In 2010, a federal jury in the Eastern District of New York convicted body-armor tycoon David H. Brooks of multiple counts of conspiracy, insider trading, fraud, and obstruction of justice for his role in a $200 million scheme to enrich himself from company coffers. Brooks was the founder and former chief executive of DHB Industries, the leading supplier of bulletproof vests to police departments and the U.S. military. Brooks later pleaded guilty to associated charges of conspiracy to defraud the IRS and filing false income tax returns that had been severed from the rest of the case. While he appealed the result of his jury trial, he did not appeal the tax fraud convictions (pursuant to the terms of a plea agreement). Brooks died in prison while his appeal was pending, forcing the Second Circuit to revisit an obscure area of law to decide what aspects of his convictions, if anything, survived his death. Ultimately, Brooks’s death in prison led to the abatement of his trial convictions, and with that abatement, the erasure of significant restitution obligations that Brooks otherwise would have owed.

Background

The Second Circuit’s opinion does not elide the details of Brooks’s fraudulent operation, in which Brooks inflated the value of its products—used at the time by troops in Iraq and Afghanistan—to attract investors and artificially drive stock prices higher, all the while diverting millions of dollars in corporate funds to finance his personal thoroughbred horse-racing enterprise and support his family’s lavish lifestyle. Brooks’s excesses eventually led to extensive and unflattering media coverage.[1]

Prior to trial, the United States sought to have Brooks detained in custody. The district court held a hearing and determined that Brooks presented a substantial flight risk based on his wealth and access to accounts abroad. Nonetheless, the district court issued a Bail Release Order that allowed Brooks to remain at liberty but restricted Brooks to home detention and required electronic monitoring and other conditions, all subject to a $400 million bond. Brooks and his provided $48 million in cash as surety for the bond to secure his release. The district court’s order provided for revocation of release and forfeiture of the $48 million security if the court found that Brooks had concealed assets.

Shortly before trial, the United States filed a motion to revoke bail based upon evidence that Brooks, with his family’s assistance, had ferreted funds overseas in various accounts and shell corporations using the passports of Brooks’s brother and children. The district court ordered Brooks’s detention and forfeiture of the $48 million cash security, based largely on an affidavit submitted by an FBI Special Agent in support of the Government’s motion, in which the agent had described at length Brooks’s scheme—called “Czerny Kot,” or “black cat” in Polish, according to a confidential source.

The trial against Brooks lasted eight months in 2010. After the jury’s verdict, the court sentenced Brooks to a 17-year term of incarceration, and ordered him to pay restitution of over $90 million on the fraud counts, $2.8 million in restitution on the tax counts, and an $8.7 million fine, plus a special assessment.

Brooks timely appealed his conviction from the jury verdict and the accompanying restitution awards, as well as his revocation of bail and the court-ordered forfeiture of his $48 million surety. While the appeal was pending, Brooks subsequently died in custody on October 27, 2016. His estate moved for an abatement of his convictions, restitution and forfeiture orders, fines, forfeited bail bond security, and special assessments.

The Second Circuit’s Decision

Certain Convictions Are Vacated Due To The Doctrine Of Abatement Ab Initio

The Second Circuit found that Brooks’s fraud convictions abated upon his death under the doctrine of abatement ab initio—a common-law rule that provides that when a defendant dies while his direct appeal as of right is pending, “everything associated with the case is extinguished, leaving the defendant as if he had never been indicted or convicted.” Slip Op. at 17 (quoting United States v. Libous, 858 F.3d 64, 66 (2d Cir. 2017)). The Court recognized that abatement ab initio is grounded in judicial interests of finality and fairness: a defendant’s conviction becomes final only upon resolution of his direct appeal, and the purposes of punishment can never be fulfilled if exacted upon a defendant who is deceased. Therefore, the Second Circuit concluded that Brooks’s trial convictions were absolved by his death. However, the Court noted that abatement ab initio is a rule designed to address only non-final judgments. To the extent Brooks had pleaded guilty to the tax offenses, and waived his right to appeal those convictions pursuant to a plea agreement (and indeed, did not appeal those convictions), his judgment of conviction on those counts was final and the doctrine of abatement ab initio did not apply.

The Circuit recognized that its split decision forced it to choose between the dual principles of fairness and finality that are advanced by abatement ab initio, but concluded that “[i]n weighing the two principles, . . . finality is the paramount consideration.” The Circuit stated its rule: “when faced with a multi-count indictment, where a defendant is convicted on some or all counts but appeals only certain convictions, the defendant’s death shall only abate the appealed convictions and the resulting punishments or consequences that relate to those convictions.”

The Restitution Arising Out Of The Abated Counts Is Likewise Abated

The Second Circuit proceeded to consider the effect of the doctrine of abatement ab initio on the ancillary aspects of Brooks’s convictions. The question of whether an award of restitution abated upon the death of the defendant was one of first impression for the Court. On similar facts, other courts had reached divergent outcomes. Some Courts of Appeals consider restitution, as adapted from civil law to the criminal context, to be a compensatory remedy rather than a punitive one. Notions of just punishment would thus suggest that restitution need not abate upon death. However, other courts have observed that restitution equally depends on a valid, final conviction, and found this to compel the conclusion that restitution must abate if a defendant dies while his appeal is pending.

The Second Circuit agreed with the latter approach, siding with those courts that have held a restitution award stemming from a non-final judgment must be vacated upon the defendant’s death. The Court principally relied on the U.S. Supreme Court’s recent decision in Nelson v. Colorado, 137 S. Ct. 1249 (2017), which held that a state’s policy of requiring criminal defendants whose convictions were overturned to prove their innocence in a separate civil proceeding to obtain refunds of financial penalties was unconstitutional. Slip Op. at 21. The Court reasoned that, although it might frustrate the purposes of restitution, fairness to the defendant required courts to abate monetary penalties like restitution where there is no longer a valid conviction to support the penalty.

Adopting the Nelson court’s logic, the Second Circuit explained that “once those convictions were erased, the presumption of . . . innocence was restored,” and the state “may not presume a person, adjudged guilty of no crime, nonetheless guilty enough for monetary exactions.” Slip Op. at 22 (citing Nelson, 137 S. Ct. at 1255–56). Therefore, the Second Circuit held that the district court’s award of restitution for Brooks’s fraud convictions abated, because those convictions were still the subject of his pending appeal, but not the award of restitution for Brooks’s tax convictions, which were final as of his guilty plea.

The Forfeiture of The Bail Bond Is Not Abated

Turning to the forfeiture of Brooks’s bail bond, the Second Circuit found that the forfeiture did not abate because the bail revocation proceeding was civil in nature and had no bearing on Brooks’s underlying guilt or innocence of the underlying offenses for which he was returned to custody. Slip Op. at 32. The Court remarked that bail proceedings concern the collateral problem of securing the defendant’s appearance at trial: here, for example, the cash security and other conditions of release were ordered to ensure that Brooks did not draw upon his family’s wealth and flee—conditions that the Government had presented substantial evidence Brooks violated in an attempt to do just that. The Court also noted that the revocation of bail had been affirmed in an interlocutory appeal, and that its purpose—to remedy Brooks’s breach of the terms of the bail release order—was not absolved upon Brooks’s death. Thus, the Court concluded that the bond forfeiture was an independent matter separate from the ultimate determination of Brooks’s guilt and did not abate under the doctrine of abatement ab initio.

Implications of the Decision

This is the second time the Second Circuit has invoked the little-known doctrine of abatement ab initio in recent months. In United States v. Libous, decided on May 30, 2017 and cited in Brooks, the Second Circuit vacated the jury conviction of former New York State Senator Thomas W. Libous, and remanded the case to the district court to return a fine and special assessment to the decedent’s estate. [2] Although the Second Circuit did not invoke notions of due process in either Libous or Brooks as firmly as the Supreme Court did in Nelson, the doctrine of abatement ab initio is rooted in the principle that the interests of justice embodied in an appeal as of right are so integral to our system of adjudicating guilt or innocence that they succeed death. So while most defendants likely hope not to avail themselves of the doctrine of abatement ab initio, the Second Circuit’s commitment to the sanctity of appeals accords with other process-based outcomes that more broadly work in defendants’ favor.

How will the government react to the Brooks decision? There is nothing that the government can do to prevent defendants from dying, and Brooks was not especially old.[3] However, the government can seek to use other tools, such as asset forfeiture and civil litigation, to recover amounts that may be owed to the victims of an offense. In this sense, the abatement ab initio doctrine does not foreclose the possibility of other forms of recompense. Indeed, the Court explained in a footnote that the assets that were the subject of the now-vacated restitution order are also the subject of a parallel civil forfeiture action. The Court also noted that a class action, a derivative shareholder action, and an SEC enforcement action also had been brought against Brooks. It appears that these proceedings remain pending.