U.S. v. Lachman

• Decision Date: 10 January 1995
• Docket Number: No. 94-2005,94-2005
• Citation: 48 F.3d 586
• Parties: 41 Fed. R. Evid. Serv. 339 UNITED STATES of America, Appellant, v. Walter L. LACHMAN, Maurice H. Subilia, Jr., Fiber Materials, Inc., Materials International, Defendants, Appellees. . Heard
• Court: U.S. Court of Appeals — First Circuit

Page 586

48 F.3d 586

41 Fed. R. Evid. Serv. 339

UNITED STATES of America, Appellant, v. Walter L. LACHMAN, Maurice H. Subilia, Jr., Fiber Materials Inc., Materials International, Defendants, Appellees.

No. 94-2005.

United States Court of Appeals First Circuit.

Heard Jan. 10, 1995.

Decided Feb. 24, 1995.

James D. Herbert, Asst. U.S. Atty., with whom Donald K. Stern, U.S. Atty., and Despena Fillios Billings, Asst. U.S. Atty., Boston, MA, were on brief, for U.S.

Nicholas C. Theodorou with whom Anthony Mirenda, Michael Boudett, Foley, Hoag & Eliot, Bruce A. Singal and Ferriter, Scobbo, Sikora, Singal, Caruso & Rodophele, Boston, MA, were on joint brief, for appellees.

Before SELYA, BOUDIN and STAHL, Circuit Judges.

BOUDIN, Circuit Judge.

This is an interlocutory appeal by the government under 18 U.S.C. Sec. 3731 contesting an evidentiary ruling made prior to trial in a criminal case. In the challenged ruling, the district court excluded from the government's case-in-chief 13 exhibits that the government deems of great importance. Finding that the district court did not abuse the discretion it possesses under Fed.R.Evid. 403, we affirm.

I.

On July 8, 1993, a grand jury returned an indictment charging that four named defendants conspired to (count I), and did in fact (count II), violate the Export Administration Act of 1979 ("the Export Act"), 50 U.S.C.App. Sec. 2410(a), and its implementing regulations. The defendants were two corporations--Fiber Materials, Inc., and its subsidiary Materials International--and the two top executive officers of the companies: Walter L. Lachman and Maurice H. Subilia. The "facts" that follow largely reflect the government's allegations (as yet unproved).

Fiber Materials has been engaged for 25 years in the production of composite materials for industrial and aerospace applications. Most of its business relates to technology for the manufacture of carbon/carbon, a category of materials that can be made to withstand intense heat and pressure. Over two-thirds of Fiber Materials' work is for the U.S. military. Materials International markets its parent company's materials, technologies and services overseas.

One of the technologies in which Fiber Materials is expert relates to the hot isostatic press; the press is a complex piece of industrial equipment that contains an internal cavity and uses high pressure gas or liquid to subject materials to intense pressure and a furnace to produce extreme heat. Carbon/carbon, when "densified" by this process, becomes suitable for use in rocket components, including ballistic missiles with nuclear capability. Fiber Materials generally subcontracts the manufacture of equipment such as the press to others but provides the expertise.

In 1984, the Indian government's Defense Research and Development Laboratory ("the Indian Defense Laboratory") issued a request for proposals to outfit a carbon/carbon facility in India for use in rocket and missile development. Fiber Materials won the bid and in 1985 signed a contract with the Defense Laboratory. Among other things, the contract called for Fiber Materials to supply a hot isostatic press with a cavity 26 inches in diameter, and a control panel for the press; such a panel contains controls to heat, pressurize and otherwise operate the press.

Under the Export Act, various goods and technologies are subject to different levels of export control for reasons of foreign policy, national security or scarcity. As one facet of this regime, the Commerce Department maintains a list of commodities that may not be exported without an individual license. Item ECCN 1312A on this list, as the list existed in the late 1980s, covered hot isostatic presses with a cavity diameter of 5 inches or more and any "components, accessories and controls" that were "specially designed" for such presses. Export to any country except Canada required a license; and the stated reasons for the restriction were "national security" and "nuclear non-proliferation." 15 C.F.R. Sec. 399.1, Supp. 1 (1988) (later revised and renumbered).

In January 1987, Fiber Materials and the Indian Defense Laboratory modified their contract to call for a hot isostatic press with a cavity diameter of 4.9 inches and a control panel for the press. According to the government, Subilia wrote to the Indian Defense Laboratory to assure the laboratory that the control panel to be supplied under the new contract could in the future be used with a larger hot isostatic press. In early 1987, the defendants were allegedly told by the government that certain other items in their contract, which required individual licenses, would probably not be licensed because of security concerns.

In March 1988, Materials International entered into a contract with the Indian Defense Laboratory to have a hot isostatic press with a cavity diameter of 26 inches made by a third party in Switzerland (which did not prohibit such exports) and shipped directly to India. A month later, defendants exported the original 4.9 inch press, along with its control panel, from the United States to India without seeking or receiving a Commerce Department license. A year and a half later, the 26 inch press was sent from Switzerland to India. In 1991 and 1992, defendants sent employees of Fiber Materials to India to install the equipment and, specifically, to connect the U.S.-made control panel to the large Swiss-made hot isostatic press.

On July 8, 1993, the four defendants were indicted in two counts for knowingly conspiring to violate, and knowing violation of, the Export Act and its regulations. 50 U.S.C.App. Sec. 2410(a). The commodity whose export was claimed to be unlawful was not the 4.9 inch press but the control panel.

II.

Pretrial proceedings were extensive. In June 1994, the district court set trial to begin on July 25 and ordered the government to provide a list of proposed exhibits to defendants by July 1. On July 1, the government filed a very lengthy list of exhibits. On July 19, the defendants filed a motion in limine aimed at excluding many of these exhibits relating to the alleged "end use" of the exported items for missiles and nuclear weapons. The government then discarded many of its exhibits but opposed the exclusion of others objected to by defendants. In the meantime trial was deferred until August.

Perceiving that judgments about relevance might be affected by the scienter instructions at trial, the district court addressed that issue. With the government acquiescing, the court ultimately adopted the defendants' theory of intent: the court held that the "knowing[ ] violat[ion]" requirement of 50 U.S.C.App. Sec. 2410(a) required the government to prove that the defendants knew that the control panel required an individual license. Compare United States v. Gregg, 829 F.2d 1430, 1437 (8th Cir.1987) (imposing such a knowledge requirement) with United States v. Shetterly, 971 F.2d 67, 73 (7th Cir.1992) (rejecting it). This issue is not before us, and we express no view upon it.

The district court held a hearing on August 3 and, in an oral ruling, excluded 13 of the governments' exhibits from use in its case-in-chief. As to nine other exhibits, the court declined to rule before the exhibits were offered at trial, but it expressed "intense skepticism" about admitting some of them. The government voluntarily withdrew 21 other challenged exhibits. Although the excluded exhibits number 13, they actually comprise four different collections, one of which accounts for 10 of the exhibits:

The first (gov. ex. EK) is a 121-page file belonging to the Institute for Defense Analysis, a U.S. industry working group that assists the Defense Department with its own program to identify militarily critical technologies. The defendant Subilia was a member of the group. The 121-page file contained records of working group meetings in 1985. The records indicate that at one meeting Subilia attended, carbon/carbon was discussed and a copy of ECCN 1312A was distributed. The file contains many references to munitions and weapons, and considerable material relating to commodities not at issue in this case.

The second file of excluded documents (gov. exs. DW through EF) consists of 10 newspaper clippings found in the files of Materials International. These articles discuss the Indian government's "AGNI" missile program. None refer to hot isostatic presses or their control panels. All but one of the articles are dated in 1989, more than a year after the export of the control panel in this case. Each of the 10 newspaper articles was designated as a separate exhibit.

The third (gov. ex. AA1 through 5) is a group of documents comprising defendants' registrations and renewal applications filed with the State Department. That department maintains its own "munitions" list of controlled exports, a list distinct from that of the Commerce Department. The State Department list does not cover hot isostatic presses or their control panels. The defendants' filings with the State Department pertained to their activities as exporters of carbon/carbon. The documents do identify the U.S. military as customers of Fiber Materials.

The fourth (gov. ex. AE) is the Indian Defense Laboratory's 1984 request for proposals for the carbon/carbon processing facility. This was the proposal for which Fiber Materials submitted the winning bid; as earlier noted, the original arrangement for a larger hot isostatic press was modified in 1987 to call for one of 4.9 inches. The exhibit indicates that the Indian carbon/carbon facility would be used in connection with rocket and missile development.

The district court's reasons for excluding these exhibits have to be discerned from the transcript of the hearing on August 3, a hearing that embraced issues and documents in addition to the 13 exhibits now in dispute. In excluding the 121-page file, the court referred to Rule 403 and called the materials duplicative, redundant...