The opinion of the court was delivered by: THOMAS F. HOGAN
The defendants in this case are charged with wire fraud, mail fraud, and related conspiracy and aiding and abetting counts. Three of the defendants have moved to dismiss the indictment on double jeopardy grounds. They argue that the combination of previous administrative forfeitures and the impending trial would punish them twice for the same offense. For the reasons stated below, the Court will deny the defendants' motion.
On February 2, 1991, the FBI executed a search and seizure warrant and removed computer equipment from the Washington, D.C. offices of a company called Shearson Management Group (SMG). On February 28 of the same year, pursuant to a separate seizure warrant, the FBI seized a total of $ 15,887.00 in U.S. currency from various accounts at a northern Virginia bank. One account was in defendant Marwan Moheyeldien's name, another account was in the name of SMG, and two other accounts belonged to other companies. The government has alleged that the defendants established SMG as part of the fraudulent behavior charged in the indictment and that all three of the defendants filing this motion were corporate officers of SMG.
The seizure warrant was premised on the magistrate judge's finding of probable cause that the funds were used for illegal money laundering in violation of 18 U.S.C. § 1956. The affidavit in support of the warrant alleged that Moheyeldien had used the money for various transactions with the intent of continuing the defendants' scheme to defraud.
In April and May of 1991, notices of forfeiture were sent to defendants Moheyeldien, Ayman El-Difrawi, Patrick Read, and another defendant, as well as to SMG itself. The notices stated that the government had initiated an administrative forfeiture proceeding pursuant to 18 U.S.C. § 981(a)(1)(A), which provides that "any property, real or personal, involved in a transaction or attempted transaction in violation of [the money laundering provisions] of this title or any property traceable to such property" is forfeitable. The procedures for such forfeitures are set forth in the customs law. 18 U.S.C. § 981(d). The notices of forfeiture announced that the government would proceed pursuant to 19 U.S.C. § 1609, which is the customs statute providing for "summary forfeiture" when no one claims the property at issue. This proceeding substitutes an administrative declaration of forfeiture by the executive branch for a judicial decree of forfeiture.
The defendants did not respond to the notices of forfeiture, and the summary proceedings were completed. In August 1991, the computer equipment was declared forfeited. In January 1992, the money was declared forfeited. The United States now has title to the property and its administrative declaration of forfeiture has the same effect as a judgment of forfeiture from a district court. 19 U.S.C. § 1609(b).
On April 20, 1994, a grand jury returned an indictment charging the defendants with conspiracy, wire fraud, mail fraud, and aiding and abetting. The indictment does not charge a violation of the money laundering statute. On July 6, 1995, defendant Moheyeldien filed this motion. Read and El-Difrawi have since joined in its filing.
A. The Double Jeopardy Clause
The Double Jeopardy Clause of the Fifth Amendment states: "nor shall any person be subject for the same offence to be twice put in jeopardy of life or limb." Though neither life nor limb is at stake here, "it is well settled that the Amendment covers imprisonment and monetary penalties." Department of Revenue of Montana v. Kurth Ranch, 114 S. Ct. 1937, 1941 n.1, 128 L. Ed. 2d 767 (1994) (citations omitted). It is also oft-repeated that the clause "protects against three distinct abuses: a second prosecution for the same offense after acquittal, a second prosecution for the same offense after conviction; and multiple punishments for the same offense." United States v. Halper, 490 U.S. 435, 440, 104 L. Ed. 2d 487, 109 S. Ct. 1892 (1989) (citation omitted).
The third prong regarding multiple punishments is at issue here. The defendants argue that the forfeiture and a conviction at trial would doubly punish them for the offenses charged in the indictment.
B. The Supreme Court's Definition of Jeopardy
A proceeding need not be denominated as criminal in order to invoke the protections of the Double Jeopardy Clause. "[A] civil as well as a criminal sanction constitutes punishment when the sanction as applied serves. . . the goals of punishment." Halper, 490 U.S. at 448. In recent years, the Supreme Court has expanded the class of proceedings which it considers to be punishment for purposes of double jeopardy analysis.
Older double jeopardy challenges to civil sanctions usually involved monetary penalties of a statutorily fixed amount. Defendants tended to object to these penalties after they had already faced criminal prosecution for the same offense. See, e.g., Helvering v. Mitchell, 303 U.S. 391, 82 L. Ed. 917, 58 S. Ct. 630 (1938) (50% penalty above taxable amount for tax fraud); United States ex rel. Marcus v. Hess, 317 U.S. 537, 87 L. Ed. 443, 63 S. Ct. 379 (1943) (double damages plus $ 2000 for each instance of government contracts fraud); Rex Trailer Co. v. United States, 350 U.S. 148, 100 L. Ed. 149, 76 S. Ct. 219 (1956) (double damages plus forfeiture of goods plus $ 2000 for each instance of fraudulent assertion of veterans purchasing rights); One Lot Emerald Cut Stones and One Ring v. United States, 409 U.S. 232, 34 L. Ed. 2d 438, 93 S. Ct. 489 (1972) (forfeiture of goods plus fine in amount of value of goods for customs fraud). In each of these cases, the Supreme Court held that the penalty was remedial in purpose because it was designed to compensate the government for its expenses in enforcing the statute. Because the fine was remedial and not punitive, the Court reasoned, jeopardy did not attach. See, e.g., Emerald Cut Stones, 409 U.S. at 237 (penalty "serves to reimburse the Government for investigation and enforcement expenses"). Though the statutory penalties were not exactly calibrated to the government's losses or costs, the Court decided in the early cases that "the Government is entitled to rough remedial justice . . . according to somewhat imprecise formulas . . . without having been deemed to have imposed a second punishment for the purpose of double jeopardy analysis." Halper, 490 U.S. at 446.
After decades of defending these fixed penalties against double jeopardy challenges, the Supreme Court finally encountered a set of facts it could not countenance. In Halper, the defendant had submitted 65 false Medicare claims, each of which defrauded the government of nine dollars, for a total loss of $ 585. After a criminal conviction, the government sought civil penalties pursuant to the False Claims Act. That statute allowed the government to seek $ 2000 per instance of fraud, in addition to recovery of the actual loss and the government's litigation costs. The total potential recovery was more than $ 130,000.
Halper appealed to the Supreme Court, arguing that the post-trial civil penalties were punitive and therefore subjected him to double jeopardy. The Court reviewed Mitchell, Hess, Rex Trailer, and Emerald Cut Stones and noted that "these cases do not tell us . . . what the Constitution commands when one of those imprecise formulas authorizes a supposedly remedial sanction that does not remotely approximate the Government's damages and actual costs, and rough justice becomes clear injustice." 490 U.S. at 446.
The Supreme Court held that the False Claims Act fines in Halper's case, unlike the statutory penalties previously reviewed by the Court, were punitive. It explained:
What we announce now is a rule for the rare case, the case such as the one before us, where a fixed-penalty provision subjects a prolific but small-gauge offender to a sanction overwhelmingly disproportionate to the damages he has caused. . . . [When] the civil penalty sought . . . bears no rational relation to the goal of compensating the Government for its loss, but rather appears to qualify as "punishment" in the plain meaning of the word,
a double jeopardy inquiry is appropriate. 490 U.S. at 449.
A few years later, the Court extended Halper's rule to in rem forfeitures. It held that a statute providing for the forfeiture of conveyances and real property associated with drug trafficking was punitive. Austin v. United States, 125 L. Ed. 2d 488, 113 S. Ct. 2801 (1993). Though Austin's ultimate holding concerned the Excessive Fines Clause of the Eighth Amendment, and not the Double Jeopardy Clause, the distinction is without import here. The analysis in Austin ...