U.S. v. Cruz-Mercado, 03-1077.

• Decision Date: 02 March 2004
• Docket Number: No. 03-1077.,No. 03-1078.,03-1077.,03-1078.
• Parties: UNITED STATES of America, Appellee, v. Jose Omar CRUZ-MERCADO, Defendant, Appellant. United States of America, Appellee, v. Victor Fajardo-Velez, Defendant, Appellant.
• Court: U.S. Court of Appeals — First Circuit

360 F.3d 30

UNITED STATES of America, Appellee, v. Jose Omar CRUZ-MERCADO, Defendant, Appellant.

United States of America, Appellee, v. Victor Fajardo-Velez, Defendant, Appellant.

No. 03-1077.

No. 03-1078.

United States Court of Appeals, First Circuit.

Heard January 6, 2004.

Decided March 2, 2004.

Rehearing and Suggestion for Rehearing En Banc Denied April 2, 2004.

COPYRIGHT MATERIAL OMITTED

Gary H. Montilla with whom Luis A. Plaza, Osvaldo Carlo Linares and Lausell & Carlo, PSC were on brief for appellant Fajardo-Velez.

Ignacio Rivera-Cordero for appellant Cruz-Mercado.

Nelson Perez-Sosa, Assistant United States Attorney, with whom H.S. Garcia, United States Attorney, and Sonia I. Torres-Pabon, Assistant United States Attorney, were on brief for appellee.

Before SELYA, Circuit Judge, COFFIN, Senior Circuit Judge, and SMITH,^* District Judge.

COFFIN, Senior Circuit Judge.

Appellants Victor Fajardo-Velez and Jose Omar Cruz-Mercado were the Secretary and Associate Secretary of the Puerto Rico Department of Education (PRDE) when they devised an extortion and kickback scheme that allegedly involved fraudulent payments of more than $4.3 million in cash and property from PRDE contractors. Appellants entered into separate cooperation agreements with the government and pled guilty to several counts in exchange for what they hoped would be shorter sentences. Those hopes were not realized, however, and appellants now raise a series of challenges to their sentences.¹ Finding no reversible error, we affirm.

I. Background

We briefly summarize the relevant facts and procedural history, drawing from appellants' cooperation agreements, and from the transcripts of their sentencing proceedings and Fajardo's bail revocation hearing. See United States v. Mateo, 271 F.3d 11, 13 (1st Cir.2001). According to their agreements, Fajardo recruited Cruz to collaborate in a scheme to extort money from PRDE contractors initially for the purpose of financing their political party obligations and later for personal purposes. Among other activities, the two administrators orchestrated the creation of a corporation to act as a front for their illegal activities. The corporation, Research & Management Group, Inc., submitted three contract proposals totaling more than $4 million to the PRDE and also generated false invoices seeking payments from other PRDE contractors. Fajardo approved the Research & Management contracts and also awarded contracts to a number of companies whose principals — charged as co-defendants in the indictment — had made payments to appellants. Fajardo and Cruz also ordered that invoices for their political party activities be distributed to various PRDE contractors for payment. In addition to the cash payments extorted from the contractors between 1994 and 2001, appellants received "items for personal use." Hundreds of thousands of dollars in cash were kept in a safe in Fajardo's office, and appellants dipped into it for various political and personal purposes.

Appellants were charged in January 2002 with fifteen co-defendants in an eight-count indictment. In February 2002, both men pled guilty to three counts (Counts One, Five and Eight) pursuant to non-binding plea and cooperation agreements that specified the sentencing calculations that the government would recommend and provided that the government would file motions for downward departure if appellants provided substantial assistance in the investigation or prosecution of others. For Cruz, the anticipated recommended sentence was set at 46-57 months; for Fajardo, the recommendation was to be for 70-87 months. Fajardo paid $1,352,000 in restitution before tendering his guilty plea; Cruz agreed to forfeit $600,000, of which approximately $14,700 was paid before his cooperation agreement was signed. Both testified before the Grand Jury and provided considerable information to authorities about their own activities and the activities of others.

In September 2002, Fajardo was called by the government as the first witness at the trial of three co-defendants. On the fifth day of his testimony, during cross-examination, the trial was aborted when the government accused Fajardo of committing perjury and moved to revoke his bond, requesting in addition that the case be dismissed with prejudice as to all remaining defendants (the three on trial as well as ten others). The district court granted the motions. Maintaining that he had been truthful, Fajardo moved for release on bail and also sought enforcement of the government's obligations under the plea agreement. Following a hearing in which the court explored the government's allegations of untruthfulness, see infra at 14-19, the court denied Fajardo's motions.

Sentencing for both appellants took place on December 11, 2002. Without any benefit from their plea agreements, their terms pursuant to the Sentencing Guidelines were roughly twice as long as they had hoped to receive.² Fajardo was sentenced to a term of 151 months on Counts One and Eight and 120 months to be served concurrently on Count Five. The court ordered restitution in the amount of $4.3 million. Cruz was sentenced to a term of 132 months on the three counts, with the previously agreed upon forfeiture amount of $600,000. These appeals followed.

II. Appeal of Cruz-Mercado

Cruz asserts generally that, in light of his substantial assistance to the government, he is entitled to be sentenced in accordance with his plea agreement. Presumably recognizing that the district court was not bound by the agreement, he particularizes that contention by identifying three specific flaws in his sentencing: (1) he was improperly denied a downward departure for substantial assistance; (2) his sentence should not have been calculated based on the total loss alleged in the indictment, $4.3 million; and (3) the court made several statements during sentencing that reflected bias toward him. We address each in turn.

A. Downward Departure. Under Cruz's plea agreement, the government was obliged to move for downward departure under U.S.S.G. § 5K1.1 if prosecutors "determine[d] that the defendant has provided substantial assistance in the investigation or prosecution of another person who has committed an offense." The agreement also provided that it was "conditioned upon the defendant providing full, complete, truthful and substantial cooperation," and that the government would be released from compliance if the defendant failed "in any way" to fulfill his obligations.

Cruz acknowledged that, in one instance, he did not tell the truth, admitting in a sentencing motion that he had "failed to remember a 1996 check that became important at trial and crucial to the position of the U.S. Attorney." He consequently stipulated to a two-level upward adjustment for obstruction of justice.

Cruz maintains that this single episode does not negate the extensive cooperation he provided, which included substantial testimony before the Grand Jury and delivery of more than 150 incriminating documents. He notes that he would have testified at trial as well had the proceedings not been cut short by the government.

Although it appears that Cruz provided significant assistance in the prosecution of this case, his cooperation agreement explicitly gave the government the authority not to request a downward departure in the event Cruz failed to meet his obligation to be truthful. Cruz does not dispute his lack of veracity or the relevance of his untruthfulness, seeking only to minimize its weight in light of his otherwise full cooperation with the government. Whether or not we agree with the government's judgment not to recommend a downward departure is of no consequence. In the absence of an unconstitutional motivation or arbitrariness, see United States v. Davis, 247 F.3d 322, 325-26 (1st Cir.2001); United States v. Doe, 233 F.3d 642, 644 (1st Cir.2000), and in the face of Cruz's admitted obstruction of justice, the government's decision was within its discretion. Cf. United States v. Saxena, 229 F.3d 1, 6 (1st Cir.2000) ("A defendant who has entered into a plea agreement with the government, and himself fulfills that agreement, is entitled to the benefit of his bargain.") (emphasis added); see also Davis, 247 F.3d at 326 (government's burden in defending a decision not to file a substantial assistance motion, "at least where there is a plea agreement," is "modest, only one of production, not of persuasion").

To the extent Cruz separately challenges the district court's denial of his motion for a downward departure under the general departure guideline, U.S.S.G. § 5K2.0, his claim is without merit. We repeatedly have stated that "departures for substantial assistance must come within the confines of U.S.S.G. § 5K1.1," United States v. Sandoval, 204 F.3d 283, 285 (1st Cir.2000), and that a district court consequently is not empowered to independently grant a departure for that reason under § 5K2.0, see, e.g., Davis, 247 F.3d at 328; Sandoval, 204 F.3d at 285; United States v. Alegria, 192 F.3d 179, 189 (1st Cir.1999). The court therefore did not err in denying his motion.

B. Calculation of Loss. Cruz maintains that the court improperly utilized the total loss alleged in the indictment, $4.3 million, in calculating his sentence, resulting in an erroneous seven-level increase in his base offense level. See U.S.S.G. § 2S1.1(b)(2)(H).³ He contends that his sentence should have been based on the amount of loss attributed to him in his plea agreement, $600,000, which would have triggered only a three-level increase.

It is undisputed that Cruz was not personally implicated in the full $4.3 million loss charged in the indictment. At sentencing, however, the district court expressed its view that Cruz and Fajardo were equally culpable "partners in crime." The court also noted that the factual allegations indicated that "the money involved in the conspiracy significantly exceeded the 4.3 million...