U.S. v. Maloof

• Decision Date: 02 March 2000
• Docket Number: No. 98-21114,98-21114
• Parties: (5th Cir. 2000) UNITED STATES OF AMERICA, Plaintiff-Appellee, v. MARK ALBERT MALOOF, Defendant-Appellant
• Court: U.S. Court of Appeals — Fifth Circuit

Page 819

205 F.3d 819 (5th Cir. 2000)

UNITED STATES OF AMERICA, Plaintiff-Appellee, v. MARK ALBERT MALOOF, Defendant-Appellant.

No. 98-21114

UNITED STATES COURT OF APPEALS FOR THE FIFTH CIRCUIT

March 2, 2000

[Copyrighted Material Omitted]

[Copyrighted Material Omitted] Appeal from the United States District Court for the Southern District of Texas

Before JONES, DeMOSS and DENNIS, Circuit Judges.

DENNIS, Circuit Judge:

This direct criminal appeal arises from the conviction following jury trial of Mark Albert Maloof (Maloof) for conspiracy to restrain trade in violation of Section 1 of the Sherman Act, 15 U.S.C. 1, and conspiracy to commit wire fraud in violation of 18 U.S.C. 371. For the reasons assigned, we affirm the convictions, but vacate the sentences, and remand for resentencing.

I. FACTUAL AND PROCEDURAL BACKGROUND

Maloof served as the southern regional sales manager for Bay Industries, Inc. (Bay), a company which produces and sells metal building insulation. Bay opened a Houston office in 1993 and recruited most of Brite Insulation Company's (Brite) sales force as its employees. Bay sharply reduced prices to attract customers, including many of Brite's major customers. Sales representatives from Bay's competitors responded by reducing their prices to generate additional sales.

One of the major components of metal building insulation is fiberglass. In 1993, fiberglass manufacturers doing business in Texas announced a price increase and reduction in the supply of fiberglass insulation. As a result of these changes Daniel Schmidt (Schmidt), Bay's general manager, prepared a price sheet in November 1993 outlining the new pricing scheme for Bay's sales representatives.

On January 3, 1994, Maloof, Bay's regional sales manager, called Wally Rhodes (Rhodes), vice president of sales for Mizell Brothers Company (Mizell), one of Bay's competitors. Rhodes, testifying on behalf of the government, stated that they discussed the effect of the insulation supply reduction and Rhodes' marital problems. Rhodes said Maloof suggested adopting uniform pricing to ensure that neither company would quote or sell under the other's prices. According to Rhodes, Maloof faxed Bay's price sheet to him. The prosecution introduced telephone records documenting phone calls and faxes between Maloof's phone line and Mizell on a daily basis the following week. Rhodes and Maloof stated that Maloof used the name Tom Coop when he called Rhodes during business hours. Rhodes testified that the purpose of the calls was to revise Mizell's price sheet to conform with Bay's pricing. Maloof stated that each of his conversations with Rhodes concerned only Rhodes' marital problems and that he neverfaxed or received price sheets from Rhodes.

Other witnesses for the prosecution testified that Maloof was involved in the solicitation of additional competitors to participate in the conspiracy to adopt uniform prices. Rhodes testified that prior to a laminators' trade association meeting in Kansas City on January 11, 1994, he and Maloof agreed to ask representatives of other insulation suppliers to join in the price fixing agreement. At the meeting, Rhodes said, he discussed the plan to adopt uniform prices with Brite employees, Peter Yueh and Jerry Killingsworth. Rhodes testified that he and Maloof decided that Rhodes should approach the Brite representatives first because of hard feelings and possible litigation resulting from Bay's hiring raid upon Brite's sales force. Killingsworth testified that his agreement for Brite to participate in the price fixing plan was obtained by Rhodes in the presence of Maloof during a smoke break. Rhodes corroborated Killingsworth's testimony. Following this meeting, Rhodes testified, he informed Maloof of Killingsworth's agreement upon Brite's participation and faxed the uniformly adjusted Mizell and Bay price sheets to Killingsworth, who prepared a Brite price sheet that was almost identical. Several weeks later Killingsworth stated that he sent the Bay, Brite and Mizell price sheets to the PBI Supply Company (PBI). Killingsworth testified that PBI faxed him a price sheet that was very similar to those of the other companies. Maloof denied having had any knowledge of the discussion between Rhodes and either Killingsworth or Yueh during the Kansas City meeting.

Fiberglass manufacturers imposed three price increases in 1994 and one in 1995. According to government witnesses, following each increase Maloof shared Bay's price sheet with representatives of Mizell, Bright and PBI. While Maloof denied participating in a conspiracy to adopt uniform prices with any competitor, Rhodes and Killingsworth testified that they agreed upon a pricing scheme with Maloof before distributing new price sheets to their sales representatives. Several Bay employees stated that they complied with Maloof's directive to adhere to Bay's price list because he had little tolerance for deviations. Maloof admitted that he informed Bay sales representatives that they had to adhere to that price list.

In 1994, Bay sales representatives began to receive complaints from some Bay customers that competing sales representatives consistently gave quotes identical to Bay's for 3 inch white vinyl insulation. Bay sales representatives testified that when they relayed the complaints to Maloof, he instructed them to stop selling to those customers.

Janne Smith, who worked for Bay as a division manager under Maloof's supervision, testified that she overheard Maloof discussing Bay's prices with Rhodes. She said that Maloof faxed Bay's price sheet to Rhodes and informed her that he had to consult Rhodes before approving a customer's request for a discounted price. According to Smith, Maloof gave her a copy of Mizell's price sheet in May 1994 and said that these were the prices Bay would adopt following the next price increase by the manufacturers. Smith also testified that Maloof fired Deloris Hill, a Bay sales representative, for charging prices below the stipulated rates.

Smith stated that because of her observations she suspected Maloof was violating antitrust laws. She testified that in July 1994 she faxed Maloof a document entitled the "Eight Major Fundamentals of Antitrust Law" and discussed her concerns with him. According to Smith, Maloof stated that he could not undo what had already been done. Maloof denied receiving a document on antitrust principles from Smith or discussing it with her.

Several weeks later, Smith reported Maloof's activities to the FBI and agreed to record some of her conversations with him in exchange for immunity. In June 1995, FBI agents and government prosecutors offered Maloof immunity in exchange for cooperating in the government's antitrust case. Maloof refused the offers. On May 15, 1997, Maloof was indicted on one count of conspiracy to restrain trade in violation of Section 1 of the Sherman Act, 15 U.S.C. 1, and one count of conspiracy to commit wire fraud in violation of 18 U.S.C. 371. Maloof was convicted by a jury of both counts and sentenced to 30 months imprisonment on each count, to run concurrently, and fined $30,847. Maloof appealed.

II. DISCUSSION

Maloof assigns several errors on appeal, including the trial court's limitations of his direct testimony and cross-examination of government witnesses, the court's application of a four level sentence enhancement, prosecutorial violations, judicial restriction of his "consciousness of innocence" defense, and the admission of the guilty pleas of witnesses-accomplices as substantive evidence of his guilt. After considering the oral arguments of counsel, the parties' briefs and the record designated for appeal, we conclude that Maloof's argument concerning his sentences has merit but that his assertions of errors affecting his convictions lack reversible merit.

Maloof's argument that he was deterred from adequately presenting a "consciousness of innocence" defense is unmeritorious. He relies on United States v. Biaggi, 909 F.2d 662, 689-91 (2d Cir. 1990), cert. denied, 499 U.S. 904 (1991), in which the court of appeals held that evidence that defendant had rejected an offer of immunity from the government in exchange for testifying as to the wrongdoing of others is relevant and admissible to show defendant's "consciousness of innocence." In Biaggi, the court reasoned that, although plea negotiations are inadmissible against the defendant, see FED. R. CRIM. P. 11(e)(6)and FED. R. EVID. 410, it does not necessarily follow that the government is entitled to a similar shield, and, more fundamentally, that the two types of negotiations differ markedly in their probative effect when they are sought to be offered against the government. "When a defendant rejects an offer of immunity on the ground that he is unaware of any wrongdoing about which he could testify, his action is probative of a state of mind devoid of guilty knowledge." Biaggi, 909 F.2d at 690. In Biaggi the court of appeals reversed bribery convictions because the trial court, unlike the district court in the present case, had completely excluded evidence of the defendant's rejection of immunity under circumstances in which that evidence might well have affected the jury verdict. Id. at 692.

Maloof was permitted to testify that he had rejected two government offers of immunity, one by two FBI agents and another by two Department of Justice attorneys, in exchange for taping conversations with his employer and other individuals, explaining to the agents and attorneys that his company could sell all of the insulation it had without price fixing and that he had no knowledge of any price fixing by his company or others. He complains, however, that the trial court erred in (1) instructing the jury to disregard his testimony that the FBI agents had knocked on his door and called out, "Mr. Maloof, this is the FBI, you're going to jail for three years;" and (2) limiting his testimony to the substance of...