MEMORANDUM OPINION AND ORDER re: FORFEITURE
STEPHEN P. FRIOT, UNITED STATES DISTRICT JUDGE.
Table of Contents
A. The Criminal Charges...882
B. The Trials and Convictions...883
C. The Moving Papers and Evidentiary Hearing...884
II. Authority for Forfeiture...886
A. Forfeiture Procedures...886
B. General Principles...887
C. Forfeitures Based on RICO Conspiracy Convictions...891
D. Forfeitures Based on Convictions for Operation of Illegal Gambling Business...894
E. Forfeitures Based on Money Laundering Conspiracy Convictions...895
F. Forfeiture Based on a Facilitation Theory...897
III. The Excessive Fines Clause...899
IV. Burden of Proof...905
A. The Government's Burden...905
B. The Defendants' Burden...907
V. The Exclusionary Rule...908
VI. Tracing, Tainting, Commingling and Extrapolation...910
A. Tracing, Tainting and Commingling...910
VII. Notice of the Government's Intent to Seek Money Judgment...916
VIII. Overview of the Government's Forfeiture Case...917
A. The Government's Forfeiture Brief (doc. no. 1999)...917
B. The Government's Presentation at the Forfeiture Trial...920
IX. Findings of Fact...922
B. Viability of the Government's Characterization of Funds Allegedly Laundered...924
C. Viability of the Government's Proposed Direct Attributions and Extrapolations...951
D. Viability of the Government's Contention that all Forfeiture Defendants, Regardless of their Respective Degrees of Participation in the Legendz Enterprise, Should be Subjected to a Forfeiture Money Judgment in the Same Amount...995
E. Findings Specific to King...996
F. Findings Specific to Koralewski...999
G. Findings Specific to Tucker...1001
H. Findings Specific to Moran...1006
I. Findings Specific to Robles...1008
J. Findings Specific to Bramley...1009
K. Findings Specific to Dieber...1013
L. Summary of Forfeiture-Related Findings...1014
X. Forfeiture-Related Sanctions Against the United States...1015
The government moves for preliminary orders of forfeiture against the defendants Bartice A. "Luke" King,
The government seeks forfeiture of specific assets as well as a forfeiture money judgment. See generally, Rule 32.2(b), Fed. R.Crim.P. (procedures for entering a preliminary order of forfeiture). As for the forfeiture money judgment, the government now seeks a judgment in the amount of $231,432,686.73 against the forfeiture defendants. (In the last of the four jury trials that were held in this case, an FBI witness maintained, repeatedly, that the government actually seeks $1 billion by way of forfeiture. Oct. Tr. 2074, 2077, 2114-14.
These forfeiture proceedings are, to put it mildly, contested.
The findings of fact in this order are based on the evidence presented at the four jury trials which were held in this case, as well as the
The Criminal Charges
The original Indictment in this case was returned on March 20, 2013. It alleged a ten-year conspiracy period for the two conspiracy counts. Doc. no. 1, at 18, 47.
The original Indictment charged fifty-seven defendants, including six of the eight forfeiture defendants now before the court (King, Koralewski, Moran, Robles, Tucker and Zapt). Doc. no. 1. The Indictment charged: Count 1, a racketeering (RICO) conspiracy in violation of 18 U.S.C. § 1962(d); Count 2, operation of an illegal gambling business in violation of 18 U.S.C. § 1955; and Count 3, conspiring in violation of 18 U.S.C. § 1956(h) to commit money laundering under 18 U.S.C. §§ 1956 and 1957. The Indictment included forfeiture allegations stating the government's intent to seek criminal forfeiture of at least $1,000,000,000.00 as well as specific items of real and personal property.
On August 21, 2013, a grand jury sitting in the Western District of Oklahoma returned a Superseding Indictment against fifty-nine defendants, including the eight forfeiture defendants before the court in these proceedings (King, Koralewski, Tucker, Moran, Robles, Zapt, Bramley and Diebner). Doc. no. 354. The Superseding Indictment included modified versions of the same three counts. The Superseding Indictment included forfeiture allegations stating the government's intent to seek criminal forfeiture of at least $1,000,000,000.00 and specific items of real and personal property. Each of the forfeiture defendants was convicted, by a jury, on one or more of the three counts.
On October 15, 2013, a Second Bill of Particulars for Forfeiture of Property was filed providing notice (to the extent material here) to King, Bramley and Diebner of the government's intent to pursue forfeiture of additional items of real and personal property. Doc. no. 465.
The Trials and Convictions
The sheer number of defendants necessitated multiple trials. Accordingly, the forfeiture defendants, along with other defendants, were grouped in four sets of defendants to be tried together in four separate trials. All of the defendants who have been tried have agreed to have forfeiture determined by the court rather than by a jury.
The first trial began on February 12, 2015, and a jury verdict was returned on March 3, 2015. Forfeiture defendants Tucker, Robles and Zapt were tried in this first set of defendants. Tucker was found guilty on all three counts. Robles was found guilty on all three counts. Zapt was not a defendant with respect to Count 2, and was found guilty on Count 1 and Count 3. The court denied their post-trial motions.
The second trial began on April 14, 2015, and a jury verdict was returned on April 30, 2015. In the second trial, King (the lead defendant) was found not guilty on Count 1 (by any standard, the flagship count), and guilty on Count 2 and Count 3. The court denied King's post-trial motion.
The third trial began on May 4, 2015, and a jury verdict was returned on May 22, 2015. Forfeiture defendants Moran, Bramley and Diebner were tried in this third set of defendants. All three of those defendants were found guilty on all three counts. The court denied their post-trial motions.
The fourth trial began on October 19, 2015, and a jury verdict was returned on November 4, 2015. Forfeiture defendant Koralewski was in this fourth set of defendants. Koralewski was found guilty on Count 1. He was found not guilty on counts two and three. The court denied Koralewski's post-trial motion.
Below is a count-by-count summary of the verdicts relevant to these proceedings.
Count 1 - Racketeering Count 2 - Illegal Count 3 - Money Conspiracy Gambling Business Laundering Conspiracy King Not guilty Guilty Guilty Koralewski Guilty Not guilty Not guilty Tucker Guilty Guilty Guilty Moran Guilty Guilty Guilty Robles Guilty Guilty Guilty Zapt Guilty [Not charged] Guilty Bramley Guilty Guilty Guilty Diebner Guilty Guilty Guilty
The Moving Papers and Evidentiary Hearing
The issues addressed in this order are those raised by the moving papers considered as a whole, which are extensive.
The government moved for preliminary orders of forfeiture against defendants King (doc. no. 1493), Koralewski (doc. no. 1975), Tucker (doc. no. 1512, amended motion), Moran (doc. no. 1482), Robles (doc. no. 1887), Zapt (doc. no. 1494), Bramley (doc. no. 1481) and Diebner (doc. no. 1480). Setting defendants Tucker and Zapt aside for the moment (because the government's motions against these two defendants stand on a slightly different procedural footing, as discussed next), defendants King, Koralewski, Moran, Bramley and Diebner dispute the government's entitlement to forfeiture of specific property identified in each of these motions. These defendants, plus Robles,
The government's motions for preliminary orders of forfeiture against Tucker and Zapt have already been granted by agreement, to the following extent. The government's amended motion for a preliminary order of forfeiture against Tucker was granted (doc. no. 1797), as was the government's motion for a preliminary order of forfeiture against Zapt. Doc. no. 1798. These motions were granted with respect to the specific property identified in the motions, as to which there was no dispute; however, the government's entitlement to a money judgment against Tucker remains in dispute, as does forfeiture of one of Tucker's bank accounts, as explained in Part VIII(A)(3), below. The government has not explicitly sought a money judgment against Zapt. See, doc. no. 1999-7, at 3-4 (describing money judgment sought against Tucker, but stating nothing about a money judgment from Zapt). Furthermore, it does not appear that the government seeks to forfeit any assets of Zapt which have not already been preliminarily forfeited. See, doc. no. 1798 (preliminary order of forfeiture by Zapt of contents of account X0897, in approximate amount of $1,657.94, located at TD Bank,
After the government filed its motions for preliminary orders of forfeiture, the forfeiture defendants filed response briefs. See, King (doc. no. 1530), Koralewski (doc. no. 1983), Tucker (doc. no. 1548), Moran (doc. no. 1513), Robles (doc. no. 1897), Zapt (doc. no. 1548), Bramley (doc. no. 1523) and Diebner (doc. no. 1525).
Viewed in light of the complexity of these proceedings, the government's motions were somewhat perfunctory. For example, the motions listed forfeiture statutes from the Superseding Indictment, but they did not specify which particular forfeiture statutes the government invoked in support of particular forfeitures. Notably, the government's motions seeking forfeitures from King, Koralewski, Tucker, Bramley, Zapt and Diebner did not mention a personal money judgment against these defendants.
On January 19, 2016 (about twelve years after the Legendz investigation started and nearly three years after the April, 2013 takedown in which the government seized hundreds of thousands of records from the defendants), the government filed its opening brief in support of its forfeiture claims. That brief (herein: Forfeiture Brief) was the government's definitive statement of its forfeiture case. It was filed pursuant to Case Management Order No. 7, doc. no. 1879, which required the government to:
Id. at 1-2.
In its Forfeiture Brief, the government set out, in separate exhibits for each of the forfeiture defendants, the government's position as it stood heading into the evidentiary hearing, regarding the property, and the size of personal money judgments, sought in these proceedings. See, doc. no. 1999-1 (King); doc. no. 1999-5 (Koralewski); doc. no. 1999-7 (Tucker); doc. no. 1999-3 (Moran); doc. no. 1999-8 (Robles); doc. no. 1999-7 (Zapt); doc. no. 1999-2 (Bramley); doc. no. 1999-4 (Diebner).
As already stated, Case Management Order No. 7 also required the government to specify the statutory basis invoked by the government in support of each forfeiture. Per the government's Forfeiture Brief, the sole statutory basis pressed by the government in support of forfeitures based on RICO conspiracy convictions was 18 U.S.C. § 1963(a). The sole statutory basis pressed by the government in support of forfeitures based on convictions for operating an illegal gambling business was 18 U.S.C. § 1955(d). And the sole statutory basis pressed by the government in support of forfeitures based on money laundering conspiracy convictions was 18 U.S.C. § 982(a)(1). Doc. no. 1999, pp. 11-12.
As required by the court's order of March 7, 2016, (doc. no. 2082), the government also filed a reply brief to address arguments made by some defendants in their response briefs, contending the government had failed to give adequate notice it intended to seek a personal money judgment. Doc. no. 2101.
An exclusionary rule argument was raised by King in his motion, seeking to exclude the documents commonly referred to as the Karlo Stewart documents. Doc. no. 2169. The government filed a response brief addressing that issue. Doc. no. 2180. (King had previously filed a successful motion to suppress those documents, and they were not admitted into evidence at his jury trial.
The government filed pre-hearing proposed findings and conclusions. Doc. no. 2130. The government's forfeiture claims against the forfeiture defendants now before the court were tried to the court in three days of hearings in late April, 2016. Doc. nos. 2174-76.
Following the hearing, proposed findings of fact and conclusions of law were submitted by all parties. See, doc. no. 2242 (government); doc. no. 2275 (King); doc. no. 2273 (Koralewski); doc. no. 2276 (Tucker); doc. no. 2270 (Moran); doc. no. 2278 (Robles); doc. no. 2276 (Zapt); doc. no. 2315 (Bramley); doc. no. 2274 (Diebner). In addition, the court has permitted the forfeiture defendants to adopt proposed findings and conclusions of the other forfeiture defendants. See adoption orders, doc. no. 2288 (King);
Authority for Forfeiture
"As soon as practical after a verdict ... of guilty ... on any count in an indictment... regarding which criminal forfeiture is sought, the court must determine what property is subject to forfeiture under the applicable statute." Rule 32.2(b)(1)(A), Fed. R. Crim. P. "If the government seeks forfeiture of specific property, the court must determine whether the government has established the requisite nexus between
"The court's determination may be based on evidence already in the record,... and on any additional evidence or information submitted by the parties and accepted by the court as relevant and reliable." Rule 32.2(b)(1)(B), Fed. R. Crim. P. "If the forfeiture is contested, ... the court must conduct a hearing after the verdict ... of guilty." Id.
"If the court finds that property is subject to forfeiture, it must promptly enter a preliminary order of forfeiture setting forth the amount of any money judgment, directing the forfeiture of specific property, and directing the forfeiture of any substitute property if the government has met the statutory criteria." Rule 32.2(b)(2)(A). "The court must enter the order without regard to any third party's interest in the property. Determining whether a third party has such an interest must be deferred until any third party files a claim in an ancillary proceeding under Rule 32.2(c)." Id. "Thus, the ancillary proceeding has become the forum for determining the extent of the defendant's forfeitable interest in the property. This allows the court to conduct a proceeding in which all third-party claimants can participate and which ensures that the property forfeited actually belongs to the defendant." Advisory Committee Notes, 2000 Adoption, Subdivision (b).
"Unless doing so is impractical, the court must enter the preliminary order sufficiently in advance of sentencing to allow the parties to suggest revisions or modifications before the order becomes final as to the defendant under Rule 32.2(b)(4)." Rule 32.2(b)(2)(B), Fed. R. Crim. P.
"At sentencing — or at any time before sentencing if the defendant consents — the preliminary forfeiture order becomes final as to the defendant." Rule 32.2(b)(4)(A), Fed. R. Crim. P. "If the order directs the defendant to forfeit specific property, it remains preliminary as to third parties until the ancillary proceeding is concluded under Rule 32.2(c)." Id.
These forfeitures are criminal forfeitures. Criminal forfeiture is part of the sentence — punishment — imposed on a defendant who has been convicted in a criminal case. See,
Criminal forfeitures fall into two categories, forfeiture of property, and forfeiture in the form of a money judgment. See, Rule 32.2(b)(1), Fed. R. Crim. P., and Advisory Committee Notes, 2000 Adoption, Subdivision (b) ("Subdivision (b)(1) recognizes that there are different kinds of forfeiture judgments in criminal cases. One type is a personal judgment for a sum of money; another is a judgment forfeiting a specific asset.").
The burden rests on the government to establish the nexus between the property forfeited and an offense of conviction that authorizes forfeiture.
As for money judgments, although the criminal forfeiture statutes in issue in this case do not explicitly refer to money judgments, courts uniformly recognize that money judgments representing unlawful proceeds are appropriate. See,
There are two primary reasons for permitting forfeiture money judgments. First, criminal forfeiture is a sanction against the individual defendant rather than a judgment against the property itself.
The nature of a particular forfeiture order will depend on the relevant forfeiture statute as well as the facts of a given case. Id. at 1248. Hybrid orders which forfeit specific property of a defendant, and which also enter a money judgment against a defendant, may be appropriate and are permitted. Id. at 1248-49.
As will be seen in the portions of this order which address the individual forfeiture statutes relied on by the government in this case, those statutes permit forfeiture of proceeds.
With the exception to be discussed immediately below, the general rule is that joint and several liability applies to forfeitures sought in a multi-defendant case. See,
For purposes of this case, the exception to the general rule of joint and several liability is that the doctrine of joint and several liability does not permit the government to forfeit racketeering proceeds under the RICO forfeiture statute, 18 U.S.C. § 1963(a)(3), where the proceeds in question were never "obtained, directly or indirectly" by the particular forfeiture defendant from whom forfeiture is sought. This exception to joint and several liability is addressed later in this order, in connection with the RICO forfeiture statute.
Similarly, it is generally (but not inevitably) true that a court may order a defendant to forfeit proceeds received by others who participated jointly with the defendant in the crime. In these proceedings, however, the government only argues for joint and several liability with respect to the conspiracy convictions.
Moreover, to obtain a money judgment based on joint and several liability for proceeds received by others, at least in the circumstances of this case, a foreseeability requirement must be met so that the government can get a judgment for only so much of the proceeds as were foreseeable to that defendant.
As discussed later in this order, at least in the context of this case, joint and several liability does not eliminate eighth amendment concerns; rather, at least arguably, it heightens them. For example,
Additional legal principles of general application are addressed later, under separate headings. Those topics (including the Excessive Fines Clause, burden of proof, the exclusionary rule, tracing, commingling, extrapolation and double counting, and the sufficiency of the government's notice of its intention to seek money judgments) address issues raised in the forfeiture defendants' papers. Before addressing those topics, it is useful to address the
Forfeitures Based on RICO Conspiracy Convictions
As the statutory authority for forfeitures based on a RICO conspiracy in violation of 18 U.S.C. § 1962(d), the government relies on 18 U.S.C. § 1963(a). Doc. no. 1999, p. 11 (in which government was required to identify all forfeiture statutes invoked). Section 1963(a) provides as follows.
The government's proposed findings and conclusions cite subsection (3). See, e.g., doc. no. 2242, pp. 57-58, ¶ 237, citing § 1963(a)(3) (the only subsection of the statute expressly cited or quoted in the government's proposed findings and conclusions). Subsections (1) and (2) (which are quoted in the government's Forfeiture Brief) provide that a defendant's conviction under RICO subjects all of his interests in the enterprise to forfeiture. See,
The RICO forfeiture provision is broadly drafted and has long been liberally construed.
Proceeds forfeitable based on a conspiracy to violate RICO potentially include gross proceeds of the RICO conspiracy, not just net profits after expenses. See,
As for the issue of joint and several liability for racketeering proceeds, this order has already indicated that although, as a general proposition, joint and several liability (limited by principles of foreseeability and the Eighth Amendment) applies to forfeitures which are based on conspiracy convictions, joint and several liability does not apply to permit forfeiture of racketeering proceeds from a particular forfeiture defendant who never, in any sense of the word, "obtained" those racketeering proceeds. In the court's view, the "obtained" language in the RICO forfeiture statute, 18 U.S.C. § 1963(a)(3), allows no other conclusion.
In this regard, the undersigned's reading of the RICO forfeiture statute is the same as the D.C. Court of Appeals' reading of almost identical language in 21 U.S.C. § 853(a), a drug forfeiture statute, as explained with clarity in
The court's agreement with
Eighth amendment limitations are addressed later, in Part III. At this point it is enough to observe that courts have applied an excessive fines analysis to forfeitures that are based on RICO convictions. See, e.g.,
The government need not provide a precise calculation of the proceeds from a RICO enterprise; however, estimates must be conservative, and overly speculative evidence about what constitute proceeds will not support a RICO forfeiture.
Forfeitures Based on Convictions for Operation of Illegal Gambling Business
As the statutory authority for forfeitures based on operation of an illegal gambling business in violation of 18 U.S.C. § 1955, the government relies on 18 U.S.C. § 1955(d). Doc. no. 1999, p. 12. Section 1955(d) provides that: "Any property, including money, used in violation of the provisions of this section may be seized and forfeited to the United States."
In addition, although not mentioned in the government's Forfeiture Brief as required by the court, the government's proposed findings and conclusions relating to forfeitures based on operation of an illegal gambling business (doc. no. 2242, ¶ 205 at p. 51, ¶ 249 at p. 60), rely on 18 U.S.C. § 981(a)(1)(C).
Continuing the chain of cross references, § 1956(c)(7) incorporates offenses listed in § 1961(1) (RICO) and § 1961(1) includes, among other things, violations of § 1955 (illegal gambling business).
Proceeds which the government seeks to forfeit based on illegal gambling convictions means gross receipts, not net profits. See, e.g., 18 U.S.C. § 981(a)(2)(A) ("For purposes of paragraph (1) [§ 981(a)(1)] ... [i]n cases involving ... illegal services [or]
The forfeiture defendants argue that, unlike the forfeiture statutes which the government relies on to support forfeiture based on RICO and money laundering conspiracy convictions, 18 U.S.C. § 1955(d) uses the permissive "may" rather than the mandatory "shall," so that forfeitures under this statute are not mandatory. For example, Diebner's response brief (doc. no. 2070, p. 10, responding to the government's Forfeiture Brief), cites
Forfeitures Based on Money Laundering Conspiracy Convictions
As the statutory authority for forfeitures based on conspiring to launder money under 18 U.S.C. §§ 1956 and 1957 in violation of § 1956(h), the government relies on 18 U.S.C. § 982(a)(1). Doc. no. 1999, p. 12. Section 982(a)(1) provides as follows:
As stated in
The forfeiture defendants argue that when the government, seeking forfeiture, relies on transactions it says constituted laundering of illegal gambling proceeds, the transactions are subject to the same
Per the general rule (which this court has held is not applicable to forfeitures of racketeering proceeds) that joint and several liability applies in the context of forfeitures based on conspiracy convictions (limited by foreseeability and the Eighth Amendment), it is only necessary to note here that courts have applied joint and several liability in the context of forfeitures based on money laundering convictions. See,
Courts have applied an excessive fines analysis to forfeitures that are based on money laundering conspiracy convictions. See, e.g.,
Forfeiture Based on a Facilitation Theory
The government seeks forfeiture of Bramley's house on a facilitation theory, arguing that Bramley maintained an office in his residence which he used to conduct illegal gambling activity and to conduct financial transactions involving criminal proceeds. See, Forfeiture Brief, doc. no. 1999-2, p. 6 of 17. The government's brief contends that the Bramley house was used to "carry out his crime, and clearly used to conceal proceeds of his crime and to conduct financial transactions involving the criminal proceeds." Id.
At a minimum,
Obviously, whether the proof supports forfeiture of a residence on a facilitation theory of forfeiture is a case-by-case determination based on the evidence before the court, as a review of some cases will show.
The court held that the evidence relied on by the government was more tenuous than the type of evidence which courts have used to find that real property is involved in money laundering, citing a Second Circuit decision in which the evidence showed the defendant had deposited the proceeds of his fraud into the business operating accounts of the companies which he ran at the subject premises, and that the premises "served as a conduit for the proceeds of the illegal transactions." Id., citing
The application of these principles to the proposed forfeiture of Bramley's house will be addressed in Part IX(J), below.
The Excessive Fines Clause
At the outset, it is important to note that, in places, the government's filings (such as in its Forfeiture Brief,
In addition, and alternatively, the court concludes that eighth amendment limitations apply for the reasons stated below.
Criminal forfeitures which proceed against a defendant (as contrasted with civil in rem forfeitures) are designed to punish the offender.
Some courts and commentators describe the Tenth Circuit as holding that forfeitures of criminal proceeds are not subject to an excessive fines clause analysis.
Moreover, civil forfeiture cases decided post-
The undersigned concludes that the Eighth Amendment applies.
The next question is: what criteria should this court use to determine whether a particular proposed forfeiture is grossly disproportionate to the gravity of the defendant's offense? Some general observations, as well as some specific criteria set out in
Third, with regard to specific factors weighed by a court,
A non-exclusive list of factors pertinent to a disproportionality analysis includes the following.
Aside from these considerations, at least two circuits have expressly held that deprivation of a defendant's future ability to earn a living should be considered.
The Court's very evident concern about deprivation of livelihood, and the Magna Carta's concern about the same thing — "wainage" being tools and implements of husbandry used to earn a livelihood — strongly suggest that the livelihood criterion is not to be folded into the mix of other excessive fines criteria, to make a difference, or not, depending on how the other criteria shake out.
Although the court, for the reasons stated, adopts the
Finally in this regard, the court emphasizes that a defendant's present inability to satisfy a forfeiture, in and of itself, is not at all sufficient to render a forfeiture unconstitutional, and is also not the correct inquiry.
Measured by the joint and several $231,432,686.73 forfeiture money judgment it seeks, the government's objective, if realized, would sentence the forfeiture defendants life terms of impoverishment or living off the books, or both. The text, the historical antecedents, and the judicial treatment of the Excessive Fines Clause, as expounded in
To summarize, the Eighth Amendment's Excessive Fines Clause requires the court to consider, first, the
Burden of Proof
The Government's Burden
The government has the ultimate burden of establishing the forfeitures by a preponderance of the evidence.
The preponderance of the evidence standard also applies to the government's burden to establish the amount of the criminal forfeiture money judgment.
"[O]nce the defendant has contended, with some evidentiary support, that at least some of the value in a given asset came from lawful, non-forfeitable sources, then the prosecutor must demonstrate how much is forfeitable."
Defendants object to the preponderance of the evidence standard when applied to forfeitures based on RICO convictions, citing the Third Circuit's rule that the government must establish entitlement to RICO forfeitures beyond a reasonable doubt. See,
The government also has the burden of proof on the issue of foreseeability as a prerequisite to joint and several liability for money laundering forfeiture. Because
Id. at 289 (emphasis added).
The quoted passage goes to the question of what the government has the burden of proving was foreseeable. The answer, per Judge Saris, is that the government must prove that the generation of proceeds, arguably in a given locale, by a given individual was reasonably foreseeable to a defendant who would be, for forfeiture purposes, chargeable with those proceeds. This court agrees. The next question is: How does this work in a multi-defendant gambling case with defendants operating in various places, with varying roles and varying levels of involvement. In
Id. at 292 (emphasis added).
The court agrees with this approach as far as it goes. If a given agent, say, Campbell, was at least generally known to one of these forfeiture defendants as an active Legendz agent, then it is highly likely that the betting proceeds generated by that agent (i.e., money "involved in" the offense of conviction for purposes of Count 3 — see, 18 U.S.C. § 982(a)(1) and discussion in Part II(E), above) were reasonably foreseeable to that defendant. This court does not exclude the possibility, however, that there are situations in which illegal betting proceeds generated by a particular agent may have been reasonably foreseeable to a particular forfeiture defendant even if that defendant was not specifically aware of that agent or of the details of his activities. This is, of necessity, a fact-bound determination.
The Defendants' Burden
The defendants other than King assert that the forfeiture relief available to the government is limited by the Excessive Fines Clause, as is discussed in Part III, above. If facts relevant to the application of the Excessive Fines Clause are actually in controversy, the burden of going forward with the evidence — some-times called the burden of production — rests with the defendant, as the proponent of the limitation.
The Exclusionary Rule
During King's trial, the court excluded documents which Karlo Stewart surreptitiously took, with the encouragement of the government, from the offices of Data Support Services. (For present purposes, DSS may be considered to have been the equivalent of Legendz.) As noted in Part I(C), above, those documents were obtained in violation of King's fourth amendment rights.
Criminal forfeiture is a component of the sentence imposed following a defendant's conviction.
Furthermore, the exclusionary rule is a prudential doctrine.
Thus, despite the inadmissibility of the Stewart documents during King's trial, the documents are not excluded in these criminal forfeiture proceedings against King. This ruling makes the Stewart documents admissible. It does not suggest what weight, if any, the court will ultimately give the documents, but the court will note, first, that significant segments of the government's forfeiture case are rooted in data extracted from the spreadsheets taken by Karlo Stewart at the instance of the government, in violation of King's fourth amendment rights (see, e.g., Tr. 720-21), and secondly, that, throughout the forfeiture trial, King was careful to preserve his objection to the use of the documents that were taken in violation of his fourth amendment rights. E.g., Tr. 70, 71, 437, 440. The court excused King's counsel from having to reassert
Tracing, Tainting, Commingling and Extrapolation
The jury's guilty verdict may turn a prince into a frog, but the frog, even though possibly headed for prison, doesn't forfeit anything until the government proves a forfeiture case. And because of the natural import of the statutory language defining a defendant's liability to forfeiture, that forfeiture case may present issues and problems of proof — for both sides — that differ markedly from the issues and problems of proof that arose in the underlying trial of the issue of guilt or innocence. For that reason, the discussion returns to the relevant statutory language. The forfeiture statutes that are relevant in this case use various words to express the concept that there must be some connection between the offense that triggers forfeiture and the assets sought to be forfeited — what Rule 32.2 refers to generically as the "nexus." Those statutory provisions are discussed in detail in Part II, above, but brief repetition is necessary here.
For present purposes:
As will be seen, the judicial decisions do pay attention to these words defining the connection the government must prove.
Tracing, Tainting and Commingling
Given the nature of most of the criminal activity (especially including organized criminal activity, as in the case at bar) the federal courts see, the property that is ultimately found and forfeited is often not the property that was used to commit the offense (the "corpus") or that was directly generated by the offense. Concealment and the mere passage of time see to that. Consequently, the forfeiture statutes, or at least those that are relevant here, permit the government to cast a wide net. It falls to the courts, addressing concrete cases, to determine the reach of the statutory language in those concrete cases. The Tenth Circuit and the other Courts of Appeals have provided much valuable guidance.
The Tenth Circuit's 1998 decision in
In reversing the forfeiture order, the court noted, as an initial matter, that, although, in the indictment, the government sought forfeiture of a specific account, "the account itself is not `property' subject to forfeiture, but merely a container to hold the `property' or money subject to forfeiture. In other words, the account number is merely used for identification purposes and is not itself a forfeitable item." Id. at 1137 n. 7 (citing Judge Easterbrook's opinion for the Seventh Circuit in
Addressing the fact that the tainted funds were no longer in the account at the time of the indictment, the court concluded that the only remaining basis for forfeiture would be a facilitation theory, rendering forfeitable "all of the money contained in the account at the time of the offense," id. (emphasis added), but — because of the conceptual basis for the facilitation theory — not limited to the amount of the corpus (the corpus being the laundered finds that had passed through the account). Id. at 1138. It was "clear error" to measure the forfeiture by the amount of the corpus because "the corpus was no longer in the account." Id. And as for facilitation — reaching tainted and untainted funds commingled in an account — the government was obliged to "demonstrate that the defendant pooled the funds to facilitate, i.e., disguise the nature and source of, his scheme." Id. at 1135. Citing, among other cases, the Third Circuit's decision in
The district court's resort to a substitute assets theory did not save the forfeiture order in
Id. at 1087.
Because the jewelry had been "purchased with funds from an account into which money laundering proceeds had been commingled with other funds, and after numerous intervening deposits and withdrawals," the court concluded that the jewelry could not be found to be "traceable to" money laundering activity. Id. at 1088. This reasoning would apply a fortiori where the government's evidence does not show the immediate source of the funds used to purchase a tangible asset.
As has been seen, in 1992, the Seventh Circuit opined that "the presence of one illegal dollar in an account does not taint the rest."
The question before the court in
As for hard assets, if a hard asset was acquired (or the mortgage on it serviced) partly with untainted funds, the record must "establish how much of the value came from [untainted sources] and how much from [tainted sources]."
The short of the matter is that commingling will not stand in the way of forfeiture if the account in question was used exclusively, or nearly so, for illicit purposes (or, by the same token, if the hard asset in question was acquired or financed exclusively, or nearly so, with illicit money). But if the commingling problem is not cured by proof of facilitation, significant commingling can present a significant obstacle to forfeiture.
The case at bar presents a tangle of issues as to tracing,
As has been discussed and will be further discussed in Part VII, below, the government is entitled to seek forfeiture by way of money judgments against the defendants. Forfeiture will not be limited to identifiable assets. But the need to determine, on a reasoned basis, the amount of a forfeiture money judgment raises the issue of extrapolation. Or, more precisely, the limits of extrapolation.
Extrapolation is necessary, and permitted by forfeiture law, in the absence of records that would directly provide, for the relevant time periods, the information necessary to enable the court to do the arithmetic. The law of extrapolation (to the extent that law, as opposed to the routine task of looking for plausible factual inferences, has any bearing on it) is that if the government proposes an extrapolation for the purpose of arriving at the amount of a forfeiture money judgment, that proposed extrapolation must be supported by evidence — measured by the preponderance standard — that provides a beginning point reliable enough to lead to the proposed end point (the amount to be included in the judgment) without unacceptable speculation and conjecture.
On one hand, it is quite obvious that "[t]he calculation of forfeiture amounts is not an exact science. The court need not establish the loss with precision but rather need only make a reasonable estimate of the loss, given the available information. A court is permitted to use general points of reference as a starting point for calculating the losses or gains from fraudulent transactions and may make reasonable extrapolations from the evidence established by a preponderance of the evidence at the sentencing proceeding."
Notice of the Government's Intent to Seek Money Judgment
Defendants argue that lack of notice, or lack of adequate or timely notice, precludes or estops the forfeitures which the government seeks in these proceedings. The court disagrees.
Rule 32.2(a) provides that "A court must not enter a judgment of forfeiture in a criminal proceeding unless the indictment or information contains notice to the defendant that the government will seek the forfeiture of property as a part of any sentence in accordance with the applicable statute." The rule further provides that "The indictment or information need not identify the property subject to forfeiture or specify the amount of any forfeiture money judgment that the government seeks." Id.
The Advisory Committee Notes to the 2009 Amendments, Subdivision (a), state: "The amendment ... makes it clear that the indictment or information need only provide general notice that the government is seeking forfeiture, without identifying the specific property being sought. This is consistent with the 2000 Committee Note, as well as many lower court decisions."
The Superseding Indictment states that "notice is hereby given to the defendants that the United States will seek forfeiture as part of any sentence" for a conviction under counts one, two or three. Doc. no. 354, ¶ 110 (forfeiture allegation 1, pertaining to racketeering conspiracy offense); ¶ 115 (forfeiture allegation 2, pertaining to illegal gambling business offense), ¶ 119 (forfeiture allegation 3, pertaining to money laundering offense; stating that upon conviction the government will seek forfeiture of any property involved in such offenses or traceable to such property). The RICO forfeiture allegation of the Superseding Indictment lists specific interests subject to forfeiture, stating that "The interests of the defendants subject to forfeiture... include but are not limited to at least $1,000,000,000.00 and all interests and proceeds traceable thereto...." Doc. no. 354, ¶ 112 (RICO). And see, ¶ 116 (the illegal gambling business forfeiture allegation, stating that "property of the defendants subject to forfeiture ... include but are not limited to at least $1,000,000,000.00 and all interests and proceeds traceable thereto, including but not limited to the following assets...."); ¶ 19 (money laundering forfeiture allegation, stating that "property of the defendants subject to forfeiture... include but are not limited to at least $1,000,000,000.00 and all interests and proceeds traceable thereto, including
Courts which have addressed the issue have found that the government is not required to provide notice of the possibility of a money judgment. See, e.g.,
Finally, there is no evidence that the timing of the government's announcements regarding its intent to seek personal money judgments has prejudiced the forfeiture defendants.
The forfeiture defendants' notice arguments are rejected as a basis for concluding that the government is precluded or estopped from seeking money judgments.
Overview of the Government's Forfeiture Case
An understanding of the outcome of the forfeiture proceedings will be aided by a review of the evolution of the government's factual contentions in support of its forfeiture claims. The court's determinations as to the merits of those factual contentions are not discussed here. They are addressed in Part IX, below.
The Government's Forfeiture Brief (doc. no. 1999)
Although the broad outlines of the government's forfeiture claims may be discerned from the motions for preliminary
The government does not assert, either in its Forfeiture Brief or in its lengthy post-trial proposed findings and conclusions (doc. no. 2242), that any of the specific items of real or personal property it seeks to forfeit are sought as substitute assets. Consistent with that, the government does not cite, or otherwise purport to invoke, the legislation
Before going further, one other matter should be noted. The government's Forfeiture Brief did, in general terms, acknowledge, as a legal matter, that the government is not entitled to run up the forfeiture score by double counting. Doc. no. 1999, at 20. But nowhere did the government attempt to address or explain the instances of double counting that are embedded in its forfeiture case, as is discussed in several places in this order. To the contrary (and remarkably), the government would have the court sift the record and do the math: "After determining which assets are subject to forfeiture and the appropriate theories for forfeiture, and after determining the full amount of the forfeiture judgments, the United States respectfully requests that the Court adjust the amount of the judgments and forfeiture of assets accordingly to ensure that there is no double counting." Id. at 21 (emphasis added).
As to King, the government seeks forfeiture of specific amounts of funds (e.g., $978.18 in one instance) from eighteen specifically identified bank and brokerage accounts (doc. no. 1999-1), as well as three automobiles, $10,236.86 in currency, 58 pieces of jewelry, 88 pairs of shoes (including, apparently, all of his 20 pairs of Jimmy Choo shoes, doc. no. 653-3), 75 purses, a jukebox, sports memorabilia, $303,527.46 as a substitute res for a residence in Texas, and five parcels of real property. Id.
As set forth in its Forfeiture Brief, the government also sought a money judgment against King in the amount of $222,358,480.00. Id. at 13. That total is substantially based on a series of extrapolations. Those proposed extrapolations are discussed in Part IX(C), below.
In support of this wide-ranging forfeiture, the government asserts that "[b]etween 2003 and 2013, Mr. King only worked for Legendz Sports [transcript citation omitted]. Consequently, his only source of income derived from his illegal gambling operation with Legendz Sports."
Eleven of the bank accounts listed for forfeiture are accounts in the name of Serena King and various children of Mr. and Mrs. King. Id. at 5-8. As for Mr. King's seventy-five purses, the government states that "Mr. King's only source of income was from the Legendz Sports illegal gambling enterprise. The approximately seventy-five miscellaneous purses constitute proceeds of his illegal gambling operations associated with Legendz Sports." Id. at 11.
As to Koralewski, the government seeks to forfeit, by way of identifiable property, a gas lease covering the Koralewski residence in Parker, Colorado, as well as specific amounts found in two Wells Fargo bank accounts, totaling about $1,500.00. In addition, the government sought a "[s]ubstitute res" in the amount of $172,039.65, representing the proceeds of the sale of the Koralewski residence. Doc. no. 1999-5, at 1. The government asserted, by way of basis for the nexus between the property and Koralewski's offense of conviction (Count 1 only) that, during the relevant period, "Koralewski's only source of income derived from his association with Legendz Sports." Id. The government elaborated by asserting that: "Koralewski failed to earn legitimate income from 2003 through 2013." Id. at 2.
In its Forfeiture Brief, the government also sought a money judgment against Koralewski for an amount slightly in excess of $1.2 million. Id. at 3. (As will be discussed, the government now seeks a forfeiture money judgment against Koralewski and the other forfeiture defendants in an amount in excess of $230 million.)
As to Paul Tucker, the government sought, in its Forfeiture Brief, slightly less than $9,000.00 in currency which had been seized, as well as the contents of four bank accounts. (Item 7 on the list on p. 1 of doc. no. 1999-7 is an exact duplicate, including dollar amount, of the description of the account listed as item 3 on that page, so the government's Forfeiture Brief only implicates four accounts even though accounts are listed in five paragraphs.) The government's Forfeiture Brief, filed in January, 2016, overlooks the fact that the currency and three of the four bank accounts (those listed in paragraphs 3, 5 and 6 in doc. no. 1999-7, at 1) had been forfeited by agreement as set forth in the Preliminary Order of Forfeiture filed on November 13, 2015 (doc. no. 1797). Consequently the only account remaining in play is the one listed in paragraph 4 of doc. no. 1999-7, p. 1, an account at "Wells Fargo/Wachovia Bank" in the amount of $3,490.64.
The government also sought, in its Forfeiture Brief, a money judgment against Tucker in an amount in excess of $8.8 million "for his participation in the Legendz
As to Moran, the government sought, in its Forfeiture Brief, approximately $60,000.00 in currency, as well as a money counter, a watch and a diamond ring. Doc. no. 1999-3, at 1. The government also stated that it sought a money judgment against Moran in an amount slightly less than $3 million, arrived at substantially by way of estimating the amount of money Moran picked up and delivered as a runner for the Legendz organization. See, doc. no. 1999-3, at 4-6.
In its Forfeiture Brief, the government sought a money judgment for slightly more than $815,000.00 against Robles, on the basis of the funds he picked up and delivered as a runner, plus the salary paid to him while he served as a runner. Doc. no. 1999-8, at 1-2.
As to Bramley's hard assets and financial assets, the government sought, in its Forfeiture Brief, forfeiture of his house in Plano, Texas, the contents of five investment accounts and bank accounts (in unspecified amounts), a Mercedes Benz automobile, slightly more than $23,000.00 in currency and slightly more than $1,100.00 in "collectible" currency. Doc. no. 1999-2, at 1. By way of nexus, the government asserted, among other things, that "Bramley's only source of income (excluding Social Security benefits), between 2003 and 2013, was income he received from his participation in the Legendz Sports conspiracy." Id. at 2. As to the residential property in Plano, Texas, the government also asserted a facilitation theory, alleging that "Bramley maintained an office in the residence that he used to conduct illegal gambling activity." Id. at 5-6.
In addition to the hard assets and financial assets, the government also sought a money judgment against Bramley in an amount slightly in excess of $5.1 million.
As to Diebner, by way of hard assets and financial assets, the government sought, in its Forfeiture Brief, forfeiture of a residence in Houston, Texas, the contents of three bank accounts (unspecified as to amount), approximately $8,400.00 in U.S. currency and miscellaneous items of jewelry. Doc. no. 1999-4, at 1. In support of forfeiture of the currency, the government stated, in its Forfeiture Brief, that: "Over the course of his involvement with the Legendz Sports enterprise, [Diebner] is responsible for approximately $18,567,345.60 in proceeds." Doc. no. 1999-4, at 3. In the very next paragraph, in support of forfeiture of the jewelry, the government said: "Over the course of his involvement with the Legendz Sports enterprise, [Diebner] is responsible for approximately $3,679,585.80 in proceeds." Id. No explanation is offered for the difference between these two figures.
As to Diebner, the government also sought a money judgment in the amount of $18,567,345.00. Id. at 4.
The government's presentation at the forfeiture trial
The government called two witnesses at the forfeiture trial. The first witness was Bart Lowrance, an asset forfeiture investigator employed by the Federal Bureau of Investigation. Tr. 8. The government's other witness was David Jansen, also a forfeiture investigator, apparently on a contract basis. Tr. 427. Jansen's description of his status was: "I do work for the FBI." Tr.
For reasons that will become apparent, some discussion of the extent of the knowledge of the government's forfeiture witnesses is appropriate.
At the forfeiture trial, Lowrance made a discernible, and mostly successful, effort to stay within the limits of what he knew. And the main thing he knew was that his arithmetic was correct. For the most part, he was right about that. Lowrance, as the sponsor of the government's updated recap of its forfeiture figures (GX C89),
The government's second (and last) witness at the forfeiture trial was Jansen. A former agent with the Internal Revenue Service Criminal Investigation Division, Jansen is employed by an organization that contracts with the Department of Justice to do forfeiture and money laundering-related work for the FBI. In his words: "I do work for the FBI." Tr. 427. He got involved in this case in 2011. His main activity has consisted of examining financial records for the purpose of "tracing
Although the testimony of Lowrance and Jansen was, in some ways, informative, it is worthy of note, before going further, that they added nothing to the record in this case in terms of first-hand knowledge imparted by testimony from percipient witnesses.
Findings of Fact
Broadly speaking, the government's forfeiture case breaks down into two categories: (i) forfeiture of specifically-identified assets (partly financial assets and partly tangible assets such as houses, cars, shoes and purses) and (ii) forfeiture in the form of money judgments against the forfeiture defendants. As stated in Part I, above, the government originally contended that the forfeiture in this case would amount to a billion dollars. Regardless of what the merits of that number might be, or might ever have been, the government's forfeiture contentions have been very much a moving target. This is so despite, or perhaps because of, the fact that the court has repeatedly required the government to provide specifics — first in terms of allegations and later in terms of proof — of just what it seeks to forfeit, both by way of specific assets and by way of forfeiture money judgments.
As for forfeiture money judgments, the government, when first required to clearly state what it sought (Case Management Order No. 7, doc. no. 1879), specified the amounts set forth at length in Part VIII(A), above, in its Forfeiture Brief. This, to put it mildly, has changed, as indicated in the following table.
Table 1 Government's Positions as to Amount Sought by way of Forfeiture Money Judgment (All amounts in dollars) Amount sought in Amount sought in Amount sought in Amount sought in Defendant Forfeiture Brief, GX C89, without GX C89, with Proposed FoF doc. no. 1999
53govt's updated govt's updated and CoL, doc. no. figures 54figures 552242 King 222,358,480.00 209,293,468.38 227,508,341.16 231,432,686.73 Koralewski 1,222,856.00 209,293,468.38 227,508,341.16 231,432,686.73 Tucker 8,842,560.00 209,293,468.38 227,508,341.16 231,432,686.73 Moran 2,993,660.00 209,293,468.38 227,508,341.16 231,432,686.73 Robles 815,197.50 209,293,468.38 227,508,341.16 231,432,686.73 Bramley 5,102,789.00 209,293,468.38 227,508,341.16 231,432,686.73 Diebner 18,567,345.60 209,293,468.38 227,508,341.16 231,432,686.73
In the second category listed above (betting proceeds attributable to individual Legendz agents), the government attributes illicit proceeds to a total of fifteen agents and runners. Id. Of those fifteen, six are forfeiture defendants now before the court (Koralewski, Tucker, Moran, Robles, Bramley and Diebner). Id.
The government seeks a forfeiture money judgment against all of the forfeiture defendants, including King, for the same grand total: $231,432,686.73. Doc. no. 2242, at 48, ¶ 189. Thus, given the government's final factual approach to determining the amount of the forfeiture money judgments, the viability of the government's proposed extrapolations (the first two categories listed above) presents an issue common to all of the forfeiture defendants — because it directly affects all of them. For instance, the viability of the government's proposed extrapolation as to Tucker, a Florida bookie, affects Moran, a California runner. Likewise, but as matters distinct from the merits of the government's proposed extrapolations, there are common issues as to the viability of the government's characterization
Viability of the government's characterization of funds allegedly laundered
By way of factual findings, the court will start with the third category listed above — the government's request for inclusion in its forfeiture money judgment of more than $43 million attributable to funds the government asserts were illegally laundered through the various bank accounts associated with the Legendz enterprise. As has been noted, the government seeks inclusion of this amount in a forfeiture money judgment against all of the forfeiture defendants.
The government's case under this heading depends on two things: (i) the facts as to the source of the funds deposited, and (ii) the facts as to the nature of the activities generating the funds in the hands of that source. These two concepts — the source of the funds and the nature of the activities that generated the funds — are related but, for analytical purposes, are not identical.
One important thing to bear in mind about the figures shown under the heading of "Money Laundering Accounts/Items," GX C89 (App. 1, Lines 1-16) is that these items are not extrapolations. As will be discussed, these items depend on some assumptions, but they are not extrapolations.
Before going further, one of those assumptions deserves detailed treatment, because it has a very substantial effect on the factual merit of the government's contention that the $43 million shown on GX C89 under the Money Laundering heading should be included in the forfeiture money judgment calculation.
When required to definitively state the factual basis for its forfeiture case, the United States Government told the court eleven times, in these words or in substance, that: "King lacked a legitimate source of income between 2003 and 2013," doc. no. 1999-1, at 3.
During the period relevant to this case, King had interests in at least four businesses other than the Legendz sports betting enterprise. They are: Grupo Legendz, Vaporama Internacional, S.A., Magna Tours and Platinum Vacations.
Although Grupo Legendz accounts apparently did receive funds generated by the Legendz gambling enterprise that is the subject of this case (Oct. Tr. 803), Lowrance acknowledged that if King's characterization of Grupo Legendz and Vaporama was correct (that being the characterization that was based on testimony from government witnesses at the four jury trials — testimony that was neither contradicted nor disputed in any other way by any party), then it "might be possible" that the $3,746,816.83 in allegedly laundered funds shown in Line 1 on GX C89 "represents both lawful and unlawful proceeds being counted into that account." Tr. 187. In light of the uncontradicted testimony of the government witnesses at the jury trials, this was a remarkably tepid concession by Lowrance. The evidence before the court will permit no finding other than that Grupo Legendz was a lawful business situated in Panama City, generating lawful revenues for Bartice King.
Magna Tours was a travel agency — an IATA-certified travel agency (Feb. Tr. 842; Apr. Tr. 1078), otherwise described as a "walk-in retail travel agency." Feb. Tr. 719. "You can go in and book a cruise, book airline tickets." Id. As a "legitimate travel agency" (Oct. Tr. 1035-36), Magna had its own, separately-keyed, leased space in the building that also housed the Legendz call center. Feb. Tr. 844; May. Tr. 344.
King was the founder, and, for a time, the sole owner of Magna Tours. Feb. Tr. 720; Apr. Tr. 657. Later, he was a partner in this business with Reggie Berthiaume and Michael Lawhorn (Feb. Tr. 328-29), both of whom (as government witnesses) testified in detail about that business. Berthiaume was in this business with King from 2004 to 2010 — very much within the conspiracy period. Feb. Tr. 720; Apr. Tr. 596. In addition to serving the needs of the Legendz organization (Oct. Tr. 1086), Magna Tours had corporate accounts in Panama. Feb. Tr. 720. With Berthiaume's help, they were "picking up a lot of corporate accounts" (id. 721), so the business was "pretty successful" (Apr. Tr. 596), concisely described by Berthiaume as "a profitable business." Apr. Tr. 657. It was "growing at about 20 percent annually in sales." Apr. Tr. 596.
Beginning in approximately 2006, King, Berthiaume and Robles were partners, one-third each, in Platinum Vacations.
This, in a nutshell, is where the record stood after the government had called various combinations of four witnesses at four jury trials who testified without contradiction — or even an intimation of doubt from the government or anyone else — about the particulars of King's outside businesses during the period in which, as the government put it after those four trials had been completed: "his only source of income derived from his illegal gambling operation with Legendz Sports." Doc. no. 1999-1, at 3. Finally, on this subject (for now), it should be noted that the government's forfeiture witnesses offered no estimation of the ratio of King's legitimate income vs. his illegal gambling income. The government made no attempt to determine this. Tr. 649. Thus, Jansen had no conclusion at all as to "how much money attributable to Mr. King is tainted up versus clean or legitimate." Tr. 629. This is consequential for forfeiture purposes.
Sources of deposits and nature of activities generating the funds.
As stated above, the government's case for inclusion of $43 million in the forfeiture money judgment based on deposits under the heading of Money Laundering on GX C89 requires resolution of two separate (but in some instances related) factual issues as to each of the sixteen line items in the money laundering section of GX C89: (1) What was the source of the funds deposited? (2) What was the nature of the activities that generated those funds in the hands of that source? The court will now address these issues as to each of the sixteen line items shown under the Money Laundering heading on GX C89.
In addition, as to 46 of those 233 deposits, the source is shown to be Grupo Legendz. GX C58A, p. 1-2. Grupo Legendz, as discussed in Part IX(B)(1), above, was a source of legitimate income for King. In fact, there is no basis in the record for any suggestion that Grupo Legendz was a source of anything other than legitimate income for King.
Unsurprisingly, when confronted with the facts establishing the deficiencies in GX C58A, Lowrance was unable to venture a guess as to the percentage of the account activity shown in GX C58A that actually consists of "deposits from bettors or reflects earnings into this account from unlawful sports betting." Tr. 186-87. Facts notwithstanding, the government has blithely asserted that: "Records from [this Banco Nacional account] show that from October 2005 through July 2012, Legendz Gamming Corp., an entity used by Legendz Sports and Mr. King to collect funding from its post-up bettors, collected approximately $3,746,816.83 in deposits for illegal gambling." Doc. no. 1999-1, at 19. In its post-trial proposed findings, the government seeks to include the entire $3.75 million in its forfeiture money judgment, without so much as a nod in the direction of the uncontroverted evidence that thoroughly undermines its factual contentions as to Line 1. Doc. no. 2242, at 21, ¶ 83.
Save for the $250 from Alfred Ly and the $8,700 from the FBI agents posing as bettors, there is a failure of proof as to both the source of the $3,746,816.83 comprising Line 1 and as to the nature of the activities generating those funds. The court finds that Line 1 contributes $8,950 to the forfeiture money judgment calculation.
Before going further with respect to Line 2, it should be noted that Line 2 is in a different category than the other fifteen lines under the heading of Money Laundering on GX C89. The reason is that the deposits into this account — $7.15 million — are the basis for the government's proposed extrapolation from twenty-four months to 108 months, to attribute $25
The summary the government uses to back up Line 2, GX C49A, is based on deposits into a bank account of Global Data Payments Services S.A. (GDPS). In turn, the source document for this summary is GX 1258, an account ledger from HSBC Bank in Panama, which has entries for the deposits summarized on GX C49A and the payments summarized on GX C49B. The deposits shown by GX C49A total $7,152,574.65, consisting of 136 deposit transactions, all of which were in 2007 or 2008. The source of the deposited funds is shown on the exhibit to be unknown for 104 of the 136 deposits. Those 104 deposits, for which the source of the funds is unknown, account for approximately $5.43 million of the $7,152,574.65 in total deposits, yet the government seeks to include this entire amount in the forfeiture money judgment.
The thirty-two deposits for which the source is known are from fourteen persons or entities. Of those fourteen, Lowrance recognized only four (International Goldstore, International Data Processing, Elite Pay Systems and Agathe Services, Ltd.) as Legendz affiliates that "receive bettor payments from the United States." Tr. 79.
International Goldstore and Elite Pay Systems need not detain the court long. The evidence from the four jury trials established quite clearly that those entities were used for receipt and payment of illegal betting proceeds. Those two entities account for $61,604.40 on GX C49A.
Agathe Services is another matter. Agathe was not mentioned at any of the four jury trials. Agathe is not mentioned in the government's Forfeiture Brief (doc. no. 1999) or in its proposed findings of fact. Doc. no. 2242. At the forfeiture trial, Lowrance could not cite any document that would implicate Agathe as a recipient of (and, in turn, as a source of) betting proceeds. Tr. 189. All he could refer to was "[d]iscussions with other investigators in this case" (id.), presumably the case agents. Thus, no percipient witness has told the court, in the jury trials or in the forfeiture trial, that Agathe was a recipient of anything, let alone illegal betting proceeds. And, not to put too fine a point on it,
Likewise, Lowrance had no personal knowledge as to International Data Processing, which was the source of one deposit into the GDPS account. Tr. 193-94. It was his understanding that International Data was "affiliated with the Legendz enterprise" (id. at 193), but he did not know in what way it was affiliated. Id. at 194. He had no "idea what that payment of $39,975 represents." Id. The testimony at the jury trials provides no real help as to International Data. That company was mentioned once, and only once, at each of the four jury trials. Feb. Tr. 912; Apr. Tr. 1186; May Tr. 433 and Oct. Tr. 972. In the first three jury trials, the singular mention was to the effect, in the testimony of Karlo Stewart (the Chief Financial Officer of the Legendz organization, Feb. Tr. 891) that he opened an account at a Costa Rican bank for International Data Processing Services. There was no mention of the uses to which that account was put, other than an unelaborated statement by Stewart in the May trial that International Data Processing was "a company that was set up to receive funds." May Tr. 433. There was no mention of whose funds were to be received, which is no small point in light of the fact that, as has been seen, King had several sources of legitimate cash flow during the conspiracy period. Stewart's lack of knowledge as to the use of the International Data Processing account was demonstrated at the October trial, where he testified that, for lack of knowledge, he had been unable to respond to an inquiry from a bank as to the provenance of some funds that were being sent to an International Data Processing account from Mexico. Oct. Tr. 972.
Another curious thing about the government's approach in Line 2 is that the transactions summarized on exhibit C49A — deposits into an account associated with Legendz — are used as the basis for an extrapolation (from $7.15 million to $25 million) arriving at a dollar amount for payouts, under the heading of "Legendz Payouts to Bettors." GX C89, p. 1; Tr. 205. As shown by GX C49B, the amount of the payouts for a virtually identical period was known (and, by the way, added up to a significantly lower dollar amount), but the government chose to estimate payouts from GDPS by adding up the deposits into its bank account. The illogic of estimating payouts by adding up deposits when the actual amount of the payouts was known was acknowledged by Lowrance on cross examination:
As will be seen in Part IX(C)(2), below, the court rejects the $25 million extrapolation (in the top box on GX C89) that the government has based on Line 2. So, even though the government does not, as a fallback position, ask the court to treat Line 2 as a money laundering item (as it does with the other fifteen lines under the Money Laundering heading), the court will do so. Measured by the preponderance of the evidence, Line 2 is good for $61,604.40 of dirty money, fair game for the forfeiture money judgment. Thus, the beginning point for the government's proposed 108-month extrapolation in the top box on GX C89 is $61,604.40, not $7,152,574.65. Other aspects of that proposed extrapolation are discussed in Part IX(C)(2), below.
The evidence does reflect what the immediate source of the funds was for each of these 32 transactions. So, strictly speaking, the government's proof adequately establishes the source of the funds comprising Line 3. In this respect, the quality of the government's evidence in support of Line 3 differs noticeably from the quality of that evidence in support of other money laundering items on GX C89.
The transactions comprising Line 3 occurred between April 8, 2008 and January 12, 2009. They fall into three categories:
Thus, per GX C42D and the underlying source documents, Platinum Advantage took in approximately $1.65 million and transferred $2.53 million to Virtual Automated Technologies. Notably, the $4.18 million comprising Line 3 is the sum of the transfers into and out of Platinum Advantage. Plainly double counting, a matter that is not mentioned, much less explained, by the government.
In support of this item, citing its summary (GX C42D), the government says that: "Platinum Advantage records show that between August 2008 and January 2009 Virtual Automated Technologies, a payment processor Legendz used to remit funds to bettors, received approximately $4,179,355.00 in illegal proceeds from Platinum Advantage and Seven Capital — entities created to move bettor funds." Doc. no. 2242, at 15, ¶ 58. The government's statement that Virtual Automated Technologies received this amount is demonstrably wrong — by more than $1.6 million. As shown above, in seven instances, involving more than $1.6 million, the recipient was not Virtual Automated Technologies. In fact, in those seven instances, the payee was Platinum Advantage, not Virtual Automated Technologies, a fact that is also borne out by a careful review of the source documents, GX 1405A.
The government cites only two passages from trial testimony to support this item. Doc. no. 2242, at 15. The first passage is from the forfeiture trial, specifically, Tr.
Neither Lowrance nor Jansen could shed light on the nature of the activities generating the funds involved in the transactions summarized on GX C42D. Jansen did not address the matter at all, and Lowrance had only this to say:
So, the government's effort, in Line 3, to include $4.18 million in the forfeiture money judgment is infected by: (i) bad math, (ii) double counting, (iii) a misrepresentation by the government as to the flow of funds (Doc. no. 2242 at 15, ¶ 58 — perhaps excusable because it simply parrots Lowrance's erroneous testimony), and (iv) inability of the government's lead forfeiture witness to say whether any of this money represented the proceeds of illegal betting activity.
Now, to be fair, the court can say quite readily, but at a high level of generality, that these transactions are suspicious. There was considerable testimony in the four jury trials about Platinum Advantage and Virtual Automated Technologies, Ltd. being involved in receiving and paying out gambling proceeds. But, as has been noted,
Suspicion is not enough. The government's contentions in support of Line 3 do not withstand scrutiny, either as a matter of simple math or in terms of evidentiary support. Line 3 is rejected.
The government has shown to the satisfaction of the court that the $4,630,377.83 deposited into the Investment Consulting Services account at Creditcorp Bank, as shown on GX C52A, was proceeds of illegal betting activity within the scope of the Indictment. The government's summary, GX C52A, associates virtually every transaction with a specific agent or bookie, for instance, "Bramley" or "Tucker." "The government [is] not required to prove that individual [deposits] were illegitimate when the evidence created a reasonable, indeed an overwhelmingly strong inference that all [deposits] ... were illegitimate."
The court finds that Line 4 contributes $4,630,377.83 to the forfeiture money judgment calculation.
In its post-trial proposed findings of fact, the government, citing the relevant summary (GX C53A), tells the court that "[f]rom June 2005 through June 2012, International Goldstore received a total of approximately $3,613,897.27 in deposits on behalf of Mr. King and Legendz Sports." Doc. no. 2242, at 23. That $3.6 million number is also what the government's forfeiture recap, GX C89, shows in Line 5 for deposits to an International Goldstore account. But, as Lowrance acknowledged at the forfeiture trial (Tr. 224), this number is clearly wrong. Lowrance's explanation: "Just didn't double-check the numbers." Tr. 224. It is off by $1,887,101.27, a fact the government inexplicably ignores in its post-trial proposed findings. See, doc. no. 2242, at 23, ¶ 88 (using the $3,613,897.27
This item also presents problems aside from bad math. Of the ninety-eight entries on the relevant summary, GX C53A, the government noted that the payor was "known" to be a bettor as to only fifty-nine. As to the rest, that column is either blank or says: "suspected." The government has neither contended nor shown that those unproven deposits (i.e., deposits that did not consist of funds that were discernibly generated by illegal betting activity) then became "part of the corpus of the money laundering conspiracy,"
Line 5 contributes nothing to the forfeiture money judgment.
The summary supporting this $5.43 million item is GX C47A. That summary exhibit shows 309 deposits into the DSS account at Banco General. Of those 309 deposits, the source of fifty-eight is shown to be unknown. The immediate source of 238 is shown to be Banvivienda, but the origin of the funds is unknown. And the source of seven is shown to be Alegui Services S.A. DSS is an entity that functioned as an integral component of the Legendz enterprise. Banvivienda is a bank in Panama. Tr. 14. The name of the actual counterparty remitting from an account at Banvivienda is not shown by GX C47A or by the source documents, GX 1255. Thus, all that is known as to these deposits is that they came from some unknown person or entity having an account at that bank. (And, to be sure, the Legendz organization had accounts at that bank, although the government ventures no suggestion as to why funds would be moved from a Legendz-affiliated account at Banvivienda to a Legendz-affiliated account at Banco General before being remitted to an ultimate recipient, such as King.)
The testimony of Lowrance at the forfeiture trial established that the government was unable to determine the source of the deposits shown to be "unknown" on GX C47A, and the government has no way to identify that source. Tr. 229. Lowrance could not testify that those deposits had any relation to sports betting activity. Id.
To be sure, given the fact that DSS was, to put it mildly, an integral component of the Legendz sports betting enterprise, there is reason to suspect that the funds coming into the DSS account may have been illegal gambling proceeds. But the evidence in this case precludes any finding, with a wave of the hand, that all funds coming into a DSS account were dirty money. The government supposes this to be the case (Doc. no. 2242, at 23, ¶¶ 89-90), but this supposition rests on (among other things) the government's altogether baseless assertion that King had no legal source of income during the conspiracy period. Nowhere in the government's presentation as to Line 6 did the government provide any evidence that any of the $5.43 million in deposits encompassed by that item (almost all of which were from unidentified sources) originated with illegal sports betting. Although this may seem to be a remarkable conclusion as to funds coming into an entity like DSS, it is a fact that DSS was a multi-purpose umbrella entity. In that respect, DSS did not serve the narrow (and, for all the record shows, exclusive) purpose of receiving illegal betting proceeds that was served by, say, Investment Consulting Services (discussed above with respect to Line 4). Thus, the government's proof with respect to DSS simply will not support the permissive inference that the court easily indulged, with the guidance of
Line 6 is rejected.
In its Forfeiture Brief, the government told the court: "Bank records from Grupo Legendz bank account number XXXXX0921 held with Banco Nacional show that from April 2008 through April 2013, approximately $3,911,702.84 in illegal gambling proceeds was deposited into the account." Doc. no. 1999-1 at 20 (emphasis added). This contention by the government died aborning, because the source of 300 of the 324 deposits into the Grupo Legendz account, comprising Line 7, is unknown. This is shown by the backup summary (GX C50A) as well as the source documents (GX 1259) and was confirmed by Lowrance:
Tr. 93-94, 241.
That alone is sufficient to render those transactions meaningless for forfeiture purposes, even aside from the evidence in the four jury trials establishing without contradiction that, in terms of its own actual operations, Grupo Legendz generated nothing but lawful revenues as a brick and mortar sportsbook in Panama City — more or less like the Ladbrokes shops that dot the United Kingdom.
In its proposed findings, the government backs off the patently unsupportable representation quoted above — but only slightly (and not nearly enough).
The twenty-four deposits included in Line 7 (out of the total of 324 deposits) for which the source is known include eleven sources. They are (in the order in which they appear in the back up summary, GX C50A):
These eleven known sources account for $567,339.65 of the $3.9 million the government includes in Line 7. But the government goes no farther than to assert that the money from four of those eleven sources was illegal gambling proceeds.
As to three of those six implicated entities, extended discussion is not necessary. The evidence from percipient witnesses at the jury trials clearly established that UDS International, as well as Legendz Gamming and Data Support Services (as mentioned above), processed illegal gambling proceeds. Those three account for $234,482.50 in Line 7. The other three, Absolute Privilege, Pentraci and Entiant require more discussion.
As for Absolute Privilege, Lowrance did testify that "Absolute Privilege is a payment processor. They show up on the Legendz spreadsheets." Tr. 91. The court does not doubt Lowrance's bona fides in saying that, but the court is unpersuaded. For one thing, Absolute Privilege was not mentioned at all at any of the four jury trials. In the jury trials, the government called several witnesses with first-hand knowledge of the internal operations of the Legendz enterprise. Most of those with first-hand knowledge were, for reasons of self-interest, keenly interested in pleasing the government. But in jury trials that generated more than 8,500 pages of transcript, none of them mentioned Absolute Privilege. Secondly, the only spreadsheets cited by the government (GX 65, 66 and 67) do not, in terms or by implication, show Absolute Privilege to be a processor of illegal gambling proceeds. Those three spreadsheets show a variety of entities (such as Western Union) for which there are entries in the "processor" column. They also show activity involving businesses like the SuperBook and Vaporama, that were operating legally in Panama. Without some explication from a witness with actual knowledge, the court declines to find, even by a preponderance of the evidence, that Absolute Privilege was a processor of illegal gambling proceeds.
Pentraci Corporation was mentioned in the May and October jury trials, by Karlo Stewart in each instance. For reasons that have been discussed at greater length in other orders
Entiant is easier, mainly because the court doesn't have to rely solely on the testimony of Karlo Stewart. Entiant was discussed in all four of the jury trials, in a fair amount of detail. Michael Lawhorn, a defendant and cooperating witness, credibly identified Entiant as an entity used to receive illegal gambling proceeds, a proposition that is also borne out by Legendz records. The Line 7 funds that came from Entiant will be included in the forfeiture money judgment calculation.
To summarize, as to Line 7, the deposits attributable to Legendz Gamming, Data Support Services, UDS International, Pentraci
To take the facts favorable to the government first, some bettor checks clearly were made payable to FLO. May Tr. 767-68 ($45,000 check from Cabrera, a/k/a Los Cucos, in February, 2012 — deposited into Banco Nacional, not into Credicorp Bank. See GX 887I.).
Cutting in the other direction, the government points the court to no bettor funds going to FLO later than October, 2012. GX 887P (check into Banvivenda, not Credicorp).
Suspicion about the origin of the funds in the FLO account at Credicorp Bank is understandable. But even so, if those funds originated with the Legendz organization, they could have had either lawful or unlawful provenance. In any event, suspicion does not amount to a preponderance of the evidence. Line 8 is rejected in toto.
As for the $15 thousand that went into Vaporama's account at Banco General from Data Support Services, it can easily be said, as an initial matter, that the main reason Data Support Services existed was to serve as a host entity and call center for the illegal sports betting enterprise operated by Legendz. But lest this $15,000 be thought of as low hanging fruit for the government, it should be borne in mind that the government's witnesses confirmed that Data Support Services also served some of King's other, legal, businesses, including AJAX, a dialer company, Platinum Vacations and Magna Tours. Apr. Tr. 1273-74; May Tr. 1123-24. Karlo Stewart, a key government witness, confirmed that Data Support Services was, for bank regulation reasons, insulated from gambling revenue. Apr. Tr. 1251-52. Moreover, as Lowrance acknowledged, this $15,000 came from the account that is the subject of the government's Line 6, which is discussed above. Tr. 257-58. As is discussed with respect to Line 6, nowhere in the government's presentation as to Line 6 did the government provide any evidence that any of the $5.43 million in deposits encompassed by that item originated with illegal sports betting.
And lest it be thought that funds coming out of that account made the $1.9 million fair game for inclusion in a forfeiture money judgment (even though the government's calculation is based entirely on funds going into that account), Lowrance identified only one individual payee (Anastasio Bayne) as having any association with Legendz. Tr. 260. Bayne was the payee on fourteen of the 550 checks written on the account (those fourteen totaling about $34,500), according to the government's summary. GX C64B. Grupo Legendz was the payee on two of the checks (for just over $9,000), and Legendz Gamming [sic] was the payee on one (for $5,000). As to all of the remaining checks out of that account, the payee is either unknown (346 of the 550 checks) or an individual who is not in any way implicated as having any involvement with the Legendz gambling enterprise. Tr. 260.
Line 9 is rejected.
Lines 10 and 11 both involve accounts owned by Inversiones Altamonte — one account at Banco Panama and one at Credicorp Bank. Inversiones was not mentioned by any witnesses at any of the four jury trials. Yet, at the forfeiture trial, Lowrance referred to Inversiones (without any elaboration at all, from him, from Jansen, or
Government Exhibit C54B summarizes deposits into Inversiones' account at Banco Panama.
Probably because of the government's overall approach to the subject of "tainting," a matter that is discussed later in this order, the government points, in its testimony or in its proposed findings, to only two of the other seven sources of deposits into the Line 10 Inversiones account as being sources of illegal gambling proceeds. Those are: Paige Overseas, Inc. and KHML Payment Processing, Inc. Tr. 111, 114, 266-68. See also, the government's proposed findings, doc. no. 2242, at 26-27, ¶ 98. This requires examination of what Lowrance claimed to know and what he does not know about these two companies.
This flat statement of fact was not garnished with any elaboration or qualification. But then came cross examination:
The court's firm expectation that any witness — but especially an FBI witness — will testify only to that which he knows to be true does not depend on whether the witness is on direct or cross examination. Sadly, Lowrance's categorical testimony on direct examination is not the first instance, in this case, of an FBI witness testifying flatly to things he did not know to be true.
Of the $1.2 million sought by the government in Line 10, per GX C54B, $109,994.65 passes muster. Attention now turns to Line 11, which is closely related to Line 10.
Line 11, based on GX C54C and GX C54D, relates to the Inversiones account at Credicorp Bank. The first noteworthy transaction in that Credicorp account is the deposit of the $229,951.78, into that account, of funds that came, in the exact same amount, from the Inversiones account at Banco Panama that is the subject of Line 10. As GX C54C indicates, and as Lowrance acknowledged, that $229,951.78 deposit into the Inversiones/Credicorp account effected the closing of the Inversiones/Banco Panama account. Tr. 116.
The rest of the transactions (twenty-one in all) comprising Line 11 are equally meaningless for forfeiture purposes. Of those twenty-one, fourteen are payments of interest on a certificate of deposit that was bought with funds from the Inversiones/Banco Panama account (e.g., the account addressed in Line 10). The government does not attribute the other seven
The government's net yield from Lines 10 and 11 is $109,994.65 for the forfeiture money judgment calculation.
Of the twenty-five deposits into the Woodcastle account, adding up to the $3.6 million sought in Line 12, six deposits came from identified sources. Two of those six are from Fundacion Los Olivos, three are from Investment Consulting Services (ICS) and one is from Olmos Overseas Ltd. Those six account for $532,500.00 of the $3.6 million. King argues that "the government did not prove that any of the deposits into the Woodcastle account involve proceeds of illegal gambling." Doc. no. 2275 at 13. The court disagrees. The evidence at the jury trials clearly established that Fundacion, ICS and Olmos were used as conduits for illegal gambling proceeds. There was no evidence that any of those entities were used for any other purpose. They may have received some legitimate revenues, but, faced with cogent evidence favoring the government on this score, the court is no more inclined to speculate in favor of the defendants than it is inclined to speculate in favor of the government on other issues.
Lowrance acknowledged on cross examination that he did not know the source of the deposits from ICS (Tr. 274), but the court is unpersuaded by King's contention that the court should reject this item. The evidence at the jury trials as to the pervasive illicit use of ICS was overwhelming. The deposits from Fundacion, ICS and Olmos account for $532,500.00 in Line 12, and this will be included in the forfeiture money judgment calculation. GX C66A.
As for the rest of the $3.6 million in Line 12, the origin of the funds (let alone the nature of the activities generating the funds) is unknown. The government asserts, correctly, that "[t]his account received deposits from entities known to receive and move illegal gambling funds on behalf of the Legendz Sports enterprise" (doc. no. 2242 at 28), but the government refers only to the three entities discussed above in support of that proposed finding. Id. The testimony at the forfeiture trial was to the same effect. Tr. 118-125. Lowrance did try to impugn some of the unknown deposits by saying, in substance, that they at least came from banks which were known to have been used by entities like Fundacion (Tr. 271), but that tie is too tenuous, for reasons that have already been discussed in detail.
Accordingly, the court finds that Line 12 contributes $532,500.00 to the forfeiture money judgment calculation.
In its Forfeiture Brief and in its Proposed Findings of Fact and Conclusions of Law, the government offers no explanation or rationale for this double counting. At the forfeiture trial, Lowrance made one vague reference to 18 U.S.C. § 1957, apparently to support his notion that double counting is permissible where there is a money laundering conviction under that section. Tr. 235. But the government's proposed findings and conclusions make no reference at all to § 1957, or to any theory, under the applicable money laundering statutes, that would support double counting, or to any other theory on which the government's proposed double counting might pass muster. On the subject of double counting, the government advances only one proposition: "The United States is not entitled to double counting of proceeds for purposes of forfeiture." Doc. no. 2242, at 61, ¶ 252. The court agrees. And that makes Line 13 all the more inexplicable in light of the fact that the double counting was made unmistakably clear at the forfeiture trial:
Tr. 398-99 (Lowrance).
Although not argued in defense of obvious double counting, the government does point out that some funds from the Line 13 Woodcastle account "were distributed to individuals and entities affiliated with the Legendz Sports enterprise." Doc. no. 2242, at 29, ¶ 105. But, aside from the fact that the government's case for a forfeiture money judgment is pitched on deposits, not withdrawals, that cannot close the gaping holes in the proof as to the character of the funds coming into the account, nor can it provide a rationale for double counting.
Line 13 is a nonstarter.
By way of the transactions comprising Line 14, the government proposes to add $445,866.52 to the forfeiture money judgment. Detail for this entry on GX C89 is provided by the summary at GX C41, for which the source document is GX 1266. This $445,866.52 consists of four deposits. Three of those deposits amount, in total, to $3,500. For those, the source is unknown. The remainder is represented by a $442,366.52 deposit remitted by Starlink Investissements Inc. An October, 2007 email cited by the government clearly shows that Starlink is associated, in some way, with King. GX 214 (received, Oct. Tr. 966). This is supported by the testimony of Karlo Stewart at the jury trials to the effect that Starlink had a Swiss bank account that was on "investment account" for King. Feb. Tr. 913 (investment account); Apr. Tr. 1187; May Tr. 433.
At the forfeiture trial, the government had nothing other than the October, 2007 email to support the suggestion that the $445,866.52 deposit into the 6 Monkeys account from Starlink consisted of funds that originated with DSS. Tr. 128, 280 (nothing other than the email). The problem is that the funds came to the 6 Monkeys account from Starlink in April, 2012, about four and a half years after the date of the email that suggests that, in October, 2007, DSS was a source of funds for Starlink. It is not enough that, as the government asserts, Starlink was "an entity which received funds from DSS." Doc. no. 2242, at 30, ¶ 107. A necessary (but not sufficient — see below) prerequisite to the government's success as to Line 14 is to produce evidence sufficient to persuade the court by a preponderance of the evidence that these funds — this $445,866.52 — originated with DSS. (To be sure, DSS was not the only entity from which illegal gambling proceeds could have come, but the government's case as to Line 14 is pitched on that assertion.) The court is unpersuaded.
Assuming that the Starlink deposit did come from DSS, it is not a forgone conclusion
The other six deposits comprising Line 15 are from DSS. Four of those are from late 2010 or early 2011 and two are from early 2013 (GX C41), a period easily encompassed by the beginning and ending dates of the flow of funds into DSS as discussed above with respect to Line 6 and as shown by GX C47A. Consequently, the government's reliance on these deposits amounts to double counting, in addition to the factual insufficiency of the government's contentions with respect to funds flowing into the DSS account at Banco General, as discussed with respect to Line 6, above.
As is discussed above with respect to Line 13, the government makes no attempt, in its Forfeiture Brief or in its proposed findings and conclusions, to support the repeated instances of double counting that the court has addressed so far. And Lowrance's vague reference to § 1957 as supporting double counting "every time that money changes an account" (Tr. 235) is unpersuasive. In
The United States Department of Justice agrees:
8 Department of Justice Manual, §
Line 15 fails on several counts, and is rejected.
The government's summary supporting Line 16 is GX C31. That exhibit summarizes 320 money order purchases between March, 2008 and September, 2012. Of those, one is shown to have been purchased by "B A King" (presumably defendant Bartice King) and four are shown to have been purchased by "King," all of which is supported by the court's review of the source document (GX 1105). The remaining 315 are either shown to have been purchased by "S King" (presumably defendant Serena King, who was acquitted on all counts) or have no indication of the identity of the purchaser. They total $245,136.55. The money orders were made payable to various credit card issuers. GX 1105. These money orders received only the slightest mention at the forfeiture trial. Tr. 160, 176.
As an initial matter, Line 16, consisting of money that came to the Kings (almost entirely Serena King, so far as the source documents show) by means not shown by the record and was then spent to buy money orders to pay their credit card debt, is a glaring departure from the government's deposit-oriented money laundering forfeiture case, a matter discussed in note 64, above. That inescapably raises the specter of double counting, for which the government offers no explanation at all, even though the court invited an explanation:
Tr. 159-160 (emphasis added).
No factually and legally supportable answer has been provided. And lest the significance of the exchange quoted above be lost in the give and take: On the first morning of the forfeiture trial (after four jury trials and twelve years after the investigation began), neither the government's lead witness (and sponsor of the summary that encapsulated the government's forfeiture case) nor the AUSA were able to tell the court with any assurance whether the government's money laundering forfeiture summary was pitched on dollars in or dollars out or both. By that afternoon, they were able to allow that they used deposits exclusively. Tr. 234. But that, also, was not true, as Line 16 demonstrates.
The court is disinclined to reach out and find double counting where there is a plausible scenario that would, when measured on a preponderance standard, suggest that double counting is not a problem. But Line 16 is a nullity if those dollars were not illegal gambling proceeds (a matter discussed below). If they were illegal gambling proceeds, then any notion that they are not already accounted for in one or more of the flows of funds already addressed (Lines 1-15) begs explanation. The government offers none.
All of this is aside from the fact (repeated several times so far, and destined to be repeated several more times) that, contrary to the government's representations to the court, King did have legal sources of income during the conspiracy period. Frustrating to the government though it surely is that Serena King walked up to grocery store or post office counters scores of times, cash in hand, to buy money orders, it was incumbent on the government to show (or at least raise a reasonable generalized inference — see the discussion of
Line 16 is rejected.
Money laundering total.
The result of the court's findings as to the accounts under the heading of "Money Laundering Accounts/Items" on GX C89 (App. 1 to this order), is:
Line 1: $ 8,950.00 Line 2: 61,604.40 Line 3: 0 Line 4: 4,630,377.83 Line 5: 0 Line 6: 0 Line 7: 364,754.92 Line 8: 0 Line 9: 0 Line 10: 109,994.65 Line 11: 0 Line 12: 532,500.00 Line 13: 0 Line 14: 0 Line 15: 0 Line 16: 0 _____________ Total:$5,708,181.80
A brief digression.
At least in a general sense, the government's approach to the money laundering accounts, Lines 1-16, sheds light on the government's approach to other aspects of its forfeiture case, as addressed in this order. For that reason, and given the government's limited success in making its forfeiture case as to the money laundering accounts, it is appropriate to pause at this point to examine more closely the conceptual basis for the government's proposed inclusion of more than $43 million of allegedly laundered funds in the forfeiture money judgment that it seeks against every forfeiture defendant.
It is evident that the government's forfeiture logic as to most of these money laundering accounts is as follows:
This reasoning process was made clear at the forfeiture trial in several ways, not the least of which is that the government was noticeably indifferent to the extent to which its money laundering-based forfeiture judgment is predicated on identification of dirty money:
Tr. 398 (Lowrance).
Thus, as has been noted, the key to the government's approach is to taint an account as if it were a vessel that would pass the taint on to all funds in the account, regardless of the source. For example, in the case of Bramley, the government was well aware that his Social Security benefits (lawful income by any standard) were transferred into one of his Scottrade accounts (Tr. 642), but the deposit of bettor funds into his Scottrade accounts "taint[ed] up those accounts from a forfeiture standpoint."
Tr. 649 (Jansen).
The potency of the government's "taint up" theory — if it had one iota of legal merit — is perhaps best illustrated by the government's treatment of the Vaporama account at Banco General. The sources of 2,337 of the 2,339 deposits into that account were unknown, as discussed above with respect to Line 9. So, of the $1.9 million going into that account, a $15,000 deposit from Data Support Services was sufficient to make the entire $1.9 million fair game for inclusion in the forfeiture money judgment. GX C64A; GX C89, Line 9. Thus, Lowrance cited the $15,000 from DSS — less than .008 of the deposits into the Vaporama account — as sufficient to "taint that account." Tr. 264. This was made quite clear: it was sufficient that "there was a payment into the account from the Data Support Services account." Id. (The $15,000 payment from DSS was the only deposit identified as being from DSS.)
Tr. 264 (Lowrance).
There is nothing "initial" about this approach. This is the theory by which the government still seeks to add $1.9 million to the forfeiture money judgment. Doc. no. 2242, at 26, 47-48; GX C89; GX C64A.
It comes, thus, as no surprise that the government does not cite the Tenth Circuit's decision in
Viability of the government's proposed direct attributions and extrapolations
Under the heading of "Legendz Payouts to Bettors" on GX C89, the government proposes an extrapolation, to slightly over $25 million, which it seeks to include in the forfeiture money judgment. Then, under the heading of "Agents" on GX C89, the government seeks to attribute more than $159 million (as revised, see the discussion below) in betting proceeds to fifteen individuals — and then to hold the seven forfeiture defendants now before the court jointly and severally liable for that sum, as part of the overall $231 million forfeiture money judgment the government seeks against all of these defendants in its Proposed Findings of Fact and Conclusions of Law. Some of those attributions are based on extrapolations and some are posited simply as arithmetic totals, unaugmented by extrapolation. The court now turns to these items, as found under the first two headings on the first page of GX C89.
General nature of the government's proposed direct attributions and extrapolations
As has been noted, at the forfeiture trial, the government sought (for the first time, despite having been ordered to state its position definitively about three months before the forfeiture trial) a money judgment against each of the forfeiture defendants equal to the sum total of (i) the extrapolated amount the government proposed to attribute to Legendz payouts to bettors, plus (ii) the amount of betting proceeds the government attributes to all of the agents and runners (fifteen in all).
As has also been noted, these two categories, based mostly on extrapolation and totaling just over $184 million, are shown on the first page of App. 1 (GX C89) and may be briefly described as follows:
Taking into account the numbers in its Forfeiture Brief, the numbers in the original version of GX C89, the numbers in the revised version of GX C89 and the numbers in its post-trial proposed findings of fact, the government, in preparing for and presenting its forfeiture case, twelve years after the Legendz investigation began, was unable to bracket the amount of its proposed attributions of betting proceeds to agents and runners more tightly than plus or minus approximately $18.3 million, as shown here:
Table 2 Government's Positions as to Amount Sought, for Forfeiture Money Judgment Purposes, by way of Attribution to Agents and Runners (All amounts in dollars) Amount Amount Amount Amount sought in sought in sought in sought in Name Forfeiture Brief original updated Proposed FoF doc. no. version of GX version of GX and CoL, doc. 1999
86C89 C89 no. 2242 Campbell 43,160,000.00 26,290,472.00 38,888,787.60 38,888,787.60 Tucker 8,842,560.00 7,958,304.00 7,958,304.00 7,958,304.00 Middle-brook 4,524,520.00 4,449,353.14 4,449,353.14 4,449,353.14 Moran 2,993,660.00 6,491,205.00 6,491,205.00 6,491,205.00 Ross 1,642,813.00 1,265,831.18 5,485,268.45 5,485,268.45 Tanner 17,667,895.00 15,143,910.00 15,143,910.00 15,143,910.00 Barry 9,139,255.20 15,275,612.57 15,275,612.57 15,275,612.57 Hernandez 22,232,393.85 18,121,267.20 18,121,267.20 18,121,267.20 Lawhorn 20,000,000.00 18,000,000.00 18,000,000.00 18,000,000.00 Wilson 3,000,000.00 4,000,000.00 18,000,000.00 18,000,000.00 McFadden 1,656,000.00 1,784,800.00 1,784,80.00 3,907,791.00 Bramley 5,102,789.00 4,953,478.78 4,953,478.78 4,945,633.78 Diebner 18,567,345.60 16,770,000.00 16,770,000.00 17,432,674.00 Koralewski 1,222,856.00 1,055,112.00 1,055,112.00 935,112.00 Robles 815,197.50 721,901.50 721,901.5 727,901.50 Total 160,567,285.15 142,281,247.37 159,006,791.24 159,350,820.24
As discussed in Part VI(B) of this order, there is no doubt that reasonable extrapolations,
Another indispensable premise is the proposition that it is more probably true than not that the level of activity in the base period is representative, and thus a reliable indicator, of the organization's level of illegal bookmaking activity, on the whole, for the period the government proposes to encompass with its proposed extrapolation. It is true that the government does not have to prove forfeiture amounts with to-the-penny precision (or even anything very close to that). But it is equally true that when the government would have the court extrapolate from a base data set to a final number, there can be no outcome other than rejection of the proposed extrapolation when the base data set is not shown to be an accurate reckoning of illegal activity during that period, when the activity in the base period, even if reliably proven, is not shown to be representative of the period to which it would be extrapolated, or when the difference between the length of the base period and the length of the total period is just too great to provide a basis for confident extrapolation from one to the other.
The government's proposed extrapolations are, in some instances, from a known number of weeks or months of betting activity to a nine-year period encompassed by the Superseding Indictment. The government's proposed extrapolations incorporate various combinations of assumptions, depending on which individual is involved. At a minimum, the government's extrapolations depend on an assumption that the average periodic dollar amount of gambling proceeds generated by a particular bookie, agent or master agent during a known period is representative of the betting activity generated by that individual for the entire period in question, which is nine years
Another assumption, well-supported as to some individuals but not as to others, is that the individual in question did, in fact, participate in the Legendz enterprise for the entire period asserted by the government. Yet another assumption is that there is no overlap, or double counting, as between funds remitted to Panama by master agents and funds generated by bookies working under those master agents.
With the government's proposed extrapolations in mind, the court will now address the merits of those proposed extrapolations
Extrapolation based on Legendz payouts to bettors through Global Data Payment Services
Under the heading of "Legendz Payouts to Bettors" at the top of the first page of GX C89 (App. 1), the government extrapolates from one of the money laundering accounts, GX C89, Line 2, to arrive at a 108-month extrapolation in the now revised amount of $25,098,950.69 which it seeks to include in the forfeiture money judgment against all of the forfeiture defendants. This is said to represent "Legendz Payouts to Bettors." GX C89. See also, doc. no. 2242, at 14, ¶ 54. (On the government's forfeiture recap, GX C89, this figure is $25,084,519.78, but the government now says that this figure should be $25,098,950.69. Doc. no. 2242, id.)
As is discussed above in Part IX(B)(2) with respect to Line 2, even though the source is unknown for the vast majority of the deposits, representing seventy-six percent of the dollar amount, the government uses $7.15 million, representing transactions that occurred only in 2007 and 2008, as the beginning point for its proposed extrapolation to 108 months (from January 1, 2004 to December 31, 2012), totaling $25,084,519.78. GX C89, p. 1 (top box). This represents, in round numbers, $25 million of the $231 million for which the government seeks a money judgment against each of the forfeiture defendants. But the court has rejected the beginning number ($7.15 million), finding that only $61,604.40 of that is fair game. Accordingly, if the extrapolation proposed in the top box in GX C89 is tenable, the base number for that extrapolation is $61,604.40.
The government's proposed extrapolation under the heading of "Legendz Payouts to Bettors" (top box on GX C89) is based on a multiplication from 24 months to 108 months. Tr. 200. The court is unwilling to use twenty-four months as the base period for an extrapolation to 108 months. To take but one example of the circumstances cutting strongly against this proposed extrapolation, the base period for the extrapolation to 108 months is entirely in 2007 and 2008, but includes only five transactions (out of 136) dated after July, 2008. GX C49A. The government's extrapolation thus implicitly assumes that betting activity was the same before and after the financial implosion that occurred beginning in the fall of 2008. As has been noted (Part VI(B), above), in
The government has failed to satisfy the court, by a preponderance of the evidence, that its proposed extrapolation for payouts to bettors is sufficiently reliable for inclusion in the forfeiture money judgment.
The government's proposed extrapolations and direct attributions re: proceeds attributable to individual agents and runners
Under the heading of "Agents" on GX C89 (App. 1), the government proposes a series of direct attributions and extrapolations
These, and kindred matters, will be addressed as the government's proposed extrapolations and direct attributions are considered. The reference point here is the fifteen lines under the heading of "Agents" on GX C89, App. 1 to this order. Those items will be addressed in the sequence in which they appear on GX C89.
The government proposes a $38,888,787.60 extrapolation as to the activity of Terry Campbell, a Legendz bookie. The government originally said this should be an extrapolation to $26,290,472.00. GX C89 (under the heading of "Agents"). Some more general aspects of this proposed extrapolation should be addressed first, because they shed light on the court's concerns about this and other extrapolations proposed by the government under the "Agents" heading.
After it was brought to Lowrance's attention on cross examination that the source document he cited would not provide the base data he said it would, he backed off:
Lowrance later asserted that the source document for the extrapolation as to Campbell should be GX 1257 (Tr. 418-19), notwithstanding his earlier testimony, and even though the government's summary refers to GX 496 and 497 — even going so far as to cite GX 497 for the updated ($38.8 million) figure.
Regardless of what the correct source document for the government's proposed extrapolation might be, Lowrance was able to confirm that the base data is not based on actual collections. Tr. 330. The base data is "not an accounting of what was actually collected or paid out." Tr. 331.
Terry Campbell entered a guilty plea in this case in early January, 2016, well before the forfeiture trial, giving the government an opportunity to discuss with Campbell the interpretation of the fairly cryptic underlying records and the reliability of the proposed $38.8 million extrapolation. But Lowrance did not discuss any aspect of this extrapolation with him. Tr. 322. Neither, to Lowrance's knowledge, did any of the other individuals involved in arriving at this extrapolation discuss either the extrapolation or the source document with Campbell. Tr. 324-25. They didn't even consider doing that (Tr. 325), although that simple step would obviously have gone a long way to engender confidence in an extrapolation by which the government seeks to add $38.8 million to the forfeiture judgment. (The court can say without hesitation, based on Campbell's appearances as a witness, that he was intelligent, articulate and cooperative with the government.) Lowrance was unable to tell the court whether the government's Campbell extrapolation was consistent with Campbell's trial testimony. Tr. 322.
To understand the significance of the government's failure to avail itself of a readily available source of confirmation of a $38.8 million extrapolation, it may be
The sense the court gets, taking the Campbell extrapolation as only one example, is that as long as the government had in hand documents that could be interpreted to support a nine-year extrapolation to some figure in the tens of millions of dollars, the government was decidedly disinclined to ask any questions that might upend that calculation. Given the magnitude of the dollar amounts the government wants the court to include in the forfeiture money judgment, and given the gravity of the matter for all concerned, the court sees no good explanation for the government's disinclination to take even simple steps to get verification that would add some credence to the base data it uses in its extrapolations.
The quality of the evidence supporting the government's proposed $38.8 million extrapolation as to Campbell is unsatisfactory. The court is unpersuaded of the reliability of the extrapolation or of the reliability of the base number. Moreover, this is not a situation in which it might be reasonable to pick a lower number just to be on the safe side. That would be as speculative as the government's proposed extrapolation is in the first instance.
The Campbell extrapolation is rejected.
A variation on the problem of extrapolations negated by the evidence is the problem of extrapolations that are simply unsupported by the evidence, exemplified by the government's proposed extrapolation with respect to gambling proceeds attributable to Ralph Hernandez. Ralph Hernandez served the Legendz enterprise in several capacities. He was a bookie, a runner, and a repository of funds generated by others. As the government asserts, he sent funds to Panama on numerous occasions.
Government Exhibit 198 is a list of tracking numbers (except for a few entries that say "hand deliver"). For each tracking number, there is a date (but not the year), a dollar amount and a name, of sorts, such as "BIGMIKE" or "GATO" or "SKI." Many of the names on the list are recognizable as monikers of Legendz bookies or agents. The natural inference to be drawn from GX 198 is that it is a record of shipments of funds generated by the various individuals whose Legendz monikers appear adjacent to the date of the shipment and the tracking number.
This is where this matter gets complicated, because Hernandez himself was a Legendz bookie. Feb. Tr. 708; Apr. Tr. 578. Recall that GX 198 is the source document for the summary exhibit GX C51. This summary exhibit is sponsored by Lowrance, who testified (Tr. 69) that he "assist[ed]" in preparing GX C51. The summary exhibit (GX C51) includes the dates, the tracking numbers and the dollar amounts; and, for every item, it shows "GEORGIE" under the heading of "WHO SENT IT." It may well be true that "Georgie" sent the money, as urged by the government per summary exhibit GX C51, and the court will so assume. ("Georgie" was Hernandez's moniker. Tr. 68-69.) Notably, however, the summary exhibit does not include the names — "BIGMIKE" or "GATO" or "SKI," etc. — which appear in GX 198, the source document for the summary.
Lowrance explained the summary (GX C51), as follows:
Tr. 69 (emphasis added).
Shortly after that, Lowrance answered "yes" when asked whether the $7.5 million total on GX C51 (the summary) reflected "his" (Hernandez's) "association with the Legendz enterprise." Tr. 71. Lowrance later testified that the $18 million Hernandez extrapolation is included in GX C89 (the government's forfeiture overview — App. 1) because "we had betting records for Mr. Hernandez." Tr. 141 (emphasis added). Lowrance could look at the summary (GX C51) and easily conclude that it reflected nothing but Hernandez's activity, because the summary didn't show any of the numerous other monikers listed on the source document.
This is no small point because, aside from the questions this raises as to Lowrance's familiarity with the source documents backing the summaries he sponsored, the other names on the source document are names to which the government also proposes to attribute betting proceeds for forfeiture purposes. If Lowrance's characterization of the activity shown by the summary (and, implicitly, by the source document) were correct (which it is not), there would be no double counting problem here. But, as will be seen, there is.
There are other problems with this extrapolation. The beginning number for the government's proposed extrapolation as to Hernandez is $7,550,528.00. GX C51. As has been discussed, this summary is based on shipments, apparently of some combination of cash and checks, shown on an internal Legendz source document. GX 198. But this Legendz spreadsheet, although reflecting a day and month for the shipment, does not show the year for any of the shipments. The years are not known. Tr. 333-334. The government's extrapolation is based on an average for 45 months, as purportedly shown by GX 198 (Tr. 141), but that exhibit actually only covers 39 months. The government then divides the total by 45 and extrapolates to 108 months to arrive at an extrapolated figure of $18,121,267.20. GX C89. (The use of a divisor of 45 months, rather than the 39 months actually shown by the source document, to arrive at the monthly average results in an understatement of this extrapolation by more than $2 million. But that is of no moment because this extrapolation is rejected for other reasons.)
The government, in its proposed findings of fact, posits a monthly dollar average for Hernandez that can only result from using a divisor of 39 (doc. no. 2242, at 18, ¶ 69), but repeats Lowrance's error by referring to 45 months. Id., ¶ 70. To support the 108-month multiplier, the government cites testimony purportedly from Bruce Middlebrook at the April, 2015 trial of Bartice King. Id. at ¶ 71. But Middlebrook did not testify at that trial, and the subject of Hernandez's tenure with the Legendz enterprise is not discussed on the page cited by the government. Testimony (not from Middlebrook) at the April, 2015 trial does indicate that Hernandez got started with King before the beginning of the conspiracy period (Apr. Tr. 319), but nothing in the transcript of that trial establishes one way or the other whether Hernandez stayed with the Legendz organization long enough to support a 108-month extrapolation.
Moreover, and of at least equal importance, it is clear from the testimony at the February and April jury trials that Hernandez was a bookie (Feb. Tr. 708; Apr.
The sum of the matter as to the proposed $18 million Hernandez extrapolation is that the base number does not represent what Lowrance says it represents,
The $18,121,267.20 extrapolation and the base number, $7,550,528.00, are untenable. The court rejects both.
Two things are not in doubt about Diebner. First, he was a Legendz bookie in Texas. Secondly, he generated a substantial amount of illegal betting proceeds for the Legendz enterprise.
By way of extrapolation, the government sought, as shown in GX C89, to attribute $16,770,000.00 to Diebner. As will be seen, this figure was advanced during the testimony of Lowrance at the forfeiture trial. Using an entirely different factual approach, a different extrapolation, to $17,432,674.40, was advanced during Jansen's testimony at the forfeiture trial. The court will first address the $16.7 million extrapolation advocated by Lowrance.
Neil Myler, a cooperating defendant, is central to both of the government's alternative extrapolations. Myler was a Legendz runner who was active in Texas. He started out as, essentially, a general helper for Bartice King, in activities unrelated to sports betting. After a time, he transitioned into his service as a trusted runner for the Legendz organization and for King, personally. Ultimately, Myler developed qualms about his involvement in the organization and went his own way in late 2011 or early 2012. Apr. Tr. 1671. He testified in three of the four jury trials and his testimony was generally credible. (Every word of his testimony may well have been true,
The $16.7 million extrapolation is, in Lowrance's words, "based on a statement given to the FBI by Mr. Neil Myler." Tr. 141-42. In response to a question from the court, Lowrance confirmed that this figure was based on an interview with the FBI, and not on trial testimony. Tr. 142. Lowrance was correct about that. Myler's jury trial testimony, although credibly establishing that he handled large amounts of betting proceeds for the Legendz organization, did not (and did not need to) establish any particular dollar amount as to Diebner.
Per Lowrance's account of the statement given to the FBI by Myler, "[h]e talked about exchanging money at the amount of $200,000 a month with Mr. Diebner over the period of time." Lowrance elaborated: "So we took the 215,000 that he told us he dealt with Diebner and his associates, multiplied that out over 78 months, and came up with a $16,770,000 figure."
The government has a source document, GX 325 (discussed below), which it cites in support of the $17.4 million extrapolation, but the government does not rely on that or any other source document to support the $16.7 million extrapolation. Tr. 589. So, as to the $16.7 million extrapolation, we are left with Lowrance's interpretation (and recollection) of an FBI 302 report (Tr. 373) which presumably reflects what the writer of that report understood Myler to be saying about his dealings with Diebner. The writer of that report did not testify and was not identified at the forfeiture trial. (Myler did not testify at the forfeiture trial.)
This is not the stuff of which $16.7 million forfeitures are made. No percipient witness has testified in support of the $215,000 multiplicand. No document supports it. Aside from that, the reliability of the seventy-eight month multiplier is subject to substantial doubt. Tr. 576-78. For reasons which presumably require no elaboration at this point, the court declines to rely on hearsay twice removed from the putative source to arrive at a basis for including this $16.7 million in the $231,432,686.73 forfeiture money judgment the government seeks.
The government characterizes GX 325 as "29 handwritten notes" which "summarize, based on [Myler's] testimony, payments from Diebner's betting group that he processed either through Mr. Diebner himself or through Rok, a runner for Mr. Diebner." Tr. 527 (Jansen). These notes (GX 325) do contain numbers and what appears to be names, or at least monikers. Some of the twenty-nine pages are fairly well organized and some are gibberish. Compare, pages 4 and 5 of GX 325. For the most part, they are not dated. Within their four corners, they do not, individually or collectively, indicate what time period they cover. Many of the entries have, from left to right, a moniker, a number, a delta (Δ) and then another figure. The first number may be a code number. Oct. Tr. 1699. In a few instances (e.g., p. 9), the first number has a "Z" prefix. Viewed in context, they surely relate to betting of some sort. But they are, beyond question, cryptic in terms of the ability of an outside observer to reach reliable conclusions as to their import.
Myler referred to these notes in only one of the three jury trials in which he testified. In the October trial (in which Myler was not subject to cross examination on behalf of Diebner, because Diebner stood trial in the May trial), Myler testified, believably, that these notes "represent the Saturday pick-up of bets that were lost the prior week." Oct. Tr. 1699. These are not Myler's notes. Id. The notes are "listings of people that lost money that would have to pay to Legendz." Id.
At the forfeiture trial, Lowrance made no reference to GX 325 (because he was advancing the $16.7 million extrapolation, not the $17.4 million one). Jansen was the sponsor of the $17,432,674.40 extrapolation. Tr. 589. As for Jansen, the beginning point is that this $17.4 million extrapolation was neither his product nor was he willing to vouch for it with any particular gusto. He testified that "the FBI analyzed the individual notes [GX 325]." Tr. 529 (emphasis added). In this context, it is clear beyond question that Jansen, a forfeiture contractor, did not, for this purpose, include himself in "the FBI." See also, Tr. 593. He testified that the "29 notes" equated to twenty-nine weeks. Tr. 529. They arrived at a weekly average. Tr. 530. But neither Jansen nor the government said what that weekly average was, or, for that matter, what total dollar amount is represented by the notes.
Thus, the court does not have before it, either by way of testimony or proposed findings of fact, any combination of numbers leading to an extrapolation to $17,432,674.40,
But there is a combination of numbers that leads to an interesting — and perhaps telling — result. When required to do so on cross examination, Jansen expounded on the $17,432,674.40 extrapolation as follows:
Although neither Jansen nor any other witness has pointed out (or even claimed to know) how GX 325, the twenty-nine weeks' worth of notes, supported a $50,000 per week beginning number (or any other beginning number), Jansen, as can be seen, unflinchingly supported that number in support of the FBI's $17.4 million extrapolation. Well, $50,000 per week for seventy-eight months (using the usual rule of thumb that, on the average, there are 4.3 weeks in a month) comes out exactly to the amount of Lowrance's extrapolation: $16,770,000.00. Jansen may well have gotten the $50,000 number from "the FBI," and he may well have been content to testify to it, but it does not support any math that leads to $17,432,674.40.
The $17.4 million extrapolation, like the $16.7 million extrapolation, is not the stuff of which forfeiture judgments are made. The court rejects it.
Nothing other than the two extrapolations the court has rejected was offered by the government, at the forfeiture trial, by way of attribution of betting proceeds to Diebner. By some standards, that should be the end of the matter. But the government offers a fallback approach in its proposed findings of fact. Doc. no. 2242, at 40-42. Those matters were not argued at the forfeiture trial and the court is disinclined to work all the way through the government's fairly elaborate newly-constructed contentions. Considerations of fairness, among other things are in play here. However, there is some low-hanging fruit which the court will pick for the government.
As has been noted, the Cabreras (Sergio Cabrera and his son, Sergio Cabrera Pineda) were major betting customers of Diebner. Both of the Cabreras testified at the May trial. The Cabreras own eighteen restaurants in the Houston area. May Tr. 735. With Diebner as their Legendz bookie, they bet on basketball, football and baseball. Id. 736. Sergio would place bets by calling a 1-800 number; his son placed bets online. Id., 737, 739. They would place as many as twenty bets a week. Id. 737. For the most part, they paid their losses by check. Id. 758.
As evidenced by checks received in evidence at the May trial, the Cabreras' losses totaled $787,100.00. GX 887A-887T. This will be included in the forfeiture money judgment calculation. Diebner argues that his forfeiture money judgment exposure is limited to his "personal financial gain." Doc. no. 2274, at 7. Some of the other forfeiture defendants also advance this personal financial gain argument, citing
Michael Caplan, another Diebner betting customer, credibly testified that he lost about $5,000 betting on football and basketball with Diebner, using the 1-800 number Diebner gave to him. May Tr. 799-800. That will be included in the forfeiture money judgment calculation, for a total of $792,100.00 attributable to Diebner.
Tanner was a Legendz bookie in Florida. For Tanner's activities, implicitly attributable to Tanner's Legendz-related bookmaking, the government proposes a base dollar amount of $2,523,985.00. Working from that base number, the government proposes an extrapolation to $15,143,910.00. The $15.1 million extrapolation is based on the government's spreadsheet (GX C71), which, in turn, is based on a source document consisting of handwritten notes (GX 528) seized at Tanner's home on the day he was arrested. Tr. 336. GX 528 was admitted into evidence in the February trial. Feb. Tr. 1785.
Lowrance did not know who prepared the government's spreadsheet supporting the Tanner extrapolation. Tr. 336-37. Whoever prepared that spreadsheet, Lowrance knows nothing of his or her ability to interpret Tanner's handwritten notes. Tr. 339. And Lowrance, himself, has never reviewed the records on which that summary is based. Tr. 336-37. Those notes (GX 528) are hardly self-explanatory. Although the government's spreadsheet purports to reflect activity in 2009, Lowrance could not say whether or not the spreadsheet reflects money collected in 2009. Tr. 339. He did not know what Tanner's arrangement was with King, and he was not aware of whether the unidentified person who prepared the government's spreadsheet ever contacted Tanner to verify the accuracy of the spreadsheet or the extrapolation based on it. Tr. 339. (Tanner entered a guilty plea in this case and was sentenced, on the basis of a Rule 11(c)(1)(C) plea agreement that was approved by the court, to ten months of probation.)
Lowrance could not shed any light on whether the betting activity reflected by Tanner's handwritten notes was exclusive to the Legendz organization — a fair question, given the fact that the spreadsheet has a column of figures under the heading of "5 Dimes," an offshore sports betting organization wholly unrelated to (and in competition with) Legendz. Tr. 337; Feb. Tr. 139, 483, 1115, 1245; May Tr. 122. Consequently, Lowrance conceded that, for purposes of this case, a spreadsheet reflecting activity associated with 5 Dimes
As for the extrapolation from the $2.52 million base number shown on the government's spreadsheet, Lowrance cited nothing to support the government's proposed extrapolation period, let alone account for trends or variations during the extrapolation period that would affect the reliability of the $15.1 million extrapolation.
There is no need to dwell on the extrapolation proposed for Tanner, because the base number has not been substantiated as a reliable reflection of Tanner's Legendz-related activity, and only that activity, for 2009 or any other period. There is no evidence as to what the numbers on the spreadsheet actually reflect. One of the columns is labeled "CT," which probably stands for Christopher Tanner himself. There is no explanation as to how the dollar amounts in the column relate to the rest of the spreadsheet. There is no explanation (nor is one conceivable) as to why the base number proposed by the government should be predicated, in part, on activity under the heading of "5 Dimes," a competitor of Legendz. There is no explanation as to whether any of the other names across the header (e.g., aside from 5 Dimes) are also Legendz competitors. Some of the names, like "Margarita" and "Ringo," appear to be names of individuals, but that is not true of most of the names. Lowrance acknowledged that all he did was "some math," and it is clear that the only math he did was to take the base number that was given to him and multiply it by the extrapolation period that was given to him. The government's proposed findings cite nothing to rectify any of these deficits. Doc. no. 2242, at 17.
The government has failed to establish, even on a preponderance standard, a reasonably reliable dollar amount to attribute to Tanner's Legendz-related activity.
The government seeks to add exactly $18,000,000.00 to the forfeiture money judgment by way of attribution of betting proceeds to Michael Lawhorn. GX C89. The mathematical building blocks of this extrapolation are exceedingly simple. At the October trial, Lawhorn, a successful master agent and runner in Florida, testified, as relevant here, as follows:
Oct. Tr. 1135.
On this basis, Lowrance elaborated as follows at the forfeiture trial:
The nine-year extrapolation period is not disputed (and may, in fact, be conservative). The "50 Red" arrangement was explained at all four of the jury trials, and in the most detail at the October trial. Oct. Tr. 278-79. Essentially, it is a 50/50 split, between the local bookie and the house (Legendz) of bookmaking wins (e.g., bettors' losses) and bookmaking losses (e.g., bettors' winnings), with a gradual recoupment by Legendz of the money the local bookie owes as his half of the bettors' winnings. In its proposed findings, the government repeats, without elaboration, the calculation set forth above. Doc. no. 2242, at 19, ¶¶ 73-75.
The government cites no other testimony to support this $18 million figure. Strictly speaking, it is an extrapolation only in the sense that the government, relying on Lawhorn's laconic estimate (quoted in full above), posits a $1 million dollar a year figure, on a "50 Red" basis, yielding $18 million in proceeds over nine years (108 months).
But the situation with Lawhorn is not as uncomplicated as the government's approach would suggest.
Lawhorn was indeed a successful master agent
The first complication arises from the fact that Lawhorn, in giving his answer, and the government, in relying on that answer, are glossing over the fact that there were significant interruptions in Lawhorn's day-to-day activities as a local bookie or master agent for Legendz in Florida. In 2003, Lawhorn went to Panama to serve as a trainer for Legendz for "four or five months". Oct. Tr. 1130, 1177. This may not be within the nine-year extrapolation period (that is not completely clear), but it is an example of a pattern of interruptions in Lawhorn's activity in Florida as a local bookie or master agent. Lawhorn went to Panama again in 2008. Oct. Tr. 1130. By Lawhorn's account, he went to Panama "very often." Id. at 1131. In fact, "I became a resident at one time." Id. "I moved to Panama." Oct. Tr. 1154. Among other activities, Lawhorn "was running the bar" at the Super-book (discussed in Part IX(B)(1), above) in Panama, an activity that is not obviously consistent with working as a master agent in Florida. Oct. Tr. 1157. As a trainer in Panama, Lawhorn "taught people how to accept bets" and "helped work on the stage when the bettings would come in," for which he was paid "750 a week." Oct. Tr. 1168-69.
Lawhorn also served as a runner for Legendz. Oct. Tr. 1134. As defendants Robles and Moran will attest, that is a decidedly less profitable role than service as a bookie or master agent. The impact of that on what we otherwise might assume was a million-dollar-a-year pace as a master agent is not explained.
One mathematical element of the government's extrapolation as to Lawhorn is the proposition that he made his money (and generated proceeds for Legendz) on a "50 red" basis, as has been discussed. But, for some undetermined period during his association with Legendz as an agent or master agent, Lawhorn made book on a "pay-per-head" basis. Oct. Tr. 1266. In its order denying the post-trial motions of the defendants Moran, Diebner and Bramley, the court explained the pay-per-head system:
Lawhorn's pay-per-head fee was $18 per bettor. Oct. Tr. 1266. His explanation of his pay-per-head arrangement was exactly the same as quoted above with respect to Bramley: "So if I had 200 active clients and only a hundred played, I would only pay for that hundred clients. So it would be a hundred times $18. So I would pay $1,800 for that week." Oct. Tr. 1320. On a pay-per-head basis, all Legendz got was the per-head fee. Id. at 1327. Obviously, during the unspecified period that Lawhorn operated on a pay-per-head basis, one of the basic premises for Lowrance's extrapolation
Even without these complications, the government's beginning point — facile testimony from which an equally facile extrapolation is drawn — requires somewhat of a leap of faith. Regardless of whether the court might otherwise be willing to make that leap, the complications arising from Lawhorn's sojourns in Panama (running the bar, training the staff) and from his ventures into pay-per-head bookmaking on a 100 percent risk-bearing basis, undermine the court's confidence in the government's proposed $18 million extrapolation.
The Lawhorn extrapolation is rejected.
f. Joseph Barry
As to Joseph Barry, who was neither a defendant nor a witness at any stage of this case, the government's extrapolation to $15,275,612.57 is based on the $3,960,344.00 shown on GX C55, a government spreadsheet. Tr. 72-73. GX C55 shows a 28-month period of activity attributed to Barry (September, 2007-December, 2009). The government divides that $3.9 million by 28 and multiplies it by 108 (months) to arrive at the $15.2 million extrapolation as to Barry. Government Exhibit C55, the government spreadsheet on which the government's extrapolation is based, was not prepared by either of the government's forfeiture witnesses. Tr. 344. Lowrance has no knowledge that would support the extrapolation period of 108 months as to Barry. Tr. 345-46.
This extrapolation is rejected. (The government proposes no alternative attribution to Barry based on discrete transactions. Doc. no. 2242, at 17-18, ¶¶ 67-68.)
By way of extrapolation, the government seeks to include $7,958,304.00, attributable to the activity of Paul Tucker, in the forfeiture money judgment against all of the forfeiture defendants. GX C89 (App. 1). This is based on a source document (GX 546), showing Tucker's activity from January 5, 2009 to March 30, 2009, generating $221,064.00 in betting proceeds. GX C86, p. 7. That calendar quarter is then multiplied by four (to annualize) and then by nine (years) to arrive at the $7.96 million attributed to Tucker, the premise being that "the volume of bets is uniform across the year." Tr. 415 (Lowrance).
Thus, the government proposes to use that January through March calendar quarter thirty-six times over for purposes of its extrapolation. In support of that approach, the government solemnly represents to the court that: "This time period would not represent prime betting activity." Doc. no. 1999-1, at 15. In other words, never mind the NFL conference championship playoffs, the Superbowl, the NCAA
This leaves the question of whether there is a basis for a reliable attribution of betting proceeds to Tucker on the basis of discrete transactions. The government, mindful of the court's invitation to propose alternative attributions of betting proceeds based on discrete transactions, does proffer an alternative attribution as to Tucker. Doc. no. 2242, at 45-46, ¶¶ 175-183. And Tucker would seem to be a good candidate for an alternative attribution. He was a successful Legendz bookie in Florida for a long time, and the government was able to get some records reflecting some of that activity.
As an initial matter, it is difficult to determine what the total for the government's proposed alternative attribution is. GX C82 would suggest that it is $2,225,099.20, net of the amount ($183,042.18) that has been forfeited by agreement. But the government's proposed findings posit $2,265,233.00, with no explanation (or even acknowledgement) of the difference between that number and the number in the government's exhibit.
At the forfeiture trial, Jansen was the government witness who was answerable for the alternative attribution, and he deserves credit for his candor.
One element of the government's alternative attribution is $80,689.00 extracted from "Gooch records of 12-16-07 to 11-9-08." GX C82. Jansen acknowledged that this amount erroneously includes $2,700 that did not actually represent proceeds because the check by which that amount was purportedly paid bounced. Tr. 663. Jansen also acknowledged that it is possible that other source documents for GX C82 would show that other checks had bounced. Id. In fact, another returned check was pointed out. Tr. 664.
Another component of the alternative attribution is $1,477,561.53 shown to have been derived "From Legends Spreadsheets." GX C82. Thus, this compilation is from internal Legendz documents — which is significant because the Legendz organization included "Pauls" other than the defendant Paul Tucker (a fact of which Jansen was unaware — Tr. 665). The government spreadsheet from which
Other components of the government's alternative attribution are outlined on a summary exhibit as to Tucker (GX C82 — 4
But there is a residuum of evidence that reasonably supports an attribution of proceeds to Tucker. Even though the court has rejected the government's proposed extrapolation based on Tucker's bookmaking activity in the first quarter of 2009, the court is satisfied that base number ($221,064.00), drawn from records seized from Tucker's own computer, is reliable for that period. GX 546; Tr. 565.
On the basis of GX 1134H as a source document (and no other document — see, doc. no. 2242 at 16, ¶ 60 and GX C89), the government proposes to attribute (by extrapolation) $4,449,353.14 in gambling proceeds to Bruce Middlebrook for inclusion in the forfeiture money judgment against all of the forfeiture defendants. The source document, GX 1134H, was found on Middlebrook's computer. Oct. Tr. 362.
Lowrance did not know the years in which the seven-month period shown on GX 1134H began and ended, but he did allow that the September through March period "would be the busy time of year for a sportsbook." Tr. 348. Although Middlebrook was a cooperating defendant and a witness for the government, neither Lowrance nor (to his knowledge) anyone else did anything to confirm with Middlebrook the accuracy of the figure to which the government proposes to extrapolate from the somewhat cryptic GX 1134H. Tr. 348-49. Consequently, even though Middlebrook lives in this locality, appeared as a witness for the government on three separate days during the October trial (a few weeks before the government's Forfeiture Brief was due), and has been readily available to the prosecution team, the government's $4.4 million extrapolation as to Middlebrook is "uncorroborated by any conversations with Mr. Middlebrook." Tr. 349. In this instance, as with some others discussed in this order, if this proposed extrapolation were a standalone $4.4 million lawsuit pending in this or any other court, the notion that it is not necessary to talk to the one person who is in the best position to confirm or cast doubt on the $4.4 million number would be unfathomable. This is especially true when the matter is viewed in light of the fact that Lowrance did not even know what year the base numbers were drawn from.
The government's proposed extrapolation based on the record taken from Middlebrook's computer is rejected. The difference between the length of the base period and the 108-month extrapolation period is just too much — especially so, given the fact that the actual period (what years?) covered by GX 1134H is not known. The lack of any indication as to the actual period encompassed by the source document adds an element of speculation to the proposed extrapolation, but that is a matter separate from the sheer length of the proposed extrapolation period vs. the base period.
Although the government proposes no alternative attribution to Middlebrook, based on discrete transactions, the court has considered whether the base number for the rejected extrapolation is, itself, a reliable number for dollar-for-dollar attribution as to the period covered by GX 1134H, whatever that period may be. It is a close question, but the court concludes that the base number has been satisfactorily established and is fair game for attribution to Middlebrook. This is a close question because, as has been noted, Jansen had never seen the source document and thus could not support the inference the government would have the court draw from that document. As for what that source document actually represents, all Lowrance said is that Middlebrook's "records for that seven-month time period totaled $288,384." Tr. 146. In keeping with his general tendency to stay within the realm of what he actually knew, Lowrance
As the court has discussed at length in another order, there are some substantial legal issues afoot as to Bramley's criminal liability in this case. See,
The government proposes to attribute $4,953,478.78 to Bramley. This is not an extrapolation. This attribution, as proposed by the government, is the total of the dollar amounts gleaned from (i) eleven types of records purportedly relating to Bramley's activities as a Legendz bookie, and (ii) the trial testimony of five witnesses. See, GX C81 (drawn "from ten years' worth of documents" — Tr. 621). Lowrance did not substantively address this attribution. The government's witness on this one was Jansen.
Not all of the sixteen components of this attribution need extended discussion. Most of them are well-supported (and either not challenged at all, or not persuasively challenged, by defendants). The ones that need discussion will now be addressed.
The reckoning as to Bramley begins with $967,847.00 extracted from internal records of Legendz, reflecting checks attributable to "Doc," which is Bramley, received by Legendz. (Within the Legendz organization, Bramley's moniker was "Doc." There is no confusion as to whether that moniker might refer to more than one individual.) At the forfeiture trial, it was suggested, on cross examination of Jansen, that these payments "did not end up in Mr. Bramley's coffer." Tr. 613. They did not end up in his "coffer," else they would not have been received by Legendz in Panama. But whether these payments ended up in Bramley's coffer is, in any event, of no moment for forfeiture purposes. Bramley also raised the possibility that these payments represent "pay-per-head" fees paid by Bramley to Legendz. Tr. 615. If they are, that also makes no difference — if the court is correct that Bramley's participation in the Legendz operation as a pay-per-head bookie is irrelevant to his criminal liability.
Based on GX C43.3, and the source documents for that summary, the government includes $117,164.00 in its total as to Bramley. This consists of checks deposited into one of Bramley's accounts at ViewPoint Bank. GX C81. Jansen did not know "how much of that money within the ViewPoint account comes from legitimate sources versus illegitimate sources." Tr. 640. That makes no difference for present purposes because the court finds by a preponderance of the evidence that these checks (in evidence as GX 871) were from bettors. These dollars were betting proceeds.
The government proposes to include $117,968.00 in the forfeiture money judgment, attributable to Bramley, consisting of bettor checks he used to service the mortgage on his house. GX 871; Tr. 489. This is a matter distinct from the question of whether the house itself is forfeitable (to be discussed later). This $117,968.00 total will be adjusted to $114,882.41 because of a double counting problem (pointed out by the government — Tr. 522-23; 635-36). This $114,882.41 will be included in the forfeiture money judgment calculation.
Citing twelve pages of the testimony of David Pray, a witness at the May trial, the government would add $256,500.00 to the forfeiture money judgment. GX C81. That Pray was a bettor in Bramley's stable is not in doubt. As would be the case with any witness whose testimony is touted as the basis for calculating a dollar amount of betting proceeds, the building blocks for determining the amount of the betting proceeds generated by Pray, attributable to Bramley, are: beginning and ending dates, frequency of bets, and dollar amounts of bets. Those building blocks, if present, would yield a raw number. That raw number must then be tested for reliability, bearing in mind that vague and uncertain testimony can undermine the reliability of a calculation based on that testimony even if, as the court presumes with Pray, the witness is doing his best to tell the facts as he recalls them.
By Pray's account, he began betting with Bramley "sometime in the early 2000, certainly before the fall of 2005." May Tr. 1054. That is not a good start for a beginning date for a quarter of a million dollar calculation. Pressed to sharpen that up, he said: "this is a guess, but it's probably in the two-to three-year range" before 2005. Id. 1054-55. When asked about the period of time in which he placed bets with Bramley, he would only say: "So assuming that I started gambling in 2003, I bet continuously until recently." Id. At 1060-61 (emphasis added).
As for an ending date, Pray said that he was directed to another website, called lookitup.net, in August of 2014. Id. at 1059. Legendz used several names for websites at various times, but the court does not recall lookitup.net as a Legendz website. Nor is it clear whether the government's calculation of $256,500.00 on the basis of Pray's testimony is based on August, 2014 as an ending date. Pray estimated that he placed bets nineteen weeks of the year, basically the NFL season. Id. At 1062. His estimate for his betting volume was "generally 1,500 to $2,000 a weekend." Id. At 1063.
At the forfeiture trial, neither of the government witnesses explained how the government arrives at $256,500.00 as to Pray. The government's proposed findings shed no light on this. Doc. No. 2242, at 35, ¶ 131. The record before the court simply will not bear the weight of a $256,500.00 calculation on the basis of Pray's vague and uncertain testimony. This item is rejected.
The government's calculation of $200,000.00 in betting proceeds attributable to Mark Polan is rejected for similar reasons. True, he estimated that his losses amounted to $200,000. He put it this way: "Probably under $200,000, close to, probably." May Tr. 791. His uncertainty may
Citing two pages from the testimony of Neil Myler, a Legendz runner, at the May trial, the government proposes including $1,200,000.00 in the attribution of betting proceeds to Bramley. This is based on the number of times that Myler picked money up from Bramley, as the multiplier for the amount of money picked up each time. As for the number of pick-ups, Myler said: "I reckon between 30 and 40 times." May Tr. 1527. Granting that Myler was not a disinterested witness, his estimate is believable. Myler estimated that the amounts involved in these collections ranged from "40" to "175," which the court presumes to be thousands. May Tr. 1528. The government's $1,200,000 calculation, though not explained at the forfeiture trial, appears to be based on the low end of the estimate of the dollar amount ($40,000), multiplied by the low end of the estimate of the number of collections (30). The court finds, by a preponderance of the evidence, that this calculation is sufficiently reliable to be included in the forfeiture money judgment calculation.
One other instance of likely double counting, involving $4,760, was pointed out by the government at the forfeiture trial — candor which the court appreciates. Tr. 522. The remainder of the items comprising the government's calculations (GX C81) as to betting proceeds attributable to Bramley are well-supported.
The government originally sought, by extrapolation, to attribute $4,000,000.00 in betting proceeds to Paul Wilson, a Legendz bookie in California. GX C89. But now, the updated total of proceeds attributable to Wilson is $3,907,791.00. GX C89 ("Updated"); Tr. 149. This is an extrapolation from $1,157,864 attributable to Wilson's activity as the government says is reflected on an internal Legendz source document, GX 61.
The government asserts that GX 61 shows thirty-two months of activity, from February of 2008 to August of 2010 (Tr.
It is tempting to try to repair Lowrance's calculation (which is repeated, to the dollar, in the government's proposed findings), but the court declines to do so, for a variety of reasons. The government's proposed extrapolation as to Wilson is rejected. The government proposes no alternative extrapolation based on discrete transactions.
Leon Moran was a Legendz runner in California. Oct. Tr. 1243. On the basis of an extrapolation from an internal Legendz document, GX 473, the government seeks to attribute $6,491,205.00 in betting proceeds to Moran. GX C89. Alternatively, the government proposes to attribute $3,218,914.00 to Moran by drawing inferences from specific items of evidence. Both approaches are without merit, for reasons to be discussed.
The proposed $6.5 million extrapolation fails for several reasons.
First, the document on which this extrapolation is based, GX 473, is a spreadsheet reflecting betting activity. Tr. 578. Regardless of whether it relates to Moran, all it reflects is betting activity, not the activities of a runner. Although some participants in the Legendz enterprise worked in both capacities (e.g., Michael Lawhorn, as has been discussed), the two functions are decidedly different. The grand jury found probable cause to believe that Moran was a runner and indicted him on that basis — in a Superseding Indictment that specifically recognized the various roles of the participants in the Legendz enterprise, designating "Executive Staff," "Agents," "Runners" and "Bookies." Doc. no. 354 at 4-9. The court has held the government to that designation. See,
Second, the court has not been persuaded that Moran is the person referred to in GX 473, the document on which the $6.5 million extrapolation is based. The moniker used in GX 473 is "Mastiff." Moran's moniker as a runner was "Makavelli." May Tr. 569. Not even Karlo Stewart, a Legendz insider and a highly cooperative government witness, could, when specifically
Third, it is difficult to determine (and the government offers no help on this) whether GX 473 reflects the activity of a bookie, and not just a single bettor. The appearance of GX 473 is decidedly different from most of the bookie sheets that are in evidence. The only individual it refers to is Mastiff. If that person is Moran, then it is far from clear that this document reflects anything other than Moran's personal betting activity. (A possibility that Jansen readily acknowledged. Tr. 754.)
For these three independent reasons, the $6.5 million Moran extrapolation fails.
The government's alternative approach to attributing betting proceeds to Moran is also without merit, for two reasons. First, as will be seen, the record thoroughly undermines any sense of confidence the court might otherwise have in the reliability of Jansen's work, as his own work product, on the alternative calculations as to Moran. That alone compels rejection of the alternative calculation, but that also bears directly on the court's conclusions as to the second reason for which the court rejects the alternative calculation — double counting.
The alternative calculation adds up to $3,218,914.00. GX C74. This total is the sum of thirteen separate items, some relatively complex, such as interpretation of betting sheets and win/loss spreadsheets, and some simple, such as looking at a figure scrawled on the front of an envelope and calling that betting proceeds — $187,200 in betting proceeds. GX 1401; Tr. 747.
On the first basis for rejection of the government's alternative calculation, a short digression is necessary. Lowrance and Jansen were latecomers to this case. They are not the case agents. Jansen was the government's witness in support of the government's alternative calculation as to Moran. His advocacy of that calculation encompassed two indispensable functions: (i) recognizing and reliably evaluating the significance of source documents in the overall context of this case, and (ii) then accurately doing the math after determining that the source documents do mean something that should make a difference for forfeiture purposes. The court is left with the distinct impression that, in many important respects, Jansen's testimony, necessarily conveying to the court the net result of those two functions, represented
The government's alternative calculation includes $22,825.00, based on six internal Legendz betting records. GX C74 (referring to GX 58-64). Those internal records are betting spreadsheets. Perhaps those spreadsheets are not as cryptic as some other records in this case (such as individual bookie sheets), but they do leave room for interpretation. For the most part, they don't indicate the year in which the transactions occurred. In some instances, there is room for interpretation, with the benefit of extrinsic knowledge, as to just what agent or bookie any given entry relates to. But the interpretation and the math for this item were not done by Jansen. That was done by Greg Melzer. Tr. 737. Melzer is a contract forfeiture investigator. Tr. 716. He did not testify at the forfeiture trial.
The alternative calculation includes $1,299,940.00 for "Odes Thompson checks per Legendz spreadsheets." GX C74. The checks are GX 883A-883S. Four of these checks contain a reference to Paul Wilson. None of them refer to Moran, Makavelli or Mastiff. When asked the source of this calculation, Jansen responded: "Again, I believe that would have come from Greg Melzer." Tr. 737. So, when Jansen was asked about any connection between one of these checks (for $5,000 — showing Legendz agent Paul Wilson, a/k/a Big Dog, as the remitter) and Moran, we had the following exchange:
Tr. 739 (emphasis added).
This is cold comfort for a finder of fact. When pressed, Jansen ventured that "I think" there is a connection between Wilson and Moran. Id. But "I don't know the specifics." Tr. 729-40. Understandably, Jansen was pressed on this point:
Jansen was asked essentially the same questions as to another check, attributed to Moran, showing Wilson as the remitter. He posited a connection with Moran in that "I believe that Moran picked these checks up...." Tr. 741. When asked by the court how he knew that Jansen replied: "From my working with Greg Melzer." Id. Obviously, Melzer himself had no way to know that as a percipient witness, but the government was satisfied to present Jansen's account of what he thought Melzer believed to be true from a source not specified at the forfeiture trial or in the government's proposed findings, doc. no 2242 at 38, ¶ 141.
Jansen gave essentially the same account as to GX 883M, N, O, P and Q. Tr. 743. The best he could say was that he was "pretty sure" that Moran picked the checks up from Wilson (Tr. 743), a proposition that, as far as the record discloses, he could not have espoused with any more assurance than anyone else in the courtroom. "It's based on my learning about this from Mr. Melzer, as I recall, yes." Tr. 744. So it boiled down to this:
On another item in the government's summary as to Moran, there was a discrepancy as to the amount of alleged betting proceeds evidenced by GX 476, a handwritten sheet of figures. Tr. 760. The difference, amounting to $5,000, was between $45,790 and $40,790. Tr. 761. Jansen had nothing of substance to offer:
Turning to the substance of some of the items in the government's alternative calculation (and still ignoring double counting for the time being), the outlook does not improve. One attribution of betting proceeds, amounting to $187,000, was urged because an empty envelope (from a dentist) that was found in Moran's house when it was searched showed, in handwriting, four figures that added up to $187,100. GX 1401. Neither the envelope nor any other evidence or testimony connects this exhibit with illegal gambling. The fact that it was found in Moran's house was enough. What transactions did this represent? Jansen: "I have no idea." Tr. 749. (And, aside from that, there was a discrepancy even in adding up the four numbers. Jansen's explanation: "That was provided to me by Mr. Melzer's information." Tr. 747.)
Another item, perhaps a bit more plausible, was a digital image, yielded by the search of Moran's computer, showing a stack of paper currency with a note leaning against the stack, suggesting (believably) that the stack amounted to $50,000. Moran wasn't shown to have ever had the money. He wasn't even shown ever to have had a physical photograph. But this digital image resulted in the attribution of $50,000 to Moran. Tr. 571.
Wholly aside from the deficits that have been discussed so far as to the government's proposed alternative calculation as to Moran, there is an unavoidable, and insoluble, problem of double counting. With the possible exception of GX 473, discussed above, the numbers that add up to the government's alternative calculation as to Moran are posited because he was a runner. He was a runner in California. He dutifully picked up gambling proceeds from bettors and took them to agents or, more typically, picked the proceeds up from agents and sent them to Legendz. The evidence from the four jury trials established unmistakably that betting proceeds were, as needed, transported all over the United States. E.g., May Tr. 887, 906 (Lawhorn delivering cash to Las Vegas and Nebraska). Billy Howell: "Big Lou would pick up from me in Orlando or we would have money picked up in California or Las Vegas, Oklahoma, and Texas." May Tr. 1469. Although it is true that the court has rejected the government's proposed extrapolations as to Wilson and Campbell (both of whom operated in California, where Moran was a runner), the record, taken as a whole, leaves the court with no assurance that money the government seeks to attribute to Moran just because he touched it is not also attributable — and attributed — to one of the other agents as to whom the government has made a satisfactory showing. Jansen's testimony as to Wilson is illustrative, even though the court has rejected the government's proposed extrapolation as to Wilson: "I think there's some connection between the money that Paul Wilson would have paid would have been picked up my Mr. Moran." Tr. 739.
The extrapolation and the proposed alternative calculation as to Moran are rejected.
The government's proposed attribution to Joseph McFadden is not an extrapolation. McFadden was an agent for Legendz in Florida. He was a credible witness for the government in the October trial. (He entered a plea of guilty in this case and has been sentenced.)
McFadden started as a Legendz agent in 2008. Oct. Tr. 592. His book of business grew to about fifty bettors. Id. 593. He stopped bookmaking in April, 2013, after he was arrested in this case. Id. 600.
In its Forfeiture Brief, the government attributed $1,656,000.00 to McFadden. Doc. no. 1999-1, at 18. In the government's forfeiture overview and at the forfeiture trial, this became $1,784,800.00. GX C89; Tr. 153, 351. In the government proposed findings, this number became $1,588,000.00. Doc. no. 2242, at 21, ¶ 82. And all of these versions were drawn from the same source — McFadden's testimony at the October trial.
The government's proposed attribution of $1.6 million to McFadden (per the government's proposed findings) is in a bit of a different category from most of the items included under the "Agents" heading on GX C89. The difference is that none of this money has been shown, or even suggested, to have been generated by McFadden's activity as a Legendz agent. Instead, this $1.6 million is the sum of five separate and mostly dissimilar events and transactions. As to some of these events, McFadden could be loosely considered to have
Giving the government the full benefit of the preponderance standard, and drawing reasonable inferences from all of the evidence in this case, the court concludes that it is more probably true than not that the cash transactions to which McFadden testified — described above in the first four paragraphs — were effected with funds that "constituted" or were "derived from" proceeds of the unlawful activities of which the defendants have been convicted, or
The McFadden transactions net $988,000 for the forfeiture money judgment.
For a number of years, David Ross was an active bookie and runner for Legendz in the Oklahoma City area. At all times relevant to this case, he has lived in central Oklahoma. Oct. Tr. 298, 321, 450. He entered a plea of guilty in this case and testified for the government in all four of the jury trials. In its Forfeiture Brief, the government went through the math step by step and came up with $1,642,813.00 in betting proceeds attributable to Ross by way of extrapolation. Doc. no. 1999-1, at 16. In the first version of GX C89, this extrapolation shrank to $1,265,831.18. In his testimony at the forfeiture trial, Lowrance went through the math step by step — purportedly using the same methodology — and came up with an extrapolation to $5,485,268.45. Tr. 154. (Jansen did not address the Ross extrapolation.) The following matters are noteworthy with respect to this proposed $5.5 million extrapolation:
In other words, the FBI's approach as to Ross was to look just far enough to get to the desired result, as a purely mathematical exercise, and then look no further, lest inconvenient facts, perhaps imparted by a person (Ross) with firsthand knowledge of those facts, get in the way. There is no need for the court even to assess the relationship between the base period and the proposed 108-month extrapolation period. This extrapolation is rejected. The government proposes no alternative calculation as to Ross. Doc. no. 2242, at 16-17, ¶¶ 63-64.
Koralewski was convicted on Count 1 (racketeering conspiracy) and acquitted on Count 2 (illegal gambling business) and Count 3 (money laundering conspiracy). For purposes of the forfeiture money judgment it seeks, the government would attribute $935,112 in illegal betting proceeds
A fair evaluation of the government's forfeiture case against Koralewski requires, for one thing, an understanding that Koralewski and King have been good friends for "many years," Oct. Tr. 537. In fact, Legendz chief financial officer Karlo Stewart knew Koralewski to be King's "good life-long childhood friend." Oct. Tr. 997.
Consistent with his talents and his friendship with King, Koralewski got involved in training Legendz employees in Panama and with recruiting prospective bookies to affiliate with Legendz. Koralewski was close enough to the Legendz organization to find it convenient to list "DSS" as his employer on a loan application, even when he lived in Colorado. GX 398C (employer listed as: "Skis BBQ/DSS" of El Dorado Hills, California).
Another complication with respect to Koralewski (not as problematic, but still in the mix) lies in the fact that Koralewski was indicted and prosecuted in this case as a member of the "Executive Staff" of Legendz. Doc. no. 354, at 4-5. The grand jury did not label him as an "Agent," a "Bookie," or a "Runner" (id. at 6-8), and the government has disclaimed any intent to characterize him as an agent or bookie. Doc. no. 1576, at 1. But, in the October jury trial, the government still wanted to prove that Koralewski was a runner. In an order entered at the outset of that trial, the court addressed the fact that the Indictment, even though characterizing Koralewski as a member of the executive staff, did allege some acts that amounted essentially to service as a runner:
Doc. no. 1727, at 4-5.
At the forfeiture trial, Koralewski renewed his objection. Tr. 154. The court received evidence as to Koralewski subject to that objection. Tr. 155. The government's proposed findings and conclusions do not address this issue. Of the $935,112 the government attributes to Koralewski for purposes of its forfeiture money judgment, only $10,790 could be regarded as attributable to Koralewski solely by virtue of functioning as an agent. Those dollars will be excluded from the forfeiture money judgment calculation for other reasons, but, in any event, they would be excluded on the basis of the court's determination that Koralewski may not be prosecuted in this case as an agent. The remainder of the $935,112 is sought by the government on a basis consistent with a fair reading of the allegations in the Indictment.
One other preliminary matter relating to Koralewski should be addressed. Koralewski was convicted only on Count 1, racketeering conspiracy, and the court has concluded, consistent with the D.C. Circuit's decision in
With this background in mind, the court turns to the specific items the government seeks to attribute to Koralewski for forfeiture money judgment purposes. The $935,112 the government seeks to attribute to Koralewski consists of four items, per GX C73 and the government's proposed findings (doc. no. 2242, at 43-44):
The $10,790 in betting proceeds.
The first item, $10,790 in betting proceeds, relates to the betting activity of
The government's Forfeiture Brief says nothing about this proposed attribution of betting proceeds. See, doc. no. 1999-5, where the government addresses "Money Judgment with Factual Basis" as to Koralewski. But the government introduced this item at the forfeiture trial. GX C87; Tr. 538. In its post-trial proposed findings, the government's entire assertion with respect to this item is:
Doc. No. 2242 at 43-44, ¶ 164.
As relevant to the matters now before the court, the gist of Patel's testimony at the October trial was:
Patel's testimony at the October trial was credible. The government's perfunctory cross examination cast no shadow on Patel's account of his betting activity and his lack of any contact with Koralewski or Legendz. Oct. Tr. at 2192-95.
At the forfeiture trial, by way of answers to three questions (and no more) on direct examination, Jansen attributed the $4,800 to Patel, and to Koralewski, because Patel's name showed up on a Legendz spreadsheet in the same line as "SKI." (GX 59). Tr. 532.
On cross examination of Jansen, it got more interesting:
Thus, when he took the stand at the forfeiture trial — six months after Patel went under oath to give his account of the matter at the October jury trial — the fact that Patel had testified in that trial, and had given the testimony recounted above, was news to Jansen.
Hurst has placed bets on sporting events. Id. He did that "mostly online." Id. at 2198. He was shown a Legendz spreadsheet that showed his name on the same line with "Ski," indicating that the "amount deposited" was $2,561. Id. at 2198-99; (GX 208). In his betting activities, he never dealt, that he knew of, with a person named Ski. Id. at 2199. Hurst does not know "Ski." Id. at 2201. Hurst had never met Koralewski until the night before he, Hurst, testified at the October trial. Id. Koralewski has never picked any money up from Hurst. Id. When the FBI came to Hurst's house to interview him, he told the FBI the same thing he told the jury. Id. at 2202.
At the forfeiture trial, Jansen's testimony linking Hurst and Koralewski consisted, in its entirety, of one answer: "There's two transactions, the fourth and fifth line down [on GX 208], attributed to Ski. The `Received on' date is March 2nd; the pending amount for the first transaction is $3,429; and the second transaction is $2,561; for a total package of $5,990. The first transaction comes from the sender Craig T. Hardy and the second one comes from Robert Hurst." Tr. 533-34.
As for Jansen's familiarity with Hurst's testimony at the October trial, Jansen had this to say:
Durborough and Hardy both bet on sports, and they did so through an internet sportsbook called ZMVP. Id. (Ample evidence in this case establishes that ZMVP was part of the Legendz sports betting enterprise.) In his capacity as a bookie, Durborough's moniker was "Apple." Id. at 2206. At the October trial, Durborough was shown GX 59, which, on three separate lines, lists Apple as the Legendz agent with respect to Hardy's betting activity. (Durborough saw that document for the first time the day before he testified at the October trial. Id. at 2205. He had been interviewed by the FBI about six weeks before that. Id.) Durborough confirmed that he is the "Apple" associated with Hardy's betting activity on GX 59. Id. at 2206.
Durborough was then shown GX 208. Government Exhibit 208 shows "Ski" on the same line as Craig Hardy, associating both of them with the $3,429 in betting activity at issue here. This led to a description by Durborough of his betting-related activity, Hardy's betting-related activity, and (importantly for present purposes), Durborough's familiarity with Hardy's betting. As far as sports betting was concerned, Durborough's account was that "Craig [Hardy] answered to me [Durborough]." Id. at 2208. On the question of how Hardy could possibly know Koralewski, Durborough said: "I collected from him [Hardy] when he would lose. I just had a few guys, friends, that wanted to play, so Craig was one of those guys. And I got him into MVP [i.e., Legendz]. So I don't know how he would know this gentleman [Koralewski] or anybody else from MVP." Id.
Durborough testified that he never had any contact with Koralewski during the time that he and Hardy were active in sports betting. Id. at 2207. Durborough told the FBI that he did not know anybody named Ski. Id. Durborough never exchanged money with Koralewski. Id. at 2208. He never reported to Koralewski. Id. Durborough testified firmly and persuasively that, to his knowledge, Koralewski never had "anything whatsoever to do with Mr. Hardy and Mr. Hardy's betting." Id. at 2208. See also, id. at 2210 ("Craig would have told me if he did."). Although it would not be possible for Durborough to know for a fact that Hardy never dealt with Koralewski, Durborough's account of his relationship with Hardy leaves the court well-satisfied that it is improbable that Hardy dealt with Legendz (or anyone associated with Legendz) other than through Durborough.
Durborough's testimony was believable. Six or seven weeks before the October trial, Durborough told the FBI the same thing he told the jury in the October trial. Oct. Tr. at 2208.
As for Jansen:
Jansen's account of what he did not know is also believable. Jansen may be forgiven for having a tone of exasperation when he summed the matter up: "I didn't know that these guys had testified." Tr. 682.
The court is far from satisfied that this $10,790 is chargeable to Koralewski for forfeiture money judgment purposes. The foregoing summary speaks for itself, and that alone is sufficient to undermine the court's confidence in the government's proposed attribution of these betting proceeds to Koralewski. (In its proposed findings, the government makes no attempt at all to explain the testimony of Patel, Hurst and Durborough at the October trial, or Jansen's testimony, quoted above, at the forfeiture trial.) But there is more.
The two internal Legendz spreadsheets (GX 59 and GX 208) relied upon by the government to attribute $10,790 in betting proceeds to Koralewski, are two of the internal Legendz spreadsheets surreptitiously taken by Karlo Stewart from the Legendz headquarters at the behest of the government. Tr. 437 (GX 59); Oct. Tr. 958 (GX 208). In
Internal financial and betting-related spreadsheets were the stuff of Stewart's day-to-day life at Legendz. Feb. Tr. 972, 996. Stewart could, in the blink of an eye, doctor up a spreadsheet in any way he thought expedient for the purpose of pleasing the government.
The court rejects the government's proposed attribution of $10,790 in betting proceeds to Koralewski.
The $711,812 based on the "shipping tracking records."
The government asserts that:
Doc. no. 2242, at 43, ¶ 163.
That is all the government's proposed findings have to say about this item. The quoted assertion, if true, is fair game for forfeiture purposes because, even though Koralewski was acquitted of money laundering conspiracy, this kind of activity could reasonably be brought within the scope of the "Executive Staff" label the grand jury attached to Koralewski. As the court noted in its order at doc. no. 1727, sometimes executives do things that underlings also do.
The source document for this proposed $711,812 attribution is GX 198, an internal Legendz spreadsheet taken by Karlo Stewart from Legendz. Tr. 534. That spreadsheet is a list of tracking numbers, apparently reflecting shipments of cash or other forms of payment to Legendz. As described by Karlo Stewart, GX 198 is a "monthly reconciliation of packages that would have arrived." Oct. Tr. 916. Each entry on GX 198 consists of a date (no year specified, and no year known), a tracking number, a dollar amount, a name under the heading of "WHO SENT IT," and, where applicable, an indication ("ARR") that the package did arrive. Seventy of these entries show "WHO SENT IT" to be "SKI." They total $711,812. GX C62; Tr. 683.
As noted, GX 198, the internal Legendz spreadsheet showing tracking numbers and related information, is the source document for this proposed attribution. But that source document has its own underlying source documents. The source documents for GX 198 are GX 68-108, forty exhibits in all. Oct. Tr. 1024. Those forty exhibits are smaller spreadsheets by which Edward Buonanno, the general manager of Legendz, "recorded the incoming packages" consisting of "[c]hecks coming from the United States." Oct. Tr. 933. Each one of those smaller spreadsheets covers two or three days. E.g., GX 100 (two days); GX 106 (three days). And, as Jansen acknowledged at the forfeiture trial, not a single one of the forty source documents for GX 198 refers to "Ski." Tr. 690. This leaves GX 198, and any inferences reasonably to be drawn therefrom, twisting in the wind, as Jansen acknowledged:
Neither Jansen nor, to his knowledge, anyone else on the prosecution team, ever investigated the tracking numbers by which the government seeks to hold Koralewski accountable for $711,812. Tr. 686. Moreover, Jansen was unaware that Karlo Stewart had testified that GX 68-108 were the source documents for GX 198. Tr. 689-90. This is apparently because, as Jansen acknowledged, he has not "read any of Karlo Stewart's testimony from any of these proceedings." Tr. 691.
In evaluating this proposed $711,812 attribution of betting proceeds to Koralewski, the court will readily grant that a spreadsheet showing seventy shipments from the United States to Panama (assuming that is what it actually reflects — probably a fair assumption) with "SKI" listed in the "WHO SENT IT" column is enough to give rise to a suspicion that Koralewski sent these packages. There is not much that Koralewski would not have done for Bartice King. As a management-level employee of some large companies, or as an entrepreneur in various small businesses (more about those matters in Part IX(F), below), it would not have been much of an inconvenience for Koralewski to pick up a package of checks or cash from a runner and take it to a UPS or FedEx office. But the evidence leaves the court short of concluding with reasonable confidence (even on a preponderance standard) that Koralewski is chargeable with this $711,812. For reasons that have already been discussed, a document produced by Karlo Stewart does not come before the court with much intrinsic reliability. Thus, GX 198 does not have a starting point any better than the simple fact that it is held out by Karlo Stewart to be a document he produced from within Legendz. The probative value of GX 198 can go up or down from there. It goes down because "Ski" is not mentioned in any of the forty source documents for GX 198 even though those forty source documents are studded with names that are very familiar to the court in this case.
The court is unpersuaded by this proposed $711,812 attribution. It is rejected.
The $202,510 the government characterizes as "Legendz Sports Payments."
The government's proposed finding as to this item is:
Doc. no. 2242, at 43, ¶ 160.
The most damning thing about these forty-five checks, from the perspective of a forfeiture defendant who seeks to avoid being held accountable for them for forfeiture purposes, is that they came from Central America, where Legendz was based. The checks are all what we in the U.S. would call cashier's checks. They are all payable to Kory Koralewski. They were issued by Banco de Costa Rica in San Jose, Costa Rica — not by a Panamanian bank or from a Panamanian office of any other bank. They are not drafts against the account of any account holder, nor is the name of any remitter or account holder shown on any of the checks. Jansen acknowledged that the checks show no link to a bank customer. Tr. 698.
Each of the checks is for 4,500 U.S. dollars, save one in the amount of $4,510. They were issued essentially monthly (there are three exceptions), beginning in early 2005 and ending in late 2008. GX C29. Many of the checks were payable through Citibank in New York, apparently as a correspondent bank. Others were payable through Bank of America or the Miami
At the forfeiture trial, Jansen's attention was called to many of these $4,500 checks, and his typical explanation was that they were "considered to be payments from the Legendz enterprise." Tr. 540. Otherwise stated: "It was funds from Banco de Costa Rica that we considered associated with Legendz enterprise." Tr. 543. Jansen also acknowledged that these checks "formed the basis of the government's allegation in Count 3 against Koralewski for money laundering conspiracy," of which Koralewski was acquitted. Tr. 701. (The court does not consider that to be fatal to the government's position as to these payments, because, if, as the government asserts, they were betting proceeds, then they would also be within the permissible ambit of Count 1.)
As to the source of the funds, Jansen acknowledged that:
In its proposed findings, the government offers nothing beyond a bare description of the checks, saying, essentially, that they are what they are. Doc. no. 2242 at 43, ¶ 160.
The government is not required to produce direct evidence that any given payment or series of payments consists of dirty money. That approach would largely reduce the right to get a forfeiture money judgment to a nullity. The required nexus may certainly be proven by circumstantial evidence, and circumstantial evidence can in many instances be compelling. Bearing that in mind, the questions the court asks about these payments are: (1) Where did the money come from? and (2) What do the payments represent? There is no evidence as to the source of the funds for these forty-five checks. The court certainly suspects that the money came from Bartice King or an entity controlled by him. But the difference between suspicion and the preponderance of the evidence is evidence. The government has failed to satisfy the court, by a preponderance of the evidence, that this money came from the Legendz enterprise.
Inferences favorable to the government about what these payments represent are also hard to draw. These payments have no resemblance to the way credits and payments between Legendz and its bookies and agents were handled. The fact that these forty-five payments came every month (with three exceptions) and were in identical amounts (with one ten-dollar exception) is air-tight proof that these were not routine transactions between the house and an agent or bookie. The fact that these payments may have come from Bartice King (which will be assumed for the moment),
As to this $202,510 item, the government's burden (having obtained a conviction of Koralewski only on Count 1) is to satisfy the court that the money was racketeering proceeds paid by Legendz to Koralewski. The government has not carried that burden.
The $10,000 that the government bases on the testimony of David Ross.
The government's contention as to this item is: "Mr. Koralewski delivered approximately $10,000.00 in illegal gambling proceeds to David Ross. (Tr. Oct. 20, 2015, Vol. II, at 502)." Doc. No. 2242, at 43, ¶ 161.
David Ross, a Legendz bookie, testified in the October jury trial that he drove from Oklahoma to Colorado, where he met Koralewski and received $10,000 from Koralewski. From all the evidence in this case, the court can conceive of no characterization of these funds as anything other than betting proceeds. Ross was a runner as well as a Legendz bookie, and he clearly went to Colorado to pick up betting proceeds. There is no reason for Koralewski to have been giving $10,000 to Ross if that money was not betting proceeds. The question is whether this money represented Koralewski's personal betting losses or whether it was garden-variety betting proceeds for which Koralewski was the conduit. At the October trial, Ross agreed that this money "could have been" Koralewski's personal betting losses. Oct. Tr. 540. The court thinks not. There is no evidence that Koralewski was a Legendz bettor. And there is no reason for the court to be concerned about the provenance of this money in anything like the sense that the court has discussed above with respect to the monthly $4,500 payments. The government has satisfied the court, by a preponderance of the evidence, that this $10,000 was betting proceeds. The money was directly handled by Koralewski, so there are no issues as to vicarious liability. The money, having been given by Koralewski to Ross, was clearly "obtained" by Koralewski from someone. 18 U.S.C. § 1963(a)(3). It is enough that it was betting proceeds, as the court has found.
In sum, the government has proven illegal betting proceeds attributable to Koralewski amounting to $10,000.
Luis Robles was a Legendz runner from Orlando, Florida. Oct. Tr. 1243. The government would attribute $721,901.50 to Robles under the "Agent" heading on GX C89. At the forfeiture trial, the government's calculation was corrected to $727,901.50. Tr. 171. Doc. No. 2242 at 44, ¶ 171.
This proposed attribution consists of six items. GX C90. They will be addressed in the sequence in which they appear on GX C90.
The first item is $46,197.50, extracted from a Legendz spreadsheet, GX 1273. The relevant page of GX 1273 refers to "Big Lou" (which, beyond question, is Robles) under the heading of "Agent" and shows $46,197.50 under the heading of "Amount." This item is rejected, for two reasons. First, Robles is prosecuted in this case as a runner, not as an agent. Doc. No.
The second item comprising the proposed $727,901.50 attribution to Robles is $160,459.00, based on "Derek Hewitt T III intercepts." GX C90. In his proposed findings, Robles complains that Hewett's testimony in the February trial did not substantiate all of the contacts that were recorded by the Title III intercepts. Doc. No. 2278, at 5. That is correct (see Feb. Tr. at 1206, et seq.), but the intercepts (GX 810 and 813) are much more reliable than the long after the fact recollection of a witness at the February trial. The recordings are also more reliable than the government's version of what they prove. GX 810 refers only to $50,000 ("50 dimes," to use the terminology Robles used in the recorded conversation). GX 813 refers to $60,459 ("60 dimes, 4-5-9" in the recording). This second item has been substantiated to that extent — $110,459 (not the $160,459 asserted by the government).
The third item ($269,000) has not been substantiated. The consensual recordings cited as evidence (GX 946 and 947) contain no references to any dollar amounts, and the only other exhibit cited by the government (GX "1C39") is not in evidence. Lowrance had nothing of substance to offer on this item. Tr. 157, 362.
The fourth item is $189,245, attributed to the trial testimony of Alan Gould. The testimony cited by the government (pages 1451 and 1453 from the February trial) does not come close to supporting the government's contention, and Lowrance's account of this item shed no light on this one. Tr. 355-56.
The fifth item is $50,000, consisting of $2,000 per month in salary allegedly paid to Robles. This would, obviously, consist of twenty-five months. The cited testimony from the February trial (Feb. Tr., 353 and 356) does not support the government's version of this item. Nothing in the cited testimony establishes the fact of the $2,000 monthly payments, the regularity with which they were made, or the duration of that arrangement, if it existed at all. Lowrance could add nothing on this one. Tr. 366-67.
The sixth, and last, item as to Robles is $13,000, asserted to be based on "Reggie/King T III intercept." The cited exhibit ("819" — see GX C90) is not in evidence. Lowrance's account of his understanding of the recorded conversation (the one that is not in evidence) suggests that the conversation, if it were in evidence, would be inconclusive at best. Tr. 367.
The evidence satisfactorily supports the attribution of $110,459 in betting proceeds to Robles.
Conclusion as to the government's proposed extrapolations and direct attributions
The result of the court's findings as to the government's proposed extrapolations and direct attributions under the heading of "Agents" on GX C89 (App. 1 to this order), is:
Terry Campbell $ 0 Ralph Hernandez 0 Kelley Diebner 792,100.00 Christopher Tanner 0 Michael Lawhorn 0 Joseph Barry 0 Paul Tucker 221,064.00 Bruce Middlebrook 288,384.00 Rodger Bramley 4,489,133.19 Paul Wilson 0 Leon Moran 0 Joseph McFadden 988,000.00 David Ross 0 Kory Koralewski 10,000.00 Luis Robles 110,459.00 _____________ Total:$6,899,140.19
The foregoing summary, viewed alone or in combination with the summary in Part IX(B)(3), above (summarizing the results of the court's analysis of the money laundering entries on GX C89), might suggest the possibility of capricious results with respect to the forfeiture money judgment sought by the government. As will be seen, the ultimate result will be evened out considerably by the application of the law with respect to (i) joint and several liability, (ii) foreseeability, and (iii) the Excessive Fines Clause.
Viability of the government's contention that all forfeiture defendants, regardless of their respective degrees of participation in the Legendz enterprise, should be subjected to a forfeiture money judgment in the same amount.
The government seeks a forfeiture money judgment against the forfeiture defendants in the amount of $231,432,686.73. As has been seen, the total amount of any forfeiture money judgment will be considerably less than that. But the issue now to be addressed is whether the government's argument for joint and several liability for the full amount of a forfeiture money judgment has any merit. It does not.
As is discussed in Part (II)(B), above, the forfeiture defendants other than Koralewski are subject to joint and several liability for the forfeiture money judgment to be entered in this case. That, at this point, is a given. Yet to be determined is the extent of that joint and several liability. The nominal joint and several liability exposure of the forfeiture defendants other than Koralewski is $12,607,321.99, the sum of $6,899,140.19 by way of attribution of betting proceeds to agents (Part IX(C)(4), above) and $5,708,181.80 by way of money laundering liability (Part IX(B)(3), above).
This nominal joint and several liability is subject to three screens: (i) foreseeability (discussed in Part (II)(B), above), (ii) disproportionality, governed by the Excessive Fines Clause (discussed in Part III, above), and (iii) deprivation of the ability to earn a living, also governed by the Excessive Fines Clause (discussed in Part III, above).
As is discussed in more detail in Part II(B), above, the government, although unmistakably on notice that foreseeability is very much in issue as a limitation on joint and several liability, advanced no legal or
The second and third screens (disproportionality and deprivation of the ability to earn a living) will be addressed separately as to each of the forfeiture defendants. Suffice it to say for present purposes that the net effect of the application of all three screens is significant.
Bearing all of these matters in mind, the court now turns to the remaining substantive tasks with respect to forfeiture: (i) determining the extent of forfeiture of specific assets (i.e., tangible property and financial assets), and (ii) determining the extent of forfeiture money judgment liability. The forfeiture defendants will be addressed in the same sequence in which they are discussed in the Forfeiture Overview (Part VIII, above). The three screens — foreseeability, disproportionality, and livelihood — serve separate purposes; all three are important.
Findings specific to King
Forfeiture of specific assets
The government has cast a wide net in terms of the assets belonging to Bartice King that it seeks to forfeit. As discussed in Part VIII(A)(1), above, this includes bank and brokerage accounts, three automobiles, jewelry, eighty-eight pairs of shoes, seventy-five purses, and five parcels of real property.
The factual linchpin of the government's proposed forfeiture of King's hard assets and financial assets is its oft-repeated and palpably untrue statement that King's only source of income during the conspiracy period was the illegal sports betting operation. In support of forfeiture of specific properties, the government puts it as follows in its Forfeiture Brief: "[K]ing's only source of income derived from his illegal gambling operation with Legendz Sports." Doc. No. 1999-1, at 3. This disregards the uncontroverted testimony of the government's witnesses — testimony the government never questioned or attempted to challenge — establishing King's history of lawful entrepreneurial activities during the conspiracy period. Those matters are discussed at length in Part IX(B)(1), above, but, to briefly review, those activities included:
Importantly, with one exception, the government does not trace gambling proceeds into the King assets it seeks to forfeit. Taking the bank accounts as an example, the government cites ten pages of testimony at the forfeiture trial, together with several account documents and transaction records, to support forfeiture
King's Invesco IRA account is an exception to the government's general failure to establish a nexus with respect to King's financial accounts and hard assets. Government's Exhibits 1218A-D (particularly 1218B) quite satisfactorily show $45,000 coming from DSS into the IRA account. The money in that account, consisting of a remaining balance of $9,962.06, will be forfeited. (The government points to no evidence showing the activity in that IRA account since the $45,000 was put into it in 2010. That, ordinarily, would suggest a tracing problem: What happened in that account between 2010 and 2013? But given the nature of that account and the fact that the balance at issue is a fraction of the illegal gambling proceeds that went into the account in 2010, the court is not inclined to take an exacting approach to this item. Cf.
As for the parcels of real property,
In sum, and reduced to its essentials, the government's approach with respect to the hard assets and financial assets is that the voids in its evidence with respect to the required nexus with illegal proceeds can be filled by presuming, categorically, that everything King bought or put into savings during the conspiracy period originated with the illegal gambling operation: "Because Mr. King's only source of income from 2003 through 2013 derives from his operation of the Legendz Sports enterprise, the United States contends that all property seized and listed for forfeiture constitutes proceeds of Mr. King's criminal activity." Forfeiture Brief, doc. no. 1999-1,
As the court put it in
Forfeiture money judgment
King's exposure to a forfeiture money judgment in this case is $12,607,321.99, and that is what it will be. See, Part IX(C)(4), above. As for foreseeability, he has a serious problem. He was at the top of the organization and ran the show. The evidence establishes quite clearly that King was not a passive proprietor. He had trusted subordinates in management, a network of master agents and runners, and "a hundred or so [employees working in the call center] during the busy season." Feb. Tr. 337-38. But he kept abreast on a day-to-day basis with the operations of his sports betting business. As noted in Part I(C), above, King has expressly disclaimed reliance on the Excessive Fines Clause, so no test for disproportionality (which would probably be a tall order for King), or for deprivation of the ability to earn a living, applies to the court's consideration of the government's case for a forfeiture money judgment against King.
The net result of the government's forfeiture case against King is: no forfeiture of property other than the IRA account and a money judgment against King in the amount of $12,607,321.99.
Findings specific to Koralewski
Forfeiture of specific assets
As has been noted, the government seeks to forfeit the proceeds of the sale of Koralewski's house as a substitute res, as well as a gas lease and about $1,500 found in two bank accounts.
In support of the asset forfeiture it seeks, the government told the court, in its Forfeiture Brief, that: "Mr. Koralewski's only source of income derived from his
These representations to the court by the government, which are important underpinnings of the asset forfeiture the government seeks against Koralewski, require an examination of the evidence from the October jury trial.
Testifying as a government witness at the October trial, Bruce Middlebrook, a Legendz bookie in central Oklahoma, told the jury that "he always knew" that Koralewski had a legitimate job. Oct. Tr. 410. This included jobs at Home Depot and Burlington Coat Factory. Id.
Jansen testified at the October trial that, as part of his investigation, he never looked into Koralewski's employment history. Oct. Tr. 2110. So, he acknowledged that he "wouldn't have any idea of what [Koralewski's] employment history actually is." Id.
Later in the October trial, three months before the government filed its Forfeiture Brief telling the court that Koralewski's only source of income derived from his association with Legendz Sports, John Meoni, a homicide detective with the Denver Police Department, was called as a witness by Koralewski. Meoni testified that in about 2000, Koralewski moved to California and was employed by Home Depot there. Oct. Tr. 2215. Meoni stayed in contact with Koralewski. Id. Consequently, Meoni knew, and was able to testify, that, in California, Koralewski continued to work for Home Depot, after which Koralewski and his wife started "a sub shop or a deli shop." Id. At 2216. Around 2004, per Meoni, Koralewski moved back to Colorado. Meoni and Koralewski started a construction company, but that lasted only about two months. Id. At 2217. Koralewski then started working for his brother installing windows and doors, after which he took a job with Burlington Coat Factory in loss prevention. Id. This would have been in the heart of the conspiracy period alleged in the Indictment, during which, according to the government, Koralewski had no legitimate income.
Meoni's testimony at the October trial was specific and credible. The government did not take issue with his testimony, other than by softening its impact a bit by pointing to some exhibits indicating (correctly) that, during the relevant period, Koralewski also had a relationship with DSS and UDS International Software, both of which were Legendz entities. Oct. Tr. 2220-21.
As stated above, this testimony was given in the October, 2015 jury trial. Three months later, with nothing in the record to cast the slightest doubt on the testimony of Detective Meoni, to say nothing of the uncontradicted testimony of Middlebrook, a government witness, the government made its repeated representations to the court that Koralewski's only source of income derived from his association with Legendz. (The government's Forfeiture Brief, and its later filing repeating the same averment, doc. no. 2130, at 21, ¶ 144, cited no supporting evidence, mainly because none existed.)
At the forfeiture trial, after acknowledging most of the particulars described above as to Koralewski's history of legitimate employment during the conspiracy period (Tr. 672-73), Jansen acknowledged that he had not even been aware that Meoni had given the testimony described above. Tr. 673-74. Understandably, and to his credit, Jansen availed himself of the opportunity to clear the air on cross examination:
The government's general theory in support of forfeiture of Koralewski's assets is that he had no legitimate employment during the conspiracy period. The government's specific theory is that the house in Parker, Colorado was paid for with those monthly $4,500 checks which the court has found have not been shown to have represented illegal proceeds. Doc. no. 2242, at 43, ¶ 162 (referring to deposits from the Costa Rican bank and citing GX 1120 — $4,500 checks and deposits thereof). See also, Tr. 708-09 (Jansen confirming government's theory).
Both theories are without merit. The proceeds of the sale of Koralewski's house will not be forfeited. (And this is aside from the fact that the government could not, in any event, get both the proceeds of the sale of the house and a money judgment for the money used to pay for the house. Cf.,
Now for the gas lease. The government's singular statement in its Forfeiture Brief in support of forfeiture of the gas lease is: "Because Mr. Koralewski failed to earn legitimate income from 2003 through 2013, the gas lease is proceeds of illegal gambling." Doc. no. 1999-5, at 2. No further discussion is necessary. The gas lease will not be forfeited. Nor, for the same reasons, will the $1,500 in the bank accounts.
Forfeiture money judgment
The forfeiture money judgment against Koralewski (who the court has previously found not to be subject to joint and several liability) will be in the amount of $10,000. This is the amount previously found by the court in its conclusions regarding the government's proposed extrapolations and direct attributions. See, Part IX(C)(4), above. There is no issue as to foreseeability, because this $10,000 forfeiture is not imposed as a result of vicarious liability. As for analysis under the Excessive Fines Clause, the court is well-satisfied that the $10,000 forfeiture money judgment will be neither disproportionate under the
Findings specific to Tucker
Forfeiture of specific assets
At the forfeiture trial and in his briefing, Tucker devotes himself almost exclusively to his substantially successful arguments against the government's proposed extrapolation of betting proceeds attributable to Tucker. As for asset forfeiture, the government has, prima facie, substantiated its case for forfeiture of the account listed in paragraph 4 on p. 1 of doc. no. 1999-7 (the $3,490.64 bank account). As is discussed in Part VIII(A)(3) above, that account is the only specific asset remaining in play as to Tucker.
Forfeiture money judgment
As stated above, the beginning point for determination of the amount of
This brings the forfeiture case to a point that is pivotal for the government and for the three agents and two runners whose forfeitures have yet to be individually addressed: the application of the governing principles with respect to foreseeability, proportionality, and deprivation of the ability to earn a livelihood. These principles have been discussed at length in this order (in Parts II(B) and IV(A) as to foreseeability and in Part III as to proportionality and deprivation of livelihood). But it is appropriate to pause here to recap concisely the governing principles:
As an initial matter, the court concludes that, with respect to the forfeiture defendants now before the court, the dollar amount of the individual attribution (for instance, $221,064.00 as to Tucker) provides little guidance because, for several reasons, that quantification of proven individual activity is a poor proxy for what was foreseeable, to any one defendant, by way of illegal activity on the part of his co-conspirators. Deriving much guidance from that number would lead either to an arbitrarily high reckoning of foreseeability or to an arbitrarily low reckoning. In either case, it would add an element of arbitrariness to an already decidedly imprecise process.
A much more rational beginning point is, instead, the $12,607,321.99 figure representing the nominal joint liability exposure of each of these forfeiture defendants. With this figure in hand, the court next examines the respective roles of these defendants. What did they do that would give them knowledge of what their co-conspirators were doing? Tucker was a well-established Legendz agent in Florida. The evidence presented in three long jury trials and several other days of evidentiary hearings persuades the court that the three main geographic areas for the Legendz sports betting operation were Florida, Texas and California. Oklahoma and other smaller states were in the mix, but the evidence points fairly strongly to Florida, Texas and California as the predominant markets.
Tucker operated in Florida, but he had good reason to have working knowledge of
Based on Tucker's in-depth knowledge of Legendz activities in Florida and his knowledge, both general and specific, of the domestic U.S. activities of his co-conspirators, the court finds that betting activity giving rise to no less than
As reduced for foreseeability, $5,042,928.76 is the amount of Tucker's forfeiture money judgment exposure. The next step is consideration of the effect of the Excessive Fines Clause.
One aspect of the proportionality analysis that cuts in favor of the government is the fact that, to the extent that the reduction for foreseeability reflects a defendant's limited role in the organization's criminal activity, it would be double counting, of sorts, to also give that defendant the benefit of that limited role by way of a proportionality analysis. But the principles of foreseeability and proportionality do bring separate, and important, concepts into play, so the court will not treat the two as being completely overlapping.
As for Tucker's role in the Legendz organization, he was lower than King but higher than the runners. He was higher than his subagents and local bookies. He was a valued member of the Legendz organization. And in this business, the primary
The facts on which the court relies in addressing the issue of deprivation of future ability to earn a living are uncontroverted, which obviates any concern about allocation of the burden of proof, as discussed in Part IV(B), above. The relevant facts may be ascertained from Tucker's presentence report.
Tucker has more than $560,000 in liabilities. He has a significant negative net worth even if he is credited with the entire equity value of his house (i.e., even if the court disregards any spousal interest). Doc. no. 1821, at 29 (presentence report). His debts appear to be, at least in part, a legacy of a lifestyle that was augmented by his work as a Legendz agent. His liquid
Findings specific to Moran
Forfeiture of specific assets
As to Moran, the government seeks to forfeit $60,000 in currency, a money counter, a watch and a ring. Doc. no. 1999-3, at 1.
The court is satisfied that the $60,000 is forfeitable. From all the evidence, the court concludes quite readily that this was cash that was in Moran's possession only because of his service as a trusted Legendz runner. The nexus requirement has been satisfied.
The court has no evidence that would tend, at least directly, to establish a nexus as to the money counter. And the government does not proceed against the money counter on a facilitation theory. But the circumstantial evidence is rather compelling, in its totality, that this tool of the trade of a Legendz runner was either the property of the Legendz enterprise or was Moran's property, acquired with illegal gambling proceeds. Either way, the nexus has been established to the satisfaction of the court.
The nexus has not been established with respect to the watch and the ring. There is no evidence as to how long Moran had them or how he got them. They will not be forfeited.
Accordingly, the asset forfeiture as to Moran will consist of items 1 and 2 on doc. no. 1999-3, p. 1.
Forfeiture money judgment
In determining the amount of the forfeiture money judgment to be entered against Moran, the court takes the approach and applies the standards discussed above with respect to Tucker.
Taking into account those factors that are relevant in a reckoning of proportionality (but separate from foreseeability and antecedent to consideration of deprivation of future ability to earn a living), the court concludes that Moran's $1,891,098.28 exposure should be reduced by sixty percent (compare the corresponding ten percent reduction for Tucker). That leaves $756,439.31 as the court proceeds to consider the issue as to deprivation of future ability to earn a living.
Moran's assets consist of two cars valued at a total of $34,000. He has no debt. He is a fifty-six year old man with noticeably limited earning capacity. Compared to Tucker, Moran has a higher net worth, at $34,000, but less auspicious earning prospects. (Tucker has a diminished earning capacity, as the court has noted, but that capacity is "diminished" from a much higher level.)
Moran has, and supports, a minor child. Doc. no. 1632, at 21-22. The court has given careful consideration to the question of whether, in assessing the impact of a forfeiture on Moran's "future ability to earn a living,"
Findings specific to Robles
Forfeiture of specific assets
The government does not seek forfeiture of any assets belonging to Luis Robles.
Forfeiture money judgment
For purposes of the court's evaluation of what was foreseeable to Robles, it is clear that even though Robles' function within the Legendz organization was that of a runner, his familiarity with the operations of the enterprise was more like Tucker's than it was like Moran's. As the court noted in Part IV(A), above, in the
The court concludes that betting activity giving rise to no less than forty percent of the total amount of the nominal joint exposure was foreseeable to Robles. In short, the unlawful proceeds-generating activity Robles was in a position to foresee put him on a par with Tucker. Forty percent of $12,607,321.99 is $5,042,928.76.
Findings specific to Bramley
Forfeiture of specific assets
As stated in Part VIII(A)(6), the government seeks, by way of forfeiture of specific assets, Bramley's house, five investment accounts, his car, and slightly over $24,000 in U.S. currency, some of which is described as "collectible U.S. currency." Doc. no. 1999-2, at 1.
Bettor checks used to make mortgage payments amount to $114,882.41 (originally $117,968, but corrected to the lower figure. Tr. 522.). One problem is that these dollars are already, at the behest of the government, in the forfeiture money judgment calculation. See, Part IX(C)(3)(i), above. Another problem is that the government has made no pretense of separating the value attributable to illicit proceeds from the value that is not (doc. no. 1999-2 at 2-5; doc. no. 2242, at 31-32, ¶ 15) because the government argues, in essence, that it needn't show anything more than the application of bettor checks to the mortgage (which clearly did happen). That will not suffice. See,
The government's other theory is facilitation, the argument being that Bramley used the house to facilitate his bookmaking. Doc. no. 2242, at 32, ¶¶ 116-17. The government cites photographs taken when Bramley's house was searched. Tr. 516; doc. no. 2242, at 32, ¶ 116. They show: mortgage-related documents sitting on Bramley's desk; FedEx shipping supplies; cards (apparently debit-type cards) from legitimate casinos such as Bally's; a Scottrade account card; an adding machine; a camera; Texas driver's licenses and cash. GX 1284-1287; Tr. 515-21.
On the basis of these photos, Jansen ventured that Bramley's use of his office in his house "possibly facilitated the gambling enterprise." Tr. 521. The items in the photos do not amount to a smoking gun, individually or collectively. Indeed, it is of more than passing interest that a thorough search of the house of a prolific pay-per-head bookie did not turn up more damning papers than the ones described above. Searches of the homes of other bookies in
Bearing in mind that the government seeks to forfeit Bramley's entire house, not just his home office, the question is whether Bramley's use of his house to facilitate his bookmaking was anything more than incidental, as is discussed at length in Part II(F), above.
The court will not repeat its earlier discussion of the legal framework of the facilitation theory here. Suffice it to say that facilitation, as applied to a decidedly mixed-use asset, can be a slippery concept. Assuming, as seems reasonable, that Bramley did take care of some Legendz-related business from his home, it is clear that the Bramley house was not used to facilitate criminal activity in the way that a drug dealer would acquire and use a stash house to store illegal drugs or the cash generated by the sale of the drugs, or as a place to meet for the purpose of receiving and delivering the drugs.
As is discussed in Part II(F), the government's burden on the issue of facilitation is to show that the degree to which the property was used to facilitate the crime was substantial. Sporadic use of the property to facilitate criminal activity may, in those sporadic instances, make the prohibited conduct less difficult, but it is not enough that the property made the crime easier to commit in some incidental way. In that respect, there is a relevant comparison between the case at bar and the cases mentioned in Part II(F). In
Once again, the court's evaluation must be based on what the evidence fairly shows, and not on what the court might guess was really the extent to which
Jansen had no idea how much money attributed to Bramley was "tainted up versus clean or legitimate." Tr. 629-30. He had no idea how much of the money in the Scottrade accounts was dirty. Tr. 643. He "didn't do any tracing to see how much money is actually sourced by legitimate funds versus illegitimate funds within any account in this case." Tr. 649. The cases discussed in Part VI(A), above, especially the Tenth Circuit's decision in
The government originally asserted that Bramley drove a Mercedes Benz to meet Neil Myler. Doc. no. 1999-2, at 8. He may well have done that, but there is no evidence (and the government has cited none) to that effect. In Bramley's jury trial, Mercedes Benz cars were attributed to a truly remarkable number of individuals who owned or drove them, but not to Bramley. See, e.g., May Tr. at 242, 380, 446, 454, 909, 1125, 1154, 1297 and 1641. In his testimony, Myler did not associate Bramley with any particular car.
Surely, Bramley used some car to go meet Myler at Gecko's. The problem is that there is no evidence that he used the car the government alleges he owned. Given the property-specific nature of facilitation forfeiture, that is a problem. It would not have taken much for Myler to persuade the court that Bramley used a Mercedes to meet Myler at the restaurant, but he at least had to say that. At that point the court would have had to consider whether Bramley's use of the car for purposes related to the offenses of which he stands convicted was incidental — which might have been a somewhat easier argument for the government than is the case with respect to Bramley's house.
In its Forfeiture Brief, the government asserted that Bramley used funds from his Viewpoint Bank account to make payments on a Mercedes. Doc. no. 1999-2, at 8. For the reasons discussed above with respect to Bramley's financial accounts, that is of no moment. The government also asserted, originally, that a search of a Mercedes the government associates with Bramley yielded "a large sum of cash believed to be illegal gambling proceeds." Id. No evidence relating to any such cash was presented at Bramley's jury trial or at the forfeiture trial.
The Mercedes Benz the government attributes to Bramley will not be forfeited.
Jansen was vague about where in the Bramley house some of the cash was found when it was seized. Tr. 518, 520-21. Some of the cash was found in a desk drawer with a stapler. Tr. 520. Jansen could not connect the cash to "any suspected or known gambler in this case." Tr. 638. Jansen acknowledged that, as to the cash found in Bramley's house, "there's really no way to connect or disconnect that money from this case." Tr. 639. On the basis of sheer amount, the cash found in Bramley's house is suspicious. But the problem here — and, bearing in mind the burden of proof, this is the government's problem — is that this is cash, not kryptonite. It is true that the court has found the satchels of cash that were delivered to King by McFadden to be dirty money, but a stash of cash sitting in the house of a 74-year old man is not freighted with the same connotations. No one would be shocked to find out that this cash in fact had something to do with illegal gambling. But that possibility is not the equivalent of proof, even on a preponderance standard. The cash will not be forfeited.
Forfeiture money judgment
Bramley's bookmaking business was brisk enough that he had "a numbers guy down in Panama." May Tr. 853. This was Steve Polak. Id. Polak worked for Bramley in Panama, at least during the time before DSS relocated to its new quarters. May Tr. 491.
Bramley's knowledge of the Legendz organization and its operations put him on a par with Tucker. Based on his extensive knowledge of Legendz activities in Texas and his knowledge, both general and specific, of the domestic U.S. activities of his co-conspirators (gleaned from what he saw and heard on his trips to Panama, if from no other source), the court finds that betting activity giving rise to no less than forty percent of the total amount of the nominal joint exposure was foreseeable to Bramley. Forty percent of $12,607,321.99 is $5,042,928.76. Accordingly, as reduced for foreseeability, $5,042,928.76 is the amount of Bramley's forfeiture money judgment exposure. The next step is consideration of the effect of the Excessive Fines Clause.
The court concludes — eliminating the benefit Bramley has already received by way of consideration of foreseeability — that considerations of proportionality require a ten percent reduction in the amount otherwise forfeitable by way of a forfeiture money judgment. The resulting number is $4,538,635.88.
Findings specific to Diebner
Forfeiture of specific assets
The government originally sought to forfeit Diebner's house, three financial accounts, $8,401 in currency, and miscellaneous items of jewelry. Doc. no. 1999-4, at 1. None of these items were mentioned at the forfeiture trial or in the government's Proposed Findings of Fact or Conclusions of Law. They will not be forfeited.
Forfeiture money judgment
Antonio Jenkins-Lara, who spent a fair amount of time at or near the Legendz headquarters in Panama had no recollection of ever having seen Diebner. May Tr. 368. More tellingly, Karlo Stewart had only "heard the name." Id. 528. Stewart
Based on Diebner's limited knowledge of the scope of Legendz-related activities other than his own activities in Texas, the court finds that betting activity giving rise to no less than ten percent of the total amount of the nominal joint exposure was foreseeable to Diebner. Ten percent of $12,607,321.99 is $1,260,732.19.
Unlike Tucker and Bramley, Diebner has minor children — two of them, both younger than eleven. He is their provider. Doc. no. 1656 at 21. As is discussed above with respect to Moran, this is relevant to the present analysis. Taking into account Diebner's net worth and earning power, viewed in light of the responsibilities that bear on the question of just what constitutes "a living" in his case, the court concludes that Diebner should be rendered liable for $75,000 by way of a forfeiture money judgment.
Summary of forfeiture-related findings
Table 3 Results re: Forfeiture Money Judgment (All amounts in dollars) Joint Exposure Individual (individual attribution As reduced: As reduced: Defendant Attribution total + money Foreseeability Excessive Fines ("Agents" on GX C89) laundering total) King (See subtotal, below) 12,607,321.99 No reduction No reduction 144Koralewski 10,000.00 N/A N/A No reduction Tucker 221,064.00 12,607,321.99 5,042,928.76 200,000.00 Moran 0 12,607,321.99 1,891,098.28 35,000.00 Robles 110,459.00 12,607,321.99 5,042,928.76 100,000.00 Bramley 4,489,133.19 12,607,321.99 5,042,928.76 100,000.00 Diebner 792,100.00 12,607,321.99 1,260,732.19 75,000.00 Middlebrook 288,384.00 McFadden 988,000.00 ____________ Subtotal for 6,899,140.19 Attributions Add: Money 5,708,181.80 Laundering: _____________ Total: 12,607,321.99
The sum total due the government by way of the forfeiture money judgment is a unitary amount, as can be discerned from GX C89 and from the government's proposed findings and conclusions. Doc. no. 2242 at 48, ¶ 189. That is inherent in the government's theory of its forfeiture case: the government asserts that all of the forfeiture defendants are liable for all of the amount adjudicated to be due. But that unitary — i.e., joint — liability is moderated by the foreseeability requirement and the Excessive Fines Clause, to the extent set forth in this order with respect to some of the forfeiture defendants. The forfeiture money judgment liability of the forfeiture defendants is joint and several (except as to Koralewski, for reasons explained earlier), but no forfeiture defendant is liable for more than the amount stated in this order with respect to his individual forfeiture money judgment obligation. The liability is also joint in the sense that collection from any forfeiture defendant will be credited to all forfeiture defendants.
Forfeiture-Related Sanctions Against the United States
Diebner, joined by the other forfeiture defendants, asks the court to reduce the amount of a forfeiture money judgment otherwise appropriate "in light of the prosecutorial misconduct that has permeated these proceedings." Doc. no. 2274, at 10. Diebner cites
The question is whether this is such a case.
Diebner complains, in particular, of: "[O]bjectively incorrect assertions in the Government's forfeiture briefs." Doc. no. 2274, at 11 (referring to colloquy between court and government counsel at the conclusion of the forfeiture trial), and government attempts to "abuse and overreach with its money judgment calculations [and] extrapolations," elaborating that the proposed extrapolations are not "grounded in reality." Id.
These complaints are not frivolous, and will be addressed, but, as an initial matter the court should make clear what it will and will not consider with respect to the complaints advanced by Diebner and (by adoption) the other forfeiture defendants. At an earlier stage of this case, the court commented pointedly with respect to some aspects of the conduct of two of the government lawyers in this case.
What the court will consider are those matters that arose in the course of these forfeiture proceedings. The court's inquiry is two-fold: (i) What, exactly, occurred that could be considered relevant to the court's consideration of Diebner's complaint and request for sanctions, and (ii) What effect, if any, did those matters have on the outcome of these forfeiture proceedings.
Diebner is correct — the government has made significant objectively incorrect factual assertions in these forfeiture proceedings. That complaint is, of course significant in itself, but it also has some impact on the "abuse and overreach" of which Diebner complains. The material misstatements of fact that the government has made in writing are in some respects compounded by, and in some respects separate from, a good many vexing (and avoidable) factual problems inherent in the government's presentation at the forfeiture trial. Because of the interrelationships between the government's written statements and its presentation at the forfeiture trial, all of those matters will be addressed here.
The record shows (with references to the relevant parts of this order):
The matters summarized above, are, of course, described in detail in the cited sections of Part IX of this order. Not addressed there, but appropriate to address here, is some of the backstory.
The government's repeated untrue assertion that King had no lawful income during the conspiracy period has been noted several times in this order. That assertion, if true, would have led to a significantly more favorable result, for the government, than the result reached in this order with respect to forfeiture by Bartice King. Moreover, if the government attorneys and forfeiture investigators had been aware of the facts as to King's legitimate income, perhaps they could have dealt with that by marshaling evidence to establish that, in the grand scheme of things, that lawful income was so paltry as to be negligible in comparison to the proceeds generated by the illegal sports betting operation. The government, however, made no attempt to determine the ratio of legitimate funds to illegitimate funds going into the accounts it scrutinized in this case. Tr. 629, 649. For that reason, the following exchange during cross examination of Lowrance is noteworthy:
One or the other (and usually both) of the case agents were present in the courtroom during the jury trials in which it was made unmistakably clear, from government witnesses, that King did, in fact, have lawful entrepreneurial activities that generated lawful cash flow during the conspiracy period.
The forfeiture trial brought out, in cross examination of Jansen, similar concerns with respect to the representations made to the court about Koralewski:
At the end of the forfeiture trial, the court considered it appropriate to direct a limited inquiry to government counsel for the purpose of shedding more light on the matters that are addressed here:
This brings the court to one other aspect of the matter that is both relevant to the present inquiry and, aside from that, ought to be mentioned as a matter of fairness. The government has had a total of eight counsel of record in this case, in various combinations and at various times, only one of whom has been in the case from the beginning. The AUSAs who presented the forfeiture case were brought into the case at a late stage. The court is quite confident that neither those AUSAs nor any other attorneys in the U.S. Attorney's office for this district knowingly made misrepresentations of fact to the court. Having been assigned to the case about twelve years after the investigation began, more than two years after the original Indictment was returned, and after four jury trials had been completed, the AUSAs who were assigned to the case at the forfeiture stage were at the mercy of others on the prosecution team, and this was true to an extent far greater than would ordinarily be true, even in relatively complex cases. As for those on the prosecution team other than the newly-assigned AUSAs, the court will refrain, also as a matter of fairness, from making any extended evaluative comment on an individual basis. But it does appear to the court that, as far as some others on the prosecution team were concerned, the witnesses at the jury trials who gave testimony that was potentially inconvenient to the government for forfeiture purposes
Before determining whether this is "such a case," as contemplated by the Court in
Diebner, joined by the other forfeiture defendants, also argues that the court should reduce the amount of forfeiture because the government failed to give adequate or timely notice to the defendants as to the government's intent to seek a joint and several judgment against all the forfeiture defendants in the full amount the government sought at the forfeiture trial — more than $200 million (as reduced from $1 billion). See, Table 1 in Part IX(A), above. While the court has determined that the notice was not so insufficient as to preclude entry of a forfeiture money judgment, the court has not addressed defendants' notice argument as a possible ground for other remedial action.
The court recognizes that the amount of a forfeiture money judgment sought by the government may be a moving target as the evidence develops. That said, the government's stated intentions as to the size of the money judgments it has sought from each of the forfeiture defendants at different stages of this case, have been all over the lot. Here are some examples:
Then, despite its detailed representations in its Forfeiture Brief as to the relief it sought, the government asked, in its post-hearing proposing findings and conclusions, (doc. no. 2242, p. 48, ¶¶ 189, 190) for a money judgment against each of the forfeiture defendants (referring to "Mr. King and the defendants convicted of the RICO counts," which covers all of them) in the amount of $231,432,686.73 (or $98,911,830.31 if no extrapolation). As stated in Part VII of this order, the law allows the government a reasonable degree of flexibility in shaping its forfeiture case. The problem here is that given the number of defendants which the government chose to prosecute, the court put case management orders in place to govern these proceedings, with which the government complied in its Forfeiture Brief but then ignored in its subsequent filings by seeking a money judgment of over $200 million from everybody involved in these proceedings.
Two separate (but perhaps related) restraints on the court's discretionary power to impose a sanction on a litigant are in play here, and the court has concluded that these restraints are fatal to the forfeiture defendants' request for sanctions.
First, the request for imposition of sanctions on the government amounts, in this instance, to an appeal to the exercise of the court's inherent powers. In that vein, the court is mindful that "[b]ecause of their very potency, inherent powers must be exercised with restraint and discretion."
Second, and equally significant here, it is clear from the Supreme Court's decisions in
Both the need for restraint and the limitations on the purpose for which a sanction might, in these circumstances, be imposed, counsel denial of the forfeiture defendants' request for sanctions. To take the second factor first, the court will assure the forfeiture defendants that it has taken care to eliminate from its adjudication of the government's forfeiture claims any advantage the government might have gained on account of the matters addressed in this part of this order. In short, remedial action by way of imposition of sanctions on the government is not necessary to put the forfeiture defendants in as good a position as they would have been in had the government conducted itself punctiliously throughout these forfeiture proceedings. That alone requires denial of sanctions. But if it were a close question, the considerations of restraint discussed above would carry the day.
The forfeiture defendants' request for sanctions against the government is
This is as good a place as any to add one final note on this distasteful subject. Although extended evaluative commentary on the government's performance in this case might, by some lights, be appropriate, the court chooses not to go down that road. There is more that could be said, but the court has not, in this order, gone down that road any farther than necessary to fairly adjudicate the government's forfeiture claims against these forfeiture defendants, with, in some instances, an exposition of the reasons for which the record undermines the confidence the court might otherwise have in the reliability of the government's factual assertions. However, the court cannot but get the impression
The chain of events that brought this case to its present pass is long and complex. The court does not have all (and probably not nearly all) of the facts that would need to be on the table as a prerequisite to any more evaluative commentary than is already in this order. So the court will let the facts plainly shown by the record speak for themselves. The reader can decide for himself whether the government has approached the forfeiture case with any real sense of intellectual rigor. The reader can decide for himself whether the government's approach to this case bespeaks anything more plainly than a desire to run up the score — in this case, into the hundreds of millions. But one thing should be made clear. The court has not set out to embarrass the government in this order. To the extent, if any, that the government is embarrassed by any of the matters that are set out at length in this order, the government has embarrassed itself.
In accordance with Rule 32.2(b)(2)(B), Fed.R.Crim.P., preliminary orders of forfeiture preliminarily granting the relief to which the government has been found to be entitled will be entered on this date. Rule 32.2 states that "Unless doing so is impractical, the court must enter the preliminary order sufficiently in advance of sentencing to allow the parties to suggest revisions or modifications before the order becomes final as to the defendant under Rule 32.2(b)(4)," i.e. at the time of sentencing. Given the scope of this order, the court does not intend to revisit its adjudications of contested legal or factual issues. But if, for example, the court has misidentified property in this Memorandum Opinion and Order Re: Forfeiture, or in the individual preliminary orders of forfeiture to be entered separately later today, or if any party believes there is a mathematical error which should be corrected, that type of specific matter may be brought to the court's attention by motion filed pursuant to Rule 32.2(b)(2). If the parties agree regarding such matters, the motion shall so state. Any such motion is
Sentencing proceedings for the forfeiture defendants will be scheduled as will be set forth in Case Management Order No. 8, to be entered on this date.
BARTICE KING FORFEITURE OVERVIEW
Description Total Exhibit Legendz Payouts to BettorsLegendz Payouts to Bettors Based on Global $ 32,251,525.43 C49A-B; 1258; Data Payment $ 7,167,005.65 (Less Global Data Payment Sys) 108 Month Extrapolation: $ 25,084,519.78
AgentsTerry Campbell* $ 26,290,472.00 Ex. 496 Updated: $ 38.888,787.60 Ex. 497 Ralph Hernandez* $ 18,121,267.20 C51; Ex. 198 Kelly Ward Diebner** $ 16,770,000.00 FBI 302 Christopher Tanner* $ 15,143,910.00 C71; Ex. 528* Michael Lawhorn* $ 18,000,000.00 Trial testimony Lawhorn); Trial 4; page 1133-1135; Joseph Barry* $ 15,275,612.57 C55; Ex. 59; Paul Tucker* $ 7,958,304.00 C86; Ex. 546 Bruce Middlebrook* $ 4,449,353.14 1134H Rodger Bramley $ 4,953,478.78 C81; Ex. Paul Wilson $ 4,000,000.00 Ex. 61 Updated: $ 3,907,791.00 Leon Mark Moran* $ 6,491,205.00 Ex. 473 Joseph McFadden $ 1,784,800.00 Trial testimony (McFadden), Trial 4, pages 604-632 David Ross* $ 1,265,831.18 1393; 394; 395; 396; 397; 398 Updated: $ 5,485,268.45 Kory Koralewski $ 1,055,112.00 C73; Luis Robles $ 721,901.50 C78; Agent Total: $ 142,281,247.37
Money Laundering Accounts/ItemsLegendz Gamming Banco Nacional # 261 $ 3,746,816.83 46; 46A; C58A-B; 1264; 10/04/2005 to 07/21/2012 Global Data Payments Services HSBC Account $ 7,167,005.65 54; 54A; C49A-B; 1258; # 130-001 01/17/2007 to 01/13/2009 Platinum Advantage LTD, Bank of America $ 4,179,355.00 C42D; 1405A-B; #, 457 Investment Consulting Services Creditcorp Bank $ 4,630,377.83 55; 55A; C52A-D; 879A-E; 1261A-B; Account # 671 12/16/2009 to 02/26/2013 International Goldstore Credicorp Bank Account $ 3,613,897.27 C53A; C53B; 56; 56A; 1255; 1260; #, 574 MLAT Total deposited 6-8-2005 to 6-26-2012
Data Support Services Banco General Panama $ 5,425,621.68 43; 43A; C47A-C; 1255; # -9074-5 5-20-2004 to 5-31-2013 bank statements show deposits of $5,425,621.68 Grupo Legendz S.A. Banco Nacional $ 3,911,702.84 C50A-B; 1259; # 921 04/30/2008 to 04/18/2013 Fundacion Los Olivos Credicorp Bank $ 1,380,866.13 C48; 1256; # 701 06/25/2013 to 12/11/2013 Vaporama Internacional S.A. Banco General $ 1,934,515.94 C64A; C64B; 1267; Account # 632-3 07/17/2006 to 10/25/2013 Inversiones Altamonte Banco Panama $ 1,119,321.72 C54A-C; 1262; # 395 03/16/2012 to 10/15/2012 Inversiones Altamonte Credicorp Bank $ 336,463.38 C54D; C54E; 1262; # 657 12/11/2012 to 12/18/2013 Woodcastle Foundation Tower Bank Account $ 3,636,171.24 C66A; C66B; 1271; # 671-5 MLAT 12-1-2010 to 5-31-2013 Woodcastle Foundation Tower Bank Account $ 1,490,912.21 C65 A; C65B; 1271; # 780-8 MLAT 12-1-2010 to 5-31-2013 6 Monkeys S. DE R.L./Bartice King President $ 445,866.52 C41; 1266; Bank of Nova Scotia # 262 12/10/2010 to 04/17/2013 Bartice Alan King Bank of Nova Scotia $ 153,000.35 C41; 1261; # 385 09/13/2010 to 04/17/2013 King Related Money Orders payable to credit $ 245,136.55 C31; 1105; card companies 3/2008-9/2012 $ 43,417,030.14
Items Seized$45,809.56 in funds from Bank Account # $ 45,809.56 C18; C19.1; C19.2; 853; 1296 878 in the names of Bartice A. and Serena M. King at AmegyBank of Texas $7,772.58 in funds from Bank Account # $ 7,772.58 C18; 894 in the names of Bartice A. and Serena M. King at AmegyBank of Texas $35,469.61 in funds from Bank Account # $ 35,469.61 C40; 1041; 1205C; 494 in the name of Starting 5, L.L.C. at AmegyBank of Texas $1,239.97 in funds from Bank Account # $ 1,239.97 n/r 316 in the names of Serena M. King and Julian Samuel King at AmegyBank of Texas $2,266.79 in funds from Amegy Bank Account $ 2,266.79 n/r # 324 in the names of Serena M. King and Skyler Isabella Morgan King at AmegyBank of Texas $2,760.85 in funds from Bank Account $ 2,760.85 n/r # 332 in the names of Serena M. King and Alexis Angelena Le-Faye King at AmegyBank of Texas
$1,360.39 in funds from Bank Account # $ 1,360.39 n/r 340 in the names of Serena M. King and Aaliyah Jordan King at AmegyBank of Texas $1,247.98 in funds from Bank Account # $ 1,247.98 n/r 359 in the names of Serena M. King and Valentyna Jazmine King at AmegyBank of Texas $1,721.95 in funds from Certificate of Deposit $ 1,721.95 n/r Account # 756 in the names of Serena M. King and Josiah Anthonay Michael King at Ames Bank of Texas $5,048.23 in funds from Certificate of Deposit $ 5,048.23 C38; 1217A-F Account # 707 in the names of Serena M. King and Julian Samuel King at AmegyBank of Texas $5,048.23 in funds from Certificate of Deposit $ 5,048.23 C38; 1217A-F Account # 715 in the names of Serena M. King and Skyler Isabella Morgan King at AmegyBank of Texas $5,048.23 in funds from Certificate of Deposit $ 5,048.23 C38; 1217A-F Account # 723 in the names of Serena M. King and Alexis Angelena Le-Faye King at AmegyBank of Texas $5,048.23 in funds from Certificate of Deposit $ 5,048.23 C38; 1217A-F Account # 731 in the names of Serena M. King and Aaliyah Jordan King at AmegyBank of Texas $5,048.23 in funds from Certificate of Deposit $ 5,048.23 C38; 1217A-F Account # 749 in the names of Serena M. King and Valentyna Jazmine King at AmegyBank of Texas $978.18 in funds from Certificate of Deposit $ 978.18 n/r account # 367 in the names of Serena M. King and Josiah Anthony Michael King at Amegy Bank of Texas All funds in Invesco Acct # 982 in the $ 9,951.75 C39; 1218A-E; name of Bartice A. King All funds in Franklin Templeton Bank and Trust $ 11,438.43 n/r Company, Account # 826 in the name of Bartice A. King All funds in Franklin Templeton Bank and Trust $ 11,269.40 n/r Company Account: 804 in the name of Serena M. King 2013 Jeep Wrangler, VIN: $ 29,625.00 C23; 1200A-H; 1C4HJWEGODL567712 1969 Ford Mustang, VIN: 9R03F105499 $ 27,800.00 Myler Testimony, Trial 4, pages 1746-1747; 1027; 1028; 2009 Maserati, VIN: ZAMJK39A290046451 $ 70,700.00 C24; 1003; 1201A-E; $10,236.86 U.S. Currency $ 10,236.86 58 Pieces of Miscellaneous Jewelry $ 20,813.00 88 pairs of Miscellaneous Shoes/Boots $ 17,440.00 75 Miscellaneous Purses $ 20,602.00
One More Time 1015 Wurlitzer Phonograph $ 1,800.00 Music Jukebox Miscellaneous Sports Memorabilia (24 items) $ 3,238.00 $303,527.46 in lieu of 2 Palmer Crest, Spring, $ 303,527.46 C25; C36; C19.2; 853; C37; C37.1; 1049-1052; Texas, also described as Lot 1, Block 2, The 1105; 1216A; 1210; Woodlands, Village of Cochrans Crossing, Section 55, Partial Replat of Blocks 2, 3, & 4, an addition in Montgomery County, Texas 86 Blue Creek Place, Spring, Texas, also $ 176,000.00 C33; C33.1; 1213A-L; C19.2; 853; described as Lot 34, in Block 1, of the Woodlands Village of Sterling Ridge, Section 14, a subdivision in Montgomery County, Texas 82 Blue Creek Place, Spring, TX, also described $ 177,000.00 C34; 1214A-F; C35; 853; C19.2; 1215A-E as Lot 33, in Block 1, of the Woodlands Village of Sterling Ridge, Section 14, a subdivision in Montgomery County, Texas 30 Nestlewood Place, The Woodlands, Texas, $ 165,000.00 C27; 1204A-C; also described as Lot 59, in Block 1, of the Woodlands Village of Sterling Ridge, Section 60, a subdivision in Montgomery County, Texas 206 North Vesper Bend Circle, Spring, Texas, $ 137,000.00 C28; 1205A-K; 1057; also described as Lot 2, in Block 1, of The Woodlands Village of Sterling Ridge, Section 30, a subdivision in Montgomery County, Texas 22 Nestlewood Place, The Woodlands, Texas, $ 170,000.00 C26; 1203A-K; also described as Lot 60, in Block 1, of the Woodlands Village of Sterling Ridge, Section 60, a subdivision in Montgomery County, Texas Seized/Complaint Assets Sub-Total: $ 1,489,310.91 Legendz Payout Sub-Total: $ 25,084,519.78 Agent Sub-Total: $ 142,281,247.37 Money Laundering Accounts/Items Sub-Total $ 43,417,030.14 Money Judgment Grand Total: $ 209,293,486.38
235 F.3d at 537, quoting 101 F.3d at 1042 (ellipsis in original).
Cassella, § 26-4, pp. 952-53, states the test was already recognized in a majority of the circuits based on forfeiture statutes for drug offenses, and that although the test is codified in the civil forfeiture statute, it applies in criminal forfeiture cases as well.
As another example, with one exception — Bramley's residence in Plano, Texas (see, Doc. no. 2242, at 32, ¶ 116) — the government does not assert a facilitation theory as to any of the properties it seeks to forfeit in this case. (The government originally asserted a facilitation theory as to Bramley's Mercedes Benz car (doc. no. 1999-2, at 8) and as to Diebner's residence (doc. no. 1999-4, at 2). It no longer does so. See, Doc. no 2242, at 31-37 and 39-43.)
In any number of nooks and crannies of this case, it has occurred to the undersigned that perhaps some available but unasserted factual or legal theory might save a point for the government. But a case as massive and complex as this one simply does not permit that form of generosity. That is especially true where, as here, the government has had an exceptionally long time to formulate and substantiate its forfeiture theories.