United States v. Lachman

United States Court of Appeals
For the First Circuit

Nos. 06-1058, 06-1060, 06-1061

UNITED STATES OF AMERICA,

Appellee,

v.

WALTER L. LACHMAN, FIBER MATERIALS, INC.,
& MATERIALS INTERNATIONAL, INC.,

Defendants, Appellants.

APPEALS FROM THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF MASSACHUSETTS

[Hon. Douglas P. Woodlock, U.S. District Judge]

Before
Boudin, Chief Judge,
Selya, Senior Circuit Judge,
and Howard, Circuit Judge.

Michael R. Schneider with whom Salsberg & Schneider was on
brief for appellants.
Vijay Shanker, Department of Justice, Criminal Division,
Appellate Section, with whom Michael J. Sullivan, United States
Attorney, and James D. Herbert, Assistant United States Attorney,
were on brief for appellee.

March 26, 2008
 BOUDIN, Chief Judge. This case, arising from defendants'

convictions on charges of violating and conspiring to violate the

Export Administration Act of 1979 ("EAA") and its implementing

regulations, is before us for the third time. The facts and

earlier procedural history are recounted in United States v.

Lachman, 387 F.3d 42, 46-49 (1st Cir. 2004) ("Lachman II"); United

States v. Lachman, 48 F.3d 586, 588 (1st Cir. 1995) ("Lachman I");

and United States v. Lachman, 278 F. Supp. 2d 68, 73-74 (D. Mass.

2003). We first describe briefly what happened and elaborate where

necessary below.

The defendants are Fiber Materials, Inc. ("FMI") and

Materials International, Inc. ("MI"), a wholly owned subsidiary of

FMI (collectively, the "corporate defendants"); Walter L. Lachman

("Lachman"), chairman and principal owner of FMI and president of

MI; and Maurice Subilia ("Subilia"), president of FMI. All were

convicted by a jury of exporting (and conspiring to export) a

control panel for a large hot isostatic press ("HIP") without the

export license required by the EAA and its regulations.1 The

underlying facts, in the light most favorable to the jury's

1
During the relevant time period, the governing statute and
regulations were 50 U.S.C. app. § 2403(a) (2000) (requiring
exporters to obtain a "validated license" before exporting
commodities listed in Department of Commerce regulations) and 15
C.F.R. § 399.1, Supp. 1 (Commodity Control List), Export Control
Classification Number ("ECCN") 1312A (1988) (listing HIPs
"possessing a chamber cavity with an inside diameter of . . . 5
inches . . . or more" and "all specially designed . . . components,
accessories and controls therefor").

-2-
verdict--the posture for sufficiency challenges, see United States

v. Downs-Moses, 329 F.3d 253, 257 (1st Cir.), cert. denied sub nom.

Ward-O'Neill v. United States, 540 U.S. 916 (2003)--are as follows.

Defendants, acting through FMI's United Kingdom

subsidiary, contracted in 1985 with the Indian government's Defense

Research and Development Laboratory ("DRDL") to supply a HIP with

an 18-inch diameter cavity, along with a control panel. However,

they could not obtain a license to export such a large HIP under

United Kingdom regulations, which (like United States regulations)

required a license to export HIPs with a cavity five inches or

larger. The larger HIP can produce densified material useful for

ballistic missiles.

So, in January 1987, the parties amended their contract

to provide for the export, from the United States, of a smaller

4.9-inch HIP, just under the limit required for a license, and a

control panel. On the same day, Subilia signed a letter to the

Indian government stating that the control panel to be exported

with the 4.9-inch HIP would have "added capacity . . . to provide

for future expansion . . . to larger vessel size." In March 1988,

defendants contracted with the Indian government to provide a

larger HIP and then arranged to have the components of that HIP

manufactured by third parties in Switzerland and England and

shipped directly to India.

-3-
 Both plans were carried out. The control panel shipped

to India in April 1988 with the 4.9-inch diameter HIP could be used

with that HIP but was designed so that it could also control a HIP

with a diameter larger than five inches. In particular, the

control panel had "controllers" not just for the two "heating

zones" contained in the 4.9-inch HIP but also for an additional

three heating zones that would be employed for a much larger HIP,

and it also had a switch that permitted the disabling of the three

additional zones.

In April 1991, after the components of the larger HIP had

been delivered to India, defendants' engineers traveled to India,

assembled the larger HIP and connected to the larger HIP the

control panel that had been shipped with the 4.9-inch HIP. After

warning the Indians of the impracticality of trying to operate both

the larger HIP and the smaller HIP with the originally provided

control panel, the defendants contracted with India to provide a

smaller two-zone control panel for use with the smaller HIP.

In July 1993, the defendants were indicted for exporting

the five-zone control panel without a license and for conspiring to

do so. The government's theory was that the control panel fell

within the category of "components, accessories and controls" that

had been "specially designed" for the larger HIP and that, while

the larger HIP had been made outside the United States, the control

panel was in fact intended for use with the larger HIP and

-4-
therefore covered by the statute and the regulations. See note 1,

above.

After a three-week jury trial in March 1995, all four

defendants were convicted both on the illegal export count and the

conspiracy count. In July 2003, the district court granted

defendants' motion for acquittal on the ground that the regulations

were unconstitutionally vague, Lachman, 278 F. Supp. 2d at 98, but,

in October 2004, this court overturned that decision and reinstated

the guilty verdicts, subject to the district court's disposition of

a yet undecided defense motion for a new trial. Lachman II, 387

F.3d at 44.

On remand, the district court denied defendants' motion

for a new trial, which rested on claims of newly discovered

evidence and government non-disclosure of evidence in violation of

Brady v. Maryland, 373 U.S. 83 (1963). Previously, the district

court had denied Lachman's separate motion for a new trial on the

ground that he was prejudiced by the district court's failure to

inquire, under Fed. R. Crim. P. 44(c)(2), about the potential

conflict of interest arising from his joint representation, with

the corporate defendants, by a single law firm.

The district court sentenced Lachman to three years of

probation, the first year to be served in home detention. Subilia

also received three years of probation, with the first six months

to be spent in community confinement followed by one year in home

-5-
detention. Fines of $250,000 were imposed on FMI and each of the

individual defendants. All of the defendants appealed, and the

government cross-appealed, challenging the leniency of the

sentences. The government and Subilia thereafter withdrew their

appeals.

Now before us are Lachman's claims that the jury's

verdict was not supported by sufficient evidence of his scienter

and that the district court erred in denying his motion for a new

trial based on the alleged Rule 44(c) violation. In addition,

Lachman and the corporate defendants appeal from the denial of

their motion for a new trial based on their proffer of newly

discovered evidence, including the supposed Brady evidence. We

discuss the sufficiency claim first, then the new evidence and

Brady issues and finally the claim based on Rule 44(c).

1. "The familiar standard that applies to sufficiency-

of-the-evidence challenges requires that a [reviewing] court

'determine whether, after assaying all the evidence in the light

most amiable to the government, and taking all reasonable

inferences in its favor, a rational factfinder could find, beyond

a reasonable doubt, that the prosecution successfully proved the

essential elements of the crime.'" United States v. Dwinells, 508

F.3d 63, 72 (1st Cir. 2007) (quoting United States v. O'Brien, 14

F.3d 703, 706 (1st Cir. 1994)), petition for cert. filed, No. 07-

9462 (Feb. 15, 2008).

-6-
 Here, the jury was instructed that the government was

required to prove two kinds of scienter–-both that defendants acted

knowingly, i.e., that they knew what was being exported, and that

they acted willfully, i.e., that they intended to violate the law

(in the sense that they were aware that their conduct was

unlawful).2 Lachman primarily argues that the government failed to

introduce sufficient evidence that he knew, in any detail, about

the nature of the control panel that was being exported. If he did

not know what was being exported, it follows that he could not be

guilty of intending to violate the law by exporting the item in

question.

The government presented sufficient evidence for a jury

to find that Lachman knew that the control panel exported with the

4.9-inch HIP was intended to be used with a HIP having an internal

working diameter of five inches or more and that it had the

capacity to perform this role. This, as we held in Lachman II, 387

F.3d at 52, would make the control panel one "specially designed"

to be used with the larger HIP and therefore one requiring an

export license.

2
The government consented to the willfulness element,
seemingly in light of the district court's concern about the
possible vagueness of the regulations. It now questions whether
that concession was proper--the statute provides different
penalties for knowing and willful violations, 50 U.S.C. app. §
2410(a), (b), and the indictment charged only knowing violations--
but we need not revisit the instruction issue here.

-7-
 The evidence is admittedly circumstantial. Lachman did

not testify; Subilia (who did) agreed only that he had regular

discussions with Lachman, and no witness testified that Lachman had

discussed or admitted to knowledge of the precise characteristics

of the control panel ultimately exported. But purely

circumstantial evidence can support an inference of knowledge, see

United States v. Mousli, 511 F.3d 7, 16 (1st Cir. 2007); and here

several different elements form a pattern that permitted (even if

they did not compel) the jury's inference.

Specifically, in addition to Lachman's overall

supervision of the companies' employees, particularly Subilia, the

government offered evidence as to Lachman of which the following

are examples:

•that at the start of the project Lachman told
the DRDL that he would himself handle the
export license requests;

•that Lachman and Subilia talked daily about
the project and that Lachman gave Subilia
"direction"; and that Lachman "knew what we
were doing" via monthly reports from the
engineers and the daily conversations with
Subilia;

•that Lachman was personally involved in the
decision to provide a smaller U.S.-made HIP
with an accompanying control panel, the
procurement of the components of a larger HIP
from third parties in England and Switzerland,
and the agreement to send FMI employees to
India to connect to the larger HIP the control
panel shipped from the United States;

•that Lachman was familiar with the regulation
requiring export licenses for large HIPs and

-8-
 control panels specially designed for them;
and

•that Lachman repeatedly complained about
Department of Commerce officials telling him
how to run his company and said that he would
"get around those sons of bitches" by
"get[ting] the parts made wherever I please,
and I'll get them shipped to India and I'll
get them put together there and our guys will
put them together and make it work."

So, although there is no direct evidence that Lachman

focused on the special capabilities of the five-zone control panel,

the circumstances could persuade a jury that he would almost

certainly have known that the panel had been modified to operate

the larger HIP and that it was intended to be connected to it.

And, while his "getting around" remarks occurred after the control

panel itself was shipped, a jury could believe that this spirit

animated the transaction of matching the U.S.-made control panel to

the foreign-made large-diameter HIP.

The evidence also supports the jury's conclusion,

implicit in its verdict, that Lachman intentionally violated the

law. The government showed that Lachman was familiar with the

export licensing procedure and was aware of the governing

regulation. The jury could also infer Lachman's intent from his

remarks and from the circuitous mechanisms by which the various

components were shipped and assembled to furnish DRDL with a large

HIP and compatible control panel. United States v. Malsom, 779

F.2d 1228, 1233-34 (7th Cir. 1985).

-9-
 The jury was also free to consider that Lachman, as a

sophisticated businessman, could easily have sought a ruling from

the Department of Commerce and chose not to do so because he

expected a negative answer. See Lambert v. California, 355 U.S.

225, 229 (1957); Morissette v. United States, 342 U.S. 246, 276

(1952). In sum, the jury could infer from circumstantial evidence

that Lachman was aware that the export of the modified control

panel was unlawful. Liparota v. United States, 471 U.S. 419, 433-

34 (1985).

Lachman posits other inferences that could be drawn from

the same evidence--in particular, that the plan to use the control

panel shipped with the smaller HIP to operate the larger HIP

evolved over time and resulted from changing independent decisions

by the customer rather than from any pre-conceived plan among the

defendants. However, when "the record is fairly susceptible of two

competing scenarios, the choice between those scenarios ordinarily

is for the jury." Dwinells, 508 F.3d at 74. That test is

satisfied here.

2. Next, Lachman and the corporate defendants sought a

new trial based on evidence that they discovered post-trial, or

alternatively, based on the government's failure to disclose

exculpatory evidence in violation of its duties under Brady. Both

arguments look to overlapping bodies of evidence aimed at showing

that officials--including representatives of the government--

-10-
sometimes used the term "specially designed" in a way helpful to a

potential good-faith defense for the defendants.

Before trial, the defendants had an affidavit from a

former Commerce Department official contending that the quoted

phrase was used in certain circumstances to refer to a device that

could be used only with the export-restricted item. The defendants

chose not to use the witness, arguing instead to the jury, among

other things, that the exported control panel was not in fact

designed for use with the larger HIP at all. The jury plainly

assessed the factual evidence differently.

Over the next several years, the defense unearthed more

evidence, presented by post-trial affidavits and accompanying

documents, that various United States officials and officials of

other countries did sometimes purport to interpret the phrase

"specially designed" as if it meant "exclusively usable for" the

export-restricted item. Sometimes this was in the context of

export restrictions for other items; in certain cases, the

officials purported to be talking about the HIP regulation itself.3

These materials underlie the new trial argument.

3
Perhaps the strongest piece of evidence for defendants is a
note from a 1975 COCOM meeting discussing the term "specially
designed" as it was used in the regulation of components for gas
turbine blades and jet engines. COCOM was the Coordinating
Committee on Multinational Export Control based in Paris. The note
stated that "[w]hat was meant by 'specially designed' was an
equipment used solely for a particular purpose . . . ."

-11-
 These materials are less impressive than might at first

appear. The "exclusive use" language seems to have been aimed

primarily at excluding general purpose items that happened to be

used with a restricted item--not modified or specially constructed

items actually intended to be used with a restricted export. Some

of the defense post-trial affiants urging an exclusive use reading

then gave the government counter-affidavits making clear that the

affiants thought that the exported control panel would have

violated the regulation even on their "exclusive use" reading of

the regulations.

Of course, however read, the affidavits and supporting

materials cannot now alter the legally correct meaning of the

regulation governing HIPs. The district court properly ruled, and

Lachman II sustained the ruling, that the regulation encompassed a

control panel designed specifically for and capable of use with the

restricted HIP. But the materials might have been of some use to

bolster a good-faith defense based on the exclusive use theory--if

one had been properly presented and supported.

Thus, had defendants claimed at trial to have believed in

the exclusive use definition when the control panel was exported,

this would be a more difficult case; and it would be even more so

if they claimed that they had relied on any of the new or allegedly

suppressed material. But neither Subilia nor Lachman ever

testified that either had relied on the material in question or any

-12-
comparable material. Indeed, if they had relied upon the materials

at the time of the export, the material could hardly be new or

suppressed evidence.

The defendants say that the materials, even though not

actually relied upon, increase the likelihood that defendants

sincerely believed in the exclusive use definition because the

materials supported the view that a "reasonable person" might hold

such a belief. Although the standard is not whether such a belief

was reasonable, the more reasonable the belief, the more likely it

was sincere. See United States v. Lussier, 929 F.2d 25, 31 (1st

Cir. 1991) (citing Cheek v. United States, 498 U.S. 192, 203-204

(1991)).

But there is no indication that in fact defendants ever

held such a contemporaneous belief in an exclusive-use

interpretation. Subilia never made such a claim in his trial

testimony, and Lachman did not testify. Although both now offer

post-trial affidavits claiming that they did, they point to no

confirming evidence. Thus the foundation for a good-faith defense

based on an exclusive use reading is simply absent.4 Defendants

4
United States v. Willie, 941 F.2d 1384, 1393 (10th Cir. 1991)
(requiring that proponent of good-faith defense "mak[e] a proffer
of great specificity regarding the type of belief he seeks to
prove"), cert. denied, 502 U.S. 1106 (1992); Lussier, 929 F.2d at
31 (evidence properly excluded where no connection between
proffered evidence and defendant's subjective belief).

-13-
cannot credibly now proffer testimony tailored to fit newly

developed evidence.

Because the defendants had available at trial an

independent witness to support such an exclusive use

interpretation, they had ample reason to press the defense--if they

were prepared to say that they had held such a belief at the time

they exported the control panel.5 The fact that the district court

would have told the jury that the witness's view was legally

mistaken is beside the point: a good faith defense is still good

(and only necessary) where the belief was mistaken.

Under these circumstances, the evidence cannot be deemed

either exculpatory or impeaching (as required by Brady) or as

creating a reasonable chance (as also required) that the evidence

might have altered the result of the proceedings. Kyles v.

Whitley, 514 U.S. 419, 434 (1995). See generally United States v.

Sepulveda, 15 F.3d 1216, 1220 (1st Cir. 1993), cert. denied, 512

U.S. 1223 (1994). Nor could the material satisfy the stiffer

standard for a new trial based on newly discovered evidence,

namely, that it would probably have altered the result. United

5
Defendants obtained before trial an affidavit from a former
Commerce Department export control specialist stating that in his
experience "specially designed" meant "exclusively designed for a
controlled product," that while working at Commerce he had provided
that definition to numerous exporters, that several Bureau of
Export Administration engineers with whom he has spoken--and whom
he named in his affidavit--shared this definition, and that he
disagreed with the definition put forth by two Commerce officials
on behalf of the government.

-14-
States v. Conley, 249 F.3d 38, 45 (1st Cir. 2001); United States v.

Wright, 625 F.2d 1017, 1019 (1st Cir. 1980).

We thus need not decide whether--if the defendants had

mounted a good-faith defense based on exclusive use--a court would

have been likely to admit the new evidence in support. The

government says the evidence would not be admissible, but case law

may well leave this up to the trial judge based on the usual

considerations. Still, it is much weaker evidence than materials

actually relied upon to support a belief, and in this case there is

no plausible evidence that the belief was ever held by the

defendants.

This conclusion also makes it unnecessary to examine

Brady's other prong, namely, wrongful suppression. Defendants'

Brady claim rests largely on notes and minutes of meetings of

COCOM, the multinational working group based in Paris. See note 3,

above. How much of the material may have found its way into

Commerce Department files is unclear and what kind of search of

such files was required is also debatable, see United States v.

Brooks, 966 F.2d 1500, 1503-04 (D.C. Cir. 1992), but in the absence

of prejudice it simply does not matter.

3. Last, Lachman seeks a new trial on the ground that

his trial counsel--who jointly represented him and the corporate

defendants (but not Subilia)--operated under a conflict of

interest, thereby denying Lachman the effective assistance of

-15-
counsel guaranteed by the Sixth Amendment. Wood v. Georgia, 450

U.S. 261, 271 (1981). The government replies that Lachman's

counsel informed him of the risks of joint representation and that

he knowingly acceded to the joint representation; further, it

argues that in any event, there was no actual conflict between his

defense strategy and that of the corporate defendants. The former

argument is debatable; the latter beyond dispute.

One might think that Lachman's choice of counsel was his

own affair; but ordinarily in cases of joint representation a

district court must "inquire about the propriety of joint

representation and must personally advise each defendant of the

right to the effective assistance of counsel, including separate

representation." Fed. R. Crim. P. 44(c)(2); see also United States

v. Foster, 469 F.2d 1, 4-5 (1st Cir. 1972). Here, a magistrate

judge warned defendants' counsel at a pre-trial conference of the

need for a Rule 44(c) hearing. For whatever reason, the district

court never engaged in the required colloquy.

However, the district court's failure to conduct a proper

Rule 44(c) inquiry does not automatically entitle Lachman to a new

trial. United States v. Nelson-Rodriguez, 319 F.3d 12, 41-42 (1st

Cir.), cert. denied sub nom. Caribe-Garcia v. United States, 539

U.S. 928 (2003). Lachman can prevail only if there was a plausible

alternative defense strategy that was either foreclosed or

inhibited by the joint representation. Id.; accord United States

-16-
v. Ramirez-Benitez, 292 F.3d 22, 30 (1st Cir. 2002).6 Once that

condition can be shown, prejudice is presumed, and a defendant need

not show that the alternative strategy would necessarily have

affected the outcome at trial. Mickens v. Taylor, 535 U.S. 162,

172-73 (2002); Nelson-Rodriguez, 319 F.3d at 42.

Lachman has not made the requisite proffer. He contends

that his counsel focused on a theory that would exonerate all the

defendants--i.e., that the export at issue did not violate the

regulations as understood by the defendants--and neglected

Lachman's alternative position, which was that as president he set

general policy and was not familiar with the details of this rather

small transaction. But the two theories are not inconsistent, and

a review of the record demonstrates that joint counsel could and in

fact did pursue both theories.

Lachman was president, chairman and virtually the sole

owner (96 percent) of the corporate defendants. His attorneys

testified in post-trial depositions that he hired them and directed

defense strategy. When they discussed with him the possibility of

conflicts emerging, he rejected the notion of separate counsel.

6
In Foster, 469 F.2d at 5, this court held that where a
district court fails properly to inquire, the burden is on the
government to prove the absence of such a conflict. More recently,
in Nelson-Rodriguez, 319 F.3d at 42, we reserved judgment as to
whether Foster's burden shifting approach was overturned by Mickens
v. Taylor, 535 U.S. 162, 173-74 (2002). However this may be, a
defendant raising a conflict claim must put forth a colorable
theory of how he was prejudiced by joint representation before the
government might be expected to respond to it.

-17-
Whether or not his discussions with counsel amounted to "the most

complete and effective out-of-court advice," Lachman was a

sophisticated businessman who "was not totally lacking in some

advance warning of the pitfalls of joint representation." United

States v. Martorano, 620 F.2d 912, 915 n.3 (1st Cir.), cert.

denied, 449 U.S. 952 (1980).

In any event, Lachman's effort to distance himself

personally from the transaction would not undermine the common

defense strategy of defending the propriety of the transaction.

Without casting aspersions on the legality of the export of the

control panel, Lachman's counsel could, and did, argue both that

the export of the control panel was lawful and also that Lachman

had no reason to be and in fact was not familiar with the details

of the transaction.

In a motion for judgment of acquittal at the close of the

government's case-in-chief and again during closing arguments

before the jury, counsel argued that "[t]here is no evidence that

he [Lachman] knew anything whatsoever regarding the nature or

design or capabilities of the control panel," and "no evidence that

Walt Lachman was involved in the building of this control panel."

Counsel also cross-examined the corporate employees who testified

for the government, seeking to undermine any testimony that the

government had elicited connecting Lachman to this transaction. In

short, joint counsel in fact pursued the very "alternative"

-18-
strategy Lachman now argues was impaired or foreclosed by the joint

representation.

Lachman's motion for a new trial was supported by an

affidavit of an expert in trial practice and legal ethics that

supports the view that a distancing argument could undermine a

claim of lawfulness. Indeed, the affidavit asserts ambitiously

that a defense (for the corporation) that the export was lawful is

"factually inconsistent enough" with a defense of lack of knowledge

(by Lachman) "so that a single lawyer could not pursue them both

vigorously and without reservation." But the two defenses are not

inconsistent: one turns on the interpretation of the law, the other

on Lachman's awareness of the control panel's capacity and intended

use.

A claim of tension between defenses might well be

colorable on some facts, but such a tension has not been shown

here. Nor does the affidavit confront the fact that joint counsel

did press Lachman's "alternative" defense of lack of knowledge as

well as the legal defense. This case is not one in which a junior

executive is sacrificed for the company; on the contrary, Lachman

effectively controlled the defense and sensibly chose to present

both defenses--either of which could have succeeded in exculpating

him, but neither of which did.

Affirmed.

-19-