# United States v. Electrodyne Systems Corp.

> District Court, D. New Jersey · August 12, 1998 · 28 F. Supp. 2d 213

URL: https://www.frixlaw.com/law-library/cases/2531823

## Case

- **Full name:** UNITED STATES of America, v. ELECTRODYNE SYSTEMS CORP., Dennis Nathan and Victor Aron Lander, Defendants
- **Court:** District Court, D. New Jersey
- **Decided:** August 12, 1998
- **Citations:** 28 F. Supp. 2d 213; 1998 U.S. Dist. LEXIS 13100; 1998 WL 531358
- **Precedential status:** Published
- **Opinion:** Opinion by Lechner
- **Judges:** Lechner
- **Cited by:** 2 later opinions in the Frix Law Library

## Citator (automated)

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## Opinion text

OPINION
LECHNER, District Judge.
On 4 March 1996, a United States Grand Jury for the District of New Jersey (the “Grand Jury”) returned a thirteen count, thirty-eight page indictment (the “Indictment”) against Electrodyne Systems Corporation (“Electrodyne”), Dennis Nathan (“Nathan”) and Victor Aron Lander (“Lander”) (collectively, the “Defendants”).
1
The Indictment charges the Individual Defendants and Electrodyne with conspiracy to commit offenses against the United States, 18 U.S.C. § 371 (“Section 371”), violations of the Arms Export Control Act (the “AECA”), 22 U.S.C. § 2778 (b)(2) (“Section 2778(b)(2)”) and (c) (“Section 2778(c)”), the International Traffic in Arms Regulations (“ITAR”), 22 C.F.R. §§ 127.1 and 127.3, unlawful importation of goods into the United States, 18 U.S.C. §§ 545 (“Section 545”) and 2 (“Section 2”), and making false statements, 18 U.S.C. § 1001 (“Section 1001”) and Section 2.
This opinion addresses the sentencing of the Individual Defendants and the resentenc-ing of Electrodyne.
2
Electrodyne was a New Jersey corporation formed in 1986 to specialize in providing military components, as a prime contractor, to the United States.
See
Letter, dated 30 September 1997, and included memorandum from Office of the General Counsel, Department of the Navy (the “30 September
*219
1997 Letter”) attached as Exhibit C to Sentencing Memorandum submitted by the Government, dated 5 August 1998, (the “Government Sentencing Memorandum”). Eleetrodyne manufactured, sold, imported and exported microwave components and electronic power conversion equipment for military application in advanced communications and radar systems in aircraft, warships, satellites, tanks and ground forces defense systems.
See id.
at 3-4 . Electrodyne held numerous contracts to provide these electronic components, including some manufactured using classified information, to a number of Government agencies.
See id.
at 4 . Its customers included the National Aeronautics and Space Administration (“NASA”), the United States Air Force (“Air Force”) and the United States Navy (“Navy”), which included the Naval Research Laboratory (“NRL”).
See id.
At all times relevant to this action, Nathan was President and Vice-President of Eleetro-dyne.
See 30
September 1997 Letter attached as Exh. C to Government Sentencing Memorandum at 4. At certain times relevant to this action, Nathan was also the designated security officer for Electrodyne.
See id.
At all times relevant to this action, Lander was Director of Marketing of Electrodyne.
See
30 September 1997 Letter attached as Exh. C to Government Sentencing Memorandum at 4. Before Lander emigrated to the United States in 1976, he assisted the military of the former Soviet Union in developing electronic warfare systems.
See id.
As will be discussed
infra
in more detail, the Indictment describes the AECA
3
and ITAR, which authorize the United States State Department’s Office of Defense Trade Controls (“ODTC”) to establish and maintain the United States Munitions List (the “Munitions List”).
See
30 September 1997 Letter attached as Exh. C to Government Sentencing Memorandum at 4; 22 C.F.R. § 121.1 . The Munitions List is a catalog of designated “defense articles” subject to export restrictions.
See
30 September 1997 Letter attached as Exh. C to Government Sentencing Memorandum at 4; 22 C.F.R. § 121.1 . Anyone wishing to export from the United States a defense article on the Munitions List must first obtain a license from the ODTC.
See
30 September 1997 Letter attached as Exh. C to Government Sentencing Memorandum at 4; 22 C.F.R. § 121.1 . Included on the Munitions List are certain electronic components designed and manufactured for use by the military for advances communications and radar systems in aircraft, warships, satellites, tanks and ground forces defense systems.
See
30 September 1997 Letter attached as Exh. C to Government Sentencing Memorandum at 4; 22 C.F.R. § 121.1 .
The ODTC also regulates the export of “defense services.”
4
See
30 September 1997 Letter attached as Exh. C to Government Sentencing Memorandum at 4. As part of the limitations on providing defense services pursuant to ITAR, an individual in the United States may not contract with a foreign person to build an item on the Munitions List outside of the United States without first obtaining a license under the AECA.
See id.
The Indictment charges that from on or about 6 November 1989 to on or about 10 March 1994, Electrodyne entered into six contracts to provide agencies of the United States Government with electronic components for use in research, communications, radar and weapon systems.
See
30 September 1997 attached as Exh. C to Government Sentencing Memorandum at 4. In order to facilitate the building of the military compo
*220
nents contracted for, and contrary to the express terms of the contracts, and in some cases Department of Defense directives, Electrodyne, Nathan and Lander disclosed to foreign manufacturers the drawings, technology and specifications for United States military components.
See id.
Electrodyne, Nathan and Lander also provided the engineering and scientific assistance necessary to build these components.
See id.
The Indictment charges these acts were,
inter alia,
in violation of the AECA, ITAR and the Buy American Act.
5
On 26 August 1996, Electrodyne entered into a written plea agreement (the “Electro-dyne Plea Agreement”) with the Government.
See
Electrodyne Plea Agreement. Electrodyne agreed to plead guilty to Count Two of the Indictment which charged Elec-trodyne with impermissibly exporting defense related items in violation of Sections 2778(b)(2) and (c) and Section 2.
See id.
Electrodyne also agreed to plead guilty to Count Ten of the Indictment which charged Electrodyne with making a false statement in violation of Section 1001 and Section 2.
See id.
On or about 16 October 1996, Electrodyne pleaded guilty (the “Electrodyne Plea Hearing”), pursuant to the Electrodyne Plea Agreement, to Counts Two and Ten of the Indictment.
See
Transcript from Electro-dyne Plea Hearing at 25. On 27 May 1997, Electrodyne was sentenced; a fine of $500,-000 on each of Counts Two and Ten was imposed.
See
Transcript from Electrodyne Sentencing at 10-11. This fine was then due and payable.
See id.
at 11 . Restitution of $369,105.70 was also ordered.
6
See id.
at 4-7 .
The Electrodyne sentence was enhanced pursuant to U.S.S.G. § 8C2.5(b)(4) (“Section 802.5(b)(4)”) because Electrodyne employed fifty or more employees.
See
Transcript from Electrodyne Sentencing at 2-3. The base offense level was also increased by nine points pursuant to Section 2F1.1 based upon a calculation of loss equal to the amount of restitution.
On 22 August 1996, Lander entered into a plea agreement (the “Lander Plea Agreement”) with the Government.
See
Lander Plea Agreement. Lander agreed to plead guilty to a one count Information (the “Information”) which charged him with the unlawful introduction of merchandise into the commerce of the United States in violation of 18 U.S.C. § 542 (“Section 542”)
7
and Section
*221
2.
8
On 25 September 1996, Nathan entered into a plea agreement (the “Nathan Plea Agreement”) with the Government.
See
Nathan Plea Agreement. Nathan agreed to plead guilty to Count Twelve of the Indictment, which charged him with knowingly importing merchandise into the United States contrary to law and with the intent to defraud the United States, in violation of Sections 545
9
and 2.
See id.
On 16 October 1996, a plea hearing (the “Nathan Plea Hearing”) was held regarding the Nathan Plea Agreement pursuant to Rule 11 (“Rule 11”) of the Federal Rules of Criminal Procedure. Nathan affirmatively responded when asked if he was aware that his guilty plea would expose him to a maximum sentence of imprisonment of up to five years.
See
Transcript from Nathan Plea Hearing at 11. Nathan also acknowledged his guilty plea would subject him to a statutory maximum fine of the greatest of $250,-000, or twice the gross amount of any pecuniary gain derived from the offense or twice the gross amount of any pecuniary loss suffered by a victim of the offense.
See id.
At the conclusion of the Nathan Plea Hearing, the plea of guilty offered by Nathan was accepted and he was found guilty of violating Sections 545 and 2.
See id.
at 21-22 .
On 31 October 1996, a plea hearing (the “Lander Plea Hearing”) was held regarding the Lander Plea Agreement pursuant to Rule 11. Lander affirmatively responded when asked if he was aware that his guilty plea would expose him to a maximum sentence of imprisonment of up to two years.
See
Transcript from Lander Plea Hearing at 12. Lander also acknowledged his guilty plea would subject him to a statutory maximum fine of the greatest of $250,000, or twice the gross amount of any pecuniary gain derived from the offense or twice the gross amount of any pecuniary loss suffered by a victim of the offense.
See id.
At the conclusion of the Lander Plea Hearing, the plea of guilty offered by Lander was accepted and he was found guilty of violating Sections 542 and 2.
See id.
at 22-23 .
After the pleas of the Individual Defendants were accepted, the Probation Department (“Probation”) conducted presentence investigations for their sentencings.
See
Fed.R.Crim.P. 32(b). The presentence investigation report for Nathan (the “Nathan Presentence Investigation Report”) and the presentence investigation report for Lander (the “Lander Presentence Investigation Report”) (collectively the “Presentence Investigation Reports”) set forth calculations by Probation for the sentencing of the Individual Defendants under the United States Sentencing Guidelines (the “Guidelines”).
In the Presentence Investigation Reports, Probation states the appropriate Guideline for the Individual Defendants is Section 2F1.1
10
rather than U.S.S.G. § 2T3.1 (“Sec
*222
tion 2T3.1”),
11
as stipulated by the Government and the Individual Defendants. Probation cites to U.S.S.G. § lB1.2(c) (“Section 1B1.2”) which states: “A plea agreement (written or made orally on the record) containing a stipulation that specifically establishes the commission of additional offense(s) shall be treated as if the defendant has been convicted of additional count(s) charging those offenses.” Nathan Presentence Investigation Report, ¶ 141; Lander Presentence Investigation Report, ¶ 148. Probation further refers to Application Note One to Section 1B1.2 (“Application Note One to Section 1B1.2”) which states:
“Where a stipulation that is set forth in a written plea agreement or made between the parties on the record during a plea proceeding specifically establishes facts that prove a more serious offense or offenses of conviction, the court is to apply the [Guideline most applicable to the more serious offense or offenses established.”
Nathan Presentence Investigation Report, ¶ 141 (quoting Application Note One to Section 1B1.2); Lander Presentence Investigation Report, ¶ 148 (quoting Application Note One to Section IB 1.2).
Probation commented that during their respective plea proceedings, Nathan and Lander were asked, under oath, a series of questions to establish a factual basis for their pleas. See Nathan Presentence Investigation Report, ¶ 141; Lander Presentence Investigation Report, ¶ 148. Probation states: “Those questions [and answers] clearly establish a more serious offense — fraud.” Nathan Presentence Investigation Report, ¶ 141; Lander Presentence Investigation Report, ¶ 148.
In the Lander Presentence Investigation Report, Probation observes the verbal admissions by Lander were not “stipulations,” but states his verbal admissions “are more persuasive or, at least, as binding as a stipulation to a more serious offense.”
12
Lander Presentence Investigation Report, ¶ 148. Probation states:
[T]he nature of the offense [committed by the Individual Defendants] was/is fraud
*223
and that the [Guideline for Evading Import Duties or Restrictions (Smuggling); Receiving or Trafficking in Smuggled Property, [Section] 2T3.1, is not the most appropriate [Guideline. Accordingly, [Section] 2F1.1, Fraud, is deemed the most analogous [Guideline and calls for a base offense level of [six].
Nathan Presentence Investigation Report, ¶ 142; Lander Presentence Investigation Report, ¶ 149.
I.
BACKGROUND
A.
Guideline Calculations
1.
Offense Guideline Calculations for Nathan
Probation states the following offense calculations should be used if Section 2F1.1 is used as the base offense level:
Base Offense Level: 6
Section 2F1.1
Specific Offense Characteristics: 9
The loss exceeded $350,000, but was not more than $500,000. Pursuant to Section 2Fl.l(b)(l)(M), nine levels are added.
Specific Offense Characteristics: 2
If the offense involved more than minimal planning (as well as a scheme to defraud more than one victim). Pursuant to Section 2F1.1(b)(2)(A), two levels are added.
Victim Related Adjustments: None 0
Adjustments for Role in the Offense: 4
Pursuant to U.S.S.G. § 3Bl.l(a) (“Section 3B1.1”), the offense is increased by four levels.
Adjustment for Obstruction of Justice: None 0
Adjusted Offense Level (Subtotal): 21
Adjustment for Acceptance of Responsibility: -2
Pursuant to U.S.S.G. § 3El.l(a), the offense is reduced two levels. Additional Adjustment for Acceptance of Responsibility: — 1
13
Total Offense Level: 18
Chapter Four Enhancements: None 0
Total Offense Level: 18
See
Nathan Presentence Investigation Report, ¶¶ 142-153.
2.
Offense Guideline Calculations for Lander:
Probation states the following offense calculations should be used if Section 2F1.1 is used as the base offense level for Lander:
Base Offense Level: 6
Section 2F1.1
Specific Offense Characteristics: 9
The loss exceeded $350,000, but was not more than $500,000. Pursuant to Section 2Fl.l(b)(l)(M), nine levels are added.
Specific Offense Characteristics: 2
If the offense involved more than minimal planning (as well as a scheme to defraud more than one victim). Pursuant to Section 2F1.1(b)(2)(A), two levels are added.
Victim Related Adjustments: None 0
Adjustments for Role in the Offense: None 0
*224
Adjustment for Obstruction of Justice: None 0
Adjusted Offense Level (Subtotal): _17
14
Adjustment for Acceptance of Responsibility: - 2
Pursuant to U.S.S.G. § 3El.l(a), the offense is reduced two levels. Additional Adjustment for Acceptance of Responsibility: — 1
Total Offense Level: 14
Chapter Four Enhancements: None 50
Total Offense Level: 14
15
See
Lander Presentence Investigation Report, ¶¶ 149-160.
B.
The Indictment
1.
Conspiracy
Count One of the Indictment charges that from on or about 12 March 1990 through on or about 10 March 1994, the Individual Defendants and Eleetrodyne knowingly and willfully conspired and agreed with each other, and with others, to commit offenses against the United States in violation of Section 371. Count One specifically charges Section 371 was violated by the Defendants:
(a) by falsely representing to the ... [Government that they would deliver military components manufactured in the United States when, in fact, they intended to manufacture such components in Russia and Ukraine, in violation of [ 18 U.S.C. § 1001 ];
(b) by exporting to Russia and Ukraine, without the required export license, defense services
16
relating to defense articles listed on the Munitions List
(ie.,
the specifications and expertise necessary to manufacture United States Military components) in violation of [the AECA];
(c) by importing into the United States from Russia and Ukraine completed military components without the required markings indicating the country of origin, contrary to [ 19 U.S.C. § 1304 ], in violation of [Section 545];
(d) by delivering completed military components made in Russia and Ukraine to the United States [Government and falsely representing that the components conformed to [G]overnment contracts requiring that the goods be manufactured in the United stats, in violation of [Section 1001]; and
(e) by receiving payment from the United States [Government for Russian and Ukrainian-made components by falsely representing that the components conformed to [Government contracts requiring that the goods be manufactured in the United States, in violation of [ 18 U.S.C. § 287 ].
Indictment, ¶ 10.
The Indictment charges that on or about 6 November 1989 through on or about 10 March 1994, Eleetrodyne entered into six contracts (the “Contracts”) to provide Government agencies and the United States military with “electronic components for use in research, communications, radar, and weapon systems.” Indictment, Count One, ¶ 13. “Each of the Contracts required Eleetrodyne to comply with the provisions of the Buy
*225
American Act.”
Id.,
¶ 14 . The Individual Defendants caused Electrodyne, nevertheless, to enter into agreements with several foreign companies to manufacture the components outside of the United States.
See id.,
¶ 16 . Significantly, in order to facilitate the manufacture of the components, the Individual Defendants disclosed to foreign manufacturers (the “Foreign Manufacturers”)
17
“the drawings, technology, and specifications of United States military components and provided engineering and scientific assistance necessary to build [the] components —”
Id.,
¶ 18 . The Individual Defendants further took “affirmative steps” and made certain omissions to conceal the agreements with the Foreign Manufacturers.
See id.,
¶¶ 19-20 . Count One alleges a number of overt acts taken by the Individual Defendants and Electrodyne in furtherance of the Conspiracy:
a) On or about [29 June 1992] ... Lander instructed the Foreign Manufacturers not to mark the components with any symbol indicating where the item was produced.
b) In or about June of 1993, ... Nathan instructed Electrodyne’s employees not to disclose to anyone outside of the company the fact that Electro-dyne manufactured components overseas.
c) On or about [26 June 1993], ____ Lander traveled to Moscow, Russia.
d) On or about [26 June 1993], ... Nathan traveled to Moscow, Russia.
e) On or about [13 August 1993], ... Nathan signed Contract Number N00014-93-C-2196 with the ... Navy.
f) On or about [12 October 1993], ... Lander sent the specifications of an item on the ... Munitions List to the Research Institute of Long Range Communication in Russia by facsimile transmission.
Indictment, ¶ 21.
2.The Diplexer Contract
Count Two charges that from on or about 1 October 1993 through on or about 24 February 1994 the Individual Defendants and Electrodyne exported “from the United States a defense service relating to a defense article on the ... Munitions List,
i.e.,
an OE-82/WSC-l(V) Diplexer, without a valid license for such export issued in accordance with the [AECA] and the regulations promulgated thereunder [i]n violation of [Sections 2778(b)(2) and (c), Section 2] and 22 [C.F.R. §§ ] 127.1 and 127.3.” Indictment, Count Two, ¶ 11.
3.
The Tone Modulator Contract
Counts Three and Four charge the Individual Defendants and Electrodyne exported “from the United States a defense service relating to a defense article on the ... Munitions List, i.e., an isolator (the ‘Isolator’) for the APG-63 Fire Control Radar without a valid license for such export issued in accordance with the [AECA] and the regulations promulgated thereunder [i]n violation of [Sections 2778(b)(2) and (c), Section 2] and 22 [C.F.R. §§ ] 127.1 and 127.3.” Indictment, Count Three, ¶ 10; Count Four, ¶ 6.
4.
The Switchable Amplifier Contract
Count Five charges the Individual Defendants and Electrodyne exported “from the United States a defense service relating to a defense article on the ... Munitions List i.e., a switchable amplifier for the MK-92 Fire Control System, without a valid license for such export issued in accordance with the [AECA] and the regulations promulgated thereunder [i]n violation of [Sections 2778(b)(2) and (c), Section 2] and 22 [C.F.R. §§ ] 127.1 and 127.3.” Indictment, Count Five, ¶ 6.
5.
The Phase Shifter Contract
Counts Six charges the Individual Defendants andr,Electrodyne exported “from the United States a defense service relating to a defense article on the ... Munitions List, i.e., a phase shifter for the AMRAAM[
18
] Radio
*226
Frequency Simulator, without a valid license for such export issued in accordance with the [AECA] and the regulations promulgated thereunder [i]n violation of [Sections 2778(b)(2) and (c), Section 2] and 22 [C.F.R. §§ ] 127.1 and 127.3.” Indictment, Count Six, ¶8.
Count Seven charges the Individual Defendants and Electrodyne imported “five phase shifters” into the United States “from Russia, without markings indicating the country of origin, contrary to the marking requirements of [ 19 U.S.C. § 1304 ] ... [and i]n violation of [Sections 545 and 2].” Indictment, Count Seven, ¶ 2.
6.
The Pin Diode Switch Contract
Counts Eight and Nine charge the Individual Defendants and Electrodyne exported “from the United States a defense service relating to a defense article on the ... Munitions List, i.e., a pin diode switch [ (‘Pin Diode Switch’) ] for the AMRAAM Radio Frequency Simulator, without a valid license for such export issued in accordance with the [AECA] and the regulations promulgated thereunder [i]n violation of [Sections 2778(b)(2) and (c), Section 2] and 22 [C.F.R. §§ ] 127.1 and 127.3.” Indictment, Count Eight, ¶ 9; Count Nine, ¶ 6.
Count Ten charges the Individual Defendants and Electrodyne “willfully and knowingly, made and used and caused to be made and used a false writing and document knowing the same to contain a false, fictitious, and fraudulent material statement in that the defendants Electrodyne and Nathan, signed the Pin Diode Switch Contract with the Air Force which stated that the Pin Diode Switches would be manufactured in the United States, whereas in truth and fact, as the [Individual Defendants and Electrodyne] ... knew, the Pin Diode Switches were to be manufactured in ... Russia and Ukraine ... [i]n violation of [Sections 1001 and 2].” Indictment, Count 10, ¶ 2.
7.
The Broad Band Amplifier Contract
Count Eleven charges the Individual Defendants and Electrodyne “made and used and caused to be made and used a false writing and document knowing the same to contain a false, fictitious, and fraudulent material statement in that the defendants Elec-trodyne and Nathan, signed the Broad Band Amplifier Contract with the [NRL] which stated that the amplifiers would be manufactured in the United States, whereas in truth and fact, [the Individual Defendants and Electrodyne], then and there well knew, the amplifiers were to be manufactured in Ukraine, in violation of [Sections 1001 and 2].” Indictment, Count Eleven, ¶ 10.
Counts Twelve and Thirteen charge the Individual Defendants and Electrodyne brought “into the United States merchandise, contrary to law, in that [Defendants [on two occasions] imported and brought into the United States ... amplifiers from Ukraine, without markings indicating the country of origin, contrary to the marking requirements of [ 19 U.S.C. § 1304 ], in violation of [Sections 545 and 2].” Indictment, Count Twelve, ¶2, Count Thirteen, ¶ 2.
C.
The Pleas
19
1.
Lander
a.
The Lander Plea
As mentioned, on 22 August 1996, Lander signed the Lander Plea Agreement. Lander agreed to plead guilty to a “one count Information, which charged the unlawful introduction of merchandise into the commerce of the United States, in violation of ... [Sections] 542 and 2.” Lander Plea Agreement at 1. The Lander Plea Agreement provides:
The violation of ... [Sections] 542 and 2 to which [Lander] agrees to plead guilty carries a statutory maximum prison sentence of [two] years.... The Sentencing Reform Act and the [Guidelines] also may impose a minimum term of imprisonment and/or fine, and the [Guideline] may authorize departure from the minimum and
*227
maximum penalties under certain circumstances.
The sentence to be imposed upon [Lander] 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 [Lander], or as to what sentence [Lander] ultimately will receive.
Lander Plea Agreement at 3.
As part of the Lander Plea Agreement, the Government and Lander stipulated to the following:
1. As [Lander] has been convicted of a violation of ... [Section] 542, the applicable [Guideline is [Section] 2T3.1.
See
U.S.S.G., Appendix A [(“Appendix A”)]. This [G]uideline carries a base offense level of [four]. The United States did not suffer a tax loss as a result of [Lander’s] ■ conduct.
2. [Lander] used sophisticated means to impede discovery of the nature and existence of the offense. Accordingly, the specific offense characteristics of [Section] 2T3.1(b)(l) applies and [Lander’s] adjusted offense level is [six].
3. In committing the offense described in the Information, [Lander] did not endanger national security. Accordingly, the [G]ovemment will not seek an upward departure pursuant to [U.S.S.G.] § 5K2.14, or any other basis.
4. As of the date of his agreement, [Lander] has clearly demonstrated a recognition and affirmative acceptance of personal responsibility for the offense charged under ... [Sections] 542 and 2. Therefore, a downward adjustmént of two points to [a total base offense] level [of four] for acceptance of responsibility is appropriate if the defendant’s acceptance of responsibility continues through the date of sentencing.
(See
U.S.S.G. § 3El.l(a).) There are no other applicable Chapter [Three] adjustments.
Lander Plea Agreement, Schedule A.
b.
The Lander Plea Hearing
On 31 October 1996, a thorough hearing pursuant to Rule 11 took place with the advice and assistance of counsel. At the Lander Plea Hearing, Lander entered his plea of guilty to the superseding Information.
See
Transcript from Lander Plea Hearing at 22. Lander was asked a series of questions to lay the factual foundation for the plea, including the following:
20
GOVERNMENT: Mr. Lander, during 1993, was Electrodyne Systems Corporation in the business of providing electronic components to the United States Government?
LANDER: Yes
GOVERNMENT: During that time, were you the director of marketing of Electro-dyne?
LANDER: Yes, sir.
GOVERNMENT: On or about [13 August 1993], did Electrodyne enter into a contract to supply the United States Government with [twenty-five] broad-band amplifiers, which were to be manufactured in the United States?
LANDER: Yes, sir.
GOVERNMENT: On or about [13 August 1993], did Electrodyne import five of the NRL amplifiers into the United States from Enterprise Saturn in Ukra[i]ne?
LANDER: Yes.
GOVERNMENT: Were these amplifiers marked with the Enterprise Saturn logo?
LANDER: Correct.
*228
GOVERNMENT: On or about [23 November 1993], did you send Enterprise Saturn a facsimile transmission with instructions not to manufacture components in a way that indicated foreign manufacture? LANDER: Yes, sir.
GOVERNMENT: On or about [30 December 1993], did you cause [twenty-two] broadband amplifiers to be imported into the United States from Ukra[i]ne without markings indicating the country of origin in violation of the laws of the United States and constructed to allow Electrodyne employees to cover the foreign markings and label them as if they had been manufactured in the United States?
LANDER: Yes, sir.
GOVERNMENT: Thereafter, did Electro-dyne employees paint the amplifiers, attach a label indicating they had been manufactured by Electrodyne in the United States and deliver them to the United States Government?
LANDER: Yes.
GOVERNMENT: Did you cause the amplifiers to be imported into the United States without country of origin markings in order to assist Electrodyne in deceiving the United States Government into believing that the amplifiers had been manufactured in the United States when they had, in fact, been manufactured in the Ukra[i]ne?
LANDER: Yes, sir.
GOVERNMENT: Did you know at the time that you committed these acts that such conduct was wrong?
LANDER: Yes.
Transcript from Lander Plea Hearing at 18-21.
It was determined Lander had discussed the possible consequences of entering the instant plea with his attorney.
See
Transcript from Lander Plea Hearing at 21, 22. It was also determined Lander voluntarily entered the plea and was aware the stipulations entered between the Government and Lander were not binding upon the court.
See id.
at 3. Lander was also informed that under some circumstances the court could depart from the Guidelines and impose a sentence more or less severe than that called for by the Guidelines.
See id.
at 15. Lander stated he understood that if he received a sentence more severe than he expected, he would still be bound by his plea and he could not withdraw his plea.
See id.
at 16.
In addition to the admissions Lander made in response to the questioning by the Government, Lander admitted he had “knowingly, willfully and intentionally committed the conduct set forth in th[e] [I]nformation.”
See
Transcript from Lander Plea Hearing at 20. The Lander guilty plea was accepted.
See id.
at 22-23. After a number of adjournments at the request of counsel for Lander, sentencing was scheduled for 12 August 1998.
21
By letter, dated 20 February 1998 (the “20 February 1998 Letter”), the Individual Defendants were provided with a supplemental notice, pursuant to Rule 32 (“Rule 32”) of the Federal Rules of Criminal Procedure, that an upward departure was being considered.
See
20 February 1998 Letter (citing Rule 32;
Burns v. United States,
501 U.S. 129, 138-39 , 111 S.Ct. 2182 , 115 L.Ed.2d 123 (1991);
United States v. Barr,
963 F.2d 641, 655-56 (3d Cir.1992)).
The 20 February 1998 Letter stated:
Although it appears the Presentence Investigation Reports notified the [Individu
*229
al] Defendants of the possibility of upward departures,
see
Nathan Presentence Investigation Report, Addendum; Lander Pre-sentence Investigation Report, ¶¶ 204-206, this letter is intended to supplement such notice.
The basis for a possible upward departure is two-fold. First, an upward departure may be appropriate for each of the [Individual] Defendants based upon the conduct underlying the counts which were dismissed as to the [Individual] Defendants pursuant to their plea agreements.
See United States v. Baird,
109 F.3d 856, 863 (3d Cir.),
cert. denied,
— U.S. -, 118 S.Ct. 243 , 139 L.Ed.2d 173 (1997).
Second, an upward departure may be appropriate for each of the [Individual] Defendants for reasons set forth in the [Lander] Presentence Investigation Re-
port____See
[Lander] Presentence Investigation Report ..., ¶ 206. The violations of the Buy American Act by each of the Individual Defendants in fulfilling certain Government contracts may not be adequately measured by the ... Guidelines if ... Section 2T3.1 is applicable.
See
Application Note Two to Section 2T3.1. It appears Section 2T3.1 may not adequately reflect the harm posed by the conduct of each of the [Individual] Defendants.
Id.
The 20 February 1998 Letter indicated if the Individual Defendants desired to respond, such submissions were to be received by 9 March 1998.
See
20 February 1998 Letter. Michael Critchley, counsel for Nathan, telephoned chambers on 2 March 1998 and requested an extension until 20 March 1998 to respond to the 20 February 1998 Letter; this request was granted by letter, dated 2 March 1998 (the “2 March 1998 Letter”).
See
2 March 1998 Letter. A joint response from the Individual Defendants was thereafter received by letter, dated 20 March 1998 (the “20 March 1998 Letter”).
2.
Nathan
a.
The Nathan Plea
As mentioned, on 25 September 1996, Nathan signed the Nathan Plea Agreement. Nathan agreed to plead guilty to Count Twelve of the Indictment which charged him with knowingly importing merchandise into the United States contrary to law and with the intent to defraud the United States, in violation of Sections 545 and 2. See Nathan Plea Agreement. The Nathan Plea Agreement provides:
The violation of ... [Sections] 545 and 2 to which [Nathan] agrees to plead guilty carries a statutory maximum prison sentence of [five] years.... The Sentencing Reform Act and the [Guidelines] also may impose a minimum term of imprisonment and/or fine, and the [Guidelines] may authorize departure from the minimum and maximum penalties under certain circumstances.
The sentence to be imposed upon [Nathan] is within the sole discretion of the sentencing judge. This Office cannot and does not make any representation or promise as to what [Gjuideline range will be found applicable to [Nathan], or as to what sentence [Nathan] ultimately will receive.
Nathan Plea Agreement at 3.
The Government and Nathan stipulated to the following:
1) The applicable [Guideline is [Section] 2T3.1. This [Guideline carries a base offense level of [four]. The United States did not suffer any tax loss as a result of defendant’s conduct.
2) The defendant used sophisticated means to impede discovery of the nature and existence of the offense. Accordingly[,] the specific offense characteristic of [Section] 2T3.1(b)(l) applies and the defendant’s adjusted level is [six].
3) In committing the offense described in Count [Twelve] of the [I]ndictment, the defendant did not endanger national security. Accordingly, the [Government will not seek an upward departure pursuant to [U.S.S.G.] § 5K2.14, or any other basis.
4) As of the date of this agreement, [Nathan] has clearly demonstrated a recognition and affirmative acceptance of personal responsibility for the offense charged under ... [Sections] 545 and 2. Therefore, a
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downward adjustment of two points to [a total offense] level [of four] for acceptance of responsibility is appropriate if [Nathan’s] acceptance of responsibility continues through the date of sentencing.
(See
U.S.S.G. § 3El.l(a).) There are no other applicable Chapter [Three] adjustments.
Nathan Plea Agreement, Schedule A.
b.
The Nathan Plea Hearing
On 16 October 1996, a thorough hearing pursuant to Rule 11 took place with the advice and assistance of counsel. At the Nathan Plea Hearing, Nathan entered his plea of guilty as to Count Twelve of the Indictment with the court.
See
Transcript from Nathan Plea Hearing at 4, 21. Nathan was asked a series of questions to lay the factual foundation for the plea:
22
GOVERNMENT: Mr. Nathan, from on or about [31 October 1989] through [10 March 1994], was Electrodyne Systems Corporation in the business of providing electronic components to the United States Government?
NATHAN: Yes, they were [sic].
GOVERNMENT: During that time, were you the majority shareholder, president and vice-president of Electrodyne?
NATHAN: Yes, I was.
GOVERNMENT: During that time, was [Lander] Electrodyne’s director of marketing?
NATHAN: He was.
GOVERNMENT: During that time, did [Lander] report to you in your capacity as president of the company?
NATHAN: He did.
GOVERNMENT: During that time, were you aware [Lander] had arranged for various companies in Ukra[i]ne and Russia to build electronic components for Electro-dyne?
NATHAN: Yes, I was.
GOVERNMENT: On or about [13 August 1993], did you sign a contract on behalf of [Electrodyne] with the United States Government to provide ... the NRL with [twenty-five] broad-band amplifiers?
NATHAN: Yes, I did.
GOVERNMENT: At the time you signed the contract, did you know that [Lander] had ordered the amplifiers from Saturn in Ukra[i]ne?
NATHAN: Yes.
GOVERNMENT: Had [Lander] done so acting at your direction and with your knowledge and approval?
NATHAN: Yes.
GOVERNMENT: Did- the NRL contract contain a Buy American Act clause obligating Electrodyne to buy the end product manufactured in the United States?
NATHAN: Yes, it did.
GOVERNMENT: On or before [23 November 1993], did employees of Electro-dyne import five of the NRL amplifiers into the United States from Enterprise Saturn without markings indicating they had been manufactured in Ukra[i]ne?
NATHAN: Yes, they did.
GOVERNMENT: Were these employees acting at your direction and with your knowledge and approval?
NATHAN: Yes.
GOVERNMENT: ,..[0]n or before [23 November 1993], did employees of Electro-dyne paint the amplifiers imported from the Ukra[i]ne to obscure markings indicating foreign manufacturing and affix stickers with the words “Electrodyne Systems Corporation”?
NATHAN: Yes, they did.
GOVERNMENT: Were those employees acting at your direction and with your knowledge and approval?
NATHAN: Yes, they were.
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GOVERNMENT: Did you cause the amplifiers to be painted and an Electrodyne sticker added with the intention of deceiving the NRL into believing that the amplifiers had been manufactured by Electro-dyne in the United States.
NATHAN: Yes, I did.
GOVERNMENT: Did you know at the time that you committed these acts that such conduct was wrong?
NATHAN: Yes.
Id.
at 17-20.
It was determined Nathan had discussed the possible consequences of entering the instant plea with his attorney.
See
Transcript from Nathan Plea Hearing at 21, 22. It was also determined Nathan voluntarily entered the plea and was aware the stipulations entered between the Government and Nathan were not binding upon the court.
See id.
at 13, 22. Nathan was also informed that under some circumstances the court could depart from the Guidelines and impose a sentence more or less severe than that called for by the Guidelines.
See id.
at 15. Nathan stated he understood that if he received a sentence more severe than expected, he would still be bound by his plea and he could not withdraw his plea.
See id.
at 15-16.
In addition to the admissions Nathan made in response to the questioning by the Government, Nathan admitted he had “knowingly, willfully and intentionally committed the conduct set forth in count [Twelve] in the [I]ndictment.” Transcript from Nathan Plea Hearing at 20. The Nathan guilty plea was accepted.
See id.
at 22. After a number of adjournments at the request of counsel for Nathan, Nathan’s sentencing was scheduled for 12 August 1998.
23
D.
Probation Investigation
After the Defendants entered pleas of guilty as described above, Probation conducted a presentence investigation to assist in the sentencing of the Defendants. Probation conducted interviews with representatives of the Office of the United States Attorney, the United States Naval Criminal Investigative Service, the Air Force Office of Special Investigations, NASA and the United States Customs Service (“Customs”).
See
Presen-tence Investigation Reports, ¶ 18.
24
The findings of Probation are set forth below.
On 1 January 1990, Nathan purchased a controlling block of Electrodyne stock to become a majority owner of the corporation.
See
Presentence Investigation Reports, ¶ 35. Shortly thereafter, Nathan hired Lander as the Director of Marketing.
See id.
As mentioned, between 6 November 1989 and 10 March 1994, Electrodyne entered the Contracts to provide United States Government agencies and branches of the military with electronic components for use in research, communications, radar and weapons systems.
See
Presentenee Investigation Reports, ¶ 36. Each of the Contracts required Electrodyne to comply with the provisions of the Buy American Act.
See id.,
¶ 36.
In each Contract, Nathan and Electrodyne represented they (a) intended to manufacture the components in the United States, (b) would not use foreign components, and (c) would not use offshore manufacturing sites.
25
*232
See
Presentence Investigation Reports, ¶ 38. Despite the representations made in the Contracts, the Individual Defendants caused Electrodyne to enter into agreements with several Foreign Manufacturers to build the military components outside the United States.
See id.
These Foreign Manufacturers included:
(a) “ISTOK” Research and Production Corp., located in Moscow, Russia (“Istok Research”),
(b) Enterprise Saturn, a/k/a Research Institute “Saturn”, located in Kiev, Ukraine (“Enterprise Saturn”),
(c) Research Institute of Long Range Communications, a/k/a NIIDAR, located in Moscow, Russia ... [ (the “Russian Institute”) ],
(d) S & R Institute “ORION”, also located in Kiev (“Enterprise Orion”), and
(e) NKPT “PHASA” a/k/a Rostov State University, located in Rostov, Russia (“Enterprise Phasa”) [collectively, the “Foreign Manufacturers”].
Presentence Investigation Reports, ¶ 40.
In order to facilitate the building of the military components and contrary to the express terms of the Contracts and, in some cases, DOD security directives, the Individual Defendants and Electrodyne disclosed to the Foreign Manufacturers the drawings, technology and specifications of the components and provided engineering and scientific assistance necessary to build the components.
See
Presentence Investigation Reports, ¶ 41.
In an attempt to hide certain conduct from the Government, as well as Electro-dyne employees, the Defendants: (1) told Electrodyne employees the foreign-made components were for “low cost commercial” applications and not United States military and Government contracts,
26
(2) instructed employees not to disclose the use of foreign components to anyone outside the corporation, (3) instructed the Foreign Manufacturers not to mark the components in any way which would indicate the country of origin, (4) marked the components to make it appear they were made in the United States, and (5) instructed employees to cover up any markings which would indicate that the components were foreign-made.
See
Presen-tence Investigation Reports, ¶ 42.
In an effort to hide certain conduct and, despite their obligation to do so, the Defendants failed to disclose to the United States Government the following: (1) the agreements with the Foreign Manufacturers, (2) travel to Ukraine and Russia, and (3) the use of off-site manufacturing locations to build Electrodyne components.
See
Presentence Investigation Reports, ¶ 43. The Defendants also failed to register with the State Department as a manufacturer and exporter of defense articles, defense services, and munitions.
See id.
Further, the Defendants failed to obtain export licenses from the State Department for the technology and
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defense services exported to Russia and Ukraine as required by ITAR.
See id.
1.
The Diplexer Contract
On 31 October 1989, Eleetrodyne entered into “contract # N00104-89-M355” (the “Diplexer Contract”) with the Navy to supply 220 electronic components known as OE 82/ WSC-1(V) Diplexers (the “Diplexers”) at an average unit cost of $3,697.58, for a total contract price of $753,468.
See
Presentence Investigation Reports, ¶ 44. The initial solicitation, which was incorporated into the Diplexer Contract, was signed by Nathan, as vice-president of Eleetrodyne.
See id.
The Diplexer is a defense article within'the meaning of ITAR, 22 C.F.R. §§ 120.3 and 121.8(b).
See
Presentence Investigation Reports, ¶45. Accordingly, Eleetrodyne could not arrange for the design, development, engineering, manufacture, production, assembly, testing, repair, maintenance, modification or operation of the Diplexer outside the United States without prior approval of the ODTC.
See id.
The Diplexer is a component part of a satellite communications antenna system (the “System”) mounted on the decks of all fighting ships in the Navy.
See
Presentence Investigation Reports, ¶ 46. The System allows ships to communicate quickly and efficiently with other armed services during a military engagement.
See id.
In January of 1989, the Navy delivered the specifications for the Diplexer to Electro-dyne.
See
Presentence Investigation Reports, ¶ 47. After being awarded the Diplexer Contract, Nathan and Lander, acting on behalf of Eleetrodyne, contracted with the Russian Institute to build the Diplexer.
See id.,
¶48 .
From October 1989 through December 1993, an Eleetrodyne engineer, working in the United States, developed engineering specifications, plans, diagrams and drawings (the “Diplexer Plans”) for the Diplexer.
See
Presentence Investigation Reports, ¶ 49. On 9 December 1993, Lander exported the Diplexer Plans to the Russian Institute.
See id.
¶ 50 .
Both before and after sending the Diplexer Plans, Lander had discussions with persons at the Russian Institute regarding the design, development, engineering, manufacture, production and assembly of the Diplexer.
See
Presentence Investigation Reports, ¶ 51. These discussions constituted the providing of a “defense service” within the meaning of ITAR regulations, more specifically 22 C.F.R. § 120.9 .
27
See id.
At no time did the Individual Defendants and Eleetrodyne seek the required export license from the Government to send the Diplexer Plans to Russia or to discuss the design, development, engineering, manufacture, production and assembly of the Diplexer with the Russian Institute.
28
See
Presen-tence Investigation Reports, ¶ 52.
2.
The Tone Modulator Contract
On 20 August 1991, Eleetrodyne entered into a classified contract with the Air Force (the “Tone Modulator Contract”) to supply
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124 tone modulators (the “Tone Modulators”) at a cost of $1,095 each.
See
Presentence Investigation Reports, ¶ 53. The Tone Modulator Contract also obligated Electrodyne to build two prototypes at a cost of $23,100 each.
See id.
The total contract price was $198,980.
See id.
The initial solicitation, which was incorporated into the Tone Modulator Contract, was signed by Nathan, as Vice-President of Electrodyne.
See id.
Tone Modulators are a component part of the APG-63 fire control radar installed in the F-15 fighter aircraft.
See
Presentence Investigation Reports, ¶ 54. The APG-63 fire control radar is used to control the firing of the aircraft’s AIM-7 air-to-air missiles.
See id.
The APG-63 radar utilizes advanced signal processing technologies to provide unambiguous target presentations on the radar indicators used on the F-15 aircraft.
See id.
The Tone Modulator is a component of the transmitter assembly and provides the means by which real and false targets are distinguished and discriminated by the radar processor on board an F-15.
See id.
Construction of the Tone Modulator requires careful component specification and vendor selection.
See id.
A critical part of the Tone Modulator is an electronic component called the “Isolator.”
See
Presentence Investigation Reports, ¶ 55. Within each Tone Modulator, there are two Isolators, a high power unit and a low power unit.
See id.
The function of the Isolator is to control the flow of radio frequencies (“RF”) within the Tone Modulator. Isolators are critical to the performance of the Tone Modulator.
See id.
Proper specification of the parameters of an Isolator is paramount to optimum performance and to avoid premature failure of the Isolator or the Tone Modulator.
See id.
The RF Isolators are the single most expensive electronic component utilized in the Tone Modulator assemblies.
29
See id.
The Isolator is a “defense article” within the meaning of ITAR, 22 C.F.R. §§ 120.3 and 121.8(b).
See id., H
56.
On 8 June 1993, Electrodyne entered into an agreement with Enterprise Phasa, a manufacturer of electronic components in Rostov, Russia, to build 140 of the Isolators at a cost of $30 each.
See
Presentence Investigation Reports, ¶ 57. On that date, Lander, acting on behalf of Electrodyne sent Enterprise Phasa an electronic facsimile transmission of the specifications for the engineering, manufacture, production and assembly of the Isolators.
30
See id.,
¶ 58 .
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Lander instructed employees of Enterprise Phasa on the engineering, manufacture, production, and design of the Isolator.
See
Pre-sentence Investigation Reports, ¶ 59. These discussions constituted the providing of a “defense service” within the meaning of ITAR, 22 C.F.R. § 120.9 .
At no time did the Individual Defendants and Electrodyne seek the required export license from the Government to send the plans and specifications or to discuss the design, development, engineering, manufacture, production and assembly of the Isolator with Enterprise Phasa.
See
Presentence Investigation Reports, If 60.
On 28 July 1993, in addition to the agreement with Enterprise Phasa, Electrodyne entered into an agreement with Istok Research, a manufacturer of electronic components in Moscow, Russia, to build the Isolators.
See
Presentence Investigation Reports, ¶ 61. On 29 July 29, Lander sent Istok Research an electronic facsimile transmission of certain specifications for the engineering, manufacture, production and assembly of the Isolator.
See id.,
¶ 62 .
From 28 July 1993 through 29 July 1993, Lander instructed Istok Research employees on the engineering, manufacture, production and design of the Isolator.
See
Presentence Investigation Reports, ¶ 63. These discussions constituted the providing of a “defense service” within the meaning of ITAR regulations, 22 C.F.R. § 120.9 .
See id.
At no time did the Individual Defendants and Electrodyne seek the required export license from the Government to send the plans and specifications for the Isolator to Russia or to discuss the design, development, engineering, manufacture, production and assembly of the Isolator with Istok Research.
See
Presentence Investigation Reports, ¶ 64.
3.
The Smtchable Amplifier Contract
On 26 December 1992, Electrodyne entered into a contract (the “Switchable Amplifier Contract”) with the Navy to supply thirty-seven switchable amplifiers (the “Switchable Amplifiers”) at a unit cost of $2,374, for a total contract price of $87,838.
See
Presentenee Investigation Reports, ¶ 65. The initial solicitation, which was incorporated into the Switchable Amplifier Contract, was signed by Nathan.
See id.
The Switchable Amplifier is a component part of the MK-92 fire control system used on Navy warships. See Presentence Investigation Reports, ¶ 66. MK-92 fire control system is used to control the firing of missiles, both anti-ship and surface-to-air, as well as the ship’s guns. See
id.
The Switchable Amplifier is a “defense article” within the
meaning of
ITAR, 22 C.F.R. §§ 120.3 and 121.8(b).
31
See id.,
¶ 67 .
On 14 July 1993, Electrodyne entered into an agreement with Istok Research, to build forty Switchable Amplifiers at a unit cost of $350.
See
Presentence Investigation Reports, ¶ 68. On 14 July 1993, Lander sent Istok Research an electronic facsimile transmission of the specifications for the engineering, manufacture, production and assembly of the Switchable Amplifiers.
See id.,
¶ 69 .
*236
From 23 August 1993 through 27 October 1993, Lander instructed employees of Istok Research on the engineering, manufacture, production and design of the Switchable Amplifiers.
32
See
Presentence Investigation Reports, ¶70. These discussions constituted the providing of a defense service within the meaning of ITAR, 22 C.F.R. § 120.9 .
See id.
The Individual Defendants and Electro-dyne did not seek the required export license from the Government to send the plans and specifications for the Switchable Amplifier to Russia or to discuss the design, development, engineering, manufacture, production and assembly of the Switchable Amplifiers with Is-tok Research.
See
Presentenee Investigation Reports, ¶ 71.
4.
The Phase Shifter Contract
On 22 March 1993, Electrodyne entered into a contract (the “Phase Shifter Contract”) with the Air Force to supply twenty-eight digital phase shifters (the “Phase Shifters”) at an average cost of $3,880 each for a total contract price of $108,640.
See
Presentence Investigation Reports, ¶ 72. The initial solicitation, which was incorporated into the Phase Shifter Contract, was signed by Nathan as Vice-President of Electrodyne.
See id.
Phase Shifters are a component part of the Radio Frequency Simulator (the “RFS”), a device used to evaluate radar guided weapons systems.
See
Presentence Investigation Reports, ¶ 73. The RFS is to used to provide simulation support to the AMRAAM.
See id.
Phase Shifters are “defense articles” within the meaning of ITAR, 22 C.F.R. §§ 120.3 and 121.8(b).
33
See id.,
¶ 74 .
On 18 May 1993, Electrodyne entered into an agreement with Enterprise Phasa to build the Phase Shifters.
See
Presentenee Investigation Reports, ¶75. On that same day, Lander sent Enterprise Phasa a facsimile transmission of the specifications for the engineering, manufacture, production and assembly of the Phase Shifters.
See id.,
¶ 76 . Lander also instructed Enterprise Phasa employees on the engineering, manufacture, production and design of the Phase Shifters.
See id.,
¶ 77 . These instructions constituted the providing of a “defense service” within the meaning of ITAR, 22 C.F.R. § 120.9 .
34
See id.
The Individual Defendants and Electro-dyne did not seek the required export license from the Government to send the plans and specifications for the Phase Shifter to Russia or to discuss the design, development, engineering, manufacture, production and assembly of the Phase Shifter with Enterprise Phasa.
See
Presentence Investigation Reports, ¶ 78.
On 15 February 1994, the Individual Defendants and Electrodyne imported five Phase Shifters from Russia.
See
Presen-tence Investigation Reports, ¶ 79. The
*237
Phase Shifters did not have the markings indicating the country of origin.
35
See id.
5.
The Pin Diode Svñtch Contract
On 12 November 1993, Electrodyne entered into a contract (the “Pin Diode Switch Contract”) with the Air Force to supply 2,377 Pin Diode Switches at an average cost of $368.23 each for a total contract price of $875,280.00.
See
Presentence Investigation Reports, ¶ 80. The Pin Diode Switch Contract was signed by Nathan.
See id.
A Pin Diode Switch is also a component part of the RFS and is a “defense article” within the meaning of ITAR, 22 C.F.R. §§ 120.3 and 121.8(b).
36
See id.,
¶ 81 .
On 29 October 1993, Eleetrodyne entered into an agreement with Istok Research to build 1,245 of the switches at an average cost of $77.91 each.
See
Presentence Investigation Reports, ¶ 82. On that same day, Lander sent Istok Research a facsimile transmission of the specifications for the engineering, manufacture, production and assembly of the Pin Diode Switches.
See id.
From 29 October 1993 through 19 November 1993, Lander instructed employees of Istok Research on the engineering, manufacture, production and design of the Pin Diode Switches.
See
Presentence Investigation Reports, ¶84. These instructions constituted the providing of a “defense service” within the, meaning of ITAR, 22 C.F.R. § 120.9 .
37
See id.
The Individual Defendants and Eleetro-dyne did not seek the required export license from the Government to send the plans and specifications for the Pin Diode Switches to Russia or to discuss the design, development, engineering, manufacture, production and assembly of the Pin Diode Switches with Istok Research.
See
Presentence Investigation Reports, ¶ 8.
On 25 October 1993, in addition to the agreement with Istok Research, Electrodyne entered into an agreement with Enterprise Orion, a manufacturer of electronic components in Kiev, Ukraine, to build 1,245 Pin Diode Switches at an average cost of $53.42 each.
See
Presentence Investigation Report, ¶ 86. On that same date, Lander sent Enterprise Orion a facsimile transmission of the specifications for the engineering, manufacture, production and assembly of the switches.
See id.,
¶ 87 .
From 25 October 1993 through 5 March 1994, Lander instructed Enterprise Orion employees on the engineering, manufacture, production, and design of the Pin Diode Switches.
See
Presentence Investigation Reports, ¶ 88. These discussions constituted the providing of a “defense service” within the meaning of ITAR, 22 C.F.R. § 120.9 .
See id.
The Individual Defendants and Electro-dyne did not seek the required export license from the Government to send the plans and specifications for the Pin Diode Switches to Ukraine or to discuss the design, develop
*238
ment, engineering, manufacture, production and assembly of the Pin Diode Switches with Enterprise Orion.
See
Presentence Investigation Report, ¶ 89.
On 12 November 1993, Electrodyne and Nathan signed the Pin Diode Switch Contract with the Air Force.
See
Presentence Investigation Reports, ¶ 90. The Pin Diode Switch Contract stated that the Pin Diode Switches would be manufactured in the United States, although the Individual Defendants and Electrodyne knew the Pin Diode Switches would be manufactured in Russia and Ukraine.
See id.
6.
The Broad Band Amplifier Contract
On 13 August 1993, Electrodyne entered into a contract with the NRL (the “Broad Band Amplifier Contract”) to supply twenty-five broad band amplifiers (the “Broad Band Amplifiers”) at a cost of $1,595 each for a total contract price of $39,875.
See
Presen-tence Investigation Reports, ¶ 91. The Broad Band Amplifier Contract was signed by Nathan and contained a “Buy American” provision.
38
See id.
The NRL intended to use the Broad Band Amplifiers in conjunction with a high priority Government program which was designing a component for attachment to NASA aircraft for airborne surveillance.
39
See id.,
¶ 92 .
As early as 13 August 1993, Electrodyne entered into an agreement with Enterprise Saturn, a manufacturer of electronic components in Kiev, Ukraine, to build the Broad Band Amplifiers at a cost of $210.00 each.
See
Presentence Investigation Reports, ¶ 93. On 23 November 1993, Electrodyne imported five Broad Band Amplifiers from Enterprise Saturn into the United States without markings indicating the country of origin.
See id.,
¶ 94 . On 30 December 1993, Electrodyne imported twenty-two Broad Band Amplifiers from Enterprise Saturn into the United States without markings indicating the country of origin.
See id.,
¶ 95 .
After the Broad Band Amplifiers had been imported into the United States, Electrodyne employees painted the Broad Band Amplifiers to obscure and disguise foreign markings on the Broad Band Amplifiers and attached a label which stated “Electrodyne Sys. Corp.”
See
Presentence Investigation Reports, ¶ 96. On 23 November 1993, Electrodyne supplied five of the Broad Band Amplifiers to the NRL.
See id.,
¶ 97 . The Broad Band Amplifiers are not classified; however, the data obtained from the unit that the Broad Band Amplifiers would have been attached to is classified.
See id.
On 7 December 1993, at the request of Customs, an independent third-party (the “Examiner”) examined one of the Broad Band Amplifiers.
See
Presentence Investigation Reports, ¶ 98. The Examiner concluded that, although the mechanical design and construction of the Broad Band Amplifiers were “good,” the internal parts were of low quality and the poor seal of the Broad Band Amplifier was non-hermetic and precluded use in an environment with high humidity and changing pressures.
40
See id.
*239
Thereafter, on or about 2 January 1994, Eleetrodyne supplied twenty of the Broad Band Amplifiers to NRL.
See id.,
¶ 99 .
In February of 1994, Nathan was informed NRL was questioning the design and components of the Broad Band Amplifiers, and was asked by a NRL contracting official where the Broad Band Amplifiers were made.
See
Presentence Investigation Reports, ¶ 100. Nathan eventually admitted the Broad Band Amplifiers were made in Ukraine.
See id.
7.
The Scheme to Sell Ukrainian Converters to NASA
Eleetrodyne was awarded separate contracts from NASA (the “NASA Contracts”) to build five “up” and five “down” converters for the Advanced Communication Technology Satellite (the “ACTS”).
See
Presentence Investigation Reports, ¶ 101. On November 29, 1993, Customs inspected a shipment
from
Ukraine to Eleetrodyne containing five “down” converters.
See id.
The country of origin was listed as “Ukraine” and the unit value was $1,500.
See id.
Inside the package was a commercial invoice and a document, believed to be in Ukrainian, containing specifications.
See id.
No country of origin markings were on any of the five converters.
See id.
During the first week of December 1993, two “down” converters were shipped by Eleetrodyne to NASA.
See
Presentence Investigation Reports, ¶ 102. On 17 December 1993, the contracting officer and the project manager for ACTS were interviewed by Customs officials.
See id.,
¶ 103 . Both of these individuals stated that neither Nathan nor David Heller, the Director of Engineering at Eleetrodyne, ever indicated the converters were not American made.
41
See id.
Each of the converters was examined and every unit had a label which stated: “Eleetrodyne Systems Corp. So. Hackensack, NJ 07606, Cage Code: OAUS1, S/N-004, P/N-M21-00-10.”
Id.
The NASA Contracts contained “Buy American” provisions similar to the Broad Band Amplifier Contract previously described with the NRL.
42
See id.,
¶ 104 . The NASA Contract for the five “down” converters indicated a unit price of $15,940.
See id.
The NASA Contract for the five “up” converters showed a unit price of $34,942.
See id.
The specifications supplied to NASA by Eleetrodyne matched the specifications imported with the converters.
See id.
One of the converters was examined by an independent thirdparty; the internal components were found to be similar to the Broad Band Amplifier supplied to the NRL and described as “unusual.”
See
Presentence Investigation Reports, ¶ 105. None of the converters had identifying markings.
See id.
The third-party also noted enameled wires touching metal surfaces in many places which he described as a “bad practice.”
See id.
The converters were described as a “poor quality, to the point that performance at any level seems unlikely and reliability poor.”
43
*240
Id.
Characters on one component were described as “cyrillic” (Slavic or Russian) in origin.
44
See id.
8.
Importation of Unmarked Components
On 16 February 1994, Customs received information that Electrodyne was importing, via Federal Express, 800 “power dividers” at $8.00 per unit.
See
Presentence Investigation Reports, ¶ 106. On 18 February 1994, the shipment, which arrived in a wooden crate, was inspected by Customs.
See id.
There were six different items inside the crate, none of which were marked to indicate the country of origin.
See id.
According to industry sources, five components in the shipment were “vector modulators” and not power dividers.
45
See id.
Vector modulators are used in a variety of applications, including missile technology.
See
Presentence Investigation Reports, ¶ 106. Some of the components were “hybrid power dividers” and according to a confidential source, Electrodyne intended to provide those components to Raytheon, a Canadian Corporation, for use in a “military job.”
See id.
On 1 March 1994, Customs inspectors in Memphis, Tennessee discovered that Elec-trodyne had imported another shipment from Ukraine.
See
Presentence Investigation Reports, ¶ 107. Inside was a single component which was believed to be one of the “down” converters destined for NASA.
See id.
Although the commercial invoice listed the country of origin as Ukraine, the component contained no markings indicating its Ukrainian manufacturer and, in fact, was pre-marked with an Electrodyne label displaying its New Jersey address.
See id.
II.
DISCUSSION
Section 1B1.2 directs a sentencing court to apply the offense Guideline in Chapter Two which is “most applicable to the offense of conviction.”
See
Section 1B1.2. There are two limited exceptions to this rule: 1) the introductory comment to Appendix A concerning “atypical” cases (the “Introductory Comment to Appendix A”), and 2) Application Note One to Section 1B1.2 regarding a plea agreement containing a stipulation which establishes a more serious offense than the offense of conviction.
See United States v. Jackson,
117 F.3d 533, 535-536, 538 (11th Cir.1997);
see also United States v. Elefant,
999 F.2d 674, 676-677 (2d Cir.1993);
United States v. McCall,
915 F.2d 811, 815-16 (2d Cir.1990).
A.
Applicable Guideline
The Individual Defendants object to the Guideline calculations set forth in ¶¶ 148 and
*241
149 of the Lander Presentenee Investigation Report and ¶¶ 141 and 142 of the Nathan Presentenee Investigation Report.
46
The Individual Defendants argue the Guidelines as stipulated by the parties in ¶ 123(1) — (4) of the Lander Presentence Investigation Report and ¶ 125(1) — (4) of the Nathan Presentence Investigation Report should apply instead of those Probation recommends.
See
Lander Objection at 19. The Government contends the Individual Defendants should be sentenced in a manner consistent with then-respective plea agreements.
See
Government Sentencing Memorandum at 1.
The Individual Defendants argue the Statutory Index contained in Appendix A provides Section 2T3.1 is “ordinarily applicable” to violations of Sections 545 and 542, the statutes involved in the pleas from Nathan and Lander.
See
Lander Objection at 19-20. The Presentence Investigation Reports, however, recommend the Individual Defendants be sentenced under Section 2F1.1 because “the nature of the offense was/is fraud and ... the [Gjuideline for ‘Evading Import Duties or Restrictions (Smuggling); Receiving or Trafficking in Smuggled Property,’ [Section] 2T3.1, is not the most appropriate [Guideline.” Lander Presentence Investigation Report, ¶ 149; Nathan Presentenee Investigation Report, ¶ 142.
The Individual Defendants specifically object to the use of Section 2F1.1 for two reasons: (1) the absence of preponderant proof that the case is “atypical,” and (2) the erroneous premise that admissions made by the Individual Defendants at their plea hearings constitute “stipulations” under Section lB1.2(a).
See
Lander Objection at 20.
1.
Case is not “atypical”
The first argument of the Individual Defendants is based upon the language of Appendix A which states:
This index specifies the [G]uideline section or sections ordinarily applicable to the statute of conviction.... If, in an atypical case, the [Guideline section indicated for the statute of conviction is inappropriate because of the particular conduct involved, use the [Guideline most applicable to the nature of the offense conduct charged in the count of which the defendant was convicted.
Id.
The Individual Defendants contend Appendix A references Section 2T3.1 as the Guideline “ordinarily applicable” to violations of Sections 542 and 545.
47
The Presentenee Investigation Reports, however, conclude Section 2F1.1 is the appropriate Guideline because “[t]he smuggling of goods into the United States without markings indicating a country of origin was to further [a] fraud; the focus of this crime was not to evade an import tax, although the [Individual Defendants] knowingly did this as well.” Nathan Presentence Investigation Report, ¶ 141; Lander Presentence Investigation Report, ¶ 148. The Individual Defendants contend
*242
this conclusion is “deeply flawed” and provides insufficient reason to deviate from the ordinarily applicable Guideline, Section 2T3.1.
See
Lander Objection at 20. The Individual Defendants rely upon the Introductory Comment to Appendix A which states a case must be atypical before a different Guideline other than the one recommended can be used.
See id.
(citing
United States v. McCall,
915 F.2d 811, 815 (2d Cir.1990)).
Arguing the instant case is not atypical,
48
the Individual Defendants rely upon the Guidelines, the language of Sections 542 and 545 and caselaw. The Individual Defendants first argue the Guidelines,’ specifically Section 2T3.1, apply to various categories of customs violations, only one of which involves the evasion of customs duties.
See
Lander Objection at 22. The Individual Defendants further contend the Sentencing Commission intended Section 2T3.1 to apply to cases involving little, if any, loss of customs revenue, because Section 2T3.1 explicitly provides for a base offense level of four “if the tax loss did not exceed $100.”
See id.
(quoting Section 2T3.1). In further support of this construction of Section 2T3.1, the Individual Defendants note the Introductory Comment to subpart 3 of Chapter Two, Part T (“Introductory Comment to Part T”) states this subsection of the Guidelines “is designed to address violations involving revenue collection
and
trade regulation.”
See
Lander Objection at 22-23 (emphasis in original). The Individual Defendants contend these examples show the Sentencing Commission made an effort to explain Section 2T3.1 “applies to a broader array of cases than just those involving the evasion of custom duties.”
Id.
at 23.
The Individual Defendants rely upon a Ninth Circuit decision to further support their position.
See
Lander Objection at 23 (citing
United States v. Carrillo-Hernandez,
963 F.2d 1316 (1992)). In
Carrillo-Hernandez ,
the defendants were charged with,
inter alia,
making a false statement to a Federal officer, in violation of Section 1001.
See id.
at 1317 . This false statement arose from the defendants having lied to a Customs officer about their possession of $431,000 worth of Mexican pesos.
See id.
The court initially looked to Section 2F1.1 as the governing Guideline because that is the Guideline ordinarily applicable to the statute of conviction.
See id.
The court ultimately concluded, however, that Section 2F1.1, which deals with offenses involving fraud and deceit, was inapplicable.
See id.
In making this determination, the court relied upon Application Note Thirteen to Section 2F1.1 (“Application Note Thirteen”), which states:
Sometimes, offenses involving fraudulent statements are prosecuted under [Section] 1001, or a similarly general statute, although the offense is also covered by a more specific statute. Examples include false entries regarding currency transactions, for which U.S.S.G. § 2S1.3 [ (“Section 2S1.3”) ] would be more apt, and false statements to a[C]ustoms officer, for which [Section] 2T3.1 likely would be more apt.
Id.
The
Carrillo-Hernandez
court then decided the offense was best characterized as “the making of false entries regarding currency transactions.”
See
963 F.2d at 1317. Relying upon Application Note Thirteen, the court determined Section 2S1.3 was the appropriate Guideline.
See id.
On appeal the Ninth Circuit reversed the decision of the trial court noting the count of conviction states, in pertinent part: “[D]efen-
*243
dants ... knowingly and willfully made false ... statements ... in a matter within the jurisdiction of ... Customs.... ”
Carrillo-Hernandez,
963 F.2d at 1317 . The court further observed Application Note Thirteen specifically points to Section 2T3.1 as the “more apt” Guideline for “false statements to a[C]ustoms official.”
Id.
The Circuit concluded the defendant did not make “false entries regarding currency transactions” but, rather, made “false statements to a[C]ustoms official.”
Id.
Accordingly, the court held the defendants should have been sentenced under Section 2T3.1, not Section 2S1.3.
See id.
at 1318 .
The
Carrillo-Hernandez
court also recognized the Introductory Comment to Section 2T3.1 stated the Guideline is “primarily [but not exclusively] aimed at revenue collection and trade regulation.”
49
See
963 F.2d at 1318 (quoting Introductory Comment to Section 2T3.1). The court explained Section 2T3.1 is applicable to cases involving violations of the country’s trade regulations even when those violations do not result in lost revenues to the United States.
See id.; see also United States v. Bagnall,
907 F.2d 432, 436 (3d Cir.1990) (indicating the purpose of Section 542 “is no less than to preserve the integrity of the process by which foreign goods are imported in the United States”).
The Individual Defendants also cite
United States v. Dall,
918 F.2d 52 (8th Cir.1990), to support their contention that the instant case is not atypical. In
Dali,
the defendant pleaded guilty,
inter alia,
to the unlawful importation of fifty kilograms of drugs in violation of Section 545.
See id.
at 53 . The Individual Defendants observe that despite the fact that the defendant in
Dali
had paid duty on the unlawful shipment of drugs, thus causing no financial loss to the Government, the district court sentenced the defendant under Section 2T3.1.
See
Lander Objection at 24 (citing
Dall,
918 F.2d at 53 ). The court of appeals affirmed the decision of the sentencing court.
See Dall,
918 F.2d at 53-54 .
The Individual Defendants argue their criminal conduct is directly related to trade regulation and involves the evasion of import restrictions and the knowing evasion of an import tax.
See
Lander Objection at 24-25. Therefore, they contend Section 2T3.1, and not Section 2F1.1, is the most appropriate Guideline to apply.
See id.
The second argument advanced by the Individual Defendants relies upon the language of Sections 542 and 545. The Individual Defendants argue Sections 542 and 545 can be violated in two ways.
See
Lander Objection at 25. First, Section 542, the statute to which Lander pleaded guilty, proscribes the introduction of imported merchandise into the commerce of the United States by means of any “false or fraudulent practice,” “whether or not the United States shall or may be deprived of any lawful duties.”
50
See id.
(quoting Section 542). Second, Section 542 proscribes the willful failure to pay customs
*244
duties.
See id.
(citing Section 542). Section 542 does not require the Government to prove fraudulent intent.
See id.
(citing Section 542).
The Individual Defendants also contend Section 545, the statute to which Nathan pleaded guilty, has two operative paragraphs. They contend it can be violated in two distinct ways, only one of which requires proof that the accused intended to defraud the Government of customs revenue.
See
Lander Objection at 26 (citing
United States v. Menon,
24 F.3d 550, 554-58 (3d Cir.1994) (only the first paragraph of Section 545 requires a showing that defendant intended to deprive the United States of revenue)). The Individual Defendants argue the fraud they committed is, therefore, not an atypical violation of the smuggling laws based upon the language of Sections 542 and 545.
See id.
at 27.
The Individual Defendants also rely upon caselaw further interpreting Section 542 and 545 to support the position that their offenses were not atypical. The Individual Defendants contend persons ordinarily are charged with having violated Sections 542 and 545 for a variety of reasons, only one of which is the evasion of customs duties.
See
Lander Objection at 29. The Individual Defendants cite
The violations of the Individual Defendants fall within the classification of importing merchandise into the United States by use of false or fraudulent means whether or not the Government is or may be deprived of lawful duties. Appendix A states Section 2T3.1 is the appropriate Guideline to use when Sections 542 and 545 are violated.
See
Appendix A. Further,
Stinson v. United States,
508 U.S. 36, 38 , 113 S.Ct. 1913 , 123 L.Ed.2d 598 (1993), states that commentary “that interprets or explains a[G]uideline is authoritative unless it violates the Constitution or a[F]ederal statute, or is inconsistent
*245
with, or a plainly erroneous reading of that subsection.”
Id.
The current Introductory Comment to Part T states this subsection of the Guidelines “is designed to address violations involving revenue collection or trade regulation.” Introductory Comment to Part T (emphasis added);
see also Carrillo-Hernan-dez,
963 F.2d at 1317-18. The conduct of the Individual Defendants, although fraudulent, was also in violation of trade regulations and it appears that it is the type of violation Section 2T3.1 was intended to cover. Accordingly, the instant matter is not atypical as to the Guideline section ordinarily applicable to the offense of conviction. Unless another exception applies, the directive contained in the Introductory Comment to Appendix A instructs a sentencing court to use the Guideline section ordinarily applicable to the statute of conviction, which in the instant matter is Section 2T3.1.
See
Introductory Comment to Appendix A.
2.
Section lBl.2(a) Stipulations
Section lB1.2(a) also contains an exception to the rule of applying the Guideline which is ordinary applicable to the offense of conviction. In the case of a plea agreement “containing a stipulation that specifically establishes a more serious offense than the offense of conviction,” the more serious offense so stipulated is used to determine the applicable offense Guideline.
See
1B1.2(a);
Braxton v. United States,
500 U.S. 344, 346-47 , 111 S.Ct. 1854 , 114 L.Ed.2d 385 (1991);
United States v. McGee,
7 F.3d 1496, 1498 (10th Cir.1993);
see also United States v. Saldana,
12 F.3d 160, 162 (9th Cir.1993) (interpreting Section IB 1.2 as requiring a sentencing court to use the Guideline which applies to other or greater offenses included within the plea agreement) (citing
United States v. Bos,
917 F.2d 1178 (9th Cir.1990)). The “stipulation” referred to in Section 1B1.2(a) must be “set forth in a written plea agreement or made between the parties on the record during a plea proceeding” and must specifically establish facts that prove a more serous offense or offenses.
See
Application Note One to Section 1B1.2.
In
Braxton ,
the defendant pleaded guilty during a plea hearing to assault on a Federal officer and to use of a firearm during a crime of violence, but did not plead guilty to the more serious charge of attempting to kill the Federal officer.
See
500 U.S. at 345 , 111 S.Ct. 1854 . At the plea hearing, the defendant agreed to the presentation of facts by the Government including that he twice shot at the Federal officer.
See id.
Based upon these facts, the district court sentenced the defendant “as though he had been convicted of the attempt to kill count, relying on ... [Section] lB1.2(a)....”
See id.
The Fourth Circuit upheld the sentence.
See id.
(citing
United States v. Braxton,
903 F.2d 292, 299 (4th Cir.1990)).
Section 1B1.2(a), as it was then drafted, provided that “ ‘in the case of a conviction by a plea of guilty or nolo contendere containing a stipulation that specifically establishes a more serious offense than the offense of conviction, [the court shall apply the [Guideline in such chapter] most applicable to the stipulated offense.’”
Braxton,
500 U.S. at 346 , 111 S.Ct. 1854 (quoting Section 1B1.2(a)). The questions presented to the Court in
Braxton
were (1) whether the plea contained a stipulation that (2) specifically established the defendant attempted to kill the Federal officer.
See id.
at 346-47, 111 S.Ct. 1854 . The defendant argued his plea did not contain a “stipulation” within the meaning of Section 1B1.2(a) because it was not part of a formal plea agreement.
See id.
The Court recognized a split in authority regarding whether Section lB1.2(a), as it was then drafted, required a “stipulation” that is part of a formal plea agreement.
See Braxton,
500 U.S. at 347 , 111 S.Ct. 1854 . The Court observed:
Some Circuits to consider the question have agreed with [the defendant’s] interpretation, believing that the “stipulation” must be part of the “quid pro quo” for the Government’s agreement not to charge a higher offense.
See, e.g., United States v. McCall,
915 F.2d 811 , 816 n. 4 (2d Cir.1990);
United States v. Warters,
885 F.2d 1266 , 1273 n. 5 (5th Cir.1989). But as the Government points out, [Section] 1B1.2 does not by its terms limit its application to stipulations contained in plea agreements; the language speaks only of
*246
“plea[s] ... containing a stipulation.” Since, [sic] the Government argues, any formal assent to a set of facts constitutes a stipulation, [the defendant’s] guilty plea “containfed] a stipulation upon which the court could rely in setting his base-offense level.”
Id.
The Court did not resolve the question whether the plea contained a stipulation within the meaning of Section lB1.2(a) because the Sentencing Commission was in the process of addressing the issue and because the specific controversy in the case could be decided on other grounds.
See id.
at 348-49, 111 S.Ct. 1854 .
Section lB1.2(a) was subsequently revised and now provides:
Determine the offense [Guideline section in Chapter Two (Offense Conduct) most applicable to the offense of conviction
{i.e.,
the offense conduct chai'ged in the count of the indictment or information of which the defendant was convicted).
Provided,
however in the case of a plea agreement (written or made orally on the record) containing a stipulation that specifically establishes a more serious offense than the offense of conviction, determine the offense [G]uideline section in Chapter Two most applicable to the stipulated offense.
Id.
(emphasis added).
52
As indicated, the Presentence Investigation Reports clearly and unambiguously state Section 2F1.1 is the appropriate Guideline based upon factual stipulations made by the Individual Defendants at their respective plea hearings indicating the more serious offense of fraud.
See
Nathan Pre-sentence Investigation Report, ¶ 141; Lander Presentence Investigation Report, ¶ 148. The Individual Defendants argue oral statements made at the time of a plea do not constitute the type of stipulations contemplated by Section lB1.2(a).
See
Lander Objection at 36. This argument appears to rely upon the distinction between statements made at a plea hearing and those set out in a plea agreement.
In
United States v. Passi
62 F.3d 1278 (10th Cir.1995), the defendant pleaded guilty to knowingly engaging in a sexual act with a minor on Federal property in contravention of 18 U.S.C. § 2243 (a).
See id.
at 1279 . In his plea agreement, the defendant stipulated the child victim was his minor biological daughter.
53
See id.
Although the Government and the defendant had proposed the
*247
defendant be sentenced under one Guideline, the sentencing court determined a different Guideline was more appropriate.
See id.
at 1280 . Before imposing a greater sentence under the Guidelines, the court explained the defendant had stipulated to a more serious offense than that agreed upon in his plea agreement.
See id.
The court provided the parties with an opportunity to brief the issue.
See id.
The
Passi
court concluded the defendant had stipulated to a more serious offense, aggravated incest, than the offense of sexual abuse of a minor agreed upon by the Government and the defendant in the plea agreement.
See Passi,
62 F.3d at 1280 . The circuit affirmed the decision of the district court and agreed that as part of his plea agreement the defendant had stipulated to a more serious offense.
See id.
at 1281 . The Tenth Circuit explained the defendant specifically pleaded guilty to sexual abuse of a minor, but then stipulated in his plea agreement that his victim was his daughter. See
id.
In
United States v. Warters,
885 F.2d 1266 (5th Cir.1989),
54
the defendant entered into a written agreement to plead guilty to mispri-son of a felony and was ultimately sentenced based upon his guilt for the underlying felony, drug conspiracy.
See id.
at 1272 . At the plea hearing in its statement of facts supporting the plea, the Government recited that the defendant was “also a member of the conspiracy which [committed] ... overt acts ... within the Southern District of Texas, [and] in the Northern District of Ohio [the defendant] furnished $20,000 for the purchase of approximately [twenty] pounds of marijuana, which he was going to distribute.”
Id.
at 1270 . The sentencing court inquired whether the defendant “failed to report [the above information] to an authority when [he] knew that a crime was being committed.”
Id.
The sentencing court interpreted the affirmative response from the defendant to its inquiry as an indication the defendant agreed to the statement from the Government as well.
See id.
The Tenth Circuit in
Warters
upheld the sentence by characterizing it as a departure.
See Warters,
885 F.2d at 1275 . The Circuit noted the particular oral admissions from the defendant at the plea hearing were insufficient to specifically establish his guilt to a higher offense.
See id.
at 1274 n. 5.
As the information to which [the defendant] pleaded guilty alleged that the felony to which his misprison related was a conspiracy among him and others, such a finding would be supported by the record. Record support is also found in [the defendant’s] admissions at the plea hearing respecting the [G]overnment’s recital of the facts, which stated he was a member of the conspiracy.... We do not, however, regard this case as one in which “a stipulation ... specifically establishes a more serious offense” within the meaning of ... [Section] lBl.2(a). [The defendant’s] guilt of misprison of the conspiracy did not depend on his having been a member of the conspiracy; nor was there any formal stipulation of his guilt of conspiracy. The plea agreement does not say anything about [the defendant] being part of the conspiracy-
id
The instant case is similar to
Warters
with one important distinction. The particular oral admissions of the Individual Defendants during their plea hearings, in addition to adoption by each of his written plea memorandum are sufficient to specifically establish a more serious offense — fraud.
The Individual Defendants argue if they have stipulated to the more serious offense of fraud, they did not stipulate to every element of the fraud offense.
See
Lander Objection at 41. Rather, the Individual Defendants contend “fraud is simply an element of the smuggling offense to which [the Individual Defendants] pleaded guilty.”
Id.
A Section lB1.2(a) stipulation must “establish a factual basis for each essential element of th[e more serious] offense.”
United States v. Domino,
62 F.3d 716, 722 (5th Cir.1995). Specifically, the Individual
*248
Defendants stipulated during their plea hearings to a violation of Section 1001.
Section 1001 states:
(a) Except as otherwise provided in this section, whoever, in any matter within the jurisdiction of the executive, legislative, or judicial branch of the Government of the United States, knowingly and willfully-
(1) falsifies, conceals, or covers up by any trick, scheme, or device a material fact;
(2) makes any materially false, fictitious, or fraudulent statement or representation; or
(3) makes or uses any false writing or document knowing the same to contain any materially false, fictitious, or fraudulent statement or entry;
shall be fined under this title or imprisoned not more than [five] years, or both.
Id.
During their plea hearings, the Individual Defendants admitted they knowingly and willfully entered into the Broad Band Amplifier Contract containing a Buy American clause with the NRL knowing the Broad Band Amplifiers they would provide had been ordered from Enterprise Saturn in Ukraine.
See
Transcript from Nathan Plea Hearing at 18-19; Lander Plea Hearing at 19. The Individual Defendants also admitted during their plea hearings that on 23 November 1993 they imported five of these Broad Band Amplifiers from Ukraine without markings indicating the country' of origin.
See
Transcript from Nathan Plea Hearing at 28-29; Transcript from Lander Plea Hearing at 19-21. The Individual Defendants further admitted the Broad Band Amplifiers were painted to obscure markings indicating foreign manufacture and affixed stickers with the words “Electrodyne Systems Corporation” intending to deceive the NRL into believing the Broad Band Amplifiers had been manufactured by Electrodyne in the United States.
See
Transcript from Nathan Plea Hearing at 28-29; Transcript from Lander Plea Hearing at 19-21.
These admissions establish the Individual Defendants knew the Broad Band Amplifiers would not be manufactured in the United States at the time the Broad Band Amplifier Contract, a matter within the jurisdiction of the executive branch of the United States, was executed. These admissions also establish the Individual Defendants fraudulently misrepresented to the NRL that such Broad Band Amplifiers would be manufactured in the United States in order to comply with the stated terms of the Broad Band Amplifier Contract.
The Broad Band Amplifier Contract specifically contained a Buy American clause making the country of origin of the Broad Band Amplifiers a material part of the Broad Band Amplifier Contract. The Broad Band Amplifier Contract could not have been executed without such a Buy American clause. Moreover, the admissions of the Individual Defendants during their plea hearings establish the Individual Defendants took affirmative steps to hide the fact that the Broad Band Amplifiers were not from the United States by requesting Enterprise Saturn manufacture the Broad Band Amplifiers without a country of origin marking. During the plea hearings, the Individual Defendants each admitted they went as far as instructing Electrodyne Employees to paint the Broad Band Amplifiers to further obfuscate they were manufactured by a foreign manufacturer.
See
transcript from Nathan Plea Hearing at 19; Transcript from Lander Plea Hearing at 20. The Individual Defendants each admitted they instructed Electrodyne Employees to mark the Broad Band Amplifiers so that they appeared to have been manufactured in the United States.
See
Transcript from Nathan Plea Hearing at 19; Transcript from Lander Plea Hearing at 20. Accordingly, the Individual Defendants specifically stipulated to every element of fraud under Section 1001(a).
Stipulations were also discussed in
United States v. McCall,
915 F.2d 811 (2d Cir.1990), where the Circuit reversed the sentence imposed by the district court. It was held the appropriate Guideline section should have been based upon the offense of conviction because the defendant did not stipulate to a more serious offense. See
id.
at 815-16 .
In
McCall ,
the defendant pleaded guilty to a one-count information charging him with committing a violent crime in aid of racke
*249
teering activity.
See
915 F.2d at 812 . The underlying crime charged in aid of the racketeering activity was assault with a dangerous weapon.
See id.
In addition to pleading guilty to this offense, the defendant agreed to admit to the court his involvement in four shootings charged in the information and in drug distribution.
See id.
Before the sentencing, the Guidelines were amended and the Guideline selected by Probation was no longer applicable to the offense.
See McCall,
915 F.2d at 813 . Probation obtained additional information and utilized the Guideline section applicable to the crime of assault with intent to commit murder to three of the assaults charged in the information.
See id.
The sentencing court applied the Guideline suggested by Probation based upon the finding the defendant had acted with a “depraved indifference to human life.”
See id.
The defendant appealed his sentence and argued the district court should have applied the Guideline for the offense to which he pleaded guilty.
See McCall,
915 F.2d at 813 . After determining that the facts alleged in the information were not atypical, the Second Circuit held the defendant did not stipulate to a more serious offense.
[The defendant] agreed to plead guilty to assault with a dangerous weapon pursuant to a written plea agreement with the [Government. The reasonable expectations of the parties to a plea agreement cannot be fulfilled unless the Guidelines section is determined solely on the basis of the offense of conviction, facts alleged in the information or indictment, and the formal stipulations to facts establishing a more severe offense. If the [G]overnment desired to have [the defendant] sentenced under another Guidelines section, it could have sought an appropriate stipulation pursuant to a proviso to Section 1B1.2. That proviso establishes a mechanism for the [Government to extract a stipulation to conduct more serious than the offense of conviction in order to apply the Guidelines section for the more serious offense while retaining the statutory maximum sentence for the offense of conviction.[
55
]
See
[Seetion] 1B1.2(a) ____ In this case, the plea agreement did not contain such a stipulation. The agreement refers only to stipulations to factors that will be used “to calculate the defendant’s adjusted offense level.” Because the choice between Guidelines sections in this case determines the base (rather than adjusted) offense level, this clause is inapplicable.
Id.
at 815 .
In so holding, the
McCall
court relied upon
United States v. Guerrero,
863 F.2d 245, 248 (2d Cir.1988), which “requires that any stipulation be part of the plea agreement, whether oral or written.”
See McCall,
915 F.2d at 816 n. 4.
In
Guerrero ,
a three-count indictment charged the defendant and others with conspiracy (count one), and with the underlying offense (count two) of distributing heroin.
See
863 F.2d at 246 . The third count of the indictment charged the defendant alone with distributing an unspecified amount of a Schedule I narcotic drug.
See id.
At his plea hearing, the defendant acknowledged he had received a small quantity of heroin and had given it to an individual, a Government agent, whom he believed to be a potential purchaser.
See id.
Before the defendant was sentenced, the Government and defense counsel entered into a stipulation of facts to obviate the need for a hearing to establish circumstances relevant to sentencing.
See Guerrero,
863 F.2d at 246 . The stipulation revealed the defendant had engaged in a number of conversations with the Government informant during which the defendant organized a meeting to introduce the informant to a potential supplier of heroin.
See id.
The stipulation also noted the defendant arranged to have the informant retrieve a sample of heroin from the defendant which had been furnished by this supplier.
See id.
The defendant also indicated he knew the informant intended to purchase additional amounts of heroin from this supplier.
See id.
The defendant further admitted he introduced the informant to the supplier and remained present while the two negotiated a sale of heroin.
See id.
The sale
*250
which later transpired involved 698 grams of heroin.
See id.
At sentencing, the Government contended, the appropriate base offense level for the defendant should be based upon the quantity of drugs involved in the overall scheme in which he participated.
See Guerrero,
863 F.2d at 248 . Instead, the court selected the base offense level applicable to the amount the defendant actually distributed, not the amount concerning the totality of his conduct.
See id.
at 247 .
In response to the argument of the Government, the Second Circuit noted this contention was based upon the provision in Section lB1.2(a), which requires use of the Guideline applicable to the stipulated offense when a guilty plea contains a stipulation “that specifically establishes a more serious offense than the offense of conviction.”
See Guerrero,
863 F.2d at 248 . The
Guerrero
court specifically disagreed with the view of the Government that the stipulation between the Government and defense counsel, which was intended to obviate fact-finding at the sentencing, invoked the proviso to Section 1B1.2(a).
See id.
The court held:
Id.; see United States v. Rutter,
897 F.2d 1558 (10th Cir.),
cert. denied,
498 U.S. 829 , 111 S.Ct. 88 , 112 L.Ed.2d 60 (1990) (quoting
Guerrero,
863 F.2d at 248 ).
The proviso [to Section IB 1.2(a) ] applies only to a stipulation contained in a plea of guilty or nolo contendere, not to a stipulation negotiated after a plea in connection with sentencing[
56
] The distinction has significance. Prior to plea, the prosecution has the opportunity to condition its willingness to accept a plea to less than all counts of an indictment on the defendant’s willingness to stipulate that he committed crimes in addition to those to which he is pleading guilty. In offering to reduce the defendant’s maximum exposure to the penalties in the conviction counts, the prosecution is entitled to extract an admission of facts that may justify a substantial sentence within that maximum. But once the Government agrees to a plea bargain without extracting such an admission, facts admitted by the defendant to shorten or obviate a sentencing hearing do not establish a “stipulated offense” within the meaning of [SJection lB1.2(a).
The instant ease is distinguishable from
Guerrero .
Lander and Nathan did not bargain with the Government after they entered into their plea agreements to obviate fact-finding at their sentencings. Rather, the Individual Defendants each specifically admitted to a more serious offense during their plea hearings conducted in conformity with Rule 11. These admissions were the result of questions which were part of the Nathan and Lander Plea Memoranda submitted to the court before each sentencing hearing. The questions asked and answered by the Individual Defendants were not surprises. Before the sentencing hearings, Nathan and Lander reviewed with counsel the plea mem-oranda and the attached questions which they would be asked under oath.
See
Transcript from Lander Plea Hearing at 10-11; Transcript from Nathan Plea Hearing at 10. Lander and Nathan each stated counsel explained the plea memorandum and that each of them understood it.
See
Transcript from Nathan Plea Hearing at 10; Transcript from Lander Plea Hearing at 10 to 11.
Lander admitted during his plea hearing, but before his plea was accepted, that he instructed Enterprise Saturn not to mark future components in a way that indicated foreign manufacture.
See
Transcript from Lander Plea Hearing at 19-20. Lander also admitted on or about 30 December 1993, he caused twenty-two Broad Band Amplifiers to be imported into the United States from Ukraine without markings indicating the country of origin in order to assist Electro-dyne in deceiving the Government such items had been manufactured in the United States.
See id.
at 20.
Similarly, Nathan admitted during his plea hearing, but before his plea was accepted, that on or about 13 August 1993 he signed a contract containing a Buy American clause on behalf of Electrodyne with the Government to provide the NRL with twenty-five Broad Band Amplifiers.
See
Transcript from Nathan Plea Hearing at 18. Nathan further
*251
admitted at the time he signed this contract he knew Lander had ordered the Broad Band Amplifiers from a Foreign Manufacturer in Ukraine.
See id.
at 19. Nathan also admitted on 23 November 1993, five of the Broad Band Amplifiers were imported into the United States without country of origin markings and were then pained and marked to indicated Eleetrodyne has manufactured them.
See id.
Nathan admitted he caused the Broad Band Amplifiers to be painted and marked to indicate Electrodyne had manufactured them so as to deceive the United States they had been manufactured in the United States.
See id.
at 19-20.
The factual basis established by the Government at each of the Lander and Nathan Plea Hearings transpired before the pleas were accepted and the Individual Defendants were found guilty. The voluntary admissions made by the Individual Defendants at their plea hearings were “made orally on the record” and were part of the plea agreements. Nathan and Lander also adopted the written statements setting forth the factual basis for each of them, as contained in his plea memorandum. These admissions were not made to shorten a sentencing hearing as in
Guerrero .
Moreover, the Individual Defendants were aware such admissions would be required in order to lay the factual basis for their pleas.
See
Rule 11(f);
see also
the Nathan and Lander Plea Memoranda.
The questions which the Government asked to establish a factual basis for the Nathan Plea were set forth in the Nathan Plea Memorandum.
See
Nathan Plea Memorandum at 3-4. During the Nathan Plea Hearing, counsel for Nathan was specifically asked if Nathan had received an opportunity to review the Nathan Plea Memorandum.
See
Transcript from Nathan Plea Hearing at 4. Counsel for Nathan stated Nathan had reviewed the Nathan Plea Memorandum.
See id.
Nathan was also asked if he had read the Nathan Plea Memorandum and if his attorney had discussed it with him.
See id.
at 10. Nathan stated his attorney had reviewed the Nathan Plea Memorandum with him and that he understood it.
See id.
Similarly, the questions which the Government asked to establish a factual basis for the Lander Plea were set forth in the Lander Plea Memorandum.
See
Lander Plea Memorandum at 3-4. During the Lander Plea Hearing, counsel for Lander was specifically asked if Lander had received an opportunity to review the Lander Plea Memorandum.
See
Transcript from Lander Plea Hearing at 3. Counsel for Lander stated Lander had reviewed the Nathan Plea Memorandum.
See id.
Lander also stated he had read and discussed the Lander Plea Memorandum with his attorney.
See id.
at 10-11. Lander further stated he understood the Lander Plea Memorandum.
See id.
at 10.
Admissions under oath and, therefore, subject to the penalty of perjury, are as, if not more, reliable than stipulations. Admissions, such as those made by the Individual Defendants during their plea hearings, provide cause to utilize the limited exception provided for in Section lB1.2(a). The answers of Nathan and Lander providing a factual basis for the pleas and the adoption of the plea memorandum by each Individual Defendant clearly establish the knowing and willful commission of fraud.
The statements by the Individual Defendants served as affirmative admissions and were not merely statements of approval to the facts as set forth by the Government. These admissions were part of the quid pro quo between the Government and the Individual Defendants and are properly termed stipulations. Moreover, these admissions, which were oral statements made under oath during the Nathan and Lander Plea Hearings, and as part of the Nathan and Lander Plea Agreements, establish a more serious offense. Accordingly, the Individual Defendants stipulated to the more serious offense of fraud and Section 2F1.1 is the applicable Guideline.
3.
Calculation of Loss
The Individual Defendants, as well as ' Electrodyne,
57
object to the amount deemed
*252
by Probation to be the applicable calculation of loss under Section 2F1.1.
58
See
Lander Objection at 45; Transcript for Eleetrodyne Sentencing at 3-7.
During the Eleetrodyne Sentencing, Elec-trodyne challenged the calculation of loss as stated in the Eleetrodyne Presentence Investigation Report.
See
Transcript from Elec-trodyne Sentencing at 3. The Eleetrodyne Presentence Investigation Report suggested the restitution amount stipulated by Electro-dyne in the Eleetrodyne Plea Agreement of $369,105.70 served as an appropriate calculation of loss as well.
See id.
3-4. Electro-dyne contended the restitution amount inflated the amount of loss because some of the figures were counted twice.
See id.
at 6. Also, Eleetrodyne argued a portion of the restitution was being paid in kind instead of money.
See id.
Probation indicated Electro-dyne contended the appropriate loss figure was $229,905.70.
59
See
Eleetrodyne Presen-tence Investigation Report at 33. The Government indicated it stood by the stipulated figure contained in the Eleetrodyne Plea Agreement and considered the objections of Eleetrodyne to be a breach of the Electro-dyne Plea Agreement.
See id.
Further, the Government indicated it could prove the total loss was, at a minimum, $369,105.70.
See id.
In the Government Sentencing Memorandum, however, the Government indicates, without explanation, the loss figure of $189,-255.65 should be used.
See
Government Sentencing Memorandum at 1 n.l.
During the Eleetrodyne Sentencing, the stipulated restitution figure of $369,105.70 was deemed adequate to serve as the loss figure as well.
See
Transcript from Electro-dyne Sentencing at 7. The Circuit remanded the determination as to the loss figure indicating a sufficient finding of the amount of loss, as required by Rule 32(c)(1), was necessary.
See Electrodyne,
147 F.3d 250 , -, 1998 WL 304358, at * 6 . Such findings as to the calculation of loss for Eleetrodyne wdll be made in connection with the loss calculation for the Individual Defendants.
The Individual Defendants argue the calculation of loss set forth in paragraphs 108 and 109 of the Presentence Investigation Reports, as well as the adjustment applied in paragraph 143 of the Nathan Presentence Investigation Report and paragraph 150 of the Lander Presentence Investigation Report, are incorrect.
See
Lander Objection at 45. As a result of this argued miscalculation, the Individual Defendants contend the adjusted and total offense levels appearing in paragraphs 155, 158 and 160 of the Lander Presentenee Investigation Report and paragraphs 148, 151 and 153 of the Nathan Pre-sentence Investigation Report are also incorrect.
See id.
The Individual Defendants argue Probation has calculated the amount of loss attributable to them based solely upon loss figures stipulated by Eleetrodyne.
See
Lander Objection at 45-46. The Individual Defendants argue they are not bound by the stipulations regarding loss contained in the Eleetrodyne Plea Agreement, which was authorized by Nathan as sole director of Eleetrodyne,
see
Corporate Resolution, dated 16 October 1996, and are only responsible for the loss applicable to their individual offenses.
See id.
at 46.
Lander contends the amount of loss applicable to his offense is $7,250.
See
Lander Objection at 46; Lander Presentence Investi
*253
gation Report at 40. Nathan argues the applicable loss figure is $229,905.70, which excludes the $139,200 claim forgiven as to the Aii’ Force.
See
Nathan Presentence Investigation Report at 36. Nathan argues the adjustment set forth in paragraph 143 of the Nathan Presentence Investigation Report should be two levels pursuant to Section 2F1.1(b)(1)(C).
60
Lander contends the adjustment set forth in paragraph 150 of the Lander Presentence Investigation Report should be eight levels pursuant to Section 2Fl.l(b)(l)(I).
61
Probation observes that in the Electro-dyne Plea Agreement, the Government stipulated to restitution figures with regard to the contracts specified in Schedule A of the Eleetrodyne Plea Agreement.
See
Presen-tence Investigation Reports, ¶ 108. Probation indicates Eleetrodyne agreed to pay restitution of at least $229,905.70 and to relinquish a claim against the Air Force of $139,200.00
See id.
Probation further notes assuming the inclusion of relevant conduct, Eleetrodyne stipulated to a total loss figure for all Contracts of $369,105.70.
See id.
Nathan, as the sole director of Eleetrodyne, authorized counsel for Eleetrodyne to enter into this stipulation with the Government.
See
Certificate, executed 16 October 1996.
Probation states pursuant to Section IB 1.3, the Individual Defendants are responsible for the loss as computed for Eleetrodyne. Section lB1.3(a)(l) states the base offense level shall be determined by:
(A) all acts and omissions committed, aided, abetted, counseled, commanded, induced, procured, or willfully caused by the defendant; and
(B) in the case of jointly undertaken criminal activity (a criminal plan, scheme, endeavor, or enterprise undertaken by the defendant in concert with others, whether or not charged as a conspiracy), all reasonably foreseeable acts and omissions of others in furtherance of the jointly undertaken criminal activity, that occurred during the commission of the offense of conviction, in preparation for that offense, or in the course of attempting to avoid detection or responsibility for that offense.
Id.
Probation states the Individual Defendants were aware of and participated in the full scope of the conspiracy to defraud the United States Government and its agencies and to sell foreign manufactured items as having been made in the United States.
See
Lander Presentence Investigation Report at 41;
see also
Presentence Investigation Reports, ¶ 41. In fact, the conspiracy was made possible because of the actions of Nathan and Lander. Eleetrodyne was able to act only through them.
During the plea hearings, both Nathan and Lander admitted to orchestrating and participating in such fraudulent conduct making it appropriate to attribute the Individual Defendants with the full extent of the loss suffered by the Government because of their actions. It was only because of the actions of Nathan and Lander that such conduct occurred. Nathan, as the President, Vice-President and sole director of Eleetro-dyne, had the authority to enter into the Contracts. Nathan not only held a position of power in Eleetrodyne but, also, a large equity interest in the company.
Lander, the director of marketing of Elee-trodyne, was in charge of finding suppliers of items necessary to fulfill the Contracts executed by Nathan. His position of authority permitted him to direct the Foreign Manufacturers not to mark their products with country of origin markings. Lander also had control over Eleetrodyne employees and the packaging of Eleetrodyne products. The positions of authority both Nathan and Lander held further evidence their involvement in the instant conspiracy to defraud the Government.
*254
In calculating the amount of loss figure, Application Note Eight to Section 2F1.1 states:
For the purposes of subsection (b)(1), the loss need not be determined with precision. The court need only make a reasonable estimate of the loss, given the available information. This estimate, for example, may be based on the approximate number of victims and an estimate of the average loss to each victim, or on more general factors, such as the nature and duration of the fraud and the revenues generated by similar operations. The offenders’s gain from committing the fraud and the revenues generated by similar operations. The offender’s gain from committing the fraud is an alternative estimate that ordinarily will underestimate the loss.
Id.
Probation states it attempted to calculate the gain of the Individual Defendants and Electrodyne by “subtracting the Russian/Uk-rain[ian] contract cost from the cost contracted with the [Government agencies.”
See
Presentence Investigation Reports, ¶ 109. Probation explains because Electrodyne contracted with the Foreign Manufacturers to build only a subpart of the unit, it is unable to determine the exact pecuniary gain.
See id.
Accordingly, Probation states the stipulated loss figure of Electrodyne should be used in computing the appropriate loss for sentencing purposes for all Defendants.
See id.
The amount stipulated to as restitution by Electrodyne,
62
at the direction and approval of Nathan as the sole director of Electrodyne, is an adequate estimate of the full amount of loss sustained by the Federal Government and its agencies.
63
Section 3663(a)(3) indicates restitution may be ordered in a criminal case “to the extent agreed to by the parties in a plea agreement.”
See
18 U.S.C. § 3663 (a)(3). As indicated, the stipulated amount in the instant matter includes $2,000.00 to the Office of the General Counsel, Navy Research Laboratory, $170,660.00 to the Air Force, Attorney Advisor, $139,200.00 in a Stipulated Settlement with the Air Force and $57,245.70 to the Inspector General of NASA, Lewis Research Center.
See
Transcript from Electro-dyne Sentencing at 4-5.
As mentioned, Electrodyne contends some of the loss figures were double counted.
See
Transcript from Electrodyne Sentencing at 6. Additionally, Electrodyne contends a portion of the restitution was being paid in kind rather than in money.
See id.
These arguments are unpersuasive, especially considering Electrodyne stipulated to the $369,105.70 in the Electrodyne Plea Agreement.
The amounts stipulated as restitution, and by analogy used to calculate loss, were
*255
and are appropriately included in any sentencing determination.
64
There is no question the Air Force suffered a loss of at least $170,660; Electrodyne stipulated it would pay $170,660 to the Air Force.
See
Electro-dyne Plea Agreement, Schedule A, ¶ 2(a). In part, this amount reflects a payment of $89,-240 by the Air Force to Electrodyne for Phase Shifters which were never delivered.
65
See
Electrodyne Presentence Investigation Report, ¶ 111. Also, the Air Force stated an outlay of an additional $14,420 was necessary for re-procurement costs in connection with the Phase Shifters.
See id.
Additionally, the loss experienced by the Air Force includes $12,000
66
to compensate the Air Force for its expenditure in excess of the price of the Pin Diode Switch Contract to procure Pin Diode Switches which were never delivered by Electrodyne.
See
Electro-dyne Presentence Investigation Report, ¶ 112. Funds totaling $67,000 associated with finding an alternative source of Pin Diode Switches were also spent by the Air Force for employee time, labor, costs, travel expenses, administrative expenses and copying expenses and are appropriately included in the loss calculation.
67
See id.,
¶ 113 . Also,
*256
the Air Force relinquished a claim of approximately $139,200 against Eleetrodyne for failure to perform “contract # F08651-93-C-0306.”
See id.,
¶ 123 .
Eleetrodyne contended the relinquishment of the $139,200 claim by the Air Force was not appropriately termed restitution but, rather, was a “mutual ... forgiveness.”
See
Transcript from Eleetrodyne Sentencing at 6. The language of the Electro-dyne Plea Agreement clearly indicates the Air Force had agreed to accept something other than cash as restitution for the inability of Eleetrodyne to perform.
See
Eleetrodyne Plea Agreement, Schedule A, ¶2^). This relinquishment of the claim for approximately $139,200 compensates the Air Force for a loss which includes items Eleetrodyne never delivered and the accompanying delays and expenses related to this nonperformance.
68
Section 3663 does not limit restitution to only cash payments. Restitution, in certain instances, may be paid in property as well.
See
18 U.S.C. § 3663 (b). Moreover, 18 U.S.C. § 3664 (f)(3)(a) states: “A restitution order may direct the defendant to make a single, lump-sum payment, partial payments at' specified intervals, in-kind payments, or a combination of payments at specified intervals and in-kind payments.”
See
18 U.S.C. § 3664 (f)(3)(a). In-kind payments are permitted to be in the form of replacement of property as is the case in the instant matter.
See
18 U.S.C. § 3664 (f)(4).
Eleetrodyne agreed to pay as restitution to NASA a combination of cash and property, specifically converters contracted for in certain NASA agreements with Eleetrodyne.
See
Eleetrodyne Plea Agreement, Schedule A, ¶ 2(c). The stipulation was structured so the cash payment due from Eleetrodyne decreased depending on the number of converters Eleetrodyne supplied to NASA.
69
See id.
In total, Eleetrodyne provided NASA with $55,245.70 when the value of the converters and the cash is considered.
70
Accordingly,
*257
the total value of the converters provided to NASA in addition to the cash payment is appropriately considered in calculating the amount of loss.
71
The Individual Defendants by abusing their positions of authority, aided in, if not caused, the full extent of the fraud perpetuated against the Government causing such losses. The conspiracy against the Government was effectuated through and by the Individual Defendants. Electrodyne, a corporation, can only act through its employees. Here, the fraud perpetrated against the Government was channeled by the Individual Defendants through Electrodyne. Accordingly, the total loss figure of $369,105.70 is an appropriate and reasonable estimate warranting the inclusion of the nine-level adjustment pursuant to Section 2Fl.l(b)(l)(M) as to the Individual Defendants and Electro-dyne.
4.
More Than Minimal Planning
Probation states a two-level adjustment is applicable under Section 2F1.1(b)(2)(A) for more than minimal planning.
72
See
Lander Presentence Investigation Report, ¶ 151; Nathan Presentence Investigation Report, ¶ 144. “More than minimal planning” is defined in Application Note One, (f), to Section 1B1.1, which provides, in pertinent part:
73
“More than minimal planning” means more planning than is typical for the commission of the offense in simple form. “More than minimal planning” also exists if significant affirmative steps were taken to conceal the offense, other than conduct to which [U.S.S.G.] § 3C1.1 (Obstructing or Impeding the Administration of Justice) applies. “More than minimal planning” is deemed present in any ease involving repeated acts over a period of time, unless it is clear that each instance was purely opportune. Consequently, this adjustment will apply especially frequently in property offenses.
Id.
In the instant case, Nathan knowingly and fraudulently entered into the Contracts with various branches of the United States Government claiming the contracted for military parts would be manufactured in the United States. Nathan and Lander were both aware Russian and Ukrainian parts would be used in fulfilling the Contracts with the Government. The Individual Defendants sent plans and specifications concerning defense services to the Foreign Manufacturers without obtaining the necessary export licenses required by ITAR. The Individual Defendants traveled to Russia to visit some of the Foreign Manufacturers.
Nathan and Lander, moreover, intentionally and knowingly requested that the Foreign Manufactures omit country of origin markings. They went as far as to paint over existing country of origin markings so as to make the contracted for items appear as if they had been manufactured in the United
*258
States. These requests made of the Foreign Manufactures establish the Individual Defendants had contemplated and determined how they would incorporate foreign built parts into items which were to be made with American parts and labor. Also, the directions the Individual Defendants gave to the Electro-dyne employees to paint over foreign markings and to affix Eleetrodyne labels further evidences their thought out plan to hide any indication of foreign manufacture. This scheme required more than minimal planning. Accordingly, the two-level adjustment is appropriate.
5.
Aggravating Role
74
Nathan objects to the four-level upward adjustment recommended by Probation pursuant to Section 3B1.1(a).
See
Nathan Objection at 12. Section 3B1.1 provides adjustments to the offense level of a defendant based upon the role the defendant played in committing the offense. The applicability of this Guideline enhancement is based upon all relevant conduct and not solely upon the elements and acts cited in the counts of conviction.
See
Introductory Commentary to Section 3B1.1.
Section 3B1.1 sets forth the appropriate upward adjustments for individuals who play an aggravating role in the offense:
Based on the defendant’s role in the offense, increase the offense level as follows:
(a) If the defendant was an organizer or leader of a criminal activity that involved five or more participants or was otherwise extensive, increase by [four] levels.
(b) If the defendant was a manager or supervisor (but not an organizer or leader) and the criminal activity involved five or more participants or was otherwise extensive, increase by [three] levels.
(c) If the defendant was an organizer, leader, manager, or supervisor in any criminal activity other than described in (a) or (b), increase by [two] levels.
Id.
Nathan first argues the Nathan Plea Agreement stated no other Chapter Three adjustments applied except for a reduction for acceptance of responsibility.
See
Nathan Objection at 12 (citing Nathan Plea Agreement, Schedule A). Nathan concedes the stipulations he entered into with the Government are not binding on the court, but argues these stipulations should be accepted because they were the product of “extensive plea negotiations.”
See id.
As indicated, the stipulations in the Nathan Plea Agreement are not binding and do not constrain the instant determination of an appropriate sentence.
Second, Nathan conten

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Source: Frix Law Library, https://www.frixlaw.com/law-library/cases/2531823. Public record. Not legal advice.