Court Opinion

ID: 200636
Source: CourtListenerOpinion
Date Created: 2011-02-07 04:56:55+00
Date Added: 2024-06-11T13:14:56.194103
License: Public Domain

United States Court of Appeals
                  For the First Circuit

No. 01-2160

                 UNITED STATES OF AMERICA,

                         Appellee,

                            v.

               STEPHEN A. SACCOCCIA, ET AL.,

                  Defendants, Appellants.

No. 01-2170

                 UNITED STATES OF AMERICA,

                         Appellee,

                            v.

               STEPHEN A. SACCOCCIA, ET AL.,

                  Defendants, Appellants.

No. 01-2393

                 UNITED STATES OF AMERICA,

                         Appellee,

                            v.

               STEPHEN A. SACCOCCIA, ET AL.,

                  Defendants, Appellants.
          APPEALS FROM THE UNITED STATES DISTRICT COURT

                FOR THE DISTRICT OF RHODE ISLAND

          [Hon. Ernest C. Torres, U.S. District Judge]

                             Before

                     Howard, Circuit Judge,

            Campbell and Cyr, Senior Circuit Judges,

     Lauren E. Jones, with whom Mark L. LaBollita and Jones
Associates were on brief for appellants Hill and O'Donnell.
     Stephen J. Finta, with whom Law Offices of Stephen J. Finta,
P.A. was on brief for appellant Finta.
     Michael P. Iannotti, Assistant United States Attorney, with
whom Margaret E. Curran, United States Attorney, and Michael E.
Davitt, Deputy Chief, United States Department of Justice, were on
brief for appellee.

                        December 22, 2003

                                2
             CYR,    Senior     Circuit       Judge.      Three     attorneys       who

represented Stephen A. Saccoccia — a convicted drug dealer and

money launderer — appeal from a district court order directing that

they forfeit some of their attorney fees to the government.

                                          I

                                    BACKGROUND

            The grand jury returned an indictment against Stephen A.

Saccoccia    in     November    1991,   charging       him   with    one    count    of

conspiracy     under      the     Racketeering         Influenced     and    Corrupt

Organizations Act, 18 U.S.C. § 1963(d) (RICO), as well as several

counts of laundering proceeds from an illegal drug trafficking

operation.    See United States v. Saccoccia, 58 F.3d 754 (1st Cir.

1995).      The government also sought the forfeiture of all the

business and personal property directly or indirectly derived from

Saccoccia's racketeering activities, explicitly including almost

$137,000,000 in currency, and, in the alternative, sought the

surrender of all non-tainted property of equivalent value (if any)

should Saccoccia's tainted property have become unavailable.                        See

18 U.S.C. §§ 1963(a), (m).            The district court promptly enjoined

the   transfer      of   the    forfeitable     property     designated      in     the

indictment.       See id. § 1963(d)(1)(A).

            Saccoccia      retained     Jack     Hill,    Esquire,    and    Kenneth

O'Donnell, Esquire, to defend him in the RICO prosecution; he

retained Stephen Finta, Esquire, to defend him against money

                                          3
laundering charges pending in California.                  We turn now to a more

detailed description of the district court proceedings below.

             Beginning        in   March     1992,      under   rather     suspicious

circumstances, Saccoccia caused $504,985 to be delivered to Hill,

$410,000 to O'Donnell, and $469,200 to Finta, all for legal fees.

Approximately one year later, Saccoccia was convicted and ordered

to    forfeit    the    $137,000,000         in    currency     specified    in   the

indictment.     We subsequently affirmed both the conviction and the

forfeiture.     Saccoccia, 58 F.3d at 754; see also United States v.

Hurley, 63 F.3d 1 (1st Cir. 1995).                Once the government discovered

that Saccoccia had paid large legal fees to Hill, O'Donnell, and

Finta, it submitted a motion to compel them to turn over the fees

as property subject to forfeiture.

             The district court granted the motion to compel, United

States v. Saccoccia, 165 F. Supp. 2d 103 (D.R.I. 2001), holding

that (i) the government established that the legal fees paid to the

appellants      must    have       derived       from   Saccoccia’s      racketeering

activity, given that Saccoccia had no legitimate sources of income,

and   the    legal     fees    were    paid       “under   especially     suspicious

circumstances” (viz., by “covert deliveries of large quantities of

cash, made by anonymous intermediaries”), id. at 111-12; (ii)

appellants met their burden of proving that they had no reasonable

cause to believe that the monies Saccoccia used to pay their fees,

prior to Saccoccia’s conviction, were subject to forfeiture, given

                                             4
that   an    Assistant      United     States       Attorney’s       pre-conviction

assurances to appellants — that the government would not seek

forfeiture     of   their    legal     fees     —    implied     some     government

uncertainty regarding whether Saccoccia might possess sufficient

non-tainted assets with which to pay his attorneys, id. at 112

(citing 18 U.S.C. § 1963(c)); (iii) following the trial at which

Saccoccia     was   convicted,       appellants      could     not    have   held   a

reasonable belief that Saccoccia's assets were not subject to

forfeiture,    given   that    the     trial    record    made       it   clear   that

virtually all of Saccoccia’s assets had been derived through

illegitimate means, id. at 112-13; (iv) appellants were ordered to

turn over only the portion of their legal fees received following

Saccoccia’s conviction, id. at 113; and (v) the government could

not reach their pre-conviction legal fees by means of the district

court's contempt power due to the fact that the government had

initiated no such proceeding and the district court had already

determined that appellants lacked reasonable cause to believe that

the pre-conviction legal fees were subject to forfeiture, hence

appellants could not have violated the post-indictment injunction

willfully, id. at 113-14.

            Appellants now challenge the district court order which

determined that their post-conviction legal fees are subject to

                                        5
forfeiture.1

                                    II

                                DISCUSSION

           Appellants Hill and O’Donnell contend, as they did in

opposing   the   government’s    motion   to   compel   below,     that    the

forfeiture statute does not permit the government to reach the

legal fees they received from Saccoccia, due to the fact that those

fees have been expended.      We subject statutory interpretations to

plenary review.    See Bryson v. Shumway, 308 F.3d 79, 84 (1st Cir.

2002).2

           The    operative   statutory   language      requires    that    a

defendant forfeit “tainted” property, viz., property (i) acquired

by committing the offense, and (ii) “constituting, or derived from,

any proceeds . . . obtained, directly or indirectly” from its

commission.      18 U.S.C. § 1963(a)(1),(3).3        Once an indictment

     1
      For its part, the government has not cross-appealed from the
district court ruling that the legal fees appellants received prior
to the Saccoccia conviction are not subject to forfeiture.
     2
      As the forfeiture provisions prescribed by RICO are
substantially similar to the criminal forfeiture provisions in 21
U.S.C § 853, we cite cases interpreting § 853 as persuasive
analogous authority. See United States v. Hooper, 229 F.3d 818,
821 n.7 (1st Cir. 2000).
     3
      For instance, the profits Saccoccia derived from the                drug
conspiracy would be subject to forfeiture under subsection                (1).
Were Saccoccia to use some of the drug profits to purchase a              boat
for $50,000, the boat would be forfeitable, under subsection              (3),
as property “derived from” tainted proceeds, even though                   not
utilized in the conspiracy.

                                    6
issues, the district court may enjoin the transfer of all property

“subject to forfeiture under [section 1963].”                    Id. § 1963(d)(1).

In the event that tainted property is unavailable for forfeiture

(as when it has been transferred to a third party),4 the government

may    recover        “substitute”     property,       viz.,     defendant’s    other

untainted property of equivalent value.                 See id. § 1963(m); United

States      v.    Lester,     85    F.3d   1409,    1411   n.3    (9th   Cir.   1996)

(“‘[S]ubstitute property,’ . . . by its very nature is ‘not

connected to the underlying crime.’”) (citation omitted).5

                 The operative statute enables the government to recover

from       the   defendant    “tainted”      or    “substitute”     property     in   a

defendant’s possession, or “tainted” property held by a third party

by virtue of a voidable fraudulent transfer.                     Id. § 1963(c).6      A

third party may petition the court for a hearing to determine the

validity         of   its   legal   interest      in   tainted    property,     id.   §

1963(l)(2), and may defeat a forfeiture petition by establishing,

       4
      Tainted property may be unreachable if it “(1) cannot be
located upon the exercise of due diligence; (2) has been
transferred or sold to, or deposited with, a third party; (3) has
been placed beyond the jurisdiction of the court;(4) has been
substantially diminished in value; or (5) has been commingled with
other property which cannot be divided without difficulty.” 18
U.S.C. § 1963(m).
       5
      The original district court forfeiture order against
Saccoccia was amended to include his substitute assets based on
evidence that Saccoccia was in the process of transferring tainted
assets. See Saccoccia, 58 F.3d at 783.
       6
      Subsection 1963(k) accords the government extraordinary
discovery rights in identifying and locating forfeitable property.

                                            7
inter alia, that it is a bona fide purchaser for value, “reasonably

without   cause   to   believe”   that   the   property   was   subject   to

forfeiture at the time it was purchased, id. § 1963(l)(6)(B).

           Nonetheless,    the    “substitute   property”   provision     is

exclusively applicable to “any other property of the defendant.”

Id. § 1963(m) (emphasis added).          The statutory language plainly

does not afford an avenue through which the government may reach a

third party’s untainted assets as a substitute for tainted assets

which the third party had already transferred prior to the date of

forfeiture.   See Bryson, 308 F.3d at 84 (“If the meaning of a

statute is clear, we enforce that meaning.”); United States v.

Meade, 175 F.3d 215, 219 (1st Cir. 1999) (noting that when “the

plain language of a statute unambiguously reveals its meaning, and

the revealed meaning is not eccentric, courts need not consult

other aids to statutory construction.”); see also Lohnes v. Level

3 Communications, Inc., 272 F.3d 49, 61 (1st Cir. 2001) (“[T]he

maxim expressio unius est exclusio alterius instructs that, ‘when

parties list specific items in a document, any item not so listed

is typically thought to be excluded.’") (citation omitted).7

     7
      The government’s contrary argument relies primarily upon one
unpublished decision as “persuasive authority.” United States v.
McCorkle, No. 6:98-CR-52-ORL-19C, 2000 WL 133759 (M.D. Fla. Jan.
14, 2000) (holding that government could recoup attorney's other
property where he had already dissipated the tainted legal fees);
see also 1st Cir. Local R. 32.3(b). However, McCorkle contains
neither an analysis of the pertinent statutory provisions, nor any
other authority supporting its conclusory holding.         Indeed,
McCorkle erroneously cites United States v. Moffitt, Zwerler &

                                     8
          The government does not contend that it can recover the

"tainted" property already transferred to Hill and O'Donnell by

Saccoccia (i.e., the in-cash legal fees), nor does it maintain that

either Hill or O'Donnell presently holds any property fairly

traceable to, or acquired with the proceeds of, their legal fees.

Rather, it argues that its right to recover derives from the

knowing violations, by Hill and O'Donnell, of the post-indictment

injunction entered pursuant to § 1963(d)(1), which constrained

Saccoccia and his counsel from transferring any funds subject to

forfeiture under subsection 1963(a). Cf. United States v. Moffitt,

Zwerling & Kemler, 864 F. Supp. 527, 530-31 (E.D. Va. 1994)

(finding assets non-forfeitable where transfers to counsel occurred

prior to injunction); id. at 544 n.46 (“Where an attorney accepts

payment in violation of such a restraining order, the government

can recover regardless of the fact that the attorney has dissipated

the funds.”), rev’d on other grounds, 83 F.3d 660 (4th Cir. 1996).

          The absence of language in subsection 1963(m), relating

to the forfeitability vel non of a third party’s substitute assets,

simply forecloses one form of remedy, not all.      Relief from a

Kemler, 83 F.3d 660, 667-70 (4th Cir. 1996), for the proposition
that the forfeiture statute “does not abrogate the government’s
right to recover attorneys’ fees that have been dissipated by a
third party law firm,” McCorkle, 2000 WL 133759, at *3 (citing
Moffitt, 83 F.3d at 666-69), even though Moffitt found the basis
for the government’s potential recovery not in the forfeiture
statute’s “substitute asset” provision, but in an extra-statutory
claim for common-law conversion, see infra.

                                9
willful violation of a subsection 1963(d)(1) injunction may be

obtained   in    a   contempt    proceeding.      See    United   States   v.

Kirschenbaum, 156 F.3d 784, 795 (7th Cir. 1998).                On the other

hand, the government’s initiation of contempt proceedings would

significantly alter its burden in litigation.           Whereas subsections

1963(c) and (l)(6) require the third party to establish that it was

without reasonable cause to believe that the transferred property

was subject to forfeiture under subsection 1963(a), in a criminal

or civil contempt proceeding the government would bear the burden

of persuasion on that issue.         In a criminal contempt proceeding,

moreover, the government’s burden of proof would be beyond-a-

reasonable-doubt, see Fed. R. Crim. P. 42; United States v. Mourad,

289 F.3d 174, 180 (1st Cir.), cert. denied, 123 S. Ct. 337 (2002);

and in a civil contempt proceeding, clear and convincing evidence

would be required, see AccuSoft Corp. v. Palo, 237 F.3d 31, 47 (1st

Cir. 2001).     See generally United States v. Marquado, 149 F.3d 36,

39-40 (1st Cir. 1998) (describing salient differences between

criminal and civil contempt proceedings).               The district court

noted, however, that “the government is not seeking to hold the

attorneys in contempt.”         Saccoccia, 165 F. Supp. 2d at 114.

           Additionally,        subsection   1963(m)    would   not   preempt

various remedies otherwise available to the government outside the

forfeiture statute, which would maximize its monetary recovery from

the substitute assets of culpable third parties. See United States

                                      10
v. Moffitt, Zwerling & Kemler, 83 F.3d 660, 667-70 (4th Cir. 1996)

(holding that § 1963(m) does not preempt state common-law claims

that enable the government to reach a third-party transferee’s

substitute assets).         For instance, since the government’s right,

title, and interest in all tainted property “relates back” to the

date Saccoccia committed the relevant acts, see 18 U.S.C. § 1963(c)

(“All    right,   title,     and   interest    in    property       described    in

subsection (a) vests in the United States upon the commission of

the act giving rise to the forfeiture.”), presumably it could

initiate a state-law proceeding against Hill and O’Donnell for

conversion of such property, and recover compensatory damages from

their non-tainted assets.          See Fuscellaro v. Indus. Nat’l Corp.,

368 A.2d 1227, 1230 (R.I. 1997) (“[T]he gravamen of an action for

conversion     lies   in     the   defendant’s      taking    the     plaintiff’s

personalty     without      consent    and   exercising      dominion    over    it

inconsistent with the plaintiff’s right of possession.”). However,

had the government brought such a tort claim in the district court,

the claim presumably would be adjudicated under substantially

different standards than a claim under subsection 1963(a) or (m),

since the government would bear the burden of proof, and appellants

might be entitled to additional procedural safeguards under state

law, such as a right to jury trial.            See, e.g., Ross v. Bernhard,

396     U.S.   531,   533    (1970);    Evergreen    Marine     Corp.    v.     Six

Consignments of Frozen Scallops, 4 F.3d 90, 95 (1st Cir. 1993);

                                        11
Russell v. City of Bryan, 919 S.W.2d 698, 704 (Tx. App. 1996);

Meyers Way Dev. Ltd. P’ship v. Univ. Sav. Bank, 910 P.2d 1308, 1320

(Wash. Ct. App. 1996).

              At first blush, the present holding may appear to diverge

from   the    stated     legislative    intent        to   accord        the    government

extremely      aggressive     forfeiture         remedies     so     as    to    preclude

criminals from realizing the monetary benefits of their crimes.

See Caplin & Drysdale, Chartered v. United States, 491 U.S. 617,

631 (1989).        On the other hand, the very potency of the forfeiture

power demands that it be reasonably contained within ascertainable

limits.      Thus, for example, Congress provided that a non-defendant

third party with rights in forfeitable property may redeem its

interest      by    establishing     either       (i)      that     it    predated       the

defendant’s crime, see United States v. Lester, 85 F.3d 1409, 1414

(9th   Cir.    1996)     (holding    that       non-defendant       spouse       had    non-

forfeitable pre-existing interest in jointly-held property), or

(ii) that it subsequently acquired a non-forfeitable interest under

a bona fide purchase for value, see 18 U.S.C. § 1963(l)(6).

              The implicit limitation in § 1963(m) — the “substitute

assets”      provision    —   that   the    government        may    reach       only   the

defendant’s substitute assets and not those of a third party – is

similar in nature.        Forfeiture is an in personam criminal remedy,

targeted primarily at the defendant who committed the criminal

offense.       See    Lester,   85    F.3d       at   1414   n.8     (noting      crucial

                                           12
distinction between in personam judgment in criminal forfeiture

proceeding and in rem judgment in civil forfeiture proceeding).

               Finally, the implicit limitation in § 1963(m) does not

trammel   the     basic    statutory    policy    by    foreclosing        all   other

remedies available to the government, nor does it enable culpable

attorneys to dissipate tainted fees with impunity.                       Rather, the

government may utilize its enforcement powers under subsection

1963(k) to       “trace”    tainted    funds,    see supra        note    6,   thereby

disproving the contention that appellants’ cash-on-hand is neither

the tainted fees, nor other property directly or indirectly derived

from the tainted fees.           Furthermore, absent such evidence, the

government may reach other non-tainted cash of the attorneys by

sustaining      the   somewhat   weightier,      though     not    insurmountable,

burden    of    establishing     the    elements       of   either       contempt   or

conversion.

               As our construction of the language utilized in the

forfeiture statute is one of first impression, the forfeiture award

against Hill and O’Donnell must be vacated and the case must be

remanded to the district court for further proceedings consistent

with this opinion.         Upon remand, the government is to be accorded

a   reasonable     opportunity    to    determine      whether     it     intends   to

institute contempt proceedings or submit conversion claims against

                                        13
appellants.8

          Accordingly,   the   district   court   order   directing

appellants Hill and O'Donnell to surrender their post-conviction

legal fees is hereby vacated, and the case is remanded for further

proceedings consistent with this opinion.     The order to compel

     8
      Unlike Hill and O'Donnell, Finta failed to raise the
“substitute assets” issue on appeal. Further, Finta's arguments on
appeal are meritless.    First, he argues that we lack appellate
jurisdiction because the district court did not reduce its final
judgment of forfeiture to a separate document, as required by
Federal Rule of Civil Procedure 58. Assuming arguendo that Rule 58
would apply to a criminal forfeiture proceeding against non-
defendants, but see Fed. R. Crim. P. 32.2(c), Finta unquestionably
waived the "separate document" rule by appealing from the district
court’s July 31, 2001 judgment without objection from the
government. See Bankers Trust Co. v. Mallis, 435 U.S. 381, 385
(1978) (“If, by error, a separate judgment is not filed before a
party appeals, nothing but delay would flow from requiring the
court of appeals to dismiss the appeal.       Upon dismissal, the
district court would simply file and enter the separate judgment,
from which a timely appeal would then be taken. Wheels would spin
for no practical purpose.”); Fiore v. Washington County Cmty.
Health Ctr., 960 F.2d 229, 235 (1st Cir. 1992).
     Second, Finta contends that the district court decision
violated his Fifth Amendment rights to notice and to confront
witnesses, by relying upon evidence introduced at the Saccoccia
criminal trial in which Finta did not participate. This argument
has been forfeited by Finta's failure to raise it below.        See
Brigham v. Sun Life of Can., 317 F.3d 72, 85 (1st Cir. 2003).
Moreover, given Finta's close involvement with and representation
of Saccoccia during the relevant time periods, as well as his
decision not to adduce further evidence to undermine the trial
record at his forfeiture hearing, we discern no plain error.
     Finally, Finta contends that, without the evidence derived
from the alleged Fifth Amendment violations, there was insufficient
evidence from which the district court could conclude that he had
reasonable cause to believe that the legal fees he received
following Saccoccia’s conviction were tainted. Not only does this
contention fail like his second claim, but Finta, not the
government, bore the burden to adduce sufficient evidence on this
pivotal issue. See 18 U.S.C. § 1963(l)(6)(B).

                                14
appellant Finta to surrender $242,000 in post-conviction legal fees

is hereby affirmed.   SO ORDERED.

                                15