No Injunctive Relief From Forfeiture

The United States Court of Appeals for the Second Circuit affirmed the denial of injunctive relief in a forfeiture action that followed a wire fraud conviction

This case arises out of a scheme in which Romeo defrauded his employer, a New Jersey law firm. In particular, Romeo created a fake shell company, which he used to bill the firm for unrendered information technology (“IT”) services. Romeo, as head of the firm’s IT department, paid the fraudulent bills using his employer’s funds, transferred those funds to bank accounts he controlled, and used them to pay for personal expenses.

On July 31, 2020, Romeo pled guilty, pursuant to a plea agreement, to a superseding information charging him with one count of wire fraud, in violation of 18 U.S.C. § 1343 (“Count One”), and one count of money laundering, in violation of 18 U.S.C §§ 1956(a)(1)(A)(i), (B)(i) (“Count Two”). The superseding information contained a forfeiture allegation, under which Romeo could be required to forfeit assets traceable to the charged offenses, and a substitute-asset provision, which stated that, should assets traceable to the offenses not be identifiable or obtainable, the government would “seek forfeiture of any other property of the defendant up to the value of the [] forfeitable property,” under 21 U.S.C. § 853(p) and 28 U.S.C. § 2461(c). App’x at 17. In accordance with his plea agreement with the government, Romeo agreed to separate orders of restitution and forfeiture in equal amounts of $855,629.76. Romeo further stipulated in his plea agreement that “any forfeiture of [his] assets shall not be treated as satisfaction of any fine, restitution, cost of imprisonment, or any other penalty the Court may impose upon him in addition to forfeiture.” Id. at 31. At the guilty plea proceeding, Romeo confirmed that he was admitting to the forfeiture allegation in the superseding information and agreeing to forfeit $855,629.76 to the United States. Romeo also confirmed his understanding that the district court could order restitution in the same amount.

On February 4, 2021, the district court sentenced Romeo to a term of 24 months’ imprisonment, followed by a term of three years’ supervised release. Consistent with the plea agreement, the district court also ordered that Romeo pay $855,629.76 in restitution and the same amount in forfeiture. In imposing the sentence, the district court chose not to assess any fines because, among other reasons, it thought that “Mr. Romeo should use whatever money he has to pay restitution to the victim in this case. It should go to the victim. It shouldn’t go to the government.” App’x at 77.

Shortly thereafter, on February 10, 2021, Romeo and his counsel signed, and thereby consented to, a preliminary order of forfeiture and money judgment in the amount of $855,629.76, in which Romeo “admit[ted] that, as a result of [his] acts and/or omissions . . . , the proceeds traceable to the offense charged in Count One of the Information that [he] personally obtained and property involved in Count Two of the Information cannot be located upon the exercise of due diligence.” App’x at 92. Romeo further agreed that “[p]ursuant to Title 21, United States Code, Section 853(p), the United States is authorized to seek forfeiture of substitute assets of the Defendant up to the uncollected amount of the Money Judgment.” 6 App’x at 93. On February 12, 2021, the district court entered that order and judgment. App’x at 94.

Holding

He…argues that the district court erred by failing to subject the substitute asset at issue here—namely, $524,657.49 in proceeds from the sale of his membership interest in Atlas Certified, LLC—to the 25% garnishment limitation enumerated in the Consumer Credit Protection Act, 15 U.S.C. § 1601 et seq. (“CCPA”). He also contends that a remand is warranted for the government to consider whether to use its discretionary authority to apply the forfeited substitute asset to his restitution obligation or, in the alternative, for the district court to consider whether to use its own authority to direct the government to prioritize satisfying the restitution obligation over forfeiture.

We first hold that Romeo had no Sixth Amendment right to counsel in the post-judgment, substitute-asset forfeiture proceeding. We further conclude that the substitute asset did not qualify for any garnishment limitations because it does not constitute “earnings” under the CCPA. We also hold that no remand is necessary to allow the government to consider its discretionary authority to apply the forfeited asset to the restitution obligation and, even assuming arguendo the district court has the authority to order such prioritization, the district court did not commit plain error in failing to do so.

Accordingly, we AFFIRM the order of the district court.

Westfair Business Journal reported on the criminal case

He embezzled funds from Budd Larner PC of Short Hills, New Jersey, from 2015 through 2018, while he was chief technology officer. He set up shell companies, opened banking and payment accounts for the phony companies, issued invoices for services that were never performed, approved the invoices and paid the bills with a company credit card.

Impact

Romeo abused a position of trust, the prosecutor stated in a sentencing letter, and duped a girlfriend into creating the shell companies. He had a good income and a comfortable life. His former employer, Andrews noted, has gone out of business after more than 80 years of providing legal services.

(Mike Frisch)