United States v. Stern ( 1994 )

UNITED STATES COURT OF APPEALS
FOR THE FIRST CIRCUIT
No. 92-2300
UNITED STATES OF AMERICA,
Appellee,
v.
AARON STERN,
Defendant, Appellant.
No. 93-1047
UNITED STATES OF AMERICA,
Appellee,
v.
LAWRENCE GORDON,
Defendant, Appellant.
APPEALS FROM THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF MASSACHUSETTS
[Hon. William G. Young, U.S. District Judge]
Before
Boudin, Circuit Judge,
Coffin and Campbell, Senior Circuit Judges.
Martin D. Boudreau for appellant Aaron Stern.
Lawrence Gordon on brief pro se.
Paul G. Levenson, Assistant United States Attorney, with whom
A. John Pappalardo, United States Attorney, was on brief for the
United States.
January 20, 1994
BOUDIN, Circuit Judge. The Miller Act, 40 U.S.C.
270a-f requires all contractors bidding for government
construction contracts in excess of $25,000 to post
performance and payment bonds, and the Air Force further
requires that a bid bond accompany the bid itself.1 In
order to qualify for consideration, contractors must submit
bonds issued by companies approved by the United States
Treasury and listed in Treasury Department Circular 570,
commonly called the "T-list." See 48 C.F.R. 28.202(a)(1).
The bonds must also be submitted on standard government
forms: SF 24 (bid bond), SF 25 (payment bond) and SF 25A
(performance bond).
Defendant Lawrence Gordon was the head of Tower
Associates, Inc., a Winchester, Massachusetts, construction
company seeking to secure a contract to renovate a
photography laboratory at Hanscom Air Force Base in Bedford,
Massachusetts. In September 1988 Tower submitted the low bid
for the project, offering to perform the renovations for
$1,000,200. This bid was accompanied by a bid bond issued by
Continental Surety Company, a surety or purported surety that
did not appear on the T-list and which apparently had no
1"Bid bonds" ensure that a contractor will in fact
undertake the contract if its bid is accepted; "performance
bonds" guarantee that the contractor will complete the
project in accordance with the specifications; and "payment
bonds" ensure that those who furnish labor and materials for
the project will be paid.
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assets. The Air Force employee responsible for overseeing
the bidding process, Lorraine McLoughlin, did not at first
notice this problem and Tower was awarded the contract on
September 30, 1988.
When shortly thereafter McLoughlin learned that
Continental was not an approved issuer, she called Gordon and
informed him that Tower's payment and performance bonds would
have to be written by a T-listed company. On October 17,
1988, Gordon presented a payment and performance bond
purportedly issued by Amwest Surety Insurance Co., a company
that did appear on the T-list. The bond bore Tower's seal,
as well as the signatures of Gordon and one "Alan Stime," who
was listed as Amwest's attorney-in-fact. The bond was
accompanied by a power of attorney, purportedly from Amwest,
also signed by "Alan Stime."
The Amwest bond and power of attorney were counterfeits
fabricated by James Grier, the principal of Continental.
Grier later testified at trial that he produced the bogus
documents at Gordon's request. Sandra Catalano, a Tower
employee, testified at trial that she was present when the
bond was signed by Gordon and defendant Aaron Stern, who
signed the bond as "Alan Stime." At trial, an Amwest
official testified that the bond was not a genuine Amwest
bond and that no "Alan Stime" was or ever had been an
authorized attorney in fact for Amwest.
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The Air Force rejected the phony bond after McLoughlin
noted that some of the signatures on the bond appeared to be
facsimiles and that the purported Amwest seal was poorly
impressed and illegible. On October 19, 1988, McLoughlin
requested that Tower resubmit its bonds and enclosed standard
government bond forms. The Air Force received a second set
of bonds, on the government forms, from Tower on October 24,
1988. These bonds were also purportedly issued by Amwest,
but the typed name of the attorney-in-fact under the "Alan
Stime" signature was "Aaron Stern." By this time, McLoughlin
had been told by an Amwest employee that Amwest "had never
heard of Tower Associates."
Rather than accept the bonds, McLoughlin forwarded them
to the Air Force Office of Investigations and sent Tower a
notice to cure. On November 18, 1988, McLoughlin notified
Gordon of her communications with Amwest. After requesting
an extension of time to submit new bonds, Tower sent
McLoughlin a third set of bonds on December 13, 1988,
explaining that Tower "[had been] given a bond which proved
invalid." This third set of bonds, like the original bid
bond, was issued by Continental and signed by Aaron Stern as
attorney-in-fact. As Continental was still not on the T-
list, McLoughlin rejected the bonds.
The Air Force terminated Tower's award on March 3, 1989,
and eventually awarded the contract (without rebidding) to
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Fellsway, Inc., which had submitted the second lowest bid.
On June 13, 1991, Gordon and Stern were charged in a multi-
count indictment with the following offenses:
Count 1 Gordon and Stern were both charged with
conspiring to defraud the United States in the
solicitation and award of the construction
contract at Hanscom Air Force Base. 18 U.S.C.
371 (conspiracy to defraud).
Count 2 Both defendants were charged with
counterfeiting the October 17, 1988, payment
and performance bond purportedly issued by
Amwest Surety Insurance Company. 18 U.S.C.
494 (making, uttering or presenting
counterfeit bond).
Count 3 Gordon was charged with knowingly presenting
the same counterfeit bond to the Air Force. 18
U.S.C. 494.
Count 4 Gordon and Stern were both charged with
uttering to the Air Force a counterfeit power
of attorney. 18 U.S.C. 495 (making, uttering
or presenting counterfeit power of attorney).
Count 5 Both defendants were charged with false
statements in completing and submitting
Standard Form 25, the government form for
performance bonds. 18 U.S.C. 1001 (false
statement statute).
Count 6 Both defendants were charged with false
statements in completing and submitting
Standard Form 25A, the government form for
payment bonds. 18 U.S.C. 1001.
After a jury trial, Stern was convicted on counts 1 and
4, and acquitted on count 2. Gordon was convicted on count 3,
and acquitted on counts 1, 2 and 4. Both defendants were
convicted on Counts 5 and 6. Gordon moved for a new trial on
June 19, 1992, arguing that the verdict was internally
inconsistent and that the government had withheld material
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exculpatory evidence. The district court denied this motion
on December 18, 1992.
On October 13, 1992, the district court sentenced Stern
to a 60-day term of imprisonment, along with a period of
supervised release. Gordon was sentenced on November 24,
1992, to a 30-day term of imprisonment and nine months of
home confinement. Both defendants were also held jointly and
severally liable for restitution.2 These consolidated
appeals followed. Stern's counsel has briefed and argued the
case; Gordon, with this court's permission, has relied upon
his district court filings in support of a new trial.
In this court both defendants claim that the jury
verdicts are internally inconsistent. Gordon argued in the
district court that since he was acquitted (under count 2) of
counterfeiting the October 17 bond, it was inconsistent for
the jury then to convict him (under count 3) of uttering the
same counterfeit bond. Stern points to his own acquittal of
the charge of counterfeiting the bond (again under count 2)
and protests that this acquittal undermines the jury verdict
convicting Stern (under count 4) of uttering a forged power
of attorney in support of the same bond.
2Stern's sentence was stayed pending appeal. The
district court denied Gordon's motion for a similar stay on
January 19, 1993, but this court stayed the payment of
Gordon's restitution pending appeal on August 24, 1993.
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Both objections lack merit. As the defendants purport
to recognize, general jury verdicts may not normally be set
aside for inconsistency as between counts. United States v.
Powell, 469 U.S. 57, 64-65 (1984); United States v.
Bucuvalas, 909 F.2d 593, 597 (1st Cir. 1990). The reasons
are explained by Judge Friendly in United States v. Maybury,
274 F.2d 899 (2d Cir. 1960), and do not need repeating.
Maybury is relied on by both defendants because the appeals
court there did set aside verdicts as inconsistent. But the
inconsistent verdicts were there rendered by a judge in a
jury-waived trial. The whole point of Maybury is that (for
both practical and historical reasons) the general verdict by
a jury is a special case but a requirement of consistency
does apply to written findings made by a single judge. Id.
at 903.
We need not discuss other inconsistent-verdict cases
cited by defendants because, as it happens, there is no
necessary inconsistency in the verdicts in this case. As to
Gordon, there was evidence from Grier that he (Grier)
fabricated the October 17, 1988, bond, but also evidence that
Gordon knew it was counterfeit and nevertheless presented it
to the Air Force. The jury may have supposed (quite wrongly)
that Grier's admission entirely lifted responsibility for the
counterfeiting from Gordon's shoulders but also permissibly
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believed that Gordon uttered the bond knowing it to be
forged.3
Similarly, the acquittal of Stern on the charge of
counterfeiting the same bond, again quite possibly because of
Grier's admission, is in no way inconsistent with Stern's
conviction for uttering to the Air Force the companion power
of attorney document knowing it to be forged. In addition to
other evidence to support the uttering conviction, there was
direct testimony from Sandra Catalano that Stern himself
signed the bond using the phony signature "Alan Stime."
Whether or not Stern, Gordon or both could have been
convicted of procuring or participating in the counterfeiting
of the bond itself is irrelevant. It is sufficient to dispel
the taint of inconsistency that a rational jury could easily
have acquitted on count 2 while convicting Gordon on count 3
and Stern on count 4. And, as explained at the outset,
inconsistency would not in any event undermine the
convictions so long as they themselves were, as they are
here, supported by sufficient evidence. See Powell, 469 U.S.
at 67.
3Gordon's claim that the conspiracy acquittal (under
count 1) is inconsistent with the uttering conviction (under
count 3) is even more far-fetched. True, the uttering was
charged as an act in furtherance of the conspiracy. But a
literal minded jury might believe that the uttering itself
was proved amply but that the "agreement" element of
conspiracy had not been established.
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Next, Gordon claimed in the district court that the
government violated its obligation, under Brady v. Maryland,
373 U.S. 83 (1963), to produce exculpatory evidence by
failing to turn over the grand jury testimony of Grier, whom
Stern called as a witness. The background is this: Grier,
called by Stern as a defense witness, was then cross-examined
by Gordon's counsel--not by the government. On this cross-
examination, Grier proceeded to testify that Gordon had asked
Grier to forge the October 17, 1988 bond. Although Gordon
was acquitted of that forgery, he was convicted of uttering
the forged bond, and the Grier testimony--elicited by
Gordon's own counsel--may have helped to confirm Gordon's
knowledge of the forgery.
After conviction Gordon learned that Grier, testifying
in the grand jury prior to trial, had himself denied any
knowledge of the bond. Gordon moved for a new trial,
contending that the government's failure to produce the grand
jury testimony at trial as impeaching evidence violated its
obligation under Brady. In pre-trial requests Gordon had
asked in general terms for Brady material, but he had never
specifically requested production of prior statements or
testimony by Grier. The district court denied the new trial
motion, citing United States v. Pandozzi, 878 F.2d 1526 (1st
Cir. 1989), and United States v. Carrasquillo-Plaza, 873 F.2d
10 (1st Cir. 1989).
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Under the Jencks Act, 18 U.S.C. 3500, the government
is required to produce prior statements by its own witnesses,
whether or not the statements are exculpatory. And, if a
statement is itself exculpatory, the government under Brady
is normally required to produce it, regardless of whether it
is made by a trial witness. See Brady, 373 U.S. at 86. Here,
says the government, Grier's grand jury testimony was not a
prior statement by a government witness, nor was it
exculpatory in the sense that it disproved Gordon's guilt.
Thus, in the government's view, the grand jury testimony
is merely newly discovered impeaching evidence. Under the
Wright-Martin standard for a new trial based on newly
discovered evidence, the ordinary requisites for a new trial
on this ground are specific and demanding.4 Gordon may not
have met any of the requisites, and he certainly did not meet
the requirement that the newly discovered evidence be (at
least in the normal case) "not merely . . . impeaching."
Martin, 815 F.2d at 824 (quoting Wright, 625 F.2d at 1019).
4A new trial will ordinarily be denied absent a showing
that
(1) the evidence was unknown or unavailable to the
defendant at the time of the trial; (2) failure to
learn of the evidence was not due to lack of
diligence by the defendant; (3) the evidence is
material, and not merely cumulative or impeaching;
and (4) it will probably result in an acquittal
upon retrial of the defendant.
United States v. Martin, 815 F.2d 818, 824 (1st Cir.), cert.
denied, 484 U.S. 825 (1987) (quoting United States v. Wright,
625 F.2d 1017, 1019 (1st Cir. 1980)).
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Thus Gordon's only hope is to argue that the grand jury
testimony did have to be produced under Brady in which event,
as the government notes, the Wright-Martin standard does not
invariably apply. See United States v. Sanchez, 917 F.2d 607,
617 (1st Cir. 1990), cert. denied, 499 U.S. 977 (1991).
Rather, there is a general obligation to produce exculpatory
testimony and failures to comply are reviewed after the fact
under the standard of United States v. Bagley, 473 U.S. 667(1985). Bagley is somewhat opaque, there being no single
majority opinion, but reversal may be warranted where there
is a "reasonable probability" that the undisclosed evidence
would havealtered the outcome. Id. at 682(plurality opinion).
Here the grand jury testimony was not exculpatory in the
sense that, reading the bare language before trial, an
assistant U.S. attorney would think it helpful to Gordon.
After all, in the testimony Grier denied knowledge of the
forgery, a position that could be neutral in its impact on
Gordon or even potentially harmful to Gordon (in shifting
responsibility to someone other than Grier). Only after
Grier, as a defense witness for Stern, named Gordon as the
procurer of the forgery did the grand jury testimony take on
a potential as impeaching evidence.
The government protests that it has no ongoing
obligation to monitor the testimony of defense witnesses and
to seek out prior statements in its files that may in the
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course of trial turn out to have impeachment value when
defense testimony injures a defendant. Even if it did have
such an obligation in some instances, there would be serious
questions--not easily answered on this record--whether in
this case Gordon's own access to Grier negated the
obligation, see United States v. Hicks, 848 F.2d 1, 3-4 (1st
Cir. 1988), and whether the failure of Gordon to request the
grand jury testimony is also fatal to the Brady claim. Cf.
18 U.S.C. 3500(b) (request by defendant required under
Jencks Act); Carrasquillo-Plaza, 873 F.2d at 13 (failure to
make a specific request for alibi witness statements).
We think that these interesting questions had best await
another occasion. It is enough in this case that the
impeaching evidence, even if made available to Gordon, could
not conceivably have altered the outcome. See generally
Pandozzi, 878 F.2d at 1528-30. The jury acquitted Gordon on
the counterfeiting count despite Grier's direct inculpation
of Gordon; and the knowledge element of the uttering count,
on which Gordon was convicted, was confirmed by the direct
testimony of another witness, Catalano, as well as much else
in Gordon's conduct. Under Bagley, the impeaching evidence
does not remotely "undermine confidence" in the outcome. 473
U.S. at 682.
The final issue in this case is the most perplexing and
relates solely to sentencing. Under the Sentencing
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Guidelines,5 the amount of "the loss" is a specific offense
characteristic of crimes involving fraud or deceit, and the
base offense level (6 levels) is increased by a specified
number of levels (from 0 to 11 additional levels) depending
on the amount of the loss. U.S.S.G. 2F1.1 (1988). The
adjusted offense level, together with criminal history,
determines the sentencing range, and actual loss may also be
the basis for a restitution order. 18 U.S.C. 3663(b)(1).
In this case, following the pre-sentence report, the
district court found that the loss to the Air Force of the
fraudulent activities in this case was "the difference
between the bid price [by Tower] and the award [to Fellsway,
the second lowest bidder] for $88,477, increased by the
restated administrative costs of $250" involved in reawarding
the contract to Fellsway. The resulting figure, $88,727,
increased the base offense level from 6 to 11, U.S.S.G.
2F1.1(b)(1) (1988), and this in turn was increased to 13 by
5The pre-sentence report referred to the 1988
guidelines, which were in effect when the crime was
committed. Current practice would normally invoke the
guidelines in effect at the time of sentencing--the 1991
version for Stern and the 1992 version for Gordon--barring
any ex post facto problems. See Isabel v. United States, 980
F.2d 60, 62 (1st Cir. 1992). But since the 1991 and 1992
guidelines employ a new loss/increase- in-level table which
would have resulted in a higher base offense level for both
Stern and Gordon than provided for under the 1988 guidelines,
we cite to the 1988 version. See United States v.
Harotunian, 920 F.2d 1040, 1042 (1st Cir. 1990).
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the addition of two more levels for "more than minimal
planning." Id. 2F1.1(b)(2).
The loss attributed to Stern may well have had no effect
on his sentence of confinement; a downward departure, based
on assistance to the government, reduced his confinement to
below the minimum range that would have prevailed if no loss
had been attributed to him. Gordon's sentence of
confinement, also based on a downward departure, might or
might not have been affected by a lower loss figure,
depending on how small a loss was imputed.6 But based on
the imputed loss of $88,727, both defendants were ordered to
pay restitution--Stern to pay $88,727 and Gordon $80,000--so
the importance of the loss figure is obvious.
At this point, some procedural history is needed. In
the district court, both defendants challenged the $88,727
loss figure on somewhat different grounds. Then, while these
appeals were pending, someone apparently happened upon Judge
Posner's decision in United States v. Schneider, 930 F.2d 555(7th Cir. 1991), which undoubtedly made the government uneasy
about the loss calculation in this case. In any event, the
government and defendants entered into a joint stipulation,
6Gordon's departure was based on the theory that the Air
Force could have rebid the entire contract for $10,000 (a
figure supplied by the Air Force), instead of merely awarding
it to the previous second lowest bidder. Cf. United States
v. Gregorio, 956 F.2d 341, 344-48 (1st Cir. 1992). The
government did not appeal this departure.
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proposing that this court remand the case, before deciding
the merits, for resentencing in light of Schneider; and the
parties stipulated further that
1. The parties jointly stipulate that the best
readily calculable measure of the loss from the
offenses of conviction, for purposes of applying
the Sentencing Guidelines, is $ 20,450. This
amount includes both an attempted gain of $ 20,200
(the purchase price for a genuine bond of the kind
that was forged in this case), and actual
consequential losses of $ 250 (the immediately
identifiable administrative costs associated with
the re-awarding the Photolab contract). For
purposes of ordering restitution, only the actual
loss figure, $ 250 is subject to restitution.
2. The United States further reserves the right to
argue that the stipulated amount--while
representing the best readily ascertainable
estimate of loss--understates the full extent of
the loss in question. The United states further
reserves the right to argue that, given the small
sum of restitution payable, fines should be imposed
upon each defendant, in an amount to be fixed in
light of the defendants' resources.
This court denied the motion to remand, believing that
the challenges to the convictions ought to be decided before
any remand for fine-tuning the sentences. Stern, taking the
view that the stipulation was binding only if this court
ordered an immediate remand, has argued in his brief in this
court that no loss, apart perhaps from the $250 involved in
shifting the award to the second bidder, has been shown by
the government. The government adheres to its request for a
remand in accordance with the stipulation, arguing that Stern
has waived the contention he now makes. Gordon has urged
nothing beyond the stipulation.
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It would be a hazardous venture to lay down abstract
rules as to how "loss" is to be calculated under the
governing guideline even if the focus were narrowed to false
statements in bid documents. As Judge Posner made clear in
Schneider, the underlying facts of individual cases may
differ widely, and even in comparable situations, what proof
is available as to specific items of loss will vary from case
to case. See 930 F.2d at 557-59. Further, we note that the
deceptively simple notion of "loss" is elaborated under the
guideline to include situations of foreseeable or intended
losses, see U.S.S.G. 2F1.1, application note 7 (1988), and
in later versions to cover various specific types of fraud,
e.g., id., application note 7(e) (1993) (Davis-Bacon Act
fraud).
If we agreed with the district court's original
calculations of loss, we would not remand the case regardless
of the stipulation of the parties, since the parties cannot
by agreement create error where none exists. On this record,
however, we think that there is no basis for mechanically
measuring the loss as the difference between the two bids.
The problem is that the government never showed that it could
have secured a bid from a properly bonded contractor at the
price offered by Tower. Without such evidence, it is hard to
see how the government can measure its loss on the theory
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that, but for the fraud, it would have enjoyed that initial
low price.7
On certain facts--say, a general increase in the level
of second round bids after a rebidding due to fraud--a
calculation of loss based on the differential between a
tainted first-round best bid and a higher second-round best
bid might be entirely persuasive. But here the government
simply took the second best first-round bid with no
rebidding; and its administrative costs in shifting the award
from Tower to Fellsway were admittedly minimal ($250). The
probation reports and the government urged the loss figure
adopted by the district judge, and the defendants while
protesting did little to undermine it. Yet the government
itself no longer supports the $88,275 figure, and we can find
no basis to sustain it on the present record.
Conversely, we reject Stern's "no loss at all" argument,
at least so far as concerns the guideline calculation. The
section 2F1.1 guideline commentary, from the 1988 version
(application note 7) to the present 1993 version (id.), has
included the "probable" or "intended" or "expected" loss
7It is true that if the Amwest bond had been a real bond
instead of a forgery, then the government would have enjoyed
the original low price; and in this sense the forgery may
seem like the cause of that loss. But there is no evidence
that Tower Associates could ever have secured a real bond by
a T-list surety or, if it could, that its bid would have been
as low. Indeed, Continental seems to have been an off-shore
"front" for contractors who could not get T-list bonding.
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threatened by a defendant's conduct as an alternative measure
of loss if that figure can be determined and is larger than
actual loss. The evident purpose of the alternative is to be
certain that attempted fraud does not escape all adjustments
based on magnitude merely because the fraud miscarried. We
think that this is just such a case where the foreseeable
loss exceeded the actual loss.
It was plainly foreseeable at the time of the fraud that
the Air Force might be deceived by the phony Amwest bond and
might finally award the contract to Tower. At that point, it
is hard to know the precise risk of loss imposed on the
government, for it would depend on many circumstances
including the likelihood that Tower would flawlessly complete
the contract. Yet "the amount of loss need not be precise,"
U.S.S.G. 2F1.1, application note 7 (1988); and, broadly
speaking, to inflict a phony construction-contract bond on
the government exposes the government to the average cost of
failure to perform the contract adjusted by the average risk
of failure to perform. That adjusted figure should also be
the approximate price of the average bond for such a project.
Of course, the pertinent figure could be higher if the
government sought to prove that Tower was a high-risk
contractor and would have been charged more for a valid bond.
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To assume that the phony bond might well be accepted is,
in a case like this one, entirely fair. It is the
defendants' intended outcome and, given possible carelessness
by administrators or merely a good forgery, it is normally a
realistic likelihood. From the standpoint of the guideline's
"intended or probable loss" criterion, we see nothing wrong
with the use of the cost of a valid bond as a fair proxy for
the potential loss caused by the uttering of the phony bond
and forged power of attorney. In this case, the potential
was not realized, but it was still intended or reasonably
likely and thus a proper measure of loss under the guideline.
Consequently, we think that the principle underlying the
first paragraph of the quoted stipulation is a legitimate
basis in this case for calculating loss under the guideline;
whether the $20,200 figure is binding on Stern is a matter
that can be resolved on remand if Stern seeks to disclaim the
stipulation.8 Of course, the government did not offer such
evidence of bond cost in the original sentencing proceeding;
but where a sentence is vacated and remanded for
redetermination under correct principles, the government is
not automatically foreclosed from offering evidence pertinent
8The district court is not required to accept a
stipulation on an issue of fact pertinent to sentencing, but
is free to do so given the apparent reasonableness of the
proposed figure. This assumes, of course, either that Stern
withdraws his disclaimer (as he would plainly be wise to do)
or that the district court decides that his initial
acceptance of the stipulation is binding in any event.
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to the newly announced rule. See United States v. Sepulveda,
1993 U.S. App. LEXIS 33020, *107 n.31 (1st Cir., Dec. 20,
1993).
Restitution is a different matter. We agree with the
government's concession that the intended or probable loss
cannot be the measure of restitution: it is one thing to
base a criminal sentence on the magnitude of threatened harm
but quite another to "restore" to the government money that
it never lost. Here, the actual loss is only the $250
administrative cost of reawarding the contract. Given the
common interrelationship between fines and restitution, we
see no reason why the government should not be allowed to
argue for a fine on remand.
Accordingly, the judgment of conviction in each case is
affirmed, and the sentence and the orders of restitution in
each case are vacated and the cases are remanded for
resentencing in accordance with this opinion. Further
proceedings on remand are for the district court to determine
in the first instance.
It is so ordered.
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