Opinion ID: 78296
Heading Depth: 2
Heading Rank: 3

Heading: Issues Related to the Forfeiture Order

Text: Chaplin's and Midtown contend that the district court erred in ordering forfeiture of their bank accounts and inventories because they did not constitute properties involved in, or used to facilitate, the offenses charged in Counts Two through Seven. Specifically, they maintain that there is no connection between these properties and the money laundering offenses. They also emphasize that, apart from the undercover sales, there was no proof of any other illegal activities taking place at the Chaplin's and Midtown stores We review de novo the district court's legal conclusions regarding forfeiture and the court's findings of fact for clear error. Puche, 350 F.3d at 1153. A person convicted of violating 18 U.S.C. § 1956 and 31 U.S.C. § 5324 must forfeit to the government all property that is either involved in that violation or traceable thereto. 18 U.S.C. § 982(a)(1); 31 U.S.C. § 5317(c)(1)(A). Property eligible for forfeiture under 18 U.S.C. § 982(a)(1) includes that money or property which was actually laundered (the corpus), along with any commissions or fees paid to the launderer[] and any property used to facilitate the laundering offense. Puche, 350 F.3d at 1153 (quotation marks and citation omitted). Property would facilitate an offense if it makes the prohibited conduct less difficult or more or less free from obstruction or hindrance. Id. (quotation marks and citation omitted). Though the pooling or commingling of tainted and untainted funds would not by itself render the entirety of an account subject to forfeiture, if the government establishes that the defendant did so to facilitate or `disguise' his illegal scheme, then forfeiture is acceptable. Id. Chaplin's and Midtown first contend that we should not interpret § 5317(c)(1)(A) to allow for forfeiture of property used to facilitate the transaction reporting violation. See 31 U.S.C. § 5317(c)(1)(A). In support of their argument, they cite United States v. Dean, 87 F.3d 1212, 1213-14 (11th Cir.1996), in which we noted that the amount forfeitable in a case would be limited to that money which was directly involved in the reporting offense. However, we conclude that discussion in Dean to be inapposite and not controlling here. In Dean we were dealing with a separate and distinct issue, the legality of a civil forfeiture agreementa question that involved determining whether § 5317 was a remedial or punitive statute. In answering this question, we never addressed whether facilitation of the offense was a valid interpretation of § 5317, instead focusing on the nature of the statute itself. See Dean at 1213-14. Furthermore, Dean was addressing an old version of § 5317, which included no mention of the current version's phrase involved in. See id. at 1213. The term `involved in' has consistently been interpreted broadly by courts to include any property involved in, used to commit, or used to facilitate the offense. United States v. Varrone, 554 F.3d 327, 331 (2d Cir.2009) (quotation marks and citation omitted). Because Dean does not affect our analysis, we instead focus on the similarity between the relevant language of § 5317(c)(1)(A) and § 982(a)(1). Section § 5317(c)(1)(A) requires the defendant to forfeit all property, real or personal, involved in the offense and any property traceable thereto, whereas § 982(a)(1) states that the person forfeit to the United States any property, real or personal, involved in such offense, or any property traceable to such property. 18 U.S.C. § 982(a)(1); 31 U.S.C. § 5317(c)(1)(A). Given that the two statutes essentially mirror each other, it seems incongruous to interpret those provisions as covering different arrays of property. Cf. Varrone, 554 F.3d at 330-31 (noting that the two provisions have nearly identical language and that the broad interpretation of involved in applies equally to § 5317(c)(1)(A) and § 982). Furthermore, we can discern no policy basis for distinguishing between the two. Accordingly, we conclude that § 5317(c)(1)(A) allows for forfeiture of property that facilitates the reporting violation. Chaplin's and Midtown next assert that forfeiture of their accounts and inventories was improper because there was no evidence that they were used in the commission of those violations. This contention ignores the fact that the availability of the two stores' inventories made it easier for Seher to launder money by giving potential buyers a large variety of jewelry options. Furthermore, Seher used telephones, business cards, and other company property to create a facade of legitimacy, which aided in the concealment of his actions. See United States v. Rivera, 884 F.2d 544, 546 (11th Cir.1989) (deeming defendant's horse breeding business a front for his drug trafficking and thus permitting forfeiture of horses under facilitation theory). Both stores' inventories thus facilitated the offenses, and the district court properly included them in the forfeiture order. For much the same reason, we also find that the district court did not err in including Midtown's bank account. The evidence established that the cash from Perkins' last two purchases was deposited in Midtown's bank account, thereby further facilitating the laundering by disguising the source of those tainted funds. See Puche, 350 F.3d at 1154 (deeming it reasonable to infer that the intermingling of tainted and legitimate proceeds act[ed] as a `cover' and hence reduced suspicion of the source of the tainted funds). We can identify no evidence in the record, however, linking a Chaplin's bank account to the reporting and laundering offenses. There were no deposit slips or account statements showing that Perkins' cash was deposited in a Chaplin's account, nor were there any references to payments being deposited into a Chaplin's bank account. In fact, the record does not disclose the name of Chaplin's bank account or even mention that a Chaplin's account exists, other than in general references to accounts apparently held by Chaplin's. The government provides no record cites to a specific Chaplin's bank account. Instead the government focuses on the interconnectedness between Chaplin's and Midtown and asserts that all of the assets of both companies, including their bank accounts, were thereby involved in the offenses. It also notes that some Midtown employees occasionally worked at Chaplin's and often were paid in cash. Though this latter fact could support the inference that Perkins' cash was used to pay employees, it would not tie the cash to a Chaplin's bank account. Additionally, the district court made no specific findings regarding whether Chaplin's and Midtown should be treated as one entity. Unless such a finding is made, we cannot view the two companies as sharing assets for forfeiture purposes. See United States v. Gilbert, 244 F.3d 888, 919 (11th Cir.2001) (noting that criminal forfeiture reaches only those assets owned by a particular defendant). Instead, the court found that the proceeds from the offenses went back into both Chaplin's and Midtown via bank deposits and cash payments. Though property need not be used exclusively for illegal activities to be forfeitable, it must have more than an incidental or fortuitous connection to criminal activity. United States v. Schifferli, 895 F.2d 987, 990 (4th Cir.1990). As a result, there must be evidence that some part of the property was used for illegal activities. Since we can identify no evidence to support the district court's finding as it pertains to Chaplin's bank accounts, we find that the district court clearly erred on that point. [27] See United States v. Bornfield, 145 F.3d 1123, 1138 (10th Cir.1998) (concluding that jury verdict ordering forfeiture of defendant's business account in money laundering case constituted clear error when the record showed that all of the laundered funds went to his personal account and that there was no connection between his business account and the laundering offense). Accordingly, we find that the district court did not err in ordering forfeiture of the inventory of both companies and of Midtown's bank account; however, we vacate that part of its order forfeiting any bank accounts of Chaplin's and remand for further hearing to address whether the evidence supports such a forfeiture.
Chaplin's and Midtown also contend that the forfeiture of their bank accounts and inventories constituted an excessive fine in violation of the Eighth Amendment. We review de novo the issue of whether a forfeiture order would be constitutionally excessive under the Eighth Amendment. See Puche, 350 F.3d at 1153. Since the forfeiture order here occurred at the end of a criminal proceeding and was imposed solely because of a criminal conviction, it would constitute a fine that would be subject to the Eighth Amendment's prohibition of excessive fines. See Browne, 505 F.3d at 1281-82. A forfeiture order violates the Excessive Fines Clause if it is grossly disproportional to the gravity of a defendant's offense. United States v. Bajakajian, 524 U.S. 321, 337, 118 S.Ct. 2028, 2038, 141 L.Ed.2d 314 (1998). To make this determination, we principally look at three factors: (1) whether the defendant falls into the class of persons at whom the criminal statute was principally directed; (2) other penalties authorized by the legislature (or the Sentencing Commission); and (3) the harm caused by the defendant. Browne, 505 F.3d at 1281. We do not take into account the impact the fine would have on an individual defendant. See United States v. 817 N.E. 29th Drive, Wilton Manors, Fla., 175 F.3d 1304, 1311 (11th Cir.1999). In addition, if the value of forfeited property is within the range of fines prescribed by Congress, a strong presumption arises that the forfeiture is constitutional. Id. at 1309. The district court never addressed whether the forfeiture order violated the Eighth Amendment, even though Chaplin's and Midtown raised it in their opposition brief. It also made no findings regarding the value of the forfeited propertiesa particular problem since the parties cite widely divergent figures. The government, relying on a pleading filed by Chaplin's and Midtown, asserts that the collective value of the two properties is approximately $3 million. [28] Chaplin's and Midtown, on the other hand, claim in their brief on appeal that the properties are worth a total of $7 million. Based on 18 U.S.C. § 3571 and 31 U.S.C. § 5324, Chaplin's and Midtown would have been eligible for $1.5 million and $3 million, respectively, in total fines for their offenses. [29] See 18 U.S.C. § 3571(c)(3); 31 U.S.C. § 5324(d)(2). We therefore do not have a clear factual basis for evaluating whether the forfeiture of the accounts and inventories would be an excessive fine, especially since we are vacating the district court's order vis-a-vis Chaplin's bank accounts. As a result, we believe that the issue would be better addressed by the district court in the first instance and therefore remand so it can examine the Eighth Amendment issue solely as to the accounts and inventories. See United States v. Land, Winston County, 163 F.3d 1295, 1303 (11th Cir.1998) (deeming remand of previously unaddressed excessive fine issue proper [b]ecause the issue of excessive fines may depend on various factors and conduct with which the district court is more familiar). Accordingly, although we find no error regarding the forfeiture order insofar as it encompassed the inventories of Chaplin's and Midtown and the bank accounts of Midtown, since the district court had not addressed the Eighth Amendment question, we also vacate those parts of the order.
Chaplin's, Midtown, and Seher all challenge the personal money judgment entered against them regarding Counts Two through Seven. Chaplin's and Midtown both concede that they would be eligible for money judgments of $22,000 and $32,800, respectively. However, they argue that the district court erred by making them jointly liable, along with Seher, for a money judgment of $54,800. [30] We agree with the government that the judgment would be acceptable if we pierced the corporate veil and deemed Chaplin's and Midtown the functional equivalent of a single corporation. However, as previously noted, the district court made no findings regarding whether Chaplin's and Midtown constituted one entity for the purpose of imposing joint and several liability. Furthermore, though courts have affirmed forfeiture orders imposing joint and several liability, those cases appear to involve offenses from which such liability would logically derive, such as conspiracy or aiding and abetting. See, e.g., United States v. Spano, 421 F.3d 599, 603 (7th Cir.2005) (conspiracy); United States v. Pitt, 193 F.3d 751, 765 (3d Cir.1999) (conspiracy); United States v. Benevento, 836 F.2d 129, 130 (2d Cir.1988) (per curiam) (criminal enterprise). The district court imposed the $54,800 money judgment for the Appellants' money laundering and failure to follow reporting requirements, neither of which are the types of offenses for which joint and several liability would be appropriate. In the absence of any clear authority or factual basis for affirming the money judgment against Seher, Midtown, and Chaplin's, we therefore vacate that portion of the forfeiture order and remand for further findings which address whether joint liability is appropriate or whether the corporate veil should be pierced.
Seher asserts that the district court erred in finding that his real property could be a substitute asset under 21 U.S.C. § 853(p) for the $1,610,400 laundered in connection with the drug conspiracy charged in Count One. He argues that these funds were the property of the Depot, not him, and that he therefore had no interest in this property and should be deemed an intermediary to the conspiracy, who could not be subject to a money judgment. He also contends that the government failed to prove that he caused this property to be unavailable via an act or omission on his part. Both of these arguments fail. The evidence at trial established that the laundered funds were originally given to Seher, and there was no indication that they ever became the property of the Depot. Furthermore, as he was convicted of conspiracy to launder money, it is reasonable to hold him liable for all the proceeds that were a reasonably foreseeable result of that conspiracy regardless of whether he still possesses them. See United States v. Caporale, 806 F.2d 1487, 1506-09 (11th Cir.1986) (affirming forfeiture order imposing joint and several liability on RICO conspirators based on this rationale); see also United States v. Reiner, 500 F.3d 10, 18 (1st Cir.2007) (affirming forfeiture order holding single conspirator vicariously liable for the total value of the conspiracy). Seher also asserts that he was merely an intermediary to these financial transactions, as defined in 18 U.S.C. § 982(b)(2), and therefore would be ineligible for a money judgment. That statute defines an intermediary as an individual who handled but did not retain the property in the course of the money laundering offense. 18 U.S.C. § 982(b)(2). However, an individual would not be an intermediary if, in committing the offense or offenses giving rise to the forfeiture, [he] conducted three or more separate transactions involving a total of $100,000 or more in any twelve month period. Id. There was evidence that Manning made at least $200,000 in purchases on a single day in 1998 and that Johnson and McDowell also made purchases that same year. Seher therefore would not be an intermediary under the statute regardless of whether he handled but did not retain the money involved in the laundering. Seher is likewise in error in asserting that the government failed to provide proof that his actions or omissions triggered the substitute asset provision. As part of the government's motion for a preliminary forfeiture order, it attached a declaration from an IRS Special Agent involved in the case stating that, based on the government's attempts to locate the missing proceeds, Seher had dissipated or otherwise disposed of the proceeds of his crimes. R4-155, Exh. B at 2. Though the affidavit did not identify every effort the government had made to obtain the proceeds, we find it sufficiently specific in identifying Seher's acts and omissions for the district court to rely on it as the basis for ordering forfeiture under the substitute asset provision. We note that the First Circuit made a similar finding based on a government affidavit that used virtually the same language regarding the defendant's actions. See United States v. Candelaria-Silva, 166 F.3d 19, 42 (1st Cir. 1999). The district court therefore did not err in finding that Seher's property could be a substitute assert for the personal money judgment on Count One.