United States v. Furnari

• Decision Date: 10 January 2014
• Docket Number: No. 13–12478.,13–12478.
• Parties: UNITED STATES of America, Plaintiff, v. Michael J. FURNARI, Beverly Furnari, Tara Furnari, and Steven Cantwell, Defendants.
• Court: U.S. District Court — Eastern District of Michigan

73 F.Supp.3d 877

UNITED STATES of America, Plaintiff

v.Michael J. FURNARI, Beverly Furnari, Tara Furnari, and Steven Cantwell, Defendants.

No. 13–12478.

United States District Court, E.D. Michigan, Southern Division.

Signed Jan. 10, 2014.

Opinion Denying Rehearing Oct. 7, 2014.

Tauras N. Ziedas, United States Attorney's Office, Detroit, MI, for Plaintiff.

Jeffrey L. Hudson, Dean & Fulkerson, Larry W. Bennett, Giarmarco, Mullins, Troy, MI, Lawrence J. Murphy, Honigman, Miller, Detroit, MI, for Defendants.

OPINION AND ORDER REGARDING DEFENDANTS' MOTION TO DISMISS/AND FOR SUMMARY JUDGMENT

GERALD E. ROSEN, Chief Judge.

I. INTRODUCTION

This is a civil action brought by the United States Government pursuant to the Federal Debt Collection Procedures Act, 28 U.S.C. § 3001 et seq., to set aside as a fraudulent transfer Michael and Beverly Furnari's conveyance of real property situated in Kihei, Hawaii to their daughter, Tara Furnari. The matter is presently before the Court on the Defendants' Motion to Dismiss Count I and for Summary Judgment on Count II of the Government's Complaint. The Government thereafter filed a Motion for Leave to Amend its Complaint, and subsequently, filed a response to Defendants' Motion to which the Defendants have replied.

Having reviewed and considered the parties' motions and briefs, and the entire record of this matter, as well as the public records of related criminal cases,¹ the Court has concluded that oral argument is not necessary. Therefore, pursuant to Eastern District of Michigan Local Rule 7.1(f)(2), this matter will be decided “on the briefs.”

II. FACTUAL BACKGROUND

A. The Criminal Charges Against Furnari Arising from His Involvement in Scott Ashley's Mortgage Loan Transactions

On September 9, 2008, Michael Furnari was charged in an Information with one count of Misprision of a Felony for concealing from authorities his knowledge of the scheme of another individual, Scott Ashley, to defraud Wells Fargo Bank and Huntington National Bank in 2002, in connection with Ashley obtaining mortgage loans from the banks in the amounts of $2,999,435.00 and $500,000.00, respectively. The loans were to be used by Ashley for the purchase of a residence located at 130 Brady Lane in Bloomfield Hills, Michigan valued at $5.5 million which was offered for sale by Furnari. See United States v. Furnari, E.D.Mich. No. 08–CR–20466.² The scheme to defraud included false and material misrepresentations to the banks that Ashley had made a down payment of $1,372,000.00 to Furnari when both Furnari and Ashley knew that Furnari received no such substantial down payment.

Despite knowing that Ashley had committed fraud against the mortgage-lending financial institutions by misrepresenting that he had made a down payment of more than one million dollars, Furnari failed to notify the authorities of Ashley's fraudulent actions. Furnari further took an affirmative step toward concealing the fraud by signing, at the closing of the mortgage loans—which was attended by both Furnari and his wife, Beverly, and Ashley and his wife, Diane Campbell—a statement falsely stating that he and his wife had received an even larger down payment of $2,096,424.00 from Ashley when he knew full well that they had been paid no such down payment; in fact, the down payment they received from Ashley was only $5,000.00.

After taking ownership of the property, Ashley made only three payments on the $500,000.00 mortgage loan from Huntington bank and did not make any payments on the $2,999,435.00 Wells Fargo loan. The banks subsequently foreclosed on the mortgages and the house was sold at auction at a substantial loss to the banks. Wells Fargo reported a net loss of $980,200.00 and Huntington Bank reported a loss of $387,130.00.

Furnari subsequently admitted in a deposition taken in a separate civil case filed in Oakland County Circuit Court, Furnari v. Wells Fargo Bank, Cir. Ct. No. 03–051024–CH, that he had entered into an agreement with Ashley to acknowledge receipt of the substantial down payment to assist Ashley in obtaining the mortgage loans to purchase the Brady Lane property. See Defendant's Memorandum of Law Regarding Restitution in United States v. Furnari, No. 08–CR–20466, Dkt. # 8.

B. The Investigation of the Brady Lane Property Transaction and Scott Ashley's Indictment

Thereafter, a federal investigation into Ashley's activities ensued. During this investigation, in 2005, Furnari was interviewed by federal agents and questioned about the sale of the Brady Lane property, his involvement with Ashley, and the Wells Fargo/Huntington Bank loan transactions. He was subsequently subpoenaed to testify before a federal grand jury.

On November 17, 2005, Ashley was indicted by the grand jury on various charges of bank fraud and wire fraud based on the fraudulent scheme concerning and the Brady Lane property. See United States v. Ashley, E.D.Mich. No. 05–CR–81039.³ The charges lodged against Ashley in a Superseding Indictment were explicitly based, in part, on his purchase of Furnari's Brady Lane property and the 2002 mortgage loan transactions with Wells Fargo and Huntington Banks, see id., Superseding Indictment, Dkt. # 13, ¶¶ 9–19; 23–28. The Superseding Indictment further specifically alleged that, in various loan applications, Ashley provided Wells Fargo, Huntington Bank and other lenders, false information and fraudulent documentation that he had paid the seller of the Brady Lane residence [i.e., Furnari] a down-payment of $1,372,000. See id., ¶¶ 5C; 11C; 17C. Though Furnari was not identified in the indictment by name, the indictment specifically referred to the “seller of the residence” on Brady Lane, see id., ¶ 17C, and charged Ashley with “knowingly execut[ing] and attempt[ing] to execute a scheme to defraud, and to obtain by means of false and fraudulent pretenses and representations” monies from Wells Fargo Bank and Huntington Bank. Id. at ¶¶ 24, 26, 28.

Ashley ultimately pled guilty on November 15, 2006—after a jury had been impaneled for his trial—to all of the charges of bank fraud (and four charges of social security fraud based on his use of fraudulent social security numbers on various loan applications). On May 16, 2007 Ashley was sentenced to 56 months imprisonment, and ordered to pay restitution in the amount of $1,664,580.00.

At his sentencing hearing, Ashley asserted that Michael Furnari had lied to the Grand Jury about his relationship with Ashley, and urged the Government to investigate Furnari's role in deceiving the banks and the crimes for which he (Ashley) was being sentenced. See United States v. Ashley, No. 05–81039, 5/16/07 Sentencing Hearing Tr., pp. 32–38.

Ashley thereafter appealed. On August 8, 2008, the Sixth Circuit affirmed this Court's imposition of the sentence imposed.

Thereafter, on September 8, 2008, Furnari was charged in an information with one count of Misprision of a Felony based on his concealment and failure to inform authorities about Ashley's fraudulent scheme. He pled guilty and on July 12, 2010, he was sentenced to one-day (time-served) incarceration, one year of supervised release, and ordered to pay (jointly and severally with Scott Ashley) $1,367,330.00 restitution to cover the respective losses of Wells Fargo and Huntington Banks.⁴ As of October 16, 2013, restitution of $1,361,807.30 remained unpaid and due and owing from Furnari, the last payment of $216.25 having been made more than a year ago on December 12, 2012.

C. Furnari's Transfer of His Property in Hawaii

Meanwhile, prior to the federal charges being brought against Furnari but after he was questioned by federal investigators concerning the Brady Lane loan transactions, and shortly after Scott Ashley was convicted and sentenced, on September 6, 2007, Furnari and his wife transferred real property they owned in Kihei, Hawaii to their daughter, Tara, for $10.00. According to Maui County property tax records, in 2007 the total assessed value of the property was $1,587,400.00.⁵

According to Furnari, he and his wife decided that they should “gift” the property to Tara because “we were turning sixty and she [my wife] wanted to gift these properties.” Furnari 10/17/12 Dep., p. 97. He testified that he does not retain use of the Hawaii property, and claimed he “d[id] not have all the details” as to whether Tara uses the property herself or uses it as income property, and stated only when asked whether she rented it out or time-shared it that she “possibly” did so. Id. at 100.

Although Furnari testified that he and his wife decided to divest their ownership of the Hawaii property because they “were turning sixty,” from information obtained by the Government through title searches, it appears that the conveyance of the property to Tara was not the first time Furnari and his wife transferred ownership of this property to other family members.

In August 1995, Furnari and his wife conveyed the Hawaii property to two of their other daughters, Rainna and Mindy. The property was held in Rainna and Mindy's names for approximately six years, until December 21, 2001 when the property was reconveyed back to Furnari and his wife. It was then held by them again until the transfer to Tara Furnari on September 6, 2007.

Tara subsequently reconveyed the property to herself and her husband, Steven Cantwell, as husband and wife, on February 1, 2011. They have since encumbered the property with another mortgage to secure a loan of $438,500.00.

Furnari also testified on October 17, 2012 that (a) he was engaged in the residential construction business since prior to 2000, operating through various LLCs, some of which had ceased doing business; (b) to continue his business, he had formed or had been a member of additional LLCs after 2000 but before 2006; (c) he had transferred his interest in certain of the LLCs to his son, Michael, and his daughter, Caroline; (d) he had personally guaranteed the debts of some of the LLCs that had discontinued doing business or were winding...