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4th Cir.: Fraud conspirator must forfeit only her own proceeds

Under recent U.S. Supreme Court precedent, a defendant convicted in a mortgage fraud conspiracy could not be ordered to forfeit the total amount of losses from the conspiracy – over $1.5 million – when she personally had received only $231,000 as a result of her involvement.


Lorene Chittenden was convicted of bank fraud and conspiracy to commit bank and mail fraud for her role in a fraudulent mortgage scheme. She received only $231,000 in proceeds from these crimes, but the district court ordered her to forfeit over $1 million to cover proceeds that her co-conspirators had received and dissipated, under 18 U.S.C. § 982(a)(2).

The Supreme Court later decided Honeycutt v. United States, 137 S. Ct. 1626 (2017), vacated this court’s affirmance of the forfeiture orders, and remanded for reconsideration in light of Honeycutt.

Property untainted by crime

Honeycutt involved forfeiture under 21 U.S.C. § 853, which covers different crimes but provides the same procedures for ordering forfeiture as 18 U.S.C.
§ 982(a)(2) – the governing statute in Chittenden’s case. On remand, this court must determine whether Honeycutt’s holding as to the first statutory framework applies to the latter.

The relevant text of 18 U.S.C. § 982(a)(2)
mirrors that of 21 U.S.C. § 853(a)(1) and limits forfeiture to “property constituting, or derived from, proceeds the person obtained directly or indirectly, as the result of” the crime. Thus, Honeycutt’s interpretation of this language to permit forfeiture only of tainted property the defendant personally acquired applies with equal force to § 982(a)(2).

Honeycutt further held that § 853 cannot permit joint and several liability. Under subsection (p), the government may confiscate substitute assets only “up to the value of” the unrecoverable proceeds the defendant acquired. Section 982 expressly incorporates § 853(p), which further supports the conclusion that § 982(a)(2), like § 853(a)(1), prohibits forfeiture of proceeds that the defendant herself did not obtain.

Honeycutt also clearly abrogated this court’s decision in United States v. McHan, 101 F.3d 1027 (4th Cir. 1996), explaining that § 853(o) cannot negate the statute’s plain text limiting forfeiture to tainted property the defendant obtained.

Thus, this court holds that forfeiture under 18 U.S.C. § 982(a)(2) is limited to property the defendant acquired as a result of the crime. The statute does not permit courts to hold a defendant liable for proceeds that only her co-conspirator acquired.

Forfeiture too broad

Based on the foregoing, the district court’s forfeiture orders for over $1 million of Chittenden’s untainted assets cannot stand. None of this amount represented assets that Chittenden obtained from her crimes. Rather, it was property that, under 18 U.S.C. § 982(a)(2) and 21 U.S.C. § 853(p), was not subject to forfeiture and that the government lacked authority to take.

Chittenden conceded below that over $1 million of her untainted assets were subject to forfeiture, but this court may consider issues not analyzed by the district court when there has been an intervening change in the law recognizing an issue that was not previously available. In this case, the intervening-change exception undoubtedly applies. Prior to Honeycutt, McHan was this circuit’s settled law and foreclosed any argument that the government could not hold Chittenden liable for her co-conspirators’ proceeds. Chittenden’s initial concession was therefore reasonable, and even wise. After Honeycutt, both parties had an equal opportunity to brief its implications. Accordingly, Chittenden didn’t waive her right to object to the forfeiture orders on the Honeycutt issue.

Affirmed in part, vacated in part, and remanded.

United States v. Chittenden, Case No. 14-4768, July 25, 2018. 4th Cir. (Gregory), remanded from SCOTUS. Joseph Ray Pope for Appellant; Christopher John Catizone for Appellee. VLW No. 018-2-154, 13 pp.

VLW 018-2-154