U.S. v. Hobby, s. 82-5143

• Decision Date: 09 March 1983
• Docket Number: Nos. 82-5143,82-5144,s. 82-5143
• Citation: 702 F.2d 466
• Parties: UNITED STATES of America, Appellee, v. Wilbur HOBBY, Appellant. UNITED STATES of America, Appellee, v. Mort LEVI, Appellant.
• Court: U.S. Court of Appeals — Fourth Circuit

Page 466

702 F.2d 466

UNITED STATES of America, Appellee, v. Wilbur HOBBY, Appellant.

UNITED STATES of America, Appellee, v. Mort LEVI, Appellant.

Nos. 82-5143, 82-5144.

United States Court of Appeals Fourth Circuit.

Argued Nov. 12, 1982.

Decided March 9, 1983.

Shelley Blum, Charlotte, N.C., Thomas C. Manning, Raleigh, N.C. (Cheshire, Manning & Parker, Raleigh, N.C., on brief), for appellants.

Janis H. Kockritz, U.S. Dept. of Justice, Washington, D.C. (Samuel T. Currin, U.S. Atty., Raleigh, N.C., on brief), for appellee.

Before HALL and PHILLIPS, Circuit Judges, and HAYNSWORTH, Senior Circuit Judge.

HAYNSWORTH, Senior Circuit Judge:

Wilbur Hobby and Mort Levi were convicted of conspiring to defraud the United States of funds appropriated under the Comprehensive Employment and Training Act in violation of 18 U.S.C.A. Secs. 371 and 665. In addition, Hobby was convicted of misapplying or obtaining by fraud monies granted under CETA in violation of Sec. 665, while Levi was convicted of hiring ineligible persons for training in a program established with CETA monies in violation of Sec. 665. Each was sentenced to imprisonment and now appeals his conviction.

I.

Wilbur Hobby was president of the AFL-CIO in North Carolina and owner of Precision Graphics, Inc., a printing company located across the street from the union office. He had involved himself many times with CETA projects, ¹ and in one of those projects he had worked with Mort Levi. ² The union had need of computer services in its daily business, and typically such services were obtained by contracting with outside companies. Hobby conceived the idea that he might provide such services through the acquisition of a minicomputer compatible with the national union's big computer.

In January 1979, Hobby began discussions with a representative from Mohawk-Data Sciences about acquiring a computer for union work. Over the next two to three months, discussions about what equipment was necessary continued. In the meanwhile, however, Hobby and Levi formed a new company, Precision Data, Inc. Levi was shown on the articles of incorporation as an incorporator and also was listed as registered agent. Hobby owned 95% of the corporation's stock and was its president.

In February 1979, the newly formed corporation, Precision Data, submitted to the North Carolina Department of Natural Resources and Community Development a CETA grant request for funds to train data processing personnel. The application was received with skepticism, both because of doubt of the need of another such program in that vicinity and because Precision Data had no staff, capital, plant or experience in computer training. The director of the Division of Community Employment of NRCD suggested that the contract be awarded to Precision Graphics because of its previous experience with CETA contracts. Levi met with two NRCD employees and drafted a new CETA application on behalf of Precision Graphics.

On May 21, 1979, the application of Precision Graphics for a grant of $129,429 was placed on NRCD's authorization list.

Meanwhile, in April, Hobby, on behalf of Precision Data, had contracted to purchase a computer from Mohawk. The purchase price was $41,317.68, to be paid with a down payment of $10,329.42 and twenty-four equal monthly installments of $1,721.57. In addition, Precision Data agreed to pay Mohawk $214 a month for maintenance.

On the same day that the application of Precision Graphics was placed on the contract authorization list, in a contract signed by Hobby, Precision Graphics agreed to lease Precision Data's computer for a monthly rental of $3,000 and a maintenance fee of $500 a month.

In late May, a CETA contract with Precision Graphics was signed and an advance of $43,696, requested by Levi, was paid. Almost immediately thereafter Hobby transferred $18,000 from the account of Precision Graphics to the account of Precision Data to cover a check he had earlier drawn on the computer. The $18,000 check was said to be "$9,000 for transportation and $9,000 for computer rental." In early July, Hobby wrote another check from Precision Graphics to Precision Data as payment for computer rental, this one for $5,000. Thus, notwithstanding that the computer was not even in place until June 15, Precision Graphics expended and Precision Data received for the audit period beginning May 21 and ending September 30, 1979, $14,000 for computer rental. ³ Moreover, Precision Graphics paid Precision Data for computer maintenance at the rate of $500 a month beginning May 21, though Precision Data's obligation to pay Mohawk for such services did not begin to run until July 16, 1979, and then only at the rate of $214 a month.

The largest diversion of funds, however, occurred in connection with charges for the transportation of students. Almost $28,000 was charged to Precision Graphics by Precision Data for services that never were provided.

Levi recruited the students, and had a number of ineligible students falsify statements to make them appear eligible.

Beginning in late August, a supervisor of an "Independent Monitoring Unit" in NRCD began to monitor Precision Graphics' CETA contract. When she and other employees of NRCD sought to meet with Hobby and Levi, they were rebuffed by Levi, and later Hobby refused them free access to books and records and other materials they needed. Finally, in late September the Secretary of NRCD requested an audit by the state auditing office. It produced a report released in May 1980.

II.

Hobby urges reversal on fourteen separate grounds. Levi makes three points which parallel three of Hobby's. Most of the contentions are of little substance or frivolous, and only two seem to us to deserve discussion.

A.

Three counts of the indictment charged Hobby with having procured CETA funds by fraud and diverting such funds for (1) purchase of data processing equipment, (2) the rental of such equipment, and (3) the maintenance of such equipment. The charge was in the conjunctive, though the statute, 18 U.S.C.A. Sec. 665, is in the disjunctive. The statute is violated if the CETA funds are obtained by fraud or if they are diverted or misapplied. Hobby obtained a preliminary instruction, to which the United States did not object, stating both the statutory prongs in the conjunctive so the prosecution would be required to prove both fraud in obtaining the grant and misapplication of the funds. In his final instructions to the jury, however, the district judge properly charged the statutory offense stating the two prongs in the disjunctive. This, Hobby contends, was a deprivation of his right of due process since his lawyer had been led to believe that he could obtain an acquittal upon a finding of no fraud in obtaining the grant, regardless of any later misapplication. ⁴

If we assume that defense counsel was misled by the prosecution and that the government had the burden of proving beyond a reasonable doubt fraud in obtaining the grant and misapplication of the funds, we can perceive no consequential prejudice to Hobby. Evidence of fraud in obtaining the grant and the misapplication of granted funds was derived from the records of the two corporations, Precision Graphics and Precision Data, the CETA applications, testimony relating to those documents and records and to events associated with them. The same core of operative facts forms the basis for finding fraud or misapplication, or both. Indeed, the two things were closely interrelated, for what Hobby did with the money tended to show both misapplication and fraud in obtaining the funds. Hobby admits that the allegation of fraud was the focus of his defense, and in making that defense he necessarily was required to do all that he could to explain and justify the expenditures. Counsel did not suggest what more he might have done in defense of the charge of misapplication of the funds. We cannot conceive of anything that might have been done that was not done.

The principle upon which Hobby relies is not without support. In United States v. San Juan, 545 F.2d 314 (2d Cir.1976), a woman was convicted of bringing...