[00:00:06] Speaker 04:
Nobody's talking.

[00:00:10] Speaker 02:
Okay.

[00:00:12] Speaker 02:
Judge Block, there's probably a way to turn off the mic.

[00:00:16] Speaker 02:
I don't know.

[00:00:17] Speaker 04:
I'm here.

[00:00:18] Speaker 02:
I know.

[00:00:19] Speaker 02:
You were saying something, and I didn't know what it was.

[00:00:22] Speaker 04:
I was whispering, yeah.

[00:00:24] Speaker 02:
Whispering doesn't work very well.

[00:00:27] Speaker 02:
Okay.

[00:00:28] Speaker 02:
Yes, ma'am.

[00:00:29] Speaker 01:
Thank you.

[00:00:30] Speaker 01:
Good afternoon.

[00:00:30] Speaker 01:
May it please the court?

[00:00:31] Speaker 01:
Wendy Overmyer for Appellant Gregory Vallejas, and I'll reserve two minutes for rebuttal.

[00:00:37] Speaker 01:
Today I'm addressing the sole issue on appeal following remand, which is the illegal forfeiture order.

[00:00:43] Speaker 01:
No other aspect of Mr. Valle has a sentence is at issue, including a $5.9 million joint and several restitution order that was never challenged.

[00:00:55] Speaker 01:
Forfeiture, as opposed to restitution, disgorges ill-gotten gains.

[00:01:00] Speaker 01:
And so it's limited to tainted property and proceeds traceable to it.

[00:01:05] Speaker 01:
So what this court said in Thompson is we ask, where did the proceeds come to rest?

[00:01:11] Speaker 01:
And in this case, we know exactly where the proceeds came to rest because the government traced them.

[00:01:17] Speaker 01:
Can I ask a question?

[00:01:17] Speaker 01:
Why did this remand take five years?

[00:01:20] Speaker 01:
That I'm not sure.

[00:01:21] Speaker 01:
There was pre and post hearing briefing and then this court issued... Was it because they were waiting for Thompson or something?

[00:01:30] Speaker 01:
Possibly.

[00:01:31] Speaker 01:
Thompson did come out after the remand hearing.

[00:01:35] Speaker 01:
The parties were able to brief that.

[00:01:38] Speaker 01:
So we know here exactly where the proceeds came to rest, because the government traced all but $180,000 approximately.

[00:01:45] Speaker 02:
Well, in fact, we don't.

[00:01:48] Speaker 02:
I mean, that's what's so strange.

[00:01:50] Speaker 02:
I mean, one assumes that Mr. Villegas, aside from what he controls,

[00:01:58] Speaker 02:
pocketed more than that money that happened to be in his bank account.

[00:02:02] Speaker 02:
But the government hasn't proven any of it up to this point, maybe because they were trying to prove something else before Thompson.

[00:02:10] Speaker 02:
I mean, Thompson is the case that uses the come to rest phrase, whatever that means.

[00:02:16] Speaker 02:
Honeycutt doesn't use that phrase.

[00:02:21] Speaker 02:
And we know that in the Ninth Circuit, profits are not the point, it's proceeds.

[00:02:27] Speaker 02:
So that number, the number that happened to be in his bank account at the time they saw his bank account, is close to meaningless under any of those terms, isn't it?

[00:02:36] Speaker 01:
Well, that represents the portion of the proceeds that was not in any other co-conspirators' bank account.

[00:02:41] Speaker 02:
No, it represents the portion that they happen to find is bad.

[00:02:43] Speaker 02:
Does everything else add up to the $5 million plus, or is there just no accounting for what happened to the rest of the money?

[00:02:50] Speaker 01:
It does add up to the total amount.

[00:02:52] Speaker 01:
So the two co-defendants together comes to about $2.3 million, and then there's nine unindicted co-conspirators that the government and the FBI agent outline.

[00:03:04] Speaker 01:
in their motion and the affidavit that comes to about 2.75.

[00:03:08] Speaker 02:
Individually, as to the money that they got was split up?

[00:03:13] Speaker 01:
Yes, they were.

[00:03:14] Speaker 01:
Where this money went into the individual conspirators' bank accounts that had sole authority by each conspirator.

[00:03:24] Speaker 02:
Except that we know that, in fact, it wasn't their money going in, it wasn't their money coming out.

[00:03:31] Speaker 02:
It was their straw people.

[00:03:34] Speaker 01:
Well, the government hasn't proven that it wasn't their money coming out.

[00:03:38] Speaker 01:
The government hasn't proven that money came out of those accounts.

[00:03:41] Speaker 01:
and went to Vallejas.

[00:03:42] Speaker 01:
That's where the government's proof stops.

[00:03:44] Speaker 01:
So the government chose to trace the money to these individual conspirator bank accounts and alleges that Vallejas could have withdrawn money from these accounts, but doesn't prove that.

[00:03:54] Speaker 02:
But there was testimony by Gagnon and other person that said that he got the money.

[00:04:00] Speaker 02:
And the affidavit says he got the money.

[00:04:04] Speaker 02:
He told them what to do with the money, and they gave him the money.

[00:04:07] Speaker 02:
And then he gave them back some money.

[00:04:09] Speaker 01:
Well, to deal with the testimony first, that sentencing, that was pre-honeycut sentencing, it wasn't at the remand hearing.

[00:04:17] Speaker 01:
And it was addressing role for leadership for guideline purposes.

[00:04:22] Speaker 01:
It did not address forfeiture and bank accounts.

[00:04:25] Speaker 02:
But it addressed what happened to the money.

[00:04:27] Speaker 01:
So the money is all but accounted for, but $180,000, which is just about the amount he had.

[00:04:34] Speaker 01:
in his account, which was 156,000, give or take.

[00:04:38] Speaker 01:
So when you add up those nine unindicted conspirators, which the government can reach through civil forfeiture, and the two co-defendants, we know exactly where the proceeds came to rest in this case.

[00:04:50] Speaker 01:
And to hold the line.

[00:04:53] Speaker 03:
Judge Gould, if I could interject, please.

[00:04:56] Speaker 03:
The issue that's most concerned to me is whether our panel would have the power

[00:05:04] Speaker 03:
We have the ability to make a ruling about mastermind liability, which I think was not addressed in Honeycutt or in Thompson.

[00:05:20] Speaker 03:
If I'm right in that, why could

[00:05:24] Speaker 03:
Could our panel not decide to reach that issue now and say that Mr. Villegas was a mastermind of this massive fraud scheme?

[00:05:39] Speaker 03:
that was involved cheating hundreds of people out of their money and that we think that provides a basis to give a joint civil liability for the full amount.

[00:06:00] Speaker 01:
I believe this court can't apply the mastermind theory here, both because the facts don't support it.

[00:06:06] Speaker 01:
We know where the proceeds came to end up individually.

[00:06:10] Speaker 01:
And it's an end run around the rejection of Pinkerton that the Honeycutt Court rejected.

[00:06:19] Speaker 01:
And the circuits who have talked about a mastermind theory ultimately relied on legal authority over accounts, whether it was a married couple committing fraud like Singari.

[00:06:31] Speaker 01:
where the money came to rest in a joint account or a house spot with proceeds by two co-defendants from that.

[00:06:39] Speaker 01:
And we don't have that here.

[00:06:40] Speaker 01:
And so this court not only would have to make a mastermind exception and explain how that does not violate Honeycutt, it would have to define what that is.

[00:06:51] Speaker 01:
And there were no findings here by the district court.

[00:06:54] Speaker 01:
It rejected the mastermind theory correctly.

[00:06:59] Speaker 02:
might be broader than what the record would support or without what we would need.

[00:07:07] Speaker 02:
But why don't we focus on who had control of the money at the time it left the hands of the victims?

[00:07:16] Speaker 02:
Apparently, it was Villegas.

[00:07:18] Speaker 02:
In other words, he determined what money was going into these sham accounts and what money was coming out.

[00:07:25] Speaker 02:
I know you're disputing the second, but I thought there was a record.

[00:07:28] Speaker 02:
that demonstrated that he also controlled when they came out.

[00:07:33] Speaker 02:
So that directly ties him to the money, not just to the plot, so to speak.

[00:07:38] Speaker 02:
And is that different?

[00:07:40] Speaker 02:
I don't look at that as a mastermind of the scheme.

[00:07:43] Speaker 02:
It's really that he was controlling the funds, even if at some interim point they were in individual accounts.

[00:07:52] Speaker 01:
So what Thompson

[00:07:55] Speaker 01:
explains and instructs courts to do is to not be so much concerned with where it passed through on the way to where it came to rest.

[00:08:04] Speaker 01:
And that's why Thompson held physical control isn't determinative of where proceeds ultimately come to rest.

[00:08:12] Speaker 01:
So here, to stop in the middle and say, oh, that's where all the proceeds were obtained is to ignore the government's tracing

[00:08:20] Speaker 01:
that takes the proceeds down to individual accounts.

[00:08:23] Speaker 02:
But we know they didn't come to rest in those accounts.

[00:08:25] Speaker 02:
They came out of those accounts in some fashion.

[00:08:28] Speaker 02:
They didn't stay there, and the people testified, the participants, that they got some relatively small portion of what was in their accounts.

[00:08:39] Speaker 01:
But there was no testimony as to what that was, and two of the defendants have been held liable for the whole entire amount in their accounts.

[00:08:45] Speaker 01:
Actually, that doesn't seem right to me at all, but they have been.

[00:08:50] Speaker 01:
And again, they testified that perhaps Vallejas would ask for

[00:08:54] Speaker 01:
money out of these accounts, but unlike Thompson, where there was 250 pages of bank records and transactional details, here we don't have that.

[00:09:02] Speaker 02:
So you're saying it's just a failure of proof, is what you're saying.

[00:09:05] Speaker 02:
It is a failure of proof.

[00:09:07] Speaker 02:
But to say that the money actually came to rest in those accounts, it's not true.

[00:09:12] Speaker 02:
It's just it didn't prove anything else, is what you're saying.

[00:09:14] Speaker 01:
That's where the government's proof ends, is that it traced it to these accounts and it didn't trace it any further with we don't have bank account records, we don't have transactional details,

[00:09:24] Speaker 01:
We don't have testimony of

[00:09:26] Speaker 01:
It was this amount that was withdrawn.

[00:09:27] Speaker 01:
It was this amount that I got paid.

[00:09:29] Speaker 01:
We don't even know those numbers.

[00:09:31] Speaker 01:
And so we're left.

[00:09:32] Speaker 04:
Yeah, if I may, Brooklyn wants to be heard also, even though three, four thousand miles away.

[00:09:38] Speaker 04:
Good afternoon.

[00:09:38] Speaker 04:
Nice to be here again.

[00:09:40] Speaker 04:
So let me understand how you view Thompson.

[00:09:45] Speaker 04:
It seems that you're saying that this matter should be remanded in order to see whether this fits within the contours of Thompson or you're saying something else.

[00:09:55] Speaker 01:
I'm saying this court is pretty much exact to Thompson.

[00:09:59] Speaker 01:
It involves a number of co-conspirators.

[00:10:02] Speaker 01:
It's the same type of fraud.

[00:10:03] Speaker 01:
We know where the proceeds ended up.

[00:10:05] Speaker 01:
And so we're asking this court to vacate the forfeiture order and remand with instructions to limit forfeiture to the 156,962 they proved came to rest with Vallejas.

[00:10:20] Speaker 04:
Well, I know that's what you're asking.

[00:10:21] Speaker 04:
Look, you know, I look at Salazar's papers here, and he has this qualifying line, which he calls me.

[00:10:28] Speaker 04:
Like, for example, the 1 million plus, which he ascribes to one of the co-conspirators.

[00:10:35] Speaker 04:
He also says these were all controlled by Villegas.

[00:10:39] Speaker 04:
All these monies were controlled by Villegas.

[00:10:42] Speaker 04:
Is this something that really is an issue of fact that has to be ascertained?

[00:10:45] Speaker 04:
Or is that part of the government's proof?

[00:10:47] Speaker 04:
How do we determine what that means?

[00:10:50] Speaker 04:
this particular case.

[00:10:54] Speaker 01:
Now the government does the FBI agent does claim he controlled that but again there was no testimony as to what exactly that meant from any of the co-conspirators at the remand hearing and we don't have detailed

[00:11:08] Speaker 01:
bank records to say, oh, we'll look at all of these deposits, look at all of these withdrawals, that we can take the tracing further.

[00:11:17] Speaker 04:
We're left with this tracing.

[00:11:19] Speaker 04:
Do you think the matter should be remanded to give the government that maybe second Biden or that opportunity in light of the currency of all these cases?

[00:11:29] Speaker 01:
Well, I think that, you know, that pendant for quite a while.

[00:11:32] Speaker 01:
And so the government had its chance to, um, you know, bring forth more evidence at the remand hearing and in the supplemental briefing, multiple supplemental briefings that it only ever brought the FBI agents affidavit to, um,

[00:11:48] Speaker 01:
the court's attention.

[00:11:49] Speaker 01:
That was its only proof down below.

[00:11:52] Speaker 01:
And we're saying that's insufficient under Honeycutt and Thompson.

[00:11:55] Speaker 01:
It's sufficient to the point they proved where the proceeds came to rest, and now two defendants have been held to have obtained part of that.

[00:12:04] Speaker 01:
And so to hold the AHAS liable for the entire amount is joint and several liability that violates Honeycutt.

[00:12:11] Speaker 04:
So as Judge Berzon said, I think possibly correctly, that this is a question of the burden of proof and whether the government has sustained its burden of proof.

[00:12:20] Speaker 04:
Is that basically your bottom line?

[00:12:23] Speaker 01:
Yes.

[00:12:24] Speaker 01:
Our argument is that the government failed to prove that he obtained any more than the money for which he had legal control over in his bank accounts.

[00:12:33] Speaker 02:
To go back to Thompson for a minute, Thompson says, yes, in many thefts, after obtaining the loot,

[00:12:40] Speaker 02:
The thieves divided it up, but that's not what these bank accounts represent.

[00:12:44] Speaker 02:
They don't represent the dividing up of the loon.

[00:12:48] Speaker 02:
They didn't come to rest in the sense that Thompson's talking about coming to rest.

[00:12:53] Speaker 02:
It was an intermediary step.

[00:12:55] Speaker 02:
Now, I don't know whether that matters, but you say that they came to rest there, but we know they didn't, in fact.

[00:13:02] Speaker 01:
Well, we don't know where the money went after that.

[00:13:04] Speaker 01:
That's true.

[00:13:05] Speaker 01:
We don't know where the money went, but it didn't come to rest.

[00:13:08] Speaker 01:
So that's where it came to rest.

[00:13:10] Speaker 01:
for legal purposes, for title over that money, which is what forfeiture looks to.

[00:13:16] Speaker 01:
Forfeiture looks to who currently possesses, has title to, the ill-gotten gains.

[00:13:21] Speaker 01:
We know exactly where the ill-gotten gains are among all these co-conspirators.

[00:13:26] Speaker 01:
And it adds up.

[00:13:26] Speaker 01:
It adds up to the total proceeds.

[00:13:28] Speaker 01:
So to get more from Vallejas would be reaching into untainted, unproven assets.

[00:13:37] Speaker 02:
One conceptual question is, why can't more than one person acquire the money in a multi-stepped process, given that we know from Prasad that it's the proceeds, not the profits?

[00:13:55] Speaker 02:
So why can't one person collect all the proceeds and then another person be

[00:14:07] Speaker 02:
a distributor of some of those proceeds.

[00:14:10] Speaker 01:
Well, Honeycutt answers that question.

[00:14:13] Speaker 01:
It looked to the dictionary definition and common usage of the word obtain, and it says that supports the conclusion an individual can't obtain property that was acquired by someone else.

[00:14:25] Speaker 01:
So that's the language of Honeycutt.

[00:14:26] Speaker 02:
Well, I don't think Honeycutt actually says that.

[00:14:27] Speaker 02:
That's the paraphrase.

[00:14:29] Speaker 02:
Well, I have the exact quote.

[00:14:31] Speaker 02:
Neither the... 1632, was that when you wrote it?

[00:14:33] Speaker 02:
1632?

[00:14:33] Speaker 02:
Yes.

[00:14:34] Speaker 02:
All right.

[00:14:34] Speaker 02:
Neither the dictionary definition

[00:14:36] Speaker 02:
supports the conclusion that an individual obtains property that was acquired by someone else, but that doesn't talk to the sequential question.

[00:14:47] Speaker 01:
So I think you, you know, looking at the steps

[00:14:51] Speaker 01:
If there's no further proof of where it went after going through, say, these joint shell companies or things like that that occurred in these other circuit cases, they have found, okay, the money was all tied up in these joint companies where both individuals owned it, and so we're going to hold them both liable, or married couples such as Singari and Sakosha.

[00:15:14] Speaker 01:
were married couples that committed fraud.

[00:15:16] Speaker 01:
That's entirely different, because they did have a joint and several contract.

[00:15:19] Speaker 01:
Yeah.

[00:15:20] Speaker 01:
So they had joint and several liability.

[00:15:21] Speaker 01:
Or Thompson explains where if your tenants and entirety

[00:15:26] Speaker 01:
in property that was bought with proceeds.

[00:15:28] Speaker 01:
You know, so forfeiture is narrowly limited to legal authority over tainted proceeds.

[00:15:37] Speaker 01:
And that's what we're asking this court to uphold here, that we don't meet any of those exceptions because the government has... Why does it have to be legal authority?

[00:15:45] Speaker 02:
I'm sorry?

[00:15:46] Speaker 02:
Why does it have to be legal authority?

[00:15:48] Speaker 02:
I think that's the best way to... As opposed to, say, contractual authority.

[00:15:51] Speaker 02:
I mean, in this instance,

[00:15:55] Speaker 02:
We're told, I don't know whether it's true, that if there's money in somebody's bank account, they have legal authority over it.

[00:16:03] Speaker 02:
Between them and the bank, yes, between them and the world, I don't know whether that's true or not.

[00:16:08] Speaker 02:
If I say to you, here's my money, put it in your account for a few weeks and then give it back to me, I don't know whether that's true.

[00:16:17] Speaker 02:
I don't have any property interest in that money.

[00:16:19] Speaker 02:
I don't know.

[00:16:21] Speaker 01:
And perhaps money could be hidden through in a person say, I'm going to pay you to put this money there.

[00:16:28] Speaker 01:
But we don't have that proof here.

[00:16:31] Speaker 01:
The government didn't reach

[00:16:33] Speaker 01:
didn't reach that step.

[00:16:34] Speaker 01:
So we're stuck with the legal authority.

[00:16:37] Speaker 02:
Maybe it's an adequate proof, but that's what the affidavit says.

[00:16:41] Speaker 02:
And it's what was said at the sentencing hearing, that he told me to collect this money and put it in there and give it to him when I told him to.

[00:16:49] Speaker 02:
And he never said it was my money.

[00:16:53] Speaker 02:
But at least contractually, it wasn't their money.

[00:16:56] Speaker 02:
I mean, there was some interest.

[00:16:58] Speaker 02:
They had some deal that they were going to put the money in when he said and take it out when they said, but you keep saying there's no proof of it.

[00:17:03] Speaker 02:
But is that because you think that affidavit isn't, is hearsay?

[00:17:08] Speaker 02:
Is that why?

[00:17:08] Speaker 02:
Why is there no proof of it?

[00:17:09] Speaker 01:
Yeah, the affidavit is insufficient.

[00:17:12] Speaker 01:
Again, it's not backed up by bank account records.

[00:17:16] Speaker 01:
And there was insufficient proof of that.

[00:17:19] Speaker 01:
Perhaps the government could prove that if it brought some more evidence forward, but it's had two chances to bring that evidence.

[00:17:26] Speaker 02:
So everything comes down to the fact that they had the chance to prove this and they didn't.

[00:17:29] Speaker 02:
I mean, that seems to be your bottom line.

[00:17:31] Speaker 02:
It could be the right bottom line.

[00:17:33] Speaker 01:
Yes, they proved it up to a point, and that's where they decided to stop.

[00:17:37] Speaker 01:
And so that's what we're left with.

[00:17:40] Speaker 01:
And that begs the question, then why hold the co-defendants responsible for what was in their bank accounts if they didn't actually obtain that?

[00:17:47] Speaker 02:
It does help open that question.

[00:17:49] Speaker 01:
But anyway, yes.

[00:17:50] Speaker 02:
So you're way out of your time, and we'll give you a couple minutes to rebuttal.

[00:17:54] Speaker 02:
Thank you.

[00:18:09] Speaker 00:
Good afternoon.

[00:18:10] Speaker 00:
May I please record Adam Flake for the United States?

[00:18:15] Speaker 00:
I think the basic problem with the defendant argument is that it ignores this court's language in Prasad that says that a defendant can't avoid liability or can't avoid forfeiture by reinvesting the

[00:18:35] Speaker 04:
his ill-gotten gains into the enterprise.

[00:18:52] Speaker 00:
I'm sorry, I'm not sure if I understand the question.

[00:18:56] Speaker 04:
Judge Block from Brooklyn, I said that Prasad doesn't even mention Thompson and we're dealing with co-conspirators in this case.

[00:19:03] Speaker 04:
That was not the case in Prasad.

[00:19:06] Speaker 00:
That's true.

[00:19:08] Speaker 00:
The people that Prasad paid the money to were not

[00:19:12] Speaker 00:
charges, conspirators in that case.

[00:19:15] Speaker 00:
But I think the point from Prasad holds, which is that what a defendant chooses to do with the money once he obtains it... But that's the question.

[00:19:25] Speaker 02:
Did he obtain it?

[00:19:26] Speaker 02:
I mean, your problem here is that you never actually... You have one affidavit and a couple of witnesses in the sentencing hearing who said, he told me where to put the money and he took it out.

[00:19:38] Speaker 02:
But you don't prove anything about what happened when the money came out at all.

[00:19:42] Speaker 02:
right?

[00:19:42] Speaker 02:
Do we have any proof of that?

[00:19:44] Speaker 00:
That's correct, Your Honor, but the district court found that that was sufficient to show that the district court's order talks about it extensively, the extent to which

[00:19:56] Speaker 00:
that bill that was was calling the shot he he was he was the person in in control he owned he obtained the the money he doled out the money and that the district court was very clear about how to money when at what point after it came out and he he doled out the money throughout the course of the the conspiracy that they would get

[00:20:16] Speaker 00:
payments in, and he would pay some of the co-defendants a percentage fee, and he would pay the overhead of the business, and he would presumably spend some, I mean, I'm not exactly sure.

[00:20:28] Speaker 00:
I don't think the defendants testified as to every expenditure that he made.

[00:20:34] Speaker 02:
But they did explain that he- They didn't say any of the expenditures they made, actually.

[00:20:38] Speaker 00:
Well, they did.

[00:20:39] Speaker 00:
I mean, they said that he paid them a percentage fee.

[00:20:44] Speaker 02:
Now, if you thought Thompson meant

[00:20:46] Speaker 02:
come to rest means this idea of the conspirators dividing up the loot.

[00:20:51] Speaker 02:
We have no evidence about that.

[00:20:53] Speaker 02:
Is that right?

[00:20:54] Speaker 02:
Where the money, how much money he actually ended up with.

[00:20:57] Speaker 02:
And that doesn't mean profits necessarily, but how much money he ended up with.

[00:21:02] Speaker 02:
He might then have reinvested in the company.

[00:21:04] Speaker 02:
But we have no idea what he ended up with or what anybody else ended up with.

[00:21:08] Speaker 02:
We only know what was in bank accounts at various times.

[00:21:11] Speaker 00:
That's my understanding, Your Honor.

[00:21:13] Speaker 02:
But why isn't that just a failure of proof?

[00:21:15] Speaker 00:
Because I think the district court in this case found that the evidence presented was sufficient to show that he, by virtue of his position within the organization, his position being the top, and by virtue of him calling all of the shots, that was what the court looked to to find that he obtained the money.

[00:21:41] Speaker 00:
is he's directing people, take this person's money and put it in this bank account.

[00:21:46] Speaker 00:
Take this person's money and put it in this bank account, pay this person, pay that person.

[00:21:50] Speaker 00:
And once again, in Persad, there's a line in that case that says, the ability to dispose of the money denotes

[00:22:02] Speaker 00:
control of the money.

[00:22:04] Speaker 04:
If you are... See, if I may, it seems to me that you have Thompson and you have to come to peace with one way or the other.

[00:22:12] Speaker 04:
And as I read Thompson, if you have co-conspirators and they divide the money up amongst themselves, it comes to rest with each of them in that particular amount of money.

[00:22:23] Speaker 04:
That may or may not have been the case here.

[00:22:25] Speaker 04:
I don't know.

[00:22:26] Speaker 04:
But when you talk about the fact that there's an X factor here, he's a distributor, but we have no idea whether the money he distributed was coming back to him.

[00:22:35] Speaker 04:
We don't trace the funds at all.

[00:22:37] Speaker 04:
We have no idea whether he controlled those funds.

[00:22:40] Speaker 04:
All I see here is that we have co-conspirators, and the money was divided up by the head guy.

[00:22:45] Speaker 04:
I don't see how that differs from Thompson, but I'm willing to be educated.

[00:22:50] Speaker 00:
Well, I would distinguish Thompson in that there was no allegation there that

[00:22:55] Speaker 00:
one of the co-conspirators was controlling the other, the other member of the conspiracy.

[00:23:02] Speaker 04:
Where is control here?

[00:23:04] Speaker 04:
I mean, what happened to the money after it went to the co-conspirators?

[00:23:09] Speaker 04:
If there's some evidence here that he controlled, that he told them what to do with the money, that they put the money into assets or into a fund that was controlled by Lagos, that they returned the money, that they did something in kind, they bought automobiles for them, whatever, I get that.

[00:23:23] Speaker 04:
But all I have is a naked allegation here by Salazar that all these things were controlled by the Lagos, and I don't see it.

[00:23:36] Speaker 00:
There's language in the plea agreement to that effect.

[00:23:40] Speaker 00:
There's testimony at their sentencing to that effect.

[00:23:45] Speaker 02:
What is in the plea agreement?

[00:23:47] Speaker 00:
Can you give me that?

[00:23:48] Speaker 00:
Let me just pull it up so I don't try to go from memory.

[00:24:00] Speaker 00:
I mean, let's see what the plea agreement says.

[00:24:06] Speaker 00:
Sorry.

[00:24:08] Speaker 00:
This is at ER 703.

[00:24:13] Speaker 00:
Villegas directed others to act as nominees.

[00:24:19] Speaker 00:
Villegas paid the nominees a percentage fee.

[00:24:22] Speaker 00:
Villegas knowingly acquired victim leads, engaged in sales.

[00:24:29] Speaker 00:
So that's the, I mean, it certainly doesn't have dollar amounts, but the plea agreement alone, I think, amply supports a finding that he was the person that was in control of how the money in the conspiracy was taken in and how it was disposed of.

[00:24:49] Speaker 04:
Look, look, have we found, have we had evidence as to what happened by the co-conspirators?

[00:24:55] Speaker 04:
For example, did they buy cars for him?

[00:24:57] Speaker 04:
Did they put any money back to him in one form or another?

[00:25:00] Speaker 04:
Did they buy gifts for him?

[00:25:02] Speaker 04:
I get that.

[00:25:02] Speaker 04:
I can really go there, and I can understand that.

[00:25:05] Speaker 04:
But we seem to have a total absence of what it means to be controlled by the legacy here, other than these general conclusions that you trot out.

[00:25:14] Speaker 04:
That's my problem with the case.

[00:25:17] Speaker 00:
You're right.

[00:25:20] Speaker 00:
I think it just simply means, I mean I don't know how to explain it other than to say he was the boss, he was calling the shots.

[00:25:29] Speaker 02:
So are you arguing for a mastermind version of Honeycutt that's basically, well you are, that's what you're saying.

[00:25:37] Speaker 02:
It doesn't matter whether he was connected to the money or whether he was just running the whole thing.

[00:25:44] Speaker 00:
I don't think the court necessarily needs to find that there's a mastermind except it certainly can.

[00:25:51] Speaker 00:
We argue that in our brief.

[00:25:55] Speaker 02:
the district court said he wasn't finding a mastermind exception and then it seemed to me he did find a mastermind exception.

[00:26:00] Speaker 02:
What's the difference between what he found and whatever a mastermind exception might mean, which I don't think is in Honeycutt anyway, but yes.

[00:26:08] Speaker 00:
Well the terms that the district court put it in, excuse me, the terms that the district court put it in were by virtue of his rank in the enterprise he obtained these funds and therefore I don't need to address whether or not he was also

[00:26:23] Speaker 00:
whether purely the fact that he was a mastermind means because by nature of his position, he obtained the money that flowed into the enterprise.

[00:26:34] Speaker 00:
That was the distinction.

[00:26:35] Speaker 02:
Why wouldn't that be true of anybody who quote was a mastermind?

[00:26:39] Speaker 00:
I think it would be.

[00:26:42] Speaker 00:
I think the district court certainly could have found that.

[00:26:45] Speaker 00:
But that was the distinction it drew.

[00:26:47] Speaker 00:
It said, I don't need to find whether or not there is this exception, because by virtue of his position, he had the ability to dispose of all of the funds.

[00:27:00] Speaker 02:
Do you think the forfeiture orders against the co-conspirators were proper in light of Thompson?

[00:27:06] Speaker 02:
They were before Thompson, right?

[00:27:08] Speaker 02:
And it doesn't seem to me that they actually comport with Thompson, because the money did not, quote, come to rest with them.

[00:27:15] Speaker 02:
We know that.

[00:27:17] Speaker 00:
I'm not sure.

[00:27:19] Speaker 00:
I mean, I don't think that their orders are in front of the court.

[00:27:24] Speaker 00:
I haven't thought about it.

[00:27:24] Speaker 02:
But they are in the following way.

[00:27:26] Speaker 02:
If their orders are impregnable now, and they probably are, whether they were right or wrong, then if we were to find, as you're asking us to, we would have

[00:27:38] Speaker 02:
overlapping forfeiture orders, right?

[00:27:41] Speaker 02:
Which does seem in some tension, great tension with Honeycutt.

[00:27:46] Speaker 02:
I mean, they would have to be joined several.

[00:27:48] Speaker 02:
What else could they be?

[00:27:53] Speaker 00:
That's correct, Your Honor.

[00:27:55] Speaker 00:
But I think the difference, I think the oddity that comes in this case is the distinction between having actual control

[00:28:06] Speaker 00:
and having like signatory control.

[00:28:10] Speaker 00:
And the defendant puts a lot of weight on that.

[00:28:13] Speaker 04:
Let me ask you this question if I may.

[00:28:15] Speaker 04:
Maybe this maybe the $64 question, whatever you call it these days.

[00:28:19] Speaker 04:
Do you want to stay on this record that you have or would you like the opportunity to go back and see what you can trace where all these monies came from and what was the number of those monies?

[00:28:29] Speaker 04:
You want to know what your position is.

[00:28:31] Speaker 00:
I don't think that there is any reason for this court to find that the district court committed clear error in finding that.

[00:28:42] Speaker 00:
that Villegas occupied such a role in the position.

[00:28:46] Speaker 00:
I don't think that we need additional evidence on that point, but if the court wants us to seek it, we certainly will comply with what the court.

[00:28:55] Speaker 02:
But suppose we thought what mattered was where the money, quote, came to rest, i.e., in terms of Thompson.

[00:29:05] Speaker 02:
How did the Colton's purges divide up the money?

[00:29:07] Speaker 02:
We don't know anything about that.

[00:29:10] Speaker 00:
Other than the accounts, I mean

[00:29:15] Speaker 00:
No, I mean, we don't know, today we don't know where the money is.

[00:29:19] Speaker 00:
We don't.

[00:29:19] Speaker 02:
Well, we don't know what happened to it.

[00:29:21] Speaker 02:
And we know these were phony accounts.

[00:29:22] Speaker 00:
Right.

[00:29:23] Speaker 02:
Right.

[00:29:23] Speaker 02:
And so we know that they didn't come to rest there.

[00:29:25] Speaker 02:
That's what bothers me.

[00:29:27] Speaker 00:
Right.

[00:29:27] Speaker 02:
They didn't come to rest there.

[00:29:28] Speaker 02:
The money did not come to rest there.

[00:29:30] Speaker 02:
It came out of those accounts at Viego's direction, according to your affidavit, your submitted affidavit.

[00:29:37] Speaker 02:
And we don't know what happened after that.

[00:29:39] Speaker 02:
So what Judge Block's question is, do you therefore lose?

[00:29:44] Speaker 02:
if we think that's what matters?

[00:29:46] Speaker 02:
Or do you get to try again?

[00:29:49] Speaker 00:
Well, I would rather try again than lose, obviously, Your Honor.

[00:29:57] Speaker 00:
But I think that the evidence, I think what matters is who obtained the funds.

[00:30:03] Speaker 00:
And I think that the evidence amply supports the district's conclusion.

[00:30:06] Speaker 02:
So your position is that they both obtained, because we know that all of the money was

[00:30:12] Speaker 02:
that is accounted for was in a bank account in someone else's name at some point.

[00:30:18] Speaker 02:
And according to the forfeiture order that you do have, your position is that that money was obtained by the straw owners of these bank accounts.

[00:30:30] Speaker 02:
And so therefore, you have a complete overlap between your concept of the money

[00:30:38] Speaker 02:
either coming to rest or being obtained by those conspirators because of the bank accounts.

[00:30:43] Speaker 02:
And Biega's controlling the money that went into and out of those bank accounts.

[00:30:50] Speaker 02:
So you have a double forfeiture.

[00:30:53] Speaker 02:
You have a joint and several forfeiture.

[00:30:55] Speaker 02:
And the question is, how can that be reconciled with Honeycutt?

[00:31:00] Speaker 00:
I think that it can be reconciled in that more than one person can obtain something.

[00:31:06] Speaker 00:
I don't think that Honeycutt says that only one person can obtain something.

[00:31:10] Speaker 02:
Sequentially or coincidentally?

[00:31:13] Speaker 00:
I would think certainly sequentially.

[00:31:18] Speaker 00:
But also with the example of joint tenants and things like that, we had one person that was a signatory to a bank account.

[00:31:29] Speaker 00:
We had another person who was making the decisions.

[00:31:32] Speaker 00:
One person has legal authority to exercise, to dispose of that.

[00:31:39] Speaker 00:
They could have gone rogue and spent the money, even though it was very clearly

[00:31:46] Speaker 00:
Is that really true?

[00:31:48] Speaker 02:
I'm just curious.

[00:31:49] Speaker 02:
If I say to somebody, you know, I don't have a bank account right now.

[00:31:52] Speaker 02:
I'm going to give you a check for $5,000.

[00:31:54] Speaker 02:
Do me a favor, put it in your bank account, just so it's in some bank.

[00:32:00] Speaker 02:
And then in two weeks, I'm going to open up a bank and you can give it to me then.

[00:32:06] Speaker 02:
So have I now lost any property interest in that money?

[00:32:10] Speaker 02:
If that person decides to just take it and run away?

[00:32:15] Speaker 00:
I'm not sure about that, Your Honor.

[00:32:17] Speaker 02:
No, I'm not either, and you keep saying that they could have done that.

[00:32:21] Speaker 00:
I mean, if I have a bank account with money sitting in it and I'm the only person whose name is on the bank account, I don't see anything that forecloses me from spending that money.

[00:32:32] Speaker 02:
Between you and the bank, yes, but between you and the world, I don't know why that's

[00:32:35] Speaker 00:
And I'm not speaking legally.

[00:32:39] Speaker 00:
Probably I couldn't legally do that if it was money that was.

[00:32:41] Speaker 02:
But your position seems to be that they could legally have that money.

[00:32:44] Speaker 02:
And I'm not at all sure that's true.

[00:32:46] Speaker 00:
But I think, in fact, these people are not obeying the law.

[00:32:52] Speaker 00:
In fact, they had control.

[00:32:56] Speaker 00:
Villegas had control over it.

[00:32:58] Speaker 00:
And he exercised it.

[00:33:00] Speaker 03:
It's such cool if I could interject or relate his question.

[00:33:05] Speaker 03:
Is there anything in Hanukkah on the Supreme Court that would stop our panel from holding that a person like Vegas, who can control the disposition of the funds, can be liable for the entire amount?

[00:33:27] Speaker 00:
I don't see anything in Honeycutt that forecloses that.

[00:33:31] Speaker 00:
I think Honeycutt left it open.

[00:33:33] Speaker 00:
And as we cited in our brief, many other courts have subsequently held that purely based on that, the mastermind exception that we were speaking about, that purely by virtue of that, without respect to the, you know, who owned what, bank account,

[00:33:52] Speaker 02:
Now, the second question is, is there anything in Honeycutt that would foreclose us from holding that if all of it has already been attributed to other people?

[00:34:03] Speaker 02:
Well, let's say, just forget about the undefined co-conspirators.

[00:34:06] Speaker 02:
Two and a half million dollars of it or something like that has already been determined to have been the

[00:34:14] Speaker 02:
come to rest or been illegal property or at least subject to forfeiture by other people.

[00:34:20] Speaker 02:
So we now have this overlap.

[00:34:22] Speaker 02:
Does HoneyCat allow that?

[00:34:26] Speaker 02:
Which is a separate question from the other one.

[00:34:29] Speaker 02:
If we didn't have the other forfeitures, it would be a different problem.

[00:34:35] Speaker 00:
Yeah, I don't think... I mean, the situation in HoneyCat was...

[00:34:43] Speaker 00:
with the example of the drug dealer and the college student that he's paying, I don't think that Honeycutt speaks to whether or not the drug dealer, the top dog would be on the hook for the whole thing.

[00:35:00] Speaker 02:
We know that in Honeycutt itself and in the hypothetical that the other person, the manager of the

[00:35:13] Speaker 02:
hardware store and the college student were collecting the money.

[00:35:20] Speaker 02:
So they had the money in their hands at some point.

[00:35:22] Speaker 02:
Right.

[00:35:24] Speaker 02:
So yet Honeycutt seemed to think, seemed to hold that they were not subject to the forfeitures because the money ran through their hands.

[00:35:36] Speaker 02:
And therefore, you didn't have this problem of having joint and several.

[00:35:39] Speaker 02:
But if the people whose money runs through their hands and they're subject to forfeiture, which is what the order is here, then you do have a joint and several problem.

[00:35:54] Speaker 00:
I think I'm following what Your Honor is saying.

[00:36:00] Speaker 00:
I mean, it certainly is joined several in the sense that they both are on the hook for it, and we can only collect it once.

[00:36:12] Speaker 00:
But.

[00:36:14] Speaker 02:
How do you seem to assume that people in the position of these co-conspirators who collected the money and dispersed it, but never really controlled it?

[00:36:25] Speaker 02:
were not subject to forfeiture.

[00:36:27] Speaker 02:
That seemed to be the assumption, not the holding actually in Honeycutt, that the college student, assuming he collected all the money, and the store manager assuming that, well, he at least took it in.

[00:36:45] Speaker 02:
Maybe he put it into the hardware store's account.

[00:36:49] Speaker 02:
I don't know if it would have been any different if he put it in his own account and then in the hardware store, I can't.

[00:36:53] Speaker 02:
So their assumption seemed to be that these people were not subject to forfeiture.

[00:36:57] Speaker 02:
And now we have an order here that these people are subject to forfeiture.

[00:37:01] Speaker 02:
So it's a very strange situation.

[00:37:04] Speaker 00:
It is strange.

[00:37:04] Speaker 00:
Again, though, I don't think it helps Mr. Villegas, because I think that he, as the one who was in charge of everything and basically orchestrating the money moving around.

[00:37:17] Speaker 02:
And if you think that point two of Honeycutt is that you can't have two people

[00:37:26] Speaker 02:
responsible for the same money for forfeiture purposes?

[00:37:34] Speaker 00:
That's true, Your Honor, but again, I think that the problem arises with reinvesting in the enterprise.

[00:37:48] Speaker 00:
Because if Mr. Villegas is spending, you know, paying nominal fees to keep the enterprise going, that money is, he controlled it, he paid it.

[00:38:01] Speaker 00:
He did it to keep the enterprise going.

[00:38:04] Speaker 00:
And that gets into the problem of profits versus proceeds.

[00:38:09] Speaker 02:
But as Judge Black said, the theory in Prasad was,

[00:38:14] Speaker 02:
And the structure of it was the employees who were being paid were not co-conspirators.

[00:38:19] Speaker 02:
I mean, they were employees.

[00:38:21] Speaker 02:
It was like buying widgets or something, buying pencils.

[00:38:25] Speaker 02:
But here, these people were co-conspirators or were determined to be co-conspirators.

[00:38:31] Speaker 02:
So it's more like the Thomson theory of dividing up the spoils by the co-conspirators.

[00:38:41] Speaker 02:
If we don't know what to divide it up.

[00:38:43] Speaker 02:
All right, your time is out.

[00:38:45] Speaker 02:
If you have anything you really want to say, you should say it.

[00:38:48] Speaker 00:
I'll submit.

[00:38:49] Speaker 00:
Thank you.

[00:38:50] Speaker 02:
Thank you.

[00:38:55] Speaker 02:
I'll give you two minutes.

[00:38:56] Speaker 02:
Your honor.

[00:39:05] Speaker 01:
First, as to whether the government should have another chance to prove its case under Thompson, this case sat for a couple years after Thompson was issued, and the government didn't request a new hearing, and it didn't offer any new evidence.

[00:39:19] Speaker 01:
And so it has waived its chance to prove the case further under Thompson.

[00:39:28] Speaker 01:
And the exception that the government's asking this court to apply goes against

[00:39:35] Speaker 01:
not just honey cut but the central idea that forfeiture doesn't examine someone's role or who caused the harm you know that's more for restitution purposes forfeiture is to find where the money ended up and the government here chose to trace to these individual bank accounts and stopped so for the government to get around honey cut by the

[00:40:00] Speaker 01:
alleged control, it's unclear how that's different than Pinkerton liability.

[00:40:05] Speaker 01:
And it seems an end run around that.

[00:40:06] Speaker 02:
It's a question of control over what, right?

[00:40:09] Speaker 02:
I think what the district judge was trying to do was to differentiate between the person who ran the scheme and the person who ran the money, which isn't necessarily the same person.

[00:40:22] Speaker 01:
And for forfeiture purposes, I think it's important who ran and controlled the money is looking to who ended up with those ill-gotten gains because it's limited to reaching tainted property and the proceeds traceable.

[00:40:33] Speaker 02:
But if that's what we want to know, we have no idea here.

[00:40:35] Speaker 02:
And then so then you have to rely on just a failure.

[00:40:38] Speaker 01:
Yes, we have to rely on the record we have, which is that the two co-defendants ended up with 2.3 million, nine of them.

[00:40:46] Speaker 02:
They didn't end up with it.

[00:40:47] Speaker 02:
They, in fact, did not end up with it.

[00:40:49] Speaker 02:
So we have to just forget about them, because they didn't end up with it.

[00:40:52] Speaker 02:
We know that.

[00:40:55] Speaker 02:
But on the other hand, we don't know what the Angus did end up with.

[00:41:00] Speaker 01:
We're left with the order that they forfeit 2.3 million of this amount and so it's our position that Vallejas cannot be ordered to forfeit that same amount because that amounts to joint and several liability and it relies on Pinkerton and both of those are forbidden by Honeycutt.

[00:41:18] Speaker 02:
Why can't you have people sequentially acquiring money?

[00:41:23] Speaker 01:
I think you can't have more than one person, you know, as the money changes hands down the conspiracy.

[00:41:28] Speaker 01:
Right.

[00:41:29] Speaker 02:
So why is that joint and several liability?

[00:41:30] Speaker 02:
If as the money changes hands, you hold one person responsible for it, then you hold another person responsible.

[00:41:37] Speaker 02:
It's joint and several in the sense that the government can't collect twice, but it's for different things, for doing different things.

[00:41:45] Speaker 01:
But that's what joint and several liability is.

[00:41:47] Speaker 01:
Multiple people responsible for harm all held for the same amount.

[00:41:50] Speaker 01:
It's the same thing.

[00:41:51] Speaker 01:
You can't have it.

[00:41:51] Speaker 02:
It can't be sequential.

[00:41:53] Speaker 02:
It can't be that if I obtained the money and am responsible to forfeit it that you also obtained it and are responsible to forfeit the same money.

[00:42:02] Speaker 02:
That can't be.

[00:42:05] Speaker 01:
I think it can change hands, but where it ultimately comes to rest is the question that needs to be asked.

[00:42:10] Speaker 01:
And we're left with the evidence here, the government provided, which is that it came to rest in these individual accounts.

[00:42:17] Speaker 02:
All right.

[00:42:17] Speaker 02:
Thank you very much.

[00:42:18] Speaker 02:
Thank you both very much for a case that turned out to be more complicated than it appears.

[00:42:23] Speaker 02:
Thank you.

[00:42:25] Speaker 02:
All right.

[00:42:26] Speaker 02:
We are adjourned.

[00:42:52] Speaker 02:
This court for this session stands adjourned.