United States v. Kenner

• Citation: 443 F.Supp.3d 354
• Decision Date: 10 March 2020
• Docket Number: No. 3-CR-607 (JFB) (AYS),3-CR-607 (JFB) (AYS)
• Parties: UNITED STATES of America, v. Phillip A. KENNER and Tommy C. Constantine, Defendants.
• Court: United States District Courts. 2nd Circuit. United States District Court (Eastern District of New York)

443 F.Supp.3d 354

UNITED STATES of America,

v.Phillip A. KENNER and Tommy C. Constantine, Defendants.

No. 3-CR-607 (JFB) (AYS)

United States District Court, E.D. New York.

Signed March 10, 2020

The United States is represented by Assistant United States Attorneys Saritha Komatireddy, Matthew Haggans, Diane C. Leonardo-Beckmann, and Madeline M. O'Connor of the United States Attorney's Office for the Eastern District of New York, 271 Cadman Plaza East, Brooklyn, New York 11201.

Defendant Phillip A. Kenner is proceeding pro se.

Defendant Tommy C. Constantine is represented by Sanford Talkin of Talkin, Muccigrosso & Roberts LLP, 40 Exchange Place, 18th Floor, New York, New York 10005; and by Michael Morrissey of Mitchell Stein Carey P.C., One Renaissance Square, 2 North Central Ave., Suite 1900, Phoenix, Arizona 85004.

MEMORANDUM AND ORDER

Joseph F. Bianco, United States Circuit Judge (sitting by designation)

On July 9, 2015, following a nine-week trial, a jury convicted defendant Phillip A. Kenner ("Kenner") of one count of conspiring to commit wire fraud, in violation of 18 U.S.C. § 1349 (Count One of the superseding indictment); four counts of wire fraud, in violation of 18 U.S.C. §§ 1343 and 2 (Counts Two, Three, Four, and Seven); and one count of conspiracy to commit money laundering, in violation of 18 U.S.C. § 1956(h) (Count Nine).¹ (Jury Verdict, ECF No. 324.) In addition, the jury convicted defendant Tommy C. Constantine ("Constantine," and together with Kenner, "defendants") of one count of conspiring to commit wire fraud (Count One); five counts of wire fraud (Counts Two through Six); and one count of conspiracy to commit money laundering (Count Nine). Now pending before the Court is the government's request for entry of an Order of Forfeiture. (Gov. Mot., ECF No. 401; Revised Gov., ECF No. 780; Prop. Forf. Order, ECF No. 693; Gov. Ltrs., ECF Nos. 795, 799.) For the reasons set forth below, the Court enters the preliminary forfeiture order.

First, as explained in greater detail below, the Court finds that Honeycutt v. United States , ––– U.S. ––––, 137 S. Ct. 1626, 198 L.Ed.2d 73 (2017), does not preclude finding defendants jointly and severally liable under 18 U.S.C. § 982(a)(1) for a money-laundering conviction. The plain text of the statute, which is materially different from 18 U.S.C. § 853 as analyzed in Honeycutt , does not require that the defendant actually acquire the property in order for the property to be subject to forfeiture; rather, the property need only be involved in, or traceable to, defendants' money-laundering conspiracy.

Second, the government has demonstrated, by a preponderance of the evidence, that the assets (i.e., the Falcon 10 Airplane, Sugar Mill property, and the Diamante Cabo San Lucas ("DCSL") property, as well as the corporate ownership entities for the DCSL property), are forfeitable because defendants stole or diverted victims' funds for their purchase, and laundered money from the fraud through those properties.

Finally, the government has proven that the money judgment amount (as amended by the Court) is warranted because defendants used these funds to facilitate the money-laundering conspiracy for which they were convicted, including the commingling of tainted and untainted funds to disguise the illegal fraud schemes. In particular, the Court finds that the government has proven that defendants must forfeit $8,554,853, representing the total value of the property involved in the money-laundering conspiracy for which defendants are jointly and severally liable. In addition, the Court finds that defendant Kenner must forfeit an additional $9,151,542, representing the money judgment amount pertaining to the victims' lines of credit, which Kenner obtained by fraud and then laundered through various accounts and entities.

Accordingly, for these reasons and those that follow – and after careful consideration of the parties' submissions and arguments, the extensive trial record, and the evidence adduced at the forfeiture hearing – the Court will enter the government's preliminary forfeiture order as amended by this Memorandum and Order.

I. BACKGROUND

A. Factual Background

Defendants were convicted of participating in a conspiracy involving three separate fraud schemes: (1) the "Hawaii Project," whereby investors were told funds would go to land development in Hawaii, but were used instead for other unauthorized purposes; (2) "Eufora," a prepaid credit card company run by Constantine where investors' funds were used for personal use; and (3) the Global Settlement Fund ("GSF"), where defendants induced investment to fund litigation against developer Ken Jowdy ("Jowdy"), but money was diverted for unauthorized and personal uses. As explained in detail below, funds acquired through these fraudulent schemes facilitated, and were disguised through, property purchases that are now subject to forfeiture.

The Court assumes the parties' familiarity with the factual background and only addresses facts relevant to the present forfeiture motion.² The government seeks forfeiture of three assets: (1) Falcon 10 Airplane; (2) Sugar Mill property; and (3) the DCSL property and its corporate ownership entities. (Prop. Forf. Order.) The government also seeks a money judgment for the balance of the proceeds of defendants' wire fraud convictions, as well as property involved in or traceable to their money-laundering conspiracy. (Id. )

B. Procedural History

On July 9, 2015, following a nine-week trial, Kenner was convicted of one count of conspiring to commit wire fraud, in violation of 18 U.S.C. § 1349 (Count One of the superseding indictment); four counts of wire fraud, in violation of 18 U.S.C. §§ 1343 and 2 (Counts Two, Three, Four, and Seven); and one count of conspiracy to commit money laundering, in violation of 18 U.S.C. § 1956(h) (Count Nine). (Jury Verdict, ECF No. 324.) The jury also convicted Constantine of one count of conspiring to commit wire fraud (Count One); five counts of wire fraud (Counts Two through Six); and one count of conspiracy to commit money laundering (Count Nine). (Id. )

On November 23, 2015, Constantine filed a motion for a judgment of acquittal as to all counts or, in the alternative, for a new trial. (ECF No. 346.) On November 28, 2016, Kenner filed his own motion for a new trial. (ECF No. 416.) Both of these motions were denied on October 13, 2017. (Order, ECF No. 501.)

The forfeiture hearing was held on a series of dates: February 12, 2016 (2/12/2016 Forf. Tr.,³ ECF No. 688), March 9, 2016 (3/9/16 Forf. Tr., ECF No. 369), April 4, 2016, and April 6, 2016 (4/4/2016 and 4/6/2016 Forf. Trs., ECF No. 377).⁴

On October 7, 2016, the government filed its motion for forfeiture of property as to defendants, pursuant to 18 U.S.C. § 981(a)(1)(C) and 18 U.S.C. § 982(a)(1). (Gov. Mot.) Specifically, the government contends that, as to Counts One through Eight of the indictment regarding wire fraud and conspiracy to commit wire fraud, defendants are required, pursuant to 18 U.S.C. § 981(a)(1)(C), to forfeit all proceeds of these offenses. The government also contends that, as to defendants' money-laundering conspiracy conviction in Count Nine of the indictment, defendants are required to forfeit all property involved in or traceable to their laundering of fraud proceeds, pursuant to 18 U.S.C. § 982(a)(1). (Id. )

On September 10, 2018, Kenner filed his opposition. (Kenner Opp'n, ECF No. 579.) Kenner then filed a motion to re-open forfeiture proceedings, requesting documentation related to one of the government's forfeiture exhibits on November 28, 2018. (ECF No. 597.)⁵ Constantine filed his own opposition on December 10, 2018, primarily relying on Honeycutt v. United States , ––– U.S. ––––, 137 S. Ct. 1626, 198 L.Ed.2d 73 (2017), to argue that joint and several liability is inapplicable to the present forfeiture motion. (Constantine Opp'n, ECF No. 599.) On December 12, 2018, Constantine submitted a forensic accounting report supplementing his opposition. (ECF No. 600.) On December 14, 2018, Constantine moved to join Kenner's opposition. (ECF No. 604.) The same day, the government then requested permission to bifurcate legal and factual issues relating to Honeycutt in its reply (i.e., first address the applicability of Honeycutt and then submit additional briefing if this Court were to determine that Honeycutt , in fact, does apply). (ECF No. 603.) This request was granted on December 26, 2018. (ECF No. 605.) On January 11, 2019, the government filed its reply addressing Honeycutt 's applicability to the present motion. (ECF No. 607.) On January 14, 2019, Kenner served the Court and the government with his Forfeiture Supplement. (ECF No. 713.) The government responded to this filing on February 22, 2019. (ECF No. 623.) On March 1, 2019, the closing arguments took place with respect to the forfeiture proceeding. (ECF No. 630.)

Following the closing arguments, several status conferences were held to address various issues raised by the forfeiture motion. Those discussions focused, in part, on concerns about the potential negative impact of a forfeiture order regarding DCSL on innocent third parties, and efforts to alter the language of the government's proposed preliminary orders of forfeiture to address those concerns. Various third parties had urged the Court orally at these conferences, and in writing, to consider these issues before issuing any forfeiture order. The parties engaged in negotiations with respect to these issues, and the parties agreed to attempt to resolve some of these issues with the assistance of a Magistrate Judge. On May 17, 2019, the government submitted revised proposed preliminary orders of forfeiture to incorporate recommendations made by Magistrate Judge Anne Shields. (ECF No. 655.)

After another status conference on July 2, 2019 (7/2/19 Forf. Tr., ECF No. 674), the government submitted a new iteration of its proposed forfeiture orders on August 14, 2019,...