Sunday, October 28, 2007

Score: Form 1; Substance 0

United States v. Rutkoske, No. 06-4067-cr (2d Cir. October 25, 2007) (Newman, Winter, Katzmann, CJJ).

This stock fraud decision deals primarily with the timeliness of a superseding indictment.

An initial indictment not naming Rutkoske was filed on December 11, 2003; S1, the first superseder, was filed on April 6, 2004. It named Rutkoske, and described a single overt act within the five-year statute of limitations. Suspiciously, that act occurred “on or about April 9, 1999,” making the indictment timely by only about three days. After repeatedly being pressed by the defendant to pin down the details of the April 9 act, the government superseded again, in July of 2005. S2 charged Rutkoske with the same offenses as S1, but the government dropped the April 9 overt act and instead alleged two others, on April 15 and April 16, 1999. When Rutkoske moved to dismiss S2 as untimely under the five-year statute of limitations, the government conceded that the April 9 act had not occurred on that date, rendering S1 retroactively untimely. Nevertheless, the district court denied the motion, and the court of appeals affirmed.

The court began with the two-part test for relation back of a superseder: the original indictment must have been be validly pending and the superseder must not “materially broaden or substantially amend the charges.” The question raised here, one of first impression in this circuit, was “whether an indictment that is facially valid only because of one alleged overt act within the limitations period should be considered . . . validly pending . . . when the Government concedes that [that] overt act did not occur within the limitations period.” In answering this question in the affirmative, held that since S1 was “facially timely” when it was returned, it did not matter than it was, in actuality, untimely. The court noted that if the case had gone to trial on S1, the government could have satisfied the statute of limitations by proving a different, timely overt act. The court also noted that the government’s concession that S1 was untimely did not occur until after the return of S2. Thus, S1 was “facially timely and validly pending” at the time that S2 was returned.

The court also held that S2 did not broaden or amend the charges, since it merely extended the dates of the conspiracy by one week.

Comment: This is a disturbing decision. S1 was, as a factual matter, untimely both when it was filed and when S2 was filed. Why on earth should the case turn on the fact that S1 erroneously appeared to be timely? Is form really more important than substance? While the court carefully notes that there is no evidence that the government “deliberately withheld” its concession that the April 9 overt act had not occurred until after S2 was filed, the court’s confidence in the government would seem to be a bit naive. The facts here surely support a strong inference of deliberate withholding. The government must have known that there was a problem with the April 9 act when it decided to supersede; the defense had been pressing for an explanation of that act for more than a year. Given this, why else would the government have superseded unless it knew it had a timing problem? The government saved its case by not disclosing the defect until after S2 was filed. This decision would thus seem to give a free pass to all ethically challenged prosecutors - as long as they successfully hide their misconduct until it is cured, the defendant has no remedy.

On the brighter front, this case has a nice discussion of one of the most vexing Guidelines issues - the instruction that loss calculations under § 2B1.1 need not calculated with precision and that a “reasonable estimate” is sufficient.

Calculating loss can be particularly difficult in stock fraud cases because so many factors contribute to the decline of share prices. Surprisingly, this is not an area where the circuit has given much guidance. Here it does, turning, unusually, to civil law - the “principles governing recovery of damages in civil securities fraud cases” - for assistance. These principles a triggered remand for resentencing because the district court relied exclusively on the testimony of a NASD expert that, in essence, attributed the total decline in the stock price to the defendant’s conduct. The court's failure to “even consider[] other factors” relevant to the decline was error.

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Saturday, October 27, 2007

We Value Your Opinion

United States v. Tsekhanovich, No. 05-4809-cr (2d Cir. October 24, 2007) (Miner, Cabranes, Straub, CJJ) (per curiam)

Treading no new ground, the court reminds us that a lay person can give opinion testimony if it is both based on his first-hand perceptions and rationally derived from them.

Here, a cooperating witness in a fraud case was permitted to describe several conversations that he had with the defendant, and explain what he thought certain of the defendant’s comments meant. There was a solid foundation for the testimony - the witness had known the defendant for years - and the witness did not “speculate about the general knowledge or intent” of the defendant. Rather, his testimony was limited to discrete matters.

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Friday, October 26, 2007

“Might” Makes Right

United States v. Zhang, No. 05-6662-pr (2d Cir. October 23, 2007) (Winter, Cabranes, CJJ, Korman, DJ)

During a plea allocution, advising a defendant that he might be deported was good enough, even though ICE believed that deportation was mandatory.

Zhang, a chemist, manufactured and sold an illegal bodybuilding supplement, DNP. One of his customers died after taking Zhang’s concoction, while another was in a coma for ten days. Zhang ultimately pled guilty to one count of mail fraud. During the plea allocution, the prosecutor stated that Zhang was subject to “possible” deportation as a result of the plea. The magistrate judge echoed this, saying that the plea “could” result in his deportation. Similar equivocal statements about the possibility of deportation were made by the prosecutor and district judge at Zhang’s sentencing.

Once sentenced, however, Zhang was served a notice by ICE indicating that he faced mandatory deportation as a result of his conviction for an aggravated felony. He filed a 2255 motion that he was affirmatively misled by the prosecutor and the court about the immigration consequences of his plea, a violation of Rule 11. The district court agreed, and vacated the plea.

The circuit had a different view, and reversed the district court, at least on the particular facts presented here. Fraud offenses are only aggravated felonies if the loss to the victim(s) exceeds $10,000. At the time Zhang pled guilty it was “far from clear” that he was pleading to an aggravated felony because and the ultimate loss amount had not yet been settled. Although the plea agreement contained a larger loss amount, Zhang reserved the right to contest it. Thus, telling him that he faced
“possible” deportation was “completely accurate.”

This is a sad case. Zhang came to the United States at the age of seven after his family was granted political asylum. He has lived in the United States for more than twenty years, is married to an American citizen, and is not proficient in Chinese. The circuit has left a door open for him, however; his 2255 also argued that his attorney was ineffective. The court has remanded the case back to the district court for consideration of that claim.

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Wednesday, October 24, 2007


United States v. Williams, No. 05-6036-cr (2d Cir. October 23, 2007) (Newman, Walker, Straub, CJJ).

In this curious but very troubling case, the court seems to have concluded, sub silentio, that Crawford trumps Bruton.

Brothers Bobby and Michael Williams were tried for a drug-related triple homicide. Neither brother testified. At trial, over objection, the court permitted two civilian witnesses to testify that, after the shootings, Bobby made statements to them admitting his involvement in the shootings. Some of those statements implicated Michael. On appeal, Michael argued that the admission of Bobby’s statements violated the Confrontation Clause and Fed.R.Evid. 804(b)(3).

Obviously, Michael’s Confrontation Clause claim raises Bruton issues; indeed, this is the classic Bruton situation - the out-of-court statement of one defendant is used against a co-defendant. But here, the court never even got to Bruton. It held that Bobby’s out of court remarks were not “testimonial” under Crawford, and thus “our Confrontation Clause inquiry is at an end.” In other words, the court denied the Bruton claim without even mentioning Bruton.

This case, if it stands, would limit Bruton to cases where the co-defendant’s out-of-court statement was taken by the police, or is otherwise “testimonial” for some reason. The court might well be right - although only the Supremes will tell us for sure. But one would have hoped that if the court really wanted to take on such a radical and new issue (as of this writing, no other Circuit has so held), it would come out and say so directly, rather than leaving the entire bar to guess. Let’s that hope the Williams brothers file cert petitions.

Another troubling aspect of this case is the court’s treatment of the “declaration against interest” issue. Michael would seem to have a strong claim that those portions of Bobby’s statements that implicated Michael were not sufficiently against Bobby’s interest to render them trustworthy. It was surely against Bobby’s interest to admit his own role in the murders, and, at least arguably, it was against his interest to admit that he acted with another person. But identifying that other person was not against Bobby’s interest at all; at best, it would seem to have been neutral to his interests. But the court did not see it that way. It held that since Bobby was not “attempting to minimize his own culpability, shift blame onto Michael, or curry favor with the authorities” his statements that mentioned Michael were “sufficiently self-inculpatory.”

Finally, this case has a fairly good discussion of the court’s current views on Daubert, in the context of ballistics.

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Monday, October 22, 2007


United States v. Gaqliardi, No. 06-4541-cr (2d Cir. October 22, 2007) (Walker, Calabresi, Sack, CJJ).

This case shuts the door on number of common challenges to convictions under 18 U.S.C. § 2422(b), which makes it a crime to entice a minor to engage in an illegal sexual act, or to attempt to do so. In relatively short order, the court held that: (1) because the statute prohibits attempts, it covers sting operations in which there is no minor victim (here the court joins six other circuits); (2) the statute is not vague, in that its various terms - entice, persuade, coerce, etc., - although not defined, are words in common usage that have ordinary meanings (joining five other circuits); (3) the statute does not criminalize speech that is protected First Amendment and hence is not overbroad.

Gagliardi also made some novel arguments, which the court also rejected. The five-year mandatory minimum that he received does not violate the separation of powers doctrine, and the fact that the FBI agent and his confederate, a private citizen, posed as thirteen-year-olds is not impermissible sentencing manipulation. In addition, the evidence was sufficient both to overcome an entrapment defense and to meet the “substantial step” requirement for an attempt.

Finally, Gagliardi argued that the documentary evidence, mostly emails and transcripts of instant-message chats, were not properly authenticated and thus might have been fabrications. The court was not impressed: The bar for authentication is “not particularly high” and the testimony of the agent and his pal that the transcripts were accurate was enough.

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Tuesday, October 16, 2007

Location, Location, Location

United States v. Cavera, No. 05-4591-cr (2d Cir. October 11, 2007) (Cardamone, Calabresi, Pooler, CJJ)

Gerard Cavera received an above-Guidelines sentence based on the district court’s view that gun offenses were more serious in densely populated areas like New York city. This opinion is the court’s second attempt to deal with a location-specific reason for imposing a non-Guideline sentence. Confusingly, both attempts have been in this same case.

The first opinion here, back in June, held unequivocally that a district court’s “reliance on community-specific characteristics, such as population density, to impose a non-Guidelines sentence constituted legal error and rendered [the] sentence unreasonable.” This opinion held that it was always inappropriate to use “community-specific” considerations as the basis for deviating from the Guidelines, because such sentences would lead to unwarranted regional disparities in sentencing. Judge Calabresi concurred in the result, but disagreed with the majority’s analysis, rejecting the “broad language . . . that denies the possibility of any consideration of geographic factors” in sentencing. He went on to decry the “false dichotomy” between sentencing factors that relate to individual culpability and those that do not, calling it a “legal fiction.” He suggested that it would be “permissible” for a court to conclude that “taking into consideration all the circumstances of the particular crime, including geography, the sentence should be enhanced.”

And now we have a new opinion to replace the one from June. It should first be noted, however, that the court has not done a particularly good job of explaining itself. A footnote reveals that the June opinion “prompted comments from several members of the Court,” without saying what the comments were. Well, whatever they were, they were sufficient to prompt the panel to withdraw both the June opinion and Judge Calabresi’s concurrence and try again.

The new opinion seems to have embraced, to a much greater degree, Judge Calbresi’s view. It definitely leaves open the possibility that, in some circumstances, findings about the characteristics of the location of the offense could legitimately affect the sentence, at least if those findings are tied to something specific about the case. The new opinion is more nuanced than that of the June opinion. It holds that under the “circumstances of this case” the reliance on location specific factors was error because the district court made “no reference to any characteristic particular to the defendant or his crime” and relied instead “entirely on circumstances common to all defendants charged with gun trafficking in New York and similar large cities.” Just to make the point clear, the court says the same thing again, about four pages later, too. It even drops a couple of footnotes on this issue: one that expressly holds, contrary to the June opinion, that it is not true that a court may “never consider characteristics of the locality” in deciding the seriousness of a crime, and another that gives an example of one type of argument that might support a location-based variance.

So where does this leave us? Well, pretty much where we already were. The court of appeals clearly prefers sentences that are based on particular findings that relate to the individual defendant and his offense, and it continues to be skeptical of categorical sentencing decisions. One interesting side-bar to this case relates to the still unresolved issue of state-federal sentencing disparities, which are clearly “location based.” So far, the court has held that a district judge is not required to consider them, but has not yet decided whether a district court is permitted to do so. When the court finally gets to that question, this case will clearly weigh heavily in its decision.

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Saturday, October 13, 2007

Steal This Footnote

United States v. Johnson, No. 05-3811-cr (2d Cir. October 10, 2007) (Meskill, Cabranes, Wesley, CJJ)

This is pretty much a case about nothing. The only real nugget is in footnote 4.

Johnson appealed his 120-month gun sentence - the statutory maximum - on several grounds. As is often true, his case had begun in state court, but was later transferred to federal court. Johnson pointed out that had the state prosecution gone forward, he could not have received more than seven years’ imprisonment. On appeal he argued that the district court was required to sentence him so as to take into account (1) the disparity between his sentence and his co-defendant’s, a claim that the court has already rejected, and (2) the disparity between his federal sentence and the sentence he would have received in the state court.

The court rejected this second claim as well, holding that a district court is not “required” to consider potential federal/state sentencing disparities. However, footnote 4 expressly leaves open the more important question, which is whether such consideration is permitted.

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Summary orders do not have precedential effect. But, those filed after January 1, 2007, can now be cited as long as certain citation requirements are met. See Fed.R.Ap.Proc. 32.1 and Second Circuit Local Rule 32.1. In light of this, starting October 2007, the Second Circuit Blog is introducing a new feature, called Summary Summary. In it we briefly comment on summary orders of interest.

So, here we go!

United States v. Watson, No. 05-6184-cr (October 3, 2007)(summary order). During deliberations, a juror became convinced that the government’s main witness was the same man who had raped the juror’s daughter the year before, and the court discharged her. The court of appeals held there was “good cause” under for the discharge under Fed.R.Crim.Proc 23.1.

United States v. Tyson, No. 06-1727-cr (October 12, 2007)(summary order). Tyson appealed several aspects of his sentence, including an obstruction of justice enhancement. The court held that it needed “more specific findings by the district court” on this issue, and remanded the case under United States v. Jacobson, 15 F.3d 19, 21-22 (2d Cir. 1994).

This is perhaps the Blog’s first look at so-called “Jacobson remands,” so here are a few words about them. Once upon a time, when the Second Circuit believed that the district court had not made adequate findings in support of an a sentence enhancement, including the obstruction enhancement, it would file a published an opinion remanding the case. See, e.g., United States v. Williams, 79 F.3d 334 (2d Cir. 1996); United States v. Catano-Alzate, 62 F.3d 41 (2d Cir. 1995).

Meanwhile, in Jacobson, 15 F.3d at 21-22, the court described its procedure for seeking supplementation of a sentencing record while retaining appellate jurisdiction in cases where the reasons for the particular sentence were unclear. Jacobson did not involve a challenge to a particular enhancement; rather, there, the district court’s reasons for the particular sentence were alleged to be unconstitutional, and the appellate court remanded the case so that the district court could explain them better.

Somewhere along the way, the circuit decided that the Jacobson procedure could be used whenever the district court record was lacking, and not just in the specific circumstance when the reasons for the sentence were unclear. A quick search reveals twenty or so cases since 1996 that have utilized this procedure, with the vast majority of them occurring within the past three years.

So - is this a good thing or a bad thing? Probably bad. Remanding the case for a limited set of findingsrestricts what defense counsel can do once the case goes back to the district court. A resentencing, on the other hand, would give the defense a second bite at the apple.

Be that as it may - it looks as if the Jacobson remand is here to stay.

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Saturday, October 06, 2007

Why Oh, Why Oh, Y.O?

United States v. Jackson, Docket No. 06-5928-cr (2d Cir. October 5, 2007) (Miner, Cabranes, CJJ, Crotty, DJ) (per curiam)

This case continues the court’s seemingly relentless, and highly questionable, line of cases upholding the use of New York State youthful offender adjudications (“Y.O.”’s) as sentencing enhancers.

In United States v. Sampson, 385 F.3d 183 (2d Cir. 2004), the court held that a Y.O. constituted a prior drug felony for purposes of the sentencing enhancements contained in 21 U.S.C. §§ 841(b) and 851.

Here, Jackson, whose Y.O doubled a five-year mandatory minimum, tried to capitalize on a potential hole in Sampson. He argued that the Sampson court’s observation that the defendant served his Y.O. sentence in an adult institution created a requirement that district courts find this to be true before enhancing a drug sentence based on a Y.O.

The court disagreed. A finding of fact on this question is not required. It is enough that, despite the Y.O., Jackson was tried and convicted in adult court of an adult drug offense that was punishable by more than one year in prison.

The court went on to note that Jackson himself never provided any evidence that he was housed in a juvenile facility, despite being in the best position to do so. It appears that this is dicta, since the rule has always been that the government has the burden of proving a sentencing enhancement.

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Et Tu, Brute - NOT!

United States v. Brutus, Docket No. 06-2710-cr (2d Cir. October 2, 2007) (Jacobs, Walker, Calabresi, CJJ)

Waline Brutus testified at her drug importation trial. During the charge, Judge Glasser instructed the jury, in relevant part, that she had a “deep personal interest in the outcome of the case” that “creates a motive to testify falsely.”

Following in the footsteps of its recent decision in United States v. Gaines, 457 F.3d 238 (2d Cir. 2006), the court held that this instruction was error. This case is significant because there had been a tension between Gaines and United States v. Tolkow, 532 F.2d 853 (2d Cir. 1976), which upheld very similar language. Here, the court very neatly cuts through the confusion and overrules Tolkow, creating a “prophylactic rule” that any “instruction that the defendant’s interest in the outcome of the case creates a motive to testify falsely impermissibly undermines the presumption of innocence” and is error. When the defendant testifies, the district court should simply tell the jury to evaluate her credibility in the same way it judges the testimony of any other witness.

Unlike the defendant in Gaines, however, Brutus did not win her case. The government, which bore the burden of establishing harmlessness beyond a reasonable doubt - the standard for a preserved constitutional error - did so. The circuit viewed this as “not a close case” and characterized Brutus’ trial testimony as “manifestly incredible.” In fact, Judge Glasser called it “the most incredible perjury I’ve ever heard in any case I’ve ever tried in this court.”

Too bad. Brutus, who has two small children, received a ten-year sentence, and will be a guest of the American taxpayers for at least eight and one half years before being deported back to Haiti. Perhaps if she had won her appeal something shorter could have been negotiated for her.

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United States v. Wilson, Docket No. 05-5985-cr (2d Cir. September 24, 2007) (Jacobs, Katzmann, Hall, CJJ) (per curiam)

This short decision disposes of a sufficiency claim that has not yet arisen in this Circuit relating to “stash house” prosecutions under 21 U.S.C. § 856(a)(2).

Wilson shared two apartments with a drug dealer - the tools of his trade were in open view all over the place. She argued that the evidence was legally insufficient because the government did not prove that she herself intended that the premises would be used for an unlawful purpose.

The Circuit made short work of this. The phrase “for the purpose” in § 856(a)(2) refers to the purpose of the person who is permitted to engage in drug activity in the premise, and not she who permits him. By contrast, § 856 (a)(1) makes it a crime for the person controlling the premises to have such a purpose. Thus, under Wilson’s reading of the law the two sections would proscribe the same conduct.

Here, the government only needed to prove that Wilson knew that her residence was being used for drug trafficking, and it did so.

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United States v. Villafuerte, Docket No. 06-1292-cr (2d Cir. September 21, 2007) (Walker, Cabranes, CJJ, Goldberg, DJ)

United States v. Hirlman, Docket No. 05-3677 -cr (2d Cir. September 27, 2007) (Winter, Walker, Sack, CJJ)

These two cases, although not related, together provide new insights into an extremely important area - the need to preserve sentencing issues for appeal.

Villafuerte is a very disturbing case. For nearly two decades, the conventional wisdom in the Second Circuit has been that appellate claims relating to the procedural aspects of sentencing - e.g., whether the court understood its departure authority, made adequate legal findings in support of an enhancement, or gave the defendant an opportunity to allocute - would be reviewed on appeal, even where there was no specific objection pointing out the procedural failing.

Villafuerte changes all that. In this case, the Circuit holds that the most common post-Booker claims about procedural unreasonableness - that the district court did not make adequate findings under § 3553(a), and that it did not provide a sufficient statement of reasons under § 3553(c), which are neither “novel” nor “complex” - must be objected to at the time of sentencing. If not, they are reviewed only for plain error, under the stringent standards of Fed.R.Crim.P. 52(b) and United States v. Olano, 507 U.S. 725 (1993). Here, the court had no trouble concluding that such claims, raised for the first time on appeal, were not plain error. It affirmed.

Hirlman, on the other hand, decided six days later, gives a nice lesson in how to do what Villafuerte requires.

In this case, a government appeal of the sentences of two brothers, the government argued that Judge Elfvin did not give adequate notice of its decision to depart from the Guidelines and did not make adequate findings in support of the departures. The government also registered objections in the district court that were specific enough to preserve those claims.

At the first brother’s resentencing, the judge did not say why he had selected the particular sentence. The prosecutor asked for findings, and the court said that it would provide them later, in writing, but never did so. At the second brother’s resentencing, the government did even more, objecting specifically to the court’s failure to give adequate notice of its intention to depart downward, and “press[ing] the court to explain” the departure, which it did not do. The Circuit reviewed the government's claims and vacated the sentences. It probably would have done so anyway, but it certainly did not help that the government objected with specificity.

Comment: It now appears that prudent lawyers must do something akin to what the AUSA did in Hirlman. Here’s something to try if words fail: “Respectfully, your honor, the defense does not believe that the court has made adequate findings in support of the sentence, because ...” or something like that.

One can easily foresee the ugly kettle of fish that the court has opened for itself in Villafuerte. Given the many procedural requirements of the sentencing statutes (and let us not forget Rule 32, as well), post-Booker sentences are open to a large number of procedural challenges on appeal. Thus, the court is going to have to resolve preservation/plain-error questions in a large number of cases that previously would have been more quickly and easily disposed of by simply ruling on the particular claim that has been raised. The Circuit could well end up having to develop an entirely new body of preservation jurisprudence for sentencing appeals - something that is entirely unnecessary, since the previous system worked just fine.

Villafuerte is also clearly in tension with the court’s recent decisions bouncing Anders briefs that did not address what were surely unpreserved claims of procedural unreasonableness. How this tension will play itself out remains to be seen.

An additional word about Hirlman: The Circuit remanded the case to a different judge, using unusually critical language about Judge Elfvin and his record on appeal. At least one assistant federal defender in the Western District feels that this portion of the opinion was both unnecessary and gratuitous; Judge Elvfin is no longer hearing criminal cases, thus a remand to different judge would have happened as a matter of course.

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United States v. Capoccia, No. 06-0669-cr (2d Cir. September 19, 2007) (Sotomayer, Katzmann, CJJ, Gertner, DJ)

In this case, the district court erred in ordering forfeiture of the proceeds of conduct that occurred prior to the date of the conduct with which the defendant was charged. The decision turned on a very narrow reading of the indictment, as well as on the nature of the statute under which the defendant was charged.

At issue was money that Capoccia, a lawyer, misappropriated from a credit counseling/debt reduction service that he founded. Capoccia was convicted of misappropriating unearned client retainer fees, failing to give complete refunds to clients who withdrew from the program, and embezzling client escrow funds that was supposed to be paid to credit card companies to settle clients’ debts.

Capoccia was charged with interstate transportation of stolen money under 18 U.S.C. § 2314. While the indictment referenced a “scheme” that existed between 1997 and 2002, the earliest actual interstate money transfers with which he was charged occurred on May 24, 2000. Despite this, the district court ordered Capoccia to forfeit the proceeds from pre-May 2000 transfers.

The court of appeals reversed. Reading the indictment very closely, it distinguished between language that “refer[ed] to the existence of” the scheme and that which “charge[d]” a scheme. [emphasis in original]. The court concluded that only the charging portion of the indictment, which listed the particular transactions that the government alleged to be violations of § 2314, determined the conduct that could be the basis of a forfeiture. Since the earliest discrete act listed occurred on May 24, 2000, the district court erred in ordering the forfeiture of the proceeds of earlier transactions.

In addition, the court relied on the nature of the particular offense with which Capoccia was charged. He was accused under the first paragraph of § 2314, which criminalizes only individual acts of transportation of stolen property, and not the second paragraph, which criminalizes, inter alia, a scheme or artifice to defraud. Accordingly, the indictment’s reference to conduct from before 2000 was treated as “background” for the specific acts alleged in the charging paragraphs, but did not itself charge a violation of the statute encompassing pre-May 2000 conduct.

Finally, the court held that, not only did the indictment did not charge Capoccia with pre-May 2000 conduct, the government failed to establish a nexus between the earlier transfers and the conduct of which he was convicted. Purely as a matter of logic, the government could not establish that the funds involved in earlier transactions were “obtained ... as the result” of the later ones.

Comment: This is a nice win for Capoccia, since the amount involved is more than $1.1 million dollars.

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