Submitted April 8, 2014 [*]
Appeals from the United States District Court for the
Northern District District of Illinois, Eastern Division. No. 09 CR 69-1, Rebecca R. Pallmeyer, Judge.
For UNITED STATES OF AMERICA (14-1824, 14-1980, 13-2040), Plaintiff - Appellee: Joseph A. Stewart, Attorney, OFFICE OF THE UNITED STATES ATTORNEY, Chicago, IL.
SUSHIL SHETH (14-1824, 14-1980, 13-2040), Defendant - Appellant, Pro se, Terre Haute, IN.
Before EASTERBROOK, ROVNER, and WILLIAMS, Circuit Judges.
Sushil Sheth, a cardiologist, pled guilty in 2009 to an information charging a single count of healthcare fraud. See 18 U.S.C. § 1347. As agreed by Sheth, the district court entered an order of criminal forfeiture for cash and investment accounts then valued at roughly $13 million plus real estate and a vehicle. The government represented that the forfeited assets represented the proceeds of Sheth's fraud, which the parties had calculated to be approximately $13 million. Sheth's plea agreement specifies that forfeited assets would be credited against the amount of restitution, which the district court had determined to be $12,376,310. In September 2012, however, before the government had liquidated all of the forfeited assets or disbursed any of the proceeds to the victims, it sought more of Sheth's assets to apply to restitution. Sheth objected, arguing that the forfeited assets in the government's possession were enough to satisfy the order of restitution. Without resolving the parties' factual dispute, the district court ordered turnover of the assets, which were held by third parties. Sheth filed an appeal of that ruling, which was docketed as No. 13-2040. We conclude that the court erred by ordering turnover of the assets without first allowing for discovery and holding an evidentiary hearing. We therefore vacate the court's turnover orders and remand for further proceedings. Sheth also has filed two more appeals from later related rulings. Those appeals have been docketed as Nos. 14-1824 and 14-1980, and consolidated with the first appeal. On remand, the district court also should address any properly raised issues related to those appeals.
The government learned of Sheth's fraud in 2006, when one of his colleagues brought a qui tam suit against him under the False Claims Act, see 31 U.S.C. § 3730(b),
and Illinois's Whistle-blower Reward and Protection Act, see 740 ILCS § 175/4(b). The United States intervened in the suit and also initiated a criminal investigation. Sheth's plea agreement lists the property subject to forfeiture and provides " that any payments made in satisfaction of the forfeiture judgment shall be credited to any outstanding restitution judgment." Contemporaneously with Sheth's sentencing in August 2010, a $20 million consent judgment in favor of the United States was entered in the civil suit. One of the terms of the civil settlement is that " [a]ny amounts paid to the United States as criminal restitution in the criminal case ... against Sheth shall be credited against the" $20 million civil judgment.
Six months after Sheth's sentencing, the government had not liquidated all of Sheth's forfeited assets, and neither had the government distributed any proceeds of liquidated assets to the victims. Nonetheless, the government began postjudgment proceedings under the existing criminal docket number to discover other assets belonging to Sheth and to collect those assets in satisfaction of the restitution amount. See United States v. Lee, 659 F.3d 619, 620 (7th Cir. 2011) (explaining that district courts may entertain postjudgment collection proceedings within underlying criminal case). The government elected to use state collection procedures, as permitted by federal law when collecting restitution. See 18 U.S.C. § § 3664(m)(1)(A)(I), 3613(a), (f); United States v. Resnick, 594 F.3d 562, 565 (7th Cir. 2010). It served citations on ten financial-services companies, see 735 ILCS § 5/2-1402(a), informing those third parties about the order of restitution and stating that $12,395,563 remained unpaid. (This is $19,253 more than Sheth was ordered to pay in the restitution order.) The service of such citations initiates supplementary proceedings during which the court may compel a third party in possession of the judgment debtor's assets to turn over the assets to the judgment creditor to satisfy an unpaid judgment. See 735 ILCS § 5/2-1402(a)-(c); Ill. S.Ct. R. 277(b); Dexia
Crédit Local v. Rogan, 629 F.3d 612, 622 (7th Cir. 2010); Workforce Solutions v. Urban Servs. of Am., Inc., 2012 IL App (1st) 111410, 977 N.E.2d 267, 275, 364 Ill.Dec. 778 (Ill.App.Ct. 2012). The government received written answers from the third parties and learned that five of them held assets belonging to Sheth--four brokerage accounts and one 401(k) plan. At the time the citations were served (April and May of 2011), the total value of these assets was $281,102.
In September 2012-18 months after learning of these accounts--the government asked the district court to order the third parties to liquidate Sheth's investments and turn over the proceeds to the clerk of the court. The government stated in its motion that Sheth owed $12,203,370 in restitution, with interest accruing. (This amount is $192,193 less than the balance listed on the citations and $172,940 less than the amount in the order of restitution. These discrepancies are puzzling, since the government had not yet distributed any funds to the victims.) At a hearing in September 2012, Sheth's lawyer requested that the government provide an accounting of the assets that had been forfeited. The government responded that it could say " with some surety [sic]" that the United States Marshals Service was holding $9 million in forfeited assets. The government also stated that it intended to distribute that money to the victims but that it wanted Sheth's additional ...