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United States of America v. Robert Egan and Bernard Mcgarry

August 28, 2012

UNITED STATES OF AMERICA
v.
ROBERT EGAN AND BERNARD MCGARRY, DEFENDANTS.
INSERRA SUPERMARKETS, INC., LML SUPERMARKETS, INC.,
SHOPRITE OF GARNERVILLE, INC., CAPITAL ONE, N.A., AS ASSIGNEE OF UNITED CHECK CASHING CORP., SULTANA DISTRIBUTION SERVICES, INC.,
SMITHFIELD ASSOCIATES LLC, WINDY GATES, SOHO, INC., MAHOPAC NATIONAL BANK, DOMINOS PIZZA, TONY MAESTRI, DENBURG PIZZA, INC., AND JAMES DENBURG, THIRD-PARTY PETITIONERS.



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

OPINION AND ORDER

JOHN F. KEENAN, UNITED STATES DISTRICT JUDGE:

Thirty-eight third-party petitions have been filed in this ancillary criminal forfeiture proceeding. Each contains a demand for the return of some portion of $19,288,702.72 in United States currency seized from the vaults of the Mount Vernon Money Center (the "Seized Currency") in the course of the Government's investigation of defendants Robert Egan and Bernard McGarry. To date, the Government has settled thirty-one of these petitions. Those petitioners who have been unable to settle with the Government now move for summary judgment with respect to their claimed ownership interests in a total of $1,030,519.80 of the Seized Currency. For the reasons discussed below, the petitioners are entitled to recover the full amount claimed in their petitions, with the exception of Dominos Pizza and Tony Maestri. Dominos Pizza and Tony Maestri may recover only $30,264.00 of their joint petition for the return of $30,668.40. Subject to this limitation, the petitioners' motion for summary judgment is granted.

I. BACKGROUND

The facts discussed below are taken from the Stipulation of Undisputed Facts ("Joint Stip."), the parties' Local Civil Rule 56.1 Statements, the declarations submitted in connection with the instant motion, and the exhibits attached thereto.

A. MOUNT VERNON MONEY CENTER AND THE DEFENDANTS' SCHEME TO DEFRAUD THEIR CUSTOMERS

Prior to his arrest in connection with this case, Robert Egan ("Egan") owned and operated Mount Vernon Money Center ("MVMC"). (Joint Stip. ¶ 5.) Through its subsidiaries, MVMC operated four principal lines of business: (1) ATM replenishment; (2) on-site employee check cashing; (3) in-store check cashing; and (4) armored transportation. (Id.) MVMC's armored transportation services were administered by American Money Services, LLC ("AMS"), which purchased American Armored Car, Ltd. in 2007 and became its successor in interest. (Joint Stip. ¶ 6.) AMS offered cash-processing and cash-counting services to some of its armored transportation customers, but for other armored transportation customers, AMS limited its services to collecting sealed bags or trays of currency and transporting these containers to third parties. (Pet'rs' L. R. 56.1 S. ¶¶ 7--10, Feb. 17, 2012, ECF No. 340) The Government admits that AMS personnel did not open the sealed bags of currency or in any way process the currency it was charged with transporting unless AMS personnel had "standing customer instructions" permitting them to do so. (Gov't L. R. 56.1 S. ¶ 13, Feb. 17, 2012, ECF No. 343.)

B. MVMC'S RELATIONSHIP WITH NON-SETTLING PETITIONERS

Inserra Supermarkets, Inc., ("Inserra"), LML Supermarkets, Inc. ("LML Supermarkets"), Shoprite of Garnerville, Inc. ("Shoprite of Garnerville," and with Inserra and LML Supermarkets, the "Inserra Petitioners"), United Check Cashing Corporation, which later assigned its claims to Capital One, N.A. ("Capital One"), Sultana Distribution Services, Inc. ("Sultana"), Smithfield Associates LLC (doing business as "Pastis"), Windy Gates Soho, Inc. (doing business as "Balthazar"), Mahopac National Bank ("Mahopac"), Tony Maestri and Dominos Pizza (together, "Maestri's Dominos"), and James Denburg and Denburg Pizza, Inc. (together, "Denburg's Dominos") (collectively, "Non-Settling Petitioners"), were customers of AMS who claim to have contracted with AMS only for its currency transportation services. According to the Non-Settling Petitioners, their money had always been delivered according to their contracts with AMS and they were at no point victims of Egan and McGarry's fraudulent scheme.

In support of these claims, the Non-Settling Petitioners rely on the statements of former AMS Vice President of Operations Steve Zabatino, as well as affidavits provided by employees and their contracts with AMS. (Pet'rs' L. R. 56.1 S. ¶¶ 19--20, 30, 57, 80, 91--92, 110--11, 122--23.) During an interview conducted by the Federal Bureau of Investigation ("FBI") on January 11, 2011, Zapatino stated that, for customers who had contracted only for currency transportation, AMS would pick up the currency in sealed bags and deliver the currency to the designated recipient on the same day or the following business day. (Weinstein Decl. Ex. A, Bates No. 000207, Feb. 17, 2012, ECF No. 329.) Zapatino clearly identified Maestri's Dominos, United Check Cashing, Mahopac, and Inserra as transportation-only customers, and was unsure about the relationships of Pastis, Balthazar, and Denburg's Dominos to AMS. (Id. at Bates Nos. 000207--12.) He also stated that "there were never any instances in which a customer's tamper-proof cash/currency bag had ever been intentionally opened by an AMS vault and/or armored transportation employee," unless the customer who owned the bag had contracted for processing and packaging services. (Id. at Bates No. 000213.) Despite Zapatino's uncertainty about AMS's relationship with Pastis, Balthazar, and Denburg's Dominos, the Government concedes that these three were also transportation-only customers of AMS. (Gov't L. R. 56.1 S. ¶¶ 80, 110--11.) In fact, the Government has proffered no evidence to contradict the Non-Settling Petitioners' claims about the services AMS performed. (See Gov't L. R. 56.1 S. ¶¶ 19--20, 30, 57, 80, 91--92, 110--11, 122--23.)

The Non-Settling Petitioners became entangled in this proceeding in early February 2010, when AMS made a number of currency pick-ups from facilities owned by the Non-Settling Petitioners or third-parties. These pick-ups are described below, in Table One:

Table One (AMS Pick-Ups from Non-Settling Petitioners in February 2010) Petitioner Pick-Up Date Identifying Numbers Amount Inserra Petitioners 2/9/2010 AH00694060 $64,939.94 Inserra Petitioners 2/10/2010 AH00692165 $7,461.23 Inserra Petitioners 2/10/2010 AH00694061 $8,372.14 Inserra Petitioners 2/10/2010 AH00688084 $8,835.61 Inserra Petitioners 2/10/2010 AH00696575 $14,204.41 Inserra Petitioners 2/10/2010 AH00691896 $10,031.18 Inserra Petitioners 2/10/2010 AH00684912 $16,456.75 Inserra Petitioners 2/10/2010 AH00692356 $6,633.81 Inserra Petitioners 2/10/2010 AH00692479 $10,049.77 Capital One 2/11/2010 F045716, E304793 $364,400.00 Sultana 2/10/2010 TT377141, TT377142 $41,266.36 Sultana 2/11/2010 TT377140 $9,978.20 Pastis 2/11/2010 H0926584 $13,446.00 Balthazar 2/11/2010 G546916 $6,356.00 Mahopac 2/11/2010 99625662/KB10044801, 99625684/KB10003680, 9962518/KB10003680, 99625238/KB10020490, 99625214/KB10032352, 99625699/KB10056475, 99625697/KB10071508 $404,000.00 Denburg's Dominos 2/11/2010 G496741 $13,420.00 Maestri's Dominos 2/2010 X938328, X938329, X938330, X938331, X938332 $9,616.40 Maestri's Dominos 2/11/2010 F449017, F449021, F449022, F449023, F449025 $13,572.00 Maestri's Dominos 2/11/2010 F443045, F443046 $7,277.00

(Pts.' L.R. 56.1 S. ¶¶ 21--29, 36--39, 63--66, 82, 97--102, 114--15, 126--27.) Although the date is obscured on the receipt provided by Maestri's Dominos with respect to currency bags X938328, X938329, X938330, X938331, and X938332, the Government does not dispute Maestri's Dominos' assertion that these currency bags were picked up "in early February 2010." (See Gov't L. R. 56.1 S. ¶ 126.) The currency bags picked up for delivery by AMS never reached their intended destinations. After being held in MVMC vaults for temporary storage, the bags and trays listed above in Table One were seized at the direction of the Government.

C. THE PROSECUTION OF EGAN AND McGARRY AND THE SEIZURE OF THE SEIZED CURRENCY

In early February 2010, the Government filed a criminal complaint charging Egan with conspiracy to commit bank fraud in violation of 18 U.S.C. § 1349, and Egan was subsequently arrested. Thereafter, the Court entered an order with Egan's consent that permitted the Government to seize all currency located in vaults operated by MVMC. (Consent Order, Feb. 23, 2010, ECF No. 8.)

Special Agent James Hilliard has submitted a declaration explaining the operation of the fraud with which Egan and McGarry were charged. Hilliard attests that "the cash kept in the vaults for ATM customers was commingled." (Hillard Decl. ¶¶ 8(e)--(g), Oct. 18, 2010, ECF No. 72.) AMS customers whose cash was counted and processed by AMS also had their money "commingled with other customers' cash in the vault." (Id. ¶ 8(h).) Hilliard speculates that Egan and McGarry may have used ATM-replenishment customers' and certain of currency-transportation customers' money to finance MVMC's on-site payroll and in-store check cashing operations, but Hilliard makes no clear factual assertion that Egan and McGarry actually misappropriated the money of currency transportation-only customers, which was typically held by MVMC entities overnight or for a similarly short duration. (See id. ¶¶ 8(i)--(k), 9.)

On February 11 and 12, 2010, the FBI seized "cash and other property," including the Seized Currency claimed by the Non-Settling Petitioners, from MVMC vaults. One of the vaults was located in Elmsford, New York, and two were located in Mount Vernon, New York. (Joint Stip. ¶ 2.) The Government has provided the Court with only a very rough account of how the Seized Currency was handled after it was seized from the MVMC vaults. What is clear from the Government's account is that the Seized Currency was transported to a Brinks facility in Brooklyn, New York, and then counted at that location. (Hilliard Decl. ¶ 9.) The Government claims that Brinks did not count the cash in each bag separately to confirm that each contained the amount of money indicated on the outside of each bag, and that it has been "unable to determine with certainty which of the bags collected were in fact [fraudulently] processed by MVMC." (Id. ¶ 10(b).) With respect to the trays of currency, the Government has asserted that they were "not segregated into separate customer bins," but makes no mention about whether individual currency trays were sealed when seized. (Id. ¶ 10(a).)

On March 10, 2010, Egan and McGarry were indicted on charges of bank fraud and conspiracy to commit bank fraud and wire fraud. Egan pleaded guilty in September 2010, ...


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