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United States v. Egan

July 29, 2010


The opinion of the court was delivered by: John F. Keenan, United States District Judge

Opinion & Order

Defendant Robert Egan ("Defendant" or "Egan") moves to set aside or modify the restraining order executed by this Court on April 19, 2010, and for a hearing pursuant to the Court of Appeals for the Second Circuit's holding in United States v. Monsanto, 924 F.2d 1186 (2d Cir. 1991). For the reasons that follow, Defendant's motion is denied.


Egan is the principal and owner of Mount Vernon Money Center ("MVMC"), a New York company that, as of January 2010, was engaged in various cash management businesses, including check cashing, ATM replenishment, armored transportation, and payroll services. On March 10, 2010, a grand jury returned a seven-count Indictment against Egan and Bernard McGarry ("McGarry"), MVMC's Chief Operations Officer, charging them with one count of conspiracy to commit bank and wire fraud, in violation of 18 U.S.C. § 1349, and six counts of bank fraud, in violation of 18 U.S.C. § 1344. The Indictment alleges that from at least in or about 2005 up to and including in or about February 2010, Egan and McGarry misappropriated tens of millions of dollars of their customers' money, using it to fund operating losses in MVMC's businesses and to enrich themselves.

On April 19, 2010, the Court granted the Government's ex parte application for a post-Indictment restraining order pursuant to 18 U.S.C. §§ 982(a)(2) and (b)(1) and 21 U.S.C. § 853(e)(1)(A) (the "Restraining Order"). The Restraining Order provides, among other things, that Defendant and his representatives shall not "transfer, sell, assign, pledge, distribute, hypothecate, encumber, attach or dispose in any manner" two residences located in Bedford Corners, New York, several investment and bank accounts held by Egan, and a single bank account held in the name of his wife.

On June 2, 2010, Egan filed the instant motion*fn1 requesting relief from the Restraining Order. Through his counsel, Egan claims that since his arrest, his only remaining sources of income are his pension benefits and his wife's social security benefits, which together total roughly $3,500 per month. Egan claims that his household's diminished monthly income, together with their remaining assets, are insufficient to cover monthly living expenses and his legal costs. He provides a table which details his "necessary" monthly costs, including his mortgage, food, vehicles, and property maintenance, which total $20,762. As such, Egan seeks a modification of the Restraining Order to allow the release of certain restrained assets to pay for attorney's fees and his living expenses. In the alternative, he asks the Court to set aside the Restraining Order on the theory that the Government has failed to establish probable cause that the restrained assets are forfeitable.*fn2 On that point, he requests a hearing, pursuant to United States v. Monsanto, 924 F.2d 1186 (2d Cir. 1991).


A. 21 U.S.C. § 853 and Monsanto

The forfeiture allegation in the Indictment is governed by the provisions of 21 U.S.C. § 853, which categorically provides that criminal defendants convicted of conspiracy and bank fraud charges "shall forfeit . . . any property constituting, or derived from, any proceeds the person obtained, directly or indirectly, as the result of such violation." 21 U.S.C. § 853(a)(1); see 18 U.S.C. §§ 982(2)(a) and (b)(1) (providing that the forfeiture of property of those convicted of bank fraud in violation 18 U.S.C. § 1344 shall be governed by 21 U.S.C. § 853). Pursuant to § 853(e)(1)(A), at any time after an indictment has been filed, the Government may move for a restraining order in order "to preserve the availability of property . . . for forfeiture under [section 853(a)]." A motion for a restraining order should be granted by the district court when there is "probable cause to believe that the assets are forfeitable." United States v. Monsanto ("Monsanto III"), 491 U.S. 600, 615 (1989).

A court's ability to restrain assets before trial under 21 U.S.C. § 853(e)(1) was thoroughly addressed by the Second Circuit and the United States Supreme Court in the Monsanto line of decisions. In that case, the same day the defendant was indicted on RICO and narcotics charges, the district court entered an order, pursuant to § 853(e)(1), prohibiting the defendant from selling or encumbering several assets. The defendant then moved to vacate or modify the restraining order on the ground that he needed use of those restrained assets to hire the private counsel of his choice. His motion was denied by the district court. In United States v. Monsanto ("Monsanto II"), 852 F.2d 1400 (2d Cir. 1988), the Second Circuit, sitting en banc, reversed the district court, with the majority of the panel agreeing that the restraining order should be modified to release funds necessary to pay for attorney's fees.*fn3 Id. at 1402. The Supreme Court then granted certiorari and reversed, holding that § 853 provides no exemption for assets needed to retain counsel of choice and "neither the Fifth nor the Sixth Amendment to the Constitution requires Congress to permit a defendant to use assets adjudged to be forfeitable to pay that defendant's legal fees." Monsanto III, 491 U.S. at 614.

The Supreme Court did not address, however, the procedural aspects of such a pre-trial restraint of property under § 853(e)(1)(A). Id. at 615 n.10. As such, on remand, the Second Circuit, again sitting en banc, addressed the issue of whether due process requires "an adversary post-attachment, pretrial hearing in order to continue an attachment of assets needed to retain counsel of choice." United States v. Monsanto (Monsanto IV), 924 F.2d 1186, 1191 (2d Cir. 1991). The Second Circuit answered that question in the affirmative, holding that the "fifth and sixth amendments, considered in combination, require an adversary, post-restraint, pretrial hearing as to probable cause." Id. at 1203.

B. Motion to Release Funds for Living Expenses and Professional Fees

The Court first addresses Defendant's request to modify the Restraining Order to release funds in the amount of $75,000 for the professional fees of his legal counsel and accountant and $20,762 per month to cover living expenses, including mortgage payments, food, insurance, and medicine.

It is first worth noting the Defendant's loose interpretation of the phrase "necessary living expenses." The Court does not take lightly a request to release funds allegedly stolen from former customers in order to finance luxuries such as $2,250 per month for Defendant's three high-end vehicles, the mortgage on his multi-million dollar home, and $900 per month for landscaping. Even if the Court were inclined to release immediately nearly $100,000 and roughly $20,000 every month thereafter so that the Defendant can maintain, ...

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