Free Response to Motion - District Court of Colorado - Colorado

Case 1:04-cr-00103-REB

Document 1375

Filed 09/17/2007

Page 1 of 6

IN THE UNITED STATES DISTRICT COURT FOR THE DISTRICT OF COLORADO

Civil Action No. 04-cr-00103-REB UNITED STATES OF AMERICA, Plaintiff, v. 1. NORMAN SCHMIDT, Defendants.

DEFENDANT NORMAN SCHMIDT'S RESPONSE TO GOVERNMENT'S MOTION FOR ORDER OF FORFEITURE

Defendant, Norman Schmidt, by his court-appointed counsel, Peter R. Bornstein and Thomas J. Hammond, responds to the government's Motion for an Order of Forfeiture and tenders his objections as follows. 1. The government has filed a Motion for an Order of Forfeiture pursuant to

28 U.S.C. § 2461(c) and Rule 32.2(b) of the Federal Rules of Criminal Procedure (Doc. 1359). They seek a forfeiture order in the amount of $55,841,066.19. 2. Defendant objects to this requested order of forfeiture on several separate

and independent grounds. 3. The government has already obtained forfeiture of all of Norman Schmidt's

assets. The government seized all of his bank accounts, whether in his name or in the name of a company where he had signature authority. This seizure was in excess of $15 million. The money has been forfeited and given to claimants who have alleged that they are victims of the scheme to defraud alleged in the criminal indictment.

Case 1:04-cr-00103-REB

Document 1375

Filed 09/17/2007

Page 2 of 6

4.

The government has seized and forfeited Mr. Schmidt's assets in the form

of personal property, including the race cars and racing team property. This was sold and the money proceeds distributed to claimants who have alleged that they are victims of the scheme to defraud alleged in the indictment. 5. The government has seized all of Mr. Schmidt's real property, which

consisted of his corporate interest in the Redstone Castle Properties. The government sold these properties at auction, raised millions of dollars, and distributed the proceeds to claimants alleged to be victims of the scheme to defraud as alleged in the criminal indictment. Some of the money was sent to a Florida trustee, who had no right to request the money and should not have received it. 6. Having seized Mr. Schmidt's bank accounts, real property, and personal

property, they obtained forfeiture of over $22 million. Mr. Schmidt has been in jail continually for the past three years and has no alternate assets which could be substituted. The government is asking the Court to sentence him to life imprisonment so that he will never have any assets. 7. In order to obtain a fourth or fifth forfeiture order (as this new motion should

be labeled), the Government must first identify property "involved in" or "traceable to" the scheme to defraud. United States v. Bornfield, 145 F.3d 1123, 1133-1135 (10th Cir. 1998). If such property exists, a forfeiture order may enter. If such property existed but, due to an act or omission if the defendant, no longer is reachable, a substitute asset order may enter if certain conditions are met. Bornfield at 1136. In this case the government cannot meet its burden as to step two.

2

Case 1:04-cr-00103-REB

Document 1375

Filed 09/17/2007

Page 3 of 6

8.

Therefore, the request for an Order of Forfeiture is an exercise in futility

whose only purpose is to allow the U.S. Attorney's Office to issue a press release. Although the government claims entitlement to a "general" in personum money judgment, the Tenth Circuit has made clear that such an in personum money judgment is limited to property derived from the criminal acts or substitute property. It is not the same as an in personum money judgment for a civil debt. A criminal forfeiture begins as a punishment and ends as a punishment for criminal activity and Congress has not authorized turning it into an ordinary judgment for a civil debt owed to the United States Government. United States v. Jarvis, 06-2264, fn 1 and fn 2, (10th Cir. 8-28-2007), and 21 U.S.C. § 853(a) and (p). 9. Any forfeiture judgment entered by this Court will be in conflict with any

restitution order entered by this Court. Anticipating that this Court will enter a restitution order at the time of sentencing, such restitution order should and ought to take precedence over any forfeiture order. Since the restitution order will be in the millions of dollars and Mr. Schmidt's income from prison labor is minimal at best, this Court should decline to issue a forfeiture order in favor of a restitution order as a matter of public policy. 10. Mr. Schmidt disputes the number of $55,841,066.19. First, he claims that at

least $11 million of that number represents the same dollars counted twice. Second, over $22 million from that original number has already been forfeited and the government is seeking to forfeit the same money twice. Therefore, at least (and maybe more) than $33 million of the $55 million has already been counted and forfeited.

3

Case 1:04-cr-00103-REB

Document 1375

Filed 09/17/2007

Page 4 of 6

11.

The request to forfeit $55 million violates the excessive fine clause of the

Eighth Amendment to the Constitution as grossly disproportional to the gravity of the offense in light of the previous forfeitures already imposed by the Court. United States v. Bajakajian, 524 U.S. 321 (1998). 12. Any forfeiture judgment should specifically provide that after-acquired

property, that is property acquired after the judgment has entered, is not subject to seizure by the government in an effort to reduce or pay down such judgment. After-acquired property, such as that earned in prison labor, does not meet the statutory requirement that forfeiture shall be for property or assets traceable to the criminal activity. Respectfully submitted this 147th day of September, 2007. THE LAW OFFICES OF PETER R. BORNSTEIN

s/ Peter R. Bornstein Peter R. Bornstein The Law Offices of Peter R. Bornstein 1600 Broadway, Suite 2300 Denver, CO 80202

4

Case 1:04-cr-00103-REB

Document 1375

Filed 09/17/2007

Page 5 of 6

THOMAS J. HAMMOND , P.C. s/ Thomas J. Hammond Thomas J. Hammond Thomas J. Hammond, P.C. 1544 Race Street Denver, CO 80206 Attorneys for Defendant Norman Schmidt

5

Case 1:04-cr-00103-REB

Document 1375

Filed 09/17/2007

Page 6 of 6

CERTIFICATE OF SERVICE (CM/ECF) I hereby certify that on this 147th day of September, 2007, I electronically filed the foregoing NORMAN SCHMIDT'S RESPONSE TO GOVERNMENT'S MOTION FOR ORDER OF FORFEITURE with the Clerk of the Court using the CM/ECF system which will send notification of such filing to the following e-mail addresses: Matthew T. Kirsch, Esq. Wyatt B. Angelo, Esq. Assistant U.S. Attorneys [email protected] [email protected] [email protected], [email protected] [email protected] Ronald Gainor, Esq. [email protected] Thomas E. Goodreid, Esq. [email protected] Thomas J. Hammond, Esq. [email protected] Declan J. O'Donnell, Esq. [email protected] Mitchell Baker, Esq. [email protected] Richard K. Kornfeld [email protected] Richard N. Stuckey [email protected]

s/ Heather Bolton Heather Bolton, Legal Assistant

6