Sears Fraud Case Dismissed for Fourth Time

In a stinging setback for the government, a federal judge Monday dismissed criminal fraud charges against Sears, Roebuck & Co., marking the fourth time in seven years that the trial court in Los Angeles has rebuffed the case.

Criticizing federal prosecutors for repeated delays in bringing the case to trial, U.S. District Judge A. Andrew Hauk cleared the way for an immediate appeal to determine whether Sears will ever be tried on charges of concealing rebates and credits on foreign television sets from U.S. Customs agents to avoid paying import duties.

The case, involving imports from the 1960s, is one of the oldest still making its way through the federal courts. The matter has been mired in a dispute between the chief federal judge in Los Angeles and the U.S. 9th Circuit Court of Appeals over the trial judge’s ability to oversee the case.

Chief Judge Manuel L. Real three times ordered the 1980 indictment dismissed, originally because of misconduct by Justice Department lawyer Paul Gorman, who had allegedly bullied witnesses during grand jury proceedings.

The federal appeals court reversed Real on all three occasions, finally ordering the chief judge to give up the case to preserve “the appearance of justice.”

Real balked, contending that the reassignment order was an affront to the independence of the trial judiciary. He reassigned the case only last month, eight months after the U.S. Supreme Court refused to hear the issue.

Hauk, a former chief judge whose reputation for tenacity exceeds even Real’s, was randomly selected to hear the case. On Monday, he considered Sears’ motion to dismiss the indictment on grounds that the protracted legal struggle had violated the corporation’s right to a speedy trial.

Government lawyers vigorously contested the motion, arguing that it was Sears’ repeated motions for dismissal and Real’s legal dispute in this case and a similar jurisdictional case that had prompted the delays.

“You were trying to placate Judge Real, I know. You were trying to be sweet,” Hauk said.

But he scoffed at suggestions that government lawyers had no notification that the court intended to dismiss a new indictment, issued in 1984 alleging similar violations, on speedy trial grounds. Government lawyers claimed that the speedy trial requirement did not apply because of the 1984 indictment.

“Real did everything but beat you over the head,” Hauk said. “The government engaged in terrible misconduct . . . all that tripe and trash that fellow (Justice Department attorney) Gorman put before the grand jury, it was horrible. . . . This is the fourth time around, now. How many warnings do you want?”

In his ruling, Hauk indicated that he expected that government lawyers would appeal the dismissal, ultimately clearing the way for a trial on the charges if the appeals court dispenses with the speedy trial issue.

U.S. Atty. Robert C. Bonner declined to comment on the case, except to say: “In all likelihood, we will pursue an appeal from the dismissal by Judge Hauk.”

The indictment accuses Sears, the nation’s largest retailer, of concealing more than $1.1 million in rebates and credits that it had privately arranged with suppliers in Japan. The government alleges Sears did so in order to avoid certain duties imposed by U.S. authorities on some merchandise sold in this country for prices below those charged in their home market.