United States v. Alexander ( 1997 )

United States Court of Appeals
FOR THE EIGHTH CIRCUIT
___________
No. 90-5417
___________
United States of America, *
*
Plaintiff-Appellee, *
* Appeal from the United States
v. * District Court for the
* District of Minnesota.
Ferris Alexander, *
*
Defendant-Appellant. *
___________
Submitted: September 11, 1996
Filed: March 10, 1997
___________
Before WOLLMAN, FLOYD R. GIBSON, and JOHN R. GIBSON, Circuit
Judges.
___________
JOHN R. GIBSON, Circuit Judge.
Ferris Alexander is before us again. The United States
Supreme Court remanded this case for a determination of whether the
forfeiture of Alexander's property under the Racketeer Influenced
and Corrupt Organizations Act, 18 U.S.C. §§ 1961-1968 (1994),
violated the Eighth Amendment prohibition against excessive fines.
Alexander v. United States, 509 U.S. 544, 559 (1993). Following
our remand to the district court, United States v. Alexander, 32
F.3d 1231 (8th Cir. 1994) (Alexander II), the district court1 held
1
The Honorable James M. Rosenbaum, United States District
Judge for the District of Minnesota.
that Alexander failed to make a prima facie case of
disproportionality, and Alexander appeals this order. Alexander
argues that the forfeiture of his property was prima facie
disproportionate, and thus, constituted an excessive fine. He
argues that the district court ignored uncontroverted valuation
evidence, erroneously excluded property forfeited from the
proportionality analysis, and misconstrued the legal and factual
tests applicable to a proportionality analysis. We affirm.
The details of Alexander's convictions and forfeiture of
property are set forth in Alexander v. Thornburgh, 943 F.2d 825,
826-29 (8th Cir. 1991) (Alexander I), Alexander II, 32 F.3d at
1233-34 (8th Cir. 1994), and Alexander, 509 U.S. at 547-49.2 We
affirmed the district court's forfeiture order, 943 F.2d at 832-36.
The Supreme Court reversed and remanded for consideration of
whether the forfeiture of Alexander's property violated the Eighth
Amendment's prohibition against excessive fines. 509 U.S. at 559.
We, in turn, remanded the case to the district court to consider
this issue and to take additional evidence as it deemed
appropriate. Alexander II, 32 F.3d at 1235. In our remand order,
we outlined a number of principles the district court might
consider in its proportionality analysis, giving the district court
full discretion to develop the record and make appropriate
findings. Id. at 1235-37.
2
In his brief, Alexander identifies and values the items
forfeited: ten parcels of real property valued at $1,040,334.06;
fifteen bank accounts totalling $5,017.47; fourteen bookstores
valued at least at $2,000,000; personal property and equipment
liquidated at auction and private sale for $47,297.47; 113.8 tons
of "presumptively protected" magazines, videos, and novelties;
1,033 boxes of magazines, videos, and novelty items from a
California warehouse; three motor vehicles valued at $12,000; and
monies acquired from the RICO enterprise from the years 1985
through 1988, totalling $8,910,548.10.
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In considering Alexander's argument that the forfeiture of his
property constituted an excessive fine, the district court
recognized this court's instruction that it must distinguish
proceeds of the racketeering activity and property which
facilitates or affords a source of influence over the illegal
enterprise. See 32 F.3d at 1236. The forfeiture of proceeds from
the illegal enterprise is not considered punishment subject to the
excessive fines analysis because the forfeiture of proceeds simply
deprives the owner of the fruits of his criminal activity. See id.
The district court found that the real property, the $8,910,548.10
in proceeds, and the personal property, equipment, and inventory
located on the premises of the forfeited real property constituted
proceeds of Alexander's racketeering enterprise, and were not
subject to the excessive fines analysis. The court determined that
it would only include Alexander's personally held real property and
business interests in the amount forfeited for the purpose of the
proportionality analysis.
The district court recognized that Alexander must make a prima
facie showing of gross disproportionality before the court will
consider the government's counter-evidence of just proportionality.
Following this court's suggestion, the district court stated that,
to determine if Alexander made a prima facie showing of gross
disproportionality, it must compare the extent and duration of
Alexander's criminal activities with the amount of property
forfeited. The court decided that Alexander had the burden to make
at least a preliminary showing of the sums forfeited, and to
demonstrate a disproportionality between the forfeiture and his
crime. The court concluded that Alexander "entirely failed to come
forward with any cognizable evidence establishing the dollar value
of his holdings." The court specifically referred to the several
amounts Alexander claimed to have held, varying from "$25 million,"
to "many millions" to "$2 million." The court pointed out that
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Alexander failed to submit any evidence of the value of his
business, such as a certified appraisal, audited financial
statements, or any value based on a capitalization of income
stream, an offer of a comparable sale, or a specific asset listing
and valuation. Because the court could not calculate "base
holdings," the court concluded it was impossible to determine the
proportion of fines and, ultimately, determine if the forfeiture
was disproportionate.
The court also commented on Alexander's lack of credibility
based on discrepancies in Alexander's trial testimony and his
declarations. Alexander had stated to the Supreme Court that his
business was worth $25 million, but on his Chapter 7 bankruptcy
schedule, he stated, under penalty of perjury, that his business
was worth approximately $2 million. The court found "unworthy of
belief," Alexander's valuation of his assets. The court referred
to evidence that Alexander failed to keep records of receipts and
that there were "vast unreported sums of money." As one example,
the court recounted evidence that Alexander maintained only a
personal monthly declaration of quarters he collected and counted
from unmetered "peep show" vending machines, and that these records
did not square with testimony from a bank employee who stated that
Alexander deposited substantial amounts of quarters into different
bank accounts, often retaining large amounts of cash in $50 and
$100 denominations. The court stated that between the time of
Alexander's conviction and the seizure of his assets, Alexander
requested and received control of his business and assets and,
during that time, he "secreted assets, attempted bulk sales, and
engaged in . . . a series of shenanigans designed to obstruct th[e]
Court's orderly processes and enrich himself before the marshal
seized his inventory and equipment." Under these circumstances,
the court concluded that the United States had no duty to inventory
Alexander's holdings and rejected Alexander's argument that he
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should be relieved of his burden to show gross disproportionality.
The district court then considered the extent and duration of
Alexander's criminal activities. The court compared Alexander's
maximum consecutive sentences (171 years and statutory fines of
$6,400,000) with his imposed sentence (72 months and $100,000 fine,
special assessments, and costs), specifically noting that the court
did not order a higher fine because of the forfeiture. The court
concluded that the imposed sentence was appropriate and Alexander
failed to make any showing that the forfeiture was grossly
disproportionate to his criminal activity.
Alexander now argues that the district court incorrectly
conducted the proportionality analysis. Alexander perceives five
problems with the court's conclusion that he failed to make a prima
facie case of disproportionality. He argues that the court: (1)
ignored uncontroverted evidence in the record regarding the value
of property forfeited; (2) misconstrued the legal and factual test
applicable to the proportionality analysis; (3) erroneously
excluded at least $8.9 million from the proportionality analysis;
(4) erroneously focused on facts relating to the tax counts; and
(5) erroneously failed to hold as a matter of due process that
Alexander had met his burden of establishing a prima facie case of
disproportionality.
I.
Alexander first claims that the district court ignored
uncontroverted valuation evidence. He argues that the court failed
to acknowledge the evidence of value of the United States Marshall
appointed by the court to "apprise" the forfeited property, who he
says valued the forfeited property at around $10,017,197.10.
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Alexander stresses that this amount did not even include the entire
amount of the forfeiture, as the ten million dollar figure did not
include the value of the fourteen ongoing businesses and 114 tons
of seized inventory.
Alexander's characterization of the affidavit is not accurate.
Pursuant to a district court order, the United States Marshall
Service was authorized and directed to dispose of forfeited
property, not value the property.3 The affidavit sets forth the
net proceeds of the property seized, and does not “value” the
seized property at anywhere near ten million dollars.4 The
affidavit contains nothing to cause us to conclude that the
district court ignored valuation evidence or erred in conducting
its proportionality analysis.
II.
Alexander next contends that the district court incorrectly
analyzed the proportionality question. He directs us to our remand
order in which we suggest that the district court compare "the
extent of the criminal activity and the quantum of property
forfeited." Alexander II, 32 F.3d at 1236. He alleges that the
district court added the further requirement, unsupported by the
case law, of requiring him to establish the sums he originally
possessed. He characterizes the district court's analysis as a
comparison of the forfeiture to his net worth, not as a comparison
3
The government explains that the term "apprise" means to
"advise, counsel, inform, notify, and warn," it does not mean to
appraise or value.
4
The affidavit sets forth the net proceeds the government
received from disposing the property seized as a result of the
forfeiture: real estate - $659,344.58; cash - $2,185.13; bank
accounts - $5,017.47; and contents of businesses - $49,297.47.
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of the forfeiture to his criminal activities.
The district court, following our suggestion, considered
whether the forfeiture constituted an excessive fine by comparing
the extent and duration of Alexander's criminal activities with the
amount of property forfeited. See id. Contrary to Alexander's
argument, the district court did not compare the amount of the
forfeiture to Alexander's net worth. The court was simply trying
to ascertain the amount forfeited by determining the amount of
Alexander's property that was not the fruit of his RICO violations.
Alexander further contends that applying the inquiries
articulated by United States v. Busher, 817 F.2d 1409, 1415 (9th
Cir. 1987), and United States v. Sarbello, 985 F.2d 716, 721-25 (3d
Cir. 1993), he has made a prima facie case of gross
5
disproportionality. As Alexander stressed in his earlier appeals,
he complains that he was convicted of three RICO counts predicated
on seven items of obscene materials, and the dollar value of these
obscene materials was "infinitesimal" when compared to the volume
of the sale of other protected expressive material. Alexander's
argument essentially asks us to limit the proportionality analysis
5
Alexander identifies the following factors from Busher and
Sarbello as critical to the disproportionality analysis: (1) the
circumstances surrounding the defendant's criminal conduct; (2) the
harm suffered by the victim and the defendant's culpability; (3)
the dollar volume of the loss caused, whether physical harm to
persons was inflicted, threatened or risked, or whether the crime
had severe collateral consequences; (4) the benefit reaped by the
defendant; (5) the defendant's state of mind and motive; and (6)
the degree to which the enterprise operated by the defendant was
infected by criminal conduct. The Supreme Court declined to
establish a multifactor test for determining when a fine is
unconstitutionally excessive, leaving the lower courts free to
develop their own tests. See Austin v. United States, 509 U.S.
602, 622-23 (1993). We have considered many of the factors urged
by Alexander. See United States v. Bieri, 68 F.3d 232, 236 (8th
Cir. 1995), cert. denied, 116 S. Ct. 1876 (1996).
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to a comparison of the number of magazines and videos specifically
found by the jury to be obscene to the dollar amount of the
forfeiture. The Supreme Court, however, implicitly rejected this
same argument:
[Alexander] contends that forfeiture of his entire
business was an "excessive" penalty for the Government to
exact "[o]n the basis of a few materials the jury
ultimately decided were obscene." It is somewhat
misleading, we think, to characterize the racketeering
crimes for which [Alexander] was convicted as involving
just a few materials ultimately found to be obscene.
Alexander was convicted of creating and managing what the
District Court described as "an enormous racketeering
enterprise." It is in the light of the extensive
criminal activities which [Alexander] apparently
conducted through this racketeering enterprise over a
substantial period of time that the question whether the
forfeiture was "excessive" must be considered.
Alexander, 509 U.S. at 559 (citations to record omitted). The
district court did not err in conducting its proportionality
analysis.
III.
Alexander further contends that the district court abused its
discretion and clearly erred in finding that the entire $8.9
million included in the forfeiture order6 constituted "proceeds" of
the racketeering enterprise. Alexander restates his argument
presented in this and earlier appeals, attacking the forfeiture of
the fourteen bookstores and theaters based on findings that three
6
The district court ordered the forfeiture of $8,910,548.10 as
proceeds obtained from the racketeering activity. The government
contends that in light of Alexander's financial situation,
including his tax liability and Chapter 7 bankruptcy, this amount
is unlikely to be collected.
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videotapes and four magazines were obscene. He does not dispute
that the business may have generated $8.9 million during the years
1985 through 1988; rather, his objection is to the district court's
conclusion that the entire $8.9 million is proceeds and is not
included in the Eighth Amendment analysis. He suggests that the
proceeds from the seven items found to be unlawful, and perhaps the
multiple copies, are all that can be excluded from the
proportionality analysis.
In remanding the case to the district court, we instructed
that "[f]orfeiture of proceeds cannot be considered punishment, and
thus, subject to the excessive fines clause, as it simply parts the
owner from the fruits of the criminal activity." Alexander II, 32
F.3d at 1236. The district court made explicit its earlier finding
that the forfeiture of $8,910,548.10 constituted proceeds of
Alexander's racketeering enterprise. This amount represented
proceeds which Alexander obtained directly or indirectly from his
racketeering activities for the years 1985 through 1988.
We have already decided that proceeds cannot be included in
the proportionality analysis. See id. The only question remaining
is whether the forfeiture ordered constitutes an excessive fine.
We have no hesitation in concluding that the district court did not
err in excluding the $8.9 million from its proportionality
analysis. The jury found this amount forfeitable as proceeds of
the racketeering activity for the years 1985 through 1988. The
district court concluded that "the proceeds were inextricably tied
to an enormous racketeering enterprise." Alexander has not
presented any cogent argument explaining why the jury and district
court determination as to the amount of proceeds from the
racketeering enterprise should not stand.
IV.
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Alexander also argues that the district court erred by
focusing on facts relating to the tax counts in concluding that the
forfeiture was not excessive. He claims the non-RICO tax counts
are irrelevant in evaluating gross disproportionality.
Alexander's indictment set forth the racketeering enterprise
and the purpose of the enterprise, as well as the extensive means
and methods that Alexander used to conduct the enterprise. The
indictment incorporated allegations of the tax counts as "means and
methods" by which Alexander "conducted and participated in the
conduct of affairs of the enterprise." Accordingly, the court did
not err in considering the entire record, including the tax counts,
in deciding whether the forfeiture constituted an excessive fine.
V.
Finally, Alexander argues that due process requires that he be
relieved of his burden to show gross disproportionality because the
United States Marshall made no detailed inventory or appraisal of
the business's videos, magazines, and other items at the time they
were seized. He contends that it is impossible for him to
determine the total value of the property forfeited because the
government destroyed approximately "114 tons of presumptively
protected magazines and videotapes."
The district court rejected Alexander's due process argument,
observing that Alexander was attempting to turn his obligation to
present valuation evidence at the forfeiture hearing into a duty
imposed on the Marshall to make an inventory at the time of
seizure.
We see no circumstance here excusing Alexander from showing
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disproportionality. The record is replete with examples of
Alexander's attempts to frustrate the valuation of his property as
well as dissipate assets between the time of his conviction and the
seizure of assets. We reject Alexander's due process argument.
We affirm the judgment of the district court.
A true copy.
Attest:
CLERK, U. S. COURT OF APPEALS, EIGHTH CIRCUIT.
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