U.S. v. Perholtz

Decision Date08 March 1988
Docket NumberNos. 86-3032,s. 86-3032
Citation842 F.2d 343
Parties, 25 Fed. R. Evid. Serv. 425 UNITED STATES of America v. Ronald J. PERHOLTZ, Appellant. UNITED STATES of America v. Franklin W. JACKSON, Appellant. UNITED STATES of America v. Gregory W. FLETCHER, Appellant. to 86-3034.
CourtU.S. Court of Appeals — District of Columbia Circuit

Appeals from the United States District Court for the District of Columbia (D.C.Criminal Nos. 85-0255-01, 85-0255-02, and 85-0255-03).

Whitney Debevoise (appointed by this court), with whom Mark A. Kass, Washington, D.C. was on the brief, for appellant Jackson.

Steven Schaars, Springfield, Va., with whom Leigh Manasevit, Washington, D.C., was on the brief, for appellant Perholtz.

William L. Gardner, Washington, D.C., (appointed by this court), for appellant Fletcher.

Katherine A. Worthington, Asst. U.S. Atty., with whom Joseph E. diGenova, U.S. Atty., Michael W. Farrell, Brian M. Murtagh, and Joseph B. Valder, Asst. U.S. Attys., Washington, D.C., were on the brief, for appellee.

Before BORK * and BUCKLEY, Circuit Judges, and EDWARD D. RE, ** Chief Judge, U.S. Court of International Trade.



A jury convicted appellants Perholtz and Jackson of one count of racketeering and thirteen counts of mail fraud in connection with Postal Service and Small Business Administration ("SBA") procurements. The jury convicted appellant Fletcher of ten counts of mail fraud in connection with the same SBA procurement. The jury also found forfeit certain property of Perholtz and Jackson related to their racketeering. Appellants challenge their convictions and the forfeitures on numerous grounds. We affirm in all respects.


In an appeal from a jury's criminal conviction, we recite the evidence presented at trial, as we must ourselves view it, in the light most favorable to the government. See, e.g., United States v. Huber, 603 F.2d 387, 391, 395 (2d Cir.1979), cert. denied, 445 U.S. 927, 100 S.Ct. 1312, 63 L.Ed.2d 759 (1980).


As a result of litigation, in 1978 the United States Postal Service initiated procurements to calculate the back pay due some ninety thousand of its workers (a task known as the FLSA Accounting Project) and also to introduce a new payroll system prospectively (the Payroll Redesign Project). At this time, John Gentile, who later testified for the government and repaid $40,000 received as bribes in exchange for immunity from prosecution, was Assistant Postmaster General for Finance. Appellant Perholtz was General Manager for Accounting for the Postal Service until December 1977, when he resigned and formed his own computer systems development firm, ATL, Inc. Appellant Jackson was Manager of the Postal Service's Systems Redesign Branch during this time.

According to Gentile, he and Perholtz had agreed that Perholtz upon his departure from the Postal Service would enter into a consulting contract with a computer company to prepare a proposal for the as-yet unannounced FLSA Accounting Project procurement. Gentile would favor selection of that company's proposal inside the Postal Service in exchange for ten percent of the profits Perholtz would receive upon the proposal's acceptance. At Perholtz's request, Gentile introduced Perholtz to an acquaintance at Systems Development Corporation, with which ATL, Perholtz's corporation, thereafter contracted to prepare the FLSA proposal. Gentile also sent a memorandum, under his signature but written in fact by Perholtz (who was then no longer a Postal Service employee), to senior management urging the need for an FLSA procurement. When the Postal Service subsequently initiated the procurement, Gentile "pushed for" the Systems Development proposal, as Perholtz by telephone frequently urged him to do. Jackson, who according to Gentile was largely a message-carrier between Perholtz and Gentile on the FLSA procurement, also exhorted Gentile to "push it." But because certain costs in the Systems Development proposal were too high, the Postal Service awarded the contract to another firm. Although Perholtz received $10,000 from Systems Development for his bid preparation work, he received no profits under his consulting contract since the proposal was rejected.


In its first phase, the Postal Service's Payroll Redesign Project was to develop a prototype computerized payroll system, the Automated Time and Attendance Procedures project ("ATAP"). Gentile testified that in early 1978 Perholtz suggested to Gentile and Jackson that the three of them "wire" the ATAP procurement. Perholtz would join with a computer hardware firm to submit an ATAP proposal, for which he would prepare software responsive to the needs of ATAP in exchange for a share of the profits to be generated by the proposal. Jackson, as manager of the Payroll Redesign Project within the Postal Service, would prepare technical aspects of the procurement and require a short response time from bidders. At the same time, Gentile would inform Perholtz in advance of the project's technical requirements. Gentile also agreed to support the Perholtz proposal before senior Postal Service management. If the Postal Service accepted the proposal, the three would share Perholtz's contractual royalties.

Perholtz contacted John Cox of General Scientific Corporation, a manufacturer's representative for Essex Engineering, to propose a consulting agreement with Essex, in which Essex would provide the hardware and Perholtz the software for a bid on ATAP. At a meeting with Essex representatives, Perholtz stated that he had "contacts" at the Postal Service whom he referred to as "my people." ATL (Perholtz's corporation) entered into a consulting agreement with Essex in May 1978 for software to be used in its ATAP proposal. Perholtz had essentially completed preparation of this software by August 25, 1978, when the Postal Service first requested proposals for the ATAP project. The Postal Service stated that this initial, informal request would be followed by a formal solicitation of bids and, if the government desired, by demonstrations of competitive proposals. The Postal Service also stated that it would not award a contract on the basis of the initial request. Jackson oversaw preparation of the request's technical specifications, which represented a "close fit" with the system of hardware and software already completed by Essex and Perholtz.

In subsequent demonstrations by seven vendors, the Essex submission met ninety-five percent of the requirements. Moreover, it was the only one to provide a demonstration of software as well as hardware. Jackson, who had headed the panel before whom the submissions were demonstrated, thereafter prepared an evaluation of the demonstrations, concurred in by the panel, recommending that Essex receive a sole-source (noncompetitive) contract for ATAP, a result not previously contemplated and one inconsistent with the wholly informational purpose of an informal request. Upon Perholtz's suggestion, Jackson also prepared a study to illustrate the urgency of quickly going forward with ATAP. This study was a key element hastening the contract's award.

When, in January 1979, the Postal Service's procurement department recommended that ATAP be awarded through a competitive procurement, Perholtz, Jackson, and Gentile met and drafted a responsive memorandum, ultimately sent under Gentile's signature, that recommended a sole-source award to Essex. The Postal Service entered into a letter contract with Essex in March 1979 on a sole-source basis. 1

Postal Service employees required training to operate the new ATAP system. Perholtz asked Gentile if he knew of a firm that could provide this training; Gentile referred him to the Metropolitan Education and Training Corporation ("Metcor"), owned by James Muldoon. According to Gentile, Perholtz said that he, Gentile, and Jackson would share equally in the commission Perholtz obtained from Metcor. Perholtz then told Muldoon that he, Perholtz, could obtain the ATAP training work from Essex in return for a ten percent commission. In March 1979, Muldoon signed a marketing agreement with ATL, backdated at Perholtz's request to November 1978. Muldoon, employees of Essex, and employees of the Postal Service, including Jackson, attended a meeting to decide whether the Postal Service or an outside contractor should handle the ATAP training. According to Muldoon, Jackson's statement favoring an outside contractor turned the meeting decisively in Muldoon's favor. Metcor, Muldoon's company, with the approval of the Postal Service, thereafter received a subcontract from Essex for the ATAP training.

Perholtz received more than $187,000 under his contract with Essex, and $9,500 under the agreement with Metcor. Jackson and Gentile each received $27,000, and Jackson also received an interest in a Florida condominium, for their participation in the ATAP arrangements.


To monitor the loans and grants it had made nationwide, the Small Business Administration ("SBA") decided to link its many local offices in a data communications system with the central computer in its main office. In November 1979, SBA awarded a one-year sole-source contract for development and implementation of such a system to International Business Services, Inc. ("IBS"). Appellant Fletcher had joined IBS as vice president for operations in April 1979. Upon Fletcher's recommendation, IBS hired Jackson in May 1979. Jackson subsequently became project manager for development of the SBA data communications system, reporting directly to Fletcher, who retained ultimate responsibility for the project. IBS also retained Perholtz as a consultant on the SBA project.

IBS had the authority to enter into subcontracts with other firms, subject to SBA approval, to perform the SBA contract. This case involves four such arrangements.

The first subcontract, for a free-standing printer in...

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