530 F.3d 422 (6th Cir. 2008), 07-3370, United States v. Parrett

Docket Nº:07-3370.
Citation:530 F.3d 422
Party Name:UNITED STATES of America, Plaintiff-Appellant, v. Rebecca S. PARRETT, Defendant-Appellee.
Case Date:July 03, 2008
Court:United States Courts of Appeals, Court of Appeals for the Sixth Circuit
 
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530 F.3d 422 (6th Cir. 2008)

UNITED STATES of America, Plaintiff-Appellant,

v.

Rebecca S. PARRETT, Defendant-Appellee.

No. 07-3370.

United States Court of Appeals, Sixth Circuit

July 3, 2008

          Argued and Submitted: June 3, 2008.

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          ARGUED:

         

          Stefan D. Cassella, United States Department of Justice, Alexandria, Virginia, for Appellant.

          ON BRIEF:

          Stefan D. Cassella, United States Department of Justice, Alexandria, Virginia, for Appellant. Jerry E. Peer, Jr., Adams, Babner & Gitlitz, Columbus, Ohio, for Appellee. Richard L. Holcomb , Law Offices of James A.H. Bell, Knoxville, Tennessee, for Amicus Curiae.

          Before: DAUGHTREY and MOORE , Circuit Judges; DUGGAN, District

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Judge.[*]

          OPINION

          KAREN NELSON MOORE , Circuit Judge.

          A grand jury indicted Rebecca S. Parrett, and six others, on numerous counts of conspiracy, securities fraud, wire fraud, money laundering, and concealment of money laundering. The indictment stated that, if convicted, Parrett would be held jointly and severally liable with fellow co-defendants for the amount involved in any offenses of conviction and would be required to forfeit any property directly or indirectly traceable to those offenses pursuant to 18 U.S.C. § 981(a)(1)(C) , 18 U.S.C. § 982 , and 28 U.S.C. § 2461(c) . After the indictment, the federal government filed a notice of lis pendens 1 on two properties that it considered to be substitute assets. Substitute assets, as defined by 21 U.S.C. § 853(p) , are not directly traceable to the underlying offenses for which Parrett was indicted, but could be used to satisfy a judgment under certain circumstances (detailed in the statute).

          Parrett filed a motion asking the district court to order the federal government to remove the notices of lis pendens; she argued that the federal government did not have authority to impose a restraint on substitute assets prior to a conviction. The district court granted Parrett's motion, holding that, under United States v. Ford, 64 Fed.Appx. 976 (6th Cir.2003) (unpublished), “21 U.S.C. § 853 does not authorize the pretrial restraint of substitute assets." United States v. Parrett, 469 F.Supp.2d 489, 493 (S.D.Ohio 2007) . The district court concluded that, because the federal statute did not authorize the federal government to file a notice of lis pendens, the court did not need to consider whether the federal government had met the requirements for filing a notice of lis pendens under Arizona and Ohio law. Id. at 493-94.

          On appeal, the federal government argues that the district court erred because it failed to understand that the federal government derived its authority to file a notice of lis pendens on substitute assets from the law of the state in which the property was located, not from 21 U.S.C. § 853 . While the federal government's appeal was pending in our court, a jury convicted Parrett on all counts; the jury found her jointly and severally liable for a $1.9 billion judgment. As of the writing of this opinion, a forfeiture order has not yet been entered by the district court. Although Parrett's attorney suggested in a letter to this court that the case had become moot after Parrett's conviction, we disagree. Because the federal government may have authority under state law to file notices of lis pendens against substitute assets prior to entry of an order of forfeiture, we VACATE the district court's judgment that the federal government lacks any authority to file a notice of lis pendens against substitute assets prior to entry of an order of forfeiture, and REMAND for further proceedings in accordance with this opinion.

          I. BACKGROUND

          On May 19, 2006, a grand jury indicted Parrett, and six others for abusing their

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positions at National Century Financial Enterprises, Inc., “one of the largest healthcare finance companies in the United States." Joint Appendix (“J.A." ) at 121 (Superseding Indictment at ¶ 1). The federal government alleged that Parrett was a “Vice Chairman, Secretary, Treasurer, Director, and an owner" of the company. J.A. at 122 (Superseding Indictment at ¶ 8). The Superseding Indictment on July 10, 2007 charged Parrett with conspiracy, securities fraud, wire fraud, money laundering, and concealment of money laundering, in violation of 18 U.S.C. § 371 , 15 U.S.C. §§ 77q and 77x , 18 U.S.C. § 1343 and 2 , 18 U.S.C. § 1956(h) , and 2 18 U.S.C. § 1956(a) respectively. Also, the Superseding Indictment included a forfeiture claim, Count 27, which stated:

65. Each defendant who is convicted of Count 1 (conspiracy) and Counts 2 through 26 shall forfeit to the United States, pursuant to 18 U.S.C. § 981(a)(1) (c) and 28 U.S.C. § 2461(c) , any property constituting or derived from proceeds obtained directly or indirectly as a result of the said violation, including but not limited to a sum of money in the amount of approximately $1,900,000,000, representing the proceeds from the conspiracy to violate statutes of the United States as alleged in Count 1 and the violations alleged in Counts 2 through 26. If more than one defendant is convicted of an offense, the defendants so convicted are jointly and severally liable for the amount involved in such offense.

66. Pursuant to 18 U.S.C. § 982 , each defendant who is convicted of the conspiracy to commit violations of Sections 1956 , in violation of 18 U.S.C. § 1956(h) , as charged in Count 17, shall forfeit to the United States the following property:

66.1. All right, title, and interest in any and all property involved in the conspiracy to violate 18 U.S.C. § 1956 for which the defendant is convicted, and all property traceable to such property, including the following: 1) all money or other property that was the subject of each transaction, transportation, transmission or transfer in violation of § 1956 ; 2) all commissions, fees and other property constituting proceeds obtained as a result of those violations; and 3) all property used in any manner or part to commit or to facilitate the commission of those violations, including but not limited to untainted funds used to conceal the proceeds of criminal activity.

66.2. A sum of money equal to approximately $1,900,000,000, representing the total amount of money involved in the conspiracy to commit violations of Sections 1956 , in violation of 18 U.S.C. § 1956(h) , as charged in Count 17, for which the defendant is convicted. If more than one defendant is convicted of an offense, the defendants so convicted are jointly and severally liable for the amount involved in such offense.

J.A. at 142-43 (Superseding Indictment at ¶¶ 65-66.2) (emphasis added). Further, the Superseding Indictment stated that each defendant would be required, pursuant to 21 U.S.C. § 853(p) , to

forfeit substitute property, up to the value of the amount described in the foregoing paragraphs, if, by any act or omission of a defendant, the property

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described in such paragraphs, or any portion thereof, cannot be located upon the exercise of due diligence; has been transferred, sold to or deposited with a third party; has been placed beyond the jurisdiction of the court; has been substantially diminished in value; or has been commingled with other property which cannot be divided without difficulty.

J.A. at 144 (Superseding Indictment at ¶ 68) (emphasis added). Although the Superseding Indictment listed certain specific property related to the offense, it did not list substitute property.3

          As the case progressed, Parrett identified two properties on which the federal government had placed a notice of lis pendens that she believed qualified only as substitute assets, not assets related to the offenses stated in the indictment. On October 23, 2006, prior to trial, Parrett filed a motion asking the district court to require the federal government to “dismiss the notice of Lis Pendens it filed against" property on North Stirrup Circle, Carefree, Arizona because it was, in her view, only a substitute asset. J.A. at 72 (Mot. to Dismiss Notice of Lis Pendens). The federal government opposed the motion. Parrett later supplemented her motion on December 1, 2006 by including two other properties on which the federal government had filed a notice of lis pendens after her first motion: property on East Thistle Drive, Fountain Hills, Arizona, and Elliott Avenue, Columbus, Ohio. The federal government filed a response to Parrett's supplemental motion, indicating that the property listed in Parrett's initial motion, on North Stirrup Circle was directly traceable to proceeds from the offense for which she had been indicted; thus, the federal government argued that only two of the three properties constituted substitute assets. On January 5, 2007, the district court granted Parrett's motion to dismiss the notice of lis pendens as to the East Thistle Drive and Elliott Avenue properties that qualified only as substitute assets. The federal government filed a timely appeal.

          On March 13, 2008, while the government's appeal in this court was pending, a jury convicted Parrett on all counts. Prior to her sentencing, Parrett absconded; the district court issued a warrant for her arrest on March 27, 2008. Parrett's attorney suggested in a letter to this court, without elaboration, that the federal government's appeal was moot because Parrett had been convicted. We asked the federal government to file a response to the assertion of mootness. During oral argument by the government and in its brief in response to the suggestion that the case may be moot, the government informed us that, after Parrett's conviction, it had reinstated the notices of lis pendens against the East Thistle Drive...

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