U.S. v. Rothstein (In re Rothstein, Rosenfeldt, Adler, P.A.)

Summarized by Jeffrey Snyder , Bilzin Sumberg Baena Price & Axelrod, LLP
12 years 8 months ago

Citation:

717 F.3d 1205 (11th Cir. 2013)

Tag(s):

Ruling:

Judgment of District Court vacated and remanded. Where proceeds of Ponzi scheme were commingled with law firm's legitimate income in bank account in name of law firm, Government precluded as a matter of law from seizing (i) law firm bank accounts under RICO forfeiture statute as "proceeds" of individual criminal defendant's Ponzi scheme, and (ii) property, to the extent it was acquired with funds from law firm bank accounts. Government not precluded from seizingindividual defendant's interest in law firm assets (including bank accounts and property) under substitute property forfeiture provision up to the value of proceeds of Ponzi scheme that were commingled, and asserting such interest in chapter 11 bankruptcy proceeding of law firm. On remand, Government may retain any seized property it can demonstrate was acquired directly with proceeds of Ponzi scheme rather than from commingled law firm bank account.

Procedural context:

Appeal from District Court order in criminal proceeding of individual denying bankruptcy trustee's petition pursuant to 21 U.S.C. § 853(n) asserting that bank accounts and certain other property seized by Government under RICO forfeiture statute (18 U.S.C. § 1963(a)) was property of law firm's bankruptcy estate, and not property of individual defendant or proceeds of Ponzi scheme.

Facts:

Individual criminal defendant operated Ponzi scheme out of law firm, which also had 70 attorneys with significant legitimate income from providing legal services. Law firm was put into bankruptcy and chapter 11 trustee was appointed. As part of individual's guilty plea to racketeering, money laundering, mail fraud, and wire fraud charges and in accordance with RICO forfeiture statute, defendant agreed to forfeit to the United States all property listed in the charging information including certain bank accounts. Law firm bank accounts contained commingled legitimate proceeds of legal services and proceeds of Ponzi scheme. When Government seized property and bank accounts as "proceeds" of Ponzi scheme/criminal enterprise, chapter 11 trustee petitioned the District Court in accordance with ancillary hearing procedure provided by forfeiture statute for the return of bank accounts held in the name of law firm and for declaration that bankruptcy estate had interest in certain other listed properties (vehicles, real property, jewelry, business interests, etc.) because they were acquired with funds from law firm bank accounts.

Judge(s):

TJOFLAT and MARTIN, Circuit Judges, and BUCKLEW, District Judge (sitting by designation)

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