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United States v. Weitzman

United States District Court, S.D. New York

July 3, 2013

UNITED STATES OF AMERICA,
v.
MATTHEW WEITZMAN, Defendant

For Jocelyn A. Keil, Interested Party: David J. Sutton, The Law Offices of David J. Sutton, P.C, Garden City, NY.

For USA, Plaintiff: Joan M. Loughnane, LEAD ATTORNEY, U.S. Attorney's Office, SDNY (86 Chambers St.), New York, NY; Jeffrey Ehrlich Alberts, U.S. Attorney's Office, Sdny (White Plains), White Plains, NY.

OPINION

Page 219

LAURA TAYLOR SWAIN, United States District Judge.

Memorandum Order

On October 19, 2009, Matthew Weitzman (" Defendant" or " Weitzman" ) pleaded guilty to an Information charging him with several counts of investment advisor fraud, securities fraud, and wire fraud. On June 30, 2010, this Court sentenced Weitzman to 97 months in prison. At the sentencing hearing, the Court also entered a Consent Preliminary Order of Forfeiture and, on June 24, 2011, the Court entered a Final Order of Forfeiture, granting the Government title to the property listed in the forfeiture order pursuant to 21 U.S.C. § 853(n)(7). Now before the Court is the Government's motion, pursuant to Federal Rule of Criminal Procedure 32.2(e) and 21 U.S.C. § 853(p), for the entry of a Preliminary Order of Forfeiture as to Substitute Assets. The Court has reviewed carefully all of the parties' submissions and, for the following reasons, the Government's application is granted.

Background

On or about June 30, 2010, the Court entered a Consent Preliminary Order of Forfeiture pertaining to Weitzman's right, title, and interest in property ranging from proceeds of the sale of real property to jewelry purchased at J. Brown Jewelry. The Consent Order of Forfeiture included the entry of a money judgment against Weitzman in the amount of $7,082,032.

On February 15, 2013, the Government moved for a Preliminary Order of Forfeiture as to Substitute Assets, contending

Page 220

that it has received less than $2 million in payments from the forfeited property towards the money judgment, leaving more than $5 million unpaid.[1] While the Government has not been able to locate, obtain, or collect any proceeds of Defendant's offenses beyond those included in the forfeited property, it has located the following substitute assets: (1) funds on deposit in a Charles Schwab account with a listed beneficiary of " Matthew D. Weitzman" (" Weitzman Schwab Account" ); (2) funds on deposit in a Charles Schwab account with a listed beneficiary of " Weitzman Family Trust IRA" (" Weitzman Family Schwab Account" ); [2] (3) Defendant's partnership interest in AFW Environmental Fund-I, LP (" Weitzman Environmental Fund Investment" ); (4) funds on deposit in the account " Matthew D. Weitzman-Trust" at TIAA CREF (" Weitzman TIAA CREF Trust" ); (5) funds on deposit in the account " Ellen B. Weitzman-Trust" at TIAA CREF (" Ellen Weitzman TIAA CREF Trust" ); [3] (6) a check in the amount of $1,620 with a listed payor of Matthew D. Weitzman and a listed payee of the United States Marshals Service (" Weitzman Check" ); [4] and (7) a check in the amount of $96.29 with a listed payor of the Comptroller State of New York Refund Account and a listed payee of Matthew D. Weitzman (" Comptroller Check" ).[5]

Discussion

Where, as a result of the defendant's actions or omissions, initially forfeited property that is subject to money judgment is unavailable, the Court may issue an order forfeiting substitute assets up to the value of that property. 21 U.S.C. § 853(p)[6]; Fed. R. Crim. P. 32.2(e)(1). Defendant Weitzman does not dispute the unavailability of the initially forfeited property. He also does not object to the Government's request to forfeit the Weitzman Check and the Comptroller Check as substitute assets.

Weitzman does, however, object to the forfeiture of all other substitute assets identified by the Government, contending that: (1) assets unrelated to any of his illegal activities cannot be forfeited, (2) assets in Individual Retirement Accounts (IRAs) cannot be forfeited, and (3) third parties may have interests in these assets. If the Court nevertheless finds that these additional assets may be forfeited as substitute assets, Weitzman requests that funds be reserved to cover any tax liabilities or early withdrawal penalties that may be incurred as a result of such forfeiture.

Page 221

The Court finds that none of Defendant's arguments warrants denial of the Government's application.

Assets Unrelated to Criminal Activity

Whether an asset is linked to a defendant's illegal activity is not relevant to determining whether 21 U.S.C. § 853(p) permits its forfeiture as a substitute asset. See, e.g., United States v. Rosario, 111 F.3d 293, 1996 WL 868385, at *4 (2d Cir. 1997) (" [W]e find that there is no requirement under 21 U.S.C. § 853(p) that the government demonstrate that substitute assets are traceable to criminal activity. . . . The purpose of § 853(p) is to substitute non-tainted assets for tainted assets that are not able to be located for forfeiture." ); United States v. Smith, 656 F.3d 821, 828 (8th Cir. 2011) (there is no " constitutional nexus requirement" mandating that forfeited property be connected to the defendant's offense; any property of the defendant, including that which the defendant may acquire in the future, may be forfeited). The fact that Weitzman's additional assets originated from legal sources is, therefore, not a barrier to the forfeiture of those assets.

Assets in IRAs

Weitzman suggests that some of the additional assets the Government has located, such as the Weitzman Environmental Fund Investment and the Weitzman Family Schwab Account, may be IRAs and asserts that IRAs are protected from forfeiture. This contention is unfounded. " Any other property of the defendant" may potentially be forfeited as substitute assets. 21 U.S.C. § 853(p) (emphasis added). There is no exemption for IRAs. See United States v. Bollin, 264 F.3d 391, 423 (4th Cir. 2001) (federal law pursuant to 21 U.S.C. § 853(p), which allows for the forfeiture of all funds in the defendant's IRA, supersedes any state law protecting such funds). Whether or not Weitzman's funds are held in IRAs is immaterial to determining whether those funds may be forfeited.

Third-Party Interests in Assets

Weitzman next objects to the forfeiture of his additional assets on the ground that third parties, such as the Internal Revenue Service (IRS) (to whom Weitzman may owe taxes) and a trustee of the Ellen Weitzman TIAA CREF Trust (to whom Weitzman's deceased sister owed money), may have interests in these assets. Weitzman, however, lacks standing to assert third-party interests. See, e.g., United States v. Tremblay, No. S1 05 CR.783, 2008 WL 4571548, at *2 (S.D.N.Y. Oct. 10, 2008) (even if third parties such as the defendant's clients owned the funds in the defendant's offshore bank accounts, the defendant lacked standing to object to forfeiture on the basis of such third-party interests). Protection for third parties' interests comes in the form of ancillary hearings following the entry of a preliminary order forfeiting a defendant's substitute assets. Once such an order is entered, the Government must serve notice to known interested parties and publish notice of the forfeiture in order to provide third parties with the opportunity to challenge the Government's claim to the property. See 21 U.S.C. § 853(n); see also Rule 32.2(e)(2). If the IRS, the Ellen Weitzman TIAA CREF Trust trustee, or any other third party claims an interest in the substitute assets here, it can properly do so after the entry of a preliminary order forfeiting Weitzman's interests in the assets.

Allocating Funds for Potential Tax Liabilities and Withdrawal Penalties

Although Weitzman does not know what, if any, tax liabilities and withdrawal penalties he may incur if the substitute

Page 222

assets are forfeited, he requests that sufficient funds be set aside to cover any such obligations that may arise. Courts have declined to deduct taxes from the value of the assets forfeited, in part to avoid requiring complex calculations. See, e.g., United States v. Defries, 129 F.3d 1293, 1315, 327 U.S. App. D.C. 181 (D.C. Cir. 1997) (when determining assets to be forfeited, " a deduction for taxes could create unwarranted complexities in the administration of the statute" ). Requiring the Government to account for possible tax liabilities and early withdrawal penalties before forfeiture would needlessly complicate the process. Additionally, given the punitive purpose of forfeiture, the possibility that Weitzman may have to pay additional taxes and withdrawal penalties for substitute assets forfeited is not unjust. See United States v. Lizza Indus. Inc., 775 F.2d 492, 498 (2d Cir. 1985) (no need for the Government to " ensure that a convicted racketeer is not deprived of a single farthing more than his criminal acts produced" ). Accordingly, the Court denies Weitzman's request to reserve funds for the purpose of covering any possible tax liabilities and early withdrawal penalties.

Conclusion

For the foregoing reasons, the Court grants the Government's application for the entry of a Preliminary Order of Forfeiture as to Substitute Assets. The Court denies Weitzman's request to reserve funds sufficient to pay any tax liabilities or withdrawal penalties incurred. This Memorandum Order resolves docket entry no. 85.

SO ORDERED.

PRELIMINARY ORDER OF FORFEITURE AS TO SUBSTITUTE ASSETS

WHEREAS, on or about October 19, 2009, Weitzman was charged in an eight-count Information, 09 Cr. 989 (LTS) (the " Information" ) with investment advisor fraud in violation of 15 U.S.C. § § 80b-6 and 80b-17, and 18 U.S.C. § 2 (Count One); securities fraud, in violation of 15 U.S.C. § § 78j(b) and 78ff, 17 C.F.R. § § 240.10b-5, and 18 U.S.C. § 2 (Counts Two, Three); and wire fraud, in violation of 18 U.S.C. § § 1343 and 2 (Counts Four through Eight);

WHEREAS, on or about May 27, 2010, the defendant was sentenced and ordered to forfeit his interest in $7,082,032.00 United States currency;

WHEREAS, on or about June 30, 2010, the Court entered a Consent Preliminary Order of Forfeiture forfeiting the defendant's right, title and interest in the following property:

a. Proceeds of the sale of the Real Property in the amount of $1,442,327.08 in United States currency funds, currently on deposit with the United States Marshal's Service;

b. $90,000 in United States currency funds returned to defendant by Fairfield Country Club by check in or about April 2009, currently on deposit with the United States Marshal's Service;

c. $1,135.04 in United States currency funds representing a charitable contribution that was returned to the defendant, currently on deposit with the United States Marshal's Service;
d. All funds on deposit in account number XXXXXX3750 at Bank of America, held in the name of " Ellen Weitzman Trust," up to $141,000 in United States currency funds;
e. All jewelry purchased for approximately $55,000 in United States currency funds at Better Ridge Jewelers on or about December 13, 2004; and
f. All jewelry purchased for approximately $84,000 in United States currency funds at J. Brown Jewelry on or about October 30, 2008.

(collectively, the " Forfeited Property" );

WHEREAS, the Consent Order of Forfeiture included a money judgment in the amount of $7,082,032 (the " Money Judgment" ), which stated that " the Court shall retain jurisdiction to enforce this Order, and to amend it as necessary, pursuant to Fed. R. Crim. P. 32.2(e)."

WHEREAS, the forfeiture of the Forfeited Property leaves over $5 million of the Money Judgment unpaid;

WHEREAS, the Government has not been able to locate, obtain or collect any proceeds of the defendant's offenses beyond those included in the Forfeited Property, despite its due diligence;

WHEREAS, the United States has located the following assets of the defendant:

a. all funds on deposit in account number XXXX-4681 at Charles Schwab, with a listed beneficiary of " Matthew D. Weitzman" (the " Matthew Weitzman Schwab Account" );

b. all funds on deposit in account number XXXX-5260 at Charles Schwab, with a listed beneficiary of " Weitzman Family Trust IRA" (the " Weitzman Family Schwab Account" );

c. all of Matthew D. Weitzman's partnership interest in AFW Environmental Fund-I, LP, currently on deposit in account number XXXX-3165 at Charles Schwab (the " Matthew Weitzman Environmental Fund Investment" );
d. all funds on deposit in the account " Matthew D Weitzman-Trust" at TIAA CREF, (the " Matthew D. Weitzman TIAA CREF Account" );
e. all funds on deposit in the account " Weitzman Family-Trust" at TIAA CREF, (the " Weitzman Family TIAA CREF Account" );
f. all funds on deposit in the account " Ellen B Weitzman-Trust" at TIAA CREF, (the " Ellen B. Weitzman TIAA CREF Account" );
g. check number 030525058 in the amount of $1,620 with a listed payor of Matthew D. Weitzman and a listed payee of the United States Marshal Service, currently in the possession of the Government (the " Weitzman Check" ); and
h. check number 00964248 in the amount of $96.29 with a listed payor of the Comptroller State of New York Refund Account and a listed payee of Matthew D Weitzman, currently in the possession of the Government (the " Comptroller Check" )

(the " Substitute Assets" );

WHEREAS, the total value of the Substitute Assets is less than $1 million.

NOW IT IS THEREFORE ORDERED, ADJUDGED AND DECREED THAT:

1. All of the defendant's right, title and interest in the Substitute Assets are hereby forfeited to the United States of America, for disposition in accordance with the law, subject to the provisions of Title 21, United States Code, Section 853(n).

2. The Substitute Assets shall be applied in partial satisfaction of the Money Judgment entered against the defendant.

3. Upon entry of this Order, the United States Marshals Service (or its designee) is hereby authorized to take possession of the Substitute Assets and to keep them in their secure, custody and control. With respect to any Substitute Assets which are investment assets, the United States Marshals Service is further authorized to direct the current custodian to liquidate the investment assets and transfer the proceeds to the United States Marshals Service.

4. Pursuant to 21 U.S.C. § 853(n)(1), Rule 32.2(b)(6) of the Federal Rules of Criminal Procedure, and Rules G(4)(a)(iv)(C) and G(5)(a)(ii) of the Supplemental Rules for Admiralty or Maritime Claims and Asset Forfeiture Actions, the United States shall publish for at least thirty (30) consecutive days on the official government internet forfeiture site, www.forfeiture.gov, notice of this Preliminary Order of Forfeiture of Substitute Assets and notice that any person, other than the defendant in this case, claiming an interest in the Substitute Assets must file a petition within sixty (60) days from the first day of publication of the notice on this official government internet site, or no later than thirty-five (35) days from the mailing of actual notice, whichever is earlier.

5. The notice referenced in the preceding paragraph shall state that the petition shall be for a hearing to adjudicate the validity of the petitioner's alleged interest in the Substitute Asset, shall be signed by the petitioner under penalty of perjury, and shall set forth the nature and extent of the petitioner's right, title or interest in the Substitute Asset and any additional facts supporting the petitioner's claim and the relief sought, pursuant to Title 21, United States Code, Section 853(n).

6. The United States may also, to the extent practicable, provide direct written notice to any person, other than the defendant, known to have an alleged interest in the Substitute Asset, as a substitute for published notice as to those persons so notified.

7. Upon adjudication of all third-party interests, this Court will enter a Final Order of Forfeiture with respect to the Substitute Asset, pursuant to Title 21, United States Code, Section 853(n), in which all interests will be addressed.

8. The Court shall retain jurisdiction to enforce this Order, and to amend it as necessary, pursuant to Federal Rule of Criminal Procedure 32.2(e).

9. Pursuant to Federal Rule of Criminal Procedure Rule 32.2(b)(3), upon entry of this Order, the United States Attorney's Office is authorized to conduct any discovery needed to identify, locate or dispose of the property subject to forfeiture, including depositions, interrogatories, requests for production of documents and the issuance of subpoenas, pursuant to Rule 45 of the Federal Rules of Civil Procedure.

10. The Clerk of the Court shall forward four certified copies of this Order to Assistant United States Attorney Sharon Cohen Levin, Chief of the Asset Forfeiture Unit, United States Attorney's Office, One St. Andrew's Plaza, New York, New York, 10007.

SO ORDERED:


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