United States v. Carl A. Smith

976 F.2d 861, 1992 WL 235222

• Court: Court of Appeals for the Fourth Circuit
• Decided: October 27, 1992
• Docket: 91-5410
• Status: Published

Opinions

OPINION

MURNAGHAN, Circuit Judge:

Carl A. Smith, the former manager of the West Virginia office of the United States Department of Housing and Urban Development (“HUD”), brought the instant appeal challenging his conviction for receiving a bribe, causing the filing of a false cost certificate for a HUD project, filing false tax returns, and perjury, in violation of 18 U.S.C. § 201(b)(2), 18 U.S.C. .§§ 1010 and 2, 26 U.S.C. § 7206(1), and 18 U.S.C. § 1623(a). Primarily, Smith has contended that the district court misinterpreted and misapplied an immunity agreement which he obtained in connection with his testimony against a HUD consultant, Frank Vinson, in an earlier trial. Because we find that the district court misinterpreted the immunity agreement and permitted the Government to base its prosecution of Smith on evidence that was clearly precluded by the immunity agreement, we reverse Smith’s conviction.

I.

As early as the fall of 1987, federal law enforcement agents had received allegations about misconduct by Smith in his role as Manager of the West Virginia HUD office. However, in 1987 investigators focused attention on Frank Vinson, a HUD consultant. In October of 1989, Vinson went to trial on charges of receiving unlawful gratuities, perjury and wiretapping. The Government subpoenaed Smith, who retained counsel (a former United States attorney) and refused to testify without an immunity agreement. Smith’s attorney bargained for and received a use immunity agreement, signed on October 20, 1989, which provides in pertinent part that “The United States will not prosecute of [sic] Mr. Smith for any federal offense based on information now in the possession of the government.” After obtaining the immunity agreement, Smith testified at Vinson’s trial.

Following the Vinson trial, investigators continued examining Maurice Toler, a HUD contractor. In early 1990, an anonymous telephone call tipped off investigators that Toler had bought Smith a farm combine in connection with some HUD projects. The investigation then focused on Smith. It was at that time that investigators began to review HUD telephone records in their possession and discovered a large number of telephone calls from Smith’s extension to Toler. Furthermore, investigators found bank records from a Toler-related company that indicated the purchase of a combine for delivery to Smith. Investigators also uncovered evidence of other bribes apparently given to further Toler’s success in obtaining and maintaining HUD contracts. Additionally, investigators audited a previously filed Certificate of Actual Cost for a HUD project, known as the Lemma Village, and found that the certificate had been inflated.

Subsequently, the United States Attorney’s Office notified Smith’s attorney that Smith was the target of a grand jury investigation and that indictment was imminent. Smith filed an injunctive action to prevent indictment based upon the October 20, 1989 immunity agreement. The district court denied Smith’s request for injunctive relief, and Smith appealed. However, prior to the appeal being heard, Smith was indicted and the appeal was dismissed as moot.

Prior to trial, Smith argued to the district court that the immunity agreement precluded the Government from using any information in its possession as of October 20, 1989, when the immunity agreement was signed. The Government argued that only information which on its face indicated wrongdoing was covered by the use immunity agreement. The district court determined that the provision at issue was ambiguous and also determined that both parties should bear equal responsibility for the ambiguity and that neither side would be charged with a greater burden in construing the agreement. The district court went on to accept the Government’s interpretation as most reasonable, construing the agreement as precluding the Government from prosecuting Smith based on any information in the possession of any agency of the Government on October 20, 1989, insofar as it would have indicated the commission of a crime on the part of the defendant. Based upon this addition of language to, and interpretation of the immunity agreement, the court permitted the Government to use Smith’s perjured testimony which occurred before the grand jury, 1987 and 1988 tax returns, and disclosure statements of Maurice Toler’s for HUD projects, all of which were indisputably in the hands of the Government prior to the October* 20, 1989 immunity agreement.

Based upon the use of such evidence against him at trial, Smith has argued on appeal that the district court afforded a much too narrow interpretation of the immunity agreement and that the introduction of such evidence violated the plain terms of the agreement. The Government, on the other hand, has acknowledged that it used evidence that it had possession of prior to the signing of the immunity agreement; however, the Government has insisted that the use of the information was permissible because the information did not, at the time the agreement was signed, implicate Smith in criminal activity. Thus, the primary issue facing us on appeal is whether the district court’s interpretation and application of the immunity agreement was erroneous.

II.

In determining whether the district court’s interpretation and application of the immunity agreement is correct, we conduct a de novo review, as only questions of law are implicated. See United States v. Blackburn, 940 F.2d 107, 109 (4th Cir.1991). In interpreting immunity agreements, as with plea agreements, we must be mindful of the fact that “the defendant’s underlying ‘contract’ right is constitutionally based and therefore reflects concerns that differ fundamentally from and run wider than those of commercial contract law.” United States v. Harvey, 791 F.2d 294, 300 (4th Cir.1986) (citing Mabry v. Johnson, 467 U.S. 504, 509, 104 S.Ct. 2543, 2547, 81 L.Ed.2d 437 (1984)). Furthermore, in federal prosecutions, such as the one involved here, “the courts’ concerns run even wider than protection of the defendant’s individual constitutional rights — to concerns for the ‘honor of the government, public confidence in the fair administration of justice, and the effective administration of justice in a federal scheme of government.’ ” Id. (citing United States v. Carter, 454 F.2d 426, 428 (4th Cir.1972)). With those principles in mind, we turn to the district court’s interpretation of the immunity agreement in question.

The provision at issue states: “The United States will not prosecute of [sic] Mr. Smith for any federal offense based on information now in the possession of the government.” The district court held a factual hearing, pursuant to Kastigar v. United States, 406 U.S. 441, 92 S.Ct. 1653, 32 L.Ed.2d 212 (1972), during which Smith’s counsel testified that he had sought “full protection” for his client, that he so informed at least one of the Government’s attorneys, and that he attempted to obtain a “bath” for his client. The Government attorney testified that his understanding was that the Government was precluded only from utilizing information which would have indicated the commission of a crime on the part of the defendant, although the attorney apparently did not communicate such a position to Smith or his counsel.

The district court found that the provision was suggested by the defense attorney and that such language had been utilized by the United States Attorney’s Office in earlier nonprosecution agreements. Under such circumstances, the district court concluded that the parties should bear equal responsibility for the ambiguity and that neither side should be charged with a greater burden in construing the agreement. The district court went on to interpret the provision as the Government urged, precluding the Government from prosecuting Smith based on any information in the possession of any agency of the Government on October 20, 1989, insofar as it would have indicated the commission of a crime on the part of the defendant.

In examining the provision of the immunity agreement in question, we find that the language employed in the agreement is in fact unambiguous, precluding the Government from prosecuting Smith based on (i.e., using) any information in its possession on October 20, 1989. If information did not form a basis for a federal offense, it would be neither relevant nor admissible. However, a factual inquiry must nonetheless be made to determine whether the parties intended a different meaning than is facially suggested. See Restatement (Second) of Contracts § 214(c) & cmt. b (1979); id. § 212; 3 Corbin on Contracts § 542, at 111.

The district court below conducted such a factual inquiry. In the opinion in the instant case, the district court indicated acceptance of the testimony of each side as truthful regarding their intention in employing the language at issue. However, the district court concluded that the Government’s interpretation was most reasonable under the circumstances and accordingly adopted it. We conclude, however, that the district court erred in doing so. Having determined that the parties had differing intentions in employing the language at issue, the district court was required to return to the unambiguous meaning of the language. See Restatement (Second) of Contracts § 212 comt. a & illus. 2b.

Accordingly, because we find the terms of the agreement unambiguous and because the parties did not both intend a different meaning, we conclude that the district court erred in reading additional language into the immunity agreement, barring prosecution based only on evidence in the Government’s possession at the date of signing, insofar as it would have indicated the commission of a crime on the part of the defendant. When a court is faced with unambiguous language like the provision at issue,

Neither side should be able, any more than would be private contracting parties, unilaterally to renege or seek modification simply because of uninduced mistake or change of mind. Such an approach is conformable not only to the policies reflected in private contract law from which it is directly borrowed, but also to constitutional concerns of fundamental • fairness ... and to the wider concerns expressed in the exercise of supervisory jurisdiction over the administration of federal criminal justice.

United States v. Harvey, 791 F.2d 294, 300 (4th Cir.1986).

Because the clear language of the immunity agreement prohibited the government from prosecuting Smith using any information in its possession on October 20, 1989, the district court erred in reading additional language into the agreement and in admitting evidence in contravention of the terms of the agreement.¹ If the Government had intended to preclude only prosecutions based on evidence in its possession insofar as it indicated the commission of a crime by Smith, the Government surely could have so provided.² However, it did not. Even the Government may agree to words having, in fact, unpalatable meanings. The Government, having entered an agreement having an unfortunate meaning, asked that the district court relieve it of the agreement. The district court, in effect, rewrote the immunity agreement to give the Government the benefit of a bargain that it did not make. Accordingly, we reverse Smith’s conviction because it was tainted by the introduction of evidence clearly prohibited by the terms of the immunity agreement.³ Because we have herein afforded Smith full relief based upon his first point of error, we need not address the other issues he raised on appeal.

JUDGMENT REVERSED.

1 . Cf. United States v. Harris, 973 F.2d 333 (4th Cir.1992) (holding that the Government must "prove that it did not use immunized testimony" when prosecuting a defendant protected by a use immunity agreement).

2 . The absurdity of the Government’s position is illustrated by several of its arguments. First, the Government has argued that since Smith’s tax returns did not contain a category denominated as "bribes,” the Government did not violate the terms of the immunity agreement because the face of the tax returns provided no incriminating evidence against Smith. Likewise, the Government has maintained that the use of HUD documents, disclosure statements and the Certificate of Actual Cost for the Lemma Project, all of which were in its hands prior to the signing of the agreement, was not prohibited because it had not yet audited the forms and had not yet located the falsifications. Yet prosecution was based on those pieces of information already in the possession of the Government. Such a result is clearly not contemplated by the language of the immunity agreement which Smith signed and relied upon.

3 . The Government, of course, remains free to retry Smith provided it does not use any information in the possession of any agency of the Government prior to October 20, 1989, the date the use immunity agreement was executed, in such a prosecution.