United States v. Lorene Chittenden

PUBLISHED
UNITED STATES COURT OF APPEALS
FOR THE FOURTH CIRCUIT
No. 14-4768
UNITED STATES OF AMERICA,
Plaintiff - Appellee,
v.
LORENE CHITTENDEN,
Defendant – Appellant.
No. 14-4828
UNITED STATES OF AMERICA,
Plaintiff - Appellee,
v.
LORENE CHITTENDEN,
Defendant – Appellant.
No. 15-4226
UNITED STATES OF AMERICA,
Plaintiff - Appellee,
v.
LORENE CHITTENDEN,
Defendant – Appellant.
No. 15-4659
UNITED STATES OF AMERICA,
Plaintiff - Appellee,
v.
LORENE CHITTENDEN,
Defendant – Appellant.
On Remand from the Supreme Court of the United States.
(S. Ct. No. 17-5100)
Decided on Remand: July 25, 2018
Before GREGORY, Chief Judge, KEENAN, and FLOYD, Circuit Judges.
Affirmed in part, vacated in part, and remanded by published opinion. Chief Judge
Gregory wrote the opinion, in which Judge Keenan and Judge Floyd joined.
Joseph Ray Pope, WILLIAMS MULLEN, Richmond, Virginia, for Appellant. Christopher
John Catizone, OFFICE OF THE UNITED STATES ATTORNEY, Alexandria, Virginia,
for Appellee.
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GREGORY, Chief Judge:
Lorene Chittenden was convicted of bank fraud and conspiracy to commit bank and
mail fraud for her role in a fraudulent mortgage scheme. Although Chittenden received
only $231,000 in proceeds from these crimes, the district court ordered her to forfeit over
$1 million to cover proceeds that her co-conspirators had received and dissipated. In
United States v. Chittenden, 848 F.3d 188 (4th Cir. 2017), we affirmed Chittenden’s
conviction and sentence. The Supreme Court later decided Honeycutt v. United States, 137
S. Ct. 1626 (2017), vacated our original decision in this case, and remanded for us to
reconsider our holding in light of Honeycutt. Chittenden v. United States, 138 S. Ct. 447,
447‒48 (2017) (mem.). For the reasons below, we now vacate the district court’s forfeiture
orders and remand for further proceedings. All other aspects of the district court’s
judgment are reaffirmed.
I.
In 2013, a federal grand jury indicted Lorene Chittenden for originating and
submitting fraudulent mortgage loan applications. 1 At the government’s request, the
district court restrained nearly all of Chittenden’s assets pending the outcome of the
charges. After a seven-day trial, a jury convicted Chittenden of one count of conspiracy to
commit bank and mail fraud, under 18 U.S.C. § 1349, and ten counts of bank fraud, under
18 U.S.C. § 1344. The evidence showed that Chittenden, a loan officer at George Mason
1
We recount only the facts and procedural history relevant to the issues on remand.
A complete summary is available in our original opinion. See 848 F.3d at 192‒94.
3
Mortgage, earned hundreds of thousands of dollars in loan commissions by falsely inflating
the incomes of unknowing, first-time homebuyers. Higher stated incomes resulted in larger
loans, and because each commission was a percentage of the loan, larger loans generally
meant higher loan commissions. Chittenden worked in concert with numerous realtors
who received hefty real estate commissions by selling houses to her clients. Similar to the
loan commissions, each real estate commission was a percentage of the house’s sale price
such that higher sale prices resulted in greater profits for the realtors.
Post-trial, the district court entered a forfeiture order under 18 U.S.C. § 982(a)(2),
pursuant to the procedures in 21 U.S.C. § 853. 2 The order consisted of a $1,513,378.82
money judgment “representing the foreseeable proceeds of the offenses of which the
defendant has been found guilty.” J.A. 1967. The court noted that Chittenden personally
had received only $231,000 in fraudulent loan commissions and that none of Chittenden’s
restrained assets were proceeds traceable to the fraud—indeed, the government had
2
See United States v. Cox, 575 F.3d 352, 355 n.2 (4th Cir. 2009) (“Section 982,
which authorizes criminal forfeiture in cases of bank fraud, incorporates the procedures set
forth in § 853.”). Although the forfeiture order cited two additional statutes—18 U.S.C.
§ 981(a)(1)(C) and 28 U.S.C. § 2461—those provisions do not apply in this case. The first,
§ 981(a)(1)(C), authorizes civil forfeiture for enumerated offenses, including bank fraud
and conspiracy to commit bank fraud. The second, § 2461, authorizes criminal forfeiture
for any offense that gives rise to civil forfeiture, including those enumerated in § 981. See
United States v. Chamberlain, 868 F.3d 290, 293 n.2 (4th Cir. 2017). But § 2461, and by
extension § 981, does not apply when a criminal forfeiture provision applies to the crime
charged. See United States v. Blackman, 746 F.3d 137, 142–43 (4th Cir. 2014). Here, a
criminal forfeiture provision does apply to the crimes charged: 18 U.S.C. § 982(a)(2)
provides that the court “shall order” forfeiture when imposing a sentence on a person
convicted of certain crimes affecting a financial institution, including bank fraud,
conspiracy to commit bank fraud, and conspiracy to commit mail fraud—the offenses listed
in Chittenden’s judgment of conviction. Accordingly, 18 U.S.C. § 982(a)(2), not 28 U.S.C.
§ 2461 and 18 U.S.C. § 981, served as the basis for the district court’s forfeiture order.
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stipulated as much. But, relying on our decision in United States v. McHan, 101 F.3d 1027
(4th Cir. 1996), the court concluded that Chittenden was jointly and severally liable for the
reasonably foreseeable proceeds of the conspiracy.
Thereafter, because the government had not recovered any proceeds from
Chittenden’s co-conspirators, it moved for forfeiture of Chittenden’s untainted, restrained
assets to satisfy the entire $1,513,378.82 money judgment. Under 21 U.S.C. § 853(p), a
court “shall order the forfeiture of any [untainted] property of the defendant” when, “as a
result of any act or omission of the defendant,” the proceeds of the underlying crime have
been placed beyond the court’s reach. The district court found that Chittenden’s co-
conspirators had dissipated, comingled, or transferred their respective proceeds such that
the government was unable to locate or seize them. Relying on McHan again, the court
determined that § 853(p) required forfeiture of Chittenden’s untainted assets as a substitute
for her co-conspirators’ proceeds that the government could not recover. However, the
court found that the government had failed to prove that $250,000 of co-conspirator
proceeds and all $231,000 of Chittenden’s proceeds were in fact out of reach. Accordingly,
the court entered a second order reducing the amount of untainted assets the government
could take from $1,513,378.82 to $1,032,378.82.
Chittenden appealed to this Court, challenging the initial seizure of her assets, the
validity of her conviction, and the forfeiture orders. See Chittenden, 848 F.3d at 192.
Specifically, she argued that the government’s pretrial seizure of her assets violated her
Sixth Amendment right to counsel, that the government failed to present sufficient
evidence to support her convictions, that the district court erred in admitting certain hearsay
5
evidence, that the government constructively amended the indictment, that the district court
lacked jurisdiction to enter the forfeiture order, and that the district court improperly
ordered forfeiture of her untainted assets based on her co-conspirators’ acts of dissipating
the conspiracy proceeds. Id. at 194‒204. We rejected each of these arguments and
affirmed the district court’s judgment. Id. Chittenden petitioned the Supreme Court for
review.
Following our decision, the Supreme Court decided Honeycutt v. United States, 137
S. Ct. 1626 (2017). The Court held that 21 U.S.C. § 853(a)(1)—which mandates forfeiture
of proceeds from certain drug crimes—limits such forfeiture “to property the defendant
himself actually acquired as the result of the crime.” Id. at 1635. “[T]he statute does not
countenance joint and several liability” for property the defendant’s co-conspirators alone
obtained. Id. at 1632‒33. The Court also stated that when tainted property falls outside
the government’s reach, § 853(p) does “not authorize the Government to confiscate
substitute property from other defendants or co-conspirators; it authorize[s] the
Government to confiscate assets only from the defendant who initially acquired the
property and who bears responsibility for its dissipation.” Id. at 1634.
In light of this decision, the Supreme Court granted Chittenden’s writ of certiorari,
vacated our original judgment, and remanded the case to us for further consideration.
Chittenden v. United States, 138 S. Ct. 447, 447‒48 (2017) (mem.). We requested
supplemental briefing on what impact, if any, Honeycutt has on this case. Having received
the parties’ briefs, we now answer that question.
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II.
Honeycutt involved forfeiture under 21 U.S.C. § 853(a)(1), a provision of the
Controlled Substances Act that mandates forfeiture for certain drug crimes. 137 S. Ct. at
1630. Here, the district court ordered forfeiture under 18 U.S.C. § 982(a)(2), a general
criminal forfeiture statute that mandates forfeiture for a much broader range of crimes,
including bank and mail fraud. The procedures for ordering forfeiture in both cases are the
same—namely, those provided in 21 U.S.C. § 853(b)‒(c) and (e)‒(p). See 18 U.S.C.
§ 982(b)(1). 3 But the statutory authorizations, 21 U.S.C. § 853(a)(1) and 18 U.S.C.
§ 982(a)(2), clearly differ because they concern different crimes. Thus, our task is to
determine whether Honeycutt’s holding regarding the former applies to the latter.
The Court in Honeycutt focused on the text of 21 U.S.C. § 853 to determine that
§ 853(a)(1) precludes co-conspirator liability. As the Court explained, the statute “defines
forfeitable property solely in terms of personal possession or use.” 137 S. Ct. at 1632.
Subsection (a)(1) limits forfeiture to “property constituting, or derived from, any proceeds
the person obtained, directly or indirectly, as the result of” the crime. 21 U.S.C.
§ 853(a)(1). To have “obtained” property, the Court said, the person must have personally
acquired it; one does not obtain property acquired by someone else. 137 S. Ct. at 1632–
3
Section 982(b)(1) states, “The forfeiture of property under this section, including
any seizure and disposition of the property and any related judicial or administrative
proceeding, shall be governed by the provisions of [21 U.S.C. § 853] (other than subsection
(d) of that section).” 18 U.S.C. § 982(b)(1). And 21 U.S.C § 853(a) and (q) by their terms
apply only to cases involving certain drug convictions. See 21 U.S.C. § 853(a), (q).
7
33. And, while the words “directly” and “indirectly” modify the word “obtained,” they do
not erase the statute’s requirement that the person in fact obtain the property. Id. at 1633.
The relevant text of 18 U.S.C. § 982(a)(2) mirrors that of 21 U.S.C. § 853(a)(1).
Section 982(a)(2) likewise limits forfeiture to “property constituting, or derived from,
proceeds the person obtained directly or indirectly, as the result of” the crime. 18 U.S.C.
§ 982(a)(2) (emphasis added). Thus, Honeycutt’s interpretation of this language as
permitting forfeiture only of tainted property the defendant personally acquired applies
with equal force to 18 U.S.C. § 982(a)(2). See 137 S. Ct. at 1632‒33; cf. United States v.
Sexton, No. 17-5743, 2018 WL 3293471, at *6 (6th Cir. July 5, 2018) (describing phrase
“the person obtained” in § 853(a)(1) as “the linchpin of the Supreme Court’s decision in
Honeycutt”).
The Honeycutt Court further found that 21 U.S.C. § 853(p)—“the sole provision of
§ 853 that permits the Government to confiscate property untainted by the crime”—makes
clear that the statute cannot permit joint and several liability. 137 S. Ct. at 1633.
Subsection (p) applies only if the government can prove that the defendant frustrated efforts
to recover “any property described in subsection (a)”—i.e., tainted property obtained by
the defendant. 21 U.S.C. § 853(p)(1). And, upon doing so, the government may confiscate
the defendant’s substitute assets only “up to the value of” the unrecoverable proceeds the
defendant acquired. See id. § 853(p)(2); Honeycutt, 137 S. Ct. at 1633‒34. This language,
the Court explained, demonstrates that “Congress did not authorize the Government to
confiscate substitute property from other defendants or co-conspirators; it authorized the
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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.
As mentioned above, 18 U.S.C. § 982 expressly incorporates 21 U.S.C. § 853(p),
among the other procedures in § 853. See 18 U.S.C. § 982(b)(1); United States v. Cox, 575
F.3d 352, 355 n.2 (4th Cir. 2009). This fact further supports the conclusion that
§ 982(a)(2), like § 853(a)(1), prohibits forfeiture of proceeds that the defendant herself did
not obtain.
The one other circuit that has addressed whether Honeycutt applies to 18 U.S.C.
§ 982(a)(2) has concluded that it does. The Third Circuit held that because § 982(a)(2)
“shares several features with 21 U.S.C. § 853,” “the reasoning of Honeycutt applies”
equally. United States v. Brown, 694 F. App’x 57, 58 (3d Cir. 2017); United States v.
Brown, 714 F. App’x 117, 118 (3d Cir. 2018); see also United States v. Sanjar, 876 F.3d
725, 749 (5th Cir. 2017) (holding that, given similarities between 21 U.S.C. § 853(a)(1)
and 18 U.S.C. § 982(a)(7)—provision mandating forfeiture for health fraud and containing
language almost identical to § 982(a)(2)—“the same analysis should apply” to both).
We also note that the Supreme Court’s decision in Honeycutt clearly abrogated this
Court’s prior decision in McHan, which held that 21 U.S.C. § 853(a) “is not limited to
property that the defendant acquired individually but includes all property that the
defendant derived indirectly from those who acted in concert with him in furthering the
criminal enterprise.” 101 F.3d at 1043 (emphasis added). McHan had reasoned that,
because § 853(o) directs courts to “liberally construe[]” § 853 “to effectuate its remedial
purposes,” 21 U.S.C. § 853(o), the word “indirectly” in § 853(a)—which authorizes
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forfeiture of property “obtained, directly or indirectly,” from the crime, id. § 853(a)(1)—
extends liability to co-conspirator proceeds. See 101 F.3d at 1043. And, McHan had
observed, the “imposition of vicarious liability under § 853 also resonates with established
criminal law principles.” Id. The Honeycutt Court rejected these arguments. It explained
that § 853(o) cannot negate the statute’s plain text limiting forfeiture to tainted property
the defendant obtained. 137 S. Ct. at 1635 n.2. Furthermore, the Court stated, the key
background principles for interpreting § 853 are those of forfeiture, not those of conspiracy
liability. Id. at 1634. And the history of forfeiture shows that it has long been restricted to
tainted property. Id. at 1634–35 (explaining that “[t]raditionally, forfeiture was an action
against the tainted property itself,” occurring “independent of, and wholly unaffected by
any criminal proceeding . . . against the defendant” (internal quotation marks and citation
omitted)).
For the foregoing reasons, we now hold that forfeiture under 18 U.S.C. § 982(a)(2)
is limited to property the defendant acquired as a result of the crime. The statute does not
permit courts to hold a defendant liable for proceeds that only her co-conspirator acquired.
Turning to the case at hand, it is clear that the district court’s forfeiture orders cannot
stand. The district court ordered Chittenden to forfeit $1,032,378.82 of her untainted assets
as a substitute for criminal proceeds that only her co-conspirators obtained. Indeed, the
court denied the government’s request to take an additional $231,000 of Chittenden’s
untainted assets because the government had failed to show that the $231,000 Chittenden
had acquired personally was unreachable. In short, none of the $1,032,378.82 represented
assets that Chittenden obtained from her crimes. The entire forfeiture amount consisted of
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property that, under 18 U.S.C. § 982(a)(2) and 21 U.S.C. § 853(p), was not subject to
forfeiture and that the government lacked authority to take.
The government maintains that Chittenden has waived any argument that she is not
liable for her co-conspirators’ proceeds. Chittenden did concede below that over $1 million
of her untainted assets were subject to forfeiture under a theory of joint and several liability.
See, e.g., J.A. 1861‒62. She argues now, in her supplemental brief, that Honeycutt
precludes such liability. Generally, we do not consider issues not passed upon by the
district court. Holland v. Big River Minerals Corp., 181 F.3d 597, 605 (4th Cir. 1999)
(citing Singleton v. Wulff, 428 U.S. 106, 120 (1976)). “This rule applies with equal force
when a party attempts to raise an issue for the first time after remand.” Liberty Univ., Inc.
v. Lew, 733 F.3d 72, 103 (4th Cir. 2013). But we have recognized an exception to this rule
where “there has been an intervening change in the law recognizing an issue that was not
previously available.” Holland, 181 F.3d at 605‒06. That exception “applies when ‘there
was strong precedent’ prior to the change, such that the failure to raise the issue was not
unreasonable and the opposing party was not prejudiced by the failure to raise the issue
sooner.” Id. (citing Curtis Publ’g Co. v. Butts, 388 U.S. 130, 142‒45 (1967)); see also
Hawknet, Ltd. v. Overseas Shipping Agencies, 590 F.3d 87, 91‒92 (2d Cir. 2009) (“[A]
party cannot be deemed to have waived objections or defenses which were not known to
be available at the time they could first have been made . . . [T]he doctrine of waiver
demands conscientiousness, not clairvoyance, from parties.” (internal quotation marks and
citations omitted)); GenCorp, Inc. v. Olin Corp., 477 F.3d 368, 374 (6th Cir. 2007) (“The
intervening-change-in-law exception to our normal waiver rules . . . exists to protect those
11
who, despite due diligence, fail to prophesy a reversal of established adverse precedent.”);
United States v. Washington, 12 F.3d 1128, 1139 (D.C. Cir. 1994) (“[I]t would be unfair,
and even contrary to the efficient administration of justice, to expect a defendant to object
at trial where existing law appears so clear as to foreclose any possibility of success.”).
Given the circumstances of this case, the intervening-change-in-law exception
undoubtedly applies. Prior to Honeycutt, McHan was settled law in the Fourth Circuit.
Our decision there foreclosed any argument that the government could not hold Chittenden
liable in forfeiture for proceeds that only her co-conspirators obtained. See 101 F.3d at
1043; see, e.g., United States v. Jalaram, Inc., 599 F.3d 347, 359 (4th Cir. 2010) (King, J.,
concurring) (“[A]s the majority acknowledges, the law in this Circuit is that coconspirators
are jointly and severally liable for the reasonably foreseeable proceeds obtained by the
conspiracy, regardless of the individual coconspirator’s share therein. This principle is
well established[.]” (citing McHan, 101 F.3d at 1043)); United States v. Bollin, 264 F.3d
391, 419 (4th Cir. 2001) (“[A]though [the defendant] received only about $30,000, he is
liable in a [$1.2 million] forfeiture judgment for the foreseeable criminal conduct of his co-
conspirators.” (citing McHan, 101 F.3d at 1043)). Indeed, nearly all other circuits to
address the question had similarly concluded that conspiracy liability principles applied to
forfeiture. See Honeycutt, 137 S. Ct. at 1631 n.1 (collecting cases). Chittenden’s initial
concession was therefore reasonable, and even wise. We cannot fault her—or the district
court—for relying on our precedent and not prophesying Honeycutt. Nor can we see any
prejudice to the government. Both parties had an equal opportunity to brief the
implications of Honeycutt in this Court, and both will have an opportunity to re-litigate the
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forfeiture amount in the district court on remand. Accordingly, Chittenden has not waived
her right to object to the district court’s forfeiture orders on the ground that post-Honeycutt
she is not liable for conspiracy proceeds she never obtained.
III.
In light of the Supreme Court’s decision in Honeycutt, we hold that 18 U.S.C.
§ 982(a)(2) precludes joint and several forfeiture liability. Accordingly, we vacate the
district court’s forfeiture orders and remand for reassessment of the appropriate forfeiture
amount per this opinion. We otherwise affirm the district court’s judgment for the reasons
set forth in our original opinion. See Chittenden, 848 F.3d 188.
AFFIRMED IN PART, VACATED IN PART, AND REMANDED
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