United States v. Lester A. Hawkey
148 F.3d 920, 82 A.F.T.R.2d (RIA) 5058, 1998 U.S. App. LEXIS 13384 (1998)
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Rule of Law:
Under the federal forfeiture statute, 18 U.S.C. § 982(a)(1), the total amount of ill-gotten gains subject to forfeiture must be reduced by any funds the defendant returned to the victim prior to the court's forfeiture order.
Facts:
- Lester A. Hawkey, the sheriff of Minnehaha County, entered into an agreement on behalf of his department with a concert promoter, Wildwood Productions, to hold annual benefit concerts.
- The concerts were promoted to the public as fundraisers for local youth programs, and money was solicited for tickets, donations, and advertisements.
- The proceeds were deposited into two bank accounts established specifically for the concerts.
- Beginning in 1991, Hawkey began using funds from these concert accounts to pay for a variety of personal and business expenses, including the purchase of vehicles.
- Hawkey also operated a separate for-profit inmate food service business, for which he purchased federal surplus food (available only to non-profits) using checks drawn on the benefit concert accounts.
- Additionally, Hawkey charged inmates a fee for urinalysis testing and kept the proceeds for his personal use.
- At various times, Hawkey made deposits of his personal and business funds back into the concert accounts to replace some of the money he had taken.
Procedural Posture:
- Lester A. Hawkey was charged in a forty-one count indictment in the United States District Court for the District of South Dakota.
- Following a trial, a jury convicted Hawkey on thirty-nine of the forty-one counts.
- The district court sentenced Hawkey to forty-one months of imprisonment.
- As part of the sentence, the district court ordered Hawkey to forfeit $140,450.08 and a motor home pursuant to 18 U.S.C. § 982(a)(1).
- Hawkey, as the appellant, appealed his convictions, sentence, and the forfeiture order to the United States Court of Appeals for the Eighth Circuit.
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Issue:
Does the federal forfeiture statute, 18 U.S.C. § 982(a)(1), require a court to reduce the total amount of property to be forfeited by any portion of the misappropriated funds that the defendant returned before the forfeiture order was issued?
Opinions:
Majority - Heaney, Circuit Judge
Yes. While the forfeiture statute requires a defendant to forfeit all property "involved in" or "traceable to" the unlawful monetary transaction, it does not support the proposition that a defendant should not be credited for returning misappropriated funds. The purpose of forfeiture is to disgorge the defendant of the proceeds of the crime. Therefore, the court must calculate the total corpus of the ill-gotten gains and then deduct any funds that were returned prior to the forfeiture order. This prevents a defendant from being penalized for funds they no longer possess because they have been returned. However, any property purchased with misappropriated funds that has appreciated in value is fully forfeitable, as the appreciation is also 'traceable to' the offense.
Analysis:
This decision clarifies the mechanics of criminal forfeiture calculations under 18 U.S.C. § 982(a)(1), establishing an important precedent for cases involving money laundering and misappropriation. It mandates that forfeiture is not a blunt instrument but must account for the net financial impact of the crime, specifically by crediting repayments made before sentencing. This creates a more equitable application of the statute, allowing defendants to mitigate their forfeiture liability by returning stolen funds. The ruling instructs lower courts to conduct more detailed factual inquiries during forfeiture hearings, ensuring the final amount accurately reflects the assets actually retained by the defendant from their criminal conduct.
