By Mark Gutglueck
With momentum building toward the concluding crescendo in the McStay family murder trial that is anticipated perhaps as early as May 15, the defense for Charles Merritt on the 47th, 48th, 49th days of testimony called its own licensed forensic auditor to the witness stand. The defense intended that expert witness, Dennis Shogren, to match and offset the testimony provided by the financial expert called earlier in the trial by the prosecution, Scott Weitzman. Thereafter, with the remainder of the 49th day and the 50th day of testimony, the defense called to the witness stand four of the homicide investigators who had ferreted out much of the circumstantial evidence assembled by the prosecution against the defendant.
Monday through Thursday of this week, as it had done since March 13 when it began the presentation of its version of events following the prosecution’s presentation of its case over the nine-plus weeks from January 7 until March 12, the defense continued in its methodical fashion to seek to dismantle virtually every element of the entirely circumstantial case that was laid out against Merritt. Nevertheless, the prosecution, in a rearguard action by the junior member of its three-lawyer team, Deputy District Attorney Melissa Rodriguez, succeeded in landing occasional stinging rabbit punches that were intended to refocus the jury’s attention to the prosecution’s narrative of guilt.
Called on to testify on Monday was Dennis Shogren, a forensic auditor and certified public accountant licensed in New York and California, who examined the financial records of murder victim Joseph McStay, Merritt and Daniel Kavanaugh, who is alleged by the defense to be the actual killer. Shogren said he had done so with an eye “to determine relationships [of the three parties] from a financial perspective.”
In the more than two-and-a-half years he had been working on the matter, Shogren said, he had been provided with “a truckload of data.” Nevertheless his insight into the entire circumstance surrounding the interlocking financial relationships of the three – McStay, Merritt and Kavanaugh – had improved substantially with the set of financial records provided to him by another expert hired by the defense, Brian LaRock, a computer forensic analyst who had succeeded in retrieving ledgers kept by Joseph McStay on a desktop computer in the McStay household that had been seized by the San Diego County Sheriff’s Department as a consequence of its investigation into the McStay family’s 2010 disappearance. That computer eventually made its way into the possession of the San Bernardino County Sheriff’s Department after the matter was pursued as a homicide investigation following the discovery of the family’s bodies in 2013.
Shogren testified on Monday, April 30 that on April 13 LaRock sent him ledgers compiled by Joseph McStay “outlining costs and revenue for projects he worked on with Mr. Merritt.” He had not before seen significant evidence relating to the case that was so detailed, he said, explaining that the ledgers were key in adding depth to his analysis.
McStay, Shogren said, kept a ledger for calendar year 2007, listing the jobs that Charles Merritt participated in for McStay’s company, Earth Inspired Products. Those jobs, consisting of the design, fabrication and delivery of water features such as water fountains and artificial waterfalls, involved $330,375.97 coming into the enterprise and $204,666.98 going to Merritt.
Shogren said that the customized water features Merritt built for and with McStay did not account for all the business that Earth Inspired Products did that year, as revenue reported on McStay’s and Earth Inspired Products’ tax filings reflected higher receipts for Earth Inspired Products.
In addition to the custom waterfalls built by Merritt, Earth Inspired Products also sold prefabricated water fountains it served as a middleman on by purchasing them from manufacturers and suppliers and then delivering them to customers.
Joseph McStay’s records reflected “checks and cash payments to Chase [Charles Merritt] against his share of payments that accumulated,” Shogren said, with the 2007 spreadsheet that McStay had prepared displayed on the courtroom’s overhead visual monitors. “Joseph was keeping a tally of what was needed to fill the spreadsheet.”
“Was it your understanding in reviewing the records that customers for custom jobs would pay in a certain way?” Merritt’s defense co-counsel Raj Maline asked.
“Yes,” said Shogren.
“How was that?” Maline asked.
“So, the invoices were issued, and 50 percent down was the standard, from what the records that we viewed, 50 percent down was standard payment, and on that payment then Joseph would begin to pay Chase for work, because the work would not begin until that 50 percent deposit had been made,” Shogren said.
In 2008 the customized water feature work done by Earth Inspired Products generated $342,099 in sales with $224,615 of that going to Merritt.
In 2009, at the height of the nationwide economic downturn that began in 2007, Earth Inspired Products sold $297,954 worth of customized water features,with $158, 210 going to Merritt.
Joseph McStay received roughly 35 percent of the proceeds, with which he used to carry out the marketing, promotion and customer-coordination and customer-satisfaction end of the business. Joseph McStay would take orders and record the specifications outlined by the customers, and upon receiving a 50 percent deposit toward the order, either pass the money along to Merritt, from which Merritt would purchase the materials and components needed and begin fabrication, or Joseph would write a check to a vendor to secure the needed materials for fabrication. In all such latter cases, the purchases of material were logged as revenue to Merritt. According to Shogren, there was a very loose and free-flowing monetary arrangement between McStay and Merritt with regard to the customized water feature operation within Earth Inspired Products. Merritt was originally provided with roughly 65 percent of gross proceeds from the business, from which he was responsible for purchasing the material, components and equipment needed to fabricate the final product. At various times, as the demand for Earth Inspired Products water features grew, multiple projects would be under way and in various states of completion. Thus, the ledger sheet as it was being composed would reflect, variously, that Merritt was owed money by McStay or that McStay was owed money by Merritt.
“Could there be an amount due to Chase or an amount owed by Chase at any given time?” Maline asked.
“Yes, that amount varies, literally by the day” said Shogren.
Such a fluctuation was an intrinsic part of the way Earth Inspired Products was conducting business, Shogren said.
“This was a project-based business,” Shogren stated. “The custom business is a project business and the payments came in in lumps, if you will. So fifty percent of a project would come in, and the spending for that project didn’t begin until after that deposit had been made. Spending was continuing on projects that had already been paid, so you could have payments a month or two or more in advance and that money would be used and maybe used up. It may still have a balance available, and then another amount comes in. When that amount comes in, it changes the math of what’s owed back and forth.”
“And it really isn’t until the end of the year, or until they stopped working with each other, that you could actually give an account of where they stand in terms of finality?” Maline said.
“Certainly,” Shogren said. “As long as the work continued, you would always have that variance that was available, based on the date and timing of receipts and payments.”
“Would it be accurate to say that at any given time in the year 2008 or any year for that matter, picking any date you want, there could be an amount owing to Chase or an amount overpaid to Chase, which means an amount owing to Joseph?” Maline asked.
“That’s correct,” Shogren said.
Based on McStay’s use of a Schedule C in his tax filings, Shogren said, Earth Inspired Products was a sole proprietorship with Joseph McStay as the owner registered with the county as a fictitious business name and not with the state as corporation, or limited liability company or partnership or other legal entity. Merritt was not considered an employee, but rather an independent contractor, Shogren said. Merritt had his own company, I Design, which was dedicated primarily to the construction of water features, artificial waterfalls in particular. Earth Inspired checks were issued to Merritt and I Design.
An element of the prosecution’s case relating to motive pertains to the contention that at the time of the McStay family murders, Merritt owed a significant amount of money to McStay. Attending the prosecution’s contention is the suggestion that the amount owed stemmed from an alleged embezzlement or series of embezzlements that Merritt had engaged in. This week, Shogren was able to shed light on the circumstance relating to the tally sheet balance the prosecution has represented as a debt situation, indicating there was no embezzlement, but rather an unforeseen situation involving a dissatisfied customer.
That matter involved an artificial waterfall that was ordered for Provecho Restaurant in Los Angeles. The initial invoice for the project indicated the waterfall was to cost Provecho $29,720, with $19,500 supposed to go to Merritt, according to Shogren. There were some possible augmentations to the project that would have pushed the final cost to $34,000, according to notations in Joseph McStay’s computer entries. Provecho provided the 50 percent deposit on the project and Merritt began fabrication work on it, proceeding well toward completion. Prior to actually taking delivery of the waterfall, however, Provecho canceled the order, in so doing reversing payment of the 50 percent deposit on the original $29,720, which was thereafter logged on the Earth Inspired Products/Joseph McStay PayPal account as a $14,860 charge. Complicating things further, McStay, because the job was nearly completed and anticipating no glitches in the final delivery of the waterfall to the customer, had paid Merritt the full $19,500 he was owed for work on the project.
In more than one place where McStay alludes to the matter in entries on his computer logs and notations, he refers to it as the “Provecho disaster.” The monetary notation he makes in conjunction with it is $34,000.
Previous testimony and evidence presented at trial indicated that McStay and Merritt had agreed to split the loss sustained on the Provecho project between them.
According to Shogren, banking, QuickBook and PayPal documentation he has examined showed that Merritt received a series of three payments – $1,463 $10,000 and $8,037 – relating to the Provecho project. That Merritt was paid in full the amount he was due on the project was most likely an indication Merritt had completed the Provecho job, Shogren said.
With Shogren on the witness stand, Maline displayed on the courtroom’s overhead display monitors an email sent from McStay to Merritt on Monday, February 1, 2010 at 11:42 am with “PM & SA” in the subject line.
For the prosecution, the information contained in that email carried with it an indication of Merritt’s sinister intent in the days that followed, a self-evident elucidation, the prosecution maintains, of Merritt’s financial desperation, which drove him to kill a family of four.
Shogren provided a far more benign interpretation of the email. He said the subject line “PM & SA” referred to two ongoing projects, the first of what was to be many waterfalls to be built for the Paul Mitchell cosmetology product and salon school giant and the second for a wealthy client in Saudi Arabia. Shogren interpreted the upshot of the email as an indication that the money previously paid out to Merritt for the Provecho job and another canceled undertaking for a customer identified as “Levine” would be made up by routing Merritt’s future anticipated earnings or some of his future anticipated earnings on the Saudi Arabia and Paul Mitchell projects back to Earth Inspired Products.
The language in the February 1 email from McStay to Merritt reads:
“PM 15% $4725 Savings $3050 Total $7775
SA 15% $7725 Savings $6500 Install $4000 Total $18,225
As of 2.1.2010
Chase paid $173,255
Chase owed $158,210
Plus $8800 (Levine)
Plus $19000 (Provecho)
This email, the prosecution has implied, was a demand made by McStay upon Merritt for $42,845. That was a gross misreading of the email, Shogren indicated.
All of the information contained in the email, Shogren said, “did not make it to a spreadsheet.” an indication it was a rough size-up of a portion of an ever fluctuating financial balancing of the ebb and flow of Earth Inspired Products activities.
“As of February 1 when this email was written, the 50 percent of both of those jobs [the Paul Mitchell and Saudi Arabia waterfalls] had been received,” Maline said. “Is that correct?”
“That’s correct,” Shogren said.
With regard to the reference to Provecho and Levine in the email, Shogren said, “It is my opinion that these are jobs that there are claims that exist,” Shogren said. “So the customer is making a claim against Earth Inspired Products for something involving the installation, the workmanship. And so they’ve been listed here as claims, but there has been no demand for payment made.”
When Maline asked Shogren about documentation relating to the Provecho matter, Shogren said “It was an ongoing issue.”
For the first several years that Merritt was working as an independent contractor for Earth Inspired Products, the arrangement by which he was paid 65 percent of the gross income on the customized product sales and he covered the material acquisition costs prevailed. In October 2009, that changed with regard to most, but not all, of the customized jobs. He was paid thereafter roughly 15 percent of the gross receipts per job, and was no longer required to pay for purchasing the materials to complete the job. Sometime prior to that, Merritt had left the foundry in Pomona where he had previously done the work for Earth Inspired Products and his company I Design, and relocated to a foundry in Azusa, Metro Sheet Metal. Metro Sheet Metal, during the last several months of the arrangement when Merritt was receiving 65 percent of the customized product proceeds, was supplying sheet metal for the projects. When the arrangement transitioned to Merritt no longer being responsible for buying the materials, Metro Sheet Metal remained as a materials supplier to Earth Inspired Products.
Since 2007, Joseph McStay had two QuickBooks accounts, one which was linked to the email address email@example.com and one affiliated with the email address firstname.lastname@example.org.
For more than two-and-a-half years, McStay handled virtually all of the accounting for Earth Inspired Products using the email@example.com QuickBooks account. As of February 1, 2010, just three days before the McStay family’s disappearance, Joseph McStay ceased using the firstname.lastname@example.org QuickBooks account and transitioned to using the email@example.com QuickBooks account. Shogren testified that at the time McStay switched QuickBooks accounts for his accounting purposes, Metro Sheet Metal was added to the firstname.lastname@example.org QuickBooks vendor list.
With the spreadsheets for Earth Inspired Products account activity displayed on the courtroom’s overhead monitors, Maline asked Shogren how the transition to the arrangement by which Merritt was paid 15 percent of the proceeds from the jobs changed Joseph McStay’s accounting of Earth Inspired Products’ activity.
“These checks are now being made directly from Joseph to Metro Sheet Metal,” Shogren said. “And in the past, those payments came from Chase’s portion of the proceeds.”
“Objection, speculation,” said Deputy District Attorney Melissa Rodriguez.
“Sustained at this time for lack of foundation” ruled Judge Michael A. Smith.
“And I move to strike the last answer,” Rodriguez said.
“The last answer is stricken,” Judge Smith said.
“Well, based on your review of the records, did the issuance of Metro Sheet Metal checks take away the issuance of checks and amounts to Chase?” Maline asked.
“The amounts issued to Chase changed because these payments were made for materials and fabrication directly from Joseph,” Shogren said. “In the past, they had been made from Chase’s share.”
“So the formula – and we had a bunch of payments in 2007 and 2008 – was there a percentage that you could gather from your review of those exhibits in the 2007 and 2008 exhibits ledgers, what percentage Chase was gaining on each one of those job orders?” Maline asked.
“So, starting with the first date we had on the ledger, which was January 23 of ‘07 through this October 2 date, of ’09 – So, there was a change made here between 8-25-09 and 10-2-09, there’s no jobs recorded. What changed was the percentage of revenue that was credited to Chase from Joseph,” Shogren said. “From January of ’07, through that October  timeframe, the standard was 65 percent of the revenue per job was to be Chase’s, and that money then went to pay Chase for his efforts and he was to then buy materials and fabrication and so those payments…”
“Objection,” said Supervising Deputy District Attorney Sean Daugherty. “That lacks foundation, that last response.”
“It’s also speculative,” Supervising Deputy District Attorney Britt Imes chimed in.
“Overruled,” Judge Smith said.
Shogren, picking up from where he had left off, said, “So, we ran those as a percent of that off of these ledgers, Chase’s percentage, his dollars, and then took as a percentage of revenue, and the average during that timeframe is 64 percent.”
“So, just to be clear, from January of 2007 to September/October 2009, the percentage that went to Chase of those jobs was approximately 65 percent,” Maline said.
“Approximately,” Shogren said. “It appears to have been the target, but there were numbers that were different from that for a variety of reasons.”
“And then, let’s say from October 2nd 2009, can you illustrate the changeover to the jury?” Maline asked.
“Here on October the 2nd, the job was $3,100, and Chase’s portion of that job was listed as $504, which rounds to 16 percent. The amounts vary during this time, but it would appear the target is about 15 percent,” Shogren said.
Shogren said that prior to the fall of 2009 checks had been written to Metro Sheet Metal but that it was at that time that a new formula for apportioning the costs was applied.
“Joseph was then paying a fabricator – Metro Sheet Metal – at that point, correct?” Maline asked.
“Correct,” said Shogren.
“As payments come and go and payments are made to Chase, those amounts, whether it is overpaid to Chase or underpaid to Chase, changes.” Maline said. “Is that correct?”
“That is correct,” Shogren said. “You can see the interaction between these is an ongoing balance for each of these transactions,” Shogren said. “So anytime we have a period of time where there are a number of jobs that money is received for and money has come in, that causes that underpaid amount to go up and offsets any overpaid up to that point.”
With this running ledger between Merritt and McStay, Shogren said, “At any given point in time that number is going to change, depending on the what the most recent payment received or payment owed would be.”
Shogren testified that the checks that were issued to Merritt or on Merritt’s behalf before September/October 2009 were not always issued to Charles Merritt, but were often issued to third parties. When those checks to Merritt were made out to a third party, they were reflected as an amount paid to Charles Merritt in the books kept by McStay.
According to Shogren, on the ledger kept by McStay, from November 2008 until January 28, 2010, the highest amount overpaid to Merritt at any given time, that is the highest amount that Merritt owed McStay at any time along that time frame, was $20,990.19 as of December 31, 2008. The highest amount underpaid to Merritt and therefore owed to him by McStay was $23,251.66 on January 15, 2009.
Reference to the Saudi Arabia job first appears on an invoice dated October 28, 2009 for a job with a total cost of $61,542.50 toward which a deposit of $30,771.25 was made by means of a wire transfer on January 22, 2010. Payments at once began to flow to material suppliers. On January 22, 2010 $9,250 went to Metro Sheet Metal drawn on Earth Inspired Products’ account, which was noted as being 50 percent of what Metro Sheet Metal was to be paid on the project.
For his part on the Saudi Job, not including installation, Merritt was provided with a $2,495 check on February 2 with the memo “Deposit SA 1001” along with a $6,500 check on February 4 with the memo “Saudi Arabia final” as well as a $2,350 check on February 4 with the memo “Install Lighting SA(1001).”
Those check numbers were 4240, 4241 and 4242.
Shogren also testified with regard to a number of disbursements from the Earth Inspired Products account around the time of the McStay family disappearance.
A $16,839.27 wire transfer was made to Daniel Kavanaugh on March 5, 2010 by an entity identified as “Kocache,” the customer who had ordered from Earth Inspired Product’s the construction of the waterfall valued at $61,542.50, according to Shogren.
Another wire transfer for $13,862 was made to Merritt from the customer identified as Kocache on March 5, 2010, according to Shogren.
The total amount of money received by McStay, Merritt and Kavanaugh for the Saudi Arabia job was $61,434.50, according to Shogren. The original sales amount on the Saudi Arabia job was $61,542.
The Paul Mitchell total job amount was pegged at $31,500, according to an invoice dated January 4, 2010. A deposit of $15,750 was received toward that assignment on January 25, 2010.
A check to Metro Sheet Metal for $6,350 was drafted on February 1, 2010, presumably for the Paul Mitchell waterfall.
Fifteen percent of the $31,500 Paul Mitchell job equals $4,725, Shogren pointed out. He said a check dated February 4 2010 was written to Charles Merritt on the Earth Inspired Products account for $4,500.
There was a wire transfer from Paul Mitchell on February 22, 2020 for $5,000, according to Shogren.
Shogren testified that after the McStay family’s disappearance, the 15 percent model that had been adopted in the fall of 2009 no longer attained and the situation reverted to Merritt making payments he would have made under the 65 percent model. Included in that were material purchases for the Saudi Arabia and Paul Mitchell projects.
Maline fought tooth-and-nail while Shogren was on the witness stand to undercut a crucial element of the prosecution’s theory pertaining to an allegation that Merritt had forged checks made out to himself on the Earth Inspired Products account.
Shogren testified that there were gaps in check sequence numbers in 2009 and 2010, which had a direct bearing on a portion of the prosecution’s case which suggests that an inconsistency in the sequencing of checks written to Merritt in the days just before, of and shortly after the McStay family’s disappearance supports the contention that Merritt forged those checks.
“Would the fact that there’s gaps in Joseph’s checks over the history be consistent with Joseph giving blocks of checks to an individual or individuals to issue checks for materials and so forth?” Maline asked Shogren.
Rodriguez and Imes simultaneously uttered objections, with only Rodriguez’s “speculation” grounds audible in the cacophony that created.
“The objection is sustained,” Judge Smith said. “The answer to the last question is stricken.”
Maline came at it another way. After again establishing the gaps in check number sequences in 2009 and 2010, he asked, “Did you get a sense by reviewing Joseph’s account that he would allow Mr. Merritt to write checks on his account?”
“Objection,” Rodriguez protested, “improper opinion.”
“The objection is sustained,” Judge Smith said.
“Did you also get to review Mr. Merritt’s account?” Maline asked.
“Yes,” said Shogren.
“Did you become familiar with the way Joseph would issue his checks, his handwritten ones?”
“Yes,” Shogren responded.
“And did you become familiar with the way Charles Merritt issued his checks?” Maline asked.
“Yes,” Shogren said.
“Would it be fair to say there was instances where Chase would write out checks on Earth Inspired Products checks?” Maline asked.
Rodriguez and Imes again protested simultaneously. “That calls for speculation; lacks any kind of foundation,” Imes said.
“Sustained,” ruled Judge Smith. “If there was an answer it’s stricken. The jury is instructed to disregard it.”
The closest Maline came to illustrating that McStay and Merritt had an arrangement by which Merritt was able to write checks on the Earth Inspired Products account came when he was able to bring to the jury’s attention once more a peculiarity in the way McStay made out handwritten checks as opposed to producing them on a printer. Maline referenced the testimony of a recurrent prosecution witness, San Bernardino County Sheriff’s Sergeant Ryan Smith, to that effect.
“You heard the testimony of Sergeant Smith here where he described how Joseph would issue checks: capital C capital M and then [when] he wrote out the amount it would all be lower case. Did you notice that Joseph wrote out checks with a capital C when it was handwritten and then he would capital[ize] the C, capital[ize] the M?” Maline said in referencing the capitalization of Charles Merritt, when Merritt was the payee on one of the checks.
“Yes, I have seen that,” Shogren said.
“And then when he would write out the amount it would all be in lower case,” Maline said.
“Yes,” Shogren said.
“And that seemed to be consistent with Joseph writing out checks, correct?” Maline said.
“Yes,” Shogren said.
“And did you see checks in that account that were not like that?” Maline asked.
“Handwritten checks?” Shogren clarified.
“Yes,” said Maline.
“Yes,” said Shogren. “There were handwritten checks that were not like that.”
Having gotten that far without a prosecution objection, Maline reached for the brass ring.
“Now, when you looked at the handwritten checks that were not like that, did that handwriting appear to be Chase’s handwriting?” Maline asked.
“Objection, calls for speculation; lacks foundation,” Imes said.
“Sustained,” Judge Smith said.
Getting what he could, Maline asked Shogren, “Did you notice that Joseph would make deposits into Chase’s account?”
“We did see that,” Shogren confirmed.
“Did you see instances where Chase would make deposits into Joseph’s account?” Maline asked.
“We did,” Shogren said.
“And how did you see that?” Maline asked.
“The deposit slips,” Shogren said.
“Actually, I’m going to object,” said Imes. “Lacks foundation and is speculative.”
“Overruled,” Judge Smith said. “The answer remains.”
In addition to looking at the Earth Inspired Account activity involving McStay and Merritt, Shogren was tasked as well with examining how Daniel Kavanaugh fit into the Earth Inspired Products business picture.
Kavanaugh, who had a degree of expertise with regard to the internet, had been employed by McStay to enhance the effectiveness of the Earth Inspired Products website, including placing the site at the top of various search engines’ registries when potential customers went online to look for available water features, including waterfalls and fountains. McStay was paying Kavanaugh for that service, but a falling out between the two occurred in 2009, and testimony during the trial indicated that McStay wanted to take back control of his website and buy out whatever interest Kavanaugh had in the company. After McStay’s disappearance, Kavanaugh muscled in on the Earth Inspired Products operation, took it over, ending, essentially the production of custom waterfalls, and acting as a middleman in selling prefabricated waterfalls and fountains to customers found primarily on the internet. It is the defense’s contention that Kavanaugh, who profited substantially as a result of McStay’s demise, is the actual killer of the McStay family, and that Merritt is being wrongfully prosecuted.
Shogren said, “We looked principally at PayPal and banking records for Daniel Kavanaugh” from the third quarter of 2005 through the end of 2010.
Payments from Earth Inspired Products to Kavanaugh in January and into early February 2010, the last month of Joseph McStay’s life, were relatively modest ones, according to Shogren. McStay had provided Kavanaugh with a $600 payment on January 4, 2010; $200 on January 11, 2010; $50 on January 18, 2010; $100 on January 25, 2010; $75 on January 29, 2010; $62 on January 30, 2010; $40 on February 1, 2010; $25 on February 3, 2010.
Thereafter, following the disappearance of the McStay family, the PayPal transferences from Joseph McStay to Kavanauagh escalated substantially, with a $900 transference on February 10, 2010; a $200 transfer on February 11, 2010; two transferences on February 12, 2010, one of $3,000 followed by another of $800; and a $3,000 transference from Joseph McStay through PayPal to Kavanaugh of $3,000 on February 12.
“Were you able to review the PayPal records and determine how these payments were made from Joseph to Dan Kavanaugh on February 10, if it’s Joseph’s account?” Maline asked.
“Yes,” Shogren said. “He would have had to have hacked into the account…”
Shogren was unable to complete his answer, as his utterance that far blasted Imes into orbit.
“Objection;” Imes thundered, “calls for speculation. Move to strike the answer and admonish the witness.”
“The last answer is stricken,” Judge Smith said. “The jury is instructed to disregard the last answer.”
“That’s not what I asked,” said Maline. “I asked if you had reviewed those records and determined how those transfers were effectuated starting on February 10 .”
“We did review the records,” Shogren said.
“And what did you see?” Maline asked.
“We saw that those were made by Daniel Kavanaugh,” Shogren said.
“Objection; calls for speculation,” Imes asserted.
“Overruled,” said Judge Smith.
“Lacks foundation and expertise,” Imes followed up, seeking to widen the judge’s catalog of options for excluding Shogren’s testimony with regard to the issue, which augmented that provided two weeks previously by two other defense witnesses, forensic computer analyst Bryan LaRock and PayPal custodian of records Sarah Kane, who offered testimony and evidence indicating Kavanaugh had hacked into McStay’s PayPal account and had changed the password some six days after the disappearance of the McStay family, utilizing a computer operating from Kavanaugh’s IP address to do so.
“Subject to a motion to strike,” Judge Smith said, indicating his ruling would be held in abeyance, and he allowed Maline to proceed. “It sounds like the next question will be ‘How did you determine that?’ So go ahead.”
“How did you determine that?” Maline obliged the judge.
“We determined that by looking at the records in PayPal…”
“Objection; misstates the exhibit as well as the PayPal records; lacks foundation,” Imes intoned.
“Overruled,” Judge Smith said.
“Did you notice there was a password reset on February 10?” Maline asked.
“Yes,” answered Shogren.
“Is that what you meant by hacking in?” Maline asked.
“Objection; calls for speculation; argumentative,” Imes said.
“Sustained,” Judge Smith said.
“Had there ever been a time that you noticed in the PayPal records from the very beginning that Mr. Kavanaugh went in himself and took money out of Joseph’s PayPal account?” Maline asked.
“Objection,” Imes said. “Again calls for speculation; lacks foundation.”
“Sustained,” said Judge Smith.
“Did you ever see in any of the PayPal records that you examined that Daniel Kavanaugh went in and did a password reset…” Maline began.
“Objection; calls for speculation; lacks foundation,” Imes broke in.
“Dan Kavanaugh was paid on several occasions through PayPal prior to February 10 , correct?” Maline asked.
“That’s correct,” Shogren said.
“How did that usually occur?” Maline asked
“It generally occurred by a request from Daniel Kavanaugh to Joseph for payment,” Shogren said.
“And then that would either be accepted or denied,” Maline said.
“That is correct,” Shogren said.
“If it were accepted, then Joseph would then send the money,” Maline said.
“That’s correct,” Shogren indicated.
“With these transactions after February 3, starting on February 10, were those done differently than the previous transfers?” Maline asked.
“They were,” Shogren said. “There was no evidence of a request.”
“No evidence of a request and also evidence of a password reset,” Maline said.
“That is correct,” Shogren said.
“Did additional transfers from PayPal to Dan Kavanaugh occur after February 13?” Maline asked.
“Yes,” Shogren said.
For Earth Inspired Products there were two accounts, one for customized fountains such as those built by Merritt and one for off-the-shelf, prefabricated water features sold on-line.
Shogren said water features purchased though the online branch of the business were paid for through PayPal or other online credit card transfers that went into Joseph McStay’s account.
“Now, after Joseph disappeared, did that business continue? Did people keep ordering waterfalls?” Maline asked.
“It did,” Shogren said. “That business did continue.”
“Did that money go into Joseph’s account at Union Bank?” Maline asked.
“There was a period of transition, so it did for a period of time and then it went into a different account,” Shogren said.
“When did it stop going into Joseph’s account, all those online orders?” Maline asked.
“My recollection was that transition was a March/April kind of a transition,” Shogren said.
“2010?” Maline sought to verify.
“2010,” Shogren confirmed.
“Then did the payments start to go to a different location after that?” Maline asked.
“They did,” Shogren said. “They went to Kavanaugh.”
“So, do you know how long all those orders and all those payments went into Kavanaugh’s account?” Maline asked.
“The records that we examined went through to the end of 2010,” Shogren said.
“Do you know what the total amount that Dan Kavanaugh took in when it came to these online orders from let’s say February 10, 2010 until when he sold the company, which would be in July of 2011?” Maline asked.
“The Pay Pal orders that came in were $127,000” Shogren said.
“I’m talking total,” Maline said.
“So there would have been, in addition to that, there were some wires that came in,” Shogren said. “There were ATM deposits, and in total the income was $206,064.”
“And that went into Kavanaugh’s account?” Maline asked.
“That’s correct,” Shogren said.
“For the online orders, based on your review of the records, when Joseph was in charge and he got an online order… did you see after payments would come in from his online orders, would there be corresponding orders to such suppliers as Blue World?” Maline asked.
Blue World is a supplier of prefabricated water fountains and other water features.
“Yes,” said Shogren, who said accountants would catalog such off-the-shelf or prefabricated supplies as “cost-of-goods-sold.”
“So were you able to review Joseph’s costs of goods on the payments that he received for online business as a percentage?” Maline asked.
“Objection; vague as to time,” Rodriguez said.
“Overruled,” Judge Smith said.
Based upon the Schedule C lists for McStay’s 2007 and 2008 tax filings showing the difference between costs and gross income thereby showing gross profit, Shogren said McStay showed a gross profit percentage of 29.8 percent in 2007 and 41.1 percent in 2008.
“Did that number change when it came to Kavanaugh?” Maline asked “He received $206,000. Did you get a cost of goods sold percentage for Mr. Kavanaugh?”
“We did,” said Shogren. “We calculated a cost of goods sold for that $206,000 of $58,677. That gross profit then was $147,487, and it was 71.5 percent.”
Maline, after noting that for every $100 in prefabricated fountains that Joseph McStay sold, he spent roughly $70 purchasing them and that Kavanaugh spent roughly $30 to purchase the fountains he sold for $100, asked Shogtren, “Were you able to account for that or determine why that big difference?”
“Objection, calls for speculation,” said Imes.
“Sustained,” Judge Smith said.
“Did you break down the $206,000 on how that money was accounted for from an accounting standpoint?” Maline asked.
“We did determine from where it came,” Shogren said.
“What about how it was spent?” Maline asked.
“The total spending during that same timeframe was $173,000,” Shogren said.
“We’re talking about a ten-month timeframe, is that correct?” Maline asked.
“Approximately, yes,” Shogren said.
“Of the $173,000 that was spent, you said $58,000 was spent on buying waterfalls…”
“Objection; misstates his testimony,” Imes said.
“Overruled,” Judge Smith said. “He can answer if that’s correct.”
“That’s correct,” Shogren said. “I said, $58,677.”
“How much was attributed in an accounting way for personal expenses?” Maline asked.
“Objection,” Rodriguez and Imes said in chorus, with Imes citing “relevance; violates the court’s order.”
“Sustained on both grounds,” Judge Smith reacted.
“Well, just as a yes or no, were you able to…” Maline began
“Objection; not relevant,” complained Imes.
“Well, I haven’t heard the question yet,” Judge Smith said.
“You were able to account or at least put into accounting categories how the money was spent, correct?” Maline asked.
“We split the money into five different categories,” Shogren said.
“And to split those into five different categories you were able to look at Dan Kavanaugh’s PayPal records, correct?” Maline inquired.
“Yes,” said Shogren.
“You were able to look at Dan Kavanaugh’s bank statements, correct?” Maline asked.
“Correct,” Shogren said.
“Your analysis went until what date?” Maline asked. “You started – the $206,000 that he received – what was your end date for that?”
“The last payment that we have record of from PayPal is 12/7/2010.” Shogren responded.
“There was testimony that the company was sold in July of 2011,” Maline said. “Was there any activity in the company after December 2010 until July 2011?” Maline asked.
“Objection, lacks foundation as phrased,” Imes said.
“Overruled,” Judge Smith said.
“We didn’t find any records past December, PayPal records,” Shogren said.
“December 2010?” Maline sought clarification.
“December 2010,” Shogren said.
“Do you know if the company was transacting business?” Maline asked. “Was there any record of that through the bank statement or any records that you reviewed, that the company EIP [[Earth Inspired Products] was transacting business from December to July of 2011?”
“We don’t have any records of sales during that period of time,” Shogren stated.
Shogren said he and his colleagues in his accounting firm had examined well over 10,000 pages of discovery documents that had come into the possession of the defense, including profit and loss detail, balance sheets, client lists, transaction lists, income by customers, sales by customers, invoice lists, check details, deposit details and activity logs for Earth Inspired Products.
Under cross examination by Deputy District Attorney Melissa Rodriguez, Shogren was asked about how much money he was making as an expert witness in the case.
“You indicated you had billed approximately $31,000 up to date. How much do you make per hour?” she asked.
“Objection; relevance,” Maline said.
“Overruled,” Judge Smith said.
“So, at the time the agreement was struck on this engagement, my billing rate, my personal billing rate, was $250 an hour,” Shogren said.
“Approximately how many hours do you think you have to add to what you billed thus far?” Rodriguez asked.
“We haven’t stopped to add that up, so I don’t know,” he said. Shogren said his firm was billing $90 an hour for administrative and clerical help and $155 for a staff accountant other than himself.
Shogren testified that he had not seen the February 1, 2010 email from Joseph McStay to Merritt until some point within the last month.
He said that before his office was provided by the defense’s computer forensic analyst Bryan LaRock with the the ledgers from Joseph McStay’s computer, there was “very little data to look at” in terms of providing meaningful context to what was going on within the Earth Inspired Products operation.
“The initial report that you did, you were asked to focus primarily on Dan Kavanauagh, right?” Rodriguez asked.
“That was the records we had at the time we produced that and we had very little to look at from Chase,” Shogren responded.
“You only looked at what you were given by the defense,” she said.
“Yes,” he said.
“So, if there was other information that wasn’t provided to you that existed, that could be relevant to your analysis, right?” Rodriguez asked.
“Yes,” Shogren said. “I’m not sure how to answer that. If you didn’t send me something I should have had, I didn’t get it.”
“Well, you were hired by the defense, right?” she asked.
“Yes,” he said.
“You’re not working for the prosecution, right?” she asked
“Right,” Shogren said.
“And you only did one page of your report – just a few paragraphs – related to the defendant, right?” she asked.
“That’s correct,” Shogren said.
“And nothing in there looks even remotely at any of his gambling, right?” Rodriguez asked.
“Correct,” Shogren said.
“Because you didn’t consider that to be relevant, right?” Rodriguez asked.
“Objection; asked and answered,” Maline said.
“Sustained,” Judge Smith said.
According to the prosecution’s theory of the case, Merritt, driven by financial desperation, on February 1, 2010 gained unauthorized access to Joseph McStay’s QuickBooks program for Earth Inspired Products and issued himself two checks against the company’s account, each for $2,500, and on the following day, February 2, 2010, again obtained unauthorized access to the Earth Inspired Products account through its QuickBooks accounting system and issued himself another check, one for $2,495.
When he learned of what Merritt was up to, either shortly before or perhaps even on February 4, 2010, Joseph McStay traveled to Rancho Cucamonga, where Merritt was then living and confronted him about his larceny, threatening to alert authorities, prosecutors allege. After Joseph McStay returned to San Diego County, the prosecution’s theory continues, Merritt early that evening drove to the McStay residence in Fallbrook where he killed Joseph McStay, his wife Summer and their two sons, four-year-old Gianni and three-year-old Joseph, Jr.
Merritt then secreted the bodies for two days, in the meantime again fraudulently accessing Joseph McStay’s QuickBooks account for Earth Inspired Products, the prosecution maintains, and on February 4, 2010 issued a check made out to himself for $4,000 and three others on February 5, 2010, each of which was written to himself and backdated to February 4, one for $4,500 and another for $6,505 and a third for $2,350. Shortly after the murders, the prosecution alleges, Merritt embarked on a gambling binge at a number of casinos throughout Southern California. His gaming frenzy was punctuated only by his transporting of the corpses of the McStay family up into San Bernardino County’s High Desert, an area with which Merritt was familiar since having grown up in Hesperia and attended Apple Valley High School for three years in the 1970s, where on February 6, 2010 he buried all four along with the sledgehammer he had used to bludgeon his victims in shallow graves he dug in a wash off a rarely-traveled dirt road. Also on February 8, Merritt again accessed Joseph McStays QuickBooks accounting system for Earth Inspired Products, making another check out to himself, this time for $6,500, backdated to February 4, the prosecution claims. To confuse the situation, throw authorities off his track and delay a serious investigation into the matter, the prosecution maintains Merritt then drove the McStay family’s 1996 Isuzu Trooper, which yet contained the child seats for Gianni and Joseph, Jr., to San Ysidro, where he left the vehicle in a shopping center parking lot roughly a quarter of a mile from the Mexican border.
This week, Rodriguez insinuated that as someone working for the defense, Shogren lacked impartiality, objectivity and integrity, not to mention that he was dishonest and a dissembler.
“When you do work for probate court and family court and things like that, you do that in a neutral way, right?” Rodriguez asked.
“That’s correct,” Shogren said.
“Because you’re just basically looking at numbers, right?” Rodriguez asked.
“And so when you looked at the information in this case, did you do that in a neutral way?” she asked.
“We did our best to do that in a neutral way,” Shogren said.
“So when you wrote in your report and used the language related to Mr. Kavanaugh and you wrote in there ‘and perhaps most damning is the evidence shows McStay was terminating his relationship,’ was that objective to you and impartial?” Rodriquez pounced.
“I think it was a fair comment,” Shogren said. “It was not meant to be prejudicial.”
“So using that language – ‘perhaps most damning’ – to you doesn’t imply you’re leaning one way over the other?” Rodriguez asked.
“No,” Shogren said.
“That to you is an impartial statement, objective?” Rodriguez pressed.
“So, I think I’m allowed to reach conclusions,” he said. “And if I do that work to get to that conclusion in a neutral way, I can still reach conclusion that may not seem neutral.”
“Were you aware that same thing was happening with respect to the defendant?” Rodriguez asked.
“I’m sorry,” Shogren said. “What same thing?”
“Were you provided information that Joseph McStay was looking at different welders and things of that nature and potentially terminating his relationship with the defendant?” she asked.
“Objection; assumes facts not in evidence,” Maline weighed in.
“Overruled,” said Judge Smith. “He can answer if he was made aware of that.”
“I was not made aware,” Shogren said.
“Would that be important to you?” Rodriguez asked.
“It probably would have been important in terms of understanding the framework of, you know, how the numbers matter,” Shogren said.
Shogren said he was not aware of any business partnership information pertaining to McStay and Kavanaugh.
Presented with documentation, Shogren acknowledged that on February 19, 2010, Geist Construction of Cleveland, Ohio had made a wire transfer of $6,250 into Kavanaugh’s account and on the same date there was a transfer out of Kavanaugh’s account of $5,000 to Merritt.
In response to Rodriguez, Shogren said with regard to the payments made to Merritt by Joseph McStay over the years for his work for Earth Inspired Products jobs “Many of the checks were written without reference to jobs.”
In wringing that concession from Shogren, Rodriguez appeared to be angling at showing that several of the February 2010 checks written to Merritt were forgeries, since they contained references in the subject line of the checks relating to a customer.
Rodriguez endeavored, without substantial success, to show that Shogren had been selective or arbitrary in his auditing procedure and examination of the record and had with regard to certain points made in his testimony under direct examination by Maline tailored his presentation to the benefit of the defendant. In his responses on certain specific issues that Rodriguez raised in this regard, Shogren pointed out that she was blurring the distinction between what was contained in the banking records as opposed to what was shown in the spreadsheets prepared and notes made by Joseph McStay. The spreadsheets prepared by McStay, while substantially accurate and in large measure consistent with the banking records and bank statements, were neither exhaustive or complete in all respects, Shogren pointed out.
Shogren acknowledged the activity log for the QuickBooks account associated with the email address email@example.com showed Merritt being added as a vendor on the account on February 1, 2010, and that checks to Merritt had been added and deleted on that date.
“In this entire activity log you did not see any other checks that had been deleted, did you, beside the one[s] to the defendant, right?” Rodriguez asked.
“I don’t recall there were any others,” Shogren said.
“In fact there were no checks written out of this account other than the ones that were written to the defendant and Metro Sheet Metal,” she said. “Those are the only checks that are also written off of that account, right?”
“In this exhibit, yes,” Shogren replied.
“In that activity log,” said Rodriguez.
“Yes,” Shogren said.
“Several of those checks were written after February 4, right?” she asked.
“Yes,” he said.
“And were you provided any information in terms of when the family disappeared?” she asked.
“Yes,” Shogren said.
“So, was it relevant to your analysis that checks were written to the defendant after the family disappeared?” she asked.
“Yes,” he said.
“And you considered that in your analysis of Dan Kavanaugh and the defendant in terms of your report, right?” Rodriguez asked.
“Yes,” Shogren said.
“Did you put anywhere in your initial report about those particular checks?” she asked.
“I don’t recall,” he said.
When shown his report, Shogren said “Those checks would have been included in the amount I stated here that Mr. Merritt received.”
“But you didn’t put anything in there about the fact that some of those checks were received after the family disappeared, right?” Rodriguez pressed.
“I did not,” said Shogren.
“But you did consider that?” Rodriguez asked.
“I didn’t dispute who wrote those checks or that they were valid or anything else,” he responded. “I just said that was money that he received.”
“So that wasn’t part of your analysis in terms of looking at those checks to determine whether or not they were forged,” she said.
“I did not look to see whether they had been forged,” Shogren said. “They had been cashed or otherwise processed.”
“And if you look at some of the records, would it be important to your analysis to determine whether or not any of those checks had been backdated to the date of February 4?” Rodriguez queried.
“Yeah,” Shogren began. “My understanding is that there were a couple of those that were backdated, I think maybe three of them. I don’t recall a precise number. Again, what we were looking at was how much money had been received, not whether they had – we weren’t reporting on issues about backdating them or anything else.”
“So you didn’t look at that as part of your analysis?” Rodriguez said.
“I did,” Shogren said. “I didn’t include it in my analysis.”
“Because if the defendant had actually forged those checks, you would agree that would also be some pretty damning evidence, right?” Rodriguez asked.
“Objection,” Maline said.
“Sustained, calls for speculation and a conclusion,” Judge Smith ruled.
In something of a risky move, Rodriguez displayed on the courtroom’s overhead viewing monitors a document showing the names of individuals associated with Joseph McStay’s PayPal account tied in with Earth Inspired Products, which included his wife Summer under the last name of Martelli, Merritt and Kavanaugh listed as added “third parties.” Without drawing attention to Merritt’s presence on the list or the potential interpretation that the defendant’s name being thereon gave him legitimate access to McStay’s business account, Rodriguez asked Shogren, “Were you aware that Dan Kavanaugh was listed as an authorized user?”
Rodriguez’s apparent purpose was to knock down a central pillar in the defense’s suggestion that Kavanaugh looted far more money out of the Earth Inspired Products account than Merritt is accused of taking. Kavanaugh logged onto McStay’s PayPal account on February 10, 2010, six days after the family’s disappearance, to change Joseph’s password to the PayPal account. He then transferred to himself $7,900 from McStay’s PayPal account over the next two days. This, the defense maintains, represented highly suspicious or even felonious activity that merited investigation by law enforcement personnel and the cataloging of Kavanaugh as a suspect in the McStay family disappearance/murders.
Rodriguez was not able to progress very far, however. Maline objected, pointing out “First of all that’s not authorized user information. That is titled ‘addresses’ and I think the PayPal representative [Sarah Kane, who testified two weeks previously] adequately explained what those mean.”
Judge Smith sustained Maline’s objection, saying “This calls for speculation and conclusion as to what is shown in that record.”
Rodriguez then disputed Shogren’s assertion that Kavanaugh had realized $206,064 in proceeds from having commandeered control of Earth Inspired Products in the ten months after the McStay family’s disappearance, claiming the actual money coming into Kavanaugh as the proceeds from Earth Inspired Products activity “was actually only $126,000 or $127,000.”
Shogren corrected her, saying the $126,000 to $127,000 figure represented money associated with the Earth Inspired Products enterprise that came in as revenue to Kavanaugh through PayPal as opposed to further revenue he received from the Earth Inspired Products venture through other modes of payment. “That’s what we represent from PayPal,” Shogren said. “There were also projects that had been paid by cash. Those would have been sales revenue as well, so it’s more than the 126 [thousand dollars].”
When Rodriguez expressed skepticism that such cash receipts by Kavanaugh could be documented, Shogren referenced $28,174 in cash or check deposits into one of Kavanaugh’s accounts. “The deposits were into an account he used for EIP [Earth Inspired Products] purposes,” Shogren said.
Additionally, $25,622 in deposits was made into yet another of Kavanaugh’s accounts during the same March to September 2010 timeframe, Shogren testified.
When Rodriguez pressed Shogren on how, exactly, any of the revenue beyond $127,000 could be documented as coming from customers purchasing water features, he indicated he did not have the invoices or receipts to establish the money in question as water feature sales-generated income beyond its placement into an account established for that purpose. In the same ten-month timeframe, Shogren said, Kavanaugh paid $58,677 to buy off-the-shelf waterfalls and fountains. Accepting Rodriguez’s insistence that only the “proven” water feature sales receipts of $127,000 be used in calculating Kavanaugh’s profit ratio, Shogren said Kavanaugh was turning a 61.1 percent profit during the March to December operation of Earth Inspired Products.
To an inquiry by Rodriguez, Shogren said he had not analyzed Merritt’s gambling activity around the time of the McStay family’s disappearance or at any other time.
Rodriguez referenced a March 8, 2010 $3,600 cash withdrawal from an ATM at the Commerce Casino, which Shogren in another context during his testimony indicated would cover the $3,400 balance owed to Metro Sheet Metal for the provision of material and services relating to the waterfall Earth Inspired Products was then engaged in completing for Paul Mitchell studios.
“Would it be relevant to your analysis to know that $3,600 was actually taken out at a casino?” Rodriguez asked Shogren.
“We did know it was taken out at a casino,” Shogren replied.
“You did?” Rodriguez came back. “So you attributed that to a job, despite the fact that that money was taken out of a casino.”
“I think you are mischaracterizing what we did here,” Shogren said. “I didn’t say it was applied to the job. I said there was sufficient funds to pay that debt.”
Rodriguez was stymied in pursuing with Shogren the degree to which Merritt’s gambling activity had impacted his financial position, after a multitude of objections by Maline to her questions pertaining to Shogren’s analysis of the gambling issue were sustained by Judge Smith. At last, she did provoke from Shogren that “We never did any analysis, I never did any analysis about gambling. What I did is look at the movement of cash. So any withdrawals, from wherever they were made, would have been reflected in any analysis we did. I did not assume a withdrawal at an ATM at a casino was necessarily for gambling.”
“So you’re indicating to us that if somebody withdrew money at a casino, you made an assumption it didn’t necessarily mean it was for gambling,” Rodriguez said.
“I didn’t care whether he was buying lunch or buying a poker chip,” Shogren said. “It was not what I was looking at.”
“So, you didn’t think that would be important in terms of your financial analysis in this case to look at the defendant’s spending history?” she asked.
“Other than to divide spending into business and personal, we would not have made any other considerations,” Shogren said.
Through her questioning, which related to two of Merritt’s checking accounts being closed out by two different banks when he had numerous checks returned for insufficient funds and was running negative balances for extended periods, Rodriguez established that Merritt was poor at managing money.
“Would you agree with me that the defendant, based on his bank records, appeared to have some financial issues back in November of 2009?” she asked.
“I didn’t form an opinion about his financial health,” Shogren said.
When Rodriguez attempted to pursue questions about McStay having covered some of Merritt’s gambling debts, she was stopped by sustained objections.
On redirect examination, Maline asked if it was still worthwhile for Merritt to work for McStay and Earth Inspired Products under the 15 percent arrangement.
“The big distinction between the 65 [percent] and 15 [percent] was who was primarily responsible for paying for fabrication,” Shogren said. “In the past when it was 65 percent – on average; that appears to have been the target – Chase was the person who was doing the fabrication and therefore buying the materials for the fabrication, performing the labor for the fabrication. So then when the model was changed from 65 [percent] to 15 [percent], the principal supplier for the fabrication was Metro Sheet Metal or someone else. So Mr. McStay would be paying for the fabrication, and therefore the [cost of buying] materials that went into that fabrication [went] to someone else other than Chase. That amount of money then, with its work and the purchase of the materials and so on, bypassed him, but he was still paid a fee for pulling it together.”
“In this case when the model switched from 65 to 15 percent, when Chase was getting 15 percent, I think you said that was October 2009, he no longer had to pay Metro Sheet Metal, correct?” Maline asked.
“Correct,” Shogren said.
“And that was a huge cost, correct?” Maline asked.
“He no longer had to pay Metro Sheet Metal or to buy materials for fabrication,” Shogren said.
Shogen said it was possible for Merritt to clear more money by the 15 percent arrangement than when he was getting 65 percent and had to defray by himself the cost of material acquisition.
The 15 percent arrangement changed after the family’s disappearance and paying for the fabrication, testing crating and shipping of the products again fell to Merritt.”
Maline asked if Shogren had done a “gain or loss” analysis to see if Merritt or Kavanaugh benefited or suffered as a consequence of what befell the McStay family.
Shogren confirmed that he had run the numbers available to him “to see whether either Mr. Kavanaugh or Mr. Merritt gained from the disappearance and subsequent death of Mr. McStay. We didn’t look for loss, necessarily, but we looked for gain to see whether there was something unusual that accrued to either one of those outside of what their normal ordinary business activity had been. They both had a business activity and they had business interactions and there would have been monies earned by both of them in the ordinary course of that relationship. So we were looking to see if there was something that was outside the pattern that had been established over time.”
Shogren said a report on that issue was provided as a status update of his work in July 2018
“Based on the records that you reviewed and that question, did you have an opinion or not as to whether Mr. Kavanaugh benefited or didn’t benefit from the disappearance of Mr. McStay?” Maline asked.
“I did form an opinion about that,” Shogren said. “It was my opinion that following his death there were things that were outside of the normal relationship that had been demonstrated over time. We examined a lot of records and looked at his relationship and his earnings as a service provider for Earth Inspired Products. There was a period of significant income in what I referred to as a growth period and there was a decline in that, and for the last year or so [that McStay was alive], he earned significantly less money than he had previously. And then almost immediately after the disappearance [of the McStay family] his [Kavanaugh’s] income from Earth Inspired Products went up significantly.”
“So, did you have an opinion whether or not Mr. Kavanaugh gained from the disappearance of Mr. McStay?” Maline asked.
“So under the parameters we were working with, I called that a gain,” Shogren said.
“You testified yesterday that Mr. Kavanaugh continued receiving payments after Mr. McStay disappeared, after February 4, 2010,” Maline said. “Mr. Kavanaugh, I think the term you used may have been redirected, the money to his PayPal account that was coming in from the online orders through PayPal, is that correct?” Maline asked.
“That’s correct,” Shogren said.
“Objection; misstates testimony,” Rodriguez said
“And is speculative,” Imes added.
“Overruled,” Judge Smith said.
“And in addition to PayPal, you indicated there was a second source where he would get the money and take the money in for these orders,” said Maline. “Is that correct?”
“I did,” Shogren said.
“And what was that source?” Maline asked.
“We also saw cash deposits outside of PayPal,” Shogren said.
“Objection; speculation,” Rodriguez said.
“The sheet we looked at yesterday indicated there was a specific account,” Shogren said. “There were two accounts. There were cash receipts. One of those was a business account. It was a business checking account with Bank of America. In my opinion, deposits made into a business account are business related. The second one was a personal account that was used – that account commingled personal and business funds, and there were substantial deposits we were able to identify that were business-related. There were some deposits that were cash deposits. We couldn’t identify them. They were made at an ATM. We don’t know whether they were checks deposited or cash.”
What was the total amount of that from the February 2010 to December 2010 ten-month period?” Maline asked.
The amount we attributed to business revenue over that period of time was just under $207,000.”
Shogen said over $147,500 of that was gross profit.
Maline attempted to ask multiple questions about Kavanaugh’s personal spending, but those questions were objected to and sustained.
“As far as Mr. Merritt is concerned, you did review his records as well, correct?” Maline asked.
“That is correct,” Shogren said.
“In terms of after the disappearance of Mr. McStay, did you have an opinion as to whether Mr. Merritt either gained or lost from that disappearance financially?” Maline asked.
“My opinion was he completed the jobs that were under way,” Shogren began.
“Objection; calls for speculation and misstates evidence,” Imes intervened.
“Overruled,” said Judge Smith. “He was asked to state his opinion.”
“So the jobs that we had visibility to were completed, to the best of our knowledge,” Shogren said. “We found no evidence of any claims for unfinished work. Payments were made in full on those jobs. The gain would have come just through the normal completion of the jobs rather than anything extraordinary.”
“So did you have an opinion on whether he gained or did not gain from the disappearance of Mr. McStay, financially?” Maline pushed.
“So, as I stated before, we were looking for things that were outside the ordinary scope of business,” Shogren said. “We didn’t find any gains outside the scope of business with his relationship to Earth Inspired Products.”
Gregg Stutchman, the owner of Napa-based Stutchman Forensic Laboratory and a forensic analyst specializing in the examination, enhancement and clarification of recorded audio and video evidence, testified last week. A former officer with the Calistoga Police Department who subsequently served as a captain with the Pacific Union College Police Department, Stutchman returned to the witness stand this week. His previous testimony and that he provided this week related to the photometric analysis he had done with regard to one of the basic elements of the prosecution’s case, consisting of the postulation that Merritt was at the McStay residence the evening of February 4, 2010, which prosecutors maintain was the night of the murders. The strongest evidence in support of that proposition is that at 7:47 pm that evening, two video cameras that were part of the home security system Jennifer Mitchley had installed at her home located across and slightly up the street from the McStay residence caught a fleeting and partial electronic glimpse of a vehicle which the prosecution maintains was that belonging to Charles Merritt at that time.
Stutchman this week essentially repeated what he had said last week, which was that certain features of Merritt’s vehicle excluded it as a match for the one seen on the Mitchley home security cameras.
Stutchman expounded upon a series of photos consisting, variously, of stills taken from the Mitchley video and ones of the truck Merritt owned in 2010 taken by a member of the sheriff’s department’s scientific analysis division, Michael Russ. The headlights in the two sets of photos did not match, Stutchman said, in that the headlights on Merritt’s truck are distinct from the running light below the headlights, and those running lights extend beyond the headlights toward and around the side of the truck, whereas no running lights are visible on the vehicle in the Mitchley video.
Stutchman dismissed the contention of the prosecution’s expert witness, Eugenio Liscio, that a light seen toward the back end of the vehicle in the Mitchley video which does not correspond as a feature of Merritt’s truck is simply a reflection of some nearby light. Liscio said that the disappearance of the light in four frames of the Mitchley video could be an indication that the light seen on all of the other frames of the video is light being mirrored into the camera, perhaps by a handle/latch of the cargo box toward the rear of Merritt’s truck. Stutchman said he believed the disappearance of the light on the Mitchley video is a function of the inferior quality of the security camera and the compression of the video data uploaded to the security camera’s digital recorder that was done to accommodate that system’s limited digital memory capacity. He referred to this loss of image as “artifact compression.”
Stutchman said the vehicle on the Mitchley video did not have cargo boxes toward the back end. “We do not see any detail of the bed in the Mitchley video,” Stutchman said.
Stuchman was subjected to cross examination by Imes, who focused on what he suggested was a damning similarity in the vehicles which indicated they were one and the same. Imes’ reference was to what was characterized as an electrical plug box on the front bumper of both trucks, and that they appeared to be located in the same position on the bumper on the passenger side of the vehicle.
Stutchman was asked if he was able to find a model of truck extant in 2010 which had the plug box in the same position that corresponded to its location on Merritt’s truck. He reported that he had been unable to locate such a vehicle model.
“So you were not able to find one with this electrical box located in a similar or same position as is found on the defendant’s truck,” Imes said.
“18 years later, that’s correct,” Stutchman said.
“So that would again limit the number of hypothetical trucks in the universe that would have that as a characteristic,” Imes said.
“It would,” Stutchman said.
Stutchman nonetheless insisted the vehicle captured on Mitchley’s video did not match Merritt’s truck.
Stutchman said the sheriff’s department’s measurement of Merritt’s truck from the ground to the bottom of the headlight was 32 inches and height to the top of the headlight was 39 inches, while the height to the bottom of the marker light on the top of the cargo box at the back of Merritt’s truck was 60 inches. “Using the measurement tool in Adobe Photoshop CS6/CS5, the bottom of the headlight was marked, the top of the headlight was marked and a custom scale was set,” Stutchman said. With that as a measuring standard, Stuchman said, “Using the custom scale, I measured down 32-and-a-half inches, which is where the ground would be, and then from the ground measured up 60 inches, which is where the side marker light on the top of the box would be. This showed it would have been above the overhang [of the porch on Mitchley’s house, which obscured the top portion of the vehicle caught on the video], taking it out of sight, making it not visible.”
The sidelight on the vehicle depicted in the Mitchley video was well below the overhang that obscured the video’s field of depiction, Stutchman said. He thus determined the sidelight was at a height of 39 inches, excluding Merritt’s truck as a match to what is captured on the video.
Sergeant Daniel Hanke, who had previously testified as a prosecution witness, was called by the defense on May 1. In response to questions from Maline, he testified that he had gone to a paintball recreational facility on the grounds of Camp Pendleton on August 20, 2014 to look at records there relating to liability release waivers signed by those using the facility. His intent was to verify a claim by Merritt, made during an interview with San Diego County Sheriff’s detectives Troy DuGal and Suzanne Fiske on February 17, 2010, that he had traveled with Joseph McStay there in the McStay family’s Isuzu Trooper to play paintball at the facility less than 60 days before the family had disappeared. With some difficulty, Hanke said, he succeeded in digging through boxes stuffed with hundreds of waivers to find a recreational activity release of liability filled out and signed by Merritt on December 10, 2009, as well as another signed by Joseph McStay on January 10, 2009.
For the purpose of the defense, establishing that Merritt had truthfully related to DuGal and Fiske that he had ridden to Camp Pendleton in the Isuzu Trooper a month or so before the family’s disappearance is of some moment, since a trace amount of Merritt’s DNA was found in the vehicle. The prosecution maintains that the presence of his DNA in the Trooper indicates Merritt was the one who drove it to San Ysidro on February 8, 2010, where it was found abandoned in a mall parking lot in close proximity to the international border with Mexico. That only a trace amount of DNA was present on the steering wheel and gearshift, the defense contends, demonstrates that Merritt did not actually drive the Trooper, but was merely present inside it, which is consistent with the testimony of experts knowledgeable about the detectibility of DNA spread by contact.
Maline also explored with Hanke what he had learned from his trip to the San Ysidro mall on August 18, 2014 to look into the circumstances relating to the Isuzu Trooper having been abandoned there on February 8, 2010.
In response to Maline’s questions, Hanke acknowledged that he considered it important to determine with as much provision as he could when the Trooper had been left in the mall parking lot.
Hanke spoke with Bruce Carter, the owner of the security service that patrolled the mall and its parking lot, and David Jackson, one of the other security personnel employed in patrolling the mall at the time. The best determination that could be made as to the Isuzu being there was that it was first noted at 9:18 p.m.
Hanke’s testimony furthered the defense’s contention that Merritt did not drive the Isuzu Trooper to San Ysidro on February 8, as his cell phone records show him in the Rancho Cucamonga area throughout the latter part of that day.
Sergeant Gary Hart, who was then a detective assigned to the McStay family murder case in 2014, testified this week as well. His assignment included picking up from the FBI evidence that had been transferred to it by the San Diego Sheriff’s Department that had been collected when the matter was being investigated as a multiple missing persons case.
Among those items were two cordless phones that had been in use in the McStay household at the time of the disappearance. Hart testified that upon charging the phones he had attempted to access their memory and phone message functions. On one of the devices, he said, “There was nothing in the memory. It was blank.” He said that he could not say with any certainty whether the messages had been manually deleted or “wiped,” because when some phones’ internal batteries become completely discharged, the memory self-erases, he said.
He had better success with the other phone, Hart testified.
On February 1, 2010, he said, the phone recorded a call at 10:06 pm involving a number associated with Patrick McStay, Joseph McStay’s stepfather. Between February 1 and February 4, there were 12 calls logged on the phone. The last call on February 4 was at 5:39 p.m.
The phone log did not provide information as to whether the calls were incoming or outgoing, Hart said, and it did not show the duration of the calls. On February 5 at 9:42 am a call with no name provided was shown on the log. At 10:39 am there was a call with a number associated with DR Horton. At 11:29 am on February 5, Hart said, there was a call from Mortgage Protection.
Under cross examination by Imes, Hart testified that the phone, which was confiscated and removed from the home when the San Diego County Sheriff’s Department served a search warrant on February 19, 2010, showed 50 calls logged between February 1 and February 18.
Imes asked Hart, of those “How many were from 909 374 0102?”
“I don’t see any” Hart said.
909 374 0102 was Merritt’s cell phone number.
Sergeant Edward Bachman, who was one of the investigators originally assigned to the case and later became the “case agent” relating to the McStay family murder investigation, was called to the witness stand by the defense this week, as well. He had testified as a prosecution witness earlier in the trial. His testimony this time around had not concluded on Thursday, May 2, and he is anticipated back next week.
The function of the case agent, he said, was not so much a supervisory one but rather entailed responsibility for compiling or assembling “the book” containing the compendium of various reports relating to the case. Generally, Bachman said, about four detectives were working on the McStay family murder case, but that the personnel assigned to it changed. Over time there were “in excess of ten” investigators who were assigned to the case in one capacity or another, he said.
Initially, Bachman acknowledged, it was thought that the vehicle seen in the Mitchley security video leaving the McStay residence was the Isuzu Trooper. He said he saw that the exhaust pipe on the Isuzu Trooper’s driver side did not match the exhaust pipe on the passenger side of the vehicle in the Mitchley vehicle. He said that his efforts in examining the Mitchley video extended to seeking to exclude the McStay family’s Isuzu Trooper as a match. Conversely, he said, he had sought to make an inclusion of Merritt’s vehicle as a match to the one seen in the Mitchley video.
On October 15, 2014, Bachamn said he and then-detective Ryan Smith and perhaps then-detectives Brian Zierdt and David Hanke went to the residence of an individual identified only by the last name of Brubraker who had come into possession of the worktruck that was owned by Merritt in 2010. At some point, according to Bachman, a FARO scan – a three-dimensional imaging – was done of Merritt’s truck as well as the streetscape in the 3400 block of Avocado Vista Lane where the McStay and Mitchley families lived in February 2010. The intention was to lay the image of the truck into the image of the streetscape to see if Merritt’s truck could be matched to the vehicle seen on the Mitchley security video, he said.
Maline asked why the investigative team had gone to Avocado Vista Lane.
“To conduct the FARO scan of the front of the residence in order to be able to mesh up the video to see if we could plug the truck into the FARO scan to be able to say that was the truck in the video,” Bachman said.
Maline questioned Bachman about the potential similarities between Merritt’s truck and the image of the vehicle captured on the Mitchley video. Measurements were taken and some similarities between the images were noted, Bachman testified.
One of those similarities was an electrical box on the front bumper of Merritt’s truck, he said.
At the time of Merritt’s arrest, Bachman testified, a photogrammetry expert had not yet been brought in to positively ascertain whether the vehicle on the Mitchley video could or could not be excluded as a match to Merritt’s truck.
“After October 15, 2014, did you do anything further than what we’re looking at here to either exclude or include Mr. Merritt’s vehicle as being the one in the Mitchley video?” Maline asked.
“I did not, no,” Bachman said.
“But you were the case agent at the time, correct?” Maline asked.
“Correct,” Bachman said.
“You would have been aware of what the other detectives would be doing, correct?” Maline asked.
“Yeah, that’s a pretty fair statement,” Bachman said.
“Okay, so are you aware of any other detectives that did anything after October 15 to either include or exclude Mr. Merritt’s vehicle as the vehicle in the Mitchley video?” Maline asked.
“At the time we were trying to find someone to be able to mesh the FARO scans together and do image overlay of the surveillance video to be able to try and include or exclude,” Bachman said. “At the time that I left, I don’t believe we had any of that complete to show whether it was a positive or, you know, show consistencies or whatnot.”
“Are you aware of when Mr. Merritt was arrested? Maline asked.
“Yes,” Bachman responded.
“When was that?” Maline asked.
“November 2014,” Bachman said.
“A month after this, correct?” Maline asked.
“Yeah, two weeks to a month after this,” Bachman said.
“So, my question actually is: Between the time of October 15 and to the time Mr. Merritt was arrested, are you aware of any efforts by you or other detectives to either include Mr. Merritt’s vehicle or exclude it from the Mitchley video?” Maline asked.
“Objection; asked and answered,” Imes protested.
“Overruled,” Judge Smith said.
“I don’t think so, sir,” Bachman said.
Bachman said he authored the warrant for Merritt’s arrest. He also acknowledged that he had mislabeled a photograph in the case summary.
Dan Kavanaugh’s name came up, Bachman said, during the second day of the excavation of the McStay family graves when San Bernardino County sheriff’s investigators were briefed by San Deigo County sheriff’s investigators.
Kavanaugh was subsequently interviewed, Bachman said, and eliminated as a suspect based upon his cell phone records and an alibi provided by Kavanaugh’s then-girlfriend, Lauren Knowles, which placed Kavanaugh in Hawaii at the time of the McStay family’s disappearance. Bachman said Knowles did not care for Kavanaugh, but that she had nonetheless satisfied the investigators that Kavanaugh was not a viable suspect in the murders of the McStay family.
Bachman in initially answering the question of how Kavanaugh was excluded as a suspect said GPS data was available to place Kavanaugh in Hawaii at the time in question. He backed away from that claim as his testimony continued.
“How were you able to verify his alibi?” Maline asked.
“We talked to his girlfriend at the time,” Bachman said.
“What else?” Maline asked.
“We obtained his phone records,” Bachman said
“And what would his phone records tell you about him being in Hawaii?” Maline asked.
“Whether or not he was in Hawaii at or around the time of the disappearance,” Bachman said.
“But what about his phone records would show that?” Maline asked.
“The cell site location,” Bachman said.
“It’s your testimony as the case agent that you had cell site data for Dan Kavanaugh?” Maline probed.
“I don’t remember exactly what we have for Kavanaugh as far as his GPS location at the time,” Bachman said. “We talked to his girlfriend Lauren Knowles, who said he was in Hawaii. She did not care for Mr. Kavanaugh, and had no problem providing the alibi. She provided us with an image that showed them on the beach while they were there, and his phone records indicated that he was making multiple calls to businesses in Hawaii to show he was not in California at the time of the disappearance.”
“Do you have to be in Hawaii to make calls to numbers in Hawaii?” Maline asked.
“You don’t, but I think that supported his statement, especially given the fact, like I said, Miss Knowles was not a fan of Mr. Kavanaugh, yet she was still honest and provided an alibi for him.”
Bachman said that “Somebody from Hawaiian Airlines verified that Kavanaugh’s flights to and from showed that he would have likely been in Hawaii at that time.”
Maline asked about the sheriff’s department’s focus on Kavanaugh’s commandeering of Earth Inspired Products after Joseph McStay’s death. Bachman indicated the department did not take a deep dive into that issue.
“Are you aware of whether you or a member of your team looked into where the money was going from the online sales of fountains from the McStay business?” Maline asked.
“Are you talking about the business while they were alive?” Bachman asked for clarification.
“No,” Maline said. “After they disappeared, the business continued operating, correct?”
“I believe Susan, Kavanaugh and Merritt – Susan Blake [Joseph McStay’s mother], Kavanaugh and Merritt – tried to keep the business going, but they ultimately weren’t able to keep the business afloat, so to speak.” Bachman said.
James McGee, who is Merritt’s defense co-counsel along with Raj Maline and Jacob Guerard, fell ill last week. Reports vary as to whether McGee’s case is simply one of exhaustion or something more serious. To Maline has since fallen the burden of handling the examinations that McGee was intending to carry out. Given that Maline already had a demanding workload in dealing with the examinations that were his bailiwick, there is a perception that the Merritt defense team will not be able to execute the climactic finish of its case as intended, unless McGee can recover before Maline, who has put on a veritable tour-de-force over the last two weeks, also collapses. The centerpiece of the defense’s ending flourish, the Sentinel has learned, will involve the playing of several hours of excerpts from an eight-hour-long interrogation of Merritt by Bachman and Hanke that was carried out on October 23, 2024, during which Merritt steadfastly denied having any involvement whatsoever in the deaths of the McStays. Accompanying that will be the testimony of Dr. Leonid Rudin, who was retained as an expert witness for the district attorney’s office but who was then shunned by the prosecution when his scientific analysis led him to the conclusion that the vehicle seen in the Mitchley video does not match Merritt’s truck. It was the defense team’s intention that McGee would carry out the examination of Rudin.
After testimony concluded on Wednesday, a bleary-eyed Maline explained to the Sentinel why he, McGee and Guerard are being so exacting and driving themselves to the point of disintegration.
“In most cases, the defense needs only to demonstrate to the jury that there is reasonable doubt about the defendant’s guilt to prevail,” he said. “This case is different, way different. You have babies – a three-year-old and a four-year-old – whose heads were beaten in with a hammer. Showing that there is some doubt our client did this will not suffice, not in this case. We have to prove by a country mile that he is absolutely innocent. We can’t let anything that the prosecution does or says go unchallenged.”
Within Sight Of Trial’s End, Merritt’s Defense In A State Of Exhaustive Collapse
By Mark Gutglueck