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UNITED STATES v. DANILOW PASTRY CO.

May 3, 1983;

UNITED STATES OF AMERICA
v.
DANILOW PASTRY CO., INC., DAN-SAN PASTRY SHOP, INC., d/b/a BROADWAY PASTRY SHOP, R. K. BAKING CORP., ACME CAKE CO., INC., MRS. MAC'S BAKING CO., INC., TEMTEE DONUTS, INC., ERNST OESTREICHER, IRVING SANDERS, SEYMOUR RAPPAPORT, WILLIAM F. WENZEL, ROBERT F. McKENNA, JOHN F. McKENNA, Defendants.



The opinion of the court was delivered by: EDELSTEIN

MEMORANDUM OPINION AND ORDER

EDELSTEIN, District Judge:

 The issue at bar is the propriety of sentences imposed by this court on January 31, 1983 against six corporations engaged in baking pastry for wholesale distribution, which were sentenced together with six individual defendants. The court ordered each of the corporations to pay a fine and to donate a certain amount of fresh baked goods to needy organizations that were to be specified by the court.

 The government contends that the sentences were improper. The government argues that the only authorization for the court to impose such an order is the Probation Act, 18 U.S.C. § 3516, and that under the Probation Act the court should have ordered the donation as a condition of probation. The government further contends that under the Probation Act such a donation is "restitution," specifically provided for by the Act, and as such it can benefit only aggrieved parties and only in the amount of their actual damages.

 FACTUAL BACKGROUND

 The defendants are six major wholesale bakeries in the New York metropolitan area and six individuals who were or are principals of those bakeries. *fn1" Total sales by the defendant corporations from 1977 through 1980 were in excess of $100 million. The indictment, filed June 4, 1982, charges that:

 From at least as early as the mid-1960s and continuing until at least March 1981 . . . the defendants and co-conspirators have engaged in a continuing combination and conspiracy in unreasonable restraint of the aforesaid interstate trade and commerce in violation of Section 1 of the Sherman Act, 15 U.S.C. § 1.

 The aforesaid combination and conspiracy has consisted of a continuing agreement, understanding and concert of action among the defendants and co-conspirators, the substantial term of which was to raise and fix prices of pastry.

 In September 1982 the defendants moved this court for an order granting them leave to change their pleas from not guilty to nolo contendere. The defendants argued that the corporate defendants were financially ailing and that they could not afford the expense of defending a six week criminal trial. *fn2" Perhaps of greater significance, the defendants sought to deny private plaintiffs the advantages of using a guilty plea or conviction as prima facie evidence in a subsequent private antitrust action, and of going to court with the evidence and data presented by the government at trial. 15 U.S.C. § 16. A nolo contendere plea would accomplish these goals for the defendants.

 The government opposed these asserting that the acceptance of nolo pleas would: (1) diminish the punitive and deterrent impact of prosecution because it would minimize the publicity, which usually surrounds a trial, and because it might allow the defendants to claim that only a technical violation had occurred; (2) lend credence to the view that white-collar offenders are treated more leniently than other offenders; and (3) not provide to private plaintiffs the aforementioned benefits of a guilty plea, trial or conviction. *fn3"

 Both sides agreed that tremendous savings would result from permitting nolo on the defendants settling with private plaintiffs who had sued them in ten class actions in the Eastern District of New York. *fn4" The court mediated the settlement discussions of the private actions until a settlement was achieved. *fn5"

 The court then sought to defuse the possibility that a defendant would use the nolo pleas to claim that their violation was merely technical. Thus, the court required each defendant to submit for the government's approval a narrative statement of his (or its) role in the conspiracy. Each defendant submitted such a statement, the government approved the accuracy and meaningfulness of each, and each became a part of the public record of the case. In addition, each individual defendant, and in the case of a corporation its representative, was required to state, in open court, the nature of his (or its) complicity in the conspiracy. Having taken these steps, and after questioning each defendant to ensure the voluntariness of the pleas, the court accepted nolo pleas from all defendants.

 The government submitted a sentencing memorandum recommending a specified fine for each corporate defendant and, for each individual defendant, a specified jail term and probation. *fn6" The government, as it had in opposing the defendants' application to change their pleas from not guilty to nolo contendere, emphasized the need for general deterrence. After carefully considering the parties contentions, and all the circumstances in this case, the court imposed fines, suspended execution of jail terms, placed the defendants on probation, and ordered five of the six individuals to perform community service as a condition of probation. No objection has been made to the sentences imposed on the individual defendants. *fn7"

 In sentencing the corporate defendants the court similarly imposed fines and ordered the defendants to perform community service. *fn8" The community service imposed on each of the corporate defendants was to donate a specified amount of their pastry products to needy organizations, the organizations to be designated in a subsequent order.

 DISCUSSION

 A. Procedural Challenge under § 3651

 By letter dated February 10, 1983 over the signature of Rebecca Meiklejohn, Attorney in the Antitrust Division of the Department of Justice (the "February 10 Letter"), the government challenges the sentences imposed on the corporate defendants.

 The first of the government's challenges to this sentence is procedural. It requests the court to correct, pursuant to Fed. R. Crim. P. 35, a sentence imposed in an illegal manner. The government argues that this court's only authority to make such a donation order lies in the Probation Act, 18 U.S.C. § 3651, *fn9" which requires that the defendant be placed on probation and the donation ordered as a condition of probation. *fn10"

 This court ordered the delivery of baked goods under its common law discretionary power with respect to sentencing. *fn11" This court, however, agrees with the government that the sentences should be based upon the statutory authority of 15 U.S.C. § 3651. Hence the first aspect of the government's application is granted and, pursuant to the Fed. R. Crim. P. 35(a) *fn12" this court hereby orders the sentences imposed on the six corporate defendants be corrected to read as follows:

 IT IS ADJUDGED that Danilow Pastry Co., Inc. is hereby fined the sum of $162,400 to be paid to the United States Treasury, as directed by the Probation Department in cooperation with the Government in scheduling the payments. The execution of said fine in excess of $100,000 is hereby suspended and the defendant is placed on probation on the condition that it arrange for the delivery of $1,200 of its fresh baked goods each week, for 12 months, to organizations that will be designated in this order. In calculating the $1,200 of baked goods, the wholesale prices are to be used. The selection of the goods is to be made by the organizations so designated.

 IT IS ADJUDGED that Dan-San Pastry Shop is hereby fined the sum of $20,400 to be paid to the United States Treasury, as directed by the Probation Department in cooperation with the Government in scheduling the payments. The execution of said fine in excess of $10,000 is hereby suspended and the defendant is placed on probation on the condition that it arrange for the delivery of $200 of its fresh baked goods each week, for 12 months, to organizations that will be designated in this order. In calculating the $200 ...


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