United States v. Nitin Shah

Citations: 44 F.3d 285; 1995 WL 35366Docket: 93-9074

Court: Court of Appeals for the Fifth Circuit; January 31, 1995; Federal Appellate Court

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Nitin Shah, the defendant-appellant, appeals his conviction for making a false statement under 18 U.S.C. Sec. 1001. The case, decided by the United States Court of Appeals for the Fifth Circuit on January 31, 1995, stems from events involving a solicitation issued by the General Services Administration (GSA) for the purchase of ironing products. The solicitation contained a "Certificate of Independent Price Determination," requiring offerors to certify that their prices were independently determined without collusion.

Omega Electronics, where Shah serves as president, was among the bidders and had previously held a GSA contract. After receiving the solicitation, Shah contacted Jerome Kipper, president of Kipper Company, proposing they exchange bid information to manipulate the bidding process. Shah suggested they could split the contract by sharing prices and dividing delivery territories. Kipper, while skeptical of Shah's ethics, did not agree to the proposal but remained ambiguous in his response.

The court affirmed Shah's conviction based on the evidence of his intent to engage in collusive bidding practices, which violated the certification requirements of the solicitation.

On July 8, 1992, Shah submitted a solicitation to the General Services Administration (GSA), certifying that the bid prices would remain confidential. He identified himself as the Managing Partner of Omega, providing his contact details. Following a conversation with Kipper on July 7, Kipper reported this discussion to GSA and his attorney. On July 15, under GSA investigator supervision, Kipper made two recorded calls to Shah. In the first call, Shah suggested that sharing price information could be mutually beneficial, claiming he had never exchanged prices with other vendors before. He acknowledged the calculated risk of discussing such matters with Kipper, whom he described as a shrewd businessman. 

In the second call, not recorded in evidence, Kipper testified that they agreed to fax each other their bids, with Shah requesting confidentiality. This exchange took place. On January 6, 1993, Shah was indicted for making a false statement to GSA, claiming that his bid prices would not be disclosed to other competitors, violating 18 U.S.C. Sec. 1001. Following a not guilty plea, Shah was convicted in July 1993 after presenting no evidence in his defense and was sentenced to three years' probation and a $5,000 fine. Shah subsequently filed an appeal.

On appeal, Shah raises several arguments: insufficient evidence regarding identity and falsity, an error by the court in rejecting a proposed jury instruction, and a fatal variance between the indictment and trial proof. A key point of Shah's appeal is the assertion that a promise of future performance cannot violate 18 U.S.C. § 1001, the False Claims Act, which prohibits the willful making of false statements within U.S. agency jurisdiction. To prove a violation, five elements must be established: a false statement, materiality, specific intent, and government jurisdiction.

The case centers on the falsity of Shah's statement in a solicitation, specifically the claim that "The prices in this offer have not been and will not be knowingly disclosed." At the time of submission, Shah had not yet disclosed any price information, only proposing to do so a day prior. The government argues that by later disclosing bid information, Shah violated his promise, while Shah contends that his statement is a prediction of future performance, which should only be judged true or false after the fact. The government counters that if Shah intended to disclose the information while promising not to, he made a false statement in violation of § 1001, which can be inferred from circumstantial evidence of his intent.

The government cites two circuit cases, United States v. Hartness and United States v. Mandanici, to support its argument regarding liability under section 1001. In Hartness, the defendant contended that he could not be prosecuted for making a false projection of future income, as projections can neither be deemed true nor false. The court acknowledged that while a wrong prediction alone does not constitute liability, the presence of objective criteria in the projections—specifically, current income—distinguished the case from the current matter, where the truth of Shah's statements is less clear.

In contrast, Mandanici involved a defendant convicted of making two false statements regarding the estimated cost of renovation work and his intention to complete that work. The court overturned the conviction for the first statement due to insufficient evidence regarding the defendant's knowledge of the costs, but upheld the conviction for the second statement, which pertained to his intent to perform the renovation. The court found substantial circumstantial evidence, including a letter and false documentation, indicating that the defendant had misrepresented his intentions. 

Shah argues that Mandanici is distinguishable because the false statement was linked to a verifiable price estimate. However, the Mandanici court assumed the accuracy of the price estimate and focused instead on the defendant’s intent to perform the work, raising the question relevant to Shah's case: whether a promise to perform can constitute a violation of section 1001.

Mandanici does not explicitly bolster the government's position, nor does Shah provide authoritative backing for his claim that a promise cannot be false under section 1001. Shah references Williams v. United States, where the Supreme Court analyzed whether an insufficient funds check constituted a false statement under 18 U.S.C. Sec. 1014. The Court determined that checks do not represent statements; they direct banks to pay amounts but do not assert the drawer's bank balance. The issue in Williams was whether a check makes a statement, not the nature of promises. The Court did not suggest that a promise cannot contain a statement. It emphasized that a check lacks factual assertions about bank balances, and the government’s interpretation does not criminalize broken promises but rather promises made with fraudulent intent.

The essential distinction is that while breaking a promise does not retroactively render it false, making a promise implies an intention to perform, which can lead to a false representation if that intention is absent. For example, the statement "I will not disclose prices" implies a commitment, and stating otherwise contradicts its meaning. Case law, such as Elmore v. United States, supports the idea that a promise can be inherently false when made, illustrated by a defendant who falsely certified the use of purchased wheat, which was later misused.

Statements made by the defendant regarding the future use of 4200 bushels of wheat were deemed promises rather than factual statements, leading to an argument that no crime was committed. The court rejected this argument, asserting that the law encompasses "false and fraudulent promises" that the maker does not intend to fulfill. The court emphasized that false promises can be as damaging as false statements of existing facts, indicating that Congress likely intended to include both under criminal sanctions. The court referenced earlier cases involving veterans' loan applications, where convictions were upheld for false promises about the intended use of loan proceeds. In these precedents, the courts did not distinguish between statements of current fact and future intentions. The court noted that while common law typically views future promises as non-fraudulent, it allows for claims of fraud when such promises are made without the intention to perform them, focusing on the promisor's fraudulent intent rather than the mere breach of promise.

A statement indicating an intention to act, when there is no actual intention, constitutes a false statement regarding the speaker's mental state, which is a factual representation. Such a misrepresentation can be deemed fraudulent under common law principles and aligns with the provisions of section 1001. Shah contended that section 1001 should not encompass promises, citing the absence of the term "promises" compared to other fraud statutes. This argument is dismissed for two reasons: firstly, a promise implies a current intent, making promises and representations interconnected; secondly, the Supreme Court precedent in Durland v. United States established that the lack of the term "promise" does not preclude fraud charges for unfulfilled promises. The Court interpreted the statute to cover all forms of deceitful representations, including promises made without intention to perform, emphasizing the need to protect the public from fraudulent schemes. The Supreme Court's recognition of the redundancy of the term "promise" in the mail fraud statute further supports this interpretation. Consequently, it is affirmed that a promise can be considered a "false, fictitious or fraudulent" statement under section 1001 if made without any present intention to fulfill it, despite implicating an intent to perform.

Shah's statement or promise indicates his intent at the time it was made. The government bears the burden of proving that Shah did not intend to fulfill this promise. Evaluating the evidence favorably to the jury's verdict, a rational jury could find that the government established all elements of the crime beyond a reasonable doubt. Shah's intention to perform is a factual question, and mere nonperformance is insufficient for a conviction. The circumstantial evidence presented supports the verdict, as courts have previously upheld similar determinations based on such evidence.

During his conversations with Kipper, Shah's non-committal stance suggests that discussions were ongoing rather than abandoned. Shah's submission of a bid before finalizing information does not negate the inference that he intended to exchange price information. His awareness that bids could be modified until the contract was awarded further supports this interpretation. Shah's readiness to discuss the bid shortly after their initial conversation implies that he maintained the intention to exchange information.

Additionally, Shah's claim that the arrested Nitin Shah was not the same individual who submitted the bid is unfounded. Evidence, including testimony from a GSA agent, confirms that Shah was arrested at the address listed on the bid, indicating he was the same person involved in the criminal activity. The government is not required to prove identity beyond all doubt; circumstantial evidence strongly indicated that Shah was the defendant.

Lastly, Shah's assertion that the government did not prove he read the certification is dismissed. His prior experience with GSA contracts and the detailed completion of the bidding forms suggest he was familiar with the process. Shah's signature and the information he provided further imply he understood the certification he signed. The jury could reasonably infer that he read and comprehended the document he submitted.

Shah's argument regarding an impermissible variance between the indictment and the trial evidence is dismissed. He contends that the indictment's omission of specific phrases related to bid disclosures affected the government's obligation to prove the circumstances of the bid arrangement. However, for a variance to constitute reversible error, it must be material and prejudice the defendant's substantial rights, such as causing surprise at trial or risking double jeopardy. The court finds no material variance, as Shah was fully aware of the charges and the relevant bid provision. Previous cases cited support the conclusion that a mere variance in language that does not modify essential elements of the offense is not an error. Consequently, the court affirms the district court's judgment.

Materiality is determined to be a factual question for the jury, diverging from other circuit rulings. Certiorari was granted in part, referenced in U.S. 115 S.Ct. 713, 130 L.Ed.2d 645 (1995). Under Section 1001, the intent to defraud is not necessary; instead, it aims to safeguard governmental functions from deceit and trickery, as established in McNally v. United States, 483 U.S. 350, 358 n. 8 (1987). This section differs from general fraud laws, which focus on the government’s property interests. Specific cases illustrate these principles: in Hartness, a defendant misrepresented employment data; in Glover, a promise was deemed non-fraudulent despite being broken; and in Clark, a statement was considered false despite its literal truth. Section 1014 criminalizes false statements to banks, while Section 714m(a) relates to falsehoods aimed at influencing the Commodity Credit Corporation. In Todorow v. United States, a defendant falsely promised usage of trucks for personal rather than resale purposes, with the court finding sufficient circumstantial evidence of falsity. Generally, failure to fulfill a promise does not imply intent to deceive, unless accompanied by additional indicators suggesting that intent may be inferred.

Statutes prohibit schemes to defraud and obtaining money or property through false pretenses (18 U.S.C. Secs. 1341, 1343, 1344). Shah argued that the trial court erred by denying a proposed jury instruction, which suggested that a conviction required the jury to find that false facts existed before the statement was made and that the defendant knew the facts were false. The court found this instruction to be confusing and incorrect, clarifying that false statements must be false at the time they were made. The court correctly instructed the jury that Shah could only be convicted if they found he intentionally made a false statement knowing it was untrue. The indictment specified the false statement regarding the nondisclosure of prices to other competitors, which was supported by evidence presented at trial.