U.S. v. One 1988 Prevost Liberty Motor Home, Civil Action No. H-93-0980.

CourtUnited States District Courts. 5th Circuit. United States District Courts. 5th Circuit. Southern District of Texas
Writing for the CourtAtlas
Citation952 F.Supp. 1180
Decision Date03 December 1996
Docket NumberCivil Action No. H-93-0980.
PartiesUNITED STATES of America, Plaintiff, v. ONE 1988 PREVOST LIBERTY MOTOR HOME, Measuring 40 Feet in Length, also known by Vehicle Identification Number 2P9M33403J1001532, and Bearing Oregon License Plate H998173, Defendant.
952 F.Supp. 1180
UNITED STATES of America, Plaintiff,
v.
ONE 1988 PREVOST LIBERTY MOTOR HOME, Measuring 40 Feet in Length, also known by Vehicle Identification Number 2P9M33403J1001532, and Bearing Oregon License Plate H998173, Defendant.
Civil Action No. H-93-0980.
United States District Court, S.D. Texas, Houston Division.
December 3, 1996.

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Michael B. Schwartz and William Emerson Yahner, Office of U.S. Attorney, Houston, TX, for the U.S.

Arch M. Skelton, Dallas, TX, for LMC Investments Inc.

MEMORANDUM AND ORDER

ATLAS, District Judge.


INTRODUCTION

This Memorandum and Order supersedes the Court's Findings of Fact and Conclusions of Law entered on October 21, 1996 [Doc. # 167] in this case.1

The United States of America (the "United States" or "Government") brought this civil forfeiture action against One 1988 Prevost Liberty Motor Home ("Defendant Property" or the "Motor Coach") pursuant to 18 U.S.C. § 981(a)(1)(A). The Government contends that the Defendant Property is proceeds traceable to a money laundering violation under 18 U.S.C. § 1956(a)(1)(A). The money laundering violation is premised on bankruptcy fraud by Lawrence or Larry Sheehan ("Sheehan") in violation of 18 U.S.C. § 152.

LMC Investments Inc. ("LMC" or "Claimant") is a Missouri corporation that has filed a claim in this action contesting the forfeiture and contending that it is the owner of the Motor Coach. Sheehan does not personally make a claim to the Defendant Property. The Government contends that LMC lacks standing to contest this forfeiture since it lacks a genuine interest in the Defendant Property.

Claimant LMC asserts eleven defenses in its Third Amended Answer and Claim for Damages and Attorney's Fees [Doc. # 79] ("Answer"), which can be summarized into four categories. First, LMC claims that

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there was no bankruptcy fraud or money laundering violation by Sheehan and therefore forfeiture is unlawful since the Defendant Property is not involved in and is not proceeds of any illegal activity. Second, it contends that there is no substantial connection between the fraud allegedly committed in Sheehan's bankruptcy and the Defendant Property or the farm and lake house, the proceeds of which were used to purchase the Defendant Property. Third, Claimant contends that it is an "innocent owner," and is entitled to avoid the forfeiture since the predicate offenses have been shown to have been committed without knowledge of the owner. Fourth and finally, Claimant challenges the procedures used in connection with and the timeliness of this action. See Answer, at 12-16.

A five day bench trial was held in this case. The Court holds that LMC has failed to establish that it has standing to contest this forfeiture. Nevertheless, since a substantial trial was held, the Court addresses the merits, in the event of a challenge to its initial ruling. On the merits, the Court holds that many of the LMC defenses are not legally viable, and that Claimant has failed to prove any of the other defenses by a preponderance of the evidence. The Defendant Property therefore is forfeited to the United States for disposition as appropriate under law.

FINDINGS OF FACT

1. Procedural Posture of This Forfeiture Action

The Defendant Property is a 1988 Prevost Liberty Motor Home, measuring 40 feet in length, also known by vehicle identification number 2P9M33403J1001532, and bearing Oregon license plate H998173.

Upon application of Plaintiff United States, on April 2, 1993, Magistrate Judge Mary Milloy issued a Warrant for Arrest in Rem directing the United States Marshal for the Middle District of Florida to seize and maintain the Defendant Property. On that day, the Defendant Property was in the possession of Larry Sheehan and his wife, Loretta Jean Adkinson Sheehan, at Richardson's Fish Camp, 1550 Scotty's Road, Kissimmee, Florida. Testimony of Larry Sheehan ("Sheehan Testimony"). On April 9, 1993, the property not having yet been seized, the United States moved for issuance of an Amended Warrant for Arrest in Rem, alleging as grounds that the Defendant Property had been removed from the Middle District of Florida. On April 9, 1993, Magistrate Judge Marcia Crone issued an Amended Warrant for Arrest in Rem directing the United States Marshal's Service to seize and maintain the Defendant Property.

The Defendant Property was seized near Covington, Kentucky by the United States Marshal's Service for the Western District of Kentucky on or about April 14, 1993, after being abandoned by Larry Sheehan and Loretta Jean Adkinson Sheehan. Since its seizure, the Defendant Property has remained in the care and custody of the United States Marshal's Service for the Western District of Kentucky in Louisville, Kentucky.

Pursuant to a Stipulation entered into by the United States and LMC, see Doc. # 21, probable cause existed for the seizure of the Defendant Property. Because LMC sought repeatedly to withdraw its agreement to the Stipulation, the Court at trial also made a finding that probable cause existed based on the evidence adduced during the first several days of trial.

The only claimant with respect to the Defendant Property is LMC. Sheehan has expressly disclaimed any ownership, lessee or possessory interest in the Defendant Property.

2. Background of LMC and its Shareholders, Officers and Directors

LMC has two 50% shareholders, William A. Ross ("Ross") and Michelle T. Sheehan. Ross is president and Michelle Sheehan is secretary of LMC. Ross and Michelle Sheehan also constitute LMC's board of directors. William A. Ross was a fellow pilot of Sheehan's at Continental Airlines (and a farm owner); they met at Continental Airlines in the mid-1980's. Michelle Sheehan, who was born on August 27, 1970, is the daughter of Sheehan.

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There is no evidence that Michelle Sheehan's involvement in LMC extended beyond signing documents prepared by others. See Memorandum and Order, dated March 7, 1995 [Doc. # 55], at 2. Michelle Sheehan has never refused to sign any documents prepared and sent to her by others relating to LMC. Ross' involvement was only slightly more substantive on isolated occasions in 1989, and ceased completely after he learned he had cancer. Cully and Ross Testimony; see LMC Ex. 30.

LMC apparently was formed in or about April 1986, according to unsigned Minutes of First Meeting of Shareholders and Minutes of First Meeting of Board of Directors and an unsigned stock certificate, each dated April 2, 1986. USA Ex. 6, 7, 8. The evidence of the identity of the initial shareholder(s) is the unexecuted stock certificate and a reference in the Minutes of First Meeting of Shareholders indicating Sheehan was the sole shareholder. USA Ex. 6, 7. The certificate was in the files of LMC's and Sheehan's attorney, Michael Cully ("Cully"). Cully Testimony. Sheehan claims he was never a shareholder of LMC.2 There is no dispute, however, that he was President of LMC from the time of its formation until sometime in May 1989, when he purportedly resigned. LMC Ex. 9A, 9B. The share certificates evidencing Michelle Sheehan's and Ross' ownership interests in LMC were prepared in 1994, after this litigation was commenced. USA Ex. 9-12. Neither Ross nor Michelle Sheehan could recall when they first received their certificates. Only after this action was filed by the United States did Ross and Michelle Sheehan prepare lost stock certificates. Id.

3. Sheehan's Rationale For Use of Corporate Ownership

On March 10, 1986, Sheehan informed United Savings & Loan Association of Lebanon, Missouri ("United Savings") by letter that he had instructed his attorneys to transfer his personal assets to "corporate umbrellas" in order to shield them from potential creditors. USA Ex. 1. He stated that he was in the process of transferring legal title to personal assets into corporate nominees. USA Ex. 1; Sheehan Testimony. Sheehan was in default of a May 1985 personal loan, that already had been extended twice but was due on May 6, 1987. He owed $90,900.00 on this loan to Union National Bank of Colorado ("Union National Bank") as of that time. In May 1987, Union National Bank began collection activities.3

Sheehan's method of operating was to attempt to conceal his assets. Sheehan was familiar with bankruptcy proceedings at this time since, in 1985 or 1986, a company he owned, Wooden Nickel, Inc., had been forced involuntarily into bankruptcy. Sheehan Testimony; see USA Ex. 323 (Transcript from Sheehan's Section 341 Meeting of Creditors), at 102.

Sheehan had represented to United Savings that his net worth in 1985 was $5.7 million. USA Ex. 18.4 He thus had a significant incentive to hide his assets. He testified at trial that he was afraid he would be sued personally if a plane he was piloting was in an airplane accident, since his employer, Continental Airlines, had changed its indemnity policies. He also stated that he wanted to be sure his former wife, Betty Olson Sheehan, did not get his property.5

Sheehan thereafter held virtually no assets in his own name. In or about April 1986, shortly after LMC was formed, Sheehan

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transferred title in 1514 So. Glenstone ("Glenstone Property") from himself to LMC. USA Ex. 93; Sheehan Testimony. Thereafter, LMC's principal business related to the ownership of two buildings in which restaurants operated.6

Sheehan's financial problems grew worse with time. On January 24, 1989, Sheehan confessed to a $125,000.00 judgment in a lawsuit brought against him by Union National. USA Ex. 71, 71.1.7 By March or April 1989, Union National Bank began its attempts to garnish Sheehan's wages as a result of this judgment. USA Ex. 123. Sheehan counseled with Cully concerning the garnishment action and the Bank's efforts to seize certain assets located in Springfield, Missouri. USA Ex. 39; Sheehan Testimony....

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2 practice notes
  • In re 650 Fifth Ave. And Related Properties., No. 1:08–cv–10934–RJH.
    • United States
    • United States District Courts. 2nd Circuit. United States District Courts. 2nd Circuit. Southern District of New York
    • March 29, 2011
    ...Rd. in Cheeks Twp., Orange County, N.C., 386 F.Supp.2d 613, 616 (M.D.N.C.2005); United States v. One 1988 Prevost Liberty Motor Home, 952 F.Supp. 1180, 1205 (S.D.Tex.1996); United States v. Contents of Account Nos. 208–06070 and 208–06068–1–2, 847 F.Supp. 329, 334 (S.D.N.Y.1994); United Sta......
  • IN RE 650 FIFTH AVENUE, NO.: 1:08-cv-10934-RJH
    • United States
    • United States District Courts. 2nd Circuit. United States District Courts. 2nd Circuit. Southern District of New York
    • March 30, 2011
    ...in Chees Twp., Orange County, N. C., 386 F. Supp. 2d 613, 616 (M. D. N. C. 2005); United States v. One 1988 Prevost Liberty Motor Home, 952 F. Supp. 1180, 1205 (S. D. Tex. 1996); United States v. Contents of Account Nos. 208-07070 and 208-0608-12, 847 F. Supp. 329, 334 (S. D. N. Y. 1994); U......
2 cases
  • In re 650 Fifth Ave. And Related Properties., No. 1:08–cv–10934–RJH.
    • United States
    • United States District Courts. 2nd Circuit. United States District Courts. 2nd Circuit. Southern District of New York
    • March 29, 2011
    ...Rd. in Cheeks Twp., Orange County, N.C., 386 F.Supp.2d 613, 616 (M.D.N.C.2005); United States v. One 1988 Prevost Liberty Motor Home, 952 F.Supp. 1180, 1205 (S.D.Tex.1996); United States v. Contents of Account Nos. 208–06070 and 208–06068–1–2, 847 F.Supp. 329, 334 (S.D.N.Y.1994); United Sta......
  • IN RE 650 FIFTH AVENUE, NO.: 1:08-cv-10934-RJH
    • United States
    • United States District Courts. 2nd Circuit. United States District Courts. 2nd Circuit. Southern District of New York
    • March 30, 2011
    ...in Chees Twp., Orange County, N. C., 386 F. Supp. 2d 613, 616 (M. D. N. C. 2005); United States v. One 1988 Prevost Liberty Motor Home, 952 F. Supp. 1180, 1205 (S. D. Tex. 1996); United States v. Contents of Account Nos. 208-07070 and 208-0608-12, 847 F. Supp. 329, 334 (S. D. N. Y. 1994); U......

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