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United States v. Ayala

United States District Court, D. Oregon

June 18, 2019

UNITED STATES OF AMERICA, Plaintiff,
v.
MARY EVELYN AYALA, Defendant.

          BILLY WILLIAMS UNITED STATES ATTORNEY DISTRICT OF OREGON JULIA JARRETT ASSISTANT UNITED STATES ATTORNEY ATTORNEYS FOR PLAINTIFF

          WHITNEY P. BOISE, BOISE MATTHEWS LLP ATTORNEY FOR DEFENDANT

          OPINION & ORDER

          MARCO A. HERNÁNDEZ, UNITED STATES DISTRICT JUDGE

         Defendant was convicted of theft concerning programs receiving federal funds under 18 U.S.C. § 666; engaging in monetary transactions in criminally derived property under 18 U.S.C. § 1957; filing a false tax return under 26 U.S.C. § 7206; and failing to file an individual tax return under 26 U.S.C. § 7203. Now, the Government moves for a preliminary order of forfeiture. The Court grants in part and denies in part the Government's motion. The Court will enter a personal money judgment against Defendant in the amount of $1, 025, 235.33 and order the specific asset forfeiture of $364.01 and $451, 006.95 as derived from proceeds traceable to her conviction under 18 U.S.C. § 666. It declines, however, to order substitute asset forfeiture at this time.[1]

         BACKGROUND

         After an eight-day trial, a jury found Defendant guilty of five counts of theft concerning programs receiving federal funds; two counts of engaging in monetary transactions in criminally derived property; six counts of filing a false tax return; and one count of failing to file an individual tax return. Verdict Form, ECF 123. The Superseding Indictment included forfeiture allegations for Counts 1 to 5 under 18 U.S.C. § 981(a)(1)(C) and 28 U.S.C. § 2461(c); and Counts 7 and 8 under 18 U.S.C. § 982(a)(1). Sup. Indict., ECF 5. The Government also indicated that it would pursue substitute asset forfeiture under 21 U.S.C. § 853(p) as incorporated by 18 U.S.C. § 2323(b)(2)(A). Id. The Government submitted a Second Bill of Particulars specifying that it was seeking forfeiture of $364.01 from a bank account operated and controlled by Defendant and $451, 006.95 from Fidelity National Title Co., previously belonging to MLK Property Group LLC, a business entity owned and operated by Defendant. Second Bill of Particulars, ECF 77. Defendant waived her right to a jury determination as to forfeiture. Min. Proceedings, ECF 120; Waiver Jury Determ., ECF 127.

         Now, in its Motion for Entry of a Preliminary Order of Forfeiture, the Government seeks: (1) a money judgment of $1, 071, 425.95; (2) forfeiture of three specific assets, $364.01 and $451, 006.95 as proceeds traceable to her conviction of Counts 1 to 5 and $20, 000 as property traceable to a $20, 000 check involved in Count 7; and (3), in the alternative, forfeiture of the specific assets as substitute property to fulfill any outstanding money judgment. Defendant opposes the personal money judgment, arguing that such judgments are no longer viable under the Supreme Court's decision in Honeycutt v. United States, 137 S.Ct. 1626 (2017). Defendant also opposes the Government's request for a money judgment and specific asset forfeiture by arguing that the Government did not properly deduct from the sought-after judgment bona fide expenses made in the usual course of business under 18 U.S.C. § 666(c).

         STANDARDS

         If applicable, forfeiture is mandatory and imposed as punishment for a crime. See United States v. Monsanto, 491 U.S. 600, 606-07 (1989) (holding that, by using the phrase “shall order” in a criminal forfeiture statute, “Congress could not have chosen stronger words to express its intent that forfeiture be mandatory in cases where the statute applied”); United States v. Davis, 706 F.3d 1081, 1083 (9th Cir. 2013) (recognizing that “[f]orfeiture is imposed as punishment for a crime”). “When the government has met the requirements for criminal forfeiture, the district court must impose criminal forfeiture, subject only to statutory and constitutional limits.” United States v. Newman, 659 F.3d 1235, 1240 (9th Cir. 2011) (citing United States v. Casey, 444 F.3d 1071, 1076 (9th Cir. 2006)). The government carries the burden of establishing facts warranting forfeiture by a preponderance of the evidence. United States v. Christensen, 828 F.3d 763, 822 (9th Cir. 2015). The government may seek criminal forfeiture in the form of: (1) an in personam money judgment against the defendant; (2) forfeiture of specific assets; and (3) forfeiture of substitute assets. Newman, 659 F.3d at 1242-43 (citing Fed. R. Crim. P. 32.2). Courts have unanimously agreed that in personam money judgments representing unlawful proceeds are proper even where forfeiture statutes do not refer to money judgments. Id. at 1242 (citing United States v. McGinty, 610 F.3d 1242, 1246 (10th Cir. 2010) (collecting cases)).

         Before entering a preliminary order of forfeiture, “[i]f the government seeks forfeiture of specific property, the court must determine whether the government has established the requisite nexus between the property and the offense. If the government seeks a personal money judgment, the court must determine the amount of money that the defendant will be ordered to pay.” Fed. R. Crim. P. 32.2(b)(1)(A). Though there does not appear to be a Ninth Circuit test for determining whether there is the requisite nexus, “five other Circuits have adopted a but-for test: The Government must show that the defendant would not have obtained the property but for her illegal activity.” U.S. v. Martin, No. 1:13-CR-0065-BLW, 2014 WL 221956, at * 4 (D. Idaho Jan. 21, 2014) (citing cases from the D.C. Circuit, the First Circuit, the Second Circuit, the Third Circuit, and the Seventh Circuit). “The court's determination may be based on evidence already in the record . . . and on any additional evidence or information submitted by the parties and accepted by the court as relevant and reliable.” Fed. R. Crim. P. 32.2(b)(1)(B).

         DISCUSSION

         Following Defendant's conviction, the Government seeks: (1) a money judgment of $1, 071, 425.95; (2) the forfeiture of specific assets, including $364.01 and $451, 006.95 as proceeds traceable to theft concerning programs receiving federal funds; and (3) in the alternative, forfeiture of the aforementioned specific assets as substitute property to fulfill any outstanding money judgment. Gov't Mot. Prelim. Order Forf. (“Gov't Mot.”) 2, ECF 132. Defendant opposes the Government's request, arguing both that a personal money judgment is unlawful under the Supreme Court's decision in Honeycutt v. United States and that the judgment and specific asset forfeiture are not supported by the evidence adduced at trial. Def. Opp'n Gov't Mot. (“Def. Opp'n”), ECF 145.

         This Court disagrees. First, the Court declines to depart from its previous decision in United States v. Ford, 296 F.Supp.3d 1251 (D. Or. 2017), and finds that, after considering Defendant's bona fide health expenses paid in the usual course of business, a personal money judgment in the amount of $1, 025, 235.33 is proper in this case. Second, the Court finds that the funds from the sale of the MLK property are properly subject to specific asset forfeiture as the property was more likely than not purchased exclusively with proceeds of Defendant's crime. Finally, the Court declines to order the forfeiture of the funds from the sale of the MLK property as substitute property. Accordingly, the Court grants in part and denies in part the Government's motion for entry of a preliminary order of forfeiture.

         I. Money Judgment

         The Government first seeks a personal money judgment of $1, 071, 425.95 as proceeds of Defendant's theft from GUTD under 18 U.S.C. § 666. “Federal Rule of Criminal Procedure 32.2 makes clear that, at least where the proceeds of the criminal activity are money, the government may seek a money judgment as a form of criminal forfeiture.” Newman, 659 F.3d. at 1241 (citing Fed. R. Crim. P. 32.2(b)(1)(A)) (“If the government seeks a personal money judgment, the court must determine the amount of money that the defendant will be ordered to pay.”). “The calculation of [the] forfeiture amount does not demand mathematical exactitude[, ] and the district courts are ‘permitted to use general points of reference as a starting point . . . and may make reasonable extrapolations from the evidence established by a preponderance of the evidence at the sentencing proceeding.'” Ford, 296 F.Supp.3d at 1260 (quoting United States v. Treacy, 639 F.3d 32, 48 (2d Cir. 2011)).

         The statute at issue here permits forfeiture of “[a]ny property, real or personal, which constitutes or is derived from proceeds traceable to” an offense under 18 U.S.C. § 666.[2] 18 U.S.C. § 981(a)(1)(C). Proceeds are “property of any kind obtained directly or indirectly, as the result of the commission of the offense giving rise to forfeiture, and any property traceable thereto, and is not limited to the net gain or profit realized from the offense.” 18 U.S.C. § 981(a)(2)(A). Thus, “[t]he language of the forfeiture statute broadly makes forfeitable any property, obtained by the defendant directly or indirectly, as a result of the commission of” Defendant's crime. See United States v. Lo, 839 F.3d 777, 793 (9th Cir. 2016) (discussing the same statutory sections in the context of wire and mail fraud).

         Defendant objects to the money judgment on two grounds. First, Defendant argues that a personal money judgment cannot be entered against her because of the Supreme Court's recent decision in Honeycutt v. United States. Second, Defendant argues that the requested $1, 071, 425.95 money judgment is not supported by the evidence adduced at trial. The Court addresses each argument in turn.

         A. Honeycutt v. United States

         Analogizing to the Supreme Court's decision in Honeycutt v. United States, Defendant first argues that no personal money judgment should issue because there is no statutory authority explicitly supporting or authorizing the money judgment against her. Def. Opp'n at 5, 9. According to Defendant, such a judgment is unlawful because it would be enforceable solely against future assets or income, which are “untainted and unrelated to the criminal charges at issue in this case.” Id. at 4. As Defendant acknowledges, this Court was previously presented with and rejected this argument in Ford, 296 F.Supp.3d at 1251. The Court will not depart from that decision here.

         Prior to Honeycutt, it was well-established in this jurisdiction that courts are required to impose money judgments on criminal defendants under certain circumstances. In Casey, for example, the Ninth Circuit explained that courts are required to impose in personam money judgments ...


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