U.S. v. MMR Corp. (LA), No. 89-3526

• Decision Date: 23 July 1990
• Docket Number: No. 89-3526
• Citation: 907 F.2d 489
• Parties: , 1990-2 Trade Cases 69,136 UNITED STATES of America, Plaintiff-Appellee, v. MMR CORPORATION (LA) and James B. Rutland, Defendants-Appellants.
• Court: U.S. Court of Appeals — Fifth Circuit

Page 489

907 F.2d 489

59 USLW 2134, 1990-2 Trade Cases 69,136

UNITED STATES of America, Plaintiff-Appellee, v. MMR CORPORATION (LA) and James B. Rutland, Defendants-Appellants.

No. 89-3526.

United States Court of Appeals, Fifth Circuit.

July 23, 1990.

Michael D. Hunt, Phelps, Dunbar, Marks, Claverie & Sims, Baton Rouge, La., Luther T. Munford, Phelps, Dunbar, Marks, Claverie & Sims, Jackson, Miss., Frederick T. Davis, Patterson, Belknap, Webb & Tyler, New York City, for MMR Corp. Donald L. Beckner, Bryan M. White, Baton Rouge, La., John R. Martzell, Martzell, Thomas & Hickford, New Orleans, La., for James B. Rutland.

Andrea Limmer, Asst. Chief, John J. Powers, III, Appellate Section, Dept. of Justice, Washington, D.C., John P. Volz, U.S. Atty., New Orleans, La., for plaintiff-appellee.

Appeals from the United States District Court, Eastern District of Louisiana.

Before THORNBERRY, GEE, and HIGGINBOTHAM Circuit Judges.

PATRICK E. HIGGINBOTHAM, Circuit Judge:

MMR Corporation (LA) and, its president, James B. "Pepper" Rutland, appeal their convictions for conspiracy to rig bids on a Cajun Electric Power Cooperative project in violation of section 1 of the Sherman Act, 15 U.S.C. Sec. 1, and for defrauding Cajun Electric on the same project in violation of the mail fraud statute, 18 U.S.C. Sec. 1341. The indictment also charged defendants with aiding and abetting these crimes contrary to 18 U.S.C. Sec. 2.

Defendants attack the convictions on numerous grounds. First, they argue that MMR was not a competitor of the charged co-conspirators and therefore cannot be guilty of a per se violation of the Sherman Act. They next complain of rulings on questions of evidence, comments by the prosecutor and the sufficiency of the evidence. We reject each of these arguments and others that we will describe and affirm both convictions.

I.

In the late 1970's Cajun Electric, a nonprofit electrical generation and transmission cooperative, decided to construct an electrical generating plant, Big Cajun No. 2 Power Station, at a New Roads, Louisiana site. The power plant was to have three units. The Big Cajun project was sponsored by the Rural Electrification Administration of the United States Department of Agriculture. MMR did not bid on Units 1 and 2 but participated as a joint venturer with Lord Electric Company on the power electrical contracts, primarily by supervising local labor.

In 1979, after construction of Units 1 and 2 was underway, Cajun Electric decided to solicit bids for the construction of Unit 3. Although MMR had never handled a large power electrical project on its own at the time, MMR lobbied Cajun Electric engineers to get on the bid list. Up until this time MMR had primarily been a specialty contractor. Its principal experience and expertise was in instrumentation work, which involves installing and testing the instruments that measure temperature, pressure, flow, and various processes in power plants and other industrial facilities. Because MMR had established a relationship with Cajun Electric, it believed its chances of successfully bidding on Unit 3 were good.

In September 1980 Cajun Electric, through its engineers, prepared a list of seven companies, including MMR, that had demonstrated the financial and technical capability to perform the electrical portion of Unit 3. Six of the invited bidders, including MMR, took out plans and specifications for the project on November 14, 1980, and sent representatives to a pre-bid meeting with Cajun Electric engineers on December 16, 1980. On January 16, 1981, two months later, four of the six companies submitted bids: Fischbach and Moore, Inc., Lord, The Howard P. Foley Company, and Hatzel & Buehler, Inc. MMR did not submit a bid. Fischbach was the low bidder and was awarded the contract on February 23, 1981, for $21.3 million. MMR received a $4.3 million subcontract from Fischbach.

The conspiracy which formed the basis for the convictions of MMR and Rutland had its beginnings at least as early as March 1980 when Paul Murphy, a Regional Vice-President of Fischbach, met with other representatives of the nation's largest electrical contractors. This was nothing new. These companies had been, for several years, rigging bids for large projects throughout the country. At this meeting they began the process of allocating upcoming electrical projects. Murphy expressed interest in Unit 3. In mid-December 1980, Fischbach's President, Alfred Manville, told Murphy that he had spoken to other potential bidders on the project and that they had agreed to rig the job in favor of Fischbach if Fischbach could get the one remaining bidder, MMR, to go along.

Murphy then called Rutland to arrange a meeting. Murphy had known Rutland for some time and had recently been negotiating with Rutland and Robert McCracken, Chairman of MMR, to acquire MMR for Fischbach. Murphy, J.R. Sturgill, another Fischbach official, Rutland, and McCracken were present at this meeting, held on December 19, 1980, at the City Club in Baton Rouge, Louisiana. They first discussed MMR's outstanding obligations on three earlier projects rigged by MMR and Fischbach--Borden Chemical Company, Freeport Uraniam Recovery Company, and Strategic Petroleum Reserve. Rutland's notes from the meeting referred to the Borden and Freeport "agreement[s]" being "cleared" and to MMR owing Fischbach $250,000 on the SPR "agreement." Murphy then told Rutland and McCracken that the other bidders had agreed to rig the job in favor of Fischbach if MMR would support Fischbach. In response Rutland indicated his strong belief that MMR, though it was a much smaller company and though it had never performed a large electrical contracting job alone, could do the work and proposed a joint venture. Murphy would not agree to a joint venture.

Rutland went to the men's room and Murphy followed. According to Murphy, he and Rutland worked out a deal in the men's room that MMR would get an instrumentation subcontract with a mark-up proportional to Fischbach's mark-up on the rigged project. When they returned they told Sturgill and McCracken that they had struck a deal. Murphy, however, did not testify to MMR's specific obligations under the agreement although it was clear from his testimony that he believed Rutland agreed that MMR would not compete but instead cooperate with Fischbach. Rutland's notes of the discussion of Unit 3 refer to bidding the job as a joint venture and to MMR having the "option" of subcontracting.

Murphy testified that MMR agreed to prepare a legitimate cost estimate so that Fischbach could compare its estimate to be sure that Fischbach's estimators had not made any mistakes. On January 14, 1981, two days before bids were due, Rutland brought his chief estimator to Fischbach's offices. While Rutland met with Sturgill and Murphy, MMR's and Fischbach's estimators met.

At the January 14 meeting Murphy had a telephone conversation with Pete Matthews of Lord about what number MMR should bid. They decided that MMR should be the high bidder, primarily because if MMR's bid was close to Fischbach's, MMR might get the job because of its good relationship with Cajun Electric. Murphy told Rutland and McCracken what number he wanted MMR to bid. Rutland was embarrassed to submit the number suggested by Murphy because it was much greater than MMR's estimated bid. Rutland feared that submitting such a bid would ruin MMR's image with Cajun Electric. Murphy testified that at the end of the meeting he still believed that MMR, although unhappy about it, was going to submit the high bid.

According to Sturgill, he and Murphy discussed the idea of MMR not submitting a bid at all, and Murphy later told him that MMR agreed to not submit a bid. Murphy, however, testified that he did not know that MMR would not bid until after the bid date. Either after the meeting or the next day, Rutland informed Cajun Electric by phone that MMR would not be submitting a bid. Rutland wrote a letter to the President of Cajun Electric confirming that MMR had decided not to bid the job, but to seek work as a subcontractor. Meanwhile, Fischbach padded its costs, raised its markup from $3.5 to $6 million, and was awarded the contract for $21.3 million. Sturgill and Rutland then worked out the terms of MMR's subcontract.

According to Sturgill, he and Rutland agreed that MMR would get $2,853,487 for its costs plus a $1,500,000 fee for a total of $4,353,487. Fischbach, however, was required to report all subcontracts to Cajun Electric and the REA. Because the markup on the MMR subcontract was 60%, Sturgill was concerned that the subcontract amount would appear too high to Cajun Electric and the REA. Thus, Sturgill and Rutland agreed that the written subcontract would be for $3,353,487, but that an additional $1 million would be paid to MMR pursuant to a change order purporting to reflect additional work. Change orders were not seen by Cajun Electric or the REA. A handwritten note on MMR memo paper initialed by Sturgill and Rutland confirmed Sturgill's testimony. The subcontract that went to REA in August 1981 showed a price of $3,353,487. In November 1981 the change order was executed by Sturgill.

A bid on Unit 3 required a bid bond or a certified check in the amount of 10% of the bid. A bidder unable to obtain a performance bond would forfeit the bid bond or check. Cajun Electric and MMR initially estimated the job to cost approximately $11 million, about the same cost as Units 1 and 2 together and within MMR's bonding capacity. At the January 14 meeting Murphy, Sturgill, McCracken, and Rutland agreed that the project cost was actually around $17 million. Cajun Electric engineers later concluded that the actual cost of the project was at least $18.6 million. There was testimony that both of these figures exceeded the limits of MMR's bonding capacity, effectively precluding MMR from bidding on Unit 3, ¹ although it is unclear whether MMR officials were...