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PAUL K. CHARLTON United States Attorney District of Arizona KEVIN M. RAPP Assistant U.S. Attorney Two R enaissance Square 40 N. Central Avenue, Suite 1200 Phoenix, Arizona 85004-4408 Arizona State Bar No. 014249 Telephone: (602) 514-7500 [email protected]

UNITED STATES DISTRICT COURT DISTRICT OF ARIZONA United States of America, Plaintiff, v. Samih Fadl Jamal, et al. Defendants. GOVERNMENT'S SUPPLEMENTAL MEMORANDUM REGARDING MONEY JUDGMENTS AND TRACING CR-03-261-PHX-FJM

MEMEMORANDUM I. HISTORY OF ASSET FORFEITURE

19 A. 20 21

Historically all forfeitures were civil forfeitures against the property in rem; requiring a direct link between the property and the offense is inherent in the nature of civil forfeiture. Forfeiture law in this country has a long history going back to the English common law.

22 Reflecting the English tradition, all federal forfeiture statutes enacted by Congress throughout the
th th 23 19 and early 20 Centuries were civil statutes that allowed the government to confiscate

24 particular assets by filing an action against the property itself, not against the wrongdoer or the
1 25 property owner. Given the in rem nature of such actions, it was necessary for the government

26 27 28 See generally Stefan D. Cassella, "The Development of Asset Forfeiture Law in the United States," Acta Juridica (University of Cape Town, South Africa) (2003) at pp. 314 - 59.
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1 to prove in every case that the property subject to forfeiture was directly traceable to some 2 underlying criminal offense. 3 While Congress has relaxed the tracing requirements from time to time,2 direct tracing is

4 still very much an essential element of most civil forfeiture actions. In cases that require strict 5 tracing, there is no question of forfeiting substitute assets or obtaining money judgments. The 6 property is the defendant in rem; it is either the property that was derived from or used to commit 7 the criminal offense or it is not. One could no sooner substitute another asset for the defendant 8 in rem in a traditional civil forfeiture case than one could substitute another individual for the 9 defendant in a criminal case. Nor would it make sense to talk in terms of money judgments in 10 civil forfeiture cases. A court cannot impose a money judgment against a defendant if the 11 defendant is an inanimate object. 12 In short, limiting civil forfeitures to property derived from or used to commit an offense

13 is inherent in the concept of civil forfeiture as an action in rem against particular assets. It does 14 not follow, however, that criminal forfeitures are subject to the same limitations. Indeed, the key 15 difference between civil and criminal forfeitures is that the former are in rem and the latter are 16 in personam. For that reason, the long history of the tracing requirement in forfeiture cases is of 17 little relevance to the question before the court. 18 B. 19 20 Criminal forfeitures are in personam; the limitations of civil forfeiture therefore do not apply to criminal forfeiture. If counsel for the government correctly understands the position stated by defendants in

21 the responses filed with the Court and the oral presentations made at the hearing on September 22 12, 2005, defendants assume that when Congress enacted the first criminal forfeiture statutes in 23 the 1970s it meant to carry forward the notion that the forfeited property must, in all instances, 24 be traceable to the underlying criminal offense. That is not correct. To be sure, Congress has 25 used the same terms ­ "forfeit" and "forfeiture" ­ in both the civil and criminal statutes, but it 26 27 28 See 18 U.S.C. § 545 (authorizing the civil forfeiture of the "value" of smuggled goods); 18 U.S.C. § 984 (relaxing the tracing requirement in cases involving fungible property); 18 U.S.C. § 981(k) (same for cases involving correspondent bank accounts).
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1 would be a mistake to assume that all of the limitations of civil forfeiture apply to criminal 2 forfeiture, or that the court has no authority in a criminal forfeiture case that it would not have in 3 a civil case. Civil and criminal forfeiture are inherently different in concept and application. 4 There are many aspects of the one procedure which do not apply in the other, whether Congress 5 expressly says so or not. 6 For example, in civil forfeiture cases, the role of the property owner is irrelevant; the

7 property is subject to forfeiture because it was derived from or used to commit a criminal offense 8 regardless of who the wrongdoer was or what her relationship to the property might have been. 9 See Bennis v. Michigan, 516 U.S. 442 (1996). In contrast, in criminal forfeiture, because 10 forfeiture is part of the punishment imposed on the defendant, only the defendant's property may 11 be forfeited. Property belonging to third parties cannot be forfeited no matter how strong the 12 connection between the property and the offense. See United States v. Totaro, 345 F.3d 989 (8th 13 Cir. 2003) (criminal forfeiture is in personam; if a third party's interest could be forfeited, the 14 forfeiture would become an in rem action in which the third party would have the right to contest 15 the forfeiture on more than ownership grounds). 16 Similarly, in civil cases, the court must have actual or constructive control over the

17 property before it may assert in rem jurisdiction. See United States v. All Funds Distributed to 18 Weiss, 345 F.3d 49, 56 n.8 (2d Cir. 2003) (seizure or constructive control of the property is 19 necessary for the court to exercise in rem jurisdiction). In contrast, in criminal cases, the court 20 exercises its jurisdiction over the defendant, not the property. Hence, in criminal cases the 21 property need not even be in the custody of the government before the court may enter a criminal 22 order of forfeiture. 23 These and many other distinctions between civil and criminal forfeiture are the inevitable

24 consequences of the differences between the two concepts. The role of the property owner is 25 irrelevant in a civil forfeiture case because the action is against the property in rem; the role of 26 the property owner means everything in a criminal case because criminal forfeiture is part of the 27 punishment imposed on the defendant as a result of his conviction. See Libretti v. United States, 28 516 U.S. 29, 38-39 (1995). The court must have control of the property in a civil forfeiture case
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1 because the property is the defendant; control over the property is irrelevant in a criminal case 2 because the forfeiture is only a sanction imposed following a conviction. 3 Strict tracing between property and the offense is another artifact of civil forfeiture that

4 does not carry over into criminal forfeiture. Strict tracing is essential in civil forfeiture cases 5 because the property is the defendant, and the theoretical underpinning on which the action is 6 based is the property was derived from or used to commit a crime and thus must be taken out of 7 circulation. See United States v. Ursery, 518 U.S. 267, 290-91 (1996) (listing the goals of civil 8 forfeiture). In contrast, the link between property and the offense is not part of the theoretical 9 construct underlying criminal forfeiture at all. Once a defendant is convicted of a criminal 10 offense, he may be subject to whatever punishments the applicable statute provides, including 11 fines and forfeitures calculated by reference to the value of the property involved in the offense, 12 but do not require a direct factual link. In short, the facts underlying a criminal conviction 13 circumscribe the outer limits of the punishment that may be imposed ­ whether it be a fine, a 14 forfeiture, or a term of incarceration under the Sentencing Guidelines ­ but they do not limit that 15 punishment to the confiscation of the actual property derived from or used to commit the offense. 16 It is true that Section 982 ­ like other criminal forfeiture statutes ­ makes reference to

17 property directly traceable to the offense; but that does not mean that criminal forfeitures are 18 limited to such property. In Section 982 Congress crafted a hybrid sanction that incorporates 19 some of the aspects of the antecedent civil practice while introducing the new concept of 20 forfeiture as a form of in personam punishment. The notion that some property is "directly 21 forfeitable" because it is traceable to the underlying offense comes, obviously, from civil 22 forfeiture law. But Congress also fully understood that making forfeiture part of the sentence in 23 a criminal case would broaden the scope of the court's forfeiture authority and lead to the 24 forfeiture of property not directly tied to the underlying offense as well.3 25 26 27 28 The American criminal forfeiture statutes may be seen as a hybrid of American concepts of civil forfeiture and European concepts of "value-based" criminal forfeiture. In the European criminal forfeiture statutes, there is no requirement of a link between the property and the offense at all. 9/19/05 4 Case 2:03-cr-00261-FJM Document 1054 Filed 09/19/2005 Page 4 of 18
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1 II. 2

THE CASE LAW SUPPORTS THE ENTRY OF A MONEY JUDGMENT The best evidence that Congress understood the broader scope of criminal forfeiture is the

3 enactment of the substitute assets provision in 21 U.S.C. § 853(p), which established a set of 4 procedures for forfeiting specific assets that have no relationship to the underlying crime 5 whatsoever. Clearly, Congress would not have authorized the forfeiture of such substitute 6 property if it thought that criminal forfeiture was limited by older concepts derived from civil 7 forfeiture law that the property itself was the instrument or the corpus delicti of the offense. Even 8 before the substitute asset provision in § 853(p) was enacted, however, courts recognized that the 9 forfeiture of money judgments was inherent in the understanding of criminal forfeiture as a form 10 of in personam punishment. 11 From the mid-1980s until today, the courts have rendered a virtually unbroken string of

12 cases holding that criminal forfeiture does not require proof of a link between the property and 13 the offense. To the contrary, the courts appear to be unanimous in holding that a defendant may 14 be ordered to pay a judgment equal to the value of the proceeds of a fraud or drug offense, or the 15 value of the property laundered in a money laundering offense. 16 17 A. RICO Cases

A good example is the Seventh Circuit's decision in United States v. Ginsburg, 773 F.2d

18 798, 801-02 (7th Cir. 1985), in which the en banc court held that criminal forfeiture is a personal 19 judgment that requires the defendant to pay the total amount derived from the criminal activity 20 "regardless of whether the specific dollars received from that activity are still in his possession." 21 Id. at 801-02. Because criminal forfeiture is a sanction against the individual defendant rather 22 than a judgment against the property itself, the court said, it does not matter whether the 23 Government recovers the identical dollars that the defendant received in committing the criminal 24 offense. The number of dollars derived from the crime serves only to set the limit on the 25 magnitude of the money judgment that the court is authorized to impose. Id. at 801 26 The Eleventh Circuit made the same point regarding the inherent differences between civil

27 and criminal forfeiture in United States v. Conner, 752 F.2d 566 (11 th Cir. 1985). By enacting the 28 criminal forfeiture statutes, the court said, Congress "revised the concept of forfeiture," making
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1 the forfeiture part of the criminal penalty against the individual instead of a remedial action 2 against the property. Id. at 576. As such, the court continued, it could take the form of "a money 3 judgment against the defendant" for the amount of money that came into his hands as a result of 4 the criminal offense. Id.4 5 Shortly after Conner was decided another panel of the Eleventh Circuit reached the same

6 conclusion in United States v. Navarro-Ordas, 770 F.2d 959 (11th Cir. 1985). Expanding on the 7 analysis in Conner, the panel held that Congress's purpose in enacting the criminal forfeiture 8 statutes was to ensure that the criminal was separated from the proceeds of his offense. Allowing 9 a criminal to escape the sanction of forfeiture if the government could not actually locate the 10 proceeds of the criminal activity would serve only to reward criminals who were successful in 11 hiding or dissipating their profits, the court said. Thus, to carry on Congress's intent, a court must 12 be able to order the convicted defendant to pay a judgment equal to the proceeds obtained from 13 the offense, "regardless of what he may actually have done with his profits." Id. at 970. 14 The Fourth Circuit said the same thing the following year in United States v. Amend, 791

15 F.2d 1120 (4 th Cir. 1986). In that case, the defendant argued that the government failed to offer 16 any evidence that the assets subject to forfeiture were still in existence at the time of her 17 conviction. Relying on Ginsburg, the court held that such proof is not required in a criminal 18 forfeiture case where the purpose of the sanction is not to recover specific property, but to ensure 19 that the defendant suffers a punishment commensurate with the value of the proceeds he received 20 ­ and dissipated ­ in the course of the offense. Id. at 1127 & n.6. 21 A year later, the Second Circuit reached the same result in United States v. Robilotto, 828

22 F.2d 940 (2 nd Cir. 1987). In that case, the defendant argued that no forfeiture judgment could be 23 imposed because he no longer retained the proceeds of his criminal offense. Because the 24 forfeiture is a sanction against the individual defendant and not a judgment against the property 25 26 27 28 This conclusion is based on the inherent differences between the concepts of civil and criminal forfeiture noted by the Seventh Circuit in Ginsburg and all subsequent cases to analyze the issue in any detail. Moreover, as discussed in the text, the panel's reasoning was reaffirmed by the Eleventh Circuit in United States v. Navarro-Ordas, 770 F.2d 959 (11th Cir. 1985). 9/19/05 6 Case 2:03-cr-00261-FJM Document 1054 Filed 09/19/2005 Page 6 of 18
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1 itself, the court said, the requirement that the property be traceable to the criminal offense does 2 not apply. Id. at 948-49.5 3 The early cases such as Conner, Ginsburg, Amend, Navarro-Ordas and Robilotto

4 established the principle that civil and criminal forfeiture were inherently different concepts, and 5 that it was not necessary for the government to show that the defendant still had the criminal 6 proceeds in his possession before the court could order the defendant to pay a money judgment 7 in a criminal case.6 Later cases took this a step further, holding that it was not necessary to show 8 that the defendant ever received any proceeds at all. 9 In United States v. Corrado, 227 F.3d 543 (6 th Cir. 2000), the district court declined to

10 enter a money judgment against the defendants on the ground that there was insufficient evidence 11 of the amount of proceeds each defendant had received in the course of the racketeering offense. 12 Id. at 547. On appeal, however, the Sixth Circuit held that such proof was not necessary: When 13 several defendants participate in a scheme that generates proceeds, and it is possible to determine 14 the overall value of the proceeds obtained by all participants in the scheme, each participant is 15 personally liable to pay a money judgment equal to the total value of the proceeds regardless of 16 how the proceeds were actually distributed among the defendants. In other words, all defendants 17 in a criminal scheme are jointly and severally liable to pay a forfeiture judgment equal to the sum 18 total of the proceeds of the scheme. Id. at 553. "The amounts subject to forfeiture need not be 19 directly linked or traced to the specific racketeering acts proved," the court said. "Co-conspirators 20 in a RICO enterprise should be held jointly and severally liable for the reasonably foreseeable 21 proceeds of the enterprise, and are not limited to amounts each defendant personally obtained." 22 Id. at 558. Accordingly, the Sixth Circuit reversed the judgment of the district court and 23 remanded the case with instructions to enter money judgments against each of the defendants 24 individually. Id. at 555-57. 25 26 27 28 Robilotto does not simply cite Ginsburg; it analyzes the issue in the same way as both Ginsburg and Conner and reaches the same conclusion. For the most recent application of this line of cases to a RICO prosecution, see United States v. Segal, 2004 WL 2260615 *8 (N.D. Ill. Oct. 6, 2004) (following Ginsburg, holding defendant liable for $30 million money judgment even though he claimed he had not retained the racketeering proceeds). 9/19/05 7 Case 2:03-cr-00261-FJM Document 1054 Filed 09/19/2005 Page 7 of 18
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The Fifth Circuit affirmed a similar judgment of forfeiture in United States v. Edwards,

2 303 F.3d 606 (5 th Cir. 2002). Following Corrado, the court held that the son of the former 3 Governor of Louisiana was liable to pay a money judgment for the value of extortion proceeds 4 that were obtained by other participants in his criminal scheme and that were foreseeable to him. 5 It was not necessary, the court said, to show that the defendant received any of the proceeds of 6 the offense himself. Id. at 643-44. 7 The concept of joint and several liability in criminal forfeiture has been universally

8 adopted by the courts.7 Obviously, the entire concept of holding a defendant liable for the value 9 of proceeds that he did not personally receive would make no sense if criminal forfeiture were 10 limited to property in the possession of the defendant that was directly traceable to the underlying 11 offense. But as one district court recently explained, "the crux of criminal forfeiture is

12 punishment, not recovery of particular property." United States v. Coleman Commercial Carrier, 13 Inc., 232 F. Supp.2d 201, 204 (S.D.N.Y. 2002). "Thus, coconspirators are liable jointly and 14 severally to forfeit the reasonably foreseeable proceeds of their criminal activity. To hold 15 16 17 18 19 20 21 22 23 24 25 26 27 28 See United States v. Pitt, 193 F.3d 751, 765 (3d Cir. 1999) (sections 853 and 982 both impose joint and several liability on convicted defendants; district court did not err in converting special verdict, in which jury found each defendant liable for a specific sum, into a judgment making both defendants liable for the aggregate amount); United States v. Genova, 333 F.3d 750 (7th Cir. 2003) (because all codefendants are liable for the sum of the proceeds realized by each other, the payer of a kickback to a city official is liable for what he received from the city as well as the amount of the kickback, and the city official is liable for the same); United States v. Bollin, 264 F.3d 391(4th Cir. 2001) (even minor participant who received only $30,000 for his role in the scheme may be liable for full $1.2 million judgment if the laundering of that amount was foreseeable to him; forfeiture of such foreseeable amount does not violation the Excessive Fines Clause); United States v. Simmons, 154 F.3d 765 (8th Cir. 1998) (each defendant is jointly and severally liable for all foreseeable proceeds of the scheme; the government is not required to prove the specific portion of proceeds for which each defendant is responsible; RICO defendant cannot limit his liability to proceeds of the racketeering acts he was charged with committing personally); United States v. Candelaria-Silva, 166 F.3d 19 (1st Cir. 1999) (even minor participants in drug conspiracy are jointly and severally liable for forfeiture of the full amount of the proceeds; no Eighth Amendment violation); United States v. DeFries, 909 F. Supp. 13, 19-20 (D.D.C. 1995) (defendants are jointly and severally liable even where the government is able to determine precisely how much each defendant benefitted from the scheme), rev'd on other grounds, 129 F.3d 1293 (D.C. Cir. 1997); United States v. Hurley, 63 F.3d 1, 23 (1st Cir. 1995) (the government can collect the total amount subject to forfeiture only once, but subject to that cap, it can collect from any defendant so much of that amount as was foreseeable to that defendant); United States v. Cleveland, 1997 WL 602186 (E.D. La. 1997) (same); United States v. McCarroll, 1996 WL 355371 at *9 (N.D. Ill. 1996) (following Hurley); United States v. Coleman Commercial Carrier, Inc., 313 F. Supp. 2d 1082 (S.D.N.Y. 2002) (following Hurley; individual defendant and corporate codefendant jointly and several liable for $1 million money judgment; because purpose of criminal forfeiture is punishment, not recovery of specific property, it is not necessary to show given defendant actually received any proceeds). 9/19/05 8 Case 2:03-cr-00261-FJM Document 1054 Filed 09/19/2005 Page 8 of 18
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1 otherwise would encourage strategic behavior on the part of coconspirators to hide funds and 2 thwart the purpose of the criminal forfeiture statute." Id. 3 4 B. Money Laundering Cases

It is true that RICO contains one of the broadest forfeiture statutes that Congress has

5 enacted and that the earliest money judgment cases were all decided under the RICO statute, but 6 that merely reflects RICO's status as the first criminal forfeiture statute ever enacted in the United 7 States.8 In fact, the case law applying money judgments in money laundering cases ­ as well as 8 fraud cases and cases brought under other statutes as well ­ is every bit as comprehensive and 9 compelling as it is in RICO cases. 9 10 In United States v. Puche, 350 F.3d 1137 (11th Cir. 2003), the Eleventh Circuit held that

11 forfeiture under the money laundering statute includes not only the illegal proceeds being 12 laundered but also any untainted property that was commingled with the illegal proceeds and used 13 to conceal or disguise that money in the course of the money laundering offense. The court then 14 affirmed a money judgment against the defendant equal to the value of the untainted funds that 15 he had used to commit the crime, even though he had disbursed those funds to the customers of 16 his money remitting business in the course of the money laundering offense. Id. at 1153-54. 17 In United States v. Iacaboni, 363 F.3d 1 (1 st Cir. 2004), the defendant committed a series

18 of money laundering offenses when he used the proceeds of illegal gambling to pay off the 19 winning bettors. In affirming the forfeiture of a money judgment equal to the sum of those 20 payments, the First Circuit held that the defendant was liable for the total amount involved in the 21 money laundering transactions for which he was convicted, even though he did not retain the 22 money for himself. Id. at 6. 23 In United States v. Baker, 227 F.3d 955 (7 th Cir. 2000), the defendant laundered a total of

24 $4.4 million representing the total proceeds of his prostitution business and other commingled 25 26 27 28 See United States v. Bajakajian, 524 U.S. 321, 332 n.7 (1998) (noting that Congress "resurrected" the English common law of criminal forfeiture in 1970 as part of the RICO statute). See generally Stefan D. Cassella, "The Forfeiture of Property Involved in Money Laundering Offenses," 7 Buffalo Criminal Law Review 583, 626 (2004) (discussing the availability of money judgments in money laundering forfeiture cases). 9/19/05 9 Case 2:03-cr-00261-FJM Document 1054 Filed 09/19/2005 Page 9 of 18
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1 funds. The district court ordered the defendant to pay a money judgment in that amount, and the 2 Seventh Circuit affirmed. It was true, the court said, that the defendant no longer had anything 3 approaching $4.4 million. Nevertheless, the forfeiture order served as a personal money judgment 4 that the government might be able to satisfy by forfeiting substitute assets. If substitute assets 5 were not available, the court concluded, the forfeiture judgment would serve as "a judgment lien 6 against Baker for the balance of his prison term and beyond." Id. at 970. In so holding, the 7 Seventh Circuit relied not only on its earlier decision in Ginsburg, but also on the Third Circuit's 8 opinion in United States v. Voigt, 89 F.3d 1050, 1084 (3 rd Cir. 1996). 9 The First Circuit also relied on Voigt in United States v. Candelaria-Silva, 166 F.3d 19 (1st

10 Cir. 1999), which set forth the current state of the law on criminal forfeiture orders as clearly as 11 it has been stated in any case. In affirming the forfeiture orders in a drug case, the panel said the 12 following: 13 14 15 16 17 18 19 Id. at 42. See United States v. Davis, 177 F. Supp. 2d 470 (E.D. Va. 2001) (same, following 20 Candelaria-Silva). 21 In Voigt, the panel continued, the Third Circuit held that a defendant convicted of A criminal forfeiture order may take several forms. First, the government is entitled to an in personam judgment against the defendant for the amount of money the defendant obtained as proceeds of the offense. Second, to the extent the government can trace any of the proceeds to specific assets, it may seek the forfeiture of those assets directly pursuant to 21 U.S.C. § 853(a)(1). Third, if as a result of some act or omission of the defendant, the government cannot trace the proceeds to specific assets, it may seek the forfeiture of "any property, cash or merchandise, in satisfaction of the amount of criminal forfeiture to which it is entitled." United States v. Voigt, 89 F.3d 1050, 1088 (3d Cir.1996); see 21 U.S.C. § 853(p) (authorizing forfeiture of substitute assets).

22 laundering $1.6 million was required to forfeit that amount as a money judgment. Id., citing 23 Voigt, 89 F.3d at 1084. When the government could not directly trace any forfeitable proceeds 24 to the defendant's current assets, the court held that the government could satisfy the $1.6 million 25 judgment by seeking forfeiture of the defendant's assets as substitute assets. Id., citing Voigt, 89 26 F.3d at 1088. 27 28

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C.

Other Crimes

Numerous other appellate and district court cases, involving money laundering and other

3 crimes, all reach the same result. See United States v. Chavez, 323 F.3d 1216, 1218 (9 th Cir. 4 2003) (money judgment for amount of defendant's drug proceeds, to be satisfied out of 5 defendant's lottery winnings); United States v. Watkins, 320 F.3d 1279, 1281 (11th Cir. 2003) 6 (money judgment for value of drug proceeds partially satisfied by substitute assets); United States 7 v. Moyer, 313 F.3d 1082, 1085 (8 th Cir. 2002) (forfeiture under the money laundering statute for 8 the value of the fraud proceeds that were laundered); United States v. Tedder, 2003 WL 23204949 9 (W.D. Wis. 2003) (government entitled to money judgment even though the possibility that the 10 forfeiture order would take that form was not mentioned in the indictment); United States v. 11 Saccoccia, 823 F. Supp. 994, 1006 (D.R.I. 1993) (money judgment for the amount laundered, 12 $136 million, entered against each defendant); United States v. Saccoccia, 898 F. Supp. 53, 56 13 (D.R.I. 1995) (the money judgment may be satisfied out of the laundered funds, property traceable 14 thereto, or substitute assets); United States v. Cleveland, 1997 WL 537707 *11 (E.D. La. 1997) 15 (money judgment for the total amount laundered). 16 In this case the government asserted as an alternative ground for the money judgment that

17 it was entitled to a judgment in the approximate amount of the sale proceeds of defendants' 18 interstate transportation of stolen formula. From the standpoint of the issuance of a money 19 judgment, the legal analysis of sales proceeds of stolen property is exactly the same as the analysis 20 of proceeds obtained by fraud. The following courts have entered money judgments under a 21 proceeds theory in fraud cases: United States v. Henry, 850 F. Supp. 681, 683 (M.D. Tenn. 1994) 22 (court enters money judgment for $191,206, which was the amount of Medicare fraud proceeds 23 defendant was convicted of laundering), aff'd, 64 F.3d 664, 1995 WL 478635 (6th Cir. 1995) 24 (Table); United States v. Bennett, 2003 WL 22208286 (S.D.N.Y. 2003) (court enters money 25 judgment for $109 million in fraud proceeds that the government could not locate); United States 26 v. Norton, 2003 WL 23532192 (W.D. Va. 2003) (noting without discussion that court entered 27 $800,000 money judgment in fraud case). See also United States v. Cherry, 330 F.3d 658, 669 28 n.17 (4th Cir. 2003) (court properly instructed the jury that it had to find, by a preponderance of

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1 the evidence, that the sum for which the Government was seeking a money judgment fairly 2 represented the amount derived from proceeds that the defendant obtained, directly or indirectly, 3 from the bank embezzlement offenses with which he was charged); United States v. Descent, 292 4 F.3d 703 (11th Cir. 2002) (because forfeiture is part of sentencing, modification of amount 5 Government is seeking as money judgment for money laundering and mail fraud is not an 6 improper amendment to the indictment). 7 It is not unusual for courts to give cursory treatment to an issue once the principle on which

8 it is based has become settled in the law. By the time cases such as Candelaria-Silva and Baker 9 were decided, the authority to enter a forfeiture order in the form of a money judgment had been 10 accepted for nearly 20 years. Indeed, by 1999, the concept was so well-settled that the Advisory 11 Committee on the Federal Rules of Criminal Procedure wrote procedures for dealing with money 12 judgments into Rule 32.2 when it reorganized the rules dealing with criminal forfeiture 13 procedure.10 14 The matter has been settled in the Third Circuit since the mid-1990s. In United States v.

15 Sokolow, 1995 WL 113079 (E.D. Pa. Mar. 14, 1995), the defendant in a criminal case raised 16 precisely the issue that has been raised by the defendants at the hearing on September 12, 2005. 17 Making a frontal assault on the notion of including money judgments in forfeiture orders in 18 criminal cases, the defendant argued that Section 982(a)(1) ­ the same statute at issue here ­ 19 permitted the forfeiture only of a "specific, guilty res" traceable to the offense for which he was 20 convicted, and that the court therefore could not enter a judgment for the amount of money 21 involved in each money laundering offense. Id. at *1. The district court held, however, that the 22 23 24 25 26 27 28 The Advisory Committee Note took no position on the availability of money judgments as a matter of law. When Rule 32.2 was under consideration, the Department of Justice advised the Advisory Committee that the availability of money judgments in criminal forfeiture cases was wellsettled and that the Rule therefore should make reference to them. A witness testifying on behalf of the defense bar responded that, in his view, there was some doubt on this issue. The Committee decided that it was unnecessary to enter into that debate, but would simply state in the Note that the Committee took no position on the question. It would be ironic and unfortunate if a Note intended to express no view as to whether an issue was well-settled or not was used as evidence that the matter was in fact not well-settled.
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1 entry of a money judgment was authorized by the statute. "Because money is fungible," the court 2 said, "the government need not receive the identical money involved, so long as the amount of 3 money involved in the criminal activity is known." Id. In so holding, the district court relied on 4 the legislative history of Section 982 as well the Eleventh Circuit's decision in Conner and the 5 Seventh Circuit's decision in Ginsburg. 6 On appeal, the defendant made precisely the same arguments, attacking the forfeiture order

7 on the ground that it was in the form of a money judgment instead of being directed against 8 specific property. United States v. Sokolow, 81 F.3d 397, 415 (3 rd Cir. 1996). But the unanimous 9 panel found that the appeal had no merit. In a brief section of its opinion headed "Identifiable 10 Forfeitable Property," the court held that a forfeiture order based on a special verdict that 11 identified only the amount of money involved in the money laundering offense, and not the 12 specific funds or account, was proper. Id. 13 Several years later, another district court entered a forfeiture order in the form of a money

14 judgment. In United States v. Stewart, 1998 WL 720063 (E.D. Pa. Oct. 6, 1998), the government 15 sought the forfeiture of approximately $2.6 million on the ground that it was directly traceable 16 to a money laundering offense. Finding that the money was not directly traceable, the district 17 court entered a money judgment for that amount ­ because it represented "the aggregate sum of 18 all money laundering counts for which defendant was convicted" ­ and then ordered the forfeiture 19 of the same $2.6 million as a substitute asset to satisfy the money judgment. Id. at *1. On appeal, 20 the Third Circuit affirmed the judgment of the district court, but on the ground that the $2.6 21 million was directly forfeitable after all. United States v. Stewart, 185 F.3d 112, 129 (3 rd Cir. 22 1999). 23 The Third Circuit's most detailed discussion of money judgments appears in United States

24 v. Voigt, 89 F.3d 1050 (3d Cir. 1996). In that case the court held that the government was entitled 25 to a personal money judgment equal to the amount of money involved in the money laundering 26 offense, but that as a procedural matter the government could only seize property directly 27 traceable to the offense or forfeitable as substitute assets. Id. at 1088. Voigt clearly held that "the 28
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1 government continued to be entitled to $1.6 million in criminal forfeiture" even though it was 2 unable to establish that any property was directly traceable to the underlying money laundering 3 offense, and it remanded the case to the district court to determine what property could be 4 forfeited as a substitute asset to satisfy the forfeiture. Id., 5 By the time Voigt was decided, the Third Circuit had already held in Sokolow, that the

6 forfeiture order in a criminal case could take the form of a money judgment. Thus, the panel in 7 Voigt was not breaking any new ground. Second, the panel unequivocally held that the

8 government was entitled to a judgment in the amount of $1.6 million. That holding was entirely 9 consistent with the host of money laundering cases cited above, and it is precisely the way Voigt 10 was understood by the First and Seventh Circuits. See Candelaria-Silva, supra; Baker, supra. 11 Absent this holding, there would have been no reason to remand the case where the only question 12 that remained for the district court to answer was whether a specific lot of jewelry could be 13 forfeited as a substitute asset to satisfy that judgment. 14 15 III. 16 ROLE OF MONEY JUDGMENT IN CRIMINAL FORFEITURE PROCEDURE The rule and the procedure that come to us from Sokolow, Voigt, and the numerous other

17 cases decided by the courts over the past two decades is this. In a money laundering case, the 18 government is entitled to a money judgment equal to the aggregate sum of the amount of money 19 laundered. In a case involving fraud, theft or any crime identified as a specified unlawful act, the 20 government is entitled to a money judgment equal to the aggregate sum of the proceeds. If the 21 government can trace specific property to the money laundering or fraud offenses, it may seize 22 and forfeit that property directly; if it cannot, it is still entitled to the money judgment. A money 23 judgment, however, is circumscribed in at least two ways. It cannot exceed the amount of money 24 involved in the money laundering, fraud, or theft offense(s) for which the defendant has been 25 convicted, and the money judgment does not, by itself, give the government the right to seize and 26 forfeit specific property. To do that ­- i.e., to use the forfeiture laws to satisfy the money 27 judgment ­ the government must return to the court pursuant to Federal Rule 32.2(e) and 21 28
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1 U.S.C. § 853(p) and ask the court to order the forfeiture of a specific item as a substitute asset. 2 Despite the references by defense counsel, this application for a preliminary order of forfeiture 3 does not request the forfeiture of substitute property, and such arguments are unfounded. 4 The government has always had ­ since the advent of criminal forfeiture ­ the right to a

5 money judgment. But to enforce that judgment under the forfeiture laws through the seizure and 6 forfeiture of specific property it needed a set of procedures. Those procedures were enacted, first 7 in Section 853(p) and later in Rule 32.2(e).11 Indeed, if money judgments were not available in 8 criminal forfeiture cases, and if such judgments did not remain in effect against the defendant 9 indefinitely until they were satisfied, much of the procedure in Rule 32.2(e) would make no sense. 10 In particular, Rule 32.2(e)(1) allows the court to amend the order of forfeiture "at any time" to 11 forfeit substitute property or property that is located and identified as directly forfeitable. The 12 procedure is available to the government "at any time" precisely because the money judgment 13 remains in effect indefinitely until satisfied, and there is no way to know when the government 14 may locate assets with which to satisfy the judgment. See United States v. Voigt, 89 F.3d 1050, 15 1088 (3d Cir. 1996) (the court may amend order of forfeiture to include substitute assets even 16 after an appeal is final), citing Todd Barnet & Ivan Fox, Trampling on the Sixth Amendment: The 17 Continued Threat of Attorney Fee Forfeiture, 22 Ohio N.U.L.Rev. 1, 55 (1995) ("The substitute 18 assets provisions constitute a procedural alternative for collecting a forfeiture judgment and are 19 20 21 22 23 24 25 26 27 28 Alternatively, the government may enforce a money judgment under the Federal Debt Collection Procedures Act. See United States v. Tedder, 2004 WL 415270 (W.D. Wis. 2004) (discussing the application of the FDCPA to the collection of a money judgment in a criminal forfeiture case, and denying defendant's request to transfer the collection action to another court); United States v. Bertolo, 55 Fed. Appx. 406, 2002 WL 31875680 (9th Cir. 2002) (Table) (noting without explanation that the government had not followed proper procedures for collection of the forfeiture judgment, and remanding to allow the government to forfeit substitute assets or collect the judgment in accordance with the Debt Collection Act); cf. United States v. Bongiorno, 106 F.3d 1027 (1st Cir. 1997) (dicta) (the government may not use the Debt Collection Act to collect a restitution order entered for the benefit of a private victim; if this had been a forfeiture judgment, the result would be different); United States v. Maxwell, 189 F. Supp. 2d 395 (E.D. Va. 2002) (when defendant transfers his real property to third party to prevent Government from using it to satisfy money judgment, government may sue to void the transfer under 28 U.S.C. §§ 3304(b) and 3306(a)).
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1 not a form of punishment in their own right...."). See also § 853(m) (permitting post-conviction 2 discovery to locate forfeitable property, including substitute assets). 3 The fact is that criminal forfeiture orders are open-ended. If they were limited, at the time

4 they were issued, to identifiable property in the defendant's possession, none of the procedures 5 described in the statutes or Rule regarding the later identification and forfeiture of substitute 6 assets would make any sense. On the other hand, the entire statutory scheme is completely 7 understandable if the court has the authority to issue a money judgment for the amount money 8 involved in the money laundering offense and amend it later when, and if, the defendant is 9 discovered to have funds or other property available to satisfy the judgment. At that point, the 10 money judgment sets the upper limit on the value of the property that may be forfeited as a 11 substitute asset. See Candelaria-Silva, 166 F.3d at 42.12 12 The number of cases in which the courts have invoked this procedure, forfeiting substitute

13 assets in satisfaction of a previously issued money judgment, is legion. See United States v. 14 Candelaria-Silva, 166 F.3d 19 (1st Cir. 1999) (once the Government has obtained a money 15 judgment, it may forfeit defendant's real property in partial satisfaction of that judgment); United 16 States v. Baker, 227 F.3d 955 (7th Cir. 2000) (same); United States v. Carroll, 346 F.3d 744 (7th 17 Cir. 2003) (defendant may be ordered to forfeit "every last penny" he owns as substitute assets 18 to satisfy a money judgment); United States v. Hill, 2002 WL 31119692 (6th Cir. 2002) (Table) 19 (630 shares of stock could be forfeited as substitute assets to satisfy money judgment entered after 20 property involved in money laundering scheme became unavailable); United States v. Numisgroup 21 International. Corp, 169 F. Supp. 2d 133 (E.D.N.Y. 2001) (Rule 32.2(e) authorizes forfeiture of 22 substitute assets to satisfy a money judgment, including a judgment based on the value of the 23 missing proceeds and the value of the missing facilitating property); United States v. Harrison, 24 25 26 27 28 For many years, commentators discussing this aspect of criminal forfeiture law would cite the hypothetical case of the defendant who was ordered to pay a money judgment even though he had no funds with which to satisfy it, but then later won the State lottery. Ironically, just such a scenario came to pass. See United States v. Chavez, 323 F.3d 1216 (9th Cir. 2003) (noting without discussion that defendant was ordered to pay a money judgment and that lottery winnings were forfeited as substitute assets to satisfy it).
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1 2001 WL 803695 (N.D. Ill. 2001) (entry of money judgment as part of preliminary order of 2 forfeiture gives government opportunity later to satisfy the judgment by seeking forfeiture of 3 substitute assets; United States v. Davis, 177 F. Supp. 2d 470 (E.D. Va. 2001) (if property cannot 4 be forfeited as directly traceable to the offense, it can be forfeited as a substitute asset and used 5 to satisfy the money judgment); United States v. Swank Corp., 797 F. Supp. 497, 503 (E.D. Va. 6 1992) (substitute assets restrained pretrial because they would have been subject to forfeiture to 7 satisfy money judgment if defendant were convicted); United States v. Davis, 2001 WL 47003 8 (S.D.N.Y. 2001) (property seized at time of arrest need not be returned at end of criminal case if 9 it can be forfeited as substitute assets in satisfaction of money judgment); United States v. 10 Messino, 917 F. Supp. 1307, 1308 (N.D. Ill. 1996) (court ordered forfeiture of motorcycle as 11 substitute asset in partial satisfaction of money judgment); United States v. Melchior, 2004 WL 12 541845 (S.D.N.Y. Mar. 19, 2004) (preliminary order of forfeiture directing forfeiture of 13 defendant's bond to satisfy money judgment); cf. United States v. Maxwell, 189 F. Supp. 2d 395 14 (E.D. Va. 2002) (when defendant transfers his real property to third party to prevent government 15 from using it to satisfy money judgment, government may sue to void the transfer under 28 U.S.C. 16 §§ 3304(b) and 3306(a)). 17 18 19 20 S/ Kevin M. Rapp 21 22 23 24 25 26 27 28 17 Case 2:03-cr-00261-FJM Document 1054 Filed 09/19/2005 Page 17 of 18 KEVIN M. RAPP Assistant U. S. Attorney Respectfully submitted this 19th day of September, 2005. PAUL K. CHARLTON United States Attorney District of Arizona

1 2 3 4 5 6 7 8 9 10 11 12 By: S/ Kevin M. Rapp 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28

CERTIFICATE OF SERVICE

:

I hereby certify that on September 19, 2005, I electronically transmitted the attached document to the Clerk's Office using the CM/ECF System for filing and transmittal of a Notice of Electronic Filing to the following CM /ECF registrants: Robert J. Kavanagh Attorney for Samih Fadl Jamal Lawrence I. Kazan, Esq. Attorney for Mamoun Al-Jammal Nancy L. Hinchcliffe, Esq. Attorney for Mounir Midani Daly David Lamond Lockhart Attorney for Ibrahim Hassan Elrawy

18 Case 2:03-cr-00261-FJM Document 1054 Filed 09/19/2005 Page 18 of 18