## Facts

- Milton Brechner, a stuffed-toy company president, was investigated for income tax evasion involving multiple sources of unreported income, including payments connected to suppliers and shipping.
- In January 1992, Brechner offered to plead guilty to four counts of income tax evasion; the government agreed not to prosecute his company, affiliates, or his wife or son for involvement in the tax fraud schemes.
- Brechner later sought sentencing leniency by offering to provide information about a corrupt bank officer he had bribed, and he entered a written cooperation agreement with the government.
- The cooperation agreement required Brechner to provide “truthful, complete, and accurate” information and conditioned any government motion for a downward departure under U.S.S.G. § 5K1.1 on the U.S. Attorney’s determination that he had fully cooperated, provided substantial assistance, and complied with the agreement.
- The agreement further provided that if the U.S. Attorney’s Office judged that Brechner intentionally gave false, misleading, or incomplete information, the government would be released from its obligation to file a § 5K1.1 motion, while Brechner would remain bound by his guilty plea.
- After the bank officer’s arrest, prosecutors questioned Brechner during a debriefing about kickbacks from Manley Company and Zim Israel Navigation Company; Brechner initially denied receiving any such payments.
- After a brief private consultation with counsel, Brechner admitted that he had received payments from those sources.
- The government concluded that Brechner’s false denial harmed his credibility and reduced his usefulness as a cooperating witness, particularly because credibility was central to prosecuting the bank officer.
- At sentencing, the government declined to file a § 5K1.1 motion; Brechner sought specific performance to compel the motion.
- The district court found the government acted in bad faith, found Brechner’s breach not material, compelled the benefit of the bargain, and imposed a downward departure.
- The government appealed.

## Issues

1. Whether Brechner’s initial false denial of kickbacks constituted a material breach of the cooperation agreement permitting the government to withhold a promised U.S.S.G. § 5K1.1 motion.
2. Whether the government acted in bad faith in refusing to file the § 5K1.1 motion after concluding Brechner had not complied with the agreement’s truthfulness requirement.
3. Whether the district court could compel specific performance and grant a downward departure absent a government § 5K1.1 motion under the agreement’s terms.

## Decision

- The court of appeals held that Brechner materially breached the cooperation agreement by lying to prosecutors about relevant criminal conduct he was obligated to disclose fully and truthfully.
- The court held that the breach damaged Brechner’s credibility and thereby harmed the case in which he was cooperating, making the government’s refusal to file a § 5K1.1 motion justified under the agreement.
- The court rejected the district court’s bad-faith finding, concluding the government’s decision reflected legitimate prosecutorial concerns and fell within the agreement’s express conditions.
- The court vacated the sentence and remanded for resentencing without requiring the government to file a § 5K1.1 motion.

## Legal Principles

- Cooperation agreements are construed using contract principles as informed by the agreement’s text; express conditions governing substantial-assistance motions control the parties’ obligations.
- Where an agreement conditions a § 5K1.1 motion on the government’s judgment that the defendant provided truthful, complete, and accurate information, an intentional material ложhood can release the government from any promise to move.
- A defendant’s dishonesty is material when it relates to required disclosures about the defendant’s own criminal conduct and foreseeably undermines credibility central to the value of cooperation.
- Courts generally will not compel a § 5K1.1 motion when the government’s refusal is consistent with the agreement’s terms and made in good faith.

## Conclusion

The court ruled that Brechner’s intentional ложhood during cooperation materially breached the agreement and impaired the value of his assistance, so the government was excused from filing a § 5K1.1 motion; the downward-departure sentence was vacated and the case remanded for resentencing.


United States v. Brechner, 99 F.3d 96 (2d Cir. 1996)