United States v. Allen

• Decision Date: 28 July 1982
• Docket Number: No. CR 81-1013 MRP.,CR 81-1013 MRP.
• Parties: UNITED STATES of America, Plaintiff, v. Lee G. ALLEN, Richard Dawson Allen, Defendants.
• Court: U.S. District Court — Central District of California

539 F. Supp. 296

UNITED STATES of America, Plaintiff, v. Lee G. ALLEN, Richard Dawson Allen, Defendants.

No. CR 81-1013 MRP.

United States District Court, C. D. California.

May 10, 1982.

As Amended July 28, 1982.

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COPYRIGHT MATERIAL OMITTED

Stephen S. Trott, U. S. Atty. by Curtis B. Rappe, Asst. U. S. Atty., Los Angeles, Cal., for plaintiff.

Leo Branton, Jr., Norman James, Los Angeles, Cal., for defendants.

OPINION

PFAELZER, District Judge.

In March 1980, the grand jury returned a multiple-count indictment against defendants and two other persons, charging them with one count of conspiracy to commit mail fraud, in violation of 18 U.S.C. § 371, and with several substantive counts of aiding and abetting mail fraud, in violation of 18 U.S.C. § 1341. The case proceeded to a jury trial in late June 1980. At the conclusion of the government's case, the court acquitted defendant Richard Allen as to all counts. The jury found Richard Allen's brother, defendant Lee Allen, guilty on the conspiracy count and most of the substantive counts. In November 1981, the grand jury returned another indictment, this one against only these two defendants, charging them again with conspiracy to commit mail fraud, in violation of 18 U.S.C. § 371, and with mail fraud, in violation of 18 U.S.C. § 1341. In the motions before the court, defendants contend that the double jeopardy clause of the Fifth Amendment bars their prosecution on the second indictment. Alternatively, they seek dismissal of the indictment pursuant to the court's supervisory power over the administration of criminal justice. In light of the particular facts of this case, the court has concluded that the defendants' arguments on both grounds are sound and that the motions must be granted.

I. FACTS

From 1974 to 1978, the Hughes Aircraft Company at El Segundo, California ("Hughes") was the subject of an illegal kickback scheme conducted through one of its purchasing departments. The government commenced an investigation into the scheme in early 1978 by interviewing several of the suspected participants. On May 17, 1978, one of those participants, Kenneth Lilly ("Lilly"), provided the government with a confession and a detailed description of the scheme's operation. Lilly, a veteran employee of Hughes, was a purchasing agent for the company's Radar Systems Group during the operation of the kickback scheme. Lilly informed government investigators that because of pressure from his departmental supervisor, defendant Lee Allen, he had purchased materials from certain Hughes suppliers at inflated prices. In so doing, he violated company policy requiring the use of competitive bids. Among the favored suppliers named by Lilly were companies operated by Jamie Tindall ("Tindall"), Roger Rinden ("Rinden"), and Samuel Mendelow ("Mendelow").¹ According to Lilly, at the direction of Lee Allen, each of these suppliers, after payment by Hughes, was obligated to and did forward a percentage of its profits to defendant Richard Allen's consulting firm.

Shortly after interviewing Lilly, the government interviewed the defendants, both of whom admitted at the outset that Richard Allen had had some type of business relationship with Tindall, Rinden, and Mendelow. Indeed, Richard Allen acknowledged that his consulting firm had accepted checks from those suppliers, although he claimed not to know precisely for what purpose the payments were made.

In October 1977, toward the end of the kickback scheme's operation and prior to the government's investigation, Lilly was transferred out of his position as buyer for the Radar Systems Group. His responsibilities were assumed by Lerner Watkins ("Watkins"). She informed investigators in January 1978 of efforts by Tindall, Rinden, and defendant Lee Allen to obtain her assistance in continuing the kickback scheme. Watkins subsequently became a government informant, and on February 14, 1978, she tape-recorded a conversation between herself and Lee Allen in which he discussed the Tindall-Rinden-Mendelow kickback transactions.

In early March 1980, after more than two years of investigation, the government presented the grand jury with its case against the defendants. The grand jury reviewed evidence of the defendants' transactions with Tindall, Rinden, and Mendelow. On March 19, it returned an indictment against Lilly, Tindall, and the defendants. The indictment presented to the grand jury and returned by it did not charge Rinden or Mendelow, and it did not mention their participation in the scheme.

The indictment charged in Count 1 that Lilly, Tindall, and the defendants had violated 18 U.S.C. § 371 by participating in a conspiracy to commit mail fraud. The goal of the conspiracy was allegedly "to devise a scheme (i) to defraud Hughes Aircraft Company of money and property, ... (ii) to defraud Hughes ... of its right to the ... honest services of defendant Kenneth Lilly ..., and (iii) to obtain money and property by false and fraudulent pretenses." 1980 Indictment at 3, ¶ 5. According to the indictment, the scheme to defraud Hughes commenced in November 1974 and continued until sometime in early 1978. The alleged scheme contemplated that Lilly would purchase certain requested supplies for Hughes from Tindall's Company, Ti-Con Industries, Inc. ("Ti-Con"), at excessive, noncompetitive prices. To effect this plan, Lilly would mail a purchase order to Ti-Con, and, after shipping the supplies to Hughes, Ti-Con would mail a billing invoice to Hughes. In return for this favored business, Ti-Con, after payment by Hughes, would pay a commission to defendants by periodically mailing a check to defendant Richard Allen's consulting firm, Contemporary Associates, Inc. These payments were then channeled to defendant Lee Allen through his corporations, Greenleaf Corporation and Lee Allen and Company. The twelve overt acts alleged in the indictment specified actions taken by the conspirators to ensure Ti-Con of business with Hughes and included certain payments of Ti-Con to Contemporary Associates. The last overt act alleged was that on or about February 14, 1978, defendant Lee Allen met with Watkins, Lilly's successor, and attempted to persuade her to join the conspiracy.

In addition to the conspiracy count, the indictment charged Lilly, Tindall, and the defendants with several substantive counts of mail fraud. Specifically, the defendants were charged with nineteen counts of aiding and abetting mail fraud, in violation of 18 U.S.C. § 1341.

Prior to trial, each of the alleged conspirators moved for a separate trial. In considering the motions for severance, the court requested that the government submit a detailed outline of the evidence it would present against each defendant at trial, including a list of witnesses. After a careful review of that evidence, the court granted Lilly's motion to sever and denied the other motions, leaving Tindall and defendants to be tried jointly. Subsequent to the court's ruling, the case against Tindall and the defendants proceeded to a trial by jury on June 30, 1980. One day into the trial, the government filed papers in support of calling an additional witness, Roger Rinden. The government sought to introduce his testimony to prove an act "identical" to that charged in the indictment—that Lilly and the defendants had also engaged in a mail fraud conspiracy with Rinden and Mendelow.² The government conceded that the decision to call Rinden was made belatedly, but attributed the delay to the fact that it had not adequately catalogued the Rinden-Mendelow kickback transactions with the Tindall transactions. Nevertheless, the court denied the government's request, stating that it was too late in the proceedings for the government to make this addition to its witness list.³

At the trial, the government proceeded on the theory that defendants and Lilly had engaged in a single conspiracy with Tindall, Mendelow, and Rinden. Consistent with that theory, the court admitted evidence of the Rinden-Mendelow transactions as well as the Tindall transactions.⁴ On July 8, 1980, the court granted defendant Richard Allen's motion for judgment of acquittal as to all counts on the ground that the government had failed to prove his connection with the conspiracy and the mail fraud scheme as a matter of law. The jury found Tindall and defendant Lee Allen guilty on the conspiracy and substantive counts,⁵ and Lilly, who was tried to the court, was also found guilty. Prior to sentencing, Lee Allen suffered a heart attack, and, on August 21, 1980, the court sentenced him to pay a fine and to serve a three-year probation term. Lee Allen did not appeal his convictions. Tindall and Lilly did seek review of their convictions, however, which were affirmed in a consolidated appeal on November 16, 1981.

On November 18, 1981, two days after the convictions were affirmed, the grand jury returned its second indictment against the defendants. That indictment, presently before the court, charges in Count 1 that defendants and their unindicted co-conspirators, Lilly, Rinden, and Mendelow, violated 18 U.S.C. § 371 by participating in a conspiracy to commit mail fraud. The indictment alleges that the defendants devised a scheme "to obtain money by means of false and fraudulent pretenses." 1981 Indictment at 4, ¶ 7a. The goal of the scheme was "(i) to defraud Hughes of money ..., (ii) to defraud Hughes of certain nondisclosed profits ..., (iii) to defraud Hughes of its right to have the company's business ... conducted by its employees ... honestly and impartially ..., and (iiii) to defraud Hughes of its right to the conscientious, loyal, and honest ... services of ... Hughes employees." Id. The conspiracy and scheme to defraud allegedly commenced in mid-1974 and continued until approximately April 1978. The indictment reveals that the Rinden-Mendelow scheme operated in the same manner as the scheme charged in the first indictment.⁶...