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Conviction for violating U.S. embargo against selling Communist Chinese made ammunition to the U.S. Army upheld

In U.S. v. Merrill, the defendant was convicted in federal court in Miami of the federal crime of knowingly selling ammunition made by a Communist Chinese military company to the U.S. Army. Here are the facts. AEY, a munitions dealership based in Miami Beach, Florida, placed a bid with U.S. Army for a contract to supply the Afghanistan Security Forces with various types of military munitions including 500 million rounds of AK-47 ammunition. The contract called for AEY to supply certain ammunition to the Afghan National Police and the Afghan National Army over a two year period. As an investor in AEY, Merrill advised AEY how to prepare the bid, and used his contacts in the arms business to find prices for ammunition. When the army requested details about the financial viability of AEY, Merrill provided letters from two of his companies promising a loan of $36 million to support the contract. Merrill and codefendant agreed to split the profits. Their bid price of $298 million was accepted by the U.S. Army. AEY acquired its munitions from a munitions supplied called MEICO located in Albania. When one of the AEY representatives went to Albania to oversee shipping, he discovered Chinese characters on the wooden crates containing the ammunition and contacted the other principles of AEY. One of the coconspirators sent an email to the Directorate of Defense Trade Controls Response Team at the State Department asking about the legality of brokering Chinese ammunition to the Army if it had been sitting for about 20 years with a company in Albania that acquired it before the U.S. enacted the arms embargo against China purchasing military equipment manufactured by the Communist Chinese military companies. The response given by the State Department was that the transaction could not be authorized. The coconspirators went ahead with it anyway by removing the Chinese characters form the crates and packaging. As the ammunition was shipped, the coconspirators sent about 30 certificates of conformance containing false statements that MEICO was the manufacturer of the ammunition and not the Communist Chinese military company that actually made it. Merrill was charged federal crimes of making false statements to the Army; defrauding the Army by making false statements, wire fraud against the Army, and defrauding the government in the procurement of property.

1. The court rejected Merrill’s motion to dismiss indictment.

Merrill challenged the indictment on the grounds that MEICO had acquired the ammunition from Communist China forty years before AEY acquired it from MEICO. It also argued that AEY had no contract with the Chinese military company. The 11th Circuit held that the charges were valid, finding that the ban on any sales of ammunition made by Communist Chinese military company does not include any exception for munitions that left China before the regulation was enacted. Merrill’s interpretation would leave a “gaping” loophole that the Department of Defense could not have intended.

2. Public authority defense rejected.

Merrill also argued that the government knew the ammunition was manufactured by the Communist Chinese military company when it accepted it, arguing the defense of public authority. The 11th Circuit upheld the exclusion of any evidence the government knew that AEY was delivering ammunition originating with the Communist Chinese military because Merrill never alleged that he knew about or relied on any government approval when he committed his crimes. He claimed he later learned after the fact that the government knew of the true origin of the ammunition

Statements made in interview with agents were not protected as plea negotiations.

He moved to suppress statements made in an interview with the AUSA and agents, arguing that the statements were made in plea negotiations. The 11th Circuit found no error in denying the motion to suppress because there were no charges pending at the time of the interview.

Agents’ statements were not Jencks.

The Trial court denied Merrill’s motion to compel production of the agents’ notes from their meeting with Merrill, claiming there were was exculpatory information in the notes. The 11th Circuit agreed that the notes did not have to be produced under Fed.R.Crim.P. 26.2(a), because the notes reflected their accounts of Merrill’s testimony and were not transcriptions of his words. Therefore the notes were not “statements” under Jencks Act.