United States v. CFW Const. Co., Inc., Crim. No. 83-300.

• Citation: 583 F. Supp. 197
• Decision Date: 01 March 1984
• Docket Number: Crim. No. 83-300.
• Parties: UNITED STATES of America v. CFW CONSTRUCTION COMPANY, INC.
• Court: U.S. District Court — District of South Carolina

583 F. Supp. 197

UNITED STATES of America v. CFW CONSTRUCTION COMPANY, INC.

Crim. No. 83-300.

United States District Court, D. South Carolina, Florence Division.

March 1, 1984.

Carl W. Mullis, III, Katherine Schlech, Bargery G. Williams, Dept. of Justice, Antitrust Div., Atlanta, Ga., for plaintiff.

Thomas P. Simpson, Columbia, S.C., John Wagster, Nashville, Tenn., for defendant.

ORDER

HAMILTON, District Judge.

The defendant, CFW Construction Company, Inc. (hereinafter "CFW"), has been indicted for two counts of conspiring to artificially establish bidding prices (i.e., "rig" bids) on two utility construction projects in South Carolina, in violation of the Sherman Act, 15 U.S.C. § 1 (1976). One such violation allegedly occurred during the period March to October, 1978, and the second violation allegedly took place during the period December 1978 to March 1979. The matter is now before the court upon CFW's motion to dismiss the indictment, which is based upon the following contentions: (a) the Government is precluded from pursuing this matter pursuant to numerous plea agreements it consented to in 1980; in particular the plea agreements of Tennessee Paving Company, Inc., and William R. Carter, chief executive officer of CFW, both entered on June 24, 1980, in the United States District Court for the Middle District of Tennessee; (b) the indictment is the product of prosecutorial vindictiveness and misconduct; and (c) the Government is violating its own internal guidelines relating to prosecution of criminal defendants, and thus is violating CFW's Fifth Amendment rights to equal protection.

FACTS

CFW, with its principal place of business in Fayetteville, Tennessee, is a company primarily engaged in utility construction. In 1980, CFW was the parent company for a number of subsidiary corporations also operating in the construction industry. Two such subsidiaries, Brown Brothers, Inc. (hereinafter "Brown Bros.") and Tennessee Paving Company, Inc. (hereinafter "Tennessee Paving"), were engaged in road construction work. In addition, Tennessee Paving had acquired an operating subsidiary corporation, Hot-Mix, Inc. (hereinafter "Hot-Mix") by purchase in December, 1976.

In 1979, the United States Department of Justice began an investigation of highway bid-rigging practices in Tennessee. As a result of this investigation, criminal antitrust charges were brought in the Middle District of Tennessee against Brown Bros. and Tennessee Paving. Criminal antitrust charges were also brought against the following individuals for their personal participation in antitrust violations:

(1) William R. Carter —chairman of the board and chief executive officer of CFW;

(2) Bobby R. Rose —president of Brown Bros., and

(3) Bradford Miller —president of Tennessee Paving.

The Government did not seek an indictment in bringing these charges, but did so by way of information. As discussed later, CFW was not named as a defendant in any information.

Pursuant to these informations, plea negotiations began for each defendant. The Government attorney, Richard J. Braun, was contacted in the latter part of 1979 by the defendants' attorney, Edward C. Blank, II. Mr. Blank indicated that he represented not only the named defendants, but also all of the affiliated corporations, including CFW and Hot-Mix. Mr. Blank indicated that CFW and its affiliated corporations and officers were willing to cooperate with the Government and expressed a desire to wrap-up all antitrust violations of the affiliated corporations. (Although CFW had not been charged, it was the target of an investigation into Tennessee bid-rigging practices.)

Plea agreements were eventually worked out for all named defendants. In regard to Bobby Rose and Bradford Miller, the Government agreed that imprisonment for a period of four months was an appropriate sentence. In regard to William R. Carter, the Government agreed that imprisonment for a period of five months was an appropriate sentence. If the court elected to impose a harsher sentence on each individual, each was to be allowed to withdraw his guilty plea. As initially proposed, in return for the pleas of guilty, the Government was to grant these individuals immunity from further prosecution for antitrust violations for "any other construction projects let by awarding authorities within the State of Tennessee" prior to the date of the plea. (Defendant's Exhibit No. 2).

The plea negotiations entered into by the corporate defendants (Tennessee Paving and Brown Bros.) were more troublesome than for the individual defendants. The corporate defendants requested that, in return for pleading guilty, all affiliated corporations be granted immunity from prosecution for any antitrust violations occurring prior to the date of the plea. The Government rejected this proposal, but offered instead to grant immunity to CFW, Tennessee Paving, Brown Bros., and Hot-Mix for any contracts let by awarding authorities in the State of Tennessee prior to the plea agreement.

On May 12, 1980, Edward Blank wrote a letter to Richard Braun advising him that there were some problems with the proposed plea on behalf of the corporate defendants:

In the case of the corporate clients, the only matter that is outstanding is the matter of the effect of the plea agreement on contracts bid prior to the date of May 15th. My original discussions, at least from my thoughts were that we were undertaking the same sort of agreement as Interstate, and the Government, therefore, would be precluded from prosecution on any contracts awarded prior to the date of the settlement. This was of particular importance to me due to the fact that Hot-Mix had operations in Texas, Mississippi, Alabama and Kentucky as well as Tennessee, and that we have not owned Hot-Mix for the full five years of the statute of limitations.

It is my understanding that you have had conferences, as I have had, with Washington, and they have denied the extension of this language to all contracts, and yet you have assured me that there have been various discussions. Frankly those discussions concern me since your statement was that the Department did not want to grant complete immunity in this regard since there were many things left open and unknown to them. As you well know there could be far greater matters left open that we have no knowledge of since we did not purchase the Company until October of 1976, and some contracts signed around the period that we took over could have been involved prior to the time we actually gained control of the Company. Therefore, the Government is asking us to undertake a responsibility which they themselves are not willing to accept. In this regard in all of our discussions I have advised you that my clients' entire purpose was to try to bring this matter to a conclusion at one time. This, of course, leaves a matter open.

As a result thereof I have attached an Appendix "B" to this agreement which sets forth the understandings I believe you stated to me as to why you do not feel that Hot-Mix or Tennessee Paving or CFW ultimately would be involved in litigation in states outside of Tennessee....

Letter from Edward C. Blank to Richard J. Braun (May 12, 1980). In attached "Exhibit `B'," Mr. Black wrote:

MEMORANDUM OF UNDERSTAND

AS TO CORPORATE DEFENDANTS,

CFW CONSTRUCTION CO., INC.

BROWN BROS., INC.,

TENNESSEE PAVING, INC.

AND HOT-MIX, INC.

1. The defendants have requested the Government to extend the effect of immunity from contracts to all contracts let prior to the date of the plea agreement, but same has been limited to the State of Tennessee.

Id. Exhibit B also went on to state that the Government knew that Hot-Mix was acquired in 1976 and that it had operated in states other than Tennessee prior to Tennessee Paving's acquisition of control over its operations. The Government further acknowledged that there was no indication of an intention to prosecute Hot-Mix in any of these states (which did not include South Carolina) and

that the general equities adopted by the Antitrust Department of the Department of Justice has been to establish procedures that once a company has pled guilty and been punished, and did not have control over its operation during a given period as in the case of Hot-Mix, Inc. prior to October, 1976, it does not prosecute further.

Id. (Defendant's Exhibit No. 1).

On May 15, 1980, the individual and corporate defendants pled guilty to one count of violating 15 U.S.C. § 1. In taking these guilty pleas, the Chief Judge for the Middle District of Tennessee (hereinafter "District Court"), the Honorable L. Clure Morton, reserved judgment on whether to accept or reject the plea agreements until he had a chance to review the presentence reports. On June 19, 1980, Chief Judge Morton filed an order rejecting the plea agreements previously tendered and entering a plea of not guilty on behalf of the defendants.

After the plea agreements were rejected, William Carter took the position that he could no longer be prosecuted for the antitrust violations. Mr. Carter asserted that the waiver of indictment he signed in the May 15, 1980, proceedings before the District Court could be withdrawn, as it was based upon the acceptance of the guilty plea. Mr. Carter argued that, since his last involvement in the charged antitrust conspiracy took place on May 15, 1975, the five-year statute of limitations had run and he could not be prosecuted for this offense. Mr. Braun took the position that the waiver of indictment remained valid, as it was wholly independent of the plea agreement. (Defendant's Exhibit No. 5).

During the ensuing period, plea negotiations continued between the defendants and the Government. The defendants again requested immunity for all contracts in any jurisdiction let prior to the date of the plea. Mr. Braun indicated that he could grant such immunity to the individual defendants as none of them had conducted operations outside of...