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A defendant may not have his sentence enhanced because of his wife’s failure to surrender alleged criminal proceeds that are the subject of a forfeiture action, the 2nd U.S. Circuit Court of Appeals has ruled. The appellate court reversed the decision of federal Judge John S. Martin of the U.S. District Court for the Southern District of New York, who had tacked 10 years onto the prison sentence of convicted pyramid scheme operator Patrick Bennett after the judge became convinced that Gwen Bennett was helping her husband hide assets. The court then remanded for resentencing in United States v. Bennett, 00-1330. Mr. Bennett was convicted in two different trials of a series of offenses, including money laundering and fraud, for using his photocopier leasing business to fleece investors. The jury at his second trial also returned a forfeiture verdict of $109 million. The federal sentencing guidelines called for Mr. Bennett to be sentenced to somewhere between 188 to 235 months in prison, an upper limit of nearly 20 years. During the first of a series of hearings on the sentence, Judge Martin said “it was very important that every dollar of money that [Bennett] and his family had taken from investors in this case be repaid.” At a second hearing, Martin found some of the assets placed in the name of Mrs. Bennett were fraud proceeds, such as the family home and interests the couple held in a racetrack and hotel. He told the couple that he would depart from the guidelines upward and sentence Mr. Bennett to 30 years in prison if the assets were not returned. Martin also granted the government’s motion for an order requiring Mr. Bennett to forfeit $109 million and, later, issued an amended order directing the forfeiture of Mr. Bennett’s interests in the family home as well as the racetrack and hotel. STATUTORY REMEDY On the appeal, the 2nd Circuit upheld Mr. Bennett’s conviction, but said it found “very little precedent,” bearing on the issue of whether Bennett’s sentence could depend on his wife’s actions. “It is unusual for a sentencing judge to select a presumptive sentence and then state that the sentence will be increased if some action the judge deems appropriate is not taken,” Senior Judge Jon O. Newman said. “It is even more unusual to use the threat of an increased sentence to compel action by someone other than the defendant.” But the court said it did not need to explore the authority of a judge’s power to use the threat of an increased sentence to compel a defendant or third party to act, because “in this case the use of such power conflicts with the statutory remedy that Congress has established to recapture the proceeds of various unlawful activities, including money laundering.” That remedy, the court said, is an action to recapture proceeds in the hands of a third party, “subject to the third party’s opportunity to establish a right of ownership superior to the Government’s or a status as a bone fide purchaser reasonably without cause to believe that the property was subject to forfeiture.” Here, Judge Newman said, threatening Bennett with additional prison time if his wife refused to surrender property she claims is her own would “undermine the statutory right accorded her by the forfeiture statute.” Mrs. Bennett was in the process of appealing the forfeiture order for the family home, he said, and a decision in that case will determine who has the right to that property — the government or Mrs. Bennett. LEGITIMATE OBJECTIVE “The 10-year sentencing enhancement was designed to cause her to surrender her statutory rights (whatever their ultimate merit), and the impermissibility of imposing punishment for that purpose is not avoided simply because Mrs. Bennett stood her ground and refused to accept the sentencing judge’s offer not to enhance her husband’s sentence if she capitulated,” Newman said. In remanding the case for resentencing, Newman said that Martin can consider, “apart from Mrs. Bennett’s refusal to surrender the properties, the defendant’s own acts of concealment or any other factors” that might warrant a departure above the 20-year sentence. “We fully understand Judge Martin’s concern to aid the victims of Bennett’s crimes,” Newman said, in closing. “Despite the legitimacy of these objectives, they may not be achieved by the threat of added punishment for Bennett unless his wife surrenders her statutory right to contest the forfeiture of properties that are at least nominally hers.” Judge Jose A. Cabranes and Judge Alvin W. Thompson of the U.S. District Court for the District of Connecticut, sitting by designation, joined in the opinion. Paul E. Wagner and Michael D. Pinnisi of Brown, Pinnisi & Michaels in Ithaca, N.Y., represented Patrick Bennett. Assistant U.S. Attorneys Patrick J. Smith, Richard D. Owens, John P. Collins and David Raymond Lewis represented the government.

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