Petition — Hobby v. United States

a o 1 40 Office - Supreme Court,*U.S.

~ ad Y FILED

JUN 29 1983

- ALEXANDER L. STEVAS,

ws CLERK

In The

SUPREME COURT OF THE UNITED STATES

October Term, 1982

WILBUR HOBBY, Petitioner,

~-

Vv.

UNITED STATES OF AMERICA, Respondent-

PETITION FOR A WRIT OF CERTIORARI TO

THE UNITED STATES COURT OF APPEALS

POR THE FOURTH CIRCUIT.

Daniel H. Pollitt

University of North Carolina

School of Law

Chapel Hill, N.C. 27514

(919) 962-4127

Counsel for Petitioner

June 29, 1983

:

we

i

QUESTIONS PRESENTED FOR REVIEW

1. Whether an “indefensible sort of

entrapment” is brought about by United

States criminal conviction for fraud in a

CETA contract between Petitioner and North

Carolina where there was open disclosure

of all the facts in issue by Petitioner,

and full authorization to proceed on these

facts by the North Carolina contracting

officers.

2. Whether the courts below erred in

requiring Petitioner to nake out a prima

facie case of selective prosecution as a

condition precedent to a threshold inquiry

into that issue.

3. Whether the courts below erred in

condoning the systematic exclusion of

Blacks from appointment as foremen of

federal grand juries.

INDEX

Page

Questions Presented for Review..... i

CREREGR DOIG sc cceworescecscoccbovve.. b

JUPISGICtLON..w.ccccccccccccccccscce 2

Statutory and Constitutional

Provisions Involved.......esseee+ 2

Statement of the Case........e0545- 4

Reasons for Granting The Writ...... 17

I. The Decision Below Sanctioned

"An Indefensible Sort of En-

trapment” Contrary to the

Holdings of This Court in Cox

v. Louisiana and Raley v.

DCecccccccesesesesesesescees 17

II. The Decision Below Requiring

a Prima Facie Showing to Trig-

ger an Evidentiary Hearing on

the Issue of Selective Prose-

cution Conflicts With the

Holdings In Other Circuits,

and Effectively Overrules the

"Evil Eye and Unequal Hand"

Doctrine of Yick.Wo v.

HOpKinS...cscceccccesescsssess 19

III. The Decision Below Condoning

The Systematic Exclusion of

Blacks From Judicial Appoint-

ment as Forepersons of Grand

Juries Denies Due Process of

Law, and Conflicts with De-

cisions In Other Circuits

ii

i

a oe

Page

and with the Decision of

This Court in Rose v.

re eeeee3e4eeee 32

Cd. 6s 6 tessa credence 40

TABI.E OF AUTHORITIES

Cases

Attorney General of U.S. v. Irish

People, Inc., 684 F.2d 928 ~

(D.C. Cir. 1982) wc ceceeereccecs 31

Cox v. Louisiana, 379 U.S. 559

bl) ee eee ee fF 18, 19

Guice v. Fortenberry, 661 F.2d

496 (Sth Cir. 1981) wc cee cecceces 34

Olyer v. Boles, 368 U.S. 448

LAG? cob ebiccan anes beaded oda 25

Raley v. Ohio, 360 U.S. 423

ek er es ee ee ey 18, 19

Rose v. Mitchell, 443 U.S. 549

- CEO PEE coetedeiésenhstenenee 34, 36, 39

United States v. Berrigan, 482

F.2d 171 (3r2 Ciz. gk Bees 27

United States v. Berrios, 501

P.2d 1207 (2d Cir. 1974)....---- 26

United States v. Cooper, 577

, F.2d 1079 (6th Cir. lo, ee

United States v. Erne, 576

F.2d 212 (9th Cir. 1978) ...++e+s

iii :

- United States v. Falk, 479

Fuge G26 (7th Gis. ITF) ccécccess BB

United States v. Kelly, 556

F.2d 257 (Sth Cir. 1977)...2.28, 32

United States v. Larson, 612

Fume Baek 66GR Cis... 1908) ..ccice B

United States v. Oaks, 508

F.2d 1403 (9th Cir. 1974)....... 31

United States v. Perez-Hernandez,

672 F.2d 1380 (llth Cir. 1982).. 35

United States v. Saade, 652

P.2d 1126 (lst Cir. 1981)....... 26

United States v. Scott, 521

Pige: Seen (PGR Gis. WiEkseccceos BW

United States v. Torquato, 602

P.2d 564 (3rd Cir. 1979)........ 27

United States v. Warinner, 606

7.246 210 (6th Gir. 1970) .ccccece 29

Williams v. State of Miss., 608

P.24 1021 (Sth Cir. 1979) .ccccee 34

Yick Wo v. Hopkins, 118 U.S. 356

CARES cé6vccetséd cocdcdatepeune 24, 25

Constitutional Provisions and Statutes

The Fifth Amendment to the

ng GCORBCACMCEGR < coes coccdoccecvcccces 4

Conspiracy to Commit Offense or

to Defraud the United States,

18 USC Sec. Den éeocbébsédieaewe 2

vie iv rf

Theft or Embezzlement from Em-

ployment and Training Funds,

18 usc Sec. idee at eadeiie me ek

pil

No.

In The

SUPREME COURT OF THE UNITED STATES

October Term, 1982

WILBUR HOBBY, Petitioner _

v. 9

—s

UNITED STATES OF AMERICA, Respondent.

PETITION FOR A WRIT OF CERTIORARI TO THE

UNITED STATES COURT OF APPEALS

FOR THE FOURTH CIRCUIT

The petitioner Wilbur Hobby respectfully

prays that a writ of certiorari issue to re-

view the judgment and opinion of the United

States Court of Appeals for the Fourth Circuit

entered in this proceeding on March 9, 1983.

- OPINION BELOW

The opinion of the Court of Appeals is re-

ported at 702 F.2d 466. It is appended hereto

at p. l-A.

-le-

JURISDICTION

The judgment of the Court of Appeals

for the Pourth Circuit was entered on

March 9, 1983. A timely petition for re-

hearing and suggestion for rehearing en

banc was denied on April 29, 1983. This

petition for certiorari was filed within

60 days of that date. This-Court' s juris-

diction is invoked under 28 usc sec. 1254()).

STATUTORY AND CONSTITUTIONAL PROVISIONS

INVOLVED

18 USC sec. 371 provides in pertinent

part as follows: “Conspiracy to commit

offense or to defraud United States:

If two or more persons conspire

either to commit any offense against

the United States, or to defraud the

United States, or any agency thereof

in any manner or for any purpose, and

one or more of such persons do any act

to effect the object of the conspiracy,

-2-

each shall be fined not more than

$10,000, or imprisoned not more than

five years, or both."

18 USC Sec. 665 provides in pertinent

part as follows: “Theft or embezzlement

from 1 t and tr funds:

(a) Whoever, being an-officer,

director, agent or emptpyee of, or con-

nected in any capacity with any acen-

cy receiving financial assistance

under the Comprehensive Employment

and Training Act knowingly hires an

ineligible individual or individuals,

embezzles, willfully misapplies,

. Steals, or obtains by fraud any of

the moneys, funds, assets, or property

which are the subject of a grant or

'

!

‘;

contract of assistance pursuant to

such Act shall be fined not more than

$10,000 or imprisoned for not more

than 2 years, or both; .. ."

-j3-

The Fifth Amendment to the Constitu-

tion of the United States provides in part

that:

"No person shall be held to

answer for a capital, or otherwise

infamous crime, unless on a present-

ment of indictment of a Grand Jury

+ « « » nor be deprived of life,

liberty, or property, @ithout due

process of law... ."

STATEMENT OF THE CASE

The bed-rock facts here are that

Wilbur Hobby, long-time President of the

North Carolina AFL-CIO, owned a printing

company named Precisions Graphics, Inc.

Precision Graphics signed a contract under

the Comprehensive Employment and Training

Act of 1973 (CETA) with the North Carolina

Department of Natural Resources and Com-

munity Development (NRCD) to train 40 un-

employed and unskilled young men and women

“4-0

as computer operators. The contract au-

thorized payment of $130,833 to Precision

Graphics. The contract was fully per-

formed. The students were trained, and

almost all obtained employment in their

new fields. Precision Graphics billed the

state only $88,786 for its services. It

did the agreed upon job for about two-

thirds of the agreed upon pvice. Some

$42,047 remained available to educate and

train other deprived youths in useful

skills. Nevertheless, Wilbur Hobby was

indicted and convicted on four counts of

conspiracy and fraud in connection with

this contract.

The somewhat unique circumstances re-

quire a brief exposition of what went on.

To begin with, Wilbur Hobby was a welcome

participant in the various state sponsored

programs to train the unemployed for useful

employment. Prior to the events here in

issue, he had signed some 15 CETA contracts

(mostly on behalf of the AFL-CIO) with the

state of North Carolina, its departments

and agencies. (App. p. 1389) Mort Levi,

the alleged co-conspirator here, was em-

ployed full time to prepare CETA proposals,

and operate the programs on a day to day

basis. ~

Wilbur Hobby and the AFL-CIO were

also consumers of computer services, and

knew of the shortages of skilled operators.

(App. p. 1202) The consequence is that

Wilbur Hobby and officials of the North

Carolina NRCD began discussions very early

in 1979 concerning a CETA program to train

computer operators.

A 1978 amendment to the CETA Act was

designed to involve the private sector, and

it made funds available for that purpose

(App. p. 574). For this reason the state

officials suggested to Wilbur Hobby that he

organize a private corporation to apply for

the proposed training grant, rather than

apply in the name of the AFL-CIO. Wilbur

Hobby and Mort Levi organized a corporatiam

named Precision Data Institute, Inc., and

Precision Data Institute filed a grant re-

quest for the training of data processing

personnel. (App. p. 590) On March 26,

the officials in the North Carolina NRCD

recommended that this application be au-

thorized. (App. p. 591)

Meanwhile, Wilbur Hobby had been nego-

tiating with a company named Mohawk Data

for the rental or purchase of computer

equipment. The salesman informed him that

the minimm lease would be for 42 months,

and that the rental price for this period

would exceed the purchase price by over

$1,000. (App. p. 451) Hobby decided to

buy, and on behalf of Precision Data In-

stitute, signed a purchase contract on

April 10, 1979.

Precision Data Institute had no assets,

and Hobby told representatives of Mohawk

Data that the payments would come from the

CETA grant. (App. 472) Officials of the

North Carolina NRCD testified that it is

customary and proper to make advances for

the purchase of equipment. (App. 560) In

fact, they testified that some 90% of the

contractors avail themselves=of the advance

system; most lack “up front" money and need

an advance to get started. (App. 601)

Wilbur Hobby met with state officials

immediately prior to his departure for

Washington, D.C. to sign the purchase agree-

ment with Mohawk Data. They knew he was

going to purchase a computer, and they knew

he would charge the purchase to his grant.

(App. p. 679) They testified that this

was permissible under the regulations.

(App. p. 672)

A review process continued within the

North Carolina WRCD, and the officials

there decided it would be better to take

the contract from Precision Data Institute

and award it to Precision Graphics (the

printing company owned by Wilbur Hobby).

(App. p. 1502) Precision Graphics had a

track record of successful CETA grants,

and capital assets; Suecisteh sate Insti-

tute had neither. Accordingly, Mort Levi

sat down with state officials and prepared

a new contract in the name of Precision

Graphics. (App. pp. 660-663)

The contract between Precision Graphics

and the North Carolina NRCD provided that

the computer recently purchased by Pre-

cision Data Institute would be leased

(along with the maintenance agreement) to

Precision Graphics for the duration of the

training period. (App. pp. 1506-1508) The

amounts of the rentals were line items in

the budget submitted by Graphics, and ap-

proved by the state officials. (App. pp.

1506-1508)

This background takes us to the five

counts of the indictment.

Count one is a general allegation that

Wilbur Hobby and Mort Levi conspired to de-

fraud the United States of funds and monies

under the CETA contract between Precision

Graphics and the North Carolina NRCD by

purchasing computer equipment and computer

maintenance services from Precision Data

Institute, Inc., such purchases resulting

in unlawful profits to Precision Data In-

stitute, Inc. (App. p. 137)

The second count charges that Mort

Levi (but not Wilbur Hobby) knowingly re~

cruited individuals for the computer train-

ing program who were not eligible under the

contract. ‘The contract provided that the

students would be recruited only from five

designated counties, and the government

alleged in part that Mort Levi recruited

students from other counties as well. For

example Sonia Bailey, the first government

witness on this score, was questioned

closely on whether her home was in Person

County, where her parents lived-and where

she went on weekends; or in Durham, where

she resided in a boarding hotize during the

week while attending school. The contract

did not list Person County as one of the

five counties from which Precision Graphics

would recruit the students.4/ Mort Levi

was also charged with recruiting students

who were ineligible under the law. No one

is eligible for CETA programs if their in-

come exceeds $3,023 for any twelve-month

od

1/ Residents of Durham County, but not

residents within the city of Durham, were

eligible for the program. Sonia Bailey

apparently lived within the city of Durham,

which made all this examination unneces-

sary.

-ll-

period. Bonnie Monsees, the government

lead-off witness on this score, testified

that Levi told her she was ineligible when

she applied for the program because her

tax form showed she had earned $5,000 in

the previous twelve months. He told her

she would become eligible if she went with-

out any pay for the first 8 weeks of the

program. These are —— the "“ille-

galities" charged in the indictment against

Mort Levi. :

The third count alleges that Wilbur

Hobby (as President of Precision Data In-

stitute) had a maintenance contract whereby

Mohawk Data agreed to do the required main-

tenance at a rate of $214.00 per month.

Wilbur Hobby then charged Precision

Graphics (his printing company) the amount

of $125.00 per week for this same service.

This continued from May 21 through October

10, 1979, and allegedly resulted in an

+.

- 12 -

Fees A

illegal profit to Hobby (and Precision Data

Institute) of approximately $1,840.00 (App.

p. 142)

The defense to the third count was

twofold. First, as a matter of law the

complete disclosure nullified the allega-

tion of "fraud". Second, as a matter of

fact the Government vas not complete in its

description of the contract” In addition

to the fixed amount, the maintenance con-

tract between Mohawk and Precision Data

Institute provided that repairs after 5:00

p.m. would cost an additional $60.00 per

hour, with a 2 hour minimum; i.e., there

would be a charge of $120.00 for each eve-

ning service call. (App. p. 497) Repre-

sentatives of Mohawk further testified that

it takes time "to get those bugs worked

out” after the initial installation. (App.

p. 445) In short, if the service men had

to make more than two service calls a month

during the evening hours (classes went

until 9:00 p.m.), Precision Data Institute

would have been in the red on this service

contract.

The fourth count charges Wilbur Hobby

with fraud in the amount of rental charged

Precision Graphics for the computer equip-

ment and for the maintenance. K Government

witness testified that CETA Yegulations

applicable to transactions between organi-

zations under common control limit the

amount of rental to the amount that could

be claimed as a depreciation on a tax re-

turn. The government witness further testi-

fied that the allowable depreciation in

this case would have been $5,535. Anything

above that amount, he testified, would be

illegal. (App. p. 1446) Since Precision

Data Institute charged Precision Graphics

some $16,625 for computer rental and main-

tenance, there was an alleged over-charge

of $11,090. (App. p. 1596)

Again the defensewas simple: there

could be no "fraud" because Wilbur Hobby

and the officials of the North Carolina

NRCD acted in good faith when they agreed

to a rental in the amount of $16,250.

(App. p. 1545) It was also brought out on

cross examination that some of thre relevant

CETA regulations were not published until

July 20, 1979, “which could have been well

into the time period of this contract”.

(App. p. 1521)

The fifth count charges Wilbur Hobby

with fraud in charging Precision Graphics

some $3,000 in rent for the use of the data

processing equipment for the period of May

21, 1979 through June 15, 1979; a period

when the equipment was not yet functionally

in operation. (App. p. 143)

Again there is a simple defense.

These first weeks of the program were uti-

lized for an orientation program; students

- 18 «

testified that the instruction prior to

the arrival of the computers was “very

beneficial". (App. p. 748) Moreover, the

total amount of the rent was set out in

the contract, and pro-rated over the nun-

ber of weeks. Rent was charged whether or

not the machines were used at any particu-

lar moment on any particular. week. Pinally,

the disputed rental payment had both prior

authorization and subsequent ratification

from the appropriate officials of the North

Carolina NRCD, thereby negating any sugges-

tion of "fraud".

The jury found Wilbur Hobby and Mort

Levi guilty on all counts as charged. They

were sentenced to 18 months in prison, to

five years probation, and to a fine of

$10,000 on each count. (App. pp. 1796-

1800)

-16-<-

REASONS FOR GRANTING THE WRIT

I.

The Decision Below Sanctioned "An

Indefensible Sort of Entrapment”

Contrary To The Holdings Of

This Court in Cox v. Louisiana

and Raley v. °.

As indicated in the statement of the

case, Wilbur Hobby and the appropriate

state officials worked in close eonsint at

every step of the CETA contract. There

was full disclosure on the part of Wilbur

Hobby, the state officials gave full ap-

proval after thorough intra- and inter-

office disagreement and discussion. The

very vouchers charged as fraudulent were

prepared for Wilbur Hobby by Mr. Vincent

Harris from the Fiscal Technical Assistance

Unit of the North Carolina NRCD. (App.

p. 1560) Wilbur Hobby submitted them

without change. (App. pp. 1561-1563)

This Court has held that when public

officials authorize the acts in question,

-l17<-

y fe

wos

to sustain a later conviction for doing

those acts “would be to sanction an inde-

fensible sort of entrapment by the State."

Put simply, “The Due Process Clause does

not permit convictions to be obtained under

such circumstances". Raley v. Ohio, 360

U.S. 423, 425-426, 438 (1959); Cox v.

Louisiana, 379 U.S. $59, S71 (1965).

Here, the trial judge danied Wilbur

Hobby's request that the jury be instructed

that:

"If a person discloses to a gov-

ernmental agency the material facts

necessary for an understanding of a

particular transaction, or group of

transactions prior to obtaining any

funds from the governmental agency,

and then submits requests for =

in connection with that

or transactions, and the soventeannal

agency approves said requests for pay-

ment, then, as a matter of law, there

can be found no fraud or misrepresen-

tation in connection with the transac-

tion or transactions". (App. p. 312)

Here, the Court of Appeals affirmed the

District Court without discussion.

Raley and Cox differ from this case

only in that they invol ted state convic-

tions for actions which state officials

earlier had authorized. This case involves

a federal conviction for actions which

state officials had earlier authorized; but

the state officials were expending federal

funds pursuant to a federal statite and

under federal regulations. >

It is submitted that the situation

here presents a substantial question of

due process which requires this Court's

attention.

Ir.

The Decision Below Requiring a Prima

Facie Showing To Trigger An Evi- ee

dentiary Hearing On the Issue of

Selective Prosecution Conflicts With

the Holdings in Other Circuits, and

Effectively Overrules the “Evil Eye

and Unequal Hand" Doctrine of Yick

Wo _v. Hopk °

A second major issue in this case

arises out of the fact that Wilbur Hobby

- 19 -

was the first person ever to be prosecuted

by the United States for CETA fraud in the

Eastern District of North Carolina; despite

ample official evidence that the audits of

379 other CETA contracts disclosed what are

known as “questioned costs". The norm,

the universal practice when costs are ques~-

tioned, is to proceed by way of adminis-

trative review and civil suit; not as here

by way of criminal indictment.

The procedure is set forth in the

regulations and in the individual CETA con-

tracts. If costs are questioned, the mat-

ter is referred to a division in the North

Carolina NRCD known as the “Questioned

Cost Resolution Unit". Following internal

review in that unit, there is a conference

with the contractor to review the problem.

(App. p. 1567) If there is disagreement at

that level, the issue can be appealed to

the Atlanta regional office of the United

= 20 -

iia” ih

States Department of Labor. The decision

of the United States Department of Labor

is reviewable by the North Carolina state

auditor; and ultimately the state can bring

civil suit for breach of contract to re-

cover the alleged “unallowable costs".

(App. pp. 1568-1569) =

None of that procedure_was followed

here. In fact, the federal government spe-

cifically requested the state of North

Carolina to terminate this contractual

method for resolving cost disputes; and

began a criminal grand jury investigation.

(App. p. 233)

Prior to trial, Wilbur Hobby moved for

a hearing on the issue of selective prose-

cution. He did not move to dismiss the in-

dictment for this reason, as he did not yet

feel confident of all the facts.

In support of his motion for a hearing,

Wilbur Hobby established a number of

threshold facts.

He established that his was the first

criminal indictment ever by the United

States in the Eastern District of North

Carolina for CETA fraud. (App. p. 231)

He established that there were 379

other contemporaneous CETA contracts where

audits disclosed questioned costs. (App.

p. 232) he

He established that in 55 of these

other contracts, the questioned costs ex-

cooded $80,000. (ep. 9. 292)

He itemized a number of well publi-

cized contemporaneous situations where

there was no federal prosecution. (App.

pp. 233-234) 2/

2/ The following are illustrative of well

publicized situations which, perforce, came

to the attention of the federal authorities.

“Now, there's a story on the 15th of

March...of $148,000 that went for work that

shouldn't have been done, allegedly, on the

St. Augustine College campus".

P "Between the l4th of September and the

. 21st of September in 1979, there were eight

- 22 -

Finally, he established that for a

decade he had been the President of the

North Carolina AFL-CIO, and for more years

then that had been an outspoken and un-

abashed critic of established state leader-

ship, as well as the established policies

in regard to labor-management relations,

in regard to racial segregation ~in regard

to questions of peace and was, in regard

to consumer protection, in regard to

women's rights, and a host of other con-

troversial issues. (App. p. 233).

(fodtnote cont’ a)

stories about CETA jobs that allegedly and

improperly went to a State senator." (App.

p- 233)

"Between the 13th of August of 1979

and the 3rd of July of 1980 there were fif-

teen stories about a $527,000 overcharge,

alleged in regard to a program in Washing-

2 ton County”. (App. p. 234)

"On the 13th of October of 1979, there

was an allegation that a state NRCP employee

approved the contract for $77,000 to a group

in which her husband was a partner and from

. which he would specifically benefit".

(App. p. 234)

Counsel for Wilbur Hobby submitted

that they had est»blished more than a

"frivolous" or “colorable basis" to sup-

port the motion for an evidentiary hear-

ing. (App. p. 235). The trial court de-

nied the motion because Wilbur Hobby had

not established a “prima facie case".

(App. p. 241) -_

The Court of Appeals apBroved of this

holding without discussion.

This requirement that Wilbur Hobby

make out a prima facie case'of invidious

selective prosecution as a condition prece-

dent to a threshold hearing where he can

question government officials on this score

has the practical consequence of overruling

the doctrine of Yick Wo v. Hopkins, 118 U.S.

356 (1886).

Almost a century ago this Court estab-

lished that the law may not be applied and

administered by “public authority with an

ad

evil eye and an unequal hand.” Yick Wo v.

Hopkins, 118 U.S. 356 (1886). Of course

"the conscious exerv:ise of some selectivity

in enforcement (of criminal laws) is not

in itself a federal constitutional viola-

tion"; but it becomes so when the selection

is “deliberately based upon an unjustifi-

able standard such as race, religion, or

other arbitrary classification*. Olyer v.

Boles, 368 U.S. 448, 456 (1962).

That much is clear. What remains un-

certain is the standard to be applied when

determining whether or not to grant an

evidentiary hearing to explore this issue.

The various Courts of Appeal are in con-

flict on this matter.

The Court of Appeals for the First

Circuit has ruled that

"A defendant need not, however,

present a prima facie case in order

to justify an evidentiary hearing.

So long as the defendant alleges some

facts (a) tending to show that he has

been selectively prosecuted, and (b)

raising a reasonable doubt about the

propriety of the prosecution's pur-

pose a district court, in the ab-

sence of countervailing reasons,

should grant a request for a hearing”.

United Stases peace. 652 F.2d 1126,

The Court of Appeals for the Second

Circuit has ruled that a “colorable basis"

entitles the defense to subpoena documen-

tary evidence required to establish a se-

lective prosecution defense.— The Court ex-

plained: “we would first require some

evidence tending to show the existence of

the essential elements of the defense and

that the documents in the government's

possession would indeed be probative of

these elements.” United States v. Berrios,

501 F.2d 1207, 1211-1212 (2d Cir. 1974)

(emphasis supplied).

The Court of Appeals for the Third

Circuit is in accord: “central to the

issue must be some initial showing that

there is a colorable basis for the

contention". United States v. Berrigan,

482 P.2d 171, 177 (3rd Cir. 1973) (empha-

sis supplied) Accord, United States v.

Torquato, 602 F.2d 564 (3rd Cir. 1979):

To meet the required “threshold showing

of discriminatory prosecution before an

evidentiary hearing will be accorded",

the defendant bears the burden OF proving

"a colorable entitlement to the claim of

selective prosecution. Some credible

evidence must be adduced indicating that

the government intentionally and purpose-

fully discriminated against the defendant

by failing to prosecute other imilarly

situated persons". 602 F.2d at 569-570.

The Court of Appeals for the Fourth

Circuit in this case apprcved a standard

demanding a prima facie as a threshold

requirement for an evidentiary hearing on

selective prosecution.

The Court of Appeals for the Fifth

- 27 <-

Circuit meets the defense of selective

prosecution with "extreme skepticism";

on the theory that “the courts are not

free to interfere with the free exercise

of the discretionary powers of the attor-

neys of the United States over criminal

prosecutions". United States v. Kelly,

$56 F.2d 257, 264 (Sth Cir. 197%. Ac-

cordingly, it will not permit questioning

of the prosecutors without some prior

demonstration by the defendant "that his

complaint might have merit". 556 F.2d

at 265.

The Court of Appeals for the Sixth

Circuit states that "Government attorneys

have great latitude in deciding which

potentially criminal actions to prose-

cute"; consequently the “offer of proof"

of selective prosecution must “show that

the decision to prosecute him was made

in bad faith and was based upon

© 28 -

impermissible considerations". United

States v. Cooper, 577 F.2d 1079, 1086

(6th Cir. 1978).

The Court of Appeals for the Seventh

Circuit, en banc, with one concurrence

and four dissents, wrote as follows re-

garding the question of proof necessary

—=—

to trigger a hearing:

"The presumption fs always that

a prosecution for violation of a

criminal law is undertaken in good

faith and in nondiscriminatory fash-

ion for the purpose of fulfilling a

duty to bring violators to justice.

However, when a defendant alleges

intentional purposeful discrimina-

tion and presents facts sufficient

to raise a reasonable doubt about

the prosecutor's purpose, we think a

different question is raised".

Gnd ted States v. as 479 F.2d 616,

3). (emphasis

supplied)

The Court of Appeals for the Eigh*»

Circuit is ambiguous on this {FaQy. In

United States v. Warinner, 607 F.2d 210

(8th Cir. 1979) a panel held that the

defendant must establish a prima facie

case "to warrant a hearing". 607 F.2d

at 213.2/ In United States v. Larson, 612

P.2d 1301 (8th Cir. 1980), a different

panel held that "A hearing is necessary

only when the motion alleges sufficient

facts to take the question past the

frivolous stage and raises a reasonable

doubt as to the prosecutor's purpose".

612 F.2d at 1304-1305. ~

The Court of Appeals for the Ninth

Circuit holds that the defendant ulti-

mately “must bear the burden of proving

a prima facie case". United States v.

Scott, 521 F.2d 1188, 1195 (9th Cir.

1975). But as a preliminary matter,

"hearings on similar pretrial objections

are usually in order when enough facts

are alleged to take the question past the

3/ The trial court in the instant case

relied upon Warinner. (App. p. 240)

frivolous stage", and that is enough in

a motion for an evidentiary hearing in a

‘selective prosecution situation. United

States v. Oaks, 508 F.2d 1403, 1404 (9th

Cir. 1974). Accord, United States v.

Erne, 576 F.2d 212, 216 (9th Cir. 1978)

(A defendant is entitled to an eviden-

tiary hearing “when enough facts are al-

leged to take the question past the

frivolous stage".)

The Court of Appeals for the Tenth

Circuit apparently has not ‘decided the

quantum of proof necessary to trigger a

preliminary hearing.

The Court of Appeals for the Dis-

trict of Columbia Circuit holds that

"where all that is being sought is dis-

covery", it "makes sense to require a

colorable claim" before “subjecting the

Government to discovery". Attorney Gen-

eral of U.S. v. Irish People, Inc., 684

- 3l1-

a

P.2d 928, 947 (D.C. Cir. 1982).

The short of the matter is that "In

recent years there has been au explosion

in the number of cases in which claims

of invidiously selective prosecution have

been made"; United States v. Kelly, 556

F.2d 257, 264 (Sth Cir. 1977) and the

Courts of Appeals are in conflict, if

not in confusion, on how these issues are

to be treated in the first instance. It

is therefore appropriate for this Court

to grant certiorari in this’ case, and

provide leadership guidance.

IIr.

The Decision Below Condoning The

Systematic Exclusion of Blacks

Prom Judicial Appointment as

Due Procesa of Law, and Conflicts.

with Decisions In Other Circuits

and With The Decision Of This

Court In Rose v. Mitchell.

The third major issue in this case

arises out of the fact that there were

fifteen grand juries in the Eastern

District of North Carolina from the years

1974 through 1981, and the federal judges

appointed only white males to serve as

foreman on each one of then.

Wilbur Hobby moved to dismiss the

indictment for this reason. He intro-

duced testimony from James M. O'Reilly,

a “statistical social science consultant"

(App. p. 170) that during tiiése years

there were no Blacks or women appointed

as forepersons (App. p. 177), and only

three Blacks and six women were appointed

as deputy forepersons. App. pp. 189-90) .4/

The trial judge denied the motion

to dismiss (App. p. 213) and the Court of

Appeals affirmed. (Appendix to Brief,

pp. 13-19)

This conflicts with the applicable

decisions of the Court of Appeals for the

4/ Co-defendant Mort Levi is Black.

ES

Fifth and Eleventh Circuits, and with the

rationale of this Court in Rose v.

Mitchell, 443 U.S. 549 (1979).

The Court of Appeals for the Fifth

Circuit first assumed that “the right to

a grand jury selected without regard to

race amplies fully when only the selec-

tion of the foreperson is at issue

rather than the selection ofthe entire

grand jury venire". Williams v. State of

Miss., 608 F.2d 1021 (Sth Cir. 1979).

The Court of Appeals for the Fifth Cir-

cuit then expressly held, en banc, that

the Equal Protection Clause is violated

"by the systematic exclusion of black

persons from service as grand jury fore-

men". Guice v. Portenberry, 661 F.2d.

496, 498 (Sth Cir. 1981).

The Fifth Circuit cases involved

the exclusion of Blacks from the leader-

ship position of grand jury foremen of

- 34 -

state grand juries. The Court of Appeals

for the Eleventh Circuit followed these

cases when the issue involved the exclu-

sion of Blacks from appointment as fore-

men in the federal grand jury system.

The Eleventh Circuit expressly rejected

the government contention that "the of-

fice of federal grand jury foremen is of

no constitutional or statutory signifi-

cance, and therefore, appellant cannot

seek relief through the protection of the

Pifth Amendment". United States v. Perez-

Hernandez, 672 F.2d 1380, 1384 (lith Cir.

1982). ;

The Court below discussed these

cases, and.respectfully disagreed. The

Court distinguished the significance of

the role played by the foremen of the

state grand - ries with that played by

the foreman of the federal grand jury,

and said that the duties of the federal

foremen are “ministerial” only. Se “has

- 38 -

no special powers or duties beyond those

borne by every grand juror, that meaning-

fully affect the rights of persons

charged with crime". Accordingly, the

Court below concluded that

"The impact of the federal

grand jury foreman as distinguished

from that of any other grand juror,

upon the criminal justice system

and the rights of persons charged

with crime is minimal~and incidental

at best. Any suspicionm-that his

office may enlarge his capacity to

influence other grand jurors is too

vague and uncertain to warrant dis-

missal of indictments and reversals

of convictions". (Appendix to Opin-

ion, pp. 17-18) ne

In effect, the Court below ruled

that the continued refusal to appoint

Blacks as foremen of federal grand juries

was not prejudicial to the defendant in

this case, and therefore constitutionally

irrelevant. But this is directly in con-

flict with the principal thrust of this

Court's opinion in Rose v. Mitchell, 443

U.S. 545 (1979).

This Court framed the initial argu-

ment there as “whether claims of grand

jury discrimination should be considered

harmless error when raised, on direct re-

view or in a habeas corpus proceeding,

by a defendant who has been found guilty

beyond a reasonable doubt by a properly

constituted petit jury at trial~on the

merits that was free from other constitu-

tional error". This Court then held that

racial discrimination in the selection of

grand jury foremen?/was not‘ and could not

be harmless error.

This Court wrote that "“discrimina-

tion on the basis of race, odious in all

aspects, is especially pernicious in the

administration of justice. Selection of

5 This Court assumed “that discrimina-

mn with regard to the selection of only

the foreman requires that a subsequent

conviction be set aside, just as if the

discrimination proved had tainted the

selection of the entire grand jury venire".

443 U.s. at 551-552, n. 4.

members of a grand jury because they are

of one race and not another destroys the

appearance of justice and thereby casts

doubt on the integrity of the judicial

process". 443 U.S. at 556. It “impairs

the confidence of the public in the ad-

ministration of justice"; and the harm

"is not only to the accused" but "it is

to society as a whole”. >

The Court reminded that "Because

discrimination on the basis of race in

the selection of members of a grand jury

thus strikes at the fundamental values

of our judicial system and our society as

a whole", “for nearly a century” it had

reversed convictions “where discrimina-

tion in violation of the Fourteenth

Amendment is proved", and always “with-

out regard to prejudice". 443 U.S. at

556.

The Court acknowledged that “there

- 38 -

are costs associated with this approach";

but believed that “such costs as do exist

are outweighed by the strong policy the

Court consistently has recognized of

combating racial discrimination in the

administration of justice". 443 U.S. at

558. -

The Court concluded on_this point

that: "We adhere to our position that

discrimination in the selection of the

grand jury remains a valid ground for

setting aside a criminal conviction".

443 U.S. at 559.

Rose v. Mitchell may be strong

medicine, but so are the Equal Protection

and Due Process Clauses of the Constitu-

tion. Unless this Court is willing to

see them denigrated piecemeal, it should

grant certiorari and reverse the decision

below. There is no question but that

the issue is both significant, and

recurrent .°/

CONCLUSION

For these reasons, a writ of cer-

tiorari should issue to review the judg-

ment and opinion of the Fourth Circuit.

Respectfully submitted,

Daniel H. Pollitt =

University of North Cardlina

School of Law =

Chapel Hill, N.C. 277514

(919) 962-4107

Counsel for Petitioner

June 29, 1983

s/ The Court below lists some of the

istrict Court cases in which the issue

has been recently presented. Appendix

to the Opinion, p. 15, n. 6

CERTIFICATE OF SERVICE

I hereby certify that on this 29th

day of June, 1983, three copies of the

Petition for Writ of Certiorari were

mailed, postage prepaid to Samuel T.

Currin, United States Attorney, Eastern

District of North Carolina, United States

Post Office Building, Raleigh, North

Carolina 27608. -

Daniel H. Pollitt

University of North Carolina

School of Law

Chapel Hill, NC 27514

(919) 962-4107

Counsel for Petitioner

- 41-

UNITED STATES COURT OF APPEALS

Por the Fourth Circuit

No. 82-5143

Unites States of America, Appellee,

versus

Wilbur Hobby, Appellant.

No. -

United States of America, Appellee,

=

versus

—

Mort Levi, Appellant.

Appeal from the United States District

Court for the Eastern District of North

Carolina. W. Earl Britt,. District Judge

Argued November 12, 1982

Decided March 9, 1983

Before HALL and Phillips, Circuit Judges,

and HAYNSWORTH, Senior Circuit Judge

Shelley Blum; Thomas C. Manning (Cheshire,

Manning & Parker on brief) for Appellants;

Janis H. Kockritz, U.S. Dept. of Justice

(Samuel T. Currin, United States Attorney

_ On brief) for Appellee.

A-l

ey oy |

HAYNSWORTH, Senior Circuit Judge:

Wilbur Hobby and Mort Levi were con-

victed of conspiring to defraud the

United States of funds appropriated under

the Comprehensive Employment and Training

Act in violation of 18 U.S.C.A. §§ 371

and 665. In addition, Hobby was convict-

ed of misapplying or obtaining By fraud

monies granted under CETA i violation of

§ 665, while Levi was convicted of hiring

ineligible persons for training in a

program established with CETA monies in

violation of § 665. Each was sentenced

to imprisonment and now appeals his

conviction.

I.

Wilbur Hobby was president of the

AFL-CIO in North Carolina and owner of

Precision Graphics, Inc., a printing com

pany located across the street from the

union office. He had involved himself

A-2

many times with CETA projects,

and in

one of those projects he had worked with

Mort Levi.* The union had need of com-

puter servuces in its daily business, and

typically such services were obtained

by contracting with outside companies.

Hobby conceived the idea that he might

provide such services through tire acqui-

sition of a minicomputer compatible with

the national union's big computer.

. In January 1979, Hobby began discus-

sions with a representative: from Mohawk-

Data Sciences about acquiring a computer

for union work. Over the next two to

three months, discussions about what

equipment was necessary continued. In

1. In all Hobby had signed 15 CETA con-

tracts between early 1977 and late 1979.

2. During one of Hobby's CETA funded

printing training programs in 1978-79,

Hobby paid Levi $2,500 for “curriculum

committee support.”

the meanwhile, however, Hobby and Levi

formed a new company, Precision Data, Inc.

Levi was shown on the articles of incor-

poration as an incorporator and also was

listed as registered agent. Hobby owned

95% of the corporation's stock and was

its president. a

In February 1979, the newly- formed

corporation, Precision Data;—submitted to

the North Carolina Department of Natural

Resources and Community Development a

CETA grant request for furds to train

data processing personnel. The applica-

tion was received with skepticism, both

because of doubt of the need of another

program in that vicinity and because Pre-

cision Data had no staff, capital, plant

or experience in computer training. The

director of the Division of Community

Employment of NRCD suggested that the

contract be awarded to Precision Graphics

a-4

because of its previous experience with

CETA contracts. Levi met with two NRCD

employees and drafted a new CETA applica-

tion on behalf of Precision Graphics.

On May 21, 1979, the application of

Precision Graphics for a grant of $129,429

was placed on NRCD's authorization list.

Meanwhile, in April, Hobby> on be-

half of Precision Data, had=tontracted to

purchase a computer from Mohawk. The

purchase price was $41,317.68, to be paid

with a down payment of $10',329.42 and

twenty-four equal monthly installments of

$1,721.57. In addition, Precision Data

agreed to pay Mohawk $214 a month for

maintenance.

On the same day that the application

of Precision Graphics was placed on the

contract authorization list, in a con-

tract signed by Hobby, Precision Graphics

agreed to lease Precision Data's computer

A-5

for a monthly rental of $3,000 and a

maintenance fee of $500 a month.

In late May, a CETA contract with

Precision Graphics was signed and an ad-

vance of $43,696, requested by Levi, was

paid. Almost immediately thereafter

Hobby transferred $18,000 from the ac-

count of Precision Graphics wo te ac-

count of Precision Data to sever a check

he had earlier drawn on the computer.

The $18,000 check was said to be "$9,000

for transportation and $9,000 for com

puter rental." In early July, Hobby

wrote another check from Precision Gra-

phics to Precision Data as payment for

computer rental, this one for $5,000.

Thus, notwithstanding that the computer

was not even in place until June 15, Pre-

cision Graphics expended and Precision

Data received for the audit period begin-

ning May 21 and ending September 30, 1979,

$14,000 for computer rental.° Moreover,

Precision Graphics paid Precision Data

for computer maintenance at the rate of

$500 a month beginning May 21, though

Precision Data's obligation to pay Mohawk

for such services did not begin to run

until July 16, 1979, and then only at the

rate of $214 a month. = =

The largest diversion 4 funds, how=-

ever, occurred in connection with charges

for the transportation of students. Al-

most $28,000 was charged to Precision

Graphics by Precision Data for services

that never were provided.

Levi recruited the students, and had

a number of ineligible students falsify

statements to make them appear eligible.

3. The contract subsequently was extend-

ed for six weeks to mid-November, but the

events that occurred after September 30

were not addressed in the audit nor are

they relevant to this appeal.

A-7

r

-

i ee

Beginning in late August, a super-

visor of an “Independent Monitoring Unit"

in NRCD began to monitor Precision Gra-

phics’ CETA contract. When she and other

employees of NRCD sought to meet with

Hobby and Levi, they were rebuffed by

Levi, and later Hobby refused them free

access to books and records and-other ma-

terials they needed. Pinally, in late

September the Secretary of NRCD requested

an audit by the state auditing office.

It produced a report released in May 1980.

Tr.

Hobby urges reversal on fourteen

separate grounds. Levi makes three points

which parallel three of Hobby's. Most of

the contentions are of little substance

or frivolous, and only two seem to us to

deserve discussion.

A.

Three counts of the indictment

é

charged Hobby with having procured CETA

funds by fraud and diverting such funds

for (1) purchase of data processing equip-

ment, (2) the rental of such equipment,

and (3) the maintenance of such equipment.

The charge was in the conjunctive, though

the statute, 18 U.S.C.A. § 665, is in the

disjunctive. The statute is vidlated if

the CETA funds are obtained by fraud or

if they are diverted or misapplied.

Hobby obtained a preliminary instruction,

to which the United States’ did not ob-

ject, stating both the statutory prongs

in the conjunctive so the prosecution

would be required to prove both fraud in

obtaining the grant and misapplication of

the funds. In his final instructions to

the jury, however, the district judge

properly charged the statutory offense

stating the two prongs in the disjunctive.

This, Hobby contends, was a deprivation

a-s

of his right of due process since his

lawyer had been led to believe that he

could obtain an acquittal upon a finding

of no fraud in obtaining the grant, re-

gardless of any later misapplication. *

If we assume that defense counsel

was mislead by the prosecution and that

the government had the burden fi ern

beyond a reasonable doubt feaud in ob-

taining the grant and misapplication of

the funds, we can perceive no consequen-

tial prejudice to Hobby. Evidence of

4. We doubt that defense counsel was

misled. It is true that the indictment

charged the matter in the conjunctive

and, at Hobby's request, the district

judge stated the matter in the conjunc-

tive in his preliminary charge to the

jury. The lawyer also points to the gov-

ernment's response to a pretrial motion ~

in which at one place the two offenses

appear in the conjunctive, but that fol-

lowed a disjunctive statement clearly

tracking the of the statute.

It would be that the lawyer

had read the statute and knew its

provisions.

A-10

fraud in obtaining the grant and the mis-

application of granted funds was derived

from the records of the two corporations,

Precision Graphics and Precision Data,

the CETA applications, testimony relating

to those documents and records and to

events associated with them. The same

core of operative facts forms the basis

for finding fraud or misappitcation, or

both. Indeed, the two things were closely

interrelated, for what Hobby did with the

money tended to show both misapplication

and fraud in obtaining the funds. Hobby

admits that the allegation of fraud was

the focus of his defense, and in making

that defense he necessarily was required

to do all that he could to explain and

justify the expenditures. Counsel did

net suggest what more he might have done

in defense cf the charge of misapplice-

tien of the funds. We cannot conceive of

A-1l

*

be.

7

+ =a

anything that might have been done that

was not done.

The principle upon which Hobby relies

is not without support. In United States

v. San Juan, 545 F.2d 314 (2d Cir. 1976),

a woman was convicted of bringing into

the United States a large sum of currency

without having declared it. She crossed

the border. from Canada in a-bus, and, at

trial, the prosecution insisted that the

offense was. committed while the defendant

was on the bus during inquiries by Cus-

toms agents and undertook the burden of

proving its case on that basis. When the

trial judge submitted the case to the

jury, however, it instructed that they

might convict on the basis of events that

occurred after the plaintiff had been re-

moved from the bus and escorted into the

Customs House. The Court of Appeals de-

cided there had been a deprivation of dus

aA-12

process since the prosecution had provid-

ed defense counsel with abundant reason

to believe that he could and should focus

his defense on the events and occurrences

on the bus. We accept the principle, of

course, but San Juan is not this case.

Proof of both branches of the offense

were found in the corporate — and

records, fully explored by the audit.

The audit revealed discrepancies that

were the basis for finding acquisition

of the CETA money by fraud: and the misap-

plication of some of those monies. In

this case it cannot be said that defense

counsel directed his efforts at a differ-

ent set of facts from those that became

the basis for his clir=%'s conviction.

B.

Each of the Gefendants scught dis-

missal of the indictment on the basis of

alleged discrimination in the selection

A-13

!

i

'

of grand jury foremen in the Eastern Dis-

trict of North Carolina. They produced

evidence that in the years 1974-1981 no

black had served as the foreman of the

grand jury in that district, and no woman.

There is no contention of discrimi-

nation in the selection of the grand jury.

They were selected under an appaoved plan

designed to insure fair repiesentation of

blacks and of women. The contention is

simply that in those years no judge had

designated a black or a woman to act as

foreman.”

In the context of a state grand jury,

this question was presented to the Supreme

Court in Rose v. Mitchell, 443 U.S. 545

(1979). The Supreme Court, however,

A-14

ee

found it unnecessary to decide whether or

not a reversal of the conviction was re-

quired upon a showing of discrimination

in the selection of grand jury foremen,

for it found an insufficient showing of

any such discrimination.

In Syj.ce_v. Fortenberry, 661 F.2d

496 (Sth Cir. 1981) (en banc), the court

held that discrimination inthe selection

of a foreman of a state grand jury re-

quired vacation of the conviction just

as would a taint affecting the selection

of all of the grand jurors. The Eleventh

Circuit, in United States v. Perez-Hernan-

dez, 672 F.2d 1380 (llth Cir. 1982), came

to the same conclusion, though the case

inyolved discrimination in the selection

of the foremen of federal grand juries.°

6. Similar problems have been presented

to other courts. See, e.g., Williams v.

Mississippi, 608 F.2d 1 (Sth os. xeren

cont.

A-15

The question which the Supreme Court

deliberately did not decide in Rose v.

Mitchell was much more debatable than the

one with which we are confronted. Involv-

ed there was alleged discrimination in

the selection of grand jury foremen in

Tennessee. In that state the foreman was

selected by the judge from the Gligibie

population at large, not fram just those

Grawn to serve. He serves a two-year

term, during which he has considerably

more authority than, that of the presiding

officer. He is authorized to assist

prosecutors in investigating crime and to

order the issuance of subpoenas to wit-

nesses. An indictment is fatally defec-

tive unless it bears the foreman's signa-

ture. 443 U.S. at 548 n.l.

United States v. Cross, 516 F. Supp. 700

(M.D. Ga. 1981); United States v. Manbeck,

514 FP. Supp. 141 (S.C. 1981); United

States v. Holman, 510 F. Supp. at oe

cont.

A~-16

The foreman of a federal grand jury

is selected after the grand jury has bean

impaneled from among those who have im-

paneled. His only duties are ministerial.

He has no special powers or duties, be-

yond those borne by every grand juror,

that meaningfully affect the rights of

persons charged with crime. he failure

of a federal grand jury foreiian to carry

out those ministerial duties placed upon

hin by F.R.Cr.P. 6(c) generally will not

invalidate an indictment. '-See, e.g.,

Prisbie v. United States, 157 U.S. 160

(1895).

The impact of the federal grand

jury foreman, as distinguished from that

of any other grand juror, upon the crin-

inal justice system and the rights of

persons charged with crime is minimal

(Pla. 1981); United States v. Jenison,

48S FP. Supp. 655 (S.D. Fla. 1979).

A-17

_—

and incidental at best. Any suspicion

that his office may enlarge his capacity

to influence other grand jurors is too

vague and uncertain to warrant dismissal

of indictments and reversals of

convictions.

The roles of grand jury foremen in

the federal system differ substantially

from the roles of grand jury _foremen in

Tennessee and other exetesi Federal

grand jury foremen are without the sig-

nificant powers authorized for Tennessee

grand jury foremen. Their role is so

little different from that of any other

grand juror that the rights of defendants

are adequately protected by assurance

that the composition of the grand jury as

a whole cannot be the product of discrim-

inatory selection.

We respectfully disagree with the

contrary conclusion of the Eleventh

a-18

Circuit in Perez-Hernandez.

IIt. .

Pinding no merit in any of the other

contentions of the defendants, their con-

victions are affirmed.

a-19