Petition — Basic Construction Co. v. United States

B3-2T2 — [oes sens com us

Oe ie he ee

a Ah ee AUG 19 192

- — -— —~1 !

In The al

Supreme Court of the United States

October Term, 1983

BASIC CONSTRUCTION COMPANY,

Petitioner,

Vv.

UNITED STATES OF AMERICA,

Respondent.

PETITION FOR A WRIT OF CERTIORARI

TO THE UNITED STATES COURT OF APPEALS

FOR THE FOURTH CIRCUIT

LEwIs T. BOOKER

L. NEAL ELLIs, Jr.

HUNTON & WILLIAMS

707 East Main Street

P. O. Box 1535

Richmond, Virginia 23212

(804) 788-8200

Attorneys for Petitioner

August 19, 1983

QUESTIONS PRESENTED

1. Whether a corporation should be subject to strict

antitrust criminal liability for acts of employees which

violate the corporation’s longstanding and strictly enforced

policy of antitrust compliance.

2. Whether the Court of Appeals erred when it found

that the trial court erred in excluding evidence relating to

the truth and veracity of the Basic employee who violated

the company’s express policy against bid rigging but never-

theless failed to award Basic a new trial.

TABLE OF CONTENTS

Page

oe Cigia sarap Sa pie s'6 0:0 0 6-0 cede eewes |

CCAS Coded y die cichocvecccvcceccsevas |

ne We BREED CAGES. ccc ccc cece seseveves 2

. REASONS FOR GRANTING THE PETITION ........ 4

A. The Trial Court’s Charge Improperly Fixed Absolute

Criminal Liability On The Corporation For The

Acts Of Employees Which Were Contrary To

Explicit Company Policy And Instructions .......... 4

B. The Court Of Appeals Erred In Failing To Grant

A New Trial When The Trial Court Excluded

Evidence Relating To The Truth And Veracity Of

The Basic Employee Who Violated The Company’s

Express Policy Against Bid Rigging ............... 10

EE 13

OO A-1

TABLE OF AUTHORITIES

Cases

Page

Dennis Vv. United States, 341 U.S. 494 (1951) .........000 ue 6

United States v. Bailey, 444 U.S. 394 (1980) ..........0045, 7

United States v. Davis, 639 F.2d 239 (Sth

Ct SEP art khnweesrae Paks Reh hee ae ars ee has ou hh 12, 13, 14

United States Vv. Hilton Hotels Corp., 467 F.2d

1000 (9th Cir. 1972), cert. denied, 409 U.S. 1125 (1973). .8, 13

United States v. Koppers Co., Inc., Crim. No.

79-85 (D. Conn., June 26, 1980), aff'd, 652 F.2d 290

(2d Cir. 1981), cert. denied, 454 U.S. 1083 (1981) ...... 9, 13

United States v. Mandel, 591 F.2d 1347 (4th Cir. 1979),

CON. GE, BEE UI: DOR CAO) ih kv eedccswesscesivesa 11

United States v. Truslow, 530 F.2d 257 (4th Cir. 1975) ...... 11

United States v. United States Gypsum Co., 438

Sis ESE 6 ono a eet cebae we wee hacia 4, 5, 6,7, 13, 14

Other Authorities

C. Wright & K. Graham, Federal Practice and

Procedare: Evidence 4 S221 CiI97B) 2... ccs ssccsccsicece 12

Lipson, A survey on the Ins and Outs of

Antitrust Compliance, 51 Antitrust L.J. 517 (1983) ....... 9

iv

In The

Supreme Court of the United States

October Term, 1983

a es

BASIC CONSTRUCTION COMPANY,

Petitioner,

Vv.

UNITED STATES OF AMERICA,

Respondent.

PETITION FOR A WRIT OF CERTIORARI

TO THE UNITED STATES COURT OF APPEALS

FOR THE FOURTH CIRCUIT

Basic Construction Company (Basic) petitions for a

writ of certiorari to review the judgment of the United

States Court of Appeals for the Fourth Circuit in this

matter.

I.

OPINION BELOW

The opinion of the United States Court of Appeals for

the Fourth Circuit is reprinted in the Appendix to this

petition.

Il.

JURISDICTION

The judgment of the Court of Appeals was entered on

June 27, 1983. On July 21, 1983, the Court of Appeals

stayed the issuance of its mandate for thirty days until

August 19, 1983, pending the filing of a petition for writ

of certiorari. Jurisdiction is conferred on this Court by 28

U.S.C. § 1254(1).

2

Il.

STATEMENT OF THE CASE

This bid-rigging case arises out of an indictment returned

by a federal grand jury on October 13, 1981, charging

that Basic Construction Company, David M. Howell, Henry

S. Branscome, Inc., Henry S. Branscome and other unnamed

co-conspirators had engaged in a conspiracy in violation

of Section | of the Sherman Act to allocate plant mix

schedule work let by the State of Virginia in 1978, Pursuant

to Basic’s motion, the district court severed the case against

David M. Howell, a former Basic employee, for separate

trial. The trial of the remaining defendants took place Feb-

ruary 22-26, 1982, in the United States District Court for

the Eastern District of Virginia in Newport News, Virginia.

At the conclusion of the trial all defendants, including

Basic, were found guilty. Basic was subsequently fined

$450,000.00 for its alleged participation in the conspiracy.

According to the Court of Appeals, the evidence for

Basic “tended to prove that it had a longstanding, well

known, and strictly enforced policy against bid rigging.”

Basic’s management repeatedly admonished all its em-

ployees, including Howell and Steve Colosi in its Highway

Department, to refrain from contacts with competitors.

Basic employees testified that they had received and under-

stood Basic’s policy against collusion. They were well aware

that any failure to adhere to the policy would be met with

swift and sure sanctions including involuntary termination.

At frial Basic never disputed the involvement of Howell

and Colosi, neither of whom was an officer in Basic, in the

bid-rigging scheme. Indeed, when Basic had reliable infor-

mation that they had been involved in the scheme it termi-

nated them both for violation of Basic’s policy. Both had

been terminated for more than a year before any indictment

3

was returned against Basic. Colosi, testifying with immunity,

was the principal witness against Basic.

At conclusion of the trial, Basic requested the following

charge to the jury on the issue of the corporation’s intent:

As I have just instructed you, the Government must

prove beyond a reasonable doubt that each corporation

possessed the required intent as defined in these instruc-

tions. One of the factors which you may consider in

determining the intent of each corporation, among

other evidence, is whether or not that corporation had

an antitrust compliance policy. In this regard, you are

instructed that the mere existence of an antitrust com-

pliance policy does not automatically mean that a cor-

poration did not have the necessary intent. If, however,

you find that a corporation acted diligently in the

promulgation, dissemination, and enforcement of an

antitrust compliance program in an active good faith

effort to ensure that the employees would not violate

the law, you may take this fact into account in determin-

ing whether or not the corporation had the required

intent. You may consider such a compliance program

only as to the intent of the company which propounded

it. You may not consider it in determining the intent

of any individual defendant.

The court refused Basic’s proposed charge and instead

charged the jury:

When the act of the agent is within the scope of his

employment or his apparent authority, the corpora-

tion is held legally responsible for it. This is true even

though the agent’s acts may be unlawful, and contrary

to the corporations actual instructions.

However, the existence of such instructions and

policies, if any be shown, may be considered by you in

determining whether the agents, in fact were acting to

benefit the corporation.

4

On appeal, the United States Court of Appeals for the

Fourth Circuit by a 2-1 vote affirmed the convictions even

though it found the trial court had erred in exclusion of

testimony relating to the credibility of Colosi.’ Judge

Widener dissented on the ground that the trial court’s

failure to admit evidence of Colosi’s bad character for

truthfulness was not harmless error.

IV.

REASONS FOR GRANTING THE PETITION

The failure of the trial court to charge as Basic requested,

and the charge actually given violated both the spirit and

letter of this Court's decision in United States v. United

States Gypsum Co., 438 U.S. 422 (1978) for at least two

reasons: (1) the charge as given imposed strict criminal

liability on Basic under the antitrust laws for acts of two

relatively minor officials even though those employees vio-

lated explicit corporate policy and instructions; and (2) the

jury was entitled to consider Basic’s diligent enforcement

of an antitrust compliance policy and its employees’ dis-

obedience of management's explicit instructions on the issue

of the corporation's criminal intent. In addition, Basic was

deprived of its opportunity to introduce evidence relating

to the truth and veracity of the government’s principal wit-

ness—the employee who had violated the Company’s policy

and had been terminated for doing so,

A. The Trial Court’s Charge Improperly Fixed Absolute Criminal

Liability On The Corporation For The Acts Of Employees Which

Were Contrary To Explicit Company Policy And Instructions

In United States v. United States Gypsum Co., 438 U.S.

422 (1978), several manufacturers of gypsum board were

* Basic Construction Company, Henry S. Branscome and Henry S.

Branscome, Inc. were appellants in the court below,

5

charged with using price verification among competitors to

fix prices in violation of Section 1 of the Sherman Act. The

trial court gave the traditional jury charge which permitted

the jury to presume criminal intent as a matter of law, Af-

firming the Court of Appeals’ reversal of the defendants’

conviction, this Court reexamined the traditional presump-

tion of intent and held that in all Sherman Act Section 1

cases:

[A] defendant’s state of mind or intent is an element

of a criminal antitrust offense which must be established

by evidence and inferences drawn therefrom and can-

not be taken from the trier of fact through reliance on

a legal presumption of wrongful intent from proof of

an effect on prices. 438 U.S. at 435.

Unlike regulatory crimes, the Sherman Act could not be

construed “as mandating a regime of strict liability criminal

offenses.” 438 U.S. at 436. Instead, in any criminal case

brought under the antitrust laws, intent must be shown by

proof either (1) that a defendant acted with the conscious

purpose of producing anti-competitive effects or (2) that a

defendant acted with knowledge of the probable conse-

quences and such consequences did, in fact, result, 438

U.S, at 444. Absent such proof “the imposition of criminal

liability on a corporate official, or for that matter on a

corporation directly” holds out the distinct possibility of

over-deterrence. 438 U.S. at 441.

In the Gypsum case this Court drew no distinction be-

tween treatment of per se or rule of reason offenses, This

Court categorically held that “intent is a necessary element

of a criminal antitrust violation.” 438 U.S. at 443. Chief

Justice Burger wrote that “(t]he criminal offenses defined

by the Sherman Act should be construed as including intent

as an element.” 438 U.S. at 443. The Court’s broad holding

6

was based upon the most fundamental principle of criminal

law that “mens rea is the rule of, rather than the exception

to, the principles of Anglo-American criminal jurispru-

dence.” 438 U.S. at 436, quoting from Dennis v. United

States, 341 U.S. 494, 500 (1951).

Gypsum imposes a burden upon the Government to prove

that a corporate defendant, like any individual defendant,

had the requisite criminal intent. It therefore follows that

the intent of relatively minor officials, as the Fourth Circuit

characterized Howell and Colosi, cannot be automatically

imputed to the employer. Yet that is precisely what the trial

court’s charge did. If the corporation has diligently promul-

gated and enforced an antitrust compliance policy to ensure

that its employees would abide by the law, then a finding

that the corporation intentionally violated the antitrust laws

based on the employee’s unauthorized acts violates both the

spirit and letter of the Gypsum decision.

At trial the evidence for Basic showed that instead of

disseminating a sanitized memorandum, the Company chose

the most effective means of communicating its policy to its

employees Basic’s officers called its employees in and in-

formed them personally that rigging of bids on highway

projects was absolutely prohibited. The employees regarded

management’s warnings seriously and were well aware

that any breach of the policy would result in dismissal.

JA 172-73.

However, relying upon the doctrine of respondeat su-

perior, the trial court gave instructions which fixed absolute

criminal liability on the corporation even though its em-

ployees had deliberately disobeyed management’s policies

and explicit instructions. The trial court imposed the gen-

eral rule of vicarious liability for the acts of agents and

employees, a policy which should not apply when the cor-

-

poration faces severe criminal sanctions for the unautho-

rized acts of its employees.

The avoidance of such inequitable results from antitrust

prosecutions was precisely the object of this Court’s opinion

in the Gypsum case. Chief Justice Burger wrote that:

While strict-liability offenses are not unknown to the

criminal law and do not invariably offend constitu-

tional requirements...the limited circumstances in

which Congress has created and this Court has recog-

nized such offenses...attest to their generally dis-

favored status. 438 U.S. at 437.

By applying respondeat superior principles to corporate

criminal defendants, the dectrine of respondeat superior

turns Section 1 cases into a strict liability offense. But Sec-

tion 1 cases in the Court's view are clearly not to be treated

as strict liability offenses. “While in certain cases [the Court

has] imputed a regulatory purpose to Congress in choosing

to employ criminal sanctions .. . the availability of a range

of nonpenal alternatives to the criminal sanctions of the

Sherman Act negates the imputation of any such purpose

to Congress in the instant context.” 438 U.S. at 442.

This Court has frequently turned to the American Law

Institute’s Model Penal Code for assistance. See United

States v. Bailey, 444 U.S. 394 (1980). Section 2.07 of that

code provides:

In any prosecution of a corporation. . .for the com-

mission of an offense. . .other than an offense for which

absolute liability has been imposed, it shall be a de-

fense if the defendant proves by a preponderance of

evidence that the high managerial agent having super-

visory responsibility over the subject matter of the

offense employed due diligence to prevent its com-

mission.

8

Section 2.07 rests criminal responsibility on the blame-

worthiness of the corporation itself and affords corporate

defendants an opportunity to establish the absence of blame-

worthiness. It recognizes that criminal liability for the acts

of lower level employees should be precluded so long as

corporate officers with the power to control the decisions

of the corporation exercise due diligence to prevent the

commission of the offense charged. Yet Basic’s proposed

charge, founded upon that principle, was refused.

That a corporation’s diligent enforcement of an antitrust

compliance policy may provide a defense to a Section 1

prosecution is not new. In United States v. Hilton Hotels

Corp., 467 F.2d 1000, 1007 (9th Cir. 1972). cert. denied

409 U.S. 1125 (1973) the court held that a corporate de-

fendant might gain exculpation if it had enforced its com-

pliance program “by means commensurate with the obvious

risks.” The court drew a careful distinction between general

instructions and a meaningful compliance policy. While

general instructions to obey the Sherman Act “are least

likely to be taken seriously,” the Ninth Circuit suggested

that diligent enforcement efforts would permit exculpation.

In this case specific instructions were issued directly to the

personnel involved that Basic’s policy prohibited collusion

with competitors on highway contracts. Management and

employees alike understood that any failure to adhere to

the policy would meet with swift and sure punishment. In

the corporate context there are no more severe “means [of

enforcement] commensurate with the obvious risk” than

involuntary termination of the errant employee. Basic was,

however, not only denied its opportunity to argue that its

instructions constituted a defense to the offense charged,

Basic was also precluded from going to the jury with its

evidence on the issue of criminal intent.

9

Basic asked for a charge which would have permitted

the jury to consider its antitrust compliance policy on the

issue of criminal intent. The court refused the proposed

instruction, however, and told the jury that Basic would be

criminally responsible for the acts of its employees even

though the employees had deliberately disobeyed manage-

ment instructions. At a minimum, the jury was entitled to

consider that evidence on the issue of Basic’s intent to

violate the antitrust laws. But the District Court and the

Court of Appeals have in effect ruled that acts of low-

ranking employees can be imputed to the corporation while

conduct of the management is irrelevant.

In United States v. Koppers Co., Inc., Crim. No. 79-85

(D. Conn., June 26, 1980), the District Court “found evi-

dence of compliance efforts admissible as ‘relevant and

competent evidence’ to show that the defendant went be-

yond ‘a simple statement of policy’ and did ‘take further

efforts to ensure that their employees are in face apprised

of the policy and are instructed to comport their conduct

to it..” Transcript of chambers conference 15-17 reprinted

in Lipson, A Survey on the Ins and Outs of Antitrust Com-

pliance, 51 Antitrust L.J. 517, 524 (1983). Because the

company had shown more than mere issuance of general

instructions to its employees, the court rejected the Govern-

ment’s proposed vicarious liability instruction and instead

charged the jury along the lines of the charge derived from

§ 2.07 of the Model Penal Code, On appeal, the Second

Circuit approved the District Court’s use of Model Penal

Code § 2.07 in antitrust cases. United States v. Koppers

Co., 652 F.2d 290, 298 (2d Cir. 1981), cert. denied 454

U.S. 1083 (1981).

These cases illustrate the emerging rule that the jury

must be afforded an opportunity to consider the promulga-

10

tion, dissemination and enforcement of an antitrust com-

pliance policy when determining whether the defendant

corporation had the requisite criminal intent, Under Section

2.07 of the Model Penal Code, a corporation may defend

a grounds that its managerial agents exercised due dili-

gence to prevent criminal violations by lower echelon em-

ployees, In this case Basic was deprived of its opportunity

to show that it exercised due diligence to enforce its anti-

trust compliance policy on a critical jury issue—whether it

had the requisite criminal intent to commit the offense

charged,

B, The Court Of Appeals Erred In Failing To Grant A New Trial

When The Trial Court Excluded Evidence Relating To The Truth

And Veracity Of The Basic Employee Who Violated The Com-

pany's Express Policy Against Bid Rigging

While Basic was prevented from going to the jury on the

issue of its criminal intent and instead had the conduct of

its employees imputed to it, Basic also was deprived of its

Opportunity to introduce evidence relating to the truth and

veracity of Steve Colosi, the Basic employee who so cava-

lierly violated the company’s policies and instructions, The

only suggestion in the record that any management officials

of Basic had any idea Colosi and Howell were participating

in a bid-rigging conspiracy was testimony by Mr, Colosi to

the effect that he had said something about trading work in

the presence of a Basic vice-president, All the others present

at the time who testified flatly denied the statement was

made,

Basic sought to offer in its direct case testimony by

Colosi’s co-workers that in their opinion Colosi was neither

honest nor trustworthy, Out of the presence of the jury

11

John M. “Jack” Holloway, a plant foreman who worked

for Colosi testified;

Q. Now, based on a long period of time that you

worked under the supervision of Mr, Colosi, do you

have an opinion as to Mr, Colosi’s honesty and trust-

worthiness?

A. Yes, sir, I don’t think he knows what the word

means,

JA 303. The trial judge ruled that “[e]vidence as to what

Mr, Holloway’s opinion is as to the truth or untruthfulness

of Mr. Colosi has absolutely no place in this case, and I'm

not going to admit that.” JA 303,

Basic also proffered the opinion of Dale Wood as to

Colosi’s honesty and trustworthiness, JA 304, Mr, Wood

was manager of Basic’s Ark plant and served under Colosi

as an estimator, The trial judge ruled that Mr, Wood's

proffered testimony was “not within the rules,” JA 304,

The Court of Appeals held that rejection of the evidence

was error, but two of the three judges decided it was harm-

less error,

The courts have long recognized that testimony regard-

ing a witness’ reputation for truth and veracity in the com-

munity is relevant and admissible, United States v, Truslow,

530 F.2d 257, 265 (4th Cir, 1975), The practice is now

codified in Fed.R.Evid, 608...) which authorizes an attack

on a witness’ credibility through an opinion of the witness’

truthfulness, Witnesses may now be asked directly to state

their opinion of another witness’ character for truthfulness,

“So the inquiry under the new rules is not limited as here-

tofore to knowledge of reputation for truth and veracity,

but also may include opinion of character for truthfulness

or untruthfulness.” United States v. Mandel, 591 F.2d

12

1347, 1370 (4th Cir, 1979), cert, denied, 445 U.S, 961

(1980),

Courts which have addressed the question have held that

the exclusion of evidence concerning a witness’ character

for truthfulness constitutes reversible error, In United States

Vv, Davis, 639 F.2d 239, 244 (Sth Cir, 1981), the de-

fendant proffered evidence, which was refused, from two

witnesses to discredit the key Government witness, The

court acknowledged that impeachment evidence offered

under Fed.R.Evid, 608(a) may be excluded under Fed.R,

Evid, 403 if its probative value is substantially outweighed

by its needlessly cumulative nature, The Fifth Circuit there-

fore weighed the probative value of the evidence against its

cumulative nature keeping in mind that the “ ‘substantially

outweighed’ requirement is designed to further a policy

favoring the admissibility of evidence.” 639 F.2d at 244

citing 22 C, Wright & K, Graham, Federal Practice and

Procedure: Evidence § 5221 (1978), Upon balancing six

factors the Fifth Circuit in Davis held that the district court

had exceeded its discretion in excluding the two character

witnesses and, in so doing, had committed error of consti-

tutional proportions, 639 F.2d at 245,

Colosi was the Government's key witness against Basic,

The United States relied upon him heavily to contradict

facts established by Basic, particularly as to Basic’s defense

that no responsible corporate official knew of, or condoned,

Colosi’s conspiratorial activities, No other character wit-

nesses were called by Basic to impeach Colosi’s veracity,

Certainly, the proffered evidence from Holloway and Wood

would not have measurably delayed the trial, Holloway’s

proffered testimony consumed but five pages of the 1149

page trial transcript. Like Davis the Government's case

lasted almost three days, while Basic’s case took less than a

13

day. In short, under facts remarkably similar to those bai-

anced by the Fifth Circuit in Davis, the probative value of

the evidence was not substantially outweighed by its alleged

cumulative nature. In excluding the evidence the court com-

mitted plain error which reached constitutional proportions,

because Colosi’s testimony was central to the Government’s

case, and Basic was deprived of its right to impeach his

credibility by evidence as to his character for untruthful-

ness, United States v. Davis, 639 F.2d 239, 245 (Sth Cir,

1981).

Vv.

CONCLUSION

This case affords the Court an opportunity to clarify the

law as to the antitrust criminal responsibility of a corpora-

tion for the unauthorized acts of its minor employees. This

Court has never explicitly ruled on that question. Both

United States v. Hilton Hotels Corp., 467 F.2d 1000 (9th

Cir, 1972), cert. denied 409 U.S, 1125 (1973), and United

States Vv. Koppers Co., Inc., 652 F.2d 290 (2d Cir. 1981),

cert, denied 454 U.S. 1083 (1981), have recently raised

aspects of this issue. The issue constauitly arises in the lower

courts and results in confusion in the law, For example, in

Koppers the Second Circuit explicitly approved the rationale

of § 2,07(1)(a) of the Model Penal Code. The trial court

here rejected a charge based on that same section, and the

Fourth Circuit found no error in its having done so.

Furthermore, the Court of Appeals has misconstrued this

Court's explanation in Gypsum of intent in a Section 1

Sherman Act case. The proper standards of criminal intent

in Gypsum warrant restating.

14

Although the corporation’s criminal intent is an essential

element of a Section 1 offense, Basic was precluded from

arguing to the jury that the company’s management had

promulgated and enforced a policy of adherence to the

antitrust laws. Instead, the jury was told that Basic could

be held criminally responsible for its employees’ conduct

even though the employees deliberately ignored manage-

ment’s instructions. If this Court’s decision in Gypsum is

to have any meaning for corporations accused of Section 1

offenses, then a defendant corporation must have the op-

portunity to show that it diligently disseminated and en-

forced a policy of antitrust compliance on the issue of the

corporation’s criminal intent.

Finally, the standards for ordering a new trial where

error has been committed in the exclusion of impeachment

testimony need to be reconciled, The Fifth Circuit's opinion

in United States vy. Davis cannot be reconciled with the

Fourth Circuit’s opinion here finding no prejudicial error

in exclusion of such testimony.

Respectfully submitted,

BASIC a aes COMPANY

LEWIS T. BOOKER

LEWIS T, BOOKER

L. NEAL ELLIS, JR.

HUNTON & WILLIAMS

707 East Main Street

P. O. Box 1535

Richmond, Virginia 23212

Counsel

15

CERTIFICATE OF SERVICE

I hereby certify that I am a member of the Bar of this

Court and that pursuant to Rules 28.3 and 28.5(b) of the

Rules of the Supreme Court I this day served three (3)

copies of the foregoing Petition for a Writ of Certiorari to

the United States Court of Appeals for the Fourth Circuit

upon each counsel for all of the parties required to be

served. Such service was accomplished by mailing the

copies first-class and postage prepaid to counsel at the

following addresses:

(1) William J. Murphy, Vincent J. Fuller, Barry S.

Simon, Linda C. Ray, Williams & Connolly, 839 - 17th

Street, N.W., Washington, D.C. 20006; and William F.

Miller, Rideout & Miller, 210 Parkway Drive, P. O. Box

CK, Williamsburg, Virginia 23185 (counsel to Henry S.

Branscome and Henry S. Branscome, Inc.);

(2) Margaret G. Halpern, Department of Justice, Wil-

liam F, Baxter, Assistant Attorney General, John J. Powers,

III, Department of Justice, Theresa H. Clinton, Diane R.

Kilbourne, Antitrust Division - Room 3313, Department

of Justice, Washington, D.C, 20530 (counsel to the United

States); and

(3) Solicitor General, Department of Justice, Washing-

ton, D.C. 20530.

LEwIs T, BOOKER

Date: August 19, 1983

APPENDIX

United States Court of Appeals

FOR THE FOURTH CIRCUIT

Nos. 82-5200, 82-5207, 82-5208

UNITED STATES OF AMERICA

Appellee

V.

BASIC CONSTRUCTION COMPANY,

HENRY S. BRANSCOME,

HENRY S. BRANSCOME, INC.

Appellants

Appeal from the United States District Court for the Eastern District

of Virginia, at Newport News. John A. MacKenzie, District Judge.

Argued February 9, 1983 Decided June 27, 1983

Before BUTZNER, Senior Circuit Judge, and RUSSELL

and WIDENER, Circuit Judges.

Lewis T. Booker (L. Neal Ellis, Jr., Hunton & Williams,

on brief) and William J. Murphy (Vincent J. Fuller, Barry

S. Simon, Linda C. Ray, Williams & Connolly; William F.

Miller, Rideout & Miller, on brief) for Appellants; Margaret

App. 2

G. Halpern, Department of Justice (William F. Baxter, As-

sistant Attorney General; John J. Powers, III, Department

of Justice; Theresa H. Clinton, Diana R. Kilbourne, on

brief) for Appellee.

PER CURIAM:

This is an appeal from a conviction for violation of

section 1 of the Sherman Act, 15 U.S.C. § 1. The defend-

ants, Basic Construction Co., Henry S. Branscome, Inc.,

and Henry Branscome, were charged with conspiring in

April of 1978 to rig the bidding for state road paving con-

tracts. A jury found the defendants guilty, and both Basic

and Branscome’ appeal. We affirm.

I.

Basic’s principal contention is that the district court gave

erroneous jury instructions regarding the criminal liability

of a corporation for acts of its employees. With regard to

corporate liability, the court instructed the jury as follows:

A corporation is legally bound by the acts or state-

ments of its agents done or made within the scope of

their employment, and within their apparent authority,

acts done within the scope of employment and acts

done on behalf of or to the benefit of a corporation, and

directly related to the performance of the type duties

the employee has general authority to perform.

When the act of an agent is within the scope of his

employment or within the scope of his apparent au-

* Henry S. Branscome, Inc., and its owner, Henry Branscome, filed

a joint appeal. Together they will be referred to as “Branscome.”

App. 3

thority, the corporation is held legally responsible for

it. This is true even though the agent’s acts may be un-

lawful, and contrary to the corporations [sic] actual

instructions.

A corporation may be responsible for the action of

its agents done or made within the scope of their au-

thority, even though the conduct of the agents may be

contrary to the corporation’s actual instructions, or

contrary to the corporation’s stated position.

However, the existence of such instructions and

policies, if any be shown, may be considered by you in

determining whether the agents, in fact, were acting

to benefit the corporation.

At trial, Basic introduced evidence which would have

tended to prove that it had a longstanding, well known, and

strictly enforced policy against bid rigging. Such evidence

tended to show that the bid rigging activities for which it

was charged were perpetrated by two relatively minor offi-

cials and were done without the knowledge of high level

corporate officers. Basic argues that, in light of this evidence,

the district court should have instructed the jury that it could

consider the evidence of Basic’s antitrust compliance policy

in deciding whether the company had the requisite intent

to violate the Sherman Act.

Basic rests its argument primarily on United States v.

United States Gypsum Co., 438 U.S. 422 (1978). Gypsum

involved a criminal antitrust prosecution in which the dis-

trict court had instructed the jury that, if it found that the

practice of competing producers giving to other producers

on request, the price of gypsum board that was currently

offered to a specific customer had the effect of fixing or

raising prices, then they should presume as a matter of law

that the parties intended such a result. Jd. at 434. The

App. 4

Supreme Court held that these instructions were erroneous,

The Court said that intent is an element that must be

proved, and cannot be presumed, in a criminal antitrust

prosecution, /d, at 434-36, Basic argues that the instructions

given by the district court in the instant case run counter to

the holding in Gypsum because they fix absolute criminal

liability on a corporation for acts done by its employees,

although such acts may have been in violation of corporate

policies and express instructions, Gypsum, Basic argues,

requires that the government prove that the corporation,

presumably as represented by its upper level officers and

managers, had an intent separate from that of its lower

level employees to violate the antitrust laws, Consequently,

Basic asserts that the jury should have been instructed

to consider corporate antitrust compliance policies in deter-

mining whether Basic had the requisite intent,

We do not think that Gypsum requires so much, Rather,

the case, on the point at issue, holds that intent to violate

the antitrust laws must be proved in a criminal antitrust

prosecution, and it defines the required intent, The Court

there was not confronted with, and did not decide, the issue

of corporate liability for the acts of employees, The instruc-

tions given by the district court in the instant case are amply

supported by case law, See United States v, Koppers Co.,

652 F.2d 290, 298 (2d Cir.), cert, denied, 454 U.S, 1083

(1981); United States v. Hilton Hotels Corp., 467 F.2d

1000, 1004-07 (9th Cir, 1972), cert, denied, 409 U.S, 1125

(1973); United States v. American Radiator & Standard

Sanitary Corp., 433 F.2d 174, 204-05 (3d Cir, 1970),

cert. denied, 410 U.S, 948 (1971), These cases hold that a

corporation may be held criminally responsible for antitrust

violations committed by its employees if they were acting

within the scope of their authority, or apparent authority,

App. 5

and for the benefit of the corporation, even if, as in Hilton

Hotels and American Radiator, such acts were against

corporate policy or express instructions, In United States v,

Koppers Co., the Second Circuit rejected the argument, as

do we, that Gypsum changes the law on corporate criminal

antitrust liability for the acts of its employees, 652 F.2d at

298,

In the instant case, the district court properly allowed

the jury to consider Basic’s alleged antitrust compliance

policy in determining whether the employees were acting

for the benefit of the corporation, It also properly instructed

on the issue of intent in an antitrust prosecution, i.e., that

corporate intent is shown by the actions and statements of

the officers, directors, and employees who are in positions

of authority or have apparent authority to make policy for

the corporation,

Basic also argues that the court erroneously admitted evi-

dence of an admission by silence by one of Basic’s corporate

officers, William Shaw, At trial, one of Basic’s minor offi-

cials, Colosi, testified about a meeting he had with Shaw

and another minor official of Basic, Howell, regarding the

bidding on another road project, Colosi testified that at the

end of the meeting, as he was leaving the room, he heard

Howell say to Shaw, “I'll see if we can get anything for

this work.” Colosi did not hear any reply by Shaw, Colosi

further testified that he believed this referred to bid rigging

and that Howell was talking about trading the job there

being discussed for one in the future.

Basic contends that the district court erred in admitting

this evidence because it claims there was no evidence that

App. 6

Shaw heard, understood, or acquiesced in Howell's state-

ment to him so as to render the evidence admissible as

an admission under FRE 801(d)(2)(B),

Howell, Colosi, and Shaw were all present in the same

room when the conversation took place, and we think

there was credible evidence to support the government's

position that Shaw heard, understood, and acquiesced

in Howell's statement, thus meeting the requirements of

FRE (801(d)(2)(B). See United States v. Moore, 522

F.2d 1068, 1075-76 (9th Cir, 1975), From the transcript,

it is clear the court properly decided the relevance of the

Statement as going to Basic’s defense that it had a long-

Standing policy against bid rigging, but, of course, as the

trial court recognized, it could have been used by the jury

for any purpose, and there was no request to limit it.

The testimony came during the government's case in chief

and was in rebuttal to a defense Basic had previously arti-

culated, that of its longstanding policy against bid rigging.

Yet, at the time the evidence was admitted, the claimed

defense had not been the subject of evidence offered by

Basic or sought to be established by cross-examination, We

think the practice of admitting evidence to refute a defend-

ant’s opening statement in a criminal case is a practice to

be discouraged and that rebuttal evidence ordinarily should

not be permitted for that purpose during the government's

case in chief, A criminal case is far different from a civil case

in which the pleaded position of a party may establish rele-

vance, and in nearly all instances in the defense of a crimi-

nal case the defendant does not finally have to decide on the

defense he will make until the government closes its case

in chief. Thus, in some instances, admitting evidence to

rebut a defense made by a criminal defendant only in the

opening statement of his attorney may get highly prejudicial

App. 7

and irrelevant evidence into the record, In this case, the

defendant followed through on its articulated defense, so

any error committed in admitting the conversation between

Howell and Shaw was harmless, But this is not to say that it

would be so in all cases, and, as we have said, the practice

should be discouraged.

Branscome contends that it was reversible error for the

district court to permit the introduction of evidence con-

cerning the conviction of a codefendant, Howell. Howell,

a former Basic employee, was included in the indictment

against Basic and Branscome, but was tried and convicted

separately prior to the trial of Branscome and Basic, At

a pretrial conference, counsel for Basic said that he intended

to bring out the fact that Howell was convicted, and the

court ruled, over Branscome’s objection, that both Basic

and the government could refer to Howell's conviction,

During trial, two references were made to Howell's con-

viction, The first reference was made in the government's

opening statement, The second reference was made during

the direct examination of Colosi, When Colosi was asked

about the result of Howell's trial, the court interrupted the

questioning and stated that Howell had been tried and con-

victed, The court further said that the conviction of Howell

had nothing to do with the trial of the other three defendants.

At the conclusion of the trial, the court again cautioned the

jury that they were not to be concerned with any disposition

made with respect to a co-defendant not on trial in the

case at bar. No other reference was made to Howell's con-

viction,

Branscome’s contention that the admission of this evi-

dence is reversible error is controlled by United States v.

App. 8

Curry, $12 F.2d 1299 (4th Cir.), cert, denied, 423 U.S.

832 (1975), In Curry we held that it was not error for the

court to tell the jury that certain codefendants charged in

the same indictment as the defendants being tried had plead

nolo contendre, /d, at 1303, We noted that, although it

might be preferable to tell the jury only that the case against

the codefendants had been previously disposed of, any pre-

judice caused by the evidence was cured by instructions that

the jury could not consider the pleas as evidence of guilt of

the defendants on trial, 7d, We therefore hold that the ref-

erences made to Howell's conviction in conjunction with

timely and appropriate cautionary instructions do not con-

stitute reversible error, We caution, however, that it is far

better to simply tell the jury that cases of codefendants not

on trial have been disposed of without saying how, and that

they should not consider that matter, particularly as evidence

of guilt,

IV,

Steve Colosi, a key government witness, was one of the

Basic employees directly involved in the bid-rigging con-

spiracy, At trial he testified as to the events surrounding the

conspiracy charged and the practices and attitudes of other

Basic employees regarding bid rigging, Basic attempted to

impeach Colosi's testimony by presenting the testimony of

two witnesses as to their opinions of Colosi's honesty and

trustworthiness, According to Basic’s offer of proof, these

witnesses Would have testified that Colosi was neither honest

nor trustworthy, The district court, however, refused to

admit the evidence, stating that it had “absolutely no place

in this case,”

Basic asserts that the district court erred in refusing to

admit this evidence, and we agree, Federal Rule of Evidence

App. 9

608(a) expressly allows impeachment through opinion

evidence of a witness's character for truthfulness, See United

States V, Truslow, $30 F.2d 257, 264-65 (4th Cir, 1975);

A, Saltzburg & K, Redden, Federal Rules of Evidence Man-

wal 346-47 (3d ed, 1982), Under the facts of this case, how-

ever, the district court's refusal to admit the evidence did

not affect substantial rights and therefore was harmless

error, 28 U.S.C, § 2111; Federal Rules of Criminal Pro-

cedure 52(a),

We base our conclusion that the exclusion of the evidence

was harmless error on several considerations, First, Basic

thoroughly attacked Colosi’s credibility on cross-examina-

tion, Colosi admitted lying to counsel during a pre-trial in-

terview about his bid-rigging activities, to using without

permission company vehicles and gasoline for personal pur-

poses, and to paving his driveway with materials and labor

procured from Basic, Second, at least one of the witnesses

willing to testify as to his opinion of Colosi’s character for

honesty and trustworthiness was a Basic employee at the

time of trial, This relationship to Basic might well have

weakened the weight of that particular opinion evidence,

Third, much of Colosi's testimony related to the events sur-

rounding the April 1978 bid-rigging conspiracy, The gov-

ernment, however, presented the testimony of two other

witnesses who were involved in the conspiracy, and their

testimony regarding the events was in agreement with that

of Colosi’s testimony,

Taken together, these considerations lead us to the con-

clusion that it is highly unlikely that the district court's

refusal to allow opinion evidence as to Colosi's character

for truthfulness would have affected the outcome of the

trial, We therefore hold that the district court's ruling was

harmless error,

App. 10

We have considered the appellant's remaining assign-

ments of error and find them to be without merit,

Accordingly, the convictions are

Affirmed,

Judge Russell and Judge Butzner concur in the opinion

and in the result,

Judge Widener concurs in all of the opinion except part

IV, While he agrees that the failure to admit the evidence

of Colosi's bad character for truthfulness was error, he does

not agree that it was harmless, and thus he cannot agree in

the result, He therefore respectfully dissents and would

award a new trial,