The opinion of the court was delivered by: Denise Cote, District Judge:
The Government has moved for an order permitting the U.S. Marshals Service to seize and conduct an interlocutory sale of the defendant property, arguing that an interlocutory sale is necessary to preserve the property's value. Claimant Medical Group Research Associates, Ltd., has opposed the motion. For the reasons that follow, the motion is granted.
In 1998, Sonia LaFontaine and her husband and former business associate, Arthur Froom (a.k.a. Arthur Kissel) were charged with conspiracy to commit health care fraud, among other related claims. LaFontaine was arrested immediately and, following a jury trial, was convicted in 2000 of conspiracy to commit mail fraud and healthcare fraud, mail fraud, healthcare fraud, witness tampering, and engaging in illegal financial transactions. She was sentenced to serve 120 months in prison. Correction of Sentence, United States v. LaFontaine, No. 98 Cr. 251, Dkt. No. 206 (S.D.N.Y. Aug. 18, 2006). In 1998, Froom fled to Canada to avoid arrest for his role in the healthcare fraud conspiracy. He was later extradited to the United States, where he pled guilty and was likewise sentenced to 120 months' imprisonment. United States v. Froom, No. 98 Cr. 251, Dkt. No. 252 (S.D.N.Y. Nov. 2, 2010).
On March 30, 1998, the Government filed this civil forfeiture action alleging that the defendant property, 479 Tamarind Drive, was purchased with the proceeds of the healthcare fraud for which LaFontein and Froom were convicted. The property is a 3-bedroom, 2-bathroom, 3,860 square-foot house in a gated community in Hallendale, Florida. As of December 6, 2011, it was appraised at $769,000. The property is currently in the possession of Medical Group Research Associates, Ltd. ("MGRA"), which appears to have been using it for income-producing purposes, and has been responsible for maintenance, upkeep, and property taxes.
Over the course of this litigation, a number of parties have claimed an interest in the property: LaFontein, Froom, Elliot Pearl, Susan Szilari, and MGRA. On October 14, 2005, the Honorable Robert L. Carter, to whom this case was previously assigned, issued an opinion and order striking the claims filed by Froom, Pearl, and Szilari. United States v. 479 Tamarind Drive, No. 98 Civ. 2279 (RLC), 2005 WL 2649001, at **2-4 (S.D.N.Y. Oct. 14, 2005).
The case was transferred to this Court on November 24, 2009. A discovery schedule that had been set on February 16, 2010 was stayed pending the sentencing of Froom. The stay was lifted on November 4, 2010. On December 10, 2010, the Government moved to strike LaFontein's claim against the defendant property for lack of standing; the motion was granted in an Opinion and Order of March 11, 2011.
Pursuant to an order of February 2, 2011, proceedings in the underlying forfeiture action were again stayed so that the Government could conduct limited discovery into the ownership structure of MGRA. The Government suspects that MGRA may be an alter ego of LaFontein or Froom and that MGRA may, therefore, lack standing to assert claims against the defendant property. That discovery remains ongoing. Most recently, an Order of May 14, 2012, granted the Government permission to depose Froom, LaFontaine, Szilasi, and Pearl on the subject of their ownership interests in MGRA.
On May 11, 2012, the Government filed the instant motion for an
interlocutory sale of the defendant property, asserting that the
property is at risk of seizure due to non-payment of property taxes.
In support of its motion, the Government produced tax records from
Broward County (the "County"), which indicate an outstanding property
tax balance on the defendant property of $17,789.45 for 2011 and
$22,648.10 for 2010. On June 25, MGRA, the only remaining claimant,
filed a brief in opposition to the Government's motion.*fn1
The Government submitted no reply.
The Government's motion for an interlocutory sale is governed by Rule G of the Supplemental Rules for Certain Admiralty and Maritime Claims and Asset Forfeiture Actions ("Supp. R."). Pursuant to that rule, "[w]hen the government does not have actual possession of the defendant property the court . . . may enter any order necessary to preserve the property, to prevent its removal or encumbrance, or to prevent its use in a criminal offense." Supp. R. G(7)(a). Specifically, the rule provides that "the court may order all or part of the property sold if . . . the property is subject . . . to taxes on which the owner is in default." Supp. R. G(7)(b)(i)(C).
An interlocutory sale is appropriate in this case. More than $40,437.55 in taxes are currently due on the defendant property, raising a risk that the County may move to impose a lien and thereby diminish the property's value to the Government should this forfeiture action succeed.
The risk is real. In May of 2011, having been unable to collect property taxes for the 2009 calendar year, the County issued a Tax Certificate on the defendant property. The Certificate was guaranteed by a lien on the defendant property and entitled the third-party that purchased the Certificate at auction to collect the past-due tax bill ($26,247.68), plus interest at a rate of 0.25%. Under Florida law, the issuance of a Tax Certificate is the first step in the process for conducting a tax sale of the underlying property. See Fla.
Stat. §§ 197.432, 197.502. The lien on the defendant property was only lifted when, in March 2012, MGRA redeemed the Certificate. In light of this history and the current property tax balance, an interlocutory sale is necessary to avoid the very real possibility that ...