United States v. Near, 090517 FED11, 15-15590

Docket Nº:15-15590
Opinion Judge:PER CURIAM
Party Name:UNITED STATES OF AMERICA, Plaintiff - Appellee Cross Appellant, v. CRAIG D. NEAR, a.k.a. Craig Douglas Near, GENZIKO, INC., Defendants - Appellants Cross Appellees.
Judge Panel:Before MARTIN, JILL PRYOR and MELLOY, Circuit Judges.
Case Date:September 05, 2017
Court:United States Courts of Appeals, Court of Appeals for the Eleventh Circuit

UNITED STATES OF AMERICA, Plaintiff - Appellee Cross Appellant,


CRAIG D. NEAR, a.k.a. Craig Douglas Near, GENZIKO, INC., Defendants - Appellants Cross Appellees.

No. 15-15590

United States Court of Appeals, Eleventh Circuit

September 5, 2017


         Appeals from the United States District Court for the Northern District of Georgia D.C. Docket No. 1:14-cr-00271-TWT-LTW-1

          Before MARTIN, JILL PRYOR and MELLOY, [*] Circuit Judges.

          PER CURIAM

         After a 10-day trial, a jury convicted defendants Craig Near and Genziko, Inc. of wire fraud and filing false claims against the United States. These convictions stemmed from misuse of grant money Near and Genziko received from the National Science Foundation (NSF) and the National Aeronautics and Space Administration (NASA). Both defendants appeal their convictions. They contend that there was insufficient evidence supporting those convictions, statements by the government and the district court's jury instructions constructively amended the indictment charging them, and statements and evidence from the government served to lower the burden of proof they faced. For its part, the government cross-appeals the defendants' sentences. After careful review and with the benefit of oral argument, we affirm the defendants' convictions and sentences.

         I. BACKGROUND

         Near and Genziko were charged with seven1 counts of committing wire fraud, in violation of 18 U.S.C. § 1343, and three counts of filing false claims against the United States, in violation of 18 U.S.C. § 287.2 A jury convicted both defendants on all seven wire fraud counts and two of the three false claims counts. Near was sentenced to four months' imprisonment followed by one year of supervised release. Genziko was sentenced to five years' probation and fined $5, 000. Neither defendant was ordered to pay restitution.

         A. Near and Genziko

         Near founded Genziko in 2004 to research and develop products based on piezoelectric materials, which generate energy from vibrations or movement. Near had worked with these materials for nearly twenty years before he founded the company. Genziko was a one-man operation with Near as its only paid employee. Despite its small size, the company managed to win grants and contracts from government agencies, including NSF and NASA.

         B. SBIR Program and Grants

         Genziko applied for and received an NSF grant and a NASA contract under the Small Business Innovation Research (SBIR) program. The SBIR program was established by Congress to direct a portion of federal research funding to small businesses to help them develop innovative products that could be successfully commercialized. See Small Business Innovation Development Act of 1982, Pub. L. No. 97-219, 96 Stat. 217. Near, Genziko, and some subcontractors legitimately performed research under these grants, but the government alleged that Near submitted false budgets to obtain the grants. We will discuss each grant in turn.

         1. NSF Grant

         In response to NSF's public solicitation for SBIR proposals, Near submitted a proposal for Genziko to develop a "High Performance Vibration Energy Harvester" that would eliminate the need for battery recharging, replacement, and disposal in industrial and transportation applications. The solicitation to which Near responded listed several award conditions, including complying with a separate document containing NSF's general grant conditions and complying with the budget the grantee submitted to NSF.

         Genziko proposed a budget just shy of $100, 000, broken down into different expense categories. An NSF employee followed up and requested more detailed budget information for Genziko's proposal to receive further consideration. Near complied, sending a detailed budget that listed himself, an unnamed student technician, and two named individuals, including a professor from the Georgia Institute of Technology ("Georgia Tech"), as employees for the project. The detailed budget also included a lease payment to Georgia Tech for a lab that was to be used for some of the necessary research and development. At trial, Dr. Benaiah Schrag, an SBIR program director at NSF, testified that NSF expected companies to follow their proposed budgets and contact NSF for approval of any changes.

         NSF approved the proposal and awarded Genziko an SBIR grant. NSF paid Genziko two-thirds of the grant amount up front with the remainder to be paid when the company submitted its final report. Schrag testified that the final reports were the only thing NSF expected to receive as a result of SBIR grants. Although Genziko performed some of the anticipated research and development, the company did not follow its proposed budget. NSF Office of the Inspector General (OIG) Special Agent Brian Hess testified that he examined Genziko's records and bank accounts and found no evidence that Genziko had paid the expenses outlined above. Indeed, Hess related that when he interviewed Near as part of OIG's investigation, Near stated that he never paid any employees but himself.

         In Genziko's final report, Near certified that to best of his knowledge the work for which he was requesting payment was performed in accordance with the award terms and conditions. Schrag testified that the agency viewed this certification as confirming that money was spent according to the proposed budget. After receiving Genziko's final report, NSF wired the final third of the grant from the U.S. Treasury to Genziko's account.

         2. NASA Contract

         Near submitted a proposal to NASA's SBIR program for Genziko to develop a "Frequency-Steerable Acoustic Transducer." In layman's terms, this device would function as something like an ultrasound to detect leaks or changes inside structures. Genziko was approved for and received a six-month NASA SBIR contract to develop the idea. After completing that contract, Near applied for a second one, which is the subject of most of the charges in this case. This second, multi-year contract was a continuation of the first contract and relied on the same proposal.

         Genziko proposed a budget of just under $600, 000 over two years for the second contract. The budget listed payments to an unnamed engineer, an unnamed technician, and two named consultants that were to be paid in the contract's first year. NASA contracting officer Julie Delgado testified at trial that she followed up requesting more detail, and Near responded that Timothy Meyer would serve as the engineer and Chris Brooks as the technician.

         Genziko was awarded the second contract. The contract specified that Genziko would be paid in installments after submitting quarterly interim reports of its progress. Genziko's proposal was also expressly incorporated by reference into the terms of the contract. A NASA contracting officer testified at trial that the budget included in the proposal was part of the contract.

         Genziko submitted the required quarterly interim reports and received its installment payments under the contract. NASA OIG Special Agent Lee Gibson and a NASA accountant testified to five wire transfers of NASA contract money from the U.S. Treasury to three different Genziko bank accounts over the course of the contract. According to Gibson, Near spent money from all three Genziko accounts on personal expenses.

         As part of the seventh report, which Near filed well into the contract's second year, Near certified that Genziko's performance had complied with the contract's terms and conditions. Yet Genziko did not spend the contract money as specified in its proposal. Brooks, for example, testified that he was never paid (and never expected to receive any payment) for some technical help he provided Near on the project. Hess, the NSF OIG agent, testified that, after examining Genziko's records, he found no evidence of payments to Brooks, Meyer, or the two consultants. In addition, the University of Toledo ("UT") entered into a contract with Genziko to act as a subcontractor on the NASA contract. A UT accountant testified that although UT faculty and students performed nearly $300, 000 worth of work on the subcontract, Genziko paid UT only about $70, 000.

         C. The Trial3

         A grand jury indicted the defendants, and the case proceeded to trial. Genziko was unrepresented at trial. During its opening statement, the government showed slides that Near had viewed at a presentation for NSF grantees given by Dr. Montgomery Fisher, a lawyer and investigator with NSF's OIG. The slides stated in large letters "Don't lie" and "Don't steal" and warned viewers that if they lied or stole they would be investigated and prosecuted. Presentation of Montgomery Fisher (Doc. 190-65 at 9-12).4 When Fisher testified, the government again displayed these slides for the jury.

         At the conclusion of the government's...

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