United States v. Dupree

• Decision Date: 28 January 2013
• Docket Number: No. 10–CR–627 (KAM).,10–CR–627 (KAM).
• Citation: 919 F.Supp.2d 254
• Parties: UNITED STATES of America v. Courtney DUPREE, Thomas Foley, and Rodney Watts, Defendants.
• Court: U.S. District Court — Eastern District of New York

919 F.Supp.2d 254

UNITED STATES of America

v.Courtney DUPREE, Thomas Foley, and Rodney Watts, Defendants.

No. 10–CR–627 (KAM).

United States District Court, E.D. New York.

Jan. 28, 2013.

Brian D. Morris, David Carey Woll, James G. McGovern, Michael Warren, Michael Lloyd Yaeger, United States Attorneys Office, Brooklyn, NY, for United States of America.

Roscoe C. Howard, Daniel Seikaly, Leasa Woods Anderson, Meena T. Sinfelt, Andrews Kurth LLP, Washington, DC, John F. Kaley, Doar Rieck & Mack, New York, NY, for Defendants.

MEMORANDUM AND ORDER

MATSUMOTO, District Judge:

On December 30, 2011, after a jury trial, defendant Courtney Dupree (“Dupree”), the owner and CEO of GDC Acquisitions, LLC (“GDC”), and a number of wholly owned subsidiaries, was convicted of (1) conspiracy to commit bank fraud, (2) bank fraud, and (3) two counts of making a false statement in connection with a complex multi-million dollar scheme to defraud Amalgamated Bank (“Amalgamated”) by obtaining or attempting to obtain loan proceeds on the basis of false financial statements and other material misrepresentations between January 2007 and July 2010. On January 3, 2012, the same jury returned a special verdict finding that Dupree obtained $18,157,000 constituting or derived from proceeds traceable to the offenses for which he was convicted, and also finding that funds in eight bank accounts seized by the government were subject to forfeiture as property constituting or derived from proceeds traceable to those offenses. ( See ECF No. 511, Special Verdict Sheet for Forfeiture.) Accordingly, on January 10, 2012, the court entered a preliminary order of forfeiture as to the funds seized from the bank accounts. Four of the eight bank accounts were with JP Morgan Chase Bank (“Chase Bank”) in the name of Unalite Southwest, LLC (“USW”), a wholly-owned subsidiary of GDC, and total $983,790.11 (the “Subject Funds”). ( See id.) Pursuant to 21 U.S.C. § 853(n) and Federal Rule of Criminal Procedure 32.2(c)(1), before the court may enter a final order of forfeiture as to the assets included in the preliminary order of forfeiture in favor of the government, it must first conduct a post-trial ancillary proceeding in order to adjudicate any third-party claims to the forfeited assets.

Presently before the court are four motions related to third-parties claiming an interest in the Subject Funds: (1) a motion by the United States of America (the “government”) to dismiss the verified petition for a hearing to adjudicate the third-party claims of defendant Rodney Watts (“Watts”) and his counsel DePetris & Bachrach, LLP (“D & B”) (collectively, the “Watts Petitioners”) to the Subject Funds; (2) a cross-motion by the Watts Petitioners for judgment on the pleadings against the government; (3) a motion by the Watts Petitioners to dismiss the verified petition for a hearing to adjudicate the third-party claims of Amalgamated to the Subject Funds; and (4) a request by pro se third-party Valerie A. Griffin (“Griffin”) that she be added as an interested party so that she may file a third-party claim to assets included in the preliminary order of forfeiture. ( See ECF Nos. 554, 559, 571, 575–76, 579–584.) For the reasons set forth below, the court hereby: (1) grants the government's motion to dismiss the Watts Petitioners' petition; (2) denies the Watts Petitioners' cross-motion for judgment on the pleadings; (3) denies the Watts Petitioners' motion to dismiss Amalgamated's petition; and (4) denies Griffin's request to be added as an interested party in order to file a third-party petition.

BACKGROUND

I. Factual and Procedural History

The court will assume the reader's familiarity with the extensive factual and procedural history of this case, and will therefore only summarize those facts that are pertinent to the present motions regarding third-party claims to assets subject to the preliminary order of forfeiture.

On July 21, 2010, Magistrate Judge Marilyn D. Go of the Eastern District of New York issued warrants to seize funds in approximately sixteen bank accounts as representing property that constituted or was derived from proceeds traceable to a conspiracy to commit bank fraud, mail fraud, and wire fraud in violation of 18 U.S.C. §§ 1344, 1341, and 1343. ( See generally ECF No. 2, Arrest Warrant.) On July 23, 2010, Magistrate Judge Ramon E. Reyes of the Eastern District of New York issued seizure warrants for funds in several additional bank accounts. Included among those assets seized by the government were the Subject Funds from four accounts at Chase Bank held in the name of USW.

In a five-count superseding indictment on August 13, 2010, defendants Dupree, Watts, and Thomas Foley (“Foley”) (collectively, “defendants”) were indicted by a grand jury for bank fraud, conspiracy to commit bank, mail, and wire fraud, and making a false statement and report for the purposes of influencing Amalgamated. ( See ECF No. 295, Superseding Indictment.) ¹ The first four counts of the Superseding Indictment arise out of an alleged scheme to defraud Amalgamated, a federally insured financial institution, by obtaining, and attempting to obtain, loan funds for GDC and its subsidiaries on the basis of false financial statements and other material misrepresentations between January 2007 and July 2010. ( Id. ¶¶ 5, 6, 8.) Specifically, on or about August 29, 2008, three of GDC's subsidiaries, JDC Lighting, LLC, Unalite Electric and Lighting, LLC, and Hudson Bay Environments Group, LLC (collectively, the “Borrower Subsidiaries”), entered into an agreement (“the Loan Agreement”) with Amalgamated under which the Borrower Subsidiaries could borrow up to $21 million through a revolving credit and term loan, which were guaranteed by GDC and other wholly owned subsidiaries of GDC. ( Id. ¶ 9). Under the terms of the Loan Agreement, the Borrower Subsidiaries pledged as security for the loans all of their property, which included, inter alia, their accounts receivable and inventory. The Borrower Subsidiaries were required to submit Borrowing Base Certificates to Amalgamated each month stating the total value of both their accounts receivable and current inventory. ( Id. ¶¶ 10–11.) The core of the fraud allegations was that defendants deliberately and falsely overstated the accounts receivable on consolidated financial statements and Borrowing Base Certificates provided to Amalgamated, which were used to determine the amount that the Borrower Subsidiaries could borrow in any given month. ( Id. ¶¶ 11–13.)

In May of 2011, Watts sought to challenge the government's continued restraint of the Subject Funds at an evidentiary hearing conducted pursuant to United States v. Monsanto, 924 F.2d 1186 (2d Cir.1991). ( See ECF No. 213, Minute Entry for Monsanto Hearing held before Magistrate Judge Joan M. Azrack.) On July 27, 2011, the court adopted in part and modified in part the Report and Recommendation of Magistrate Judge Azrack, and found that the government had demonstrated probable cause to continue to restrain $350,290.87 of the Subject Funds in advance of trial. (ECF No. 281, Memorandum and Order (“July 27th Order”) at 23–24, 2011 WL 3235637.) As part of his opposition to the government's motion for reconsideration and clarification of the court's order, Watts tendered an assignment by USW, executed by counsel for Dupree on August 11, 2011 (the “Assignment”), which purports to assign all of USW's right, title, and interest in the Subject Funds to Watts' counsel, D & B, in payment of past and future legal services provided by D & B to Watts. ( See ECF No. 314–1, Assignment ¶¶ 2–3.)

Despite Watts' request that the remaining balance of the Subject Funds, totaling $633,499.24, be released to D & B, the court instead directed the government to deposit the remaining balance into the Eastern District of New York's Seized Asset Deposit Fund pending further orders from this court or a court with jurisdiction over those funds. ( See Minute Entry of Sept. 13, 2011; ECF No. 338, Order.) At Watts' request, based upon Watts' appeal to the Second Circuit of those orders, the court granted Watts a stay of his criminal case pending adjudication of his appeal. ( See Minute Entry of Oct. 17, 2011.)

After jury selection on December 5, 2011, the trial of Dupree and Foley commenced with opening statements the following day on December 6, 2011, and continued thereafter. On December 30, 2012, after one day of deliberations, the jury returned its verdict finding Dupree guilty of counts One through Four of the Superseding Indictment, and acquitting Foley of all charges.

( See Jury Verdict.) The forfeiture phase of the jury trial then continued in a separate proceeding following the guilty verdict. On January 3, 2012, the jury returned a Special Verdict for a Forfeiture Money Judgment, by a preponderance of the evidence, that Dupree obtained funds constituting or derived from proceeds of the offenses in the Superseding Indictment of which he was convicted, in the amount of $18,157,000, as representing proceeds traceable to offenses for which he was convicted, and that funds seized by the government from the eight bank accounts were also subject to forfeiture as property traceable to or derived from proceeds of Dupree's offenses of conviction. ( See Special Verdict Sheet for Forfeiture.) Accordingly, on January 10, 2012, the court entered preliminary orders of forfeiture as to the Subject Funds. ( See ECF Nos. 520, 521, First and Second Preliminary Orders of Forfeiture.) Dupree has not contested the sufficiency of the evidence to sustain the forfeiture verdict.

By summary order issued on April 30, 2012, the Second Circuit held that the jury's verdict as to Dupree, as well as the preliminary orders of forfeiture entered on the basis of that verdict, rendered Watts' appeal moot, and therefore dismissed his appeal. See United States v. Watts, 477 Fed.Appx. 816, 817–818 (2d Cir.2012). The Second Circuit...