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UNITED STATES v. IANNIELLO

September 3, 1985

UNITED STATES OF AMERICA, Plaintiff against MATTHEW IANNIELLO, a//k/a "Matty the Horse", BENJAMIN COHEN a/k/a "Benny Cohen," VINCENT FIORILLO, a/k/a "Jimmy Fiorillo," MICHAEL FIORILLO, a/k/a "Red Fiorillo," ANTHONY FIORILLO, JOSEPH FIORILLO, and MICHAEL MARCHINI, a/k/a "Mike Atlas, Defendants


The opinion of the court was delivered by: MOTLEY

MOTLEY, CH. J.

The recently and hastily enacted Comprehensive Forfeiture Act of 1984, Pub.L.No. 98-473, Title II, has, and no doubt, will continue to result in many thorny legal issues to be considered by the courts. Two such issues are before this court. Defendants have made an application seeking the release of certain funds now subject to a restraining order which was issued pursuant to an ex parte application by the Government. Additionally, defendants seek an order declaring that attorneys' fees are exempt from forfeiture under 18 U.S.C. section 1963.

 FACTS

 Defendants Matthew Ianniello, Benjamin Cohen, Vincent Fiorillo, Michael Fiorillo, Anthony Fiorillo, Joseph Fiorillo and Michael Marchini, in a twenty-nine count indictment, have been charged with violating the Racketeer Influenced and Corrupt Organization ["RICO"] statute, and with committing mail fraud and extortion. Defendants are charged in the indictment with concealing their ownership interests in Consolidated Carting Corporation, a waste carting company, in order to fraudulently obtain waste removal licenses from the New York City Department of Consumer Affairs. Defendants also are alleged to have defrauded Consolidated Edison Company of New York ["Con Edison"] by causing other waste carting companies to refrain from collecting or attempting to collect waste from the utility. In addition, defendants allegedly caused other waste carting companies to refrain from submitting bona fide bids for the collection of Con Edison's waste. Furthermore, defendants are alleged to have concealed the identity of those who had interests in Con Edison's waste removal contracts by using "front" corporations and to have caused Con Edison to overpay them for waste collection. In furtherance of this scheme, defendant Vincent Fiorillo is alleged to have extorted competing waste carting companies by threatening their owners in order to obtain their waste removal contracts from Con Edison.

 On February 15, 1985, Judge Palmieri, upon the ex parte application of the United States Attorney for the Southern District of New York, issued a restraining order prohibiting the sale, assignment, pledge or disposition in any manner of certain property belonging to defendants or certain companies owned and controlled by them, to wit: Consolidated Carting Corporation ["Consolidated Carting"], Fiorillo Brothers of New Jersey, Inc. ["Fiorillo Brothers"], Tri-Compaction Sales, Inc., and Atlas Sanitation Co. Inc. The ex parte order does not provide for a hearing to contest the Government's right to restrain these assets. Although the Government and defendants reached an agreement earlier on defendants' use of certain funds which were subject to forfeiture, the parties have not been able to agree upon whether retained earnings from Consolidated Carting and Fiorillo Brothers of New Jersey may be distributed to defendants. Defendants, therefore, have made an application to this court requesting that defendants be permitted to distribute a portion of the profits they have earned since the filing of the indictment in this case.

 The United States Attorney has advised defendants and their counsel that should defendants be convicted of the RICO counts and judgments of forfeiture be obtained against them, the Government might seek to obtain attorneys' fees paid to counsel to satisfy the judgments. The Government asserts that such fees are subject to forfeiture under 18 U.S.C. section 1963.

 Defendants' counsel, therefore, have entered conditional appearances in this case, agreeing to represent defendants only on condition that this court finds legal fees cannot be forfeited under 18 U.S.C. section 1963(e) and (m). Defendants have brought this motion for an order providing that legal fees paid by defendants in connection with this case are exempt from forfeiture under 18 U.S.C. section 1963 (m) in order that they may be represented by their chosen counsel.

 For the following reasons, defendants' motions are granted.DISCUSSION

 Forfeiture of Attorneys' Fees 18 U.S.C. section 1963(c) of the Comprehensive Forfeiture Act of 1984 provides:

 All right, title, and interest in property described in subsection (a) vests in the United States upon the commission of the act giving rise to forfeiture under this section. Any such property that is subsequently transferred to a person other than the defendant may be subject of a special verdict of forfeiture and thereafter shall be ordered forfeited to the United States, unless the transferee establishes in a hearing pursuant to subsection (m) that he is a bona fide purchaser for value of such property who at the time of purchase was reasonably without cause to believe that the property was subject to forfeiture under this section.

 Section 1963(m) of 18 U.S.C. permits a third party to challenge the forfeiture of property transferred to him by a defendant convicted of RICO violations. The third party, after the judgment of forfeiture has been entered, has the burden of petitioning the court to vacate the forfeiture. An opportunity is provided to the third party petitioner to present his case at a post-conviction hearing. The third party petitioner must establish by a preponderance of the evidence that:

 
(A) the petitioner has a legal right, title or interest in the property, and such right, title or interest renders the order of forfeiture invalid in whole or in part because the right, title, or interest was vested in the petitioner rather than the defendant or was superior to any right, title or interest of the defendant at the time of the commission of the acts which gave rise to the forfeiture of the property under this section.
 
(B) the petitioner is a bona fide purchaser for value of the right, title, or interest in the property and was at the time of purchase reasonably without cause to believe that the property was ...

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