In the Courts

D.C. District Court Applies Southern Union

On July 19, 2012, the District Court for the District of Columbia considered application of the Supreme Court's recent decision in Southern Union Co. v. United States, — U.S. —, 132 S. Ct. 2344, —L.Ed.2d.—- (2012), to the admissibility of gross revenue evidence in calculation of criminal fines under the Alternative Fines Provision, 18 U.S.C. ' 3571(d). United States v. Sanford Ltd, —F.Supp.2d.—, 2012 WL2930770, *13 (2012). The case involves felony charges against the defendants under the Act to Prevent Pollution from Ships, 33 U.S.C. ” 1901 et. seq., and other related criminal charges, based on defendants' alleged knowing failure to maintain an accurate Oil Record Book, falsification of records, obstruction of justice and unlawful discharge of oil waste. Id. at *1. The opinion considers a motion in limine to exclude evidence regarding the alleged proceeds received by the defendants as a result of their sales of fishing cargo from the fishing vessel at issue, the San Nikunau, during the relevant timeframe (i.e., between March 2007 and July 2011). Id.

The government proposed to introduce evidence indicating that the defendants had received $24,862,954.89 in gross revenue from sales of fishing cargo offloaded from the San Nikunau during that period. The defendants argued that the evidence was irrelevant under Federal Rule of Evidence (F.R.E.) 402 and, in the alternative, unfairly prejudicial under F.R.E. 403. The government argued ' and the court ultimately agreed ' that, regardless of whether revenue figures were relevant to any element of the charged offenses, gain is always relevant to motive in a criminal case. Id. at *4-5. However, after rejecting the defendants' arguments with respect to F.R.E. 402 and 403, the court raised questions sua sponte as to the implications of the recent Supreme Court decision in Southern Union. Id. at *1.

In Southern Union, the Supreme Court held that the requirement, set forth under Apprendi v. New Jersey, 530 U.S. 466 (2000), that a jury determine any fact that increases a potential sentence extended to facts increasing a potential criminal fine. Based on this ruling, the district court in Sanford questioned whether admission of the specific “gross revenue” figures proffered by the government was appropriate, given that the jury may later be required to determine the “gross gain ' derived from” the charged offenses in order to determine the ultimately penalty under the Alternative Fines Provision. Id. at *1. The court held that the gross revenue amounts proposed by the government was not an appropriate measure of “gross gain ' derived from” the charged offenses and that the proffered evidence must, therefore, be excluded as irrelevant and potentially confusing to the jury. Id.

The Alternative Fines Provision, 18 U.S.C. ' 3571(d), stated that “if any person derives pecuniary gain from the offense, or if the offense results in pecuniary loss to a person other than the defendant,” a fine may be imposed of “not more than the greater of twice the gross gain or twice the gross loss.” Id. at *7. The term “gross gain” is not defined, however, anywhere in the statute, although the similar term “pecuniary gain” is defined in the United States Sentencing Guidelines as “the additional before-tax profit to the defendant resulting from the relevant conduct of the offense.” U.S. Sentencing Guidelines Manual ' 8A1.2 cmt. 3(H) (noting that the term “pecuniary gain” is “derived from 18 U.S.C. ' 3571(d)”). Id. at *8. The court further cites legislative history as supportive of the proposition that “gross gain” would be measured by profit rather than revenue. Id. Noting that some district courts have viewed “gross gain” to mean “gross revenues derived from a crime ' rather than profits,” the Sanford court held, nonetheless, that the appropriate measure of “gross gain” would be “based upon the amount of illicit profit.” Id. at *9.

The court also noted that the “gross gain” must be “derived from” the charged offense in order to support a fine under the Alternative Fines Provision. While this term is also not defined under the Act, the court held that the government must demonstrate that the proposed “gross gain” was proximately caused by the charged conduct, citing a single district court case, United States v. BP Products North America, Inc., 610 F.Supp.2d. 655 (S.D.Tex. 2009), as the only case to have addressed the issue. Id. at *10-11. The court ultimately held that government would have the burden under the Alternative Fines Provision and Southern Union of proving to the jury beyond a reasonable doubt that the “gross gain,” equal to “any before-tax profits,” were earned by the defendants as “a proximate result of the charged offenses.” Id. at *13.

The court also noted that the Alternative Fines Provision includes a complexity clause, such that the provision is not available where the measure of gains would “unduly complicate or prolong the sentencing.” Id. at *12. In that case, the available penalty would revert to the statutory maximum for the charged conduct. While the Alternative Fines Provisions refers to delay and complexity in sentencing, the court held that, “in the wake of the Southern Union decision, the court must consider these factors in determining the admissibility at trial of evidence pertaining to gross gain,” as this evidence would later come to bear on the jury's determinations with respect to “gross gain” in calculating the ultimate fine. Id. The court reserved judgment as to whether allowing the government to seek a fine under the Alternative Fines Provision would “unduly complicate or prolong the trial,” instructing the parties to produce notice of the number of witnesses and kinds of evidence they intend to present regarding the “gross gain” calculations.

D.C. District Court Applies Southern Union

On July 19, 2012, the District Court for the District of Columbia considered application of the Supreme Court's recent decision in Southern Union Co. v. United States, — U.S. —, 132 S. Ct. 2344, —L.Ed.2d.—- (2012), to the admissibility of gross revenue evidence in calculation of criminal fines under the Alternative Fines Provision, 18 U.S.C. ' 3571(d). United States v. Sanford Ltd, —F.Supp.2d.—, 2012 WL2930770, *13 (2012). The case involves felony charges against the defendants under the Act to Prevent Pollution from Ships, 33 U.S.C. ” 1901 et. seq., and other related criminal charges, based on defendants' alleged knowing failure to maintain an accurate Oil Record Book, falsification of records, obstruction of justice and unlawful discharge of oil waste. Id. at *1. The opinion considers a motion in limine to exclude evidence regarding the alleged proceeds received by the defendants as a result of their sales of fishing cargo from the fishing vessel at issue, the San Nikunau, during the relevant timeframe (i.e., between March 2007 and July 2011). Id.

The government proposed to introduce evidence indicating that the defendants had received $24,862,954.89 in gross revenue from sales of fishing cargo offloaded from the San Nikunau during that period. The defendants argued that the evidence was irrelevant under Federal Rule of Evidence (F.R.E.) 402 and, in the alternative, unfairly prejudicial under F.R.E. 403. The government argued ' and the court ultimately agreed ' that, regardless of whether revenue figures were relevant to any element of the charged offenses, gain is always relevant to motive in a criminal case. Id. at *4-5. However, after rejecting the defendants' arguments with respect to F.R.E. 402 and 403, the court raised questions sua sponte as to the implications of the recent Supreme Court decision in Southern Union. Id. at *1.

In Southern Union , the Supreme Court held that the requirement, set forth under Apprendi v. New Jersey , 530 U.S. 466 (2000), that a jury determine any fact that increases a potential sentence extended to facts increasing a potential criminal fine. Based on this ruling, the district court in Sanford questioned whether admission of the specific “gross revenue” figures proffered by the government was appropriate, given that the jury may later be required to determine the “gross gain ' derived from” the charged offenses in order to determine the ultimately penalty under the Alternative Fines Provision. Id. at *1. The court held that the gross revenue amounts proposed by the government was not an appropriate measure of “gross gain ' derived from” the charged offenses and that the proffered evidence must, therefore, be excluded as irrelevant and potentially confusing to the jury. Id.

The Alternative Fines Provision, 18 U.S.C. ' 3571(d), stated that “if any person derives pecuniary gain from the offense, or if the offense results in pecuniary loss to a person other than the defendant,” a fine may be imposed of “not more than the greater of twice the gross gain or twice the gross loss.” Id. at *7. The term “gross gain” is not defined, however, anywhere in the statute, although the similar term “pecuniary gain” is defined in the United States Sentencing Guidelines as “the additional before-tax profit to the defendant resulting from the relevant conduct of the offense.” U.S. Sentencing Guidelines Manual ' 8A1.2 cmt. 3(H) (noting that the term “pecuniary gain” is “derived from 18 U.S.C. ' 3571(d)”). Id. at *8. The court further cites legislative history as supportive of the proposition that “gross gain” would be measured by profit rather than revenue. Id. Noting that some district courts have viewed “gross gain” to mean “gross revenues derived from a crime ' rather than profits,” the Sanford court held, nonetheless, that the appropriate measure of “gross gain” would be “based upon the amount of illicit profit.” Id. at *9.

The court also noted that the “gross gain” must be “derived from” the charged offense in order to support a fine under the Alternative Fines Provision. While this term is also not defined under the Act, the court held that the government must demonstrate that the proposed “gross gain” was proximately caused by the charged conduct, citing a single district court case, United States v. BP Products North America, Inc. , 610 F.Supp.2d. 655 (S.D.Tex. 2009), as the only case to have addressed the issue. Id. at *10-11. The court ultimately held that government would have the burden under the Alternative Fines Provision and Southern Union of proving to the jury beyond a reasonable doubt that the “gross gain,” equal to “any before-tax profits,” were earned by the defendants as “a proximate result of the charged offenses.” Id. at *13.

The court also noted that the Alternative Fines Provision includes a complexity clause, such that the provision is not available where the measure of gains would “unduly complicate or prolong the sentencing.” Id. at *12. In that case, the available penalty would revert to the statutory maximum for the charged conduct. While the Alternative Fines Provisions refers to delay and complexity in sentencing, the court held that, “in the wake of the Southern Union decision, the court must consider these factors in determining the admissibility at trial of evidence pertaining to gross gain,” as this evidence would later come to bear on the jury's determinations with respect to “gross gain” in calculating the ultimate fine. Id. The court reserved judgment as to whether allowing the government to seek a fine under the Alternative Fines Provision would “unduly complicate or prolong the trial,” instructing the parties to produce notice of the number of witnesses and kinds of evidence they intend to present regarding the “gross gain” calculations.