United States v. Aguasvivas–Castillo

• Decision Date: 17 January 2012
• Docket Number: No. 10–1460.,10–1460.
• Citation: 668 F.3d 7
• Parties: UNITED STATES, Appellee, v. Bepsy O. AGUASVIVAS–CASTILLO, Defendant, Appellant.
• Court: U.S. Court of Appeals — First Circuit

668 F.3d 7

UNITED STATES, Appellee,

v.Bepsy O. AGUASVIVAS–CASTILLO, Defendant, Appellant.

No. 10–1460.

United States Court of Appeals, First Circuit.

Heard Nov. 9, 2011.Decided Jan. 17, 2012.

Anita Hill Adames, for appellant.

Myriam Y. Fernandez–Gonzalez, with whom Rosa Emilia Rodriguez–Velez, United States Attorney, Nelson Pérez–Sosa, Assistant United States Attorney, and Thomas F. Klumper, Assistant United States Attorney, were on brief, for appellee.

Before LYNCH, Chief Judge, STAHL and THOMPSON, Circuit Judges.

LYNCH, Chief Judge.

Bepsy Aguasvivas–Castillo, the owner of a supermarket chain in Puerto Rico, was convicted on one count of conspiracy to commit food stamp fraud and one count of money laundering. He had engaged in and enlisted his family in an illegal scheme in which the supermarkets he owned and operated provided cash for food stamps beyond Puerto Rico's permissible limits. Some fourteen defendants were originally charged. Several, including some of Aguasvivas–Castillo's family members, pled guilty and testified against him.

All told, the supermarkets' illegal receipts from the fraud, conservatively estimated to be over $4 million, were intermingled with over $20 million in food stamp funds. Aguasvivas–Castillo was sentenced to 108 months in prison and ordered to forfeit the amount of $20 million. He appeals only from his sentence, arguing that two sentencing guideline enhancements were erroneously applied, and he challenges the amount of the forfeiture order under the Excessive Fines Clause of the Eighth Amendment. We affirm the district court's application of the sentence enhancements as well as its forfeiture order.

I.

The Food Stamp Program is administered by the U.S. Department of Agriculture's Food and Nutrition Service. Each year, the Food and Nutrition Service assigns a block grant of approximately $1.5 billion to Puerto Rico's Administration for Socioeconomic Development of Families (ASEDF) to provide nutrition assistance to low income families. ASEDF administers Puerto Rico's Program of Nutrition Assistance (NAP), which awards food stamps to families and individuals on a monthly basis in an amount based on the family's number of dependents and overall income.

NAP deposits the monthly food stamp amount for each family or individual onto an Electronic Benefit Transfer (EBT) debit card, which can then be used to purchase food at NAP-certified establishments. Food stamp recipients in Puerto Rico are permitted to withdraw 25% of the amount deposited on their EBT-debit cards as cash for purchases of food at other establishments, but they may not use the remaining 75% to get cash. This restriction was implemented by Puerto Rico and the U.S. Department of Agriculture to try to reduce instances of fraud and error in Puerto Rico's food stamp program. See Food and Nutrition Serv., U.S. Dep't of Agric., Implementing Supplemental Nutrition Assistance Program in Puerto Rico: A Feasibility Study 71 (2010) [hereinafter “ Implementing SNAP in Puerto Rico ”]; Office of Mgmt. and Budget, Detailed Information on the Nutrition Assistance for Puerto Rico Assessment ¶ 3.7 (2005).

Not all food retailers in Puerto Rico are NAP-certified, so one purpose of the 25% cash allowance is to allow participants without ready access to certified retailers a way to purchase food elsewhere. Implementing SNAP in Puerto Rico 71. While the program requires that the cash be used only to purchase eligible food items, actual use of the cash is unmonitored. Id.

Businesses wishing to obtain certification to accept food stamps must file an application and submit various documents including a criminal record certificate, use permits, municipal patents, a Treasury Department Certificate of Filed Income Tax Returns for the last five years, and a certificate of incorporation.

When food stamp recipients purchase food at a business that has been certified, the money from their EBT-debit card is automatically transferred to the business's account. This electronic transfer is managed by Evertec Inc., a subcontractor hired by the government to manage the money transfers and store the account data of food stamp participants and certified businesses.

Aguasvivas–Castillo was the president, owner, and sole shareholder of Aguasvivas Food Market, Inc. (AFMI) and Aguasvivas Borinquen, Inc. (ABI). AFMI owned a grocery store located in San Juan, Puerto Rico, and another in Canóvanas, Puerto Rico. ABI owned an additional grocery store in San Juan, Puerto Rico. In 2001, Aguasvivas–Castillo applied for NAP-certification for each of the three supermarkets, and received the certifications in September of 2001. From that point until his indictment in 2007, he owned and operated the three NAP-certified stores, at which food stamp participants could use their EBT-debit cards to obtain food and cash. The fraudulent scheme started as soon as the certifications issued and only slowed down after the fraud investigation began and a search warrant was served in 2006.

Aguasvivas–Castillo exercised control over the three stores' finances, cash flows, and employment decisions. He also exercised at least some managerial control over store operations and received regular reports from the stores' managers as to sales, deposits, and other financial operations in the three stores.

In 2007, a grand jury indicted Aguasvivas–Castillo and thirteen other defendants for conspiracy to commit food stamp fraud (Count 1), in violation of 7 U.S.C. § 2024(b) and 18 U.S.C. § 371, and for knowingly conducting and attempting to conduct financial transactions affecting interstate commerce involving the proceeds of unlawful activity (Count 2), in violation of 18 U.S.C. §§ 1956(a)(1)(A)(i) and 1956(a)(1)(B)(i), and 2. The grand jury indicted all fourteen defendants, including Aguasvivas–Castillo, for committing food stamp fraud; it also indicted Aguasvivas–Castillo and four other defendants for money laundering. The indictment also sought an asset forfeiture of $20 million under each substantive count (Counts 3 and 4). The jury convicted Aguasvivas–Castillo on all counts.

At trial, the government proved that during the length of the four and a half year conspiracy, food stamp recipients used their EBT-debit cards to obtain cash in excess of the 25% limit at Aguasvivas–Castillo's three stores. In exchange for this illegal service, Aguasvivas–Castillo and his co-conspirators profited: they collected a commission of approximately 20–25% of every $100 cashed. Their commissions totaled, at a minimum, $4,440,744.29.

Aguasvivas–Castillo waived the right to have the asset forfeiture determinations made by the jury and asked the court to make the final forfeiture determinations. The court held the forfeiture hearing on September 19, 2008.

The government argued that under 18 U.S.C. §§ 981 and 982, the total forfeitable amount was at least $20 million. Under § 982, the court “shall order that [a person convicted under 18 U.S.C. § 1956] forfeit to the United States any property, real or personal, involved in such offense, or any property traceable to such property.” 18 U.S.C. § 982(a)(1). The government argued that Aguasvivas–Castillo should forfeit $20 million under 18 U.S.C. § 982 because that was the total sum involved in the fraud.

In fact, the stores received $28,038,985.98 (not $20 million) in government food stamp funds over the course of the conspiracy, which Aguasvivas–Castillo placed in six different accounts. Aguasvivas–Castillo intermingled and concealed the fraudulent food stamp proceeds within the total sum of $28 million in these accounts, in order to shield the fraud. Throughout the conspiracy, Aguasvivas–Castillo regularly withdrew cash from these accounts to operate the cash-intensive food stamp fraud/money laundering venture.

Aguasvivas–Castillo argued at the forfeiture hearing that because there was no way to quantify the total fraudulent amount, he should not be ordered to forfeit $20 million. He also initially argued that the fraudulent amount was $24,310 at most.

After permitting the parties to submit additional briefing, the district court entered a preliminary order of forfeiture on October 30, 2008. The court found that the United States had proven by a preponderance of the evidence that the amount of $20 million constituted “proceeds traceable to the conspiracy to commit food stamp fraud ... [and] money laundering,” and therefore was subject to forfeiture.

In his February 23, 2009, sentencing memorandum, Aguasvivas–Castillo objected to this amount and requested a downward sentence departure and/or variance. He argued that the allegedly criminally-derived funds amounted to no more than $334,493 ¹ and that any money laundering was “incidental and therefore, de minimis ” to the scheme.

The January 27, 2009, pre-sentence report (PSR) recommended that Aguasvivas–Castillo's convictions on Counts 1 and 2 be grouped together pursuant to U.S.S.G. § 3D1.2(d) since both offenses were based on a common loss amount, and that Count 2 be used to determine the calculation under U.S.S.G. § 3D1.3(b) because it produced the highest offense level. It recommended a base offense level of eight under § 2S1.1(a)(2), plus a twenty-level increase under § 2B1.1 based on the total loss amount; a two-level increase under § 2S1.1(b)(2)(B), because Aguasvivas– Castillo was convicted of 18 U.S.C. § 1956; a four-level increase pursuant to U.S.S.G. § 2S1.1(b)(2)(C), because Aguasvivas–Castillo was in the business of laundering money; and a four-level increase under § 3B1.1(a), because Aguasvivas–Castillo was a leader and organizer in a fraud which involved five or more participants or was otherwise extensive. Thus, with a total offense level of thirty-eight, and a Criminal History Category of I, the PSR calculated Aguasvivas–Castillo's guidelines range as 235 to 293 months of imprisonment.

Aguasvivas–Castillo filed a supplemental objection to the PSR and a motion for...