United States v. Charles Emor , 785 F.3d 671 ( 2015 )

United States Court of Appeals
FOR THE DISTRICT OF COLUMBIA CIRCUIT
Argued September 9, 2014 May 5, 2015
No. 13-3071
UNITED STATES OF AMERICA,
APPELLEE
v.
CHARLES IKE EMOR, ALSO KNOWN AS CHARLES IKE
EMENOGHA, ALSO KNOWN AS CHARLES IKESON,
APPELLEE
SUNRISE ACADEMY,
APPELLANT
Appeal from the United States District Court
for the District of Columbia
(No. 1:10-cr-00298-1)
John D. Quinn argued the cause for appellant. With him
on the briefs were Stephen Sale and David B. Smith.
Zia M. Faruqui, Assistant U.S. Attorney, argued the
cause for appellee. With him on the brief were Ronald C.
Machen Jr., U.S. Attorney, and Elizabeth Trosman, John P.
Mannarino, and Diane G. Lucas, Assistant U.S. Attorneys.
Elizabeth H. Danello, Assistant U.S. Attorney, entered an
appearance.
2
Before: BROWN, MILLETT and WILKINS, Circuit Judges.
Opinion for the Court filed by Circuit Judge BROWN.
Concurring opinion filed by Circuit Judge WILKINS.
BROWN, Circuit Judge. In an episode of the iconic 1990s
television show Friends, Joey Tribbiani tries to dissuade
Rachel Green from moving to Paris. Joey asks Rachel to flip a
coin. If he wins the coin flip, she must agree to stay. Rachel
flips the coin; Joey loses. When later recounting the story to
Ross Gellar, a befuddled Joey says, “[w]ho loses fifty-seven
coin tosses in a row?” Friends: The One with Rachel’s Going
Away Party (NBC television broadcast Apr. 29, 2004). Before
Ross can answer, Joey explains Rachel’s rules: “Heads, she
wins; tails, I lose.” Id.
The proceedings in this case have largely followed the
same rules. SunRise Academy (“SunRise”) claimed the
federal government seized property from criminal defendant
Charles Emor belonging to SunRise. But the government
succeeded in excluding SunRise from Emor’s criminal
proceedings, suggesting SunRise could press its claims to the
property in a third-party forfeiture proceeding. When SunRise
later did so, the government filed a motion to dismiss the
petition, contending that SunRise should be denied a hearing
based on findings the court made in the prior proceeding from
which SunRise was excluded. Because this heads the
government wins and tails SunRise loses form of criminal
forfeiture does not comport with the statutory scheme, we
reverse.
3
I
A
SunRise was founded in 1999 by Charles Emor as a
private nonprofit school serving special needs children in the
District of Columbia. SunRise was governed by a Board of
Directors, which, at various times, consisted of SunRise’s
principal, teachers, employees, and Emor’s family members.
Emor was the one constant on SunRise’s Board.
SunRise was no small operation. It built a solid financial
endowment, possessed two campuses, educated over 150
students each semester, and employed a number of teachers,
therapists, and counselors. In July 2007, SunRise filed a
successful application for a Certificate of Approval with the
District of Columbia to provide educational services to special
needs students. Students paid no tuition to attend SunRise;
instead, the District reimbursed SunRise for educating the
students. That reimbursement often totaled over $400,000 a
month.
In April 2009, the District of Columbia Public Schools
(“DCPS”) decided to investigate whether SunRise had fully
implemented DCPS’s policies. More than a year later, the
Office of State Superintendent of Education (“OSSE”) issued
a report and revoked SunRise’s Certificate, after finding
SunRise had failed to keep accurate daily attendance records,
fully report absenteeism, and had fabricated student records to
receive payment from the District for services not actually
rendered. But OSSE did not revoke SunRise’s Certificate due
to the quality of education provided by SunRise.
4
B
Meanwhile, from January 2006 through November 2010,
Emor used his authority as a SunRise Director and Board
Member to withdraw funds from SunRise’s bank accounts.
He then used those funds to, inter alia, purchase luxury items
for himself, provide money to his family members, and pay
the rent on his townhouse.
Emor’s most brazen fraud involved convincing
SunRise’s Board to invest in a for-profit company called Core
Ventures. According to the proposal, Core would build a
coffee shop or vocational school on SunRise property. The
business would provide training for SunRise students and
profits would be returned to SunRise.
Beginning in March 2009, Jamila Negatu, a SunRise
Board Member and employee, made a series of wire transfers
totaling over two million dollars to Core. Emor directed
Negatu to transfer the money, even though SunRise possessed
no loan documentation binding Core to repay the money,
reinvest the profits, or explaining the consequence of default.
The only documentation regarding the money transfers were
minutes from two SunRise Board meetings and financial
documents prepared for SunRise by its accountant
characterizing the transfers as loans.
The money wired to Core was never returned to SunRise.
Nor did Core pursue its plans for building a coffee shop or a
vocational school. Core, however, did purchase and pay the
insurance on a Lexus SUV that Emor drove.
5
C
The federal government eventually caught Emor,
arresting him, and seizing the Lexus SUV and the over two
million dollars in Core’s bank account. The government
charged Emor with thirty-seven counts, including mail and
wire fraud, and various other federal and D.C. Code
violations. The government also provided notice it was
seeking forfeiture of Core’s property.
The government had trouble identifying the alleged
victim of Emor’s fraud. In some counts, the government
alleged Emor, through SunRise, devised a scheme to defraud
and to obtain public money from the District, for his own use
and benefit. Consistent with a scheme to defraud the District,
the government charged Emor with ten counts of mail fraud
and five counts of wire fraud, with each count involving the
District reimbursing SunRise for educational services. The
district court ultimately dismissed these counts of the
indictment with prejudice over the government’s objections.
But the government also described Emor’s scheme as one
to defraud SunRise, alleging Emor created a set of bogus
SunRise Board of Director resolutions purportedly
authorizing SunRise to lend over two million dollars to Core
for the purposes of operating a coffee shop, when the “terms
of the loan w[ere] never reduced to writing.” J.A. 50. And the
government charged Emor with several wire fraud counts
involving each wire transfer from SunRise to Core.
SunRise was never charged with wrongdoing by the
government. In fact, SunRise filed a motion under Federal
Rule of Criminal Procedure 41 for the return of its property,
claiming that it owned the two million dollars and the Lexus.
The district court denied that request, holding that 21 U.S.C.
6
§ 853(k) prohibits third parties from intervening in criminal
proceedings, other than a third party proceeding under 21
U.S.C. § 853(n). Sunrise Acad. v. United States, 791 F. Supp.
2d 200, 204 (D.D.C. 2011).
Emor ultimately negotiated a sweetheart deal with the
government, which agreed to drop every count save one in
exchange for Emor’s guilty plea. The Statement of the
Offense, included as part of Emor’s plea agreement to one
count of wire fraud, alleged that Emor devised a scheme to
obtain money “from SunRise’s bank accounts.” J.A. 71. As a
part of the scheme, Emor committed “various
misrepresentations and omissions of material facts,” and
“used the money obtained from SunRise’s bank accounts in a
manner unrelated to the education of students with disabilities
at SunRise.” Id. But the prosecutors consciously and
deliberately declined to identify the victim of Emor’s fraud,
and the district court deferred a determination of the fraud
victim’s identity until the preliminary forfeiture hearing.
D
SunRise could not participate at the preliminary forfeiture
hearing, although two board members and several employees
were called to testify as part of the government’s case. The
court made a number of findings at the hearing, of which
three are relevant to this appeal. First, the court found
SunRise did not own Core. Second, the court held SunRise
was Emor’s alter ego. Third, the court found, for restitution
purposes, that SunRise was not a victim of Emor’s fraud. The
court entered a preliminary order forfeiting the funds in
Core’s bank accounts and the Lexus SUV to the federal
government.
7
SunRise then filed a third-party petition claiming
ownership in the forfeited property and requesting a hearing
to determine its interest. SunRise claimed it was a secured
lender to Core; the owner of the forfeited property; the
assignee of all interest in the forfeited property from Core; the
beneficiary of a constructive trust; and the victim of Emor’s
fraud.
The government moved to dismiss SunRise’s petition for
lack of standing, and the district court granted the motion.
United States v. Emor¸ 2013 WL 3005366 (D.D.C. June 18,
2013). The court found SunRise had failed to assert facts
showing it possessed a secured interest in the seized funds.
Moreover, SunRise’s bare assertion it owned Core was
insufficient in light of the court’s previous finding at the
preliminary forfeiture hearing that Emor, alone, owned Core.
The court also rejected SunRise’s claim of assignment
from Core. The court found Core was Emor’s nominee (hence
Core and Emor were the same), and only someone “other
than” the defendant could petition for a third-party
proceeding. J.A. 313. Based on a finding it made during the
preliminary forfeiture hearing, the court held SunRise lacked
standing because it was an alter ego of Emor—a finding it
found “no reason to revisit.” J.A. 323. The court further
declined SunRise’s constructive trust argument, noting that
this Court does not allow the constructive trust theory of
standing in forfeiture cases. See United States v. BCCI
Holdings (Luxemborg), S.A., 46 F.3d 1185 (D.C. Cir. 1995).
Lastly, the court concluded SunRise was not entitled to the
forfeited funds as a victim of fraud because merely being a
fraud victim does not confer an interest in property necessary
to meet the standing requirements.
8
II
SunRise claims it possessed the standing necessary to
obtain a third-party ancillary hearing under several legal
theories. Before addressing those theories, a discussion of
criminal forfeiture procedures is necessary.
A
Under 28 U.S.C. § 2461(c), “criminal forfeiture is
available for general . . . wire fraud violations.” United States
v. Day, 524 F.3d 1361, 1376 (D.C. Cir. 2008). The procedures
set forth in 21 U.S.C. § 853—minus subsection (d)—apply
“to all stages of a criminal forfeiture proceeding.” 28 U.S.C.
2461(c).
At the preliminary order of forfeiture stage, “[i]f the
government seeks forfeiture of specific property, the court
must determine whether the government has established the
requisite nexus between the property and the offense.” FED. R.
CRIM. P. 32.2(b)(1)(A). The court is required to make its
determination “without regard to any third party’s interest in
the property.” FED. R. CRIM. P. 32.2(b)(2)(A). Indeed, no third
party may “intervene” in the criminal forfeiture proceeding.
21 U.S.C. § 853(k)(1).
The sole forum for a third party to address its interest in
forfeited property is through a third party ancillary
proceeding. See id. § 853(n). Any third party, “other than the
defendant,” may petition for an ancillary proceeding if it can
assert a “legal interest” in the forfeited property. Id. §
853(n)(2). The third party must file a petition setting forth the
“nature and extent” of its interest in the property, the “time
and circumstances” when petitioner acquired that interest, any
supporting facts, and the requested relief. Id. § 853(n)(3).
9
After receiving a petition, a court may, upon motion,
“dismiss the petition for lack of standing” or for “failure to
state a claim.” FED. R. CRIM. P. 32.2(c)(1)(A). For purposes
of deciding any motion to dismiss, “the facts set forth in the
petition are assumed to be true.” Id.
In an appeal from a criminal forfeiture proceeding, we
review the district court’s fact finding for clear error, see
United States v. Oregon, 671 F.3d 484, 490 (4th Cir. 2012),
and the district court’s legal interpretations de novo, see Day,
524 F.3d at 1367.
B
As a threshold matter, we must determine whether
SunRise has standing under Article III of the Constitution. See
Lujan v. Defenders of Wildlife, 504 U.S. 555, 559–60 (1992).
“[T]he requirements for a [petitioner] to demonstrate
constitutional standing [to challenge a forfeiture] are very
forgiving.” United States v. One-Sixth Share of James J.
Bulger in All Present And Future Proceeds of Mass Millions
Lottery Ticket No. M246233, 326 F.3d 36, 41 (1st Cir. 2003).
While some courts have focused on whether a party had an
ownership or possessory interest under state law at the time of
forfeiture, see, e.g., United States v. Timley, 507, F.3d 1125,
1129 (8th Cir. 2007), other courts have noted “it is the injury
to the party seeking standing that remains the ultimate focus,”
United States v. Cambio Exacto, S.A., 166 F.3d 522, 527 (2d
Cir. 1999). In general, any colorable claim on the property
suffices, if the claim of injury is “redressable, at least in part,
by a return of the property.” United States v. 7725 Unity Ave.
N., 294 F.3d 954, 957 (8th Cir. 2002).
10
SunRise claims ownership over the money it transferred
to Core’s accounts in response to Emor’s fraudulent
statements. SunRise further claims that had the government
not seized the property and obtained a preliminary order of
forfeiture, SunRise would have obtained its property back,
either as the prior owner and crime victim with a superior
interest or under Core’s assignment of rights. If SunRise
could have obtained the property back from Core, SunRise
continues to suffer injury because of the forfeiture order. See
Oregon, 671 F.3d at 491 (declining to adopt government’s
argument that “a petitioner with less than legal title
challenging the forfeiture . . . could never have standing, even
if its interest is greater than that forfeited by the defendant to
the United States”); United States v. Campos, 859 F.2d 1233,
1237–38 (6th Cir. 1988) (noting the criminal forfeiture statute
“goes beyond giving only a party with a secured interest an
opportunity to be heard”). Thus, because the seizure of
property without due process is the quintessential injury, it is
sufficient, for constitutional purposes, that SunRise alleged its
property was taken by the government through forfeiture; it
would have reacquired its property had the property not been
forfeited to the government; it was excluded from the
forfeiture proceedings; and its injury is redressable through an
amendment of the forfeiture order. See Lujan, 504 U.S. at560–61 (requiring injury, causation, and redressability in
order to establish constitutional standing).
C
We next turn to statutory standing. Under 21 U.S.C. §
853(n)(2), any third party, “other than the defendant,” may
petition for an ancillary proceeding. The district court held
that SunRise was Emor’s alter ego; and hence, SunRise
lacked standing because it was not someone “other than the
defendant.” SunRise claims the court was wrong to dismiss its
11
petition based on an alter ego finding the court made at a
hearing in which it was not allowed to participate. We agree.
To begin with, the Supreme Court has said that the term
“statutory standing” is a bit “misleading.” Lexmark Int’l, Inc.
v. Static Control Components, Inc., 134 S. Ct. 1377, 1387 n.4
(2014). Statutory standing is not really about standing at all,
in the sense that it limits a “court’s statutory or constitutional
power to adjudicate the case.” Id. (emphasis in original).
Instead, statutory standing is nothing more than an inquiry
into whether the statute at issue conferred a “cause of action”
encompassing “a particular plaintiff’s claim.” Id. at 1387; see
also Natural Res. Def. Council v. EPA, 755 F.3d 1010, 1018
(D.C. Cir. 2014). In other words, statutory standing “is itself a
merits issue.” Oregon, 671 F.3d at 490 n.6.
The focus on whether SunRise pled a valid cause of
action substantially changes the inquiry. A district court
deciding a motion to dismiss on jurisdictional grounds, such
as standing, may consider evidence outside the complaint. See
Coal. for Underground Expansion v. Mineta, 333 F.3d 193,
198 (D.C. Cir. 2003) (citing FED. R. CIV. P. 12(b)(1)). But
when a court decides whether a petitioner stated a valid claim
for relief, a court must treat the complaint’s factual allegations
as true and may not use factual findings and legal conclusions
drawn from outside the pleadings. See Holy Land Found. for
Relief & Dev. v. Ashcroft, 333 F.3d 156, 165 (D.C. Cir. 2003)
(citing FED. R. CIV. P. 12(b)(6)). The Federal Rules of
Criminal Procedure have largely adopted this pleadings-only
rule for third-party ancillary proceedings. See FED. R. CRIM.
P. 32.2(c)(1)(A) (in deciding a motion to dismiss a third-party
12
criminal forfeiture petition, “the facts set forth in the petition
are assumed to be true”). 1
By requiring courts to stick to the pleadings when
determining whether a petitioner has failed to state a valid
claim for relief, the pleadings-only rule fortifies the due
process concerns associated with stripping third parties of
property rights based on proceedings in which they had no
prior opportunity to participate. See Parklane Hosiery Co. v.
Shore, 439 U.S. 322, 326 n.7 (1979) (“It is a violation of due
process for a judgment to be binding on a litigant who was not
a party or a privy and therefore has never had an opportunity
to be heard.”); United States v. Reckmeyer, 836 F.2d 200, 208
(4th Cir. 1987) (“Congress intended, through . . . [the criminal
forfeiture statutes], to provide a means by which third persons
who raise challenges to the validity of the forfeiture order
could have their claims adjudicated.”). Thus, to the extent the
district court relied on an alter ego finding drawn from outside
the petition and made during a proceeding in which SunRise
could not represent its own interests, the court erred.
As to the government’s claim that SunRise failed to plead
sufficient facts rebutting the district court’s alter ego finding,
we disagree. The statutory text requires a third party to plead
only a “legal interest” in the forfeited property, and then set
forth the “nature and extent” of its interest in the property, the
“time and circumstances” when petitioner acquired that
interest, any supporting facts, and the requested relief. 21
U.S.C. § 853(n)(2), (n)(3). There is no textual anchor forcing
third parties to allege facts rebutting a court’s findings made
1
The criminal forfeiture statute prescribes when a court can
consider “relevant portions of the record of the [underlying]
criminal case” in deciding whether to amend a preliminary
forfeiture order, and that is “[a]t the hearing.” 21 U.S.C. §
853(n)(5).
13
at a proceeding in which the third party did not participate.
And even assuming that SunRise was required to plead it was
someone “other than the defendant,” 21 U.S.C. § 853(n)(2), it
did so. In its petition, SunRise stated that Emor never had an
“ownership interest” in SunRise. J.A. 287.
III
SunRise must state a valid claim of relief in order to
obtain a hearing. SunRise stated such a claim when it alleged,
“the Forfeited Property at all times remained the property of
SunRise Academy.” J.A. 285.
A
A third-party petitioner seeking relief from a preliminary
order of criminal forfeiture must satisfy one of two
conditions. A petitioner must either show a legal interest in
the forfeitable property vested in petitioner rather than the
defendant or show its interest was superior to the criminal
defendant’s at “the time of the commission of the acts which
gave rise to the forfeiture.” 21 U.S.C. § 853(n)(6)(A). If the
petitioner’s interest arose after the crime, the petitioner must
show it was a “bona fide purchaser for value” of the property,
who was “reasonably without cause to believe that the
property was subject to forfeiture” at the time of purchase. Id.§ 853(n)(6)(B). The vesting and superior interest clause is
most relevant here.
In its petition, SunRise alleged an embezzlement theory,
claiming the “Forfeited Property at all times remained the
property of SunRise Academy,” J.A. 285, and that “Mr.
Emor’s embezzlement from SunRise occurred at the time of
each transfer from SunRise to Core,” J.A. 289. In its
opposition to the government’s motion to dismiss, SunRise
14
again referred to Emor’s “embezzle[ment]” of the $2 million
dollars and claimed SunRise owned the funds transferred to
Core at the time of “the alleged illegal taking by Mr. Emor . .
. .” Petitioner SunRise Academy’s Memorandum of Points
and Authorities in Opposition to Government’s Motion to
Dismiss at 3, 15-16, United States v. Emor, No. 10-CR-298-
PLF (D.D.C. Oct. 10, 2012), ECF No. 122 (emphasis added).
Although the embezzlement theory was not well developed,
SunRise did enough to preserve the claim for our review.
SunRise claimed Emor stole the funds. Under District of
Columbia law, theft covers not merely larceny, but “larceny
by trick, larceny by trust, embezzlement, and false pretenses.”
D.C. CODE § 22-3211(a) (emphasis added). So if SunRise
proves Emor stole or embezzled the funds SunRise sent to
Core for the purposes of building a coffee shop, SunRise
could establish possession of legal title or a superior legal
interest at “the time of the commission of the acts which gave
rise to the forfeiture.” 21 U.S.C. § 853(n)(6)(A). That is so
because, under District of Columbia law, embezzlement is a
form of theft in which the defendant deprives the victim of the
possession of, but not title to, property. See Great Am. Indem.
Co. v. Yoder, 131 A.2d 401, 403 (D.C. 1957) (where one
transfers possession of property to another who converts it to
his own use, the taking is a larceny); see also GEORGE G.
BOGERT, ET AL., BOGERT’S TRUSTS AND TRUSTEES § 476
(Thomsen-Reuters rev. 3d ed. 2015) (“A thief or an embezzler
has no title to the stolen property and thus, if the stolen
property is found still in his or her hands, the property may be
recovered by the rightful possessor.”).
Congress designed criminal forfeiture to punish criminal
defendants, not crime victims, and clearly did not contemplate
section 853(c) being used to defeat a victim’s property
interest. To put it another way, the vesting statute targets the
15
perpetrator’s interests downstream from the crime, not the
upstream interests of the victim. Thus, whether a third party
petitioner can claim continuous title or superior interest
should make little practical difference in circumstances such
as these. An example helps to illustrate how seemingly
disparate characterizations ought to lead to congruent results.
Say an employee convinced the Metropolitan Museum of Art
to take part in an art transfer with another museum. But
instead of shipping the painting to the other museum, the
employee ships it to his home for his personal use,
committing mail fraud in the process. If the act is labeled a
fraud, the Museum’s vested interest prior to the fraud should
mean it retains a superior interest sufficient to defeat
forfeiture. Arguably, though, a fraud victim could be
relegated to the ranks of general creditors and, lacking the
ability to claim a constructive trust, have a more difficult time
regaining its property. See BCCI Holdings, 46 F.3d at 1191–
92. In contrast, if the act is characterized as larceny by trick or
embezzlement, the Museum can argue its title was never
relinquished.
If SunRise can prove embezzlement upon remand, then
SunRise at all times possessed vested legal title or a superior
legal interest over the money and Emor did not, which means
the government never had a valid legal interest. See 21 U.S.C.
§ 853(n)(6)(A) (stating a petitioner may seek an amendment
of forfeiture, if a petitioner possessed title that “vested in the
petitioner rather than the defendant”). Suffice it to say,
SunRise may be able to establish a vested legal interest in the
$2 million dollars, thus stating a valid claim. 2
2
Because SunRise could not claim title to or possession of the
Lexus at the time of the wire transfer from SunRise to Core,
SunRise could only have had a superior interest in the Lexus at the
time of the acts giving rise to forfeiture through the imposition of a
constructive trust. But, as we explain below, this Court does not
16
B
In an effort to give the district court some guidance upon
remand, we highlight some potential issues that could arise.
Normally, a purported victim of crime would never need to
claim a vested or superior interest to obtain its money back
from the perpetrator. In many cases, a criminal defendant
pleads guilty to defrauding an identifiable victim. At
sentencing, the victim seeks restitution, see 18 U.S.C. §
3663A(c)(1)(A)(ii), and if restitution is ordered and the
government has seized assets belonging to the crime victim, it
often returns them. Similarly, the U.S. Attorney’s Office
would usually recommend restoration of forfeited assets to a
victim who is named in the restitution order. Status Hearing at
13, United States v. Emor, No. 10-CR-298-PLF (D.D.C. Aug.
2, 2011), ECF No. 50 (“Status Hearing”).
This is, however, not a typical third party case. The
government initially charged Emor with a scheme to defraud
the District of Columbia and SunRise. The district court
dismissed—with prejudice—the counts alleging a scheme
whereby Emor, through SunRise, defrauded the District. But
when the government offered Emor a guilty plea to a single
count of taking money from “SunRise’s bank accounts,” it
failed to identify a victim. 3 At Emor’s change of plea hearing,
recognize the constructive trust doctrine in federal criminal
forfeiture proceedings. See infra, at 21.
3
The Statement of Offense accompanying Emor’s guilty plea
claims Emor fraudulently obtained money from SunRise’s bank
accounts, not from the District. See J.A. 71. ¶ 7 (“A goal of the
scheme and artifice was for defendant Emor to fraudulently obtain
money, from SunRise’s bank accounts, for his own use and benefit .
. . .”) (emphasis added); J.A. 71 ¶ 8 (“It was part of the scheme and
artifice that defendant Emor, through various misrepresentations
17
the district court asked how it could “take a plea” without
knowing the identity of the victim, and the government
responded that the court could determine the identity of the
victim at sentencing. 4 Status Hearing, at 5. After Emor pled
guilty, the government took the position that, for restitution
and forfeiture purposes, the victim was the District of
Columbia. This meant SunRise could be denied restitution (it
was not the victim) and the government was free to argue
SunRise was Emor’s alter ego (SunRise was the defendant).
The government was candid about the reasons for its
unorthodox approach: it would permit the forfeiture
determination to be made in “a compressed evidentiary
hearing . . . with a preponderance standard and the hearsay
rules, obviously not applying,” see Status Hearing, at 5–6,
United States v. Emor, No. 10-CR-298-PLF (D.D.C. Aug. 3,
2011), ECF No. 59 (“Status Hearing II”), and without
agreement as to the nature of the offense.
and omissions of material facts, used the money obtained from
SunRise’s bank accounts in a manner unrelated to the education of
students with disabilities at SunRise.”) (emphasis added).
4
While establishing the precise identity of the victim(s) of the fraud
is not a required element of wire fraud, as a practical matter it is
difficult to conceive how the government could prove a violation of
a statute intended to punish those who deprive others of their
property, without identifying in some manner who those “others”
were. See Pasquantino v. United States, 544 U.S. 349, 355 (2005)
(holding that an element of wire fraud includes that the object of the
fraudulent scheme be money or property “in the victim’s hands”);
United States v. Madeoy, 912 F.2d 1486, 1492 (D.C. Cir. 1990)
(“We reject the appellants’ contention that the indictment did not
charge a scheme or artifice to defraud a victim of property.”)
(emphasis added).
18
Fraudulent schemes are not fungible. They come in many
forms and courts must consider the nature of the scheme to
determine how to connect the dots—who was defrauded and
how—and the amount of harm caused or intended. See United
States v. Munoz, 430 F.3d 1357, 1370 (11th Cir. 2005)
(“Fraudulent schemes, however, comes in various forms, and
we must consider the nature of the scheme in determining
what method is to be used to calculate the harm caused or
intended”). Even when guilt is established by plea rather than
a jury trial, the factual basis underlying the plea plays an
important role in assuring a knowing, intelligent, and
voluntary plea and resolving questions about restitution and
forfeiture. See United States v. Gonzalez, 647 F.3d 41, 65–66
(2d Cir. 2011). Here, when the district court suggested the
superseding information was “open to interpretation,” defense
counsel disputed this interpretation, insisting everyone was
“operating under the assumption that this is stealing from
SunRise,” and SunRise “was the victim.” Status Hearing, at
20, 22, 23. Both the court and defense counsel acknowledged
the parties would need to be on the same page “as to what the
thrust of the charge is” before Mr. Emor could enter a
“knowing, intelligent, and voluntary plea.” Id. at 23.
District courts must determine the crime before a
defendant pleads guilty and is sentenced. The government’s
strategic determination not to identify the victim in the plea—
arguing that the court could determine the victim at or after
the defendant’s sentence—has logical consequences.
Contradictory factual determinations could possibly sever the
nexus between the criminal conviction and the forfeiture. See
21 U.S.C. § 853(a); FED. R. CRIM. P. 32.2(b)(1)(A) (stating
there must be a nexus “between the property and the offense”
in order for property to be forfeitable). On remand, the district
court must ensure that its findings of fact and conclusions of
law do not contradict the factual and liability admissions
19
within the Statement of Offense. By the same token, the
government may not use the forfeiture proceeding to try and
establish additional facts—including the identity of the fraud
victim—that would contradict the factual basis for Emor’s
plea or alter the scope of legal liability to which he pled in the
Statement of Offense. See Status Hearing II, at 5–6.
IV
Several of SunRise’s claims fail as a matter of law, and
the district court need not consider them on remand.
A
SunRise claims it possessed “documents evidencing” its
ownership of Core, “through the members it appointed, who
hold their membership interest for the benefit and on behalf of
Sunrise” J.A. 289. As the district court noted, “[w]hat
SunRise means by this is not clear.” J.A. 306–07. What is
apparent is that SunRise failed to provide any legal or factual
support of its ownership claim. Cf. Ashcroft v. Iqbal, 556 U.S.
662, 678 (2009). The district court correctly found SunRise
failed to state a valid claim of ownership over Core.
B
SunRise further contends it possesses a legal interest
because Core assigned its rights to SunRise and SunRise was
a bona fide purchaser. Neither of these claims withstands
scrutiny.
Under the criminal forfeiture statute’s relation back
provision, these theories fail because title to forfeited property
vested in the government upon commission of the criminal act
giving rise to forfeiture. 21 U.S.C. § 853(c). Emor’s fraud
20
occurred at the very latest when SunRise wired the money to
Core in 2010, and thus well before Core’s alleged assignment
to SunRise in May 2012. Core could not have taken a
cognizable interest in the property because its interest vested
at the same time as the government’s interest. See 21 U.S.C. §
853(c). So Core had no right to seek return of its property.
Consequently, as to its assignment from Core, SunRise is
restricted to arguing that it is a bona fide purchaser for value
without reason to believe the property was subject to
forfeiture.
SunRise’s allegations were insufficient to meet that
burden. See Smith v. Wells Fargo Bank, 991 A.2d 20, 26
(D.C. 2010) (holding that a bona fide purchaser for value is
one who “acquired . . . interest in a property for valuable
consideration and without notice of any outstanding claims
which are held against the property by third parties”). Given
SunRise’s attempt to intervene in Emor’s criminal
proceedings in 2011 and the government’s seizure of the
property a year before, SunRise had sufficient cause to
believe the property was subject to forfeiture when Core
assigned its right to SunRise in 2012. Cf. United States v.
Huntington Nat’l. Bank, 682 F.3d 429, 436 (6th Cir. 2012)
(“[T]he whole purpose of 21 U.S.C. § 853(n)(6)(B) is to
protect innocent purchasers who acquire property without
notice of the government’s superior interest . . . in the
forfeited property.”) (emphasis added).
C
Finally, SunRise contends it possessed a constructive
trust in the forfeited property superior to the government’s
interest. SunRise acknowledges its constructive trust theory is
in considerable tension with BCCI Holdings, but it asks us to
limit BCCI Holdings to the RICO context.
21
While it is true BCCI Holdings was decided in the RICO
context and under a different statute, see 18 U.S.C. § 1963, it
is also true the two forfeiture statutes contain identical
language, and “it appears that no court has interpreted these
two provisions differently,” United States v. BCCI Holdings
(Luxembourg) S.A., 956 F. Supp. 5, 9 n.4 (D.D.C. 1997).
BCCI Holdings is not limited solely to the RICO context. See
Clark v. Martinez, 543 U.S. 371, 378 (2005) (“To give these
same words a different meaning . . . would be to invent a
statute rather than interpret one.”).
SunRise did not specifically request that we overturn
BCCI Holdings. Such a strategy would have support. Every
circuit to consider the constructive trust question in the
context of criminal forfeiture has rejected the analysis in
BCCI Holdings. E.g., Willis Mgmt. (Vermont), Ltd. v. United
States, 652 F.3d 236, 244–45 (2d Cir. 2011); United States v.
Salti, 579 F.3d 656, 670 (6th Cir. 2009); United States v.
Shefton, 548 F.3d 1360, 1366 (11th Cir. 2008); see also Osin
v. Johnson, 243 F.2d 653 (D.C. Cir. 1957). However, since
we cannot overrule a prior panel’s decision, except via an
Irons footnote or en banc review, we leave this issue for
another day. See Oakey v. U.S. Airways Pilots Disability
Income Plan, 723 F.3d 227, 232 (D.C. Cir. 2013) cert. denied,
134 S. Ct. 1513 (2014).
IV
For the foregoing reasons, the district court’s judgment is
Affirmed in Part, Reversed in Part, and Remanded.
So ordered.
WILKINS, Circuit Judge, concurring: I join in the Court’s
result and much of its rationale. I agree that SunRise has
standing to petition as the alleged victim of Emor’s
embezzlement and that SunRise is not estopped from
demonstrating its “interest” in the forfeited property based on
findings of fact the District Court made before it was entitled
to intervene in the proceedings. I write separately due to my
concern that Section III.B. of the majority opinion may
engender confusion about the scope of wire fraud or criminal
forfeiture.
I agree with the majority that the government is not
required to establish the identity of a specific victim in order
to prove wire fraud, Maj. Op. at 17 n.4, as the nine circuits to
consider the question have uniformly held. See United States
v. Tum, 707 F.3d 68, 75-76 & n.6 (1st Cir. 2013) (citing cases
from the Fourth, Fifth, Seventh, Ninth and Eleventh circuits);
see also United States v. McAuliffe, 490 F.3d 526, 533 (6th
Cir. 2007); United States v. Trapilo, 103 F.3d 547, 552 (2d
Cir. 1997); United States v. Pelullo, 964 F.2d 193, 216 (3d
Cir. 1992). As we have held, wire fraud requires proof only
of 1) knowing and willful entry into a scheme to defraud and
2) use of an interstate wire communication in furtherance of
the scheme. See United States v. Tann, 532 F.3d 868, 872
(D.C. Cir. 2008). Consequently, I disagree with the
suggestions throughout the majority opinion that the
government needed to identify the victim of the wire fraud in
the charging documents, or that the District Court needed to
determine whether SunRise, the District of Columbia, or the
federal government was the victim of Emor’s fraud at the time
of the guilty plea.
Wire fraud comes in many shapes and sizes. One
paradigmatic iteration of the offense transpires when the
defendant diverts for personal use funds that a donor provided
to a nonprofit corporation for a specific purpose. In such
cases, the donor/grantor can be properly characterized as the
2
victim even though the defendant took the property directly
from the nonprofit. See, e.g., United States v. Treadwell, 760
F.2d 327, 335-37, 337 n.17 (D.C. Cir. 1985); Post v. United
States, 407 F.2d 319, 329 (D.C. Cir. 1968); United States v.
Kilpatrick, No. 10-20403, 2013 WL 4041866, at *18-19 (E.D.
Mich. Aug. 8, 2013). As the majority notes, the diversion of
funds could also be characterized as an embezzlement in
which the nonprofit organization – here SunRise – is the
victim. Maj. Op. at 14.
In this case, the Information and Statement of Offense
expressly noted that the District and federal governments
were SunRise’s sole sources of funds and that the funds were
provided exclusively as reimbursement for special education
services, and characterized Emor’s scheme as involving the
use of SunRise’s funds “in a manner unrelated to the
education of students with disabilities at
SunRise.” 1 Superseding Information at 1, 3, United States v.
Emor, No. 10-cr-298 (D.D.C. July 22, 2011), ECF No. 44;
J.A. 69, 71. Thus, slightly differing from the majority, Maj.
Op. at 18-19, my reading of the record is that the prosecution
and Emor agreed at the time of the guilty plea that the wire
fraud scheme involved illegally diverting funds restricted for
educational uses to Emor’s personal use; and the parties went
forward with the plea with the full understanding that, in
subsequent proceedings, the government would argue that the
victim of Emor’s fraudulent scheme was the District, while
Emor would argue that the victim was SunRise. Transcript of
Aug. 3, 2011 at 14-15, Emor (D.D.C. Aug. 3, 2011), ECF No.
59.
1
Echoing the Internal Revenue Code, SunRise’s articles of
incorporation provide that “[n]o part of the net earnings of the
corporation shall inure to the benefit of, or be distributable to,” its
officers. J.A. 183; 26 U.S.C. § 501(c)(3).
3
Indeed, the government had ample basis to have
questions about the role of SunRise in Emor’s scheme. When
the government subpoenaed SunRise’s documents related to
Core Ventures, SunRise produced only brief, incomplete
notes purportedly reflecting two Board of Directors meetings
to document its $2 million “loan.” J.A. 232, 237-38. After
the guilty plea, the evidence presented at the hearings
indicated that SunRise’s Board at relevant times consisted
solely of Emor, his college-age son, and a young SunRise
employee; that the Board neglected to meet at all during 2008;
that it completely failed to document major activities such as
the purported loan to Core Ventures; that it approved
hundreds of thousands of dollars in purchases of luxury
vehicles, housing, and gifts for Emor and his family members;
and that it approved a $500,000 bonus to Emor while he was
incarcerated for selling stolen computers. J.A. 214-44. Of
course, SunRise will have the opportunity to rebut or explain
this evidence on remand, and to show that SunRise was not
complicit in Emor’s diversion. Nonetheless, I think it unfair
to suggest that the government should have been certain that
SunRise was a victim at the time of the guilty plea based on a
reasonable assessment of the facts as they would have
appeared to the government at that time.
In sum, the District Court can sort out any remaining
disputed issues of fact and law on remand, including
SunRise’s ability to demonstrate its “legal interest” in the
forfeited property and whether it is someone “other than the
defendant.” 21 U.S.C. § 853(n)(2).