In the
United States Court of Appeals
For the Seventh Circuit
No. 13-1375
UNITED STATES OF AMERICA,
Plaintiff-Appellee,
v.
KERRY L. SMITH,
Defendant-Appellant.
Appeal from the United States District Court
for the Southern District of Illinois.
No. 4:07-cr-40038-jpg-1 — J. Phil Gilbert, Judge.
ARGUED FEBRUARY 19, 2014 — DECIDED OCTOBER 24, 2014
Before POSNER, RIPPLE and KANNE, Circuit Judges.
RIPPLE, Circuit Judge. Kerry L. Smith was indicted for
conspiring to distribute marijuana, in violation of 21 U.S.C.
§§ 841 and 846, purchasing a vehicle with currency derived
from an unlawful activity, in violation of 18 U.S.C. § 1957;
concealing information with the intent to defraud the Social
2 No. 13-1375
Security Administration, in violation of 42 U.S.C. § 1383(a)(3);1
and making false statements on applications for food stamps,
in violation of 18 U.S.C. § 1001(a)(2). He signed a proffer
agreement and later pleaded guilty to each of those charges.
After a sentencing and forfeiture hearing, the district court
imposed a forfeiture order that included the forfeiture of eight
parcels of real property owned by Mr. Smith. The Government
claimed these parcels were proceeds from his illegal activities.
Mr. Smith timely appealed the district court’s forfeiture
ruling; he contended that, in determining that the properties
were subject to forfeiture, the district court had relied improp-
erly on statements that he had made during proffer discus-
sions. We now affirm the district court’s judgment. The district
court did not err in admitting testimony about Mr. Smith’s
proffer statements. Furthermore, its determination that the
eight properties were subject to forfeiture as proceeds of his
drug trafficking was supported by a preponderance of the
evidence. In the alternative, the properties are clearly subject
to forfeiture as substitute assets.
1
The Government appears mistakenly to have cited 42 U.S.C. § 1383(a)(3)
in Count Three of the Superseding Indictment instead of 42 U.S.C.
§ 1320a-7b(a)(3). Neither party contested the validity of the charge.
No. 13-1375 3
I
BACKGROUND
A.
Before pleading guilty to the crimes charged in the indict-
ment, Mr. Smith participated in two proffer interviews on May
21 and July 2, 2007. Prior to the beginning of those interviews,
he signed a proffer letter. His counsel also signed the letter.
The proffer letter set forth the limits on how the Government
could use any information that Mr. Smith provided in the
proffer interviews. The letter first stated that “no statements or
information provided by [Mr. Smith] … will be used against
[him] in any criminal case during the government’s case in
chief.”2 It explicitly noted, “That is, however, the
only limitation on the use the government may make of
[Mr. Smith’s] statements.”3
The remainder of the letter discussed various situations in
which the Government could use Mr. Smith’s proffer state-
ments. It specifically informed Mr. Smith and his counsel that
the Government could make derivative use of any information
revealed during the proffer sessions:
[T]he government may make derivative use of any
information revealed during the proffer. The gov-
ernment may pursue any investigative leads sug-
gested by … information received … . Thus, should
[Mr. Smith] proceed to trial, the government will not
2
R.71-1 at 1.
3
Id. (emphasis in original).
4 No. 13-1375
have to prove that the evidence it would introduce
at trial is not derived from any statements made by
or other information received from [Mr. Smith]
during the … proffer[.][4]
The proffer letter also stated that information he provided
could be used against him at trial if he took a position inconsis-
tent with his proffer statements:
[I]f … [Mr. Smith] were to testify contrary to the
substance of his proffer statement, or through any
manner whatsoever, either personally or through an
attorney or other representative, … present a posi-
tion inconsistent with the information provided in
his proffer statement, the government may use
either as evidence in chief, or rebuttal evidence, any
statements made or other information provided by
[him]. This provision is necessary to assure that no
court or jury is misled by receiving information or
implications materially different from that provided
by [Mr. Smith]. In addition, we want to emphasize
that the above-mentioned examples are not totally
inclusive of the uses the government may make of
… [the] proffer or discussion.[5]
The letter further provided that Mr. Smith’s proffer statements
could be presented to the district court during sentencing:
4
Id.
5
Id. at 2.
No. 13-1375 5
[T]he government has agreed that no … information
provided by [Mr. Smith] during the … discussion
will be used against [him] in any criminal case
during the government’s case in chief. The govern-
ment will, however, be free to provide any such informa-
tion to any United States District Court in the event [he]
either pleads guilty or is found guilty … .
[N]o self-incriminating information … will be used
to enhance the Offense Level against [Mr. Smith]
except as provided in [Section 1B1.8 of the Sentenc-
ing Guidelines]. The government may, however, use
any … information provided by [him] to rebut
evidence or arguments at sentencing materially
different from any statements made or other infor-
mation provided by [him] during the … discus-
sion.[6]
The proffer letter did not recite Federal Rule of Criminal
Procedure 11(f) (“Rule 11”), which states that “[t]he admissibil-
ity or inadmissibility of … a plea discussion[] and any related
statement is governed by Federal Rule of Evidence 410”(“Rule
410”).7
6
Id. (emphasis added).
7
Federal Rule of Evidence 410 states:
(a) Prohibited Uses. In a civil or criminal
case, evidence of the following is not admissible
against the defendant who made the plea or
participated in the plea discussions:
(continued...)
6 No. 13-1375
During the first proffer session, Mr. Smith admitted that he
had trafficked in marijuana and described the quantities and
amounts of money typically involved in his transactions.
7
(...continued)
(1) a guilty plea that was later
withdrawn;
(2) a nolo contendere plea;
(3) a statement made during a
proceeding on either of those pleas under
Federal Rule of Criminal Procedure 11 or
a comparable state procedure; or
(4) a statement made during plea
discussions with an attorney for the pros-
ecuting authority if the discussions did
not result in a guilty plea or they resulted
in a later-withdrawn guilty plea.
(b) Exceptions. The court may admit a
statement described in Rule 410(a)(3) or (4):
(1) in any proceeding in which
another statement made during the same
plea or plea discussions has been intro-
duced, if in fairness the statements ought
to be considered together; or
(2) in a criminal proceeding for
perjury or false statement, if the defen-
dant made the statement under oath, on
the record, and with counsel present.
No. 13-1375 7
During the second proffer session, Mr. Smith admitted that he
had used proceeds from his drug trafficking to purchase real
estate and vehicles. Specifically, Mr. Smith told the Govern-
ment that he had used drug proceeds to purchase real property
at 317 Birch Lane, 309 S. Crestview, 605 E. Snider and 1808
W. Freeman in Carbondale, Illinois. He also admitted that his
purchases of real property at 501 E. Snider and 1005 E. Cindy
in Carbondale, Illinois, were tied indirectly to drug proceeds
because those properties were financed in part from sales or
loans from property that had been purchased with drug
proceeds.
After the proffer sessions, Mr. Smith moved for a substitu-
tion of counsel. He wanted to replace his attorney, John Rogers,
with new counsel, Beau Brindley. The district court permitted
Rogers to withdraw, but denied the request from Mr. Brindley
to substitute as Mr. Smith’s counsel and to continue an
impending trial date. The district court then appointed
replacement counsel for Mr. Smith because of his indigence.
He subsequently pleaded guilty to all of the charges in the
superseding indictment, and the district court entered a
judgment of conviction against him.
We overturned that conviction because, by denying the
motion to substitute Mr. Brindley and to continue the trial
date, the district court had denied Mr. Smith his Sixth Amend-
ment right to choose his counsel. United States v. Smith, 618
F.3d 657, 665–67 (7th Cir. 2010). We remanded with instruc-
tions to allow Mr. Smith to withdraw his initial guilty plea.
Mr. Smith then retained Mr. Brindley as his counsel and
withdrew his earlier plea.
8 No. 13-1375
Under the guidance of his preferred counsel, Mr. Brindley,
Mr. Smith later entered a new guilty plea to all of the charges
in the Government’s superseding indictment. He contested,
however, Count Six of that indictment, which sought forfeiture
of property that the Government alleged was tainted by
Mr. Smith’s criminal activity. Specifically, in Count Six, the
Government charged that “any and all property constituting or
derived from any proceeds [Mr. Smith] obtained directly or
indirectly as a result of” his crimes was subject to forfeiture;8 it
also specified eight parcels of real property that Mr. Smith
owned in Carbondale, Illinois, as subject to forfeiture.9 Those
properties included five properties that Mr. Smith had men-
tioned during the proffer sessions (317 Birch Lane, 309
S. Crestview, 1808 W. Freeman, 501 E. Snider and 1005
E. Cindy), as well as three other properties that he had not
mentioned (111 S. Dixon, 403 N. University and 313 Crestview
Lane).
At the forfeiture and sentencing hearing, the parties
stipulated that Mr. Smith was responsible for the sale of 399
kilograms of marijuana, sold at $900 per pound. They also
agreed that Mr. Smith had two other sources of income during
the relevant time: disability income from Social Security and
rental income from real estate properties that he owned. The
8
We note that revised Federal Rule of Criminal Procedure 32.2(a)
specifically provides that the Government’s intention to seek forfeiture of
property as part of any sentence “should not be designated as a count of the
indictment or information.”
9
R.22 at 4–7.
No. 13-1375 9
Government presented evidence that the disputed properties
were connected to Mr. Smith’s illicit drug activities.
Agent Robert Anderson of the IRS Criminal Investigation
Division testified during the first session of the hearing on
January 17, 2013. He recounted that he had investigated
Mr. Smith’s finances and that Mr. Smith had received far more
income during the relevant period than he had reported to the
IRS. In support of his testimony, Agent Anderson relied on
records from various financial institutions to reach his conclu-
sions about Mr. Smith’s income. Agent Anderson testified that
Mr. Smith’s expenditures during the relevant period had far
exceeded what Mr. Smith could have paid from his Social
Security disability benefits and rental income unconnected to
his criminal activity.
Agent Anderson also testified:
Through testimony that we have from
Kerry Smith, he advised us that he commingled both
his drug proceeds and other proceeds from the sale
of property and money from other sources into his
bank accounts.[10]
Defense counsel objected to Agent Anderson’s reference to
testimony from Mr. Smith “for foundation[,] for [the] time,
[and the] place, when this testimony supposedly happened.”11
10
R.261 at 25.
11
Id.
10 No. 13-1375
The district court ruled that defense counsel could
cross-examine the witness on those points.12
On cross-examination, defense counsel asked
Agent Anderson:
Now, you did not specifically observe where
Smith got the cash payments he might have made
on any property in the list that you went through,
did you?
….
You can’t identify a specific drug transaction that
happened that can then be connected to any specific
payment he made on any property, can you?[13]
Agent Anderson admitted that he could not. On redirect
examination, the Government then questioned
12
Defense counsel also objected to Agent Anderson’s testimony that,
“[b]ased on interviews we conducted throughout the investigation,” he had
learned that certain checks were purchased by another individual on
Mr. Smith’s behalf. Id. at 33–34. Defense counsel objected that the testimony
was inadmissible hearsay, but the district court responded that hearsay was
acceptable at a sentencing hearing. Defense counsel stated his belief that
hearsay was not admissible at a forfeiture hearing. The Government offered
to submit cases holding that forfeiture is “a preponderance [of the evidence
standard] like the rest of sentencing” and that “hearsay or any other reliable
evidence can be received at the forfeiture hearing.” Id. at 34. The district
court reviewed the cases; defense counsel then objected that the testimony
was not reliable evidence within the meaning of the standard. The parties
eventually agreed that the district court could determine the reliability of
the testimony about the checks based on a full interview report.
13
Id. at 69.
No. 13-1375 11
Agent Anderson about whether Mr. Smith had stated in his
proffer interview that he had used drug proceeds to purchase
the 1808 W. Freeman property. Agent Anderson responded
affirmatively.
Defense counsel objected to the redirect testimony about
what Mr. Smith had said in his proffer interviews. He main-
tained that nothing from the proffer interviews was admissible
for any purpose. He contended that the proffer letter’s terms,
which permitted the use of proffer statements if defense
counsel took a position contrary to the substance of those
statements, did not control the admissibility of the proffer
statements because Mr. Smith had a right under Rule 11 and
Rule 410 not to have statements made as part of plea negotia-
tions used against him—a right he had not waived in a
knowing and voluntary manner. In defense counsel’s view,
absent such a knowing and voluntary waiver by Mr. Smith,
everything from the proffer sessions had to be excluded under
Rule 11. Defense counsel asserted:
Rule 11(f) indicates that the admissibility of any plea
discussion is governed by the language from Rule
410 of the Federal Rules of Evidence. And if you go
back to Federal Rule 410, 410 says any statement
made by a defendant through a representative of the
Government for purposes of plea negotiation cannot
be used against him.
Rule 11 adopts that with respect to plea discus-
sions generally and says[] … that’s governed by
Rule 410 in terms of admissibility.
12 No. 13-1375
It’s our position that that means the statements
[from the proffer session] couldn’t be used unless
there’s a waiver. The proffer letter constitutes a
waiver [only] if it’s knowing and voluntary.[14]
In response to questions from the district court, defense
counsel added that his argument was premised on Federal
Rule of Evidence 410(a)(4), which provides that statements
made during plea discussions are not admissible as evidence
against the defendant in a civil or criminal case “if the discus-
sions did not result in a guilty plea or they resulted in a later-
withdrawn guilty plea.” Defense counsel argued that this
provision applied to Mr. Smith’s proffer statements because he
had withdrawn his first guilty plea. In his view, the proffer
discussions did not result in a plea because we overturned
Mr. Smith’s initial conviction on Sixth Amendment grounds
and allowed him to withdraw his first guilty plea. Defense
counsel asserted that Mr. Smith’s second guilty plea “was not
pursuant to those [proffer] negotiations.”15
Counsel argued that Mr. Smith not only had a right not to
have the proffer statements used against him but that the
proffer letter was inadequate to show a valid waiver of that
right. Counsel described his objection:
The Government’s proffer letter … does not in the
view of the defense advise Mr. Smith of the preexist-
ing right he had under Rule 11 and under Rule 410
14
Id. at 77.
15
Id. at 84.
No. 13-1375 13
not to have statements he made for purposes of
negotiating pleas to the Government used against
him.
If that right is not made known to him by way of
the contents of the document, and the document
does not establish that he knew that he had a right,
the document cannot consequently establish that he
voluntarily waived that right.
Therefore, it is our position that the proffer letter
does not constitute a voluntary waiver of the Rule 11
and Rule 410 protections[] … . And as a result, the
statement should not be admissible. …
….
… My objection is based on the fact that the letter
itself and no evidence that the Government can
provide indicates that Mr. Smith ever had knowl-
edge that, before signing that, he had a right not to
have these statements used at all, absent any agree-
ment. … The letter doesn’t indicate that he knew
about [that right] or waived it.[16]
In short, defense counsel argued that (1) Rule 410, as
incorporated by Rule 11(f), applied at the forfeiture and
sentencing stage; (2) Mr. Smith’s proffer statements were made
during plea discussions that resulted in a later-withdrawn
guilty plea within the meaning of Rule 410(a)(4); (3) the proffer
statements therefore were barred by Rule 410 absent a waiver;
16
Id. at 73–74.
14 No. 13-1375
and (4) there was no knowing and voluntary waiver of
Mr. Smith’s right not to have the statements admitted because
the proffer letter does not memorialize any such waiver.
The Government responded that the proffer information
was admissible at the forfeiture and sentencing hearing. The
Government further argued that, in any event, defense counsel
had not properly raised the argument that Mr. Smith’s accep-
tance of proffer terms was not knowing and voluntary. In this
respect, the Government first submitted that it had been given
“no notice” of defense counsel’s argument and that the
argument was “not timely.”17 Turning to its principal point, the
Government took issue with defense counsel’s contention that
the Government must “put[] forth some affirmative evidence
that [it had] advised the defendant of these rights.”18 It noted
that Mr. Smith had been represented by counsel when he
signed the letter and also urged that “the burden would be on
the defendant to at least come forward and say[] … [that his
attorney] never advised [him] of these things.”19
The district court did not accept the Government’s prelimi-
nary argument that defense counsel’s contentions were
untimely. It then ruled that, under the terms of the proffer
letter, the Government could use Mr. Smith’s proffer state-
ments “that appear … from his position here and from the
cross-examination of counsel [to] be contrary to” his proffer
17
Id. at 79, 81.
18
Id. at 78.
19
Id. at 80.
No. 13-1375 15
statements. 2 0 It further ruled that, through his
cross-examination of Agent Anderson, defense counsel had
opened the door to a discussion about whether Mr. Smith
admitted to using drug proceeds for the disputed properties.
Following the district court’s ruling, Agent Anderson
testified further. He stated that Mr. Smith had said during the
proffer sessions that several of his properties, including 309
Crestview, 605 E. Snider and 1808 W. Freeman, were pur-
chased at least in part with drug proceeds.
B.
At the hearing, the district court ruled that the properties
were forfeitable under 21 U.S.C. § 853(a) as proceeds from
Mr. Smith’s drug trafficking.21 The district court noted that
Mr. Smith had two other sources of income during the relevant
time: disability income from Social Security and rental income
from real estate properties that he owned. The court first
concluded that Mr. Smith’s disability income was insufficient
to account for the purchase of the properties. It then concluded
that Mr. Smith’s rental income was “ill-gotten gains from drug
sale[s]” because it “was derived … from purchases … funded
20
Id. at 89.
21
The district court was required to find that the disputed properties were
forfeitable by a preponderance of the evidence. United States v. Melendez, 401
F.3d 851, 856 (7th Cir. 2005).
16 No. 13-1375
primarily from Smith’s drug proceeds.”22 Even if the rental
income were legitimate, the district court further determined,
“his legitimate income from both the [Social Security] and
rental income would not be enough to justify his cash flow or
the purchases that he made.”23 The district court noted that,
under 21 U.S.C. § 853(d), there is a rebuttable presumption that
Mr. Smith’s disputed properties were subject to forfeiture since
they were acquired during or near the period of his criminal
activity, and “there is no likely source for [them] other than the
proceeds of the sale of his drugs.”24
The district court imposed a forfeiture judgment of $790,020
to reflect the admitted proceeds of Mr. Smith’s drug sales. The
forfeiture judgment listed various property, including the eight
parcels of real property at issue here, as forfeitable because
they constituted or were derived from Mr. Smith’s marijuana
proceeds. The district court’s forfeiture order also allowed the
forfeiture of substitute assets to reach the $790,020 judgment.25
22
R.262 at 176.
23
Id.
24
Id. at 175. The parties do not dispute when the property was acquired.
25
The forfeiture order stated:
A monetary forfeiture judgment is hereby entered
in favor of the United States against Kerry Smith in the
amount of $790,020.00. The net proceeds from the sale of
the above-listed specific property items shall be credited
towards the $790,020.00 judgment. The United States may,
(continued...)
No. 13-1375 17
II
DISCUSSION
A.
Mr. Smith presents us with a single issue—the legality of
the forfeiture of eight particular properties.26 The Government
claimed, and the district court found, that the properties were
subject to forfeiture because they were purchased with funds
derived from Mr. Smith’s illicit drug transactions. In the
alternative, the Government argued that the properties were
subject to forfeiture as substitute property.
25
(...continued)
at its option, enforce said judgment as a forfeiture judg-
ment with the ability to seek to forfeiture substitute assets;
enforce said judgment as an ordinary monetary judgment
in favor of the United States by any legal means; or enforce
said judgment as a combination of the foregoing as long as
the United States does not obtain double recovery in excess
of the total amount of the judgment.
The Court specifically finds that with respect to the
$790,020.00 in drug proceeds, not all of the proceeds, as a
result of the acts and omissions of the defendant, can be
located upon the exercise of due diligence and that the
forfeiture of substitute property pursuant to 21 U.S.C.
§ 853(p) is appropriate.
R.246-1 at 5.
26
The district court had jurisdiction under 18 U.S.C. § 3231. This court has
jurisdiction over this appeal under 28 U.S.C. § 1291.
18 No. 13-1375
Criminal forfeiture is considered to be punishment and
therefore is part of the sentencing process. Libretti v. United
States, 516 U.S. 29, 39 (1995). The Government therefore has the
ultimate burden of establishing the forfeitures by a preponder-
ance of the evidence. United States v. Patel, 131 F.3d 1195, 1200
(7th Cir. 1997). We review factual findings of the district court
made in the course of adjudicating a forfeiture for clear error.
United States v. Melendez, 401 F.3d 851, 856 (7th Cir. 2005).
The forfeiture approved by the district court was calculated
on the basis of Mr. Smith’s relevant conduct: He had sold 877.8
pounds of marijuana at $900 per pound. Consequently, the
district court entered an in personam judgment for $790,020.
Mr. Smith does not dispute the correctness of this in personam
judgment. What Mr. Smith does dispute is the district court’s
decision to permit the Government to seize, pursuant to that
forfeiture judgment, the eight properties specifically named in
the forfeiture order. After our study of the record and briefs,
and after hearing from counsel at oral argument, we conclude
that Mr. Smith’s contention that these properties cannot be
seized under the order must fail.
1.
We begin by examining in some detail Mr. Smith’s precise
contention. As we have noted, Mr. Smith contests the district
court’s decision that eight parcels of real property were subject
to forfeiture as proceeds of his drug trafficking.27 In his view,
27
In his reply brief, Mr. Smith also contends for the first time that the
(continued...)
No. 13-1375 19
those parcels were tied to his illicit activities only by the
statements that he made to the Government in his proffer
interview, and, therefore, those proffer statements were
improperly admitted in the forfeiture proceedings.
It is also important to note the basis of Mr. Smith’s conten-
tion that his proffer statements were improperly admitted. He
does not claim that the district court erred in concluding that
these statements were admissible under the terms of the
proffer letter. Rather, he contends his statements were not
admissible because there was insufficient evidence to establish
that he knowingly and voluntarily had waived his alleged
right under Rules 11 and 410. To show that he made a knowing
and voluntary waiver, he contends, the Government must
demonstrate that he was “informed of his pre-existing right to
have such statements protected from disclosure”28 before he
signed the proffer letter permitting disclosure in certain
circumstances.
Mr. Smith maintains that these proffer statements were the
only evidence that his eight parcels of real property were
purchased with drug trafficking proceeds and therefore were
subject to forfeiture. He therefore submits that the Government
cannot justify the forfeiture of these parcels under 21 U.S.C.
§ 853(a) as proceeds from or connected to illicit activity
27
(...continued)
properties cannot be seized as substitute property because the district court
treated them as proceeds. Reply Br. 2. We address that argument infra Part
II.B.1.
28
Appellant’s Br. 6.
20 No. 13-1375
without his proffer statements. In Mr. Smith’s view, the
Government’s reliance on a “net worth” analysis under section
853(d) of that statute is infirm. The net worth theory compares
legitimate income to expenditures; excess expenditures are
presumed to come from illegitimate sources. In order to apply
this theory to his disputed properties, he notes, the court must
accept the conclusion that his rental income was tainted
because the rental properties were purchased with ill-gotten
gains from his drug trafficking. That conclusion, he submits, is
based on his improperly admitted proffer statements. Without
admissible proof that the rental income was tainted, he
contends, the Government cannot argue that there was no
likely legitimate source for the funds used to purchase the
properties disputed here.
2.
We first address the Government’s submission that
Mr. Smith has waived the right to make these admissibility
arguments on appeal by failing to raise those arguments in
advance of the district court’s forfeiture and sentencing
hearing. The Government had notified Mr. Smith of its
intention to introduce his proffer statements in advance of the
hearing. Mr. Smith did not object, however, until the hearing,
when Agent Anderson testified about Mr. Smith’s proffer
statements. In the Government’s view, his arguments were, by
that point, untimely.
Although the Government was not notified of Mr. Smith’s
arguments before the hearing, the Government had adequate
time to respond. The hearing was split into two sessions, one
No. 13-1375 21
on January 17 and one on February 14, 2013. Defense counsel
clearly laid out the objection during the first session. The
Government therefore had time to prepare a response before
the second session of the hearing. In any event, the district
court considered and ruled on Mr. Smith’s argument without
finding it to be waived. A district court “may, for good cause,
allow a party to make a new objection at any time before
sentence is imposed” during sentencing. Fed. R. Crim. P.
32(i)(1)(D). Like the district court, we decline to hold that
Mr. Smith waived his challenge to the admissibility of the
proffer statements by not making it before the forfeiture and
sentencing hearing, and we proceed to a substantive consider-
ation of his arguments.
3.
Assuming for the moment that Mr. Smith’s reading of Rule
11 and Rule 410 is correct, the record makes clear that he has
waived, through his proffer letter, any right to rely on these
rules. The provisions of Rule 11 and Rule 410 “are presump-
tively waivable.” United States v. Mezzanatto, 513 U.S. 196, 201
(1995). Indeed, the parties agree that a defendant may waive
his right to prevent his statements from plea negotiations from
being used against him. Accord United States v. Krilich, 159 F.3d
1020, 1024 (7th Cir. 1998) (citing Mezzanatto, 513 U.S. 196).29
29
The Supreme Court has held explicitly that the waiver of a jury
determination as to the forfeitability of property need not be included
within the Rule 11 inquiry. See Libretti v. United States, 516 U.S. 29, 48–51
(1995); see also Fed. R. Crim. P. 32.2(b), advisory committee’s note to the
(continued...)
22 No. 13-1375
Mr. Smith contends that he has not waived these rights
because the Government had the burden of showing that his
waiver was knowing and voluntary, and it did not carry that
burden. We cannot accept that argument. The Supreme Court
has held that “absent some affirmative indication that the [proffer]
agreement was entered into unknowingly or involuntarily, an
agreement to waive the exclusionary provisions of the
plea-statement Rules is valid and enforceable.” Mezzanatto, 513
U.S. at 210 (emphasis added); see also Libretti, 516 U.S. at 42
(“We are unpersuaded that the Rule 11(f) inquiry is necessary
to guarantee that a forfeiture agreement is knowing and
voluntary.”). Consequently, signing a proffer letter waiving
rights concerning the admissibility of a plea or statements
made in conjunction with that plea is treated as a valid waiver
of a defendant’s rights not to have proffer statements used
against him. See United States v. Dortch, 5 F.3d 1056, 1068 (7th
Cir. 1993) (“A defendant waives any objection to the use of his
own proffer statements to impeach him at trial when he signs
a proffer letter that specifically grants the government permis-
sion to impeach him if he testifies inconsistently, and later
proceeds to testify inconsistently at trial.”); United States v.
Goodapple, 958 F.2d 1402, 1409 (7th Cir. 1992) (“[T]he easy
answer to [the defendant’s] objections to [the Government’s]
use [of his proffer statements] is that the objection was waived
when he signed [the proffer letter].”); cf. Mezzanatto, 513 U.S.
at 211 (noting that defendant “has never complained that he
29
(...continued)
2000 adoption.
No. 13-1375 23
entered into the waiver agreement at issue unknowingly or
involuntarily”).
At the hearing, Mr. Smith failed to identify any evidentiary
basis for the assertion that he unknowingly or involuntarily
had entered into the proffer agreement. Indeed, defense
counsel refused to state that John Rogers, Mr. Smith’s counsel
when the proffer letter was signed, had not informed
Mr. Smith of his rights.30 Furthermore, Mr. Smith declined to
testify at the forfeiture and sentencing hearing. Consequently,
Mr. Smith did not make a preliminary showing that his waiver
was unknowing or involuntary. While raising the issue,
defense counsel refused to identify any affirmative indications
that Mr. Smith’s waiver of his rights was invalid. Mr. Smith
had the opportunity at the hearing to raise any factual basis to
suggest that his waiver of his rights by signing the proffer
letter was not a knowing and voluntary decision. At oral
argument in this court, he could point to no part of the record
that supported his contention. He offered no more than
criticism about the absence of more evidence from the Govern-
ment. Speculation that he may not have known his rights,
without more, is insufficient to raise a question about whether
his waiver was knowing and voluntary.31
30
Defense counsel responded to an inquiry on whether he thought that
Rogers had properly informed Mr. Smith of his rights, “I don’t think we can
put that on the record as proof of any kind. I don’t think that’s appropri-
ate.” R.261 at 81.
31
Contrary to Mr. Smith’s assertions, United States v. Robinson, 8 F.3d 418
(7th Cir. 1993), does not govern the present case. In Robinson, the defendant
(continued...)
24 No. 13-1375
4.
Lastly, assuming, for the sake of argument, that Mr. Smith
had not waived the contention, we address, for the sake of
completeness, whether Federal Rule of Evidence 410(a)(4)
precludes the use of Agent Anderson’s testimony about his
proffer statements at the forfeiture and sentencing hearing.
That rule prohibits use of “a statement made during plea
discussions … if the discussions did not result in a guilty plea
or they resulted in a later-withdrawn guilty plea.” Fed. R. Evid.
410(a)(1).32
31
(...continued)
challenged a forfeiture order entered by the district court on the ground
that he had not waived his right to have a jury determine factual issues
related to forfeiture. We vacated the forfeiture order on that basis, noting
repeatedly that there was no evidence in the record, such as “a signed
waiver form,” that Robinson personally had waived his right. Id. at 422.
Here, by contrast, Mr. Smith personally signed the proffer letter, which
explicitly stated that the Government only was prohibited from using his
statements in its case in chief.
32
Mr. Smith contends that the withdrawal of his initial guilty plea
following his initial appeal means that the proffer sessions “resulted in a
later-withdrawn guilty plea” within the meaning of Rule 410(a)(4). He urges
this view even though he pleaded guilty a second time after he had
obtained his counsel of choice. Mr. Smith cites no authority to support his
contention that a guilty plea which is withdrawn on remand and then
followed by another guilty plea is the type of “later-withdrawn guilty plea”
referenced in Rule 410(a)(4). In light of our determination that Mr. Smith
has waived any reliance on these rules and, in any event, that the rules do
not apply to a sentencing/forfeiture situation, we pretermit any further
discussion of this issue since it is unnecessary to our resolution of the case.
No. 13-1375 25
Mr. Smith relies exclusively on the text of the rule to
support his argument. Specifically, he invites our attention to
the plain wording of subsection (a)(4). The language of that
subsection, read in context, simply will not bear the load that
he asks it to carry.
The most direct answer to Mr. Smith’s contention is that
Rule 11 and Rule 410 do not govern the conduct of forfeiture
proceedings. The Supreme Court has held that criminal
forfeiture is “an element of the sentence imposed following
conviction or[] … a plea of guilty.” Libretti, 516 U.S. at 38–39
(emphasis in original); see Fed. R. Crim. P. 32.2(b). In Libretti,
the Court noted that “Congress plainly intended forfeiture of
assets to operate as punishment for criminal conduct … not as
a separate substantive offense” and that its precedents “have
likewise characterized criminal forfeiture as an aspect of
punishment imposed following conviction of a substantive
criminal offense.” 516 U.S. at 39. Mr. Smith’s forfeiture and
sentencing hearing therefore are part of the sentencing phase
of his case.
The Federal Rules of Evidence are inapplicable at sentenc-
ing.33 United States v. Gonzalez, 608 F.3d 1001, 1006 (7th Cir.
2010) (citing Fed. R. Evid. 1101(d)(3)). Indeed, Mr. Smith
admits that the Federal Rules of Evidence do not apply at the
forfeiture and sentencing stage and that, consequently,
33
Because Mr. Smith waived his right to a jury trial, we are not confronted
here with a situation where a jury must consider whether specific properties
are forfeitable. See Fed. R. Crim. P. 32.2(b)(5). We therefore pretermit
discussion about whether the Federal Rules of Evidence would apply in a
forfeiture determination before a jury.
26 No. 13-1375
Rule 410, on its own, does not apply to the forfeiture and
sentencing hearing here. He contends, however, that because
Rule 11 incorporates Rule 410’s provisions into the Federal
Rules of Criminal Procedure, Rule 410 does apply at the
sentencing phase. He points out that Rule 11, as part of the
Federal Rules of Criminal Procedure, applies during “all
criminal proceedings” in federal court. Fed. R. Crim. P. 1(a)(1).
By incorporating Rule 410, Mr. Smith argues, Rule 11 expands
the applicability of Rule 410 beyond its normal scope such that
its provisions apply during all criminal proceedings, including
the forfeiture and sentencing hearing here.34
The argument that Rule 410 applies during sentencing is
unpersuasive. Rule 11 states that the admissibility of a plea, a
plea discussion and any related statement “is governed by”
Rule 410. Fed. R. Crim. Proc. 11(f). The obvious meaning of this
provision is that, during proceedings governed by the Federal
Rules of Evidence, Rule 410 governs the admissibility of
utterances that a defendant might be expected to make during
the plea process, the subject matter of Rule 11. The Federal
Rules of Evidence, however, do not apply to sentencing. See Fed.
R. Evid. 1101(d)(3). Accordingly, Rule 410 did not bar admis-
sion of testimony about Mr. Smith’s proffer statements at the
forfeiture and sentencing hearing.
In sum, Rule 11 and Rule 410 are inapplicable; they pose no
impediment to the admission of Mr. Smith’s statements during
34
See Appellant’s Br. 7 (“Rule 11(f)[] … incorporates [Rule 410] to all
criminal proceedings … including sentencing hearings and criminal
forfeiture trials, which are subject to the Rules of Criminal Procedure even
if the Federal Rules of Evidence are not otherwise wholly applicable.”).
No. 13-1375 27
the forfeiture hearing. Furthermore, since the statements were
admitted during the forfeiture hearing, not during the Govern-
ment’s case-in-chief, the proffer letter poses no barrier to their
admission.
B.
Having determined that the testimony about Mr. Smith’s
proffer statements was admissible, we next consider whether
the district court had a sufficient basis for finding that the
disputed properties were subject to forfeiture. We conclude
that whether or not the proffer statement is considered, the
district court was on solid ground in holding that properties
were forfeitable.
1.
The most straightforward reason why Mr. Smith’s conten-
tion must fail is that the properties in question are clearly
substitute assets that may be used to satisfy the in personam
judgment entered by the district court. Section 853(p) provides
explicitly that substitute property may be used to satisfy a
judgment whenever property that is directly forfeitable under
21 U.S.C. § 853(a):
(A) cannot be located upon the exercise of due
diligence;
(B) has been transferred or sold to, or deposited
with, a third party;
28 No. 13-1375
(C) has been placed beyond the jurisdiction of the
court;
(D) has been substantially diminished in value; or
(E) has been commingled with other property
which cannot be divided without difficulty.
21 U.S.C. § 853(p)(1). The properties at issue here clearly fall
within the ambit of this statute. Agent Anderson testified at the
forfeiture hearing that he had searched diligently to locate all
of Mr. Smith’s assets. Mr. Smith does not contest that assertion.
More fundamentally, all of Mr. Smith’s known unencumbered
assets, valued at their original purchase prices, amounted to
less than half of the forfeiture judgment amount. Under these
circumstances, even if the properties were not directly subject
to forfeiture as drug proceeds, they were subject to forfeiture
as substitute property.
Mr. Smith contends that the properties could not be
forfeited as substitute property because of the wording of the
district court’s forfeiture order. He invites our attention to the
order’s provision that “[t]he United States may, at its option,
enforce said judgment as a forfeiture judgment with the ability
to seek to forfeit[] substitute assets.”35 Mr. Smith submits that
“[t]he court indicated that the forfeiture of substitute property
would be appropriate and that the government could seek to
forfeit such property, but did not specifically order any items
35
R.246-1 at 5 (emphasis added).
No. 13-1375 29
or parcels forfeited pursuant to § 853(p).”36 The Government
had not sought to forfeit the properties within the meaning of
the court’s order, he argues. We are unpersuaded that the
wording of the district court’s order did not provide ade-
quately for the disputed properties to be forfeited as substitute
property or that the Government has not pursued them as
such. Mr. Smith attempts to sow dubiety where none exists.
Mr. Smith next maintains that the properties cannot be
forfeited as substitute property because it “would be a logically
self-contradicting ruling” to determine that assets can be both
forfeitable as substitute property and forfeitable as proceeds
from criminal activity.37 In his view, assets must logically be
one or the other; an asset cannot be both proceeds and substi-
tute property.38 An attempt to categorize the disputed proper-
ties as forfeitable proceeds of Mr. Smith’s criminal activities, if
it were unsuccessful, does not forever prevent those same
properties from being forfeited as substitute property.39
36
Reply Br. 2 (emphasis in original).
37
Id.
38
See id. (quoting United States v. Bornfield, 145 F.3d 1123, 1139 (10th Cir.
1998), for the proposition that “an asset cannot logically be both forfeitable
and a substitute asset” because “[t]o allow such an anomaly would render
the substitute assets provision meaningless”).
39
We do not believe that this conclusion is contrary to that reached by the
Tenth Circuit in Bornfield. In Bornfield, the Tenth Circuit vacated the jury’s
special verdict, which determined that certain assets were forfeitable
because they were involved in the defendant’s money laundering offense.
(continued...)
30 No. 13-1375
2.
The Government maintained that the properties in question
were subject to forfeiture as proceeds from illegal activity
under 21 U.S.C. § 853(a). That subsection provides that a
person convicted of a violation shall forfeit:
(1) any property constituting, or derived from, any
proceeds the person obtained, directly or indirectly,
as the result of such violation;
(2) any of the person’s property used, or intended
to be used, in any manner or part, to commit, or to
facilitate the commission of, such violation[.]
21 U.S.C. § 853(a)(1)-(2). The Government employed a “net
worth” analysis and the statutory presumption in § 853(d) to
argue that there was no likely income source for Mr. Smith’s
disputed properties that was unconnected to his drug traffick-
ing. Section 853(d) provides:
There is a rebuttable presumption at trial that any
property of a person convicted of a felony … is
subject to forfeiture under this section if the United
39
(...continued)
The Tenth Circuit also vacated the district court’s forfeiture order which
purported to designate the assets at issue as substitute assets under 18
U.S.C. § 982(b)(1)(A) and 21 U.S.C. § 853(p); it explained that, “[a]bsent the
jury’s valid initial award of forfeiture, the district court could not grant
forfeiture pursuant to the substitute assets provision.” Bornfield, 145 F.3d at
1139. Here, however, there is no question that the “monetary forfeiture
judgment … in the amount of $790,020,” see R.246-1 at 5, is sound. Cf. United
States v. Saccoccia, 564 F.3d 502, 506 (1st Cir. 2009) (distinguishing Bornfield).
No. 13-1375 31
States establishes by a preponderance of the evi-
dence that—
(1) such property was acquired by such person
during the period of the violation … or within a
reasonable time after such period; and
(2) there was no likely source for such property
other than the violation … .
21 U.S.C. § 853(d). Agent Anderson provided extensive
testimony about Mr. Smith’s income and expenditures during
the relevant period, which indicated that there was no likely
source for the disputed properties other than Mr. Smith’s illicit
drug trafficking. The Government argued, and the district
court agreed, that Mr. Smith’s rental income could not provide
a legitimate income source to account for his purchase of the
disputed properties.
Mr. Smith contends on appeal that “the only evidence” that
his rental income was linked to drug proceeds was his
“improperly-admitted proffer statements.”40 We explained
earlier that those proffer statements were admitted properly.
Even if the statements were not admitted properly, there is
sufficient evidence to establish that Mr. Smith’s rental income
was not a legitimate and sufficient source for his purchase of
the disputed properties. Mr. Smith does not contest that his
expenditures far exceeded his modest disability income during
the relevant period. He offers no explanation of how he was
able to purchase so many properties—either his rental proper-
ties or the properties disputed here—on his limited disability
40
Reply Br. 3–4.
32 No. 13-1375
income. It therefore was not unreasonable for the district court
to conclude, even absent the proffer statements, that
Mr. Smith’s finances indicated that his rental income was
tainted by illicit drug proceeds. There was certainly sufficient
evidence to support the district court’s finding by a preponder-
ance of the evidence that the disputed properties were subject
to forfeiture because they were obtained in part through drug
proceeds.
Conclusion
The judgment of the district court is affirmed.
AFFIRMED