U.S. v. Reiner

Decision Date31 October 2005
Docket NumberNo. CRIM. 04-127PH01.,CRIM. 04-127PH01.
Citation397 F.Supp.2d 101
PartiesUNITED STATES of America v. Gary H. REINER, Defendant
CourtU.S. District Court — District of Maine

George T. Dilworth, Assistant United States Attorney, District Of Maine, F. Todd Lowell, Assistant United States Attorney, District Of Maine, Portland, for United States of America.

James D. Rosenberg, Steven M. Gordon, Concord, NH, Alan G. Stone, Skelton, Taintor & Abbott, Auburn, for Gary H. Reiner, Defendant.

MEMORANDUM IN SUPPORT OF PRELIMINARY ORDER OF FORFEITURE

HORNBY, District Judge.

I have previously ruled that Gary Reiner has no right to jury trial on the government's request for an in personam money judgment of forfeiture. United States v. Reiner, 393 F.Supp.2d 52 (D.Me.2005). Here, I make my findings of fact and conclusions of law determining the amount of the money judgment. See Fed.R.Crim.P. 23, 32.2(b)(1).

I. PROCEDURAL BACKGROUND

On September 30, 2005, a jury convicted Reiner of an interstate prostitution conspiracy (Count 1);1 violation of the Travel Act (Count 2);2 inducement of interstate travel to engage in prostitution (Count 3);3 and conspiracy to commit money laundering (Count 7).4 At the end of the trial, the government narrowed its requested forfeiture relief to a personal money judgment against Reiner — in the words of the Superseding Indictment, a "sum of money equal to the total amount of money [Reiner] obtained as proceeds from" the offenses for Counts 1, 2, and 3,5 and a "sum of money equal to the total amount of money involved in" the conspiracy offense for Count 7.6

At a post-verdict forfeiture hearing on September 30, 2005, I invited both sides to present evidence on the forfeiture issues. The government called one witness — Internal Revenue Service Agent Giguere — and submitted three exhibits. The exhibits summarized the methodology Agent Giguere used to calculate the amounts the government is seeking. Reiner's lawyers called no witnesses and objected to the admission of one exhibit that corresponded to the forfeiture request for Count 3. I adjourned the hearing, allowing the parties to confer and the defendant to determine whether he wished to put on additional evidence and/or argument based upon the Kittery Health Club, Inc.'s7 records (at least some of which had been admitted at trial).

On October 14, 2005, I held an on-the-record telephone conference with the lawyers to ascertain whether there was going to be additional evidence, and whether there was a need for any further briefing of the legal issues. All the lawyers agreed that there was no need for additional evidence and that they had fully briefed the legal issues.8 The government explained the differing start dates used in its calculations of the forfeiture amounts for the Count 1 conspiracy (August 23, 2000) and the Count 7 conspiracy (January 4, 1999).9 Reiner's lawyers responded that they believed the dates used by the government were "correct." I asked for clarification of what they meant by "correct." Reiner's lawyers responded that if I should find Reiner responsible, the dates are proper in light of the government's explanation that (1) the beginning date for forfeiture calculations under Counts 1 and 2 is determined by the statute's effective date, and (2) the beginning date for forfeiture calculations under Count 7 is determined by the available bank records. The parties still requested that I make a factual finding on the amount of forfeiture for Count 3.

The only question that remains, then, is the amount of forfeiture to order on each count. According to Fed.R.Crim.P. 32.2(b)(1): "If the government seeks a personal money judgment, the court must determine the amount of money that the defendant will be ordered to pay."

II. ANALYSIS
(A) Count 1

The government asserts that Reiner obtained $3,927,392.40 in proceeds under the interstate prostitution conspiracy conviction. 18 U.S.C. § 371. See Superseding Indictment ¶ 9(b); Gov't Ex. F-1. "Any property, real or personal, which constitutes or is derived from proceeds traceable to a violation of ... any offense constituting `specified unlawful activity'... or a conspiracy to commit such [an] offense" is subject to civil forfeiture. 18 U.S.C. § 981(a)(1)(C). If it is subject to civil forfeiture, it is also subject to criminal forfeiture, 28 U.S.C. § 2461(c), the relief the government requests here.

In United States v. Candelaria-Silva, 166 F.3d 19, 42 (1st Cir.1999), the First Circuit specifically approved money judgment forfeitures as one of "several forms" a criminal forfeiture can take, rather than limiting forfeiture relief to specific property or traceable proceeds.10 Interpreting a "proceeds" forfeiture statute much like that for Count 1,11 the First Circuit held that "the government is entitled to an in personam judgment against the defendant for the amount of money the defendant obtained as proceeds of the offense." Id. (emphasis supplied). The First Circuit has made clear that "proceeds" means gross revenue, not just profits. United States v. Hurley, 63 F.3d 1, 21 (1st Cir.1995) ("[T]he broader definition of `proceeds' seems to us a rather easy call"); United States v. Iacaboni, 363 F.3d 1, 4 (1st Cir.2004) ("We have previously rejected Iacaboni's interpretation of the term `proceeds' [as net profits] in the RICO forfeiture context. Iacaboni has offered no rationale for abandoning that approach here [for forfeiture under 18 U.S.C. § 982(a)(1).]") (internal citation omitted). The question for me in deciding the Count 1 forfeiture, therefore, is what amount the government has established that Reiner "obtained as proceeds" from his violation of the Count 1 interstate prostitution conspiracy offense. See Candelaria-Silva, 166 F.3d at 42. In United States v. Hurley, the First Circuit held that proceeds are "obtained" by a defendant even "when it has merely been held in custody by that individual and has been passed along to its true owner." 63 F.3d at 21.

The standard of proof for the Count 1 forfeiture, based upon 28 U.S.C. § 2461(c), is preponderance of the evidence. Section 2461 incorporates all the procedural sections of the Controlled Substances Act, 21 U.S.C. § 853 (other than subsection (d) relating to rebuttable presumptions created at trial in narcotics cases). The First Circuit has held that the standard of proof for forfeitures under section 853 is preponderance of the evidence. United States v. Keene, 341 F.3d 78, 85-86 (1st Cir.2003) (refusing to apply the burden of proof requirements of Apprendi v. New Jersey, 530 U.S. 466, 120 S.Ct. 2348, 147 L.Ed.2d 435 (2000), to criminal forfeitures, and holding that the preponderance "evidentiary standard used to impose the forfeiture was proper") (citing United States v. Rogers, 102 F.3d 641, 647 (1st Cir.1996)) (observing with approval that "almost every circuit that has pronounced on the issue has held the standard of proof as to forfeiture issues under section 853 ... is a preponderance of the evidence."). I therefore apply that standard to section 28 U.S.C. § 2461(c).

IRS Agent Giguere testified that he derived the government's requested forfeiture amount for Count 1 by calculating the total deposits going into the Club's Ocean National Bank Business Operating Account. See also Gov't Ex. F-1. He limited his calculations to the time period between August 23, 2000, the effective date of 28 U.S.C. § 2461(c), and June 9, 2004, the date federal agents raided and shut down the Club. Reiner has not challenged the accuracy of Giguere's calculations.

What Reiner does challenge is the assertion that these deposits are all proceeds of illegal activity. I reject the challenge. The purpose of this so-called "health club" was prostitution. The deposits all derived from cash and credit card sales from the Club's operations, or payments by the prostitutes to the Club for the privilege of working there — all illegal proceeds. The overwhelming evidence established that customers, mostly from out of state, paid a $70 entrance fee (either in cash, or by credit card payments, stipulated at trial to have been transferred via interstate channels). Then they proceeded to a lounge area to select one of several available "attendants." The customer and the attendant next went to a private room where they negotiated payment — in the form of a cash tip paid directly to the attendant — for sexual favors. The fact that a few customers were content to have only a massage does not alter the overall purpose of the operation. The massage "licenses" the attendants obtained and their skimpy "training" in the art of massage,12 just like the Club's seemingly legitimate locker room, whirlpool, spa, and entrance fee, were all just a front so that the health club could remain open as a house of illegal prostitution. The Club's highly sexually suggestive advertisements strongly support this conclusion. Testimony at trial revealed that Reiner had a role in the hiring and licensing of the attendants, nearly all of whom lived out of state and traveled to the Club daily to engage in prostitution; that Reiner met and spoke regularly with their pimps, including Lance Williams, particularly when customers complained about a prostitute; and that Reiner worked with others at the Club to design an advertising scheme targeted specifically at drawing more out-of-state customers.

Based on this and other evidence presented at trial, the jury found beyond a reasonable doubt that Reiner knowingly and willingly conspired with Lance Williams, Cheryl A. Stilwell, the Club, and others to use interstate commerce facilities to promote prostitution, to transport persons in interstate commerce with the intent that they engage in prostitution, and/or to induce and entice persons to travel in interstate commerce to engage in prostitution. In short, the interstate prostitution conspiracy for which Reiner was convicted was the "cause in fact" of the acquisition of the deposited Club funds....

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3 cases
  • U.S. v. Black
    • United States
    • U.S. District Court — Northern District of Illinois
    • December 10, 2007
    ...aiders and abettors may be jointly and severally liable with their principals for forfeiture awards, see United States v. Reiner, 397 F.Supp.2d 101, 108 (D.Me. 2005), as a derivative of the "well engrained [principle] in the law that one who aids or abets the commission of an act is as resp......
  • U.S. v. Nicolo
    • United States
    • U.S. District Court — Western District of New York
    • February 17, 2009
    ...the money laundering offense." Schlesinger, 396 F.Supp.2d at 271 (S.D.N.Y.2005) (collecting cases). See also United States v. Reiner, 397 F.Supp.2d 101, 112 (D.Me.2005) (noting authority that "the standard for determining what funds are `involved in' a money laundering offense is less deman......
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    • United States
    • Maine Superior Court
    • May 20, 2008

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