Wednesday, July 14th, 2010

Second Time Aground

United States v. Castello, No. 09-2784-cr (2d Cir. July 7, 2010) (Jacobs, Winter, McLaughlin, CJJ)

Joseph Castello was convicted of failing to file CTRs in connection with his check cashing business. When last we heard from him, see Cashed and Burned, posted 2/6/2009, the circuit vacated a 12 million dollar-plus forfeiture order and remanded for more complete findings under United States v. Bajakajian, 524 U.S. 321, 337-39 (1998), and its Eighth Amendment-derived excessive fines test. On remand, the district court made findings on the four factors set out in Bajakajian, and reduced the amount of the forfeiture to zero. On this, the government’s appeal, the circuit vacated the zero and ordered reimposition of the original forfeiture amount.

Reviewing the district court’s findings de novo, the circuit found fault with all of them. The first Bajakajian factor requires consideration of “the essence of the crime of the defendant and its relation to other criminal activity.” Here, while Castello was convicted only of failing to file CTRs and nothing else, his conduct was still very serious because it conduct permitted thousands of his check-cashing customers to commit fraud.

The second Bajakajian factor considers “whether the defendant fit[s] into the class of persons for whom the statute was principally designed.” The circuit concluded that this factor weighed in favor of full forfeiture. While Castello himself was not a money launder, drug trafficker or tax evader, the main targets of the statute of conviction, his conduct facilitated such conduct “in just the way the statute was designed to frustrate.”

Third, Bajakajian considers “the maximum sentence and fine that could have been imposed.” For this factor, the court concluded that the Guidelines are a “more indicative” measure of offense severity than the statutory maximum penalties. Castello received the statutory maximum sentence – five years’ imprisonment and a $250,000 fine. But the Guideline range based on his actual conduct was far greater than five years, even though the court could not impose it because of the statutory maximum. Accordingly, this factor weighed in favor of full forfeiture.

Finally, Bajakajian invites an analysis of “the nature of the harm caused by” the offense conduct. Castello cashed thousands of checks in excess of $10,000, totaling over $200 million, without filing the required CTRs, and he did so knowingly and willfully. This helped his customers evade taxes, cash fictitious checks, and commit securities fraud. The victims included private parties as well as the federal government. Accordingly, this final factor also weighed in favor of full forfeiture.

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