The opinion of the court was delivered by: William M. Skretny United States District Judge
Presently before this Court is the government's request for entry of a preliminary order of forfeiture in the amount of $28,204,000 against Defendant Frank E. Peters. (Docket No. 285.*fn1 ) The government contends that forfeiture is proper and required as the result of Peters's convictions after trial of conspiracy to commit bank fraud, making a false statement to a bank, wire fraud, and mail fraud. (Docket No. 338.*fn2 ) Peters, who elected to have this Court determine forfeiture, contends that the government failed to provide sufficient notice of its forfeiture demand and has failed to meet its burden of proving, by a preponderance of the evidence, that it is entitled to a forfeiture judgment in any amount. For the reasons explained below, this Court will grant the government's request and enter a preliminary order of forfeiture in the amount of $23,154,259.
On October 22, 2003, a federal grand jury returned an 18-count Indictment against Peters and his co-defendants, Mark Hoffman*fn3 and Gregory Samer*fn4, relating to an alleged scheme to defraud Chase Manhattan Bank ("Chase"), a federally-insured financial institution. (Docket No. 1.) Peters controlled two corporate entities - World Auto Parts, Inc., and Big Horn Core, Ltd. - that had an asset-based revolving line of credit with Chase. In short, the government charged that the defendants conspired to defraud Chase by falsely overvaluing assets used to secure and maintain the revolving line of credit.
Along with the thirteen substantive counts, the Indictment included five forfeiture counts, which sought various sum-certain money judgments, along with "any other proceeds generated from the offense[s] of conviction," for each offense of conviction. (Docket No. 1, Counts 14-18.) In the event that money judgments were unavailable, the government identified other property that it would seek forfeiture of "up to the value of [the sum-certain amounts]." (Id.)
On June 26, 2006, the government moved to dismiss counts 2, 3, 4, 5, and 15, of the Indictment, without prejudice, pursuant to Rule 48(a) of the Federal Rules of Criminal Procedure. (Docket No. 102.) This Court granted that request on June 30, 2006. (Docket No. 104.) Thereafter, on July 26, 2006, the Government obtained a new 5-count Indictment, which essentially re-alleged the previously-dismissed counts against Peters. (Docket No. 1;06-CR-227S.) But instead of including a sum-certain money judgment in the new forfeiture count, the government sought "a sum of money to be determined by the Court upon the conviction(s) as aforesaid." (Docket No. 1; 06-CR-227S; Count 5.) It also requested that in the event a money judgment was unavailable, a forfeiture "of any other property of the defendant up to the value of the amount of money to be determined by the Court after said conviction(s)" be entered. (Id.)
On July 30, 2007, after a ten week trial, the jury convicted Peters of one count of conspiracy to commit bank fraud in violation of 18 U.S.C. §§ 371 and 2; one count of making a false statement to a bank in violation of 18 U.S.C. §§ 1014 and 2; one count of bank fraud in violation of 18 U.S.C. §§ 1344 and 2; two counts of wire fraud in violation of 18 U.S.C. §§ 1343 and 2; and one count of mail fraud in violation of 18 U.S.C. §§ 1341 and 2. (Docket No. 338.) The jury acquitted Peters of three other counts of making a false statement to a bank in violation of 18 U.S.C. §§ 1014 and 2, and at the conclusion of the government's proof, this Court dismissed a single count of money laundering in violation of 18 U.S.C. §§ 1957 and 2, and three counts of bank fraud in violation of 18 U.S.C. § 1344, pursuant to Rule 29 of the Federal Rules of Criminal Procedure. (Docket Nos. 254, 255, 270, 338.)
On September 5, 2007, the government filed its request for entry of a preliminary order of forfeiture in the amount of $28,204,000. (Docket No. 285.) Initial briefing concluded on March 5, 2008, and this Court took the matter under advisement on March 31, 2008, without oral argument.*fn5 Briefing was reopened on June 13, 2008, due to the issuance of a decision by the United States Supreme Court. Supplemental briefing concluded on June 27, 2008.*fn6
A. Legal Standards Governing Criminal Forfeiture
Criminal forfeiture, as an aspect of sentencing, is distinct from the determination of criminal guilt, and for that reason, proof beyond a reasonable doubt is not required, nor is there a constitutional right to have forfeiture determined by a jury. See Libretti v. United States, 516 U.S. 29, 49, 116 S.Ct. 356, 367-68, 133 L.Ed.2d 271, 289 (1995). Rather, after a defendant is convicted, the government must establish that the property at issue is subject to criminal forfeiture only by a preponderance of the evidence. See United States v. Capoccia, 503 F.3d 103, 116 (2d Cir. 2007) ("Sentencing courts determine forfeiture amounts by a preponderance of the evidence.") (citing United States v. Fruchter, 411 F.3d 377, 383 (2d Cir. 2005)).
The court is tasked with determining "what property is subject to forfeiture under the applicable statute" based on the evidence of record, including trial evidence, and evidence developed at a forfeiture hearing, if any. FED. R. CRIM. P. 32.2(b)(1); Capoccia, 503 F.3d at 109-110; United States v. Gaskin, No. 00-CR-6148, 2002 WL 459005, at *9 (W.D.N.Y. Jan. 8, 2002). For the forfeiture of specific property, "the court must determine whether the government has established the requisite nexus between the property and the offense."*fn7
FED. R. CRIM. P. 32.2(b)(1). For imposition of a personal money judgment, "the court must determine the amount of money that the defendant will be ordered to pay." Id.
Here, the government must satisfy the requirements of the criminal forfeiture provisions in 18 U.S.C. § 982(a)(2), which are as follows:
The court, in imposing sentence on a person convicted of a violation of, or a conspiracy to violate --
(A) section 215, 656, 657, 1005, 1006, 1007, 1014, 1341, 1343, or 1344 of this title, affecting a financial institution, [ ] . . . shall order that the person forfeit to the United States any property constituting, or derived from, proceeds the person obtained directly or indirectly, as the result of such violation.
Section 982(b)(1) incorporates by reference 21 U.S.C. § 853, which also provides for forfeiture of "any property constituting, or derived from, any proceeds the person obtained, directly or indirectly, as the result of such violation." 21 U.S.C. § 853(a)(1). It further requires that the court order forfeiture of "all property described in this subsection" when imposing sentence. 21 U.S.C. § 853(a). The forfeiture provisions in § 853 must be liberally construed to effectuate their remedial purposes. See 21 U.S.C. § 853(o).
If the court finds that property is subject to forfeiture, it must enter a preliminary order of forfeiture setting forth the amount of any money judgment or directing the forfeiture of specific property without regard to any third party interests, which are determined in an ancillary proceeding under Rule 32.2(c). FED. R. CRIM. P. 32.2(b)(2).
Finally, no order of forfeiture may issue without proper notice to the defendant. See FED. R. CRIM. P. 7(c)(2) and 32.2(a).
B. The Parties' Forfeiture Submissions
In accordance with the forfeiture statutes identified above and based upon the trial evidence and additional evidence submitted in these forfeiture proceedings, the government requests entry of a preliminary order of forfeiture against Peters, as a result of his offenses of conviction, in the form of a personal money judgment for $28,204,000, along with the forfeiture of any substitute assets necessary to satisfy the personal money judgment.
Peters opposes the government's request, arguing essentially that (1) he received inadequate notice of the government's forfeiture demand because the government represented pre-trial that $1,596,000 was the "best case" forfeiture recovery, and (2) he did not "obtain" criminal proceeds as required by the forfeiture statutes.
These arguments are addressed below.
1. The Government Provided Adequate Notice ...