Uniroyal Goodrich Tire Company v. Mutual Trading Corporation, Mohammad Shafiq and John P. Hauper

63 F.3d 516, 1995 WL 457881
CourtCourt of Appeals for the Seventh Circuit
DecidedSeptember 7, 1995
Docket94-2915, 94-3799
StatusPublished
Cited by54 cases

This text of 63 F.3d 516 (Uniroyal Goodrich Tire Company v. Mutual Trading Corporation, Mohammad Shafiq and John P. Hauper) is published on Counsel Stack Legal Research, covering Court of Appeals for the Seventh Circuit primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
Uniroyal Goodrich Tire Company v. Mutual Trading Corporation, Mohammad Shafiq and John P. Hauper, 63 F.3d 516, 1995 WL 457881 (7th Cir. 1995).

Opinion

BAUER, Circuit Judge.

A jury found the defendants (collectively “MTC”) liable for civil violations of the Racketeer Influenced and Corrupt Organizations Act (“RICO”), 18 U.S.C. § 1962 et seq., and for violations of various state laws. Uniroyal was also awarded its attorneys’ fees and costs incurred in bringing this action. MTC appeals the verdict and the award of fees and costs. It also appeals the trial court’s rejection of its counterclaims. Unpersuaded by its arguments, we affirm.

*519 I.

Throughout most of the 1980s, MTC purchased tires from Uniroyal Goodrich (“Uniroyal”) and its predecessors and resold them in Saudi Arabia. 1 During the relevant period, Mohammad Shafiq was MTC’s president and sole shareholder; John Hauper was MTC’s Vice-President. Uniroyal’s complaint alleges that MTC bribed a Uniroyal employee in order to induce him into providing MTC with confidential information and into assisting MTC with its plan to defraud Uniroyal. The picture presented by Uniroyal at trial illustrates how this unfolded.

A. The Detroiter Scheme

It became apparent soon after MTC began selling tires in Saudi Arabia that MTC would develop into a significant customer of Goodrich’s. Consequently, Goodrich offered MTC the exclusive sale rights to a tire model known as the Detroiter. This opportunity was potentially lucrative because although MTC had two competing Goodrich distributors, it would be alone in selling the Detroi-ter. To the dismay of its competitors, MTC achieved a significant degree of success with the Detroiter.

In 1986, MTC informed Uniroyal that an entity named Palmer Industries had begun exporting flawed versions of the Detroiter from Mexico into Saudi Arabia. Purchasers of the flawed tires were coming to MTC for refunds, and MTC had paid them. MTC requested that Uniroyal reimburse it.

Uniroyal insisted that MTC substantiate its claim for reimbursement by supplying Uniroyal with a list of the serial numbers for the returned tires. Uniroyal also instructed MTC to hold all the returned tires for Uniroyal’s inspection. MTC submitted a list of serial numbers for 4,896 tires which matched Uniroyal’s records of blemished tires it had sold in Mexico, and so Uniroyal reimbursed MTC. When Uniroyal representatives went to Saudi Arabia to inspect the tires, however, they were told that the majority of the tires already had been discarded. The tires which remained were not on Uniroyal’s list of blemished tires or on MTC’s list submitted for reimbursement, nor were they marked with the “appearance imperfect” designation as they should have been. Uniroyal subsequently discovered that the information on MTC’s reimbursement list had been compiled from information supplied to MTC by Richard Germano, a Uniroyal pricing administrator. After further investigation, Uniroyal concluded that the claim for reimbursement was fraudulent.

B. The Cooperative Advertising Scheme

Germano furthered MTC’s position with Uniroyal in other ways. Uniroyal ran a cooperative advertising program under which Uniroyal would bear a portion of its customers’ advertising costs. Germano administered this program for Uniroyal’s international customers.

In 1988, with Uniroyal’s blessing, MTC decided to enter the tire market in Nigeria. Under Nigerian law, MTC had to conduct business through a domestic entity. MTC selected a company called Multiplex Globe as its Nigerian liaison. Multiplex Globe was owned by Shafiq and MTC. MTC submitted requests for cooperative funds for the erection of several billboards and for magazine advertising. Germano approved all of these requests, reimbursing MTC for one hundred percent of its costs despite the fact that the program provided for a maximum reimbursement level of fifty percent. In total, Germa-no approved reimbursements close to $300,-000 for MTC. Upon discovering other fraudulent activity in MTC’s account, Uniroyal dispatched its own internal auditor, Martin Wynne-Brown and a subordinate, Tom Taylor, to Nigeria to inspect the billboards. Their investigation uncovered some unsettling truths. First, they obtained estimates from two advertising agencies in Lagos, Nigeria, which placed the cost of the work done at approximately $25,000. Second, they learned that the billboards they had seen had only recently been erected. This was about two years after the reimbursements had been requested.

*520 Meanwhile, back at the Uniroyal ranch, the company’s investigation was closing in on Germano. On February 29, 1990, Germano confessed to being “lenient” on MTC’s advertising account. He also told company auditors that about the time he was handling the cooperative advertising payments for MTC, he had met with Hauper, MTC’s Vice-President. Hauper gave Germano a plane ticket to London where Germano met Patrick Mehl, an MTC representative. Mehl gave Germa-no $15,000 which Germano deposited in a Gibraltar bank account. Ten months later, Germano received another $5,000 from MTC. (The two payments remained unreported in Germano’s tax returns until he was deposed in this ease at which time he filed an amended return reflecting the payments.)

C. The Volume Bonus Scheme

Yet another instance of fraud arose from some creative bookkeeping with respect to MTC’s account. Uniroyal had an incentive program which rewarded customers annually for high volume purchases. To be included in any given year’s calculation, tires had to have been shipped and paid for. In December of 1987, Germano included in MTC’s account an order for 50,000 tires which had not yet been manufactured let alone purchased and delivered. Moreover, Germano did not deduct those orders from the 1988 purchase tally. In fact, Germano added 80,-000 tires to MTC’s account which never existed. The result of Germano’s shenanigans was an unearned credit to MTC’s account exceeding $230,000.

D. Other Schemes

Another scam involving Germano and MTC occurred after Germano agreed to help unload the excess inventory of a discontinued model known as the Reno tire. Germano shipped some of these to MTC but billed MTC for a cheaper type of tire, a model known as the ADV tire. Germano claimed MTC told him that the tires were ADV tires and not Reno tires. But testimony from those who saw the tires revealed that the tires were in fact the more expensive Reno tires.

In addition to these more elaborate schemes, Germano engaged in several isolated but no less serious actions most of which involved some creative bookmaking but all of which bestowed upon MTC a healthy windfall at the expense of his employer. He often charged MTC prices well below those authorized by Uniroyal and on one occasion, in direct defiance of his superior’s directions, wrote off interest charges in excess of $38,-000.

Subsequent to his confession to Uniroyal’s auditors, Germano resigned, and Uniroyal severed its relationship with MTC. Uniroyal then filed a twelve-count complaint consisting of five civil RICO counts 2 and seven pendent state law counts.

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Cite This Page — Counsel Stack

Bluebook (online)
63 F.3d 516, 1995 WL 457881, Counsel Stack Legal Research, https://law.counselstack.com/opinion/uniroyal-goodrich-tire-company-v-mutual-trading-corporation-mohammad-ca7-1995.