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ASG’s CPO faces sentencing in federal 1602 case

A local couple, the first recipients to face federal charges under the federally-funded Section 1602 low income housing program, said they were “faced with growing financial pressures” including debts owed for another business operated by the couple, which caused them to use the federal funds as a “short-term loan”, according to the Sentencing Memorandums filed yesterday by the defense at the federal court in Washington D.C.

 

John Emil Kruse and his wife Elaine Gurr Kruse are each charged with one one count of “knowing conversion of government property” for personal and business use. John Kruse is the ASG’s chief procurement officer.

 

A Sentencing Memorandum was filed separately for each defendant.

 

The pair was arraigned via video conference from American Samoa on Nov. 14, when they entered pleas of not guilty.  A status hearing is set for Feb. 5, at which time the couple will enter guilty pleas and be sentenced thereafter, according to each of the Sentencing Memorandums.

 

The Sentencing Memorandums filed by the pair’s defense lawyers request that the court not impose jail time for the defendants.

 

(Samoa News reported previously that the couple pled indigence before the court and were each granted court appointed attorneys, who are from different D.C. law firms.)

 

For John Kruse, the defense requests a sentence of probation or, at most, home confinement, in whatever authorized period of time the Court may deem appropriate.

 

For Mrs. Kruse, a sentence of supervised probation, conditioned upon a 12-month period of home confinement, is sufficient, but not greater than necessary, to comply with the purposes of federal sentencing guidelines.

 

According to the defense, the couple has agreed to make full restitution in an amount determined by the court, “but that amount is at least $200,000”.

 

Some of the information from the court’s Pre-sentence Report was also included in the defense arguments in each memo.

 

JOHN KRUSE’S SENTENCING MEMORANDUM

 

“There is no suggestion – nor could there be – that the Kruses intended from the outset to obtain government funds they would misuse,” the defense argued in the 24-page memo. “The facts instead show a laudable plan gone awry.”

 

It went on to say that the Kruses — who provided their own land for the project — initially submitted a plan requesting a grant of $1.2 million to build 8 low-income housing units, but local administrator of the program, Development Bank of American Samoa, approved $864,095.04, while the project’s parameters would not be altered.

 

“In retrospect, the Kruses should never have accepted this reduced grant [amount], and should have simply walked away,” the memo states, adding that the Kruses now wished they had, even though this would have forced them to lose their up-front costs spent in completing the project plan.

 

“Instead, they ultimately agreed to proceed using these reduced terms, hoping to make the best of the limited funds being made available to them, after receiving express encouragement to proceed from American Samoa’s Governor,” according to the memo, which didn’t identify the governor by name, nor the time such encouragement was given.

 

When the Kruses proceeded with their revised, later-approved grant, they learned that most of the limited number of skilled laborers on island were already committed to other Section 1602 projects, the memo pointed out.

 

Most of the laborers they could find turned out to be unskilled and not up to the task of completing the Kruses’ more ambitious 8-unit project, the defense noted, and says the Kruses nevertheless engaged in substantial efforts to work on and complete the project they had designed.

 

John Kruse had acquired past construction experience from his days working for his father’s company, and had gone through several weeks to obtain his contractor’s license, according to the defense. However, he was not the one directly managing the accounts, but he did consult with his wife on such matters, and also worked generally at the project site daily from 2011-13, laboring diligently and in good faith, including sometimes during early and late hours, in a genuine attempt to complete the housing project the Kruses had designed — hoping to make his family proud, said the defense.

 

These efforts included even “working on the project well after the deadline of December 31, 2012 in an effort to finish it,” the memo says. “But with diminishing funds and limited help, the Kruses now acknowledge that they were ultimately unable to complete this project before the deadline specified by DBAS, and also that they would be unable to complete the work with the limited project funds remaining.”

 

During times when they were working on this project, “the Kruses were often faced with growing financial pressures, including from debts owed for another Region Pac business they ran,” the memo says, and noted that while the couple did not live lavishly, the Kruses acknowledge knowingly converting Section 1602 funds “to pay for personal and business expenses unrelated to that project.”

 

“The nature and circumstances of this offense, however, do not reveal an evil plan, so much as a good plan gone bad, due to unexpected circumstances and outside financial pressures,” it says.

 

Further John Kruse has openly admitted — even before being confronted with criminal charges, during his interviews with FBI agents — that he began to treat the funds as a short-term loan, which was then used to pay for unrelated expenses.

 

Kruse “had hoped to use these funds to buy retail products that the family business could then resell, and use future profits from the business to go back toward the Section 1602 Project,” said the defense, who acknowledged these “actions were clearly wrongful, [but] it is also apparent that this was not his goal from the outset.”

 

The defense argued that the nature and circumstances of this offense are a far cry from that of other defendants who set out to scam people, steal money, or defraud the system.

 

Instead, the Kruses’ offense “was more in the nature of an opportunistic offense that developed – the Kruses faced bills that needed to be paid, and as their financial pressures mounted, the Section 1602 funds seemed available to ease that strain,” the defense said.

 

“The Kruses crossed the line, and their actions have now resulted in felony convictions. But as their substantial hard work on-site, and in managing the various materials and labor, all attest — and as independently verified by the Kruses’ nearly 50 years (each) as law-abiding, respected members of society — the nature and circumstances of this offense call for mitigation,” the defense further argued.

 

The defense says the defendants are remorseful and cited provisions of the Pre-sentence Report, which states, “We are sorry... We are ashamed and embarrassed. Regardless of what happens in court, we will do all we can to pay back every penny that is owed to the government.”

 

ELAINE KRUSE’S SENTENCING MEMORANDUM

 

A separate 23-page Sentencing Memorandum filed yesterday for Mrs. Kruse states that she committed the crime during a period when she was overworked, stressed at the prospect of not being able to complete the project and severely depressed because there seemed to be no answer to the problems she and her husband were having with the project, which was draining what little financial reserves they had.

 

“They questioned how they would pay mounting bills that they were incurring, in large part, because they were drawn away from their other work trying to finish the 1602 project on time,” the memo says. “Their answer was to use some of the funds earmarked for the housing units to pay for other personal and business expenses.”

 

“The answer Mrs. Kruse chose was wrong, but she is not a heartless thief nor is she even a remote threat to the community that she has served faithfully for so many years,” the memo says.