Billman, In re, 90-7029

• Decision Date: 09 November 1990
• Docket Number: No. 90-7029,90-7029
• Citation: 915 F.2d 916
• Parties: In re Assets of Tom J. BILLMAN, Petitioner. UNITED STATES of America, Petitioner-Appellant, v. Barbara A. McKINNEY; Robert Budjac; Roselyn Budjac, Respondents-Appellees.
• Court: U.S. Court of Appeals — Fourth Circuit

Page 916

915 F.2d 916

In re Assets of Tom J. BILLMAN, Petitioner.

UNITED STATES of America, Petitioner-Appellant, v. Barbara A. McKINNEY; Robert Budjac; Roselyn Budjac,

Respondents-Appellees.

No. 90-7029.

United States Court of Appeals, Fourth Circuit.

Argued June 7, 1990.

Decided Oct. 3, 1990.

Rehearing and rehearing In Banc Denied Nov. 9, 1990.

Joyce K. McDonald (argued), Asst. U.S. Atty., Baltimore, Md. (Breckinridge L. Willcox, U.S. Atty., Barbara S. Sale, Asst. U.S. Atty., Baltimore, Md., on the brief), for petitioner-appellant.

Abbe David Lowell (argued), Brand & Lowell, Washington, D.C. (Ross A. Nabatoff, Brand & Lowell, Washington, D.C., Eugene Gressman, Seton Hall University School of Law, South Orange, N.J., on the brief), for respondents-appellees.

Before POWELL, Associate Justice, Retired, United States Supreme Court, sitting by designation, HALL, Circuit Judge, and BUTZNER, Senior Circuit Judge.

BUTZNER, Senior Circuit Judge:

The principal issue in this appeal is whether 18 U.S.C. Sec. 1963 empowers a district court to enjoin, pending a criminal trial and forfeiture proceedings, the disposition of substitute assets that a fugitive RICO defendant transferred to a third person. The district court denied an injunction, holding that the statute provides authority to restrain prior to trial only those assets which the government proves are connected to the fugitive's alleged racketeering activity. Because we believe that the district court's dismissal of the petition filed by the United States reflects an impermissibly narrow construction of RICO forfeiture provisions, we reverse.

I

There is little dispute about the facts. The controversy arises out of the transfer of money by Tom J. Billman, a fugitive, to Barbara A. McKinney, who is subject to the personal jurisdiction of the court. A grand jury indicted Billman, McKinney, and another individual for conspiracy to commit mail and wire fraud and for numerous counts of fraud that caused the failure of Community Savings and Loan Association of Bethesda, Maryland. The indictment charged that Billman and McKinney "transferred to Swiss bank accounts proceeds from the conspiracy and scheme and artifice to defraud for the purpose of concealing their ill-gotten gains." Billman--but not McKinney--was indicted for racketeering. The indictment also charged that the proceeds derived from the racketeering activity were forfeit pursuant to 18 U.S.C. Sec. 1963(a)(1) and (3).

Before the grand jury returned the indictment, Billman fled the country. The government has been unable to locate him, but McKinney had frequent conversations with him on phones that had been lawfully tapped.

On May 9, 1989, McKinney received an overseas call from Michael Byrd, a London solicitor, who informed her that he and she had a "mutual client." Byrd said, "I'm hoping to receive in the coming week some money, which, ah, I will be forwarding to you." Byrd added that he was not "in funds myself yet, but as soon as I am, I'll arrange the appropriate transfer." Byrd later told an agent from New Scotland Yard that Billman was his client.

Eight days after Byrd's call, a wire transfer of $499,935.89, originating at Barclay's Bank in London from Byrd's law firm, was credited to an account in the name of McKinney and her mother, Roselyn Budjac, at Comerica Bank in Detroit. The day after the wire transfer, McKinney received a brief, cryptic telephone call from Billman. He said, "It's my understanding that the eagle has flown and landed on your end. Is that correct?" McKinney responded that she had not heard, to which Billman replied, "It should be done, so-ah, normal tomorrow." Billman later added, "Yeah, 703," and concluded the call with "I'll talk to you tomorrow, babe."

From this coded conversation and previously intercepted conversations, postal inspectors determined that Billman and McKinney were setting up a further telephone conversation at a "safe" location within the "703" area code of northern Virginia. The district court authorized a tap to intercept that conversation. Billman called McKinney the next day on the "703" telephone, and they spoke at length about the wire transfer. When Billman asked, "Did you get the money?" McKinney replied, "Yes ... I got word this morning." Billman then said, "Hope your mother didn't call you on an open line." McKinney responded that she had called her parents from "some place else." Billman apologized for taking so long to effect the wire transfer, and they subsequently discussed how McKinney would use the money. McKinney said that she intended to repay her parents and to pay a $25,000 settlement to "Brickley," a reference to Brickley v. EPIC, a case pending in the district court, which McKinney had recently settled for $25,000. Billman then cautioned that McKinney should "make sure, be careful where you get the Brickley money from," and they discussed that she might borrow the money from a friend or her parents. Billman later asked, "Is McKnew still paying you?" and McKinney answered, "Well, I hope so. I'll wait and see."

According to bank records, McKinney's mother withdrew $500,368.81 from the Comerica account on May 19, 1989, and closed that account. McKinney's parents distributed the money among other accounts and certificates of deposit. McKinney later phoned her parents that she would be at Mabel's place the next day. McKinney's father replied, "Oh, well, good, ah, ah, we took care of the photos and, ah, I, ah, five photos, and I sent the negatives to Mabel. I mailed them, ah, yesterday.... Everything went smooth as silk...." McKinney's mother later stated that "we increased, ah, ah, the return." When McKinney said, "I've got to be able to get to" the money "without a penalty," her mother answered, "Well, you can ... so far as I know."

Bank records also reveal that William C. McKnew was making regular payments of $6,250 to McKinney. The money came from a business transaction between McKnew, Billman, and Europlan Holdings, Ltd., a company located on the Channel Island of Jersey. Michael Dee, a director of Europlan, provided oral and written statements to New Scotland Yard concerning the McKnew transactions. Dee stated that Billman introduced McKnew and Dee. When Europlan subsequently invested $80,000 in McKnew's business, Billman gave Europlan the option of selling its McKnew stock to Billman in three years, at Europlan's cost. Billman subsequently bought Europlan's shares in McKnew's company but requested that the shares remain registered in Europlan's name, with Europlan acting as a "bare trustee or nominee" for Billman.

McKnew later bought the shares from Billman for $80,000, and Billman directed Dee to transfer the shares in exchange for McKnew's promissory note. However, in April 1989, Billman and McKnew agreed to vary the terms of the sale. Instead of paying $80,000 in 1993, McKnew agreed to make eight monthly payments of $6,250 to McKinney. As Dee stated to an officer of New Scotland Yard, "I felt this transaction very strange as Billman was losing a lot of money from it. I was of the opinion that he did not want the money traceable." McKnew had made four payments to McKinney by the time this litigation commenced. Although the source of the McKnew payments had been carefully laundered at great expense to Billman, it is apparent that McKnew was discharging a debt he owed to Billman by paying McKinney. The debt and subsequent payments were among Billman's assets.

II

The district court entered a temporary restraining order that prohibited McKinney and her parents from disposing of the wire transfer of $499,935.89 and the transfers of $50,000.00 made or being made by McKnew. The parties agreed to extend the TRO until further order of the court. Subsequently, McKinney requested the district court to determine the validity of the TRO, and the United States moved for entry of an injunction restraining expenditure of the funds pending forfeiture proceedings.

At the hearing before the district court, the government proved that Billman and other conspirators transferred $22,000,000 to Swiss bank accounts. The government, however, was unable to trace the funds from the Swiss bank accounts to Barclay's Bank or to Europlan. It proved the transfer of the funds in issue to McKinney by introducing tapes of the intercepted phone calls. Dee's affidavit established the source of the McKnew payments. The evidence also disclosed that Billman had sufficient assets apart from the alleged theft of Community's deposits to make the payments in issue to McKinney.

The district court held that Sec. 1963 did not authorize a pretrial injunction to restrain assets transferred by the defendant to a third party when the assets were not proved to be proceeds of a RICO offense. It found that the government had failed to prove that these funds were actual RICO proceeds. It also found that after the transfer of the funds, they belonged to McKinney. The court denied the injunction, vacated the TRO, and dismissed the government's petition. The district court's decision is consistent with the only reported case that deals with pretrial restraint of substitute assets in the hands of a third person. United States v. Chinn, 687 F.Supp. 125 (S.D.N.Y.1988).

III

The government may "seize property based on a finding of probable cause to believe that the property will ultimately be proven forfeitable." United States v. Monsanto, --- U.S. ----, 109 S.Ct. 2657, 2666, 105 L.Ed.2d 512 (1989).

The probable cause found by the grand jury satisfies the government's burden of proving the allegations of the indictment. This is evident from the legislative history of the Comprehensive Crime Control Act of 1984, which explains: "For the purposes of issuing a restraining order, the probable cause established in the indictment or information is to be determinative of any issue regarding the merits of the government's case on which the forfeiture is to be based." S.Rep. No....