US v. California Publishers Liquidating Corp.

• Decision Date: 17 October 1991
• Docket Number: Crim. No. 3-90-318-H.
• Citation: 778 F. Supp. 1377
• Parties: UNITED STATES of America v. CALIFORNIA PUBLISHERS LIQUIDATING CORP., Video Team, Inc., Investment Enterprises, Inc. d/b/a Great Western Litho Bindery, Donald P. Browning, and Michael Warner.
• Court: U.S. District Court — Northern District of Texas

778 F. Supp. 1377

UNITED STATES of America v. CALIFORNIA PUBLISHERS LIQUIDATING CORP., Video Team, Inc., Investment Enterprises, Inc. d/b/a Great Western Litho Bindery, Donald P. Browning, and Michael Warner.

Crim. No. 3-90-318-H.

United States District Court, N.D. Texas, Dallas Division.

October 17, 1991.

COPYRIGHT MATERIAL OMITTED

Marvin Collins, U.S. Atty. by Paul D. Macaluso, Asst. U.S. Atty., Dallas, Tex., Ruth E. Plagenhoef Trial Atty., U.S. Dept. of Justice, Crim. Div., Washington, D.C., for the Government.

Anthony Michael Glassman, Stephen J. Rawson, Glassman & Browning, Beverly Hills, Cal., Marcia A. Morrissey, Los Angeles, Cal., John H. Weston, Weston & Sarno, Beverly Hills, Cal., Paul J. Cambria, Jr., Lipsitz Green Fahringer Roll Salisbury & Cambria, Buffalo, N.Y., Roy R. Barrera, Nichols & Barrera, San Antonio, Tex., for defendants.

MEMORANDUM OPINION AND ORDER

SANDERS, Chief Judge.

Before the Court are the Government's Motion for Forfeiture, filed September 9, 1991, Defendants' Reply Memorandum, filed October 1, 1991, and related pleadings.

This is a case of first impression. By the present motion, the Government asks the Court to order forfeit real and personal properties belonging to the Defendants pursuant to 18 U.S.C. § 1467. For the reasons given below, the Court concludes that the Government's motion should be DENIED.

I. Facts.

On November 30, 1990 a federal Grand Jury in Dallas, Texas returned an eight-count indictment against Defendants California Publishers Liquidating Corporation, Video Team, Inc., Investment Enterprises, Inc. (doing business as Great Western Litho & Bindery), Donald P. Browning, Michael Warner, Susan C. Colvin, Christian Mann, and Ron Zdeb. California Publishers Liquidating Corporation ("CPLC") is a California Corporation with its principal place of business in Los Angeles, California. CPLC has been in the business of distributing sexually explicit materials nationwide since 1973. Donald P. Browning is president and a part owner of CPLC, and Susan Colvin is an employee of CPLC. Video Team, Inc. ("Video Team") is a wholly owned subsidiary of CPLC which was formed in December, 1985, and which operates out of the same Los Angeles facility as CPLC. Christian Mann is an employee of Video Team. Investment Enterprises, Inc. (doing business as Great Western Litho & Bindery) ("Great Western") is a California publishing company, located across the street from CPLC. Although a majority of Great Western's business is derived from producing sexual explicit materials or box covers for sexually explicit video tapes (for CPLC, Video Team and any other business wishing to contract for Great Western's services), a substantial portion of its business involves publishing material that is not sexually related. Michael Warner is the president and a part owner of Great Western, and Ron Zdeb is an employee of Great Western. The charges against the Defendants arose from an undercover sting operation run by police in Dallas and the Federal Bureau of Investigation in Los Angeles. Pursuant to a plea agreement with its owner, the Dallas Police Department assumed control of Good Vibrations, Inc. ("Good Vibrations"), a sexually oriented business located in Dallas. Through Good Vibrations, Dallas Police Detective Ronnie Bardin placed several orders with CPLC and Video Team, which resulted in the shipment, by United Parcel Service ("UPS"), of dozens of sexually explicit video tapes from Los Angeles to the Dallas address used by Good Vibrations. (A police facility actually was located at the address to which the video tapes were shipped.) The eight indicted video tapes were among those shipped to Texas via UPS. In addition, Video Team mailed Good Vibrations advertisements for two of the indicted video tapes.

In the first seven counts of the indictment, the Government charged the eight Defendants with conspiracy to transport obscene material in interstate commerce, in violation of 18 U.S.C. § 371; interstate transportation of obscene material, in violation of 18 U.S.C. § 1462; mailing advertisements for obscene material, in violation of 18 U.S.C. § 1461; and aiding and abetting the offenses of interstate transportation of obscene material and mailing advertisements for obscene material, in violation of 18 U.S.C. § 2.¹ By Order entered March 18, 1991 the Court granted the Government's motion to dismiss Counts Two, Three, and Six of the indictment as to Christian Mann on the ground that Mann was not an employee of Video Team at the time of the offenses charged in those Counts.

The case went to trial on July 15, 1991. At the close of the Government's case, all eight Defendants moved for judgments of acquittal, pursuant to Federal Rule of Criminal Procedure 29. The Court granted Ron Zdeb's motion for judgment of acquittal on the ground that the Government failed to meet its burden under Rule 29 to provide evidence about Zdeb's knowledge of the purpose of the alleged conspiracy, to transport obscene materials in interstate commerce. For the same reason — lack of proof of criminal intent — the Court entered judgments of acquittal for Zdeb on the remaining charged offenses. See Memorandum Opinion and Order entered July 19, 1991. The Court denied the Rule 29 motions of the other Defendants.

On July 30, 1991 the jury returned its verdict. The jury reached unanimous verdicts only as to Counts One, Two, and Four; it was unable to reach unanimous verdicts as to Counts Three, Five, Six, and Seven. Defendant Christian Mann was acquitted as to Counts One and Four (Count Two having previously been dismissed as to him). The remaining six Defendants — CPLC, Video Team, Great Western, Donald P. Browning, Michael Warner, and Susan C. Colvin — were found guilty on Counts One, Two, and Four. Two video tapes were charged as obscene in each of Counts Two and Four. See supra note 1. Although the Court instructed the jury that they would have to unanimously find that at least one video tape charged in a Count was obscene in order to convict a Defendant on that Count, the jury was not required to identify which video tapes they determined to be obscene. The parties have stipulated that two video tapes were found to be obscene, one for Count Two and one for Count Four.²

Because of the guilty verdicts returned as to CPLC, Video Team, Great Western, Donald P. Browning, and Michael Warner, the Court proceeded to Count Eight of the indictment.³ Count Eight charged that by violating 18 U.S.C. § 1462, as found by the jury in convicting the Defendants on Counts Two and Four, certain properties belonging to CPLC, Video Team, Great Western, Browning, and Warner were subject to forfeiture pursuant to 18 U.S.C. § 1467. These properties included the two tracts of real property in Los Angeles together with the buildings housing the corporate defendants and their contents, and numerous corporate and personal bank accounts. In short, the Government sought forfeiture of the entire businesses of CPLC, Video Team, and Great Western, as well as substantial assets of Warner and Browning, on the basis of a finding that two video tapes are obscene in Dallas, Texas. The Government seeks these forfeitures in addition to the fines and terms of imprisonment provided by Title 18, United States Code, Sections 371 and 1462. The Government did not seek forfeiture of properties with no connection to the offenses charged in the indictment, such as the Defendants' homes and other businesses.

The Court submitted the forfeiture issue to the jury, which returned a special verdict on August 1, 1991.⁴ The jury found that the two parcels of real property and four corporate bank accounts were subject to forfeiture. The jury did not find that personal bank accounts in the names of Michael Warner and Donald Browning were subject to forfeiture.

The Court subsequently held a conference and received briefing on the motion presently before the Court, namely, what proportion of the property found by the jury to be subject to forfeiture, if any, should be forfeited to the Government under 18 U.S.C. § 1467.

II. Discussion.

Title 18, United States Code, Section 1467 was passed as part of the Child Protection and Obscenity Enforcement Act of 1988 (Subtitle N of the Anti-Drug Abuse Act of 1988), Pub.L. No. 100-690, Title VII, § 7522(a), 102 Stat. 4490 (1988). President Reagan signed the Act into law on November 18, 1988. Section 1467 was amended by the Crime Control Act of 1990, Pub.L. No. 101-647, Title XXXV, § 3549, 104 Stat. 4926 (1990).⁵ The portions of Section 1467 most directly relevant to the issues presently before the Court provide as follows.

§ 1467 Criminal forfeiture

(a) Property subject to criminal forfeiture. A person who is convicted of an offense involving obscene material under this chapter shall forfeit to the United States such person's interest in —

(1) any obscene material produced, transported, mailed, shipped, or received in violation of this chapter;

(2) any property, real or personal, constituting or traceable to gross profits or other proceeds obtained from such offense; and

(3) any property, real or personal, used or intended to be used to commit or to promote the commission of such offense, if the court in its discretion so determines, taking into consideration the nature, scope, and proportionality of the use of the property in the offense.

....

(e) Order of forfeiture. The court shall order forfeiture of the property referred to in subsection (a) if — (1) the trier of fact determines, beyond a reasonable doubt, that such property is subject to forfeiture; and

(2) with respect to the property referred to in subsection (a)(3), if the court exercises the court's discretion under that subsection.

....

(m) Construction. This section shall be liberally construed to effectuate its remedial purposes.

(n) Substitute assets. If any of the property described in subsection (a), as a result of any act or omission of the defendant —

(1)

...