The opinion of the court was delivered by: TENNEY
Harriet B. Larsen and the Internal Revenue Service ("IRS" or "Government") are the only parties still before the Court in this interpleader action.
Both Ms. Larsen and the IRS have asserted claims against the interpleaded fund, which consists of $145,000, plus interest. The sum in issue was deposited with the Midland Insurance Company ("Midland") in 1975 to secure a bail bond for Dr. Charles Friedgood, who had been indicted for the murder of his wife. In 1976, Dr. Friedgood was convicted of murder in the second degree and larceny in the second degree. After his conviction, the bond was exonerated and this action was commenced.
Ms. Larsen argues that she owned the money in question at the time that she transferred it and that she is therefore entitled to have the funds returned to her. The IRS, which has made a jeopardy assessment against Dr. Friedgood for unpaid federal income taxes, argues that the money belongs to Dr. Friedgood, and should therefore be paid to the Government.
The IRS contends that the money at issue was originally transferred to Ms. Larsen by Dr. Friedgood and that it still belonged to Dr. Friedgood when it was presented to Midland as collateral for the bail bond. The IRS also argues that the transfer of money to Ms. Larsen constituted a fraudulent conveyance under Section 276 of New York's Debtor and Creditor Law, so that the transfer can be set aside, and the money can be reached by Dr. Friedgood's creditors.
A bench trial of this matter was held on June 15, 1986. For the reasons set forth below, the Court finds that the money at issue here is Dr. Friedgood's property and it is therefore subject to the IRS's tax lien. Accordingly, the interpleaded fund is hereby awarded to the IRS.
1. While married to Sophie Friedgood, Dr. Friedgood had a relationship with Ms. Larsen, a nurse whom he employed.
Dr. Friedgood fathered Ms. Larsen's two children, Henrik Larsen, born October 7, 1972, and Mette Larsen, born May 22, 1974. Pre-Trial Order ("PTO") 2.
2. Ms. Larsen is a Danish citizen, and in March 1975, she went back to Denmark with her children. PTO 3.
3. On June 18, 1975 Dr. Friedgood's wife, Sophie Friedgood, was found dead at the Friedgood's Long Island home. The police became suspicious of Dr. Friedgood when they learned that he had signed his wife's death certificate. PTO 4; Trial Transcript ("Tr.") 9.
4. On June 25, 1975, Dr. Friedgood purchased a one-way ticket to London, and boarded a British Airways flight at Kennedy Airport. After the plane had left the gate, it was recalled by the police, and Dr. Friedgood agreed to leave the plane. He carried a black satchel off the plane with him. Inside the satchel were bearer bonds with a total value of $600,000, jewelry valued at $37,000 and stock registered to Dr. Friedgood, in his own name and in his corporate name, CEF Enterprises, Inc. PTO 5.
5. On July 3, 1975, Dr. Friedgood wrote a check for $50,000 on the corporate account of Smallwood Estates Corp. The check -- number 254 -- was made payable to himself, and he sent it to Ms. Larsen in Denmark, where she cashed it. The endorsement stated that the check was cashed by Ms. Larsen, for Dr. Friedgood. PTO 6; Exhibits ("Exhs.") C, AC.
6. On July 7, 1975, Dr. Friedgood wrote another check for $50,000, this time on the corporate account of CEF Enterprises, Inc., which was also made payable to Dr. Friedgood. Ms. Larsen cashed that check in Denmark, and the endorsement stated that it was cashed for Dr. Friedgood. PTO 7; Exhs. D, AC.
7. On July 8, 1975, Dr. Friedgood wrote a third check -- number 267 -- for $50,000. That check was written on the corporate account of Smallwood Estates Corp., and was also made payable to Dr. Friedgood. It was cashed in Denmark by Ms. Larsen, after being signed by both Ms. Larsen and Dr. Friedgood. PTO 8; Exhs. C, AC.
8. On August 5, 1975, Dr. Friedgood was indicted for murder in the second degree and grand larceny in the second degree. He was accused of killing his wife by injecting her with a lethal dose of Demerol. He was also accused of stealing bonds, securities, jewelry, and United States currency from his wife and her estate. PTO 9; Exh. E.
9. In August 1975, Ms. Larsen wired $155,000 from the Handelsbank in Copenhagen to the account of Austin & Dupont, the law firm handling Dr. Friedgood's defense. The source of those funds was money that Dr. Friedgood had ...