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A federal appeals court panel on Tuesday heard a case that tests the limits of the government’s ability to take property of businesses convicted of crimes. The defendant appealing in the case is an Atlanta jewelry business, convicted of money laundering and violation of federal requirements to report certain transactions. The business, Chaplin’s Inc., has been subjected to a forfeiture order and monetary penalties of nearly $2 million, an amount its lawyer says is unconstitutionally high given that it relates to the company’s failure to report a $22,000 sale of a set of wedding rings to an undercover agent posing as a drug dealer. The company’s lawyer, Wilmer “Buddy” Parker III of Atlanta’s Maloy Jenkins Parker, argues that the forfeiture order violates the excessive fine clause of the Eighth Amendment. Federal prosecutors contend that the harm caused by the business’ crime is serious. Federal law requires businesses to report cash transactions in amounts of more than $10,000 to the Internal Revenue Service using what’s known as a Form 8300. Prosecutors say that for years Toros Seher assisted drug dealers in laundering tainted funds by concealing that money among funds generated by another jewelry retailer where Seher previously worked, Gold & Diamond Depot in Greenbriar Mall. Prosecutors say Seher continued his practices when he came to work for Chaplin’s, a company owned by Seher’s brother and located in downtown Atlanta, and Chaplin’s Midtown, a separate company with a store at Atlantic Station that was co-owned by Toros Seher and another individual. They say that in 2005 a wife of a major Atlanta drug dealer, acting at law enforcement’s request, arranged a meeting at Chaplin’s among herself, Toros Seher and an undercover IRS agent at which the agent selected a wedding set for a price of $22,000. Prosecutors say Seher suggested three different people come back on three separate occasions with parts of the $22,000 price, a practice the agent understood to be designed to avoid filing a Form 8300. The agent later returned to Chaplin’s and gave Seher $3,000 in cash and, on another day, $19,000 in cash, for a different $22,000 wedding set selected when the original set couldn’t be found, prosecutors say. The agent allegedly told Seher he “can’t have nothing in my name,” with Seher responding, “No, don’t worry,” and the agent referred to “the game” and how “hot” it was. At a jury trial in February 2007, U.S. District Judge Timothy C. Batten Sr. dismissed several charges; Seher, Chaplin’s and Chaplin’s Midtown each pleaded guilty to at least one charge; and a jury found them guilty of remaining counts. An 11th Circuit panel—Stanley F. Birch Jr., William H. Pryor Jr., and a district judge visiting from Nebraska—in March 2009 upheld the convictions as well as various aspects of sentences handed down by Batten, including a six-year prison sentence for Seher. But the panel sent the case back to Batten to reconsider various rulings, including a forfeiture order for all inventories and bank accounts of Chaplin’s and Chaplin’s Midtown. The judges said Batten hadn’t addressed the companies’ arguments that the forfeiture order violated the 8th Amendment. On remand, prosecutors no longer sought the forfeiture of money the government had seized from a Chaplin’s bank account, but otherwise Batten found the earlier forfeiture order to be constitutional. Parker explained that Chaplin’s Midtown didn’t appeal the forfeiture order again as it had filed for bankruptcy, but the surviving Chaplin’s appealed again on the Eighth Amendment issue. Its brief says the district court valued the Chaplin’s inventory at $1,877,262 and contends that an additional fine and money judgment bring the total to $1,999,262. Parker is arguing in the appeal that the nearly $2 million forfeiture is excessive when measured against fines allowed by relevant federal statutes. Chaplin’s was found guilty of violating 18 U.S.C. § 1956, a money laundering statute that would allow a $500,000 fine, and 31 U.S.C. § 5324, a reporting statute that would allow for a $1 million fine. Parker argues that 31 U.S.C. § 5331, a reporting statute which carries a $500,000 maximum fine, should be the guidepost instead of § 5324, because the latter statute was intended principally by Congress to apply to individuals, not corporate entities. In their appellate brief and letters to the 11th Circuit, federal prosecutors have acknowledged making misstatements to Batten and the appeals court. Prosecutors had said in an appellate brief that by February 2002, Chaplin’s corporate filings had listed Toros Seher as the company’s secretary and that Chaplin’s filings from 2005 listed Seher as its chief financial officer. But in a recent letter to the court, prosecutors said Chaplin’s 2005 corporate filings did not list Seher as a CFO or any other officer. At the beginning of Tuesday’s 11th Circuit arguments in the case, Parker began by delving into the government’s conceded errors. “He was a mere employee,” Parker said of Seher. Senior Judge James C. Hill asked Parker why Seher’s employment status was important, and Parker acknowledged that it “actually has no legal import.” “That’s interesting but of no moment,” Hill observed. Parker turned to the meat of his 8th Amendment argument, saying the forfeiture of $1.8 million worth of inventory was based solely on the $22,000 transaction with the undercover agent. He argued that § 5331 was the appropriate statute to serve as the court’s guidepost in considering whether the forfeiture was excessive. “Your problem is you pled guilty to the other one,” Judge Gerald B. Tjoflat retorted. Tjoflat authored a leading precedent on the issue, United States v. Browne, 505 F.3d 1229 (11th Cir. 2007), which says courts should determine whether a forfeiture is unconstitutionally excessive by examining three factors: 1) whether the defendant falls into the class of persons at whom the criminal statute was principally directed; 2) other penalties authorized by the legislature or the sentencing commission; and 3) the harm caused by the defendant. Appearing for the government, Assistant U.S. Attorney Jenny R. Turner began by acknowledging mistakes she had referenced in a Dec. 13 letter to the court. “I apologize to the court and defense counsel,” said Turner. “But I think we should talk about the law.” Turner argued that it was appropriate for the district court to consider “the larger picture of what the defendant did in this case,” but she contended the forfeiture still was within the constitutional bounds of proportionality even if only the $22,000 transaction with the undercover agent were considered. “The harm was huge. This was not a one-time isolated transaction,” Turner said, saying there were multiple contacts with the undercover agent. “That one $22,000 transaction had many, many facts leading up to it.” The judges didn’t take Turner to task for the government’s admitted mistakes, but Tjoflat quizzed her on her legal argument. “Suppose the inventory had been $5 million,” Tjoflat posed as a hypothetical. “Take it all?” Turner said she thought that would be allowed, but Tjoflat upped the ante. “$10 million?” he asked. The prosecutor said that might be pushing it. “I need my calculator,” she said. The third judge on the panel was a senior 9th Circuit judge sitting by designation, Arthur R. Alarcón. At the beginning of Tuesday’s court session, Tjoflat, 81, noted that he, Alarcón, 85, and Hill, 86, altogether had 109 years of experience on the bench. The case is United States v. Chaplin’s, No. 10-10832. Staff Reporter Alyson M. Palmer can be reached at [email protected]

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