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United States v. Rodriguez

May 12, 2006

UNITED STATES OF AMERICA
v.
ANGELO C. RODRIGUEZ



The opinion of the court was delivered by: Wolfson, United States District Judge

OPINION

This matter comes before the Court upon Defendant Angelo C. Rodriguez's Motion to Vacate the Court's Preliminary Order of Forfeiture, in which the Court entered judgment against Defendant in the amount of $1,245,018 following his conviction by a jury on a six-count Indictment charging him with knowingly structuring transactions to avoid a domestic financial institution's obligation to file currency transaction reports, in violation of 31 U.S.C. § 5313(a) and 31 U.S.C. § 5324(a)(3). The jury also found that Defendant's structuring acts constituted a pattern of illegal activity involving more than $100,000 in a twelve-month period, in violation of 31 U.S.C. § 5324(d)(2) and 18 U.S.C. § 2. As required by Fed. R. Crim. P. 7(c)(2) and 32.2(a), the Indictment also contained a forfeiture allegation in which the Government asserted that Defendant's structuring activity involved $1,300,000 in United States currency, which was subject to forfeiture upon Defendant's conviction, pursuant to 31 U.S.C. § 5317(c)(1)(A). The forfeiture allegation noted the Government's intent to seek forfeiture of substitute assets in the event it could not locate the currency involved in the offense because Defendant had transferred, dissipated, placed beyond the jurisdiction of the Court, substantially diminished, or commingled it with other funds such that it could not be subdivided without difficulty. After trial, Defendant waived his right to have the jury decide the forfeiture allegation in the Indictment. Consequently, following a hearing on the matter before this Court, I conducted a review of the entire record and determined, by a preponderance of the evidence, that Defendant's structuring offenses involved $1,245,018 in United States currency, which was subject to forfeiture. On June 13, 2005, I issued a Preliminary Order of Forfeiture, and entered a money judgment against Defendant in that amount.

Defendant now challenges the Court's Preliminary Order of Forfeiture on multiple grounds. He argues that: (1) the Court should have determined the amount subject to forfeiture beyond a reasonable doubt, rather than by a preponderance of the evidence; (2) the Court lacks statutory authority to order forfeiture of substitute assets in this case; and (3) the amount subject to forfeiture is unjustly high and violates the Excessive Fines Clause of the Eighth Amendment to the Constitution. On March 31, 2006, I heard oral argument on Defendant's Motion. For the reasons discussed more fully below, I conclude that: (1) a forfeiture amount in a proceeding pursuant to 31 U.S.C. § 5317(c)(1)(A) need only be determined by a preponderance of the evidence; (2) 31 U.S.C. § 5317(c)(1)(B) does not authorize the Government to seize substitute assets in forfeiture proceedings following a conviction for violation of 31 U.S.C. § 5324; and (3) the forfeiture amount in this case is not grossly disproportionate to the gravity of Defendant's criminal offense and, thus, does not violate the Eighth Amendment's Excessive Fines Clause. Accordingly, Defendant's Motion to Vacate the Court's Preliminary Order of Forfeiture is denied, but the Government is precluded from seizing substitute assets, pursuant to 21 U.S.C. § 853(p), to satisfy the forfeiture amount contained therein.

I. FACTUAL BACKGROUND*fn1

On April 4, 2005, a jury found Defendant guilty of Counts 1 through 6 of an Indictment which charged him with knowingly structuring transactions to avoid a domestic financial institution's obligation to file currency transaction reports, in violation of 31 U.S.C. § 5313(a) and 31 U.S.C. § 5324(a)(3). Jury Verdict ¶¶ 1-6. In addition, the jury found Defendant's acts of structuring were part of a pattern of illegal activity involving more than $100,000 in a twelve-month period, in violation of 31 U.S.C. § 5324(d)(2) and 18 U.S.C. § 2.*fn2 Id. ¶ 7. Pursuant to 31 U.S.C. § 5317(c), the Government sought forfeiture of "$1,300,000 in United States currency and all property traceable [thereto]," which it alleged constituted an amount representing all of Defendant's property involved in or traceable to offenses for which he was convicted.*fn3 See Indict. Forf. Alleg. ¶ 2. On April 5, 2005, Defendant waived his right to have a jury decide the applicable forfeiture amount and that duty fell to the Court. See April 5, 2005 Jury Waiver.

Defendant disputed the Government's allegation of the amount subject to forfeiture. In an April 20, 2005 letter to the Court, he asserted that the Government's calculation of $1,300,000 was "arbitrary and capricious and not based on the evidence presented at trial." See United States v. Rodriguez, No. 03-789 slip op. at 2 (D.N.J. June 6, 2005) (memorializing the Court's forfeiture determination). Defendant argued that the Government did not establish that each of the deposits totaling $1,300,000 was involved in one of the six specific substantive structuring offenses alleged in the Indictment. Id. Accordingly, he urged the Court to restrict the total amount subject to forfeiture to the amount the jury found, beyond a reasonable doubt, connected to the substantive structuring counts of the Indictment -namely, $372,000. Id.

In response, the Government asserted that it was entitled to look beyond the six substantive counts alleged in the Indictment to calculate the total amount subject to forfeiture. Id. The Government argued that because the jury also specifically found that Defendant engaged in of a pattern of illegal activity committed over a twelve-month period, the total forfeiture amount should not be limited to the amounts involved in the particular transactions alleged in the Indictment. Id. Instead, the Government asserted that it was free to consider any amount involved in Defendant's banking activity during the entire period set forth in the Indictment, so long as evidence of those transactions was presented at trial, and thus formed the basis of Defendant's conviction. Id.

In a June 6, 2005 Memorandum Opinion, I held that funds beyond those specifically enumerated in the substantive counts of the Indictment, which were involved in transactions during the twelve-month period set forth in the aggregate count, were subject to forfeiture so long as the Government established, by a preponderance of the evidence, a factual nexus between such funds and Defendant's offenses. Id. at 4-5. I also noted that neither party presented any additional evidence during the post-trial forfeiture hearing, pursuant to Fed. R. Crim. P. 32.2(b)(1). United States v. Rodriguez, No. 03-789 slip op. at 5. Consequently, relying on the evidence presented at trial, which included all of Defendant's relevant banking records for the twelve-month period specified in the Indictment, I independently evaluated Defendant's financial transactions during the period and found that "most but not all, bank deposits constituting the $1,300,000 amount [asserted by the Government as subject to forfeiture] were proven by a preponderance of the evidence to be part of" Defendant's structuring activity. Id. After excluding certain amounts related to transactions deemed outside of Defendant's structuring activity, I concluded that $1,245,018 in United States currency constituted the total amount involved in Defendant's offenses, and was thus subject to forfeiture to the United States. Id. at 6 (setting forth exact transactions deemed subject to forfeiture in Appendix A). On June 13, 2005, I filed a Preliminary Order of Forfeiture in which I entered judgment in the amount of $1,245,018 against Defendant.

On March 7, 2006, Defendant filed the instant Motion to Vacate the Preliminary Order of Forfeiture and the judgment entered pursuant thereto. See Def. Motion to Vacate. The Government filed a brief in opposition to the Motion on March 17, 2006. See Gov. Opp. Br. The parties filed supplemental briefs expanding and clarifying their arguments, and, on March 31, 2006,I heard oral argument on the Motion.*fn4 See Transcript of March 31, 2006 Oral Argument ("Tr.").

II. DISCUSSION

Before addressing Defendant's arguments, a brief discussion of the interplay between the separate statutes imposing the currency transaction reporting requirement, prohibiting evasion of that requirement through structured transactions, imposing forfeiture as a consequence upon a conviction for structuring transactions, and facilitating seizure of property subject to forfeiture, is in order. First, 31 U.S.C. § 5313(a) establishes the authority of the Secretary of the Treasury to promulgate rules requiring domestic financial institutions to report certain transactions beyond a particular amount. Pursuant to those rules, each such financial institution "shall file a report of each deposit, withdrawal, exchange of currency or other payment or transfer, by, through, or to such financial institution which involves a transaction in currency of more than $10,000...."*fn5 31 C.F.R. 103.22(b). A second statute, 31 U.S.C. § 5324, proscribes evasion of the reporting requirement. Specifically, § 5324(a)(3) provides that "[n]o person shall, for the purpose of evading the reporting requirements of section 5313(a) ... structure or assist in structuring, or attempt to structure or assist in structuring, any transaction with one or more domestic financial institutions." The same statute also contains a provision that imposes enhanced penalties on one who "violates this section ... as part of a pattern of any illegal activity involving more than $100,000 in a 12-month period...." 31 U.S.C. § 5324(d)(2).

A third statute, 31 U.S.C. § 5317(c), establishes forfeiture as a penalty for violations of §§ 5313 and 5324. The forfeiture statute provides that "[t]he court in imposing sentence for any violation of [31 U.S.C. §§ 5313, 5316, or 5324], or any conspiracy to commit such violation, shall order the defendant to forfeit all property, real or personal, involved in the offense and any property traceable thereto." 31 U.S.C. § 5317(c)(1)(A). However, the forfeiture statute only establishes the substantive penalty, and does not address enforcement. Instead, the forfeiture statute incorporates the procedures in yet another statute, 21 U.S.C. § 853, to facilitate enforcement. 31 U.S.C. § 5317(c)(1)(B). Section 853 includes a list of subsections which facilitate the Government's seizure of property subject to forfeiture under 31 U.S.C. § 5317(c)(1)(A). Having set forth the statutory framework at issue, I turn to Defendant's contentions.

A. Burden of Proof

Defendant presents two separate arguments in support of his contention that the Court should have determined the amount subject to forfeiture in this case beyond a reasonable doubt instead of by a preponderance of the evidence. First, he argues that Congress intended the reasonable doubt standard to apply in forfeiture proceedings under 31 U.S.C. § 5317(c)(1)(A). Second, he argues that, notwithstanding any otherwise generally applicable rule, the facts of this case require application of the reasonable doubt standard because the jury verdict does not provide an adequate factual basis to support the Court's forfeiture determination. Both contentions are without merit.

1. Congressional Intent in Forfeiture Cases Under 31 U.S.C. § 5317(c)(1)(A)

Defendant asserts that Congress intended the reasonable doubt standard to apply in forfeiture proceedings under § 5317(c)(1)(A) because application of the preponderance standard violates the due process guarantee of the Fifth Amendment and the right to a jury trial under the Sixth Amendment. See Def. Rep. Br. at 5-6. The Third Circuit has not addressed Defendant's due process argument in the context of forfeiture proceedings in a structured transaction case. However, in a trilogy of cases, the Circuit has considered due process challenges to the application of the preponderance standard in proceedings under other forfeiture statutes. See United States v. Sandini, 816 F.2d 869 (3d Cir. 1987) (applying preponderance standard under the continuing criminal enterprise statute, 21 U.S.C. § 848(a)); United States v. Pelullo, 14 F.3d 881 (3d Cir. 1994) (applying reasonable doubt standard under the RICO statute, 18 U.S.C. § 1963); United States v. Voigt, 89 F.3d 1050 (3d Cir. 1996) (applying preponderance standard under money laundering statute, 18 U.S.C. § 982(a)(1)). While distinct forfeiture statutes must be analyzed independently, the Third Circuit's holdings in prior cases are persuasive authority for district courts considering analogous statutes. Voigt, 89 F.3d at 1083. Based on the reasoning in those cases, I conclude that application of the preponderance standard in forfeiture proceedings under 31 U.S.C. § 5317(c)(1)(A) does not violate due process.

In United States v. Sandini, the Third Circuit first considered the propriety of employing the preponderance standard in post-trial proceedings under a forfeiture statute. 816 F.2d at 869. In Sandini, the defendant was convicted under the continuing criminal enterprise statute, 21 U.S.C. § 848(a) ("CCE"). The CCE contains a forfeiture provision that defines the substantive forfeiture penalty, but facilitates enforcement of forfeitures by reference to 21 U.S.C. § 853. See 21 U.S.C. § 848(a); see also Sandini, 816 F.2d at 871. Among the applicable subsections is § 853(d), which establishes a "rebuttable presumption" that the possessions of a convicted person are subject to forfeiture "if the United States establishes by a preponderance of the evidence" that the property was acquired during or within a reasonable period after the violation and there was no other "likely source for such property." 21 U.S.C. § 853(d).

The defendant in Sandini argued that the preponderance standard imposed by § 853(d) deprived him of due process. 816 F.2d at 871. The Third Circuit disagreed, and explained that forfeiture under the CCE is a criminal penalty and not an element of the crime of which the defendant had been convicted that required proof beyond a reasonable doubt.*fn6 Id. at 875. Accordingly, the Circuit held that the preponderance standard imposed on CCE forfeitures by § 853(d) was valid "to the extent that the forfeiture proceeding occurs only after a conviction based on the constitutional standard." Sandini, 816 F.2d at 876.

In United States v. Pelullo, the Third Circuit confronted the same question in the context of 18 U.S.C. § 1963(a), the RICO criminal forfeiture statute. 14 F.3d at 881. Unlike the CCE, the RICO forfeiture statute is self-contained, and does not facilitate enforcement forfeitures by reference to another statute. The Third Circuit acknowledged that difference, and the fact that the RICO forfeiture statute does not include a procedure similar to that established in 21 U.S.C. § 853(d), which imposes the preponderance standard in CCE forfeitures. Pelullo, 14 F.3d at 904. The Circuit also noted that in 1984, Congress simultaneously amended the RICO and CCE forfeiture statutes, and added § 853(d) to the CCE but did not similarly modify the RICO forfeiture statute. Pelullo, 14 F.3d at 905. The Third Circuit concluded that the omission was intentional and signaled "that Congress intended the higher beyond a reasonable doubt standard to control in a § 1963(a) proceeding." Id.

In a third case, United States v. Voigt, the Third Circuit considered a due process challenge to the application of the preponderance standard in proceedings under the money laundering forfeiture statute, 18 U.S.C. § 982(a)(1). 89 F.3d at 1050. The money laundering and CCE forfeiture statutes are similar insofar as both define the substantive forfeiture penalty but refer to 21 U.S.C. § 853 to facilitate enforcement. Compare 18 U.S.C. § 982(b)(1) with 21 U.S.C. § 848(a). However, there is an important difference between the two statutes. The CCE incorporates all of § 853, while the money laundering forfeiture statute expressly excludes application of § 853(d), which imposes the preponderance standard in CCE forfeitures.*fn7 Seizing on that difference, and relying on the Circuit's comparison of the CCE and RICO forfeiture statutes in Pelullo, the defendant in Voigt argued that Congress' exclusion of § 853(d) in money laundering forfeitures evinced its intent to require application of the reasonable doubt standard in those proceedings. Voigt, 89 F.3d at 1083. The Third Circuit rejected that argument. Id.

Instead, the Circuit held that application of the preponderance standard in money laundering forfeitures was permissible because "the amount of the transaction that forms the basis of a substantive money laundering offense will be identified in the indictment and, thus, ... its connection to money laundering activity will have been proved beyond a reasonable doubt at trial." Id. at 1084. In support of its holding, the Circuit compared the "extremely broad and sweeping" scope of the RICO forfeiture statute with its more narrowly focused money laundering counterpart. Id.at 1083-84. The Circuit noted that in RICO cases "the identity and extent of property subject to forfeiture will not have been addressed in the course of proving the substantive ... charge." Id. at 1084. Consequently, the Circuit explained, in the RICO context the reasonable doubt burden of proof "ensures greater accuracy in determining the scope of property subject to forfeiture." Id. By contrast, the Circuit observed that the money laundering forfeiture provision is more precise and "makes clear that the government is entitled only to property 'involved in' or 'traceable to' money laundering activity." Id. (citation omitted). The Third Circuit concluded that applying the reasonable doubt standard in money laundering forfeitures was unnecessary because of the substantially decreased likelihood of accuracy problems like those possible in the RICO context. Id. at 1084.

The reasoning in Sandini is instructive, and indeed, compelling. Accordingly, I find that application of the preponderance standard in forfeiture proceedings under 31 U.S.C. § 5317(c)(1)(A) does not violate due process. Like the CCE forfeiture statute, the structured transaction forfeiture statute refers to 21 U.S.C. § 853 to facilitate enforcement of forfeitures. See 31 U.S.C. § 5317(c)(1)(B). Also, unlike the money laundering forfeiture statute at issue in Voigt, the preponderance standard in § 853(d) is not excluded by 31 U.S.C. ...


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