U.S. v. Saccoccia

• Decision Date: 22 December 2003
• Docket Number: No. 01-2170.,No. 01-2393.,No. 01-2160.,01-2160.,01-2170.,01-2393.
• Citation: 354 F.3d 9
• Parties: UNITED STATES of America, Appellee, v. Stephen A. SACCOCCIA, et al., Defendants, Appellants. United States of America, Appellee, v. Stephen A. Saccoccia, et al., Defendants, Appellants. United States of America, Appellee, v. Stephen A. Saccoccia, et al., Defendants, Appellants.
• Court: U.S. Court of Appeals — First Circuit

354 F.3d 9

UNITED STATES of America, Appellee, v. Stephen A. SACCOCCIA, et al., Defendants, Appellants.

United States of America, Appellee, v. Stephen A. Saccoccia, et al., Defendants, Appellants.

United States of America, Appellee, v. Stephen A. Saccoccia, et al., Defendants, Appellants.

No. 01-2160.

No. 01-2170.

No. 01-2393.

United States Court of Appeals, First Circuit.

Heard March 5, 2003.

Rehearing Denied in No. 03-2393 December 2, 2003.

Decided December 22, 2003.

Lauren E. Jones, with whom Mark L. LaBollita and Jones Associates were on brief for appellants Hill and O'Donnell.

Stephen J. Finta, with whom Law Offices of Stephen J. Finta, P.A. was on brief for appellant Finta.

Michael P. Iannotti, Assistant United States Attorney, with whom Margaret E. Curran, United States Attorney, and Michael E. Davitt, Deputy Chief, United States Department of Justice, were on brief for appellee.

Before HOWARD, Circuit Judge, CAMPBELL and CYR, Senior Circuit Judges.

CYR, Senior Circuit Judge.

Three attorneys who represented Stephen A. Saccoccia — a convicted drug dealer and money launderer — appeal from a district court order directing that they forfeit some of their attorney fees to the government.

I BACKGROUND

The grand jury returned an indictment against Stephen A. Saccoccia in November 1991, charging him with one count of conspiracy under the Racketeering Influenced and Corrupt Organizations Act, 18 U.S.C. § 1963(d) (RICO), as well as several counts of laundering proceeds from an illegal drug trafficking operation. See United States v. Saccoccia, 58 F.3d 754 (1st Cir. 1995). The government also sought the forfeiture of all the business and personal property directly or indirectly derived from Saccoccia's racketeering activities, explicitly including almost $137,000,000 in currency, and, in the alternative, sought the surrender of all non-tainted property of equivalent value (if any) should Saccoccia's tainted property have become unavailable. See 18 U.S.C. § 1963(a), (m). The district court promptly enjoined the transfer of the forfeitable property designated in the indictment. See id. § 1963(d)(1)(A).

Saccoccia retained Jack Hill, Esquire, and Kenneth O'Donnell, Esquire, to defend him in the RICO prosecution; he retained Stephen Finta, Esquire, to defend him against money laundering charges pending in California. We turn now to a more detailed description of the district court proceedings below.

Beginning in March 1992, under rather suspicious circumstances, Saccoccia caused $504,985 to be delivered to Hill, $410,000 to O'Donnell, and $469,200 to Finta, all for legal fees. Approximately one year later, Saccoccia was convicted and ordered to forfeit the $137,000,000 in currency specified in the indictment. We subsequently affirmed both the conviction and the forfeiture. Saccoccia, 58 F.3d at 754; see also United States v. Hurley, 63 F.3d 1 (1st Cir.1995). Once the government discovered that Saccoccia had paid large legal fees to Hill, O'Donnell, and Finta, it submitted a motion to compel them to turn over the fees as property subject to forfeiture.

The district court granted the motion to compel, United States v. Saccoccia, 165 F.Supp.2d 103 (D.R.I.2001), holding that (i) the government established that the legal fees paid to the appellants must have derived from Saccoccia's racketeering activity, given that Saccoccia had no legitimate sources of income, and the legal fees were paid "under especially suspicious circumstances" (viz., by "covert deliveries of large quantities of cash, made by anonymous intermediaries"), id. at 111-12; (ii) appellants met their burden of proving that they had no reasonable cause to believe that the monies Saccoccia used to pay their fees, prior to Saccoccia's conviction, were subject to forfeiture, given that an Assistant United States Attorney's pre-conviction assurances to appellants — that the government would not seek forfeiture of their legal fees — implied some government uncertainty regarding whether Saccoccia might possess sufficient non-tainted assets with which to pay his attorneys, id. at 112 (citing 18 U.S.C. § 1963(c)); (iii) following the trial at which Saccoccia was convicted, appellants could not have held a reasonable belief that Saccoccia's assets were not subject to forfeiture, given that the trial record made it clear that virtually all of Saccoccia's assets had been derived through illegitimate means, id. at 112-13; (iv) appellants were ordered to turn over only the portion of their legal fees received following Saccoccia's conviction, id. at 113; and (v) the government could not reach their pre-conviction legal fees by means of the district court's contempt power due to the fact that the government had initiated no such proceeding and the district court had already determined that appellants lacked reasonable cause to believe that the pre-conviction legal fees were subject to forfeiture, hence appellants could not have violated the post-indictment injunction willfully, id. at 113-14.

Appellants now challenge the district court order which determined that their post-conviction legal fees are subject to forfeiture.¹

II DISCUSSION

Appellants Hill and O'Donnell contend, as they did in opposing the government's motion to compel below, that the forfeiture statute does not permit the government to reach the legal fees they received from Saccoccia, due to the fact that those fees have been expended. We subject statutory interpretations to plenary review. See Bryson v. Shumway, 308 F.3d 79, 84 (1st Cir.2002).²

The operative statutory language requires that a defendant forfeit "tainted" property, viz., property (i) acquired by committing the offense, and (ii) "constituting, or derived from, any proceeds ... obtained, directly or indirectly" from its commission. 18 U.S.C. § 1963(a)(1),(3).³ Once an indictment issues, the district court may enjoin the transfer of all property "subject to forfeiture under [section 1963]." Id. § 1963(d)(1). In the event that tainted property is unavailable for forfeiture (as when it has been transferred to a third party),⁴ the government may recover "substitute" property, viz., defendant's other untainted property of equivalent value. See id. § 1963(m); United States v. Lester, 85 F.3d 1409, 1411 n. 3 (9th Cir. 1996) ("`[S]ubstitute property,' ... by its very nature is `not connected to the underlying crime.'") (citation omitted).⁵

The operative statute enables the government to recover from the defendant "tainted" or "substitute" property in a defendant's possession, or "tainted" property held by a third party by virtue of a voidable fraudulent transfer. Id. § 1963(c).⁶ A third party may petition the court for a hearing to determine the validity of its legal interest in tainted property, id. § 1963(l)(2), and may defeat a forfeiture petition by establishing, inter alia, that it is a bona fide purchaser for value, "reasonably without cause to believe" that the property was subject to forfeiture at the time it was purchased, id. § 1963(l)(6)(B).

Nonetheless, the "substitute property" provision is exclusively applicable to "any other property of the defendant." Id. § 1963(m) (emphasis added). The statutory language plainly does not afford an avenue through which the government may reach a third party's untainted assets as a substitute for tainted assets which the third party had already transferred prior to the date of forfeiture. See Bryson, 308 F.3d at 84 ("If the meaning of a statute is clear, we enforce that meaning."); United States v. Meade, 175 F.3d 215, 219 (1st Cir.1999) (noting that when "the plain language of a statute unambiguously reveals its meaning, and the revealed meaning is not eccentric, courts need not consult other aids to statutory construction."); see also Lohnes v. Level 3 Communications, Inc., 272 F.3d 49, 61 (1st Cir.2001) ("[T]he maxim expressio unius est exclusio alterius instructs that, `when parties list specific items in a document, any item not so listed is typically thought to be excluded.'") (citation omitted).⁷

The government does not contend that it can recover the "tainted" property already transferred to Hill and O'Donnell by Saccoccia (i.e., the in-cash legal fees), nor does it maintain that either Hill or O'Donnell presently holds any property fairly traceable to, or acquired with the proceeds of, their legal fees. Rather, it argues that its right to recover derives from the knowing violations, by Hill and O'Donnell, of the post-indictment injunction entered pursuant to § 1963(d)(1), which constrained Saccoccia and his counsel from transferring any funds subject to forfeiture under subsection 1963(a). Cf. In re Moffitt, Zwerling & Kemler, 864 F.Supp. 527, 530-31 (E.D.Va.1994) (finding assets non-forfeitable where transfers to counsel occurred prior to injunction); id. at 544 n. 46 ("Where an attorney accepts payment in violation of such a restraining order, the government can recover regardless of the fact that the attorney has dissipated the funds."), rev'd on other grounds, 83 F.3d 660 (4th Cir.1996).

The absence of language in subsection 1963(m), relating to the forfeitability vel non of a third party's substitute assets, simply forecloses one form of remedy, not all. Relief from a willful violation of a subsection 1963(d)(1) injunction may be obtained in a contempt proceeding. See United States v. Kirschenbaum, 156 F.3d 784, 795 (7th Cir.1998). On the other hand, the government's initiation of contempt proceedings would significantly alter its burden in litigation. Whereas subsections 1963(c) and (l)(6) require the third party to establish that it was without reasonable cause to believe that the transferred property was subject to forfeiture under subsection 1963(a), in a criminal or civil contempt proceeding the government would bear the burden of persuasion on that issue. In a criminal contempt proceeding, moreover, the government's burden of proof would be...