Opinion ID: 329996
Heading Depth: 2
Heading Rank: 5

Heading: defendant's dismissal from international harvester

Text: 37 In 1961, the Board of Directors of I-H adopted a conflict of interest policy. Under the policy, the company's expectation of the complete and undivided loyalty of its employees to the company was set forth. Additionally, the policy listed certain activities or interests which were considered to be in conflict with the interests of the company. 7 38 Each year, in the month of January, every officer and management employee of I-H was required to sign a card stating that he understood I-H's policy and that he had no conflicts with or exceptions to it. In the event any employee believed that he had a conflict, he was required to submit the details. The I-H law department reviewed the details and a decision was then made as to whether or not a conflict existed, and, if so, what action was required. 39 Bryza was one of the I-H employees who was required to sign a conflict of interest card. 40 In the summer of 1973, International Harvester was informed by Nicholas Polydoris of the E.N.M. Company that they had been making payments to Kenneth Bryza. After some initial investigation by Mr. Gordon Lane, the I-H manager of auditing and Mr. Robert Parker, the director of purchasing to confirm the payments, Bryza was confronted. Some time prior to the confrontation, Mr. Lane had been in charge of an audit of the purchasing department. This audit concluded that all of the contracts Bryza handled were proper and that there was no evidence to indicate that the company was not getting a full measure of service from him. 41 Upon receipt of this information from E.N.M., Lane and Parker called Bryza in and asked him about it. The defendant falsely denied knowing anything about the Post Office box, the Searsport Company or Charles W. Morgan. Bryza also falsely denied having received payments from suppliers. 42 At that point Bryza was reminded of the company's conflict of interest policy and summarily discharged. His personnel record stated that he was terminated for a conflict of interest. International Harvester has never made any demands on the defendant that he pay to them any of the monies he received through Searsport. 43 International Harvester has not taken any action against any of the suppliers who were making payments to Bryza. They continue to purchase from these same suppliers and do business with the manufacturer's representatives at about the same level as before. Indeed, as far as Marvin Nathan is concerned, his business with International Harvester has doubled. 44 II. THE DEFENDANT HAD THE REQUISITE SPECIFIC INTENT TO COMMIT AN OFFENSE UNDER THE MAIL FRAUD STATUTE. 45 Mail fraud, like all other crimes arising out of deceit or deception, requires a specific criminal intent. The burden is on the government to establish beyond a reasonable doubt that the defendant not only knowingly performed acts which the law forbids, but that he did the acts with intent to violate the law. Bryza argues that his conduct did not constitute a violation of the mail fraud statute because, in his view, International Harvester suffered no harm and he had no intent to defraud. 46 The mail fraud statute is a broad proscription of behavior for the purposes of protecting society United States v. Owen, 231 F.2d 831, 832 (7th Cir. 1956); United States v. Sylvanus, 192 F.2d 96 (7th Cir. 1951). Whether or not the defendant had the specific criminal intent to defraud is governed by the conduct and state of mind of the schemer rather than the objects of the scheme. In United States v. Faser, 303 F.Supp. 380 (E.D.La. 1969), the defendants were charged with depriving the State of Louisiana of the honest and faithful performance of their duties as public officials. The underlying scheme charged that the defendants had used their official positions to cause state funds to be deposited into non-interest bearing accounts in exchange for a kickback from the depository bank. Asserting that state funds were not required to be, nor were in fact, placed in interest bearing accounts, defendants argued that no criminal scheme was charged because of the absence of an allegation that the state was deprived of anything of value which could be measured in terms of money or property (303 F.Supp. at 383). 47 The court employed a dual analysis to reject this contention. First, it held that, on the basis of familiar agency principles, the amount of the kickback received by defendants belonged to the state and, therefore, the indictment charged, both expressly and by implication, that the state was defrauded out of a sum certain. Secondly, and of particular applicability here, the court recognized that, even in the absence of an object susceptible to measurement in terms of money or property, a mail fraud violation can be asserted where a person defrauds the State out of the 'loyal and faithful services of an employee.'  Id. at 384. 48 The faithful services rationale is applicable to the instant case and has found support in a variety of different factual situations. For example, in United States v. Proctor & Gamble Co., 47 F.Supp. 676 (D.Mass.1942), defendant companies were charged with obtaining confidential information from employees of a competitor. Upholding the viability of a mail fraud prosecution, the court focused not upon the property right represented by the information, but upon the deprivation of the employees' loyal services: 49 When one tampers with (the employer-employee) relationship for the purpose of causing the employee to breach his duty he in effect is defrauding the employer of a lawful right. The actual deception that is practised is in the continued representation of the employee to the employer that he is honest and loyal to the employer's interests 47 F.Supp. at 678. 50 United States v. George, 477 F.2d 508 (7th Cir.), Cert. denied 414 U.S. 827, 94 S.Ct. 49, 38 L.Ed.2d 61 (1973) is directly analogous to the instant case and supports the notion that a deprivation of an employee's loyal services can amount to actual fraud under the mail fraud statute. There, three defendants were indicted for substantive mail fraud violations arising from a scheme in which Yonan, a buyer for Zenith Radio Corporation received kickbacks from Greenspan, a supplier, through middleman George. The indictment alleged that the scheme deprived Zenith of its lawful money and property and of the honest and faithful performance of its employee Yonan's duties (477 F.2d at 510). 51 Because the jury in George had been instructed that a knowing interference with the employer-employee relationship for the purpose of depriving an employer of his employee's honest and faithful services could amount to criminal fraud, this Court on appeal was compelled to reach the merits of the honest and faithful services issue. Upholding the instruction, Judge Cummings' opinion recognized that either the deprivation of honest and faithful services occasioned by the acceptance of secret profits or fraudulent activities to the actual detriment of the employer sufficed under the statute. In this case defendant Bryza's failure to disclose his receipt of kickbacks and consulting fees from International Harvester's suppliers resulted in a breach of his fiduciary duties depriving his employer of his loyal and honest services. Bryza's specific intent is manifested by the actions he took in preventing his employer and others from discovering this breach of his fiduciary duty. Bryza assumed a bogus name, Charles W. Morgan, formed a phony company, and lied on his annual company statement that he had no conflict of interest. Whether or not Bryza had a specific criminal intent to defraud is clearly demonstrated by these overt acts to defraud. Simply because the employer, International Harvester, took no retributive action against the defendant does not mean that no crime was committed. Bryza argues that I-H suffered no harm and in fact still does business with the other parties who were indicted as a result of this scheme to defraud. However, as this Court stated earlier the defendant's intent must be judged by his actions, not the reaction of the mail fraud victims. International Harvester's decision not to take legal steps against Bryza and to maintain its business relationship with some of the other parties involved is probably based on a myriad of complex factors both business and legal in nature. Nevertheless, it is clear that International Harvester was deprived of Bryza's honest and faithful services in addition to the right to make the best possible purchase. Although Bryza argues he obtained the best possible contracts for his employer, I-H was entitled to negotiate those purchases with the knowledge of its employee's interest. Thus, even though I-H was satisfied with Bryza's job performance and the products he purchased for I-H from its suppliers, and despite the fact that no preferential treatment, beyond receiving business, was accorded the suppliers, that the suppliers' prices to I-H were fair and reasonable, that I-H was never shown to be dissatisfied with the suppliers' prices or products, and that Bryza insisted upon efficiency, quality and fair prices from the suppliers, Bryza's conduct nonetheless falls within the purview of the mail fraud statute. The fraud consisted in Bryza's holding himself out to be a loyal employee, acting in I-H's best interests, but actually not giving his honest and faithful services, to I-H's real detriment. See United States v. George (supra); United States v. Faser (supra); United States v. Barrett, 505 F.2d 1091 (7th Cir. 1974); United States v. Isaacs, 493 F.2d 1124 (7th Cir. 1974). 52 We believe that the evidence established that Bryza's course of conduct amounted to an actual, rather than a constructive, fraud. By his own nefarious activities, the solicitations, the setting up of Searsport, the use of the alias Charles Morgan, the deceitful conflict of interest statements, Bryza was able to defraud International Harvester of his loyal and faithful services. In our opinion his actions clearly show a specific intent and fall within the prohibition of the mail fraud statute. 53 III. THE TRIAL COURT DID NOT ERR IN INSTRUCTING THE JURY THAT THE LAW PRESUMES THAT EVERY PERSON KNOWS WHAT THE LAW FORBIDS. 54 Under our system of jurisprudence it has long been well established that every man is presumed to know the law. This principle stems from a common law inference of long-standing acceptance, 8 and is founded in the common sense concept that without it (N)o penal law could be enforced, because there is no penal law a knowledge of which, by a due degree of self-stupefaction, could not be precluded. 1 F. Wharton, Criminal Law § 102 at 142 (12th Ed.1932). 55 In this case the trial court instructed the jury that the government had the burden of proving a specific intent on the part of the defendant to commit the crime but also that the defendant would be presumed to know what the law requires and forbids unless outweighed by evidence to the contrary. 9 Bryza contends that those instructions had the effect of reducing the government's burden of proving intent citing Mann v. United States, 319 F.2d 404, 409 (5th Cir. 1963); United States v. Woodring, 464 F.2d 1248, 1251 (10th Cir. 1972); and Johnson v. United States, 348 F.2d 772 (D.C.Cir. 1965). We have reviewed the cases cited by the defendant and believe that the instructions involved in those cases differ markedly from those in the instant case. The propriety of the knowledge of the law instruction cannot be viewed in isolation but must be considered with the other charges instructing the jurors that the burden of proof never shifts from the government. Cupp v. Naughton, 414 U.S. 141, 94 S.Ct. 396, 38 L.Ed.2d 368 (1973); United States v. Bessesen, 445 F.2d 463, 468 (7th Cir. 1971). 56 Thus, the instructions about which Bryza complains properly were accompanied by an instruction to the jury that they had to find that the defendant acted with specific intent, and the concept of specific intent was fully explained, as were the terms knowingly, willfully and intent to defraud. Furthermore, the jury was fully instructed that it could consider the defendant's evidence that he acted because of ignorance of the law in determining whether he acted with the requisite specific intent. Finally, the jury was clearly told that the burden of proof rests upon the government, that it never shifts to the defendant, that the law does not require a defendant to prove his innocence or produce any evidence and that it was the jury's duty to acquit if the government failed to prove the defendant guilty beyond a reasonable doubt. We find no error in the instructions dealing with the defendant's specific intent and the presumption of knowledge of what the law requires and forbids. 57 IV. ADMISSION OF FACT THAT BRYZA'S CO-DEFENDANTS HAD PLED GUILTY WAS NOT IMPROPER UNDER THE CIRCUMSTANCES. 58 Over the defendant's objection the court permitted witness Nathan and witness Selzer to testify that they had pled guilty to the same charges for which Bryza was being tried. Prior to the testimony of Selzer and Nathan, the defendant moved to exclude any testimony concerning their pleas of guilty and their subsequent convictions and sentences. In making the motion In limine the defendant agreed to give up his right to cross-examine the witnesses concerning their pleas and therefore not to make any attempt to impeach their credibility by bringing out the convictions during cross-examination. The trial judge denied the motion. The trial judge was correct in denying the motion because defense counsel had previously brought out during the examination of Stewart Polydoris that Polydoris was involved in the scheme but not indicted. 10 As a result of this examination, the fact that the Polydoris brothers were named in the same indictment charging Bryza, but were not prosecuted for the offenses set forth therein, was clearly brought to the attention of the jurors. Thus defense counsel opened the door to the subject as a result of his cross-examination of Stewart Polydoris. Had the information that Selzer and Nathan were charged and convicted not been brought to the jury's attention, the plain inference which the jury would have been left to draw was that all parties to the charged scheme, save Bryza, were permitted by the government to go unpunished for their illegal activities. Thus, to foreclose the possibility that the jury might incorrectly believe that the government had singled out Bryza for prosecution and punishment, while permitting his co-schemers to go free, the testimony at issue properly was elicited. 59 Normally the fact that co-defendants have entered guilty pleas has no place in another defendant's trial. Guilty pleas of co-defendants should be brought to the attention of the jury in only certain narrow instances; 11 i. e., when it is used to impeach trial testimony or to reflect on a witness' credibility in accordance with the standard rules of evidence; where other co-defendants plead guilty during trial and are conspicuously absent; where opposing counsel has left the impression of unfairness which raises the issue or invites comment on the subject. In all of these situations the trial judge should give a cautionary instruction concerning the guilty pleas when he charges the jury. However, if the trial judge thinks that the admission of co-defendant's guilty pleas arose out of aggravated or egregious circumstances and that even the strongest curative instruction would be insufficient he can take more drastic action such as declaring a mistrial. Cf.: United States v. Baete, 414 F.2d 782 (5th Cir. 1969). In some cases this entire problem could be avoided by simply allowing counsel to bring out the fact that the co-defendants were indicted, thus avoiding the impression that the government is being unfair without telling the jurors that the co-defendants had actually admitted their guilt. 60 In the instant case, the testimony of Selzer and Nathan regarding their guilty pleas was very brief, was not referred to after it initially was adduced, and each time the information was brought out, the jury was carefully instructed that the fact that the witnesses pled guilty was not to be considered as any evidence of Bryza's guilt. And during the charge to the jury, the court again instructed the jurors that: 61 As I told you before, the fact that a co-defendant pleads guilty is not evidence of the guilt of this defendant or that the crime charged in the indictment was committed. The guilt or innocence of the defendant on trial must be determined by you solely by the evidence introduced in the trial of this case which has just concluded. 62 Accordingly, the defendant was fully protected against the possibility that the jury might consider the evidence of the guilty pleas in an improper manner. 63 V. THE COURT PROPERLY INSTRUCTED THE JURORS CONCERNING AN EMPLOYEE'S DUTY OF DISCLOSURE AND CONFLICT OF INTEREST. 64 Defendant argues that the instructions given by the trial judge all but told the jurors to return a guilty verdict; that instructions 55 through 57 effectively destroyed Bryza's defense contentions that there was no intent to defraud; that his activities did not amount to a scheme to defraud; and that he had no inkling that he was violating federal law. 65 We have reviewed the instructions 12 given and believe that they were proper when considered in the total context of this case. The duty of disclosure instruction was predicated upon the George (Supra ) case which, as previously discussed, plainly includes a duty not to conceal facts known to him which he has reason to believe are material to the employer's conduct of its business and affairs. Bryza's duty of disclosure in this case was predicated upon the right of I-H, as set forth in its policy, to do business with its suppliers in possession of all relevant facts. Bryza's receipt of monies from I-H suppliers, while at the same time, he denied that he had any conflicts of interest, constituted material misrepresentations and involved the concealment of material facts which in and of themselves were violations of the mail fraud statute. 66 The duty of disclosure instruction did not, as Bryza contends virtually direct the jury to find him guilty. Rather, the instruction simply stated that the jury may find the existence of a scheme within the meaning of the mail fraud statute if it should find from all the evidence, that Bryza devised a plan in which he would breach his duty of disclosure. The instruction, moreover, must be considered in the context in which it was given. Viewing it together with the court's charge on specific intent, it clearly did not direct the jury to return a guilty verdict. 67 Finally, the court's instruction to the jury on the definition of a conflict of interest was quite proper. Throughout the trial of the case, the jury heard testimony regarding conflicts of interest. They had a right to know what the definition of that term was. The instant instruction did no more than explain in plain language the meaning of a conflict of interest. 68 Since the charge to the jury with respect to the meaning of a conflict of interest and Bryza's duty of disclosure accurately reflects the state of the law, and because the charge required a finding of specific intent to defraud as a prerequisite to a finding of guilt, no error can be attributed to the instructions here at issue. 69 Finally, the defendant offered four instructions which the trial court refused to give to the jury, i. e. (1) it was not per se illegal for Bryza to accept these payments, or (2) to use an assumed name; (3) that Bryza's entire employment relationship with I-H and (4) the quality and price of the items purchased could be considered on the issue of defendant's intent to defraud. Even assuming that there is nothing inherently wrong with these instructions, we do not believe that the trial judge's refusal to give the tendered instructions amounted to reversible error. The trial judge had observed the entire case before ruling on instructions. Thus we must rely on his discretion in refusing the instructions. Perhaps, as the government argues, the trial court believed that giving those instructions would unduly single out and emphasize pieces of evidence. A review of the record shows that the trial court allowed Bryza to show his capable service to I-H, the high quality of goods received, and the alleged reasonableness of prices paid. Thus the proposed instructions would merely attempt to emphasize portions of the evidence rather than instruct the jurors as to the law. The court had the discretion to refuse the instructions. Blauner v. United States, 293 F.2d 723 (8th Cir.), Cert. denied 368 U.S. 931, 82 S.Ct. 368, 7 L.Ed.2d 193 (1938); United States v. Terry, 362 F.2d 914 (6th Cir. 1966); United States v. Thomas, 484 F.2d 909 (6th Cir.), Cert. denied 415 U.S. 924, 94 S.Ct. 1428, 30 L.Ed.2d 480 (1973). 70 Accordingly, the judgment of conviction is affirmed. 71 Affirmed.