$14M forfeiture order upheld in fraud case.

Byline: Eric T. Berkman

A businessman convicted of defrauding clients of his property exchange company was not entitled to have a jury set the amount of his criminal forfeiture, the 1st U.S. Circuit Court of Appeals has ruled.

Defendant Daniel Carpenter ran a business that provided tax benefits to clients by investing proceeds from their property sales until they purchased replacement property. He was found guilty of mail and wire fraud for engaging in risky option trading strategies with clients' money, running counter to promises he made about the security of their funds and causing more than $9 million in losses.

After his conviction was affirmed, a U.S. District Court judge ordered that Carpenter forfeit $14 million, apparently based on amounts invested.

Carpenter argued on appeal that, under the Sixth Amendment, forfeiture was an issue for the jury.

But the 1st Circuit disagreed.

"The short answer is that the Supreme Court's [1995] decision in Libretti v. United States holds that the Sixth Amendment does not require that the facts underlying a criminal forfeiture be found by a jury," Judge Sandra L. Lynch wrote for the court. "We held in [our 2006 decision in] United States v. Ortiz-Cintrn that we are bound by that holding in Libretti. We are not free to override Supreme Court precedent."

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United States v. Carpenter, Lawyers Weekly No. 01-230-19 (22 pages)

THE ISSUE: Was a businessman who was convicted of defrauding his property-exchange clients entitled to have a jury set the amount of his criminal forfeiture?

DECISION: No (1st U.S. Circuit Court of Appeals)

LAWYERS: Kirby A. Heller, Brian A. Benczkowski and Matthew S. Miner, of the U.S. Department of Justice, Washington, D.C.; U.S. Attorney Andrew E. Lelling, Boston (government)

Kimberly Homan of Boston (defense)[/box]

The panel also rejected the defendant's arguments that the forfeiture order was invalid because he never took ownership of client property and thus never "acquired" it within the meaning of the relevant forfeiture statute, 18 U.S. 981(a)(2)(B), and that an order requiring him to forfeit a much larger sum than he gained constituted an excessive fine in violation of the Eighth Amendment.

Shaky precedent?

U.S. Attorney Andrew E. Lelling, whose office handled Carpenter's prosecution, said in a prepared statement that he was pleased with the decision and would "continue to pursue the proceeds of fraud, where appropriate."

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