U.S. v. Capoccia

• Decision Date: 19 September 2007
• Docket Number: Docket No. 06-0669-cr.
• Citation: 503 F.3d 103
• Parties: UNITED STATES of America, Appellee, v. Andrew CAPOCCIA, Defendant-Appellant, Thomas Dale, Carol Capoccia, Carlo Spano, Defendants.
• Court: U.S. Court of Appeals — Second Circuit

503 F.3d 103

UNITED STATES of America, Appellee, v. Andrew CAPOCCIA, Defendant-Appellant, Thomas Dale, Carol Capoccia, Carlo Spano, Defendants.

Docket No. 06-0669-cr.

United States Court of Appeals, Second Circuit.

Argued: March 29, 2007.

Decided: September 19, 2007.

James J. Gelber (Gregory L. Waples, David V. Kirby, on the brief), Assistant United States Attorneys, for Thomas D. Anderson, United States Attorney for the District of Vermont, Burlington, Vermont, for appellee.

Elizabeth L. Tang, Delmar, New York (Thomas A. Zonay, Ford & Zonay, P.C., Woodstock, Vermont, on the brief), for defendant-appellant.

Before: SOTOMAYOR and KATZMANN, Circuit Judges, and GERTNER, District Judge.^*

SOTOMAYOR, Circuit Judge:

Defendant-appellant Andrew Capoccia appeals from the February 2, 2006 Preliminary Order of Forfeiture of the United States District Court for the District of Vermont (Murtha, J.),¹ which ordered forfeited the contents of several bank accounts and other items and imposed a money judgment. The forfeiture was based on Capoccia's conviction, following a jury verdict, of thirteen counts of various crimes in connection with his management of and involvement in certain centers offering debt-reduction services. We hold that the district court did not err under Federal Rule of Criminal Procedure 32.2(b)(1) in basing its forfeiture determination both on the trial record and on evidence adduced at the forfeiture hearing, but that the district court did err in ordering forfeited assets obtained by Capoccia prior to May 24, 2000. Count One of the Second Superseding Indictment, which charged Capoccia with interstate transportation of stolen property in violation of 18 U.S.C. § 2314, did not charge Capoccia with any criminal conduct before that date, and any assets derived from that uncharged conduct did not bear the requisite nexus to the violations of which Capoccia was convicted, as required by the forfeiture provisions 18 U.S.C. § 981(a)(1) and 28 U.S.C. § 2461(c) and by Federal Rule of Criminal Procedure 32.2(b)(1). We AFFIRM the forfeiture order in part, VACATE it in part, and REMAND for further proceedings consistent with this decision.

Capoccia has also challenged several other aspects of his conviction and restitution order in a companion case, United States v. Capoccia, No. 06-0670, ___ Fed. Appx. ___, 2007 WL 2719097. We reject these challenges and affirm his conviction in a summary order also filed today.

BACKGROUND

I. Offense Conduct

The following facts are drawn from the Second Superseding Indictment (the "Indictment") and evidence adduced at trial.

In February 1997, Andrew Capoccia, then a licensed lawyer,² formed a company called Andrew F. Capoccia, LLC, of which Capoccia was the sole owner. The company changed its name in 1998 to the Andrew F. Capoccia Law Centers, LLC. These entities will be referred to as the "Capoccia Law Centers" or "Law Centers."

The Capoccia Law Centers, which operated in New York, offered a debt reduction program targeted at consumers who had problems paying their unsecured debt, primarily credit card debt. The Law Centers heavily advertised its debt reduction business, claiming that by negotiating collectively with a consumer's creditors, the Law Centers could reduce the consumer's debt by as much as 50 percent to 70 percent. Each client enrolling in the program signed a contract specifying his or her total amount of unsecured debt and projecting the total savings the Law Centers would obtain for the client by negotiating with the client's creditors. The contract also estimated the retainer fee (twenty-five percent, and later twenty-eight percent, of the projected total savings) the Law Centers would earn upon settling the client's debts. The client agreed to make monthly payments to the Law Centers to fund the debt reduction program—i.e., the money the Centers would use to settle with creditors—and to pay the retainer fee and account maintenance fees. If the client withdrew, the Law Centers would refund the unearned retainer fees and the debt reduction payments. The Law Centers utilized two principal types of bank accounts. Its operating account was funded by the retainer fee payments, which the Law Centers treated as income immediately upon receipt. The Law Centers' escrow account held the funds to be used to settle clients' debts.

In June 2000, Capoccia, who faced disciplinary proceedings in New York and a civil fraud suit commenced by the New York Attorney General against the Law Centers, entered into an agreement with co-defendants Howard Sinnott and Thomas Daly, employee-attorneys of the Law Centers, to sell the Law Centers' assets. The agreement provided that the Daly, Murphy & Sinnott Law Centers, PLC would purchase the Law Centers' assets for at least $12,000,000 and would pay Capoccia 20 percent of its gross income over a period of ten years. The Daly, Murphy & Sinnott Law Centers, which also underwent name changes, will be referred to, along with its successors, as the "Law Centers for Consumer Protection" or "LCCP." Following the asset purchase, LCCP continued to provide similar debt reduction services to those previously offered by the Capoccia Law Centers. In July 2000, LCCP moved its base of operations from New York to Vermont. Although Capoccia no longer possessed an ownership interest in LCCP after the asset purchase, he remained affiliated with LCCP in an advisory capacity and actively participated in management decisions.

As described in the Indictment, Capoccia and his colleagues at the Law Centers and LCCP committed several types of misconduct with respect to those entities' funds. First, they engaged in the misappropriation of unearned retainer fees by depositing those fees into the firms' general operating accounts and then spending them before settling the client's debts. As a result of this misappropriation, and because the Law Centers experienced continuous and severe financial shortfalls, it regularly failed to pay timely and complete refunds to clients who withdrew from the debt reduction program. Nonetheless, in recruiting clients, the Law Centers continued to represent that withdrawing clients would receive refunds of unearned retainer fees.³ Following its purchase of the Law Centers' assets, LCCP engaged in similar conduct and, as a result, lacked funds to pay timely refunds to withdrawing clients.

Second, starting in 2000, Capoccia and his colleagues began embezzling client escrow money, which the firm was required to hold on the clients' behalf until the money was used to pay off their debts. Capoccia authorized several transfers of money from the client escrow account into LCCP's payroll and general operating accounts, both directly and to cover overdrafts in the general account. All told, over two million dollars was removed from the client escrow account.

Finally, throughout this time period, even as the Law Centers and later LCCP faced serious shortfalls and owed millions of dollars to clients, Capoccia transferred several million dollars from the firms' accounts to accounts controlled by his wife, Carol Capoccia. Capoccia also used the Law Centers' funds to pay his income taxes, make improvements on his home, and purchase jewelry.

In March 2002, federal and state authorities executed search warrants of LCCP's offices. The firm eventually declared bankruptcy.

II. The Indictment

On March 10, 2003, a federal grand jury in Rutland, Vermont, returned a fifty-count fraud and forfeiture indictment against Capoccia and six of his Law Centers and LCCP colleagues. The same grand jury returned a Superseding Indictment on November 3, 2003, and on September 14, 2004, a different grand jury sitting in Burlington, Vermont returned a Second Superseding Indictment (the "Indictment") against Capoccia and three of his colleagues.⁴

Count One of the Indictment, of principal relevance to this appeal, charged Capoccia with violating 18 U.S.C. § 2314 by transporting in interstate commerce monies he knew to be stolen, converted and taken by fraud. Summarizing the prefatory paragraphs of the Indictment, the count referred to Capoccia's "scheme, between 1997 and 2002, to convert to his own benefit and to the benefit of others unearned retainer fees paid by clients to the Capoccia Law Centers and to LCCP." It then alleged that Capoccia transferred in interstate commerce thirty-one payments, the earliest of which was dated May 24, 2000.

Count Two charged Capoccia and his co-defendants with conspiracy under 18 U.S.C. § 371, the object of which was to commit violations of § 2314, wire fraud in violation of 18 U.S.C. § 1343, mail fraud in violation of 18 U.S.C. § 1341, and receipt of stolen property transported interstate in violation of 18 U.S.C. § 2315. The count alleged the conspiracy to commence on or about July 1, 2000, and terminate on or about January 27, 2003. Counts Three through Five, Seven, and Nine through Fifteen charged Capoccia, and in certain instances his co-defendants as well, with substantive violations of those statutes, as well as money laundering in violation of 18 U.S.C. § 1956.⁵ Count Nineteen sought forfeiture of "any and all proceeds of the statutory violations specified" in Count One. Counts Twenty through Twenty-three and Twenty-five through Thirty sought forfeiture of the property traceable to the violations alleged in the other substantive counts.

III. The Trial

Capoccia's three co-defendants pleaded guilty on the eve of trial, so Capoccia alone proceeded to trial. The government's direct case consisted primarily of testimony by former Law Centers employees. Special Agent Daniel Rachek of the Federal Bureau of Investigations testified about the financial aspects of the Law Centers' conduct, including the flow of money from the Law Centers' and LCCP's accounts to accounts held by Carol Capoccia.

Prior to the testimony of Agent Rachek, the district court held two bench conferences to discuss defense counsel's reque...