United States v. Larry Davis & DCM Erectors, Inc.

• Decision Date: 03 August 2017
• Docket Number: 13-cr-923 (LAP)
• Parties: UNITED STATES OF AMERICA, v. LARRY DAVIS and DCM ERECTORS, INC. Defendants.
• Court: U.S. District Court — Southern District of New York

UNITED STATES OF AMERICA, v. LARRY DAVIS and DCM ERECTORS, INC. Defendants.

13-cr-923 (LAP)

UNITED STATES DISTRICT COURT SOUTHERN DISTRICT OF NEW YORK

August 3, 2017

OPINION & ORDER

List of Attorneys

Attorney for United States of America

Robert Lee Boone

Carrie Heather Cohen

Kan Min Nawaday

United States Attorney's Office

Southern District of New York

One St. Andrew's Plaza

New York, NY 10007

Attorney for Defendant Larry Davis

Sanford N. Talkin

Talkin, Muccigrosso & Roberts

40 Exchange Place

New York, NY 10005

Attorneys for Defendant DCM Erectors, Inc.

Kevin Ronald Puvalowski

Sarah Elizabeth Aberg

Sheppard Mullin Richter & Hampton, LLP

30 Rockefeller Plaza

New York, NY 10112

TABLE OF CONTENTS

I. BACKGROUND .................................................. 4

A. The Defendants ............................................. 4

B. Port Authority MWBE Program ................................ 5

C. Solera/DCM Joint Venture ................................... 9

D. GLS Subcontract ........................................... 10

E. The WTC contracts with Port Authority ..................... 10

F. The Indictment ............................................ 13

G. Trial ..................................................... 15

H. The Post-Trial Motions .................................... 19

II. DISCUSSION ................................................. 20

A. Rule 29 Motion for Acquittal ............................. 20

1. Standard Of Review .................................... 23

2. Wire Fraud and Conspiracy to Commit Wire Fraud-Elements .............................................. 23

3. Sufficiency of the Evidence ........................... 25

a. Defendants' misrepresentations did not go to an ..... essential element of the contract ..................... 42

i. The Port Authority received the full benefit of its bargain with Defendants ....................... 42

ii. The MWBE sections were not essential elements of the contracts ..................................... 45

(a) A breach of the MWBE sections of the contracts were not violations of law ...................... 45

(b) The MWBE sections of the contracts were merely "aspirational" .................................. 46

b. Defendants' misrepresentations did not expose the Port Authority to potential or actual economic harm ...... 49

c. Much of the Government's evidence was legally irrelevant ............................................... 63

B. Rule 29(d) Conditional Determination of New Trial (Rule 33) ................................................... 68

C. Sufficiency of the Indictment, Constructive Amendment and Variance .................................................... 75

1. Sufficiency of the Indictment .......................... 75

2. Constructive Amendment/Prejudicial Variance ............ 79

III. CONCLUSIONS ............................................. 100

LORETTA A. PRESKA, Senior United States District Judge:

The Court entered a judgment of conviction as to Defendants Larry Davis ("Davis") and DCM Erectors, Inc. ("DCM") (collectively, the "Defendants") on August 10, 2016 following a jury trial. Both Defendants were found guilty of one count of Wire Fraud in violation of Title 18, United States Code, Section 1343 and one count of Conspiracy to Commit Wire Fraud in violation of Title 18, United States Code, Section 1349. 18 U.S.C. § 1343 (2012); 18 U.S.C. §1349 (2012).

Defendants move, pursuant to Rules 29 and 33 of the Federal Rules of Criminal Procedure, for a judgment of acquittal or a new trial. The Defendants also seek to dismiss the indictment, S3 13 Cr. 123 (LAP), and to vacate the convictions on the grounds of constructive amendment and prejudicial variance.

For the reasons set forth below, the Court:

1. grants the motion for acquittal;

2. conditionally grants the motion for a new trial;

3. denies the motion to dismiss the indictment; and

4. grants the motion to vacate the convictions on the grounds of constructive amendment and prejudicial variance.

I. BACKGROUND

A. The Defendants

Defendant Larry Davis is the owner and President of DCM. (See Trial Transcript¹ ("Tr.") at 157.) DCM is a firm with an expertise in erecting the structural steel for office buildings. In its construction jobs, DCM typically furnishes and erects the steel. (See id.)

DCM won the steel decking contract for Tower 1 ("One-WTC") ("Tower 1") of the World Trade Center ("WTC"). (See Tr. 157; see also Government Exhibit 1 ("GX-1")). On July 25, 2007, DCM executed the Structural Steel and Metal Deck Contract ("Tower 1 Contract") with Tishman Construction Corporation, the construction manager for the project hired by the Port-Authority-owned company, 1-WTC, LLC. (See GX-1.) The contract amount was $256 million. (See GX-1 at 32.)

Subsequently, DCM also became involved in the construction of the neighboring World Trade Center PATH Transportation Hub ("Hub"). (See Tr. 170-71.) On May 12, 2009, Larry Davis signed a subcontract ("Hub subcontract") on behalf of DCM with thegeneral contractor, Phoenix, LLC, for the metal decking of the Hub.² This contract was priced at $330 million. (See GX-2 at 1.)

B. Port Authority MWBE Program

In large construction projects worth over a million dollars, the Port Authority has participation goals for minority-owned and woman-owned business enterprises ("MWBEs"). (See Tr. 71.) The "overall goal" of the Port Authority is for MBEs to have 12 percent participation and for WBEs to get five percent participation in large contracts. (See Tr. 71:11-16.) To help fulfill the Port Authority's goal, when the Port Authority signs a contract for a large job with a prime contractor (typically a non-minority owned business), the contract will customarily include a provision related to subcontracts with MWBEs. (See Tr. 71:17-21.)

The Port Authority certifies MWBEs as being in fact minority-owned or woman-owned and publishes an online directory of these firms that includes the companies' names and a specific trade for which they are certified. (See Tr. 73:20-74:12.) As a practice, the Port Authority refers prime contractors to this directory of MWBEs in all of its contracts. (See Tr. 74:8-12.) To begin the certification process, a prospective MWBE fills outan application with a series of questions regarding ownership and control of the business and submits supporting documentation. (See Tr. 75:9-15.) The Port Authority will only certify a MWBE if the business is 51 percent minority-owned or woman-owned and the minority or woman business owner operates, controls, and manages the operation. (See Tr. 75:9-20.) To aid the certification analysts' review of MWBE certification applications, the Port Authority maintains an internal guidelines document that outlines the approval criteria. (See GX-20; see also Tr. 76:3-11.) Once the Port Authority makes the certification decision, the owner is notified by letter. (See Tr. 76:1-2.) If certified, the business is then listed by the Port Authority in the MWBE online directory. (See Tr. 75:21-25.)

While the Port Authority encourages prime contractors to form joint ventures ("JVs") or otherwise subcontract with MWBES, the Port Authority does not certify JVs as MWBEs. (See Tr. 79:4-7.) Instead, a related but separate process governs the participation of JVs in Port Authority projects where one of the joint venturers is an MWBE.³ (See Tr. 79:13-19.) In such an instance, a prospective JV submits an application to the Port Authority describing the work to be performed and the role ofthe MWBE in the project. (See Tr. 81:2-14; see also GX-24.) The application also calls for a copy of the JV agreement. (See GX-24; Tr. 81:15-21.) The Port Authority maintains a separate internal guidance document designed "to assist Port Authority staff in providing direction and oversight to [MWBE JVs] which are operative on PA construction sites." (See GX-23 at 1; see also Tr. 84:7-8.)

Port Authority tabulates its progress towards its "aspirational" goal, (see Tr. 129:17-19), of ensuring the involvement of MWBEs through a system of MWBE "credit," (see Tr. 129). After reviewing MWBE involvement in a particular job, the Port Authority assigns a numerical figure in dollars to reflect the involvement of MWBEs according to its own internal standards. Because of the idiosyncrasies of the Port Authority's process, the credit figure does not necessarily correspond to the monies actually received by MWBEs on Port Authority projects. For example, if a MWBE is paid $100,000 for supplying material to a building, unless the MWBE also installed the material, the Port Authority will determine the credit figure to be $60,000. (See GX-1 at 8; see also Tr. 131.)

Thus, despite the financial connotation of the word "credit," as the word is used in this specialized context, credit has a non-pecuniary meaning. Credit does not connote anyactual pecuniary exchange between the Port Authority and a contractor but is rather an evaluative figure assigned by the Port Authority to characterize the participation of MWBE firms in Port Authority projects. (See Tr. 82-83, 101.) This credit figure has at least two relevant applications. First, the credit figure calculated by the Port Authority is used by the Port Authority in its annual reports to its Board of Directors and the public. (See Tr. 129.) Second, that same figure is "credited" to the contractors and is used as a way for the Port Authority to monitor the contractors' performance towards the Port Authority MWBE goals under their contracts. (See 127-28.)

At trial, the parties stipulated that the Port Authority policies and guidelines as contained in the MWBE certification guidelines, (see GX-20), and MWBE JV guidelines, (see GX-23), and reflected in the JV application, (see GX-24), were to be considered by the jury only for the limited purpose of explaining the Port Authority's certification process for MWBEs. (See Tr. 85:19-86:4.) The stipulation further provided that the guidelines and the policies of the Port Authority "are not criminal laws" and that "[v]iolation of...