LINDA R. READE, Chief Judge.
TABLE OF CONTENTS
I. INTRODUCTION ............................................................853
II. RELEVANT PROCEDURAL BACKGROUND ..........................................853
III. RELEVANT FACTUAL BACKGROUND ..............................................854
IV. APPLICABLE LAW ...........................................................854
V. ANALYSIS .................................................................856
A. Applicability of Southern Union ......................................857
1. Relevant Supreme Court precedent .................................857
a. Decisions addressing criminal forfeiture ....................857
b. Apprendi and its progeny .....................................858
2. Parties'arguments ...............................................859
3. Analysis ........................................................859
a. Waiver .......................................................859
b. Right to jury determination ..................................860
B. Statute of Limitations ..............................................861
C. Legitimate Income ...................................................862
D. Objections to Particular Items as "Proceeds" .........................863
E. Substitute Assets, Including a Money Judgment ........................864
1. Extent of Defendant's liability ..................................864
2. Requirements under 21 U.S.C. § 853(p) ............................865
F. Eighth Amendment .....................................................866
VI. CONCLUSION ..............................................................868
The matter before the court is the government's "Motion ... for Preliminary Order of Forfeiture" ("Motion") (docket no. 276).
On April 28, 2011, the government filed a twenty-two count Indictment (docket no. 2) against Defendant. Counts 1 through 9 charged Defendant with committing wire fraud in violation of 18 U.S.C. §§ 1343 and 2(b). Counts 10 through 15 charged Defendant with committing mail fraud in violation of 18 U.S.C. §§ 1341 and 2(b). Count 16 charged Defendant with conspiracy to commit mail and wire fraud in violation of 18 U.S.C. § 371. Finally, Counts 17 through 22 charged Defendant with engaging in and attempting to engage in money laundering transactions in violation of 18 U.S.C. §§ 1957 and 2(b).
The Indictment also contains forfeiture allegations. Specifically, the Indictment alleges that Defendant should forfeit to the United States "any property, real or personal, constituting or derived from any proceeds traceable" to the mail fraud, wire fraud and conspiracy to commit mail and wire fraud offenses. Indictment at 25. Such forfeiture is authorized by 18 U.S.C. § 981(a) and 28 U.S.C. § 2461(c). The Indictment also alleges that Defendant
On March 19, 2012, a jury trial on Counts 1 through 22 commenced. On April 9, 2012, at the close of the government's evidence, the government moved to dismiss Counts 14 and 15, and the court granted the motion. On that same date, Defendant waived his right to have the jury decide whether the specific properties listed in Appendix A to the Indictment are subject to forfeiture. See Fed.R.Crim.P. 32.2(b)(5)(A). The case was submitted to the jury, and, on April 13, 2012, the jury returned guilty verdicts on Counts 1 through 13 and 16 through 22.
On May 22, 2012, the government filed the instant Motion seeking a forfeiture determination. On June 25, 2012, Defendant filed a Resistance (docket no. 295). On July 9, 2012, the government filed a Reply (docket no. 301) to Defendant's Resistance. On July 26, 2012, Defendant filed a Supplemental Forfeiture Memorandum (docket no. 315) addressing the impact of a recent United States Supreme Court case, Southern Union Co. v. United States, ___ U.S. ___, 132 S.Ct. 2344, 183 L.Ed.2d 318 (2012). On August 9, 2012, the government filed a Response (docket no. 330) to Defendant's Supplemental Forfeiture Memorandum. On August 20, 2012, Defendant filed a Reply (docket no. 336) to the government's Response to Defendant's Supplemental Forfeiture Memorandum. On September 27, 2012, the parties filed a "Joint Statement of Issues and Objections Relating to Forfeiture Determination" ("Joint Statement of Issues") (docket no. 356) and a "Chart of Items Sought for Forfeiture and Objections Thereto" (docket no. 355-1).
On October 3, 2012, the court held a hearing. Assistant United States Attorneys Steven E. Holtshouser, Jess E. Michaelsen and Richard E. Finneran represented the government. Attorney Douglas P. Roller represented Defendant. The court finds that the matter is fully submitted and ready for decision.
The court incorporates the summary of the trial evidence set forth in its August 7, 2012 Order (docket no. 325). In pertinent part, the trial evidence established that Defendant organized and operated a fraudulent loan program that induced individuals to loan money to Derek J. Smith, a real estate developer, for purported land purchases in England. The loan program was known as the "British Lending Program," or BLP. After Defendant and his co-conspirators deducted fees from a new investment, the remaining balance of the investment was primarily used to pay interest or principal to other investors. Between 2000 and the time the BLP collapsed in 2010, Defendant defrauded approximately 140 individuals out of approximately $51,568,087.17. See BLP Lender Summary — Main, Government Trial Exhibit 102 at 3.
Pursuant to Federal Rule of Criminal Procedure 32.2(b)(1)(A):
Fed.R.Crim.P. 32.2(b)(1)(A).
In this case, forfeiture is authorized under 28 U.S.C. § 2461(c) and 18 U.S.C. § 981(a)(1)(C).
28 U.S.C. § 2461(c); see also United States v. Jennings, 487 F.3d 564, 584-85 (8th Cir.2007) (discussing 28 U.S.C. § 2461(c)). Civil forfeiture of mail fraud, wire fraud and conspiracy to commit mail and wire fraud proceeds is authorized by 18 U.S.C. § 981(a)(1)(C), which provides that "[a]ny property, real or personal, which constitutes or is derived from proceeds traceable to ... any offense constituting `specified unlawful activity' (as defined in [18 U.S.C. § 1956(c)(7)]), or a conspiracy to commit such offense" is subject to forfeiture. 18 U.S.C. § 981(a)(1)(C). "Specified unlawful activity" includes mail and wire fraud. See 18 U.S.C. § 1956(c)(7) (incorporating by reference the offenses in 18 U.S.C. § 1961(1)). Thus, forfeiture is authorized in this case and, under 28 U.S.C. § 2461(c), it is a mandatory part of sentencing.
Therefore, under the applicable statutes, the court must order Defendant to forfeit all "proceeds" of his mail fraud, wire fraud and conspiracy to commit mail and wire fraud offenses. Under 18 U.S.C. § 981(a)(2), "proceeds" is defined in one of two ways:
18 U.S.C. § 981(a)(2).
A preponderance of the evidence standard applies to forfeitures under 28 U.S.C. § 2461(c).
In the Motion, the government requests that the court order Defendant to forfeit 670 specific properties listed in Appendix A to the Indictment and enter a personal money judgment against Defendant in the amount of $51,568,087.17.
Number
Group Nature of Evidence of Items
A Items whose forfeitability is established by direct evidence that the 7
property constitutes or is derived from fraud proceeds.
B Items whose forfeitability is established by circumstantial evidence 148
relating to lack of legitimate income and date of purchase as reflected
in a receipt or invoice.
C Items whose forfeitability is established by circumstantial evidence 57
relating to lack of legitimate income and date of purchase as reflected
by date of addition to an insurance list.
D Items whose forfeitability is established by circumstantial evidence 430
relating to lack of legitimate income and date of purchase as reflected
by the items' location at the time of seizure.
E Items whose forfeitability is established by circumstantial evidence 28
relating to lack of legitimate income and date of purchase as
suggested by the nature of the item itself.
Memorandum in Support of Motion at 7. To the extent the court should find that any of the 670 specific properties are not proceeds, the government requests that the court order Defendant to forfeit the properties as substitute assets pursuant to 21 U.S.C. § 853(p).
In the Joint Statement of Issues, the parties identify six issues
First, Defendant argues that a recent Supreme Court decision, Southern Union, applies to forfeitures and, consequently, the court cannot impose a forfeiture sentence in this case without running afoul of his Sixth Amendment right to a jury trial. Because Defendant argues that an earlier Supreme Court decision, Libretti v. United States, 516 U.S. 29, 116 S.Ct. 356, 133 L.Ed.2d 271 (1995), has been abrogated, at least in part, by more recent decisions, including Southern Union, the court first briefly examines the applicable Supreme Court precedent, beginning with Libretti and ending with Southern Union. Next, the court summarizes the parties' arguments. Finally, the court addresses the government's contention that Defendant waived any right to a jury determination of forfeiture and then turns to the ultimate issue raised by Defendant — whether he has a Sixth Amendment right to a jury verdict on the forfeiture allegations.
The court begins by briefly examining the Supreme Court cases that the parties cite in support of their respective arguments and that the court ultimately relies on in its analysis. First, the court summarizes two Supreme Court cases dealing specifically with the issue of criminal forfeiture. Then, the court turns to the line of cases beginning with the Supreme Court's seminal decision in Apprendi v. New Jersey, 530 U.S. 466, 120 S.Ct. 2348, 147 L.Ed.2d 435 (2000), and ending with the principal case Defendant relies on, Southern Union.
On November 7, 1995, the Supreme Court decided Libretti v. United States, 516 U.S. at 29, 116 S.Ct. 356, which addressed a defendant's argument that the district court was required to advise him during his plea colloquy that he was waiving his right to a jury determination as to the forfeitability of certain property. Id. at 48, 116 S.Ct. 356. The Supreme Court held that, although former Federal Rule of Criminal Procedure 31(e) created a statutory right to a jury verdict on criminal forfeiture allegations, there is no corresponding Sixth Amendment right: "Without disparaging the importance of the right provided by Rule 31(e), our analysis of the nature of criminal forfeiture as an aspect of sentencing compels the conclusion that the right to a jury verdict on forfeitability does not fall within the Sixth Amendment's constitutional protection." Id. at 49, 116 S.Ct. 356. Consequently, because the right was merely statutory rather than constitutional in origin, the Supreme Court concluded that the district court was not required to specifically advise the defendant during the plea colloquy that he had a right to a jury determination on the forfeitability of certain property. Id.
Nearly three years after its decision in Libretti, the Supreme Court decided another case analyzing the applicability of constitutional protections to criminal forfeiture determinations. In United States
On June 26, 2000, the Supreme Court held in Apprendi v. New Jersey, 530 U.S. 466, 120 S.Ct. 2348, that there is a Sixth Amendment right to have a jury determine facts that increase the applicable statutory maximum sentence. Id. at 490, 120 S.Ct. 2348. In Apprendi, the defendant was charged with, among other offenses, possessing a firearm for an unlawful purpose. Id. at 469-70, 120 S.Ct. 2348. Ordinarily, the statute carried a maximum sentence of ten years; however, if the defendant committed the offense with a "biased" purpose, a "hate crime" enhancement applied and the maximum sentence was twenty years. Id. at 470, 120 S.Ct. 2348. The defendant argued that he had a constitutional right to have a jury determine, beyond a reasonable doubt, whether the offense was committed with a "biased" purpose such that the twenty-year maximum sentence applied. Id. at 471, 120 S.Ct. 2348. The Supreme Court agreed and held that, "[o]ther than the fact of a prior conviction, any fact that increases the penalty for a crime beyond the prescribed statutory maximum must be submitted to a jury, and proved beyond a reasonable doubt." Id. at 490, 120 S.Ct. 2348.
After Apprendi, the Supreme Court decided a line of cases that explained and clarified what facts must be submitted for jury determination. For example, in Blakely v. Washington, 542 U.S. 296, 124 S.Ct. 2531, 159 L.Ed.2d 403 (2004), the Supreme Court held that the "`statutory maximum' for Apprendi purposes is the maximum sentence a judge may impose solely on the basis of the facts reflected in the jury verdict or admitted by the defendant. In other words, the relevant `statutory maximum' is not the maximum sentence a judge may impose after finding additional facts, but the maximum he may impose without any additional findings." Id. at 303-04, 124 S.Ct. 2531 (emphasis omitted) (citations omitted); see also Oregon v. Ice, 555 U.S. 160, 164, 129 S.Ct. 711, 172 L.Ed.2d 517 (2009) (holding that the Sixth Amendment, as construed in Apprendi, does not require juries to determine facts warranting the imposition of consecutive, rather than concurrent, sentences for multiple offenses); United States v. Booker, 543 U.S. 220, 259, 125 S.Ct. 738, 160 L.Ed.2d 621 (2005) (invalidating the portion of the Federal Sentencing Act that established mandatory sentencing guidelines).
Finally, at issue in this case, is the Supreme Court's June 21, 2012 decision in Southern Union, 132 S.Ct. 2344. In Southern Union, the Supreme Court held that the Sixth Amendment gives defendants the right to have a jury determine, beyond a reasonable doubt, facts that would increase the maximum criminal fine a court could impose at sentencing. Id. at 2348-49. The case arose when Southern Union Company ("Southern Union"), a natural gas distributor, stored mercury in
In this case, Defendant asks the court to extend Southern Union's holding to forfeiture determinations. Defendant contends that, because the Supreme Court previously determined in Bajakajian that "forfeiture is a punishment equivalent to a criminal fine," the rule in Apprendi, as explained in Southern Union, applies to forfeiture determinations. Defendant's Supplemental Forfeiture Memorandum at 1 (citing Bajakajian, 524 U.S. at 327-28, 118 S.Ct. 2028). Consequently, Defendant argues that the court should deny the Motion.
In its Response to Defendant's Supplemental Forfeiture Memorandum, the government argues that: (1) Defendant waived his right to have the jury address forfeiture; (2) "the Supreme Court has recognized that the Constitution does not require a determination of forfeiture by the jury in two separate cases, [Libretti] and [Booker]"; (3) circuit court precedent establishes that there is no statutory maximum for forfeiture and, thus, Apprendi cannot apply; and (4) juries historically have not determined forfeiture. Response to Defendant's Supplemental Forfeiture Memorandum at 1-11. Alternatively, the government argues that the jury found beyond a reasonable doubt that Defendant acquired two properties, the Marthasville house (Property #670) and the 2006 Volvo (Property #516), with BLP proceeds because those properties were the subjects of two of the money laundering counts, Counts 17 and 21. Finally, the government requests that, "[a]s a [p]recaution," the court make its forfeiture determination using the reasonable doubt standard. Id. at 12 (emphasis omitted).
In his Reply, Defendant argues that he did not waive his right to have the jury make the forfeiture determination beyond a reasonable doubt; rather, at the time he elected to have the court make the forfeiture determination under Federal Rule of Criminal Procedure 32.2, he only waived his right to have the jury decide the issue using the preponderance of the evidence standard. Defendant also argues that Libretti has been abrogated by Apprendi and its progeny and pre-Southern Union circuit court precedent does not "preclude the position advanced by Defendant." Reply to Government's Response to Defendant's Supplemental Forfeiture Memorandum at 6. Finally, Defendant contends that "[t]he government's reliance on common law forfeiture upon conviction as applicable to the present case is ... misplaced." Id. at 7.
First, the government argues that Defendant waived his right to a jury verdict
The court recognizes that, like the defendant in Hively, Defendant elected to have the court, as opposed to the jury, "determine the forfeitability of specific property if [the jury] return[ed] a guilty verdict." Fed.R.Crim.P. 32.2(b)(5)(A). The statutory right guaranteed under Rule 32.2, however, is the right to have the jury determine by a preponderance of the evidence whether certain property is subject to forfeiture. Defendant aptly points out that, under Apprendi and its progeny, the higher reasonable doubt standard applies. The court, however, finds it unnecessary to determine whether Defendant waived his right to a jury verdict on the forfeiture determination because, as set forth below, there is no Sixth Amendment right to a jury verdict on forfeiture allegations.
After a review of the applicable case law, the court finds that Defendant does not have a Sixth Amendment right to a jury verdict on the forfeiture allegations in the Indictment. The court reaches this conclusion for two reasons: (1) the Supreme Court's decision in Libretti forecloses Defendant's argument; and (2) even if Libretti were not binding law, Apprendi and its progeny do not apply because there is no statutory maximum applicable to criminal forfeiture.
First, this court is bound by prior Supreme Court precedent. In Libretti, the Supreme Court held that a defendant does not have a Sixth Amendment right to a jury trial on forfeiture allegations. Libretti, 516 U.S. at 49, 116 S.Ct. 356. The court recognizes that there appears to be some tension between the rationale in Libretti and the subsequent Apprendi line of cases. See, e.g., United States v. Leahy, 438 F.3d 328, 331 (3d Cir.2006) (en banc) (recognizing tension between Booker and Libretti). Nevertheless, the Supreme Court has not explicitly overruled Libretti, and, accordingly, the court is bound by its holding. See United States v. Ortiz-Cintron, 461 F.3d 78, 82 (1st Cir.2006) (finding that the defendant waived his right to a jury trial on the forfeiture issue but noting that, "[e]ven without waiver, we would be bound — unless and until it is overruled by the Supreme Court — by Libretti, holding that the Sixth Amendment does not apply to `criminal forfeiture as an aspect of sentencing'" (quoting Libretti, 516 U.S. at 49, 116 S.Ct. 356) (citation omitted)); Leahy, 438 F.3d at 333 ("[W]e join our sister Courts of Appeals and hold that, even after Booker, the Sixth Amendment's trial by jury protection does not apply to forfeiture, as Libretti remains Supreme Court authority by which we are bound."); United States v. Fruchter, 411 F.3d 377, 380 (2d Cir.2005) (noting that the holding in Libretti is binding "even if it might appear `to rest on reasons rejected in some other line of decisions'" (quoting Rodriguez de Quijas v. Shearson/Am. Express, Inc., 490 U.S. 477, 484, 109 S.Ct. 1917, 104 L.Ed.2d 526 (1989))); cf. United States v. Torres-Alvarado, 416 F.3d 808, 810 (8th Cir.2005) (noting that, even if the continued viability of a Supreme Court decision is questionable, the Eighth Circuit is bound by the
Second, even if the court were not completely satisfied that Libretti is still binding law, the court would nevertheless find that Apprendi and its progeny do not apply to a criminal forfeiture determination. Defendant attempts to conflate the criminal fine at issue in Southern Union with the criminal forfeiture at issue in this case. In doing so, Defendant relies on the Supreme Court holding in Bajakajian that a criminal forfeiture is subject to the limits imposed by the Eighth Amendment's Excessive Fines Clause. There is, however, a notable difference between the criminal fine at issue in Southern Union and the criminal forfeiture at issue in this case. The statute at issue in Southern Union imposes a cap on the fine a judge can impose at sentencing — no more than $50,000 per day of violation. Criminal forfeiture, on the other hand, has no applicable statutory maximum. As the Second Circuit recognized in Fruchter, "[a] judge cannot exceed his constitutional authority by imposing a punishment beyond the statutory maximum if there is no statutory maximum. Criminal forfeiture is, simply put, a different animal from determinate sentencing." Fruchter, 411 F.3d at 383; see also United States v. Hall, 411 F.3d 651, 655 (6th Cir.2005) (finding that 18 U.S.C. § 982(a)(2) does not impose a statutory maximum); United States v. Messino, 382 F.3d 704, 713 (7th Cir.2004) ("The criminal forfeiture provisions do not include a statutory maximum; they are open-ended in that all property representing proceeds of illegal activity is subject to forfeiture.").
The court is aware of only one federal court that has addressed the applicability of Apprendi to criminal forfeiture determinations following the decision in Southern Union.
In view of the foregoing, the court finds it unnecessary to address the parties' remaining arguments and also declines the government's invitation to make the forfeiture determination using the higher reasonable doubt standard. Because the court concludes that Defendant has no Sixth Amendment right to a jury determination on the forfeiture allegations, the court next turns to Defendant's statute of limitations argument.
Defendant argues that the applicable statute of limitations for mail and wire fraud precludes forfeiture of proceeds obtained prior to April 28, 2006. The government counters that, because forfeiture is not a substantive criminal offense, no statute of limitations applies. Furthermore, the government argues that it need only prove that the specific properties in question are traceable to the scheme charged in the Indictment. Additionally, the government notes that Count 16 of the Indictment charged a conspiracy to commit mail and wire fraud and the applicable statute of limitations for conspiracy does
For the reasons set forth by the government in its Reply to Defendant's Resistance to the Motion, the court finds that Defendant's argument is unavailing. It is a well-settled point of law that the government may seek the forfeiture of all proceeds involved in a scheme or conspiracy. See 18 U.S.C. § 981(a)(1)(C) (providing that "[a]ny property, real or personal, which constitutes or is derived from proceeds traceable" to mail fraud, wire fraud or a conspiracy to commit mail and wire fraud is subject to forfeiture); United States v. Venturella, 585 F.3d 1013, 1015, 1016-17 (7th Cir.2009) (holding that the defendants must forfeit the total proceeds of the scheme to defraud); United States v. Capoccia, 503 F.3d 103, 117-18 (2d Cir. 2007) ("Where the conviction itself is for executing a scheme, engaging in a conspiracy, or conducting a racketeering enterprise, the government need only establish that the forfeited assets have the `requisite nexus,' Fed.R.Crim.P. 32.2(b)(1), to that scheme, conspiracy, or enterprise."); see also United States v. Emor, 850 F.Supp.2d 176, 217 (D.D.C.2012) ("When a defendant has engaged in a mail or wire fraud scheme, forfeiture is not limited to the proceeds gained through the particular mailing or wire transaction on which the conviction was based; rather, it `extends to the entire scheme' of which the mailing or wire transaction was a part." (quoting Venturella, 585 F.3d at 1015)). Defendant has cited no authority, binding or persuasive, which leads the court to a different conclusion. Thus, the court rejects Defendant's statute of limitations argument.
Next, Defendant argues that, prior to 2004, he had legitimate income from his law practice.
For the reasons stated by the government in its Memorandum in Support of the Motion and its Reply to Defendant's Resistance
Second, to the extent Defendant did have some legitimate income between 2000 and 2003, Defendant has produced no evidence of his personal expenses during that period, such as mortgage payments, car-related expenses, child rearing expenses, grocery bills and so forth. Even if Defendant's wife was making $100,000 per year — a claim Defendant has failed to substantiate — the court has no means of determining whether whatever legitimate income Defendant had in combination with his wife's income would be sufficient to cover not only personal expenses but also the collectibles and luxury items listed in Groups B through E. Furthermore, the government aptly notes that Defendant does not allege that he actually purchased any of the items listed in Groups B through E with any legitimate income; rather, Defendant merely raises the possibility that he had legitimate income between 2000 and 2003.
Thus, in view of the foregoing, the court finds that Defendant's argument is without merit. The government has proven by a preponderance of the evidence that Defendant had no significant legitimate income since the inception of the BLP and, consequently, there is no likely source for the items listed in Groups B through E other than BLP proceeds.
Next, Defendant claims that he purchased eleven of the properties listed in Groups B, C and D before he had any significant income from the BLP, see id. at 11-12 (identifying eleven properties in dispute), and, therefore, those properties are not subject to forfeiture as proceeds.
For the reasons stated by the government in its Memorandum in Support of the Motion and its Reply to Defendant's Resistance to the Motion, the court finds that the government has proven by a preponderance of the evidence that the eleven items Defendant claims that he purchased
Because Defendant's current assets constitute only a fraction of the total proceeds of the BLP, the government requests that, pursuant to the substitute assets provision of 21 U.S.C. § 853, the court enter a money judgment against Defendant in the amount of $51,568,087.17. Furthermore, in the event that the court finds that any of the specific properties listed in Appendix A to the Indictment are not "proceeds" under 18 U.S.C. § 981(a)(1)(C), the government requests that the court find the properties are forfeitable as substitute assets. In his Resistance to the Motion, Defendant contends that the government has failed to satisfy the requirements under 21 U.S.C. § 853. Furthermore, Defendant argues that, if the court issues a money judgment against him, the money judgment should be limited to the amount of proceeds he personally retained.
In relevant part, 21 U.S.C. § 853(p) states:
21 U.S.C. § 853(p). In United States v. Smith, 656 F.3d 821, 827 (8th Cir.2011), cert. denied, ___ U.S. ___, 132 S.Ct. 1586, 182 L.Ed.2d 200 (2012), the Eighth Circuit held that "§ 853 permits imposition of a money judgment on a defendant who has no assets at the time of sentencing." Id.; accord United States v. Prather, 456 Fed. Appx. 622, 625 (8th Cir.2012). "[T]he court must determine the amount of money that the defendant will be ordered to pay." Fed.R.Crim.P. 32.2(b)(1)(A). "`The court may make the determination based on evidence in the record, or on additional evidence submitted by the defendant or evidence submitted by the government in support of the motion for the entry of a judgment of forfeiture.'" Prather, 456 Fed.Appx. at 625 (quoting Fed.R.Crim.P. 32.2 advisory committee's note).
The parties' arguments raise two separate issues. First, the parties disagree about the extent of Defendant's liability. Second, Defendant contends that the government has failed to satisfy the requirements under 21 U.S.C. § 853(p). The court shall address each issue in turn.
Defendant argues that his liability should be limited to the BLP proceeds he personally retained — $6,274,010. See Overall BLP Financial Summary 2003-2010, Government Trial Exhibit 118 at 1. Alternatively, Defendant requests that the court limit his liability to "a figure consisting of the amount of proceeds and directly forfeitable property the government has recovered from all defendants subtracted from the $25 million that was not returned to the investors." Defendant's Resistance
Under 18 U.S.C. § 981(a)(1)(C), the court shall order Defendant to forfeit "[a]ny property, real or personal, which constitutes or is derived from proceeds traceable to" the mail fraud, wire fraud and conspiracy to commit mail and wire fraud offenses. 18 U.S.C. § 981(a)(1)(C). As noted above, 18 U.S.C. § 981(a)(2) provides two different definitions of proceeds — subparagraph A is applicable when the case involves "illegal goods, illegal services, unlawful activities, and telemarketing and health care fraud schemes" and subparagraph B is applicable when the case involves "lawful goods or lawful services that are sold or provided in an illegal manner." 18 U.S.C. § 981(a)(2). In the case of a conspiracy, a defendant's "liability is not limited to the amount the government proves he personally obtained. He is jointly and severally liable to forfeit the proceeds of the criminal enterprise." United States v. Elder, 682 F.3d 1065, 1073 (8th Cir.2012); cf. United States v. Simmons, 154 F.3d 765, 769 (8th Cir.1998) ("Codefendants are properly held jointly and severally liable for the proceeds of a RICO enterprise.").
In this case, Defendant offered no lawful goods or lawful services as part of the BLP; rather, Defendant merely took lenders' investments under false pretenses, and, then, after deducting fees for himself and his co-conspirators, he redistributed new investments as interest or principal to old investors. Accordingly, the court finds that 18 U.S.C. § 981(a)(2)(A) provides the applicable definition of "proceeds." Therefore, Defendant's liability is not limited to his net gain and he is not entitled to a deduction for any direct costs incurred in operating the BLP, including money returned to investors in the form of interest or principal. After reviewing the trial evidence, the court agrees with the government that the conspiracy entailed a total of $51,568,087.17 in proceeds. Accordingly, the court finds that Defendant is jointly and severally liable to forfeit $51,568,087.17.
Defendant next argues that the government has failed to meet the requirements under 21 U.S.C. § 853(p). The court disagrees. The government has conducted an "in-depth analysis of financial records and [has] execut[ed] multiple search warrants, [but] has been able to recover only a small portion of the proceeds that [Defendant] and his coconspirators obtained or retained as a result of their crimes." Memorandum in Support of Motion at 15. As the government notes, the dearth of recoverable proceeds is attributable to the fact that Defendant and his co-conspirators "spent nearly all of the money they received." Id. at 5. Indeed, the evidence at trial established that, during the height of the BLP, Defendant lived a lavish lifestyle, including frequent travel, a membership with the exclusive Racquet Club and use of a car service on a daily basis.
Thus, the court finds that the government has met its burden of proving that, as a result of Defendant's acts, the bulk of the BLP proceeds cannot be located or have been transferred to third parties. Accordingly, the court finds that it is appropriate to enter a personal money judgment against Defendant in the full amount of $51,568,087.17. Furthermore, in the event
Finally, Defendant argues that a money judgment in the amount of $51,568,087.17 is a grossly disproportionate penalty in violation of the Eighth Amendment's Excessive Fines Clause. Defendant contends that the crimes in this case cannot be considered serious enough to warrant such a large forfeiture judgment because Smith, one of Defendant's coconspirators, received a sentence of probation and, likewise, Brown, the other coconspirator, received a thirty-six month sentence. Furthermore, Defendant contends that, because half of the proceeds were returned to lenders as interest or principal, it would be a grossly disproportionate penalty to hold Defendant accountable for the full $51,568,087.17.
In its Reply to Defendant's Resistance to the Motion, the government first suggests that the court need not conduct an inquiry into the gross disproportionality of the forfeiture because Bajakajian is "inapplicable where the government does not seek to forfeit property that is merely `involved in' an offense but instead seeks to forfeit the proceeds of the offense." Reply to Defendant's Resistance to Motion at 11. Moreover, the government argues that, in a conspiracy case where a defendant is held jointly and severally liable for the proceeds of the offense, courts have generally upheld forfeiture judgments unless the defendant was only a minor participant. Finally, the government argues that the forfeiture of $51,568,087.17 is not a grossly disproportionate penalty given the nature and extent of Defendant's offenses.
As previously noted, the Supreme Court held in Bajakajian that a punitive forfeiture is subject to the Eighth Amendment's prohibition against excessive fines. See Bajakajian, 524 U.S. at 328, 118 S.Ct. 2028. Bajakajian directs "district courts ... [to] compare the amount of the forfeiture to the gravity of the defendant's offense. If the amount of the forfeiture is grossly disproportional to the gravity of the defendant's offense, it is unconstitutional." Id. at 336-37, 118 S.Ct. 2028; accord Smith, 656 F.3d at 828 (quoting Bajakajian, 524 U.S. at 337, 118 S.Ct. 2028). Eighth Circuit precedent establishes a two-prong inquiry for determining whether a forfeiture judgment violates the Excessive Fines Clause. See United States v. Dodge Caravan, 387 F.3d 758, 763 (8th Cir.2004). First, the defendant must "mak[e] a prima facie showing of gross disproportionality." Id. (alteration in original) (quoting United States v. Bieri, 68 F.3d 232, 236 (8th Cir.1995)) (internal quotation marks omitted); see also United States v. Bollin, 264 F.3d 391, 417 (4th Cir.2001) ("The burden is on the party challenging the constitutionality of the forfeiture to demonstrate its excessiveness."). If the defendant is able to make such a showing, "the court considers whether the disproportionality `reach[es] such a level of excessiveness that ... the punishment is more criminal than the crime.'" Dodge Caravan, 387 F.3d at 763 (first alteration in original) (quoting United States v. Premises Known as 6040 Wentworth Ave. S., Minneapolis, Hennepin Cnty., Minn., 123 F.3d 685, 688 (8th Cir.1997)).
Under the relevant factors identified in Bajakajian and by the Eighth Circuit, the court finds that a $51,568,087.17 forfeiture judgment is not grossly disproportional to Defendant's offenses.
Second, Defendant's offenses are serious. The United States Sentencing Guidelines recommend a sentence of life imprisonment. The court recognizes that the forfeiture order greatly exceeds the Guidelines fine range of $25,000 to $250,000. The court, however, does not find this fact
Finally, Defendant caused significant harm. In his Resistance to the Motion, Defendant suggests that the forfeiture is excessive, in part, because nearly half of the proceeds were returned to lenders in the form of interest and principal. Defendant fails to acknowledge, however, that ninety-six lenders lost a total of $30,677,714.31 in the BLP. BLP Lender Summary — Main, Government Trial Exhibit 102 at 3.
Thus, in view of all the circumstances in this case, the court finds that Defendant has failed to make a prima facie showing that a $51,568,087.17 forfeiture order is excessive. Even if Defendant did make such a showing, the court does not find that the forfeiture amount reaches "such a level of excessiveness that ... the punishment is more criminal than the crime." Dodge Caravan, 387 F.3d at 763 (quoting Premises Known as 6040 Wentworth Ave. S., 123 F.3d at 688).
In light of the foregoing, the court shall order Defendant to forfeit the specific properties listed in Appendix A to the Indictment. In the event that the Eighth Circuit finds that any of the specific properties listed in Appendix A are not proceeds, the court finds that such properties are forfeitable under 21 U.S.C. § 853(p). Finally, the court shall enter a personal money judgment against Defendant in the amount of $51,568,087.17. Defendant shall be jointly and severally liable with his co-conspirators, Smith and Brown,
Accordingly, the "Motion ... for Preliminary Order of Forfeiture" (docket no. 276) is
