U.S. v. Razmilovic

• Citation: 419 F.3d 134
• Decision Date: 17 August 2005
• Docket Number: Docket No. 04-4543-CR(L).,Docket No. 04-5801-CR(CON).
• Parties: UNITED STATES of America, Appellee, v. Tomo RAZMILOVIC, David E. Nachman, Defendants, Kenneth Jaeggi, Movant-Appellant.
• Court: United States Courts of Appeals. United States Court of Appeals (2nd Circuit)

419 F.3d 134

UNITED STATES of America, Appellee, v. Tomo RAZMILOVIC, David E. Nachman, Defendants, Kenneth Jaeggi, Movant-Appellant.

Docket No. 04-4543-CR(L).

Docket No. 04-5801-CR(CON).

United States Court of Appeals, Second Circuit.

Argued: January 3, 2005.

Decided: August 17, 2005.

Steven F. Molo (Tai H. Park, Wendy E. Ackerman, on the brief), Shearman & Sterling, New York, New York, for Movant-Appellant.

Varuni Nelson, Assistant United States Attorney (Roslynn R. Mauskopf, United States Attorney for the Eastern District of New York, and Richard Weber and Richard T. Lunger, Assistant United States Attorneys, on the brief), Central Islip, New York, for Appellee.

Before: FEINBERG, WINTER, and SOTOMAYOR, Circuit Judges.

WINTER, Circuit Judge.

Kenneth Jaeggi appeals from Judge Wexler's denial of his motion to vacate an ex parte pretrial order freezing assets claimed by the government to be forfeitable proceeds of alleged securities, mail, and wire fraud offenses. We hold that 28 U.S.C. § 2461(c), enacted as part of the Civil Asset Forfeiture Reform Act of 2000 ("CAFRA"), does not authorize pretrial restraint of assets subject to criminal forfeiture. We therefore vacate the restraining order.

BACKGROUND

Jaeggi was the Senior Vice President of Finance and the Chief Financial Officer of Symbol Technologies, Inc. ("Symbol"), a publicly traded company, from May 1997 to December 2002. An 87-page indictment, filed on May 28, 2004, charged Jaeggi and other Symbol officers and executives with, inter alia, securities fraud, 15 U.S.C. §§ 78j(b), 78ff; wire fraud, 18 U.S.C. § 1343; mail fraud, id. § 1341; and conspiracy, id. § 371. The indictment also stated that the government would seek forfeiture of certain of Jaeggi's assets upon his conviction — the "proceeds" of the securities, mail, and wire fraud offenses — pursuant to 18 U.S.C. § 981(a)(1)(C) (authorizing civil forfeiture for mail, wire, and securities fraud proceeds) and 28 U.S.C. § 2461(c) (authorizing criminal forfeiture where civil forfeiture authorized).

The indictment charged Jaeggi and his codefendants with two illegal schemes. First, it alleged that between 1999 and December 2002 they manipulated Symbol's financial results to meet or exceed securities analysts' performance forecasts. Second, it alleged that the defendants participated in a "look-back scheme" in which, when exercising their stock options, they backdated the exercise date to claim a lower stock price thereby reducing the taxable gains realized by the defendants. The two schemes are alleged to have involved conspiracy and substantive offenses of securities fraud, tax evasion, and mail and wire fraud.

After filing the indictment, the government successfully moved for an ex parte order restraining specified assets belonging to Jaeggi. The court later amended that order, again ex parte, to freeze additional assets, amounting to a total value of approximately $7.5 million. The government claimed these assets were proceeds of Jaeggi's illegal activity and would be forfeitable upon his conviction.

Jaeggi moved to vacate or modify the restraining order, claiming, inter alia, that it was not authorized by Section 2461(c). The district court denied the motion.

DISCUSSION

Whether Section 2461(c) authorizes pretrial restraint of putative forfeitable property is a legal issue that we review de novo. United States v. Gotti, 155 F.3d 144, 146 (2d Cir.1998).

a) Language

In interpreting Section 2461(c), we look first to its language. "Statutory construction begins with the plain text and, if that text is unambiguous, it usually ends there as well." United States v. Gayle, 342 F.3d 89, 92 (2d Cir.2003). Section 2461(c) provides that

If a forfeiture of property is authorized in connection with a violation of an Act of Congress, and any person is charged in an indictment or information with such violation but no specific statutory provision is made for criminal forfeiture upon conviction, the Government may include the forfeiture in the indictment or information in accordance with the Federal Rules of Criminal Procedure, and upon conviction, the court shall order the forfeiture of the property in accordance with the procedures set forth in [21 U.S.C. § 853], other than subsection (d) of that section.

Section 2461(c) thus authorizes criminal forfeiture as a punishment for any act for which civil forfeiture is authorized, and allows the government to combine criminal conviction and criminal forfeiture in a consolidated proceeding.

Section 2461(c) directs that "upon conviction" an order of "forfeiture" shall be entered "in accordance with the procedures" set out in 21 U.S.C. § 853. Section 853 authorizes criminal forfeiture as a punishment for drug crimes and sets forth the procedures governing such forfeiture, the forfeitable property, and the forfeiture-related actions that are allowed. 21 U.S.C. § 853. For example, Section 853 specifies that a court "shall" order forfeiture of certain property at sentencing, 21 U.S.C. § 853(a), and that when a forfeiture order is entered, "the court shall authorize the Attorney General to seize" the forfeited property, id. § 853(g). It defines forfeitable property as, inter alia, the property used to facilitate, and proceeds of, violations of the Controlled Substances Act, 21 U.S.C. § 801 et seq. Id. § 853(a).

In forfeiture-related actions, Subsection (e) of Section 853 authorizes, post-indictment, pretrial "Protective Orders" as follows:

[T]he court may enter a restraining order or injunction, require the execution of a satisfactory performance bond, or take any other action to preserve the availability of property described in subsection (a) of this section for forfeiture under this section . . . upon the filing of an indictment or information charging a violation of this subchapter or subchapter II of this chapter for which criminal forfeiture may be ordered under this section and alleging that the property with respect to which the order is sought would, in the event of conviction be subject to forfeiture under this section

. . . .

Id. § 853(e)(1)-(1)(A).

Whether Section 853(e) is incorporated into Section 2461(c) is the principal subject of this appeal. The opposing arguments go thusly. For the government, it is argued that, because Section 2461(c) incorporates all of Section 853 except subsection (d), Section 853(e)'s pretrial restraint procedures are incorporated. The critical inference drawn is that, in specifically excluding subsection (d), Congress must have intended to include all other subsections of Section 853. [R-19] For Jaeggi, it is argued that Section 2461(c) authorizes "forfeiture" "in accordance with the procedures" set out in Section 853 only "upon conviction." There was thus no need for Congress specifically to exclude any provisions of Section 853 relating to pretrial procedures because such procedures are inapplicable to post-conviction proceedings and were not even purportedly incorporated into Section 2461(c). In contrast, there was a need to exclude Section 853(d) explicitly because it establishes a rebuttable presumption that certain property is subject to forfeiture. This presumption would apply under Section 2461(c) "upon conviction" but for Congress's specific exclusion.

We hold that the language of Section 2461(c) dictates the conclusion that it does not authorize pretrial restraint of forfeitable assets. Section 2461(c)'s use of the term "forfeiture" cannot include pretrial restraint. Forfeiture is the "divestiture of property without compensation," Black's Law Dictionary 661 (7th ed.1999). In a criminal case, it constitutes punishment for a crime and necessarily occurs post-conviction. See Libretti v. United States, 516 U.S. 29, 38-39, 116 S.Ct. 356, 133 L.Ed.2d 271 (1995); Fed.R.Crim.P. 32.2(b)(3) (order of forfeiture "must be made a part of the sentence and be included in the judgment"). The distinction between forfeiture and pretrial restraint is no technical play on words. Pretrial restraint is a severe remedy independent of a right to damages or property following a finding of liability. Indeed, the Supreme Court has dubbed pretrial restraint as a "`nuclear weapon' of the law." Grupo Mexicano de Desarrollo, S.A. v. Alliance Bond Fund, Inc., 527 U.S. 308, 332, 119 S.Ct. 1961, 144 L.Ed.2d 319 (1999) (pretrial restraint of debtor's assets in civil proceeding).

The language of Section 2461(c), read as a whole, reinforces this interpretation. It permits two things: inclusion of forfeiture allegations in certain criminal indictments "in accordance with" the Federal Rules of Criminal Procedure, and "forfeiture. . . upon conviction . . . in accordance with" the procedures of Section 853, except for subsection (d). The "upon conviction" language not only recognizes the fact that forfeiture is an act that occurs after conviction but also serves to specify which procedures are to be used. At the indictment stage, the Federal Rules of Criminal Procedure apply; "upon conviction," the procedures of Section 853 are used. The only plausible reading of Section 2461(c) therefore is that it incorporates all of the Federal Rules' procedures relevant to forfeiture allegations in indictments, and all of Section 853's procedures relevant to post-conviction forfeiture, except subsection (d).¹ Section 853(e)'s procedures relating to pretrial restraint do not relate to post-conviction forfeiture and never were incorporated, so Congress had no need to exclude them.

To the extent that any forfeiture-related procedures apply under Section 2461(c) during the period between indictment and conviction, they must be found in the Federal Rules of Criminal Procedure. The Rules, however, do not authorize pretrial restraint of assets subject to forfeiture. They address only the inclusion of forfeiture allegations in indictments, notice of potential forfeiture during plea colloquies, post-conviction preliminary orders of forfeiture, and final...