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United States v. Merkel

United States District Court, D. Oregon, Portland Division

January 4, 2019

DENNIS G. MERKEL, Defendant.

          Sandra Moser ACTING CHIEF, FRAUD SECTION United States Department of Justice Jennifer Ballantyne Emily Scruggs TRIAL ATTORNEYS Fraud Section, Criminal Division United States Department of Justice Attorneys for Plaintiff

          Per A. Ramfjord Andrew Ho STOEL RIVES LLP Wendy J. Olson STOEL RIVES LLP Attorneys for Defendant HERNANDEZ, District Judge:

          OPINION & ORDER

          Marco A. Hernandez United States District Judge

         Defendant Dennis Merkel is charged with two counts of Major Fraud Against the United States in violation of 18 U.S.C. § 1031. On December 14, 2018, I heard oral argument on three motions to dismiss and a motion to strike surplusage from the Indictment. I ruled from the bench on three of those four motions but took the motion to dismiss based on the statute of limitations and/or pre-indictment delay, under advisement. See Dec. 14, 2018 Min. Ord., ECF 52. This Opinion explains my reasoning for denying that motion.

         Pursuant to Federal Rule of Criminal Procedure 12(b)(1), Defendant moves to dismiss the Indictment because the charges are barred by the applicable statute of limitations. Alternatively, he argues that the Indictment should be dismissed based on pre-indictment delay that violated his Fifth Amendment due process rights. Rule 12(b)(1) generally provides that "[a] party may raise by pretrial motion any defense, objection, or request that the court can determine without a trial on the merits." Fed. R. Cr. P. 12(b)(1).

         I. Factual Background Relevant to the Motion

         On April 17, 2018, the grand jury returned the Indictment charging Defendant with two counts of major fraud against the United States, arising out of the alleged alteration of tensile test results on two orders of aluminum extrusions sold by his employer, Company A, to two customers that were subcontractors to entities that had prime contracts with the United States. ECF 1, 2. Those test results were transmitted on May 20, 2002, nearly sixteen years before the Indictment.

         The Indictment alleges that Defendant was the production manager for Plant A beginning in or about 1986. It also alleges that Plant A was acquired by Company A in 2000. On April 2, 2002, Company A agreed to sell aluminum extrusions to Customer A, which was a subcontractor to an entity that had a prime contract with NASA dated October 28, 1998. On April 9, 2002, Company A agreed to sell aluminum extrusions to Company C, which was a subcontractor to Customer B, which had a prime contract with the Missile Defense Agency dated January 1, 2001.

         The Indictment alleges that Defendant was part of a scheme which existed over a ten-year period ending in about December 2006. As Defendant notes, this is approximately twelve years before the Indictment was returned.

         II. Statute of Limitations

         The major fraud statute has a seven-year statute of limitations. 18 U.S.C. § 1031(f). Defendant acknowledges that the seven-year period can be extended under certain circumstances by the Wartime Suspension of Limitations Act, 18 U.S.C. § 3287 (WSLA). Defendant argues, however, that the 2002 version of the WSLA, the statute that was in effect when the charged conduct allegedly took place, does not extend the period here and further, that the 2008 version does not apply retroactively. The Government does not appear to dispute that the statute of limitations begins to run on the date of the charged executions of the offense which is May 20, 2002. But, it argues that the 2008 amended version of the WSLA applies retroactively and thus, the charges are timely.

         Before its 2008 amendment, the WSLA provided that "[w]hen the United States is at war[, ] the running of any statute of limitations applicable to any offense (1) involving fraud or attempted fraud against the United States or any agency thereof in any manner, whether by conspiracy or not, . . . . shall be suspended until three years after the termination of hostilities as proclaimed by the President or by a concurrent resolution of Congress." 18 U.S.C. § 3287 (1948) (emphasis added). Before 2008, meaning under the original 1948 version of the statute, the WSLA applied "only when the United States was at war." Kellogg Brown & Root Servs., Inc. v. United States, ex rel. Carter, 135 S.Ct. 1970, 1974 (2015). Defendant argues that because there has been no formal declaration of war since the date of the alleged offenses involved here, May 20, 2002, the applicable version of the WSLA at that time would not have extended the major fraud statute's seven-year limitations period. Defendant contends that although the United States was engaged in military activity in Afghanistan beginning on October 7, 2001, and in Iraq as of March 30, 2003, Congress did not declare war in either instance and thus, the WSLA was never triggered. Because the United States has not been in a declared state of war since the offense date of May 20, 2002, Defendant argues that the pre-2008 WSLA cannot be applied to extend the statutory limitations period.

         Defendant relies on Kellogg Brown & Root for the proposition that the pre-2008 WSLA tolled the statute of limitations only when there was a formal declaration of war by Congress. The Court did not so hold, however. Instead, it expressly declined to resolve the issue. 135 S.Ct. at 1978 & n.4 (holding that because the case involved civil claims, the WSLA did not suspend the applicable statute of limitations under either the 1948 or 2008 version of the statute; explaining that "[t]his holding obviates any need to determine . . . whether the term 'war' in the 1948 Act applies only when Congress has formally declared war"). As a 2014 district court case observed, there is conflicting authority regarding whether the pre-2008 version of the WSLA was triggered by the Congressional Authorizations for the Use of Military Force (AUMF) in Iraq and Afghanistan with some courts holding that these conflicts did not implicate the pre-2008 version of the WSLA because there was no formal Congressional declaration of war and others reaching the opposite conclusion. United States v. Arnold, 991 F.Supp.2d 1307, 1314 (S.D. Ga. 2014) (discussing cases). Nonetheless, the Government here does not rely on the 2002 version of the statute and given the conflicting law on the "formal declaration of law" issue, I decline to further address the issue.

         The Government contends that the charges are timely under the 2008 amended WSLA. In 2008, the WSLA was amended to apply not only when the United States was at war but also "whenever Congress has enacted 'a specific authorization for the use of the Armed Forces, as described in section 5(b) of the War Powers Resolution (50 U.S.C. § 1544(b)).'" Kellogg Brown & Root, 135 S.Ct. at 1974 (quoting 18 U.S.C. § 3287 after 2008 amendment). The Government cites to two specific Congressional AUMFs in which Congress cited section 5(b) of the War Powers Resolution: one for the War on Terror, Pub. L. No. 107-40, 115 Stat. 224 (2001), and one for the operations in Iraq, Pub. L. No. 107-243, 116 Stat. 1498 (2002). Thus, both of these "conflicts" trigger the post-2008 WSLA's tolling of the statute of limitations. Additionally, the 2008 WSLA amendments extended the WSLA's tolling period from three years to five years. Kellogg Brown & Root, 135 S.Ct. at 1976.

         Several cases have applied the 2008 amended WSLA retroactively as long as the original statute of limitations had not expired at the time the amendments were adopted in October 2008. In Arnold, a case involving criminal charges to which the WSLA could apply to toll the statute of limitations, the court made several determinations relevant here. 991 F.Supp.2d at 1314-17. First, the court agreed that the AUMFs directed at the use of force in Iraq and Afghanistan in 2001 and 2002 triggered WSLA suspension under the 2008 version of the statute. Id. In contrast to the pre-amendment version on which there was a split of authority as to whether a formal Congressional declaration of war was required, the post-2008 version "clearly contemplates these authorizations as triggering suspension." Id. at 1314.

         Next, the Arnold court agreed with the majority of courts that the 2008 amended version of the WSLA applied to pre-amendment conduct as long as the original limitations period had not yet expired. Id. at 1314-15 ("The 'application of a statute of limitations extended before the original limitations period has expired does not violate the Ex Post Facto Clause'") (quoting United States v. Grimes, 142 F.3d 1342, 1351 (11th Cir. 1998); citing United States v. Wells Fargo Bank, N.A., 972 F.Supp.2d 593, 602 (S.D.N.Y. 2013); United States v. BNP Paribas SA, 884 F.Supp.2d 589, 608 (S.D. Tex. 2012)). Thus, the charges in the indictment at issue in Arnold, which were still timely as of the 2008 amendment of the WSLA, were tolled by the WSLA amendment unless, as provided for in the statute, there was a termination of hostilities. Id. at 1315. Quoting from a 2011 Florida case, the Arnold court noted that for charges "'for which the limitations period had expired prior to the effective date of the 2008 WSLA amendment, there is no suspension of the limitations period pursuant to the WSLA.'" Id. (quoting United States v. Anghaie, No. 1:09-CR-37-SPM/AK, 2011 WL 720044, at *2 (N.D. Fla. Feb. 21, 2011)). But for ...

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