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United States v. Croce

September 8, 2004


The opinion of the court was delivered by: Dalzell, District Judge


After Vincent J. Croce, Brian J. Rose, and Joseph A. Quattrone, Jr. were convicted of money laundering and other crimes, the Government supplied us with proposed orders that, if signed, would create "forfeiture money judgments" against each of them. Because the defendants did not object, we signed the proposed orders. When the Government asked us to modify those orders, however, we began to question whether Congress authorized us to impose forfeiture money judgments.

Factual Background

On December 17, 2002, the Grand Jury returned a sixteen-count indictment against Croce, Rose, Quattrone, and two others *fn1 charging that they had fraudulently obtained about fourteen million dollars from Independence Blue Cross, a nonprofit health insurance company, by billing for goods and services that were never provided. More technically, the indictment included four counts of mail fraud, *fn2 five counts of interstate transportation of money taken by fraud, *fn3 one count of conspiracy to commit money laundering, *fn4 and three counts of money laundering. *fn5 In the aggregate, the money laundering and conspiracy to commit money laundering counts alleged that the defendants laundered $2,171,043.45. The indictment also contained five notices of forfeiture, each identifying general "sum[s]" and specific items of personal and real property *fn6 of which the Government intended to seek forfeiture if the defendants were convicted.

On February 26, 2003, Croce agreed to plead guilty to all of the charges against him and to cooperate with the Government in exchange for the Government's conditional promise to request a downward departure from the Sentencing Guidelines range that would otherwise apply to him. Croce recognized that, as part of his sentence, "[f]orfeiture of any property, real or personal, which constitutes or is derived from proceeds involved in or traceable to the offenses ... may be ordered," Plea Agreement, at 8, and he also agreed to the entry of preliminary and final forfeiture orders, id. Attachment A, p b. We accepted Croce's guilty plea on April 2, 2003.

The Government moved for entry of preliminary forfeiture on May 20, 2003, and Croce did not object to the entry of the Government's proposed order. Without the benefit of defense counsel's arguments, we granted the Government's motion and signed its proposed Judgment and Preliminary Order of Forfeiture on June 6, 2003. Part of that Order explained that "a money judgment in the amount of $5,138,935.66 shall be entered against defendant as the amount of property which constitutes or is derived from proceeds traceable to any offense constituting specified unlawful activity." Order of June 6, 2003, at p 3. Note that this sum is 2.37 times larger than the $2,171,043.45 covered by the money laundering counts. *fn7 On November 5, 2003, we sentenced Croce to fifty-four months' imprisonment, imposed a special assessment of $1,600.00, and ordered him to pay restitution of $14,176,094.17.

Rather than plead guilty, Rose and Quattrone chose to contest the charges against them in a two-week jury trial that began on September 29, 2003. During the course of the trial, Rose testified that he had assets valued at around $800,000.00, and Quattrone testified that he had a total of about $1.2 million in assets. After the jury convicted them of all charges, Rose and Quattrone waived their rights to have a jury determine issues related to forfeiture.

On January 16, 2004, we sentenced Rose and Quattrone each to ninety-four months' imprisonment, directed them each to pay a fine of $15,000.00, imposed special assessments of $1,300.00 on each of them, ordered them to make restitution of $9,200,000.00 to their victims, and stated that each of them would "forfeit" their interest in $2,611,149.41 to the United States. To further explain that final component of their sentences, we signed proposed Forfeiture Money Judgments that the Government had submitted a few days before the sentencing hearings. *fn8 Each of the Forfeiture Money Judgments states that a "money judgment in the amount of $2,611,149.41 is hereby entered against the defendant" and also explains that we "retain jurisdiction to enforce [them], and to amend [them] as necessary, pursuant to Fed.R.Crim.P. 32.2(e)." Orders of Jan. 16, 2004, pp 3, 7.

A few months later, the Government filed three motions. Because we had entered only a preliminary forfeiture order against Croce, the first motion sought entry of a Judgment and Final Order of Forfeiture against him. Like the preliminary order, the proposed final forfeiture order would order the forfeiture of the "sum of $5,138,935.66 United States currency (forfeiture money judgment)" to the United States. We had already entered final Forfeiture Money Judgments against Rose and Quattrone, so the second and third motions sought to substitute "$100,000 U.S. currency" in partial satisfaction of the $2,611,149.41 forfeiture money judgment against Rose and "$280,000 U.S. currency" in partial satisfaction of the $2,611,149.41 forfeiture money judgment against Quattrone.

The three motions raise complicated questions about the extent of our power to order asset forfeiture in criminal cases. As we examined those questions, we began to doubt whether we even had the authority to order the forfeiture money judgments that we had imposed at the Government's request and without opposition. We directed the Government and invited the defendants to submit additional briefing on these issues, and, having fully considered them, we are at last prepared to rule on the Government's three motions.

Legal Analysis

A. Forfeiture Money Judgments

The Government's motions assume that we have the power to enter forfeiture money judgments against the defendants. Rather than blithely accept that assumption, we must carefully test it lest we impose a punishment that Congress has not authorized. Of course, we cannot sensibly consider whether Congress has given us the power to impose forfeiture money judgments without first explaining what the concept means.

As we understand it, when the Government requests that we enter a forfeiture money judgment, it is requesting that we enter a money judgment pursuant to our statutory authority to order forfeiture. This understanding assumes that the Government could collect a forfeiture money judgment from a criminal defendant in the same way that a successful plaintiff could collect a money judgment from a civil defendant. Two important consequences flow from our understanding. First, a forfeiture money judgment is nonspecific because it is entered for a general sum of money, such as $1 million, even though other kinds of forfeiture are directed at specific items of property (e.g., the $1 million in First National Bank account number 12345 or the 1999 Ford Taurus with VIN# 6789012345).

Second, a forfeiture money judgment is unlimited because its magnitude bears no relation to the assets that a convict possesses at any particular time. Imagine, for example, a convict who owns only $10,000 in assets but faces a forfeiture money judgment of $1 million. Even if the Government seized all of the convict's assets, a judgment of $990,000 would remain undischarged. See Gov't Br. at 7 ("A money judgment is nothing more than an order reflecting the defendant's liability for a specific sum of money equivalent to the proceeds of the offense which are no longer available.") (emphasis added). It is possible that the Government could continue seizing all of the convict's assets, at any time, until he either satisfies the full $1 million judgment or dies (leaving the Government with a sizeable claim on his estate).

With these features in mind, our task is to discern whether Congress authorized us to impose nonspecific and unlimited forfeiture money judgments against convicts.

B. Statutory Framework for Forfeiture

As we have noted, the defendants were all convicted of mail fraud, interstate transportation of money taken by fraud, conspiracy to commit money laundering, and money laundering. Each mail fraud conviction subjected them to up to twenty years' imprisonment and a fine. *fn9 18 U.S.C. s 1341 (2004). Interstate transportation of money taken by fraud carries a penalty of not more than ten years' imprisonment and a fine. 18 U.S.C. s 2314 (2004). The money laundering and conspiracy to commit money laundering convictions also each subjected the defendants to up to twenty years' imprisonment and a fine. 18 U.S.C. s 1956(a)(1), (h) (2004). The defendants were also subject to mandatory restitution. See 18 U.S.C. s 3663A (2004).

Although none of these laws provides for forfeiture, a separate statute requires us to order that "a person convicted of an offense in violation of section 1956 [ (i.e., money laundering) ] ... forfeit to the United States any property, real or personal, involved in such offense, or any property traceable to such property." 18 U.S.C. s 982(a)(1) (2004). *fn10 In addition to directly forfeitable property, *fn11 s 982 also subjects "substitute property" up to the value of the directly forfeitable property to forfeiture if the directly forfeitable property:

[A]s a result of any act or omission of the defendant--

(A) cannot be located upon the exercise of due diligence;

(B) has been transferred or sold to, or deposited with, a third party;

(C) has been placed beyond the jurisdiction of the court;

(D) has been substantially diminished in value; or

(E) has been commingled with other property which cannot be divided without difficulty.

21 U.S.C. s 853(p)(1) (2004); see also 18 U.S.C. s 982(b)(1) (2004); United States v. Voigt, 89 F.3d 1050, 1088 (3d Cir.1996) (recognizing that s 982(b)(1) incorporates s 853(p)). In short, when a defendant has been convicted of money laundering, Congress has empowered us to order the forfeiture of that defendant's directly forfeitable property and substitute property. *fn12 Whether our statutory mandate to order money launderers to "forfeit" property also authorizes us to enter forfeiture money judgments against them depends in large measure on what Congress meant by the term "forfeit." To resolve this question, we look to lay and legal definitions of the word, the history of forfeiture in Anglo-American law, appellate decisions construing forfeiture statutes, and the structure of penalties in the federal criminal code.

Regardless of the Committee's views, it lacked the power to propose--and the Supreme Court lacked any power to adopt--rules that "abridge, enlarge or modify any substantive right." See 28 U.S.C. s 2072(b) (2004). Thus, Rule 32.2's references to forfeiture money judgments could not impliedly authorize us to impose them unless a statute also empowered us to do so.

C. Definitions

Common sense suggests that one cannot "forfeit" something unless he first owns or possesses it. Thus, the Oxford English Dictionary defines forfeit to mean "[t]o lose, lose the right to; to render oneself liable to be deprived of (something)." VI Oxford English Dictionary 67 (2d ed.1989). On the other hand, the word sometimes means "to have to pay (a sum of money) in consequence of a crime, offence, breach of duty, or engagement." Id. While the former definition clearly ...

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