14‐1452‐cr(L) United States v. Tanaka UNITED STATES COURT OF APPEALS FOR THE SECOND CIRCUIT

SUMMARY ORDER

RULINGS BY SUMMARY ORDER DO NOT HAVE PRECEDENTIAL EFFECT. CITATION TO A SUMMARY ORDER FILED ON OR AFTER JANUARY 1, 2007 IS PERMITTED AND IS GOVERNED BY FEDERAL RULE OF APPELLATE PROCEDURE 32.1 AND THIS COURTʹS LOCAL RULE 32.1.1. WHEN CITING A SUMMARY ORDER IN A DOCUMENT FILED WITH THIS COURT, A PARTY MUST CITE EITHER THE FEDERAL APPENDIX OR AN ELECTRONIC DATABASE (WITH THE NOTATION ʺSUMMARY ORDERʺ). A PARTY CITING A SUMMARY ORDER MUST SERVE A COPY OF IT ON ANY PARTY NOT REPRESENTED BY COUNSEL.

At a stated term of the United States Court of Appeals for the Second Circuit, held at the Thurgood Marshall United States Courthouse, 40 Foley Square, in the City of New York, on the 23rd day of March, two thousand sixteen.

PRESENT: RALPH K. WINTER, DENNY CHIN, SUSAN L. CARNEY, Circuit Judges.

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UNITED STATES OF AMERICA, Appellee,

v. 14‐1452‐cr(L) 14‐1453‐cr(Con) GARY ALAN TANAKA, ALBERTO WILLIAM VILAR, AKA Albert Vilar, Defendants‐Appellants,

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FOR APPELLEE UNITED STATES OF JOSHUA A. NAFTALIS, Rebekah A. AMERICA: Donaleski, Karl Metzner, Assistant United States Attorneys, for Preet Bharara, United States Attorney for the Southern District of New York, New York, New York. FOR DEFENDANT‐APPELLANT BARRY D. LEIWANT, Appeals Bureau, GARY ALAN TANAKA: Federal Defenders of New York, Inc., New York, New York.

FOR DEFENDANT‐APPELLANT MICHAEL K. BACHRACH, New York, New ALBERTO WILLIAM VILAR: York.

Appeal from the United States District Court for the Southern District of

New York (Sullivan, J.).

UPON DUE CONSIDERATION, IT IS HEREBY ORDERED,

ADJUDGED, AND DECREED that the judgments of the district court are AFFIRMED,

except that the fines imposed are VACATED, and the case is REMANDED.

This case returns to us following a resentencing conducted pursuant to

our remand order in United States v. Vilar,

(2d Cir. 2013). Defendants‐

appellants Gary Alan Tanaka and Alberto William Vilar were convicted, following a

jury trial, of various offenses relating to securities fraud. In 2010, the district court

sentenced Tanaka to 60 monthsʹ imprisonment, Vilar to 108 monthsʹ imprisonment, and

both to a $25,000 fine. On April 24, 2014, the district court resentenced Tanaka to 72

monthsʹ imprisonment, Vilar to 120 monthsʹ imprisonment, and both to a $10 million

fine. The district court also imposed forfeiture and restitution against both defendants

totaling over $47 million, to be paid jointly and severally. Both defendants now appeal

that resentencing. We assume the partiesʹ familiarity with the underlying facts and

‐ 2 ‐ procedural history of the case, much of which is recited in our opinion in Vilar,

, as well as the issues on appeal.

We address in turn defendantsʹ claims that (1) the district court was

vindictive in the resentencing and (2) the fines were unreasonable.

1. Judicial Vindictiveness

Tanaka and Vilar first contend that the district court violated their due

process rights when it increased each of their terms of imprisonment by 12 months and

their fines from $25,000 to $10 million.

The Due Process Clause ʺrequires that vindictiveness against a defendant

for having successfully attacked his first conviction must play no part in the sentence he

receives after a new trial.ʺ North Carolina v. Pearce,

(1969). The

Supreme Court has since reiterated that ʺ[t]o punish a person because he has done what

the law plainly allows him to do is a due process violation ʹof the most basic sort.ʹʺ

United States v. Goodwin,

(1982) (quoting Bordenkircher v. Hayes,

(1978)); see Bordenkircher,

(ʺ[F]or an agent of the State to pursue a

course of action whose objective is to penalize a personʹs reliance on his legal rights is

ʹpatently unconstitutional.ʹʺ (quoting Chaffin v. Stynchcombe,

, 33 n.20 (1973))).

If there is a reasonable likelihood that the district court punished the

defendant for successfully appealing or otherwise exercising his legal rights, we

presume that the sentence is vindictive. See United States v. Singletary,

, 76

‐ 3 ‐ (2d Cir. 2006). That presumption may be rebutted, however, ʺbased upon objective

information concerning identifiable conductʺ that ʺaffirmativelyʺ appears in the record.

Pearce,

; see Singletary,

.

There is ʺno reasonable likelihood of vindictiveness where the sentencing

court ʹpredicated its increased sentence on events which occurred subsequent to the

original sentencing proceeding.ʹʺ United States v. Weingarten,

(2d Cir.

2013) (quoting United States v. Bryce,

(2d Cir. 2002)). Such events may

include a defendantʹs ʺanti‐social conduct following the initial sentence.ʺ Bryce,

; accord United States v. Coke,

(2d Cir. 1968) (en banc). If no

reasonable likelihood of vindictiveness exists, ʺthe defendant must affirmatively prove

actual vindictiveness.ʺ Wasman v. United States,

(1984); see, e.g.,

Weingarten,

.

Tanaka and Vilar argue that the district court sentenced them on the basis

of their successful appeal, see Vilar,

, and their defense of a related civil

enforcement action brought by the government, over which this district judge also

presided, see SEC v. Amerindo Inv. Advisors Inc., No. 05 Civ. 5231 (S.D.N.Y.). Of course, if

the district court in fact sentenced Tanaka and Vilar on either of those bases, their due

process rights would have been violated. See Goodwin,

.

On this record, however, we find that there was no reasonable likelihood

of vindictiveness. As the district court made clear at resentencing:

‐ 4 ‐ I certainly canʹt hold it against the defendants that they appealed and I certainly donʹt. They have ‐‐ you have the right to appeal. You have the right to defend yourselves in civil cases. You have the right to protect your legal rights. Of course you do.

Vilar App. 312. It then went on to conclude that Tanaka and Vilar had engaged in ʺanti‐

social conduct following the initial sentence.ʺ

Notably, at the initial sentencing, the district court imposed sentences well

below the Guidelines range of 210 to 262 months, in part because it concluded, based on

defendantsʹ affirmations, that they wanted to help their investors be repaid. Vilar told

the district court, ʺI donʹt know where the government gets the idea that I am not

responsible or remorseful.ʺ Feb. 5, 2010 Sent. Tr. 57. He went on to explain that he

ʺdeeply regret[ted] any inconvenience that our 14,000 clients might have sufferedʺ and

that ʺ[f]ortunately there are only five victims, and [he] would be 95 percent confident

that they will be paid and that they will not have lost anything.ʺ Id. at 60. Likewise,

Tanakaʹs attorney described how, post‐conviction, Tanaka had engaged others to help

find and value assets to repay investors and ʺspearheaded the effort to get the Mayers [a

family of investors] paid.ʺ Id. at 108. Tanaka also apologized ‐‐ ʺI am sorry for what has

happened.ʺ Id. at 144. He attested that his ʺobjective mind is to restore [the] clientsʹ

capital,ʺ that he ʺwould like to get into trying my best to restore client assets,ʺ and that

he would ʺhope [he] get[s] the opportunity in the near term again to restore these client

assets, because [he] do[es] feel deeply responsible.ʺ Id. at 141‐42, 144.

‐ 5 ‐ At resentencing, the district court discussed at length how, in stark

contrast, defendantsʹ post‐sentencing conduct ʺseemed designed at every step to slow

down the distribution process and to punish the investors.ʺ Vilar App. 313. The district

court noted instances where the defendants obstructed or refused to consent to

distributions, opposed the receiver, and refused hardship payouts to certain victims

who were in dire financial straits.1 Further, the district court referenced two letters that

Tanaka and Vilar sent to investors where they claimed that they ʺdid not perpetrate a

ʹfraud,ʹ to leave hapless ʹvictimsʹ in [their] wake.ʺ Id. at 332. The letters also incited

investors to oppose the receiver and requested that, ʺ[i]n any communication with [the

receiver], [they should] ask him directlyʺ why he was not taking certain actions. Id. at

335. In the district courtʹs words, after the initial sentencing, Tanaka and Vilar

ʺreneg[ed] [on] the promisesʺ they had made then to obtain lighter sentences. Id. at 315.

In the meantime, two victims had passed away between the initial sentencing and

resentencing, still awaiting their money.

In light of these changed circumstances and this additional conduct

following the initial sentencing, we do not apply a presumption of vindictiveness

because there is no reasonable likelihood of vindictiveness on the part of the district

court. In the absence of the presumption, and in light of Tanaka and Vilarʹs failure to

1 Though the district court referenced, in passing, an email sent by Tanaka, it is clear from the record that the district court was not improperly using that email to punish Vilar for Tanakaʹs conduct, but referencing how that email was indicative of conduct attributable to both.

‐ 6 ‐ affirmatively prove actual vindictiveness, we reject the claim of vindictive resentencing.

See Weingarten,

.

2. Reasonableness of the Fines

Tanaka and Vilar also challenge the $10 million fine imposed on each of

them. We review all aspects of a sentence, including criminal fines, for reasonableness

under a ʺdeferential abuse‐of‐discretion standard.ʺ United States v. Aldeen,

(2d Cir. 2015) (quoting Gall v. United States,

(2007)). Because Tanaka

and Vilar failed to object to the fine below, we review for plain error. See United States v.

Pfaff,

(2d Cir. 2010).

Guidelines § 5E1.2(a) directs courts to ʺimpose a fine in all cases, except

where the defendant establishes that he is unable to pay and is not likely to become able

to pay any fine.ʺ ʺIf the defendant is indigent, a fine should not be imposed absent

evidence in the record that he will have the earning capacity to pay the fine after release

from prison.ʺ United States v. Rivera,

(2d Cir. 1992). Fines may not be

imposed on the ʺmere suspicion that the defendant has funds,ʺ United States v. Rivera,

(2d Cir. 1994), or ʺwhen the possibility of a future ability to pay is based

merely on chance,ʺ United States v. Wong,

(2d Cir. 1994) (quoting

United States v. Seale,

(3d Cir. 1994)). It is ʺordinarily an abuse of

discretion to impose a fine that exceeds a defendantʹs ability to payʺ as established by

evidence in the record. United States v. Salameh,

(2d Cir. 2001).

‐ 7 ‐ We conclude that the fines must be vacated. First, the government

concedes that even on plain error review Tanakaʹs fine should be vacated as it exceeds

the statutory maximum. See

(b) (specifying maximum). Second, the

record of the resentencing proceeding demonstrates that the district court imposed a

$10 million fine on each defendant based apparently on the possibility of future assets.

At the time, Tanaka and Vilar were indigent defendants of over 70 years of age who

were represented by court‐appointed attorneys. The district court stated that ʺthe

residual amount in the Amerindo accounts which [Tanaka and Vilar] claim could be

worth millions or tens of millions of dollars and that may, in fact, be true.ʺ Vilar App. 319

(emphases added). The district court also commented that ʺthose accounts have not yet

been fully valued and so there may be a remainder.ʺ

(emphasis added).

Though the government did not ask for an increased fine below, at oral

argument it pointed to a January 27, 2016 motion by the receiver suggesting that there is

over $38 million left in the receivership account. See No. 05 Civ. 5231, ECF No. 584, at 3.

Still, much remains unclear. It is not clear whether the district court found on then‐

available evidence in the record that money would in fact remain, whether Tanaka and

Vilar were entitled to any of that money, and whether Tanaka and Vilar could still

afford $10 million fines after satisfying their other criminal and civil repayment

obligations. These obligations included: for Tanaka and Vilar, criminal forfeiture of

$20,578,855.28 and restitution of $26,637,502.69, with joint and several liability; for

‐ 8 ‐ Tanaka individually, civil disgorgement of $13,118,693.96 and a civil penalty of

$10,000,000; and for Vilar individually, civil disgorgement of $18,572,902.02 and a civil

penalty of $10,000,000. See Vilar App. 254‐59; Suppl. App. 15‐20; No. 05 Civ. 5231, ECF

Nos. 433, 434 (also imposing some joint and several liability for the individual

disgorgement obligations). The record is not at all clear that the defendants are or are

likely to become able to pay the $10 million criminal fines. Accordingly, in the interest

of fairness, we vacate the criminal fines as to both Tanaka and Vilar and direct the

district court to reconsider those fines in light of the defendantsʹ actual ability to pay

and to take into account all the aforementioned obligations, including civil obligations.

We have reviewed defendantsʹ remaining arguments and conclude they

are without merit. Accordingly, we AFFIRM the judgments of the district court, except

that we VACATE the fines imposed and REMAND the case for reconsideration of those

fines.

FOR THE COURT: Catherine OʹHagan Wolfe, Clerk

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