United States v. Electrodyne Sys Corp ( 1998 )

Opinions of the United
1998 Decisions States Court of Appeals
for the Third Circuit
6-10-1998
United States v. Electrodyne Sys Corp
Precedential or Non-Precedential:
Docket 97-5366
Follow this and additional works at: http://digitalcommons.law.villanova.edu/thirdcircuit_1998
Recommended Citation
"United States v. Electrodyne Sys Corp" (1998). 1998 Decisions. Paper 140.
http://digitalcommons.law.villanova.edu/thirdcircuit_1998/140
This decision is brought to you for free and open access by the Opinions of the United States Court of Appeals for the Third Circuit at Villanova
University School of Law Digital Repository. It has been accepted for inclusion in 1998 Decisions by an authorized administrator of Villanova
University School of Law Digital Repository. For more information, please contact Benjamin.Carlson@law.villanova.edu.
Filed June 10, 1998
UNITED STATES COURT OF APPEALS
FOR THE THIRD CIRCUIT
No. 97-5366
UNITED STATES OF AMERICA
v.
ELECTRODYNE SYSTEMS CORPORATION,
Appellant
On Appeal from the United States District Court
For the District of New Jersey
(D.C. Crim. Action No. 96-cr-00127)
Submitted Pursuant to Third Circuit LAR 34.1(a)
April 24, 1998
BEFORE: STAPLETON and NYGAARD, Circuit Judges,
and SCHWARTZ,* District Judge
(Opinion filed June 10, 1998)
J. Barry Cocoziello
H. Richard Chattman
Lisa J. Trembly
Newark, New Jersey 07102
Attorney for Appellant
_________________________________________________________________
*Honorable Murray M. Schwartz, Senior United States District Judge for
the District of Delaware, sitting by designation.
Faith S. Hochberg
United States Attorney
George S. Leone
Allan Tananbaum
Office of the United States Attorney
Newark, New Jersey 07102
Attorneys for Appellee
OPINION OF THE COURT
SCHWARTZ, Senior District Judge
Introduction
On October 16, 1996, Appellant Electrodyne Systems
Corporation ("Electrodyne") plead guilty, pursuant to a plea
agreement, to Counts Two and Ten of an Indictment.
Counts Two and Ten charged Electrodyne with
impermissibly exporting defense related equipment in
violation of 22 U.S.C. SS 2778(b)(2) and (c) and 18 U.S.C.
S 2, and with making a false statement, in violation of 18
U.S.C. S 1001 and S 2, respectively. Electrodyne appeals the
imposition of a one million dollar fine payable immediately
as part of the sentence imposed on May 27, 1997.
Electrodyne asserts five grounds in support of its appeal:
1. The district court failed to consider or make
findings with respect to Electrodyne's ability to pay
a million dollar fine.
2. The district court failed to make findings where
matters were disputed in the presentence report, as
required by Federal Rule of Criminal Procedure
32(c)(1).
3. The district court improperly calculated the
applicable guideline fine range on Count Ten,
making a false statement, for two reasons.
1) The district court failed to determ ine accurately
the amount of loss under Sentencing Guideline
S 8C2.3(a).
2
2) The district court erroneously applied a 50 or
more employee enhancement under Sentencing
Guideline S 8C2.5(b)(4).
4. The district court, during the plea colloquy,
understated the maximum fine to which
Electrodyne was exposed on Count Ten.
5. The district court ordered the fine payable
immediately when the plea agreement provided
Electrodyne should have six months to pay any
fine.
Electrodyne has asserted it is entitled to withdraw its
plea if it prevails on grounds four or five. However, it has
stated that it will not pursue points four or five above if it
succeeds in obtaining its requested relief on thefirst two
grounds for appeal. Electrodyne requests that this court
direct the district court to make detailed findings with
respect to Electrodyne's ability to pay and then to impose a
fine that does not exceed $140,000 and that is not due for
six months. The government has conceded a remand for
resentencing on the fine is necessary on grounds one, two
and three. However, the government contests Electrodyne's
proposed directions that the fine may not exceed $140,000
and should be payable over the course of six months.
Because we conclude the proposed directive should not be
given, it is necessary to review grounds four andfive and
determine whether on remand defendant should be afforded
the opportunity to withdraw its plea.
Jurisdiction and Standard of Review
The district court had jurisdiction over the conviction and
sentence below under 18 U.S.C. S 3231. We have
jurisdiction under 28 U.S.C. S 1291 and 18 U.S.C. S 3742.
The first, second, third and fifth grounds for appeal are
subject to plenary review. See United States v. Demes, 941
F.2d 220, 223-224 (3d Cir. 1991); United States v. Furst,
918 F.2d 400, 406 (3d Cir. 1990); see generally United
States v. Gilchrist, 130 F.3d 1131 (3d Cir. 1997). The fourth
ground for appeal is reviewed for harmless error. See United
States v. De le Puente, 755 F.2d 313, 315 (3d Cir.), cert.
denied, 471 U.S. 1005 (1985).
3
Discussion
Withdrawal of Plea
A. District Court's Incorrect Advice as to the Maximum
Statutory Fine for the Offense of Making a False
Statement During Plea Allocation
The court's erroneous advice regarding the maximum
statutory fine occurred during the taking of a Rule 11 plea.
See Fed.R.Crim.P. 11. When taking the plea, the district
judge, apparently misled by the plea agreement, see DA 53,
and the government's plea memorandum, see DA 62,
advised defendant's representative with respect to Count
Ten, the false statement count, 18 U.S.C. S 1001, that "the
maximum fine is the greatest of $10,000 or twice the gain
or twice the loss." DA 77. In fact, the correct maximum
statutory fine on the false statement count was the greatest
of $500,000 or twice the loss or twice the gain caused by
the offense. See 18 U.S.C. SS 3559(a)(4), 3571 (c) and (d).1
The government concedes the district judge erroneously
informed Electrodyne as to the maximum fine on Count
Ten; however, the government asserts the error was
harmless because the court correctly advised the defendant
that the maximum fine on Count Two, an Arms Export
Control Act violation, 22 U.S.C. S 2778, was"$1 million or
twice the gain or twice the loss." DA 77. The government
then argues that because the defendant corporation was
advised the maximum total fine which could be imposed
was $1,010,000 and defendant was fined one millions
dollars, the error was harmless.
In support of its position, Defendant relies primarily on
United States v. Herrold, 635 F.2d 213 (3d Cir. 1980), for
the proposition that "failure to instruct defendant of the
actual maximum sentence before the submission of a guilty
plea violates Rule 11(c)(1)," id. at 215, and affords grounds
for withdrawal of a plea under Rule 32(e) (formerly Rule
32(b)). See id. at 216. See also Kelsey v. United States, 484
F.2d 1198 (3d Cir. 1973) (holding that defense counsel's
informing a defendant the maximum penalty was more
_________________________________________________________________
1. The presentence report erroneously listed the maximum fine as
$250,000.
4
than the statute allowed resulted in the plea not being
knowing or voluntarily and necessitated withdrawal of the
plea). The Herrold court reviewed the proceeding below
under an abuse of discretion standard, see 635 F.2d at
215, while the Kelsey court was silent as to the standard of
review it employed.
With the amendment to Rule 11 and its codification of a
harmless error standard of review in 1983, however, our
decisional law has changed. In De le Puente, we held it was
harmless error to fail to advise defendant that if the court
did not accept the government's recommendation, the
defendant nevertheless could not withdraw his plea. See
755 F.2d at 315. Although our decision in United States v.
Hawthorne, 806 F.2d 493 (3d Cir. 1986), would seemingly
support defendant's position, closer analysis demonstrates
that Hawthorne left the holding of De le Puente unmarred.
In Hawthorne, a restitution order was held invalid after the
district court failed to inform the defendant during the plea
colloquy that restitution could be ordered in excess of the
loss attributable to the counts to which defendant pleaded
guilty. See id. at 499. Nevertheless, the Hawthorne court
did not order that defendant have the opportunity to
withdraw the plea. See id. at 499-500. Instead, Hawthorne
remanded for resentencing because the district court could
remedy the error by imposing either the allowable amount
of restitution or a fine exceeding that amount and still be
in accordance with the plea agreement. See id. at 499-501.
When all is said and done, the immutable fact is
Electrodyne was advised its maximum fine exposure was
$1,010,000, when in fact the maximum fine exposure was
$1,500,000. Defendant was fined $1 million, an amount
below the exposure about which it was informed. Under
this circumstance, the error must be characterized as
harmless. Defendant will not be permitted to withdraw its
plea on this ground.
B. District Court's Refusal to Allow Defendant a Period of
Six Months in Which to Pay the Fine
The parties plea agreement contained a "Stipulations"
section which provided in pertinent part:
5
This Office and Electrodyne agree to stipulate at
sentencing to the statements set forth in the attached
Schedule A, which hereby is made a part of this plea
agreement. This agreement to stipulate, however,
cannot and does not bind the sentencing judge, which
[sic] may make independent factual findings and may
reject any or all of the stipulations entered into by the
parties. . . .
DA 54-55. Pursuant to the "Stipulations" provision, the
government and Electrodyne agreed $140,000 was an
appropriate fine, see DA 58-59, PP 4 and 5, and "that the
fine should be paid no later than six months after the date
of sentencing." DA 59, P 5. Electrodyne agrees with the
district court that the stipulation was not binding. See DA
85. That would seemingly end the matter but for the
language of the plea agreement itself.
The plea agreement independent of the attached
"Stipulations" provides:
. . . The parties agree that the fine imposed by the
sentencing court may be paid within six months of the
date of sentencing and that the timely payment of the
fine shall be made a special condition of organizational
probation. . . .
DA 53-54. Electrodyne argues in effect that the six month
provision for payment of the fine was part of a specific
sentence which, if not followed by the district court,
required an opportunity to withdraw the plea. The
weakness in defendant's position is threefold. First, the
same provision for a six month delay in the payment of the
fine is contained in the Stipulations section which
Electrodyne concedes is not binding on the court. Second,
the very next paragraph of the plea agreement makes clear
the sentence to be imposed is within the sole discretion of
the sentencing judge:
The sentence to be imposed upon Electrodyne is within
the sole discretion of the sentencing judge. This Office
cannot and does not make any representation or
promise as to what guideline range will be found
applicable to Electrodyne, or as to what sentence
Electrodyne ultimately will receive. . . .
6
DA 54. Finally, the district judge advised Electrodyne that
in the event the penalty was more severe than that
anticipated by the defendant, the plea could not be
withdrawn. See DA 85. Accordingly, the rejection of the six
month provision and the order of immediate payment was
simply an example of a more severe penalty that was
"within the sole discretion of the sentencing judge." Id.We hold that neither the district court's incorrect advice
as to the maximum penalty on the false statement count
nor its refusal to allow the fine to be paid within six months
of sentencing provides a ground for withdrawal of
Electrodyne's plea. Because withdrawal of the plea will not
be ordered, this Court must address the failure of the
district judge to make a finding on Electrodyne's ability to
pay a fine, the district court's failure to comply with Rule
32(c)(1) and the district court's determination of the fine
guideline range. Each will be briefly discussed.
Vacating the Sentence
A. Necessity of Findings on Ability to Pay a Fine
Electrodyne asserts that on remand, our order that the
district court make a finding on Electrodyne's ability to pay
should be accompanied by a directive that any fine imposed
should not exceed $140,000. In support of this assertion,
Electrodyne correctly states that the stipulation between it
and the government provided the fine should not exceed
$140,000, see DA 58-59, and that the government affirmed
its agreement at the sentencing hearing. See DA 143.
In further support of its position, Electrodyne argues the
presentence report "confirmed Electrodyne's inability to pay
more than the stipulated fine," Appellant's Reply Brief, p. 2,
and that by adopting the factual findings of the presentence
report the district court so found. While we agree the
district court adopted the factual findings of the
presentence report, see DA 153, by signing the "Judgment
in a criminal case,"2 DA 149-153, we cannot accept that the
_________________________________________________________________
2. The "Judgment in a criminal case" is the formal judgment entered
against a criminal defendant. On that form, there is a box that can be
checked stating: "The court adopts the factualfindings and guideline
application in the presentence report." DA 153. This box was checked in
the instant case. See id. We are not unaware that the mark may have
been clerical error; nonetheless, we must assume it is an accurate
reflection of the district court's position.
7
probation officer adopted any factual position with respect
to the financial condition of Electrodyne.
A constant problem faced by a district court in
establishing fines is that the defendant controls what
information flows to the probation office. The problem is
exacerbated both by the fact that probation officers rarely
have training in accounting and by defendant's status as a
corporation, which enables defendant to choose to be less
than forthcoming because, by definition, a corporation
cannot be incarcerated. That is exactly what happened in
this case:
At the request of the probation office, the corporate
defendant has provided corporate income tax returns
for the last three fiscal years. Electrodyne does not
have audited financial statements for the past three
years; however, provided [sic] a financial statement
with the accountant's compilation for the year end
December 31, 1994. A compilation is limited to
presenting in the form of financial statements
information that is the representation of management.
The accountant did not audit or review the
accompanying financial statements and,
accordingly, does not express an opinion or any
other form of assurance on them. Management
elected to omit substantially all of the disclosures
and the statement of cash flows required by
generally accepted accounting principles. If the
omitted disclosures and statement of cash flows
were included in the financial statements, they
might influence the user's conclusion about the
Company's financial position, results of operations,
and cash flows. Accordingly, these financial
statements are not designed for those who are not
informed about such matters.
Presentence report at 27, P 138 (emphasis added).
The accountant expressly declined to render an opinion
or to find any assurance of the accuracy of Electrodyne's
financial statements and noted the defendant declined to
supply other documentation. In effect, the accountant was
saying the financial information supplied by Electrodyne
8
was insufficient to make a determination. Given the facts
contained in the presentence report, we hold the probation
officer made no factual finding on ability to pay a fine.
Given that state of affairs, we decline to direct the district
judge to impose a fine not exceeding $140,000.
We do not believe the district judge must be a puppet
dancing to whatever financial disclosure strings a
defendant corporation wishes to pull. We can think of no
reason why the district judge does not have the power to
require production of necessary financial documents so as
to have a basis in fact for any fine which is to be imposed.
Should the defendant corporation fail to producefinancial
documentation requested by the probation office and/or the
court, the necessity for the district judge to have a basis in
fact for establishing the amount of fine is reduced.
Similarly, the sentencing judge is not controlled by, but
may accept, a fine amount negotiated by the corporate
defendant and the government. If the judge accepts the
negotiated fine, no detailed finding of ability to pay is
necessary because the defendant has implicitly
acknowledged its ability by virtue of the agreement.
Section 3572(a)(1) of Title 18 of the United States Code
mandates that when a court imposes a fine and determines
"the amount, time for payment and method of payment,"
the court must consider, inter alia, "the defendant's
income, ensuring capacity and financial resources."
Further, it is well settled in this circuit that"[t]he district
court must make findings regarding a defendant's ability to
pay a fine." United States v. Seale, 20 F.3d 1279, 1284 (3d
Cir. 1994). "Where the court has created enough of a
factual record that it is clear that it considered a
defendant's ability to pay, its findings may be deemed
adequate." Id. at 1284. Here the district judge failed to
make any findings pertaining to imposition of afine.
Without factual findings there can be no meaningful
appellate review. Ordinarily, we would only vacate the fine
portion of the sentence and remand for resentencing.
However, as discussed in Section B below, the entire
sentence must be vacated. Therefore, we will vacate and
remand with instructions to make factual findings on both
the ability to pay a fine and the time within which the fine
can be paid.
9
B. The District Court's Reliance Upon Disputed Matters
Rule 32(c)(1) requires that with respect to each disputed
matter the court "must make either a finding on the
allegation or a determination that no finding is necessary
because the controverted matter will not be taken into
account in, or will not affect, sentencing." Fed. R. Crim. P.
32(c)(1). A finding on a disputed fact or a disclaimer of
reliance upon a disputed fact must be expressly made. See
United States v. Murello, 76 F.3d 1304, 1317 (3d Cir. 1996);
Furst, 918 F.2d at 408. Further, the Rule requires that the
findings and determinations be appended to a copy of the
presentence report. See Fed. R. Crim. P. 32(c)(1). This Rule
is strictly enforced and failure to comply with it is grounds
for vacating the sentence. See Furst, 918 F.2d at 408; U.S.
v. Blanco, 884 F.2d 1577, 1580-1582 (3d Cir. 1989).
Electrodyne asserts it made numerous objections to the
presentence report and the district court neither made
findings regarding the disputed issues nor expressly
disclaimed reliance on the disputed matters. The
government concedes the record supports this allegation.
After Electrodyne's objections, see DA 131-134, were
articulated to the district court, see DA 136-141, the court
rejected some of the objections and then stated,"Now, the
other objections do not affect the guideline. *** They don't
affect my determination as to sentencing." DA 141.
However, the judgment order noted that the court
"adopt[ed] the factual findings and guideline application in
the presentence report." DA 153. At best, the record is
ambiguous as to the district court's reliance upon the
disputed matters; at worst, the record reflects a direct
conflict with Rule 32(c)(1)'s mandate.
Electrodyne's sentence will be vacated and the case will
be remanded for resentencing consistent with Rule 32(c)(1).
C. The District Court's Calculation of the Applicable
Guideline Fine Range for Count 10
Electrodyne argues the district court incorrectly assessed
the total loss figure used to determine the base fine
pursuant to U.S.S.G. S 8C2.3 and S 8C2.4. More
specifically, the court allegedly equated the stipulated
restitution with a stipulated loss when, in fact, the
10
restitution was not an accurate reflection of the loss. In
addition, Electrodyne asserts the court erroneously found
the corporation had 50 or more employees, which increased
the fine range under U.S.S.G. S 8C2.5(b)(4). The government
agrees that the district court did not make sufficient
findings to afford meaningful appellate review.
Although the parties do not characterize this ground for
appeal as a failure to comply with Rule 32(c)(1), it is
apparent that such a problem has been presented.
Electrodyne challenged the presentence report's calculation
of the loss as the same figure to which the parties
stipulated for restitution. See Presentence report at 19,
P 108; DA 137-141. Electrodyne explained to the district
court that the restitution amount inflated the amount of
loss because some of the loss figures were double counted
and some of the restitution was being paid in kind rather
than in money. See DA 137-141. The court responded, "I'm
not buying into the argument. The fact of the matter is if
this figure is good enough for restitution, and Ifind it is,
it's good enough to make a loss, an analogy as [sic]
appropriate loss figure." DA 141. Not only is this finding on
the disputed issue of loss not appended to a copy of the
presentence report but the nature of the finding also
precludes meaningful appellate review of the issue. The
conclusory statement that restitution and loss are
equatable does not sufficiently address the points raised by
defendant so as to constitute a finding or determination as
required by Rule 32.
The issue of whether Electrodyne satisfied the "50 or
more employees" basis for increasing the culpability score
underlying the fine range presents a similar problem.
U.S.S.G. S 8C2.5(b)(4). The presentence report stated that
Electrodyne had "approximately 50 people," presentence
report at 26, P 134, but Electrodyne argued to the district
court that its workforce consisted of fewer than 50
employees on average and only at times reached 50. See DA
136-137. Electrodyne asserted that the guideline provision
should be based on the average number of employees and,
therefore, should not be applied to Electrodyne. See id. The
government did not take a position on the issue and the
court stated, "I'll rule against you on that." DA 137. This
11
summary dismissal of Electrodyne's argument is
insufficient to offer this Court a basis for review.
At a minimum, the district court must offer a factual
basis for rejecting Electrodyne's assertion that its workforce
did not satisfy the criterion, including a factual finding as
to the number of days Electrodyne had 50 or more
employees in whatever the district court determines is the
relevant time period. The presentence report's statement
that "approximately 50" people were employed by
Electrodyne cannot serve as a basis for finding that the "50
or more" criterion was actually met. Accordingly, upon
remand, the court shall make findings pursuant to Rule
32(c)(1) on the amount of loss and the number of employees
for the purpose of determining Electrodyne's fine.
A True Copy:
Teste:
Clerk of the United States Court of Appeals
for the Third Circuit
12