Appeal from the United States District Court for the District of Oregon Michael R. Hogan, District Judge, Presiding, D.C. No. 6:05-cr-60140-HO.
The opinion of the court was delivered by: O'scannlain, Circuit Judge
Argued and Submitted October 5, 2009 -- Portland, Oregon
Before: Diarmuid F. O'Scannlain and N. Randy Smith, Circuit Judges, and Charles Wolle,*fn1 Senior District Judge.
We consider whether the estate of a criminal defendant who dies pending appeal of his fraud conviction must continue to pay restitution to victims.
Michael Rich operated Pac Equities, a real estate investment firm. As president of the firm, he solicited investors with promises of high annual returns and low loan-to-value ratios, touting his prior successes. Unfortunately, Pac Equities was a Ponzi scheme. Over the course of several years, Rich and Pac Equities defrauded over 300 individuals of approximately $16 million. A grand jury charged Rich and co-defendant Pac Equities in a twenty-seven count superseding indictment with securities fraud, bank fraud, wire fraud, mail fraud, money laundering, obstruction of justice, and filing a false tax return.
After indictment, Rich violated his pre-trial release conditions by spending over $600,000, part of it in a Las Vegas casino. He subsequently agreed to the appointment of a temporary receiver both to preserve the assets held by or seized from the defendants and to distribute them to victims of his scheme. The magistrate judge, the government prosecutor, and the defense counsel all signed the temporary receivership stipulated order, dated March 14, 2006, over 18 months prior to the trial.
A few months later, the temporary receivership was converted to a permanent receivership through a permanent receivership stipulated order dated October 24, 2006 ("Receivership Order") signed by counsel for both parties and the magistrate judge. Subsequent to his permanent appointment, the receiver began recovering and disposing of property. By April 2, 2007, approximately seven months before Rich's trial, the receiver had returned nearly $3 million of seized assets to victims.
After a ten-day trial, a jury found Rich guilty of twenty-six of the twenty-seven counts of the superseding indictment.*fn2 It also returned special forfeiture verdicts finding that all the property described in the superseding indictment derived from the fraudulent scheme, and thus was forfeitable. Three months later, after the trial but before sentencing, the permanent receiver returned an additional $3 million to victims from the seized assets for a total of $5,818,009.55.
On May 7, 2008, the district judge sentenced Rich to a 236-month term of imprisonment.*fn3 It also ordered Rich to pay a special fee assessment of $2,400, or $100 for each count on which he was convicted. Most importantly for our purposes, the court ordered Rich and Pac Equities, jointly and severally, to pay restitution of over $10 million dollars ("Restitution Order"), the amount of the loss to investors remaining after deducting funds already returned to victims or held by the Receiver.
Rich timely appealed on May 9, 2008. But on June 2, 2008, before his appeal could be heard, Rich passed away. His counsel subsequently moved to abate and to dismiss the appeal and all criminal proceedings, which the government opposed. A motions panel of this court denied the motions "without prejudice to renewing the arguments in the merits briefs."
 Rich now challenges the denial of his motions to abate the conviction and all criminal proceedings. There is no doubt that "death pending appeal of a criminal conviction abates not only the appeal but all proceedings in the prosecution from its inception." United States v. Oberlin, 718 F.2d 894, 895 (9th Cir. 1983) (citing Durham v. United States, 401 U.S. 481 (1971) (per curiam)). This principle, called the rule of abatement ab initio, prevents, among other things, recovery against the estate of a fine imposed as part of the conviction and sentence and use of an abated conviction against the estate in related civil litigation. The rationale for abatement ab initio is that "the interests of justice ordinarily require that [the deceased] not stand convicted without resolution of the merits of his appeal." Oberlin, 718 F.2d at 896 (quoting United States v. Moehlenkamp, 557 F.2d 126, 128 (7th Cir. 1977)). Thus, in our case, there is no doubt that Rich's conviction and any outstanding fines must be abated, and that his indictment must be dismissed.*fn4
But, Rich also argues that the Restitution Order for $10 million should also be abated.*fn5 In Rich's view, abatement of the Order will not only eliminate requirements of future payments, but also will result in the return of all the property titled in his name that is currently in the possession of the receiver and of amounts previously returned to victims pursuant to the Restitution Order. The government strenuously objects, responding that the Restitution Order should not abate and that, even if it does, moneys the receiver currently possesses or has already disbursed should not be refunded.
As the foregoing suggests, the parties' contentions are muddied by the coexistence of a pre-conviction Receivership Order and a post-conviction Restitution Order. For example, Rich refers to moneys that already have been paid pursuant to the Restitution Order. But there are no such moneys. The only moneys that already have been paid to victims were those disbursed by the receivership, but those distributions occurred prior to the sentencing when there was no Restitution Order. Rich could not have paid moneys to victims pursuant to a Restitution Order that did not exist.
Because of this confusion, we must examine the nature of the interaction of the Receivership Order and the Restitution Order and then address the ...