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Forfeiture: A Primer on Proceeds

By Gary Stein

The U.S. Court of Appeals for the Second Circuit has become the second court of appeals to reject the government's broad interpretation of the statute defining “proceeds” for purposes of federal forfeiture proceedings. Agreeing with the Tenth Circuit, the Second Circuit held in a pair of securities fraud cases last month that the defendants could only be ordered to forfeit the net profits they received, not the gross revenues generated by the offense. United States v. Contorinis, ___ F.3d ___, 2012 WL 3538270 (2d Cir. Aug. 17, 2012); United States v. Mahaffy, ___ F.3d ___, 2012 WL 3125209 (2d Cir. Aug. 2, 2012).

The Second Circuit's decisions furnish an occasion to review the state of the “proceeds” statute, 18 U.S.C. ' 981(a)(2), a dozen years after its enactment as part of the Civil Asset Forfeiture Reform Act of 2000 (CAFRA). As the Supreme Court has observed, “proceeds” is an inherently ambiguous word. United States v. Santos, 553 U.S. 507, 511 (2008). While ' 981(a)(2) presumably was intended to limit that ambiguity, Congress' somewhat unusual choice of wording has instead spawned a host of interpretive difficulties, which have divided courts and done little to clarify what “proceeds” means in a particular case.

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