770 F.3d 628
7th Cir.2014Background
- Kerry L. Smith pleaded guilty to drug distribution, money laundering (§ 1957), Social Security fraud, and false statements on food-stamp applications; the district court entered a forfeiture judgment of $790,020 and ordered forfeiture of eight parcels of real property as proceeds of drug trafficking.
- Smith had participated in two proffer sessions and signed a proffer letter that limited government use of proffer statements in its case-in-chief but permitted derivative use, impeachment, rebuttal at sentencing, and use where defendant’s position was inconsistent with the proffer.
- After a prior conviction was vacated on Sixth Amendment grounds and Smith withdrew his initial plea, he pleaded guilty again with new counsel; the Government sought forfeiture of eight Carbondale, Illinois properties (five identified in proffers, three not mentioned).
- At the forfeiture/sentencing hearing the Government relied on an IRS agent’s net-worth analysis and testimony that Smith admitted in proffers to using drug proceeds to buy certain properties; defense objected that proffer statements were inadmissible under Fed. R. Evid. 410 (incorporated by Fed. R. Crim. P. 11(f)) absent a knowing and voluntary waiver.
- The district court ruled the proffer statements were admissible because Smith had waived the protections by signing the proffer letter and because Rule 410 and the Federal Rules of Evidence do not govern sentencing/forfeiture proceedings; the court found by a preponderance that the properties were forfeitable as drug proceeds and alternatively available as substitute assets under 21 U.S.C. § 853(p).
- The Seventh Circuit affirmed: it held the proffer waiver was valid (no showing waiver was involuntary), Rule 410/11 do not bar use of proffer statements at sentencing/forfeiture, and ample evidence (independent of the proffers) supported forfeiture and use of substitute assets to satisfy the in personam judgment.
Issues
| Issue | Plaintiff's Argument (Smith) | Defendant's Argument (Government) | Held |
|---|---|---|---|
| Admissibility of proffer statements at forfeiture hearing | Proffer statements were plea discussions protected by Rule 410 (via Rule 11) and inadmissible because his earlier plea was later withdrawn; proffer letter did not show a knowing, voluntary waiver | Proffer letter expressly permitted derivative use, impeachment, rebuttal and use at sentencing; Smith signed with counsel — he waived protections | Court: Waiver was valid and enforceable; Smith offered no evidence his waiver was involuntary; statements admissible |
| Applicability of Rule 410/Rule 11 at sentencing/forfeiture | Rule 11 incorporates Rule 410 into all criminal proceedings, so Rule 410 applies at sentencing and bars use of proffer statements | Federal Rules of Evidence (including Rule 410) do not apply to sentencing/forfeiture; Rule 11’s reference to Rule 410 governs admissibility only where the Rules of Evidence apply | Court: Federal Rules of Evidence do not apply at sentencing; Rule 410/11 do not bar use of proffer statements at forfeiture/sentencing |
| Sufficiency of evidence that properties are proceeds of drug trafficking | The only link between several properties and drug proceeds was Smith’s proffer statements, which are inadmissible; net-worth analysis depends on tainted rental income | Even without proffers, net-worth analysis and financial records show expenditures far exceeded legitimate income; proffers only corroborative | Court: Preponderance of evidence supports finding properties derived from drug proceeds; forfeiture valid |
| Use of properties as substitute assets under § 853(p) | Properties cannot be forfeited as substitutes if they are not specifically ordered as such or if they were already deemed proceeds | Defendant may forfeit substitute assets to satisfy the in personam forfeiture judgment when directly forfeitable assets cannot satisfy the judgment | Court: Properties may be forfeited as substitute assets; district court properly authorized substitute forfeiture to satisfy the judgment |
Key Cases Cited
- Mezzanatto v. United States, 513 U.S. 196 (1995) (waiver of statutory evidentiary protections in plea discussions is enforceable absent an affirmative showing of involuntariness)
- Libretti v. United States, 516 U.S. 29 (1995) (criminal forfeiture is part of sentencing; Rule 11(f) inquiry not required to validate forfeiture waiver)
- United States v. Patel, 131 F.3d 1195 (7th Cir. 1997) (Government bears burden to prove forfeiture by preponderance)
- United States v. Melendez, 401 F.3d 851 (7th Cir. 2005) (review of forfeiture factual findings for clear error)
- United States v. Gonzalez, 608 F.3d 1001 (7th Cir. 2010) (Federal Rules of Evidence do not apply at sentencing)
- United States v. Robinson, 8 F.3d 418 (7th Cir. 1993) (distinguishable; addressed absence of a signed waiver to waive jury on forfeiture)
- United States v. Bornfield, 145 F.3d 1123 (10th Cir. 1998) (discusses relationship between direct forfeiture and substitute-asset forfeiture)
- United States v. Saccoccia, 564 F.3d 502 (1st Cir. 2009) (distinguishes Bornfield; recognizes substitute-asset forfeiture where monetary forfeiture judgment is sound)