Pubdate: 4 Jun 2001
Source: New York Law Journal (NY)
Copyright: 2001 NLP IP Company
Contact:  http://www.nylj.com/
Details: http://www.mapinc.org/media/615
Author: Mark Hamblett
Bookmark: http://www.mapinc.org/af.htm (Asset Forfeiture)

SECOND CIRCUIT BARS SENTENCE TIED TO WIFE'S ACTION

A defendant may not have his sentenced enhanced because of his wife's 
failure to surrender alleged criminal proceeds that are the subject of a 
forfeiture action, the U.S. Court of Appeals for the Second Circuit has ruled.

The appellate court reversed the decision of Southern District Judge John 
S. Martin, who had tacked 10 years onto the prison sentence of convicted 
pyramid scheme operator Patrick Bennett after the judge became convinced 
that Gwen Bennett was helping her husband hide assets.  The court then 
remanded for resentencing in United States v. Bennett, 00-1330.

Mr. Bennett was convicted in two different trials of a series of offenses, 
including money laundering and fraud, for using his photocopier leasing 
business to fleece investors. The jury at his second trial also returned a 
forfeiture verdict of $109 million.

The federal sentencing guidelines called for Mr. Bennett to be sentenced to 
somewhere between 188 to 235 months in prison, an upper limit of nearly 20 
years.

During the first of a series of hearings on the sentence, Judge Martin said 
"it was very important that every dollar of money that [Bennett] and his 
family had taken from investors in this case be repaid."

At a second hearing, Judge Martin found some of the assets placed in the 
name of Mrs. Bennett were fraud proceeds, such as the family home and 
interests the couple held in a race track and hotel. He told the couple 
that he would depart from the guidelines upward and sentence Mr. Bennett to 
30 years in prison if the assets were not returned.

Judge Martin also granted the government's motion for an order requiring 
Mr. Bennett to forfeit $109 million and, later, issued an amended order 
directing the forfeiture of Mr. Bennett's interests in the family home as 
well as the race track and hotel.

Statutory Remedy

On the appeal, the Second Circuit upheld Mr. Bennett's conviction, but said 
it found "very little precedent," bearing on the issue of whether Mr. 
Bennett's sentence could depend on his wife's actions.

"It is unusual for a sentencing judge to select a presumptive sentence and 
then state that the sentence will be increased if some action the judge 
deems appropriate is not taken," Senior Judge Jon O. Newman said. "It is 
even more unusual to use the threat of an increased sentence to compel 
action by someone other than the defendant."

But the court said it did not need to explore the authority of a judge's 
power to use the threat of an increased sentence to compel a defendant or 
third party to act, because "in this case the use of such power conflicts 
with the statutory remedy that Congress has established to recapture the 
proceeds of various unlawful activities, including money laundering."

That remedy, the court said, is an action to recapture proceeds in the 
hands of a third party, "subject to the third party's opportunity to 
establish a right of ownership superior to the Government's or a status as 
a bone fide purchaser reasonably without cause to believe that the property 
was subject to forfeiture."

Here, Judge Newman said, threatening Mr. Bennett with additional prison 
time if his wife refused to surrender property she claims is her own would 
"undermine the statutory right accorded her by the forfeiture statute."

Mrs. Bennett was in the process of appealing the forfeiture order for the 
family home, he said, and a decision in that case will determine who has 
the right to that property - the government or Mrs. Bennett.

Legitimate Objective

"The 10-year sentencing enhancement was designed to cause her to surrender 
her statutory rights (whatever their ultimate merit), and the 
impermissibility of imposing punishment for that purpose is not avoided 
simply because Mrs. Bennett stood her ground and refused to accept the 
sentencing judge's offer not to enhance her husband's sentence if she 
capitulated," Judge Newman said.

In remanding the case for resentencing, Judge Newman said that Judge Martin 
can consider, "apart from Mrs. Bennett's refusal to surrender the 
properties, the defendant's own acts of concealment or any other factors" 
that might warrant a departure above the 20-year sentence.

"We fully understand Judge Martin's concern to aid the victims of Bennett's 
crimes," Judge Newman said, in closing. "Despite the legitimacy of these 
objectives, they may not be achieved by the threat of added punishment for 
Bennett unless his wife surrenders her statutory right to contest the 
forfeiture of properties that are at least nominally hers."

Judge Jose A. Cabranes and Judge Alvin W. Thompson of the U.S. District 
Court for the District of Connecticut, sitting by designation, joined in 
the opinion.

Paul E. Wagner and Michael D. Pinnisi of Brown, Pinnisi & Michaels in 
Ithaca represented Patrick Bennett. Assistant U.S. Attorneys Patrick J. 
Smith, Richard D. Owens, John P. Collins and David Raymond Lewis 
represented the government.

Date Received: June 01, 2001
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