On Appeal from the United States District Court for the Middle District of Pennsylvania - Scranton D.C. Criminal Nos. 84-00156-04, 84-00156-05
Before: HUNTER, MANSMANN, Circuit Judges, and POLLAK,*fn* District Judge
1. XET, Ltd. d/b/a CTA, Ltd., Computer Technology Associates, Inc., John R. Torquato, Jr., William T. Smith, Alan R. Stoneman, Judy Ellis, and David Herbert were charged in an thirty-nine count indictment with conspiracy, 18 U.S.C. § 371 (1982), fifteen violations of the Interstate Transportation and Aid of Racketeering ("I.T.A.R." or "Travel Act") statute, 18 U.S.C. § 1952(a)(3) (1982) and the mail fraud statute, 18 U.S.C. § 1341 (1982). The indictment outlined a conspiracy involving fifty-one overt acts, seven mail fraud violations, and nine I.T.A.R. violations.
2. The conspiracy count alleged that the defendant sought to obtain Federal Insurance Contribution Act ("FICA") recovery contracts*fn1 from state and local entities, not by placing bids, but by bribing public officials with cash, stock, stock options, campaign contributions, employment, and paid travel. The defendants directed their efforts at obtaining the contracts for Allegheny County, the City of Pittsburgh, and the Pennsylvania school employees. The indictment alleged that the conspiracy existed from January 1983 until October 22, 1984.
3. Torquato, Ellis, and Herbert entered guilty pleas to various counts. Smith and Stoneman pleaded not guilty to all counts. Their trial began on March 26, 1985 and was completed on June 24, 1985. At trial, the government called twenty-two witnesses against Smith and Stoneman, including their principal witness, Torquato, to support the government's allegations that Smith had offered a total of $400,000 in bribes to the Treasurer and Attorney General of Pennsylvania and that Stoneman had participated in the bribery scheme. The defendants called eighty-eight witnesses including many public officials who had dealt with Torquato on the FICA recovery contracts.
4. The jury found Smith guilty of conspiracy, four counts of mail fraud and four I.T.A.R. counts. Stoneman was found guilty only of conspiracy. The court sentenced Smith, who could have received up to two million dollars from the scheme, to a twelve-year prison term and a $63,000 fine. Stoneman was sentenced to a prison term of four months and fined $10,000. The government presented no evidence that Stoneman was to receive any payment other than his usual attorney fees.
5. In early 1983, Smith and Torquato met to discuss how to obtain Pennsylvania state contracts to recover overpaid Social Security taxes. The two had been friends and business associates for over twenty years. Torquato is the son of a former Democratic County Chairman of Cambria County. Smith was then the Republican Chairman of Dauphin County. They agreed to make political contributions to officials in a position to award the contracts. Torquato introduced Smith to David I. Herbert, the State Director for Social Security, who controlled FICA recovery for Pennsylvania's public employees. The three men discussed other political subdivisions where they might obtain contracts. From January 1983 to October 1984, Smith and Torquato concentrated on obtaining contracts for Allegheny County, the City of Pittsburgh, and Pennsylvania state employees.
6. CTA, Ltd. obtained and performed a contract for FICA recovery for Allegheny County. This company had been formed by Stoneman on November 29, 1982. Torquato sent a copy of the proposal to Smith for review and wrote to him about contracts in other areas. Torquato paid $852.00 for James Scanlon, head of Allegheny County Computer Services, to take a trip to New York with his family. Stoneman paid this bill on August 31, 1983. Scanlon recommended that CTA, Ltd. be given the contract over other companies giving lower bids. Stoneman executed the contract on behalf of CTA, Ltd.
7. Torquato offered Gene Scanlon, James Scanlon's brother, a number of benefits including a $50,000 a year job at CTA, Ltd. for Jim Scanlon, mailing lists for his daughter's business, use of a rented car, payment for an airline ticket, and finally $100,000 to set up a "widget factory" in Hong Kong. Allegheny County paid CTA, Ltd. for the contract in November 1983. The next month, Torquato sent Smith $1,000 for his services along with a letter discussing how to influence Herbert.
8. Stoneman set up a California corporation, Com-Max, Inc., on January 5, 1984, but did not file the corporate documents that would have identified the officers of the corporation and disclosed its connection to CTA, Ltd. He sent 1,500 shares of Com-Max, Inc. to Herbert on January 22, 1984 with a letter stating that the stock would be bought back in three years for a at least $15,000. A similar letter plus 1,500 shares was set to Scott O'Donnell, Chief Clerk of Allegheny County.
9. CTA, Ltd. also obtained a FICA recovery contract for the employees of Pittsburgh. The company was to be paid $150,000 even though another contractor, who eventually did the job for the city, had bid $35,000. In fact, after CTA, Ltd. obtained the contract. Torquato hired this bidder as a subcontractor to do the work for $35,000. Stoneman sent Robert Rade Stone, president of the Pittsburgh City Council, a $6,374.86 check drawn on Stoneman's own bank account and stock options for 35,000 shares of Com-max stock. Stoneman also sent stock options for 25,000 shares to Richard Schmeiser, Director of Finance for the City of Pittsburgh. Some of the profits from the FICA contracts were to be used to make the Com-Max stock valuable and therefore to benefit the public officials who were given Com-Max stock and stock and options.
10. During 1983, the defendants tried to obtain the FICA recovery contract for all Pennsylvania state employees. Torquato and Smith wanted a fee of $8,000,000 for the job. In November 1983, however, they discovered that the contract was to be performed in-house at a cost of $300,000. To secure the contract, Smith and Torquato had visited the Republican State Chairman, Robert Asher, in July 1983 and offered him $500,000 from the contract for the Republican party. They decided that in order to obtain the FICA recovery contracts, they needed to have jurisdiction over the contracts moved from the governor to the State Treasurer, R. Budd Dwyer, a friend of Smith's. Smith met with Senate Minority Whip Eugene Scanlon, David Herbert, and Jim Scanlon to discuss legislation to accomplish the change. After the legislation passed, Torquato purchased $500 worth of tickets to House Majority Leader Jim Manderino's fund raiser.
11. Torquato and Smith met with the Treasurer of Pennsylvania on March 2, 1984, and discussed a $300,000 payment to be divided among the Treasurer, the Treasurer's reelection campaign, and the Republican State Committee. Herbert continued to aid Torquato and Smith and on May 10, 1984 the Treasurer awarded the Pennsylvania contract to the Pennsylvania company formed by Smith in April 1984, Computer Technology Associates, Inc. Herbert was to be given $100,000 in a Swiss bank account. The contract, awarded on a no-bid basis, would have generated $4,000,000 in profit, to be split between Smith, and Torquato, at an expense to the Commonwealth of $6,000,000. The contract was ultimately performed by an accounting firm, Levin-Horwath, for $1,300,000 with a possibility of up to thirty-five percent being rebated.
12. To avoid any competition in collecting FICA overpayments, Smith attempted to obtain a ruling from the Attorney General of Pennsylvania, Leroy Zimmerman, that the contract was exclusive. Smith told Patrick Boyle, press Secretary to the Attorney General, that Torquato would give $100,000 to the General, that Torquato would give $100,000 to the Attorney General's reelection campaign. The Attorney General ruled that the Treasurer's Counsel could decide the issue. The Treasurer's Counsel then ruled that the contract was exclusive.
13. When Smith and Torquato heard that their contract might be investigated, they were concerned that officials might discover that Com-Max was a holding company for CTA, Inc., the company handling the school employees contract. In June 1984, Smith formed a new corporation. Application Software Systems, Inc. (A.S.S.I.). The FBI searched Torquato's residence on July 6, 1984, and found records of payments to be made to various Pennsylvania officials. The defendants were indicated on October 22, 1984.
III. VARIANCE BETWEEN THE INDICTMENT AND THE PROOF
14. Smith and Stoneman claim that the conspiracy charged in the indictment impermissibly varied from the evidence at trial because the evidence proved multiple conspiracies. There are two possible ways in which the evidence at trial may vary from the indictment. First, an amendment may alter the terms of the indictment and, therefore, constitute a per se violation of the fifth amendment grand jury clause. See Stirone v. United States, 361 U.S. 212, 217, 80 S. Ct. 270, 4 L. Ed. 2d 252 (1960); United States v. Castro, 776 F.2d 1118, 1121 (3d Cir. 1985); United States v. Somers, 496 F.2d 723, 743 (3d Cir.), cert. denied, 419 U.S. 832, 95 S. Ct. 56, 42 L. Ed. 2d 58 (1974). Second, a variance may exist if the evidence at trial proves facts different from those alleged in the indictment. The evil of a variance is that defendants may be deprived of notice of the charges against them and may be subject to double jeopardy. See Gaither v. United States, 134 U.S. App. D.C. 154, 413 F.2d 1061, 1071 (D.C.Cir. 1969). Variances are not subject to the Stirone per se rule. They are examined on a case-by-case basis and constitute reversible error only if the defendant was prejudiced. See Castro, 776 F.2d at 1121; Somers, 496 F.2d at 743. The Supreme Court recently considered the variance issue in United States v. ...