U.S. v. Martel, s. 85-1249
| Decision Date | 05 June 1986 |
| Docket Number | 85-1250,Nos. 85-1249,s. 85-1249 |
| Citation | 792 F.2d 630 |
| Parties | 20 Fed. R. Evid. Serv. 1104 UNITED STATES of America, Plaintiff-Appellee, v. Paul E. MARTEL, Daniel G. Martel and Pace Development, Inc., Defendants- Appellants. UNITED STATES of America, Plaintiff-Appellee, v. PACE DEVELOPMENT, INC., Defendant-Appellant. |
| Court | U.S. Court of Appeals — Seventh Circuit |
Stuart R. Lefstein, Katz, McAndrews, Durkee, Balch & Lefstin, Rock Island, Ill., for defendants-appellants.
L. Lee Smith, Asst. U.S. Atty., Gerald D. Fines, U.S. Atty., Springfield, Ill., for plaintiff-appellee.
Before CUDAHY, FLAUM, and EASTERBROOK, Circuit Judges.
A defense contractor and its two principal corporate officers were convicted by a jury of making false statements and conspiring to defraud the United States, in connection with fraudulent billings submitted to the government. In addition, the contractor, pursuant to a separate indictment, was convicted of the misdemeanor offense of illegally supplementing a government employee's salary. The defendants appeal the conspiracy and false statement convictions on the basis of alleged evidentiary errors and improper prosecutorial conduct at trial. The contractor challenges the misdemeanor conviction because the contractor was charged in the indictment only with the felony of unlawfully compensating a government employee, and it claims that the misdemeanor was not a lesser included offense of that felony. After review of each of these claims, we affirm all of the convictions.
Pace Development, Inc. is headquartered in East Moline, Illinois with additional offices in Oklahoma, New Jersey, and New York. During the time period relevant to this case, Pace's president and vice-president were, respectively, Paul Martel and his son Dan. The company produces technical manuals for commercial clients and, beginning in 1972, produced technical manuals for the United States Army Arsenal at Rock Island, Illinois. Pace operated on a timecard system, whereby employees kept track of the hours they spent by completing timecards that included hours worked and numbers which corresponded to the various client projects. The data from these timecards was entered into the company's computer payroll and billing system, and employees were paid on the basis of the system's compilation of their total hours worked. Commercial clients and, until 1979, the Army were billed on a piecework basis, rather than on an hourly basis.
In 1979, Pace signed a new contract with the government that changed Pace's compensation basis on military projects from piecework to hours billed. This change allegedly created problems for Pace because due to the continuing nature of the government work, Pace's practice had always been to continue devoting employee time to government work even during the interim between an old contract's expiration and a new contract's effective date. Under the old piecework billing system, Pace apparently would continue to produce work for the government during this interim and simply would wait to submit the work for payment until the new contract was in effect. According to the defendants, the 1979 contract presented a "mechanical" billing problem: employees devoting hours to the government project during the interim could not create timecards reflecting time spent on the military account because there technically was no current military account in effect. Thus, after the 1979 contract became effective, Pace faced the possibility that it would remain uncompensated for work done between the prior contract and the 1979 contract, and between the 1979 and subsequent contracts.
Against this backdrop, Pace began to submit invoices to the government based on altered timecards. The government demonstrated, and the defendants do not dispute, that from late 1979 until September 1980 the Martels changed certain timecards of employees performing commercial work in order to make it appear that those employees had worked instead on the military accounts. The government argued that the invoices based on altered timecards inflated Pace's compensation, since it was paid for military work that it did not perform. The defendants claimed that the company was merely attempting to receive compensation for military work that had been performed but for which it could not create timecards at the time the hours actually were incurred.
The government charged Pace and the Martels with one count of conspiring to defraud the United States in violation of 18 U.S.C. Sec. 371 by submitting false billing statements and receiving money for labor that was "not performed as stated." The three defendants also were charged with five counts of making false statements as to material facts in violation of 18 U.S.C. Sec. 1001. The Martels each were acquitted on two of the false statement counts and were convicted of the conspiracy and remaining false statement counts. Pace was convicted on all charges except one false statement count.
The defendants raise the following claims that they allege warrant reversal of their convictions: (1) the trial court erroneously admitted an ambiguous letter as evidence of intent; (2) the court allowed the government to introduce irrelevant rebuttal evidence and engage in improper cross-examination and closing argument; (3) the court refused to instruct the jury on the element of materiality in the false statement charges; and (4) the court failed to answer a question posed by the jury during its deliberations. We will address these in turn.
A. The admission of evidence. The government's conspiracy to defraud case rested in part on proof that the defendants' practice of altering timecards was not an innocent method of recouping time actually spent on military matters. To this end the government sought to introduce a letter to Paul Martel from a Pace employee working out of the Rochester, New York office. The letter seemed to support the government's assertion that the defendants had conspired to defraud the government out of funds to which Pace was not entitled. The letter read:
Dear Paul:
I am enclosing copies of monthly progress report forms that will be sent to you the first of each month on both MARTA and NECIP. 1 I will be getting reports from Mel and Jeff, and from these reports will give a report on both projects' progress.
In my monthly projection of work I will be giving you a report on actual hours projected for NECIP and hours that will be needed to be charged to NECIP. I had talked with you about this previously. I would like for Mel to handle this number charges [sic] and coordinate this thru me, but know that you need Military charges. Your needs for charges will definitely override what is needed on NECIP, but would like to be informed of these charges to Mel's NECIP report so my report to GRS will not conflict. I am definitely aware of the problems we got into with MARTA by changing charge hours; but feel we can keep this under control if as few people as possible are aware of what we are doing. I do not want the people working for Mel aware of this. I prefer that Mel keep a true picture of time actually spent on NECIP. The manner of handling this will have to be your decision.
Letters of transmittal will be handled as always. They will be generated by Mel with copies forwarded to your attention for billing purposes. There is no need to notify anyone a week ahead that the letter is forthcoming, since no actual billing can be done until the actual transmittal is completed. Transmittals for NECIP will be handled by my writing the letter, sending it to Mel; then when ready to ship, Mel will fill in that date. All transmittals will be coordinated and controlled by Mel.
I hope these methods will satisfy everyone's needs and keep confusion to minimum.
Yours truly,
C.A. Mott
The government introduced evidence demonstrating that Mott was the supervisor of the Rochester office who also supervised Mel Parkhurst, an employee in the East Moline office whose subordinates' timecards frequently were altered. Although Mott admitted during his testimony that he wrote the letter and sent it to Paul Martel, he also testified that the letter had nothing to do with altering military timecards and, indeed, that he was unaware of any altering. Mott stated further that the purpose of the letter was merely to ensure accurate accounting of commercial time and that the statements "but know that you need military charges" and "your needs for charges will definitely override what is needed in NECIP" reflected his understanding that at the East Moline office, military work had top priority.
The defendants objected to the letter's admissibility on the basis of relevance under Rules 401 and 402 of the Federal Rules of Evidence, claiming that the trial court was required to accept as true Mott's uncontroverted testimony that the letter had nothing to do with altering timecards. Nevertheless, the court admitted the letter into evidence, finding that it was relevant to the issues of the defendants' intent and motive. The defendants continue their argument on appeal, asserting that the court was bound to accept Mott's explanation and therefore committed error when it allowed the jury to speculate on the letter's meaning. The defendants attempt to bolster this argument by making reference to the parol evidence rule. The defendants also make a belated attempt to attack the letter's admissibility on the ground of hearsay.
Bearing in mind that our role in reviewing evidentiary rulings lies in determining whether the trial court abused its discretion, see, e.g., Hamling v. United States, 418 U.S. 87, 124-25, 94 S.Ct. 2887, 2911-12, 41 L.Ed.2d 590 (1974); United States v. Hyman, 741 F.2d 906, 913 (7th Cir.1984); we find these arguments to be without merit. First, the trial court was in no sense bound by Mott's innocent...
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