2:10-cr-20403-NGE-MKM Doc # 552 Filed 05/15/14 Pg 1 of 18 Pg ID 16745 UNITED STATES DISTRICT COURT EASTERN DISTRICT OF MICHIGAN SOUTHERN DIVISION UNITED STATES OF AMERICA, Plaintiff, Case No. 10-20403 v. Hon. Nancy G. Edmunds VICTOR M. MERCADO, D-4, Defendant. / DEFENDANT VICTOR MERCADO’S SENTENCING MEMORANDUM Defendant Victor Mercado asks the Court to consider the facts discussed in the following Sentencing Memorandum when determining an appropriate sentence. Mercado respectfully requests a sentence of probation due to the fact that he acted under duress and did not profit nor ever try to profit illegally from his position as Director of the Detroit Water and Sewerage Department. INTRODUCTION Mercado stood trial along with co-Defendants Kwame Kilpatrick, Bernard Kilpatrick, and Bobby Ferguson. The forty-six count Fourth Superseding Indictment alleged a RICO Conspiracy, bribery, extortion, mail/wire fraud, obstruction of justice, false tax returns, tax evasion, money laundering, aiding & abetting, and forfeiture of illegal proceeds. Unlike his co-Defendants, Mercado did not receive any money beyond his salary. Mercado was charged in Count One, the 200549127.1 34139/141939 2:10-cr-20403-NGE-MKM Doc # 552 Filed 05/15/14 Pg 2 of 18 Pg ID 16746 RICO Count (18 U.S.C. § 1962(d)); Count Four, Extortion (18 U.S.C. § 1951); Count Five, Extortion (18 U.S.C. § 1951); and Count Fourteen, Obstruction of Justice (18 U.S.C. § 1512(c)). As the government’s case moved to the counts related to Mercado, Mercado began to establish his defense via cross-examination of government witnesses. However, early in that part of the government’s case, and before Mercado had a chance to set out his defense, Mercado agreed to a narrow Rule 11 Plea Agreement. The government filed a Fifth Superseding Information alleging one count of Conspiracy to Commit an Offense Against the United States, 18 U.S.C. § 371. Mercado pled guilty to that count and in exchange the government agreed to dismiss all the counts in the Fourth Superseding Indictment, and further agreed to a downward departure under U.S.S.G. § 5K.2.0 due to the existence of mitigating facts not adequately taken into consideration in the sentencing guidelines, including that Mercado was acting under duress of a type not amounting to a complete defense. The parties agreed that if the Court were to grant the downward departure, the guideline range should be no higher than 18 months, with no minimum. Mercado admits to his mistakes, but wants the Court to consider the context when imposing sentence, including understanding the difficult job he was asked to perform by the late Honorable Judge Feikens, the long-standing history of 2 200549127.1 34139/141939 2:10-cr-20403-NGE-MKM Doc # 552 Filed 05/15/14 Pg 3 of 18 Pg ID 16747 inefficiency at the Detroit Water and Sewerage Department, the close relationships which existed between construction contractors and city government, and the unusual power wielded by Kilpatrick as Special Administrator over the DWSD, which allowed him to override Detroit City Council and Michigan state law. The Mayor abused this power, which was meant to combat the Clean Water Act compliance problems with DWSD, and instead personally enriched himself and his friends. City workers like Mercado found themselves in the unenviable position of needing to placate a corrupt Mayor and his corrupt administration. This memorandum will provide a portrait of Victor Mercado, his family, and career, and describe the nature of the duress under which he and the government agree he acted. Mercado asks the Court to consider all of the circumstances involved and impose a sentence of probation, which is appropriate in light of the duress under which Mercado acted and the fact that Mercado, in contrast to all the other defendants who have plead guilty or been convicted at trial, never took a single illicit penny. BACKGROUND Personal Background Victor Mercado is sixty two years old. He was born in 1951 in the Bronx and raised by his parents, who emigrated from Puerto Rico. His parents taught him and his three siblings the value of hard work and education, lessons Mercado has 3 200549127.1 34139/141939 2:10-cr-20403-NGE-MKM Doc # 552 Filed 05/15/14 Pg 4 of 18 Pg ID 16748 lived by his entire life and which he has imparted to his children. Mercado grew up in near poverty, close to Yankee Stadium, but was never able to afford a ticket to a ball game. He has never been materialistic, knowing that a job well done is its own reward. Mercado has always been employed from the time he was a young man. He worked his way through college in New York, earning a Bachelor’s Degree in Industrial Management and Economics. His work ethic and ability to get things done resulted in him landing a wide range of jobs around the world as his expertise and reputation grew, including London, the Dominican Republic, Puerto Rico, Argentina, Mexico, Panama, Turkey, and Costa Rica. His reputation and work ethic are what lead Hendrick & Struggles (a head hunting firm) to recruit him for the DWSD director job. After leaving DWSD, he was fired from his job as director at BexarMet Water in San Antonio, Texas, because of the Indictment. He eventually took a job working at a home improvement store as a floor clerk, a job he maintains to this day. Mercado is a loving father to his three children from his first marriage and his step daughter, whom he considers his own daughter, from his second marriage. He is married to Dadila Mercado and resides with her in Florida today. His wife and children have been supportive of him through this ordeal and are concerned for his future. Please see character reference letters submitted separately to the court 4 200549127.1 34139/141939 2:10-cr-20403-NGE-MKM Doc # 552 Filed 05/15/14 Pg 5 of 18 Pg ID 16749 from family, friends, and former coworkers which demonstrate the impact and positive influence he has had on all of their lives. Hiring Into Detroit Water and Sewerage Department Mercado had no ties to Detroit prior to being hired to run the DWSD. He was not brought in because he was a friend of Kilpatrick, whom he did not meet until he arrived in Detroit. Judge Feikens and Kilpatrick engaged a head hunting firm to perform a nationwide search to identify an appropriate candidate, and that firm identified Mercado as the best candidate. The reason for Judge Feikens’ involvement in the hiring process is explained in the history of federal court oversight of the DWSD.1 Judge Feikens appointed various Detroit mayors to the Special Administrator position, empowering them to override both state and city laws, giving them “the power to swiftly take the necessary actions to achieve compliance” with the Clean Water Act.2 This power was analogous to that of a federal receiver.3 Mercado learned at his very first job interview that the job at the DWSD was going to be unique, because he would be reporting to both a federal judge as well as Kilpatrick. Mercado knew that Kilpatrick’s responsibility was to ensure compliance with the Clean Water Act, and Mercado knew Kilpatrick could ignore city 1 For a brief history of the Special Administrator authority, see United States v. Michigan, 409 F. Supp. 2d 883, 885- 88 (E.D. Mich. 2006). 2 Id. at 886. 3 Id. at 886. 5 200549127.1 34139/141939 2:10-cr-20403-NGE-MKM Doc # 552 Filed 05/15/14 Pg 6 of 18 Pg ID 16750 contracting laws and override DWSD contracting procedures at whim. This helps explain the duress under which Mercado acted under during his tenure at DWSD. Mercado knew Kilpatrick had the legal authority to refuse to approve contracts until he was satisfied and could simply dictate to whom DWSD contracts should be awarded. Mercado felt pressure to do as Kilpatrick demanded, even though what Kilpatrick demanded seemed at odds with city contracting ordinances and seemed to favor Ferguson. Mercado was not one to let bureaucratic obstacles stand in his way. He did not care about politics and Kilpatrick’s motives, he just wanted to do his job, to ensure the DWSD complied with the Clean Water Act and also ensuring that proper investments in capital improvements were timely made to the constantly aging and failing Detroit water system—as he had learned to do in New York and San Juan. Mercado’s Tenure at the DWSD On his first day on the job, the DWSD experienced a massive water main break on E. Jefferson Avenue near Mt. Elliott. Mercado told his deputy director Gary Fujita to take him to the repair site. Mercado spoke with the repair foreman, observed the repair work, and stated to Fujita that the repair methods being used were 40 years old and that there were cheaper, safer, and quicker methods available that he had learned at prior positions in New York and San Juan. 6 200549127.1 34139/141939 2:10-cr-20403-NGE-MKM Doc # 552 Filed 05/15/14 Pg 7 of 18 Pg ID 16751 Fujita had served as interim director of the DWSD while Judge Feikens and Kilpatrick searched for a new director. Fujita told Kilpatrick that he would work at the DWSD until he was eligible for retirement in June, 2002, but he ultimately stayed and served as Deputy Director under Mercado until 2008 because of “Victor’s commitment to the successful operation of the water and sewerage systems [which] made the day-to-day work effort challenging and fulfilling for” Fujita until Mercado resigned.