Court Opinion

ID: 4232623
Source: CourtListenerOpinion
Date Created: 2017-12-27 17:00:36.427876+00
Date Added: 2024-06-11T14:43:08.739449
License: Public Domain

FILED
                                                                     United States Court of Appeals
                                      PUBLISH                                Tenth Circuit

                                                                          December 27, 2017
                      UNITED STATES COURT OF APPEALS
                                                                          Elisabeth A. Shumaker
                             FOR THE TENTH CIRCUIT                            Clerk of Court
                         _________________________________

UNITED STATES OF AMERICA,

      Plaintiff - Appellee,

v.                                                          No. 17-6038

RICHARD M. ARNOLD, SR.,

      Defendant - Appellant.
                      _________________________________

                     Appeal from the United States District Court
                        for the Western District of Oklahoma
                            (D.C. No. 5:14-CR-00347-D-1)
                       _________________________________

Susan M. Otto, Office of the Federal Public Defender, Oklahoma City, Oklahoma, for
Defendant-Appellant.

Scott E. Williams, Assistant U.S. Attorney (Mark A. Yancey, U.S. Attorney for the
Western District of Oklahoma, with him on the brief), Office of the United States
Attorney, Oklahoma City, Oklahoma, for Plaintiff-Appellee.
                        _________________________________

Before TYMKOVICH, Chief Judge, MATHESON, and BACHARACH, Circuit
Judges.
                 _________________________________

MATHESON, Circuit Judge.
                   _________________________________

      Richard Arnold, Sr., appeals the district court’s forfeiture order following his

wire fraud and conspiracy convictions and sentencing for a scheme involving
vehicle-financing rebates.1 He argues the district court erred by (1) imposing an

order of forfeiture after sentencing, and (2) failing to require the Government to use

forfeited proceeds to offset the restitution Mr. Arnold owes his victims, which would

lower the total amount of restitution and forfeiture he is required to pay. Exercising

jurisdiction under 28 U.S.C. § 1291, we affirm the district court’s forfeiture order.

                                 I. BACKGROUND

      According to the indictment, Mr. Arnold—along with his wife, Robyn, and his

sons Ricky and Robert (collectively, “the Arnolds”)—devised a scheme to defraud

individuals out of the rebates paid to them when they purchased new vehicles. The

Arnolds persuaded the victims to turn their rebates over to a charitable trust by

falsely representing they would manage the trust to pay off the victims’ car loans.

Although the Arnolds made some loan payments from the trust, they eventually

stopped and used the remaining rebate funds for their own personal expenses. The

victims then either took over the loan payments or relinquished the vehicles to the

lenders. The indictment notified Mr. Arnold of the Government’s intent to seek

forfeiture of “a money judgment in an amount equal to the proceeds obtained as a

result of the offenses.” ROA, Vol. 1 at 43.

      Mr. Arnold pled guilty to one count each of wire fraud and conspiracy to

commit wire fraud. See 18 U.S.C. §§ 1343, 1349. He acknowledged in his plea that

      1
         In a previous appeal, this court rejected Mr. Arnold’s challenge to the district
court’s restitution award in this same case. See United States v. Arnold, 701 F.
App’x 702 (10th Cir. 2017) (unpublished). Mr. Arnold does not challenge the
restitution award in this appeal.

                                            2
the Government would pursue forfeiture. Following Mr. Arnold’s conviction but

before sentencing, the district court granted the Government’s motion for a

preliminary order of forfeiture. It ordered Mr. Arnold to pay “a money judgment in

an amount to be determined” later by the court. ROA, Vol. 1 at 87. The court said

“this Preliminary Order of Forfeiture will be amended under Fed. R. Crim. P.

32.2(e)(1) when the amount of the money judgment has been determined by this

Court.” Id.

      On March 24, 2016, at the first sentencing hearing, the Government reiterated

its intent to seek forfeiture once the precise amount owed could be calculated. The

district court sentenced Mr. Arnold to 54 months in prison and postponed a final

determination on restitution and forfeiture.2

      On May 16, 2016, the district court conducted a second sentencing hearing,

focused on restitution, and entered a final restitution order of $280,075.15, payable to

the victims who were entitled to compensation under the Mandatory Victims

Restitution Act (“MVRA”), 18 U.S.C. § 3663A(a)(1). The court again left the

amount of forfeiture unresolved. The Government stated that it would “discuss with

counsel a number or potential resolution and submit to the Court a motion for an

amended order.” ROA, Vol. 5 at 13.

      2
         As discussed in greater detail below, criminal restitution and forfeiture are
“separate remedies with different purposes.” United States v. McGinty, 610 F.3d
1242, 1247 (10th Cir. 2010). Restitution is remedial in nature, and its goal is to
restore the victim’s loss. Id. Forfeiture, by contrast, is punitive and seeks to
disgorge any profits that the defendant obtained from the offense. Id.
                                            3
       On June 9, 2016, the Government moved under Fed. R. Crim. P. 32.2(e)(1) to

amend the preliminary order of forfeiture, which lacked any specified amount, and to

impose a $160,136.50 forfeiture order. Mr. Arnold objected, arguing the court lacked

jurisdiction to amend the preliminary order after sentencing. The court overruled his

objection and adopted the Government’s proposed forfeiture order. United States v.

Arnold, No. CR-14-347-D, 2017 WL 187546, at *3-4 (W.D. Okla. Jan. 17, 2017)

(“Rule 32.2 envisions scenarios such as the present and expressly allows orders of

forfeiture to be subject to amendment [after sentencing] when the money judgment

has been calculated.”). This appeal followed.

                                    II. DISCUSSION

       On appeal, Mr. Arnold challenges the district court’s forfeiture order, arguing

(1) the Government’s failure to establish the amount of forfeiture before sentencing

violated Rule 32.2 and thereby deprived the district court of jurisdiction to enter the

forfeiture order; and (2) the order failed to require the Government to use Mr.

Arnold’s forfeited proceeds to reduce the amount of restitution he owes his victims,

and it must therefore be vacated.

       In evaluating these arguments, “we review the district court’s forfeiture order

as we would any other sentencing determination—that is, we review its legal

conclusions de novo and its factual findings for clear error.” United States v. Bader,

678 F.3d 858, 893 (10th Cir. 2012); see also United States v. McGinty, 610 F.3d
1242, 1245 (10th Cir. 2010) (concluding that we apply de novo review to the district

court’s legal interpretation of federal forfeiture statutes).

                                             4
                                          A. Rule 32.2

       We first consider Mr. Arnold’s argument that the Government failed to comply

with Rule 32.2 and thus the district court lacked jurisdiction to amend the preliminary

forfeiture order after sentencing. We find no Rule 32.2 violation and therefore affirm

the district court’s forfeiture order.3

1. Legal Background

       Criminal forfeiture is a punitive measure that forces offenders of certain

crimes to disgorge any profits obtained from their criminal activity. McGinty, 610
F.3d at 1247. Unlike restitution, which compensates victims for their losses,

forfeiture compels the offender to surrender money or substitute assets to the

government. Id. (explaining that, given their different purposes, the amount of

forfeiture and restitution may differ). The parties agree that Mr. Arnold’s conviction

for wire fraud subjects him to forfeiture under 18 U.S.C. § 981(a)(1)(C) and 28

U.S.C. § 2461(c). See Aplt. Br. at 13-14; Aplee Br. at 21.

       Rule 32.2 of the Federal Rules of Criminal Procedure governs the criminal

forfeiture procedure. First, it requires the government to notify a defendant of its

intent to seek forfeiture:

       (a) Notice to the Defendant. A court must not enter a judgment of
           forfeiture in a criminal proceeding unless the indictment . . .
           contains notice to the defendant that the government will seek the
           forfeiture of property as part of any sentence in accordance with the
           applicable statute. . . . The indictment . . . need not . . . specify the

       3
        Because we find no violation of a timing requirement under Rule 32.2, we do
not address whether such a violation would deprive the district court of jurisdiction to
impose a forfeiture order.
                                               5
           amount of any forfeiture money judgment that the government
           seeks.

Fed. R. Crim. P. 32.2(a). The primary purpose of Rule 32.2 is to ensure that “a

defendant is on notice as to all aspects of his sentence, including forfeiture.” See

United States v. Martin, 662 F.3d 301, 309 (4th Cir. 2011).

      Second, the court determines the amount the defendant will be ordered to pay,

and, if practical, enters a preliminary order of forfeiture that becomes final at

sentencing:

      (b) Entering a Preliminary Order of Forfeiture

          (1) Forfeiture Phase of the Trial.

              (A)   Forfeiture Determinations. As soon as practical after a
                    verdict or finding of guilty, or after a plea of guilty or nolo
                    contendre is accepted . . . the court must determine what
                    property is subject to forfeiture under the applicable
                    statute. . . . If the government seeks a personal money
                    judgment, the court must determine the amount of money
                    that the defendant will be ordered to pay.

                                          ....

          (2) Preliminary Order.

              (A)   Contents of a Specific Order. If the court finds that
                    property is subject to forfeiture, it must promptly enter a
                    preliminary order of forfeiture setting forth the amount of
                    any money judgment . . . .

              (B)   Timing. Unless doing so is impractical, the court must
                    enter the preliminary order sufficiently in advance of
                    sentencing to allow the parties to suggest revisions or
                    modifications before the order becomes final as to the
                    defendant under Rule 32.2(b)(4).

                                          ....

                                            6
          (4) Sentence and Judgment.

             (A)    When Final. At sentencing—or at any time before
                    sentencing if the defendant consents—the preliminary
                    forfeiture order becomes final as to the defendant.

Fed. R. Crim. P. 32.2(b).

      In 2009, Rule 32.2 was amended to include Section 32.2(b)(2)(C), which

anticipates the possibility that a court may not be able to calculate the forfeiture

amount owed before sentencing. This provision explicitly authorizes a court to enter

a general order of forfeiture at sentencing and amend it later once the court

determines the specific amount owed:

             (C) General Order. If, before sentencing, the court cannot . . .
                 calculate the total amount of the money judgment, the court
                 may enter a forfeiture order that:

                                          ....

                    (iii) states that the order will be amended under Rule
                          32.2(e)(1) when . . . the amount of the money
                          judgment has been calculated.

Id. at 32.2(b)(2)(C).

      Rule 32.2(e)(1), as referenced in Rule 32.2(b)(2)(C), provides for the later

amendment of a preliminary, general forfeiture order:

      (1) In General. On the government’s motion, the court may at any time enter
         an order of forfeiture or amend an existing order of forfeiture to include
         property that:

          (A) is subject to forfeiture under an existing order of forfeiture but was
              located and identified after that order was entered; or

          (B) is substitute property that qualifies for forfeiture under an applicable
              statute.

                                            7
Id. at 32.2(e)(1).

       The purpose of the 2009 amendments was to clarify “how the court is to

reconcile the requirement that it make the forfeiture order part of the sentence with

the fact that in some cases the government will not have completed its post-

conviction investigation” to determine the precise forfeiture amount. Fed. R. Crim.

P. 32.2 advisory committee’s note to 2009 amendment.

2. Analysis

       Mr. Arnold fails to demonstrate a Rule 32.2 violation. As described above,

Rule 32.2 anticipates the possibility that the court may not be able to determine the

amount of the money judgment before sentencing. See Fed. R. Crim. P.

32.2(b)(2)(C). It therefore permits a court to amend a preliminary, general forfeiture

order once the amount of the money judgment has been calculated. See id.

       Ongoing disputes between the parties in this case prevented the district court

from calculating the total amount of Mr. Arnold’s forfeiture order before sentencing.

Although these disputes were specifically about restitution, they concerned the

amount of proceeds the Arnolds retained and thus were also relevant to the forfeiture

calculation. See McGinty, 610 F.3d at 1246 (explaining that forfeiture requires a

defendant to disgorge “any and all proceeds of the offense”). For example, Mr.

Arnold contested the Government’s initial restitution calculation, arguing it failed to

credit interest payments he had made on the victims’ car loans. See ROA, Vol. 1 at

111. Resolution of this dispute would affect the amount of proceeds Mr. Arnold

                                           8
retained, which in turn would determine how much he must forfeit. After the court

settled these disputes and entered restitution, the Government moved to amend the

preliminary forfeiture order, which the court granted in compliance with Rule

32.2(b)(2)(C).

      Mr. Arnold complains he lacked adequate notice of the forfeiture order the

district court ultimately imposed, noting that neither the indictment nor any other pre-

sentencing document submitted by the Government “provided notice of an

approximate amount, a method of computation, or substitute assets associated with its

request for forfeiture.” See Aplt. Br. at 16. But nothing in Rule 32.2 requires this

specificity. Nor can he claim he was caught off-guard. The Government announced

its intent to seek forfeiture in the indictment—as Mr. Arnold acknowledged in his

guilty plea—and reiterated its intent throughout the sentencing process. When the

Government announced at the March 24, 2016 sentencing hearing that it would be

“moving for final forfeiture with a precise amount for a money judgment at a later

time after we’ve resolved the restitution issues,” defense counsel raised no

objections. ROA, Vol. 4 at 35.

      Mr. Arnold also argues the Government lacked a “logical explanation” for its

inability to calculate the amount of forfeiture before sentencing. See Aplt. Br. at 17.

We disagree in light of the ongoing factual disputes about the amount of illegal

proceeds the Arnolds retained.

                 B. Reducing Restitution Amount by Forfeiture Owed

                                           9
       We next consider Mr. Arnold’s argument that the district court erred by failing

to direct the Government to apply any forfeiture funds toward restitution for the

victims of his vehicle-financing scheme. Instead, the Government indicated it might

use forfeited funds to repay victims from a previous case in which Mr. Arnold was

convicted of fraud. Mr. Arnold asks that we remand this case to the district court

with instructions “requiring payment of any forfeited assets to the victims, with a

concomitant offset to order of restitution.” Aplt. Br. at 25. We decline to do so and

affirm the district court’s order.

1. Legal Background

       Both forfeiture and restitution were mandatory in this case. The pertinent

criminal forfeiture statute provides that “the court shall order the forfeiture of the

property as part of the sentence in the criminal case.” 28 U.S.C. § 2461(c) (emphasis

added). The property subject to forfeiture includes “[a]ny property, real or personal,

which constitutes or is derived from proceeds traceable to [the] violation.” 18 U.S.C.

§ 981(a)(1)(C). Interpreting another forfeiture statute with materially similar

language, the Supreme Court said, “Congress could not have chosen stronger words

to express its intent that forfeiture be mandatory in cases where the statute applied, or

broader words to define the scope of what was to be forfeited.” United States v.

Monsanto, 491 U.S. 600, 607 (1989) (interpreting 21 U.S.C. § 853(a)); see also

Forest Guardians v. Babbitt, 174 F.3d 1178, 1187 (10th Cir. 1999) (“The Supreme

Court and this circuit have made clear that when a statute uses the word ‘shall,’

Congress has imposed a mandatory duty upon the subject of the command.”).

                                            10
      The restitution statute in this case also was mandatory. The MVRA states that

when a defendant commits an offense by fraud (e.g., wire fraud), “the court shall

order . . . that the defendant make restitution to the victim of the offense.” 18 U.S.C.

§ 3663A(a)(1) (emphasis added); see United States v. Quarrell, 310 F.3d 664, 677-78

(10th Cir. 2002) (explaining that district courts are required to impose restitution for

offenses that fall within the MVRA).

2. Analysis

      Our holding in McGinty defeats Mr. Arnold’s argument that the district court

should have required the Government to apply his forfeiture payments toward the

amount of restitution he owes his victims, thereby reducing the total amount—

restitution plus forfeiture—owed. In McGinty, the defendant was also subject to

mandatory forfeiture and restitution based on a conviction for misapplication of bank

funds in violation of 18 U.S.C. § 656. McGinty, 610 F.3d at 1243, 1248; see 18

U.S.C. §§ 982(a)(2), 3663A(a)(1). We held the district court had erred in concluding

that mandatory forfeiture and restitution awards could be used to offset each other.

See 610 F.3d at 1247 (rejecting the notion that ordering both restitution and forfeiture

would be “unfair as a double recovery”). The government was entitled to forfeiture

in the amount of the defendant’s proceeds, and the victim—a bank—was entitled to

                                           11
the restitution of its loss. Id. at 1247-48. Mr. Arnold fails to distinguish McGinty

and cites no persuasive authority to the contrary.4

      Several courts have reached the same conclusion, holding that the statutes

mandating restitution and forfeiture do not allow a defendant’s payments toward one

to offset the amount owed to the other. See, e.g., United States v. Alalade, 204 F.3d
536, 540 (4th Cir. 2000) (holding that “the plain language of the MVRA did not grant

the district court discretion to reduce the amount of restitution” by the amount

ordered to be forfeited). In an opinion we cited favorably in McGinty, 610 F.3d at

1248, the Fifth Circuit held that a district court that imposed both forfeiture and

restitution had “properly adhered to the mandatory language found within the

statutory schemes.” United States v. Taylor, 582 F.3d 558, 566 (5th Cir. 2009); see

also United States v. Emerson, 128 F.3d 557, 566-67 (7th Cir. 1997) (rejecting

defendant’s request to credit his forfeiture payment towards the restitution amount he

owed). The district court properly rejected Mr. Arnold’s request to mandate that his

forfeiture payments be used to offset restitution.

                                 III. CONCLUSION

      For the foregoing reasons, we affirm the district court’s forfeiture order.

      4
        Mr. Arnold notes the victim in McGinty was a bank while the victims in the
present case are individuals and lenders. See Aplt. Reply Br. at 15-16. He fails to
explain the significance of this distinction.

                                           12