From the United States District Court for the District of
Massachusetts [Hon. George A. O'Toole, Jr., U.S. District
Kimberly Homan for appellant.
A. Heller, Attorney, U.S. Department of Justice, with whom
Andrew E. Lelling, United States Attorney, Brian A.
Benczkowski, Assistant Attorney General, and Matthew S.
Miner, Deputy Assistant Attorney General, were on brief for
Lynch, Stahl, and Lipez, Circuit Judges.
Carpenter's conviction for nineteen counts of mail and
wire fraud in 2008 was affirmed by this court in 2013.
United States v. Carpenter, 736 F.3d 619
(1st Cir. 2013) (Carpenter II). He now challenges on
several grounds a forfeiture order entered against him on May
23, 2014 by the district court in the amount of $14, 053,
715.52. This is the sum he obtained from only six of his
investor/exchangor clients through his fraudulent scheme.
initially argues that the district court lacked what he calls
"subject matter jurisdiction" to enter the
forfeiture order when it did. He then argues that the
forfeiture order of over $14 million must be vacated because:
(1) he never "acquired" the funds to be forfeited,
as required by 18 U.S.C. § 981(a)(2)(B); (2) the amount
forfeited violates the Excessive Fines Clause of the Eighth
Amendment; and (3) the imposition of the forfeiture order by
the district court violated his right to a jury trial under
the Sixth Amendment.
argues it is unfair to make him forfeit a much larger sum
than he gained and/or than his clients lost. In doing so, he
loses sight of the fact that the purpose of forfeiture is not
merely restitution or disgorgement of ill-gotten gains. It is
also to "deter future illegality." Kaley
v. United States, 571 U.S. 320, 323 (2014).
There would be no effective deterrence if the sums forfeited
were no greater than the sums he gained through his scheme.
Forfeitures must have a greater bite than that in order to
deter future illegality by Carpenter and by others.
Carpenter's Role at Benistar
factual basis for Carpenter's convictions for mail and
wire fraud is set forth in Carpenter II, and we
describe here only that evidence most pertinent to the
1998, Carpenter and his business partner, Martin Paley,
founded Benistar, which performed property exchanges under
§ 1031 of the Internal Revenue Code, 26 U.S.C. §
1031(a)(1). In order to gain tax benefits in a property
exchange business, clients entrust funds from property sales
to an "intermediary" company, which invests the
funds until the client purchases replacement property.
See id. Carpenter was the chairman of such an
"intermediary" company, Benistar. He worked out of
Benistar's Simsbury, Connecticut office, which was
responsible for handling client funds. Carpenter and a single
employee who reported to him conducted Benistar's §
1031 exchange business from Simsbury.
opened accounts at Merrill Lynch in which he deposited client
funds. Carpenter used one of the accounts, the
"B01" account, for depositing client funds, and
used the other, the "B10" account, primarily for
trading. He opened the accounts under Benistar's
corporate name and listed himself as the sole signatory on
checks and wire transfers were sent to Benistar, the employee
who reported to Carpenter deposited the funds at Merrill
Lynch (and later, PaineWebber). Carpenter had sole authority
to invest these funds, once deposited, as he chose. Acting in
the name of Benistar, Carpenter routinely moved funds from
the B01 account to the B10 account. He did so to pursue
aggressive option trading strategies with clients' money,
contrary to representations made to these clients. These
trades exposed the funds to risk of significant losses,
contradicting the promises Benistar made about the security
of exchangor funds in its marketing materials.
1999, Carpenter confirmed to his partner Paley that he
"want[ed] to continue having everything come through the
Simsbury office." Carpenter's letter listed
procedures and stated that "[a]t no time are any
procedures to be changed by any staff of the Benistar
Property Exchange without the prior approval of Daniel
first, Carpenter's strategy made money, even after paying
exchangors their promised 3% or 6% return. In consequence, he
made money in his role at Benistar. But by September 2000,
Carpenter had lost about $4 million of the clients' money
and Merrill Lynch prohibited him from opening any new options
positions. These losses were hidden from existing clients.
Further, Benistar continued to take on new clients. In the
fall of 2000, Carpenter transferred funds to PaineWebber and
again listed himself as the point person for the accounts. He
continued his risky trading, and the trades continued to lose
money. By 2001, Carpenter had lost about $9 million.
conviction established that Carpenter, through his knowing
use of marketing materials, had induced clients to invest in
his Benistar endeavor. The superseding indictment alleged
that six of these clients invested $14, 053,
Procedural History of the Forfeiture Order
February 26, 2014, following this court's affirmance of
Carpenter's conviction after his second trial, the
district court sentenced Carpenter to thirty-six months'
imprisonment. The district court also ordered Carpenter to
pay restitution in the amount of $310, 033.96, which
represented the outstanding balance owed to two
exchangors. The sentencing judgment stated that
"[t]he defendant shall forfeit [his] interest in the
following property to the United States," and specified,
"[i]f there are any proceeds, they are to be forfeited.
The court to scheduled [sic] a hearing to determine the
amount to be forfeited." That order did not set the
amount to be forfeited. Carpenter filed a notice of appeal on
March 17, 2014.
23, 2014, the district court ordered that Carpenter forfeit
$14, 053, 715.52, pursuant to 18 U.S.C. § 981 and 28
U.S.C. § 2461(c). Carpenter then filed a supplemental
notice of appeal on June 5, 2014 from the May 23 forfeiture
order. In 2015, this court affirmed Carpenter's sentence
in United States v. Carpenter, 781 F.3d 599
(1st Cir. 2015) (Carpenter III), and rejected his
speedy trial challenges to his conviction. Id. at
608-18. The Carpenter III court did not reach the
May 23 forfeiture order because "both parties . . .
agree[d] that the forfeiture order [was] not properly before
[the] court." Id. at 623. Carpenter's
appeal from the May 23 forfeiture order was docketed as a
separate appeal from the appeal decided in Carpenter
present case concerns Carpenter's June 5, 2014 appeal
after entry of the May 23, 2014 forfeiture order, which set