188 F.3d 190 (3rd Cir. 1999), 98-6262, United States v. Nathan
|Docket Nº:||DENNIS NATHAN, APPELLANT IN NO. 98-6262|
|Citation:||188 F.3d 190|
|Party Name:||UNITED STATES OF AMERICA, v.|
|Case Date:||August 18, 1999|
|Court:||United States Courts of Appeals, Court of Appeals for the Third Circuit|
Argued: May 20, 1999
Amended September 23, 1999
On Appeal From the United States District Court For the District of New Jersey District Judge: Honorable Alfred J. Lechner, Jr., (D.C. Crim. No. 96-cr-00127-2) (D.C. Crim. No. 96-cr-00127-3) (D.C. Crim. No. 96-cr-00127-1)
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Michael Critchley, Esquire (argued) John Michael Vazquez, Esquire 354 Main Street West Orange, NJ 07052 Counsel for Appellant Dennis Nathan Lawrence
Lawrence S. Lustberg, Esquire (argued) Mark A. Berman, Esquire Gibbons, Del Deo, Dolan, Griffinger & Vecchione A Professional Corporation One Riverfront Plaza Newark, NJ 07102-5497 Counsel for Appellant Victor Aron Lander
J. Barry Cocoziello, Esquire (argued) Lisa J. Trembly, Esquire Podvey, Sachs, Meanor, Catenacci, Hildner & Cocoziello One Riverfront Plaza Newark, NJ 07102 Counsel for Appellant Electrodyne Systems Corporation
Faith S. Hochberg, Esquire United States Attorney George S. Leone, Esquire Assistant United States Attorney Noel L. Hillman, Esquire (argued) Assistant United States Attorney 970 Broad Street Newark, NJ 07102 Counsel for Appellee United States of America
Becker, Chief Judge, Rendell and Garth, Circuit Judges.
OPINION OF THE COURT
Becker, Chief Judge.
This opinion addresses a number of sentencing issues presented by the consolidated appeal of three defendants: Dennis Nathan, who pled guilty to importing goods into the United States that were not marked with the country of origin in violation of 18 U.S.C. § 545; Victor Lander, who pled guilty to unlawfully introducing merchandise into the United States in violation of 18 U.S.C. § 542; and Electrodyne Systems Corporation, which pled guilty to violating the Arms Control Export Act, 22 U.S.C.§ 2778, and making false statements in violation of 18 U.S.C. § 1001. Only two of the issues are of general interest and precedential value. The first involves the proper definition of a "stipulation" under U.S.S.G. § 1B1.2, the presence of which may take a sentence to a higher guideline level. We conclude that statements made during the factual basis portion of the plea colloquy after the plea agreement has been made are not stipulations for the purpose of section 1B1.2, as such statements cannot be said to be part of a plea agreement. Because the District Court relied on such non-cognizable statements in finding that Nathan and Lander had stipulated to the greater offense of fraud, we will reverse the judgment to the extent that it relied on the fraud guidelines in sentencing the defendants.
The second question concerns whether the president of a defense contracting company occupies a position of trust with regard to the government, an issue we must resolve to decide whether the District Court correctly applied the adjustment for the abuse of a position of trust. We conclude that the District Court's findings that Nathan held a position of trust, and that he breached that trust, are supported by the record and are legally correct. We will therefore affirm the District Court's decision to increase Nathan's base offense level two points on this ground. For these reasons and the reasons that follow in our Discussion of the other more fact-bound issues before us, we will affirm in part, reverse in part, and remand to the District Court so that each defendant can be resentenced.
I. Facts and Procedural History
A. The Charges and the Pleas
Electrodyne Systems Corporation, a defense contracting company, specialized in providing military components to the United States government. Nathan was Electrodyne's president and vice-president. Lander was its director of marketing. Between November 1989 and March 1994, Electrodyne entered into six contracts to provide United States government agencies and the United States military--including the National Aeronautics and Space Administration ("NASA") and the United States Air Force--with electronic components to be used in research, communications, radar, and weapons systems. Each contract required Electrodyne to comply with the Buy American Act, 41 U.S.C. § 10a-10d (1988), and in each contract Nathan (on Electrodyne's behalf) represented that Electrodyne (a) intended to manufacture the components in the United States; (b) would not use foreign components; and (c) would not use offshore manufacturing sites.
Despite their contractual and statutory obligations, Nathan and Electrodyne entered into agreements with foreign companies in Russia and the Ukraine to build the components specified in the contracts. In so agreeing, Nathan disclosed to the foreign manufacturers the drawings, specifications, and technology of the contracted-for components. To conceal this plan, Nathan instructed Electrodyne's employees not to disclose the use of foreign components, instructed the foreign manufacturers not to mark the components with the country of manufacture, and directed his own employees to mark the components to make it appear as if they had been manufactured in the United States. Nathan failed to disclose these foreign contracts to the government and failed to register with the State Department as a manufacturer or exporter of defense articles.
A federal grand jury returned a thirteen-count indictment charging Electrodyne, Nathan, and Lander with, inter alia, violating the Arms Export Control Act ("AECA") and the International Traffic in Arms Regulations ("ITAR"), making false or fraudulent claims, and smuggling goods into the United States. A few months later, pursuant to written plea agreements, all three defendants pled guilty to various parts of the indictment. Electrodyne pled guilty to exporting defense-related items in violation of the AECA and to making false statements in violation of 18 U.S.C.§ 1001. Nathan pled guilty to Count 12 of the indictment, which alleged that he had illegally imported goods into the United States because he failed to mark the items with the country of origin, in violation of 18 U.S.C. § 545. Lander pled guilty to a one-count information alleging unlawful introduction of merchandise into the commerce of the United States in violation of 18 U.S.C. § 542.
As part of their plea agreements, Nathan and Lander and the government drafted a schedule of stipulations. They stipulated that the applicable sentencing guideline was the smuggling guideline,
which is found at section 2T3.1,1 and that the government would not seek an upward departure for either defendant. They also stipulated that Nathan's and Lander's actions did not threaten national security. In Nathan's plea agreement, the government stated that it did not suffer a tax loss as a result of Nathan's conduct. Finally, each of Nathan's and Lander's agreements recited that the schedule attached to the agreement contained all of their stipulations and that any changes to the agreement had to be in writing and signed by both the defendant and the government.
At the plea hearing for Nathan and Lander, the District Court questioned them on their understanding of the agreement, and then asked each of them to provide a factual basis for the plea, using questions contained in a government plea memorandum. During this questioning, Nathan admitted that, when he entered into a contract with the Naval Research Laboratory ("NRL") to provide it with amplifiers, he knew that Lander had ordered the amplifiers from a Ukrainian company. He also admitted that he had instructed Electrodyne's employees to obscure markings indicating foreign manufacturing and to affix Electrodyne labels to the amplifiers in an effort to deceive the NRL. Lander in turn conceded that Electrodyne had contracted with the Ukrainian company, that he had instructed the Ukrainian manufacturer not to mark the components in a way that indicated where they were made, and that he had informed the manufacturer that Electrodyne would relabel all future shipments of amplifiers to indicate that the amplifiers were made in the United States. Lander admitted that he knowingly assisted Electrodyne in deceiving the United States government.
B. The Sentencing Proceedings
1. The Factual Record
Prior to sentencing, Nathan submitted to the Court a report from Retired Rear Admiral Lawrence Layman of the United States Navy stating that no American troops had been put in danger by Nathan's disclosure of information. In addition, the government researched whether the defendants had divulged any sensitive information and concluded: (i) that they had not revealed sensitive information; (ii) that all relevant information was already in the public domain; and (iii) that the parts supplied by the defendants to the government agencies were not defective. In its sentencing memorandum, the government: (1) represented that all affected government agencies approved of the plea agreement; (2) conceded that the defendants had taken action to prevent classified material from being disclosed; and (3) noted that some of the components imported by the defendants actually represented a flow of technology into, rather than out of, the United States.
Also prior to sentencing, the U.S. Probation Office submitted a proposed Presentence Investigation Report ("PSI"). The PSI recommended that Nathan and Lander be sentenced under the fraud guidelines (section 2F1.1), rather than the smuggling guidelines...
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