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United States v. Landersman

United States Court of Appeals, Fourth Circuit

March 28, 2018

UNITED STATES OF AMERICA, Plaintiff - Appellee,
v.
MARK STUART LANDERSMAN, a/k/a Mark Stuart, Defendant-Appellant. UNITED STATES OF AMERICA, Plaintiff - Appellee,
v.
LEE HALL, Defendant-Appellant.

          Argued: December 6, 2017

          Appeals from the United States District Court for the Eastern District of Virginia, at Alexandria. Leonie M. Brinkema, District Judge. (1:13-cr-00419-LMB-1; 1:13-cr-00419-LMB-2)

         ARGUED:

          Stuart A. Sears, SCHERTLER & ONORATOR, LLP, Washington, D.C., for Appellant Lee Hall.

          Cary Citronberg, ZWERLING/CITRONBERG, PLLC, Alexandria, Virginia, for Appellant Mark Stuart Landersman.

          Morris Rudolph Parker, Jr., Patricia Marie Haynes, OFFICE OF THE UNITED STATES ATTORNEY, Alexandria, Virginia, for Appellee.

         ON BRIEF:

          John Zwerling, ZWERLING/CITRONBERG, PLLC, Alexandria, Virginia, for Appellant Mark Landersman.

          Dana J. Boente, United States Attorney, OFFICE OF THE UNITED STATES ATTORNEY, Alexandria Virginia, for Appellee.

          Before KING and THACKER, Circuit Judges, and SHEDD, Senior Circuit Judge.

          THACKER, Circuit Judge

         In this consolidated appeal, Lee Hall, former Director of Intelligence for the Deputy Undersecretary of the Navy, and Mark Landersman, a machinist from California (collectively, "Appellants"), appeal guilty verdicts for criminal conspiracy and, as to Hall, unlawful conversion of government funds. Specifically, following a bench trial, the district court found that Hall facilitated the purchase of hundreds of firearm suppressors from Mark Landersman, Hall's boss's brother, for over $1.6 million in government funds. The district court concluded that this transaction was illegal because, inter alia, Hall did not use the proper channels for government funding approval; Mark Landersman was an untested and unlicensed firearm manufacturer; and upon arrival, the suppressors did not meet government performance standards.

         Appellants raise a host of challenges to the manner in which their bench trials were conducted and the sufficiency of the evidence against them. Because some of these challenges relied on classified government records, the district court and this court conducted proceedings pursuant to the Classified Information Procedures Act ("CIPA"), see 18 U.S.C. app. 3, §§ 1-16. For the reasons that follow, we find no reversible error in the classified and unclassified proceedings below and therefore affirm Appellants' convictions.

          I.

         A.

         We recount the facts in the light most favorable to the Government, the prevailing party at trial. See United States v. Garcia-Ochoa, 607 F.3d 371, 376 (4th Cir. 2010). In late 2012 and early 2013, Hall facilitated the Navy's purchase of 349 unattributable (i.e., unserialized and untraceable) firearm suppressors for approximately $1, 657, 750. At that time, Hall worked directly for David Landersman, Senior Director of Intelligence for the Navy's Office of Plans, Policy, Oversight and Integration ("PPOI").[1]

         As background, sometime during the summer of 2012, David Landersman and Hall approached Robert Martinage, Deputy Undersecretary for PPOI and David's superior, to seek funds for "intelligence studies." J.A. 373.[2] Martinage approved their request to approach Carla Lucchino, Department of the Navy Assistant for Administration ("DON/AA"), and ask for authorization to seek funding for this purpose.

         On June 6, 2012, David sent an email to Lucchino, asking for a total of $3 million from the PPOI Senior Director's operational budget for the following: intelligence studies, a program integration assessment, an anti-submarine warfare research project, an assessment of the Navy's participation in the Defense Clandestine Service program, [3] and "an overall assessment of how well D[epartment] O[f] N[avy] intelligence requirements are being satisfied." J.A. 1185. Lucchino forwarded the request to David Nugent, the Director of the Financial Management Division of DON/AA.

         Nugent then began working with Hall on David Landersman's budget request. During the time that Hall and Nugent discussed the funding request, Hall emphasized to Nugent that this was "an Under Secretary priority, " which "would move [it] up on the [priority] list." J.A. 439-40. On August 13, 2012, Nugent indicated to Lucchino that he had been working with Hall and explained that the budget for the studies was reduced from $3 million to $2.2 million. Lucchino authorized Nugent to disburse $2.2 million to David Landersman. Notably, Lucchino testified that she could not authorize the purchase of "weapons or small arms." Id. at 349.

         Also on August 13, 2012, David Landersman sent an email to his brother Mark, the erstwhile owner of an automobile machinery company in California called "Advanced Machining and Engineering, " or "AME." J.A. 1191-92. Mark had been in dire straits, as he "couldn't keep up the overhead" at AME, id. at 723; he was forced to file for Chapter 7 bankruptcy on July 9, 2012; and a 2011 tax return showed that another of his businesses owed his brother David $50, 000 in unpaid loans.

         In that August 13 email, David asked Mark for the proper name of his company. The next day, Mark responded to David with the name and phone number of his company: "Advanced Machining and Engineering (951) 852 1653." J.A. 1192. About an hour later, David forwarded this information to Hall, noting, "Lee, Info a[s] follows . . . ." Id. at 1193. Later that same day, David sent his brother Mark an email with the subject line "300BLK Suppressor, " which included a link to a website entitled "How I Built a 300 AAC Blackout Suppressor." Id. at 1195, 1447. Under the link, David wrote, "Look this over . . . Looks very much like what we're going to send you." Id. at 1195. Mark responded, "Wow! [V]ery simple." Id. at 1194.

         Five weeks after Lucchino authorized Hall to spend $2.2 million for studies and assessments, on September 17, 2012, Hall met with Tedd Shellenbarger, a counterdrug director within PPOI; Sherri Donahue, the Navy Contracting Officer Representative; and Gail Williams, a senior program manager at CACI International, Inc. ("CACI"), a government contractor. The purpose of the meeting was to discuss what Hall wanted to be done with the money.[4]

          During that meeting, Hall asked about procuring materials, as opposed to studies as he previously represented to DON/AA. Donahue recalled that "the conversation ha[d] to do with . . . alterations on guns." J.A. 480. Williams also recalled that Hall was seeking to procure equipment or materials. She did not recall Hall mentioning "anything about using [the money] to support intelligence studies." Id. at 499. During the meeting, Hall and Williams "discuss[ed] . . . what was required for CACI to do a sole source justification, " meaning that the contract would not have to be put out for bid, but rather, CACI would award the contract to a preselected vendor. Id.

         As a follow up to that meeting, on October 19, 2012, Hall emailed Williams, providing her with the name of the vendor he proposed to use for the contract. He stated:

Gail,
We are finally ready to move. Here is the information you need to get started:
Poc: Mark Stuart of Applied Engineering and Materials Phone: 951-851-1653.
What else do you need? Also, if at all possible, we'd like this rolling by the end of November. I understand you have internal hurdles, but we have accelerated interest in delivering the products.

J.A. 1208. Notably, Mark's middle name is Stuart, but his full name is Mark Stuart Landersman; the company name is actually Advanced Machining and Engineering; and this phone number is one off from the actual number David Landersman forwarded to Hall, which was 951-852-1653.

         Williams responded by email the same day, stating, "[I] will need some information in order to justify a 'sole source' purchase." Id. For example, "Why is Applied Engineering and Materials the vender [sic] of choice?" Id. (parentheses omitted). Thereafter, Hall sent Williams an email stating in relevant part:

Other subcontractors were not considered due to the fact that they do not possess the expertise required to do the job nor posses [sic] the unique proprietary tooling systems created by AME to produce the required enhancements needed. Their proprietary system is wholly, and solely exclusive to AME and therefore unavailable by any other subcontractor.
. . .
[] AME currently has sole proprietary expertise that is not commercially offered by other companies or individuals. It is the only responsible source for the engineering expertise sought and no other services will satisfy requirements [sic]. Their product is the first that incorporate [sic] a unique design that significantly reduces the decibel ratings to near background noise levels. All technologies are developed and owned exclusively by AME and no licensing agreements currently exist, providing a unique opportunity for CACI and the end customer to utilize proprietary engineering and services not readily available elsewhere.

J.A. 1207. At CACI's request, Hall then sent an Statement of Work, proposing that CACI would pay AME 50% up front and 50% "upon delivery, inspection and acceptance trials" of the product. Id. at 1206. In addition, each suppressor was to be billed at a cost of around $5, 000.

         In finalizing the contract and performing the required due diligence, a CACI officer asked Mark to "provide a detailed breakout of [his] costs, i.e., labor and materials, " and also to "provide . . . a copy of an invoice and/or PO" demonstrating that he "suppl[ied] this product . . . to [a] client of [his] within one year." J.A. 1215. Mark replied, "I am not be able [sic] to provide this information, " and told the CACI officer to contact Hall. Id.; see also id. at 1247 (November 8, 2012 email from Mark Landersman to CACI procurement director explaining, "[Hall] has instructed me to direct any and all requests for information" to Hall). In turn, Hall claimed the information CACI requested was confidential, citing "increased questioning on the[] vendor issues, " and explaining, "[T]he sensitive nature of the product(s), past performance and service, and the proprietary information involved . . . makes for potential problems later regarding security and classification." Id. at 1415 (Nov. 9, 2012 email). On November 12, 2012, Mark finally quoted CACI a labor rate of $85 per hour for 29 hours per part, coming to $2, 465 per suppressor, which Hall said he and David "determined . . . to be fair, reasonable, and accurate." See id. at 1416. Hall also emailed CACI on December 3, 2012, and notified the project analyst that the items were to be shipped to Al Zalewski, a Navy intelligence official, at a Chesapeake, Maryland address. He also advised the analyst to use the notation "Hold for Al Zalewski, " rather than using Hall's name. Id. at 1014 n.17.

         On December 7, 2012, CACI approved a purchase order in the amount of $1, 657, 750 for 349 "Signature Suppressor[s]." J.A. 1303-04. However, in November 2012, before the purchase order was approved, Mark gave $2, 000 to Juan Carlos Robles, a machinist and successor-owner of AME, to "cover the entire costs of the materials" for the suppressor project. Id. at 726. Nonetheless, on December 12, Mark emailed CACI, stating, "I can't get started without the deposit check and wondered if you have an idea when it might be sent." Id. at 1306-07. Two days later, CACI cut a check for 50% of the contract price, or $828, 875, and sent it to Mark.

         Using blueprints provided by Mark, Robles alone manufactured the suppressor tubes and accompanying assembly parts for the suppressors. It took him four to five weeks, working around five hours per day. Mark paid Robles under $10, 000, [5] in contrast to the labor charge of $2, 465 per suppressor quoted by Mark (which comes to $860, 285 in labor for 349 suppressors).[6]

         Meanwhile, in January 2013, Hall met with Zalewski and asked if he could have a shipment sent to a Naval Intelligence warehouse in Chesapeake, Maryland, even though he had already scheduled to have the shipment delivered there. Zalewski agreed, but testified Hall "made it clear to me that I was not to know . . . what was in the boxes . . . I was not cleared for that." J.A. 746. Hall also asked Zalewski to remove the boxes' labels, which contained Mark Landersman's name, but Zalewski refused to do so.

         On February 19, 2013, boxes containing the 349 Landersman suppressors arrived at the warehouse. Despite the fact that the suppressors were delivered on February 19, Hall certified on a Form DD-250 (Material Inspection and Receiving Report) that he accepted and inspected the suppressors on February 14. Notably, on February 14, 2013, Hall was on administrative leave for an unrelated matter and thus, could not have accepted and inspected the suppressors as indicated. Because Hall signed the DD-250, CACI mailed Mark Landersman a check for the $828, 875 balance on the contract.

         A few weeks later, Nugent saw the DD-250 and realized the money intended for intelligence studies was actually used for suppressors. As a result, the matter was referred to the Naval Criminal Investigative Services ("NCIS"). The boxes containing the Landersman suppressors were finally opened when they were seized by NCIS agents in April 2013, two months after they were delivered. The boxes were located "next to a photocopier and in an otherwise inappropriate area for classified materials as they were . . . accessible to anyone in that space." J.A. 1014. Thereafter, Jason Davis, a mechanical engineer for the Naval Surface Warfare Center at Crane, Indiana, tested the suppressors to see if they would meet Navy performance standards for sound and flash.[7]Davis's report reveals that the suppressors failed to meet those performance standards. Indeed, the report states that the suppressors were deemed "[u]nacceptable" in multiple ways, which "would have made this suppressor ineligible for [a Navy] contract award." Id. at 1783. After an investigation, Mark Landersman was identified as the manufacturer of the suppressors, and he was indicted singly for conspiracy on November 14, 2013.

         B.

         On March 13, 2014, a grand jury sitting in the Eastern District of Virginia returned a two-count superseding indictment, charging Hall and Mark Landersman together with a conspiracy containing three objects: (a) the unlicensed manufacture of firearms; (b) shipping of unregistered firearms; and (c) mail fraud ("Count One"); and charging Hall alone with converting Navy funds without authority ("Count Two"). Hall and Mark consented to a bench trial, and on June 20, 2014, they jointly filed a notice pursuant to CIPA to use classified information.[8]

         On September 25, 2014, the district court granted Mark Landersman's motion to sever, scheduling Hall's bench trial for October 20, and Mark's for October 27. At the hearing on the motion to sever, Hall represented that he would testify at Mark's trial. However, on October 9, Hall rescinded that representation. The district court nonetheless allowed the cases to proceed separately.

          1.

         Pre-Trial Motions

         a.

         On June 20, 2014, Appellants moved to dismiss the indictment based on the allegation that some of Hall's personal notes were destroyed by Pentagon officials while he was on administrative leave. At a hearing on July 14, 2014, Hall posited that the missing notes would have demonstrated that: (1) he communicated with a man named Robert Gudz, president of the International Police Supply and a firearms dealer, who represented to him that suppressors meeting Hall's requirements[9] would cost between $10, 000 and $12, 000 a piece; (2) Hall informed Lucchino they could no longer carry out the studies for which they initially requested funds, but Lucchino had no objection to using the money for another purpose; (3) Shellenbarger, the other PPOI director who attended the CACI meeting, had a contract vehicle for purchase of the suppressors, and they talked about the contract at the meeting; (4) Hall spoke with Zalewski about holding the boxes in a secure facility; and (5) Hall had a meeting with Martinage about the suppressor purchase.

         From the bench, the district court denied the motion to dismiss the indictment but explained:

[T]here'll be an inference drawn against the government on th[e] issue [of the handwritten notes], and it will come out to play as it comes out to play.
Again, it may be moot. These witnesses . . . may say exactly what Mr. Hall recalls them saying. If they don't then he'll be permitted to testify, and as I said, if he says under oath that he had a note that ...

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