ok last case before the court today is an appeal from the court of federal claims case number one five five one line for mr christianson do you pronounce that nacchio or not you i believe it is not first in holding that mr nashville wasn't titled the tax at auction for a criminal forfeiture payment he made to the united states as part of the sentence for insider trading second the corner erred in holding that his criminal conviction did not assist collaterally a stop him from seeking to establish in this case that it appeared to him that he had an unrestricted right to the proceeds of his insider trading offenses and we need to decide the first question if we decide the second question in your favor yes your honor the if the court rules that mr nash was not entitled to it at the auction then he is not entitled to recover any refund whatsoever if the court however rules that he is collaterally a stopped from the benefits of section thirteen forty one then he would be entitled to a small refund in the amount of six thousand or so so the first issue however would be dispositive in the court would not necessarily need to reach the second issue gets a small refund and that amount of his refund depends upon whether or not we agree with his so call that yes there's a potential that that amount could vary depending on whether the court agreed that this was a business  because it does make a difference to the dollars the according to your stipulated sat on the amount of money that the federal government allow a return of taxes paid i guess is wh for a fine and a fine or similar penalty a to a government for the violation of any law the court below agreed in the parties do not dispute on appeal that deduction that would be part by section one sixty two would also be precluded under section that's right restitution isn't entirely it's a distinct remedy with with a separate purpose and the case law also clearly distinguishes between for richer and restitution on the one hand as i said forfeiture as designed to punish that shows that crime does not pay on the other hand restitution is intended to compensate victims and it's paid to the victims and the calculation of a recitation amount as based on the victim's loss as opposed to a forfeiture penalty which is based on the gain from the criminal activity well you know the money that actually got in the paper i guess the class action satisfy the whole thing so the but they paraded it to their wall but the yes that's correct your honor but the reporting thing here is that the forfeiture amount of forty four million was not calculated all with respect to the loss of the victims there was no determination in the criminal case as to what amount any victim hood had suffered in damages instead by statute the forfeiture amount was required to be determined to equal the net profit of the mr not gain through his criminal insider trading offenses so that was the calculation of the forfeiture in this case it was based on his gain the and the  loss suffered by any victims played no part in that calculation so this just means that the government gets paid twice because the government gets taxes on its forty four million dollars and then get the forty four million dollars without any deduction the the policy behind section one sixty two i have is that in the case of a fine or similar penalty it's paid to  the penalty is paid with after tax dollars and the person paying the penalty is not entitled to deduct that amount in other words you know even though the person has already paid taxes on that amount so in any case where has been accumulated with after tax dollars so that i suppose that you could say that that's parallel it does it does sound like there is a kind of double hit here that you're saying that's what the statute specifically require are intended to punish the defendants were guilty conduct by disgorging the ill gotten gains what about the fact that all of those cases that you're talking about were were based on at a time a point in time decision that says you know we need to basically morph this forfeiture process into a process where we can give recompense to the victims i believe your honor is referring to the civil asset forfeiture reform act of two thousand again in congress in ten and the purpose manifested in the legislative history of that act was it was focused on protecting innocent property owners from civil forfeiture of their property and so what chaffer did was to enact safeguards to protect innocent owners from the wrongful seizure of their property by by the government and one of the critical ways that congress did that was by an act section twenty four sixty once paragraph city which is a forfeiture statute issue in our case in order to encourage rather than rather encourage the use of criminal forfeiture in lieu of proceeding results in a conviction of an underlying felony and that cannot be imposed on an innocent person and so congress was in an active chaffer and as relevant here the purpose was to encourage a greater use of if you have a system in which by virtue of the combination of statute and regulation you've converted it in effect with it least with respect to those crimes as to which there are identifiable victims a forfeiture system discretion to use amounts that were forfeited to grant remission but by no means was that a requirement this court has held and other courts of have that the remission process which was totally grace in a meaningful way it's just the next question i don't i don't think so i think the attorney general has sole discretion whether to grant those petitions or to use the forfeited funds for any of the other number of may the attorney general may but but may only in very limited circumstances right i mean he's he's he's very cap and in terms of his ability to not give it to victims anything else can be identified no no i don't i don't agree with that he has under the statutes in the regulations he has complete discretion and he's not required to grant permission there are a number of other authorize uses yeah but it's not like he can pick from see him in other words he has to go to pal may unless there's a and explain more extreme justification to go to county or see right that's not correct your honor that's not the way that i read the statute or the implementing regulations the the purpose for which section one sixty two f was and acted which was to deny of adoption in cases where allowing a deduction would was deemed to violate public policy the court  looked beyond that the criminal judgment itself in determining whether the forfeiture was deductible on this in this circumstance because the statute requires forfeiture and doesn't allow for had been free to do that in this case i'm not sure what the answer to that is i my my understanding is that there was there was none in the political restitution statute so i'm not sure whether  of that in the in characterizing a payment for purposes of section one sixty two after the court must look to the origin of the liability given rise to that forfeiture and here it the criminal judgment which require not sure to forfeit the money to the united states there was the order of the judgment said that restitution was not even a political so mr national never paid restitution to any victims and that is the government's discretionary decision to do so after the fact is not relevant to the question of deductibility under section one sixty two and your time is up we'll give you two fundamental question of this case presents why should mr not she'll pay taxes on money that he didn't get to keep judge williams pointed out that day normally in american jurisprudence one pays taxes on income t restitution or compensatory payment or remedial payment the case in law or regarding section one sixty two out in the public policy exception holds that you need to look at the economic reality of the transaction to determine whether a payment is compensatory in nature or punitive in nature so the fact that i think it's in to any say in nature when do we decide that we decide after the fact to see if someone got the money or do we look at whether it's classified as a but there were restitution mary were compensatory payments that compensatory in nature that were found to be deductible and she or the the issue of first impression in this case is whether there is something forfeited funds in the government's coffers when under the terms of the kaffir statute there were identifiable and qualified victims to whom the money could be channel but you didn't really answer my question that despite the fact that there was an you would lose so many days we started we have to ultimately look forward to see what the eternal general decides to do we need to look forward to see what actually happened i don't believe the attorney general had a broad discretion here i think  we have no idea what the status of the class action why don't you have forty four million bucks that you should not have had you mr knox dischord it and doesn't sound like it has anything at all to do has nothing to do with characterization with you look later on to see what happened that's what you're well one thing we need to remember about the unique facts of this case your honor is that it was expressly stated you agree that the forty four million dollars is not actually nothing  t for purposes of deductibility particularly with regard to the fine or similar penalty qualification of one sixty two f this is not a penalty that is similar to a fine of fine goes into the coffers of the government and never has anything to do with identifiable unqualified victims and this is qualitatively different from a fine under section one sixty two half because this amount of money was routed to identifying qualified victims i want to there's a statute now in place and that victim's rights become a major issue in recent years there's a statute i believe that that says fines will be put into a fund which may be used to compensate harm and there's a ten thousand dollar fine and i intend to use that fine specifically to compensate this victim when that fine then become deductible well first of all when you're speaking about the statute your honor i believe speaking about the crime victims fund right and that is if on that routes money that is paid as fines to general government programs to help victims of crimes and suppose in a particular instance the attorney general says i am going to make sure if there's say that ten thousand dollars out of the fund will go to a particular victim i would assume i don't believe that's the case on a respect like i believe that the crime victims fund act requires that the money pa crime it's directed to general programs of the government including state governments which are used to help victims of crime is generally somewhere down the line it might be used to help someone who has suffered some crimes that he does not purposely with ok well let's were the proceeds of compensatory stock options that mr not shield was given as compensation for his services as the c e o of the quotes that would be similar to personal income right it is personal have held that employment income qualifies under section one sixty two sir no court has ever no recorded cases ever of look to the subsequent use by the government of an amount that's paid as a fine or penalty to determine its character for purposes of section one sixty two or including the cases relied on by mr not show the first seventy s case in the first circuit there was never any mention in any of those cases or any discussion as to how the that the recent sing hearing itself which is the earliest evidence evidence that mr nash points to an intent on the part of the government to compensate victims remission was three years after mr not show was sentenced to pay over the basically it was the same sentence except that the tenth circuit had held that the amount of the forfeiture was required to be the net profits rather than the gross profits that mr n so that again it didn't matter to the imposition of the sentence whatever the usa said was going to be done with no and in fact the case law is clear that you know the district judge certainly you know had no discretion in as as a mandatory sanction under the statute that was referred to section twenty four sixty one so about as the origin of the liability here when when the net profits were calculated and agreed to worth or payment of taxes taken into account