U.S. v. Bryza
| Citation | 522 F.2d 414 |
| Decision Date | 25 August 1975 |
| Docket Number | Nos. 75-1215,s. 75-1215 |
| Parties | UNITED STATES of America, Plaintiff-Appellee, v. Kenneth J. BRYZA, Defendant-Appellant. to 75-1218. |
| Court | United States Courts of Appeals. United States Court of Appeals (7th Circuit) |
James P. Chapman, Gerald F. Murray, Chicago, Ill., for defendant-appellant.
Samuel K. Skinner, U. S. Atty., Gary L. Starkman, Ann C. Tighe, Asst. U. S. Attys., Chicago, Ill., for plaintiff-appellee.
Before MOORE, Senior Circuit Judge, * and CUMMINGS and BAUER, Circuit Judges.
Defendant-appellant, Kenneth J. Bryza, was charged in four separate indictments with violations of the mail fraud statute, 18 U.S.C. § 1341. 1 In one of the indictments he was also charged with using a false name to carry out a mail fraud scheme in violation of 18 U.S.C. § 1342. 2 In substance each of the four indictments alleged that the defendant, while acting as a purchasing agent for International Harvester Company (hereinafter referred to at times as "I-H"), accepted payments from various outside salesmen and suppliers 3 of I-H in violation of the company's conflict of interest policy. These payments were channelled to the defendant through Searsport Company, an entity organized by the defendant specifically for that purpose. The government contended that as a result of these payments to Bryza, I-H was deprived of its rights to have its business conducted in an honest manner, to the loyal, faithful and honest services of its employee Bryza, and to the secret profits Bryza received. Following a jury trial, Bryza was convicted on all remaining counts in all four indictments. 4 The trial judge imposed concurrent one year terms of probation. As a special condition of probation, Bryza was ordered to serve the first 177 days in the custody of the Attorney General.
Defendant Bryza has been employed in the corporate purchasing field for the past sixteen years. Since December, 1966, Bryza has been employed by International Harvester in the capacity of a buyer in the central purchasing department. His responsibilities included negotiating contracts with suppliers, placing business, evaluating sources, overseeing the services of suppliers and the quality of their products, and working with the engineering department to ensure that purchased products met company specifications. During the time he worked at International Harvester Bryza also taught a course at Northwestern University School of Business.
On the average, the defendant was responsible for approximately 175 contracts. He purchased from $35 to $40 million in goods per year from sources throughout the country. Before any buyer could approve a purchase, there had to be a formal requisition from one of the many plants Harvester maintained across the country. When such a requisition came in, it became the responsibility of the particular buyer for that item to secure a source. If the part requested had a specific mechanical function (most of the items Bryza bought had such a function), the requisition was normally accompanied by blueprints from the I-H engineering department. It was often the case that a particular supplier had been classified as an "Approved Source" by I-H engineering. The notation "Approved Source" would appear on the blueprint and in such a situation the buyer had no choice but to purchase from that particular source.
In other circumstances, the buyer was to send the blueprints and seek quotations from one or more potential suppliers whom he knew to be capable of producing the product sought. If more than one supplier submitted a bid, the buyer would then evaluate them based on past history of sales, quality, price and delivery capabilities. The buyer's performance was continually supervised and critiqued by the various departments placing the orders and by his own superiors.
Marvin Nathan first met the defendant in 1967. At that time, Nathan was the sales representative of the Albany Chicago Corporation and he called on Bryza in an attempt to secure more sales for Albany Chicago to International Harvester. According to the defendant, Nathan was an excellent manufacturer's representative and because of this, Bryza recommended Nathan to the Tenna Corporation and to the Hallmark Company, I-H suppliers, who at the time were looking for a sales representative in the Chicago area.
Over the next several years, Nathan and Bryza saw each other frequently. In December of 1969 they had a luncheon meeting. During the course of the meeting they reached an agreement whereby Bryza would receive a certain percentage of Nathan's commissions in return for aiding Nathan in obtaining two accounts and than watching over them. These payments were to be paid to Bryza through a separate entity called Searsport Company. The evidence is in dispute as to whether Bryza or Nathan suggested the idea of an independent phony consulting company to wash the payment monies. It is clear that Nathan supplied all of the stationery for Searsport. However, Bryza himself took all the initial steps to set up Searsport Company.
In January, 1970, Bryza applied for and received Post Office Box 662, Arlington Heights, Illinois, in the name of the Searsport Company. Shortly thereafter, on February 21, 1070, Bryza opened a checking account for Searsport at the Schaumberg State Bank, Schaumberg, Illinois. The persons authorized to sign on that account were Bryza and "Charles W. Morgan," 5 a name adopted by Bryza.
In February, 1970, Bryza asked Nathan for an advance payment in the amount of $500. Accordingly, on February 3, 1970, Nathan complied with the demand by paying Bryza $500 by a check made payable to the Searsport Company. After the first payment was made in February, 1970, Nathan continued until July, 1973 to make payments to Bryza on the commissions Nathan received from the Tenna and Hallmark accounts.
The Tenna and Hallmark accounts were not the only accounts on which Nathan made payments to Bryza. In May or June, 1971, Nathan and Bryza had a conversation about the Albany-Chicago Company, which, like Tenna and Hallmark, was an I-H supplier and for which Nathan was a manufacturer's representative and Bryza was the I-H purchasing agent. At that time, Bryza told Nathan to retroactively compute the commissions Nathan had earned from January, 1970 to June, 1971, on the Albany-Chicago account and to pay Bryza a portion of those commissions. Nathan agreed to the arrangement and made the requested payment to Bryza through Searsport. Thereafter, from June, 1971 to July, 1973, Nathan made regular payments to Bryza on the Albany-Chicago account. Additionally, Nathan began making payments to Bryza on one other account the Bulk Packaging Company account in the spring of 1971.
From January, 1970 to July, 1973, Nathan paid Bryza, through Searsport, a total of $18,000. Nathan showed those payments on his company books as consulting fees. However, neither he, his companies, nor the companies he represented ever received any consulting services from Bryza, Searsport or "Charles W. Morgan." Rather, in Nathan's view, the payments ensured that he could continue to do business with I-H through Bryza.
Marvin Nathan was indicted with the defendant in case No. 74 CR 439. Although he testified that at the time he was involved in the transactions with Mr. Bryza, he did not believe he was engaged in any fraudulent conduct and was not aware that he may have been violating the law, he pleaded guilty to the charges and was sentenced to a term of probation plus a fine.
Nathan further stated that in the year since International Harvester uncovered Bryza's conduct and fired him, Nathan's business with I-H had doubled.
Max Selzer had been the president of Selzer-Ivice Sales, a manufacturer's representative company, since 1971. Selzer- Ivice represented a company called Airtex Products which had approximately $400,000.00 worth of sales per year to International Harvester.
In approximately mid-year, 1970, Selzer and Bryza had a luncheon meeting. During the luncheon, Bryza mentioned that he was working for I-H for under $11,000 per year and he further noted that manufacturer's representatives made a great deal of money. Approximately one month later, at another luncheon meeting between Bryza and Selzer, Bryza again stated that his I-H yearly salary was under $11,000. He also mentioned that other companies were making efforts to secure the I-H account which Airtex then enjoyed. Selzer responded that he was very grateful to have Bryza's good will and wanted to work out some plan to remunerate Bryza.
Approximately two weeks later, Bryza and Selzer had another luncheon date. During the luncheon, Selzer said that he had worked out a plan of remuneration and he offered to pay Bryza one-half of one percent of the commission he received for selling Airtex products to I-H. Bryza accepted the proposal and suggested that the monies be paid to him as consultation fees. Bryza said he would contact Selzer later to advise him as to how the payments should be made. Several weeks later, Bryza called Selzer and told him that the payments should be made to the Searsport Company. In March, 1971, Selzer made his first payment to Bryza, through Searsport, and he continued to make the payments until August, 1973.
During the period from 1971-1973 Selzer paid approximately $4,500 to the Searsport Company. This amount represented the agreed upon percentage of the commissions Selzer-Ivice was receiving from Airtex Products.
From 1969 through 1973 the volume of business Airtex did with International Harvester remained relatively constant. According to Selzer, "we gave them the very best value that we could." The payments to Bryza apparently had no effect on increasing the sales to I-H. Selzer made other attempts to sell other products to International Harvester through...
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