Sunday, March 03, 2013

Case o' The Week: The Fruits of One's Labor - Davis, Resitution, and Forfeiture

Take a bunch of apples from a farmer, then take the same number of oranges, and you’ve doubled the size of your fruit basket. 

But, “[m]oney levied as a punitive fine does not ‘double’ the money intended to compensate a loss anymore than the addition of apples to one’s store doubles the orange stock.” 
 United States v. Davis, 2013 WL 387908 (9th Cir. Feb. 1, 2013), decision available here.

If you’re the Ninth Circuit, forfeiture and restitution are apples and oranges. If you’re the farmer, just feels like you’ve lost a lot of fruit.

Players: Decision by Sr. Judge Wallace. Concurring opinion by Judge Berzon, joined by Judge Thomas.

Facts: At the request of undercover FBI agents, Davis laundered money and took a percentage of the funds as his cut. Id. at *1. By the time of the indictment, Davis had laundered over $1.2 million, and kept around $73,000 for his efforts. Id. When convicted, Davis was ordered to pay over $95,000 in restitution to the FBI. Id. After some procedural wrangling, the district court also imposed a criminal in personam forfeiture judgment against Davis of $1,290,000. Id.

Issue(s): “Davis's only argument on appeal is that his forfeiture amount should be offset by his restitution amount to avoid a double recovery by the government.” Id. “Davis argues that, because the FBI is essentially a part of the Department of Justice (DOJ), the two entities are functionally the same. Thus, he argues, requiring him to pay forfeiture to the DOJ and restitution to the FBI will result in an impermissible double recovery for the government.” Id.

Held: “[W]e [have previously] stated that requiring a defendant to pay both forfeiture and restitution would not, on its own, result in double recovery. However, because the victims of the crimes in that case were private financial institutions, we did not address the issue of whether payment of both forfeiture and restitution to the government created an impermissible double recovery. . . . We now address that question.” Id. at *2 (citation omitted) (emphasis in original). “Even if the same government entity will receive both forfeiture and restitution, there simply is no double recovery. The two payments represent different types of funds: punitive and compensatory. They are different in nature, kind, and purpose. Money levied as a punitive fine does not ‘double’ the money intended to compensate a loss anymore than the addition of apples to one's store doubles the orange stock. Nor is the collection of forfeiture and restitution based on the same crime an impermissible doubling insofar as a defendant is concerned. . . . It is therefore irrelevant to what extent the FBI and the DOJ are distinct entities, and the district court did not clearly err when it did not offset Davis's forfeiture amount.” Id. (citation omitted).

Of Note: The Fifth, the Seventh, and Eighth Circuits have all held or implied that “if two government entities are related closely enough, restitution or forfeiture should be reduced” to avoid double payment. Id. at *2. (E.g., restitution to the FBI and forfeiture to its parent agency, DOJ, see chart here.).

  Judge Wallace pulls the Ninth away from these three courts: our Circuit appears to stand alone in allowing a single federal entity to twice collect. Id. As noted above, Judge Wallace sees no double counting because a dollar taken for forfeiture is different than a dollar taken for restitution. (A distinction that may be lost on our clients).

How to Use: In a concurring opinion, Judge Berzon (joined by Judge Thomas) writes to note the “narrowness of our holding.” Id. at *3. Judge Berzon notes that Davis was ordered to forfeit $1.29 million, the money that he laundered for the FBI. Id. at *3-*4. She correctly observes, however, that Davis only kept roughly $73,000 as his fee. Id. at *3.

  Why Davis was ordered to forfeit money he “never had in the first place” is a mystery to Judges Berzon and Thomas (and to us!) Id. at *3. Judge Berzon therefore leaves “to another day the question whether a defendant who essentially is paid a commission on other people's money he handles as part of an illegal scheme can be made to ‘forfeit’ funds that passed through his hands but, it appears, were never his.” Id. at *4.
For Further Reading: Wondering how sequestration will impact the defense of indigent clients, for Federal Public Defenders and Criminal Justice Act attorneys? For a thoughtful description of this budget reduction and its impact on one district, see the letter from Executive Director Daniel Stiller, Federal Defender Services of Wisconsin, Inc., available here.

Image of apples and oranges from

Steven Kalar, Federal Public Defender, N.D. Cal. (Refreshed!) website at , thanks to AFPD Candis Mitchell .


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