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USA v. MERRITT

October 8, 1991

USA,
v.
MARTYN MERRITT, DEFENDANT.



The opinion of the court was delivered by: Martin, District Judge:

FINDINGS OF FACT AND CONCLUSIONS OF LAW

The defendant in this case has pleaded guilty to one count of a 12-count indictment. The charge to which he entered his plea was a conspiracy to commit fraud which involved the submission of false bills of lading pursuant to which defendant received $936,000. The payment was made pursuant to an Agency for International Development [AID] program to supply needed foodstuffs to the country of Sudan. In return for the $936,000, the defendant and his associates were supposed to ship and deliver high-quality powdered non-fat milk. In fact, the product that defendant supplied was not non-fat milk but rather a "replacer" sometimes used in animal feed, not fit for human consumption. The report of defendant's expert states:

    "The solubility, taste, odor, scorched
  particles and appearance were quite below that
  normally found in Grade A skim powder. The taste
  and odor were unpleasant."

Defendant's plea of guilty was made pursuant to a plea agreement with the Government contained in a letter dated May 31, 1991. In that letter, the parties stipulated to certain facts and Guidelines analysis pursuant to which they agreed that the offense level should fall somewhere within the range of 15 and 17 points. Each party reserved the right to dispute whether the defendant should be given a 2-point credit for acceptance of responsibility, or alternatively, the Government reserved the right to argue that any downward adjustment for acceptance of responsibility should be offset by a corresponding upward adjustment for obstruction pursuant to U.S.S.G. § 3C1.1. The agreement further provides:

    "In arguing for offense level of 17 as opposed
  to 15, the Government is free to raise all
  arguments which, in its view, indicate an absence
  of acceptance of responsibility, and, in
  addition, to raise all arguments which support
  its contention that the defendant engaged in
  obstruction pursuant to § 3C1.1."

Although the agreement provided that neither party would seek a departure from the Guidelines, both parties recognized "that neither the Court nor the Probation Department are bound by the foregoing Guidelines Stipulations/Analysis. . . ."

Upon receipt of the pre-sentence report and written submissions by the defendant and the Government, the Court advised counsel that it would not impose sentence on the date then scheduled, but would meet with the parties to discuss sentencing issues. At a conference held on August 16, 1991, the Court advised counsel that a review of the materials on file with the Court suggested that the defendant was attempting to retain the proceeds from his crime and may have misrepresented to the Probation Department the nature of his relation to Broadview Development Ltd. ("Broadview"), a corporation which had owned the home in which defendant was living and which had received the proceeds from the sale of that home in 1990. The Court therefore directed a hearing be held at which the Government was to produce all available evidence as to the disposition of the proceeds of the bill of lading which defendant's company had received as well as all evidence in the Government's possession relating to the ownership of Broadview.

The hearing ordered by the Court was held on September 26, 1991. At the outset of the hearing, defense counsel objected to the Government's participation in such a hearing, asserting that it was inconsistent with the representation contained in the plea agreement that the Government would not seek a departure from the Guidelines. The Government responded that the evidence which it would be presenting at the hearing was relevant to the questions left open in the plea agreement, to wit, whether the appropriate offense level was 15 or 17 points and also where within that range the Court should impose sentence. Defense counsel agreed to stipulate that the Court could impose sentence at the high end of the range, level 17, and could also impose as restitution the full amount obtained by plaintiff's corporation without any offset for the amount defendant allegedly paid to the supplier of the replacer. Defense counsel, therefore, urged that it was improper for the Government to participate in the hearing because to do so would be a violation of the plea agreement which the Government was bound to honor, under Santobello v. New York, 404 U.S. 257, 92 S.Ct. 495, 30 L.Ed.2d 427 (1971). At that point, the Court directed the Assistant U.S. Attorney to present to the Court all of the evidence which the Government had available concerning the disposition of the proceeds of the fraud and the ownership of Broadview.

Having reviewed the evidence presented as well as the submission of the parties, the following constitute the findings of fact of the Court with respect to the issues raised relating to the defendant's sentence.

First, the Court finds that the Government did not violate the plea agreement by participating in the hearing at the direction of the Court. As noted above, the plea agreement expressly recognized that neither the Court nor the Probation Department was bound by any agreement with respect to the Guidelines calculation.

The defendant did not and could not contend that the materials submitted to the Court prior to the August 16, 1991 conference constituted a violation of the plea agreement since that agreement specifically recognized that the Government would be free to submit all evidence and arguments indicating an absence of acceptance of responsibility and obstruction of justice by the defendant. Nothing could be more relevant on the issue of acceptance of responsibility than evidence that the defendant was attempting to secrete assets necessary to make restitution of the amount he received by fraud. Thus, all of the evidence submitted by the Government was clearly relevant to an issue which they had every right to present.

From August 16 onward the Government was operating not only pursuant to its rights under the plea agreement but also under a direction from the Court to make available evidence which the Court deemed material to the sentencing decision. The defendant's agreement to stipulate to the most severe sentence possible under the agreement did not deprive the Court of the power and duty to direct the United States Attorney to present evidence which the Court deemed relevant to the sentencing decision.

The hearing focused on three specific issues, the first being whether the defendant engaged in an obstruction of justice prior to the indictment. In support of that claim, the Government points to a fax purportedly from Mr. van der Beld, the supplier of the product shipped to the Sudan, which stated: "We hereby acknowledge full and final settlement and we accept the responsibility of settlement with other suppliers as agreed." The Government contends that this fax is a fabrication since Mr. van der Beld denied ever sending the fax and specifically denied that defendant's corporation, AMG Services, had ever paid for the product in question. In support of its contentions, the Government originally submitted a faxed message from Mr. van der Beld to the Agency for International Development in which he denied ever having sent the fax at issue as well as other documents indicating that, at or about the time of the fax at issue, van der Beld was in fact asserting that the shipment had not been paid for. At the hearing, the Government presented an affidavit from Mr. van der Beld in which he swears that Mr. Merritt and his company agreed to pay $660,000 to his company, Traco, for the powdered milk, but that no such payment was ever made.

Another issue related to this disputed payment involves a letter dated May 8, 1991 which Mr. Merritt apparently caused to be sent out on the stationery of the "Maritime Bureau of Investigations" which asked for confirmation that the product had been paid for. While the official looking stationery with the title "Maritime Bureau of Investigations" obviously was designed to mislead the recipient of the letter into believing that they were responding to some official Government inquiry, that fact alone would not warrant a finding that the defendant had attempted to obstruct justice. If, in fact, no payment ...


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