United States v. LaBar

• Decision Date: 14 August 1981
• Docket Number: Crim. No. 80-00130-01 to 80-00130-05.
• Citation: 521 F. Supp. 203
• Parties: UNITED STATES of America v. James C. LaBAR, et al.
• Court: U.S. District Court — Middle District of Pennsylvania

521 F. Supp. 203

UNITED STATES of America v. James C. LaBAR, et al.

Crim. Nos. 80-00130-01 to 80-00130-05.

United States District Court, M. D. Pennsylvania.

August 14, 1981.

COPYRIGHT MATERIAL OMITTED

Gordon A. D. Zubrod, Asst. U. S. Atty., Scranton, Pa., for the U. S.

Ronald F. Kidd, Michael M. Mustokoff, Philadelphia, Pa., for James C. LaBar.

Jack B. Stevens, Alexandria, Va., for Donald J. Romanowski.

Barnet D. Skolnik, Washington, D. C., for Robert F. Conner and Petroleum Suppliers, Inc.

William W. Warren, Jr., Scranton, Pa., for LaBar Transp. Corp. and LaBar Enterprises, Inc.

OPINION

MUIR, District Judge.

I. Introduction.

On March 2, 1981, a jury convicted each of the Defendants of one count of conspiracy, 18 U.S.C. § 371, twenty-one counts of mail fraud, 18 U.S.C. § 1341, and two counts of making a false statement to a government agency, 18 U.S.C. § 1001. At the close of the Government's case, the Court granted a motion by Petroleum Suppliers, Inc. for judgment of acquittal because the Government failed to prove that any of its officers or agents acted with an intent to benefit it. The Court also granted all the Defendants' motions for judgment of acquittal as to Count 25 because the Court determined that the letter on which that Count was based was not a false statement under 18 U.S.C. § 1001. Immediately upon the return of the jury's verdict the Court granted the Defendants' motion for judgment of acquittal as to the two false statement counts.

On March 17, 1981, timely motions for judgment of acquittal, a new trial, and in arrest of judgment were filed by the Defendants. On April 3, 1981, the individual defendants were sentenced to fines and suspended terms of imprisonment and fines were imposed on the two corporate defendants. Documents supporting the post trial motions were filed on April 21, 1981 and briefs in support of the motions were filed on May 1, 1981. The Government filed briefs in opposition to the motions on June 5, 1981 and the Defendants filed reply briefs on June 15, 1981. Both sides also submitted additional documents in support of their positions.

On June 4, 1981, the Defendants filed a motion seeking the production of two memoranda from the Government that the Defendants claim are material to their motion for judgment of acquittal. That motion was granted on June 30, 1981 and the parties were given until July 20, 1981 in which to file further briefs which they did. On June 15, 1981, new counsel entered the case for LaBar and further briefing was permitted, which concluded on July 21, 1981 when LaBar filed his last brief. All of the post-trial motions will be denied.

II. Motion for Judgment of Acquittal.

The first of nine grounds asserted in support of the motion for judgment of acquittal is that the Government failed to produce sufficient evidence to sustain the convictions. The Defendants recognize that in ruling on their motion for judgment of acquittal the evidence must be viewed in the light most favorable to the Government, see United States v. Schmidt, 471 F.2d 385, 385-86 (3d Cir. 1972) (per curiam), and that all reasonable and logical inferences in support of the verdicts must be drawn from the evidence. See United States v. Trotter, 529 F.2d 806 (3d Cir. 1976). Utilizing that standard of review, the Court must determine whether the Government presented evidence to support a finding of guilt beyond a reasonable doubt.

Defendant LaBar Transportation Corporation was at the times relevant to the indictment one of the six largest mail hauling contractors in the United States. Among the multitude of statutory and regulatory provisions applicable to postal contractors is 39 U.S.C. § 5005(b)(1) which provides that the Postal Service with the consent of the holder of a transportation contract may adjust the compensation allowed under that contract "for increased ... costs resulting from changed conditions occurring during the term of the contract." The Postal Service has promulgated at least two publications relating to this section. Section 19-316.21 of the Postal Contracting Manual, Government Exhibit 1.01, defines changed conditions as those over which the contractor has "little, if any control." The Postal Service's regional instructions, Government Exhibit 1.02, define changed conditions as those over which the contractor has "little or no control." If a contractor experienced fuel cost increases that met those definitions of changed conditions, and if the increases amounted to 3.5% of the amount previously approved, it could seek on a monthly basis so-called one line adjustments in its contracts to cover those costs. See Government Exhibit 1.02. It is these provisions that form the basis for the Government's prosecution of the Defendants.

It was the Government's contention at trial that the Defendants embarked upon a scheme to defraud the Postal Service by submitting to the Postal Service records of fuel purchases by LaBar Transportation that showed prices in excess of the prices actually paid for the fuel. The Government sought to show that this scheme was executed in the following manner: The Defendants agreed in March 1977 to create a corporation to be called Petroleum Suppliers, Inc., whose sole function would be to purchase diesel fuel from suppliers who had been selling the fuel directly to LaBar Transportation. Petroleum Suppliers would then resell the fuel at increased prices to LaBar Transportation thereby providing LaBar Transportation with documentary evidence to support its requests for fuel price adjustments under its postal contracts. The Government further sought to prove that the Defendants actively misled the Postal Service as to the relationship between LaBar Transportation and Petroleum Suppliers.

The Defendants have never contended that Petroleum Suppliers was not created by them for the purpose of providing fuel to LaBar Transportation at a cost in excess of the costs LaBar Transportation had previously paid for fuel. They also do not dispute that they used the Petroleum Suppliers invoices to support their requests for fuel price adjustments. What they vehemently contest is that the Government's evidence proved beyond a reasonable doubt that the Defendants acted with an intent to defraud the Government or with an intent to disobey or disregard the law.

From the evidence produced at trial, the jury could reasonably have concluded that Petroleum Suppliers had no legitimate business purpose. The Government's evidence established that Petroleum Suppliers purchased fuel from the same suppliers that had previously sold fuel directly to LaBar Transportation and that it did so on credit terms no more favorable than those available to LaBar Transportation. The only new source of supply used by Petroleum Suppliers was a company in Florida to which Petroleum Suppliers turned after Colonial Oil, the company that had been selling fuel to LaBar Transportation, refused to sell to Petroleum Suppliers because in its view Petroleum Suppliers was not creditworthy. In all cases, fuel was delivered by the primary suppliers directly to LaBar Transportation's trucks or facilities. Petroleum Suppliers simply received the invoices and billed LaBar Transportation higher prices for the fuel.

Perhaps the most probative evidence of the lack of a legitimate business purpose of Petroleum Suppliers relates to the purchase of fuel with credit cards. Some of the LaBar Transportation drivers were issued credit cards by LaBar Truck Rental, Inc., a sister company to LaBar Transportation and both wholly owned by LaBar Enterprises, Inc. which was wholly owned by LaBar. When these drivers purchased fuel on the road, the purchases were charged using the credit cards and LaBar Truck Rental was billed. LaBar Truck Rental would then send the invoices to Petroleum Suppliers which would pay the invoices and bill LaBar Transportation a higher price for the fuel.

The Defendants, in their cross examination of the Government's witnesses and by certain documentary evidence introduced during the Government's case sought to convince the jury that Petroleum Suppliers had a legitimate business purpose. Among that evidence was testimony by Roger Crockford, Vice-President and General Manager of LaBar Transportation, that Defendant Conner was a "fuel professional" who was able to secure fuel when others could not do so. From this testimony, the Defendants argued that Petroleum Suppliers was a legitimate business because Conner's abilities were available if needed to secure fuel in the event of a recurrence of supply problems that had been experienced by LaBar Transportation in the years preceding 1977. The jury, however, was free to disregard this testimony coming as it did from an interested witness. The jury was also entitled to look at the other evidence in the case and reach the conclusion that Petroleum Suppliers did nothing more than mark up invoices.

From that conclusion, the jury was entitled to draw the further inference that the price increases charged by Petroleum Suppliers had no basis and were designed to secure for LaBar Transportation increased compensation from the Postal Service. Since Petroleum Suppliers did nothing other than receive invoices from fuel oil companies, pay those invoices, and then invoice LaBar Transportation, it was reasonable for the jury to conclude that Petroleum Suppliers had no legitimate reason to charge LaBar Transportation prices in excess of what Petroleum Suppliers paid for the fuel. Since there is no question that Petroleum Suppliers did charge LaBar Transportation more for the fuel than Petroleum Suppliers paid for it, the jury was faced with the task of determining why it did so and why LaBar Transportation paid the invoices or dealt with Petroleum Suppliers at all.

There was evidence, Defendants' Exhibit 4, a letter written by Defendant Romanowski to the corporate attorney for the LaBar companies, that Conner was involved in the...