Chief Judge Coughenour MI I aura-out?ows 33% ram ll - - - ?gs Irish UNITED STATES DISTRICT We Straw,? WESTERN DISTRICT OF WASHINGTON AT SEATTLE any UNITED STATES oE AMERICA, It NO. Plaintiff, v. PLEA AGREEMENT ALPHA TECHNOLOGIES, INC. Defendant. The United States of America, by and through John McKay, United States. Attorney for the Western District of Washington, and Robert Westinghouse and Susan Loitz, Assistant United States Attorneys for said District, and the defendant ALPHA TECHNOLOGIES, INC. by and through its attorneys, Robert M. McCallurn and Bradley A. Smith, enter into the following Plea Agreement, pursuant to Federal Rule of Criminal Procedure 1. Waiver of Indictment. Defendant ATI, having been advised of the right to llhe charged by Indictment, agrees to waive that right and enter a plea of guilty to the charge brought by the United States Attorney in an Information. 2. The Charge. Defendant ATI, having been advised of the right to have this matter tried before a jury, agrees to waive that right and enter a plea of guilty to the following charge contained in the Information: Aiding and Assisting in the Preparation and Presentation of a False Income Tart Return in violation of Title 26, United States Code, Section 7206(2) PLEAL AGREEMENT - 1 UNITED STATES arrow or - ti?l UNIDH STREET. SUITE 5100 15113113 Im" SEATTLE. Wartime-Ton atom-3903 tees} 55:1 .1910 1 By entering this plea of guilty, Defendant ATI hereby waives all objections to the form 2 of the charging document. 3 2. Corporate Audtoriaatiop. Defendant ATI represents that it is authorized to 4 enter into this Plea Agreement. On or before the date of entry and ?ling of the Plea 5 Agreement, ATI shall provide to the United States and the Court a true and correct cop}r 6 of the resolution issued by Board of Directors authorizing ATI to enter into this 7 Plea Agreement and to appear at the Rule 11 hearing and enter the plea on behalf of the 3 company. ATI has voluntarily agreed to appear at the guilty plea hearing through an a of?cer of the company. to 3. Elemeng of me O??ense. The elements of the offense of Aiding and I1. Assisting in the Preparation and Presentation of a False Income Tax Return as charged 12 llin the Information, in violation of Title 26, United States Code, Section 7206(2), are as 13 follows: 14 First, Defendant assisted or advised Defendant G. B. Enterprises, Inc. 15 ll in the preparation and presentation of an income tax return for GBE for 16 the calendar year 1996 that was false as to a material matter; 17 Second, the return contained a written declaration that it was made under it the penalties of perjury; 19 ll Third, Defendant ATI did not believe the return to be true and correct as so to the material matter charged in the Information; and, 21 Fourth, Defendant ATI acted willfully, with the speci?c intent to violate 22 the law. 23 4. The Penalties. Defendant ATI understands that the statutory penalties for 24 the offense of Aiding and Assisting the Preparation and Presentation of a False Income 25 Tax Return, as charged in the Information, are as followsFive Hundred Thousand dollars a period of 27 probation of up to Five (5) years; assessment of the costs of prosecution; and a Four 23 Hundred dollar ($400.00) penalty assessment. PLEA AGREEMENT 2 UNITED arroassr Alpha Technologies, Inc. mm? Sen-rut, wastnuo'ron ?lial-39:13 [206) ass-?ism Defendant ATI understands that in addition to the statutory maximum penalties set forth above, the Court may order Defendant ATI to pay restitution to any victim of the offense, including all past due tax. liabilities, civil penalties, and interest as required by law. Defendant ATI further understands that it may be ?ned under the Alternative Fines Provision set forth in Title 18, United States Code, Section 3571((1), "which provides: ?If any person derives pecuniary gain from the offense, or if the offense results in a pecuniary loss to a person other than the defendant, the defendant may be ?ned not more than the greater of Mice the gross gain or twice the gross loss "unless imposition of a fine under this subsection would unduly complicate or prolong the sentencing process. Defendant agrees that the special assessment is due and payable upon ?entry of the guilty plea and any other monetary penalty the Court imposes, including any ?ne or costs, is due and payable immediately upon imposition of the sentence provided for in this Plea Agreement. Defendant ATI further agrees that if any ?nancial obligation imposed by the court at sentencing is not paid in full at sentencing, ATI will submit completed Financial Statement of Debtor forms as requested by the United States Attorney?s Of?ce. Defendant ATI and the United States further understand that, pursuant to Rule the speci?c sentence that the Court must impose in this case has been agreed upon by the parties and the Court, if it accepts the pleas of guilty, must either impose the speci?ed sentence or allow Defendant ATI to withdraw its plea of guilty and the United States to withdraw from this Plea Agreement. 5. Rights Waiv? by Pimps? Guilty. Defendant ATI understands that, by pleading gllilty, it knowingly and voluntarily waives the following tights: a. The right to plead not guilty, and to persist in a plea of not guilty; b. The right to a speedy and public trial before an impartial jury; PLEA AGREEMENT - 3 urorsn stares Alpha technologies, Inc. mm" Seamus. ?lm-39m 553-1970 The right to the effective assistance of counsel at trial, including, if Defendant could not afford an attorney, the right to have the Court appoint one for Defendant; d. The right to be presumed innocent until guilt has been established at trial, beyond a reasonable doubt; I e. The right to confront and cross-examine witnesses against Defendant at trial; f. The right to compel or subpoena witnesses to appear on Defendant?s behalf at trial; g. The right to testify or to remain silent at trial, at which trial such silence could not he used against Defendant; and h. The right to appeal a ?nding of guilt or any pretrial rulings. 6. Mplicabili? o: Sentencing Guidelines. Defendant ATI understands that "the United States Sentencing Guidelines promulgated by the United States Sentencing Commission apply to this case, subject to the terms of this Plea Agreement and Rule of the Federal Rules of Criminal Procedure. Speci?cally, the November 1995 Edition of the Federal Sentencing Guidelines Manual, as amended through November 1, 1996, shall app];r to this case. Defendant ATI may not withdraw its guilty plea solely because of the sentence imposed by the Court, provided the Court imposes the speci?c sentence provided for in this Plea Agreement. 7. Ultimate Sentegg. Defenth ATI acknowledges that this Plea Agreement lie governed by Rule of the Federal Rules of Criminal Procedure. Pursuant lno Rule the United States and Defendant ATI have agreed that the speci?c sentence that the Court must impose in this case is as follows: a. Line. A fine of Five Hundred Thousand dollars Said ?ne is due and payable immediately upon imposition of the sentence provided for in this Plea Agreement. PLEA AGREEMENT 4 sense stares arroausr so: Hurts-t Smear, Sum 5100 Alpha Tethnologres, Inc. Mm,? momma tans; assure assessment. A penalty assessment of Four Hundred dollars Said assessment is due and payable upon entry of the guilty plea. No additional assessment for costs of prosecution will he intposed on Defendant ATI. c. Probation Organizational probation for a period of one (1) year pursuant to USSG Sections 3131.1 and 3D1.2. The terms of probation shall include the following standard conditions through (7), with the modi?cation of condition (7) as set forth below, and speci?c provisions (3) through (11): (1) Within thirt}.r days from the date of this judgment, Defendant ATI shall designate an of?cer to act as its representative and to be the primary.r contact with the probation of?cer; (2) Defendant All shall answer truthfully all inquiries by the rebation of?cer and follow the instructions of the probation of?cer; (3) Defendant ATI shall notify the probation of?cer ten days rior to an},r change in principal business or mailing address; (4) Defendant ATI shall permit a probation of?cer to visit at any of its operating business sites; (5) Defendant ATI shall notify the probation of?cer within seventy-nave hours of any criminal prosecution, major civil litigation, or administrative proceeding against it; I (6) Defendant ATI shall not dissolve, change its natne, or Change the name under which it does business unless this judgment and all criminal monetary penalties imposed by this Court are either fully satis?ed or are equally enforceable against ATI's successors and assigns; and (7) Defendant ATI shall not waste, not without permission of the probation of?cer sell, assign or transfer its assets, unless this judgment and all criminal monetary penalties imposed by this Court are fully satis?ed. (8) No Futlher Violation Defendant ATI shall commit no further tax offenses nor aid and assist any other individual or business entity in the PLEA AGREEMENT - 5 UNITED srarcs arronner . . an em arse sun Alpha Technologies, Inc. Seam, saint-sacs {206] 553-797!) commission of any further tan offenses, including any offense involving the improper claim of a deduction from income of any amount of commission when the commission or a portion thereof is transferred to a foreign bank account or to a foreign business entity or to an individual in a foreign country for any purpose other than to pay ordinary and necessary business expenses incurred by ATI. Nothing herein shall prohibit the United Stems from proceeding administratively, civilly, or criminally against Defendant ATI in any separate proceeding for any such alleged tax offense involving any subsequent tan period. (9) Accounting for Foreign fl mfers - On an annual basis, Defendant ATI will provide an accounting to the United States Probation Of?ce of all transfers of funds to and from foreign bank accounts and to and from foreign business entities and to and from all individuals in foreign countries in which it is a participant or where such transfers are undertaken at its direction or on its behalf, and will, if requested by the United States Probation Of?ce, provide the transfer documents showing the source of and the recipient of, including originating and receiving banks, all- international transfers of funds, and all documents relating to the reasons for the transfers, (10) Ta and accounting Sgt?: - Defendant ATI shall form a tax i and accounting staff separate and apart from Defendant GEE. I (11) CPA Eirni Defendant ATI shall engage an independent CPA firm not previously associated with the preparation of its income tax returns to prepare income tax remrns. 8. of Facts. The parties agree on the following facts in support of Defendant guilty plea and for purposes of calculating the base offense level of the Sentencing Guidelines, Defendant ATI admits it is guilty of the charged offense. a. Defendants Alpha Technologies, Inc. and G. B. Enterprises, Inc. are Washington corporations, with their principal places of business in Bellingham, Washington. Fred Kaiser controls ATI and a group of related ?Alpha" corporate PLEA AGREEMENT - 6 UNITED stares arrosnsv - 601 UNIDH Eraser. Solrasloo Alpha Technologies, Inc. S?mm WAS assist-sacs ?106} Sid-Tm entities worldwide. The Alpha corporate entities manage product lines that include uninterruptible poWer supplies and related products for the cable television and cellular telephone industries Grace L. Borsari is the sole shareholder of GBE, which manufactures ?Alpha? branded products. Mr. Kaiser and Ms. Borsari are close business associates. b. In 1996, GEE paid an eight percent sales commission? on meat product sales to ATI, the entity primarily responsible for administration and sales. ATE was responsible for the maintenance of a regional sales network principally comprised of independent sales representatives. paid these independent sales representatives a smaller sales commission, amounting to approximatelyr onehalf of the gross sales commissions. c. The balance of the sales commissions paid by GBE to was lrecorded on books in a commissions clearing account. From time to time during 1996, at the direction of Mr. Kaiser, ATI wire transferred amounts from the commissions clearing account either to Alpha Technologies GRC, Ltd. a Cayman corporation, or to Alphatec. Ltd, a Cypriot corporation. d. GEE reported the entire amount of its sales commissions paid into the ATI commissions clearing account as an ordinary and necessary business expense for which GEE claimed a deduction. However, in truth, GEE and ATI knew that GEE was only entitled to deduct that portion of the sales commissions that was acmally paid to independent sales representatives and could not deduct that portion of the sales commissions that was transferred off-shore to Alpha Technologies GRC, Ltd. and "Alphatec, Ltd., both of which were controlled by Fred Kaiser. These residual commissions were not bona ?de ordinary and necessary business expenses because there were no services rendered to GEE or ATI and, consequently, there was no justification for the deduction of these residual comissions by GEE. e. For 1996, GEE reported in its federal tax return sales commissions of $9,577,413. In truth, $5,031,490 was improperly included in the clairned deduction. PLEA AGREEMENT - "l entree STATEEATTURNEY . an ?rm .5 5th Alpha In? tans) 553?1er This failure to accurately report only the legitimate business expense relating to sales commissions results in an additional tax owing for 1996 of $1,721,369. For the eight year period beginning in 1994 and continuing through 2001, GEE exaggerated its true sales commissions by $56,879,852, thereby resulting, in an additional tax liability in "excess of $19,564,000, exclusive of civil penalties and interest. f. Defendant ATI aided and assisted in the preparation and presentation of the 1996 federal income tax return for Defendant GEE. 9. of Additional Offenses. As part of this Plea Agreement and the plea agreement between the United States and Defendant GBE (the Plea Agreement?), the United States Attorney?s Of?ce for the Western District of Washington and the Tax Division of the United States Department of Justice agree not to prosecute Defendants ATI and GEE for any additional offenses known to them as of the time of this Agreement that are based upon evidence in their possession at this time, or that arise out of the conduct giving rise to this investigation, the improper deduction as a business expense of sales commissions paid by GEE to and transferred by ATI off-shore. The United States Attorney?s Of?ce for the Western District of Washington and the Tax Division of the United States Department of Justice further agree not to prosecute Fred Kaiser, Grace L. Eorsari, or any employee (or agents) of either Defendant ATI or GEE, individually, for any offenses that are based upon evidence in their possession at this time, or that arise out of the conduct giving rise to this investigation, the improper deduction as a business expense of sales "commissions paid by GEE to ATI and transferred by ATI off?shore. This agreement not to prosecute includes any offenses committed in connection with the IRS civil audit andfor the criminal tax investigation of ATI, GEE andfor any agent or employee of the corporations. In this regard, Defendant ATI recognizes that the United States has agreed not to prosecute all of the criminal charges that the United States contends were committed by these defendants and by individuals associated with or employed by these defendants solely because of the promises made by ATI in this Plea Agreement and by PLEA AGREEMENT 3 UNITED xrrotntev Alpha Technologies, Inc. [206} 553 #919 Defendant GEE in the GEE Plea Agreement. Defendant ATI acknowledges, however, that the United States Attorney?s Of?ce will provide the United States Probation Of?ce with evidence of all relevant conduct committed by each of the defendants. 10. Veluntariness of Plea. Defendant ATI acknowledges that it has entered into this Plea Agreement freer and voluntarily, and that no threats or promises, other than the premises contained in this Plea Agreement, were made to induce Defendant ATI to enter this plea of guilty. II. Statutes Qf Litnitgtion. In the event that this Agreement or the GEE Plea Agreement is not accepted by the Court for an}.r reason, or Defendants ATI andfer GEE have breached any of the terms of their respective Plea Agreements, all statutes of "limitation that have not expired as of the date of this Plea Agreement shall be deemed to have been tolled from the date of this Plea Agreement to: (1) 30 days following the date of non-acceptance of this Plea Agreement or the GEE Plea Agreement by the Court; or (2) 30 days following the date on which a breach of this Plea Agreement or the GEE Plea Agreement by a defendant is discovered by the United States Attorney?s Of?ce. 12. Application of this Plea Agreemnt. The United States and Defendant ATI acknowledge that this Plea Agreement is made pursuant to Rule of the Federal Rules of Criminal Procedure. If the Court rejects any part of the sentence provided for in this Plea Agreement, the United States and Defendant ATI will be given Ilthe oppermnity to withdraw from the Plea Agreement and Defendant ATI will be given the opportunity to withdraw the plea of guilty. 13. Post?Plea Conduct. Defendant ATI understands that the terms of this Plea Agreement apply only to conduct that occurred prior to the execution of this Plea Agreement. If between the date of this Plea Agreement and sentencing either or both of Defendants ATI and GBE should engage in conduct that would warrant an increase in either defendant's adjusted offense level. or justify an upward departure under the Sentencing Guidelines (examples of which include, but are not limited to: obstruction of 'ustice, failure to appear for a court proceeding, criminal conduct while pending PLEA AGREEMENT - 9 ounce srarss ar-reassv Alpha Technologies, Inc. an UtooN sneer. sun-sum SEATTLE. 98101?3903 {1905} sentencing, and false statements to law enforcement agents, the probation of?eer or 2 Court), the United States is free under this Plea Agreement to withdraw from this Plea 3 Agreement. 4 l4. ef Plea Agreements. This Plea Agreement shall be 5 ?conditioned upon the Court?s acceptance of the GEE Plea Agreement. ATI understands 6 that this Plea Agreement is one part of a two-part package plea agreement with the '3 United States, and that if GEE does not enter a plea pursuant to its agreement with the a United States, or subsequently withdraws its plea entered pursuant to that agreement a "prior to sentencing, ATI will be free to withdraw its plea under this Plea Agreement and 10 the United States will be free to withdraw from both plea agreements, This Plea 11 Agreement is also conditioned upen the execution by Defendant GEE of the Closing 12 Agreement as provided in paragraph 3 of the GEE Plea Agreement. 13 ll 15. Completeness 9f Aggeemgnt. The United States and Defendant ATI 14 aelmowledge that these terms together with the GEE Plea Agreement and the Closing 15 Agreement constitute the entire agreement between the parties. This Plea Agreement. 16 only binds the United States Attorney?s Of?ce for the Western District of Washington 1? and the Tar Division of the United States Department of Justice. It does not hind any PLEA AGREEMENT - 10 unrrso stares ATTORNEY Al ha Teehnolo ies Inc. on ones: Smear. sons are: Sear-rte, Wasameron Balm?3903 553-1970 1 other United States Attorney's Of?ce or any e?zler of?ce or agency 0f the United States, 2 01' any state 01' local pmaeeuter. Dated this I day of April, 2004. 3 27/? 9 R0 M. . Attorney for Alpha Technelogms, IncSUSANIOITZ 5? Assistant United tea Henley PLEA AGREEMENT - 11 UNITED sums ATTORNEY A1 1 . . 601 Dream STREET. Sane mm P113 Tm 03155: 111': SEATTLE. Waanmetea natal-3903 12.06] 553-3970 DOCKET NUMBERINSTRUCTIONS FOR PAYING SPECIAL ASSESSMENTS PRIOR TO SENTENCING 1. ecial Assessments aid prior to sentencing must be paid to the erk, United States Court. 2. Special Assessments must be paid a ?rst party, certi?ed, or cashiers check, or a mono order. 0 second party checks will be accepted. No post-dated ecks be accepted. 3. $11 checks must he made out in U.S. dollars to ?Clerk, District 01111. 4. All checks or money orders must be accompanied by the attached form entitled, ?Plea A cement ecial Assessment Payments? The entire form must be ?l ed out or Clerk, United States District Court, Will not accept the payment. PLEA AGREEMENT SPECIAL ASSESSMENT PAYMENT DATE: TO: CLERK U.s. DISTRICT COURT ATTN: INTAKE TEAM CASE NAME: United Stags v. Alpha Technologies, Inc. NAME: Alpha Technologies, Inc, SINGLE DR MULTIPLE DEFENDANTS: Single Egg??l? SPECIAL ASSESSMENT AS SET FORTH IN THE PLEA AGREEMENT: PLEA AGREEMENT - 12 UNITED - 15011! Eraser. Stars 5100 Alpha Technologies, Inc. semi-sacs SSE-TWO