United States v. Channon

• Decision Date: 01 September 2020
• Docket Number: No. 19-2029,No. 19-2028,19-2028
• Citation: 973 F.3d 1105
• Parties: UNITED STATES of America, Plaintiff - Appellee, v. Brandi CHANNON, Defendant - Appellant. United States of America, Plaintiff - Appellee, v. Matthew Channon, Defendant - Appellant.
• Court: U.S. Court of Appeals — Tenth Circuit

973 F.3d 1105

UNITED STATES of America, Plaintiff - Appellee,

v.Brandi CHANNON, Defendant - Appellant.

United States of America, Plaintiff - Appellee,

v.Matthew Channon, Defendant - Appellant.

No. 19-2028

No. 19-2029

United States Court of Appeals, Tenth Circuit.

FILED September 1, 2020

Katayoun A. Donnelly, Azizpour Donnelly LLC, Denver, Colorado, for Defendant-Appellant Brandi Channon.

James L. Hankins, Edmond, Oklahoma, for Defendant-Appellant Matthew Channon.

C. Paige Messec, Assistant United States Attorney (John C. Anderson, United States Attorney, with her on the brief), Albuquerque, New Mexico, for Plaintiff-Appellee.

Before BRISCOE, KELLY, and CARSON, Circuit Judges.

CARSON, Circuit Judge.

At first glance, a district court's order of forfeiture and its order of restitution may appear to be a double punishment to a defendant—especially when the district court orders a defendant to pay forfeiture and restitution in the same amount. But forfeiture and restitution are distinct remedies. Restitution exists to make victims whole. Forfeiture, on the other hand, exists to punish those who commit crimes. In this case, Defendants fraudulently obtained over $100,000 in store credit, redeemed those credits for merchandise and prepaid debit cards, and then sold that same merchandise on the internet.

Unsurprisingly, no one disputes how to calculate the value of the loss to the retailer—the loss equals the value of the fraudulently obtained merchandise. But what is Defendants’ gain? Is it the value of the fraudulently obtained merchandise? Or is it solely the profit Defendants received from selling the merchandise? And do Defendants have a forfeitable gain if they sell the merchandise for less than market value?

In some cases, a defendant either does not resell fraudulently obtained merchandise or does so at a discount and thus has no profit above the value of the merchandise. To address that scenario, we hold that a district court may base a judgment's forfeiture amount on the value of the fraudulently obtained merchandise at the time a defendant acquired it. We further hold that a district court may not reduce or eliminate criminal forfeiture because of restitution. Finally, we reaffirm our holding that in personam money judgments representing the amount of unlawful proceeds are appropriate under the criminal forfeiture statutes. United States v. McGinty, 610 F.3d 1242, 1245 (10th Cir. 2010). We exercise jurisdiction under 28 U.S.C. § 1291 and affirm the district court's forfeiture order.

I.

Defendants—a married couple—opened numerous rewards accounts at OfficeMax using fictitious names and addresses. They fraudulently claimed other customers’ purchases as their own to generate undeserved rewards through OfficeMax's customer loyalty program. As part of the scheme, Defendants also violated the terms of the reward program by using various accounts to sell more than 27,000 used ink cartridges to OfficeMax in exchange for OfficeMax rewards. Defendants’ scheme lasted twenty-one months. In that time, they redeemed $105,191 in OfficeMax rewards.

A jury convicted Defendants of wire fraud and conspiracy to commit wire fraud relating to their scheme to defraud OfficeMax in violation of 18 U.S.C. §§ 1343 and 1349. At sentencing, after an evidentiary hearing, the district court ordered Defendants to pay $96,278 in restitution to OfficeMax and entered a separate forfeiture money judgment jointly and severally against Defendants in the amount of $105,191. Defendants appealed. In their first appeal, Defendants argued, among other things, that the district court erred when it entered a forfeiture money judgment without proving the $105,191 constituted, or was derived from, proceeds traceable to the wire fraud. Specifically, Defendant Matthew Channon posited that the government made no attempt to trace the OfficeMax rewards to cash. The government, on the other hand, contended that they proved Defendants fraudulently acquired OfficeMax rewards with a face value of $105,191, and that Defendants exchanged that credit for $105,191 in actual merchandise. At oral argument in their first appeal, Defendants spent their entire argument regarding forfeiture disputing the amount of forfeiture the district court ordered. Specifically, Defendant Brandi Channon's attorney argued that if a defendant steals something worth $50,000, but sells it for $3,000, the gain to that defendant, and thus the proper amount of forfeiture, is $3,000, not $50,000.

We upheld the district court's admission of certain challenged exhibits but remanded for further proceedings on the money judgment of forfeiture in light of the Supreme Court's decision in Honeycutt v. United States, ––– U.S. ––––, 137 S. Ct. 1626, 198 L.Ed.2d 73 (2017). Honeycutt held, among other things, that the substitute-asset provision of the Comprehensive Forfeiture Act of 1984, 21 U.S.C. § 853(p), provides the only method for the forfeiture of untainted property; that is, property not flowing from or used in the crime itself. Id. at 1632. At the time, we stated:

Defendants last argue that the government failed to meet its burden to prove the amount forfeited ($105,191) was traceable to the offense of wire fraud. We have held that wire fraud proceeds are subject to forfeiture under 18 U.S.C. § 981(a)(1)(C) and 28 U.S.C. § 2461. SeeUnited States v. Courtney, 816 F.3d 681, 685 (10th Cir. 2016). The property subject to forfeiture includes "[a]ny property, real, or personal, which constitutes or is derived from proceeds traceable to [the] violation." 18 U.S.C. § 981(a)(1)(C). The substitute-asset provision, 21 U.S.C. § 853(p), provides the only method for the forfeiture of untainted property. Honeycutt v. United States, ––– U.S. ––––, 137 S. Ct. 1626, 1633, 198 L.Ed.2d 73 (2017).

The government concedes a remand to conform the money judgment to the requirements of § 853(p) may be necessary. The government explains that going forward it will seek only to enforce a forfeiture money judgment through the substitute-asset provisions of § 853(p) and will seek to amend the forfeiture order under Fed. R. Crim. P. 32.2(e). Accordingly, we remand so the district court may conduct further proceedings on this issue.

United States v. Channon, 881 F.3d 806, 812 (10th Cir. 2018).

On remand, Defendant Matthew Channon sought another evidentiary hearing on the money judgment. Defendants argued that the district court incorrectly calculated the forfeiture amount and had to determine the amount of profit they received through their fraudulent scheme. The government objected to the motion, contending that our mandate "left that determination untouched." The district court did not hold a second evidentiary hearing. Instead, it amended its order, clarifying that if the government seeks forfeiture of substitute-property—i.e., untainted property when the tainted property is unavailable—it must satisfy § 853(p) ’s requirements at that time. Defendants again appealed the district court's forfeiture order.

II.

In this second appeal, Defendants fault the district court for simply amending the judgment to clarify that the government must satisfy the requirements of § 853(p) when seeking forfeiture of substitute property. Defendants assert that our mandate required an evidentiary hearing on the proper forfeiture amount because the government failed to prove the amount of profit Defendants realized as a result of their scheme. Defendants further contend the district court failed to make specific findings as to what tainted assets each Defendant obtained as a result of their criminal activity, whether any need existed for substitution of untainted assets for the tainted assets, and whether the value of the substituted asset is equal to or less than the value of unavailable tainted assets. Finally, they assert that Supreme Court precedent foreclosed the district court from holding Defendants jointly and severally liable for the entire forfeiture judgment.

We first examine the language of our prior mandate, looking to whether the district court acted within its discretion in failing to hold an evidentiary hearing after remand. We then turn to the district court's forfeiture order. For the reasons set forth below, we conclude that the district court did not abuse its discretion in refusing an evidentiary hearing. We further hold that the district court properly entered the money judgment in the amount of $105,191 and that the district court did not err in imposing joint and several liability against Defendants. Finally, we hold that the government may satisfy § 853(p) ’s substitute-asset requirements at the time it seeks forfeiture of substitute assets.

A.

We first address the parties’ disagreement regarding the scope of our prior mandate. Defendants believe our mandate required the district court to hold an evidentiary hearing while the government contends that the district court had the discretion to hold a hearing but did not have an obligation to begin anew. We agree with the government.

Under the law of the case doctrine, "once a court decides an issue, the same issue may not be relitigated in subsequent proceedings in the same case." Harte v. Bd. of Comm'rs of Cty. of Johnson, Kan., 940 F.3d 498, 510 (10th Cir. 2019) (quoting Ute Indian Tribe of the Uintah & Ouray Reservation v. Utah, 114 F.3d 1513, 1520 (10th Cir. 1997) ). An important corollary of the law of the case doctrine—the "mandate rule"—"provides that a district court must comply strictly" with the reviewing court's mandate. Id. Although "[i]nterpretation of the mandate is an issue of law that we review de novo," id., "where the appellate court has not specifically limited the scope of the remand, the district court generally has discretion to expand the resentencing beyond the sentencing error causing the reversal." United States v. West, 646 F.3d 745, 748 (10th Cir. 2011). In this Circuit, "unless the district court's discretion is specifically cabined, it may exercise discretion...