U.S. v. McCorkle, No. 00-13657.

• Decision Date: 18 February 2003
• Docket Number: No. 00-13657.,No. 00-14859.
• Citation: 321 F.3d 1292
• Parties: UNITED STATES of America, Plaintiff-Appellee, v. William J. McCORKLE, a.k.a. William T. McCokle, Defendant, F. Lee Bailey, Claimant-Appellant.
• Court: U.S. Court of Appeals — Eleventh Circuit

321 F.3d 1292

UNITED STATES of America, Plaintiff-Appellee, v. William J. McCORKLE, a.k.a. William T. McCokle, Defendant, F. Lee Bailey, Claimant-Appellant.

No. 00-13657.

No. 00-14859.

United States Court of Appeals, Eleventh Circuit.

February 18, 2003.

F. Lee Bailey, Bailey, Fishman, Freeman & Ferrin, West Palm Beach, FL, pro se.

David Paul Rhodes, Tamra Phipps, Tampa, FL, for Plaintiff-Appellee.

Appeals from the United States District Court for the Middle District of Florida.

Before TJOFLAT, RONEY and COX, Circuit Judges.

TJOFLAT, Circuit Judge:

I.

After finding William and Chantal McCorkle guilty of laundering the proceeds of a fraudulent telemarketing scheme,¹ the jury returned a special verdict forfeiting to the United States the McCorkles' interests in various assets. Among these assets were $2 million that had been placed in trust by the McCorkles in the Cayman Islands for the payment of their lawyers' fees and transferred by the trust to F. Lee Bailey, William McCorkle's attorney.² At the January 25, 1999 sentencing, the district court, as a part of the McCorkles' sentencing package, entered an order of forfeiture which conveyed such interests to the United States.

The jury, in returning its forfeiture verdict, found that Bailey was a transferee of the laundered proceeds that belonged to the Unite States. To defeat the Government's right to such proceeds—that is, to avoid being sued by the Government for conversion of its property—Bailey had to file a petition with the district court and prove that he had received the money as a bona fide purchaser for value without cause to believe that the money was subject to forfeiture ("BFP"). See 21 U.S.C. §§ 853(n)(6)(B). Bailey filed his petition on February 16, 1999.

The district court referred Bailey's petition to a magistrate judge. On March 5, 1999, the Government moved the court for an order to show cause why Bailey should not be held in civil contempt for failing to turn over the funds withdrawn from the trust.³ On March 30, 1999, the magistrate judge, in advance of the hearing on the merits of Bailey's section 853(n) petition, entered a preliminary order in which he addressed the Government's motion. He ordered Bailey to either deposit $2 million into the registry of the court or, by May 3, 1999, post a $2 million bond. Bailey did neither.

On October 18, 1999, the magistrate judge held a hearing to adjudicate the merits of Bailey's petition and to permit Bailey to show cause why he should not be cited for contempt for failing to comply with the March 20 order. On January 14, 2000, the magistrate judge forwarded his report and recommendation to the district court. He recommended that the court reject Bailey's section 853(n) petition on the ground that Bailey had not shown that he was a BFP,⁴ and that the court require Bailey to show cause why he should not be held in civil contempt for failing to pay $2 million into the court's registry or, in lieu of the deposit, post a bond.

On June 29, 2000, the district court entered an order adopting the magistrate judge's recommendation that Bailey's petition be denied, thus giving the Government clear title to the $2 million trust fund earmarked for attorney's fees, including the $1,994,301 that had been disbursed as Bailey directed. The court also agreed that Bailey should be required to show cause why he should not be held in contempt, and it scheduled a hearing for August 17, 2000. Meanwhile, the court reduced to $700,000 the amount of the bond the magistrate judge had required Bailey to post; the court found that $1,300,000 of the trust fund had been dissipated and that the bond "should be reduced to reflect and amount that the Government may still be able to lawfully seize from Mr. Bailey in the form of forfeitable property."⁵

At the August 17 show cause hearing, Bailey represented that he lacked the financial ability to post a $700,000 bond. The district court disagreed, and it adjudged him in contempt of court. In its September 14, 200 order memorializing the adjudication, however, the court declined to impose a sanction (such as a fine or incarceration) that would give Bailey the opportunity to purge himself of the contempt. The court reasoned that a bond was no longer needed. Having adjudged Bailey in contempt, though, the court apparently felt that it had to take some action, and it therefore referred him to the Florida Bar for consideration of disciplinary action.

Bailey now separately appeals (1) the denial of his section 853(n) petition and (2) the contempt adjudication. We consider his appeals in order.

II.

It is clear that the McCorkles used $2 million in laundered, and therefore forfeitable, funds to create the trust fund for payment of attorney's fees. It is also clear that Bailey knew from the outset that the funds were subject to forfeiture. Assuming that he cannot meet the BFP test of 21 U.S.C. § 853(n)(6)(B), Bailey contends that he should be able to keep the money because the Government's conduct induced him to provide legal services that he would not have provided had he known that the Government intended to pursue the money. Specifically, Bailey contends that the Government sent him seven "signals" that he was entitled to the otherwise forfeitable money,⁶ and that the signals "would have inclined any reasonable lawyer to believe that he or she was safe and legally correct in receiving and spending funds from the `defense fund.'" Therefore, Bailey argues, the Government should be estopped from claiming those funds.

Even if Bailey were permitted, as a matter of law, to invoke the estoppel doctrine in this criminal forfeiture context, he has not established the elements of estoppel. To make out a claim of estoppel against the Government, a party must adduce evidence of the following: (1) words, conduct, or acquiescence that induces reliance; (2) willfulness or negligence with regard to the acts, conduct, or acquiescence; (3) detrimental reliance; and (4) affirmative misconduct by the Government. See Tefel v. Reno, 180 F.3d 1286, 1302-04 (11th Cir.1999). Affirmative misconduct requires more than governmental negligence or inaction; otherwise, prong two and prong four would be redundant.

Most of the "signals" to which Bailey points could not possibly have induced reasonable reliance. Signals one, two, three, five, and six (five of the seven signals asserted by Bailey) focus upon the Government's failure to seek injunctive relief at various times. This is an odd argument, because the statutory scheme expressly grants the Government discretion whether to employ the protective measures Bailey says should have been employed. See 21 U.S.C. § 853(e); cf. Caplin & Drysdale v. United States, 491 U.S. 617, 622-23, 109 S.Ct. 2646, 2650-51, 105 L.Ed.2d 528 (1989) (concluding that a district court's exercise of discretion not to enter a pretrial restraining order does not "`immunize' nonrestrained assets from subsequent forfeiture under § 853(c), if they are transferred to an attorney to pay legal fees"). Moreover, Government inaction does not give rise to an estoppel claim; the Government must engage in affirmative misconduct. See Tefel, 180 F.3d at 1303-04. Bailey's "signal seven"—the Government's failure to warn defense counsel that it would seek forfeiture upon a conviction — does not give rise to an estoppel claim for the same reason.

This leaves "signal four," in which Bailey asserts that prosecutor DeMarco represented to Horwitz—either explicitly or implicitly — that the Government would not seek forfeiture. Even if this were true, it would only fulfill the first element of an estoppel claim—namely, conduct that induces reliance. It certainly does not meet the requirement that Bailey demonstrate affirmative misconduct by the Government. See Montana v. Kennedy, 366 U.S. 308, 314-15, 81 S.Ct. 1336, 1340-41, 6 L.Ed.2d 313 (1961). There, the Court considered a case in which a Government official erroneously advised the petitioner's mother that she could not return to the United States from abroad because she was pregnant, thus causing petitioner to be born outside of the United States—a fact later crucial in denying the petitioner citizenship. The Court held that this conduct fell "far short" of the affirmative conduct that might justify estoppel.

Finally, Bailey has not shown that the district court committed clear error when it found that he could not have reasonably relied upon the Government's signals in light of the many counter-signals by the Government, the magistrate judge, and the district court that forfeiture would be sought. On March 10, 1998, when the McCorkles made their initial appearance before the magistrate judge, for example, prosecutor Byron told Bailey: "In terms of whether or not the asset forfeiture unit of the U.S. Attorney's Office would agree to give money up to which they have a claim, I certainly cannot speak for that although I am happy to put counsel in contact with the appropriate authority to make that kind of representation." Thus, Byron made clear that he did not have authority to abandon a claim of forfeiture—a claim sought from the very beginning. Similarly, the magistrate judge made clear to Bailey at the bail hearing the next day that the ownership of the trust fund was disputed and potentially forfeitable when he said: "I'm sure no counsel of record would do anything to transfer away any portion of that two million dollar attorney fund ... until we've had a chance to make a determination on that." The judge ultimately found that the United States "has always actively sought forfeiture of the $2,000,000 fund" and that Bailey's claim of detrimental reliance was "not credible." This finding of fact is not clearly erroneous. See Marine Transp. Serv. Sea-Barge Group, Inc. v. Python High Perf. Marine Corp., 16 F.3d 1133, 1138 (11th Cir.1994) (noting that the constituent elements of an equitable estoppel claim are questions of fact that can be...