                               PUBLISHED

                    UNITED STATES COURT OF APPEALS
                        FOR THE FOURTH CIRCUIT


                              No. 12-4442


UNITED STATES OF AMERICA,

                  Plaintiff − Appellee,

           v.

NAWAF M. HASAN,

                  Defendant – Appellant.



Appeal from the United States District Court for the Eastern
District of Virginia, at Alexandria.  T. S. Ellis, III, Senior
District Judge. (1:11-cr-00503-TSE-1)


Argued:   March 28, 2013                     Decided:   June 6, 2013


Before GREGORY, DUNCAN, and AGEE, Circuit Judges.


Affirmed by published opinion. Judge Agee wrote the opinion, in
which Judge Gregory and Judge Duncan joined.


ARGUED:   Marvin   David   Miller,  Alexandria,   Virginia,  for
Appellant.   Richard Daniel Cooke, OFFICE OF THE UNITED STATES
ATTORNEY, Richmond, Virginia, for Appellee.    ON BRIEF: Neil H.
MacBride, United States Attorney, Rebeca H. Bellows, Assistant
United States Attorney, OFFICE OF THE UNITED STATES ATTORNEY,
Alexandria, Virginia, for Appellee.
AGEE, Circuit Judge:

        Nawaf Hasan was convicted of various offenses related to

the trafficking of contraband cigarettes.                        Hasan challenges his

convictions      on   the    basis    that       the   conduct      of    the    government

agents investigating this case was so outrageous as to violate

his   due   process     rights.        Separately,          Hasan       argues     that    the

district court applied the wrong statutory rule to calculate the

amount of the civil forfeiture adjudicated against him.                             For the

reasons explained herein, we reject both challenges and affirm

the judgment of the district court in its entirety.



                                         I.

      Significant      state-by-state            disparities       in     the     amount    of

taxes    levied    against     the    sale       of    a   pack    of     cigarettes       has

created     an    interstate     black       market        in    the     trafficking       and

distribution of cigarettes.            Typically, cigarettes are purchased

in a state with low taxes and then subsequently sold in another

state where such taxes are much higher, but without the payment

of the higher levy at point of sale.                        In this way, contraband

cigarette traffickers seek to evade applicable state and local

taxes on cigarettes while profiting from the tax disparity.

      In    response    to     this    potential           for    state     tax    evasion,

Congress enacted a statutory scheme to ensure that cigarettes

are taxed at the applicable rate in the locality in which sold

                                             2
to the consumer.           One part of the statutory framework is the

Contraband Cigarette Trafficking Act (“CCTA”), 18 U.S.C. § 2341,

et seq., which prohibits the trafficking of tobacco products to

avoid payment of state taxes.                Pursuant to 18 U.S.C. § 2342(a),

“[i]t    shall     be    unlawful     for    any    person     knowingly     to    ship,

transport,       receive,        possess,     sell,    distribute,      or   purchase

contraband       cigarettes         or      contraband       smokeless       tobacco.”

“Contraband cigarettes” are defined as

     a quantity in excess of 10,000 cigarettes, which bear
     no evidence of the payment of applicable State or
     local cigarette taxes in the State or locality where
     such cigarettes are found, if the State or local
     government requires a stamp, impression, or other
     indication   to  be  placed  on  packages   or  other
     containers of cigarettes to evidence payment of
     cigarette taxes[.]

18 U.S.C. § 2341(2). 1             Exempted from this definition, however,

are cigarettes in the possession of, inter alia, “an officer,

employee, or other agent of the United States . . . having

possession of such cigarettes in connection with the performance

of official duties.”         Id. § 2341(2)(D).

     In    2008,        agents     with     the    Federal     Bureau   of    Alcohol,

Tobacco,     and    Firearms        (“ATF”)       began   an    investigation,       in

conjunction with other state and federal authorities, into a

ring of alleged traffickers of contraband cigarettes.                        For more

     1
       Each carton of cigarettes contains 200 cigarettes.                         10,000
cigarettes is fifty cartons of cigarettes.



                                             3
than two years, ATF agents and other law enforcement officers

participated in undercover transactions involving the sale of

untaxed and unstamped cigarettes to members of the conspiracy,

including Hasan. 2       The government alleges that between June 2009

and April 2011, undercover agents sold nearly 40,000 cartons of

untaxed or unstamped cigarettes to Hasan and other members of

the   conspiracy.        Most       of    these   contraband       cigarettes    were

purchased from ATF agents in Virginia before being transported

to New York for sale. 3

      In 2011, Hasan was indicted in the United States District

Court for the Eastern District of Virginia on six counts: one

count     of   conspiracy      to        purchase,     possess,     transport,    and

distribute     contraband      cigarettes,        in    violation    of    18   U.S.C.

§ 371     (Count   1),   and    five      substantive     counts    of    purchasing,

      2
       The CCTA defines “contraband cigarettes” as those which do
not bear evidence of payment of state taxes (i.e., a stamp),
where such evidence is required.        Thus, while there is a
technical   difference    between   “untaxed”   and   “unstamped”
cigarettes, the terms are largely used interchangeably.     There
is no allegation that any of the cigarettes purchased and resold
by Hasan in this case were properly taxed, but merely unstamped.
Consequently, we treat “untaxed” and “unstamped” cigarettes as
interchangeable terms for purposes of this opinion.
      3
       As the district court observed, New York imposed (as of
August 2011) a relatively high, $4.35 per pack tax rate on
cigarettes. Virginia, on the other hand, imposed a tax of only
$.30 per pack during the same period.            Charging prices
comparable to properly taxed cigarettes, therefore, a criminal
enterprise trafficking cigarettes from Virginia to New York
could potentially make up to $4.05 per pack in profit.



                                            4
possessing, and transporting contraband cigarettes, in violation

of 18 U.S.C. § 2342(a) (Counts 2-6).

        Prior      to     trial,       Hasan     filed     a    motion       to       dismiss    the

indictment,          or    in    the    alternative,           to    exclude       the    evidence

collected against him on the basis that the undercover sales of

untaxed cigarettes by ATF agents constituted government conduct

so    outrageous          as    to     violate     his    due       process       rights.        The

district court denied the motions.                             Hasan and the government

then made certain factual stipulations and agreed to proceed to

a bench trial while preserving his due process challenge.                                        The

court    found       that       the    stipulations        were       sufficient         to   prove

beyond a reasonable doubt that Hasan was guilty of the offenses

charged       in     the       indictment,        and     issued       a     written       opinion

explaining         its     decision       to     deny    the    motions          to    dismiss    or

suppress.

       The      court          explained        that     the    ATF        had    congressional

authorization to possess and distribute untaxed cigarettes in

furtherance of the ATF’s law enforcement mission.                                        The court

also    saw     no      merit     in    Hasan’s        argument       that       the    undercover

operation was “outrageous” because the ATF “let the cigarettes

walk,” and allowed those items to be distributed on the black

market rather than confiscating them.                           The court reasoned that

the    government’s            failure     to    recover       the    contraband         does    not

render an undercover operation unlawful because often, in order

                                                  5
to gather more evidence, law enforcement is required to delay

intervention    in   unlawful    activity.      The     court   observed   an

“important     distinction”     between    cases   involving      undercover

distribution of illegal narcotics and distribution of contraband

cigarettes, “which, apart from being untaxed and/or unstamped,

are otherwise legal commodities.”         (J.A. 165.)

     The government then filed a motion for a preliminary order

of forfeiture in the amount of $604,220, which represented the

gross proceeds Hasan realized through the contraband trafficking

offenses charged in the indictment.          The government represented

that its proposed forfeiture order was supported by the plain

language of 18 U.S.C. § 981(a)(2)(A), which provides:

     In cases involving illegal goods, illegal services,
     unlawful activities, and telemarketing and health care
     fraud schemes, the term “proceeds” means property of
     any kind obtained directly or indirectly, as the
     result of the commission of the offense giving rise to
     forfeiture, and any property traceable thereto, and is
     not limited to the net gain or profit realized from
     the offense.

Hasan objected to the proposed forfeiture order and argued that

the forfeiture amount should only be $130,000—the profits he

realized from the cigarette smuggling scheme.            He relied upon 18

U.S.C. § 981(A)(2)(B), which provides that “[i]n cases involving

lawful goods or lawful services that are sold or provided in an

illegal manner, the term “proceeds” means the amount of money

acquired   through   the   illegal    transactions       resulting   in    the


                                     6
forfeiture,      less    the   direct         costs     incurred        in    providing         the

goods     or    services.”          Hasan          claimed       that        the    contraband

cigarettes       were   merely    lawful           goods    sold    or   provided          in    an

illegal manner, thus entitling him to the benefit of the lower

forfeiture amount.

     The       district     court       overruled           Hasan’s          objection          and

concluded      that     “[t]his    is     a    case        involving         illegal       goods,

illegal    services,      unlawful        activities.              Undercover        sales       of

cigarettes were, as soon as they were . . . taken to New York,

contraband.”       (J.A. 223.)         The court adjudicated Hasan as guilty

of the charges against him, adopted the government’s proposed

forfeiture order, and imposed a twenty-four month sentence of

incarceration.            Hasan     has        timely       appealed          and     we     have

jurisdiction pursuant to 28 U.S.C. § 1291.



                                              II.

     Hasan raises two assignments of error on appeal.                                 He first

argues that the district court erred in denying his motion to

dismiss    the    indictment      or    suppress           the   evidence          against      him

based on the conduct of the government agents investigating this

case.       Hasan’s      second     claim          of   error      is    that       the     court

miscalculated      the    amount    of        forfeiture         imposed      in     the    civil

forfeiture order.         We address each issue in turn.



                                               7
                                             A.

       Hasan      first       contends     that   the    district      court   erred   in

denying his motion to suppress the evidence against him on the

basis that his due process rights were violated.                          The facts of

this       case   are       uncontested,    and   we     review   the    legal   issues

underlying the denial of a motion to suppress de novo.                                 See

United States v. Cain, 524 F.3d 477, 481 (4th Cir. 2008). 4

       Hasan      is    essentially        raising   a   generalized      due    process

claim that the law enforcement conduct at issue here was either

unlawful or so outrageous as to violate fundamental notions of

fairness.          He seeks to invoke what the district court aptly

described         as    a    “seldom-addressed       category     of    constitutional

violations,” J.A. 158, first articulated in United States v.

Russell, 411 U.S. 423 (1973).                 In Russell, a criminal defendant

argued outrageous government conduct where an undercover agent

supplied narcotics manufacturers with a legal, but difficult to

obtain,       chemical        that   was    essential     to   the     methamphetamine

manufacturing process.               Id. at 431.        After flatly rejecting the

       4
       In its response brief on appeal, the government suggests
that this is an appeal of the denial of a motion to dismiss the
indictment.   The difference, for purposes of our standard of
review, is not a material one.    The parties do not dispute any
material facts, and under either paradigm our review of the
legal issues involved would be de novo. Compare, Cain, 524 F.3d
at 481 (reviewing denial of motion to suppress de novo), with
United States v. Hatcher, 560 F.3d 222, 224 (4th Cir. 2009)
(reviewing denial of motion to dismiss indictment de novo).



                                              8
defendant’s claim to an entrapment defense, the Supreme Court

also denied a due process claim and observed that

     [w]hile we may some day be presented with a situation
     in which the conduct of law enforcement agents is so
     outrageous   that   due    process   principles would
     absolutely bar the government from invoking judicial
     processes to obtain a conviction, . . . the instant
     case is distinctly not of that breed.

Id. at 431-32 (internal citation omitted).

     A    plurality    of    the   Supreme    Court     expounded       upon    (and

greatly limited) the application of an “outrageous conduct” due

process    violation   in    Hampton   v.    United    States,    425    U.S.    484

(1976).      In   Hampton,    a    government   informant        allegedly      sold

heroin to the defendant, who later sold it to government agents.

Although    the   Court     acknowledged     that     “the   Government        . . .

played a more significant role in enabling petitioner to sell

contraband in this case than it did in Russell,” id. at 489, the

Court nevertheless rejected the defendant’s claim that his due

process rights were violated, id. at 490.

           To sustain petitioner's contention here would run
     directly contrary to our statement in Russell that the
     defense of entrapment is not intended to give the
     federal judiciary a ‘chancellor's foot’ veto over law
     enforcement practices of which it did not approve.
     . . .

           The limitations of the Due Process Clause of the
     Fifth    Amendment  come   into  play   only  when   the
     Government    activity   in   question   violates   some
     protected right of the defendant.      Here, as we have
     noted, the police, the Government informant, and the
     defendant acted in concert with one another.      If the
     result of the governmental activity is to implant in

                                       9
       the mind of an innocent person the disposition to
       commit the alleged offense and induce its commission,
       the   defendant  is   protected  by  the   defense  of
       entrapment.   If the police engage in illegal activity
       in concert with a defendant beyond the scope of their
       duties the remedy lies, not in freeing the equally
       culpable defendant, but in prosecuting the police
       under the applicable provisions of state or federal
       law.

Id. at 490 (internal citation and quotation marks omitted). 5

       After Hampton, the “outrageous conduct” doctrine survives

in theory, but is highly circumscribed.                 As we explained in

United States v. Goodwin, 854 F.2d 33 (4th Cir. 1988), a due

process violation may only be found when the conduct at issue

“is outrageous, not merely offensive.”             Id. at 37.     And as the

district court observed, this Court has never held in a specific

case       that   the   government   has    violated   the   defendant’s   due

process rights through outrageous conduct.              In United States v.

Osborne, 935 F.2d 32 (4th Cir. 1991), this Court opined on the

“high shock threshold” of the appellate courts in the context of


       5
       Justice Powell wrote a concurring opinion in Hampton,
expressing doubts as to the plurality’s conclusion that the
entrapment defense is the only remedy available to an accused
defendant who claims he was the victim of fundamentally unfair
government conduct: “[t]here is certainly a [constitutional]
limit to allowing governmental involvement in crime.   It would
be unthinkable, for example, to permit government agents to
instigate robberies and beatings merely to gather evidence to
convict other members of a gang of hoodlums.” Hampton, 425 U.S.
at 493 n.4 (Powell, J., concurring) (quoting United States v.
Archer, 486 F.2d 670, 676-77 (2d Cir. 1973)) (alterations in
Hampton).



                                       10
the “outrageous conduct” due process violation, and the Court’s

reluctance to vacate a conviction based on outrageous government

conduct that does not otherwise violate a defendant’s rights.

Id. at 36.    The Osborne court cited with approval several cases,

including    United   States   v.    Simpson,     813   F.2d   1462    (9th   Cir.

1987),   wherein   the   Ninth   Circuit    upheld      the    conviction     of    a

defendant who had provided heroin in exchange for sexual favors

from a woman who had been manipulated into doing so by the FBI.

935 F.2d at 36.       Thus, the Osborne court articulated what has

become the test in this circuit for whether government conduct

is so outrageous as to offend due process: the conduct must be

“shocking,” or “offensive to traditional notions of fundamental

fairness.”     935 F.2d at 37.         In refining the standard for an

“outrageous conduct” due process claim, however, the court again

concluded that the government conduct at issue failed to satisfy

that threshold.       With these general standards in mind, we turn

now to Hasan’s specific arguments.

     Hasan    first   contends      that   the    district     court   erred       in

concluding that Congress authorized the ATF to undertake the

investigation that lead to his apprehension.                   He implies that

the multiple sales of cigarettes to him by the ATF, anticipating

the cigarettes would later be resold without payment of state

taxes are outrageous acts, per se, because the ATF effectively

distributed “contraband cigarettes.”             We disagree.

                                      11
     As noted earlier, the CCTA specifically exempts from the

definition of “contraband cigarettes” unstamped cigarettes that

are in the possession of an “officer, employee, or other agent

of the United States . . . having possession of such cigarettes

in connection with the performance of official duties.”                            See 18

U.S.C. § 2341(2)(D).                 Hasan acknowledges that ATF agents may

possess untaxed cigarettes, but argues that by failing to grant

explicit authorization for government agents to also distribute

untaxed     cigarettes,          Congress       has     impliedly      prohibited       the

practice.

     Hasan’s argument, however, is based on a misreading of the

exemption language of the CCTA.                     The CCTA does not, as such,

“authorize”     federal         agents    to    possess       contraband      cigarettes.

Rather, under the plain language of the statute, when unstamped

cigarettes     are       in    the    possession      of    federal    agents    (in    the

course    of    their          official      duties)       the    cigarettes    are     not

“contraband”        as     a    matter    of    law.        This    distinction        is   a

significant         one.         Since    the       untaxed       cigarettes    are     not

contraband in the possession of federal agents, the subsequent

distribution through undercover sales to cigarette traffickers

is not a distribution of contraband cigarettes by the agents.

The untaxed cigarettes only become contraband when they are then

possessed      by     someone,        like     Hasan,       not    exempted     from     the



                                               12
statutory    definition.          See    § 2341(2). 6       The    ATF-distributed

cigarettes    were   not    “contraband        cigarettes”        under    the     clear

terms of the statute.

     Moreover,     Congress       has   explicitly      authorized        federal   law

enforcement to conduct commercial endeavors in the context of

undercover investigations, and to use the proceeds from these

transactions to offset the costs of the undercover operation.

See Departments of State, Justice, and Commerce, the Judiciary

and Related Agencies Appropriations Act of 1992, Pub. L. No.

102-395, § 102(b)(1)(B), (D) (authorizing the Federal Bureau of

Investigation      and     Drug     Enforcement      Administration           to     use

appropriated funds to establish, inter alia, “business entities

as   part     of   an    undercover        investigative          operation,”        and

authorizing    “proceeds     from       such   undercover    operation       [to]     be

used to offset necessary and reasonable expenses incurred in

such operation”).        This statutory authorization has also been

specifically extended to the ATF.               See Consolidated and Further

Continuing Appropriations Act of 2012, Pub. L. No. 112-55 § 207


     6
       Hasan further undermines his own argument by explicitly
conceding that the ATF is authorized to purchase contraband
cigarettes from cigarette traffickers.  See Appellant’s Opening
Br. at 8 (“[ATF] may only possess, such as when an undercover
agent buys from dealers.”).    Thus, under Hasan’s theory, if
“possession” can be read to include “purchase” or “receipt,”
there is no logical reason that term would not also be read to
include “distribution.”



                                          13
(“Public Law 102-395 section 102(b) shall extend to the [ATF] in

the conduct of undercover investigative operations[.]”).

       With this statutory foundation, it simply cannot be said

that   the    actions    undertaken       by     the   ATF     in    this   case    were

unlawful.

       There is also no merit to Hasan’s claim that ATF agents in

this case otherwise engaged in behavior that is “offensive to

traditional notions of fundamental fairness.”                       Osborne, 935 F.2d

at 37.      As we observed in Goodwin, “[o]utrageous is not a label

properly applied to conduct because it is a sting or reverse

sting operation involving contraband.”                    854 F.2d at 37.            We

further reasoned in United States v. Milam, 817 F.2d 1113, 1116

(4th Cir. 1987), that “Justice Powell's concurrence in Hampton

recognized that the practicalities of law enforcement sometimes

compel      officers    to    provide     supplies       to    drug     manufacturing

operations, or even to supply ‘contraband itself,’ and suggested

that due process does not necessarily prohibit use of these and

similar investigative techniques.”                  Thus, the mere fact that ATF

sold   untaxed     cigarettes      does    not      render     their    investigation

outrageous.

       In   sum,   we   see   no   merit       to    Hasan’s    argument     that   the

conduct of ATF agents in this case was unlawful, or otherwise




                                          14
“shocking,” or “offensive to traditional notions of fundamental

fairness.”      We therefore affirm his conviction. 7

                                           B.

      Hasan     also   contends   on       appeal    that    the      district    court

miscalculated the forfeiture amount by calculating the sum based

on   the   gross   proceeds,   rather       than    profits,       realized      by   the

contraband      cigarette   distribution          scheme.        We   find   that     his

claim lacks merit and the district court did not err.

      This Court reviews the district court’s interpretation of

statutory provisions de novo, Scott v. United States, 328 F.3d

132, 137 (4th Cir. 2003), but will reverse its findings of fact

only if we find them clearly erroneous.                     See, e.g., HSBC Bank

USA v. F & M Bank N. Va., 246 F.3d 335, 338 (4th Cir. 2001); see

also United States v. Funds Held in the Name or for the Benefit

of Wetterer, 210 F.3d 96, 106 (2d Cir. 2000) (reviewing legal

determination de novo and factual findings for clear error in

applying civil forfeiture statute).

      Pursuant to 18 U.S.C. § 981(a), a defendant’s property is

subject    to    forfeiture    if,    inter       alia,     it   is    “derived       from

proceeds traceable to . . . any offense constituting ‘specified

unlawful      activity[.]’”          See    id.     § 981(a)(1)(C).           Section


      7
       Hasan does not raise a separate challenge to the term of
imprisonment imposed against him.



                                           15
981(a)(1)(C) defines “specified unlawful activity” in part by

cross-reference       to   18   U.S.C.    § 1956(c)(7)(A),    which    in   turn

cross-references        18      U.S.C.    § 1961(1).        That     subsection

encompasses     offenses        related    to   trafficking   in     contraband

cigarettes.     Thus, the “proceeds” of the cigarette trafficking

are clearly subject to forfeiture.              However, the definition of

what constitutes “proceeds” differs depending on the nature of

the offense.         See id. § 981(a)(2) (“For purposes of paragraph

(1),    the   term    ‘proceeds’     is    defined   as   follows”    and   then

providing different categories).

       The district court applied § 981(a)(2)(A), which provides:

       In cases involving illegal goods, illegal services,
       unlawful activities, and telemarketing and health care
       fraud schemes, the term “proceeds” means property of
       any kind obtained directly or indirectly, as the
       result of the commission of the offense giving rise to
       forfeiture, and any property traceable thereto, and is
       not limited to the net gain or profit realized from
       the offense.

Hasan contends using subsection A was error and the district

court should have instead applied subsection B, which states

       In cases involving lawful goods or lawful services
       that are sold or provided in an illegal manner, the
       term “proceeds” means the amount of money acquired
       through the illegal transactions resulting in the
       forfeiture,   less  the   direct  costs  incurred   in
       providing the goods or services. The claimant shall
       have the burden of proof with respect to the issue of
       direct costs. The direct costs shall not include any
       part of the overhead expenses of the entity providing
       the goods or services, or any part of the income taxes
       paid by the entity.


                                          16
Id. § 981(a)(2)(B).            In support, Hasan argues that contraband

cigarettes are merely lawful goods that are sold or provided in

an illegal manner and cites the district court’s order denying

his motion to dismiss or suppr0ess, in which the court concluded

that    “contraband        cigarettes,    which,     apart    from    being   untaxed

and/or unstamped, are otherwise legal commodities.”                    (J.A. 165.)

       We      must       determine,     therefore,      whether        “contraband

cigarettes”         are    “illegal    goods”    (§ 981(a)(2)(A))       or    “lawful

goods . . . that are sold or provided in an illegal manner”

(§ 981(a)(2)(B)).           We have identified no published opinion from

a court of appeals that has addressed this specific question.

The sole unpublished court of appeals decision, as well as the

district court decisions to have confronted the issue, are in

agreement, however, that distribution of contraband cigarettes

is     a      “case       involving     illegal      goods”     thus     triggering

§ 981(a)(2)(A).           United States v. Noorani, 188 F. App’x 833, 838

(11th Cir. 2006) (per curiam) (“[W]e conclude that the district

court did not err in calculating the order of forfeiture based

upon the wholesale value of the cigarettes because the statute

authorized that amount.”); United States v. Funds from First

Reg’l Bank Acct. No. XXXXX1859, 639 F. Supp. 2d 1203, 1216 (W.D.

Wash.       2009)     (“Global's   conduct      in   selling    and    transporting

contraband cigarettes in violation of the CCTA therefore falls

into the category of ‘cases involving . . . unlawful activities’

                                          17
in which gross receipts are subject to forfeiture as ‘proceeds.’

.   .   .    This   case       also    involves     the    sale   and   transport    of

‘illegal goods’ because the cigarettes or ‘goods’ that Global

sold and transported to Washington were unlawful under state

law.”); United States v. Patel, No. 05:11cr031, 2013 WL 149672,

at *7 (W.D. Va. Jan. 11, 2013) (unpublished) (“[B]ecause the

possession        and        trafficking     of     contraband      cigarettes      is

inherently illegal, they are illegal goods for the purposes of

§ 981(a)(2), requiring forfeiture of gross proceeds[.]”); United

States v. Diallo, No. 09 CR 858 (MEA), 2011 WL 135005, at *2

(S.D.N.Y. Jan. 13, 2011) (unpublished) (citing § 981(a)(2)(A)).

        In   conducting          our     independent         analysis     into      the

categorization          of     “contraband        cigarettes,”     for    forfeiture

purposes, we look primarily to the statutory definition of that

term.        As   explained        supra,    the     CCTA     defines    “contraband

cigarettes” as “a quantity in excess of 10,000 cigarettes, which

bear no evidence of payment of the applicable State or local

cigarette taxes in the State or locality where such cigarettes

are found[.]”           18 U.S.C. § 2341(2).              By its plain terms, the

statute does not define contraband cigarettes by reference to

the manner in which the cigarettes are sold.                      Rather, when the

cigarettes are possessed without evidence of payment of taxes,




                                            18
they       are   contraband     per    se. 8         In     other   words,    contraband

cigarettes        are    inherently     unlawful,           i.e.,   “unlawful    goods.”

Contraband cigarettes could never be sold lawfully because it is

possession of the defined item itself that violates the CCTA.

       By contrast, courts have found § 981(a)(2)(B) applies when

a good or service that is not inherently illegal is sold or

provided in an illegal manner.                       See, e.g., United States v.

Mahaffy,         693    F.3d   113,    138     (2d    Cir.     2012)    (holding       that

securities fraud constituted lawful goods sold in an illegal

manner because, while “trading . . . securities, as a general

manner, is not unlawful. . . . [A]ny illegality occurred when

the defendants bought and sold securities as part of a scheme

involving illegal bribery and frontrunning.”); United States v.

St. Pierre, 809 F. Supp. 2d 538, 543 (E.D. La. 2011) (applying

§ 981(a)(2)(B) to calculate forfeiture of a contractor convicted

of bribery and fraud because “[i]nformation technology work is a

lawful      service      and   crime   cameras        are    lawful    goods,    but   the

contracts for that work or those cameras were obtained through

illegal      bribes      and   kickbacks.            Thus     the   amounts     of   money




       8
        As   explained earlier,  the  ATF’s   possession and
distribution of cigarettes in the course of its duties is
expressly exempt from the statutory definition of contraband
cigarettes.



                                             19
acquired through those contracts were for otherwise legal goods

and services provided ‘in an illegal manner.’”). 9

     Hasan also invokes the law of the case doctrine by arguing

that the district court should have been bound by the statement

it made in denying his motion to dismiss, that “apart from being

untaxed and/or unstamped, [contraband cigarettes] are otherwise

legal    commodities.”      (J.A.       165).       He       argues    that   this

constitutes,    in    effect,     a    concession       by    the     court   that

contraband cigarettes are lawful goods sold in an illegal way.

     Once    again,    however,       Hasan     fails    to     recognize     that

contraband   cigarettes,   as     defined     by   statute,     are    inherently

unlawful goods.      The district court’s statement, that cigarettes

are otherwise lawful (i.e., when they are properly taxed) is

correct, but the cigarettes to which the court referred were not

contraband cigarettes.


     9
       Because we conclude that contraband cigarettes are illegal
goods, we do not decide whether the distribution of contraband
cigarettes is an “unlawful activity” within the meaning of
§ 981(a)(2)(A).     To be sure, distribution of contraband
cigarettes is against the law, but at least one court has
recognized that “unlawful activity,” as the term is used in
§ 981(a)(2)(A), is a term of art that is not meant to encompass
every activity that is unlawful. See United States v. Nacchio,
573 F.3d 1062, 1089 (10th Cir. 2009) (“The term ‘unlawful
activities’   in  section   981(a)(2)(A)  was   meant  to   cover
inherently unlawful activities such as robbery that are not
captured by the words ‘illegal goods’ and ‘illegal services.”)
(quoting 1 David Smith, Prosecution and Defense of Forfeiture
Cases, ¶ 5.03[2], at 5-62 (2008)).



                                       20
     We   therefore   conclude   that   the   district   court   properly

calculated the order of forfeiture in this case. 10



                                 III.

     For the foregoing reasons, the judgment of the district

court is affirmed.

                                                                 AFFIRMED




     10
        Hasan’s sole challenge to the forfeiture order is the
legal one discussed above. He does not otherwise claim an error
in the amount of proceeds attributed to him for forfeiture
purposes.



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