United States v. Channon (Brandi) ( 2020 )

FILED
United States Court of Appeals
PUBLISH Tenth Circuit
UNITED STATES COURT OF APPEALS September 1, 2020
Christopher M. Wolpert
FOR THE TENTH CIRCUIT Clerk of Court
_________________________________
UNITED STATES OF AMERICA,
Plaintiff - Appellee,
v. No. 19-2028
BRANDI CHANNON,
Defendant - Appellant.
_________________________________
UNITED STATES OF AMERICA,
Plaintiff - Appellee,
v. No. 19-2029
MATTHEW CHANNON,
Defendant - Appellant.
_________________________________
Appeal from the United States District Court
for the District of New Mexico
(D.C. Nos. 1:13-CR-966-JCH-KK-1 and 1:13-CR-966-JCH-KK-2)
_________________________________
Katayoun A. Donnelly, Azizpour Donnelly LLC, Denver, Colorado, for Defendant-
Appellant Brandi Channon.
James L. Hankins, Edmond, Oklahoma, for Defendant-Appellant Matthew Channon.
C. Paige Messec, Assistant United States Attorney (John C. Anderson, United States
Attorney, with her on the brief), Albuquerque, New Mexico, for Plaintiff-Appellee.
_________________________________
Before BRISCOE, KELLY, and CARSON, Circuit Judges.
_________________________________
CARSON, Circuit Judge.
_________________________________
At first glance, a district court’s order of forfeiture and its order of restitution
may appear to be a double punishment to a defendant—especially when the district
court orders a defendant to pay forfeiture and restitution in the same amount. But
forfeiture and restitution are distinct remedies. Restitution exists to make victims
whole. Forfeiture, on the other hand, exists to punish those who commit crimes. In
this case, Defendants fraudulently obtained over $100,000 in store credit, redeemed
those credits for merchandise and prepaid debit cards, and then sold that same
merchandise on the internet.
Unsurprisingly, no one disputes how to calculate the value of the loss to the
retailer—the loss equals the value of the fraudulently obtained merchandise. But
what is Defendants’ gain? Is it the value of the fraudulently obtained merchandise?
Or is it solely the profit Defendants received from selling the merchandise? And do
Defendants have a forfeitable gain if they sell the merchandise for less than market
value?
In some cases, a defendant either does not resell fraudulently obtained
merchandise or does so at a discount and thus has no profit above the value of the
merchandise. To address that scenario, we hold that a district court may base a
judgment’s forfeiture amount on the value of the fraudulently obtained merchandise
at the time a defendant acquired it. We further hold that a district court may not
2
reduce or eliminate criminal forfeiture because of restitution. Finally, we reaffirm
our holding that in personam money judgments representing the amount of unlawful
proceeds are appropriate under the criminal forfeiture statutes. United States v.
McGinty, 610 F.3d 1242, 1245 (10th Cir. 2010). We exercise jurisdiction under 28
U.S.C. § 1291 and affirm the district court’s forfeiture order.
I.
Defendants—a married couple—opened numerous rewards accounts at
OfficeMax using fictitious names and addresses. They fraudulently claimed other
customers’ purchases as their own to generate undeserved rewards through
OfficeMax’s customer loyalty program. As part of the scheme, Defendants also
violated the terms of the reward program by using various accounts to sell more than
27,000 used ink cartridges to OfficeMax in exchange for OfficeMax rewards.
Defendants’ scheme lasted twenty-one months. In that time, they redeemed $105,191
in OfficeMax rewards.
A jury convicted Defendants of wire fraud and conspiracy to commit wire
fraud relating to their scheme to defraud OfficeMax in violation of 18 U.S.C.
§§ 1343 and 1349. At sentencing, after an evidentiary hearing, the district court
ordered Defendants to pay $96,278 in restitution to OfficeMax and entered a separate
forfeiture money judgment jointly and severally against Defendants in the amount of
$105,191. Defendants appealed. In their first appeal, Defendants argued, among
other things, that the district court erred when it entered a forfeiture money judgment
without proving the $105,191 constituted, or was derived from, proceeds traceable to
3
the wire fraud. Specifically, Defendant Matthew Channon posited that the
government made no attempt to trace the OfficeMax rewards to cash. The
government, on the other hand, contended that they proved Defendants fraudulently
acquired OfficeMax rewards with a face value of $105,191, and that Defendants
exchanged that credit for $105,191 in actual merchandise. At oral argument in their
first appeal, Defendants spent their entire argument regarding forfeiture disputing the
amount of forfeiture the district court ordered. Specifically, Defendant Brandi
Channon’s attorney argued that if a defendant steals something worth $50,000, but
sells it for $3,000, the gain to that defendant, and thus the proper amount of
forfeiture, is $3,000, not $50,000.
We upheld the district court’s admission of certain challenged exhibits but
remanded for further proceedings on the money judgment of forfeiture in light of the
Supreme Court’s decision in Honeycutt v. United States, 137 S. Ct. 1626 (2017).
Honeycutt held, among other things, that the substitute-asset provision of the
Comprehensive Forfeiture Act of 1984, 21 U.S.C. § 853(p), provides the only method
for the forfeiture of untainted property; that is, property not flowing from or used in
the crime itself. Id. at 1632. At the time, we stated:
Defendants last argue that the government failed to meet its burden to prove
the amount forfeited ($105,191) was traceable to the offense of wire fraud.
We have held that wire fraud proceeds are subject to forfeiture under 18
U.S.C. § 981(a)(1)(C) and 28 U.S.C. § 2461. See United States v.
Courtney, 816 F.3d 681, 685 (10th Cir. 2016). The property subject to
forfeiture includes “[a]ny property, real, or personal, which constitutes or is
derived from proceeds traceable to [the] violation.” 18 U.S.C.
§ 981(a)(1)(C). The substitute-asset provision, 21 U.S.C. § 853(p),
4
provides the only method for the forfeiture of untainted property.
Honeycutt v. United States, 137 S. Ct. 1626, 1633 (2017).
The government concedes a remand to conform the money judgment to the
requirements of § 853(p) may be necessary. The government explains that
going forward it will seek only to enforce a forfeiture money judgment
through the substitute-asset provisions of § 853(p) and will seek to amend
the forfeiture order under Fed. R. Crim. P. 32.2(e). Accordingly, we
remand so the district court may conduct further proceedings on this issue.
United States v. Channon, 881 F.3d 806, 812 (10th Cir. 2018).
On remand, Defendant Matthew Channon sought another evidentiary hearing
on the money judgment. Defendants argued that the district court incorrectly
calculated the forfeiture amount and had to determine the amount of profit they
received through their fraudulent scheme. The government objected to the motion,
contending that our mandate “left that determination untouched.” The district court
did not hold a second evidentiary hearing. Instead, it amended its order, clarifying
that if the government seeks forfeiture of substitute-property—i.e., untainted property
when the tainted property is unavailable—it must satisfy § 853(p)’s requirements at
that time. Defendants again appealed the district court’s forfeiture order.
II.
In this second appeal, Defendants fault the district court for simply amending
the judgment to clarify that the government must satisfy the requirements of § 853(p)
when seeking forfeiture of substitute property. Defendants assert that our mandate
required an evidentiary hearing on the proper forfeiture amount because the
government failed to prove the amount of profit Defendants realized as a result of
their scheme. Defendants further contend the district court failed to make specific
5
findings as to what tainted assets each Defendant obtained as a result of their
criminal activity, whether any need existed for substitution of untainted assets for the
tainted assets, and whether the value of the substituted asset is equal to or less than
the value of unavailable tainted assets. Finally, they assert that Supreme Court
precedent foreclosed the district court from holding Defendants jointly and severally
liable for the entire forfeiture judgment.
We first examine the language of our prior mandate, looking to whether the
district court acted within its discretion in failing to hold an evidentiary hearing after
remand. We then turn to the district court’s forfeiture order. For the reasons set
forth below, we conclude that the district court did not abuse its discretion in refusing
an evidentiary hearing. We further hold that the district court properly entered the
money judgment in the amount of $105,191 and that the district court did not err in
imposing joint and several liability against Defendants. Finally, we hold that the
government may satisfy § 853(p)’s substitute-asset requirements at the time it seeks
forfeiture of substitute assets.
A.
We first address the parties’ disagreement regarding the scope of our prior
mandate. Defendants believe our mandate required the district court to hold an
evidentiary hearing while the government contends that the district court had the
discretion to hold a hearing but did not have an obligation to begin anew. We agree
with the government.
6
Under the law of the case doctrine, “once a court decides an issue, the same
issue may not be relitigated in subsequent proceedings in the same case.” Harte v.
Bd. of Comm’rs of Cty. of Johnson, Kan., 940 F.3d 498, 510 (10th Cir. 2019)
(quoting Ute Indian Tribe of the Uintah & Ouray Reservation v. Utah, 114 F.3d 1513,
1520 (10th Cir. 1997)). An important corollary of the law of the case doctrine—the
“mandate rule”—“provides that a district court must comply strictly” with the
reviewing court’s mandate. Id. Although “[i]nterpretation of the mandate is an issue
of law that we review de novo,” id., “where the appellate court has not specifically
limited the scope of the remand, the district court generally has discretion to expand
the resentencing beyond the sentencing error causing the reversal.” United States v.
West, 646 F.3d 745, 748 (10th Cir. 2011). In this Circuit, “unless the district court’s
discretion is specifically cabined, it may exercise discretion on what may be heard.”
Id. at 749. In practice, a district court looks “to the mandate for any limitations on
the scope of the remand and, in the absence of such limitations, exercise[s] discretion
in determining the appropriate scope.” Id.
In interpreting the prior panel’s forfeiture holding, we look to the language of
the prior opinion and, in particular, the mandate. Harte, 940 F.3d at 511. The panel
acknowledged the government’s concession that a remand to conform the money
judgment might be necessary and set forth the government’s position that it would
seek to enforce a forfeiture money judgment only through the substitute-asset
provisions of § 853(p). The panel remanded “so the district court may conduct
further proceedings on this issue.” Channon, 881 F.3d at 812. Nothing in the prior
7
panel’s holding cabined the district court on remand. Importantly, nothing in the
prior panel’s holding indicated to the district court that it had erred in calculating the
amount of forfeiture money judgment. Thus, the mandate’s language did not require
the district court to hold an evidentiary hearing on the forfeiture amount.
Accordingly, the district court retained the discretion to make its own determination
on Matthew Channon’s hearing request.
The dissent argues that the district court should not have relied on the
language of the opinion to determine the mandate. Instead, the dissent tells us that in
addition to looking at the clear language of the order, the district court should have
also examined the parties’ arguments from the first appeal. The mandate rule
demands no such inquiry and the dissent provides no basis for one. Prior to the first
appeal, the district court had held a hearing at which time it listened to testimony,
viewed evidence, and calculated a forfeiture money judgment. Defendants appealed
that judgment. The prior panel remanded based on the government’s concession that
the language of the judgment needed to reference § 853(p)’s requirements—no more
explanation, no less. The prior panel did not specifically cabin the district court’s
actions on remand. Did the mandate give the district court the discretion to hold a
second hearing? Absolutely. But did it require a second hearing? No. The dissent’s
statement that the mandate encompassed “the general arguments raised by the
Channons” in their appeal does not comport with the long-standing and established
discretion we afford a district court. Indeed, the dissent’s position that we must scour
the Court record for appellate arguments made in prior appeals finds no support in
8
our precedents. And we decline to require district courts on remand to rehash every
argument mentioned in old briefing, but not set forth in the mandate.
Now, we turn to whether the district court abused that discretion in refusing to
hold a second evidentiary hearing.
B.
Defendants assert the district court erred: (1) by declining to revisit the amount
of the money judgment representing the proceeds of the scheme, (2) by holding them
jointly and severally liable, and (3) by failing to determine the need for substitution
of untainted assets for tainted assets or to determine whether the value of the
substituted asset is equal to or less than that of the unavailable tainted assets
Defendants obtained.1 Defendant Matthew Channon principally relies on Honeycutt,
which held that the procedure outlined in § 853(p) is the only way for the government
to recoup substitute property (which prompted the government’s concession to
remand) and that forfeiture is limited to property the defendant himself actually
acquired as a result of the crime. He argues that Honeycutt required a hearing on
remand to determine whether the government met its burden and to amend the
judgment so as to not hold him and his wife jointly and severally liable. Defendant
Brandi Channon’s argument focuses on the district court’s understanding of the
1
The dissent asserts that we acknowledge, but then ultimately fail to address
these issues on the merits. We disagree. See infra Section II.B.3. (discussing that
nothing in the text of § 853(p) limits the substitute property eligible for forfeiture to
property that the defendant owns at the time of sentencing and that the government
will have to prove one of the elements in § 853(p)(1) before the district court may
order forfeiture of specific substitute property under § 853(p)(2)).
9
difference between restitution and forfeiture. We review the district court’s
interpretation of the federal forfeiture laws de novo, McGinty, 610 F.3d at 1245, and
its factual findings for clear error, United States v. Bader, 678 F.3d 858, 893 (10th
Cir. 2012).
1.
We first consider whether the district court had an obligation to revisit the
amount of the money judgment. And we begin our inquiry with the plain language of
the statute. McGinty, 610 F.3d at 1245. The criminal forfeiture statute at issue
provides that “[a]ny property, real or personal, which constitutes or is derived from
proceeds traceable to a violation of . . . ‘specified unlawful activity’” including wire
fraud “is subject to forfeiture to the United States.” 18 U.S.C. § 981(a)(1)(C). The
statute defines “proceeds” as “property of any kind obtained directly or indirectly, as
the result of the commission of the offense giving rise to forfeiture, and any property
traceable thereto, and is not limited to the net gain or profit realized from the
offense.” 18 U.S.C. § 981(a)(2)(A). The Code further provides that if a defendant is
charged in a criminal case “with a violation of an Act of Congress for which the civil
or criminal forfeiture of property is authorized,” the government may include a notice
of forfeiture in the charging document. 28 U.S.C. § 2461(c). And if the defendant is
convicted of the offense giving rise to the forfeiture, “the court shall order the
forfeiture of the property as part of the sentence in the criminal case pursuant to the
Federal Rules of Criminal Procedure.” Id. In personam money judgments
representing the amount of unlawful proceeds are appropriate under criminal
10
forfeiture.2 McGinty, 610 F.3d at 1246. Thus, a district court may award the
government a money judgment against a defendant for the value of what he obtained
from his criminal activity. Id.
Defendants do not dispute that a district court may award a forfeiture
judgment, but instead fault the district court for entering a forfeiture judgment based
on the value of the merchandise and certificates they redeemed through OfficeMax
rewards.3 Defendants specifically claim that because the district court based both the
restitution and forfeiture amounts on OfficeMax’s loss, the forfeiture judgment
constitutes a double recovery. But awarding a forfeiture amount equal to restitution
does not amount to a double recovery. Id. at 1247.
“Criminal forfeiture and restitution are separate remedies with different
purposes.” Id. Restitution—designed to compensate victims and restore their
losses—is not punitive, but rather is remedial in nature. Id. Forfeiture—the vesting
of title in the United States in a defendant’s tainted property—is punitive in nature
and seeks to disgorge any profits that the offender realized from his illegal activity.
Id.; see also United States v. Awad, 598 F.3d 76, 78 (2d Cir. 2010) (stating that
2
An “in personam” judgment is a “judgment that imposes personal liability on
a defendant and that may therefore be satisfied out of any of the defendant’s property
within judicial reach.” Black’s Law Dictionary 861 (8th ed. 1999).
3
Restitution and forfeiture are not the same amount in this case because the
district court considered the value of the used ink cartridges Defendants brought to
OfficeMax and subtracted that amount from the value of the merchandise Defendants
obtained from OfficeMax with the fraudulent rewards. Because of the value of the
used ink cartridges, the district court reduced OfficeMax’s loss—the restitution
amount—to $96,278.
11
forfeiture “is concerned not with how much an individual has but with how much he
received in connection with the commission of the crime” (quoting United States v.
Casey, 444 F.3d 1071, 1077 (9th Cir. 2006))). Because restitution (calculated based
on the victim’s loss) and forfeiture (calculated based on the offender’s gain) are
distinct remedies, “ordering both in the same or similar amounts does not generally
amount to a double recovery.” McGinty, 610 F.3d at 1247.
We understand that the orders of forfeiture and restitution may at first glance
appear to be a double or alternative punishment. Both order cash payments that
approximate OfficeMax’s loss. But Defendants’ “double recovery” argument runs
afoul of not only our precedent, but also the text of the statute. Section 981 treats as
“proceeds” any “property” that a defendant “obtained directly or indirectly” as a
result of the commission of the theft of property and “is not limited to the net gain or
profit realized from the offense.” 18 U.S.C. § 981(a)(2)(A).
Likewise, case law provides that restitution and forfeiture serve different
goals. McGinty, 610 F.3d at 1247. “[T]hat the combination of a forfeiture order and
a restitution order results in a form of punitive damages piled on top of the other
penalties for the defendant’s crime” is appropriate given that fraud is a concealable
offense. United States v. Navarrete, 667 F.3d 886, 888 (7th Cir. 2012); see also
McGinty, 610 F.3d at 1247–48 (concluding that requiring an offender to pay both
restitution and forfeiture “at worst forces the offender to disgorge a total amount
equal to twice the value of the proceeds of the crime” (quoting United States v.
Taylor, 582 F.3d 558, 566 (5th Cir. 2009))). “Given the many tangible and intangible
12
costs of criminal activity, this is in no way disproportionate to the harm [the offense]
inflicted upon government and society.” McGinty, 610 F.3d at 1247–48 (quoting
Taylor, 582 F.3d at 566).
To illustrate their position, Defendants ask us to imagine a defendant who
steals a $50,000 piano from a music store and then sells that piano for $3,000.
Defendants argue that the music store is entitled to $50,000 in restitution and the
government is entitled to $3,000 in forfeiture. Defendants’ argument overlooks the
distinction between restitution and forfeiture. In addition to Defendants’ scenario—
where the hypothetical thief sells the piano for less than $50,000, let’s also assume a
scenario where the thief keeps the piano for his personal use. Under either scenario,
the thief realizes a gain of $50,000—the value of the piano at the time of the
wrongdoing. The thief does not need to sell the piano for more than its value to
realize a gain.4 The forfeiture statute says that “any property . . . which constitutes or
is derived from proceeds traceable to” the scheme is subject to forfeiture. 18 U.S.C.
§ 981(a)(1)(C). Nothing in the statute requires that Defendants re-sell the OfficeMax
merchandise to realize a gain. Put simply, the government is entitled to forfeiture in
the amount of Defendants’ proceeds, and OfficeMax, the victim, was entitled to
restitution in the amount of its loss. United States v. Arnold, 878 F.3d 940, 946 (10th
Cir. 2017).
4
Although not at issue in this case, assume that hypothetical thief sells the
piano for $53,000. In that scenario, the thief’s gain is $53,000.
13
Statutes mandating restitution and forfeiture do not allow a defendant’s
payments toward one to offset the amount owed to the other. Id. In this case,
Defendants either did not resell the merchandise they fraudulently obtained from
OfficeMax or claim that they sold it at a discount and thus had no profit above the
value of the merchandise.5 Thus, because Defendants did not resell the merchandise
or sell it for a profit above the value of the merchandise, we base Defendants’ gain on
the value of the merchandise at the time they obtained it. And at trial, the
government presented evidence showing that Defendants redeemed certificates for
merchandise worth $105,191—property traceable to Defendants’ scheme.6
Remarkably, the dissent contends that Defendants do not and have “never
made” the argument contesting the forfeiture amount and suggests that we
misunderstand Defendants’ arguments. Yet both in this second appeal and the first
appeal Defendants challenged the forfeiture amount. As mentioned above, Brandi
Channon’s counsel at the first oral argument argued that Defendants sold the
5
The dissent asserts that Defendants do not claim that they sold the
merchandise at a discount and thus had no profit above the value of the merchandise.
In her opening brief, Brandi Channon argued that the “Government has presented
evidence of the loss of OfficeMax, but no evidence concerning the actual gain by the
Channons, which is likely much less because the evidence at trial indicated that the
Channons sold items received as a result of their use of OfficeMax rewards at a deep
discount.” Appellant Brandi Channon’s Opening Br. at 18–19 (emphasis added).
6
The dissent posits that we appear to place the burden on criminal defendants
to prove what happened to merchandise obtained from their crimes. Not so. The
government, as it did in this case, must prove the amount of loss. And before the
district court may order forfeiture of specific substitute property, the government
must prove one of the elements in § 853(p)(1). See infra Section II.B.3.
14
merchandise at discounted prices, so the district court erred in its forfeiture
calculation. In her briefing in this appeal, Brandi Channon stated she wanted to
underscore “the conceptual difference between restitution, which is a measure of loss
to the victim; as opposed to forfeiture, which is a measure of gain by the perpetrator.”
Appellant Brandi Channon Br. at 11. She then raised the piano example by way of
analogy and said:
Channon perceives force in this example because it illustrates the defense
argument—that the $105,191.00 figure proffered by the Government as the
forfeiture amount does not include with any acceptable degree of proof by
the Government that this figure represents the amount of gain to the
Channons traceable to the wire fraud conviction as distinguished from the
amount of loss to Office Max.
It may well be that the Government agrees to comply with § 853(p) at the
time that it seizes and attempts to convert assets to cash, but that does not
resolve the central attack of the Channons on the amount of judgment itself.
Id. at 18 (emphasis in original). Brandi Channon clearly perceives the “central
attack” in this appeal to be “the amount of judgment itself.”
Despite the dissent’s assertions to the contrary, Defendant Matthew Channon
also shared this view. In his “Motion for Evidentiary Hearing to Determine
Forfeiture Amount” filed in the district court after remand, but before the second
appeal, Matthew Channon asked “the Court to set this matter for an evidentiary
hearing to determine the actual amount of gain to the Channons; and then, and only
then, if the government satisfies its burden of proof on that issue, to identify
traceable property, or substitute assets, for satisfaction of any forfeiture judgment”
(emphasis added). By way of example, he not only used the piano example, but also
argued that “If a $30 gift card was sold for $10, then the gain to the Channons would
15
have been $10, not $30.” Id. at DNM 255. Again, Matthew Channon sought to re-
litigate the forfeiture amount on remand and then “and only then” identify traceable
property or substitute assets.
We conclude the district court properly determined the forfeiture judgment
based on the value of the merchandise and, as a result, did not abuse its discretion in
declining to hold a second evidentiary hearing.
2.
Defendants next argue that the district court erred in holding them jointly and
severally liable for the forfeiture judgment. Defendant Matthew Channon asserts that
Honeycutt made clear that the criminal forfeiture statute does not permit joint and
several liability. Under his interpretation of Honeycutt, the government may only
substitute untainted assets (money) for the tainted assets that the defendant personally
(not jointly with his wife) obtained. Because Defendants did not raise this issue to
the district court on remand—after the Supreme Court decided Honeycutt—we
review for plain error.7 Accordingly, Defendants must show “(1) there was error,
7
Defendants refuse to make their arguments under a plain error standard of
review. They assert that the district court failed on remand to apply new Supreme
Court law in accordance with our direction for the district court to “conduct further
proceedings on this issue.” True, the Supreme Court decided Honeycutt prior to our
remand. But once back in the district court, Defendants never asked the court in their
requests for hearing to reassess the forfeiture order because they believed Honeycutt
prohibited joint and several liability. The dissent believes Defendants did not have
an opportunity to raise this issue. Defendants had such an opportunity. Defendant
Matthew Channon filed a “Motion for Evidentiary Hearing to Determine Forfeiture
Amount” in the district court following the remand. He never mentioned joint and
several liability. Instead, he focused his request for a hearing on the district court’s
alleged error in properly calculating their gain.
16
(2) that is plain, (3) that affects substantial rights, and (4) that seriously affects the
fairness, integrity or public reputation of judicial proceedings.” United States v.
Headman, 594 F.3d 1179, 1183 (10th Cir. 2010) (quoting United States v. Fields, 516
F.3d 923, 943 (10th Cir. 2008)).
We note that a circuit split has developed over whether Honeycutt applies to a
forfeiture under 18 U.S.C. § 981(a)(1)(C). In Honeycutt, the Supreme Court
analyzed a forfeiture under a different statute, 21 U.S.C. § 853(a), which states that
“[a]ny person convicted of a violation of this subchapter . . . shall forfeit to the
United States . . . (1) any property constituting, or derived from, any proceeds the
person obtained, directly or indirectly, as the result of such violation.” To limit
forfeiture to property that the defendant actually acquired under that statute, the
Supreme Court relied on § 853(a)’s phrase “the person obtained.” Honeycutt, 137 S.
Ct. at 1632–33. This led the Supreme Court to hold that a defendant may not be
“held jointly and severally liable for property that his co-conspirator derived from the
crime but that the defendant himself did not acquire.” Id. at 1630, 1634. Unlike
§ 853(a), Congress did not write the phrase “the person obtained” into
§ 981(a)(1)(C). The circuits concluding that Honeycutt does not apply to
§ 981(a)(1)(C) identified that phrase as the “linchpin” of the Supreme Court’s
decision. Compare United States v. Sexton, 894 F.3d 787, 799 (6th Cir. 2018)
(holding Honeycutt’s reasoning does not apply to a forfeiture under § 981(a)(1)(C)),
and United States v. Peithman, 917 F.3d 635, 652 (8th Cir. 2019) (same), with United
States v. Gjeli, 867 F.3d 418, 427 n.16, 428 (3d Cir. 2017) (holding that a court may
17
no longer impose joint and several liability in a forfeiture under § 981(a)(1)(C) after
Honeycutt).
We do not need to weigh in on whether Honeycutt applies to forfeitures under
§ 981(a)(1)(C) for two reasons. First, under plain error review, Defendants must
show that the district court committed obvious error. United States v. Cingari, 952
F.3d 1301, 1305 (11th Cir. 2020) (concluding Defendants could not demonstrate an
obvious error in the same situation). The textual difference between § 853 and § 981
proves fatal to this plain error argument. Id. at 1306. Moreover, because of the split
in authority on whether Honeycutt applies to a § 981 forfeiture, we cannot rely on
Honeycutt as the basis for obvious error.8 See United States v. Teague, 443 F.3d
1310, 1319 (10th Cir. 2006) (“If neither the Supreme Court nor the Tenth Circuit has
8
Even if Honeycutt applied to § 981(a)(1)(C), Defendants failed to show that
its analysis plainly applies to them. In Honeycutt, the Supreme Court’s analysis
turned on an employer-employee relationship. The employer-owner in that case
obtained the profits while the salaried employee did not. “Honeycutt’s bar against
joint and several forfeiture for co-conspirators applies only to co-conspirators who
never possessed the tainted proceeds of their crimes.” United States v. Tanner, 942
F.3d 60, 67–68 (2d Cir. 2019). “But when each co-conspirator acquired the full
proceeds ‘as a result of the crime,’ each can still be held liable to forfeit the value of
those tainted proceeds.” Id. at 68 (quoting Honeycutt, 137 S. Ct. at 1635).
Defendants are a married couple who lived together and enjoyed the benefits of their
scheme together. The facts here are unlike the case of a drug kingpin and several
drug dealers who do not have any relationship or shared benefits outside of the
conspiracy. In that scenario, each member would take his cut and go his separate
way, resulting in different forfeiture amounts. The record indicates that both
Defendants acquired the full proceeds of their conspiracy as a result of their scheme.
For example, Defendant Brandi Channon’s attorney at sentencing told the district
court that “as a result of being married to Mr. Channon, she was a . . . passive
recipient of those benefits.”
18
ruled on the subject, we cannot find plain error if the authority in other circuits is
split.”). Thus, we see no plain error in the district court’s decision to hold them
jointly and severally liable for the entire forfeiture amount.
3.
We agree with Defendants that the government will have to prove one of the
elements in § 853(p)(1) before the district court may order forfeiture of specific
substitute property under § 853(p)(2).9 The government, however, is not required to
do so at sentencing. See United States v. Newman, 659 F.3d 1235, 1242–43 (9th Cir.
2011) (“Because the government sought a money judgment in the first instance, there
was no need to seek substitute property.” (emphasis in original)). Federal Rule of
Criminal Procedure 32.2(b)(4)(C) allows Defendants or the government the
opportunity to appeal a district court’s amended order regarding substitute property
when that order granting or denying the amendment becomes final. Accordingly, the
district court did not err in declining to hold an evidentiary hearing on remand to
determine the need for substitution of untainted assets for tainted assets or to
determine whether the value of the substituted asset is equal to or less than that of the
unavailable tainted assets Defendants obtained.
9
Pursuant to § 853(p)(1), the district court shall order the forfeiture of
substitute property when, as a result of a defendant’s act or omission, the tainted
property:
(A) cannot be located upon the exercise of due diligence; (B) has been
transferred or sold to, or deposited with, a third party; (C) has been
placed beyond the jurisdiction of the court; (D) has been substantially
diminished in value; or (E) has been commingled with other property
which cannot be divided without difficulty.
19
The dissent finds our holding that a district court may order forfeiture in the
form of a money judgment against a defendant at the time of sentencing troubling.
We agree with the dissent that if Defendants are still in possession of the tainted
merchandise, then those items are subject to forfeiture under the applicable statutes.
We also agree with the dissent that only if the government proves the existence of
one or more of the circumstances described in § 853(p)(1) can it seek the forfeiture of
untainted property. But we part ways with the dissent when it comes to when the
government must meet its burden. Section 853(p) does not require the government to
prove the existence of one or more of the circumstances described in § 853(p)(1) at
sentencing. Indeed, nothing in § 853(p)’s text “limit[s] the substitute property
eligible for forfeiture to property that the defendant owns at the time of sentencing.”
United States v. Nejad, 933 F.3d 1162, 1165 (9th Cir. 2019). As the Nejad court
pointed out, a contrary rule “would allow an insolvent defendant to escape the
mandatory forfeiture penalty Congress has imposed simply by spending or otherwise
disposing of his criminal proceeds before sentencing.”10 Id.
10
In addition to nothing in the statute or the Rules requiring the government
to prove the elements in § 853(p)(1) at the time of sentencing, the practical concern
exists that the government often does not have evidence showing what proceeds a
defendant has in possession at that time. As we explained in Arnold, Federal Rule of
Criminal Procedure 32.2 “anticipates the possibility that the court may not be able to
determine the amount of the money judgment before sentencing.” Arnold, 878 F.3d
at 944. In this case, the government does not have evidence of what Defendants did
with the merchandise they obtained from OfficeMax. The government, however,
proved that the Channons fraudulently obtained $105,191 of actual merchandise from
OfficeMax.
20
We also note that, to the extent Defendant Matthew Channon asserts that the
government cannot seek substitute assets for the value of direct proceeds the
government has already seized, the government agrees that this would be a double
recovery and prohibited under § 853(p). The government may obtain a money
judgment in the full amount of fraud proceeds and apply the value of specific
forfeited property towards satisfaction of that judgment.
4.
The dissent ignores the arguments in Defendants’ opening briefs in this appeal
and what they identify as the “central attack” of this appeal. In order to reframe the
arguments, it reaches back to Defendants’ first appeal and quotes from Defendant
Matthew Channon’s brief in another appeal in order to reframe the issue on the
present appeal: that a district court may not enter an in personam money judgment
order of forfeiture for tainted merchandise obtained with rewards points rather than
cash. But the Federal Rules of Appellate Procedure are clear that an opening brief
must identify “appellant’s contentions and the reasons for them, with citations to the
authorities and parts of the record on which the appellant relies.” Fed. R. App. P.
28(a)(8)(A). “Consistent with this requirement, we routinely have declined to
consider arguments that are not raised, or are inadequately presented, in an
appellant’s opening brief.” Bronson v. Swensen, 500 F.3d 1099, 1104 (10th Cir.
2007).
True, Defendant Matthew Channon argued in his first appeal that money
judgments may be appropriate when the offender acquires money but that a jury
21
convicted him and his wife of acquiring rewards points, not money. He did not
reassert that argument in this appeal. Accordingly, Defendants have waived that
argument in this appeal. Instead, Defendant Matthew Channon argued: (1) the
government did not prove he personally obtained certain tainted property traced to
the underlying crime; (2) the government did not prove the identified tainted assets
could not be forfeited and needed to be substituted; and (3) the government did not
prove the amount of their gain, which invalidated the forfeiture order. As mentioned
above, Defendant Brandi Channon’s brief in the present appeal seeks to underscore
the conceptual difference between restitution and forfeiture and states that the
government failed to present any evidence of gain by the Channons, which caused the
forfeiture order amount to be “invalid and over-inflated.”
“[I]n personam money judgments are appropriate under criminal forfeiture.”
McGinty, 610 F.3d at 1246. This holding is not new. And we reaffirm it today.
Contrary to the dissent’s view, our holding does not undermine or nullify the
forfeiture statutes in this case. Because the dissent would reverse based on this
waived argument, we will address it.
The dissent attempts to distinguish our prior precedent on the basis that
Defendants’ original proceeds were not cash. The dissent characterizes the proceeds
traceable to the offenses of conviction as (a) unredeemed MaxPerks Rewards dollars,
(b) prepaid debit cards, (c) goods obtained through the Channons’ use of the prepaid
debit cards; and (d) merchandise from OfficeMax (including gift cards). The
merchandise, however, is “proceeds” because it is property traceable to redeemed
22
MaxPerks Rewards dollars. Defendants fraudulently acquired OfficeMax MaxPerks
Rewards—a cash equivalent that when redeemed has tangible and actual value and
“proceeds” under § 981(a)(2)(A)—and then used those rewards to obtain gift cards
and merchandise. And the government has proven that Defendants redeemed
$105,191 of Rewards for merchandise. Thus, the merchandise was “property
traceable thereto”—also making it “proceeds” under 18 U.S.C. § 981(a)(2)(A). Our
reasoning in McGinty and Arnold makes sense and applies equally in this case to
fraudulently obtained, redeemed rewards points. After all, criminal forfeiture is a
sanction against the individual rather than a judgment against the property itself.
McGinty, 610 F.3d at 1246 (quoting United States v. Hall, 434 F.3d 42, 59 (1st Cir.
2006)).
The dissent further contends that had Congress intended to authorize the
government in any case to obtain an in personam money judgment of forfeiture
equivalent to the retail value of any tainted merchandise obtained by a defendant, it
would have explicitly said so. The dissent fails to point out, however, that nothing in
the applicable statutes authorizes a district court to impose an in personam money
judgment of forfeiture in any circumstance. And in any event, we crossed that bridge
in McGinty where we held that “[a]lthough the criminal forfeiture statute does not
explicitly refer to money judgments, our sister circuits have uniformly recognized
that money judgments representing the unlawful proceeds are appropriate.”
McGinty, 610 F.3d at 1246. In the end, the dissent does not identify the specific
statutory text we supposedly violate, let alone explain how we run afoul of the text.
23
And nothing in our precedent or the statute prohibits or cautions against treating a
redeemed cash equivalent such as fraudulently obtained store credit or rewards points
differently from cash.
AFFIRMED.
24
Nos. 19-2028, 19-2029, United States v. Channon
BRISCOE, Circuit Judge, dissenting.
I respectfully dissent. In my view, the majority opinion is erroneous in four
respects. First, it fails to acknowledge the relevant procedural history of this case, and, as
a result, misinterprets the prior mandate. Second, the majority opinion acknowledges, but
then ultimately fails to address on the merits, the key arguments asserted by the
Channons in these appeals. Third, and most problematic for future cases, the majority
opinion ignores the plain language of the applicable forfeiture statutes, and also
improperly extends circuit precedent, by authorizing the entry of in personam money
judgments of forfeiture in cases, such as those at hand, where the offenses of conviction
resulted in the defendants obtaining items of personal property rather than money. In
other words, the majority opinion, in direct contravention of the applicable forfeiture
statutes, allows the government to seize property that was not derived from the offenses
of conviction (untainted property) without having first proven what proceeds defendants
actually derived from their offenses of conviction (tainted property) and why that tainted
property was not available for or otherwise not subject to seizure. Lastly, the majority
opinion errs in applying a plain error standard of review to the Channons’ argument that
the district court erred in holding them jointly and severally liable for the amended
judgment of forfeiture.
In my view, the district court was obligated to conduct an evidentiary hearing at
which the government was required to prove what tainted property defendants actually
derived from their offenses of conviction and, if necessary, the existence of one or more
of the circumstances described in the substitute-asset provision, 21 U.S.C. § 853(p), that
might allow for the seizure of untainted property. Here, those key steps were omitted,
permitting the government to obtain an in personam money judgement by showing only
the loss amount suffered by the victim—the face value of the redeemed MaxPerks
Rewards. I therefore vote to reverse the district court’s amended judgment of forfeiture
and remand to the district court for such a hearing.
I
I begin with the scope of the original panel’s mandate. The majority opinion, in
interpreting this prior mandate, fails to acknowledge the arguments that were made by the
Channons in their original appeals. Those arguments, however, and the manner in which
they were addressed by the original panel, necessarily must inform our interpretation of
the prior mandate.
In their original appeals, the Channons argued “that the government failed to meet
its burden to prove the amount forfeited ($105,191) was traceable to the offense of wire
fraud.” United States v. Channon, 881 F.3d 806, 811 (10th Cir. 2018) (Channon I). For
her part, Brandi Channon argued:
The $105,191 money judgment forfeiture against the Channons is based on
disregard of the language of 18 U.S.C. § 981(a)(1)(C). The forfeiture is in
the amount of the face value of the redeemed MaxPerks Rewards. But
that’s not how § 981(a)(1)(C) works. It does not say “[a]ny property” is
subject to forfeiture, as the government would have it. What property may
be forfeited under § 981(a)(1)(C) is “[a]ny property . . . which constitutes or
is derived from proceeds traceable to” the offense.
2
Money judgments may be appropriate when money is what the offender
acquires as a results of the offense. The Channons were convicted of
acquiring Rewards and merchandise, not money. The Rewards can only be
used to buy OfficeMax merchandise. The government alleged in the
indictment the Channons conspired to obtain merchandise and it set out to
prove at trial the Channons exchanged Rewards for merchandise. It
presented evidence of OfficeMax merchandise in the Channons’ home as
support for that contention. It seized the merchandise.
The government made no attempt at the forfeiture evidentiary hearing to
trace the Rewards to cash. It did not attempt to prove the market value of
the Rewards. It simply declared it was entitled to forfeiture of money
equivalent to whatever the Rewards certificates indicated they were worth
in discounts on OfficeMax merchandise. Section 981(a)(1)(C) does not
contemplate such an outcome. This Court must vacate the money judgment
forfeiture and remand for further proceedings.
Case No. 16-2285, Aplt. Br. at 36-37.
And Matthew Channon similarly argued:
The $105,191 money judgment forfeiture against the Channons is based on
a disregard of the language of 18 U.S.C. § 981(a)(1)(C). The forfeiture is in
the amount of the face value of the redeemed MaxPerks rewards. But that’s
not how § 981(a)(1)(C) works. It does not say “[a]ny property” is subject to
forfeiture, as the government would have it. What property may be forfeited
under § 981(a)(1)(C) is “[a]ny property . . . which constitutes or is derived
from proceeds traceable to” the offense.
Money judgments may be appropriate when money is what the offender
acquires as a result of the offense. The Channons were convicted of
acquiring rewards, not money. The rewards can only be used to buy
OfficeMax merchandise. The government alleged in the indictment the
Channons conspired to obtain merchandise and it set out to prove at trial
the Channons exchanged rewards for merchandise. It presented evidence of
OfficeMax merchandise in the Channons’ home as support for that
contention. It seized that merchandise.
The government made no attempt at the forfeiture evidentiary hearing to
trace the rewards to cash.
3
Case No. 16-2254, Aplt. Br. at 42-43.
The government argued, in response:
The Channons received valuable merchandise from OfficeMax as the
proceeds of their fraud. Those proceeds were dissipated, hidden, or
otherwise untraceable, making a money judgment the only means of taking
title of the Channons’ unlawful gains. The district court did not err in
awarding the United States a money judgment in the amount of their fraud
proceeds.
Case No. 16-2254, Aple Br. at 53. The government also filed a Rule 28(j) letter stating,
in pertinent part:
Going forward, including in the Channons’ case, the government w[ould]
. . . seek to enforce a forfeiture money judgment only through the
substitute-asset provision of § 853(p). In other words, in seeking to forfeit
specific property of the Channons to satisfy the money judgment, the
government will move to amend the forfeiture order under Federal Rule of
Criminal Procedure 32.2(e) and will establish under § 853(p) that the
proceeds are unavailable or are substantially diminished in value.
Aple. Rule 28(j) Letter at 1.
The original panel had this to say about the parties’ arguments, under the general
heading description “Forfeiture”:
Defendants last argue that the government failed to meet its burden to prove
the amount forfeited ($105,191) was traceable to the offense of wire fraud.
We have held that wire fraud proceeds are subject to forfeiture under 18
U.S.C. § 981(a)(1)(C) and 28 U.S.C. § 2461. See United States v.
Courtney, 816 F.3d 681, 685 (10th Cir. 2016). The property subject to
forfeiture includes “[a]ny property, real, or personal, which constitutes or is
derived from proceeds traceable to [the] violation.” 18 U.S.C.
§ 981(a)(1)(C). The substitute-asset provision, 21 U.S.C. § 853(p),
provides the only method for the forfeiture of untainted property.
Honeycutt v. United States, ––– U.S. ––––, 137 S. Ct. 1626, 1633, 198 L.
Ed. 2d 73 (2017).
4
The government concedes a remand to conform the money judgment to the
requirements of § 853(p) may be necessary. The government explains that
going forward it will seek only to enforce a forfeiture money judgment
through the substitute-asset provisions of § 853(p) and will seek to amend
the forfeiture order under Fed. R. Crim. P. 32.2(e). Accordingly, we
remand so the district court may conduct further proceedings on this issue.
Channon I, 881 F.3d at 811–12 (emphasis added).
There has been confusion on the part of the parties, and I would submit the district
court as well, regarding the meaning of the concluding phrase “this issue.” The
Channons have consistently interpreted the phrase “this issue” as referring to their
general challenge to the district court’s original judgment of forfeiture as identified in the
original panel’s ruling just quoted: “Defendants last argue that the government failed to
meet its burden to prove the amount forfeited ($105,191) was traceable to the offense of
wire fraud.” The government, in contrast, has interpreted it as referring only to the
government’s concession that a remand was necessary to conform the judgment to the
requirements of § 853(p).
In deciding between these two competing interpretations, it is important to note
that the panel in Channon I acknowledged, but did not expressly address, defendants’
argument “that the government failed to meet its burden to prove the amount forfeited
($105,191) was traceable to the offense of wire fraud.” Id. at 811. Likewise, the panel
acknowledged, but again did not expressly address, the government’s concession that “a
remand to conform the money judgment to the requirements of § 853(p) may be
necessary.” Id. at 811-12. In addition, the panel discussed both defendants’ arguments
5
and the government’s concession under the general heading of “Forfeiture.” Id. at 811.
Therefore, the better interpretation of the prior mandate is that it was intended to
encompass both the issue raised by defendants, i.e., the general challenge to the judgment
of forfeiture, and the § 853(p) issue raised by the government in its concession. To
conclude that the remand was limited only to the § 853(p) issue raised by the government
would mean that we would have to interpret the decision in Channon I as having
implicitly rejected the Channons’ general challenge to the original judgment of forfeiture
order. Nothing in Channon I, however, suggests that this was the prior panel’s intent.
Unfortunately, the majority opinion fails to acknowledge the full scope of the
arguments asserted by the Channons in their original appeals, and all but ignores the
parties’ competing interpretations of the original panel’s mandate. Further, the majority
opinion treats the phrase “this issue” in Channon I as referring solely to the § 853(p)
issue raised by the government. Maj. Op. at 8 (“The prior panel remanded based on the
government’s concession that the language of the judgment needed to reference
§ 853(p)’s requirements—no more explanation, no less.”). For the reasons outlined
above, I think that this is both incomplete and incorrect.
Because, in my view, the prior mandate encompassed both the general arguments
raised by the Channons and the § 853(p) issue raised by the government, I believe that
the district court was required to do more on remand than simply issue an amended
judgment of forfeiture. See generally Harte v. Bd. of Comm’rs, 940 F.3d 498, 510 (10th
Cir. 2019) (holding that “a district court must comply strictly” with the mandate). More
6
to the point, I disagree with the majority opinion’s conclusion that “the [prior] mandate’s
language did not require the district court to hold an evidentiary hearing on the forfeiture”
issues raised by the defendants.1 Maj. Op. at 7.
II
Near the beginning of Section II, the majority opinion correctly summarizes the
key arguments made by the Channons in the present appeals:
Defendants further contend the district court failed to make specific
findings as to what tainted assets each Defendant obtained as a result of
their criminal activity, whether any need existed for substitution of
untainted assets for the tainted assets, and whether the value of the
substituted asset is equal to or less than the value of unavailable tainted
assets.
Id. at 4-5. In other words, the Channons argue in their current appeals, as they did in
their original appeals, that the government failed to meets its burden of proving the
existence of any tainted property that they obtained from their crimes of conviction2 or,
1
Whether or not it was the responsibility of the district court to decipher the
mandate by examining the parties’ arguments from the first appeal, it is most certainly
our duty to do so.
2
Curiously, the majority asserts elsewhere in its opinion that defendant Matthew
Channon waived his challenge to the money judgment of forfeiture that was entered by
the district court. Maj. Op. at 22. This is incorrect. Both of the Channons have
consistently argued, both in their first appeals and again in the current appeals, that the
government failed to meet its burden of proof under 18 U.S.C. § 981(a)(1)(C) and that, as
a result, it was error for the district court to enter the money judgment of forfeiture. For
example, Matthew Channon’s opening brief in this case describes the “ISSUES
PRESENTED” as follows:
Whether pursuant to Honeycutt v. United States, 137 S. Ct. 1626 (2017),
before a court can issue a judgment to forfeit untainted money as substitute
7
alternatively, that such tainted property is unavailable for one or more of the reasons
outlined in the substitute-asset provision, 21 U.S.C. § 853(p).
Unfortunately, the majority opinion, after acknowledging these arguments, makes
no further mention of them. Instead, much of the remainder of the majority opinion
focuses on arguments that were actually never made by either defendant: that “because
the district court based both the restitution and forfeiture amounts on OfficeMax’s loss,
the forfeiture judgment constitutes a double recovery,” Maj. Op. at 11; that, with respect
to fraudulently obtained merchandise that defendants subsequently sold, forfeiture is
proper only if defendants made a profit above the value of the merchandise; and,
ultimately, that defendants are challenging only the amount, rather than the fact, of the
money judgment of forfeiture.
III
The most troubling aspect of the majority opinion is its “hold[ing] that a district
court may base a judgment’s forfeiture amount on the value of the fraudulently obtained
assets under 21 U.S.C. § 853(p) and Fed. R. Crim. P. 32.2(e), it must hold a
hearing to determine whether the Government has met its burden to prove
that (1) the defendant obtained certain tainted money or property traced to
the underlying crime, (2) pursuant to one of the subsections A-E in section
853(p) and due to the defendant’s actions or omissions, the identified
tainted assets cannot be forfeited and need to be substituted with untainted
assets in the defendant’s possession, and (3) the value of the untainted
substituted assets is not higher than the initial tainted assets the defendant
had obtained.
Matthew Channon Br. at 3-4.
8
merchandise at the time a defendant acquired it.” Id. at 2; see id. at 13 (“Put simply, the
government is entitled to forfeiture in the amount of Defendants’ proceeds, and
OfficeMax, the victim, was entitled to restitution in the amount of its loss.”). This
holding, as I shall proceed to explain, is quite remarkable because it is contrary to, and
effectively nullifies, the language of the forfeiture statutes relied on by the government in
this case by enabling the government to obtain an in personam money judgment by
proving only the amount of the victim’s loss.
“Criminal forfeiture statutes empower the Government to confiscate property
derived from or used to facilitate criminal activity. Such statutes serve important
governmental interests such as ‘separating a criminal from his ill-gotten gains,’ ‘returning
property, in full, to those wrongfully deprived or defrauded of it,’ and ‘lessen[ing] the
economic power’ of criminal enterprises.” Honeycutt v. United States, 137 S. Ct. 1626,
1631 (2017) (quoting Caplin & Drysdale, Chartered v. United States, 491 U.S. 617, 629–
630 (1989)).
“If the government intends to pursue a forfeiture, Federal Rule of Criminal
Procedure 32.2(a) requires that the indictment ‘contain[] notice to the defendant that the
government will seek the forfeiture of property as part of any sentence in accordance with
the applicable statute.’” United States v. Courtney, 816 F.3d 681, 684–85 (10th Cir.
2016) (quoting Fed. R. Crim. P. 32.2(a)). In this case, the superseding indictment
notified the Channons that the government would seek forfeiture pursuant to 18 U.S.C.
§ 981(a)(1)(C) and 28 U.S.C. § 2461.
9
“Section 981(a)(1)(C) allows for the forfeiture of any property or proceeds
traceable to an offense constituting a ‘specified unlawful activity.’” Courtney, 816 F.3d
at 685. “Specified unlawful activity” is defined in 18 U.S.C. § 1956(c)(7) to include any
offense listed in 18 U.S.C. § 1961(1). “Among the offenses listed [in] § 1961(1) is
§ 1343—the wire fraud statute” that the Channons were convicted of violating. Id.
Because § 981(a)(1)(C) “is a civil forfeiture statute,” 28 U.S.C. § 2461, the other statute
cited in the superseding indictment, “comes into play” and “is read as a gap-filler
between civil and criminal forfeiture, in that it permits criminal forfeiture when no
criminal forfeiture provision applies to the crime charged against a particular defendant
but civil forfeiture for that charged crime is nonetheless authorized.”3 Id. (quotations
omitted).
3
Section 2461(c) states:
If a person is charged in a criminal case with a violation of an Act of
Congress for which the civil or criminal forfeiture of property is authorized,
the Government may include notice of the forfeiture in the indictment or
information pursuant to the Federal Rules of Criminal Procedure. If the
defendant is convicted of the offense giving rise to the forfeiture, the court
shall order the forfeiture of the property as part of the sentence in the
criminal case pursuant to the Federal Rules of Criminal Procedure and
section 3554 of title 18, United States Code. The procedures in section 413
of the Controlled Substances Act (21 U.S.C. § 853) apply to all stages of a
criminal forfeiture proceeding, except that subsection (d) of such section
applies only in cases in which the defendant is convicted of a violation of
such Act.
28 U.S.C. § 2461(c).
10
The term “proceeds,” as employed in § 981(a)(1)(C), carries slightly different
definitions depending upon the specific criminal activity at issue. “In cases,” such as the
one at hand, “involving illegal goods, illegal services, [and] unlawful services, . . . the
term ‘proceeds’ means property of any kind obtained directly or indirectly, as the result
of the commission of the offense giving rise to forfeiture, and any property traceable
thereto, and is not limited to the net gain or profit realized from the offense.”4 18 U.S.C.
§ 981(a)(2)(A).
As the original panel noted in Channon I, “[t]he substitute-asset provision, 21
U.S.C. § 853(p), provides the only method for the forfeiture of untainted property.”
Channon I, 881 F.3d at 811. Section 853(p) states as follows:
(p) Forfeiture of substitute property
(1) In general
Paragraph (2) of this subsection shall apply, if any property described in
subsection (a), as a result of any act or omission of the defendant--
(A) cannot be located upon the exercise of due diligence;
(B) has been transferred or sold to, or deposited with, a third party;
4
Section 981(a)(2)(A) also lists “telemarketing and health care fraud schemes.”
The First Circuit has concluded that listing these two specific fraud schemes in
subsection (a)(2)(A) would have been unnecessary if Congress had intended for the
generic term “unlawful activities” to be broadly interpreted to include fraud schemes.
United States v. Carpenter, 941 F.3d 1, 7 (1st Cir. 2019). The problem here, however, is
that the other two definitions of “proceeds” outlined in §§ 981(a)(2)(B) and (C) do not
apply. Subsection (B)’s definition applies to “cases involving lawful goods or lawful
services that are sold or provided in an illegal manner.” Subsection (C)’s definition
applies to “cases involving fraud in the process of obtaining a loan or extension of
credit.”
11
(C) has been placed beyond the jurisdiction of the court;
(D) has been substantially diminished in value; or
(E) has been commingled with other property which cannot be divided
without difficulty.
(2) Substitute property
In any case described in any of subparagraphs (A) through (E) of
paragraph (1), the court shall order the forfeiture of any other
property of the defendant, up to the value of any property described
in subparagraphs (A) through (E) of paragraph (1), as applicable.
(3) Return of property to jurisdiction
In the case of property described in paragraph (1)(C), the court may, in
addition to any other action authorized by this subsection, order the
defendant to return the property to the jurisdiction of the court so that the
property may be seized and forfeited.
28 U.S.C. § 853(p).5
In Honeycutt, the Supreme Court held that “[s]ection 853(p) demonstrates that
Congress contemplated situations where the tainted property itself would fall outside the
Government’s reach” and, “[t]o remedy that situation, Congress did not authorize the
Government to confiscate property from other defendants or co-conspirators; it
authorized the Government to confiscate assets only from the defendant who initially
acquired the property and who bears responsibility for its dissipation.” 137 S. Ct. at
1634.
5
Section 2461(c) expressly states that “[t]he procedures in section” 853 “apply to
all stages of a criminal forfeiture proceeding.” 28 U.S.C. § 2461(c). Thus, § 853(p)
applies in instances where the government seeks forfeiture of so-called “substitute
property,” i.e., property that is untainted by the crimes of conviction.
12
The question is how these forfeiture statutes apply in the case before us. Notably,
the presentence investigation reports (PSRs) that were prepared and filed in these cases
provide us with some details about how the Channons committed their crimes:
This case arose from a fraud scheme perpetrated on the former office-
supply retail chain OfficeMax by Albuquerque residents Matthew and
Brandi Channon. The scheme had two basic components, both of which
depended on the Channons creating and controlling thousands of customer-
reward accounts in fictitious names. First, the Channons used their
accounts and a computer program to claim reward credit for purchases
made by other customers. Second, the Channons used their many accounts
to evade OfficeMax’s restrictions on participation in a program in which
OfficeMax would award store credit to customers who recycled used ink
and toner cartridges at its stores. The Channons then used the store credit
they amassed through the scheme to purchase prepaid debit cards at
OfficeMax, which they could use like cash; they also used their rewards to
purchase items at OfficeMax that Matthew Channon would then resell on
eBay. To avoid detection, the Channons traveled across the country to
execute their scheme, personally visiting over 300 different OfficeMax
stores in 20 states.
***
The investigation also discovered that Matthew Channon was using
multiple eBay accounts in execution of the fraud. These accounts sold
merchandise obtained with MaxPerks rewards—and in some cases, sold
fraudulently obtained MaxPerks Rewards certificates themselves. These
accounts also purchased at least 32,000 used ink cartridges through eBay at
an average cost of 32 cents per cartridge. In addition, Matthew Channon’s
eBay accounts purchased OfficeMax coupons, which the Channons often
used in connection with the reward certificates to purchase items at
OfficeMax at a discount.
***
Brandi Channon was interviewed during the search of the Channons’
residence in Albuquerque on June 28, 2011. * * * She described how she
and Matthew would travel around the country to execute the scheme,
including ordering ink online and having it shipped ahead of time to the
13
hotel they planned to stay at. To pay for airfare they would purchase
Southwest Airlines gift cards at OfficeMax using MaxPerks Rewards.
ROA, Vol. 3 (Brandi Channon PSR) at 3–8.
Applying § 981(a)(1)(C) to this set of facts, it appears that the “proceeds traceable
to” the Channons’ offenses of conviction are varied and include, among other things,
(a) unredeemed MaxPerks Rewards dollars, (b) prepaid debit cards, (c) goods obtained
through the Channons’ use of the prepaid debit cards, and (d) merchandise from
OfficeMax (including gift cards).6 Thus, if the Channons were, at the time of arrest, still
in possession of merchandise and/or prepaid debit cards that they obtained from
OfficeMax, then those items of tainted personal property are subject to forfeiture under
the statute.7 Only if the government proves the existence of one or more of the
circumstances described in § 853(p)(1) can it seek the forfeiture of untainted property.
6
If the government can prove that some of these items were sold by the Channons,
then the government could obtain a money judgment of forfeiture equal to the sale
proceeds. See United States v. Gregoire, 638 F.3d 962, 972 (8th Cir. 2011) (holding that,
for purposes of criminal forfeiture, “[t]he gross revenues from Gregoire’s eBay sales [of
stolen property] during the period alleged in the indictment were direct proceeds of his
mail fraud offense of conviction”).
7
Notably, government counsel conceded at oral argument in the first appeals that
items of merchandise were seized from the Channons’ home during the execution of a
search warrant. But government counsel offered no explanation as to why it did not seek
the forfeiture of these items under § 981(a)(1)(C), or why its failure to do so did not
preclude it from seeking the forfeiture of untainted property. And, curiously, the majority
“agree[s] . . . that if Defendants are still in possession of the tainted merchandise, then
those items are subject to forfeiture under the applicable statutes.” Maj. Op. at 19. The
majority, however, offers no explanation regarding precisely how, under the statutory
14
Unfortunately, the majority opinion ignores these controlling statutory provisions
and the relevant facts of the Channons’ crimes, and instead “hold[s] that a district court
may base a judgment’s forfeiture amount on the value of the fraudulently obtained
merchandise at the time a defendant acquired it.” Maj. Op. at 2; see id. at 14 (“[B]ecause
Defendants did not resell the merchandise or sell it for a profit above the value of the
merchandise, we base Defendants’ gain on the value of the merchandise at the time they
obtained it.”).8 As authority for this holding, the majority opinion cites only to two of our
prior cases: United States v. Arnold, 878 F.3d 940 (10th Cir. 2017), and United States v.
McGinty, 610 F.3d 1242 (10th Cir. 2010). Maj. Op. at 8-9, 11. Arnold and McGinty are
distinguishable, however, because the crimes of conviction in both cases resulted in
money proceeds. 878 F.3d at 941 (noting that the defendant “devised a scheme to
framework, this merchandise should now be forfeited and, if so, how it would impact the
money judgment issued by the district court.
Somewhat relatedly, the majority opinion also discusses a hypothetical scenario in
which a thief steals and then keeps a $50,000 piano. Id. at 13. According to the majority,
the thief realized a gain of $50,000 at the time of the wrongdoing and thus is subject to a
money judgment of forfeiture in that amount. Id. This is incorrect. Under the statutory
framework outlined above, the piano would be subject to seizure and no money judgment
of forfeiture would be available (unless, of course, the government could prove the
existence of one or more of the circumstances described in § 853(p)(1)).
8
The majority also, again contrary to the language of the statutory framework that
is applicable here, appears to place the burden on criminal defendants to prove what
happened to merchandise obtained from their crimes. See United States v. Ursery, 518
U.S. 267, 289 (1996) (holding that 19 U.S.C. § 1615 “governs the burden of proof in
forfeiture proceedings under §§ 881 and 981”); 19 U.S.C. § 1615 (providing that the
burden of proof lies on the claimant).
15
defraud individuals out of the rebates paid to them when they purchased new vehicles”);
610 F.3d at 1245 (“The government contends that it is entitled to the forfeiture of the
proceeds of McGinty’s misapplication of bank funds, and the district court erred in
refusing to order a money judgment representing those proceeds. We agree.”). Money
judgments in those cases were therefore consistent with the language of the forfeiture
statute. Nothing in either Arnold or McGinty can reasonably be read as suggesting that it
is proper for a district court to impose an in personam money judgment of forfeiture
against a defendant who obtains merchandise, rather than money proceeds, as a result of
his crime.
In sum, the majority opinion’s extension of Arnold and McGinty to the cases at
hand is clearly contrary to, and effectively serves to nullify, the plain language of the
forfeiture statutes relied on by the government in these cases. Had Congress intended to
authorize the government in any case to obtain an in personam money judgment of
forfeiture equivalent to the retail value of any tainted merchandise obtained by a
defendant, it would have said so. But it did not.
For these reasons, I would remand the case to the district court with directions to
conduct an evidentiary hearing on the forfeiture issues raised by the defendants. At that
time, the government would be required to establish the existence of tainted property
and/or the existence of one or more of the circumstances outlined in § 853(p)(1). In the
absence of such proof, no judgment of forfeiture can properly be entered against the
Channons.
16
IV
Lastly, I disagree with the majority opinion’s conclusion that the Channons’
challenge to the joint and several nature of the district court’s amended judgment of
forfeiture is subject to review only for plain error. Maj. Op. at 16. As outlined above, the
Channons believed, reasonably in my view, that the prior mandate required the district
court to do more than simply issue an amended judgment. Thus, on remand, the
Channons moved for an “evidentiary hearing on the matter of the propriety and amount,
if any, of forfeiture of money or property.” ECF No. 486 at 1. The district court,
however, never ruled on that motion and instead simply issued the amended judgment of
forfeiture. Thus, there was never truly an opportunity for the Channons to raise the joint
and several issue prior to the district court’s issuance of its amended judgment of
forfeiture.
17