On Appeal From the United States District Court For the District of New Jersey
(D.C. Crim. ActionNo. 94-cr-00524-1)
BEFORE: STAPLETON, McKEE and GIBSON, *fn* Circuit Judges
J. David Smith contends that multiple conspiracy indictments have put him twice in jeopardy for the same offense. The defendant was indicted in New Jersey for conspiring to defraud GTECH, his employer, through a kickback scheme. On the same day, he was indicted in Kentucky for conspiring to defraud GTECH with a different co-conspirator, also through a kickback scheme. After he was acquitted of the Kentucky charges, Smith filed a pretrial motion in the New Jersey prosecution to dismiss the conspiracy charges on double jeopardy grounds and both the conspiracy and substantive charges on collateral estoppel grounds. The court denied his motion, finding that he had failed to make the required showing under United States v. Liotard, 817 F.2d 1074 (3d Cir. 1987), and that the issues raised in the New Jersey indictment were not identical to those decided in the Kentucky trial. We will affirm.
All charges against J. David Smith stem from his employment with GTECH, a lottery service company located in Rhode Island. Smith was the national sales manager for GTECH until December 1993, with offices at the Rhode Island headquarters. He also maintained a farm and residence in Kentucky. During the time periods covered by the indictments, GTECH provided services to the state lotteries of New Jersey and Kentucky, as well as other states.
Steven D'Andrea and Joseph LaPorta are New Jersey residents who owned and controlled three New Jersey consulting companies, Benchmark Enterprises, Inc. ("Benchmark"), Sambuca Consultants ("Sambuca"), and Production Group Incorporated ("PGI"). Luther Roger Wells, Jr., was a Kentucky resident who owned Bluegrass Industrial ("Bluegrass") and Bluegrass Industrial Distributors ("BID"). BID ostensibly provided ribbons used to print lottery tickets. Karen Smith, the defendant's wife, lived in Kentucky with her husband. She owned International Marketing Concepts, Inc. ("IMC").
The Federal Bureau of Investigations ("FBI") began investigating D'Andrea in June of 1993. Investigators had Benchmark corporate records, GTECH records, and Smith's Kentucky bank records subpoenaed. By April 11, 1994, the investigation had produced information that prompted the New Jersey Division of the United States Attorney's Office to send Smith a target letter. Smith was thereafter advised that the FBI's evidence indicated that he was involved in a kickback scheme to defraud GTECH. Smith allegedly would arrange for service providers in New Jersey, New York, Texas, and Kentucky to be engaged by GTECH and to be paid for non-existent or over-valued services. *fn1 These service providers included Benchmark, Sambuca, and PGI in New Jersey, and BID in Kentucky. In return, these service providers would send kickbacks to third parties in Kentucky designated by Smith. These third parties included IMC and Billy Adams, a carpenter who frequently did work on Smith's farm. When IMC, Adams, and the three other designated third parties received the "consulting fees" from the service providers in the various states, they would transmit the funds to Smith and his wife or apply them for their benefit. According to an affidavit of Smith's counsel, the United States Attorney sought Smith's cooperation and threatened him with indictments in all four states if he failed to cooperate. Smith declined to cooperate and indictments against him were simultaneously returned in Kentucky and New Jersey.
The federal grand jury in Kentucky returned a ten count indictment charging Wells and Smith with conspiracy to commit mail fraud in violation of 18 U.S.C. Section(s) 371, aiding and abetting mail fraud in violation of 18 U.S.C. Section(s) 1341 & 1346, money laundering in violation of 18 U.S.C. Section(s) 1956, and assisting in the preparation of a false corporate tax return in violation of 26 U.S.C. Section(s) 7206(2). The fraud counts charged Smith and Wells of defrauding GTECH of money and Smith's "honest services." See Indictment in United States v. Smith, Para(s) 6, 19 (W.D. Ky., September 29, 1994).
Allegedly, Smith authorized BID to receive 8% brokerage commissions on paper sales from RMF Business Forms, Inc., a New York corporation, to GTECH and the Kentucky Lottery Corporation. Wells set up BID for the sole purpose of receiving the brokerage payments. Neither Wells nor BID provided services of any kind to GTECH or the Kentucky Lottery Corporation. Smith had GTECH employees in Kentucky fill out false invoices from Wells requesting his 8% commission, which were then processed in Rhode Island.
When Wells received his payments, he sent a portion to IMC, Adams, and other designated third parties. The payments were disguised as "consulting fees." The alleged conspiracy lasted from April 1992 to February 1994, and a total of $31,000 was purportedly kicked back to Smith and his wife during this period.
The Kentucky prosecution went to trial. After the prosecution presented its case, the judge entered a judgment of acquittal on all the charges pursuant to Fed. R. Crim. P. 29. He found that (i) the record contained insufficient evidence indicating that GTECH lost any money; (ii) a violation of GTECH's intangible right to Smith's honest services could not support a criminal fraud conviction; and (iii) the government failed to prove that GTECH was unaware of the kickback payments and that the payments were unauthorized. The judge found that the facts indicated that GTECH had willingly paid BID fees for the purpose of generating goodwill, and no fraud had occurred.
The New Jersey federal grand jury returned a nineteen count indictment charging Smith, D'Andrea, and LaPorta with conspiring unlawfully to transport money obtained by fraud in violation of 18 U.S.C. Section(s) 371, transporting such money in violation of 18 U.S.C. Section(s) 2314, violating the New Jersey commercial bribery statute in violation of 18 U.S.C. Section(s) 1952, and laundering the proceeds of their fraud in violation of 18 U.S.C. Section(s) 1956. See Indictment in United States v. Smith (D.N.J., September 29, 1994).
Allegedly, Smith met with D'Andrea and LaPorta in April 1992. LaPorta agreed to introduce GTECH employees to representatives of the State of New Jersey to discuss implementing a new lottery game called "Keno." Smith recommended to officers of GTECH that GTECH employ Benchmark as a consultant in New Jersey. He eventually had $579,047 in consulting fees paid to Benchmark, and in return, D'Andrea and LaPorta gave Smith $157,000 in kickbacks. Over the course of the alleged conspiracy, Smith also directed GTECH to pay consulting fees to PGI and Sambuca. As in the Kentucky scheme, the consultants sent the payments to IMC, Adams, and other third parties in Kentucky designated by Smith, who then applied the balance for the benefit of Smith and his wife. The conspiracy allegedly lasted from March 1992 to March 1994.
The trial in the New Jersey case was scheduled to proceed in April 1995. In pretrial motions, Smith raised double jeopardy and collateral estoppel as defenses to all the New Jersey counts. Applying the analysis set forth in Liotard, the court found, without an evidentiary hearing, that the conspiracy charge was not barred because Smith had failed to make the required non-frivolous showing that there had been only one conspiracy. Issue preclusion was found to be inapposite since none of the issues decided in Kentucky were presented by the New Jersey indictment. Smith appeals the court's ruling on the ...