U.S. v. Alex Janows & Co.

• Decision Date: 06 August 1993
• Docket Number: No. 92-3615,92-3615
• Citation: 2 F.3d 716
• Parties: 1993-2 Trade Cases 70,323 UNITED STATES of America, Plaintiff-Appellee, v. ALEX JANOWS & COMPANY, and Sherwin Janows, Defendants-Appellants.
• Court: U.S. Court of Appeals — Seventh Circuit

Page 716

2 F.3d 716

1993-2 Trade Cases 70,323

UNITED STATES of America, Plaintiff-Appellee, v. ALEX JANOWS & COMPANY, and Sherwin Janows, Defendants-Appellants.

No. 92-3615.

United States Court of Appeals Seventh Circuit.

Argued April 29, 1993.

Decided Aug. 6, 1993.

Barry R. Elden, Asst. U.S. Atty., United States Crim. Receiving, Appellate Div., Chicago, IL, John J. Powers, III, Marion L. Jetton (argued), Dept. of Justice, Antitrust Div., Appellate Section, Washington, DC, James E. Gross, Kent Brown, Dept. of Justice Antitrust Div., Chicago, IL, for plaintiff-appellee.

Robert S. Bailey, Paul Bradley (argued), Chicago, IL, for defendants-appellants.

Before POSNER, FLAUM and KANNE, Circuit Judges.

FLAUM, Circuit Judge.

Sherwin Janows and his company Alex Janows & Company were found guilty of rigging bids for the construction of commercial kitchens and similar projects in the Chicago area, in violation of federal antitrust law. 15 U.S.C. Sec. 1. We affirm the convictions and sentences.

I.

Sherwin Janows owned and ran Alex Janows & Company, which designed and installed kitchen facilities for large companies. In the commercial kitchen industry, the designers create plans and blueprints, specifying the equipment that should be used. Some items like stoves are mass-produced, while others like countertops are fabricated to order for a particular project. Once the facility has been designed to its satisfaction, the customer engages a contractor to obtain and install the necessary equipment. Ordinarily, the customer solicits competitive bids to determine which contractor it will employ. Companies like Alex Janows & Company both design and bid to construct and install commercial kitchens. Frequently customers rely on their kitchen designers to recommend a list of bidders for the construction.

From approximately 1984 to 1988, Sherwin Janows conspired with a group of kitchen designers to rig bids for the construction and installation of commercial kitchens. According to their agreement, if the design consultant wanted to perform the installation work, it would recommend the other conspirators to the customer, knowing that they would provide non-competitive bids or refrain from bidding at all. If the customer mentioned a company that was not part of the conspiracy, the consultant would discourage accepting a bid from that company by disparaging its quality. The consultant who planned to be the successful bidder would give the coconspirators its pricing figures, to facilitate their submission of higher bids. In the absence of an arrangement like this one, the preparation of bids for a commercial kitchen project is a costly and time-consuming endeavor, requiring the bidder to price hundreds of items. The conspirators avoided this cost by using the numbers supplied by the design consultant who was selected to win the project.

Most of the evidence against Janows came from coconspirator testimony, particularly Frederick Pruim and John Tierney, both of whom had plead guilty to similar antitrust violations. Pruim testified that he participated in bid rigging for over ten projects with Janows and others. Using the conspiracy arrangement to ensure that he was the lowest bidder on projects he helped design, he won seven bids, including the Adlai Stevenson High School and Lake Forest Academy projects. He testified that he had plead guilty to rigging those two projects and had been sentenced prior to Janows' trial. Tr. 840-41, 852-56. He also named three projects which eventually were awarded to Janows and for which he had provided artificially-determined high bids.

John Tierney, president of Equipment Manufacturing Company (EMCO), testified that Janows had enlisted him into the conspiracy in 1985. Tierney described two projects for which he submitted high bids after receiving by messenger the numbers Janows had prepared for the Alex Janows & Company bid. He also corroborated Pruim's testimony that Pruim had requested high bids from Tierney for projects Pruim wanted to win. In 1988, Tierney told Pruim that he would not submit fixed bids in any other projects, but would refrain from bidding in the latest project Pruim had designed. Tierney also testified that his company plead guilty to rigging bids in the St. Joseph's Hospital project (which Janows won) and the Allstate project (which Pruim won) and that he had personally guaranteed payment of the criminal penalty. Tr. 148-154.

The government offered additional corroborating evidence to support its case that Janows conspired to rig bids. Leroy Johnson, one of Janows' estimators who confirmed that preparing bids requires a substantial investment of time by the contractor, testified that he did not remember preparing bids for the projects Pruim had identified as projects for which Janows had agreed to submit fixed, high bids; he did remember preparing estimates for the ones identified by Pruim as projects rigged for Janows to win. Tr. 754-57, 768-779. Janows could produce no preparation documents on the bids for which Pruim allegedly supplied the numbers, while he did have files on bids prepared by estimating materials and labor costs in the traditional way. Other employees of commercial kitchen design and construction companies testified that Janows or Pruim attempted to solicit "complimentary" or high bids from their companies between 1984 and 1988.

Janows offered the testimony of several customers who awarded his company design and construction contracts and praised the work that he did for them. He also testified in his own defense, portraying himself as an honest, struggling businessman who ran a high-quality shop. Janows claimed to have used "guesstimates" instead of formally prepared bids for projects he did not want, in order to keep his company's name current. His experience in the industry explained the narrow margin between his guesses and the winning bid. He threw away documentation for jobs he did not win because it was useless, and he submitted high bids on projects Pruim won because his primary competitive focus was quality, not price. He emphatically denied ever arranging or rigging bids in order to win contracts.

II.

The defendant argues that the district court erred in allowing the government to use the guilty pleas in their case-in-chief without a contemporaneous limiting instruction. Essentially, his argument is that the government used the pleas as substantive evidence of Janows' guilt. Before trial, the government moved in limine to be permitted to introduce Pruim's and EMCO's guilty pleas and plea agreements, including mention of them in the opening statements and closing arguments. Dkt. 57. Unfortunately, the district court's ruling was off the record. The problem of reconstructing what issues were considered, what positions the parties took, and what fell within the scope of the judge's ruling is further exacerbated by the lack of a written response to the government's motion. We note that, because the defendant did not object to the admission of, or to any specific use of, the guilty pleas, he must show that the admission and use constituted plain error. United States v. Davis, 838 F.2d 909, 917 (7th Cir.1988).

Juries may consider guilty pleas and plea agreements entered by witnesses in assessing the credibility of those witnesses. They may not consider the pleas for the purpose of proving the defendant's guilt. When an alleged accomplice testifies, it is better to give a limiting instruction to be certain that the jury considers the testimony only for its proper purpose. See id. We have held, however, that even in the absence of a limiting instruction, the admission of guilty pleas may not be reversible error. United States v. Braxton, 877 F.2d 556, 565 (7th Cir.1989); Davis, 838 F.2d at 917. We consider the impact of evidence in the context of the whole trial.

The defendant's primary argument is that it was error for the trial court to grant the government's motion and permit the admission of the guilty pleas before the defendant gave any indication that he would use the pleas to undermine the credibility of the government's witnesses. Implicit in the defendant's argument is an acknowledgment of the basic trial strategy to impeach one's own witness "to lessen the blow of cross-examination." United States v. Shields, 999 F.2d 1090, 1100 (7th Cir.1993); Davis, 838 F.2d at 918; see also United States v. Mealy, 851 F.2d 890, 899 (7th Cir.1988) ("The well-established rule in this circuit is that, on direct examination, the prosecutor may elicit testimony regarding the witness' plea agreement and actually introduce the plea agreement into evidence.") (citations omitted). This is fair because "the jury is bound to wonder from the outset why someone should be testifying to all these things that damn him along with the defendant, and having wondered may be shocked or puzzled to discover the reason for the first time on cross-examination." United States v. LeFevour, 798 F.2d 977, 984 (7th Cir.1986). In this case, Pruim and Tierney admitted doing just the things for which Janows was being prosecuted, and their frankness in the face of criminal penalties must have been a curiosity for the jury and might have distracted the jury's attention from the appropriate subject, Janows' actions. A jury is likely to wonder why a witness would willingly incriminate himself, whether or not the defendant intended to impeach the witness' credibility on cross by suggesting a motive for the witness' testimony. Thus, we have previously held that guilty pleas may have relevance to the witnesses' credibility, even without considering the effect of cross examination. Id.

Naturally, the government wanted to advise the jury that their main witnesses were testifying pursuant to plea agreements, rather than wait for the defense counsel to accuse the witnesses of doing so. In this case, however, the government went further. It elicited testimony about specific projects...