Opinion
Criminal No. 15-CR-285
2020-04-15
UNITED STATES of America v. Linda Diane WALLIS
Uzo Asonye, Karen Ledbetter Taylor, Samantha Bateman, United States Attorney's Office, Alexandria, VA, for United States of America.
Uzo Asonye, Karen Ledbetter Taylor, Samantha Bateman, United States Attorney's Office, Alexandria, VA, for United States of America.
ORDER
T.S.Ellis, III, United States District Judge
This matter is before the Court on: (i) the government's motion for entry of a final order of forfeiture; and (ii) the government's motion to dismiss Petitioner David Miller's petition for interest in forfeited property for lack of standing. Miller filed a response in opposition to the government's motion for entry of a final order of forfeiture but did not file any response to the Motion to Dismiss despite the passage of over two months. The matter is thus ripe for disposition. Oral argument is dispensed with as the facts and legal contentions are adequately set forth in the existing record and oral argument would not aid the decisional process.
I.
On October 15, 2015, Defendant Linda Diane Wallis pled guilty to an amended criminal information charging her with wire fraud in violation of 18 U.S.C. § 1343. In addition to pleading guilty to wire fraud against SkyLink Aviation, the Statement of Facts signed by Wallis asserts that she also engaged in fraud against the Community College Consortium on Autism and Intellectual Disabilities ("CCCAID") and against the Saslaw for State Senate Campaign (the "Saslaw Campaign") in order to pay for her family's expenses, including those of David Miller, her husband. The amended criminal information asserts that the scheme involving all three inter-linked frauds caused losses of more than $1 million and were "[a]ll in violation of Title 18, United States Code, Section 1349." Dkt. 3. On March 18, 2016, a Consent Order of Forfeiture issued which forfeited Wallis' interest in fraud-related assets, including but not limited to: (i) the proceeds from the sale of the property located at 4551 Forest Drive, Fairfax, Virginia (the "Fairfax Property"); and (ii) the property located at 28961 Indian Harbor Drive, Unit 3, Bethany Beach, Delaware (the "Bethany Beach Property").
On April 18, 2016, Miller filed a petition for interest in forfeited property (the "Petition") asserting his interest as the sole owner of the Fairfax and Bethany Beach Properties. Miller argued that Wallis never had an ownership interest in nor was she a titled owner of the properties and thus the properties cannot be forfeited as part of Wallis' criminal case. The government opposed the petition. A hearing on the petition was held on December 16, 2016. Thereafter, an Order issued requiring further briefing on certain issues. After supplemental briefing was completed, a second hearing was held on March 24, 2017. That same day a second order requiring supplemental briefing issued and a third hearing was set. On June 9, 2017, the Court resumed the forfeiture hearing on Miller's petition and thereafter took the petition under advisement, providing the parties with one more opportunity to file supporting briefs.
Miller also filed a motion for relief seeking to require the government to release the lis pendens that it had filed on the Fairfax Property. The government did not oppose releasing the lis pendens so that the Fairfax Property could be sold, so long as the proceeds were deposited with the United States Marshals Service.
As part of the extensive hearings held regarding forfeiture, the Court heard testimony from an Stacy Young, a certified public accountant, and received evidence submitted by the parties.
On September 20, 2017, a federal grand jury returned an indictment charging Miller with: (i) conspiracy to commit mail or wire fraud (Count 1); (ii) conspiracy to launder monetary instruments (Count 2); (iii) mail fraud (Counts 3-6); (iv) wire fraud (Counts 7-10); and (v) aggravated identity theft (Counts 11-12). See United States v. Miller , No. 17-cr-213 (E.D. Va.). As part of that proceeding, Miller also contested the seizure of the proceeds from the Fairfax Property and the lis pendens on the Bethany Beach Property. After evidentiary hearings in February 2018, a memorandum opinion issued denying Miller's motion. See United States v. Miller , No. 17-cr-213, Memorandum Opinion (Dkt. 44). The March 8, 2018 memorandum opinion held that there was probable cause to believe that the Fairfax and Bethany Beach Properties were "involved in" the money laundering conspiracy and, in part, "traceable to" the money laundering conspiracy and the fraud charged in the indictment. Miller appealed that decision. Thereafter, the Fourth Circuit affirmed the district court's decision, holding that probable cause supported a finding that Miller "involved the properties in money laundering transactions by spending laundered funds to improve and retain them." United States v. Miller , 911 F.3d 229, 234 (4th Cir. 2018). The Fourth Circuit also found that the Fairfax and Bethany Beach Properties were "forfeitable because they are ‘traceable to’ laundered funds and funds obtained through fraud under § 981." Id.
On September 24, 2019, a jury trial began on the twelve-count indictment against Miller. On October 4, 2019, the jury returned a verdict finding Miller guilty of ten of the twelve counts charged in the indictment. Specifically, the jury found Miller guilty of: (i) conspiracy to commit mail or wire fraud (Count 1); (ii) conspiracy to launder monetary instruments (Count 2); (iii) mail fraud (Counts 3-6); and (iv) wire fraud (Counts 7-10). The jury deadlocked on the remaining two counts of aggravated identity theft, following which a mistrial was declared on the ground that there was a manifest necessity. Thereafter, the government's motion to dismiss the aggravated identify theft charges was granted.
Because Miller was found guilty of Counts 1-10, the question of forfeiture was required to be presented to the jury. Following the parties' arguments on forfeiture, the jury found, in a special forfeiture form: (i) that the net proceeds from the sale of the "Fairfax Property constitute proceeds or are derived from proceeds traceable to Count 1 or Counts 3-10; (ii) that the amount of traceable proceeds from the Fairfax Property is $315,317.10; (iii) that the property and improvements at the "Bethany Beach Property constitute proceeds or are derived from proceeds traceable to Count 1 or Counts 3-10; (iv) that the amount of traceable proceeds to the Bethany Beach Property is $58,818.35; (v) that the Fairfax Property was involved in the money laundering offense charged in Count 2; and (vi) that the Bethany Beach Property was involved in the money laundering offense charged in Count 2.
On November 21, 2019, after oral argument by the parties, a preliminary order of forfeiture issued finding that the Fairfax and Bethany Beach Properties were forfeitable to the government. See United States v. Miller , No. 17-cr-213, Preliminary Order of Forfeiture (Dkt. 175). On January 24, 2020, following Miller's sentencing, a final order of forfeiture issued. See United States v. Miller , No. 17-cr-213, Final Order of Forfeiture (Dkt. 206). The final order of forfeiture ordered that the government shall have clear title to the Bethany Beach Property and to the proceeds of the sale of the Fairfax Property.
The government sought to have the same final order of forfeiture entered in this case. Miller opposed the entry of that order. The government then filed a motion to dismiss Miller's April 2016 petition for interest in forfeited property and in support of its motion for entry of a final order of forfeiture.
II.
Rule 32.2, Fed. R. Crim. P., governs criminal forfeiture and sets out the procedure that the government must follow before a court may enter a final order of forfeiture. See United States v. Oregon , 671 F.3d 484, 487-88 (4th Cir. 2012). Where a court enters a preliminary order of forfeiture, "any third party who claims an interest in the property to be forfeited may file a petition with the district court contesting the forfeiture." Id. at 488. If a third party comes forward and files a petition, the court must conduct an ancillary forfeiture proceeding. See id. The first step of such a proceeding is for the district court to consider "any motion by the United States to dismiss the petition for lack of standing before moving to the merits of the petition." Id. Here, the government has now moved to dismiss Miller's petition based on a lack of standing.
To contest a government forfeiture action, a claimant must establish both Article III standing and statutory standing. "In order to establish Article III standing, a claimant must have a colorable ownership, possessory or security interest in at least a portion of the [seized] property." United States v. Munson , 477 F. App'x 57, 62–63 (4th Cir. 2012) (citations omitted). To establish statutory standing in a forfeiture case, a claimant must satisfy the standing requirements of 21 U.S.C. § 853(n). Specifically, § 853(n)(2) "allows any person, other than the defendant, asserting a ‘legal interest’ in the property to petition the district court for a hearing to adjudicate its asserted interest." Oregon , 671 F.3d at 490. Thus, the possession of a "legal interest" in the forfeited property is "the touchstone for standing" of a third party to challenge a preliminary order of forfeiture. Id.
Here, the Court has already. determined, in Miller's criminal proceeding that Miller's interest in the subject properties is forfeit and that the government has clear title to the properties. See United States v. Miller , No. 17-cr-213, Final Order of Forfeiture (Dkt. 206). The question then becomes: what is the effect of the final order of forfeiture in Miller's criminal case on his petition in this case? The answer, as the government correctly notes, is that Miller no longer has standing to pursue the petition. As the Fourth Circuit recognizes, an order of forfeiture entered at sentencing conclusively determines all of a defendant's interests in the forfeited property. See United States v. Earquhart , 776 F. App'x 802 (4th Cir. 2019) (per curiam) (citing United States v. Pelullo , 178 F.3d 196, 202 (3d Cir. 1999) ). Thus, where a co-defendant or co-conspirator seeks to file ancillary proceedings after an order of forfeiture was entered in that individual's own criminal case, courts have sensibly dismissed those petitions.
Courts uniformly recognize that an order of forfeiture terminates a criminal defendant's interest in a forfeited property. See United States v. Elliott , 149 F. App'x 489, 492 (7th Cir. 2005) ("The March 30, 2004 preliminary order of forfeiture was conclusive as to Elliott's interest in the forfeited townhouse and thus was the final order in the matter as to him."); United States v. Brunson , 89 F.3d 851 (10th Cir. 1996) (unpublished) (holding that effect of forfeiture order was "to terminate entirely defendant's interest, whatever it might be, in the listed property").
In United States v. Ford , No. 12-cr-163, 2014 WL 1334223 (D. Me. Apr. 2, 2014), the district court dismissed a third-party petition in an ancillary forfeiture proceeding after that individual was convicted at trial and ordered to forfeit the same property. In Ford , a husband and wife were charged together in a criminal conspiracy but were tried separately. See id. at *1. After the husband was convicted and ordered to forfeit his interest in a piece of real property, the wife filed a third-party petition asserting that she was an innocent owner. See id. While that petition was pending, trial commenced against the wife and she was likewise convicted and ordered to forfeit her interest in the subject property. See id. The district court in Ford then struck the wife's petition on the government's motion. In so doing, the district court held:
As the Court's earlier preliminary order of forfeiture as to Mr. Ford's property rights in 360 Swan Lake Avenue is the same property that the jury subsequently determined was involved in Ms. Ford's controlled substances offenses, this jury determination and the preliminary order of forfeiture as to Ms. Ford have extinguished the predicate for her earlier-filed notice of claim to 360 Swan Lake Avenue. In other words, Ms. Ford has no cognizable ‘legal right, title, or interest’ under 18 U.S.C. § 853(n)(6) to the property that the jury and this Court have determined she must forfeit.
Id. at *2. Similarly, here, the jury and the Court in Miller's criminal case determined that Miller's interest in the Fairfax and Bethany Beach Properties was forfeited and terminated Miller's interest in the forfeited properties. See United States v. Miller , No. 17-cr-213, Special Forfeiture Jury Verdict (Dkt. 130); Preliminary Order of Forfeitures (Dkt. 175); Final Order of Forfeiture (Dkt. 206). Thus, Miller no longer has any "legal right, title, or interest" in the subject properties pursuant to 18 U.S.C. § 853(n)(6). While this scenario appears to be fairly unusual, other courts have recognized that third parties in Miller's situation do not have an interest in the subject properties.
See United Sates v. Winkelman , 527 F. App'x 127, 129 (3d Cir. 2013) (holding that defendant's "interest in the bank account was finally forfeited in 2003 as part of the criminal judgment against him" thus rendering the failure to provide notice of forfeiture in criminal proceedings involving a co-defendant a "specious" argument); United States v. Pelullo , 178 F.3d 196, 202 (3d Cir. 1999) (defendant lacks standing to file a claim in ancillary forfeiture proceeding because he no longer had an interest in the property); cf. United States v. Bennett , No. 97-cr-639, 2004 WL 829015, at *2 (S.D.N.Y. Apr. 15, 2004) ("A defendant lacks standing to make substantive motions in a forfeiture proceeding ancillary to his criminal case where he has lost his interest in the properties at issue.").
Because Miller lacks any legal right, title, or interest in the subject properties, he lacks standing to pursue the petition and his petition must be dismissed.
III.
Even assuming arguendo that Miller has an interest in the subject properties, it would still be appropriate to enter the final order of forfeiture in Wallis' case. In both the Wallis case and the Miller case, the government established a scheme involving three inter-linked frauds against SkyLink, CCCAID, and the Saslaw Campaign. See Am. Crim. Info.; United States v. Miller , No. 17-cr-213, Indictment. The government also established, through a tracing analysis, that proceeds from that scheme were traceable to the Fairfax and Bethany Beach Properties. Miller argues that it is inappropriate to forfeit the properties in Wallis' case, because she had no ownership interest in the properties. This argument ignores authority that "[t]he interests subject to forfeiture encompass all the fruits of a defendant's crimes, including assets held in the names of third parties." United States v. Grossman , 501 F.3d 846, 849 (7th Cir. 2007). Here, the government established that $313,550.82 in fraud proceeds were traceable to the Fairfax Property and that $58,818.35 in fraud proceeds were traceable to the Bethany Beach Property. Accordingly, it is appropriate to enter the final order of forfeiture in this case.
In Miller's case, the Fourth Circuit affirmed the use of the tracing analysis and held that the proceeds of the fraud were traceable to the properties. See United States v. Miller , 911 F.3d 229, 234 (4th Cir. 2018).
See, e.g., United States v. Hooper , 229 F.3d 818, 822 (9th Cir. 2000) ("[Section] 853(n)(6)(A) is likely never to apply to proceeds of the crime"); United States v. Seabrook , 661 F. App'x 84, 86 (2d Cir. 2016) (funds transferred to third parties were forfeitable as proceeds).
Miller also challenges the amount of the money judgment in his briefs on forfeiture. Wallis has not, however, challenged the amount of the money judgment and the preliminary order of forfeiture was entered by consent of the parties to this case. Miller does not have standing to challenge the amount of the money judgment entered against Wallis, especially where Wallis concedes that the amount is correct.
Accordingly,
It is hereby ORDERED that the government's motion for final order of forfeitures (Dkt. 112) is GRANTED . An appropriate final order of forfeiture will issue separately.
It is further ORDERED that the government's motion to dismiss Miller's petition for lack of standing (Dkt. 116) is GRANTED.
It is further ORDERED that Miller's petition for interest in forfeited property (Dkt. 36) is DISMISSED .