United States v. Bromwell , 222 F. App'x 307 ( 2007 )

UNPUBLISHED
UNITED STATES COURT OF APPEALS
FOR THE FOURTH CIRCUIT
No. 06-4119
UNITED STATES OF AMERICA,
Plaintiff - Appellee,
versus
THOMAS L. BROMWELL, SR.; MARY PATRICIA
BROMWELL,
Defendants - Appellants,
and
W. DAVID STOFFREGEN,
Defendant.
Appeal from the United States District Court for the District of
Maryland, at Baltimore. J. Frederick Motz, District Judge. (1:05-
cr-00358-JFM)
Argued: December 1, 2006 Decided: March 14, 2007
Before NIEMEYER, WILLIAMS, and KING, Circuit Judges.
Affirmed by unpublished per curiam opinion.
ARGUED: Joshua R. Treem, SCHULMAN, TREEM, KAMINKOW, GILDEN &
RAVENELL, P.A., Baltimore, Maryland, for Appellants. Michael
Joseph Leotta, Assistant United States Attorney, OFFICE OF THE
UNITED STATES ATTORNEY, Baltimore, Maryland, for Appellee. ON
BRIEF: Robert B. Schulman, SCHULMAN, TREEM, KAMINKOW, GILDEN &
RAVENELL, P.A., Baltimore, Maryland, for Appellant Thomas L.
Bromwell, Sr.; Gerard P. Martin, T. Christine Pham, ROSENBERG,
MARTIN, FUNK & GREENBERG, L.L.P., Baltimore, Maryland, for
Appellant Mary Patricia Bromwell.
Unpublished opinions are not binding precedent in this circuit.
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PER CURIAM:
Thomas L. Bromwell, Sr., and his wife Mary Patricia Bromwell
(“the Bromwells”) appeal the district court’s grant of a protective
order restraining certain property pending their trial for various
offenses, including a racketeering conspiracy and mail and wire
fraud. The Bromwells contend that this property is not subject to
pretrial restraint under 18 U.S.C.A. § 1963 (West 2000 & Supp.
2006) because it is substitute property, rather than tainted
property deriving from or constituting proceeds of the racketeering
activity. Following our circuit precedent that interprets § 1963
as authorizing pretrial restraint of substitute property, we
affirm.
I.
Thomas Bromwell was a member of the Maryland Senate from 1983
until his resignation in May 2002. From 1995 until his
resignation, Thomas Bromwell served as the Chairperson of the
Senate Finance Committee, which had wide-ranging responsibility for
legislation concerning banking and financial institutions, economic
and community development, and health and welfare matters. Thomas
Bromwell also owned Dallas, Inc., a Maryland construction company.
Mary Bromwell worked part-time as a sign-language interpreter for
the hearing impaired.
3
On October 19, 2005, a federal Grand Jury in the District of
Maryland returned a thirty-count superseding indictment charging
the Bromwells and W. David Stoffregen (collectively, the
“Defendants”) with a racketeering conspiracy, mail and wire fraud,
extortion, and other offenses. Stoffregen was the President and
Chief Executive Officer of Poole and Kent, a Maryland construction
company, and he was the President of Forti, Poole and Kent, LLC, a
company that provided steel erection services.
The indictment charged a racketeering conspiracy in which
Thomas Bromwell used his position as Chairperson of the Senate
Finance Committee to obtain contracts for Stoffregen’s construction
companies in exchange for financial benefits. These benefits
allegedly included $192,923 in salary payments made by unindicted
co-conspirators to Mary Bromwell, even though she performed no
useful business functions or tasks in return for the payments, and
construction services and materials valued at $9,150 provided to
Dallas, Inc., Thomas Bromwell’s construction company. Finally,
Stoffregen and others allegedly provided construction services,
materials, and equipment valued at $85,000 for free, or for a
substantially reduced cost, for the construction of a new residence
for the Bromwells.
The indictment notified the Defendants that the Government
would seek forfeiture of the property that constituted proceeds of
the illegal activity. See Fed. R. Crim P. 32.2 (requiring notice
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to a defendant that the Government will seek criminal forfeiture).
This property included the $192,923 in salary payments to Mary
Bromwell, the $9,150 of construction services and materials
provided to Thomas Bromwell’s construction company, and the $85,000
of construction services, equipment, and materials provided by
Stoffregen to build the Bromwells’ residence. The indictment also
sought the forfeiture of $1,707,879 in salary payments to
Stoffregen and $93,267 in kickbacks to him. In total, the
indictment sought forfeiture of $2,088,219, for which the
Defendants were jointly and severally liable.
The indictment also notified the Defendants that if any of the
forfeitable property “a. cannot be located upon the exercise of due
diligence; b. has been transferred or sold to, or deposited with,
a third party; c. has been placed beyond the jurisdiction of the
court; d. has been substantially diminished in value; or e. has
been commingled with other property which cannot be divided without
difficulty,” the Government would seek forfeiture of certain
substitute property listed in the indictment, including real
property and numerous financial accounts owned by the Defendants.
(J.A. at 67.)
On October 19, 2005, the same day that the grand jury returned
the superseding indictment, the Government filed an Ex Parte
Application for a Protective Order and Seizure. The application
requested a protective order over the substitute property listed in
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the indictment. A United States Magistrate Judge granted the
Government two protective orders over this property. Thereafter,
the Defendants moved to vacate the protective orders on several
grounds, including that the magistrate judge was without authority
to enter the order.
In response, on November 15, 2005, the Government filed with
the district court an Ex Parte Application for Renewed Protective
Order and Seizure Warrants For Assets Subject to Forfeiture,
seeking a renewed protective order covering the Defendants’
substitute property. Attached to the Application for Renewed
Protective Order was an affidavit by FBI Special Agent Jeffrey
Williams. Special Agent Williams averred that the tainted property
to be forfeited could not be located, had been transferred or
deposited with a third party, and had been commingled with other
property that could not be divided without difficulty.
Specifically, Special Agent Williams’s affidavit stated that the
Bromwells had expended most of the $192,923 in salary payments made
to Mary Bromwell, and had only $384 remaining in the account in
which the salary had been deposited. The affidavit stated that the
$9,150 in construction materials and services provided to Thomas
Bromwell’s construction company was unavailable because it had been
used in the construction of a building for a third party. Finally,
the affidavit stated that the $85,000 worth of construction
services, equipment, and materials provided by Stoffregen to build
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the Bromwells’ residence had been commingled with other property
that could not be divided without difficulty, i.e., it was used in
the construction of the home.
On January 17, 2006, the district court vacated the protective
orders entered by the magistrate judge and entered a Renewed
Protective Order restraining real and personal property of the
Defendants as substitute property subject to forfeiture. The
Bromwells await trial, currently scheduled to begin in March 2007.
The Bromwells timely noted an interlocutory appeal of the
Renewed Protective Order.1 We have jurisdiction to hear this
appeal pursuant to 28 U.S.C.A. § 1292(a)(1) (West 2006), which
authorizes interlocutory appeals from the district court’s grant of
injunctions.
II.
The district court entered a protective order over the
Bromwells’ property pursuant to 18 U.S.C.A. § 1963(d). We review
the district court’s decisions regarding protective orders
restraining property for an abuse of discretion. United States v.
Bollin, 264 F.3d 391, 421 (4th Cir. 2001). “A district court per
se abuses its discretion when it makes an error of law . . . .”
1
Stoffregen also appealed. Prior to oral argument, however,
Stoffregen reached an agreement with the Government on the
underlying criminal matter, and we granted his motion to dismiss
his appeal.
7
Thorn v. Jefferson-Pilot Life Ins. Co., 445 F.3d 311, 317 (4th Cir.
2006).
The sole issue on appeal is the legal question of whether
property that is not profits of illegal racketeering activity, and
instead is substitute property, is subject to pretrial restraint
under § 1963 to preserve it for forfeiture after trial. Section
1963(a) provides that
Whoever violates any provision of section 1962 of this
chapter . . . shall forfeit to the United States,
irrespective of any provision of State law --
(1) any interest the person has acquired or
maintained in violation of section 1962;
(2) any --
(A) interest in;
(B) security of;
(C) claim against; or
(D) property or contractual right of
any kind affording a source of
influence over;
any enterprise which the person has
established, operated, controlled, conducted,
or participated in the conduct of, in
violation of section 1962; and
(3) any property constituting, or derived
from, any proceeds which the person obtained,
directly or indirectly, from racketeering
activity or unlawful debt collection in
violation of section 1962.
18 U.S.C.A. § 1963(a). Thus, the property described in subsection
(a) is tainted property that is forfeitable because it is connected
with or derived from the illegal racketeering activity. See, e.g.,
United States v. West, 877 F.2d 281, 292 (4th Cir. 1989) (affirming
the RICO forfeiture of an automobile and two houses because the
defendant stored and sold drugs in the houses and used the
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automobile to secure debts incurred in purchasing drugs, rendering
those assets forfeitable under § 1963(a)(1) and (2)).
Concerned that “‘a defendant may succeed in avoiding the
forfeiture sanction simply by transferring his assets to another,
placing them beyond the jurisdiction of the court, or taking other
actions to render his forfeitable property unavailable at the time
of conviction,’” Congress enacted a substitute property forfeiture
provision, 18 U.S.C.A. § 1963(m). United States v. McHan, 345 F.3d
262, 271 (4th Cir. 2003) (quoting S. Rep. 98-225 at 201, reprinted
in 1984 U.S.C.C.A.N. at 3384)). Subsection (m) provides that
If any of the property described in subsection (a), as a
result of any act or omission of the defendant --
(1) cannot be located upon the exercise of due
diligence;
(2) has been transferred or sold to, or
deposited with, a third party;
(3) has been placed beyond the jurisdiction of
the court;
(4) has been substantially diminished in
value; or
(5) has been commingled with other property
which cannot be divided without difficulty;
the court shall order the forfeiture of any other
property of the defendant up to the value of any property
described in paragraphs (1) through (5).
18 U.S.C.A. § 1963(m). In other words, subsection (m) provides for
forfeiture of substitute property after conviction if one or more
of the five statutory conditions has occurred that makes the
tainted property unavailable for forfeiture.
Section 1963 has another provision to prevent defendants from
thwarting forfeiture. Subsection (d) provides that
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[T]he court may enter a restraining order or injunction,
require the execution of a satisfactory performance bond,
or take any other action to preserve the availability of
property described in subsection (a) for forfeiture under
this section.
18 U.S.C.A. § 1963(d)(1) (emphasis added).
The district court entered a protective order under § 1963(d)
to restrain the Bromwells’ substitute property, i.e., property
described in subsection (m). The Bromwells contend that the
district court erred because the text of § 1963(d) provides only
for pretrial restraint of property described in subsection (a), not
pretrial restraint of substitute property described in subsection
(m).
In In re Billman, 915 F.2d 916 (4th Cir. 1990), cert. denied
sub. nom. McKinney v. United States, 500 U.S. 952 (1991), we held
that “the pretrial restraining provisions of § 1963 do not permit
a defendant to thwart the operation of the forfeiture laws by
absconding with RICO proceeds and then transferring his substitute
assets to a third party . . . .” Id. at 921. We noted that
although § 1963(d)(1)(A) authorizes a district court to enter an
injunction “to preserve the availability of property described in
subsection (a) for forfeiture” -- that is, the property that is the
proceeds of the racketeering activity –- “when . . . the defendant
has placed the assets specified in subsection (a) beyond the
jurisdiction of the court, subsection (d)(1)(A) must be read in
conjunction with subsection (m) to preserve the availability of
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substitute assets pending trial. In this way the purpose of
§ 1963(d)(1)(A) can be attained.” Id. at 920-21. We therefore
concluded “that § 1963(d)(1)(A) should be construed to authorize
pretrial restraint of property specified by subsections (a) and (m)
that can be forfeited after conviction.” Id. at 921.
We perceive no basis on which to distinguish this case from
Billman, which we have described broadly as holding “that the pre-
trial restraint provision of . . . 18 U.S.C.A. § 1963(d)[] permits
the restraint of substitute assets under § 1963(m) pending
resolution of the defendant’s case.” Bollin, 264 F.3d at 422. In
view of Billman, the district court correctly determined that
§ 1963(d)(1) authorizes the pretrial restraint of the Bromwells’
substitute assets.2
2
Billman was the first case in the courts of appeals to
address pretrial restraint of substitute property, and we are aware
that our position has not been followed by other circuits. See
United States v. Gotti, 155 F.3d 144, 149-50 (2d Cir. 1998)
(holding that the “unambiguous language” of § 1963(d)(1)(A) does
not authorize pretrial restraint of substitute assets); United
States v. Riley, 78 F.3d 367, 371 (8th Cir. 1996) (same); In re
Assets of Martin, 1 F.3d 1351, 1359 (3d Cir. 1993) (same); see also
United States v. Ripinsky, 20 F.3d 359, 362 (9th Cir. 1994)
(holding that substitute assets are not subject to pretrial
restraint under the criminal forfeiture provision of the Controlled
Substances Act, 21 U.S.C.A. § 853); United States v. Floyd, 992
F.2d 498, 501-02 (5th Cir. 1993) (same). We, of course, must
follow Billman, which was decided by a distinguished panel that
included retired Justice Powell. See McMellon v. United States,
387 F.3d 329, 332 (4th Cir. 2004) (en banc) (“[O]ne panel [of this
court] cannot overrule a decision issued by another panel.”).
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III.
One final matter must be addressed. On March 9, 2006 -- after
the district court entered its order in this case -- Congress
amended the statute governing the mode of recovering forfeiture
penalties, 28 U.S.C.A. § 2461(c) (West 2006), to state that the
forfeiture procedures of the Controlled Substances Act, 21 U.S.C.A.
§ 853 (West 1999 & Supp. 2006), “apply to all stages of a criminal
forfeiture proceeding.” See USA PATRIOT Improvement and
Reauthorization Act of 2005, Pub. L. 109-177, § 410, 120 Stat.
192, 246 (“Uniform Procedures for Criminal Forfeiture”) (March 9,
2006). Congress did not alter or repeal § 1963. Although the
district court’s protective order was entered pursuant to § 1963,
the Government contends that our appellate review of that order
should be conducted under § 853.
We need not address whether 21 U.S.C.A. § 853 now applies
rather than 18 U.S.C.A. § 1963 because the result is the same. For
the most part, the distinction between 18 U.S.C.A. § 1963 and 21
U.S.C.A. § 853 is without a difference. Compare 18 U.S.C.A.
§ 1963(d)(1) with 21 U.S.C.A. § 853(e)(1) (authorizing pretrial
restraint of tainted property) and 18 U.S.C.A. § 1963(m) with 21
U.S.C.A. § 853(p) (requiring the forfeiture of substitute property
if any of five conditions has occurred making tainted property
unavailable for forfeiture). In light of this similarity, we have
applied Billman to conclude that § 853 authorizes pretrial
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restraint of substitute property, observing that “[t]he restraint
and substitute assets provisions of § 853 are identical to those in
the RICO statute, and we see no reason to construe them
differently.” Bollin, 264 F.3d at 421-22. Therefore, whether
further forfeiture proceedings in this case are now governed by 18
U.S.C.A. § 1963 or 21 U.S.C.A. § 853, the district court was
authorized to enter an order restraining the Bromwells’ substitute
property because our precedent dictates that substitute property is
subject to pretrial restraint under both statutes. See Billman,
915 F.2d at 921; Bollin, 264 F.3d at 421-22.
IV.
Because the Bromwells’ substitute property is subject to
pretrial restraint to preserve its availability for forfeiture, we
affirm the district court’s order.
AFFIRMED
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