United States v. Lo: Developments on the Application of Southern Union
08 Nov 2016

Stefan Cassella of Asset Forfeiture Law, LLC comments on the recent judgement of United States v. Lo, in which four recurring and difficult issues with criminal forfeiture orders, and one more novel issues, are resolved.

 

[United States v. Lo, ___ F.3d ___, 2016 WL 5799706 (9th Cir. Oct. 5, 2016).]

 

Ninth Circuit * Defendant stole $2.2 million from his employer and pled guilty to three counts of mail and wire fraud. In his written plea agreement, Defendant admitted that the amount stolen in the course of the scheme was at least $2.2 million, acknowledged that the court would enter orders for forfeiture and restitution, and waived the right to appeal those orders.

Prior to sentencing, the Government applied for a forfeiture order in the form of a money judgment for $2.2 million, and the court entered the order at sentencing. Defendant appealed.

Defendant argued that the waiver of appeal in his plea agreement was invalid for two reasons. First, he claimed that the waiver was not “knowing and voluntary” because the plea agreement did not give him a “reasonably accurate estimate of the amount of forfeiture to which he was exposed.” But the court did not agree.

There is no requirement, the court said, that a plea agreement provide a defendant with a “reasonably accurate estimate” of the amount he will be required to forfeit. It is sufficient to show that he knew that the trial judge was free to order him to forfeit “the proceeds of the crime.” Accordingly, just as a defendant may waive the right to appeal without knowing the length of the period of incarceration that the court will impose, he may waive the right to appeal a forfeiture order without knowing precisely how the court will calculate the amount of the forfeiture judgment.

Second, Defendant argued that the appeal waiver was invalid because the forfeiture order was illegal. He offered four reasons why this was so.

First, he argued that the Government violated Rule 32.2(a) by failing to provide him with notice in his indictment that it would be seeking a forfeiture order in the form of a money judgment. The forfeiture notice did say that the Government would be seeking the forfeiture of property “including but not limited to” a list of specified real and personal property. Defendant’s objection, however, was that after he entered his guilty plea, the Government abandoned the option of forfeiting specific property and instead sought only a money judgment without previously giving him notice that it was going to do so.

The court held that there was nothing wrong with proceeding in that fashion. Rule 32.2(a) requires the Government to give the defendant notice that it will be seeking to forfeit property; it does not require the Government to say what form the forfeiture order will take. In particular, the rule does not require the Government to notify a defendant that it will be seeking a money judgment.

Nor was Defendant misled by the Government’s change of strategy. The indictment, the court noted, made it clear that the property subject to forfeiture included but was not limited to the list of specific assets that appeared in the indictment. Thus, the court concluded that Defendant received sufficient notice of the forfeiture order.

Second, Defendant complained that the Government failed to satisfy the requirements in 21 U.S.C. § 853(p) before obtaining the money judgment. That statute provides that before ordering the forfeiture of substitute assets, the court must find that the directly-forfeitable property is unavailable due to an act or omission of the defendant. But the court held that those requirements do not apply when the Government is seeking only a money judgment and not the forfeiture of specific property as substitute assets.

Third, Defendant argued that the forfeiture order was illegal because it should have been limited to the amounts involved in the three substantive counts to which he pled guilty. But the panel followed all other courts that have addressed this issue and held that when a defendant is convicted of one or more executions of a “scheme to defraud,” he is liable to forfeit the proceeds of the entire scheme, “including additional executions of the scheme that were not specifically charged or on which the defendant was acquitted.”

Finally, Defendant objected that under the Supreme Court’s decisions in Apprendi and Southern Union, he had a constitutional right to have the amount of the forfeiture determined by a jury and not by the court. Prior decisions of the Ninth Circuit and other courts rejecting that argument, Defendant said, did not apply in his case, because the forfeiture was based on a 3 scheme to defraud and not on a discrete offense. But the panel saw no reason to distinguish its prior decisions on that basis, and thus reaffirmed that there is neither a statutory nor a constitutional right to have a jury determine the amount of a money judgment.

Accordingly, the panel held that Defendant’s waiver of appeal was valid and enforceable and dismissed the appeal.

 

Comment: In a single opinion, the Ninth Circuit has addressed and resolved four recurring and controversial issues regarding criminal forfeiture orders, and a fifth issue that is somewhat novel.

Regarding the requirements of Rule 32.2(a), the court follows all others in holding that the rule does not require the Government to state in the indictment that it will be seeking forfeiture in the form of a money judgment. See Section VI.D of the Criminal Forfeiture Case Outline. What is somewhat more controversial is the court’s holding that because Rule 32.2(a) contains no such requirement, the Government is free to change its theory of forfeiture at sentencing from the forfeiture of specific assets to the forfeiture of a money judgment without giving the defendant prior notice that it plans to do so. See generally the cases on switching theories of forfeiture in Section XIII.F of the Criminal Forfeiture Case Outline.

Other courts have permitted the Government to change its theory of forfeiture in that way, but defendants have objected that in doing so, the Government deprives them of the statutory right under Rule 32.2(b)(5) to have the forfeiture determined by the jury. See Christie v. United States, 2014 WL 2158432, *9-10 (S.D.N.Y. May 23, 2014) (Government has the discretion to choose between seeking a money judgment and specific assets, and defendant has no right to object on the ground that by seeking a money judgment, the Government deprived him of his right to a jury under Rule 32.2(b)(5)). Cf. United States v. Gregoire, 638 F.3d 962, 972 (8th Cir. 2011) (there is no right to a jury if the Government announces that it is abandoning its request to forfeit specific assets and is seeking only a money judgment; but in that case the Government cannot use the money judgment to recover the value of specific assets traceable to the offense that are available for forfeiture). The Ninth Circuit did not address that issue in this opinion.

With regard to the scope of the forfeiture, the court follows the Seventh Circuit’s decision in United States v. Venturella, 585 F.3d 1013, 1015, 1016-17 (7th Cir. 2009), and other cases from other courts in holding that the forfeiture in a mail or wire or fraud case includes the proceeds of the entire scheme. See Section I.D of the Criminal Forfeiture Case Outline. It actually goes beyond most of those cases, however, in holding that the forfeiture may include property derived from conduct on which the defendant was acquitted. Accord. United States v. Jafari, 85 F. Supp.3d 679 (W.D.N.Y. 2015) (defendant liable for proceeds of fraud count on which he was acquitted if the court finds by preponderance of the evidence that she committed that offense), aff’d ___ Fed. Appx. ___, 2016 WL 5340280 (2nd Cir. Sept. 22, 2016); United States v. Hasson, 333 F.3d 1264, 1279 n.19 (11th Cir. 2003) (if defendant is convicted of a conspiracy, the forfeiture may be based on amounts defendant conspired to launder, including amounts derived from uncharged substantive conduct, or substantive counts for which he has been acquitted).

With respect to applying the requirements in Section 853(p) when the Government is seeking only money judgment, the court had much less precedent to follow. The Ninth 4 Circuit said the same thing five years ago in United States v. Newman, 659 F.3d 1235, 1242-43 (9th Cir. 2011) (when seeking only a money judgment, the Government does not have to show that the requirements for forfeiting substitute assets in § 853(p) or Rule 32.2(e) are satisfied), and a handful of district courts have agreed. See Section IX.E of the Criminal Forfeiture Case Outline. But other circuits have either disagreed or have withheld ruling on that issue. See United States v. Abdelsalam, 311 Fed. Appx. 832, 847 (6th Cir. 2009) (because the only way the Government can, in the future, enforce the money judgment is by forfeiting substitute assets, it must show that § 853(p) is satisfied before the money judgment is entered); United States v. Nagin, 810 F.3d 348, 353 n.5 (5th Cir. 2016) (finding it unnecessary to decide if § 853(p) applies to money judgments because defendant conceded it would be satisfied in his case). See also United States v. Gregoire, 638 F.3d 962, 972 (8th Cir. 2011) (Government may not seek a money judgment for the value of the specific assets when the assets themselves were available for forfeiture).

Regarding the constitutional right to a jury trial, all circuits that have considered the issue agree that Apprendi and Southern Union do not apply to criminal forfeiture. See Section VIII.F of the Criminal Forfeiture Case Outline. In this case, the panel affirmed the Ninth Circuit’s holding in United States v. Phillips, 704 F.3d 754, 770 (9th Cir. 2012), that Southern Union does not apply to criminal forfeiture for the same reasons that Apprendi does not apply: the Supreme Court’s earlier decision in Libretti remains binding on the lower courts until the Supreme Court reconsiders it; and the Apprendi cases only apply if there is a statutory maximum, which is not the case for criminal forfeiture. The panel saw no reason to depart from that rule just because the forfeiture in this case required a finding as to the proceeds of the entire scheme to defraud.

The novel issue concerns the defendant’s complaint that his waiver of appeal was invalid because he wasn’t told in advance what amount of forfeiture the trial court was likely to impose.

Generally, courts hold that compliance with Rule 32.2(a) provides all the notice that due process requires, and that accordingly, if the Government tracks the language of the applicable forfeiture statute in the forfeiture notice in the indictment, it need not itemize the property subject to forfeiture nor state the amount of the money judgment that it intends to seek. See Section VI.B of the Criminal Forfeiture Case Outline. The defendant’s argument on this point, however, was not with the notice provided by the indictment, but with the voluntariness of his plea agreement. In his view, the court erred in finding his guilty plea knowing and voluntary because it failed to advise him, at the time of the plea, that the forfeiture order would be in the amount of $2.2 million. The panel held, however, that the amount of the forfeiture, like the length of the defendant’s jail sentence, is a matter left to the trial judge to decide, and that a defendant’s guilty plea is valid as long as he understands that.

Stefan Cassella, Asset Forfeiture Law, LLC 

www.assetforfeiturelaw.us

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