UNITED STATES OF AMERICA v. MARK STUART LANDERSMAN
US Court of Appeals for the Fourth Circuit, Thacker, March 28, 2018,
Unlawful conversion of government funds – The fact that faulty suppressors were priced in line with functional suppressors nevertheless constituted fraud when obtained in violation of Navy procurement regulations to enrich the brother of a Navy official

Facts:
In 2012, Mark Landersman, owner of “Advanced Machining and Engineering,” had that company file for Chapter 7 bankruptcy. Another of his businesses owed his brother David $50,000 in unpaid loans.
At the time, David Landersman was Senior Director of Intelligence for the Navy’s Office of Plans, Policy, Oversight and Integration (“PPOI”).
Just prior to Mark filing for bankruptcy, David went to his boss and sought funds for “intelligence studies.” This request was approved and David approached the Navy’s administrative arm to ask for $3 million from the PPOI 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, and “an overall assessment of how well Department Of Navy intelligence requirements are being satisfied.
Instead of doing anything on that list, David gave a contract to his brother Mark for $1.6 million to buy 349 suppressors. Suppressors were not included on the funding request (and could not have been, as the approving admin unit was not allowed to approve purchase of weapons or small arms). Moreover, Mark did not know how to make a suppressor. David sent him a link to a website entitled “How I Built a 300 AAC Blackout Suppressor.” Mark responded, “Wow! very simple.”
Lee Hall worked for Mark and assisted him in carrying out this request. Hall emphasized to fiscal that this was a “priority.” Fiscal approved the request, but reduced it to $2.2 million. Hall gave Navy contractors a fake name and phone number for Mark Landersman’s company (to avoid using his last name and revealing the connection between Mark and David).
When a contracting officer contacted Mark to get information about a detailed breakdown of costs, Mark replied in an e-mail that “I am not be able to provide this information.” Mark referred the contractor to Hall. Hall then claimed that the information was confidential. Eventually a rate was quoted at labor of $2,465 per suppressor plus materials for a total of approximately $5,000 per suppressor.
In fact, out of the contract for $1,657,750, Mark paid only $2,000 for materials for all 349 suppressors along with about $6,000-$8,000 to the person who put the suppressors together.
The suppressors were delivered on February 14, 2013, and Hall certified on a Material Inspection and Receiving Report that he had accepted and inspected the 349 suppressors.
When administrative officials saw that money intended for intelligence activity was spent on suppressors, they contacted NCIS.
NCIS agents seized the boxes of suppressors, which had been placed “next to a photocopier” in a public area (inappropriate for the “classified material” they were supposed to contain).
The Navy tested the suppressors and found that they failed to meet performance standards and were “unacceptable” in multiple ways.
Mark Landersman, David Landersman, and Lee Hall were indicted for criminal conspiracy and conversion of governmental property.
At trial, the government introduced testimony from a Navy mechanical engineer who tested the suppressors. In seeking the contract, Hall had claimed that the suppressors reduced noise to “near background noise levels.” However, in testing the suppressors failed to operate properly. The suppressors failed for accuracy, excessively obstructed sight picture, and one even separated from itself during testing.
Hall argued that the government expert’s testimony was unfairly prejudicial because the suppressor was designed for a soviet-style AK-47 but was tested on a Chinese-equivalent AK-47.
Additionally, Hall argued that the price paid of $5,000 per suppressor was cheaper than alternative suppressors.
After conviction, Hall and Landersman appealed.

Held: Hall and Landersman were properly convicted. The price of the suppressor, even if proven and even if they worked, still would have been irrelevant since the Navy contract was improperly and fraudulently directed to Mark Landersman.

Mail Fraud – It is illegal to use the mail for the purpose of carrying out a fraud

Conspiracy (Federal) – Conspiracy requires proof that the suspect: agreed to commit a crime, willingly participated in the conspiracy, and that there was an overt act committed to further the conspiracy.

Conspiracy (Federal) – A conspiracy conviction requires only “a showing that the defendant knew of the conspiracy’s purpose and some action indicating his participation.”

Conspiracy (Federal) – This can be shown by circumstantial evidence such as his relationship with other members of the conspiracy, the length of this association, his attitude, conduct, and the nature of the conspiracy

Conspiracy – Agreement- An agreement to join a conspiracy “need not be explicit; it may be inferred from circumstantial evidence.”

From the Case: Evidence was more than sufficient to show that the co-conspirators “engaged in a fraudulent scheme to funnel government money to Mark’s flailing business.”

Conversion of Government Funds – There are two ways to commit this crime: 1) to embezzle, steal, or knowingly convert United States property and 2) to sell, convey, or dispose of United States property without authority.

Conversion of Government Funds – This crime includes intentional and knowing abuse of property as well as the unauthorized use of government property.

For Example: A defendant was convicted in a conversion of government property case after directing that trees on federal property be cut down to enhance the view from his home and, therefore, his property value

From the Case: The evidence presented to the district court reveals that Hall — rather than acting in good faith — knew how the system worked and circumvented the normal procurement process in order to deliver government money to his boss’s brother.