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In re Assets of Martin

filed: July 26, 1993; As Corrected August 2, 1993. As Amended August 26, 1993.

IN RE: ASSETS OF MYLES MARTIN, ET AL. GERALD D. DITURSI, DAVID SAVAGE, ROBERT SELF, JR., BRUCE EBERT, WILLIAM SELVAGN, SELF OIL HEAT, INC., GLOBAL ENTERPRISES, INC., BELL FUEL CORPORATION, BELL FUELS T/A ASCO, INC., ATLANTIC OIL & HEAT CO., PAR SALES, INC., ASCA, INC./NOVA PETROLEUM AND OMNI PETROLEUM JACOB DOBRER, VYACHESLAV DOBRER, N.W.R. ENTERPRISES, INC., GRAST INC., AND AMERICAN ENTERPRISES, INC., APPELLANTS IN NO. 93-1189, GERALD D. DITURSI, APPELLANT IN NO. 93-1201


On Appeal from the United States District Court for the Eastern District of Pennsylvania. D.C. Misc. No. 92-419

Before: Greenberg, Nygaard, and Rosenn, Circuit Judges

Author: Greenberg

Opinion OF THE COURT

GREENBERG, Circuit Judge.

The penalty provisions of the Racketeer Influenced and Corrupt Organizations Act (RICO), 18 U.S.C. §§ 1961-1968, provide upon conviction for mandatory forfeiture of assets related to the criminal enterprise. 18 U.S.C. § 1963(a). The statute also provides, 18 U.S.C. § 1963(m), that certain substitute assets may be forfeitable upon conviction if assets related to the criminal enterprise are not available. The district courts are authorized by 18 U.S.C. §§ 1963(d)(1)(A) and 1963(d)(1)(B) to impose, respectively, pre-conviction and pre-indictment restraints to preserve the availability of Section 1963(a) forfeitable assets. Here, we must determine whether the RICO forfeiture provisions also permit pre-conviction and pre-indictment restraints to preserve the availability of substitute assets.*fn1 ence on the part of the detectives that a drug sniffing unit was not on duty that day, so that one had to be summoned to the airport. Nor is it unreasonable that the unit, being summoned at six o'clock in the evening, would take nearly an hour to reach the airport. Moreover, the detectives exhibited diligence in giving Frost receipts for the detained items and instructing him on how he could retrieve them. We find that none of the indicia of a lack of the alleged criminal enterprise rather than their status as substitute assets. We therefore will vacate the order of the district court and will remand the case for reconsideration of that issue and for further proceedings consistent with this opinion.

I. BACKGROUND

This case arises from the government's investigation of "daisy chain" schemes to evade federal and state excise taxes on diesel fuel. The same product, number 2 fuel oil, is used as home heating oil and diesel motor fuel. Number 2 fuel oil used as home heating oil is not subject to federal or state excise taxes; however, these taxes are imposed when it is sold as diesel motor fuel. This state of affairs encourages "daisy chain" operators to buy untaxed heating oil and pass it through various entities, some existing only on paper, to obscure responsibility for payment of excise taxes. The product eventually is sold to retailers as diesel fuel, without the payment of applicable excise taxes. The "daisy chain" operators can undercut legitimate wholesalers' prices and make inordinate profits by pocketing the amounts that should have been paid as taxes.

These consolidated appeals were brought by Gerald DiTursi (No. 93-1201) and jointly by Jacob Dobrer, Vyacheslav Dobrer, N.W.R. Enterprises, Inc., Grast Inc., and American Enterprises, Inc. (No. 93-1189). DiTursi, other individuals, and several companies in the wholesale and retail heating-oil and fuel-oil businesses, were investigated during 1991 and 1992 by the Federal Bureau of Investigation and Internal Revenue Service, on suspicion of operating a "daisy chain." The investigation included extensive court-approved wiretaps of DiTursi's conversations about fuel-oil transactions. By late November 1992, the government was ready to execute search warrants on the oil businesses, the residences of DiTursi and other implicated persons, and the New York City offices shared by Grast Inc. and American Enterprises, Inc., corporations implicated in the scheme. (The government was not yet aware that a third corporation, N.W.R. Enterprises, Inc., was doing business out of the same offices as Grast and American Enterprises; it learned of N.W.R. when agents executed the warrants.)

The government did not want the targets of the investigation to dissipate or hide assets that might become forfeitable under RICO. Therefore, in anticipation of executing the search warrants, the government sought an ex parte temporary restraining order pursuant to RICO, 18 U.S.C. § 1963(d)(2), to preserve the availability of assets of DiTursi, five other individuals, and eight fuel companies. The district court granted the ex parte order on November 23, 1992; the search warrants were then executed on November 24, 1992. On November 25, the government obtained an amended ex parte order to preserve the availability of additional assets discovered during the searches. On December 3, 1992, the government obtained a further ex parte restraint directed to assets of Grast, American Enterprises, N.W.R., and certain principals and owners of those corporations, i.e., Jacob Dobrer, Vyacheslav Dobrer, and David Shuster. The government then moved for a pre-indictment preliminary injunction pursuant to Section 1963(d)(1)(B). To preserve the existing ex parte restraints pending the preliminary injunction hearing, the government obtained an order of extension for good cause shown.

The court conducted the hearing on the Section 1936(d)(1)(B) pre-indictment injunction application on February 11, 1993. The government introduced as exhibits, inter alia, records of fuel-oil transactions seized at the New York offices of Grast, American Enterprises, and N.W.R.; bookkeeping records of those companies; and copies of newspaper articles concerning state law-enforcement agencies' investigations of fuel-oil "daisy chains," which had been found in a file at the Grast/N.W.R./American Enterprises offices. The government also introduced affidavits of the investigating agents and presented oral testimony from FBI agent John J. Terry. The subjects of the restraints presented exhibits in support of their contention that Grast, N.W.R., and American Enterprises had bona fide sources of income from their legitimate businesses of exporting consumer goods to Russia and Europe generally. The attorneys for the subjects cross-examined Terry extensively, but did not present any witnesses.

On February 12, 1993, the district court, ruling from the bench, granted the government's motion for an order enjoining removal, sale, or dissipation of the subjects' assets. (J.A. 643-661). While recognizing that its authority to do so was not settled by any decision of the Supreme Court or of this court, the district court held that it could "restrain substitute assets [as defined in Section 1963(m)] in the pre-indictment stage, so long as the property restrained does not exceed the profits from the enterprise." (J.A. 646). The district court also rejected DiTursi's argument that his Sixth Amendment right to counsel precluded restraint of his substitute assets. (J.A. 657). The court entered an order enumerating the restraints on February 17, 1993. (J.A. 662-670). Jacob Dobrer, Vyacheslav Dobrer, N.W.R., Grast, and American Enterprises jointly appealed from that order on February 24, 1993, and DiTursi appealed on February 26, 1993. As a matter of convenience we will refer to the order of February 17, 1993, as having entered restraints, though it would be technically correct to consider it as having entered a preliminary injunction.

Thereafter on March 26, 1993, a grand jury in the Eastern District of Pennsylvania indicted two of the appellants, DiTursi and Jacob Dobrer, as well as numerous other persons and certain entities, by reason of the "daisy chain" scheme.*fn2 (Government's Supplemental App. at 1-169). Whereas the government had represented at the February 11th hearing, and the district court had found, that potential forfeitable profits from the alleged RICO scheme were in excess of $15 million (J.A. 646), the RICO forfeiture counts of the indictment allege the substantially smaller sum of $6,196,242.98 as forfeitable assets. (Government's Supplemental App. at 112, 119, 126).

II. JURISDICTION AND STANDARD OF REVIEW

a. Jurisdiction

The government has raised four challenges to our jurisdiction: (1) as to the appellants who have been indicted, DiTursi and Jacob Dobrer, the order of February 17, 1993, is interlocutory and thus non-appealable; (2) the order has expired as to the unindicted appellants, Vyacheslav Dobrer, American Enterprises, Inc., Grast Inc., and N.W.R. Enterprises, Inc., and their appeals are therefore moot; (3) because David Shuster,*fn3 DiTursi, and Jacob Dobrer have been indicted, the restraints under Section 1963(d)(1)(B) on their assets have been continued pursuant to Section 1963(d)(1)(A), which provides for pre-conviction restraints, so that the appellants' claims are moot; and (4) Jacob Dobrer is a fugitive and thus is precluded from appealing by the fugitive disentitlement doctrine. We find the first three objections to be without merit. However, we conclude that the government's contention with respect to Jacob Dobrer is meritorious so we will dismiss his appeal.

The government's argument that the order of February 17, 1993, is interlocutory as to the indicted appellants, and therefore is not appealable immediately by them is against the considerable weight of several decisions on point. As recently explained by the Court of Appeals for the Fifth Circuit, "pretrial asset restraining orders are appealable as 'injunctions' under [28 U.S.C.] § 1292(a)(1)." United States v. Floyd, 992 F.2d 498, 500 (1993), citing United States v. Jenkins, 974 F.2d 32, 34 (5th Cir. 1992); United States v. All Assets of Statewide Auto Parts, Inc., 971 F.2d 896, 900-01 (2d Cir. 1992); United States v. Roth, 912 F.2d 1131, 1132-33 (9th Cir. 1990); United States v. Thier, 801 F.2d 1463 (5th Cir. 1986). We find these decisions persuasive in their recognition that asset restraint orders are treated as injunctions immediately appealable under 28 U.S.C. § 1292(a)(1), and we therefore follow them.*fn4

The government's argument that the restraints have expired as to the unindicted appellants is contradicted by the terms of the order imposing the restraints: "this Order will expire 90 days from the date it is entered, unless an indictment . . . has been filed against any of the Subjects, or unless the Order is extended for good cause shown. If . . . an indictment . . . is filed within 90 days of the date . . . this Order is entered, the Order will remain in full force and effect." (J.A. 670). The order was entered on February 17, 1993, and the indictment was filed within 90 days thereafter, on March 26, 1993. Therefore, the entire order, as to all subjects of the restraints, remains in effect; it has not expired as to any of the subjects and these appeals are not moot on that basis.

We also reject the government's contention that the indictment of Shuster, DiTursi, and Jacob Dobrer continues all the restraints to preserve the availability of the assets in question and therefore renders the appeals moot.*fn5 While there might be substance to this argument if Section 1963(m) property were treated differently under Section 1963(d)(1)(A) than it is under Section 1963(d)(1)(B), we will hold that Section 1963(d)(1) limits the applicability of both pre-conviction and pre-indictment restraints to Section 1963(a) forfeitable assets. Thus, neither a pre-indictment nor pre-conviction order may be entered to preserve the availability of Section 1963(m) substitute assets. Therefore, the government's assertion that the district court's Section 1963(d)(1)(B) order has been converted to a Section 1963(d)(1)(A) order by the filing of the indictment, is irrelevant to the validity of the restraints in question. If, as we will conclude, the statute does not authorize either pre-conviction or pre-indictment restraints to preserve the availability of Section 1963(m) substitute assets, then it does not matter whether the restraints in the order of February 17, 1993, are in place by reason of Section 1963(d)(1)(A) or Section 1963(d)(1)(B).

We do, however, grant the government's request to dismiss Jacob Dobrer's appeal pursuant to the doctrine of fugitive disentitlement. As recognized in Molinaro v. New Jersey, 396 U.S. 365, 90 S. Ct. 498, 24 L. Ed. 2d 586 (1970), that doctrine involves a discretionary refusal by an appellate court to entertain an appeal on behalf of a party who has been convicted of a crime but who has become a fugitive subsequent to conviction. The rationale for dismissing fugitives' appeals usually is explained as a principle of mutuality -- if a defendant is not willing to suffer the penalties of the crime, then an appellate court should not afford the defendant an opportunity to improve his or her position by challenging the validity of the conviction. See Smith v. United States, 94 U.S. 97, 24 L. Ed. 32 (1876) ("it is clearly within our discretion to refuse to hear a criminal case in error, unless the convicted party . . . is where he can be made to respond to any judgment we render"); Williams v. Holbrook, 691 F.2d 3, 14 (1st Cir. 1982) (courts give great weight to impropriety of allowing a fugitive to "opt in" only if the appeal is decided favorably to him); Lopez v. Malley, 552 F.2d 682, 683 (10th Cir. 1977) (upon decision of an appeal, a fugitive would be likely to surrender only if it were in his interest).

Although the fugitive disentitlement doctrine originally developed on appeals of criminal convictions, the government argues that it also should apply to this appeal from a restraining order to preserve the availability of assets. See, e.g., United Electrical, Radio and Machine Workers v. 163 Pleasant Street Corp., 960 F.2d 1080, 1097-98 (1st Cir. 1992) (fugitive disentitlement may be applied in civil context as well as on appeal of conviction); United States v. Van Cauwenberghe, 934 F.2d 1048, 1055 (9th Cir. 1991) (fugitive disentitlement doctrine may be applied in contexts other than appeal of conviction). The general applicability of the doctrine to asset restraints was accepted in United States v. Veliotis, 586 F. Supp. 1512 (S.D.N.Y. 1984), although there the court refused to apply the doctrine because constitutional issues were presented and because the fugitive appellant would be bound by either a favorable or an unfavorable result concerning the restraint.

Here, however, we think that the doctrine should be applied. Jacob Dobrer has been indicted and a bench warrant has been issued for him. He was mailed a notice to appear for arraignment but he did not do so. When the government moved to dismiss his appeal, Jacob Dobrer's attorneys in their responding papers did not claim that he was unaware of his indictment. Furthermore, they concede he is in Russia and they present no facts from which we could conclude that he is unable to return to answer the indictment. In these circumstances we only can regard him as a fugitive.*fn6 As the court indicated in United States v. Catino, 735 F.2d 718, 722 (2d Cir. 1984): "The intent to flee from prosecution or arrest may be inferred from a person's failure to surrender to authorities once he learns that charges against him are pending. This is true whether the defendant leaves the jurisdiction intending to avoid prosecution, or, having learned of charges while legally outside the jurisdiction 'constructively flees' by deciding not to return." Id. at 722. Indeed the Catino court concluded that a defendant imprisoned in France could be a fugitive because he actively resisted extradition to the United States. In this case, we believe ...


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