United States v. Egan
Opinion of the Court
SUMMARY ORDER
ADP Federal Credit Union (“ADP”) appeals from an August 13, 2015 opinion and order as well as an August 20, 2015 final order of forfeiture entered by the United States District Court for the Southern District of New York (Keenan, /.). These orders direct the forfeiture to the United
ADP contends that the Government’s interest in substitute property does not vest until the entry of a final order of forfeiture—i.e., one entered following the ancillary proceeding—and accordingly, ADP’s judgment lien filed between entry of the preliminary order and entry of the final order gives it priority over the Government under § 853(n)(6)(A). This argument is wholly inconsistent with the statute. Section 853(p) provides that a court “shall order the forfeiture” of substitute property upon the Government’s demonstration of the statutory factors. The entry of “an order of forfeiture” authorizes the Attorney General to take a number of actions, including seizure and disposition by sale of such property as she sees fit, subject to certain considerations and emergency restraint mechanisms. See § 853(g)-(i); see also Fed. R. Crim. P. 32.2(b)(3). Only “following the entry of an order of forfeiture” may third parties assert in an ancillary proceeding any legal interests they may possess. § 853(n)(l)-(2). Where a third party demonstrates that it meets the criteria for superior third-party interests, the court is required to “amend the order of forfeiture.” § 853(n)(6); see also Fed. R. Crim. P. 32.2(c)(2).
The statute therefore contemplates that an order of forfeiture actually accomplishes the forfeiture of the defendant’s interest in the contested property. The court must then allow third parties to assert any pre-existing legal interest in the forfeited property and must amend the order if that interest is proven by a preponderance of the evidence. But nothing about the statute suggests that the order of forfeiture entered before the ancillary proceeding (denoted as the “preliminary order” in Rule 32.2(b)(1)) does not actually effect the forfeiture of the substitute property. Accordingly, we conclude that the Government’s interest in the property in question vests, at the very latest, upon entry of an order of forfeiture concerning that property, notwithstanding the fact that it is a “preliminary order” as identified by Rule 32.2(b).
Next, ADP argues that entry of the preliminary order four days after the Government’s motion—and thus ten days prior to expiration of the fourteen-day time to oppose provided by Local Rule 49.1—con-stitutes error and that, if the preliminary order had been entered on the fifteenth day, its judgment lien would have priority. It is true that local rules “have ‘the force of law.’ ” Hollingsworth v. Perry, 558 U.S. 183, 191, 130 S.Ct. 705, 175 L.Ed.2d 657 (2010) (quoting Weil v. Neary, 278 U.S. 160, 169, 49 S.Ct. 144, 73 L.Ed. 243 (1929));
Finally, ADP asserts that its judgment against Egan should qualify it as a “bona fide purchaser” under § 853(n)(6)(B). This argument borders on frivolous. First, a judgment creditor is not a bona fide purchaser for value. See United States v. BCCI Holdings, Lux., S.A., 69 F.Supp.2d 36, 62 (D.D.C. 1999) (concluding a judgment lienholder “is not a bona fide purchaser of that property because he has given nothing of value in exchange for the property interest”). Second, the purchase must be of the specific “right, title, or interest in the property,” § 853(n)(6)(B), and there is no indication that the contract ADP relies upon involved the Shares in any capacity. Third, at the time ADP gained whatever interest it possesses in, the' Shares—ie., “the time of purchase” under this (strained) reading of the subsection—the Shares had already been ordered forfeited and thus ADP cannot claim to have been “reasonably without cause to believe the property was subject to forfeiture” as required by the statute. Id. The District Court thus properly concluded that ADP did not satisfy the criteria embodied in the bona fide purchaser exception.
We have considered all of ADP’s arguments and find them to be without merit. For the reasons stated above, the opinion and orders of the District Court are AFFIRMED.
. The district courts in our Circuit are divided as to whether the government’s interest in substitute assets may in fact vest even prior to entry of the forfeiture order. Compare United States v. Peterson, 820 F.Supp.2d 576, 585 (S.D.N.Y. 2011) (vests when grand jury indictment noticing forfeiture was returned), with United States v. Kramer, No. 06-cr-200, 2006 WL 3545026, at *6-8 (E.D.N.Y. Dec. 8, 2006) (vests when defendant is convicted), with United States v. Jennings, No. 98-cr-418, 2007 WL 1834651, at *4 (N.D.N.Y. June 15, 2007) (vests when order of forfeiture is entered). We need not determine this question, since ADP's filing of its judgment lien occurred after all of these dates.
. ADP contends that, although it could not raise its own claims prior to the ancillary proceeding, it had a right to raise any challenge that Egan might have had to the preliminary order of forfeiture on the ground that the government had failed to meet its burden to prove that the assets were subject to forfeiture. That argument is precluded by § 853(k)’s bar on third-party intervention in forfeiture proceedings.
Reference
- Full Case Name
- United States v. Robert EGAN, Bernard Mcgarry, ADP Federal Credit Union, Third-Party-Petitioner-Appellant
- Cited By
- 1 case
- Status
- Published