United States v. John Bernard Industries, Inc.

589 F.2d 1353, 3 Fed. R. Serv. 1171
CourtCourt of Appeals for the Eighth Circuit
DecidedJanuary 15, 1979
DocketNos. 78-1343, 78-1347, 78-1348 and 78-1349
StatusPublished
Cited by5 cases

This text of 589 F.2d 1353 (United States v. John Bernard Industries, Inc.) is published on Counsel Stack Legal Research, covering Court of Appeals for the Eighth Circuit primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
United States v. John Bernard Industries, Inc., 589 F.2d 1353, 3 Fed. R. Serv. 1171 (8th Cir. 1979).

Opinion

GIBSON, Chief Judge.

In these cases, John Bernard Industries, Inc., Jerome B. Newton, Lonna G. Munsch, and Barbara Helgren appeal from their convictions for making false claims against the United States in violation of 18 U.S.C. § 287 (1976), and conspiracy to commit fraud against the United States in violation of 18 U.S.C. § 286 (1976). Each defendant was convicted of more than one count of the multiple-count indictment. On appeal, it is contended that the District Court1 erred in a variety of ways. After carefully considering the arguments of the parties, we affirm the convictions in all respects.2

These criminal charges arose from the civilian operation of a supply store at the United States Air Force Base at Minot, North Dakota. Simmons Construction Company of San Diego, California, was the contractor authorized to operate the supply store at Minot. The sole owner was Patrick E. Simmons. Jerome B. Newton was the vice-president and operations manager of Simmons Construction Company. He had authority to hire and fire other employees and had authority to carry out the dealings the company had with the Government. Lonna Munsch was store manager of the supply store at Minot. Barbara Helgren was a secretary and later a buyer for the operation.

The contract betwéen Simmons Construction Company and the Government provided three methods of pricing items required by Air Force personnel. A specific price was negotiated prior to award of the contract for some items (pre-priced items). Other items were found on a price list or lists approved by the Government (price-listed items). If an item was found on those lists, the contractor was to use the lowest price available. Finally, there were items which were not on the price list (non-price-list items). In these cases the contractor was authorized to purchase the item anywhere. However, the contractor was essentially limited to recovering from the Government the amount he paid for it, plus a set fee for procuring the item. In other words, the contractor was not to make a profit on these items but was to receive a service fee for his expense and activity in obtaining the desired item. Section J12(b) of the contract further provided:

Sales or transfer of items between a parent company and/or subsidiaries or affiliates in which the [contractor] or principals of the company has a financial interest which increases the price to the government beyond the price which the [contractor] would normally expect to pay if the item was purchased elsewhere in the market is prohibited.

This provision was the basis for the Government’s prosecution of John Bernard Industries, Inc. It was housed in the same building occupied by Simmons Construction Company in San Diego. Patrick E. Simmons was its president and was a member of the Board of Directors authorized to do business on behalf of the corporation. Simmons was the majority stockholder of John Bernard Industries. Testimony at trial indicated that during 1976 John Bernard In[1357]*1357dustries3 did ninety percent of its business with Simmons Construction Company.

The supply store functioned in a fairly simple manner. When the Air Force desired an item, a form 1445 would be filled out by Air Force personnel. This would be submitted to the store. If the item were on the shelf it would immediately be turned over to Air Force personnel, and a sales slip would be prepared for submission to the Government for payment. If the item were not in the warehouse, the store would place an order with their supplier and upon receipt of the item it would be delivered to the Government and a sales slip would be prepared and submitted. Typically, the sales slip would be signed by Air Force personnel.

In general terms, fraud entered into the arrangement through various practices of the defendants. In some cases items were routed through a series of related companies with the result that the Government paid a higher price than permitted under the basic contract. In other cases, store personnel would substitute products of a different quality or price, or would submit a false price to the Government for payment. There was also evidence that in some cases Air Force personnel and employees of Simmons Construction Company obtained for their own use items which were in fact paid for by the Government. In sum, the factual outline presented by the evidence is a scenario of a group of people casually and deliberately plundering the Government for their own benefit and the benefit of their employer, Patrick Simmons, by creating false sales, overcharging, making unauthorized substitution of items, and using inflated price lists.

The defendants raise numerous allegations of error which we will consider separately. They assert that the trial court erred in allowing the Government to present witnesses whose names were not included in any notice to the defendants prior to the trial. It is clear at the outset that under general legal principles the Government had no obligation to supply such a list. United States v. Larson, 555 F.2d 673, 676 (8th Cir. 1977); United States v. Brown, 535 F.2d 424, 429 (8th Cir. 1976); United States v. Harflinger, 436 F.2d 928, 936 (8th Cir. 1970), cert. denied, 402 U.S. 973, 91 S.Ct. 1660, 29 L.Ed.2d 137 (1971). However, in this case the District Court granted an Order on Omnibus Pre-trial Conference. In that order, the defendants were arguably granted discovery of the names of the Government’s witnesses and their statements, and any additional information coming into the Government’s possession between the conference and trial. This order was completed by filling in blanks and circling items on a standardized form apparently used by the District Court in many cases. The reason for the District Court’s order is not clear. It may have been simply to facilitate conduct of the trial in a smooth and orderly fashion. In any event, the Government was permitted to call as witnesses certain individuals who had not been identified to the defendants as witnesses prior to trial. Some of these individuals were called as substitutes for other witnesses who were unavailable at trial. In these cases the testimony presented was of a routine nature in the introduction of certain documentary evidence. Other witnesses were called whom the Government asserts it did not determine were necessary witnesses until the trial was in process, and at that time notice was given to the defendants. The District Court permitted the defendants to take time prior to testimony of such undisclosed witnesses to prepare for their testimony and cross-examination.

The District Court’s order was clearly within the area of permissible discretion of a court in controlling litigation before it. However, we reject the defendants’ position that the Government was estopped from [1358]*1358introducing any witnesses not disclosed on a formal list prior to trial. In our view, the District Court had discretion to order the Government to disclose the witnesses it expected to call. United States v. Jackson,

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589 F.2d 1353, 3 Fed. R. Serv. 1171, Counsel Stack Legal Research, https://law.counselstack.com/opinion/united-states-v-john-bernard-industries-inc-ca8-1979.