United States v. Peters
2013 U.S. App. LEXIS 20526
| 2d Cir. | 2013Background
- Frank E. Peters owned and controlled two auto-parts companies (WAPI and Bighorn) that obtained an asset-based revolving loan from Chase secured by accounts receivable and inventory.
- From ~1997–2000 company employees engaged in fraudulent accounting ("holding the month open," "prebilling," "rebilling") to inflate the borrowing base and induce larger draws under the line of credit; some payments were diverted to a new Peters-controlled entity (ITEC).
- Peters was convicted of conspiracy, bank fraud, mail and wire fraud, and related counts; the district court entered a criminal forfeiture money judgment of $23,154,259 under 18 U.S.C. § 982(a)(2).
- The district court found the loan disbursements (gross draws) constituted the proceeds subject to forfeiture and concluded that Peters indirectly obtained those proceeds through corporations he effectively controlled.
- On appeal Peters argued (1) “proceeds” under § 982(a)(2) means only profits (not gross receipts), and (2) he did not personally obtain the funds paid to the corporate entities (corporate veil should not be pierced).
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Meaning of "proceeds" in 18 U.S.C. § 982(a)(2) | Gov’t: "proceeds" includes gross receipts (loan disbursements) and punishes receipt of funds regardless of profit | Peters: "proceeds" should be read as "profits" (Santos reasoning/regulatory lenity) | Court: "proceeds" means gross receipts/receipts for § 982(a)(2); punitive purpose and administrability favor receipts over profits |
| Whether Peters "obtained indirectly" proceeds paid to his companies | Gov’t: Peters exercised near-total control over companies and effectively obtained funds through them | Peters: The companies, not he, obtained the loan proceeds; veil-piercing required and was improper | Court: Peters indirectly obtained proceeds — federal standard permits attributing corporate receipts to an individual who so extensively controlled the corporation; finds no clear error in district court’s factual findings relating to control and use of assets |
Key Cases Cited
- United States v. Santos, 553 U.S. 507 (discusses "proceeds" ambiguity in money-laundering statute)
- United States v. Bajakajian, 524 U.S. 321 (criminal forfeiture characterized as punishment; Excessive Fines analysis)
- Libretti v. United States, 516 U.S. 29 (criminal forfeiture as aspect of punishment)
- United States v. Monsanto, 491 U.S. 600 (broad wording of forfeiture statutes)
- United States v. Newman, 659 F.3d 1235 (RICO forfeiture: "proceeds" as amount of loan)
- United States v. Awad, 598 F.3d 76 (forfeiture money judgment may be imposed even if defendant has no assets)
- United States v. Quinones, 635 F.3d 590 (interpretive discussion of Santos)
- First Nat. City Bank v. Banco Para El Comercio Exterior de Cuba, 462 U.S. 611 (control/domination standard referenced)