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United States v. Terzakis

United States District Court, N.D. Illinois, Eastern Division

August 19, 2016

UNITED STATES OF AMERICA, Plaintiff,
v.
JOHN TERZAKIS, Defendant.

          MEMORANDUM OPINION AND ORDER

          REBECCA R. PALLMEYER UNITED STATES DISTRICT JUDGE

         A federal grand jury in the Northern District of Illinois returned a five-count indictment against Defendant John Terzakis on April 25, 2013. Each of the five counts alleged that Defendant transported across state lines more than $5, 000 he knew to be stolen, in violation of 18 U.S.C. § 2314. These charges were based on allegations that Defendant had stolen funds from the estate of a deceased business partner, Berenice Ventrella. The government sought to recover approximately $2.5 million it claims was stolen from Ventrella. In October 2015, the government learned that a critical witness, Nicholas “Nick” Ventrella (Berenice’s son) (hereinafter, “Nick”), had been diagnosed with a brain tumor and given just six months to live. Prosecutors shared this information with the Defendant, and the parties entered plea negotiations that ultimately proved fruitless. In January 2016, Terzakis demanded a trial; citing the unavailability of a key witness, the government conceded it could not proceed and dismissed the charges.

         Terzakis now claims that the government’s justification for dismissal “is a lie.” (Def.’s Reply [63] at 2 (emphasis in original).) Defendant contends that the indictment was an unsuccessful attempt to strong-arm him into cooperating in another case, and that the government never actually intended to call Nick, whom the indictment described as suffering from “longstanding cognitive disabilities.” Based on these assertions, Defendant has moved to recover his attorney’s fees pursuant to the Hyde Amendment, 18 U.S.C. § 3006A, which allows for fee shifting where the government’s prosecution of an individual was “vexatious, frivolous, or in bad faith.” To obtain evidence he believes would support that motion, Terzakis has also asked the court to order the disclosure of the grand-jury materials related to the indictment in this case. The government objects to both the release of the grand-jury materials and Defendant’s fee motion. For the reasons set forth below, the court concludes that the government’s prosecution of Terzakis does not trigger the fee-shifting provision of the Hyde Amendment. Defendant’s motion for attorney’s fees [51] is therefore denied. As the grand-jury materials are not necessary for the court’s analysis, Defendant’s motion to disclose those materials [57] is also denied.

         BACKGROUND

         I. Factual history

         Most of the facts underlying this case are not in dispute. Until her death in 2008, Berenice Ventrella served as trustee for a family trust with extensive real estate holdings. (Ex. 1 to Gov’t’s Resp. [60] at 1.) Berenice met Defendant John Terzakis-the owner of a property-management company that managed some of her companies-in the early 1990s. (Id. at 2.) Shortly before her death, Berenice signed a document, created at Terzakis’s behest, appointing her son Nick the successor trustee for the Ventrella trust. (Id. at 3.) The appointment agreement required that any significant decisions regarding the trust would be made with Terzakis’s advice and consent. (Ex. 7 to Gov’t’s Resp. at 86-88.)

         This case relates to a particular parcel of land owned by Berenice. Known as the Milwaukee Deerfield North property, the vacant plot abuts two of the four corners of Milwaukee Avenue and Deerfield Road in Buffalo Grove, Illinois. In March 2007, Defendant and Berenice formed an LLC to hold the property, giving Terzakis a 75% interest in the LLC and Berenice 25%. The LLC purchased the property, which had been owned by Berenice, using a $15 million loan from the Parkway Bank.

         Two months after Berenice died, Terzakis opened a new account at Parkway in the name of “Estate of Berenice Ventrella.” Terzakis, Nick, and Berenice’s husband, Angelo, were named as signatories. (Ex. 6 to Gov’t’s Resp. at 1491-94.) This is where the parties’ accounts begin to diverge. According to the government,

Terzakis then took Nick to various banks and caused Nick to move funds totaling approximately $5.4 million out of Berenice’s accounts into the Estate account. Terzakis told Nick-who was still the trustee for Berenice’s estate and therefore responsible for the Estate account-that he needed to pay for the property’s development. . . . Between March and September 2008, Terzakis transferred approximately $4.2 million from the Estate account to the Milwaukee Deerfield North account. Terzakis then transferred substantial amounts of those funds to other accounts he held, for purposes that had nothing whatsoever to do with development of Milwaukee Deerfield North. He had stolen the money based on false representations to Nick about the purpose of the transfers.

(Gov. Resp. at 3.) The government claims that these facts are based, in part, on its interviews with Nick, who said that he had not authorized Terzakis to take the money for any purpose other than the development of the Milwaukee Deerfield North property. (Id. at 3-4.)

         Terzakis has a different account of how he obtained these funds. According to him, the money was used to develop the property. But, he argues, what he did with the money is irrelevant, because it was loaned to him by Berenice’s Estate. (Def.’s Mem. [53] at 7.) Defendant claims that Nick, who has been diagnosed as autistic, was misled and coached into telling a false story to the FBI by government agents and by Joseph Santucci and Joseph Ventrella-Nick’s cousin and brother, respectively. (Id. at 5.) The two men came to the FBI’s Chicago office on March 16, 2010 “to report a theft from the Berenice Ventrella Revocable Trust.” (FBI 302, Ex. 7 to Vol 3, Def.’s Merits Reply [69].) According to Terzakis, Santucci and Joseph Ventrella were lying to the FBI in order to get some of the fortune that Berenice left behind. (Def.’s Reply at 3 n.2 (“After Berenice’s death, Joseph Santucci came up with a plan to regain the vast fortune that his mother had been disinherited from receiving. The plan included manipulation of the Ventrella brothers . . . and making false allegations against John Terzakis, who stood as an obstacle to Santucci’s plan . . . .”).) During that meeting, Santucci provided the FBI with a medical evaluation[1] of Nick performed by Dr. Karen Levin, dated August 19, 2009. (Levin Report, Ex. 2 to Def.’s Grand Jury Reply at 3.) Nick was 67 at the time of Dr. Levin’s evaluation.

         Terzakis proffered in September 2010, while under federal indictment in California on charges arising from an unrelated $24 million Ponzi scheme. (Terzakis 302, Ex 17 to Vol. 3, Def.’s Merits Reply.) Terzakis pleaded guilty to those charges and faced a Guidelines sentence of 188 to 235 months. The court imposed a sentence of just 84 months, well below the guideline, based, in large part, on his significant restitution efforts in that case. (Def.’s Mem. at 10 n.10.) During his proffer, Terzakis shared his version of events regarding the millions of dollars removed from the Estate account in 2008. According to the three agents that conducted the proffer, Terzakis stated that he took Nick and Angelo to multiple banks where Berenice maintained accounts and transferred all of her money into a single account at Parkway Bank in the name of “Estate of Berenice Ventrella.” (Terzakis 302 at 2-3.) When asked about the money removed from the Estate account, Terzakis “responded that he took a loan from the Ventrella family. The loan was for ‘working capital.’” (Id. at 3) He told the agents that the loan ledger and other documents related to the loan could be found in the Willowbrook, Illinois office of his real estate company, Single Site Solutions. He drew a map pointing the government to the documents’ location in the office. (Id.) In reality, the government had already searched the office and recovered the ledger.

         The government contends that it offered Terzakis a “global resolution” to both this case and his California indictment. (Gov’t Resp. at 8.) Defendant and his California attorney “have a different recollection.” (Def.’s Merits Reply at 23.) His California-based lawyer, who represented Defendant from April 2011 to May 2013, says that “At no time during that period of time had anyone mentioned an offer for a global resolution of the two cases. We had no idea a second case existed prior to Mr. Terzakis’ arrest [on the Chicago charges on April 26, 2013].” (Diamond Decl., Ex. 18 to Vol 3, Def.’s Merits Reply.)

         Terzakis pleaded guilty to the California charges in February 2012. He was sentenced in the Northern District of California on September 27, 2012. In April 2013, before Terzakis’s surrender date in that case and just days after Defendant had undergone back surgery, a federal grand jury in the Northern District of Illinois returned an indictment charging Defendant with five counts of violating 18 U.S.C. § 2314. The Chicago indictment also sought criminal forfeiture in the amount of $2, 437, 233.00. Since his April 26, 2013 arrest, Terzakis has remained in custody and is currently serving the sentence imposed by the Northern District of California.

         In October 2015, prosecutors learned that Nick was terminally ill and had approximately six months to live. They disclosed these circumstances to Defendant, and the parties entered into plea negotiations. With Terzakis already incarcerated, the parties reached a tentative agreement that contemplated a guilty plea to a single violation of § 2314, and would have exposed Defendant to no additional prison time and to payment of $250, 000 in restitution. (Ex. 5 to Def.’s Grand Jury Reply [63].) But Terzakis chose to reject the offer on December 23, 2015 and demanded a speedy trial. The government moved to dismiss the case due to Nick’s unavailability on January 8, 2016, and the court entered a dismissal order [49] later that day. Terzakis now moves to recover attorney’s fees under the Hyde Amendment on January 5, 2016 [51].

         DISCUSSION

         I. Hyde Amendment

         Defendant seeks to recover attorney’s fees under the so-called Hyde Amendment[2], named for its sponsor, Illinois Congressman Henry Hyde. The Amendment authorizes the award of attorney fees to a “prevailing party” who was the subject of a federal prosecution that was “vexatious, frivolous, or brought in bad faith.” 18 U.S.C. § 3006A. A party seeking to recover fees “must establish by a preponderance of the evidence that the government’s position was vexatious, frivolous, or in bad faith.” United States v. Truesdale, 211 F.3d 898, 908 (5th Cir. 2000); see also United States v. Campbell, 291 F.3d 1169, 1171 (9th Cir. 2002) (“[Defendant] bears the burden of proof, as well as establishing that he is otherwise qualified[3]for the award under the law.” (internal quotation marks omitted)).

         A. Terzakis is a “prevailing party” for purposes of the Hyde Amendment

         The government contends that Terzakis is not a “prevailing party” because “[he] received no relief on the merits. No judge or jury acquitted him of the charges in the indictment, and he has not been found to be innocent.” (Gov’t’s Resp. at 13.)

         Whether a party is “prevailing” for purposes of the Hyde Amendment is a threshold question. United States v. Sriram, 482 F.3d 956, 959 (7th Cir. 2007) (“[E]ven if the government's position is vexatious, etc., the defendant cannot be awarded fees unless he is the prevailing party.”), vacated on other grounds, 552 U.S. 1163 (2008). The Amendment does not define this key term. It does, however, provide that “awards [of attorney’s fees] shall be granted pursuant to the procedures and limitations (but not the burden of proof) provided for an award under section 2412 of title 28, United States Code [the Equal Access to Justice Act (“EAJA”)].” 18 U.S.C. § 3006A Note. In fact, the Hyde Amendment was modeled after the EAJA.[4] Accordingly, courts have looked to EAJA cases for guidance in determining whether a party has “prevailed.” See Id. (“For the general principle [of who is a prevailing party], see Farrar v. Hobby, 506 U.S. 103, 111-14 (1992) (‘the prevailing party inquiry does not turn on the magnitude of the relief obtained, ’ id. at 114), and Buckhannon ...


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