United States v. Channon (Brandi)

973 F.3d 1105

• Court: Court of Appeals for the Tenth Circuit
• Decided: September 1, 2020
• Docket: 19-2028
• Status: Published

Opinion

FILED United States Court of Appeals PUBLISH Tenth Circuit

UNITED STATES COURT OF APPEALS September 1, 2020

Christopher M. Wolpert FOR THE TENTH CIRCUIT Clerk of Court _________________________________

UNITED STATES OF AMERICA,

Plaintiff - Appellee,

v. No. 19-2028

BRANDI CHANNON,

Defendant - Appellant. _________________________________

v. No. 19-2029

MATTHEW CHANNON,

Appeal from the United States District Court for the District of New Mexico (D.C. Nos. 1:13-CR-966-JCH-KK-1 and 1:13-CR-966-JCH-KK-2) _________________________________

Katayoun A. Donnelly, Azizpour Donnelly LLC, Denver, Colorado, for Defendant- Appellant Brandi Channon.

James L. Hankins, Edmond, Oklahoma, for Defendant-Appellant Matthew Channon.

C. Paige Messec, Assistant United States Attorney (John C. Anderson, United States Attorney, with her on the brief), Albuquerque, New Mexico, for Plaintiff-Appellee. _________________________________ Before BRISCOE, KELLY, and CARSON, Circuit Judges. _________________________________

CARSON, Circuit Judge. _________________________________

At first glance, a district court’s order of forfeiture and its order of restitution

may appear to be a double punishment to a defendant—especially when the district

court orders a defendant to pay forfeiture and restitution in the same amount. But

forfeiture and restitution are distinct remedies. Restitution exists to make victims

whole. Forfeiture, on the other hand, exists to punish those who commit crimes. In

this case, Defendants fraudulently obtained over $100,000 in store credit, redeemed

those credits for merchandise and prepaid debit cards, and then sold that same

merchandise on the internet.

Unsurprisingly, no one disputes how to calculate the value of the loss to the

retailer—the loss equals the value of the fraudulently obtained merchandise. But

what is Defendants’ gain? Is it the value of the fraudulently obtained merchandise?

Or is it solely the profit Defendants received from selling the merchandise? And do

Defendants have a forfeitable gain if they sell the merchandise for less than market

value?

In some cases, a defendant either does not resell fraudulently obtained

merchandise or does so at a discount and thus has no profit above the value of the

merchandise. To address that scenario, we hold that a district court may base a

judgment’s forfeiture amount on the value of the fraudulently obtained merchandise

at the time a defendant acquired it. We further hold that a district court may not

2 reduce or eliminate criminal forfeiture because of restitution. Finally, we reaffirm

our holding that in personam money judgments representing the amount of unlawful

proceeds are appropriate under the criminal forfeiture statutes. United States v.

McGinty, 610 F.3d 1242, 1245 (10th Cir. 2010). We exercise jurisdiction under 28

U.S.C. § 1291 and affirm the district court’s forfeiture order.

I.

Defendants—a married couple—opened numerous rewards accounts at

OfficeMax using fictitious names and addresses. They fraudulently claimed other

customers’ purchases as their own to generate undeserved rewards through

OfficeMax’s customer loyalty program. As part of the scheme, Defendants also

violated the terms of the reward program by using various accounts to sell more than

27,000 used ink cartridges to OfficeMax in exchange for OfficeMax rewards.

Defendants’ scheme lasted twenty-one months. In that time, they redeemed $105,191

in OfficeMax rewards.

A jury convicted Defendants of wire fraud and conspiracy to commit wire

fraud relating to their scheme to defraud OfficeMax in violation of 18 U.S.C.

§§ 1343 and 1349. At sentencing, after an evidentiary hearing, the district court

ordered Defendants to pay $96,278 in restitution to OfficeMax and entered a separate

forfeiture money judgment jointly and severally against Defendants in the amount of

$105,191. Defendants appealed. In their first appeal, Defendants argued, among

other things, that the district court erred when it entered a forfeiture money judgment

without proving the $105,191 constituted, or was derived from, proceeds traceable to

3 the wire fraud. Specifically, Defendant Matthew Channon posited that the

government made no attempt to trace the OfficeMax rewards to cash. The

government, on the other hand, contended that they proved Defendants fraudulently

acquired OfficeMax rewards with a face value of $105,191, and that Defendants

exchanged that credit for $105,191 in actual merchandise. At oral argument in their

first appeal, Defendants spent their entire argument regarding forfeiture disputing the

amount of forfeiture the district court ordered. Specifically, Defendant Brandi

Channon’s attorney argued that if a defendant steals something worth $50,000, but

sells it for $3,000, the gain to that defendant, and thus the proper amount of

forfeiture, is $3,000, not $50,000.

We upheld the district court’s admission of certain challenged exhibits but

remanded for further proceedings on the money judgment of forfeiture in light of the

Supreme Court’s decision in Honeycutt v. United States, 137 S. Ct. 1626 (2017).

Honeycutt held, among other things, that the substitute-asset provision of the

Comprehensive Forfeiture Act of 1984, 21 U.S.C. § 853(p), provides the only method

for the forfeiture of untainted property; that is, property not flowing from or used in

the crime itself. Id. at 1632. At the time, we stated:

Defendants last argue that the government failed to meet its burden to prove the amount forfeited ($105,191) was traceable to the offense of wire fraud. We have held that wire fraud proceeds are subject to forfeiture under 18 U.S.C. § 981(a)(1)(C) and 28 U.S.C. § 2461. See United States v. Courtney, 816 F.3d 681, 685 (10th Cir. 2016). The property subject to forfeiture includes “[a]ny property, real, or personal, which constitutes or is derived from proceeds traceable to [the] violation.” 18 U.S.C. § 981(a)(1)(C). The substitute-asset provision, 21 U.S.C. § 853(p),

4 provides the only method for the forfeiture of untainted property. Honeycutt v. United States, 137 S. Ct. 1626, 1633 (2017). The government concedes a remand to conform the money judgment to the requirements of § 853(p) may be necessary. The government explains that going forward it will seek only to enforce a forfeiture money judgment through the substitute-asset provisions of § 853(p) and will seek to amend the forfeiture order under Fed. R. Crim. P. 32.2(e). Accordingly, we remand so the district court may conduct further proceedings on this issue. United States v. Channon, 881 F.3d 806, 812 (10th Cir. 2018).

On remand, Defendant Matthew Channon sought another evidentiary hearing

on the money judgment. Defendants argued that the district court incorrectly

calculated the forfeiture amount and had to determine the amount of profit they

received through their fraudulent scheme. The government objected to the motion,

contending that our mandate “left that determination untouched.” The district court

did not hold a second evidentiary hearing. Instead, it amended its order, clarifying

that if the government seeks forfeiture of substitute-property—i.e., untainted property

when the tainted property is unavailable—it must satisfy § 853(p)’s requirements at

that time. Defendants again appealed the district court’s forfeiture order.

II.

In this second appeal, Defendants fault the district court for simply amending

the judgment to clarify that the government must satisfy the requirements of § 853(p)

when seeking forfeiture of substitute property. Defendants assert that our mandate

required an evidentiary hearing on the proper forfeiture amount because the

government failed to prove the amount of profit Defendants realized as a result of

their scheme. Defendants further contend the district court failed to make specific

5 findings as to what tainted assets each Defendant obtained as a result of their

criminal activity, whether any need existed for substitution of untainted assets for the

tainted assets, and whether the value of the substituted asset is equal to or less than

the value of unavailable tainted assets. Finally, they assert that Supreme Court

precedent foreclosed the district court from holding Defendants jointly and severally

liable for the entire forfeiture judgment.

We first examine the language of our prior mandate, looking to whether the

district court acted within its discretion in failing to hold an evidentiary hearing after

remand. We then turn to the district court’s forfeiture order. For the reasons set

forth below, we conclude that the district court did not abuse its discretion in refusing

an evidentiary hearing. We further hold that the district court properly entered the

money judgment in the amount of $105,191 and that the district court did not err in

imposing joint and several liability against Defendants. Finally, we hold that the

government may satisfy § 853(p)’s substitute-asset requirements at the time it seeks

forfeiture of substitute assets.

A.

We first address the parties’ disagreement regarding the scope of our prior

mandate. Defendants believe our mandate required the district court to hold an

evidentiary hearing while the government contends that the district court had the

discretion to hold a hearing but did not have an obligation to begin anew. We agree

with the government.

6 Under the law of the case doctrine, “once a court decides an issue, the same

issue may not be relitigated in subsequent proceedings in the same case.” Harte v.

Bd. of Comm’rs of Cty. of Johnson, Kan., 940 F.3d 498, 510 (10th Cir. 2019)

(quoting Ute Indian Tribe of the Uintah & Ouray Reservation v. Utah, 114 F.3d 1513,

1520 (10th Cir. 1997)). An important corollary of the law of the case doctrine—the

“mandate rule”—“provides that a district court must comply strictly” with the

reviewing court’s mandate. Id. Although “[i]nterpretation of the mandate is an issue

of law that we review de novo,” id., “where the appellate court has not specifically

limited the scope of the remand, the district court generally has discretion to expand

the resentencing beyond the sentencing error causing the reversal.” United States v.

West, 646 F.3d 745, 748 (10th Cir. 2011). In this Circuit, “unless the district court’s

discretion is specifically cabined, it may exercise discretion on what may be heard.”

Id. at 749. In practice, a district court looks “to the mandate for any limitations on

the scope of the remand and, in the absence of such limitations, exercise[s] discretion

in determining the appropriate scope.” Id.

In interpreting the prior panel’s forfeiture holding, we look to the language of

the prior opinion and, in particular, the mandate. Harte, 940 F.3d at 511. The panel

acknowledged the government’s concession that a remand to conform the money

judgment might be necessary and set forth the government’s position that it would

seek to enforce a forfeiture money judgment only through the substitute-asset

provisions of § 853(p). The panel remanded “so the district court may conduct

further proceedings on this issue.” Channon, 881 F.3d at 812. Nothing in the prior

7 panel’s holding cabined the district court on remand. Importantly, nothing in the

prior panel’s holding indicated to the district court that it had erred in calculating the

amount of forfeiture money judgment. Thus, the mandate’s language did not require

the district court to hold an evidentiary hearing on the forfeiture amount.

Accordingly, the district court retained the discretion to make its own determination

on Matthew Channon’s hearing request.

The dissent argues that the district court should not have relied on the

language of the opinion to determine the mandate. Instead, the dissent tells us that in

addition to looking at the clear language of the order, the district court should have

also examined the parties’ arguments from the first appeal. The mandate rule

demands no such inquiry and the dissent provides no basis for one. Prior to the first

appeal, the district court had held a hearing at which time it listened to testimony,

viewed evidence, and calculated a forfeiture money judgment. Defendants appealed

that judgment. The prior panel remanded based on the government’s concession that

the language of the judgment needed to reference § 853(p)’s requirements—no more

explanation, no less. The prior panel did not specifically cabin the district court’s

actions on remand. Did the mandate give the district court the discretion to hold a

second hearing? Absolutely. But did it require a second hearing? No. The dissent’s

statement that the mandate encompassed “the general arguments raised by the

Channons” in their appeal does not comport with the long-standing and established

discretion we afford a district court. Indeed, the dissent’s position that we must scour

the Court record for appellate arguments made in prior appeals finds no support in

8 our precedents. And we decline to require district courts on remand to rehash every

argument mentioned in old briefing, but not set forth in the mandate.

Now, we turn to whether the district court abused that discretion in refusing to

hold a second evidentiary hearing.

B.

Defendants assert the district court erred: (1) by declining to revisit the amount

of the money judgment representing the proceeds of the scheme, (2) by holding them

jointly and severally liable, and (3) by failing to determine the need for substitution

of untainted assets for tainted assets or to determine whether the value of the

substituted asset is equal to or less than that of the unavailable tainted assets

Defendants obtained.1 Defendant Matthew Channon principally relies on Honeycutt,

which held that the procedure outlined in § 853(p) is the only way for the government

to recoup substitute property (which prompted the government’s concession to

remand) and that forfeiture is limited to property the defendant himself actually

acquired as a result of the crime. He argues that Honeycutt required a hearing on

remand to determine whether the government met its burden and to amend the

judgment so as to not hold him and his wife jointly and severally liable. Defendant

Brandi Channon’s argument focuses on the district court’s understanding of the

1 The dissent asserts that we acknowledge, but then ultimately fail to address these issues on the merits. We disagree. See infra Section II.B.3. (discussing that nothing in the text of § 853(p) limits the substitute property eligible for forfeiture to property that the defendant owns at the time of sentencing and that the government will have to prove one of the elements in § 853(p)(1) before the district court may order forfeiture of specific substitute property under § 853(p)(2)). 9 difference between restitution and forfeiture. We review the district court’s

interpretation of the federal forfeiture laws de novo, McGinty, 610 F.3d at 1245, and

its factual findings for clear error, United States v. Bader, 678 F.3d 858, 893 (10th

Cir. 2012).

1.

We first consider whether the district court had an obligation to revisit the

amount of the money judgment. And we begin our inquiry with the plain language of

the statute. McGinty, 610 F.3d at 1245. The criminal forfeiture statute at issue

provides that “[a]ny property, real or personal, which constitutes or is derived from

proceeds traceable to a violation of . . . ‘specified unlawful activity’” including wire

fraud “is subject to forfeiture to the United States.” 18 U.S.C. § 981(a)(1)(C). The

statute defines “proceeds” as “property of any kind obtained directly or indirectly, as

the result of the commission of the offense giving rise to forfeiture, and any property

traceable thereto, and is not limited to the net gain or profit realized from the

offense.” 18 U.S.C. § 981(a)(2)(A). The Code further provides that if a defendant is

charged in a criminal case “with a violation of an Act of Congress for which the civil

or criminal forfeiture of property is authorized,” the government may include a notice

of forfeiture in the charging document. 28 U.S.C. § 2461(c). And if the defendant is

convicted of the offense giving rise to the forfeiture, “the court shall order the

forfeiture of the property as part of the sentence in the criminal case pursuant to the

Federal Rules of Criminal Procedure.” Id. In personam money judgments

representing the amount of unlawful proceeds are appropriate under criminal

10 forfeiture.2 McGinty, 610 F.3d at 1246. Thus, a district court may award the

government a money judgment against a defendant for the value of what he obtained

from his criminal activity. Id.

Defendants do not dispute that a district court may award a forfeiture

judgment, but instead fault the district court for entering a forfeiture judgment based

on the value of the merchandise and certificates they redeemed through OfficeMax

rewards.3 Defendants specifically claim that because the district court based both the

restitution and forfeiture amounts on OfficeMax’s loss, the forfeiture judgment

constitutes a double recovery. But awarding a forfeiture amount equal to restitution

does not amount to a double recovery. Id. at 1247.

“Criminal forfeiture and restitution are separate remedies with different

purposes.” Id. Restitution—designed to compensate victims and restore their

losses—is not punitive, but rather is remedial in nature. Id. Forfeiture—the vesting

of title in the United States in a defendant’s tainted property—is punitive in nature

and seeks to disgorge any profits that the offender realized from his illegal activity.

Id.; see also United States v. Awad, 598 F.3d 76, 78 (2d Cir. 2010) (stating that

2 An “in personam” judgment is a “judgment that imposes personal liability on a defendant and that may therefore be satisfied out of any of the defendant’s property within judicial reach.” Black’s Law Dictionary 861 (8th ed. 1999). 3 Restitution and forfeiture are not the same amount in this case because the district court considered the value of the used ink cartridges Defendants brought to OfficeMax and subtracted that amount from the value of the merchandise Defendants obtained from OfficeMax with the fraudulent rewards. Because of the value of the used ink cartridges, the district court reduced OfficeMax’s loss—the restitution amount—to $96,278. 11 forfeiture “is concerned not with how much an individual has but with how much he

received in connection with the commission of the crime” (quoting United States v.

Casey, 444 F.3d 1071, 1077 (9th Cir. 2006))). Because restitution (calculated based

on the victim’s loss) and forfeiture (calculated based on the offender’s gain) are

distinct remedies, “ordering both in the same or similar amounts does not generally

amount to a double recovery.” McGinty, 610 F.3d at 1247.

We understand that the orders of forfeiture and restitution may at first glance

appear to be a double or alternative punishment. Both order cash payments that

approximate OfficeMax’s loss. But Defendants’ “double recovery” argument runs

afoul of not only our precedent, but also the text of the statute. Section 981 treats as

“proceeds” any “property” that a defendant “obtained directly or indirectly” as a

result of the commission of the theft of property and “is not limited to the net gain or

profit realized from the offense.” 18 U.S.C. § 981(a)(2)(A).

Likewise, case law provides that restitution and forfeiture serve different

goals. McGinty, 610 F.3d at 1247. “[T]hat the combination of a forfeiture order and

a restitution order results in a form of punitive damages piled on top of the other

penalties for the defendant’s crime” is appropriate given that fraud is a concealable

offense. United States v. Navarrete, 667 F.3d 886, 888 (7th Cir. 2012); see also

McGinty, 610 F.3d at 1247–48 (concluding that requiring an offender to pay both

restitution and forfeiture “at worst forces the offender to disgorge a total amount

equal to twice the value of the proceeds of the crime” (quoting United States v.

Taylor, 582 F.3d 558, 566 (5th Cir. 2009))). “Given the many tangible and intangible

12 costs of criminal activity, this is in no way disproportionate to the harm [the offense]

inflicted upon government and society.” McGinty, 610 F.3d at 1247–48 (quoting

Taylor, 582 F.3d at 566).

To illustrate their position, Defendants ask us to imagine a defendant who

steals a $50,000 piano from a music store and then sells that piano for $3,000.

Defendants argue that the music store is entitled to $50,000 in restitution and the

government is entitled to $3,000 in forfeiture. Defendants’ argument overlooks the

distinction between restitution and forfeiture. In addition to Defendants’ scenario—

where the hypothetical thief sells the piano for less than $50,000, let’s also assume a

scenario where the thief keeps the piano for his personal use. Under either scenario,

the thief realizes a gain of $50,000—the value of the piano at the time of the

wrongdoing. The thief does not need to sell the piano for more than its value to

realize a gain.4 The forfeiture statute says that “any property . . . which constitutes or

is derived from proceeds traceable to” the scheme is subject to forfeiture. 18 U.S.C.

§ 981(a)(1)(C). Nothing in the statute requires that Defendants re-sell the OfficeMax

merchandise to realize a gain. Put simply, the government is entitled to forfeiture in

the amount of Defendants’ proceeds, and OfficeMax, the victim, was entitled to

restitution in the amount of its loss. United States v. Arnold, 878 F.3d 940, 946 (10th

Cir. 2017).

4 Although not at issue in this case, assume that hypothetical thief sells the piano for $53,000. In that scenario, the thief’s gain is $53,000. 13 Statutes mandating restitution and forfeiture do not allow a defendant’s

payments toward one to offset the amount owed to the other. Id. In this case,

Defendants either did not resell the merchandise they fraudulently obtained from

OfficeMax or claim that they sold it at a discount and thus had no profit above the

value of the merchandise.5 Thus, because Defendants did not resell the merchandise

or sell it for a profit above the value of the merchandise, we base Defendants’ gain on

the value of the merchandise at the time they obtained it. And at trial, the

government presented evidence showing that Defendants redeemed certificates for

merchandise worth $105,191—property traceable to Defendants’ scheme.6

Remarkably, the dissent contends that Defendants do not and have “never

made” the argument contesting the forfeiture amount and suggests that we

misunderstand Defendants’ arguments. Yet both in this second appeal and the first

appeal Defendants challenged the forfeiture amount. As mentioned above, Brandi

Channon’s counsel at the first oral argument argued that Defendants sold the

5 The dissent asserts that Defendants do not claim that they sold the merchandise at a discount and thus had no profit above the value of the merchandise. In her opening brief, Brandi Channon argued that the “Government has presented evidence of the loss of OfficeMax, but no evidence concerning the actual gain by the Channons, which is likely much less because the evidence at trial indicated that the Channons sold items received as a result of their use of OfficeMax rewards at a deep discount.” Appellant Brandi Channon’s Opening Br. at 18–19 (emphasis added). 6 The dissent posits that we appear to place the burden on criminal defendants to prove what happened to merchandise obtained from their crimes. Not so. The government, as it did in this case, must prove the amount of loss. And before the district court may order forfeiture of specific substitute property, the government must prove one of the elements in § 853(p)(1). See infra Section II.B.3. 14 merchandise at discounted prices, so the district court erred in its forfeiture

calculation. In her briefing in this appeal, Brandi Channon stated she wanted to

underscore “the conceptual difference between restitution, which is a measure of loss

to the victim; as opposed to forfeiture, which is a measure of gain by the perpetrator.”

Appellant Brandi Channon Br. at 11. She then raised the piano example by way of

analogy and said:

Channon perceives force in this example because it illustrates the defense argument—that the $105,191.00 figure proffered by the Government as the forfeiture amount does not include with any acceptable degree of proof by the Government that this figure represents the amount of gain to the Channons traceable to the wire fraud conviction as distinguished from the amount of loss to Office Max. It may well be that the Government agrees to comply with § 853(p) at the time that it seizes and attempts to convert assets to cash, but that does not resolve the central attack of the Channons on the amount of judgment itself. Id. at 18 (emphasis in original). Brandi Channon clearly perceives the “central

attack” in this appeal to be “the amount of judgment itself.”

Despite the dissent’s assertions to the contrary, Defendant Matthew Channon

also shared this view. In his “Motion for Evidentiary Hearing to Determine

Forfeiture Amount” filed in the district court after remand, but before the second

appeal, Matthew Channon asked “the Court to set this matter for an evidentiary

hearing to determine the actual amount of gain to the Channons; and then, and only

then, if the government satisfies its burden of proof on that issue, to identify

traceable property, or substitute assets, for satisfaction of any forfeiture judgment”

(emphasis added). By way of example, he not only used the piano example, but also

argued that “If a $30 gift card was sold for $10, then the gain to the Channons would 15 have been $10, not $30.” Id. at DNM 255. Again, Matthew Channon sought to re-

litigate the forfeiture amount on remand and then “and only then” identify traceable

property or substitute assets.

We conclude the district court properly determined the forfeiture judgment

based on the value of the merchandise and, as a result, did not abuse its discretion in

declining to hold a second evidentiary hearing.

2.

Defendants next argue that the district court erred in holding them jointly and

severally liable for the forfeiture judgment. Defendant Matthew Channon asserts that

Honeycutt made clear that the criminal forfeiture statute does not permit joint and

several liability. Under his interpretation of Honeycutt, the government may only

substitute untainted assets (money) for the tainted assets that the defendant personally

(not jointly with his wife) obtained. Because Defendants did not raise this issue to

the district court on remand—after the Supreme Court decided Honeycutt—we

review for plain error.7 Accordingly, Defendants must show “(1) there was error,

7 Defendants refuse to make their arguments under a plain error standard of review. They assert that the district court failed on remand to apply new Supreme Court law in accordance with our direction for the district court to “conduct further proceedings on this issue.” True, the Supreme Court decided Honeycutt prior to our remand. But once back in the district court, Defendants never asked the court in their requests for hearing to reassess the forfeiture order because they believed Honeycutt prohibited joint and several liability. The dissent believes Defendants did not have an opportunity to raise this issue. Defendants had such an opportunity. Defendant Matthew Channon filed a “Motion for Evidentiary Hearing to Determine Forfeiture Amount” in the district court following the remand. He never mentioned joint and several liability. Instead, he focused his request for a hearing on the district court’s alleged error in properly calculating their gain. 16 (2) that is plain, (3) that affects substantial rights, and (4) that seriously affects the

fairness, integrity or public reputation of judicial proceedings.” United States v.

Headman, 594 F.3d 1179, 1183 (10th Cir. 2010) (quoting United States v. Fields, 516

F.3d 923, 943 (10th Cir. 2008)).

We note that a circuit split has developed over whether Honeycutt applies to a

forfeiture under 18 U.S.C. § 981(a)(1)(C). In Honeycutt, the Supreme Court

analyzed a forfeiture under a different statute, 21 U.S.C. § 853(a), which states that

“[a]ny person convicted of a violation of this subchapter . . . shall forfeit to the

United States . . . (1) any property constituting, or derived from, any proceeds the

person obtained, directly or indirectly, as the result of such violation.” To limit

forfeiture to property that the defendant actually acquired under that statute, the

Supreme Court relied on § 853(a)’s phrase “the person obtained.” Honeycutt, 137 S.

Ct. at 1632–33. This led the Supreme Court to hold that a defendant may not be

“held jointly and severally liable for property that his co-conspirator derived from the

crime but that the defendant himself did not acquire.” Id. at 1630, 1634. Unlike

§ 853(a), Congress did not write the phrase “the person obtained” into

§ 981(a)(1)(C). The circuits concluding that Honeycutt does not apply to

§ 981(a)(1)(C) identified that phrase as the “linchpin” of the Supreme Court’s

decision. Compare United States v. Sexton, 894 F.3d 787, 799 (6th Cir. 2018)

(holding Honeycutt’s reasoning does not apply to a forfeiture under § 981(a)(1)(C)),

and United States v. Peithman, 917 F.3d 635, 652 (8th Cir. 2019) (same), with United

States v. Gjeli, 867 F.3d 418, 427 n.16, 428 (3d Cir. 2017) (holding that a court may

17 no longer impose joint and several liability in a forfeiture under § 981(a)(1)(C) after

Honeycutt).

We do not need to weigh in on whether Honeycutt applies to forfeitures under

§ 981(a)(1)(C) for two reasons. First, under plain error review, Defendants must

show that the district court committed obvious error. United States v. Cingari, 952

F.3d 1301, 1305 (11th Cir. 2020) (concluding Defendants could not demonstrate an

obvious error in the same situation). The textual difference between § 853 and § 981

proves fatal to this plain error argument. Id. at 1306. Moreover, because of the split

in authority on whether Honeycutt applies to a § 981 forfeiture, we cannot rely on

Honeycutt as the basis for obvious error.8 See United States v. Teague, 443 F.3d

1310, 1319 (10th Cir. 2006) (“If neither the Supreme Court nor the Tenth Circuit has

8 Even if Honeycutt applied to § 981(a)(1)(C), Defendants failed to show that its analysis plainly applies to them. In Honeycutt, the Supreme Court’s analysis turned on an employer-employee relationship. The employer-owner in that case obtained the profits while the salaried employee did not. “Honeycutt’s bar against joint and several forfeiture for co-conspirators applies only to co-conspirators who never possessed the tainted proceeds of their crimes.” United States v. Tanner, 942 F.3d 60, 67–68 (2d Cir. 2019). “But when each co-conspirator acquired the full proceeds ‘as a result of the crime,’ each can still be held liable to forfeit the value of those tainted proceeds.” Id. at 68 (quoting Honeycutt, 137 S. Ct. at 1635). Defendants are a married couple who lived together and enjoyed the benefits of their scheme together. The facts here are unlike the case of a drug kingpin and several drug dealers who do not have any relationship or shared benefits outside of the conspiracy. In that scenario, each member would take his cut and go his separate way, resulting in different forfeiture amounts. The record indicates that both Defendants acquired the full proceeds of their conspiracy as a result of their scheme. For example, Defendant Brandi Channon’s attorney at sentencing told the district court that “as a result of being married to Mr. Channon, she was a . . . passive recipient of those benefits.”

18 ruled on the subject, we cannot find plain error if the authority in other circuits is

split.”). Thus, we see no plain error in the district court’s decision to hold them

jointly and severally liable for the entire forfeiture amount.

3.

We agree with Defendants that the government will have to prove one of the

elements in § 853(p)(1) before the district court may order forfeiture of specific

substitute property under § 853(p)(2).9 The government, however, is not required to

do so at sentencing. See United States v. Newman, 659 F.3d 1235, 1242–43 (9th Cir.

2011) (“Because the government sought a money judgment in the first instance, there

was no need to seek substitute property.” (emphasis in original)). Federal Rule of

Criminal Procedure 32.2(b)(4)(C) allows Defendants or the government the

opportunity to appeal a district court’s amended order regarding substitute property

when that order granting or denying the amendment becomes final. Accordingly, the

district court did not err in declining to hold an evidentiary hearing on remand to

determine the need for substitution of untainted assets for tainted assets or to

determine whether the value of the substituted asset is equal to or less than that of the

unavailable tainted assets Defendants obtained.

9 Pursuant to § 853(p)(1), the district court shall order the forfeiture of substitute property when, as a result of a defendant’s act or omission, the tainted property: (A) cannot be located upon the exercise of due diligence; (B) has been transferred or sold to, or deposited with, a third party; (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. 19 The dissent finds our holding that a district court may order forfeiture in the

form of a money judgment against a defendant at the time of sentencing troubling.

We agree with the dissent that if Defendants are still in possession of the tainted

merchandise, then those items are subject to forfeiture under the applicable statutes.

We also agree with the dissent that only if the government proves the existence of

one or more of the circumstances described in § 853(p)(1) can it seek the forfeiture of

untainted property. But we part ways with the dissent when it comes to when the

government must meet its burden. Section 853(p) does not require the government to

prove the existence of one or more of the circumstances described in § 853(p)(1) at

sentencing. Indeed, nothing in § 853(p)’s text “limit[s] the substitute property

eligible for forfeiture to property that the defendant owns at the time of sentencing.”

United States v. Nejad, 933 F.3d 1162, 1165 (9th Cir. 2019). As the Nejad court

pointed out, a contrary rule “would allow an insolvent defendant to escape the

mandatory forfeiture penalty Congress has imposed simply by spending or otherwise

disposing of his criminal proceeds before sentencing.”10 Id.

10 In addition to nothing in the statute or the Rules requiring the government to prove the elements in § 853(p)(1) at the time of sentencing, the practical concern exists that the government often does not have evidence showing what proceeds a defendant has in possession at that time. As we explained in Arnold, Federal Rule of Criminal Procedure 32.2 “anticipates the possibility that the court may not be able to determine the amount of the money judgment before sentencing.” Arnold, 878 F.3d at 944. In this case, the government does not have evidence of what Defendants did with the merchandise they obtained from OfficeMax. The government, however, proved that the Channons fraudulently obtained $105,191 of actual merchandise from OfficeMax. 20 We also note that, to the extent Defendant Matthew Channon asserts that the

government cannot seek substitute assets for the value of direct proceeds the

government has already seized, the government agrees that this would be a double

recovery and prohibited under § 853(p). The government may obtain a money

judgment in the full amount of fraud proceeds and apply the value of specific

forfeited property towards satisfaction of that judgment.

4.

The dissent ignores the arguments in Defendants’ opening briefs in this appeal

and what they identify as the “central attack” of this appeal. In order to reframe the

arguments, it reaches back to Defendants’ first appeal and quotes from Defendant

Matthew Channon’s brief in another appeal in order to reframe the issue on the

present appeal: that a district court may not enter an in personam money judgment

order of forfeiture for tainted merchandise obtained with rewards points rather than

cash. But the Federal Rules of Appellate Procedure are clear that an opening brief

must identify “appellant’s contentions and the reasons for them, with citations to the

authorities and parts of the record on which the appellant relies.” Fed. R. App. P.

28(a)(8)(A). “Consistent with this requirement, we routinely have declined to

consider arguments that are not raised, or are inadequately presented, in an

appellant’s opening brief.” Bronson v. Swensen, 500 F.3d 1099, 1104 (10th Cir.

2007).

True, Defendant Matthew Channon argued in his first appeal that money

judgments may be appropriate when the offender acquires money but that a jury

21 convicted him and his wife of acquiring rewards points, not money. He did not

reassert that argument in this appeal. Accordingly, Defendants have waived that

argument in this appeal. Instead, Defendant Matthew Channon argued: (1) the

government did not prove he personally obtained certain tainted property traced to

the underlying crime; (2) the government did not prove the identified tainted assets

could not be forfeited and needed to be substituted; and (3) the government did not

prove the amount of their gain, which invalidated the forfeiture order. As mentioned

above, Defendant Brandi Channon’s brief in the present appeal seeks to underscore

the conceptual difference between restitution and forfeiture and states that the

government failed to present any evidence of gain by the Channons, which caused the

forfeiture order amount to be “invalid and over-inflated.”

“[I]n personam money judgments are appropriate under criminal forfeiture.”

McGinty, 610 F.3d at 1246. This holding is not new. And we reaffirm it today.

Contrary to the dissent’s view, our holding does not undermine or nullify the

forfeiture statutes in this case. Because the dissent would reverse based on this

waived argument, we will address it.

The dissent attempts to distinguish our prior precedent on the basis that

Defendants’ original proceeds were not cash. The dissent characterizes the proceeds

traceable to the offenses of conviction as (a) unredeemed MaxPerks Rewards dollars,

(b) prepaid debit cards, (c) goods obtained through the Channons’ use of the prepaid

debit cards; and (d) merchandise from OfficeMax (including gift cards). The

merchandise, however, is “proceeds” because it is property traceable to redeemed

22 MaxPerks Rewards dollars. Defendants fraudulently acquired OfficeMax MaxPerks

Rewards—a cash equivalent that when redeemed has tangible and actual value and

“proceeds” under § 981(a)(2)(A)—and then used those rewards to obtain gift cards

and merchandise. And the government has proven that Defendants redeemed

$105,191 of Rewards for merchandise. Thus, the merchandise was “property

traceable thereto”—also making it “proceeds” under 18 U.S.C. § 981(a)(2)(A). Our

reasoning in McGinty and Arnold makes sense and applies equally in this case to

fraudulently obtained, redeemed rewards points. After all, criminal forfeiture is a

sanction against the individual rather than a judgment against the property itself.

McGinty, 610 F.3d at 1246 (quoting United States v. Hall, 434 F.3d 42, 59 (1st Cir.

2006)).

The dissent further contends that had Congress intended to authorize the

government in any case to obtain an in personam money judgment of forfeiture

equivalent to the retail value of any tainted merchandise obtained by a defendant, it

would have explicitly said so. The dissent fails to point out, however, that nothing in

the applicable statutes authorizes a district court to impose an in personam money

judgment of forfeiture in any circumstance. And in any event, we crossed that bridge

in McGinty where we held that “[a]lthough the criminal forfeiture statute does not

explicitly refer to money judgments, our sister circuits have uniformly recognized

that money judgments representing the unlawful proceeds are appropriate.”

McGinty, 610 F.3d at 1246. In the end, the dissent does not identify the specific

statutory text we supposedly violate, let alone explain how we run afoul of the text.

23 And nothing in our precedent or the statute prohibits or cautions against treating a

redeemed cash equivalent such as fraudulently obtained store credit or rewards points

differently from cash.

AFFIRMED.

24 Nos. 19-2028, 19-2029, United States v. Channon BRISCOE, Circuit Judge, dissenting.

I respectfully dissent. In my view, the majority opinion is erroneous in four

respects. First, it fails to acknowledge the relevant procedural history of this case, and, as

a result, misinterprets the prior mandate. Second, the majority opinion acknowledges, but

then ultimately fails to address on the merits, the key arguments asserted by the

Channons in these appeals. Third, and most problematic for future cases, the majority

opinion ignores the plain language of the applicable forfeiture statutes, and also

improperly extends circuit precedent, by authorizing the entry of in personam money

judgments of forfeiture in cases, such as those at hand, where the offenses of conviction

resulted in the defendants obtaining items of personal property rather than money. In

other words, the majority opinion, in direct contravention of the applicable forfeiture

statutes, allows the government to seize property that was not derived from the offenses

of conviction (untainted property) without having first proven what proceeds defendants

actually derived from their offenses of conviction (tainted property) and why that tainted

property was not available for or otherwise not subject to seizure. Lastly, the majority

opinion errs in applying a plain error standard of review to the Channons’ argument that

the district court erred in holding them jointly and severally liable for the amended

judgment of forfeiture.

In my view, the district court was obligated to conduct an evidentiary hearing at

which the government was required to prove what tainted property defendants actually

derived from their offenses of conviction and, if necessary, the existence of one or more of the circumstances described in the substitute-asset provision, 21 U.S.C. § 853(p), that

might allow for the seizure of untainted property. Here, those key steps were omitted,

permitting the government to obtain an in personam money judgement by showing only

the loss amount suffered by the victim—the face value of the redeemed MaxPerks

Rewards. I therefore vote to reverse the district court’s amended judgment of forfeiture

and remand to the district court for such a hearing.

I

I begin with the scope of the original panel’s mandate. The majority opinion, in

interpreting this prior mandate, fails to acknowledge the arguments that were made by the

Channons in their original appeals. Those arguments, however, and the manner in which

they were addressed by the original panel, necessarily must inform our interpretation of

the prior mandate.

In their original appeals, the Channons argued “that the government failed to meet

its burden to prove the amount forfeited ($105,191) was traceable to the offense of wire

fraud.” United States v. Channon, 881 F.3d 806, 811 (10th Cir. 2018) (Channon I). For

her part, Brandi Channon argued:

The $105,191 money judgment forfeiture against the Channons is based on disregard of the language of 18 U.S.C. § 981(a)(1)(C). The forfeiture is in the amount of the face value of the redeemed MaxPerks Rewards. But that’s not how § 981(a)(1)(C) works. It does not say “[a]ny property” is subject to forfeiture, as the government would have it. What property may be forfeited under § 981(a)(1)(C) is “[a]ny property . . . which constitutes or is derived from proceeds traceable to” the offense.

2 Money judgments may be appropriate when money is what the offender acquires as a results of the offense. The Channons were convicted of acquiring Rewards and merchandise, not money. The Rewards can only be used to buy OfficeMax merchandise. The government alleged in the indictment the Channons conspired to obtain merchandise and it set out to prove at trial the Channons exchanged Rewards for merchandise. It presented evidence of OfficeMax merchandise in the Channons’ home as support for that contention. It seized the merchandise.

The government made no attempt at the forfeiture evidentiary hearing to trace the Rewards to cash. It did not attempt to prove the market value of the Rewards. It simply declared it was entitled to forfeiture of money equivalent to whatever the Rewards certificates indicated they were worth in discounts on OfficeMax merchandise. Section 981(a)(1)(C) does not contemplate such an outcome. This Court must vacate the money judgment forfeiture and remand for further proceedings.

Case No. 16-2285, Aplt. Br. at 36-37.

And Matthew Channon similarly argued:

The $105,191 money judgment forfeiture against the Channons is based on a disregard of the language of 18 U.S.C. § 981(a)(1)(C). The forfeiture is in the amount of the face value of the redeemed MaxPerks rewards. But that’s not how § 981(a)(1)(C) works. It does not say “[a]ny property” is subject to forfeiture, as the government would have it. What property may be forfeited under § 981(a)(1)(C) is “[a]ny property . . . which constitutes or is derived from proceeds traceable to” the offense.

Money judgments may be appropriate when money is what the offender acquires as a result of the offense. The Channons were convicted of acquiring rewards, not money. The rewards can only be used to buy OfficeMax merchandise. The government alleged in the indictment the Channons conspired to obtain merchandise and it set out to prove at trial the Channons exchanged rewards for merchandise. It presented evidence of OfficeMax merchandise in the Channons’ home as support for that contention. It seized that merchandise.

The government made no attempt at the forfeiture evidentiary hearing to trace the rewards to cash.

3 Case No. 16-2254, Aplt. Br. at 42-43.

The government argued, in response:

The Channons received valuable merchandise from OfficeMax as the proceeds of their fraud. Those proceeds were dissipated, hidden, or otherwise untraceable, making a money judgment the only means of taking title of the Channons’ unlawful gains. The district court did not err in awarding the United States a money judgment in the amount of their fraud proceeds.

Case No. 16-2254, Aple Br. at 53. The government also filed a Rule 28(j) letter stating,

in pertinent part:

Going forward, including in the Channons’ case, the government w[ould] . . . seek to enforce a forfeiture money judgment only through the substitute-asset provision of § 853(p). In other words, in seeking to forfeit specific property of the Channons to satisfy the money judgment, the government will move to amend the forfeiture order under Federal Rule of Criminal Procedure 32.2(e) and will establish under § 853(p) that the proceeds are unavailable or are substantially diminished in value.

Aple. Rule 28(j) Letter at 1.

The original panel had this to say about the parties’ arguments, under the general

heading description “Forfeiture”:

Defendants last argue that the government failed to meet its burden to prove the amount forfeited ($105,191) was traceable to the offense of wire fraud. We have held that wire fraud proceeds are subject to forfeiture under 18 U.S.C. § 981(a)(1)(C) and 28 U.S.C. § 2461. See United States v. Courtney, 816 F.3d 681, 685 (10th Cir. 2016). The property subject to forfeiture includes “[a]ny property, real, or personal, which constitutes or is derived from proceeds traceable to [the] violation.” 18 U.S.C. § 981(a)(1)(C). The substitute-asset provision, 21 U.S.C. § 853(p), provides the only method for the forfeiture of untainted property. Honeycutt v. United States, ––– U.S. ––––, 137 S. Ct. 1626, 1633, 198 L. Ed. 2d 73 (2017).

4 The government concedes a remand to conform the money judgment to the requirements of § 853(p) may be necessary. The government explains that going forward it will seek only to enforce a forfeiture money judgment through the substitute-asset provisions of § 853(p) and will seek to amend the forfeiture order under Fed. R. Crim. P. 32.2(e). Accordingly, we remand so the district court may conduct further proceedings on this issue.

Channon I, 881 F.3d at 811–12 (emphasis added).

There has been confusion on the part of the parties, and I would submit the district

court as well, regarding the meaning of the concluding phrase “this issue.” The

Channons have consistently interpreted the phrase “this issue” as referring to their

general challenge to the district court’s original judgment of forfeiture as identified in the

original panel’s ruling just quoted: “Defendants last argue that the government failed to

meet its burden to prove the amount forfeited ($105,191) was traceable to the offense of

wire fraud.” The government, in contrast, has interpreted it as referring only to the

government’s concession that a remand was necessary to conform the judgment to the

requirements of § 853(p).

In deciding between these two competing interpretations, it is important to note

that the panel in Channon I acknowledged, but did not expressly address, defendants’

argument “that the government failed to meet its burden to prove the amount forfeited

($105,191) was traceable to the offense of wire fraud.” Id. at 811. Likewise, the panel

acknowledged, but again did not expressly address, the government’s concession that “a

remand to conform the money judgment to the requirements of § 853(p) may be

necessary.” Id. at 811-12. In addition, the panel discussed both defendants’ arguments

5 and the government’s concession under the general heading of “Forfeiture.” Id. at 811.

Therefore, the better interpretation of the prior mandate is that it was intended to

encompass both the issue raised by defendants, i.e., the general challenge to the judgment

of forfeiture, and the § 853(p) issue raised by the government in its concession. To

conclude that the remand was limited only to the § 853(p) issue raised by the government

would mean that we would have to interpret the decision in Channon I as having

implicitly rejected the Channons’ general challenge to the original judgment of forfeiture

order. Nothing in Channon I, however, suggests that this was the prior panel’s intent.

Unfortunately, the majority opinion fails to acknowledge the full scope of the

arguments asserted by the Channons in their original appeals, and all but ignores the

parties’ competing interpretations of the original panel’s mandate. Further, the majority

opinion treats the phrase “this issue” in Channon I as referring solely to the § 853(p)

issue raised by the government. Maj. Op. at 8 (“The prior panel remanded based on the

government’s concession that the language of the judgment needed to reference

§ 853(p)’s requirements—no more explanation, no less.”). For the reasons outlined

above, I think that this is both incomplete and incorrect.

Because, in my view, the prior mandate encompassed both the general arguments

raised by the Channons and the § 853(p) issue raised by the government, I believe that

the district court was required to do more on remand than simply issue an amended

judgment of forfeiture. See generally Harte v. Bd. of Comm’rs, 940 F.3d 498, 510 (10th

Cir. 2019) (holding that “a district court must comply strictly” with the mandate). More

6 to the point, I disagree with the majority opinion’s conclusion that “the [prior] mandate’s

language did not require the district court to hold an evidentiary hearing on the forfeiture”

issues raised by the defendants.1 Maj. Op. at 7.

II

Near the beginning of Section II, the majority opinion correctly summarizes the

key arguments made by the Channons in the present appeals:

Defendants further contend the district court failed to make specific findings as to what tainted assets each Defendant obtained as a result of their criminal activity, whether any need existed for substitution of untainted assets for the tainted assets, and whether the value of the substituted asset is equal to or less than the value of unavailable tainted assets.

Id. at 4-5. In other words, the Channons argue in their current appeals, as they did in

their original appeals, that the government failed to meets its burden of proving the

existence of any tainted property that they obtained from their crimes of conviction2 or,

1 Whether or not it was the responsibility of the district court to decipher the mandate by examining the parties’ arguments from the first appeal, it is most certainly our duty to do so. 2 Curiously, the majority asserts elsewhere in its opinion that defendant Matthew Channon waived his challenge to the money judgment of forfeiture that was entered by the district court. Maj. Op. at 22. This is incorrect. Both of the Channons have consistently argued, both in their first appeals and again in the current appeals, that the government failed to meet its burden of proof under 18 U.S.C. § 981(a)(1)(C) and that, as a result, it was error for the district court to enter the money judgment of forfeiture. For example, Matthew Channon’s opening brief in this case describes the “ISSUES PRESENTED” as follows: Whether pursuant to Honeycutt v. United States, 137 S. Ct. 1626 (2017), before a court can issue a judgment to forfeit untainted money as substitute 7 alternatively, that such tainted property is unavailable for one or more of the reasons

outlined in the substitute-asset provision, 21 U.S.C. § 853(p).

Unfortunately, the majority opinion, after acknowledging these arguments, makes

no further mention of them. Instead, much of the remainder of the majority opinion

focuses on arguments that were actually never made by either defendant: that “because

the district court based both the restitution and forfeiture amounts on OfficeMax’s loss,

the forfeiture judgment constitutes a double recovery,” Maj. Op. at 11; that, with respect

to fraudulently obtained merchandise that defendants subsequently sold, forfeiture is

proper only if defendants made a profit above the value of the merchandise; and,

ultimately, that defendants are challenging only the amount, rather than the fact, of the

money judgment of forfeiture.

III

The most troubling aspect of the majority opinion is its “hold[ing] that a district

court may base a judgment’s forfeiture amount on the value of the fraudulently obtained

assets under 21 U.S.C. § 853(p) and Fed. R. Crim. P. 32.2(e), it must hold a hearing to determine whether the Government has met its burden to prove that (1) the defendant obtained certain tainted money or property traced to the underlying crime, (2) pursuant to one of the subsections A-E in section 853(p) and due to the defendant’s actions or omissions, the identified tainted assets cannot be forfeited and need to be substituted with untainted assets in the defendant’s possession, and (3) the value of the untainted substituted assets is not higher than the initial tainted assets the defendant had obtained. Matthew Channon Br. at 3-4.

8 merchandise at the time a defendant acquired it.” Id. at 2; see id. at 13 (“Put simply, the

government is entitled to forfeiture in the amount of Defendants’ proceeds, and

OfficeMax, the victim, was entitled to restitution in the amount of its loss.”). This

holding, as I shall proceed to explain, is quite remarkable because it is contrary to, and

effectively nullifies, the language of the forfeiture statutes relied on by the government in

this case by enabling the government to obtain an in personam money judgment by

proving only the amount of the victim’s loss.

“Criminal forfeiture statutes empower the Government to confiscate property

derived from or used to facilitate criminal activity. Such statutes serve important

governmental interests such as ‘separating a criminal from his ill-gotten gains,’ ‘returning

property, in full, to those wrongfully deprived or defrauded of it,’ and ‘lessen[ing] the

economic power’ of criminal enterprises.” Honeycutt v. United States, 137 S. Ct. 1626,

1631 (2017) (quoting Caplin & Drysdale, Chartered v. United States, 491 U.S. 617, 629–

630 (1989)).

“If the government intends to pursue a forfeiture, Federal Rule of Criminal

Procedure 32.2(a) requires that the indictment ‘contain[] notice to the defendant that the

government will seek the forfeiture of property as part of any sentence in accordance with

the applicable statute.’” United States v. Courtney, 816 F.3d 681, 684–85 (10th Cir.

2016) (quoting Fed. R. Crim. P. 32.2(a)). In this case, the superseding indictment

notified the Channons that the government would seek forfeiture pursuant to 18 U.S.C.

§ 981(a)(1)(C) and 28 U.S.C. § 2461.

9 “Section 981(a)(1)(C) allows for the forfeiture of any property or proceeds

traceable to an offense constituting a ‘specified unlawful activity.’” Courtney, 816 F.3d

at 685. “Specified unlawful activity” is defined in 18 U.S.C. § 1956(c)(7) to include any

offense listed in 18 U.S.C. § 1961(1). “Among the offenses listed [in] § 1961(1) is

§ 1343—the wire fraud statute” that the Channons were convicted of violating. Id.

Because § 981(a)(1)(C) “is a civil forfeiture statute,” 28 U.S.C. § 2461, the other statute

cited in the superseding indictment, “comes into play” and “is read as a gap-filler

between civil and criminal forfeiture, in that it permits criminal forfeiture when no

criminal forfeiture provision applies to the crime charged against a particular defendant

but civil forfeiture for that charged crime is nonetheless authorized.”3 Id. (quotations

omitted).

3 Section 2461(c) states: If a person is charged in a criminal case with a violation of an Act of Congress for which the civil or criminal forfeiture of property is authorized, the Government may include notice of the forfeiture in the indictment or information pursuant to the Federal Rules of Criminal Procedure. If the defendant is convicted of the offense giving rise to the forfeiture, the court shall order the forfeiture of the property as part of the sentence in the criminal case pursuant to the Federal Rules of Criminal Procedure and section 3554 of title 18, United States Code. The procedures in section 413 of the Controlled Substances Act (21 U.S.C. § 853) apply to all stages of a criminal forfeiture proceeding, except that subsection (d) of such section applies only in cases in which the defendant is convicted of a violation of such Act. 28 U.S.C. § 2461(c).

10 The term “proceeds,” as employed in § 981(a)(1)(C), carries slightly different

definitions depending upon the specific criminal activity at issue. “In cases,” such as the

one at hand, “involving illegal goods, illegal services, [and] unlawful services, . . . the

term ‘proceeds’ means property of any kind obtained directly or indirectly, as the result

of the commission of the offense giving rise to forfeiture, and any property traceable

thereto, and is not limited to the net gain or profit realized from the offense.”4 18 U.S.C.

§ 981(a)(2)(A).

As the original panel noted in Channon I, “[t]he substitute-asset provision, 21

U.S.C. § 853(p), provides the only method for the forfeiture of untainted property.”

Channon I, 881 F.3d at 811. Section 853(p) states as follows:

(p) Forfeiture of substitute property

(1) In general

Paragraph (2) of this subsection shall apply, if any property described in subsection (a), as a result of any act or omission of the defendant-- (A) cannot be located upon the exercise of due diligence; (B) has been transferred or sold to, or deposited with, a third party;

4 Section 981(a)(2)(A) also lists “telemarketing and health care fraud schemes.” The First Circuit has concluded that listing these two specific fraud schemes in subsection (a)(2)(A) would have been unnecessary if Congress had intended for the generic term “unlawful activities” to be broadly interpreted to include fraud schemes. United States v. Carpenter, 941 F.3d 1, 7 (1st Cir. 2019). The problem here, however, is that the other two definitions of “proceeds” outlined in §§ 981(a)(2)(B) and (C) do not apply. Subsection (B)’s definition applies to “cases involving lawful goods or lawful services that are sold or provided in an illegal manner.” Subsection (C)’s definition applies to “cases involving fraud in the process of obtaining a loan or extension of credit.”

11 (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.

(2) Substitute property

In any case described in any of subparagraphs (A) through (E) of paragraph (1), the court shall order the forfeiture of any other property of the defendant, up to the value of any property described in subparagraphs (A) through (E) of paragraph (1), as applicable.

(3) Return of property to jurisdiction

In the case of property described in paragraph (1)(C), the court may, in addition to any other action authorized by this subsection, order the defendant to return the property to the jurisdiction of the court so that the property may be seized and forfeited.

28 U.S.C. § 853(p).5

In Honeycutt, the Supreme Court held that “[s]ection 853(p) demonstrates that

Congress contemplated situations where the tainted property itself would fall outside the

Government’s reach” and, “[t]o remedy that situation, Congress did not authorize the

Government to confiscate property from other defendants or co-conspirators; it

authorized the Government to confiscate assets only from the defendant who initially

acquired the property and who bears responsibility for its dissipation.” 137 S. Ct. at

1634.

5 Section 2461(c) expressly states that “[t]he procedures in section” 853 “apply to all stages of a criminal forfeiture proceeding.” 28 U.S.C. § 2461(c). Thus, § 853(p) applies in instances where the government seeks forfeiture of so-called “substitute property,” i.e., property that is untainted by the crimes of conviction. 12 The question is how these forfeiture statutes apply in the case before us. Notably,

the presentence investigation reports (PSRs) that were prepared and filed in these cases

provide us with some details about how the Channons committed their crimes:

This case arose from a fraud scheme perpetrated on the former office- supply retail chain OfficeMax by Albuquerque residents Matthew and Brandi Channon. The scheme had two basic components, both of which depended on the Channons creating and controlling thousands of customer- reward accounts in fictitious names. First, the Channons used their accounts and a computer program to claim reward credit for purchases made by other customers. Second, the Channons used their many accounts to evade OfficeMax’s restrictions on participation in a program in which OfficeMax would award store credit to customers who recycled used ink and toner cartridges at its stores. The Channons then used the store credit they amassed through the scheme to purchase prepaid debit cards at OfficeMax, which they could use like cash; they also used their rewards to purchase items at OfficeMax that Matthew Channon would then resell on eBay. To avoid detection, the Channons traveled across the country to execute their scheme, personally visiting over 300 different OfficeMax stores in 20 states.

***

The investigation also discovered that Matthew Channon was using multiple eBay accounts in execution of the fraud. These accounts sold merchandise obtained with MaxPerks rewards—and in some cases, sold fraudulently obtained MaxPerks Rewards certificates themselves. These accounts also purchased at least 32,000 used ink cartridges through eBay at an average cost of 32 cents per cartridge. In addition, Matthew Channon’s eBay accounts purchased OfficeMax coupons, which the Channons often used in connection with the reward certificates to purchase items at OfficeMax at a discount.

*** Brandi Channon was interviewed during the search of the Channons’ residence in Albuquerque on June 28, 2011. * * * She described how she and Matthew would travel around the country to execute the scheme, including ordering ink online and having it shipped ahead of time to the

13 hotel they planned to stay at. To pay for airfare they would purchase Southwest Airlines gift cards at OfficeMax using MaxPerks Rewards.

ROA, Vol. 3 (Brandi Channon PSR) at 3–8.

Applying § 981(a)(1)(C) to this set of facts, it appears that the “proceeds traceable

to” the Channons’ offenses of conviction are varied and include, among other things,

(a) unredeemed MaxPerks Rewards dollars, (b) prepaid debit cards, (c) goods obtained

through the Channons’ use of the prepaid debit cards, and (d) merchandise from

OfficeMax (including gift cards).6 Thus, if the Channons were, at the time of arrest, still

in possession of merchandise and/or prepaid debit cards that they obtained from

OfficeMax, then those items of tainted personal property are subject to forfeiture under

the statute.7 Only if the government proves the existence of one or more of the

circumstances described in § 853(p)(1) can it seek the forfeiture of untainted property.

6 If the government can prove that some of these items were sold by the Channons, then the government could obtain a money judgment of forfeiture equal to the sale proceeds. See United States v. Gregoire, 638 F.3d 962, 972 (8th Cir. 2011) (holding that, for purposes of criminal forfeiture, “[t]he gross revenues from Gregoire’s eBay sales [of stolen property] during the period alleged in the indictment were direct proceeds of his mail fraud offense of conviction”). 7 Notably, government counsel conceded at oral argument in the first appeals that items of merchandise were seized from the Channons’ home during the execution of a search warrant. But government counsel offered no explanation as to why it did not seek the forfeiture of these items under § 981(a)(1)(C), or why its failure to do so did not preclude it from seeking the forfeiture of untainted property. And, curiously, the majority “agree[s] . . . that if Defendants are still in possession of the tainted merchandise, then those items are subject to forfeiture under the applicable statutes.” Maj. Op. at 19. The majority, however, offers no explanation regarding precisely how, under the statutory 14 Unfortunately, the majority opinion ignores these controlling statutory provisions

and the relevant facts of the Channons’ crimes, and instead “hold[s] that a district court

may base a judgment’s forfeiture amount on the value of the fraudulently obtained

merchandise at the time a defendant acquired it.” Maj. Op. at 2; see id. at 14 (“[B]ecause

Defendants did not resell the merchandise or sell it for a profit above the value of the

merchandise, we base Defendants’ gain on the value of the merchandise at the time they

obtained it.”).8 As authority for this holding, the majority opinion cites only to two of our

prior cases: United States v. Arnold, 878 F.3d 940 (10th Cir. 2017), and United States v.

McGinty, 610 F.3d 1242 (10th Cir. 2010). Maj. Op. at 8-9, 11. Arnold and McGinty are

distinguishable, however, because the crimes of conviction in both cases resulted in

money proceeds. 878 F.3d at 941 (noting that the defendant “devised a scheme to

framework, this merchandise should now be forfeited and, if so, how it would impact the money judgment issued by the district court. Somewhat relatedly, the majority opinion also discusses a hypothetical scenario in which a thief steals and then keeps a $50,000 piano. Id. at 13. According to the majority, the thief realized a gain of $50,000 at the time of the wrongdoing and thus is subject to a money judgment of forfeiture in that amount. Id. This is incorrect. Under the statutory framework outlined above, the piano would be subject to seizure and no money judgment of forfeiture would be available (unless, of course, the government could prove the existence of one or more of the circumstances described in § 853(p)(1)). 8 The majority also, again contrary to the language of the statutory framework that is applicable here, appears to place the burden on criminal defendants to prove what happened to merchandise obtained from their crimes. See United States v. Ursery, 518 U.S. 267, 289 (1996) (holding that 19 U.S.C. § 1615 “governs the burden of proof in forfeiture proceedings under §§ 881 and 981”); 19 U.S.C. § 1615 (providing that the burden of proof lies on the claimant). 15 defraud individuals out of the rebates paid to them when they purchased new vehicles”);

610 F.3d at 1245 (“The government contends that it is entitled to the forfeiture of the

proceeds of McGinty’s misapplication of bank funds, and the district court erred in

refusing to order a money judgment representing those proceeds. We agree.”). Money

judgments in those cases were therefore consistent with the language of the forfeiture

statute. Nothing in either Arnold or McGinty can reasonably be read as suggesting that it

is proper for a district court to impose an in personam money judgment of forfeiture

against a defendant who obtains merchandise, rather than money proceeds, as a result of

his crime.

In sum, the majority opinion’s extension of Arnold and McGinty to the cases at

hand is clearly contrary to, and effectively serves to nullify, the plain language of the

forfeiture statutes relied on by the government in these cases. Had Congress intended to

authorize the government in any case to obtain an in personam money judgment of

forfeiture equivalent to the retail value of any tainted merchandise obtained by a

defendant, it would have said so. But it did not.

For these reasons, I would remand the case to the district court with directions to

conduct an evidentiary hearing on the forfeiture issues raised by the defendants. At that

time, the government would be required to establish the existence of tainted property

and/or the existence of one or more of the circumstances outlined in § 853(p)(1). In the

absence of such proof, no judgment of forfeiture can properly be entered against the

Channons.

16 IV

Lastly, I disagree with the majority opinion’s conclusion that the Channons’

challenge to the joint and several nature of the district court’s amended judgment of

forfeiture is subject to review only for plain error. Maj. Op. at 16. As outlined above, the

Channons believed, reasonably in my view, that the prior mandate required the district

court to do more than simply issue an amended judgment. Thus, on remand, the

Channons moved for an “evidentiary hearing on the matter of the propriety and amount,

if any, of forfeiture of money or property.” ECF No. 486 at 1. The district court,

however, never ruled on that motion and instead simply issued the amended judgment of

forfeiture. Thus, there was never truly an opportunity for the Channons to raise the joint

and several issue prior to the district court’s issuance of its amended judgment of

forfeiture.