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UNITED STATES of America, Appellee, v. Sandy ANNABI and Zehy Jereis, Defendants-Appellants

United States Court of Appeals for the Second Circuit2014-03-25No. Nos. 12-4988 (Lead), 12-4990(Con)
746 F.3d 83

Summary

Holding. The court affirmed the forfeiture orders on Counts Eight and Nine but vacated and remanded the forfeiture order on Count Seven, holding that when the government fails to cite an applicable forfeiture statute in the indictment and does not correct this omission before sentencing, forfeiture must be limited to what is authorized by the statute actually cited, even if a different statute would permit greater forfeiture.

Sandy Annabi was convicted of three counts of mortgage fraud and ordered to forfeit proceeds from fraudulently obtained loans. The indictment specified different forfeiture statutes for different counts: a civil forfeiture provision for Count Seven that permits deductions for repaid loans, and a criminal forfeiture provision for Counts Eight and Nine that requires forfeiture of the full loan amount regardless of repayment. At sentencing, the district court ordered forfeiture of the complete loan amounts on all three counts without accounting for repayments, effectively applying the harsher criminal forfeiture standard to Count Seven even though only the civil forfeiture provision had been charged in the indictment.

Appellate review focused on whether the district court erred by imposing forfeiture under a statute that was not properly noticed to the defendant in the indictment. The court found this violated the defendant's right to fair notice under Federal Rule of Criminal Procedure 32.2(a), which requires that an indictment inform defendants of the specific statutory basis for any forfeiture sought. Because the government failed to invoke the criminal forfeiture provision for Count Seven before or during sentencing, the forfeiture for that count must be limited to what the charged civil forfeiture statute permits.

Summary generated by law.co from the public-domain opinion. The opinion text itself is public domain.

Key issues

  • Whether a district court may impose forfeiture under a statutory provision not cited in the indictment
  • Distinction between civil forfeiture (which permits deductions for repaid loans) and criminal forfeiture (which does not)
  • Defendant's right to notice of the specific statutory basis for forfeiture under Federal Rule of Criminal Procedure 32.2(a)
  • Whether government failure to invoke a harsher forfeiture provision prior to sentencing limits the scope of permissible forfeiture

Procedural posture

Annabi appealed from a November 2012 district court judgment imposing forfeiture in connection with her mortgage fraud convictions, challenging the amount of forfeiture ordered.

Authorities cited

No cited authorities resolved to law.co cases yet.

Opinion

majority opinion

JOSÉ A. CABRANES, Circuit Judge:

Defendant Sandy Annabi appeals from a November 19, 2012 judgment of the United States District Court for the Southern District of New York (Colleen McMahon, Judge) ordering forfeiture in connection with a conviction for, inter alia, three counts of mortgage fraud (Counts Seven, Eight, and Nine). We consider here whether the District Court erred by ordering forfeiture on Count Seven under a statute which, while applicable to Count Seven, was only charged in the indictment in connection with Counts Eight and Nine — an oversight that was not corrected by the Government or the District Court before or during sentencing.

We hold that this was error inasmuch as the uncharged forfeiture statute resulted in harsher forfeiture with respect to Count Seven than that sought in the indictment. Accordingly, we AFFIRM the forfeiture order on Counts Eight and Nine only, and REMAND the cause to the District Court with instructions to VACATE the forfeiture order on Count Seven, and conduct such further forfeiture proceedings as may be appropriate in the circumstances.

BACKGROUND

On March 29, 2012, a jury convicted Annabi of, inter alia, three counts of mortgage fraud in violation of 18 U.S.C. § 1014 (Counts Seven, Eight, and Nine). The Government sought forfeiture of the gross proceeds of the fraudulently obtained loans described in these three counts.

The Superseding Indictment (the “Indictment”) sought, on all three counts, forfeiture to the United States, pursuant to the civil forfeiture provision, 18 U.S.C. § 981(a)(1)(C), and 28 U.S.C. § 2461(c). On Counts Eight and Nine only, the Indictment sought forfeiture pursuant to the criminal forfeiture provision, 18 U.S.C. § 982(a)(2)(A). Significantly, § 981(a)(2)(C) of the civil forfeiture provision requires a deduction from forfeiture of any portion of the fraudulent loan that was repaid at no loss to the victim, whereas the criminal forfeiture provision, § 982(a)(2)(A), requires forfeiture of the entire amount of the fraudulent loan, regardless of whether it was repaid. United States v. Peters, 732 F.3d 93, 100-01 & n. 2 (2d Cir.2013).

At sentencing, the District Court ordered Annabi to forfeit $1,060,800 in connection with the three mortgage fraud counts based on the full amount of the loans fraudulently obtained, without regard to any portions of the loans that had been repaid: $480,700 for the Patton Drive house (Count Seven); $522,500 for the Bacon Place house (Count Eight); and $57,600 for the Rumsey Road apartment (Count Nine). The District Court did not specify whether it was ordering forfeiture under the civil or criminal forfeiture provision for each of the various counts.

DISCUSSION

Annabi argues on appeal that the forfeiture order was excessive inasmuch as she had already satisfied her obligations in their entirety for the Patton Drive house (Count Seven) and the Rumsey Road apartment (Count Nine), resulting in no loss to the banks, and inasmuch as the anticipated loss to the banks on the Bacon Place house (Count Eight) was only $164,460.68.

On appeal from a forfeiture order, we review the district court’s legal conclusions de novo and its factual findings for clear error. United States v. Treacy, 639 F.3d 32, 47 (2d Cir.2011).

A. Counts Eight and Nine

We recently confirmed that § 982(a) of the criminal forfeiture statute does not permit a defendant to offset loan proceeds that have been repaid. See Peters, 732 F.3d at 102 (gross receipts, rather than profits, are the proper measure of criminal forfeiture); see also United States v. Newman, 659 F.3d 1235, 1244 (9th Cir. 2011) (“For purposes of criminal forfeiture, the ‘proceeds’ of a fraudulently obtained loan equal the amount of the loan.”). The District Court did not, therefore, err by ordering forfeiture of the full amount of the loans fraudulently obtained in connection with Counts Eight and Nine, totaling $580,100, without regard to whether Anna-bi repaid any portion of those loans.

B. Count Seven

Although § 982(a)(2)(A) also could have applied to Count Seven, the Indictment sought forfeiture on this Count only pursuant to civil forfeiture provision 18 U.S.C. § 981(a)(1)(C), which permits “a deduction from the forfeiture to the extent that the loan was repaid, or the debt was satisfied, without any financial loss to the victim.” Id. § 981(a)(2)(C).

Federal Rule of Criminal Procedure 32.2(a) states: “A court must not enter a judgment of forfeiture in a criminal proceeding unless the indictment ... contains notice to the defendant that the government will seek the forfeiture of property as part of any sentence in accordance with the applicable statute.” (emphasis supplied). Pursuant to this Rule, a criminal defendant has the right to know not only that forfeiture is being sought, but also the statutory basis for forfeiture.

With respect to Count Seven, the Government failed to state the criminal forfeiture provision in the Indictment, and did not correct this oversight prior to or during sentencing. At sentencing, the District Court did not specify that it was ordering forfeiture pursuant to the criminal forfeiture provision, but it nonetheless required Annabi to forfeit the full amount of the loan fraudulently obtained on the Patton Drive house, despite the fact that the loan had been repaid in full. Such forfeiture is permissible only under § 982(a)(2)(A), see note 4 ante, as “a form of punishment, separate and apart from any restitutive measures imposed during sentencing,” Peters, 732 F.3d at 98.

We hold that where the Government fails to invoke an applicable forfeiture provision in the indictment, and fails to correct that error prior to entry of a final judgment, forfeiture must be limited to that authorized by the statute cited as the basis for forfeiture, and of which the defendant had notice. Accordingly, Anna-bi’s forfeiture on Count Seven is limited to that authorized by § 981(a)(1)(C), which, by its express terms, entities her to offset the amount of the loan on the Patton Drive house that she repaid at no loss to the bank.

CONCLUSION

To summarize:

(1) Forfeiture is limited to that authorized by the statute listed in the indictment, even if greater forfeiture would have been authorized by a different statute, where the Government fails to invoke the harsher forfeiture provision prior to or during sentencing.

(2) 18 U.S.C. § 982(a) authorizes forfeiture of the full amount of the loans fraudulently obtained in Counts Eight and Nine, without an offset for any portion of the loan that has been repaid.

(3) 18 U.S.C. § 981(a)(1)(C), the only forfeiture provision charged on Count Seven, permits an offset for that portion of the loan that was repaid with no loss to the victim.

Accordingly, we AFFIRM the forfeiture order on Counts Eight and Nine, and REMAND the cause to the District Court with instructions to VACATE the forfeiture order on Count Seven, and conduct such further forfeiture proceedings as may be appropriate in the circumstances.

. In a summary order entered today in this case, we affirmed the convictions of defendants Sandy Annabi and Zehy Jereis on all eleven counts charged against one or both of them, and affirmed the District Court’s order of forfeiture with respect to Counts One through Six.

. 18 U.S.C. § 981(a)(1)(C) provides for forfeiture to the United States of [a]ny property, real or personal, which constitutes or is derived from proceeds traceable to a violation of section [1014] of this title....” In such cases, proceeds must include a deduction from the forfeiture to the extent that the loan was repaid ... without any financial loss to the victim.” Id. § 981(a)(2)(C).

. 28 U.S.C. § 2461(c) provides: "If a person is charged in a criminal case with a violation of an Act of Congress for which the civil or criminal forfeiture of property is authorized, the Government may include notice of the forfeiture in the indictment or information pursuant to the Federal Rules of Criminal Procedure.”

. 18 U.S.C. § 982(a)(2)(A) provides, in relevant part: “The court, in imposing sentence on a person convicted of a violation of ... section [1014] of this title, affecting a financial institution ... shall order that the person forfeit to the United States any property constituting, or derived from, proceeds the person obtained directly or indirectly, as the re-suit of such violation.”

. The Government relies on United States v. Silvious, 512 F.3d 364 (7th Cir.2008), for the proposition that failure to state the correct forfeiture provision in an indictment is harmless where the defendant has notice that forfeiture is sought. The circumstances of that case are readily distinguishable. The defendant in Silvious had objected to a preliminary forfeiture order that relied on statutes not listed in the indictment, where the statute listed in the indictment was inapplicable to the circumstances presented. Id. at 369. Prior to the forfeiture hearing, the Government conceded that the statute charged was inapplicable, but argued that forfeiture was still appropriate under a different statute. Id. The Seventh Circuit affirmed the order of forfeiture, holding that the defendant had adequate notice of the corrected forfeiture statute, and that the forfeiture "was not broadened in any way by the substitution of the proper statute.” Id. In the instant case, by contrast, Annabi did not receive notice until appellate proceedings that the Government intended to rely upon the harsher criminal forfeiture provision.

. We do not address whether, prior to entry of the final forfeiture order, the Government could have substituted the criminal forfeiture provision as the basis for forfeiture on Count Seven. Nor do we opine on the fact pattern set forth in Silvious, note 5 ante, where the scope of forfeiture under the substituted provision was no greater than the provision mistakenly cited in the Indictment. Those are not the facts before us.

. In the interest of judicial economy, any appeal from a subsequent District Court Order, on remand or otherwise, shall be assigned to this panel upon the filing of a letter request with the Clerk of the Court of Appeals within 21 days of the entry of the District Court Order being appealed.