Source: https://law.justia.com/cases/federal/appellate-courts/F3/141/463/554218/
Timestamp: 2020-01-21 15:11:17
Document Index: 691170637

Matched Legal Cases: ['§ 1031', '§ 1344', '§ 2', '§ 5', '§ 7', '§ 14', '§ 14', '§ 1502', '§ 2', '§ 2', '§ 3231', '§ 1291', '§ 3742']

United States of America v. Samir K. Sain, Appellant No. 97-3114.united States of America v. Advanced Environmental Consultants, Inc., Appellant No. 97-3115, 141 F.3d 463 (3d Cir. 1998) :: Justia
Justia › US Law › Case Law › Federal Courts › Courts of Appeals › Third Circuit › 1998 › United States of America v. Samir K. Sain, Appellant No. 97-3114.united States of America v. Advance...
United States of America v. Samir K. Sain, Appellant No. 97-3114.united States of America v. Advanced Environmental Consultants, Inc., Appellant No. 97-3115, 141 F.3d 463 (3d Cir. 1998)
U.S. Court of Appeals for the Third Circuit - 141 F.3d 463 (3d Cir. 1998) Argued Jan. 22, 1998. Decided April 10, 1998
This complex fraud case arises out of an approximately $7-million contract between the United States Army and AEC, pursuant to which AEC built, owned, and operated a waste-water treatment plant at the Army Depot at Tooele, Utah. AEC is an environmental consulting company headquartered in Pittsburgh and incorporated in Pennsylvania. Sain has a masters degree in engineering and several credits toward a doctorate, is a licensed professional engineer, and is the sole shareholder and president of AEC.2 It is well established that, because the jury returned guilty verdicts in the district court, this Court must construe the evidence in the light most favorable to the Government. See, e.g., Glasser v. United States, 315 U.S. 60, 80, 62 S. Ct. 457, 469-70, 86 L. Ed. 680 (1942); United States v. Cooper, 121 F.3d 130, 133 (3d Cir. 1997). Following is a statement of facts which the jury could have found based on the trial evidence.
Sain first argues that the district court erred in denying his motion for a judgment of acquittal on the ground that the evidence did not prove that he engaged in a fraudulent scheme. We address Sain's sufficiency of the evidence argument first because, if he is correct, we would be required to order the district court to enter a judgment of acquittal on all counts, eliminating the need to consider any of his other arguments. See Burks v. United States, 437 U.S. 1, 17-18, 98 S. Ct. 2141, 2150-51, 57 L. Ed. 2d 1 (1977).
A criminal defendant seeking reversal of his conviction based on a claim of insufficiency of the evidence bears a very heavy burden. Cooper, 121 F.3d at 133; Coyle, 63 F.3d at 1243. This Court must "affirm the convictions if a rational trier of fact could have found the defendant guilty beyond a reasonable doubt, and the verdict is supported by substantial evidence." Coyle, 63 F.3d at 1243 (citations omitted). If there is substantial evidence to support the jury's verdict, we will not reverse even though we might have made a different decision based on the evidence. Cooper, 121 F.3d at 133; United States v. Hannigan, 27 F.3d 890, 892 (3d Cir. 1994).
We need not decide whether to follow Brooks or Nadi, because we conclude that there was only one contract in this case. The contract modifications pointed to by Sain were simply that--modifications of the approximately $4.5 million original contract which ultimately increased in value to approximately $7 million. As modifications, they were not separate contracts and did not stand on their own; they merely changed some of the terms of the original contract. The modifications incorporated and referred back to the terms of the original contract, explicitly stating that that contract remained in effect. Each modification states that it is a "modification of contract/order no. DAAC89-88-C-0008 [the original contract]," but did not reduce the Government's financial liability under the contract. To the contrary, the modifications increased the total liability to almost $7 million. The modifications also state that " [a]ll other terms and conditions in the contract remain the same." Thus, the jury reasonably relied on this language in the modifications in concluding that even though Sain used the modifications to defraud the Army, the fraud intrinsically involved the approximately $7 million contract.
Sain next argues that the indictment improperly charged him with a separate violation of the Act for each false claim he submitted. He claims he should have been charged only with a single count predicated on his devising the overall fraudulent scheme. Because this claim requires interpretation of a statute, we exercise plenary review. See United States v. Cross, 128 F.3d 145, 147 (3d Cir. 1997).
By its plain language, the statute criminalizes each knowing "execution " of the fraudulent scheme and not simply devising the fraudulent scheme itself. (Emphasis added). The statute's contemplation that defendants could be convicted of "multiple counts" supports this reading. See 18 U.S.C. § 1031(c) (providing for a maximum fine of $10 million for defendants convicted of "multiple counts"). Our reading of the statute is consistent with this and other circuits' interpretation of the bank fraud statute, 18 U.S.C. § 1344,5 which contains language virtually identical to the Major Fraud Act. "The circuits that have addressed multiplicity in the context of bank fraud have consistently held that the ... statute 'punishes each execution of a fraudulent scheme rather than each act in furtherance of such a scheme.' " United States v. Harris, 79 F.3d 223, 232 (2d Cir. 1996) (collecting cases from the Third, Fifth, Seventh, Ninth, and Tenth circuits), cert. denied, --- U.S. ----, 117 S. Ct. 142, 136 L. Ed. 2d 89 (1996); see United States v. Schwartz, 899 F.2d 243, 248 (3d Cir. 1990); United States v. Rimell, 21 F.3d 281, 287 (8th Cir. 1994).
Sain next argues that he cannot be convicted of violating the Act because the Act only permits conviction of an entity or individual that actually contracted with the United States, and AEC, not Sain, was the contracting party. The indictment alleged that Sain aided and abetted AEC in the commission of the violations of the Act. See 18 U.S.C. § 2.6 Sain contends that he cannot be convicted under the theory that he aided and abetted AEC in violating the Act because he owned and completely controlled AEC. According to Sain, there is no other entity for him to aid or abet because his ownership and control of AEC merge him and corporation into a single entity. Sain relies on United States v. Stevens, 909 F.2d 431 (11th Cir. 1990), which holds that an individual agent of a corporation cannot be convicted of conspiracy when the only other possible party to the conspiracy is the agent's corporation. This is a legal argument, and we exercise plenary review. See United States v. Jefferson, 88 F.3d 240, 241 (3d Cir.), cert. denied, --- U.S. ----, 117 S. Ct. 536, 136 L. Ed. 2d 421 (1996).
Although a corporation has certain limitations imposed by the particular statute permitting its creation, it is a separate legal entity, with an existence "independent of individuals who compose it." William M. Fletcher, Fletcher Cyclopedia of the Law of Private Corporations § 5, at 441 (Permanent ed.1990); see also Wooddale, Inc. v. Fidelity and Deposit Co. of Maryland, 378 F.2d 627, 631 (8th Cir. 1967). A corporation is not in reality a person, but the law regards it as "distinct and separate from the individual stockholders. It has a real existence with rights and liabilities as a separate legal entity." Fletcher § 7, at 445. This is true even if a single individual owns and controls all of the corporation's stock. See id. § 14, at 463.
One of the principal reasons why individuals choose the corporate form is that it is a separate entity and offers protection from personal liability for its debts. See Walkovszky v. Carlton, 18 N.Y.2d 414, 276 N.Y.S.2d 585, 586-87, 223 N.E.2d 6, 7 (1966) ("The law permits the incorporation of a business for the very purpose of enabling its proprietors to escape personal liability"). Like individuals, corporations may sue and be sued, enter into contracts, see N.J. Stat. Ann. § 14A:3-1(1) (listing duties and privileges of corporation); 15 Pa. Con. Stat. Ann. § 1502(a) (2) (same), and be separately convicted of and sentenced for criminal offenses. See United States v. Hughes Aircraft Co., Inc., 20 F.3d 974, 978 (9th Cir. 1994). AEC, because it is a corporation, is a separate legal entity, even though Sain owned all the stock. Thus, it has the capacity of being aided and abetted. To hold otherwise would allow the controlling stockholder of a corporation to enjoy the benefits of the corporate form, protection from personal liability for corporation's debts, without accepting the burden of assuming criminal responsibility when the individual causes the corporation to commit a crime. Indeed, Sain, by his conduct, recognized and exploited AEC's existence as a separate entity; he caused AEC to sign the contract with the Army in order to protect himself from personal liability. If a corporation is permitted to perform the wide range of functions listed above, we see no reason why it cannot be used by its officers and agents to commit a crime as contemplated by 18 U.S.C. § 2(b).
Even assuming that Sain is correct that it was impossible for him to conspire with AEC, that conclusion does not preclude imposition of aiding and abetting responsibility. Arguably, Sain could not conspire with AEC because AEC could not form the mental state required to conspire with another. This is because a corporation is a conspirator only pursuant to respondeat superior liability. If an agent of the corporation conspires with another individual, the corporation for which the individual is the agent may be criminally liable. However, there must be at least two natural individuals for a conspiracy involving a corporation to exist because two entities must have the required mental state to form a conspiracy. The aiding and abetting statute allows for broader liability and does not require proof that an unwitting entity being used to commit the crime possessed any mental state. See 18 U.S.C. § 2(b) ("Whoever willfully causes an act to be done which if directly performed by him or another would be an offense against the United States, is punishable as a principal."); see also United States v. Curran, 20 F.3d 560, 567 (3d Cir. 1994) ("A defendant charged under section 2(b) with willfully causing another person to file a false report, can be convicted even if that intermediary was unaware that the document was inaccurate.") (citations omitted). Only the person causing the unwitting entity to act must possess the knowing mental state. See 20 F.3d at 567. Therefore, an individual who causes a corporation to commit a crime is criminally liable for the corporation's criminal conduct as an aider and abettor even if the corporation does not act with a knowing mental state. United States v. Dotterweich, 320 U.S. 277, 284, 64 S. Ct. 134, 138, 88 L. Ed. 48 (1943). For that reason, conviction of Sain was proper even assuming arguendo that Sain caused AEC to unwittingly commit the crime. Thus, the district court committed no error in sustaining Sain's conviction as an aider and abettor.
Sain next argues that the district court erred when it refused to admit the testimony of defense expert James Foster, a metallurgist, on the ground that Foster's testimony was irrelevant and confusing. According to Sain's proffer, Foster would have testified that it was against Sain's interest to perform unnecessary carbon change outs because the change outs damaged the adsorbers. Foster also would have testified that he observed signs that carbon had collected on the sides of the adsorbers and had been scraped from that position. This second aspect of Foster's testimony would have rebutted the Government's suggestion that Sain allowed the carbon to build up along the inside of the tanks making his calculation of the amount of his use of carbon based on volume inaccurate. This court reviews the district court's conclusion to exclude evidence for abuse of discretion. United States v. Eufrasio, 935 F.2d 553, 571-72 (3d Cir. 1991).
The district court had subject-matter jurisdiction of the case pursuant to 18 U.S.C. § 3231. This Court has appellate jurisdiction pursuant to 28 U.S.C. § 1291 and 18 U.S.C. § 3742(a) (2)
Section 2 provides: "(a) Whoever commits an offense against the United States or aids, abets, counsels, commands, induces or procures its commission, is punishable as a principal [;] (b) Whoever willfully causes an act to be done which if directly performed by him or another would be an offense against the United States, is punishable as a principal."