Opinion ID: 497978
Heading Depth: 1
Heading Rank: 3

Heading: Forfeiture Under Section 1963(a)(1)

Text: 18 The district court ordered that Horak forfeit, pursuant to section 1963(a)(1), his job with H.O.D., the gross income and bonuses he received from H.O.D. from January, 1981 until his conviction, and all corporate contributions to his pension and profit-sharing plans for the same time period. The version of section 1963(a)(1) in effect at the time of Horak's violation provided: 19 (a) Whoever violates any provision of section 1962 of this chapter shall be fined not more than $25,000 or imprisoned not more than twenty years, or both, and shall forfeit to the United States (1) any interest he has acquired or maintained in violation of section 1962 .... 20 18 U.S.C. Sec. 1963(a)(1) (1982) (amended 1984). 3 The district court concluded that Horak's criminal acts enhanced his position as manager of HOD Disposal. The award of a garbage contract by [Fox Lake] to HOD unquestionably increased HOD's revenue. All of the interests identified by the government depended (in part or whole) upon Horak's performance as manager of HOD. United States v. Horak, 633 F.Supp. 190, 200 (N.D.Ill.1986). The court therefore found that the interests were maintained by Horak's racketeering activities. 21 Horak contends that the (a)(1) forfeiture order was improper because the evidence failed to show that he actually maintained all the interests in violation of section 1962 and because the order violated the Eighth Amendment. We agree that the interests (other than the job) ordered forfeited were not adequately proven to be acquired or maintained in violation of section 1962 and we therefore remand for further forfeiture proceedings. We do not reach the Eighth Amendment claim as it relates to section (a)(1). 4 22 The forfeiture provisions of section 1963(a) are the first revival in modern times of forfeiture as a criminal sanction against a defendant, i.e. forfeiture as applied in personam. See United States v. Huber, 603 F.2d 387, 396 (2d Cir.1979), cert. denied, 445 U.S. 927, 100 S.Ct. 1312, 63 L.Ed.2d 759 (1980). Congress emphasized that new remedies were needed to attack organized crime and racketeering, see S.Rep. No. 617, 91st Cong., 1st Sess. 76 (1969), and, to accompany the statutory scheme, Congress enacted a provision very rare in criminal law: The provisions of this title shall be liberally construed to effectuate its remedial purpose. Pub.L. 91-452, Sec. 904(a), 84 Stat. 947; cf. 18 U.S.C. Sec. 3731 (defining the right of the United States to appeal in criminal cases and directing that [t]he provisions of this section shall be liberally construed to effectuate its purposes). In light of these facts, section (a)(1) has been read broadly to mandate forfeiture of every interest, including proceeds, that a defendant acquired or maintained in violation of section 1962. See Russello v. United States, 464 U.S. 16, 104 S.Ct. 296, 78 L.Ed.2d 17 (1983). Thus, presumably, section (a)(1) requires that a convicted defendant forfeit all ill-gotten gains or their proceeds. 23 The government contended and the district court agreed that the interests ordered forfeited all were dependent, in part or in whole, upon Horak's performance as operating manager of H.O.D., a position enhanced by Horak's racketeering activity. However, we believe that viewing Horak's job, salary, bonuses and corporate contributions to his profit-sharing and pension plans as an indivisible unit subject to total forfeiture under section (a)(1) as an interest maintained in violation of RICO, was incorrect. We believe that the various interests must be viewed separately, and thus we affirm the forfeiture of Horak's job but remand for further consideration the forfeiture of Horak's salary, bonuses and corporate profit-sharing and pension plans. 24 The forfeiture of Horak's job is consistent with numerous cases that have interpreted section 1963(a). See e.g., United States v. Kravitz, 738 F.2d 102, 103 (3d Cir.1984), cert. denied, 470 U.S. 1052, 105 S.Ct. 1752, 84 L.Ed.2d 816 (1985); United States v. Rubin, 559 F.2d 975, 992 (5th Cir.1977), vacated on other grounds, 439 U.S. 810, 99 S.Ct. 67, 58 L.Ed.2d 102 (1978). The rationale behind these job forfeiture orders seems to be that section (a)(1) demands that the defendant be separated from any employment position that afforded him the opportunity to engage in the racketeering activity for which he was convicted. See Kravitz, 738 F.2d at 103; Rubin, 559 F.2d at 992. Significantly, none of these decisions analyzed the potential forfeiture of defendant's position of employment as Horak suggests: namely, was it shown that the defendant would have lost his position if he had not engaged in the racketeering activity? Rather, in light of the Congressional intent, these courts have construed section (a)(1) to authorize the forfeiture of any employment position that allowed defendant the opportunity to perform the racketeering acts. See Kravitz, 738 F.2d at 103; Rubin, 559 F.2d at 992. We agree that such a forfeiture order is consistent with section (a)(1). We do not decide here the scope and duration of job forfeiture permissible in such an order. In the present circumstances, the order is proper under (a)(1). 25 However, it is not clear to us that Horak should be required to forfeit the entirety of his salary, bonuses and corporate profit-sharing and pension plans from 1981 to the present. The district court concluded that these forfeited interests all depended (in part or whole) on Horak's performance as H.O.D. manager, which performance was enhanced by his criminal activity that violated section 1962. Thus, according to this analysis, any interest that partially depends on, or is in some measure caused by, the criminal activity must be wholly forfeited. We believe that this construction of section (a)(1) is overly expansive. 26 The Supreme Court did construe section (a)(1) rather broadly in Russello, concluding that a right to profits or proceeds can be an interest subject to forfeiture. 464 U.S. at 22, 104 S.Ct. at 300. But the Court did not face a question whether the interest subject to forfeiture was in fact acquired or maintained in violation of section 1962. Id. at 21, 104 S.Ct. at 299 (There is no question that petitioner Russello acquired the insurance proceeds at issue in violation of Sec. 1962(c)....). Courts agree that actual ill-gotten gains or booty from racketeering activity--such as amounts extorted from victims and profits or proceeds of arson or drug conspiracies--are forfeitable interests. E.g., United States v. Ginsburg, 773 F.2d 798, 801 (7th Cir.1985) (en banc), cert. denied, 475 U.S. 1011, 106 S.Ct. 1186, 89 L.Ed.2d 302 (1986). And it is clear that no tracing need be undertaken once evidence establishes such an interest. E.g., United States v. Conner, 752 F.2d 566, 576 (11th Cir.), cert. denied, 474 U.S. 821, 106 S.Ct. 72, 88 L.Ed.2d 59 (1985). Section (a)(1) commands forfeiture as an in personam penalty. Therefore, once an interest is acquired or maintained, the penalty attaches, or vests, and a subsequent forfeiture order need not trace the path of the affected interest. See Ginsburg, 773 F.2d at 800. 27 Undoubtedly, section 1963 was intended to be a powerful tool against what was perceived as a special criminal threat, and we are certainly directed to construe its provisions liberally. Nonetheless, we believe close attention is due to the structure of the forfeiture provisions and particularly to the separate modes of operation of subsections (a)(1) and (a)(2). Section (a)(1) focuses on the racketeering activity and divests the convicted defendant of all interests acquired or maintained by that activity. It is apparently irrelevant whether such interests are part of the charged enterprise. Section (a)(2), on the other hand, as discussed below, focuses on the enterprise, not the specific racketeering activity, and divests the convicted defendant of all interests in the enterprise. It would therefore seem irrelevant (at least in terms of the structure of the statute) whether (a)(2) interests were directly related to the racketeering activity of which the defendant was convicted. 28 In view of the focus of these respective sections, a remand is necessary for the district court to consider whether Horak's salary, bonuses and profit-sharing and pension plans were in fact acquired or maintained in violation of section 1962. We do not believe that it is sufficient under section (a)(1) for the court to determine that Horak's racketeering activities enhanced his performance as H.O.D. manager, thus affecting the enumerated interests. Instead, on remand, the court must determine what portion of Horak's interests would not have been acquired or maintained but for his racketeering activities. That is, in order to win a forfeiture order, the government must show on remand that Horak's racketeering activities were a cause in fact of the acquisition or maintenance of these interests or some portion of them. For example, if the government can prove that Horak would have been fired in 1981 but for his landing the Fox Lake contract (which he accomplished by violating section 1962), the court should order forfeiture of his entire salary thereafter and such other emoluments of his employment as would have been lost by the firing. But, if the government can prove only that Horak received a bonus for his landing of the Fox Lake contract, then only that bonus is forfeitable under (a)(1). Presumably, the pension and profit-sharing issues are also subject to a but-for test. When and under what circumstances were these benefits earned? 29 Two additional points are relevant with respect to remand under section (a)(1). First, at oral argument counsel for the government answered questions about the relevant burden of proof by agreeing with Horak that the government must prove the relevant facts beyond a reasonable doubt to win forfeiture under section 1963. It seems, therefore, that the government has agreed that on remand it must establish the necessary causal connections under section (a)(1) beyond a reasonable doubt. See United States v. Roberts, 749 F.2d 404, 409 (7th Cir.1984), cert. denied, 470 U.S. 1058, 105 S.Ct. 1770, 84 L.Ed.2d 830 (1985); see also United States v. McKeithen, 822 F.2d 310 (2d Cir.1987) (construing 21 U.S.C. Sec. 848(a)(2)(B)); Briggs v. Procunier, 764 F.2d 368, 371 (5th Cir.1985) (construing habitual offender statute). But see United States v. Sandini, 816 F.2d 869, 874-76 (3d Cir.1987) (construing 21 U.S.C. Secs. 848(a), 853(d)). See generally Bullington v. Missouri, 451 U.S. 430, 437-46, 101 S.Ct. 1852, 1857-62, 68 L.Ed.2d 270 (1981) (comparing guilt and sentencing phases in capital case with sentencing phase in noncapital case, recognizing role of standards of proof in each). 30 Second, we note that our vacatur of the forfeiture ordered under section (a)(1) does not preclude the conclusion on remand that certain of the interests at issue may be forfeitable under section (a)(2). The government makes this contention on appeal and we believe there may be some merit to the argument. However, we believe that this issue should be addressed in the first instance by the district court on remand. 31 We therefore affirm in part and vacate in part the section (a)(1) forfeiture order and remand for further proceedings consistent with this opinion. We do not reach Horak's contention that the section (a)(1) forfeiture order violates his rights under the Eighth Amendment. 32