Searching over 5,500,000 cases.


searching
Buy This Entire Record For $7.95

Download the entire decision to receive the complete text, official citation,
docket number, dissents and concurrences, and footnotes for this case.

Learn more about what you receive with purchase of this case.

United States v. Leahy

February 15, 2006

UNITED STATES OF AMERICA,
v.
PAUL J. LEAHY, APPELLANT
UNITED STATES OF AMERICA,
v.
JAMES C. FALLON, APPELLANT
UNITED STATES OF AMERICA,
v.
TIMOTHY SMITH, APPELLANT
UNITED STATES OF AMERICA,
v.
DANTONE, INC., T/A CARRIAGE TRADE AUTO AUCTION, APPELLANT
UNITED STATES OF AMERICA,
v.
KENNARD GREGG, APPELLANT



On Appeal from the United States District Court for the Eastern District of Pennsylvania District Judge: Honorable J. Curtis Joyner. (D.C. No. 01-cr-00260-2). On Appeal from the United States District Court for the Eastern District of Pennsylvania District Judge: Honorable James T. Giles. (D.C. No. 02-cr-00324). On Appeal from the United States District Court for the Eastern District of Pennsylvania District Judge: Honorable J. Curtis Joyner. (D.C. No. 01-cr-00260-1). On Appeal from the United States District Court for the Eastern District of Pennsylvania District Judge: Honorable J. Curtis Joyner. (D.C. No. 01-cr-00260-3). On Appeal from the United States District Court for the Eastern District of Pennsylvania District Judge: Honorable John R. Padova. (D.C. No. 04-cr-00103).

The opinion of the court was delivered by: Fuentes, Circuit Judge.

PRECEDENTIAL

Argued: November 1, 2005

Before: SCIRICA, Chief Judge, SLOVITER, ALITO*fn1, ROTH, MCKEE, RENDELL, BARRY, AMBRO, FUENTES, SMITH, FISHER, VAN ANTWERPEN, ROSENN*fn2 and BECKER Circuit Judges.

OPINION

We ordered rehearing en banc in three separate appeals to determine whether the District Courts' orders of restitution and forfeiture violated defendants' Sixth Amendment right to trial by jury.

I. Background

In United States v. Paul J. Leahy, No. 03-4490, following trial, a jury found defendant Dantone, Inc. ("Dantone"), and its two senior managers, defendants Paul Leahy and Timothy Smith, guilty of engaging in, and aiding and abetting, bank fraud in violation of 18 U.S.C. § 1344.*fn3 Defendants' convictions stemmed from their defrauding various banks out of profits derived from Dantone's auctioning of 311 repossessed and after-lease cars on behalf of the banks. At sentencing, the District Court imposed prison sentences upon Leahy and Smith and entered orders of forfeiture in the sum of $418,657 and restitution in the sum of $408,970, jointly and severally, against all three defendants. Dantone, Leahy and Smith appeal both their convictions and the orders of forfeiture and restitution.*fn4

In United States v. Kennard Gregg, No. 04-2912, after being arrested and charged for twice attempting to sell counterfeit money to a government informant, defendant Gregg pled guilty to two counts of dealing in counterfeit obligations in violation of 18 U.S.C. § 473. Gregg was sentenced to six months in prison and three years of supervised release, and ordered to pay restitution to the federal government in the amount of $350. He appeals only the restitution order.

In United States v. James C. Fallon, No. 03-4184, a jury convicted defendant Fallon of one count of wire fraud in violation of 18 U.S.C. § 1341, and three counts of mail fraud in violation of 18 U.S.C. § 1343 in connection with marketing his company's Derma Peel skin treatment without FDA approval. Fallon was sentenced to 12 months in prison and ordered to pay restitution in the amount of $55,235. Fallon appeals both his conviction and the District Court's restitution order.

In these appeals, all five of the defendants -- Dantone, Leahy, Smith, Gregg and Fallon -- challenge their respective restitution orders on Sixth Amendment grounds, arguing that, in accordance with United States v. Booker, 125 S.Ct. 738 (2005), the facts underlying the orders should have been submitted to a jury and established by proof beyond a reasonable doubt. Additionally, on the same grounds, Dantone, Leahy and Smith challenge their orders of forfeiture. We called for rehearing en banc to consider three sentencing issues:

1. Whether the decision of the Supreme Court in Booker applies to forefeiture;

2. Whether orders of restitution are a criminal penalty;

3. Whether Booker applies to orders of restitution under the Victim and Witness Protection Act (the "VWPA")*fn5 and the Mandatory Victims Restitution Act (the "MVRA").*fn6

Because, in our view, restitution under the VWPA and the MVRA is not the type of criminal punishment that evokes Sixth Amendment protection under Booker, we conclude that the amount a defendant must restore to his or her victim need not be admitted by the defendant or proved to a jury beyond a reasonable doubt. As to forfeiture, based upon the Supreme Court's decision in Libretti v. United States, 516 U.S. 29 (1995), we conclude that the amount a defendant must forfeit also need not be admitted or proved to a jury beyond a reasonable doubt.

II. Forfeiture and Booker

We consider first the constitutionality of the District Court's forfeiture order in Leahy. Following trial, the District Court entered an order of forfeiture in the sum of $418,657, finding that the Government had proven by a preponderance of the evidence that this sum constituted the defendants' "proceeds" from their fraudulent activity within the meaning of 18 U.S.C. § 982(a)(2).*fn7 The Leahy defendants contend that the imposition of forfeiture by the District Court under a preponderance of the evidence standard violated their Sixth Amendment right in light of the Supreme Court's decisions in Blakely v. Washington, 542 U.S. 296 (2004), and Booker.

The Leahy defendants' Sixth Amendment argument with respect to forfeiture cannot be reconciled with the Supreme Court's decision in Libretti. In that case, the defendant entered a guilty plea in the middle of trial and agreed in his plea agreement to forfeit considerable property. Libretti, 516 U.S. at 33-34. He subsequently argued that his forfeiture plea colloquy was inadequate, in part because the District Court did not explain the right to a jury determination regarding forfeiture and in part because the District Court failed to obtain his express waiver of that right. Id. at 37-38. The Supreme Court acknowledged that, pursuant to what was then Federal Rule of Criminal Procedure 31(e), a special jury verdict was required to permit an order of forfeiture.*fn8 Id. at 48-49. It nonetheless concluded that there was no Sixth Amendment right to a jury determination, rejecting the defendant's claim that an express description and waiver of the jury right was a necessary component of the plea proceeding:

Without disparaging the importance of the right provided by Rule 31(e), our analysis of the nature of criminal forfeiture as an aspect of sentencing compels the conclusion that the right to a jury verdict on forfeitability does not fall within the Sixth Amendment's constitutional protection. Our cases have made abundantly clear that a defendant does not enjoy a constitutional right to a jury determination as to the appropriate sentence to be imposed.

Id. at 49. Libretti thus flatly holds that the Sixth Amendment is not implicated in the forfeiture context. See id. at 40-41 (rejecting defendant's argument that forfeiture "is not 'simply' an aspect of sentencing, but is, in essence, a hybrid that shares elements of both a substantive charge and a punishment imposed for criminal activity").

The Leahy defendants contend that Libretti has been undercut by Blakely and Booker to such an extent that its precedential value has been eroded. Even assuming that to be true, we nonetheless note that as a Court of Appeals, we are not free to ignore the Supreme Court's holding in Libretti, nor do we possess the authority to declare that the Supreme Court has implicitly overruled one of its own decisions. See United States v. Ordaz, 398 F.3d 236, 241 (3d Cir. 2005) ("[I]f a precedent of [the Supreme Court] has direct application in a case, yet appears to rest on reasons rejected in some other line of decisions, the Court of Appeals should follow the case which directly controls, leaving to [the Supreme] Court the prerogative of overruling its own decisions.") (quoting Rodriguez de Quijas v. Shearson/American Express, Inc., 490 U.S. 477, 484 (1989)).

Defendants argue in the alternative that Libretti should be distinguished on the grounds that it addressed only the question of whether there exists a Sixth Amendment jury right to forfeiture determinations, not the constitutionally-mandated burden of proof, which they contend must be "beyond a reasonable doubt" after Booker. While there may be some tension between Booker and Libretti to the extent that the Libretti Court cites with approval its earlier statement in McMillan v. Pennsylvania that "[t]here is no Sixth Amendment right to jury sentencing, even where the sentence turns on specific findings of fact," we are not dissuaded from our conclusion that Libretti controls the forfeiture issue here. 516 U.S. at 49 (quoting McMillan, 477 U.S. 79, 93 (1986)).

We further observe that the other Courts of Appeals that have considered this issue have reached the same conclusion. See United States v. Fruchter, 411 F.3d 377, 382-83 (2d Cir. 2005) (rejecting arguments that Sixth Amendment applies to forfeiture and that Booker and Blakely require proof beyond reasonable doubt in forfeiture determinations; further holding that "Libretti remains the determinative decision"), cert. denied sub nom. Braun v. United States, 126 S.Ct. 840 (2005); United States v. Hall, 411 F.3d 651, 655 (6th Cir. 2005) (stating that "we fail to see how Booker . . . allows us to turn our back on the Supreme Court's prior ruling in this area (Libretti)"); United States v. Tedder, 403 F.3d 836, 841 (7th Cir. 2005) (holding in pertinent part that Libretti remains binding Supreme Court precedent with respect to forfeiture and Sixth Amendment) cert. denied, 126 S.Ct. 827 (2005).

For the foregoing reasons, we join our sister Courts of Appeals and hold that, even after Booker, the Sixth Amendment's trial by jury protection does not apply to forfeiture, as Libretti remains Supreme Court authority by which we are bound.*fn9

III. The Nature of Restitution

Before turning to Booker's applicability to restitution under the MVRA and the VWPA, we consider whether restitution under these statutes is criminal or civil in nature. If we deem restitution to be civil, there is no Sixth Amendment concern because that Amendment's protections apply only to criminal trials. We note first that restitution combines features of both criminal and civil penalties, as it is, on the one hand, a restoration to the victim by defendant of ill-gotten gains, while it is, at the same time, an aspect of a criminal sentence.

This is not the first time we have addressed this issue. In United States v. Syme, after reviewing several of our earlier cases, we stated that "[w]e consider restitution orders made pursuant to criminal convictions to be criminal penalties." 276 F.3d 131, 159 (3d Cir. 2002). Syme accordingly held that "restitution ordered under 18 U.S.C. § 3663 [the VWPA] constitutes 'the penalty for a crime' within the meaning of Apprendi." Id.; see also United States v. Edwards, 162 F.3d 87, 91 (3d Cir. 1998) (holding that restitution ordered under MVRA constitutes punishment for purpose of Ex Post Facto Clause analysis); United States v. Sleight, 808 F.2d 1012, 1020 (3d Cir. 1987) (finding that under Federal Probation Act, restitution "remains inherently a criminal penalty"); United States v. Palma, 760 F.2d 475, 479 (3d Cir. 1985) (holding that restitution ordered under VWPA is criminal penalty).

The Supreme Court has touched on this issue as well. In Pasquantino v. United States, a wire fraud case in which the MVRA applied, the Court noted:

Petitioners answer that the recovery of taxes is indeed the object of this suit, because restitution of the lost tax revenue to Canada is required under the [MVRA]. We do not think it matters whether the provision of restitution is mandatory in this prosecution. Regardless, the wire fraud statute advances the Federal Government's independent interest in punishing fraudulent domestic criminal conduct, a significant feature absent from all of petitioners' revenue rule cases. The purpose of awarding restitution in this action is not to collect a foreign tax, but to mete out appropriate criminal punishment for that conduct.

125 S.Ct. 1766, 1777 (2005) (footnote omitted and emphasis added). Pasquantino suggests that whether the restitution order being reviewed is mandatory or discretionary does not change the analysis. Moreover, and more importantly, Pasquantino clearly states that an award of restitution under the MVRA or the VWPA is a "criminal punishment."

This latter stance is consistent with earlier Supreme Court precedent. In Kelly v. Robinson, 479 U.S. 36 (1986), the Court reviewed a Connecticut restitution statute in order to determine whether a restitution order was dischargeable in bankruptcy. The Court initially observed that "[t]he criminal justice system is not operated primarily for the benefit of victims." Id. at 52. The Court went on to state that "[a]lthough restitution does resemble a judgment 'for the benefit of' the victim," it is imposed in the context of a criminal sentence and "[t]he victim has no control over the amount . . . or the decision to award" restitution. Id. Additionally, the Court noted that "the decision to impose restitution generally does not turn on the victim's injury, but on the penal goals of the state and the situation of the defendant." Id. Quoting the Bankruptcy Judge who decided the underlying issue, the Court finally observed that [u]nlike an obligation which arises out of a contractual, ...


Buy This Entire Record For $7.95

Download the entire decision to receive the complete text, official citation,
docket number, dissents and concurrences, and footnotes for this case.

Learn more about what you receive with purchase of this case.