United States District Court, E.D. New York
the Government: Bridget M. Rohde United States Attorney
Charles P. Kelly, A.U.S.A. Burton T. Ryan, Jr., A.U.S.A.
Sophia Atias: LaRusso Conway & Bartling, LLP By: Robert
P. LaRusso, Esq.
Joseph Atias:, Law Offices of Jeffrey T. Schwartz, By:
Jeffrey T. Schwartz, Esq.
MEMORANDUM & ORDER
R. Hurley United States District Judge.
purpose of this Memorandum is to address the application of
the government for criminal forfeiture against the defendants
following their conviction for bank fraud, conspiracy to
commit bank fraud, and Medicaid fraud.
forth in its initial application, the government seeks
forfeiture only as to the bank fraud and the conspiracy to
commit bank fraud (Counts One and Two of the Superseding
Indictment) in the amount of $455, 000, representing the
spread between the sale price of $925, 000 in March 2012 to
Sacred Heart Academy of the real property located at 83
Cathedral Avenue, Hempstead, New York and the fraudulent
short sale price of $480, 000 for that property in January
2012. (DE 246 at p. 1.)
oppose the application to the extent that they assert that
the appropriate amount of forfeiture is $365, 965.09
representing defendants “personal gain . . . from the
transactions which form the basis of the criminal convictions
for [Counts One and Two].” (DE 247 at p.1.) Defendants
argue that of the $465, 965.09 of the sale proceeds
transferred to the MC12-11 Trust, $100, 000 represented
“a return of the $100, 000 investment made by the Trust
to . . . the entity used to purchase the Property from Sofia
Atias in the short sale” which money came from Sofia
Atias' brother “and was never considered unlawful
proceeds of the bank fraud offense.” (Id. at
reply, the government argues that defendants are not entitled
to reduce the forfeiture to their personal gain and based on
defendants' submission, increases its request for
forfeiture from $445, 000 to $465, 965.09. (DE 248 at p. 1.)
is this case is governed by 18 U.S.C. § 981(a)(1)(C)
which provides, in relevant part, for the forfeiture of
“[a]ny property, real or personal, which constitutes or
is derived from proceeds traceable to a violation of . . .
any offense constituting ‘specified unlawful
activity' (as defined in section 1956(c)(7) of this
title), or a conspiracy to commit such an offense.”
Bank fraud is a specified unlawful activity as defined in 18
U.S.C. §1956(c)(7)(A) and (D).
constitutes “proceeds” depends on the nature of
the crime. Section 981(2) defines proceeds for purposes of
paragraph (1) as follows:
(A) In cases involving illegal goods, illegal services,
unlawful activities, and telemarketing and health care fraud
schemes, the term “proceeds” means property of
any kind obtained directly or indirectly, as a result of the
commission of the offense giving rise to forfeiture, and any
property traceable thereto, and is not limited to the net
gain or profit realized from the offense.
(B) In cases involving lawful goods or lawful services that
are sold or provided in an illegal manner, the term
“proceeds” means the amount of money acquired
through the illegal transactions resulting in the forfeiture,
less the direct costs incurred in providing the goods or
services. The claimant shall have the burden of proof with
respect to the issue of direct costs. The direct costs shall
not include any part of the overhead of the entity providing
the goods or services, or any part of the income taxes paid
by the entity.
18 U.S.C. § 981(2).
argument and the cases they cite, e.g. United States v.
Contorinis, 692 F.3d 136 (2d Cir. 2012), presumes that
the appropriate definition of proceeds in this case is §
981(2)(B). It is not. Rather, the applicable definition of
“proceeds” is contained in § 981(2)(A).
See United States v. Torres, 703 F.3d 194, 198 (2d
Cir. 2012) (“In cases involving ‘unlawful
activities'” the definition of proceeds is that
contained in § 981(2)(A).) Unlike subsection A,
subsection B “does not contain the ‘obtained . .
. indirectly, ' ‘traceable thereto, ' or
‘not limited to . . . net gain or profit' language
that [is] decisive here.” Id. at 202. The
broad language contained in § 981(2)(A) “evinces
an intent to reach all manner of property in the
defendant's possession and fairly considered as derived
from the crime of conviction. Stated otherwise, so long as
there is a causal nexus between the wrongdoer's
possession of the property and [his or ] her crime, the
property may be said to have been ...