When you are convicted of a white collar crime, you have many things to think about. First and foremost, are you going to prison? Second, how will this affect your family? Third, as a convicted felon, what rights will you lose, such as the right to vote, and how difficult will it be to find a job, as job applications inevitably ask if you’ve been convicted of a crime.
What often gets lost in the shuffle is what will be the financial consequences resulting from your conviction. You need to recognize that there will be financial consequences, possibly significant ones, including restitution, forfeiture and/or fines.
Over the years, Congress has expressed increasing concerns for victims of crime. In 2004, Congress passed the Crime Victims’ Rights Act, 18 U.S.C. § 3771(a), which provides victims with certain rights during the prosecution of their perpetrator, including the right to consult with the government before plea agreements are signed and the right to be heard in court before sentence is imposed. Congress also enacted the Mandatory Victims Restitution Act (“MVRA”), 18 U.S.C § 3663A, which requires courts to impose an obligation to pay restitution to victims as part of criminal sentences.
Restitution is a means of requiring a defendant to directly compensate his or her victims for the victims’ losses attributable to the defendant’s criminal activities. The MVRA requires courts to order restitution when imposing a sentence for any “offense against property, including any offense committed by fraud and deceit…in which an identifiable victim or victims has suffered a physical injury or pecuniary loss.” 18 U.S.C. § 3663A (c)(1)(A).
It should be recognized that the MVRA has made restitution mandatory, 18 U.S.C. § 3663A(a)(1); that courts are required to order restitution “in the full amount of each victim’s losses”; and that courts cannot even consider the defendant’s economic circumstances. 18 U.S.C. § 3664(f)(1)(A) The court determines the amount of restitution, usually on the basis of a pre-sentence report prepared by a probation officer. The restitution determination is normally based on either the evidence presented to a jury or the facts stipulated to in a plea agreement.
Asset forfeiture is the confiscation by the government of assets involved in the commission of a crime or assets that constitute the proceeds of a crime. The purpose of forfeiture is to punish the individual for committing the crime.
The federal criminal forfeiture provisions are generally consolidated into two statutes, 18 U.S.C. § 982 and 21 U.S.C. § 853. Additionally, Federal Rule of Criminal Procedure (“Fed.R.Crim.Pro.”) 32.2 sets forth the manner in which a convicted defendant’s assets are forfeited to the Government.
To ensure that potentially forfeitable assets are secured, the government will often obtain preliminary restraining orders, sometimes even before an indictment is filed, freezing many of the defendant’s assets. See 21 U.S.C. § 853(e)(1)(B)(2); 18 U.S.C. § 981(b).
Section 982(b) grants a court the power to enter a restraining order or injunction if (a) the government alleges that the property at issue will be subject to forfeiture; (b) there is a “substantial probability” that the government will win on the issue of forfeiture; and (c) the need to preserve the property outweighs any hardship to the defendant.
Section 982 is essentially a catchall provision, and requires the forfeiture of any assets involved in, or which are the proceeds of, a large number of criminal offenses, including the two federal money laundering statutes. Committing a property crime or fraud almost inevitably leads to conducting transactions with the proceeds. Therefore, Section 982 makes criminal forfeiture available in prosecutions for almost any property crime or fraud, the same set of offenses for which the MVRA requires restitution. See also 21 U.S.C. § 853(f).
Fed. R. Crim. Pro. 32.2 includes a number of procedural protections for defendants, including the following:
• The charging document must notify the defendant that the Government intends to seek forfeiture.
• The Government must prove by a preponderance of evidence that the assets at issue were the proceeds of, or were used in, the underlying crime.
• If, after a conviction, the court finds a nexus, a preliminary order for the forfeiture of specific property or a specific amount of money must be entered.
Criminal defendants should also recognize that forfeitable assets cannot be used to pay attorneys’ fees, an issue addressed in two separate cases by the Supreme Court.
Finally, it should be recognized that the gross proceeds of a crime may be forfeitable to the government, not just the profits. Thus, for example, the entire amount of a contract obtained by bribery may be forfeitable to the Government, not just the profits from that contract.
Criminal forfeiture also permits the forfeiting of substitute assets if the original assets either cannot be located, have been transferred or sold, have been placed beyond the jurisdiction of the court, or have been commingled with other property. See 18 U.S.C. §853(p).
Restitution v. Forfeiture: Double Recovery?
Restitution and forfeiture are not mutually exclusive, and, in fact, a federal circuit court addressed this very issue in 2010. Because restitution and forfeiture are distinct remedies, ordering both in the same or similar amounts does not amount to a double recovery. In fact, federal criminal rules and statutes require both, with Fed.R.Crim.Pro. 32.2(b)(i)(A) requiring forfeiture and 18 U.S.C. § 3556 requiring restitution.
Thus, upon conviction, you could be forced to disgorge, via a combination of restitution and forfeiture, a total amount equal to twice the value of the proceeds of your crime.
In addition to restitution and forfeiture, a convicted defendant may also be subject to the payment of fines. Ranges of fines are set forth in the Federal Sentencing Guidelines.
What about Parallel Proceedings by Two Different Government Agencies?
If you are being investigated and/or prosecuted by a second federal agency in addition to the Department of Justice (“DOJ”), such as the Securities and Exchange Commission, you could face additional penalties and/or fines above those you receive as a result of your criminal prosecution by the DOJ. In an insider trading case, for example, you may have to disgorge to the SEC a penalty of up to three times the amount of the profits you received from your improper activities.
What If You Can’t Pay?
The United States abolished debtors’ prisons centuries ago. Therefore, if you can’t pay your restitution, forfeiture and/or fines, the government can’t keep you locked up until you do. But the government can seize your assets, garnish your wages, and, in general, make things very difficult for you financially. Moreover, pursuant to Fed.R.Crim.Pro. 32.2(b)(3), upon entry of a forfeiture order, the government may conduct any discovery necessary “to identify, locate or dispose of forfeitable property, including depositions, interrogatories, requests for production of documents and the issuance of subpoenas.”
It is important to recognize that criminal charges have significant financial implications for defendants. Indeed, merely being changed with a crime can result in a significant portion of your assets being tied up by means of a restraining order. Moreover, if convicted, you’ll pay for your crime through a combination of restitution, forfeiture and/or fines. As I have said time and time again in my blogs, as with other significant issues, when you are dealing with the issue of financial penalties in a white collar case, it is important to retain an experienced white collar criminal defense attorney to advise you as to your rights and responsibilities.
If you’d like to learn more, please feel free to reach out to me. I practice white collar criminal defense and securities and bank regulatory defense in New York, New Jersey and elsewhere, and my contact information is included in the link below.
LINK TO CONTACT INFORMATION
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