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United States v. Peithman

United States District Court, D. Nebraska

May 1, 2017



          Richard G. Kopf Senior United States District Judge.

         There are two matters pending before me that are intertwined and mind-numbingly complex, yet require rapid resolution so that sentencing may proceed. I am reminded of William Shakespeare's advice. In his play, Hamlet, in the second act, Polonius (speaking for the Bard of Avon) asserts, “Since brevity is the soul of wit/And tediousness the limbs and outward flourishes, I will be brief . . . .”

         What's This Fight About?

         Although set forth in 14[1] counts and over 30 pages in the indictment, this case boiled down to the alleged illegal sale of “potpourri” (sometimes called “K-2”) and drug paraphernalia by a local “head shop” that generated a lot of money. After a long, and very well fought jury trial, a wise and discriminating jury found the defendants guilty of some counts but not guilty on other counts. In particular, the jury found that all of the defendants except AEP were guilty of Count 8, conspiracy to distribute drug paraphernalia, and Count 11, conspiracy to commit mail fraud by, among other things, acquiring for resale misbranded drugs (the “potpourri”). The jury found that all defendants were guilty of Count 12, conspiracy to structure currency transactions that followed the acquisition of the drug paraphernalia and potpourri.

         The government sought forfeiture of specific property. It set forth the statutory authorization for forfeiture at pages 29 and 30, paragraphs 1-3, in the indictment. I will not repeat or discuss those statutes because the defendants have not asserted that the government lacks a statutory basis for forfeiture.

         Both parties demanded (or at least agreed) that the jury also determine whether the sought-after specific property should be forfeited. The jury agreed that packets of potpourri and related drug paraphernalia together with one bank account should be forfeited. The jury was unable to reach a unanimous agreement on some other specific items and found other specific items should not be forfeited. The items the jury did not forfeit or about which they could not reach agreement are the most valuable items of specific property.

         The government also sought a money judgment as part of the forfeiture allegations for Count 8[2] and Count 11[3] and and Count 12.[4] But that matter, quite properly and as I will discuss later, was not submitted to the jury.

         The government now asks me to enter a money judgment at the time of sentencing against the defendants. At the same time, the defendants seek a return of the property that the jury did not forfeit. The parties were heard, and evidence was received on April 24, 2017.

         Money Judgment

         The term “money judgment” is “a short-hand way of describing the defendant's continuing obligation to forfeit the money derived from or used to commit his criminal offense whether he has retained the actual dollars in his possession or not.” Stefan D. Cassella, Asset Forfeiture Law in the United States - Second Edition, at 579 (2013) (italics added) (hereafter “Cassella”).[5]Indeed, “[t]he use of money judgments in criminal forfeiture cases is now well-established in the case law.” Id. at 580.

         More specifically, Federal Rule of Criminal Procedure 32.2 explicitly contemplates that the government may seek a money judgment. For example, see Rule 32.2(a), Rule 32.2(b)(1)(A), and Rule 32.2(b)(2)(A). If the government seeks a personal money judgment, “the court must determine the amount of money that the defendant will be ordered to pay.” Rule 32.2(b)(1)(A) (italics added). The right to a jury determination is limited to “the forfeitability of specific property.” Rule 32.2(b)(5)(A) (italics added).

         By the greater weight of the evidence, I preliminarily decide that the government is entitled to a money judgment against all four defendants jointly and severally. I find by the greater weight of the evidence this judgment should be in the sum of $1, 142, 942.32. (See Hearing Exs. 68, 68A, 69, 69A (Apr. 24, 2017).) This represents the wholesale costs of acquiring the drug paraphernalia and potpourri, the sale of which generated the structuring conviction.

         I have intentionally concentrated on activities that go to the core of the illegal activity and that facilitated everything that followed. Particularly to avoid double counting, I did not, at least directly, rely heavily on a “proceeds theory.”[6]

         Such an approach is consistent with the law:

Money judgments . . . are not limited to property forfeited under a “proceeds” theory, if a sum of money was used to facilitate an offense, it may be forfeited in the form of a money judgment. See United States v. Puche, 350 F.3d 1137, 1153-54 (11th Cir. 2003) (affirming money judgment equal to the combined value of the commission paid to the money launderer and the untainted money used to facilitate the offense); United States v. Numisgroup International Corp., 169 F.Supp.2d 133, 136 (E.D.N.Y. 2001) (money judgment entered under § 982(a)(8) may be based on the value of the gross proceeds derived from the offense and the value of the property used to facilitate or promote it); United States v. Harrison, 2001 WL 803695, at *1-2 (N.D. Ill. 2001) (Government entitled to money judgment for the amount of money defendant used to facilitate his drug offense - i.e., the amount he used to purchase drugs.)

Cassella, at 588 & n.63 (italics added).

         I next turn to the arguments of the parties. The government seeks $2, 248, 728.56.

         However, if I granted the government's request, I fear that I would be double counting should I include those sums. Besides, by concentrating on the wholesale costs of the acquisition of the drug paraphernalia and the misbranded drugs, I have gotten to the core of the illegal activity. In this regard, I must not go overboard and thereby violate the Constitution. See United States v. Bajakajian, 524 U.S. 321, 334 (1998) (“We now hold that a punitive forfeiture violates the Excessive Fines Clause if it is grossly disproportional to the gravity of a defendant's offense.”) By concentrating on wholesale costs, the money judgment is proportional to the gravity of defendants' offenses since that is the amount of money ...

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