United States v. Kolbusz
| Decision Date | 22 February 2023 |
| Docket Number | 12 CR 782 |
| Parties | UNITED STATES OF AMERICA, Plaintiff, v. ROBERT KOLBUSZ, Defendant. |
| Court | U.S. District Court — Northern District of Illinois |
MEMORANDUM OPINION AND ORDER
On October 20, 2014, a jury convicted defendant Robert Kolbusz of six counts of fraud (by mail and wire) in violation of 18 U.S.C. §§1341 and 1343. On September 10, 2015 District Court Judge John Z. Lee entered a judgment sentencing defendant to an 84-month term of imprisonment and ordering restitution in the amount of $3,764,381.69. (Dckt #313 at 4, 8). Subsequently, the Government initiated citation proceedings to discover defendant's assets. Currently before the Court are the Government's motions for turnover, (Dckt. #353, #355 & #370), to which pro se defendant has responded raising almost identical objections to each motion, and requesting that the Court quash the citations, (Dckt. #375, #376 & #381, respectively). At the Court's direction, the Government filed a consolidated reply, (Dckt. #388), to address each of defendant's objections.
For the reasons set forth below, the Government's motion for turnover as to Bank of America, (Dckt. #353), is granted. The motions for turnover as to Fidelity & Guaranty Life Insurance Company, (Dckt. #355), and Fidelity Management Trust Company, (Dckt. #370) are granted in part as modified by the Court below. Defendant's motions to quash the citations, (Dckt. #375, #376 & #381), are denied.
Again, on September 10, 2015, Judge Lee entered a judgment sentencing defendant to an 84-month term of imprisonment plus restitution in the amount of $3,764,381.69 that is to be disbursed to the patients, private insurers, and the governmental entity who were victimized by defendant's unlawful conduct. (Dckt. #313 at 4, 8-12). The judgment order directed defendant to surrender to the federal correctional institution in Bastrop, Texas on November 6, 2015, and further directed him to notify the U.S. Attorney “within 30 days of any change of name, residence, or mailing address, until all fines, restitution, costs, and special assessments . . . are fully paid.” (Id. at 1, 4). The schedule of payments provided for a lump sum payment of $600 due immediately and a lump sum payment of $250,000 due within 60 days. (Id. at 2).[1] The judgment order included a special instruction reflecting that the defendant's monthly payment schedule shall be an amount that is at least 10% of defendant's net monthly income. (Id.)
The Seventh Circuit affirmed defendant's conviction on September 21, 2016. See United States v. Kolbusz, 837 F.3d 811 (7th Cir. 2016).
On November 9, 2015 - three days after defendant surrendered to the correctional facility in Bastrop, Texas to begin serving his sentence - the Government issued a citation to discover assets to third-party Bank of America, N.A. (“BOA”). (Dckt. #293 & #297). The citation was served on BOA on November 10, 2015, and the certificate of mailing reflects that a copy was mailed to defendant within three business days thereafter to his residence in Oak Brook, IL, where his wife continued to reside. (Dckt. #297). BOA answered the citation on November 30, 2015, (Dckt. #301 at 2-4), and provided an amended answer on September 20, 2021, (Dckt. #353 at 4-6).[2] The amended answer indicates that BOA is holding $3,575.44 in a checking account in defendant's name. (Id.)
On November 9, 2015, the Government also issued a citation to discover assets to Fidelity Management Trust Company (“FMTC”).[3] (Dckt. #294 & #298). The citation was served on FMTC on November 12, 2015, with a copy mailed to defendant - again to the Oak Brook residence - within three business days. (Dckt. #298 at 2). FMTC answered the citation on November 20, 2015, (Dckt. #302), and provided an amended answer on March 5, 2021, (Dckt. # 370 at 5-7). According to the amended answer, FMTC is holding $8,492 in an IRA account in defendant's name. (Id.)
On December 8, 2015, the Government issued a citation to third-party Fidelity & Guaranty Life Insurance Company (“F&G Life”). (Dckt. #304 & #306). The citation was served on F&G Life on December 9, 2015, and the certificate of mailing reflects that a copy was mailed to defendant within three business days thereafter, but this time to the correctional facility in Bastrop, Texas. (Dckt. #306 at 2). F&G Life answered the citation on January 15, 2016, and provided an amended answer on April 1, 2021, (Dckt. #355 at 5-7). The amended answer indicates that F&G Life is holding $17,320.21 in a non-qualified annuity account in defendant's name. (Id.).
In the instant motions, the Government seeks turnover orders for the approximately $29,000 being held by the three institutions for application towards defendant's restitution judgment.[4] In support, the Government argues that all statutory notice requirements have been met and that none of the funds are exempt from garnishment.
In response, defendant does not dispute the restitution judgment against him or attempt to argue that the funds are exempt. Instead, he raises a bevy of objections, mostly technical, including, inter alia, that: (1) he did not receive proper notice of the citations; (2) the citations have expired; and (3) the Government has not established that the funds at issue are traceable to the offense or are otherwise appropriate substitute assets. The Court addresses each of defendant's arguments in turn below.[5]
Upon entry of judgment, the order for payment of restitution becomes a lien in favor of the Government on all of a defendant's property and rights to property. United States v. Miller, 39 F.4th 844, 846 (7th Cir. 2022) (citing the Mandatory Victims Restitution Act “MVRA”), 18 U.S.C. § 3613(c)). “Liens to pay restitution debts are treated like tax liens . . . [and] are ‘effective against every interest in property accorded a taxpayer by state law.'” Id., quoting United States v. Kollintzas, 501 F.3d 796, 800 (7th Cir. 2007).
Under the MVRA, the Government may enforce restitution awards “in accordance with the practices and procedures for the enforcement of a civil judgment under Federal law or State law.” United States v. Sayyed, 186 F.Supp.3d 879, 881 (N.D.Ill. 2016), aff'd, 862 F.3d 615 (7th Cir. 2017); see also United States v. Bronke, No. 01-CR-532, 2022 WL 4119784, at *5 (N.D.Ill. Sept. 8, 2022) (). Under either course, it is well-settled that “district courts may entertain civil garnishment and other collection proceedings as post judgment remedies within an underlying criminal case.” Kollintzas, 501 F.3d at 800. The “MVRA rests on the recognition that it is essential that the criminal justice system recognize the impact that crime has on the victim, and, to the extent possible, ensure that the offender be held accountable to repay these costs.” United States v. Swenson, 971 F.3d 977, 982 (9th Cir. 2020) (internal quotation and citation omitted).
As explained above, the Government initiated collection proceedings in this criminal action by issuing citations to discover assets, which are governed here by 735 ILCS 5/2-1402 and Illinois Supreme Court Rule 277. See Fed.R.Civ.P. 69; Kelley v. Stevanovich, 40 F.4th 779, 782 (7th Cir. 2022) () (internal quotation and citation omitted). Because the bulk of defendant's arguments relate to the Government's purported failure to abide by the statutory notice and service requirements of 735 ILCS 5/2-1402 and Rule 277, the Court begins there.
Pursuant to 735 ILCS 5/2-1402, a judgment debtor is “entitled to prosecute citations to discover assets for the purposes of examining the judgment debtor or any other person to discover assets or income of the debtor . . . and of compelling the application of non-exempt assets or income discovered toward the payment of the amount due under the judgment.” 735 ILCS 5/2-1402(a). The citation proceeding is commenced by the service of a citation issued by the Clerk of Court in a form substantially similar to that set forth in the statute. 735 ILCS 5/2-1402(a), (b); Ill.S.Ct. Rule 277. The statute further provides, in relevant part, that:
Whenever a citation is served upon a person or party other than the judgment debtor, the officer or person serving the citation shall send to the judgment debtor, within three business days of the service upon the cited party, a copy of the citation and the citation notice, which may be sent by regular first-class mail to the judgment debtor's last known address.
735 ILCS 5/2-1402(b). Further, “[n]o order or judgment shall be entered . . . in favor of the judgment creditor unless there appears of record a certification of mailing showing that a copy of the citation and a copy of the citation notice was mailed to the judgment debtor as required” by the statute. 735 ILCS 5/2-1402(d).
With these requirements in mind, the Court turns to each of defendant's purported misgivings regarding the Government's issuance and service of the citations.
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