Response in Opposition by Eric Dean Sheppard — USA v. Sheppard (Dkt. 275, S.D. Fla.)

Record facts

U.S. District Court for the Southern District of Florida · No. 1:22-cr-20290-BB · Doc. 275 · 2024-07-09 · Docket on CourtListener

Full text

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UNITED STATES DISTRICT COURT 
SOUTHERN DISTRICT OF FLORIDA 
 
CASE No. 22-20290-CR-BLOOM 
 
UNITED STATES OF AMERICA, 
 
 
vs. 
 
 
 
 
 
 
 
ERIC DEAN SHEPPARD, 
 
 
 
 
 
 
 
 
 
 
 
Defendant. 
_______________________________/ 
 
DEFENDANT’S RESPONSE TO GOVERNMENT’S AMENDED 
MOTION FOR PRELIMINARY ORDER OF FORFEITURE  
 
Defendant Eric Dean Sheppard, through undersigned counsel, hereby opposes 
the government’s amended motion [DE:255] for preliminary forfeiture order and 
requests that the Court conduct a hearing to address contested issues regarding the 
government’s motion. 
Defendant contests the government’s forfeiture motion which seeks to 
impose, in addition to any restitution order, forfeiture of loan amounts that were 
repaid by Defendant as well as forfeiture regarding an abandoned allegation on 
which the jury did not find any liability by the Defendant.   
 
The government seeks forfeiture as to the face amount of each PPP loan 
attributed to the Defendant, including two loans referenced in the counts of 
conviction (where Defendant was convicted of Counts 5, 7, 8, and 9, all of which 
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relate to conduct occurring on or after February 11, 2021) and a PPP loan that the 
government originally indicted, but then dismissed, which pertains to conduct nearly 
one year earlier, on April 15, 2020.  See DE:255 at 8–9.  The loans at issue are: 
4/15/2020 
PPP loan 
$146,587 - Dismissed count 
Debt forgiven 
3/11/2021 
PPP loan 
$148,397 - Count 7 (convicted) 
Repaid by Defendant 
3/12/2021 
PPP loan 
$148,591 - Count 9 (convicted) 
Repaid by Defendant 
 
 
1. 
Repayment of loans associated with counts of conviction precludes 
forfeiture of the repaid loans.   
 
 
Defendant first objects that his repayment in full of the loans associated with 
the counts of conviction forecloses any forfeiture under the relevant statute.  
Specifically, as to the two loans relating to the counts of conviction—a loan of 
$148,397 on March 11, 2021 and a loan of $148,591 on March 12, 2021—Defendant 
fully repaid both loans prior to sentencing.  Under the express terms of the forfeiture 
statute employed by the grand jury in returning the indictment, 18 U.S.C. § 981, 
because those loans were repaid in full, that repayment must be deducted from the 
forfeiture calculation, leaving no forfeiture to be imposed as to those two loans.  See 
§ 981(a)(2)(C) (“In cases involving fraud in the process of obtaining a loan or 
extension of credit, the court shall allow the claimant a deduction from the forfeiture 
to the extent that the loan was repaid, or the debt was satisfied, without any financial 
loss to the victim.”). 
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The government has acknowledged that if the Court concludes that the 
indicted basis for forfeiture (§ 981) is used, then forfeiture as to the repaid loans is 
not warranted.  However, the government argues in its motion that it is not bound by 
the forfeiture allegations in the indictment and that it is free to add, following the 
trial, a new claim for forfeiture under a different statute, specifically 18 U.S.C. § 
982, which lacks the set-off provision of § 981(a)(2)(C).   
 
As argued in its motion, the government claims it may assert additional 
grounds and statutory bases of forfeiture after trial, because—in the government’s 
view—even an incorrect form of forfeiture notice is satisfactory in federal criminal 
proceedings.  See DE:255 at 4 & n.6 (relying principally on the non-precedential 
decision in United States v. Wall, 285 F. App’x. 675, 684 (11th Cir. 2008), which 
permitted the government to amend a scrivener’s error in the indictment).   In Wall, 
the court concluded that a citation to § 982, rather than § 981 was a scrivener’s error, 
where the fraud did not concern a financial institution and it was clear that 
referencing financial institution fraud rather than the generic fraud charged was 
simply an oversight, and not a decision by the grand jury. 
 
In the present case, unlike Wall, because no financial institution was actually 
financially liable for loan repayment—in that the federal government was merely 
using the banks to pass through federal funding for PPP loans—it cannot be said that 
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the decision to treat the loss as one pertaining not to the banks, but instead to the 
federal government, was a scrivener’s error.    See, e.g., United States v. Esterman, 
135 F. Supp. 2d 917, 919 (N.D. Ill. 2001) (rejecting forfeiture claim where despite 
involvement of bank, there was no intent to harm the bank and no meaningful risk 
of harm to the bank from the fraud scheme; citing cases); accord United States v. 
Grass, 274 F. Supp. 2d 648, 653 (M.D. Pa. 2003) (concluding that the § 982(a)(2)(A) 
term “affecting a financial institution” requires an allegation that the financial 
institution was affected in an adverse manner, rather than merely used as an 
instrumentality of the crime; citing cases). 
 
In the present case, the notion that the banks would have been adversely 
affected by the alleged fraud arises only in the newly filed forfeiture motion.  The 
new claim for forfeiture is thus substantive and was not alleged in the indictment, 
which makes no reference to “financial institution” forfeiture issues.  Rather than a 
scrivener’s error, it appears instead that when the case was indicted, the government 
and the grand jury correctly viewed the federal government, and not bank processors 
of PPP loans, as the victim that was adversely affected. 
 
Adding to this interpretation of the indictment is that the allegations of the 
indictment omit any reference to affecting the interests or assets of any bank.  The 
banks the government now identifies as being affected in some manner by the loans 
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are not even identifiedned in the indictment.  One of the two counts of conviction 
(Count 7) makes this point even clearer by referring to “Bank Processor 2,” thus 
highlighting the role of the bank as processing the loan under the PPP program, 
rather than being financially affected by fraud.  
 
Notice is effective where a mere scrivener’s error is involved.  But prejudice 
and reliance ensue when a substantive alteration of a key punishment allegation of 
the indictment is implicated.  Whether or not the Fifth Amendment required the 
notice in this context is an unresolved question, particularly in light of the Supreme 
Court’s recent holding in Erlinger v. United States, No. 23-370, 2024 WL 3074427 
(U.S. June 21, 2024), that defendants’ Fifth and Sixth Amendment rights are 
implicated by matters affecting maximum sentences, even as to enhancements for 
prior convictions.  The due process requirement of the Fifth Amendment that a 
defendant know what he faces before going to trial creates at least constitutional 
doubt whether the provision of notice that did not alert the Defendant that the 
government was going to seek forfeiture based on a theory of harm to financial 
institutions.   
 
Because the notice issue in this case is substantive and because the 
government’s new claim results not from a scrivener’s error, but rather a change in 
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the exposure the Defendant faces, the Court should decline the government’s 
invitation to amend the forfeiture allegation at this time.   
 
A further constitutional ground warrants limiting the government to the § 981 
forfeiture ground asserted in the indictment.  Where a defendant has fully repaid the 
loan obtained and thus has complied with loan obligations, it is incorrect to treat the 
defendant as being required to forfeit his gain from the transaction, because there 
actually was no gain.  By analogy, if a person rents a car based on a false driver 
license, but returns it timely and pays the amounts owed, even though he has 
committed a fraud, it would be arbitrary in the extreme to order the defendant to 
forfeit the value of the car.  So too here. Imposition of forfeiture for a repaid loan to 
a bank never at risk compels a finding of no forfeitable gain to the Defendant 
consistent with principles of due process and equal protection. 
 
2. 
The April 15, 2020 loan transaction which was originally 
charged, but later dismissed, by the government cannot be 
the basis for a forfeiture order. 
 
 
The government concedes that it dismissed, upon filing a superseding 
indictment, all charges pertaining to an April 15, 2020 PPP loan in the amount of 
$146,587.  The government also seeks restitution for this loan (as it does for the 
loans applicable to counts of conviction).  Whether or not restitution is owed, there 
cannot be a forfeiture order regarding this 2020 loan transaction given its excision 
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from the indictment by the government.  Unlike relevant conduct determinations 
made for sentencing guideline purposes, the forfeiture statutes limit the 
government’s right to seek forfeiture to matters on which there is a count of 
conviction.  There is no count of conviction for the 2020 loan.  And equally 
important, although acquitted conduct may still be employed for guideline purposes, 
it clearly cannot be employed for forfeiture purposes. 
 
In this case, the jury acquitted the Defendant of all loan fraud accusations 
relating to conduct occurring prior to February 2021, including even Count 4, 
pertaining to a transaction in January 2021.  There is no basis for the government, 
on this record of acquittal, to claim that the jury found the Defendant guilty of any 
crimes occurring in 2020.  For that reason, relevant conduct analysis is of no use to 
the government in this context, and forfeiture cannot be awarded as to the dismissed 
count pertaining to the April 15, 2020 transaction. 
 
3. 
The government has represented that it no longer will seek 
forfeiture of loans addressed in dismissed and acquitted 
counts relating to EIDL loans. 
 
 
 At sentencing, this Court excluded from the relevant conduct calculation of 
intended loss the EIDL loans that were previously referenced in the government’s 
forfeiture motion.  See DE:255 at 8–9.  As to Counts 1, 2, and 3 of the indictment 
(relating to an October 2020 loan), the jury acquitted, leaving no basis for forfeiture.  
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Regarding the remaining two EIDL loans (part of the 2020 conduct that the jury 
acquitted across the board), the Court found no relevant conduct basis for loss 
calculation, particularly in light of the acquittal as to all EIDL allegations that had 
not already been dismissed.   
 
The government has therefore agreed that it will not pursue forfeiture as to 
any of the EIDL loans, reducing the government’s forfeiture claim by a total of 
$450,000. 
 
4. 
Additional statutory and constitutional grounds of 
objection to the government’s remaining claim (of 
$443,575). 
 
 
The government correctly observes that the Eleventh Circuit has upheld the 
use of money judgment forfeiture orders even though there is no express statutory 
basis for them.  Defendant nevertheless preserves his objection to the use of money 
judgment forfeiture in the context of this case, and particularly in the context of 
repaid loans and where restitution is ordered for any unpaid loan.   
 
First, money judgment is a form of substitute asset forfeiture.  See Fed. R. 
Crim. P. 32.2(e) (providing for imposition of forfeiture money judgment as 
substitute asset); see also United States v. Waked Hatum, 999 F.3d 1156, 1166 (11th 
Cir. 2020) (“[F]orfeiture money judgment is available because 21 U.S.C. § 853(p) 
permits substitute forfeiture where, as here, a defendant does not retain” the property 
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subject to direct forfeiture.).  But where a repaid loan is concerned, there is no lost 
or dissipated asset, the item or money has simply been returned (as in the car rental 
example). 
 
Thus, even treating money judgment forfeiture as a form of substitute asset 
forfeiture—and Defendant disputes such a reading of the statute and notes that 
certiorari review may still be sought in Waked Hatum as the case remains on appeal 
after remand—there is no substitute asset to forfeit where the loan has been repaid 
and the loaned item returned.  Treating the absconder/dissipator the same as the loan 
repayor makes no coherent or logical sense in this context, whatever value it may 
have in money laundering or other instrumentality cases.  See id.  
Second, denying Defendant the constitutional right to a jury trial and a beyond 
a reasonable doubt proof standard, including as to uncharged conduct, defies the 
Sixth Amendment principles recently reiterated by the Supreme Court in Erlinger, 
such that Defendant preserves this issue dispute the prevailing interpretation of 
Libretti v. United States, 516 U.S. 29 (1995), excising forfeiture from the protection 
of the Sixth Amendment. Id. at 49 (“right to a jury determination of forfeitability is 
merely statutory in origin”). 
 
 
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CONCLUSION 
 
This Court should deny the government’s motion for a preliminary order of 
forfeiture of $443,575.  Alternatively, this Court should reduce the forfeiture amount 
to the amount of the defendant’s actual gain, if any, attributable to any count of 
conviction.  
Respectfully submitted,  
 
 
 
 
 
BLACK SREBNICK  
 
 
 
 
 
201 South Biscayne Boulevard, Suite 1300   
 
 
 
 
 
Miami, Florida 33131 / Tel (305) 371-6421   
 
 
 
 
 
By:  /s Howard Srebnick   
 
 
 
 
 
Howard Srebnick  
 
 
 
 
 
  Florida Bar No. 919063  
 
 
 
 
 
 
O’MELVENY & MYERS 
 
 
 
 
 
Jeffrey L. Fisher (admitted pro hac vice) 
 
 
 
 
 
Jason Zarrow (admitted pro hac vice) 
 
 
 
 
 
 
 
 
 
 
 
NELSON MULLINS 
Jayne C. Weintraub 
  Florida Bar No. 320382 
Jonathan Etra  
  Florida Bar No. 686905 
Christopher Cavallo  
  Florida Bar No. 0092305 
 
Case 1:22-cr-20290-BB   Document 275   Entered on FLSD Docket 07/09/2024   Page 10 of 10

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