In the United States Court of Appeals
For the Seventh Circuit
Nos. 96-3252 and 96-3769
UNITED STATES OF AMERICA,
Plaintiff-Appellee, Cross-Appellant,
v.
ROCCO E. INFELISE,
Defendant-Appellant, Cross-Appellee,
and
ANN M. INFELISE,
Claimant-Appellant.
Appeal from the United States District Court
for the Northern District of Illinois, Eastern Division.
No. 90 CR 87--Ann Claire Williams, Judge.
Argued September 9, 1998--Decided October 23, 1998
Before CUDAHY, MANION, and EVANS, Circuit Judges.
EVANS, Circuit Judge. At least until he was
convicted of racketeering and sentenced to 63
years in prison, Rocco Infelise was the boss of
the "Ferriola Street Crew," a name honoring a
previous boss; the crew was part of the "Outfit."
Its business included collecting protection money
from bookmakers, houses of prostitution, and
pornographic bookstores; illegal gambling; and
making juice loans. It also dabbled in bribery
and murder.
The jury, which convicted Infelise of
racketeering under 18 U.S.C. sec. 1962 and other
violations, also entered a verdict of forfeiture
of his interest in his primary residence in River
Forest, Illinois, and $3 million from his
racketeering activity, for which he was found
jointly and severally liable with a codefendant,
Salvatore DeLaurentis. The government sought to
collect the $3 million through the substitute
assets provision found at 18 U.S.C. sec. 1963(m).
Infelise and his wife Ann, who is a claimant to
certain assets, appeal from the forfeiture of two
of the substitute assets, and the government
appeals from the court's refusal to forfeit
another. Our jurisdiction to hear the
government's appeal is also under attack./1
After a defendant is convicted of certain
violations of sec. 1962, sec. 1963(a) provides
for the forfeiture of, among other things, any
interest the defendant has in property acquired
through racketeering activity and any property
acquired with the proceeds of racketeering
activity. Section 1963(m), the substitute assets
provision, allows the government to take other
property of the defendant when, for one reason or
another, the illegally obtained property cannot
be located.
In this case, both the appeal and the cross-
appeal involve substitute assets. But even though
Infelise and his wife appeal from part of an
order of forfeiture of substitute assets under
sec. 1963(m), the contention is made that we have
no jurisdiction to hear an appeal brought by the
government regarding one of the assets which was
not forfeited under the same provision.
The government asserts that there is
jurisdiction for its appeal under 18 U.S.C. sec.
3742(b), a statute enacted in connection with the
revolution brought about by the United States
Sentencing Guidelines. The statute granted both
the government and defendants meaningful appeal
rights for errors of law and for sentences below
or above the guideline ranges, respectively:
(a) Appeal by a defendant. A defendant may file
a notice of appeal in the district court for
review of an otherwise final sentence if the
sentence--
(1) was imposed in violation of law;
(2) was imposed as a result of an incorrect
application of the sentencing guidelines; or
(3) is greater than the sentence specified in
the applicable guideline range to the extent that
the sentence includes a greater fine or term of
imprisonment, probation, or supervised release
than the maximum established in the guideline
range, or includes a more limiting condition of
probation or supervised release under section
3563(b)(6) or (b)(11) than the maximum
established in the guideline range; or
(4) was imposed for an offense for which there
is no sentencing guideline and is plainly
unreasonable.
(b) Appeal by the Government. The Government,
with the personal approval of the Attorney
General or the Solicitor General, may file a
notice of appeal in the district court for review
of an otherwise final sentence if the sentence--
(1) was imposed in violation of law;
(2) was imposed as a result of an incorrect
application of the sentencing guidelines issued
by the Sentencing Commission pursuant to 28
U.S.C. 994(a);
(3) is less than the sentence specified in the
applicable guideline range to the extent that the
sentence includes a lesser fine or term of
imprisonment, probation, or supervised release
than the minimum established in the guideline
range, or includes a less limiting condition of
probation or supervised release under section
3563(b)(6) or (b)(11) than the minimum
established in the guideline range; or
(4) was imposed for an offense for which there
is no sentencing guideline and is plainly
unreasonable.
There is no question that, in general,
forfeiture is part of the sentence and is
appealable. See Libretti v. United States, 516
U.S. 29 (1995); United States v. Patel, 131 F.3d
1195 (7th Cir. 1997). But Infelise argues that
sec. 1963(m) is different from the other
provisions of sec. 1963 in that it does not, by
itself, involve punishment, but rather provides
an alternate procedure by which the sentence can
be executed. The inspiration for this argument,
it seems, comes from language in cases
considering ex post facto challenges to sec.
1963(m). For instance, in United States v. Reed,
924 F.2d 1014 (11th Cir. 1991), the court
rejected a challenge to the application of sec.
1963(m) to facts occurring before its enactment.
The court concluded that there was no violation
of the ex post facto clause because the statute
did not change the quantum of punishment, but
rather was merely a procedural change in how the
government could collect the forfeiture. If
sec.1963(m) is merely procedural, Infelise says,
then sec. 3742, which applies to appeals from
sentences, does not provide jurisdiction here.
For several reasons we reject the argument.
Title 18 U.S.C. sec. 3551 sets forth "authorized
sentences," including the imposition of sanctions
pursuant to 18 U.S.C. sec. 3554, one of which is
criminal forfeiture pursuant to sec. 1963. Thus,
forfeiture is part of a sentence. See Libretti,
supra. Section 3557 provides that review of a
sentence imposed under sec. 3551 is governed by
sec. 3742, which, as we know, gives the
government the right to appeal an error of law in
sentencing, which would include an error of law
under sec. 1963. So far, Infelise would not
disagree, but he says that if subsection 1963(m)
is merely procedural, then orders pursuant to
that particular subsection of sec. 1963 are not
appealable as sentences even though orders under
other subsections of sec. 1963 are appealable.
We see no reason that we should carve out one
subsection of the statute. The cases Infelise
cites, which analyze a principle of law other
than the one we are considering, do not compel us
to view sec. 1963(m) differently from the other
subsections. Furthermore, Congress did not do so.
When subsection 1963(m) was added to sec. 1963,
there was no corresponding amendment to eliminate
the government's right to appeal from sec.
1963(m) determinations. The reference in sec.
3554 remains a reference to sec. 1963 in its
entirety. The scheme we have just described is
labyrinthian but not impenetrable and provides
jurisdiction for our review of orders of
forfeiture of substitute assets.
Having satisfied ourselves of our jurisdiction,
we turn to the government's appeal of the
district court's refusal to forfeit Infelise's
Equitable Life Insurance annuity of about
$134,000. The annuity is governed by the
provisions of 26 U.S.C. sec. 408(b), which
Infelise argues immunize the asset from criminal
forfeiture. That section provides in part that
"[t]he entire interest of the owner is
nonforfeitable." Nonforfeitable means
nonforfeitable, says Infelise, and therefore the
annuity is not subject to criminal forfeiture.
His argument is nothing if not literal.
But too literal, we think. While we must respect
the plain language of a statute, we also must
read the words of a statute in context. For
instance, recently the word use as found in 18
U.S.C. sec. 924(c)(1) has received considerable
attention. Section 924(c)(1) provides a 5-year
minimum term of imprisonment upon a person who
"uses or carries a firearm" in relation to a
crime or violence or a drug trafficking crime.
Congress did not provide a definition of use. In
Bailey v. United States, 516 U.S. 137 (1995), the
Court wrestled with the meaning of that simple
word and illustrated that it can mean different
things by the following example: "I use a gun to
protect my house, but I've never had to use it."
The Court said that its analysis of the meaning
of use in the statute started, as it must, with
the language of the statute. But given the fact
that words have multiple meanings, it continued:
We consider not only the bare meaning of the
word but also its placement and purpose in the
statutory scheme. "'[T]he meaning of statutory
language, plain or not, depends on context.'"
[Citation omitted.]
At 145.
Similarly, our analysis of the meaning of
nonforfeitable must start with the word, but it
must then move to the meaning of the word in
context. In addition, we are aided in our
analysis because Congress has provided a
definition of nonforfeitable. And the Supreme
Court has weighed in with its view.
Section 408 was enacted as part of the Employee
Retirement Income Security Act. Congressional
findings on which ERISA is based show that the
purpose of the statute was to protect the
interests of beneficiaries of pension plans:
"[T]he continued well-being and security of
millions of employees and their dependents are
directly affected by these plans[.]" 29 U.S.C.
sec. 1001(a). The termination of plans was found
to deprive employees of anticipated benefits.
Section 408(b) provides in part:
(b) Individual retirement annuity.
For purposes of this section, the term
"individual retirement annuity" means an annuity
contract, or an endowment contract (as determined
under regulations prescribed by the Secretary),
issued by an insurance company which meets the
following requirements:
(1) The contract is not transferable by the
owner.
(2) Under the contract--
(A) the premiums are not fixed,
(B) the annual premium on behalf of any
individual will not exceed $2000, and
(C) any refund of premiums will be applied
before the close of the calendar year following
the year of the refund toward the payment of
future premiums or the purchase of additional
benefits.
(3) Under regulations prescribed by the
Secretary, rules similar to the rules of section
401(a)(9) and the incidental death benefit
requirements of section 401(a) shall apply to the
distribution of the entire interest of the owner.
(4) The entire interest of the owner is
nonforfeitable.
The statute is quite clear that its provisions
set out the requirements for the contract between
the company and the annuitant.
The definition of "nonforfeitable" found in
ERISA is set out in 29 U.S.C. sec. 1002(19):
The term "nonforfeitable" when used with respect
to a pension benefit or right means a claim
obtained by a participant or his beneficiary to
that part of an immediate or deferred benefit
under a pension plan which arises from the
participant's service, which is unconditional,
and which is legally enforceable against the
plan. For purposes of this paragraph, a right to
an accrued benefit derived from employer
contributions shall not be treated as forfeitable
merely because the plan contains a provision
described in section 203(a)(3) [29 USCS sec.
1053(a)(3)].
Notably, the definition specifically states that
the benefit is nonforfeitable "against the plan."
Furthermore, the Supreme Court has wrestled with
the meaning of the word and has said:
[L]egislators consistently described the class of
pension benefits to be insured as "vested
benefits." Petitioner recognizes, as it must,
that the terms "vested" and "nonforfeitable" were
used synonymously.
Nachman Corp. v. Pension Benefit Guaranty Corp.,
446 U.S. 359, 376 (1980).
That nonforfeitable in the context of ERISA is
synonymous with vested is borne out in other
statutes, which refer to vesting periods as
involving an employee's "nonforfeitable right" to
benefits. See, e.g., 26 U.S.C. sec. 411(a)(1)(A)
and (B); 26 U.S.C. sec. 416(b); 26 U.S.C. sec.
417(f)(1); 26 U.S.C. sec. 418(b)(7)(B); 29 U.S.C.
sec. 1052(b) (4)(C); 29 U.S.C. sec.
1053(b)(30)(D)(iii); and 29 U.S.C. sec.
1055(h)(1).
All of which convinces us that the word
"nonforfeitable" as used in sec. 408(b) refers to
a requirement that an individual retirement
annuity must be vested in the owner. That means
that under his contract, Infelise's annuity is
vested. But sec. 408(b) says nothing at all about
whether the government, as part of a criminal
proceeding, can obtain forfeiture of the account
owned by a defendant, especially as the
provisions of sec. 1963 are to be liberally
construed. Russello v. United States, 464 U.S. 16
(1983); United States v. Horak, 833 F.2d 1235
(7th Cir. 1987). The forfeiture of an asset
following conviction in a criminal case is a far
cry from an employer, for instance, terminating
an employee to prevent a pension from vesting. It
is also different from the situation in Guidry v.
Sheet Metal Workers Pension Fund, 493 U.S. 365, a
case on which Infelise relies. Guidry embezzled
money from his union and the union won a judgment
of restitution against him and obtained a
constructive trust on Guidry's pension benefits.
The Court found that the anti-alienation
provision in 29 U.S.C. sec. 1056(d)(1) prohibited
the imposition of a constructive trust on pension
benefits in this situation. The case is not
dispositive of our problem. The anti-alienation
provisions apply to employer pension plans, not
individual annuity accounts; furthermore, the
Court said nothing at all about criminal
forfeiture. Section 408 simply does not prevent
criminal forfeiture of this annuity any more than
it did the individual retirement account
forfeited in Libretti v. United States.
In their appeal, the Infelises contest the
forfeiture, pursuant to sec. 1963(m), of two
assets. One is an account at PaineWebber in the
name of Ann Infelise. The second is a Florida
house, which Rocco bought and on which he paid
for repairs to the tune of more than $700,000.
The house was originally purchased in the name of
Infelise's mother-in-law, Marie Capezio, whom the
district court found to have been a straw owner.
Later the property was conveyed from Capezio to
Ann Infelise and Capezio as joint tenants. After
Capezio's death, title passed through joint-
tenancy laws to Ann.
The Infelises' claim is similar as to both
assets. It is that these items are not
forfeitable as "property of the defendant," not,
as one might expect, because they are the
property of Ann Infelise. Rather, the argument is
that they are not forfeitable because they are
"tainted"--that is, they were used to hide, or
bought with, criminal proceeds. And, the argument
continues, only untainted property can be
forfeited as a substitute asset; tainted property
must be forfeited up front under sec. 1963(a) and
is in reality property of the government under
sec. 1963(c). The conclusion they draw is that
tainted property does not qualify as a substitute
asset. Alternatively, the Infelises argue that
the assets are not forfeitable under sec. 1963(m)
because they were transferred to a third party to
avoid the reach of the government.
The government points out, correctly we think,
that these arguments were not raised in the
district court. In the district court the
argument was that the items belonged to Ann, not
to her husband. The Infelises did not contend
that the property was "tainted," nor did they
contend that, through the "relation back"
provisions in sec. 1963(c), the property belonged
to the government. The shifting sands of this
argument are distressing. Even in this court it
is difficult to pin down exactly what the
Infelises' contentions are and what the support
for their argument is. The assertion that the
assets are "tainted" rests on a pretty shaky
base. The Infelises state that the judge
"expressly held: 'The evidence unambiguously
shows that Infelise provided the money for the
purchase of the house by Capezio . . . in order
to conceal his own tainted assets from government
forfeiture.'" Yet at oral argument counsel said
that the Infelises did not claim that there was a
finding that the assets were tainted. The latter
statement conforms with our view of the record
and is consistent with the fact that the
government never contended in the district court
that the assets were proceeds of criminal
activity. But even if there was a finding that
these assets are, in fact, tainted, the argument
would nevertheless fail.
The Infelises draw the conclusion that
substitute assets must, by definition, be
untainted from cases in which the issue is
whether substitute assets are subject to pretrial
restraint under 18 U.S.C. sec. 1963(d)(1). In
United States v. Ripinsky, 20 F.3d 359 (9th Cir.
1994), for instance, the court determined that
substitute assets were not subject to pretrial
restraint because they were "untainted"; they
were not proceeds of criminal activity. The
Ripinsky court was placing a limit on the
restraint of assets following an indictment but
prior to conviction; restraining assets not even
alleged to be the fruits of criminal activity
would be overreaching. See also United States v.
Gotti, 155 F.3d 144 (2d Cir. 1998).
To find that an asset is tainted or not prior to
trial is hardly the equivalent of a finding, at
trial, beyond a reasonable doubt, that the asset
is property constituting or derived from
racketeering activity, which was the finding
required of the jury in this case. See, e.g.,
transcript, March 11, 1992, Vol. 69, p. 12217.
Were we to rule as the Infelises urge and say
that only assets with no connection with
racketeering can be used as substitute assets,
would we be requiring the government to somehow
prove that property it seeks as a substitute
asset is pure? That would certainly be a strange
posture for both the government and a defendant.
There will often, it seems to us, be property
falling somewhere in between, property which may
be suspected of being tainted but which the
government cannot prove is derived from
racketeering activity. We are convinced that such
property can be forfeited under sec. 1963(m).
This conclusion is consistent with United States
v. Voigt, 89 F.3d 1050 (3rd Cir. 1996), cert.
denied, 117 S. Ct. 623, in which the court
reversed a forfeiture of jewelry under 21 U.S.C.
sec. 982(a)(1) because the money used to purchase
the jewelry included some funds traceable to
money laundering but which had been commingled
with other funds. It was not possible to
establish that the jewelry was purchased with
money laundering proceeds. Nor, we presume, would
it be possible to say it was not. Nevertheless,
what is important for our analysis is that the
court remanded the case so that the jewelry could
be forfeited as a substitute asset. To use the
rather imprecise language which has crept into
the cases, the jewelry was suspected of being
"tainted" but it was nevertheless forfeitable as
a substitute asset. The Infelises' other
arguments do nothing to convince us that the
district court erred in ordering forfeiture of
these items as substitute assets.
Accordingly, we reverse the order denying
forfeiture of the Equitable Life Insurance
annuity and remand the case to the district court
with instructions to enter forfeiture of that
asset; we affirm the order of forfeiture of the
PaineWebber account and the Florida house.
FOOTNOTE
/1 The government's notice of appeal includes Ann
Infelise in the caption, and both Rocco and Ann
moved to have the appeal dismissed for lack of
appellate jurisdiction. However, the appeal
involves an asset belonging to Rocco to which Ann
made no independent claim here or in the district
court. Accordingly, we will discuss the
government's appeal and the jurisdictional
challenge to that appeal as if both involved
Rocco Infelise only. After Infelise moved to
dismiss the appeal for lack of appellate
jurisdiction, it was considered by a motions
judge, who determined that the issue should be
decided by the merits panel and that the issues
should be fully briefed for the panel. That has
been done.