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United States v. Ventura

decided: December 13, 1983.

UNITED STATES OF AMERICA, PLAINTIFF-APPELLEE,
v.
ARMAND VENTURA, DEFENDANT-APPELLANT



Appeal from a judgment of conviction entered in the United States District Court for the Southern District of New York after a jury trial before William C. Conner, Judge, of one count of conspiring to defraud the Agency for International Development and the World Bank, in violation of 18 U.S.C. § 371 (1976), and four counts of wire fraud, in violation of 18 U.S.C. § 1343 (1976).

Friendly, Kearse, and Cardamone, Circuit Judges.

Author: Kearse

KEARSE, Circuit Judge:

Defendant Armand Ventura appeals from a judgment entered in the United States District Court for the Southern District of New York, after a jury trial before William C. Conner, Judge, convicting him on one count of conspiring to defraud the Agency for International Development ("AID") and the World Bank, in violation of 18 U.S.C. § 371 (1976), and four counts of wire fraud, in violation of 18 U.S.C. § 1343 (1976). Ventura was sentenced to four concurrent terms of eighteen months' imprisonment on the wire fraud counts and was assessed a committed fine of $10,000 on the conspiracy count. On appeal Ventura contends principally that his conviction should be reversed and the indictment against him dismissed because his conduct was commonplace business activity not prohibited by any law. We reject Ventura's contentions and affirm the conviction.

I. BACKGROUND

Ventura and his alleged coconspirators defendant Eugene Pagano and Paul Munsch*fn1 were officers or agents of an ocean freight forwarder, Cargo Export Corporation ("CEC"). The prosecution centered on an alleged kickback scheme involving the inflation of the cost of shipping certain freight from the United States to an AID-financed project in Bangladesh. The essence of this scheme, according to the government, was the employment by CEC of unnecessary middlemen, called non-vessel-operating common carriers or "NVOCCs," in order to increase the shipping costs to be charged AID. The conspirators were to profit from this arrangement by accepting from the NVOCCs a portion of the difference between the price charged to AID by the NVOCCs and the lower price charged to the NVOCCs by the steamship line that actually carried the cargo.

A. The Shipping Industry

The expert witnesses for the government and the defendants painted the following background picture of the shipping industry. An ocean freight forwarder is an entity that arranges transportation of goods on behalf of a shipper from a United States location to an overseas location. The freight forwarder, acting as the shipper's agent, takes delivery of the goods, routes them to their destination, prepares documentation, arranges for any necessary storage, and completes any other tasks relating to the movement of the goods. Freight forwarders must be licensed by the Federal Maritime Commission ("FMC"), see 46 C.F.R. § 510.3 (1977),*fn2 and are strictly regulated, id. § 510.

The ocean freight forwarder arranges for an "oceangoing common carrier," see id. § 510.21(c), to transport the goods to their ultimate destination. Oceangoing common carriers are divided into two categories based upon whether or not they transport goods on their own ships: a vessel-operating common carrier ("VOCC") is a steamship company that transports the goods overseas on its own ships; an NVOCC is a common carrier without ships. See id. § 510.21(d). The NVOCC, unable itself to move the goods overseas, usually performs such services for the shipper as consolidating small cargoes in large containers in order to obtain better rates from VOCCs; on occasion NVOCCs perform special services such as supplying trucks and heavy lifting equipment. Because an NVOCC does not own ships, any plan of shipment involving an NVOCC must also involve a VOCC. If a shipper does not require the services of an NVOCC, it need not deal with an NVOCC but may deal directly with a VOCC.

Ocean carriers' rates for transporting goods are set forth in published tariffs. Ordinarily, the freight forwarder is paid a commission for its services out of the published tariff rate charged the shipper by the VOCC, or if an NVOCC is involved, by the NVOCC. This commission, published as part of the VOCC's or NVOCC's tariff, is a non-negotiable percentage, normally ranging from 1 1/4 to 3 3/4 percent of the gross freight charged by the carrier. The freight forwarder is not entitled to payment from a common carrier in excess of the established percentage. In addition to this primary compensation, the freight forwarder often receives a small fee -- normally in the range of $3 to $5 per task -- from the shipper for documentation work. See id. § 510.24(e) & (f). In both cases this compensation must be for services actually performed by the freight forwarder. See id.

Often VOCCs form associations, or join together to form "conferences," in order to set uniform rates to be charged with respect to a particular geographic trade area. See id. § 522. The conference files a joint tariff with the FMC, see id. § 522.3, and thereafter conference members are usually permitted to charge only the rates set forth in the tariff. See id. §§ 522.2(a)(1)(i), 522.6.*fn3 Conference VOCCs, which generally offer faster and better service than nonconference VOCCs, but at higher rates, may enter into special contracts with shippers whereby the shipper agrees to ship all his cargo with conference members in exchange for a lower rate. Id. § 522.4.

B. The Bangladesh Project

The events preceding the arrangements for the particular shipments on which this prosecution focused are not in dispute. In 1975, the United States, through AID, joined a group of industrialized nations in financing a $350 million project (the "Project") in Bangladesh. Each of the participating nations was to ship to Bangladesh large quantities of materials, as coordinated by Foster Wheeler Ltd. ("Foster Wheeler"), which was acting as general engineer and prime contractor. To facilitate the shipment of materials, Foster Wheeler awarded contracts, through a bid process, to freight forwarders in each of the participating nations. In 1976, it awarded the freight forwarding contract relating to United States materials to CEC.

CEC, a licensed freight forwarder, had been formed in 1971 by Munsch and Pagano. Pagano, the President, was in charge of operations; Munsch served as Secretary-Treasurer in charge of accounting and finance. In 1974, CEC retained Armand International, Ltd. ("AIL"), as a commissioned sales representative. AIL was a personal holding company formed by Ventura in 1972 and controlled by him throughout its existence. In 1974 Ventura undertook marketing responsibilities for CEC and often represented himself to others as CEC's Vice President and Director of Marketing.

It was Ventura who obtained the Foster Wheeler contract for CEC. He met with Foster Wheeler officials in England to solicit the account, prepared and submitted CEC's written bid, and signed the bid letter and other correspondence to Foster Wheeler, designating himself as CEC's Vice President and Director of Marketing. After CEC received the contract from Foster Wheeler, Ventura retained responsibility for matters relating to the Project and became CEC's primary contact with Foster Wheeler.

Foster Wheeler sought to ensure the availability of ships to carry Project cargo by contracting with the Burma Outward Freight Conference (the "Burma Conference") for carriage of all Project shipments from the East Coast of the United States to Bangladesh. At Foster Wheeler's request, Ventura initially negotiated a special 10% discount from the Burma Conference for all Project shipments. On Ventura's recommendation, Foster Wheeler subsequently signed an agreement with the Burma Conference in April 1977 that obligated Foster Wheeler to use only Burma Conference ships in exchange for a further 15% discount on ...


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