The opinion of the court was delivered by: Michael M. Mihm United States District Judge
Before the Court is the Government's Motion to Deny Claim of Third Party Interest in $1 million. For the reasons set forth below, the Government's motion [#139] is GRANTED.
This case involves a criminal forfeiture pursuant to 18 U.S.C. § 982. The following summary of relevant facts is primarily adopted from the Government's Memorandum Regarding the Forfeiture of $1 Million. (See Docket Entry #151.)
From approximately June 1997, through April 9, 2002, Wendell Gates, Gigi Zaccagnino, and Peter Zaccagnino engaged in a scheme to defraud investors of over $20 million through a "high yield" investment program. These individuals used a number of corporate entities, including New Millennium Management ("NMM") a Florida corporation, to divert investors' funds and launder the proceeds of their fraud. There is no dispute that the transfer of the $1 million at issue in this case to the account in Switzerland was part of the fraudulent scheme.
On November 22, 1999, Gates, wire transferred $1 million from a NMM bank account to the account of Mr. Liam Skelley in Switzerland. The account was frozen upon the order of the Swiss authorities at the request of the United States Department of Justice..
On April 9, 2002, Gates, on behalf of NMM, filed bankruptcy in the Middle District of Florida. An automatic stay was issue pursuant to Title 11 U.S.C. § 362(a)(1).
On January 26, 2003, Gates and the Zaccagninos were indicted in the Central District of Illinois. A supercedeing indictment was filed on January 20, 2005. Both indictments contained forfeiture allegations whereby the Government sought the forfeiture of a number of the Defendants' properties, including the $1 million in Switzerland.
On July 21, 2003, the Government filed an in rem action in this Court regarding the $1 million. See United States v. $1,000,000, 03-CV-1236 (C.D. Ill., July 21, 2003).
On May 6, 2004, the Bankruptcy Trustee for the NMM bankruptcy filed an adversary proceeding against Liam Skelley and the Swiss bank asserting a claim to the $1 million alleging that the $1 million was part of the NMM bankruptcy estate. The Trustee did not provide notice to the United States of the adversary proceeding. The Bankruptcy Trustee obtained an order of default against Skelley and then filed a Motion for Summary Judgment asking the Bankruptcy Court to enter judgment declaring that the $1 million was the property of the NMM estate, that Liam Skelley has no interest in such money, and that the estate is entitled to have the money turned over to it. In the Memorandum accompanying its Motion for Summary Judgment, the Trustee stated that the Swiss bank (formerly Bank Adamas and now known as Bipielle Bank) froze the funds at the request of the United States Department of Justice because of a suspicion that the funds were involved in a money laundering scheme. Later in the Memorandum, the Trustee informed the Bankruptcy Court "[t]here is no suggestion or indication that the United States has sought to seize the funds for itself or for any other distribution to defrauded investors."
On March 4, 2005, the Bankruptcy Court entered summary judgment in favor of the Bankruptcy Trustee and found that the funds in the Swiss bank were actually property of the bankruptcy estate. In its Order, the Bankruptcy Judge noted that the Swiss bank account had been frozen at the request of the United States but that there was no suggestion or indication that the United States sought the money for itself or to distribute to defrauded investors.
On April 1, 2005, Wendell Gates pled guilty to multiple counts of the superceding indictment, as well admissions to the forfeiture allegations.
On May 16, 2005, this Court entered a Preliminary Order of Forfeiture relating to Wendell Gates' interest in the properties listed in the superceding indictment, including the $1 million in the Swiss bank account.
In July 2005, the Bankruptcy Trustee filed a third party claim to the $1 million in this Court. The Government responded to the Bankruptcy Trustee's claim by filing a Motion to Deny the claim. The Bankruptcy Trustee responded to the Government's motion and the Court held both a telephone and an in-person hearing on the motion. As a result of the in-person hearing on January 12, 2006, the Court ordered both the Trustee and the Government to file supplemental briefs on ...