United States v. Arnold (Richard Sr.)

FILED
United States Court of Appeals
PUBLISH Tenth Circuit
December 27, 2017
UNITED STATES COURT OF APPEALS
Elisabeth A. Shumaker
FOR THE TENTH CIRCUIT Clerk of Court
_________________________________
UNITED STATES OF AMERICA,
Plaintiff - Appellee,
v. No. 17-6038
RICHARD M. ARNOLD, SR.,
Defendant - Appellant.
_________________________________
Appeal from the United States District Court
for the Western District of Oklahoma
(D.C. No. 5:14-CR-00347-D-1)
_________________________________
Susan M. Otto, Office of the Federal Public Defender, Oklahoma City, Oklahoma, for
Defendant-Appellant.
Scott E. Williams, Assistant U.S. Attorney (Mark A. Yancey, U.S. Attorney for the
Western District of Oklahoma, with him on the brief), Office of the United States
Attorney, Oklahoma City, Oklahoma, for Plaintiff-Appellee.
_________________________________
Before TYMKOVICH, Chief Judge, MATHESON, and BACHARACH, Circuit
Judges.
_________________________________
MATHESON, Circuit Judge.
_________________________________
Richard Arnold, Sr., appeals the district court’s forfeiture order following his
wire fraud and conspiracy convictions and sentencing for a scheme involving
vehicle-financing rebates.1 He argues the district court erred by (1) imposing an
order of forfeiture after sentencing, and (2) failing to require the Government to use
forfeited proceeds to offset the restitution Mr. Arnold owes his victims, which would
lower the total amount of restitution and forfeiture he is required to pay. Exercising
jurisdiction under 28 U.S.C. § 1291, we affirm the district court’s forfeiture order.
I. BACKGROUND
According to the indictment, Mr. Arnold—along with his wife, Robyn, and his
sons Ricky and Robert (collectively, “the Arnolds”)—devised a scheme to defraud
individuals out of the rebates paid to them when they purchased new vehicles. The
Arnolds persuaded the victims to turn their rebates over to a charitable trust by
falsely representing they would manage the trust to pay off the victims’ car loans.
Although the Arnolds made some loan payments from the trust, they eventually
stopped and used the remaining rebate funds for their own personal expenses. The
victims then either took over the loan payments or relinquished the vehicles to the
lenders. The indictment notified Mr. Arnold of the Government’s intent to seek
forfeiture of “a money judgment in an amount equal to the proceeds obtained as a
result of the offenses.” ROA, Vol. 1 at 43.
Mr. Arnold pled guilty to one count each of wire fraud and conspiracy to
commit wire fraud. See 18 U.S.C. §§ 1343, 1349. He acknowledged in his plea that
1
In a previous appeal, this court rejected Mr. Arnold’s challenge to the district
court’s restitution award in this same case. See United States v. Arnold, 701 F.
App’x 702 (10th Cir. 2017) (unpublished). Mr. Arnold does not challenge the
restitution award in this appeal.
2
the Government would pursue forfeiture. Following Mr. Arnold’s conviction but
before sentencing, the district court granted the Government’s motion for a
preliminary order of forfeiture. It ordered Mr. Arnold to pay “a money judgment in
an amount to be determined” later by the court. ROA, Vol. 1 at 87. The court said
“this Preliminary Order of Forfeiture will be amended under Fed. R. Crim. P.
32.2(e)(1) when the amount of the money judgment has been determined by this
Court.” Id.
On March 24, 2016, at the first sentencing hearing, the Government reiterated
its intent to seek forfeiture once the precise amount owed could be calculated. The
district court sentenced Mr. Arnold to 54 months in prison and postponed a final
determination on restitution and forfeiture.2
On May 16, 2016, the district court conducted a second sentencing hearing,
focused on restitution, and entered a final restitution order of $280,075.15, payable to
the victims who were entitled to compensation under the Mandatory Victims
Restitution Act (“MVRA”), 18 U.S.C. § 3663A(a)(1). The court again left the
amount of forfeiture unresolved. The Government stated that it would “discuss with
counsel a number or potential resolution and submit to the Court a motion for an
amended order.” ROA, Vol. 5 at 13.
2
As discussed in greater detail below, criminal restitution and forfeiture are
“separate remedies with different purposes.” United States v. McGinty, 610 F.3d
1242, 1247 (10th Cir. 2010). Restitution is remedial in nature, and its goal is to
restore the victim’s loss. Id. Forfeiture, by contrast, is punitive and seeks to
disgorge any profits that the defendant obtained from the offense. Id.
3
On June 9, 2016, the Government moved under Fed. R. Crim. P. 32.2(e)(1) to
amend the preliminary order of forfeiture, which lacked any specified amount, and to
impose a $160,136.50 forfeiture order. Mr. Arnold objected, arguing the court lacked
jurisdiction to amend the preliminary order after sentencing. The court overruled his
objection and adopted the Government’s proposed forfeiture order. United States v.
Arnold, No. CR-14-347-D, 2017 WL 187546, at *3-4 (W.D. Okla. Jan. 17, 2017)
(“Rule 32.2 envisions scenarios such as the present and expressly allows orders of
forfeiture to be subject to amendment [after sentencing] when the money judgment
has been calculated.”). This appeal followed.
II. DISCUSSION
On appeal, Mr. Arnold challenges the district court’s forfeiture order, arguing
(1) the Government’s failure to establish the amount of forfeiture before sentencing
violated Rule 32.2 and thereby deprived the district court of jurisdiction to enter the
forfeiture order; and (2) the order failed to require the Government to use Mr.
Arnold’s forfeited proceeds to reduce the amount of restitution he owes his victims,
and it must therefore be vacated.
In evaluating these arguments, “we review the district court’s forfeiture order
as we would any other sentencing determination—that is, we review its legal
conclusions de novo and its factual findings for clear error.” United States v. Bader,
678 F.3d 858, 893 (10th Cir. 2012); see also United States v. McGinty, 610 F.3d
1242, 1245 (10th Cir. 2010) (concluding that we apply de novo review to the district
court’s legal interpretation of federal forfeiture statutes).
4
A. Rule 32.2
We first consider Mr. Arnold’s argument that the Government failed to comply
with Rule 32.2 and thus the district court lacked jurisdiction to amend the preliminary
forfeiture order after sentencing. We find no Rule 32.2 violation and therefore affirm
the district court’s forfeiture order.3
1. Legal Background
Criminal forfeiture is a punitive measure that forces offenders of certain
crimes to disgorge any profits obtained from their criminal activity. McGinty, 610
F.3d at 1247. Unlike restitution, which compensates victims for their losses,
forfeiture compels the offender to surrender money or substitute assets to the
government. Id. (explaining that, given their different purposes, the amount of
forfeiture and restitution may differ). The parties agree that Mr. Arnold’s conviction
for wire fraud subjects him to forfeiture under 18 U.S.C. § 981(a)(1)(C) and 28
U.S.C. § 2461(c). See Aplt. Br. at 13-14; Aplee Br. at 21.
Rule 32.2 of the Federal Rules of Criminal Procedure governs the criminal
forfeiture procedure. First, it requires the government to notify a defendant of its
intent to seek forfeiture:
(a) Notice to the Defendant. A court must not enter a judgment of
forfeiture in a criminal proceeding unless the indictment . . .
contains notice to the defendant that the government will seek the
forfeiture of property as part of any sentence in accordance with the
applicable statute. . . . The indictment . . . need not . . . specify the
3
Because we find no violation of a timing requirement under Rule 32.2, we do
not address whether such a violation would deprive the district court of jurisdiction to
impose a forfeiture order.
5
amount of any forfeiture money judgment that the government
seeks.
Fed. R. Crim. P. 32.2(a). The primary purpose of Rule 32.2 is to ensure that “a
defendant is on notice as to all aspects of his sentence, including forfeiture.” See
United States v. Martin, 662 F.3d 301, 309 (4th Cir. 2011).
Second, the court determines the amount the defendant will be ordered to pay,
and, if practical, enters a preliminary order of forfeiture that becomes final at
sentencing:
(b) Entering a Preliminary Order of Forfeiture
(1) Forfeiture Phase of the Trial.
(A) Forfeiture Determinations. As soon as practical after a
verdict or finding of guilty, or after a plea of guilty or nolo
contendre is accepted . . . the court must determine what
property is subject to forfeiture under the applicable
statute. . . . If the government seeks a personal money
judgment, the court must determine the amount of money
that the defendant will be ordered to pay.
....
(2) Preliminary Order.
(A) Contents of a Specific Order. If the court finds that
property is subject to forfeiture, it must promptly enter a
preliminary order of forfeiture setting forth the amount of
any money judgment . . . .
(B) Timing. Unless doing so is impractical, the court must
enter the preliminary order sufficiently in advance of
sentencing to allow the parties to suggest revisions or
modifications before the order becomes final as to the
defendant under Rule 32.2(b)(4).
....
6
(4) Sentence and Judgment.
(A) When Final. At sentencing—or at any time before
sentencing if the defendant consents—the preliminary
forfeiture order becomes final as to the defendant.
Fed. R. Crim. P. 32.2(b).
In 2009, Rule 32.2 was amended to include Section 32.2(b)(2)(C), which
anticipates the possibility that a court may not be able to calculate the forfeiture
amount owed before sentencing. This provision explicitly authorizes a court to enter
a general order of forfeiture at sentencing and amend it later once the court
determines the specific amount owed:
(C) General Order. If, before sentencing, the court cannot . . .
calculate the total amount of the money judgment, the court
may enter a forfeiture order that:
....
(iii) states that the order will be amended under Rule
32.2(e)(1) when . . . the amount of the money
judgment has been calculated.
Id. at 32.2(b)(2)(C).
Rule 32.2(e)(1), as referenced in Rule 32.2(b)(2)(C), provides for the later
amendment of a preliminary, general forfeiture order:
(1) In General. On the government’s motion, the court may at any time enter
an order of forfeiture or amend an existing order of forfeiture to include
property that:
(A) is subject to forfeiture under an existing order of forfeiture but was
located and identified after that order was entered; or
(B) is substitute property that qualifies for forfeiture under an applicable
statute.
7
Id. at 32.2(e)(1).
The purpose of the 2009 amendments was to clarify “how the court is to
reconcile the requirement that it make the forfeiture order part of the sentence with
the fact that in some cases the government will not have completed its post-
conviction investigation” to determine the precise forfeiture amount. Fed. R. Crim.
P. 32.2 advisory committee’s note to 2009 amendment.
2. Analysis
Mr. Arnold fails to demonstrate a Rule 32.2 violation. As described above,
Rule 32.2 anticipates the possibility that the court may not be able to determine the
amount of the money judgment before sentencing. See Fed. R. Crim. P.
32.2(b)(2)(C). It therefore permits a court to amend a preliminary, general forfeiture
order once the amount of the money judgment has been calculated. See id.
Ongoing disputes between the parties in this case prevented the district court
from calculating the total amount of Mr. Arnold’s forfeiture order before sentencing.
Although these disputes were specifically about restitution, they concerned the
amount of proceeds the Arnolds retained and thus were also relevant to the forfeiture
calculation. See McGinty, 610 F.3d at 1246 (explaining that forfeiture requires a
defendant to disgorge “any and all proceeds of the offense”). For example, Mr.
Arnold contested the Government’s initial restitution calculation, arguing it failed to
credit interest payments he had made on the victims’ car loans. See ROA, Vol. 1 at
111. Resolution of this dispute would affect the amount of proceeds Mr. Arnold
8
retained, which in turn would determine how much he must forfeit. After the court
settled these disputes and entered restitution, the Government moved to amend the
preliminary forfeiture order, which the court granted in compliance with Rule
32.2(b)(2)(C).
Mr. Arnold complains he lacked adequate notice of the forfeiture order the
district court ultimately imposed, noting that neither the indictment nor any other pre-
sentencing document submitted by the Government “provided notice of an
approximate amount, a method of computation, or substitute assets associated with its
request for forfeiture.” See Aplt. Br. at 16. But nothing in Rule 32.2 requires this
specificity. Nor can he claim he was caught off-guard. The Government announced
its intent to seek forfeiture in the indictment—as Mr. Arnold acknowledged in his
guilty plea—and reiterated its intent throughout the sentencing process. When the
Government announced at the March 24, 2016 sentencing hearing that it would be
“moving for final forfeiture with a precise amount for a money judgment at a later
time after we’ve resolved the restitution issues,” defense counsel raised no
objections. ROA, Vol. 4 at 35.
Mr. Arnold also argues the Government lacked a “logical explanation” for its
inability to calculate the amount of forfeiture before sentencing. See Aplt. Br. at 17.
We disagree in light of the ongoing factual disputes about the amount of illegal
proceeds the Arnolds retained.
B. Reducing Restitution Amount by Forfeiture Owed
9
We next consider Mr. Arnold’s argument that the district court erred by failing
to direct the Government to apply any forfeiture funds toward restitution for the
victims of his vehicle-financing scheme. Instead, the Government indicated it might
use forfeited funds to repay victims from a previous case in which Mr. Arnold was
convicted of fraud. Mr. Arnold asks that we remand this case to the district court
with instructions “requiring payment of any forfeited assets to the victims, with a
concomitant offset to order of restitution.” Aplt. Br. at 25. We decline to do so and
affirm the district court’s order.
1. Legal Background
Both forfeiture and restitution were mandatory in this case. The pertinent
criminal forfeiture statute provides that “the court shall order the forfeiture of the
property as part of the sentence in the criminal case.” 28 U.S.C. § 2461(c) (emphasis
added). 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). Interpreting another forfeiture statute with materially similar
language, the Supreme Court said, “Congress could not have chosen stronger words
to express its intent that forfeiture be mandatory in cases where the statute applied, or
broader words to define the scope of what was to be forfeited.” United States v.
Monsanto, 491 U.S. 600, 607 (1989) (interpreting 21 U.S.C. § 853(a)); see also
Forest Guardians v. Babbitt, 174 F.3d 1178, 1187 (10th Cir. 1999) (“The Supreme
Court and this circuit have made clear that when a statute uses the word ‘shall,’
Congress has imposed a mandatory duty upon the subject of the command.”).
10
The restitution statute in this case also was mandatory. The MVRA states that
when a defendant commits an offense by fraud (e.g., wire fraud), “the court shall
order . . . that the defendant make restitution to the victim of the offense.” 18 U.S.C.
§ 3663A(a)(1) (emphasis added); see United States v. Quarrell, 310 F.3d 664, 677-78
(10th Cir. 2002) (explaining that district courts are required to impose restitution for
offenses that fall within the MVRA).
2. Analysis
Our holding in McGinty defeats Mr. Arnold’s argument that the district court
should have required the Government to apply his forfeiture payments toward the
amount of restitution he owes his victims, thereby reducing the total amount—
restitution plus forfeiture—owed. In McGinty, the defendant was also subject to
mandatory forfeiture and restitution based on a conviction for misapplication of bank
funds in violation of 18 U.S.C. § 656. McGinty, 610 F.3d at 1243, 1248; see 18
U.S.C. §§ 982(a)(2), 3663A(a)(1). We held the district court had erred in concluding
that mandatory forfeiture and restitution awards could be used to offset each other.
See 610 F.3d at 1247 (rejecting the notion that ordering both restitution and forfeiture
would be “unfair as a double recovery”). The government was entitled to forfeiture
in the amount of the defendant’s proceeds, and the victim—a bank—was entitled to
11
the restitution of its loss. Id. at 1247-48. Mr. Arnold fails to distinguish McGinty
and cites no persuasive authority to the contrary.4
Several courts have reached the same conclusion, holding that the statutes
mandating restitution and forfeiture do not allow a defendant’s payments toward one
to offset the amount owed to the other. See, e.g., United States v. Alalade, 204 F.3d
536, 540 (4th Cir. 2000) (holding that “the plain language of the MVRA did not grant
the district court discretion to reduce the amount of restitution” by the amount
ordered to be forfeited). In an opinion we cited favorably in McGinty, 610 F.3d at
1248, the Fifth Circuit held that a district court that imposed both forfeiture and
restitution had “properly adhered to the mandatory language found within the
statutory schemes.” United States v. Taylor, 582 F.3d 558, 566 (5th Cir. 2009); see
also United States v. Emerson, 128 F.3d 557, 566-67 (7th Cir. 1997) (rejecting
defendant’s request to credit his forfeiture payment towards the restitution amount he
owed). The district court properly rejected Mr. Arnold’s request to mandate that his
forfeiture payments be used to offset restitution.
III. CONCLUSION
For the foregoing reasons, we affirm the district court’s forfeiture order.
4
Mr. Arnold notes the victim in McGinty was a bank while the victims in the
present case are individuals and lenders. See Aplt. Reply Br. at 15-16. He fails to
explain the significance of this distinction.
12