U.S. v. Morris
| Decision Date | 03 June 1992 |
| Docket Number | 90-1134,Nos. 90-1080,s. 90-1080 |
| Citation | 957 F.2d 1391 |
| Parties | 35 Fed. R. Evid. Serv. 456 UNITED STATES of America, Plaintiff-Appellee, v. Melvin MORRIS and Noah A. Spann, Defendants-Appellants. |
| Court | U.S. Court of Appeals — Seventh Circuit |
David Capp, Asst. U.S. Atty. (argued), Andrew B. Baker, Jr., Asst. U.S. Atty., Dyer, Ind., for U.S.
Michael B. Nash (argued), Chicago, Ill., for Melvin Morris.
Ellen G. Robinson (argued), Robinson, Curley & Clayton, Chicago, Ill., for Noah A. Spann.
Before CUMMINGS, COFFEY and EASTERBROOK, Circuit Judges.
Defendants-appellants Melvin Morris and Noah A. Spann were found guilty after a jury trial on August 31, 1989 of one count of conspiracy to defraud the United States in violation of 18 U.S.C. § 371, two counts of mail fraud in violation of 18 U.S.C. § 1341, and one count of misapplying federal revenue sharing funds in violation of 18 U.S.C. § 666(a). They contest their convictions on numerous grounds. We affirm.
This case involves the purchase of a nursing home facility in East Chicago, Indiana by Tri-City Comprehensive Community Mental Health Center, Inc. ("Tri-City"), a community mental health provider, using Lake County, Indiana funds and federal revenue sharing funds. The jury convicted the two appellants of misappropriating federal funds to bribe various individuals involved in the purchase of the nursing home facility and to pay an inflated purchase price for the facility.
In 1980, the state of Indiana converted a state mental hospital into a correctional facility, displacing a number of psychiatric patients. Some of these displaced patients were housed in a deteriorating nursing home facility in Lake County that provided nothing more than room and board. A dispute between the nursing home's owner and the state over the rates the nursing home charged led to the closing of the facility, requiring the emergency placement of the mental patients. Thereafter, a permanent solution for the placement of these mentally ill patients was sought.
During the time that the patient housing crisis was straining the Lake County mental health system, the owners of the East Chicago Rehabilitation Center, Inc. ("ECRC"), a nursing home in East Chicago, Lake County, Indiana, were considering selling their facility. ECRC was owned by a group of five men, including one of the appellants, attorney Melvin Morris.
The interest of the ECRC owners in selling their facility was communicated shortly thereafter to Glenn Kuipers, the executive director of Tri-City. Tri-City was one of three mental health centers in Lake County, and its operation was funded from patient fees combined with state and federal funds. 1 A sister corporation to Tri-City, the Foundation for Comprehensive Mental Health Care, Inc. ("Foundation"), was formed in 1980 to hold property for Tri-City.
Tri-City's specific responsibility within the Lake County mental health system was As Melvin Morris and the other ECRC owners were looking for a buyer and Tri-City was seeking ways to solve the CMI problem, Noah A. Spann, the other defendant-appellant, stepped to center stage. From 1974 to 1986, Spann was one of three district commissioners of the Lake County Board of Commissioners, the governmental body in the Lake County executive branch entrusted with the authority to enter into contracts on behalf of the county and approve payment requests of county contracts. 2
to care for those persons diagnosed as being chronically mentally ill ("CMIs"). Mental patients were classified as CMIs when the nature of their mental illness was more acute and required repeated hospitalization or occasional confinement for extended periods of time in a more structured psychiatric setting. The CMIs were among the patients most acutely affected by the mental health system's housing shortage
Although it required a majority vote of the three commissioners to award a contract, the commissioners had a tacit agreement among themselves that any contract within a commissioner's district would not be opposed if the local commissioner was in favor of it. Thus, the potential purchase of ECRC by Tri-City fell within Spann's designated de facto authority as East Chicago's commissioner.
Events began to accelerate after Kuipers, representing Tri-City, met with Commissioner Spann to discuss the purchase. Spann responded favorably to Kuipers' inquiries about the possible purchase by Tri-City of ECRC. Spann indicated that he was interested in the transaction since ECRC was located in his district. Sometime in the middle of 1982, Kuipers met with both Morris and Spann to discuss the ECRC purchase, and negotiations continued through 1983. In late 1983, after discussions with his ECRC partners, Morris proposed to Kuipers an asking price of $6,423,000 for the facility. Shortly thereafter, at a meeting between ECRC and Tri-City officials, Morris made a presentation suggesting a per bed cost of $40,000. A Tri-City accountant characterized the proposed price as "way too high".
On December 5, 1983, Kuipers submitted a proposal to Morris for the acquisition of ECRC for a total price of $4,948,000, which included a sale price of $4,148,000, a ten month lease of ECRC by Tri-City for $500,000, and a ten-month $300,000 management contract under which ECRC would operate the facility. Morris and his partners rejected the proposal.
Kuipers then discussed the purchase price with Spann. On or about December 21, Kuipers submitted a proposal of $5,073,000, including the same previously discussed sale price of $4,148,000 and $500,000 lease, but with the management contract fee increased to $425,000. Morris and his partners accepted this proposal.
On December 31, 1983, ECRC entered into a Memorandum of Agreement with the Foundation . The memorandum provided that the parties would enter into a ten month lease of ECRC by the Foundation, with lease payments of $210,000, $160,650 and $189,350, due on December 31, 1983, February 1, 1984 and August 31, 1984, respectively. The agreement also provided that ECRC would operate the facility pursuant to a $425,000 management contract. The Foundation would purchase ECRC for $4,148,000. The total payments under the Memorandum were $5,133,000, $60,000 more than the total of the proposal Morris had accepted.
In January, 1984, Tri-City began receiving money from the County for the ECRC transaction and transferred it to the Foundation, which in turn began making payments to ECRC pursuant to the Memorandum agreement.
State regulations, however, created problems for the developing scheme. Kuipers was advised by his accounting firm that the state of Indiana, pursuant to Indiana law, would not grant a license to a facility if it The parties also negotiated a training agreement, under which ECRC would train designated representatives of the Foundation in the operation of the facility. The training fee was set at $160,650. This amount was equal to the second contemplated lease payment under the memorandum agreement. The negotiations also included other contracts to cover the remaining lease payment and the management contract provided in the memorandum agreement. These additional agreements included a temporary in-patient care contract under which 15 beds would be reserved for 351 days at ECRC for Tri-City patients for a price of $355,000. A psychiatric care agreement valued at $260,000 was also made part of the restructured transaction.
was operating under a lease arrangement. Morris and Kuipers restructured the agreement into a purchase agreement, using the initial lease payment of $210,000 as an option price for the purchase. The option agreement provided for a cash purchase price for ECRC of $4,148,000 and an alternative contract sale price of $4,800,000 with monthly payments of $52,162
The option agreement was signed on February 1, 1984, with an expiration date in 425 days. The training agreement was signed on February 14, 1984, and eight days later the Foundation paid ECRC the $160,650 required under its terms. No one was ever trained under the agreement. Shortly thereafter, the Indiana State Board of Health, pursuant to its regulatory obligations, determined that the ECRC purchase price was excessive as the ECRC purchase price came to $34,000 per bed, far exceeding new construction costs in the area calculated on the high side at $28,000 per bed.
Undeterred, the schemers restructured the ECRC sale a third time. The original option had expired by this time and thus, on March 29, 1985, the parties entered into the "First Amended Option Agreement." The amended option agreement provided for a purchase price of $3,416,000 Gowering the per bed costs to $28,000), which was some $732,000 less than the purchase price in the original option. Morris then put together a new agreement for temporary in-patient care. This temporary in-patient care agreement provided that 30 skilled care beds would be reserved at ECRC for Foundation patients for six months, up from the previously reserved 15 beds. The agreement provided that the cost of reserving the thirty beds for Foundation patients was $104,000 per month for a total of $624,000 during the six month period. Under the agreement, the Foundation was liable for the full amount whether the beds were occupied or not.
Spann then went to the Lake County, Indiana Council and requested $1,050,000 in County funds for the acquisition of a CMI facility in 1985 for use in 1986. At a budget committee meeting of the County Council on June 6, 1985, Kuipers and Spann told the Council president that they had not yet selected a facility, even though the president specifically asked about ECRC. The commissioners allocated $1,050,000 for the purchase of ECRC, the money coming from federal revenue sharing funds. On August 30, 1985, the Foundation exercised its...
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US v. Jackson
...are also discoverable if they contain a written statement signed, adopted or approved by the government witness. United States v. Morris, 957 F.2d 1391, 1401 (7th Cir.), cert. denied, ___ U.S. ___, 113 S.Ct. 380, 121 L.Ed.2d 290 (1992). A statement within a report is adopted by the witness ......
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U.S. v. Ross
...statutes are routinely utilized to punish schemes to defraud the federal government of a property interest. See, e.g., United States v. Morris, 957 F.2d 1391 (7th Cir.), cert. denied, 506 U.S. 941, 113 S.Ct. 380, 121 L.Ed.2d 290 (1992); United States v. Jones, 938 F.2d 737 (7th Cir.1991); U......
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US v. Jackson
...during the interview. Palermo v. United States, 360 U.S. 343, 352, 79 S.Ct. 1217, 1224, 3 L.Ed.2d 1287 (1959); see United States v. Morris, 957 F.2d 1391, 1401 (7th Cir.), cert. denied, ___ U.S. ___, 113 S.Ct. 380, 121 L.Ed.2d 290 (1992). An agent's summary of an oral statement that is not ......
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U.S. v. Smith
...are also discoverable if they contain a written statement signed, adopted or approved by the government witness. United States v. Morris, 957 F.2d 1391, 1401 (7th Cir.), cert. denied, 506 U.S. 941, 113 S.Ct. 380, 121 L.Ed.2d 290 (1992). A statement within a report is adopted by the witness ......