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Case 2:13-cr-00106-DOC Document 269 Filed 11/26/18 Page 1 of 3 Page ID #:2483

1 NICOLA T. HANNA
2 United States Attorney
LAWRENCE S. MIDDLETON
3 Assistant United States Attorney
4 Chief, Criminal Division
STEVEN R. WELK (Cal. Bar No. 149883)
5 Assistant United States Attorney
6 Chief, Asset Forfeiture Section
CHRISTOPHER BRUNWIN (Cal. Bar No. 158939)
7 Assistant United States Attorney
Violent and Organized Crime Section
8 1400 United States Courthouse
9 312 North Spring Street
Los Angeles, California 90012
10 Telephone: (213) 894-6166/4242
Facsimile: (213) 894-3713
11 E-mail: Steven.Welk@usdoj.gov
12 Christopher.Brunwin@usdoj.gov
13 Attorneys for Plaintiff
UNITED STATES OF AMERICA
14
15 UNITED STATES DISTRICT COURT
16 FOR THE CENTRAL DISTRICT OF CALIFORNIA
17 UNITED STATES OF AMERICA, ) No. CR 13-106(A)-DOC
)
18 Plaintiff, )
) GOVERNMENT’S THIRD BILL OF
19 vs. ) PARTICULARS RE: CRIMINAL
)
20 ) FORFEITURE
MONGOL NATION, )
21 An unincorporated association, )
)
22 Defendant. )
)
23 )
24
25 The First Superseding Indictment (“FSI”) in this case includes a forfeiture
26 allegation in which Plaintiff United States of America (“the government”) gave
27 notice to defendant that it intends to seek the forfeiture of (1) all property acquired
28 or maintained in violation of 18 U.S.C. § 1962; (2) any property, interest in
1
Case 2:13-cr-00106-DOC Document 269 Filed 11/26/18 Page 2 of 3 Page ID #:2484

1 property, or contractual or other legal rights that afforded a source of influence


2 over the enterprise described in the FSI; and (3) any proceeds constituting or
3 derived from the racketeering activity alleged in the FSI. FSI at 33. The criminal
4 forfeiture allegation includes descriptions of two trade/service/association marks,
5 described in the indictment as the “Word Image” (that is, the word “Mongols”) and
6 the “Rider Image.” (that is, the image on the Mongols center patch) Id. at 34-35.
7 After the filing of the original Indictment in this case, defendant, acting
8 under two other names, registered with the United States Patent and Trademark
9 Office (“USPTO”) two marks that included the Word Image and Rider Image. The
10 first of these marks (the “Mongol Nation Combined Mark”) was registered by
11 defendant as a collective membership mark, using the name “Mongols Nation
12 Motorcycle Club LLC,” on May 3, 2013, and included the Word Image, Rider
13 Image and the word “Nation.” The registration of the Mongol Nation Combined
14 Mark was abandoned on October 7, 2014. The second of these marks (the
15 “Combined Mark”), consisting of a combination of the Word Image and Rider
16 Image, was registered by defendant as a collective membership mark, using the
17 name “Mongols Nation Motorcycle Club Corporation,” on May 5, 2015.
18 Defendant also re-registered the Word Image as a collective membership mark.
19 On May 29, 2015, Plaintiff filed its First Bill of Particulars Re: Criminal
20 Forfeiture, providing notice that, pursuant to the criminal forfeiture allegation of
21 the original Indictment, 18 U.S.C. § 1963 and Rule 32.2 of the Federal Rules of
22 Criminal Procedure, it intended to seek the forfeiture of any and all marks that
23 included or incorporated in any way one or both of the Word Image and Rider
24 Image described in the Indictment in this case, including the Mongol Nation
25 Combined Mark and the Combined Mark.
26 On June 18, 2018, Plaintiff filed a Second Bill of Particulars, providing
27 notice to defendant that, pursuant to the criminal forfeiture allegation of the FSI, 18
28 U.S.C. § 1963, and Rule 32.2 of the Federal Rules of Criminal Procedure, it
2
Case 2:13-cr-00106-DOC Document 269 Filed 11/26/18 Page 3 of 3 Page ID #:2485

1 intends to seek the forfeiture of any and all marks that include or incorporate in any
2 way one or both of the Word Image and Rider Image described in the Indictment
3 and FSI in this case, including the Mongol Nation Combined Mark and the
4 Combined Mark.
5 The Second Bill of Particulars also included a notice that the government
6 intended to seek a money judgment against defendant equal to the value of all
7 property subject to forfeiture pursuant to 18 U.S.C. § 1963, but which property is
8 not available for forfeiture, including (but not limited to) the full amount of
9 proceeds obtained by defendant as a result of the violations alleged in Counts One
10 and Two of the FSI.
11 By this filing, the government gives notice that, in addition to the property
12 and interests described above, the government intends to seek, pursuant to the
13 criminal forfeiture allegation of the FSI, 18 U.S.C. § 1963, and Rule 32.2 of the
14 Federal Rules of Criminal Procedure, the criminal forfeiture of all personal
15 property currently in the government’s possession that bears all or part of any of
16 the marks described above, to include the Image Mark, the Rider Mark, the
17 Mongol Nation Combined Mark and/or the Combined Mark, including all evidence
18 seized as a result of Operation Black Rain.
19
20 DATED: November 26, 2018 NICOLA T. HANNA
United States Attorney
21
LAWRENCE S. MIDDLETON
22 Assistant United States Attorney
Chief, Criminal Division
23
24 /s/ Steven R. Welk
STEVEN R. WELK
25 CHRISTOPHER BRUNWIN
Assistant United States Attorneys
26
27 Attorneys for Plaintiff
UNITED STATES OF AMERICA
28
3
Case 2:13-cr-00106-DOC Document 264 Filed 11/20/18 Page 1 of 22 Page ID #:2457

1 NICOLA T. HANNA
United States Attorney
2 LAWRENCE S. MIDDLETON
3 Assistant United States Attorney
Chief, Criminal Division
4 STEVEN R. WELK (Cal. Bar No. 149883)
Assistant United States Attorney
5 Chief, Asset Forfeiture Section
6 CHRISTOPHER BRUNWIN (Cal. Bar No. 158939)
Assistant United States Attorney
7 Violent and Organized Crime Section
8 1500 United States Courthouse
312 North Spring Street
9 Los Angeles, California 90012
Telephone: (213) 894-6166/4242
10 Facsimile: (213) 894-3713
11 E-mail: Steven.Welk@usdoj.gov
Christopher.Brunwin@usdoj.gov
12
Attorneys for Plaintiff
13
UNITED STATES OF AMERICA
14
UNITED STATES DISTRICT COURT
15
FOR THE CENTRAL DISTRICT OF CALIFORNIA
16
UNITED STATES OF AMERICA, No. CR 13-106(A)-DOC
17
Plaintiff, PLAINTIFF’S MEMORANDUM OF
18 POINTS AND AUTHORITIES RE
v. PROCEDURE APPLICABLE TO
19 FORFEITURE PHASE OF TRIAL
20 MONGOL NATION,
An unincorporated association, Trial Date: October 30, 2018
21 Time: 8:30 a.m.
Location: Courtroom of the
Defendant. Hon. David O. Carter
22
23
24 ///
25 ///
26 ///
27
28
Case 2:13-cr-00106-DOC Document 264 Filed 11/20/18 Page 2 of 22 Page ID #:2458

1 TABLE OF CONTENTS
2 PAGE
3 I. INTRODUCTION .................................................................................................... 1
4 II. ARGUMENT ............................................................................................................ 1
5 A. The Property Sought for Forfeiture ................................................................ 1
6 B. Forfeiture Is an Aspect of Sentencing ............................................................ 1
7 C. Applicable Substantive and Procedural Authority ......................................... 2
8 1. Substantive RICO Forfeiture Authority – 18 U.S.C. § 1963 ............... 2
9 2. Determination of Forfeitability of Property Sought for Forfeiture
10 and Entry of A Preliminary Order of Forfeiture .................................. 3

11 3. Procedural Rules for the Forfeiture Phase ........................................... 6


12
4. Proceedings Following the Entry of A Preliminary Order of
13 Forfeiture ............................................................................................ 10
14
5. Consideration of Constitutional and Other Issues Should Follow
15 Adjudication of Any Third Party Interests ........................................ 14
16
17
18
19
20
21
22
23
24
25
26
27
28

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Case 2:13-cr-00106-DOC Document 264 Filed 11/20/18 Page 3 of 22 Page ID #:2459

1 TABLE OF AUTHORITIES
2
CASES PAGE
3
Alexander v. United States,
4 509 U.S. 544 (1993) ..................................................................................................... 9
5
United States v. Hernandez-Escarsega,
6 886 F.2d 1560 (9th Cir. 1989) ...................................................................................... 7
7 Caplin & Drysdale v. United States,
8 491 U.S. 617 (1989) ..................................................................................................... 2
9 Kaley v. United States,
10 134 S. Ct. 1090 (2014) .............................................................................................. 1-2
11 Libretti v. United States,
516 U.S. 29 (1995) ................................................................................................... 1, 5
12
13 United States v. Andrews,
530 F.3d 1232 (10th Cir. 2008) .............................................................................. 9, 10
14
United States v. Arbolaez,
15
450 F.3d 1283 (11th Cir. 2006) .................................................................................... 6
16
United States v. Bennett,
17 423 F.3d 271 (3d Cir. 2005) ....................................................................................... 10
18
United States v. Blackman,
19 746 F.3d 137 (4th Cir. 2014) ........................................................................................ 8
20 United States v. Capoccia,
21 503 F.3d 103 (2d Cir. 2007) ......................................................................................... 6
22 United States v. Carrie,
23 206 F. App’x. 920 (11th Cir. 2006) ............................................................................ 14
24 United States v. Christensen,
828 F.3d 763 (9th Cir. 2015) ........................................................................................ 7
25
26 United States v. Cooper,
679 F. App’x. 738 (11th Cir. 2017) ............................................................................ 13
27
28

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Case 2:13-cr-00106-DOC Document 264 Filed 11/20/18 Page 4 of 22 Page ID #:2460

1 United States v. Creighton,


2 52 F. App’x 31 (9th Cir. 2002) ..................................................................................... 6

3 United States v. DeFries,


129 F.3d 1293 (D.C. Cir. 1997) ................................................................................... 7
4
5 United States v. Dejanu,
163 F. App’x. 493 (9th Cir. 2006) .............................................................................. 13
6
United States v. Derman,
7 211 F.3d 175 (1st Cir. 2000) ...................................................................................... 14
8
United States v. Evanson,
9 2008 WL 3107332, *2 (D. Utah 2008) ........................................................................ 6
10 United States v. Garcia-Guizar,
11 160 F.3d 511 (9th Cir. 1998) ........................................................................................ 7
12 United States v. Gaskin,
13 2002 WL 459005, *9 (W.D.N.Y. Jan. 8, 2002), aff’d,
364 F.3d 438 (2d Cir. 2004) ...................................................................................... 5, 9
14
United States v. Gilbert,
15
244 F.3d 888 (11th Cir. 2001) .................................................................................... 10
16
United States v. Guerra,
17 216 F. App’x. 906 (11th Cir. 2007) ............................................................................ 14
18
United States v. Kennedy,
19 201 F.3d 1324 (11th Cir. 2000) .................................................................................. 13
20 United States v. Lazarenko,
21 476 F.3d 642 (9th Cir. 2007) ................................................................................ 2, 8, 9
22 United States v. Lazarenko,
23 504 F. Supp. 2d 791 (N.D. Cal. 2007) ......................................................................... 4
24 United States v. Lester,
85 F.3d 1409 (9th Cir. 1996) ...................................................................................... 13
25
26 United States v. Louthian,
756 F.3d 295 (4th Cir. 2014) ........................................................................................ 2
27
28

iii
Case 2:13-cr-00106-DOC Document 264 Filed 11/20/18 Page 5 of 22 Page ID #:2461

1 United States v. Marquez,


2 685 F.3d 501 (5th Cir. 2012) ........................................................................................ 3

3 United States v. McHan,


345 F.3d 262 (4th Cir. 2003) ...................................................................................... 10
4
5 United States v. Messino,
382 F.3d 704 (7th Cir. 2004) ........................................................................................ 2
6
United States v. Monsanto,
7 491 U.S. 600 (1989) ..................................................................................................... 7
8
United States v. Najjar,
9 300 F.3d 466 (4th Cir. 2002) ........................................................................................ 7
10 United States v. Nava,
11 404 F.3d 1119 (9th Cir. 2005) ............................................................................ 8, 9, 12
12 United States v. Neal,
13 2003 WL 24307070, *2 (E.D. Va. Sept. 29, 2003) ...................................................... 5
14 United States v. Newman,
659 F.3d 1235 (9th Cir. 2011) ............................................................................... 7-8, 8
15
16 United States v. Nicolo,
597 F. Supp. 2d 342 (W.D.N.Y. 2009) ................................................................... 9-10
17
United States v. Prejean,
18
2006 WL 2414256, *1 (E.D. La. Aug. 18, 2006) ........................................................ 5
19
United States v. Sabhnani,
20 599 F.3d 215 (2d Cir. 2010) ......................................................................................... 6
21
United States v. Schlesinger,
22 396 F.Supp.2d 267 (E.D.N.Y. 2005) ............................................................................ 9
23 United States v. Shryock,
24 342 F.3d 948 (9th Cir. 2003) ........................................................................................ 7
25 United States v. Teadt,
26 653 F. App’x. 421 (6th Cir. 2016) .............................................................................. 12
27 United States v. Vampire Nation,
451 F.3d 189 (3d Cir. 2006) ......................................................................................... 2
28

iv
Case 2:13-cr-00106-DOC Document 264 Filed 11/20/18 Page 6 of 22 Page ID #:2462

1 United States v. Warshak,


2 631 F.3d 266 (6th Cir. 2010) ........................................................................................ 7

3 United States v. Yeje-Cabrera,


430 F.3d 1 (1st Cir. 2005) ......................................................................................... 8-9
4
5 FEDERAL STATUTES AND RULES
6 18 U.S.C. § 1962 ........................................................................................................... 2, 3
7 18 U.S.C. § 1963 ......................................................................................................... 2, 3, 9
8 18 U.S.C. § 1963 (a) - (c) .................................................................................................. 2
9 18 U.S.C. § 1963(e) .................................................................................................. 14, 15
18 U.S.C. § 1963(e) - (m) ................................................................................................. 3
10
18 U.S.C. § 1963(l) ..................................................................................................... 8, 10
11
18 U.S.C. § 1963(l)(1) .................................................................................................... 11
12
18 U.S.C. § 1963(l)(2) .................................................................................................... 11
13
18 U.S.C. § 1963(l)(3) .................................................................................................... 11
14 18 U.S.C. § 1963(l)(4) .................................................................................................... 11
15 18 U.S.C. § 1963(l)(5) .................................................................................................... 12
16 18 U.S.C. § 1963(l)(6) .................................................................................................... 12
17 18 U.S.C. § 1963(l)(7) .................................................................................................... 13
18 21 U.S.C. § 853 .................................................................................................................. 7
19 21 U.S.C. § 853(n)(6) ...................................................................................................... 12
20 28 U.S.C. § 2072(b) .......................................................................................................... 3
21 28 U.S.C. § 2461(c) .......................................................................................................... 8

22 Fed. R. Crim. P. 32.2 ................................................................................................. 3, 8, 9


Fed. R. Crim. P. 32.2(a) ...................................................................................................... 3
23
Fed. R. Crim. P. 32.2(b)(1) ................................................................................................. 4
24
Fed. R. Crim. P. 32.2(b)(1)(A)............................................................................................ 4
25
Fed. R. Crim. P. 32.2(b)(1)(B) ............................................................................................ 6
26
Fed. R. Crim. P. 32.2(b)(2)(A)............................................................................................ 7
27 Fed. R. Crim. P. 32.2(b)(2)(B) .......................................................................................... 10
28 Fed. R. Crim. P. 32.2(b)(4)(A).......................................................................................... 10

v
Case 2:13-cr-00106-DOC Document 264 Filed 11/20/18 Page 7 of 22 Page ID #:2463

1 Fed. R. Crim. P. 32.2(b)(5) ..............................................................................................4-5


2 Fed. R. Crim. P. 32.2(b)(6)(A).......................................................................................... 10
3 Fed. R. Crim. P. 32.2(b)(6)(B) .......................................................................................... 11
4 Fed. R. Crim. P. 32.2(b)(6)(C) .......................................................................................... 11

5 Fed. R. Crim. P. 32.2(c) .................................................................................................. 10


Fed. R. Crim. P. 32.2(c)(1) ............................................................................................... 11
6
Fed. R. Crim. P. 32.2(c)(1)(A) .......................................................................................... 11
7
Fed. R. Crim. P. 32.2(c)(1)(B) .......................................................................................... 12
8
Fed. R. Crim. P. 32.2(c)(2) ............................................................................................... 13
9
Fed. R. Crim. P. 32.2(c)(4) ............................................................................................... 13
10 Supplemental Rules for Admiralty or Maritimes Claims and Asset Forfeiture Actions
11 Rule G(4)(a)(iii) ............................................................................................................ 11
12 Rule G(4)(a)(iv) ............................................................................................................ 11
13 Rule G(4)(a)(iv)(C) ....................................................................................................... 11
14
15 MISCELLANEOUS
16 Advisory Committee Notes to Federal Rules of Criminal Procedure 32.2
17 (2000 Adoption) .............................................................................................. 8, 9, 12, 13
18
19
20
21
22
23
24
25
26
27
28

vi
Case 2:13-cr-00106-DOC Document 264 Filed 11/20/18 Page 8 of 22 Page ID #:2464

1 I. INTRODUCTION
2 Plaintiff United States of America (“the government”) offers this memorandum
3 explaining the procedures applicable to criminal forfeiture proceedings in the event of
4 defendant Mongol Nation’s (“Defendant”) conviction on either or both counts of the
5 First Superseding Indictment (“FSI”). This memorandum assumes a conviction is
6 forthcoming.
7 II. ARGUMENT
8 A. The Property Sought for Forfeiture
9 The government intends to seek the forfeiture of two basic categories of property
10 in this case: (1) all rights associated with the collective membership marks described in
11 the FSI and the government’s Bills of Particulars, including what has been referred to as
12 the Word Mark (that is, the word “MONGOLS”), the Image Mark (that is, the center
13 patch image), and any combined marks that contain either or both of the Word and
14 Image marks (collectively, the “Marks”); and (2), any items of personal property bearing
15 any of the Marks, which items were seized in connection with Operation Black Rain,
16 including the Mongols vests (or “cuts”) admitted into evidence during trial.
17 B. Forfeiture Is an Aspect of Sentencing
18 Criminal forfeiture is imposed on a convicted defendant as part of sentencing. It
19 is not an element of the underlying substantive offense. See Libretti v. United States,
20 516 U.S. 29, 39 (1995) (“Our precedents have likewise characterized criminal forfeiture
21 as an aspect of punishment imposed following conviction of a substantive criminal
22 offense.”).
23 Criminal forfeiture is an important sentencing tool, carrying into effect
24 Congressional intent to deprive criminals and criminal organizations of the
25 instrumentalities and profits of their illegal conduct. See Kaley v. United States, 134 S.
26 Ct. 1090 (2014) (forfeiture serves to punish the wrong-doer, deter future illegality, lessen
27 the economic power of criminal enterprises, compensate victims, improve conditions in
28 crime-damaged communities, and support law enforcement activities such as police

1
Case 2:13-cr-00106-DOC Document 264 Filed 11/20/18 Page 9 of 22 Page ID #:2465

1 training); Caplin & Drysdale v. United States, 491 U.S. 617, 630 (1989) (“a major
2 purpose motivating congressional adoption and continued refinement of the Racketeer
3 Influenced and Corrupt Organizations (RICO) and Continuing Criminal Enterprise
4 (CCE) forfeiture provisions has been the desire to lessen the economic power of
5 organized crime and drug enterprises”).
6 Criminal forfeiture is in personam, meaning that it may be imposed only after a
7 criminal conviction, and applies only to property of the convicted defendant. See United
8 States v. Lazarenko, 476 F.3d 642, 647 (9th Cir. 2007); United States v. Louthian, 756
9 F.3d 295, 307 n.12 (4th Cir. 2014) (criminal and civil forfeiture are “distinct law
10 enforcement tools:” the former is an in personam action that requires a conviction, and
11 the latter is an in rem action against the property itself); and United States v. Vampire
12 Nation, 451 F.3d 189, 202 (3d Cir. 2006) (distinguishing civil and criminal forfeiture).
13 Finally, the extent of criminal forfeiture is determined by the conviction. The forfeiture
14 must correspond in nature and scope to the underlying criminal conduct of which the
15 defendant was convicted. See United States v. Messino, 382 F.3d 704, 714 (7th Cir.
16 2004).
17 C. Applicable Substantive and Procedural Authority
18 1. Substantive RICO Forfeiture Authority – 18 U.S.C. § 1963
19 The substantive forfeiture authority applicable here is found at 18 U.S.C. § 1963
20 (a) - (c), which describes the penalties for violation of the criminal RICO statute.
21 Subsection (a) authorizes the criminal forfeiture of
22 (1) any interest the person has acquired or maintained in violation of section
23 1962;
(2) any –
24 (A) interest in;
25 (B) security of;
(C) claim against; or
26 (D) property or contractual right of any kind affording a source of influence
27 over; any enterprise which the person has established, operated,
28

2
Case 2:13-cr-00106-DOC Document 264 Filed 11/20/18 Page 10 of 22 Page ID #:2466

1 controlled, conducted, or participated in the conduct of, in violation of


2 section 1962; and
(3) any property constituting, or derived from, any proceeds which the person
3 obtained, directly or indirectly, from racketeering activity or unlawful debt
4 collection in violation of section 1962.
5 Subsection (b) provides that property subject to forfeiture includes “tangible and
6 intangible personal property, including rights, privileges, interests, claims and
7 securities.” Subsection (c) provides that
8 All right, title, and interest in property described in subsection (a) vests in
9 the United States upon the commission of the act giving rise to forfeiture
under this section. Any such property that is subsequently transferred to a
10 person other than the defendant may be the subject of a special verdict of
11 forfeiture and thereafter shall be ordered forfeited to the United States,
unless the transferee establishes in a hearing pursuant to subsection (1) that
12 he is a bona fide purchaser for value of such property who at the time of the
13 purchase was reasonably without cause to believe that the property was
14 subject to forfeiture under this section.

15 Procedurally, criminal forfeitures are governed by 18 U.S.C. § 1963(e) - (m), and


16 Federal Rule of Criminal Procedure 32.2 (“Rule 32.2"), entitled “Criminal Forfeiture.”1
17 2. Determination of Forfeitability of Property Sought for
Forfeiture and Entry of A Preliminary Order of Forfeiture
18
19 The government is required to provide notice of its intent to seek forfeiture in the
20 indictment or information. See Rule 32.2(a) (“A court must not enter a judgment of
21
1
22 While both set out procedural rules, Rule 32.2 is the primary source. See United
States v. Marquez, 685 F.3d 501, 509 (5th Cir. 2012) (reciting the requirements in Rule
23 32.2 and holding that they are “not empty formalities” but are mandatory). While § 1963
24 also includes procedural provisions, they are essentially identical to those in Rule 32.2,
25 provide additional powers or authority unique to RICO forfeitures (some of which are
discussed below), or are inapplicable to this particular case. Moreover, while the
26 government does not believe that any of the provisions of § 1963 are inconsistent with
27 those of Rule 32.2, to the extent conflicts are found, Rule 32.2 governs. See 28 U.S.C.
§ 2072(b) (“All laws in conflict with [the Federal Rules of Criminal Procedure] shall be
28 of no force or effect after such rules have taken effect.”).
3
Case 2:13-cr-00106-DOC Document 264 Filed 11/20/18 Page 11 of 22 Page ID #:2467

1 forfeiture in a criminal proceeding unless the indictment or information contains notice


2 to the defendant that the government will seek forfeiture of property as part of any
3 sentence in accordance with the applicable statute.”). The FSI includes such notice in
4 the form of the forfeiture allegation that begins on page 33. The government’s forfeiture
5 efforts are not necessarily limited to the specific property listed in the indictment.
6 United States v. Lazarenko, 504 F. Supp. 2d 791, 796-97 (N.D. Cal. 2007) (Rule 32.2(a)
7 requires only that the indictment give notice of the forfeiture in generic terms; that the
8 Government did not itemize all of the property subject to forfeiture until much later was
9 of no moment; older cases holding that property had to be listed in the indictment are no
10 longer good law).
11 Following conviction, forfeitability of the property sought for forfeiture is
12 determined either by the Court or the jury, depending on the election of either party.
13 Rule 32.2(b)(1) provides:
14 (A) Forfeiture Determinations. As soon as practical after a verdict or
15 finding of guilty, or after a plea of guilty or nolo contendere is
accepted, on any count in an indictment or information regarding
16 which criminal forfeiture is sought, the court must determine what
17 property is subject to forfeiture under the applicable statute. If the
government seeks forfeiture of specific property, the court must
18 determine whether the government has established the requisite nexus
19 between the property and the offense. If the government seeks a
personal money judgment, the court must determine the amount of
20
money that the defendant will be ordered to pay.
21 (B) Evidence and Hearing. The Court’s determination may be based upon
22 evidence already in the record, including any written plea agreement,
and on any additional evidence or information submitted by the parties
23 and accepted by the Court as relevant and reliable. If the forfeiture is
24 contested, on either party’s request the Court must conduct a hearing
after the verdict or finding of guilty.
25
26 Notwithstanding the above language of Rule 32.2(b)(1)(A), which requires the
27 Court to determine the forfeitability of any property sought for forfeiture, subsection
28

4
Case 2:13-cr-00106-DOC Document 264 Filed 11/20/18 Page 12 of 22 Page ID #:2468

1 (b)(5), entitled “Jury Determination,” gives each of the parties the option of retaining the
2 jury to make that determination:
3
(A) Retaining the Jury. In any case tried before a jury, if the indictment or
4 information states that the government is seeking forfeiture, the Court
5 must determine before the jury begins deliberating whether either party
requests that the jury be retained to determine the forfeitability of
6 specific property if it returns a guilty verdict.
7 (B) Special Verdict Form. If a party timely requests to have the jury
8 determine forfeiture, the government must submit a proposed Special
Verdict Form listing each property subject to forfeiture and asking the
9 jury to determine whether the government has established the requisite
10 nexus between the property and the offense committed by the
defendant.
11
12 The government filed its demand that the jury be retained for the determination of
13 forfeitability on November 20, 2018. Docket Number (“DN”) 262.2 The nexus inquiry
14 is the same whether the Court or the jury is the finder of fact. See United States v. Neal,
15 2003 WL 24307070, *2 (E.D. Va. S ept. 29, 2003) (citing Advisory Committee Notes);
16 see also United States v. Prejean, 2006 WL 2414256, *1 (E.D. La. Aug. 18, 2006)
17 (same; following Neal).
18 ///
19 ///
20
2
While there is no Constitutional right to a jury determination of forfeitability (see
21 Libretti, 516 U.S. at 49 (“the nature of criminal forfeiture as an aspect of sentencing
22 compels the conclusion that the right to a jury verdict on forfeitability does not fall
within the Sixth Amendment’s constitutional protection”), the courts that have addressed
23
the issue have concluded that Rule 32.2 does provide that right to either party (see, e.g.,
24 United States v. Gaskin, 2002 WL 459005, *9 n.3 (W.D.N.Y. Jan. 8, 2002)
25 (notwithstanding Libretti, which appears to make trial by jury on the forfeiture issue
inappropriate, Rule 32.2(b)(5) gives the defendant the right to have the jury determine
26 the forfeiture, if the case was tried before a jury), aff ’d, 364 F.3d 438 (2d Cir. 2004)),
27 Under the plain language of the Rule, so long as one of the parties makes the retention
demand before the jury begins its deliberations on guilt, the jury must be retained.
28

5
Case 2:13-cr-00106-DOC Document 264 Filed 11/20/18 Page 13 of 22 Page ID #:2469

1 3. Procedural Rules for the Forfeiture Phase


2 As indicated above, Rule 32.2(a) requires that the determination of what property
3 is subject to forfeiture under the applicable statute be determined “as soon as practicable
4 after a finding of guilty.”3 Whether made by the Court or the jury, the nexus
5 determination may be based upon “evidence already in the record, including any written
6 plea agreement, and on any additional evidence or information submitted by the parties
7 and accepted by the court as relevant and reliable.” Rule 32.2 ((b)(1)(B); United States
8 v. Sabhnani, 599 F.3d 215, 262-63 (2d Cir. 2010); United States v. Capoccia, 503 F.3d
9 103, 109 (2d Cir. 2007) (finder of fact may rely on evidence from the guilt phase; it is
10 not necessary for the government to reintroduce that evidence in the forfeiture phase).
11 Nor is it necessary that the evidence presented in the forfeiture phase satisfy the Rules of
12 Evidence, and may include hearsay, as the forfeiture determination is part of the
13 sentencing process. See Capoccia, 503 F.3d at 109; United States v. Evanson, 2008 WL
14 3107332, at *2 (D. Utah 2008); United States v. Creighton, 52 F. App’x 31, 35-36 (9th
15 Cir. 2002).4
16
17
18 3
The mandatory bifurcation of the guilt and forfeiture phases tends to have the
19 unfortunate effect of surprising a jury that returns a guilty verdict because the members
of the jury reasonably believe that they have completed their work by reaching a
20 unanimous verdict on guilt. They are unaware that they will be required to devote
21 additional time and effort to the determination of forfeitability. For that reason, the
government suggests that the forfeiture phase should begin either immediately upon the
22
return of a guilty verdict, or no later than the following court day.
23 4
Either party is permitted by the Rule to present additional evidence during the
24 post-verdict forfeiture phase of the trial. The government anticipates calling one witness
25 and then arguing why the jury should make findings of forfeitability based primarily on
the evidence presented during the guilt phase. The defendant may call witnesses as well
26 if it requests the opportunity. See United States v. Arbolaez, 450 F.3d 1283, 1294-95
27 (11th Cir. 2006) (reversing forfeiture judgment where defense counsel requested but was
denied opportunity to put on evidence and argue to the jury in the forfeiture phase of the
28 trial).
6
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1 The standard of proof regarding the criminal forfeitability of property is


2 preponderance of the evidence. See United States v. Christensen, 828 F.3d 763 (9th Cir.
3 2015) (RICO); United States v. Shryock, 342 F.3d 948, 991 (9th Cir. 2003) (following
4 United States v. Najjar, 300 F.3d 466, 485-86 (4th Cir. 2002) (RICO)); United States v.
5 Garcia-Guizar, 160 F.3d 511, 518 (9th Cir. 1998) (preponderance standard is
6 constitutional because criminal forfeiture is not a separate offense, but only an additional
7 penalty for an offense that was established beyond a reasonable doubt); United States v.
8 DeFries, 129 F.3d 1293, 1312 (D.C. Cir. 1997) (RICO); and United States v. Hernandez-
9 Escarsega, 886 F.2d 1560, 1576-77 (9th Cir. 1989) (interpreting identical language in 21
10 U.S.C. § 853, the forfeiture statute applicable to most criminal forfeiture proceedings).
11 The defendant is not permitted to relitigate the legality of his conduct or otherwise
12 attempt to undermine the jury’s finding of guilt during the forfeiture phase. United
13 States v. Warshak, 631 F.3d 266, 331 (6th Cir. 2010) (affirming district court’s refusal to
14 let defendant introduce evidence tending to show his conduct was not illegal, and
15 holding that in the forfeiture phase, the legality of the conduct is “no longer a live issue;”
16 the only question is the nexus between the conduct and the offense).
17 The only question to be determined during the forfeiture phase is whether the
18 evidence submitted during the guilt phase, together with any additional evidence
19 received during the forfeiture phase, establishes by a preponderance of the evidence that
20 there is the requisite nexus between the underlying crime(s) of conviction and the
21 property sought to be forfeited by the government. If the jury finds that there is such a
22 nexus, prompt entry of a Preliminary Order of Forfeiture (“POF”) is mandatory. See
23 Rule 32.2(b)(2)(A) (“If the [finder of fact] finds that the property is subject to forfeiture,
24 [the court] must promptly enter a preliminary order of forfeiture . . . directing the
25 forfeiture of specific property . . . .”); United States v. Monsanto, 491 U.S. 600, 607
26 (1989) (“Congress could not have chosen stronger words to express its intent that
27 forfeiture be mandatory in cases where the statute applied.”); United States v. Newman,
28 659 F.3d 1235, 1240 (9th Cir. 2011) (following Monsanto: “When the Government has

7
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1 met the requirements for criminal forfeiture, the district court must impose criminal
2 forfeiture, subject only to statutory and constitutional limits”); id. (“[T]he district court
3 has no discretion to reduce or eliminate mandatory criminal forfeiture”); Lazarenko, 476
4 F.3d at 648 (“Upon a finding that the property involved is subject to forfeiture, a court
5 must promptly enter a preliminary order of forfeiture without regard to a third party’s
6 interests in the property”); United States v. Blackman, 746 F.3d 137, 143 (4th Cir. 2014)
7 ( interpreting similar language in 28 U.S.C. § 2461(c): “The word ‘shall’ does not
8 convey discretion . . The plain text of the statute thus indicates that forfeiture is not a
9 discretionary element of sentencing. . . . Insofar as the district court believed that it could
10 withhold forfeiture on the basis of equitable considerations, its reasoning was in error.”
11 Rule 32.2 uses the word “must.”) .
12 As the Ninth Circuit held in Lazarenko, the forfeiture determination that precedes
13 the entry of a POF does not include a determination of who is the owner of the property
14 subject to forfeiture. That determination is deferred to ancillary proceedings that follow
15 the entry of the POF, in which the purported interests of third parties are determined.
16 See Advisory Committee Notes to Federal Rule of Criminal Procedure 32.2 (2000
17 Adoption):
18 Under [the statutory forfeiture scheme first enacted in 1984, including 18
19 U.S.C. § 1963(l)], the court orders the forfeiture of the defendant’s interest
in the property - whatever that interest may be -- in the criminal case. At
20 that point, the court conducts a separate proceeding in which all potential
21 third party claimants are given an opportunity to challenge the forfeiture by
asserting a superior interest in the property. This proceeding does not
22 involve relitigation of the forfeitability of the property; its only purpose is to
23 determine whether any third party has a legal interest in the forfeited
property.
24
25 (Emphasis added). See also United States v. Nava, 404 F.3d 1119, 1132 (9th Cir. 2005)
26 (district court properly instructed jury that questions of ownership “were not before
27 them”; jury’s return of special verdict of forfeiture silent on the issue of ownership of the
28 property); and United States v. Yeje-Cabrera, 430 F.3d 1, 15 (1st Cir. 2005) (explaining

8
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1 that the primary purpose of Rule 32.2(b)(2) was to preserve the resources of the court
2 and third parties by deferring the ownership issue to the ancillary proceeding, thus
3 avoiding duplicative litigation).
4 Ownership is not an issue to be determined before entry of the POF because
5 forfeiture of the defendant’s interest in property found to have a nexus to the underlying
6 violation for which he has been convicted is mandatory. Alexander v. United States, 509
7 U.S. 544, 562 (1993) (“a RICO conviction subjects the violator not only to traditional,
8 thought stringent, criminal fines and prison terms, but also mandatory forfeiture under §
9 1963"); Nava, 404 F.3d at 1124. The court need not define the defendant’s interest
10 before entering the POF because it is impossible as a matter of law for the defendant to
11 retain any interest in property as to which the requisite nexus has been shown. “Thus,
12 the ancillary proceeding has become the forum for determining the extent of the
13 defendant’s forfeitable interest in the property.” Rule 32.2, Advisory Committee Notes,
14 2000 Adoption. Rule 32.2 establishes the “more sensible procedure [whereby] the court,
15 once it (or a jury) determines that property was involved in the criminal offense for
16 which the defendant has been convicted, [orders] the forfeiture of whatever interest a
17 defendant may have in the property without having to determine exactly what that
18 interest is.” Id. (emphasis added).5
19 For the same reasons, a defendant cannot object to the entry of a preliminary order
20 on the ground that the property at issue does not belong to him. United States v.
21 Schlesinger, 396 F.Supp.2d 267, 273 (E.D.N.Y. 2005); United States v. Nicolo, 597 F.
22 Supp. 2d 342, 346 (W.D.N.Y. 2009) (in the forfeiture phase of the trial, the court “is not
23 to consider potentially thorny issues concerning third party ownership of property sought
24
5
25 The deferral of the ownership determination serves both the letter and spirit of
the forfeiture scheme. See United States v. Andrews, 530 F.3d 1232, 1236 (10th Cir.
26 2008) (once forfeitability is determined, the court does not – “and indeed may not” --
27 determine ownership; that issue is deferred to the ancillary proceeding); Lazerenko, 476
F.3d at 648; Gaskin, 2002 WL 459005, at *9 n.4 (ownership is a question for the court
28 alone to determine in the ancillary proceeding), aff’d, 364 F.3d 438 (2d Cir. 2004).
9
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1 to be forfeited;” if the Government establishes the required nexus to the offense, the
2 property must be forfeited; if the property belonged to a third party, she will have an
3 opportunity in the ancillary proceeding to make that claim).
4 4. Proceedings Following the Entry of A Preliminary Order of
5 Forfeiture

6 The POF becomes final as to the defendant at the time of sentencing, and must be
7 entered at or before the time of sentencing (Rule 32.2(b)(2)(B)), but the forfeiture is not
8 truly final until the existence and validity of any potential third party rights have been
9 determined. Rule 32.2(b)(4)(A) (“If the [POF] directs the defendant to forfeit specific
10 property, it remains preliminary as to third parties until the ancillary proceeding is
11 concluded under Rule 32.2(c).”) ; United States v. Bennett, 423 F.3d 271, 275 (3d Cir.
12 2005) (the POF becomes final as to the defendant at sentencing but it remains
13 preliminary as to third parties until the court issues a final order pursuant to Rule
14 32.2(c)(2)).
15 Following entry of the POF, the second phase of the forfeiture proceedings begins,
16 to determine the existence and effect, if any, of alleged third party rights in the property
17 described in the POF. Fed. R. Crim. P. 32.2(c); 18 U.S.C. § 1963(l); Andrews, 530 F.3d
18 at 1236 (the purpose of the ancillary proceeding is determine if any third party has an
19 interest in the forfeited property and to amend the order of forfeiture accordingly);
20 United States v. McHan, 345 F.3d 262, 275 (4th Cir. 2003) (ancillary proceeding tests a
21 third party’s claim of an ownership interest; it is not a civil forfeiture proceeding in
22 which the government is seeking to forfeit a third party’s interest in property); United
23 States v. Gilbert, 244 F.3d 888, 909 (11th Cir. 2001) (ancillary proceeding creates an
24 orderly procedure whereby third parties who claim their property interests have been
25 forfeited in a criminal case can “challenge the validity of the forfeiture order and
26 establish their legitimate ownership interests”; discussing legislative history).
27 Pursuant to Rule 32.2(b)(6)(A), following the entry of a POF ordering the
28 forfeiture of specific property, “the government must publish notice of the [POF] and

10
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1 send notice to any person who reasonably appears to be a potential claimant with
2 standing to contest the forfeiture in the ancillary proceeding.”6 “The notice must
3 describe the forfeited property, state the times under the applicable statute when a
4 petition contesting the forfeiture must be filed, and state the name and contact
5 information for the government attorney to be served with the petition.” Rule
6 32.2(b)(6)(B). 7
7
A petition must be signed under penalty of perjury and set forth the nature and
8
extent of the petitioner’s purported right, title or interest in the property, the time and
9
circumstances of the petitioner’s acquisition of the right, title or interest in the property,
10
any additional facts supporting the petitioner’s claim, and the relief sought. 18 U.S.C.
11
§ 1963(l)(3).
12
If any third party files a timely ancillary petition asserting an interest in the
13
property to be forfeited, “the court must conduct an ancillary proceeding.” Rule
14
32.2(c)(1). That hearing “shall, to the extent practicable and consistent with the interests
15
of justice, be held within thirty days of the filing of the petition. The court may
16
consolidate the hearing on the petition with a hearing on any other petition filed by a
17
person other than the defendant under this subsection.” § 1963(l)(4). However, Rule
18
32.2(c)(1)(A) provides that a petition may be dismissed for lack of standing, failure to
19
20 6
Publication notice is to be given as described in Supplemental Rule G(4)(a)(iii)
21 of the Federal Rules of Civil Procedure, and may be accomplished by any means
described in Supplemental Rule G(4)(a)(iv). Rule 32.2(b)(6)(C). Here, the government
22
will publish notice on “an official internet government forfeiture site for at least 30
23 consecutive days” in accordance with Rule G(4)(a)(iv)(C). An essentially identical
24 notice requirement is found at § 1963(l)(1).
7
25 Section 1963(l)(2) provides that “any person, other than the defendant, asserting
a legal interest in property which has been ordered forfeited to the United States pursuant
26 to this section may, within thirty days of the final publication of notice or his receipt of
27 notice under paragraph (1), whichever is earlier, petition the court for a hearing to
adjudicate the validity of his alleged interest in the property. The hearing shall be held
28 before the court alone, without a jury.”
11
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1 state a claim, or “any other lawful reason,” and Rule 32.2(c)(1)(B) provides that prior to
2 a hearing on a petition, the court may permit the parties to conduct discovery in
3 accordance with the Federal Rules of Civil Procedure. The exercise of any of these
4 options will likely delay a hearing beyond the 30-day window provided in the Rule.
5 At the petition hearing, the petitioner may testify and present evidence and
6 witnesses on his own behalf, and cross-examine witnesses who appear at
the hearing. The United States may present evidence and witnesses in
7 rebuttal and in defense of its claim to the property and cross-examine
8 witnesses who appear at the hearing. In addition to testimony and evidence
presented at the hearing, the court shall consider the relevant portions of the
9 record of the criminal case which resulted in the [POF].
10
11 18 U.S.C. § 1963(l)(5).
12 The petitioner bears the burden of proof in the ancillary proceeding to prove by a
13 preponderance of the evidence either that
14
(A) the petitioner has a legal right, title, or interest in the property, and such
15 right, title or interest renders the [POF] invalid in whole or part
16 because the right, title or interest was vested in the petitioner rather
than the defendant or was superior to any right, title, or interest of the
17 defendant at the time of the commission of the acts which gave rise to
18 the forfeiture of the property under this section; or
19 (B) The petitioner is a bona fide purchaser for value of the right, title, or
interest in the property and was at the time of the purchase reasonably
20 without cause to believe that the property was subject to forfeiture
21 under this section.
22 18 U.S.C. § 1963(l)(6); Nava, 404 F.3d at 1125 (in ancillary proceeding, “the petitioner
23 bears the burden of proving his right, title, or interest”) (interpreting similar provision in
24 21 U.S.C. § 853(n)(6)); United States v. Teadt, 653 F. App’x. 421 (6th Cir. 2016) (in an
25 ancillary proceeding, the burden shifts to the petitioner to establish the petitioner’s third
26 party claim by a preponderance of the evidence). Petitioners may not argue that the
27 entry of the POF was improper or not adequately supported by the evidence at trial. See
28 Advisory Committee Note to Rule 32.2 (“[The ancillary proceeding] does not involve

12
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1 relitigation of the forfeitability of the property; its only purpose is to determine whether
2 any third party has a legal interest in the forfeited property.”); United States v. Dejanu,
3 163 F. App’x. 493, 498 (9th Cir. 2006) (“Whether the criminal forfeiture of the property
4 was proper is not an issue subject to litigation by third parties in the ancillary
5 proceeding”); United States v. Cooper, 679 F. App’x. 738 (11th Cir. 2017) (third party
6 cannot relitigate the merits of the forfeitability determination).
7 Whether a third party petitioner has a valid right, title or interest in the property
8 described in the POF is determined according to state law. Federal law determines
9 whether any such interest is subject to forfeiture. United States v. Lester, 85 F.3d 1409,
10 1412 (9th Cir. 1996) (court looks to state law to see what interest the claimant has in the
11 property and looks to the federal statute to see if that interest is subject to forfeiture);
12 United States v. Kennedy, 201 F.3d 1324, 1334 (11th Cir. 2000).
13 When all third party petitions have been adjudicated, the court must enter a
14 final order of forfeiture by amending the preliminary order of forfeiture as
necessary to account for any third-party rights. If no third party files a
15 timely petition, the preliminary order becomes the final order of forfeiture if
16 the court finds that the defendant (or any combination of defendants
convicted in the case) had an interest in the property that is forfeitable under
17 the applicable statute. The defendant may not object to the entry of the final
18 order on the ground that the property belongs, in whole or in part, to a
codefendant or a third party; nor may a third party object to the final order
19
on the ground that the third party has an interest in the property.
20
21 Rule 32.2(c)(2).8 The ancillary proceeding is not part of the defendant’s sentencing,
22 meaning that the Rules of Evidence do apply. See Rule 32.2(c)(4) and Committee Note
23 to 2000 Adoption of Rule.
24
25 8
Section 1963(l)(7) provides that “following the court’s disposition of all petitions
26 filed under this subsection, or if no such petitions are filed following the expiration of
27 the period provided in paragraph (2) for the filing of such petitions, the United States
shall have clear title to property that is the subject of the [POF] and may warrant good
28 title to any subsequent purchaser or transferee.”
13
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1 Finally, Section 1963(e) provides:


2 Upon conviction of a person under this section, the court shall enter a
3 judgment of forfeiture of the property to the United States and shall also
authorize the Attorney General to seize all property ordered forfeited upon
4 such terms and conditions as the court shall deem proper. Following the
5 entry of an order declaring the property forfeited, the court may, upon
application of the United States, enter such appropriate restraining orders or
6 injunctions, require the execution of satisfactory performance bonds,
7 appoint receivers, conservators, appraisers, accountants, or trustees, or take
8 any other action to protect the interest of the United States in the property
ordered forfeited.
9
10 5. Consideration of Constitutional and Other Issues Should
Follow Adjudication of Any Third Party Interests
11
12 As this Court has already discussed with the parties -- both formally and
13 informally -- it is anticipated that certain Constitutional issues will be addressed at some
14 point during the criminal forfeiture proceedings in this case, specifically relating to
15 whether the forfeiture of the Marks sought by the government implicates the First
16 Amendment to the Constitution. It should be noted that Constitutional issues are not
17 within the purview of the jury, but are to be determined solely by the Court, suggesting
18 that those issues should be deferred at least until after the forfeiture phase of the trial and
19 entry of a POF. United States v. Derman, 211 F.3d 175, 184 (1st Cir. 2000) (whether a
20 forfeiture violates the Eighth Amendment is an issue for the court, not the jury).
21 Moreover, third party petitioners lack standing to raise Constitutional challenges on
22 behalf of the defendant. See, e.g., United States v. Carrie, 206 F. App’x. 920, 924 (11th
23 Cir. 2006) (claimant lacked standing to argue that the forfeiture of a liquor license was
24 unconstitutional because it violated the State’s right to regulate alcohol under the
25 Twenty-First Amendment); United States v. Guerra, 216 F. App’x. 906, 908 n.2 (11th
26 Cir. 2007) (third party lacked standing to contest the forfeiture in the ancillary
27 proceeding on the ground that it violated the defendant’s Eighth Amendment rights).
28

14
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1 The government urges the Court to find that it is appropriate to defer consideration
2 of any Constitutional issues until the forfeitability and ownership of the Marks is
3 determined – that is, after the adjudication of any third-party ancillary claims – if for no
4 other reason than that the Constitutional analysis will be unnecessarily complicated prior
5 to the Court’s determination of exactly whose Constitutional rights are potentially
6 implicated.
7 Should the Court adopt the government’s suggestion in this regard and in order to
8 facilitate this request and avoid any potential Constitutional conflict prior to the final
9 adjudication of forfeitability and ownership, the government will agree to refrain from
10 asking the Court (pursuant to § 1963(e)) to issue any orders authorizing the actual
11 seizure of the rights associated with the Marks until the Constitutional issues have been
12 adjudicated by this Court. Nor will the government immediately seek any restraining
13 orders or injunctive relief concerning tangible items of personal property bearing the
14 Marks not already in the government’s custody, other than an order instructing the
15 defendant not to take any actions to destroy or conceal such property, or otherwise
16 interfere with any subsequent orders that may authorize the seizure of such property
17 from defendant or its representatives and licensees.
18
19 DATED: November 20, 2018 NICOLA T. HANNA
20 United States Attorney
LAWRENCE S. MIDDLETON
21 Assistant United States Attorney
Chief, Criminal Division
22
23
/s/ Steven R. Welk
24 STEVEN R. WELK
CHRISTOPHER BRUNWIN
25 Assistant United States Attorneys
26
Attorneys for Plaintiff
27 UNITED STATES OF AMERICA
28

15