United States v. Ritchie
| Decision Date | 02 August 2019 |
| Docket Number | Case No.: 2:15-CR-0285-APG-GWF |
| Parties | UNITED STATES OF AMERICA, Plaintiff, v. CHARLES BURTON RITCHIE, BENJAMIN GALECKI, Defendants. |
| Court | U.S. District Court — District of Nevada |
Charles Burton Ritchie and Benjamin Galecki were convicted of 24 counts, including Continuing Criminal Enterprise, Money Laundering, Mail and Wire Fraud, crimes related to controlled substance analogues, and conspiracy. ECF No. 439. The Government seeks a forfeiture money judgment and the forfeiture of cash and properties it previously seized. The parties waived their right to a jury determination of the forfeiture issues, so I conducted an evidentiary hearing on July 8, 2019. I previously ruled on the scope of the Government's ability to forfeit property in this case. ECF No. 441. I incorporate that order. I will not repeat the underlying facts as the parties are well-familiar with them. Based on the evidence presented during the trial and the July 8, 2019 hearing, I make the following findings.
"[T]he government must prove by a preponderance of the evidence that property is subject to forfeiture." United States v. Adams, 189 F. App'x 600, 602 (9th Cir. 2006) (citing United States v. Garcia-Guizar, 160 F.3d 511, 517 (9th Cir. 1998)). Because the defendants were convicted of operating a Continuing Criminal Enterprise, they must forfeit their "interest in, claims against, and property or contractual rights affording a source of control over, the continuing criminal enterprise." 21 U.S.C. § 853(a)(3).
The Government also may seek forfeiture of "any property obtained by the defendant[s] directly or indirectly as a result of the commission of a mail fraud or wire fraud offense." United States v. Lo, 839 F.3d 777, 793 (9th Cir. 2016). This includes proceeds traceable to the fraud schemes.
Because the defendants were also convicted of money laundering, they must "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). See Adams, 189 F. App'x at 602. "A criminal defendant, however, may be ordered to forfeit only property purchased with proceeds from the crimes 'for which [he] was convicted.'" Id. (citation omitted) (emphasis in original). Thus, proceeds of activities that pre-date the crimes of conviction may not be forfeited unless they were "involved in" or facilitated the crimes of conviction. 18 U.S.C. § 982(a)(1). United States v. Bornfield, 145 F.3d 1123, 1135 (10th Cir. 1998) (citations and internal quotes omitted) (emphasis in original).
The Government seeks a forfeiture money judgment against Ritchie and Galecki in the amount of $2,534,319.62. That amount is the gross proceeds that their Continuing Criminal Enterprise (operated through their entity ZIW, LLC) received from the sale of synthetic cannabinoids between March 21, 2012 (the date ZIW registered to do business in Nevada) and July 31, 2012 (which was approximately seven days after the July 25, 2012 seizure of materials in Nevada).1 The defendants owned ZIW and used it to fund and operate their Nevada operation. The defendants argue there was no Continuing Criminal Enterprise (CCE) until at least three qualifying violations occurred, and therefore the starting date for the forfeiture calculation should be no earlier than June 1, 2012 (the earliest the Nevada operation could have started). The Government responds that the defendants moved the manufacturing part of their business toNevada specifically to conduct the CCE, so preparation time should be counted as part of the CCE.
ZIW bankrolled the start-up of the Nevada operation. ZIW's bank account was the source of (1) rental payments for the Nevada warehouse; (2) funds to purchase the chemical, equipment, and materials used in producing the illegal product; and (3) reimbursement to Ryan Eaton for his rented apartment in Nevada. Although these activities predate the beginning of the Nevada manufacturing operation, they were part of the CCE's activities and helped facilitate the commission of the crimes. Later, proceeds of the sale of Nevada-manufactured drug analogues were deposited into ZIW's bank account. ZIW's funds afforded the defendants "control over" the CCE, were involved in and facilitated the commission of the crimes, and are traceable to the illegal activities. Thus, those funds are subject to forfeiture.2
The Government proved by a preponderance of the evidence that, during the relevant time period, ZIW received gross proceeds from the sale of synthetic cannabinoids of $2,534,319.62. Exh. 102. The defendants argue that not all synthetic cannabinoids are illegal, and that ZIW also sold legal merchandise, including detoxification products, herbal medicines, and e-cigarettes. However, Rachel Templeman, a salesperson for ZIW during that time, testified that ZIW stopped selling those other products by the first quarter of 2012. And no evidence was presented that ZIW sold legal synthetic cannabinoids during the relevant period. Therefore, the Government is entitled to a forfeiture money judgment in the amount of $2,534,319.62. Given the nature of the offenses the defendants were convicted of, and the proceeds they received from their operations, this amount is not "an excessive monetary punishment in relation to the offense giving rise to the forfeiture." United States v. Wild, 47 F.3d 669, 676 (4th Cir. 1995).
Ritchie owned 80% of ZIW and Galecki owned 20%. See Exh. 106 at 3 (deposition p. 8); Exh. 107 at 7-8. Galecki argues that he therefore should be subject to only 20% of the money forfeiture judgment. But Galecki, like Ritchie, was an authorized signatory on the ZIW bank account and thus had control over, and the ability to use, all of those funds. Thus, he is liable for the entire judgment amount.
Joint and several liability is not permitted for forfeiture judgments. Honeycutt v United States, 137 S.Ct. 1626, 1630 (2017). Both Ritchie and Galecki had control over ZIW's funds and the CCE, and both benefitted personally from the illegal activities. Therefore, each of them is individually liable for the full amount of the $2,534,319.62 forfeiture money judgment.
The Government seized several properties from the defendants and others, including bank accounts, vehicles, and a condominium. It now seeks to forfeit those properties to apply against the forfeiture money judgment.
Subject Property #1: ZIW's GCCB account
On July 31, 2012, the Government seized $177,844.68 from ZIW's Gulf Coast Community Bank account number 0001304740 (the "4740 account"). Those funds are properly forfeited under 21 U.S.C. § 853(a)(3) as they afforded the defendants control over the CCE. The entire amount is also forfeitable under 21 U.S.C. § 853(a)(1) as proceeds of the defendants' drug crimes, and forfeitable under 18 U.S.C. §§ 981 and 982 as property involved in money laundering and traceable to such property. Adams, 189 F. App'x at 602. See also United States v. $448,342.85, 969 F.2d at 476-77 ().
Subject Property #2: Ritchie's GCCB account
The Government seized $296,746.66 from Gulf Coast Community Bank account number 00003305034 (the "5034 account") managed by defendant Ritchie. IRS Special Agent Matt Schaefer traced $734,800 in "dirty" funds from the ZIW 4740 account directly to this account.After using a LIBR analysis,3 Schaefer concluded that $294,151 was the amount of remaining "dirty" funds that are subject to forfeiture. I agree.
Subject Property #6: Stephanie Ritchie's Fidelity Investment account
The Government seized $1,002,327 from Fidelity Investment Brokerage account number 648169730 (the "Fidelity account") held in the name of Ritchie's wife Stephanie. Special Agent Schaefer traced $75,150 in dirty deposits into this account from Subject Property #1 through Subject Property #2. He testified that his LIBR analysis concluded that $75,082.76 in dirty funds remained in the account as of July 31, 2012. That amount is forfeited.
Subject Property #7: Ritchie's Bank of America account
The Government seized $46,173.56 from Bank of America account number 501014213971 (the "BofA account") managed by Ritchie. Special Agent Schaefer testified that this account became the de facto ZIW operating account after the seizure of the 4740 account. He traced $241,737 in dirty funds to this account from Subject Property #1 through Subject Property #2. His LIBR analysis determined that $92,408 in dirty funds remained in this account as of July 31, 2012. Because less than that was seized on January 3, 2013, the entire amount seized ($46,173.56) is forfeited.
Special Agent Schaefer testified that a Chevrolet Cutaway van was purchased using $17,000 from ZIW's 4740 account (Subject Property #1) and a $5,000 credit card down payment. Exh. 102. The van therefore is traceable to proceeds of the criminal activity and forfeited.
Special Agent Schaefer testified that Ritchie purchased a condominium in Las Vegas with a $137,567.86 wire transfer from ZIW's 4740 account (Subject Property #1). Exh. 102. The condominium is traceable to proceeds of the criminal activity and forfeited.
Subject Property #3: Psychedelic Shack bank account
The Government seized $39,451.60 from Gulf Coast Community Bank account number 00001304690 (the "Psychedelic Shack Account") held in the name of Psychedelic Shack Inc. ("PS"). The Government argues that these funds are forfeitable because (1) Ritchie owned PS, ...
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