Opinion
CRIMINAL 1:22-cr-00016-MR-WCM
09-07-2023
UNITED STATES OF AMERICA, Plaintiff, v. SHAWN THOMAS JOHNSON, Defendant.
PRELIMINARY ORDER OF FORFEITURE FOR SPECIFIC PROPERTY
Martin Reidmger Chief United States District Judge
THIS MATTER is before the Court on the Government's Revised Motion for Preliminary Order of Forfeiture for Specific Property. [Doc. 59].
I. BACKGROUND
On March 11, 2022, the Defendant Shawn Thomas Johnson was charged in a one-count Bill of Information with bank fraud, in violation of 18 U.S.C. § 1344. [Doc. 1]. On March 25, 2022, the Defendant pled guilty to Count One of the Bill of Information pursuant to a written Plea Agreement. [Doc. 3]. According to the Factual Basis submitted in support of the Plea Agreement, beginning in 2012, the Defendant and other individuals acting at his direction fraudulently obtained millions of dollars in loans to purchase properties that the Defendant effectively owned, managed, and rented through various nominees and companies. [See Doc. 4: Factual Basis at ¶ 4]. Through this scheme, the Defendant “and his co-conspirators closed on at least sixteen loans from financial institutions, totaling over $3.5 million, to purchase real estate.” [Id. at ¶ 6]. Once these properties were acquired, the Defendant used them to generate income as short-term rentals. [Id.].
In the Plea Agreement, the Defendant agreed to the entry of a forfeiture money judgment [Doc. 3 at ¶ 8(b)] and further agreed that the Government had satisfied the factors set forth in 21 U.S.C. § 853(p) so that the forfeiture money judgment may be satisfied through the forfeiture of substitute property. [Id. at ¶ 8(d)]. On April 27, 2023, the Court entered an Order granting the Government a forfeiture money judgment in the amount of $2,778,237.00, representing the “net proceeds of the Defendant's bank fraud offense.” [Doc. 57 at 14].
By the present motion, the Government moves, pursuant to Rule 32.2(b) and (e) of the Federal Rules of Criminal Procedure, 18 U.S.C. § 982(a)(2), and 21 U.S.C. § 853(p), for the entry of a preliminary order of forfeiture of the following assets in partial satisfaction of the forfeiture money judgment: proceeds derived from the sale/foreclosure of 31 Daniel Brooke Drive, 24 Apogee Drive, 23 Springwood Drive, and 577 Emma Road; an unused bankruptcy retainer in the trust account of attorney R. Todd Mosley; and the Defendant's interests in The Spice Must Flow, LLC and Stay Asheville, Inc. The Government contends that these funds and business interests are properties constituting or derived from proceeds that the Defendant obtained directly or indirectly as the result of fraud, and/or are substitute property. [Doc. 59].
The Defendant filed a response in opposition to the Government's motion on June 23, 2023. [Doc. 62]. The Government filed its reply in support of its motion on June 30, 2023. [Doc. 63].
Having been fully briefed, this matter is ripe for disposition.
II. STANDARD OF REVIEW
Pursuant to 18 U.S.C. § 982(a)(2), any person convicted of bank fraud in violation of 18 U.S.C. § 1344 shall forfeit to the United States “any property constituting, or derived from, proceeds the person obtained directly or indirectly, as the result of such violation.” 18 U.S.C. § 982(a)(2). Where the Government seeks forfeiture of specific property, the Government must establish “the requisite nexus between the property and the offense.” Fed. R. Crim. P. 32.2(b)(1)(A). Where the Government seeks a personal money judgment, the Court “must determine the amount of money that the defendant will be ordered to pay.” Id. Once a forfeiture money judgment is entered, the Court has the authority to order the forfeiture of substitute assets to satisfy a forfeiture money judgment, provided that the Government satisfies the substitute property provisions of 21 U.S.C. § 853(p)(1)(A)-(E). Fed. R. Crim. P. 32.2(e); 21 U.S.C. § 853(p)(2). The Government has the burden of proving forfeiture by a preponderance of the evidence. United States v. Cherry, 330 F.3d 658, 670 (4th Cir. 2003).
III. FACTUAL BACKGROUND
The assets subject to forfeiture and the transactions that resulted in these assets are as follows:
A. 31 Daniel Brooke Drive Proceeds/Interest in 18 Brennan Broke Me, LLC
In March 2023, 18 Brennan Broke Me, LLC, Tomasz Foster, and GRB 31 Daniel Brook Drive, Inc. sold 31 Daniel Brooke Drive, one of the properties identified in the Court's Order as having a nexus to the fraud. [Doc. 59-1]. As a result, approximately $184,986.27 in sale proceeds were deposited into the First Citizens Bank account of 18 Brennan Broke Me, LLC. The U.S. Marshals Service seized those funds pursuant to a Seizure Warrant issued by the Court. [Case 1:23-mj-20, Doc. 1-2: SA Wahl Aff.]. Further, according to the Defendant's property manager, Julie Nash, an additional $5,000 in funds from the sale were held back to facilitate the transaction and currently are held in the trust account of attorneys Barnwell and Long, PLLC. The Government contends that the total $189,986.27 in proceeds of the sale of the Daniel Brooke property is subject to forfeiture as proceeds of fraud.
The Government advises that it could not locate GRB 31 Daniel Brooke Drive, Inc. on the North Carolina Secretary of State website.
Further, North Carolina Secretary of State records reflect the creation of 18 Brennan Broke Me, LLC in 2019 and, as of the last Annual Report (2022), identify the Defendant as the sole member and Nash as the manager. [Doc. 59-2]. The Defendant used 18 Brennan Broke Me, LLC to acquire and hold title to real property that he funded via fraud. The Government contends that the Defendant's interest in 18 Brennan Broke Me, LLC is subject to forfeiture as fraud proceeds.
B. 24 Apogee Drive Proceeds
In Spring 2023, one or more lenders foreclosed upon 24 Apogee Drive, one of the properties the Court identified as having a nexus to the fraud and that was previously titled to GRB Apogee Drive, LLC. GRB Apogee Drive, LLC, was previously registered with the North Carolina Secretary of State but has now been administratively dissolved. [Doc. 59-4]. The Defendant was the CEO and Registered Agent of GRB Apogee Drive, LLC. [Id.]. According to Ms. Nash, following foreclosure, net sale proceeds of $10,980 were deposited into the account of Leloo Dallas MultiPass, LLC, another entity controlled by the Defendant, but some of those funds were used for closing costs, resulting in a balance of $3,980 which Ms. Nash deposited into the trust account of Mr. Devereux. The Government contends that these funds are fraud proceeds.
C. 23 Springwood Drive Proceeds/Interest in Leloo Dallas MultiPass, LLC
In or around April 2023, one or more lenders foreclosed upon 23 Springwood Drive, one of the properties the Court identified as having a nexus to the fraud. [See Doc. 59-7]. Prior to foreclosure, this real estate was titled to GRB SpringWood Drive, LLC, which, in turn granted the property to18 Brennan Broke Me, LLC by action of the Defendant. [See Doc. 59-5]. GRB SpringWood Drive, LLC, was an entity previously registered with the North Carolina Secretary of State but that has now been administratively dissolved. [Doc. 59-6]. The Defendant was listed as the CEO and Registered Agent of this LLC. [Id.].
According to Ms. Nash, the sale initially generated net proceeds of $15,000 deposited into an account of Leloo Dallas MultiPass, LLC and then deposited by Ms. Nash to Mr. Devereux's trust account. Further, according to the Buncombe County Clerk of Court Final Report and Account of Foreclosure Sale, $83,349.18 in remaining surplus sale proceeds remains from the sale [Doc. 59-7] and the Clerk is awaiting instructions from Ms. Nash or elsewhere on disposal of these surplus moneys, resulting in a total of $98,349.18 in funds derived from this sale. The Government contends that these $98,349.18 in total funds being held in Mr. Devereux's trust account and at the Buncombe County Clerk of Court are fraud proceeds.
Further, the North Carolina Secretary of State records reflect that Leloo Dallas MultiPass, LLC was created in 2019. [Doc. 59-8]. A 2023 Annual Report identifies the members of Leloo Dallas as the Defendant and Ms. Nash, and indicates that Leloo Dallas engages in the business of vacation rentals. [IdJ. The Government contends that the Defendant's interest in Leloo Dallas MultiPass, LLC is fraud proceeds.
D. 577 Emma Road Assets/Interest in The Spice Must Flow, LLC
On April 11, 2023, the Defendant, through his entity, The Spice Must Flow, LLC, sold 577 Emma Road. [Doc. 59-9]. This sale resulted in the distribution of $166,013.56 in funds that are now being held in the trust account of Mr. Devereux. [Doc. 59-10]. North Carolina Secretary of State records reflect the formation of The Spice Must Flow in 2019 and, as of the last Annual Report (2022), identify the members as Defendant and “Thomas Johnson.” [Doc. 59-11]. The records indicate that The Spice Must Flow, LLC engaged in the business of short-term rentals. [Id.]. The Government contends that the $166,013.56 in funds and the Defendant's interest in The Spice Must Flow, LLC are substitute property.
E. Unused Bankruptcy Retainer/Interest in Stay Asheville, Inc.
In 2023, the Defendant, through another of his entities named Stay Asheville, Inc., engaged attorney R. Todd Mosley to file a bankruptcy petition on behalf of Stay Asheville. [WDNC Bankruptcy Case 1:23-bk-10030, Doc. 1]. According to North Carolina Secretary of State Records, the Defendant incorporated Stay Asheville in 2017. [Doc. 59-12]. According to the latest annual report (2019), the Defendant was the Chief Executive Officer. [Id.]. Attorney Mosley filed the Petition but, on March 21, 2023, the Bankruptcy Court dismissed the Petition and barred the petitioner from refiling. [Doc. 632: Order Granting Bankruptcy Administrator's Motion to Dismiss Case and Bar the Debtor from Refiling]. Ms. Nash, through her attorney, has advised the Government that Mr. Mosley is currently holding $10,000 in unused retainer and that Mr. Mosley is awaiting an order of this Court before disbursing the money. The Government contends that this money is substitute property or, alternatively or in addition, the Defendant's interest in Stay Asheville, Inc., which he used to rent various properties (including fraudulently acquired properties), is subject to forfeiture as substitute property.
The Government contends that Stay Asheville is also likely fraud proceeds but, that it only asserts a substitute property theory in its motion for the sake of simplicity.
IV. DISCUSSION
[2] The Government asserts that “Thomas Johnson” is an alias for the Defendant. The Defendant has not contested this assertion.