Sentencing of a defendant who pleaded guilty to embezzling $1.7 million from Little Switzerland was postponed Wednesday until next week, after a co-defendant submitted a mysterious document to the court without her attorney's knowledge.
But before Territorial Court Judge Brenda Hollar set a new date for sentencing Lorrain Quetel, government prosecutors for the first time suggested the embezzled money left a trail leading to an attempt by her co-defendant, Lydia Magras, to purchase a Contant nightclub in 1996.
In May, Magras entered a plea of no contest to compounding the crime of embezzlement, a charge that carries a maximum penalty of three years in prison. The other defendant in the case, Quetel, pleaded guilty to embezzlement in a plea-bargain agreement shortly after charges were filed in 1998 and was to be sentenced Wednesday.
The postponement came after prosecutors presented their step-by-step analysis of how the monies were embezzled from the chain of general merchandise stores, where Quetel held a key position in the accounting department, and deposited into the accounts of the now-defunct Bon Voyage Travel.
Assistant Attorney General Douglas Sprotte said the "government has been able to track a substantial amount of the money" and described Magras and Quetel as partners in Bon Voyage, based on their individual 1995 tax returns.
An inspector general's report, he said, reflected receivables of $2.5 million, deposits of $2.1 million, expenditures of $2.4 million and an operating deficit of $370,845.69.
"This business was losing money badly," Sprotte said.
Sprotte said a Justice Department investigation suggested the funneling of funds through the travel agency was expressly for the purpose of purchasing Club Z, the Contant nightclub for which a public offering was made on June 12, 1996. With the assistance of Justice Department investigator Nicholas Peru, Sprotte began a methodical transaction-by-transaction history of the government's case against both women:
– In June 1996, JOPPA Inc. made a public offering to sell Club Z, a nightclub located in Estate Contant on St. Thomas.
– On Aug.12, 1996, Magras negotiated a contract to purchase Club Z with $50,000 as a downpayment followed by a $550,000 payment at closing and a $1 million mortgage to finance the remaining balance.
– On Aug. 13, 1996, the first check from Little Switzerland totaling $25,000 was deposited into Bon Voyage Travel accounts.
– On Aug. 20, 1996, Magras formed a corporation, Premium Properties, along with Glenn Freeman and Desmond Percell. Lorrain Quetel, Sprotte noted, was not a member of this corporation.
– On Aug. 22, 1996, another check from Little Switzerland for $50,000 was deposited into the accounts of Bon Voyage Travel.
– On Aug. 23, 1996, Magras wrote a $50,000 check from Bon Voyage Travel as downpayment on the Club Z nightclub and its associated real estate.
– Over the next seven months, Magras paid $281,664 towards the nightclub's purchase.
– The deal closed on March 12, 1997, with monthly payments expected to begin on June 1, 1997.
– The last check from Little Switzerland was deposited into Bon Voyage Travel's account on April 18, 1997.
"In essence, no payments were made on the club after the closing because the money dried up," Sprotte said.
He also told the court that Quetel wrote off $395,000 of the embezzled funds to her personal accounts while $1.3 million was deposited into the accounts of Bon Voyage Travel. Of the monies deposited to Bon Voyage Travel, Quetel wrote $145,000 back to herself and it is possible that $50,000 written in the form of a check bounced, he said.
Sprotte told the court that Peru's investigation determined that $370,845.69 was spent on the travel agency's business expenses. And he said thousands upon thousands of the embezzled funds went to Magras's friends and relatives and to Magras's automobile purchases, mortgages and credit-card expenses.
"When we look at this case in totality, we establish that it was motivated by the purchase of Club Z, to subsidize the operations of Bon Voyage Travel and for Lydia Magras to live an extravagant and exorbitant lifestyle," Sprotte said.
On the other hand, Sprotte admitted that "Ms. Quetel's motive is a mystery to us."
The prosecutor described her as a cooperating witness. "She pleaded guilty from the start — she has assisted the government greatly in its investigation," he told Hollar. He said the court should take that into account when imposing sentence.
Her own attorney, Frederick Watts, called the 40-year-old Quetel a wife and mother who has been disgraced in the last two years. He described her growing up in the V.I. French community, her education and her employment at Little Switzerland, where she climbed the ranks in the Accounting Divsion to a position where "perhaps she learned too much about the company's accounting methods."
She used her knowledge to engage a credit card scheme that saw her issuing credits against charges made on her credit cards after purchasing big-ticket merchandise. Watts detailed how she used pre-signed checks on a dormant, multimillion-dollar checking account to siphon money out of the company and into Bon Voyage Travel.
"While she was doling out thousands of dollars to aid a failing business, her partner was spending money like a drunken sailor," Watts said.
He said once the criminal activity came to light, Quetel immediately confessed and began returning jewelry and other items bought with the funds and offering restitution.
"My client has confessed to the government and to Little Switzerland that she embezzled the money," Watts said, "but we cannot say that she retained any of the money for personal gain."
Quetel sat with hands clasped at the defense table throughout the presentations by the government and her attorney, and her family occupied four benches in the courtroom.
Watts concluded by asking Hollar to suspend the prison sentence and instead place Quetel on supervised probation with the condition that "if she stumbles, the supervised probation would be revoked." He told the court that his client has been steadily employed since she was fired from Little Switzerland.
"She wants to earn money to make full restitution," Watts said. "I can assure that at the present time, she cannot do that. The family has no money buried in the backyard," Watts said.
On Quetel's behalf, Watts offered restitution of $100 per month for 10 years. Hollar frowned on that offer, describing it as "not even a good-faith offer, given what was embezzled."
Watts sought a continuance of the sentencing hearing while Sprotte asked to cross-examine the document submitted by Magras, and at one point asked that Magras be summoned to explain its contents. Watts' motion for continuance was denied.
One of Magras's attorney, Steve Russell, addressed the court admitting that he had no prior knowledge of the document being filed. "If in fact the court calls my client for the purposes of cross-examination," Russell said, "she could plead the Fifth Amendment" against self-incrimination.
Russell also told Hollar his client has refused to take the witness stand to discuss any aspect of the case before her sentencing, which is now set for 10 a.m. Tuesday.
Watts implored the court to strike the document from his client's pre-sentence report. "It's unreliable," he told Hollar. "It's an attempt by Ms. Magras, an accomplice, to shift the load to my client, Ms. Quetel,"
Hollar said she had it included because it is a document she reviewed prior to the sentencing hearing. According to court testimony, in the document Magras attempted to distance herself from the financial transactions of Little Switzerland and her travel agency, Bon Voyage Travel.
Watts repeatedly asked the court for additional time to "det
ermine the falsity of the document filed by Ms. Magras," calling it a "fantasy of Ms. Magras to avoid responsibility for what has been done."
Sprotte also asked the document be thoroughly investigated by the court prior to Quetel's sentencing. "Before the court is a statement bearing one side of the story," he said. "To fairly sentence Lorrain Quetel, we must examine this document and put the whole truth of this case on the record."
Hollar said she will impose sentence on Quetel in a hearing at 2:30 p.m. Wednesday — one day after Magras is to be sentenced before Territorial Court Judge Ishmael Meyers.
