U.S. v. Certain Funds on Deposit in Scudder Tax Free Inv. Account No. 2505103, 2505103

• Decision Date: 14 July 1993
• Docket Number: No. 200413322-77,No. 2505103,D,No. 1548,2505103,200413322-77,1548
• Citation: 998 F.2d 129
• Parties: UNITED STATES of America, Plaintiff-Appellee, v. CERTAIN FUNDS ON DEPOSIT IN SCUDDER TAX FREE INVESTMENT ACCOUNT # 2505103 and Certain Funds on Deposit in T. Rowe Price Tax Exempt Money Fund Account # 200413322-77, Defendants, Aaron A. Baer, sole owner of the dft "certain funds on deposit in Scudder tax free investment account" and sole owner of "certain funds on deposit in T. Rowe tax exempt money fund account", Claimant-Appellant. ocket 93-6025.
• Court: U.S. Court of Appeals — Second Circuit

Page 129

998 F.2d 129

UNITED STATES of America, Plaintiff-Appellee, v. CERTAIN FUNDS ON DEPOSIT IN SCUDDER TAX FREE INVESTMENT ACCOUNT # 2505103 and Certain Funds on Deposit in T. Rowe Price Tax Exempt Money Fund Account # 200413322-77, Defendants Aaron A. Baer, sole owner of the dft "certain funds on deposit in Scudder tax free investment account No. 2505103" and sole owner of "certain funds on deposit in T. Rowe tax exempt money fund account No. 200413322-77", Claimant-Appellant.

No. 1548, Docket 93-6025.

United States Court of Appeals Second Circuit.

Argued May 28, 1993.

Decided July 14, 1993.

Robert S. Fink, New York City (Kostelanetz Ritholz Tigue & Fink, Ross N. Herman, Catherine A. Duke, Caroline Rule, of counsel), for claimant-appellant.

Joseph D. McCann, Brooklyn, NY, Asst. U.S. Atty. for the E.D. of N.Y. (Mary Jo White, U.S. Atty. for the E.D. of N.Y., Robert L. Begleiter, Deborah B. Zwany, Asst. U.S. Attys., of counsel), for plaintiff-appellee.

Before: FEINBERG and NEWMAN, Circuit Judges, and KELLEHER, District Judge. ^*

FEINBERG, Circuit Judge:

Claimant-appellant Aaron A. Baer appeals from an order entered in November 1992, in the United States District Court for the Eastern District of New York, Arthur D. Spatt, J., granting summary judgment to plaintiff-appellee United States of America, dismissing Baer's claims to the defendant-accounts and forfeiting those accounts to the United States. For the reasons stated below, we reverse and remand.

Background

In 1978, Baer purchased a New York City Industrial Development Agency Revenue Bond (1978 Valco Reproduction Mailing Services, Inc. Project) with a face value of $125,000 (the Valco bond). In 1982, Baer purchased a similar bond (Nab Construction Corporation Project) with a face value of $180,000 (the Nab bond). Baer was an officer of the United Independent Federal Credit Union (United) at the time he purchased each bond.

In 1983, Baer purportedly assigned his interest in the Valco and Nab bonds to United. Baer claims that these assignments were sham transactions, without real effect, and that he retained ownership of the bonds. Baer asserts that there is no evidence that the document purporting to assign the Nab bond was ever delivered to United, and that there is no written assignment of the Valco bond in the record. Baer claims that it was always understood by himself and the other officers of United that United was nothing more than Baer's nominee and that Baer retained ownership of the bonds and was entitled to their proceeds. In support of this claim, Baer asserts that United gave no consideration for the bonds and never listed the bonds as assets on its books; the bonds similarly were never listed as assets in any of the reports filed by United with the National Credit Union Administration Board (NCUA) and were never recorded as United's assets in any audit report produced by the NCUA.

Consistent with his asserted understanding that the bonds were his, Baer claims that he arranged with United to have the monthly principal and interest paid to his personal accounts. Baer's uncontradicted affidavits tell the following story. Each month, United received payment of approximately $1,084 on the Nab bond. At about the same time, United wrote a check for the equivalent amount to Baer, which Baer deposited in his T. Rowe Price Tax Exempt Money Fund Account No. 200413322-77 (the Price account). Similarly, United received a monthly payment of approximately $1,981 on the Nab bond and wrote a check for the equivalent amount to Baer, who then deposited it in his Scudder Tax Free Investment Account No. 2505103 (the Scudder account). Baer asserts that United's records fully disclosed this routing of monthly payments on the bonds through United, as nominee, to Baer's accounts, and that neither Baer nor United ever sought to hide or conceal from government regulators this use of United as Baer's nominee.

In November 1990, the NCUA appointed itself conservator of United and took possession of United's books and records. Thereafter, Baer claims, he attempted to have the Valco and Nab bonds formally reassigned to his name to comport with his actual ownership of the bonds; in response, the government had him arrested, alleging that he had attempted to impede the functions of the NCUA Board, in violation of 18 U.S.C. § 1032(2). In July 1991, the criminal complaint against Baer was dismissed without prejudice.

In the instant civil action, the government alleges that Baer willfully misappropriated the monthly principal and interest on the bonds, in violation of 18 U.S.C. § 657. In support of this claim, the government alleges that Baer knew that the payments generated by the bonds were the property of United when he arranged for United to issue checks to him in the exact amount of the payments. Further, the government alleges that Baer's subsequent deposit of those checks from United into the Price and Scudder accounts constituted money laundering, in violation of 18 U.S.C. § 1956(a)(1). On this basis, pursuant to 18 U.S.C. § 981(a)(1)(A), the government sought forfeiture of all the money in the Price and Scudder accounts, amounting to $139,445 and $256,105, respectively, not just the $97,630.95 and $162,520.17 that represented the identifiable amounts of the United checks in those respective accounts.

Baer filed claims for each of the defendant-accounts and answered the complaint. In August 1992, in an oral opinion, Judge Spatt awarded the government summary judgment and forfeited both accounts. The district court apparently accepted the government's theory that Baer had violated 18 U.S.C. § 657 by "taking funds from United without authorization, a statutory violation." The court, however, apparently made no other finding bearing on criminal intent.

At the close of his August 1992 decision, Judge Spatt granted Baer leave to file a motion for reargument. Thereafter, in an oral opinion and in a written order in November 1992, Judge Spatt granted the motion for reargument, but upon reargument, adhered to his prior decision. This appeal followed.

Discussion

Summary judgment is improper unless there is "no genuine issue as to any material fact." Fed.R.Civ.P. 56(c). On a motion for summary judgment, the district court cannot try issues of fact but must determine only whether there are issues of fact to be tried. The burden is on the party moving for summary judgment to demonstrate the absence of any genuine issue of material fact. See Patrick v. LeFevre, 745 F.2d 153, 158 (2d Cir.1984). In determining whether the moving party has satisfied this burden, the court must resolve all ambiguities in favor of the non-moving party and draw all reasonable inferences against the moving party. See Liscio v. Warren, 901 F.2d 274, 276 (2d Cir.1990) (citing Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 106 S.Ct. 2505, 91 L.Ed.2d 202 (1986)). In other words, the court must view the evidence in the light most favorable to the party opposing the motion, giving that party the benefit of all favorable inferences that may reasonably be drawn. Moreover,

[t]his admonition [to view the evidence in the light most favorable to the opponent] should especially be kept in mind when the inferences which the parties seek to have drawn deal with questions of motive, intent, and subjective feelings and reactions.

Empire Elecs. Co. v. United States, 311 F.2d 175, 180 (2d Cir.1962).

Baer argues in this court, among other things, that there remain genuine issues of material fact concerning (i) the validity of his purported assignment of the Nab and Valco bonds to United in view of his intent not to assign the bonds; and (ii) whether he had the requisite knowledge or intent to violate either 18 U.S.C. § 657 (embezzlement of funds belonging to credit institution) or 18 U.S.C. § 1956(a)(1) (money laundering). Indeed, as to the latter, Baer argues that the district court made no finding at all. Both issues involve questions of intent, which makes them especially unsuitable for summary judgment.

The government asserted in the district court that Baer did make bona fide assignments of the Nab and Valco bonds to United. If, however, as Baer argues, the purported assignments were sham transactions and thus did not transfer ownership of the bonds to United, then Baer did not willfully misapply United's funds in violation of 18 U.S.C. § 657 when he directed United to issue him checks for the bond proceeds. Further, if he and United were both aware that the purported assignments to United were not assignments in substance, Baer could not have laundered money in violation of 18 U.S.C. § 1956 because the allegedly laundered money did not belong to United.

In his initial affidavit in opposition to the government's summary judgment motion, Baer contested the government's assertion that the purported assignments transferred ownership of the bonds to United. In support of his position, he stressed that United gave no consideration for the bonds and did not record the bonds as an asset on its books. Baer further maintained that he retained ownership of the bonds and their proceeds at all times, that the transactions concerning the flow of the bond proceeds were not concealed in any way, and that the transactions were clearly reported in the books and records of United. His affidavit stated:

The 1983 assignment to United was made solely for my personal convenience. United paid nothing for the bonds. Nor is there any record in United showing that the bonds were treated as an asset of United. A review of the annual and semi-annual reports required by law to be filed with the NCUA will show that the bonds were not considered as an asset of United. And a review of the records will confirm that United paid nothing for the assignment of these bonds.

While the bonds were assigned to United, [the bonds' trustee] forwarded the monthly amortized payments to United pursuant to my direction. As the...