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United States v. Castello

July 7, 2010

UNITED STATES OF AMERICA, APPELLANT,
v.
JOSEPH A. CASTELLO, DEFENDANT-APPELLEE,
MICHAEL VARRONE, RAMON CALVO, ROLF ANDERSEN, DANA SCHWARTZ CASTELLO, DEFENDANTS.



SYLLABUS BY THE COURT

Defendant-Appellee Joseph Castello was convicted in the United States District Court for the Eastern District of New York (Wexler, J.), after a jury trial, of failing to file thousands of Currency Transaction Reports in the course of running his check-cashing business, in violation of 31 U.S.C. § 5313(a). Forfeiture was mandatory, and the district court fixed the amount at $12,012,924.31, plus his equity in certain real property. On appeal, this Court affirmed the conviction but vacated the forfeiture order and remanded to the district court for further fact-finding as to whether the forfeiture was unconstitutionally excessive under United States v. Bajakajian, The opinion of the court was delivered by: Dennis Jacobs, Chief Judge

Argued: May 11, 2010

Before: JACOBS, Chief Judge, WINTER and McLAUGHLIN, Circuit Judges.

Defendant-Appellee Joseph Castello was convicted in the United States District Court for the Eastern District of New York (Wexler, J.), after a jury trial, of failing to file thousands of Currency Transaction Reports ("CTRs") in the course of running his check-cashing business, in violation of 31 U.S.C. § 5313(a). Forfeiture was mandatory, and the district court fixed the amount at $12,012,924.31, plus his equity in his house (the "First Order"). On appeal, this Court affirmed the conviction but vacated the First Order and remanded to the district court for further fact-finding as to whether the forfeiture was unconstitutionally excessive.

On remand, the district court's "Second Order" fixed the forfeiture amount at zero. This appeal by the United States does not contest (or concede) the unconstitutionality of the original amount; instead, the government argues that some amount of forfeiture is mandated.

We now vacate the Second Order and remand for the district court to reinstate the First Order.

I.

Castello's check-cashing business cashed more than $600 million in checks over the period of the indictment: January 1, 1995 to November 30, 2004. In violation of 31 U.S.C. § 5313(a) and 31 C.F.R. § 103.22(b), Castello failed to file CTRs for thousands of these checks exceeding $10,000. Checks in amounts exceeding $10,000 constituted about $200 million of the total.

On March 9, 2006, a federal grand jury returned a superseding indictment charging Castello with conspiracy to launder money (18 U.S.C. § 1956(h)); failure to file CTRs (31 U.S.C. § 5313(a)); unlawfully structuring financial transactions (31 U.S.C. § 5324); conspiracy to impair, impede, obstruct, and defeat the Internal Revenue Service (18 U.S.C. § 371); tax evasion (26 U.S.C. § 7201); and obstruction of justice (18 U.S.C. § 1512). Following a jury trial, Castello was acquitted of all charges except failure to file CTRs.

Forfeiture is mandatory for failure to file CTRs. 31 U.S.C. § 5317(c)(1)(A). The government sought forfeiture of: $9,341,051.81 (which represented four percent of the value of the checks exceeding $10,000 for which no CTRs were filed)*fn1; $2,671,872.50 (representing funds connected with a

Citibank account held in Castello's wife's name); and Castello's equity in the family home in Greenwich, Connecticut. Castello opposed the government's proposed forfeiture on the grounds that the funds sought were not involved in the offense and therefore were not subject to forfeiture, and that in any event the amount of forfeiture was grossly disproportional to the crime in violation of the Excessive Fines Clause of the Eighth Amendment, as that clause had been interpreted in United States v. Bajakajian, 524 U.S. 321 (1998).

By Memorandum and Order of September 17, 2007, the district court concluded that the government's proposal "represents a proper amount subject to forfeiture" because it was "properly representative of the fees earned by Castello for cashing checks in excess of $10,000 for which no CTRs were filed," and because the specific "assets identified are properly traceable to the crime." United States v. Castello, No. 04-336, 2007 WL 2778686, at *2 (E.D.N.Y. Sept. 17, 2007). Separately, the court considered the constitutionality of the forfeiture under Bajakajian and held that it was "fair, reasonable, and well-supported by the evidence of record. Accordingly, the forfeiture sought does not violate the Eighth Amendment." Id. at *3.

The First Order, entered September 25, 2007, imposed forfeiture as sought by the government: $12,012,924.31, plus the equity in the house. Castello was also sentenced to the statutory maximum of five years' imprisonment, three years' supervised release, a $250,000 fine, and a $100 special assessment.

Castello appealed his conviction and his sentence. The conviction was affirmed by summary order. See United States v. Castello, 308 F. App'x 523 (2d Cir. 2009) (summary order). The forfeiture order was vacated in a separate opinion. See United States v. Varrone, 554 F.3d 327 (2d Cir. 2009).*fn2 Varrone rejected Castello's argument that the forfeiture violated ยง 5317(c)(1)(A), Varrone, 554 F.3d at 330-31; it is therefore law of the case that the entire amount deemed forfeitable in the First Order is properly forfeitable under the ...


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