UNITED STATES OF AMERICA, Appellee, v. JOHN GEORGE, JR., Defendant, Appellant.
No. 17-1371
United States Court of Appeals For the First Circuit
March 23, 2018
Before Thompson, Circuit Judge, Souter, Associate Justice, and Selya, Circuit Judge.
APPEAL FROM THE UNITED STATES DISTRICT COURT FOR THE DISTRICT OF MASSACHUSETTS [Hon. Denise J. Casper, U.S. District Judge]
Randall E. Kromm, Assistant United States Attorney, with whom William D.
March 23, 2018
* Hon. David H. Souter, Associate Justice (Ret.) of the Supreme Court of the United States, sitting by designation.
SELYA, Circuit Judge. In United States v. George (George I), 841 F.3d 55 (1st Cir. 2016), we affirmed the conviction and sentence of a corrupt politician, defendant-appellant John George, Jr. At the same time, we vacated the district court‘s forfeiture order because the court lacked jurisdiction when it purposed to enter that order. See id. at 72. On remand, the district court — its jurisdiction having reattached — revisited the matter of forfeiture and ordered the defendant to forfeit proceeds of his criminal activity in the amount of $1,382,214.
The defendant again appeals. This time around, he mounts both procedural and substantive challenges to the forfeiture order. After careful consideration, we hold that the district court did not abridge the defendant‘s procedural rights. We further hold, as a matter of first impression in this circuit, that the district court applied an appropriate yardstick in measuring the “proceeds” to be forfeited. Accordingly, we affirm the forfeiture order.
I. BACKGROUND
We sketch the relevant facts and travel of the case. The reader who hungers for more exegetic detail is free to consult our earlier opinion.
This case revolves around the Southeast Regional Transit Authority (SRTA), a public authority funded jointly by the Commonwealth of Massachusetts and the federal government. The defendant, described in our earlier opinion as a local “political satrap,” id. at 58, served on the SRTA advisory board until 1988, when he arranged for his friend and political ally, Joseph Cosentino, to replace him. Some three years later, the defendant purchased Union Street Bus Company (Union Street) through an alter ego, Trans-Ag Management, Inc. (Trans-Ag). The defendant was the sole shareholder of Trans-Ag and was its only employee.
After the defendant took control of Union Street, the SRTA granted the company an exclusive franchise for certain bus routes, and the contract between the SRTA and Union Street was periodically renewed (the last time in 2006). In order to secure the 2006 renewal, the defendant colluded with Cosentino to discredit Union Street‘s main competitor. What is more, he brought in a stalking horse — an artificially high bidder — to make Union Street‘s bid appear more attractive. The defendant‘s machinations succeeded, and Union Street‘s contract was renewed.
The renewed contract was lucrative. Throughout its term, the SRTA reimbursed Union Street for the amounts by which Union Street‘s operating expenses exceeded its operating income. Over and above this stipend, the SRTA paid Union Street a hefty management fee to oversee the operation of the designated routes.1 The operating expenses included the salaries of two individuals,
nominally employees of Union Street, who spent most of their work-hours (during which they were compensated directly by Union Street and, thus, indirectly by the SRTA) toiling at the defendant‘s farm and otherwise ministering to the defendant‘s personal projects.
The defendant‘s success at bilking the SRTA was not a mere fortuity. During the renewal term, he was able to limit oversight of Union Street‘s contract. Moreover, the defendant was able to arrange for Cosentino (his political ally) to be appointed, mid-way through the contract term, as the SRTA Administrator.
Toward the end of the renewal term, Cosentino turned over a new leaf and began challenging the defendant‘s diversion of SRTA-funded resources. He also took steps to ensure a fair bidding process for the next renewal of the contract. Displeased by this about-face, the defendant used his influence to have Cosentino removed as Administrator. Nevertheless, the 2010 renewal of the contract was awarded to another bidder.
Eventually, the chickens came home to roost. After conducting an investigation of the SRTA‘s finances, the government charged the defendant with conspiracy to commit an offense against the United States and embezzlement.2
Following a lengthy jury trial that resulted in the defendant‘s conviction, the district court held a sentencing hearing on July 29, 2015. In the course of that hearing, the court, inter alia, entertained arguments on the government‘s motion for an order of forfeiture. When the sentencing hearing had concluded, the court (wanting additional time to consider forfeiture) suggested that it delay the actual imposition of sentence. Defense counsel resisted this suggestion and instead sought the immediate imposition of sentence. He told the court that “[i]t require[s] [the defendant], who is obviously taking this very badly, . . . to have to wait more time to know what his fate is going to be, I think would be devastating . . . let‘s get a sentence today, your Honor.” Defense counsel prefaced this request with an acknowledgment that he had “absolutely no problem” with the court resolving the issue of forfeiture at a later date and entering an amended judgment. The government did not object, and the court acquiesced. It sentenced the defendant to a 70-month term of immurement on the substantive offense count and a
concurrent 60-month term of immurement on the conspiracy count; ordered restitution in the amount of $688,772;3 and reserved judgment on the forfeiture issue.
The court embodied these sentencing determinations in a written judgment, and the defendant appealed. While his appeal was pending, the district court accepted additional briefing and heard further argument with respect to forfeiture. On September 21, 2015 — with the defendant‘s appeal still pending — the district court entered an amended judgment, which included a forfeiture award in the amount of $1,382,214 (the total amount of the management fees paid under the 2006 contract renewal).
In due course, we upheld the defendant‘s conviction and the sentencing determinations
On December 7, 2016, the district court — its jurisdiction having been refreshed — notified the parties that it was “inclined” to consider the matter of forfeiture on the papers previously filed. In an abundance of caution, the court nonetheless allowed additional briefing. After receiving the parties’ supplemental briefs, the court ordered forfeiture in the amount of $1,382,214, holding that this amount, which it derived by aggregating the management fees paid under the 2006 renewal contract, constituted proceeds of the charged crimes. This timely appeal followed.
II. ANALYSIS
In this forum, the defendant advances both procedural and substantive claims. First, he contends that the district court denied him the right to allocute and the right to be present when the forfeiture order was entered. Second, he contends that the management fees that formed the basis for the forfeiture award did not constitute “proceeds” of the offenses of conviction. We discuss these contentions sequentially.
A. Sentencing Rights.
The defendant claims that he had a right to allocute before the district court upon remand and a right to be present when the district court reentered the forfeiture order. We deem it useful to start our analysis of this two-pronged claim by rehearsing a baseline principle discussed in United States v. Bryant, 643 F.3d 28 (1st Cir. 2011). Bryant was a case in which we considered a defendant‘s rights upon remand after we had vacated his original sentence. We explained that “whether the defendant‘s presence and an opportunity to allocute are required has in practice turned on whether requiring these safeguards made sense in the context of the proceedings.” Bryant, 643 F.3d at 32. On one end of the continuum are remanded cases involving the full range of sentencing issues in proceedings that are as “open-ended as an initial sentencing.” Id. On the other end are remanded cases in which the remand order is “so focused and limited that it involves merely a technical revision of the sentence dictated by the appeals court and calls for no formal proceeding.” Id. Bryant fell near the “full range” end of the continuum; the case at hand falls near the “limited” end of the continuum.
1. Allocution.
Against this backdrop, we turn first to the defendant‘s claim that he was denied the right to allocute. With respect to this claim, his argument relies principally on
Pertinently,
Exploring the pertinent events requires us to take a trip down memory lane. On July 29, 2015, the district court held a sentencing hearing at which the defendant was present. At that time, the court considered all aspects of the defendant‘s sentence (including forfeiture). The court offered the defendant the opportunity to allocute, but the defendant‘s counsel replied that he had discussed this possibility with the defendant and the defendant did not wish to make any statement. The court accepted this demurral, stating that it would “take the words of [the defendant‘s] counsel on [the defendant‘s] behalf.”
Later in the July 29 proceeding, the court suggested delaying the imposition of the sentence so that it could give further consideration to the forfeiture issue. Defense counsel pleaded with the court to impose the main components of the sentence immediately and resolve the matter of forfeiture at a future date. The court acquiesced and imposed the majority of the sentence, reserving the forfeiture component as the defendant had requested.
While the case was pending on appeal, the district court entertained supplemental arguments on the forfeiture issue (for which the defendant was once again present). On September 21, 2015, the court granted the forfeiture motion, fixed the forfeiture amount in the sum of $1,382,214, and entered an electronic order to that effect. That order was memorialized in an amended judgment, later vacated, but eventually re-entered after the district court regained jurisdiction.
The bottom line is that the defendant was given a full opportunity to allocute at the July 29 sentencing hearing. While the defendant protests that he deserved a second opportunity to allocute on remand, his protest rings hollow. We explain briefly.
We have held that
In an effort to change the trajectory of the debate, the defendant argues that he should have been allowed to allocute anew since the district court should have revisited both the sophisticated means enhancement,
The short of it is that the defendant‘s right to allocute was satisfied at the initial sentencing hearing. In the circumstances of this case, he was not entitled to a second bite at the cherry. In other words, he was not entitled to a further opportunity to allocute on remand. The fact that the court deferred the entry of the forfeiture order at the defendant‘s request did not by some mysterious witchcraft revivify an allocution right already fully exercised.
2. Presence.
The defendant‘s claim that he was denied his right to be present when the district court re-entered the forfeiture order need not detain us. As framed, this claim draws its essence from
A defendant‘s
43 arguments . . . where trial counsel had a clear opportunity to object, but did not.” United States v. Flores-Rivera, 787 F.3d 1, 30 (1st Cir. 2015). Moreover, in appropriate circumstances, “[d]efendants need not be expressly warned of their rights under
This reasoning applies with full force to the case at hand. At the defendant‘s sentencing hearing, his counsel represented that the defendant would have “absolutely no problem with [the district court] submitting an amended judgment” regarding forfeiture at a future date. When the district court later convened a hearing at which the defendant was present to hear additional arguments about forfeiture, the district court told the parties that, if it decided forfeiture was appropriate, it planned to “enter an [electronic] order in that regard and amend the judgment.” The defendant did not object to this plan, nor did he ask to be present at the time such an order might be entered. And when the case was remanded, the defendant made no request to be present after the district court told the parties that it was “inclined to consider” forfeiture “on papers previously filed.”
Here, as in United States v. Gagnon, 470 U.S. 522 (1985) (per curiam), “[t]imely invocation
To cinch the matter, this is a situation in which requiring the defendant‘s presence at the time the forfeiture order was re-entered would serve no useful purpose and, thus, would not have “made sense.” Bryant, 643 F.3d at 32. The remand order in this case was “so focused and limited,” id., that it called for a bare minimum of formal proceedings.
To say more about the claim of denied presence would be to paint the lily. Since the defendant waived any
B. Proceeds.
This brings us to the defendant‘s substantive contentions: that the district court erred in finding the management fees to be “proceeds” of the offenses of conviction. Where, as here, a claim of error directed at a forfeiture order has been duly preserved, we review challenges to the ordering court‘s legal conclusions de novo and challenges to its factual findings for clear error. See United States v. Ponzo, 853 F.3d 558, 589 (1st Cir. 2017), cert. denied, 2018 WL 942454 (2018); see also U.S. Bank Nat‘l Ass‘n ex rel. CWCapital Asset Mgmt. LLC v. Vill. at Lakeridge, LLC, 2018 WL 1143822, at *5-7 (U.S. Mar. 5, 2018). We are at liberty to affirm a district court‘s judgment on any ground made manifest by the record, whether or not that particular ground was raised below. See United States v. Zorrilla-Echevarria, 723 F.3d 298, 300 (1st Cir. 2013); Doe v. Anrig, 728 F.2d 30, 32 (1st Cir. 1984).
In cases like this one, the provisions of
We have said before that “words are like chameleons; they frequently have different shades of meaning depending upon the circumstances.” United States v. Romain, 393 F.3d 63, 74 (1st Cir. 2004). As foreshadowed by this zoomorphic simile, the word “proceeds,” when used in
Given these varying definitions, it is readily apparent that the classification of an offense of conviction can have a profound effect on the amount that may be subject to forfeiture in a particular case.
Here, the defendant was convicted of embezzlement from an organization receiving federal funds,
To qualify under
There is no need for us to reinvent the wheel. In a thoughtful opinion, the Second Circuit has determined that embezzlement “cannot be done lawfully, and therefore is properly considered an ‘unlawful activity’ within the meaning of section 981(a)(2)(A).” Bodouva, 853 F.3d at 80 (quoting Contorinis, 692 F.3d at 145 n.3). We share this view.
The defendant‘s attempt to place embezzlement under the carapace of
That ends this aspect of our inquiry. Because we conclude that embezzlement is an unlawful activity within the ambit of
The inquiry thus reduces to whether the management fees paid to Union Street under its contract with the SRTA constitute proceeds obtained, directly or indirectly, as a result of one or more
In determining what constitutes the “proceeds” of a conspiracy or other common enterprise, several courts of appeals have recognized that the scope of forfeitable property may extend to all the ill-gotten gains of that conspiracy or enterprise, not just those ill-gotten gains that flow from the underlying substantive offense. See, e.g., United States v. Capoccia, 503 F.3d 103, 117-18 (2d Cir. 2007); United States v. Hasson, 333 F.3d 1264, 1279 (11th Cir. 2003); United States v. Edwards, 303 F.3d 606, 643 (5th Cir. 2002); cf. Cox, 851 F.3d at 128-29 (holding that forfeitable funds obtained through a “scheme to defraud” may include “additional executions of the scheme that were not specifically charged or on which the defendant was acquitted“). We align ourselves with these courts and hold that, for forfeiture purposes under
As such, “a conspiracy poses distinct dangers quite apart from those of the [underlying] substantive offense.” Iannelli v. United States, 420 U.S. 770, 778 (1975).
Not surprisingly, “[i]t has been long and consistently recognized . . . that the commission of [a] substantive offense and a conspiracy to commit it are separate and distinct offenses.” Pinkerton v. United States, 328 U.S. 640, 643 (1946). The rationale for treating the two separately is powerful: among other things, “[g]roup association for criminal purposes often, if not normally, makes possible the attainment of ends more complex than those which one criminal could accomplish.” Iannelli, 420 U.S. at 778 (quoting Callanan v. United States, 364 U.S. 587, 593 (1961)).
The threats inherent in group criminality are on full display in this case. Through cronyism and the wielding of political influence, the conspiracy allowed the defendant to obtain and keep in force Union Street‘s 2006 contract with the SRTA. During its term, the conspiracy enabled him corruptly to turn the contract into something resembling his personal piggy bank. Contrary to the defendant‘s importunings, the ensuing loss to the public substantially surpassed the value of the misappropriated services and diverted work-hours: the conspiracy not only produced a rigged bidding process but also deprived the public of arm‘s-length oversight of a regional transportation system. Seen in this light, the case offers a paradigmatic example of how the proceeds of a conspiracy can substantially exceed the proceeds of the underlying substantive offense.
The defendant nonetheless argues that the management fees were not supportably found to be proceeds of the charged conspiracy.7 This argument lacks force.
with others to ensure that Union Street received the 2006 contract. The conspiracy then operated to minimize meaningful superintendence of Union Street‘s handling of the contract, which in turn allowed the defendant relatively free reign to plunder Union Street‘s SRTA-funded resources. The district court was warranted in concluding that the defendant, instead of managing the contract to achieve maximum efficiency in transportation services and to further the public good, managed the contract with an eye toward lining his own pockets.
Finally, the management fees were only a fraction of the contract‘s total value,9 and that fraction was specifically intended to compensate the defendant‘s company for its stewardship of government funds. The conspiracy perverted this stewardship and turned it into a license to steal. On this record, it was not clear error for the district court to determine that the management fees were garnered by the defendant, at least indirectly, as fruit of the charged conspiracy.
We add a coda. The Supreme Court has observed that “[f]orfeitures help to ensure that crime does not pay: [t]hey at once punish wrongdoing, deter future illegality, and ‘lessen the economic power’ of criminal enterprises.” Kaley v. United States,
134 S. Ct. 1090, 1094 (2014) (quoting Caplin & Drysdale, Chartered v. United States, 491 U.S. 617, 630 (1989)). Our application of
III. CONCLUSION
We need go no further. For the reasons elucidated above, the order of forfeiture is
Affirmed.
BRUCE M. SELYA
UNITED STATES CIRCUIT JUDGE