United States v. Future Tech Int'l, Inc.
| Decision Date | 18 July 2014 |
| Docket Number | Criminal No. 98–0431PLF |
| Citation | 58 F.Supp.3d 86 |
| Court | U.S. District Court — District of Columbia |
| Parties | United States of America v. Future Tech International, Inc., Defendant. |
Ellen Chubin Epstein, Oliver W. McDaniel, U.S. Attorney's Office, Washington, DC, for United States of America.
Brian S. Dervishi, Weissman & Dervishi, P.A., Miami, FL, Eric W. Bloom, Winston & Strawn LLP, Richard A. Hibey, Miller & Chevalier, Chartered, Washington, DC, for Defendant.
On February 23, 1999, after pleading guilty to two counts of tax evasion, defendant Future Tech International, Inc. was sentenced to probation, restitution, a $500 special assessment, and a $1,000,000 fine. Fourteen years later, during a routine audit, the Clerk of the Court observed that $1,000,200 remained in the Court Registry in connection with this case, and that this sum had accumulated over $300,000 in interest. The Clerk notified the parties, who subsequently filed papers regarding the disposition of these funds and presented their arguments at a status conference on June 12, 2014. Upon consideration of the arguments made in the parties' papers and in open court, the relevant legal authorities, and the entire record in this case, the Court will direct the Clerk of the Court to disburse the postjudgment interest and $1,000,000 of the principal to the Crime Victims Fund and the prejudgment interest to Future Tech Liquidating Corporation. The remaining $200 will be applied to the special assessment.1
On December 17, 1998, Future Tech International, Inc. (“FTI”) and the United States entered into a Plea Agreement in this case. Under the terms of the Agreement, FTI was to plead guilty to two counts of tax evasion and to pay $1,000,200 in fines and costs to the United States. Plea Agreement at 1, 5. On December 21, 1998, FTI entered its guilty plea before this Court. See Minute Entry dated December 21, 1998. That same day, the Court ordered FTI to deposit $1,000,200 into the Court Registry as security for any fines or costs imposed at sentencing, with instructions that the Clerk of the Court “hold said funds until their disposition is further ordered by the Court.” See Dec. 21, 1998 Order. Accordingly, FTI deposited a check for $1,000,200 payable to the United States District Court Clerk into the Court Registry. See FTI Payment Ledger, Gov't Mot., Ex. D.
Sentencing took place on February 23, 1999. During those proceedings, the Court stated that the maximum fine that it could impose was $1,000,000, and observed that FTI “has already paid that fine of $1,000,000.” Feb. 23, 1999 Tr. at 15. The Court also ordered FTI to pay a special assessment of $500. Id. Noting that $200 of this sum “ha[d] already been paid,” the Court ordered FTI to pay the remaining $300 immediately. Id. This Court entered a Judgment on February 25, 1999, and an Amended Judgment on April 9, 1999. See Judgment; Am. Judgment.
Around the same time, and 900 miles away from Washington, D.C., FTI filed for Chapter 11 bankruptcy in the United States Bankruptcy Court for the Southern District of Florida. See FTLC Probation Mot. at 1. Most of FTI's assets were sold to Bell Microproducts, Inc., and FTI became FT Liquidating Corporation (“FT Liquidating”), a six-employee entity tasked with winding down the company's affairs. Id. FT Liquidating informed the Court of this transition on August 13, 1999, id., and subsequently acted as FTI's successor in a small matter that arose in this case in 2002. See Show Cause Response.
The case remained quiet until June 2013, when the Clerk undertook a routine review of the funds in the Court Registry. Finding that FTI's December 21, 1998 deposit of $1,000,200 remained in the Registry—along with over $300,000 in accrued interest—the Clerk notified the parties of the unclaimed funds. On July 15, 2013, the government filed a motion to correct the Amended Judgment in order to effect the transfer of $1,000,000 from the Court Registry to the government. FT Liquidating opposed the motion. The parties further presented their arguments in cross memoranda and during a status conference held on June 12, 2014.
The government argues that the deposited funds were clearly intended to cover the $1,000,000 fine and a portion of the $500 special assessment imposed at sentencing, and that the United States therefore is entitled to $1,000,000 of the principal and any interest accrued on that amount. Gov't Mem. at 6–10; see generally Gov't Mot.; Gov't Supp. Mem. The government also questions whether there is sufficient continuity of operations or structure between FTI and FT Liquidating to warrant FT Liquidating stepping in as FTI's successor in this matter. Gov't Mem. at 10–14.
FT Liquidating concedes that if FTI never paid the $1,000,000 fine, then that principal amount belongs to the government. See FTLC Mem. at 5. FT Liquidating asserts, however, that the burden is on the government and it has not adequately established that FTI failed to pay the fine through some other mechanism. Id. at 5–7. FT Liquidating also argues that it is entitled to all accrued interest. Id. at 9–11.
As a threshold matter, the Court finds that FT Liquidating is the proper successor to FTI for the purpose of this litigation. FT Liquidating expressly agreed to become responsible “for resolving and paying claims” against FTI in its May 19, 1999 agreement with the Internal Revenue Service, see Motion to Approve Stipulation of Settlement at 1, FTLC Mem., Ex. 1; Bankruptcy Court Order Approving IRS Settlement, FTLC Mem., Ex. 1, and has been tasked with winding down FTI's affairs. See FTLC Probation Mot. at 1; Bankruptcy Court Order Approving FTI's Amended Chapter 11 Plan at 11–18, FTLC Probation Mot., Ex. 1. In addition, FT Liquidating acted as FTI's successor in another matter in this case, without any objection from the government. See Show Cause Response. Under these circumstances, the Court finds that FT Liquidating is the appropriate successor to FTI.
FT Liquidating asserts that because the principal has remained unclaimed in the Court Registry for over five years, the government may obtain an order directing payment to it only if the government offers “full proof of the right” to the principal under 28 U.S.C. § 2042.2 Courts interpreting Section 2042 have held that the burden of proof under the statute is a preponderance of the evidence standard. See United States v. Beach, 113 F.3d 188, 191 (11th Cir.1997) ; United States v. Kim, 870 F.2d 81, 84 (2d Cir.1989). The government does not challenge FT Liquidating's assertion that 28 U.S.C. § 2042 applies to this matter, and the Court assumes that it does.
After carefully reviewing the record, the Court is convinced that the government has met its burden and has shown, well beyond a preponderance of the evidence, that it is entitled to $1,000,000 of the principal. As the government points out, the Court stated at the time of sentencing that $1,000,000 of the $1,000,200 deposited by FTI in the Court Registry in December 1998 was to be used to pay the fine. Feb. 23, 1999 Tr. at 15; see also Dec. 21, 1998 Order (specifying that $1,000,000 was to be deposited “as security for any fine and costs ordered by the Court at sentencing”). In its Amended Judgment, the Court stated, in reference to the funds deposited in the Registry: “A fine of $1 million has been assessed and already paid.” Am. Judgment at 4. Although FT Liquidating suggests that FTI might have paid the fine through some other mechanism, and that the Court might have been alluding to something other than the money in the Court Registry, this theory is illogical and has no support in the record.
The funds remained in the Registry due to a clerical error in the Amended Judgment, which omitted instructions to the Clerk to transfer the $1,000,000 to the government or, more specifically, to the Crime Victims Fund.3 Because this is merely a clerical error, the Court has authority under Rule 36 of the Federal Rules of Criminal Procedure or, in the alternative, under Rule 60 of the Federal Rules of Civil Procedure, to correct the Amended Judgment. Fed. R. Crim. P. 36 (); Fed. R. Civ. P. 60(a) (). The Court therefore will issue an Amended Judgment and Order directing the Clerk to disburse $1,000,000 of the principal amount to the government, and specifically, to the Crime Victims Fund. See 42 U.S.C. § 10601(a).
As explained supra at 88, the Court ordered defendant FTI to deposit the anticipated fine and assessment into the Court Registry on December 21, 1998, two months prior to the date of judgment, as security for fines and costs to be imposed at sentencing. Until February 23, 1999—when the Court sentenced FTI and imposed a $1,000,000 fine and a $500 special assessment—FTI remained the rightful owner of these deposited funds. Under the rule that “the interest follows the principal,” Pigford v. Vilsack, 2013 WL 1629204, at *1 (D.D.C. Apr. 16, 2013), FTI also was the rightful owner of any interest accrued before February 23, 1999. The Court did not order the payment of prejudgment interest at the sentencing, as would be required to transfer entitlement to this interest from FTI to the government. See Cont'l Transfert Technique Ltd. v. Fed. Gov't of Nigeria, 850 F.Supp.2d 277, 287 (D.D.C.2012) (). The Court...
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