U.S. v. Pantelidis

• Citation: 335 F.3d 226
• Decision Date: 11 July 2003
• Docket Number: No. 02-3436.,No. 02-4318.,02-3436.,02-4318.
• Parties: UNITED STATES of America v. Jerry PANTELIDIS, Appellant. In re: Jerry Pantelidis, Petitioner.
• Court: United States Courts of Appeals. United States Court of Appeals (3rd Circuit)

335 F.3d 226

UNITED STATES of America v. Jerry PANTELIDIS, Appellant In re: Jerry Pantelidis, Petitioner.

No. 02-3436.

No. 02-4318.

United States Court of Appeals, Third Circuit.

Argued: April 1, 2003.

Filed July 11, 2003.

James M. Becker, (Argued), James A. Keller, Saul Ewing LLP, Philadelphia, PA, for Appellant/Petitioner.

Patrick L. Meehan, United States Attorney, Laurie Magid, Deputy United States Attorney for Policy and Appeals, Robert A. Zauzmer, Assistant United States Attorney, Chief of Appeals, Paul L. Gray, (Argued), Assistant United States Attorney, Philadelphia, PA, for Appellee/Respondent.

Before: McKEE and SMITH, Circuit Judges, and COWEN, Senior Circuit Judge.

OPINION OF THE COURT

McKEE, Circuit Judge.

Jerry Pantelidis appeals from the district court's order denying his motion for return of property filed under Fed. R.Crim.P. 41(e). He claims that he is entitled to the return of certain funds escrowed pursuant to the terms of a non-prosecution agreement. However, since we conclude that the agreement is ambiguous, we will vacate the district court's order and remand for further proceedings so that the district court can resolve the ambiguity.

I. FACTS AND PROCEDURAL HISTORY

On November 5, 2001, a federal grand jury returned an indictment charging Jerry Pantelidis with seven counts of making false statements to federally insured financial institutions, in violation of 18 U.S.C. § 1014, two counts of bank fraud, in violation of 18 U.S.C. § 1344, one count of making a false oath in a bankruptcy proceeding, in violation of 18 U.S.C. § 152(2), and one count of use of a false social security number, in violation of 42 U.S.C. § 408(a)(7). The false statement and bank fraud counts charged that Pantelidis advanced his real estate business interests by making false and fraudulent statements, including: fraudulently creating fictitious income tax returns claiming inflated income amounts; creating false financial statements; and making false declarations of income and assets in order to secure bank loans and lines of credit totaling in excess of $3.5 million, and to secure credit cards and a car lease. The indictment further alleged that Pantelidis earned hundreds of thousands of dollars profit from the acquisition, development and resale of properties which Pantelidis purchased using fraudulently obtained financing. The indictment also contained a notice of forfeiture concerning $637,411.40 in proceeds obtained directly or indirectly from the violations of 18 U.S.C. §§ 1014 and 1344, and a notification of the government's intention, if necessary, to seek forfeiture of substitute assets, up to the value of the property subject to forfeiture.¹

According to the government, the amount of the funds in the notice of forfeiture in the indictment, viz., $637,441.40, represents the total net proceeds Pantelidis realized from the sale of two buildings he purchased or improved using the fraudulently obtained funds. Those buildings were located at 311 S. Juniper Street and 1315 Walnut Street in Philadelphia. This appeal also involves proceeds derived from the sale of the Barclay Hotel in Philadelphia.

A. 311 S. Juniper Street.

Count Two of the indictment charged that Pantelidis made false statements to Regent National Bank to obtain a $500,000 loan to purchase and improve upon a property at 311 S. Juniper Street, in violation of 18 U.S.C. § 1014. The indictment alleged that in late 1994 Pantelidis supplied the bank with copies of his federal income tax returns for the years 1991, 1992 and 1993, on which returns he claimed adjusted gross income of $107,706, $133,675 and $162,423, respectively. The indictment further alleged that Pantelidis had not filed federal income tax returns during those years, and that the returns he furnished to the bank were fictitious and contained inflated income. According to the government, Pantelidis's actual federal income tax returns for those years, filed with the IRS in April 1995, showed true income during 1991, 1992 and 1993, of minus $9,996, minus $34,878, and minus $59,908, respectively.

On February 3, 1998, Pantelidis's company, 311 S. Juniper Street, Inc., sold the property on Juniper Street. The proceeds check from the sale of the property, $263,901.40 was seized by the government pursuant to a seizure warrant executed at the real estate closing. The indictment seeks the forfeiture of these alleged proceeds of the § 1014 violation. The proceeds are currently worth $87,973, as will be explained later.

B. 1315 Walnut Street.

Count Three charged that Pantelidis defrauded Regent National Bank, while attempting to obtain a $1,300,000 secured line of credit to pay delinquent taxes and make capital improvements to a property at 1315 Walnut Street, in violation of 18 U.S.C. § 1344. The indictment alleged that Pantelidis supplied the bank with a personal financial statement dated May 10, 1995, in which he claimed to have filed federal income tax returns for the years, 1991, 1992 and 1993. The indictment alleged that Pantelidis made the claim knowing that Regent would rely on the fictitious income tax returns he had previously given the bank in connection with the Juniper Street property. The indictment further alleged that Pantelidis did not give the bank his true 1991, 1992 and 1993 federal income tax returns, which he had filed with the IRS only sixteen days earlier on April 24, 1995, but which showed negative income during the three years, as described above.

After the seizure of the 311 S. Juniper Street proceeds, the government learned that Pantelidis intended to sell the 1315 Walnut Street property. Pantelidis's former counsel was aware by then that the government had the same forfeiture claim to the proceeds of the sale of this property: the building was improved using a $1,300,000 loan allegedly obtained through deceiving Regent National Bank. Rather than cause the government to apply for another seizure warrant, Pantelidis's former counsel attended the April 6, 1999 closing, which was also attended by an FBI agent, and agreed to have the proceeds of the sale of the building placed in escrow accounts. As a result of the agreement, Pantelidis escrowed approximately $447,540. Approximately $267,180 of this amount remains escrowed.

C. The Barclay Hotel.

Count Eleven charged Pantelidis with making a false oath before the bankruptcy court during hearings on two competing plans of reorganization to purchase the Barclay Hotel from bankruptcy. One of the plans was Pantelidis's. Pantelidis is accused of claiming to have "a little under a million" in cash and readily marketable securities available to him to secure financing for the project. The indictment alleged that Pantelidis actually had approximately $101,000 in cash and unpledged securities at the time. The indictment also alleged that Pantelidis's financial status was a material matter to the bankruptcy court.

Neither of the two plans was accepted, which necessitated the sale of the hotel at auction. At auction, Pantelidis won the right to purchase the hotel for $5.5 million, which he did in January 1997. According to the closing documents from the subsequent sale of the hotel in June 1999, Pantelidis was paid in excess of $9 million for the hotel less than two and one-half years after he purchased it for $5.5 million. His profit allowed Pantelidis to pay off more than $4 million in business and personal debts.

At the time of closing in June 1999 (which was two months after the sale of his 1315 Walnut Street property), and while Pantelidis and the government were in plea negotiations, the government learned that Pantelidis wished to sell his interest in the Barclay. As noted in an agreement reached between Pantelidis and the government concerning the sale, the government was aware of a difficult situation involving the property and the benefits to be obtained through the sale. The parties to the sale, and others, requested that the government clear the way for the sale of the building.

The government agreed not to seek money laundering charges against Pantelidis concerning the sale of the Barclay, primarily on the condition that, from the gross proceeds of the sale, Pantelidis escrow $850,000 allegedly owed to Elizabeth McHenry, an elderly benefactor of Pantelidis, and that he escrow all remaining proceeds from the sale.

On June 25, 1999, a week after the government agreed not to seek money laundering charges against him, Pantelidis sold his interest in the Barclay. The closing documents for the sale show that, as agreed, Pantelidis escrowed $855,496.50 for the benefit of Elizabeth McHenry, and escrowed the net proceeds of the sale, $371,211.35. Exhibit A to the closing documents shows that company and personal debts of Pantelidis, well in excess of $4 million, were paid off from the gross proceeds. Among the debts paid off were: $20,000 to Elizabeth McHenry's attorneys; $236,250 to Pantelidis's civil attorneys; $50,000 to Pantelidis's accountant; $212,000 to certain of Pantelidis's employees; $68,250 to Pantelidis's criminal attorney; and $2,255,863 to the Barclay Condo Association. The Barclay proceeds were also used to pay off three loans to Pantelidis which were, according to the indictment, procured by false statements or fraud. These bank loans are involved in Counts Four, Five and Six of the indictment.

Approximately $150,000 of the $371,211 net proceeds from the Barclay sale remains in escrow. The government does not contend that the remaining $150,000 constitutes direct proceeds of criminal activity. Rather, because the government says that it cannot recover the entire $637,441.40 in proceeds from the remaining seized and escrowed funds available for forfeiture from the Juniper Street and Walnut Street properties (now approximately $355, 153), the indictment seeks to forfeit the $150,000 as substitute assets pursuant to 18 U.S.C. § 982(b) and 21 U.S.C. § 853(p).

D. Disposition of the Seized and...