United States v. Grossman, 11959.

Decision Date18 July 1968
Docket NumberNo. 11959.,11959.
Citation400 F.2d 951
PartiesUNITED STATES of America, Appellee, v. Bernard D. GROSSMAN, Appellant.
CourtU.S. Court of Appeals — Fourth Circuit

Roy G. Hall, Jr., Winston-Salem, N. C., and Ralph N. Strayhorn, Durham, N. C., (E. C. Bryson, Jr. and Newsom, Graham, Strayhorn & Hedrick, Durham, N. C., and Hatfield, Allman & Hall, Winston-Salem, N. C., on brief), for appellant.

William H. Murdock, U. S. Atty. (Richard M. Dailey, Jr., Asst. U. S. Atty., on brief), for appellee.

Before HAYNSWORTH, Chief Judge, WINTER, Circuit Judge, and MERHIGE, District Judge.

Certiorari Denied December 9, 1968. See 89 S.Ct. 453.

WINTER, Circuit Judge:

Convicted under two counts of an indictment charging violations of the "Anti-Kickback" Act, 41 U.S.C. §§ 51, 541 and sentenced to concurrent terms of three months, and fined $2,500, on each count, defendant appeals, assigning numerous grounds for reversal. We reverse defendant's conviction and award him a new trial, because of prejudicial argument by the prosecutor. In so doing we notice only those of defendant's other grounds of appeal as might constitute a bar to retrial.

In count one of the indictment, defendant, an officer of Modern Screw Machine Company, Inc., of Wallington, New Jersey, was charged with having given to Nicholas Sterling Sinhel, an employee of Western Electric Company, 255 pounds of candy, cigars, whiskey and 14 cases of beer, a "fee, commission, compensation, gift and gratuity" as an inducement to Western's award of subcontracts and orders to Modern Screw in violation of the statute. In count two, defendant was charged with having given to Western's employee Walter Roland Clitherow 200 shares of stock in Developers Small Business Investment Corporation, of a value of $1,000, for the same purpose.

The proof adduced at trial showed that Western had a number of prime negotiated contracts with the Department of the Army, many of which were for research and development of the Nike missile defense system. Sinhel and Clitherow were, respectively, an assistant buyer and buyer of Western. Sinhel had authority to make purchases up to $2,000, and Clitherow had authority to make purchases up to $15,000. Modern Screw was a subcontractor to Western, filling purchase orders for parts and equipment used by Western in performing its army contracts. Modern Screw did practically all of its business with Western, and Sinhel and Clitherow placed over 95% of Western's business with Modern Screw. Defendant had been doing business with Western for as long as 25 years. He was so familiar with Western's future needs that he maintained an inventory valued in excess of $500,000, of parts ordered by Western.

During 1961 and 1962, when Sinhel was placing purchase orders with defendant under Western's prime negotiated contracts, defendant, from time to time, gave Sinhel quantities of candy, cigars, beer and liquor. Sinhel, who stated that he also received gifts from other suppliers, admitted that such gifts caused him to favor them in the award of purchase orders or subcontracts. The gift of stock was made to Clitherow early in 1962 by defendant's arranging for his New York broker to mail the stock certificates to Clitherow at the home of his mother, in New York, who forwarded them to Clitherow in Winston-Salem, North Carolina. Defendant paid for the stock in March, 1962. In approximately July, 1962, Clitherow sent defendant a check for $1,000; but this was several months after Clitherow and defendant became aware that an investigation of Modern Screw's prices had been made, and that Modern Screw was found to be making a profit of 35%-45% on its business with Western.

Without detailing all of the evidence contained in the record, we are satisfied from our review of it that in general there was a substantial evidentiary basis from which the jury could find defendant's guilt beyond a reasonable doubt. We find no error in the instructions or evidentiary rulings. We turn then, to the more important grounds of attack.

First, defendant contends that, with regard to the stock purchased for Clitherow, defendant could not be guilty of a crime committed in the Middle District of North Carolina because the certificates for the shares were delivered in New York, either by delivery by the seller of his endorsed certificates to the broker acting for defendant and Clitherow, or by delivery of new certificates by the broker or the issuer to Clitherow's mother. The effect of delivery, so the argument runs, vested title in Clitherow and, hence, "payment" proscribed by 41 U.S.C. §§ 51 and 54 occurred in New York. Delivery in this place, it is claimed, thus bars prosecution in the Middle District of North Carolina.

Defendant is, of course, correct in asserting the jurisdictional imperative that an offense be committed within the state and district of indictment,2 but defendant's argument in stressing the original place of delivery of the certificates and defendant's lack of control over ultimate delivery is erected upon a faulty premise. Ownership of stock in a corporation is ownership of a species of intangible personal property and, by accepted rules, intangible personal property acquires a situs in the place of domicile of the owner. Actual delivery of the certificates to Clitherow in North Carolina was merely delivery of evidence of ownership and evidence that the transfer was made. This is so because Clitherow was not an unwilling donee who declined to accept the gift, or to accept the certificates when they were forwarded to him. Moreover, the broker, in accepting delivery of the seller's certificates in New York, was acting for Clitherow. The evidence shows that Clitherow's mother, who was away when delivery was made to her, forwarded the certificates to her son at his request, so that it follows that she, too, was acting for Clitherow in accepting the certificates. There can be no question but that the intention of the parties was to vest ownership of the shares in Clitherow, and to place the new certificates therefor in his hands, at a time when he was domiciled and was physically present in the Middle District of North Carolina, where the prosecution was laid, and that the delivery to the broker and the delivery to Clitherow's mother, followed by delivery by her to Clitherow, were but steps in a continuing transaction. Because the whole purpose of the transaction was to vest ownership of the stock in Clitherow in Winston Salem, in the Middle District of North Carolina, and to place the stock certificates in his physical possession in that state and since that overall purpose was accomplished, we think that "payment" proscribed by the statute was made in the Middle District of North Carolina and that the nice questions of jurisdiction and venue do not then depend upon technical considerations of the exact time and place that title passed to Clitherow.

Nor do we find merit in the argument that defendant was improperly convicted because proof was lacking that defendant knew that Western's contracts were "negotiated contracts" so as to render 41 U.S.C. §§ 51 and 54 applicable. The short answer to the contention is that other circuits have held that knowledge of the terms of the prime contract is not an essential element of the statutory crime, and with them we are in accord. Hanis v. United States, 246 F.2d 781 (8 Cir. 1957); United States v. Barnard, 255 F.2d 583 (10 Cir. 1958). See also, Howard v. United States, 345 F.2d 126, 129 (1 Cir. 1965). The use of "knowingly" in § 54 as modifying the phrase "make or receive any such prohibited payment" requires only, insofar as is pertinent to defendant, that defendant knew that he was making a payment in order to induce a contract to be awarded to Modern Screw. The proof overwhelmingly supports an affirmative conclusion in this regard.

We are not persuaded by defendant's argument that § 54 was not shown to have been violated because property as distinguished from money, was what passed from defendant to Sinhel and Clitherow. It is true that § 51 prohibits the "payment of any fee, commission, or compensation of any kind or the granting of any gift or gratuity of any kind," (emphasis supplied) to induce the award of a subcontract or as an acknowledgment of a subcontract previously awarded, but that § 54 which provides the criminal sanction purportedly applies only to persons who make or receive "any such prohibited payment" (emphasis supplied). No good reason is apparent why Congress should outlaw the payment of money or the granting of a gift for the prohibited purposes, but yet provide a criminal penalty only for the payment of money.3 To read § 54 thus would be unduly to frustrate the general purpose of the Act. The gift of property may be as great, or even greater, an inducement for an illegal purpose as the payment of money. Section 54 need not be read as restrictively as defendant asserts. "Payment" in § 54 — particularly "such prohibited payment" — may be read as referring to...

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