Where the Money Went

The accusation, and the record

Susan Blake had nothing to do with the two big jobs

The State put Susan Blake’s money behind the Saudi and Paul Mitchell jobs. On its direct examination she said the checks she wrote me were “funds to finish the jobs to keep the business going” (RT 1777:15-16), and that I “would receive the money from the Saudi job” (RT 1784:16-17). Ruling on my motion to acquit, the court took it as fact: she “did advance Mr. Merritt over $5,000 of her own funds, ostensibly to complete existing projects” (RT 4995:23-4996:2).

She had no part in either job. Paul Mitchell’s wire came to me on February 22, and I finished the install in New York by March 5; by my account, the final payment of about $11,000 went to Dan after the install. Kocache paid the Saudi balance on March 5, $13,862 to me and $16,839.25 to Dan. Both jobs were finished and paid for before she wrote me anything. Her first check to me is dated March 31, 2010 (RT 1777:10-13), 26 days later, and every check after it was for the new orders she and Dan took in (section 5). Of the final payments on the two big jobs, about $27,800 went to Dan, not to me (section 5). On March 17, before she wrote me a single check, I sat in her car and wrote out for her everything that had come in on those jobs (Part 4). She knew this.

See the trial transcript (RT 1777, 1784, 4995, 4996)

What the State built on the money

Mr. Imes gave the jury the motive in one line: (RT 8213:22-26)

“Why? Because he owes $42,000.00, he forged checks, he’s being sidelined. He’s not going to let that happen, because he’s a greedy …”

See the trial transcript (RT 8212-8214)

Ms. Rodriguez, in rebuttal, the State’s last word: (RT 8442:17-8443:6)

“Dan Kavanaugh took money from the business after. Absolutely. There’s no question about that. … Whether or not that was right or wrong, he wasn’t taking money before the McStay family disappeared. He was. (Pointing.) He was the one taking the money. He was the one forging the checks.”

See the trial transcript (RT 8442, 8443)

And the court, denying my motion for a new trial: (RT 8946:10-25)

“All of that information corroborates the financial motive alleged by the People, that the defendant was taking funds from the business, corroborates Metro Sheet Metal complaints regarding the defendant, and corroborates Joseph’s stated intentions to phase the defendant out of the business.”

See the trial transcript (RT 8946)

1. February 2 to March 5: what came to me

Joseph and I were finishing two big jobs: three waterfalls for Kocache in Saudi Arabia, and one for Paul Mitchell in Albany, New York. Joseph’s own e-mail of February 1 put what I was owed on these two jobs at $18,225 for Saudi Arabia and $7,775 for Paul Mitchell (section 4). That is the yardstick. Everything I received in that month is below. The four checks are the ones on Joseph’s account that the State called forgeries; they are answered on Part 2.

See my bank records (February and March 2010)

On February 22, the day the Paul Mitchell wire came in, Dan and I were on a recorded call with Det. DuGal. Dan said Paul Mitchell was “sending a five G wire to you for materials” … “to finish that right now.” I told the detective that money was going straight to Metro: “none of that five thousand dollars is actually mine … it’d have to go to Metro Sheet Metal … if Metro Sheet Metal doesn’t get that money they cannot or actually will not release the waterfalls.” (Speakerphone call, February 22, 2010, pp. 21-22; Part 4) That afternoon I withdrew $4,900, and Metro’s own statement shows a $4,900 payment that day.

2. Where it went

These are my figures. I worked them out by hand, from my own records, and gave them to my lawyers, and to their accounting expert on a jail visit. My lawyers’ trial exhibits on these two jobs are headed “From Charles Merritt’s Records.” They took my figures and matched them, line by line, to my bank record and to Joseph’s QuickBooks. That matching is in the right-hand column.

The glass. On February 10, I withdrew $5,500 in cash. On the morning of February 11, at 10:26, I called directory assistance (411). At 10:32 a San Bernardino number called me, and at 10:35, as my phone reached San Bernardino, I called it back. It is a number I had dealt with before: it had called me on March 30, 2009, three days before one of my checks to SB Glass, and again on July 7, 2009. My phone stayed on San Bernardino towers until 11:17, including two within about a mile of downtown, where SB Glass is (Exhibit 794, items 857, 3357, 9231-9248). Whose number it was is not in the record; that it was SB Glass is my inference from the dates. On February 22, on the recorded call with Det. DuGal listening, I said of the Saudi waterfalls: “I ordered the glass in place and all we have is the smaller of the three,” and of Paul Mitchell: “the glass is here.” (Speakerphone call, February 22, 2010, p. 21)

See my sheets

See my lawyers’ exhibits, built from my sheets (with my own notes on them)

See my bank record (the withdrawals)

Where the exhibits differ from my sheets, the exhibits counted less: $1,300 for pumps instead of my $1,820, and nothing for crating and shipping or for the replacement glass on Paul Mitchell. On the other side, they added $900 in cash I received on Paul Mitchell, which is on the pages I wrote for Susan Blake on March 17. Counted their way, I was still $7,328 short of Joseph’s figures.

3. March 5: the Saudi balance, from New York

On March 5, 2010, Kocache paid the balance on the Saudi job. My share came to my account; Dan’s came to his. My bank record shows the wire, $13,862.00, “Orig: Kocache Enterprises Sal,” for the balance “Of Payment Of PO.” The court’s exhibit shows the other half: $16,839.25 to Dan Kavanaugh the same day (Exhibit 1115; RT 7085-7086).

See my bank record and the trial transcript

I was in Albany, New York, that day, finishing the Paul Mitchell install. My bank record shows a teller withdrawal and a transfer at the Bank of America at 500 State Street, New York, on March 5, and card charges the next day in Charlotte, North Carolina, and Inglewood, California. The $6,000 transfer that day went to Cathy’s account, for our household bills. She needed it right away.

See my bank record (March 5 and 6)

4. Less than Joseph’s own figures

Joseph wrote down what I was owed on these two jobs in his February 1, 2010 e-mail: “PM 15% $4725 Savings $3050 Total: $7775 / SA 15% $7725 Savings $6500 Install $4000 Total$18,225” (Exhibit 419; Part 4). Those are his numbers, not mine.

A second comparison holds the work constant and changes only the pay. Over the five months after the Metro work began, I applied my existing 15% arrangement with Joseph to the same jobs. With Joe gone, my sheets show $23,232 left after costs. Had Joe still been here, at the same 15%, it would have been $33,293. That is $10,061 less, close to the $10,370 on the two jobs.

See my sheets for the five months

My Saudi sheet shows $4,785; $18,225 less $13,460 is $4,765. The $100 on Paul Mitchell is the check Joseph signed on February 2, which I used to open my account the next day (my bank record, February 3).

See my bank record (February 3)

See my sheets for both jobs

5. After Joseph: the jobs that kept coming

Joseph’s customers kept paying after he was gone, and new orders kept coming in. Susan Blake and Dan took the money. I built the fountains. These are the jobs, from my 2010 sheets.

Existing jobs: where the customers’ money went

New orders after Joseph, February to April 2010

Susan Blake kept the sales records. I built the fountains. The customers’ names on these orders are in her records, not mine; what survives is the money.

See my 2010 sheets for these jobs

6. Susan Blake’s account

The account was opened at Chase on March 16, 2010, in the name “EARTHINSPIREDPRODUCTSCOM,” at her son Michael’s address in Capistrano Beach. Susan Blake was added as a signer on March 23. These are her bank’s records, returned to the court on my lawyers’ subpoena in January 2019.

Money in: $36,460

Paid out to Susan Blake herself, by check and cash withdrawal: $19,950

Money out to me: $12,600

She also wrote Dan Kavanaugh a $3,000 check on April 12; it does not appear among the checks the bank paid. The account’s card also paid $964.40 at Seaside Eyecare (May 8) and two charges at Giggles N Hugs (April 2). To me, those look personal, not business.

See Susan Blake’s account statements

See the checks and withdrawals

What I was paid for the new orders

The $1,567.60 is mostly the February 17 order, which still had $1,625 due. The other orders came out a few dollars over or under.

Those five checks are in the State’s own exhibit of her personal Wells Fargo checks to me, Exhibit 566 (Bates 015012-015028). It has one more: $560 on May 11, with “Visa” in the memo. My sheet notes it as “for Bizmark + VISA,” and she told the jury it was “for some glass company” (RT 1779). It was for parts, not my pay, so it is not counted above. All six come to $5,410: the “about $5,000” of her own money she told the jury she gave me.

See Exhibit 566 (her account number, address and phone number blacked out)

7. What Susan Blake told my jury

On January 8, 2019, on the State’s direct examination, Ms. Rodriguez asked Susan Blake about the checks she wrote me: (RT 1777:14-1778:2; 1781:22-26)

Q “Why did you provide him this check?”
A “It was funds to finish the jobs to keep the business going, all of these.”
…
Q “And just to back up for a second, where is this money coming from that you are writing to him, these checks?”
A “From my personal account.”
…
A “Well, it was — it was agreed that I would, you know, receive my funds back, especially from some of the bigger fountains that he had that, you know, money would come in, but I never saw any.”

See the trial transcript (RT 1777, RT 1778, RT 1781)

That afternoon, on Mr. Maline’s cross-examination, the court asked her itself: (RT 1825:17-28)

THE COURT: “So after — let’s say after February 10th, of 2010, were you involved in handling funds when money would come into the business?”
THE WITNESS: “There were no funds that came into the business because I was not involved with money prior to those fountains coming into the business.”
THE COURT: “Okay. Once you started to try to help save the business, did you receive any funds from customers for fountains?”
THE WITNESS: “I don’t remember receiving any funds.”
…
THE WITNESS: “They weren’t completed.”

See the trial transcript (RT 1825)

Mr. Maline asked how she could sign checks for Earth Inspired Products and not know what money came in. The State objected, and the court sustained it, in front of the jury: (RT 1826:11-17)

Q “And despite being somebody who signed checks for Earth Inspired Products, you don’t know what money came in?”
MS. RODRIGUEZ: “Objection. Argumentative, asked and answered.”
THE COURT: “It assumes fact not in evidence that any funds did actually come. Objection sustained.”

See the trial transcript (RT 1826)

And then: (RT 1834:9-16)

THE WITNESS: “I was trying to keep customers, or whoever was calling me, calm to hopefully find my kids and hopefully keep the business going. Obviously, there wasn’t money coming in. I was paying for money going out.”
Q “Okay. To your knowledge, there was no money coming in, at least you didn’t learn of any coming in?”
A “Correct, yeah.”

See the trial transcript (RT 1834)

What her own account shows

She knew customer money was coming to her. The Geis wire on May 7 was addressed to her account with the reference “Susan Blake Inv.” The withdrawals of $5,500 and $4,000 are on slips she signed, and the April 6 slip reads “Susan Blake / Earth Inspired Prod.”

See the Geis wire and her withdrawal slips

8. When the State knew, and what it did

On March 18, 2019, Susan Blake was recalled. Mr. Maline put her Chase account in front of her as Exhibit 985. On recross, Ms. Rodriguez used the same account to point the jury to the Geis wire and, the same day, the checks to me: (RT 5544:3-5545:16)

Q “Going back to Exhibit 985, you were asked specifically about a deposit from Geis Construction, do you recall that?”
A “Yes.”
Q “And, in fact, on page 13 of that, we see that actual wire into that account for 6250; right? Do you see that?”
A “Yes.”
…
Q “And the total of those three checks would be $6,000.00; right?”

On further redirect, Mr. Maline tried to give the jury the total that came in. The State objected, and the court sustained it: (RT 5545:28-5546:3)

Q “And I know you don’t want to add up the total deposits for the account, I’ll let you know it’s 36,000, does —”
MS. RODRIGUEZ: “Objection. Beyond the scope.”
THE COURT: “Sustained.”

See the trial transcript (RT 5544, 5545, 5546)

From that day, the State knew what was in that account. Susan Blake’s testimony that no money came in, and the court’s statement to the jury that there was no evidence any did, stood through closing. The State never corrected either one. A conviction cannot stand when the State “allows [false testimony] to go uncorrected when it appears” (Napue v. Illinois (1959) 360 U.S. 264, 269). The duty is the prosecutor’s, whoever else could have spoken.

9. What my lawyers had

I gave Mr. Maline every one of the sheets on this page in 2017, with most of my other handwritten papers. On January 2, 2019, six days before Susan Blake testified, my lawyers subpoenaed her Chase account, under seal, with the records to go directly to the court. Chase returned them on January 29.

See the subpoena and Chase’s return

On March 18, with the statements in hand, Mr. Maline was cut off at “36,000.” He asked one more question. Susan Blake said she did not know how much came in: “Honestly, I do not. I wasn’t in the right frame of mind.” He said “Thank you,” and sat down (RT 5546:4-11). The jury saw the Geis wire, when Ms. Rodriguez put that page up. It never got the $36,000 total, never saw where the money went, and never saw my accounting.

The money was Mr. Maline’s part of my defense. At the hearing on my motion for a new trial, he told the court so himself: (RT 8838:26-8839:6)

MR. MALINE: “The Court may or may not be aware that Mr. McGee had, kind of, a division of labor. … He mainly paid attention to most of the — the technical issues, such as the cell towers and the DNA, and things of that nature. … And I handled some of the other stuff, financial stuff, kind of along those lines, your Honor, is the way that we divided up the labor.”

See the hearing transcript (RT 8838, 8839)

Denying the motion, the court said of the checks: “there was no receipts or accounting for the money” (RT 8943:20-27). There was an accounting. I did it, long before trial, and gave it to my lawyers in 2017. Their own trial exhibits were built from it. It is this page. My lawyers never presented it, to the court or the jury.

See the trial transcript (RT 8943)

Before that hearing, I wrote out for Mr. Maline the questions I wanted him to ask me on the stand, and what I would show in answer: the $4,900 to Metro, the $5,500 for the glass, our home expenses and Cathy’s declaration, my Saudi and Paul Mitchell sheets and cost verifications, the Geis job, and Susan Blake’s deposits and checks. I wanted him to call me, or at least to put McGee’s failures on the record. He did neither. He did not call me, and when he examined Mr. McGee at the hearing, he did not ask him a single question about the money (RT 8908-8929). By his own account, the money was not Mr. McGee’s part of the defense. It was Mr. Maline’s. Raising it would have meant raising his own failure. I believe that is why he left it out.

See my notes to Mr. Maline before the hearing

10. The check that came back

Nothing on this page is left out, including this. On April 12, 2010, Susan Blake gave me check #1004 for $3,300, written on the Earth Inspired account. She owed it to me. I don’t remember now what it was for; I believe it was for a job that was cancelled on her end. It was separate money from two other checks she wrote me that day, #1006 for $2,900 and #1008 for $400, which by my sheets were for the March 30 and April 6 orders. I cashed those two at her bank, Chase, on April 12.

I did not take #1004 to Chase. I deposited it at my own bank, Bank of America, on April 13. The check carries a Chase stamp from 11:36 a.m. on April 12, the day before I deposited it, reading “Endorsement Cancelled, JPMorgan Chase Bank, N.A.” I believe that is Susan Blake cancelling the check. On April 15, $3,200 was withdrawn from my account. On April 16, #1004 came back unpaid, and on May 10, 2010, Bank of America closed my account with the balance unpaid.

See the records

11. The casino entries

My bank record shows eight days with casino entries between February 9 and April 16, 2010:

I went to play tournaments; the $75 and $60 were the entries. The ATM was there, so I took out cash for the next day’s business expenses, or the like. Eight days in about ten weeks is not a man living at a casino, and the accounting on this page shows where the money went. The bank record shows when my card was used at a casino, not what I did there; that part is my account.

See my bank record

See my sheet, “cash out”

12. The year before

From January 6 to October 22, 2009, the ten months before the Metro work, my sheets show the business taking in $112,835.88, with $48,664.30 in cost of goods, leaving $64,171.58, what my sheet calls net, before labor and consumables. Our home expenses for the same ten months were $58,150. The business covered them, with about $6,000 to spare.

See my sheets for 2009

[PENDING: Cathy Jarvis’s sworn statement of our 2009 home expenses]

[PENDING: records showing no household or shop bill went unpaid]

From January 2007 to December 2009, I built 156 custom fountains. Seven had a problem, from shipping damage to a leak; two were never resolved; no customer ever sued. (My sheet.) One was the Levine job, which Joseph’s e-mail counted at $8,800. Joseph’s own ledger has it at $7,999, with $5,400 of that to me (Exhibit 1125, August 30, 2007).

See my sheet

My sheets

I worked these out by hand from my own records. I gave them to Mr. Maline in 2017, and went over them with the defense accounting expert on a jail visit. My lawyers’ exhibits were built from them. They are shown as I wrote them. Where my arithmetic was off, this page uses the corrected figure and says so.

See all of my sheets

Sources

• Trial transcript, People v. Merritt, San Bernardino County Superior Court, Case No. FVI1404194 (RT): the court’s ruling on the motion to acquit 4995-4996; Susan Blake 1767-1785, 1820-1834 (Jan. 8, 2019) and 5496-5498, 5527-5528, 5539-5546 (Mar. 18, 2019); defense accountant 7085-7086; Mr. Imes’s closing 8212-8214; Ms. Rodriguez’s rebuttal 8442-8443; the court’s ruling on the motion for new trial 8946.
• My Bank of America records, February 3 – May 10, 2010, with the bank’s copies of deposited checks.
• JPMorgan Chase records, account “EARTHINSPIREDPRODUCTSCOM,” March 16 – June 9, 2010, returned to the court January 29, 2019 (file SB999730-F1), Exhibit 985.
• Defense subpoena duces tecum to JPMorgan Chase, January 2, 2019.
• Hearing on the motion for new trial (RT 8838-8839, 8908-8929, 8943), January 2020.
• My handwritten notes to Mr. Maline before the hearing on the motion for new trial.
• Joseph McStay’s e-mail of February 1, 2010 (Exhibit 419); the Saudi flow of money (Exhibit 1115); the State’s check list (Bates 007415, 007417).
• Speakerphone call with Dan Kavanaugh and Det. DuGal, February 22, 2010 (San Diego transcript, pp. 21-22).
• The defense’s exhibits on the Saudi and Paul Mitchell jobs, “From Charles Merritt’s Records,” built from my sheets.
• Shogren & Associates, Charles Merritt’s percentage of revenue per job, from Joseph McStay’s ledger, 2007-2009 (Exhibit 1125).
• My handwritten accounting sheets, given to my counsel in 2017.