worked out and if IMS did a good job they were talking about a three to five year relationship.

After a phone call from Ackal, a second Washington meeting was arranged for September 12, this one being among Ackal, Kunzelman and Koenig. At the meeting, Ackal handed Kunzelman a bid proposal for the screening contract which was in a LSDE envelope. The bid proposal was for the screening of 45,000 children but did not specify a dollar figure. Ackal repeated his request for $350,000, but Koenig said that the labor costs prohibited such a figure. Ackal then modified his demands and asked for $150,000 in cash. Koenig said that they wanted to write checks so that they could have "a trail of what was going on." Ackal suggested a "washing" process whereby money would be paid to a third party. The third party would pay taxes on the money, keep some for himself and return the majority which could then be used to make up the $150,000. Finally, the parties discussed a billing system, and the meeting dispersed.

On September 20, 1979, Smith submitted a description of the screening project, calling for the screening of 44,361 children at a cost of $889,620 to the BESE Board's Finance Committee. The proposal was approved by the committee, and on September 27, 1979, the BESE Board approved the letting of contracts for the screening program as presented to the committee. Also on September 27, Smith gave LSDE employees instructions to process the contract on a sole-source basis, thereby eliminating the bid requirement.

Ackal and Kunzelman again met in Washington on October 10, 1979. Ackal informed Kunzelman that it was now a "whole new ball game." He told Kunzelman that the contract now called for the screening of only 30,000 students for $889,000. Ackal also indicated that the contract could be ready by October 20, 1979.

On October 11, 1979, Kunzelman sent a contract proposal to the LSDE to screen 30,000 children...

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