Second Circuit Finds Death Extinguishes Trial Convictions and Related Restitution Order – But Tax Offenses and Bail Forfeiture Survive
In 2010, a federal jury in the Eastern District of New York convicted body-armor tycoon David H. Brooks of multiple counts of conspiracy, insider trading, fraud, and obstruction of justice for his role in a $200 million scheme to enrich himself from company coffers. Brooks was the founder and former chief executive of DHB Industries, the leading supplier of bulletproof vests to police departments and the U.S. military. Brooks later pleaded guilty to associated charges of conspiracy to defraud the IRS and filing false income tax returns that had been severed from the rest of the case. While he appealed the result of his jury trial, he did not appeal the tax fraud convictions (pursuant to the terms of a plea agreement). Brooks died in prison while his appeal was pending, forcing the Second Circuit to revisit an obscure area of law to decide what aspects of his convictions, if anything, survived his death. Ultimately, Brooks’s death in prison led to the abatement of his trial convictions, and with that abatement, the erasure of significant restitution obligations that Brooks otherwise would have owed.
On July 7, 2017, the Second Circuit (Jacobs, Leval, Raggi) issued a short summary order in United States v. Stegemann. Most of the order is dedicated to affirming the defendant’s conviction at trial on several drug and firearm-related offenses, but at the end the Court reverses the order of forfeiture imposed as part of the defendant’s sentence, in part with the government’s consent.
In United States v. Bodouva, 16-3937 (March 22, 2017) (Katzmann, C.J., Pooler and Lynch, J.), the Court held in a per curiam order that a defendant convicted of embezzlement must forfeit the full amount of her illicit gains to the government even after paying restitution to victims. The ostensibly “duplicative” financial penalty entered against the defendant was not only permissible, but in fact required by statute. The district court thus appropriately ruled at sentencing that it lacked discretion to modify the forfeiture amount. With this decision, the Second Circuit joined several other circuits in holding that restitution and forfeiture serve distinct purposes and, absent clear statutory authority to the contrary, may not offset each other.
On August 17, 2016, the Second Circuit issued a decision in United States v. Stevenson, No. 14-1862-cr, holding that a state legislator convicted of bribery could be required to forfeit a portion of his pension fund as part of a sentence. Former New York State Assemblyman Eric Stevenson was convicted in 2014 of conspiracy to commit honest services wire fraud, conspiracy to commit federal programs bribery and to violate the Travel Act, accepting bribes, and extortion under color of official right. The charges arose out of an investigation finding that Stevenson took bribes of $22,000 from businessmen in the Bronx who ran an adult day care center in exchange for proposing legislation that would have imposed a moratorium on new facilities that would have provided competition.
In In re 650 Fifth Avenue and Related Properties, 14-2027 (Kearse, Raggi, Wesley), the Second Circuit vacated an award forfeiting the appellants’—the Alavi Foundation and 650 Fifth Avenue Company—properties to the United States. The lower court ordered the forfeiture of the properties, including inter alia, a 36-story office building located at 650 Fifth Avenue in Manhattan, on two grounds: (1) pursuant to 18 U.S.C. § 981(a)(1)(C) as proceeds traceable to violations of the International Emergency Powers Act and certain Iranian Transactions Regulations issued by the Department of the Treasury, and (2) as property involved in money laundering transactions forfeitable under 18 U.S.C. § 981(a)(1)(A).