# Petition — Huber v. United States

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## Record

- **Collection:** Supreme Court brief
- **Document type:** Petition
- **Published:** January 1, 1980
- **Citation:** 445 U.S. 927

## Text

Supreme Court - the Wnithd States :

OCTOBER TERM, 1970

No. ° @9- 896

.*
bs

KARL R, HUBER,
Petitioner,

v.

UNITED STATES OF AMERIOA,
Respondent,

PETITION FOR A WRIT OF CERTIORARI TO
THE UNITED STATES COURT OF APPEALS
FOR THE SECOND CIRCUIT

i iS

— ti = => _ —

No.
Karu R. Huser, )
Petitioner,
v.
Unrrep Status or AMERICA,
Respondent.

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vv

PETITION FOR A WRIT OF CERTIORARI TO
THE UNITED STATES COURT OF APPEALS
FOR THE SECOND CIRCUIT

The Petitioner, Karl R. Huber, prays that a Writ of
Certiorari issue to review the judgment entered on October
10, 1979, by the United States Court of Appeals for the
Second Circuit, denying a petition for rehearing contain-
ing a suggestion for rehearing en banc, following an origi-
nal decision and order of the United States Court of Ap-
peals for the Second Circuit on July 20, 1979, affirming
Petitioner’s convictions for federal criminal offenses in
proceedings entitled United States of America, Appellee,
vs. Karl R. Huber, Appellant, Docket No. 79-1132.

Opinion Below

The Opinion of the United States Court of Appeals for
the Second Circuit affirming Petitioner’s ¢onvictions is re-
ported at 603 F.2d 387, and reproduced in the Appendix

2

at page la. The Orders of the United States Court of
Appeals for the Second Circuit denying rehearing and re-
hearing en banc are reproduced in the Appendix beginning
at page 29a.

Jurisdiction

The judgment of tir Court of Appeals was entered on
July 20, 1979. A petition for rehearing containing a sug-
gestion for rehearing en banc was denied October 10, 1979.
This Court extended the time within which to file Peti-
tioner’s petition for a writ of certiorari to and including
December 10, 1979. The jurisdiction of this Court is in-
voked under Title 28, United States Code, § 1254(1).

Questions Presented

1. May a defendant be convicted and his interest in
seven business corporations and subsidiary legal entities
forfeited under the racketeer influenced and corrupt organi-
zation (RICO) statute, 18 U.S.C. $§ 1961 e¢ seq., where the
trial court’s charge to the jury authorized it to conclude
that all seven entities constituted a single enterprise and
were subject to forfeiture if the jury found that the defend-
ant merely owned them all, without regard to whether the
affairs of each of the entities were conducted “through a
pattern of racketéering activity,” so long as the affairs of
at least one of the seven entities were so conducted?

2. Is an indictment purporting to allege a single vio-
lation of the RICO statute duplicitous where the enterprise
alleged consists of seven different business organizations,
and the evidence fails to establish the existence of any
single set of activities or affairs common to all of the mem-
bers of the group?

A eg ee

3

3. Is the evidence sufficient to sustain a conviction under
the RICO statute, and the forfeiture of parent or holding
corporate entities where the evidence shows only that the
affairs of subsidiary corporations were operated through
a “pattern of racketeering activity”?

4. May the reiteration of the same false statement on
more than one occasion be used to justify multiple viola-
tions of $1001 of Title 18, United States Code, and the
imposition of cumulative punishment?

Statutory Provisions

Title 18, United States Code, Section 1001
§ 1001. Statements or entries generally

Whoever, in any matter within the jurisdiction of any
department or agency of the United States knowingly and
willfully falsifies, conceals or covers up by any trick, scheme,
or device a material fact, or makes any false, fictitious or
fraudulent statements or representations, or makes or uses
any false writing or document knowing the same to contain
any false, fictitious or fraudulent statement or entry, shall
be fined not more than $10,000 or imprisoned not more
than five years, or both.

Title 18, United States Code, Section 1961(4)
§ 1961. Definitions
As used in this chapter—

(4) “enterprise”? includes any individual, partnership,
corporation, association, or other legal entity, and union
or group of individuals associated in fact although not a
legal entity;

Title 18, United States Code, Section 1962(c)
§ 1962. Prohibited activities

4

(c) It shall be unlawful for any person employed by
or associated with any enterprise engaged in, or the
activities of which affect, interstate or foreign commerce
to conduct or participate, directly or indirectly, in the
conduct of such enterprise’s affairs through a pattern of
racketeering activity or collection of unlawful debt.

Title 18, United States Code, Section 1963(a) &.

§ 1968. Criminal penalties

(a) Whoever violates any provision of § 1962 of this
chapter shall be fined not more than $25,000 or imprisoned
not more than 20 years, or both, and shall forfeit to the
United States (1) any interest he has acquired or main-
tained in violation of §1962, and (2) any interest in,
security of, claim against, or property or contractual
right of any kind affording a source of influence over, any
enterprise which he has established, operated, controlled,
conducted, or participated in the conduct of, in violation
of $1962.

Statement of the Case

The Petitioner, Karl R, Huber, was convicted in the
United States District Court for the Southern District
of New York of one count of conspiracy, in violation of
Title 18, United States Code, Section 371, 19 counts of
having caused the making of false statements, in violation
of Title 18, United States Code, Sections 1001 and 2.
eight counts of mail fraud, in violation of Title 18, United
States Code, Section 1341, one count of perjury before a
grand jury in violation of Title 18, United States Code,
Section 1623, and one count of having participated in the
affairs of an enterprise through a pattern of racketeering
activity, in violation of Title 18, United States Code,

A a RE ND AN Ra a a ntl tae pa Nii

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Section 1962(c).* On March 20, 1979, Petitioner was
sentenced to concurrent terms of three years of imprison-
ment on the conspiracy and false statement counts, and
concurrent two years terms of imprisonment on the mail
fraud counts, such periods of incarceration to run con-
currently with the sentences imposed for conspiracy and
false statements, and to a period of one year of incar-

‘ceration on the perjury count, to run consecutively to

the sentences imposed on the remaining counts. In addi-
tion, the Court imposed cumulative fines of $5,000 each
on the conspiracy and false statement counts and $1,000
each on the mail fraud counts, for a total of $108,000.
The Court further directed the forfeiture of all of the
defendant’s right and interest in the seven business
organizations identified in the racketeering count, and di-
rected that the Attorney General of the United States
seize all property or interests of the defendant in those
entities subject, however, to the defendant’s right to re-
deem and repossess himself of such Property and prop-
erty rights upon his payment to the Attorney General of
cash or property satisfactory to the Attorney General
having the value of $100,000, pursuant to 18 U.S.C.
§§ 1963(a) and (b). In addition, the costs of prosecution
were charged to the defendant.

Statement of Facts

1. The structure of State and Federal funding pro-
grams: Under a variety of different State and Federal
programs, during the 1970’s, funds were made available

* Prior to the empaneling of the petit jury, the government
moved to dismiss four counts charging the defendant with vio-
lating 18 U.S.C. § 1001 and one count of mail fraud. Prior to
submission of the case to the jury, the District Court granted the
defendant’s motion, pursuant to Rule 29 of the Federal Rules of
Criminal Procedure, for a judgment of acquittal on all six counts
of the indictment which had alleged the defendant with having
transported stolen money across state lines in violation of 18 U.9.C.
§ 2314.

6

to eligible hospitals, nursing homes, and other health-related
institutions to constsruct and furnish new facilities and
renovate or rehabilitate old ones. Federal funds for these
purposes were made available under the auspices of the
Department of Health, Education and Welfare through the
Hill-Burton program. (Tr. 87-89)* In the State of New
York, similar funds are provided by the State Department
of Health under financing arrangements set forth in
Articles 28A and 28B of the New York State Public Health
Law. (Tr. 113-115) Each of the hospitals named in the
indictment, Alexian Brothers Hospital, Columbus Hospital,
Greater Paterson General Hospital, Long Island College
Hospital, Point Pleasant Hospital, Saint Clare’s Hospital,
and Wyckoff Heights Hospital, availed themselves of the
benefits of these programs in order to obtain funding for
construction, reconstruction and modernization projects
between 1971 and 1973. (Tr. 89; 115; 414; 595; 755)

In addition,to receiving funds through various grant and
loan programs, each of the seven hospitals identified in the
indictment was eligible for Medicare and Medicaid reim-
bursement for certain costs and expenses related to the
treatment of patients eligible to received. Medicare and
Medicaid benefits. (Tr. 53; 712; 755; 773) Among the costs
and expenses thus reimbursed was the depreciation on
capital assets used in the care and treatment of eligible
individuals. (Tr. 681) At the conclusion of each year,
each of the hospitals submitted a “Cost Report” setting
forth, among other things, an amount of depreciation on
capital assets which, in turn, was derived as a function of
the historical cost of the asset divided by its useful life.
(Tr. 56; 175-76; 446; 618) ‘These cost reports were sub-
mitted to various insurance companies under the contract
with the Department of Health, Education and Welfare to
act as intermediaries between the hospital providers and

* Parenthetical numerical references are to pages of the trial
transcript.

7

the Department of Health, Education and Welfare. On
the basis of the cost reports, these insurance companies
or “fiscal intermediaries” determined the prorated amount
of per diem reimbursement to be received by each hospital
in the next following fiscal year. (Tr. 68-72; 176-31 ; 711-23,
755-60)

2. The medical companies: Hospital Equipment Com-
pany (HEC) was engaged in the business, primarily, of
selling soft goods and disposable supplies to hospitals,
nursing homes, and other health related facilities. (Tr. 940)
A division of the company, to become known as “Medical
Facilities,” was engaged in the business of planning, design-
ing, and equipping the interiors of newly constructed or
renovated hospitals and nursing homes. (‘Tr. 1073-75)
Medical Facilities provided a complete package of services.
Its staff designers planned entire interior hospital layouts
including the selection of wall coverings, carpeting, drap-
eries, and other fixtures, and it sold all of the furniture
items necessary to completely furnish and equip hospitals
and nursing homes, with the exception of major medical
machinery, such as X-ray equipment, and other sophisti-
cated diagnostic hardware. (Tr. 1080-84)

Between 1971 and 1972, HEC entered into contract agree-
ments with the hospitals identified in the indictment, accord-
ing to which HEC was to provide complete planning and
design services to the hospitals and was to sell to them
furniture and equipment for patient rooms, offices, common
areas, and the like. Under the terms of these contracts or
“letter agreements,” the hospital was to be charged a price
equal to the company’s cost of acquiring furniture, fix-
tures, and equipment plus a percentage of cost ranging
between 5 and 8 percent. In addition, ‘freight charges
actually incurred by the company were to be passed on to
the hospitals. (Tr. 152; 252-3; 412-14; 599-600 ; 671-72)

In 1973, the business of Medical Facilities Division of
HEC was taken over by Debs Hospital Supplies, Inc., a

8

Chicago-based business engaged in essentially the same ac-
tivities as HEC. (Tr. 3025; 4817) Later, this business was
conducted by a corporation created out of the former Med-
ical Facilities Division of Debs Hospital Supplies, Inc.
(Debs) and a subsidiary of Debs known as Hospital Furni-
ture, Inc. The new corporation was known as Hospital
Furniture/Medical Facilities, Inc. (Tr. 2498-2500)

3. The scheme to defraud: Although the terms of the
letter agreements required that furniture and equipment
be sold by HEC or a successor company to the hospitals
at the company’s cost plus a stated percentage of between
five and eight per cent, the hospitals were in fact charged
a price substantially in excess of that which would have
been arrived at if calculated according to this formula.
Actual manufacturers’ invoiced prices to the company were
inflated by approximately 20 to 30 per cent, and the con-
tract formula of five to eight per cent was then added on
to this inflated price, the entire cost being passed on to the
hospitals. In addition, freight charges not actually in-
curred by the company, known as free freight or phantom
freight, were billed to the hospitals. (Tr. 1176; 2591-92;
2606-07)

4. The conspiracy: Peter Conroy and Anthony Eckert
were the principal salesmen for the Medical Facilities Divi-
sion of HEC, and one or the other or both of them signed
or negotiated all of the ‘‘cost plus” agreements with the
six* hospitals named in the indictment. Conroy and
Eckert each received commissions equal to approximately
30 per cent of the gross profit earned on each contract, and
each of them acknowledged, at trial, that it was not his
intention to carry otit the cOntradts with the indictment
hospitals according to their terms, but rather, to engage in

~ @ systematic course of conduct designed to artificially in-

flate costs and thus increase the profit to be made on each
contract. (Tr. 1179; 3242; 3655; 3681-84) In addition, Con-

* Counts relating to one of the original seven hospitals named
were dismissed prior to the empaneling of the petit jury.

| A ID Ie i ah APES Nat ved a

9

roy and Kckert received commissions equal to 50 per cent
of the non-existent freight charges, or phantom freight,
charged to the hospitals. (Tr. 3244; 3634)

Petitioner, Karl R. Huber, and his father, Karl Huber,*
were officers and principals of HEC and Debs, and owned
these entities indirectly through their control of other cor-
porations. Prior to November 1, 1971, HEC had been a
division of Esterline Corp., a large publicly held corpora-
tion. (Tr. 887-89) On November 1, 1971, Tudor, Inc., an
investment holding company wholly controlled by the
Huber family, acquired all of the outstanding stock of
HEC. (Tr. 4006-08) Viewed in the light most favorable
to the Government, the evidence showed that Petitioner
became aware of the disparity between the actual 20 to 30
per cent gross profit margin earned by HEC on its con-
tracts with various hospitals and the contract formulations
which called for gross profit margins on the order of five
to eight per cent shortly after Tudor’s acquisition of HEC.
The evidence further showed that Karl R. Huber and Karl
Huber involved themselves in the business affairs of HEC,
and that both were familiar with the day to day operations
of the company. (Tr. 1050-54; 1573) The dual signatures
of Karl Huber and Karl R. Huber were required in order
to disburse funds out of the company’s principal checking
account.

The evidence further showed, viewed in the light most
favorable to the Government, that Petitioner encouraged
the inflation of invoiced prices and the charging of falsified
amounts for freight, and that Petitioner’s father, co-
defendant Karl Huber, invented the term ‘phantom
freight.” (Tr. 3148-49; 3628) The principal area of ac-
tivity of Kar] R, Huber, however, was in the raising of

* Karl Huber was indicted as a co-defendant, but because of
his advanced age and failing health, the case against him was
severed for separate trial.

10

sufficient capital to permit the company to do business
and in the financing of its accounts receivable. (Tr. 1877)

By the end of its first fiscal year under Tudor (October,
1972), HEC had lost in excess of $400,000. (Tr. 1438-41;
1562) In January, 1973, Tudor, Ine., acquired Debs Hos-
pital Supplies, Inc., a Chicago-based business engaged
in the same kinds of activities as HEC. (Tr. 4802-04)
Debs had a subsidiary known as Hospital Furniture, Inc.,
which was engaged in the same business as the Medical
Facilities Division of HEC. Because of the serious finan-
cial difficulties which were encountered at HEC, the busi-
ness of Medical Facilities Division of HEC was trans-
ferred to Debs in February, 1973, and virtually all of
the invoices submitted to the hospitals named in the in-
dictment were done under the auspices of Debs. (Tr. 2491)
In December, 1973, Medical Facilities was combined with
the Hospital Furniture subsidiary of Debs and a new
corporation, Hospital Furniture/Medical Facilities was
formed. (Tr. 5324)

0. The “Enterprise”: The ‘“‘enterprise” alleged in that
count of the indictment charging the defendant with
having participated in the affairs of an enterprise through
a pattern of racketeering activitiy in violation of 18 U.S.C.
§ 1962(c), consisted of seven business organizations: Hos-
pital Equipment Company, Debs Hospital Supplies, Inc.,
Medical Facilities, Hospital Furniture/Medical Facilities,
Ine., Atlantic Medical Corporation, Tudor, Inc, and
Boden, Inc. The first four of these entities, HEC, Debs,
Medical Facilities, and Hospital Furniture/Medical Facili-
ties, Inc., were the “front line” medical companies actually
engaged in doing business with the hospitals identified in
the indictment. As previously set forth, Medical Facilities
was a division of HEC whose activities were transferred,
in 1973, to Debs. The business activities of Medical Facili-
ties and Hospital Furniture, Inc., already a subsidiary
of Debs at the time of its acquisition by Tudor, Inc.,
were combined to form a single entity, Hospital Fur-
niture/Medical Facilities, Inc. (Tr. 2498-2500; 5324)

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11

Tudor, Inc., was an investment holding company having
interests in real estate, securities portfolios, minority in-
terests in various small enterprises, and other related
activities. (Tr. 2482; 5148) On November 1, 1971, it ac-
quired all of the outstanding shares of HEC. (Tr. 5298-99)
Other than guaranteeing certain trade debt and other ob-
ligations of HEC, Tudor had no connection or association
of any kind with the front line medical companies nor,
for that matter, was it in any way associated or connected
with the fraudulent activities which formed the core of
the government’s case.*

Atlantic Medical Corporation was a public shell cor-
poration in which Tudor, Inc., held a majority interest.
(Tr. 2481; 5299) Following its acquisition by Tudor, HEC
was organized as a subsidiary of Atlantic. (Tr. 5305)
Later, following Tudor’s acquisition of Debs, in January,
1973, Tudor exchanged its shares in Debs for Atlantic’s
shares of HEC, leaving the result that Debs became a
subsidiary of Atlantic. (Tr. 2491) Other than its purely
passive ownership capacity, Atlantic had no connection
with the facts of the case. (Tr. 2495; 5298-99)

Boden, Inc., was an investment holding company created
in April, 1975, and, as was the case with Tudor, it was
wholly owned and controlled by the Huber family. (Tr.
4978; 5388) Shortly after its creation, Boden obtained all
of the assets of Tudor, Inc., subject to Tudor’s outstand-
ing liabilities. In addition, Boden owned or controlled

*The government established that some $871,000 flowed from
HEC to Independent Management Company (IMC), which oper-
ated under Tudor in the management of real properties owned by
the Hubers. (Tr. 1547) HEC lent IMC $300,000 and made pay-
ments to IMC for rent and leasehold improvements as well. (Tr.
2048-49; 4945) In turn, consideration in the form of debt assump-
tion and otherwise flowed from IMC to HEC, guch that, by 1973,
the inter-company balance was approximately $1200. None of the
$871,000 was ill-gotten pelf from the hospitals named in the in-
dictment, however. (Tr. 5474)

12

investments in real estate, securities portfolios, and other
similar assets. Other than as a successor to Tudor, Ine.,
Boden, like Tudor and Atlantic, had no connection or
association with the activities alleged in the indictment.
(Tr. 2474-78; 4878-83)

Reasons for Granting the Writ

The decision below raises critical issues concerning the
ambit of a portion of the Organized Crime Control Act
of 1970, specifically, the Racketeer Influenced and Cor-
rupt Organizations law (“RICO”), 18 U.S.C. §§1961 e¢
seq., and thus issues of critical importance both to the
fair and uniform administration of federal criminal justice.

Enacted by Congress in 1970, the RICO statute has
provoked substantial interpretive litigation centering upon
the scope of its coverage and the meaning and application
of its various terms. While there has been general
unanimity respecting the facial constitutionality of the
statute in the circuits, see, e.g., United States v. Parness,
503 F.2d 430 (2d Cir. 1974), cert. denied, 419 U.S. 1105
(1975); United States v. Campanale, 518 F.2d 352 (9th
Cir. 1975), cert. denied sub nom., Matthews v. United
States, 423 U.S. 1050 (1976), judicial consensus begins and
ends there. In the analysis and application of its most
basic concepts, there has been nothing less than conflict,
inconsistency and contradiction. Compare, e.g., United
States v. Stofsky, 409 F.Supp. 609 (S.D.N.Y. 1973), aff’d
on other grounds, 527 F.2d 237 (2d Cir. 1975), cert. de-
nied, 429 U.S. 819 (1976), and United States v. Scalzitti,
408 F.Supp. 1014 (W.D.Pa. 1975), appeal dismissed, 556
F.2d 569 (3rd Cir. 1977) (“pattern of racketeering
activity” requires that the two or more predicate offenses
be related to each other) with United States v. Elliott,
O71 F.2d 880 (5th Cir. 1978), cert. denied sub nom., Delph
v. Umited States, 439 U.S. 953 (1978) (predicate offenses

PeebASideinetente

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13

need not be related to each other to constitute a “pattern
of racketeering activity); United States v. Brown, 555
F.2d 407 (5th Cir. 1977), cert. denied, 435 U.S. 904 (1978)
(“enterprise” includes public entities) with United States
v. Mandel, 415 F.Supp. 997 (D.Md. 1976), aff’d on other
grounds, 591 F.2d 1347 (4th Cir. 1979) (governmental
bodies not within the meaning of “enterprise”); United
States v. Altese, 542 F.2d 104 (2d Cir. 1976), cert. denied
sub nom., Napoli v. United States, 429 U.S. 1039 (1977)
(“enterprise” may be legitimate or illegitimate activity)
with United States v. Sutton, 605 F.2d 260 (6th Cir. 1979)
(“enterprise” refers only to legitimate business organiza-
tions and undertakings) ; United States v. Parness, supra,
and United States v. Altese, supra (s:atute is to be liber-
ally construed in criminal cases) with United States v.
Mandel, 415 F.Supp 997, supra (liberal construction lim-
ited to civil remedial provisions of RICO and does not
extend to its punitive provisions; latter to be construed
in favor of lenity); United States v. Nerone, 563 F.2d
836 (7th Cir. 1977), cert. denied, 435 U.S. 951 (1978)
(substantial nexus between racketeering activity and
affairs of the “enterprise” must be established to sustain
guilt) with United ‘States v. Stofsky, 409 F.Supp. 609
supra (conviction requires only that predicate acts be
committed in the course of association with the “enter-
prise” so long as the acts of racketeering are themselves
interrelated) and United States v. Rubin, 559 F.2d 975
(5th Cir. 1977), vacated and remanded, 439 U.S. 810
(1978) (inclining toward Nerone, but not resolving the
issue).

Indeed, even the relative lucidity of the expression of
legislative intent in the language of the statute has been
the subject of diametrically opposed comment in the eases.
Compare, e.g., United States v. McMonagaie, 437 F.Supp.
721 (E.D.Pa. 1977) (“. . .the clear language of 18 U.S.C.

14
§ 1962(c)) . . .”) with United States v. Rubin, supra, (“the
language of § 1962(c) is less than pellucid . . .”).

Despite the existence of this dazzling array of sharply
conflicting viewpoints in the Circuits, this Court has not
yet availed itself of an opportunity to address and defini-
tively resolve any of the host of issues arising under RICO.
The urgency of the need for this Court to do so is, in the
context of this case, brought into sharp focus. For in addi-
tion to questions going to the scope of substantive liability
under the statute, the present case involves issues of the
extent to which the criminal forfeiture feature of RICO—
unknown to American law for nearly two centuries—may
be applied to parent or holding corporations by virtue of
their controlling interest in subsidiary entities whose
affairs are corrupted by acts of racketeering.

For the most part, prosecutions under the RICO statute
to date have involved labor unions, see, e.g., United States
v. Rubin; supra, public entities, e.g., United States v. Brown,
supra; Umted States v. Mandel, supra; and groups of
natural persons united in common cause through their
conduct of unlawful gambling businesses, e.g., United States
v. Altese, supra; United States v. Hawes, 529 F. 2d 472
(Sth Cir. 1976); or for the common purpose of committing
arson, murder, obstruction of justice, and other assorted
forms of more or less syndicated mayhem, United States v.
Elliott, supra.

In such cases, the criminal forfeiture sanction of RICO
(18 U.S.C. $1963) is either not meaningfully enforceable
because there 7s no legitimate interest to forfeit, or results
in the forfeiture of one’s position in the organization, a
consequence already compelled by the statute, in the case
of iabor unions (29 U.S.C. $504), and usually by local law,
in the cases of persons convicted of participating in
political entities through acts of racketeering.

She Te is AB Re ne Deg Aico, BF:

Mn ato Rn hh A SE Aa ai) Laeger

DEN, Alena emg ie kee.

15

Only rarely have the cases involved legitimate business
enterprises, and even in these rare instances, the enter-
prise itself is generally a simply constituted business cor-
poration or unincorporated proprietorship. See, e.g.,
United States v. Nerone, 563 F.2d 836 (7th Cir. 1977)
cert. denied, 435 U.S. 951 (1978), United States v. Mandel,
supra, United States v. Weatherspoon, 581 F.2d 595 (7th
Cir. 1978), United States v. Swiderski, 593 F.2d 1246 (D.C.
Cir. 1978), cert. denied sub nom., McGowan v. United
States, —— U.S. ——, 99 S.Ct. 2055-56 (April 30, 1979).

But the present case represents one of a growing trend
of cases in which more than one legitimate enterprise is
exposed to forfeiture as a result of a single prosecution
under RICO. See, United States v. Thevis, F.Supp.
—— (8.D.Ga. 1979); United States v. Marubeni America
Corp., No. Cr 78-1060 (C.D.Cal. 1978).

Here, as in those cases, the relevant “enterprise” con-
sists of a group or cluster of corporate and quasi-cor-
porate bodies indisputably related to each other, by ties
of common ownership and ownership inter se, but not
by any common activity, project, or set of “affairs” in
which the defendant participated through a pattern of
racketeering activity. Here, rather, by a process of per-
verse transitivity, the involvement of the affairs of sub-
sidiary entities in racketeering activity has resulted in
the forfeiture of all of the Petitioner’s interest in parent
or holding organizations solely by virtue of the status of
those corporate bodies vis a vis their subsidiaries and
their ownership in common by the defendant. The sheer
magnitude of the interests exposed to forfeiture in this
and other pending cases compounds the already urgent
need for this Court to exercise its discretion in favor of
hearing and finally disposing of the issues presented.

In addition, the instant case also presents important
issues regarding the construction and application of 18

16

U.S.C, § 1001. Petitioner’s conviction below on nearly a
score of false statement counts and the imposition of
cumulative punishment i3 totally inconsistent with the
position of this Court that liabiliy may not be multiplied
and punishment may not be cumulated for a single act
absent a clear expression of congressional purpose to the
contrary.

For these reasons, as more fully enunciated in the body
of this petition, this Court should issue a writ of certiorari
to the United States Court of Appeals for the Second
Circuit in this matter and set the case down for briefing

and argument.
POINT I

Petitioner’s conviction under RICO and the sub-
sequently ordered forfeiture of seven legitimate busi-
ness organizations may not be sustained because the
District Court permitted the jury to find that all seven
entities were parts of a single enterprise if it found
that petitioner owned them all, and because the in-
dictment was duplicitous.

Joining together seven business corporations, subsidiary
corporations, and operating subdivisions of these concerns
in a single RICO count, as a single RICO “enterprise”
the government alleged below that the defendant had par-
ticipated in the affairs of the “enterprise” thus identified
through a pattern of racketeering activity, consisting of
his involvement in a scheme to defraud various hospitals
in the New York metropolitan area through the submission
of inflated invoices for services performed and goods de-
livered and demands for payment for freight charges not
actually incurred.* It was incumbent upon the govern-

* Whether the indictment alleged the existence of a single
enterprise and thus a single offense, or rather represented the

(footnote continued on following page)

Set eden S Seth 9 ae

17

ment, therefore, to establish through competent evidence
sorhe singularity of purpose or objective in the operation
of these seven entities as a whole in order to justfiably
regard them as a single RICO enterprise. “[G]roups” as
the Sixth Circuit Court of Appeals only recently observed
in United States v. Sutton, supra, at 265, “do not become
‘enterprises’ except in relation to something they do.”
That is, the existence of some activity or project is what
defines a group as an enterprise. It follows from this that
the existence of some shared external characteristic by
each alleged constituent of a putative enterprise—such as,
for example, their common ownership by a single indi-
vidual—does not, without more, define the group as an
enterprise any more than the common membership in a
given community or the common residence of a group of
natural persons, without more, would create an enterprise
within the meaning of RICO.

It was necessary, therefore, in the instant case, for the
government to establish and the jury to find, upon appro-
priate instructions from the trial court, an associational
nexus among the seven entities named in the indictment
going beyond their mere status as parts of a corporate
hierarchy controlled by the defendant in order to justify

(footnote continued from preceding page)

joinder of several enterprises together and thus the allegation of
seven different offenses in a single count was a source of serious
dispute at trial and on appeal. The charging language in the
indictment itself ambiguously alternated between singular and
plural formulations of the term, and added to confusion by al-
legirig that the ‘‘éhterpfise’’ consisted of the seven named entities
which, in turh, were described as “‘eorporations, associations, and
other legal entities,’’ and thus, as “‘enterprises’’ in and of them-
selves; in language which precisely tracks 18 U.S.O. § 1961(4).
Although acknowledging that the government ““‘thight be fatilted
for imprecise lahguage on oecasion,’’ United States v. Huber,
supra, 603 F.2d at 394, the Court of Appeals nevertheless con-
eluded that it was ‘‘clear’’ that the indictment alleged the ex-

istence of a single entefprise, and thus, presumably, a single
offense.

18

convicticn—-and the forfeiture of rights and interest which
follows necessarily upon conviction under 18 U.S.C.
§ 1963(a).

The Second Circuit, however, without any analytical
amplification, reached a contrary conclusion. Rather than
require the Government to demonstrate the existence of a
common set of affairs to the seven entities named in the
indictment, the Court ruled that it was sufficient for the
Government to show that the affairs of each legal entity
named as part of the “single” RICO enterprise was con-
ducted through “a pattern of racketeering activity.” But
having previously concluded that a single RICO offense
had been alleged in the indictment the Court created a
legal and logical impossibility; the matter may not be had
both ways. If the indictment alleged a single enterprise,
and thus a single offense, as the Second Circuit held, the
Government’s evidentiary burden was necessarily to show
the existence of a common set of affairs galvanizing the
seven named entities into a single unit, whose affairs, in
turn, were conducted in the relevant unlawful way. If, on
the other hand, the Government was only bound to show as
the Second Circuit also held, a connection between each
entity and the acts of racketeering, the indictment was
fatally duplicitous, charging seven different offenses com-
mitted in connection with the affairs of seven different
enterprises.*

*The Court of Appeals viewed the issue of duplicity as one
which may have been waived. United States v. Huber, supra, 603
F.2d at 394, because it was not asserted until the close of the
Government’s case, as part of a motion for a judgment of ac-
quittal under Rule 29 of the Federal Rules of Criminal Procedure.
But a finding of waiver, under the circumstances of this case, is
totally insupportable. Because the structure and language of the
indictment appeared to allege a single offense, the defendant had
a right to assume that the Government would pursue a ‘‘single
enterprise’’ theory of the case, based upon proof that all seven
entities were united through pursuit of a group of activities or

(footnote continued on following page)

—

19

In charging the jury, however, the District Court re-
quired neither proof of a common set of affairs, nor a
demonstrable connection between each of the seven named
legal entities and the acts of racketeering charged in the
indictment. Instead, the District Court charted a different
course, and charged the jury that it could find that the
seven entities named in the indictment constituted a single
enterprise if it found that the defendant merely owned
them all. The trial court told the jury, in relevant part:

The indictment charges and you must find beyond a
reasonable doubt that the defendant was employed by
or associated with an enterprise, to wit: Tudor Inc.,
Boden Ine., Atlantic Medical Corporation, Hospital
Kquipment Company, Debs Hospital Supplies, Inc.,
Medical Facilities, Hospital Furniture/Medical Facil-
ities.

You are instructed that if you find the defendant owned
one or more of the aforesaid corporations, subsidiary
corporations, or corporate divisions (hereinafter re-
ferred to as corporations) through ownership directly
or indirectly, of a majority of stock of such corpora-
tions, then you may find that such corporations so
owned were associated in fact so as to constitute an
‘enterprise’ within the meaning of the statute.

Next, with respect to this count, you must also find
beyond a reasonable doubt that the defendant com-
mitted two or more of the offenses alleged in counts

(footnote continued from preceding page)

affairs in which the defendant participated through the relevant
racketeering offenses elsewhere charged in the indictment. Coun-
sel’s duty to raise the issue of duplicity by way of a pretrial
motion under Rule 12 of the Federal Rules of Criminal Procedure
assumes that the issue is apparent on the face of the pleadings;
it does not require counsel to possess clairvoyant powers or to
assume that the Government will pursue a theory of the case
radically at variance with the single offense apparently charged
in the indictment.

ee te ew we eee ee ee ee

20

25, 26, and 28 through 33 [charging mail fraud] while,
and as a part of, his conducting or participating, either
directly or indirectly, in the conduct of the affairs of
the enterprise.

In this regard it is not necessary for the government
to prove that the a‘fairs of the enterprise were ad-
vanced by the defendant’s activities, although you may
find this to be true, or that the particular enterprise
was corrupt, or that the enterprise authorized the de-
fendant to commit, or cause to be committed, the
particular acts of racketeering activity—that is the
two or more acts of mail fraud.

It is only necessary to find once you reach this ele
ment of the caunt, that the acts of mail fraud were
committed by the defendant, or caused to be com-
mitted by him in the conduct of the affairs of the
enterprise.*

Thus, it was not necessary, under the District Court’s
instructions, for the jury to find that the organizational
association of the seven entities together was in some way
or other connected to the perpetration of the acts of mail
fraud charged in the indictment, as the Sixth Circuit has
found the statute requires, nor was it even necessary for
the jury to find that the defendant had participated in ihe
affairs of each one of the seven entities through the un-
lawful acts of racketeering alleged, as the Second Circuit
later viewed the matter. Instead, it was sufficient to find
that an ‘‘association in fact” existed by virtue of the de-
fendant’s common ownership of the seven entities, without
regard ta any connection between each of the seven entities
and the wrongful acts alleged, or any common or unifying
purpose in the organization of the seven entities or any
set of activities or affairs defining the group of seven as

* Transcript of proceedings below at 6287-88; Appellant’s Ap-
pendix on Appeal at A165-A166. (Emphasis added.)

ey ee >

a

21

an enterprise, which activities or affairs, in turn, were
corrupted by the commission of the crimes of mail fraud
charged in the indictment.

Accordingly, the subsequently returned general verdict
of guilty on this count of the indictment, and the special
verdict which found that each of the seven named legal
entities was a constituent of the enterprise was tainted by
fatal ambiguity.* Because the District Court permitted
the jury to predicate the finding of ‘‘enterprise” merely
upon the defendant’s common ownership of the seven
named business organizations, it could not be known from
the verdict whether the jury was persuaded beyond a rea-
sonable doubt of the defendant’s implication of the affairs
of each of these entities in the acts of racketeering charged
in the indictment. The jury could well have concluded,
based upon the evidence, that although the defendant
owned all seven of the organizations named, his participa-
tion in the affairs of the “enterprise” through racketeering
activity was limited to his conduct of the frontline medical
companies through acts of mail fraud. But because of the
way in which the matter was structured for them by the
trial court, the jury was necessarily bound to find that all
seven entities were members of the enterprise because the
defendant owned them all and, having found that the de-
fendant’s participation in racketeering activity occurred
“in the course of his conduct of the affairs of” only some
of the entities but not others, the jury could not have
expressed such a conclusion of the evidence except through
a verdict of guilty.

On appeal to the Court of Appeals for the Second Cir-
cuit, Petitioner vigorously argued that, contrary to the

* In addition to its general verdict on the count, the jury was
required to return a special verdict identifying members of the
enterprise and the extent of the defendant’s ownership interest
in each member of the enterprise pursuant to Rule 31 of the
Federal Rules of Criminal Procedure.

22

District Court’s instruction, his mere ownership of the
seven business organizations named in the indictment was
not a sufficient predicate on which the jury could find
that each of the seven named entities was a part of a
single enterprise. The Government ultimately conceded
the point as a general proposition, but argued mysteriously
that common ownership was the proper standard on the
“facts” of this case. In the end, the Court of Appeals
rejected the Government’s position, and agreed that owner-
ship was not a proper associational circumstance upon
which the jury could find the existence of the single enter-
prise charged in the indictment.

Nevertheless, the Second Circuit affirmed Petitioner’s
conviction concluding that:

So long as the jury is correctly apprised of the
elements of a RICO violation and is instructed that
it may find an entity owned by a defendant to be
part of the enterprise only if the evidence warrants,
then there is no error. We do not believe [the Dis-
trict Court’s] charge authorized the jury to include

entities in the enterprise merely because they were

owned by appellant [Petitioner]. Reading the charge
as a whole, we think that the jury understood that it
could not include a particular entity in the enter-
prise unless its affairs were found to have been con-
ducted through the pattern of racketeering activity.
United States v. Huber, supra, 603 F.2d at 394-95.
(emphasis added)

But this assessment of the state of the record and the
requirements of the statute is both factually and legally
erroneous. Factually, contrary to the Second Circuit’s
view of the record, the District Court did not charge the
jury that ownership was an insufficient predicate upon
which to base a conclusion of “enterprise”; indeed, as the
foregoing reference to the text of the trial court’s charge

23

makes abundantly clear, the District Court did precisely
the opposite.* Legally, even accepting as accurate the
Second Circuit’s reconstruction of the record so as to
include events which did not happen, and exclude those
which did, the Court’s analysis of the Government’s
burden of proof is at odds with the statute itself. For
as we have already observed, RICO “enterprises” may
not be forged out of combinations of individuals or cor-
porate bodies except in relation to some common project,
activity or set of affairs which makes it possible to refer
to the group as a single enterprise. The Second Circuit’s
failure to require the Government to establish any sin-
gularity of purpose or activity permits the Government
to join as many violations of the RICO statute as it may
believe to exist in a single count of an indictment and thus
deprive the defendant of his right to have a jury separ-
ately consider his liability under the statute in terms of
each entity so named.

To be emphasized here is the fact that such duplicity
cannot be a matter of harmless error. The involvement of
different legal entities in racketeering activities entails the
forfeiture of very different legal interests. Moreover, in
the context of the present case, the seven entities named

* That the jury plainly received the erroneous message that the
defendant’s ownership of each of the seven entities was a suffi-
cient basis upon which to include each of them in the enterprise
emerges most clearly from its subsequent request for further in-
formation from the District Court. On the second day of its
deliberations, having apparently reached this count of the indict-
ment, the jury submitted a note to the Court which read as follows:

Exhibits: Certificates of incorporation of Huber Companies
listed in count 42.

Testimony of Karl R. Huber and Karl Huber pertaining to
ownership of the Huber companies in ¢ount 42.

Definition of an enterprise.
Definition of racketeering.

Transcript of proceedings at p. 6353.

24

were brought into being at different times—indeed, one of
them, Boden, Inc. did not exist at all, ahd therefore had
no affairs at all, until 1975, well after the last fraudulent
act had been committed. Necessarily, therefore, different
constellations of fact were necessary to establish the rele-
vant degree of connection between the affairs of each entity
and the acts of mail fraud charged in the indictment as a
“pattern of racketeering activity.”

The very vice of duplicity is the generation of ambiguous
general verdicts which fail to make clear which one or
more of the offetises charged in the single count were
committed by the defendant. The vice may be harmless
where the penal conseqtiences are not different, as for ex-
ample, where more than one mailing, and thus more than
one act of mail fraud is charged in a single mail fraud
count. But the vice of duplicity is itretrievably prejudi-
cial in a case such as the present one, where separate
violations of the statute may be differentiated according
to the identity of the legal entities whose affairs are
claimed to be involved in racketeering activity and thus
differentiated according to the very different legal interests
exposed to forfeiture in the event of conviction.

Accordingly, as a result of the District Court’s erroneous
charge to the jury, and the Court of Appeals’ erroneous
analysis of both the record and the evidentiary require-
ments of the statute, the defendant has been forced to
suffer the forfeiture of substantial business interests upon
the most ambiguous of verdicts. For these reasons, we
respectfully submit, this Court should grant this petition
and issue a writ of certiorari to the Court of Appeals for
the Second Circuit.

25

POINT II

Multiple convictions and cumulative punishment
under 18 U.S.C. § 1001 may not be obtained where
the same false statement is reiterated on more than
one occasion.

Each of the six hospitals named in the indictment filed
Medicare-Medicaid Cost Reports for the years 1974, 1975,
and 1976 in which depreciation was asserted with re-
spect to capital assets and equipment purchased from
the medical companies in this case.* Even assuming that
the amounts reported for depreciation were “false” and
that the act of reporting them was within the ambit of
the defendant’s criminal purpose, it nevertheless follows,
however, that, at most, only one offense was committed
with respect to each hospital, not three—or, in one case,
four—as alleged in the indictment.

The essence of the offense committed by the Petitioner
with respect to these counts was in setting in motion a
chain of events which lead, ineluctably, to an overstatement
of depreciation on capital assets in annual Medicare and
Medicaid Cost Reports by the various hospitals with which
companies owned by the defendant had done business. In
each year for which a Cost Report was filed, the same
assets were depreciated in an equal prorated amount
using the straight line method of depreciation. Thus, each
succeeding year’s Cost Report, for each hospital, contained
nothing more than a reproduction of the amount of depreci-
ation claimed for the preceding year for each asset as to
which depreciation had been claimed in the preceding year.
Thus the government trifureated each offense, multiplying
by a factor of three the defendant’s exposure to conviction

*In the case of Greater Paterson Hospital, a Cost Report
covering the second half of 1973 was included in the indictment.

26

and punishment.* But one offense does not become three
at the whim of the government, and the making of a false
statement is a single offense regardless of how many times
the same statement may be reproduced or replicated.

In Bramblett v. United States, 231 F.2d 489 (D.C. Cir.
1956), the defendant was convicted on seven counts of
having violated 18 U.S.C. $1001. The evidence showed
that the defendant, then a member of Congress, had con-
trived a scheme to defraud the United States by falsely
representing, in compensation claims submitted on a
monthly basis, that a certain individual was a clerk for
him and entitled to receive compensation when, in truth
and in fact, the defendant converted and intended to con-
vert to his own use the compensation thus authorized.
Like the present case, each count of the indictment repre-
sented a different and succeeding month in which forms
designating the individual as a clerk were submitted to
the relevant agency. The Court ruled, however, that only
one offense was committed.

It is true that, in Bramblett, the defendant was charged
with having engaged in a scheme to conceal a material
fact under Section 1001, rather than with having made a
false statement under the same statute, as in the present
case. Nevertheless, although each of these disjunctive
sub-divisions of $1001 is a distinct offense, the essence
of the wrong in both cases is in the act of concealment or
the act of making a false representation, as the case may
be, and the ‘‘scheme to conceal” in the case of prosecutions
for concealment or covering up a material fact refers
merely to the means by which the offense is perpetrated.
“It is the knowing falsity of the statement which is the
material part of the statutory crime, not [the scheme to
conceal which is] the vehicle of its perpetration.” United

* Indeed; in this case, cumulative fines of $5,000 on each count
were imposed on all of the 19 convictions under § 1001, for a
total of $95,000 in fines.

27

States v. Uram, 148 F.2d 187, 190 (2d Cir. 1945). And
Bramblett has not been construed, in subsequent decisions,
to be to the contrary. Compare, United States v. Ma-
tanky, 482 F.2d 1319, 1322 (9th Cir. 1973).

Relying upon United States v. Bettenhausen, 499 F.2d
1223 (10th Cir. 1974), however, the Second Circuit ruled
that Petitioner was properly convicted of 19 counts of
having made a false statement. But the Second Circuit’s
reliance upon Bettenhausen was misplaced, and, in any
ease, the subdivision of the defendant’s activities into 19
false statement counts is totally at odds with this Court’s
clear and unwavering commitment to the principle that
a single transaction may not be subdivided into a multitude
of discrete offenses.

Bettenhausen involved the submission of false docu-
mentation in support of a single tax return. The defend-
ant had argued that because all of the documents were
submitted on the single occasion only one false statement
count would lie. But the Bettenhausen court rejected this
contention, observing that the defendant was not charged
with having made “fraudulent statements or representa-
tions,” under § 1001, but rather under that clause of the
statute expressed in singular terms—‘‘any false writing
or document . . .” Thus the Court ruled, ‘We feel that
the statute aims at the making or using of each ‘false writ-
ing or document’ and intends the wrong connected with
each to be a separate offense.” United States v. Betten-
hausen, supra, at 12364.

In Bettenhausen, however, each false document related
to a separate and unrelated transaction, although all were
submitted in support of a single fraudulent tax return at
one time. Here, in complete contrast, each Cost Report
submitted was identical in all relevant respects to every
other Cost Report submitted by that hospital, and all of
them related to a single series of transactions with
companies owned and controlled by Petitioner.

28

In any case, however, the thrust of the Second Circuit’s
determination in this case runs across the grain of that
line of decisions in this Court holding that “doubt will be
resolved against turning a single transaction into multiple
offenses.’’ Bell v. United States, 349 U.S. 81, 84 (1955) ;
Ladner v. United States, 358 U.S. 169 (1958); see also
Simpson v. United States, 435 U.S. 6 (1978); Jeffers v.
United States, 432 U.S. 137, 155 (1977). Here, the Peti-
tioner’s crime lay in his causing the various hospitals to
overstate their respective claims for depreciation; surely
his liability for that wrong may not be enhanced by virtue
of the fortuitous circumstance that claims for deprecia-
tion are, in fact, amortized over the useful life of the
relevant asset, so that his liability is multiplied by the
number of years of useful life of the assets sold. At most,
Petitioner caused the making of six false statements, rep-
resenting the inflated depreciation claims by each of the
six hospitals for assets purchased from companies owned
or controlled by ‘Petitioner, and the matter should not be
parsed so fine as to justify the multiplication of his lia-
bility for each year in which the same statement is re-
peated. At the very least, there must exist some doubt on
this score; as even the Second Circuit observed the matter
was not ‘‘free from difficulty.” United States v. Huber,
supra, at 399. Such doubt may not be resolved in favor of
the visitation of cumulative sanctions upon the Petitioner,
and accordingly, his convictions should be reversed and the
matter remanded for appropriate further proceedings.

29

CONCLUSION

The petition for a writ of certiorari should be
granted.

Dated: New York, New York
December 10, 1979

Respectfully submitted,

JEFFREY D, ULLMAN
Attorney for Petitioner

335 Broadway

New York, New York 10013
(212) 966-1000

Bourer, Uttman & Tarkerr

Of Counsel

la

Appendix A, Opinion of United States Court of
Appeals for the Second Circuit.

UNITED STATES COURT OF APPEALS
FOR THE SECOND CIRCUIT
—~>—
No. 1202—August Term, 1978.
(Argued June 21, 1979 Decided July 20, 1979.)
Docket No. 79-1132
—{>—_
UNITED STATES OF AMERICA,

Appellee,

—against—

KARL R. Huser,
Defendant-Appellant.

Before:

WATERMAN, FEINBERG and TIMBERS,
Circuit Judges.

—>—

Appeal from judgment of conviction following jury
trial before Charles H. Tenney, J. in the United
States District Court for the Southern District of
New York for conspiracy in violation of 18 U.S.C.
§ 371, causing to be made false and fraudulent state-
ments to the United States Department’ of Health,
Education and Welfare in violation of 18 U.S.C.
§§ 1001, 2, mail fraud in violation of 18 US.C.
§§ 1341, 2, making false declarations before a grand

3915

2a
Appendix A.

jury in violation of 18 U.S.C. § 1623, and conducting
the affairs of an enterprise through a pattern of
racketeering activity in violation of 18 U.S.C.
§§ 1961, 1962(c), 1963, 2.

Affirmed.

—_~—

JEFFREY D. ULLMAN, New York, N.Y.
(Bohrer, Ullman & Taikeff, New
York, N.Y., Barry A. Bohrer, of
Counsel), for Defendant-Appellant.

GEORGE FE. WILSON, Assistant United
States Attorney, New York, N.Y.
(Robert B. Fiske, Jr., United States
Attorney for the Southern District of
New York, Howard W. Goldstein, As-
sistant United States Attorney, of
Counsel), for Appellee.

—»—

FEINBERG, Circuit Judge:

Karl R. Huber appeals from a judgment of convic-
tion following a lengthy jury trial on a multi-count
indictment before Judge Charles H. Tenney in the
United States District Court for the Southern Dis-
trict of New York. Appellant was charged in Count
One with conspiring, among other things, to defraud
the United States in connection with its administra-
tion of the Medicaid, Medicare and Hill-Burton pro-
grams, to make and cause to be made false
statements to a government agency in a matter
within its jurisdiction, and to use the mails in fur-
therance of a scheme to defraud in violation of 18

3916

3a
Appendix A.

U.S.C. § 371. Counts Two through 24 charged ap-
pellant with making, and causing to be made, false,
fictitious and fraudulent Statements to the United
States Department of Health, Education and Welfare
in violation of 18 U.S.C. §§ 1001, 2. Counts 25.33
charged using the mails in furtherance of a scheme
to defraud certain insurance companies, hospitals, the
United States, and the States of New York and New
Jersey in violation of 18 U.S.C. §§ 1341, 2. In addi-
tion, appellant was charged with six counts of trans-
porting stolen money in interstate commerce, in
violation of 18 U.S.C. §§ 2314, 2 (Counts 34-39), one
count of making false material declarations before a
grand jury in violation of 18 U.S.C. § 1623 (Count
40), and one count of conducting the affairs of an
enterprise through a pattern of racketeering activity
in violation of 18 U.S.C. §§ 1961, 1962(c), 1963, 2
(Count 42).'

During the course of the trial, the district court
entered judgments of acquittal on Counts 14-16, 20,
27, and 34-39. The jury convicted appellant on all of
the remaining counts, and returned a special verdict
in which it found that the enterprise concerned in
Count 42 consisted of the following entities also
found to be wholly owned by appellant: Tudor, Inc.
(Tudor), Boden, Inc. (Boden), Atlantic Medical Corpo-
ration (Atlantic), Hospital Equipment Company

1 Also charged, in Counts One to 39 and 42 were Huber's
father, Karl Huber, Peter M. Conroy and Anthony W. Eckert,
Jr. Appellant’s father was also charged in Count 41 with making
false material declarations before a grand jury, in-violation of 18
U.S.C. § 1623. His trial was severed because of ill health. Con-
roy and Eckert pleaded guilty prior to trial to the conspiracy
count, four false statement counts, and four mail fraud counts,
and each was sentenced to six months’ imprisonment, three
years’ probation, and a $25,000 fine.

3917

4a
Appendix A.

(HEC), Debs Hospital Supplies, Inc. (Debs), Medical
Facilities, and Hospital Furniture/Medical Facilities
(HF/MF). Judge Tenney sentenced appellant to a
three-year prison term on the conspiracy and false
statement counts and a two-year term on the mail
fraud counts to run concurrently with each other,
and to a one-year term on the perjury count to be
consecutive to the other prison terms, a total of four
consecutive years. Appellant was fined $5,000 on the
conspiracy count and on each of the false statement
counts, and $1,000 on each of the mail fraud counts,
a total of $108,000. The judge directed conditional
forfeiture of appellant’s enterprise in accordance with
the special verdict on the racketeering count. The
condition gave appellant the option to redeem his
corporations by payment within six months of cash
or other property satisfactory to the Attorney Gen-
eral having a value of $100,000. Appellant was also
required to bear the costs of prosecution, which
amounted to $19,412.72. He remains free on $50,000
bail pending appeal.

Appellant makes numerous arguments to us, var-
iously seeking either a new trial or the striking of
some of the counts and a resentencing. For the rea-
sons set forth below, we affirm the judgment of con-
viction in a:l respects.

I

A number of appellant’s arguments concern the le-
gal sufficiency of the evidence. At this juncture, we
briefly summarize the activities for which appellant
was convicted viewing the evidence most favorably to
the government. Detailed review of the evidence will
be added later where necessary.

3918

5a

Appendiz A.

Appellant Karl R. Huber, an honors graduate of
Princeton University, a 1965 graduate of Harvard
Law School and a member of the New Jersey bar,
joined his father, Karl Huber, in the latter’s allegedly
troubled business ventures instead of working for a
law firm in Newark as planned. In October 1971, ap-
pellant and his father obtained control of HEC, an
established New Jersey hospital supply house. HEC,
through its contract division, Medical Facilities, and
a series of corporate successors, entered into a num-
ber of cost-plus contracts with hospitals in New York
and New Jersey for the sale of hospital and surgical
supplies, furniture and equipment. The price con-
sisted of the manufacturers’ invoiced costs to HEC
plus a specified mark-up (usually between five and
eight percent) and the net cost of any freight. The
evidence showed that the Hubers knew about and un-
derstood the nature of the cost-plus contracts from
the time they took over HEC, were involved in and
managed the hospital supply business on a day-to-day
basis, and were kept apprised in detail about new
contracts as they were made.

Shortly after the Hubers acquired HEC, and at
their specific direction, HEC employees Conroy and
Eckert, see note 1 supra, began to inflate the manu-
facturers’ costs quoted to the hospitals. At appellant’s
Suggestion, invoices were falsified where necessary.
The hospitals were also charged for freight not ac-
tually incurred. The term “phantom freight,” appar-
ently coined by appellant’s father, was in general
usage at the office. As a result of these fraudulent
practices, HEC and Medical Facilities received an ef.
fective mark-up of roughly between 18 percent and
29 percent rather than the five to eight percent

3919

6a
Appendix A.

specified in the contracts. There was evidence that
the mails were used in connection with the scheme
to defraud the hospitals. The fraudulent overcharges
totalled nearly $471,000, most of which was subject
to reimbursement by either the federal or state
government.* Further, each hospital capitalized the
costs incurred in outfitting it, and a depreciation ex-
pense was annually claimed as part of each hospital’s
operating expenses. These expenses were reported to
insurance companies, which served as fiscal in-
termediaries for the Medicare and Medicaid Pro-
grams. The cost reports formed the basis for reim-
bursement by the federal and state governments, and
the fraud resulted in inflated depreciation claims of
nearly $105,000. The nature of the federal and state
hospital funding programs was made clear to the
Hubers from the outset of their involvement in the
hospital supply operation, and they understood that
those programs would stimulate hospital expansion.
In July 1977, appellant appeared before a grand
jury that was investigating whether fraud had been
committed by HEC or its successors. Appellant
denied to the grand jury that he exercised close con-
trol over the hospital business and that he knew of
the cost-plus nature of the contracts or the meaning
of the term “phantom freight.” The proof at trial
overwhelmingly showed otherwise.
In defense, appellant contended that he and his
father had been cheated by Conroy and Eckert and
2 The federal government would reimburse the hospitals through
the United States Public Health Service under the Hill-Burton
Act, 42 U.S.C. § 291 et seq. State reimbursement would be by
the New York Department of Health under N.Y. Pub. Health
Law, Arts. 28-A and 28-B (McKinney 1977), the Nursing Home

Companies Law and the Hospital Mortgage Loan Construction
Law, respectively.

3920

7a
Appendiz A.

that if appellant was directly involved in the fraudu-
lent scheme, because of the peculiar relationship be-
tween him and his domineering father, appellant
lacked the independence of will necessary to form
the intent needed to sustain the convictions. Numer-
ous witnesses, expert and otherwise, testified on this
latter point. Appellant also testified in his own de-
fense.

II

Appellant makes several challenges to his convic-
tion on Count 42 of the indictment, which charged
that he conducted the affairs of an enterprise
through a pattern of racketeering activity in viola-
tion of 18 U.S.C. § 1962(c), and which resulted in the
forfeiture of the enterprise pursuant to 18 US.C.
§ 1963. Those provisions are part of Title IX of the
Organized Crime Control Act of 1970 (Act), Pub. L.
No. 91-452, 84 Stat. 922, reprinted in [1970] U.S.
Code Cong. & Ad. News 1073, which was enacted in
response to what Congress perceived as. the threat to
the American economy from the unchecked growth
of organized crime. United States v. Parness, 503
F.2d 430, 439 (2d Cir. 1974), cert. denied, 419 U.S.
1105 (1975). The Act was intended in part to rem-
edy

defects in the evidence-gathering process of the
law inhibiting the development of the legally ad-
missible evidence necessary to bring criminal and
other sanctions or remedies to bear on the un-
lawful activities of those engaged in organized
crime and because the sanctions and remedies

3921

8a
Appendix A.

available to the Government are unnecessarily
limited in scope and impact.*

Title IX of the Act added a new Chapter 96 to Title
18 of the United States Code, entitled “Racketeer In-
fluenced and Corrupt Organizations” (RICO). The pur-
pose of RICO is to enable law enforcement authori-
ties not only to punish individual criminals, but to
separate the corrupt interstate enterprises in which
they were involved from their criminal organizations
so that prosecutions will do more than merely impose
a “compulsory retirement and promotion system as
new people step forward to take the place of those
convicted.” S. Rep. 91-617, 91st Cong., 1st Sess. 78
(1969) (Senate Report). Thus, in order to “deal not
only with individuals, but also with the economic
base through which those individuals constitute such
a serious threat to the economic well-being of the
Nation,” id. at 79, RICO, in 18 U.S.C. § 1963, im-
poses the sanction of forfeiture of an “enterprise” in-
volved in violations of 18 U.S.C. § 1962.

That section specifies the kinds of corrupt infiltra-
tion into interstate commerce that Congress sought
to prevent. The section provides:

(a) It shall be unlawful for any person who
has received any income derived directly or indi-
rectly, from a pattern of racketeering activity or
through collection of an unlawful debt in which
such person has participated as a principal
within the meaning of section 2, title 18, United
States Code, to use or invest, directly or indi-

3 The quotation is from the Act’s statement of findings and
purpose, reprinted in [1970] U.S. Code Cong. & Ad. News at
1073.

"3922

9a
Appendiz A.

rectly, any part of such income, or the proceeds
of such income, in acquisition of any interest in,
or the establishment or operation of, any enter-
prise which is engaged in, or the activities of
which affect, interstate or foreign commerce

(b) It shall be unlawful for any person
through a pattern of racketeering activity or
through collection of an unlawful debt to acquire
or maintain, directly or indirectly, any interest
in or control of any enterprise which is engaged
in, or the activities of which affect, interstate or
foreign commerce.

(c) It shall be unlawful for any person em-
ployed by or associated with any enterprise en-
gaged in, or the activities of which affect, inter-
state or foreign commerce, to conduct or partici-
pate, directly or indirectly, in the conduct of
such enterprise’s affairs through a pattern of
racketeering activity or collection of unlawful
debt.

(d) It shall be unlawful for any person to con-
spire to violate any of the provisions of subsec-
tions (a), (b), or (c) of this section.

A “pattern of racketeering activity” is defined in 18
U.S.C. § 1961(5) as consisting of at least two acts of
racketeering activity within ten years of one another.
“Racketeering activity” is defined in 18 U.S.C.
§ 1961(1) as any of a wide variety of serious criminal
acts under state and federal law, including mail
fraud in violation of 18 U.S.C. § 1341, which was
the racketeering activity charged in the indictment

3923

10a

Appendia A.

here.‘ Since appellant was charged with a violation
of section 1962(c), the government had to show that
appellant had committed at least two acts of mail
fraud within ten years of one another in the conduct
of the affairs of an enterprise in interstate commerce
with which he was associated.

Pointing to what he claims are inconsistent judicial
interpretations of RICO, appellant urges this court to
reconsider its holding that -RICO is not unconstitu-
tionally vague. See United States v. Parness, supra,
503 F.2d at 440-42. We decline the invitation, noting
that each circuit court faced with the issue has
reached the same result. See United States v. Hawes,
029 F.2d 472, 479 (5th Cir. 1976); United States v.
Campanale, 518 F.2d 352, 364 (9th Cir. 1975), cert.
denied, 423 U.S. 1050 (1976); United States v. Cap-
petto, 502 F.2d 1351, 1357-58 (7th Cir. 1974), cert.
denied, 420 U.S. 925 (1975). See also Atkinson,
Criminal Law, “Racketeer Influenced and Corrupt Or-
ganizations,” 18 U.S.C. §§ 1961-68: Broadest of the
Federal Criminal Statutes, 69 J. Crim. Law 1, 4 n.26
(1978).

In a number of loosely related arguments concern-
ing the composition to the enterprise to be forfeited,
appellant claims that a group of corporations cannot
be an “enterprise” within the meaning of RICO, that
the government’s theory of the composition of the
enterprise varied in the indictment and at trial, that
the indictment was duplicitous in the RICO count,
that the judge’s charge concerning the degree of con-
nection that the government had to show between

4 The indictment also charged transporiation of stolen money in
interstate commerce, in violation of 18 U.S.C. § 2314, as part of
the racketeering activity. The substantive charges of 18 U.S.C.
§ 2314 violations, Counts 34-39, were not submitted to the jury.

3924

~

lla
Appendix A.

each corporation and appellant’s racketeering activity
was erroneous, that the evidence was insufficient to
support the inclusion of certain of the corporations
in the enterprise, and that the use of a special ver-
dict to determine the composition of the enterprise
was error, prejudiced the defense, and in any event
did not cure any of the other problems just itemized.

Appellant’s argument that a group of corporations
cannot be an enterprise within the meaning of the
statute stems from an overly rigid reading of the
definitions contained in section 1961. Subsection (4)
provides

“enterprise” includes any individual, partnership,
corporation, association, or other legal entity,
and any union or group of individuals associated
in fact although not a legal entity.

The argument runs that since the term “corporation”
is in the singular, the only way a group of corpora-
tions may be an “enterprise” within the meaning of
the statute is if they come within the language,
“group of individuals associated in fact.” And since
“person” is defined in subsection (3) as including “any
individual or entity ... ,” it must be that the term,
“individual,” since used in the disjunctive with “en-
tity,” cannot encompass an entity such as a corpora-
tion. Therefore a group of corporations cannot be a
“group of individuals associated in fact” within the
meaning of the definition of “enterprise.” But this
makes nonsense of the statute. First, the language
does not require that result. The definition of “enter-
prise” is a list beginning with the word “includes.”
This indicates that the list is not exhaustive but
merely illustrative. See, e.g., Federal Land Bank of

3925

12a
Appendiz A.

St. Paul v. Bismarck Lumber Co., 314 USS. 95,
99-100 (1941). Second, at least where the enterprise
is commercial, courts have consistently construed “en-
terprise” broadly in light of Congress’ mandate that
the provisions of Title IX of the Act “shall be liber-
ally construed to effectuate its remedial purposes,”
Act § 904(a), [1970] U.S. Code Cong. & Ad. News at
1104. See, e.g., United States v. Altese, 542 F.2d
104, 106 (2d Cir. 1976), cert. denied, 429 U.S. 1039
(1977); United States v. Parness, supra, 503 F.2d at
439. Congress was concerned about the impact on
the American economy of the infiltration of organ-
ized crime into interstate commerce. There is no rea-
son to believe that Congress cared what form such
infiltration took, except to indicate by an abundance
of caution in listing the examples in the definition of
enterprise that all such harmful infiltration, regard-
less of form, should be eradicated. To view “enter-
prise” as excluding groups of corporations would
make it too easy to avoid RICO’s forfeiture sanction.
One could simply transfer assets from the corpora-
tion whose affairs had been conducted through a pat-
tern of racketeering activity to another corporation
whose affairs had up to that point not been so con-
ducted. We agree with the government that ap-
pellant’s reading of the statute would perversely in-
sulate the most sophisticated racketeering combina-
tions from RICO’s sanctions, the precise opposite of
Congress’ intentions. p-

Appellant claims that the government’s theory of
the case never crystallized; that it never decided
whether the prosecution was based on a single enter-
prise composed of one or more of the seven entities
listed in the indictment, or a seven-enterprise theory.

3926

13a
Appendix A.

We disagree. Although there were occasions when
the word “enterprises” was used in the indictment
and during the trial, it seems clear that it was used
as a synonym for “entities” rather than in the tech-
nical sense of a RICO enterprise. While the govern-
ment might be faulted for imprecise language on oc-
casion, it is clear that the indictment was predicated
on a one-enterprise theory, and that that was the
basis on which proof was offered and on which the
jury was charged.

Appellant also claims that the indictment was du-
plicitous in that Count 42, the RICO count, charged
a series of acts through a number of entities, and
that the jury was therefore not required to agree
unanimously on any particular fact to reach a guilty
verdict. Appellant’s failure to raise this claim prior
to trial “may be deemed” a waiver. Fed.R.Crim.P.
12(bX2); United States v. Kelley, 395 F.2d 727, 729
(2d Cir.), cert. denied, 393 U.S. 963 (1968). Further,
the convictions on all the mail fraud counts sub-
mitted to the jury coupled with the special verdict
specifying that all the entities were memers of the
enterprise show that the jury was obviously not
divided on the theory underlying its verdict of guilt.

Appellant argues that Judge Tenney’s charge per-
mitted the jury to find that the various entities were
part of the enterprise if it found that defendant
owned them all even if he conducted the affairs of
only one of them through a pattern of racketeering
activity. The government properly concedes that such
a connection alone would not support application of
RICO’s forfeiture sanction to enterprises whose af-
fairs were not conducted through a pattern of racket-
eering activity. However, so long as the jury is cor-

3927

tt il el ee

l4a
Appendix A.

rectly apprised of the elements of a RICO violation
and is instructed that it may find an entity owned
by a defendant to be part of the enterprise only if
the evidence warrants, then there is no error. We do
not believe Judge Tenney’s charge authorized the
jury to include entities in the enterprise merely be-
cause they were owned by appellant. Reading the
charge as a whole, we think the jury understood that
it could not include a particular entity in the enter-
prise unless its affairs were found to have been con-
ducted through the pattern of racketeering activity.
Appellant contends that, even if the jury was
properly instructed, the evidence was insufficient to
link a number of the enterprises to the pattern of
racketeering activity. The evidence at trial, however,
viewed most favorably to the government, established
that Tudor, Boden, Atlantic, HEC, Debs, Medical
Facilities and HF/MF were involved in the racketeer-
ing activity as follows. First, appellant virtually con-
cedes that the evidence was sufficient to show that
the affairs of Medical Facilities and HF/MF were
conducted through a pattern of racketeering activity.
The focus of the argument is really on the five other
entities. Medical Facilities was the contract division
of HEC when the Hubers acquired HEC in October
1971 through Tudor, a Huber controlled corporation.
In 1972, HEC became the wholly owned subsidiary
of Atlantic, another corporation controlled by the
Hubers. During the operation of the fraud, checks to-
talling $871,000 were drawn on HEC by the Hubers
in favor of Independent Management Company (IMC),
a division of Tudor. This was during a period when
Huber made large transfers of funds among various
company checking accounts. The jury could infer that

3928

15a

Appendiz A.

checks drawn on HEC to IMC represented funds de-
rived from the scheme to defraud the hospitals on
the cost-plus contracts serviced by Medical Facilities.
In 1973, Tudor acquired Debs. Huber then had Tudor
trade its Debs stock for Atlantic’s HEC stock. In
1973, HEC was wound down, and its business was
transferred to Debs. Debs’s name was pasted over
HEC’s name on the invoices. HF/MF was then
formed and became the successor to the hospital de-
sign and interior business of HEC and Debs. The lat-
ter ceased operations in March 1974, and HF/MF
ceased in May 1975. Shortly before this last event,
Huber shifted to Boden all of Tudor’s assets, subject
to its liabilities. Thus, these companies were not
merely unrelated businesses owned by the same per-
son. They were all involved in the hospital supply
operation, which could be fairly characterized as a
single business operated under various names and
forms chosen by appellant to suit his own purposes
and convenience.

Appellant relies heavily on United States v.
Nerone, 563 F.2d 836 (7th Cir. 1977), cert. denied,
435 U.S. 951 (1978), in arguing that not all of the
seven entities were conducted “though a pattern of
racketeering activity.” There, the Seventh Circuit re-
versed a RICO conviction where the defendants had
been charged with conducting the affairs of Mapel
Manor, Inc., a trailer park corporation, through a
pattern of racketeering activity. The defendants ap-
parently conducted an illegal gambling operation in
one of the mobile homes at their trailer park. But
the gambling operation had nothing to do with the
affairs of the trailer park. There was no “endeavor to
show that gambling revenues were used by or in any

3929 ©

l6a
Appendix A.

way channeled into the corporation or that persons
were paid out of gambling revenues to perform ser-
vices for Mapel Manor, Inc.” Id. at 851. Thus, the
government's RICO case failed there “because of a to-
tal want of proof of the connection between the
racketeering activities and the affairs of Maple
Manor, Inc.” Id. at 852. Moreover, the trailer park
was not in the gambling business. In contrast to that
case, the seven entities here were all in the hospital
supply business, and that business was conducted
through a series of mail frauds.

We thus find there was sufficient evidence to sus-
tain the charge that the affairs of the seven entities
were conducted by appellant though a pattern of
racketeering activity. We note, however, that the po-
tentially broad reach of RICO poses a danger of
abuse where a prosecutor attempts to apply the stat-
ute to situations for which it was not primarily in-
tended. Therefore, we caution against undue prosecu-
torial zeal in invoking RICO. We also emphasize to
the district judges that when RICO is invoked each
set of facts must be evaluated independently. We
cannot at this point lay down: any fixed rules con-
cerning the applicability of the statute. For example,
in some cases a pattern of racketeering activity in
the conduct of a subsidiary’s affairs may not be at-
tributable to the parent. We hold only that on these
facts, particularly the evidence of continuous manipu-
lation of the form of the business and the transfer
of large sums among the corporations, these entities
were sufficiently intertwined in the mail fraud to be
deemed part of the RICO enterprise.

Appellant also challenges the use of the special
verdict. Fed.R.Crim.P. 31(e) provides:

3930

17a

Appendix A.

Criminal Forfeiture. If the indictment or the
information alleges that an interest or property
is subject to criminal forfeiture, a special verdict
shall be returned as to the extent of the interest
or property subject to forfeiture, if any.

This provision, along with Fed.R.Crim.P. 7(cX2) gov-
erning indictments, was specifically added to the
rules in 1972 “to provide procedural implementation
of the recently enacted criminal forfeiture provision
of [RICO].” Notes of Advisory Committee on Rules,
Rule 7(cX2). Appellant claims that the Rule au-
thorizes the use of a special verdict only to the ex-
tent necessary to determine a defendant’s interest in
an enterprise, but not for the purpose of identifying
membership in the enterprise. Here the special ver-
dict called for both inquiries. The jury was required
to specify which corporations were part of the enter-
prise and the percentage of appellant’s interest in
each. Appellant argues that since the former was un-
authorized by Rule 31(e), the special verdict runs
afoul of the asserted general proposition that special
verdicts are anathema to federal criminal procedure.
However, we believe this special verdict to be wholly
within the confines of Rule 31(e). Given the nature
of the enterprise alleged, it was obviously necessary
for the jury to say which entities were part of it, as
well as appellant’s interest in each, in order to deter-
mine the “extent of the... property subject to
forfeiture.”

Finally, appellant argues that the forfeiture sanc-
tion violates the Eighth Amendment’s proscription on
cruel and unusual punishments. Judge Tenney re-

5 Both parties incorporated by reference their arguments on this
issue in the district court.

3931

18a

Appendix A.

jected the contention in a lengthy oral opinion. RICO
is apparently the first modern federal statute to im-
pose forfeiture as a criminal sanction directly on an
individual defendant. As noted in the Senate Report
to RICO,

While there is some indication that this con-
cept of criminal forfeiture was in usage in the
colonies, the First Congress by Act of April 20,
1790, abolished forfeiture of estate and corrup-
tion of blood, including in cases of treason. That
statute, as revised, is found in 18 U.S.C. § 3563
.... From that date to the present, therefore,
no Federal statute has provided for a penalty of
forfeiture as a punishment for violation of a
criminal statute of the United States. Section
1963(a), therefore, would repeal 18 U.S.C. § 3563
by implication.

Senate Report at 80. However, what is innovative
about RICO is not that it imposes forfeiture as a
consequence of criminal activity, but rather that it
imposes it directly on an individual as part of a
criminal prosecution rather than in a separate pro-
ceeding in rem against the property subject to for-
feiture. Statutes providing for in rem forfeiture of
property related to criminal activity are relatively
common. See, e.g., 49 U.S.C. §§ 781-83 (relating to
narcotics violations); Legislative N ote, Organized
Crime Control Act of 1970, 4 U. Mich. J. of Law
Reform 546, 624 & n.13 (1971). Such statutes have
been upheld even where, unlike here, the effect is to
deprive an owner of property where that owner is
not the person guilty of using the property for
criminal purposes. See Goldsmith-Grant Co. v. United

3932

19a
Appendix A.

States, 254 U.S. 505, 511 (1921) (statute “too firmly
fixed in the punitive and remedial jurisprudence of
the country to be now displaced”). Further, such “a
forfeiture proceeding is quasi-criminal in character.
Its object, like a criminal proceeding, is to penalize
for the commission of an offense against the law.”
Plymouth Sedan v. Pennsylvania, 380 US 693, 700
(1965). At least for this purpose, there is no substan-
tial difference between an in rem proceeding and a
forfeiture proceeding brought directly against the
owner. Cf. Shaffer v. Heitner, 433 U.S. 186 (1977).

We do not say that no forfeiture sanction may
ever be so harsh as to violate the Eighth Amend-
ment. But at least where the provision for forfeiture
is keyed to the magnitude of a defendant’s criminal
enterprise, as it is in RICO, the punishment is at
least in some rough way proportional to the crime.
We further note that where the forfeiture threatens
disproportionately to reach untainted property of a
defendant, for example, if the criminal and
legitimate aspects of the “enterprise” have been com-
mingled over time, section 1963 permits the district
court a certain amount of discretion in avoiding
draconian (and perhaps potentially unconstitutional)
applications of the forfeiture provision. Section
1963(c) provides:

Upon conviction of a person under this sec-
tion, the court shall authorize the Attorney Gen-
eral to seize all property or other interest de-
elared forfeited under this section upon such
terms and conditions as the court shall deem

proper.

In this case, Judge Tenney provided in his sentence
that the seizure
3933

20a
Appendix A.

shall be on the following terms and conditions:
(1) that defendant may redeem and repossess
himself of said entities at any time within six
months of the date of this judgment upon pay-
ment or delivery to the Attorney General of cash
or other property satisfactory to the Attorney
General having a value of $100,000 ....

We certainly cannot say that the forfeiture provision
is unconstitutional as applied to these circumstances,
even if there were some doubt about its application
to others.

Having determined that appellant’s conviction
under the RICO count is entirely proper, we turn to
the other points raised.

Ii

Huber raises several points with respect to his
false statement convictions under 18 U.S.C. §§ 1001,
2. Section 1001 provides:

Whoever, in any matter within the jurisdiction
of any department or agency of the United
States knowingly and willfully falsifies, conceals
or covers up by any trick, scheme, or device a
material fact, or makes any false, fictitious or
fraudulent statements or representations, or
makes or uses any false writing or document
knowing the same to contain any false, fictitious
or fraudulent statement or entry, shall be fined
not more than $10,000 or imprisoned not more
five years, or both.

Section 2 provides:

(a) Whoever commits an offense against the
United States or aides, abets, counsels, com-

3934

2la

Appendix A.

mands, 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.

Huber was convicted on 19 counts for having caused
six hospitals with which he dealt to submit claims to
the government, through fiscal intermediaries, for re-
imbursement for depreciation costs that were inflated
due to fraud. The 19 convictions represented each
hospital’s annual claims over three, and in one case
four, years.

Appellant first argues that the statements made to
the government were not literally false, since the
figures reported as the basis on which depreciation
was calculated reflected the hospitals’ actual original
(albeit inflated) costs. But the hospitals were required
to certify that the claims submitted represented
properly reimbursable costs. Appellant bases his argu-
ment on regulations applicable to depreciation claims
on capital expenditures. 20 C.F.R. § 405.415. Al-
though these regulations were not referred to by the
district judge in his charge to the jury,® they do not
differ on this issue from those to which the judge
did refer in his charge. That is, under either set of
regulations the government provides reimbursement
only to the extent that the expenditures were based
on reasonable costs honestly arrived at. Thus, even
under the regulations cited to us by appellant, for

6 Appellant did not refer to the depreciation claims regulations
either in his written requests to charge or in his exceptions to
the charge.

3935

22a
Appendiz A.

depreciable assets acquired after 1970 as those in-
volved here, allowable depreciation could only be
based on “historical cost” to the extent that such
cost did not exceed the “lower of current reproduc-
tion cost . . . or fair market value at the time of pur-
chase.” 20 C.F.R. § 405.415(b\(1). “Fair market value”
is defined in the next subsection, (bX2), as “the price
that the asset would bring by bona fide bargaining
between well-informed buyers and sellers at the date
of acquisition.” In this case, there was bona fide
bargaining, which produced the cost-plus contracts.
The costs relied on by the hospitals in the reports,
however, were not the costs that would have been in-
curred through honest performance of those con-
tracts, but were costs that were inflated by fraud,
and to the extent they were so inflated, the claims
were not reimbursable. The hospitals’ innocent
statements that the costs were fully reimbursable
were therefore false. On this view, we need not ad-
dress the government’s contention that even if the
statements were not literally false, they were “fraud-
ulent” within the meaning of section 1001.

Appellant next argues that the evidence was insuf-
ficient as a matter of law to establish that he “will-
fully cause{d]” the submission of the false statements
to the government within the meaning of section
2(b). He argues that his purpose, if any, was only to
defraud the hospitals, not the government. Appellant
claims that he did not care about the hospitals’ cost
reports because they “played no role in the amount
of money paid by the hospitals to the defendants

. and even their filing vel non was a matter of
total irrelevance and indifference to the defendants.”
Thus, he argues, in the absence of a criminal purpose

3936

23a
Appendiz A.

or objective to cause a false statement to be made to
the government, his convictions cannot stand, citing
United States v. Peoni, 100 F.2d 401, 402-03 (2d
Cir. 1938) (L. Hand). However, there was sufficient
evidence from which the jury could infer that the fil-
ing of the false statements was a criminal purpose of
appellant and that their filing was not a matter of
indifference to him. There was plenty of evidence
that from the outset Huber was familiar with the
government hospital funding programs, which he
knew would stimulate hospital activity and encourage
expansion. The jury was entitled to infer that such
funding, and the paper work that went with it, was
essential to the prosperity of appellant’s ongoing
fraudulent business activities. This was not a one-
time fraud that ended prior to the filing of any
papers with the government by the hospitals.
Appellant’s last objection to his false statement
convictions is to the number of them. He was con-
victed on 19 counts, whereas, he argues, the ac-
tivities alleged comprised at most six counts, i.e., one
count for each of the six hospitals submitting de-
preciation claims to the government. Appellant’s
point is that since the historic cost figure reported to
the government as the basis for each hospital’s an-
nual claim for depreciation was the same each year,
there was, in effect, only one false statement for
each hospital, which was merely repeated a number
of times. In other words, appellant claims the convic-
tions were multiplicitous, in that a single act was al-
leged to constitute several violations of the same
statute. See United States v. Samuel Israelski, 597
F.2d 22, 24-25 (2d Cir. 1979). While such a question

3937

24a
Appendiz A.

is rarely free from difficulty, we think appellant was
correctly convicted on all 19 counts. Appellant was
not charged with a given number of fraudulent
schemes, but rather with having caused a certain
number of false statements to be made. Had a hos-
pital knowingly used an inflated historic cost as the
basis for depreciation claims, it would have com-
mitted a separate violation with each annual claim.
See United States v. Bettenhausen, 499 F.2d 1223,
1234 (10th Cir. 1974). Thus, appellant’s convictions
for having caused the submission of the 19 state-
ments are affirmed.

Appellant next complains of the district judge’s re-
fusal to allow a defense witness to testify as an ex-
pert in the field of psychoanalysis, and that such re-
_ fusal seriously interfered with appellant’s ability to
present his defense that because of his relationship
with his father he was incapable of forming the men-
tal state necessary to sustain the convictions. The
witness did testify as a business expert. He is a pro-
fessor of economics at Harvard Business School. He
has also studied psychoanalysis at the Boston Psycho-
analytic Institute, and, though he has had no medical
training, is certified as a psychoanalyst by the
American Psychoanalytic Institute. He has treated
people regularly without supervision for a number of
years. Judge Tenney heard the proffered testimony
in the absence of the jury, and ruled the witness un-
qualified to testify as an expert concerning ap-
pellant’s mental state. While we do not say that all
of us would have ruled the same way, we hold that
the district judge did not abuse his broad discretion
in deciding that this witness was not qualified in
this case. See, e.g., Hamling v. United States, 418

3938

25a
Appendiz A.

U.S. 87, 108 (1974); United States v. Bermudez, 526
F.2d 89, 98 (2d Cir. 1975), cert. denied, 425 US.
970 (1976). This is particularly so in light of the fact
that two psychiatrists did testify as experts concern-
ing appellant’s mental state, and thus the defense
based on appellant’s asserted lack of free will was
presented to the jury.

Appellant challenges the sufficiency of the evi-
dence on four of the mail fraud counts. These chal-
lenges are aimed at more than simply reversal of
those convictions. Relying on a case in the Third Cir-
cuit for the proposition, appellant argues that if any
of the mail fraud counts are reversed, the RICO
count must be reversed as well, because it is impos-
sible to know which mail fraud counts the jury relied
on in finding the requisite “pattern of racketeering
activity.” United States v. Brown, 583 F.2d 659, 669
(3d Cir. 1978). We need not decide whether this cir-
cuit would agree with that analysis, cf. United States
v. Parness, supra, 503 F.2d at 438 (“Convictions on
any two of these [travel fraud] counts were sufficient
under § 1961(5) to establish the ‘pattern of racketeer-
ing activity’ necessary for a conviction under
§ 1962(b).”), because the evidence was sufficient to
sustain all the mail fraud counts submitted to the
jury.

Appellant argues that as to two of the counts, 25
and 26, there was insufficient evidence of use of the
mails. Those counts concerned checks paid by two of
the hospitals to Medical Facilities. Officials from
both hospitals testified that checks were typically
mailed in the ordinary course of business. Although
there was testimony that some checks were picked
up by hand, they were identified as checks other

3939 ©

26a

Appendiz A.

than those specified in Counts 25 and 26, Witnesses
could not recall whether any checks other than those
identified were picked up by hand. This testimony of
an alternative mode of delivery is simply too scanty,
compare United States v. Baker, 50 F.2d 122, 123
(2d Cir. 1931) (testimony by lawyer that “a great
many letters delivered by his office were not
mailed”), to prevent the use of customary business
practices as proof of mailing. See United States V.
Toliver, 541 F.2d 958, 966 (2d Cir. 1976); United
States v. Fassoulis, 445 F.2d 13, 1% (2d Cir.), cert.
denied, 404 U.S. 858 (1971).

As to Counts 32 and 33, appellant claims that use
of the mails by the hospital to deliver monthly pay-
ment requisitions to the New York State Department
of Health came only after consummation of the
fraudulent transactions, and thus could not have
been “for the purpose of executing [a] scheme or ar-
tifice [to defraud]” within the meaning of 18 U.S.C.
§ 1341,’ under United States vy. Maze, 414 U.S. 395
(1974). Appellant’s point is that all the invoices on
which the requisitions were based had already been
paid to one of appellant’s entities by the hospital be-
fore the mailing. However, regardless of whether all

7 In relevant part, 18 U.S.C. § 1341 provides:

Whoever, having devised or intending to devise any scheme
or artifice to defraud .. . , for the purpose of executing such
scheme or artifice or attempting so to do, places in any post
office or authorized depository for mail matter, any matter or
thing whatever to be sent or delivered by the Postal Service,
or takes or receives therefrom, any such matter or thing, or
knowingly causes to be delivered by mail according to the di-
rection thereon, or at the place at which it is directed to be
delivered by the person to whom it is addressed, any such
matter or thing, shall be fined not more than $1,000 or im-
prisoned not more than five years, or both.

3940

27a
Appendiz A,

of the invoices had already been paid, the mailing to
obtain reimbursement was a part of this ongoing
scheme to defraud. As stated earlier, the jury could
find that government funding of hospital expansion
was essential to the prosperity of appellant’s fraud-
ulent scheme. In Maze, supra, 414 U.S. 395, the de-
fendant stole a credit card and fraudulently used it
to obtain food and lodging at motels. The mails were
used by the motels to obtain payment on invoices
from banks. Maze’s “scheme reached fruition when he
checked out of the motel, and there is no indication
that the success of his scheme depended in any way
on which of his victims ultimately bore the loss.” Id.
at 402. Further, the mailings there “increased the
probability that [the] respondent would be detected
and apprehended.” Id. at 403. Thus, in Maze, the
mailings were not only not in furtherance of a
scheme to defraud, they threatened to thwart it.
Here, viewed realistically, the mailings were an inte-
gral part of Huber’s fraudulent scheme. As stated
earlier, the jury could find that the government
funding was essential to generate the funds for
hospital expansion on which the continuance of the
illegal enterprise depended. See generally United
States v. Hasenstab, 575 F.2d 1035, 1038-39 (2d Cir.
1978). Therefore, there was sufficient evidence that
the mailings were in furtherance of a scheme to
defraud.

Finally, appellant argues that his request for an
order withdrawing several of the 18 specifications of
perjury set forth in Count 40 should have been
granted. We have carefully reviewed the objections

8 Appellant was charged with violating 18 U.S.C. § 1623, which

provides in relevant part:
(footnote continued on next page)

3941.

2a
Appendia A.

to each specification and find that the truthfulness
of each was a question that was properly submitted
to the jury. United States v. Bonacorsa, 528 F.2d
1218 (2d Cir.), cert. denied, 426 U.S. 935 (1976).
There was no “fundamental ambiguity or im-
preciseness in the questioning,” id. at 1221, and we
cannot say that any of the answers was literally true
on its face.

For the reasons set forth above, we affirm the
judgment of conviction is all respects.

(a) Whoever under oath in any proceeding before or an-
cillary to any court or graad jury of the United States know-
ingly makes any false material declaration . . . Shall be fined
not more than $10,000 or imprisoned not more than five
years, or both.

3942

570—7-23-79 ad USCA—4391

29a

Appendix B, Order Denying Petition for Rehearing.
UNITED STATES COURT OF APPEALS

Seconp Circuit

At a Stated Term of the United States Court of Appeals,
in and for the Second Circuit, held at the United States
‘Court House, in the City of New York, on the tenth day of
October, one thousand nine hundred and seventy-nine.

Present: Hon. Srerry R. WarTerMan,
Hon. Witrrep FEInsere,
Hon. Wit11am H. Timsers,

Circuit Judges.

79—1132

A.
¥
Unirep States or AMERICA,

Plaintiff-Appellee,

Karu Huser,
Defendant-Appellant.

y%
>

A petition for a rehearing having been filed herein by
counsel for the appellant, Karl Huber

Upon consideration thereof, it is
Ordered that said petition be and it hereby is denied.

A. Dante Fvsaro,
Clerk.

30a

Appendix C, Order Denying Petition for Rehearing
in banc.

UNITED STATES COURT OF APPEALS

Seconp Circuir

At a stated term of the United States Cov~’ .. Appeals,
in and for the Second Circuit, held at the United States
Court House, in the City of New York, on the tenth day
of October, one thousand nine hundred and seventy-nine.

79-1132

Unirep States oF AMERICA,

Plaintiff-Appellee,
v.

Karu R. Huser,
Defendant-A ppellant.

A
bi

A petition for rehearing containing a suggestion that
the action be reheard in banc having been filed herein by
counsel for the appellant, Karl R. Huber, and no active
judge who was a member of the panel having requested
that a vote be taken on said suggestion

Upon consideration thereof, it is
Ordered that said petition be and it hereby is denied.

Irvine R. KavrmMan
Chief Judge

---

Source: Frix Law Library, https://www.frixlaw.com/law-library/documents/brief%3Amicro_IA40385006_1363%3A1. Public record. Not legal advice.