Opinion ID: 1057121
Heading Depth: 2
Heading Rank: 1

Heading: Proceeds Versus Profits

Text: On appeal, Peters urges us to read proceeds in section 982 to include only the profits of his fraud. Section 982 does not supply a definition of the term proceeds. Neither have we determined whether, as used in section 982(a)(2), proceeds means profits or gross receipts. We ultimately agree with the district court that the term proceeds is not limited to profits. 1. Textual Arguments. When a term in a statute is undefined, we are to give it its ordinary meaning. FDIC v. Meyer, 510 U.S. 471, 476 (1994). Proceeds, however, can mean either 'receipts' or 'profits.' Both meanings are accepted, and have long been accepted, in ordinary usage. United States v. Santos, 553 U.S. 507, 511 (2008). The term '[p]roceeds,' moreover, has not acquired a common meaning in the provisions of the Federal Criminal Code. . . . Congress has defined 'proceeds' in various criminal provisions, but sometimes has defined it to mean 'receipts' and sometimes 'profits.' Id. at 511-12. The defendant argues that this case is controlled by Santos, a case involving an illegal lottery. In Santos, the Supreme Court construed the word 15 proceeds in the federal anti-money laundering statute, 18 U.S.C. § 1956, to mean profits, rather than gross receipts. A plurality of the Santos Court found that because [f]rom the face of the statute, there is no more reason to think that 'proceeds' means 'receipts' than there is to think that 'proceeds' means 'profits,' the rule of lenity required that the tie must go to the defendant. Id. at 514. The defendant would have us conclude that the term proceeds under section 982(a)(2) must therefore also be limited to profits. The problem with the defendant’s argument is that, under the rule announced by the Supreme Court in Marks v. United States, 430 U.S. 188 (1977), the holding in Santos is limited to the position taken by those Members who concurred in the judgments on the narrowest grounds, id. at 193 (internal quotation marks omitted). And as we explained in United States v. Quinones, 635 F.3d 590 (2d Cir.), cert. denied, 132 S. Ct. 830 (2011), Justice Stevens' concurrence controls the scope of the Court's holding in Santos. Id. at 599 (citing Santos, 553 U.S. at 523). Unlike the plurality, Justice Stevens would have held that proceeds meant profits when the antimoney laundering statute was applied to specified unlawful activities, but that it meant receipts when applied to others. Santos, 553 U.S. at 525 (Stevens, J., concurring). 16 We need not and do not decide here the precise contours of Santos's holding. It is enough to observe, as we did in Quinones, that a key point of agreement among the plurality and Justice Stevens was the desire to avoid a merger problem. Quinones, 635 F.3d at 599. In the context of the illegal lottery at issue in Santos, the plurality explained that [i]f 'proceeds' meant 'receipts,' nearly every violation of the illegal-lottery statute would also be a violation of the money-laundering statute, because paying a winning bettor is a transaction involving receipts that the defendant intends to promote the carrying on of the lottery. Santos, 553 U.S. at 515. Justice Stevens agreed that such payments would necessarily be funded by the receipts of illegal activity. Id. at 526-27 (Stevens, J., concurring). And he agreed with the plurality that Congress could not have intended violations of the money-laundering statute to merge in this way with violations of other statutes. Id. at 528 & n.7. By contrast, the criminal forfeiture statute presents no merger issue. Unlike the anti-money laundering statute, section 982(a)(2) is a form of punishment rather than a substantive criminal offense. There is therefore no risk of what Justice Stevens called a practical effect tantamount to double jeopardy, id. at 527, when section 982(a)(2) captures funds essential to the commission of one of its predicate offenses. Because the concerns uniting Justice Stevens's 17 concurrence and the plurality in Santos do not apply in the context of criminal forfeiture, Santos does not control the question of how to interpret proceeds for the purposes of section 982(a)(2). Turning then to the text, the defendant points to subsections (a)(3) and (4) of section 982, which apply to violations of other statutes and which require forfeiture of all property traceable to gross receipts obtained as a result of the violation.2 The government counters by pointing to the seemingly broad language of section 982, which reaches any property . . . obtained directly or indirectly from the crime. The government notes that, in interpreting nearly identical language in 21 U.S.C. § 853, which addresses criminal forfeiture in the context of narcotics violations, the Supreme Court was of the view that Congress could not have chosen . . . broader words to define the scope of what was to be forfeited. United States v. Monsanto, 491 U.S. 600, 607 (1989). We do not find either of these arguments particularly helpful or persuasive. For much the same reasons the Santos Court thought that the term 2 Although Peters does not cite it, another example is section 982's civil cousin, 18 U.S.C. § 981. In imposing civil forfeiture for unlawful activity -- indeed, for the same types of fraud for which the defendant was convicted -- that provision explicitly states that the court shall allow the claimant a deduction from the forfeiture to the extent that the loan was repaid, or the debt was satisfied, without any financial loss to the victim. 18 U.S.C. § 981(a)(2)(C). 18 proceeds in section 1956 was ambiguous in the context of money laundering, we think that the term is ambiguous as used in section 982. 2. Primary Purpose of Section 982. Where the language of a statute is ambiguous, we focus upon the 'broader context' and 'primary purpose' of the statute. Castellano v. City of New York, 142 F.3d 58, 67 (2d Cir. 1998) (citing Robinson v. Shell Oil Co., 519 U.S. 337, 345-46 (1997)). Here, the punitive intent of section 982 favors the government's interpretation of the word proceeds. Criminal forfeiture is a form of punishment. As such, it is distinct from restitution or other remedial actions, which are intended to return the victim and the perpetrator to the status quo that existed before the violation took place. We agree with the government that doing no more than returning a wrongdoer to the economic position he occupied before he committed his criminal offense does not provide much of a deterrent to those who might be tempted to follow in his footsteps. Gov’t Br. at 64. That is not punishment. Moreover, as the Eighth Circuit noted in a case involving forfeiture under the Racketeer Influenced and Corrupt Organizations Act (RICO), 18 U.S.C. § 1963(a)(3), a broad reading of proceeds in the context of criminal forfeiture punishes all convicted criminals who receive income from illegal activity, and 19 not merely those whose criminal activity turns a profit. United States v. Simmons, 154 F.3d 765, 771 (8th Cir. 1998). We also find relevant the fact that it may often, although not always, be difficult to isolate and identify the profits of criminal activity. Here, for example, the fraudulent accounting practices at the heart of the scheme also make it challenging to determine what exactly became of the loan disbursements. As the Eighth Circuit noted, quoting the RICO forfeiture provision's legislative history, [i]t should not be necessary for the prosecutor to prove what the defendant's overhead expenses were. Id.; see also United States v. McHan, 101 F.3d 1027, 1042 (4th Cir. 1996) (Were we to read proceeds in § 853 [the narcotics forfeiture statute] to mean only profits, . . . we would create perverse incentives for criminals to employ complicated accounting measures to shelter the profits of their illegal enterprises.). We conclude that reading proceeds to mean receipts rather than profits in the context of section 982(a)(2) better vindicates the primary purpose of the statute. In so doing, we agree with the Ninth Circuit that in enacting the section, Congress sought to punish equally the thief who carefully saves his stolen loot and the thief who spends the loot on 'wine, women, and song.' United States v. Newman, 659 F.3d 1235, 1243 (9th Cir. 2011). [T]he 'proceeds' of a 20 fraudulently obtained loan equal the amount of the loan, id. at 1244, irrespective of whether the defendant personally profited from the loan or whether the bank recovered part of the loan principal. We came to a similar conclusion in United States v. Awad, 598 F.3d 76 (2d Cir. 2010) (per curiam). There, we held that criminal forfeiture under 21 U.S.C. § 853 permits imposition of a money judgment on a defendant who possesses no assets at the time of sentencing. Id. at 78. Because [m]andatory forfeiture is concerned not with how much an individual has but with how much he received in connection with the commission of the crime, id. at 78 (internal quotation marks omitted, brackets in original), we conclude that the term proceeds as used in section 982(a)(2) means receipts.