The Honorable James M. Rosenbaum, United States Distric t 1 Judge for the District of Minnesota. United States Court of Appeals

FOR THE EIGHTH CIRCUIT

___________ No. 90-5417

___________ United States of America, * * Plaintiff-Appellee, * * Appeal from the United States v. * District Court for the * District of Minnesota. Ferris Alexander, * * Defendant-Appellant. *

___________ Submitted: September 11, 1996 Filed: March 10, 1997

___________ Before WOLLMAN, FLOYD R. GIBSON, and JOHN R. GIBSON, Circui t Judges.

___________ JOHN R. GIBSON, Circuit Judge.

Ferris Alexander is before us again. The United State s Supreme Court remanded this case for a determination of whet her the forfeiture of Alexander's property under the Racketeer Influenced andCorrupt Organizations Act, 18 U.S.C. §§ 1961-1968 (1994) , violated the Eighth Amendment prohibition against excessive fines. Alexander v. United States , 509 U.S. 544, 559 (1993). Followin g
our remand to the district court, United States v. Alexander , 3 2 F.3d 1231 (8th Cir . 1994) ( Alexander II ), the district court held 1In his brief, Alexander identifies and values the item s 2 forfeited: ten parcels of real property valued at $1,040,334.06; fifteenbank accounts totalling $5,017.47; fourteen bookstore s va luedat least at $2,000,000; personal property and equipmen t liquidated at auction and private sale for $47,297.47; 113.8 tons of "presumptively protected" magazines, videos, and novelties ; 1,0 33 boxes of magazines, videos, and novelty items from a California warehouse; three motor vehicles valued at $12,000; and monies acquired from the RICO enterprise from the years 198 5 through 1988, totalling $8,910,548.10.
-2- that A lexander failed to make a prima facie case o f di sproportionality, and Alexander appeals this order. Alexande r arg ues that the forfeiture of his property was prima faci e di sproportionate, and thus, constituted an excessive fine. H e argu es that the district court ignored uncontroverted valuatio n evidence, erroneously excluded property forfeited from th e pr oportionalityanalysis, and misconstrued the legal and factua l tests applicable to a proportionality analysis. We affirm.

The details of Alexander's convictions and forfeiture o f propertyare set forth in Alexander v. Thornburgh , 943 F.2d 825 , 826-29 (8th Cir. 1991) ( Alexander I ), Alexander II , 32 F.3d a t 1233-34 ( 8th Cir. 1994), and Alexander , 509 U.S. at 547-49. W e 2 affirmed the district court's forfeiture order, 943 F.2d at 832-36. The Su preme Court reversed and remanded for consideration o f whether the forfeiture of Alex ander's property violated the Eighth Amendment's prohibition agains t excessive fines. 509 U.S. at 559. We, in t urn, remanded the case to the district court to conside r thi s issue and to take additional evidence as it deeme d appropriate. Alexander II , 32 F.3d at 1235. In our remand order,
we outlined a number of principles the district court migh t consider in its proportionality analysis, giving the distric t court fu ll discretion to develop the record and make appropriat e findings. Id. at 1235-37.-3-

In considering Alexander's argument that the forfeiture of h is propertyconstituted an excessive fine, the district cour t
rec ognizedthis court's instruction that it must distinguis h proc eeds of the racketeering activity and property whic h fac ilitates or affords a source of influence over the illega l enterprise. See 32 F.3d at 12 36. The forfeiture of proceeds from the illegal enterprise is not considered punishment subject to the excessive fines analysis becau se the forfeiture of proceeds simply deprives the owner of the fruits of his criminal activity. See id. The district court found that the real property, the $8,910,548.10 in pro ceeds, and the personal property, equipment, and inventor y located on the premises of the forfeited real property constituted proceeds of Alexander's racketeering enterprise, and were no t subject to the excessive fines analysis. The court determin ed that it would only include Alexander's personally held real prope rty and business interests in the amount forfeited for the purpose of the proportionality analysis.
The district court recognized that Alexander must make a pri ma faci e showing of gross disproportionality before the court wil l consider the government's counter-evidence of just proportio nality. Following this court's suggest ion, the district court stated that, to determine if Alexander made a prima facie showing of gros s di sproportionality, it must compare the extent and duration o f Alexa nder's criminal activities with the amount of propert y forfeited. The court decided that Alexander had the burden to make at least a preliminary showing of the sums forfeited, and t o demo nstrate a disproportionality between the forfeiture and hi s crime. The court concluded that Alexander "entirely failed to come forward with any cognizable ev idence establishing the dollar value of his holdings." The court specifically referred to the several amounts Alexander claimed to have held, varying from "$25 mi llion," to "many millions" to "$2 million." The court pointed out that-4-

Alexander failed to submit any evidence of the value of hi s business, such as a certified appraisal, audited financia l statem ents, or any value based on a capitalization of incom e stream, an offer of a comparab le sale, or a specific asset listing andvaluation. Because the court could not calculate "bas e holdings," the court concluded it was impossible to determine the propor tionof fines and, ultimately, determine if the forfeitur e was disproportionate.

The co urt also commented on Alexander's lack of credibilit y basedon discrepancies in Alexander's trial testimony and hi s declarations. Alexander had stated to the Supreme Court that his business was worth $25 million, but on his Chapter 7 bankruptc y sch edule, he stated, under penalty of perjury, that his busines s was worth approximately $2 million. The court found "unworthy of belief," Alexander's valuation of his assets. The court referred to evidence that Alexander failed to keep records of receipts and that there were "vast unreported sums of money." As one example, the court recounted evidence that Alexander maintained only a personal monthly declaration of quarters he collected and counted from unmetered "peep show" vending machines, and that these records did not square with testimony from a bank employee who stated that Alexander deposited substantia l amounts of quarters into different bank accounts, often retaining large amounts of cash in $50 an d $100 denominations. The court stated that between the time o f Alex ander's conviction and the seizure of his assets, Alexande r requestedand received control of his business and assets and , dur ing that time, he "secreted assets, attempted bulk sales, an d engaged in . . . a series of shenanigans designed to obstruc t th[e] Cour t's orderly processes and enrich himself before the marsha l seized his inventory and equipment." Under these circumstances , the court concluded that the United States had no duty to inventory Alexander's holdings and rejected Alexander's argument that he-5-

should be relieved of his burd en to show gross disproportionality.

The district court then consid ered the extent and duration of Al exander's criminal activities. The court compared Alexander' s maxi mumconsecutive sentences (171 years and statutory fines o f $6,400,000) with his imposed sentence (72 months and $100,00 0 fine, special assessments, and costs), specifically noting that th e court did not order a higher fine because of the forfeiture. The court concluded that the imposed sentence was appropriate and Alexander fai ledto make any showing that the forfeiture was grossl y disproportionate to his criminal activity.

Alexander now argues that the district court incorrectl y conducted the proportionality analysis. Alexander perceives five problems with the court's conclusion that he failed to make a prima facie case of disproportionality. He argues that the court: (1) ignored uncontroverted evidence in the record regarding the value of property forfeited; (2) mis construed the legal and factual test applicable to the proportionality analysis; (3) erroneousl y excluded at least $8.9 million from the proportionality analysis; (4) erroneously focused on facts relating to the tax counts; an d (5 ) erroneously failed to hold as a matter of due process tha t Alexander had met his burden o f establishing a prima facie case of disproportionality.

I.

Alexa nder first claims that the district court ignore d uncontroverted valuation evidence. He argues that the court failed to acknowledge the evidence of value of the United States Marshall appointed by the court to "app rise" the forfeited property, who he says valued the forfeited property at around $10,017,197.10.The government explains that the term "apprise" means t o 3 "advise, counsel, inform, notify, and warn," it does not mean t o appraise or value.

The affidavit sets forth the net proceeds the governmen t 4 receivedfrom disposing the property seized as a result of th e forfeiture: real estate - $659,344.58; cash - $2,185.13; ban k accounts - $5,017.47; and contents of businesses - $49,297.47.
-6- Alexander stresses that this amount did not even include the entire amount of the forfeiture, as t he ten million dollar figure did not include the value of the fourteen ongoing businesses and 114 tons of seized inventory.

Alexander's characterization of the affidavit is not accurat e. Pursuant to a district court order, the United States Marshal l Serv ice was authorized and directed to dispose of forfeite d pr operty, not value the property. The affidavit sets forth th e 3 net proceeds of the property seized, and does not “value” th e sei zedproperty at anywhere near ten million dollars. Th e 4 affidavit contains nothing to cause us to conclude that th e distri ct court ignored valuation evidence or erred in conductin g its proportionality analysis.

II.

Al exander next contends that the district court incorrectl y analyzed the proportionality question. He directs us to our remand order in which we suggest that the district court compare "th e extent of the criminal activity and the quantum of propert y forfei ted." Alexander II , 32 F.3d at 1236. He alleges that th e distri ct court added the further requirement, unsupported by th e
case law, of requiring him to establish the sums he originall y posses sed. He characterizes the district court's analysis as a comparison of the forfeiture t o his net worth, not as a comparisonAlexander identifies the following factors from Busher an d 5 Sarbello as critical to the disproportionality analysis: (1) the circumstances surrounding the defendant's criminal conduct; (2) the har msuffered by the victim and the defendant's culpability; (3 ) the dollar volume of the loss caused, whether physical harm t o persons was inflicted, threatened or risked, or whether the crime had severe collateral consequences; (4) the benefit reaped by the defendant; (5) the defendant's state of mind and motive; and (6 ) the degree to which the enterprise operated by the defendant wa s infect edby criminal conduct. The Supreme Court declined t o establisha multifactor test for determining when a fine i s uncons titutionallyexcessive, leaving the lower courts free t o devel op their own tests. See Austin v. United States , 509 U.S

. 602, 622-23 (1993). We have considered many of the factors urged byAle xander. See United States v. Bieri , 68 F.3d 232, 236 (8t h Cir. 1995), cert. denied , 116 S. Ct. 1876 (1996).
-7- of the forfeiture to his criminal activities.

The district court, following our suggestion, considere d whether the forfeiture constituted an excessive fine by comparing the extent and duration of Alexander's criminal activities w ith the amount of property forfeited. See id. Contrary to Alexander' s argument, the district court did not compare the amount of th e forfeiture to Alexander's net worth. The court was simply trying to ascertain the amount forfeited by determining the amount o f Alexander's property that was not the fruit of his RICO viol ations.

Alexander further contends that applying the inquirie s articulatedby United States v. Busher , 817 F.2d 1409, 1415 (9t h Cir. 1987), and United States v. Sarbello , 985 F.2d 716, 721 -25 (3d Cir. 1993), he has made a prima facie case of gros s disproportionality. As Alexander stressed in his earlier appeals, 5 he complains that he was convi cted of three RICO counts predicated on seven items of obscene mate rials, and the dollar value of these obscene materials was "infinitesimal" when compared to the volume of the sale of other protected expressive material. Alexander' s argument essentially asks us t o limit the proportionality analysisThe district court ordered the forfeiture of $8,910,548.10 as 6 proceeds obtained from the racketeering activity. The government contends that in light of Alexander's financial situation , including his tax liability and Chapter 7 bankruptcy, this amount is unlikely to be collected. -8- to a comparison of the number of magazines and videos specifically foundby the jury to be obscene to the dollar amount of th e forfeiture. The Supreme Court, however, implicitly rejected this same argument:

[Alexander] contends that forfeiture of his entire business was an "excessive" penalty for the Government t o exact "[o]n the basis of a few materials the jur y ultim atelydecided were obscene." It is somewha t misleading, we think, to characterize the racketeerin g crimes for which [Alexander] was convicted as involving ju st a few materials ultimately found to be obscene

. Alexander was convicted of creating and managing what th e District Court described as "an enormous racketeerin g enterprise." It is in the light of the extensiv e cr iminal activities which [Alexander] apparentl y conductedthrough this racketeering enterprise over a substantial period of time tha t the question whether the forfeiture was "excessive" must be considered.

Alexander , 509 U.S. at 559 (citations to record omitted). Th e distri ct court did not err in conducting its proportionalit y analysis.

III.

Alexander further contends tha t the district court abused its discre tionand clearly erred in finding that the entire $8. 9 million included in the forfeiture order const ituted "proceeds" of 6 the racketeering enterprise. Alexander restates his argumen t presented in this and earlier appeals, attacking the forfeiture of the fourteen bookstores and theaters based on findings that three-9-

videotapes and four magazines were obscene. He does not disput e that the business may have gen erated $8.9 million during the years 1985 through 1988; rather, his objection is to the district court's conclusionthat the entire $8.9 million is proceeds and is no t includedin the Eighth Amendment analysis. He suggests that th e proceeds from the seven items found to be unlawful, and perh aps the multip le copies, are all that can be excluded from th e proportionality analysis.

In rem anding the case to the district court, we instructe d that "[f]orfeiture of proceeds cannot be considered punishme nt, and thus, subject to the excessive fines clause, as it simply pa rts the owner from the fruits of the c riminal activity." Alexander II , 32 F.3d at 1236. The district court made explicit its earlier finding tha t the forfeiture of $8,910,548.10 constituted proceeds o f Alexander's racketeering enterprise. This amount represente d proceeds which Alexander obtained directly or indirectly from his racketeering activities for the years 1985 through 1988.

We have already decided that proceeds cannot be included i n the proportionality analysis. See id. The only question re maining is whe ther the forfeiture ordered constitutes an excessive fine

. We have no hesitation in concluding that the district court did not
er r in excluding the $8.9 million from its proportionalit y analysis. The jury found this amount forfeitable as proceeds o f the racketeering activity for the years 1985 through 1988. Th e district court concluded that "the proceeds were inextricably tied to a n enormous racketeering enterprise." Alexander has no t presented any cogent argument explaining why the jury and district court determination as to the amount of proceeds from th e racketeering enterprise should not stand.

IV.-10-

Alex ander also argues that the district court erred by focusing on facts relating to the tax counts in concluding t hat the forfeiture was not excessive. He claims the non-RICO tax count s are irrelevant in evaluating gross disproportionality.
Alexander's indictment set forth the racketeering enterprise and the purpose of the enterprise, as well as the extensive means andmethods that Alexander used to conduct the enterprise. Th e indictment incorporated allegations of the tax counts as "me ans and
me thods" by which Alexander "conducted and participated in th e conduct of affairs of the ente rprise." Accordingly, the court did not err in considering the entire record, including the tax counts, in deciding whether the forfeiture constituted an excessive fine.

V.
Finally, Alexander argues that due process requires that he be relieved of his burden to show gross disproportionality beca use the United States Marshall made no detailed inventory or appraisal of the business's videos, magazin es, and other items at the time they
were seized. He contends that it is impossible for him t o determ ine the total value of the property forfeited because th e government destroyed approximately "114 tons of presumptivel y protected magazines and videotapes."
The district court rejected Al exander's due process argument, observing that Alexander was attempting to turn his obligation to pre sent valuation evidence at the forfeiture hearing into a dut y impo sedon the Marshall to make an inventory at the time o f seizure.
We see no circumstance here excusing Alexander from showing-11-

disp roportionality. The record is replete with examples o f Alexander's attempts to frustr ate the valuation of his property as well as dissipate assets between the time of his conviction and the seizure of assets. We reject Alexander's due process argument.
We affirm the judgment of the district court.

A true copy.

Attest:

CLERK, U. S. COURT OF APPEALS, EIGHTH CIRCUIT.